Document:

Exhibit 10.8

 

	
REFINING AGREEMENT NO: RG13/12/1433
    	
 
    	
DATE: December 16, 2013
    

 

JOHNSON MATTHEY GOLD & SILVER REFINING INC.

 

Principal place of business:

 

4601 West 2100 South

Salt Lake City, Utah

USA 84120

 

(“the Refiner”)

 

agrees to receive from:

 

McEWEN MINING INC.

 

181 Bay Street

Suite 4750

Toronto, ON  M5J 2T3

Canada

 

(“the Customer”)

 

and to refine the material from the Customer’s El Gallo mine in Sinaloa, Mexico referred to in Clause 1 (“the Material”) at the Refiner’s refinery at Salt Lake City, Utah, USA (“the Refinery”) and the Customer agrees to deliver the Material to the Refiner for refining on the terms and conditions of this agreement (“this Agreement”). The Refiner and the Customer are referred to in this Agreement as a “Party” or together as the “Parties”.

 

1.              Material and Quality

 

1.1.         “Material” means gold/silver Doré in the form of bars, having the following approximate assays:

 

Gold                      - approximately 50%; in the range of 45-55%

Silver                  - approximately 50%; in the range of 45-55%

 

1.2.         Each bar shall:

 

(a)                                 weigh no more than 25 kgs; and

 

(b)                                 be suitable for direct melting and sampling.

 

 

1.3.         Customer represents, warrants, and covenants with the Refiner that the Customer shall have the legal right to deliver the Material to the Refiner as provided in this Agreement and to receive delivery of the Recoverable Metals (as defined below) from the Refiner as provided in this Agreement.

 

1.4.         Refiner represents, warrants, and covenants with the Customer that Refiner shall perform the services required to be performed by Refiner pursuant to this Agreement (the “Services”) with reasonable skill and care in accordance with the generally accepted industry standards for refiners providing similar services.

 

2.              Quantity

 

2.1.         The Customer shall deliver to the Refiner for refining all the production of Material from the Customer’s El Gallo Mine (the “Mine”), estimated to be approximately 1,800 ounces of Material, available as one shipment every two weeks throughout the term of this Agreement.

 

2.2.         Each shipment of Material by the Customer to the Refiner under this Agreement (“Shipment”) will consist of no less than 1,000 ounces of Material.

 

3.              Delivery

 

The Customer shall deliver the Material to the Refinery, free of all charges on the Refiner with full all risks insurance covered by the Customer on a door to door basis.  The Material will be securely packaged and sealed, with the unique number of each seal detailed on the bar list that accompanies each shipment. Each bar shall be marked to correspond with the bar list.

 

Each Shipment will have full and complete documentation to permit correct importation into the United States, including but not limited to a Commercial Invoice and a detailed bar list. The Commercial Invoice shall include the following information with respect to the Shipment: (a) the number of Doré bars, (b) the weight of each Doré bar and of the total Shipment, and (c) the provisional assay for each Doré bar and the total gold and silver content of the Shipment.

 

4.              Risk of Loss

 

4.1.         Risk of loss and damage to the Material shall pass from the Customer to the Refiner upon signature for the Material by the Refiner at the Refinery.

 

4.2.         In the event of the loss of a Shipment prior to sampling by the Refiner, the value of such loss shall be based on the weight and assays provided by the Customer to the Refiner in the Commercial Invoice or bar list included with the Shipment; provided, however, that if the loss occurs after the Refiner has weighed the Material upon arrival in accordance with Appendix 1, Refiner’s weight shall be used.

 

 

4.3.         In the event of the loss of a Shipment after sampling by the Refiner, the value of such loss shall be based on the average of the assays conducted by each of the Customer and the Refiner.

 

4.4.         The value of each Shipment for insurance purposes shall be as set out in the Commercial Invoice or bar list.

 

5.              Weighing, Sampling and Assaying

 

Weighing, sampling and assaying will be carried out in accordance with the procedures set out in Appendix 1 to this Agreement.

 

6.              Recoverable Metals

 

The Refiner shall recover and credit the Customer with the following percentages of the final agreed assayed gold and silver contents of refined Material from each Shipment (“the Recoverable Metals”)

 

	
Gold
    	
 
    	
99.75% of assayed content
    
	
Silver
    	
 
    	
99.00% of assayed content
    

 

7.              Metal Availability

 

Delivery of the Recoverable gold and silver from each Shipment will be made as directed by the Customer pursuant to Clause 8 no more than fifteen (15) working days after receipt of the Material by the Refiner at the Refinery if requested in Salt Lake City, and no more than fifteen (15) working days after receipt of the Material by the Refiner at the Refinery if requested in London, subject in each case to the assay results being within the splitting limits set forth in Appendix 1 to this Agreement (“the Metal Availability Date”).  If the assay results are submitted to umpire as set forth in Appendix 1 to this Agreement, an initial settlement shall be made on the dates specified in this Clause 7 based on the lower of the two assays, and shall be adjusted based on the umpire’s results within one (1) working day after receipt of the umpire’s assay results.

 

For the purposes of calculating Metal Availability Dates, the five Business Days immediately prior to the Refiner’s annual inventory listing date shall be excluded. The Refiner undertakes to provide the Customer with written notice of its annual inventory listing date. The Customer may reorganise the timing of their deliveries to minimise the impact of this period, provided it gives the Refiner two weeks’ notice of its intent to do so.

 

 

8.              Settlement as Metal Account Credit

 

8.1                                                       Customer shall instruct the Refiner, in writing prior to receipt of the Shipment concerned, to deliver the Recoverable Metals on or after the Metal Availability Date in accordance with the following options:

 

8.1.1                                             Customer may instruct the Refiner to credit the Recoverable Metals to the Customer’s unallocated metal account with the Refiner and to await further instructions from the Customer, or

 

8.1.2                                             Customer may instruct the Refiner to transfer the Recoverable Metals to the unallocated loco Salt Lake City account of a third party with an account in good standing, or

 

8.1.3                                             Customer may instruct the Refiner to transfer the Recoverable Metals to the unallocated loco London account of the Customer with a member of the London Bullion Market Association, or

 

8.1.4                                             Customer may instruct the Refiner to transfer the Recoverable Metals to the unallocated loco London account of a nominated third party held with a member of the London Bullion Market Association.

 

8.2                                                   In the case of Clauses 8.1.2, 8.1.3 and 8.1.4 above, Customer will have the right, prior to receipt of the Shipment concerned, to give irrevocable instructions, in writing, to the Refiner that the Recoverable Metals are to be so transferred and to request the Refiner to confirm, in writing to the nominated recipient that it is in receipt of such instructions from the Customer and will act irrevocably in accordance with them.  For the avoidance of doubt, any such instructions remain subject to the terms of this Agreement, including Section 9.4 hereof.

 

8.3                                                   Customer will provide fourteen (14) days written notice, prior to receipt of the Shipment concerned, to the Refiner to switch locations for the metal credits. In addition, any changes to the settlement option being used must be notified to the Refiner prior to receipt of the Shipment concerned.

 

8.4                                                   In the event Customer elects to sell the payable gold and/or silver contents of the Material to the Refiner, it may price these with the Refiner on or after the Metal Availability Date referred to in Clause 7, using a price basis agreed with the Refiner.

 

8.5                                                   Customer may set off or withhold payment of money due to Refiner until all amounts of money or Recoverable Metals due from Refiner to Customer have been paid or delivered. Interest shall accrue on late payments or deliveries at 3% per annum above the Fed Funds daily rate from time to time from the date of the payment or delivery was due to the date of payment or delivery (before and after judgment).  Refiner acknowledges that its business dealings with the Customer constitute a single

 

 

continuous transaction, notwithstanding the issuance of separate purchase orders, acknowledgments, or similar documents from time to time.

 

9.              Charges

 

The Customer shall pay the Refiner’s charges as follows:

 

9.1.         Treatment:

 

US$0.75 per troy ounce of Material received.

 

9.2.         All charges due to the Refiner in accordance with this Clause 9 shall be invoiced in United States dollars by the Refiner at the time of delivery of the Recoverable Metals as provided in Clause 7, and shall be payable by the Customer within fifteen (15) working days of receipt of the Refiner’s invoice therefore in accordance with the Refiner’s payment instructions.

 

9.3.         The Refiner may setoff or withhold delivery or payment of metal or money due to Customer until all amounts due from Customer to Refiner have been paid. Interest shall accrue on late payments at 3% per annum above the Fed Funds daily rate from time to time from the date of invoice to the date of payment (before and after judgment).  Customer acknowledges that its business dealings with Refiner constitute a single continuous transaction, notwithstanding the issuance of separate purchase orders, acknowledgments, or similar documents from time to time.

 

10.       Deleterious Elements

 

10.1.                                             The Customer shall notify the Refiner in advance of delivery if any Material proposed to be sent to the Refiner contains any of the deleterious elements referred to in this clause. The Customer shall regularly sample the Doré on site and send such sample to the Refiner on occasion to check the levels of deleterious elements in the sampled lot. The Refiner and Customer shall communicate to ensure that each lot has acceptable levels of deleterious elements before leaving the Mine.

 

10.2.                                             Unless prior written agreement is given the Refiner may reject any Material containing in excess of the maximum limits of deleterious elements set out herein (defined, for each element, as the level just below the level that is “to be agreed prior to shipment”). The Refiner shall have no liability for such rejection.  The Customer shall, at its expense, remove any rejected Material from the Refinery.

 

10.3.                                             The Refiner may make additional charges as set out in Clause 10.4 if the free limit in respect of any element referred to below is exceeded.  The Refiner will notify the Customer of such additional charges when the nature and proportion of any such element is determined. Charges will only be levied on melts that have exceeded these limits.

 

 

10.4.                                             The elements, ranges, and related penalty amounts are:

 

	
Element
    	
 
    	
Range (PPM)
    	
 
    	
Penalty (US$ per ounce net weight received)
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Bismuth
    	
 
    	
0 - less than 50
    	
 
    	
Free
    
	
 
    	
 
    	
50 — less than 200
    	
 
    	
0.04
    
	
 
    	
 
    	
200 — less than 1,000
    	
 
    	
0.06
    
	
 
    	
 
    	
1000 —less than 2,000
    	
 
    	
0.09
    
	
 
    	
 
    	
2,000 and above
    	
 
    	
to be agreed prior to shipment
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Mercury
    	
 
    	
0 — less than 200
    	
 
    	
Free
    
	
 
    	
 
    	
200 — less than 500
    	
 
    	
0.10
    
	
 
    	
 
    	
500 — less than 750
    	
 
    	
0.20
    
	
 
    	
 
    	
750 and above
    	
 
    	
to be agreed prior to shipment
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Tellurium
    	
 
    	
0 — less than 1,000
    	
 
    	
Free
    
	
 
    	
 
    	
1,000 — less than 5,000
    	
 
    	
0.06
    
	
 
    	
 
    	
5,000 and above
    	
 
    	
to be agreed prior to shipment
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Cadmium
    	
 
    	
0 — less than 500
    	
 
    	
Free
    
	
 
    	
 
    	
500 — less than 1,000
    	
 
    	
0.06
    
	
 
    	
 
    	
1,000 — less than 2,500
    	
 
    	
0.10
    
	
 
    	
 
    	
2,500 and above
    	
 
    	
to be agreed prior to shipment
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Tin
    	
 
    	
0 — less than 5,000
    	
 
    	
Free
    
	
 
    	
 
    	
5,000 — less than 10,000
    	
 
    	
0.06
    
	
 
    	
 
    	
10,000 and above
    	
 
    	
to be agreed prior to shipment
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Arsenic
    	
 
    	
0 — less than 500
    	
 
    	
Free
    
	
 
    	
 
    	
500 — less than 1,000
    	
 
    	
0.06
    
	
 
    	
 
    	
1,000 — less than 2,500
    	
 
    	
0.10
    
	
 
    	
 
    	
2,500 and above
    	
 
    	
to be agreed prior to shipment
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Lead
    	
 
    	
0 — less than 5,000
    	
 
    	
Free
    
	
 
    	
 
    	
5,000 — less than 10,000
    	
 
    	
0.06
    
	
 
    	
 
    	
10,000 — less than 20,000
    	
 
    	
0.08
    
	
 
    	
 
    	
20,000 and above
    	
 
    	
to be agreed prior to shipment
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Selenium
    	
 
    	
0 — less than 10,000
    	
 
    	
Free
    
	
 
    	
 
    	
10,000 — less than 20,000
    	
 
    	
0.03
    
	
 
    	
 
    	
20,000 — less than 30,000
    	
 
    	
0.06
    
	
 
    	
 
    	
30,000 and above
    	
 
    	
to be agreed prior to shipment
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Sulphur
    	
 
    	
0 — less than 10,000
    	
 
    	
Free
    
	
 
    	
 
    	
10,000 — less than 30,000
    	
 
    	
0.03
    
	
 
    	
 
    	
30,000 — less than 50,000
    	
 
    	
0.06
    

 

 

	
 
    	
 
    	
50,000 and above
    	
 
    	
to be agreed prior to shipment
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Nickel
    	
 
    	
0 — less than 10,000
    	
 
    	
Free
    
	
 
    	
 
    	
10,000 — less than 20,000
    	
 
    	
0.03
    
	
 
    	
 
    	
20,000 and above
    	
 
    	
to be agreed prior to shipment
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Zinc
    	
 
    	
0 — less than 50,000
    	
 
    	
Free
    
	
 
    	
 
    	
50,000 — less than 75,000
    	
 
    	
0.03
    
	
 
    	
 
    	
75,000 and above
    	
 
    	
to be agreed prior to shipment
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Iron
    	
 
    	
0 — less than 10,000
    	
 
    	
Free
    
	
 
    	
 
    	
10,000 — less than 20,000
    	
 
    	
0.03
    
	
 
    	
 
    	
20,000 and above
    	
 
    	
to be agreed prior to shipment
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Copper
    	
 
    	
0 — less than 50,000
    	
 
    	
Free
    
	
 
    	
 
    	
50,000 — less than 75,000
    	
 
    	
0.03
    
	
 
    	
 
    	
75,000 — less than 100,000
    	
 
    	
0.04
    
	
 
    	
 
    	
100,000 and above
    	
 
    	
to be agreed prior to shipment
    

 

On no account can the Refiner accept Material that is radioactive or which contains Beryllium or is a hazardous waste, which, for purposes of this Section 10.4, shall be deemed to be contaminated with an unacceptable level of deleterious elements.  Material that shows any signs of having been quenched in water to aid cooling may be subject to additional charges and/or rejection for safety reasons.  The above restrictions are subject to adjustment at Refiner’s reasonable discretion and Refiner may reject, return and/or quarantine Material with properties that it deems constitute an exceptional safety or environmental risk.

 

11.       Indemnities

 

11.1.                                             Customer shall indemnify and hold harmless Refiner against all actions, proceedings, losses, claims, costs, damages and/or expenses whatsoever (a “Loss”) in respect of:

 

(a)                                 loss of life, personal injury or damage to property resulting from the Material containing in excess of the maximum limits of deleterious elements set forth in  Section 10.4 of this Agreement or from any false or misleading information given or supplied by Customer in connection with the Services, except to the extent the Loss arises as a direct result of negligence by Refiner or those in Refiner’s employ.  For the avoidance of doubt, prior to Refiner’s receipt of the results of its assay for the Material, it shall not be negligent for Refiner, and Refiner shall be entitled, to rely upon Customer’s notice (or lack thereof) of the types and amounts of deleterious elements present in the Shipment;

 

(b)                                 failure by the Customer to comply with any applicable law or regulation in relation to Material shipped to Refiner by Customer, except to

 

 

the extent that such Loss arises directly from any action or failure to act of the Refiner or those in Refiner’s employ.  For the avoidance of doubt, prior to Refiner’s receipt of the results of its assay for the Material, Refiner shall be entitled to rely upon Customer’s notice (or lack thereof) of the types and amounts of deleterious elements present in the Shipment; and

 

(c)                                  Customer’s warranty of ownership of the Material being untrue in any respect.

 

11.2.                                             Refiner shall indemnify and hold harmless Customer against all Loss in respect of:

 

(a)                                 loss of life, personal injury or damage to property resulting from the performance of the Services, except to the extent the Loss arises as a direct result of negligence by the Customer, those in Customer’s employ, or those contracted by Customer (other than Refiner); and

 

(b)                                 failure by the Refiner to comply with any applicable law or regulation in the performance of the Services, except to the extent that such Loss arises directly from any action or failure to act of the Customer, those in Customer’s employ, or those contracted by Customer (other than Refiner).

 

12.       Limitations of Liability

 

12.1.                                             Refiner’s sole obligation in respect of a claim arising from the fact that the Recoverable Metals content of any Material has been lost, damaged, destroyed or depleted while the Refiner is at risk for the Material including, without limitation, where such loss, damage, destruction or depletion arises as a result of negligence by the Refiner or theft (a “Lost Metal Claim”) shall be either (at Refiner’s option) (a) to replace the quantity of Recoverable Metal lost; or (b) to pay to the Customer monetary compensation in an amount equal to the value of such Recoverable Metals determined using the market prices on the date of the loss for such Recoverable Metals. Refiner shall deliver the replacement Recoverable Metals or pay the monetary compensation no later than two (2) working days after the Metal Availability Date otherwise applicable to the lost Material.

 

12.2.                                             Neither Refiner nor Customer shall in any circumstances (whether in contract, tort (including negligence) or otherwise) be liable to the other for (a) loss of profit (whether direct or indirect) or for any indirect, special, contingent or consequential damages or losses (whether for loss of business, loss of contracts, depletion of goodwill, losses arising from market fluctuations or otherwise) arising out of, or in connection with, this Agreement or the provision of (or failure or delay in providing) the Services; or (b) damage to property or persons resulting from the provision of (or failure or delay in providing) the Services.

 

 

13.       Entire Agreement

 

13.1.                                             This Agreement sets out the entire agreement between the Parties, supersedes all prior agreements and understandings and shall not be altered or modified except in writing signed by the Parties.

 

14.       Term

 

14.1.                                             This Agreement shall be deemed effective on 1st January, 2014 (the “Effective Date”) and, subject to Clause 14.2, shall remain in effect in respect of all Material delivered to the Refiner until 31st December 2015.

 

14.2.                                             In the event of a breach that cannot be resolved by good faith negotiation, this Agreement may be terminated at any time by either Party, upon giving not less than 90 days prior notice in writing to the other. The Parties agree that the remedy of termination provided herein is not exclusive of any other remedy in this Agreement and each remedy shall be cumulative and shall be in addition to every other remedy in this Agreement.

 

14.3.                                             The Customer shall not be in breach of this Agreement if there is any failure of its performance to produce Material due to low gold and/or silver prices and/or diminished reserves or ore grades or reduced or ceasing of production for whatsoever reason.

 

14.4.                                             Either Party shall have the right to terminate this Agreement by giving the other Party not less than five (5) working days written notice in the event that:

 

(a)                                 a Party fails to perform its obligations under this Agreement and such failure to perform continues for a period of thirty (30) days following notice of such failure;

 

(b)                                 a Party ceases or threatens to cease to carry on business in the ordinary course;

 

(c)                                  a Party admits its inability to pay its debts generally as they become due or otherwise acknowledges its insolvency; or

 

(d)                                 a Party initiates or has initiated against it insolvency proceedings.

 

15.       Assignment

 

Neither Party hereto shall have the right to assign their interests in this Agreement or their rights, duties and obligations hereunder, without the prior written consent of the other Party, which consent shall not be unreasonably conditioned or withheld.  This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective successors and permitted assigns.

 

 

16.       Definition - Working Day

 

For the purposes of this Agreement, “working day” means any day, which is not a Saturday, Sunday or a public holiday in the United States of America.

 

17.       Notices

 

17.1.                                             Any notice or other communication under this Agreement shall be in writing and shall be addressed as follows:

 

If to the Customer, to:

 

McEwen Mining Inc.

181 Bay Street, Suite 4750

Toronto, ON  M5J 2T3

Attn :                                                                 CFO

Telephone :                                +1 647 258 0395

Facsimile :                                      +1 647 258 0408

 

If to the Refiner, to:

 

Johnson Matthey Gold & Silver Refining Inc.

4601 West 2100 South

Salt Lake City, Utah, 84120, USA

Attn:                                                                    General Manager

Facsimile:                                         + 1 801 973 7313

 

Copy to:

Johnson Matthey Inc

435 Devon Park Drive

Wayne, Pennsylvania 19087, USA

Attn:                                                                    Vice President, General Counsel & Secretary

Facsimile:                                         +1 610 971 3022

 

17.2.                                             All notices shall be given (a) by personal delivery, or (b) by electronic communication, with a confirmation sent by registered or certified mail return receipt requested, or (c) by registered or certified mail return receipt requested.

 

17.3.                                             All notices shall be effective and shall be deemed given (a) if given by personal delivery on the date of delivery if delivered during normal business hours, and, if not delivered during normal business hours, on the next business day following delivery, (b) if given by electronic communication on the next business day following receipt of the electronic communication, and (c) if given solely by mail on the next business day after actual receipt.  A Party may change its address by notice given pursuant to this Clause 17 to the other Party.

 

 

18.       Arbitration

 

18.1.                                             If any dispute, controversy or claim arises out of or in connection with this Agreement, the Parties shall use their best efforts to settle it by friendly negotiation before pursuing any other remedies available to them.

 

18.2.                                             If either Party fails or refuses to participate in such negotiations or if, in any event, the dispute, controversy or claim is not resolved to the satisfaction of both Parties within 21 days after it has arisen, any such dispute, controversy or claim shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce, by a single arbitrator appointed in accordance with such rules.

 

18.3.                                             The substantive law of the Agreement for the purposes of any arbitration shall be the law of the State of New York, United States of America without giving effect to its principles of conflict of laws.

 

18.4.                                             The arbitrator shall be empowered to make orders for interim relief on the application of either Party, which shall in all cases be final and binding on the Parties. The place of the arbitration shall be Salt Lake City. The language of the arbitrator shall be English.

 

19.       Amendment

 

This Agreement may not be amended or modified except by instrument in writing executed on behalf of each of the Parties hereto.

 

20.       Counterparts

 

This Agreement may be executed in counterparts with the same force and effect as if the Parties had executed one instrument, and each counterpart will constitute an original thereof.  This Agreement and counterparts thereof may be delivered by facsimile and when so delivered will be deemed to be an original.

 

21.       Confidentiality

 

Unless such disclosure is required by law or the applicable rules of a stock exchange, neither Party hereto will disclose the refining charges or settlement terms of this Agreement, nor any information that would reveal such terms, nor any processing arrangements under this Agreement, nor any other information, data and knowledge  that is specific to this Agreement.

 

22.       Governing Law

 

The substantive law of this Agreement shall be the laws of the State of New York, United States of America, without regard to its principles of conflict of laws.  The

 

 

Parties hereby exclude the application of the United Nations Convention in Agreements for the International Sale of Goods.

 

23.       Independent Contractor

 

Nothing in this Agreement shall be construed to create a partnership, joint venture, or other business relationship between the Parties. The Refiner is an independent contractor and will be solely responsible for the performance of its obligations under this Agreement.

 

24.       Compliance with Law

 

In the performance of their respective obligations under this Agreement, each of the Refiner and the Customer shall comply with all applicable federal, state, provincial, municipal, and local laws, regulations, ordinances, orders, rules, decrees, and amendments thereto, including, but not limited to all such laws, regulations, ordinances, orders, rules, decrees, and amendments thereto aimed at reclamation or restoration of property; abatement of pollution; protection of the environment; protection of wildlife, including endangered species; ensuring public safety from environmental hazards; protection of cultural or historic resources; management, storage or control of hazardous materials and dangerous substances; releases or threatened releases of pollutants, contaminants, chemicals or industrial, toxic, dangerous or hazardous substances as wastes into the environment, including without limitation, ambient air, surface water and groundwater; and all other such laws, regulations, ordinances, orders, rules, decrees, and amendments thereto relating to the manufacturing, processing, distribution, use, treatment, storage, disposal, handling or transport of pollutants, contaminants, chemicals or industrial, toxic, dangerous or hazardous substances or wastes.

 

25.       Force Majeure

 

Force Majeure means any event beyond Refiner’s or Customer’s reasonable control which is unforeseen or, if foreseen, unavoidable, arising after this Agreement comes into force which prevents, hinders or delays the total or partial performance of the Agreement including without limitation Acts of God, natural catastrophes, strikes, lockouts, fire, flood, war (declared or not), inability to obtain utilities, chemicals or raw materials. Neither Party shall be liable for non-fulfillment of its obligations to the extent such non-fulfillment is due to a Force Majeure event provided the affected Party notifies the other in writing as soon as reasonably practicable after becoming aware of the same and, in any event, within 10 days. If either Party declares a Force Majeure event, the Parties shall negotiate in good faith to extend or modify the performance of the obligations of the Party affected by the event of Force Majeure as appropriate. The affected Party must notify the other Party in writing of the cessation of the Force Majeure event as soon as reasonably practicable after becoming aware of the same and, in any event, within 10 days. If a Force Majeure event lasts for 30

 

 

days or more from the date of the first notice, the unaffected Party may, if no other agreement is reached and without prejudice to any rights or obligations already accrued to either Party, terminate the Agreement immediately by written notice to the other Party.  If a Force Majeure event affects the Refinery, the Refiner shall not be obligated to allocate its provision of Services to Customer on a pro rata basis; provided, however, that to the extent that the Refiner is unable or determines not to refine the Customer’s Material, the Customer shall be entitled to deliver the Material to other refiners or refineries for refining without liability to the Refiner.

 

26.       General

 

26.1.                                            Headings are for convenience of reference and do not affect the interpretation of this Agreement.

 

26.2.                                             If any provision of this Agreement shall be or become illegal or unenforceable in whole or in part for any reason whatsoever, the remaining provisions shall nevertheless be deemed valid, binding and subsisting.

 

26.3.                                             The waiver by either Party of any breach of a provision of this Agreement shall not prevent the subsequent enforcement of that provision or be deemed a waiver of any subsequent breach of that or another provision.

 

26.4.                                             There are no third party beneficiaries of this Agreement.

 

THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOLLOWS

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the Effective Date, regardless of the date signed.

 

	
For:
    	
Johnson Matthey   Gold & Silver Refining Inc.
    
	
 
    	
Precious Metal Products   Division
    

 

 

	
 
    	
/s/ Grant Angwin
    	
January 6, 2014
    
	
 
    	
 
    	
 
    	
Date: 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Commercial Director
    	
 
    
	
Title:
    	
 
    	
 
    	
 
    

 

 

	
For:
    	
McEwen Mining Inc
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
/s/ Perry Ing
    	
December 18, 2013
    
	
 
    	
 
    	
 
    	
Date: 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Chief Financial Officer
    	
 
    
	
Title:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
/s/ Nils Engelstad
    	
December 18, 2013
    
	
Witnessed by:
    	
 
    	
 
    	
Date: 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
VP General Counsel & Secretary
    	
 
    
	
Title:
    	
 
    	
 
    	
 
    
						

 

 

Appendix 1

 

WEIGHING AND SAMPLING PROCEDURE FOR

 GOLD AND SILVER DORÉ

 

1,                                                                                      General

 

Weighing and sampling will be carried out at Johnson Matthey Inc., Salt Lake City, USA works.  The sampling will be final for all contractual purposes.

 

The Customer has the right to be represented at these operations at its own expense, either by use of an agreed independent representative company or an employee of the Customer.

 

2.                                                                                      Weighing

 

2.1                               On arrival of the Material, visual inspection of the seals will take place and the gross weight of the Material and packing will be determined and compared with the advised gross weight.  Any difference in excess of 1% (one percent) of the gross weight as stated in the Commercial Invoice between the gross weight as stated in the Commercial Invoice and the gross weight determined by the Refiner, or the detection of damaged packaging, will be reported to the Customer or its representative immediately.

 

In the case of a representative not being present, the Material will be placed in a secure vault pending arrival of the representative, or a decision to proceed or otherwise, in writing, from the Customer.

 

2.2                               The net weight of the Material shall be determined by removing the Material from the packing and individually weighing each Dore bar on a Class II balance having a tolerance of +/-1 (one) gram.

 

In the case of a difference greater than 0.2% of the net weight of any Dore bar as stated in the Commercial Invoice between the net weight of such Dore bar as stated in the Commercial Invoice and as determined by the Refiner, such Dore bar will be held in a secure vault pending advice from the Customer to proceed or otherwise, in writing.

 

3.                                      Melting

 

3.1                               Melts of up to 3,000 ounces troy will be covered with charcoal/borax to prevent oxidation and raised to a temperature of 100oC above the melt point of the material.

 

 

3.2                               When the melt is completely molten and has been allowed to stir vigorously by the induced current, the flux cover will be removed and reserved.

 

3.3                               Pin samples will be taken from the molten mass, by use of a vacuum tube, as follows:

 

2                                         samples for the Refiner to analyse,

2                                         samples to be held by the Refiner in case of a reserve analysis or recourse to an independent third party, and

1                                         sample for the Customer or its representative.

 

3.4                               The agreed net weight will be arrived at by adding the weight of the after melt bars together with any samples retained by the Refiner.  This will be the final after melt weight.  Any samples that the Customer or its representative takes will not constitute payable settlement weight.

 

4.                                                                                      Slag Sampling

 

The slags and pot scrapings will be remelted and any grain bars produced during this operation will be weighed and added to the final after melt weight.  Any grain bars weighing in excess of 5 troy ounces will be assayed separately.  All slags will be kept until agreement of assays and then disposed of.

 

5.                                                                                      Assaying and Settlement Procedure

 

Assaying will be by the classical fire assay method.

 

5.1                               The Refiner and the Customer will exchange assays by registered mail, on a date agreed in advance.  The day after the date on which the Parties have agreed to make the exchange, the Refiner and the Customer will exchange said assays by e-mail, telephone or fax.

 

The splitting limit for gold shall be 0.05%

 

The splitting limit for silver shall be 0.20%.

 

If the assay results exchanged are within the splitting limits described, the arithmetic mean of the results will be the settlement assay

 

If the exchange assays are outside the splitting limits and agreement cannot be reached, either Party may request umpire analysis by one of the independent assayers listed in Appendix 2 to this Agreement.  The independent assayers shall act as an expert and not an arbitrator.  The Party whose assay is closer to the umpire shall be the final assay.  The cost of the umpire assay shall be borne by the Party whose assay is further from the umpire assay.

 

 

In the event that the umpire assay equals the arithmetic mean of the assays, the umpire assay shall be the final assay and the cost of such umpire assay shall be borne equally by the Parties.

 

 

Appendix 2

 

Independent Samplers and Assayers Acceptable to the Parties

 

Alfred H. Knight Int’l Ltd.

Eccleston Grange

Prescott Road

St. Helens

Merseyside WA10 3BQ England

Tel:  +44 1744 733757

Fax:  +44 1744 27062

 

Alfred H. Knight North America Ltd.

130 Tradd Street

Spartanburg, SC 29304

Tel: 864 595 1903

Fax: 864 595 1627

 

Alex Stewart (Assayers) Ltd

314 Route 22 West, Suite C

Greenbrook, NJ, 08812

Tel:         732 529 4408

Fax:        732 529 4411

 

Ledoux & Company

359 Alfred Avenue

Teaneck, NJ, 07666

Tel: 201 837 7160

Fax: 201 837 1235

 

Umpire & Control Services

359 Alfred Avenue

Teaneck, NJ, 07666

Tel: 201 837 7160

Fax: 201 837 1235

 

 

Certificate of Compliance

with

Conflict Minerals and Patriot Act Anti Money-Laundering Regulations

 

Customer certifies:

 

i)                      that all the Material delivered under this contract has been mined from the El Gallo Mine owned and operated by Customer, its affiliates and/or subsidiaries;

 

ii)                     that none of the funds generated from the sale of its production are used either directly or indirectly to:

                                        a) support any forms of conflict or human rights abuses, and

                                        b) finance  illegal activities of any sort;

 

iii)                    that, in the event the region from which the Material is produced, or through which the Material is transported, is defined as a conflict-affected or high-risk area by an LBMA-accepted authority, the Customer will immediately adopt and commit to a supply chain policy for identifying and managing risks for gold potentially from conflict-affected and high-risk areas as outlined in the OECD Due Diligence Guidance for Minerals from Conflict-Affected and High-Risk Areas and the associated Supplement on Gold.

 

	
For:
    	
McEwen Mining Inc
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
/s/ Perry Ing
    	
December 18, 2013
    
	
 
    	
 
    	
 
    	
Date: 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Chief Financial Officer
    	
 
    
	
Title:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
/s/ Nils Engelstad
    	
December 18, 2013
    
	
Witnessed by:
    	
 
    	
 
    	
Date: 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
VP General Counsel & Secretary
    	
 
    
	
Title:Exhibit 10.9

 

FIRST AMENDMENT TO

MINING PRODUCTION WORK AGREEMENT

 

THIS FIRST AMENDMENT TO MINING PRODUCTION WORK AGREEMENT (“First Amendment”) is entered into as of Sept 23 2013, by and between COMPANIA MINERA PANGEA SA DE CV, (“Contracting Party”), and EXPLORACIONES MINERAS DEL DESIERTO SA DE CV, a, (“Contractor”).  In addition, MCEWEN MINING INC., a Colorado corporation, (“McEwen”) is party to this First Amendment only for purposes of issuing shares of its common stock to Contractor pursuant to the terms of this First Amendment.

 

RECITALS:

 

A.                                    Contracting Party and Contractor entered into that certain Mining Production Work Agreement dated as of October 15, 2011 (“Agreement”) pertaining to the mineral production work to be completed by Contractor at the project known as El Magistral (the “Project”).  Capitalized terms not otherwise defined herein shall have the meanings set forth in the Contract.

 

B.                                    With the letter dated January 2, 2013, Contracting Party and Contractor agreed to increase the price per tonne as described in the letter (“Letter”), which is attached hereto as Exhibit A.

 

C.                                    Contracting Party and Contractor desire to amend the Agreement on the terms and conditions of this First Amendment.

 

NOW THEREFORE, in consideration of the Recitals, which are incorporated in and made a part of this First Amendment, and other good and valuable consideration, the parties agree as follows:

 

1.                                      Increased Production Program.  For the six (6) month period(the “Term”) beginning September, 1, 2013(the “effective Date”) (unless earlier terminated under Paragraph 3 herein or extended by written agreement), it is agreed that Contractor will increase the production program of 30,000 tonnes per day to a maximum of 42,000 tons per day.  Beginning on the Effective Date, the price per ton above 30,000 tonnes per day will be paid for at a price of $1.50/ton.  If the production is less than 30,000 tons for reasons attributable to Contractor, the price will be $1.45/ton.  In both cases the price is plus adjustment for distances over 1,500 meters as stated in the Agreement.  The maximum estimated production program will be integrated as provided in the table attached hereto as Exhibit B.

 

2.                                      Payment Method for Increased Production Program.  Of total monthly surplus tons over 30,000 tons per day 50% of the payment due will be deferred until March 30, 2014 (with no payment of interest) and the other 50% of payment due (before taking into account any applicable taxes) will be paid by the issuance of shares of common stock of McEwen (the “Shares”) to Contractor.  Contractor shall deliver a monthly statement of production (“Production Statement”) to Contracting Party no later than five business days after the last day

 

 

of each month during the Term, which displays the total production for the month, the applicable price per tonne, and the total amount owed to Contractor.  Concurrent with the delivery of the Production Statement, Contractor must deliver to Contracting Party and McEwen a Notice and Agreement of Share Issuance, substantially in the form attached hereto as Exhibit C, specifying the number of Shares owed to Contractor for the applicable month; as well, an invoice for the 50% deferred payments (which for certainty, will include any applicable taxes on the 100% of the funds due to Contractor). The deferred payment shall be payable in full(with no interest) within thirty (30) days following the end of the Term.  The Shares shall be issued to Contractor within 30 days of McEwen’s receipt of the Notice and Agreement of Share Issuance.  The number of Shares to be issued in the applicable month will be determined by dividing the dollar amount owed to Contractor that is to be paid in Shares by the final closing price of McEwen’s common stock on the last of the month in which the NYSE is open for business that corresponds to the month for which the payment is due (“Share Price”).

 

3.                                      Maximum Shares Issued.  Notwithstanding anything to contrary, the maximum number of Shares to be issued under this First Amendment shall be 2,500,000 Shares.  This First Amendment shall automatically terminate upon issuance of 2,500,000 Shares hereunder.

 

4.                                      Contractor Representations and Warranties.  Contractor represents that the Shares are being acquired for Contractor’s own account and for investment purposes only, and without the intention of reselling or redistributing the same in violation of applicable securities laws; Contractor has made no agreement with others regarding the transfer, assignment or distribution of the Shares.

 

The Shares have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”) and may not be offered or sold (including hedging transactions involving such securities) in the United States or to any U.S. Person (as defined in Rule 902 of Regulation S adopted under the Securities Act), unless the securities are registered under the Securities Act and all applicable state securities laws or an exemption from such registration requirements is available.

 

No representation has been made by or on behalf of McEwen as to the applicable minimum statutory hold period for the Shares.  McEwen is under no further obligation to register the Shares or file a prospectus qualifying the distribution of the Shares or to take any other action to allow Contractor to sell the Shares.

 

Contractor understands that the certificates representing the Shares will bear a legend substantially in the following form:

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY OTHER FEDERAL, PROVINCIAL OR STATE SECURITIES LAWS.  THESE SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULES 901 THROUGH 905 OF REGULATION S UNDER THE SECURITIES ACT, (B) IN

 

2

 

COMPLIANCE WITH RULE 144 OR 144A THEREUNDER, IF AVAILABLE, AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, (C) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR (D) IN ANOTHER TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS, AND THE HOLDER HAS, PRIOR TO SUCH SALE, FURNISHED TO MCEWEN AN OPINION OF COUNSEL OR OTHER EVIDENCE OF EXEMPTION, IN EITHER CASE REASONABLY SATISFACTORY TO MCEWEN.  HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE LISTED ON THE TORONTO STOCK EXCHANGE (“TSX”); HOWEVER, THE SAID SECURITIES CANNOT BE TRADED THROUGH THE FACILITIES OF TSX SINCE THEY ARE NOT FREELY TRANSFERABLE, AND CONSEQUENTLY ANY CERTIFICATE REPRESENTING SUCH SECURITIES IS NOT “GOOD DELIVERY” IN SETTLEMENT OF TRANSACTIONS ON TSX.

 

McEwen agrees to use reasonable commercial efforts to assist Contractor in obtaining the removal of the foregoing legends upon the expiry of the applicable statutory holding periods.

 

The Shares are speculative in nature and there are risks associated with the acquisition thereof, and Contractor has such knowledge, sophistication and experience in business and financial matters as to be capable of evaluating the merits and risks of its investment in the Shares, fully understands the speculative nature of the Shares and is able to bear the economic risk of loss of its entire investment.

 

Contractor has not received or been provided with a prospectus, offering memorandum or any sales or advertising literature in connection with this First Amendment or the acquisition of the Shares.  However, Contractor has had the opportunity to review the periodic reports filed by McEwen with the U.S. Securities and Exchange Commission (“SEC”), including its annual report on Form 10-K for the year ended December 31, 2012, its quarterly reports on Form 10-Q for the quarters ended March 31 and June 30, 2013, its current reports on Form 8-K filed during 2013 and its proxy statement for the annual meeting of shareholders for 2013 (the “Periodic Reports”).  Contractor’s decision to enter into this First Amendment was not based upon, and Contractor has not relied upon, any verbal or written representations concerning the Shares made by or on behalf of McEwen other than the information contained in the Periodic Reports.

 

McEwen and its counsel are relying on the representations, warranties and covenants of Contractor’s contained in this Paragraph of the First Amendment and Contractor agrees to indemnify McEwen, and each of its directors, officers, employees, agents and representatives against all losses, claims, costs, expenses, damages or liabilities which any of them may suffer or incur as a result of or arising from reliance thereon.

 

3

 

Contractor hereby represents and warrants to, and covenants with, McEwen as follows as at the date hereof:

 

(a)                                 Contractor is not a person in the United States nor a U.S. Person (as defined in Rule 902(k) of Regulation S under the Securities Act) and not purchasing the Shares on behalf of a person in the United States or a U.S. Person;

 

(b)                                 Contractor has its head office in Mexico and is organized under the laws of Mexico.

 

(c)                                  The Shares have not been offered to Contractor in the United States and that this First Amendment and any subsequent Notice and Agreement of Share Issuance has not been signed in the United States;

 

(d)                                 Contractor will not offer, sell or otherwise dispose of the Shares in the United States or to a U.S. Person unless (A) such offer, sale or disposition is made in accordance with an exemption from the registration requirements under the Securities Act and the securities laws of all applicable states of the United States or (B) the SEC has declared effective a registration statement in respect of such securities.

 

Contractor acknowledges and agrees that McEwen and its agents and advisors may each collect, use and disclose its name and other specified identifiable information (“Information”), including the number of Shares distributed to Contractor hereunder for purposes of meeting legal, regulatory and audit requirements and as otherwise permitted or required by law or regulation.  Contractor consents to the disclosure of that Information.  Such information is being collected for the purposes of completing the distribution of the Shares to Contractor which includes, without limitation, determining the eligibility of Contractor to receive the Shares under applicable securities laws, preparing and registering certificates representing the Shares to be issued hereunder and completing filings required under applicable securities laws and/or securities regulatory authorities.  Contractor hereby consents to the collection, use and disclosure of such Information.

 

By receiving the Shares, Contractor acknowledges (a) that Information concerning Contractor will be disclosed to the relevant Canadian securities regulatory authorities, including the Ontario Securities Commission (the “OSC”), and may become available to the public in accordance with the requirements of applicable securities and freedom of information laws and Contractor consents to the disclosure of the Information; (b) the Information is being collected indirectly by the applicable Canadian securities regulatory authority under the authority granted to it in securities legislation; and (c) the Information is being collected for the purposes of the administration and enforcement of the applicable Canadian securities legislation; by receiving the Shares, Contractor shall be deemed to have authorized such indirect collection of information by the relevant Canadian securities regulatory authorities.  Questions about such indirect collection of Information by the OSC should be directed to the Administrative Assistant to the Director of Corporate Finance, OSC, Suite 1903, Box 55, 20 Queen Street West, Toronto, Ontario M5H 3S8 or to the following telephone number (416) 593-8086.

 

4

 

5.                                      Governing Law.  This First Amendment shall be construed, interpreted and enforced in accordance with, and the respective rights and obligations of the parties shall be governed by United States law.

 

6.                                      Notices.  All notices or other communications required or permitted to be given under this First Amendment shall be sufficiently given if in writing and personally delivered, delivered by recognized courier service (such as Federal Express) or certified United States Mail, return receipt requested, or sent by e-mail transmission to the appropriate address set forth below.

 

If to McEwen:

 

McEwen Mining Inc.

181 Bay Street, Suite 4750

Box 792

Toronto, Ontario M5J 2T3

CANADA

Attention:  Nils Engelstad

nils@mcewenmining.com

 

If to Contracting Party:

 

Blvd. Antonio Rosales 855 Ote Altos 12

Col. Morelos

C.P. 81460

Guamuchil, Sinaloa, Mexico

 

If to Contractor:

 

Del cobre No. 95

Col. Parque Industrial

C.P. 83299

Hermosillo, Sonora, Mexico

 

7.                                      Survival and Ratification.  The Agreement and the Letter shall remain in full force and effect, fully binding on Contracting Party and Contractor and unmodified except as expressly provided herein.  The Agreement, as amended hereby, is hereby ratified and confirmed by Contracting Party and Contractor.

 

8.                                      Counterparts; Electronic Delivery.  This First Amendment may be executed in any number of counterparts, each of which shall be an original, but all of such counterparts shall together constitute one and the same document.  Delivery of an executed counterpart of this First

 

5

 

Amendment by facsimile, e-mail or by other electronic means shall be equally as effective as delivery of a manually executed counterpart of this First Amendment.

 

SIGNATURES ON THE FOLLOWING PAGE

 

6

 

IN WITNESS WHEREOF, the parties have executed this First Amendment to be effective as of the date first above written.

 

 

CONTRACTOR:

 

 

	
/s/ Euridice   Gonzalez
    	
 
    
	
 
    	
 
    
	
Euridice   Gonzalez
    	
 
    
	
Legal   Representative
    	
 
    
	
Compania   Minera Pangea S.A. de C.V.
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
CONTRACTING PARTY:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
/s/ Samuel Fraijo Flores
    	
 
    
	
 
    	
 
    
	
Samuel Fraijo Flores
    	
 
    
	
Legal Representative
    	
 
    
	
Exploaciones   del Desierto S.A de C.V.
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
MCEWEN:
    	
 
    
	
MCEWEN MINING INC.,
    	
 
    
	
a Colorado corporation
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
/s/ William A. Faust
    	
 
    
	
 
    	
 
    
	
COO. William A. Faust
    	
 
    
	
McEwen Mining
    	
 
    

 

7

 

EXHIBIT A

TO FIRST AMENDMENT TO

MINING PRODUCTION WORK AGREEMENT

 

See attached Letter.

 

8

 

2 de Enero 2013

 

Ing. Samuel Fraijo,

 

Espero que haya tenido una buena Navidad junto con su familia y amigos.

 

Recibí su carta del 4 de Diciembre del año en curso con sus propuestas de nuevos precios de minado . Entiendo que tanto sus costos como los nuestros están subiendo y que tenemos que alcanzar un acuerdo que sea benéfico para ambas empresas. EMD es el contratista más importante para Magistral y representa el 60% de los costos de nuestra operación durante 2012.

 

Como usted tiene conocimiento, el 2012 fue el primer año del contrato entre EMD y CMP. La tabla que sigue muestra las metas en términos de producción.

 

	
 
    	
 
    	
Year 1
    	
 
    	
Year 2
    	
 
    
	
LEACH 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Sagrado Corazon
    	
 
    	
220,000
    	
 
    	
220,000
    	
 
    
	
Lupita
    	
 
    	
577,000
    	
 
    	
577,000
    	
 
    
	
Samaniego
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Total
    	
 
    	
797,000
    	
 
    	
797,000
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
WASTE
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Sagrado Corazon
    	
 
    	
506,000
    	
 
    	
506,000
    	
 
    
	
Lupita
    	
 
    	
3,000,400
    	
 
    	
3,000,400
    	
 
    
	
Samaniego
    	
 
    	
5,806,667
    	
 
    	
5,806,667
    	
 
    
	
Total
    	
 
    	
9,313,067
    	
 
    	
9,313,067
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
TOTAL
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Sagrado Corazon
    	
 
    	
726,000
    	
 
    	
726,000
    	
 
    
	
Lupita
    	
 
    	
3,577,400
    	
 
    	
3,577,400
    	
 
    
	
Samaniego
    	
 
    	
5,806,667
    	
 
    	
5,806,667
    	
 
    
	
Total
    	
 
    	
10,110,067
    	
 
    	
10,110,067
    	
 
    

 

Es importante notar que la meta de 10.1 millones de toneladas no se logró y que terminaremos el año con un total de 9.0, es decir, con un déficit del 10%. Esperamos que en el 2013 podamos incrementar las toneladas para eliminar este déficit. Lo anterior se basa en los 10.1 millones de toneladas estipuladas por contrato en el segundo año de operaciones ya que para continuar el desarrollo de Magistral necesitamos minar alrededor 12.2 millón de toneladas.

 

Además de lo anterior, uno de los temas durante del año fue la baja disponibilidad de equipos basado en el 90% estipulado por contrato. Como tu sabes, en el 2012 no aplicamos ninguna penalización por baja disponibilidad, pero de acuerdo al contrato este concepto está pendiente de cubrir por su parte.

 

9

 

La siguiente tabla muestra los resultados por el segundo mitad de 2012:

 

	
 
    	
 
    	
PORCENTAJE DE DISPONIVILIDAD
    	
 
    
	
EQUIPO
    	
 
    	
JUNIO
    	
 
    	
JUUO
    	
 
    	
AGOSTO
    	
 
    	
SEPTIEMBRE
    	
 
    	
OCTUBRE
    	
 
    	
NOVIENBRE
    	
 
    
	
CARGADORES
    	
 
    	
38.16
    	
 
    	
67.2
    	
 
    	
68.75
    	
 
    	
71.6
    	
 
    	
60.59
    	
 
    	
63.78
    	
 
    
	
CAMIONES
    	
 
    	
75.37
    	
 
    	
70.24
    	
 
    	
65.31
    	
 
    	
60.00
    	
 
    	
84.02
    	
 
    	
78.86
    	
 
    
	
ROTARIAS
    	
 
    	
71.08
    	
 
    	
49.12
    	
 
    	
48.15
    	
 
    	
46.94
    	
 
    	
46.27
    	
 
    	
67.23
    	
 
    
	
EQIPO.AUX.
    	
 
    	
57.93
    	
 
    	
52.21
    	
 
    	
50.08
    	
 
    	
50.55
    	
 
    	
63.11
    	
 
    	
53.32
    	
 
    

 

Los datos que se tomaron para la fabricación de esta tabla son de equipo que habitualmente se está trabajando, dejando fuera equipo que esta en mina pero que nunca a trabajado, a continuación se nombran los criterios tomados por familia de equipo.

 

Cargadores.- Se tomaron los siguientes equipos (992 #204,  988F y 988H).

 

Camiones.- Se toman los (4) terex 100, los(2) 773, y (3)740, a partir de que estos llegaron.

 

Rotarias.- en la tabla entran DM45,DM30,780 y 720.

 

Equipo Auxiliar.- 3 tractores D8, 1 tractor D9, 2 tractores D6, 2motoniveladoras, 2 pipas de agua, excavadora.

 

La baja disponibilidad fue el elemento más significativo para el fracaso en alcanzar la meta de producción en 2012. Pangea necesita alcanzar sus metas de 2013 y para eso es indispensable que haya una mejoría en la disponibilidad y un reconocimiento de su parte que el mantenimiento de los equipos deben mejorar, así mismo queremos contar con la certeza de que su almacén cuenta con las refacciones y partes importantes para mantenimiento preventivo y correctivo.

 

También que las requisiciones de partes tengan un tiempo de respuesta razonable y que nuestro personal gerencial pueda autorizar la compra de partes cuando éstas sean urgentes y no sea necesario esperar a su autorización para proceder a la compra. Nosotros podemos comprar las partes y podemos pasarle a usted los costos sin cargo de administración. Sabemos por la experiencia en este año que los tiempos de respuesta de compra de partes ha sido lenta en más de muchas ocasiones. He podido notar que muchos de los equipos importantes no cuenta con un buen mantenimiento preventivo, ya que si bien en apariencia es equipo nuevo, tiene muchas horas de trabajo como ha sido el caso de los cargadores. Pienso que puede mejorar la inversión de mantenimiento si reemplaza el equipo con muchas horas de trabajo por equipo en mejores condiciones.

 

Por otro lado si hay equipos nuevos o semi-nuevos como los camiones, considero que es posible para EMD alcanzar mejor disponibilidad sin inversiones grandes en más mantenimiento.

 

Por estas razones estamos proponiendo tres casos de mejora de precios por 2013 que refleje el nivel de desempeño de EMD.

 

Por la producción de la mina la propuesta es la siguiente:

 

Caso 1: Si la disponibilidad de los equipos es un mínimo de 90% o el promedio de producción total de la mina diario es un mínimo de 33,000 toneladas por día.

 

Caso2: Si la disponibilidad de los equipos está entre 60% y 90% o el promedio de producción total de la mina diario es un mínimo de 30,000 toneladas por día.

 

10

 

Case 3: Si la disponibilidad es menor a 60% o el promedio de producción diario es menor a 28,000 toneladas por día.

 

La siguiente tabla muestra los precios () a pagar cada dos semanas basado en los cálculos por el mismo periodo:

 

	
 
    	
 
    	
Mineral y Esteril
    	
 
    	
Relleno Vegetal, Jales
    	
 
    
	
Concepto
    	
 
    	
Actual -2012
    	
 
    	
Caso 1- 2013
    	
 
    	
Caso 2 - 2013
    	
 
    	
Caso 3 - 2013
    	
 
    	
Actual -2012
    	
 
    	
2013
    	
 
    
	
Disponibilidad
    	
 
    	
 
    	
 
    	
>=90%
    	
 
    	
>=60%
    	
 
    	
<60%
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Tonelada por día de mina
    	
 
    	
 
    	
 
    	
>32,000
    	
 
    	
>30,000
    	
 
    	
>28,000
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Perforación
    	
 
    	
$
    	
0.22
    	
 
    	
$
    	
0.24
    	
 
    	
$
    	
0.230
    	
 
    	
$
    	
0.225
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Carga
    	
 
    	
$
    	
0.30
    	
 
    	
$
    	
0.32
    	
 
    	
$
    	
0.315
    	
 
    	
$
    	
0.310
    	
 
    	
$
    	
0.25
    	
 
    	
$
    	
0.26
    	
 
    
	
Acarreo(hasta 1,500 mts)
    	
 
    	
$
    	
0.70
    	
 
    	
$
    	
0.74
    	
 
    	
$
    	
0.735
    	
 
    	
$
    	
0.730
    	
 
    	
$
    	
0.70
    	
 
    	
$
    	
0.73
    	
 
    
	
Equipo Auxiliar
    	
 
    	
$
    	
0.18
    	
 
    	
$
    	
0.20
    	
 
    	
$
    	
0.190
    	
 
    	
$
    	
0.185
    	
 
    	
$
    	
0.18
    	
 
    	
$
    	
0.19
    	
 
    
	
Total
    	
 
    	
$
    	
1.40
    	
 
    	
$
    	
1.50
    	
 
    	
$
    	
1.470
    	
 
    	
$
    	
1.450
    	
 
    	
$
    	
1.13
    	
 
    	
$
    	
1.18
    	
 
    
	
% Incremento
    	
 
    	
 
    	
 
    	
7.1
    	
%
    	
5.0
    	
%
    	
3.6
    	
%
    	
 
    	
 
    	
4.4
    	
%
    

 

Para la producción de trituración la propuesta es la siguiente:

 

Caso 1: Si la disponibilidad de los equipos es un mínimo de 90% o el promedio de producción total de trituración diario es un mínimo de 3,400 toneladas por día.

 

Caso2: Si la disponibilidad de los equipos es entre 60% y 90% o el promedio de producción total de trituración diario es un mínimo de 3,000 toneladas por día.

 

Case 3: Si la disponibilidad es menos del 60% o el promedio de producción trituración diario es un mínimo de 2,800 toneladas por día.

 

La siguiente tabla muestra los precios a pagar cada dos semanas basados en los cálculos por el mismo periodo:

 

	
Concepto
    	
 
    	
Actual -2012
    	
 
    	
Caso 1 - 2013
    	
 
    	
Caso 2 - 2013
    	
 
    	
Caso 3 - 2013
    	
 
    
	
Disponibilidad
    	
 
    	
 
    	
 
    	
>=90%
    	
 
    	
>=60%
    	
 
    	
<60%
    	
 
    
	
Tonelada por día a   quebadora
    	
 
    	
 
    	
 
    	
>3,400
    	
 
    	
>3,000
    	
 
    	
>2,800
    	
 
    
	
Alimentación
    	
 
    	
$
    	
0.25
    	
 
    	
$
    	
0.27
    	
 
    	
$
    	
0.265
    	
 
    	
$
    	
0.260
    	
 
    
	
Carga de Mineral
    	
 
    	
$
    	
0.25
    	
 
    	
$
    	
0.27
    	
 
    	
$
    	
0.265
    	
 
    	
$
    	
0.260
    	
 
    
	
Acarreo de Mineral
    	
 
    	
$
    	
0.60
    	
 
    	
$
    	
0.64
    	
 
    	
$
    	
0.630
    	
 
    	
$
    	
0.620
    	
 
    
	
Extedido y Ripeado
    	
 
    	
$
    	
0.25
    	
 
    	
$
    	
0.27
    	
 
    	
$
    	
0.260
    	
 
    	
$
    	
0.260
    	
 
    
	
Equipo Auxiliar
    	
 
    	
$
    	
0.05
    	
 
    	
$
    	
0.05
    	
 
    	
$
    	
0.050
    	
 
    	
$
    	
0.050
    	
 
    
	
Total
    	
 
    	
$
    	
1.40
    	
 
    	
$
    	
1.50
    	
 
    	
$
    	
1.470
    	
 
    	
$
    	
1.450
    	
 
    
	
% Incremento
    	
 
    	
 
    	
 
    	
7.1
    	
%
    	
5.0
    	
%
    	
3.6
    	
%
    

 

11

 

En todos casos será un cálculo por separado cada 2 semanas que corresponda con las fechas que están publicados por CMP por las semanas en 2013, estamos proponiendo a esperar un mes o hasta 4 de Febrero a aplicar los nuevos precios en las tablas anteriores para cubrir la penalización por baja disponibilidad en 2012.

 

Por fin para tener más certeza en nuestros costos estamos proponiendo que el único ajuste de los costos de EMD será en enero con una nueva tabla de precios por tonelada.

 

Esperamos un prospero año Nuevo 2013 para ambas empresas y la disponibilidad de incrementar nuestra relación mercantil con el desarrollo del proyecto El Gallo fase 2.

 

	
 
    	
/s/ William A. Faust
    	
 
    
	
 
    	
William A. Faust
    	
 
    
	
 
    	
COO - McEwen Mining
    	
 
    

 

	
/s/ Euridice Gonzalez
    	
 
    	
/s/ Samuel Fraijo Flores
    
	
Euridice Gonzalez
    	
 
    	
Samuel Fraijo Flores
    
	
Representante LegaI
    	
Representante legal
    
	
Compañía Minera Pangea   S.A. de C.V.
    	
Exploraciones Mineras
    
	
 
    	
del Desierto S.A. de C.V.
    

 

12

 

EXHIBIT B

TO FIRST AMENDMENT TO

MINING PRODUCTION WORK AGREEMENT

 

	
Month
    	
 
    	
Tonnes
    	
 
    	
Tons with
   payment
   deferred until
   March 30,
   2014
    	
 
    	
Tons paid in
   shares
    	
 
    
	
September 2013
    	
 
    	
360,000
    	
 
    	
180,000
    	
 
    	
180,000
    	
 
    
	
October 2013
    	
 
    	
360,000
    	
 
    	
180,000
    	
 
    	
180,000
    	
 
    
	
November 2013
    	
 
    	
360,000
    	
 
    	
180,000
    	
 
    	
180,000
    	
 
    
	
December 2013
    	
 
    	
360,000
    	
 
    	
180,000
    	
 
    	
180,000
    	
 
    
	
January 2014
    	
 
    	
360,000
    	
 
    	
180,000
    	
 
    	
180,000
    	
 
    
	
February 2014
    	
 
    	
360,000
    	
 
    	
180,000
    	
 
    	
180,000
    	
 
    
	
Total
    	
 
    	
2,160,000
    	
 
    	
1,080,000
    	
 
    	
1,080,000
    	
 
    
	
USD/Ton
    	
 
    	
$
    	
1.50
    	
 
    	
$
    	
1.50
    	
 
    	
$
    	
1.50
    	
 
    
	
Amount
    	
 
    	
$
    	
3,240,000.00
    	
 
    	
$
    	
1,620,000.00
    	
 
    	
$
    	
1,620,000.00
    	
 
    

 

13

 

EXHIBIT C

TO FIRST AMENDMENT TO

MINING PRODUCTION WORK AGREEMENT

 

NOTICE AND AGREEMENT OF SHARE ISSUANCE

 

Contractor hereby provides notice of its request for issuance of Shares under the First Amendment to Mining Production Agreement dated August     , 2013 (the “First Amendment”) for the month of                         , 2013 as to                        shares of common stock of McEwen Mining Inc. (“Shares”), which has been calculated as follows:

 

	
$
    	
/
    	
 $
    	
=
    	
 
    
	
   Dollar Amount   owed
    	
 
    	
 Share Price
    	
 
    	
 # of Shares
    

 

Contractor understand that no Shares will be issued unless and until, in the opinion of McEwen Mining Inc. (“McEwen”), any applicable registration requirements of the Securities Act of 1933, as amended (the “Act”), and any applicable listing requirements of any securities exchange on which stock of the same class is then listed, and any other requirements of law or any regulatory bodies having jurisdiction over such issuance and delivery, shall have been fully complied with and approvals received.  Contractor hereby represents and warrants that all representations and warranties made in the First Amendment are true and correct as of the date set forth below.  Contractor further represents that the Share Price listed above equals the final closing price of shares of McEwen common stock (MUX) on the last business day of the month that corresponds to this Notice and Agreement of Share Issuance.

 

	
CONTRACTOR:
    	
 
    
	
 
    	
 
    
	
COMPANIA   MINERA PANGEA SA DE CV,
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Date:
    	
 
    	
 
    

 

14

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