Document:

Exhibit 10.18

 

(ENGLISH VERSION)

 

EXPLORATION, EXPLOITATION AND UNILATERAL PROMISE OF ASSIGNMENT OF RIGHTS AGREEMENT EXECUTED ON THE ONE PART BY LA CUESTA INTERNATIONAL, S. A. DE C. V. (HEREINAFTER CALLED “LA CUESTA”) REPRESENTED BY MR. WILLIAM PERRY DURNING AND ON THE OTHER PART BY MINERA PLATA REAL, S. A. DE C. V. (HEREINAFTER CALLED “PLATA REAL”), REPRESENTED BY MR. VICTOR GARCIA JIMENEZ, IN ACCORDANCE WITH FOLLOWING STATEMENTS AND CLAUSES:

 

S T A T E M E N T S

 

I. LA CUESTA states:

 

a)             That it is a mining corporation legally incorporated according to the laws of the Mexican Republic, legally qualified to execute agreements and to be owner of mining concessions;

 

b)             That its sole administrator, Mr. William Perry Durning is dully empowered to represent it and to execute this agreement;

 

c)              That it is the legal titleholder of the rights derived from the application for mining concession filed over the mining lot (“THE LOT”), “LOS GATOS”, File N° 16/33429, with a surface of approximately 19,000 hectares, located in the Municipality of Satevo, State of Chihuahua, within the jurisdiction of the Mining Agency of Chihuahua, Chihuahua, as described in Schedule 1;

 

d)             That in regard to the application for the mining concession existing over THE LOT, to date, it has fulfilled all the obligations imposed upon it by the Mining Law, its Regulations and all other applicable legal requirements and that therefore, it is expected that official title for the mining concession will be issued in the future and likewise, that the rights derived from said application are free and clear from any lien, encumbrance or limitation of dominion; and

 

e)              That it is willing to grant PLATA REAL the right to explore and, when titled, to purchase and to exploit THE LOT in accordance with the terms and conditions stipulated in this agreement.

 

II. PLATA REAL states:

 

a)             That it is a mining corporation legally incorporated according to the laws of the Mexican Republic, legally qualified to execute agreements and to be owner of mining concessions;

 

b)             That its attorney, Mr. Victor Garcia-Jimenez is dully empowered to represent it and to execute this agreement; and

 

c)              That it is willing to be granted the right to explore and, when titled, to purchase and exploit THE LOT, on the terms and conditions stipulated in this agreement.

 

In accordance with the former statements, the parties agree the following:

 

1

 

C L A U S E S

 

FIRST. Right to explore, purchase and exploit THE LOT. Subject to that provided in Clause Third below, LA CUESTA hereby grants PLATA REAL the exclusive right to explore and, when titled, purchase and exploit THE LOT during the entire term for which the existing application for mining concession is valid and enforceable or a mining concession exists over THE LOT, and entitles PLATA REAL to execute during said term all exploration and exploitation works permitted to be executed by the concessionaires under the Mining Laws of Mexico, its Regulations and the titles of mining concessions.

 

SECOND. Right to terminate this agreement in advance. The term of this agreement will be compulsory for LA CUESTA and optional for PLATA REAL, who consequently will be able to terminate it on at least sixty days prior written notice to LA CUESTA to inform it of the date of termination.

 

Nevertheless, LA CUESTA will also have the right to terminate this agreement if PLATA REAL does not fulfill the work expenditures set out in the Fourth Clause, does not make the advance royalty payments as set out in the Sixth Clause, or if THE LOT is transferred back to LA CUESTA in connection with the Tenth Clause. La Cuesta should also have the right to terminate the Agreement in the event Plata Real incurs in any form of noncompliance, particularly, should Plata Real violate any mining, environmental, labor, tax or other legal provisions either in the course of the exploration or exploitation of the Los Gatos lot; or also in the course of its ordinary business operations not related to the Los Gatos lot, should in the latter instance the violation of those legal provisions by Plata Real affect or put in jeopardy the Los Gatos lot.

 

In the event of termination of this agreement, PLATA REAL will return THE LOT to LA CUESTA in good standing and free and clear from any encumbrances and will provide LA CUESTA within sixty days after termination copies of all assays, maps geological and geophysical reports and data, drilling reports, logs, technical reports and all other data relating to THE LOT and its evaluation.

 

THIRD. Unilateral promise to transfer THE LOT. LA CUESTA hereby unilaterally commits to transfer to PLATA REAL 100% (One Hundred Percent) of the title to THE LOT, as soon as the respective mining concession title is issued to LA CUESTA by the Mining Direction, for a purchase price of $15,000 United States Dollars (fifteen thousand United States dollars), an amount that has already been paid by PLATA REAL to LA CUESTA. This promise shall be valid and enforceable during the entire term of this agreement.

 

In view of the unilateral nature of this promise, it will be compulsory for LA CUESTA and optional for PLATA REAL, who therefore will have the right to decide to acquire or not the above-mentioned rights during the term of this agreement.

 

Upon the title to THE LOT being issued, LA CUESTA will immediately notify PLATA REAL and, upon such notification, PLATA REAL will confirm in writing that it wishes to continue with this agreement. If PLATA REAL agrees to continue with this agreement, LA CUESTA will transfer the title to THE LOT to PLATA REAL. In this case, both parties agree to do all things necessary to complete such transfer, including appearing before a Notary Public. If PLATA REAL decides not to continue with this agreement, the agreement will terminate and have no further force or effect.

 

2

 

LA CUESTA estimates but does not guarantee that the mining concession title over THE LOT will be issued between April and December 2006 and, meanwhile, inasmuch as it is not at this time required to pay surface taxes nor to invest a minimum amount in exploration works, all amounts received from PLATA REAL for those purposes up to the date of signature of this agreement will be used toward the payment of the surface taxes of THE LOT that will be required upon the date of issuance of title.

 

When the title to THE LOT is issued to LA CUESTA, LA CUESTA will, as soon as practicable, transfer title to PLATA REAL and all clauses contained herein regarding investments, royalties, payments and other obligations of the parties will be reproduced in a definitive Contract of Transfer.

 

FOURTH. Minimum annual investment in exploration and development. To maintain this Agreement valid and in effect, PLATA REAL will have to spend the following minimum work expenditures on THE LOT to keep THE LOT in good standing during the following years:

 

	
a)
    	
 
    	
Year 2006:
    	
 
    	
US $
    	
40,000
    	
 
    
	
b)
    	
 
    	
Year 2007:
    	
 
    	
US $
    	
80,000
    	
 
    
	
c)
    	
 
    	
Year 2008:
    	
 
    	
US $
    	
100,000
    	
 
    
	
d)
    	
 
    	
Each Year Thereafter
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Until the End Date (described below)
    	
 
    	
US $
    	
100,000
    	
 
    

 

The “End Date” will be the earlier of December 31, 2016 or the date a feasibility study is prepared on THE LOT. Any amount expended in excess of the above mentioned limits in any give year can be applied to the future year(s) work commitments.

 

The exploration to be carried out by the PLATA REAL, whether directly or by means of contractors who render their services to them, comprise, among others, the works that allow the location, identification and determination of mineral substances existing in THE LOT, consisting of but not limited to road construction, site preparation, assaying, geological and geophysical investigations and examinations, including geological explorations, surveying, metallurgical studies, drillings of any kind and mining works such as drifts, crosscuts, pits, shafts and the like considered convenient, additionally to one or more Feasibility Studies to evaluate the viability of this project considering the possibility of establishing a new mining unit, in the opinion of a financing entity contracted by PLATA REAL.

 

Likewise, applicable minimum work expenditures includes each and all such other activities excluding land acquisition costs related with the exploration for the direct benefit of THE LOT allowed by the applicable legal provisions in the area of mining and mineral exploration, particularly those indicated in articles 28 and 29 of the Mining Law, and which may be used, to prove the mining works to which PLATA REAL is obligated, as titleholder of THE LOT.

 

All work done on the property will be conducted under the applicable environmental laws and regulation, where required appropriate permits will be acquired before work begins.

 

FIFTH. Royalties. Upon the transfer of title to THE LOT, PLATA REAL grants LA CUESTA a 2% royalty (the “2% Royalty”) on net smelter returns from all minerals obtained and sold from THE LOT, as long as PLATA REAL is producing and selling any minerals from THE LOT. In addition, PLATA REAL agrees to grant LA CUESTA a 0.5% royalty on net smelter returns from all minerals obtained and sold from all properties owned by third parties that PLATA REAL acquires within the boundaries of THE LOT and the Area

 

3

 

of Influence as described in the Seventeenth Clause below (collectively the 2% Royalty and the 0.5% royalty are referred to as the “Royalty”). The terms of the Royalty are set out in Schedule 2.

 

PLATA REAL shall pay the Royalty to LA CUESTA, in check or wire transfer, within 30 days after the end of each calendar quarter in which there has been production and sales of minerals. PLATA REAL shall appoint a competent auditor acceptable to LA CUESTA to verify the calculation of the amounts to be paid as royalties.

 

It is expressly understood that, should PLATA REAL initiate commercial production, and should the Royalty referred to herein above be determined and same be less than the amount of the minimum Advance Royalty Payments described in Clause Six, PLATA REAL shall continue paying to LA CUESTA every six months, the amount of $20,000 United States dollars (twenty thousand United States dollars).

 

PLATA REAL will be entitled to transfer the rights to exploit THE LOTS, or sell them to third parties, provided, however, that it shall be a condition of such transfer that the transferee first execute and deliver to LA CUESTA and PLATA REAL an instrument pursuant to which the transferee agrees to be bound by all the terms of this agreement and to be bound to all liabilities and obligations in relation to the Royalty and Advance Royalty Payments required of PLATA REAL as if the transferee was an original party of this Agreement.

 

Once PLATA REAL pays to LA CUESTA the total amount of $10,000,000 United States dollars (ten million United States dollars), , in combined Advance Royalty and Royalty payments, the production Royalty payable to LA CUESTA shall be reduced from 2% (two percent) to 0.5% (one half percent). Once PLATA REAL pays to LA CUESTA the total amount of $15,000,000 United States dollars (fifteen million United States dollars), it shall have no obligation to make any additional payment in favor of LA CUESTA.

 

SIXTH. Advance Royalty Payments. As long as PLATA REAL and/or its successors or assigns has an interest in and/or is exploring THE LOT or other mineral interest within the Area of Influence of the Seventeenth Clause, it will pay LA CUESTA the following Advance Royalty Payments plus applicable Value Added Tax:

 

	
On signing this   Agreement (already paid to LA CUESTA)
    	
 
    	
US $
    	
7,500
    	
 
    
	
On or before   April 27, 2006
    	
 
    	
7,500
    	
 
    
	
On or before   October 27, 2006
    	
 
    	
12,500
    	
 
    
	
On or before   April 27, 2007
    	
 
    	
12,500
    	
 
    
	
On or before   October 27, 2007
    	
 
    	
15,000
    	
 
    
	
On or before   April 27, 2008
    	
 
    	
15,000
    	
 
    
	
On or before October 27,   2008
    	
 
    	
20,000
    	
 
    
	
Each 6 months   thereafter
    	
 
    	
20,000
    	
 
    

 

LA CUESTA accepts and recognizes that on February 1, 2006 PLATA REAL already made the first Advance Royalty Payment in the amount of $7,500 United States dollars (Seven thousand five hundred United States dollars).

 

The above mentioned Advance Royalty Payments would apply as long as PLATA REAL maintains any rights to THE LOT or any portion thereof, or any other mineral interest within the Area of Influence of Clause Seventeen and until commercial production commences on THE LOT. In the case where commercial production has commenced on THE LOT, but the calculated Royalty is less than the minimum Advance Royalty Payments as described above, then the Advance Royalty Payment would apply.

 

4

 

All Advance Royalty Payments paid by PLATA REAL to LA CUESTA prior to production would be credited against the Royalty that becomes due as provided in the Fifth Clause.

 

SEVENTH. Fees, Taxes and Expenses. All the fees, taxes and expenses incurred on the granting and execution of this agreement and of the respective purchase agreement will be paid by PLATA REAL, except for those taxes imposed on the income obtained by LA CUESTA, which will be paid by them.

 

To all payment made by PLATA REAL to LA CUESTA, a Value Added Tax at the rate of 15% will be added, indicating separately in the invoice to be issued the amount of said Tax.

 

All amounts paid by PLATA REAL to LA CUESTA will be in dollars, currency of the United States of America.

 

EIGHTH. Labor responsibility. Each party acknowledges and agrees that no labor relations exist between the workers and contractors of such party and the other party, and expressly agrees that, with respect to its employees and contractors, such party or its contractors (as to their employees), will assume all labor responsibilities and will hold the other party harmless against any reclamation, claim, accusation or complaint which may be filed against the first party by its workers or employees, contractors or by applicable labor or administrative authorities.

 

NINTH. Additional obligations of LA CUESTA. In addition to the obligations assumed by LA CUESTA in the preceding clauses, until THE LOT is transferred to PLATA REAL, it will have also the following obligations:

 

a)             To follow up, carry out any action required and, in its case, file any document required, in order for the title of mining concession for THE LOT to be issued.

 

b)             Inform PLATA REAL on the issuance of the titles of mining concession which shall cover THE LOT, delivering copies of such title to PLATA REAL, within 10 (ten) calendar days counted from the date on which LA CUESTA receives such titles.

 

c)              To maintain valid and in force the rights derived from the existing mining concessions or from those that would be issued over THE LOT and, likewise, to maintain them free and clear from any lien, encumbrance or limitation of dominion, fulfilling all obligations imposed to them by the Mining Law, its Regulations and all applicable legal provisions;

 

d)             Permit PLATA REAL to carry out all kind of exploration or evaluation works and metallurgical tests in THE LOT as it may consider necessary, as well as to provide it with all the information they may have on THE LOT; and

 

e)              Indemnify and hold harmless PLATA REAL from and against any liability, claim or responsibility that may arise from any acts or omission of LA CUESTA with respects to THE LOT.

 

TENTH. Additional obligations of PLATA REAL. In addition to the obligations assumed by PLATA REAL in the preceding clauses, until THE LOT is transferred to PLATA REAL, it also will have the following obligations:

 

5

 

a)             To carry out the exploration at THE LOT in the best possible manner in accordance with the most appropriate and rational mining practices and in accordance with all legal regulations regarding executing enough exploration work required to fulfill with the provisions of the law;

 

b)             To help LA CUESTA fulfill in a timely manner the obligations to prepare and file the exploration assessment work and to pay the duties on mining concessions;

 

c)              To maintain THE LOT in good shape and exploration condition, free of any liens or encumbrances; and

 

d)             To permit LA CUESTA or their agents to inspect THE LOT and the work that will be carried out in them at any moment, but without LA CUESTA interfering in the proper execution of the exploration work.

 

In addition, during the term of this agreement, PLATA REAL will have the following obligations:

 

e)              To punctually pay to LA CUESTA all considerations provided herein in this agreement; and

 

f)               If THE LOT has been transferred to PLATA REAL and it decides to abandon or otherwise dispose of THE LOT or any portion thereof, LA CUESTA will have the right to acquire THE LOT or the proposed abandoned portion thereof back from PLATA REAL, at no cost and free of any liens or encumbrances, with PLATA REAL bearing all of the cost of transfer. In the case where PLATA REAL abandons all of THE LOT and retains no mineral interests within the Area of Influence in Clause 17, the full rights on THE LOT shall revert to LA CUESTA free of all charges, and the obligations under this agreement will terminate and LA CUESTA releases PLATA REAL from all obligations and liabilities connected to THE LOT or this agreement, whether past, present, future or contingent.

 

g)              Comply with all mining, environmental and other legal provisions in the course of the exploration and exploitation of the Los Gatos lot, as well as to fulfill all applicable provisions and requirements under the labor, tax and other applicable laws in the course of its ordinary business operations, to the extent required in order for its rights and title to the Los Gatos lot not be affected or put in jeopardy because of any violation of or non compliance with those applicable laws.

 

If at any time during the term of this agreement PLATA REAL does not fulfill or breaches any of its obligations under this agreement, and especially those provided in this Clause, LA CUESTA will have the right to terminate this agreement under the terms of the Eleventh Clause herein below, and consequently the transfer of the rights deriving from the mining concession on the LOT shall be revoked and shall remain with no legal effects, and PLATA REAL undertakes to take at its own expense all and any legal steps which may be required, in order for all rights deriving from the said mining concession on THE LOT to be transferred to LA CUESTA at no cost and free of any liens or encumbrances, without prejudice of LA CUESTA being also entitled to seek indemnification from PLATA REAL for the damages and losses suffered by LA CUESTA.

 

ELEVENTH. Noncompliance. The noncompliance of any of the parties with the obligations they assume in this agreement will grant the other party the right to ask the immediate fulfillment of the non-fulfilled obligations. For said purpose, it will be required to ask, in writing, the party in default to fulfill said obligations and, if after a thirty days period from the date of delivering said petition, the noncompliance still exists and no reasonable effort to remedy it has been made, then the affected party will have the right, at its option, to seek arbitration as outlined in Clause Fifteenth, to remedy of the unfulfilled obligations or to terminate this agreement, and shall be entitled to seek indemnification for damages.

 

6

 

It is expressed understood that in case that, because of reasons of the exclusive responsibility of the LA CUESTA, the General Direction of Mines does not accept the applications and, therefore does not issue the title of mining exploration concession covering THE LOT, same shall be a cause of termination of this Contract, having LA CUESTA therefore, the obligation to reimburse to PLATA REAL all the amounts it had received from PLATA REAL.

 

TWELVETH. Force Majeure. The parties will not be considered in noncompliance with the agreement when such noncompliance is due to force majeure and they are unable to fulfill the obligations they assume under this agreement.

 

Force majeure is defined, including but not limited to: Acts of God, earthquakes, fires, floods, collapses, riots, rebellions, wars, strikes, revolutions, acts of authority and, in general, any other fact or act totally out of the will of the parties and of their control and which prevent them to fulfill, totally or partially, their obligations under this agreement.

 

Should any of the parties be affected by force majeure and therefore is unable to fulfill its obligations in accordance with this agreement, it shall notify the other party in writing, informing of the circumstances leading to the evoking of force majeure and regarding the estimated time said force majeure will prevent said party from fulfilling its obligations.

 

If after six months from the date in which such force majeure has occurred it continues and no reasonable efforts have been made to remedy the force majeure when such remedy is possible, then the other party will have the right to terminate this agreement.

 

THIRTEENTH. Total agreement of the parties. This agreement reflects the total agreement between the parties with respect to its purpose and, therefore, it cancels and renders without effects the Exploration, Exploitation and Unilateral Promise to Sell Agreement executed by the parties on April 13, 2006 and any other agreements, contracts or letters of intent, executed previously between them with respect to the same purpose.

 

This agreement will oblige under its terms and conditions to the heirs, assignees or beneficiaries of the parties.

 

The parties agree to ratify their signatures in this agreement before a Notary Public, and to register it with the Public Registry of Mining of Mexico in accordance with the provisions of the Mining Law and its Regulations of Mexico, should the mining concession title be issued and PLATA REAL notify in writing to LA CUESTA as provided in the third paragraph of Clause Third, PLATA REAL’s decision to continue with this agreement.

 

FOURTEENTH. Communications and notifications. All communications and notifications to be made among the parties pursuant to this Contract shall be in writing delivered at their domiciles; and, for such purpose, the parties designate the following addresses:

 

	
LA CUESTA
    	
PLATA REAL
    
	
 
    	
 
    
	
La Cuesta   International, S. A. de C. V.
    	
Minera Plata Real, S.A.   de C.V.
    
	
Batopilas No. 250
    	
San Francisco N° 656 -   601
    
	
Col. Cacho
    	
Col. Del Valle, CP.   03100,
    
	
Tijuana, B.C., CP.   22320
    	
Mexico, D.F.
    

 

7

 

If LA CUESTA or PLATA REAL has any change in its above mentioned address, such change shall be notified in writing to the other party.

 

FIFTEENTH. Arbitration, Applicable Laws and Courts. In the event of a dispute, controversy or claim under this agreement that is not resolved within thirty calendar days following the delivery of written notice of the dispute, controversy or claim, the matter shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by three arbitrators appointed in accordance with the said Rules. The law applicable to this agreement and to the merits of the case shall be the Mexican laws, while the place of arbitration shall be the city of New York, N.Y and the language of the arbitration shall be the English language.

 

SEVENTEENTH. Area of Influence. During the term of this agreement, if PLATA REAL or its affiliates, acquire any mineral rights located, wholly or in part within the area extending one kilometer from the outermost boundary of THE LOT (as it exists on the date of this agreement), then such interest will be deemed to form part of THE LOT.

 

Having read this document, the parties ratify same in its entirety and sign it in four copies, LA CUESTA on 4 day of May, 2006, in the City of Tijuana BCN; and, PLATA REAL on 4 day of May, 2006, in the City of Tijuana BCN.

 

	
LA CUESTA
    	
 
    	
PLATA REAL
    
	
LA CUESTA   INTERNATIONAL, S.A. DE C. V.
    	
 
    	
MINERA PLATA REAL, S.   A. DE C. V.
    
	
 
    	
 
    	
 
    
	
/s/ William Perry   Durning
    	
 
    	
/s/   Victor García-Jiménez
    
	
Mr. William Perry   Durning
    	
 
    	
Mr. Victor   García-Jiménez
    

 

8

 

SCHEDULE 1

 

Property Description

 

THE LOT is described as the Los Gatos Lot, file number 16/33429, located in the Municipality of Satevo, state of Chihuahua.

 

The Los Gatos Lot was registered on October 20th of 2005 at the Direction of Mines in Chihuahua City, Chihuahua, Mexico. The Trabajos Periciales [official lot survey document submitted by a register mineral surveyor] was submitted to the Direction of Mines in Chihuahua, December 21, 2005. The title is pending.

 

The Coordinates of the claim monument are as follows:

 

North (Y) = 3,050,465.7227 M

 

East (X) = 365,811.1408 M

 

The exterior boundaries of the claim starting at the claim monument (Punto de Partido) are as follows:

 

9

 

DATOS RELATIVOS AL PERIMETRO DEL LOTE:

 

LINEAS AUXILIARIES:

 

	
P.P. - A ESTE
    	
1,200.000 mts.
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
A.-1 NORTE
    	
1,500.000 mts.
    	
 
    	
 
    	
 
    

 

	
LADOS
    	
 
    	
RUMBOS
    	
 
    	
DISTANCIA
    	
 
    	
COOLINDANCIAS
    
	
01-02
    	
 
    	
ESTE
    	
 
    	
2000.000
    	
 
    	
TERRENO LIBRE
    
	
02-03
    	
 
    	
SUR
    	
 
    	
2000.000
    	
 
    	
TERRENO LIBRE
    
	
03-04
    	
 
    	
ESTE
    	
 
    	
3000.000
    	
 
    	
TERRENO LIBRE
    
	
04-05
    	
 
    	
SUR
    	
 
    	
9000.000
    	
 
    	
TERRENO LIBRE
    
	
05-06
    	
 
    	
OESTE
    	
 
    	
5000.000
    	
 
    	
TERRENO LIBRE
    
	
06-07
    	
 
    	
NORTE
    	
 
    	
2000.000
    	
 
    	
TERRENO LIBRE
    
	
07-08
    	
 
    	
OESTE
    	
 
    	
3000.000
    	
 
    	
TERRENO LIBRE
    
	
08-09
    	
 
    	
NORTE
    	
 
    	
2000.000
    	
 
    	
TERRENO LIBRE
    
	
09-10
    	
 
    	
OESTE
    	
 
    	
3000.000
    	
 
    	
TERRENO LIBRE
    
	
10-11
    	
 
    	
NORTE
    	
 
    	
3000.000
    	
 
    	
TERRENO LIBRE
    
	
11-12
    	
 
    	
OESTE
    	
 
    	
5000.000
    	
 
    	
TERRENO LIBRE
    
	
12-13
    	
 
    	
NORTE
    	
 
    	
5000.000
    	
 
    	
TERRENO LIBRE
    
	
13-14
    	
 
    	
OESTE
    	
 
    	
3000.000
    	
 
    	
TERRENO LIBRE
    
	
14-15
    	
 
    	
NORTE
    	
 
    	
3000.000
    	
 
    	
TERRENO LIBRE
    
	
15-16
    	
 
    	
OESTE
    	
 
    	
3000.000
    	
 
    	
TERRENO LIBRE
    
	
16-17
    	
 
    	
NORTE
    	
 
    	
5000.000
    	
 
    	
TERRENO LIBRE
    
	
17-18
    	
 
    	
ESTE
    	
 
    	
8000.000
    	
 
    	
TERRENO LIBRE
    
	
18-19
    	
 
    	
SUR
    	
 
    	
5000.000
    	
 
    	
TERRENO LIBRE
    
	
19-20
    	
 
    	
ESTE
    	
 
    	
5000.000
    	
 
    	
TERRENO LIBRE
    
	
20-21
    	
 
    	
SUR
    	
 
    	
2000.000
    	
 
    	
TERRENO LIBRE
    
	
21-22
    	
 
    	
ESTE
    	
 
    	
4000.000
    	
 
    	
TERRENO LIBRE
    
	
22-01
    	
 
    	
SUR
    	
 
    	
2000.000
    	
 
    	
TERRENO LIBRE
    

 

	
SUPERFICIE
    	
20 200.0000 Has
    	
 
    
	
 
    	
 
    	
 
    
	
SUPERFICIE INTERNA 1
    	
111.7743 Has
    	
 
    
	
 
    	
 
    	
 
    
	
SUPERFICIE INTERNA 2
    	
44.1992 Has
    	
 
    
	
 
    	
 
    	
 
    
	
SUPERFICIE INTERNA 3
    	
10.0000 Has
    	
 
    
	
 
    	
 
    	
 
    
	
SUPERFICIE INTERNA 4
    	
130.0000 Has
    	
 
    
	
 
    	
 
    	
 
    
	
SUPERFICIE TOTAL
    	
19 904.0265 Has
    	
 
    

 

10

 

SCHEDULE 2

 

Net Smelter Return Royalty

 

NET SMELTER RETURN ROYALTY:

 

(a)         Royalty: For the purposes of the agreement “Royalty” will mean the actual proceeds received from any independent custom smelter, mill, mint or other purchaser for the sale of all minerals, metals, dore or concentrates extracted and derived from the ore mined from THE LOT after deducting there from all charges and penalties for smelting and refining and the cost of transportation (to the mill or smelter and thereafter to the mint), insurance premiums, sampling and assaying charges incurred after the minerals, metals or concentrates have left THE LOT and all appropriate mint charges.

 

(b)         Settlement: The Royalty is due and payable under the terms hereof upon the commercial production commencing on THE LOT. Settlement for the Royalty after commercial production, after having first applied and credited the payments shall be made on or before the last day of each calendar quarter, for all production for which payment has been received during the preceding three months, accompanied by a statement showing the factors used in determining the amount of the Royalty.

 

(c)          Commercial production: Commercial production shall mean any period of time during which a mine within THE LOT is producing or selling minerals or ores, or intermediate products to one or more third party purchasers on a commercial basis or producing mineral product for PLATA REAL inventory.

 

(c)          Access to Records, Audit and Inspection: Representatives of the LA CUESTA shall be afforded reasonable access once per calendar year to PLATA REAL’S accounts, records and supporting documents related to the Royalty payment calculations for audit and verification of costs and revenues for the determination of production payments hereunder by any certified public accountant; provided that LA CUESTA’S independent certified public accountant is well versed with accounting principals that are generally accepted in the mining industry. Said accountant shall at any and all reasonable times during the applicable calendar year be permitted to inspect Royalty books and settlement records relating to the sale of valuable minerals produced from THE LOT in order to determine whether or not the provisions of this agreement are being complied with and followed. In addition, from time to time, and with consent from the PLATA REAL (such consent will not be unreasonably withheld), LA CUESTA and its authorized agent(s) shall be allowed to enter upon THE LOT for the purpose of inspection at such reasonable times as not to interfere with the regular operation of THE LOT. All Royalty settlement statements presented to the LA CUESTA shall be conclusively presumed correct after the expiration of 60 (sixty) days from the date of such presentation, unless within that period LA CUESTA takes written exception thereto, specifying with particularity the items excepted and the grounds for such exception. Any exception or objection to the payments required above shall apply only to the methodology of calculation as presented to LA CUESTA and shall not preclude further examination of and challenges to the accuracy or adequacy of costs and receipts used in making the calculations. All inspections shall be conducted at the sole risk and expense of the LA CUESTA or its authorized agents. Audit adjustments will be remitted promptly (no later than 60 days) following notice to PLATA REAL, providing that PLATA REAL agrees with said adjustment.

 

(d)         Binding Effect: The obligation to make Royalty payments shall be a permanent encumbrance of THE LOT, and shall be binding upon each and every successor in interest to PLATA REAL in THE LOT. This obligation of PLATA REAL to pay LA CUESTA the Royalty shall terminate upon LA CUESTA receiving consideration as provided in section 4 of the Fifth Clause.

 

11Exhibit 10.19

 

Certain confidential information contained in this document, marked by [***], has been omitted because Sunshine Silver Mining & Refining Corporation (the “Company”) has determined that the information (i) is not material and (ii) would likely cause competitive harm to the Company if publicly disclosed.

 

OPUSA CONTRACT REFERENCE: OPUS.ZP.70634

 

This Agreement (“Agreement”) is hereby executed as of July 15, 2019

 

Between:                                                                                             OCEAN PARTNERS USA, INC.

 

43 Danbury Road

Wilton, CT, USA, 06897

(hereinafter called “Buyer”)

 

and

 

OPERACIONES SAN JOSE DE PLATA, S. DE R.L. DE C.V.

 

Gabriel Mancera No. 1041 Del Valle

Mexico 03100

Benito Juarez, Distrito Federal Mexico

(hereinafter called “Seller”)

 

Buyer agrees to buy, accept delivery of and pay for and Seller agrees to sell and deliver to Buyer, Zinc Concentrates which will be produced from the Cerro Los Gatos (Los Gatos) Mine, Chihuahua state, the United Mexican States under the following terms and conditions.

 

1.                                      DEFINITIONS

 

(a)                                 The terms “tonne” and “metric ton” mean 2,204.62 pounds or 1,000 kilograms, wet or dry basis as specifically stated herein.

 

(b)                                 The term “unit” used in relation to any quantity of concentrates means 1% of the net dry weight thereof.

 

(c)                                  The abbreviation “WMT” means wet metric ton(s).

 

(d)                                 The abbreviation “DMT” means dry metric ton(s).

 

(e)                                  Amounts of money stated in US$ and US ₵ (Dollars and Cents) and references to the lawful currency to the United States of America.

 

(f)                                   The terms “ounce” and “troy ounce” mean 31.1035 grams.

 

(g)                                  The term “kg” means kilogram.

 

(h)                                 The term “CIF” means CIF as defined in Incoterms published in 2010

 

(i)                                     The term “IMSBC” means the International Maritime Solid Bulk Cargoes Code for Safe Practice as amended from time to time.

 

 

(j)                                    The term “PPM” means parts per million.

 

(k)                                 The term “Calendar Year” means any year commencing January 1 and ending December 31.

 

(l)                                     The term “date of arrival” means the date the Notice of Readiness for discharge of the carrying vessel is tendered at the port of discharge.

 

(m)                             The term “laytime” means the number of weather working days (or part thereof) or Sundays, if used, or legal, local and customary holidays, if used, in which Buyer has to discharge each concentrate shipment from the carrying vessel and is calculated by dividing the Bill of Lading wet tonnes discharged for each shipment by the discharge rate guaranteed by Buyer.

 

(n)                                 The term “demurrage” means the amount payable by Buyer to Seller for not discharging the carrying vessel within the laytime allowed.

 

(o)                                 The term “despatch money” means the amount payable by Seller to Buyer for discharging the carrying vessel prior to the termination of laytime.

 

(p)                                 The term “business day” means a calendar day, excepting for Saturday, Sunday or holidays in Japan, Mexico and the USA.

 

(q)                                 The term “Smelter” means Buyer’s Iijima zinc smelter in Akita, Japan.

 

(r)                                    The term “Partner Agreement” means that certain Unanimous Omnibus Partner Agreement by and among Buyer, Seller, and Sunshine Silver Mining & Refining Corporation, dated as of January 1, 2015, as amended.

 

2.                                      QUALITY

 

(a)                                 In this Agreement the terms “Concentrates” shall mean Los Gatos zinc concentrates produced by Seller at its Los Gatos Mine in Chihuahua, Mexico.

 

 

The typical analysis of Concentrates is expected to be in accordance with Seller’s assays as follows:

 

	
Au
    	
 
    	
g
    	
 
    	
[***]
    	
 
    
	
Ag
    	
 
    	
g
    	
 
    	
[***]
    	
 
    
	
Cu
    	
 
    	
%
    	
 
    	
[***]
    	
 
    
	
Zn
    	
 
    	
%
    	
 
    	
[***]
    	
 
    
	
Cd
    	
 
    	
%
    	
 
    	
[***]
    	
 
    
	
Pb
    	
 
    	
%
    	
 
    	
[***]
    	
 
    
	
Fe
    	
 
    	
%
    	
 
    	
[***]
    	
 
    
	
As
    	
 
    	
%
    	
 
    	
[***]
    	
 
    
	
S
    	
 
    	
%
    	
 
    	
[***]
    	
 
    
	
Hg
    	
 
    	
ppm
    	
 
    	
[***]
    	
 
    
	
Co
    	
 
    	
ppm
    	
 
    	
[***]
    	
 
    
	
Ni
    	
 
    	
ppm
    	
 
    	
[***]
    	
 
    
	
F
    	
 
    	
ppm
    	
 
    	
[***]
    	
 
    
	
MgO
    	
 
    	
%
    	
 
    	
[***]
    	
 
    
	
Ga
    	
 
    	
ppm
    	
 
    	
[***]
    	
 
    
	
In
    	
 
    	
ppm
    	
 
    	
[***]
    	
 
    
	
CaO
    	
 
    	
%
    	
 
    	
[***]
    	
 
    
	
A12O3
    	
 
    	
%
    	
 
    	
[***]
    	
 
    
	
Sb
    	
 
    	
ppm
    	
 
    	
[***]
    	
 
    
	
Mn
    	
 
    	
%
    	
 
    	
[***]
    	
 
    
	
Ge
    	
 
    	
ppm
    	
 
    	
[***]
    	
 
    
	
Na
    	
 
    	
ppm
    	
 
    	
[***]
    	
 
    
	
Sn
    	
 
    	
ppm
    	
 
    	
[***]
    	
 
    
	
SiO2
    	
 
    	
%
    	
 
    	
[***]
    	
 
    
	
BaSO4
    	
 
    	
%
    	
 
    	
[***]
    	
 
    
	
Cl
    	
 
    	
ppm
    	
 
    	
[***]
    	
 
    
	
K
    	
 
    	
ppm
    	
 
    	
[***]
    	
 
    
	
Tl
    	
 
    	
ppm
    	
 
    	
[***]
    	
 
    
	
Bi
    	
 
    	
ppm
    	
 
    	
[***]
    	
 
    
	
Se
    	
 
    	
ppm
    	
 
    	
[***]
    	
 
    

 

 

In the event the composition of Concentrates sold hereunder should not conform to the composition described above, Buyer and Seller will negotiate in good faith with full disclosure to overcome any financial hardship or technical difficulty which Buyer may suffer as a result thereof.

 

(b)                                 The moisture content of each shipment of Concentrates shall not exceed the transportable moisture limit provided in the International Maritime Organization’s International Maritime Solid Bulk Cargoes (“IMSBC”) then in effect at the time of shipment.

 

3.                                      QUANTITY

 

(a)                                 During the term of this Agreement, Seller shall sell, and Buyer shall purchase all of the annual Concentrates produced.

 

(b)                                 The Buyer shall deliver 100% of the Concentrates purchased from OSJ to Dowa Metals and Mining Co. Ltd.’s (“Dowa”) Smelter in Akita Japan unless otherwise agreed or advised by Dowa.

 

(c)                                  To establish the quantity to be delivered pursuant to this Agreement during a given Calendar Year (hereinafter called a “Shipment Year”), Seller shall advise Dowa with copy to Buyer of the estimated Concentrate production for each Shipment Year by October 31 of the immediately preceding Calendar Year. Furthermore, Seller shall declare the quantity of Concentrates (hereinafter called “Contractual Quantity”) to be shipped during such Shipment Year by November 30 of the immediately preceding Calendar Year. If there appears to be any substantial change in the Concentrate production or the Contractual Quantity as declared in accordance with the above, Seller shall immediately give notice to Dowa with copy to Buyer of such change and both parties shall attempt in good faith to resolve any problems raised thereby.

 

4.                                      DURATION / NEGOTIATION

 

(a)                                 This Agreement shall be effective from the date hereof and shall remain in full force and effect until the completion of the last delivery before June 30, 2022 (the “Initial Period”). Any extension to the Initial Period must be mutually agreed.

 

 

Notwithstanding anything in this Agreement to the contrary this Agreement may be terminated pursuant to Section 13.1 of the Seller and Dowa’s Partner Agreement in accordance with the provisions set forth therein.

 

(b)                                 Commercial terms, as provided in Clauses 9, 10, 11 and 12, shall be annually negotiated in good faith and agreed between Dowa and Seller (with copy to Buyer) taking into consideration the prevailing world markets, including 1) Bench Mark Terms as published by the Metal Bulletin of London and 2) the prevailing international terms and conditions governing delivery of zinc Concentrate to Japan, for zinc concentrates, for the period in which Concentrate shipments are scheduled, or such other time as may be agreed; provided, however, for 2019 commercial terms are set forth in Appendix A attached hereto, and provided that the intent of this paragraph (c) is to apply solely to renegotiation of commercial terms, and not legal terms under this Agreement, and neither party shall be liable to the other if they are unable to agree on any revisions to the commercial terms currently in effect.

 

(c)                                  Notwithstanding the foregoing, Dowa and/or Seller (with copy to Buyer) may request additional commercial terms beyond those in Clauses 9, 10, 11 and 12 for negotiation, if such new additional commercial terms are justified as competitive International and/or Japanese market conditions for zinc concentrate with volumes, specifications and other terms and conditions similar to those in this Agreement. The Buyer and Seller must negotiate and agree such additional commercial terms.

 

5.                                      SHIPMENT

 

(a)                                 Seller shall arrange and pay for bulk Concentrate shipments, as specified in Clause 3, to be delivered to the Buyer’s TMC Warehouse in Manzanillo. The Seller shall allow the Buyer a freight credit equal to actual costs to deliver the Concentrate to CIF FO Akita Japan (the “Freight Credit”).

 

(b)                                 Seller acknowledges that Buyer shall deliver Concentrates to Dowa on a vessel which shall meet berth accommodation restrictions as specified in Appendix B attached hereto.

 

6.                                      DELIVERY

 

(a)                                 Each bulk Concentrate shipment shall be delivered by Seller to Buyer FCA Hazesa Terminal, Manzanillo via the Buyer’s TMC warehouse in Manzanillo.

 

 

(b)                                 For purposes of the Freight Credit, the Buyer is responsible for discharge of Concentrates from the carrying vessel’s hold(s) and shall arrange and shall pay for all costs associated with discharge.

 

(c)                                  For purposes of the Freight Credit, the carrying vessel used by Buyer shall be classified highest Lloyd’s registration or equivalent and shall be no more than fifteen (15) years of age (provided, however, that if the age of the nominated vessel exceeds fifteen (15) years, Buyer will accept a vessel with an age of no more than twenty (20) years, provided that all additional cargo insurance caused by the age being above fifteen (15) years shall be for the Seller’s account), single deck, bulk carrier otherwise suitable to discharge the Concentrate by grab having fully flat and unobstructed tank top without any protruding structures which might be a hindrance for the performance of normal grab discharge and/or the use of payloaders in holds. Spout trimming must be observed at loading port, not leveling.

 

No Concentrate to be stowed in bridge spaces, deep tanks or other spaces inaccessible to mechanical grabs for discharging. Any extra expenses incurred in discharging by reason of stowage in excepted places shall be for account of Seller and any time so lost and above the usual time required for grab discharge is not to count as laytime used.

 

(d)                                 For purposes of the Freight Credit, Buyer has responsibility to deliver Concentrate to the port of discharge nominated by Dowa at Buyer’s own costs, even in case of loss or damage to the Concentrate or expense, if caused by insolvency or financial default of owners, managers, charterers, or operators of the carrying vessel, unless such cause also constitutes a Force Majeure Event as defined herein.

 

(e)                                  For purposes of the Freight Credit, for discharge at Akita, Japan, Dowa guarantees a discharge rate of 2,500 wet tonnes per weather working day of 24 consecutive hours, Sundays and legal, local and customary holidays excepted unless used, and if used, actual time used to count as laytime used. Laytime shall commence at 08:00 a.m. of the immediately next working day after the carrying vessel has tendered Notice of Readiness for discharge, unless sooner commenced, whether in berth or not, but only after free pratique is granted. Notice of Readiness is to be tendered during office hours only from 08:00 a.m. to 05:00 p.m., Monday through Friday, and 09:00a.m.-12:00p.m. on Saturday that the performing vessel is ready in all respects to start discharging operations, whether in berth or not, after it has arrived at the port of discharge.

 

(f)                                   For purposes of the Freight Credit, demurrage or despatch money (as applicable) at the port of discharge shall be for Dowa’s account at those rates in Buyer’s Charter

 

 

Party for each shipment, provided that such rates are approved by Dowa, prior to each shipment.

 

(g)                                  If another cargo is being discharged from the same vessel at the Akita port,

 

(i)                                     In case of the Concentrate being discharged after the completion of discharge of such other cargo, laytime shall commence two (2) hours later after discharge completion of such cargo unless sooner commenced.

 

(ii)                                  In the case of combined shipment with other cargoes, laytime shall be calculated based on the total quantity discharged at the Akita port and shall be proportionally allocated based on the Bill of Lading quantities.

 

7.                                      TITLE AND RISK

 

Title to the Concentrates shall pass from Seller to Buyer upon Seller’s receipt of the first provisional payment.

 

Risk of loss or damage to the Concentrates shall pass from Seller to Buyer in accordance with the FCA, Incoterms (2010), when material is delivered to Hazesa terminal in Manzanillo.

 

8.                                      PRICE

 

The purchase price payable by Buyer to Seller for Concentrate sold and delivered hereunder, shall be the sum of the amounts payable for metal contained in Concentrates determined pursuant to Clauses 4(b), 9 and 11 of this Agreement, less the applicable deductions determined pursuant to Clauses 4(b) and 10 of this Agreement.

 

9.                                      METAL PAYMENT

 

Metal  payment and metal price to be applicable for the shipments in each Calendar Year shall be agreed between Dowa and Seller (with copy to Buyer) in accordance with Clause 4 of this Agreement.

 

10.                               DEDUCTIONS, TREATMENT CHARGES AND ESCALATORS / DE-ESCALATORS

 

The treatment charge and escalators/de-escalators to be applicable for the shipments in each Calendar Year shall be agreed between Dowa and Seller (with copy to Buyer) in accordance with Clause 4 of this Agreement.

 

PENALTIES

 

Penalties to be applicable for the shipments in each Calendar Year shall be agreed between Dowa and Seller (with copy to Buyer) in accordance with Clause 4 of this Agreement.

 

 

11.                               QUOTATIONAL PERIOD

 

The quotational period to be applicable for the shipments in each Calendar Year shall be agreed between Dowa and Seller (with copy to Buyer) in accordance with Clause 4 of this agreement.

 

12.                               SETTLEMENT

 

(a)                                 All invoices shall be prepared and issued by Seller in US$. All payments shall be made by wire transfer to such banks as Buyer and Seller, as the case may be, shall designate from time to time.

 

(b)                                 All payment terms to be agreed between Dowa and Seller (with copy to Buyer).

 

Seller at its sole option may request an accelerated provisional payment from Buyer, in minimum 500 wet metric tonne lots against following documents:

 

(i)            Holding certificate in Buyer’s (or its nominated bank’s) name in a form acceptable to the Buyer

 

(ii)           Seller’s Weight and Assay Certificate

 

(iii)          Seller’s Provisional Invoice based on received weights at Buyer’s warehouse, Seller’s provisional assays and average prices for the last five business days prior to the date of the holding certificate

 

(iv)          MSDS Sheet to be provided immediately upon signing of the Contract and renewed every 18 months.

 

Buyer shall charge Seller interest at [***] from the date of advanced provisional payment by Buyer until the date of receipt of payment from Dowa as per Appendix A or as adjusted from time to time between the Seller and Dowa.

 

(c)                                  For each shipment, payment of the balance due to Seller will be made three (3) business days after presentation of Seller’s final invoice based on actual weight determined in accordance with Clause 14, final assays determined in accordance with Clause 15 and final price determined in accordance with Clause 8, 9, 10 and 11. If the amount on Seller’s final invoice is lower than the provisional payment, Seller shall remit to Buyer by wire transfer within three (3) business days after presentation of Seller’s final invoice, the excess of the provisional payment received by Seller.

 

 

(d)                                 Total and Partial loss:

 

(i)                  Should a part of any delivery of Concentrate be lost or damaged after delivery and before completion of weighing, sampling and determination of moisture, final settlement will be made as soon as all the necessary details are available based on Seller’s provisional invoice wet weight and the agreed assays and the final moisture content as provided in Clause 14 and 15 on that part of the Concentrates which has been safely delivered and otherwise in accordance with the terms of this Agreement.

 

(ii)               Should shipment of Concentrates be lost or damaged after the risk of loss or damage passes from Seller to Buyer, then final settlement will be made based on Seller’s provisional invoice weight and assays, moisture content and the terms provided in Clause 8 hereof.

 

(iii)            For the purpose of determination of the quotational period, in case of total loss or damage to Concentrates, the carrying vessel will be deemed to have arrived at the port of discharge 30 days after the date of Bill of Lading.

 

13.                               INSURANCE

 

(a)                                 Buyer at its own expense shall arrange and place marine insurance on each shipment with an international insurance company rated at least Lloyds A1.

 

Such insurance shall:

 

(i)                    Be placed provisionally for the amount of 110% of the CIF value determined at the time of shipment subject to the adjustment at 110% of the final CIF value determined in accordance with Clauses 8, 9, 10, 11, 12, 14 and 15 of this Agreement.

 

(ii)                     Name Dowa as an additional insured under the policy of insurance to preserve and protect their interest under the policy buyer’s obligation to pay for Concentrates pursuant to this Agreement shall not change or be affected by any insurance claim as long as the insurance is duly placed by Buyer in accordance with this Clause of this Agreement.

 

(iii)                      Cover Concentrates against All Risk of direct physical loss or damage from any insured peril, howsoever caused, from the time when they shall have been delivered to TMC warehouse in Manzanillo, until the port of discharge, Akita, Japan.

 

(iv)                Include the following conditions:

 

Institute Cargo Clause (A) 1/1/82. War risks subject to Institute War Clauses (Cargo) 1/1/82, the risks of Strikes, Riots and Civil Commotions subject to Institute Strikes Clauses (Cargo) 1/1/82, also cover the risks of heat and

 

 

spontaneous combustion howsoever caused but exclude the claims for normal shortage in the ordinary course of transit.

 

(b)                                 Vessels chartered by Buyer shall comply with the London Institute Classification Clause.

 

14.                               WEIGHING, SAMPLING AND DETERMINATION OF MOISTURE

 

(a)                                 Weighing, sampling and determination of moisture of Concentrate shall be carried out immediately after discharge from the carrying vessel at Dowa’s risk and expense.

 

(b)                                 Weighing and sampling shall be carried out in lots of approximately 500 WMT each or as may be agreed between Seller and Dowa (with copy to Buyer) and the moisture content of each lot shall be determined separately.

 

Each lot shall form a separate and complete delivery for the purpose of this Agreement. Each sample shall be delivered into 6 parts — two each for Dowa and Seller, one for umpire analysis, and one to be held in reserve by Seller’s nominee.

 

(c)                                  Seller shall have the right to be represented at the carrying vessel’s discharge, weighing, sampling and determination of moisture at its own expense.

 

15.                               ASSAYS

 

(a)                                 From the samples taken from each lot in accordance with Clause 14, the assays of metal and other materials contents shall be determined independently by Dowa and Seller or their respective nominees in accordance with international practice.

 

(b)                                 Within 45 calendar days after completion of sampling at the smelter, Dowa and Seller shall notify each other that they are ready to exchange the results of their respective assays. The initiative to notify should be taken by either party immediately when its results are available.

 

(c)                                  The assay results on the laboratory Certificate of Analysis shall then be exchanged between Dowa and Seller by email, registered crossing mail or as otherwise agreed.

 

(d)                                 Should the difference between Dowa’s and Seller’s results for a lot be not more than:

 

	
Zn
    	
 
    	
%
    	
 
    	
[***]
    	
 
    
	
Ag
    	
 
    	
g
    	
 
    	
[***]
    	
 
    
	
Fe
    	
 
    	
%
    	
 
    	
[***]
    	
 
    
	
As
    	
 
    	
%
    	
 
    	
[***]
    	
 
    
	
F
    	
 
    	
ppm
    	
 
    	
[***]
    	
 
    

 

 

the exact mean of the 2 results shall be taken as the agreed assay and shall govern for all purpose herein.

 

If the difference between Dowa’s and Seller’s assay results for a lot is greater than the aforesaid limits, unless Dowa and Seller agree to average the said difference (in which event that assay shall be conclusive in respect of the relevant lot), the samples of material taken from the relative lot for Umpire analysis in accordance with Clause 14, shall be sent for Umpire analysis to:

 

SGS Netherland B.V.

Malledjik 18

Postbus 200

3200 AE Spijkenissse

The Netherlands

 

or

 

The John Knight Laboratory

(Formerly, Alfred H. Knight International Ltd.)

Pegasus House

Kings Business Park

Prescot, Knowsley L34 1PJ

United Kingdom

 

or

 

Alex Stewart International Corporation

2b Sefton Park

Aintree, Liverpool

L30 1RD

United Kingdom

 

acting in rotation, or any mutually acceptable laboratory(ies).

 

(e)                                  Should the umpire assay fall between the results of the two parties, the arithmetical mean of the umpire assay and the assay of the party whose results are nearer to the umpire’s shall be taken for final settlement. Should the umpire assay fall outside the exchanged results, the middle of the 3 (three) results shall be final. If the umpire assay coincides with the result of either of the two parties or is the exact mean of the exchanged result, the umpire assay shall be final.

 

 

The cost of the umpire assay shall be borne by the party whose result is farther from the umpire result. The cost of the umpire assay shall be borne equally by both parties when the umpire assay is the exact mean of the exchanged results.

 

16.                               WASTE DISPOSAL AND HEALTH AND SAFETY OF WORKERS

 

(a)                                 Buyer shall be responsible for environmental protection and for all costs and liabilities of waste disposal and worker health and safety related to Concentrate arising after delivery to TMC warehouse in Manzanillo until arrival at the Port of Akita, Japan, and Buyer shall defend, indemnify and hold Seller harmless against any claims made against Seller and costs incurred by Seller as a result of any failure by Buyer to discharge that responsibility.

 

(b)                                 Seller shall be responsible for all costs and liabilities of waste disposal and worker health and safety related to Concentrate arising before arrival at TMC warehouse in Manzanillo, and Seller shall defend, indemnify and hold Buyer harmless against any claims made against Buyer, and costs incurred by Buyer as a result of any failure by Seller to discharge that responsibility.

 

17.                               FORCE MAJEURE

 

(a)                                 Should Seller be prevented from making any shipment or delivery hereunder or Buyer or Dowa be prevented from taking delivery of any Concentrates as a result of any governmental acts, regulations or directions, refusal of any necessary export or import licenses, outbreak of a state of emergency, act of God, war, unrest, warlike hostilities, shortage of raw materials, civil commotions or embargoes, blockades, riots, epidemics, fires, floods, earthquake, hurricane, typhoon, delays in route, perils of the sea or other natural or man-made catastrophes, strikes or lockouts (the “Force Majeure Event”) then provided the party so prevented (the “Affected Party”):

 

(i)                  give prompt written notice to the other party of the nature of the Force Majeure Event; and

 

(ii)               has taken all proper precautions, due care and reasonable alternative measures with the object of avoiding the effects of the Force Majeure Event and of carrying out its obligations hereunder (but nothing herein shall require the Affected Party to settle or compromise a labor dispute except on terms satisfactory to itself),

 

the shipment and/or deliveries which are or will be affected by the Force Majeure Event shall be suspended during the period in which the Force Majeure Event continues; provided that:

 

Should shipments be suspended in accordance with this clause for more than

 

 

three (3) months, either party may at its option, cancel future shipments.

 

(b)                                 Notwithstanding anything contained therein, in the event of Dowa or the Buyer’s declaring the Force Majeure Event, it will not apply to Concentrates in transit on board carrying vessel or which pricing has been established and Buyer must pay for such Concentrates and all Concentrates that have been delivered. However, in such event Seller and Buyer and Dowa shall endeavor to resolve Dowa and the Buyer’s difficulties to perform its obligation under this Agreement.

 

18.                               ARBITRATION

 

Any disputes, controversy or claim arising out of, or in connection with this Agreement or the breach, termination or validity thereof, which cannot be amicably resolved by the parties within 60 calendar days after receipt by one party of written notice from the other party, such a controversy or claim shall be settled by final and binding arbitration conducted in the English language in New York in accordance with the Rules of Concentration and Arbitration of the International Chamber of Commerce by three arbitrators appointed one by Seller, one by Buyer and the third by the first two arbitrators.

 

If either or both Seller or Buyer fails to appoint an arbitrator within 60 calendar days after receiving notice of the commencement or arbitration proceedings, or if the two arbitrators within 14 calendar days after they have been chosen failed to appoint the third arbitrator, the International Court of Arbitration of the International Chamber of Commerce shall, upon request of either or both of Buyer and Seller, appoint the arbitrator or arbitrators required to complete the arbitral tribunal.

 

The parties agree that the Arbitration Award of the arbitral tribunal shall be:

 

(i)                                     conclusive, final and binding upon the parties; and

 

(ii)                                  the sole and exclusive remedy between the parties regarding any and all claims and counterclaims presented to the arbitral tribunal.

 

All notices to be given in connection with the arbitration shall be as provided in Clause 23 of this Agreement.

 

The Arbitration Award shall be made and shall be payable in US$ only. The Arbitration Award shall also include the fixing of the expense of the arbitration and the assessment of the same, as is appropriate in the parties hereto. Each party shall otherwise bear its cost of its respective legal fees, witnesses, depositions and other out-of—pocket expenses incurred

 

 

in the course of arbitration.

 

In the event either party to this Agreement commences legal proceedings to enforce the Arbitration Award, the expense of such litigation (including reasonable attorney’s fees and costs of court) shall be borne by the party not prevailing therein.

 

19.                               SUSPENSION OF QUOTATIONS

 

If the event of the price quotations specified under this Agreement will cease to exist, cease to be published by the “Metal Bulletin” and/or cease to be the representative basis on which majority of sales of zinc concentrates in Japan are made, Dowa and Seller (with copy to Buyer) will immediately consult together to agree on a pricing basis acceptable to both parties in order to secure the continuance of this Agreement.

 

Failing such agreement, the provision of Clause 18 shall apply, and the arbitral tribunal shall determine a fair and reasonable price for Concentrates.

 

 

20.                               EXEMPTION FROM LIABILITY AND OBLIGATION

 

In case Dowa decides to withdraw from the zinc smelting business for any reason whatsoever, the liability and obligation of Dowa to take delivery of Concentrates under this Agreement shall be released and discharged, except for Concentrates in transit to discharging port. The liability and obligation of Seller to deliver Concentrates to Buyer under this Agreement shall be released and discharged when Seller decides to close permanently the Los Gatos Mine for any reason whatsoever.

 

Seller or Dowa who decides to close the Los Gatos Mine or to withdraw from the zinc smelting business, as the case may be, shall notify the other party (with copy to Buyer) of such effect at least six (6) months prior to such closure or withdrawal.

 

21.                               TARIFFS, TAXES AND DUTIES

 

Any export tax or duty, whether existing or new, levied in the United Mexican States shall be borne by Seller. Any tariffs and duties, whether existing or new, on Concentrates and contained metal or on commercial documents relating thereto imposed in Japan shall be borne by Buyer.

 

22.                               GOVERNING LAW

 

This Agreement shall be governed by and construed in all respects in accordance with the laws of the State of New York, U. S. A. (without giving effect to internal principles of conflicts of laws). The application of the United States Convention on Contracts for the International Sale of Goods is hereby excluded from this Agreement.

 

23.                               NOTICES

 

Any notice permitted or required to be given hereunder shall be validly given if in written and sent to the party to which the notice is directed at the address set out below:

 

Buyer

 

OCEAN PARTNERS USA, INC.

43 Danbury Road

Wilton, CT, USA, 06897

Attention : Roberto Guerra

Telephone : +1 203 834 4444

Email Address : Roberto.guerra@oceanpartners.com

 

 

Seller

 

OPERACIONES SAN JOSE DE PLATA S. DE C.V

 

Gabriel Mancera No. 1041 Del Valle

Mexico 03100

Benito Juarez, Distrito Federal Mexico

Attention: Emir Toledo

Telephone: 52-614-220-1483

Email Address: etoledo@mprmex.com

 

With copies to:

 

Sunshine Silver Mining & Refining Corporation

1660 Lincoln Street

Suite 2750

Denver, Colorado, U.S.A.

Attention: Roger P. Johnson

Telephone: (303) 784-5334

Email Address: roger.johnson@ssmines.com]

 

or, in either case, such other address as may be notified by the relevant party to the other. Notices given by first class mail shall be deemed to have been delivered when received. Notices sent by facsimile or electronic mail shall be deemed to have been received upon completion of successful transmission if sent during normal office hours at the place of receipt. Any facsimile or electronic mail transmitted outside of normal office hours at the place of receipt shall be deemed to have been received on the next Business Day.

 

24.                               ASSIGNMENT

 

No right or obligation or either party under this Agreement is assignable without the prior written consent of the other, and any purported assignment without such consent shall be void.

 

25.                               GENERAL CLAUSES

 

(a)                                 The provisions set out in this Agreement are exclusive and in lieu of all other warrantees, conditions, guarantees, representations and similar obligations, expressed or implied by fact or by law, including any statute ore regulation, by custom or trade usage, or by any course of dealing, including but not limited to any implied warranties or conditions of merchantability or fitness for purpose or for a particular purpose, all of which warranties, conditions, guarantees, representations and similar obligations are expressly disclaimed by Seller.

 

 

(b)                                 The terms and conditions of this Agreement and the settlement information shall be kept confidential by both parties, except insofar as disclosure is required to royalty payees, by law or the rules of any stock exchange, in connection with any financing or issuance of securities by Seller or Buyer, or deemed appropriate in connection with communication to shareholders or securities analyst.

 

(c)                                  No amendment to this Agreement is valid or binding upon the parties, unless it is in writing and executed by parties.

 

(d)                                 All provisions of this Agreement are severable, and no provision is affected by the invalidity of any other provision, except to the extent that invalidity also renders that other provision invalid. If any provision is contrary to any law, the parties agree to observe and perform all the provisions of this Agreement as if that unlawful provision were not contained in this Agreement.

 

(e)                                  No approval, consent or waiver by either party to or of any breach by the other party in the performance or observance of its obligations under this Agreement is an approval, consent or waiver to or of any other breach or continuing breach. Failure by either party to complain of any breach by other party in the performance or observance of its obligations under this Agreement, irrespective of how long the breach continues, is not a waiver of the rights of either party under or relating to this Agreement. All approvals, consents, and waivers given by either party are not enforceable, unless in writing and signed by that party.

 

(f)                                   This Agreement inures to the benefits of and is binding upon each of the parties and their respective successors.

 

(g)                                  This Agreement, together with the Partner Agreement, is the complete and entire agreement between the parties with respect to the purchase and sale of Concentrate. All representations, warranties, conditions, terms, agreements, understandings and communications given or made before the date of this Agreement and whether written or oral, are not of legal effect.

 

(h)                                 If a remedy for breach of this Agreement by either party is specified in this Agreement, that remedy is exclusive. Otherwise the rights and remedies available to a party under the law governing this Agreement are applicable.

 

(i)                                     The obligation to defend, indemnify and hold harmless a party under this Agreement includes the obligation to pay for all reasonable investigation costs and reasonable legal and expert fees and disbursements incurred by the indemnitor and the indemnitee in relation to the subject matter of the indemnification. The right of an indemnitee to be defended, indemnified and held harmless under any indemnity contained in this Agreement in respect of a claim made by a third person is subject to the conditions that:

 

 

(i)                                     the indemnitee gives to the indemnitor prompt notice of the claim,

 

(ii)                                  the indemnitor may select and instruct counsel in the defense of settlement of the claim and may manage the litigation in respect thereof so long as the indemnitor has agreed in writing to bear full responsibility for all such indemnification,

 

(iii)                               the indemnitee shall give the indemnitor, and counsel selected by it, all documents and information in the possession of indemnitee that are relevant to the defense or settlement of the claim, and shall render to the indemnitor and that counsel reasonable assistance in relation to the defense or settlement of the claim, and

 

(iv)                              the indemnitee shall not make any admission of liability, or make any settlement, or do any act, that could reasonably be expected to be prejudicial to the successful defense or favorable settlement of the claim, without prior written consent of the indemnitor or counsel selected by it.

 

The indemnitor shall have the right to settle the claim on terms that require only the payment of money and that are not otherwise prejudicial to the indemnitee.

 

(j)                                    This Agreement may be executed in one or more counterparts, each of which shall be considered an original for all purposes. This Agreement shall be deemed to have been executed by all parties when each such party has executed this Agreement or a counterpart thereof and delivered said executed Agreement (or counterpart) to the other party.

 

(k)                                 Execution of this Agreement by a party may be evidenced by said party transmitting by email or facsimile to the other party a copy of the signature page showing execution by the transmitting party. In such event, transmission by facsimile shall be the equivalent of the delivery to the other party of a signed original of this Agreement.

 

IN WITNESS WHEREOF, the parties here to have caused this Agreement to be signed by their respective duly authorized representatives in duplicate as of the day and year first above written.

 

	
/s/ Roger Johnson
    	
 
    	
/s/ Brent Omland 
    	
 
    	
/s/ Al Paterson
    
	
Roger Johnson
    	
 
    	
Brent Omland
    	
 
    	
Al Paterson
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
SELLER: OPERACIONES SAN   JOSE DE
    	
 
    	
BUYER: OCEAN PARTNERS   USA, INC.
    
	
PLATA S. DE C.V.
    	
 
    	
 
    

 

 

APPENDIX A

 

Date:                  July 15, 2019

 

MEMORANDUM OF AGREEMENT

 

OPERACIONES SAN JOSE DE PLATA S. DE C.V., SELLER and DOWA Metals & Mining Co., Ltd., (and acknowledged by Buyer, Ocean Partners USA, Inc.) hereby agree to the following 2019 terms and conditions for the sales and purchase of Los Gatos zinc concentrate.

 

	
1.
    	
Quantity
    	
:
    	
2019 production
    
	
 
    	
 
    	
 
    	
 
    
	
2.
    	
TC
    	
:
    	
$ [***] /dmt
    
	
 
    	
 
    	
 
    	
 
    
	
3.
    	
Scale
    	
:
    	
$[***]/dmt for each   $1.00/mt increase in the zinc price over $[***]/mt
    
	
 
    	
 
    	
 
    	
$[***]/dmt for each   $1.00/mt decrease in the zinc price below $[***]/mt
    
	
 
    	
 
    	
 
    	
 
    
	
4.
    	
Metal payment
    	
:
    	
Zn : [***] with minimum   deduction of [***] units at LME SHG settlement price published in London   Metal Bulletin 

Ag : Deduct [***]/dmt   and pay for [***] of the remaining silver content at LBMA silver price   published in London Metal Bulletin
    
	
 
    	
 
    	
 
    	
 
    
	
5.
    	
Penalty
    	
:
    	
Fe :$[***] / % over   [***]%
    
	
 
    	
 
    	
 
    	
As :$[***] / 0.1% over   [***]%
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
F :
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
[***]ppm
    	
To
    	
[***]ppm
    	
US$[***]/dmt
    	
 
    
	
 
    	
 
    	
 
    	
[***]ppm
    	
To
    	
[***]ppm
    	
US$[***]/dmt
    	
 
    
	
 
    	
 
    	
 
    	
[***]ppm
    	
To
    	
[***]ppm
    	
US$[***]/dmt
    	
 
    
	
 
    	
 
    	
 
    	
[***]ppm
    	
Over
    	
 
    	
US$[***]/dmt
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
6.
    	
Quotational Period
    	
:
    	
Third calendar month   following the month of vessel arrival at the discharge port (3MAMA)
    
	
 
    	
 
    	
 
    	
 
    
	
7.
    	
Settlement
    	
:
    	
1st provisional payment : [***] value on 3rd   business day after vessel arrival at Akita port
    
	
 
    	
 
    	
 
    	
2nd provisional payment : [***] value on 60th   calendar days after vessel arrival at Akita port
    
	
 
    	
 
    	
 
    	
Final payment : when   all necessary information referenced in Section 12(c) of the   Agreement is provided
    

 

 

	
/s/ Roger Johnson
    	
 
    	
/s/ Brent Omland 
    	
 
    	
/s/ Al Paterson
    
	
Roger Johnson
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
SELLER: OPERACIONES SAN   JOSE DE
    	
 
    	
BUYER: OCEAN PARTNERS   USA, INC.
    
	
PLATA S. DE C.V.
    	
 
    	
 
    

 

 

 

APPENDIX B

 

FACILITIES OF PORT OF DISCHARGE FOR CONCENTRATES

 

	
Discharging port
    	
Smelter
    	
Berth conditions
    	
 
    	
 
    
	
Akita in Japan
    	
Iijima
    	
Draft
    	
:
    	
11.8 meters Max.
    	
 
    
	
 
    	
 
    	
LOA
    	
:
    	
185 meters Max.
    	
 
    
	
 
    	
 
    	
Beam
    	
:
    	
25 meters Max.
    	
 
    
	
 
    	
 
    	
* Total cargo tonnage on board should be below   50,000t.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00314-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00314-of-00352.parquet"}]]