Document:

exv10w2

 

Exhibit 10.2

Mr. Notary:

Please enter in your Registry of Public Deeds one recording the Option
Agreement and the Lease Agreement entered into by and between BEAR CREEK MINING
COMPANY – SUCURSAL DEL PERU, registered in entry 1, file No 41289 of the Public
Mining Registry, duly represented by it’s general manager Andrew T. Swarthout,
identified with foreign identity card N114755, whose faculties are registered
as entry 1, file 41289, domiciled at calle Monteflor No 460, Urbanización Valle
Hermoso, Santiago de Surco, Lima 33, hereinafter referred to as “OPTIONEE”; on
one side; and, on the other side JULIO CÉSAR HUERTA DEPAZ, domiciled at Av.
Carlos Izaguirre No. 1000, Urbanización Las Palmeras, Los Olivos, Lima 39,
identified with DNI No10294911, single, hereinafter referred to as the
“TITLEHOLDER”; on the following terms and conditions:

RECITALS

WHEREAS:

	1.	 	The Titleholder, as the unique and exclusive concessionaire, has agreed
to grant to the Optionee an exclusive and irrevocable option to acquire
100% of the mining concessions namely Carola JCE, code 01-02439-99,
Paraíso Minero IX, code 01-00157-01, Paraíso Minero X, code 01-00210-01
and Paraíso Minero XII, code 01-00344-01, within a maximum thirty-six
month term.
	 
	2.	 	Together with this exclusive and irrevocable option to acquire, the
Titleholder has agreed lease the mining concessions Carola JCE, code
01-02439-99, Paraíso Minero IX, code 01-00157-01, Paraíso Minero X, code
01-00210-01 and Paraíso Minero XII, code 01-00344-01 to the Optionee, for
exploration purposes and for the same term.

NOW AND THEREFORE, the Parties have agreed as follows:

	1.	 	FIRST: DEFINITIONS
	 
	 	 	For the purposes hereof and of the preceding recitals, the following words
and expressions shall have the following meanings:
	 
	1.1	 	“Exhibits”, means Exhibit “A” and “B” of the agreement hereof.
	 
	1.2	 	“Deposits”, means the sums of money that will be delivered to the
Titleholder in virtue of the option agreement, pursuant to Article 1480
and followings of the Peruvian Civil Code, which shall be deducted in full
and immediately from the Transfer Price if the Optionee exercises the
Option.

 

 

	1.3	 	“Mineral Rights”, means the following mining concessions:

	 	a)	 	Carola JCE, code 01-02439-99, with an extent of 200 hectares,
located in the district of Ocaña, province of Lucanas, department of
Ayacucho, which title to mining concession granted to Julio César
Huerta Depaz was approved by resolution RJ No 01267-2000-RPM, issued
by the Public Mining Registry on April 3, 2000, recorded on entry 1,
file 301060 of the Public Mining Registry.
	 
	 	b)	 	Paraíso Minero IX, code 01-00157-01, with an extent of 100
hectares, located in the district of Ocaña, province of Lucanas,
department of Ayacucho, which title to mining concession granted to
Julio César Huerta Depaz was approved by resolution RJ No
00285-2001-INACC/J issued by the National Institute of Mining
Concessions and Cadastre on May 25, 2001.
	 
	 	c)	 	Paraíso Minero X, code 01-003444-01, with an extent of 100
hectares, located in the district of Nazca, province of Nazca,
department of Ica, which title to mining concession granted to Julio
César Huerta Depaz was approved by resolution RJ No
00471-2001-INACC/J issued by the National Institute of Mining
Concessions and Cadastre on June 28, 2001.
	 
	 	d)	 	Paraíso Minero XII, code 01-00344-01, with an extent of 300
hectares, located in the district of Ocaña, province of Lucanas,
department of Ayacucho, which title to mining concession granted to
Julio César Huerta Depaz was approved by resolution RJ No
00553-2001-INACC/J, issued by the National Institute of Mining
Concessions and Cadastre on July 18, 2001.

	1.4	 	“Agreement”, means this document that contains the Option to Acquire and
Mining Lease Agreements, its Exhibits, as well as any amendments,
clarifications or additions thereto that the Parties may agree from time
to time.
	 
	1.5	 	“Lease Agreement”, means the mining lease agreement relating to the
Mineral Rights, and any amendments, clarifications, or additions thereto
that the Parties may agree from time to time pursuant to Article 166 of
the General Mining Act.
	 
	1.6	 	“Option Agreement”, means the option to acquire the Mineral Rights, and
any amendments, clarifications, or additions thereto that the Parties may
agree from time to time pursuant to Article 165 of the General Mining Act.

2

 

	1.7	 	“Transfer Agreement”, means the contract to be drafted in the form of
Exhibit B hereto, to formalize the transfer of the Mineral Rights from the
Titleholder to the Optionee, subject to exercise of the Option, whereby
the Optionee becomes the sole and exclusive titleholder of 100% of the
Mineral Rights.
	 
	1.8	 	“Dollars” or “US$”, means the currency of legal tender in the United States of America.
	 
	1.9	 	“Force Majeure”, has the meaning set out in sub-section 6.3
	 
	1.10	 	 “Confidential Information”, has the meaning set out in sub-section 6.7
	 
	1.11	 	“Land Act” means the Law regulating Private Investment in the Development
of Economic Activities in Lands of the National Territory and Peasant and
Native Communities, Law No. 26505, enacted July 18, 1995, and its
regulations, amendments, additions, substitutions, and related laws.
	 
	1.12	 	“General Mining Act” means the Consolidated General Mining Act, approved
by Supreme Decree 014-92-EM dated June 2, 1992, and any regulations,
amendments, additions, substitutions, and related laws.
	 
	1.13	 	“Notice” means any notice, request, order, demand, offer, requirement, or
other communication authorized or required to be made under the Option
Agreement or the Lease Agreement, as set out in sub-section 6.5.
	 
	1.14	 	“Option” means the exclusive, irrevocable and indivisible option granted
to the Optionee according to the terms of the Option Agreement, whereby
the Optionee is entitled to acquire, at its own discretion, 100% of one,
some or all the mining concessions that comprise the Mineral Rights.
	 
	1.15	 	“Optionee” means Bear Creek Mining Company, Sucursal del Perú, or its
successor.
	 
	1.16	 	“Party” or “Parties” means the Titleholder and the Optionee, and any
other person who may acquire any rights under the Option Agreement and/or
the Lease Agreement.
	 
	1.17	 	“Lease Term”, means the term of the Lease Agreement, during which the
Optionee is entitled to carry out exploration activities in accordance
with section 5, including any extension in accordance with sub-sections
4.2 and 6.3.

3

 

	1.18	 	“Option Term” means the term of the Option, during which the Optionee may
exercise the Option in accordance with section 3.3, including any
extension of this term in accordance with sub-sections 4.2 and 6.3.
	 
	1.19	 	“Transfer Price” has the meaning set out in sub-section 3.2.
	 
	1.20	 	“Environmental Regulations” mean the Environmental Regulations for Mining
Exploration Activities approved by Supreme Decree No. 038-98-EM and
published in the official gazette El Peruano on November 30, 1998, and its
extensions, amendments, and related regulations.
	 
	1.21	 	“Titleholder” means Julio César Huerta Depaz.

SECOND: REPRESENTATIONS AND WARRANTIES

	2.1	 	The Titleholder hereby represents and warrants that:

	 	a)	 	At the date of signing this Agreement, the Titleholder holds
the Mineral Rights; that the Mineral Rights are in force, free from
encumbrances, liens, overlapping and oppositions due to prior
existing mineral rights, and there is no legal or extra-judicial
process or agreement publicly recorded or not that affects or limits
the free transferability of the Mining Rights, or the execution of
the Option Agreement or the Lease Agreement; that the License Fees
(“Derecho de Vigencia”) for the years 1999, 2000 and 2001, as the
case may be, have been duly paid, having the Titleholder complied
with all the formal obligations applicable to the Mineral Rights
under the General Mining Act and other applicable laws;
	 
	 	b)	 	In the ordinary course of its business relating to the Mineral
Rights and during the performance of exploration and/or exploitation
activities within the area of the Mineral Rights, the Titleholder has
complied with all the necessary legal formalities, and has not
infringed any law, regulation or norm relating to the exercise of
mining activities as concession holder, nor infringed any
environmental regulation; and that there are no adverse environmental
conditions that affect or may affect the Mineral Rights as a result
of its past or present activities.
	 
	 	c)	 	If title to the Mineral Rights were defective, deficient, or
contained limitations restricting the free transfer of the Mineral
Rights, the Optionee shall have the right to institute and pursue, at
the cost and account of the Titleholder, every legal process that may
be necessary to cure such defects or deficiencies, without incurring
any liability, having the Optionee the

4

 

	 	 	 	right to deduct from the deposits, any expenses effectively incurred
to defend the title. In any event, the delivery of Deposits under
sub-section 3.4 shall be suspended until the defect or deficiency is
finally settled.
	 
	 	d)	 	During the Option Term, the Titleholder shall not, by action or
inaction, permit or cause any rights of creditors, legal or
extra-judicial actions, liens, charges, or other real or personal
rights to be established or maintained over the Mineral Rights, or
any part or appurtenance thereof, that may affect the Mineral Rights
or this Agreement; nor put at risk the validity, existence, or title
to the Mineral Rights.
	 
	 	e)	 	The Titleholder will defend and hold the Optionee harmless and
free from any responsibility, obligation, lost, costs, expenses,
damages and demands, including without limitation damages to third
persons, or to property, reclamation costs of damages caused to the
environment and third parties, that may result from the activities
carried out in the Mineral Rights and/or in relation to them, prior
to the execution of this Agreement; and
	 
	 	f)	 	At the time of signing this Agreement and/or executing its
obligations under the Agreement, the Titleholder does not violate,
infringe and/or breaches any other agreement, contract or obligation
with third persons or the Peruvian State.

	2.2	 	The Optionee hereby represents and warrants that:

	 	a)	 	It is a branch of Bear Creek Mining Company, established in
Peru in accordance with the applicable Peruvian laws; and
	 
	 	b)	 	The Optionee has no impediment to execute this Agreement.

THIRD: OPTION AGREEMENT

	3.1	 	Option Agreement
	 
	 	 	Pursuant to Article 165 of the General Mining Act, the Titleholder grants
the Optionee an exclusive and irrevocable option to acquire one hundred
percent (100%) of one, some or all of the Mineral Rights (the “Option”),
during the term provided under sub-section 3.3. The option to acquire the
Mineral Rights includes all of the Mineral Rights’ parts and appurtenances
as well as everything that de facto or de lure pertains thereto, whether
within or outside their external boundaries, without demanding any payment
other than the agreed herein on these or other accounts.

5

 

	3.2	 	Transfer Price
	 
	 	 	The consideration for the transfer of the Mineral Rights is US$ 610,000.00
(six hundred and ten thousand Dollars) (the “Transfer Price”). All
amounts previously delivered as Deposits pursuant to sub-section 3.4 shall
be deducted from the Transfer Price.
	 
	3.3	 	Option Term

	 	3.3.1	 	The term of the Option is thirty-six months from the date on
which the formal deed that may arise from this minute is signed by
both Parties (the “Option Term”).
	 
	 	3.3.2	 	The Option Term is mandatory for the Titleholder and voluntary
for the Optionee. The Optionee may therefore terminate the Option at
any time by giving Notice of termination to the Titleholder via a
public notary.

	3.4	 	Deposits (“Arras de Retractación”)

	 	3.4.1	 	The Optionee undertakes to give as Deposits to the Titleholder the following amounts:
	 

	 	a) US $29,000	 	On the signing date of this document, with
no more proof that the signature of the Titleholder at the end
of this document.
	 
	 	b) US $40,000	 	On the day following the first six months
counted as of the date of signing of the public deed that will
arise from this private document.
	 
	 	c) US $100,000	 	On the day following the first
anniversary counted as of the date of signing the public deed
that will arise from this private document.
	 
	 	d) US $200,000	 	On the day following the second
anniversary counted as of the date of signing the public deed
that will arise from this private document.

	 	 	If the Optionee does exercise the Option, the Deposits
delivered to the Titleholder under this sub-section 3.4.1, shall
be deducted in full and immediately from the Transfer Price.

6

 

	 	3.4.2	 	Waiver of the right of withdrawal
	 
	 	 	 	The Titleholder hereby waives its right to withdraw its offer
pursuant to Article 1482 of the Peruvian Civil Code.
	 
	 	3.4.3	 	Requirements for Making the Deposits
	 
	 	 	 	The Deposits referred to in sub-sections 3.4.1 (b), 3.4.1 (c) and
3.4.1 (d) shall be made if accrued during the Option Agreement, and
provided the Agreement is in force.
	 
	 	3.4.4	 	Consequences of the Failure to Exercise the Option
	 
	 	 	 	Failure by the Optionee to exercise the Option shall cause the
Optionee to lose the Deposits in favor of the Titleholder. The
Deposits include the VAT and the Municipal Promotion Tax, as well as
any other value added tax or sales tax that may replace them.
	 
	 	3.4.5	 	Indivisibility of the Deposits
	 
	 	 	 	The Optionee and the Titleholder hereby declare that the Deposits
referred to in sub-section 3.4.1 will only accrue on the specified
dates, and are indivisible. No claim for delivery of the Deposits or
portions thereof based on the number of days, weeks or months elapsed
shall be therefore admitted.
	 
	 	 	 	Failure by the Optionee to deliver the Deposits under sub-section
3.4.1 will entitle the Titleholder to deliver a Notice to the
Optionee by a public notary, detailing the Optionee’s default. The
Optionee may cure the default within seven (7) calendar days
following receipt of the Notice. If the Optionee does not cure the
default, the Option will be deemed terminated, except for sub-section
6.3.

	3.5	 	Authorization
	 
	 	 	The Titleholder authorizes the Optionee to carry out evaluation works in
the area of the Mineral Rights, in order to allow the Optionee to decide
whether to exercise the Option or not. For these purpose, the Titleholder
authorizes the Optionee access to the area of the Mineral Rights and to
carry out such activities as deemed appropriate for the evaluation of the
Mineral Rights.

7

 

	3.6	 	Exercise of the Option

	 	3.6.1	 	The Optionee shall exercise the Option at any time during the
Option Term by giving Notice of its decision to exercise the Option
to the Titleholder, via public notary.
	 
	 	3.6.2	 	Upon the exercise of the Option, the Mineral Rights shall be
automatically transferred to the Optionee. The Parties therefore
agree that the Option Notice delivered by the Optionee will effect
the transfer of the Mineral Rights and will constitute sufficient
title to publicly register the transfer of the Mineral Rights on
behalf of the Optionee.
	 
	 	3.6.3	 	Without prejudice of sub-section 3.6.2, the Titleholder
unconditionally and irrevocably undertakes to issue and deliver all
public and private documents that may be required to formalize the
transfer of the Mineral Rights in favor of the Optionee, within a
maximum of twenty (20) calendar days following receipt of the Notice
thereof. Any delay by the Titleholder in signing the documents that
the Optionee may require upon the exercise of the Option, shall
automatically extend the Lease Term referred to in sub-section 5.3,
until such time as the Titleholder signs the documents in question.

	3.7	 	Payment of the Transfer Price
	 
	 	 	The balance of the Transfer Price shall be equal to the difference between
the Transfer Price and the aggregate Deposits delivered to the Titleholder
by the Optionee. This amount shall be paid to the Titleholder at the time
the public deed containing the Transfer Agreement is signed by the
Parties.
	 
	3.8	 	Termination of the Option

	 	3.8.1	 	The Optionee may terminate the Option at any time during the
Option Term by giving a termination Notice to the Titleholder via
public notary, as provided under sub-section 3.3.2. Upon termination
of the Option Agreement, the delivery of Deposits pursuant to
sub-section 3.4 and any other right or obligation under this
Agreement shall cease.
	 
	 	3.8.2	 	Upon delivery of the termination Notice, or failure to
exercise the Option within the Option Term, the Titleholder shall
issue and deliver a receipt for the aggregate amount of Deposits
received from the Optionee. The receipt shall be issued within
twenty (20) days following delivery of the termination Notice or on
the date of signing of the public deed that formalizes the
termination of the Option, whichever occurs first.

8

 

FOURTH: CONTRACTS FOR ACCESS TO SURFACE LANDS

	4.1	 	Pursuant to article 7 of the Land Act, the Optionee will enter into
agreements with owners of surface lands located within or outside the
external boundaries of the Mineral Rights that may be deemed necessary to
obtain access to the Mineral Rights for performance of the exploration
works.
	 
	4.2	 	Any delay or impediment for entering into these agreements is a cause of
Force Majeure to be communicated to the Titleholder as soon as reasonably
possible. This will allow the Optionee to suspend the Option Term and the
Lease Term referred to in sub-sections 3.3 and 5.34 of this Agreement,
respectively. The Titleholder agrees to provide its full support to the
Optionee insofar for this purpose.

FIFTH: LEASE AGREEMENT

	5.1	 	Lease of the Mineral Rights

	 	5.1.1	 	Pursuant to Article 166 of the General Mining Act, the
Titleholder hereby exclusively leases the Mineral Rights to the
Optionee, for exploration purposes and subject to the condition
detailed in sub-section 5.6.
	 
	 	5.1.2	 	By the lease, the Optionee is assigned with all of the
Titleholder’s rights as concession holder of the Mineral Rights,
being the Optionee entitled to determine, at its own discretion, the
programmes and budgets.

	5.2	 	Consideration for the Lease
	 
	 	 	The consideration for the lease of the Mineral Rights is US$1,000.00 (one
thousand Dollars), including VAT. The Optionee will pay the consideration
for the lease at the time of signing this Agreement, with no more proof
that the Titleholder’s signature in this document.
	 
	5.3	 	Lease Term

	 	5.3.1	 	The term of the mining lease is thirty-six (36) months counted as of the date on which the condition under sub-section 5.6 is verified (“Lease Term”).

9

 

	 	5.3.2	 	The Lease Term is mandatory for the Titleholder and voluntary
for the Optionee. The Optionee may therefore terminate the Lease
Agreement at any time by giving Notice of its decision to the
Titleholder via public notary.
	 	 	 	 
	 	 	 	Upon termination of the Lease Agreement, the Optionee will remove all
facilities, tubing and piping, improvements, machinery, equipment,
tools, supplies, constructions, and other assets installed or placed
in the Mineral Rights, within six (6) months following receipt of the
termination Notice.

	5.4	 	Rights and Obligations of the Optionee under the Lease Agreement

	 	5.4.1	 	Exploration Works
	 
	 	 	 	The Optionee is entitled to:
	 

	 	(a)	 	Start and carry out exploration works at any time in
accordance with the programs and budgets to be determined by the
Optionee, and apply for the necessary permits and approvals
before the competent authorities.
	 
	 	(b)	 	Apply for or acquire mineral rights in areas adjacent
to the Mineral Rights, which, if applied for or acquired, shall
not be part of this Agreement.
	 
	 	(c)	 	Obtain from the Mineral Rights the quantities of ores
or other materials that may be deemed appropriate for the
evaluation of the Mineral Rights or for the completion of a
feasibility study, being authorized to dispose of them freely,
at its own discretion. As regards to the portions of cores
and/or samples obtained from drilling operations, the Optionee
is authorized to freely dispose of up to fifty percent (50%)
thereof, keeping control thereof in accordance with the
provisions of the General Mining Act.
	 

	 	5.4.2	 	Environmental Obligations
	 
	 	 	 	The Optionee hereby agrees to comply with the Environmental
Regulations in the course of its exploration activities.
	 

10

 

	 	5.4.3	 	Licence Fees

	 	(a)	 	The Titleholder is responsible for payment of the
Licence Fees for the Mineral Rights for the years 1999, 2000 and
2001 inclusive.
	 
	 	(b)	 	The Optionee will pay the Licence Fees for the
Mineral Rights pursuant to article 59 of the Mining General Act,
while the Lease Agreement is in force.
	 

	 	5.4.4	 	Delivery of Documentation
	 
	 	 	 	The Optionee shall deliver copies of receipt of payment of the
Licence Fees and of the annual consolidated statement to the
Optionee. These documents shall be made available to the Titleholder
within thirty (30) days following delivery to the Ministry of Energy
and Mines.
	 
	 	5.4.5	 	The Titleholder may carry out mining works in the Mineral
Rights during the Option Term, prior agreement with the Optionee. The
mining works shall be carried out in a technical and planned manner
without interfering with the works of the Optionee, being fully
liable for all the works that it may carry out before the State and
third parties.

	5.5	 	Termination of the Lease
	 
	 	 	The Optionee may terminate the Lease Agreement at any time during the Lease
Term by giving Notice of its decision to the Titleholder via public notary,
pursuant to sub-section 5.3.2.
	 
	5.6	 	Condition

	 	5.6.1	 	It is a condition precedent to the Lease Agreement that either
of the following persons complete a report containing the geological
mapping of one or more mining concessions that comprise the Mineral
Rights, within a six (6) months following the date of signing the
public deed that will arise from this Agreement. Once the report has
been completed to the Optionee’s satisfaction, the Optionee shall
deliver a Notice to the Titleholder confirming compliance of the
condition precedent:
	 

	 	(i)	 	David Volkert
	 
	 	(ii)	 	César Ríos Caldas
	 
	 	(iii)	 	Wilberto Vásquez Estrada
	 

	 	5.6.2	 	By virtue of the Notice delivered by the Optionee, the
Optionee is hereby authorized to sign all the public and private
documentation that may be required, and to carry out all the
recording proceedings before the Public Registry to give publicity to
compliance with the condition imposed, pursuant to Exhibit “A”,
without requiring the Titleholder’s intervention.

11

 

SIXTH: COMMON PROVISIONS APPLICABLE TO THE OPTION AGREEMENT AND LEASE AGREEMENT

	6.1	 	Applicable Law
	 
	 	 	The Parties hereby agree to be bound by the terms and conditions of this
Agreement and, if needed, by the provisions of the General Mining Act and
the Civil Code.
	 
	6.2	 	Arbitration

	 	6.2.1	 	Any dispute, controversy or claim arising out of or relating
to the execution of the public and private documents relating to the
exercise of the Option and the subsequent formalization of the
transfer of the Mineral Rights shall be settled by the judges and
courts of the Judicial District of Lima, to which jurisdiction the
Parties hereby submit to.
	 
	 	6.2.2	 	Any dispute, controversy or claim arising out of or relating
to the Option Agreement and/or the Lease Agreement, the execution,
object, subscription, validity, interpretation, breach or termination
thereof, except as provided in sub-section 6.2.1, shall be settled by
arbitration of law in accordance with the applicable law. The ruling
shall be final and binding. All Notices relating to the arbitration
process, including the Notice of arbitration and the response
thereto, may be served as provided under sub-section 6.5 of this
Agreement.
	 
	 	6.2.3	 	There shall be one arbitrator appointed by the Parties within
thirty (30) calendar days after receipt of a Notice of arbitration.
If the Parties fail to agree on a single arbitrator within that term,
there shall be three arbitrators. Each Party will appoint one
arbitrator and the two arbitrators so appointed will elect the third
arbitrator, who will preside the arbitration tribunal.
	 
	 	6.2.4	 	If within thirty (30) calendar days after receipt of a Party’s
Notice of appointment of an arbitrator, the other Party has not
notified the first Party of its appointment of an arbitrator, or if
within thirty (30) calendar days of the appointment of the second
arbitrator the Parties have not reached an agreement on the third
arbitrator, the third arbitrator will be chosen by the National
Institute of Mining Petroleum and Energy Law (Instituto Nacional de
Derecho de Minería, Petróleo y Energía). This decision shall be final
and binding.

12

 

	 	6.2.5	 	As regards to any intervention of the judiciary that may be
required or specified in the applicable law, the Parties hereby
submit to the jurisdiction of the Judges and Courts of the Judicial
District of Lima — Cercado.

	6.3	 	Force Majeure

	 	6.3.1	 	All the obligations under the Option Agreement and/or the
Lease Agreement may be suspended, and the terms thereof shall be
extended, during any event of force majeure or Act of God
(indistinctly, “Force Majeure”) duly communicated to the other Party
by the affected Party. The Notice of force majeure shall contain
reasonably full particulars of the event of force majeure, the
reasons thereof, and estimated period of suspension. The affected
Party shall resume its obligations as soon as reasonably possible.
	 
	 	6.3.2	 	“Force Majeure” means any extraordinary, unforeseeable and
irresistible event which, even if foreseeable, is beyond the
reasonable control by the affected Party and that prevents, impedes,
or delays fulfillment by the affected Party of its obligations
hereunder, including, but not limited to, regional or national
strikes, acts of God, orders, mandates, instructions or resolutions
of government or governmental agencies restricting or affecting the
performance of the proposed work in the Mineral Rights, judicial,
administrative or arbitral decisions or resolutions of any rank or
hierarchy; inability to obtain on reasonably acceptable terms any
private or public exploration right, licenses, permits or
concessions; failure to obtain in reasonable terms any rights of
access pursuant to section 4, suspension or curtailment of the
exploration works due inability to exercise the access rights
pursuant to section 4, in reasonable terms for the Optionee;
suspension or curtailment of the activities to remedy or avoid an
actual or alleged, present or future, violation of the environmental
laws; delay in obtaining approval for the exploration project or the
environmental permit referred to under the Environmental Regulations;
acts of war, whether declared or undeclared, terrorism, riots,
commotion or civil war, disorders, seditions, insurrection or
rebellion, fires, explosions, earthquakes, natural disasters, storms,
floods, droughts, adverse climatological conditions other than those
considered normal.
	 
	 	6.3.3	 	Except as provided for below, any Party shall have the right
to terminate this Agreement if the period of Force Majeure extends
for more than a year. The Party who decides to terminate the Option
Agreement and the Lease Agreement given that the term of Force
Majeure continues for more than one year, shall notify its decision
to the other Party. If the Titleholder is the Party who decides to
terminate the Agreement (provided it does not

13

 

	 	 	 	contribute to the cause of the Force Majeure), the Optionee shall
have the right to exercise the Option within thirty (30) days
following receipt of Notice, pursuant to sub-section 3.6.

	6.4	 	Assignment — Authorizations
	 
	 	 	Pursuant to articles 1435 of the Civil Code and 166 of the General Mining
Act, the Optionee is hereby expressly authorized to assign its interest in
the Option Agreement and/or the Lease Agreement, in whole or in part, and
on the same terms and conditions hereof. In such case, the successor will
be subject to the same terms and conditions hereof.
	 
	6.5	 	Notices
	 
	 	 	All notices, offers, summons, petitions, and communications in general
(“Notice”) between the Parties in connection with the Option Agreement or
the Lease Agreement shall be in writing, delivered to the addresses
specified below, and considered effective on the date of reception,
receipt acknowledged, or on the date of delivery via notary. If not
received on a business day, the notice shall be considered received the
following business day. Any change of address, telephone, or facsimile
shall be communicated to the other Party via notary or with
acknowledgement of receipt five days prior thereto, otherwise any Notice
addressed to the former address shall be deemed delivered.

	 	 	 	 	 	 	 	 
	 	a)
	 	OPTIONEE:	 	BEAR CREEK MINING COMPANY SUCURSAL DEL PERÚ
	 
	Address:	 	Calle Monteflor No. 460, Urbanización Valle
Hermoso, Santiago de Surco, Lima 33 – Perú
	 
	Telephone:	 	(511) 3725765
	 
	Facsimile:	 	(511) 3728070
	 
	 	b)
	 	TITLEHOLDER:	 	JULIO CÉSAR HUERTA DEPAZ
	 
	Address:	 	Av. Carlos Izaguirre No. 1000, Urbanización
Las Palmeras, Los Olivos, Lima 39.
	 
	Telephone:	 	(511) 4850381

	6.6	 	Taxes
	 
	 	 	Each Party will be responsible for the applicable tax obligations.

14

 

	6.7	 	Confidentiality

	 	6.7.1	 	All the facts, reports, registers and other information of any
kind developed or acquired by the Titleholder as a result of the
performance of this Agreement shall be kept by the Titleholder as
strictly confidential (“Confidential Information”), and such
Confidential Information shall not be revealed or divulged in other
way to third Parties if there is no prior written consent from the
Optionee.
	 
	 	6.7.2	 	In the event that the Titleholder is required to disclose
Confidential Information to any competent governmental entity and/or
its dependencies, to the extent required by law or in response to a
legitimate request for such Confidential Information, the Titleholder
must immediately send Notice to the Optionee of the requirement and
its terms before the divulgation. The Optionee shall have the right
to object, to the agency concerned, to such disclosure and to seek
confidential treatment of any Confidential Information to be
disclosed.

	6.8	 	Expenditures
	 
	 	 	The Optionee shall bear all notarial and registration fees required to
formalize this Agreement into a public deed and to have it recorded with
the Public Registry.

Mr. Notary: Please add the legal formalities hereto and file notice to the
Public Mining Register for registration of this document. Signed in two
identical counterparts in Lima, on the 17th day of January, 2002.

BEAR CREEK MINING COMPANY, SUCURSAL DEL PERU

By: “Andrew Swarthout”                              

Position: General Manager

JULIO CÉSAR HUERTA DEPAZ

“Julio César Huerta Depaz”                       

15

 

EXHIBIT “A”

COMPLIANCE WITH THE CONDITION PRECEDENT

Mr. Notary:

Please enter in your Registry of Public Deeds one recording the Compliance of
the Condition Precedent, hereinafter referred to as the “Affidavit” issued and
delivered by BEAR CREEK MINING COMPANY – SUCURSAL DEL PERU, registered in entry
1, file No 41289 of the Public Mining Registry, duly represented by it’s
general manager Andrew T. Swarthout, identified with foreign identity card
N114755, whose faculties are registered as entry 1, file 41289, domiciled at
calle Monteflor No 460, Urbanización Valle Hermoso, Santiago de Surco, Lima 33,
hereinafter referred to as “OPTIONEE”; on the following terms and conditions:

	1.	 	BACKGROUND
	 
	1.1	 	On January 17, 2002, Julio César Huerta Depaz and the Optionee entered
into an Option and Lease Agreement with regard to the following mineral
rights, hereinafter referred to as “Mineral Rights”:

	 	a)	 	Carola JCE, code 01-02439-99, with an extent of 200 hectares,
located in the district of Ocaña, province of Lucanas, department of
Ayacucho, which title to mining concession granted to Julio César
Huerta Depaz was approved by resolution RJ No 01267-2000-RPM, issued
by the Public Mining Registry on April 3, 2000, recorded on entry 1,
file 301060 of the Public Mining Registry.
	 
	 	b)	 	Paraíso Minero IX, code 01-00157-01, with an extent of 100
hectares, located in the district of Ocaña, province of Lucanas,
department of Ayacucho, which title to mining concession granted to
Julio César Huerta Depaz was approved by resolution RJ No
00285-2001-INACC/J issued by the National Institute of Mining
Concessions and Cadastre on May 25, 2001.
	 
	 	c)	 	Paraíso Minero X, code 01-003444-01, with an extent of 100
hectares, located in the district of Nazca, province of Nazca,
department of Ica, which title to mining concession granted to

16

 

	 	 	 	Julio César Huerta Depaz was approved by resolution RJ No
00471-2001-INACC/J issued by the National Institute of Mining
Concessions and Cadastre on June 28, 2001.

	 	d)	 	Paraíso Minero XII, code 01-00344-01, with an extent of 300
hectares, located in the district of Ocaña, province of Lucanas,
department of Ayacucho, which title to mining concession granted to
Julio César Huerta Depaz was approved by resolution RJ No
00553-2001-INACC/J, issued by the National Institute of Mining
Concessions and Cadastre on July 18, 2001.

	1.2	 	Pursuant to sub-section 5.6 of the agreement referred to in sub-section
1.1, the Lease Agreement was entered into subject to the condition
precedent that either of the appointed persons, completes a report
containing the geological mapping of one or more mining concessions that
comprise the Mineral Rights, within a six (6) months following signing the
public deed that arose from the private document.
	 
	2.	 	PURPOSE OF THE AGREEMENT

	 	2.1	 	On XXXXX, XXXX completed and delivered the report containing
the geological mapping carried out on the Mineral Rights.
	 
	 	2.2	 	The Optionee acknowledged compliance with the condition
precedent by means of a Notice delivered to the Titleholder.
	 
	 	2.3	 	Pursuant to sub-section 5.6 of the Option and Lease Agreement
dated January 17, 2002, the Optionee issues and delivers this
document to give publicity to the completion of the condition
precedent pursuant to the Agreement entered into with Julio César
Huerta Depaz, and to give full effect to the lease agreement.

	3.	 	EXPENDITURES
	 
	 	 	The Optionee shall bear the cost of all the notarial and registration fees
required to formalize this agreement into a public deed and to have it
registered with the Public Registry.

Mr. Notary: Please add the legal introduction and conclusion, inserting the
resolution of the approval of the title to mining concession xxx, given by the
National Institute of Mining Concessions and Cadastre for its recording.

17

 

Lima, xxx

BEAR CREEK MINING COMPANY, SUCURSAL DEL PERÚ

18

 

EXHIBIT “B”

TRANSFER OF THE MINERAL RIGHTS

Mr. Notary:

Please enter in your Registry of Public Deeds the Transfer of Mineral Rights
entered into by and between BEAR CREEK MINING COMPANY – SUCURSAL DEL PERU,
registered as entry 1, file No 41289, of the Public Mining Registry, duly
represented by XXXXXX, whose faculties are duly registered with the Public
Registry, domiciled at Calle Monteflor No 460, Urbanización Valle Hermoso,
Santiago de Surco, Lima 33, hereinafter referred to as “OPTIONEE”; and on the
other side JULIO CÉSAR HUERTA DEPAZ, hereinafter referred to as “TITLEHOLDER”;
on the following terms and conditions:

FIRST: DEFINITIONS

For the purposes hereof and of the preceding recitals, the following words and
expressions shall have the following meanings:

	1.1	 	“Mineral Rights”, means the following mining concessions:

	 	a)	 	Carola JCE, code 01-02439-99, with an extent of 200 hectares,
located in the district of Ocaña, province of Lucanas, department of
Ayacucho, which title to mining concession granted to Julio César
Huerta Depaz was approved by resolution RJ No 01267-2000-RPM, issued
by the Public Mining Registry on April 3, 2000, recorded on entry 1,
file 301060 of the Public Mining Registry.
	 
	 	b)	 	Paraíso Minero IX, code 01-00157-01, with an extent of 100
hectares, located in the district of Ocaña, province of Lucanas,
department of Ayacucho, which title to mining concession granted to
Julio César Huerta Depaz was approved by resolution RJ No
00285-2001-INACC/J issued by the National Institute of Mining
Concessions and Cadastre on May 25, 2001.
	 
	 	c)	 	Paraíso Minero X, code 01-003444-01, with an extent of 100
hectares, located in the district of Nazca, province of Nazca,
department of Ica, which title to mining concession granted to Julio
César Huerta Depaz was approved by resolution RJ No
00471-2001-INACC/J issued by the National Institute of Mining
Concessions and Cadastre on June 28, 2001.

19

 

	 	d)	 	Paraíso Minero XII, code 01-00344-01, with an extent of 300
hectares, located in the district of Ocaña, province of Lucanas,
department of Ayacucho, which title to mining concession granted to
Julio César Huerta Depaz was approved by resolution RJ No
00553-2001-INACC/J, issued by the National Institute of Mining
Concessions and Cadastre on July 18, 2001.

	1.2	 	“Agreement”, means the Transfer Agreement of the Mineral Rights.
	 
	1.3	 	“Option and Lease Agreement”, means the Option to Acquire and Lease
Agreements, entered into by and between Bear Creek Mining Company –
Sucursal del Perú Julio César Huerta Depaz, dated January 17, 2002, its
exhibits, amendments, clarifications or periodical additions that may have
agreed from time to time.
	 
	1.4	 	“Dollars” or “US$”, means the currency of legal tender in the United
States of America.
	 
	1.5	 	“General Mining Act”, means the Consolidated General Mining Act, approved
by Supreme Decree 014-92-EM dated June 2, 1992, and any regulations,
amendments, additions, substitutions and related laws.
	 
	1.6	 	“Notice”, means any notice, request, order, demand, offer, requirement,
or other communication authorized or required to be made under this
Agreement, as set out in sub-section 6.5.
	 
	1.7	 	“Optionee” means Bear Creek Mining Company, Sucursal del Perú, or its
successor.
	 
	1.8	 	“Party” or “Parties” means the Titleholder and the Optionee, and any
other person who may acquire any rights under this Agreement.
	 
	1.9	 	“Transfer Price” has the meaning set out in sub-section 3.2.
	 
	1.10	 	“Titleholder” means Julio César Huerta Depaz.

SECOND: BACKGROUND

	2.1	 	The Titleholder is the sole and exclusive concession holder of the
Mineral Rights.
	 
	2.2	 	On January 17, 2002, the Optionee and the Titleholder entered into the
Option and Lease Agreement, whereby was granted the Optionee the right to
acquire, at its own discretion, one

20

 

	 	 	hundred percent (100%) of one, some or all the mining concessions that
comprise the Mineral Rights, during a thirty-six (36) month term. The
Parties agreed that the consideration for the transfer of the Mineral
Rights was six hundred ten thousand Dollars (US$610,000.00).
Simultaneously to the option to acquire, the Titleholder leased the
Mineral Rights for exploration purposes and for the same term, in favor
of the Optionee.
	 
	2.3	 	The Optionee has exercised its option to acquire the Mineral Rights.
Pursuant to sub-section 3.6 of the Option and Lease Agreement, the
Optionee delivered the Notice of exercise of the option via public
notary, which acknowledgment of receipt will be inserted in the public
deed that will arise from this document.

THIRD: PURPOSE OF THE AGREEMENT

Pursuant to Articles 164 and 165 of the General Mining Act, the Parties hereby
acknowledge the transfer of the Mineral Rights in favor of the Optionee,
including all its parts and appurtenances as well as everything that de facto
or de lure pertains thereto, whether within or outside the external boundaries
of the Mineral Rights, without demanding any payment other than the agreed
herein on these or other accounts.

FOURTH: TRANSFER PRICE

	4.1	 	Pursuant to section 3.2 of the Option and Lease Agreement, the
consideration for the transfer of 100% of the Mineral Rights, is the
amount of six hundred ten thousand Dollars (US$ 610,000.00).
	 
	4.2	 	Pursuant to sub-section 3.4.1 of the Option and Lease Agreement, the
Deposits delivered to the Titleholder are the aggregate amount of US$XXXX.
The balance of the Transfer Price to be paid to the Titleholder is
therefore US$XXXXX.

FIFTH: REPRESENTATIONS AND WARRANTIES

	5.1	 	The Titleholder hereby represents and warrants that:

	 	a)	 	On the date of this agreement, the Mineral Rights are in good
standing, free from any liens, encumbrances, charges, overlapping
and oppositions to prior existing mineral rights, and there is no
legal or extra-judicial order or agreement that affects or limits
their free transferability; that the License Fees (“Derecho de
Vigencia”) have been duly paid, having

21

 

	 	 	 	the Titleholder complied with all formal obligations applicable to
the Mineral Rights under the General Mining Act, and other applying
laws.
	 
	 	b)	 	That in the ordinary course of business relating to the Mineral
Rights or during the exploration and/or exploitation activities
carried out before the execution of the Option and Lease Agreement,
the Titleholder has not infringed any law, regulation or permit
relating to activities as concession holder, nor infringed any
environmental law or the health safety regulation applicable to the
Mineral Rights.
	 
	 	c)	 	That during the term of the Option and Lease Agreement, the
Titleholder has not agreed, permitted or disposed under any title, by
action or inaction, the constitution or maintenance of any creditor,
legal or extra-judicial order, lien, encumbrance or any other real or
personal right over the Mineral Rights, or over any part of them,
that may affect the Mineral Rights or this agreement; and has not
carried on activities of any kind in the Mineral Rights, or has
compromised the validity, existence or title to the Mineral Rights.
	 
	 	d)	 	That it will defend and hold the Optionee harmless of any
responsibility or obligation, lost, costs, expenses, damages and
demands, including, without limitation, damages to third persons,
damages to property, reclamation costs of damages caused to the
environment and third parties that may result from the activities
carried out by the Titleholder prior to the execution of the Option
and Lease Agreement.
	 
	 	e)	 	At the time of signing this Agreement and/or executing its
obligations under this Agreement, the Titleholder does not violate,
infringe and/or breaches any other agreement, contract or obligation
with third persons and that it has disposed of, transferred or
institute any lien or encumbrance over the Mineral Rights and that no
offer, counteroffer or negotiation with third parties has concluded
in a contract pursuant to Articles 1359 and 1376 of the Civil Code.
	 
	 	f)	 	That the Titleholder hereby agrees with the execution and
performance under the Option and Lease Agreement and with the terms
hereof.

	5.2	 	The Optionee hereby represents and warrants that it is a branch duly
established under the laws of Peru and that has full power and authority
to execute this Agreement.

SIXTH: OTHER PROVISIONS

	6.1	 	Applicable Law

22

 

	 	 	The Parties hereby agree to be bound by the terms and conditions of this
Agreement and, if needed, by the provisions of the General Mining Act and
the Civil Code.

	6.2	 	Notices
	 
	 	 	All notices, offers, summons, petitions, and communications in general
(“Notice”) between the Parties in connection with this Agreement shall be
in writing, delivered to the addresses specified below, and considered
effective on the date of reception, receipt acknowledged, or on the date
of delivery via notary. If not received on a business day, the notice
shall be considered received the following business day. Any change of
address, telephone, or facsimile shall be communicated to the other Party
via notary or with acknowledgement of receipt five days prior thereto,
otherwise any Notice addressed to the former address shall be deemed
delivered.

	 	 	 	 	 	 	 	 
	 	a)
	 	OPTIONEE:	 	BEAR CREEK MINING COMPANY SUCURSAL DEL PERÚ
	 
	Address:	 	Calle Monteflor No. 460, Urbanización Valle
Hermoso, Santiago de Surco, Lima 33 – Perú
	 
	Telephone:	 	(511) 3725765
	 
	Facsimile:	 	(511) 3728070
	 
	 	b)
	 	TITLEHOLDER:	 	JULIO CÉSAR HUERTA DEPAZ
	 
	Address:	 	Av. Carlos Izaguirre No. 1000, Urbanización
Las Palmeras, Los Olivos, Lima 39.
	 
	Telephone:	 	(511) 4850381

	6.3	 	Expenditures
	 
	 	 	The Optionee shall bear the cost of all the notarial and registration fees
required to formalize this agreement into a public deed and to have it
registered with the Public Registry.

Mr. Notary: Please add the legal introduction and conclusion, inserting the
Notice of exercise of the Option, hereto and file notice to the Public Mining
Register for registration of this document. Signed in two identical
counterparts in Lima, on the XXXX day of XXXXX, XXXX.

BEAR CREEK MINING COMPANY, SUCURSAL DEL PERU

23exv10w3

 

Exhibit 10.3

Mr. Notary:

Please enter in your Registry of Public Deeds one recording the Option
Agreement and the Lease Agreement entered into by and between BEAR CREEK MINING
COMPANY — SUCURSAL DEL PERU, registered in entry 1, file No 41289 of the
Public Mining Registry, duly represented by it’s general manager Andrew T.
Swarthout, identified with foreign identity card N114755, whose faculties are
registered as entry 1, file 41289, domiciled at calle Monteflor No 460,
Urbanización Valle Hermoso, Santiago de Surco, Lima 33, hereinafter referred to
as “OPTIONEE”; on one side; and, on the other side FELIPE BENICIO VERA
PALOMINO, identified with DNI No 29736017, and his wife ROSA JUANA PALOMINO
NEYRA, identified with DNI No 30770133, both domiciled at Pasillo Los Lirios,
Calle Los Lirios, Calle Los Geranios, Manzana F, Lote 9, El Eden de Lara, San
Martín de Socabaya, Arequipa, hereinafter collectively referred to as the
“TITLEHOLDER”; on the following terms and conditions:

RECITALS

WHEREAS:

	1.	 	The Titleholder, as the unique and exclusive concessionaire, has agreed
to grant to the Optionee an exclusive and irrevocable option to acquire
100% of the mining concessions namely Santa Rosa 94 de Ispacas, code
01-03058-94; Santa Rosa II 95 de Ispacas, code 01-09272-95 and Santa Rosa
III 95 de Ispacas, code 01-09273-95, within a maximum forty-eight month
term.
	 
	2.	 	Together with this exclusive and irrevocable option to acquire, the
Titleholder has agreed lease the mining concessions Santa Rosa 94 de
Ispacas, code 01-03058-94, Santa Rosa II 95 de Ispacas, code 01-09272-95,
and Santa Rosa III 95 de Ispacas, code 01-09273-95 to the Optionee, for
exploration purposes and for the same term.

NOW AND THEREFORE, the Parties have agreed as follows:

	1.	 	FIRST: DEFINITIONS
	 
	 	 	For the purposes hereof and of the preceding recitals, the following words
and expressions shall have the following meanings:
	 
	1.1	 	“Exhibits”, means Exhibit “A” of the agreement hereof.
	 
	1.2	 	“Deposits”, means the sums of money that will be delivered to the
Titleholder in virtue of the option agreement, pursuant to Article 1480
and followings of the Peruvian Civil Code, which shall be deducted in full
and immediately from the Transfer Price if the Optionee exercises the
Option.

 

 

	1.3	 	“Mineral
Rights”, means the following mining concessions:

	 	a)	 	Santa Rosa 94 de Ispacas, code 01-03058-94, with an extent of
200 hectares, located in the district of Caraveli, province of
Caravelí, department of Arequipa, which title to mining concession
was approved by resolution RJ No 6508-94-RPM, issued by the Public
Mining Registry on October 20, 1994.
	 
	 	b)	 	Santa Rosa 95 II de Ispacas, code 01-09272-95, with an extent
of 700 hectares, located in the district of Caravelí, province of
Caravelí, department of Arequipa, which title to mining concession
was approved by resolution RJ No 0723-96-RPM issued by the Public
Mining Registry on February 12, 1996; and
	 
	 	c)	 	Santa Rosa III 95 de Ispacas, code 01-09273-95, with an extent
of 100 hectares, located in the district of Caravelí, province of
Caravelí, department of Arequipa, which title to mining concession
was approved by resolution RJ No 0716-96-RPM issued by the Public
Mining Registry on February 12, 1996.

	1.4	 	“Agreement”, means this document that contains the Option to Acquire and
the Mining Lease Agreements, the Exhibit, as well as any amendments,
clarifications or additions thereto that the Parties may agree from time
to time.
	 
	1.5	 	“Lease
Agreement”, means the mining lease agreement relating to the
Mineral Rights, and any amendments, clarifications, or additions thereto
that the Parties may agree from time to time pursuant to Article 166 of
the General Mining Act.
	 
	1.6	 	“Option
Agreement”, means the option to acquire the Mineral Rights, and
any amendments, clarifications, or additions thereto that the Parties may
agree from time to time pursuant to Article 165 of the General Mining Act.
	 
	1.7	 	“Transfer
Agreement”, means the contract to be drafted in the form of
Exhibit A hereto, to formalize the transfer of the Mineral Rights from the
Titleholder to the Optionee, subject to exercise of the Option, whereby
the Optionee becomes the sole and exclusive titleholder of 100% of the
Mineral Rights.
	 
	1.8	 	“Dollars” or
“US$”, means the currency of legal tender in the United States of America.

2

 

	1.9	 	“Force Majeure”, has the meaning set out in sub-section 6.3
	 
	1.10	 	“Confidential
Information”, has the meaning set out in sub-section 6.7
	 
	1.11	 	“Land Act” means the Law regulating Private Investment in the Development
of Economic Activities in Lands of the National Territory and Peasant and
Native Communities, Law No. 26505, enacted July 18, 1995, and its
regulations, amendments, additions, substitutions, and related laws.
	 
	1.12	 	“General Mining Act” means the Consolidated General Mining Act, approved
by Supreme Decree 014-92-EM dated June 2, 1992, and any regulations,
amendments, additions, substitutions, and related laws.
	 
	1.13	 	“Notice” means any notice, request, order, demand, offer, requirement, or
other communication authorized or required to be made under the Option
Agreement or the Lease Agreement, as set out in sub-section 6.5.
	 
	1.14	 	“Option” means the exclusive, irrevocable and indivisible option granted
to the Optionee according to the terms of the Option Agreement, whereby
the Optionee is entitled to acquire, at its own discretion, 100% of one,
some or all the mining concessions that comprise the Mineral Rights.
	 
	1.15	 	“Optionee” means Bear Creek Mining Company, Sucursal del Perú, or its
successor.
	 
	1.16	 	“Party” or
“Parties” means the Titleholder and the Optionee, and any
other person who may acquire any rights under the Option Agreement and/or
the Lease Agreement.
	 
	1.17	 	“Lease Term”, means the term of the Lease Agreement, during which the
Optionee is entitled to carry out exploration activities in accordance
with sub-section 5.3, including any extension in accordance with
sub-sections 4.2 and 6.3
	 
	1.18	 	“Option Term” means the term of the Option, during which the Optionee may
exercise the Option in accordance with section 3.3, including any
extension of this term in accordance with sub-sections 4.2 and 6.3.
	 
	1.19	 	“Transfer Price” has the meaning set out in sub-section 3.2.

3

 

	1.20	 	“Environmental Regulations” mean the Environmental Regulations for Mining
Exploration Activities approved by Supreme Decree No. 038-98-EM and
published in the official gazette El Peruano on November 30, 1998, and its
extensions, amendments, and related regulations.
	 
	1.21	 	“Titleholder” means Felipe Benicio Vera Palomino and Rosa Juana Palomino
Neyra.

SECOND: REPRESENTATIONS AND WARRANTIES

	2.1	 	The Titleholder hereby represents and warrants that:

	 	a)	 	At the date of signing this Agreement, the Titleholder holds
the Mineral Rights; that the Mineral Rights are in force, free from
encumbrances, liens, overlapping and oppositions due to prior
existing mineral rights, and there is no legal or extra-judicial
process or agreement publicly recorded or not that affects or limits
the free transferability of the Mining Rights, or the execution of
the Option Agreement or the Lease Agreement; that the License Fees
(“Derecho de Vigencia”) for the years 1994, 1995, 1996, 1997, 1998,
1999 and 2000, have been duly paid, having the Titleholder complied
with all the formal obligations applicable to the Mineral Rights
under the General Mining Act and other applicable laws;
	 
	 	b)	 	In the ordinary course of its business relating to the Mineral
Rights and during the performance of exploration and/or exploitation
activities within the area of the Mineral Rights, the Titleholder has
complied with all the necessary legal formalities, and has not
infringed any law, regulation or norm relating to the exercise of
mining activities as concession holder, nor infringed any
environmental regulation; and that there are no adverse environmental
conditions that affect or may affect the Mineral Rights as a result
of its past or present activities.
	 
	 	c)	 	If title to the Mineral Rights were defective, deficient, or
contained limitations restricting the free transfer of the Mineral
Rights, the Optionee shall have the right to institute and pursue, at
the cost and account of the Titleholder, every legal process that may
be necessary to cure such defects or deficiencies, without incurring
any liability, having the Optionee the right to deduct from the
deposits, any expenses effectively incurred to defend the title. In
any event, the delivery of Deposits under sub-section 3.4 shall be
suspended until the defect or deficiency is finally settled.
	 
	 	d)	 	During the Option Term, the Titleholder shall not, by action or
inaction, permit or cause any rights of creditors, legal or
extra-judicial actions, liens, charges, or other real or personal

4

 

	 	 	 	rights to be established or maintained over the Mineral Rights, or
any part or appurtenance thereof, that may affect the Mineral Rights
or this Agreement; nor put at risk the validity, existence, or title
to the Mineral Rights.
	 
	 	e)	 	The Titleholder will defend and hold the Optionee harmless and
free from any responsibility, obligation, lost, costs, expenses,
damages and demands, including without limitation damages to third
persons, or to property, reclamation costs of damages caused to the
environment and third parties, that may result from the activities
carried out in the Mineral Rights and/or in relation to them, prior
to the execution of this Agreement; and
	 
	 	f)	 	At the time of signing this Agreement and/or executing its
obligations under the Agreement, the Titleholder does not violate,
infringe and/or breaches any other agreement, contract or obligation
with third persons or the Peruvian State.

	2.2	 	The Optionee hereby represents and warrants that:

	 	a)	 	It is a branch of Bear Creek Mining Company, established in
Peru in accordance with the applicable Peruvian laws; and
	 
	 	b)	 	It has sufficient authorization given by its principal Bear
Creek Mining Company, to execute this Agreement.

THIRD: OPTION AGREEMENT

	3.1	 	Option Agreement
	 
	 	 	Pursuant to Article 165 of the General Mining Act, the Titleholder grants
the Optionee an exclusive and irrevocable option to acquire one hundred
percent (100%) of one, some or all of the Mineral Rights (the “Option”),
during the term provided under sub-section 3.3. The option to acquire the
Mineral Rights includes all of the Mineral Rights’ parts and appurtenances
as well as everything that de facto or de lure pertains thereto, whether
within or outside their external boundaries, without demanding any payment
other than the agreed herein on these or other accounts.
	 
	3.2	 	Transfer Price
	 
	 	 	The consideration for the transfer of the Mineral Rights is US$900,000.00
(nine hundred thousand Dollars) (the “Transfer Price”). All amounts
previously delivered as Deposits pursuant to sub-section 3.4 shall be
deducted from the Transfer Price.

5

 

	3.3	 	Option Term

	 	3.3.1	 	The term of the Option is forty-eight (48) months from the
date on which the formal deed that may arise from this minute is
signed by both Parties (the “Option Term”).
	 
	 	3.3.2	 	The Option Term is mandatory for the Titleholder and voluntary
for the Optionee. The Optionee may therefore terminate the Option at
any time by giving Notice of termination to the Titleholder via a
public notary.

	3.4	 	Deposits (“Arras de Retractación”)

	 	3.4.1	 	The Optionee undertakes to give as Deposits to the Titleholder the following amounts:

	 	a) US $65,000	 	On the sixth month counted as of the date
the Parties sign the public deed that will arise from this
private document.
	 
	 	b) US $90,000	 	On the day following the first anniversary
counted as of the date of signing of the public deed that will
arise from this private document.
	 
	 	c) US $175,000	 	On the day following the second
anniversary counted as of the date of signing the public deed
that will arise from this private document.
	 
	 	d) US $250,000	 	On the day following the third
anniversary counted as of the date of signing the public deed
that will arise from this private document.

	 	 	 	If the Optionee does exercise the Option, the Deposits
delivered to the Titleholder under this sub-section 3.4.1, shall
be deducted in full and immediately from the Transfer Price.
	 
	 	3.4.2	 	Waiver of the right of withdrawal
	 
	 	 	 	The Titleholder hereby waives its right to withdraw its offer
pursuant to Article 1482 of the Peruvian Civil Code.

6

 

	 	3.4.3	 	Requirements for Making the Deposits
	 
	 	 	 	The Deposits referred to in sub-sections 3.4.1 (a), 3.4.1 (b), 3.4.1
(c) and 3.4.1 (d) shall be made if accrued during the Option
Agreement, and provided the Agreement is in force.
	 
	 	3.4.4	 	Consequences of the Failure to Exercise the Option
	 
	 	 	 	Failure by the Optionee to exercise the Option shall cause the
Optionee to lose the Deposits in favor of the Titleholder. The
Deposits include the VAT and the Municipal Promotion Tax, as well as
any other value added tax or sales tax that may replace them.
	 
	 	3.4.5	 	Indivisibility of the Deposits
	 
	 	 	 	The Optionee and the Titleholder hereby declare that the Deposits
referred to in sub-section 3.4.1 will only accrue on the specified
dates, and are indivisible. No claim for delivery of the Deposits or
portions thereof based on the number of days, weeks or months elapsed
shall be therefore admitted.
	 
	 	 	 	Failure by the Optionee to deliver the Deposits under sub-section
3.4.1 will entitle the Titleholder to deliver a Notice to the
Optionee by a public notary, detailing the Optionee's default. The
Optionee may cure the default within thirty (30) calendar days
following receipt of the Notice. If the Optionee does not cure the
default, the Option will be deemed terminated, except for sub-section
6.3.

	3.5	 	Exercise of the Option

	 	3.5.1	 	The Optionee shall exercise the Option at any time during the
Option Term by giving Notice of its decision to exercise the Option
to the Titleholder, via public notary.
	 
	 	3.5.2	 	Upon the exercise of the Option, the Mineral Rights shall be
automatically transferred to the Optionee. The Parties therefore
agree that the Option Notice delivered by the Optionee will effect
the transfer of the Mineral Rights and will constitute sufficient
title to publicly register the transfer of the Mineral Rights on
behalf of the Optionee.
	 
	 	3.5.3	 	Without prejudice of sub-section 3.5.2, the Titleholder
unconditionally and irrevocably undertakes to issue and deliver all
public and private documents that may be required to formalize the
transfer of the Mineral Rights in favour of the Optionee, within a
maximum of

7

 

	 	 	 	twenty (20) calendar days following receipt of the Notice thereof.
Any delay by the Titleholder in signing the documents that the
Optionee may require upon the exercise of the Option, shall
automatically extend the Lease Term referred to in sub-section 5.3,
until such time as the Titleholder signs the documents in question.

	3.6	 	Payment of the Transfer Price
	 
	 	 	The balance of the Transfer Price shall be equal to the difference between
the Transfer Price and the aggregate Deposits delivered to the Titleholder
by the Optionee. This amount shall be paid to the Titleholder at the time
the public deed containing the Transfer Agreement is signed by the
Parties.
	 
	3.7	 	Termination of the Option

	 	3.7.1	 	The Optionee may terminate the Option at any time during the
Option Term by giving a termination Notice to the Titleholder via
public notary, as provided under sub-section 3.3.2. Upon termination
of the Option Agreement, the delivery of Deposits pursuant to
sub-section 3.4 and any other right or obligation under this
Agreement shall cease.
	 
	 	3.7.2	 	Upon delivery of the termination Notice, or failure to
exercise the Option within the Option Term, the Titleholder shall
issue and deliver a receipt for the aggregate amount of Deposits
received from the Optionee. The receipt shall be issued within
twenty (20) days following delivery of the termination Notice or on
the date of signing of the public deed that formalizes the
termination of the Option, whichever occurs first.

FOURTH: CONTRACTS FOR ACCESS TO SURFACE LANDS

	4.1	 	Pursuant to article 7 of the Land Act, the Optionee will enter into
agreements with owners of surface lands located within or outside the
external boundaries of the Mineral Rights that may be deemed necessary to
obtain access to the Mineral Rights for performance of the exploration
works.
	 
	4.2	 	Any delay or impediment for entering into these agreements is a cause of
Force Majeure to be communicated to the Titleholder as soon as reasonably
possible. This will allow the Optionee to suspend the Option Term and the
Lease Term referred to in sub-sections 3.3 and 5.34 of this Agreement,
respectively. The Titleholder agrees to provide its full support to the
Optionee insofar for this purpose.

8

 

FIFTH: LEASE AGREEMENT

	5.1	 	Lease of the Mineral Rights

	 	5.1.1	 	The Titleholder hereby exclusively leases the Mineral Rights
to the Optionee, for exploration purposes and for a forty-eight month
term, in accordance with Article 166 of the General Mining Act.
	 
	 	5.1.2	 	By the lease, the Optionee is assigned with all of the
Titleholder  ́s rights as concession holder of the Mineral Rights,
being the Optionee entitled to determine, at its own discretion, the
programmes and budgets.

	5.2	 	Consideration for the Lease
	 
	 	 	The consideration for the lease of the Mineral Rights is US$2,000.00 (two
thousand Dollars), including VAT. The Optionee will pay the consideration
for the lease at the time of signing this Agreement, with no more proof
that the Titleholder’s signature in this document.
	 
	5.3	 	Lease Term

	 	5.3.1	 	The term of the mining lease is forty-eight (48) months
counted as of the date on which the public deed that contains this
Agreement (“Lease Term”) is signed by both Parties.
	 
	 	5.3.2	 	The Lease Term is mandatory for the Titleholder and voluntary
for the Optionee. The Optionee may therefore terminate the Lease
Agreement at any time by giving Notice of its decision to the
Titleholder via public notary.
	 
	 	 	 	Upon termination of the Lease Agreement, the Optionee will remove all
facilities, tubing and piping, improvements, machinery, equipment,
tools, supplies, constructions, and other assets installed or placed
in the Mineral Rights, within six (6) months following receipt of the
termination Notice.

	5.4	 	Rights and Obligations of the Optionee under the Lease Agreement

	 	5.4.1	 	Exploration Works
	 
	 	 	 	The Optionee is entitled to:

9

 

	 	(a)	 	Start and carry out exploration works at any time in
accordance with the programs and budgets to be determined by the
Optionee, and apply for the necessary permits and approvals
before the competent authorities.
	 
	 	(b)	 	Apply for or acquire mineral rights in areas adjacent
to the Mineral Rights, which, if applied for or acquired, shall
not be part of this Agreement.
	 
	 	(c)	 	Obtain from the Mineral Rights the quantities of ores
or other materials that may be deemed appropriate for the
evaluation of the Mineral Rights or for the completion of a
feasibility study, being authorized to dispose of them freely,
at its own discretion. As regards to the portions of cores
and/or samples obtained from drilling operations, the Optionee
is authorized to freely dispose of up to fifty percent (50%)
thereof, keeping control thereof in accordance with the
provisions of the General Mining Act.

	 	5.4.2	 	Environmental Obligations
	 
	 	 	 	The Optionee hereby agrees to comply with the Environmental
Regulations in the course of its exploration activities.
	 
	 	5.4.3	 	Licence Fees

	 	(a)	 	The Titleholder is responsible for payment of the
Licence Fees for the Mineral Rights for the years 1994, 1995,
1996, 1997, 1998, 1999, 2000 and 2001 inclusive.
	 
	 	(b)	 	The Optionee will pay the Licence Fees for the
Mineral Rights pursuant to article 59 of the Mining General Act,
while the Lease Agreement is in force.

	 	5.4.4	 	Delivery of Documentation
	 
	 	 	 	The Optionee shall deliver copies of receipt of payment of the
Licence Fees and of the annual consolidated statement to the
Optionee. These documents shall be made available to the Titleholder
within thirty (30) days following delivery to the Ministry of Energy
and Mines.

	5.5	 	Termination of the Lease
	 
	 	 	The Optionee may terminate the Lease Agreement at any time during the
Lease Term by giving Notice of its decision to the Titleholder via public
notary, pursuant to sub-section 5.3.2.

10

 

SIXTH: COMMON PROVISIONS APPLICABLE TO THE OPTION AGREEMENT AND LEASE AGREEMENT

	6.1	 	Applicable Law
	 
	 	 	The Parties hereby agree to be bound by the terms and conditions of this
Agreement and, if needed, by the provisions of the General Mining Act and
the Civil Code.
	 
	6.2	 	Arbitration

	 	6.2.1	 	Any dispute, controversy or claim arising out of or relating
to the execution of the public and private documents relating to the
exercise of the Option and the subsequent formalization of the
transfer of the Mineral Rights shall be settled by the judges and
courts of the Judicial District of Lima, to which jurisdiction the
Parties hereby submit to.
	 
	 	6.2.2	 	Any dispute, controversy or claim arising out of or relating
to the Option Agreement and/or the Lease Agreement, the execution,
object, subscription, validity, interpretation, breach or termination
thereof, except as provided in sub-section 6.2.1, shall be settled by
arbitration of law in accordance with the applicable law. The ruling
shall be final and binding. All Notices relating to the arbitration
process, including the Notice of arbitration and the response
thereto, may be served as provided under sub-section 6.5 of this
Agreement.
	 
	 	6.2.3	 	There shall be one arbitrator appointed by the Parties within
thirty (30) calendar days after receipt of a Notice of arbitration.
If the Parties fail to agree on a single arbitrator within that term,
there shall be three arbitrators. Each Party will appoint one
arbitrator and the two arbitrators so appointed will elect the third
arbitrator, who will preside the arbitration tribunal.
	 
	 	6.2.4	 	If within thirty (30) calendar days after receipt of a Party’s
Notice of appointment of an arbitrator, the other Party has not
notified the first Party of its appointment of an arbitrator, or if
within thirty (30) calendar days of the appointment of the second
arbitrator the Parties have not reached an agreement on the third
arbitrator, the third arbitrator will be chosen by the National
Institute of Mining Petroleum and Energy Law (Instituto Nacional de
Derecho de Minería, Petróleo y Energía). This decision shall be final
and binding.

11

 

	 	6.2.5	 	As regards to the intervention of the judiciary that may be
required or specified in the applicable law, the Parties hereby
submit to the jurisdiction of the Judges and Courts of the Judicial
District of Lima — Cercado.

	6.3	 	Force Majeure

	 	6.3.1	 	All the obligations under the Option Agreement and/or the
Lease Agreement may be suspended, and the terms thereof shall be
extended, during any event of force majeure or Act of God
(indistinctly, “Force Majeure”) duly communicated to the other Party
by the affected Party. The Notice of force majeure shall contain
reasonably full particulars of the event of force majeure, the
reasons thereof, and estimated period of suspension. The affected
Party shall resume its obligations as soon as reasonably possible.
	 
	 	6.3.2	 	“Force Majeure” means any extraordinary, unforeseeable and
irresistible event which, even if foreseeable, is beyond the
reasonable control by the affected Party and that prevents, impedes,
or delays fulfillment by the affected Party of its obligations
hereunder, including, but not limited to, regional or national
strikes, acts of God, orders, mandates, instructions or resolutions
of government or governmental agencies restricting or affecting the
performance of the proposed work in the Mineral Rights, judicial,
administrative or arbitral decisions or resolutions of any rank or
hierarchy; inability to obtain on reasonably acceptable terms any
private or public exploration right, licenses, permits or
concessions; failure to obtain in reasonable terms any rights of
access pursuant to section 4, suspension or curtailment of the
exploration works due inability to exercise the access rights
pursuant to section 4, in reasonable terms for the Optionee;
suspension or curtailment of the activities to remedy or avoid an
actual or alleged, present or future, violation of the environmental
laws; delay in obtaining approval for the exploration project or the
environmental permit referred to under the Environmental Regulations;
acts of war, whether declared or undeclared, terrorism, riots,
commotion or civil war, disorders, seditions, insurrection or
rebellion, fires, explosions, earthquakes, natural disasters, storms,
floods, droughts, adverse climatological conditions other than those
considered normal.
	 
	 	6.3.3	 	Except as provided for below, any Party shall have the right
to terminate this Agreement if the period of Force Majeure extends
for more than a year. The Party who decides to terminate the Option
Agreement and the Lease Agreement given that the term of Force
Majeure continues for more than one year, shall notify its decision
to the other Party. If the Titleholder is the Party who decides to
terminate the Agreement (provided it does not

12

 

	 	 	 	contribute to the cause of the Force Majeure), the Optionee shall
have the right to exercise the Option within thirty (30) days
following receipt of Notice, pursuant to sub-section 3.6.

	6.4	 	Assignment — Authorizations
	 
	 	 	Pursuant to articles 1435 of the Civil Code and 166 of the General Mining
Act, the Optionee is hereby expressly authorized to assign its interest in
the Option Agreement and/or the Lease Agreement, in whole or in part, and
on the same terms and conditions hereof. In such case, the successor will
be subject to the same terms and conditions hereof.
	 
	6.5	 	Notices
	 
	 	 	All notices, offers, summons, petitions, and communications in general
(“Notice”) between the Parties in connection with the Option Agreement or
the Lease Agreement shall be in writing, delivered to the addresses
specified below, and considered effective on the date of reception,
receipt acknowledged, or on the date of delivery via notary. If not
received on a business day, the notice shall be considered received the
following business day. Any change of address, telephone, or facsimile
shall be communicated to the other Party via notary or with
acknowledgement of receipt five days prior thereto, otherwise any Notice
addressed to the former address shall be deemed delivered.

	 	 	 	 	 	 	 
	a)	 	
OPTIONEE:
	 	BEAR
CREEK MINING COMPANY SUCURSAL DEL PERÚ
	 	 	 	 	Address:
	 	Calle Monteflor No. 460, Urbanización Valle
Hermoso, Santiago de Surco, Lima 33 — Perú
	 	 	 	 	Telephone:

Facsimile:
	 	(51 1) 372 5765

(51 1) 3728070
	 
	b)	 	
TITLEHOLDER:
	 	FELIPE BENICIO VERA PALOMINO

ROSA JUANA PALOMINO NEYRA
	 	 	 	 	Address:
	 	Pasillo los Lirios, Calle Los
Geranios, Manzana F, Lote 9, El Eden
de Lara, San Martín de Socabaya,
Arequipa.

	6.6	 	Taxes
	 
	 	 	Each Party will be responsible for the applicable tax obligations.

13

 

	6.7	 	Confidentiality

	 	6.7.1	 	All the facts, reports, registers and other information of any
kind developed or acquired by the Titleholder as a result of the
performance of this Agreement shall be kept by the Titleholder as
strictly confidential (“Confidential Information”), and such
Confidential Information shall not be revealed or divulged in other
way to third Parties if there is no prior written consent from the
Optionee.
	 
	 	6.7.2	 	In the event that the Titleholder is required to disclose
Confidential Information to any competent governmental entity and/or
its dependencies, to the extent required by law or in response to a
legitimate request for such Confidential Information, the Titleholder
must immediately send Notice to the Optionee of the requirement and
its terms before the divulgation. The Optionee shall have the right
to object, to the agency concerned, to such disclosure and to seek
confidential treatment of any Confidential Information to be
disclosed.

	6.8	 	Expenditures
	 
	 	 	The Optionee shall bear all notarial and registration fees required to
formalize this Agreement into a public deed and to have it recorded with
the Public Registry.

Mr. Notary: Please add the legal formalities hereto and file notice to the
Public Mining Register for registration of this document. Signed in two
identical counterparts in Lima, on the 15th day of March, 2002.

BEAR CREEK MINING COMPANY, SUCURSAL DEL PERU

	 	 	 
	By: 	 	“Andrew Swarthout”
	 	 	

	Position: 	 	General Manager

FELIPE BENICIO VERA PALOMINO

 

“Felipe Benicio Vera Palomino”

_____________________________________

ROSA JUANA PALOMINO NEYRA

 

“Rosa Juana Palomino Neyra”

_____________________________________

14

 

EXHIBIT “A”

TRANSFER OF MINERAL RIGHTS

Mr. Notary:

Please enter in your Registry of Public Deeds the Transfer of Mineral Rights
entered into by and between BEAR CREEK MINING COMPANY — SUCURSAL DEL PERU,
registered as entry 1, file No 41289, of the Public Mining Registry, duly
represented by XXXXXX, whose faculties are duly registered with the Public
Registry, domiciled at Calle Monteflor No 460, Urbanización Valle Hermoso,
Santiago de Surco, Lima 33, hereinafter referred to as “OPTIONEE”; and on the
other side FELIPE BENICIO VERA PALOMINO, identified with DNI No29736017, and
his wife ROSA JUANA PALOMINO NEYRA, identified with DNI No30770133, both
domiciled at Pasillo Los Lirios, Calle Los Geranios, Manzana F, Lote 9, El Eden
de Lara, San Martin de Socabaya, Arequipa, hereinafter collectively referred to
as “TITLEHOLDER”; on the following terms and conditions:

FIRST: DEFINITIONS

For the purposes hereof and of the preceding recitals, the following words and
expressions shall have the following meanings:

	1.1	 	“Mineral
Rights”, means the following mining concessions:

	 	a)	 	Santa Rosa 94 de Ispacas, code 01-03058-94, with an extent of
200 hectares, located in the district of Caravelí, province of
Caravelí, department of Arequipa, which Mining Concession title was
approved by resolution RJ No 6508-94-RPM issued by the Public Mining
Registry on October 20, 1994;
	 
	 	b)	 	Santa Rosa II 95 de Ispacas, code 01-09272-95, with an extent
of 700 hectares, located in the district of Caravelí, province of
Caravelí, department of Arequipa, which Mining Concession title was
approved by resolution

RJ No 0723-96-RPM issued by the Public Mining
Registry on February 12, 1996; and
	 
	 	c)	 	Santa Rosa III 95 de Ispacas, code 01-09273-95, with an extent
of 100 hectares, located in the district of Caravelí, province of
Caravelí, department of Arequipa, which Mining Concession title was
approved by resolution

RJ No 0716-96-RPM issued by the Public Mining
Registry on February 12, 1996.

15

 

	1.2	 	“Agreement”,
means this Mineral Rights' Transfer Agreement.
	 
	1.3	 	“Option and Lease Agreement”, means the Option to Acquire and Lease
Agreements, entered into by and between Bear Creek Mining Company —
Sucursal del Perú and Felipe Benicio Vera Palomino and Rosa Juana Palomino
Neyra, dated March 15, 2002, its exhibit, amendments, clarifications or
periodical additions that may have agreed from time to time.
	 
	1.4	 	“Dollars” or “US$”, means the currency of legal tender in the United
States of America.
	 
	1.5	 	“General Mining Act”, means the Consolidated General Mining Act, approved
by Supreme Decree 014-92-EM dated June 2, 1992, and any regulations,
amendments, additions, substitutions and related laws.
	 
	1.6	 	“Notice”, means any notice, request, order, demand, offer, requirement,
or other communication authorized or required to be made under this
Agreement, as set out in sub-section 6.2.
	 
	1.7	 	“Optionee” means Bear Creek Mining Company, Sucursal del Perú, or its
successor.
	 
	1.8	 	“Party” or “Parties” means the Titleholder and the Optionee, and any
other person who may acquire any rights under this Agreement.
	 
	1.9	 	“Transfer Price” has the meaning set out in sub-section 3.2.
	 
	1.10	 	“Titleholder” means Felipe Benicio Vera Palomino and Rosa Juana Palomino
Neyra.

SECOND: BACKGROUND

	2.1	 	The Titleholder is the sole and exclusive concession holder of the
Mineral Rights.
	 
	2.2	 	On March 15, 2002, the Optionee and the Titleholder entered into the
Option and Lease Agreement, whereby the Titleholder granted the Optionee
the right to acquire, at its own discretion, one hundred percent (100%) of
one, some or all the mining concessions that comprise the Mineral Rights,
during a forty-eight (48) month term. The Parties agreed that the
consideration for the transfer of the Mineral Rights was nine hundred
thousand Dollars (US$900,000.00). Simultaneously to the option to acquire,
the Titleholder leased the Mineral Rights for exploration purposes and for
a forty-eight month term, in favour of the Optionee.

16

 

	2.3	 	The Optionee has exercised its option to acquire the Mineral Rights.
Pursuant to sub-section 3.5 of the Option and Lease Agreement, the
Optionee delivered the Notice of exercise of the option via public
notary, which acknowledgment of receipt will be inserted in the public
deed that will arise from this document.

THIRD: PURPOSE OF THE AGREEMENT

Pursuant to Articles 164 and 165 of the General Mining Act, the Parties hereby
acknowledge the transfer of the Mineral Rights in favor of the Optionee,
including all its parts and appurtenances as well as everything that de facto
or de lure pertains thereto, whether within or outside the external boundaries
of the Mineral Rights, without demanding any payment other than the agreed
herein on these or other accounts.

FOURTH: TRANSFER PRICE

	4.1	 	Pursuant to section 3.2 of the Option and Lease Agreement, the
consideration for the transfer of 100% of the Mineral Rights, is the
amount of nine hundred thousand Dollars (US$900,000.00).
	 
	4.2	 	Pursuant to sub-section 3.4.1 of the Option and Lease Agreement, the
Deposits delivered to the Titleholder are the aggregate amount of US$XXXX.
The balance of the Transfer Price to be paid to the Titleholder is
therefore US$XXXXX.

FIFTH: REPRESENTATIONS AND WARRANTIES

	5.1	 	The Titleholder hereby represents and warrants that:

	 	a)	 	On the date of this agreement, the Mineral Rights are in good
standing, free from any liens, encumbrances, charges, overlapping
and oppositions to prior existing mineral rights, and there is no
legal or extra-judicial order or agreement that affects or limits
their free transferability; that the License Fees (“Derecho de
Vigencia”) have been duly paid, having the Titleholder complied with
all formal obligations applicable to the Mineral Rights under the
General Mining Act. and other applicable laws.
	 
	 	b)	 	That In the ordinary course of business relating to the Mineral
Rights or during the exploration and/or exploitation activities
carried out before the execution of the Option and Lease Agreement,
the Titleholder has not infringed any law, regulation or permit
relating to

17

 

	 	 	 	activities as concession holder, nor infringed any environmental law
or the health safety regulation applicable to the Mineral Rights.
	 
	 	c)	 	That during the term of the Option and Lease Agreement, the
Titleholder has not agreed, permitted or disposed under any title, by
action or inaction, the constitution or maintenance of any creditor,
legal or extra-judicial order, lien, encumbrance or any other real or
personal right over the Mineral Rights, or over any part of them,
that may affect the Mineral Rights or this agreement; and has not
carried on activities of any kind in the Mineral Rights, or has
compromised the validity, existence or title to the Mineral Rights.
	 
	 	d)	 	That it will defend and hold the Optionee harmless of any
responsibility or obligation, lost, costs, expenses, damages and
demands, including, without limitation, damages to third persons,
damages to property, reclamation costs of damages caused to the
environment and third parties that may result from the activities
carried out by the Titleholder prior to the execution of the Option
and Lease Agreement.
	 
	 	e)	 	At the time of signing this Agreement and/or executing its
obligations under this Agreement, the Titleholder does not violate,
infringe and/or breaches any other agreement, contract or obligation
with third persons and that it has disposed of, transferred or
institute any lien or encumbrance over the Mineral Rights and that no
offer, counteroffer or negotiation with third parties has concluded
in a contract pursuant to Articles 1359 and 1376 of the Civil Code.
	 
	 	f)	 	That the Titleholder hereby agrees with the execution and
performance under the Option and Lease Agreement and with the terms
hereof.

	5.2	 	The Optionee hereby represents and warrants that it is a branch duly
established under the laws of Peru and that has full power and authority
to execute this Agreement.

SIXTH: OTHER PROVISIONS

	6.1	 	Applicable Law
	 
	 	 	The Parties hereby agree to be bound by the terms and conditions of this
Agreement and, if needed, by the provisions of the General Mining Act and
the Civil Code.

18

 

	6.2	 	Notices
	 
	 	 	All notices, offers, summons, petitions, and communications in general
(“Notice”) between the Parties in connection with this Agreement shall be
in writing, delivered to the addresses specified below, and considered
effective on the date of reception, receipt acknowledged, or on the date
of delivery via notary. If not received on a business day, the notice
shall be considered received the following business day. Any change of
address, telephone, or facsimile shall be communicated to the other Party
via notary or with acknowledgement of receipt five days prior thereto,
otherwise any Notice addressed to the former address shall be deemed
delivered.

	 	 	 	 	 	 	 
	a)	 	
OPTIONEE:
	 	BEAR
CREEK MINING COMPANY SUCURSAL DEL PERÚ
	 	 	 	 	Address:
	 	Calle Monteflor No. 460, Urbanización Valle
Hermoso, Santiago de Surco, Lima 33 — Perú
	 	 	 	 	Telephone:
	 	(51 1) 3725765
	 	 	 	 	Facsimile:
	 	(51 1) 3728070
	 
	b)	 	
TITLEHOLDER:
	 	FELIPE BENICIO VERA PALOMINO

ROSA JUANA PALOMINO NEYRA
	 	 	 	 	Address:
	 	Pasillo los Lirios, Calle
Los Geranios, Manzana F, Lote 9, El Eden de
Lara, San Martín de Socabaya, Arequipa.

	6.3	 	Expenditures
	 
	 	 	The Optionee shall bear the cost of all the notarial and registration fees
required to formalize this agreement into a public deed and to have it
registered with the Public Registry.

Mr. Notary: Please add the legal introduction and conclusion, inserting the
Notice of exercise of the Option, hereto and file notice to the Public Mining
Register for registration of this document. Signed in two identical
counterparts in Lima, on the XXXX day of XXXXX, XXXX.

BEAR CREEK MINING COMPANY, SUCURSAL DEL PERU

By:__________________________________

Position: General Manager

FELIPE BENICIO VERA PALOMINO

_____________________________________

ROSA JUANA PALOMINO NEYRA

_____________________________________

19

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00045-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00045-of-00352.parquet"}]]