Document:

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                                                                    EXHIBIT 4.49

                               SERVICES AGREEMENT

THIS AGREEMENT dated the 1st day of April, 2005.

BETWEEN:

         FALLS MOUNTAIN COAL INC. ("Falls Mountain"), a British Columbia
         corporation with its principal place of business in Vancouver, British
         Columbia, Canada

AND:

         SEDGMAN CANADA COMPANY ("Sedgman Canada"), a Nova Scotia company with
         registered offices at Halifax, Nova Scotia, Canada

AND:

         SEDGMAN, L.L.C. ("Sedgman USA"), Pennsylvania Limited Liability Company
         with its principal place of business in Pittsburgh, Pennsylvania

WHEREAS Falls Mountain entered into an Agreement of Purchase and Sale, dated the
1st day of April, 2005 (the "PURCHASE AND SALE AGREEMENT"), for the supply and
delivery of "EQUIPMENT", as defined in the Purchase and Sale Agreement to Falls
Mountain's Preparation Plant (the "PLANT"), located at Willow Creek Mine in
Chetwynd, British Columbia, Canada;

AND WHEREAS Falls Mountain desires to engage Sedgman Canada to provide services
at the Plant as required to take delivery of, install and fully commission the
Equipment.

THEREFORE, in consideration of the promises and of the mutual agreements
hereinafter contained, the parties hereto do hereby agree as follows:

1.   SCHEDULES

1.1  ATTACHED SCHEDULES. The following attached Schedules are a part of this
     Agreement:

          Schedule I - Scope of Services

          Schedule 1 - Scope of Services

          Schedule 2 - Fees and Payment
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2.   SERVICES

2.1  SERVICES. Sedgman Canada will provide Falls Mountain with the services
     described in the Scope of Services attached hereto as Schedule 1 (the
     "SERVICES") and hereby incorporated into and made a part of this Agreement.
     In the event of any inconsistency between this Agreement and Schedule 1,
     this Agreement shall govern.

2.2  AMENDMENT OF SERVICES. Falls Mountain may from time to time, by written
     notice to Sedgman Canada, make any alteration, addition, or deletion of or
     to the Services. Subject to any specific agreement by the parties on the
     fees payable with respect to any alteration, addition, or deletion of or to
     the Services, the hourly rates as set out in Section 4 of Schedule 2 to
     this Agreement will apply to determine the fees owing for any alteration,
     addition, or deletion of or to the Services, provided that Sedgman Canada
     will not perform any such alteration, addition, or deletion of or to the
     Services without the prior express written approval of Falls Mountain.

2.3  STANDARD OF CARE. Sedgman Canada will perform the Services with that degree
     of care, skill and diligence normally provided by a qualified and
     experienced professionals performing services similar to the Services with
     respect to industrial equipment similar to the Plant.

2.4  QUALIFIED PERSONNEL. Sedgman Canada represents that it has professional
     personnel who have the qualifications, experience and capabilities as
     described in section 2.3 to perform the Services, and that any contractors
     or subcontractors retained by Sedgman Canada to perform the Services are
     similarly qualified.

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3.   FEES

3.1  FEES. Falls Mountain will pay Sedgman Canada the fees on the terms as set
     out in Schedule 2.

3.2  TAXES. Falls Mountain shall be responsible for and pay all provincial sales
     taxes, goods and services taxes and transfer taxes, if any, exigible with
     respect to the provision of services hereunder.

3.3  TAX INDEMNITY. Falls Mountain shall indemnify and save harmless Sedgman
     Canada from any and all costs, demands, claims, liabilities, actions and
     other obligations of any nature whatsoever arising from Falls Mountain's
     breach of section 3.2.

4.   SCHEDULE OF SERVICES

4.1  SCHEDULE. Sedgman Canada shall prepare and submit to Falls Mountain, to
     Falls Mountain's reasonable satisfaction, prior to the first payment, a
     schedule (the "SCHEDULE OF SERVICES") acceptable to both the parties that
     indicates the timing (start and completion) of the major constituents,
     steps or elements of the Services. The Schedule of Services will include
     the date that all the Equipment has been supplied and all the Services have
     been performed ("PROJECT COMPLETION").

4.2  PROGRESS. Sedgman Canada shall monitor the progress of the Services
     relative to the Schedule of Services; Falls Mountain shall not be required
     to make payment of any amount specified in an invoice submitted by Sedgman
     Canada in accordance with Schedule 2 unless such invoice is accompanied by
     an updated version the Schedule of Services and report as described in
     section 4.3.

4.3  RELIANCE ON SCHEDULE OF SERVICES. As part of the monitoring of the progress
     of the Services Sedgman Canada acknowledges that Falls Mountain has an
     interest in receiving

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     an accurate estimate of the achievement of Mechanical Completion as soon as
     possible, and that Falls Mountain will be entitled to receive this
     information and rely on it to plan its sales of coal. Sedgman Canada will,
     not later than 60 days prior to the anticipated date of Mechanical
     Completion provide Falls Mountain with an updated Schedule of Services for
     the purpose of permitting Falls Mountain to begin to make committed coal
     sales.

4.4  PERFORMANCE. Sedgman Canada shall perform the Services in compliance with
     the Schedule of Services. If at any time Sedgman Canada discovers that the
     Schedule for Services cannot be met it will promptly advise Falls Mountain
     in writing and provide a revised Schedule for Services to the reasonable
     satisfaction of Falls Mountain indicating the revised dates for the
     remaining portions of the Services. Failure to comply with this section 4.4
     shall entitle Falls Mountain to terminate this Agreement in accordance with
     Article 7 - Termination.

4.5  MECHANICAL COMPLETION, PERFORMANCE STANDARD AND COMMISSIONING. The
     equipment, when fully installed and commissioned, has been designed to
     achieve a standard of performance (the "PERFORMANCE STANDARD") as follows:

          (a)  process coal at a continuous feed rate of at least 450 metric
               tons per hour in accordance with the conditions outlined in
               Schedule 1, the Scope of Services;

          (b)  separation of ash from the coal so as to achieve less than or
               equal to 8% ash dry basis per coal quality specifications
               provided by Falls Mountain as detailed in Schedule 1, Scope of
               Services;

     will be mechanically completed when the Plant is ready to run at the
     Performance Standard ("MECHANICAL COMPLETION"). It is a material provision
     of this Agreement that Sedgman Canada

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     achieve Mechanical Completion. Commissioning is achieved with Sedgman
     Canada staff operating the Plant for a continuous period of at least 24
     hours at a ninety two percent (92%) availability level where availability
     is defined as operating hours divided by scheduled hours. In the event
     Sedgman Canada is delayed in its efforts to complete commissioning of the
     Plant by reason of:

          (a)  downtime associated with the existing crushing and handling
               system;

          (b)  lack of raw coal feed from the mine; or

          (c)  excessive trash in the raw coal feed stock producing delays;

     and such delay continues for 30 days or more, then , notwithstanding that
     Commissioning has not taken place, Falls Mountain shall immediately remit
     to Sedgman Canada the final payment amount set forth in Schedule 2. In the
     event that 60 days elapses from the time Sedgman Canada advises in writing
     that the Plant is ready to be commissioned and such 60 days' delay is a
     result of the causes referred to in (a), (b) or (c) hereof, then Sedgman
     Canada will be relieved of its obligation hereunder to commission the
     Plant. Falls Mountain further agrees that it will also release any holdback
     monies held under the Builders' Lien Act at the end of such 60 day period,
     provided that it shall only be obliged to do so if it receives a Statutory
     Declaration sworn by a senior officer of Sedgman Canada attesting to the
     fact that all of the subtrades and suppliers to Sedgman Canada have been
     paid and Sedgman Canada provides an indemnity in respect of any liabilities
     which may arise under the Builders' Lien Act (British Columbia) in form and
     substance and from a party satisfactory to Falls Mountain acting
     reasonably.

5.   RELEASE, INDEMNITY AND GUARANTEE

5.1  RELEASE. In consideration of the mutual promises made in this Agreement,
     Sedgman Canada does hereby release, remise, acquit and forever discharge
     Falls Mountain, its

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     directors, officers, employees, agents, servants, and representatives, and
     their respective successors and assigns, heirs, and representatives of and
     from any and all demands, claims, liabilities, actions and causes of
     actions, or other obligations of whatsoever nature (including obligations
     of Sedgman Canada to its employees, agents and representatives) arising
     directly and solely from Sedgman Canada's breach of this Agreement or
     Sedgman Canada's negligence or willful misconduct in the performance of
     it's obligations under this Agreement. Notwithstanding the foregoing
     provisions of this section, Falls Mountain acknowledges and agrees that no
     provision of this section shall be deemed to release, remise, acquit or
     discharge Falls Mountain and its successors and assigns from any duty or
     obligation which Falls Mountain or its successors and assigns has to
     Sedgman Canada under this Agreement or by operation of law or otherwise.

5.2  SEDGMAN CANADA INDEMNITY. Sedgman Canada agrees and binds itself to
     indemnify, hold and save harmless Falls Mountain, its officers, agents,
     servants and employees from and against all claims, losses, costs, expenses
     or damages, including reasonable legal fees, incurred or sustained by them,
     or any of them, as a result of injury to persons and damage to property
     (including but not limited to, officers, agents, servants or employees of
     Sedgman Canada and officers, agents, servants or employees of any
     subcontractors of Sedgman Canada) sustained in connection with or arising
     out of or occurring in or resulting from Sedgman Canada's breach of this
     Agreement or negligence or willful misconduct in the performance of its
     obligations under this Agreement; and Sedgman Canada further agrees that in
     the event any suits or other proceedings shall be brought against Falls
     Mountain or its officers, agents, servants or employees on account of any
     such injury or damage or violation of law, Sedgman Canada will provide for
     and

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     undertake the defence thereof, will pay any judgment or judgments rendered
     against Falls Mountain , its officers, agents, servants or employees
     therein, and will pay on behalf of Falls Mountain, its officers, agents,
     servants or employees any and all reasonable legal fees incurred by them or
     any of them as a result of such suit.

5.3  FALLS MOUNTAIN INDEMNITY. Subject to Sedgman Canada's obligation to comply
     with all safety rules as set out in section 11.6 to this Agreement, Falls
     Mountain agrees and binds itself to indemnify, hold and save harmless
     Sedgman Canada, its members, officers, agents, servants and employees from
     and against all claims, losses, costs, expenses or damages, including
     reasonable legal fees, incurred or sustained by them, or any of them, as a
     result of injury to persons (including but not limited to, partners,
     officers, agents, servants or employees of Sedgman Canada and officers,
     agents, servants or employees of any subcontractors of Sedgman Canada)
     sustained in connection with or arising out of or occurring in or resulting
     from Falls Mountain's activities at the Plant or the ownership, lease or
     operation of (a) the Plant or (b) the premises on which the Plant is
     located, and Falls Mountain further agrees that in the event any suits or
     other proceedings shall be brought against Sedgman Canada or its members,
     officers, agents, servants or employees on account of any such injury or
     damage, Falls Mountain will provide for and undertake the defence thereof,
     will pay any judgment or judgments rendered against Sedgman Canada, its
     officers, agents, servants or employees therein, and will pay on behalf of
     Sedgman Canada, its officers, agents, servants or employees any and all
     reasonable legal fees incurred by them or any of them as a result of such
     suit.

5.4  SEDGMAN USA GUARANTEE. Sedgman USA hereby absolutely, irrevocably and
     unconditionally guarantees to Falls Mountain, its successor and assigns,
     the full

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     performance and observation of all the terms, covenants, conditions and
     provisions to be performed or observed by Sedgman Canada under this
     Agreement. Such guarantee shall be as primary obligor and not merely as
     surety.

6.   INSURANCE AND DAMAGES

6.1  ADDITIONAL INSURED. In further consideration of the foregoing and in
     recognition that insurance coverage with Falls Mountain named as an
     additional insured may be the only practical manner of protecting Falls
     Mountain from financial loss arising from or in any way related to or
     connected with Sedgman Canada's activities, Sedgman Canada agrees to obtain
     at its cost insurance policies from reliable insurers on terms reasonably
     satisfactory to Falls Mountain covering normal perils and risks including:
     current and valid equipment insurance, course of construction insurance and
     general liability insurance; all own expense, commence to rectify, or cause
     to be rectified, the breach, matter or thing with Falls Mountain as an
     additional named insured in an amount not less than US $2,000,000 (Two
     Million Dollars), including excess umbrella insurance coverage, covering
     injury to persons and damage to property sustained in connection with or
     arising out of or occurring in or resulting from Sedgman Canada's
     activities and covering any and all contractual obligations of Sedgman
     Canada under this Agreement, including any and all obligations of Sedgman
     Canada with respect to the indemnity or save harmless provision set forth
     above, it being expressly agreed that this obligation shall constitute a
     contract to procure insurance.

6.2  LIMIT OF LIABILITY. Subject to amounts recoverable under policies of
     insurance required to be maintained under the Agreement, Sedgman Canada's
     aggregate liability under this Agreement for any amounts not covered by
     insurance proceeds, shall not exceed 10% of

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     the sum of the total fees payable to Sedgman Canada under this Agreement.
     Sedgman Canada will not take any action, or permit others to take any
     action, or fail to take any action as required, which will have the effect
     of reducing or prejudicing or impairing in any way any applicable insurance
     coverage of which Falls Mountain is a potential beneficiary.

6.3  CONSEQUENTIAL DAMAGES. Notwithstanding any other provision of this
     Agreement, Sedgman Canada shall not be liable to Falls Mountain for any
     claim of any kind relating to interruption of operations or loss of
     anticipated profits, nor for any other special, incidental, contingent, or
     consequential damages.

7.   TERMINATION

7.1  NOTICE OF DEFAULT. In the event Sedgman Canada breaches any material
     provision of this Agreement, Falls Mountain may give Sedgman Canada a
     notice of default.

7.2  RECTIFICATION. In the event a notice of default is given by Falls Mountain
     pursuant to section 7.1, Sedgman Canada shall within 10 days after receipt
     of such notice, and at its giving rise to Falls Mountain's notice. If such
     breach is not capable of being cured within 10 days, Sedgman Canada shall
     diligently continue such rectification until completed.

7.3  FAILURE TO RECTIFY. If rectification of the default is not commenced in
     accordance with section 7.2, Falls Mountain may immediately terminate the
     Agreement.

7.4  PAYMENT ON TERMINATION. In the event of termination under this Article 7 -
     Termination, Falls Mountain shall pay Sedgman Canada the fees payable in
     accordance with Schedule 2 for all Services completed up to the date of the
     termination, but in the event of termination, may set off and deduct any
     and all additional costs, expenses and damages incurred by Falls Mountain
     on a commercially reasonable basis as a result of the default.

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8.   APPLICABLE LAWS, BUILDING CODES AND BY-LAWS

8.1  APPLICABLE LAW. This Agreement shall be governed by and construed in
     accordance with the laws of the Province of British Columbia. In the event
     of a dispute under this Agreement, a suit may be brought only in a court of
     competent jurisdiction of the Province of British Columbia.

8.2  CODES AND BYLAWS. Sedgman Canada shall provide the Services in full
     compliance with all laws, statutes, ordinances, rules and regulations,
     including all judicial interpretations of the foregoing, relating to or in
     any way connected with the labor, health, safety, environment, and work
     undertaken herein including, without limitation, any surface mining laws if
     Sedgman Canada's activities hereunder are construed by any governmental
     agency or authority as being a surface mining operation. Sedgman Canada
     agrees and binds itself to indemnify, hold and save harmless Falls Mountain
     from and against all claims losses, costs, expenses, damages or fines,
     including reasonable attorneys' fees incurred as a result of Sedgman
     Canada's non-compliance, for whatever reason, with said law, statute,
     ordinance, rule or regulation.

9.   BUILDERS LIENS

9.1  HOLDBACK. Falls Mountain will retain a 10% holdback in accordance with the
     Builders' Lien Act (British Columbia), and will, subject to Falls
     Mountain's set-off rights, release that amount in accordance with that Act.

9.2  REMOVAL OF LIENS. Sedgman Canada will take steps to keep the place of the
     Services free of any builder's liens and Sedgman Canada will defend and
     indemnify Falls Mountain from any builder's lien filed as a result of the
     Services. Sedgman Canada will pay all

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     costs and expenses including actual legal costs incurred by Falls Mountain
     as a result of any builders lien.

9.3  PAYMENT INTO COURT. If any builder's lien is filed Falls Mountain may hold
     back an amount equal to the lien, plus security for costs, and may, at its
     election, pay such holdback into court to obtain the discharge of the lien.

10.  SUBCONTRACTING

10.1 SUBCONTRACTORS. Sedgman Canada may subcontract part or parts of the
     Services, subject to the prior approval of Falls Mountain, which approval
     shall not be unreasonably withheld.

11.  GENERAL

11.1 ARBITRATION. All matters in dispute under this Agreement may, with the
     concurrence of both Falls Mountain and Sedgman Canada, be submitted to
     arbitration by a single arbitrator under the Commercial Arbitration Act of
     British Columbia, with any arbitration taking place in Vancouver, Canada,
     or such other location as the parties may agree.

11.2 ENTIRE AGREEMENT. This Agreement, including the Schedules and any other
     documents expressly referred to in this Agreement as being a part of this
     Agreement, and the Agreement of Purchase and Sale, contains the entire
     agreement of the parties regarding the provision of Services and no
     understandings or agreements, oral or otherwise, exist between the parties
     except as expressly set out in this Agreement.

11.3 COUNTERPARTS. This Agreement and all documents contemplated by or delivered
     under or in connection with this Agreement may be executed and delivered in
     any number of counterparts with the same effect as if all Parties had all
     signed and delivered the same

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     document and all counterparts will be construed together to be an original
     and will constitute one and the same agreement.

11.4 AMENDMENT. This Agreement may be amended only by agreement in writing,
     signed by both parties.

11.5 SURVIVAL OF OBLIGATIONS. All of Sedgman Canada's obligations to perform the
     Services to the required standard of care shall survive the termination or
     completion of this Agreement.

11.6 TIME. Sedgman Canada acknowledges that time is of the essence with respect
     to the Services and accordingly Sedgman Canada will provide the Services in
     accordance with the Schedule for Services. Sedgman Canada shall not be in
     default under this Agreement if it fails to meet the Schedule for Services
     because of events beyond Sedgman Canada's reasonable control.

11.7 SAFETY. Sedgman Canada will at all times, and in the performance of all
     obligations under this Agreement, without additional payment, strictly
     comply with all of Falls Mountain's safety rules and regulations applicable
     to the Plant and delivered in writing to Sedgman Canada, and also all
     statutory rules applicable to the Plant.

11.8 INDEPENDENT CONTRACTOR. Sedgman Canada is an independent contractor in the
     provision of the Services and accepts all risks, known or unknown or
     unforeseen, in connection with the safety of Falls Mountain's premises
     including without limitation activities and occurrences in any way
     connected with Falls Mountain's operations.

11.9 NOTICES. Any notice, report or other document that either party may be
     required or may wish to give to the other must be in writing, unless
     otherwise provided for, and will be deemed to be validly given to and
     received by the addressee, if served personally, on the

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     date of such personal service or, if delivered by mail, or facsimile, when
     received. The addresses for delivery will be as follows:

          FALLS MOUNTAIN:

               Falls Mountain Coal Inc.
               c/o Pine Valley Mining Corporation
               501-- 535 Thurlow Street
               Vancouver, British Columbia, Canada
               V6E 3L2
               Fax: (604) 682-4698

          ATTENTION: Graham Mackenzie

          with a copy to:

               Bull, Housser & Tupper
               Banisters and Solicitors
               3000 Royal Centre
               1055 West Georgia Street
               PO Box 11130
               Vancouver BC V6E 3R3

          ATTENTION: Grant Weaver

          SEDGMAN CANADA:

               Sedgman Canada Company
               2090 Greentree Road
               Pittsburgh, Pennsylvania, United States 15220
               Fax: (412) 429-9801

          ATTENTION: Michael F. Placha

11.10 UNENFORCEABILITY. If any provision of this Agreement is invalid or
     unenforceable, it shall be severed from the Agreement and will not affect
     the enforceability or validity of the remaining provisions of the
     Agreement.

11.11 HEADINGS. The headings in this Agreement are inserted for convenience of
     reference only and shall not form part of nor affect the interpretation of
     this Agreement.

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11.12 WAIVER. No waiver by either party of any breach by the other party of any
     of its covenants, obligations and agreements shall be a waiver of any
     subsequent breach or of any other covenant, obligation or agreement, nor
     shall any forbearance to seek a remedy for any breach be a waiver of any
     rights and remedies with respect to such or any subsequent breach.

11.13 FORCE MAJEURE. If, because of an event or circumstance beyond the
     reasonable control of either party, Sedgman Canada is unable to meet or is
     delayed in meeting its obligations under this Agreement, and if Sedgman
     Canada promptly gives Falls Mountain written notice of such event or
     circumstance, then the time of performance will be extended as reasonably
     required as a result of the circumstance or event. The parties will each
     bear their own costs as a result of the circumstance or event. Nothing in
     this paragraph shall be construed as relieving or suspending Falls Mountain
     from its obligations to pay for work performed to the date of such
     circumstance or event.

11.14 ASSIGNMENT. No party will assign this Agreement, or any part of this
     Agreement, without the consent of the other party, such consent not to be
     unreasonably withheld, provided that Sedgman Canada acknowledges and agrees
     that Falls Mountain may assign this contract to an institutional lender, by
     way of security, without consent and Sedgman Canada agrees it will execute
     and deliver such consents and other agreements as such lender may
     reasonably request in connection therewith.

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day
and year first above written.

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ATTEST:                                 SEDGMAN CANADA COMPANY

                                        BY: /s/ Michael F. Placha
/s/ Melissa J. Englesberry                  ------------------------------------
-------------------------------------   ITS: President

ATTEST:                                 SEDGMAN, L.L.C.

                                        BY: /s/ Larry A. Walter
/s/ Melissa J. Englesberry                  ------------------------------------
-------------------------------------   ITS:
                                             -----------------------------------

ATTEST:                                 FALLS MOUNTAIN COAL INC.

                                        BY: /s/ Graham Mackenzie
                                            ------------------------------------
-------------------------------------   ITS: President and CEO

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                         SCHEDULE 1 -- SCOPE OF SERVICES

1.   FALLS MOUNTAIN

                             SEDGMAN CONTRACT - 2342

1.0  EXECUTIVE SUMMARY

     Falls Mountain has selected Sedgman to construct new Coal Preparation Plant
     at their Willow Creek Mine located in northeast British Columbia. The
     Project site is approximately 45 km west of Chetwynd, British Columbia. The
     new preparation plant will be capable of processing 450 ton per hour (TPH)
     of run-of-mine coal produced from the open-pit Willow Creek Mine. Existing
     facilities include primary and secondary crushers, a crushed coal stockpile
     and rail loadout bin. Using the information provided by Falls Mountain in
     their request for proposal and data obtained from the summary technical
     report of the Willow Creek property dated September, 2002, prepared by
     Norwest, Sedgman has prepared a flowsheet and capital cost for the
     following plant processing configuration:

<TABLE>
<CAPTION>
Option          Facility Description
------          --------------------
<S>             <C>
Base proposal   50mm x 13mm full processing, heavy media 13mm x 0.15mm partial
                processing, heavy media, spirals 0.15mm x 0 belt filter press
                dewater
</TABLE>

1.1  SYSTEM PARAMETERS

     Falls Mountain requested Sedgman to provide a turnkey bid proposal for a
     preparation facility capable of processing crushed, run-of-mine coal
     (primary or secondary crushing) at a rate of 450 tons per hour. Specific
     design requirements provided by the Owner include:

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     -    Raw Coal Feed Source(s)

          -    PCI and metallurgical coal produced from the Willow Creek
               open-pit mine (central and north pit areas).

          -    Coal Seam Nos. 1, 2, 3, 4, 5, 6, 7 and Seam A.

     -    Plant Design Capacity

<TABLE>
<CAPTION>
          Size       TPH   Process Facility
          ----       ---   ----------------
          <S>        <C>   <C>
          50mm x 0   450   Heavy Media Cyclone, Water Only/Spiral
</TABLE>

     -    Operating Mode

          -    6,500 hours/year

     -    Climate

          -    Minus 48 degrees Celsius to plus 32 degrees Celsius

     -    Product Specifications

          -    Washed Coal/Bypass Product

<TABLE>
<CAPTION>
                   MAXIMUM
                 ----------
<S>              <C>
     Moisture:     8%
     Ash:        8.5% (dry)
</TABLE>

     -    Plant Site

          -    Adjacent to secondary crusher building

     -    Environmental Permits and Building Permits

          -    Provided by Falls Mountain

     -    Ancillary Facilities

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          -    Site preparation, electrical power supply, water supply and
               communications are provided by Owner.

     -    Additional Wash Plan Requirements

          -    Ability to bypass a variable portion of the plant feed while
               operating

          -    Option for tailings disposal to either ponds or belt press for
               dewatering

          -    PLC control, automated density control

          -    Sample points for product and waste streams

          -    Optional on-line ash analyzer

          -    Provisions to allow an increase to 600 tons per hour feed rate

1.2  PREPARATION PLANT DESIGN

1.2.1 FACILITY CAPACITY

     The new Preparation Plant will process the 50mm x 0 raw coal product from
     the secondary crusher. Sedgman will modify the existing crusher discharge
     to allow the 50mm x 0 crushed coal to be delivered to the plant feed
     conveyor at a rate of 450 tph. Using the size consist data provided,
     Sedgman determined that the 13mm x 0 size will range from 55 to 65 percent
     of the plant feed.

     Based upon a review of the data provided and discussion with Falls
     Mountain, Sedgman is proposing the following process circuitry to meet
     product quality specifications:

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     Base Proposal -- 50mm x 0 Processing; Flowsheet Drawing No. 2342-0102

<TABLE>
<CAPTION>
     Size                 Circuit                      Processing
     ----                 -------                      ----------
<S>              <C>                         <C>
50mm x 13mm      Heavy Media Cyclone         100% Processing
13mm x 1.5mm     Heavy Media Cyclone         Variable, up to 80% Processing
13mm x 0         Bypass                      Variable, up to 100% bypass of
                                             13mm x 0
1.5mm x 0.15mm   Water-Only Cyclone/Spiral
0.15mm x 0       Belt Filter Press           Dewater 100% of 0.15mm x 0
</TABLE>

     The flowsheet configuration developed by Sedgman allows Falls Mountain to
     process the run-of-mine coal at a 450 TPH feed rate. Depending upon
     run-of-mine quality characteristics, in-seam ash, percent dilution,
     washability characteristics and size consist, the weight percentage of raw
     coal bypassed to the clean coal product during coal washing will vary from
     <20 percent of the plant feed up to 65 percent of the plant feed.

1.2.2 PLANT LOCATION

     The new Preparation Plant Facility will be located adjacent to the existing
     secondary crushing tower. The plant location will be in general accordance
     with the general site building plan drawing 04318-100-300 prepared by
     Westmar Consulting Engineers. Sedgman considers this location preliminary,
     with the final location to be adjusted based upon final contours, existing
     conveyor profiles and Falls Mountain requirements.

1.2.3 SCOPE OF SUPPLY -- PLANT AND MATERIAL HANDLING

     The following items have been included in the Sedgman capital cost estimate
     for the base and alternate bid proposals.

     -    Base Proposal

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          -    Plant Feed Conveyor and bypass chute arrangement connecting
               existing secondary crusher discharge with new preparation plant.

          -    450 TPH Preparation Plant-- Partial to Full Washing

          -    Raw fine coal bypass (13mm x 0) return to new plant clean coal
               conveyor

          -    Refuse conveyor and 75 ton refuse bin

          -    Clean coal conveyor connecting new plant with existing crushed
               coal transfer conveyor

          -    Refuse thickener with two 3.0 meter wide belt presses to dewater
               the 0.15mm x 0 thickener underflow

          -    Provisions for sampling of feed and product streams and alternate
               for ash analyzer

2.0  PROCESS DESCRIPTION

     A base bid process configuration, including 0.15mm x 0 refuse fines
     dewatering and disposal, is detailed in this Proposal.

2.1  OWNER-SUPPLIED DATA

     Falls Mountain has provided Sedgman with current size and washability data.
     The size and washability data provided was collected from production
     samples of seam 6 and seam 7.

2.2  MINE PLAN

     Falls Mountain has indicated that the bulk of their production from
     2005-2007 will be from Seam 7 (40%-50%), Seam 6 (20%) and the balance from
     Seams 1-4 (30%-40%). Production during this period will be primarily from
     the Willow Creek central pit.

                                       20
<PAGE>
2.3  RAW COAL SIZE DISTRIBUTION

     The raw coal size distribution provided by Falls Mountain is summarized
     below. Sedgman believes that the current size consist will degrade to finer
     size consist when Falls Mountain begins mining seams 1-5 in the central and
     north pit areas. The finer size consist shown as future size consist
     reflects coals with an HGI index of 80-95.

<TABLE>
<CAPTION>
 Size (mm)   Seam 6-7 Wt.%   Projected Size(1) Wt.%
 ---------   -------------   ----------------------
<S>          <C>             <C>
  50 x25          28.7                 11.0
  25 x 10         20.2                25.53
  10 x 6           7.4                 7.97
   6 x 2          13.6                 20.4
   2 x 1           8.7                  7.6
  1 x 0.5          7.6                  8.6
0.5 x 0.15         6.4                 9.45
   -0.15           7.4                 9.45
                 100.0                100.0
</TABLE>

2.4  WASHABILITY

     Falls Mountain provided washability data for seams 6, 7 and "A" seam. This
     data used for plant design is summarized in the table below:

----------
1    "'Projected size consist reflects coals to be mined with HGI index ranging
     from 80-95 HGI.

                                       21
<PAGE>
                                    TABLE 2.1

                                    +6MM SIZE

<TABLE>
<CAPTION>
 Size/Spec. Gravity      Seam 6 (1)        Seam 7          Seam A
--------------------   -------------   -------------   -------------
    Sink       Float   Wt. %   Ash %   Wt. %   Ash %   Wt. %   Ash %
    ----       -----   -----   -----   -----   -----   -----   -----
<S>            <C>     <C>     <C>     <C>     <C>     <C>     <C>
Float - 1.30            4.22    3.11   60.06    2.49   40.78    6.91
1.30 - 1.50            66.05    5.37   23.14    4.16   14.28   11.12
1.50- 1.70             16.51   22.36    1.32   37.11    9.93   30.65
1.70 - 1.80             3.94   31.07    1.27   47.54    1.96   46.70
1.80 - Sink             9.29   57.66   14.21   87.38   33.05   80.87
</TABLE>

(1)  WASHABILITY DATA FOR +3.0MM SIZE

                                    TABLE 2.2

                         FALLS MOUNTAIN WASHABILITY DATA

                                6MM X 0.5MM SIZE

<TABLE>
<CAPTION>
 Size/Spec. Gravity      Seam 6 (1)        Seam 7          Seam A
--------------------   -------------   -------------   -------------
    Sink       Float   Wt. %   Ash %   Wt. %   Ash %   Wt. %   Ash %
    ----       -----   -----   -----   -----   -----   -----   -----
<S>            <C>     <C>     <C>     <C>     <C>     <C>     <C>
Float - 1.30           17.13    1.78   59.72    1.46   41.06     2.1
1.30 - 1.50             61.4    3.34   28.78    4.33   36.44    9.56
1.50 - 1.70             8.49   22.96    1.95   31.95    6.76   27.01
1.70 - 1.80             1.92    33.8    0.76   48.74    1.32   36.09
1.80 - Sink            11.06   62.71    8.79   73.96   14.32    82.2
</TABLE>

(1)  WASHABILITY DATA FOR +3.0 X 0.5MM SIZE

                                       22
<PAGE>
                                    TABLE 2.3

                         FALLS MOUNTAIN WASHABILITY DATA

                                0.5 X 0.15MM SIZE

<TABLE>
<CAPTION>
 Size/Spec. Gravity        Seam 7          Seam A
--------------------   -------------   -------------
    Sink       Float   Wt. %   Ash %   Wt. %   Ash %
    ----       -----   -----   -----   -----   -----
<S>            <C>     <C>     <C>     <C>     <C>
Float - 1.30           45.88    1.46   57.03    2.24
1.30 - 1.50            44.82    4.33   28.12    9.04
1.50- 1.70               2.8   31.95    4.04   31.08
1.70 - 1.80             0.59   48.74    0.98   45.11
1.80 - Sink             5.91   73.96    9.83   75.37
</TABLE>

2.5  CLEAN COAL PRODUCT SPECIFICATIONS

     Falls Mountain has provided the following clean coal quality specifications
     for the wash plant output:

<TABLE>
<CAPTION>
Wash Plant Product     Maximum
------------------   ----------
<S>                  <C>
Moisture:            8.0%
Ash:                 8.5% (dry)
</TABLE>

     The wash plant product is the combined output of bypassed raw coal fines
     (13mm x 0) combined with 50 x 0.15mm wash coal to meet the quality
     specifications.

4.0  CLARIFICATIONS AND DUTIES

4.1  CLARIFICATIONS AND DUTIES OF SEDGMAN CANADA

     -    Sedgman Canada shall install all the Equipment, as defined in the
          Purchase and Sale Agreement, at the Plant.

     -    Sedgman Canada shall provide all on-site services required for the
          installation of the Equipment, including inspection, surveying, design
          and construction services as required.

                                       23
<PAGE>
     -    Sedgman Canada will provide engineering services and technical
          assistance as may be required to fully install and commission the
          Equipment and achieve Mechanical Completion in accordance with the
          Schedule of Services.

     -    Sedgman Canada will at its cost provide one week of on-site training
          of Falls installed and operational. Such training may occur during the
          time of commissioning leading to Mechanical Completion.

     -    Sedgman assumes the Owner's existing equipment is in proper working
          condition and no mechanical repairs are necessary.

     -    No sales or use taxes are included in the Proposal. All such taxes
          will be the Owner's responsibility.

     -    Sedgman assumes a two (2) working day Owner drawing approval
          turnaround, with only one (1) review stage.

     -    Our price is based on non-union wages, work rules and productivity.

     -    No field work would be performed if temperatures fall below 20 degrees
          above zero Fahrenheit, unless we would be compensated for the added
          cost of providing winter protection.

     -    No concrete would be poured below 25 degrees above zero when the
          temperatures are holding or falling, unless we would be compensated
          for added cost for winter protection.

     -    Climbing to erect steel would be stopped when ice or frost is on the
          same.

     -    Unusual amount of snow or rain would be reason for schedule
          extensions.

     -    Excessive high winds would be reason for requesting extension of time
          for doing sheeting work, erection, or concrete forms.

                                       24
<PAGE>
     -    Sizes of items and equipment (except for major equipment) stated in
          this proposal are for comparison purposes only and actual size
          requirements are subject to final engineering design.

     -    A full-time in-field erection supervisor will be supplied.

     -    All primary power will be provided by Owner.

4.2  DUTIES OF OWNER

     -    Supply all primary power and electrical transformers

     -    All necessary building permits.

     -    Initial field engineering services providing benchmark elevations and
          reference centerlines.

     -    Adequate all-weather access road to and throughout the construction
          site and to the ground storage area for construction materials.

     -    Road construction for all permanent access roads.

     -    Adequate construction power consisting of 575 volt, 3 phase, 60 cycle,
          alternating current to temporary load centers with devices suitable
          for the Contractor's electrical connections at a convenient location.

     -    3 phase, 60 cycle, primary permanent service as specified.

     -    Lubricants for all equipment.

     -    Furnish a disposal site for debris within 5,000 ft. of the plant site.

     -    Provide adequate storage area and parking within 1,000 ft. of
          construction site.

     -    Furnish any and all environmental pollution controls and other safety
          devices required by law.

     -    Furnish all required security, including both personnel and fencing.

                                       25
<PAGE>
     -    Furnish water supply suitable for construction.

     -    Provide site for office and equipment trailers for Sedgman and
          subcontractors.

     -    Provide two (2) operating telephone lines to within 50 ft. of the site
          for exclusive use of contractor.

     -    Furnish personnel needed for operating the proposed facility during
          testing/commissioning period and any certified personnel, as may be
          required by mandatory safety requirements.

     -    Payment of all sales and use taxes associated with the project.

     -    Provide any required erosion control and surface drainage excluding
          normal construction water from our own excavation.

                                       26
<PAGE>
                         SCHEDULE 2 -- FEES AND PAYMENT

1.   PRICE FOR SERVICES

     Subject to the provisions of this Schedule, Falls Mountain shall pay
     Sedgman Canada for the Services on a progress basis in accordance with the
     following table (U.S. Dollars):

<TABLE>
<CAPTION>
                               3/31/05   4/30/05   5/31/05   6/30/05   7/31/05   8/31/05   9/30/05      TOTAL
                               -------   -------   -------   -------   -------   -------   -------   ----------
<S>                            <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>
ENGINEERING
Process Design & Project
   Mgt                           30%       25%      12.5%      7.5%      7.5%      7.5%       10%       453,648
Civil/Structural Electrical      15%       70%        15%                                               283,350

CONSTRUCTION
Mobilization/Demobilization                75%                                                25%        40,000
Foundations                                70%        20%       10%        0         0         0        107,741
Structural Steel                                                                                              0
Equipment Installation                      5%        10%       25%       30%       20%       10%     1,360,944
Electrical                                  0         10%       20%       30%       30%       10%       453,648
Siding & Roofing                            0                                       10%       90%        85,059
Mechanical Completion                       0                                                100%        17,000

COMMISSIONING                                                                                I00%        13,000

Total                                                                                                $2,814,390
</TABLE>

     The above table amounts are independent of the bonus and deduction
     schedule.

     It is expected that the Services will be performed in accordance with the
     percentages set out in the above table. If the actual percentage of
     Services performed by the date indicated is different from the percentage
     shown in the above table, Falls Mountain shall pay Sedgman based on the
     actual percentage.

     On a monthly basis, Sedgman shall submit invoices to Falls Mountain.
     Invoice payment shall be made by Falls Mountain within 30 calendar days
     following receipt.

2.   BONUS AND DEDUCTION SCHEDULE

     In addition to the Price set out in section 1 of this Schedule, the
     following bonus and deduction schedule shall apply for early or late
     completion, as the case may be. The bonus or deduction is based on the
     achievement of Mechanical Completion. If

                                       27
<PAGE>
     Mechanical Completion is achieved by or between the dates set out below
     (each day shall start at 1:00 am and end at 12:59:59 midnight of the day
     listed), then the applicable bonus payment (or deduction) will apply:

<TABLE>
<CAPTION>
                                           Bonus Payment or (Deduction) ($US)
                                              (200,000) plus an additional
          Mechanical Completion            deduction of (10,000) per day for
          After January 2, 2006              each day after January 2, 2006
          ---------------------            ----------------------------------
<S>                                        <C>
December 26, 2005 to January 2, 2006                     (200,000)
December 19, 2005 to December 25, 2005                   (140,000)
December 13, 2005 to December 18, 2005                    (80,000)
December 6, 2005 to December 12, 2005                     (20,000)
November 29, 2005 to December 5, 2005                      40,000
November 22, 2005 to November 28, 2005                    100,000
November 15, 2005 to November 21, 2005                    175,000
November 8, 2005 to November 14, 2005                     250,000
November 1, 2005 to November 7, 2005                      325,000
October 25, 2005 to October 31, 2005                      400,000
October 18, 2005 to October 24, 2005                      475,000
October 11, 2005 to October 17, 2005                      550,000
October 4, 2005 to October 10, 2005                       625,000
September 27, 2005 to October 3, 2005                     700,000
September 20, 2005 to September 26, 2005                  760,000
September 13, 2005 to September 19, 2005                  820,000
</TABLE>

                                       28
<PAGE>
<TABLE>
<S>                                                     <C>
September 7, 2005 to September 12, 2005                   880,000
August 30, 2005 to September 6, 2005                      940,000
On or before August 29, 2005                            1,000,000
</TABLE>

     The bonus payment (or deduction) is due 10 days after Mechanical
     Completion. Falls Mountain may deduct and set off any deduction from
     payments owning by Falls Mountain to Sedgman Canada.

3.   PAYROLL BURDEN AND OVERHEAD

     All costs of any kind, including all labour, equipment, materials and
     supplies, and expenses, disbursements and costs of consultants and
     contractors, and all direct and indirect costs, as may be required to
     perform the Services are included in the Price for Services as set out in
     this Schedule. These prices also include:

     -    Provisions for vacation, public holiday, sick leave, payroll taxes,
          and insurance premiums, group or other life insurance, pension,
          retirement, etc.

     -    General accounting.

     -    Home office overheads.

     -    Transportation, lodging, and subsistence.

     -    Insurance as required

     -    Financing costs and profit

4.   SCHEDULE OF RATES

     The following schedule of rates applies to any variation Falls Mountain may
     approve during the course of the provision of the Services ($US):

                                       29
<PAGE>
<TABLE>
<CAPTION>
                           HOURLY RATE
     CLASSIFICATION       STRAIGHT TIME
     --------------       -------------
<S>                       <C>
Project Management           $125.00
Process Design Engineer      $115.00
Civil Design Engineer        $105.00
Estimator                    $ 90.00
Lead Project Engineer        $ 90.00
Purchasing                   $ 85.00
Project Engineer             $ 80.00
Drafter/Cad Operator         $ 75.00
Checker                      $ 75.00
Administrative/Clerical      $ 65.00
</TABLE>

5.   INFLATION INDICATORS

     The Base Price was calculated based on the following estimated prices in
     U.S. Dollars for delivered steel components:

<TABLE>
<S>                               <C>
Structural Steel                  $1.38/lb.
Galvanized Stair Treads           $38.00/each
1-1/4 x 3/16 Galvanized Grating   $14.50/sq. ft.
Platework (without liners)        $1.30/lb.
1 in. ceramic liners              $43.00/sq. ft.
1/2 in. ceramic liners            $34.00/sq. ft.
1 in. stonehard liner             $16.00/sq. ft.
Conveyor bents                    $1.15/lb.
Conveyor stringers:               $1.20/lb.
</TABLE>

                                       30
<PAGE>
<TABLE>
<S>                               <C>
Conveyor trusses:                 $1.18/lb.
Conveyor skirtboards              $1.54/lb.
Guards:                           $3.00/lb.
Truss Corbels                     $1.50/lb.
Conveyor sheeting hoops           $2.38/lb.
Counter weights                   $0.75/lb.
Miscellaneous steel items         $1.38/lb.
</TABLE>

If the actual price for any individual line item in the above table is more than
10% of the price indicated, then Sedgman Canada shall be entitled to 50% of the
additional cost on providing Falls Mountain with substantiation of the
additional cost and verification that the prices in the above table were
reasonable estimates of market value at the time.

If the actual price for any individual line item in the above table is less than
the price indicated, then Falls Mountain is entitled to a deduction of the Base
Price in that amount.

                                       31<PAGE>
                                                                    EXHIBIT 4.50

                             UNDERWRITING AGREEMENT

March 22, 2005

Pine Valley Mining Corporation
Suite 501-535 Thurlow Street
Vancouver, British Columbia V6E 3L2

Attention: Martin Rip

Mark T. Smith
5090 Warwick Terrace
Pittsburgh, PA 15213

The R. Templeton Smith Foundation
3001 Fairmount Boulevard
Cleveland Heights, OH 44118

Attention: Mark T. Smith

Dear Sirs:

The undersigned, Sprott Securities Inc., Salman Partners Inc. and Canaccord
Capital Corporation (collectively, the "UNDERWRITERS") understand that Pine
Valley Mining Corporation (the "COMPANY") proposes to issue and sell up to
1,250,000 treasury units of the Company (individually a "Treasury Unit" and,
collectively, the "TREASURY UNITS") subject to the terms and conditions set out
below. In addition, the Underwriters understand that Mark T. Smith and the R.
Templeton Smith Foundation (collectively, the "SELLING SHAREHOLDERS") propose to
sell an aggregate of 1,250,000 Secondary Shares (as hereinafter defined).

Upon and subject to the terms and conditions set forth herein, the Underwriters
hereby agree to purchase from the Company 1,250,000 Treasury Units at a price of
$5.60 per Treasury Unit for an aggregate purchase price of $7,000,000 (the
"TREASURY OFFERING"). Each Treasury Unit shall consist of one Treasury Share (as
hereinafter defined) (a "TREASURY UNIT SHARE") and one-half of one Treasury
Share purchase warrant (a "WARRANT"). Each whole Warrant will entitle the holder
thereof to purchase one Treasury Share (a "WARRANT SHARE") at a price of $6.25
per Warrant Share at any time prior to 5:00 p.m. (Vancouver time) on the date
that is 18 months following the Closing Date (as hereinafter defined). In
addition, the Underwriters hereby agree to purchase from the Selling
Shareholders 1,250,000 Secondary Shares at a price of $5.25 per Secondary Share
for an aggregate purchase price of $6,562,500 (the "Secondary Offering"). The
Underwriters, the Company and the Selling Shareholders agree that the
Underwriters may satisfy their obligations hereunder to purchase the Treasury
Units and Secondary Shares by presenting substituted purchasers in the Selling
Jurisdictions (as hereinafter defined).

The Underwriters shall have an option (the "OPTION"), which Option may be
exercised in the Underwriters' sole discretion and without obligation, to
purchase up to an additional 250,000 Treasury Units from the Company at a price
of $5.60 per Treasury Unit which, if subscribed for
<PAGE>
hereunder, shall be deemed to form part of the Treasury Units for the purposes
hereof and up to an additional 250,000 Secondary Shares from the Selling
Shareholders at a price of $5.25 per Secondary Share which, if subscribed for
hereunder, shall be deemed to form part of the Secondary Shares for the purposes
hereof. In addition, the Underwriters shall have a second option (the "SECOND
OPTION"), which option may be exercised in whole or in part, in the
Underwriters' sole discretion and without obligation, to purchase up to an
additional 1,000,000 Secondary Shares from the Selling Shareholders at a price
of $5.25 per Secondary Share which, if subscribed for hereunder, shall be deemed
to form part of the Secondary Shares for the purposes hereof. The Option and the
Second Option shall be exercisable by the Underwriters in whole or in part at
any time up to the Closing Time by delivering written notice to the Company and
the Selling Shareholders, as applicable to that effect, after which time the
Option and the Second Option shall be void and of no further force and effect.

The Treasury Offering and Secondary Offering (which terms shall individually
include any additional Treasury Units and Secondary Shares to be purchased in
the event of the exercise of the Option and any additional Secondary Shares to
be purchased in the event of the exercise of the Second Option) by the Company
is hereinafter referred to as the "OFFERING". Unless the context otherwise
requires, all references to the "TREASURY UNITS", "TREASURY UNIT SHARES",
"WARRANTS", "WARRANT SHARES" and "SECONDARY SHARES" shall assume the exercise of
the Option and the Second Option.

The Company and the Selling Shareholders agree that the Underwriters will be
permitted to appoint other registered dealers (or other dealers duly licensed or
registered in their respective jurisdictions) as their agents to assist in the
Offering and that the Underwriters may determine the remuneration payable to
such other dealers appointed by them. Such remuneration shall be payable by the
Underwriters.

In consideration of the services to be rendered by the Underwriters in
connection with the Offering, the Company shall pay to the Underwriters at
Closing (as hereinafter defined) in cash a commission equal to 4.0% of the gross
proceeds realized by the Company in respect of the sale of Treasury Units, and
the Selling Shareholders shall pay to the Underwriters at Closing a cash
commission equal to 4.0% of the gross proceeds realized by the Selling
Shareholders in respect of the sale of Secondary Shares (collectively, the
"COMMISSION").

                                   DEFINITIONS

In this Agreement, in addition to the terms defined above, the following terms
shall have the following meanings:

"AFFILIATES" has the meaning ascribed thereto in Section 10;

"AGREEMENT" means the agreement resulting from the acceptance by the Company and
the Selling Shareholders of the offer made hereby;

"BUSINESS DAY" means a day which is not a Saturday, Sunday or statutory or civic
holiday in the City of Vancouver, British Columbia, or Toronto, Ontario, as
applicable;

                                        2
<PAGE>
"CANADIAN SECURITIES LAWS" means all applicable securities laws in each of the
Canadian Selling Jurisdictions and the respective regulations made thereunder,
together with applicable published fee schedules, prescribed forms, policy
statements, notices, orders, blanket rulings and other regulatory instruments of
the securities regulatory authorities in such provinces and all rules and
policies of the TSXV;

"CLOSING" means the closing on the Closing Date of the transaction of purchase
and sale in respect of the Treasury Units and Secondary Shares as contemplated
by this Agreement and the Subscription Agreements;

"CLOSING DATE" means March 22, 2005 or such other date as the Underwriters, the
Selling Shareholders and the Company shall agree;

"CLOSING TIME" means 10:00 a.m. (Toronto time) on the Closing Date or such other
time on the Closing Date as the Company, the Selling Shareholders and the
Underwriters may agree;

"COMMON SHARE" means a common share in the capital of the Company;

"COMPANY'S AUDITORS" means Deloitte & Touche LLP, Chartered Accountants, or such
other firm of chartered accountants as the Company may have appointed or may
from time to time appoint as auditors of the Company;

"COMPANY'S KNOWLEDGE" means knowledge of members of the Company's Board of
Directors or senior management team'

"DEBT INSTRUMENT" means any loan, bond, debenture, promissory note or other
instrument evidencing indebtedness (demand or otherwise) for borrowed money or
other liability;

"ENVIRONMENTAL LAWS" has the meaning ascribed thereto in paragraph 4(a)(xxix);

"FINANCIAL STATEMENTS" has the meaning ascribed thereto in paragraph 4(a)(v);

"FMCI" means Falls Mountain Coal Inc.;

"GMC" means Globaltex Gold Mining Corp.

"INCLUDING" means including without limitation;

"INFORMATION" has the meaning ascribed thereto in paragraph 4(a)(xxi);

"LEASED PREMISES" means the premises which are material to the Company and its
subsidiaries, taken as a whole and which the Company or its subsidiaries occupy
as a tenant;

"MATERIAL ADVERSE EFFECT" has the meaning ascribed thereto in paragraph 4(a)(i);

"MATERIAL AGREEMENT" means any material Debt Instrument, indenture, contract,
commitment, agreement (written or oral), instrument, lease or other document, to
which the Company or its subsidiaries or the Selling Shareholders, as
applicable, are a party;

                                        3
<PAGE>
"MATERIAL SUBSIDIARIES" means FMCI and PVCL;

"MISREPRESENTATION", "MATERIAL FACT", "MATERIAL CHANGE", "AFFILIATE",
"ASSOCIATE", and "DISTRIBUTION" have the respective meanings ascribed thereto in
the Securities Act (Ontario);

"NI 43-101" has the meaning ascribed thereto in paragraph 4(a)(xliii);

"PERSON" means any individual, corporation, partnership, joint venture,
association, trust or other legal entity;

"PERSONNEL" has the meaning ascribed thereto in Section 10;

"PVCL" means Pine Valley Coal Ltd.;

"PUBLIC DISCLOSURE DOCUMENTS" means, collectively, all of the documents which
have been filed by or on behalf of the Company prior to the Closing Time with
the relevant Securities Regulators pursuant to the requirements of Canadian
Securities Laws, including all press releases filed on SEDAR;

"PURCHASERS" means the persons (which may include the Underwriters) who, as
purchasers or beneficial purchasers acquire Treasury Units and/or Secondary
Shares by duly completing, executing and delivering Subscription Agreements and
any other required documentation and permitted assignees or transferees of such
persons from time to time;

"SECONDARY SHARES" means Common Shares sold by the Selling Shareholders;

"SELLING JURISDICTIONS" means the provinces of British Columbia and Ontario, and
such other jurisdictions inside or outside Canada, including the United States,
as mutually agreed to by the Company, the Selling Shareholders and the
Underwriters;

"SELLING SHAREHOLDERS" has the meaning ascribed to such term on the face page of
this Agreement;

"SECURITIES REGULATORS" means, collectively, the securities regulators or other
securities regulatory authorities in the Selling Jurisdictions;

"SPROTT" means Sprott Securities Inc.

"SUBSCRIPTION AGREEMENTS" means collectively the Canadian and U.S. subscription
agreements in the forms agreed upon by the Underwriters, the Company and the
Selling Shareholders, as applicable, pursuant to which Purchasers agree to
subscribe for and purchase the Treasury Units and/or the Secondary Shares herein
contemplated and shall include, for greater certainty, all schedules thereto;

"SUBSIDIARY" and "SUBSIDIARIES" shall have the meaning ascribed thereto in the
Canada Business Corporations Act;

"TAXES" shall have the meaning ascribed thereto in paragraph 4(a)(vii);

                                        4
<PAGE>
"TRANSFER AGENT" means Computershare Trust Company of Canada, in its capacity as
transfer agent and registrar of the Company at its principal offices in the
cities of Vancouver, British Columbia and Toronto, Ontario;

"TREASURY SHARES" means the Common Shares issued from the treasury of the
Company;

"TREASURY UNIT" has the meaning ascribed to such term on the face page of this
Agreement;

"TREASURY UNIT SHARES" has the meaning ascribed to such term on the face page of
this Agreement;

"TSXV" means the TSX Venture Exchange;

"U.S. SECURITIES ACT" means the United States Securities Act of 1933, as
amended;

"WARRANT CERTIFICATES" means the certificates evidencing the Warrants and
containing the terms of such Warrants;

"WARRANT SHARE" has the meaning ascribed to such term on the face page of this
Agreement; and

"WARRANT" has the meaning ascribed to such term on the face page of this
Agreement.

                              TERMS AND CONDITIONS

1. (A) SALE ON EXEMPT BASIS. The Underwriters shall offer for sale and sell the
Treasury Units and Secondary Shares in the Selling Jurisdictions on a private
placement basis in compliance with all applicable Canadian Securities Laws and
all applicable securities laws of other Selling Jurisdictions such that the
offer and sale of the Treasury Units and Secondary Shares does not obligate the
Company or the Selling Shareholders to file a prospectus, a registration
statement or other offering document under applicable securities legislation.
The Underwriters shall offer the Treasury Units and Secondary Shares for sale in
the United States through a U.S. registered broker-dealer affiliate pursuant to
exemptions from the registration requirements of the U.S. Securities Act and
applicable state securities laws, all such sales to be carried out and completed
in accordance with Schedule "A" annexed hereto, the particulars of which are
incorporated herein by reference.

(B) FILINGS. The Company and the Selling Shareholders, as applicable, undertake
to file, or cause to be filed, all forms or undertakings required to be filed by
the Company and the Selling Shareholders in connection with the issue and sale
of the Treasury Units and Secondary Shares respectively so that the distribution
of the Treasury Units and Secondary Shares to the Purchasers may lawfully occur
without the necessity of filing a prospectus, a registration statement or an
offering memorandum in Canada or the United States (but on terms that will
permit the Treasury Unit Shares, Warrants and Secondary Shares acquired by the
Purchasers in the Selling Jurisdictions to be sold by such Purchasers at any
time in the Selling Jurisdictions subject to applicable hold periods and other
restrictions under Canadian Securities Laws, the U.S. Securities Act and the
provisions of paragraph 2 of this Agreement), and the Underwriters undertake to
use their commercially reasonable best efforts to cause Purchasers of Treasury

                                        5
<PAGE>
Units and Secondary Shares to complete any forms required by Canadian Securities
Laws or under other applicable securities laws. All fees payable in connection
with such filings shall be at the expense of the Company and the Selling
Shareholders, as applicable.

(C) NO OFFERING MEMORANDUM. Neither the Company, the Selling Shareholders nor
any of the Underwriters shall (i) provide to prospective purchasers any document
or other material that would constitute an offering memorandum or future
oriented financial information within the meaning of Canadian Securities Laws or
applicable securities laws of the United States or any state or territory
thereof; or (ii) engage in any form of general solicitation or general
advertising in connection with the offer and sale of the Treasury Units and
Secondary Shares, including causing the sale of the Treasury Units and Secondary
Shares to be advertised in any newspaper, magazine, printed public media,
printed media or similar medium of general and regular paid circulation,
broadcast over radio, television or telecommunications, including electronic
display, or conduct any seminar or meeting relating to the offer and sale of the
Treasury Units and Secondary Shares whose attendees have been invited by general
solicitation or advertising.

(D) UNITED STATES OFFERS AND SALES. Each of the Company, the Selling
Shareholders and the Underwriters (on their own behalf and on behalf of a U.S.
registered broker-dealer affiliate of the Underwriters) agree that the
representations, warranties and covenants contained in Schedule "A" to this
Agreement entitled "United States Offers and Sales" are incorporated by
reference in and shall form part of this Agreement with respect to offers and
sales of Treasury Units and Secondary Shares in the United States by a U.S.
registered broker-dealer affiliate of the Underwriters. The Underwriters agree,
on behalf of themselves and their United States affiliates, for the benefit of
the Company and the Selling Shareholders, as applicable, to comply with the U.S.
selling restrictions imposed by the laws of the United States and contained in
Schedule "A" to this Agreement. Notwithstanding the foregoing provisions of this
paragraph 1(d), an Underwriter will not be liable to the Company or the Selling
Shareholders under this paragraph or Schedule "A" to this Agreement with respect
to a violation by another Underwriter or by another member of the selling dealer
group.

2. (A) COVENANTS OF THE COMPANY. The Company hereby covenants to the
Underwriters, the Purchasers and their respective permitted assigns and
acknowledges that each of them is relying on such covenants in connection with
the purchase of the Treasury Units, that the Company shall:

     (i)  for a period of two years after the Closing Date, use its reasonable
          best efforts subject to the reasonable discretion of the board of
          directors of the Company to act in the best interest of the Company,
          remain a reporting issuer under Canadian Securities Laws in the
          provinces of British Columbia and Alberta not in default of any
          requirement of such Canadian Securities Laws;

     (ii) allow the Underwriters and their representatives the opportunity to
          conduct all due diligence which the Underwriters may reasonably
          require to be conducted prior to the Closing Date;

     (iii) duly execute and deliver the Subscription Agreements and the Warrant
          Certificates at the Closing Time and shall comply with and satisfy all
          terms,

                                        6
<PAGE>
          conditions and covenants therein contained to be complied with or
          satisfied by the Company;

     (iv) fulfil or cause to be fulfilled, at or prior to the Closing Date, each
          of the conditions applicable to the Company set out in Section 6;

     (v)  ensure that the Treasury Unit Shares shall, upon issuance in
          accordance with their terms, be duly issued as fully paid and
          non-assessable securities in the capital of the Company, and shall
          have the attributes corresponding in all material respects to the
          description thereof set forth in this Agreement and the Subscription
          Agreements;

     (vi) ensure that the Warrants shall be duly and validly created, authorized
          and issued and shall have the attributes corresponding in all material
          respects to the description thereof set forth in this Agreement and
          the Warrant Certificates;

     (vii) ensure that at all times prior to the expiry of the Warrants,
          sufficient Warrant Shares are allotted and reserved for issuance upon
          the due and proper exercise of the Warrants and, upon issuance in
          accordance with the terms of the Warrant Certificates, shall be issued
          as fully paid and non-assessable securities in the capital of the
          Company;

     (viii) use its best efforts to ensure that the Treasury Unit Shares and the
          Warrant Shares are listed and remain listed for trading on the TSXV if
          and when such securities are issued;

     (ix) in connection with the issuance of the Treasury Units, execute and
          file with the Securities Regulators all forms, notices and
          certificates required to be filed pursuant to the Canadian Securities
          Laws in the time required by the applicable Canadian Securities Laws,
          including, for greater certainty, all forms, notices and certificates
          set forth in the opinions delivered to the Underwriters pursuant to
          Section 6 of this Agreement required to be filed by the Company; and

     (x)  for a period of 150 days from the Closing Date, not issue any
          additional securities in the capital of the Company without the prior
          written consent of Sprott, such consent not to be unreasonably
          withheld, except in conjunction with: (i) the grant or exercise of
          stock options to or by employees, officers or directors of, or
          consultants to, the Company and other similar issuances pursuant to
          the existing share incentive plan of the Company and other existing
          share compensation arrangements of the Company, (ii) outstanding
          warrants or obligations disclosed in the Public Disclosure Documents,
          and (iii) a trade occurring 30 Business Days after the Closing Date
          completed at a price per Common Share of $6.00 or greater.

     (B) COVENANTS OF THE SELLING SHAREHOLDERS. The Selling Shareholders hereby
jointly and severally covenant to the Underwriters, the Purchasers and their
respective permitted assigns and acknowledge that each of them is relying on
such covenants in connection with the purchase of the Secondary Shares, that the
Selling Shareholders shall:

                                        7
<PAGE>
     (i)  allow the Underwriters and their representatives the opportunity to
          conduct all due diligence which the Underwriters may reasonably
          require to be conducted prior to the Closing Date;

     (ii) duly execute and deliver the Subscription Agreements at the Closing
          Time and shall comply with and satisfy all terms, conditions and
          covenants therein contained to be complied with or satisfied by the
          Selling Shareholders;

     (iii) fulfil or cause to be fulfilled, at or prior to the Closing Date,
          each of the conditions applicable to them set out in Section 6;

     (iv) ensure that the Secondary Shares shall have the attributes
          corresponding in all material respects to the description thereof set
          forth in this Agreement and the Subscription Agreements;

     (v)  in connection with the sale of Secondary Shares, execute and file with
          the Securities Regulators all forms, notices and certificates required
          to be filed pursuant to the Canadian Securities Laws in the time
          required by the applicable Canadian Securities Laws, including, for
          greater certainty, all forms, notices and certificates set forth in
          the opinions delivered to the Underwriters pursuant to Section 6 of
          this Agreement required to be filed by the Selling Shareholders; and

     (vi) for a period of 150 days from the Closing Date, not sell any
          additional securities of the Company without the prior written consent
          of Sprott (such consent not to be unreasonably withheld), acting
          reasonably except in conjunction with a trade occurring 30 Business
          Days after the Closing Date completed at a price per Common Share of
          $6.00 or greater.

3. (A) MATERIAL CHANGES DURING DISTRIBUTION. During the period from the date
hereof to the Closing Date, the Company shall promptly notify the Underwriters
(and, if requested by any of the Underwriters, confirm such notification in
writing) of any material change (actual, anticipated, contemplated or
threatened, financial or otherwise) in the business, affairs, operations,
assets, liabilities (contingent or otherwise) or capital of the Company and its
subsidiaries, taken as a whole.

During the period from the date hereof to the Closing Date, the Company shall
promptly, and in any event, within any applicable time limitation, comply with
all applicable filing and other requirements under Canadian Securities Laws as a
result of such change. The Company shall in good faith discuss with the
Underwriters any fact or change in circumstances (actual, anticipated,
contemplated or threatened, and financial or otherwise) which is of such a
nature that there is reasonable doubt as to whether notice in writing need be
given to the Underwriters pursuant to this paragraph 3.

(B) PRESS RELEASES. During the period from the date hereof to the Closing Date,
subject to applicable law (including the time limits imposed thereunder), the
Company shall obtain prior approval of the Underwriters as to the content and
form of any press release. In addition, until the Closing Date, any press
release announcing or otherwise referring to this Offering shall

                                        8
<PAGE>
include an appropriate legend on each page as follows: "Not for distribution to
U.S. news wire services or dissemination in the United States."

4. (A) REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and
warrants to the Underwriters, the U.S. registered broker-dealer affiliate of the
Underwriters, and the Purchasers, and acknowledges that each of them is relying
upon such representations and warranties in purchasing the Treasury Units, that:

     (i)  the Company and each of its Material Subsidiaries has been duly
          incorporated and is validly existing under the laws of their
          respective jurisdictions of existence, has all requisite corporate
          power and authority and is duly qualified and possess all material
          certificates, authority, permits and licenses issued by the
          appropriate provincial, municipal, federal regulatory agencies or
          bodies necessary (and has not received or is not aware of any
          modification or revocation to such licenses, authority, certificates
          or permits, except such modifications or amendments as are necessary
          for the conduct of their business) to carry on their businesses as now
          conducted and to own their properties and assets, except for those
          certificates, authority, permits and licenses which the failure to
          obtain would not, individually or in the aggregate, have a material
          adverse effect on the business, results of operations or financial
          condition of the Company and its Material Subsidiaries, considered as
          a whole (a "MATERIAL ADVERSE EFFECT"), has all requisite corporate
          power and authority to carry out its obligations under this Agreement,
          the Subscription Agreements and the Warrant Certificates;

     (ii) the Company has no material subsidiaries other than as listed below
          and the Company beneficially owns, directly or indirectly, the
          percentage indicated below of the issued and outstanding shares in the
          capital of the Material Subsidiaries, free and clear of all mortgages,
          liens, charges, pledges, security interests, encumbrances, claims or
          demands of any kind whatsoever except as set out in the Public
          Disclosure Documents, all of such shares have been duly authorized and
          validly issued and are outstanding as fully paid and non-assessable
          shares and no person has any right, agreement or option, present or
          future, contingent or absolute, or any right capable of becoming a
          right, agreement or option, for the purchase from the Company of any
          interest in any of such shares or for the issue or allotment of any
          unissued shares in the capital of any of the Material Subsidiaries or
          any other security convertible into or exchangeable for any such
          shares:

<TABLE>
<CAPTION>
                           JURISDICTION OF INCORPORATION   BENEFICIAL EQUITY/VOTING
          NAME                     OR CONTINUANCE                  OWNERSHIP
          ----             -----------------------------   ---------------------
<S>                        <C>                             <C>
Falls Mountain Coal Inc.          British Columbia                  100%
Pine Valley Coal Ltd.                 Alberta                       100%
</TABLE>

                                        9
<PAGE>
          GMC and Pine Valley Coal Pty. Limited are inactive wholly-owned
          subsidiaries of the Company and are not material to the Company;

     (iii) at the Closing Time, all consents, approvals, permits, authorizations
          or filings as may be required under Canadian Securities Laws necessary
          for the execution and delivery of this Agreement, the Warrant
          Certificates and the Subscription Agreements, the issuance and sale of
          the Treasury Unit Shares, the Warrants comprising the Treasury Units
          and the Warrant Shares and the consummation of the transactions
          contemplated hereby and thereby have been made or obtained, as
          applicable;

     (iv) each of the execution and delivery of this Agreement, the Warrant
          Certificates and the Subscription Agreements, the performance by the
          Company of its obligations hereunder or thereunder, the issue and sale
          of the Treasury Unit Shares, the issue and sale of the Warrants
          comprising the Treasury Units and the issue and sale of Warrant Shares
          upon the exercise of the Warrants and the consummation of the
          transactions contemplated hereby and thereby do not and will not
          conflict with or result in a breach or violation of any of the terms
          or provisions of, or constitute a default under, (whether after notice
          or lapse of time or both), (A) any statute, rule or regulation
          applicable to the Company or its subsidiaries including Canadian
          Securities Laws and the securities laws of any other Selling
          Jurisdiction; (B) the constating documents, by-laws or resolutions of
          the Company or its subsidiaries which are in effect at the date
          hereof; (C) any Debt Instrument, Material Agreement, mortgage,
          indenture, contract, agreement, instrument, lease or other document to
          which the Company or its subsidiaries are a party or by which any one
          of them is bound; or (D) any judgment, decree or order binding the
          Company or its subsidiaries or the property or assets of the Company
          or its subsidiaries;

     (v)  the audited consolidated financial statements of the Company as at and
          for the year ended March 31, 2004 and the unaudited consolidated
          financial statements of the Company as at and for the nine months
          ended December 31, 2004 (collectively, the "Financial Statements")
          have been prepared in accordance with generally accepted accounting
          principles in Canada consistently applied throughout the period
          referred to therein and present fairly, in all material respects, the
          financial position (including the assets and liabilities, whether
          absolute, contingent or otherwise) of the Company and its subsidiaries
          (on a consolidated basis) as at such dates and results of operations
          of the Company and its subsidiaries (on a consolidated basis) for the
          periods then ended and there has been no change in accounting policies
          or practices of the Company and its subsidiaries since March 31, 2004;

     (vi) there has been no adverse material change (actual, proposed or
          prospective, whether financial or otherwise) in the business, results
          of operations, assets, liabilities (contingent or otherwise) or
          capital or financial condition of the Company or its Material
          Subsidiaries, since March 31, 2004, which has not been generally
          disclosed to the public and, except as disclosed in the Public
          Disclosure

                                       10
<PAGE>
          Documents, the business of the Company and its subsidiaries has been
          carried on in the usual and ordinary course consistent with past
          practice since March 31, 2004 to the extent that such past practice is
          consistent with the current business direction of the Company and its
          subsidiaries except for the proposed increase in coal production of
          the Willow Creek Mine from 900,000 tonnes per annum to 2,200,000
          tonnes per annum;

     (vii) all taxes (including income tax, capital tax, payroll taxes, employer
          health tax, workers' compensation payments, property taxes, customs
          duties and land transfer taxes), duties, royalties, levies, imposts,
          assessments, deductions, charges or withholdings and all liabilities
          with respect thereto including any penalty and interest payable with
          respect thereto (collectively, "TAXES") due and payable or required to
          be collected or withheld and remitted, by the Company or its
          subsidiaries have been paid, collected or withheld and remitted as
          applicable, except for where the failure to pay such Taxes would not
          have a Material Adverse Effect or result in an adverse material change
          to the Company and its subsidiaries, taken as a whole. All tax
          returns, declarations, remittances and filings required to be filed by
          the Company or its subsidiaries have been filed with all appropriate
          governmental authorities and all such returns, declarations,
          remittances and filings are complete and accurate and no material fact
          or facts have been omitted therefrom which would make any of them
          misleading or result in an adverse material change to the Company and
          its subsidiaries, taken as a whole. To the best knowledge of the
          Company, no examination of any tax return of the Company or its
          subsidiaries is currently in progress and there are no issues or
          disputes outstanding with any governmental authority respecting any
          taxes that have been paid, or may be payable, by the Company or its
          subsidiaries. There are no agreements, waivers or other arrangements
          with any taxation authority providing for an extension of time for any
          assessment or reassessment of taxes with respect to the Company.

     (viii) the auditors of the Company who audited the consolidated financial
          statements of the Company for the year ended March 31, 2004 and who
          provided their audit report thereon are independent public accountants
          as required under applicable Canadian Securities Laws;

     (ix) there has never been a reportable event (within the meaning of
          National Instrument 51-102) with the present or former auditors of the
          Company;

     (x)  no holder of outstanding securities of the Company is entitled to any
          pre-emptive or any similar rights to subscribe for any Common Shares
          or other securities of the Company and no rights, warrants or options
          to acquire, or instruments convertible into or exchangeable for, any
          security in the capital of the Company are outstanding other than as
          set forth in Schedule "B" hereto;

     (xi) except as set out in the Public Disclosure Documents, there is not, in
          the constating documents, by-laws or in any Debt Instrument, Material
          Agreement, agreement, mortgage, indenture or other instrument or
          document to which the

                                       11
<PAGE>
          Company is a party, any restriction upon or impediment to, the
          declaration or payment of dividends by the directors of the Company or
          the payment of dividends by the Company to the holders of its Common
          Shares;

     (xii) neither the Company nor any of its subsidiaries are a party to or
          bound or affected by any commitment, agreement or document containing
          any covenant which expressly limits the freedom of the Company or any
          of its subsidiaries to compete in any line of business, transfer or
          move any of their respective assets or operations or which materially
          or adversely affects the business practices, operations or condition
          of the Company and its subsidiaries, taken as a whole except as set
          out in the Public Disclosure Documents and except that the Project
          Approval Certificate issued on March 3, 1998 for the Willow Creek Mine
          approves a project with a production of 900,000 tonnes per annum;

     (xiii) to the best of the Company's knowledge, no legal or governmental
          proceedings are pending to which the Company or its Material
          Subsidiaries are a party or to which their property is subject that
          would result individually or in the aggregate in any material adverse
          change in the operation, business or condition of the Company and its
          subsidiaries, taken as a whole, and to the best knowledge of the
          Company no such proceedings have been threatened against or are
          contemplated with respect to the Company or its subsidiaries or their
          properties except for the current government review of the Company's
          application for an amendment to its mining permit to allow an increase
          in coal production at the Willow Creek Mine from 900,000 tonnes per
          annum to 2,200,000 tonnes per annum;

     (xiv) the Company and its Material Subsidiaries have conducted and are
          conducting their business in material compliance with all applicable
          laws and regulations of each jurisdiction in which they carry on
          business (including all applicable federal, provincial, municipal and
          local environmental, anti-pollution and licensing laws, regulations
          and other lawful requirements of any governmental or regulatory body,
          including relevant exploration and exploitation permits and
          concessions) except where the failure to so comply would not have a
          Material Adverse Effect and have not received a notice of
          non-compliance, nor know of, nor has reasonable grounds to know of,
          any facts that could give rise to a notice of non-compliance with any
          such laws, regulations or permits which would have a Material Adverse
          Effect;

     (xv) the Company is not aware of any pending or contemplated change to any
          applicable law or regulation or governmental position that would
          materially adversely affect the business of the Company and its
          subsidiaries or the business or legal environment under which the
          Company or its subsidiaries operate;

     (xvi) this Agreement has been duly authorized, executed and delivered by
          the Company and constitutes a valid and binding obligation of the
          Company enforceable against the Company in accordance with its terms;

                                       12
<PAGE>
     (xvii) upon the execution and delivery thereof, the Subscription Agreements
          and the Warrant Certificates shall constitute valid and binding
          obligations of the Company and each shall be enforceable against the
          Company in accordance with its terms, except as enforcement thereof
          may be limited by bankruptcy, insolvency, reorganization, moratorium
          and other laws relating to or affecting the rights of creditors
          generally and except as limited by the application of equitable
          principles when equitable remedies are sought, and by the fact that
          rights to indemnity, contribution and waiver, and the ability to sever
          unenforceable terms, may be limited by applicable law;

     (xviii) at the Closing Time, all necessary corporate action will have been
          taken by the Company to: (a) validly issue the Treasury Unit Shares as
          fully paid and non-assessable securities in the capital of the
          Company; (b) validly create, authorize and issue the Warrants; and (c)
          allot, reserve and authorize the issuance of Warrant Shares, as fully
          paid and non-assessable securities in the capital of the Company upon
          the due exercise of the Warrants;

     (xix) at the Closing Date (and prior to giving effect to this Offering) the
          authorized capital of the Company consists of an unlimited number of
          Common Shares of which 67,386,858 Common Shares are issued and
          outstanding as fully paid and non-assessable;

     (xx) the Company is a reporting issuer in the provinces of British Columbia
          and Alberta. The Company is not currently in default of any
          requirement of the Canadian Securities Laws of such jurisdictions,
          except for such defaults as would not have a Material Adverse Effect
          and the Company is not included on a list of defaulting reporting
          issuers maintained by any of the securities regulators of such
          jurisdictions;

     (xxi) all information which has been prepared by the Company relating to
          the Company and its subsidiaries and their business, property and
          liabilities and either publicly disclosed or provided to the
          Underwriters, including all financial, marketing, sales and
          operational information provided to the Underwriters and all Public
          Disclosure Documents (collectively, the "INFORMATION") is, as of the
          date of such information, true and correct in all material respects,
          and no fact or facts have been omitted therefrom which would make such
          information materially misleading;

     (xxii) all filings and fees required to be made and paid by the Company
          pursuant to the Canadian Securities Laws and general corporate law
          have been made and paid, and such disclosure and filings were true and
          accurate in all material respects as at the respective dates thereof
          and the Company has not filed any confidential material change
          reports;

     (xxiii) the Company and its subsidiaries are in compliance with all laws
          respecting employment and employment practices, terms and conditions
          of employment, occupational health and safety, pay equity and wages,
          except for such failures to

                                       13
<PAGE>
          comply as would not have a Material Adverse Effect. There is not
          currently any, or any reasonably foreseeable, labour disruption or
          conflict involving the Company or its subsidiaries;

     (xxiv) except as disclosed in the Public Disclosure Documents, none of the
          Company or its subsidiaries have any loans or other indebtedness
          outstanding which has been made to any of their respective
          shareholders, officers, directors or employees, past or present, or
          any person not dealing at "arm's length" (as such term is defined in
          the Income Tax Act (Canada)) with the Company or its subsidiaries;

     (xxv) the assets of the Company and its subsidiaries and their business and
          operations are insured against loss or damage with responsible
          insurers on a basis consistent with insurance obtained by reasonably
          prudent participants in comparable businesses, and such coverage is in
          full force and effect, and the Company or its subsidiaries have not
          breached the terms of any policies in respect thereof nor failed to
          promptly give any notice or present any material claim thereunder;

     (xxvi) the Transfer Agent, at its principal offices in the city of
          Vancouver, British Columbia has been duly appointed as transfer agent
          and registrar in respect of the Common Shares;

     (xxvii) other than the Underwriters, there are no persons acting or
          purporting to act at the request or on behalf of the Company, that are
          entitled to any brokerage or finder's fee in connection with the
          transactions contemplated by this Agreement;

     (xxviii) other than the Company and the Selling Shareholders, there is no
          person that is or will be entitled to the proceeds from the sale of
          the Treasury Units pursuant to this Offering under the terms of any
          Debt Instrument, Material Agreement, mortgage, indenture, contract,
          instrument, lease agreement (written or unwritten);

     (xxix) the Company and its subsidiaries are in material compliance with
          each material license and permit held by them and they are not in
          material violation of, or in material default under, the applicable
          statutes, ordinances, rules, regulations, orders or decrees (including
          "ENVIRONMENTAL LAWS" as defined below) of any governmental entities,
          regulatory agencies or bodies having, asserting or claiming
          jurisdiction over them or over any part of their operations or assets;

     (xxx) the Company and its subsidiaries (i) are in compliance with any and
          all applicable foreign, federal, provincial, state and local laws and
          regulations relating to the protection of human health and safety,
          conservation, the environment or hazardous or toxic substances or
          wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS"), except for
          such failures to comply as would not have a Material Adverse Effect,
          (ii) have received all material permits, licenses or other approvals
          required of any of them under applicable Environmental Laws to conduct
          their business, and (iii) are in compliance with all terms and
          conditions of any such permit, license or approval, except in each
          case for such permits,

                                       14
<PAGE>
          licenses, approvals or failures to comply that would not have a
          Material Adverse Effect;

     (xxxi) there have been no past, and there are no pending or, to the best
          knowledge of the Company, threatened claims, complaints, notices or
          requests for information received by the Company or its subsidiaries
          with respect to any alleged violation of any Environmental Law and no
          conditions exist at, on or under any property now or previously owned,
          operated, leased or contracted to perform work by the Company or its
          subsidiaries which, with the passage of time, or the giving of notice
          or both, would give rise to liability under any Environmental Law
          that, individually or in the aggregate, has or may reasonably be
          expected to have a Material Adverse Effect, except complaints from
          neighbouring property owners concerning the migration of dust from the
          Willow Creek Mine;

     (xxxii) except as set out in the Public Disclosure Documents, the Company
          is not party to any agreement, nor is the Company aware of any
          agreement, which in any manner affects the voting control of any of
          the securities of the Company or its subsidiaries;

     (xxxiii) other than as disclosed in or contemplated by the Public
          Disclosure Documents or in the Information, the Company is not party
          to any Debt Instrument or any agreement, contract or commitment to
          create, assume or issue any Debt Instrument other than of the ordinary
          cause of business;

     (xxxiv) neither the Company, nor any of its subsidiaries, nor, to the
          knowledge of the Company, any other person is in default in the
          observance or performance of any term or obligation to be performed by
          any one of them under any Material Agreement, except for such defaults
          as would not have a Material Adverse Effect and no event has occurred
          which with notice or lapse of time or both would constitute such a
          default;

     (xxxv) the minute books and records of the Company and its Material
          Subsidiaries which the Company has made available to the Underwriters
          and their counsel, Cassels Brock & Blackwell LLP, in connection with
          their due diligence investigation of the Company for the period from
          inception to the date of examination thereof, are all of the minute
          books and substantially all the records of the Company and its
          Material Subsidiaries for such period and contain copies of all
          proceedings (or certified copies thereof) of the shareholders, the
          board of directors and all committees of the board of directors of the
          Company and its subsidiaries to the date of review of such corporate
          records and minute books. There have been no other meetings,
          resolutions or proceedings of the shareholders, board of directors or
          any committees of the board of directors of the Company and its
          Material Subsidiaries during such period not reflected in such minute
          books and other records;

     (xxxvi) with respect to each of the Leased Premises, the Company or its
          subsidiaries occupy the Leased Premises and have the exclusive right
          to occupy and use the

                                       15
<PAGE>
          Leased Premises and each of the leases pursuant to which the Company
          or its subsidiaries occupy the Leased Premises is in good standing and
          in full force and effect. The performance of obligations pursuant to
          and in compliance with the terms of this Agreement and the completion
          of the transactions described herein by the Company, will not afford
          any of the parties to such leases or any other person the right to
          terminate such lease or result in any additional or more onerous
          obligations under such leases;

     (xxxvii) there are no actions, suits, proceedings or inquiries pending or,
          to the best knowledge of the Company, threatened against or affecting
          the Company its subsidiaries or their respective property or assets at
          law or in equity or before or by any federal, provincial, municipal or
          other governmental department, commission, board, bureau, agency or
          instrumentality other than those that would not have a Material
          Adverse Effect, except complaints from neighbouring property owners
          concerning the migration of dust from the Willow Creek Mine;

     (xxxviii) there are no judgments against the Company or its subsidiaries,
          which are unsatisfied, nor are there any consent decrees or
          injunctions to which the Company are subject;

     (xxxix) the Company and its Material Subsidiaries are the absolute legal
          and beneficial owners of, and have good and marketable title to or
          leasehold interest in, all of the material property or assets thereof
          as described in the Information, free of all mortgages, liens,
          charges, pledges, security interests, encumbrances, claims or demands
          whatsoever, other than those described in the Information, and no
          other property rights are necessary for the conduct of the business of
          the Company and its subsidiaries (taken as a whole) as currently
          conducted or contemplated to be conducted, the Company knows of no
          claim or basis for any claim that might or could adversely affect the
          right of the Company and its subsidiaries to use, transfer or
          otherwise exploit such property rights, other than those described in
          the Public Disclosure Documents, and the Company and its Subsidiaries
          have no responsibility or obligation to pay any commission, royalty,
          license fee or similar payment to any person with respect to the
          property rights thereof, expect as described in the Public Disclosure
          Documents;

     (xl) the Company and its Material Subsidiaries hold either freehold title,
          mining leases, mining claims, coal licenses, coal leases, or other
          conventional property, proprietary or contractual interests or rights,
          recognized in the jurisdiction in which a particular property is
          located in respect of the coal deposits, ore bodies and minerals
          located in properties in which the Company and its Material
          Subsidiaries have an interest as described in the Information under
          valid, subsisting and enforceable title documents or other recognized
          and enforceable agreements or instruments, sufficient to permit the
          Company and its Material Subsidiaries to explore the coal deposits,
          ore bodies or other minerals relating thereto, all such property,
          leases or claims and all property, leases or claims in which the
          Company or its Material Subsidiaries have any interest or right have
          been validly located and recorded in accordance with all applicable
          laws and are

                                       16
<PAGE>
          valid and subsisting, the Company or its Material Subsidiaries have
          all necessary surface rights, access rights and other necessary rights
          and interest relating to the properties in which the Company or its
          Material Subsidiaries have an interest as described in the Information
          granting the Company or its Material Subsidiaries the right and
          ability to explore for minerals, ore and metals for development
          purposes as are appropriate in view of their respective rights and
          interests therein, and each of the proprietary interests or rights and
          each of the documents, agreements and instruments and obligations
          relating thereto referred to above are currently in good standing in
          the name of the Company or its Material Subsidiaries;

     (xli) any and all of the agreements and other documents and instruments
          pursuant to which the Company and its subsidiaries hold their property
          and assets (including any interest in, or right to earn an interest
          in, any property) are valid and subsisting agreements, documents or
          instruments in full force and effect, enforceable in accordance with
          the terms thereof, the Company and its subsidiaries are not in default
          of any of the provisions of any such agreements, documents or
          instruments nor has any such default been alleged. None of the
          properties (or any interest in, or right to earn an interest in, any
          property) of the Company and its subsidiaries are subject to any right
          of first refusal or purchase or acquisition rights which are not
          disclosed in the Information;

     (xlii) the Company has disclosed all material information relating to the
          Willow Creek coal project in the Public Disclosure Documents in
          compliance with Canadian Securities Laws and such disclosure was true
          and complete and accurate in all material respects;

     (xliii) the Company has duly filed with the applicable regulatory
          authorities in compliance with Canadian Securities Laws all reports
          required by National Instrument 43-101 ("NI 43-101"), and all such
          reports comply with the requirements of NI 43-101;

     (xliv) the currently issued and outstanding common shares of the Company
          are listed and posted for trading on the TSXV and no order ceasing or
          suspending trading in any securities of the Company or prohibiting the
          trading of the Company's issued securities has been issued and no
          proceedings for such purpose are pending or, to the knowledge of the
          Company, threatened; and

     (xlv) neither the Company nor any of its subsidiaries shall take any action
          which would be reasonably expected to result in the delisting or
          suspension of its Common Shares on or from the TSXV or on or from any
          securities exchange, market or trading or quotation facility on which
          its Common Shares are then listed or quoted and the Company shall
          comply with the rules and regulations thereof.

     (B) REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDERS. Each of the
Selling Shareholders hereby severally represents, warrants and covenants to the
Underwriters, the U.S. registered broker-dealer affiliate of the Underwriters,
and the Purchasers, and

                                       17
<PAGE>
acknowledges that each of them is relying upon such representations and
warranties in purchasing the Secondary Shares, that:

     (i)  if the Selling Shareholder is

          (A)  an individual, the Selling Shareholder has attained the age of
               majority and is legally competent and has full authority to enter
               into, execute and deliver this Agreement and the Subscription
               Agreements, to take all actions required pursuant hereto and
               thereto, and to otherwise perform and comply with its obligations
               herein and therein;

          (B)  a corporation, the Selling Shareholder is duly incorporated and
               is validly subsisting under the laws of its jurisdiction of
               incorporation and has all requisite legal and corporate power and
               authority to enter into, execute and deliver this Agreement and
               the Subscription Agreements, to take all actions required
               pursuant hereto and thereto, and to otherwise perform and comply
               with its obligations herein and therein;

          (C)  a partnership, syndicate, trust, or other form of unincorporated
               organization, the Selling Shareholder has the necessary legal
               capacity and authority to enter into, execute and deliver this
               Agreement and the Subscription Agreements, to take all actions
               required pursuant hereto and thereto, and to otherwise perform
               and comply with its obligations herein and therein;

     (ii) all of the Secondary Shares are owned by the Selling Shareholder as
          the beneficial owner of record, with good and marketable title
          thereto, free and clear of all mortgages, liens, charges, security
          interests, adverse claims, pledges, encumbrances and demands
          whatsoever;

     (iii) no person, firm, corporation or other entity has any agreement,
          option, commitment, right or privilege (whether by law, pre-emptive or
          contractual) entitling such person or entity to, or which is capable
          of becoming an entitlement, option or agreement for the purchase from
          the Selling Shareholder of any of the Secondary Shares;

     (iv) the Selling Shareholders have no reasonable grounds to believe that
          the Company is in default of Canadian Securities Laws;

     (v)  at the Time of Closing, all consents, approvals, permits,
          authorizations or filings as may be required by the Selling
          Shareholder under Canadian Securities Laws necessary for the execution
          and delivery of this Agreement and the Subscription Agreements, the
          sale of the Secondary Shares and the consummation of the transactions
          contemplated hereby and thereby have been made or obtained, as
          applicable;

     (vi) each of the execution and delivery of this Agreement and the
          Subscription Agreements, the performance by the Selling Shareholder of
          his or its obligations

                                       18
<PAGE>
          hereunder or thereunder, the sale of the Secondary Shares and the
          consummation of the transactions contemplated hereby and thereby do
          not and will not conflict with or result in a breach or violation of
          any of the terms or provisions of, or constitute a default under, as
          applicable: (A) any statute, rule or regulation applicable to the
          Selling Shareholders including Canadian Securities Laws and the
          securities laws of any other Selling Jurisdiction; (B) the constating
          documents of any Selling Shareholder that is not an individual; (C)
          any Debt Instrument, Material Agreement, mortgage, indenture,
          contract, instrument, lease or other document to which any Selling
          Shareholder is a party or by which any one of them is bound; or (D)
          any judgment, decree or order binding the Selling Shareholder or his
          or its property or assets;

     (vii) other than the Underwriters, there are no persons acting or
          purporting to act at the request of or on behalf of the Selling
          Shareholder that are entitled to any brokerage or finder's fee in
          connection with the transactions contemplated by this Agreement;

     (viii) other than the Selling Shareholder, there is no person that is or
          will be entitled to the proceeds received from the sale of the
          Secondary Shares by the Selling Shareholder pursuant to this Offering
          under the terms of any Debt Instrument, Material Agreement, mortgage,
          indenture, contract, instrument, or lease agreement (written or
          unwritten);

     (ix) the Selling Shareholder is not a party to any shareholder agreement,
          pooling agreement or any other agreement which in any manner affects
          the voting control or disposition of the Secondary Shares;

     (x)  there are no actions, suits, judgments, investigations or proceedings
          of any kind whatsoever outstanding, pending, to the knowledge of the
          Selling Shareholder, or threatened against or affecting the Selling
          Shareholder or at law or in equity or before any governmental or
          regulatory authority which would affect the ability of the Selling
          Shareholder to complete the sale of Secondary Shares and otherwise
          carry out the transactions contemplated by this Agreement and the
          Subscription Agreements;

     (xi) the Selling Shareholder is not in breach of any laws of any kind
          whatsoever the failure to comply with which could affect the ability
          of the Selling Shareholder to complete the sale of Secondary Shares
          and otherwise carry out the transactions contemplated by this
          Agreement and the Subscription Agreements; and

     (xii) this Agreement has been duly authorized, executed and delivered by
          the Selling Shareholder and constitutes a valid and binding obligation
          of the Selling Shareholder enforceable against the Selling Shareholder
          in accordance with its terms.

     (C) REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE UNDERWRITERS. Each of
the Underwriters hereby severally represent, warrant and covenant to the Company
and

                                       19
<PAGE>
acknowledges that the Company and the Selling Shareholders are relying upon such
representations and warranties, that:

     (i)  in respect of the offer and sale of the Treasury Units and Secondary
          Shares, it will comply with all Canadian Securities Laws and all
          applicable laws of the jurisdictions outside Canada in which it offers
          the Treasury Units and Secondary Shares and will offer the Treasury
          Units and Secondary Shares in the United States only on a basis exempt
          from the registration requirements under the U.S. Securities Act in
          accordance with the provisions of Schedule "A" to this Agreement;

     (ii) it and its representatives have not engaged in or authorized, and will
          not engage in or authorize, any form of general solicitation or
          general advertising in connection with or in respect of the Treasury
          Units and Secondary Shares in any newspaper, magazine, printed media
          of general and regular paid circulation or any similar medium, or
          broadcast over radio or television or otherwise or conducted any
          seminar or meeting concerning the offer or sale of the Treasury Units
          and Secondary Shares whose attendees have been invited by any general
          solicitation or general advertising; and

     (iii) it has not and will not solicit offers to purchase or sell the
          Treasury Units and Secondary Shares so as to require the filing of a
          prospectus or offering memorandum with respect thereto or the
          provision of a contractual right of action (as defined in Ontario
          Securities Commission Rule 14-501) under the laws of any jurisdiction,
          including the United States of America or any state thereof

5. CLOSING DELIVERIES. The purchase and sale of the Treasury Units and Secondary
Shares shall be completed at the Closing Time at the offices of Cassels Brock &
Blackwell LLP in Toronto, Ontario, or at such other place as Sprott (on behalf
of the Underwriters) and the Company may agree upon. At or prior to the Closing
Time: (a) the Company shall, subject to the provisions of Section 6 of this
Agreement, duly and validly deliver to the Underwriters certificates in
definitive form representing the Treasury Unit Shares and Warrants comprising
the Treasury Units in the names of the Purchasers or as indicated on their
respective Subscription Agreements in the City of Toronto, against payment at
the direction of the Company of the subscription price therefor, in lawful money
of Canada; and (b) the Selling Shareholders shall, subject to the provisions of
Section 6 of this Agreement, duly and validly deliver to the Underwriters
certificates in definitive form representing the Secondary Shares in the names
of the Purchasers or as indicated on their respective Subscription Agreements in
the City of Toronto, against payment at the direction of the Selling
Shareholders of the subscription price therefor, in lawful money of Canada. The
Underwriters, the Company and the Selling Shareholders may discharge their
respective payment obligations by delivery by the Underwriters of a bank draft,
certified cheque or by transfer of funds by electronic wire transfer to the
designated bank account of each of the Company and the Selling Shareholders.
Such payment to the Company shall be solely in respect of the sale of Treasury
Units and shall be equal to the aggregate purchase price for the Treasury Units,
less the Commission payable in respect of the sale of Treasury Units and the
reasonable out-of-pocket costs and expenses of the Underwriters of the Offering,
including reasonable fees and disbursements of counsel expenses

                                       20
<PAGE>
(subject to the maximum amount set out and as more particularly described in
paragraph 8 hereof). Such payment to the Selling Shareholders shall be solely in
respect of the sale of Secondary Shares and shall be equal to the aggregate
purchase price for the Secondary Shares, less the Commission payable in respect
of the sale of Secondary Shares and the reasonable out-of-pocket costs and
expenses of the Underwriters of the Offering, including reasonable fees and
disbursements of counsel (subject to the maximum amount set out and as more
particularly described in paragraph 8 hereof). The out-of-pocket costs and
expenses of the Offering will be allocated among the Selling Shareholders and
the Company on the basis that 39% will be allocated to the Company, 55% will be
allocated to Mark Smith and 6% will be allocated to the R. Templeton Smith
Foundation.

6. CLOSING CONDITIONS. Each Purchaser's obligation to purchase the Treasury
Units at the Closing Time shall be conditional upon the fulfilment at or before
the Closing Time of the following conditions:

(A)  the Underwriters shall have received a certificate, dated as of the Closing
     Date, signed by the Chief Executive Officer and Chief Financial Officer of
     the Company, or such other officers of the Company as the Underwriters may
     agree, certifying for and on behalf of the Company, to the best of their
     knowledge, information and belief after due injury, that:

     (i)  no order, ruling or determination having the effect of suspending the
          sale or ceasing the trading in any securities of the Company
          (including the Common Shares) has been issued by any regulatory
          authority and is continuing in effect and no proceedings for that
          purpose have been instituted or are pending or, are contemplated or
          threatened by any regulatory authority;

     (ii) the Company has duly complied with all the terms, covenants and
          conditions of this Agreement on its part to be complied with up to the
          Closing Time; and

     (iii) the representations and warranties of the Company contained in this
          Agreement are true and correct as of the Closing Time with the same
          force and effect as if made at and as of the Closing Time after giving
          effect to the transactions contemplated by this Agreement.

(B)  the Underwriters shall have received a certificate, dated as of the Closing
     Date, from each of the Selling Shareholders, signed by the Selling
     Shareholder in question or an authorized signatory thereof, as applicable,
     certifying for on behalf of such Selling Shareholder, that:

     (i)  no order, ruling or determination having the effect of suspending the
          sale or ceasing the trading in the securities held by the Selling
          Shareholders (including the Secondary Shares) has been issued by any
          regulatory authority and is continuing in effect and no proceedings
          for that purpose have been instituted or are pending or are
          contemplated or threatened by any regulatory authority;

     (ii) the Selling Shareholder has duly complied with all the terms,
          covenants and conditions of this Agreement on its part to be complied
          with up to the Closing Time; and

                                       21
<PAGE>
     (iii) the representations and warranties of the Selling Shareholder
          contained in this Agreement are true and correct as of the Closing
          Time with the same force and effect as if made at and as of the
          Closing Time after giving effect to the transactions contemplated by
          this Agreement.

(C)  the Underwriters shall have received at the Closing Time certificates dated
     the Closing Date, signed by appropriate officers of the Company addressed
     to the Underwriters and their counsel, with respect to the articles and
     by-laws of the Company, all resolutions of the Company's board of directors
     relating to this Agreement and the transactions contemplated hereby and
     thereby, the incumbency and specimen signatures of signing officers, the
     constating documents of the Company and such other matters as the
     Underwriters may reasonably request;

(D)  the Underwriters shall have received at the Closing Time, evidence that all
     requisite approvals, consents and acceptances of the shareholders, the
     appropriate regulatory authorities and the TSXV required to be made or
     obtained by the Company and the Selling Shareholders in order to complete
     the Offering have been made or obtained;

(E)  the Subscription Agreements, the Warrant Certificates and the certificates
     representing the Treasury Unit Shares, the Warrants and the Secondary
     Shares shall have been executed or endorsed, as applicable and delivered by
     the parties thereto in form and substance satisfactory to the Underwriters
     and their counsel, acting reasonably;

(F)  the TSXV shall have issued its conditional acceptance for the issuance of
     the Treasury Unit Shares and the Warrant Shares;

(G)  the Underwriters shall have received favourable legal opinions addressed to
     the Underwriters dated the Closing Date, from Bull, Housser & Tupper,
     counsel for the Company (it being understood that such counsel may rely to
     the extent appropriate in the circumstances, (i) as to matters of fact, on
     certificates of the Company executed on its behalf by a senior officer of
     the Company and on certificates of the Transfer Agent, as to the issued
     capital of the Company; (ii) as to matters of fact not independently
     established, on certificates of the Company's auditors or a public
     official); and (iii) as to matters of law with respect to consulting
     counsel in the applicable local jurisdictions) with respect to the
     following matters:

     (i)  as to the incorporation and subsistence of the Company under the laws
          of British Columbia and as to the corporate power of the Company to
          carry out its obligations under this Agreement, the Subscription
          Agreements and the Warrant Certificates and to issue the Treasury Unit
          Shares, the Warrants and the Warrant Shares;

     (ii) as to the authorized and issued capital of the Company;

     (iii) that the Company has all requisite corporate power and authority
          under the laws of its jurisdiction of incorporation to carry on its
          business as presently carried on and to own its properties;

                                       22
<PAGE>
     (iv) that none of the execution and delivery of this Agreement, the
          Subscription Agreements and the Warrant Certificates, the performance
          by the Company of its obligations hereunder and thereunder, or the
          sale or issuance of the Treasury Unit Shares, the Warrants and the
          Warrant Shares will conflict with or result in any breach of the
          constating documents or by-laws of the Company or the resolutions of
          the directors and shareholders of the Company;

     (v)  that each of this Agreement, the Subscription Agreements and the
          Warrant Certificates have been duly authorized and executed and
          delivered by the Company, and constitute a valid and legally binding
          obligation of the Company enforceable against it in accordance with
          its terms, except as enforcement thereof may be limited by bankruptcy,
          insolvency, liquidation, reorganization, moratorium or similar laws
          affecting the rights of creditors generally and except as limited by
          the application of equitable principles when equitable remedies are
          sought, and the qualification that the enforceability of rights of
          indemnity and contribution may be limited by applicable law;

     (vi) that the Treasury Unit Shares have been validly issued as fully paid
          and non-assessable securities in the capital of the Company;

     (vii) that the Warrants have been duly and validly created and issued;

     (viii) that the Warrant Shares have been reserved and authorized and
          allotted for issuance to the Purchasers and, upon the due exercise of
          the Warrants in accordance with the provisions thereof and of the
          Warrant Certificates, will be validly issued as fully paid and
          non-assessable securities in the capital of the Company;

     (ix) that the issuance and sale by the Company of the Treasury Unit Shares
          and Warrants to the Purchasers are exempt from the prospectus and
          registration requirements of applicable Canadian Securities Laws in
          the Canadian Selling Jurisdictions and no documents are required to be
          filed (other than specified forms accompanied by requisite filing
          fees), proceedings taken or approvals, permits, consents or
          authorizations obtained under the applicable Canadian Securities Laws
          to permit such issuance and sale;

     (x)  that the issuance of the Warrant Shares upon the due exercise of the
          Warrants will be exempt from the prospectus and registration
          requirements of applicable Canadian Securities Laws subject to certain
          provisos and specified resale restrictions;

     (xi) that no other documents will be required to be filed, proceedings
          taken or approvals, permits, consents or authorizations obtained under
          the applicable Canadian Securities Laws in connection with the first
          trade of the Treasury Unit Shares, the Warrants or the Warrant Shares,
          as the case may be, provided that four months and a day have lapsed
          since the Closing Date, subject to the usual qualifications;

                                       23
<PAGE>
     (xii) that the issuance of the Treasury Unit Shares, the Warrants and the
          Warrant Shares has been conditionally accepted for filing by the TSXV
          and the Common shares of the Company are listed on the TSXV;

     (xiii) as to such other matters as the Underwriters' legal counsel may
          reasonably request prior to the Closing Time.

(H)  the Underwriters shall have received favourable legal opinions addressed to
     the Underwriters and the Underwriters' counsel, dated the Closing Date,
     from legal counsel for the Selling Shareholders (it being understood that
     such counsel may rely to the extent appropriate in the circumstances, as to
     matters of fact, on certificates provided by the Selling Shareholders or
     the authorized officers thereof and as to matters of law with respect to
     consulting counsel in the applicable local jurisdictions) with respect to
     the following matters:

     (i)  that each of the Selling Shareholders have all requisite power and
          authority to carry out their respective obligations under this
          Agreement and the Subscription Agreements;

     (ii) that each of this Agreement and the Subscription Agreement have been
          duly authorized and executed and delivered by the Selling
          Shareholders, and constitute a valid and legally binding obligation of
          the Selling Shareholders enforceable against each Selling Shareholder
          in accordance with its terms, except as enforcement thereof may be
          limited by bankruptcy, insolvency, liquidation, reorganization,
          moratorium or similar laws affecting the rights of creditors generally
          and except as limited by the application of equitable principles when
          equitable remedies are sought, and the qualification that the
          enforceability of rights of indemnity and contribution may be limited
          by applicable law;

     (iii) that the sale by the Selling Shareholders of the Secondary Shares to
          the Purchasers is exempt from the prospectus and registration
          requirements of Canadian Securities Laws applicable in the Canadian
          Selling Jurisdictions and no documents are required to be filed (other
          than specified forms accompanied by requisite filing fees),
          proceedings taken or approvals, permits, consents or authorizations
          obtained under applicable Canadian Securities Laws to permit such
          sale;

     (iv) that no other documents will be required to be filed, proceedings
          taken or approvals, permits, consents or authorizations obtained under
          the applicable Canadian Securities Laws in connection with the first
          trade of the Secondary Shares, provided a period of four months and a
          day has lapsed since the Closing Date, subject to the usual
          qualifications;

     (v)  that the Secondary Shares are listed on the TSXV;

     (vi) as to such other matters as the Underwriters' legal counsel may
          reasonably request prior to the Closing Time.

                                       24
<PAGE>
(I)  the Underwriters shall have received certificates of status or similar
     certificates with respect to the jurisdiction in which the Company is
     incorporated;

(J)  the Underwriters shall have received a legal opinion addressed to the
     Underwriters and the Purchasers from special United States counsel to the
     Company and the Selling Shareholders, dated as of the Closing Date, in form
     and substance satisfactory to the Underwriters and their counsel, acting
     reasonably, with respect to the initial sale of the Treasury Units and
     Secondary Shares by the Company and the Selling Shareholders in the United
     States or to U.S. persons (as such term is defined in Regulation S under
     the U.S. Securities Act).

(K)  the Underwriters shall have received a favourable legal opinion addressed
     to the Underwriters and the Purchasers dated as of the Closing Date, in
     form and substance satisfactory to the Underwriters and its counsel, acting
     reasonably, as to (i) the incorporation and subsistence of the Material
     Subsidiaries; (b) the corporate power and authority of the Material
     Subsidiaries; (iii) the ability of each of the Material Subsidiaries to
     carry on its business as presently carried on and to own it assets; (iv)
     the authorized capital, issued and outstanding share capital of the
     Material Subsidiaries; and (v) as to the ownership of the issued and
     outstanding securities of the Material Subsidiaries;

(L)  the Underwriters shall have received a favourable legal opinion addressed
     to the Underwriters, the Purchasers and the Underwriters' counsel, as to
     the title to the coal licenses and coal leases issued pursuant to the Coal
     Act (British Columbia) and constituting the Willow Creek coal project,
     dated as of the Closing Date, in form and substance satisfactory to the
     Underwriters and its counsel, acting reasonably;

(M)  the Underwriters shall, in their sole discretion, be satisfied with their
     due diligence review with respect to the business, assets, financial
     condition, affairs and prospects of the Company; and

(N)  each of Jeff Fehn and Graham MacKenzie shall have entered into a
     stand-still agreement in favour of the Underwriters agreeing not to sell,
     assign or otherwise transfer any Common Shares for a period of 150 days
     from the Closing Date other than in connection with: (i) the sale of an
     aggregate of 1,000,000 Common Shares; and (ii) a trade of the Common Shares
     occurring 30 business days after the Closing Date completed at a price per
     Common Share of $6.00 or greater.

7.   RIGHTS OF TERMINATION

(A) DUE DILIGENCE OUT. In the event that the due diligence investigations
performed by the Underwriters and/or their representatives reveal any material
information or fact not generally known to the public which might, in the sole
opinion of the Underwriters (or any one of them), acting reasonably, adversely
affect the market price of the Common Shares, quality of the investment or
marketability of the Offering, the Underwriters (or any one of them) shall be
entitled, at their sole option and in accordance with subparagraph 7(g) of this
Agreement, to terminate their obligations under this Agreement (and the
obligations of the Purchasers arranged

                                       25
<PAGE>
by them to purchase the Treasury Units and Secondary Shares) by notice to that
effect given to the Company and the Selling Shareholders any time prior to the
Closing Time.

(B) LITIGATION. If any inquiry, action, suit, investigation or proceeding
whether formal or informal (including matters of regulatory transgression or
unlawful conduct and including any inquiry or investigation by the TSXV, any
securities commission, or the U.S. Securities Exchange Commission) is commenced,
announced or threatened in relation to the Selling Shareholders, the Company or
its Material Subsidiaries, or any of their respective officers, directors or
principal shareholders, the Underwriters (or any one of them) shall be entitled,
at their sole option and in accordance with subparagraph 7(g) of this Agreement,
to terminate their obligations under this Agreement (and the obligations of the
Purchasers arranged by them to purchase the Treasury Units and Secondary Shares)
by notice to that effect given to the Company and the Selling Shareholders any
time prior to the Closing Time.

(C) DISASTER OUT. In the event that prior to the Closing Time, there should
develop, occur or come into effect any event of any nature, including terrorism,
accident, a new or change in any governmental law or regulation, or other
condition or major financial occurrence of national or international
consequence, which, in the sole opinion of the Underwriters (or any one of
them), materially adversely affects, or may adversely affect, the financial
markets generally or the business, operations, affairs or profitability of the
Company and its Material Subsidiaries, taken as a whole, or on the market price
or value of the Common Shares, the Underwriters (or any one of them) shall be
entitled at their sole option, in accordance with subparagraph 7(g) of this
Agreement, to terminate their obligations under this Agreement (and the
obligations of the Purchasers arranged by them to purchase the Treasury Units
and Secondary Shares) by written notice to that effect given to the Company and
the Selling Shareholders prior to the Closing Time.

(D) CHANGE IN MATERIAL FACT. In the event that prior to the Closing Time, the
Underwriters or the Underwriters' representatives, through their due diligence
investigations, or otherwise discover or there should occur a material change or
a change in any material fact or new material fact shall arise, which, in the
sole opinion of the Underwriters (or any one of them), has or could be expected
to have a material adverse change or material adverse effect on the business,
affairs or profitability of the Company and its Material Subsidiaries, taken as
a whole, or on the market price or value of the Common Shares, the Underwriters
(or any one of them) shall be entitled, at their sole option, in accordance with
subparagraph 7(g), to terminate their obligations under this Agreement (and the
obligations of the Purchasers arranged by them to purchase the Treasury Units
and Secondary Shares) by written notice to that effect given to the Company and
the Selling Shareholders prior to the Closing Time.

(E) NON-COMPLIANCE WITH CONDITIONS. The Company and Selling Shareholders agree
that all terms, conditions and covenants in this Agreement shall be construed as
conditions and complied with so far as the same relate to acts to be performed
or caused to be performed by the Company and/or the Selling Shareholders, as
applicable, that they will each use its best efforts to cause such conditions to
be complied with, and any breach or failure by the Company or the Selling
Shareholders to comply with any of such conditions or in the event that any
representation or warranty given by the Company or the Selling Shareholders
becomes false and is not rectified as at the Closing Time, shall entitle the
Underwriters (or any one of them), at their

                                       26
<PAGE>
sole option in accordance with subparagraph 7(g), to terminate their obligations
under this Agreement (and the obligations of the Purchasers arranged by them to
purchase the Treasury Units and Secondary Shares) by notice to that effect given
to the Company and the Selling Shareholders at or prior to the Closing Time. The
Underwriters may waive, in whole or in part, or extend the time for compliance
with, any terms and conditions without prejudice to their rights in respect of
any other of such terms and conditions or any other or subsequent breach or
non-compliance, provided that any such waiver or extension shall be binding upon
the Underwriters only if the same is in writing and signed by them.

(F) CEASE TRADE ORDER. In the event that any order to cease trading in
securities of the Company or in respect of the Selling Shareholders is made or
threatened by a Securities Regulator, which, in the sole opinion of the
Underwriters (or any one of them), acting reasonably, operates or could operate
to prevent or restrict trading in the Common Shares or distribution or sale of
the Treasury Units or Secondary Shares in the Selling Jurisdictions, or any
other jurisdiction where Purchasers are resident the Underwriters (or any one of
them) shall be entitled, at their sole option, in accordance with subparagraph
7(g) of this Agreement, to terminate their obligations under this Agreement (and
the obligations of the Purchasers arranged by them to purchase the Treasury
Units and the Secondary Shares) by written notice to that effect given to the
Company and the Selling Shareholders prior to the Closing Time.

(G) EXERCISE OF TERMINATION RIGHTS. The rights of termination contained in
subparagraphs 7(a), (b), (c), (d), (e) and (f) may be exercised by the
Underwriters and are in addition to any other rights or remedies the
Underwriters may have in respect of any default, act or failure to act or
non-compliance by the Company or the Selling Shareholders in respect of any of
the matters contemplated by this Agreement or otherwise. In the event of any
such termination by the Underwriters, there shall be no further liability on the
part of the Underwriters to the Company or the Selling Shareholders or on the
part of the Company or the Selling Shareholders to the Underwriters except in
respect of any liability which may have arisen or may arise after such
termination in respect of acts or omissions prior to such termination under
paragraphs 8 and 10.

8. EXPENSES. Whether or not the Offering is completed, the Company and the
Selling Shareholders will pay all reasonable expenses and fees in connection
with the Offering, including all expenses of or incidental to the issue, sale or
distribution of the Treasury Units and Secondary Shares including, the fees and
expenses of the Company's counsel and counsel to the Selling Shareholders; all
costs incurred in connection with the preparation of documents relating to the
Offering; and all reasonable expenses and fees incurred by the Underwriters
which shall include the reasonable fees (to a maximum of $75,000, exclusive of
GST) and disbursements of the Underwriters' counsel. All reasonable fees and
expenses incurred by the Underwriters or on their behalf shall be payable by the
Company immediately upon receiving an invoice therefor from the Underwriters and
shall be payable whether or not the Offering is completed.

9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All terms, warranties,
representations, covenants and agreements herein contained or contained in any
documents submitted pursuant to this Agreement and in connection with the
transactions herein contemplated shall survive the purchase and sale of the
Treasury Unit Shares and Warrants comprising the Treasury Units and Secondary
Shares and continue in full force and effect for the benefit of the Underwriters
and the Purchasers and shall not be limited or prejudiced by any investigation
made by or on behalf of

                                       27
<PAGE>
the Underwriters in connection with the purchase and sale of the Treasury Unit
Shares and Warrants comprising the Treasury Units and/or Secondary Shares.

10. (A) INDEMNITY. The Company and the Selling Shareholders hereby severally
agree to indemnify and hold the Underwriters and/or any of their respective
affiliates (the "AFFILIATES") and each of the directors, officers, employees and
shareholders of the Underwriters and/or the Affiliates (hereinafter collectively
referred to as the "PERSONNEL") harmless from and against any and all expenses,
losses (other than loss of profits), claims, actions, damages or liabilities,
whether joint or several (including the aggregate amount paid in reasonable
settlement of any actions, suits, proceedings or claims), and the reasonable
fees and expenses of their counsel that may be incurred in advising with respect
to and/or defending any claim that may be made against the Underwriters and/or
the Affiliates, to which the Underwriters and/or the Affiliates and/or the
Personnel may become subject or otherwise involved in any capacity under any
statute or common law or otherwise insofar as such expenses, losses, claims,
damages, liabilities or actions arise out of or are based, directly or
indirectly, upon the performance of professional services rendered to the
Company and the Selling Shareholders by the Underwriters and/or the Affiliates
and the Personnel hereunder or otherwise in connection with the matters referred
to in this Agreement, provided, however, that this indemnity shall not apply to
the extent that a court of competent jurisdiction in a final judgment that has
become non-appealable shall determine that:

     (i)  the Underwriters and/or the Affiliates or the Personnel have been
          grossly negligent or dishonest or have committed any fraudulent act in
          the course of such performance;

     (ii) the expenses, losses, claims, damages or liabilities, as to which
          indemnification is claimed, were directly caused by the gross
          negligence, dishonesty or fraud referred to in (i).

If for any reason (other than the occurrence of any of the events itemized in
(i) and (ii) above), the foregoing indemnification is unavailable to the
Underwriters and/or the Affiliates or insufficient to hold them harmless, then
the Company and the Selling Shareholders shall contribute to the amount paid or
payable by the Underwriters and/or the Affiliates as a result of such expense,
loss, claim, damage or liability in such proportion as is appropriate to reflect
not only the relative benefits received by the Company and/or the Selling
Shareholders on the one hand and the Underwriters and/or the Affiliates on the
other hand but also the relative fault of the Company, the Selling Shareholders
and the Underwriters and/or the Affiliates, as well as any relevant equitable
considerations; provided that the Company and the Selling Shareholders shall, in
any event, contribute to the amount paid or payable by the Underwriters and/or
the Affiliates as a result of such expense, loss, claim, damage or liability,
any excess of such amount over the amount of the fees received by the
Underwriters and/or the Affiliates hereunder pursuant to this Agreement.

The Company and the Selling Shareholders agree that in case any legal proceeding
shall be brought against the Company, the Selling Shareholders and/or the
Underwriters and/or the Affiliates by any governmental commission or regulatory
authority or any stock exchange or other entity having regulatory authority,
either domestic or foreign, shall investigate the Company, the Selling
Shareholders and/or the Underwriters and/or the Affiliates and any

                                       28
<PAGE>
Personnel shall be required to testify in connection therewith or shall be
required to respond to procedures designed to discover information regarding, in
connection with, or by reason of the performance of professional services
rendered to the Company and/or the Selling Shareholders by the Underwriters
and/or the Affiliates under this Agreement, the Underwriters and/or the
Affiliates shall have the right to employ its own counsel in connection
therewith, and the reasonable fees and expenses of such counsel as well as the
reasonable costs (including an amount to reimburse the Underwriters and/or the
Affiliates for time spent by its Personnel in connection therewith) and
out-of-pocket expenses incurred by its Personnel in connection therewith shall
be paid by the Company and the Selling Shareholders as they occur. Provided
that, notwithstanding the foregoing, the Underwriters and/or the Affiliates and
the Personnel shall utilize counsel to the Company and/or the Selling
Shareholders unless in the opinion of the Underwriters and/or the Affiliates,
based on counsel, there is an actual, potential or apparent conflict between the
interests of such parties and the interests of the Company and/or the Selling
Shareholders such that joint representation would be inappropriate.

Promptly after receipt of notice of the commencement of any legal proceeding
against the Underwriters and/or the Affiliates or any of the Personnel or after
receipt of notice of the commencement of any investigation, which is based,
directly or indirectly, upon any matter in respect of which indemnification may
be sought from the Company and/or the Selling Shareholders, the Underwriters
and/or the Affiliates (or any one of them) will notify the Company and the
Selling Shareholders in writing of the commencement thereof and, throughout the
course thereof, will provide copies of all relevant documentation to the Company
and the Selling Shareholders, will keep the Company and the Selling Shareholders
advised of the progress thereof and will discuss with the Company and the
Selling Shareholders all significant actions proposed.

The indemnity and contribution obligations of the Company and the Selling
Shareholders shall be in addition to any liability which the Company and the
Selling Shareholders may otherwise have, shall extend upon the same terms and
conditions to those of the Underwriters and/or the Affiliates and the Personnel
who are not signatories hereto and shall be binding upon and enure to the
benefit of any successors, assigns, heirs and personal representatives of the
Company, the Selling Shareholders, the Underwriters and/or the Affiliates and
any of the Personnel of the Underwriters and/or the Affiliates. The foregoing
provisions shall survive the completion of professional services rendered under
this Agreement or any termination of the authorization given by this Agreement.

(B) RIGHT OF INDEMNITY IN FAVOUR OF OTHERS. With respect to any party who may be
indemnified by paragraph 10(a) above and is not a party to this Agreement, the
Underwriters shall obtain and hold the rights and benefits of this paragraph 10
in trust for and on behalf of such Indemnified Party.

11. ACTION BY UNDERWRITERS. All steps which must or may be taken by the
Underwriters in connection with this Agreement, with the exception of the
matters relating to termination contemplated by Section 7 or matters relating to
indemnity and contribution contemplated by Section 10, may be taken by Sprott on
behalf of itself and the Underwriters and the execution and delivery of this
Agreement by the Company, the Selling Shareholders and the Underwriters shall
constitute the authority of the Company and the Selling Shareholders for
accepting

                                       29
<PAGE>
notification of any such steps from, and for delivery of the definitive
documents constituting the Treasury Units and/or Secondary Shares to, Sprott
Securities Inc. Sprott Securities Inc. agrees to consult with the other
Underwriters with respect to all material matters.

12. LIABILITY OF UNDERWRITERS. The obligations of the Underwriters to purchase
the Treasury Units and Secondary Shares in connection with the Offering at the
Closing Time shall be several (and not joint or joint and several) and shall be
as to the following percentages of the Treasury Units and Secondary Shares to be
purchased at that time:

<TABLE>
<CAPTION>
Name of Underwriter             Percentage
-------------------             ----------
<S>                             <C>
Sprott Securities Inc.              65%
Salman Partners Inc.                25%
Canaccord Capital Corporation       10%
</TABLE>

     Nothing in this Agreement shall oblige any U.S. broker dealer affiliate of
any of the Underwriters to purchase the Treasury Units and/or Secondary Shares.
Any U.S. broker dealer affiliate who makes any offers or sales of the Treasury
Units and/or Secondary Shares to U.S. persons will do so solely as an agent for
an Underwriter.

     If any of the Underwriters shall fail to purchase its applicable percentage
of the total number of Treasury Units and Secondary Shares at the Closing Time
pursuant to the Offering and such failure shall constitute a default in its
obligations under this Agreement, then, notwithstanding the provisions of this
paragraph, any Underwriter not in default of its obligations under this
Agreement may, but shall not be obligated to, purchase the Treasury Units and
Secondary Shares which the Underwriter in default was to have purchased.

13. ADVERTISEMENTS. The Company and the Selling Shareholders acknowledge that
the Underwriters shall have the right, subject always to clauses 1(a) and (c)
and 4(b) of this Agreement, at their own expense, to place such advertisement or
advertisements relating to the sale of the Treasury Units and Secondary Shares
contemplated herein as the Underwriters may consider desirable or appropriate
and as may be permitted by applicable law. The Company, the Selling Shareholders
and the Underwriters each agree that they will not make or publish any
advertisement in any media whatsoever relating to, or otherwise publicize, the
transaction provided for herein so as to result in any exemption from the
prospectus and registration requirements of applicable Canadian Securities Laws
or the securities legislation in any other jurisdiction in which the Treasury
Units and/or Secondary Shares shall be offered or sold being unavailable in
respect of the sale of the Treasury Units and/or Secondary Shares to prospective
purchasers.

14. NOTICES. Unless otherwise expressly provided in this Agreement, any notice
or other communication to be given under this Agreement (a "NOTICE") shall be in
writing addressed as follows:

                                       30
<PAGE>
(A)  If to the Company, to:

     Pine Valley Mining Corporation
     Suite 501 -- 535 Thurlow Street
     Vancouver, British Columbia V6E 3L2

     Attention: Martin Rip, Vice President, Finance and Chief Financial Officer
     Fax:       (604) 682-4698

     with a copy to:

     Bull, Housser & Tupper
     3000 -- 1055 West Georgia Street
     Vancouver, British Columbia V6E 3R3

     Attention: Grant Weaver
     Fax:       (604) 646-2514

     If to the Selling Shareholders, to each of:

     Mark T. Smith
     5090 Warwick Terrace
     Pittsburgh, PA 15213

     Fax:       (440) 359-0001

     The R. Templeton Smith Foundation
     3001 Fairmount Boulevard
     Cleveland Heights, Ohio 44118

     Attention: Mark T. Smith
     Fax:       (440) 359-0001

     If to the Underwriters, to:

     Sprott Securities Inc.
     Royal Bank Plaza
     South Tower, Suite 3450
     200 Bay Street
     Toronto, Ontario M5J 2J2

     Attention: Darren Wallace
     Fax:       (416) 943-6496

                                       31
<PAGE>
     with a copy to:

     Cassels Brock & Blackwell LLP
     Suite 2100, Scotia Plaza
     40 King Street West
     Toronto, Ontario M5H 3C2

     Attention:        John Vettese
     Telecopier:       (416) 350-6930

or to such other address as any of the parties may designate by notice given to
the others.

Each notice shall be personally delivered to the addressee or sent by facsimile
transmission to the addressee and (i) a notice which is personally delivered
shall, if delivered on a Business Day, be deemed to be given and received on
that day and, in any other case, be deemed to be given and received on the first
Business Day following the day on which it is delivered; and (ii) a notice which
is sent by facsimile transmission shall be deemed to be given and received on
the first Business Day following the day on which it is sent.

15. TIME OF THE ESSENCE. Time shall, in all respects, be of the essence hereof.

16. CANADIAN DOLLARS. All references herein to dollar amounts are to lawful
money of Canada.

17. HEADINGS. The headings contained herein are for convenience only and shall
not affect the meaning or interpretation hereof.

18. SINGULAR AND PLURAL, ETC. Where the context so requires, words importing the
singular number include the plural and vice versa, and words importing gender
shall include the masculine, feminine and neuter genders.

19. ENTIRE AGREEMENT. This Agreement constitutes the only agreement between the
parties with respect to the subject matter hereof and shall supersede any and
all prior negotiations and understandings, including the engagement letter dated
February 25, 2005. This Agreement may be amended or modified in any respect by
written instrument only.

20. SEVERABILITY. The invalidity or unenforceability of any particular provision
of this Agreement shall not affect or limit the validity or enforceability of
the remaining provisions of this Agreement.

21. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Province of British Columbia and the laws of
Canada applicable therein.

22. SUCCESSORS AND ASSIGNS. The terms and provisions of this Agreement shall be
binding upon and enure to the benefit of the Company, the Selling Shareholders,
the Underwriters and the Purchasers and their respective executors, heirs,
successors and permitted assigns; provided that, except as provided herein or in
the Subscription Agreements, this Agreement shall not be assignable by any party
without the written consent of the others.

                                       32
<PAGE>
23. FURTHER ASSURANCES. Each of the parties hereto shall do or cause to be done
all such acts and things and shall execute or cause to be executed all such
documents, agreements and other instruments as may reasonably be necessary or
desirable for the purpose of carrying out the provisions and intent of this
Agreement.

24. EFFECTIVE DATE. This Agreement is intended to and shall take effect as of
the date first set forth above, notwithstanding its actual date of execution or
delivery.

25. LANGUAGE. The parties hereby acknowledge that they have expressly required
this Agreement and all notices, statements of account and other documents
required or permitted to be given or entered into pursuant hereto to be drawn up
in the English language only. Les parties reconnaissent avoir expressment
demandees que la presente Convention ainsi que tout avis, tout etat de compte et
tout autre document a etre ou pouvant etre donne ou conclu en vertu des
dispositions des presentes, soient rediges en langue anglaise seulement.

                           [INTENTIONALLY LEFT BLANK]

                                       33
<PAGE>
26. COUNTERPARTS. This Agreement may be executed in any number of counterparts
and by facsimile, each of which so executed shall constitute an original and all
of which taken together shall form one and the same agreement. If the Company
and the Selling Shareholders are in agreement with the foregoing terms and
conditions, please so indicate by executing a copy of this letter where
indicated below and delivering the same to the Underwriters.

Yours very truly,

SPROTT SECURITIES INC.

Per: /s/ Jeff Kennedy
     -----------------------------------
     Authorized Signing Officer

SALMAN PARTNERS INC.

Per: /s/ Alan C. Herrington
     -----------------------------------
     Authorized Signing Officer

CANACCORD CAPITAL CORPORATION

Per:
     -----------------------------------
     Authorized Signing Officer

The foregoing is hereby accepted on the terms and conditions therein set forth.

DATED as of March 22, 2005.

                                        PINE VALLEY MINING CORPORATION

                                        Per: /s/ Jeffrey Fehn
                                             -----------------------------------
                                             Authorized Signing Officer

                                        THE R. TEMPLETON SMITH FOUNDATION

                                        Per: /s/ Mark T. Smith
                                             -----------------------------------
                                             Authorized Signing Officer

                                        Mark T. Smith
-------------------------------------   ----------------------------------------
Witness                                 Mark T. Smith

                                       34
<PAGE>
                                  SCHEDULE "A"

                         UNITED STATES OFFERS AND SALES

As used in this Exhibit A, capitalized terms used herein and not defined herein
shall have the meaning ascribed thereto in the Underwriting Agreement to which
this Exhibit is annexed and the following terms shall have the meanings
indicated:

     (a)  "Directed Selling Efforts" means directed selling efforts as that term
          is defined in Regulation S. Without limiting the foregoing, but for
          greater clarity in this Exhibit, it means, subject to the exclusions
          from the definition of directed selling efforts contained in
          Regulation S, any activity undertaken for the purpose of, or that
          could reasonably be expected to have the effect of, conditioning the
          market in the United States for any of the Treasury Units and
          Secondary Shares and includes the placement of any advertisement in a
          publication with a general circulation in the United States that
          refers to the offering of the Treasury Units; and Secondary Shares

     (b)  "Foreign Issuer" means a foreign issuer as that term is defined in
          Regulation S. Without limiting the foregoing, but for greater clarity
          in this Exhibit, it means any issuer which is (a) the government of
          any foreign country or of any political subdivision of a foreign
          country; or (b) a corporation or other organization incorporated under
          the laws of any foreign country, except an issuer meeting the
          following conditions: (1) more than 50 percent of the outstanding
          voting securities of such issuer are held of record either directly or
          through voting trust certificates or depositary receipts by residents
          of the United States; and (2) any of the following: (i) the majority
          of the executive officers or directors are United States citizens or
          residents, (ii) more than 50 percent of the assets of the issuer are
          located in the United States, or (iii) the business of the issuer is
          administered principally in the United States;

     (c)  "Qualified Institutional Buyer" means a "qualified institutional
          buyer" as that term is defined in Rule 144A;

     (d)  "Regulation D" means Regulation D adopted by the SEC under the U.S.
          Securities Act;

     (e)  "Regulation S" means Regulation S adopted by the SEC under the U.S.
          Securities Act;

     (f)  "Rule 144" means Rule 144 adopted by the SEC under the U.S. Securities
          Act;

     (g)  "Rule 144A" means Rule 144A adopted by the SEC under the U.S.
          Securities Act;

     (h)  "Rule 701" means Rule 701 adopted by the SEC under the U.S. Securities
          Act;

     (i)  "SEC" means the United States Securities and Exchange Commission;

                                       35
<PAGE>
     (j)  "Selling Dealer Group" means dealers or brokers other than the
          Underwriters and their U.S. affiliates who participate in the offer
          and sale of the Treasury Units and/or Secondary Shares pursuant to the
          Underwriting Agreement;

     (k)  "Substantial U.S. Market Interest" means substantial U.S. market
          interest as that term is defined in Regulation S;

     (l)  "U.S. Exchange Act" means the United States Securities Exchange Act of
          1934, as amended;

     (m)  "U.S. Person" means a U.S. person as that term is defined in
          Regulation S; and

     (n)  "U.S. Securities Act" means the United States Securities Act of 1933,
          as amended;

     (o)  "United States" means the United States of America, its territories
          and possessions, any state of the United States, and the District of
          Columbia.

REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE UNDERWRITERS

The Underwriters acknowledge that the Treasury Units, Treasury Unit Shares,
Warrants, Warrant Shares and Secondary Shares have not been and will not be
registered under the U.S. Securities Act and may be offered and sold within the
United States or to, or for the account or benefit of, U.S. persons only in
transactions exempt from or not subject to the registration requirements of the
U.S. Securities Act. Accordingly, the Underwriters represent, warrant and
covenant to and with the Company that:

1.   They have not offered or sold, and will not offer or sell, any Treasury
     Units or Secondary Shares except (a) in an offshore transaction in
     accordance with Rule 903 of Regulation S or (b) within the United States as
     provided in paragraphs 2 through 10 below. Accordingly, none of the
     Underwriters, their affiliates, any persons acting on their behalf, or any
     member of the Selling Dealer Group have made or will make (except as
     permitted in paragraphs 2 through 10 below) (i) any offer to sell or any
     solicitation of an offer to buy, any Treasury Units or Secondary Shares to
     any U.S. Person or any person in the United States, (ii) any sale of
     Treasury Units or Secondary Shares to any purchaser unless, at the time the
     buy order was or will have been originated, the purchaser was outside the
     United States, or such Underwriters, affiliate or person acting on behalf
     of either, reasonably believed that such purchaser was outside the United
     States, or (iii) any Directed Selling Efforts in the United States with
     respect to the Treasury Units or Secondary Shares. Terms used in this
     paragraph have the meanings given to them by Regulation S.

2.   They have not entered and will not enter into any contractual arrangement
     with respect to the distribution of the Treasury Units and/or the Secondary
     Shares, except with their affiliates, any members of the Selling Dealer
     Group or with the prior written consent of the Company and/or the Selling
     Shareholders. They shall require each selling group member to agree, for
     the benefit of the Company and the Selling Shareholders, to comply with,
     and shall use their best efforts to ensure that each selling group member
     complies

                                       36
<PAGE>
     with, the same provisions of this Exhibit as apply to the Underwriters as
     if such provisions applied to such selling group member.

3.   All offers and sales of Treasury Units and Secondary Shares in the United
     States shall be made through a U.S. registered broker dealer affiliate in
     compliance with all applicable U.S. broker-dealer requirements. Each of the
     Underwriters and the U.S. registered broker-dealer affiliate is an
     Institutional Accredited Investor and a Qualified Institutional Buyer.

4.   Offers and sales of Treasury Units and Secondary Shares in the United
     States shall not be made (i) by any form of general solicitation or general
     advertising (as those terms are used in Regulation D), including
     advertisements, articles, notices or other communications published in any
     newspaper, magazine, or similar media or broadcast over radio or
     television, or any seminar or meeting whose attendees had been invited by
     general solicitation or general advertising or (ii) in any manner involving
     a public offering within the meaning of Section 4(2) of the U.S. Securities
     Act.

5.   Any offer, sale or solicitation of an offer to buy Treasury Units and
     Secondary Shares that has been made or will be made in the United States
     was or will be made only to Qualified Institutional Buyers in accordance
     with the requirements of Rule 144A in transactions that are exempt from
     registration under the U.S. Securities Act and applicable state securities
     laws.

6.   The Underwriters acting through a U.S. registered broker dealer affiliate,
     may offer the Treasury Units and Secondary Shares in the United States only
     to offerees with respect to which any of the Underwriters has a
     pre-existing relationship and has reasonable grounds to believe are
     Qualified Institutional Buyers and immediately prior to making any such
     offer and, based on the institutional accredited investor certificates
     attached as a schedule to the Subscription Agreement for Purchasers
     purchasing as Qualified Institutional Buyers, had reasonable grounds to
     believe and did believe that each offeree was a Qualified Institutional
     Buyer, and on the date hereof, they continue to believe that each U.S.
     Purchaser is a Qualified Institutional Buyer.

7.   Prior to any sales of Treasury Units or Secondary Shares in the United
     States, they shall cause each U.S. Purchaser thereof to sign and deliver a
     Subscription Agreement containing such representations, warranties and
     acknowledgements as may be necessary to ensure compliance with U.S.
     securities laws.

8.   Prior to completion of any sale to the Closing Time, they will provide the
     Company and the Selling Shareholders with a list of all purchasers of the
     Treasury Units and Secondary Shares in the United States.

9.   At least one business day prior to the Closing Time, they will provide the
     Company and the Selling Shareholders with a list of all purchasers of the
     Treasury Units and Secondary Shares in the United States.

10.  They will inform, and cause the U.S. registered broker dealer affiliate to
     inform, all purchasers of the Treasury Units and Secondary Shares in the
     United States that the

                                       37
<PAGE>
     Treasury Units and Secondary Shares have not been and will not be
     registered under the U.S. Securities Act and are being sold to them without
     registration under the U.S. Securities Act in reliance on Rule 506 of
     Regulation D, in the case of Treasury Units and Rule 144A, in the case of
     Secondary Shares.

11.  The Underwriters agree that at the Closing Time, they, together with the
     U.S. registered broker dealer affiliate, will provide a certificate,
     substantially in the form of Annex I to this Exhibit A, relating to the
     manner of the offer and sale of the Treasury Units and the Secondary Shares
     in the United States.

REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY

The Company represents, warrants, covenants and agrees that:

1.   The Company is a Foreign Issuer within the meaning of Regulation S and
     reasonably believes that there is no Substantial U.S. Market Interest in
     the Treasury Units.

2.   The Company is not, and as a result of the sales of the Treasury Units
     contemplated hereby will not be, an "investment company" as defined in the
     United States Investment Company Act of 1940, as amended.

3.   Except with respect to offers and sales within the United States to
     accredited investors (within the meaning of Rule 501(a) of Regulation D)
     who are Qualified Institutional Buyers, in reliance upon any exemption from
     registration under Regulation D, neither the Company nor any of its
     affiliates, nor any person acting on its behalf, has made or will make: (A)
     any offer to sell, or any solicitation of an offer to buy, any Treasury
     Units to a U.S. Person or a person in the United States; or (B) any sale of
     Treasury Units unless, at the time the buy order was or will have been
     originated, the purchaser is (i) outside the United States or (ii) the
     Company, its affiliates, and any person acting on their behalf reasonably
     believes that the purchaser is outside the United States.

4.   During the period in which the Treasury Units are offered for sale, neither
     it nor any of its affiliates, nor any person acting on its or their behalf
     (i) has engaged in or will engage in any form of general solicitation or
     general advertising (as those terms are used in Regulation D) with respect
     to offers or sales of the Treasury Units in the United States, including
     advertisements, articles, notices or other communications published in any
     newspaper, magazine or similar media, or broadcast over radio, or
     television, or any seminar or meeting whose attendees have been invited by
     general solicitation or general advertising; or (ii) or in any manner
     involving a public offering within the meaning of Section 4(2) of the U.S.
     Securities Act.

5.   Except with respect to the offer and sale of the Treasury Units offered
     hereby and offers and sales of Common Shares to accredited investors only
     pursuant to the Company's employee benefit plans in accordance with Rule
     506 of the U.S. Securities Act, the Company has not, for a period of six
     months prior to the date hereof sold, offered for sale or solicited any
     offer to buy any of its securities in the United States.

                                       38
<PAGE>
6.   The Treasury Units satisfy the requirements set out in Rule 144A(d)(3) of
     the U.S. Securities Act.

7.   So long as any Treasury Units and Secondary Shares which have been sold in
     the United States are outstanding and are "restricted securities" within
     the meaning of Rule 144(a)(3) under the U.S. Securities Act, the Company
     shall either: (i) furnish to the SEC all information required to be
     furnished in accordance with Rule 12g3-2(b) under the U.S. Exchange Act;
     (ii) file reports and other information with the SEC under Section 13 or
     Section 15(d) of the U.S. Exchange Act; or (iii) in the event it is not
     exempt from reporting pursuant to Rule 12g3-2(b) nor subject to Section 13
     or Section 15(d) of the U.S. Exchange Act, furnish to any holder of the
     Treasury Units and any prospective purchaser of the Treasury Units
     designated by such holder, upon request of such holder, the information
     required to be delivered pursuant to Rule 144A(d)(4) under the U.S.
     Exchange Act (so long as such requirement is necessary in order to permit
     holders of the Treasury Units to effect resales under Rule 144A).

8.   Neither the Company, nor any of its affiliates, nor any person acting on
     its or their behalf, has paid or will pay any commission or other
     remuneration, directly or indirectly for soliciting the exercise of the
     Warrants.

9.   The Corporation will use its commercially reasonable efforts to qualify as
     a "foreign issuer" for a period of 24 months after the Closing Date.

REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLING SHAREHOLDERS

The Selling Shareholders represent, warrant, covenant and agree that:

1.   Except with respect to offers and sales to Qualified Institutional Buyers
     within the United States in reliance upon any exemption from registration
     under Rule 144A, neither the Selling Shareholders nor any of their
     affiliates, nor any person acting on its behalf, has made or will make: (A)
     any offer to sell, or any solicitation of an offer to buy, any Secondary
     Shares to a U.S. Person or a person in the United States; or (B) any sale
     of Secondary Shares unless, at the time the buy order was or will have been
     originated, the purchaser is (i) outside the United States or (ii) the
     Selling Shareholders their affiliates, and any person acting on their
     behalf reasonably believes that the purchaser is outside the United States.

2.   During the period in which the Secondary Shares are offered for sale,
     neither it nor any of its affiliates, nor any person acting on its or their
     behalf (i) has engaged in or will engage in any form of general
     solicitation or general advertising (as those terms are used in Regulation
     D) with respect to offers or sales of the Secondary Shares in the United
     States, including advertisements, articles, notices or other communications
     published in any newspaper, magazine or similar media, or broadcast over
     radio, or television, or any seminar or meeting whose attendees have been
     invited by general solicitation or general advertising; or (ii) or in any
     manner involving a public offering within the meaning of Section 4(2) of
     the U.S. Securities Act.

                                       39
<PAGE>
3.   The Secondary Shares satisfy the requirements set out in Rule 144A(d)(3) of
     the U.S. Securities Act.

                                       40
<PAGE>
                              ANNEX I TO SCHEDULE A

                            UNDERWRITERS' CERTIFICATE

In connection with the private placement in the United States of the units (the
"Treasury Units") and secondary shares (the "Secondary Shares") of Pine Valley
Mining Corporation (the "Company") with one or more U.S. qualified institutional
buyers (the "U.S. Purchasers") pursuant to one or more Subscription Agreements
dated as of March 22, 2005, the undersigned Sprott Securities Inc., on behalf of
the Underwriters referred to in the Underwriting Agreement dated March 22, 2005
among the Company, Mark T. Smith, the R. Templeton Smith Foundation, Sprott
Securities Inc., Salman Partners Inc. and Canaccord Capital Corporation (the
"Underwriting Agreement"), and Sprott Securities (U.S.A.) Limited who has signed
below in its capacity as placement agent in the United States for the
Underwriters (the "U.S. Placement Agent"), do hereby certify as follows:

     (i)  the U.S. Placement Agent is a duly registered broker or dealer with
          the United States Securities and Exchange Commission (the "SEC") and
          the National Association of Securities Dealers, Inc, ("NASD") and is
          in good standing with the NASD and the SEC on the date hereof;

     (ii) all offers and sales of Treasury Units and/or Secondary Shares in the
          United States were made to a maximum of 50 U.S. Purchasers by the U.S.
          registered broker-dealer affiliate;

     (iii) no written material other than the Subscription Agreement, was used
          in connection with the offer and sale of the Treasury Units and
          Secondary Shares in the United States;

     (iv) immediately prior to offering Treasury Units and Secondary Shares to
          such offerees in the United States, we had reasonable grounds to
          believe and did believe that each offeree was an qualified
          institutional buyer (a "Qualified Institutional Buyer") (as defined in
          Rule 144A adopted by the US Securities and Exchange Commission under
          the United States Securities Act of 1933 (the "U.S. Securities Act"))
          and, on the date hereof, we continue to believe that each U.S. person
          purchasing Treasury Units and/or Secondary Shares through or from us
          is a Qualified Institutional Buyer;

     (v)  no form of general solicitation or general advertising (as those terms
          are used in Regulation D under the U.S. Securities Act) was used, nor
          will be used, by us or our representatives, including advertisements,
          articles, notices or other communications published in any newspaper,
          magazine or similar media or broadcast over radio or television, or
          any seminar or meeting whose attendees had been invited by general
          solicitation or general advertising, in connection with the offer or
          sale of the Treasury Units and Secondary Shares in the United States
          or to U.S. persons;

     (vi) the offering of the Treasury Units and Secondary Shares in the United
          States has been conducted by the Underwriters through the U.S.
          Placement Agent in

                                       41
<PAGE>
          accordance with the Underwriting Agreement and all applicable U.S.
          broker-dealer requirements; and

     (vii) (vii) prior to the sale of Treasury Units and the Secondary Shares in
          the United States pursuant to Rule 144A, we caused each U.S. purchaser
          to execute a Subscription Agreement which includes a term sheet and
          containing such representations, warranties and acknowledgements as
          may be necessary to ensure compliance with U.S. securities laws.

Terms used in this certificate have the meanings given to them in the
Underwriting Agreement unless defined herein.

DATED this 22nd day of March, 2005

SPROTT SECURITIES INC.                     SPROTT SECURITIES (U.S.A.) LIMITED

By:                                        By:
    ------------------------------------       ---------------------------------
    Authorized Signing Officer                 Authorized Signing Officer

                                       42
<PAGE>
                                  SCHEDULE "B"

                       OUTSTANDING CONVERTIBLE SECURITIES

A.   Director Stock Options -- December 13, 2001

     Effective December 13, 2001, the Company granted director stock options to
purchase up to an aggregate of 1,050,000 Common shares exercisable for a period
of five years ending on December 12, 2006 at a price of $0.90, of which the
following remain outstanding:

<TABLE>
<CAPTION>
Name          No. of Shares
----          -------------
<S>           <C>
Mark Fields      300,000
</TABLE>

B.   Director Stock Options -- April 29, 2002

     Effective April 29, 2002, the Company granted director stock options to
purchase up to an aggregate of 400,000 Common shares exercisable for a period of
five years ending on April 28, 2007 at a price of $0.90, of which the following
remain outstanding:

<TABLE>
<CAPTION>
Name             No. of Shares
----             -------------
<S>              <C>
Mark Smith          150,000
Clay Gillespie      100,000
</TABLE>

     These options were approved by the TSX Venture Exchange on May 21, 2002.

C.   Private Placement Warrants -- April 16, 2003

On April 16, 2003, the Company issued private placement warrants to purchase
5,500,000 Common shares in the capital of the Company exercisable for a term of
two years ending on April 16, 2005 at a price of $0.25 per share, of which the
following remain outstanding:

<TABLE>
<CAPTION>
Name              No. of Shares
----              -------------
<S>               <C>
Bazamakijo Pty.
   Limited          1,100,000
</TABLE>

D.   Director Stock Option -- August 12, 2003

     Effective August 12, 2003, the Company granted to Gord Fretwell, pursuant
to the terms of the Company's Share Option Plan, a director stock option to
purchase up to 100,000 Common shares exercisable for a period of five years
ending on August 12, 2008 at a price of $0.29 per share, of which 10,000 remain
unexercised.

                                       43
<PAGE>
E.   Employee and Consultant Stock Options -- April 23, 2004

     Effective April 23, 2004, pursuant to the Company's Share Option Plan, the
Company granted employee and consultant stock options to purchase up to an
aggregate of 85,000 Common shares exercisable for a period of five years ending
on April 23, 2009 at a price of $1.01, of which the following remain
outstanding:

<TABLE>
<CAPTION>
Name                   No. of Shares
----                   -------------
<S>                    <C>
Lei Wang, (employee)       35,000
</TABLE>

F.   Employee Stock Option -- July 8, 2004

     Effective July 8, 2004, the Company granted to Gail MacLaren an employee
stock option to purchase 100,000 Common shares exercisable for a period of five
years ending on July 8, 2009 at a price of $1.56 per share. This option will
vest and may be exercised as follows: (a) 25,000 shares on the date of grant
(July 8, 2004), (b) 25,000 shares on July 8, 2005; and (c) 50,000 shares on July
8, 2006, and, should a change of control occur of the Company, then all
remaining shares shall vest upon the change of control. This option has been
exercised as to 25,000 shares on December 2, 2004.

G.   Director Stock Option -- September 24, 2004

     Effective September 24, 2004, the Company granted to Jeff Fehn a director
stock option to purchase 950,000 Common shares exercisable for a period of five
years ending on September 24, 2009 at a price of $2.30 per share. This option
will vest and may be exercised as follows: (a) 310,000 shares on the date of
grant (September 24, 2004), and (b) 80,000 shares on each of November 30, 2004,
February 28, 2005, May 31, 2005, August 31, 2005, November 30, 2005, February
28, 2006, May 31, 2006 and August 31, 2006.

H.   Senior Officer and Employee Stock Options -- February 14, 2005

     Effective February 14, 2005, pursuant to the Company's Share Option Plan,
the Company granted senior officer and employee stock options to purchase up to
an aggregate of 400,000 Common shares exercisable for a period of five years
ending on February 14, 2010 at a price of $5.60 per share as follows:

<TABLE>
<CAPTION>
Name             Type of Option   No. of Shares
----             --------------   -------------
<S>              <C>              <C>
Martin Rip(1)    Senior Officer      300,000
Roy Fougere(2)      Employee         100,000
</TABLE>

NOTES:

(1)  This option vests as to 37,500 shares on May 14, 2005 and 37,500 shares
     every three months thereafter.

(2)  This option vests as to 12,500 shares on May 14, 2005 and 12,500 shares
     every three months thereafter.

                                       44
<PAGE>
I.   Director Stock Options -- March 9, 2005

     Effective March 9, 2005, pursuant to the Company's Share Option Plan, the
Company granted director stock options to purchase up to an aggregate of 750,000
Common shares exercisable for a period of five years ending on March 9, 2010 at
a price of $5.30 per share as follows:

<TABLE>
<CAPTION>
Name                  No. of Shares   Date of Exercise   No. of Shares Exercised
----                  -------------   ----------------   -----------------------
<S>                   <C>             <C>                <C>
Graham Mackenzie(1)      500,000
Jeffrey Fehn(2)          250,000
</TABLE>

NOTES:

(1)  This option vests as to 62,500 shares on June 1, 2005 and 62,500 shares
     every three months thereafter.

(2)  This option vests as to 31,250 shares on June 1, 2005 and 31,250 shares
     every three months thereafter.

Director Stock Options -- March 17, 2005

Effective March 17, 2005, pursuant to the Company's Share Option Plan, the
Company granted director stock options to purchase up to an aggregate of 300,000
Common shares exercisable for a period of five years ending on March 17, 2010 at
a price of $5.31 per share to Sam Yik( I).

NOTES:

(1)  This option vests as to 37,500 shares on June 16, 2005 and 62,500 shares
     every three months thereafter.

                                       45

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