EX-4.11 11 ex4_11.htm

EXHIBIT 4.11



PROPERTY ACQUISITION AGREEMENT

made among

TECK COMINCO AMERICAN INCORPORATED

and

WHITE KNIGHT RESOURCES LTD.

and

WHITE KNIGHT GOLD (U.S.) INC.

in respect of

the Celt Property, Nevada





Effective as of December 1, 2004





PROPERTY ACQUISITION AGREEMENT

This Property Acquisition Agreement (hereafter “Agreement”) is entered into and effective this 1st day of December 2004 by and between Teck Cominco American Incorporated, a Washington corporation, (hereafter “TCAI”) of 15918 East Euclid Avenue, Spokane, Washington 99216-1815, White Knight Resources Ltd., a British Columbia corporation, of 922 — 510 Hastings St. W., Vancouver B.C. Canada V6B 1L8, and White Knight Gold (U.S.) Inc., a Delaware corporation of Suite 140, 121 Woodland Ave., Reno, Nevada, USA 89523 (hereafter collectively referred to as “WKR”).

RECITALS

WHEREAS:

(A)        WKR is engaged in the acquisition and exploration of mineral properties in the State of Nevada; and

(B)        WKR and TCAI entered into a Financing and Acquisition Agreement with respect to the Fye Canyon Property dated October 20, 2004 (the “Financing Agreement”); and

(C)        Under the Financing Agreement WKR provided TCAI the right to enter into an option agreement to earn a direct ownership interest in the Celt property located in Nevada; and

(D)        WKR is agreeable to providing to TCAI certain rights to earn a direct ownership interest in the Celt property located in Nevada as provided for in this Agreement; and

(E)        TCAI is desirous of exercising its rights to the Celt property under the Financing Agreement and securing rights to earn a direct ownership interest in the Celt property located in Eureka County in the State of Nevada, USA and more particularly described in Schedule “A1” (the “Celt Property”), all as provided for in this Agreement; and

(F)        Upon and subject to the terms and conditions herein WKR has agreed to grant TCAI an option to earn an initial 51% interest in the Celt Property; and

(G)        Upon TCAI exercising the option with respect to the Celt Property a joint venture shall be formed amongst TCAI and WKR; and

(H)        WKR has agreed to grant TCAI an additional option to increase its interest in the Celt Property after the earlier of $8 million in expenditures by the joint venture or the delivery of a preliminary feasibility study by the joint venture.

NOW THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

1.   Option

1.1   Subject as hereinafter provided, WKR hereby grants TCAI an option (the “Option”) to earn an initial 51% undivided right, title and interest in and to the Celt Property.

1.2   As consideration for the granting of the Option, TCAI shall make the following optional cash payments, for an aggregate of $750,000, to White Knight Gold (U.S.) Inc. as follows:




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  (a)   on the first anniversary of this Agreement, $50,000;

  (b)   on or before December 31, 2006, an additional $100,000;

  (c)   on or before December 31, 2007, an additional $250,000; and

  (d)   on or before December 31, 2008, an additional $350,000.

1.3   TCAI may exercise the Option by incurring the following expenditures (the “Expenditures”) on the Celt Property:

  (a)   on or before December 31, 2005, TCAI shall incur a minimum of $500,000 in Expenditures (note that, subject only to §22.1, this first amount is a guaranteed Expenditure under this Agreement and the balance of the Expenditures are optional);

  (b)   on or before December 31, 2006, TCAI shall incur a minimum of $1,250,000 in Expenditures in the aggregate;

  (c)   on or before December 31, 2007, TCAI shall incur a minimum of $2,500,000 in Expenditures in the aggregate; and

  (d)   on or before December 31, 2008, TCAI shall incur a minimum of $4,000,000 in Expenditures in the aggregate.

  The amounts required to be spent within the periods referred to in §1.3(a) to §1.3(d) hereof are cumulative, aggregate amounts and accordingly, all Expenditures incurred in a particular period, including any excess in the amount of Expenditures required to be incurred to maintain the Option to the end of such period, shall be carried over and included in the aggregate amount of Expenditures for the subsequent period.

1.4   If TCAI terminates the Option prior to December 31, 2005 then any shortfall between the actual Expenditures incurred and the guaranteed Expenditure requirement of $500,000 contemplated in §1.3(a) shall be due and owing in cash within 30 days of the date of such termination. If that shortfall is not paid by that date it shall accrue interest from the original date due at a rate of prime, for the period of calculation, as quoted by the Bank of America, as being charged by it on United States Dollar demand loans to its most creditworthy domestic commercial customers (the “Prime Rate”) plus 2%, calculated monthly, until paid.

1.5   Upon TCAI making the cash payments under §1.2 and expending an aggregate of $4,000,000 in Expenditures under §1.3, TCAI shall forthwith provide WKR written notice of such Expenditures (the “Earn-in Notice”), which shall include a statement in reasonable detail evidencing such Expenditures and a technical report on the results obtained from such Expenditures.

2.   Deficiencies in Expenditures

2.1   If TCAI has not incurred the requisite Expenditures under §1.3 to maintain the Option in good standing, TCAI may pay to WKR, within 30 days following the Expenditure due date, the amount of the deficiency and the amount of such deficiency shall thereupon be deemed to have been Expenditures incurred by TCAI.




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3.   Expenditures Defined

3.1   “Expenditures” include:

  (a)   all costs, expenses, charges and outlays, direct and indirect, funded or incurred by or on behalf of TCAI on or in respect of the Celt Property from the date hereof until the formation of the JV, and thereafter during the term of the JV by the Operator, including, without limiting generality, all costs, including but not limited to, costs for prospecting, claim staking, tenure obligations, taxes, mapping, surveying, permitting, geochemical surveys, geophysical surveys, sampling, assaying, trenching, drilling, geochemical analyses, road building, drill site preparation, drafting, report writing, consultants, all costs related to the preparation of a Feasibility Study and production program, all costs spent or incurred directly or indirectly in connection with a production program in order to equip the Celt Property or a part thereof for commercial production, all costs, incurred or chargeable, directly or indirectly, by the Operator in connection with operating the Celt Property as a mine and all other project expenditures; and

  (b)   a fee for administrative services and head office services overhead provided by or on behalf of TCAI during the term of the Option and thereafter by the Operator and not recovered directly in §3.1(a) above, which charge shall be as follows:

    (i)   10% of costs incurred prior to a production decision; and

    (ii)   3% of mine construction costs; and

    (iii)   2% of mine operating costs.

  The charges set out in §3.1(b) are intended as a reimbursement of the direct costs for the time incurred by TCAI’s or the Operator’s, as the case may be, head office management and support functions in respect of work carried out on or in respect of the Celt Property. It is intended that TCAI or the Operator, as the case may be, shall not profit nor suffer loss by virtue of providing the services. This charge shall not be subject to audit but may be reviewed, in good faith, by the parties from time to time, at the election of either party.

4.   Holding of the Celt Property

4.1   Initially WKR shall hold title to the Celt Property in trust for the parties. TCAI may register this Agreement against title to the Celt Property. TCAI may request that WKR and, if so requested, WKR shall promptly execute and deliver to TCAI a transfer of the portions of the Celt Property held by WKR in recordable form. TCAI shall then hold such portions of the Celt Property in trust for the parties as their interests may appear as provided for herein. On the formation of any JV under §8, the Operator shall then hold such portions of the Celt Property in trust for the parties as their interests may appear as provided for herein.

5.   TCAI’s Obligations During the Currency of the Option

5.1   During the currency of the Option TCAI and its employees, agents and contractors shall have the right and option, as between TCAI and WKR, to:

  (a)   enter upon the Celt Property;




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  (b)   have exclusive and quiet possession thereof;

  (c)   do such prospecting, exploration, development or other mining work thereon and thereunder as TCAI in its sole discretion may consider advisable and including, without limitations, the removal of ores, minerals and metals from the Celt Property but only for the purpose of testing; and

  (d)   bring upon and erect upon the Celt Property such facilities and workings (whether fixed or moveable) as TCAI may consider advisable.

5.2   During the currency of the Option TCAI shall, prior to January 31st of each year beginning in 2006, deliver to WKR a statement showing in reasonable detail the Expenditures incurred by TCAI during the period, under §1.3, last expired and the aggregate Expenditures incurred to the end of such period. WKR shall have 45 days from the time of receipt of such statement to question the accuracy thereof in writing, failing which such statement shall be deemed to be correct and unimpeachable thereafter. If WKR questions any statement delivered pursuant to §5.2, WKR shall have 3 months from the time of delivery of any statement to request that TCAI’s independent external auditors review the accounts and provide their audit opinion as to the correctness of the statement, and:

  (a)   the audit opinion shall be final and determinative of the amount of Expenditures incurred for the audited period; provided that, if such audit opinion discloses a deficiency in the amount of Expenditures required to be incurred to maintain its Option in good standing, TCAI may pay to WKR the amount of such deficiency within 15 days following receipt of notice of such audited results, whereupon such amount shall be deemed to have been Expenditures incurred during the audited period; and

  (b)   the costs of the audit opinion shall be borne by WKR if TCAI’s statement understated Expenditures or if it overstated Expenditures by not more than 3% and shall be borne by TCAI if such statement overstated Expenditures by greater than 3%.

5.3   During the currency of the Option TCAI shall:

  (a)   keep the Celt Property free and clear of all liens, charges and encumbrances arising from its operations hereunder (except liens for taxes not yet due, other inchoate liens and liens contested in good faith by TCAI) and shall proceed with all diligence to contest and discharge any such lien that is filed and shall keep the Celt Property in good standing by the doing and filing of all necessary work and by the doing of all other acts and things and making all other payments (said payments being considered Expenditures), which may be necessary in that regard, in connection with the above and while WKR holds title to the Celt Property WKR shall provide timely support to TCAI in the processing of filings and payments on the Celt Property;

  (b)   permit WKR, or its representatives duly authorized by it in writing, at their own risk and expense, access to the Celt Property at all reasonable times and access to all factual records in the possession of TCAI, its servants and agents in connection with work done on or with respect to the Celt Property;

  (c)   furnish WKR with annual reports by January 31st of each year during the conduct of the work carried out by TCAI on or with respect to the Celt Property and results obtained, together with regular progress updates, during periods of active work, on the status of




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  exploration, and immediately or as soon as practicable furnish WKR with any results obtained which reasonably may be considered to be material to WKR for the purpose of its meeting applicable public disclosure requirements;

  (d)   conduct all work on or with respect to the Celt Property in a manner consistent with good exploration, engineering and mining practices and in compliance with all applicable laws, rules, orders and regulations, and indemnify and save WKR harmless from any and all claims, suits or actions made or brought against it as a result of work done by or on behalf of TCAI on or with respect to the Celt Property;

  (e)   provide insurance in accordance with TCAI’s ongoing business practices. Such insurance shall include, but shall not be limited to, comprehensive general liability, with coverage of at least $5 million and automobile liability insurance, having a limit of not less than $2 million inclusive for any one occurrence, and insuring against claims for bodily injury, including death, and for property damage arising out of the use of TCAI ‘s owned, leased and non-owned vehicles for the performance of any activities under this Agreement. TCAI shall pay the full deductible amounts if there is a claim against any policy of insurance to be provided by TCAI under §5.3(e) of this Agreement;

  (f)   be responsible for providing health, accident, and employment insurance and worker’s compensation coverage for its personnel; and

  (g)   indemnify and save harmless WKR and its respective directors, officers, employees and agents from and against any liability whatsoever for any loss (other than loss of profits), damage, claim, demand, lien, action or suit, charge or expense, including legal fees, on account of injury to or the death of any person, damage to or loss of any property, or infringement or interference of patent, any of which arises directly or indirectly from TCAI’s negligence or willful misconduct in relation to or connection with any work done by or for TCAI on or in respect of the Celt Property save and except that TCAI shall not be liable for special or consequential damages, or indirect damages or for acts or omissions of WKR. Any other liabilities will be shared by the parties in proportion to their interest in the Celt Property.

5.4   Prior to the Participation Date TCAI may recommend the abandonment of up to 20% of the initial lands comprising the Celt Property in a given year. If WKR, within 30 days of receiving a notice of abandonment, notifies TCAI that they wish to acquire the claims in question, then TCAI shall cause a transfer of the claims to be abandoned to WKR, with at least 90 days good standing from the date of TCAI’s notice recommending the abandonment, as soon as practicable thereafter and such claims shall cease to form part of the Celt Property or be subject to this Agreement.

6.   TCAI’s Obligations on Termination

6.1   TCAI may terminate the Option at any time prior to the delivery of the Earn-in Notice by giving notice in writing to that effect to WKR. Subject to §2.1, the Option shall also terminate if TCAI fails to make the requisite cash payments under, and before the dates set forth in, §1.2 or fails to make the requisite Expenditures under, and before the dates set forth in §1.3. On termination, the Option shall be of no further force or effect and TCAI shall have no interest in the Celt Property. However on termination of the Option TCAI shall:

  (a)   leave the Celt Property in good standing with respect to the filing of assessment work for a period of 90 days from the date of termination, free and clear of all liens, charges and




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  encumbrances arising from operations hereunder (except for taxes not yet due, other inchoate liens and liens contested in good faith by TCAI during the period of such contest, such liens to be removed by TCAI if such contest is unsuccessful) and in good standing with respect to all applicable environmental, safety and other statutory rules, regulations and orders arising from or applicable to work done on the Celt Property by TCAI;

  (b)   if the Agreement is terminated after June 1st in any given year TCAI shall be responsible for making payment with respect to the BLM and county holding costs for the Property that are due in such calendar year;

  (c)   upon a written request made by WKR within 60 days of termination of the Option, remove from the Celt Property, within 180 days of said request, such equipment, facilities and workings (whether fixed or moveable) brought on to, or erected on the Celt Property by TCAI, or arising from work done on the Celt Property by TCAI; and

  (d)   deliver to WKR, within 60 days of a written request made by WKR, a comprehensive report on all work carried out by TCAI on the Celt Property (limited to factual matters only), together with all drill cores, assay samples, copies of all maps, drill logs, assay results and other factual technical data compiled by TCAI with respect to the Celt Property which were not previously delivered to WKR; and

  (e)   if TCAI holds title to the Celt Property, promptly execute and deliver to WKR a transfer of the Celt Property in recordable form.

7.   Interest to be Earned by TCAI

7.1   Upon TCAI exercising the Option, by making the cash payments referred to in §1.2 within the time referred to therein, incurring the Expenditures referred to in §1.3 within the time referred to therein or paying any deficiencies as provided for in §2.1, and delivering to WKR the Earn-in Notice under §1.5, (the “Participation Date”) TCAI shall have earned a 51% undivided right, title and interest in and to the Celt Property and WKR shall retain a 49% interest in the Celt Property and the parties shall form a joint venture under §8.

8.   Formation, Funding and Dilution of the JV

8.1   On the Participation Date, a joint venture (“JV”) shall be formed between TCAI and WKR with the JV interests being 51% TCAI – 49% WKR and the JV shall be governed by the terms outlined under §8 through §13.

8.2   On the Participation Date each parties initial deemed Expenditure for the purposes of the JV shall be based on their pro rata share of total Expenditures (“TE”), where the pro rata share of TE shall be $4,000,000 in the case of TCAI and the pro rata share of TE shall be $3,840,000 for WKR. Subsequent to the Participation Date, the respective interests of the parties shall be determined from time to time as being equal to the product obtained by:

  (a)   multiplying 100% by;

  (b)   the respective parties initial deemed Expenditures on the Participation Date plus the amount of the respective parties’ contributions to Expenditures subsequent to the Participation Date;




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  (c)   divided by the TE plus the amount of all contributions to Expenditures made subsequent to the Participation Date by all parties.

8.3   From formation of the JV each party shall be liable for its pro rata share of costs in accordance with its interest in the JV.

8.4   If a party elects not to contribute its pro rata share of Expenditures of a work program or Feasibility Study (and the other party contributes to the shortfall thereby created), the interests of the parties shall be adjusted according to §8.2 so that each party holds an interest proportionate to its deemed and actual contributions. If any party dilutes its interest to less than 10% in the JV, its interest shall then be converted to a 2% net smelter returns royalty (the “NSR”), as further defined in Schedule “B”. However, if any program is completed with less than 80% of the budgeted Expenditures having been incurred, the non-contributing party may contribute, within 30 days, its proportionate share of the actual Expenditures incurred and thereby maintain its interest.

8.5   A party shall be entitled to surrender its interest to the other party on notice to it. A surrender of interest shall not release a party from liabilities accrued prior to the effective surrender date. Should the other party not consent to receive the interest offered for surrender under this §8.5 then the JV shall be terminated and the assets shall be liquidated or sold and the assets or proceeds from the sale thereof distributed to the parties, net of liabilities hereunder or related thereto, in accordance with their interests in the JV. Each party shall be responsible for its share of all costs and expenses related to such termination and liquidation.

8.6   Upon payment for Expenditures incurred by the Operator under the JV a party contributing to those Expenditures shall be entitled to all tax benefits with respect thereto.

9.   Management Committee, Operator and Programs Under the JV

9.1   Upon the formation of a JV, a management committee (the “Management Committee”) shall be formed to manage all exploration, development and operating programs on the Celt Property. The Management Committee shall be comprised of two representatives from each party having an interest in the Celt Property. Each party’s representatives shall have a collective vote equal to the interest held by the party they represent and the Operator shall have the deciding vote in the case of a tie.

9.2   Except as otherwise specifically provided for herein to the contrary, TCAI shall be the initial operator (the “Operator”) of all programs on the Celt Property, and shall remain as Operator so long as TCAI holds at least a 51% interest in the JV. If TCAI holds less than a 51% interest in the JV WKR shall be entitled to elect to become Operator.

9.3   Prior to a production decision the Operator shall propose draft work programs, by February 28th of each year, for Management Committee approval and carry out approved programs. Any Feasibility Study or Preliminary Feasibility Study shall be prepared under a separate program and budget.

9.4   Each party may, within 30 days of Management Committee approval, elect to contribute its proportionate share of the Expenditures required to conduct each program. If a party (for the purposes hereof a “Non-Contributor”) elects or is deemed to have elected not to contribute its cost share of a program, each other party (for the purposes hereof a “Contributor”) that has elected to contribute its cost share of the program may give notice in writing to the Operator and




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  the Non-Contributor stating that it will contribute, in addition to its own cost share, the cost share of the Non-Contributor.

9.5   Except as provided for in §9.7, the Operator will not proceed with any program which is not fully subscribed. If the parties fully subscribe to a program, the Operator will proceed with such program.

9.6   The Operator may invoice for exploration Expenditures incurred or to cash call reasonably in advance of requirements. If a party has approved a program and does not pay the amount invoiced for said program within 30 days, the Operator may demand payment. If payment is not made within 30 days of demand, and subject to §9.7, the other party may elect to either:

  (a)   advance all of the unpaid cost share of the defaulting party. If the other party advances such unpaid share, then they or it will be entitled to recover the amount so paid, together with interest thereon from the date so paid at a per annum rate equal to Prime Rate plus 4%. The party making the advance shall have a lien against the defaulting party’s interest, which it may enforce by selling the defaulting party’s interest; or

  (b)   pay the amount of the defaulted payment and the defaulting party shall be deemed to have incurred dilution at a rate equal to twice the standard dilution rate, their interest shall be adjusted and the deemed total Expenditures of each party shall be adjusted to reflect the interest held; provided that if a party’s interest is reduced to less than 10% it shall be deemed to have assigned and conveyed its interest to the other party and be entitled to a 2% NSR.

9.7   If in any year there is no approved program and circumstances are such that the Operator must incur costs in order to maintain tenure to the Celt Property, to satisfy contractual obligations or obligations imposed by law or to prevent waste or protect life and property, the Operator shall be entitled to propose a program (the “mandatory program”) of Expenditures to maintain tenure to the Celt Property, to satisfy contractual obligations that have been entered into as the result of a previously approved program and to satisfy obligations imposed by law or to prevent waste or protect life and property. The mandatory program shall be deemed to be approved and each of the parties shall be obligated to contribute its proportionate share of Expenditures. If payment is not made within 30 days of written demand, the other party may elect to advance the amount of the defaulted payment and the defaulting party shall be deemed to have forfeited its rights to participate in future programs and its interest shall then be converted to a 2% NSR. If a written demand is made as aforesaid, it shall contain a reminder to the party upon which demand is being made that its interests under this Agreement will be converted to a NSR interest if payment of its proportionate share is not made as demanded.

9.8   If the Management Committee elects to abandon any claim comprising the Celt Property and one party (the “Contesting Party”) has voted against such abandonment, then each party shall be notified of such abandonment at least 60 days prior to the anniversary of the recording date for the claim to be abandoned. If the Contesting Party, within 30 days of receiving a notice of abandonment, notifies the Management Committee that the Contesting Party wishes to acquire the abandoned claim, then the parties shall cause a transfer of the claim to be abandoned to the Contesting Party as soon as practicable thereafter without any payment to the other parties, however the Contesting Party shall be responsible for the costs of the transfer.




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10.   Additional TCAI Option

10.1   Upon the earlier of the JV completing:

  (a)   $8.0 million in Expenditures from the formation of the JV; or

  (b)   a Preliminary Feasibility Study on the Celt Property,

  the Operator shall forthwith provide the parties written notice (the “Additional Rights Notice”) which shall include a copy of the Expenditures incurred to date and, if applicable, a copy of the Preliminary Feasibility Study.

  “Preliminary Feasibility Study” means a comprehensive study, prepared in good faith, of the viability of exploiting a mineral deposit on the Celt Property that has advanced to a stage where the mining method, in the case of underground mining, or the pit configuration, in the case of an open pit, has been established, and includes an effective method of mineral processing and a financial analysis based on reasonable assumptions of technical, engineering, operating, economic factors and the evaluation of other relevant factors which are sufficient for a Qualified Person, as defined in §11.2, acting reasonably, to determine that all or part of the mineral resource may be classified as a mineral reserve.

10.2   TCAI will have a one-time option to elect to earn an additional 9% interest in the JV and Celt Property (“Additional Interest”) by sole funding and completing a Feasibility Study within 4 years of the Additional Rights Notice (the “Additional Earn-in Right”).

10.3   TCAI may elect to invoke the Additional Earn-in Right with respect to the Celt Property by delivering written notice to WKR, at any time up to 60 days after the delivery by the Operator of the Additional Rights Notice. If TCAI fails to deliver such notice within such applicable 60 day period the Additional Earn-in Right shall terminate.

10.4   After electing to invoke the Additional Earn-in Right TCAI shall commence a Feasibility Study and incur a minimum of $500,000 in Expenditures per calendar year until the completion of such Feasibility Study or earlier termination of the Additional Earn-in Right under §10.5. If TCAI fails to meet the minimum annual expenditure requirement then WKR may by providing Notice to TCAI, revoke the Additional Earn-in Right, in which case, TCAI shall:

  (a)   have no further obligation to sole fund Expenditures to earn the Additional Interest;

  (b)   pay WKR any shortfall between the actual Expenditures incurred and the requirement of $500,000 per calendar year contemplated above, which shall be due and owing in cash within 30 days of the date of termination of the Additional Earn-in Right; and

  (c)   retain the interest it held prior to invoking the Additional Earn-in Right and the provisions of the JV shall apply to further funding.

  However, if TCAI has been diligent in carrying out the Feasibility Study but has been prevented or delayed from being able to expend funds effectively or efficiently to meet the minimum annual expenditure requirement by events of force majeure or by technical, engineering, permitting, local or social issues, or country/global financing issues that are outside the control of TCAI, acting reasonably, then WKR may not revoke the Additional Interest Earn-in Right.




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10.5   After electing to invoke the Additional Earn-in Right TCAI may at any time notify WKR that TCAI does not wish to earn the Additional Interest, in which case, TCAI shall have no further obligation to sole fund Expenditures to earn the Additional Interest, TCAI shall retain the interest it held prior to invoking the Additional Earn-in Right and the provisions of the JV shall apply to further funding.

10.6   If TCAI invokes the Additional Earn-in Right and completes a Feasibility Study within the time referred to in §10.2, subject to any extensions under §10.8, TCAI shall have earned the Additional Interest.

10.7   If TCAI earns the Additional Interest, if a positive production decision is made and if requested by WKR under §12.1, TCAI shall arrange project financing on behalf of WKR as provided for in §12.1.

10.8   If TCAI has initiated but not completed a Feasibility Study within 4 years of the Additional Rights Notice (subject to force majeure and permitting issues) it may elect to extend the time limit to complete Feasibility Study (so long as it is in good faith diligently working to complete such feasibility study) for additional annual periods of 12 months by making cash payments to WKR of one million dollars ($1,000,000) for each 12 month extension.

10.9   If TCAI invokes the Additional Earn-in Right and does not complete a Feasibility Study within the time referred to in §10.2, subject to any extensions under §10.8, it shall lose the right to earn the Additional Interest, it shall retain the interest it held prior to invoking the Additional Earn-in Right and the provisions of the JV shall apply to further funding.

11.   Feasibility Study Defined

11.1   “Feasibility Study” means a comprehensive report, prepared in good faith and signed by a Qualified Person, that shows the feasibility of placing the Celt Property or part thereof into commercial production. The Feasibility Study shall contain all geological, engineering, operating, economic and other relevant factors which are to be considered in sufficient detail that, in the opinion of a Qualified Person, the Feasibility Study could reasonably serve as the basis for a decision by an independent commercial financial institution to finance the development of the Celt Property for commercial production. The Feasibility Study shall examine the following matters: ore reserves; mining methods; metallurgy and processing (including metal recovery); environment, tailings and waste disposal; capital and operating cost estimates; manpower, social and community affairs; transportation methods and costs; marketing; project financing alternatives; a sensitivity analysis; such other matters as are appropriate. The Feasibility Study shall include at least the following information:

  (a)   a description of that part of the Celt Property to be covered by the proposed mine;

  (b)   the estimated recoverable reserves of minerals and the estimated composition and content thereof;

  (c)   the proposed procedure for development, mining and production;

  (d)   results of ore amenability tests;




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  (e)   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;

  (f)   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;

  (g)   all environmental impact studies prepared to date and the anticipated future costs of reclamation;

  (h)   the period in which it is proposed the Celt Property shall be brought to commercial production;

  (i)   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; and

  (j)   working capital requirements for the initial four months of operation of the Property as a mine or such longer period as may be reasonably justified in the circumstances.

11.2   “Qualified Person” means an individual who:

  (a)   is an engineer or geoscientist with at least five years relevant experience and expertise in mineral exploration, mine development or operation or mineral project assessment, or any combination of these;

  (b)   has experience relevant to the subject matter of the mineral project and the technical report; and

  (c)   is a member in good standing of a professional association.

12.   Project Financing

12.1   If TCAI has earned the Additional Interest, upon the Management Committee approving a production plan under §13.2, WKR will have the option to request that TCAI arrange financing for WKR’s share of the capital costs required to develop the Celt Property. WKR may exercise this option by providing notice to TCAI within 45 days of the Management Committee approving a production plan under §13.2. TCAI shall then commit to either:

  (a)   use its best efforts to arrange or provide project debt financing for not less than 60% of the projected capital costs on a limited recourse basis after technical completion (the “Debt Financing”), and in connection therewith TCAI shall be entitled to arrange such Debt Financing on such terms as it deems fit and may commit, on behalf of WKR, the whole of the Celt Property as security for such financing. For greater clarity TCAI shall not be obliged to agree to project loan rates higher than those that would be payable if TCAI remained liable in respect of such financing after technical completion and, if Debt Financing is provided by a third party, the terms of any financing arranged for WKR shall be on terms no less favorable than those arranged for TCAI; and




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    (i)   if TCAI elects to arrange the Debt Financing, and if project costs exceed the amount available for Debt Financing and the parties elect nonetheless to put the Celt Property into commercial production, then at WKR’s election, TCAI shall also arrange or provide WKR’s portion of equity financing on a subordinate loan basis at LIBOR (“LIBOR” means the average London Inter Bank Offered Rate, for three-month US dollar borrowings, posted by the British Bankers Association, currently at their website www.bba.org.uk but at such other locations as they may post if this website changes, two business days prior to the commencement of the calendar quarter.) plus 4% per annum, calculated monthly.

  or

    (ii)   even if third party project debt financing is available at acceptable rates, TCAI may nevertheless, itself, elect to use its best efforts to arrange or provide project financing for 100% of the projected capital costs, through other means, and shall provide such financing to WKR on a subordinate loan basis at Prime Rate plus 2% per annum, calculated monthly and in connection therewith TCAI shall be entitled to arrange such financing on such terms as it deems fit and may commit, on behalf of WKR, the whole of the Celt Property as security for such financing;

12.2   For greater clarity if TCAI is able to raise financing on commercially reasonable terms and does not arrange the financing, then the Additional Interest earned shall be returned to WKR.

12.3   TCAI’s obligation to arrange or provide project financing on WKR’s behalf, is non-assignable by WKR and WKR’s option to elect to have TCAI provide such project financing shall terminate if:

  (a)   White Knight Resources Ltd. is controlled by a third party (defined as a party holding a right to at least 30% of the voting shares of White Knight Resources Ltd.); or

  (b)   White Knight Gold (U.S.) Inc. ceases to be 100% owned by White Knight Resources Ltd.

  For clarity in such a case TCAI shall have no obligation to return any of the Additional Interest earned.

12.4   If TCAI provides financing for WKR under §12.1, the available free cash flows from the project, after deduction of operating costs, shall be used, firstly, to retire Debt Financing (including principal, interest and a charge (to cover TCAI’s direct costs) attributable to any guarantees provided by TCAI (the “Project Debt”)) and the balance shall be divided and paid as follows:

    (i)   100% of the free cash flow attributable to TCAI’s interest shall be paid to TCAI; and

    (ii)   until any subordinated loan provided under under 12.1(a)(i) or 12.1(a)(ii) has been repaid, 85% of the free cash flow attributable to WKR’s interest shall be paid to TCAI, to recover the principal and interest of such subordinated loan, and 15% shall be paid to WKR, and

    (iii)   after any subordinated loan provided under 12.1(a)(i) or 12.1(a)(ii) has been repaid, 100% of the free cash flow attributable to WKR’s interest shall be paid to WKR,




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12.5   In connection with and as security for the financing, WKR shall also provide TCAI with the right (but not the obligation) to market WKR’s share of production until the payback of the initial development cost (the Project Debt and the subordinated loan). TCAI may have the right to charge a competitive marketing fee.

13.   Developing and Operating the Celt Property as a Mine

13.1   Any decision to place the Celt Property into production is to be based on a production plan approved by the Management Committee and based on an approved Feasibility Study with such modifications, if any, as the Management Committee considers necessary or desirable and which do not have a material negative impact upon either party.

13.2   Upon delivery of a production plan on the Celt Property the Management Committee may approve a production plan (including a cost estimate, with reasonable allowance for contingencies, which the Management Committee considers necessary to implement the production plan, together with a schedule of advances which the parties shall be required to make in respect of Expenditures required to construct and to operate the mine) and the giving of a notice to each of the parties that a decision has been made to construct a mine on the Celt Property.

13.3   Each party may, by notice within 60 days of receipt of an approved production plan, elect to participate in placing the Celt Property into production by committing to contribute its proportionate share of the capital Expenditures required to construct and to operate the mine in proportion to its interest, or some lesser share but at least 10%. If a party so elects to contribute, it shall be deemed to hold an interest equivalent to that percentage it elected to contribute. If either TCAI or WKR elects not to contribute, it shall be deemed to have assigned its interest to the other party, in consideration for a 2% NSR, if that other party elects to increase its contribution thereby. If a party elects to fund some lesser share than its entire interest percentage, but at least 10%, the interest that was forgone in the election shall be deemed to have been assigned to the other party, for no consideration, if that other party elects to increase its contribution thereby. No party shall be required to provide any completion guarantees, unless completion guarantees are required by lenders providing project financing, in which case each party shall provide guarantees acceptable to those lenders. No party may mortgage its interest in the Celt Property except to a lender that provides project financing and which agrees that upon any realization of its security it shall observe all of the terms of the JV and Agreement including right of first offer provisions in the Agreement to the same extent as if its borrower proposed to sell its interest in the Celt Property. If elections have not been made to fully fund the capital Expenditures then the production plan shall be deemed withdrawn.

13.4   A mine shall be constructed substantially in conformity with the production plan approved under §13.2, but subject to the right of the Management Committee to approve such reasonable variations in construction as it may deem advisable.

13.5   A mine shall be operated on the basis of annual operating plans approved by the Management Committee; provided that the Management Committee may temporarily suspend or permanently terminate operations pursuant to a suspension or closure plan approved by it.

13.6   The Operator may invoice for mine capital Expenditures or operating Expenditures incurred or to cash call reasonably in advance of requirements. If a party does not pay the amount invoiced within 30 days, the Operator may demand payment. If payment is not made within 30 days of demand the other party may elect to pay all or a portion of the unpaid cost share of the defaulting




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  participant. If the other party advances such unpaid share, then they or it shall be entitled to recover the amount so paid, together with interest thereon from the date so paid at a per annum rate equal to Prime Rate plus 4%. The party making the advance shall have a lien against the defaulting participants interest and shall have:

  (a)   the right to take possession of all or a portion of the defaulting participant’s interest in the Celt Property and to sell, or purchase, such interest to recover the amount of such default; provided that

  (b)   if the Celt Property is in production the party making the advance may, in the interim of proceeding under §13.6(a) above, have a prior and a first right, after retirement of project debt, to receive the share of mineral products of the defaulting party until such party has received mineral products in kind of a value equal to (after the costs of sale and costs of enforcement of the lien) the amount advanced, together with interest thereon at the rate specified.

13.7   The definitive option joint venture agreement contemplated under §25.3 shall provide for suspension of operations during sustained periods of negative operating cash flow and for resumption of suspended operations.

13.8   Subject to §12.5, a party contributing to mine costs shall take, in kind, its proportionate share of any minerals produced and to separately dispose of the same.

14.   Restrictions On Alienation and Right of First Offer

14.1   Except in accordance with this Agreement no party shall transfer, sell, dispose or encumber its interest in the Celt Property. Subject to §14.4, this Agreement may not be assigned by either party without the written consent of the other party, and any attempt to assign this Agreement or delegate performance hereunder without such consent shall be void.

14.2   No party shall institute any proceedings to partition the Celt Property.

14.3   A party (including a party with respect to its NSR) wishing to dispose of any interest or rights under this Agreement shall, by notice, first offer to sell it to the other party for a price (payable in work commitments and/or cash and/or marketable securities or a combination of the three) and on terms which the disposing party establishes. If TCAI and/or WKR as the case may be does not accept the offer within 30 days the disposing party shall then have 180 days, from the earlier of notice of rejection of the offer or the end of the 30 day period, to dispose of its interest to a third party for the same or greater price and on the same terms or terms no more favourable to the third party, provided that the incoming party delivers, in a form acceptable to the other parties, a document whereby it agrees to be bound by, and comply with, the terms of this Agreement. For the purposes of this §14.3 marketable securities means common stock of a company with a market capitalization of at least $50,000,000.00 and at least 10 million common shares issued and outstanding that is traded on a recognized stock exchange. The per share value of the marketable security used in any transaction hereunder for purposes of determining the price and market capitalization of the issuer shall be the average of the closing price for such security on its principal stock exchange for the 60 trading days that end 10 days before the closing of the transaction. In determining the price of a transaction hereunder, work commitments shall be valued at the amount required to be expended to meet the work commitment without discounting or other adjustments.




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14.4   The right of first offer shall not apply to transfers to affiliated corporations provided that the incoming party delivers, in a form acceptable to the other parties, a document whereby it agrees to be bound by, and comply with, the terms of this Agreement. However if the transferee ceases to be an affiliate within 2 years of the transfer it shall offer the interest to the remaining party at fair market value under §14.3.

15.   Area of Interest and Use of Data

15.1   Both during the term of the Option and subsequently, there shall be an area of interest which shall be comprised of those lands included within the outer boundaries of the Celt Property, Schedule A1 (the “Area of Interest”). If either party stakes or acquires any surface or water rights or mineral property within the Area of Interest, it shall offer to have those rights or property included in this Agreement. The other party shall have 30 days to elect whether to accept that offer and, where appropriate, pay its share of the costs of acquisition (for clarity if acquired during the term of the Option costs shall be to TCAI’s account and be considered Expenditures and if acquired during the JV each party shall be responsible for their cost share of such Expenditures); failing which election and payment, the acquiring party may retain the rights or property so acquired free of the terms of this Agreement.

15.2   Neither party will have any obligation to the other with respect to the acquisition of properties or interests in minerals, surface or water rights, whether directly or indirectly, which are outside the Area of Interest.

16.   Representations and Warranties

16.1   White Knight Resources Ltd. and White Knight Gold (U.S.) Inc. each represent and warrant to TCAI that:

  (a)   White Knight Gold (U.S.) Inc. owns or has the right to earn a 100% interest in the Celt Property, as set out on Schedule “A1";

  (b)   the Celt Property is recorded in the name of White Knight Gold (U.S.) Inc.;

  (c)   White Knight Gold (U.S.) Inc. has the exclusive right and necessary lawful authority to explore for minerals on the Celt Property and that evidence of such right is or shall be recorded against title to the Celt Property;

  (d)   White Knight Gold (U.S.) Inc. has the right to enter into this Agreement, to assign all or a portion of the interest in the Celt Property free of any consent or preferential purchase right held by other parties, and to dispose of the Celt Property in accordance with the terms of this Agreement;

  (e)   there are no adverse claims or challenges against or to the ownership of or title to any of the mineral claims and other interests comprising the Celt Property, nor to its knowledge is there any basis therefor, and there are no outstanding agreements or options to acquire or purchase the Celt Property or any portion thereof or any production therefrom granted by it and no person has any royalty or other interest whatsoever in the Celt Property or in production therefrom except as herein defined;

  (f)   WKR’s transfer of the Celt Property to TCAI will be free of all liens, mortgages, pledges, encumbrances and charges of every kind and nature;




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  (g)   WKR has not committed and will not commit any act or acts which would reasonably be expected to encumber or cause any lien to be placed against the Celt Property, including without limitation, by reason of any Environmental Law;

  (h)   all required permits, authorizations, approvals and consents to the transfer and conveyance of the Celt Property will be obtained by WKR;

  (i)   the mineral claims and other rights (land, water etc.) that comprise the Celt Property are presently in good standing and are free and clear of all liens, charges and encumbrances and subject to the provisions of this Agreement it shall maintain them in that condition so long as TCAI has any right to earn an interest therein hereunder;

  (j)   the Celt Property and its existing and prior uses by WKR comply and have, to its knowledge, at all times complied with, and WKR is not in violation of, and have not violated, in connection with the ownership, use, maintenance or operation of the Celt Property, any applicable federal or local laws, regulations, rules, orders or approvals relating to its operations on the Celt Property;

  (k)   without limiting the generality of §16.1(j), WKR has operated the Celt Property and has at all times received, handled, used, stored, treated, shipped and disposed of all Hazardous Materials or Hazardous Substances in strict compliance with all Environmental Laws and applicable health or safety laws, regulations, orders or approvals;

  (l)   no Hazardous Materials or Hazardous Substances have been released into the environment, or deposited, discharged, placed or disposed of at, on or near the Celt Property as a result of its operations carried out on the Celt Property, nor, to the best of its knowledge, have any of the above occurred nor has the Celt Property been used at any time by any person as a landfill or waste disposal site;

  (m)   no notices of any violation or apparent violation of any of the matters referred to in §16.1(j) through §16.1(l) relating to the Celt Property or its use have been received by WKR;

  (n)   to the best of its knowledge, there are no writs, injunctions, orders or judgments outstanding, no lawsuits, claims, proceedings or investigations pending or threatened, relating to the use, maintenance or operation of the Celt Property, whether related to environmental, archaeological or similar matters, or otherwise, nor, to the knowledge of WKR, is there any basis for such lawsuits, claims, proceedings or investigations being instituted or filed;

  (o)   to the best of its knowledge, there are no active treaty negotiations in respect of native land claims affecting the Celt Property, nor is WKR aware of pending native land claims that may affect the Celt Property; and

  (p)   the Celt Property does not comprise all or substantially all of the assets of White Knight Resources Ltd or White Knight Gold (U.S.) Inc.

16.2   Each party represents and warrants to the other party that:




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  (a)   it is a corporation, duly incorporated, organized, validly existing, and in good standing under the laws of its incorporating jurisdiction and has the full corporate power and authority to carry on its business and to enter this Agreement and any agreement or instrument referred to or contemplated by this Agreement;

  (b)   the execution, delivery and performance of this Agreement and the other instruments to be executed and delivered by it have been authorized by all necessary corporate action of it, including approval by its board of directors and shareholders if required, and do not and will not: (a) contravene it’s charter or bylaws or other constating documents; (b) violate any material provision of law, rule, regulation, order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to it; or (c) result in a material breach of or constitute a material default under any agreement to which it is a party which would have a material adverse effect upon the right, power and authority of it to perform its obligations hereunder;

  (c)   no civil or criminal actions, proceedings or investigations exist or have been or are threatened by or before any court, governmental agency, regulatory authority, or arbitrator with respect to or affecting it which would restrain or prohibit the execution, delivery or performance of this Agreement;

  (d)   no agent, broker, investment banker, person or firm acting on behalf or under the authority of it is or will be entitled to any broker’s or finder’s fee or any other similar commission or fee in connection with the execution, delivery, or performance of this Agreement; and

  (e)   neither the execution and delivery of this Agreement nor any of the agreements referred to herein or contemplated hereby, nor the consummation of the transactions hereby contemplated conflict with, result in the breach of or accelerate the performance required by any agreement to which it is a party.

16.3   The warranties herein shall survive the execution of this Agreement and shall be unaffected by any examinations undertaken by TCAI or its counsel.

17.   Covenants

17.1   Until the expiry of the Option, WKR covenants, subject toss.5.3(a):

  (a)   to pay any costs incurred in defending its existing title to the Celt Property; and

  (b)   not to dispose of any part or portion of the Celt Property except in accord with the terms of this Agreement or enter into any agreement or do anything that would create a lien or encumbrance on the Celt Property except as permitted herein; not to enter into any contract or agreement with respect to the Celt Property which would in any away negatively impact TCAI’s rights to exercise its Option as provided for herein; and that it will comply with all governmental requirements and laws respecting WKR’s use and operation of the Celt Property, including the Environmental Laws.

17.2   TCAI shall perform its work on the Celt Property in conformity with all environmental and other applicable requirements.




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18.   Indemnification

18.1   White Knight Resources Ltd and White Knight Gold (U.S.) Inc. agree to jointly and severally indemnify, hold harmless and release TCAI and its officers, directors, employees, shareholders, authorized agents, representatives, parent and affiliated companies from and against any and all claims, causes of action, liabilities, obligations, losses, damages, penalties, fines, settlements, costs or expenses of any nature whatsoever, including without limitation reasonable attorneys’ fees and disbursements arising from:

  (a)   Any of the WKR’s representations or warranties set forth in §16 of this Agreement being incorrect or untrue or any state of facts contrary to any such representation or warranty; and

  (b)   Any of WKR’s covenants, duties, obligations or agreements contained in this Agreement being breached.

18.2   TCAI agrees to indemnify and hold harmless and release WKR and its officers, directors, employees, shareholders, authorized agents and representatives from and against any and all claims, causes of action, liabilities, obligations, losses, damages, penalties, fines, settlements, costs or expenses of any nature whatsoever, including without limitation reasonable attorneys’ fees and disbursements, arising from:

  (a)   Any of TCAI’s representations or warranties set forth in §16 of this Agreement being incorrect or untrue or any state of facts contrary to any such representation or warranty;

  (b)   Any of TCAI’s covenants, duties, obligations or agreements contained in this Agreement being breached.

19.   Environmental Law(s) Defined

19.1   “Environmental Law(s)” means any federal, state, or municipal law, code, ordinance, rule, regulation, policy, guidelines, permit, consent, approval, license, judgment, order, writ, decree, injunction or other authorization, relating to:

  (a)   emissions, discharges, releases or threatened releases of Hazardous Materials or Hazardous Substances into the natural or human environment, including, without limitation, air, soil, sediments, land surface or subsurface, surface water, ground water, buildings or facilities, treatment works, drainage systems or septic systems; or

  (b)   the generation, treatment, storage, disposal, recycling, use, handling, manufacturing, processing, reprocessing, transportation or shipment or arrangement for transportation or shipment of any Hazardous Materials or Hazardous Substances; or

  (c)   otherwise concerning pollution or protection of the environment, public health and safety or exposure to Hazardous Materials, Hazardous Substances or other hazardous or toxic substances alleged to be harmful including without limitation, the laws described in the definition of “Hazardous Materials” below, the Clean Water Act, and all amendments to the foregoing and all state and local variations of the same.

19.2   “Hazardous Materials” and “Hazardous Substances” means:




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  (a)   any and all contaminants, pollutants, constituents, wastes and substances that are listed or defined as hazardous in the following statutes and their implementing federal and state regulations:

    (i)   the Hazardous Materials Transportation Act, 49 U.S.C. §1801 et seq.;

    (ii)   the Resource Conservation and Recovery Act, 42 U.S.C. §6901 et seq. (“RCRA”);

    (iii)   the Comprehensive Environmental Response, Compensation and Liability Act, as amended by the Superfund Amendments and Reauthorization Act, 42 U.S.C. §9601 et seq. (“CERCLA”);

    (iv)   the Federal Water Pollution Control Act, 33 U.S.C. §1251 et seq.;

    (v)   the Clean Air Act, as amended by the Clean Air Act Amendments of 1990, 42 U.S.C. §7401 et seq.;

    (vi)   the Emergency Planning and Community Right-to-Know Act of 1986, as amended, 42 U.S.C. §11001 et seq.; and

    (vii)   any amendments to any of the foregoing and any state or local variation thereto.

  (b)   petroleum, including crude oil and any fractions thereof;

  (c)   natural gas, synthetic gas and any mixtures thereof;

  (d)   asbestos and/or asbestos-containing materials

  (e)   PCBs or PCB-containing materials or fluids;

  (f)   any other substance with respect to which any federal, state or local agency or other governmental authority may require either an environmental investigation or environmental remediation; and

  (g)   any other hazardous or noxious material, contaminant, pollutant, constituent, substance, or solid or liquid waste that is or may be regulated by, or forms a basis of liability under, any Environmental Laws.

20.   Confidentiality and Press Releases

20.1   Each party agrees that until the termination of this Agreement all information obtained hereunder shall be the exclusive property of the parties and shall not be publicly disclosed or used other than for the activities contemplated hereunder, except as required by law or by the rules and regulations of any regulatory authority or stock exchange having jurisdiction or in connection with the filing of an annual information form, prospectus or similar document, or with the written consent of the other parties, such consent not to be unreasonably withheld, provided that the provisions of this section do not apply to information which is or becomes part of the public domain other than through a breach of the terms hereof or which would not otherwise be considered as material to the parties, acting reasonably.




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20.2   Consent to disclosure of information hereunder shall not be unreasonably withheld where a party wishes to disclose any such information to a third party for the purpose of arranging financing for its contributions hereunder or, where permitted by this Agreement, for the purpose of selling its interest in the Celt Property or its interest in this Agreement, provided that such third party gives its undertaking to the parties that any such information not theretofore publicly disclosed shall be kept confidential and not disclosed to others for a period agreed upon by the parties, which shall not be less than one year in duration.

20.3   A party proposing a press release relating to the Celt Property, or the terms of this Agreement, work thereon or the activities of the parties or their affiliates with respect thereto, shall provide a copy to the other party for its information and comments using its best efforts, in light of its timely disclosure obligations under applicable law, to ensure it is provided at least 2 business days prior to release. Any comments that the receiving party may make shall not be considered certification by the other party of the accuracy of the information in such press release, or a confirmation by it that the content of such press release complies with the disclosure standards of the applicable regulatory authorities. If the receiving party fails to provide comments within said time period the providing party may, subject to §20.4 make the proposed press release.

20.4   Each party shall obtain prior approval of the other party before issuing any press release or public statement using the other party’s name, the name of any of the officers, directors or employees of the other party, or the name of any of its subsidiaries. The foregoing prohibition shall not apply if disclosure of the other party’s name is required, in the written opinion of counsel to a party, by applicable public disclosure requirements however in such a case the party wishing to make the disclosure must provide a copy to the other party for its information and comments using its best efforts to ensure it is provided at least 2 Business Days prior to release. However, such approval shall not be considered certification by the other party of the accuracy of the information in such press release, or a confirmation by it that the content of such press release complies with the rules, policies, by-laws and disclosure standards of the applicable regulatory authorities or stock exchanges.

21.   Notice

21.1   Any notices, requests, demands or other communication required or permitted to be given under this Agreement shall be in writing and shall be given in the manner provided below addressed as follows:

  (a)   If to TCAI at:

  Teck Cominco American Incorporated
Post Office Box 3087
Spokane, Washington 99220
Attention: Legal Department
Fax: 509-459-4400

  with a copy to

  Teck Cominco American Incorporated
c/o Teck Cominco Limited
500 - 200 Burrard St.
Vancouver, British Columbia, Canada V6C 3L7
Attention: Corporate Secretary




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  Fax: 604-687-6100

  (b)   If to WKR at:

  White Knight Resources Ltd.
922 - 510 Hastings St. W.,
Vancouver B.C. Canada V6B 1L8
Attention: President
Fax: 604-681-0180

  All notices shall be given (i) by personal delivery, (ii) by commercial courier, (iii) by certified mail, return receipt requested, or (iv) by sending it by facsimile or other similar form of telecommunication. All notices shall be effective and shall be deemed delivered on the date of delivery if delivered during normal business hours. If not delivered during normal business hours, delivery shall be deemed effective on the next business day following delivery. A party may change its address by notice to the other parties.

22.   Exchange Approval

22.1   This Agreement is subject to the acceptance of the Financing Agreement by the TSX Venture Exchange. If such acceptance is not obtained within 30 days of the date hereof, this Agreement, at TCAI’s sole discretion, shall terminate and have no force or effect.

23.   Termination

23.1   This Agreement shall terminate upon the occurrence of the following:

  (a)   a termination of the Option or subsequent JV formed with respect to the Celt Property.

23.2   The JV with respect to the Celt Property shall terminate upon the occurrence of the earliest of:

  (a)   sale or other disposition of the Celt Property following the written agreement by the parties to terminate the JV;

  (b)   a termination pursuant to §8.5 or §13.6(a);

  (c)   except with respect to its NSR, the conversion of a party’s entire interest to a NSR pursuant to §8.4, §9.6(b), §9.7 or §13.3; or

  (d)   abandonment of the entire Celt Property under §9.8.

24.   Force Majeure

24.1   A party may claim force majeure if such party is prevented from or delayed in performing any obligation under this Agreement by any cause beyond its reasonable control, whether foreseeable or unforeseeable, excluding only lack of finances, but including, without limitation, acts of God, strikes, lockouts, or other industrial disputes, laws, rules and regulations or orders of any duly constituted court or governmental authority, acts of terrorism, acts of the public enemy, war, insurrection, riots, fire, storm, flood, unusually harsh weather causing delay, explosion, government restriction, failure to obtain any approvals required from regulatory authorities or unavailability of equipment, materials or transportation (provided the approvals were properly




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  applied for and pursued in good faith and on a timely basis or the equipment, materials or transportation were sought in a timely way), interference by third party interests groups (including environmental lobbyists and First Nations or indigenous peoples’groups) or other causes whether of the kind enumerated above or otherwise, then the time for the performance of that obligation shall be extended for a period equivalent to the total period the cause of the prevention or delay persists regardless of the length of such total period. A party may also claim force majeure, if such party, acting reasonably, believes that social or political unrest in the region of the Celt Property or the threat of that unrest will endanger the safety of its employees or the employees of its contractors if the party were to continue with the work program unless such social or political unrest is caused by action or inaction by that party. The party that claims force majeure shall promptly notify the other party and shall take all reasonable steps to remove or remedy the cause of the prevention or delay insofar as it is reasonably able to do so and as soon as possible. The party claiming force majeure will provide the other party with a regular a written report summarizing events that have occurred and prospects for resolution.

25.   Miscellaneous Provisions

25.1   The obligations of TCAI under this Agreement will be subject to the satisfaction of the following conditions:

  (a)   White Knight Resources Ltd. will have received, within 30 days of execution or this Agreement, all required approvals from the TSX Venture Exchange for White Knight Resources Ltd. entering into the Financing Agreement and completing the transactions contemplated thereby.

25.2   This Agreement shall be a binding agreement between the parties, until such time, if any, as a definitive agreement contemplated under §25.3 is executed, that shall govern joint operations on the Celt Property.

25.3   After the execution of this Agreement, and prior to TCAI exercising the Option, TCAI’s solicitors shall prepare, and the parties shall endeavor to settle, a definitive joint venture agreement, which incorporates the terms of this Agreement and which contains such other provisions for the joint operation of the Celt Property as the parties may otherwise agree.

25.4   This Agreement, and the Schedules and instruments to be delivered in connection herewith, contains the entire understanding of the parties and supersedes all prior agreements and understandings between the parties relating to the subject matter hereof. In the event of any conflict between this Agreement and any Schedule attached hereto, the terms of this Agreement shall be controlling. No modification of this Agreement shall be valid unless made in writing and duly executed by the parties.

25.5   The rights and obligations of the parties shall be several, the parties shall hold their interests as tenants in common, and nothing contained in the Agreement shall be construed as creating a partnership or in imposing any fiduciary duty on any party.

25.6   Nothing expressed or implied in this Agreement is intended by the parties or shall be construed to confer upon or to give to any person or entity other than the parties to this Agreement or their successors or assigns any rights or remedies under or by reason of this Agreement.




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25.7   Each of the parties agrees that it shall take such actions and execute such additional instruments as counsel to any party deems reasonably necessary or convenient to implement and carry out the intent and purpose of this Agreement.

25.8   Each of the parties shall have the right from time to time to register or record notice of this Agreement against title to the Celt Property, and the other parties shall co-operate with all such registrations and recordings and provide its written consent or signature to any documents and do such other things from time to time as are necessary or desirable to effect all such registrations or recordings or otherwise to protect the interests of the parties hereunder.

25.9   Each party shall have all remedies provided at law or in equity with respect to the obligations hereunder.

25.10   Except as otherwise specifically provided in this Agreement, all fees, costs and expenses incurred by WKR or TCAI in negotiating this Agreement or in consummating this transaction shall be paid by the party incurring the same, including without limitation, legal, brokerage and accounting fees, costs and expenses.

25.11   If any legal action or any arbitration or other proceeding is brought for the enforcement of this Agreement, or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions, representations or warranties in this Agreement, the successful or prevailing party shall be entitled to recover reasonable attorney’s fees and other costs incurred in that action or proceeding, in addition to any other relief to which it may be entitled.

25.12   The failure of a party to insist on the strict performance of any provision of this Agreement or to exercise any right, power or remedy upon a breach hereof shall not constitute a waiver of any provision of this Agreement or limit the party’s right thereafter to enforce any provision or exercise any right.

25.13   Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall be ineffective in such jurisdiction only to the extent of such prohibition or unenforceability without affecting the remaining provisions of this Agreement.

25.14   Unless otherwise specified, all dollar amounts referred to herein shall be in the currency of the United States of America.

25.15   This Agreement shall be governed by and interpreted in accordance with the laws of the State of Nevada.

25.16   This Agreement may be executed in counterparts, each of which when so executed shall be deemed an original, and such counterparts shall together constitute but one and the same instrument.

25.17   This Agreement shall be read with such changes in gender or number as the context shall require.

25.18   The headings to the articles, paragraphs, parts or clauses of this Agreement are inserted for convenience only and shall not affect the construction hereof.

25.19   The Schedules to this Agreement are an integral part of this Agreement and are incorporated into this Agreement.




24



25.20   Unless otherwise stated, a reference to an Article means an Article of this Agreement and the symbol “§” followed by a number or some combination of numbers and letters refers to the provision of this Agreement so designated and the symbol “§" followed by a letter within a provision refers to a clause within such provision. A reference to “this Agreement”, “hereof”, “hereunder”, “herein” or words of similar meaning, means this agreement including the schedules hereto, together with any amendments thereof.

25.21   Time is of the essence in this Agreement and the performance by the parties of their respective duties and obligations hereunder.

If the foregoing terms are acceptable, please confirm your acceptance of the terms set out above by kindly executing in the space provided below and returning it to TCAI, whereupon it shall form a binding agreement between us in consideration for the mutual covenants herein.

TECK COMINCO AMERICAN INCORPORATED

By:  “Fred S. Daley”                                
Fred S. Daley
Its:   Vice President Exploration

WHITE KNIGHT RESOURCES LTD.

By:   “John M. Leask”                                   
Its:   President

WHITE KNIGHT GOLD (U.S.) INC.

By:   “John M. Leask”                                       
Its:  President






This is SCHEDULE “A1” to the Letter Agreement between
TECK COMINCO AMERICAN INCORPORATED,
WHITE KNIGHT RESOURCES LTD. and WHITE KNIGHT GOLD (U.S.) INC.
dated for reference December 1, 2004

Celt Property

The Celt Property consists of the following mining claims owned by White Knight Gold (US) Inc. All are located in portions of Townships 22 and 23 North, Ranges 49 and 50 East, Mount Diablo Base and Meridian, all in Eureka County, Nevada.

A 100% interest in KILT 1-47, 50-64: consisting of 62 Claims, CELT 1-70: consisting of 70 Claims, COT 001-121: consisting of 121 Claims, KEL 001-136, and 141-148: consisting of 144 Claims, AMT 1 to 69, and 76 to 77: consisting of 71 Claims, and CSAMT 67 -78 and 87- 91: consisting of 17 Claims, all of which are listed below.

A 100% interest in CS AMT 1-66, 79-86, and 92-95, consisting of 78 claims, which have been legally located and will be filed with the BLM and recorded in Eureka County within 2 weeks of the effective date of this Agreement.

Total of 563 claims.

Claim Name BLM Serial No. Book Page
         KILT 1   852265   367   298  
         KILT 2  852266  367  299 
         KILT 3  852267  367  300 
         KILT 4  852268  367  301 
         KILT 5  852269  367  302 
         KILT 6  852270  367  303 
         KILT 7  852271  367  304 
         KILT 8  852272  367  305 
         KILT 9  852273  367  306 
        KILT 10  852274  367  307 
        KILT 11  852275  367  308 
        KILT 12  852276  367  309 
        KILT 13  852277  367  310 
        KILT 14  852278  367  311 
        KILT 15  852279  367  312 
        KILT 16  852280  367  313 
        KILT 17  852281  367  314 
        KILT 18  852282  367  315 
        KILT 19  852283  367  316 
KILT 20 Amended  852284  367  317 
        KILT 21  852285  367  318 
        KILT 22  852286  367  319 
        KILT 23  852287  367  320 
        KILT 24  852288  367  321 
        KILT 25  852289  367  322 
        KILT 26  852290  367  323 
        KILT 27  852291  367  324 




A-2



Claim Name BLM Serial No. Book Page
       
        KILT 28  852292  367  325 
        KILT 29  852293  367  326 
        KILT 30  852294  367  327 
        KILT 31  852295  367  328 
        KILT 32  852296  367  329 
        KILT 33  852297  367  330 
        KILT 34  852298  367  331 
        KILT 35  852299  367  332 
        KILT 36  852300  367  333 
        KILT 37  852301  367  334 
        KILT 38  852302  367  335 
        KILT 39  852303  367  336 
        KILT 40  852304  367  337 
        KILT 41  852305  367  338 
        KILT 42  852306  367  339 
        KILT 43  852307  367  340 
        KILT 44  852308  367  341 
        KILT 45  852309  367  342 
        KILT 46  852310  367  343 
        KILT 47  852311  367  344 
        KILT 50  852314  367  347 
        KILT 51  852315  367  348 
        KILT 52  852316  367  349 
        KILT 53  852317  367  350 
        KILT 54  852318  367  351 
        KILT 55  852319  367  352 
        KILT 56  852320  367  353 
        KILT 57  852321  367  354 
        KILT 58  852322  367  355 
        KILT 59  852323  367  356 
        KILT 60  852324  367  357 
        KILT 61  852325  367  358 
        KILT 62  852326  367  359 
        KILT 63  852327  367  360 
        KILT 64  852328  367  361 
         CELT 1  852329  367  228 
         CELT 2  852330  367  229 
         CELT 3  852331  367  230 
         CELT 4  852332  367  231 
         CELT 5  852333  367  232 
         CELT 6  852334  367  233 
         CELT 7  852335  367  234 
         CELT 8  852336  367  235 
         CELT 9  852337  367  236 
        CELT 10  852338  367  237 
        CELT 11  852339  367  238 
        CELT 12  852340  367  239 
        CELT 13  852341  367  240 
        CELT 14  852342  367  241 




A-3



Claim Name BLM Serial No. Book Page
       
        CELT 15  852343  367  242 
        CELT 16  852344  367  243 
        CELT 17  852345  367  244 
        CELT 18  852346  367  245 
        CELT 19  852347  367  246 
    CELT 20 Amended  852348  367  247 
        CELT 21  852349  367  248 
        CELT 22  852350  367  249 
        CELT 23  852351  367  250 
        CELT 24  852352  367  251 
        CELT 25  852353  367  252 
        CELT 26  852354  367  253 
        CELT 27  852355  367  254 
        CELT 28  852356  367  255 
        CELT 29  852357  367  256 
        CELT 30  852358  367  257 
        CELT 31  852359  367  258 
        CELT 32  852360  367  259 
        CELT 33  852361  367  260 
        CELT 34  852362  367  261 
        CELT 35  852363  367  262 
        CELT 36  852364  367  263 
        CELT 37  852365  367  264 
        CELT 38  852366  367  265 
        CELT 39  852367  367  266 
        CELT 40  852368  367  267 
        CELT 41  852369  367  268 
        CELT 42  852370  367  269 
        CELT 43  852371  367  270 
        CELT 44  852372  367  271 
        CELT 45  852373  367  272 
        CELT 46  852374  367  273 
        CELT 47  852375  367  274 
        CELT 48  852376  367  275 
        CELT 49  852377  367  276 
        CELT 50  852378  367  277 
        CELT 51  852379  367  278 
        CELT 52  852380  367  279 
        CELT 53  852381  367  280 
        CELT 54  852382  367  281 
        CELT 55  852383  367  282 
        CELT 56  852384  367  283 
        CELT 57  852385  367  284 
        CELT 58  852386  367  285 
        CELT 59  852387  367  286 
        CELT 60  852388  367  287 
        CELT 61  852389  367  288 
        CELT 62  852390  367  289 
        CELT 63  852391  367  290 




A-4



Claim Name BLM Serial No. Book Page
       
        CELT 64  852392  367  291 
        CELT 65  852393  367  292 
        CELT 66  852394  367  293 
        CELT 67  852395  367  294 
        CELT 68  852396  367  295 
        CELT 69  852397  367  296 
        CELT 70  852398  367  297 
         COT 1  872489  383  374 
         COT 2  872490  383  375 
         COT 3  872491  383  376 
         COT 4  872492  383  377 
         COT 5  872493  383  378 
         COT 6  872494  383  379 
         COT 7  872495  383  380 
         COT 8  872496  383  381 
         COT 9  872497  383  382 
         COT 10  872498  383  383 
         COT 11  872499  383  384 
         COT 12  872500  383  385 
         COT 13  872501  383  386 
         COT 14  872502  383  387 
         COT 15  872503  383  388 
         COT 16  872504  383  389 
         COT 17  872505  383  390 
         COT 18  872506  383  391 
         COT 19  872507  383  392 
         COT 20  872508  383  393 
         COT 21  872509  383  394 
         COT 22  872510  383  395 
         COT 23  872511  383  396 
         COT 24  872512  383  397 
         COT 25  872513  383  398 
         COT 26  872514  383  399 
         COT 27  872515  383  400 
         COT 28  872516  383  401 
         COT 29  872517  383  402 
         COT 30  872518  383  403 
         COT 31  872519  383  404 
         COT 32  872520  383  405 
         COT 33  872521  383  406 
         COT 34  872522  383  407 
         COT 35  872523  383  408 
         COT 36  872524  383  409 
         COT 37  872525  383  410 
         COT 38  872526  383  411 
         COT 39  872527  383  412 
         COT 40  872528  383  413 
         COT 41  872529  383  414 
         COT 42  872530  383  415 
         COT 43  872531  383  416 




A-5



Claim Name BLM Serial No. Book Page
       
         COT 44  872532  383  417 
         COT 45  872533  383  418 
         COT 46  872534  383  419 
         COT 47  872535  383  420 
         COT 48  872536  383  421 
         COT 49  872537  383  422 
         COT 50  872538  383  423 
         COT 51  872539  383  424 
         COT 52  872540  383  425 
         COT 53  872541  383  426 
         COT 54  872542  383  427 
         COT 55  872543  383  428 
         COT 56  872544  383  429 
         COT 57  872545  383  430 
         COT 58  872546  383  431 
         COT 59  872547  383  432 
         COT 60  872548  383  433 
         COT 61  872549  383  434 
         COT 62  872550  383  435 
         COT 63  872551  383  436 
         COT 64  872552  383  437 
         COT 65  872553  383  438 
         COT 66  872554  383  439 
         COT 67  872555  383  440 
         COT 68  872556  383  441 
         COT 69  872557  383  442 
         COT 70  872558  383  443 
         COT 71  872559  383  444 
         COT 72  872560  383  445 
         COT 73  872561  383  446 
         COT 74  872562  383  447 
         COT 75  872563  383  448 
         COT 76  872564  383  449 
         COT 77  872565  383  450 
         COT 78  872566  383  451 
         COT 79  872567  383  452 
         COT 80  872568  383  453 
         COT 81  872569  383  454 
         COT 82  872570  383  455 
         COT 83  872571  383  456 
         COT 84  872572  383  457 
         COT 85  872573  383  458 
         COT 86  872574  383  459 
         COT 87  872575  383  460 
         COT 88  872576  383  461 
         COT 89  872577  383  462 
         COT 90  872578  383  463 
         COT 91  872579  383  464 
         COT 92  872580  383  465 
         COT 93  872581  383  466 




A-6



Claim Name BLM Serial No. Book Page
       
         COT 94  872582  383  467 
         COT 95  872583  383  468 
         COT 96  872584  383  469 
         COT 97  872585  383  470 
         COT 98  872586  383  471 
         COT 99  872587  383  472 
        COT 100  872588  383  473 
        COT 101  872589  383  474 
        COT 102  872590  383  475 
        COT 103  872591  383  476 
        COT 104  872592  383  477 
        COT 105  872593  383  478 
        COT 106  872594  383  479 
        COT 107  872595  383  480 
        COT 108  872596  383  481 
        COT 109  872597  383  482 
        COT 110  872598  383  483 
        COT 111  872599  383  484 
        COT 112  872600  383  485 
        COT 113  872601  383  486 
        COT 114  872602  383  487 
        COT 115  872603  383  488 
        COT 116  872604  383  489 
        COT 117  872605  383  490 
        COT 118  872606  383  491 
        COT 119  872607  383  492 
        COT 120  872608  383  493 
        COT 121  872609  383  494 
         KEL 1  867814  381  211 
         KEL 2  867815  381  212 
         KEL 3  867816  381  213 
         KEL 4  867817  381  214 
         KEL 5  867818  381  215 
         KEL 6  867819  381  216 
         KEL 7  867820  381  217 
         KEL 8  867821  381  218 
         KEL 9  867822  381  219 
         KEL 10  867823  381  220 
         KEL 11  867824  381  221 
         KEL 12  867825  381  222 
         KEL 13  867826  381  223 
         KEL 14  867827  381  224 
         KEL 15  867828  381  225 
         KEL 16  867829  381  226 
         KEL 17  867830  381  227 
         KEL 18  867831  381  228 
         KEL 19  867832  381  229 
         KEL 20  867833  381  230 
         KEL 21  867834  381  231 
         KEL 22  867835  381  232 




A-7



Claim Name BLM Serial No. Book Page
       
         KEL 23  867836  381  233 
         KEL 24  867837  381  234 
         KEL 25  867838  381  235 
         KEL 26  867839  381  236 
         KEL 27  867840  381  237 
         KEL 28  867841  381  238 
         KEL 29  867842  381  239 
         KEL 30  867843  381  240 
         KEL 31  867844  381  241 
         KEL 32  867845  381  242 
         KEL 33  867846  381  243 
         KEL 34  867847  381  244 
         KEL 35  867848  381  245 
         KEL 36  867849  381  246 
         KEL 37  867850  381  247 
         KEL 38  867851  381  248 
         KEL 39  867852  381  249 
         KEL 40  867853  381  250 
         KEL 41  867854  381  251 
         KEL 42  867855  381  252 
         KEL 43  867856  381  253 
         KEL 44  867857  381  254 
         KEL 45  867858  381  255 
         KEL 46  867859  381  256 
         KEL 47  867860  381  257 
         KEL 48  867861  381  258 
         KEL 49  867862  381  259 
         KEL 50  867863  381  260 
         KEL 51  867864  381  261 
         KEL 52  867865  381  262 
         KEL 53  867866  381  263 
         KEL 54  867867  381  264 
         KEL 55  867868  381  265 
         KEL 56  867869  381  266 
         KEL 57  867870  381  267 
         KEL 58  867871  381  268 
         KEL 59  867872  381  269 
         KEL 60  867873  381  270 
         KEL 61  867874  381  271 
         KEL 62  867875  381  272 
         KEL 63  867876  381  273 
         KEL 64  867877  381  274 
         KEL 65  867878  381  275 
         KEL 66  867879  381  276 
         KEL 67  867880  381  277 
         KEL 68  867881  381  278 
         KEL 69  867882  381  279 
         KEL 70  867883  381  280 
         KEL 71  867884  381  281 
         KEL 72  867885  381  282 




A-8



Claim Name BLM Serial No. Book Page
       
         KEL 73  867886  381  283 
         KEL 74  867887  381  284 
         KEL 75  867888  381  285 
         KEL 76  867889  381  286 
         KEL 77  867890  381  287 
         KEL 78  867891  381  288 
         KEL 79  867892  381  289 
         KEL 80  867893  381  290 
         KEL 81  867894  381  291 
         KEL 82  867895  381  292 
         KEL 83  867896  381  293 
         KEL 84  867897  381  294 
         KEL 85  867898  381  295 
         KEL 86  867899  381  296 
         KEL 87  867900  381  297 
         KEL 88  867901  381  298 
         KEL 89  867902  381  299 
         KEL 90  867903  381  300 
         KEL 91  867904  381  301 
         KEL 92  867905  381  302 
         KEL 93  867906  381  303 
         KEL 94  867907  381  304 
         KEL 95  867908  381  305 
         KEL 96  867909  381  306 
         KEL 97  867910  381  307 
         KEL 98  867911  381  308 
         KEL 99  867912  381  309 
        KEL 100  867913  381  310 
        KEL 101  867914  381  311 
        KEL 102  867915  381  312 
        KEL 103  867916  381  313 
        KEL 104  867917  381  314 
        KEL 105  867918  381  315 
        KEL 106  867919  381  316 
        KEL 107  867920  381  317 
        KEL 108  867921  381  318 
        KEL 109  867922  381  319 
        KEL 110  867923  381  320 
        KEL 111  867924  381  321 
        KEL 112  867925  381  322 
        KEL 113  867926  381  323 
        KEL 114  867927  381  324 
        KEL 115  867928  381  325 
        KEL 116  867929  381  326 
        KEL 117  867930  381  327 
        KEL 118  867931  381  328 
        KEL 119  867932  381  329 
        KEL 120  867933  381  330 
        KEL 121  867934  381  331 
        KEL 122  867935  381  332 




A-9



Claim Name BLM Serial No. Book Page
       
        KEL 123  867936  381  333 
        KEL 124  867937  381  334 
        KEL 125  867938  381  335 
        KEL 126  867939  381  336 
        KEL 127  867940  381  337 
        KEL 128  867941  381  338 
        KEL 129  867942  381  339 
        KEL 130  867943  381  340 
        KEL 131  867944  381  341 
        KEL 132  867945  381  342 
        KEL 133  867946  381  343 
        KEL 134  867947  381  344 
        KEL 135  867948  381  345 
        KEL 136  867949  381  346 
        KEL 141  867950  381  347 
        KEL 142  867951  381  348 
        KEL 143  867952  381  349 
        KEL 144  867953  381  350 
        KEL 145  867954  381  351 
        KEL 146  867955  381  352 
        KEL 147  867956  381  353 
        KEL 148  867957  381  354 
         AMT 1  878790  395  179 
         AMT 2  878791  395  180 
         AMT 3  878792  395  181 
         AMT 4  878793  395  182 
         AMT 5  878794  395  183 
         AMT 6  878795  395  184 
         AMT 7  878796  395  185 
         AMT 8  878797  395  186 
         AMT 9  878798  395  187 
         AMT 10  878799  395  188 
         AMT 11  878800  395  189 
         AMT 12  878801  395  190 
         AMT 13  878802  395  191 
         AMT 14  878803  395  192 
         AMT 15  878804  395  193 
         AMT 16  878805  395  194 
         AMT 17  878806  395  195 
         AMT 18  878807  395  196 
         AMT 19  878808  395  197 
         AMT 20  878809  395  198 
         AMT 21  878810  395  199 
         AMT 22  878811  395  200 
         AMT 23  878812  395  201 
         AMT 24  878813  395  202 
         AMT 25  878814  395  203 
         AMT 26  878815  395  204 
         AMT 27  878816  395  205 
         AMT 28  878817  395  206 




A-10



Claim Name BLM Serial No. Book Page
       
         AMT 29  878818  395  207 
         AMT 30  878819  395  208 
         AMT 31  878820  395  209 
         AMT 32  878821  395  210 
         AMT 33  878822  395  211 
         AMT 34  878823  395  212 
         AMT 35  878824  395  213 
         AMT 36  878825  395  214 
         AMT 37  878826  395  215 
         AMT 38  878827  395  216 
         AMT 39  878828  395  217 
         AMT 40  878829  395  218 
         AMT 41  878830  395  219 
         AMT 42  878831  395  220 
         AMT 43  878832  395  221 
         AMT 44  878833  395  222 
         AMT 45  878834  395  223 
         AMT 46  878835  395  224 
         AMT 47  878836  395  225 
         AMT 48  878837  395  226 
         AMT 49  878838  395  227 
         AMT 50  878839  395  228 
         AMT 51  878840  395  229 
         AMT 52  878841  395  230 
         AMT 53  878842  395  231 
         AMT 54  878843  395  232 
         AMT 55  878844  395  233 
         AMT 56  878845  395  234 
         AMT 57  878846  395  235 
         AMT 58  878847  395  236 
         AMT 59  878848  395  237 
         AMT 60  878849  395  238 
         AMT 61  878850  395  239 
         AMT 62  878851  395  240 
         AMT 63  878852  395  241 
         AMT 64  878853  395  242 
         AMT 65  878854  395  243 
         AMT 66  878855  395  244 
         AMT 67  878856  395  245 
         AMT 68  878857  395  246 
         AMT 69  878858  395  247 
         AMT 76  878859  395  248 
         AMT 77  878860  395  249 
        CSAMT 67  876631  393  149 
        CSAMT 68  876632  393  150 
        CSAMT 69  876633  393  151 
        CSAMT 70  876634  393  152 
        CSAMT 71  876635  393  153 
        CSAMT 72  876636  393  154 
        CSAMT 73  876637  393  155 




A-11



Claim Name BLM Serial No. Book Page
       
CSAMT 74   876638   393   156  
CSAMT 75  876639  393  157 
CSAMT 76  876640  393  158 
CSAMT 77  876641  393  159 
CSAMT 78  876642  393  160 
CSAMT 87  876651  393  169 
CSAMT 88  876652  393  170 
CSAMT 89  876653  393  171 
CSAMT 90  876654  393  172 
CSAMT 91  876655  393  173 








This is SCHEDULE “B” to the Letter Agreement between
TECK COMINCO AMERICAN INCORPORATED,
WHITE KNIGHT RESOURCES LTD. and WHITE KNIGHT GOLD (U.S.) INC.
dated for reference December 1, 2004

NET SMELTER RETURNS ROYALTY

1   DEFINITION

1.01     “Net Smelter Returns” for purposes of the Agreement are defined as follows:

  (a)    where all or a portion of the ores or concentrates derived from the Property are sold as ores or concentrates, the Net Smelter Returns shall be the gross amount received from the purchaser following sale thereof after deduction of:

  (i)    if applicable under the sale contract, of all smelter charges, penalties and other deductions;

  (ii)    all costs of transporting and insuring the ores or concentrates from the mine to the smelter or other place of final delivery; and

  (iii)    sales, use, severance, excise, net proceeds of mine, and ad valorem taxes and any tax on or measured by mineral production, but excluding income taxes of the Royaltypayor; and

  (b)    where all or a portion of the said ores or concentrates derived from the Property are treated in a smelter and a portion of the metals recovered therefrom are delivered to, and sold by Royaltypayor, the Net Smelter Returns shall be the gross amount received from the purchaser following sale of the metals so delivered, after deduction of:

  (i)    all smelter charges, penalties and other deductions;

  (ii)    all costs of transporting and insuring the ores or concentrates from the mine to the smelter; and

  (iii)    if applicable under the smelter contract, all costs of transporting and insuring the metals from the smelter to the place of final delivery by the purchaser; and

  (iv)    sales, use, severance, excise, net proceeds of mine, and ad valorem taxes and any tax on or measured by mineral production, but excluding income taxes of the Royaltypayor.

  Where any ores or concentrates are sold to, or treated in, a smelter owned or controlled by Royaltypayor, the pricing for that sale or treatment will be established by Royaltypayor on an arms-length basis so as to be fairly competitive with pricing, net of transportation, insurance, treatment charges and other related costs, then available on world markets for product of like quantity and quality.




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2   PAYMENT OF NET SMELTER RETURNS

2.01     If a party becomes entitled to a Net Smelter Returns royalty pursuant to the Agreement, the party paying the Net Smelter Returns (the “Royaltypayor”) shall calculate the Net Smelter Returns and the sums to be disbursed to the party receiving the Net Smelter Returns (the “Royaltyholder”) as at the end of each calendar quarter.

2.02     The Royalty payor shall, within 60 days of the end of each calendar quarter, as and when any Net Smelter Returns are available for distribution:

  (a)     pay or cause to be paid to the Royaltyholder that percentage of the Net Smelter Returns to which the Royaltyholder are entitled under the Agreement less any net smelter returns royalty or other royalties;

  (b)     deliver to the Royaltyholder a statement indicating:

  (i)     the gross amounts received from the purchaser contemplated in §1.01of this Schedule “B”;

  (ii)     the deductions therefrom in accordance with §1.01 of this Schedule “B”;

  (iii)     the amount of Net Smelter Returns remaining;

  (iv)     the amount of any net smelter returns royalty or other royalties; and

  (v)     the amount of the Net Smelter Returns to which the Royaltyholder are entitled;

  supported by such reasonable information as to the tonnage and grade of ores or concentrates shipped as will enable the Royaltyholder to verify the gross amount payable by the smelter or other purchaser.

3   ADJUSTMENTS AND VERIFICATION

3.01     Payment of any Net Smelter Returns by Royaltypayor shall not prejudice the right of Royaltypayor to adjust any statement supporting the payment; provided, however, that all statements presented to the Royaltyholder by Royaltypayor for any quarter shall conclusively be presumed to be true and correct upon the expiration of 12 months following the end of the quarter to which the statement relates, unless within that 12-month period Royaltypayor gives notice to the Royaltyholder claiming an adjustment to the statement which will be reflected in subsequent payment of Net Smelter Returns.

3.02     Royaltypayor shall not adjust any statement in favour of itself more than 12 months following the end of the quarter to which the statement relates.

3.03     The Royaltyholder shall, upon 30 days’ notice in advance to Royaltypayor, have the right to request that Royaltypayor have its independent external auditors provide their audit certificate for the statement or adjusted statement, as it may relate to the Agreement and the calculation of Net Smelter Returns.

3.04     The cost of the audit certificate shall be solely for the Royaltyholder’ account unless the audit certificate discloses material error in the calculation of Net Smelter Returns, in which case Royaltypayor shall reimburse the Royaltyholder the cost of the audit certificate. Without limiting the generality of the





B-3



foregoing, a discrepancy of one percent in the calculation of Net Smelter Returns shall be deemed to be material.

4   ROYALTYPAYOR TO DETERMINE OPERATIONS

4.01     The Royaltypayor will have complete discretion concerning the nature, timing and extent of all exploration, development, mining and other operations conducted on or for the benefit of the Property and may suspend operations and production on the Property at any time it considers prudent or appropriate to do so. The Royaltypayor will owe the Royaltyholder no duty to explore, develop or mine the Property, or to do so at any rate or in any manner other than that which the Royaltypayor may determine in its sole and unfettered discretion. The Royaltypayor may, but will not be obligated to treat, mill, heap leach, sort, concentrate, refine, smelt, or otherwise process, beneficiate or upgrade the ores, concentrates, and other products at sites located on or off the Property, prior to sale, transfer, or conveyance to a purchaser, user, or consumer. The Royaltypayor will not be liable for mineral values lost in processing under sound practices and procedures, and no royalty will be due on any such lost mineral values.

5   COMMINGLING

5.01     Ores, concentrates and derivatives mined or retrieved from the Property may be commingled with ores, concentrates or derivatives mined or retrieved from other properties. All determinations required for calculation of Net Smelter Returns, including without limitation the amount of the metals contained in or recovered from ores, solutions, concentrates or derivatives mined or retrieved from the Property, the amount of the metals contained in or recovered from commingled ores, solutions, concentrates or derivatives shall be made in accordance with prudent engineering, metallurgical and cost accounting practices.

6   TRADING ACTIVITIES

6.01     The Royaltypayor may, but need not, engage in forward sales, futures trading or commodity options trading, and other price hedging, price protection, and speculative arrangements (“Trading Activities”) which may involve the possible delivery of base or precious metals produced from the Property. The parties acknowledge and agree that the Royaltyholder shall not be entitled to participate in the proceeds or be obligated to share in any losses generated by the Trading Activities.