MODEL FOR A MODERN MAJOR GENERAL KEY CONSIDERATIONS

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 don’t 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 Ko. Ko’s 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 o need to be flexible o certain o allow relationship to evolve

FINALE

Caroline Thomas Chief Counsel, Exploration, Property & Aboriginal Affairs Vale, Base Metals 416 -361 -7919 (w) caroline. thomas@vale. com www. vale. com Carmen L. Diges, LL. M, CFA Chair National Mining Group Miller Thomson LLP 416 -596 -2117 (w) cdiges@millerthomson. com www. millerthomson. com