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Schaft Creek Option
Copper Fox has an option agreement dated January 1, 2002 to:
- Acquire 100% of Teck Cominco's 'Direct Holding', defined as a 70% direct participating interest in the Schaft Creek Property, by:
- Incurring $5,000,000 in expenditures on or before December 31, 2006 and aggregate expenditures of $15,000.000 on or before December 31, 2011.
- Further acquire Teck Cominco's 'Indirect Holding' (defined as an indirect 23.4% carried interest through its 78% shareholding in Liard Copper Mines Ltd. who hold a 30% carried interest in the property) by incurring the above described $5,000,000 in expenditures and completing and delivering to Teck Cominco a positive bankable feasibility study.
If Copper Fox delivers a feasibility notice to Teck Cominco prior to completing the $15,000,000 in expenditures, Copper Fox will be deemed to have exercised the option as to Teck Cominco's Direct Holding in addition to having acquired the Indirect Holding.
- The option agreement has a time-limited back-in right exercisable by Teck Cominco within up to 120 days of the delivery of the positive feasibility study. If the back-in right is not exercised, and at Teck Cominco's option, CFM shall grant Teck Cominco a 1% net smelter royalty or, if CFM has assigned the option agreement to a public company whose shares are listed on a recognized stock exchange, shares of that company having a value of $1,000,000.
If Teck Cominco wishes to exercise its back-in right, it may earn;
- a 20% interest by matching prior incurred expenditures, or it may earn;
- a 40% interest by matching three times prior incurred expenditures, or it may earn
- a 75% interest by incurring four times prior expenditures and arranging all production financing.
The option agreement includes provisions for joint management and for dilution of interests in proportion to expenditures, including reversion of either party to a defined net profits royalty if that party's interest is diluted below a 20% working interest in the joint venture.
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