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EXHIBIT 5.1

 

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**OPTION / JOINT VENTURE AGREEMENT 

FOR THE ISLAND GOLD PROJECT 

BETWEEN 

PATRICIA MINING CORP. 

-and - 

RICHMONT MINES INC. 

 

Aylesworth Thompson Phelan O'Brien LLP 18th Floor, 222 Bay Street Toronto, Ontario M5K 1H1**
**AGREEMENT 

    THIS AGREEMENT is made as of the 28thday of August, 2003 between **PATRICIA MINING CORP.** ("Patricia"), acorporation amalgamated pursuant to the laws of the Province of Ontario, and **RICHMONT MINES INC.** ("Richmont"), a corporation continued pursuant to thelaws of the Province of Quebec. **RECITALS 

    WHEREAS upon and subject to the termsof this Agreement Patricia hereby grants Richmont the right to earn up to a 55%interest in and to the Properties and thereafter to participate jointly withPatricia in the development of and production from the Properties. **    NOW THEREFORE THIS AGREEMENT WITNESSETHthat in consideration of the mutual covenants, agreements and premises hereincontained and other good and valuable consideration (the receipt and sufficiencywhereof being hereby acknowledged by each party), the parties hereto do herebycovenant and agree as follows: 
**ARTICLE 1 DEFINITIONS 

1.1        Definitions. 
In this Agreement: 

"Accounting Procedure" means the procedure set forth in Exhibit B.  "Affiliate" has the meaning ascribed thereto in the *Business Corporations  Act*, Ontario. 

"Agreement" means this Agreement, including all amendments and  modifications thereof and all exhibits, which are incorporated herein by  reference. 

"Area of Interest" means an area within a 15 kilometre radius of the  outside perimeter of the walls of the existing mill on the Kremzar property.  

"Assets" means the Properties, Products and all other real and personal  property, tangible and intangible, held for the benefit of the Participants  hereunder. 

"Budget" means a detailed estimate of all costs to be  incurred by the Participants with respect to a Program of the Venture and a  schedule of cash advances to be made by the Participants in respect thereof.  

"Capital Expenditures" means those items presented in  Programs and Budgets of the Venture approved by the Management Committee which  qualify as capital expenditures under Canadian generally accepted accounting  principles consistently applied. 

"Commercial Production" means the commercial exploitation  of Products but shall not include treating, shipping or milling of Products  for the purposes of testing or milling or leaching by a pilot plant or during  an initial tune-up period of a plant. Commercial Production shall be deemed to  have 

commenced on the first day immediately following 60 consecutive days during  which Products have been processed through such plant at a daily rate of at  least 500 dry metric tonnes. 

"Commercial Production Program" means that certain work program to be  conducted by Richmont to bring the Properties into Commercial Production. 

"Damages Amount" has the meaning ascribed thereto in section 8.4(b). 

"Demanding Party" has the meaning ascribed thereto in section 19.9. 

"Development" means all preparation for the removal and  recovery of Products of the Properties, including the construction or  installation or rehabilitation of a mill, processing plant or any other  improvements to be used for the mining, handling, milling, treatment,  processing or other benefication of Products. 

"Exploration" means all activities directed toward ascertaining the  existence, location, quantity, quality or commercial value of deposits of  Products. 

"Flow Through Share Offering" means the flow through  private placement offering to be completed on or before August 31, 2003 of  common shares of Patricia at a price of $0.50 per share when purchased by  Richmont or its Affiliates and at a price of $0.40 per share when purchased by  parties other than Richmont or its Affiliates, to achieve a minimum of $2.5  million of aggregate gross proceeds including therein proceeds of $700,000  from the subscription therefor by Richmont which subscription shall be  conditional upon Patricia achieving the aforesaid minimum of $2.5 million of  gross proceeds including the subscription of Richmont. 

"Force Majeure" shall have the meaning set forth in section 19.4. 

"Initial Contribution" means the initial contribution of each Participant  as set forth in section 7.1. 

"Initial Participating Interests" means the Participating Interest of each  Participant as set forth in section 8.1. 

"Joint Account" means the account maintained in accordance with the  Accounting procedure showing the charges and credits accruing to the  Participants. 

"Management Committee" means the committee established under Article 9. 

"Manager" means the person or entity appointed under Article 10 to manage  Operations and any successor Manager. 

"Mining" means the mining, extracting, producing, treating, handling,  milling or other processing of Products. 

"Net Smelter Return Royalty" means certain amounts calculated as provided  in Exhibit C, which may be payable to a Participant under section 8.4 or 8.5.  

"NSR" has the meaning ascribed thereto in section 4.4(c). 

"Operations" means Exploration, Development, Mining and all other  activities carried out in respect of the Venture under this Agreement. 

"Participant" and "Participants" mean the persons or entities that from  time to time have Participating Interests. 

"Participating Interests" means the percentage interest  representing the operating ownership interest of a Participant in the Assets  and all other rights and obligations arising under this Agreement, as such  interest may from time to time be adjusted hereunder. Participating Interests  shall be calculated to three decimal places and rounded to two (e.g., 1.519%  rounded to 1.52%). Decimals of .005 or more shall be rounded up to 01;  decimals of less than .005 shall be rounded down. 

"Pre-Election Program" means that certain program to be  conducted by Patricia utilizing a minimum of $2.5 million of net proceeds from  share offerings completed by Patricia, which program shall include the  dewatering of the existing ramp structure, the conducting of surface and  underground diamond drilling and the drifting to the targeted resources  associated with the Properties. 

"Prime Rate" means the interest rate quoted as "Prime" by the Canadian  Imperial Bank of Commerce, at its head office in Toronto, as said rate may  change from day to day. 

"Products" means all ores, minerals and mineral resources produced by the  Venture from the Properties and all products produced by the Venture therefrom  under this Agreement. 

"Program" means a description in reasonable detail of Operations to be  conducted and objectives to be accomplished by the Manager on behalf of the  Venture for a year or any longer period. 

"Property Interest" has the meaning ascribed thereto in section 15.1. 

"Properties" means those interests in real property described in Exhibit A  and all other interests in real property within the Area of Interest which are  acquired and held subject to this Agreement. 

"Representatives" has the meaning ascribed thereto in section 6.1. 

"Responding Party" has the meaning ascribed thereto in section 19.9. 

"Transfer" means, when used as a verb, to sell, grant,  assign, encumber, pledge or otherwise commit or dispose of, directly or  indirectly, including through mergers, consolidations or asset purchases and  when used as a noun, means a sale, grant, assignment, pledge or disposal or  the commitment to do any of the foregoing, directly or indirectly, including  through mergers, consolidations or asset purchase. 

"Venture" means the business arrangement of the Participants under this  Agreement as set forth in Article 6 through 19 inclusive. 
**ARTICLE 2 REPRESENTATIONS AND WARRANTIES 

2.1     Representations of Patricia. 

Patricia represents and warrants to  Richmont as follows, namely that: -  it is a corporation duly incorporated and in good    standing in its jurisdiction of incorporation and that it is qualified to do    business and is in good standing in those jurisdictions where necessary in    order to carry out the purposes of this Agreement; 
-  it has the capacity to enter into and perform this    Agreement and all transactions contemplated herein and that all corporate    and other actions required to authorize it to enter into and perform this    Agreement have been properly taken;  the execution, delivery of this Agreement and performance    thereof by Patricia will not conflict with or breach any other agreement or    arrangement to which Patricia is a party or by which it is bound;  this Agreement has been duly executed and delivered by    Patricia and is valid and binding upon it in accordance with its terms    except to the extent that enforceability may be limited by bankruptcy,    insolvency or other similar laws affecting creditors' rights generally and    by general principles of equity;  it has the right to deal with the Properties as herein    set forth; to the best of its knowledge, each mining claim forming part of    the Properties has been duly and properly issued and held in accordance with    the laws of the Province of Ontario and is in good standing;  except as described in Exhibit A, as at August 5, 2003    and to the best of its knowledge as at the date of this Agreement, it is the    sole recorded holder of the Properties and upon earn in by Richmont in    accordance with the terms hereof, will be in a position to convey its    interest herein to Richmont free and clear of any lien, encumbrance, claim    or agreement other than those agreements and matters described in Exhibit A;     there are no adverse claims to, or challenges against the    ownership of, or title to the Properties, nor to the knowledge of Patricia    is there any basis therefor, and there are no outstanding agreements or    options to acquire or purchase the Properties or any parts thereof and, save    and except as described in Exhibit A no person has any right, title or    interest in the Properties or any part thereof;  no proceedings are pending for, and Patricia is unaware    of any basis for, the institution of any proceedings leading to the    dissolution or winding up of Patricia or the placing of Patricia in    bankruptcy or the subjecting of Patricia to any other laws governing the    affairs of insolvent persons;  there is no litigation, suit, action, arbitration,    proceeding or claim whatsoever pending or in progress or to the best of its    knowledge threatened against Patricia which materially affects or might    materially affect the Properties or Patricia's interest therein or    Patricia's ability to carry out its obligations under this Agreement and, to    the best of Patricia's knowledge and belief, no event has occurred which    might result in any such litigation, suit, action, arbitration, proceeding    or claim being commenced with any reasonable likelihood of success;  the Properties are in compliance with all applicable    mining laws of the Province of Ontario including all applicable reclamation    and environmental laws, rules, regulations, orders, judgements and decrees;    and  the agreements listed on Exhibit A are in good standing and not in    default except as otherwise disclosed thereon. 
**2.2        Representations ofRichmont. 

Richmont represents and warrants to Patricia as follows, namely that: 

-  it is a corporation duly incorporated and in good    standing in its jurisdiction of incorporation and that it is duly qualified    to do business and is in good standing in those jurisdictions where    necessary in order to carry out the purposes of this Agreement;  it has the capacity to enter into and perform this    Agreement and all transactions contemplated herein and that all corporate    and other actions required to authorize it to enter into and perform this    Agreement have been properly taken;  the execution and delivery of this Agreement and    performance thereof by Richmont will not conflict with or breach any other    agreement or arrangement to which Richmont is a party or by which it is    bound;  this Agreement has been duly executed and delivered by    Richmont and is valid and binding upon it in accordance with its terms    except to the extent that enforceability may be limited by bankruptcy,    insolvency or other similar laws affecting creditors' rights generally and    by general principles of equity.  no proceedings are pending for, and Richmont is unaware    of any basis for, the institution of any proceedings leading to the    dissolution or winding up of Richmont or the placing of Richmont in    bankruptcy or the subjecting of Richmont to any other laws governing the    affairs of insolvent persons.  there is no litigation, suit, action, arbitration,    proceeding or claim whatsoever threatened to its best knowledge or pending    or in progress against Richmont which materially affects or which might    materially affect Richmont's ability to carry out its obligations under this    Agreement and to the best of Richmont's knowledge and belief, no event has    occurred which might result in any such litigation, suit, action,    arbitration, proceeding or claim being commenced with any reasonable    likelihood of success. **ARTICLE 3 CONDITIONS PRECEDENT 

3.1         Conditions Precedent in favour ofPatricia. 
The obligations of Patricia hereunder are subject to the satisfaction of thefollowing conditions precedent which shall be satisfied on or before September15, 2003: 
-  Patricia shall have completed on or before September 15,  2003 the share subscriptions of a minimum $1.8 million in the aggregate  excluding the subscriptions from Richmont;  Richmont shall have subscribed for $700,000 worth of common  shares of Patricia pursuant to the Flow Through Share Offering which  subscription shall be conditional upon Patricia achieving share subscriptions  of a minimum of $1.8 million in the aggregate excluding the subscriptions from  Richmont;  Subject to Patricia achieving the minimum subscription  referred to in (ii) above, Richmont shall have subscribed for a further  $300,000 worth of common shares of Patricia from treasury at a price of $0.50  per share; and 
-  The receipt by Patricia of TSX Venture Exchange approval.  It being understood and agreed that Richmont will forthwith provide to  Patricia for filing with the TSX Venture Exchange a duly executed Personal  Information Form and a Form 4C-Corporate Placee Registration form. **3.2         ConditionsPrecedent in favour of Richmont. 

The obligations of Richmont hereunder are subject to the following conditionsprecedent which shall be satisfied on or before September 15, 2003: 

(i) Patricia shall have completed on or before September 15, 2003 the FlowThrough Share Offering; 

(ii) Richmont shall have received from its counsel asatisfactory legal opinion in respect of the Properties and from counsel toPatricia a satisfactory legal opinion as to usual corporate matters subject toreasonable qualifications; and 

(iii) The receipt by Patricia of TSX Venture Exchange approval. 
**ARTICLE 4 COVENANTS OF PATRICIA 

4.1         Expenditure on Program. 
Subject to achieving minimum aggregate gross proceeds of    $2.5 million dollars in connection with the Flow Through Share Offering,    Patricia covenants and agrees to expend a minimum of $2.5 million dollars on    the Pre-Election Program which Patricia covenants and agrees to complete,    subject to obtaining all requisite permits, on or before October 1, 2004    subject to Force Majeure. All expenditures shall be incurred in respect of    the Pre-Election Program so as to comply with the covenants of Patricia    under the terms of the Flow Through Share Offering. 
**4.2         Design of Program.

Patricia covenants and agrees to consult and work with    Richmont in the design of the Pre-Election Program provided that the    ultimate determination of the Pre-Election Program shall be decided by    Patricia. 
**4.3         Reports on Programand Access to Data. 

Patricia covenants and agrees to provide Richmont full accessto all data produced from the PreElection Program and shall provide Richmont ona quarterly basis with written progress reports in respect of the progress ofthe work to date on such program. Within 60 days of completion of thePreElection Program, Patricia covenants and agrees to deliver in writing toRichmont, a full report on the results of such program. 
**ARTICLE 5 ACQUISITION OF INTEREST 

5.1      Grant of Option. 

Subject to satisfaction of the conditions precedent set  forth in section 3.1, Patricia hereby gives and grants to Richmont, effective  the date of completion and satisfaction of the aforesaid conditions precedent,  the sole and exclusive right and option to earn up to an undivided fifty-five  percent (55%) interest in the Properties, free and clear of all liens,  encumbrances, claims or agreements other than as described in Exhibit A. 
**5.2       Election of Richmont. 

Within 90 days immediately following receipt by Richmont of  the final report on the Pre-Election Program pursuant to section 4.3, Richmont  may elect by notice in writing delivered to Patricia to place the Properties  into Commercial Production and by such election shall, except as hereinafter  provided, have committed to incur in respect of the Commercial Production  Program, within 24 months immediately following the date of such notice,  expenditures in the sum of $10 million. Notwithstanding the foregoing, in the  event Richmont makes an election under section 5.6 hereof, then subject to  section 5.7 hereof, a minimum of $3 million of such sum shall, subject to  Force Majeure, be incurred within the first 12 months of such 24-month period  and a minimum of $5 million of such sum shall have been incurred within the  said 24 month period. For greater certainty and without limitation, it is  understood and agreed that Richmont shall earn no interest in the Venture  unless and until Richmont has incurred expenditures under the Commercial  Production Program of a minimum of $5 million (as set forth in section 5.6  hereof). 
**5.3       Design of CommercialProduction Program. 

Patricia and Richmont shall endeavour to work together and  to co-operate in the design of the Commercial Production Program provided that  the ultimate determination of such program shall be determined by Richmont and  all work and activities in respect of such program shall be managed and  conducted by Richmont. 
**5.4       Exclusive Right of Access.

During the currency of the Commercial Production Program,  Patricia hereby gives and grants to Richmont the sole and exclusive right to  enter upon the Properties and to have quiet and exclusive possession thereof  with full power and authority to Richmont, its servants, agents, workmen and  contractors to conduct such work and to complete such matters as are  contemplated by such program, including the right to erect, bring and install  on the Properties all such buildings, machinery, equipment and supplies as  Richmont shall deem necessary and proper. 
**5.5       Earning of Interest byRichmont. 

Richmont shall have earned its 55% undivided interest in the Properties  upon: 
- commencement of Commercial Production on the Properties, or    
-  upon completion of $10 million on capital expenditures    pursuant to the Commercial Production Program, notwithstanding that further    capital expenditures may be required to be incurred in order to commence    Commercial Production, or  in the event capital expenditures required to put the    Properties into Commercial Production under the Commercial Production    Program are less than $10 million, Richmont shall have earned its 55%    interest if Richmont shall have committed to incur capital expenditures    equal to the unspent balance of the $10 million committed under section 5.2    within, subject to Force 

Majeure, the next following 18 months of the date of the    expiry of the 24 month period referred to in section 5.2. Notwithstanding    the foregoing, Richmont may elect to extinguish its obligation to incur the    balance of the aforesaid capital expenditures by paying Patricia within the    aforesaid 18 months a sum equivalent to 45% of the unspent $10 million    commitment. 
**5.6       Earning of Reduced Interest byRichmont. 

In the event Richmont has given notice of its election to  put the Properties into Commercial Production under section 5.2 and has  incurred expenditures under the Commercial Production Program of $5 million of  which a minimum of $3 million has been incurred within 12 months of the date  of the election, subject to Force Majeure, and a minimum of $5 million has  been incurred, within 24 months of the date of election, subject to Force  Majeure, Richmont may elect, in writing, to cease further expenditures in  respect of such program and shall have earned at that time an undivided 25%  interest in the Properties for the minimum $5 million in expenditures and  shall receive an additional 1% interest for each $166,666.67 in expenditures  over $5 million incurred at the time of such election. 
**5.7       Extension of Election. 

In the event the price of gold as determined by the London  p.m. fix for a period of 90 consecutive days is less than CDN$475 per ounce at  any time during the 90-day period referred to in section 5.2, Richmont may  extend its obligation to elect to incur the required capital expenditure under  the Commercial Production Program and to extend the time for completion of  such program for up to a total of 12 months provided that it pays Patricia the  sum of $100,000 for each extension of a period of six months or less. 
**5.8       Joint Participation.

After Richmont has earned a fifty-five percent interest in  the Properties or has earned the interest in the Properties referred to in  section 5.6, the parties shall thereafter participate in the Venture in  carrying out all further work on the Properties all as hereinafter set out in  Articles 6 through 19 inclusive. 
**ARTICLE 6 RELATIONSHIP OF THE PARTICIPANTS 

6.1       No Partnership. 
Nothing contained in this Agreement shall be deemed to  constitute either Participant the partner of the other, nor except as  otherwise herein expressly provided, to constitute either Participant the  agent or legal representative of the other, nor to create any fiduciary  relationship between them. Neither Participant shall have any authority to act  for or to assume any obligation or responsibility on behalf of the other  Participant, except as otherwise expressly provided herein. The rights,  duties, obligations and liabilities of the Participants shall be several and  not joint or collective. Each Participant shall be responsible only for its  obligations as herein set out and shall be liable only for its share of the  costs and expenses as provided herein, it being the express purpose and  intention of the Participants that their ownership of Assets and the rights  acquired hereunder shall be as tenants in common. Each Participant shall  indemnify, defend and hold harmless the other Participant and its directors,  officers, employees, agents and attorneys (collectively, the  "Representatives") from and against any and all losses, claims, damages and  liabilities arising out of any act or any assumption of liability by the 

indemnifying Participant or any of its Representatives done  or undertaken, or apparently done or undertaken, on behalf of the other  Participant, except pursuant to the authority expressly granted herein or as  otherwise agreed in writing between the Participants. 
**6.2       Provincial Income Tax. 

To the extent permissible under applicable law, the relationship of the  Participants shall be treated for provincial income tax purposes in the same  manner as it is for federal income tax purposes. 
**6.3       Tax Returns. 

The Manager shall prepare and shall file, if required, any tax returns or  other tax forms on behalf of the Venture. 
**6.4     Other Business Opportunities. 

Except as expressly provided in this Agreement, each  Participant shall have the right independently to engage in and to receive  full benefits from business activities, whether or not competitive with the  Operations, without consulting the other. The doctrine of "corporate  opportunity" shall not be applied to any other activity, venture or operation  of either Participant and neither Participant shall have any obligation to the  other with respect to any opportunity to acquire any property outside the Area  of Interest at any time. Unless otherwise agreed in writing, neither  Participant shall have any obligation to mill, beneficiate or otherwise treat  any Products or any other Participant's share of Products in any facility  owned or controlled by such Participant. 
**6.5       Record Title. 

Title to the Properties shall be held in the name of the  Manager for the benefit of the Participants in accordance with their  Participating Interests. Title to all other Assets shall be held in the name  of the Manager for the benefit of the Participants in the Venture. 
**6.6       Waiver of Right to Partition.

The Participants hereby waive and release all rights of partition or of  sale in lieu thereof, or other division of Assets, including any such rights  provided by statute. 
**6.7       Transfer or Termination ofRights to Properties. 

Except as otherwise provided in this Agreement, neither Participant shall  Transfer all or any part of its interest in the Assets or this Agreement or  otherwise permit or cause such interests to terminate. 
**6.8       Implied Covenants. 

There are no implied covenants contained in this Agreement other than those  of good faith and fair dealing. 
**ARTICLE 7 CONTRIBUTIONS BY PARTICIPANTS 

7.1       Additional Cash Contributions. 

The Participants, subject to any election permitted by section 8.3, shall  be obligated to contribute funds to approved Programs and Budgets in  proportion to their respective Participating Interests. 
**7.2       Funding of Reclamationand Closure Costs. 

The Participants agree that if required by applicable  regulatory authorities, funds regularly shall be set aside by the Venture from  the date of its institution and continuing during the balance of the term of  this Agreement in an amount sufficient to meet reclamation and other closure  costs which are reasonably estimated to be required for reclamation and  closure for all Operations conducted during the currency of the Venture. If so  required by such applicable regulatory authorities, the Manager will  periodically, but not less frequently than once every year, estimate the  amount of funds which will be required for such purposes and will establish  the amount of annual funding required which, together with interest thereon,  will accumulate to such estimate. The estimated annual required funding shall  be made part of the Program and Budget and shall be satisfied by cash  contributions from the Participants or the posting of a letter of credit or  other form of surety, provided however, if a Participant posts a letter of  credit or other form of surety that Participant shall be obligated to make  additional contributions on an annual basis so that the value of the letter of  credit or other surety equals the value of a cash contribution plus interest  at the rate of return realized by investment of the cash contribution as  provided in this section 7.2. Funds will be deposited in an interest-bearing  escrow account or such other revenue generating investment account as the  Manager shall direct. Withdrawals from such accounts will be restricted to the  specified purpose of paying end of mine life reclamation and closure costs;  provided however that the Manager may, from time to time, use such funds to  perform reclamation that would otherwise have to be undertaken at the end of  Operations so long as the ability to fund all such reclamation is not  impaired. If any escrow funds remain after reclamation and closure obligations  have been fulfilled, they shall be distributed to the Participants in  proportion to the Participants ' Participating Interests at the time of  distribution. 
**7.3       Financing of Venture. 

Richmont covenants and agrees to provide or to arrange  financing of the Venture in respect of capital expenditures to be incurred by  the Venture in excess of the $10 million referred to in section 5.2 to a  maximum of a further $10 million. The Participants covenant and agree to  secure any such financing against the Assets. In the event Richmont, in its  sole discretion, arranges such financing from third party financial  institution(s), then Richmont shall use its good faith efforts to procure such  financing on the best available commercial terms. Additionally, in respect of  a financing to be provided by either Richmont or third party financial  institution(s), it is understood and agreed that Patricia shall only be  required (if at all) to provide a limited recourse guarantee limited to a  percentage of the loan that is equal to its pro rata share of the Venture  assets recourse to be limited to Patricia's interest in the Venture assets(and  no other assets). 
**ARTICLE 8 INTERESTS OF PARTICIPANTS 

8.1      Initial ParticipatingInterests. 
Subject to sections 5.5 and 5.6, the Participants shall have the following  Initial Participating Interests in the Venture: 

   Richmont-55%Patricia-45%   or     Richmont-25% + 1% for each      $166,666.67  expended by Richmont      in excess of $5  millionPatricia-75% - 1% for each      $166,666.67  expended by Richmont      in excess of $5  million
For greater certainty and without limitation, in the event  the provisions of section 5.6 are operative, the calculation of the initial  interests of the Participants shall be calculated as at the point in time at  which Richmont elects to cease to make further expenditures in accordance with  such section 5.6. Moreover, if in the event Richmont has given notice of its  election to put the Properties into Commercial Production under section 5.2  and has failed to incur expenditures under the Commercial Production Program  of $5 million, then Richmont shall be deemed to have irrevocably withdrawn  from the Venture and this Agreement shall forthwith be terminated without any  liability on the part of any party therefor. 
**8.2       Changes in ParticipatingInterests. 

A Participant's Participating Interest shall be changed as follows: 
-  Upon an election by a Participant pursuant to section 8.3    to contribute less than the percentage reflected by its Participating    Interest to Capital Expenditures which are a part of an approved Program and    Budget.  In the event of default by a Participant in making its agreed-upon    contribution to an approved Program and Budget, followed by an election by    the other Participant to invoke section 8.4(c). 
 
Transfer by a Participant of less than all its Participating Interest in    accordance with Article 17. 
 
Acquisition of less than all of the Participating Interest of the other    Participant, howsoever arising. 
**8.3       Voluntary Reduction inParticipation. 

A Participant may elect, as provided in section 11.4, to limit its  contributions to the Venture's Capital Expenditures which are a part of an  approved Program and Budget as follows: 
- to some lesser amount than its Participating Interest; or    
- not at all. 

In such event the Participating Interest of the Participant  shall be recalculated at the time of election by reducing such Participating  Interest by 1% for each $166,666 not contributed by such Participant in  respect of its Participating Interest provided always that such amount is  contributed by the other Participant. The Participating Interest of the other  Participant shall thereupon become the difference between 100% and the  recalculated Participating Interest. 
**8.4       Default in Meeting Cash Calls
-  If a Participant defaults in paying a cash call pursuant    to section 12.2 by written notice to the other Participant, given on not    more than 10 days' written notice after the cash call, the defaulting    Participant may elect that the dilution provisions of section 8.3 become    applicable. Failing such notice, the non-defaulting Participant in its sole    discretion, may advance the defaulted amount on behalf of the defaulting    Participant and treat the same, together with any accrued interest, as a    demand loan bearing interest from the date of the advance at the rate    provided in section 12.3. The failure to repay the loan upon demand shall be    a default as provided in section 8.4(b). Each Participant hereby grants to    the other a lien upon its interest in the Properties and a security interest    in its rights under this Agreement and in its Participating Interest in    other Assets and the proceeds therefrom, to secure any loan made hereunder,    including interest thereon, reasonable attorneys' fees and all other    reasonable costs and expenses incurred in recovering the loan with interest    and in enforcing such lien or security interest or both, the non-defaulting    Participant may elect the applicable remedy under section 8.4(a), 8.4(b) or    8.4(c), or, to the extent a Participant has a lien or security interest    under applicable law, it shall be entitled to its rights and remedies at law    and in equity. All such rights and remedies shall be cumulative. The    election of one or more remedies shall not waive the election of any other    remedies. Each Participant hereby irrevocably appoints the other its    attorney-in-fact to execute, file and record all instruments necessary to    perfect or effect the provisions hereof.  If a default in paying a loan is not cured within 60 days    after notice to the defaulting Participant of such default, the defaulting    Participant shall have until six months after such 60 days notice to cure    the default by paying to the non-defaulting Participant an amount equal to    the amount of the cash call for which the Participant is in default    multiplied by 2 (the "Damages Amount"). During the period of default    commencing after the initial 60-day period, the non-defaulting Participant    shall be entitled to the proceeds from the Participant's share of Products    to fund the amount required by the cash call, up to a maximum amount equal    to the Damages Amount. If such proceeds are sufficient to pay the entire    Damages Amount, the defaulting Participant shall be deemed to have cured the    default and shall owe nothing further to the non-defaulting Participant. If    such proceeds are insufficient to pay the entire Damages Amount, the    defaulting Participant may cure the default by paying to the non-defaulting    Participant the difference between the Damages Amount and the amount    received from such proceeds within the six-month period by the    non-defaulting Participant.  Subject to section 8.4(a), if a Participant defaults in    paying a cash call, in repaying a loan or in paying the Damages Amount, as    required hereunder, it will be difficult to measure the damages resulting    from any such default. In the event of any such default, as reasonable    liquidated damages and not as a penalty, the non-defaulting Participant with    respect to any such default not cured within the applicable six months    period, may elect to treat such default as a deemed withdrawal from the    Venture, whereupon the defaulting Participant's Participating Interest shall    terminate and shall be automatically relinquished to the non-defaulting    Participant; provided however, the defaulting Participant shall have the    right to 

receive only a 1.5% Net Smelter Return Royalty (calculated as provided in    Exhibit C) (the "NSR "). 
**8.5       Elimination of MinorityInterest. 

Upon the reduction of a Participant's Participating  Interest to less than 10% (either pursuant to section 8.3 and/or section 8.4)  such Participant shall be deemed to have withdrawn from this Agreement and  shall relinquish its entire Participating Interest and the withdrawing  Participant shall have the right to receive the NSR. 
**8.6       Continuing Liabilities UponAdjustments of Participating Interests. 

Any reduction of a Participant's Participating Interest  under this Article 8 shall not relieve such Participant of its share of any  liability, cost, penalty or fine, whether it accrues before or after such  reduction, arising out of Operations conducted prior to such reduction. For  purposes of this Article 8, such Participant's share of such liability shall  be equal to its Participating Interest at the time such liability was  incurred. The increased Participating Interest accruing to a Participant as a  result of the reduction of the other Participant's Participating Interest  shall be free of royalties, liens or other encumbrances arising by, through or  under such other Participant, other than those existing at the time the  Properties were acquired or those to which both Participants have given their  written consent. 
**ARTICLE 9 MANAGEMENT COMMITTEE 

9.1       Organization and Composition. 
The Participants hereby establish a Management Committee to  determine overall policies, objectives, procedures, methods and actions under  this Agreement. The Management Committee shall consist of two members  appointed by each of Richmont and Patricia. Each Participant may appoint one  or more alternates to act in the absence of a regular member. Any alternate so  acting shall be deemed a member. Appointments shall be made or changed by  notice to the other Participant. 
**9.2       Decision. 

Each Participant, acting through its appointed members,  shall have the number of votes on the Management Committee equal to its then  Participating Interest. Unless otherwise provided in this Agreement, decisions  of the Management Committee shall be determined by a majority vote. In the  event of a deadlock in voting at the Management Committee, the Manager shall  have a casting vote. 
**9.3       Meetings. 

The Management Committee shall hold regular meetings at  least bi-annually at the mine site unless otherwise agreed by the Participants  to review and approve Programs and Budgets submitted by the Manager. The  Manager shall give 30 days' notice to the Participants of all regular  meetings. Additionally, either Participant may call a special meeting upon 15  days' notice to the Manager and the other Participant. In case of emergency,  reasonable notice of a special meeting shall suffice. There shall be a quorum  if at least one member representing each Participant is present. In the event  a quorum is not present at the meeting the meeting shall be adjourned to a  date which is the fifth business day (being a day on which chartered banks in  the Province of Ontario are open for business) immediately following the date  of the meeting and at such meeting on such date there shall be a 

quorum if Participating Interests of at least 51% are  present at the meeting. Each notice of a meeting shall include an itemized  agenda prepared by the Manager in the case of a regular meeting or by the  Participant calling the meeting in the case of a special meeting, but any  matters may be considered with the consent of all Participants. The Manager  shall prepare minutes of all meetings and shall distribute copies of such  minutes to the Participants within 30 days after the meeting. Failure by a  Participant to sign or furnish written detailed notice of objection to the  minutes within 20 days after receipt from the Manager shall be deemed  acceptance of such minutes by the Participant. The minutes, when signed or  deemed accepted by all Participants, shall be the official record of the  decisions made by the Management Committee and shall be binding on the Manager  and the Participants. If personnel employed in Operations are required to  attend a Management Committee meeting, reasonable costs incurred in connection  with such attendance shall be a Venture cost. All other costs shall be paid by  the Participants individually. 
**9.4       Action Without Meeting. 

In lieu of meetings, the Management Committee may hold telephone  conferences, so long as all decisions are immediately confirmed in writing by  the Participants. 
**9.5       Matters Requiring UnanimousApproval. 

Except as otherwise provided by this Agreement, the Management Committee  shall have exclusive authority to determine all management matters related to  this Agreement. 

Notwithstanding any other provision of this Agreement, the following shall  require the unanimous approval of the Management Committee: 
- Any Program and Budget proposing an increase in operating costs of more    than 25% over the previous approved Program and Budget. 
- Changing the fiscal year end of the Venture. 
- Selling all or substantially all of the Properties. 
- Entering into any related party transaction. 
-  Entering into any acquisition or investment other than in    the ordinary course of business. Disposing of any material property or assets other than    in the ordinary course of business. Executing and delivering any agreement with respect to    the Properties. 
The matters set forth in this section shall not require the unanimous  approval of the Management Committee if one Participant's Participating  Interest becomes less than 20%. 
**ARTICLE 10 MANAGER 

10.1      Appointment. 

So long as Richmont holds a minimum of a 50% Participating  Interest in the Venture, Richmont shall be entitled to be and is hereby  appointed to be the Manager. The Manager shall be in charge of all day-to-day  operations in connection with the Venture including carrying out all Programs  and Budgets, which will be prepared by the Manager and ratified by the  Management Committee as herein provided. 
**10.2     Powers and Duties of Manager. 

Subject to the general oversight and direction of the  Management Committee, the Manager is vested with the full authority to manage  and carry out the day to day management of the Venture and to conduct all  Operations pursuant to the terms of this Agreement. Without limiting the  generality of the foregoing but subject to section 9.5, the Manager shall have  the following powers and duties: 
- The Manager shall manage, direct and control Operations.    
-  The Manager shall implement the decisions of the    Management Committee, shall make all expenditures necessary to carry out    approved Programs and Budgets and shall promptly advise the Management    Committee if it lacks sufficient funds to carry out its responsibilities    under this Agreement.  The Manager shall: (i) purchase or otherwise acquire all    material, supplies, equipment, water, utility and transportation services    required for Operations, such purchases and acquisitions to be made on the    best terms available, taking into account all of the circumstances; (ii)    obtain such customary warranties and guarantees as are available in    connection with such purchases and acquisitions; and (iii) keep the Assets    free and clear of all liens and encumbrances, except for those existing at    the time of, or created concurrent with, the acquisition of such Assets, or    mechanic's or materialmen's liens which shall be released or discharged in a    diligent manner, or liens and encumbrances specifically approved by the    Management Committee  The Manager shall conduct such title examinations and cure such title    defects as may be advisable in the reasonable judgment of the Manager. 
 
The Manager shall: (i) make or arrange for all payments    required by leases, licenses, permits, contracts and other agreements    related to the Assets; (ii) pay all taxes, assessments and like charges on    Operations and Assets except taxes determined or measured by a Participant's    sales revenue or net income. If authorized by the Management Committee, the    Manager shall have the right to contest in the courts or otherwise, the    validity or amount of any taxes, assessments or charges if the Manager deems    them to be unlawful, unjust, unequal or excessive, or to undertake such    other steps or proceedings as the Manager may deem reasonably necessary to    secure a cancellation, reduction, readjustment or equalization thereof    before the Manager shall be required to pay them, but in no event shall the    Manager permit or allow title to the Assets to be lost as the result of the    non-payment of any taxes, assessments or like charges; and (iii) do all    other acts reasonably necessary to maintain the Assets.  The Manager shall: (i) apply for all necessary permits,    licenses and approvals; (ii) use reasonable best efforts to comply with    applicable federal, provincial, municipal and local laws and regulations;    (iii) notify promptly the Management Committee of any allegations of    substantial violation thereof; and (iv) prepare and file all reports or    notices required for Operations. 
-  The Manager shall prosecute and defend, but shall not    initiate without the consent of the Management Committee, all litigation or    administrative proceedings arising out of Operations. The non-managing    Participant shall have the right to participate, at its own expense, in such    litigation or administrative proceedings. The non-managing Participant shall    approve in advance any settlement involving payments, commitments or    obligations in excess of $1,000,000 in cash or value.  The Manager may dispose of Assets, whether by    abandonment, surrender or Transfer in the ordinary course of business,    except that Properties may be abandoned or surrendered only as provided in    Article 16. However, without prior authorization from the Management    Committee, the Manager shall not; (i) dispose of Assets in any one    transaction having a value in excess of $500,000; or (ii) enter into any    sales contracts or commitments for Products, except as permitted in section    13.2  The Manager shall have the right to carry out its responsibilities    hereunder through agents, Affiliates or independent contractors. 
 
The Manager shall perform or cause to be performed during    the term of this Agreement all assessment and other work required by law and    pay all rental fees or other charges required by law in order to maintain    the unpatented mining claims included within the Properties. The Manager    shall have the right to perform the assessment work or pay the fees required    in lieu thereof. The Manager shall not be liable on account of any    determination by any court or governmental agency that the work performed by    Manager does not constitute the required annual assessment work or occupancy    for the purposes of preserving or maintaining ownership of the claims,    provided that the work done is in accordance with the adopted Program and    Budget. The Manager shall timely record with the appropriate county and file    with the appropriate authorities affidavits in proper form attesting to the    performance of assessment work or notices of intent to hold in proper form    or notice of payment of annual rental fees and allocating therein, to or for    the benefit of each claim, at least the minimum amount of assessment work or    rental fee required by law to maintain such claim or site.  The Manager may; (i) locate, amend or relocate any    unpatented mining claim or mill site or tunnel site; (ii) locate any    fractions resulting from such amendment or relocation; (iii) apply for    patents or mining leases or other forms of mineral tenure for any such    unpatented claims or sites; (iv) abandon any unpatented mining claims for    the purpose of locating mill sites or otherwise acquire from the Crown    rights to the ground covered thereby; (v) abandon any unpatented mill sites    for the purpose of locating mining claims or otherwise acquire from the    Crown rights to the ground covered thereby; (vi) exchange with or convey to    the Crown or other parties any of the Properties for the purpose of    acquiring rights to the ground covered thereby or other adjacent ground; and    (vii) convert any unpatented claims or mill sites into one or more leases or    other forms of mineral tenure pursuant to any federal or provincial law    hereafter enacted.  The Manager shall keep and maintain all required    accounting and financial records pursuant to the Accounting Procedure and in    accordance with customary cost accounting practices in the mining industry.     The Manager shall keep the Management Committee advised    of all Operations by submitting in writing to the Management Committee: (i)    monthly progress reports which include statements of expenditures and    comparisons of such expenditures to the adopted Budget 

within 15 days of the end of each month and a full report    annually with respect to activities on the Properties within 60 days of the    end of each year; (ii) periodic summaries of data required; (iii) copies of    reports concerning Operations; (iv) a detailed final report within 90 days    after completion of each Program and Budget, which shall include comparisons    between actual and budgeted expenditures and comparisons between the    objectives and results of Programs; (v) any activities undertaken pursuant    to section 10.2(1); and (vi) such other reports as the Management Committee    may reasonably request. At all reasonable times the Manager shall provide    the Management Committee or the representative of any Participant, upon the    request of any member of the Management Committee, access to and the right    to inspect and copy all maps, drill logs, core tests, reports, surveys,    assays, analyses, production reports, operations, technical, accounting and    financial records and other information acquired in Operations. In addition,    the Manager shall allow the non-managing Participant, at the latter's sole    risk and expense and subject to reasonable safety regulations, to inspect    the Assets and Operations at all reasonable times, so long as the inspecting    Participant does not unreasonably interfere with Operations. 
-  The Manager shall undertake all other activities    reasonably necessary to fulfill the foregoing enumerated powers and shall    undertake and is hereby empowered on behalf of the Venture to take all such    other actions and do all such other things as are reasonably necessary to    advance and foster the business of the Venture.  The Manager shall cause to be paid from the Joint Account    all workmen and wage earners employed by it or its contractors in connection    with the Venture and for all materials and services purchased in connection    therewith, except for claims for, without limitation, wages or materials    which the Manager is contesting in good faith. Operations generally will be    carried out by employees of the Manager appointed pursuant to Article 10.    Expenses related to employees of the Manger directly engaged in Operations    shall be charged to the Joint Account as provided in Exhibit B. 
The Manager shall not be in default of any duty under this  section 10.2 if its failure to perform results from the failure of the  non-managing Participant to perform acts or to contribute amounts required of  it by this Agreement. 
**10.3     Standard of Care. 

The Manager shall conduct all Operations in a good,  workmanlike and efficient manner, in accordance with sound mining and other  applicable industry standards and practices and in material compliance with  the terms and provisions of leases, licenses, permits, contracts and other  agreements pertaining to Assets. The Manager shall not be liable to the  non-managing Participant for any act or omission resulting in damage, loss,  cost, penalty or fine, except to the extent caused by the Manager's wilful  misconduct or gross negligence. 

**10.4     Resignation: Deemed Offer to Resign. 

The Manager may resign upon two months' prior written  notice to the other Participant, in which case the other Participant may elect  to become the new Manager by notice to the resigning Participant within 30  days after the notice of resignation. If any of the following shall occur, the  Manager shall be deemed to have offered to resign, which offer shall be  accepted by the other Participant, if at all, within 90 days following such  deemed offer and in the absence of written acceptance by the other  Participant, the Manager shall continue to be Manager: 
- The Participating Interest of the Manager becomes less than 50% and any  other Participant holds a Participating Interest greater than the Manager.    
-  The Manager fails to perform a material obligation imposed  upon the Manager under this Agreement and fails within 60 days to commence  curing or contest the default within 30 days after notice from the other  Participant demanding performance.  If the Manager becomes insolvent, bankrupt or is placed in receivership,  it shall be deemed to have resigned without any action by the other  Participant. 
**10.5     Payments to Manager. 

The Manager shall be entitled to charge to the Joint  Account all time expended by its employees on Venture matters at a fair and  reasonable cost and shall be entitled to be reimbursed for all out-of-pocket  expenses incurred in carrying out its responsibilities as Manager. Effective  upon the commencement of Commercial Production, the Manager shall be entitled  to receive a management fee equal to CDN$200,000 per annum, to be paid in two  equal instalments semi-annually. 
**10.6     Transactions with Affiliates. 

If the Manager engages Affiliates to provide services hereunder, it shall  do so on terms no less favourable to the Venture than would be the case with  unrelated persons in arm's-length transactions. 
**10.7     Activities Pending Adoption of NewProgram and Budget. 

If the Management Committee for any reason fails to adopt a  Program and Budget, subject to the contrary direction of the Management  Committee and to the receipt of necessary funds, the Manager shall continue  Operations at levels comparable with the last adopted Program and Budget. For  purposes of determining the required contributions of the Participants and  their respective Participating Interests, the last adopted Program and Budget  shall be deemed extended. 
**10.8    Financial Benefit. 

For greater certainty and without limitation, it is  understood and agreed that, subject to the provisions of section 10.5, each  Participant shall derive its financial benefit from the Venture as and by way  of its Participating Interest and benefits accruing thereto and not by means  of fees or other charges made to or as against or in respect of the Venture.  

**ARTICLE 11 PROGRAMS AND BUDGETS 

11.1     Operations Pursuant to Programs and Budgets. 
Except as otherwise provided in section 11.6 and Article 15, Operations  shall be conducted, expenses shall be incurred, and Assets shall be acquired  only pursuant to approved Programs and Budgets. 
**11.2    Presentation of Programs and Budgets. 

Proposed Programs and Budgets shall be prepared by the  Manager for a period of one year unless a longer period is agreed to by all  Participants. Each approved Program and Budget, regardless of length of time,  shall be reviewed at least once a year at a meeting of the Management  Committee. During the period encompassed by any Program and Budget and at  least two months prior to its expiration, a proposed Program and Budget for  the succeeding period shall be prepared by the Manager and submitted to the  Participants. 
**11.3     Review and Approval of Proposed Programsand Budgets. 

Within 30 days after submission of a proposed Program and Budget, each  Participant shall submit to the Management Committee: 
- notice that the Participant approves the proposed Program and Budget; or       
- proposed modifications of the proposed Program and Budget; or    
- notice that the Participant rejects the proposed Program and Budget.    

If a Participant fails to give any of the foregoing  responses within the allotted time, the failure shall be deemed to be an  approval by the Participant of the Manager's proposed Program and Budget. If a  Participant makes a timely submission to the Management Committee pursuant to  section 11.3(b) or (c), then the Management Committee shall meet to consider  and develop a Program and Budget acceptable to the Participants. If the  Management Committee does not unanimously approve a proposed Program and  Budget within 30 days after the Manager's receipt of a notice pursuant to  section 11.3(b) or (c), a proposed Program and Budget may be approved by a  majority vote of the Management Committee. 

If a Program and Budget is subsequently modified to  decrease expenditures by 15% or more from the Program and Budget as originally  approved, the non-contributing or partially-contributing Participant, as the  case may be, shall have the right to contribute the difference between the  amount, if any, already contributed and its full share, based on its  Participating Interest prior to the reduction, of the modified Program and  Budget and thereby avoid any reduction in its Participating Interest. The  Manager shall, at such time as it becomes aware that expenditures for the  Budget will be 75% or less than that as originally adopted, notify the  non-contributing or partially-contributing Participant. The noncontributing or  partially-contributing Participant may within 30 days thereafter notify the  Manager of its election to contribute to its full share of the modified  Program and Budget. Such notice shall include full payment of the  non-contributing or partially-contributing Participant's share of the modified  Program and Budget to the date of the payment. 

Notwithstanding any other provision of this Agreement, any proposal by the  Manager to shutdown Operations when the forecasted losses of the Venture for  the one year period following the proposed 

shutdown are less than the closure and holding costs of the Venture for the  same period shall require the approval of the Management Committee. 
**11.4     Election to Participate. 

By notice to the Management Committee within 20 days after  the final vote approving a Program and Budget or deemed approval of a Program  and Budget a Participant may elect to contribute to Capital Expenditures which  are a part of such Program and Budget in some lesser amount than its  respective Participating Interest, or not at all, in which case its  Participating Interest shall be recalculated as provided in Article 8. If a  Participant fails to so notify the Management Committee, the Participant shall  be deemed to have elected to contribute to such Program and Budget in  proportion to its respective Participating Interest as of the beginning of the  period covered by the Program and Budget. Notwithstanding the foregoing, in  the event the Venture has fully utilized the $10.0 million loan either loaned  by or arranged by Richmont pursuant to the provisions of section 7.3 and a  Program and Budget recommends a further total expenditure of in excess of  $10.0 million, the time required under this section to elect to participate  shall at the option of a Participant be extended up to nine (9) months from  the date of the final vote to permit such party to obtain an independent  bankable feasibility study and to arrange financing. 
**11.5     Budget Overruns; Program Changes. 

The Manager shall immediately notify the Management  Committee of any material departure from an adopted Program and Budget. The  Manager may not exceed an approved Program and Budget by more than 15% without  the approval of the Management Committee. If the Manager does exceed an  approved Program and Budget by more than 15% without the approval of the  Management Committee, the Manager shall be solely responsible for the costs  associated with exceeding the approved Program and Budget by more than 15%.  
**11.6     Emergency or Unexpected Expenditure. 

In case of emergency, the Manager may take any reasonableaction it deems necessary to protect life, limb or property, to protect theAssets or to comply with law or government regulation. The Manager may also makereasonable expenditures for unexpected events which are beyond its reasonablecontrol and which do not result from a breach by it of its standard of care. TheManager shall promptly notify the Participants of the emergency or unexpectedexpenditure and the Manager shall be reimbursed for all resulting costs by theParticipants in proportion to their respective Participating Interests at thetime the emergency or unexpected expenditures are incurred. 
**ARTICLE 12 ACCOUNTS AND SETTLEMENTS 

12.1     Monthly Statements. 
The Manager shall promptly submit to the Management Committee monthly  statements of account reflecting in reasonable detail the charges and credits  to the Joint Account during the preceding month. 
**12.2     Cash Calls. 

On the basis of the approved Program and Budget, the Manager shall submit  to each Participant prior to the last day of each month, a billing for  estimated cash requirements for the next month. Within 10 

days after receipt of each billing, each Participant shall  advance to the Manager its proportionate share of the estimated amount. The  Manager shall promptly submit to each Participant billings for all other  authorized expenditures as they are incurred. Time is of the essence in  payment of such billings. 
**12.3     Failure to Meet Cash Calls. 

A Participant that fails to meet cash calls in the amount  and at the times specified in section 12.2 shall deemed to be in default of  its obligations under this Agreement and the amounts of the defaulted cash  call shall bear interest from the date due at an annual rate equal to two  percentage points over the Prime Rate, but in no event shall the rate of  interest exceed the maximum permitted by law. The non-defaulting Participant  shall have those rights, remedies and elections specified in section 8.4. 
**12.4     Audits. 

Upon request made by any Participant within 12 months  following the end of the calendar year (or , if the Management Committee has  adopted an accounting period other than the calendar year, within 12 months  after the end of such period), the Manager shall order an audit of the  accounting and financial records for such calendar year (or other accounting  period). The cost of such audit shall be charged to the Joint Account. All  written exceptions to and claims upon the Manager for discrepancies disclosed  by such audit shall be made not more than three months after receipt of the  audit report. Failure to make any such exception or claim within the  three-month period shall mean the audit is correct and binding upon the  Participants. The audits shall be conducted by a firm of certified public  accountants selected by unanimous vote of the Management Committee. 
**ARTICLE 13 DISPOSITION OF PRODUCTION 

13.1     Proceeds of Production. 
Proceeds of production shall be distributed, or if a  Participant elects to take in kind or separately dispose of its share of all  Products, Richmont shall be entitled to 70% and Patricia to 30% of all  proceeds of production or all Products, as the case may be, in each case, net  of all costs (i.e. net cash flow) until Richmont has recovered all its initial  expenditures pursuant to section 5.2 or 5.6 as the case may be, after which  time, each of Richmont and Patricia shall be entitled to their share of  Products based on their respective Participating Interests. Calculations as to  the amount recouped by Richmont on account of its initial maximum $10 million  expenditures (or such lesser amount pursuant to section 5.6 hereof) shall be  based on the London p.m. fix of gold as at each applicable delivery date. The  Manager shall send each calculation to the Participants as at each such  delivery date and Patricia shall have 10 days to dispute the calculation. If  the other Participant shall not dispute such calculation within the said 10  day period, the other Participant shall be deemed to have accepted the one  applicable calculation. If the other Participant shall dispute such  calculation, the matter shall be referred to arbitration in accordance with  the provisions of section 19.9. Any extra expenditure incurred in the taking  in kind or separate disposition by any Participant of its proportionate share  of Products shall be borne by such Participant. Nothing in this Agreement  shall be construed as providing, directly or indirectly, for any joint or  cooperative marketing or selling of Products or permitting the processing of  Products of any parties other than the Participants at any processing  facilities constructed by the Participants pursuant to this Agreement. The  Manager shall give the Participants notice at least 10 days in advance of the  delivery date upon which their respective share of Products will be available.  

**13.2     Failure of Participant to Take in Kind.

If a Participant elects to take in kind but fails to so  take, the Manager shall have the right, but not the obligation, for a period  of time consistent with the minimum needs of the industry, but not to exceed  one year, to purchase the Participant's share for its own account or to sell  such share as agent for the Participant at not less than the prevailing market  price in the area. Subject to the terms of any such contracts of sale then  outstanding, during any period that the Manager is purchasing or selling a  Participant's share of production, the Participant may elect by notice to the  Manager to take in kind. The Manager shall be entitled to deduct from proceeds  of any sale by it for the account of a Participant reasonable expenses  incurred in such a sale. 
**ARTICLE 14 WITHDRAWAL AND TERMINATION 

14.1     Termination by Expiration or Agreement.
This Agreement shall terminate as expressly provided in this Agreement,  unless earlier terminated by written agreement of all Participants. 
**14.2     Withdrawal. 

A Participant may elect to withdraw as a Participant from  this Agreement by giving notice to the other Participant of the effective date  of withdrawal, which shall be the later of the end of the then current Program  and Budget or at least 30 days after the date of the notice. Upon such  withdrawal, this Agreement shall terminate and the withdrawing Participant  shall be deemed to have transferred to the remaining Participant, without cost  and free and clear of royalties, liens or other encumbrances arising by,  through or under such withdrawing Participant, except those exceptions  existing as at the date of the execution and delivery of this Agreement and  those to which both Participants have given their written consent after the  date of this Agreement, all of its Participating Interest in the Assets and in  this Agreement. Notwithstanding the foregoing, a Participant holding a 1.5%  NSR shall retain the 1.5% NSR. No withdrawal under this section 14.2 shall  relieve the withdrawing Participant of its share of liabilities, costs,  penalties or fines to federal, provincial, municipal or local government or to  third persons (whether such accrues before or after such withdrawal) arising  out of Operations conducted prior to such withdrawal. For purposes of this  section 14.2, the withdrawing Participant's share of such liabilities shall be  equal to its Participating Interest at the time such liability, cost, penalty  or fine was incurred. 
**14.3     Continuing Obligations. 

On termination of this Agreement under section 14.1, the  Participants shall each remain liable for all continuing obligations hereunder  until final settlement of all accounts and for any liability, whether it  accrues before or after termination, if it arises out of Operations during the  term of the Agreement. 
**14.4     Disposition of Assets on Termination. 

Promptly after termination under section 14.1, the Manager  shall take all action necessary to wind up the activities of the Venture and  all costs and expenses incurred in connection with the termination of the  Venture shall be expenses chargeable to the Venture. Any Participant that has  a negative capital account balance when the Venture is terminated for any  reason shall contribute to the Assets of the Venture an amount sufficient to  raise such balance to zero. The Assets shall first be paid, applied or 

distributed in satisfaction of all liabilities of the  Venture to third parties and then to satisfy any debts, obligations, or  liabilities owed to the Participants. Before distributing any funds or Assets  to Participants, the Manager shall have the right to segregate amounts which  in the Manager's reasonable judgment are necessary to discharge continuing  obligations or to purchase for the account of Participants, bonds or other  securities for the performance of such obligations. The foregoing shall not be  construed to include the repayment of any Participant's capital contributions.  Thereafter, any remaining cash and all other Assets shall be distributed (in  undivided Interests unless otherwise agreed) to the Participants in proportion  to their respective Participating Interest, first in the ratio and to the  extent of their respective capital accounts and then in proportion to their  respective Participating Interests, subject to any dilution, reduction or  termination of such Participating Interests as may have occurred pursuant to  the terms of this Agreement. No Participant shall receive a distribution of  any interest in Products or proceeds from the sale thereof if such  Participant's Participating Interest therein has been terminated pursuant to  this Agreement. 
**14.5     Right to Data After Termination. 

After termination of this Agreement pursuant to section  14.1, each Participant shall be entitled to copies of all information acquired  hereunder before the effective date of termination not previously furnished to  it, but a terminating or withdrawing Participant shall not be entitled to any  such copies after any other termination or any withdrawal. 
**14.6     Continuing Authority. 

On termination of this Agreement under section 14.1 or the  deemed withdrawal of a Participant pursuant to section 8.4(c) or 8.5 or the  withdrawal of a Participant pursuant to section 14.2, the Manager shall have  the power and authority, subject to control of the Management Committee, if  any, to do all things on behalf of the Participants which are reasonably  necessary or convenient to: (a) wind up Operations; and (b) complete any  transaction and satisfy any obligation, unfinished or unsatisfied, at the time  of such termination or withdrawal, if the transaction or obligation arises out  of Operations prior to such termination or withdrawal. The Manager shall have  the power and authority to grant or receive extensions of time or change the  method of payment of an already existing liability or obligation, prosecute  and defend actions on behalf of the Participants and the Venture, mortgage  Assets and take any other reasonable action in any matter with respect to  which the former Participants continue to have, or appear or are alleged to  have, a common interest or a common liability. 
**ARTICLE 15 ACQUISITIONS WITHIN AREA OF INTEREST 

15.1     General. 
Any interest or right to acquire any interest in real  property, water, water rights or a royalty interest (a "Property Interest")  wholly or partially within the Area of Interest acquired during the term of  this Agreement by or on behalf of a Participant or any Affiliate shall be  subject to the terms and provisions of this Agreement. 
**15.2     Notice of Acquisition. 

If either Participant acquires during the term of this  Agreement any mineral property which lies wholly or partly within the Area of  Interest, the acquiring Participant shall within 30 days of such acquisition  give notice of such acquisition or right to the same to the other Participant  together with copies of all 

related geological and other data in its possession and  such other Participant shall have the right during the 30 days next following  the receipt of such notice and data, by written notice to the acquiring  Participant, to elect that such mineral interest be included as part of the  Properties hereunder. Failure to provide such notice to the acquiring  Participant shall be deemed to constitute an election by the other Participant  that such mineral property not be included as part of the Properties. Any  agreement entered into by the acquiring Participant for the acquisition of a  mineral interest within the Area of Interest shall contain a term permitting  the disposition of an interest therein to the other Participant. If the other  Participant elects that such mineral property not be included as part of the  Properties, the acquiring Participant shall be free to deal with such mineral  properties as it sees fit, free of any obligations contained in this  Agreement. If the other Participant elects that such mineral properties shall  be included as part of the Properties, all acquisition costs incurred (or the  cash equivalent thereof) with respect to such mineral property shall be  included as part of a Program and Budget. 
**ARTICLE 16 ABANDONMENT AND SURRENDER OF PROPERTIES 

16.1     Surrender or Abandonment of Property. 
The Management Committee may authorize the Manager to  surrender or abandon part or all of the Properties consistent with the terms  and conditions of any agreement under which such portion or portions of the  Properties were acquired. If the Management Committee authorizes any such  surrender or abandonment over the objection of a Participant, the Participant  that desires to abandon or surrender shall assign to the objecting  Participant, by quitclaim deed and without cost to the surrendering  Participant, all of the surrendering Participant's interest in the property to  be abandoned or surrendered and the abandoned or surrendered property shall  cease to be part of the Properties. 
**ARTICLE 17 TRANSFER OF INTEREST 

17.1     General. 
A Participant shall have the right to Transfer to any third party its  interest in or to this Agreement, its Participating Interest, the NSR or the  Assets solely as provided in this Article 17. 
**17.2     Limitations on Free Transferability. 

The Transfer right of a Participant in section 17.1 shall be subject to the  following terms and conditions: 
-  Subject to section 17.3 and section 17.4 a Participant    may only transfer all of its interest in or to this Agreement, its    Participating Interest, the NSR or the Assets and only in compliance with    the provisions of this Article 17.  No transferee of all or any part of the interest of a    Participant in this Agreement, any Participating Interest, the NSR or the    Assets shall have the rights of a Participant unless and until the    transferring Participant has provided to the other Participant notice of the    Transfer and except as provided in sections 17.2(f) and 17.2(g), the    transferee, as of the effective date of the Transfer, has committed in    writing to be bound by this Agreement to the same extent as the transferring    Participant or NSR owner. 
-  No Transfer permitted by this Article 17 shall relieve    the transferring Participant of its share of any liability, cost, penalty or    fine whether accruing before or after such Transfer, which arises out of    Operations conducted prior to such Transfer.  The transferring Participant and the transferee shall bear all tax    consequences of the Transfer. 
 
No Participant shall Transfer any interest in this Agreement or the    Assets except as contemplated by sections 17.2(f), 17.2(g) or by Transfer of    all of its Participating Interest. 
 
If the Transfer is the grant of a security interest by    mortgage, deed of trust, pledge, lien or other encumbrance of any interest    in this Agreement, any Participating Interest or the Assets to secure a loan    or other indebtedness of a Participant in a bona fide transaction, such    security interest shall be subordinate to the terms of this Agreement and    the rights and interests of the other Participant hereunder. Upon any    foreclosure or other enforcement of rights in the security interest, the    acquiring third party shall be deemed to have assumed the position of the    encumbering Participant with respect to this Agreement and the other    Participant and it shall comply with and be bound by the terms and    conditions of this Agreement.  If a sale or other commitment or disposition of Products    or proceeds from the sale of Products by a Participant upon distribution to    it pursuant to Article 13 creates in a third party a security interest in    Products or proceeds therefrom prior to such distribution, such sale,    commitment or disposition shall be subject to the terms and conditions of    this Agreement.  Only Canadian currency shall be used for Transfers for consideration.    
 
Notwithstanding the provisions of section 17.3, any    Transfer of all of a Participant's interest in or to this Agreement, its    Participating Interest, the NSR or the Assets, (except for a Transfer    consummated in accordance with the provisions of section 17.4) shall be    subject to the prior written approval of the other Participant, such    approval not to be unreasonably withheld or delayed. **17.3     Pre-emptive Right. 

Except as otherwise provided in section 17.4, if a  Participant desires to Transfer all of its interest in this Agreement, the NSR,  its Participating Interest or the Assets, the other Participant shall have a  preemptive right to acquire such interests as provided in this section 17.3  and subject to section 17.2(i). 
-  A Participant wishing to Transfer all of its interest in    this Agreement, the NSR, its Participating Interest or the Assets shall    promptly notify the other Participant of its intensions. The notice shall    state the price and all other pertinent terms and conditions upon which the    Participant wishes to complete the Transfer. The other Participant shall    have 20 days from the date such notice is delivered to notify the    transferring Participant whether it elects to acquire the offered interest    at the price and on the terms and conditions set forth in the notice. If it    does so elect, the Transfer shall be consummated promptly after notice of    such election is delivered to the transferring Participant.  If the other Participant fails to so elect within the    period provided for in section 17.3(a), subject to the provisions of section    17.2(i) the transferring Participant shall have 180 days following the    expiration of such period to consummate the Transfer to a third party at a    price and on terms no less favourable than those offered by the transferring    Participant to the other Participant in the notice required in section    17.3(a). 
-  If the transferring Participant fails to consummate    the Transfer to a third party within the period set forth in section    17.3(b), the pre-emptive right of the other Participant in such offered    interest shall be deemed to be revived. Any subsequent proposal to Transfer    such interest shall be conducted in accordance with all of the procedures    set forth in this section 17.3.  If the other Participant fails to so elect within the    period provided for in article 17.3(a), the transferring Participant shall    have the right to require the other Participant to sell all of its interest    in this Agreement, its Participating Interest or the Assets, on identical    terms, to the third party to whom the transferring Participant proposes to    sell its interest, by providing the other Participant with 60 days' prior    written notice of such forced sale of its interest.  If the transferring Participant does not provide the    other Participant with 60 days, prior written notice of its option to elect    such forced sale of its interest, the other Participant shall have the right    to elect to "piggy back" its interest in this Agreement, its Participating    Interest or the Assets and to have its interest sold on terms identical to    the transferring Participant, by providing the transferring Participant with    written notice of such exercise of the piggy back right within 30 days after    such 60 day notice period has expired. **17.4     Exceptions to Pre-emptive Right. 

Section 17.3 shall not apply to the following: 
- Transfer by a Participant of all or any part of its interest in its    Participating Interest to an Affiliate.    
-  Corporate merger, consolidation, amalgamation or    reorganization of a Participant by which the surviving entity shall possess    substantially all of the stock or all of the Property rights and interests    and be subject to substantially all of the liabilities and obligations of    that Participant. The grant by a Participant of a security interest in any    interest in this Agreement, any Participating Interest, or the Assets by    mortgage, deed of trust, pledge, lien or other encumbrance.  A sale or other commitment or disposition of Products or proceeds from    sale of Products by a Participant upon distribution to it pursuant to    Article 13. 
**ARTICLE 18 CONFIDENTIALITY 

18.1     General. 
The financial terms of this Agreement and all information    obtained in connection with the performance of this Agreement shall be the    confidential, exclusive property of the Participants and, except as provided    in section 18.2, shall not be disclosed by the parties to this Agreement or    their affiliates to any third party or the public without the prior written    consent of the other parties which consent shall not be unreasonably    withheld. 
**18.2     Exceptions. 

The consent required by section 18.1 shall not apply to a disclosure: 
- To an Affiliate, consultant, contractor or subcontractor that has a bona    fide need to be informed.    
-  To any third party to whom the disclosing Participant    contemplates a Transfer of all or any part of its interest in or to this    Agreement, the NSR, its Participating Interest or the Assets, as provided in    this Agreement.  To a governmental agency or to the public which the disclosing    Participant believes in good faith is required by pertinent law or    regulation or the rules of any stock exchange. 

In any case to which this section 18.2 is applicable, the  disclosing Participant shall give notice to the other Participant concurrently  with the making of such disclosure. As to any disclosure pursuant to section  18.2(a) or (b), only such confidential information as such third party shall  have a legitimate business need to know shall be disclosed and such third  party shall first agree in writing to protect the confidential information  from further disclosure to the same extent as the Participants are obligated  under this Article 18. 
**18.3     Duration of Confidentiality. 

The provisions of this Article 18 shall apply during the  term of this Agreement and for two years following termination of this  Agreement pursuant to section 14.1 and shall continue to apply to any  Participant who withdraws, who is deemed to have withdrawn, or who Transfers  its Participating Interest, for three years following the date of such  occurrence. 
**ARTICLE 19 GENERAL PROVISIONS 

19.1        Notices. 
All notices, payments and other required communications ("Notices") to the  Participants shall be in writing, and shall be addressed respectively as  follows: 
If to        Richmont:110        Avenue Principale        Rouyn-Noranda, QuebecJ9X        4P2        Attention: Louis Dionne        Facsimile: 819-797-0166with a        copy to:        Aylesworth Thompson Phelan O'Brien LLP Ernst        & Young Tower         Toronto Dominion Centre 18th        Floor, 222 Bay Street         Toronto, Ontario M5K 1H1           Attention: James W. Spence         Facsimile: 416-865-1398
If to        Patricia:100        Adelaide Street West Suite        405         Toronto, Ontario M5H 1S3           Attention: Richard H. Sutcliffe           Facsimile: 416-864-0620    with a        copy to:        Cassels Brock & Blackwell LLP Scotia        Plaza, Suite 2100 40        King Street West         Toronto, Ontario M5H 3C2           Attention: John H. Craig           Facsimile: 416-350-6951
All Notices shall be given; (i) by personal delivery to the  Participant; or (ii) by electronic communication, with a confirmation sent by  registered or certified mail return receipt requested; or (iii) by registered  or certified mail return receipt requested. All Notices shall be effective and  shall be deemed delivered; (i) if by personal delivery on the date of delivery  if delivered during normal business hours, and, if not delivered during normal  business hours, on the next business day following delivery; (ii) if by  electronic communication on the next business day following receipt of the  electronic communication; and (iii) if solely by mail on the next business day  after actual receipt. A Participant may change its address by Notice to the  other Participant. 
**19.2     Waiver. 

The failure of a Participant to insist on the strict  performance of any provision of this Agreement or to exercise any right, power  or remedy upon a breach hereof shall not constitute a waiver of any provision  of this Agreement or limit the Participant's right thereafter to enforce any  provision or exercise any right. 
**19.3     Modification. 

No modification of this Agreement shall be valid unless made in writing and  duly executed by the Participants. 
**19.4     Force Majeure. 

Except for the obligation to make payments when due  hereunder, the obligations of a Participant shall be suspended to the extent  and for the period that performance is prevented or delayed by any cause,  whether foreseeable or unforeseeable, beyond its reasonable control,  including, without limitation, lack of access to the Properties, labour  disputes (however arising and whether or not employee demands are reasonable  or within the power of the Participant to grant); acts of God; laws,  regulations, orders, proclamations, instructions or requests of any government  or governmental entity, judgments or orders of any court; inability to. obtain  on reasonably acceptable terms any public or private license, permit or other  authorization; curtailment or suspension of activities to remedy or avoid an  actual or alleged, present or prospective violation of federal, provincial,  municipal or local environmental 

standards; acts of war or conditions arising out of or  attributable to war, whether declared or undeclared; riot, civil strife,  insurrection or rebellion; fire, explosion, earthquake, storm, flood, sink  holes, drought or other adverse weather condition; delay or failure by  suppliers or transporters of materials, parts, supplies, services or equipment  or by contractors' or subcontractors' shortage of, or inability to obtain,  labour, transportation, materials, machinery, equipment, supplies, utilities  or services; accidents; breakdown of equipment, machinery or facilities; or  any other cause whether similar or dissimilar to the foregoing. The affected  Participant shall promptly give notice to the other Participant of the  suspension of performance, stating therein the nature of the suspension, the  reasons therefor and the expected duration thereof. The affected Participant  shall resume performance as soon as reasonably possible. During the period of  suspension, the obligations of the Participants to advance funds pursuant to  section 12.2 shall be reduced to levels consistent with Operations. 
**19.5     Governing Law. 

This Agreement shall be governed by and interpreted in accordance with the  laws of the Province of Ontario and the federal laws of Canada applicable  therein. 
**19.6     Further Assurances. 

Each of the Participants agrees to take from time to time  such actions and execute such additional instruments as may be reasonably  necessary or convenient to implement and carry out the intent and purpose of  this Agreement. 
**19.7     Survival of Terms and Conditions. 

The following sections shall survive the termination of  this Agreement to the full extent necessary for their enforcement and the  protection of the Participant in whose favour they run: sections 2.1, 2.2,  6.5, 8.4, 8.6, 12.3, 14.2, 14.3, 14.4, 14.5, 14.6 and 14.7. 
**19.8     Entire Agreement, Successors and Assigns.

This Agreement contains the entire understanding of the  Participants and supersedes all prior agreements and understandings between  the Participants relating to the subject matter hereof. This Agreement shall  be binding upon and enure to the benefit of the respective successors and  permitted assigns of the Participants. In the event of any conflict between  this Agreement and any Exhibit or Schedule attached hereto, the terms of this  Agreement shall be controlling. 
**19.9     Arbitration of Disputes. 

All disputes between the Participants, their successors and  assigns, arising under this Agreement, which the parties are unable to resolve  within 20 days, may at any time thereafter be submitted to arbitration by  written demand of any Participant. To demand arbitration any Participant (the  "Demanding Party") shall give written notice to the other Participant (the  "Responding Party"). Such notice shall specify the nature of the issues in  dispute, the amount involved and the remedy requested. Within 20 days of the  receipt of the notice, the Responding Party shall answer the demand in  writing, specifying the issues that party disputes. Each Participant shall  select one qualified arbitrator within 10 days of the Responding Party's  answer. Each of the arbitrators shall be a disinterested person qualified by  experience to hear and determine the issues to be arbitrated. The arbitrators  so chosen shall select a neutral arbitrator within 10 days of their selection.  If the named arbitrators cannot agree on a neutral arbitrator, the arbitrators  shall make application to any court of competent jurisdiction in the Province  of Ontario, with a copy of both Participants ' notice or answer, as the case  may be, requesting that 

court to select and appoint the third arbitrator. The  court's selection shall be final and binding on the Participants. If either  Participant does not name an arbitrator, the arbitrator named by either party  shall serve as sole arbitrator. Immediately upon appointment of the third  arbitrator, each Participant shall present in writing to the panel of three  arbitrators (with a copy to the other Participant) their statement of the  issues in dispute. Any questions of whether a dispute should be arbitrated  under this section shall be decided by the arbitrators. The arbitrators, as  soon as possible, but not more than 30 days after their appointment, shall  meet in Toronto, Ontario, at a time and place reasonably convenient for the  Participants, after giving each Participant at least 10 days' notice. The  failure of a Participant to appear at the hearing shall not operate as a  default. The attendance of all arbitrators shall not be required at all  hearings. Actions of the arbitrators shall be by majority vote. After hearing  the Participants in regard to the matter in dispute, taking such evidence and  making such other investigation as justice requires and as the arbitrators  deem necessary, they shall decide the issues submitted to them within 10 days  thereafter and serve a written and signed copy of the award upon each  Participant. Such award shall be final and binding on the Participants and  confirmation thereon may be applied for in any court of competent jurisdiction  by any Participant. If the Participants settle the dispute in the course of  the arbitration, such settlement shall be approved by the arbitrators on  request of either Participant and become the award. Fees and expenses of the  arbitration shall be shared by the Participants in proportion to their  Participating Interests. Each Participant shall bear its own solicitors' fees.  
**19.10   Currency. 

All sums of money in this Agreement (unless otherwise specifically stated)  shall be expressed in terms of Canadian dollars. 
**19.11   Execution by Counterpart. 

This Agreement may be executed in counterpart, by original  or telefacsimile signature and each such counterpart when taken together shall  be one and the same agreement and shall be deemed to be dated as of the date  and year set forth above. 
**19.12   TSX Venture Exchange Approval. 

This Agreement and the transactions contemplated hereunder shall be subject  to acceptance by the TSX Venture Exchange with respect to Patricia. 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of theday and year first hereinabove written. 
**RICHMONT MINES      INC.**      Per:__________________NameTitle**PATRICIA MINING      CORP.**       Per:__________________NameTitle
**EXHIBIT A 

LEGAL DESCRIPTION 

KREMZAR

Registered in the name of Patricia Mining Corp. 
1stlyMining      claims SSM 3859; SSM 3861; SSM 3931; SSM 3932; SSM 3951; Part of mining      claim SSM 3860; and Part of mining claim SSM 3933 in the Township of Finan,      District of Algoma, Province of Ontario, being Parcel 1855 Algoma West Section.  2ndly:Mining      claims SM 3900; SSM 3901; SSM 3908 and Part of mining claim SSM 3909 in the      Township of Finan, District of Algoma, Province of Ontario, being Parcel      1801 Algoma      West Section.  3rdly:Mining      claim SSM 3902 in the Township of Finan, District of Algoma, Province of Ontario      being Parcel 1802 Algoma West Section.  4thly:Mining      claims SSM 3903; SSM 3905; SSM 3906; and Part of mining claim SSM 3910 in      the Township of Finan, District of Algoma, Province of Ontario being      Parcel 1839      Algoma West Section.  5thly:Mining      claim SSM 3904 in the Township of Finan, District of Algoma, Province of Ontario      being Parcel 1837 Algoma West Section.  6thly:Surface      Rights only in Mining claim SSM 3991 in the Township of Finan, District of Algoma,      Province of Ontario being Parcel 11326 Algoma West Section.
**LOCALSH**
Registered in the name of Patricia Mining Corp. 
1stly:Mining      claims SSM 884824 designated as Part 1 on 1R-7046 in the Township of Finan,      District of Algoma, Province of Ontario, being parcel 1790 Algoma      Leasehold.  2ndly:Mining      claim SSM 884834 designated as Part 2 on 1R-7046 in the Township of Finan,      District of Algoma, Province of Ontario, being Parcel 1789 Algoma      Leasehold.  3rdly:Mining      claims SSM 543310; SSM 825287; SSM 825288; SSM 837117 and SSM 837118      in the Township of Finan, District of Algoma, Province of Ontario being Parcel      1788 Algoma Leasehold.  4thly:Mining      claim SSM 884834 designated as Part 2 on 1R-7046; Part of mining claim 3991      designated as Part 1 on 1R-7063; Part of mining claim SSM 3910 designated      as Part 2      on 1R-7063 in the Township of Finan, District of Algoma, Province of      Ontario, being      Parcel 1787 Algoma Leasehold.  5thly:Mining      claims SSM 724370; SSM 724371; SSM 825290; SSM 724372; SSM 825289      and SSM 724373 designated as Parts 1, 2, 3, 4, 5 and 6 on 1R-7537 in the Township      of Finan, District of Algoma, Province of Ontario, being Parcel 1809 Algoma      Leasehold.  6thly:Mining      claims SSM 991857 and SSM 991858 designated as Parts 1 and 2 on 1R- 7538 in      the Township of Finan, District of Algoma, Province of Ontario being      parcel 1810      Algoma Leasehold.  7thly:Mining      claims SSM 991852; SSM 991853; SSM 991854; SSM 991855; SSM 991856;      and SSM 724369 designated as Parts 1, 2, 3, 4, 5, 6, and 7 on 1R-7673 in      the Township      of Finan, District of Algoma, Province of Ontario being Parcel 1812 Algoma      Leasehold.  8thly:Mining      claim SSM 837681 designated as Parts 1, 2, 3 and 4 on 1R-7905 in the Township      of Finan, District of Algoma, Province of Ontario, being Parcel 1819 Algoma      Leasehold.  9thly:Part of      Mining claim SSM 2075 in the Township of Finan, District of Algoma, Province      of Ontario being Parcel 1514 Algoma West Section.  10thly:Mining      claim SSM 4101 in the Township of Finan, District of Algoma, Province of Ontario      being Parcel 1894 Algoma West Section.
          Unpatented ClaimsClaim      Nos.      Township      Registered Owner     825291JacobsonPatricia      Mining Corp.     825292JacobsonPatricia      Mining Corp.     825293JacobsonPatricia      Mining Corp.     825294JacobsonPatricia      Mining Corp.     849447Finan-     884825Finan-     884835Finan-        
**GOUDREAU**1stly:Mining      claims SSM 1087; SSM 1088; Part of mining claim SSM 1114 and part of mining      claim SSM 1149 in the Township of Riggs, District of Algoma, Province of Ontario      being Parcel 1038 Algoma West Section. (1)  2ndly:A 69/100      interest in Part of mining claim SSM 2490 in the Township of Finan, District      of Algoma, Province of Ontario being Parcel 1389 Algoma West Section.(2)  3rdly:A 69/100      interest in Mining claims SSM 2491; SSM 2666 and SSM 2667 in the Township      of Finan, District of Algoma, Province of Ontario being Parcel 1390 Algoma      West Section.(2)  4thly:Mining      claims SSM 2054; SSM 2055; SSM 2056 and SSM 2057 in the Township of Finan,      District of Algoma, Province of Ontario being Parcel 1462 Algoma West       Section.(3)  5thly:Mining      claims SSM 2262; SSM 2263 and SSM 2264 in the Township of Finan, District      of Algoma, Province of Ontario being Parcel 1510 Algoma West Section.(3)  6thly:Certain      parcel of land under water, situate, lying and being in Township 27 Range      26       (Township of Aguonie) District of Algoma Province of Ontario being Parcel      1956 Algoma      West Section.(4)  7thly:Mining      claim SSM 1711 and Part of Mining claim SSM 1772 in the Township of Finan,      District of Algoma, Province of Ontario, being Parcel 2886 Algoma West       Section.(3)  8thly:Mining      claims SSM 1708; SSM 1709; SSM 1710; SSM 1769; SSM 1771; SSM 1775;      SSM 1776; SSM 1777; SSM 1778 and part of mining claim SSM 1770 in the Township      of Finan, District of Algoma, Province of Ontario being Parcel 2887 Algoma      West Section.(3)  9thly:Part of      mining claim SSM 28242 in the Township of Jacobson, District of Algoma, Province      of Ontario being Parcel 4364 Algoma West Section.(3)  10thly:Part of      mining claim SSM 28240 in the Township of Finan, District of Algoma, Province      of Ontario being Parcel 4365 Algoma West Section.(3)  11thly:Part of      mining claim SSM 28241 in the Township of Finan, District of Algoma, Province      of Ontario being Parcel 4366 Algoma West Section.(3)  12thly:Part of      mining claim SSM 28244 in the Township of Jacobson, District of Algoma, Province      of Ontario being Parcel 4367 Algoma West Section.(3)  13thly:Part of      mining claim SSM 28243 in the Township of Jacobson, District of Algoma, Province      of Ontario being Parcel 4368 Algoma West Section.(3)  14thly:Mining      claim SSM 2705 in the Township of Jacobson, District of Algoma, Province of      Ontario being Parcel 55 Michipicoten.(3)  15thly:Mining      claims SSM 1813 and SSM 1814 in the Township of Jacobson, District of Algoma,      Province of Ontario being Parcel 71 Michipicoten.(3)
    16thly:Mining      claim SSM 1831 in the Township of Jacobson, District of Algoma, Province of      Ontario being Parcel 72 Michipicoten.(3)  17thly:Mining      claims SSM 2994; SSM 2995; SSM 2996 and SSM 2997 in the Township of       Jacobson, District of Algoma, Province of Ontario being Parcel 73      Michipicoten.(3)  18thly:Part of      mining claims SSM 2438; SSM 2439; SSM 2440; SSM 2441 in the Township of      Jacobson and part of mining claim SSM 3817 in the Township of Finan,      District of Algoma,      Province of Ontario being Parcel 74 Michipicoten.(3)  19thly:Mining      claim SSM 4207 in the Township of Jacobson, District of Algoma, Province of      Ontario being Parcel 75 Michipicoten.(3)  20thly:Mining      claim SSM 4206 in the Township of Jacobson, District of Algoma, Province of      Ontario being Parcel 76 Michipicoten.(3)  21stly:Mining      claim SSM 6765 in the Township of Jacobson, District of Algoma, Province of      Ontario being Parcel 77 Michipicoten.(3)  22ndly:Part of      mining claims SSM 2438; SSM 2439; SSM 2440; SSM 2441 in the Township of      Jacobson and part of mining claim SSM 3817 in the Township of Finan,      District of Algoma,      Province of Ontario being Parcel 78 Michipicoten.(3)  23rdly:Mining      claim SSM 9108 in the Township of Jacobson, District of Algoma, Province of      Ontario being Parcel 79 Michipicoten.(3)  24thly:Mining      claims SSM 2775 and SSM 2776 in the Township of Jacobson, District of Algoma,      Province of Ontario being Parcel 80 Michipicoten.(3)  25thly:Mining      claims SSM 7282; SSM 7283 and SSM 7284 in the Township of Jacobson, District      of Algoma, Province of Ontario being Parcel 81 Michipicoten.(3)  26thly:Mining      claims SSM 1958; SSM 1959; SSM 1960 and SSM 1961 in the Township of Finan,      District of Algoma, Province of Ontario being Parcel 82 Michipicoten.(3)  27thly:Mining      claim SSM 4212 in the Township of Jacobson, District of Algoma, Province of      Ontario being Parcel 83 Michipicoten.(3)  28thly:Mining      claims SSM 7219; SSM 7220 and SSM 7221 in the Township of Jacobson, District      of Algoma, Province of Ontario being Parcel 84 Michipicoten.(3)
(1) Registered in the name of Algoma Steel Corp. Ltd.   (2) Registered in the name of 710238 Ontario Limited as to a 69/100 interest  RIX, Marlene, as to a 31/100 interest.   (3) Registered in the name of 710238 Ontario Limited.   (4) Registered in the name of The Algoma Steel Corporation, Limited. 

M.L.O.      (1)Parcel      641RiggsSSM 1149M.L.O.      (1)Parcel      13520FinanSSM 2056M.L.O.      (1)Parcel      13268FinanSSM      28240  FinanSSM      28241  JacobsonSSM      28242  JacobsonSSM      28243  JacobsonSSM      28244
(1) Mining License of Occupation for mining rights only of parts of the  former mining claims under water 

**PERMITTED ENCUMBRANCES 

Kremzar**
The property and related assets including the mill and associatedinfrastructure referred to as the Kremzar property (the "Property") are subjectto the following permitted encumbrances affecting title thereto: 
- The reservations and exceptions contained in the original Grants from the  Crown as varied by statute.    
- Any of the qualifications contained in subsections 47(1) of the  Land  Titles Act  (Ontario) not including qualifications 47(1)(12).    
-  Any rights to lawful unregistered easements, rights of  access or rights of way of which there is no registered notice provided the  same do not impair the use of the Property for the purposes of exploration  for, or development and mining of, all minerals, metals and ores situate on  the Property or for the purposes of producing, removing, treating, milling or  transporting of all minerals, metals or ores situate on the Property.  Any encroachments either onto the Property by improvements  on adjoining lands or by improvements on the Property onto adjoining lands and  any discrepancies in the legal descriptions of the Property or adjoining lands  which might be revealed by an up-to-date survey provided the same do not  impair the use of the Property for the purposes of exploration for, or  development and mining of, all minerals, metals and ores situate on the  Property or for the purposes of producing, removing, treating, milling or  transporting all minerals, metals or ores situate on the Property.  All documents currently registered against title to the Property,  including, without limitation, the following registered agreements: 
-  On parcels 1801, 1839 and 1855 (AWS) - Instrument    Nos. 169054 and 169055 registered April 2, 1990 where HER MAJESTY THE QUEEN    in Right of Ontario as represented by the Minister of Government Services    registered a Caution stating "No Dealing Without the Consent of Cautioner".    As to parcels 1801 and 1855 the aforesaid Caution expired per section 128(5)    03/02/07;   
- On parcels 1801, 1802, 1837, 1839 and 1855 (AWS) - Instrument No.    146739 registered May 1, 1987 as a Notice of Agreement with The Algoma Steel    Corporation Limited; and    
- On parcel 11326 (AWS) - Instrument No. 148841 registered August 6,    1987 - this parcel is subject to covenants as set forth in #148841. 
- Instrument No. 227469 being a Notice registered February 21, 2000 in  favour of Aur Resources Inc. re: Royalty Agreement.    
-  Instrument No. 227470 being a Charge registered February  21, 2000 in favour of Her Majesty The Queen, in Right of the Province of  Ontario, as represented by the Minister of Northern Development and Mines  securing the sum of $577,800.00.  The following unregistered option agreement: 
- The Goudreau Option and Joint Venture Agreement made as of July 15    1983 between Canamax Resources Inc. and The Algoma Steel Corporation,    Limited as 

amended by agreements dated October 14, 1983; November 10, 1987; July 3,    1989; December 3, 1990; February 26, 1991; and September 15, 1993. 
- An unregistered lease agreement dated April 25, 1989 between 716239  Ontario Limited and Canamax Resources Inc., concerning parcels 2886 (AWS) and  2887 (AWS).    
- Any tax and/or rental notices with respect to the Property which must be  paid on an annual basis. 
**Lochalsh**
The property referred to as the Lochalsh property (the "Property") is subjectto the following permitted encumbrances affecting title thereto: 
- The reservations and exceptions contained in the original Grants from the  Crown as varied by statute.    
- Any of the qualifications contained in subsections 47(1) of the  Land  Titles Act  (Ontario) not including qualifications 47(1)(12).    
-  Any rights to lawful unregistered easements, rights of  access or rights of way of which there is no registered notice provided the  same do not impair the use of the Property for the purposes of exploration  for, or development and mining of, all minerals, metals and ores situate on  the Property or for the purposes of producing, removing, treating, milling or  transporting of all minerals, metals or ores situate on the Property.  Any encroachments either onto the Property by improvements  on adjoining lands or by improvements on the Property onto adjoining lands and  any discrepancies in the legal descriptions of the Property or adjoining lands  which might be revealed by an up-to-date survey provided the same do not  impair the use of the Property for the purposes of exploration for, or  development and mining of, all minerals, metals and ores situate on the  Property or for the purposes of producing, removing, treating, milling or  transporting all minerals, metals or ores situate on the Property.  All documents currently registered against title to the Property,  including, without limitation, the following registered agreements: 
-  On parcels 1514 and 1894 (AWS) - a Right of Easement  No. 30628 dated May 21, 1953, for a power transmission line which was  transferred on July 13, 1981 to Great Lakes Power Limited by Instrument No.  113588;   
- On parcels 1812 Leasehold and 1894 (AWS) - a Lien registered as  Instrument No. 207293 on August 23, 1996 by Norex Drilling Ltd. 
- Notice registered February 21, 2002 by Aur Resources Inc. (re: Royalty  Agreement);    
- The following unregistered option agreement: 
-  The Goudreau Option and Joint Venture Agreement made as  of July 15, 1983 between Canamax Resources Inc. and The Algoma Steel  Corporation, Limited as amended by agreements dated October 14, 1983; November  10, 1987; July 3, 1989; December 3, 1990; February 26, 1991; and September 15,  1993  
- Any tax and/or rental notices with respect to the Property which  must be paid on an annual basis. 

**Goudreau**
The property referred to as Goudreau (the "Property") is subject to thefollowing permitted encumbrances affecting title thereto: 
- The reservations and exceptions contained in the original Grants from the  Crown as varied by statute.    
- Any of the qualifications contained in subsections 47(1) of the  Land  Titles Act  (Ontario) not including qualifications 47(1)(12).    
-  Any rights to lawful unregistered easements, rights of  access or rights of way of which there is no registered notice provided the  same do not impair the use of the Property for the purposes of exploration  for, or development and mining of, all minerals, metals and ores situate on  the Property or for the purposes of producing, removing, treating, milling or  transporting of all minerals, metals or ores situate on the Property.  Any encroachments either onto the Property by improvements  on adjoining lands or by improvements on the Property onto adjoining lands and  any discrepancies in the legal descriptions of the Property or adjoining lands  which might be revealed by an up-to-date survey provided the same do not  impair the use of the Property for the purposes of exploration for, or  development and mining of, all minerals, metals and ores situate on the  Property or for the purposes of producing, removing, treating, milling or  transporting all minerals, metals or ores situate on the Property.  All documents currently registered against title to the Property,  including, without limitation, the following registered agreements: 
iOn        parcels 1038 (AWS), 1389 (AWS), 1390 (AWS), 12474 (AWS), 1462 (AWS),        1510 (AWS),        1956 (AWS), 2886 (AWS), 12321 (AWS), 2887 (AWS), 12322 (AWS), 4364 (AWS,        4365 (AWS), 4366 (AWS), 4367 (AWS), 4368 (AWS), 55 (Michipicoten), 71 (Michipicoten),        72 (Michipicoten), 73 (Michipicoten), 74 (Michipicoten), 75 (Michipicoten), 76 (Michipicoten),        77 (Michipicoten), 78 (Michipicoten), 79 (Michipicoten), 80 (Michipicoten),        81 (Michipicoten), 82 (Michipicoten), 83 (Michipicoten), 84 (Michipicoten)        - a        restriction that no Transfer or Charge shall be registered without the        consent of Canamax         Resources Inc. With respect to Parcels 89, 80 and 81 (Michipicoten)        there is a right of         reversion to the Crown in the event ores or minerals extracted therefrom        are not treated and         refined within Canada.  iiOn        parcels 82, 83 and 84 (Michipicoten) - A Right of Easement No. 31152        dated October 23,        1953 for a power transmission line which was transferred on July 13,        1981 to Great Lakes Power        Limited by Instrument No. 113488.  iiiOn        parcels 1389 and 1390 (AWS) - a transfer of a 31% undivided interest on        December 29, 1953        to William Henry Webb by Instrument No. 31296 as amended by Order        registered as         Instrument No. 231140 on October 24, 2000 to transfer the interest of        William Henry Webb to Rix,        Marlene;  ivOn        parcels 1462, 1956 and 2887 (AWS) - A right of Easement No. 29817 dated        April 14, 1952,        for a power transmission line, which was transferred on July 3, 1981 to        Great Lakes Power        Limited by Instrument No. 113588;  vOn        parcel 1956 (AWS) - Instrument No. 20366 dated April 23, 1923, whereby        the Algoma         Central and Hudson Bay Railway Company reserved a right of way for a        railway and retained

the right to certain royalties upon all ores and minerals raised, won        or taken from the said lands; 
viOn parcels 2886        and 1887 (AWS) - Instrument Nos. 169054 and 169055 registered April 2, 1990 where HER        MAJESTY THE QUEEN in Right of Ontario as represented by the Minister of Government        Services registered a Caution stating "No Dealing Without the Consent of Cautioner";  viiOn parcel 4364 (AWS)        - Subject to a licence of occupation with Algoma Central Telephone.- The following unregistered option agreement: 
-  The Goudreau Option and Joint Venture Agreement made    as of July 15 1983 between Canamax Resources Inc. and The Algoma Steel    Corporation, Limited as amended by agreements dated October 14, 1983;    November 10, 1987; July 3, 1989; December 3, 1990; February 26, 1991; and    September 15, 1993.  
- An unregistered lease agreement dated April 25, 1989 between 716239  Ontario Limited and Canamax Resources Inc., concerning parcels 2886 (AWS) and  2887 (AWS).    
-  Unregistered Undertaking of 108668 Ontario Inc. and of  710238 Ontario Limited to deliver in registrable form Transfer/Deed of Land  conveying a 53.4% interest in the Property to Patricia or such larger interest  as the parties may agree or as may be delivered under the Option Agreement as  defined. (108668 Ontario Inc. and 710238 Ontario Limited are in default of  this Undertaking.)  Undertaking to permit Aur Resources Inc. to register Notice of Royalty  Interest in the Properties. 
 
Any tax and/or rental notices with respect to the Property which must be  paid on an annual basis. 

**EXHIBIT B 

ACCOUNTING PROCEDURE**
The financial and accounting procedures to be followed by theManager and the Participants under the Agreement are set forth below. Referencesin this Accounting Procedure to Sections and Articles are to those located inthis Accounting Procedure unless it is expressly stated that they are referencesto the Agreement. 
**ARTICLE 1 GENERAL PROVISIONS 
**1.1**      General Accounting Records. The Manager shall maintain detailed and      comprehensive cost       accounting records in accordance with this Accounting Procedure, including      general ledgers,       supporting and subsidiary journals, invoices, cheques and other customary      documentation, sufficient to      provide a record of revenues and expenditures and periodic statements of      financial position and the results      of operations for managerial, tax, regulatory or other financial reporting      purposes. Such records shall be      retained for the duration of the period allowed the Participants for audit      or the period       necessary to comply with tax or other regulatory requirements. The records      shall reflect all obligations, advances      and credits of the Participants.  **1.2**Bank      Accounts. The Manager shall maintain one or more separate bank      accounts for the payment of all      expenses and the deposit of all cash receipts for the Venture.  **1.3**      Statements and Billings. The Manager shall prepare statements and bill      the Participants as provided in Article      12 of the Agreement. Payment of any such billings by either Participant,      including the Manager,      shall not prejudice such Participant's right to protest or question the      correctness thereof for a period      not to exceed 12 months following the year end adopted by the Management      Committee during which      such billings were received by the Participant. All written exceptions to      and claims upon the Manager      for incorrect charges, billings or statements shall be made upon the      Manager within such 12- month      period. The time period permitted for adjustments hereunder shall not      apply to adjustments       resulting from periodic inventories as provided in Article 5 of this      Exhibit.
ARTICLE 2 CHARGES TO JOINT ACCOUNT**
Subject to the limitations hereinafter set forth, the Manager shall chargethe Joint Account with the following: 
**2.1**      Rentals, Royalties and Other Payments. All Property acquisition and      holding costs, including filing fees.      license fees, costs of permits and assessment work, delay rentals,      production royalties, including any      required advances and all other payments made by the Manager which are      necessary to acquire or maintain      title to the Assets.**2.2        Labour and Employee  Benefits. 
-  Salaries and wages of the Manager's employees directly      engaged in Operations, including salaries or wages of employees who are      temporarily assigned to and directly employed by same. 
-  The Manager's cost of holiday, vacation, sickness and      disability benefits and other customary allowances applicable to the      salaries and wages chargeable under sections 2.2(a) and 2.12 hereof. Such      costs may be charged on a "when and as paid basis" or by "percentage      assessment" on the amount of salaries and wages. If percentage assessment      is used, the rate shall be applied to wages or salaries excluding overtime      and bonuses. Such rate shall be based on the Manager's cost experience and      it shall be periodically adjusted at least annually to ensure that the      total of such charges does not exceed the actual cost thereof to the      Manager.  The Manager's actual cost of established plans for      employees' group life insurance, hospitalization, pension, retirement,      stock purchase, thrift, bonus (except production or incentive bonus plans      under a union contract based on actual rates of production, cost savings      and other production factors and similar non-union bonus plans customary      in the industry or necessary to attract competent employees, which bonus      payments shall be considered salaries and wages under sections 2.2(a) and      2.12 hereof; rather than employees' benefit plans) and other benefit plans      of a like nature applicable to salaries and wages chargeable under      sections 2.2(a) or 2.12 hereof, provided that the plans are limited to the      extent feasible to those customary in the industry.  Cost of assessments imposed by governmental authority      which are applicable to salaries and wages chargeable under sections      2.2(a) and 2.12 hereof, including all penalties except those resulting      from the wilful misconduct or gross negligence of the Manager. **2.3**      Materials, Equipment and Supplies. The cost of materials, equipment      and supplies (herein called       "Material ") purchased from unaffiliated third parties or furnished by the      Manager or any Participant as      provided in Article 3. The Manager shall purchase or furnish only so much      Material as may be required      for immediate use in efficient and economical Operations. The Manager      shall also maintain       inventory levels of Material at reasonable levels to avoid unnecessary      accumulation of surplus in stock.  **2.4**      Equipment and Facilities Furnished by Manager. The cost of machinery,      equipment and facilities owned by      the Manager and used in operations or used to provide support or utility      services to       Operations charged at rates commensurate with the actual costs of      ownership and operation of such       machinery, equipment and facilities. Such rates shall include costs of      maintenance, repairs, other       operating expenses, insurance, taxes, depreciation and interest at a rate      not to exceed two percent per annum      above the prime rate as determined by the Canadian Imperial Bank of      Commerce. Such rates shall      not exceed the average commercial rates currently prevailing in the      vicinity of the Operations.  **2.5**      Transportation. Reasonable transportation costs incurred in connection      with the transportation of       employees and material necessary for the Operation.  **2.6**      Contract-Services and Utilities. The cost of contract services and      utilities procured from outside sources,      other than services described in sections 2.9 and 2.13 hereof. If contract      services are       performed by the Manager or an Affiliate thereof, the cost charged to the      Joint Account shall not be greater      than that for which comparable services and utilities are available in the      open market within the      vicinity of the Operations.  **2.7**      Insurance Premiums. Net premiums paid for insurance required to be      carried for Operations for the       protection of the Participants. When the operations are conducted in an      area where the Manager may       self-insure for Workers' Compensation and/or Employer's Liability under      provincial law, the Manager may      elect to include such risks in its self-insurance program and shall charge      its costs of self-insuring such      risks to the Joint Account provided that such charges shall not exceed      published manual rates.
**2.8**      Damages and Losses. All costs in excess of insurance proceeds      necessary to repair or replace damage or      losses to any Assets resulting from any cause other than the wilful      misconduct or gross negligence of the      Manger. The Manager shall furnish the Management Committee with written      notice of damages or      losses as soon as practicable after a report thereof has been received by      the Manager.  **2.9**Legal      and Regulatory Expense. Except as otherwise provided in section 2.13      hereof, all legal and       regulatory costs and expenses incurred in or resulting from the Operations      or necessary to protect or recover      the Assets.  **2.10**      Audit. Cost of annual audits under section 12.4 of the Agreement.  **2.11**      Taxes. All taxes (except income taxes) of every kind and nature      assessed or levied upon or in       connection with the Assets, the production of Products or operations,      which have been paid by the Manager      for the benefit of the Participants. Each Participant is separately      responsible for income taxes which      are attributable to its respective Participating Interest.  **2.12**      District and Camp Expenses (Field Supervision and Camp Expenses). A      pro rata portion of; (i) the salaries      and expenses of the Manager's superintendent and other employees serving      operations whose time is      not allocated directly to such operations; (ii) the costs of maintaining      and operating an office (herein      called "the Manager's Project Office") and any necessary suboffice; and      (iii) all necessary camps,      including housing facilities for employees, used for Operations. The      expense of those facilities, less any      revenue therefrom, shall include depreciation or a fair monthly rental in      lieu of depreciation of the      investment. The total of such charges for all Properties served by the      Manager's employees and       facilities shall be apportioned to the Joint Account on the basis of a      ratio, the numerator of which is the      direct labour costs of the Operations and denominator of which is the      total direct labour costs incurred      for all activities served by the Manager.  **2.13**Other      Expenditures. Any reasonable direct expenditure, other than      expenditures which are covered by the      foregoing provisions, incurred by the Manager for the necessary and proper      conduct of Operations.**ARTICLE 3 BASIS OF CHARGES TO JOINT ACCOUNT****3.1**      Purchases. Material purchased and services procured from third parties      shall be charged to the Joint Account      by the Manager at invoiced cost, including applicable transfer taxes, less      all discounts taken. If any      Material is determined to be defective or is returned to a vendor for any      other reason, the Manager      shall credit the Joint Account when an adjustment is received from the      vendor.  **3.2**      Material Furnished by or Transferred to the Manager or a Participant.       Any Material furnished by the Manager      or Participant from its stocks or transferred to the Manager or      Participant shall be priced on the      following basis:-  New Material. New Material transferred from the    Manager or Participant shall be priced F.O.B. the nearest reputable supply    store or railway receiving point, at which like Material is available, at    the current replacement cost of the same kind of Material, exclusive of any    available cash discounts, at the time of the transfer (herein called, "New    Price").  Used Material 
- Used Material in sound and serviceable condition and suitable      for reuse without reconditioning shall be priced as follows: 

- Used Material transferred by the Manager or a Participant shall be      priced at 75% of the New Price.    
- Used Material transferred to the Manager or a Participant shall be      priced; (i) at 75% of the New Price if such Material was originally      charged to the Joint Account as new Material; or (ii) at 65% of the New      Price if such Material was originally charged to the Joint Account as good      Used Material at 75% of the New Price. 
-  Other Used Material which, after reconditioning will be    further serviceable for original function as good second hand Material, or    which is serviceable for original function but not substantially suitable    for reconditioning shall be priced at 50% of New Price The cost of any    reconditioning shall be borne by the transferee.-  All other Material, including junk, shall be priced at a    value commensurate with its use or at prevailing prices. Material no longer    suitable for its original purpose but usable for some other purpose shall be    priced on a basis comparable with items normally used for such other    purposes. Obsolete Material. Any Material which is    serviceable and usable for its original function, but its condition is not    equivalent to that which would justify a price as provided above shall be    priced by the Management Committee. Such price shall be set at a level which    will result in a charge to the Joint Account equal to the value of the    service to be rendered by such Material. ****3.3**Premium      Prices. Whenever Material is not readily obtainable at published or listed      prices because of national      emergencies, strikes or other unusual circumstances over which the Manager      has no control, the      Manager may charge the Joint Account for the required Material on the      basis of the Manager's direct      cost and expenses incurred in procuring such material and making it      suitable for use. The Manager      shall give written notice of the proposed charge to the Participants prior      to the time when such      charge is to be billed, whereupon either Participant shall have the right,      by notifying the Manager within      10 days of the delivery of the notice from the Manger, to furnish at the      usual receiving point all or part      of its share of Material suitable for use and acceptable to the Manager.  **3.4**Warranty      of Material Furnished by the Manager or Participants. Neither the Manager      nor any       Participant warrants the Material furnished beyond the dealer's or      manufacturer's warranty and no credits      shall be made to the Joint Account for defective Material until      adjustments are received by the Manager      from the dealer, manufacturer or their respective agents.
ARTICLE 4 DISPOSAL OF MATERIAL 
**4.1**Disposition      Generally. The Manager shall have no obligation to purchase a      Participant's interest in Material. The      Management Committee shall determine the disposition of major items of      surplus Material, provided      the Manager shall have the right to dispose of normal accumulations of      junk and scrap Material      either by sale or by transfer to the Participants as provided in section      4.2 hereof.  **4.2**Distribution to      Participants. Any Material to be distributed to the Participants shall be      made in proportion to their      respective Participating Interests and corresponding credits shall be made      to the Joint Account on the      basis provided in section 3.2 hereof.
**4.3**Sales.      Sales of Material to third parties shall be credited to the Joint Account      as the net amount       received. Any damages or claims by the Purchaser shall be charged back to      the Joint Account if and when      paid.**ARTICLE 5 INVENTORIES****5.1**Periodic      Inventories, Notice and Representations. At reasonable intervals,      inventories shall be taken by the      Manager, which shall include all such Material as is ordinarily considered      controllable by       operators of mining properties and the expense of conducting such periodic      inventories shall be charged      to the Joint Account. The Manager shall give written notice to the      Participants of its intent to take any      inventory at least 30 days before such inventory is scheduled to take      place. A Participant shall be      deemed to have accepted the results of any inventory taken by the Manager      if the Participant fails to be      represented at such inventory.  **5.2**      Reconciliation and Adjustment of Inventories. Reconciliation of inventory      with charges to the Joint Account      shall be made and a list of overages and shortages shall be furnished to      the Management       Committee within 3 months after the inventory is taken. Inventory      adjustments shall be made by the Manger      to the Joint Account for overages and shortages, but the Manager shall be      held accountable to the      Venture only for shortages due to lack of reasonable diligence.
**EXHIBIT C**
    "Net Smelter Return Royalty" for purposesof this Agreement means the amount actually received by the remainingParticipant or Participants ( or their respective successors and/ or assigns)(the "Owner" and the "Owners") with respect to the Properties from the sale ofany ores and minerals mined and removed from the Properties and thereafter soldby or for the account of the Owner or the Owners before or after processing,smelting or refining, less but only to the extent actually incurred and borne bythe Owner or the Owners, the following: 
11.      Sales,      use, gross receipts, severance, ad valorem and other taxes, if any,      however denominated, payable with respect      to existence, severance, production, removal, sale or disposition of such      ores and minerals, but       excluding taxes on net income.  12.      Charges      and costs, if any, for transportation (including direct insurance costs      while in transit) to places where such      ores and minerals are smelted, refined and sold.  13.      Charges,      costs and penalties, if any, for smelting, refining and marketing,      including costs of assaying and       sampling.
    In the event smelting or refining arecarried out in facilities owned or controlled, in whole or in part, by the Owneror Owners, charges, costs and penalties with respect to such operations,including transportation, shall mean reasonable charges, costs and penalties forsuch operations but not in excess of the amounts that the Owner or Owners wouldhave incurred if such operations were carried at facilities not owned orcontrolled by the Owner or Owners then offering comparable custom services forcomparable products on prevailing terms. 

    The Net Smelter Return Royalty shall bepaid on or before the 45th day after the last day of the fiscal quarter of theVenture between the Owners or the fiscal quarter of the Owner, as the case maybe, in which the Owner or the Owners receive payment for the sale of ores andminerals. 

    Within 90 days after the end of eachfiscal year of the Venture between the Owners or the fiscal year of the Owner,as the case may be, the Owner or Owners shall deliver to the owner of the netsmelter return royalty (the "Holder") an unaudited statement of the productionof gold equivalents from the Properties and royalties paid to the Holder duringthe year and the calculations thereof. All year-end statements shall be deemedtrue and correct one year after presentation unless within that period theHolder delivers notice to the Owner or Owners specifying with particularity thegrounds for each exception, The Holder shall be entitled at its own sole costand expense to an annual independent audit of the statement by its own auditorsand/or an external certified public accountant, but only if the Holder deliversa demand for audit to the Owner or Owners within one year after presentation ofthe related year-end statement. 

    The Owner or Owners may commingle ores andminerals from the Properties with other ores and minerals. Before commingling,the Owner or Owners shall weigh (or calculate by volume) sample and assay, suchores and minerals in accordance with sound mining and metallurgical practicesfor moisture and payable content. The Owner or Owners shall keep records of suchdeterminations for two years after the end of the applicable fiscal year inwhich such determinations are made. 

    At reasonable times and with reasonableadvance notice to the Owner or Owners, the Holder may its own sole risk andexpense enter the Properties to make reasonable inspections of the recordsnecessary to substantiate the payment of the Net Smelter Return Royalty inaccordance with the provisions of this Agreement.****************************************************************************************************************************************************************************************