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RIO
  TINTO

Verónica Vera G., 
  General Manager, 
  Minera Ricardo Resources Inc. S.A., 
  Isidora Goyenechea 2925, Of. 301, 
  Las Condes, Santiago 
  CHILE

30th January 2004

Dear Verónica,

Letter of Understanding  Ricardo Purchase Option Agreement

This Letter of Understanding (LOU) sets out
  the terms under which Minera Ricardo Resources Inc. S.A. (Minera Ricardo)
  grants Rio Tinto Mining and Exploration Limited, Agencia en Chile (Rio
  Tinto) an exclusive option to acquire a 100% interest in the mineral
  rights held by it that are shown in Appendix A and listed in Appendix B (the
  Property).

The parties agree as follows:

|1. | Minera Ricardo grants Rio Tinto an exclusive and
        irrevocable option exercisable at the sole discretion of Rio Tinto to
        acquire a 100% interest in the Property by the fourth anniversary of this
        LOU by Rio Tinto completing Work Expenditures totalling US$4 million and
        by making payments to Minera Ricardo of US$6 million. The right to earn
        a 100% interest will be referred to in this LOU as the Option.                                                                                                                                                                                                                                                                                                                                                             
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|2. | Together with the exclusive and irrevocable option
        to acquire a 100% interest in the Property, Minera Ricardo hereby agrees
        for the period of the Option to lease the Property to Rio Tinto for the
        purpose of conducting mineral exploration.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|3. | Subject to the representations and warranties contained
        in Clause 10 being correct, Rio Tinto will complete Work Expenditures
        of US$250,000 within 12 months from the date of this LOU. This expenditure,
        which is to include 2000m of drilling, is a firm commitment and is referred
        to as the Initial Commitment. If Rio Tinto does not complete
        the Initial Commitment of US$250,000 within 12 months from the date of
        this LOU Rio Tinto will pay Minera Ricardo the difference, between the
        amount of the actual expenditures and US$250,000. For the avoidance of
        doubt, Rio Tinto is not obliged to complete the Initial Commitment if
        the representations and warranties contained in Clause 10 are not correct
        or fulfilled.

Rio Tinto Mining and Exploration Limited, Sucursal Antofagasta
  
  Liparita 251, Barrio Industrial, Antofagasta Tel.: 56-55-275625 Fax: 56-55-275630.
  REGISTERED OFFICE: 6 St James's Square London SW1Y, 4LD. Registered in England
  N° 1.305.702

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|4. | In order to earn a 100% interest in the Property Rio Tinto will incur the following Work Expenditures.
|-- | ------------------------------------------------------------------------------------------------------
|  

| | Year  | Work Expenditure US$
| | ----- | --------------------
| |       |                     
| | 1     | 250,000             
| |       |                     
| | 2     | 750,000             
| |       |                     
| | 3     | 1,000,000           
| |       |                     
| | 4     | 2,000,000           
| |       |                     
| | Total | 4,000,000           

| |                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------
| | If Rio Tinto fails to complete the minimum
      Work Expenditure in any one year, Rio Tinto may at its election either:
| |                                                                                                                         
| | (a)                                                                                                                     
|
| | (b)                                                                                                                     

|   |                                                                                                                                                                                                                                                                                                                                                  
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | For the avoidance of doubt if Rio Tinto incurs Work
        Expenditure in excess of the minimum required in one year, the excess
        will be credited to the minimum expenditure requirements in the subsequent
        year. The expenditure obligation for year one of this LOU is the Initial
        Commitment referred to in Clause 3.
|   |                                                                                                                                                                                                                                                                                                                                                  
|5. | In addition to the Work Expenditures set out in
        this LOU, Rio Tinto must also make the following payments to Minera Ricardo
        if it is to maintain and exercise the Option to acquire a 100% interest
        in the Property:                                                                                                     
|  

| | Due Date       | Payment US$
| | -------------- | -----------
| |                |            
| | 12 months      | 150,000    
| |                |            
| | 24 months      | 300,000    
| |                |            
| | 36 months      | 550,000    
| |                |            
| | 48 months      | 5,000,000  
| |                |            
| | Total Payments | 6,000,000  

| |                                                                                                                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In addition to the payments set forth above, Rio
        Tinto shall pay to Minera Ricardo a 1% NSR on any mineral production undertaken
        by Rio Tinto or its Affiliates on the Property. Rio Tinto will have the
        option to acquire the first 0.5% of the NSR at

|Rio Tinto Mining and Exploration Limited, Sucursal Antofagasta | Page 2 of 9
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|   | a price of US$ 5.000.000 million and the remaining
        0.5% for the sum of US$ 7.000.000 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | Option payments as per the above schedule will be
        due and payable as agreed unless Rio Tinto notifies Ricardo at least 30
        days in advance of its intension to terminate the option agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|  
|6. | All due dates for expenditures and payments in this
        LOU will be extended for such time as access to the Property and/or work
        on it is prevented by any condition of force majeure declared by Rio Tinto.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  
|7. | During the term of the Option, Rio Tinto will be
        responsible for payment of all mining property maintenance costs, including
        property taxes ("patentes") landman fees and other related charges in
        order to maintain the mineral rights in good standing. Routine mining
        property costs will be reimbursed by Rio Tinto to Minera Ricardo on a
        monthly basis but annual mining taxes will be payable directly by Rio
        Tinto upon presentation by Ricardo of the invoiced amounts due by 31 st
        March of each year. The first annual land taxes payable by Rio Tinto correspond
        to the period 2004-2005 and are due by 31 st March 2004. All costs related
        to maintaining the mineral rights in good standing including land taxes
        will be included in Work Expenditures.
|  

|8. | The parties agree that the terms of this
        LOU are in effect for a minimum of twelve months whereby all commitments
        will be honoured for this period. After this period Rio Tinto may withdraw
        from and terminate this LOU at any time upon written notice to Minera
        Ricardo, subject to having met the Initial Commitment. Such termination
        will not relieve Rio Tinto of liabilities, whether known or unknown, to
        Minera Ricardo, to third parties or to governmental authorities which
        arise from its activities undertaken and obligations under this LOU. Rio
        Tinto will be required to fund any environmental rehabilitation required
        as a result of work undertaken after the date of this LOU and up to the
        date of Rio Tinto's withdrawal. No later than 60 days after its withdrawal
        Rio Tinto will provide Minera Ricardo with a final report and with copies
        of all data obtained from the property during its work under its Option.
        For the avoidance of doubt, Rio Tinto may notify Minera Ricardo of its
        intention to withdraw from this LOU thirty days prior to the first anniversary
        of this LOU, thus liberating it from making the first payment due at twelve
        months.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|9. | During the term of the Option, Rio Tinto
        will:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
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|Rio Tinto Mining and Exploration Limited, Sucursal Antofagasta | Page 3 of 9
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|    |                                                                                                 | preceding twelve month period.
        In addition Rio Tinto will provide Minera Ricardo with drilling progress
        reports including full assay and analytical results no later than 60 days
        following the termination of each drilling campaign. Minera Ricardo is
        entitled at its own risk and expense to visit the Property at reasonable
        times and also to view there or at Rio Tinto's offices the data and results
        from the Property.                                                            
|--- | ----------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                 | Maintain accounts of expenditures
        in accordance with generally accepted accounting standards, and legislative
        or regulatory requirements. Such accounts must be available for inspection
        and/or audit by Minera Ricardo, at its cost, at reasonable times.                                                                                                                                                                                                                                                          
|    |                                                                                                
|10. | Minera Ricardo represents
        and warrants that, to the best of Minera Ricardo's knowledge:
|    |                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                 | It is able to give full effect to the
        exclusive rights granted to Rio Tinto under this LOU.                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|    |                                                                                                 | The mineral rights listed in Appendix
        B that comprise the Property with the exception of areas A, B & C
        referred to in Clause 11 and shown in Appendix A are in the full legal
        control of Minera Ricardo, and free and clear of all liens, encumbrances,
        royalties, options, leases or any contractual commitments with the exception
        of rights of way-easement contracts for transit and pipeline construction
        and maintenance signed by Minera Ricardo with the following three companies:
|   
|    |                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|    |                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|    |                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|    |                                                                                                 | It will not breach nor have a conflict
        with any other agreement or arrangement by entering into or performing
        the terms of this LOU.                                                                                                                                                                                                                                                                                                                                                                                        
|   
|    |                                                                                                 | The mineral rights listed in Appendix
        B that comprise the Property are in good standing at the date of this
        LOU.                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|    |                                                                                                 | It has delivered or made available to
        Rio Tinto all material information concerning the Property in its possession
        or control or in the possession or control of an Affiliate; and                                                                                                                                                                                                                                                                                                                                          
|   
|    |                                                                                                 | All previous work by it and any of its
        Affiliates and any parties authorised by it or its Affiliates on the Property
        has been in accordance with applicable law and sound mining, environmental
        and business practice.                                                                                                                                                                                                                                                                                              
|   

|11. | The parties agree that an area of approximately
        90 hectares shown in Appendix A (areas A, B & C) that forms parts
        of the claims Ricardo 92, Ricardo XVII, Ricardo VIII and Ricardo 110,
        all of which are currently involved in easement lawsuits in the
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|   

|Rio Tinto Mining and Exploration Limited, Sucursal Antofagasta | Page 4 of 9
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|    | vicinity of the city of Calama, are
        excluded from the present agreement. In the event that the court rules
        in favour of Minera Ricardo for part or all of the above named properties,
        these properties will be incorporated at a later date in the formal agreement
        referred to in Clause 13.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|12. | All payments and royalties referred
        to in this LOU are gross amounts, will comply with Chilean law and their
        tax consequences will be sole responsibility of the recipient.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   
|13. | Rio Tinto and Minera Ricardo agree that
        although this LOU is a binding document and subject to Chilean law, it
        only sets out the basic terms of the Option. At the earlier of Rio Tinto's
        election or the end of the first twelve month period, the parties will
        use their best efforts, in good faith, to ensure that a formal agreement,
        in compliance with all legal requirements established in article 169 of
        the Chilean Mining Code, is executed for registration in Chile. If such
        documentation is not executed and registered by 30 th June 2005 (unless
        such non execution and registration is the result of Rio Tinto negotiating
        or operating in bad faith or not making best efforts to achieve such ends)
        Rio Tinto's work expenditure and payment obligations will be suspended
        without loss of rights hereunder until such time as the more complete
        agreements are executed.
|   
|    | In addition, the parties agree to take
        such acts and to negotiate, prepare, file, notarise and publicly record
        such documents in Chile as may be necessary at any time to protect the
        interests of the parties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|14. | This LOU supersedes all prior agreement(s),
        correspondence, discussion or any other exchanges between the parties
        in respect of and related to its subject matter.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|15. | Any information or data obtained in
        connection with the performance of this LOU is confidential and neither
        Minera Ricardo nor Rio Tinto will make public statement concerning this
        LOU or the activities contemplated in it without the prior consent of
        the other. Such consent must not be unreasonably withheld. For the avoidance
        of doubt, withholding such consent will be deemed unreasonable if such
        disclosure is required by law or by a stock exchange. If a party does
        not give a definitive written reply to any request for permission to disclose
        information by the end of the third business day following the day upon
        which such request is made, consent to such disclosure will be deemed
        to have been given.                                                                                                                                                                           
|   
|    | Either party may disclose the terms
        hereunder and information relating to the Property to bone fide potential
        purchasers and partners in respect of the Property provided such party
        is subject to a written agreement of confidentiality approved by Rio Tinto.
        Either party may disclose the terms of this LOU and information relating
        to the Property to their Affiliate companies, provided such Affiliates
        are bound by obligations of confidentiality.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|16. | Either party may transfer its interest
        under this LOU to an Affiliate, provided that such Affiliate;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|    | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   

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|    | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | is qualified to do business in Chile to the extent
        necessary to fulfil all its obligations hereunder.                                                                                                                                                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|17. | Subject to a first right of offer to the
        other party, either party is permitted to transfer its rights and obligations
        under this LOU to a non-Affiliate.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|18. | All notices and other communications to
        either party shall be in writing and delivered personally or sent by prepaid
        mail or other means providing for receipt of the communication in written
        form. Notices sent by ordinary mail shall be effective five days after
        the date of mailing. Notices sent by certified or registered mail shall
        be effective on the next business day after the date of actual delivery.
        Notices sent by e-mail shall be effective on the next business day after
        the day of transmission provided that the sender has received electronic
        confirmation of successful transmission. Until a change of address is
        so given, notices shall be addressed to Minera Ricardo and Rio Tinto,
        respectively:
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | Minera Ricardo Resources Inc. S.A.
      Isidora Goyenechea 2925, Of. 301 
      Las Condes, Santiago
      Attn: Verónica Vera 
      Tel: (56) 2 2318176 
      Fax: (56) 2 2321969 Rio Tinto Mining and Exploration Limited
        /Agencia en ChileLiparita 251, Barrio Industrial, 
        Antofagasta 
        Attn: George Steele 
        Tel: (56) 55 275625 
        Fax: (56) 55 275630

|    |                                                                                          
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|19. | In this LOU and in the subsequent more
        formal agreement referred to in Clause 13:
|   
|    | (a)                                                                                      
|   
|    | (b)                                                                                      
|   
|    | (c)                                                                                      
|   

|Rio Tinto Mining and Exploration Limited, Sucursal Antofagasta | Page 6 of 9
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|    | and charges required to keep or secure the Property in good standing;
      all expenditures for geophysical, geochemical and geological work; all expenditures
      for surveys, drilling, assays, metallurgical testing, engineering, construction
      and all other expenditures directly benefiting the Property and the work
      thereon. Included in Work Expenditure will be a charge for administrative
      overheads and corporate technical and business support not to exceed 8%
      of the total Work Expenditures.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|20. | This LOU shall be construed and enforced in accordance with, and the
      rights and duties of the parties shall be governed by, the laws of Chile.
      Any difficulty or controversy arising among the parties with respect to
      the application, interpretation, duration, validity or execution hereof
      or for any other reason shall be submitted to Arbitration pursuant to the
      current Rules of Arbitration Procedure of the Arbitration and Mediation
      Centre of Santiago. The parties confer an irrevocable special power of attorney
      upon the Santiago Chamber of Commerce so that it may, at the written request
      of any thereof, appoint the arbitrator ex aequo et bono from among the members
      of the arbitration corps of the Santiago Arbitration and Mediation Centre.
      There shall be no remedy against the arbitrator's resolutions, which is
      hereby expressly waived. The arbitrator is especially empowered to resolve
      any matter relating to his/her competence and/or jurisdiction.

Please signify the agreement of Minera Ricardo to this LOU by counter signature below.

Yours sincerely,

RIO TINTO MINING AND EXPLORATION LTD, Agencia en Chile

|By                                 | : |                           
|---------------------------------- | - | --------------------------
|                                  
|Name                               | : | George Steele             
|Title                              | : | Exploration Manager, Chile
|                                   |   |                           
|MINERA RICARDO RESOURCES INC. S.A.
|                                   |   |                           
|By                                 | : |                           
|                                  
|Name                               | : | Verónica Vera             
|Title                              | : | General Manager           

|Rio Tinto Mining and Exploration Limited, Sucursal Antofagasta | Page 7 of 9
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APPENDIX A

Map of the Property

See next page





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APPENDIX B

Mineral Rights comprising the Property

See next page





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