Enigma, for your information from the Prospectus prepared July 1997:
On March 14, 1996 the Issuer Pacific Rim, entered into a letter of intent with Barrick Cayman (G) Ltd. ("Barrick"), an indirect wholly owned subsidiary of Barrick Gold Corporation wherein the Issuer agreed to form Salta Gold Ltd. ("Salta"), a Cayman Islands company having as its sole asset the shares of Pacific S.A. and, enter into a share purchase agreement providing for the purchase by Barrick of 70% of the shares of Salta. The sole asset of Pacific S.A. is the Diablillos Property.
Pursuant to the terms of a Share Purchase Agreement dated as of June 26, 1996 among Barrick, the Issuer, Salta and Pacific S.A.:
1. Barrick acquired 70% of the shares of Salta (the "Shares") for the purchase price equal to exploration expenditures of US$81,667 to be expended on or before June 26, 1997 (incurred), and one share of Pacific S.A. for US$1; and
2. Barrick may at its option make voluntary additional exploration expenditures on the property provided that Salta has the option to purchase all of the Shares for US$10,000 or reacquire the Diablillos Property if Barrick fails to make additional exploration expenditures, inclusive of the US$81,667 purchase price, as follows:
- US$1,500,000 on or before June 26, 1997 (incurred);
- an additional US$2,000,000 on or before June 26, 1998 (incurred);
- an additional US$3,000,000 on or before June 26, 1999 (incurred);
- an additional US$4,000,000 on or before June 26, 2000 (incurred); and
- an additional US$4,000,000 each 12 month period beginning on the fourth and subsequent anniversaries of the Share Purchase Agreement terminating on the subsequent anniversary of the date of the Share Purchase Agreement until a decision is made by Pacific S.A. to place the property or any portion of it into commercial production.
Exploration expenditures means and includes payment, incurrence or accrual by Barrick or its affiliates of all costs, liabilities and charges directly related to exploration and/or development, including, without limitation, any payments made to Abra under the Abra de Mina Agreement.
As at July 1, 1997 Barrick had expended approximately US$10,450,000 including the US$3,750,000 payment due to Abra on July 1, 1997. Barrick may cease making the expenditures referred to above at any time. Pursuant to the Share Purchase Agreement and the Shareholders' Agreement referred to below, if Barrick makes a determination to so cease making such expenditures, Barrick is required to notify the Issuer as to whether Barrick will cause Salta to purchase the Shares for US$10,000 or will cause Salta to redeem the shares of Salta owned by the Issuer in exchange for all right, title and interest of Pacific S.A. in and to the Diablillos Property.
As the indirect owner of 70% of Pacific S.A., Barrick is the operator and controls all decision-making relating to the Diablillos Property. The Issuer has limited rights only to information relating to the Diablillos Property. The Issuer's retainer of Peter Ronning, P.Eng and Mine Development Associates to prepare the reports relating to the Diablillos Property referred to below to provide an assessment of the Diablillos Property was not done in conjunction with Barrick. Barrick has prepared a pre-feasibility report for the purposes of satisfying the terms of the Abra de Mina Agreement, a copy of which has been provided to the Issuer on a confidential basis. The conclusions contained in the pre-feasibility report are indicative of the fact that it is premature at this stage of exploration of the Diablillos Property to consider development.
Shareholders' Agreement relating to Salta and Pacific S.A.
In conjunction with the entering into of the Share Purchase Agreement, Barrick, Salta, Pacific S.A. and the Issuer entered into a shareholders agreement dated as of July 23, 1996 (the "Shareholders' Agreement") to govern the operations and affairs of, and ownership of shares in, and funding of certain activities of Salta and Pacific S.A. Pacific S.A. and Salta have authorized Barrick to make one or more production decisions.
Under the Shareholders' Agreement, if a production decision is made, Pacific S.A. is required to notify the other parties and provide a copy of a feasibility study in connection with the production decision together with a budget relating thereto, within 60 days before the first cash advance, if any, is to be made by the Issuer and/or Barrick. Each of Barrick and the Issuer is required to notify the other parties within 30 days of receipt of notice of a production decision whether or not it will make its share of cash calls to pay for development and operating costs and expenses to implement the production decision and achieve and maintain commercial production.
If either of Barrick or the Issuer elects not to make its share of cash calls, the Shareholders' Agreement contains a dilution formula providing for adjustment of a party's interest. Once a party's interest falls below 10%, the other party has a right to purchase such interest at a specified price. |
