Document:

Exhibit 10.1

    
      

    

    
      EXHIBIT
        10.1

      FIRST
        AMENDMENT TO LOAN AND SECURITY AGREEMENT

       

      This
        First Amendment to Loan and Security Agreement, made as of December 4, 2006
        (this “Amendment”),
        is
        between FANSTEEL INC., a Delaware corporation (“Fansteel”),
        and
        WELLMAN DYNAMICS CORPORATION, a Delaware corporation (“Wellman”,
        and
        together with Fansteel, “Borrowers”,
        and
        each a “Borrower”),
        and
        Fifth Third Bank (Chicago), a Michigan banking corporation (the “Lender”).
        Capitalized terms used in this Amendment and not otherwise defined herein
        have
        the meanings assigned to such terms in the Loan Agreement as defined
        below.

       

      WITNESSETH

       

      WHEREAS,
        The
        Borrowers and the Lender are parties to that certain Loan and Security Agreement
        dated as of July 15, 2005 (as such agreement has been amended, restated,
        supplemented or otherwise modified from time to time, the “Loan
        Agreement”);

       

      WHEREAS,
        the
        Borrowers have requested an increase to the Revolving Loan and certain other
        modifications to the Loan Agreement;

       

      WHEREAS,
        the
        Lender is willing to modify the Loan Agreement and increase the maximum amount
        of the Revolving Loan, all on the terms and subject to the conditions of
        this
        Amendment;

       

      NOW,
        THEREFORE,
        in
        consideration of the mutual agreements contained in this Amendment, and other
        good and valuable consideration, the receipt and sufficiency of which are
        acknowledged, the parties to this Amendment agree as follows:

       

      SECTION
        1. AMENDMENT
        TO LOAN AGREEMENT

       

      On
        the
        date this Amendment becomes effective, after satisfaction by the Borrowers
        of
        each of the conditions set forth in Section
        3
        (the
“Effective
        Date”),
        the
        Loan Agreement is amended as follows:

       

      1.1    Section
        2.1
        of the
        Loan Agreement is hereby deleted in its entirety and in lieu thereof is inserted
        the following:

       

      2.1    Revolving
        Loan Facility.
        Lender
        may, in its good faith discretion, make available for Borrowers’ use from time
        to time during the term of this Agreement, upon Borrowers’ request therefor,
        certain loans and other financial accommodation, including letters of credit
        (the “Revolving
        Loan Facility”).
        The
        Revolving Loan Facility shall be subject to all of the terms and conditions
        of
        this Agreement and shall consist of a revolving line of credit consisting
        of
        discretionary Advances against Eligible Accounts, Eligible Inventory, and
        Borrowers’ Equipment (the “Revolving
        Loans”)
        in an
        aggregate principal amount not to exceed, at any time, the lesser of (i)
        Twenty
        One Million Five Hundred Thousand and No/100 Dollars ($21,500,000), less
        the
        greater of (x) One Million Five Hundred Thousand and No/100 Dollars ($1,500,000)
        or (y) the amount outstanding from time to time on any credit cards issued
        by
        Lender for the benefit of Borrowers and (ii) the amount of Revolving
        Availability of Borrowers, which Revolving Loans shall be evidenced by the
        Note.

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      As
        used
        in this Agreement, “Revolving Availability” with respect to each Borrower shall
        mean, and, at any particular time and from time to time, be equal to the
        sum of
        (i) up to eighty-five percent (85%) of the net amount (after deduction of
        such
        reserves as Lender deems proper and necessary in its sole discretion) of
        Eligible Accounts of such Borrower, plus
        (ii) up
        to the lesser of (A) Six Million Five Hundred Thousand and No/100 Dollars
        ($6,500,000) and (B) sixty percent (60%) of the lower of cost or market value
        of
        Eligible Inventory of such Borrower (net of such reserves as Lender deems
        proper
        and necessary in its sole discretion), plus
        (iii) up
        to the lesser of (A) Two Million Three Hundred Thirty Thousand Six Hundred
        Forty
        Five and No/100 Dollars ($2,330,645) and (B) seventy-five percent (75%) of
        the
        orderly liquidation value of such Borrower’s Equipment as determined by an
        appraiser acceptable to Lender in its sole discretion (net of such reserves
        as
        Lender deems proper and necessary in its sole discretion), less
        the face
        amount of any Letters of Credit issued on behalf of such Borrower and the
        amount
        of any drawn upon but unpaid Letters of Credit.

       

      At
        no
        time shall a Borrower borrow amounts which in the aggregate exceed its
        respective Revolving Availability and in no event shall the amounts borrowed
        by
        Borrowers in the aggregate at any time exceed the Maximum Revolving Loan
        Limit.

       

      The
        Revolving Loans shall be repayable on January 5, 2009 and as provided in
        Section 4.2
        of this
        Agreement. Subject to the foregoing limits and the other terms and conditions
        contained herein, and provided that no Default or Event of Default then exists,
        funds out of the Revolving Loan Facility may be advanced, repaid and
        re-advanced.

       

      It
        is
        expressly understood and agreed by Borrowers that nothing contained in this
        Agreement shall, at any time, require Lender to make loans, advances or other
        extensions of credit (collectively, “Advances”)
        to
        Borrowers and the making and amount of such loans, advances or other extensions
        of credit to Borrowers under this Agreement shall at all times, be in Lender’s
        reasonable good faith discretion. Lender may, in the exercise of such
        discretion, at any time and from time to time, upon at least seven (7) days’
prior written notice to Borrowers, increase or decrease the advance percentages
        to be used in determining Revolving Availability, which are contained in
        this
Section 2.1
        and, in
        the event such percentages are decreased, such decrease shall become effective
        seven (7) days following Borrowers receipt of such notice for the purpose
        of
        calculating the Revolving Availability. The amount of any decrease in the
        lending formulas shall have a reasonable relationship to the event, condition
        or
        circumstance which is the basis for such decrease as determined by Lender
        in
        good faith. In determining whether to reduce the advance percentages, Lender
        may
        consider events, conditions, contingencies or risks which are also considered
        in
        determining Eligible Accounts and Eligible Inventory.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      1.2    Section
        10.7(a)
        of the
        Loan Agreement is hereby deleted in its entirety and in lieu thereof is inserted
        the following:

       

      (a)    measured
        as of the end of each fiscal year hereafter commencing with the fiscal year
        ending December 31, 2006, Borrowers shall not permit their EBITDA plus
        extraordinary losses or charges permitted to be included by Lender, in its
        sole
        discretion, to be less than Three Million Six Hundred Thousand and No/100
        Dollars ($3,600,000).

       

      1.3    Section
        10.7(b)
        of the
        Loan Agreement is hereby deleted in its entirety and in lieu thereof is inserted
        the following:

       

      measured
        as of the end of each of month hereafter, Borrowers shall not permit their
        Leverage Ratio to exceed 10.0 to 1.00.

       

      1.4    Section
        10.7(c)
        of the
        Loan Agreement is hereby deleted in its entirety and in lieu thereof is inserted
        the following:

       

      (c)    measured
        as of the end of each fiscal year hereafter for the twelve month period then
        ending, commencing with the fiscal year ending December 31, 2006, Borrowers
        shall maintain a Debt Service Coverage Ratio of not less than 1.25 to
        1.00.

       

      1.5    Section
        13.2
        of the
        Loan Agreement is hereby deleted in its entirety and in lieu thereof is inserted
        the following:

       

      13.2    Acceleration
        of the Liabilities.
        Upon
        and after the occurrence of a Default, all of the Liabilities may, at the
        option
        of Lender, after written notice and demand, but without legal process of
        any
        kind, be declared, and immediately shall become, due and payable.

       

      1.6    Section
        14.10
        of the
        Loan Agreement is hereby amended by changing the address of the Lender to
        222 S.
        Riverside Plaza, 33rd
        Floor,
        Chicago, Illinois 60606.

       

      SECTION
        2. REPRESENTATIONS
        AND WARRANTIES

       

      To
        induce
        the Lender to enter into this Amendment, the Borrowers represent and warrant
        to
        the Lender that:

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      2.1    Due
        Authorization: Authority; No Conflicts; Enforceability.
        The
        execution delivery and performance by the Borrowers of this Amendment and
        the
        other documents delivered under Section
        3
        (collectively the “Amendment Documents”) are within each of their respective
        corporate powers, have been duly authorized by all necessary corporate action,
        have received all necessary governmental, regulatory or other approvals (if
        any
        are required), and do not and will not contravene or conflict with any provision
        of (i) any law, (ii) any judgment, decree or order or (iii) its respective
        articles of incorporation or by-laws, and do not and will not contravene
        or
        conflict with, or cause any lien to arise under, any provision of any agreement
        or instrument binding upon the Borrowers or upon any of its respective
        properties. This Amendment, the Loan Agreement, as amended by this Amendment,
        and the other Amendment documents are the legal, valid and binding obligations
        of the Borrowers enforceable against the Borrowers in accordance with their
        respective terms.

       

      2.2    No
        Default: Representations and Warranties.
        As of
        the Effective Date, (i) no Default or Event of Default under the Loan Agreement
        has occurred and is continuing and (ii) the representations and warranties
        of
        the Borrowers contained in the Loan Agreement are true and correct.

       

      SECTION
        3. CONDITIONS
        TO EFFECTIVENESS

       

      The
        obligation of the Lender to make the amendments and modifications contemplated
        by this Amendment, and the effectiveness thereof, are subject to the
        following:

       

      3.1    Representations
        and Warranties.
        The
        representations and warranties of the Borrowers contained in this Amendment
        are
        true and correct as of the Effective Date.

       

      3.2    Documents.
        The
        Lender has received all of the following, each duly executed and dated as
        of the
        Effective Date (or such other date as is satisfactory to the Lender) in form
        and
        substance satisfactory to the Lender:

       

      (a)    Amendment.
        This
        Amendment.

       

      (b)    Revolving
        Note.
        The
        Revolving Note, the form of which is attached hereto as Exhibit
        A.

       

      (c)    Consents.
        Etc.
        Certified copies of any documents evidencing any necessary corporate action,
        consents and governmental approvals, if any, with respect to this Amendment,
        the
        Amendment Documents or any other document provided for under this
        Amendment.

       

      (d)    Other.
        Such
        other documents as the Lender may reasonably request.

       

      SECTION
        4. MISCELLANEOUS

       

      4.1    Captions.
        The
        recitals to this Amendment (except for definitions) and the section captions
        used in this Amendment are for convenience only, and do not affect the
        construction of this Amendment.

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      4.2    Governing
        Law: Severability.
        This
        Amendment is a contract made under and governed by the internal laws of the
        State of Illinois. Wherever possible, each provision of this Amendment will
        be
        interpreted in such manner as to be effective and valid under applicable
        law,
        but if any provision of this Amendment is prohibited by or invalid under
        such
        law, such provision will be ineffective to the extent of such prohibition
        or
        invalidity, without invalidating the remainder of such provision or the
        remaining provisions of this Amendment.

       

      4.3    Counterparts.
        This
        Amendment may be executed in any number of counterparts and by the different
        parties on separate counterparts, and each such counterpart will be deemed
        to be
        an original, but all such counterparts together constitute but one and the
        same
        Amendment.

       

      4.4    Successors
        and Assigns.
        This
        Amendment is binding upon the Borrowers, the Lender and their respective
        successors and assigns, and inures to the sole benefit of the Borrowers,
        the
        Lender and their successors and assigns. The Borrowers have no right to assign
        their rights or delegate their duties under this Amendment.

       

      4.5    References.
        From
        and after the Effective Date, each reference in the Loan Agreement to “this
        Agreement,” “hereunder,” hereof,” “herein “ or words of like import, and each
        reference in the Loan Agreement or any other Financing Agreement to the Loan
        Agreement or to any term, condition or provision contained “thereunder,”
“thereof,” “therein,” or words of like import, means and be a reference to the
        Loan Agreement (or such term, condition or provision, as applicable) as amended,
        supplemented, restated or otherwise modified by this Amendment.

       

      4.6    Continued
        Effectiveness.
        Notwithstanding anything contained in this Amendment, the terms of this
        Amendment are not intended to and do not serve to effect a novation as to
        the
        Loan Agreement. The parties to this Amendment expressly do not intend to
        extinguish the Loan Agreement. Instead, it is the express intention of the
        parties to this Amendment to reaffirm the indebtedness created under the
        Loan
        Agreement. The Loan Agreement remains in full force and effect and the terms
        and
        provisions of the Loan Agreement are ratified and confirmed.

       

      4.7    Costs.
        Expenses and Taxes.
        The
        Borrower affirms and acknowledges that Section 14.3 of the Loan Agreement
        applies to this Amendment and the transactions and agreements and documents
        contemplated under this Amendment.

       

      (remainder
        of page left intentionally blank; signature page follows)

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

      Delivered
        as of the day and year first above written.

       

      
        	 	
                FIFTH
                  THIRD BANK (CHICAGO)

              
	 	 
	 	
                By:/s/
                  Michael E.
                  May              

              
	 	
                Name:
                  Michael
                  E.
                  May              
                  

              
	 	
                Title:
                  Vice
                  President                   

              
	 	 
	 	
                FANSTEEL
                  INC.

              
	 	 
	 	
                By:/s/
                  R. Michael
                  McEntee      

              
	 	
                Name:R.
                  Michael
                  McEntee       

              
	 	
                Title:
                  Vice
                  President &
                  CFO      

              
	 	 
	 	
                WELLMAN
                  DYNAMICS CORPORATION

              
	 	 
	 	
                By:/s/
                  R. Michael
                  McEntee       

              
	 	
                Name:R.
                  Michael
                  McEntee       

              
	 	
                Title:
                  Vice
                  President                   

              

      

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

      EXHIBIT
        A

      to

      Loan
        and Security Agreement

       

      REVOLVING
        LOAN NOTE

       

      
        	
                $21,500,000

              	
                Chicago,
                  Illinois

              
	 	
                as
                  of December 4, 2006

              

      

       

      FOR
        VALUE
        RECEIVED, the undersigned, FANSTEEL INC., a Delaware corporation (“Fansteel”),
        and
        WELLMAN DYNAMICS CORPORATION, a Delaware corporation (“Wellman”,
        and
        together with Fansteel, “Borrowers”,
        and
        each a “Borrower”),
        hereby jointly and severally unconditionally promise to pay to the order
        of
        FIFTH THIRD BANK (CHICAGO), a Michigan banking corporation (“Lender”),
        at
        Lender’s office at 222 South Riverside Plaza, 33rd
        Floor,
        Chicago, Illinois 60606, or at such other place as Lender may from time to
        time
        designate in writing, in lawful money of the United States of America and
        in
        immediately available funds, the principal sum of TWENTY ONE MILLION FIVE
        HUNDRED THOUSAND AND NO/100 DOLLARS ($21,500,000), or the aggregate unpaid
        principal amount of all advances made pursuant to subsection
        2.1
        of the
        Loan Agreement (as hereinafter defined) at such times as are specified in
        and in
        accordance with the provisions of the Loan Agreement. This Revolving Loan
        Note
        (this “Note”)
        is
        referred to in and was executed and delivered pursuant to that certain Loan
        and
        Security Agreement dated as of even date herewith by and among Borrowers
        and
        Lender (as amended, restated, modified or supplemented and in effect from
        time
        to time, the “Loan
        Agreement”),
        to
        which reference is hereby made for a statement of the terms and conditions
        under
        which the loan and other advances evidenced hereby were made and are to be
        repaid and for a statement of Lender’s remedies. All terms which are capitalized
        and used herein (which are not otherwise specifically defined herein) and
        which
        are defined in the Loan Agreement shall be used in this Note as defined in
        the
        Loan Agreement.

       

      Borrowers
        promise to pay interest, including default interest, on the outstanding unpaid
        principal amount hereof, as provided in the Loan Agreement. If demand is
        not
        sooner made, all accrued interest and principal, if not sooner paid, shall
        be
        due and payable on January 5, 2009.

       

      Interest
        on this Note shall be payable at the rates and from the dates specified in
        the
        Loan Agreement, on the date of any prepayment hereof, at maturity, whether
        due
        by acceleration or otherwise, and as otherwise provided in the Loan Agreement.
        Interest shall be payable on the last Business Day of each month
        hereafter.

       

      This
        Note
        is secured pursuant to the Loan Agreement and the other Ancillary Agreements
        referred to therein, and reference is made thereto for a statement of the
        terms
        and conditions of such security.

       

      Lender
        shall have the continuing exclusive right to apply and to reapply any and
        all
        payments hereunder against the Liabilities of Borrowers, in accordance with
        the
        terms of the Loan Agreement.

       

      Each
        Borrower hereby waives demand, presentment, protest, notice of demand,
        presentment, protest and nonpayment. Each Borrower also waives all rights
        to
        notice and hearing of any kind upon the occurrence of a Default or an Event
        of
        Default prior to the exercise by Lender, of its rights to repossess the
        Collateral without judicial process or to replevy, attach or levy upon the
        Collateral without notice or hearing.

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      In
        addition to and not in limitation of the foregoing and the provisions of
        the
        Loan Agreement, the undersigned further agrees, subject only to any limitation
        imposed by applicable law, to pay all expenses, including reasonable attorneys’
fees and legal expenses, incurred by the holder of this Note in endeavoring
        to
        collect any amounts payable hereunder which are not paid when due whether
        by
        acceleration or otherwise.

       

      THIS
        NOTE SHALL BE DEEMED TO HAVE BEEN MADE AT CHICAGO, ILLINOIS AND SHALL BE
        INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED
        IN
        ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAW PROVISIONS)
        AND DECISIONS OF THE STATE OF ILLINOIS. WHENEVER POSSIBLE EACH PROVISION
        OF THIS
        NOTE SHALL BE INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND VALID UNDER
        APPLICABLE LAW, BUT IF ANY PROVISION OF THIS NOTE SHALL BE PROHIBITED BY
        OR
        INVALID UNDER APPLICABLE LAW, SUCH PROVISION SHALL BE INEFFECTIVE TO THE
        EXTENT
        OF SUCH PROHIBITION OR INVALIDITY, WITHOUT INVALIDATING THE REMAINDER OF
        SUCH
        PROVISION OR THE PROVISIONS OF THIS NOTE. ALL
        REFERENCES TO THE SINGULAR SHALL BE DEEMED TO INCLUDE THE PLURAL, AND VICE
        VERSA, WHERE THE CONTEXT SO REQUIRES.
        WHENEVER IN THIS NOTE REFERENCE IS MADE TO LENDER OR A BORROWER OR BORROWERS,
        SUCH REFERENCE SHALL BE DEEMED TO INCLUDE AS APPLICABLE, A REFERENCE TO THEIR
        RESPECTIVE SUCCESSORS AND ASSIGNS. THE PROVISIONS OF THIS NOTE SHALL BE BINDING
        UPON AND SHALL INURE
        TO
        THE BENEFIT OF SUCH SUCCESSORS AND ASSIGNS. EACH BORROWER’S SUCCESSORS AND
        ASSIGNS SHALL INCLUDE, WITHOUT LIMITATION, A RECEIVER, TRUSTEE OR DEBTOR
        IN
        POSSESSION OF OR FOR SUCH BORROWER. EACH
        BORROWER SHALL BE JOINTLY AND SEVERALLY OBLIGATED
        HEREUNDER.

       

      This
        Revolving Note replaces that certain Revolving Note in the original principal
        amount of $15,000,000, dated July 15, 2005, and does not constitute payment
        thereof or a novation therefor.

       

      [Remainder
        of page intentionally left blank; signature page follows]

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

      IN
        WITNESS WHEREOF, each Borrower has caused its duly authorized representative
        to
        execute this Revolving Loan Note as of the date first set forth
        above.

       

      

      
        	 	
                FANSTEEL
                  INC.

              
	 	 
	 	
                By:__________________________

              
	 	
                Name:_______________________

              
	 	
                Title:________________________

              
	 	 
	 	
                WELLMAN
                  DYNAMICS CORPORATION

              
	 	 
	 	
                By:___________________________

              
	 	
                Name:________________________

              
	 	
                Title:_________________________

              

      

       

       

    

    
      9Exhibit
      10.10

    

    Mr.
      John
      Anderson

    Key
      Gold
      Corporation

    

    December
      1, 2006

    

    
      	
              RE:

            	
              Letter
                Agreement for the Option to Purchase Uranium Properties by Key Gold
                Corporation (or its designee) from Somuncurah SRL, an Argentine
                Entity

            

    

    

    Dear
      Mr.
      Anderson:

    

    This
      Letter Agreement, when signed by both parties, shall constitute the binding
      agreement for an option to purchase the 29,950 hectares of uranium claims,
      comprising the Guanchin, Cuesta de Miranda, Alpasinche, Bolson de Palqui, Huaco,
      Rincon de los Paez, and Cuesta de Miranda I, all in the Province of La Rioja,
      Argentina, and as listed in Exhibit A attached hereto (collectively hereinafter
      the “Properties”), by Key Gold Corporation (“Key”) or its designee from
      Somuncurah SRL (“Somuncurah”), an Argentine entity. Somuncurah shall provide to
      Key, pursuant to industry standard confidentiality and non-compete agreements
      to
      be entered into, historic reports and project descriptions of the Properties,
      a
      title review of the land status of the Properties, and sufficient information
      (financial and otherwise) that may be required to be filed with the Securities
      and Exchange Commission by Key in connection with the exercise of the option
      on
      December 8, 2006 as provided below. Following a reasonable opportunity to review
      such reports and land review data, the option to purchase shall be exercised
      by
      Key by paying US$250,000.00 to Somuncurah on or before December 8, 2006 by
      wire
      transfer to the account information to be supplied by Somuncurah. Upon such
      exercise, Key shall have the option to purchase the Properties on the following
      terms and conditions:

    

    
      	
              1.

            	
              In
                order to maintain the purchase option in force, Key shall make the
                following payments in the amounts and at the times specified
                below:

            

    

    

    
      	
              On
                or before May 10, 2007

            	
              US$   
                150,000.00

            
	
              On
                or before May 10, 2008

            	
              US$   
                150,000.00

            
	
              On
                or before May 10, 2009

            	
              US$   
                250,000.00

            
	
              On
                or before November 10, 2010

            	
              US$
                2,800,000.00

            

    

    

    
      	
              2.

            	
              Upon
                making the final payment listed above (and, assuming each of the
                previous
                payments have been made timely), Key shall have completed the purchase
                of
                all of Somuncurah’s right, title and interest in the Properties, and
                Somuncurah, directly and through the best efforts of George Young
                and its
                and his respective affiliates, shall promptly convey the Properties
                (that
                have not been relinquished as provided in paragraph 3 below) to Key,
                free
                and clear of all liens and encumbrances, except any as shall have
                been
                suffered to attach to the Properties by any action or inaction of
                Key or
                any of its officers, directors, agents or successors. In such conveyance,
                Somuncurah shall reserve to itself or its assigns a 1.5% Net Smelter
                Return royalty interest, determined and documented in accordance
                with
                industry standards.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              3.

            	
              At
                any time, Key may make any payment or payments called for above in
                advance
                of the actual date(s) specified. During the time up to and until
                all
                payments have been made, and so long as the purchase option is in
                effect,
                Key shall maintain the Properties in full compliance with all regulatory
                requirements (except with respect to any Property or Properties that
                Key
                has previously properly relinquished, as described below), and shall
                have
                the right to operate mineral exploration and any related exploitation
                and
                other activities as it sees fit, and shall file all reports and proofs
                of
                work as reasonable and necessary to maintain the Properties in good
                standing with the Province of La Rioja and the Republic of Argentina.
                In
                addition, in the event that Key at any time desires not to proceed
                with
                the purchase option with respect to one or more of the Properties,
                Key
                shall notify Somuncurah at least thirty (30) days in advance of the
                date
                for the next subsequent payment provided in paragraph 2 above, and
                thereafter with respect to any such Property or Properties, Key shall
                have
                no further responsibility to maintain the good standing thereof,
                and the
                payment amounts to be made by Key shall be proportionately reduced
                in the
                ratio of the hectares contained within the relinquished Property
                or
                Properties to the total amount of hectares of 29,950. In such event,
                Somuncurah shall take such Property or Properties from that point
                for its
                own account. With respect to any Property or Properties so relinquished
                by
                Key, Key shall have no further obligation to make any payment or
                payments
                falling due after thirty (30) days of such notice of relinquishment,
                or
                any other obligation relating to such Property of Properties, except
                for
                reclamation or other obligations arising from Key’s operations prior to
                the time of relinquishment.

            
	 	 
	
              4.

            	
              George
                Young, Somuncurah, and his and its respective affiliates accept
                responsibility for, and shall indemnify and hold Key harmless from
                and
                against, any and all taxes, governmental fees, and the like that
                may
                accrue against George Young, Somuncurah, and his and its affiliates
                in
                respect of the transactions contemplated
                hereby.

            

    

     

    Upon
      the
      execution of this Letter Agreement by both parties and the payment of the
      initial exercise price of US$250,000.00, this Letter Agreement shall become
      a
      binding purchase option agreement enforceable in accordance with its terms.
      However, the parties may desire to enter into more formal documentation to
      enable any reasonable financing or regulatory review as may be required. In
      the
      event either party desires to do so, it is hereby mutually agreed that the
      parties will negotiate in good faith a more formal and definitive purchase
      option agreement and use their best efforts to finalize and execute the same
      within thirty (30) days from the date that either party notifies the other
      of
      such desire. Any such formal document shall contain the provisions of this
      Letter Agreement and such other usual and customary terms and conditions as
      are
      within the industry standards, so long as the basic provisions of this Letter
      Agreement remain embodied in such document.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    In
      consideration of the foregoing agreements and commitments of the parties and
      the
      other terms provided above, the undersigned hereby acknowledge their consent
      and
      agreement to be bound by the terms of this Letter Agreement.

    

    ACCEPTED
      AND AGREED THIS 1st
      DAY OF
      DECEMBER, 2006

    

    KEY
      GOLD
      CORPORATION

     

    
      	
              By:

            	_______________________
	 	
              John
                Anderson

            
	 	
              Chairman
                and CEO

            

    

    

    ACCEPTED
      AND AGREED THIS _____ DAY OF DECEMBER, 2006

    

    SOMUNCURAH
      SRL

     

    
      	
              By:

            	_______________________
	 	
              George
                S. Young

            
	 	
              Its
                Attorney in Fact

            

    

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    EXHIBIT
      A

    

    To
      Letter
      Agreement

    between
      Key Gold Corporation (or its designee) and Somuncurah SRL

    

    The
      following mining claims in the Province of La Rioja, Argentina:

    

    
      	
              Name

            	
              Hectares

            	
              Identifying
                Information

            
	 	 	 
	
              Guanchin

            	
              3,500
                hectares

            	
              As
                filed in La Rioja Official Records 

            
	
              Cuesta
                de Miranda

            	
              4,500
                hectares

            	
              As
                filed in La Rioja Official Records

            
	
              Alpasinche

            	
              3,500
                hectares

            	
              As
                filed in La Rioja Official Records

            
	
              Bolson
                de Palqui

            	
              3,950
                hectares

            	
              As
                filed in La Rioja Official Records

            
	
              Huaco

            	
              3,000
                hectares

            	
              As
                filed in La Rioja Official Records

            
	
              Rincon
                de los Paez

            	
              5,500
                hectares

            	
              As
                filed in La Rioja Official Records

            
	
              Cuesta
                de Miranda I

            	
              6,000
                hectares

            	
              As
                filed in La Rioja Official Records

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