Document:

Unassociated Document

     

     

    Company
Name

    Street
Address

    City,
State Zip

    

    Re: Genta
Incorporated: Note Conversion and Amendment to Consent Agreement

    

    Ladies
and Gentlemen:

    

    The Board
of Directors of Genta Incorporated (the “Company”) deems it advisable
and in the best interests of the Company and its stockholders to encourage you
to convert a greater portion of the outstanding principal amount of your 2008
Note (as defined below) into shares of the Company’s Common Stock than you are
currently permitted to convert pursuant to the terms of the 2008
Note.  In order to authorize the conversion of the outstanding
principal amount of your 2008 Note and induce you to convert your 2008 Note, the
Company hereby proposes to amend the Consent Agreement (as defined below) to
remove certain limitations on conversion and make other changes as outlined
below.

    

    Background

    

    As you are aware, on June 5, 2008, the
Company entered into a securities purchase agreement (the “Securities Purchase
Agreement”), with certain accredited institutional investors (the “2008 Note Holders”) for a
private placement of senior secured convertible notes totaling in the aggregate
of up to $40 million in gross proceeds (the “2008
Financing”).  The Company closed on approximately $20 million
of such Notes on June 9, 2008.  On June 9, 2008, in connection with
the 2008 Financing, the Company issued a form of senior secured convertible
promissory note due June 9, 2010 to the 2008 Note Holders (the “2008 Note”). For purposes of
this letter agreement, references to the 2008 Note(s) refers to the 2008 Notes
issued in June 2008, and not the 2008 Notes issued as payment in kind in lieu of
cash interest payments (“2008
PIK Notes”).

    

    In addition, as you are also aware, on
April 2, 2009 the Company closed on a securities purchase agreement, with
certain accredited institutional investors listed on the signature page thereto
(the “2009 Note
Holders”), to place up to $12 million of senior secured convertible notes
and corresponding warrants to purchase common stock with such 2009 Note Holders
(the “2009
Financing”).  The Company closed with gross proceeds of
approximately $6 million of such notes and warrants.  In connection
with the 2009 Financing, the Company and each of the 2008 Note Holders entered
into a Consent Agreement, dated April 2, 2009 (the “Consent Agreement”), whereby
the 2008 Note Holders, for all purposes and in all respects under the Securities
Purchase Agreement, consented to the 2009 Financing and transactions
contemplated thereby.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Pursuant to Section 5(a) of the Consent
Agreement, no 2008 Note Holder may convert any of such holder’s 2008 Notes on
any day to the extent that, together with all prior conversions under such 2008
Notes following the Effective Date (as defined therein), the total amount of
such 2008 Notes that has been converted since the Effective Date exceeds (A) 10%
of the principal amount of such 2008 Notes on the Effective Date multiplied by
(B) the number of whole or partial calendar weeks since the Effective
Date.

    

    The
Company hereby requests your approval and consent as a 2008 Note Holder to
effect the proposal below.  However, if the consent of holders of at
least 95% in outstanding principal amount of the 2008 Notes (the “Requisite Approval”), is not
obtained, then your consent and the changes reflected in the proposal below
shall not be effective.

    

    Proposal

    

    1.           Subject
to the receipt of the Requisite Approval, by signing below, (except that the
conversion provisions of this Section 1 shall not apply to the June 2008
holdings of Dr. Raymond P. Warrell, Jr. and Dr. Loretta M. Itri), you
agree:

    

    a.           to
convert the entire outstanding principal amount of your 2008 Note, subject to
the limitations on conversion in Section 3.4 of your 2008 Notes and Section 5(b)
of the Consent Agreement, on May 22, 2009 (the “Initial Conversion
Date”).  You agree to deliver, concurrently with the delivery
of your signature to this letter, a Notice of Conversion in the form attached to
this letter as Exhibit A, which notice of conversion shall be irrevocable, shall
be effective as of May 22, 2009 and shall constitute your irrevocable
instruction to convert, on May 22, 2009, the entire outstanding principal amount
of your 2008 Notes, subject to the limitations on conversion in Section 3.4 of
your 2008 Notes and Section 5(b) of the Consent Agreement;

    

    b.           to
the extent any of the principal amount of your 2008 Note remains outstanding
following the Initial Conversion Date, to convert any additional outstanding
principal amount of your 2008 Notes, subject to the conversion limitations
contained in Section 3.4 and Section 5(b) of the Consent Agreement, on May 26,
2009.  You agree to deliver, concurrently with the delivery of your
signature to this letter, a Notice of Conversion in the form attached to this
letter as Exhibit B, which notice of conversion shall be irrevocable, shall be
effective as of May 26, 2009 and shall constitute your irrevocable instruction
to convert, on May 26, 2009, the entire outstanding principal amount of your
2008 Notes, subject to the limitations on conversion in Section 3.4 of your 2008
Notes and Section 5(b) of the Consent Agreement; and

    

    c.           not
to sell, assign or transfer any of the shares of Common Stock received upon
conversion of your 2008 Notes, or any interest therein, during the period
beginning on the effective date of this letter and ending at 11:59 pm EDT May
28, 2009.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    2.           Upon
the receipt of the Requisite Approval, the parties hereby agree as
follows:

    

    a.           Section
5(a) of the Consent Agreement is hereby deleted in its entirety and replaced
with the following:

    

    “(a)           [Intentionally
Omitted]”

    

    b.           Section
5(b) of the Consent Agreement is hereby deleted in its entirety and replaced
with the following:

    

    “(b)           that
until the earlier of (A) 105 days following the Effective Date and (B) the
Authorization Date (as defined in the Purchase Agreement) such Holder shall not
convert any 2008 PIK Notes into shares of Common Stock and shall not assert its
rights arising out of any event of default arising under Section 2.1(g) of the
2008 Note(s).” 

    

    c.           The
second sentence of Section 11 of the Consent Agreement is hereby deleted in its
entirety and replaced with the following sentence:

    

    “No
provision of this Agreement may be waived or amended other than by a written
instrument signed by the Company and the Holders of at least two-thirds of the
then outstanding and unexercised Purchase Rights and the then outstanding
principal amount of New Notes issued upon exercise of the Purchase Rights
(together, as one class).”

    

    3.           Dr. Warrell and Dr. Itri further agree
not to convert such portion of the 2008 Notes beneficially held by
each of them as necessary in order for the Company to
authorize and reserve a sufficient number of unissued shares to cover the
conversions set forth under Section 1 above and the conversion of all of the
2008 Notes, in each case, other than those held by Dr. Warrell and Dr.
Itri.

    

    4.           Except
as specifically stated above, all other terms and provisions of the Consent
Agreement shall remain in full force and effect.

    

    

    [Signature
Page Follows]

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    Please indicate your agreement to
convert the outstanding principal amount of your 2008 Note, and to amend the
Consent Agreement in accordance with the proposal set forth above, by
countersigning this letter and returning it to the undersigned.

    

    

    Very
truly yours,

    

    GENTA
INCORPORATED

    

    ___________________________________

    By:

    Name:

    Title:

    

    Date: May
[   ], 2009

    

    Acknowledged
and Agreed as of

    the date
first set forth above

    

    

    INVESTOR

    

    ___________________________________

    By:

    Name:

    Title:

    

    Date: May
[   ], 2009

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    Exhibit
A

     

    NOTICE OF
CONVERSION

     

    (To be
Executed by the Registered Holder in order to Convert the Note)

     

    The
undersigned hereby irrevocably elects to convert $ *see footnote________________
of the principal amount of the above Note No. ___ into shares of Common
Stock of Genta Incorporated (the “Maker”) according to the conditions hereof, as
of the date written below.

     

    Date of
Conversion      May 22,
2009

     

    Applicable
Conversion Price _______________________________________

     

    Number of
shares of Common Stock beneficially owned or deemed beneficially owned by the
Holder on the Date of Conversion: _________________________ ** see
footnote

     

    Signature___________________________________________________________________________________

     

    
      [Name]

    

     

    Address:____________________________________________________________________________________

     

    
      ___________________________________________________________________________________________

    

     

     

    *  The
undersigned hereby irrevocably elects to convert, on May 22, 2009, the entire
outstanding principal amount of the above-referenced Note held by the
undersigned, subject to the limitations on conversion in Section 3.4 of said
Note and Section 5(b) of the Consent Agreement dated April 2, 2009 by and among
the Company, the undersigned and the other parties thereto.

    

    **
Reflects ownership as of 5:30 pm EDT on May 21, 2009.  The undersigned
hereby undertakes to notify the Company if there is any change in the number of
shares of Common Stock held by the undersigned between May 21, 2009 and 5:30 pm
EDT on May 22, 2009, other than directly as a result of the conversion described
herein.

    

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    Exhibit
B

     

    NOTICE OF
CONVERSION

     

    (To be
Executed by the Registered Holder in order to Convert the Note)

     

    The
undersigned hereby irrevocably elects to convert $ _* see
footnote_______________ of the principal amount of the above Note No. ___
into shares of Common Stock of Genta Incorporated (the “Maker”) according to the
conditions hereof, as of the date written below.

     

    Date of
Conversion      May 26,
2009

     

    Applicable
Conversion Price _______________________________________

     

    Number of
shares of Common Stock beneficially owned or deemed beneficially owned by the
Holder on the Date of Conversion: _________________________  ** see
footnote

     

    
      Signature___________________________________________________________________________________

       

      
        [Name]

      

       

      Address:____________________________________________________________________________________

       

      
        ___________________________________________________________________________________________

      

       

       

    

    *  The
undersigned hereby irrevocably elects to convert, on May 26, 2009, the entire
outstanding principal amount of the above-referenced Note held by the
undersigned, subject to the limitations on conversion in Section 3.4 of said
Note and Section 5(b) of the Consent Agreement dated April 2, 2009 by and among
the Company, the undersigned and the other parties thereto.

    

    **
Reflects ownership as of 5:30 pm EDT on May 21, 2009.  The undersigned
hereby undertakes to notify the Company if there is any change in the number of
shares of Common Stock held by the undersigned between May 21, 2009 and 5:30 pm
EDT on May 26, 2009, other than directly as a result of the conversion described
herein and the conversion effected by the undersigned effective as of May 22,
2009.

    

    
      
         

      

      
        6Exhibit 10.1

                            CONDOR YACU GOLD PROJECT

                             JOINT VENTURE AGREEMENT

                                     BETWEEN

                                 HECTOR VITTONE

                                       AND

                          SOUTHERN ENERGY COMPANY INC.

<PAGE>
                             JOINT VENTURE AGREEMENT

THIS AGREEMENT is dated for reference and is effective May 31, 2009.

BETWEEN:

                                 HECTOR VITTONE

                                                                     ("Vittone")

AND:

                          SOUTHERN ENERGY COMPANY INC.

                                                                    ("Southern")

WHEREAS:

A. Vittone and Southern  have agreed to form a joint  venture  called the CONDOR
YACU JOINT VENTURE (the "Joint  Venture")  with respect to the  exploitation  of
interest  in  certain  mineral  properties  (the  "Property")  located  in Salta
Province, Argentina; and

B. Vittone and Southern now wish to form this Joint Venture to finance, explore,
develop, and bring into commercial production, the Property.

NOW THEREFORE in consideration of the covenants and agreements contained herein,
Vittone and Southern agree as follows:

1. DEFINITIONS AND INTERPRETATION

1.1 DEFINITIONS

For the purposes of this Agreement,  except as otherwise  expressly  provided or
unless the context otherwise requires:

1.1  "ACCOUNTING PROCEDURE" means the procedures set forth in Exhibit B.

1.2  "AFFILIATE" means any person,  partnership,  joint venture,  corporation or
     other  form  of  enterprise  which  directly  or  indirectly  controls,  is
     controlled by, or is under common control with, a Participant. For purposes
     of  the  preceding  sentence,  "control"  means  possession,   directly  or
     indirectly,  of the power to direct or cause  direction of  management  and
     policies through ownership of voting securities,  contract, voting trust or
     otherwise.

1.3  "AGREEMENT"  means this Joint Venture  Agreement,  including all amendments
     and  modifications  thereof,  and all  schedules  and  exhibits,  which are
     incorporated herein by this reference.
<PAGE>
                                       3

1.4  "ASSETS"  means the  Properties,  Products  and all other real and personal
     property, tangible and intangible, held for the benefit of the Participants
     hereunder.

1.5  "BUDGET"  means a  detailed  estimate  of all costs to be  incurred  by the
     Participants  with respect to a Program and a schedule of cash  advances to
     be made by the Participants.

1.6  "DEVELOPMENT"  means  all  preparation  for the  removal  and  recovery  of
     Products, including the construction or installation of a mill or any other
     improvements to be used for the mining,  handling,  milling,  processing or
     other  beneficiation  of  Products,  and  all  Exploration  work  conducted
     subsequent to a decision to commence  Development  as  contemplated  by the
     Feasibility Study.

1.7  "EXPLORATION"   means  all  activities  directed  toward  ascertaining  the
     existence,  location,  quantity, quality or commercial value of deposits of
     Products.

1.8  "FEASIBILITY  STUDY"  means a  detailed  study  compiled  by  Manager or an
     independent third party conducted to determine  commercial  feasibility and
     viability of placing a prospective  ore body or deposit into production and
     may include, but not be limited to:

     (a)    such geophysical, geochemical, geological, aerial or other survey as
            may be necessary to provide a reasonable estimate of the quality and
            extent of the deposit;

     (b)    such  technical or assay reports as may be necessary to evaluate any
            proposed method of extraction and processing;

     (c)    the  area  required  for  optimum  development  of the  ore  body or
            deposit;

     (d)    a mine  construction  program setting forth the  descriptions of the
            work, permits, equipment, facilities, supplies and mines required to
            bring  the  prospective  ore  body  or  deposits  of  Products  into
            commercial production, and the estimated costs thereof or a schedule
            of  expenditures by year of the costs necessary to bring the project
            into production;

     (e)    details of a proposed annual program for initial, development of the
            deposit;

     (f)    a plan for such  reclamation of the Properties as is required by law
            and the estimated costs thereof;

     (g)    conclusions and recommendations  regarding the economic  feasibility
            and timing for  bringing  the  prospective  ore body or  deposits of
            Products into commercial  production,  taking into account items (a)
            through (e) above;

     (h)    such  other  information  as  the  Management   Committee  may  deem
            appropriate  to  allow  banking  or  other  financial   institutions
            familiar with the mining  business to make a decision  about loaning
            funds  sufficient to construct the proposed mine with security based
            solely on the reserves and mine described in the Feasibility Study.

1.9   "INITIAL  CONTRIBUTION"  means that contribution each Participant has made
      or agrees to make pursuant to Section 5.1.
<PAGE>
                                       4

1.10  "JOINT  ACCOUNT"  means the  account  maintained  in  accordance  with the
      Accounting  Procedure  showing the  charges  and  credits  accruing to the
      Participants.

1.11  "MANAGEMENT COMMITTEE" means the committee established under Article 7.

1.12  "MANAGER"  means the person or entity  appointed under Article 8 to manage
      Operations, or any successor Manager.

1.13  "MINING" means the mining,  extracting,  producing,  handling,  milling or
      other processing of Products.

1.14  "OPERATIONS" means the activities carried out under this Agreement.

1.15  "PARTICIPANT" and "PARTICIPANTS" means the persons or entities that have a
      Participating Interest.

1.16  "PARTICIPATING  INTEREST" means the percentage  interest  representing the
      operating  ownership  interest of a Participant  in Assets,  and all other
      rights and obligations arising under this Agreement,  as such interest may
      from  time  to time  be  adjusted  hereunder.  The  initial  Participating
      Interests of the Participants are set forth in Section 6.1.

1.17  "PRODUCTION  DECISION"  means a decision by the  Management  Committee  to
      commence Development and put the Properties into production.

1.18  "PRODUCTS" means all ores,  minerals,  and mineral resources produced from
      the Properties under this Agreement.

1.19  "PROGRAM" means a description in reasonable detail of the activities which
      are to be conducted by the Manager during a period.

1.20  "PROPERTY"  OR  "PROPERTIES"   means  those  interests  in  mining  claims
      described in Exhibit A.

1.21  "SIMPLE MAJORITY" means a decision by the Management  Committee by greater
      than 50% of the votes being entitled to be cast.

1.22.1"TRANSFER"  means  sell,  grant,  assign,  encumber,  pledge or  otherwise
      commit or dispose of.

In addition,  For the purposes of this Agreement,  except as otherwise expressly
provided or unless the context otherwise requires:

     (a)    "this Agreement" means this Joint Venture agreement and all Exhibits
            attached hereto;

     (b)    any  reference  in  this   Agreement  to  a  designated   "Section",
            "Subsection",  "paragraph", "Exhibit" or other subdivision refers to
            the  designated  section,  subsection,  paragraph,  exhibit or other
            subdivision of this Agreement;
<PAGE>
                                       5

     (c)    the words "herein" and "hereunder" and other words of similar import
            refer to this Agreement as a whole and not to any particular section
            or other  subdivision of this Agreement,  unless the context clearly
            otherwise provides;

     (d)    the word "including",  when following any general statement, term or
            matter, is not to be construed to limit such general statement, term
            or matter to the  specific  items or matters  set forth  immediately
            following  such word or to similar items or matters,  whether or not
            non-limiting  language  (such as  "without  limitation"  or "but not
            limited  to" or words of  similar  import)  is used  with  reference
            thereto but rather  refers to all other items or matters  that could
            reasonably  fall within the broadest  possible scope of such general
            statement, term or matter;

     (e)    any reference to a statute includes and, unless otherwise  specified
            herein,  is a reference to such statute and to the regulations  made
            pursuant thereto, with all amendments made thereto and in force from
            time to time, and to any statute or  regulations  that may be passed
            which has the effect of supplementing or superseding such statute or
            such regulation;

     (f)    any reference to "party" or "parties" means, singly or collectively,
            the Participants as the context requires;

     (g)    the headings in this Agreement are for convenience of reference only
            and do not affect the interpretation of this Agreement;

     (h)    words importing the masculine  gender include the feminine or neuter
            gender,  and vice  versa,  and  words in the  singular  include  the
            plural, and vice versa; and

     (i)    all references to currency refer to US dollars.

1.2 EXHIBITS

The following are the Exhibits to this Agreement, and are incorporated into this
Agreement by reference:

          Exhibit A  Property Description, Purchase Agreement, Power of Attorney
          Exhibit B  Accounting Procedure

Wherever any term or  condition,  expressed or implied,  in any of the Schedules
conflicts or is at variance  with any term or condition of this  Agreement,  the
terms or  conditions  of this  Agreement  will  prevail but shall not affect any
difference of definition or terms internal to and specific to the Exhibits where
such are internally consistent and do not offend the import of the Agreement.
<PAGE>
                                       6

2. REPRESENTATIONS AND WARRANTIES

2.1 MUTUAL REPRESENTATIONS AND WARRANTIES OF PARTICIPANTS

Each of the Participants represents and warrants to each other that:

     (a)    it has the  capacity  and  authority  to enter into and perform this
            Agreement and all transactions (other than present general financial
            capacity  for  the  Property  Development  which  will  require  the
            Participants to engage future debt or equity financing) contemplated
            under this  Agreement  and that all  necessary  corporate  and other
            actions  required to  authorize  it to enter into and  perform  this
            Agreement have been properly taken;

     (b)    it is unaware of any material facts or circumstances  which have not
            been disclosed in this  Agreement,  which should be disclosed to the
            other  Participant in order to prevent the  representations  in this
            Section 2 from being materially misleading;

     (c)    it will not breach its constating  documents or any other  agreement
            or arrangement by entering into or performing this Agreement;

     (d)    this  Agreement  has been duly  executed and  delivered by it and is
            valid and binding upon it in accordance with its terms; and

     (e)    the parties  will duly,  in good  faith,  and with  reasonable  best
            efforts  punctually  comply  with  the  terms of this  Agreement  in
            accordance with the terms and spirit of this Agreement.

3. THE JOINT VENTURE

3.1 GENERAL TERMS

Vittone and Southern hereby enter into this Agreement for the purposes stated in
this  Agreement,  and  they  agree  that  all of  their  rights  and  all of the
Operations  on or in  connection  with  the  Property  shall be  subject  to and
governed by this  Agreement.  Pursuant to the terms of the  Purchase  Agreement,
Vittone has agreed to transfer all  interests  of the Property  into the name of
the Joint  Venture as outlined  below.  The  ownership  of the  interests on the
Property shall revert back to Vittone one year after  commercial  production has
ceased  on the  Property,  but may be  extended  upon  mutual  agreement  of the
parties.

3.2 NAME

The name of this Joint  Venture  shall be the "Condor Yacu Joint  Venture".  The
Operator shall accomplish any registration required by applicable legislation in
the name of the Joint Venture.
<PAGE>
                                       7

3.3 TITLE

Except  as  otherwise  provided  herein  or by the  Participants,  title  to the
Property  shall be held in trust  (with such  notations  on title as shall place
third parties on notice) in the name of the Joint Venture for the parties hereto
according to their Participating  Interests or in such commonly held corporation
or other  entity as the  Management  Committee  may  recommend  and the  parties
accept.

3.4 PURPOSES

This Agreement is entered into for the following purposes and for no others, and
shall serve as the exclusive means by which the Participants, or either of them,
shall accomplish such purposes:

     (a)    to conduct Exploration on the Property;

     (b)    to evaluate the possible Development of the Property;

     (c)    to engage in Development of the Property;

     (d)    to carry on the Operating Mine;

     (e)    to engage in Property financing;

     (f)    to engage in marketing Products; and

     (g)    to perform any other activity necessary,  appropriate, or incidental
            to any of the foregoing.

3.5 LIMITATION

Unless the  Participants  otherwise  agree in writing,  the Operations  shall be
limited  to the  purposes  described  in  Subsection  3.4,  and  nothing in this
Agreement shall be construed to enlarge or expand such purposes.

3.6 DISTRIBUTION OF NET PROFIT

To the extent  permitted  by law,  the Net Profit of the Joint  Venture from the
sale of Assets  and/or  Products (for the purposes of this section not including
taking in kind, as provided for in Part 14) available  for  distribution,  after
making such  provisions for any Program or Budget as are required in the opinion
(expressed by  resolution)  of the  Management  Committee,  will be  distributed
quarterly  within 60 days of the end of each calendar  quarter unless  otherwise
agreed to in writing by the Participants.
<PAGE>
                                       8

3.7 TAKING IN KIND

Unless otherwise  agreed by the  Participants,  each Participant  shall take its
Proportionate  Share of Product in kind in accordance  with the  provisions  set
forth elsewhere in this  Agreement,  subject to the most favorable tax situation
available to Vittone under the tax laws of Argentina.

3.8 LOSS OF TITLE

Any  failure  or loss of title to the Assets or the  Property,  and all costs of
recovering  or  defending  title,  shall be charged to the Joint  Account but if
caused or allowed  to occur by  negligence  by a party then such costs  shall be
paid by such party or otherwise recovered from such party.

3.9 EFFECTIVE DATE AND TERM

The effective  date of the Joint  Venture  shall be the date of this  Agreement.
This Agreement shall continue from the effective date for so long as two or more
parties to this Agreement hold a Participating Interest.

4. RELATIONSHIP OF THE PARTICIPANTS

4.1 NO PARTNERSHIP

Nothing contained in this Agreement shall be deemed to render either Participant
the partner of the other, nor, except as otherwise herein expressly provided, to
render either Participant the agent or legal representative of the other, nor to
create any fiduciary  relationship  between them. It is not the intention of the
Participants  to create,  nor shall this  Agreement be construed to create,  any
mining,  commercial or other  partnership.  Neither  Participant  shall have any
authority to act for or to assume any obligation or  responsibility on behalf of
the other  Participant,  except as  otherwise  expressly  provided  herein.  The
rights, duties, obligations and liabilities of the Participants shall be several
and not joint or collective.  Each Participant shall be responsible only for its
obligations  as herein  set out and  shall be  liable  only for its share of the
costs and  expenses  as  provided  herein,  it being  the  express  purpose  and
intention of the  Participants  that their  ownership of Assets and the Property
and  the  rights  acquired  hereunder  shall  be  as  tenants  in  common.  Each
Participant shall indemnify, defend and hold harmless the other Participant, its
directors,  officers,  employees,  agents and attorneys from and against any and
all  losses,  claims,  damages  and  liabilities  arising  out of any act or any
assumption  of  liability  by  the  indemnifying  Participant,  or  any  of  its
directors,  officers,  employees,  agents and attorneys done or  undertaken,  or
apparently  done or  undertaken,  on  behalf of the  other  Participant,  except
pursuant to the authority  expressly  granted  herein or as otherwise  agreed in
writing between the Participants.

4.2 OTHER BUSINESS OPPORTUNITIES

Except as expressly provided in this Agreement,  each Participant shall have the
right  independently  to engage  in and  receive  full  benefits  from  business
activities,  whether or not competitive with the Operations,  without consulting
<PAGE>
                                       9

the other.  The doctrines of "corporate  opportunity" or "business  opportunity"
shall not be applied to any other  activity,  joint  venture,  or  operation  of
either  Participant,  and neither  Participant  shall have any obligation to the
other with respect to any  opportunity to acquire any property  outside the Area
of Interest at any time, or within the Area of Interest after the termination of
this Agreement. Unless otherwise agreed to in writing, no Participant shall have
any obligation to mill, beneficiate or otherwise treat any Products or any other
Participant's  share of Products in any  facility  owned or  controlled  by such
Participant.

4.3 WAIVER OF RIGHT TO PARTITION

The Participants hereby waive and release all rights of partition, or of sale in
lieu thereof;  or other  division of Assets or the Property,  including any such
rights provided by statute.

4.4 TRANSFER OR TERMINATION OF RIGHTS TO THE PROPERTY

Except as  otherwise  provided  in this  Agreement,  neither  Participant  shall
Transfer  all or any part of its  interest in the Assets,  the  Property or this
Agreement.

4.5 IMPLIED COVENANTS

There are no implied  covenants  contained in this Agreement other than those of
good faith and fair dealing.

5. CONTRIBUTIONS BY PARTICIPANTS

5.1 PARTICIPANTS' INITIAL CONTRIBUTION

At the time of this  Agreement,  Each  Participant  is  deemed  to have made the
following Initial Contribution to the Joint Venture:

     (a)    Southern:  Payment  of  $500,000  (payable  to  Vittone  as per  the
            attached Purchase  Agreement) plus the further funding of $4,500,000
            for the work  program  on the  Property.  These two  payments  shall
            together  constitute 100% of Southern's total required  contribution
            to the Joint Venture; and

     (b)    Vittone:   Deemed   payment  of  $750,000   (reflecting  an  initial
            contribution  of $500,000,  which has been revalued at current rates
            to equal $750,000) plus the transfer of title to the Property.  This
            payment  and  transfer of title shall  together  constitute  100% of
            Vittone's total required contribution to the Joint Venture.

5.2 ADDITIONAL CASH CONTRIBUTIONS

In addition to the Initial  Contribution,  Southern shall be responsible for the
cost of putting the Property into  production.  In exchange,  Southern  shall be
granted 80% of all proceeds of net revenue until they have recovered 115% of the
<PAGE>
                                       10

total costs of putting the Property  into  production.  Thereafter,  the parties
shall each receive 50% of the net proceeds of the Joint Venture.

5.3 PRIORITY OF THIRD PARTY FUNDING

The parties  agree that  wherever  feasible,  priority  will be given to funding
Operations by negotiated joint ventures with third parties,  in particular major
mining  companies,  or  debt,  or  other  appropriate  mechanisms  which  may be
recommended  by  investment  counsel.  All  parties  shall  be  involved  in any
negotiations and shall adopt reasonable positions in good faith.

5.4 THIRD PARTY CONTRACTS

The parties agree that third party  contracts,  whether entered into with majors
or otherwise,  shall not alter,  or be deemed to alter,  the parties' rights and
interests herein as between the parties hereto unless such shall be specifically
provided in such third party  agreement or would be an  unavoidable  implication
thereof and would occur if the event occurred under this Agreement (for example,
a dilution  provision of a third party agreement would operate to dilute a party
to this Agreement but would not extinguish  any carried  interests  provided for
hereunder,  as between the  parties  hereto,  unless the third  party  agreement
specifically  stated that it supersedes  such provision of this  Agreement).  If
additional  rights or property are acquired or made available  under third party
agreements  then  such  rights  and  property  shall  accrue to the  parties  in
accordance with their rights and interests, as they may be from time to time, of
this Agreement  (for example,  if a property is available to the parties under a
third  party  agreement,  then the parties  shall have the right to  participate
therein in accordance with their Participating  Interest herein, as adjusted for
the third party interest under the third party agreement).

6. INTERESTS OF PARTICIPANTS

6.1 INITIAL PARTICIPATING INTEREST

Per section 5.2 above, the initial  Participating  Interests of the Participants
in the Joint Venture is as follows:

     (a)    Southern as to 80%  Participating  Interest until it has been repaid
            115% of the cost of putting the Property into production; and

     (b)    Vittone as to 20% Participating Interest.

Thereafter,  the parties shall each receive 50% of the net proceeds of the Joint
Venture.

6.2 CHANGES IN PARTICIPATING INTERESTS

Southern's  Participating  Interest  in the Joint  Venture  shall be  changed as
follows:

     (a)    transfer by Southern of less than all its Participating  Interest in
            accordance with Section 14;
<PAGE>
                                       11

     (b)    acquisition  of less than all of the  Participating  Interest of the
            other Participant, however arising; or

     (c)    in the  event of  default  by  Southern  in making  its  agreed-upon
            contribution  to an  adopted  Program  and  Budget,  followed  by an
            election by the other Participant to invoke paragraph 6.5(b).

6.3 Not Applicable

6.4 Not Applicable

6.5 DEFAULT IN MAKING COMMITTED CONTRIBUTIONS

If Southern,  having  committed to making a contribution to a Program or Budget,
defaults in making a contribution or cash call or paying an invoiced amount (the
Defaulted  Contribution")  required by an  approved  Program and Budget to which
Southern had  committed to  contribute  its  Proportionate  Share,  or some part
thereof,  Vittone may elect, within thirty days of notice of the default, one of
the following:

     (a)    to  pay  the   Defaulted   Contribution   and  treat  the  Defaulted
            Contribution,  together  with any accrued  interest  calculated  and
            compounded  on a  quarterly  basis from  advance,  as a demand  loan
            bearing  interest  at a rate of 10% per annum.  The failure to repay
            said loan upon  demand  shall be a default  of the  deemed  loan and
            Vittone may effect execution proceedings and take all steps it deems
            advisable  to recover the loan and  interest,  including  auctioning
            Southern's  Interest.  Southern hereby grants to Vittone a lien upon
            and a security interest in its Participating  Interest in the Assets
            and the  Property,  and the  Products and Net Profit  therefrom,  to
            secure  any  loan  made  hereunder,   including   interest  thereon,
            reasonable  legal fees and all other  reasonable  costs and expenses
            incurred in recovering  the loan with interest and in enforcing such
            lien or security interest, or both; or

     (b)    to have Southern's Participating Interest in the Property reduced.

Each Participant hereby irrevocably  appoints the other its  attorney-in-fact to
execute,  file and record all instruments necessary to perfect or effectuate the
provisions hereof.

6.6 REASONABLE TIME FOR FINANCING

Southern shall be required to meet the following minimum finance periods:

     (a)    $500,000 (the payment to Vittone) on or before 60 days from the date
            of this Agreement; and
<PAGE>
                                       12

     (b)    $4,500,000 on or before 120 days from the date of this Agreement.

The  parties  agree  that an  extension  of up to 60 days  shall be  granted  to
Southern  to meet  either  of the  above  funding  timelines,  if,  at the  sole
discretion of Vittone,  Southern has shown a reasonable plan to meet the funding
requirement within this extended 60 day timeline.

6.7 CONTINUING LIABILITIES UPON ADJUSTMENTS OF PARTICIPATING INTERESTS

Any  reduction of Southern's  Participating  Interest in the Joint Venture under
this Section 6 shall not relieve Southern of its share of any liability, whether
it accrues before or after such reduction,  arising out of Operations  conducted
prior to such  reduction.  For purposes of this Section 6,  Southern's  share of
such  liability  shall be equal to its  Participating  Interest at the time such
liability was incurred. The increased Participating Interest accruing to Vittone
as a result of the reduction of Southern's  Participating Interest shall be free
of royalties, liens or other encumbrances, other than those existing at the time
the Property was  acquired,  those to which both  Participants  have given their
written  consent,  or the Net Profits  Interest of Vittone.  An  adjustment to a
Participating  Interest need not be evidenced  during the term of this Agreement
by  the   execution  and  recording  of   appropriate   instruments,   but  each
Participant's  Participating  Interest  shall  be  shown  in  the  books  of the
Operator. However, either Participant, at any time upon the request of the other
Participant,  shall execute and  acknowledge  instruments  necessary to evidence
such adjustment in form sufficient for recording in the  jurisdiction  where the
Property is located.

7. MANAGEMENT COMMITTEE

7.1 ORGANIZATION AND COMPOSITION

The Participants  hereby establish a Management  Committee to determine  overall
policies,  objectives,  procedures, methods and actions under this Agreement and
to  supervise  Operations  and approve  Budgets  and  Programs.  The  Management
Committee  shall  consist of two  members  appointed  by Vittone and two members
appointed by Southern.  Each  Participant  may appoint one or more alternates to
act in the absence of a regular member.  Any alternate so acting shall be deemed
a  member.  Appointments  shall  be made  or  changed  by  notice  to the  other
Participant.

7.2 DECISIONS

Each  Participant,  acting through its appointed  member(s) shall have one equal
vote on the Management Committee for each appointed member.

7.3 MEETINGS

The  Management  Committee  shall hold regular  meetings at least  annually at a
mutually  agreed  place.   The  Operator  shall  give  15  days  notice  to  the
Participants of such regular meetings. Additionally, either Participant may call
a  special  meeting  upon  30  days'  notice  to  the  Operator  and  the  other
<PAGE>
                                       13

Participant. In case of emergency,  reasonable notice of a special meeting shall
suffice.  There  shall be a quorum  of at least  one  member  representing  each
Participant  present. In the event that a quorum is not present then the meeting
may be adjourned to the fifth  business day, with notice to the absent  members,
and the members present at an adjourned  meeting shall constitute a quorum which
shall only have the power to deal with the matters of the agenda  circulated for
the adjourned meeting. Each notice of a meeting shall include an itemized agenda
prepared by the Operator in the case of a regular meeting, or by the Participant
calling  the  meeting in the case of a special  meeting,  but any matters may be
considered with the consent of the Participants.  The Management Committee shall
establish  its own  procedural  rules,  which  shall be modeled  upon  corporate
precedent.  The  Operator  shall  prepare  minutes  of all  meetings  and  shall
distribute  copies of such minutes to the Participants  within 15 days after the
meeting.  The minutes,  when signed by the members of the meeting,  shall be the
official  record of the decisions made by the Management  Committee and shall be
binding on the Operator and the  Participants,  except as otherwise  provided in
this Agreement or where inconsistent with this Agreement.  If personnel employed
in operations are required to attend a Management Committee meeting,  reasonable
costs incurred in connection with such attendance shall be a Joint Venture cost.
All other costs shall be paid by the Participants individually.

7.4  ACTION WITHOUT MEETING

In lieu of meetings, the Management Committee may hold telephone conferences, so
long as all decisions are immediately confirmed in writing by the Participants.

7.5 PROCEDURE FOR DEADLOCK

In the event of a dead-lock of the Management  Committee respecting the approval
of  or  operation  of  Programs,  Feasibility  Reports,  Operating  plans,  mine
maintenance  plans,  mine closure  plans,  or any other matters  respecting  the
exploration,   development,  operation,  maintenance,  production,  or  sale  of
Products of or from the  Property,  then the matter in dispute shall be referred
to a recognized engineering or geological consultant (the "CONSULTANT") selected
by the  Operator.  A  dead-lock  shall be  irrevocably  deemed to occur upon the
Management  Committee  having failed to agree on a matter in two (2)  successive
meetings. Upon a dead-lock occurring:

     (a)    any party (the  "SENDING  PARTY")  may  forthwith  give  notice (the
            "NOTICE") in writing to the other parties (the "RECEIVING  PARTIES")
            declaring  a  dead-lock,   specifying   the  issue  (or  issues)  in
            contention;

     (b)    the Operator  shall,  within ten (10) days of receipt or issuance of
            the  written  notice,  select a  Consultant  to examine  and give an
            opinion on the matter,  and  thereupon  give  written  notice to the
            parties naming the Consultant and giving the  Consultant's  estimate
            of the cost to have the Consultant determine the issue;

     (c)    within thirty (30) days (or such longer period as the Consultant may
            allow,  but it shall not be required to give any  extension)  of the
<PAGE>
                                       14

            written notice of the Operator  naming the  Consultant,  the parties
            shall  submit  to  the  Consultant   such  materials  as  they  deem
            advisable,  in respect to the issue or issues,  for consideration by
            the Consultant and, if a party fails to submit such materials,  then
            the  Consultant  shall  conduct  its  inquiries  from the  submitted
            materials  of the  other  parties  and  from its own  resources  and
            researchers;

     (d)    the parties and the Management  Committee shall allow the Consultant
            complete  access to all records and files  regarding  the  Property,
            whether on the premises of the parties or the  Management  Committee
            or  elsewhere,  and the  Consultant  shall have  access to all other
            persons  having  knowledge of the  Property and shall have  complete
            access to the  Property and shall have the right to conduct all such
            tests  and  researches  as  it  may  determine  including  sampling,
            trenching, drilling or other activities as it may deem advisable;

     (e)    upon having familiarized  itself with the materials,  the Consultant
            shall hold a meeting with the parties to hear their  representations
            and to query the parties as to their opinions and to attempt to seek
            majority consensus of the parties with the Consultant's assistance;

     (f)    if the parties cannot reach majority consensus, the Consultant shall
            submit its reports and  recommendations to the parties in respect to
            the  issue  or  issues   submitted   to  it  and  such   report  and
            recommendations  shall be final and binding upon the parties  unless
            modified by majority vote of the parties; and

     (g)    the cost of the  Consultant  shall be a cost  charged  to the  Joint
            Venture Account.

7.6 MATTERS REQUIRING APPROVAL

Except as otherwise  delegated to the Operator in Subsection 8.2, the Management
Committee  shall have exclusive  authority to determine all  management  matters
related to this Agreement.

8. OPERATOR

8.1 APPOINTMENT

The Joint  Venture  shall be the  Operator  until  such time as it resigns or is
required  to resign by the terms of this  Agreement.  The Joint  Venture  or its
successor hereby agrees to serve as such until it resigns or is deemed to resign
as provided in Subsection 8.5 or it is removed,  as provided in Subsection  8.6.
The Joint Venture or its successor  shall,  at all times,  appoint an individual
employed  on its  staff as having  primary  responsibility  to direct  the Joint
Venture's  activities  as  Operator.  Any  proposed  change  in  the  individual
appointed under this Subsection 8.1 will be communicated by notice in writing to
the Participants in advance of the appointment.
<PAGE>
                                       15

8.2 POWERS AND DUTIES OF OPERATOR

Subject  to the terms and  provisions  of this  Agreement  and  subject  to such
variations as may be prescribed by the  Management  Committee from time to time,
the  Operator  shall  have the  following  powers  and  duties,  subject  to the
provision of adequate  funding,  which shall be discharged  in  accordance  with
adopted Programs and Budgets:

     (a)    The Operator shall manage, direct and control Operations;

     (b)    The  Operator  shall  implement  the  decisions  of  the  Management
            Committee,  shall  make all  expenditures  necessary  to  carry  out
            adopted Programs, and shall promptly advise the Management Committee
            if it lacks sufficient funds to carry out its responsibilities under
            this Agreement;

     (c)    The Operator shall:

            (i)    purchase  or  otherwise   acquire  all  material,   supplies,
                   equipment,   water,   utility  and  transportation   services
                   required for Operations,  such purchases and  acquisitions to
                   be made on the best terms available,  taking into account all
                   of the circumstances;

            (ii)   obtain  such  customary  warranties  and  guarantees  as  are
                   available in connection with such purchases and acquisitions;
                   and

            (iii)  keep the Assets and the Property  free and clear of all liens
                   and  encumbrances,  except for those  liens and  encumbrances
                   existing  at the time of, or  created  concurrent  with,  the
                   acquisition  of the Assets,  or mechanic's or material  men's
                   liens which shall be  released  or  discharged  in a diligent
                   manner,  or liens and encumbrances  specifically  approved by
                   the Management Committee.

            (iv)   make  or  arrange  for  all  payments   required  by  leases,
                   licenses,  permits, contracts and other agreements related to
                   the Assets and the Property;

            (v)    pay all taxes,  assessments  and like charges on  Operations,
                   Assets and the Property  except taxes  determined or measured
                   by a Participant's sales revenue or net income. If authorized
                   by the  Management  Committee,  the  Operator  shall have the
                   right to contest in the courts or otherwise,  the validity or
                   amount of any taxes,  assessments  or charges if the Operator
                   deems them to be unlawful,  unjust, inequitable or excessive,
                   or to  undertake  such  other  steps  or  proceedings  as the
                   Operator   may  deem   reasonably   necessary   to  secure  a
                   cancellation, reduction, readjustment or equalization thereof
                   before the Operator  shall be required to pay them, but in no
                   event shall the Operator  permit or allow title to the Assets
<PAGE>
                                       16

                   or the Property to be lost as the result of the nonpayment of
                   any taxes, assessments or like charges;

            (vi)   apply for all necessary permits, licenses and approvals;

            (vii)  comply with applicable federal, provincial and local laws and
                   regulations;

            (viii) notify  promptly the Management  Committee of any allegations
                   of violation of any license,  regulation,  agreement or other
                   matter which may result in a dispute, fine,  prosecution,  or
                   other liability or investigation or proceeding ;

            (ix)   prepare  and  file  all  reports  or  notices   required  for
                   Operations.  The  Operator  shall  not be in  breach  of this
                   provision  if a  violation  has  occurred  in  spite  of  the
                   Operator's good faith efforts to comply and the Operator has,
                   or has  attempted  to,  timely  cured  or  disposed  of  such
                   violation  through  performance,  or  payment  of  fines  and
                   penalties; and

            (x)    shall do all other acts reasonably  necessary to maintain the
                   Assets and the Property.

     (d)    The Operator  shall  conduct such title  examinations  and cure such
            title defects as may be advisable in the reasonable  judgment of the
            Operator.

     (e)    The  Operator  shall  prosecute  and defend,  but shall not initiate
            without  consent of the  Management  Committee,  all  litigation  or
            administrative proceedings arising out of Operations. Any settlement
            involving payments,  commitments or obligations in excess of $50,000
            in cash or value  shall be subject to the  advance  approval  of the
            non-managing Participant.

     (f)    The  Operator  shall  provide  insurance  for  the  benefit  of  the
            Participants as stipulated by the Management Committee.

     (g)    The  Operator  may  dispose  of  Assets,   whether  by  abandonment,
            surrender  or Transfer in the ordinary  course of  business,  except
            that the Property may be abandoned or  surrendered  only as provided
            in  Section  13.  However,  without  prior  authorization  from  the
            Participants, the Operator shall not:

            (i)    dispose  of Assets in any one  transaction  having a value in
                   excess of $50,000;

            (ii)   enter into any sales  contracts or  commitments  for Product,
                   except as permitted in Subsection 11.2;
<PAGE>
                                       17

            (iii)  begin a liquidation of the Joint Venture; or

            (iv)   dispose of all or a substantial  part of the Assets necessary
                   to achieve the purposes of the Joint Venture.

     (h)    The Operator shall have the right to carry out its  responsibilities
            hereunder through agents,  Affiliates or independent contractors or,
            with the written consent of the Participants,  to an unrelated third
            party.

     (i)    The Operator shall perform or cause to be performed  during the term
            of this  Agreement all  assessment and other work required by law in
            order to maintain in good standing the mining claims or  concessions
            included  within the Property.  The Operator  shall not be liable on
            account of any  determination  by any court or  governmental  agency
            that the work performed by Operator does not constitute the required
            annual  assessment  work or occupancy for the purposes of preserving
            or maintaining ownership of the claims,  provided that the work done
            is in accordance  with the adopted Program and Budget and such error
            does not occur due to negligence of reporting of the Operator to the
            Management  Committee  or in the  carrying  out of the  Programs  or
            Budgets.  The  Operator  shall  timely  record  and  file  with  the
            appropriate governmental agency, records in proper form attesting to
            the performance of assessment  work, and allocating  therein,  to or
            for the benefit of each claim,  at least the minimum amount required
            by law to maintain such claim or site in good standing.

     (j)    If authorized by the Management Committee, the Operator may:

            (i)    locate,  amend or relocate  any mining  claim or mill site or
                   tunnel site;

            (ii)   locate  any  fractions   resulting  from  such  amendment  or
                   relocation;

            (iii)  apply for patents or mining  leases or other forms of mineral
                   tenure for any such claims or sites;

            (iv)   abandon any mining  claims for the  purpose of locating  mill
                   sites or otherwise;

            (v)    abandon  any mill sites for the  purpose of  locating  mining
                   claims or otherwise;

            (vi)   exchange with or convey to the government of Argentina any of
                   the  Property  for the  purpose  of  acquiring  rights to the
                   ground covered thereby or other adjacent ground; and

            (vii)  convert  any claims or mill sites into one or more  leases or
                   other forms of mineral  tenure  pursuant to any law hereafter
                   enacted.
<PAGE>
                                       18

     (k)    The Operator  shall keep and maintain  all required  accounting  and
            financial  records  pursuant  to  the  Accounting  Procedure  and in
            accordance  with customary cost  accounting  practices in the mining
            industry.

     (l)    The  Operator  shall keep the  Management  Committee  advised of all
            Operations by submitting in writing to the Management Committee:

            (i)    monthly summary  progress reports within 15 days of month end
                   which include  programs in progress and completed  during the
                   month, number of samples collected,  and estimated statements
                   of expenditures;

            (ii)   immediately  provide  Participants with notice of and written
                   details of all material changes,  as such would reasonably be
                   defined pursuant to relevant securities laws;

            (iii)  quarterly   progress  reports  which  include  statements  of
                   expenditures  and comparisons of such  expenditures to be the
                   adopted  Budget,  within  30 days of the end of the  calendar
                   quarter;

            (iv)   copies of reports concerning Operations;

            (v)    a detailed  final report  within 60 days after  completion of
                   each Program and Budget, and no less frequently than one such
                   report every twelve months,  which shall include  comparisons
                   between  actual and  budgeted  expenditures  and  comparisons
                   between the objectives and results of Programs, together with
                   the following information:

                    (A)  introduction;

                    (B)  project or property location and access;

                    (C)  physiography, vegetation and climate;

                    (D)  historical background and current exploration program;

                    (E)  description of properties, including claims with expiry
                         dates and assessment requirements;

                    (F)  regional geology;

                    (G)  property geology;
<PAGE>
                                       19

                    (H)  mineralization;

                    (I)  geochemistry-- rock and/or soil with interpretation;

                    (J)  description of individual mineralized zones;

                    (K)  geophysics;

                    (L)  conclusions on exploration potential and interpretative
                         models;

                    (M)  maps of various scales,  including location maps, claim
                         maps,  geology maps,  geochemical sample location maps,
                         detailed  maps of showings with all location of surface
                         samples, trenches and drill holes;

                    (N)  appendices including a list of all samples, description
                         of these samples and the assays and analytical  results
                         (on sheets as received from the lab); and

            (v)    such other reports as the Management Committee may reasonably
                   request.

                  At all  reasonable  times  the  Operator  shall  provide  the
                  Management Committee or the representative of any Participant,
                  upon the  request of any member of the  Management  Committee,
                  access to, and the right to inspect  and copy all maps,  drill
                  logs,  core  tests,  reports,   surveys,   assays,   analyses,
                  production  reports,  operations,  technical,  accounting  and
                  financial   records,   and  other   information   acquired  in
                  operations.   In  addition,   the  Operator  shall  allow  the
                  Non-Operating  Participant,  at the  latter's  sole  risk  and
                  expense,  and subject to  reasonable  safety  regulations,  to
                  inspect  the  Assets,  Operations  and  the  Property  at  all
                  reasonable  times, so long as the inspecting  Participant does
                  not unreasonably interfere with Operations.

     (m)    The  Operator  shall  undertake  all  other  activities   reasonably
            necessary to fulfill the foregoing and as directed by the Management
            Committee.

The Operator  shall not be in default of any duty under this  Subsection  8.2 if
its failure to perform results from the failure of the Non-Operating Participant
to perform acts or to contribute amounts required of it by this Agreement.

8.3 STANDARD OF CARE

The Operator shall conduct all operations in a good,  workmanlike  and efficient
manner, in accordance with sound mining and other applicable  industry standards
and  practices,  and in  accordance  with the terms and  provisions  of  leases,
licenses,  permits,  contracts and other agreements pertaining to Assets and the
<PAGE>
                                       20

Property. The Operator shall not be liable to the Non-Operating  Participant for
any act or omission  resulting in damage or loss except to the extent  caused by
or attributable to the Operator's willful misconduct or gross negligence.

8.4 Not Applicable

8.5 Not Applicable

8.6 Not Applicable

8.7 Not Applicable

8.8 Not Applicable

8.9 PAYMENTS TO OPERATOR

The Operator shall be compensated  for its services and reimbursed for its costs
hereunder in accordance with the Accounting Procedure.

8.10 TRANSACTIONS WITH AFFILIATES

If the Operator engages Affiliates to provide services hereunder, it shall do so
on terms no less  favorable  than  would be the case with  unrelated  persons in
arm's length transactions.

8.11 ACTIVITIES DURING DEADLOCK

If the  Management  Committee for any reason fails to adopt a Program and Budget
as a consequence of a dead-lock,  subject to the contrary  direction by majority
of the Management  Committee and to the receipt of necessary finds, the Operator
shall  continue  Operations  at levels  necessary  to maintain  the Property and
Assets but shall not  commence or extend any  Programs  until the  dead-lock  is
resolved.  Financial  contributions  to  such  necessary  maintenance  shall  be
obligatory on all Participating Interests.

9. PROGRAMS AND BUDGETS

9.1 OPERATIONS PURSUANT TO PROGRAMS AND BUDGETS

Except as otherwise  provided herein,  Operations  shall be conducted,  expenses
shall be  incurred,  and Assets  shall be  acquired  only  pursuant  to approved
Programs and Budgets.

9.2 PRESENTATION OF PROGRAMS AND BUDGETS

Proposed Programs and Budgets for the Property shall be prepared by the Operator
for a period of one year, or any shorter period,  or a longer period if approved
<PAGE>
                                       21

by the Management  Committee.  Each adopted Program and Budget for the Property,
regardless  of length,  shall be  reviewed at least once a year or at the end of
the  Program,  whichever  is earlier,  at the annual  meeting of the  Management
Committee. During the period encompassed by any Program and Budget, and at least
three  months  prior to its  expiration,  a proposed  Program and Budget for the
succeeding  period  shall be  prepared  by the  Operator  and  submitted  to the
Participants.

9.3 REVIEW AND APPROVAL OF PROPOSED PROGRAMS AND BUDGETS

Within  30  days  after  submission  of a  proposed  Program  and  Budget,  each
Participant shall submit to the Management Committee:

     (a)    notice  that the  Participant  approves  the  proposed  Program  and
            Budget; or

     (b)    proposed modifications of the proposed Program and Budget; or

     (c)    notice that the Participant rejects the proposed Program and Budget.

If a  Participant  fails  to give  any of the  foregoing  responses  within  the
allotted  time the  Operator  shall give the party notice that reply is required
and if  response  is not  forthcoming  within 15 days of delivery of such second
notice the failure shall be deemed to be an approval by the  Participant  of the
Operator's proposed Program and Budget and if, upon another 15 days of notice by
the  Operator to such  Participant  that the  Program is  approved  and the said
Participant  must  respond that it will  consider  providing  its  Proportionate
Share,  such Participant does not respond then it will be deemed to have elected
not to participate. If a Participant makes a timely submission to the Management
Committee  pursuant to paragraph  9.3(b) or (c), then the  Management  Committee
shall seek, in a bona fide attempt,  to develop a Program and Budget  acceptable
to the  Participants  otherwise it shall  initiate the  provisions of subsection
7.5.

9.4 ELECTION TO PARTICIPATE

By notice to the Management  Committee  within the time provided by section 6.6,
after the final vote adopting a Program and Budget,  a Participant  may elect to
contribute to such Program and Budget in some lesser amount than its  respective
Participating Interest, or not at all, in which cases its Participating Interest
shall be  recalculated  as provided in Section 6. If a  Participant  fails to so
notify the Management Committee, the Participant shall be deemed to have elected
not to contribute  to such Program and Budget in  proportion  to its  respective
Participating  Interest as of the beginning of the period covered by the Program
and Budget.

9.5 DEADLOCK ON PROPOSED PROGRAMS AND BUDGETS

If the Participants,  acting through the Management Committee, fail to approve a
Program and Budget for the Property by the  beginning of the period to which the
proposed Program and Budget applies,  the provisions of Subsections 7.5 and 8.11
shall apply.
<PAGE>
                                       22

9.6 BUDGET OVERRUNS; PROGRAM CHANGES

The Operator shall immediately  notify the Management  Committee of any material
departure from an adopted  Program and Budget for the Property.  If the Operator
exceeds an adopted  Budget by more than 10%,  then the excess over 110%,  unless
directly  caused by an  emergency or  unexpected  expenditure  made  pursuant to
subsection 9.7 or unless otherwise authorized by the Management Committee, shall
be for the sole account of the Operator and such excess shall not be included in
the  calculations  of the  Participating  Interests  for  the  Property.  Budget
overruns of 110% or less shall be borne by the  Participants  in  proportion  to
their respective Participating Interests as of the time the overrun occurs.

9.7 EMERGENCY OR UNEXPECTED EXPENDITURES

In case of emergency or events outside the control of the Operator, the Operator
may take any  reasonable  action it deems  necessary  to protect  life,  limb or
property,  to  protect  the  Assets,  the  Property  or to  comply  with  law or
government  regulation.  The Operator may also make reasonable  expenditures for
unexpected  events  which are beyond  its  reasonable  control  and which do not
result from a breach by it of its standard of care.  The Operator shall promptly
notify the  Participants  of the  emergency or unexpected  expenditure,  and the
Operator  shall be reimbursed  for all resulting  costs by the  Participants  in
proportion to their respective Participating Interests at the time the emergency
or unexpected expenditures are incurred.

10. PRODUCTION NOTICE

10.1 PRODUCTION RECOMMENDATION

Within 60 days of the production of the Feasibility  Report,  the Operator shall
call a Management  Committee  meeting to consider the  Feasibility  Report.  The
Management  Committee shall consider such  Feasibility  Report prepared and may,
subject to the resolution of any outstanding  issues  contemplated in Section 10
herein,  approve the Feasibility Report, with such modifications,  if any, as it
considers  necessary or desirable.  Forthwith  after approval of the Feasibility
Report,  the  Management  Committee  shall cause the Operator to give notice (in
this  Agreement  called  the  "PRODUCTION   RECOMMENDATION")   to  each  of  the
Participants  stating that the Management  Committee recommends that a Mining be
established  and brought into  production  in  conformity  with the  Feasibility
Report as so approved.

11. NOT APPLICABLE

12. CONSTRUCTION OF MINE

12.1 FACILITIES COMPLETION DATE

The Management  Committee  shall cause the Operator to, and the Operator  shall,
proceed with construction of the Mining facilities with all reasonable  dispatch
after a Production Notice has been given. Construction shall be substantially in
<PAGE>
                                       23

accordance  with the Production  Notice,  subject to the right of the Management
Committee to cause such reasonable  variations in construction to be made as the
Management  Committee deems advisable from time to time. The Operator may of its
own  initiative,  and shall  forthwith  upon  request by a  Participant,  call a
Management Committee meeting to consider recommending that the Mining facilities
are  complete  and are  ready to  commence  Operations  for the  production  and
processing  of Product as of a date  determined  by the  Management  Committee (
called  the  "Completion  Date").  Forthwith  upon  the  Completion  Date  being
established, the Operator shall give notice of that date to the parties.

13. OPERATION OF THE MINE

13.1 MINE OPERATING PLAN

Commencing with the Completion Date, all Mining  Operations shall be planned and
conducted  (such plans called the "Operating  Plan") and all estimates,  reports
and statements shall be prepared and made on the basis of an operating year (the
"Operating Year") as determined by the Management Committee.  The Operator shall
submit an Operating Plan for each Operating  Year to the  Participants  not less
than 90 days prior to the Operating Year to which the Operating Plan relates.

Each Operating Plan shall contain the following:

     (a)    a plan of the proposed Mining Operations;

     (b)    a detailed  estimate of all construction  costs,  production  costs,
            operating capital costs,  administrative  costs and any other costs,
            plus a reasonable allowance for contingencies;

     (c)    an estimate of the  quantity  and quality of the ore to be mined and
            the concentrates or metal to be produced; and

     (d)    such other facts as may be necessary to  reasonably  illustrate  the
            results intended to be achieved by the Operating Plan.

Upon request of any  Participant the Operator shall meet with the Participant to
discuss the Operating Plan. The Management  Committee shall adopt each Operating
Plan, with such changes as it deems necessary, not less than 30 days immediately
preceding the  Operating  Year to which the  Operating  Plan relates;  provided,
however,  that the Management  Committee may approve amendments to the Operating
Plan.
<PAGE>
                                       24

14. DISTRIBUTION IN KIND

14.1 PRESUMPTION OF TAKING IN KIND

Unless  otherwise  agreed  by the  Participants,  each  Participant  shall  take
delivery in kind of Product and separately dispose of its Proportionate Share of
the Products produced from the mine. Unless otherwise  unanimously agreed by the
representatives of all parties,  the terms of delivery to the Participants shall
be f.o.b.  transport carrier at the concentrator,  as Products are produced. Any
costs and  expenses  incurred by reason of the  Participants  taking in kind and
making  separate  dispositions  shall  be  paid by  each  Participant  directly.
However,  unless  otherwise  instructed  by a  Participant,  the Operator  shall
receive and sell on each  Participant's  behalf,  as agent,  that  Participant's
Product and shall remit the proceeds  thereof to the  Participants  but that the
Operator  shall be at  liberty  to  deduct  all  such  invoiced  amounts  to the
Participant  for its share of  Operations  costs and NS Royalties or Net Profits
Interests which are due and unpaid. Nothing in this Agreement shall be construed
as providing,  directly or indirectly, for any joint or cooperative marketing or
selling of Products or  permitting  the  processing  of Products of any parties,
other than the  Participants,  at any processing  facilities  constructed by the
Participants   pursuant  to  this   Agreement.   The  Operator  shall  give  the
Participants notice at least ten days in advance of the delivery date upon which
their Proportionate Share of Products will be available.

14.2 RECORDS BY OPERATOR

The  Operator  shall weigh (or  calculate by volume),  sample and assay,  all in
accordance with sound mining and metallurgical  practices, all Products produced
from the mine prior to  delivery  of those  Products  to the  Participants.  The
Operator shall keep records of weights (or calculations, as the case may be) and
sample and assay results.

14.3 PARTICIPANT FACILITIES

Each Participant shall be entitled to use, dispose of or otherwise deal with its
Proportionate Share of Products as it sees fit. From the time of delivery,  each
Participant  shall have  ownership  of and title to its  Proportionate  Share of
Products separate from, and not as tenant in common with, the other parties.  If
a Participant  has instructed the Operator that it will take delivery of Product
then each  Participant  shall  construct,  operate and maintain,  all at its own
costs and risk,  any and all  facilities  which may be  necessary to receive and
store and  dispose of its  Proportionate  Share of the  Products at the rate the
same are produced.

14.4 PARTICIPANT'S FAILURE TO STORE

If a  Participant  has not made the necessary  arrangements  to take in kind and
store its share of production the Operator  shall,  at the sole cost and risk of
that Participant  store, in any location where it will not interfere with Mining
Operations,  the  production  owned by that  Participant.  All of the  costs and
expenses  involved in arranging and providing  storage shall be billed  directly
<PAGE>
                                       25

to, and be the sole responsibility of, the Participant whose share of production
is so stored.

14.5 FAILURE OF PARTICIPANT TO TAKE IN KIND

If a Participant  fails to take in kind, the Operator shall have the right,  but
not the  obligation,  for a period of time  consistent with the minimum needs of
the industry,  but not to exceed six months, to purchase the Participant's share
for its own  account  or to sell  such  share as agent  for the  Participant  on
reasonable  efforts  to sell at the  prevailing  market  price in the area;  any
deficiency for which the Operator shall bear no responsibility, absent bad faith
.. Subject to the terms of any such  contracts of sale then  outstanding,  during
any  period  that  the  Operator  is  purchasing  or  selling  a   Participant's
Proportionate  Share of  Products,  the  Participant  may elect by notice to the
Operator to take in kind. The Operator shall be entitled to deduct from proceeds
of any sale by it for the account of a Participant  reasonable expenses incurred
in such a sale and any other unpaid costs of the  Participant  in respect to the
Joint Venture and the Property.

14.6 PARTICIPANT'S RESPONSIBILITY FOR COSTS

Each  Participant  shall be  responsible  to pay all  charges  and  costs of its
Proportionate  Share of the Joint Venture and all of its Proportionate  Share of
Net Profit  Interests  and  neither  the  Operator  nor any other party shall be
responsible for the same.

15. SUSPENSION AND TERMINATION OF OPERATIONS

15.1 MINE MAINTENANCE PLAN

The Operator  may, at any time  subsequent to the  Completion  Date, on at least
sixty (60)  days'  notice to all  Participants,  recommend  that the  Management
Committee   approve  that  Mining   Operations  be  suspended.   The  Operator's
recommendation  shall  include a plan and budget  (called the "Mine  Maintenance
Plan"), in reasonable  detail, of the activities to be performed to maintain the
Assets  and  Property  during  the  period  of  suspension  and the  costs to be
incurred. The Management Committee may, at any time subsequent to the Completion
Date,  cause the Operator to suspend  Mining  Operations in accordance  with the
Operator's  recommendation with such changes to the Mine Maintenance Plan as the
Management Committee deems necessary.  The Management Committee may cause Mining
Operations to be resumed at any time.

15.2 MINE CLOSURE PLAN

The Operator or any Participant  may, at any time following a period of at least
ninety (90) days during which Mining  Operations  have been  suspended,  upon at
least thirty (30) days notice to all Participants, recommend that the Management
Committee approve the permanent termination of Mining Operations. The Operator's
recommendation shall include a plan and budget (called the "Mine Closure Plan"),
in reasonable  detail,  of the  activities to be performed to close the mine and
reclaim the Property and the estimated  cost to implement the Mine Closure Plan.
The  Management  Committee  may,  by  approval  of  the  representatives  of all
Participants,  approve the  Operator's  recommendation  with such changes to the
<PAGE>
                                       26

Mine Closure Plan as the Management Committee deems necessary. If the Management
Committee  does not approve the  Operator's  recommendation  the Operator  shall
maintain  Mining  Operations in  accordance  with the Mine  Maintenance  Plan as
approved pursuant to subsection 15.1 herein. Upon Mine Closure,  the title shall
revert back to Vittone and/or his assigns.

15.3 IMPLEMENTATION OF MINE CLOSURE PLAN

If the Management Committee approves the Operator's  recommendation as aforesaid
it shall cause the Operator to:

     (a)    implement the Mine Closure Plan, whereupon the Participants shall be
            committed to pay, in  proportion to their  respective  Participating
            Interests, the costs required to implement that Mine Closure Plan;

     (b)    remove, sell and dispose of such Assets as may reasonably be removed
            and disposed of profitably and such other Assets as the Operator may
            be  required  to remove  pursuant to  applicable  environmental  and
            mining laws;

     (c)    perform all site remediation as required by law; and

     (d)    sell, abandon or otherwise dispose of the Property.

                  The disposal  price for the Assets and the  Property  shall be
the best price  obtainable,  and the net revenues,  if any, from the removal and
sale shall be credited to the  Participants  in proportion  to their  respective
Participating Interests.

16. ACCOUNTS AND SETTLEMENTS

16.1 MONTHLY STATEMENTS

The  Operator  shall  promptly  submit  to  the  Management   Committee  monthly
statements of account reflecting in reasonable detail the charges and credits to
the Joint Account during the preceding month.

16.2 AUDITS

Upon request made by Southern or Vittone  within 24 months  following the end of
any Operating  Year (or, if the  Management  Committee has adopted an accounting
period  other than the  calendar  year,  within 24 months  after the end of such
period),  the  Operator  shall order an audit of the  accounting  and  financial
records  for such  calendar  year (or  other  accounting  period).  All  written
exceptions to and claims upon the Operator for  discrepancies  disclosed by such
audit shall be made not more than 3 months  after  receipt of the audit  report.
Failure to make any such exception or claim within the 3 month period shall mean
the audit is correct  and binding  upon the  Participants.  The audits  shall be
<PAGE>
                                       27

conducted  by an  international  firm of chartered  accountants  selected by the
Operator, unless otherwise agreed by the Management Committee.

17. WITHDRAWAL AND TERMINATION

17.1 TERMINATION BY EXPIRATION OR AGREEMENT

This Agreement shall terminate as expressly  provided in this Agreement,  unless
earlier terminated by written agreement.

17.2 NOT APPLICABLE

17.3 NOT APPLICABLE

17.4 CONTINUING OBLIGATIONS

On termination of this Agreement  under sections 17.1 to 17.3, the  Participants
shall remain liable for continuing  obligations hereunder until final settlement
of all  accounts  and for any  liability,  whether  it  accrues  before or after
termination, if it arises out of Operations during the term of the Agreement.

17.5 DISPOSITION OF ASSETS ON TERMINATION

Promptly after an event requiring  termination has occurred,  the Operator shall
take all action  necessary to wind up the activities of the Joint  Venture,  and
all costs and expenses  incurred in connection with the termination of the Joint
Venture shall be expenses  chargeable to the  Participants.  In accordance  with
Exhibit B any Participant  that has a negative  Capital Account balance when the
Joint Venture is terminated for any reason shall contribute to the Assets of the
Joint Venture an amount sufficient to raise such balance to zero. The Assets and
the Property shall first be paid, applied, or distributed in satisfaction of all
liabilities of the Joint Venture to third parties and then to satisfy any debts,
obligations,  or liabilities owed to the Participants.  Before  distributing any
finds or Assets or Property to  Participants,  the Operator shall have the right
to segregate amounts which, in the Operator's reasonable judgment, are necessary
to  discharge  continuing   obligations  or  to  purchase  for  the  account  of
Participants, bonds or other securities for the performance of such obligations.
The  foregoing   shall  not  be  construed  to  include  the  repayment  of  any
Participant's capital contributions or Capital Account balance.  Thereafter, any
remaining  cash and all other  Assets  and  Property  shall be  distributed  (in
undivided  interests unless otherwise agreed) to the Participants,  first in the
ratio  and to the  extent  of  their  respective  Capital  Accounts  and then in
proportion to their respective Participating Interests, subject to any dilution,
reduction,  or termination of such Participating  Interests as may have occurred
pursuant  to the  terms  of this  Agreement.  No  Participant  shall  receive  a
distribution  of any  interest in Products or proceeds  from the sale thereof if
such Participant's  Participating  Interest therein has been terminated pursuant
to this Agreement.
<PAGE>
                                       28

17.6 NON-COMPETITION COVENANTS

A  Participant,  its  successor or  Affiliate,  that  withdraws  from this Joint
Venture  shall not,  directly or  indirectly,  acquire any  interest in property
within a 1.5  kilometers  distance from the  perimeter of the  Property,  for 12
months  after  the  effective  date  of   withdrawal.   If  such  a  withdrawing
Participant,  its  successor or  Affiliate,  acquires  property  subject to this
section 17.6, such party, its successor or Affiliate shall be obligated to offer
to convey to the non-withdrawing  Participant,  at its proportionate acquisition
cost and  geologic and other  expenditures,  a  Proportionate  Share of any such
property or  interest  so  acquired as if such party were still a  Participating
party at the interest  immediately prior to the withdrawal.  Such offer shall be
made in writing and can be accepted by the  non-withdrawing  Participant  at any
time within 45 days after it is received by such non-withdrawing Participant.

17.7 RIGHT TO DATA AFTER TERMINATION

After  termination  of this  Agreement,  each  Participant  shall be entitled to
copies of all  information  of the Joint Venture  before the  effective  date of
termination  not  previously  furnished to it, but a terminating  or withdrawing
Participant shall not be entitled to any such copies after any other termination
or any withdrawal.

17.8 CONTINUING AUTHORITY

On  termination  of this  Agreement,  the  Operator  shall  have the  power  and
authority,  subject to control of the  Management  Committee,  if any, to do all
things  on  behalf  of  the  Participants  which  are  reasonably  necessary  or
convenient  to:  (a) wind up  Operations  (either  of the Joint  Venture  or the
Property)  and  (b)  complete  any   transaction  and  satisfy  any  obligation,
unfinished or unsatisfied, at the time of such termination or withdrawal, if the
transaction or obligation  arises out of Operations prior to such termination or
withdrawal.  The Operator shall have the power and authority to grant or receive
extensions  of time or change  the  method of  payment  of an  already  existing
liability  or  obligation,  prosecute  and  defend  actions  on  behalf  of  the
Participants  and the Joint Venture,  mortgage Assets or the Property,  and take
any other  reasonable  action in any  matter  with  respect  to which the former
Participants  continue  to have,  or appear  or are  alleged  to have,  a common
interest or a common liability.

18. ABANDONMENT AND SURRENDER OF THE PROPERTY

18.1 SURRENDER OR ABANDONMENT OF THE PROPERTY

The Management Committee may authorize the Operator to surrender or abandon part
or  all  of the  Property.  If the  Management  Committee  authorizes  any  such
surrender or abandonment  over the objection of a Participant,  the  Participant
that desires to abandon or surrender shall assign to the objecting  Participant,
without  cost  to  the  surrendering   Participant,   all  of  the  surrendering
Participant's  interest in the property to be abandoned or surrendered,  and the
abandoned or surrendered property shall cease to be part of the Property.
<PAGE>
                                       29

18.2 REACQUISITION

If any part or all the Property is abandoned or surrendered under the provisions
of this Section 18, then, unless this Agreement is earlier  terminated,  neither
Participant  nor any successor nor Affiliate  thereof shall acquire any interest
in or a right to  acquire  that part of the  Property  for a period of 12 months
following  the  date of  such  abandonment  or  surrender.  If such  Participant
reacquires any of the Property in violation of this  Subsection  18.2,  then the
other  Participant,  its  successor or Affiliate as the case may be may elect by
notice to the reacquiring  Participant within 45 days after it has actual notice
of such  reacquisition,  to have such part of the  Property  made subject to the
terms of this  Agreement.  In the event such an election is made, the reacquired
part of the Property shall thereafter be treated as the Property hereunder,  and
the costs of reacquisition shall be borne solely by the reacquiring  Participant
and  shall  not be  included  for  purposes  of  calculating  the  Participants'
respective Participating Interests.

19. TRANSFER OF INTEREST

19.1 GENERAL

A  Participant  shall  not have the  right  to  Transfer  all or any part of its
Participating Interest, or any other interest, except on the following terms and
conditions:

     (a)    a Transfer to a  subsidiary  or  Affiliate,  so long as the same are
            controlled  by the  Participant,  may  be  effected  by the  parties
            subject to such entering into this Agreement but, unless approved by
            the other  Participant,  the transferring  Participant  shall not be
            relieved of its obligations under this Agreement;

     (b)    each Participant  shall have a right of first refusal to acquire the
            interest  of the  other  Participant  which it wishes to sell or for
            which it has received an offer. The other  Participant must exercise
            its right of first  refusal  within 30 days of  receipt of notice of
            all material terms of the Transfer by notifying the Participant that
            it will acquire  such  offered  interest on the terms set out in the
            notice. An offer shall be priced and offered in Canadian dollars. If
            the  offer  is not  accepted  by the  other  Participant,  then  the
            offering Participant shall be free to sell such offered interest for
            a period of 120 days but not at a more favourable price;

     (c)    no transferee of all or any part of the Participating  Interest of a
            Participant shall have the rights of a Participant  unless and until
            the transferring  Participant has provided to the other  Participant
            notice of the Transfer, and except as provided in paragraphs 19.1(h)
            and  19.l(i),  the  transferee,  as of  the  effective  date  of the
            Transfer,  has committed in writing to be bound by this Agreement to
            the same extent as the transferring Participant;

     (d)    no  Transfer   permitted  by  this  Section  19  shall  relieve  the
            transferring  Participant  of its  share of any  liability,  whether
<PAGE>
                                       30

            accruing  before  or  after  such  Transfer,  which  arises  out  of
            Operations conducted prior to such Transfer;

     (e)    the  transferring  Participant and the transferee shall bear all tax
            consequences of the Transfer;

     (f)    in the  event of a  Transfer  of less  than  all of a  Participating
            Interest, the transferring  Participant and its transferee shall act
            and be treated as one Participant;

     (g)    no Participant  shall Transfer any interest in this Agreement or the
            Assets  or the  Property  except by  Transfer  of part or all of its
            Participating Interest;

     (h)    if the  Transfer is the grant of a security  interest  by  mortgage,
            deed of trust,  pledge, lien or other encumbrance of any interest in
            this  Agreement,  any  Participating  Interest  or the Assets or the
            Property to secure a loan or other  indebtedness of a Participant in
            a bona fide transaction, such security interest shall be subordinate
            to the terms of this  Agreement  and the rights and interests of the
            other   Participant   hereunder.   Upon  any  foreclosure  or  other
            enforcement of rights in the security  interest the acquiring  third
            party  shall  be  deemed  to  have   assumed  the  position  of  the
            encumbering Participant with respect to this Agreement and the other
            Participant,  and it shall comply with and be bound by the terms and
            conditions of this Agreement; and

     (i)    if a sale or other commitment or disposition of Products or proceeds
            from the sale of Products by a Participant  creates in a third party
            a security interest in Products or proceeds  therefrom prior to such
            distribution, such sales, commitment or disposition shall be subject
            to the terms and conditions of this Agreement.

20. DISPUTES

20.1 ARBITRATION OF DISPUTES

All disputes between the  Participants,  their  successors and assigns,  arising
under this  Agreement,  which the parties are unable to resolve  within 20 days,
may at any time  thereafter be submitted to arbitration by written demand of any
party. To demand arbitration, any Participant (the "demanding party") shall give
written notice to the other  Participant (the "responding  party").  Such notice
shall specify the nature of the issues in dispute, the amount involved,  and the
remedy  requested  and the  names of at  least  three  qualified,  disinterested
arbitrators  acceptable to it. Within fifteen days of the receipt of the notice,
the responding  party shall answer the demand in writing,  specifying the issues
that party  disputes and advising  whether it accepts as  arbitrator  any of the
arbitrators  named in the notice.  If the responding party accepts an arbitrator
named in the notice,  that person will act as sole arbitrator of the dispute. If
the  responding  party  does  not  accept  any of the  arbitrators  named,  each
Participant shall select one qualified  arbitrator within ten days of responding
<PAGE>
                                       31

party's  answer.  Each  of  the  arbitrators  shall  be a  disinterested  person
qualified by experience to hear and determine the issues to be  arbitrated.  The
arbitrators  so chosen  shall  select a neutral  arbitrator  within five days of
their selection.

21. CONFIDENTIALITY

21.1 GENERAL

The financial terms of this Agreement and all information obtained in connection
with the  performance of this Agreement  shall be the exclusive  property of the
Participants  and, except as provided  elsewhere,  shall not be disclosed to any
third  party or the  public  without  the  prior  written  consent  of the other
Participant, which consent shall not be unreasonably withheld.

21.2 EXCEPTIONS

The consent required by Subsection 21.1 shall not apply to a disclosure:

     (a)    to an Affiliate, consultant,  contractor or subcontractor that has a
            bona fide need to be informed;

     (b)    to any third party to whom the disclosing Participant contemplates a
            Transfer of all or any part of its interest in or to this Agreement,
            its Participating Interest, or the Assets;

     (c)    to a  governmental  agency or to the  public  which  the  disclosing
            Participant  believes in good faith is required by pertinent  law or
            regulation or the rules of any stock exchange; or

     (d)    to  an  investment  dealer,   broker,   bank  or  similar  financial
            institution,  in confidence if required,  as part of a due diligence
            investigation  by such financial  institution  in connection  with a
            financing   required  by  a  Participant  or  its   shareholders  or
            Affiliates to meet, in part, its obligations under this Agreement.

In any  case to  which  this  Subsection  21.2  is  applicable,  the  disclosing
Participant  shall give notice to the other  Participant  concurrently  with the
MAKING of such disclosure.  As to any disclosure  pursuant to paragraph 21.2(a),
(b), or (d), only such confidential information as such third party shall have a
legitimate  business  need to know shall be disclosed and such third party shall
first  agree in writing to protect the  confidential  information  from  further
disclosure  to the same  extent as the  Participants  are  obligated  under this
Section 21.

21.3 PUBLIC STATEMENTS

When either of the Participants  wishes to issue a public statement  relating to
this  Agreement or the Property  notice of and a draft copy of any release shall
<PAGE>
                                       32

first be submitted to the other Participant who will have 24 hours to approve of
or produce suggested revisions to the content of such release.

21.4 DURATION OF CONFIDENTIALITY

The  provisions of this Section 21 shall apply during the term of this Agreement
and for two years following  termination of this Agreement and shall continue to
apply to any Participant who withdraws,  who is deemed to have withdrawn, or who
Transfers its Participating  Interest,  for two years following the date of such
occurrence.

22. GENERAL PROVISIONS

22.1 NOTICES

All  notices,  payments and other  required  communications  ("Notices")  to the
Participants  shall be in  writing,  and shall be  addressed  to the  parties as
follows or at such other address as the parties may specify from time to time

Notices must be  delivered,  sent by telex,  telegram or telecopier or mailed by
pre-paid  post and  addressed  to the party to which  notice is to be given.  If
notice is sent by telex,  telegram or  telecopier  or is  delivered,  it will be
deemed to have been given and received on the next  business day from the day of
transmission  or delivery.  If notice is mailed,  it will be deemed to have been
received ten business days  following the date of the mailing of the notice.  If
there is an interruption in normal mail service due to strike,  labour unrest or
other cause at or prior to or during the time a notice is mailed the notice must
be sent by telex, telegram or telecopier or will be delivered.

22.2 ADDITIONAL LAND INTERESTS WITHIN AREA OF INFLUENCE

In the event that either  Vittone or  Southern  should  acquire  any  additional
interest in mineral claims within a 1.5 kilometer distance from the perimeter of
the  Property.  it will deliver  details of the  acquisition  to the other party
within 30 days of such acquisition and thereafter that party may, within 30 days
of receiving such notice, require either Vittone or Southern, as applicable,  to
cause such  interest to be made a part of the Joint  Venture and subject to this
Agreement as between Southern and Vittone and such interest shall be transferred
at cost.

22.3 N/A

22.4 WAIVER

The  failure  of a  Participant  to  insist  on the  strict  performance  of any
provision of this  Agreement  or to exercise  any right,  power or remedy upon a
breach  thereof shall not constitute a waiver of any provision of this Agreement
or limit the Participant's right thereafter to enforce any provision or exercise
any right.
<PAGE>
                                       33

22.5 MODIFICATION

No modification of this Agreement shall be valid unless made in writing and duly
executed by the Participants.

22.6 FORCE MAJEURE

Except for the obligation to make payments when due hereunder,  the  obligations
of a  Participant  shall be  suspended  to the extent  and for the  period  that
performance is prevented by any cause,  whether  foreseeable  or  unforeseeable,
beyond its reasonable control,  including,  without limitation,  labour disputes
(however  arising and whether or not employee  demands are  reasonable or within
the power of the participant to grant); acts of God; laws, regulations,  orders,
proclamations,  instructions  or  requests  of any  government  or  governmental
entity;  judgments  or orders of any court;  inability  to obtain on  reasonably
acceptable terms any public or private license,  permit or other  authorization;
curtailment or suspension of activities to remedy or avoid an actual or alleged,
present or  prospective  violation  of  national,  state or local  environmental
standards;  acts of war or  conditions  arising out of or  attributable  to war,
whether declared or undeclared;  riot, civil strife,  insurrection or rebellion;
fire, explosion,  earthquake, storm, flood, sink holes, drought or other adverse
weather  condition;  delay or failure by suppliers or transporters of materials,
parts,  supplies,  services or equipment or by contractors'  or  subcontractors'
shortage  of,  or  inability  to  obtain,  labour,  transportation,   materials,
machinery,  equipment,  supplies, utilities or services; accidents; breakdown of
equipment,  machinery  or  facilities;  or any other  cause  whether  similar or
dissimilar to the foregoing. The affected Participant shall promptly give notice
to the other  Participant of the suspension of performance,  stating therein the
nature of the  suspension,  the  reasons  therefor,  and the  expected  duration
thereof. The affected Participant shall resume performance as soon as reasonably
possible. During the period of suspension the obligations of the Participants to
advance funds shall be reduced to levels  consistent with essential  maintenance
of Operations.

22.7 GOVERNING LAW

This Agreement  shall be governed by and interpreted in accordance with the laws
of the State of Nevada,  and all  Operations  of the Joint Venture in respect to
the  Property  will be carried out in  compliance  with the  applicable  laws of
Argentina.

22.8 N/A

22.9 FURTHER ASSURANCES

Each of the  Participants  agrees to take from  time to time  such  actions  and
execute such additional instruments as may be reasonably necessary or convenient
to implement and carry out the intent and purpose of this Agreement.
<PAGE>
                                       34

22.10 SURVIVAL OF TERMS AND CONDITIONS

The following Subsections shall survive the termination of this Agreement to the
full  extent  necessary  for  their   enforcement  and  the  protection  of  the
Participant in whose favour they run:  Subsections 2.1, 4.5,6.7, 7.1 to 7.6, 8.1
to 8.11, 9.7, 15.1 to 15.3, 17.4, 17.5, 17.7, 17.8, 20.1, 21.1 to 21.4, and such
other  provisions  as  specifically  or by  necessary  implication  survive  the
termination of this Agreement.

22.11 ENTIRE AGREEMENT; SUCCESSORS AND ASSIGNS

This  Agreement  contains  the  entire  understanding  of the  Participants  and
supersedes all prior  agreements  and  understandings  between the  Participants
relating to the subject matter hereof.  This Agreement shall be binding upon and
enure to the benefit of the respective  successors and permitted  assigns of the
Participants.  In the  event of any  conflict  between  this  Agreement  and any
Exhibit attached hereto, the terms of this Agreement shall be controlling.

IN WITNESS  WHEREOF the parties have hereunto set their hands and seals by their
duly authorized signatories effective the date first herein set forth.

/s/ Hector Vittone
------------------------------------
HECTOR VITTONE

THE COMMON SEAL of SOUTHERN ENERGY)
COMPANY INC. was hereunto affixed            )
in the presence of                           )
                                             )
                                             )
/s/ Ricardo Munoz                            )
------------------------------------         )                        c/s
Authorized Signatory                         )
<PAGE>
                                       35

                                    EXHIBIT A

                  DETAILS OF THE PROPERTY, PURCHASE AGREEMENT,
                              AND POWER OF ATTORNEY

<PAGE>
                                       36

                                   EXHIBIT B

ACCOUNTING PROCEDURE

The financial and  accounting  procedures to be followed by the Operator and the
Participants  under  the  Agreement  are set  forth  below.  References  in this
Accounting  Procedure to subsections and paragraphs are to those located in this
Accounting  Procedure  unless it is expressly stated that they are references to
the  Agreement.  In the event of any  conflict  between this Exhibit "B" and the
main body of the  Agreement,  the terms of the main body of the Agreement  shall
prevail.

1. GENERAL PROVISIONS

1.1 GENERAL ACCOUNTING RECORDS

The Operator shall maintain detailed and comprehensive  cost accounting  records
in  accordance  with  this  Accounting  Procedure,  including  general  ledgers,
supporting  and  subsidiary  journals,  invoices,  checks  and  other  customary
documentation,  sufficient to provide a record of revenues and  expenditures and
periodic  statements  of financial  position and the results of  operations  for
managerial,  tax, regulatory or other financial reporting purposes. Such records
shall be retained for the duration of the period  allowed the  Participants  for
audit  or  the  period   necessary  to  comply  with  tax  or  other  regulatory
requirements. The records shall reflect all obligations, advances and credits of
the Participants.

1.2 BANK ACCOUNTS

The Operator  shall  maintain one or more separate bank accounts for the payment
of all expenses and the deposit of all cash receipts for the Joint Venture.

1.3 STATEMENTS AND BILLINGS

The Operator shall prepare  statements and bill the  Participants as provided in
Section 16.2 of the Agreement.  Payment of any such billings by any Participant,
including the Operator,  shall not prejudice such Participant's right to protest
or  question  the  correctness  thereof  for a period  not to  exceed  24 months
following  the  calendar  year during  which such  billings  are received by the
Participant.  All  written  exceptions  to and  claims  upon  the  Operator  for
incorrect charges, billings or statements shall be made upon the Operator within
such 24 month period.

2. CHARGES TO JOINT ACCOUNT

Subject to the limitations  hereinafter set forth, the Operator shall charge the
Joint Account with the following:
<PAGE>
                                       37

2.1 RENTALS, ROYALTIES AND OTHER PAYMENTS

All property acquisition and holding costs, including filing fees, license fees,
costs of permits and  assessment  work,  delay  rentals,  production  royalties,
including  any required  advances,  and all other  payments made by the Operator
which are necessary to acquire or maintain title to the Assets and the Property.

2.2 LABOUR AND EMPLOYEE BENEFITS

     (a)    Salaries and wages of the Operator's  employees  directly engaged in
            Operations,  including  salaries  or  wages  of  employees  who  are
            temporarily assigned to and directly employed by same.

     (b)    The Operator's  cost of holiday,  vacation,  sickness and disability
            benefits,  and other customary allowances applicable to the salaries
            and wages  chargeable  under paragraph  2.2(a) and Subsection  2.12.
            Such  costs  may be  charged  on a "when  and as paid  basis"  or by
            "percentage  assessment"  on the amount of  salaries  and wages.  If
            percentage  assessment is used,  the rate shall the applied to wages
            or salaries excluding overtime and bonuses. Such rate shall be based
            on the  Operator's  cost  experience  and it shall  be  periodically
            adjusted at least  annually to ensure that the total of such charges
            does not exceed the actual cost thereof to the Operator.

     (c)    The Operator's actual cost of established plans for employees' group
            life  insurance,   hospitalization,   pension,   retirement,   stock
            purchase,  thrift, bonus (except production or incentive bonus plans
            under a union  contract  based on actual rates of  production,  cost
            savings and other production  factors,  and similar  non-union bonus
            plans  customary in the  industry or necessary to attract  competent
            employees,  which bonus  payments  shall be considered  salaries and
            wages  under  paragraph  2.2(a)  or  Subsection  2.12;  rather  than
            employees'  benefit  plans) and other benefit plans of a like nature
            applicable to salaries and wages  chargeable  under paragraph 2.2(a)
            or  Subsection  2.12,  provided  that the plans are  limited  to the
            extent feasible to those customary in the industry.

     (d)    Cost of  assessments  imposed by  governmental  authority  which are
            applicable to salaries and wages  chargeable  under paragraph 2.2(a)
            and Subsection 2.12,  including all penalties except those resulting
            from the willful misconduct or gross negligence of the Operator.

2.3 MATERIALS, EQUIPMENT AND SUPPLIES

The  cost of  materials,  equipment  and  supplies  (herein  called  "Material")
purchased  from  unaffiliated  third parties or furnished by the Operator or any
Participant  as provided in Section 3. The  Operator  shall  purchase or furnish
only so much  Material as may be required for  immediate  use in  efficient  and
economical  operations.  The Operator  shall also maintain  inventory  levels of
Material  at  reasonable  levels to avoid  unnecessary  accumulation  of surplus
stock.
<PAGE>
                                       38

2.4 EQUIPMENT AND FACILITIES FURNISHED BY OPERATOR

The cost of machinery,  equipment and facilities  owned by the Operator and used
in  Operations  or used to provide  support or utility  services  to  Operations
charged at rates  commensurate  with the actual costs of ownership and operation
of such machinery,  equipment and facilities.  Such rates shall include costs of
maintenance,  repairs, other operating expenses,  insurance, taxes, depreciation
and interest at a rate not to exceed the rate charged by the principal chartered
bank of the Operator plus 1% per annum.  Such rates shall not exceed the average
commercial rates currently prevailing in the vicinity of the Operations.

2.5 TRANSPORTATION

Reasonable  transportation  costs incurred in connection with the transportation
of employees and material necessary for the Operations.

2.6 CONTRACT SERVICES AND UTILITIES

The cost of contract  services and utilities  procured from outside sources.  If
contract services are performed by the Operator or an Affiliate thereof the cost
charged to the Joint Account shall not be greater than that for which comparable
services and  utilities  are available in the open market within the vicinity of
the  Operations.  The cost of  professional  consultant  services  procured from
outside sources, or provided by the Operator,  in excess of $50,000 shall not be
charged to the Joint Account unless approved by the Management Committee.

2.7 INSURANCE PREMIUMS

Net premiums paid for insurance  required to be carried for  Operations  for the
protection of the  Participants.  When the  operations  are conducted in an area
where the Operator may self-insure for Workers  Compensation  and/or  Employer's
liability under  applicable law, the Operator may elect to include such risks in
its  self-insurance  program and shall  charge its costs of  self-insuring  such
risks to the Joint Account provided that such charges shall not exceed published
manual rates.

2.8 DAMAGES AND LOSSES

Costs in excess of insurance  proceeds  necessary to repair or replace damage or
losses to any Assets or the  Property  resulting  from any cause  other than the
willful  misconduct  or gross  negligence of the  Operator.  The Operator  shall
furnish the  Management  Committee  with written  notice of damages or losses as
soon as practicable after a report thereof has been received by the Operator.
<PAGE>
                                       39

2.9 LEGAL AND REGULATORY EXPENSE

Except as otherwise  provided in Subsection 2.13, all legal and regulatory costs
and  expenses  incurred in or  resulting  from the  Operations  or  necessary to
protect  or  recover  the  Assets  or the  Property  of the Joint  Venture.  All
attorney's  fees  and  other  legal  costs to  handle,  investigate  and  settle
litigation  or claims,  including  the cost of legal  services  provided  by the
Operator's  legal staff;  and amounts paid in settlement  of such  litigation or
claims in excess of $50,000  shall not be charged  to the Joint  Account  unless
approved by the Management Committee.

2.10 AUDIT

Cost of audits under Subsection 16.2 of the Joint Venture  Agreement if approved
by all of the Participants.

2.11 TAXES

All taxes (except income taxes) of every kind and nature assessed or levied upon
or in connection  with the Assets,  the Property,  the production of Products or
Operations,  which  have  been  paid  by the  Operator  for the  benefit  of the
Participants.  Each Participant is separately responsible for income taxes which
are attributable to its respective Participating Interest.

2.12 DISTRICT AND CAMP EXPENSES (FIELD SUPERVISION AND CAMP EXPENSES)

A pro  rata  portion  of  (i)  the  salaries  and  expenses  of  the  Operator's
superintendent  and  other  employees  serving  operations  whose  time  is  not
allocated  directly to such  Operations,  and (ii) the costs of maintaining  and
operating an office  (herein  called "the  Operator's  Project  Office") and any
necessary suboffice and (iii) all necessary camps,  including housing facilities
for employees,  used for Operations.  The expense of those facilities,  less any
revenue therefrom,  shall include  depreciation or a fair monthly rental in lieu
of depreciation of the investment.  The total of such charges for all properties
served by the Operator's  employees and  facilities  shall be apportioned to the
Joint  Account  on the basis of a ratio,  the  numerator  of which is the direct
labour costs of the Operations and the  denominator of which is the total direct
labour costs incurred for all activities served by the Operator.

2.13 ADMINISTRATIVE CHARGE

     (a)    Each month the  Operator  shall  charge the Joint  Account a sum for
            each  phase  of  Operations  as  provided  below,  which  shall be a
            liquidated  amount to  reimburse  the  Operator  for its home office
            overhead  and general and  administrative  expenses to conduct  each
            phase  of  the  Operations,  and  which  shall  be in  lieu  of  any
            management fee:

               (i)  Exploration Phase: 5% of Allowable Costs.
<PAGE>
                                       40

               (ii) Development Phase: 5% of Allowable Costs.

               (iii) Major Construction Phase: 2.5% of Allowable Costs.

               (iv) Mining Phase: 2.5% of Allowable Costs.

     (b)    The term  "Allowable  Costs" as used in this  Subsection  2.13 for a
            particular  phase of Operations  shall mean all charges to the Joint
            Account excluding:

               (i)  the administrative charge referred to herein;

               (ii) depreciation,  depletion  or  amortization  of  tangible  or
                    intangible assets; and

               (iii) amounts charged in accordance with Subsections 2.1 and 2.9.

               The Operator shall attribute such Allowable Costs to a particular
               phase of Operations by applying the following guidelines:

               (i)  the Exploration phase shall cover those activities conducted
                    to ascertain the existence,  location, extent or quantity of
                    any deposit of ore or mineral. Such phase shall cease when a
                    commercially  recoverable  reserve is determined to exist on
                    completion of a bankable Feasibility Report;

               (ii) the Development phase shall cover those activities conducted
                    to  access a  commercially  feasible  ore body or to  extend
                    production  of an existing  ore body,  and to  construct  or
                    install related fixed assets;

               (iii)the major  construction  phase shall include all  activities
                    involved in the construction of a mill, smelter or other ore
                    processing facilities;

               (iv) the Mining  phase  shall  include all other  activities  not
                    otherwise  covered  above,  including  activities  conducted
                    after mining operations have ceased.

     (c)    The  monthly  administration  charge  determined  for each  phase of
            Operations shall be equitably  apportioned among all of the Property
            served  during  such  monthly  period on the  basis of a ratio,  the
            numerator  of  which  is  the  direct  labour  costs  charged  to  a
            particular property and the denominator of which is the total direct
            labour costs incurred for the Property served by the Operator

     (d)    The  following  is a  representative  list of items  comprising  the
            Operator's  principal  business  office  expenses that are expressly
            covered by the  administrative  charge  provided in this  Subsection
            2.13:
<PAGE>
                                       41

               (i)  administrative supervision, which includes services rendered
                    by managers, department supervisors,  officers and directors
                    of the  Operator for  Operations,  except to the extent that
                    such  services  represent  a  direct  charge  to  the  Joint
                    Account, as provided for in Subsection 2.2;

               (ii) accounting,   data  processing,   personnel  administration,
                    billing and record keeping in accordance  with  governmental
                    regulations   and  the   provisions  of  the  Joint  Venture
                    Agreement, and preparation of reports;

               (iii)the   services  of  tax   counsel  and  tax   administration
                    employees  for  all tax  matters,  including  any  protests,
                    except any outside  professional  fees which the  Management
                    Committee  may  approve  as a  direct  charge  to the  Joint
                    Account;

               (iv) routine legal services  rendered by outside  sources and the
                    Operator's  legal staff not  otherwise  charged to the Joint
                    Account under Subsection 2.9; and

               (v)  rentals and other  charges  for office and  records  storage
                    space, telephone service, office equipment and supplies.

     (e)    The Management  Committee shall annually  review the  administration
            charges and shall amend the  methodology  or rates used to determine
            such charges if they are found to be insufficient or excessive.

2.14 OTHER EXPENDITURES

Any reasonable direct expenditure,  other than expenditures which are covered by
the foregoing provisions,  incurred by the Operator for the necessary and proper
conduct of Operations.

3. BASIS OF CHARGES TO JOINT ACCOUNT

3.1 PURCHASES

Material  purchased and services procured from third parties shall be charged to
the Joint  Account  by the  Operator  at  invoiced  cost,  including  applicable
transfer  taxes,  less all discounts  taken. If any Material is determined to be
defective or is returned to a vendor for any other  reason,  the Operator  shall
credit the Joint Account when an adjustment is received from the vendor.

3.2 MATERIAL FURNISHED BY OR TRANSFERRED TO THE OPERATOR OR A PARTICIPANT

Any  Material  furnished  by the  Operator  or  Participant  from its  stocks or
transferred  to the  Operator or  Participant  shall be priced on the  following
basis:

     (a)    New Material
<PAGE>
                                       42

          New Material  transferred  from the Operator or  Participant  shall be
          priced F.O.B. the nearest  reputable supply store or railway receiving
          point,  where like Material is available,  at the current  replacement
          cost of the same kind of  Material,  exclusive of any  available  cash
          discounts, at the time of the transfer (herein called, "New Price").

     (b)    Used Material

          (i)  Used Material in sound and serviceable condition and suitable for
               reuse without reconditioning shall be priced as follows:

               (A)  Used  Material  transferred  by the Operator or  Participant
                    shall be priced at 70% of the New Price;

               (B)  Used  Material  transferred  to the Operator or  Participant
                    shall be priced:

                    (1)  at 70% of the New Price if such Material was originally
                         charged to the Joint Account as new Material, or

                    (2)  at 70% of the  price if such  Material  was  originally
                         charged to the Joint  Account as good used  Material at
                         70 % of the New Price.

          (ii) Other Used Material which, after  reconditioning  will be further
               serviceable for original function as good secondhand Material, or
               which is serviceable for original  function but not substantially
               suitable  for  reconditioning  shall be  priced at 45% of the New
               Price.  The  cost of any  reconditioning  shall  be  borne by the
               transferee.

          (iii)All other Material,  including  junk,  shall be priced at a value
               commensurate  with its use or at prevailing  prices.  Material no
               longer  suitable  for its  original  purpose  but usable for some
               other  purpose shall be priced on a basis  comparable  with items
               normally used for such other purposes.

     (c)    Obsolete Material

          Any  Material  which  is  serviceable  and  usable  for  its  original
          function,  but its  condition  is not  equivalent  to that which would
          justify a price as provided  above  shall be Priced by the  Management
          Committee.  Such price  shall be set at a level which will result in a
          charge to the Joint  Account  equal to the value of the  service to be
          rendered by such Material. }
<PAGE>
                                       43

3.3 PREMIUM PRICES

Whenever  Material is not  readily  obtainable  at  published  or listed  prices
because of national  emergencies,  strikes or other unusual  circumstances  over
which the Operator has no control, the Operator may charge the Joint Account for
the required  Material on the basis of the  Operator's  direct cost and expenses
incurred in procuring such Material and making it suitable for use. The Operator
shall give written notice of the proposed  charge to the  Participants  prior to
the time when such charge is to be billed,  whereupon any Participant shall have
the right,  by  notifying  the  Operator  within ten days of the delivery of the
notice from the Operator, to furnish at the usual receiving point all or part of
its share of Material suitable for use and acceptable to the Operator.

3.4 WARRANTY OF MATERIAL FURNISHED BY THE OPERATOR OR PARTICIPANTS

Neither the Operator nor any Participant  warrants the Material furnished beyond
any  dealer's or  manufacturer's  warranty  and no credits  shall be made to the
Joint  Account for  defective  Material  until  adjustments  are received by the
Operator from the dealer, manufacturer or their respective agents.

4. DISPOSAL OF MATERIAL
}
4.1 DISPOSITION GENERALLY

The Operator  shall have no obligation to purchase a  Participant's  interest in
Material.  The Management  Committee  shall  determine the  disposition of major
items of surplus Material, provided the Operator shall have the right to dispose
of normal accumulations of junk and scrap Material either by sale or by transfer
to the Participants as provided in Subsection 4.2.

4.2 DISTRIBUTION TO PARTICIPANTS

Any Material to be distributed to the  Participants  shall be made in proportion
to their respective  Participating Interests, and corresponding credits shall be
made to the Joint Account on the basis provided in Subsection 3.2.

4.2 SALES

Sales of Material to third parties shall be credited to the Joint Account at the
net amount  received.  Any damages or claims by the  purchaser  shall be charged
back to the Joint Account if and when paid.

5. INVENTORIES

5.1 PERIODIC INVENTORIES, NOTICE AND REPRESENTATIONS

At reasonable intervals, inventories shall be taken by the Operator, which shall
include all such Material as is ordinarily considered  controllable by operators
<PAGE>
                                       44

of mining  properties  and the expense of conducting  such periodic  inventories
shall be charged to the Joint Account. The Operator shall give written notice to
the  Participants  of its intent to take any  inventory  at least 30 days before
such inventory is scheduled to take place. A Participant shall be deemed to have
accepted the results of any inventory  taken by the Operator if the  Participant
fails to be represented at such inventory.

5.2 RECONCILIATION AND ADJUSTMENT OF INVENTORIES

Reconciliation of inventory with charges to the Joint Account shall be made, and
a list of overages and shortages shall be furnished, to the Management Committee
within six months after the inventory is taken.  Inventory  adjustments shall be
made by the Operator to the Joint  Account for overages and  shortages,  but the
Operator  shall be held  accountable to the Joint Venture only for shortages due
to lack of reasonable diligence.

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