DEFINITIONS AND INTERPRETATION

Definitions

(a)

which arises from an adjustment to the amount paid to the Payer in a previous Quarter, based on the actual Products recovered after refining;

(b)

to correct any accounting or recording errors from previous Quarters;

(c)

which arises as a result of a review and reassessment of transfer pricing by a Governmental Authority pursuant to (c) of the definition of Transfer Price herein;

(d)

which is otherwise made in accordance with this Deed; or

(e)

which is agreed by the parties.

all the information provided for in (a) through (d) of the definition of Statement herein, annual period covering the immediately preceding four Quarters comprising the Payer’s fiscal year, and

a certificate of an independent accounting firm confirming the information used to provide the information in (a) above is (i) consistent with the information used to prepare the annual unconsolidated audited financial statements of the Payer for such fiscal year, and (ii) consistent with the information used to determine any income tax or royalty payable to a Governmental Authority;

that is in or becomes part of the public domain other than through breach of this Deed or an obligation of confidence owed to the disclosing party; or

which the recipient can prove by credible evidence was already known by it at the time of disclosure to it (unless such knowledge arose from disclosure of information in breach of an obligation of confidentiality).

means the aggregate amount paid by the Payer, as calculated in US Dollars, for the relevant Quarter for:

(a)

the average of the buy and sell rates for the foreign currency in United States dollars, as quoted by any one of the four largest (by market share) banks in Australia; or

if those rates are not quoted, then the average of the buy and sell rates for the foreign currency as quoted by any two major Australian trading banks selected by the Payer in good faith and on a consistent basis;

(a)

the quantity and grades of each Product extracted or produced in each Quarter;

(b)

the quantity and grades of each Product sold in each Quarter;

(c)

the calculation of the Royalty in each Quarter;

(d)

Gross Proceeds from Product sold in each Quarter;

(e)

Deductible Expenses for each Quarter; and

(f)

if there is any commingling of Products in a Quarter with materials from areas outside the Mining Area, the measures, moistures, assays and other relevant details pertaining to the Minerals in the Products prior to such commingling.

a breakdown of Gross Proceeds from each Product sold in such Quarter, such that any applicable Exchange Rate used to determine the value of all or any part of such Gross Proceeds in US Dollars can be observed;

a breakdown of all Deductible Expenses during such Quarter;

a breakdown of any Adjustments made in such Quarter;

the total amount owing in respect of the Royalty for such Quarter; and

in the case of a sale of Product to any Person that is a Related Person, the basis of how the Transfer Price was established;

the price at which the Payer or a Related Person of the Payer has made comparable sales of Product to a Third Party within the proximate time as at which such value is sought to be determined, or

in the absence of such comparable sales, such other evidence of market price for comparable sales of Product made between parties dealing at arm’s length, or

where the price cannot readily be determined by the methods described in either (a) or (b) above, the transfer price accepted by applicable Governmental Authority responsible for assessing and collecting income taxes or royalties of the Payer.

Interpretation

(a)

words importing the singular include the plural and vice versa;

(b)

an expression importing a natural Person includes any company, partnership, joint venture, association, corporation or other body corporate;

(c)

a reference to anything (including, but not limited to, any right) includes a part of that thing but nothing in this sub section implies that performance of part of an obligation constitutes performance of the obligation;

(d)

a reference to a section, part, schedule, exhibit and annexure refers to a section, part, schedule, exhibit or annexure of, in or to this Deed;

(e)

a reference to this Deed includes all schedules, exhibits and annexures to this Deed;

(f)

a reference to any document (including this Deed) is to that document as varied, novated, ratified or replaced from time to time;

(g)

a reference to an act, statute, regulation, proclamation, ordinance or by-law includes all acts, statutes, statutory instruments, regulations, proclamations, ordinances or by-laws varying, consolidating or replacing it, and a reference to an act includes all regulations, proclamations, ordinances and by-laws issued under that act;

(h)

a reference to any party means a party to this Deed and includes that party's executors, administrators, successors and permitted assigns, including any person taking by way of novation and, in the case of a trustee, includes any substituted or additional trustee;

(i)

a reference to conduct includes an omission, statement and undertaking, whether or not in writing;

(j)

a reference to writing includes a facsimile transmission and any means of reproducing words in a tangible and permanently visible form;

(k)

no provision of this Deed will be construed adversely to a party solely on the ground that the party was responsible for the preparation of this Deed or that provision;

(l)

other parts of speech and grammatical forms of a word or phrase defined in this Deed have a corresponding meaning; and

(m)

words of inclusion are not words of limitation.

Business Day

Accounting matters

Royalty Purchase and Grant

Calculation and Payment of Royalty

Within 30 days after the end of each Quarter ending after the Commencement Date, the Payer must:

calculate the Royalty payable for the Quarter, if any; and

pay the Royalty payable for the Quarter to the Payee without demand, reduction or set-off, and without adjustment or deduction (except for any Adjustment or Withholdings permitted hereunder or required by Law), which amount will be adjusted in accordance with any Adjustment applicable to such Quarter pursuant to Section 2.4, and payable by the Payer by wire transfer to an account specified in writing by the Payee, which the Payee agrees to so specify prior to the end of the first Quarter following the Commencement Date.

Without limiting the rights of the Payee in relation to any breach of this Deed by the Payer, if the Payer fails to pay a Royalty payment due under this Deed in accordance with Section 2.2(a) within ten days following the due date for such payment, then the Payer must also pay to the Payee immediately on demand:

interest at the rate of 10% per annum on the amount due from such due date to and including the date upon which such Royalty payment is paid in full, calculated daily and compounded monthly; and

all costs and expenses (including legal costs and expenses on a full indemnity basis) incurred by the Payee and attributable to the Payer’s failure to pay by such due date.

Statement

the Payee disputes all or part of any Annual Statement that includes such Quarter by providing a Dispute Notice (as defined herein) to the Payer within 3 months after the date on which the Payee received such Annual Statement; or

there has been any fraud, deliberate miscalculation or reckless miscalculation of the Royalty by the Payer.

Adjustment

Royalty a continuing obligation

No interest in Tenements

Further assurances

Perpetuity period

Maintenance of Tenements in good standing

(a)

observing the provisions of all Laws affecting the Tenements and mining operations and activities conducted by the Payer on or about the Mining Area, including lodging in good time all required reports;

(b)

paying all fees, rates, royalties, taxes and rental payments due in respect of all of the Tenements;

(c)

ensuring all Statutory Tenement Expenditure conditions are met or exemptions obtained; and

(d)

making all necessary applications for renewals of the Tenements.

Payer to determine Tenement operations

(a)

owes the Payee no duty to explore, develop or mine any of the Tenements, or to do so at any rate or in any manner other than that which the Payer may determine in its sole and unfettered discretion;

(b)

has complete discretion concerning the nature, timing and extent of all exploration, development, mining, treating, milling and other operations conducted on the Tenements and may suspend operations and production on the Tenements at any time it wishes to do so;

(c)

may, but is not obliged to, treat, mill, sort, concentrate, refine, or otherwise process, beneficiate or upgrade Ores, Concentrates, and Products extracted from the Tenements; and

(d)

is not liable for any mineral or commercial value lost in processing Ores, Concentrates, and Products extracted from the Tenements, and no Royalty is due on any such lost value.

Commingling

The Payer may commingle Products extracted from the Tenements prior to being dispatched with other Ores, Concentrates or products produced elsewhere in accordance with customary good mining and metallurgical practice in Australia applied reasonably.

The Payer must establish, and record in the Royalty Records, the methods and practices adopted by the Payer necessary to weigh, sample, assay and perform other measuring or testing necessary to fairly allocate to each party the valuable minerals and metals contained in the Products extracted and recovered from the Tenements prior to being dispatched from the Mining Area.

Tailings

Samples

Royalty Records

Inspection and audit of Royalty Records

(a)

The Payer agrees to prepare unconsolidated unaudited financial statements of Payer for each Quarter of the Payer, and unconsolidated audited financial statements of the Payer for each fiscal year of the Payer audited by an independent nationally recognized accounting firm or such other accounting firm as is approved in writing by the Payee.

(b)

The Payee may, upon reasonable notice to the Payer and at reasonable times and at its own cost, appoint a registered company auditor, to audit and report on the Royalty Records and any Annual Statement.

(c)

The Payer shall, subject to reasonable prior notice, give the auditor appointed by the Payee pursuant to Section 4.2(b) full and free access to the Royalty Records of the Payer at its offices, or elsewhere as agreed, at reasonable times, in respect of the applicable audit.

(d)

Any audit of an Annual Statement by the Payee must be conducted by an auditor appointed by the Payee pursuant to Section 4.2(b) hereof and must be completed prior to the expiry of 90 days from the date of receipt by the Payee of such Annual Statement, failing which the Annual Statement shall be deemed to be correct and accepted by the Payee, provided that if the audit of an Annual Statement by the Payee has been initiated but has not been completed within the foregoing 90 day period, and such audit is being diligently conducted as expeditiously as reasonably possible, then the Payer agrees to provide the Payee with a reasonable extension of the audit period on written request made by the Payee to Payer.

Access, inspection and technical audit

(a)

The Payee may, upon reasonable notice to the Payer and at reasonable times but not more frequently than once in every 12 months (unless the Payer has materially breached this Deed), and at its own cost and risk, inspect any operations carried on within the Mining Area, provided that the Payee must ensure that it does not unduly interfere with the operations or with the general conduct by the Payer of its business and complies with the reasonable requirements of the Payer and its safety officers.

(b)

This section applies where the Payer is commingling Products extracted from the Tenements prior to being dispatched from the Mining Area with other Ores, Concentrates, mineral products, metals and minerals produced elsewhere. In that event, the Payee may, at reasonable times and at its own cost and risk and not more than once in every 12 months upon reasonable notice to the Payer, by itself or by a qualified and recognised mining engineer appointed by it, inspect and conduct a technical audit on the methods and practices used by the Payer in weighing, sampling, assaying or other measuring or testing extracted from the Tenements, and in doing so must comply with the reasonable requirements of the Payer and its safety officers.

(c)

The Payer must provide, at the Payee’s cost, all reasonable access to the Payee and to the mining engineer appointed by the Payee sufficient and necessary to reasonably carry out any technical audit.

(d)

The Payee must ensure that any audit undertaken by, or on behalf of, the Payee is conducted and concluded promptly and diligently.

Consequences of financial audit

Consequences of technical audit

(a)

The Payee may give the Payer a copy of any technical report arising from a technical audit conducted under this section which raises, as a matter of concern, any matter concerning the weighing, sampling, assaying or any other measuring or testing practice which is not consistent with good mining and metallurgical practice in Australia applied reasonably.

(b)

If the Payer does not accept that there is a matter of mining and metallurgical practice which it is prepared to, and does, correct, either party may give a Dispute Notice under this Deed in relation to that matter within 3 months of receiving the technical report.

Total abandonment or surrender of Tenements

Revival of obligations under a Relinquished Tenement

Relinquishment in the normal course of business

Transfer by Payer

by a Transfer to a Third Party which is expressly subject to the Royalty, and such Third Party transferee has agreed in writing in favour of the Payee to assume the obligations of the Payer hereunder (including the obligation to pay the Royalty to the Payee) to the extent that the transferee acquires all or any part of the Tenements or the rights to the Products or Minerals and to execute an Assumption Deed at the time at which the transferee acquires any such rights or property; or

by the sale of Products in the ordinary course of business; or

an abandonment or surrender of the Tenements as contemplated in Sections 5.1 and 5.3 of this Deed, and subject to Section 5.2 hereof.

Payer release and survival

(a)

The Payer may be released from its obligations under this Deed in respect of a Transfer pursuant to Section 7.1(a) as from the date of the Transfer, but only if a Transfer is completed strictly in accordance with this Deed, but without affecting its obligations arising prior to that date.

(b)

The rights of the Payee survive any Transfer and do not merge on or by virtue of completion and registration of the Transfer.

Sale of interest by Payee

(a)

If the Payee wishes to Transfer the whole or a part of its rights under this Deed to a Third Party (Available Interest) the Payee must first offer to sell the whole of the Available Interest to the Payer (Payee's Offer) for cash (Cash Consideration) and not for any other consideration, and otherwise on the terms and conditions contained in the Payee's Offer.

(b)

A Payee's Offer must be open for acceptance within 30 days after service of the Payee's Offer (Offer Period).

(c)

If the Payer accepts the Payee’s Offer by notice in writing to the Payee within the Offer Period, the Payer must complete the purchase of the Available Interest on the terms set out in the Payee's Offer.

(d)

If the Payer does not accept the Payee’s Offer within the Offer Period or complete the purchase of the Available Interest on the terms set out in the Payee’s Offer, the Payee may, at any time, within 210 days after service of Payee’s Offer, sell the Available Interest, but only on terms and conditions not less favourable than the Payees’ Offer.

(e)

The Payee may be released from its obligations under this Deed in respect of the interest that is the subject of the Transfer as from the date of the Transfer, but only if such Transfer is completed strictly in accordance with this Deed, and without affecting any of its obligations arising prior to that date.

(f)

The Payee may Transfer its interest in and under this Deed to a Related Person of the Payee if the Payee first delivers to the Payer an Assumption Deed executed by the Related Person which includes a covenant that the Related Person has agreed with the Payer promptly to offer to re-assign the interest to the Payer if the recipient ceases to be a Related Person of the Payee within 3 years after such Transfer.

Notice of Assignment or Encumbrance

Non-disclosure of Confidential Information

(a)

if the disclosure is expressly permitted by this Deed; or

(b)

to its Representative, or the Representative of a Related Person, who requires the information for the purposes of or related to this Deed, the Tenements or the Royalty, provided that such Representative agrees to keep the disclosed information confidential in accordance with this section; or

(c)

with the written consent of the party who supplied the Confidential Information, which consent may be given or withheld in its absolute discretion; or

(d)

if the party, or a Related Person of the party, holding the Confidential Information is required to do so by Law, including by a recognised stock exchange, or in connection with legal proceedings relating to this Deed; or

(e)

if disclosure is made on a confidential basis to a prospective assignee of the party's rights and obligations under this Deed or prospective financier of the party or its Related Person, or to another Third Party that proposes to enter into contractual relations with the party; provided the assignee, financier or other Third Party agrees in writing to keep the disclosed information confidential in accordance with this section.

Disclosure by Recipient of Confidential Information

Return of Confidential Information

Survival of termination

Announcements, Press Releases and Public Filings

Personal Information

The Payer shall withhold and remit any applicable Withholdings required to be withheld and remitted by applicable Law in connection with the payment of the Royalty.

GST

(a)

Any consideration payable or to be provided for a supply made under or in connection with this Deed, unless specifically described in this Deed as 'GST inclusive', does not include any amount on account of GST. If GST is payable on any supply made under or in connection with this Deed (not being a supply the consideration for which is specifically described in this Deed as 'GST inclusive'), the recipient of the supply must pay to the supplier, an additional amount equal to the GST payable on the supply at the same time and in the same manner as the consideration for the supply, or the first part of the consideration for the supply (as the case may be), is to be provided, provided that the supplier gives the recipient a tax invoice for the supply.

(b)

If a payment to a party under this Deed is a reimbursement or indemnification, calculated by reference to a loss, cost or expense incurred by that party, then the payment will be reduced by the amount of any input tax credit to which that party, or the representative member of the GST group that such party is a member of (as the case may be), is entitled for that loss, cost or expense.

(c)

If a payment is calculated by reference to or as a specified percentage of another amount or revenue stream, that payment shall be calculated by reference to or as a specified percentage of the amount or revenue stream exclusive of GST.

(d)

The parties agree that they have each formed the view that the supply made by the Payer to the Payee is GST-free on the basis of section 38- 190 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) and that, subject to a contrary determination by the Commissioner of Taxation, no GST will be payable in relation to the grant of the royalty under clause 2.1.

Stamp Duty

The Payer represents and warrants to the Payee that:

it is a corporation duly incorporated, organized and validly existing and in good standing under the Laws of its jurisdiction of incorporation;

it has all necessary corporate power and authority to enter into and perform its obligations under this Deed, to own its interest in the Tenements and to carry on its business as presently conducted and as currently proposed to be conducted;

neither the execution nor delivery of this Deed nor the performance by it of its obligations hereunder will conflict with or result in a breach of any terms, conditions or provisions of its incorporating documents, bylaws, directors’ and shareholders’ resolutions, shareholders’ agreements, any law, rule or regulation having the force of law, any contract to which it is a party, or any writ, judgement, injunction, determination or award that is binding on it;

the execution and delivery of this Deed and the performance by it of its obligations hereunder have been duly authorized by all necessary corporate action and all necessary third party consents have been obtained, and this Deed has been duly executed and delivered by it and constitutes a valid and legally binding obligation that is enforceable against it in accordance with its terms;

it has good and marketable title to, and is in exclusive possession of the Tenements, and each exploration license, mining lease and mining claim constituting or relating to the Tenements is fully and accurately disclosed on Schedule A to this Deed, is in good standing and has been properly recorded in the name of the Payer (or a predecessor thereto, as applicable) in accordance with all applicable Laws;

there are no actions, suits or proceedings pending or, to the best knowledge of the Payer, threatened against or affecting the Payer or any Related Person, the Tenements or any Product, that might materially adversely affect the Tenements or the Payer’s interest therein or challenge the validity or propriety of the Royalty granted to the Payee pursuant to this Deed; and the Payee is not in default in any material respect under any applicable Law;

the Payer has filed all tax returns that are required to be filed by it and has paid all taxes that have become due pursuant to such returns or pursuant to any assessment or reassessment received by the Payer;

the Tenements disclosed in Schedule A to this Deed are each in good standing, have been properly recorded in accordance with all applicable Law and all Statutory Tenement Expenditures and all other amounts owing to any Governmental Authority in respect of each Tenement that are payable on or prior to the Execution Date have been paid in full.

The Payee represents and warrants to the Payer that:

it is a corporation duly incorporated, organized and existing;

it has all necessary corporate power and authority to enter into and perform its obligations under this Deed;

neither the execution nor delivery of this Deed nor the performance by it of its obligations hereunder will conflict with or result in a breach of any terms, conditions or provisions of its charter documents or bylaws, any law, rule or regulation having the force of law, any contract to which it is a party, or any writ, judgement, injunction, determination or award that is binding on it;

(d)

the execution and delivery of this Deed and the performance by it of its obligations hereunder have been duly authorized by all necessary corporate action; the Payee has all necessary power and authority to enter into and perform his obligations under this Deed; and

(e)

this Deed has been duly executed and delivered by the Payee and constitutes a valid and legally enforceable obligation of the Payee.

Dispute Resolution

(a)

Any dispute, claim, question or difference arises (Dispute) between the parties with respect to this Deed or its performance, enforcement, breach, termination, validity or otherwise, will be subject to binding arbitration, upon written notice (Dispute Notice) by either party to the other party, and any such Dispute shall not be the subject of an action in any court of law or equity by any party hereto unless such Dispute has first been submitted to arbitration and finally determined in accordance with the Commercial Arbitration Rules of the American Arbitration Association.

(b)

The decision of the arbitrator (or arbitrators, as the case may be) shall be deemed to conclusively determine the rights and liabilities of the parties to the arbitration in respect of the matter in dispute and any court action subsequently commenced by any party shall only be for judgment based upon the decision of the arbitrator (or arbitrators, as the case may be) and costs incidental to such action.

(c)

The language of the arbitration and the arbitration decision will be in English. The arbitration will take place in New South Wales, Australia.

(d)

Any arbitration shall be conducted by one arbitrator appointed by the mutual agreement of the parties within 30 days after the date on which the Dispute Notice is received by either party from the other party. If the parties fail to agree upon the appointment of the arbitrator, each of the parties shall appoint one arbitrator within a further 15 days, and the two such arbitrators so appointed shall, within 15 days after their appointments, select a third arbitrator who shall act as the presiding arbitrator. If the two arbitrators appointed by the parties hereto fail to agree upon the appointment of the third arbitrator, such arbitrator shall be appointed by the American Arbitration Association (or if such Association fails to make such appointment, by a court of competent jurisdiction) at the request of either party and such selection shall be final and binding upon each of the parties hereto.

(e)

The arbitrator or arbitrators, as the case may be, shall take evidence directly from witnesses and documents presented by the parties and all witnesses shall be made available for cross-examination. The arbitrator or arbitrators, as the case may be, shall render a written decision, stating reasons therefor, within three months after the appointment of such arbitrator, or the last arbitrator, if the arbitration is conducted by a panel of three arbitrators, as applicable, and such award shall be final and binding upon the parties to such arbitration.

Each party shall be responsible for all costs incurred by such party in respect of the preparation for the arbitration proceedings and the appointment of the arbitrator or arbitrators. The cost of the arbitration proceedings and all related expenses shall be borne by the losing party to the arbitration or, if neither party is clearly the losing party, the costs of the arbitration proceedings and all related expenses shall be shared equally by each party, unless the arbitrator or arbitrators, as the case may be, determine that the costs should be allocated differently, in which case the decision of the arbitrator or arbitrators, as the case may, be shall be final.

Form of Notice

(i)

if delivered by hand, when left at the address set out in section 14.1;

(ii)

if sent by pre-paid post, on the 10^th day following the date of postage;

(iii)

if given by fax, on production of a transmission report by the machine from which the fax was sent which indicates that the fax was sent in its entirety to the recipient’s fax number during the recipient’s normal business hours, unless the recipient informs the sender that the Notice is illegible or incomplete within 24 hours of it being transmitted; and

(iv)

if sent by email, at the time shown in the read receipt for that email from the recipient's email address or the time shown in any reply or response email received by the deliverer in connection with the Notice email.

A Notice delivered or received other than on a Business Day of the recipient, or after 5.00pm (recipient’s time) on a Business Day, is regarded as received at 9.00am (recipient’s time) on the following Business Day. A Notice delivered or received before 9.00am (recipient’s time) on a Business Day, is regarded as received at 9.00am (recipient’s time).

Governing law

Counterparts and Deliver

Alterations

Survival

No merger

Entire agreement

Further action

Severability

Waiver

Relationship