REFINING AGREEMENT NO:  SC-2014/05/17     DATE: August 15, 2014

 

JOHNSON MATTHEY GOLD & SILVER REFINING INC.

 

Principal place of business:

 

4601 West 2100 South,

Salt Lake City, Utah, 84120,

USA

 

("the Refiner")

 

agrees to receive from:

 

DON DAVID GOLD MEXICO S.A. de C.V.

 

Principal place of business:

 

Las Rosas No. 339,

Col. Reforma, Oaxaca,

Oaxaca, CP 68050

Mexico

 

("the Customer")

 

and to refine the material referred to in Clause 1 ("the Material") at the Refiner's refinery in Salt Lake City, Utah ("the Refinery") and the Customer agrees to deliver the Material to the Refiner for refining on the terms and conditions of this agreement ("this Agreement"). The Refiner and the Customer are referred to in this Agreement as a “Party” or together as the “Parties”.

 

 

 

Gold-  approximately 30%; in the range of 25% to 35%

Silver   - approximately 70%; in the range of 60% to 80%

Balance Metals and Elements – approximately 5%

 

 

(a)weigh approximately 10-25 kilograms; and

 

(b) be suitable for direct melting and sampling.

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Weighing, sampling and assaying will be carried out in accordance with the procedures set out in Appendix 1.

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The Refiner shall recover and credit the Customer with the following percentages of the final agreed assayed gold and silver contents of refined Material from each Shipment (“the Recoverable Metals”)

 

Gold -99.925% of the agreed settlement assay

Silver -99.250% of the agreed settlement assay

 

 

7.2. During the Refiner’s annual inventory, the Metal Availability Date will be extended       by 5 working days for any Material received during the week prior to and the week following the inventory date.  The Refiner will notify the Customer of the inventory date in advance.

 

 

8.1The Customer shall instruct the Refiner, in writing no later than five (5) working days prior to receipt of each Shipment, to deliver the Recoverable Metals from such Shipment on or after the Metal Availability Date in accordance with one of the following options:

 

8.1.1The Customer may instruct the Refiner to credit the Recoverable Metals to the Customer’s unallocated metal account with the Refiner and to await further instructions from the Customer, or

 

8.1.2The Customer may instruct the Refiner to transfer the Recoverable Metals to the unallocated loco London account of the Customer with a member of the London Bullion Market Association(swap charges apply), or

 

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8.1.3The Customer may instruct the Refiner transfer the Recoverable Metals to the unallocated loco London account of a nominated third party held with a member of the London Bullion Market Association(swap charges apply).

 

As an alternative to the Customer providing written instructions to the Refiner prior to each Shipment, the Customer may provide written blanket instructions to the Refiner specifying one of the above options for all Shipments during a specified period of time.  In the event that the Customer provides such blanket instructions to the Refiner, no deviation from those instructions will be effective in respect of a Shipment unless provided to the Refiner in writing five (5) working days prior to receipt by the Refiner of such Shipment.  If, in the Refiner’s opinion, any settlement instructions are unclear, ambiguous or conflicting, the Refiner shall immediately notify the Customer in writing of such lack of clarity, ambiguity or conflict and, to the extent such lack of clarity, ambiguity or conflict remains unresolved as of the applicable Metal Availability Date, the Refiner shall deliver the Recoverable Metals in accordance with the most recent acceptable blanket instructions received from the Customer. 

 

8.2In the case of Clauses 8.1.2 and 8.1.3 above, the Customer will have the right, prior to receipt by the Refiner of a Shipment, to give irrevocable instructions, in writing, to the Refiner that the Recoverable Metals in such Shipment are to be so transferred and to request the Refiner to confirm, in writing to the nominated recipient, that it is in receipt of such instructions from the Customer and will act irrevocably in accordance with them.  For greater certainty, any such instructions shall remain subject to the terms of this Agreement, including clause 9.5.

 

8.3 In the event the Customer elects to sell the Recoverable Metals to the Refiner, such Recoverable Metals shall be sold at a price agreed upon by the Parties on or after the Metal Availability Date referred to in clause 7.

 

8.5 Early Settlement Option

 

As an option the Customer may elect to receive an Early Settlement from the Refiner of up to 95% of its estimated payable gold and silver content prior to the Final Settlement Date set out in Clause 7.  Early Settlement may be taken either in the form of a sale to the Refiner or by a Metal Account Settlement as follows:

 

8.5.1In the case of an early sale to the Refiner, the Customer may price up to 95% of its estimated gold content no earlier than three days following the date of receipt of the material at the refinery.  Payment to be effected by the Refiner one market day after such pricing, less all of the Refiner’s charges.

 

8.5.2In the case of an Early Metal Account Settlement, the Customer may instruct the Refiner to transfer up to 95% of its estimated gold content in accordance with each of the provisions detailed in section 8.5.1 no earlier than the third market day after receipt of the Material at the Refinery. 

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8.5.3Where the Customer elects to take an Early Settlement then the remaining balances of the payable contents will be available for Metal Account Settlement or sale to the Refiner on the market day following agreement of assays.

 

8.5.4The Customer agrees and acknowledges that, in the event of an Early Settlement, they will no longer have claim, right, title, or ownership in or the Material that remains in the refining process at the time of Early Settlement, up to the amount of gold or silver made available to the Customer as a result of such Early Settlement.  Customer will indemnify and hold the Refiner harmless from any claims by any person in or to such material which is consistent with the foregoing Early Settlement terms.  In the event that the gold or silver made available to the Customer on the date of Early Settlement is greater than the amount of returnable gold or silver, the Customer shall be liable to the Refiner for the excess gold or silver to be returned.

 

 

The Customer shall pay the Refiner's charges as follows:

 

 

USD$0.50 per troy ounce of Material received.

 

USD$1.00 per troy ounce of contained gold

The Finance Fee of will be calculated at 3% per annum (the “Finance Fee”).  Such Finance Fee will be calculated from the date of Early Settlement to the Metal Availability Date using the London P.M. Fix on the date of Early Settlement.

Should market conditions warrant it, the Refiner reserves the right to change the service charge for Early Settlement.  Five days written notice of such change will be given by the Refiner to the Customer.  The Refiner agrees to fulfil Early Settlement commitments against lots received during that thirty day period.

 

$6,900 Fixed Charge plus

$0.30 per thousand dollars of declared value

 

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Transport prices are subject to change and are subject to Brink's Global Services. Rates are exclusive of any customs duties and taxes. The rates are applied on gross weight (incl. of packaging).

 

 

10.1The Customer shall notify the Refiner in advance of the Refiner’s commencement of processing of a Shipment if any Material sent to the Refiner contains any of the deleterious elements referred to in this clause 10, including any hazardous or toxic substance or hazardous waste.  The Parties acknowledge that the Customer shall be deemed to have fulfilled this notification requirement if the Customer has provided Refiner a Balance Elements Report or a Balance Elements Sample, each as described in clause 3.4.

 

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Element                 Range (PPM)          Penalty (US$ per ounce net weight received)

 

Bismuth                  0 - less than 50                           Free50 – less than 2000.06

200 – less than 1,000                    0.091000 –less than 2,0000.122,000 and aboveto be agreed prior to shipment

 

Mercury                 0 – less than 200                             Free200 – less than 500                    0.10

500 – less than 7500.20

750 and aboveto be agreed prior to shipment

 

Tellurium              0 – less than 1,000Free1,000 – less than 5,0000.065,000 and aboveto be agreed prior to shipment

 

Cadmium                0 – less than 500                                Free500 – less than 1,0000.061,000 – less than 2,5000.102,500 and aboveto be agreed prior to shipment

 

Tin                          0 – less than 5,000Free5,000 – less than 10,000   0.0610,000 and aboveto be agreed prior to shipment

 

 

 

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Arsenic                   0 – less than 500Free

500 – less than 1,0000.061,000 – less than 2,5000.102,500 and aboveto be agreed prior to shipment

 

Lead                       0 – less than 5,000Free5,000 – less than 10,0000.0610,000 – less than 20,0000.0820,000 and aboveto be agreed prior to shipment

 

Selenium               0 – less than 10,000Free10,000 – less than 20,0000.0320,000 – less than 30,0000.0630,000 and aboveto be agreed prior to shipment

 

Sulphur                 0 – less than 10,000Free10,000 – less than 30,0000.0330,000 – less than 50,0000.0650,000 and aboveto be agreed prior to shipment

 

Nickel                    0 – less than 10,000Free10,000 – less than 20,0000.0320,000 and aboveto be agreed prior to shipment

Zinc                      0 – less than 50,000Free50,000 – less than 75,0000.0375,000 and aboveto be agreed prior to shipment

 

Iron                       0 – less than 10,000Free10,000 – less than 20,0000.0320,000 and aboveto be agreed prior to shipment

 

Copper                  0 – less than 50,000Free50,000 – less than 75,0000.0275,000 – less than 100,0000.04

100,000 and aboveto be agreed prior to shipment

 

10.5The above is not necessarily representative for all material compositions and subject to adjustment in case of necessity.

 

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(a) loss of life, personal injury or damage to property directly resulting from any false or misleading information given or supplied by Customer in connection with the Services, except to the extent the Loss arises as a direct result of the negligence or willful misconduct of the Refiner, those contracted by the Refiner or those in Refiner’s employ and such negligence shall include, without limitation, Refiner’s failure to assay the Balance Elements Sample, if any, provided by the Customer pursuant to clause 3.4.  For greater certainty, it shall not constitute negligence or willful misconduct for Refiner, and Refiner shall be entitled, to rely upon Customer’s Balance Elements Report or Refiner’s assay of the Balance Elements Sample provided by the Customer pursuant to clause 3.4, for the types and amounts of deleterious elements present in the Shipment; 

(b)failure by the Customer to comply with any applicable law or regulation in relation to Material shipped to Refiner by Customer, except to the extent that such Loss arises directly from any action or failure to act of the Refiner, those contracted by the Refiner or those in Refiner’s employ.  For greater certainty, Refiner shall be entitled to rely upon Customer’s Balance Elements Report or Refiner’s assay of the Balance Elements Sample provided by the Customer pursuant to clause 3.4, for the types and amounts of deleterious elements present in the Shipment; and

(c)Customer’s representations, warranties and covenants set out in clause 1.3 being untrue in any respect.

(a) loss of life, personal injury or damage to property directly resulting from the performance of the Services, except to the extent the Loss arises as a direct result of the negligence or willful misconduct by the Customer, those in Customer’s employ, or those contracted by Customer (other than Refiner); and

(b)failure by the Refiner to comply with any applicable law or regulation in the performance of the Services, except to the extent that such Loss arises directly from any action or failure to act of the Customer, those in Customer’s employ, or those contracted by Customer (other than Refiner);

(c)Refiner’s representations, warranties and covenants set out in clause 1.4 being untrue in any respect.

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The representations and warranties set out in this Agreement shall survive for a period of two years after the termination of this Agreement.

Title to all Material and Recoverable Metals produced therefrom (without duplication) shall reside with the Customer at all times under this Agreement, except, in respect of any of the Recoverable Metals which are transferred to an account other than Customer’s pursuant to clauses 8.1.2 and 8.1.3 at the Customer’s direction, title to such Recoverable Metals shall pass to such third party under such applicable clause. 

16.1.The Refiner shall maintain in effect during the term of this Agreement full all risks insurance against damage or loss of Material delivered by the Customer or any Recoverable Metals and as required to otherwise fully protect the Customer against all risk of loss from any cause.  Upon the Customer’s request, the Refiner shall provide the Customer with reasonable evidence of such insurance.

16.2.The Refiner represents, warrants and covenants to the Customer that the insurance policies required by this clause shall not be cancelled by the Refiner during the term of this Agreement.  For greater certainty, the cancellation of any such insurance policies by a third party shall not relieve the Refiner of its obligations under clause 16.1.

16.3The Refiner will notify the Customer in writing thirty (30) days prior to any change in the insurance coverage satisfying the Refiner’s obligations under this clause; provided, however, that any such notice shall not relieve the Refiner of its obligations under clause 16.1.

 

 

 

 

(a)fails to perform its obligations under this Agreement and such failure to perform continues for a period of thirty (30) days following notice of such failure;

(b)ceases or threatens to cease to carry on business in the ordinary course;

(c)admits its inability to pay its debts generally as they become due or otherwise acknowledges its insolvency;

(d)initiates or has initiated against it insolvency proceedings.

 

Neither Party shall have the right to assign their interests in this Agreement or their rights, duties and obligations hereunder, without the prior written consent of the other Party, which consent shall not be unreasonably conditioned or withheld; provided, however, that this Agreement shall be assigned to, be binding upon and inure to the benefit of any person that acquires all or substantially all of a Party’s assets to which this Agreement relates.  Notwithstanding the immediately preceding sentence, either Party may assign this Agreement to an affiliate without the prior written consent of the other Party.  This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns.

 

 

For the purposes of this Agreement, "working day" means any day, which is not a Saturday, Sunday or a public holiday in the State of Utah or, solely for the purpose of clauses 8.1.2 and 8.1.3, a banking holiday in the United Kingdom.

 

 

 

If to the Customer, to: 

 

Don David Gold Mexico S.A. DE C.V.,

Las Rosas No. 339,

Col. Reforma, Oaxaca,

Oaxaca, CP 68050

Mexico

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Attention:  Rick Irvine, COO

Telephone: +52-951-502-4051

Email: rickirvine@goldresourcecorp.com

 

Copy to :

 

Gold Resource Corporation

Colorado Center Tower I

2000 South Colorado Blvd, Suite 10200

Denver, Colorado 80222

USA

Telephone: +1-303-320-7708

Email:  joerodriquez@goldresourcecorp.com

 

If to the Refiner, to:

 

Johnson Matthey Gold & Silver Refining Inc.

4601 West 2100 South,

Salt Lake City, Utah, 84120,

USA

Attn:  Commercial Director

Facsimile:+ 1 801-973-7313

Email: angwig@jmusa.com

 

Copy to:

 

Johnson Matthey Inc.

435 Devon Park Drive

Wayne, Pennsylvania 19087, USA

Attn:  President-Corporate, General Counsel & Secretary

Facsimile: +1 610 971 3022

 

 

 

 

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This Agreement may not be amended or modified except by instrument in writing executed on behalf of each of the Parties.

 

This Agreement may be executed in counterparts with the same force and effect as if the Parties had executed one instrument, and each counterpart will constitute an original thereof.  This Agreement and counterparts thereof may be delivered by facsimile and when so delivered will be deemed to be an original.

 

 

Unless such disclosure is required by law or the applicable rules of a stock exchange, neither Party will disclose the refining charges or settlement terms of this Agreement, nor any information that would reveal such terms, nor any processing arrangements under this Agreement, nor any other information, data and knowledge  that is specific to this Agreement or any Confidential Information (as described below) without the prior written consent of the other, which consent will not be unreasonably withheld, conditioned or delayed.

 

The term “Confidential Information” as used in this Agreement will mean all information, data and knowledge (whether in the form of documents or other written material, electronic, magnetic or laser recording or memory, know-how or otherwise) relating, directly or indirectly, to the Mine, the Mine’s production of Material, the Material and the processing, refining and accounting for the Material under this

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Agreement that is delivered or disclosed in writing or electronically, and will include the receiving Party’s analyses, interpretations and compilations of such information, data, knowledge or know-how.  The term “Confidential Information” will not include information, data and knowledge that (a) the receiving Party can show by written records was in its possession or control prior to its disclosure by the other Party, (b) is in the public domain prior to such disclosure, or (c) lawfully enters the public domain through no violation of this Agreement or any other confidentiality obligation between the Refiner and the Customer.

 

 

The substantive law of this Agreement shall be the laws of Utah, USA, without regard to its principles of conflict of laws.  The Parties hereby exclude the application of the United Nations Convention in Contracts for the International Sale of Goods.

 

 

 

 

 

 

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Nothing in this Agreement shall be construed to create a partnership, joint venture, or other business relationship between the Parties. The Refiner is an independent contractor and will be solely responsible for the performance of its obligations under this Agreement.

 

 

In the performance of their respective obligations under this Agreement, each of the Refiner and the Customer shall comply with all applicable federal, state, provincial, municipal, and local laws, regulations, ordinances, orders, rules, decrees, and amendments thereto, including, but not limited to all such laws, regulations, ordinances, orders, rules, decrees, and amendments thereto related to the prohibition of the bribery of government officials or aimed at reclamation or restoration of property; abatement of pollution; protection of the environment; protection of wildlife, including endangered species; ensuring public safety from environmental hazards; protection of cultural or historic resources; management, storage or control of hazardous materials and dangerous substances; releases or threatened releases of pollutants, contaminants, chemicals or industrial, toxic, dangerous or hazardous substances as wastes into the environment, including without limitation, ambient air, surface water and groundwater; and all other such laws, regulations, ordinances, orders, rules, decrees, and amendments thereto relating to the manufacturing, processing, distribution, use, treatment, storage, disposal, handling or transport of pollutants, contaminants, chemicals or industrial, toxic, dangerous or hazardous substances or wastes.

 

 

In case any provision of this Agreement is found to be illegal, invalid or unenforceable, the remainder of this Agreement shall not be affected thereby.  The parties shall use their best efforts to replace any illegal, invalid or unenforceable provision with a valid and enforceable provision that comes nearest to the meaning and intention of the provision to be replaced.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the Effective Date, regardless of the date signed.

 

 

Johnson Matthey Gold & Silver Refining Inc.

 

 

 

By: /s/ G.A. Angwin

Name: G.A. Angwin

Title: Commercial Director

 

By: /s/ Brad Boyko

Name: Brad Boyko

Title: Manager Global Mining Sales

 

 

 

Don David Gold Mexico S.A. DE C.V.

 

 

 

By: /s/ Joe A. Rodriguez

Name: Joe A. Rodriguez

Title: CFO of Parent Co. (Gold Resource Corporation)

 

By: ________________________________

Name:

Title:

 

 

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Appendix 1

 

 

WEIGHING AND SAMPLING PROCEDURE FOR

GOLD AND SILVER DORÉ

 

1,General

 

Weighing and sampling will be carried out at the Refinery. The sampling will be final for all contractual purposes.

 

The Customer has the right to be represented at these operations at its own expense, either by use of an agreed independent representative company or an employee of the Customer. The Customer shall inform the Refiner of the name, address, telephone number and email address of its representative and of the authority delegated to the representative.  The Refiner shall notify the representative of the Customer of any weighing, melting or sampling operations to be performed by the Refiner to the Material at least two working days prior to such operations being conducted.  The representative of the Customer will be available to perform his duties at any time provided the Refiner has given two working days’ notice of its intention to commence operations during Refiner’s business hours (which shall commence at 12:01 am on Monday and end at 11:59 pm on Friday).

 

2.Weighing

 

2.1Within 72 hours of the arrival of the Material at the Refinery, visual inspection of the seals will take place and the gross weight of the Material and packing will be determined and compared with the advised gross weight.  Any difference in excess of 1% (one percent) of the gross weight as stated in the Commercial Invoice and the gross weight determined by the Refiner, or the detection of damaged packaging, will be reported to the Customer or its representative immediately.

 

In the case of a representative not being present, the Material will be placed in a secure vault pending arrival of the representative, or a decision to proceed or otherwise, in writing, from the Customer.

 

2.2The net weight of the Material shall be determined by removing the Material from the packing and individually weighing each Dore bar on a Class II balance having a tolerance of +/-10 (ten) grams.

 

In the case of a difference greater than 0.2% of the net weight of any Dore bar as stated in the Commercial Invoice and as determined by the Refiner, such Dore bar will be held in a secure vault pending advice from the Customer to proceed or otherwise, in writing.

 

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3.Melting

 

3.1Melts may be covered with charcoal/borax to prevent oxidation and raised to a temperature of 100oC above the melt point of the Material.

 

3.2When the melt is completely molten and has been allowed to stir vigorously by the induced current, the slag/flux cover will be removed and reserved.

 

3.3Pin samples will be taken from the molten mass, by use of a vacuum tube, as follows: -

 

2samples for the Refiner to analyse

2samples to be held by the Refiner in case of a reserve analysis or recourse to an independent third party.

1sample for the Customer or its representative.

 

3.4The agreed net weight will be arrived at by adding the weight of the after melt bars together with any samples retained by the Refiner.  This will be the final after melt weight.  Any samples that the Customer or its representative takes will not constitute payable settlement weight.

 

4.Slag Sampling

 

The slags and pot scrapings will be remelted and any grain bars produced during this operation will be weighed and added to the final after melt weight.  Any grain bars weighing in excess of 10 troy ounces will be assayed separately.  All slags will be kept until agreement of assays.

 

5.Assaying and Settlement Procedure

 

5.2. The Refiner and Customer will exchange assays by registered mail on an agreed date. The day after the date on which the Parties have agreed to make the exchange, the Refiner and Customer will exchange said assays by e-mail, telephone or fax.  The exchange of assay results by the Customer and the Refiner shall occur within no more than four (4) working days following receipt of the sample by the representative of the Customer, provided that the Customer may at its option defer such exchange of assay results for an additional two (2) working  days.

The splitting limit for gold shall be 0.10% and for silver 0.25%.

then, the exact mean of the two values shall be taken as the agreed Settlement assay.

If the difference exceeds the limits under this section 5.3, either the Customer or the Refiner may request an assay by an independent assayer (as identified on Appendix 2, an “Umpire”), or both parties may agree to resolve the difference without calling an Umpire. If Umpire analysis is required the Refiner shall send the sample reserved for the Umpire to the Umpire forthwith and obtain an Umpire assay of such sample as soon as possible.

Any payments required to be made by the Customer under this section 5.4 shall be made within 10 working days following the receipt by the Customer from the Refiner of a copy of the invoice of the Umpire.

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Appendix 2

 

 

Independent Samplers and Assayers Acceptable to the Parties

 

 

Alfred H. Knight Int’l Ltd.

Eccleston Grange

Prescott Road

St. Helens

Merseyside WA10 3BQ England

Tel:  +44 1744 733757

Fax:  +44 1744 27062

 

 

Alfred H. Knight North America Ltd.

130 Tradd Street

Spartanburg, SC 29304

Tel: 864 595 1903

Fax: 864 595 1627

 

 

Alex Stewart (Assayers) Ltd

314 Route 22 West, Suite C

Greenbrook, NJ, 08812

Tel:732 529 4408

Fax:732 529 4411

 

 

Ledoux & Company

359 Alfred Avenue

Teaneck, NJ, 07666

Tel: 201 837 7160

Fax: 201 837 1235

 

 

 

 

 

 

 

 

 

 

 

 

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Appendix 3

 

 

 

Certificate of Compliance

with

Conflict Minerals and Patriot Act Anti Money-Laundering Regulations

 

Customer certifies:

     ( http://www.oecd.org/dataoecd/54/39/49187571.pdf)

 

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