Document:

exv10w2

 

Exhibit
10.2

 

PURCHASE AND SALE AGREEMENT

FOR

PEÑASQUITO AND OTHER ROYALTIES

 

BETWEEN

MINERA KENNECOTT S.A. DE C.V.

as Vendor

KENNECOTT EXPLORATION COMPANY

as Vendor Parent

AND

ROYAL GOLD, INC.

As Purchaser

December 28, 2006

 

 

 

PURCHASE AND SALE AGREEMENT

FOR

PEÑASQUITO AND OTHER ROYALTIES

 

THIS PURCHASE AND SALE AGREEMENT is made as of this 28th day of December, 2006

BETWEEN:

MINERA KENNECOTT S.A. DE C.V., a company incorporated under the laws of
Mexico (the “Vendor”),

KENNECOTT EXPLORATION COMPANY, a Delaware corporation (“KEC”)

AND:

ROYAL GOLD, INC., a Delaware corporation

(the “Purchaser”).

THIS AGREEMENT WITNESSES that in consideration of the premises and the mutual covenants,
agreements, representations, warranties and payments contained in this Agreement, the parties agree
with each other as follows:

	1.	 	DEFINITIONS AND INTERPRETATION
	 
	1.1.	 	Definitions
	 
	 	 	Unless the context otherwise requires, where used in this Agreement, the following terms
shall have the respective meanings set out below, and grammatical variations of such terms
shall have corresponding meanings:

	 	1.1.1.	 	“Agreement” means this Purchase and Sale Agreement for Peñasquito and Other
Royalties.
	 
	 	1.1.2.	 	“Assumed Liabilities” has the meaning set forth in Section 7.1.
	 
	 	1.1.3.	 	“Business Day” means any day that is not a Saturday or Sunday or a statutory holiday
in either Denver, Colorado or Salt Lake City, Utah.
	 
	 	1.1.4.	 	“Concessions” mean the Other Concessions and the Peñasquito Concessions.

 

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	 	1.1.5.	 	“Data Disclosure Agreement” means that certain Data Disclosure Agreement between KEC
and Purchaser, effective October 4, 2006.
	 
	 	1.1.6.	 	“Disclosure Documents” means the financial statements, annual, quarterly or current
reports, proxy statements, and other documents required to be filed by the Purchaser
pursuant to the reporting requirements of the United States Securities Exchange Act of
1934, as amended (the “1934 Act”) and the registration statement on Form S-4 (File no.
333-111590) (the “Registration Statement”), including exhibits, financial statements or
other documents or required 1934 Act filings that are incorporated therein, and as may
be amended by any prospectus supplement or post-effective amendment filed with the
United States Securities and Exchange Commission (the “SEC”).
	 
	 	1.1.7.	 	“Environmental Laws” means all Laws relating to the environment and/or the protection
thereof, including without limitation with respect to the following substances and/or
the transportation thereof:

	 	1.1.7.1.	 	any substance the presence of which requires reporting, investigation,
removal and remediation under any Laws;
	 
	 	1.1.7.2.	 	any substance that is defined as a pollutant, contaminant, dangerous
substance, toxic substance, hazardous or toxic chemical, hazardous waste
or hazardous substance under any Laws;
	 
	 	1.1.7.3.	 	any substance that is toxic, explosive, corrosive, flammable,
ignitable, infectious, carcinogenic or otherwise hazardous and is
regulated by or forms the basis of liability under any Laws;
	 
	 	1.1.7.4.	 	any substance the presence of which on a property causes or threatens
to cause a nuisance upon the property or to adjacent properties or poses
or threatens to pose a hazard to health or safety of persons on or about a
property;
	 
	 	1.1.7.5.	 	any substance that contains gasoline, diesel fuel or other petroleum
hydrocarbons, including crude oil and fractions thereof, natural gas,
synthetic gas and any mixtures thereof;
	 
	 	1.1.7.6.	 	any substance that contains asbestos and/or asbestos-containing
materials; or
	 
	 	1.1.7.7.	 	any substance that contains pcbs, or pcb-containing materials or
fluids.

	 	1.1.8.	 	“Governmental Authority” means a federal, state, provincial, regional, municipal or
local government in the United States of America or Mexico or a subdivision thereof
including an entity, person, court or other body or organization exercising executive,
legislative, judicial, regulatory or
administrative functions of, or pertaining to, any such government or subdivision.

 

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	 	1.1.9.	 	“KEC” has the meaning set forth on the first page of this Agreement.
	 
	 	1.1.10.	 	“Knowledge of Vendor” means the actual knowledge of Stephen Scott, without any duty
of inquiry or recollection whatsoever with nothing being imputed or deemed to be known
even if known and accessible means of knowledge exists or actual notice of information
has been received.
	 
	 	1.1.11.	 	“Laws” means all laws, statutes, ordinances, regulations, rules and orders of any
Governmental Authority applicable to a party, this Agreement, the Royalties or the
Concessions, including without limitation labor, tax, and Environmental Laws.
	 
	 	1.1.12.	 	“LIBOR” means for any month the the London Inter-Bank Offered Rate on the first
Business Day of that month.
	 
	 	1.1.13.	 	“Minera Peñasquito” means Minera Peñasquito S.A. de C. V., a Mexican corporation.
	 
	 	1.1.14.	 	“Notice” shall have the meaning set forth in Section 10.3.
	 
	 	1.1.15.	 	“Other Concessions” means (i) all of the concessions, except the Peñasquito
Concessions, that are identified in Exhibit A to the Termination of Property Rights
Agreement, (ii) the concessions identified in “CONTRATO DE CESION DE DERECHOS QUE
OTORGA, POR UNA PARTE, MINERA KENNECOTT, S.A. DE C.V., REPRESENTADA EN ESTE ACTO POR EL
SR. DAVE F. SIMPSON Y, POR LA OTRA, MINERA PEÑASQUITO, S.A. DE C.V., REPRESENTADA EN
ESTE ACTO POR EL SR. ABELARDO GARZA HERNANDEZ,” dated November 24 and 26, 1999, a copy
of which is attached as Schedule B1 to this Agreement, (iii) the concessions identified
in “CONTRATO DE CESION DE DERECHOS QUE OTORGA, POR UNA PARTE, MINERA KENNECOTT, S.A. DE
C.V., REPRESENTADA EN ESTE ACTO POR EL SR. DAVE F. SIMPSON Y, POR LA OTRA, MINERA AGUA
TIERRA, S.A. DE C.V., REPRESENTADA EN ESTE ACTO POR LA LIC. YVONNE AVALOS CAZARES,”
dated November 8 and 19, 1999, a copy of which is attached as Schedule B2 to this
Agreement, and (iv) any Projects which were for base or precious metals and in respect
of which any member of the Rio Tinto Group holds a royalty or similar interest which it
has the legal right, power and authority to sell and dispose of without breaching any
contractual or other obligation to any third party, the Vendor and KEC acknowledging
that to Vendor’s Knowledge it holds no such royalties and interests and the Purchaser
acknowledging and confirming to the Vendor and KEC that it does not know whether any
such royalties or interests exist, and (v) includes all rights if any which have been
obtained since May 5, 1999 by conversion,
extension or substitution of any concession described in Subsections (i) – (iv)
above.

 

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	 	1.1.16.	 	“Other Royalties” means the right, title and interest, if any, that was granted to
the Vendor and/or KEC in, to, relating to or arising from the 2% net smelter royalties
and the 1% net smelter royalties, as the case may be, with respect to the Other
Concessions provided in (a) Section 4 of the Termination of Property Rights Agreement
or (b) the contractos attached hereto as Schedule B.
	 
	 	1.1.17.	 	“Other Royalties Closing” has the meaning set forth in Section 6.1.2.
	 
	 	1.1.18.	 	“Other Royalties Closing Date” means a date to be agreed by the parties no later
than 10 Business Days after the Purchaser notifies the Vendor which, if any, of the
Other Royalties it will purchase, but in no event shall the Other Royalties Closing
Date be earlier than the Peñasquito Royalty Closing Date.
	 
	 	1.1.19.	 	“Other Royalties Purchase Price” has the meaning set forth in Section 2.2.
	 
	 	1.1.20.	 	“Peñasquito Concessions” means the EL PEÑASQUITO, LA PEÑA, LAS PEÑAS, ALFA, and BETA
concessions more particularly described in Exhibit A to the Termination of Property
Rights Agreement and includes all rights if any which have been obtained since May 5,
1999 by conversion, extension or substitution of such concessions.
	 
	 	1.1.21.	 	“Peñasquito Project” means the gold, silver, lead and zinc mine in that Minera
Peñasquito proposes to construct in the State of Zacatecas, Mexico.
	 
	 	1.1.22.	 	“Peñasquito Purchase Price” has the meaning set forth in Section 2.2.
	 
	 	1.1.23.	 	“Peñasquito Royalty” means (i) all right, title, and interest that was granted to
the Vendor and/or KEC in, to, and relating to or arising from the 2% net smelter
royalty on the Peñasquito Concessions provided in (a) Section 4 of the Termination of
Property Rights Agreement and (b) the “CONTRATO DE CESION DE DERECHOS QUE OTORGA, POR
UNA PARTE, MINERA KENNECOTT, S.A. DE C.V., REPRESENTADA EN ESTE ACTO POR EL SR. DAVE F.
SIMPSON Y, POR LA OTRA, MINERA PEÑASQUITO, S.A. DE C.V., REPRESENTADA EN ESTE ACTO POR
EL LIC. JOSE MARIA GALLARDO TAMAYO,” dated October 29, 1999, a copy of which is
attached as Schedule C to this Agreement, and (ii) subject to Sections 7.1 and 7.2, all
obligations relating thereto.
	 
	 	1.1.24.	 	“Peñasquito Royalty Closing” means the completion of the purchase and sale of the
Peñasquito Royalty pursuant to Article 6.
	 
	 	1.1.25.	 	“Peñasquito Royalty Closing Date” means January 20, 2007, unless otherwise agreed in
writing by the parties.

 

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	 	1.1.26.	 	“Projects” means the groups of concessions that were held subject to the Property
Rights Agreement or the Termination of Property Rights Agreement and are identified in
Schedule A hereto.
	 
	 	1.1.27.	 	“Promissory Note” means a promissory note in the amount of $20,000,000 payable by
the Purchaser on demand, which may not be made before the first Business Day after the
Penasquito Royalty Closing, without interest before demand but with interest after
demand at an annual rate equal to the rate of LIBOR plus 6% per annum, both before and
after judgment with interest on overdue interest at the same rate.
	 
	 	1.1.28.	 	“Property Rights Agreement” means the Property Rights Agreement between Western
Copper Holdings Ltd., Minera Western Copper S.A. de C.V., Kennecott Exploration
Company, and Minera Kennecott S.A. de C.V., dated March 13, 1998, a copy of which is
attached as Schedule D to this Agreement.
	 
	 	1.1.29.	 	“Purchaser” has the meaning set forth on the first page of this Agreement.
	 
	 	1.1.30.	 	“Rio Tinto Group” means the dual listed company structure incorporating Rio Tinto
plc and Rio Tinto Limited and including any Affiliate of either of them.
	 
	 	1.1.31.	 	“Royalties” means the Other Royalties and the Peñasquito Royalty.
	 
	 	1.1.32.	 	“Taxes” means value-added taxes (impuesto al valor agredado), sales or commodity
taxes, goods and services taxes or similar taxes, duties and any registration, transfer
or other fees imposed or levied in accordance with applicable Law or by Governmental
Authority, but excludes taxes on income or capital gains (impuesto sobre la renta).
	 
	 	1.1.33.	 	“Termination of Property Rights Agreement” means the Termination of Property Rights
Agreement between Kennecott Exploration Company, Minera Kennecott S.A. de C.V., Western
Copper Holdings Ltd. and Minera Western Copper S.A. de C.V., dated May 5, 1999, a copy
of which is attached as Schedule E to this Agreement.
	 
	 	1.1.34.	 	“Vendor” has the meaning set forth on the first page of this Agreement, and is a
partially owned direct subsidiary of KEC.
	 
	 	1.1.35.	 	“Western Copper” means Western Copper Holdings Ltd. and Minera Western Copper S.A.
de C.V., each a party to the Termination of Property Rights Agreement.

	1.2.	 	Gender and Number
	 
	 	 	In this Agreement, unless the context otherwise requires, words importing the singular
include the plural and vice versa, and words importing a gender include all genders.

 

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	1.3.	 	Headings
	 
	 	 	The headings used in this Agreement are inserted for convenience of reference only and shall
not affect the interpretation of this Agreement.

	1.4.	 	Generally Accepted Accounting Principles
	 
	 	 	All accounting terms not otherwise defined in this Agreement shall have the meanings
ascribed to them in accordance with generally accepted accounting principles in the United
States, applied consistently.

	1.5.	 	Currency
	 
	 	 	All dollar amounts in this Agreement are stated in U.S. currency.
	 
	1.6.	 	Schedules
	 
	 	 	The following Schedules attached hereto are incorporated herein and form part of this
Agreement:

	 	 	 	 	 
	 

	 	Schedule A
	 	List of Projects
	 
	 	 	 	 
	 

	 	Schedule B.1
	 	Spanish Language Agreements referenced in clause (ii) of the definition
of Other Concessions
	 
	 	 	 	 
	 

	 	Schedule B.2
	 	Spanish Language Agreements referenced in clause (iii) of the
definition of Other Concessions
	 
	 	 	 	 
	 

	 	Schedule C
	 	Spanish Language Agreement applicable to and referenced in the definition
of the Peñasquito Concessions
	 
	 	 	 	 
	 

	 	Schedule D
	 	Property Rights Agreement
	 
	 	 	 	 
	 

	 	Schedule E
	 	Termination of Property Rights Agreement

	2.	 	PURCHASE AND SALE OF PEÑASQUITO ROYALTY AND OTHER ROYALTIES
	 
	2.1.	 	Purchase and Sale

	 	2.1.1.	 	Upon the terms and subject to the conditions of this Agreement, the Vendor agrees to
sell, assign and transfer to the Purchaser, and the Purchaser agrees to purchase from
the Vendor, the Peñasquito Royalty and all of the Vendor’s right, title and interest
therein as of and from the Peñasquito Royalty Closing, without representation or
warranty of any kind as to title or otherwise except as set forth in Section 3.1.
	 
	 	2.1.2.	 	By Notice given on or before May 1, 2007, the Purchaser shall advise the Vendor and
KEC which, if any, of the Other Royalties it elects to purchase. Upon the terms and
subject to the conditions of this Agreement, the Vendor
agrees to sell, assign and transfer to the Purchaser, without representation or
warranty of any kind as to title or otherwise except as set forth in Section
3.1, all of the Other Royalties that the Purchaser has elected to purchase.

 

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	2.2.	 	Purchase Price

	 	2.2.1.	 	The purchase price for the Peñasquito Royalty payable by the Purchaser to the Vendor
shall be $100,000,000 (the “Peñasquito Purchase Price”) payable as follows:

	 	2.2.1.1.	 	$80,000,000 at the Penasquito Royalty Closing; and
	 
	 	2.2.1.2.	 	$20,000,000 on the first Business Day following the Penasquito Royalty
Closing, pursuant to the Promissory Note.

	 	2.2.2.	 	The purchase price for any and all of the Other Royalties that Purchaser elects to
acquire shall be $1.00 (the “Other Royalties Purchase Price”).

	2.3.	 	Payment of the Peñasquito Purchase Price
	 
	 	 	The Peñasquito Purchase Price shall be paid and satisfied by the Purchaser as follows:

	 	2.3.1.	 	by the wire transfer of immediately available federal funds in the amount of
$80,000,000 to a bank account maintained by the Vendor in a bank organized under the
Laws of and situated in the United States as shall be designated by the Vendor by
Notice to the Purchaser not later than three (3) Business Days prior to the Peñasquito
Royalty Closing and delivered at the Peñasquito Royalty Closing; and
	 
	 	2.3.2.	 	by the payment to the Vendor of $20,000,000 on the first Business Day after the
Penasquito Royalty Closing pursuant to the Promissory Note.

	2.4.	 	Payment of the Other Royalties Purchase Price
	 
	 	 	The Other Royalties Purchase Price shall be paid and satisfied by the Purchaser as a cash
payment of $1.00 on the Other Royalties Closing Date.

	3.	 	REPRESENTATIONS, WARRANTIES AND ACKNOWLEDGEMENTS
	 
	3.1.	 	Representations and Warranties of the Vendor and KEC
	 
	 	 	The Vendor and KEC jointly and severally represent and warrant to the Purchaser as follows,
in each case subject to the limitations set forth in Section 3.4, and acknowledge that the
Purchaser will rely on such representations and warranties in entering into this Agreement,
and in concluding the purchase and sale contemplated by this Agreement.

	 	3.1.1.	 	Organization and Power  —  Each of Vendor and KEC is a duly incorporated,
organized and validly subsisting corporation under the laws of its jurisdiction
of incorporation and has the corporate power to own its interest in the
Royalties and to carry out its obligations under this Agreement.

 

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	 	3.1.2.	 	Due Authorization  —  The execution and delivery of this Agreement and the
other documents to be executed and delivered by the Vendor and KEC hereunder and the
carrying out of the transactions contemplated hereby on the part of the Vendor and KEC
have been duly authorized by all necessary corporate action on the part of the Vendor
and KEC.
	 
	 	3.1.3.	 	Validity of Agreement  —  This Agreement and all other agreements and all
assignments and transfers to be executed and delivered by the Vendor and KEC hereunder
at the Peñasquito Royalty Closing and the Other Royalties Closing constitute and will
constitute valid, binding and enforceable obligations of the Vendor and KEC .
	 
	 	3.1.4.	 	No Conflicts or Violations  —  Neither the entering into of this Agreement
and the other documents and agreements to be executed and delivered by the Vendor or
KEC hereunder nor the completion of the transactions contemplated hereby in accordance
with the terms hereof will result in the violation of any of the terms or provisions of
the constating documents of the Vendor or KEC nor, subject to obtaining, on or before
the Peñasquito Royalty Closing and the Other Royalties Closing, any required consents
of any Governmental Authorities in Mexico to permit or recognize the transfer of the
Royalties to the Purchaser, and obtaining the consent of Minera Peñasquito to the
assignment of the Peñasquito Royalty and the Other Royalties, will the entering into of
this Agreement or such other documents and agreements nor such completion thereof:

	 	3.1.4.1.	 	result in the violation of any of the terms or provisions of any
indenture or other agreement, instrument or obligation to which either of
the Vendor or KEC is a party or by which it is bound or by which any of
the Vendor’s or KEC’s interests in the Royalties is bound or affected;
	 
	 	3.1.4.2.	 	conflict with, or result in a breach of, or violate any Law; or
	 
	 	3.1.4.3.	 	give to any other person, after the giving of notice or otherwise, any
right of termination, cancellation or acceleration in or with respect to
any agreement or other instrument to which the Vendor or KEC is a party or
is subject, or from which it derives benefit, by which any of the Vendor’s
or KEC’s interest in the Royalties is bound or affected.

	 	3.1.5.	 	Royalties free and clear  — The Vendor holds the Peñasquito Royalty, free and
clear of all liens, claims and encumbrances. Neither the Vendor nor KEC has
previously:

 

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	 	3.1.5.1.	 	assigned the Royalties or any of their rights with respect thereto;
	 
	 	3.1.5.2.	 	granted or created any liens, charges or encumbrances on or in respect
of the Royalties;
	 
	 	3.1.5.3.	 	granted any options to purchase or rights of first refusal with
respect to the Royalties; or
	 
	 	3.1.5.4.	 	agreed to any amendment to Section 4 of the Termination of Property
Rights Agreement or waived any of their rights thereunder or under the
contractos attached hereto as Schedules B and C.

	3.1.6.	 	Royalty Documents — The documents attached hereto as Schedules B through E
are true, correct, accurate, and complete copies of the documents they purport to be.
The Termination of Property Rights Agreement, and the Contratos de Cesión de Derechos
which are attached hereto as Schedules B, C, and E have not been altered, modified,
supplemented, or amended.

	 	3.1.7.	 	Compliance with Laws -To the Knowledge of Vendor

	 	3.1.7.1.	 	before May 5, 1999 all operations on and with respect to the
Concessions were conducted in substantial compliance with all applicable
Laws, including Environmental Laws, in all material respects; and
	 
	 	3.1.7.2.	 	the Vendor has not received from any Governmental Authority written
notice of any pending or threatened investigation or inquiry by any
Governmental Authority relating to any actual or alleged violation of any
Law, including any Environmental Law, in with respect to or affecting the
Concessions.

	 	3.1.8.	 	Broker’s Fees – Neither the Vendor nor KEC have any liability to pay any fees
or commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which Purchaser could become liable or obligated.
	 
	 	3.1.9.	 	Litigation  —  There is no action, suit, prosecution or other similar
proceeding of a material nature of which process initiating the same has been served on
the Vendor or KEC or, to the Knowledge of Vendor, threatened against the Vendor or KEC
and affecting any of the Vendor’s or KEC’s interest in the Royalties at law or in
equity or before or by any Governmental Authority.
	 
	 	3.1.10.	 	Information and Data — The Vendor and KEC have provided the Purchaser with
copies of all correspondence, notes, written information, data, and other documents in
their possession or control relating to the Royalties.

 

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	 	3.1.11.	 	Capitalization — The authorized and outstanding capital of the Vendor
consists of 426,193,333 shares of which KEC owns 126,507,103 shares and San Pedro
Mining Company, a Delaware corporation and a wholly owned subsidiary of KEC, owns
299,686,230 shares.
	 
	 	3.1.12.	 	Activities regarding Concessions — None of KEC, the Vendor or any affiliate
of either has at any time (a) engaged in any commercial mining of minerals from the
lands subject to the Concessions, provided the Purchaser acknowledges that KEC, the
Vendor or affiliates of them have conducted exploration on such lands or (b) had or
exercised the power to control the commercial mining of minerals from the lands subject
to the Concessions by any third party that owned or held rights in respect of any of
the Concessions, provided the Purchaser acknowledges that KEC, the Vendor or affiliates
of them may have had or exercised the power to control exploration on such lands by
third parties that owned or held rights in respect of the Concessions.

	3.2.	 	Representations and Warranties of the Purchaser
	 
	 	 	The Purchaser represents and warrants to the Vendor and KEC as follows, and acknowledges
that the Vendor and KEC will rely on such representations and warranties in entering into
this Agreement, and in concluding the purchase and sale contemplated by this Agreement.

	 	3.2.1.	 	Organization and Power  —  The Purchaser is a duly incorporated, organized
and validly subsisting company in good standing under the laws of its jurisdiction of
incorporation and has the corporate power to enter into this Agreement and to carry out
its obligations under this Agreement.
	 
	 	3.2.2.	 	Due Authorization  —  The execution and delivery of this Agreement and the
other documents to be executed and delivered by the Purchaser hereunder and the
carrying out of the transactions contemplated hereby on the part of the Purchaser have
been duly authorized by all necessary corporate and shareholder action on the part of
the Purchaser.
	 
	 	3.2.3.	 	Validity of Agreement  —  This Agreement and all other agreements to be
executed and delivered by the Purchaser hereunder at the Peñasquito Royalty Closing and
the Other Royalties Closing constitute and will constitute valid, binding and
enforceable obligations of the Purchaser.
	 
	 	3.2.4.	 	No Conflicts or Violations  —  Neither the entering into of this Agreement
and the other documents and agreements to be executed and delivered by the Purchaser
hereunder nor the completion of the transactions contemplated hereby in accordance with
the terms hereof will conflict with or result in the breach or violation of any Law or
any of the terms and provisions of the constating documents of the Purchaser or of any
indenture or other agreement, instrument or obligation to which the Purchaser is a
party or by which it is bound, or give to any other person, after the giving of notice
or otherwise, any right of termination, cancellation or acceleration in or with
respect to any agreement or other instrument to which the Purchaser is a party
or is subject, or from which it derives benefit.

 

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	 	3.2.5.	 	Broker’s Fees – The Purchaser has no liability to pay any fees or commissions
to any broker, finder, or agent with respect to the transactions contemplated by this
Agreement for which the Vendor or KEC could become liable or obligated.

	3.3.	 	Acknowledgements of the Vendor and KEC

	 	3.3.1.	 	The Vendor and KEC acknowledge that except as expressly set forth in Section 3.2, the
Purchaser makes no express or implied representations or warranties with respect to the
subject matter of this Agreement.
	 
	 	3.3.2.	 	The Vendor and KEC acknowledge and agree each with the other that KEC does not hold
any rights and interests in and to the Penasquito Royalty or the Other Royalties and,
based thereon, the Vendor and KEC jointly and severally represent and warrant to the
Purchaser that KEC does not hold any rights or interests in and to the Peñasquito
Royalty or the Other Royalties. The Vendor acknowledges that the Peñasquito Purchase
Price, regardless of how allocated between the Vendor and KEC, is full and fair
consideration for the Peñasquito Royalty and that the Purchaser is not responsible for,
and shall not be liable for, the consequences of the allocation of the Peñasquito
Purchase Price between the Vendor and KEC.

	3.4.	 	Acknowledgements of the Purchaser
	 
	 	 	The Purchaser acknowledges that except as expressly set forth in Section 3.1, the Vendor
and KEC make no express or implied representations or warranties with respect to the subject
matter of this Agreement and, in particular but without limitation (and without limiting the
other subsections of this Section 3.4) no express or implied representations or warranties
are or have been made, except as set forth in Subsections 3.1.7 and 3.1.12, and any and all
implied representations and warranties are hereby excluded, relating to the following, and
the Purchaser acknowledges that it is relying solely upon its own investigations with
respect to such matters:

	 	3.4.1.	 	Condition of Concessions  —  the value, merchantability or fitness for any
purpose of the Concessions; the existence or presence of any mineral substance or ore;
the feasibility or profitability of any mining operation on or with respect to the
Concessions; the value of the Royalties; the right or ability of Western Copper to mine
or produce minerals from the Concessions; the likelihood that minerals can or will be
removed from the Concessions in commercially saleable quantities; the physical
condition of the Concessions; the existence of contaminants on the Concessions; or
environmental or other liabilities associated with the Concessions; or the validity or
enforceability of Section 4 of the Termination of Property Rights Agreement or the
agreements attached as Schedules B and C hereto;

 

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	 	3.4.2.	 	Data  —  the accuracy or completeness, other than as set forth in Section
3.1.6, of any information, documentation or data, including without limitation any
information, documentation or data provided pursuant to or in connection with the
negotiation hereof, relating to the Royalties, the Concessions or otherwise;
	 
	 	3.4.3.	 	Royalties  —  the right or ability of Western Copper to pay the Royalties;
the legal status of Western Copper or the validity or enforceability of Section 4 of
the Termination of Property Rights Agreement or the agreements attached as Schedules B
and C hereto; or
	 
	 	3.4.4.	 	Title — the title, if any, of Western Copper to the Concessions, the absence
of third-party claims to or interests in the Concessions; or the status or good
standing of the Concessions including as to whether any or all of them continue to
exist or as to whether taxes or assessments required to maintain them in good standing
have been paid or as to whether before or after May 5, 1999 any rights were validly
obtained by conversion, extension or substitution of concessions.

	4.	 	PRE-CLOSING COVENANTS 
	 
	4.1.	 	Actions
	 
	 	 	Subject to the terms and conditions of this Agreement, each of the parties will use its good
faith efforts to take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary to be ready to comply with the requirements of Sections 6.2 and 6.3 at the
Penasquito Royalty Closing or the Other Royalties Closing as the case may be including
without limitation making such filings or registrations with Governmental Authorities as may
on its part be required.
	 
	4.2.	 	Consents
	 
	 	 	Subject to the limitations contemplated in Section 3.4, in respect of which no action by KEC
or the Vendor will be required and which KEC and the Vendor shall not be obligated to remedy
or cure, and to Section 8.2 :

	 	4.2.1.	 	Each of the parties shall use its respective reasonable commercial efforts to obtain
at its own expense on or before the Peñasquito Royalty Closing any and all consents or
approvals of Governmental Authorities as may be required on its part to sell, assign
and transfer its interest in the Penasquito Royalty to the Purchaser, provided that the
parties shall not be required to make any payments, including without limitation
payment of Taxes, or commit to any work or provision of services or otherwise incur any
material obligations in performing their obligations under this Subsection 4.2.1.
	 
	 	4.2.2.	 	Each of the Vendor and KEC shall use its reasonable commercial efforts to obtain at
its own expense as soon as reasonably possible after the date of this Agreement, and in
any event on or before the Peñasquito Royalty Closing, any and all consents, without
any material conditions or restrictions and in

 

13

	 	 	 	form and substance satisfactory to Purchaser acting reasonably, to this
Agreement and to the transactions contemplated hereby that are required to be
obtained from (a) Minera Peñasquito or it successors or assigns under the terms
of the Termination of Property Rights Agreement or the contrato attached hereto
as Schedule C and (b) from any third party other than Minera Peñasquito that
are necessary to the completion of the transactions contemplated hereby in
respect of the Peñasquito Royalty, provided that the Vendor and KEC shall not
be required to make any payments or otherwise incur any obligations in
performing their obligations under this Subsection 4.2.2, and provided further
that the Vendor and KEC shall consult with the Purchaser concerning the form
and substance of the request for consent to be made to Minera Peñasquito.
	 
	 	4.2.3.	 	Each of the Vendor and KEC shall use its reasonable commercial efforts to obtain at
its own expense as soon as reasonably possible after Notice from the Purchaser of the
identity of the Other Royalties, if any, it elects to purchase, and in any event on or
before the Other Royalties Closing, any and all consents, without any material
conditions or restrictions and in form and substance satisfactory to Purchaser acting
reasonably, to this Agreement and to the transactions contemplated hereby in respect of
such Other Royalties that are required to be obtained from (a) Minera Peñasquito or it
successors or assigns under the terms of the Termination of Property Rights Agreement
or the contratos attached hereto as Schedule B and (b) from any third party other than
Minera Peñasquito that are necessary to the completion of the transactions contemplated
hereby in respect of such Other Royalties, provided that the Vendor and KEC shall not
be required to make any payments or otherwise incur any obligations in performing their
obligations under this Subsection 4.2.3.

	4.3.	 	Due Diligence

	 	4.3.1.	 	Following the execution of this Agreement, until the Peñasquito Royalty Closing Date
or earlier termination of this Agreement, the Purchaser shall have the exclusive right
to conduct reasonable due diligence in respect of the ownership, terms and conditions,
validity, and good standing of the Peñasquito Royalty and the Peñasquito Concessions,
including, without limitation, through inquiries made of Governmental Authorities and
Minera Peñasquito and its affiliates.
	 
	 	4.3.2.	 	Following the execution of this Agreement, until the Other Royalties Closing Date or
earlier termination of this Agreement, the Purchaser shall have the exclusive right to
conduct reasonable due diligence in respect of the ownership, terms and conditions,
validity, and good standing of the Other Royalties and the Other Concessions,
including, without limitation, through inquiries made of Governmental Authorities and
Minera Peñasquito and its affiliates.

 

14

	 	4.3.3.	 	The Vendor and KEC shall co-operate with Purchaser in respect to such due diligence,
and, if requested by the Purchaser, each shall use its reasonable efforts to facilitate
direct communications between the Purchaser and Minera Peñasquito or any other third
party whose consent may be needed for the completion of the transactions contemplated
hereby.
	 
	 	4.3.4.	 	Following the execution of this Agreement, neither the Vendor nor KEC nor the
affiliates of either will enter into or continue any negotiations or discussions with
respect to the subject matter of this Agreement with any other person or entity.

	5.	 	CONDITIONS OF CLOSING
	 
	5.1.	 	Mutual Conditions

	 	5.1.1.	 	The obligations of the Vendor to complete the sale of the Peñasquito Royalty as
contemplated by this Agreement and the corresponding obligation of the Purchaser to
complete the purchase of the Peñasquito Royalty are subject to fulfillment of the
following conditions:

	 	5.1.1.1.	 	No Order or Proceedings  —  No injunction or restraining order
of any Governmental Authority of competent jurisdiction shall be in effect
which prohibits the transactions contemplated by this Agreement in respect
of the Peñasquito Royalty and no action or proceeding shall have been
instituted and remain pending before any such court or other Governmental
Authority to restrain or prohibit any of the transactions contemplated
hereby in respect of the Peñasquito Royalty.
	 
	 	5.1.1.2.	 	Approvals and Consents  —  Except as contemplated in Section
8.2, all consents, approvals, orders and authorizations of any person
(including, without limitation, Minera Peñasquito) or Governmental
Authority (or registrations, declarations, filings or recordings with any
such Governmental Authority) or stock exchange or securities commission
required in connection with the completion of any of the transactions
contemplated by this Agreement in respect of the Peñasquito Royalty, the
execution of this Agreement, the Peñasquito Royalty Closing, or the
performance of any of the terms and conditions hereof, shall have been
obtained without any material conditions or restrictions and in form and
substance satisfactory to both the Purchaser and Vendor, acting
reasonably, on or before the Peñasquito Royalty Closing Date.

	 	5.1.2.	 	The obligations of the Vendor to complete the sale of the Other Royalties that the
Purchaser has elected to purchase and the corresponding obligation of the Purchaser to
complete the purchase of such Other Royalties are subject to fulfillment of the
following conditions:

 

15

	 	5.1.2.1.	 	No Order or Proceedings  —  No injunction or restraining order
of any Governmental Authority of competent jurisdiction shall be in effect
which prohibits the transactions contemplated by this Agreement in respect
of the Other Royalties to be purchased and no action or proceeding shall
have been instituted and remain pending before any such court or other
Governmental Authority to restrain or prohibit any of the transactions
contemplated hereby in respect of such Other Royalties.
	 
	 	5.1.2.2.	 	Approvals and Consents  —  Except as contemplated in Section
8.2, all consents, approvals, orders and authorizations of any person
(including, without limitation, Minera Peñasquito) or Governmental
Authority (or registrations, declarations, filings or recordings with any
such Governmental Authority) required in connection with the completion of
any of the transactions contemplated by this Agreement in respect of the
Other Royalties to be purchased, or the performance of any of the terms
and conditions hereof in respect of such Other Royalties, shall have been
obtained without any material conditions or restrictions and in form and
substance satisfactory to both the Purchaser and Vendor, acting
reasonably, on or before the Other Royalties Closing Date.

	 	 	The foregoing conditions are inserted for the mutual benefit of the Vendor and the Purchaser
and may be waived in whole or in part if and only if jointly waived by the Vendor and the
Purchaser.
	 
	5.2.	 	Purchaser’s Conditions

	 	5.2.1.	 	The obligation of the Purchaser to complete the purchase of the Peñasquito Royalty is
subject to fulfillment of the following conditions:

	 	5.2.1.1.	 	Due Diligence  —  The completion of due diligence to the
Purchaser’s reasonable satisfaction with respect to the ownership, terms
and conditions, validity, and good standing of the Peñasquito Royalty and
the Peñasquito Concessions.
	 
	 	5.2.1.2.	 	Representations and Warranties  —  The representations and
warranties of the Vendor and KEC made in this Agreement (except in respect
of the Other Royalties) shall be true and correct in all material respects
as if made at and as of the Peñasquito Royalty Closing Date.
	 
	 	5.2.1.3.	 	Performance of Covenants - All covenants to be performed by
the Vendor or KEC hereunder on or before the Peñasquito Royalty Closing
Date pursuant to this Agreement shall have been performed in all material
respects.

 

16

	 	5.2.2.	 	If the Purchaser elects to purchase any of the Other Royalties, the obligation of the
Purchaser to complete the purchase of such Other Royalties is subject to fulfillment of
the following conditions:

	 	5.2.2.1.	 	Representations and Warranties  —  The representations and
warranties of the Vendor and KEC made in this Agreement shall be true and
correct in all material respects as if made at and as of the Other
Royalties Closing Date.
	 
	 	5.2.2.2.	 	Performance of Covenants - All covenants to be performed by
the Vendor or KEC hereunder on or before the Other Royalties Closing Date
pursuant to this Agreement shall have been performed in all material
respects.

	 	 	The conditions in Subsection 5.2.1 and 5.2.2 are for the exclusive benefit of the
Purchaser and may be waived by the Purchaser in whole or in part by Notice to the Vendor
from the Purchaser.
	 
	5.3.	 	Vendor’s Conditions

	 	5.3.1.	 	The obligations of the Vendor to complete the sale of the Peñasquito Royalty are
subject to fulfillment of the following conditions:

	 	5.3.1.1.	 	Representations and Warranties  —  The representations and
warranties of the Purchaser made in this Agreement shall be true and
correct in all material respects as if made on and as of the Peñasquito
Royalty Closing Date.
	 
	 	5.3.1.2.	 	Performance of Covenants - All covenants to be performed by
the Purchaser hereunder on or before the Peñasquito Royalty Closing Date
pursuant to this Agreement shall have been performed in all material
respects.

	 	5.3.2.	 	The obligations of the Vendor to complete the sale of any of the Other Royalties that
the Purchaser elects to purchase are subject to fulfillment of the following
conditions:

	 	5.3.2.1.	 	Representations and Warranties  —  The representations and
warranties of the Purchaser made in this Agreement shall be true and
correct in all material respects as if made on and as of the Other
Royalties Closing Date.
	 
	 	5.3.2.2.	 	Performance of Covenants - All covenants to be performed by
the Purchaser hereunder on or before the Other Royalties Closing Date
pursuant to this Agreement shall have been performed in all material
respects.

 

17

	 	 	The conditions in Subsection 5.3.1 and 5.3.2 are for the exclusive benefit of the Vendor
and may be waived by the Vendor in whole or in part by Notice to the Purchaser from the
Vendor.
	 
	5.4.	 	Termination
	 
	 	 	This Agreement, including without limitation Section 4.3.4, shall be subject to termination
as follows:

	 	5.4.1.	 	by the Vendor by Notice to the Purchaser on or before the Peñasquito Royalty Closing
Date if any one or more of the conditions set forth in Sections 5.1.1 or 5.3.1 has
become incapable of fulfillment or has not been fulfilled on the Peñasquito Royalty
Closing Date and has not been waived by the Vendor; or
	 
	 	5.4.2.	 	by the Purchaser by Notice to the Vendor on or before the Peñasquito Royalty Closing
Date if any one or more of the conditions set forth in Sections 5.1.1 or 5.2.1 has
become incapable of fulfillment or has not been fulfilled on the Peñasquito Royalty
Closing Date and has not been waived by the Purchaser.

	 	 	Any such termination shall be without prejudice to any right or remedy of any party with
respect to a breach of this Agreement by any other party.
	 
	 	 	Notwithstanding any other provision of this Agreement, if Minera Peñasquito timely objects
to, or attempts to condition, the transfer and assignment to the Purchaser of the Peñasquito
Royalty, the parties shall use their reasonable good faith efforts to cause Minera
Peñasquito to remove the objection or condition, provided that the Vendor and KEC shall not
be required to make any payments or otherwise incur any obligations in performing such
obligations, and the Peñasquito Royalty Closing Date shall be extended to the extent
necessary, but not later than April 30, 2007, after which this Agreement may be terminated
be either party.
	 
	 	 	Notwithstanding any other provision of this Agreement, if Minera Peñasquito or any third
party with the right to consent timely objects to, or attempts to condition, the transfer
and assignment to the Purchaser of any of the Other Royalties that the Purchaser has elected
to purchase, the parties shall use their reasonable good faith efforts to cause Minera
Peñasquito or such third party to remove the objection or condition, provided that the
Vendor and KEC shall not be required to make any payments or otherwise incur any obligations
in performing such obligations, and the Other Royalties Closing Date, shall be extended to
the extent necessary, but not later than July 30, 2007, after which this Agreement may be
terminated by either party, but such termination shall not affect in any manner the
transactions consummated at or in connection with the Peñasquito Royalty Closing.
	 
	5.5.	 	Confidentiality
	 
	 	 	The parties acknowledge that the Data Disclosure Agreement remains in full force and effect,
except as modified by this Section 5.5 and by Section 10.2. All information

 

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furnished to the Purchaser by the Vendor in connection with the Purchaser’s due diligence
investigations or otherwise pursuant to this Agreement shall be subject to the Data
Disclosure Agreement. The term of the Data Disclosure Agreement with respect to information
relating to the Peñasquito Royalty and the Peñasquito Concessions is hereby modified to
expire on the earlier of (a) October 4, 2008 or (b) the Peñasquito Royalty Closing. The
term of the Data Disclosure Agreement with respect to all other information subject thereto
is hereby modified to expire on the earlier of (a) October 4, 2008 or (b) the Other
Royalties Closing.

	6.	 	CLOSING
	 
	6.1.	 	Time and Place of Closing

	 	6.1.1.	 	The Vendor and Purchaser shall consummate and close the transactions contemplated
herein in respect of the Peñasquito Royalty (“Peñasquito Royalty Closing”), at KEC’s
offices located at 224 North 2200 West, Salt Lake City, Utah (or at such other place as
the parties may mutually agree) at 10:00 o’clock a.m., local time, on the Peñasquito
Royalty Closing Date. The Peñasquito Royalty Closing Date may be postponed to a later
time and date by mutual agreement signed by both parties. If the Peñasquito Royalty
Closing is postponed, all references to the Peñasquito Royalty Closing Date in this
Agreement shall refer to the postponed date.
	 
	 	6.1.2.	 	The Vendor and Purchaser shall consummate and close the transactions contemplated
herein in respect of any of the Other Royalties that the Purchaser elects to purchase
(“Other Royalties Closing”), at KEC’s offices located at 224 North 2200 West, Salt Lake
City, Utah (or at such other place as the parties may mutually agree) at 10:00 o’clock
a.m., local time, on the Other Royalties Closing Date. The Other Royalties Closing
Date may be postponed to a later time and date by mutual agreement signed by both
parties. If the Other Royalties Closing is postponed, all references to the Other
Royalties Closing Date in this Agreement shall refer to the postponed date.

	6.2.	 	Documents to be Delivered by the Vendor
	 
	 	 	At the Peñasquito Royalty Closing and at the Other Royalties Closing, as the case may be,
the Vendor shall deliver or cause to be delivered to the Purchaser:

	 	6.2.1.	 	all deeds of conveyance, bills of sale, transfer and assignments, in form and content
satisfactory to the Purchaser’s counsel, appropriate to vest in the Purchaser all of
the Vendor’s rights to the Peñasquito Royalty or the Other Royalties, as the case may
be, free and clear of all liens, claims and encumbrances, but subject to the
limitations set forth in Section 3.4, in immediately registerable form (if applicable)
in all places where registration of such instruments is required;
	 
	 	6.2.2.	 	certified copies of those resolutions of the directors and, if required, shareholders
of the Vendor and KEC required to be passed to authorize the

 

19

execution, delivery and implementation of this Agreement and of all documents
to be delivered by the Vendor and KEC under this Agreement and the completion
of the transactions contemplated hereby;

	 	6.2.3.	 	an opinion of the each of the Vendor’s and KEC’s internal or external counsel in a
form to the reasonable satisfaction of counsel for the Purchaser as to the corporate
existence of such party, and to the effect that the Agreement has been duly authorized,
executed and delivered by such party and constitutes a legal, valid and binding
obligation of such party;
	 
	 	6.2.4.	 	a certificate of an officer of the Vendor as to the accuracy as of the Peñasquito
Royalty Closing Date or the Other Royalties Closing Date, as the case may be, of the
Vendor’s representations and warranties and the performance of its covenants to be
performed at or before the Peñasquito Royalty Closing or Other Royalties Closing, as
the case may be; and
	 
	 	6.2.5.	 	a certificate of an officer of KEC as to the accuracy as of the Peñasquito Royalty
Closing Date or the Other Royalties Closing Date, as the case may be, of KEC’s
representations and warranties and the performance of its covenants to be performed at
or before the Peñasquito Royalty Closing or Other Royalties Closing, as the case may
be.

	6.3.	 	Documents to be Delivered by the Purchaser

	 	6.3.1.	 	At the Peñasquito Royalty Closing the Purchaser shall deliver or cause to be
delivered to the Vendor:

	 	6.3.1.1.	 	a covenant of the Purchaser in favour of the Vendor agreeing to assume
and pay or perform and indemnify the Vendor against the Assumed
Liabilities and other obligations agreed to be assumed by the Purchaser
under this Agreement in the manner and to the extent provided in this
Agreement, or such other documents as the Vendor may reasonably require in
order to provide for such assumption and indemnity;
	 
	 	6.3.1.2.	 	certified copies of those resolutions of the directors and, if
required, shareholders of the Purchaser required to be passed to authorize
the execution, delivery and implementation of this Agreement and of all
documents and payments to be delivered by the Purchaser under this
Agreement and the completion of the transactions contemplated hereby;
	 
	 	6.3.1.3.	 	a certificate of an officer of the Purchaser as to the accuracy as of
the Peñasquito Royalty Closing Date of the Purchaser’s representations and
warranties and the performance of its covenants to be performed at or
before the Peñasquito Royalty Closing;

 

20

	 	6.3.1.4.	 	an opinion of the Purchaser’s internal or external counsel in a form
to the reasonable satisfaction of counsel for the Vendor as to the
corporate existence of the Purchaser and to the effect that the Agreement
has been duly authorized, executed and delivered by the Purchaser and
constitutes a legal, valid and binding obligation of the Purchaser;
	 
	 	6.3.1.5.	 	the wire transfer of immediately available funds for $80,000,000,
being portion of the Peñasquito Purchase Price payable in cash at the
Peñasquito Royalty Closing; and
	 
	 	6.3.1.6.	 	the Promissory Note as evidence of the Purchaser’s obligation to pay
the balance of the Purchase Price on the first Business Day after the
Peñasquito Royalty Closing.

	 	6.3.2.	 	At the Other Royalties Closing the Purchaser shall deliver or cause to be delivered
to the Vendor:

	 	6.3.2.1.	 	certified copies of those resolutions of the directors and, if
required, shareholders of the Purchaser required to be passed to authorize
the execution, delivery and implementation of all documents to be
delivered by the Purchaser under this Agreement in respect of the Other
Concessions and the completion of the transactions contemplated hereby
with respect to the Other Concessions;
	 
	 	6.3.2.2.	 	a certificate of an officer of the Purchaser as to the accuracy as of
the Other Royalties Closing Date of the Purchaser’s representations and
warranties and the performance of its covenants to be performed at or
before the Other Royalties Closing; and
	 
	 	6.3.2.3.	 	the Other Royalties Purchase Price.

	7.	 	ASSUMPTION OF LIABILITIES; RELATED INDEMNITIES
	 
	7.1.	 	Assumed Liabilities 
	 
	 	 	Subject to the provisions of Section 7.2, from and after the Peñasquito Royalty Closing or
the Other Royalties Closing Date, as the case may be, the Purchaser shall assume, pay and
discharge as and when due and be responsible for all liabilities, if any, arising out of (a)
the ownership by the Vendor or KEC of the Peñasquito Royalty and, if the Purchaser purchases
any of the Other Royalties, such Other Royalties as are purchased by the Purchaser, and (b)
the ownership by the Vendor of the Peñasquito Concessions, and, if the Purchaser purchases
any of the Other Royalties, the Other Concessions to which the Other Royalties that are
purchased by the Purchaser apply, whether fixed, absolute or contingent, including but not
limited to any such liabilities arising under any Environmental Laws to which the Purchaser
or the Vendor may be subject, relating to:

 

21

	 	7.1.1.	 	the presence, on or within the Peñasquito Concessions or such Other Concessions as
the case may be of any reagent, chemical, contaminant, pollutant, dangerous substance,
liquid and industrial waste, industrial effluents, or hazardous
substance (in Section 7.1 collectively called the “Substances”), whether or not present at the Peñasquito
Royalty Closing Date or the Other Royalties Closing Date as the case may be;
	 
	 	7.1.2.	 	the environmental conditions of the air, water, surface or subsurface of the
Peñasquito Concessions or such Other Concessions as the case may be, resulting directly
or indirectly from the use, storage, transportation, disposal or discharge of any
Substances in, about or relating to the Peñasquito Concessions or such Other
Concessions, or the mining operations carried out thereon, including acts or omissions
done or omitted or conditions or events that existed at or prior to the Peñasquito
Royalty Closing Date or the Other Royalties Closing Date as the case may be; and
	 
	 	7.1.3.	 	any actual environmental damage or similar condition relating to the Peñasquito
Concessions or such Other Concessions as the case may be, except to the extent that
such damage results from non-compliance by the Vendor with any applicable Law;

in each case whether disclosed in environmental audits or other material provided by the
Vendor or KEC to the Purchaser or identified through investigations carried out by or on
behalf of the Purchaser and disclosed in writing to the Vendor (collectively, the “Assumed
Liabilities”), and the Purchaser shall, subject to the limitations set forth in Section
7.2, indemnify and save the Vendor and KEC harmless from all claims, demands, suits and
actions in respect of the Assumed Liabilities. Notwithstanding the foregoing or any other
provision of this Agreement, Assumed Liabilities shall expressly exclude (a) any obligations
of the Vendor or KEC of any type or character whatsoever not arising from or related to the
Peñasquito Concessions, the Peñasquito Royalty, the Other Concessions or the Other
Royalties, (b) any obligation, which to the Knowledge of Vendor was created by KEC or the
Vendor, to pay to any party that is not a Governmental Authority any royalty or other
payment based on production of minerals from the Peñasquito Concessions or the Other
Concessions, (c) any obligation to pay any taxes on income or capital gains (impuesto sobre
la renta) for or on behalf of the Vendor or KEC, and (d) liability or penalties for criminal
acts that occurred before May 5, 1999.

	7.2.	 	Limitations on Indemnity Relating to Assumed Liabilities 
	 
	 	 	Notwithstanding anything to the contrary set forth in this Agreement, the Purchaser shall
not be obligated to indemnify, defend or hold harmless the Vendor and KEC or either of them
from the first $10,000,000 in the aggregate, subject to adjustment as provided in the next
sentence of this Section 7.2, of losses otherwise subject to indemnity pursuant to Section
7.1 which arise out of or relate to events, acts or omissions that occurred prior to the
Penasquito Closing Date. The said $10,000,000 shall be reduced (so that the Purchaser’s
obligation to indemnify increases) by the aggregate amount of any liability of the Vendor
and KEC, limited by Section 7.5.4, for breach of the representation and warranty in Section
3.1.12.

 

22

	7.3.	 	Payment of Certain Taxes on Sale and Transfer
	 
	 	 	Each of the parties has concluded that no value added tax (impuesto al valor agregado) or
transfer tax is payable to any Mexican Governmental Authority in respect of the sale and
transfer of the Royalties to the Purchaser pursuant to this Agreement. Nonetheless the
Purchaser shall be responsible for and shall pay when due any such value added tax or
transfer tax payable by the Vendor or KEC or either of them or by the Purchaser in respect
of the sale and transfer of the Royalties to the Purchaser. The Vendor and the Purchaser
shall use their commercially reasonable efforts in good faith to minimize or eliminate any
such value added tax or transfer tax. The Purchaser shall have the right to contest the
imposition of any such tax and the Vendor and KEC shall cooperate with the Purchaser in any
opposition, contest or challenge to any attempt by any Mexican Governmental Authority to
impose any such tax. Notwithstanding the foregoing provisions of this Section 7.3, the
Purchaser shall have no obligation to pay any taxes due with respect to or based on (a) the
income or capital gains (impuesto sobre la renta) whether resulting from cash or other
consideration received by the Vendor for the sale of the Royalties or (b) any profit sharing
obligation or other employee compensation liability or social responsibility tax of the
Vendor or KEC.
	 
	7.4.	 	Indemnification by Purchaser
	 
	 	 	In accordance with the procedures in Section 7.6, the Purchaser shall indemnify the Vendor,
KEC, and their respective directors, officers, employees, agents, and representatives
against and agrees to hold the Vendor, KEC, and their respective directors, officers,
employees, agents, and representatives harmless from any and all damages, claims, losses,
liabilities, fines, penalties and expenses (including without limitation, expenses of
investigation, attorneys’ fees in connection with any action, suit or proceeding brought
against any of them, the cost of all studies, surveys, clean-up and any other environmental
expenses) incurred or suffered by the Vendor, KEC, or their respective directors, officers,
employees, agents, and representatives or any of them arising out of:

	 	7.4.1.	 	any misrepresentation or breach of warranty of which Notice has been given under
Section 7.6 before expiration of the representation or warranty as provided in Section
9.2;
	 
	 	7.4.2.	 	any covenant or agreement made or to be performed by the Purchaser pursuant to this
Agreement; and
	 
	 	7.4.3.	 	any liabilities or obligations assumed in Section 7.1 and in Section 7.3.

	7.5.	 	Indemnification by Vendor and KEC
	 
	 	 	In accordance with the procedures in Section 7.6, the Vendor and KEC, jointly and severally
agree to indemnify the Purchaser and its directors, officers, employees, agents, and
representatives against and agree to hold the Purchaser and its directors, officers,
employees, agents, and representatives harmless from any and all damages, claims, losses,
liabilities, fines, penalties and expenses (including without limitation, expenses of
investigation, attorneys’ fees and expenses in connection with any action, suit or

 

23

proceeding brought against the Purchaser, the cost of all studies, surveys, clean-up and any
other environmental expenses) incurred or suffered by the Purchaser or its directors,
officers, employees, agents, and representatives arising out of:

	 	7.5.1.	 	any misrepresentation or breach of warranty of which Notice has been given under
Section 7.6 before expiration of the representation or warranty as provided in Section
9.1;
	 
	 	7.5.2.	 	any covenant or agreement made or to be performed by the Vendor or KEC pursuant to
this Agreement; and
	 
	 	7.5.3.	 	any liabilities or obligations assumed in Section 7.3;

provided that notwithstanding the foregoing or anything else in this Agreement:

	 	7.5.4.	 	the liability of the Vendor and KEC collectively for breach of the representation and
warranty in Section 3.1.12 shall be limited in the aggregate to the lesser of
$10,000,000 or the difference between $10,000,000 and the aggregate of any losses
referred to in Section 7.2 which materialize.

If the Vendor and KEC pay the Purchaser on account of the obligation to indemnify against
breach of the representation and warranty in Section 3.1.12 and subsequently losses referred
to in Section 7.2 materialize which, if they had materialized first, would have reduced the
amount required to be paid by the Vendor and KEC, the Purchaser will repay the difference to
KEC.

The Vendor and KEC acknowledge that they retain responsibility for the amount of certain
losses as provided in Section 7.2.

	7.6.	 	Claims of Indemnity
	 
	 	 	A party claiming for indemnity under this Article 7 (the “Indemnitee”) shall give prompt
Notice of any claim, action, proceeding or circumstances that could reasonably give rise to
such a claim to the party which has agreed to indemnify it (the “Indemnitor”). Inadvertent
failure to give such prompt Notice will not preclude the Indemnitee from pursuing the claim
unless and to the extent that the Indemnitor is materially prejudiced by such failure. The
Indemnitor may, and will, if directed to do so by the Indemnitee, at its own expense and in
the name of the Indemnitee or otherwise, dispute any claim made, or any matter on which a
claim could be made, by a third party in respect of which a Notice has been given by the
Indemnitee under this Section 7.6 and may retain legal counsel acceptable to the Indemnitee
to have conduct of any proceeding relating to such a claim. The Indemnitee may employ
separate counsel with respect to any such claims brought by a third party and participate in
the defense thereof, provided the fees and expenses of such counsel shall be the
responsibility of the Indemnitee unless:

	 	7.6.1.	 	the Indemnitor fails to assume the defence of such claim on behalf of the Indemnitee
within five days of receiving Notice of such claim; or
	 
	 	7.6.2.	 	the employment of such counsel has been authorized by the Indemnitor;

 

24

in each of which cases the Indemnitor shall not have the right to assume the defense of such
suit on behalf of the Indemnitee but shall be liable to pay the reasonable fees and expenses
of counsel for the Indemnitee. For the purpose of confirming or disputing such a claim, the
Indemnitee will provide full and complete disclosure to the Indemnitor and complete access
to and right of inspection by the representatives of the Indemnitor of all documents and
records in the possession or control of the Indemnitee relating to such claim. If any
security is required to be provided for the purpose of defending or contesting any such
claim, including, without limitation, any appeal of any judgment, the Indemnitor shall
provide such security and all monies or property representing such security received by the
Indemnitee as a result of a successful defense or contestation will be held in trust by the
Indemnitee for the benefit of the Indemnitor and will be remitted to the Indemnitor on
demand. Neither the Indemnitee nor the Indemnitor shall settle, compromise or pay any claim
for which indemnity is sought hereunder except with the prior written consent of the other,
such consent not to be unreasonably withheld, or in the case of the Indemnitee unless the
Indemnitor fails to dispute and defend such claim.

	8.	 	POST-CLOSING MATTERS
	 
	8.1.	 	Royalty Payments
	 
	 	 	From and after the Peñasquito Royalty Closing, the Purchaser will be entitled to the full
use and enjoyment of the Peñasquito Royalty, including without limitation all payments
thereunder. From and after the Other Royalties Closing, the Purchaser will be entitled to
the full use and enjoyment of the Other Royalties acquired by the Purchaser, including
without limitation all payments thereunder.
	 
	8.2.	 	Consents and Approvals
	 
	 	 	Where the consent or approval of any Governmental Authority is required to transfer, or
assign or recognize the Royalties to and in the name of the Purchaser and has not been
obtained on or before the Peñasquito Royalty Closing Date or the Other Royalties Closing
Date, as the case may be, the Vendor will continue to hold the Royalties pending receipt by
the Purchaser of such consent or approval, provided that the Vendor’ sole obligation
hereunder will be to hold the Royalties, to remit any payments in respect thereof to the
Purchaser, and to carry out at the request and expense of the Purchaser such acts in
compliance with applicable Law as must be carried out by the holder thereof. The Purchaser
will be responsible for and will pay, and will indemnify and hold the Vendor and KEC and
each of them harmless from, any and all Taxes applicable to or arising from the receipt by
the Vendor of payments of the Royalties or the remittance of the Royalties to the Purchaser.
	 
	8.3.	 	Further Assurances
	 
	 	 	From and after the Peñasquito Royalty Closing each of the parties will make any and all such
filings or registrations with Governmental Authorities as may on its part be required to
complete the transfer of the Peñasquito Royalty to the Purchaser. If the Purchaser elects
to Purchase any of the Other Royalties, from and after the Other Royalties Closing each of
the parties will make any and all such filings or registrations with Governmental

 

25

Authorities as may on its part be required to complete the transfer of such Other Royalties
to the Purchaser, including all necessary or appropriate registrations with Governmental
Authorities.

	9.	 	SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
	 
	9.1.	 	Vendor’s and KEC’s Representations, Warranties and Covenants
	 
	 	 	All representations and warranties made by the Vendor or KEC in this Agreement or under this
Agreement shall, unless otherwise expressly stated, survive the Peñasquito Royalty Closing
and the Other Royalties Closing and any investigation at any time made by or on behalf of
the Purchaser, and shall continue in full force and effect for the benefit of the Purchaser
for a period of three years after the Peñasquito Royalty Closing; provided, however, that:

	 	9.1.1.	 	the representations and warranties made in Section 3.1.5 shall survive in perpetuity;
	 
	 	9.1.2.	 	the representations and warranties made in Section 3.1.12 shall survive for a period
of seven years after the Peñasquito Royalty Closing; and
	 
	 	9.1.3.	 	any and all representations or warranties that are limited to the “Knowledge of
Vendor” shall expire upon the earlier of (a) one year from the Peñasquito Royalty
Closing Date, or (b) the cessation of Stephen Scott’s full-time employment with the Rio
Tinto Group.

All covenants and agreements made by the Vendor or KEC in this Agreement or under this
Agreement shall survive Peñasquito Royalty Closing and the Other Royalties Closing and any
investigation at any time made by or on behalf of the Purchaser, and shall continue in full
force and effect for the benefit of the Purchaser.

	9.2.	 	Purchaser’s Representations, Warranties and Covenants
	 
	 	 	All representations and warranties made by the Purchaser in this Agreement or under this
Agreement shall, unless otherwise expressly stated, shall survive the Peñasquito Royalty
Closing and the Other Royalties Closing and any investigation at any time made by or on
behalf of the Vendor or KEC, and shall continue in full force and effect for the benefit of
the Vendor and KEC for a period of three years after the Peñasquito Royalty Closing. All
covenants and agreements made by the Purchaser in this Agreement or under this Agreement
shall survive the Peñasquito Royalty Closing and the Other Royalties Closing and any
investigation at any time made by or on behalf of the Vendor or KEC, or either of them, and
shall continue in full force and effect for the benefit of the Vendor and KEC.
	 
	10.	 	MISCELLANEOUS 
	 
	10.1.	 	Expenses – The parties shall each bear all of their own costs and expenses,
including consultants’ and attorneys’ fees, incurred in connection with the negotiation of
this Agreement and the consummation of the transactions contemplated hereby.

 

26

	10.2.	 	Public Announcements – The Vendor and KEC acknowledge that the Purchaser will
disclose the existence and terms and conditions of this Agreement and file this Agreement as
required by applicable Securities Laws, and the Vendor and KEC acknowledge that the Purchaser
will thereafter continue to disclose information concerning this Agreement, the Royalties, and
the Concessions to industry analysts and members of the public. The Purchaser shall comply
with all applicable Laws and shall not attribute any statements regarding this Agreement or
the Royalties to KEC or the Vendor. The parties will provide a draft of their initial
proposed press release to all other parties sufficiently in advance of its release to provide
the other parties a reasonable opportunity to review and comment on the content thereof.
	 
	10.3.	 	Notices — All notices, requests, demands, claims, and other communications hereunder
(“Notices”) must be in writing. Any party may send any Notice to the intended recipient at
the address set forth below using certified mail, nationally recognized express courier,
personal delivery or facsimile transmittal, and any such Notice will be deemed to have been
duly given (a) three days after being deposited in the U.S. mail, postage prepaid, (b) the
next Business Day after being deposited with a nationally recognized overnight courier and
upon confirming delivery with such courier, and (c) when actually received by an individual at
the intended recipient’s facsimile number and acknowledged as received.

	 	 	 	 	 
	 

	 	If to the Vendor or KEC:
	 	Kennecott Exploration Company
	 

	 	 	 	224 North 2200 West
	 

	 	 	 	Salt Lake City, UT 84116
	 

	 	 	 	Attention: President & CEO
	 

	 	 	 	Fax: (801) 238-2488
	 
	 	 	 	 
	 

	 	Informational copy to:
	 	Kennecott Exploration Company
	 

	 	 	 	224 North 2200 West
	 

	 	 	 	Salt Lake City, UT 84116
	 

	 	 	 	Attention: General Counsel
	 

	 	 	 	Fax: (801) 238-2494
	 
	 	 	 	 
	 

	 	If to Purchaser:
	 	Royal Gold, Inc.
	 

	 	 	 	1660 Wynkoop Street, Suite 1000
	 

	 	 	 	Denver, Colorado 80202
	 

	 	 	 	Attention: President
	 

	 	 	 	Fax: (303) 595-9385
	 
	 	 	 	 
	 

	 	Informational copy to:
	 	Royal Gold, Inc.
	 

	 	 	 	1660 Wynkoop Street, Suite 1000
	 

	 	 	 	Denver, Colorado 80202
	 

	 	 	 	Attention: General Counsel
	 

	 	 	 	Fax: (303) 595-9385

Notice to the Vendor in accordance with this Section shall be effective as Notice to both
the Vendor and KEC hereunder and only KEC shall be authorized to give Notice from or on
behalf of either the Vendor or KEC. Any party may change the address to which

 

27

	 	 	Notices are to be delivered by giving the other parties Notice in the manner herein set
forth.
	 
	10.4.	 	Entire Agreement — This Agreement, including the Schedules hereto, and the Data
Disclosure Agreement, as herein modified, constitute the entire agreement between the parties
in relation to the transactions herein contemplated and, except as specifically set out
herein, or in any documents delivered at Peñasquito Royalty Closing and the Other Royalties
Closing pursuant hereto, supersedes every previous agreement, communication, expectation,
negotiation, representation or understanding, whether oral or written, express or implied,
statutory or otherwise, among the parties with respect to the subject matter of this
Agreement, including without limitation the letter of the Purchaser to the Vendor dated
October 13, 2006 and the letter of KEC to the Purchaser dated October 17, 2006, and there are
no collateral agreements other than as expressly set forth or referred to in this Agreement.
	 
	10.5.	 	Amendments and Waivers — This Agreement may not be amended except by written
agreement among all the parties to this Agreement. No waiver of any provision of this
Agreement will be valid unless it is in writing and signed by each party. No such waiver by
any party of any default, misrepresentation, or breach of warranty or covenant hereunder,
whether intentional or not, will be deemed to extend to any prior or subsequent default,
misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence.
	 
	10.6.	 	Severability — Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction will not affect the validity or
enforceability of the remaining terms and provisions hereof or the validity or enforceability
of the offending term or provision in any other situation or in any other jurisdiction.
	 
	10.7.	 	Assignment –No party hereto may assign any right, benefit or interest in this
Agreement or the subject matter hereof without the written consent of all other parties hereto
and any purported assignment without such consent shall be void and of no effect.
	 
	10.8.	 	Enurement — This Agreement shall enure to the benefit of and be binding upon the
parties and their respective successors and permitted assigns.
	 
	10.9.	 	Conflict between Documents — Unless otherwise specifically stated, the provisions of
this Agreement shall govern and prevail in the event of any inconsistency or conflict between
the terms hereof and of any assignment, bill of sale, transfer or other document or instrument
executed or delivered by any party hereto in connection with the transactions contemplated
hereby.
	 
	10.10.	 	Time — Time shall be of the essence of this Agreement.
	 
	10.11.	 	Governing Law — This Agreement will be governed by and construed in accordance with
the laws of the State of Utah without giving effect to any choice or conflict of law provision
or rule that would cause the application of the laws of any jurisdiction other than the State
of Utah.

 

28

	10.12.	 	Execution — This Agreement may be executed by the parties in one or more
counterparts and by facsimile, each of which shall be deemed an original and all of which, taken
together, shall constitute one and the same instrument.

AS EVIDENCE OF THEIR AGREEMENT the parties have executed this Agreement as of the date first above
written.

	 	 	 	 	 
	KENNECOTT EXPLORATION COMPANY	 	 
	 
	 	 	 	 
	Per:
	 	/s/ Justin Quigley	 	 
	 

	 	 	 	 
	 

	 	Authorized Signatory	 	 
	 
	 	 	 	 
	MINERA KENNECOTT S.A. DE C.V	 	 
	 
	 	 	 	 
	Per:
	 	/s/ Justin Quigley	 	 
	 

	 	 	 	 
	 

	 	Authorized Signatory	 	 
	 
	 	 	 	 
	ROYAL GOLD, INC.	 	 
	 
	 	 	 	 
	Per:
	 	/s/ Tony Jensen	 	 
	 

	 	 	 	 
	 

	 	Authorized Signatory	 	 

 

 

Schedule A

Projects referred to in Definition of Other Concessions

Peñasquito

Villa de Ramos

San Jeronimo

La Virgen

Caños

Valenciana

Minillas

Nieves

Cazodero

El Herradero

San Pedro

Villa de Cos

 

 

Schedule D

Property Rights Agreement

 

 

PROPERTY RIGHTS AGREEMENT

THIS AGREEMENT is made as of the 13th day of March, 1998,

BETWEEN:

WESTERN COPPER HOLDINGS LTD., a company

incorporated under the laws of British Columbia (hereinafter

called “WTC”) together with MINERA WESTERN

COPPER S.A. DE C.V., a company incorporated under

the laws of Mexico (hereinafter called “Minera Western”)

(hereinafter collectively called “Western”)

OF THE FIRST PART

AND:

KENNECOTT EXPLORATION COMPANY, a

company incorporated under the laws of Delaware

(hereinafter called “KEC”), together with MINERA

KENNECOTT S.A. DE C.V., a company incorporated

under the laws of Mexico (hereinafter called “Minera

Kennecott”)

(hereinafter collectively called “Kennecott”)

OF THE SECOND PART

THIS AGREEMENT WITNESSES that in consideration of the sum of $10 now paid by Western to Kennecott
(the receipt and sufficiency of which is hereby acknowledged) and the covenants and agreements
hereinafter set forth, the parties hereto agree as follows:

	1.	 	DEFINITIONS
	 
	1.1.	 	“Affiliate” means any corporation which directly or indirectly controls, is controlled by, or
is under common control with, a party. The term “control” as used in this section and
elsewhere in this Agreement means the rights to the exercise of more than 50% of the voting
rights attributable to the shares of the controlled corporation. In the case of Kennecott, an
Affiliate shall mean any corporation, wherever situate, in which Rio Tinto PLC owns or
controls directly or indirectly such voting rights.

 

2

	1.2.	 	“Alliance Area” means the area that is outlined in black and identified as the “Western
Copper Kennecott Alliance Area of Interest” on the map attached as Schedule 1.2 hereto,
which area comprises the whole of the States of Zacatecas, Guanajuato and
Aguascalientes and part of the States of Jalisco and San Luis Potosi, Mexico, together
with any areas that the parties may add thereto by agreement in writing, but excluding the
area comprising the Teck Project.
	 
	1.3.	 	“Alliance Term” means the period of five years commencing January 1, 1998, subject to
being terminated or extended by agreement in writing of the parties.
	 
	1.4.	 	“Back-in Right” has the meaning assigned to it in Section 5.2.
	 
	1.5.	 	“Closing” means the completion of the purchase and sale of the Penasquito Project in
accordance with Article 2.
	 
	1.6.	 	
“Closing Date” means March 13, 1998 or such other date as may be agreed upon in
writing by the parties.
	 
	1.7.	 	“Corporation” means a joint venture corporation which may be incorporated by the parties
pursuant to Article 8.
	 
	1.8.	 	“Development Property” has the meaning assigned to it in Section 5.1.
	 
	1.9.	 	“Exercise Date” has the meaning assigned to it in Section 5.2.
	 
	1.10.	 	“Expenditures” means all expenses spent or incurred for Operations including but not
limited to, all fees and assessment work required to keep the Properties in good standing,
all expenditures for geophysical, geological and geochemical work of direct benefit to the
Properties, all surveys, drilling, assaying, metallurgical testing and engineering, costs of
feasibility studies and reports, and all other expenditures directly benefiting the
Properties and, in lieu of a charge for home office or administration expenses, an amount not to
exceed 5% of the foregoing expenditures. Payments that may be made pursuant the
Underlying Agreements are not included in Expenditures but cash payments after the date

 

3

hereof to acquire concessions that become included in Properties may be added to
Expenditures.

	1.11.	 	(This section intentionally left blank.)
	 
	1.12.	 	“Force Majeure” means any cause beyond a party’s reasonable control, including laws or
regulation, action or inaction of civil or military authority, inability to obtain any
licence, permit or other authorization that may be required, unusually severe weather, fire,
explosion, flood, insurrection, riot, labour dispute, inability after diligent effort to
obtain workmen or material, delay in transportation and acts of God, but not including lack of
funds.
	 
	1.13.	 	“Kennecott Concessions” means the exploration, exploitation mineral concessions and
lottery applications described in Schedule 1.13 to this Agreement, all of which are located
in the Alliance Area, together with any concessions that are added to Kennecott
Concessions pursuant to this Agreement and any mineral concessions, mining leases or
other forms of mineral title which may be issued in replacement thereof.
	 
	1.14.	 	“Net Smelter Returns” has the meaning assigned to it in Schedule 1.14 hereto.
	 
	1.15.	 	“Operations” means any and every kind of work which Western or Kennecott, as the case
may be, in its sole discretion, elects to do or to have done to explore and develop the
Properties or to conduct reconnaissance exploration in the Alliance Area in accordance
with good mining practice.
	 
	1.16.	 	“Option Agreement” means the agreement dated as of June 20, 1997 between the parties
hereto.
	 
	1.17.	 	“Penasquito Project” means the concessions described in Schedule 1.17 hereto.
	 
	1.18.	 	“Penasquito Agreements” means the three agreements under which Minera Kennecott
holds rights to the Penasquito Project, copies of which are attached as Schedule 1.18 hereto.

 

4

	1.19.	 	“Prime Rate” means at any particular time the annual rate of interest announced from
time to time by the Canadian Imperial Bank of Commerce, main branch, Vancouver, British
Columbia as a reference rate then in effect for determining floating rates of interest on
Canadian dollar loans made in Canada and as to which from time to time a certificate of an
officer of the Canadian Imperial Bank of Commerce shall be conclusive evidence.
	 
	1.20.	 	“Production Decision” means a decision made in good faith by Kennecott, subject to
Force Majeure and to the accuracy of the assumptions or forecasts on which the decision
is based, to bring a Development Property into commercial production.
	 
	1.21.	 	“Properties” means the Kennecott Concessions, the Western Concessions and the Penasquito Project.
	 
	1.22.	 	“Shareholders Agreement” means the agreement between the parties attached
as Schedule 1.22 to this Agreement.
	 
	1.23.	 	“Subscription Agreement” means the agreement dated the same date as this Agreement
between WTC and Minera Kennecott pursuant to which Minera Kennecott subscribes for
250,000 units of WTC, each unit comprising one common share and one common share
purchase warrant of WTC.
	 
	1.24.	 	“Shares” means common shares in the capital of WTC.
	 
	1.25.	 	“Teck Project” means the area within a square each of the sides of which is 15 kilometres
in length and runs between north and south or east and west and that has its south-east
corner at UTM coordinates 202,514.90 East; 2,495,967.40 North.
	 
	1.26.	 	“Underlying Agreements” means agreements, including the Penasquito Agreements,
between KEC or Minera Kennecott or any Affiliate of either of them and third parties
pursuant to which the Properties or any of them have been acquired.
	 
	1.27.	 	“Western Concessions” means the exploration, exploitation, mineral concessions and
lottery applications listed in Schedule 1.27 to this Agreement, all of which are located in
the Alliance Area, together with any concessions that are added to Western Concessions

 

5

pursuant to this Agreement and any mineral concessions, mining leases or other forms
of mineral title which may be issued in replacement thereof.

	1.28.	 	“$” means Canadian dollars, unless preceded by “U.S.”, in which case, it shall mean
United States of America dollars.
	 
	1.29.	 	Attached and forming part of this Agreement are the following Schedules:

	 	 	 	 	 
	 

	 	Schedule 1.2   -
	 	Alliance Area
	 

	 	Schedule 1.13 -
	 	Kennecott Concessions
	 

	 	Schedule 1.14 -
	 	Net Smelter Returns Royalty
	 

	 	Schedule 1.17 -
	 	Penasquito Project
	 

	 	Schedule 1.18 -
	 	Penasquito Agreement
	 

	 	Schedule 1.22 -
	 	Shareholders Agreement
	 

	 	Schedule 1.27 -
	 	Western Concessions

	2.	 	PURCHASE OF PENASQUITO
	 
	2.1.	 	Purchase and Sale
	 
	 	 	Kennecott hereby agrees to sell, assign and transfer the Penasquito Project to Western and
Western hereby agrees to purchase the Penasquito Project from Kennecott, at the Closing free
and clear of all liens, charges and encumbrances, but subject to the paramount title of the
United States of Mexico and to the Penasquito Agreement, in accordance with and subject to
the terms and conditions set forth in this Agreement for a purchase price and consideration
consisting of 995,740 Shares. Kennecott acknowledges that the Shares so acquired will be
subject to a 12-month hold period.
	 
	2.2.	 	Covenants of WTC
	 
	 	 	WTC covenants with Kennecott that:

	 	2.2.1.	 	it shall ensure that the Shares are listed and posted for trading on the Toronto
Stock Exchange forthwith after they have been issued;
	 
	 	2.2.2.	 	it shall file a Form 20 report under the regulations to the Securities Act
(British Columbia) and the Securities Act (Ontario) with the British Columbia

 

6

and Ontario Securities Commissions relating to the issue and sale of the Shares
to Kennecott hereunder within 10 days after such issuance and pay the required
filing fees in respect thereof;

	 	2.2.3.	 	for so long as Minera Kennecott or any Affiliate is a shareholder of WTC,
WTC shall maintain its status as a reporting issuer in good standing under the
Securities Act (Ontario), the Securities Act (British Columbia) and under the
securities legislation of any other province where it is a reporting issuer for
as long as its securities are listed and posted for trading on the Toronto Stock Exchange.

	2.3.	 	Conditions of Closing: Kennecott
	 
	 	 	The obligation of Kennecott to complete the sale of the Penasquito Project contemplated by
this Agreement is subject to the fulfilment of the following conditions:

	 	2.3.1.	 	Representations and Warranties  —  the representations and warranties
of Western contained in this Agreement and in the Subscription Agreement shall
be true on and as of the Closing Date with the same effect as though such representations and warranties had been made as of the Closing;
	 
	 	2.3.2.	 	Covenants — all of the covenants and agreements of Western to be performed
on or before the Closing Date pursuant to this Agreement and the
Subscription Agreement shall have been duly performed;
	 
	 	2.3.3.	 	Opinion — Kennecott shall have received an opinion of counsel to Western, in
form and substance satisfactory to Kennecott and its counsel, with respect to
all such matters as counsel to Kennecott may reasonably request relating to:

	 	2.3.3.1.	 	the corporate status of WTC and Minera Western,
	 
	 	2.3.3.2.	 	the allotment and issue of the Shares; the exemption of the issue, sale and delivery of the Shares from the prospectus and

 

7

registration requirements of applicable securities laws;
and any applicable resale restrictions on the Shares,

	 	2.3.3.3.	 	the due authorization, execution and delivery of this
Agreement and the Subscription Agreement and the
enforceability of such documents in accordance with their
terms (subject to qualifications relating to bankruptcy or
insolvency laws affecting creditors’ rights generally and the
availability of discretionary equitable remedies), and
	 
	 	2.3.3.4.	 	all such other legal matters relating to the issue and sale of the
Shares, and the consummation of the transactions contemplated by this Agreement and the Subscription
Agreement as Keanecott or its counsel may reasonably require;

	 	2.3.4.	 	Certificate — Kennecott shall have received a certificate signed by a senior
officer of WTC to the effect that the matters represented and warranted by
Western in Sections 10.1.1 to 10.1.14 inclusive are true and correct as of the
Closing with the same force and effect as if made at the Closing; and
	 
	 	2.3.5.	 	Concurrent Closing  —  the closing of the transactions provided in the
Subscription Agreement shall be consummated concurrently with the closing hereunder.

The foregoing conditions are inserted for the exclusive benefit of Kennecott and may be
waived in whole or in part by Kennecott at any time.

	2.4.	 	Conditions of Closing: Western
	 
	 	 	The obligation of Western to complete the purchase of the Penasquito Project contemplated by
this Agreement is subject to the fulfilment of each of the following conditions:

 

8

	 	2.4.1.	 	Representations and Warranties  — the representations and warranties of
Kennecott contained in this Agreement shall be true on and as of the Closing
Date with the same effect as though such representations and warranties had
been made as of the Closing;
	 
	 	2.4.2.	 	Covenants  —  all of the covenants and agreements of Kennecott to be
performed on or before the Closing Date pursuant to this Agreement shall
have been duly performed; and
	 
	 	2.4.3.	 	Concurrent Closing —  the closing of the transactions provided in the
Subscription Agreement shall be consummated concurrently with the closing hereunder.

The foregoing conditions are inserted for the exclusive benefit of Western and may be
waived in whole or in part by Western at any time.

	2.5.	 	Time and Place of Closing
	 
	 	 	The Closing shall take place in the offices of Lawson Lundell
Lawson & McIntosh, 16th Floor, 925 West Georgia Street, Vancouver, British Columbia at 10:00 a.m. Vancouver time on
the Closing Date, or at such other time on the Closing Date as the parties may agree.
	 
	2.6.	 	Kennecott’s Closing Documents
	 
	 	 	At the Closing, Kennecott will deliver to Western an assignment of the Penasquito Project
in such form as Western may reasonably require. Kennecott will use reasonable efforts to
assign to Western the environmental permit or permits and the surface rights agreement or
agreements that pertain to the Penesquito Project, but Western acknowledges that the same
might not be assignable, in which case Western will be required to obtain the same from the
relevant authority.

 

9

	2.7.	 	Western’s Closing Documents
	 
	 	 	At the Closing Western will:

	 	2.7.1.	 	deliver to Minera Kennecott duly executed certificates for the Shares referred
to in Section 2.1 in the name of Minera Kennecott;
	 
	 	2.7.2.	 	by agreement in form and content to the reasonable satisfaction of Kennecott
accept the assignment of the Penasquito Project and, subject to Section 4.9,
assume the Penasquito Agreement and all obligations of Kennecott
thereunder, including payment obligations;
	 
	 	2.7.3.	 	deliver to Kennecott a certified copy of resolutions of the directors of WTC
approving the allotment, issue, sale and delivery of the Shares as contemplated
by this Agreement and the execution and delivery of this Agreement, and
	 
	 	2.7.4.	 	execute and deliver to Kennecott, in recordable form, a notice of this
Agreement that Kennecott may record against title to the Properties, at its
expense.

	2.8.	 	Concurrent Delivery
	 
	 	 	It shall be a condition of the Closing that all matters of payment and the execution and
delivery of documents by each party to the other all pursuant to the terms hereof shall be
concurrent requirements and that nothing shall be complete at the Closing until everything
required as a condition precedent to the Closing has been paid, executed and delivered.
	 
	3.	 	ALLIANCE AREA: ADDITIONAL PROPERTIES
	 
	3.1.	 	If at any time during the Alliance Term Western stakes or otherwise acquires, directly or
indirectly, any right to or interest in any mining claim, licence, lease, grant, concession,
permit, patent, or other mineral property (collectively, “Acquired Rights”) that is located
wholly or partly within the Alliance Area it shall forthwith give notice to Kennecott of that
staking or acquisition, the cost thereof and all details in its possession with respect to the

 

10

nature of the Acquired Rights and the known mineralization. Kennecott may, within 30
days of receipt of Western’s notice, elect, by notice to Western, to require that the
Acquired Rights and the right or interest acquired be included in and thereafter form part
of the Western Concessions and the Properties for all purposes of
this Agreement. If
Kennecott does not make the election aforesaid within that period of 30 days, the Acquired
Rights shall not form part of the Western Concessions or the Properties and Western shall
be solely entitled thereto.

	3.2.	 	Kennecott shall be free, without obligation of any kind to Western, to stake or otherwise
acquire, own, explore, develop and mine and, subject to Section 7.1, to dispose of, directly
or indirectly, mining claims, licences, leases, grants, concessions, permits, patents and
other mineral properties and surface rights and water rights located wholly or partly in the
Alliance Area before, during and after the Alliance Term. Western acknowledges that Kennecott
now holds concessions in the Alliance Area that are not included in Kennecott Concessions.
	 
	4.	 	EXPLORATION OF THE PROPERTIES
	 
	4.1.	 	Western will manage and carry out Operations and will incur and pay Expenditures of not
less than US $1,000,000, during each year of the Alliance Term.
	 
	4.2.	 	Upon receipt by Kennecott of evidence to its reasonable satisfaction that Western has
incurred and paid Expenditures of not less than U.S. $1,000,000 during the first year of
the Alliance Term, Kennecott will subject to the provisions of Section 10.3 transfer the
Kennecott Concessions to Western and Kennecott will assign to Western and subject to
Section 4.9 Western will assume and perform any and all Underlying Agreements to which
the Kennecott Concessions may be subject.
	 
	4.3.	 	Upon the completion of the Closing on the Closing Date, the Option Agreement will be terminated.
	 
	4.4.	 	Kennecott will provide to Western immediate access to Kennecott’s exploration database for the Alliance
Area as at the date of this Agreement.

 

11

	4.5.	 	Kennecott will make one of its geoscientists available to work full time in connection
with Western’s Operations during the Alliance Term (subject to Kennecott’s normal policies
regarding vacation entitlement and sick leave). Kennecott will also provide to Western
additional technical and administrative support for its Operations on an “as available” basis
in Kennecott’s office in Guadalahara, Mexico. Each month, on receipt of invoice from
Kennecott, Western will:

	 	4.5.1.	 	reimburse Kennecott for the salaries or wages paid to the technical and
administrative support staff (but not the geoscientist) and for the cost of
benefits provided to them, in respect of those days during the preceding month
during which they were providing support for Western’s Operations; and
	 
	 	4.5.2.	 	pay to Kennecott one-twelfth of US $100,000 to defray the cost of Kennecott
maintaining its office Guadalahara, Mexico.

Western will also pay all expenses and costs incurred by the aforementioned personnel
including the geoscientist in connection with Operations.

	4.6.	 	Kennecott does not and will not represent or warrant the correctness, accuracy or
completeness of the information that it makes available pursuant to Section 4.4 or of any
advice or support provided to Western by any of its geoscientists or support staff, which
support will be relied upon by Western at its sole risk.
	 
	4.7.	 	Kennecott may terminate its obligations under Section 4.5 on notice to Western at any
time after there is a change in, or any person or group of persons acquire, control of
WTC. Upon such termination Western will return to Kennecott all information provided
by Kenneeott pursuant to Section 4.4 and any other information pertaining to the Alliance
Area or the Properties that Western may have received from Kennecott, in whatever form,
and any copies thereof or other documents that may contain such information in whole or
in part, will be delivered immediately to Kennecott by Western.
	 
	4.8.	 	During the Alliance Term, Western will keep the Properties free and clear of all liens,
charges and encumbrances; comply with all applicable laws, rules and
regulations; not

 

12

carry out or permit anyone to carry out any activity on or in respect of the
Properties which does not qualify as Operations; and carry out Operations in a good and
workmanlike manner in accordance with generally accepted mining practice.

	4.9.	 	Western will make the cash payments that total US $1,500,000 required to be paid in
1998 under the Penasquito Agreement and will file all Expenditures incurred by it for
assessment credit under applicable legislation for the benefit of the Properties. Western
may allow any part or parts of the Properties to lapse or to revert to third parties at any
time, provided that Kennecott will maintain the Penasquito Project in good standing and
will not allow it to lapse or revert until the first year of the Alliance Term has expired.
Before allowing any of the Properties to lapse or revert, Western will give 60 days notice
to Kennecott and will, if required by Kennecott within that time, transfer to Kennecott the
part or parts of the Property which Western intends to allow to lapse or revert, and the
same shall then cease to be subject to this Agreement. If Kennecott does not make such
request and part or parts of the Property lapse or revert, neither Western nor Kennecott
nor their respective Affiliates shall stake or reacquire the same in whole or in part until the
expiry of 12 months after the termination of the Alliance Term.
	 
	4.10.	 	Western will provide to Kennecott within 30 days of the end of each calendar quarter
during the Alliance Term written reports showing the Operations carried out and the
results obtained and detailing the Expenditures incurred together with evidence of
payment thereof. Kennecott shall at all reasonable times on reasonable notice to Western
have access to the information and data generated from Western’s Operations and to the
Properties and to Western’s Operations, provided that Kennecott shall not interfere with
Western’s activities hereunder. Kennecott will have the right from time to time on
reasonable notice to Western to audit and make copies of the books and records of
Western that pertain to Operations.
	 
	4.11.	 	Western shall indemnify and save harmless Kennecott from and against any and all claims,
debts, demands, suits, actions and causes of action whatsoever which may be brought or
made against Kennecott by any person, firm or corporation and all loss, cost, damages,
expenses and liabilities which may be suffered or incurred by Kennecott arising out of or in

 

13

connection with or in any way referable to, whether directly or indirectly, the entry
on, presence on, or activities on the Properties or the approaches thereto by Western or
its servants or agents, or, insofar as they are acting at the direction of Western, by the
geoscientist or other technical or administrative support staff provided by Kennecott
pursuant to Section 4.5, including without limitation bodily injuries or death at any time
resulting therefrom or damage to property.

	4.12.	 	Western shall maintain, during the Alliance Term, the following insurance:

	 	4.12.1.	 	the Mexican equivalent, if any, of Worker’s Compensation Insurance for
employees which is in full compliance with all applicable laws of the State of
Zacatecas or the United States of Mexico;
	 
	 	4.12.2.	 	Comprehensive General Liability Insurance and blanket contractual liability,
specifically including the liability assumed under any indemnity provided
herein, with a limit of liability for bodily injury of $1,000,000 each occurrence
and $1,000,000 aggregate and for property damage of $1,000,000 each
occurrence and $1,000,000 aggregate,
	 
	 	4.12.3.	 	
Comprehensive Automobile Insurance including all owned, non-owned and
hired vehicles with not less than the following limits:

	 	 	 	 	 	 	 	 	 
	 

	 	 	4.12.3.1.	 	 	Bodily Injury
	 	$1,000,000 each person
	 

	 	 	 	 	 	 	 	$1,000,000 each occurrence
	 
	 	 	 	 	 	 	 	 
	 

	 	 	4.12.3.2.	 	 	Properties Damage
	 	$500,000 each occurrence

All policies in subsection 4.12.2 shall be endorsed to provide that 30 days prior written
notice will be given to Kennecott by the carrier before effecting cancellation or material
change of coverage. In addition, all liability policies shall be endorsed to include
Kennecott and all subsidiary, associated and affiliated companies as additional insureds.

During the Alliance Term, Western shall not commence any work until a certificate in
evidence of insurance coverage has been provided to Kennecott, nor shall Western allow any

 

14

subcontractors to commence work until a similar evidence for each subcontractor has
been obtained and approved by Western. Western shall be responsible for compliance by all
subcontractors with these insurance requirements.

A certificate evidencing the required insurance shall be made out to Kennecott, and shall
be furnished to Kennecott promptly after issuance and must reflect both the endorsement
provisions requiring 30 days prior written notice to be given before cancellation or
material change, and the additional interests where applicable. Each certificate shall
specify the date when such benefits and insurance expire.

Western agrees that such benefits and insurance, as specified above, shall be provided and
maintained until the Alliance Term expires. The original certificate shall be mailed or
delivered to Kennecott.

If at any time the required insurance policies should be cancelled, terminated, or modified
so that the insurance is not in full force and effect as required herein, Kennecott may at
its option obtain insurance coverage equal to that required herein, with the cost thereof
chargeable to Western.

Kennecott and all of its subsidiary, associated and affiliated companies shall be released
and held harmless by Western and its subcontractors for all loss of or damage to Western’s
and/or its subcontractors’ sheds, tools, equipment, and/or materials, or to any property of
its employees.

	4.13.	 	The liability of Western assumed under this Agreement shall in no manner be limited by
the amount of the insurance which Western is required to provide by the provisions
hereof.
	 
	4.14.	 	Western will, at its own expense, repair any damage to all property as required by law,
whether such property is publicly or privately owned, including the property of Kennecott,
which may result from Western’s performance of this Agreement.

 

15

	5	 	BACK-IN RIGHTS
	 
	5.1.	 	Western will not mine or remove ores, minerals or metals from any concession comprised
in the Properties, except in non-commercially saleable quantities for the purpose of
sampling, testing and assaying, without first providing to Kennecott:

	 	5.1.1.	 	a copy of a report certified by a recognized firm of competent, professional
engineers stating that drilling by Western on the concession (a “Development
Property”) has defined an inferred resource thereon; and
	 
	 	5.1.2.	 	a detailed statement audited and verified by a recognized firm of competent
chartered accountants showing the aggregate amount of (i) the Expenditures
incurred and paid by Western on that Development Property; (ii) the
aggregate amount of any and all payments by Western made pursuant to the
Underlying Agreement, if any, that pertains to the Development Property; and
(iii) the aggregate amount that Western paid to Kennecott to acquire that
Development Property from Kennecott (the aggregate of the foregoing
amounts being hereafter called the “Back-in Price”).

(the date on which all of the above have been received by Kennecott being hereinafter
called the “Notice Date”).

	5.2.	 	Kennecott shall have and Western hereby grants separately in respect
of each Development Property the option (the “Back-in Right”) to reacquire from Western a 51%
undivided right, title and interest in the Development Property and in all information,
property and assets, both real and personal, acquired by the expenditure of Expenditures
thereon, free and clear of all liens, charges, encumbrances, security interests, liabilities
and adverse claims whatsoever that were not existing on the date of this Agreement.
Kennecott may exercise the Back-in Right by delivering notice of exercise to Western within
the time provided in Section 5.4 and within 30 days thereafter providing Western with
payment of an amount which, subject to Section 5.5, shall be equal to 150% of 51% of the
Back-in Price for that Development Property, whereupon Kennecott shall acquire and be vested
with a 51% undivided right, title and interest in and to the Development

 

16

Property
and all information, property and assets, both real and personal, acquired by the
expenditure of the Expenditures thereon, free and clear as aforesaid. Failure to exercise a
Back-in Right as provided herein shall be deemed to be an election not to exercise such
Back-in Right.

	5.3.	 	Kennecott shall have the right to conduct its own audit of the Back-in Price claimed by
Western and to dispute the amount or any portion thereof within 50 days after the Notice
Date. Such dispute shall be referred to a single arbitrator acting under the Commercial
Arbitration Act (British Columbia), whose decision shall be final and binding. The party in
whose favour the arbitrator’s decision is made will pay the costs of the arbitration.
	 
	5.4.	 	If the amount (the “Disputed Amount”) that Kennecott in good faith disputes is more than
10% of the Back-in Price claimed by Western, then Kennecott may exercise the Back-in
Right within 60 days after the Notice Date or 30 days after any dispute is resolved under
Section 5.3, whichever is later. If the Disputed Amount is 10% or less of the Back-in
Price claimed by Western, then Kennecott may exercise the Back-in Right within 60 days
after the Notice Date (the date by which Kennecott must give notice being hereinafter
called the “Exercise Date”).
	 
	5.5.	 	If the Disputed Amount is 10% or less of the Back-in Price claimed by Western,
Kennecott may defer payment of 150% of 51% of the Disputed Amount until the dispute
is resolved by arbitration. Within 10 days after the arbitrator’s decision, Kennecott will
pay to Western 150% of 51% of the Disputed Amount to the extent that the arbitrator
determines that it was properly included in the Back-in Price. If the arbitrator finds that
the whole of the Disputed Amount was properly included, Kennecott shall also pay to
Western interest on the deferred payment at an annual rate equal to the Prime Rate plus
2% calculated from the Exercise Date to the date of payment.
	 
	5.6.	 	If Kennecott exercises a Back-in-Right in respect of a Development Property it must either:

 

17

	 	5.6.1.	 	incur aggregate Expenditures in respect of that Development Property and/or
make payments to third parties pursuant to the Underlying Agreement or
other agreement pertaining thereto of US $25,000,000, or
	 
	 	5.6.2.	 	make a Production Decision in respect of that Development Property,

within 60 months from the Exercise Date applicable to that Development Property.
Additionally, at least US$1,000,000 of the US $25,000,000 referred to above must be
incurred or paid in each of five successive years, the first of which commences on the
Exercise Date.

	5.7.	 	Kennecott may accelerate any or all of the Expenditures contemplated by Section 5.6.
Kennecott may at any time from time to time pay to Western money in lieu of incurring
Expenditures under Section 5.6, if sufficient Expenditures have been incurred to maintain
the Development Property in good standing, in which event Kennecott shall be deemed to
have incurred additional Expenditures in the same amount as the amount of any such
payment and in satisfaction of such of the provisions of Section 5.6 as indicated by
Kennecott at the time of the making of such payment. Any excess payments or
Expenditures made or incurred in any period will be carried forward and applied as a
credit against Expenditures to be made in the next succeeding period
or periods.
	 
	5.8.	 	If from time to time Kennecott is prevented by Force Majeure from incurring Expenditures
or making a Production Decision as provided in Section 5.6 then Kennecott shall have
such additional time as is reasonable in the circumstances to do so, the amount of such
additional time not to exceed the duration of the Force Majeure.
	 
	5.9.	 	If Kennecott does not satisfy the requirements in Section 5.6 in respect of a Development
Property, it will at its own expense and without reimbursement of any amounts that it paid
to exercise its Back-in Right in respect of that Development Property provide to Western
a duly executed retransfer of its right, title and interest in that Development Property,
and Kennecott will then have no further rights or obligations hereunder, including without
limitation under Section 5.6, with respect to that Development Property.

 

18

	6.	 	ROYALTIES
	 
	6.1.	 	For each Development Property in respect of which Kennecott does not exercise the
Back-in Right, Kennecott shall be entitled to and Western will pay each year a royalty
equal to a percentage of Net Smelter Returns from the Development Property. The
percentage will be 2% in respect of each Development Property that was a Kennecott
Concession or the Penasquito Project (with the Penasquito Project deemed to be a single
Development Property) and 1% in respect of each Development Property that was a Western
Concession. The maximum aggregate amount payable by Western on account of each such royalty
will be US $15,000,000 if the royalty pertains to a Kennecott Concession or the Penasquito
Project or US $7,500,000 if the royalty pertains to a Western Concession.
	 
	6.2.	 	“Net Smelter Returns” shall be calculated and paid as provided in Schedule 1.14.
	 
	6.3.	 	The royalties granted hereunder shall constitute an interest in land that will run with the land.
	 
	7.	 	TRANSFERS OF THE PROPERTIES
	 
	7.1.	 	Subject to Section 7.2, if at any time during the Alliance Term Kennecott intends to sell or
otherwise dispose of one or more concessions (the “Subject Property”) located in the Alliance
Area that are not comprised in the Kennecott Concessions, Western shall have a right to
purchase the same as follows:

	 	7.1.1.	 	Kennecott shall provide notice in writing to Western that identifies the Subject
Property and states the aggregate amount, in current U.S. dollars, that has been
expended on the Subject Property up to the date of the notice to explore or develop it
in accordance with good mining practice and to acquire and maintain title to it, plus
5% thereof in lieu of home office or administration expenses (the total thereof being
hereinafter referred to as “Historical Cost”) The delivery of such notice shall
constitute an offer by Kennecott to Western to dispose of the Subject Property to
Western for a purchase price equal to

 

19

the Historical Cost, provided that Western may elect to pay such price
in U.S. dollars or Canadian dollars or in Shares, with the exchange rate
between U.S. and Canadian dollars being the rate in effect on the date of
Kennecott’s notice to Western and the price per Share equal to the weighted
average price at which such Shares traded on the Toronto Stock Exchange on the
ten days (exclusive of holidays) preceding the delivery of such notice by
Kennecott). Western shall have 30 days from the date of such notice to elect to
acquire the Subject Property by delivering to Kennecott, within such 30 days,
payment of the Historical Cost by way of a certified cheque for U.S. dollars or
Canadian dollars in the appropriate amount or delivery to Kennecott of the
appropriate number of fully paid and non-assessable Shares represented by a
duly executed share certificate in the name of Minera Kennecott;

	 	7.1.2.	 	if Western fails to so elect and pay for the Subject Property within the time
provided for in Section 7.1.1, Kennecott shall have 90 days following the
expiration of such period to sell or otherwise dispose of the Subject Property
or any interest in it for consideration of such value (which may be greater or
less than the Historical Cost) and of such kind as Kennecott may choose to
accept from the purchasing party;
	 
	 	7.1.3.	 	if Kennecott fails to consummate such transaction within the period set forth
in Section 7.1.2, the right of Western under this Section 7.1 shall be deemed
to be revived and any subsequent disposition by Kennecott during the Alliance
Term of any concessions located in the Alliance Area that are not Kennecott
Concessions shall again be conducted in accordance with the provisions of
Section 7.1; and
	 
	 	7.1.4.	 	If Western exercises its right to acquire concessions from Kennecott pursuant
to this Section 7.1, such concessions shall be deemed to be Kennecott
Concessions for all purposes of this Agreement.

	7.2.	 	Kennecott shall have the right without restriction under Section 7.1 to:

 

20

which Western has given notice under Section 3.1 and the 30 day period referred to in
Section 3.1 has not expired) unless:

	 	7.3.1.	 	the person to whom the disposition is being made first agrees with Kennecott
in writing to be bound by this Agreement including without limitation
Article 6 and, unless Kennecott has waived its Back-in Right in respect of the
property pursuant to Section 7.6, Article 5, such agreement to be in form and
content satisfactory to Kennecott; and
	 
	 	7.3.2.	 	if the Penasquito Project or. the Kennecott Concessions or any of them are
included in the disposition, Kennecott has given its prior written consent; and
	 
	 	7.3.3.	 	if the Penasquito Project or the Kennecott Concessions or any of them are
included in the disposition and at any time after the date of this Agreement
there has been a change in, or an acquisition by any person or group of
persons of, control of WTC, Western has first provided Kennecott with a right
of first refusal as provided in Section 7.5, which Kennecott has not exercised.

	7.4.	 	Western shall have the right without restriction under Section 7.3 to transfer the
Properties to a corporation at least 99.9% of the shares of which are beneficially owned
and held by WTC or Minera Western, provided that such corporation agrees in writing
with Kennecott to hold the Properties subject to this Agreement, the form and content of
such agreement in writing to be as Kennecott may reasonably require.
	 
	7.5.	 	If Western intends to sell, assign, transfer, convey or otherwise dispose of the Penasquito
Project, the Kennecott Concessions, or any of them or any interest therein, (the “Subject
Interest”) as permitted by Section 7.3 but in circumstances where Section 7.3.3 applies,
Kennecott shall have a right of first refusal as follows:

	 	7.5.1.	 	Western shall promptly notify Kennecott of its intentions. The notice shall be
accompanied by an executed agreement (the “Third Party Agreement”) entered into
by Western in good faith with an arm’s length third party that provides for all
of the terms of the intended disposition and is subject to

 

21

Interest”) as permitted by Section 7.3 except in circumstances where Section 7.3.3
applies, Kennecott shall have a right of first refusal as follows:

	 	7.5.1.	 	Western shall promptly notify Kennecott of its intentions, The notice shall be
accompanied by an executed agreement (the “Third Party Agreement”)
entered into by Western in good faith with an arm’s length third party that
provides for all of the terms of the intended disposition and is subject to
Kennecott’s right in this Section 7.5. If the purchase price and consideration does
not consist solely of cash the notice shall also state Western’s good faith
calculation of the fair market value of such consideration stated in U.S. or
Canadian dollars. If Kennecott in good faith disputes such valuation within 10 days
of receipt of the notice from Western it may refer the matter to a single
arbitrator under the Commercial Arbitration Act (British Columbia) whose decision
shall be final and binding on the parties. The delivery of such notice and Third
Party Agreement shall constitute an offer by Western to Kennecott to dispose of the
Subject Interest to Kennecott on the same terms and conditions as provided in the
Third Party Agreement, provided that Kennecott may elect to pay the fair market
value of such consideration in U.S. or Canadian dollars. Kennecott shall have 30
days from the date of such notice or the date on which the arbitrator’s decision is
made, whichever is later to notify Western whether it elects to acquire the Subject
Interest. If it does so elect, the disposition shall be consummated promptly after
notice of such election is delivered to Western;
	 
	 	7.5.2.	 	if Kennecott fails to so elect within the time provided for in Section 7.5.1,
Western shall have 90 days following the expiration of such period to
consummate the transaction provided by the Third Party Agreement but
subject to Kennecott’s rights under this Agreement; and
	 
	 	7.5.3.	 	if Western fails to consummate such transaction within the period set forth in
Section 7.5.2, the right of first refusal of Kennecott under this Section 7.5
shall be deemed to be revived. Any subsequent proposal to dispose of any

 

 

22

rights or interests of Western shall again be conducted in accordance with
the provisions of Section 7.5.

	7.6.	 	If Western intends, at any time before the same has become a Development Project, to sell,
transfer or assign all or an interest in the Penasquito Project or any of the Kennecott
Concessions to an arm’s length third party for consideration which Western in good faith
believes represents the fair market value thereof Western may require Kennecott to waive its
Back-in Right in respect thereof at the closing of the sale thereof to the arm’s length third
party, in consideration for payment to Kennecott at such closing of 10% of such consideration.
The request for such waiver will be made to Kennecott at least 15 days but not more than 30
days before the intended closing date and shall be accompanied by a copy of the purchase
agreement and an affidavit of a senior officer of Western stating that the consideration
specified therein is all of the consideration to be received by Western for the sale of such
property and that such officer in good faith believes it to be the fair market value thereof.
As provided in Section 7.3.1, the third-party purchaser must acknowledge that it is acquiring
the property subject to Kennecott’s right to be paid a royalty in respect of that property
pursuant to Article 6 hereof.
	 
	7.7.	 	Western will not mortgage, charge, pledge or otherwise encumber any of the Properties without
the prior written consent of Kennecott, except for the sole purpose of raising funds to be
expended on the development of the Properties.
	 
	8.	 	CORPORATION AND SHAREHOLDERS AGREEMENT
	 
	8.1.	 	If from time to time Kennecott exercises the Back-in Right on any Development Property and
completes the expenditures required by Section 5.6, then as soon as reasonably possible
thereafter, Kennecott and Western shall meet to finalize an appropriate corporate structure
for the post-exploration mining activities on that Development Property and cause a
Corporation to be incorporated. Such corporation shall be governed pursuant to the terms of
the Shareholders Agreement. Kennecott and Western agree that the final corporate structure and
organization shall be in accordance with the Shareholders Agreement and shall be one which
will minimize tax liability and optimize profit repatriation for both Kennecott and Western.
Incorporation of the Corporation, its

 

 

23

organization and the subscription of the Shares shall be completed no later than 30
days following the exercise by Kennecott of a Back-in Right. A Shareholders Agreement shall
be entered into and a new Corporation shall be incorporated for each Development Property.
For the purposes of Section 4.1 of the Shareholders Agreement, the agreed value of a
Development Property will be the Back-in Price applicable to it plus the Expenditures
incurred by Kennecott under Section 5.6 in respect of it.

	8.2.	 	Unless otherwise agreed to in writing, Kennecott and Western, to the extent of their
respective interests in accordance with Section 5.2, shall pay all costs and expenses incurred
or accrued by either of them which are directly or reasonably related to the incorporation,
organisation or setting up of the Corporation (the “Preincorporation Expenses”).
Preincorporation Expenses shall include, but not be limited to, any and all stamp taxes,
import duties, other taxes’ or duties,, filing or other fees, assessments or other payments
made to a Governmental Authority, notary public and legal fees and
disbursements and any costs or expenses directly or reasonably incurred or accrued by either
Kennecott or Western (the “Paying Party”) to third parties, shall not include costs and
expenses incurred or accrued internally by the Paying Party or its Affiliates.
	 
	8.3.	 	Preincorporation Expenses incurred to third parties shall be reimbursed to the Paying Party
in the amount and currency actually incurred by the Paying Party. Within 60 days following the
date of incorporation of the Corporation, the Paying Party shall submit to the non-Paying
Party invoices for the Preincorporation Expenses specifying the non-Paying Party’s share of
all such Preincorporation Expenses not previously billed or invoiced to the non-Paying Party.
	 
	8.4.	 	The non-Paying Party shall pay its pro rata share of Preincorporation Expenses as set forth
in any invoice submitted to it by the Paying Party pursuant to Section 8.3 within 30 days
after such invoice is sent to the non-Paying Party.
	 
	8.5.	 	Upon the incorporation and organization of the Corporation and the issuance of Shares in
accordance with Section 4.1 of the Shareholders Agreement, of which 51% will be issued to
Minera Kennecott and 49% will be issued to Minera Western, Kennecott shall complete

 

 

24

the date on page 1 of the Shareholders Agreement which shall be the date on which
the Corporation was incorporated and any other information required by such form. Kennecott
shall also complete Schedule A thereto with a description of the Development Property and
each of the parties shall then execute and deliver to the other a copy of the Shareholders
Agreement and all documents and instruments contemplated by the Shareholders Agreement to
be executed and delivered concurrently with or following the entering into of the
Shareholders Agreement.

	8.6.	 	Kennecott and Western shall not be liable to one another for losses sustained or liabilities
incurred by either Kennecott or Western or their respective Affiliates relating to or arising
out of the incorporation, organization or setting up of the Corporation (“Preincorporation
Activities”), except as may result from Kennecott’s or Western’s (or their respective
Affiliates’) negligence or wilful misconduct. Neither Kennecott nor Western nor their
Affiliates shall in any event have any liability to the other for incidental, consequential,
indirect, exemplary or punitive damages for losses or liabilities to
or arising out of Preincorporation Activities.
	 
	8.7.	 	None of the provisions in this Agreement will merge in the Shareholders Agreement and this
Agreement will survive the execution and delivery thereof. For greater certainty but without
limiting the scope of Article 9 hereof, the parties acknowledge that Kennecott’s rights under
Article 9 hereof shall continue to apply in respect of funds that Minera Western requires to
carry out the purposes and intent of each Shareholders Agreement.
	 
	9.	 	WESTERN’S FINANCING REQUIREMENTS
	 
	9.1.	 	From and after the date hereof, Western shall provide written notice to Kennecott of any and
all transactions proposed to be entered into or corporate actions proposed to be taken by
Western or any subsidiary thereof for the purpose, directly or indirectly, of raising funds
(each such transaction being hereinafter referred to as a “Financing”). Each such notice
provided by Western shall set out the terms and conditions on which such Financing is
proposed to be entered into (which may include the approval of the Toronto Stock Exchange or
other securities regulatory authority) and shall be deemed to constitute an

 

 

25

offer (a “Financing Offer”) to Kennecott to participate in such Financing upon such terms
and conditions by providing a fraction of the funds to be raised under the financing, where
the numerator of such fraction is the number of Shares at that time held by Kennecott and
the denominator of such fraction is the total number of Shares at that time issued and
outstanding. The terms and conditions of the Financing Offer shall be set out in sufficient
detail that the acceptance thereof by Kennecott would constitute a binding agreement
between the parties to complete the Financing as to the portion to be provided by Kennecott
on such terms and conditions and, without limiting the generality of the foregoing, such
terms and conditions shall include the closing date (which shall be a date not more than 90
days from the date of the Financing Offer) for such Financing and:

	 	9.1.1.	 	in the case of a Financing involving the issue and sale of shares of WTC or a
subsidiary thereof, the number and class of shares proposed to be issued and sold, the
purchase price therefor and any special rights or restrictions
attached to such shares;
	 
	 	9.1.2.	 	in the case of a Financing involving a loan to be made to or a debt to be incurred by
Western or a subsidiary thereof, the principal amount and term of such loan or debt,
the applicable interest rate and details regarding the calculation and payment thereof
and provisions relating to any security to be granted in respect of the loan or debt;
	 
	 	9.1.3.	 	if the Financing is conditional on Western receiving from the proposed sources of
funds (collectively, the “investors”) commitments to provide an amount which in the
aggregate is not less than a specified amount, details of such condition; and
	 
	 	9.1.4.	 	if the Financing is conditional on Western receiving from each investor a commitment
to provide an amount which is not less than a specified amount, details of such
condition.

	9.2.	 	Kennecott shall provide written notice to Western of its acceptance or rejection of each
Financing Offer within 72 hours after the receipt by it thereof, provided however that

 

 

26

Western shall not present Kennecott with a Financing Offer unless it has previously given
to Kennecott at least 20 days notice of all material terms of the Financing other than
pricing matters, including dividend or interest rates as applicable.

	9.3.	 	If Kennecott accepts a Financing Offer as to participation in the Financing as to all or a
portion of the funds intended to be raised thereby by Western or a subsidiary thereof, Western
or such subsidiary and Kennecott shall complete the Financing (or the portion thereof in
respect of which Kennecott has determined to participate) on the terms and conditions set out
in the Financing Offer, with any and all such amendments thereto as they may agree upon in
writing. Kennecott may, at its option, from time to time complete any Financing accepted by it
through any Affiliate.
	 
	9.4.	 	If Kennecott declines to participate in a Financing Offer Western may complete the Financing
with other investors on and subject to the terms and conditions set out in the Financing
Offer. Any amendment to such terms and conditions such that they are materially less
favourable to Western or any amendment or waiver of a condition made pursuant to Subsection
9.1.3 or Subsection 9.1.4 shall be deemed to constitute a new Financing and shall require
Western to make a Financing Offer to Kennecott to participate in such new proposed Financing
on such amended terms and conditions in accordance with the provisions of Section 9.1, in
which case the provisions of this Article 9 shall apply mutatis mutandis to such new proposed
Financing.
	 
	9.5.	 	WTC may issue Shares as consideration for the acquisition of mineral properties without
obligation to Kennecott under Section 9.1. Each time that WTC issues Shares as
consideration for the acquisition of mineral properties it will, at the same time, to the
extent permitted by applicable securities laws, offer to allot and issue to Kennecott the
number of Shares which is in the same proportion to the number of such Shares so issued as
consideration for the acquisition of mineral properties as the number of Shares then held by
Kennecott is to the total number of Shares then outstanding, at a price per share equal to the
weighted average price at which such shares traded on the Toronto Stock Exchange on the ten
days (exclusive of holidays) preceding the date of such offer on

 

 

27

which Shares were traded. The offer by Western shall be open for acceptance by
Kennecott for 30 days.

	10.	 	REPRESENTATIONS AND WARRANTIES

	 
	10.1.	 	Western represents and warrants to Kennecott (all of which shall survive Closing)
that:

	 	10.1.1.	 	WTC is duly incorporated and organized and validly existing under the laws of the
Province of British Columbia and Minera Western is duly incorporated and organized and
validly existing under the laws of Mexico and each of them has the requisite power and
capacity and is duly qualified to carry on its business as now conducted and to own its
properties and assets;
	 
	 	10.1.2.	 	the execution and delivery of this Agreement and the performance of the terms hereof
by Western have been duly authorized by all necessary corporate action and this
Agreement constitutes a legal, valid and binding agreement enforceable
against Western in accordance with the terms hereof;
	 
	 	10.1.3.	 	the transactions contemplated by this Agreement do not and will not result in a
breach of or constitute a default under (whether after notice or lapse of time or both)

	 	10.1.3.1.	 	any statute, rule or regulation applicable to Western, including,
without limitation, the securities laws of the provinces of Ontario and
British Columbia and other provinces where WTC is reporting issuer and the
bylaws, rules and regulations of the Toronto Stock Exchange;
	 
	 	10.1.3.2.	 	the provisions of the constating documents of WTC and Minera Western
or of any resolutions of the directors or shareholders of either of them
in effect as of the date hereof;

 

 

28

	 	10.1.3.3.	 	any mortgage, note, indenture, contract, agreement or other instrument to
which Western is a party or by which it is bound; or
	 
	 	10.1.3.4.	 	any judgment, decree or order which binds Western or the property or assets
of Western;

	 	10.1.4.	 	to the best of Western’s knowledge, Western is conducting its business in all respects in
compliance with all applicable laws, rules and regulations of each jurisdiction in which its
business is carried on and is duly licensed, registered or qualified in all jurisdictions in
which it owns, leases or operates its property or carries on business to enable its business
to be carried on as now conducted and its property and assets to be owned, leased and operated
and all such licenses, registrations and qualifications are valid and subsisting and in good
standing;
	 
	 	10.1.5.	 	there is no action, suit, proceeding or inquiry before any court, governmental agency or
body, pending or threatened, to which Western is a party or to which its property is subject,
which might result in any material adverse change in the condition (financial or otherwise) or
business of Western or which might adversely affect the property or assets of Western, taken
as a whole;
	 
	 	10.1.6.	 	at the Closing Time, WTC will have obtained all necessary regulatory, stock exchange and
other approvals and consents with respect to the issue and sale of the Shares to be issued at
the Closing;
	 
	 	10.1.7.	 	at the Closing Time, the Shares to be issued at the Closing will be duly authorized and
validly allotted and issued as fully paid and non-assessable Shares in the capital of WTC;

 

 

29

	 	10.1.8.	 	the authorized capital of WTC consists of 20,000,000 Shares, of which 12,227,413 Shares are
issued and outstanding as fully paid and non-assessable Shares as at the date hereof;
	 
	 	10.1.9.	 	WTC is a reporting issuer not in default under the Securities Act (Ontario) and is not in
default under the securities legislation of any other province where it is a reporting issuer;
	 
	 	10.1.10.	 	the audited consolidated financial statements of WTC for the years ended September 30,
1997, 1996 and 1995 have been prepared in accordance with generally accepted accounting
principles and present fully, fairly and correctly in all material respects the results of
operations and the changes in WTC’s financial position for the periods then ended, and any
interim financial statements for any subsequent financial period have been prepared in
accordance with generally accepted accounting principals and present fully, fairly and
correctly in all material respects the results of operations and the changes in WTC’s
financial position for the periods then ended;
	 
	 	10.1.11.	 	Western has no material liabilities contingent or otherwise other than those disclosed in
the audited financial statements of WTC for the year ended September 30, 1997;
	 
	 	10.1.12.	 	WTC has met all timely disclosure requirements under the Securities Act (British
Columbia), the Securities Act (Ontario) and National Policy No. 40, and, without limiting the
generality of the foregoing, there has not occurred any adverse material change since
September 30, 1997 and no adverse material fact exists in relation to Western or its
securities that has not been publicly disclosed;
	 
	 	10.1.13.	 	the representations and warranties of Western in this Agreement are now and at the Time of
Closing will be true and correct;

 

 

30

	 	10.1.14.	 	WTC is the registered and beneficial owner of 4999 shares in the capital of
Minera Western which represent 99.9% of the issued and outstanding shares in the
capital of Minera Western and WTC owns such shares free and clear of all liens,
charges, encumbrances or rights of third parties. No person other than WTC has the
right, actual, contingent, conditional or otherwise, in any circumstance, to be
allotted or issued shares or other securities of Minera Western;
	 
	 	10.1.15.	 	it has title to the Western Concessions subject only to the paramount title of the
United States of Mexico; and
	 
	 	10.1.16.	 	it has paid all taxes, assessments, charges, fees and other levies imposed upon or
required with respect to the Western Concessions and has filed all returns and reports
required therefore.

	10.2.	 	Kennecott represents and warrants to Western that:

	 	10.2.1.	 	Kennecott has title to concessions comprised in the Kennecott Concessions of which
it is the claimholder, as shown in Schedule 1.13, subject only to the paramount title
of the United States of Mexico and to the provisions of the Underlying Agreements to
which the same may be subject;
	 
	 	10.2.2.	 	it has paid all taxes, assessments, charges, fees and other levies imposed upon or
required with respect to the Kennecott Concessions and has filed all returns and
reports required therefore;
	 
	 	10.2.3.	 	it has full power and absolute authority to grant to Western the rights provided in
this Agreement that pertain to the Penasquito Project and the concessions comprised in
the Kennecott Concessions of which Kennecott is the claimholder as shown in Schedule
1.13 and to assign the Penasquito Agreements;
	 
	 	10.2.4.	 	this Agreement constitutes a legal, valid and binding obligation of Kennecott; and

 

 

31

	 	10.2.5.	 	to the best of its knowledge, there are no actual pending or
threatened lawsuits or administrative actions affecting the Kennecott Concessions.

	10.3.	 	Western acknowledges that Kennecott makes not representation or warranty as to its title to,
or its right to assign, the Kennecott Concessions of which it is not the claimholder as shown
in Schedule 1.13 and that under Section 4.2 it will be required only to transfer to Western
such interest therein if any as it may have and only if it has the right to do so without
incurring any cost, penalty or liability.
	 
	10.4.	 	The representations and warranties contained in Section 10.1 are provided for the
exclusive benefit of Kennecott and a breach of any one or more of them may be waived by
Kennecott in writing in whole or in part at any time without prejudice to its rights in
respect of any other breach of the same or any other representation or warranty.
	 
	10.5.	 	The representations and warranties contained in Section 10.2 are provided for the
exclusive benefit of Western and a breach of any one or more of them may be waived by Western
in writing in whole or in part at any time without prejudice to its rights in respect of any
other breach of the same or any other representation or warranty.
	 
	10.6.	 	Western shall indemnify and hold Kennecott harmless in respect of any loss resulting from
any breach of any representation or warranty of Western (and for the purposes of this Section
10.6 the words “to the best of Western’s knowledge” in Section 10.1.4 shall be deemed to be
deleted therefrom) in this Agreement or in any document delivered hereunder or arising out of
facts or circumstances constituting such a breach, or any failure to perform any covenant
contained in this Agreement.
	 
	10.7.	 	The covenants, representations and warranties contained in this Agreement will not merge in
or be extinguished by the Shareholders Agreement or the Closing and shall survive Closing and
the execution and delivery of the Shareholders Agreement and of documents delivered at the
Closing and shall continue in full force and effect.

 

 

32

	11.	 	CONFIDENTIALITY
	 
	11.1.	 	During the Alliance Term, all information received or obtained by a party hereunder or
pursuant hereto shall be kept confidential by it and no part thereof may be disclosed or
published without the prior written consent of the other except such information as may be
required to be disclosed or published by regulatory bodies having jurisdiction.
	 
	11.2.	 	Notwithstanding Section 11.1, a party may disclose information to any person or persons with
whom it proposes to contract as permitted by Article 7 or to its professional advisors or
consultants, provided that Western shall not disclose any information or data that has been or
is provided to it by Kennecott without Kennecott’s prior written consent and that neither
party will disclose information to persons with whom it proposes to contract or to
professional advisors or consultants without first requiring them to acknowledge, in writing,
the confidentiality of such information.
	 
	11.3.	 	Except as required by law or regulatory authority, during the Alliance Term neither party
shall make any public announcements or statements concerning this Agreement or the Properties
without the prior approval of the other, not to be unreasonably withheld.
	 
	11.4.	 	During the Alliance Term, the text of any public announcements or statements including news
release which Western intends to make pursuant to the exception in Section 11.3 shall be made
available to Kennecott prior to publication and Kennecott shall have the right to make
suggestions for changes therein. If Kennecott is identified in such public announcement or
statement it shall not be released without the consent of Kennecott in writing.
	 
	12.	 	NOTICES
	 
	12.1.	 	All notices, payments and other required communications (“Notices”) to one of Kennecott
or Western by the other shall be in writing and shall be addressed respectively as follows:

 

 

33

If to Kennecott:

Commercial Director

Kennecott Exploration Company

224 North 2200 West

Salt Lake City, Utah 84116

USA

Telecopier: (801) 238-2420

with a copy to:

Director Strategic Development

Kennecott Canada Exploration Inc.

200 Granville Street, Suite 354

Vancouver, B.C.

V6C 1S4

Telecopier: (604) 669-5255

If to Western:

President

Western Copper Holdings Ltd.

1185 West Georgia Street, Suite 1650

Vancouver, B.C.

V6E 4E6 Canada

Telecopier: (604) 688-4670

All Notices shall be given (1) by personal delivery to the addressee, or (2) by electronic
communication, with a confirmation sent by registered or certified mail return receipt requested,
or (3) by registered or certified mail or commercial carrier return receipt requested. All Notices
shall be effective and shall be deemed delivered (1) if by personal delivery on the date of
delivery if delivered during normal business hours and, if not delivered during normal business
hours, on the next business day following delivery, (2) if by electronic communication on the next
business day following receipt of the electronic communication, and (3) if solely by mail or
commercial carrier on the next business day after actual receipt. A party may change its address
by Notice to the other party.

	13.	 	MISCELLANEOUS
	 
	13.1.	 	Ownership of Subsidiaries. WTC covenants with Kennecott that it will at all times
hold and beneficially own at least 99.9% of the shares of Minera Western and that WTC or
Minera Western will at all times hold and beneficially own at least 99.9% of the shares of any
corporation to which the Properties are transferred pursuant to Section 7.4. KEC

 

 

34

covenants with Western that it and its Affiliates will at all times be the sole
shareholders of Minera Kennecott.

	13.2.	 	Assignment. KEC and Minera Kennecott may freely assign their respective rights
under this Agreement in whole or in part, subject only to the restriction in Section 7.1.
WTC and Minera Western may assign this Agreement only as expressly permitted.
	 
	13.3.	 	Applicable Law. The terms and provisions of this Agreement shall be interpreted
in accordance with the laws of British Columbia.
	 
	13.4.	 	Time. Time shall be of the essence of this Agreement.
	 
	13.5.	 	Entire Agreement. This Agreement terminates and replaces all prior agreements,
either written, oral or implied, between the parties with respect to the subject matter
hereof, and together with the Subscription Agreement constitutes the entire agreement between
the parties with respect to the subject matter hereof.
	 
	13.6.	 	Void or Invalid Provision. If any term; provision, covenant or condition of
this Agreement, or any application thereof, should be held by a court of competent
jurisdiction to be invalid, void or unenforceable, all provisions, covenants and conditions of
this Agreement, and all applications thereof not held invalid, void or unenforceable shall
continue in full force and effect and in no way be affected, impaired or invalidated thereby.
	 
	13.7.	 	Additional Documents. The parties shall do and perform all such acts and things,
and execute all such deeds, documents and writings, and give all such assurances, as may be
necessary to give effect to this Agreement.
	 
	13.8.	 	Modification. No modification of this Agreement shall be valid unless made in writing and
duly executed by the parties.
	 
	13.9.	 	Waiver. The failure of a party to insist on the strict performance of any provision
of this Agreement or to exercise any right, power or remedy upon a breach hereof shall not
constitute a waiver of any provision of this Agreement or limit that party’s right thereafter
to enforce any provision or exercise any right.

 

 

35

	13.10.	 	Binding Effect. This Agreement shall enure to the benefit of and be binding upon
the parties hereto and their respective successors and permitted assigns.
	 
	13.11.	 	Counterparts. This Agreement may be executed in counterparts.

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

	 	 	 	 	 
	WESTERN COPPER HOLDINGS LTD.	 	 
	 
	 	 	 	 
	By:

	 	/s/ [ILLEGIBLE]	 	 
	 

	 	 	 	 
	 
	Title:

	 	V. P. Finance	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	MINERA WESTERN COPPER S.A. DE C.V.	 	 
	 
	 	 	 	 
	By:

	 	/s/ [ILLEGIBLE]	 	 
	 

	 	 	 	 
	 
	Title:

	 	V. P. Finance	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	KENNECOTT EXPLORATION COMPANY	 	 
	 
	 	 	 	 
	By:

	 	/s/ John V. [ILLEGIBLE]	 	 
	 

	 	 	 	 
	 
	Title:

	 	President	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	MINERA KENNECOTT S.A. DE C.V.	 	 
	 
	 	 	 	 
	By:

	 	/s/ John V. [ILLEGIBLE]	 	 
	 

	 	 	 	 
	 
	Title:

	 	President	 	 
	 

	 	 	 	 

 

 

 

Schedule E

Termination of Property Rights Agreement

 

 

TERMINATION OF PROPERTY RIGHTS AGREEMENT

THIS
AGREEMENT is made as of the 5th day of May, 1999, by and between KENNECOTT EXPLORATION
COMPANY, a Delaware corporation, MINERA KENNECOTT S.A. DE C.V., a Mexico corporation (collectively,
“Kennecott”), WESTERN COPPER HOLDINGS LTD., a British Columbia corporation, and MINERA WESTERN
COPPER S.A. DE C.V., a Mexico Corporation (collectively, “Western Copper”).

WHEREAS, Kennecott and Western Copper entered into that certain Property Rights Agreement
(“Property Rights Agreement”) dated 13 March, 1998; and,

WHEREAS, The parties now wish to terminate the Property Rights Agreement;

NOW THEREFORE, in consideration of the mutual covenants and promises contained herein, the parties
agree as follows:

	1.	 	Western Copper acknowledges that it currently owes Kennecott ONE MILLION THREE HUNDRED
FORTY-FOUR THOUSAND FIVE HUNDRED AND FIFTY-SIX UNITED STATES DOLLARS (US$1,344,556.00)
for expenses incurred by Kennecott on Western Copper’s behalf, plus interest.
Western Copper hereby confirms that the expenditures are valid and this amount is undisputed.
On or before the close of business on 5 May, 1999 (the “Effective Date”), Western Copper shall
pay Kennecott such amount in full.
	 
	2.	 	After the Effective Date, and performance of Western Copper’s obligations pursuant to
Paragraphs 1, 3(a) and 3(b) herein, Kennecott shall assign, at Western Copper’s sole expense,
all of Kennecott’s right, title and interest in the Properties, as more particularly described
in Exhibit A hereto, to Western Copper or its designated assignee. Western Copper shall assume
and perform, at its sole risk and expense, all of obligations pertaining to the Properties and
shall indemnify and hold Kennecott harmless for any liabilities, costs or expenses
arising from Western Copper’s activities on the Properties. WESTERN COPPER HEREBY
ACKNOWLEDGES THAT TITLE TO SEVERAL OF THE CONCESSIONS COMPRISING THE
PROPERTIES ARE IN JEOPARDY, THROUGH NO FAULT OF KENNECOTT, DUE TO DELINQUENT TAX AND
PROPERTY PAYMENTS. ASSIGNMENT OF THE PROPERTIES TO WESTERN COPPER SHALL BE MADE ON AN “AS IS”
BASIS, AND KENNECOTT MAKES NO REPRESENTATIONS OR WARRANTIES AS TO TITLE. If transfer of the
Properties is not made as of the Effective date, Kennecott shall continue to hold title to the
Properties for the benefit of Western Copper or its designated assignee, provided that Western
Copper acknowledges that it shall be solely responsible for the prompt payment of taxes and
property payments required to keep the Properties in good standing. It is understood and
agreed that Kennecott shall be under no obligation to make any payments on Western Copper’s
behalf. Western Copper shall indemnify and hold Kennecott harmless for any claim of any type
resulting directly or indirectly from Western Copper’s failure to make tax or property
payments in a timely manner.
	 
	3.	 	As of the Effective Date, Kennecott shall surrender its Back-In Rights on the
Properties, as set forth in Section 5 of the Property Rights Agreement. As

1

 

	 	 	consideration for Kennecott surrendering such rights, on the Effective Date Western
Copper shall:

	 	(a)	 	Issue Kennecott 250,000 common shares of Western Copper common stock. Such
stock shall be subject only to such hold period as is required under the rules of the
Toronto Stock Exchange, and shall be validly issued, fully paid and nonassessable, and
free and clear of all liens. Such number of shares shall be adjusted for any
intervening subdivision of Western Copper stock or other capital reorganization.
	 
	 	(b)	 	Amend Section 2 (b) of that certain Subscription Agreement dated 12 March,
1998 and each of the, share purchase warrants referred to therein, so that such
warrants may be exercised any time prior to March 12, 2001 at a price of two dollars
(C$2.00) per share, subject to such restrictions and accelerated expiry time as
required by the Toronto Stock Exchange.
	 
	 	(c)	 	In addition to performing the obligations set forth above, Western Copper
shall pay Kennecott, on or before 1 August, 1999, the sum of fifty thousand U.S.
dollars (US$50,000), plus the full amount of tax penalties incurred for failure to
make tax payments on 30 April, 1999.

	4.	 	After the Effective Date, and performance of Western Copper’s obligations pursuant to
Paragraphs 1, 3(a) and 3 (b) herein, the Properties shall be transferred to Western Copper subject
to Kennecott’s right to receive a one percent (1%) net smelter return royalty on Western Copper
Concessions, and two percent (2%) net smelter return royalty on
kennecott Concession or the Penasquito Property, as set forth in
Section 6 of the Property
Rights Agreement, with the exception that the royalties shall no longer be capped. The net smelter
return royalty shall be payable as provided in Schedule 1.14 of the Property Rights Agreement. A
copy of Schedule 1.14 is attached hereto as Exhibit B. A schedule of
properties subject to such obligation to pay royalties is attached
hereto as Exhibit A. Any subsequent
transfers of the Properties by Western Copper shall be subject to
Kennecott’s right to receive its net smelter
royalty, and any subsequent transferee shall acknowledge in writing its obligation to pay such
royalty and file, at its sole expense, such documentation as may be necessary to acknowledge
Kennecott’s right with the appropriate governmental authorities in Mexico.
	 
	 	 	Kennecott’s royalty interest on the Villa de Ramos
claim group, as described in Exhibit C hereto, can be purchased under the
following terms.

	 	(a)	 	One million U.S. dollars (US$1,000,000) per percentage point at any time on or before
the second anniversary of this Termination Agreement; or,
	 
	 	(b)	 	Two million U.S. dollars (US$2,000,000) per percentage point at any time after the
second anniversary, but before the third anniversary of this Termination Agreement.
	 
	 	(c)	 	If any portion of the royalty is not purchased prior to the third
anniversary of this Termination Agreement, Kennecott’s right to receive a net smelter
return royalty, pursuant to Paragraph 4 above shall remain in full force and effect.

2

 

	 	 	The parties acknowledge that different net smelter royalty rates apply to different
concessions within the Villa de Ramos claim group. It is acknowledged and agreed that the
payment of one million U.S. dollars (US$1,000,000) under subparagraph (a) above or two million
U.S. dollars (US$2,000,000) under subparagraph (b) above, as the case may be, acquires one
percentage point from all the royalty interest payable on the entire Villa de Ramos claim
group. Subsequently, the concessions previously subject to a one percent (1%) royalty would
have no royalty due, and the concessions subject to a two percent (2%) royalty would be subject
to a one percent (1%) royalty. The maximum percentage amount payable to Kennecott in any
buyout, where both a one percent (1%) and two (2%) percent royalty is due, shall be two percent
(2%). The rights granted hereunder may be exercised in part under subparagraph (a) and the
balance under subparagraph (b), but exercise must be as to full percentage points only.
	 
	6.	 	After the Effective Date, and performance of Western Copper’s obligations pursuant to
Paragraphs 1, 3(a) and 3 (b) herein, Kennecott shall grant Western Copper the exclusive right
to find a buyer for Kennecott’s equity interest in Western Copper. The term of such right will
be sixty (60) days from the Effective Date. If Western Copper fails to find a buyer, ready,
willing and able to purchase Kennecott’s equity interest at a price of three dollars sixty-five cents (C$3.65) per share or greater, then Kennecott
shall be free to seek a buyer on its own initiative without further obligation to Western
Copper. The appropriateness of any sales offer shall be determined in Kennecott’s sole
discretion. Western Copper shall not be entitled to any fees for finding a buyer. Western
Copper shall not make any representations or warranties on Kennecott’s behalf. During and
before such sixty (60) day period, Kennecott shall be free to tender its shares to a
take-over bid.
	 
	7.	 	Western Copper shall, within sixty (60) days of the date hereof, return all confidential data
provided to it under Section 4.4 of the Property Rights Agreement to Kennecott. This paragraph
shall not apply to data directly related to the concessions to be transferred to Western
Copper.
	 
	8.	 	Western Copper shall, within sixty (60) days of the date hereof, remove any of its property
now stored in the Kennecott’s Guadalajara office or the core shed located near the Penasquito
property. Any property not removed within the sixty (60) day period shall become the property
of Kennecott. If Western Copper wishes to store drill core in Kennecott’s Penasquito core shed
after the expiry of the sixty-day period, it shall execute a lease, in a form acceptable to
Kennecott, and make lease payments to Kennecott of seven hundred fifty U.S. dollars (US$750)
per month.
	 
	9.	 	As of the Effective Date, and after the performance of Western Copper’s obligations pursuant
to Paragraphs 1, 3(a) and 3(b) herein, the Property Rights Agreement shall terminate and the
parties shall have no further reciprocal obligations, except for Sections 2.7.2, 4.11, 4.13,
4.14, and 10.2.1 which shall survive such termination, and the provisions of this Termination
Agreement.
	 
	10.	 	Time shall be of the essence hereof. Western Copper shall be obligated to
pay the amounts set forth in Paragraph 1 on or before 5 May, 1999, and the references herein
to the Effective Date are not intended to provide Western Copper with a grace period.

3

 

	11.	 	This Termination Agreement shall be interpreted under the laws of the Province of
British Columbia, without regard to conflicts of law.

	 	 	 	 	 
	KENNECOTT EXPLORATION COMPANY	 	 
	 
	 	 	 	 
	By:
	 	/s/ [ILLEGIBLE]	 	 
	 

	 	 	 	 
	 
	Title:
	 	President	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	MINERA KENNECOTT S.A. DE C.V.	 	 
	 
	 	 	 	 
	By:
	 	/s/ [ILLEGIBLE]	 	 
	 

	 	 	 	 
	 
	Title:
	 	President	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	WESTERN COPPER HOLDINGS LTD	 	 
	 
	 	 	 	 
	By:

	 	/s/ Thomas C. Patt	 	 
	 

	 	 	 	 
	 
	Title:

	 	President	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	MINERA WESTERN COPPER S.A. DE C.V.	 	 
	 
	 	 	 	 
	By:

	 	/s/ Thomas C. Patt	 	 
	 

	 	 	 	 
	 
	Title:

	 	President	 	 
	 

	 	 	 	 

4exv10w3

 

Exhibit
10.3

SHARES FOR DEBT AGREEMENT

THIS AGREEMENT is made as of this 28th day of December, 2006

BETWEEN:

               KENNECOTT EXPLORATION COMPANY, a Delaware corporation (“KEC”)

AND:

               ROYAL GOLD, INC., a Delaware corporation
(the “Purchaser”).

THIS AGREEMENT WITNESSES that in consideration of the premises and the mutual covenants,
agreements, representations, warranties and payments contained in this Agreement, the parties agree
with each other as follows:

	1.	 	DEFINITIONS AND INTERPRETATION
	 
	1.1.	 	Definitions
	 
	 	 	Unless the context otherwise requires, where used in this Agreement, the following terms
shall have the respective meanings set out below, and grammatical variations of such terms
shall have corresponding meanings:

	 	1.1.1.	 	“Business Day” has the meaning assigned to it in the Purchase and Sale Agreement.
	 
	 	1.1.2.	 	“Closing” means the closing of the transactions contemplated by this Agreement and
“Closing Date” means the first Business Day after the Peñasquito Royalty Closing Date.
	 
	 	1.1.3.	 	“Debtor Substitution Agreement” means the Debtor Substitution Agreement dated
December 28, 2006 between the Purchaser, KEC and the Vendor, a true and complete fully
executed copy of which is attached hereto as Schedule A.
	 
	 	1.1.4.	 	“Disclosure Documents” means the financial statements, annual, quarterly or current
reports, proxy statements, and other documents required to be filed by the Purchaser
pursuant to the reporting requirements of the United States Securities Exchange Act of
1934, as amended (the “1934 Act”) and the registration statement on Form S-4 (File no.
333-111590) (the “Registration Statement”), including exhibits, financial statements or
other documents or required 1934 Act filings that are incorporated therein, and as may
be
amended by any prospectus supplement or post-effective amendment filed with the
United States Securities and Exchange Commission (the “SEC”).

 

 

 2 

	 	1.1.5.	 	“Governmental Authority” has the meaning assigned to it in the Purchase and Sale
Agreement.
	 
	 	1.1.6.	 	“Laws” has the meaning assigned to it in the Purchase and Sale Agreement.
	 
	 	1.1.7.	 	“Notices” has the meaning set forth in Section 9.3.
	 
	 	1.1.8.	 	“Other Royalties Closing” has the meaning assigned to it in the Purchase and Sale
Agreement.
	 
	 	1.1.9.	 	“Penasquito Royalty Closing Date” has the meaning assigned to it in the Purchase and
Sale Agreement.
	 
	 	1.1.10.	 	“Penasquito Royalty Closing” has the meaning assigned to it in the Purchase and Sale
Agreement and is subject to extension as provided in the Purchase and Sale Agreement.
	 
	 	1.1.11.	 	“Promissory Note” means the promissory note referred to in the Purchase and Sale
Agreement.
	 
	 	1.1.12.	 	“Purchaser” has the meaning set forth on the first page of this Agreement.
	 
	 	1.1.13.	 	“Receivable” means the $20,000,000 which shall become due and payable by the
Purchaser to KEC pursuant to the Debtor Substitution Agreement.
	 
	 	1.1.14.	 	“Royal Gold Shares” means shares of common stock, par value $0.01 per share, of the
Purchaser to be validly issued to and registered in the name of KEC at the Peñasquito
Royalty Closing in accordance with Sections 2.2 and 5.2.
	 
	 	1.1.15.	 	“Royalties” has the meaning assigned to it in the Purchase and Sale Agreement.
	 
	 	1.1.16.	 	“Securities Laws” means the securities acts, securities exchange acts or similar
legislation of the jurisdictions in the United States where the Purchaser is a
“reporting issuer” or where its securities are listed for trading, and all regulations,
rules and orders thereunder, including without limitation the United States Securities
Act of 1933, as amended (the “1933 Act”), 1934 Act, and Marketplace Rules of NASDAQ.
	 
	 	1.1.17.	 	“Trading Days” means days on which shares of common stock of the Purchaser are
traded on NASDAQ.
	 
	 	1.1.18.	 	“Vendor” means Minera Kennecott S.A. de C.V.

 

3

	1.2.	 	Gender and Number
	 
	 	 	In this Agreement, unless the context otherwise requires, words importing the singular
include the plural and vice versa, and words importing a gender include all genders.
	 
	1.3.	 	Headings
	 
	 	 	The headings used in this Agreement are inserted for convenience of reference only and shall
not affect the interpretation of this Agreement.
	 
	1.4.	 	Generally Accepted Accounting Principles
	 
	 	 	All accounting terms not otherwise defined in this Agreement shall have the meanings
ascribed to them in accordance with generally accepted accounting principles in the United
States, applied consistently.
	 
	1.5.	 	Currency
	 
	 	 	All dollar amounts in this Agreement are stated in U.S. currency.
	 
	1.6.	 	Schedules
	 
	 	 	The following Schedule is attached hereto and is incorporated herein and forms a part of
this Agreement:

	 	 	 	 	 
	 

	 	Schedule A
	 	Debtor Substitution Agreement, as executed by and between the Purchaser, KEC and
the Vendor.

	2.	 	SHARES FOR DEBT
	 
	2.1.	 	At the Closing on the Closing Date:

	 	2.1.1.	 	the Purchaser will issue Royal Gold Shares to KEC, valued at $20,000,000 as
determined in accordance with Section 2.2;
	 
	 	2.1.2.	 	KEC will accept the Royal Gold Shares in complete satisfaction of the Receivable; and
	 
	 	2.1.3.	 	KEC will cause the Vendor to surrender the Promissory Note to the Purchaser for
cancellation.

	2.2.	 	Calculation of Royal Gold Shares
	 
	 	 	The number of Royal Gold Shares to be issued to KEC at the Closing in accordance with
Section 2.1 shall be the number obtained by dividing $20,000,000 by the weighted average
closing price per common share in the capital of the Purchaser on NASDAQ for the 10 Trading
Days immediately preceding the second day before the date of the first public disclosure by
any party of the Purchase and Sale Agreement. The number of shares to be issued at Closing
shall be adjusted as necessary to reflect any change in the

 

4

	 	 	share capital of the Purchaser
after the date of the Purchase and Sale Agreement as a
result of any subdivision, consolidation or reclassification thereof, or stock dividend or
other distribution (other than Purchaser’s regular cash dividend) on the common shares of
the Purchaser.
	 
	3.	 	REPRESENTATIONS, WARRANTIES AND ACKNOWLEDGEMENTS
	 
	3.1.	 	Representations and Warranties of KEC
	 
	 	 	KEC represents and warrants to the Purchaser as follows and acknowledges that the Purchaser
will rely on such representations and warranties in entering into this Agreement, and in
concluding the transactions contemplated by this Agreement.

	 	3.1.1.	 	Organization and Power  —  KEC is a duly incorporated, organized and validly
subsisting corporation under the laws of its jurisdiction of incorporation and has the
corporate power to carry out its obligations under this Agreement.
	 
	 	3.1.2.	 	Due Authorization  —  The execution and delivery of this Agreement and the
other documents to be executed and delivered by KEC hereunder and the carrying out of
the transactions contemplated hereby on the part of KEC, including without limitation
the acquisition of the Royal Gold Shares, have been duly authorized by all necessary
corporate and shareholder action on the part of KEC.
	 
	 	3.1.3.	 	Validity of Agreement  —  This Agreement constitutes valid, binding and
enforceable obligations of KEC and the Debtor Substitution Agreement constitutes valid,
binding and enforceable obligations of KEC and the Vendor.
	 
	 	3.1.4.	 	No Conflicts or Violations  —  Neither the entering into of this Agreement
and the other documents and agreements to be executed and delivered by KEC hereunder
nor the completion of the transactions contemplated hereby in accordance with the terms
hereof will result in the violation of any of the terms or provisions of the constating
documents of KEC nor will the entering into of this Agreement or such other documents
and agreements nor such completion thereof:

	 	3.1.4.1.	 	result in the violation of any of the terms or provisions of any
indenture or other agreement, instrument or obligation to which KEC is a
party;
	 
	 	3.1.4.2.	 	conflict with, or result in a breach of, or violate any Law; or
	 
	 	3.1.4.3.	 	give to any other person, after the giving of notice or otherwise, any
right of termination, cancellation or acceleration in or with respect to
any agreement or other instrument to which KEC is a party or is subject,
or from which it derives benefit, by which any of KEC’s interest in the
Royalties is bound or affected.

 

5

	 	3.1.5.	 	Broker’s Fees – Neither the Vendor nor KEC have any liability to pay any fees
or commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which Purchaser could become liable or obligated.
	 
	 	3.1.6.	 	Accredited Investor; Receipt of Information. KEC is an “accredited investor”
as such term is defined in Rule 501(a) promulgated by the SEC under 1933 Act. Each of
the Vendor and KEC have received or has had full access to all the information it
considers necessary or appropriate to make an informed decision with respect to the
issuance of the Royal Gold Shares. KEC has had the opportunity to ask questions of,
and receive answers from, the Purchaser and its management regarding the Purchaser’s
business, management and financial affairs. Except for the representations and
warranties of the Purchaser set forth in Section 3.2, Vendor is relying solely on its
own examination of the Purchaser and the Disclosure Documents, and advice of its
attorneys, accountants and financial and tax advisors, in making its decision with
respect to the issuance of the Royal Gold Shares, including the merits and risks
involved.

	3.2.	 	Representations and Warranties of the Purchaser
	 
	 	 	The Purchaser represents and warrants to KEC as follows, and acknowledges that KEC will rely
on such representations and warranties in entering into this Agreement, and in concluding
the transactions contemplated by this Agreement.

	 	3.2.1.	 	Organization and Power  —  The Purchaser is a duly incorporated, organized
and validly subsisting company in good standing under the laws of its jurisdiction of
incorporation and has the corporate power to enter into this Agreement and to carry out
its obligations under this Agreement.
	 
	 	3.2.2.	 	Due Authorization  —  The execution and delivery of this Agreement and the
other documents to be executed and delivered by the Purchaser hereunder and the
carrying out of the transactions contemplated hereby on the part of the Purchaser,
including without limitation the issuance of the Royal Gold Shares, have been duly
authorized by all necessary corporate and shareholder action on the part of the
Purchaser.
	 
	 	3.2.3.	 	Validity of Agreement  —  This Agreement and all other agreements to be
executed and delivered by the Purchaser hereunder at the Closing constitute and will
constitute valid, binding and enforceable obligations of the Purchaser.
	 
	 	3.2.4.	 	No Conflicts or Violations  —  Neither the entering into of this Agreement
and the other documents and agreements to be executed and delivered by the Purchaser
hereunder nor the completion of the transactions contemplated

 

6

	 	 	 	hereby in accordance with
the terms hereof will conflict with or result in the breach or violation of any Law or
any of the terms and provisions of the constating documents of the Purchaser or of any
indenture or other
agreement, instrument or obligation to which the Purchaser is a party or by
which it is bound, or give to any other person, after the giving of notice or
otherwise, any right of termination, cancellation or acceleration in or with
respect to any agreement or other instrument to which the Purchaser is a party
or is subject, or from which it derives benefit.

	 	3.2.5.	 	Right to Carry on Business  —  The Purchaser and each of its subsidiaries
have all necessary corporate power to own their respective properties and assets and to
carry on their respective businesses as now conducted by them and are registered as
required and in good standing under the laws of all jurisdictions in which their
failure to so register would have a material adverse effect on the Purchaser and its
subsidiaries taken as a whole.
	 
	 	3.2.6.	 	Compliance with Securities Laws; No Misrepresentation  —  The Disclosure
Documents have been filed with securities regulatory authorities in accordance with
applicable Securities Laws and were, at their respective dates of filing or
publication, in compliance in all material respects with the disclosure requirements of
applicable Securities Laws and did not, at such dates (inclusive of all amendments
thereto) contain any untrue statements of a material fact or omit to state a material
fact required to be stated therein or necessary to be stated therein to make the
statements therein not misleading.
	 
	 	3.2.7.	 	No Material Adverse Change  —  Neither the Purchaser nor any of its
subsidiaries has since June 30, 2006 sustained or experienced any material loss or
interference with its business from fire, explosion, flood or other calamity, whether
or not covered by insurance, or from any labour dispute or court or governmental
action, order or decree otherwise than as set forth or contemplated in the Disclosure
Documents; and, since June 30, 2006, other than as set forth or contemplated in the
Disclosure Documents or as specifically disclosed to KEC in writing, there has not been
any material adverse change, or any development involving a prospective material
adverse change, in or, to the knowledge of the Purchaser affecting its general affairs
(which shall include the business, operations, assets, capital or ownership),
management, financial position, shareholders’ equity or results of operations of the
Purchaser and its subsidiaries, taken as a whole.
	 
	 	3.2.8.	 	Issuance, Registration and Restrictions on Trading of Royal Gold Shares -The
issuance of the Royal Gold Shares to KEC pursuant to this Agreement will be in
compliance with any applicable Securities Laws, and except as otherwise shall be filed
or obtained, by the Purchaser at or before Closing, no consent, approval,
authorization, order, registration, filing or qualification of or with any Governmental
Authority, stock exchange or securities commission in the United States is required for
the issuance of the Royal Gold Shares by the Purchaser to KEC as securities listed and
posted for trading on NASDAQ in the United States. The Royal Gold Shares, when

 

7

	 	 	 	issued
at the Closing Date to KEC, will be registered and free-trading under the 1933 Act and
they may at any time be sold and transferred by KEC within the United States without
the need for a hold period or an exemption from the
registration and prospectus delivery requirements of the 1933 Act or other
applicable Securities Laws.
	 
	 	3.2.9.	 	No Legal Proceedings  —  Except as set forth or contemplated in the
Disclosure Documents, there are no legal or governmental proceedings pending to which
the Purchaser or any of its subsidiaries is a party or, to the best of the Purchaser’s
knowledge, of which any property of the Purchaser or any of its subsidiaries is the
subject which, if determined adversely to the Purchaser or any of its subsidiaries or
any such corporation, would individually or in the aggregate have a material adverse
effect on the consolidated financial position, shareholders’ equity, results of
operations, business or prospects of the Purchaser or any of its subsidiaries or any
such corporations; and, to the Purchaser’s knowledge, no such proceedings are
threatened by Governmental Authorities or threatened by others.
	 
	 	3.2.10.	 	No Material Default  —  The Purchaser and its subsidiaries are not in
material default under any material contracts, leases or agreements, indentures or
other instruments to which any of them is a party, and to the knowledge of the
Purchaser there exists no state of facts which after notice or lapse of time or both
would constitute such a material default and the Purchaser or one of its subsidiaries
is entitled to all benefits thereunder.
	 
	 	3.2.11.	 	Valid Issue  —  The Royal Gold Shares will, when issued to KEC at the
Closing, be validly issued and outstanding as fully paid and non-assessable shares in
the capital of the Purchaser and will be registered in the name of KEC at the Closing
in accordance with Section 5.2.
	 
	 	3.2.12.	 	Broker’s Fees – The Purchaser has no liability to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which the Vendor or KEC could become liable or
obligated.

	3.3.	 	Acknowledgements of KEC
	 
	 	 	KEC acknowledges that except as expressly set forth in Section 3.2, the Purchaser makes no
express or implied representations or warranties with respect to the subject matter of this
Agreement.
	 
	4.	 	CONDITIONS OF CLOSING
	 
	4.1.	 	Conditions of the Parties 
	 
	 	 	The obligations of the parties to complete the transactions contemplated by this Agreement
at the Closing on the Closing Date are subject to the fulfillment of the

 

8

	 	 	condition that the
parties have consummated transactions at the Penasquito Royalty Closing as provided in the
Purchase and Sale Agreement.
	 
	 	 	The foregoing condition is inserted for the mutual benefit of KEC and the Purchaser and may
be waived in whole or in part if and only if jointly waived by KEC and the Purchaser.
	 
	4.2.	 	Termination
	 
	 	 	This Agreement will automatically terminate on termination of the Purchase and Sale
Agreement in accordance with the provisions in Section 5.4 thereof.
	 
	 	 	Any such termination shall be without prejudice to any right or remedy of any party with
respect to a breach of this Agreement or the Purchase and Sale Agreement by any other party.
	 
	5.	 	CLOSING
	 
	 	 	The Vendor and Purchaser shall consummate and close the transactions contemplated herein in
at KEC’s offices located at 224 North 2200 West, Salt Lake City, Utah (or at such other
place as the parties may mutually agree) at 10:00 o’clock a.m., local time, on the Closing
Date. The Closing Date may be postponed to a later time and date by mutual agreement signed
by both parties. If the Closing is postponed, all references to the Closing Date in this
Agreement shall refer to the postponed date.
	 
	5.1.	 	Documents to be Delivered by KEC
	 
	 	 	At the Closing KEC shall deliver or cause to be delivered to the Purchaser:

	 	5.1.1.	 	the Promissory Note, for cancellation;
	 
	 	5.1.2.	 	certified copies of those resolutions of the directors and, if required, shareholders
of KEC required to be passed to authorize the execution, delivery and implementation of
this Agreement and of all documents to be delivered by the Vendor and KEC under this
Agreement and the completion of the transactions contemplated hereby;
	 
	 	5.1.3.	 	an opinion of KEC’s internal or external counsel in a form to the reasonable
satisfaction of counsel for the Purchaser as to the corporate existence of such party,
and to the effect that this Agreement has been duly authorized, executed and delivered
by such party and constitutes a legal, valid and binding obligation of such party;
	 
	 	5.1.4.	 	an opinion of KEC’s internal or external counsel in a form to the reasonable
satisfaction of counsel for the Purchaser as to the corporate existence of Minera
Kennecott S.A. de C.V., and to the effect that the Debtor Substitution Agreement has
been duly authorized, executed and delivered by KEC and the Vendor and constitutes a
legal, valid and binding obligation of such parties; and

 

9

	 	5.1.5.	 	a certificate of an officer of KEC as to the accuracy as of the Closing Date of KEC’s
representations and warranties and the performance of its covenants to be performed at
or before the Closing.

	5.2.	 	Documents to be Delivered by the Purchaser
	 
	 	 	At the Closing the Purchaser shall deliver or cause to be delivered to KEC:

	 	5.2.1.	 	certified copies of those resolutions of the directors and, if required, shareholders
of the Purchaser required to be passed to authorize the execution, delivery and
implementation of this Agreement and of all documents and payments to be delivered by
the Purchaser under this Agreement and the completion of the transactions contemplated
hereby;
	 
	 	5.2.2.	 	a certificate of an officer of the Purchaser as to the accuracy as of the Closing
Date of the Purchaser’s representations and warranties and the performance of its
covenants to be performed at or before the Closing;
	 
	 	5.2.3.	 	an opinion of the Purchaser’s internal or external counsel in a form to the
reasonable satisfaction of counsel for the Vendor as to the corporate existence of the
Purchaser, the Royal Gold Shares have been duly authorized and, when issued in
accordance with the provisions of this Agreement, will be validly issued, fully paid,
non-assessable and registered pursuant to the Registration Statement, which has become
effective under the 1933 Act, and no stop order suspending the effectiveness of the
Registration Statement or suspending or preventing the use of the prospectus thereto,
as amended, has been issued and no proceedings for that purpose have been instituted or
are threatened by the SEC and to the effect that the Agreement has been duly
authorized, executed and delivered by the Purchaser and constitutes a legal, valid and
binding obligation of the Purchaser; and
	 
	 	5.2.4.	 	share certificate(s) bearing no legends duly registered in the name of KEC
representing the Royal Gold Shares to be issued in accordance with Section 2.2.

	6.	 	INDEMNITIES
	 
	6.1.	 	Indemnification by Purchaser
	 
	 	 	In accordance with the procedures in Section 6.3, the Purchaser shall indemnify KEC, and its
directors, officers, employees, agents, and representatives against and agrees to hold KEC,
and its directors, officers, employees, agents, and representatives harmless from any and
all damages, claims, losses, liabilities, fines, penalties and expenses (including without
limitation, expenses of investigation, attorneys’ fees in connection with any action, suit
or proceeding brought against any of them, the cost of all studies, surveys, clean up and
any other environmental expenses) incurred or suffered by KEC, or its directors, officers,
employees, agents, and representatives or any of them arising out of:

 

10

	 	6.1.1.	 	any misrepresentation or breach of warranty of which Notice has been given under
Section 6.3 before expiration of the representation or warranty as provided in Section
8.2; and
	 
	 	6.1.2.	 	any covenant or agreement made or to be performed by the Purchaser pursuant to this
Agreement.

	6.2.	 	Indemnification by KEC
	 
	 	 	In accordance with the procedures in Section 6.3, KEC agrees to indemnify the Purchaser and
its directors, officers, employees, agents, and representatives against and agree to hold
the Purchaser and its directors, officers, employees, agents, and representatives harmless
from any and all damages, claims, losses, liabilities, fines, penalties and expenses
(including without limitation, expenses of investigation, attorneys’ fees and expenses in
connection with any action, suit or proceeding brought against the Purchaser,) incurred or
suffered by the Purchaser or its directors, officers, employees, agents, and representatives
arising out of:

	 	6.2.1.	 	any misrepresentation or breach of warranty of which Notice has been given under
Section 6.3 before expiration of the representation or warranty as provided in Section
8.1;
	 
	 	6.2.2.	 	any covenant or agreement made or to be performed by KEC pursuant to this Agreement.

	6.3.	 	Claims of Indemnity
	 
	 	 	A party claiming for indemnity under this Article 6 (the “Indemnitee”) shall give prompt
Notice of any claim, action, proceeding or circumstances that could reasonably give rise to
such a claim to the party which has agreed to indemnify it (the “Indemnitor”). Inadvertent
failure to give such prompt Notice will not preclude the Indemnitee from pursuing the claim
unless and to the extent that the Indemnitor is materially prejudiced by such failure. The
Indemnitor may, and will, if directed to do so by the Indemnitee, at its own expense and in
the name of the Indemnitee or otherwise, dispute any claim made, or any matter on which a
claim could be made, by a third party in respect of which a Notice has been given by the
Indemnitee under this Section 6.3 and may retain legal counsel acceptable to the Indemnitee
to have conduct of any proceeding relating to such a claim. The Indemnitee may employ
separate counsel with respect to any such claims brought by a third party and participate in
the defense thereof, provided the fees and expenses of such counsel shall be the
responsibility of the Indemnitee unless:

	 	6.3.1.	 	the Indemnitor fails to assume the defence of such claim on behalf of the Indemnitee
within five days of receiving Notice of such claim; or
	 
	 	6.3.2.	 	the employment of such counsel has been authorized by the Indemnitor;

	 	 	in each of which cases the Indemnitor shall not have the right to assume the defense of such
suit on behalf of the Indemnitee but shall be liable to pay the reasonable fees and expenses
of counsel for the Indemnitee. For the purpose of confirming or disputing such

 

11

	 	 	a claim, the Indemnitee will provide full and complete disclosure to the Indemnitor and
complete access to and right of inspection by the representatives of the Indemnitor of all
documents and records in the possession or control of the Indemnitee relating to such claim.
If any security is required to be provided for the purpose of defending or contesting any
such claim, including, without limitation, any appeal of any judgment, the Indemnitor shall
provide such security and all monies or property representing such security received by the
Indemnitee as a result of a successful defense or contestation will be held in trust by the
Indemnitee for the benefit of the Indemnitor and will be remitted to the Indemnitor on
demand. Neither the Indemnitee nor the Indemnitor shall settle, compromise or pay any claim
for which indemnity is sought hereunder except with the prior written consent of the other,
such consent not to be unreasonably withheld, or in the case of the Indemnitee unless the
Indemnitor fails to dispute and defend such claim.
	 
	7.	 	POST-CLOSING MATTERS
	 
	 	 	If approval for listing of the Royal Gold Shares on the Toronto Stock Exchange has not been
obtained on or prior to the Closing, the Purchaser shall use all reasonable efforts to
obtain such approval for such listing within 10 Business Days after the Closing.
	 
	8.	 	SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
	 
	8.1.	 	KEC’s Representations, Warranties and Covenants
	 
	 	 	All representations and warranties made by KEC in this Agreement or under this Agreement
shall, unless otherwise expressly stated, survive the Closing and any investigation at any
time made by or on behalf of the Purchaser, and shall continue in full force and effect for
the benefit of the Purchaser for a period of three years after the Peñasquito Royalty
Closing.
	 
	8.2.	 	Purchaser’s Representations, Warranties and Covenants
	 
	 	 	All representations and warranties made by the Purchaser in this Agreement or under this
Agreement shall, unless otherwise expressly stated, shall survive the Closing and any
investigation at any time made by or on behalf of KEC, and shall continue in full force and
effect for the benefit of KEC for a period of three years after the Peñasquito Royalty
Closing.
	 
	9.	 	MISCELLANEOUS 
	 
	9.1.	 	Expenses – The parties shall each bear all of their own costs and expenses, including
consultants’ and attorneys’ fees, incurred in connection with the negotiation of this
Agreement and the consummation of the transactions contemplated hereby.
	 
	9.2.	 	Public Announcements – KEC acknowledges that the Purchaser will disclose the
existence and terms and conditions of this Agreement and file this Agreement as required by
applicable Securities Laws. The Purchaser shall comply with all applicable Laws and shall not
attribute any statements regarding this Agreement to KEC or the Vendor. Each of the parties
will provide a draft of their initial proposed press release to the other party
sufficiently in advance of its release to provide the other party a reasonable opportunity
to review and comment on the content thereof.

 

12

	9.3.	 	Notices — All notices, requests, demands, claims, and other communications hereunder
(“Notices”) must be in writing. Any party may send any Notice to the intended recipient at
the address set forth below using certified mail, nationally recognized express courier,
personal delivery or facsimile transmittal, and any such Notice will be deemed to have been
duly given (a) three days after being deposited in the U.S. mail, postage prepaid, (b) the
next Business Day after being deposited with a nationally recognized overnight courier and
upon confirming delivery with such courier, and (c) when actually received by an individual at
the intended recipient’s facsimile number and acknowledged as received.

	 	 	 	 	 
	 

	 	If to KEC:
	 	Kennecott Exploration Company
	 

	 	 	 	224 North 2200 West
	 

	 	 	 	Salt Lake City, UT 84116
	 

	 	 	 	Attention: President & CEO
	 

	 	 	 	Fax: (801) 238-2488
	 
	 	 	 	 
	 

	 	Informational copy to:
	 	Kennecott Exploration Company
	 

	 	 	 	224 North 2200 West
	 

	 	 	 	Salt Lake City, UT 84116
	 

	 	 	 	Attention: General Counsel
	 

	 	 	 	Fax: (801) 238-2494
	 
	 	 	 	 
	 

	 	If to Purchaser:
	 	Royal Gold, Inc.
	 

	 	 	 	1660 Wynkoop Street, Suite 1000
	 

	 	 	 	Denver, Colorado 80202
	 

	 	 	 	Attention: President
	 

	 	 	 	Fax: (303) 595-9385
	 
	 	 	 	 
	 

	 	Informational copy to:
	 	Royal Gold, Inc.
	 

	 	 	 	1660 Wynkoop Street, Suite 1000
	 

	 	 	 	Denver, Colorado 80202
	 

	 	 	 	Attention: General Counsel
	 

	 	 	 	Fax: (303) 595-9385

	 	 	Either party may change the address to which Notices are to be delivered by giving the other
parties Notice in the manner herein set forth.
	 
	9.4.	 	Entire Agreement — This Agreement, the Data Disclosure Agreement, the Debtor
Substitution Agreement and the Purchase and Sale Agreement all of which survive execution of
this Agreement, constitute the entire agreement between the parties in relation to the
transactions herein contemplated and, except as specifically set out herein, or in any
documents delivered at Peñasquito Royalty Closing, the Other Royalties Closing or the Closing,
supersedes every previous agreement, communication, expectation, negotiation, representation
or understanding, whether oral or written, express or implied, statutory or otherwise, among
the parties with respect to the subject matter of
this Agreement and there are no collateral agreements other than as expressly set forth or
referred to in this Agreement.

 

13

	9.5.	 	Amendments and Waivers — This Agreement may not be amended except by written
agreement among all the parties to this Agreement. No waiver of any provision of this
Agreement will be valid unless it is in writing and signed by each party. No such waiver by
any party of any default, misrepresentation, or breach of warranty or covenant hereunder,
whether intentional or not, will be deemed to extend to any prior or subsequent default,
misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence.
	 
	9.6.	 	Severability — Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction will not affect the validity or
enforceability of the remaining terms and provisions hereof or the validity or enforceability
of the offending term or provision in any other situation or in any other jurisdiction.
	 
	9.7.	 	Assignment — No party hereto may assign any right, benefit or interest in this
Agreement or the subject matter hereof without the written consent of the other party and any
purported assignment without such consent shall be void and of no effect.
	 
	9.8.	 	Enurement — This Agreement shall enure to the benefit of and be binding upon the
parties and their respective successors and permitted assigns.
	 
	9.9.	 	Conflict between Documents – The provisions of this Agreement shall be fully
effective notwithstanding the provisions in Section 10.9 of the Purchase and Sale Agreement.
	 
	9.10.	 	Time — Time shall be of the essence of this Agreement.
	 
	9.11.	 	Governing Law — This Agreement will be governed by and construed in accordance with
the laws of the State of Utah without giving effect to any choice or conflict of law provision
or rule that would cause the application of the laws of any jurisdiction other than the State
of Utah.
	 
	9.12.	 	Execution — This Agreement may be executed by the parties in one or more
counterparts and by facsimile, each of which shall be deemed an original and all of which,
taken together, shall constitute one and the same instrument.

AS EVIDENCE OF THEIR AGREEMENT the parties have executed this Agreement as of the date first above
written.

	 	 	 	 	 
	KENNECOTT EXPLORATION COMPANY	 	 
	 
	 	 	 	 
	Per:
	 	/s/ Justin Quigley	 	 
	 

	 	 	 	 
	 

	 	Authorized Signatory	 	 
	 
	 	 	 	 
	ROYAL GOLD, INC.	 	 
	 
	 	 	 	 
	Per:
	 	/s/ Tony Jensen	 	 
	 

	 	 	 	 
	 

	 	Authorized Signatory	 	 

 

SCHEDULE A

Copy of Debtor Substitution Agreement

 

 

DEBTOR SUBSTITUTION AGREEMENT

THIS AGREEMENT is made as of this 28th day of December, 2006

BETWEEN:

     ROYAL GOLD, INC., a Delaware corporation

     (hereinafter called “Royal Gold”)

OF THE FIRST PART,

AND:

     KENNECOTT EXPLORATION COMPANY, a Delaware corporation

     (hereinafter called “KEC”)

OF THE SECOND PART,

AND:

     MINERA KENNECOTT S.A. DE C.V., a company incorporated under
the laws of Mexico

     (hereinafter called “Minera Kennecott”)

OF THE THIRD PART,

WITNESSES that in consideration of the premises and the mutual covenants, agreements,
representations, warranties and payments contained in this Agreement, the parties agree with each
other as follows:

	1.	 	DEFINITIONS

Where used in this Agreement, the following terms shall have the respective meanings set out
below, and grammatical variations of such terms shall have corresponding meanings:

	 	1.1.	 	“Loan Agreement” means the Loan Agreement dated December 28, 2006 between KEC
as lender and Minera Kennecott as borrower.
	 
	 	1.2.	 	“Payable” means the $20,000,000 which is or shall become due and payable by
Royal Gold to Minera Kennecott pursuant to Section 2.3.2 of the Purchase and Sale
Agreement, and will be evidenced by the Promissory Note.

 

2

	 	1.3.	 	“Penasquito Royalty Closing” has the meaning assigned to it in the Purchase and
Sale Agreement.
	 
	 	1.4.	 	“Promissory Note” means the promissory note referred to in the Purchase and
Sale Agreement.
	 
	 	1.5.	 	“Purchase and Sale Agreement” means the Purchase and Sale Agreement for
Peñasquito and Other Royalties dated December 28, 2006 between Minera Kennecott, KEC
and Royal Gold, Inc. (“Royal Gold”).
	 
	 	1.6.	 	“Royal Gold Shares” means shares of common stock, par value $0.01 per share, of
Royal Gold to be issued to and registered in the name of KEC in accordance with the
Shares for Debt Agreement.
	 
	 	1.7.	 	“Shares for Debt Agreement” means the Shares for Debt Agreement dated December
28, 2006 between KEC and Royal Gold.

	2.	 	ASSIGNMENT OF PAYABLE

     With effect at and as of the Penasquito Royalty Closing, KEC hereby:

	 	2.1.	 	assumes and agrees to pay the Payable; and
	 
	 	2.2.	 	agrees to indemnify and save Royal Gold harmless from and against any claim,
demand, action, cause of action, loss, damage, cost, fine, penalty or expense
whatsoever, including legal fees suffered or incurred, directly or indirectly, by Royal
Gold by reason of the failure of KEC to pay or discharge the Payable.

	3.	 	NOTICE OF ASSIGNMENT
	 
	 	 	Minera Kennecott hereby:

	 	3.1.	 	consents to and acknowledges receipt of notice of the assignment of the Payable
to KEC;
	 
	 	3.2.	 	agrees that from and after the assumption of the Payable by KEC, Minera
Kennecott will have recourse only to KEC and not to Royal Gold for payment of the
Payable; and
	 
	 	3.3.	 	as provided in the Shares for Debt Agreement, upon issuance of the Royal Gold
Shares to KEC, Minera Kennecott will surrender and deliver the Promissory to Royal Gold
for cancellation.

	4.	 	CONSIDERATION

The consideration payable by Royal Gold to KEC for the assumption by KEC of liability for
the Payable shall be $20,000,000, which shall be paid and satisfied by Royal Gold on the
first Business Day after the Penasquito Royalty Closing as provided in the Shares for Debt
Agreement.

 

3

	5.	 	TERMINATION

This Agreement will automatically terminate on termination of the Purchase and Sale
Agreement in accordance with the provisions in Section 5.4 thereof. Any such termination
shall be without prejudice to any right or remedy of any party with respect to a breach of
this Agreement or the Purchase and Sale Agreement by any other party.

	6.	 	REPRESENTATIONS AND WARRANTIES OF BOTH PARTIES

	 	 	Each of the parties represents and warrants to the others that:

	 	6.1.	 	It is a duly incorporated, organized and validly subsisting company in good
standing under the laws of its jurisdiction of incorporation and has the corporate
power to enter into this Agreement and to carry out its obligations under this
Agreement.
	 
	 	6.2.	 	The execution and delivery of this Agreement have been duly authorized by all
necessary corporate and shareholder action on its part.
	 
	 	6.3.	 	This Agreement is legal, valid, binding and enforceable against it.

	7.	 	MISCELLANEOUS

	7.1.	 	Assignment — Neither party hereto may assign any right, benefit or interest in this Agreement
or the subject matter hereof without the written consent of the other.
	 
	7.2.	 	Enurement — This Agreement shall enure to the benefit of and be binding upon the parties and
their respective successors and permitted assigns.
	 
	7.3.	 	Time — Time shall be of the essence of this Agreement.
	 
	7.4.	 	Governing Law — This Agreement will be governed by and construed in accordance with the laws
of the State of Utah without giving effect to any choice or conflict of law provision or rule
that would cause the application of the laws of any jurisdiction other than the State of Utah.
	 
	7.5.	 	Execution — This Agreement may be executed by the parties in one or more counterparts and by
facsimile, each of which shall be deemed an original and all of which, taken together, shall
constitute one and the same instrument.

AS EVIDENCE OF THEIR AGREEMENT the parties have executed this Agreement as of

 

4

the date first above written.

	 	 	 	 	 
	ROYAL GOLD, INC.  
	 	 	 
	 	 
	Per:
	 	/s/
Tony Jensen
	 	 
	 	 	 
	 	 
	 	 	   Authorized Signatory
	 	 
	 	 	 
	 	 
	KENNECOTT EXPLORATION COMPANY
	 	 	 
	 	 
	Per:
	 	/s/
Justin Quigley
	 	 
	 	 	 
	 	 
	 	 	   Authorized Signatory
	 	 
	 	 	 
	 	 
	MINERA KENNECOTT S.A. DE C.V
	 	 	 
	 	 
	Per:
	 	/s/
Justin Quigley
	 	 
	 	 	 
	 	 
	 	 	   Authorized Signatory

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