Filed by Avantafile.com - I-Minerals Inc. - Exhibit 10.1









ASSIGNMENT
AGREEMENT WITH CONTINGENT RIGHT OF REVERTER


This Assignment Agreement with Contingent Right of Reverter (hereafter
the “Agreement”) is made effective as of August 10, 2002 (the “Effective Date”)
by and between Alchemy Ventures, Ltd., a British Columbia, Canada corporation
(“ALY”), and Idaho Industrial Minerals, LLC., and Idaho limited liability
company (“IIM”), Northwest Kaolin, Inc., an Idaho corporation (“NWK”).
(Collectively, referred to hereinafter as the “Parties.”)


RECITALS


Whereas, on November 1, 1999, Phillip C. Nisbet (“Nisbet”)
submitted fourteen lease applications, Nos. 9264-9269, 9272-9279 (the “Fourteen
Applications”), covering certain State of Idaho (“State”) lands in Latah
County, Idaho, to the Idaho Department of Lands (“IDL”) for processing into
State mineral leases are provided for under Idaho Code §47-704;


Whereas, on November 15, 1999, Nisbet and Northwest Kaolin
entered into an Agreement in Principle by which, for the consideration stated
therein, Nisbet agreed to sell his rights, title and Interest “in the
Helmar-Bovill properties located in Latah County, Idaho, comprising 7840 acres
of kaolin clay deposits” [actually, the Parties understand that it is
approximately 6,301 acres, more or less];


Whereas, on December 7, 1999, ALY entered into an Agreement with
Northwest Kaolin, Inc. (“NWK”) to purchase certain properties “comprised of approximately
seven (7) square miles of claims lawfully registered to [NWK] in the State of
Idaho for the purpose of gathering, processing and marketing the kaolin clay
deposits thereon” (hereafter “Agreement #1”);


Whereas, on December 11, 1999, Nisbet executed, under notary,
and assignment of leases to Northwest Kaolin; however, his spouse did not join
in the original execution;


Whereas, on June 15, 2000, Nisbet and NWK entered into a second
Agreement in Principle that replaced the previous Agreement in Principle and
required Nisbet to relinquish “all rights, title or interest held by [Nisbet]
in the Helmar-Bovill properties and the leases from the State of Idaho for said
properties...”


Whereas, on July 1, 2000, NWK submitted two lease applications,
Nos. 9292 and 9293 (the “Two Applications”) covering certain State lands in
Latah County, Idaho to the IDL for processing into state mineral leases as
provided for under Idaho Code §47-704;


Whereas, on August 24, 2000, NWK and ALY entered into an
Agreement that provided the option in ALY to acquire 51% of certain “Mineral
Claims”, as defined in the Agreement, from NWK upon completing certain
exploration expenditures, making payments and issuing shares within certain
time parameters, and further provided the option in Aly to enter in to 51/49
joint venture with NWK or to acquire the additional 49% within a set time
period (“Agreement #2”);


Whereas, disputes existed between ALY and NWK regarding their
respective rights and obligations under the various above-described Agreements,
and regarding the enforceability of said Agreements;


Whereas, on May 15, 2001, NWK submitted to the IDL the original
of the Assignment of Clay Lease Applications executed by Nisbet to NWK for
fourteen clay lease application along with a filing fee of $700;

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Whereas, on May 25, 2001, Scott Nicols, Chief, Bureau of
Minerals, wrote to NWK, c/o Lois Van Hoover, regarding “State of Idaho Mineral
Lease Application Nos. 9264-69, 9272-9279” stating:


This
correspondence is notification we are unable to transfer the subject mineral
lease applications from Phil Nisbet to Northwest Kaolin at this time.  In order
to assign the lease applications, Phil Nisbet’s wife, Marian Nisbet, must also
sign the assignment form, have her signature notarized, and submit the original
assignment document bearing her signature to this office.  As we discussed,
since we have the assignment form with Mr. Nisbet’s signature on file, we will
accept a second assignment document with Mrs. Nisbet’s signature and the
completed notary statement.



Whereas, by Assignment of Mineral, Oil and Gas, and/or
Geothermal Resource Lease(s), dated July 9, 2001, Phillip and Marian Nisbet,
did “sell, assign and transfer unto Alchemy Kaolin Corporation ...100% of our
rights, title and interest” in certain described lease applications;


Whereas, on July 17, 2001, Sharon A. Murray, Mineral Leasing
Specialist, Bureau of Minerals, returned the above-referenced assignment form
to Phillip C. Nisbet stating that the IDL:


will not take any
action to assign any of the 14 mineral lease applications held in your name, or
the two applications filed by Northwest Kaolin, until all issues regarding
community property laws in Idaho as they relate to said applications are
resolved...[and] until all issues as to who holds an interest in applications has
been resolved in writing between you, Northwest Kaolin, Inc., and Alchemy
Ventures, Ltd., and its subsidiaries;



Whereas, no additional documentation exists in the official IDL
files regarding a resolution of the assignment of fourteen clay lease
applications from Phil Nisbet to Northwest Kaolin, Inc.;


Whereas, a dispute existed between and/or among the Parties as
to their respective rights in and to lease applications Nos. 9264-9269,
9272-9279 and Nos. 9292, 9293, (hereafter collectively referred to as the
“Lease Applications”);


Whereas, NWK and certain individuals as principals of NWK or as
interested parties in association with NWK have resolved their disputes with
ALY and desire to transfer and assign any and all of their right, title and
interest that they possess in the Lease Applications to ALY and to forever
release and assign any claims they may have with respect to ownership of said
Lease Applications and the dispute(s) arising there form to ALY;


Whereas, by that certain “Contribution Agreement by and among
Idaho Industrial Minerals and Phillip C. Nisbet,” dated October 16, 2001,
Nisbet contributed, among other things, “all right title and interest in and
to...[certain] Applications for State of Idaho Mineral Leases” to IIM;


Whereas, ALY, IIM and Nisbet executed a Letter of Understanding,
dated January 23, 2002, that laid a foundation for resolving disputes between
the Parties and for a  deal that would transfer the Properties to ALY
(hereafter “Agreement #3”);


Whereas, by that Conditional purchase and Sale Agreement, dated
March 18, 2002 (hereafter “Agreement #4”), ALY, IIM and Nisbet agreed to
certain terms to be incorporated into an “Agreement in Full” as the basis for
the transfer of the Lease Applications to ALY.

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Whereas, ALY desires to acquire the Lease Applications from NWK
and certain individuals as principals of NWK or as interested parties in
association with NWK, and IIM, NWK and certain individuals as principals of NWK
or as interested parties in association with NWK, desire to convey the Lease
Applications to ALY subject to the terms and conditions set forth herein.


AGREEMENT


Now Therefore, in consideration of, and subject to, the
covenants, terms and conditions made herein, and intending to be legally bound,
the Parties hereto agree as follows:


DEFINITIONS


Definitions.  For the purposes of this Agreement, the following
items shall have the meanings set forth below:


                “Agreement” means this “Assignment Agreement
with Contingent Right of Reverter,” including all exhibits and schedules, all
of which are incorporated by this reference.


                “ALY” shall have the meaning set forth in the
introduction to this Agreement and includes its U.S. subsidiary, AlchemyKaolin
Inc.


                “Effective Date” shall have the meaning set
forth in the introduction to this Agreement. 


                “Feasibility Study” means a comprehensive
description of the construction, development, mining, processing, and marketing
plan for the commercial products produced from the Mineral(s) extracted from
the Properties.  The Study must be in such form and substance as would
reasonably be required by an experienced investment banker in making an arms-length
investment decision to place such a mine into production.  The Feasibility
Study shall include the confirmation of reserves based upon reasonable drilling
works, hydrological and geotechnical works, environmental studies, and, if
deemed necessary by ALY, the mining of one or more bulk samples of ore for
metallurgical studies which may require the construction of one or more shafts
or pits, the construction of an incline, or works associated with a trial
mine.  The Feasibility Study shall contain estimates of both capital and
operating costs and shall analyze how to proceed with mining operations to
economically and commercially extract the target Mineral(s), identify the
optimum structure for the mining venture, and include reference to relevant marketing
and financial aspects.


                “IIM” shall have the meaning set forth in the
introduction to this Agreement and includes, as appropriate for context, its
wholly owned subsidiary, Northwest Kaolin Inc., an Idaho corporation.  (For
purposes of improving the clarity of the granting language, the first reference
to IIM and Northwest kaolin Inc. specifically identifies both companies,
instead just using the collective term “IIM” to describe both entities.)


                “Lease Applications” shall mean the sixteen (16)
mineral lease applications in the Helmar-Bovill region of Latah County, Idaho
on file with the IDL in the names of Phillip C. Nisbet and Northwest Kaolin Inc
as more fully described in Exhibits A, parts 1 and 2.


                “Lease” and “Leases”
shall mean the form of instrument issued by the IDL pursuant to a Lease
Application that provides for a vested right to mine the Minerals applied for
in the Lease Application and any intervening grant of right by the IDL that may
be less than a vested right to mine whether for all or part of the Properties.

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                “Mineral” means kaolinite,
clays of any type and all other minerals, including, without limitation,
feldspar, quartz, and micas, subject only to the limitations that may be
imposed by the State.


                “Permitting Process” shall have
the meaning ascribed in subsection 2.1.3 herein.


                “Person” means any legal
person, including, without limitation, an individual, a partnership, a joint
venture, a corporation, a trust, limited liability company, other business
entity, an unincorporated organization or a government or any department or
agency thereof. 


                “Production Plant” shall
mean any plant that is capable of producing Mineral products in commercial
quantities and quality.


                “Properties” means those
lands covered by the Lease Applications (or Leases granted thereby).


SECTION 1
GRANT OF RIGHTS; TERM


1.1          Grant of Rights.  Subject to the paramount title of
the State and the Contingent Right as Reverter as provided for in Section 3,
IIM and Northwest Kaolin Inc. hereby assign to ALY one Hundred Percent (100%)
of its undivided interest in the Lease Applications described in Parts 1 and 2
of Exhibit A and grants to ALY, without limitation, the following rights:



1.1.1      the
exclusive right to enter, take possession and use the Properties covered by the
Lease Applications;

1.1.2      the
exclusive right to convert the Lease Applications to a Lease(s); however, ALY
shall notify IIM promptly of any action by the State to issue a Lease.  If
necessary, IIM shall cooperate with ALY in the process of converting the Lease
Applications to a Lease(s) subject to the terms and conditions provided herein.






1.2          Accord and Satisfaction.  The parties agree that
with the issuance of a total of 1,750,000 common shares of ALY to IIM, IIM
releases any and all interest in the Lease Applications and that IIM
acknowledges that it has received full and final consideration of the transfer
of the rights to the Lease Applications to ALY.


1.3          Execution of Instruments.  The Parties shall
execute such instruments and provide such correspondence as is reasonably
necessary to effect the assignment of the Lease Applications described in the
Paragraph 1.1; however, it is anticipated by the Parties that:


(1) the assignment
of the Fourteen Lease Applications will be effected in the IDL records by
resubmitted the State “Assignment of Mineral, Oil and Gas, And/Or Geothermal
Resources Lease(s),” executed by Phillip C. and Marian Nisbet, dated July 9,
2001 (Exhibit B); and


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(2) the assignment
of the Two Lease Applications will be effected in the IDL records by NWK’s
execution, simultaneously with this Agreement, of the attached State
“Assignment of Mineral, Oil and Gas, And/Or Geothermal Resources lease(s)”
(Exhibit C) form for delivery by ALY to the IDL.



1.4          Term.     The Term of this Agreement shall commence
on the Effective Date and shall continue for a period of three (3) years (the
“Term”), unless sooner terminated as provided in this Agreement.


1.5          Supercedes and Replaces.           This Agreement
is the “Agreement in Full” contemplated by Agreement 4; however, this Agreement
supercedes and replaces all prior agreements between the Parties and their
predecessors in interest relating to the Lease Applications and Properties
including, but not limited to, the agreements in principle and Agreements #1,
2, 3 and 4, described in the Recitals.


1.6          IIM’s Representations Regarding the Lease Applications.              IIM
makes no representations or warranties regarding the likelihood that all or any
of the Lease Applications will become Leases; however, during the Term of this
Agreement, IIM shall indemnify and holds harmless ALY from any claims, demands
and legal actions by Nisbet and/or NWK, any individuals as past or present
principals of NWK or as interested parties in association with NWK arising out
of or related to the Lease Applications or Properties.  Both during and
subsequent to the Term of this Agreement, IIM shall cooperate with ALY in any
action of ALY in defense of any claims, demands and legal actions by Nisbet and
NWK and certain individuals as principals of NWK or as interested parties in
association with NWK arising out of or related to the Lease Applications or
Properties.


SECTION 2
ALY’S DELIVERABLES


2.1          Consideration.  The purchase price (the “Purchase
Price”) for the assignment of Lease Applications shall be One Million Seven
Hundred Fifty Thousand (1,750,000) common shares of ALY, subject to such
timing, terms, conditions, and restrictions as may be imposed by the Canadian
Venture Exchange (“CDNX”), to be delivered by ALY to IIM on the following
schedule.  Not later than thirty (30) calendar days after the occurrence of
each of the following described events, ALY shall deliver to IIM common shares
of ALY in the amounts specified below:


2.1.1      Upon Execution.  Upon receipt of the assignment of
Lease Applications described in Paragraph 1.1, ALY shall deliver to IIM, One
Hundred Thousand (100,000) common shares of ALY.


2.1.2      Upon Completion of a Feasibility Study.                Upon
completion of a Feasibility Study, ALY shall deliver to IIM, Four Hundred
Thousand (400,000) common shares of ALY.


2.1.3      Upon Lease Issuance.    Upon the State of Idaho
issuing Leases to ALY for all acreage subject to the Lease Application, ALY
shall deliver to IIM, Three Hundred Fifty Thousand (350,000) common shares of
ALY.  In the event that the State issues Leases on less than all of the Lease Applications,
then the number of shares issued shall be proportionate to the percent of the
acreage converted to Lease relative to the amount of acres covered by the Lease
Applications; the remaining shares of this 350,000 shall be paid upon the
occurrence of Paragraph 2.1.5 below, as additional shares to the 400,000 shares
already provided for in Paragraph 2.1.5.  In the event that ALY, in its sole
discretion, voluntarily agrees to accept Leases from the State for less than
all of the acreage subject to the Lease Applications, then ALY shall either pay
the additional shares to IIM pursuant to this Paragraph 2.1.3 or ALY shall
reassign such Lease Applications per Paragraph 3.4 below.

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2.1.4      Upon Completion of a Permitting Process.  Upon
completion of the Permitting Process, ALY shall deliver to IIM, Five Hundred
Thousand (500,000) common shares of ALY.  The “Permitting Process” means the
activities and time period required to obtain all federal, state or local
government permits, licenses or other approvals (including water rights)
necessary for ALY (or its subsidiaries or affiliates), to construct and operate
commercial mining and beneficiation facilities on the Properties, including, if
required, through the development of a Production Plant.


2.1.5      Upon Completion of a Production Plant and First Delivery
of Commercial Product.  Upon completion of the first delivery of a
Commercial Product from a Production Plant, ALY shall deliver to IIM, Four
Hundred Thousand (400,000) common shares of ALY.  The “first delivery of
Commercial Product” shall be when ALY sells the product from beneficiating
Mineral(s) in its Production Plant to a third-party end user or agent or broker
for end users in commercially reasonable quantities at a cash amount
representing the fair market value for the product so delivered.


2.2          Acceptance and Performance.   By accepting the
shares when tendered by ALY, IIM unconditionally accepts that ALY has completed
the performance requirement associated with each block of shares being
delivered as provided in Section 2.1 above.  IIM shall have fourteen (14)
calendar days from the delivery of the shares to provide Notice objecting to
the completion ALY’s deliverable and returning the tendered shares. If IIM has
not tendered a return of the shares within said fourteen (14) calendar days,
then the associated deliverable for ALY will be deemed accepted.  In the event
of an alleged default by ALY, IIM shall describe with reasonable specificity
the alleged default in ALY’s performance that gives rise to any declaration of
nonperfomance, and the procedures described in Section 10 hereof shall be
applicable.  Failure to declare a default at such time shall be deemed a waiver
of IIM’s rights to declare a default at a later date.


2.3          Verification of Authorization.     With each
tendered delivery of shares as provided in Subsections 2.1.1 through 2.1.4, ALY
shall provide IIM with certified copies of the resolutions of ALY’s board of
directors and its shareholders, if applicable, authorizing the issuance of
common shares, subject to the parameters imposed by the CDNX.  Similarly, with
each tendered delivery of shares as provided in Subsections 2.1.1 through
2.1.4, IIM shall provide ALY with certified copies of the resolutions of IIM’s
board of directors and IIM’s shareholders, if applicable, authorizing the
acceptance of common shares of ALY.


2.4          Other Items.      ALY shall also deliver such other
documents as IIM may reasonable request in connection with the transaction
contemplated by this Agreement.  IIM shall also deliver such other documents as
ALY shall reasonably request in connection with the transactions contemplated
by this Agreement.


2.5          Adjustments.    The Purchase Price is for an
undivided One Hundred Percent (100%) interest in the Lease Applications,
subject to paramount title held by the State.  In the event that there is an
outstanding right, title or interest including, without limitation, an
outstanding lien or encumbrance on the title, or if the IIM holds less than an
undivided One Hundred Percent (100%) interest in the Lease Applications,
subject to the paramount interest held by the State, then the purchase price
shall be adjusted in accordance with the provisions of Section 7.4 (Lesser
Interest).  Such adjustment may be made by offset from future issues of ALY
common, if ALY so chooses.

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SECTION 3
CONTINGENT RIGHT OF REVERTER


3.1          Retention of Revisionary Interest.  By the
assignment and grant provided for in Paragraph 1.1, IIM reserves a right of
reverter of the Lease Applications (or leases acquired thereby), upon failure
of ALY to complete all of its deliverables described in Section 2 by the end of
the Term or upon ALY terminating work on development of the Properties.  This
Contingent Right of Reverter may be enforced in equity; the Parties recognize
that an adequate remedy at law might not exist.  The governing jurisdiction for
equitable and legal remedies shall be as provided in Paragraph 14.1.


3.2          Allegation of Failure to Complete Deliverables.  ALY
shall have the entire Term to complete the deliverables provided for in
Paragraph 2.1, which may be extended by Force Majeure.  If ALY has tendered all
of the common shares in association with the performance deliverables described
in Subparagraphs 2.1.1 through 2.1.4, then IIM must have rejected or
re-tendered, as provided for in Paragraph 2.2, at least one block of shares in
order to preserve a claim of default and its Contingent Right of Reverter. 


3.3          Resolution of Contingent Right of Reverter.  The
procedure for claiming a default, as provided in Section 10, shall govern the
initiation and enforcement of the Contingent Right of Reverter by IIM.  If ALY
does not dispute the claim that it has failed to complete the deliverables
described in Paragraph 2.1 within the Term, or that it cannot so complete such
deliverables within the time period allowed under Subparagraph 10.1.2, then ALY
shall promptly reconvey to NWK or to IIM, as designated by IIM, the Lease
Applications covered thereby in a format recognizable and acceptable to the IDL
office.  IF IIM has accepted all of the shares as provided for in Paragraph
2.2, then the Contingent Right of Reverter shall automatically expire upon the
expiration of the Term of this Agreement and shall not survive the expiration
of this Agreement.


3.4          Reassignment.  It is agreed that if ALY should
choose to abandon any of the Lease Applications (or Leases derived from such
Lease Applications) listed on Exhibit A, then ALY shall provide IIM with Notice
of such intent, and IIM shall have the option for fourteen (14) days from
receipt of such Notice to cause ALY to execute a reassignment instrument.  In
addition, ALY will execute an appropriate State assignment form, and shall
generally cooperate with IIM and the State to implement the intent of such
reassignment; however, ALY does not represent or warrant that the State will
accept such reassignment, nor shall ALY bear any of the costs associated with
reassignment.


3.5          Notice. In the event that the State of Idaho
provides notice to ALY that any Lease Application or Lease is deemed invalid,
out of compliance or otherwise subject to termination of rights, ALY shall
provide IIM with this is same information within 48 hours of ALY receiving
actual notice.


SECTION 4
RELEASE


4.1          Release of Claims.  As of the Effective Date, each
party to this Agreement releases and discharges the other as well as any of its
officers, directors, shareholders, agents, employees, attorneys, successors,
heirs, devisees, assigns, affiliates, related organizations, if any, and any
other persons, firms or corporations in interest with them, or any of them, of
and from all contracts, agreements, understandings, claims, liabilities,
demands, liens, debts, loans, obligations, accounts, causes of action and/or
suit of any and every nature, known or unknown, for damages or otherwise, at
law or in equity (“Claims”), which each party may have or claim to have had
against the other including without limitation: Claims related to ownership of
the Lease Applications; Claims related to any previous agreements or alleged
agreements between or among any of the Parties hereto; Claims of breach of any
understanding or agreement related to the Lease Applications and the proposed
mining of Mineral(s) by predecessors in interest of the Parties, and Claims of
compensation owing or due in the form of fees, wages, royalties or and any
other obligation for sums due and owing from any of the Parties that arose from
or may arise from actions or omissions of the Parties or their predecessors in
interest prior to the Effective Date.

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SECTION 5
Performance Obligations


5.1          Operational Performance of ALY.  ALY shall conduct
all activities on the Properties in a good and workmanlike manner and in
compliance with all applicable laws and regulations and permits, including
those related to environment and reclamation.  ALY shall promptly pay all
outstanding debts.  ALY shall use its good faith effort to obtain all
governmental approvals required to exercise its rights granted hereunder;
however, and IIM agrees to cooperate with ALY in the Permitting Process,
including granting and documenting any required consent.  ALY shall owe no
duties to IIM except as provided in this Agreement.


5.2.         Obligation to Maintain the Lease Applications (or
Leases acquired thereby).  ALY shall use its good faith efforts to cause
the Lease Applications to be converted to Leases and ALY shall seek to do so as
promptly as reasonably possible under the entirety of circumstances, and to
keep any Leases acquired in good standing under the laws of the State while
this Agreement is in effect, including the payment of fees and the filing of
necessary reports.  The Parties recognize that converting the Lease
Applications to Leases potentially involves a discretionary decision by the
State; the Parties shall use their good faith efforts to obtain Leases for all
of the Lease Applications.  It is understood by the Parties that if the State
fails to issue Leases covering sufficient lands to support ALY’s anticipated
production operations, this may be deemed Force Majeure pursuant to Section 6
hereunder, so long as the terms and conditions in Section 6 are satisfied.


5.3          Claims and Liens.  ALY shall pay and satisfy all
claims and liens for materials, supplies and labor used in connection with
ALY’s operations on the Properties, and shall keep the Lease Application (or
Lease acquired thereby) free and clear from any and all liens and encumbrances,
except any such lien or encumbrance that may result from the actions of parties
other than ALY, its agents, employees, and contractors, and excepting any such
lien or encumbrance that is in good faith being subject to active challenge or
appeal during the pendency of such challenge or appeal.


5.4          Coordinating with the State.  ALY shall maintain
close contact with the State at all reasonable times to keep the relevant
agencies informed of current and planned activities relating to the Properties
regardless of whether or not such communication may be required by law.  ALY
shall provide IIM with copies of any correspondence sent to, or received from,
the State of Idaho and its various agencies.


5.5          Inspection.  IIM, or IIM’s authorized
representative may at any reasonable time, inspect ALY’s activities, but such
representative shall do so at his or her own risk, and shall conduct such
inspections so as not to hinder unreasonably the activities of ALY.  IIM and
its representatives, shall indemnify and hold ALY harmless from any costs,
loss, or damage by reason of injury to IIM, or its representative in making
such an inspection.  ALY may refuse access to the Properties for all
representatives of IIM that refuse to execute a waiver of liability in the
favor of ALY before entering the Properties.  IIM and/or IIM’s representative
shall not disclose any of the information collected under this Agreement,
except to ALY, nor shall IIM use such information to identify and/or capture
corporate opportunities of ALY, or in any way compete with ALY, unless and
until IIM and ALY enter into a commercially reasonable
confidentiality/nondisclosure agreement, which shall include an “area of
interest” clause that precludes IIM or owners of IIM from acquiring an interest
in mineral property within 25 miles of the Properties without promptly offering
any such interest to ALY at IIM’s cost.

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SECTION 6
FORCE MAJEURE


6.1          Force Majeure. 



6.1.1      Force
Majeure means any cause or condition beyond the reasonable control of, and
without the fault or negligence of, the party claiming Force Majeure which
causes the party to be unable to perform its obligations, which by exercise of
due foresight such party could not reasonably have been expected to avoid and
which the party is unable to overcome by the exercise of due diligence.

6.1.2      The
obligations of ALY under this Agreement shall be suspended if ALY is delayed or
interrupted in or prevented from conducting any operations on the Properties,
or significant portion thereof, as the result of an Act of God, fire,
earthquake, hurricane, unreasonably heavy precipitation or floods, shortage of
fuel supply, raw materials, or other supplies or equipment, changes in
governmental laws, rules, regulations or orders adversely affecting any
operations on part or all of the Properties; inability to obtain on reasonably
acceptable terms any public or private license, permit or other authorization
that may be required to conduct operations; any extraordinary restrictions
upon, unusual delays in receiving, or failures to receive any permits,
licenses, or approvals from any governmental agency; or any other cause beyond
ALY’s reasonable control.

6.1.3      In
such event ALY shall notify IIM in writing of the particulars of the delays or
interruptions and the term of this Agreement shall be extended for a period of
time equal to the period during which ALY operations are so delayed,
interrupted, or prevented








6.2          Adverse Claims.  If at any time during the Term of
this Agreement it appears that one or more private third parties may have a
claim of economic interest or ownership in the Properties or the Lease
Applications (or Leases acquired thereby), ALY may claim Force Majeure for a
period of time equal to the time necessary to resolve such claim(s) of economic
interest or ownership in the Properties or the Lease Applications (or Leases
acquired thereby).


SECTION 7
IIM’S WARRANTIES, REPRESENTATIONS
& COVENANTS


7.1          IIM’s Warranties, Representations, and Covenants. 
Excepting only the paramount title of the State, its participating interest
and production royalties, if any, IIM represents and warrants to ALY that:


7.1.1      IIM and Nisbet own or
control the Lease Applications.


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7.1.2      IIM
knows of no other person claiming any interest in the Lease Applications; and
the Lease Applications are free from all liens and encumbrances, except liens
for property taxes not yet due and payable.

7.1.3      No
royalties, fees or monies (or claims therefore) are payable or required to be
paid to any person having or claiming an interest in the Lease Applications
other than the State.

7.1.4      IIM
has full power and authority to execute this Agreement and this Agreement is
valid and binding upon it in accordance with its terms.

7.1.5      IIM
knows of no violation of any applicable law or regulation relating to land use,
environmental protection or otherwise with respect to the Lease Applications or
activities relating thereto; and IIM represents that there is no judgment
outstanding and no litigation, proceeding or governmental investigation pending
or threatened against the Lease Applications or IIM in connection with the
Lease Applications except as described below:










                NONE


7.2          Defects In Title.  In the event that any cloud or
defect may arise in IIM’s title to the Lease Applications (or Leases granted
thereby), except matters involving the title and rights of the State
(including, without limitation, discretionary lease issuance), then at ALY’s
request pursuant to Notice, IIM will take all action necessary, including
judicial proceedings, to remove any cloud from and cure any defect in ALY’s
title to the Lease Applications (or Lease granted thereby).  If IIM fails or
refuses to take such action, ALY may take such action in IIM’s name.  IIM shall
cooperate with ALY in any such action taken.  ALY may recover from IIM, or from
any payments in stock thereafter to become due to IIM under this Agreement, all
costs and expenses, including reasonable attorney’s fees, incurred by ALY in
such action.


7.3          Challenge to Title by State  If the State attacks
the validity of the Lease Applications for any reason, except ALY’s failure to
comply with its obligation to maintain the Lease Applications (or Leases
granted thereby) in good standing, ALY, in its sole discretion, may
prosecute/defend an action in mandamus to issue lease, damages, or such other
action as it may choose.  However, in the event that ALY does not choose to
defend/prosecute such claim, then ALY, in its sole discretion, shall provide
Notice to IIM, who then may take such action in ALY’s name.


7.4          Lesser Interest.  The total
number of common shares deliverable to IIM pursuant to the terms of this
Agreement are premised on the fact that ALY is acquiring an undivided One
Hundred Percent (100%) interest in the Lease Applications subject to the
paramount interest held by the State, and that ALY’s rights in the Properties
are as herein set forth and are subject to no covenants, conditions,
restrictions, or encumbrances other than those created by this Agreement.  In
the event that at any time during the term of this Agreement there is any
outstanding right, title or interest in the Properties not created or caused by
ALY such that for any reason ALY is not possessed of the entire interest which
this Agreement purports to grant, then the number of shares deliverable to IIM
under this Agreement shall be reduced by the proportion which any outstanding
interest or encumbrance bears to the full unencumbered interest contracted for
by ALY hereunder.

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SECTION 8
DAMAGES, INSURANCE & GAURANTEE


8.1          Damages.  In no event shall any Party be liable to
the other Party for any consequential, special or incidental loss or damage.


8.2          Insurance.  Within Ninety (90) days of the
Effective Date, ALY shall obtain and maintain such insurance coverage as
required by law, and such other insurance coverage as might be deemed
reasonable and prudent, including, but not limited to the following types of
insurance: (1) worker compensation; (2) general liability; (3) automobile; (4)
fire; and (5) directors and officers (however, if directors and officers
coverage cannot be obtained on commercially reasonable terms, as determined by
the Alchemy Board of Directors, then no such insurance will be required.


SECTION 9
TAXES


9.1          Payment Obligation.  Except as hereinafter set
forth, ALY shall pay all taxes levied during the Term of this Agreement against
all improvements, structures, equipment, personal property, and fixtures placed
upon the Properties by ALY and all taxes levied against ALY as an employer of
labor.  All taxes shall be paid before delinquent, but ALY shall be under no
obligation to pay any tax, so long as the tax is being contested in good faith
and by appropriate legal proceedings and the nonpayment thereof does not
adversely affect ALY’s right, title, or interest in or to the Premises.


SECTION 10
DEFAULT, TERMINATION &
SURRENDER


10.1        Default.



10.1.1    ALY
shall not be deemed to be in default hereunder until IIM shall first have given
to ALY written notice of the alleged default, specifying with particularity the
circumstances of the default and, if applicable, the amount of shares, which
IIM claims is due and payable by ALY.

10.1.2    Such
notice shall be given in accordance with Section 12 (NOTICES).  ALY shall have
a period of sixty (60) days from and after receipt of such notice in which to
cure the default, or in the event that such default cannot be cured within
sixty (60) days to initiate and diligently pursue steps to correct the default,
failing which this Agreement shall terminate and all liabilities and
obligations of ALY, except those liabilities existing on the date of
termination, shall terminate.  Any default claimed with respect to the issuance
of shares may be cured by the deposit in escrow of the number and class of
shares in controversy and the giving of notice of the deposit to IIM.  The
amount to remain in escrow until the controversy is resolved or until there has
been a final disposition of the controversy by a court of competent
jurisdiction.

10.1.3    Should
ALY dispute the existence of the default, then this AGREEMENT shall not
terminate unless ALY does not initiate and diligently pursue steps to cure the
default within sixty (60) days after the default has been determined by a final
decision of a court of competent jurisdiction.



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10.2        Early Termination.



10.2.1    ALY
may, at any time and from time to time, terminate this Agreement, as to all or
any portion of the Lease Applications (or Leases granted thereby) and
Properties, by notifying IIM of its intent to file for record in the IDL office
(with a copy to IIM) a good and sufficient surrender or notice of termination
of all or a portion of the Lease Applications (or Leases granted thereby). 
Upon receipt of such notification of intent to surrender or terminate, IIM, or
its designated subsidiary, will have fourteen (14) calendar days to elect to
receive a reassignment of such Lease Applications (or Leases granted thereby)
from ALY free and clear of all liens and encumbrances or instruct ALY to
proceed with filing such notice of surrender with the IDL office.  In the event
IIM elects to receive reassignment, ALY will execute an appropriate State
assignment form, and generally shall cooperate with IIM and the State to
implement the intent of such reassignment; however, ALY does not represent or
warrant that the State will accept such reassignment, nor shall ALY bear any of
the costs associated with reassignment.  This Agreement shall terminate with
respect to that portion of the Properties described in the surrender or
termination notice to the IDL office, and all rights, liabilities and
obligations of ALY under this Agreement with respect to that portion of the
Properties described in such notice shall terminate on the date specified in
the notice, except those rights which survive termination and those liabilities
and obligations existing on the date of termination. If IIM elects not to
re-acquire the surrendered Lease Applications (or Leases granted thereby) and
Properties, then either IIM or ALY, or their subsidiaries, may apply to the IDL
office for the lease to such surrendered Properties at any time thereafter, and
such after-acquired Properties shall not be subject to the terms of this
Agreement.

10.2.2    In
the event of such termination, all equipment, machinery and supplies that have
been brought upon such portion of the Properties by ALY shall be removed by ALY
from the portion of the Properties so surrendered within twelve months of
providing such notice except such facilities on the Properties that IIM elects
to retain.

10.2.3    In
the event IIM does not make an election within said fourteen (14) days or
elects that ALY should surrender its interest, then ALY shall promptly file a
notice of termination of interest with the IDL for the portion of the
Properties so surrendered.

10.3        Continued Access.  Subject to
the paramount title and authorities of the State, for as long as ALY requires
after termination of the Agreement, ALY shall have the right of continued
access to the Properties and across the Properties for purposes of reclamation
and  remediation, if applicable.  This grant of rights shall survive
termination of this Agreement.










SECTION 11
DATA


11.1        ALY’s Data.  ALY shall upon termination of this
Agreement provide to IIM, upon IIM’s request, copies of all available
non-interpretative information relating to ALY’s activities on the Properties. 
This information shall include copies of all ALY’s maps, drill logs and
reports, assays, surveys, reports of records submitted to governmental
agencies, and geological, geophysical, geochemical or similar data with respect
to the Properties, and shall be provided to IIM, or its designated subsidiary,
without any warranty or representation as to the accuracy, completeness,
reliability or usefulness thereof.

12



 
SECTION 12
NOTICES


12.1        All notices and other communications under this Agreement
(“Notices”) to the Parties shall be in writing, and shall be addressed
respectively as follows:


	 	
ALY:
	 Barry Girling
Malespina, Ltd.
900 – 580 Hornby Street
Vancouver, B.C. V6C 3B6
Ph:         (877) 688-2321





	 	
with a copy to:
	 Baird Hanson Quinn, LLP
2117 Hillway Drive
Boise, Idaho 83702

Attn: Joe Baird
Ph:         (208) 388-0110
Fax         (208) 345-4930





	 	
IIM:
	 IDAHO INDUSTRIAL MINERALS, INC.
C/O Sacajawea Motor Inn
1874 Main Street
Lewiston, Idaho 83501
USA

Attn: Brent Thompson
Ph:         (208) 746-1393
Fax         (208) 743-3620




A Party may change its address by Notice to the other Party.


12.2        All Notices shall be given:



12.2.1    by personal delivery (including courier); or

12.2.2    by registered mail, charges prepaid; or

12.2.3    by
electronic facsimile communication, with a confirmation sent by registered mail
or courier.








12.3        All
Notices shall be effective and shall be deemed received:



12.3.1    if
by personal delivery or by registered mail, 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; or

12.3.2    if
by electronic communication, on the next business day following receipt of the
electronic communication.



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SECTION 13
ASSIGNMENT


13.1        ALY
may not assign the Lease Applications (or Leases granted thereby) to a corporation
or other entity that is not a subsidiary or affiliated corporation of ALY
without the prior written approval of IIM 


13.2        ALY
may, subject to any applicable law, assign this Agreement or ALY’s rights
hereunder or any portion thereof, or may otherwise convey, assign or transfer
its interest hereunder or in the Lease Applications or subsequent Leases, once
acquired from IIM, to a subsidiary or affiliated corporation of ALY, or to any
successor by way of a merger, consolidation or reorganization without prior
notice to IIM.  The term “subsidiary or affiliated corporation” as used herein
means any corporation that directly or indirectly controls, is controlled by, or
is under common control with, ALY.


SECTION 14
MISCELLANEOUS PROVISIONS


14.1        Choice
of Law; Survival. The formation, interpretation, performance and
enforcement of this Agreement shall be governed by the laws of the State of
Idaho, USA; except that, if the primary dispute concerns a question of
securities law, then the interpretation and enforcement of this Agreement shall
be governed by the laws of British Columbia, Canada.  Any terms or agreements
herein which by their nature may or must be performed or occur after
termination of this Agreement shall survive such termination.


14.3        Additional
Documents.  IIM shall provide ALY with such additional documents as may be
necessary to carry out the purposes of this Agreement.  If conditions change by
reason of acquisition, conveyances, assignments, or other matters relating to
the [unreadable] or description of the Properties, IIM and ALY shall execute
amendments of this Agreement and any other documents which may be necessary to
reflect such changed conditions.


14.4        Counterparts.    This
Agreement may be executed in two or more counterparts, each of which shall be
deemed to be an original and all of which together shall constitute one and the
same instrument.


14.5        Finders
and Brokers.  Each party represents to the other that it has not dealt with
anyone who is or may be entitled to a broker’s commission, finder’s fee or
other compensation for introducing the parties or for advising or assisting in
connection with this Agreement or the transactions contemplated by it.  Each
party shall indemnify and hold the other harmless from any cost or expense,
including attorneys’ fees and court costs, arising out of such a claim by such
a person, including costs incurred in response to discovery and related
proceedings in connection with such a claim.


14.6        Inurement. 
This Agreement shall be binding upon and inure to the benefit of the respective
successors and assigns of IIM and ALY.


14.7        Severability. 
In the event any provision of this Agreement is held to be invalid or void, it
shall not affect the validity of the remaining provisions.

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14.8        Waiver. 
No waiver of any breach of this Agreement shall be deemed to be a waiver of any
other subsequent breach.


14.9        Headings. 
Headings to the various Sections herein are for reference only and are not to
be used for the purpose of construing the provisions herein.


14.10     Entire
Agreement.  Except as provided in Section 1.3, this Agreement constitutes
the entire agreement of the Parties.  No modification, variation, or amendment
of this Agreement shall be effective unless it is in writing and signed by all
the Parties to this Agreement.


                IN
WITNESS WHEREOF, this Agreement has been executed as of the day and year first
above written.


                IIM:                                                                                        ALY:


                IDAHO
INDUSTRIAL MINERALS LLC.                         ALCHEMY VENTURES, LTD.


                By  /s/ W. Robert Lemke                                                      By   /s/
Barry Girling                    


                8-12-2002           President                                                     8-12-2002        Director & Secretary


                NWK:


                Northwest Kaolin, INC.


                By   /s/ W. Robert Lemke                 


                8-12-2002       President


15