MODEL FOR A MODERN MAJOR GENERAL: KEY CONSIDERATIONS FOR LOIs AND OPTION AGREEMENTS IN EXPLORATION DEALS

1.Preliminary Considerations basic business terms preliminary information

2.Strategic Considerations rational timelines negotiate now vs negotiate later disclosure

Poor Ol' Nugget - Act I, Scene 1

3.LOIs – Binding vs. Non-Binding binding preferable where: o commitment o certainty o disclosure non-binding preferable where: o flexibility o speed

4.Binding LOIs – Legal Risks uncertainty contract terms not fully addressed reliance on common law can prejudice o bargaining position o legal position/relationship

5.Non-Binding LOIs – Legal Risks can be abandoned some terms should be binding casual, no legal review court may find binding morally binding

6.LOIs – Binding vs Non-Binding – How to Tell? test o basic contract principles satisfied – did the parties agree? o are the essential terms agreed? o did the parties intend to be bound? each case is fact specific o wording of LOI o actions of parties

7.Non-Binding LOIs – Tips use conditional language dont use imperative language leave key terms for later agreement include conditions state non-binding conduct of parties

Poor Ol' Nugget - Act I, Scene 2

8.LOIs – Drafting Considerations speed vs. certainty extent of representation approvals – corporate & regulatory termination notice mechanics effective date and impact on timelines

9.LOI – Best Practices is priority timing or detail? be wary of obligation to negotiate in good faith standalone – exclusivity and confidentiality diarize dates check AOI for overlaps note issues that were problematic assess relationship/troubleshoot potential challenges no work on property (sorry!)

Poor Ol' Nugget - Act II, Scene 1

10.Moving from LOI to Option remaining/outstanding due diligence issues refer back to LOI best practices consider representations and warranties o What needs to be customized o What needs to be covered o Old standards: singing the same old song

11.Exercise of Option/Form of JV exercising the option o Formal approach o Automatic approach form of JV o All information: vegetable, animal and mineral o Substantially in the form attached o KoKos list o Worry about it later

Poor Ol' Nugget - Act II, Scene 2

12.Practical Issues treatment of shortfalls currency risk transition matters o into JV o on terminating option partial surrenders and additions accelerations

13.Best Practices decision tree as much ADR as you need, not as much as you can stand transaction summary databases debrief and capture process

14.Conclusion business/strategic analysis drives document living documents oneed to be flexible ocertain oallow relationship to evolve

FINALE

Caroline Thomas Chief Counsel, Exploration, Property & Aboriginal Affairs Vale, Base Metals (w) Carmen L. Diges, LL.M, CFA Chair National Mining Group Miller Thomson LLP (w)