WHICH THE PURCHASER MAY BE REQUIRED TO PAY;
AND
(VI)
GOVERNMENT IMPOSED PRODUCTION, ROYALTIES AND AD VALOREM TAXES
(EXCLUDING TAXES ON INCOME).
WHERE A COST OR EXPENSE OTHERWISE CONSTITUTING A PERMISSIBLE DEDUCTION IS
INCURRED IN A TRANSACTION WITH A PARTY NOT DEALING AT ARM'S LENGTH (AS THAT TERM
IS DEFINED IN THE INCOME TAX ACT (CANADA), SUCH COSTS OR EXPENSES MAY BE
DEDUCTED, BUT ONLY AS TO THE LESSER OF THE ACTUAL COST INCURRED OR THE FAIR
MARKET VALUE THEREOF CONSIDERING THE TIME OF SUCH TRANSACTION AND UNDER ALL THE
CIRCUMSTANCES THEREOF.
3.
PAYMENTS AND AUDITED STATEMENTS
(A)
PAYMENT OF NET SMELTER RETURNS BY THE PURCHASER TO THE VENDOR
SHALL BE MADE QUARTERLY WITHIN 45 DAYS AFTER THE END OF EACH QUARTER OF EACH
FISCAL YEAR, AND SHALL BE ACCOMPANIED WITH UNAUDITED FINANCIAL STATEMENTS
PERTAINING TO THE OPERATIONS CARRIED OUT ON THE PROPERTY.
(B)
WITHIN 120 DAYS AFTER THE END OF THE FISCAL YEAR, THE RECORDS
RELATING TO THE CALCULATION OF THE NET SMELTER RETURNS ROYALTY SHALL BE AUDITED
BY THE PURCHASER'S EXTERNAL INDEPENDENT AUDITOR AND ANY RESULTING ADJUSTMENTS IN
THE PAYMENT OF NET SMELTER RETURNS PAYABLE TO THE VENDOR SHALL BE MADE AS
FOLLOWS:
(I)
IF AMOUNTS ARE OWED TO THE VENDOR, THE PAYMENT WILL BE MADE
FORTHWITH TOGETHER WITH INTEREST AT THE PRIME RATE OF THE ROYAL BANK OF CANADA
PLUS 2%, AND
(II)
IF THE VENDOR HAS BEEN OVER PAID, SUCH OVERPAYMENT WILL BE
DEDUCTED FROM SUBSEQUENT NET SMELTER RETURNS ROYALTY PAYMENTS TO THE VENDOR.
(C)
THE INFORMATION CONTAINED IN THE AUDITED STATEMENTS REFERRED
TO IN (B)
ABOVE, WILL INCLUDE DETAILED INFORMATION RELATING TO:
(I)
THE QUANTITY OF MINERAL PRODUCTION AND SALE OF MINERAL
PRODUCTION FOR THAT FISCAL YEAR;
(II)
THE PERMISSIBLE DEDUCTIONS, INCLUDING PERMISSIBLE DEDUCTIONS
CARRIED OVER FROM PREVIOUS YEARS IF IN EXCESS OF THE GROSS SALES PRICE(S)
OBTAINED FOR THE MINERAL PRODUCTION IN SUCH PREVIOUS YEARS;
(III)
GROSS SALES PRICE(S) OBTAINED FOR THE MINERAL PRODUCTION; AND
(IV)
THE CALCULATION OF THE ROYALTY PAYABLE TO THE VENDOR.
(D)
EACH ANNUAL AUDITED STATEMENTS SHALL BE FINAL AND NOT SUBJECT
TO ADJUSTMENT UNLESS THE VENDOR DELIVERS TO THE PARTICIPANT WRITTEN EXCEPTIONS
IN REASONABLE DETAIL WITHIN 90 DAYS AFTER THE VENDOR RECEIVES SUCH STATEMENTS.
THE VENDOR, OR ITS REPRESENTATIVE DULY
17
AUTHORIZED IN WRITING, AT ITS EXPENSE, SHALL HAVE THE RIGHT TO AUDIT THE BOOKS
AND RECORDS OF THE PURCHASER RELATED TO NET SMELTER RETURNS TO DETERMINE THE
ACCURACY OF THE AUDITED STATEMENTS, BUT SHALL NOT HAVE ACCESS TO ANY OTHER BOOKS
AND RECORDS OF THE PARTICIPANT.
THE AUDIT SHALL BE CONDUCTED BY A CHARTERED OR
CERTIFIED PUBLIC ACCOUNTANT.
THE VENDOR'S AUDITOR SHALL HAVE THE RIGHT TO
CONDITIONAL ACCESS TO THE PARTICIPANTS' BOOKS AND RECORDS ON EXECUTION OF A
WRITTEN AGREEMENT BY THE AUDITOR THAT ALL INFORMATION WILL BE HELD IN CONFIDENCE
AND USED SOLELY FOR PURPOSES OF AUDIT AND RESOLUTION OF ANY DISPUTES RELATED TO
THE REPORT.
A COPY OF THE VENDOR'S REPORT SHALL BE DELIVERED TO THE PARTICIPANT
UPON COMPLETION, AND ANY DISCREPANCY BETWEEN THE AMOUNT