SUMMARY OF AN OPTION AGREEMENT DATED SEPTEMBER 28, 2002 BETWEEN
MINERA GAVILAN, S.A. DE C.V. (“GAVILAN”), A WHOLLY-OWNED SUBSIDIARY OF THE
COMPANY, AND ABELARDO GARZA HERNANDEZ (“GARZA”) FOR THE GALEANA
PROPERTY, (THE “PROPERTY”) CHIHUAHUA STATE, MEXICO
Garza confirmed he is a Mexican citizen and Gavilan confirmed it is a Mexican corporation in good standing.
Gavilan and Garza agree to the following terms and conditions:
Garza agrees to sell 100% of his rights to the Property under the following terms and conditions:
1) A total price for 100% is US$100,000, paid as follows:
July 2002 US$5,000 plus value-added tax (“IVA”)
July 2003 US$5,000 plus IVA
July 2004 US$5,000 plus IVA
July 2005 US$10,000 plus IVA
July 2006 US$10,000 plus IVA
July 2007 US$10,000 plus IVA
July 2008 US$25,000 plus IVA
July 2009 US$30,000 plus IVA
1) At this point, a 100% interest is transferred to Gavilan, subject to a US$400,000 plus IVA payment
should the Property go into commercial production and a sliding scale net smelter royalty as follows:
Sliding scale royalty, relating to tonnage per diam:
Less than 50 tonnes per day 3.0%
50 to 100 tonnes per day
100 to 500 tonnes per day
greater than 1000 tonnes per day
Gavilan can purchase 50% of this net smelter royalty for a fixed payment of US$500,000 plus IVA
at any time.
Gavilan, or its assigns, may drop its option at any time provided it has met its obligations up to that point in time
and the Property is left in good standing.
Option terms also provide for regular reporting to Garza, property maintenance and adherence to applicable laws
and regulations by both parties.