Document:

HI
      HO SILVER RESOURCES INC.

    

    STOCK
      OPTION PLAN

    

    SEPTEMBER
      5, 2006

    

    AMENDED
      OCTOBER 12, 2006

    

    

    
      
        
          

        

         

      

      
         

        
          

        

      

      
         

        
        

      

    

    HI
      HO SILVER RESOURCES INC.

    

    STOCK
      OPTION PLAN

    

    Adopted
      September 5, 2006

    Amended
      October 12, 2006

    

    ARTICLE
      1

    PURPOSE

    

    1.1 General
      Purpose. The
      purpose of this Plan is to promote the interests of the Employees and the
      Company by:

    

    
      	 	
              (a)

            	
              furnishing
                directors, officers, employees and consultants with an opportunity
                to
                invest in the Company in a simple and cost effective
                manner;

            

    

    

    
      	 	
              (b)

            	
              better
                aligning the interests of directors, officers, employees and consultants
                with those of the Company and its shareholders through the ownership
                of
                Common Shares of the Company.

            

    

    

    ARTICLE
      2 

    DEFINITIONS
      AND INTERPRETATIONS

    

    2.1 Definitions.
      In this
      Plan, unless the context otherwise requires:

    

    "Affiliate"
      shall
      have the meaning ascribed to that term in section 1.2 of the National Instrument
      45-106 entitled Prospectus
      and Registration Exemptions
      as
      from time to time amended, supplemented or re-enacted;

    

    "Associate"
      shall
      have the meaning ascribed to that term in section 2.22 of the National
      Instrument 45-106 entitled Prospectus
      and Registration Exemptions
      as
      from time to time amended, supplemented or re-enacted;

     

    "Board
      of Directors"
      means
      the board of directors of the Company as constituted from time to
      time;

    

    "Consultant"
      shall
      have the meaning ascribed to that term in section 2.22 of the National
      Instrument 45-106 entitled Prospectus
      and Registration Exemptions
      as
      from time to time amended, supplemented or re-enacted;

    

    "Company"
      means Hi
      Ho Silver Resources Inc., and its successors;

    

    "Designated
      Subsidiary"
      means a
      Subsidiary of the Company, which has not been excluded by the Board of Directors
      from participating in this Plan;

    

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

     

    "Disability"
      means a
      physical or mental incapacity of a nature which the Plan Committee has
      determined prevents or would prevent the Employee from satisfactorily performing
      the duties of his or her position with the Company or any of its Designated
      Subsidiaries;

    

    "Disinterested
      Shareholder Approval"
      means,
      if the Company is decreasing the exercise price of stock options previously
      granted to Related Persons, approval by a majority of the votes cast by all
      members at the members' meeting called for such purpose excluding the votes
      attaching to shares beneficially owned by Related Persons to whom Options may
      be
      Granted under the Plan and their Associates. For purposes of such meeting,
      holders of non-voting and subordinate voting shares must be given full voting
      rights on the matter. 

    

    "Employee"
      means an
      individual who is considered an employee of the Company or a Designated
      Subsidiary of the Company under the provisions of the Income
      Tax Act
      (Canada), or an individual who works full or part time on a regular basis for
      the Company or a Designated Subsidiary of the Company providing services
      normally provided by an employee and subject to the same control and direction
      by the Company or the Designated Subsidiary regarding details and methods of
      work as an employee, and, for purposes of this Plan, shall include a Consultant,
      a director of the Company or a Designated Subsidiary and an officer of the
      Company or a Designated Subsidiary;

    

    "Exchange"
      means
      such stock exchange or exchanges or other trading facility or system on which
      the Shares of the Company may be listed or traded and if the Shares are listed
      or traded on more than one exchange, facility or system, for purposes of
      determining Market Value, "Exchange" means such exchange, facility or system
      on
      which the largest volume of trading has occurred on the relevant date or within
      the relevant period;

    

    "Grant"
      means
      the grant of an Option to an Employee in accordance with Article 6
      hereof;

    

    "Market
      Value"
      of a
      Share means the greater of the closing market prices for the Shares on the
      Exchange on (a) the trading day immediately prior to the date of the Grant,
      and
      (b) the date of the Grant; 

    

    "Option"
      means an
      option granted to an Employee pursuant to Article 6 hereof to purchase a
      prescribed number of Shares, from treasury, subject to such terms and conditions
      as determined by the Board of Directors and as evidenced by an Option
      Agreement;

    

    "Option
      Agreement"
      means
      the written agreement entered into between the Company and the Employee
      evidencing an Option granted hereunder and setting out the terms and conditions
      of such Option;

     

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    
 

    "Option
      Period"
      means
      the period during which an Option may be exercisable;

    

    "Plan"
      means
      this Stock Option Plan as the same may be amended, supplemented, modified or
      restated and in effect from time to time;

    

    "Plan
      Committee"
      means
      the committee of the Board of Directors, comprised of not less than three
      directors, that has been authorized and appointed by the Board of Directors
      from
      time to time to administer this Plan and, if no such committee has been
      authorized or appointed, the Board of Directors itself;

    

    "Related
      Person"
      shall
      have the meaning ascribed to that term in section 2.22 of the National
      Instrument 45-106 entitled Prospectus
      and Registration Exemptions
      as
      from time to time amended, supplemented or re-enacted;

    

    "Reserved
      for Issuance"
      means
      Shares which may be issued in the future upon the exercise of Options Granted
      under this Plan;

    

    "Shares"
      means
      the common shares without par value in the capital of the Company, subject
      to
      adjustment as set out in Article 9 hereof;

    

    "Subscription
      Price"
      means
      the price per Share at which Shares may be purchased upon exercise of an Option;
      and

    

    “Subsidiary”
      shall
      have the meaning ascribed to that term in section 1.1 of the National Instrument
      45-106 entitled Prospectus
      and Registration Exemptions
      as
      from time to time amended, supplemented or re-enacted.

    

    2.2 Interpretation.
      In this
      Plan, unless the context otherwise requires, the masculine gender includes
      the
      feminine gender and the singular includes the plural and vice
      versa.

    

    ARTICLE
      3

    ADMINISTRATION

    

    3.1 Administration
      of the Plan.
      This
      Plan shall be administered by the Plan Committee.

    

    3.2 Plan
      Committee Action.
      Subject
      to the provisions of this Plan, the Plan Committee may make such determinations
      under, interpretation of, take such steps and actions in connection with and
      establish such rules and regulations concerning this Plan or any Grants pursuant
      to this Plan as it may consider necessary or advisable including, but not
      limited to, calculating and determine the Subscription Price of Options to
      be
      granted hereunder and issuance of Shares upon the exercise thereof.

     

    3.3 Plan
      Committee Decisions Binding.
      All
      questions arising as to the interpretation of this Plan or any Grants hereunder
      shall be determined by the Plan Committee from time to time, and any such
      determination will, absent manifest error, be final, binding and conclusive
      for
      all purposes.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    ARTICLE
      4

    LIMITATIONS
      ON GRANTS OF OPTIONS UNDER THIS PLAN

    

    4.1 Plan
      Committee to Establish Criteria.
      The Plan
      Committee may establish such criteria and policies as it may consider fit for
      designating Employees who may be eligible to receive and to whom Options may
      be
      granted hereunder.

    

    4.2 Limitation
      on Grants.
      Subject
      to the provisions hereof, the following terms and conditions shall apply to
      all
      Options granted under this Plan:

    

    
      	 	
              (a)

            	
              a
                majority of the Shares Reserved for Issuance under this Plan may
                be
                reserved for Options to Related Persons of the
                Company;

            

    

    

    
      	 	
              (b)

            	
              unless
                the Company has obtained all required regulatory approvals, including
                approval of the Exchange, if required, and, if required, approval
                of the
                shareholders of the Company to permit
                otherwise:

            

    

    

    
      	 	
              (i)

            	
              the
                number of Shares Reserved for Issuance to Related Persons and Employees
                pursuant to this Plan together with all of the Shares reserved with
                respect to the Company's other previously established stock option
                plans
                or grants may not at any time exceed 20% of the issued Shares at
                that
                time;

            

    

    

    
      	 	
              (ii)

            	
              in
                any twelve-month period, the number of Shares represented by Grants
                in
                that period to Related Persons pursuant to this Plan, together with
                the
                number of Shares represented by all options granted in that period
                to
                Related Persons with respect to the Company’s other previously established
                stock option plans or grants, shall not exceed 10% of the issued
                Shares at
                the beginning of the respective
                period;

            

    

    

    
      	 	
              (iii)

            	
              in
                any twelve-month period, the issuance to Related Persons of a number
                of
                securities shall not exceed 10% of the issued Shares at the beginning
                of
                the respective period;

            

    

    

    
      	 	
              (iv)

            	
              in
                any twelve-month period, the number of Shares represented by Grants
                in
                that period to any Related Person pursuant to this Plan, together
                with the
                number of Shares represented by all options granted in that period
                to such
                Related Person with respect to all of the Company’s other previously
                established stock option plans or grants shall not exceed 5% of the
                issued
                Shares at the beginning of the period;

            

    

     

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    
 

    
      	 	
              (v)

            	
              in
                any twelve-month period, the issuance to any one Related Person and
                the
                Related Person’s Associates of a number of securities shall not exceed 5%
                of the issued Shares at the beginning of the respective
                period;

            

    

    

    
      	 	
              (vi)

            	
              in
                any twelve-month period, the number of Shares represented by Grants
                in
                that period to any one Consultant pursuant to this Plan, together
                with the
                number of Shares represented by all options granted in that period
                to such
                Consultant with respect to all of the Company’s other previously
                established stock option plans or grants shall not exceed 2% of the
                issued
                Shares at the beginning of the period;

            

    

    

    
      	 	
              (vii)

            	
              [deleted
                October 12, 2006]

            

    

    

    
      	 	
              (viii)

            	
              [deleted
                October 12, 2006]

            

    

    

    ARTICLE
      5

    MAXIMUM
      NUMBER OF SHARES

    

    5.1 Shares
      Subject to this Plan.
      The
      maximum number of Shares Reserved for Issuance upon exercise of Options Granted
      pursuant to the provisions of this Plan at any time shall not exceed 20% of
      the
      issued and outstanding common shares of the Company at the relevant time less
      any Shares required to be reserved with respect to any other options granted
      prior to the adoption and implementation of this Plan. 

    

    ARTICLE
      6

    TERMS
      AND CONDITIONS OF GRANTS

    

    6.1 Terms
      and Conditions of Grants.
      Subject
      to the provisions of this Plan, the Plan Committee shall, in its sole discretion
      and from time to time, determine those Employees to whom Grants shall be made,
      the number of Shares subject to such Grants, the Subscription Price therefor,
      the date on which Grants are to be made and the Option Period. The Plan
      Committee may also:

    

    
      	 	
              (a)

            	
              determine,
                in connection with any Grant, any vesting, performance or other conditions
                which must be satisfied before an Option is
                exercisable;

            

    

    

    
      	 	
              (b)

            	
              approve
                the form or forms of and enter into Option Agreements with respect
                to any
                Grant; and

            

    

    

    
      	 	
              (c)

            	
              determine
                such other terms and conditions (which need not be identical) of
                any
                Options granted hereunder.

            

    

     

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    
 

    ARTICLE
      7

    OPTION
      AGREEMENTS

    

    7.1
       Option
      Agreements.
      Each
      Option covered by a Grant shall be evidenced by a written Option Agreement
      between the Company and the Employee, such agreement to contain such terms
      and
      conditions, not inconsistent with provisions of this Plan, as may be established
      by the Plan Committee, and which terms and conditions shall include the
      following:

    

    
      	 	
              (a)

            	
              the
                Subscription Price in respect of any Option shall not be less than
                the
                greater of the Market Value
                of the Shares with respect to such Grant less any discount permitted
                by
                the policies of the Exchange; 

            

    

    

    
      	 	
              (b)

            	
              the
                Option Period shall not exceed five (5) years from the date of Grant
                and
                no Option may be exercised upon the expiry of the Option Period applicable
                thereto;

            

    

    

    
      	 	
              (c)

            	
              unless
                otherwise set out in the Option Agreement with respect to any particular
                Grant, Options shall be exercisable at any time and from time to
                time
                after the Grant; 

            

    

    

    
      	 	
              (d)

            	
              except
                as set out in Article 8, no Option may be exercised unless the Employee
                is, at the time of such exercise, an officer or director of or an
                Employee
                who has been continuously employed, elected, appointed or engaged
                by the
                Company or a Designated Subsidiary, as the case may be, since the
                date of
                the Grant provided that absence on leave with the approval of the
                Company
                or Designated Subsidiary or a change in duties or position of the
                Employee
                shall not constitute an interruption of employment for purposes of
                this
                Plan;

            

    

    

    
      	 	
              (e)

            	
              for
                Options Granted to employees, management company employees and
                Consultants, a representation and warranty by the Company that the
                optionee is a bona fide employee, management company employee or
                Consultant, as the case may be;

            

    

    

    
      	 	
              (f)

            	
              the
                issuance of Shares upon the exercise of any Option shall be contingent
                upon satisfaction by the Employee of the terms and conditions of
                the
                Option Agreement (or other written agreement) and receipt in full
                by the
                Company of the Subscription Price for the number of Shares in respect
                of
                which the Option is being exercised in cash, by cheque, certified
                cheque,
                bank draft, wire transfer or any combination thereof;
                

            

    

    

    
      	 	
              (g)

            	
              the
                Option may not be assigned or transferred and shall be exercisable
                only by
                the Employee or the Employee’s legal guardian or legal representative;
                and

            

    

     

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    
 

    
      	 	
              (h)

            	
              any
                amendment to the Option subsequent to its Grant, where the optionee
                is an
                Insider of the Company or an Affiliate of an Insider of the Company
                at the
                time of the amendment, and where such amendment has the effect of
                reducing
                the exercise price of the Option, before becoming effective, must
                first
                receive Disinterested Shareholder
                Approval.

            

    

    

    ARTICLE
      8

    TERMINATION
      OF EMPLOYMENT

    

    8.1  Termination
      Due to Death.
      All
      agreements representing Grants pursuant to this Plan shall provide that in
      the
      event of the death of an optionee, either while an Employee of the Company
      or
      any Designated Subsidiary, the heirs, executors or other legal representatives
      of the Employee may exercise any Option granted to such Employee, to the extent
      such option was exercisable by the Employee at the date of his death, for a
      period of one year following the date of death of the Employee. 

    

    8.2  Termination
      For Other Reasons.
      All
      agreements representing Grants pursuant to this Plan shall provide that in
      the
      event an Employee’s employment with or engagement by the Company or any
      Designated Subsidiary ceases or is terminated for any reason other than death,
      the Option shall terminate on a date determined by the Plan Committee at the
      time of the Grant, but in no event later than ninety days following the date
      of
      termination, or thirty days, if the Employee was engaged in investor relations
      activities. 

    

    8.3 No
      Right to Continued Employment.
      This
      Plan shall not confer upon any Employee any right with respect to their
      employment or continued employment or engagement by the Company or any
      Designated Subsidiary nor shall it interfere in any way with the right of the
      Company or such Designated Subsidiary to terminate any Employee’s employment at
      any time.

    

    ARTICLE
      9

    ADJUSTMENT
      OR ALTERATION OF SHARE CAPITAL

    

    9.1 Subdivision,
      Consolidation etc.
      In the
      event of a subdivision or consolidation of the outstanding Shares or the payment
      of a stock dividend thereon, the number of Shares reserved or authorized to
      be
      reserved under this Plan, the number of Shares issuable on the exercise of
      an
      Option and the Subscription Price therefor shall be increased or reduced
      proportionately and such other adjustments shall be made as may be deemed
      necessary or equitable by the Plan Committee.

    

    9.2 Capital
      Reorganization, Merger etc.
      In the
      event of any reclassification, redesignation, change or other capital
      reorganization of the outstanding Shares (other than as set out in Section
      9.1
      above) or if the Company amalgamates, consolidates with or mergers with or
      into
      another body corporate, whether by way of amalgamation, statutory arrangement
      or
      otherwise (the right to do so being hereby expressly reserved), then upon the
      exercise of an Option, the Employee shall be entitled to receive and shall
      accept in lieu of the number of Shares he or she would otherwise be entitled
      to,
      such number or amount of Shares securities, property or cash which the Employee
      would have received upon such reclassification, redesignation, change or capital
      reorganization or amalgamation, consolidation or merger as determined by the
      Plan Committee as being equitable in the circumstances, as if the Employee
      had
      exercised his or her Option immediately prior to the effective date thereof
      and
      in connection therewith the Subscription Price may be adjusted as may be deemed
      equitable by the Plan Committee in the circumstances.

     

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    9.3 Other
      Changes in Capital.
      In the
      event of any other change affecting the Shares, such adjustment, if any, shall
      be made as may be deemed equitable by the Plan Committee in the
      circumstances.

    

    9.4 No
      Fractional Shares.
      No
      adjustment provided in this Article 10 shall require the Company to issue a
      fractional Share and the total adjustment with respect to any Option shall
      be
      limited accordingly. 

    

    9.5 No
      Adjustment for Cash Dividends or Rights Offerings.
      No
      adjustment to any Option shall be made pursuant to this Article 10 in respect
      of
      the payment of any cash dividend or in respect of the distribution of any other
      rights where the record date for such distribution is prior to the date of
      issuance of any Shares upon the exercise of any Option.

    

    ARTICLE
      10

    AMENDMENT
      AND TERMINATION

    

    10.1 Amendment,
      Suspension or Termination of this Plan.
      The
      Board of Directors may amend, suspend or terminate the Plan or any portion
      thereof at any time in accordance with applicable legislation and subject to
      required approval. No such amendment, suspension or termination shall alter
      or
      impair any Options or any rights pursuant thereto granted previously to any
      Employee without the consent of such Employee. If the Plan is terminated, the
      provisions of the Plan and any administrative guidelines an other rules and
      regulations adopted by the Board of Directors and in force at the time of the
      termination of the Plan shall continue in effect during such time as any Option
      or any rights pursuant thereto remain outstanding.

    

    10.2 Effect
      of Termination of Plan.
      No
      action by the Board of Directors to terminate this Plan pursuant to this Section
      10 shall affect Grants which became effective pursuant to this Plan prior to
      such action.

    

    10.3 Amendment,
      Modification or Termination of Options.
      The
      Board of Directors may, with the consent of the affected Employees, amend or
      modify any outstanding Option in any manner to the extent that the Board of
      Directors would have had the authority to initially grant such award as so
      modified or amended, including without limitation, to change the date or dates
      as of which an Option becomes exercisable, subject to any required approvals.
      

     

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    ARTICLE
      11

    REGULATORY
      APPROVAL AND APPLICABLE LAWS

    

    11.1 Compliance
      With Applicable Laws.
      Notwithstanding anything herein to the contrary, the Company shall not be
      obliged to cause any Shares to be issued or certificates evidencing Shares
      to be
      delivered pursuant to this Plan, where issuance and delivery is not, or would
      result in the Company not, being in compliance with all applicable laws,
      regulations, rules, orders of governmental or regulatory authorities and the
      requirements of the Exchange.

    

    11.2 No
      Obligation to File Prospectus.
      The
      Company shall not be liable to compensate any Employee and in no event shall
      it
      be obliged to take any action, including the filing of any prospectus,
      registration statement or similar document, in order to permit the issuance
      and
      delivery of any Shares upon the exercise of any Option in order to comply with
      any applicable laws, regulations, rules, orders or requirements.

    

    11.3 Condition
      to Issue of Shares.
      The Plan
      Committee may require, as a condition of the issuance and delivery of such
      Shares or certificates upon the exercise of any Option and in order to ensure
      compliance with any applicable laws, regulations, rules, orders and requirements
      that the Employee or the Employee’s heirs, executors or other legal
      representatives, as applicable, make such covenants, agreements and
      representations as the Plan Committee may deem necessary or
      desirable.

    

    ARTICLE
      12

    GENERAL

    

    12.1 Rights
      of Shareholders.
      An
      Employee entitled to Shares as a result of the exercise of an Option shall
      not
      be deemed for any purpose to be, or to have rights as, a shareholder of the
      Company upon such exercise, except to the extent a share certificate is issued
      therefor and then only from the date such certificate has been
      issued.

    

    12.2 Withholding
      or Deductions of Taxes.
      The
      Company or Employer may deduct, withhold, or require an Employee, as a condition
      of exercise of an Option, to withhold, pay or reimburse any taxes or similar
      charges, which are required to be paid or withheld in connection with the
      exercise of any Option.

    

    12.3
      No
      Representation or Warranty.
      The
      Company makes no representation or warranty as to the future market value of
      any
      Shares issued in accordance with the provision of this Plan.

    

    12.4 Compliance
      With Applicable Law, Etc. If
      any
      provision of this Plan or any Option Agreement or other agreement entered into
      pursuant to this Plan contravenes any applicable law, rule, regulation or order,
      or any policy, by-law or regulation of any regulatory body or Exchange having
      authority over the Company, this Plan or the Employee, such provision shall
      be
      deemed to be amended to the extent required to bring such provision into
      compliance therewith, provided, however, that the Company shall not be
      responsible to pay and shall not incur any penalty, liability or further
      obligation in connection therewith. Subject to compliance with applicable
      securities legislation, and the policy, by-law or regulation of any Exchange,
      a
      Grant may be made pursuant to this Plan prior to the receipt of all necessary
      approvals required by such Exchange provided that the Option Agreement (or
      other
      written agreement) evidencing such Grant specifies that such Option may not
      be
      exercised, in whole or in part, unless such approvals are received.

     

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    
 

    12.5 Governing
      Law.
      This
      Plan will be governed by and construed in accordance with the laws of the
      Province of Ontario.

    

    12.6 Reference
      Date.
      This
      plan was first adopted and approved by the directors of the Company on September
      5, 2006,
      and
      was amended by the directors of the Company on October 12, 2006.

    

    
      
         

      

      
        10KETTLE
      RIVER PROPERTY

     

    PROPERTY
      OPTION AGREEMENT

     

    Dated
      as
      of September 12, 2005

     

    Between:

     

    ST.
      ELIAS
      MINES LTD.

     

    and:

     

    HI
      HO
      SILVER RESOURCES INC.

    
      
        
        

      

      
        
        

        
          

        

      

       

    

     

    INDEX

    

    
      	
              1.
                GRANT OF OPTION

            	
              2

            
	
              2.
                OPTION ONLY

            	
              8

            
	
              3.
                EXERCISE OF OPTION - SHAREHOLDERS’ VENTURE AGREEMENT

            	
              8

            
	
              4.
                REGULATORY APPROVAL

            	
              9

            
	
              5.
                TRANSFER OF TITLE

            	
              9

            
	
              6.
                RIGHT OF ENTRY

            	
              10

            
	
              7.
                REPRESENTATIONS AND WARRANTIES OF ST. ELIAS

            	
              
                10

              

            
	
              8.
                REPRESENTATIONS AND WARRANTIES OF HI HO SILVER

            	
              12

            
	
              9.
                COVENANTS OF ST. ELIAS

            	
              13

            
	
              10.
                COVENANTS OF HI HO SILVER

            	
              14

            
	
              11
                SHARE DISPOSITIONS

            	
              15

            
	
              12.
                TERMINATION

            	
              15

            
	
              13.
                INDEPENDENT ACTIVITIES

            	
              16

            
	
              14.
                AREA OF INTEREST

            	
              17

            
	
              15.
                CONFIDENTIALITY OF INFORMATION

            	
              17

            
	
              16.
                ARBITRATION

            	
              18

            
	
              17.
                DELAYS

            	
              
                18

              

            
	
              18.
                ASSIGNMENT

            	
              19

            
	
              19.
                NOTICES

            	
              20

            
	
              20.
                GENERAL TERMS AND CONDITIONS

            	
              21

            
	 	 
	
              SCHEDULE
                “A”: The Property

            	 
	
              SCHEDULE
                “B”: Shareholders’ Venture Agreement

            	 

    

     

    
      
        
        

      

      
        
        

        
          

        

      

       

    

    KETTLE
      RIVER PROPERTY

     

    PROPERTY
      OPTION AGREEMENT

     

    THIS
      AGREEMENT is made as of the 12th
      day of
      September, 2005,

     

    BETWEEN:

     

    ST.
      ELIAS MINES LTD.,
      a
      company incorporated under the laws of the Province of British Columbia and
      having its head office at Suite 604 - 700 West Pender Street, Vancouver, B.C.,
      V6C 1G8

     

    (hereinafter
      referred to as “St.
      Elias”)

     

    OF
      THE
      FIRST PART,

     

    AND:

     

    HI
      HO SILVER RESOURCES INC.,
      a
      company duly incorporated under the laws of Canada, having an office at Suite
      #15A, 3045 Southcreek Road, Mississauga, Ontario, L4X 2E9 

     

    (hereinafter
      referred to as “Hi
      Ho Silver”)

     

    OF
      THE
      SECOND PART.

    

    RECITALS

     

    A.  WHEREAS
      St. Elias is the beneficial and recorded owner of a 100% interest in the Kettle
      River Property, Beaverdell Mining Division, British Columbia, more particularly
      described in Schedule “A” attached hereto and made a part hereof (hereinafter
      collectively called the “Property”);
      and

     

    B.  AND
      WHEREAS pursuant to a letter agreement dated May 18, 2005 (the “Letter
      Agreement”)
      St.
      Elias has agreed to grant to Hi Ho Silver exclusive options to acquire up to
      a
      70% undivided beneficial and recorded interest in and to the
      Property;

     

    C.  AND
      WHEREAS pursuant to the said Letter Agreement Hi
      Ho
      Silver paid to St. Elias the sum of $10,000;

     

    D.  AND
      WHEREAS the said Letter Agreement contemplated
      that the parties would enter into a formal agreement to record the terms of
      their agreement;

    
      
        
        

      

      
        
        

        
          

        

      

       

    

     

    NOW
      THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the mutual
      covenants and agreements herein contained and subject to the terms and
      conditions hereafter set out, the parties hereto agree as follows:

     

    1. GRANT
      OF OPTION

     

    1.01  St.
      Elias, in consideration of the sum of $10, the receipt and sufficiency of which
      is hereby acknowledged, hereby grants to Hi Ho Silver the exclusive right and
      option (the “First
      Option”)
      to
      acquire a 51% undivided beneficial and recorded interest in and to the Property
      by paying to St. Elias the aggregate of sum of $75,000 in cash (of which $10,000
      was paid by Hi Ho Silver to St. Elias upon the execution of the Letter Agreement
      and the receipt of which is hereby acknowledged by St. Elias), issuing to St.
      Elias an aggregate of 500,000 common shares in the capital stock of Hi Ho
      Silver, and by incurring $2,000,000 in “Exploration Expenditures” (as
      hereinafter defined), to be paid and issued to St. Elias and to be incurred
      by
      Hi Ho Silver as follows:

     

    (a) payment
      of the balance of $65,000 to St. Elias is to be made on or before the dates
      indicated below:

     

    
      	(i)  	
              $15,000
                to be paid to St. Elias within 10 days of the common shares of Hi
                Ho
                Silver being listed, called and posted for trading on the Canadian
                Trading
                and Quotation System Inc. stock exchange (the “Exchange”);

            

    

     

    
      	(ii)  	
              $25,000
                to be paid to St. Elias on or before September 18, 2006;
                and

            

    

     

    
      	(iii)  	
              $25,000
                to be paid to St. Elias on or before September 18, 2007;
                

            

    

     

    (b) cumulative
      Exploration Expenditures totaling not less than $2,000,000 are to be incurred
      on
      or before the dates indicated below:

     

    
      	(i)  	
              Exploration
                Expenditures totalling $400,000 (the “Phase
                I Program”)
                to be incurred on or before June 30, 2006;

            

    

     

    
      
        
        

      

      
        2

        
          

        

      

       

    

     

    
      	(ii)  	
              an
                additional $600,000 (the “Phase
                II Program”)
                to be incurred on or before September 18, 2007 and after the Phase
                I
                Program Exploration Expenditures have been incurred;
                and

            

    

     

    
      	(iii)  	
              an
                additional $1,000,000 (the “Phase
                III Program”)
                to be incurred on or before September 18, 2008 and after the Phase
                I
                Program and Phase II Program Exploration Expenditures have been incurred;
                and

            

    

     

    (c) 500,000
      common shares in the capital of Hi Ho Silver are to be issued to St. Elias
      in
      accordance with the requirements of the Exchange or any such other applicable
      regulatory body on or before the dates indicated below:

     

    
      	 	
              (i)   
                

            	
              100,000
                common shares within ten (10) business days following the receipt
                (the
                “Acceptance
                Date”)
                by Hi Ho Silver of a notice from the Exchange accepting this agreement
                for
                filing;

            

    

     

    
      	(ii)  	
              an
                additional 100,000 common shares to be issued and delivered to St.
                Elias
                within ten business days following the receipt by Hi Ho Silver of
                the
                consent of the Exchange to such issuance based upon the results of
                the
                Phase I Program; 

            

    

     

    
      	(iii)  	
              an
                additional 100,000 common shares to be issued and delivered to St.
                Elias
                within ten business days following the receipt by Hi Ho Silver of
                the
                consent of the Exchange to such issuance based upon the results of
                the
                Phase II Program; and

            

    

     

    
      	(iv)  	
              an
                additional 200,000 common shares to be issued and delivered to St.
                Elias
                within ten business days following the receipt by Hi Ho Silver of
                the
                consent of the Exchange to such issuance based upon the results of
                the
                Phase III Program.

            

    

     

    1.02  In
      the
      event that Hi Ho Silver’s Exploration Expenditures, in any of the above periods,
      are more than the specified sum, the excess shall be carried forward and applied
      to the Exploration Expenditures to be incurred in succeeding periods. Any
      exploration expenditures incurred in excess of the cumulative $2,000,000
      exploration expenditures required pursuant to paragraph 1.01(b) shall be carried
      forward to the succeeding period or periods set out in paragraph 1.04 (b) hereof
      and qualify as exploration expenditures thereunder in the event that Hi Ho
      Silver elects to acquire an additional 19% interest in and to the Property
      pursuant to the Second Option as set out in sections 1.03 to 1.07 hereof.

     

    
      
        
        

      

      
        3

        
          

        

      

       

    

     

    1.03  Within
      90
      days following the exercise of the First Option, Hi Ho Silver shall give the
      St.
      Elias written notice (the “Second
      Option Notice”)
      that
      either:

     

    
      
        (a)
          Hi
          Ho
          Silver elects to accept the grant of the “Second Option” (as hereinafter
          defined); or

      

    

     

    (b) Hi
      Ho
      Silver elects not to accept the grant of the Second Option.

     

    The
      date
      of delivery of said written notice shall be referred to herein as the
Election
      Date.
      Failure
      of St. Elias to give any such notice within the said 90-day period shall be
      deemed to be an election under subparagraph 1.03(b). 

     

    1.04  St.
      Elias
      hereby grants to Hi Ho Silver the exclusive right and option (the “Second
      Option”),
      exercisable only following the exercise of the First Option, to increase Hi
      Ho
      Silver’s undivided beneficial interest in and to the Property from 51% to 70% by
      issuing to St. Elias an additional aggregate of 1,000,000 common shares in
      the
      capital stock of Hi Ho Silver and incurring additional Exploration Expenditures
      in the amount of $3,000,000, to be issued and incurred as follows:

     

    (a) 1,000,000
      common shares in the capital stock of Hi Ho Silver are to be issued to St.
      Elias
      on or before the dates indicated below:

     

    
      	 	
              (i)  
                  

            	
              250,000
                common shares to be issued and delivered to St. Elias on or before
                the
                first anniversary of the Election
                Date;

            

    

     

    
      	 	
              (ii)   
                

            	
              an
                additional 250,000 common shares to be issued and delivered to St.
                Elias
                on or before the second anniversary of the Election Date;
                and

            

    

     

    
      	 	
              (iii)  
                

            	
              an
                additional 500,000 common shares to be issued and delivered to St.
                Elias
                on or before the third anniversary of the Election Date;
                and

            

    

     

    
      
        
        

      

      
        4

        
          

        

      

       

    

     

    (b) cumulative
      Exploration Expenditures totaling a minimum of $3,000,000 are to be incurred
      on
      or before the dates indicated below:

     

    
      	(i)  	
              $1,000,000
                to be incurred on or before the first anniversary of the Election
                Date;

            

    

     

    
      	(ii)  	
              an
                additional $1,000,000 to be incurred on or before the second anniversary
                of the Election Date; and

            

    

     

    
      	(iii)  	
              an
                additional $1,000,000 to be incurred on or before the third anniversary
                of
                the Election Date. 

            

    

     

    1.05  Exploration
      expenditures incurred by any date in excess of the amount of Exploration
      Expenditures required to be incurred by such date pursuant to paragraph 1.04(b)
      shall be carried forward to the succeeding period or periods and qualify as
      Exploration Expenditures. If Exploration Expenditures are less than the amount
      of exploration expenditures required to be incurred by any date, Hi Ho Silver
      may pay the deficiency to St. Elias in cash by the required date in order to
      maintain the Second Option. Such payments in cash in lieu shall be deemed to
      be
      exploration expenditures for the purposes of paragraph 1.04(b).

    

    1.06  If
      Hi Ho
      Silver does not fully exercise the Second Option, then Hi Ho Silver’s ownership
      of the Property shall nevertheless be increased on a pro-rata basis based upon
      the amount of exploration expenditures incurred and the number of common shares
      issued pursuant to the Second Option. In such instance, Hi Ho Silver shall
      advise St. Elias, in writing, that Hi Ho Silver does not intend to fully
      exercise the Second Option. 

    

    1.07  If
      and
      when Hi Ho Silver has fully (or partially) exercised the Second Option by
      issuing all (or a portion) of the common shares and incurring all (or a portion)
      of the Exploration Expenditures required pursuant to section 1.04, then a 19%
      (or a pro-rata) undivided right, title and interest in and to the Property
      shall
      vest in Hi Ho Silver free and clear of all charges, encumbrances and claims,
      and
      St. Elias shall immediately take all necessary steps reasonably required by
      Hi
      Ho Silver to transfer an undivided 19% interest (or an undivided pro-rata
      interest) in and to the Property to Hi Ho Silver.

    

    1.08  In
      this
      agreement, “Exploration
      Expenditures”
      means
      all costs and expenses, however denominated, incurred by Hi Ho Silver on or
      in
      connection with the exploration and development of the Property and shall
      include, without limiting the generality of the foregoing, the
      following:

     

    
      
        (a) 
          all
          expenditures required to maintain the Property in good standing in accordance
          with the laws of the jurisdiction in which the Property is situated including,
          notwithstanding generality, all rental payments outstanding or becoming
          due
          during the currency of the Option including for certainty the annual mining
          surface rights fee;

      

    

    
      
        
        

      

      
        5

        
          

        

      

       

    

     

    
      
        (b)
          all
          expenditures made relating to reclamation, rehabilitation and protection
          of the
          environment; and

      

    

     

    
      
        (c)
          a
          charge
          for overhead, management and administrative costs which cannot be specifically
          allocated, equal to 8% of all other costs and expenses.

      

    

    

    1.09  If
      the
      Exploration Expenditures incurred by Hi Ho Silver are less than the sums
      specified in paragraphs 1.01 and 1.04 or if Hi Ho Silver fails to incur any
      of
      the Exploration Expenditures listed in paragraphs 1.01 and 1.04 by the end
      of
      the last day on which the same was due to be incurred by reason of paragraphs
      1.01 or 1.04 or as deferred by reason of article 17, Hi Ho Silver may, at any
      time within 15 days of such day, make a cash payment to St. Elias in an amount
      equal to the deficiency in the Exploration Expenditures. Any cash payment so
      made shall be deemed to have been Exploration Expenditures duly and properly
      incurred for the purposes of paragraphs 1.01(b) and 1.04(b) in an amount equal
      to the cash payment and shall be carried forward to the succeeding period or
      periods and qualify as Exploration Expenditures.

    

    1.10  In
      this
      agreement, a written notice delivered by Hi Ho Silver to St. Elias by no later
      than 30 days after any date listed in paragraph 1.01 and paragraph 1.04 on
      or
      before which Exploration Expenditures are to be incurred and accompanied by
      a
      statement of a representative of Hi Ho Silver to the effect that the amount
      of
      Exploration Expenditures have been incurred by the applicable date shall be
      conclusive evidence of the making thereof unless St. Elias questions the
      accuracy of such statement within 15 days of receipt. If St. Elias questions
      the
      accuracy of the statement, the matter shall be referred to a national firm
      of
      Chartered Accountants for final determination. If such firm determines, after
      having consulted with Hi Ho Silver, that the Exploration Expenditures incurred
      were less than those reported by Hi Ho Silver, Hi Ho Silver shall not lose
      any
      of its rights hereunder provided Hi Ho Silver pays to St. Elias within 15 days
      of the receipt of the determination 100% of the deficiency in such Exploration
      Expenditures. If Hi Ho Silver makes such payment, it shall be deemed to have
      timely incurred Exploration Expenditures equal to such payment. If the firm
      of
      Chartered Accountants determines that the Exploration Expenditures incurred
      were
      less than 95% of those reported by Hi Ho Silver, Hi Ho Silver shall pay the
      entire cost of the determination; it they were 95% to 105% of those reported
      by
      Hi Ho Silver, the cost of the determination shall be paid by Hi Ho Silver and
      St. Elias equally; if in excess of 105% of the Exploration Expenditures reported
      by Hi Ho Silver, St. Elias shall pay the entire cost of the Chartered
      Accountant's determination.

     

    
      
        
        

      

      
        6

        
          

        

      

       

    

     

    1.11           
       The
      parties acknowledge and agree that for valid business and legal reasons it
      may
      be advisable to transfer the ownership of the Property to a separate company
      (“HoldCo”)
      incorporated for the single purpose of owning the Property. HoldCo will be
      incorporated by St. Elias and Hi Ho Silver in a mutually acceptable common
      law
      jurisdiction for the purpose of implementing this agreement. St. Elias agrees
      that at any time after the exercise of the First Option, upon the written
      request of Hi Ho Silver, it shall cause the entire ownership of the Property
      to
      be transferred to HoldCo, which shall be a newly incorporated company
      incorporated for such purpose, and to the extent necessary, the First Option
      and
      the Second Option shall be re-structured as options granted by St. Elias to
      Hi
      Ho Silver to acquire up to 70% of the issued shares of Holdco. If Hi Ho Silver
      makes such request, all of the costs and expenses of establishing Holdco and
      transferring the ownership of the Property to Hi Ho Silver shall be borne by
      Hi
      Ho Silver, and shall constitute Exploration Expenditures hereunder. It is the
      intent of the parties that Holdco be incorporated under a corporate statute
      which is consistent with the terms and conditions of this agreement and the
      Shareholders’ Venture Agreement and which imposes few or no restrictions on the
      implementation hereof. The parties agreement to cause Holdco to be incorporated
      in such a jurisdiction, and to cause Holdco to be continued into any other
      jurisdiction thereafter in order to implement such intent.

     

    1.12  If
      St.
      Elias should own less than a 100% recorded and beneficial interest in and to
      the
      Property and the right to receive 100% of the proceeds of production therefrom,
      Hi Ho Silver shall have the right, but not the obligation, to make all cash
      payments and incur all Exploration Expenditures in proportion to St. Elias's
      actual interest in and to the Property.

     

    1.13  If
      any
      third party asserts any right or claim to the Property or the proceeds of
      production therefrom, or to any amounts payable to St. Elias, Hi Ho Silver
      may
      deposit any amounts otherwise due St. Elias in escrow with a suitable agent
      until the validity of such right or claim has been finally resolved. If Hi
      Ho
      Silver deposits said amounts in escrow, Hi Ho Silver shall be deemed not in
      default under the agreement for failure to pay such amounts to St.
      Elias.

    
      
        
        

      

      
        7

        
          

        

      

       

    

     

    2. OPTION
      ONLY

     

    2.01  This
      agreement represents the granting of options only, Hi Ho Silver shall be under
      no obligation to issue any further shares or to make any further payment to
      St.
      Elias or to incur Exploration Expenditures other than to fulfil its obligations
      on termination as set out in Article 12 hereof. No act done or payment made
      by
      Hi Ho Silver hereunder shall obligate Hi Ho Silver to do any further act or
      make
      any further payment and, except as provided herein to the contrary, in no event
      shall this agreement or any act done or any payment made be construed as an
      obligation of Hi Ho Silver to do or perform any work or make any payments on
      or
      with respect to the Property.

     

    3. EXERCISE
      OF OPTION
      - SHAREHOLDERS’ VENTURE
      AGREEMENT

     

    3.01 Hi
      Ho
      Silver shall have exercised the First Option and shall have acquired a 51%
      undivided beneficial interest in and to the Property by paying the aggregate
      sum
      of $75,000 to St. Elias (including the sum of $10,000, which was paid by Hi
      Ho
      Silver to St. Elias upon the execution of the Letter Agreement and the receipt
      of which is hereby acknowledged by St. Elias), incurring $2,000,000 in
      Exploration Expenditures, and by issuing to St. Elias 500,000 common shares
      in
      the capital stock of Hi Ho Silver, all in accordance with paragraph 1.01 hereof.
      Hi Ho Silver shall acquire no additional interest in and to the Property by
      electing to be granted, and subsequently failing to exercise, the Second Option,
      and in such event shall receive no credit for the incurrence of Exploration
      Expenditures over $2,000,000.

     

    3.02  Hi
      Ho
      Silver shall have exercised the Second Option and shall have acquired a 70%
      undivided beneficial interest in and to the Property by having exercised the
      First Option, by incurring additional Exploration Expenditures of $3,000,000
      pursuant to this agreement and by issuing to St. Elias an additional 1,000,000
      shares, all on or before the third anniversary of the Election
      Date.

     

    3.03  If
      the
      First Option alone is exercised or if the First and Second Options are
      exercised, all further work on and with respect to the Property, and the
      subsequent relationship between the Optionor and St. Elias in relation to the
      Property shall be governed by an agreement (the “Shareholders’
      Venture Agreement”) between
      the parties, substantially in the form as attached hereto as Schedule “B”. The
      said Shareholders’ Venture Agreement shall come into effect without it having
      been executed by any party.

    
      
        
        

      

      
        8

        
          

        

      

       

    

     

    4. REGULATORY
      APPROVAL

     

    4.01  The
      issuance of the shares of Hi Ho Silver pursuant to sub-paragraphs 1.01(b),
      1.01(e), 1.01(h) and 1.01(j) hereof, and sub-paragraphs 1.03(c), 1.03(f) and
      1.03(i) hereof, may be subject in each case to Hi Ho Silver filing with the
      Exchange a technical report prepared by an independent engineer or geologist
      summarizing the work carried out on the Property by Hi Ho Silver and
      recommending further work. Hi Ho Silver agrees to use its best efforts to file
      such a report on a timely basis to permit the issuance of the subject shares
      on
      or before the applicable dates; PROVIDED HOWEVER that notwithstanding that
      any
      number of shares may not have been issued by the applicable date, Hi Ho Silver
      shall not lose any of its rights hereunder if it has filed such a report with
      the Exchange and is diligently seeking the consent of such body to the issuance
      of such shares.

     

    4.02  St.
      Elias
      acknowledges and accepts that the shares of Hi Ho Silver received by St. Elias
      hereunder shall be subject to restrictions on trading as required by applicable
      law.

     

    5. TRANSFER
      OF TITLE

     

    5.01  Forthwith
      following the exercise of the First Option and Hi Ho Silver, St. Elias shall
      initiate all steps required to transfer and register with the applicable
      governmental agencies a 51% interest in the Property or other evidence
      satisfactory to Hi Ho Silver that Hi Ho Silver holds a 51% interest in the
      Property.

     

    5.02  If
      Hi Ho
      Silver exercises the Second Option, St. Elias shall initiate all steps required
      to transfer and register with the applicable governmental agencies a further
      19%
      interest in the Property or other evidence satisfactory to Hi Ho Silver that
      Hi
      Ho Silver holds a 70% interest in the Property.

     

    5.03  At
      any
      time prior to the exercise of the First Option and at the request of Hi Ho
      Silver, St. Elias will deliver, to Hi Ho Silver’s attorneys, a Bill of Sale or
      any such documents as required, transferring a 51% interest in the Property
      to
      Hi Ho Silver and Hi Ho Silver’s attorneys shall hold such Bill of Sale or other
      document(s) in trust until the First Option has been exercised.

    
      
        
        

      

      
        9

        
          

        

      

       

    

     

    6. RIGHT
      OF ENTRY
      - PROGRAMS

     

    6.01  During
      the currency of this agreement prior to the exercise of the First Option, or
      the
      First Option and the Second Options, as the case may be, Hi Ho Silver, its
      servants, agents and workmen and any persons duly authorized by Hi Ho Silver,
      shall have the right of access to and from and, subject to sub-paragraph
      10.01(f) hereof, the exclusive right to enter upon and take possession of and
      prospect, explore and develop the Property and to manage and operate the
      exploration programs on the Property, in such manner as Hi Ho Silver in its
      sole
      discretion may deem advisable.

     

    7. REPRESENTATIONS
      AND WARRANTIES OF ST.
      ELIAS

     

    7.01  St.
      Elias
      represents and warrants to Hi Ho Silver that:

     

    
      
        (a)
          St.
          Elias
          owns 100% of the Property;

      

    

     

    
      
        (b)
          the
          Property is now duly recorded and in good standing in
          accordance with the laws of the jurisdiction in which the Property is situated
          and, except as specified in Schedule "A" and accepted by Hi Ho Silver,
          are in
          good standing with respect to all filings, fees, taxes, assessments, work
          commitments or other conditions on the date hereof and until the dates
          set
          opposite the respective names thereof in Schedule "A";

      

    

     

    
      
        (c)
          it
          has
          full corporate right, capacity, power and authority to enter into this
          agreement
          without first obtaining the consent of any other person or body corporate
          and
          this agreement has been authorized by all necessary corporate action on
          the part
          of St. Elias and St. Elias has full right and authority to enter into this
          Agreement;

      

    

     

    
      
        (d)
          St.
          Elias
          is a company validly existing and in good standing under the laws of the
          province of British Columbia and is up to date with respect to its filings
          with
          the applicable governmental corporate agency;

      

    

     

    
      
        (e)
          the
          entering into this agreement does not conflict with any applicable laws
          or with
          the charter documents of St. Elias and will not result in a breach of any
          agreement or instrument to which St. Elias is a
          party;

      

    

    
      
        
        

      

      
        10

        
          

        

      

       

    

     

    
      
        (f)
          it
          has
          the exclusive right to enter into this agreement and all necessary authority
          to
          assign to Hi Ho Silver, up to a 70% beneficial right, title and interest
          in and
          to the Property;

      

    

     

    
      
        (g)
          St.
          Elias
          has the exclusive right to receive 100% of the proceeds from the sale of
          minerals, metals, ores or concentrates removed from the Property and no
          person,
          firm or corporation is entitled to any royalty or other payment in the
          nature of
          rent or royalty on such materials removed from the Property or is entitled
          to
          take such materials in kind;

      

    

    

    
      
        (h)
          the
          Property is free and clear of all liens, charges and encumbrances of every
          nature and is to the best of St. Elias’s knowledge wholly within Crown
          Lands;

      

    

     

    
      
        (i)
          to
          the
          best of its knowledge and belief, reclamation and rehabilitation of those
          parts
          of the Property which have been previously worked by persons other than
          St.
          Elias have been properly completed by such other persons in compliance
          with laws
          applicable at the time that the work took place; 

      

    

     

    (j)  it
      has
      advised Hi Ho Silver of all of the material information relating to the mineral
      potential of the Property which St. Elias has in its possession or under its
      control;

     

    (k)  it
      is
      legally entitled to hold the Property and the Property Rights and will remain
      so
      entitled until the interest of St. Elias in the Property which is subject to
      the
      First Option and Second Option has been duly transferred to Hi Ho Silver as
      contemplated hereby;

     

    (l)  it
      is,
      and at the time of the transfer to Hi Ho Silver of an interest in the mineral
      claims comprising the Property pursuant to the exercise of the First Option
      and
      the Second Option it will be, the recorded holder and the legal and beneficial
      owner of all of the mineral claims comprising the Property free and clear of
      all
      liens, charges, encumbrances, claims of others, surface right restrictions,
      environmental hazards and liabilities except as noted on Schedule "A", and
      no
      taxes or rentals are or will be due in respect of any of the mineral claims;
      

    
      
        
        

      

      
        11

        
          

        

      

       

    

     

    (m) the
      consummation of the transactions herein contemplated will not:

     

    
      	(1)  	
              conflict
                with or result in any breach of any covenants or agreements contained
                in,
                or constitute a default under, or result in the creation of any
                encumbrance under the provisions of any shareholders' or directors'
                resolution, indenture, agreement or other instrument whatsoever to
                which
                St. Elias is a party or by which it is bound or to which it is
                subject;

            

    

     

    
      	(2)  	
              constitute
                the sale, lease or exchange of all or substantially all of the assets,
                property or undertaking of St.
                Elias,
                or an extraordinary sale of St.
                Elias’s property,
                or a fundamental change of St.
                Elias;
                

            

    

     

    (n)there
      are
      not any adverse claims or challenges against or to the ownership of or title
      to
      any of the mineral claims comprising the Property, nor to the knowledge of
      St.
      Elias
      is there
      any basis therefor, and there are no outstanding agreements or options to
      acquire or purchase the Property or any portion thereof, and no person has
      any
      royalty or other interest whatsoever in production from any of the mineral
      claims comprising the Property other than as set out in Schedule "A";
      and

     

    (o)no
      proceedings are pending for, and St. Elias is unaware of any basis for the
      institution of any proceedings leading to the placing of St. Elias in bankruptcy
      or subject to any other laws governing the affairs of insolvent
      persons.

     

    7.02  The
      representations and warranties hereinbefore set out are conditions upon which
      Hi
      Ho Silver has relied on entering into this agreement and shall survive the
      exercise of the First Option and the Second Option for a period of two years,
      and St. Elias hereby indemnifies and saves Hi Ho Silver harmless from all loss,
      damage, costs, actions and suits arising out of or in connection with any breach
      of any representation or warranty made by it and contained in this
      agreement.

     

    8. REPRESENTATIONS
      AND WARRANTIES OF HI HO SILVER

     

    8.01  Hi
      Ho
      Silver represents and warrants to St. Elias that:

     

    
      
        (a)
          it
          has
          full corporate power and authority to enter into this
          agreement;

      

    

    
      
        
        

      

      
        12

        
          

        

      

       

    

    
      
        (b)
          it
          is a
          company validly existing and in good standing under the laws of Canada
          and is up
          to date with respect to its filings with the applicable governmental corporate
          agency;

      

    

     

    
      
        (c)
          it
          has
          the power to enter into this agreement and all necessary authority to acquire
          from St. Elias up to a 70% right, title and interest in and to the
          Property;

      

    

     

    
      
        (d)
          the
          entering into of this agreement does not conflict with any applicable laws
          or
          with its charter documents nor does it conflict with, or result in a breach
          of,
          or accelerate the performance required by any contract or other commitment
          to
          which it is party or by which it is bound;

      

    

     

    
      
        (e)
          it
          is
          using its best efforts to have its common shares listed and called for
          trading
          on the Exchange;

      

    

     

    8.02  The
      representations and warranties hereinbefore set out are conditions upon which
      St. Elias has relied on entering into this agreement and shall survive the
      exercise of the First Option and the Second Option for a period of two years,
      and Hi Ho Silver hereby indemnifies and saves St. Elias harmless from all loss,
      damage, costs, actions and suits arising out of or in connection with any breach
      of any representation or warranty made by it and contained in this
      agreement.

     

    9. COVENANTS
      OF ST.
      ELIAS

     

    9.01  St.
      Elias
      hereby covenants with and to Hi Ho Silver that:

     

    
      
        (a)
          it
          will,
          forthwith following the execution and delivery of this agreement, provide
          Hi Ho
          Silver from time to time with all of the data and information in its possession
          or under its control relating to the mineral potential of the Property
          and to
          St. Elias’s exploration activities on and in connection with the Property
          including but not limited to all geophysical, geochemical and geographic
          data,
          reports, maps, surveys and exploration results; and

      

    

     

    
      
        (b)
          until
          such time as the First Option or the Second Option, as the case may be,
          is
          exercised or otherwise terminates, it will not deal, or attempt to deal
          with its
          right, title and interest in and to the Property in any way that would
          or might
          affect the right of Hi Ho Silver to become absolutely vested in up to a
          70%
          interest in and to the Property, free and clear of any liens, charges and
          encumbrances, other than as set out herein.

      

    

    
      
        
        

      

      
        13

        
          

        

      

       

    

     

    10. COVENANTS
      OF HI
      HO SILVER

     

    10.01  Hi
      Ho
      Silver covenants and agrees with St. Elias that until the First Option, or
      the
      First Option and the Second Option, as the case may be, are exercised or
      otherwise terminate, subject to the provisions of paragraph 6.02 hereof, it
      shall, where applicable:

     

    
      
        (a)
          timely
          make all rental and other payments and do such other acts as may be required
          in
          order to maintain the Property in good standing at all times, including
          the
          application, if necessary or desirable, for another form of successor mineral
          tenure for the Property;

      

    

     

    
      
        (b)
          keep
          the
          Property clear of liens and other charges arising from its operations
          thereon;

      

    

     

    
      
        (c)
          carry
          on
          all operations on the Property in a competent and workmanlike manner and
          in
          compliance with all applicable governmental regulations and restrictions
          including, without limiting generality, those regulations relating to
          reclamation costs and protection of the environment;

      

    

     

    
      
        (d)
          pay
          or
          cause to be paid any rates, taxes, duties, royalties, assessments or fees
          levied
          with respect to the Property or Hi Ho Silver’s operations
          thereon;

      

    

     

    
      
        (e)
          indemnify
          and hold St. Elias harmless from any and all liabilities, costs, damages
          or
          charges arising from the failure of Hi Ho Silver to comply with the covenants
          contained in this article or otherwise arising from its operations on the
          Property including, without limiting generality, Hi Ho Silver’s covenant to
          comply with all regulations and restrictions relating to reclamation costs
          and
          the protection of the environment;

      

    

     

    
      
        (f)
          allow
          St.
          Elias or any duly authorized agent or representative of St. Elias to inspect
          the
          Property upon giving Hi Ho Silver 24 hours notice; PROVIDED HOWEVER that
          it is
          agreed and understood that St. Elias or any such agent or representative
          shall
          not interfere with Hi Ho Silver’s activities on the Property and shall be at his
          or her own risk and that Hi Ho Silver shall not be liable for any loss,
          damage
          or injury incurred by St. Elias or its agent or representative arising
          from its
          inspection of the Property, however caused;

      

    

    
      
        
        

      

      
        14

        
          

        

      

       

    

     

    (g)provide
      St. Elias with a comprehensive annual factual report, in writing, with respect
      to its operations on the Property including all factual maps, reports, assay
      results and other technical data prepared or obtained by Hi Ho Silver in
      connection with its operations on the Property; 

     

    (h) require
      its contractors and subcontractors to maintain adequate insurance with respect
      to their operations on and relating to the Property; and 

     

    (i) maintain
      accurate books and records relating to the incurrence of Exploration
      Expenditures and all operations on and relating to the Property.

     

    11 SHARE
      DISPOSITIONS

     

    11.01  St.
      Elias
      shall dispose of the shares of Hi Ho Silver to be issued to it hereunder only
      in
      accordance with all applicable laws, regulations and policies.

     

    12. TERMINATION

     

    12.01  Hi
      Ho
      Silver, may terminate this agreement at any time upon giving not less than
      30
      days’ notice thereof to St. Elias.

     

    12.02  Notwithstanding
      paragraph 12.01, if Hi Ho Silver fails to make any payment or fails to do any
      thing on or before the last day provided for such payment or performance under
      this agreement, St. Elias may terminate this agreement but only if:

     

    
      
        (a)
          it
          shall
          have first given to Hi Ho Silver written notice of the failure containing
          particulars of the payment which Hi Ho Silver has not made or the act which
          Hi
          Ho Silver has not performed; and

      

    

     

    
      
        (b)
          Hi
          Ho
          Silver has not, within 30 days following delivery of St. Elias's notice,
          given
          notice to St. Elias that it has cured such failure or commenced proceedings
          to
          cure such failure by appropriate payment or performance (Hi Ho Silver hereby
          agreeing that should it so commence to cure any failure it will prosecute
          the
          same to completion without undue delay, and in any event shall use its
          reasonable best efforts to cure the failure within 60
          days).

      

    

    
      
        
        

      

      
        15

        
          

        

      

       

    

     

    Should
      Hi
      Ho Silver fail to deliver the notice provided for in subparagraph 12.02(b)
      within the said 30 days, this agreement shall terminate thereafter at the
      election of St. Elias, upon St. Elias giving Hi Ho Silver notice
      thereof.

     

    12.03  Upon
      termination of this agreement Hi Ho Silver shall deliver to St. Elias, within
      30
      days of the effective date of termination, copies of all factual maps, reports,
      assay results and other factual data and documentation relating to its
      operations on the Property, and provide St. Elias with access to and ownership
      and control over all samples, drill core and sample pulps generated by Hi Ho
      Silver’s activities on the Property.

     

    12.04  Upon
      the
      termination of this agreement, Hi Ho Silver forfeits any and all interest in
      the
      Property hereunder and shall cease to be liable to St. Elias in debt, damages
      or
      otherwise save for the performance of those of its obligations which were not
      satisfied on the effective date of termination. Such obligations shall include
      all work in progress, all contractual commitments which cannot be terminated
      in
      a cost-effective manner, and all of Hi Ho Silver obligations set out in
      sub-paragraph 10.01(c) hereof.

     

    12.05  Upon
      termination of this agreement, Hi Ho Silver, upon giving reasonable notice
      to
      St. Elias, shall have the right of access to the Property for a period of six
      months thereafter for the purpose of removing its chattels, machinery, equipment
      and fixtures therefrom.

     

    13. INDEPENDENT
      ACTIVITIES

     

    13.01  Except
      as
      expressly provided herein, each party shall have the free and unrestricted
      right
      to independently engage in and receive the full benefit of any and all business
      endeavours of any sort whatsoever, whether or not competitive with the
      endeavours contemplated herein without consulting the other or inviting or
      allowing the other to participate therein. No party shall be under any fiduciary
      or other duty to the other which will prevent it from engaging in or enjoying
      the benefits of competing endeavours within the general scope of the endeavours
      contemplated herein. The legal doctrines of "corporate opportunity" sometimes
      applied to persons engaged in a joint venture or having fiduciary status shall
      not apply in the case of any party. In particular, without limiting the
      foregoing, no party shall have an obligation to any other party as
      to:

     

    
      
        (a)
          any
          opportunity to acquire, explore and develop any mining property, interest
          or
          right presently owned by it or offered to it outside the Property at any
          time;
          and

      

    

    
      
        
        

      

      
        16

        
          

        

      

       

    

     

    
      
        (b)
          the
          erection of any mining plant, mill, smelter or refinery, whether or not
          such
          mining plant, mill, smelter or refinery treats ores or concentrates from
          the
          Property.

      

    

     

    14. AREA
      OF INTEREST

     

    14.01  If
      either
      St. Elias or Hi Ho Silver shall, directly or indirectly, locate or otherwise
      acquire during the term of this agreement any mineral interest which lies wholly
      or partly within the “Area of Interest” (as hereinafter defined), such party
      shall give the other party notice of such acquisition within 30 days thereafter
      together with copies of all related geological and other data in its possession
      and such mineral interest shall be deemed to be included, at no cost to the
      non-acquiring party, in the definition of the “Property” for the purposes of
      this agreement.

     

    14.02  In
      this
      agreement, “Area
      of Interest”
      means
      any mineral interest which lies wholly or partly within the outside boundary
      of
      the Property as constituted on the date of this agreement.

     

    15. CONFIDENTIALITY
      OF INFORMATION

     

    15.01  Except
      as
      otherwise provided in this paragraph, both parties shall treat, and shall cause
      their respective agents, employees and consultants to treat, all data, reports,
      records and other information relating to this agreement and the Property as
      confidential and shall not trade, and shall cause their respective agents,
      employees and consultants to refrain from trading, in the securities of any
      company based on such information. The text of any news release or any other
      public statements, other than those required by law or regulatory bodies or
      stock exchanges, which a party desires to make shall be sent to the other party
      for its comments prior to publication and shall not include references to the
      other party unless such party has given its prior consent in writing. The text
      of any disclosure which a party is required to make by law, by regulatory bodies
      or stock exchanges shall be sent to the other party prior to filing in order
      that the other party may have the opportunity to comment thereon. For all public
      disclosure, whether required to be made or not, any reasonable changes requested
      by the non-disclosing party shall be incorporated into the disclosure
      document.

    
      
        
        

      

      
        17

        
          

        

      

       

    

     

    16. ARBITRATION

     

    16.01  If
      there
      is any disagreement, dispute or controversy (hereinafter collectively called
      a
"dispute")
      between
      the parties with respect to any matter arising under this agreement or the
      construction hereof, then the dispute shall be determined by arbitration in
      accordance with the following procedures:

     

    
      
        (a)
          the
          parties to the dispute shall appoint a single mutually acceptable arbitrator.
          If
          the parties cannot agree upon a single arbitrator, then the party on one
          side of
          the dispute shall name an arbitrator, and give notice thereof to the party
          on
          the other side of the dispute;

      

    

     

    
      
        (b)
          the
          party
          on the other side of the dispute shall within 14 days of the receipt of
          notice,
          name an arbitrator; and

      

    

     

    
      
        (c)
          the
          two
          arbitrators so named shall, within seven days of the naming of the later
          of
          them, name a third arbitrator.

      

    

     

    If
      the
      party on either side of the dispute fails to name its arbitrator within the
      allotted time, then the arbitrator named may make a determination of the
      dispute. Except as expressly provided in this paragraph, the arbitration shall
      be conducted in Vancouver, B.C. and in accordance with the Commercial
      Arbitration Act
      (British
      Columbia). The decision shall be made within 30 days following the naming of
      the
      latest of them, shall be based exclusively on the advancement of exploration,
      development and production work on the Property and not on the financial
      circumstances of the parties, and shall be conclusive and binding upon the
      parties. The costs of arbitration shall be borne equally by the parties to
      the
      dispute unless otherwise determined by the arbitrator(s) in the
      award.

     

    17. DELAYS

     

    17.01  If
      any
      party should be delayed in or prevented from performing any of the terms,
      covenants or conditions of this agreement by reason of a cause beyond the
      control of such party, whether or not foreseeable, excluding lack of funds
      but
      including fires, floods, earthquakes, subsidence, ground collapse or landslides,
      interruptions or delays in transportation or power supplies, strikes, lockouts,
      wars, acts of God, government regulation (including currency control) or
      interference or the inability to secure on reasonable terms any private or
      public permits or authorizations, then any such failure on the part of such
      party to so perform shall not be deemed to be a breach of this agreement and
      the
      time within which such party is obliged to comply with any such term, covenant
      or condition of this agreement shall be extended by the total period of all
      such
      delays. In order that the provisions of this article may become operative,
      such
      party shall give notice in writing to the other party, forthwith and for each
      new cause of delay or prevention and shall set out in such notice particulars
      of
      the cause thereof, and the day upon which the same arose, and shall take all
      reasonable steps to remove the cause of such delay or prevention, and shall
      give
      like notice forthwith following the date that such cause ceased to
      subsist.

    
      
        
        

      

      
        18

        
          

        

      

       

    

     

    18. ASSIGNMENT

     

    18.01  If
      a
      party (hereinafter in this paragraph referred to as the "Owner"):

    

    
      
        (a)
          receives
          a bona fide offer from an independent third party (the "Proposed
          Purchaser")
          dealing
          at arm's length with the Owner to purchase all or any part all of the Owner's
          interest in this agreement, which offer the Owner desires to accept;

      

    

    

    
      
        (b)
          or
          if the
          Owner intends to sell all or any part of its interest in this
          agreement.

      

    

     

    The
      Owner
      shall first offer (the "Offer")
      such
      interest in writing to the other party upon terms no less favourable than those
      offered by the Proposed Purchaser or intended to be offered by the Owner, as
      the
      case may be. The Offer shall specify the price and terms and conditions of
      such
      sale, the name of the Proposed Purchaser (which term shall, in the case of
      an
      intended offer by the Owner, mean the person or persons to whom the Owner
      intends to offer its interest) and, if the offer received by the Owner from
      the
      Proposed Purchaser provides for any consideration payable to the Owner otherwise
      than in cash, the Offer shall include the Owner's good faith estimate of the
      cash equivalent of the non-cash consideration. If within a period of 60 days
      of
      the receipt of the Offer, the other party notifies the Owner in writing that
      it
      will accept the same, the Owner shall be bound to sell such interest to the
      other party (subject as hereinafter provided with respect to price) on the
      terms
      and conditions of the Offer. If the Offer so accepted by the other party
      contains the Owner's good faith estimate of the cash equivalent consideration
      as
      aforesaid, and if the other party disagrees with the Owner's best estimate,
      the
      other party shall so notify the Owner at the time of acceptance and the other
      party shall, in such notice, specify what it considers, in good faith, the
      fair
      cash equivalent to be and the resulting total purchase price. If the other
      party
      so notifies the Owner, the acceptance by the other party shall be effective
      and
      binding upon the Owner and the other party and the cash equivalent of any such
      non-cash consideration shall be determined by binding arbitration under the
      Commercial
      Arbitration Act
      (British
      Columbia) and shall be payable by the other party, subject to prepayment as
      hereinafter provided, within 60 days following its determination by arbitration.
      The other party shall in such case pay to the Owner, against receipt of an
      absolute transfer of clear and unencumbered title to the interest of the Owner
      being sold, the total purchase price which it specified in its notice to the
      Owner and such amount shall be credited to the amount determined following
      arbitration of the cash equivalent of any non-cash consideration. If the other
      party fails to notify the Owner before the expiration of the time limited
      therefor that it will purchase the interest offered, the Owner may sell and
      transfer such interest to the Proposed Purchaser at the price and on the terms
      and conditions specified in the Offer for a period of 60 days, provided that
      the
      terms of this paragraph shall again apply to such interest if the sale to the
      Proposed Purchaser is not completed within the said 60 days. Any sale hereunder
      shall be conditional upon the Proposed Purchaser delivering a written
      undertaking to the other party, in form and content satisfactory to its counsel,
      to be bound by the terms and conditions of this agreement and upon the receipt,
      if applicable, of the prior approval of the Minister.

    
      
        
        

      

      
        19

        
          

        

      

       

    

     

    19. NOTICES

     

    19.01  Any
      notice, election, consent or other writing required or permitted to be given
      hereunder shall be deemed to be sufficiently given if delivered or if mailed
      by
      registered air mail or by fax, addressed as follows:

    

    In
      the
      case of St. Elias:

     

    St.
      Elias
      Mines Ltd.

    Suite
      604
      - 700 West Pender Street 

    Vancouver,
      BC V6C 1G8

    

    Attention:
      Lori McClenahan, President

    Fax
      No.:
      (604) 669-9626

    

    In
      the
      case of the Hi Ho Silver:

    

    Hi
      Ho
      Silver Resources Inc.

    #15A,
      3045 Southcreek Road

    Mississauga
      ON L4X 2E9

    

    Attention:
      Frederick S. Fisher, President

    Fax
      No.:
      905) 602-4656

    
      
        
        

      

      
        20

        
          

        

      

       

    

     

    and
      any
      such notice given as aforesaid shall be deemed to have been given to the parties
      hereto if delivered, when delivered, or if mailed, on the tenth business day
      following the date of mailing, or, if faxed, on the next succeeding business
      day
      following the faxing thereof PROVIDED HOWEVER that during the period of any
      postal interruption in either the country of mailing or the country of delivery,
      any notice given hereunder by mail shall be deemed to have been given only
      as of
      the date of actual delivery of the same. Any party may from time to time by
      notice in writing change its address for the purpose of this
      paragraph.

     

    20. GENERAL
      TERMS AND CONDITIONS

     

    20.01  The
      parties hereto hereby covenant and agree that they will execute such further
      agreements, conveyances and assurances as may be requisite, or which counsel
      for
      the parties may deem necessary to effectually carry out the intent of this
      agreement.

     

    20.02  This
      agreement shall represent the entire understanding between the parties with
      respect to the subject matter hereof and replaces and supersedes the Letter
      Agreement between them dated May 18, 2005. No representations or inducements
      have been made save as herein set forth. No changes, alterations, or
      modifications of this agreement shall be binding upon either party until and
      unless a memorandum in writing to such effect shall have been signed by both
      parties hereto.

     

    20.03  The
      titles to the articles to this agreement shall not be deemed to form part of
      this agreement but shall be regarded as having been used for convenience of
      reference only.

     

    20.04  The
      schedules to this agreement shall be construed with and as an integral part
      of
      this agreement to the same extent as if they were set forth verbatim
      herein.

     

    20.05  All
      references to dollar amounts contained in this agreement are references to
      Canadian funds unless expressly set out to the contrary.

     

    20.06  This
      agreement shall be governed by and interpreted in accordance with the laws
      in
      effect in British Columbia, and is subject to the exclusive jurisdiction of
      the
      Courts of British Columbia.

    
      
        
        

      

      
        21

        
          

        

      

       

    

     

    20.07  This
      agreement shall enure to the benefit of and be binding upon the parties hereto
      and their respective successors and assigns.

     

    20.08  If
      it
      does not become necessary or desirable to incorporate a Holdco, the parties
      shall use their bona fide best efforts to replace the Shareholders’ Venture
      Agreement with a joint venture agreement having equivalent effect.

     

    IN
      WITNESS WHEREOF this agreement has been executed by the parties hereto as of
      the
      day and year first above written.

    

    
      	
              The
                COMMON SEAL of ST.
                ELIAS MINES 

              LTD.
                was hereunto affixed in the presence of:

               

                /s/
                  Signed                                                                                               

              

               

              
                

              

            	
              )

              )

              )

              )

              )

              )

              )

            	
              c/s

            

    

    

    HI
      HO SILVER RESOURCES INC.

    
      	 	 	 	 
	 	 	 	 
	
              /s/
                Signed

            	 	 	
            
	
              

              Authorized
                Signatory

            	 	 	
            

    

     

    This
      is
      page 22 of that certain agreement dated September 12, 2005, between St. Elias
      Mines Ltd. of the first part and Hi Ho Silver Resources Inc. of the second
      part.

    
      
        
        

      

      
        22

        
          

        

      

       

    

    SCHEDULE
      “A”

     

    TO
      THAT
      CERTAIN AGREEMENT BETWEEN ST. ELIAS MINES LTD., OF THE FIRST PART AND HI HO
      SILVER RESOURCES INC. OF THE SECOND PART MADE AS OFSEPTEMBER 12,
      2005

     

    THE
      “PROPERTY”

    

    All
      mineral claims that comprise the Property are located in the Greenwood Mining
      Division of British Columbia

    

    
      	
              TENURE
                NUMBER

            	 	
              CLAIM
                NAME

            	 	
              ANNIVERSARY
                DATE

            	 	
              SIZE
                (Ha)

            
	
              509186
                

            	 	
               
                Carmi West Pit 

            	 	
              March
                17, 2006

            	 	
              524.339

            
	
              509187
                

            	 	
               
                Carmi East 

            	 	
              March
                17, 2006

            	 	
              524.246

            
	
              509188
                

            	 	
               
                Carmi SE 

            	 	
              March
                17, 2006

            	 	
              524.521

            
	
              509189
                

            	 	
               
                Carmi SW 

            	 	
              March
                18, 2006

            	 	
              524.52

            
	
              512778

            	 	
              Carmi
                Main

            	 	
              July
                02, 2006

            	 	
              776.01

            
	
              Total
                size (Ha)

            	 	 	 	 	 	
              2873.636

            

    

    

    The
      only
      surface right restrictions that St. Elias is aware of with respect to the
      Property are potential shared cattle grazing, timber and other crown granted
      rights. 

     

    
      
        
        

      

      
        
        

        
          

        

      

       

    

    SCHEDULE
      “B”

    

    TO
      THAT
      CERTAIN AGREEMENT BETWEEN ST. ELIAS MINES LTD., OF THE FIRST PART AND HI HO
      SILVER RESOURCES INC. OF THE SECOND PART MADE AS OFSEPTEMBER 12,
      2005

     

    KETTLE
      RIVER PROPERTY

    SHAREHOLDERS’
      VENTURE AGREEMENT

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    I
      N D E
      X

     

    
      	 	
              Page

            
	 	 
	
              1.
                INTERPRETATION

            	
              2

            
	
              2.
                FORMATION OF THE VENTURE

            	
              7

            
	
              3.
                SHARE PARTICIPATIONS

            	
              10

            
	
              4.
                SHAREHOLDERS’ COMMITTEE - BOARD OF DIRECTORS

            	
              10

            
	
              5.
                OPERATOR

            	
              17

            
	
              6.
                RIGHTS, DUTIES AND STATUS OF OPERATOR

            	
              18

            
	
              7.
                EXPLORATION PROGRAMS

            	
              20

            
	
              8.
                FEASIBILITY REPORT

            	
              23

            
	
              9.
                PRODUCTION NOTICE

            	
              24

            
	
              10.
                ELECTION TO CONTRIBUTE

            	
              24

            
	
              11.
                OPERATOR'S FEE

            	
              25

            
	
              12.
                MINE FINANCING

            	
              26

            
	
              13.
                CONSTRUCTION

            	
              27

            
	
              14.
                OPERATION OF THE MINE

            	
              27

            
	
              15.
                PAYMENT OF MINE COSTS

            	
              28

            
	
              16.
                DIVIDENDS

            	
              29

            
	
              17.
                SURRENDER OF SHARE PARTICIPATION

            	
              29

            
	
              18.
                TERMINATION OF MINING OPERATIONS

            	
              31

            
	
              19.
                THE PROPERTY

            	
              32

            
	
              20.
                AREA OF COMMON INTEREST

            	
              32

            
	
              21.
                INFORMATION AND DATA

            	
              33

            
	
              22.
                LIABILITY AND INDEMNITY OF THE OPERATOR

            	
              34

            
	
              23.
                INSURANCE

            	
              35

            
	
              24.
                ASSIGNMENT

            	
              35

            
	
              25.
                FORCE MAJEURE

            	
              37

            
	
              26.
                NOTICE

            	
              37

            
	
              27.
                WAIVER

            	
              38

            
	
              28.
                AMENDMENTS

            	
              
                38

              

            
	
              29.
                TERM

            	
              
                38

              

            
	
              30.
                TIME OF ESSENCE

            	
              
                38

              

            
	
              31.
                SUCCESSORS AND ASSIGNS

            	
              
                38

              

            
	
              32.
                ARBITRATION

            	
              
                39

              

            
	
              33.
                GOVERNING LAW

            	
              39

            
	 	 
	
              APPENDIX
                I Accounting Procedure

            	 
	
              APPENDIX
                II Net Smelter Returns Royalty

            	 

    

    

    
      
        
        

      

      
        
        

        
          

        

      

       

    

    KETTLE
      RIVER PROPERTY

    SHAREHOLDERS'
      VENTURE AGREEMENT

    

    THIS
      AGREEMENT made the ____ day of __________, 20___;

     

    AMONG:

     

    ST.
      ELIAS MINES LTD.,
      a
      company duly incorporated under the laws of British Columbia and having its
      head
      office at Suite 604 - 700 West Pender Street, Vancouver, B.C., V6C
      1G8

     

    (hereinafter
      referred to as "St.
      Elias")

     

    OF
      THE
      FIRST PART,

     

    AND:

     

    HI
      HO SILVER RESOURCES INC.,
      a
      company duly incorporated under the laws of Canada and having an office at
      #15A,
      3045 Southcreek Road, Mississagua, Ontario, L4X 2E9

     

    (hereinafter
      called "Hi
      Ho Silver")

     

    OF
      THE
      SECOND PART,

     

    AND:

     

    HOLDCO,
      a
      company duly incorporated under the laws of  ̈,
      and
      having a registered office at  ̈

     

    (hereinafter
      called "Holdco")

     

    OF
      THE
      THIRD PART,

     

    WHEREAS:

     

    A. By
      agreement (the "Original
      Agreement")
      dated
      as of September 12, 2005, between St. Elias and Hi Ho Silver, St. Elias and
      Hi
      Ho Silver agreed to form a venture with the purpose of developing and if
      warranted, placing into commercial production, certain mineral properties
      situated in British Columbia; and

    
      
        
        

      

      
        
        

        
          

        

      

       

    

     

    B. The
      parties have agreed to give effect to the venture relationship through a
      corporate entity, and have incorporated Holdco for this purpose.

     

    1. INTERPRETATION

     

    1.01  In
      this
      Agreement, in addition to those defined individually elsewhere herein, the
      following words, phrases and expressions shall have the following
      meanings:

     

    
      
        (a)
          "Accounting
          Procedure" means
          the
          procedure attached to this Agreement as Appendix I.

      

    

     

    
      
        (b)
          "Affiliate"
          shall
          have the meaning attributed to it in the Canada
          Business Corporation Act,
          as
          amended.

      

    

     

    
      
        (c)
          "Assets"
          means
          all tangible and intangible goods, chattels, improvements or other items
          including, without limiting generality, land, buildings, and equipment
          but
          excluding the Property, acquired for or made to the Property under this
          Agreement in connection with the Mining Operations.

      

    

     

    
      
        (d)
          "Board
          of Directors" means
          the
          board of directors of Holdco elected or appointed pursuant to paragraph
          4.02.

      

    

     

    
      
        (e)
          “Completion
          Date” means
          the
          date on which it is demonstrated to the satisfaction of the Shareholders’
Committee that the preparing and equipping of the Mine for commercial production
          is complete.

      

    

     

    
      
        (f)
          "Construction"
          means
          every kind of work carried out during the Construction Period by the Operator
          in
          accordance with the Feasibility Report approved by the Shareholders’
Committee.

      

    

     

    
      
        (g)
          “Construction
          Period” means,
          unless the Production Notice is subsequently withdrawn, the period beginning
          on
          the date a Production Notice is given and ending on the Completion
          Date.

      

    

     

    
      
        (h)
          "Costs"
          means,
          except as to Prior Exploration Costs, all items of outlay and expense
          whatsoever, direct or indirect, with respect to Mining Operations, incurred
          by
          Holdco and funded by the Shareholders by way of contributions to capital
          in
          accordance with this Agreement. Without limiting generality, the following
          categories of Costs shall have the following meanings:

      

    

    
       

      (i)
"Construction
        Costs"
        means
        those Costs recorded by the Operator during the Construction Period, including,
        without limiting generality, the Operator's fee contemplated in article
        11. 

    

    
      
        
        

      

      
        2

        
          

        

      

       

    

     

    
      
        (ii)
          "Exploration
          Costs"
          means
          those Costs recorded by the Operator during the Exploration Period,
          including, without limiting generality, the Operator's fee contemplated
          in
          article 11.

      

    

     

    
      
        (iii) 
          "Mine
          Costs"
          means
          Construction Costs and Operating Costs.

      

    

     

    
      
        (iv)
          "Operating
          Costs"
          means
          those Costs incurred by Holdco subsequent to the Operative Date, including,
          without limiting generality, the Operator's fee contemplated in article
          11;
          and

      

    

     

    
      
        (v)
          "Prior
          Exploration Costs" means
          the
          deemed capital contributions of the parties under paragraph
          7.07.

      

    

     

    
      
        (i)
          "Director"
          means
          a
          member of the board of directors of Holdco.

      

    

    

    (j)  “Feasibility
      Report”
      means a
      detailed report, in form and substance sufficient for presentation to arm’s
      length institutional lenders considering project financing, showing the
      feasibility of placing any part of the Property into commercial production
      as a
      Mine and shall include a reasonable assessment of the various categories of
      ore
      reserves and their amenability to metallurgical treatment, a complete
      description of the work, equipment and supplies required to bring such part
      of
      the Property into commercial production and the estimated cost thereof, a
      description of the mining methods to be employed and a financial appraisal
      of
      the proposed operations and including at least the following: 

     

    
      	·   	
              a
                description of that part of the Property to be covered by the proposed
                Mine;

            

    

    
      
        
        

      

      
        3

        
          

        

      

       

    

    

    
      	·  	
              the
                estimated recoverable reserves of Minerals and the estimated composition
                and content thereof;

            

    

    

    
      	·  	
              the
                proposed procedure for development, mining and
                production;

            

    

    

    
      	·  	
              results
                of ore amenability treatment tests (if
                any);

            

    

    

    
      	·  	
              the
                nature and extent of the facilities proposed to be acquired, which
                may
                include mill facilities if the size, extent and location of the ore
                body
                makes such mill facilities feasible, in which event the study shall
                also
                include a preliminary design for such
                mill;

            

    

    

    
      	·  	
              the
                total costs, including capital budget, which are reasonably required
                to
                purchase, construct and install all structures, machinery and equipment
                required for the proposed Mine, including a schedule of timing of
                such
                requirements;

            

    

    

    
      	·  	
              all
                environmental impact studies and costs of
                implementation;

            

    

    

    
      	·  	
              the
                period in which it is proposed the Property shall be brought to commercial
                production; and

            

    

    

    
      	·  	
              such
                other data and information as are reasonably necessary to substantiate
                the
                existence of an ore deposit of sufficient size and grade to justify
                development of a mine, taking into account all relevant business,
                tax and
                other economic considerations including a cost comparison between
                purchasing or leasing and renting of facilities and equipment required
                for
                the operation of the Property as a
                Mine.

            

    

    
      
        
        

      

      
        4

        
          

        

      

       

    

     

    
      
        (k)
          "Joint
          Operation" shall
          have the meaning attributed to it in paragraph 2.01.

      

    

     

    
      
        (l)
          "Mine"
          means
          the workings established and Assets acquired, including, without limiting
          generality, development headings, plant and concentrator installations,
          infrastructure, housing, airport and other facilities in order to bring
          the
          Property into commercial production in accordance with the Production
          Notice.

      

    

     

    
      
        (m)
          "Minerals"
          means
          any and all ores (and concentrates derived therefrom) and minerals, precious
          and
          base, metallic and non-metallic, in, on or under the Property which may
          lawfully
          be explored for, mined and sold.

      

    

     

    
      
        (n)
          "Mining
          Operations"
          means
          every kind of work done by the Operator:

      

    

     

    
      
        (i)
          on
          or in
          respect of the Property in accordance with a Program or Production Notice;
          or

      

    

     

    
      
        (ii)
          if
          not
          provided for in a Program or Production Notice, unilaterally and in good
          faith
          to maintain the Property in good standing, to prevent waste or to otherwise
          discharge any obligation which is imposed upon it pursuant to this Agreement
          and
          in respect of which the Shareholders’ Committee has not given it
          directions;

      

    

    
    

    
      
        including,
          without limiting the generality of the foregoing, investigating, prospecting,
          exploring, developing, property maintenance, preparing reports, estimates
          and
          studies, designing, equipping, improving, surveying, construction and mining,
          processing, rehabilitation, reclamation, and environmental
          protection.

      

    

     

    
      
        (o)
          "Net
          Smelter Returns Royalty" shall
          have the meaning attributed to it in Appendix II. 

      

    

    
      
        
        

      

      
        5

        
          

        

      

       

    

     

    
      
        (p)
          "Operating
          Plan"
          means
          the annual plan of Mining Operations submitted pursuant to paragraph
          14.02.

      

    

     

    
      
        (q)
          "Operative
          Date"
          means
          the date upon which this Agreement becomes effective.

      

    

     

    
      
        (r)
          "Operator"
          means
          the party appointed as the Operator in accordance with article
          5.

      

    

     

    
      
        (s)
          "Participant"
          means
          a
          party that is contributing to Costs.

      

    

     

    
      
        (t)
          "party"
          or
"parties"
          means
          the
          parties to this Agreement and their respective successors and permitted
          assigns
          which become parties pursuant to this Agreement.

      

    

     

    
      
        (u)
          "Prime
          Rate" means
          the
          rate of interest stated by the Bank of Nova Scotia, Main Office, Vancouver,
          British Columbia, as being charged by it on Canadian Dollar demand loans
          to its
          most creditworthy domestic commercial customers.

      

    

    
    

    
      
        “Production
          Notice”
          has the
          meaning set out in paragraph 9.02.

      

    

     

    
      
        (v)
          "Program"
          means
          the
          work plan and budget of Mining Operations conducted during the Exploration
          Period and adopted pursuant to paragraph 7.02.

      

    

     

    
      
        (w)
          "Property"
          means
          the
          mineral properties that become subject to this Agreement on the Operative
          Date,
          any additional mineral properties that become part of the Property pursuant
          to
          this Agreement, the Minerals thereon, all information obtained from Mining
          Operations and those rights and benefits appurtenant to the Property that
          are
          acquired for the purpose of conducting Mining
          Operations.

      

    

     

    
      
        (x)
          "Proportionate
          Share" means
          that share which is equal to a party's percentage Share
          Participation.

      

    

    
      
        
        

      

      
        6

        
          

        

      

       

    

     

    
      
        (y)
          “Shareholders’
          Committee” means
          the
          committee established under paragraph 4.01. 

      

    

     

    
      
        (z)
          "Shares"
          means
          the
          ordinary shares of Holdco with a par value of  ̈
          each, as
          constituted as of the date hereof or as may be subsequently
          altered.

      

    

     

    
      
        (aa)
          "Share
          Participation" means
          the
          number of shares of Holdco beneficially owned by any party, expressed as
          a
          percentage interest, subject to adjustment according to article
          7.

      

    

     

    
      
        (bb)
          "Shareholder"
          means
          any
          party with a Share Participation.

      

    

     

    
      
        (cc) “Simple
          Majority” means
          a
          decision made by the Shareholders’ Committee by more than 50% of the votes
          represented and entitled to be cast at a meeting
          thereof.

      

    

     

    
      
        (dd)
          “Special
          Majority” means
          a
          decision made by the Shareholders’ Committee by more than 70% of the votes
          represented and entitled to be cast at a meeting
          thereof.

      

    

     

    
      
        (ee)
          "$"
          means
          Canadian Dollars.

      

    

     

    1.02  The
      words
"article",
      "paragraph", "subparagraph", "herein"
      and
      "hereunder" refer
      to
      this Agreement. The words
      "this Agreement"
      include
      every Schedule or Appendix attached hereto.

     

    1.03  The
      captions and the emphases of the defined terms have been inserted for
      convenience and do not define the scope of any provision.

     

    2. FORMATION
      OF THE VENTURE

     

    2.01  The
      parties hereby agree to associate and participate as Shareholders in a joint
      operation (herein called the "Joint
      Operation")
      for the
      purpose of exploring the Property and developing and placing the Property or
      a
      portion thereof in commercial production by establishing and operating a
      Mine.

    
      
        
        

      

      
        7

        
          

        

      

       

    

     

    2.02  Except
      as
      expressly provided in this Agreement, each party shall have the right
      independently to engage in and receive full benefits from business activities,
      whether or not competitive with the Joint Operation, without consulting any
      other party. The doctrines of "corporate opportunity" or "business opportunity"
      shall not be applied to any other activity, venture or operation of any party
      and no party shall have any obligation to another party with respect to any
      opportunity to acquire any assets at any time outside of the Property, or within
      the Property after the termination of this Agreement. Unless otherwise agreed
      in
      writing, no party shall have any obligation to mill, beneficiate or otherwise
      treat any Minerals or any other party's share of Minerals in any facility owned
      or controlled by such party.

     

    2.03  Each
      Shareholder shall vote or cause to be voted the Shares held or controlled by
      it
      in such a way as to fully implement the terms and conditions of this Agreement
      and shall, if any director acts contrary to the terms of this Agreement,
      forthwith use its best efforts to take or cause to be taken such steps as are
      necessary to cause such director to act in accordance with the terms and
      conditions of this Agreement and failing same, to remove such director from
      office.

     

    2.04  In
      the
      event of any conflict between the provisions of this Agreement and the Charter
      document or such other constating documents of Holdco, the provisions of this
      Agreement shall have precedence and shall govern to the extent permitted under
      applicable law. Each Shareholder agrees to vote or cause to be voted the Shares
      held or controlled by it as necessary so as to cause the Charter document or
      such other constating documents of Holdco to be amended to resolve any such
      conflict in favour of the provisions of this Agreement. It is the intent of
      the
      parties that Holdco be incorporated under a corporate statute which is
      consistent with the terms and conditions of this Agreement and which imposes
      few
      or no restrictions on the implementation hereof. The parties agreement to cause
      Holdco to be incorporated in such a jurisdiction, and to cause Holdco to be
      continued into any other jurisdiction thereafter in order to implement such
      intent.

     

    2.05  Holdco
      by
      its execution hereof hereby acknowledges that it has actual notice of the terms
      of this Agreement, consents thereto and hereby covenants with each of the
      Shareholders and the other parties that it will at all times during the
      continuance hereof be governed by this Agreement in carrying out its business
      and affairs and accordingly shall give or cause to be given such notice,
      execute, or cause to be executed such deeds, transfers and documents, and cause
      to be done all such acts, matters and things as may from time to time be
      necessary or conducive to the implementation of the terms and intent of this
      Agreement.

    
      
        
        

      

      
        8

        
          

        

      

       

    

     

    2.06  All
      share
      certificates issued by Holdco shall have typed or otherwise written thereon
      the
      following legend:

     

    "The
      Shares represented by this certificate are subject to the provisions of the
      Kettle River Property Shareholders’ Venture Agreement dated for the reference
      the __ day of______, 20___, among St. Elias Mines Ltd., Hi Ho Silver Resources
      Inc .and Holdco, which agreement contains restrictions on the right of the
      holder hereof to sell, assign, transfer, dispose of, donate, mortgage, encumber,
      charge or otherwise deal with the Shares represented hereby and notice of those
      restrictions is hereby given."

     

    2.07  Each
      person who becomes a Shareholder hereafter shall subscribe to and be bound
      by
      the terms of this Agreement and shall signify assent to the terms hereof by
      signing this Agreement or by delivering an instrument in writing duly executed
      under seal to the secretary of Holdco and to the existing Shareholders
      indicating an intention to be bound by the terms hereof and setting out an
      address for delivery hereunder.

     

    2.08  The
      provisions of this Agreement relating to the Shares shall apply mutatis
      mutandis
      to any
      shares or securities into which the Shares may be converted, changed,
      reclassified, redivided, redesignated, redeemed, subdivided or consolidated;
      to
      any shares or securities that are received by the Shareholders as a stock
      dividend or distribution payable in shares or securities of Holdco; and to
      any
      shares or securities of Holdco or of any successor to Holdco that may be
      received by the Shareholders on a reorganization, amalgamation, consolidation,
      or merger, statutory or otherwise.

     

    2.09  It
      is the
      parties’ intention that on or before the issuance of a Production Notice, all
      Mining Operations shall be conducted by Holdco through their employees,
      contractors and agents under the management, supervision and control of the
      Shareholders’ Committee (and as far as necessary, the Board of Directors) and
      that HoldCo will be a “stand-alone” mining company with sufficient staff to
      undertake directly Mining Operations supported by the management expertise
      of
      the Shareholders’ Committee.

    
      
        
        

      

      
        9

        
          

        

      

       

    

     

    3. SHARE
      PARTICIPATIONS

     

    3.01  Except
      as
      otherwise provided herein, the parties shall bear all Costs and all liabilities
      arising under this Agreement in proportion to their respective Share
      Participations.

     

    3.02  On
      the
      Operative Date the respective Share Participations of the parties shall be
      as
      follows:

     

    a. If,
      pursuant to the Original Agreement, the First Option alone has been
      exercised:

    

    
      	
              Party

            	 	
              Share
                Participation

            	 
	
              St.
                Elias

            	 	 	
              49

            	
              %

            
	
              Hi
                Ho Silver

            	 	 	
              51

            	
              %

            

    

     

    
      
        b.
          If,
          pursuant to the Original Agreement, the First Option and the Second Option
          have
          been exercised:

      

    

     

    
      	
              Party

            	 	
              Share
                Participation

            	 
	
              St.
                Elias 

            	 	 	
              30

            	
              %

            
	
              Hi
                Ho Silver

            	 	 	
              70

            	
              %

            

    

     

    4. SHAREHOLDERS’
      COMMITTEE AND BOARD OF DIRECTORS

     

    4.01  Except
      as
      herein otherwise provided, the Shareholders’ Committee shall make all decisions
      in respect of Mining Operations. Each party shall, forthwith following the
      Operative Date, appoint one representative and one alternate representative
      to
      the Shareholders’ Committee. The alternate representative may act for a party’s
      representative in his absence.

    

    4.02  Notwithstanding
      the appointment or election of the Board of Directors, the parties will cause
      Holdco, to the greatest extent permitted by law, to be managed by the
      Shareholders’ Committee. The Board of Directors shall not act upon or support or
      implement any proposals put forward at a meeting of the Board of Directors
      and
      which requires the approval of the Shareholders’ Committee unless that approval
      has first been obtained.

    
      
        
        

      

      
        10

        
          

        

      

       

    

    

    4.03  The
      Operator shall call a Shareholders’ Committee meeting at least once every 12
      months, and, in any event within 14 days of being requested to do so by any
      representative to the Shareholders’ Committee.

    

    4.04  The
      Operator shall give notice, specifying the time and place of, and the agenda
      for, the meeting, to all representatives at least seven days before the time
      appointed for the meeting. Unless otherwise agreed to by the Shareholders’
Committee, all meetings of the Shareholders’ Committee shall be held in
      Vancouver, British Columbia.

    

    4.05  Notice
      of
      a meeting shall not be required if representatives of all the parties are
      present and unanimously agree upon the agenda.

    

    4.06  A
      quorum
      for any Shareholders’
      Committee meeting shall be present if the representative or all the
      representatives of parties holding Share Participations of not less than 50
      percent and one nominee of each of St. Elias and Hi Ho Silver are present.
      If a
      quorum is present at the meeting, the Shareholders’ Committee shall be competent
      to exercise all of the authorities, powers and discretions herein bestowed
      upon
      it hereunder. The Shareholders’ Committee shall not transact any business at a
      meeting unless a quorum is present at the commencement of the meeting. If a
      quorum is not present within 30 minutes following the time appointed for the
      commencement of the Shareholders’ Committee meeting, the meeting shall be
      automatically re-scheduled for the same time of day and at the same place five
      business days later, and the Operator shall be under no obligation to give
      any
      party notice thereof. A quorum shall be deemed to be present at such
      re-scheduled meeting for all purposes under this Agreement if at least one
      representative is present, and a party or parties holding a Share Participation
      of not less than 35% is or are represented. A representative may attend and
      vote
      at a meeting of the Shareholders’ Committee by telephone conference call in
      which each representative may hear, and be heard by, the other
      representatives.

    

    4.07  The
      Shareholders’ Committee shall decide every question submitted to it by a vote
      with each representative being entitled to cast that number of votes which
      is
      equal to its party's Share Participation. Except as otherwise set out in this
      Agreement, the Shareholders’ Committee shall make decisions by Simple Majority.
      In the event of a tied vote, the chairman shall have a casting vote in addition
      to the votes to which the chairman is entitled to cast as the representative
      of
      a party.

    
      
        
        

      

      
        11

        
          

        

      

       

    

    

    4.08  The
      representative and alternate representative of the Operator shall be the
      chairman and secretary, respectively, of the Shareholders’ Committee meeting.
      The chairman shall be empowered to conduct all meetings of the Shareholders’
Committee

    

    4.09  The
      secretary of the Shareholders’ Committee meeting shall take minutes of that
      meeting and circulate copies thereof to each representative within 15 days
      of
      the conclusion of a meeting. The Shareholders’ Committee will approve or suggest
      corrections to the minutes within 30 days of receipt, failing which the minutes
      will be deemed to have been approved by the Shareholders’ Committee as written.
      If suggested corrections to minutes are submitted by a member of the
      Shareholders’ Committee within the time provided, the approval, and if
      appropriate the correction, of the minutes will be the first order of business
      of the Shareholders’ Committee at its next succeeding meeting.

    

    4.10  The
      Shareholders’ Committee may make decisions by obtaining the consent in writing
      of the representatives of all parties. Any decision so made shall be as valid
      as
      a decision made at a duly called and held meeting of the Shareholders’
Committee.

    

    4.11  Shareholders’
      Committee decisions made in accordance with this Agreement shall be binding
      upon
      all of the parties.

    

    4.12  Each
      party shall bear the expenses incurred by its representatives and alternate
      representatives in attending meetings of the Shareholders’
Committee.

    

    4.13  The
      Shareholders’ Committee may, by agreement of the representatives of all the
      parties, establish such other rules of procedure, not inconsistent with this
      Agreement, as the Shareholders’ Committee deems fit.

    

    4.14  Reference
      in this section to the "parties" shall apply during the Exploration Period.
      After the date of a Production Notice this section shall be read as if the
      word
      "Participant" appeared wherever the word "party" appears.

    
      
        
        

      

      
        12

        
          

        

      

       

    

     

    4.15  The
      parties agree that Holdco shall not be permitted to undertake any of the
      following activities without a resolution of the Shareholders’ Committee
      approved by a Special Majority:

     

    
      
        (a)
          a
          change
          in the number or composition of the Board of Directors or the Shareholders’
Committee from that set forth in this Agreement;

      

    

     

    
      
        (b)
          any
          delegation of any powers of the Board of Directors or the Shareholders’
Committee, except as may be permitted by this
          Agreement;

      

    

     

    
      
        (c)
          the
          change of any dividend or distribution policy;

      

    

     

    
      
        (d)
          the
          determination of any salaries or bonuses or fees to directors of Holdco,
          representatives serving on the Shareholders’ Committee and non-fulltime
          employees who are associated with any party;

      

    

     

    
      
        (e)
          the
          approval of a Feasibility Report or any material amendment or supplement
          of a
          Feasibility Report;

      

    

     

    
      
        (f)
          a
          transaction between Holdco and any party or an Affiliate of any party which
          is
          not on ordinary commercial terms or which in any event is for an amount
          in
          excess of $125,000 (except creation of and payments under loans to finance
          Mine
          Costs made and approved by the Shareholders’ Committee for any of the purposes
          contemplated by this Agreement), in which case the approval required by
          this
          paragraph for any such transaction shall have been given by the other parties
          then holding 75% of the outstanding shares remaining after the deduction
          of the
          Share Participation held by the subject party;

      

    

     

    
      
        (g)
          the
          settlement of any litigation providing for the payment to or payment by
          Holdco
          of an amount greater than $100,000;

      

    

     

    
      
        (h)
          following
          the commencement of the Construction Period, the permanent termination
          of Mining
          Operations unless Mining Operations have been suspended for 49 consecutive
          months;

      

    

    
      
        
        

      

      
        13

        
          

        

      

       

    

     

    
      
        (i)
          the
          temporary suspension of Mining Operation, unless the cash operating costs
          of the
          metal concentrates and ore (net of other metal credits) exceed 80% of the
          weighted average metal concentrates and ore price realized by Holdco for
          final
          settlements on the sale by Holdco of its metal concentrates and ore during
          a
          four month period calculated at any time within 30 days of the determination,
          in
          which event the determination of a temporary suspension will be by Simple
          Majority;

      

    

     

    
      
        (j)
          the
          issuance of any additional Shares, the receipt of any loans or the issuance
          or
          the issuance of any other securities of Holdco, except as provided by this
          Agreement; and

      

    

     

    
      
        (k)
          the
          incurring of indebtedness of Holdco or the creation of charges or encumbrances
          in respect of its assets to secure such indebtedness, except for the incurring
          of indebtedness and the creation of encumbrances in respect
          of:

      

    

     

    (i) the
      financing or refinancing of Mine Costs; and

     

    
      
        (ii)
          working
          capital required for Mining Operations following the Completion Date.

      

    

     

    4.16  The
      Parties agree that Holdco shall not be permitted to undertake any of the
      following activities without a resolution of the Shareholders’ Committee
      approved by 100% of the Shares represented and entitled to be cast at a meeting
      thereof:

     

    
      
        (a)
          the
          acquisition by Holdco of any assets other than those relating to the Property
          except as contemplated by this Agreement or a Feasibility Report approved
          pursuant to this Agreement;

      

    

     

    
      
        (b)
          a
          disposition of any assets outside the ordinary course of business, except
          as
          contemplated by this Agreement or a Feasibility Report approved pursuant
          to this
          Agreement;

      

    

     

    
      
        (c)
          the
          conduct of any business other than the conduct of Mining
          Operations;

      

    

     

    
      
        (d)
          any
          action relating to the winding up of Holdco;

      

    

    
      
        
        

      

      
        14

        
          

        

      

       

    

     

    
      
        (e)
          prior
          to
          the Completion Date, the inventorying of the Property for any fiscal year
          of
          Holdco; and

      

    

     

    
      
        (f)
          the
          amendment of the Articles or By-Laws of Holdco.

      

    

     

    4.17  The
      Operator will cause to be prepared and promptly submitted to the members of
      the
      Shareholders’ Committee appropriate minutes of each meeting of the Shareholders’
Committee. The Shareholders’ Committee will approve or suggest corrections to
      the minutes within thirty (30) days of receipt, failing which the minutes will
      be deemed to have been approved by the Shareholders’ Committee as written. In
      the event that suggested corrections to minutes are submitted by a member of
      the
      Shareholders’ Committee within the time provided, the approval, and if
      appropriate, the correction of the minutes will be the first order of business
      of the Shareholders’ Committee at its next succeeding meeting. The Operator
      shall have the responsibility to maintain the corporate records of
      Holdco.

     

    4.18  Notwithstanding
      the By-Laws of Holdco, any properly constituted meeting of the Shareholders’
Committee shall be deemed to be a properly constituted Shareholders’ meeting for
      the purposes of this Agreement and the By-Laws of Holdco.

     

    4.19  If
      any
      duly authorized representative of any party fails to vote on any matter when
      required to do so by the provisions of this Agreement, then the party whose
      representative is so failing to perform shall take all necessary measures to
      replace such representative.

     

    4.20  Each
      Shareholder shall vote or cause to be voted the Shares held or controlled by
      it
      so that:

     

    
      
        (a)
          if
          Hi Ho
          Silver has a Share Participation of 50% or greater, the Board of Directors
          shall
          be comprised of five members, three of which shall be nominated by Hi Ho
          Silver
          and two of which shall be nominated by St. Elias;

      

    

     

    
      
        (b)
          if
          Hi Ho
          Silver has a Share Participation of less than 50%, the Board of directors
          shall
          be comprised of five members, three of which shall be nominated by St.
          Elias and
          two of which shall be nominated by Hi Ho Silver;

      

    

     

    
      
        (c)
          if
          the
          laws of the jurisdiction of incorporation of Holdco require the Board of
          Directors to have one or more directors resident in that jurisdiction,
          then each
          of St. Elias and Hi Ho Silver shall be entitled to appoint or elect such
          directors in the above proportions; and

      

    

    
      
        
        

      

      
        15

        
          

        

      

       

    

     

    
      
        (d)
          the
          President and Secretary of Holdco shall be appointed by the Board of
          Directors.

      

    

     

    4.21  The
      President shall call a Board of Directors meeting at least once every 12 months,
      and, in any event, within 14 days of being requested to do so by any
      director.

     

    4.22  The
      President shall give notice, specifying the time and place of, and the agenda
      for, the meeting, to all directors at least seven days before the time appointed
      for the meeting, or such longer period as may be required by the constating
      documents of Holdco.

     

    4.23  Notice
      of
      a meeting shall not be required if all directors are present and unanimously
      agree upon the agenda.

     

    4.24  A
      quorum
      for any Board of Directors meeting shall be present if there is a majority
      of
      the directors present, and at least one nominee of each of Hi Ho Silver and
      St.
      Elias. If a quorum is present at the meeting, the Board of Directors shall
      be
      competent to exercise all of the authorities, powers and discretions herein
      bestowed upon it hereunder. The Board of Directors shall not transact any
      business at a meeting unless a quorum is present at the commencement of the
      meeting. If a quorum is not present within 30 minutes following the time
      appointed for the commencement of the Board of Directors meeting, the meeting
      shall be automatically re-scheduled for the same time of day and at the same
      place five business days later, and the Operator shall be under no obligation
      to
      give any party notice thereof. A quorum shall be deemed to be present at such
      re-scheduled meeting for all purposes under this Agreement if at least a
      majority of directors is present. A director shall be entitled to attend a
      meeting of the directors by telephone conference call or by any other means
      of
      telecommunication which enables a director to hear, and to be heard by, each
      of
      the other directors present, and if a director does attend by such means, that
      director shall be deemed to be present for the purposes of determining the
      quorum for such meeting.

     

    4.25  The
      Board
      of Directors shall decide every question submitted to it by a majority vote.
      In
      the event of a tied vote, the chairman shall have a casting vote in addition
      to
      the votes to which the chairman is entitled to cast in the capacity of a
      director. For so long as the two Participants have equal Share Participations,
      the position of chairman for each meeting shall alternate between a director
      nominated by Hi Ho Silver and a director nominated by St. Elias. If the two
      Participants have unequal Share Participations, the position of chairman shall
      be filled by a nominee of the Participant with the larger Share
      Participation.

    
      
        
        

      

      
        16

        
          

        

      

       

    

     

    4.26  The
      directors present at a Board of Directors' meeting shall appoint the chairman
      and secretary of the Board of Directors' meeting.

     

    4.27  The
      secretary of the Board of Directors' meeting shall take minutes of that meeting
      and circulate copies thereof to each director.

     

    4.28  The
      Board
      of Directors may make decisions by obtaining the consent in writing of all
      directors. Any decision so made shall be as valid as a decision made at a duly
      called and held meeting of the Board of Directors.

     

    4.29  Board
      of
      Directors decisions made in accordance with this Agreement shall be binding
      upon
      all of the parties.

     

    4.30  Each
      party shall bear the expenses incurred by its directors in attending meetings
      of
      the Board of Directors.

     

    4.31  Except
      as
      contemplated by this Agreement or with the unanimous consent of the
      Shareholders, the directors shall not purport to or cause Holdco
      to:

     

    (a) modify
      the corporate period or duration of Holdco; or

     

    (b) engage
      in
      any business other than that contemplated by this Agreement.

     

    5. OPERATOR

     

    5.01  Hi
      Ho
      Silver shall act as Operator for so long as its Share Participation is 50%
      or
      more. If Hi Ho Silvers Share Participation is less than 50%, the party with
      the
      highest Share Participation shall be the Operator.

    
      
        
        

      

      
        17

        
          

        

      

       

    

     

    5.02  The
      party
      acting as Operator may resign as Operator on at least 90 days' notice to all
      the
      parties. The Shareholders’ Committee shall thereupon select another party to be
      Operator upon the 90th day after receipt of the Operator's notice of
      resignation;

     

    5.03  The
      new
      Operator shall assume all of the rights, duties, liabilities and status of
      the
      previous Operator as provided in this Agreement. The new Operator shall have
      no
      obligation to hire any employees of the former Operator .

     

    5.04  Upon
      ceasing to be Operator, the former Operator shall forthwith deliver to the
      person nominated for that purpose by the Shareholders’ Committee, the custody of
      all Assets, Property, books, records, and other property both real and personal
      relating to this Agreement. If the Operator resigns and no other party consents
      to act as Operator, the Joint Operation shall terminate and the provisions
      of
      article 18 shall apply mutatis
      mutandis.

     

    6. RIGHTS,
      DUTIES AND STATUS OF OPERATOR

     

    6.01  The
      Operator in its operations hereunder shall be deemed to be an independent
      contractor. The Operator shall not act or hold itself out as agent for any
      of
      the Shareholders or Holdco nor shall it make any commitments on their individual
      behalf unless specifically permitted by this Agreement or directed in writing
      by
      a Shareholder.

     

    6.02  Subject
      to any specific provision of this Agreement and subject to it having the right
      to reject any direction on reasonable grounds by virtue of its status as an
      independent contractor, the Operator shall perform its duties hereunder in
      accordance with the directions of the Shareholders’ Committee and in accordance
      with this Agreement.

     

    6.03  The
      Operator shall manage and carry out such Mining Operations as the Shareholders’
Committee may direct and in connection therewith shall, in advance if reasonably
      possible, notify the Shareholders’ Committee of any change in Mining Operations
      which the Operator considers material and if it is not reasonably possible,
      the
      Operator shall notify the Shareholders’ Committee as soon thereafter as is
      reasonably possible.

     

    6.04  The
      Operator shall have the sole and exclusive right and authority to manage and
      carry out all Mining Operations and to incur the Costs required for that
      purpose. In so doing the Operator shall, unless it obtains the approval of
      the
      Shareholders’ Committee:

     

    
      
        (a)
          comply
          with the provisions of all agreements or instruments of title under which
          the
          Property or Assets are held;

      

    

    
      
        
        

      

      
        18

        
          

        

      

       

    

     

    
      
        (b)
          pay
          all
          Costs properly incurred promptly as and when due;

      

    

     

    
      
        (c)
          keep
          the
          Property and Assets free of all liens and encumbrances (other than those,
          if
          any, in effect on the Operative Date, those the creation of which is permitted
          pursuant to this Agreement, or builder's or mechanic's liens) arising out
          of the
          Mining Operations and, in the event of any lien being filed as aforesaid,
          proceed with diligence to contest or discharge the
          same;

      

    

     

    
      
        (d)
          prosecute
          claims or, where a defence is available, defend litigation arising out
          of the
          Mining Operations, provided that any Participant may join in the prosecution
          or
          defence at its own expense;

      

    

     

    
      
        (e)
          pay
          such
          rentals, taxes or other payments and do all such other things as may be
          necessary to maintain the Property in good standing, including, without
          limiting
          generality, staking and restaking mining claims and applying for licenses,
          leases, grants, concessions, permits, patents and other rights to and interests
          in the Minerals;

      

    

     

    
      
        (f)
          maintain
          accounts in accordance with the Accounting Procedure, provided that the
          judgment
          of the Operator as to matters related to the accounting, for which provision
          is
          not made in the Accounting Procedure, shall govern if the Operator's accounting
          practices are in accordance generally accepted accounting principles in
          the
          Canadian mining industry ("GAAP"); and

      

    

     

    
      
        (g)
          perform
          its duties and obligations hereunder in a sound and workmanlike manner,
          in
          accordance with sound mining and engineering practices and in substantial
          compliance with all applicable laws, by-laws, ordinances, rules and regulations
          and this Agreement.

      

    

     

    
      
        (h)
          prepare
          and deliver to each Participant, quarterly during the Exploration Period
          and
          bi-monthly during the Construction Period and thereafter, a summary progress
          report for the Mining Operations during the subject period, together with
          a
          summary of the Costs incurred, and in sufficient detail for each Participant
          to
          reasonably assess the progress of Mining Operations, the results thereof,
          and
          the Costs incurred.

      

    

    
      
        
        

      

      
        19

        
          

        

      

       

    

     

    7. EXPLORATION
      PROGRAMS

     

    7.01  Until
      such time as the Shareholders’ Committee has adopted a Feasibility Report
      pursuant to paragraph 9.02, the Operator shall prepare draft Programs for
      consideration by the Shareholders’ Committee. The draft Program shall contain a
      statement in reasonable detail of the proposed Mining Operations and estimates
      of all Exploration Costs to be incurred. Unless otherwise determined by the
      Shareholders’ Committee, each draft Program shall cover a calendar year, and
      shall be submitted to the Shareholders’ Committee no later than October 31 of
      each year.

     

    7.02  The
      Shareholders’ Committee shall review the Program prepared and, if it deems fit,
      adopt the Program with such modifications, if any, as the Shareholders’
Committee deems necessary. The Operator shall be entitled to an allowance for
      a
      Cost overrun of 10 percent in addition to any budgeted Exploration Costs and
      any
      Costs so incurred shall be deemed to be included in the Program, as
      adopted.

     

    7.03  The
      Operator shall be entitled to include in the Program the reasonably estimated
      costs of satisfying continuing obligations that may remain after this Agreement
      terminates, in excess of amounts actually expended. Such continuing obligations
      are those that are or will be incurred as a result of the Joint Operation and
      shall include such things as monitoring, stabilization, reclamation or
      restoration obligations, severance and other employee benefit costs and all
      other obligations incurred or imposed as a result of the Joint Operation which
      continue or arise after termination of this Agreement and settlement of all
      accounts. The amount accrued from time to time for the satisfaction of such
      continuing obligations shall be classified as Costs hereunder but shall be
      segregated into a separate account.

     

    7.04  The
      Operator shall forthwith submit the adopted Program to the parties. Each party
      may, within 30 days of receipt of the Program, give notice to the Operator
      committing to contribute its Proportionate Share of the Costs for that Program.
      A party which fails to give that notice within the 30 day period shall be deemed
      to have elected not to contribute.

    
      
        
        

      

      
        20

        
          

        

      

       

    

     

    7.05  If
      the
      Operator fails to submit a draft Program to the Shareholders’ Committee by the
      date set out in subparagraph 7.01 hereof, any Participant may submit a draft
      Program to the Shareholders’ Committee within 15 days of such date. The draft
      Program shall contain a statement in reasonable detail of the proposed Mining
      Operations and estimates of all Exploration Costs to be incurred. The
      Shareholders’ Committee shall review the non-Operator's Program and, if it deems
      fit, adopt the Program with such modifications, if any, as the Shareholders’
Committee deems necessary. The representative of the Operator on the
      Shareholders’ Committee shall not be entitled to vote with respect to the
      modification or adoption of the non-Operator's Program. A non-Operator's Program
      adopted pursuant to the foregoing procedure shall be deemed to be an adopted
      Program for all purposes under this Agreement.

     

    7.06  If
      any
      party elected not to contribute to a Program, the amounts to be contributed
      by
      the parties who elected to contribute shall be increased pro rata,
      subject
      to the right of any of them to elect not to contribute more than the amount
      initially committed pursuant to paragraph 7.04 hereof.

     

    7.07  If
      a
      party elected not to contribute to the Costs of any Program the Share
      Participation of that party shall be decreased and the Share Participation
      of
      each Participant contributing in excess of its Proportionate Share of the Costs
      shall be increased so that at all times the Share Participation of each party
      will be that percentage which is equivalent to its Costs and Prior Exploration
      Costs expressed as a percentage of the aggregate Costs and Prior Exploration
      Costs of all parties. A Shareholder whose Share Participation has been reduced
      shall be entitled to receive details of and to contribute to future Programs.
      On
      the Operative Date, the parties' respective Share Participations and Prior
      Exploration Costs shall be deemed to be as follows:

     

    a. If,
      pursuant to the Original Agreement, the First Option alone has been
      exercised:

     

    
      	
              Prior
                Exploration Costs

            	 	
              Share
                Participation

            	 
	
              Hi
                Ho Silver

            	 	
              $

            	
              2,000,000

            	 	 	
              51

            	
              %

            
	
              St.
                Elias

            	 	
              $

            	
              1,921,568

            	 	 	
              49

            	
              %

            

    

    

    
      
        
        

      

      
        21

        
          

        

      

       

    

     

    
      
        b.
          If,
          pursuant to the Original Agreement, the First Option and the Second Option
          have
          been exercised:

      

    

     

    
      	
              Prior
                Exploration Costs

            	 	
              Share
                Participation

            	 
	
              Hi
                Ho Silver

            	 	
              $

            	
              5,000,000

            	 	 	
              70

            	
              %

            
	
              St.
                Elias

            	 	
              $

            	
              2,142,857

            	 	 	
              30

            	
              %

            

    

     

    In
      the
      event of an adjustment of Share Participations pursuant to this paragraph 7.07,
      the reduction in a party's Share Participation shall take place by a redemption
      or repurchase, or surrender (without consideration) of Shares, and the
      corresponding increase in the other party's Share Participation shall take
      place
      by an issuance of Shares, or in such other equitable manner as may be achieved
      in accordance with the charter documents of Holdco, and in compliance with
      all
      applicable laws.

     

    7.08  The
      Operator shall be entitled to invoice each Participant:

     

    
      
        (a)
          no
          more
          frequently than monthly, for its Proportionate Share of Costs incurred
          and paid
          by the Operator; or

      

    

     

    
      
        (b)
          no
          more
          than 30 days in advance of requirements, for an advance of that Participant's
          Proportionate Share of Costs.

      

    

     

    Each
      invoice shall be signed by some responsible official of the
      Operator.

     

    Each
      Participant shall pay to the Operator the amount invoiced, within 30 days of
      receipt of the invoice. If the payment or advance requested is not so made,
      the
      amount of the payment or advance shall bear interest calculated monthly not
      in
      advance of the 30th day after the date of receipt of the invoice thereof by
      the
      Participant at a rate equivalent to the weighted average Prime Rate for the
      month plus four percent until paid. If a Participant protests the correctness
      of
      an invoice it shall nevertheless be required to make the payment.

     

    7.09  If
      any
      Participant elects to contribute to a Program and then fails to pay its
      Proportionate Share within the 30-day period referred to in paragraph 7.08
      the
      Operator may, by notice, demand payment. If no payment, with accrued interest,
      is made within the period of 30 days next succeeding the receipt of the demand
      notice, that Participant shall be deemed to have forfeited all its right and
      Share Participation under this Agreement to the other Participant, and if more
      than one then in proportion to their respective Share
      Participations.

    
      
        
        

      

      
        22

        
          

        

      

       

    

     

    7.10  The
      Operator shall expend all monies advanced by a Participant rateably with the
      advances of the other Participants. If the Operator suspends or prematurely
      terminates a Program, any funds advanced by a Participant in excess of that
      Participant's Proportionate Share of Costs incurred prior to the suspension
      or
      premature termination shall be refunded forthwith.

     

    7.11  If
      any
      Program is altered, suspended or terminated prematurely so that the Costs
      incurred on that Program as altered, suspended or terminated are less than
      80
      percent of the Costs originally proposed, any party which elected not to
      contribute to that Program shall be given notice of the alteration, suspension
      or termination by the Operator and shall be entitled to contribute its
      Proportionate Share of the Costs incurred on that Program by payment thereof
      to
      the Operator within 30 days after receipt of the notice. If payment is not
      made
      by that party within the 30 days aforesaid it shall forfeit its right to
      contribute to that Program without a demand for payment being required to be
      made thereafter by the Operator.

     

    7.12  If
      the
      effect of the application of paragraph 7.07 is to reduce the Share Participation
      of any party to less than 10% such party shall be deemed to have assigned and
      conveyed its Share Participation to the Participants, if more than one, then
      in
      proportion to their respective Share Participations, and shall be entitled
      to
      receive as its sole remuneration and benefit in consideration of that assignment
      and conveyance, the Net Smelter Returns Royalty. If more than one party is
      entitled to receive the Net Smelter Returns Royalty pursuant to this paragraph
      and subparagraph 10.02(b), then the Net Smelter Returns Royalty shall be
      allocated and paid to them in proportion to their respective Costs
      incurred.

     

    8. FEASIBILITY
      REPORT

     

    8.01  A
      Feasibility Report shall only be prepared with the approval of the Shareholders’
Committee. The Operator shall provide copies of the completed Feasibility Report
      to each of the parties forthwith upon receipt.

    
      
        
        

      

      
        23

        
          

        

      

       

    

     

    8.02  The
      parties shall meet at reasonable intervals and times to review the Feasibility
      Report and discuss whether the establishing and bringing of a Mine into
      commercial production in conformity with the Feasibility Report is feasible
      or
      desirable.

     

    9. PRODUCTION
      NOTICE

     

    9.01  The
      Operator shall call a Shareholders’ Committee meeting to consider the
      Feasibility Report for a date no sooner than six months after the Feasibility
      Report was provided to each of the parties.

     

    9.02  The
      Shareholders’ Committee shall consider the Feasibility Report prepared and may
      approve the Feasibility Report, with such modifications, if any, as it considers
      necessary or desirable. If a Feasibility Report is approved as aforesaid the
      Shareholders’ Committee shall forthwith cause a Production Notice to be given to
      each of the parties by the Operator stating that the Shareholders’ Committee
      intends to establish and bring a Mine into production in conformity with the
      Feasibility Report as so approved.

     

    10. ELECTION
      TO CONTRIBUTE

     

    10.01  Each
      party with a Share Participation may, within 120 days of the receipt of the
      Production Notice, give the Operator notice committing to contribute its share
      of Mine Costs.

     

    10.02  If
      any
      party fails to give notice pursuant to paragraph 10.01, that party shall forfeit
      the right to contribute to Mine Costs and shall suffer dilution and conversion
      of its Share Participation as provided in this paragraph. Those parties which
      elected to contribute as aforesaid may thereupon elect to increase their
      contribution to the Mine Costs, if more than one party then in proportion to
      their respective Share Participations, by the amount which any party has
      declined to contribute. If elections are made so that Mine Costs are fully
      committed:

     

    
      
        (a)
          the
          Share
          Participation of each Participant shall be increased and that of each
          non-Participant shall be decreased so that the Share Participation of each
          party
          at all times is that percentage which is equivalent to

      

    

     

    
      
        (i)
          the
          sum
          of its Exploration Costs, its Prior Exploration Costs and its contribution
          to
          Mine Costs;

      

    

    
      
        
        

      

      
        24

        
          

        

      

       

    

     

    divided
      by

     

    
      
        (ii)
          the
          sum
          of the total Exploration Costs, total Prior Exploration Costs and the total
          contribution to Mine Costs of all the parties;

      

    

     

    multiplied
      by

     

    
      
        (iii)
          100;

      

    

     

    
      
        (b)
          each
          non-Participant shall then be deemed to have assigned and conveyed its
          Share
          Participation to the Participants, if more than one then in proportion
          to their
          respective Share Participations, and shall be entitled to receive as its
          sole
          remuneration and benefit in consideration of that assignment and conveyance,
          the
          Net Smelter Returns Royalty;

      

    

     

    
      
        (c)
          the
          Operator shall calculate and cause Holdco to pay to each non-Participant
          the Net
          Smelter Returns Royalty derived from the Property in the manner provided
          in
          Appendix II; and 

      

    

     

    
      
        (d)
          notwithstanding
          the provisions of subparagraphs 10.02(b) and (c), if the effect of the
          application of subparagraph 10.02(a) reduces any party's Share Participation
          to
          less than one percent it shall forfeit its Share Participation to the
          Participants, if more than one then in proportion to their respective Share
          Participations, and that party shall have no further right or interest
          under
          this Agreement. 

      

    

     

    10.03  If,
      after
      the operation of paragraph 10.02, Mine Costs are not fully committed the
      Production Notice shall be deemed to be withdrawn.

     

    11. OPERATOR'S
      FEE

     

    11.01  The
      Operator may charge the following sums in return for its head office overhead
      functions which are not charged directly:

     

    
      
        (a)
          with
          respect to Programs:

      

    

     

    
      
        (i)
          two
          percent for each individual contract which includes an overhead charge
          by the
          party contracted;

      

    

    
      
        
        

      

      
        25

        
          

        

      

       

    

     

    
      
        (ii)
          five
          percent for each individual contract which exceeds $50,000 and is not subject
          to
          clause 11.01(a)(i) hereof;

      

    

     

    
      
        (iii)
          10
          percent of all other Costs not included in clauses 11.01(a)(i) and
          11.01(a)(ii).

      

    

     

    
      
        (b)
          with
          respect to Mine development and Construction: three percent of all other
          such
          Costs;

      

    

     

    (c) subsequent
      to the Completion Date: two percent of all Operating Costs.

     

    12. MINE
      FINANCING

     

    12.01  The
      contributions of the Participants toward the Costs shall be individually and
      separately provided by them as capital contributions to Holdco.

     

    12.02  Subject
      to the prior right of Holdco, as determined by the Shareholders’ Committee, to
      encumber the Share Participation of each Participant in order to secure
      financing or refinancing of Mine Costs, any party may pledge, mortgage, charge
      or otherwise encumber all, and not less than all, of its Share Participation
      in
      order to secure moneys borrowed and used by that party for the sole purpose
      of
      enabling it to finance its participation under this Agreement or in order to
      secure by way of floating charge as a part of the general corporate assets
      of
      that party moneys borrowed for its general corporate purposes, provided that
      the
      pledgee, mortgagee, holder of the charge or encumbrance (in this subsection
      called the "Chargee")
      shall
      hold the same subject to the provisions of this Agreement and that if the
      Chargee realizes upon any of its security it will comply with this Agreement.
      The Agreement between the party hereto, as borrower, and the Chargee shall
      contain specific provisions to the same effect as the provisions of this
      paragraph, and evidence thereof shall first be provided to all other parties
      hereto.

    
      
        
        

      

      
        26

        
          

        

      

       

    

     

    13. CONSTRUCTION

     

    13.01  Subject
      to paragraph 9.02 the Shareholders’ Committee shall cause the Operator to, and
      the Operator shall, proceed with Construction with all reasonable dispatch
      after
      a Production Notice has been given. Construction shall be substantially in
      accordance with the Feasibility Report subject to any variations proposed in
      the
      Production Notice, and subject also to the right of the Shareholders’ Committee
      to cause such other reasonable variations in Construction to be made as the
      Shareholders’ Committee deems advisable.

     

    14. OPERATION
      OF THE MINE

     

    14.01  Commencing
      on the Completion Date, all Mining Operations shall be planned and conducted
      and
      all estimates, reports and statements shall be prepared and made on the basis
      of
      a calendar year.

     

    14.02  With
      the
      exception of the year in which the Completion Date occurs, an Operating Plan
      for
      each calendar year shall be submitted by the Operator to the Participants not
      later than September 30 in the year immediately preceding the calendar year
      to
      which the Operating Plan relates.  Each Operating Plan shall contain the
      following:

     

    
      
        (a)
          a
          plan
          for the proposed Mining Operations;

      

    

     

    
      
        (b)
          a
          detailed estimate of all Mine 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 metals 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 that Participant to discuss the Operating Plan and shall
          provide
          such additional or supplemental information as that Participant may reasonably
          require with respect thereto.

      

    

     

    14.03  The
      Shareholders’ Committee shall adopt each Operating Plan, with such changes as it
      deems necessary, by October 31 in the year immediately preceding the calendar
      year to which the Operating Plan relates; provided, however, that the
      Shareholders’ Committee may from time to time and any time amend any Operating
      Plan.

    
      
        
        

      

      
        27

        
          

        

      

       

    

     

    14.04  The
      Operator shall be entitled to include in the estimate of Mine Costs referred
      to
      in subparagraph 14.02(b) hereof the reasonably estimated costs of satisfying
      continuing obligations that may remain after this Agreement terminates, in
      excess of amounts actually expended. Such continuing obligations are or will
      be
      incurred as a result of the Joint Operation and shall include such things as
      monitoring, stabilization, reclamation or restoration obligations, severance
      and
      other employee benefit costs and all other obligation incurred or imposed as
      a
      result of the Joint Operation which continue or arise after termination of
      this
      Agreement and settlement of all accounts. The amount accrued from time to time
      for the satisfaction of such continuing obligations shall be classified as
      Costs
      hereunder but shall be segregated into a separate account.

     

    15. PAYMENT
      OF MINE COSTS

     

    15.01  The
      Operator may invoice each Participant, from time to time, for that Participant's
      Proportionate Share of Mine Costs incurred to the date of the invoice, or at
      the
      beginning of each month for an advance equal to that Participant's Proportionate
      Share of the estimated cash disbursements to be made during the month. Each
      Participant shall pay its Proportionate Share of the Mine Costs or the estimated
      cash disbursements aforesaid to the Operator within 30 days after receipt of
      the
      invoice. If the payment or advance requested is not so made, the amount of
      the
      payment or advance shall bear interest calculated monthly not in advance from
      the 30th day after the date of receipt of the invoice thereof by that
      Participant at a rate equivalent to the weighted average Prime Rate for the
      month plus two percent until paid. The Operator shall have a lien on each
      Participant's Share Participation in order to secure that payment or advance
      together with interest which has accrued thereon.

     

    15.02  If
      any
      Participant fails to pay an invoice contemplated in paragraph 15.01 within
      the
      30-day period aforesaid, the Operator may, by notice, demand payment. If no
      payment is made within 30 days of the Operator's demand notice, the Operator
      may, without limiting its other rights at law, enforce the lien created by
      paragraph 15.01 by taking possession of all or any part of that Participant's
      Share Participation. The Operator may sell and dispose of the Share
      Participation which it has so taken into its possession by:

     

    
      
        (a)
          first
          offering that Share Participation to the other Participants, if more than
          one
          then in proportion to the respective Share Participations of the Participants
          who wish to accept that offer, for that price which is the fair market
          value
          stated in the lower of two appraisals obtained by the Operator from independent,
          well recognized appraisers competent in the appraisal of mining properties;
          and

      

    

    
      
        
        

      

      
        28

        
          

        

      

       

    

     

    
      
        (b)
          if
          the
          Participants have not purchased all or part of that Share Participation
          as
          aforesaid, then by selling the balance, if any, either in whole or in part
          or in
          separate parcels at public auction or by private tender (the Participants
          being
          entitled to bid) at a time and on whatever terms the Operator shall arrange,
          having first given notice to the defaulting Participant of the time and
          place of
          the sale.

      

    

     

    As
      a
      condition of the sale as contemplated in subparagraph 15.02(b), the purchaser
      shall agree to be bound by this Agreement and, prior to acquiring the Share
      Participation, shall deliver notice to that effect to the parties, in form
      acceptable to the Operator. The proceeds of the sale shall be applied by the
      Operator in payment of the amount due from the defaulting Participant and
      interest as aforesaid, and the balance remaining, if any, shall be paid to
      the
      defaulting Participant after deducting reasonable costs of the sale. Any sale
      or
      disposal made as aforesaid shall be a perpetual bar both at law and in equity
      by
      the defaulting Participant and its successors and assigns against all other
      Participants.

     

    16. DIVIDENDS

     

    16.01  The
      Operator shall, on behalf of Holdco, market and sell all Minerals produced
      from
      the Mine on the terms and conditions established from time to time by the
      Shareholders’ Committee. The Shareholders shall cause the Shareholders’
Committee to declare and pay dividends to each Shareholder to the maximum amount
      permitted under the applicable corporate statute and after having made such
      allowances and established such reserves as may be determined by the Board
      of
      Directors in accordance with prudent business practices.

     

    17. SURRENDER
      OF SHARE PARTICIPATION

     

    17.01  Any
      Participant may, at any time upon notice, surrender its entire Share
      Participation to the other Participant by giving that Participant notice of
      surrender.

    
      
        
        

      

      
        29

        
          

        

      

       

    

     

    The
      notice of surrender shall:

     

    
      
        (a)
          indicate
          a date for surrender not less than three months after the date on which
          the
          notice is given; and

      

    

     

    
      
        (b)
          contain
          an undertaking that the surrendering Participant will:

      

    

     

    
      
        (i)
          satisfy
          its Proportionate Share, based on its then Share Participation, of all
          obligations and liabilities which arose at any time prior to the date of
          surrender;

      

    

     

    
      
        (ii)
          if
          the
          Operator has not included in Costs the costs of continuing obligations
          as set
          out in paragraphs 7.03 and 14.04 hereof, pay on the date of surrender its
          reasonably estimated Proportionate Share, based on the surrendering
          Participant's then Share Participation, of the Costs of such continuing
          obligations; and

      

    

     

    
      
        (iii)
          will
          hold
          in confidence, for a period of two years from the date of surrender, all
          information and data which it acquired pursuant to this Agreement, except
          such
          information as is required to be disclosed by law or by rule or policy
          of any
          applicable securities commission or stock exchange.

      

    

     

    17.02  Upon
      the
      surrender of its entire Share Participation as contemplated in paragraph 17.01
      and upon delivery to the other Participant of:

     

    
      
        (a)
          a
          release
          in writing, in form acceptable to counsel for the Operator, releasing the
          other
          Participant from all claims and demands hereunder;

      

    

     

    
      
        (b)
          share
          certificates, duly endorsed for transfer, representing the surrendering
          Participant's entire Share Participation and;

      

    

     

    
      
        (c)
          all
          reports, data and information, whether recorded on paper or stored on tape,
          computer discs or any other form of electronic storage, acquired by it
          pursuant
          to this Agreement;

      

    

    
      
        
        

      

      
        30

        
          

        

      

       

    

     

    the
      surrendering Participant shall be relieved of all obligations or liabilities
      hereunder except for those which arose or accrued or were accruing due on or
      before the date of the surrender.

     

    17.03  A
      Participant to whom a notice of surrender has been given as contemplated in
      paragraph 17.01 may elect, by notice within 90 days to the Participant which
      first gave the notice to accept the surrender, in which case paragraphs 17.01
      and 17.02 shall apply, or to join in the surrender. If all of the Participants
      join in the surrender the Joint Operation shall be terminated in accordance
      with
      article 18, and Holdco wound up accordingly.

     

    18. TERMINATION
      OF MINING OPERATIONS

     

    18.01  The
      Operator may, at any time subsequent to the Operative Date, on at least 30
      days
      notice to all parties, recommend that the Shareholders’ Committee approve that
      the Mining Operations be suspended. The Operator's recommendation shall include
      a plan and budget (in this article 18 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
      Shareholders’ Committee may, at any time subsequent to the Operative 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
      Shareholders’ Committee deems necessary. The Participants shall contribute their
      Proportionate Share of the Costs incurred in connection with the Mine
      Maintenance Plan. The Shareholders’ Committee may cause Mining Operations to be
      resumed at any time.

     

    18.02  The
      Operator may, at any time following a period of at least 90 days during which
      Mining Operations have been suspended, upon at least 30 days notice to all
      parties, or in the events described in paragraph 18.01, recommend that the
      Shareholders’ Committee approve the permanent termination of Mining Operations.
      The Operator's recommendation shall include a plan and budget (in this article
      18 called the "Mine
      Closure Plan"),
      in
      reasonable detail, of the activities to be performed to close the Mine and
      reclaim the Property, and the Costs to be incurred. The Shareholders’ Committee
      may approve the Operator's recommendation with such changes to the Mine Closure
      Plan as the Shareholders’ Committee deems necessary.

     

    18.03  If
      the
      Shareholders’ Committee approves the Operator's recommendation as aforesaid, it
      shall cause the Operator to:

     

    
      
        (a)
          implement
          the Mine Closure Plan, whereupon the Participants shall pay, in proportion
          to
          their respective Share Participations, such Costs as may be required to
          implement that Mine Closure Plan;

      

    

    
      
        
        

      

      
        31

        
          

        

      

       

    

     

    
      
        (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;
          and

      

    

     

    
      
        (c)
          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 Share
      Participations.

     

    18.04  If
      the
      Shareholders’ Committee does not approve the Operator's recommendation
      contemplated in paragraph 11.02, the Operator shall maintain Mining Operations
      in accordance with the Mine Maintenance Plan as pursuant to paragraph
      11.01.

     

    19. THE
      PROPERTY

     

    19.01  Title
      to
      the Property shall be held in the name of Holdco. Each of the parties shall
      have
      the right to receive, forthwith upon making demand therefor to the Operator,
      such documents as it may reasonably require to confirm its Share
      Participation.

     

    20. AREA
      OF COMMON INTEREST

     

    20.01  The
      area
      of common interest shall be deemed to comprise that area which is included
      within the outermost boundary of the mineral properties which constitute the
      Property as at the Operative Date.

     

    20.02  Except
      as
      to renewals or improvements in title to mineral claims or mineral rights held
      by
      a party prior to the Operative Date which have not been added to the Property,
      if at any time during the subsistence of this Agreement any party (in this
      section only called the "Acquiring
      Party")
      stakes
      or otherwise acquires, directly or indirectly, any right to or interest in
      any
      mining claim, licence, lease, grant, concession, permit, patent, or other
      mineral property located wholly or partly within the area of interest referred
      to in subparagraph 20.01 the Acquiring Party shall forthwith give notice to
      the
      other parties of that staking or acquisition, the total cost thereof and all
      details in the possession of that party with respect to the details of the
      acquisition, the nature of the property and the known
      mineralization.

    
      
        
        

      

      
        32

        
          

        

      

       

    

     

    20.03  Each
      other party may, within 30 days of receipt of the Acquiring Party's notice,
      elect, by notice to the Acquiring Party, to require that the mineral properties
      and the right or interest acquired be included in and thereafter form part
      of
      the Property for all purposes of this Agreement.

     

    20.04  If
      the
      election aforesaid is made, all the other parties shall reimburse the Acquiring
      Party for that portion of the cost of acquisition which is equivalent to their
      respective Share Participations.

     

    20.05  If
      no
      other party makes the election aforesaid within that period of 30 days, the
      right or interest acquired shall not form part of the Property and the Acquiring
      Party shall be solely entitled thereto.

     

    20.06  Notwithstanding
      subparagraph 6.04(e), the Operator shall be entitled, at any time and from
      time
      to time to surrender all or any part of the Property or to permit the same
      to
      lapse, but only upon first either obtaining the unanimous consent of the
      Shareholders’ Committee, or giving 60 days notice of its intention to do so to
      the other parties. In this latter event, the parties, other than the Operator,
      shall be entitled to receive from the Operator, on request prior to the date
      of
      the surrender or lapse, a conveyance of that portion of the Property intended
      for surrender or lapse, together with copies of any plans, assay maps, diamond
      drill records and factual engineering data in the Operator's possession and
      relevant thereto. Any part of the Property so acquired shall cease to be subject
      to this Agreement and shall not be subject to paragraph 20.02. Any part of
      the
      Property which has not been so acquired by any of the parties shall remain
      subject to paragraph 20.02.

     

    21. INFORMATION
      AND DATA

     

    21.01  At
      all
      times during the currency of this Agreement the duly authorized representatives
      of each Shareholder shall, at its and their sole risk and expense and at
      reasonable intervals and times, have access to the Property and to all technical
      records and other factual engineering data and information relating to the
      Property which is in the possession of the Operator.

    
      
        
        

      

      
        33

        
          

        

      

       

    

     

    21.02  While
      Operating Plans are being carried out, the Operator shall furnish the
      Participants with quarterly progress reports and with a final report on
      conclusion of each Operating Plan. The final report shall show the Mining
      Operations performed and the results obtained and shall be accompanied by a
      statement of Costs and copies of pertinent plans, sampling results and other
      factual engineering data. 

     

    21.03  All
      information and data concerning or derived from the Mining Operations shall
      be
      kept confidential and, except to the extent required by law or by regulation
      of
      any Securities Commission or Stock Exchange, shall not be disclosed to any
      person other than an Affiliate without the prior consent of all the parties,
      which consent shall not unreasonably be withheld.

     

    21.04  The
      text
      of any news releases or other public statements which a party desires to make
      with respect to the Property shall be made available to the other parties prior
      to publication and the other parties shall have the right to make suggestions
      for changes therein.

     

    22. LIABILITY
      AND INDEMNITY OF THE OPERATOR

     

    22.01  Subject
      to paragraph 22.02, each Participant shall indemnify and save the Operator
      harmless from and against any loss, liability, claim, demand, damage, expense,
      injury or death (including, without limiting the generality of the foregoing,
      legal fees) resulting from any acts or omissions of the Operator or its
      officers, employees or agents.

     

    22.02  Notwithstanding
      paragraph 22.01, the Operator shall not be indemnified nor held harmless by
      any
      of the parties for any loss, liability, claim, damage, expense, injury or death,
      (including, without limiting the generality of the foregoing, legal fees)
      resulting from the gross negligence or willful misconduct of the Operator or
      its
      officers, employees or agents.

     

    22.03  An
      act or
      omission of the Operator or its officers, employees or agents done or omitted
      to
      be done:

     

    
      
        (a)
          at
          the
          direction, or within the scope of the direction, of the Shareholders’ Committee;
          or

      

    

    
      
        
        

      

      
        34

        
          

        

      

       

    

     

    
      
        (b)
          with
          the
          concurrence of the Shareholders’ Committee; or

      

    

     

    
      
        (c)
          unilaterally
          and in good faith by the Operator to protect life or property;

      

    

     

    shall
      be
      deemed not to be gross negligence or willful misconduct.

     

    22.04  The
      obligation of the other parties to indemnify and save the Operator harmless
      pursuant to paragraph 22.01 shall be in proportion to its Share Participation
      as
      at the date that the loss, liability, claim, demand, damage, expense, injury
      or
      death occurred or arose.

     

    22.05  The
      Operator shall not be liable to any other party nor shall any party be liable
      to
      the Operator in contract, tort or otherwise for special or consequential
      damages, including, without limiting the generality of the foregoing, loss
      of
      profits or revenues.

     

    23. INSURANCE

     

    23.01  Commencing
      on the Operative Date, the Shareholders’ Committee shall cause the Operator to
      place and maintain with a reputable insurer or insurers such insurance, if
      any,
      as the Shareholders’ Committee in its discretion deems advisable in order to
      protect the parties, together with such other insurance as any party may by
      notice reasonably request. The Operator shall, upon the written request of
      any
      party, provide it with evidence of such insurance.

     

    23.02  Paragraph
      23.01 shall not preclude any party from placing, for its own account insurance
      for greater or other coverage than that placed by the Operator.

     

    24. ASSIGNMENT

     

    24.01  If
      a
      party (hereinafter in this paragraph referred to as the "Owner"):

    

    
      
        (a)
          receives
          a bona fide offer from an independent third party (the "Proposed
          Purchaser")
          dealing
          at arm's length with the Owner to purchase all or any part all of the Owner's
          Shares or its interest in this Agreement (which for certainty shall include
          the
          Owner's right to receive Net Smelter Returns), which offer the Owner desires
          to
          accept; 

      

    

    
      
        
        

      

      
        35

        
          

        

      

       

    

     

    
      
        (b)
          or
          if the
          Owner intends to sell all or any part of its Shares or its interest in
          this
          Agreement,

      

    

     

    the
      Owner
      shall first offer (the "Offer")
      such
      interest in writing to the other party upon terms no less favourable than those
      offered by the Proposed Purchaser or intended to be offered by the Owner, as
      the
      case may be. The Offer shall specify the price and terms and conditions of
      such
      sale, the name of the Proposed Purchaser (which term shall, in the case of
      an
      intended offer by the Owner, mean the person or persons to whom the Owner
      intends to offer its interest) and, if the offer received by the Owner from
      the
      Proposed Purchaser provides for any consideration payable to the Owner otherwise
      than in cash, the Offer shall include the Owner's good faith estimate of the
      cash equivalent of the non-cash consideration. If within a period of 60 days
      of
      the receipt of the Offer, the other party notifies the Owner in writing that
      it
      will accept the same, the Owner shall be bound to sell such interest to the
      other party (subject as hereinafter provided with respect to price) on the
      terms
      and conditions of the Offer. If the Offer so accepted by the other party
      contains the Owner's good faith estimate of the cash equivalent consideration
      as
      aforesaid, and if the other party disagrees with the Owner's best estimate,
      the
      other party shall so notify the Owner at the time of acceptance and the other
      party shall, in such notice, specify what it considers, in good faith, the
      fair
      cash equivalent to be and the resulting total purchase price. If the other
      party
      so notifies the Owner, the acceptance by the other party shall be effective
      and
      binding upon the Owner and the other party and the cash equivalent of any such
      non-cash consideration shall be determined by binding arbitration under the
      Commercial
      Arbitration Act
      (British
      Columbia) and shall be payable by the other party, subject to prepayment as
      hereinafter provided, within 60 days following its determination by arbitration.
      The other party shall in such case pay to the Owner, against receipt of an
      absolute transfer of clear and unencumbered title to the interest of the Owner
      being sold, the total purchase price which it specified in its notice to the
      Owner and such amount shall be credited to the amount determined following
      arbitration of the cash equivalent of any non-cash consideration. If the other
      party fails to notify the Owner before the expiration of the time limited
      therefor that it will purchase the interest offered, the Owner may sell and
      transfer such interest to the Proposed Purchaser at the price and on the terms
      and conditions specified in the Offer for a period of 60 days, provided that
      the
      terms of this paragraph shall again apply to such interest if the sale to the
      Proposed Purchaser is not completed within the said 60 days. Any sale hereunder
      shall be conditional upon the Proposed Purchaser delivering a written
      undertaking to the other party, in form and content satisfactory to its counsel,
      to be bound by the terms and conditions of this Agreement and upon the receipt,
      if applicable, of the prior approval of the Minister.

    
      
        
        

      

      
        36

        
          

        

      

       

    

     

    25. FORCE
      MAJEURE

     

    25.01  Notwithstanding
      anything herein contained to the contrary, if any party is prevented from or
      delayed in performing any obligation under this Agreement, and such failure
      is
      occasioned by any cause beyond its reasonable control, excluding only lack
      of
      finances, then the time for the observance of the condition or performance
      of
      the obligation in question shall be extended for a period equivalent to the
      total period the cause of the prevention or delay persists or remains in effect
      regardless of the length of such total period.

     

    25.02  Any
      party
      hereto claiming suspension of its obligations as aforesaid shall promptly notify
      the other parties to that effect and shall take all reasonable steps to remove
      or remedy the cause and effect of the force majeure described in the said notice
      insofar as it is reasonably able so to do and as soon as possible; provided
      that
      the terms of settlement of any labour disturbance or dispute, strike or lockout
      shall be wholly in the discretion of the party claiming suspension of its
      obligations by reason thereof; and that party shall not be required to accede
      to
      the demands of its opponents in any such labour disturbance or dispute, strike,
      or lockout solely to remedy or remove the force majeure thereby
      constituted.

     

    25.03  The
      extension of time for the observance of conditions or performance of obligations
      as a result of force majeure shall not relieve the Operator from its obligations
      to keep the Property in good standing.

     

    26. NOTICE

     

    26.01  All
      invoices, notices, consents and demands under this Agreement shall be in writing
      and may be delivered personally, sent by telegram, fax or telex or may be
      forwarded by first class prepaid registered mail to the address for each party
      set out herein or to such addresses as each party set out herein. Any notice
      delivered or sent by telegraph, fax or telex shall be deemed to have been given
      and received on the business day next following the date of delivery. Any notice
      mailed as aforesaid shall be deemed to have been given and received on the
      tenth
      business day following the date it is posted, provided that if between the
      time
      of mailing and the actual receipt of the notice there shall be a mail strike,
      slowdown or other labour dispute which affects delivery of the notice by mails,
      then the notice shall be effective only if actually delivered.

    
      
        
        

      

      
        37

        
          

        

      

       

    

     

    27. WAIVER

     

    27.01  No
      waiver
      of any breach of this Agreement shall be binding unless evidenced in writing
      executed by the party against whom charged. Any waiver shall extend only to
      the
      particular breach so waived and shall not limit any rights with respect to
      any
      future breach.

     

    28. AMENDMENTS

     

    28.01  This
      Agreement constitutes the entire agreement between the parties hereto with
      respect to the subject matter hereof. Any amendment or variation of this
      Agreement shall only be binding upon a party if evidenced in writing executed
      by
      that party.

     

    29. TERM

     

    29.01  Unless
      earlier terminated by mutual agreement of the parties or as a result of one
      party acquiring a 100 percent Share Participation and the right to receive
      100%
      of Net Smelter Returns of Production, this Agreement shall remain in full force
      and effect for so long as Holdco has any right, title or interest in the
      Property. Termination of the Agreement shall not, however, relieve any party
      from any obligations theretofore accrued but unsatisfied, nor from its
      obligations with respect to rehabilitation of the Mining Operations site and
      reclamation.

     

    30. TIME
      OF ESSENCE

     

    30.01  Time
      is
      of the essence of this Agreement.

     

    31. SUCCESSORS
      AND ASSIGNS

     

    31.01  This
      Agreement shall enure to the benefit of and be binding upon the parties hereto
      and their respective successors and permitted assigns.

    
      
        
        

      

      
        38

        
          

        

      

       

    

     

    32. ARBITRATION

     

    32.01  If
      there
      is any disagreement, dispute or controversy (hereinafter collectively called
      a
"dispute")
      between
      the parties with respect to any matter arising under this agreement or the
      construction hereof, then the dispute shall be determined by arbitration in
      accordance with the following procedures:

     

    
      
        (a)
          the
          parties to the dispute shall appoint a single mutually acceptable arbitrator.
          If
          the parties cannot agree upon a single arbitrator, then the party on one
          side of
          the dispute shall name an arbitrator, and give notice thereof to the party
          on
          the other side of the dispute;

      

    

     

    
      
        (b)
          the
          party
          on the other side of the dispute shall within 14 days of the receipt of
          notice,
          name an arbitrator; and

      

    

     

    
      
        (c)
          the
          two
          arbitrators so named shall, within seven days of the naming of the later
          of
          them, name a third arbitrator.

      

    

     

    If
      the
      party on either side of the dispute fails to name its arbitrator within the
      allotted time, then the arbitrator named may make a determination of the
      dispute. Except as expressly provided in this paragraph, the arbitration shall
      be conducted in Vancouver, B.C. and in accordance with the Commercial
      Arbitration Act
      (British
      Columbia). The decision shall be made within 30 days following the naming of
      the
      latest of them, shall be based exclusively on the advancement of exploration,
      development and production work on the Property and not on the financial
      circumstances of the parties, and shall be conclusive and binding upon the
      parties. The costs of arbitration shall be borne equally by the parties to
      the
      dispute unless otherwise determined by the arbitrator(s) in the
      award.

     

    33. GOVERNING
      LAW

     

    33.01  This
      Agreement shall be governed by and interpreted in accordance with the laws
      of
      the Province of British Columbia.

    
      
        
        

      

      
        39

        
          

        

      

       

    

     

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

    

    
      	
              The
                COMMON SEAL of ST.
                ELIAS MINES 

              LTD.
                was hereunto affixed in the presence of:

               

                

              

               

              
                

              

               

            	
              )

              )

              )

              )

              )

              )

              )

              )

              )

            	
               

               

               

               

              c/s

            

    

    

    
      	
              The
                COMMON SEAL of HI
                HO SILVER RESOURCES INC. 

              was
                hereunto affixed in the presence of:

               

              
                
 

              
                

              

               

            	
              )

              )

              )

              )

              )

              )

              )

              )

              )

            	
               

               

               

               

              c/s

            

    

    

    
      	
              The
                COMMON SEAL of HOLDCO
                was hereunto 

              affixed
                in the presence of:

               

              
                
 

              
                

              

               

               

               

            	
              )

              )

              )

              )

              )

              )

              )

              )

              )

            	
               

               

               

               

              c/s

            

    

     

    
      
        
        

      

      
        40

        
          

        

      

       

    

     

    THIS
      IS
      APPENDIX I TO THAT CERTAIN SHAREHOLDERS’ VENTURE AGREEMENT MADE AS OF THE
 ̈
      DAY OF
      ________, 20__, BETWEEN ST. ELIAS MINES LTD. OF THE FIRST PART, HI HO SILVER
      RESOURCES INC. OF THE SECOND PART, AND HOLDCO OF THE THIRD PART

     

    ACCOUNTING
      PROCEDURE

     

    1.  INTERPRETATION

     

    1.01  In
      this
      Appendix the following words, phrases and expressions shall have the following
      meanings:

     

    
      
        (a)
          "Agreement"
          means
          the Agreement to which this Accounting Procedure is attached as Appendix
          I.

      

    

     

    
      
        (b)
          "Count"
          means a
          physical inventory count.

      

    

     

    
      
        (c)
          "Employee"
          means
          those employees of the Operator who are assigned to and directly engaged
          in the
          conduct of Mining Operations, whether on a full-time or part-time
          basis.

      

    

     

    
      
        (d)
          "Employee
          Benefits"
          means
          the Operator's cost of holiday, vacation, sickness, disability benefits,
          field
          bonuses, amounts paid to and the Operator's costs of established plans
          for
          employee's group life insurance, hospitalization, pension, retirement and
          other
          customary plans maintained for the benefit of Employees and Personnel,
          as the
          case may be, which costs may be charged as a percentage assessment on the
          salaries and wages of Employees or Personnel, as the case may be, on a
          basis
          consistent with the Operator's cost experience.

      

    

     

    
      
        (e)
          "Field
          Offices"
          means
          the necessary sub-office or sub-offices in each place where an Operating
          Plan or
          Construction is being conducted or a Production Facilities is being
          operated.

      

    

     

    
      
        (f)
          "Government
          Contributions"
          means
          the cost or contributions made by the Operator pursuant to assessments
          imposed
          by governmental authority which are applicable to the salaries or wages
          of
          Employees or Personnel, as the case may be.

      

    

     

    
      
        (g)
          "Joint
          Account"
          means
          the books of account maintained by the Operator to record all costs, expenses,
          credits and other transactions arising out of or in connection with the
          Mining
          Operations.

      

    

    
      
        
        

      

      
        
        

        
          

        

      

       

    

     

    
      
        (h)
          "Material"
          means
          the personal property, equipment and supplies acquired or held, at the
          direction
          or with the approval of the Shareholders’ Committee, for use in the Mining
          Operations and, without limiting the generality, more particularly "Controllable
          Material" means such Material which is ordinarily classified as Controllable
          Material, as that classification is determined or approved by the Shareholders’
Committee, and controlled in mining operations.

      

    

     

    
      
        (i)
          "Personnel"
          means
          those management, supervisory, administrative, clerical or other personnel
          of
          the Operator normally associated with the Supervision Offices whose salaries
          and
          wages are charged directly to the Supervision Office in
          question.

      

    

     

    
      
        (j)
          "Reasonable
          Expenses"
          means
          the reasonable expenses of Employees or Personnel, as the case may be,
          for which
          those Employees or Personnel may be reimbursed under the Operator's usual
          expense account practice; including without limiting generality, any relocation
          expenses necessarily incurred in order to properly staff the Mining Operations
          if the relocation is approved by the Shareholders’
Committee.

      

    

     

    
      
        (k)
          "Supervision
          Offices"
          means
          the Operator's offices or department within the Operator's offices from
          which
          the Mining Operations are generally supervised.

      

    

     

    2.  STATEMENTS
      AND BILLINGS

     

    2.01  The
      Operator shall, by invoice, charge each Participant with its Proportionate
      Share
      of Costs in the manner provided in sections 7 and 15 of the Agreement
      respectively.

     

    2.02  The
      Operator shall deliver, with each invoice rendered for Costs incurred a
      statement indicating:

     

    
      
        (a)
          all
          charges or credits to the Joint Account relating to Controllable Material
          in
          detail; and

      

    

     

    
      
        (b)
          all
          other
          charges and credits to the Joint Account summarized by appropriate
          classification indicative of the nature of the charges and
          credits.

      

    

     

    2.03  The
      Operator shall deliver with each invoice for an advance of Costs a statement
      indicating:

     

    
      
        (a)
          the
          estimated Costs or the estimated cash disbursements to be made during the
          second
          next succeeding month;

      

    

     

    
      
        (b)
          the
          addition thereto or subtraction therefrom, as the case may be, in respect
          of
          Costs actually having been incurred in an amount greater or lesser than
          the
          advance which was made by each Participant for the month preceding the
          month of
          the invoice; and

      

    

    
      
        
        

      

      
        2

        
          

        

      

       

    

     

    
      
        (c)
          the
          advances made by each Participant to date and the Costs incurred to the
          end of
          the month preceding the month of the invoice.

      

    

     

    3.  DIRECT
      CHARGES

     

    3.01  The
      Operator shall charge the Joint Account with the following items:

     

    
      	 	
              (a)

            	
              Contractor's
                Charges:

            

    

     

    
      	 	 	
              All
                proper costs relative to the Mining Operations incurred under contracts
                entered into by the Operator with third
                parties.

            

    

     

    (b) Labour
      Charges:

     

    
      	 	 	
              (i)

            	
              The
                salaries and wages of Employees in an amount calculated by taking
                the full
                salary or wage of each Employee multiplied by that fraction which
                has as
                its numerator the total time for the month that the Employees were
                directly engaged in the conduct of Mining Operations and as its
                denominator the total normal working time for the month of the
                Employee;

            

    

     

    (ii)          
      the
      Reasonable Expenses of the Employees; and

     

    
      	 	 	
              (iii)

            	
              Employee
                Benefits and Government Contributions in respect of the Employees
                in an
                amount proportionate to the charge made to the Joint Account in respect
                to
                their salaries and wages.

            

    

     

    (c) Office
      Maintenance:

     

    
      	 	 	
              (i)

            	
              The
                cost or a pro rata portion of the costs, as the case may be, of
                maintaining and operating the Offices. The basis for charging the
                Joint
                Account for Office maintenance costs shall be as
                follows:

            

    

     

    
      	 	 	 	
              (A)

            	
              the
                expense of maintaining and operating Field Offices, less any revenue
                therefrom; and

            

    

     

    
      	 	 	 	
              (B)

            	
              that
                portion of maintaining and operating the Supervision Offices which
                is
                equal to

            

    

     

    
      	 	 	 	 	
              (1)

            	
              the
                anticipated total operating expenses of the Supervision
                Offices

            

    

    
      
        
        

      

      
        3

        
          

        

      

       

    

     

    divided
      by

     

    
      	 	 	 	 	
              (2)

            	
              the
                anticipated total staff man days for the Employees whether in connection
                with the Mining Operations or not;

            

    

     

    multiplied
      by

     

    
      	 	 	 	 	
              (3)

            	
              the
                actual total time spent on the Mining Operations by the Employee
                expressed
                in man days.

            

    

     

    
      	 	 	
              (ii)

            	
              Without
                limiting generality, the anticipated total operating expenses of
                the
                Supervision Offices shall include:

            

    

     

    
      	 	 	 	
              (A)

            	
              the
                salaries and wages of the Operator's Personnel which have been directly
                charged to those Offices;

            

    

     

    
      	 	 	 	
              (B)

            	
              the
                Reasonable Expense of the Personnel;
                and

            

    

     

    
      	 	 	 	
              (C)

            	
              Employee
                Benefits.

            

    

     

    
      	 	 	
              (iii)

            	
              The
                Operator shall make an adjustment in respect of the Office Maintenance
                cost forthwith after the end of each Operating Year upon having determined
                the actual operating expenses and actual total staff man days referred
                to
                in clause 3.01(c)(i)(B) of this Appendix
                I.

            

    

     

    (d) Material:

     

    
      	 	 	
              Material
                purchased or furnished by the Operator for use on a Property as provided
                under section 6 of this Appendix I.

            

    

     

    
      	 	
              (e)

            	
              Transportation
                Charges:

            

    

     

    
      	 	 	
              The
                cost of transporting Employees and Material necessary for the Mining
                Operations.

            

    

     

    
      	 	
              (f)

            	
              Service
                Charges:

            

    

     

    
      	 	 	
              (i)

            	
              The
                cost of services and utilities procured from outside sources other
                than
                services covered by paragraph 3.01(h). The cost of consultant services
                shall not be charged to the Joint Account unless the retaining of
                the
                consultant is approved in advance by the Shareholders’ Committee;
                and

            

    

    
      
        
        

      

      
        4

        
          

        

      

       

    

     

    
      	 	 	
              (ii)

            	
              Use
                and service of equipment and facilities furnished by the Operator
                as
                provided in subsection 4.05 of this Appendix
                I.

            

    

     

    (g) Damages
      and Losses to Joint Property:

     

    
      	 	 	
              All
                costs necessary for the repair or replacement of Assets made necessary
                because of damages or losses by fire, flood, storms, theft, accident
                or
                other cause. The Operator shall furnish each Participant with written
                particulars of the damages or losses incurred as soon as practicable
                after
                the damage or loss has been discovered. The proceeds, if any, received
                on
                claims against any policies of insurance in respect of those damages
                or
                losses shall be credited to the Joint
                Account.

            

    

     

    (h) Legal
      Expense:

     

    
      	 	 	
              All
                costs of handling, investigating and settling litigation or recovering
                the
                Assets, including, without limiting generality, attorney's fees,
                court
                costs, costs of investigation or procuring evidence and amounts paid
                in
                settlement or satisfaction of any litigation or claims; provided,
                however,
                that, unless otherwise approved in advance by the Shareholders’ Committee,
                no charge shall be made for the services of the Operator's legal
                staff or
                the fees and expenses of outside
                solicitors.

            

    

     

    (i) Taxes:

     

    
      	 	 	
              All
                taxes, duties or assessments of every kind and nature (except income
                taxes) assessed or levied upon or in connection with the Property,
                the
                Mining Operations thereon, or the production therefrom, which have
                been
                paid by the Operator for the benefit of the
                parties.

            

    

     

    (j) Insurance:

     

    Net
      premiums paid for

     

    
      	 	 	
              (i)

            	
              such
                policies of insurance on or in connection with Mining Operations
                as may be
                required to be carried by law; and

            

    

     

    
      	 	 	
              (ii)

            	
              such
                other policies of insurance as the Operator may carry for the protection
                of the parties in accordance with the Agreement;
                and

            

    

     

    the
      applicable deductibles in event of an insured loss.

     

    
      	 	
              (k)

            	
              Rentals:

            

    

     

    
      	 	 	
              Fees,
                rentals and other similar charges required to be paid for acquiring,
                recording and maintaining permits, mineral claims and mining leases
                and
                rentals and royalties which are paid as a consequence of the Mining
                Operations.

            

    

    
      
        
        

      

      
        5

        
          

        

      

       

    

     

    (l) Permits:

     

    
      	 	 	
              Permit
                costs, fees and other similar charges which are assessed by various
                governmental agencies.

            

    

     

    
      	 	
              (m)

            	
              Other
                Expenditures:

            

    

     

    
      	 	 	
              Such
                other costs and expenses which are not covered or dealt with in the
                foregoing provisions of this subsection 3.01 of this Appendix I as
                are
                incurred with the approval of the Shareholders’ Committee for Mining
                Operations or as may be contemplated in the
                Agreement.

            

    

     

    4.  PURCHASE
      OF MATERIAL

     

    4.01  Subject
      to subsection 4.04 of this Appendix I the Operator shall purchase all Materials
      and procure all services required in the Mining Operations.

     

    4.02  Materials
      purchased and services procured by the Operator directly for the Mining
      Operations shall be charged to the Joint Account at the price paid by the
      Operator less all discounts actually received.

     

    4.03  So
      far as
      it is reasonably practical and consistent with efficient and economical
      operations, the Operator shall purchase, furnish or otherwise acquire only
      such
      Material and Assets as may be required for immediate use. The Operator shall
      attempt to minimize the accumulation of surplus stocks of Material.

     

    4.04  Any
      Participant may sell Material or services required in the Mining Operations
      to
      the Operator for such price and upon such terms and conditions as the
      Shareholders’ Committee may approve.

     

    4.05  Notwithstanding
      the foregoing provisions of this section 4, the Operator shall be entitled
      to
      supply for use in connection with the Mining Operations equipment and facilities
      which are owned by the Operator and to charge the Joint Account with such
      reasonable costs as are commensurate with the ownership and use
      thereof.

     

    5.  DISPOSAL
      OF MATERIAL

     

    5.01  The
      Operator, with the approval of the Shareholders’ Committee may, from time to
      time, sell any Material which has become surplus to the foreseeable needs of
      the
      Mining Operations for the best price and upon the most favourable terms and
      conditions available.

    
      
        
        

      

      
        6

        
          

        

      

       

    

     

    5.02  Any
      Participant may purchase from the Operator any Material which may from time
      to
      time become surplus to the foreseeable need of the Mining Operations for such
      price and upon such terms and conditions as the Shareholders’ Committee may
      approve.

     

    5.03  Upon
      termination of the Agreement, the Shareholders’ Committee may approve the
      division of any Material held by the Operator at that date may be taken by
      the
      Participants in kind or be taken by a Participant in lieu of a portion of its
      Proportionate Share of the net revenues received from the disposal of the Assets
      and Property. If the division to a Participant be in lieu, it shall be for
      such
      price and on such terms and conditions as the Shareholders’ Committee may
      approve.

     

    5.04  The
      net
      revenues received from the sale of any Material to third parties or to a
      Participant shall be credited to the Joint Account.

     

    6.  INVENTORIES

     

    6.01  The
      Operator shall maintain records of Material in reasonable detail and records
      of
      Controllable Material in detail.

     

    6.02  The
      Operator shall perform Counts from time to time at reasonable intervals and
      in
      connection therewith shall give notice of its intention to perform a Count
      to
      each Participant at least 30 days in advance of the date set for performing
      of
      the Count. Each Participant shall be entitled to be represented at the
      performing of a Count upon giving notice thereof to the Operator within 15
      days
      of the Operator's notice. A Participant who is not represented at the performing
      of the Count shall be deemed to have approved the Count as taken.

     

    6.03  Forthwith
      after performing a Count, the Operator shall reconcile the inventory with the
      Joint Account and provide each Participant with a statement listing the overages
      and shortages. The Operator shall not be held accountable for any shortages
      of
      inventory except such shortages as may have arisen due to a lack of diligence
      on
      the part of the Operator.

     

    7.  ADJUSTMENTS

     

    7.01  Payment
      of any invoice by a Participant shall not prejudice the right of that
      Participant to protest the correctness of the statement supporting the payment;
      provided, however, that all invoices and statements presented to each
      Participant by the Operator during any Operating Year shall conclusively be
      presumed to be true and correct upon the expiration of 12 months following
      the
      end of the Operating Year to which the invoice or statement relates, unless
      within that 12 month period that Participant gives notice to the Operator making
      claim on the Operator for an adjustment to the invoice or
      statement.

     

    7.02  The
      Operator shall not adjust any invoice or statement in favour of itself after
      the
      expiration of 12 months following the end of the Operating Year to which the
      invoice or statement relates.

    
      
        
        

      

      
        7

        
          

        

      

       

    

     

    7.03  Notwithstanding
      subsections 7.01 and 7.02 of this Appendix I, the Operator may make adjustments
      to an invoice or statement which arise out of a physical inventory of Material
      or Assets.

     

    7.04  A
      Participant shall be entitled upon notice to the Operator to request that the
      independent external auditor of the Operator provide that Participant with
      its
      opinion that any invoice or statement delivered pursuant to the Agreement in
      respect of the period referred to in subsection 7.01 of this Appendix I has
      been
      prepared in accordance with this Agreement.

     

    7.05  The
      time
      for giving the audit opinion contemplated in subsection 7.04 of this Appendix
      I
      shall not extend the time for the taking of exception to and making claims
      on
      the Operator for adjustment as provided in subsection 7.01 of this Appendix
      I.

     

    7.06  The
      cost
      of the auditor's opinion referred to in subsection 7.04 of this Appendix I
      shall
      be solely for the account of the Participant requesting the auditor's opinion,
      unless the audit disclosed a material error adverse to that Participant, in
      which case the cost shall be solely for the account of the
      Operator.

    
      
        
        

      

      
        8

        
          

        

      

       

    

    THIS
      IS
      APPENDIX II TO THAT CERTAIN SHAREHOLDERS’ VENTURE AGREEMENT (THE “AGREEMENT”)
      MADE AS
      OF THE  ̈
      DAY OF
      ________, 20__, BETWEEN ST. ELIAS MINES LTD. OF THE FIRST PART, HI HO SILVER
      RESOURCES INC. OF THE SECOND PART AND HOLDCO OF THE THIRD PART

    

    NET
      SMELTER RETURNS ROYALTY

    

    1. In
      the
      Agreement, “Net
      Smelter Returns Royalty”
      means
      the right of a party or parties (the “Owner”)
      to
      receive from Holdco (the “Payor”)
      a 0.5%
      of Net Smelter Returns until such time as the Owner has received $1,000,000,
      and
      thereafter the right to receive 1.0% of Net Smelter Returns.

    

    2.  In
      the
      Agreement, "Net
      Smelter Returns"
      means
      the net amount of money received by the Payor for its own account from the
      sale
      or other disposition of ore, or ore concentrates or other products from the
      Property to a smelter or other ore buyer after deduction of smelter and/or
      refining charges, ore treatment charges, ad valorem taxed, penalties and any
      and
      all charges made by the purchaser of ore or concentrates, less any and all
      transportation and insurance costs which may be incurred in connection with
      the
      transportation of ore or concentrates, less all umpire charges which the
      purchaser may be required to pay.

    

    3.  Payment
      of Net Smelter Returns by the Payor to the Owner shall be made quarterly within
      60 days after the end of each fiscal quarter of the Payor and shall be
      accompanied by unaudited financial statements pertaining to the operations
      carried out by the Payor on the Property. Within 90 days after the end of each
      fiscal year of the Payor in which Net Smelter Returns are payable to the Owner,
      the records relating to the calculation of Net Smelter Returns for such year
      shall be audited and any resulting adjustments in the payment of Net Smelter
      Returns payable to the Owner shall be made forthwith. A copy of the said audit
      shall be delivered to the Owner within 30 days of the end of such 90-day
      period.

    

    4.  Each
      annual audit shall be final and not subject to adjustment unless the Owner
      delivers to the Payor written exceptions in reasonable detail within six months
      after the Owner receives the report. The Owner, or its representative duly
      authorized in writing, at its expense, shall have the right to audit the books
      and records of the Payor related to Net Smelter Returns to determine the
      accuracy of the report, but shall not have access to any other books and records
      of the Payor. The audit shall be conducted by a chartered or certified public
      accountant of recognized standing. The Payor shall have the right to condition
      access to its books and records on execution of a written agreement by the
      auditor that all information will be held in confidence and used solely for
      purposes of audit and resolution of any disputes related to the report. A copy
      of the Owner's report shall be delivered to the Payor upon completion, and
      any
      discrepancy between the amount actually paid by the Payor and the amount which
      should have been paid according to the Owner's report shall be paid forthwith,
      one party to the other. In the event that the said discrepancy is to the
      detriment of the Owner and exceeds 5% of the amount actually paid by the Payor,
      then the Payor shall pay the entire cost of the audit.

    
      
        
        

      

      
        
        

        
          

        

      

       

    

     

    5.  Any
      dispute arising out of or related to any report, payment, calculation or audit
      shall be resolved solely by arbitration as provided in the Agreement. No error
      in accounting or in interpretation of the Agreement shall be the basis for
      a
      claim of breach of fiduciary duty, or the like, or give rise to a claim for
      exemplary or punitive damages or for termination or rescission of the Agreement
      or the estate and rights acquired and held by the Payor under the terms of
      the
      Agreement.

    
      
        
        

      

      
        2

        
          

        

      

       

    

     

    Dated:
      September 12, 2005 
      
        

      

    BETWEEN:

    

    ST.
      ELIAS MINES LTD.

    

    

    OF
      THE
      FIRST PART

    

    AND:

    

    HI
      HO SILVER RESOURCES INC.

    

    OF
      THE
      SECOND PART 

     

     

      
        

      

    

    

    KETTLE
      RIVER PROPERTY

    

    PROPERTY
      OPTION AGREEMENT

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