As filed with the Securities and Exchange Commission on July 2, 2021

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 20-F

 

☒ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

☐

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended___________________________________________________________________

OR

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________________________ to ______________________________

OR

☐

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report _______________________________________________

 

Commission File Number: __________

 

Arras Minerals Corp.

(Exact name of registrant as specified in its charter)

 

N/A

(Translation of Registrant’s name into English)

 

British Columbia

(Jurisdiction of incorporation or organization)

 

777 Dunsmuir Street, Suite 1610

Vancouver, British Columbia V7Y 1K4

Canada

(Address of principal executive office)

 

Timothy T. Barry

President and Chief Executive Officer

777 Dunsmuir Street, Suite 1610

Vancouver, British Columbia V7Y 1K4

Canada

Tel: (604) 687-5800

(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)

 

Copies to:

Brian Boonstra

Davis Graham & Stubbs LLP

1550 Seventeenth Street, Suite 500

Denver, CO 80202

Tel: (303) 892-7348

 

 
 
 

 

Securities registered or to be registered pursuant to Section 12(b) of the Act.

         

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

         

Securities for which there is a reporting obligation pursuant to Section 12(g) of the Act.

Common Shares, without par value

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act. None.

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report. Not applicable.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☐ No ☒

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ☐ No ☐

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☐ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ☐   Accelerated filer  ☐   Non-accelerated filer  ☒   Emerging growth company  ☒

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP    ☐ International Financial Reporting Standards as issued by the
International Accounting Standards Board  ☒ 		Other  ☐

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ☐ Item 18 ☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☐

 

 
 
 

 

               , 2021

Dear Shareholders of Silver Bull Resources, Inc.:

On May 25, 2021, Silver Bull Resources, Inc., a Nevada corporation (“Silver Bull”), announced its intention to “spin off” its assets and operations located in Kazakhstan to its shareholders in a new British Columbia incorporated company called Arras Minerals Corp. (“Arras”). Arras is currently a subsidiary of Silver Bull, which holds approximately 88% of the outstanding shares of Arras, with the remaining shares of Arras being held by certain investors following the completion of a private placement of Arras common shares on April 1, 2021. The spin-off will be structured as a pro-rata distribution of shares of Arras to Silver Bull shareholders. Approximately 34.2 million shares of Arras are expected to be distributed, with one Arras share to be distributed to Silver Bull shareholders for each share of Silver Bull common stock held. I am pleased to report that we expect to effect the proposed distribution on or around                , 2021. Immediately following the spin-off, Silver Bull will retain an approximately 4% ownership interest, or approximately 1.8 million shares, in Arras.

The spin-off is expected to:

· provide investors with the potential for greater value than a single company by unlocking a premium value for the Beskauga and Sierra Mojada projects separately;
· create two separate companies that have clear commodity and regional demarcation, allowing for targeted branding and marketing;
· allow each company flexibility in allocating resources and deploying capital in a manner consistent with the separate business strategies;
· broaden the appeal of the potential investor base for both companies, with Kazakhstan potentially appealing to European and Middle Eastern investors and Mexico potentially appealing to North American investors; and
· facilitate the ability of the companies to separately finance the Beskauga and Sierra Mojada projects based on the unique characteristics of each project and jurisdiction.

Completion of the spin-off is subject to a number of conditions and associated risks. In addition, following the spin-off, common shares of Arras will not be listed or posted for trading on any stock exchange or market. We invite you to learn more about Arras and the spin-off by reviewing the enclosed registration statement.

Sincerely,

 

 

Timothy T. Barry

Chief Executive Officer of Silver Bull Resources, Inc.

 

 
 
 

TABLE OF CONTENTS

Page

INTRODUCTION AND USE OF CERTAIN TERMS 1
MARKET INFORMATION 1
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS 2
SUMMARY 5
PART I
ITEM 1.     IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS. 17
ITEM 2.     OFFER STATISTICS AND EXPECTED TIMETABLE. 17
ITEM 3.     KEY INFORMATION. 17
ITEM 4.     INFORMATION ON THE COMPANY. 31
ITEM 4A.  UNRESOLVED STAFF COMMENTS. 48
ITEM 5.     OPERATING AND FINANCIAL REVIEW AND PROSPECTS. 48
ITEM 6.     DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES. 49
ITEM 7.     MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS. 60
ITEM 8.     FINANCIAL INFORMATION. 61
ITEM 9.     THE OFFER AND LISTING. 61
ITEM 10.   ADDITIONAL INFORMATION. 62
ITEM 11.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. 81
ITEM 12.   DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES. 82
PART II
ITEM 13.   DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES. 83
ITEM 14.   MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS. 83
ITEM 15.   CONTROLS AND PROCEDURES. 83
ITEM 16.   [RESERVED]. 83
ITEM 16A.   AUDIT COMMITTEE AND FINANCIAL EXPERT. 83
ITEM 16B.   CODE OF ETHICS. 83
ITEM 16C.   PRINCIPAL ACCOUNTANT FEES AND SERVICES. 83
ITEM 16D.   EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES. 83
ITEM 16E.   PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS. 83
ITEM 16F.   CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT. 83
ITEM 16G.   CORPORATE GOVERNANCE. 83
ITEM 16H.   MINE SAFETY DISCLOSURE. 83
PART III
ITEM 17.   FINANCIAL STATEMENTS. 84
ITEM 18.   FINANCIAL STATEMENTS. 84
ITEM 19.   EXHIBITS. 84
SIGNATURES 85

 

 

 
 
 

INTRODUCTION AND USE OF CERTAIN TERMS

We have prepared this registration statement on Form 20-F (the “Form 20-F”) using a number of conventions, which you should consider when reading the information contained herein. In this Form 20-F, the “Company,” “we,” “us,” “our” and “Arras” shall refer to Arras Minerals Corp. as the context may require. As used in this Form 20-F, the terms “Mineral Resource,” “Measured Mineral Resource,” “Indicated Mineral Resource,” “Measured Mineral Resource,” and “Inferred Mineral Resource” and any grammatical variations thereof are based on the definitions of such terms set forth in Item 1300 of Regulation S-K.

We publish financial statements expressed in U.S. dollars. Our financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

We have prepared this Form 20-F to register common shares, without par value, of Arras under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), in connection with the proposed distribution of our common shares held by Silver Bull to its shareholders by way of a special dividend, on the basis of one common share of Arras for each share of common stock in the capital of Silver Bull.

MARKET INFORMATION

This Form 20-F contains industry and market data prepared by our management on the basis of such industry sources and our management’s knowledge of and experience in the industry and markets in which we operate (including management’s estimates and assumptions relating to such industry and markets based on that knowledge). Our management has developed its knowledge of such industry and markets through its experience and participation in these markets.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Form 20-F uses certain statements that may be deemed to be “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Exchange Act, and the United States Private Securities Litigation Reform Act of 1995, and “forward-looking information” within the meaning of applicable Canadian securities legislation. We use words such as “anticipate,” “continue,” “likely,” “estimate,” “expect,” “may,” “will,” “projection,” “should,” “believe,” “potential,” “could,” or similar words suggesting future outcomes (including negative and grammatical variations) to identify forward-looking statements. These statements include statements regarding the following, among other things:

· the timing, conditions, mechanics, income tax consequences, and other aspects of the proposed distribution of our common shares held by Silver Bull to its shareholders by way of a special dividend;
· the sufficiency of our existing cash resources to enable us to continue our operations for the next 12 months as a going concern;
· future exploration expenditures on the Beskauga Property, the potential exercise of the Beskauga Option and potential bonus payments under the Beskauga Option Agreement;
· the prospects of entering the development or production stage with respect to any of our projects;
· our planned activities at the Beskauga Project in 2021 and beyond;
· whether any part of the Beskauga Project will ever be confirmed or converted into Regulation S-K 1300-compliant “reserves”;
· our ability to obtain and hold additional concessions in the Beskauga Project area;
· the timing, duration and overall impact of the novel coronavirus (“COVID-19”) pandemic on the Company’s business;
· the sufficiency of our surface rights in respect of the Beskauga Property if a mining operation is determined to be feasible;
· the potential acquisition of additional mineral properties or property concessions;
· the impact of recent accounting pronouncements on our financial position, results of operations or cash flows and disclosures;
· our ability to raise additional capital and/or pursue additional strategic options, and the potential impact on our business, financial condition and results of operations of doing so or not;
· the requirement for Arras shareholder approval of the issuance of certain options to purchase Arras common shares; and
· the impact of changing foreign currency exchange rates on our financial condition.

These statements are based on certain assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate in the circumstances. Such statements are subject to a number of assumptions, risks and uncertainties, and our actual results could differ from those expressed or implied in these forward-looking statements as a result of the risk factors discussed in more detail in this Form 20-F under “Item 3. Key Information—Risk Factors,” including without limitation, risks associated with the following:

· our ability to continue as a going concern as a single-project company;
· the lack of an existing public market for our common shares;
· some or all of the expected benefits of the Spin-off may not be achieved;
· the Spin-off could result in significant tax liability to certain shareholders;
· we are uncertain that we will be able to maintain sufficient cash to accomplish our business objectives;
· our exploration activities require significant amounts of capital that may not be recovered;

 

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· our ability to meet our current and future capital requirements on favorable terms or at all;
· risks relating to the results of future exploration at the Beskauga Property and our ability to raise the capital for exploration expenditures on the Beskauga Property to maintain the effectiveness of the Beskauga Option;
· our operations may be disrupted, and our financial results may be adversely affected, by global outbreaks of contagious diseases, including the COVID-19 pandemic;
· we are an exploration stage mining company with no history of operations;
· we have no commercially mineable ore body;
· the reliability of our Mineral Resource estimates;
· our ability to acquire additional mineral properties or property concessions;
· inherent risks in the mineral exploration industry;
· risks relating to fluctuations of metal prices;
· risks relating to competition in the mining industry;
· risks relating to the title to our properties;
· risks relating to our option and joint venture agreements;
· risks associated with joint ventures;
· our ability to obtain required permits;
· timing of receipt and maintenance of government approvals;
· compliance with laws is costly and may result in unexpected liabilities;
· our success depends on developing and maintaining relationships with local communities and other stakeholders;
· risks relating to social and environmental activism;
· risks relating to evolving corporate governance and public disclosure regulations;
· risks relating to foreign operations;
· risks relating to worldwide economic and political events;
· risk of political and economic instability in Kazakhstan;
· our financial condition could be adversely affected by changes in currency exchange rates;
· risks relating our “foreign private issuer” status;
· risks relating to our possible status as a passive foreign investment company;
· risks relating to volatility in our share value;
· further equity financings leading to the dilution of our common shares;
· our common shares continuing not to pay dividends;
· risks relating to information systems and cybersecurity;
· our ability to retain key management, consultants and experts necessary to successfully operate and grow our business;
· our overlapping officers and directors with Silver Bull may give rise to conflicts of interest;
· our reliance on international advisors and consultants;
· risks relating to changes in tax laws; and
· risks relating to changes in regulatory frameworks or regulations affecting our activities.

All forward-looking statements speak only as of the date made. All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements. Except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. You should not place undue reliance on these forward-looking statements.

 

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Cautionary Note Regarding Exploration Stage Companies

We are an exploration stage company and do not currently have any known reserves and cannot be expected to have known reserves unless and until a feasibility study is completed for the Beskauga Property concessions that shows proven and probable reserves. There can be no assurance that our concessions contain proven and probable reserves or that even if such reserves are found, that we will be successful in economically recovering them. Investors may lose their entire investment.

 

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 SUMMARY

This summary highlights selected information from this Form 20-F and provides an overview of our company, our separation from Silver Bull and the distribution by Silver Bull of our common shares to its shareholders. For a more complete understanding of our business and the spin-off, you should read this entire Form 20-F carefully, particularly the discussion under “Item 3. Key Information—Risk Factors” and our financial statements and the notes to those financial statements appearing elsewhere in this Form 20-F.

Overview

Arras is an exploration stage company, engaged in the business of mineral exploration. The Company’s exploration is focused on discovering and delineating Mineral Resources at the Company’s material property, the Beskauga Project, which is comprised of three contiguous licenses located in Kazakhstan. We have not realized any revenues. We have not established any reserves with respect to our exploration projects and may never enter into the development stage with respect to any of our projects.

We are currently a subsidiary of Silver Bull, which holds approximately 88% of our outstanding shares, with the remaining shares of Arras being held by certain investors following the completion of a private placement of common shares on April 1, 2021. Immediately following the Spin-off, Silver Bull will retain an approximately 4% ownership interest in Arras. We do not own any interest in another entity, whether wholly or partially.

Reasons for the Spin-off

We and Silver Bull believe that the Spin-off will provide a number of benefits to our business, to the business of Silver Bull and to the shareholders of Silver Bull. As two distinct companies, Silver Bull and Arras will be better positioned to capitalize on significant growth opportunities and focus resources on their respective businesses and strategic priorities. Silver Bull and its board of directors (the “Silver Bull Board”) considered a wide variety of factors in their initial evaluation of the proposed Spin-off, including the following potential benefits:

· provide investors with the potential for greater value than a single company by unlocking a premium value for the Beskauga and Sierra Mojada projects separately;
· create two separate companies that have clear commodity and regional demarcation, allowing for targeted branding and marketing;
· allow each company flexibility in allocating resources and deploying capital in a manner consistent with the separate business strategies;
· broaden the appeal of the potential investor base for both companies, with Kazakhstan potentially appealing to European and Middle Eastern investors and Mexico potentially appealing to North American investors; and
· facilitate the ability of the companies to separately finance the Beskauga and Sierra Mojada projects based on the unique characteristics of each project and jurisdiction.

Neither we nor Silver Bull can assure you that, following the Spin-off, any of the benefits described above or otherwise in this Form 20-F will be realized to the extent or at the time anticipated or at all. See also “Item 3. Key Information—Risk Factors.”

Silver Bull and the Silver Bull Board also considered a number of potentially negative factors in their initial evaluation of the potential Spin-off, including the following:

· potential disruption to the businesses of Arras and Silver Bull;

 

 

 

 

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· management distraction due to the significant amount of time and effort required to complete the Spin-off;
· the significant one-time costs of separating the two companies;
· challenges for management of Arras who will continue to have operational responsibilities for Silver Bull;
· incremental costs on the resulting companies, including, among others, the costs of being a stand-alone company and potential tax inefficiencies;
· greater susceptibility to market fluctuations and other adverse events as a stand-alone company, including as a result of reduced business diversification; and
· risk that the Spin-off is not consummated or does not achieve its intended benefits.

Silver Bull and the Silver Bull Board believe that the potential benefits of the Spin-off outweigh these potentially negative factors. The completion of the Spin-off remains subject to the satisfaction, or waiver by the Silver Bull Board, of a number of conditions. We describe these benefits and certain other factors considered by Silver Bull and the Silver Bull Board, as well as conditions to the closing, in greater detail under “Item 4. Information on the Company—The Spin-off.”

Summary of Risks Associated with Our Business and the Spin-off

Our business is subject to numerous risks, including:

· our ability to continue as a going concern as a single-project company;
· the lack of an existing public market for our common shares;
· some or all of the expected benefits of the Spin-off may not be achieved;
· the Spin-off could result in significant tax liability to certain shareholders;
· we are uncertain that we will be able to maintain sufficient cash to accomplish our business objectives;
· our exploration activities require significant amounts of capital that may not be recovered;
· our ability to meet our current and future capital requirements on favorable terms or at all;
· risks relating to the results of future exploration at the Beskauga Property and our ability to raise the capital for exploration expenditures on the Beskauga Property to maintain the effectiveness of the Beskauga Option;
· our operations may be disrupted, and our financial results may be adversely affected, by global outbreaks of contagious diseases, including the COVID-19 pandemic;
· we are an exploration stage mining company with no history of operations;
· we have no commercially mineable ore body;
· the reliability of our Mineral Resource estimates;
· our ability to acquire additional mineral properties or property concessions;
· inherent risks in the mineral exploration industry;
· risks relating to fluctuations of metal prices;
· risks relating to competition in the mining industry;
· risks relating to the title to our properties;
· risks relating to our option and joint venture agreements;
· risks associated with joint ventures;
· our ability to obtain required permits;
· timing of receipt and maintenance of government approvals;
· compliance with laws is costly and may result in unexpected liabilities;
· our success depends on developing and maintaining relationships with local communities and other stakeholders;

 

 

 

 

 

 

 

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· risks relating to social and environmental activism;
· risks relating to evolving corporate governance and public disclosure regulations;
· risks relating to foreign operations;
· risks relating to worldwide economic and political events;
· risk of political and economic instability in Kazakhstan;
· our financial condition could be adversely affected by changes in currency exchange rates;
· risks relating our “foreign private issuer” status;
· risks relating to our possible status as a passive foreign investment company;
· risks relating to volatility in our share value;
· further equity financings leading to the dilution of our common shares;
· our common shares continuing not to pay dividends.
· risks relating to information systems and cybersecurity;
· our ability to retain key management, consultants and experts necessary to successfully operate and grow our business;
· our overlapping officers and directors with Silver Bull may give rise to conflicts of interest;
· our reliance on international advisors and consultants;
· risks relating to changes in tax laws; and
· risks relating to changes in regulatory frameworks or regulations affecting our activities.

Corporate Information

Arras is an exploration stage company, engaged in the business of mineral exploration. The Company’s exploration is focused on discovering and delineating Mineral Resources at the Company’s material property, the Beskauga Project (as defined below), which is comprised of three contiguous licenses located in Kazakhstan.

The Company was incorporated under the Business Corporations Act (British Columbia) on February 5, 2021 as a wholly owned subsidiary of Silver Bull Resources, Inc. Arras was formed to hold Silver Bull’s interests in the Beskauga Project located in Kazakhstan. We are domiciled in Canada and our registered office is located at Suite 2600, Three Bentall Centre, 595 Burrard Street, Vancouver, British Columbia V7X 1L3, Canada. Our principal executive offices are located at 777 Dunsmuir Street, Suite 1610, Vancouver, British Columbia V7Y 1K4, Canada, and our telephone number is (604) 687-5800.

Restrictions on Trading

Upon consummation of the Spin-off, our common shares will not be listed or posted for trading on any stock exchange or market. Accordingly, our common shares distributed to Silver Bull shareholders, though freely transferable in the United States, may be illiquid until such time as such shares are listed or a trading market develops, if at all. In Canada, our shareholders will be able to trade their shares only pursuant to an exemption from prospectus requirements. See also “Item 4. Information on the Company – The Spin Off – Canadian Securities Laws Matters.”

Implications of Being a Foreign Private Issuer and an Emerging Growth Company

Foreign Private Issuer

Upon consummation of the Spin-off, we will report under the Exchange Act as a non-U.S. company with foreign private issuer (“FPI”) status. As long as we qualify as an FPI under the Exchange Act, we will be exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including:

 

 

 

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· the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act;
· the sections of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and
· the rules under the Exchange Act requiring the filing with the Securities and Exchange Commission (the “SEC”) of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K, upon the occurrence of specified significant events.

Notwithstanding these exemptions, we will file with the SEC an annual report on the applicable prescribed form containing financial statements audited by an independent registered public accounting firm. Our initial annual report on Form 20-F will be filed within four months after the end of our fiscal year ending October 31, 2021.

We may take advantage of these exemptions until such time as we are no longer an FPI. We would cease to be an FPI at such time as more than 50% of our outstanding voting securities are held by U.S. residents and any of the following three circumstances applies: (i) the majority of our executive officers or directors are U.S. citizens or residents, (ii) more than 50% of our assets are located in the United States or (iii) our business is administered principally in the United States.

Emerging Growth Company

As a company without any revenue, we are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012. As such, we may take advantage of certain exemptions from various reporting requirements that are applicable to reporting entities that are not emerging growth companies. These exemptions include:

· the ability to include only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations disclosure;
· an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002;
· reduced disclosure obligations regarding executive compensation in any required periodic reports and proxy statements; and
· exemptions from the requirement to hold a non-binding advisory vote on executive compensation, including golden parachute compensation.

As a result, the information contained in this Form 20-F may be different from the information you receive from other reporting companies in which you hold shares.

We may take advantage of these provisions for up to five years or until such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company upon the earliest to occur of: (i) the last day of the first fiscal year in which our annual gross revenues exceed $1.07 billion, (ii) the date on which we have issued more than $1 billion in non-convertible debt securities during the previous three years and (iii) the last day of the fiscal year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act (which would occur if the market value of our common equity that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter).

Both FPIs and emerging growth companies are also exempt from certain more stringent executive compensation disclosure rules. Thus, even if we no longer qualify as an emerging growth company, but remain an FPI, we will continue to be exempt from the more stringent compensation disclosures required of companies that are neither an emerging growth company nor an FPI.

 

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Summary Historical Financial Information

The following table sets forth summary financial information for the periods and dates indicated below and should be read together with our financial statements and related notes, and “Item 3. Key Information—Capitalization and Indebtedness” and “Item 5. Operating and Financial Review and Prospects” appearing elsewhere in this Form 20-F. We derived the summary historical statement of operations data for the period from the Company’s inception on February 5, 2021 to April 30, 2021 and the summary balance sheet data as of April 30, 2021 from our financial statements and related notes appearing elsewhere in this Form 20-F.

The summary financial data is not intended to replace our financial statements or related notes. Our historical results could differ from those that would have resulted if we operated autonomously or as an entity independent of Silver Bull in the periods for which historical financial data is presented below, and such results are not necessarily indicative of results that may be expected in the future.

For additional details regarding the preparation of our financial statements, please see “Item 5. Operating and Financial Review and Prospects—Operating Results” and “Note 2. Basis of Presentation” to our financial statements.

We prepare our financial statements in accordance with IFRS.

Balance Sheet

   

April 30, 2021

USD

(audited)

ASSETS        
Current Assets        
Cash   $ 1,562,570  
Loans to Ekidos Minerals LLP     1,435,000  
Total Current Assets     2,997,570  
Non-current Assets        
Office and equipment     50,151  
Mineral properties     327,690  
Total Non-current Assets     377,841  
Total Assets   $ 3,375,411  
LIABILITIES AND SHAREHOLDERS EQUITY        
Current Liabilities        
Accounts payable and accrued liabilities   $ 163,553  
Due to related party     118,668  
Total Liabilities     282,221  
Shareholders’ Equity        
Share capital     3,350,375  
Reserves     305,876  
Deficit     (563,061 )
Total Shareholders’ Equity     3,093,190  
Total Liabilities and Shareholders’ Equity   $ 3,375,411  

 

 

 

 

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Statement of Comprehensive Loss

   

For the Period from Inception on February 5, 2021 to April 30, 2021

USD

(audited)

EXPENSES        
Exploration   $ 81,804  
Personnel     201,576  
Office and administrative     12,281  
Professional services     156,098  
Directors’ fees     140,553  
Foreign exchange gain     (34,078 )
Depreciation     4,827  
Total Expenses     563,061  
Net Loss and Comprehensive Loss for the Period   $ (563,061 )
Basic and Diluted Loss per Common Share   $ (0.03 )

 

The Spin-off

On March 19, 2021, Silver Bull transferred its Kazakh assets to the Company pursuant to the terms of an Asset Purchase Agreement (the “APA”) in exchange for the issuance of 36,000,000 common shares of the Company to Silver Bull (the “Asset Transfer”). The transferred assets included an option agreement with respect to the Beskauga Property (as defined below), a joint venture agreement with respect to the Stepnoe and Ekidos properties (the “Stepnoe and Ekidos JV Agreement”) and loans payable by Ekidos Minerals LLP (“Ekidos LLP”) to Silver Bull. On May 25, 2021, Silver Bull announced plans to spin-off substantially all of its shares of Arras to the Silver Bull shareholders. On                , 2021, Silver Bull expects to distribute approximately 34.2 million of our common shares issued to Silver Bull in respect of the Asset Transfer to its shareholders by way of a special dividend, on the basis of one common share for each share of common stock in the capital of Silver Bull (the “Distribution,” and together with the Asset Transfer, the “Spin-off”). The Spin-off is not expected to be tax-free to the Silver Bull shareholders (see “Item 10. Additional Information—Taxation”).

Prior to completion of the Spin-off, we intend to enter into a Separation and Distribution Agreement and possibly other agreements with Silver Bull related to the Distribution and the Spin-off. The Separation and Distribution Agreement and any other agreements will govern the relationship between us and Silver Bull up to and after completion of the Spin-off, including the treatment of certain contracts and outstanding Silver Bull warrants, among other items.

See “Item 4. Information on the Company—History and Development of the Company” for further details regarding the Spin-off and related matters.

Questions and Answers About the Spin-off

The following provides only a summary of and certain questions relating to the terms of the Spin-off. You should read the section entitled “Item 4. Information on the Company—The Spin-off” below in this Form 20-F for a more detailed description of the matters identified below.

 

 

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Q: Why am I receiving this document?
A: Silver Bull has made this document available to you because you are a holder of Silver Bull common shares. If you hold and do not sell or otherwise dispose of your Silver Bull shares prior to the close of business on                , 2021, you will be entitled to receive one Arras share for each of your Silver Bull shares in connection with the Spin-off. This document will help you understand how the separation and Distribution will affect your investment in Silver Bull and your investment in us after the Spin-off. Under Nevada law, though, the Spin-off does not require shareholder approval. We are not asking you for a proxy, and we request that you not send us a proxy. Please see “—The Spin-off—When and How You Will Receive Arras Shares—Holders of Silver Bull physical share certificates” below.
Q: How will the Spin-off of Arras from Silver Bull work?
A: To accomplish the Spin-off, Silver Bull will distribute on                , 2021 (the “distribution date”) approximately 34.2 million of Arras common shares held by Silver Bull to holders of Silver Bull shares on a pro rata basis. Immediately following the Spin-off, Silver Bull will retain an approximately 4% ownership interest, or approximately 1.8 million shares, in Arras. See also “Item 7. Major Shareholders and Related Party Transactions—Major Shareholders.”
Q: Why is the separation of Arras structured as a Spin-off?
A: Silver Bull believes that the Spin-off structure we are using is an efficient way to separate the Arras business in a manner that will create long-term value for Silver Bull, Arras, and their respective shareholders.
Q: When will Arras shares begin to trade on a stand-alone basis?
A: No securities of the Company will be listed or posted for trading on any stock exchange or market upon consummation of the Spin-off. Until our common shares are listed or posted for trading on a stock exchange or other market, the Arras shares distributed to Silver Bull shareholders will be illiquid and shareholders may have difficulty selling their Arras shares. If our common shares are not listed or posted for trading on an exchange or other market, the liquidity for our common shares may be significantly impaired, which may significantly decrease the value of our common shares. See also “Item 4. Information on the Company—The Spin-off—Trading of Arras Shares.”
Q: What is “regular way” and “ex-distribution” trading of Silver Bull shares?
A: It is expected that, beginning one trading day before                , 2021 (the “record date”) and continuing up to and through the distribution date, the Silver Bull shares on the OTCQB marketplace and the Toronto Stock Exchange (the “TSX”) will trade “ex-distribution,” as opposed to “regular way.” Silver Bull shares that trade “regular way” trade with an entitlement to Arras shares to be distributed pursuant to the Distribution. Silver Bull shares that trade “ex-distribution” will trade without an entitlement to Arras shares to be distributed pursuant to the Distribution. Therefore, if Silver Bull shareholders sell Silver Bull shares up to the date that is one trading day prior to the record date (i.e., in the “regular way” market), they will be selling their right to receive our common shares in the Distribution.

 

 

 

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Q: What do I have to do to participate in the Spin-off?
A: Holders of Silver Bull shares held in book-entry form with a bank or broker. Most Silver Bull shareholders hold their Silver Bull shares through a bank or brokerage firm. In such cases, the bank or brokerage firm would be said to hold the shares in “street name,” and ownership would be recorded on the bank’s or brokerage firm’s books. If a Silver Bull shareholder holds his, her or its Silver Bull shares through a bank or brokerage firm, his, her, or its bank or brokerage firm will credit his, her or its account for the Arras shares that he, she or it is entitled to receive in the Distribution. If Silver Bull shareholders have any questions concerning the mechanics of having shares held in “street name,” they should contact their bank or brokerage firm.

Holders of Silver Bull physical share certificates. In connection with the Spin-off, all registered Silver Bull shareholders holding physical share certificates will be issued Arras shares in book-entry form only, which means that no physical share certificates will be issued. For questions relating to the transfer or mechanics of the distribution, please contact Olympia Trust Company by telephone at 1-833-684-1546 (toll free in North America) or by online inquiry at cssinquiries@olympiatrust.com. For more information, see “Item 4. Information on the Company—The Spin-off—When and How You Will Receive Arras Shares,” as well as “—Where can I get more information?” below.

The Spin-off will not affect the number of outstanding Silver Bull shares or any rights of Silver Bull shareholders, although it will affect the market value of each outstanding Silver Bull share. See “—Will the Spin-off affect the trading price of my Silver Bull shares?” below.

Q: How many Arras shares will I receive in the Spin-off?
A: Silver Bull will distribute to you one Arras share for each Silver Bull share that you hold and do not sell or otherwise dispose of prior to the close of business on                , 2021. The total number of our common shares that Silver Bull will distribute will depend on the total number of issued Silver Bull shares (excluding treasury shares held by Silver Bull and its subsidiaries) as of                , 2021. The Arras shares that Silver Bull distributes will constitute approximately 95% of our common shares held by Silver Bull immediately prior to the Spin-off. For additional information on the Spin-off, see “Item 4. Information and Development of the Company—The Spin-off—When and How You Will Receive Arras Shares,” for additional information on our expected share capital following the Spin-off, see “Item 10. Additional Information—Share Capital.”
Q: What will happen to the listing of Silver Bull shares?
A: After the Spin-off, Silver Bull shares will continue to trade on the OTCQB marketplace under the symbol “SVBL” and on the TSX under the symbol “SVB.”
Q: Will the number of Silver Bull shares I own change as a result of the Spin-off?
A: No, the number of Silver Bull shares you own will not change as a result of the Spin-off.
Q: Will the Spin-off affect the trading price of my Silver Bull shares?
A: Yes. As a result of the Spin-off, Silver Bull expects the “ex-distribution” trading prices of Silver Bull shares at market open on                , 2021 to be lower than the “regular way” trading prices at market close on                , 2021, because the trading prices will no longer reflect the value of the Arras business. In addition, any Silver Bull shares sold “ex-distribution” will reflect an ownership interest solely in Silver Bull and will not include the right to receive any of our common shares in the Spin-off, but may not yet accurately reflect the value of such Silver Bull shares excluding the Arras business.

 

 

 

 

 

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Q: What is the expected date of completion of the Spin-off?
A: It is expected that the Arras shares that eligible holders of Silver Bull shares are entitled to receive in the Spin-off will be received on                , 2021. However, the completion and timing of the Spin-off are dependent upon a number of conditions, and no assurance can be provided as to the timing of the Spin-off or that all conditions to the Spin-off will be met.
Q: What are the conditions to the Spin-off?
A: We expect that the spin-off will be effective on                , 2021, provided that the following conditions have been satisfied or waived by Silver Bull:
· the Silver Bull Board providing final approval of all material aspects of the Spin-off;
· all corporate and other action necessary to execute, deliver and perform the Separation and Distribution Agreement and to consummate the transactions contemplated thereby by each of us and Silver Bull having been obtained;
· the SEC declaring this Form 20-F effective under the Exchange Act, and no stop order suspending the effectiveness of this Form 20-F being in effect and no proceedings for that purpose being pending before or threatened by the SEC;
· copies of this Form 20-F, or a notice of Internet availability thereof, having been mailed to record holders of Silver Bull shares as of the record date;
· any other actions necessary or appropriate under U.S. federal or state, Canadian federal or province, or other securities laws or blue sky laws having been taken or made;
· the receipt of all necessary government approvals required to consummate the Spin-off; and
· no order, injunction or decree issued by any governmental authority of competent jurisdiction or other legal restraint or prohibition preventing consummation of the Spin-off being in effect.

The fulfillment of these conditions will not create any obligation on Silver Bull’s part to effect the Distribution and complete the Spin-off, and Silver Bull has reserved the right to amend, modify or abandon any and all terms of the Spin-off and the related transactions at any time prior to the distribution date, at the direction of the Silver Bull Board. Silver Bull does not intend to notify its shareholders of any modifications to the terms or the conditions to the Spin-off that, in the judgment of the Silver Bull Board, are not material. To the extent that the Silver Bull Board determines that any such modifications materially change the terms and conditions of the Spin-off, Silver Bull will notify its shareholders in a manner reasonably calculated to inform them of such modifications with a press release, current report on Form 8-K or other similar means.

Q: What if I want to sell my Silver Bull shares?
A: You should consult with your custodian bank or broker or other financial advisors and/or your tax advisors.

 

 

 

 

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Q: How will the Spin-off affect Silver Bull stock options issued to employees and other service providers?
A: Silver Bull stock options issued to employees and other service providers will remain outstanding following the Spin-off but will be adjusted to account for the Spin-off’s effect on the trading price of Silver Bull shares. The adjustment will be designed to maintain the same “spread” in the Silver Bull options (i.e., the difference between the exercise price and the fair market value of Silver Bull’s stock) both before and after the Spin-off. The exact adjustment mechanism has yet to be determined but may include a reduction in the exercise price per share, or an adjustment to both the exercise price per share and the number of Silver Bull shares subject to each outstanding option. See also “Item 4. Information on the Company—The Spin-off— Treatment of Outstanding Silver Bull Options.”
Q: How will the Spin-off affect the outstanding Silver Bull warrants?
A: Silver Bull intends to offer holders of outstanding Silver Bull warrants who exercise them after the Distribution the right to receive, instead of solely Silver Bull shares, one Silver Bull share and one Arras common share for the original exercise price, subject to compliance with applicable securities laws. In order to take advantage of this offer, a Silver Bull warrantholder, at the time of exercise, would be required to sign an amendment to the warrant that would (i) amend the consideration to be deliverable upon the warrant’s exercise to one Silver Bull share and one Arras share; (ii) waive the application of the warrant’s provision providing for an automatic adjustment to the exercise price to reflect the fair market value of the Arras shares distributed in the Distribution; and (iii) ensure that the issuance of Arras common shares to the Silver Bull warrantholder was in compliance with applicable securities laws. Holders of outstanding Silver Bull warrants who do not want to accept this offer, or who are not able to due to applicable securities laws or other reasons, can instead exercise their warrants in accordance with their original terms, which provide for, among other things, an automatic adjustment to the exercise price effective immediately following the record date for the Spin-off to reflect the fair market value of the Arras shares distributed in the Distribution. For additional information, see “Item 4. Information on the Company—The Spin-off— Treatment of Outstanding Silver Bull Warrants.”
Q: What are the U.S. federal and Canadian income tax consequences to me as a result of the Spin-off?
A: For U.S. federal income tax purposes, the receipt of our common shares by Silver Bull shareholders, pursuant to the Spin-off, should be treated as a distribution of property in an amount equal to the fair market value of the common shares received. The distribution of our common shares should be treated as ordinary dividend income to the extent considered paid out of Silver Bull’s current and accumulated earnings and profits (as determined under U.S. federal income tax principles). Distributions in excess of Silver Bull’s current and accumulated earnings and profits will be treated as a non-taxable return of capital, which reduces basis, to the extent of the holder’s basis in its Silver Bull shares and thereafter as capital gain. While we reasonably anticipate Silver Bull not having any accumulated earnings and profits for the taxable year of the distribution, Silver Bull will likely have current earnings and profits for the taxable year of the distribution, and therefore the distribution will be treated as a taxable dividend to the extent of such current (and any accumulated) earnings and profits. Silver Bull will not be able to determine the amount of the distribution that will be treated as a dividend until after the close of the taxable year of the Spin-off because its current year earnings and profits will be calculated based on its income for the entire taxable year in which the distribution occurs. However, based on current projections, it is reasonably expected that a portion of the distribution of our common shares should be treated as a return of capital rather than a dividend. For a more detailed discussion, see “Item 10. Additional Information—Taxation—Material U.S. Federal Income Tax Considerations—Tax Consequences of the Spin-off.”

 

 

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For Canadian tax purposes, the Spin-off of Arras shares will be considered a dividend in kind on the Silver Bull shares to shareholder’s resident in Canada. Such shareholders will be required to include in computing their income for a taxation year the amount of such dividend (equal to the fair market value of the Arras shares received). A dividend in kind of the Arras shares paid in respect of the Silver Bull shares to a shareholder who is not a resident of Canada will not be subject to Canadian withholding tax or other income tax under the Income Tax Act (Canada). The foregoing discussion is qualified in its entirety be the discussion set forth in “Item 10. Additional Information—Taxation—Material Canadian Federal Income Tax Considerations.”

Q: Who will manage Arras after the Spin-off?
A: The board of directors of Arras will consist of the following individuals:
· Brian D. Edgar – Chairman
· Timothy T. Barry
· Daniel J. Kunz
· John A. McClintock
· G. Wesley Carson

With the exception of G. Wesley Carson, who is not a current director of Silver Bull, the board of directors of Arras will initially be the same as the Silver Bull Board.

The management team of Arras will initially consist of the following individuals, who are the same as the officers of Silver Bull:

· Brian D. Edgar – Executive Chairman
· Timothy T. Barry – President and Chief Executive Officer
· Christopher Richards – Chief Financial Officer
Q: Does Arras intend to pay cash dividends?
A: We have never declared or paid cash dividends to our shareholders. Currently, we do not intend to pay cash dividends. We intend to reinvest any earnings in developing and expanding our business. Any future determination relating to our dividend policy will be at the discretion of the board of directors of Arras (the “Arras Board”) and will depend on a number of factors, including future earnings, our financial condition, operating results, contractual restrictions, capital requirements, business prospects, applicable Canadian law and other factors that the Arras Board may deem relevant.
Q: What will the Arras relationship with Silver Bull be following the Spin-off?
A: We will enter into a Separation and Distribution Agreement and possibly other agreements with Silver Bull to effect the separation and provide a framework for our relationship with Silver Bull after the Distribution and the Spin-off. The Separation and Distribution Agreement and any other agreements will govern the relationship between us and Silver Bull up to and after completion of the Spin-off, including the treatment of certain contracts and outstanding Silver Bull warrants, among other items.

 

 

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In order to minimize salaries and office-related overhead costs, Silver Bull will continue to incur these costs and will charge Arras for a portion of these costs on a pro-rata cost-recovery basis until our common shares are listed or trade on a stock exchange or other market or some other outside date to be agreed upon by Silver Bull and Arras. At that time, it is expected that separate employment agreements will be put in place, and a formal service agreement will be completed for common office-related overhead costs.

We describe these arrangements in greater detail under “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions.”

Q: Are there risks associated with owning Arras shares?
A: Yes. Ownership of our common shares is subject to both general and specific risks relating to the Arras business, the industry in which we operate and our status as a stand-alone company. Ownership of our common shares is subject to risks relating to the Spin-off. Accordingly, you should carefully read the information set forth under “Item 3. Key Information—Risk Factors” in this Form 20-F.
Q: Who will be the registrar and transfer agent for the Arras shares?
A: Olympia Trust Company will act as our share registrar and transfer agent.
Q: Where can I get more information?
A: Before the Spin-off, if you have any questions relating to the business performance of Silver Bull or us or the Spin-off, you should contact Silver Bull at:

Silver Bull Resources, Inc.

777 Dunsmuir Street, Suite 1610

P.O. Box 10427

Vancouver, British Columbia V7Y 1K4

Canada

Attention: Christopher Richards, Chief Financial Officer

After the Spin-off, if you have any questions relating to our business performance, you should contact us at:

Arras Minerals Corp.

777 Dunsmuir Street, Suite 1610

P.O. Box 10427

Vancouver, British Columbia V7Y 1K4

Canada

Attention: Christopher Richards, Chief Financial Officer

 

 

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PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS.

Directors and Senior Management

For information regarding our directors and senior management, see “Item 6. Directors, Senior Management and Employees—Directors and Senior Management.”

Advisers

Our U.S. legal counsel is Davis Graham & Stubbs LLP, 1550 Seventeenth Street, Suite 500, Denver, Colorado 80202 and our Canadian legal counsel is Blake, Cassels & Graydon LLP, 595 Burrard Street, Suite 2600, Three Bentall Centre, Vancouver, British Columbia V7X 1L3, Canada.

Auditors

The Company’s independent registered auditors are Smythe LLP, Chartered Professional Accountants, with a business address at #1700 – 475 Howe Street, Vancouver, British Columbia, Canada V6C 2B3. Smythe LLP, Chartered Professional Accountants, are members of the Chartered Professional Accountants of British Columbia and are registered with both the Canadian Public Accountability Board and the U.S. Public Company Accounting Oversight Board. Smythe LLP, Chartered Professional Accountants, were appointed as the Company’s auditors in 2021.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE.

Not applicable.

ITEM 3. KEY INFORMATION.

Capitalization and Indebtedness

The following table sets forth our cash and cash equivalents, capitalization and indebtedness as of April 30, 2021.

We are providing the capitalization table below for informational purposes only. It should not be construed to be indicative of our capitalization or financial condition had the separation been completed on the date assumed. The capitalization table below may not reflect the capitalization or financial condition that would have resulted had we operated as a stand-alone company at that date and is not necessarily indicative of our future capitalization or financial position. For additional details regarding the actual balances, please see the notes to our financial statements appearing elsewhere in this Form 20-F.

   

April 30, 2021

USD

(audited)

Cash   $ 1,562,570  
Debt:        
Short-term debt   $ 282,221  
Long-term debt     $nil  
Equity:        
Non-controlling interests     $nil  
Total shareholders’ equity   $ 3,093,190  
Total capitalization   $ 3,375,411  

 

 

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Reasons for the Offer and Use of Proceeds

Not applicable.

Risk Factors

You should carefully consider the risks described below, together with all other information included in this Form 20-F, in evaluating us and our shares. The following risk factors could adversely affect our business, financial condition, results of operations and the price of our shares.

Risks Related to the Company

There is substantial doubt about whether we can continue as a going concern.

To date, we have earned no revenues and have incurred accumulated net losses of $563,061. In addition, we have limited financial resources. As of April 30, 2021, we had cash of $1,562,570 and working capital of $2,715,349. Therefore, our continuation as a going concern is dependent upon our achieving a future financing. However, there is no assurance that we will be successful pursuing such a financing. Accordingly, there is substantial doubt as to whether our existing cash resources and working capital are sufficient to enable us to continue our operations for the next 12 months as a going concern. Ultimately, in the event that we cannot obtain additional financial resources, or achieve profitable operations, we may have to liquidate our business interests and investors may lose their investment. The accompanying financial statements have been prepared assuming that our company will continue as a going concern. Continued operations are dependent on our ability to obtain additional financial resources or generate profitable operations. Such additional financial resources may not be available or may not be available on reasonable terms. Our financial statements do not include any adjustments that may result from the outcome of this uncertainty. Such adjustments could be material.

Our operations may be disrupted, and our financial results may be adversely affected, by global outbreaks of contagious diseases, including the novel coronavirus (COVID-19) pandemic.

Global outbreaks of contagious diseases, including the December 2019 outbreak of COVID-19 have the potential to significantly and adversely impact our operations and business. On March 11, 2020, the World Health Organization recognized COVID-19 as a global pandemic. Pandemics or disease outbreaks such as the currently ongoing COVID-19 outbreak may have a variety of adverse effects on our business, including by depressing commodity prices and the market value of our securities and limiting the ability of our management to meet with potential financing sources. The spread of COVID-19 in Kazakhstan may impact our ability to travel to the region and complete the work necessary to maintain the Beskauga Option. Moreover, the spread of COVID-19 has had, and continues to have, a negative impact on the financial markets, which may impact our ability to obtain additional financing in the near term. A prolonged downturn in the financial markets could have an adverse effect on our business, results of operations and ability to raise capital.

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We may have difficulty meeting our current and future capital requirements.

We are required to incur cumulative exploration expenditures on the Beskauga Project of $15 million over the next four years in order to maintain the Beskauga Option. If we elect to exercise the Beskauga Option, we are required to pay an additional $15 million. In addition, we must have sufficient funds to pay general and administrative expenses and conduct other exploration activities. If we are unable to fund these amounts by way of financings, including public or private offerings of equity or debt securities, we will need to reorganize or significantly reduce our operations, which may result in an adverse impact on our business, financial condition and exploration activities. If we are unable to fund the amounts specified under the Beskauga Option, we may lose our ability to acquire the Beskauga Project. We do not have a credit, off-take or other commercial financing arrangement in place that would finance continued evaluation or development of the Beskauga Project, and we believe that securing credit for these projects may be difficult. Moreover, equity financing may not be available on attractive terms and, if available, will likely result in significant dilution to existing shareholders.

We are an exploration stage mining company with no history of operations.

We are an exploration stage enterprise engaged in mineral exploration in Kazakhstan. We were formed in 2021 and therefore have a very limited operating history and are subject to all the risks inherent in a new business enterprise. As an exploration stage company, we may never enter the development and production stages. To date, we have had no revenues and have relied upon equity financing to fund our operations. The likelihood of our success must be considered in light of the problems, expenses, difficulties, complications, and delays frequently encountered in connection with an exploration stage business, and the competitive and regulatory environment in which we operate and will operate, such as under-capitalization, personnel limitations, and limited financing sources.

We have no commercially mineable ore body.

No commercially mineable ore body has been delineated on the Beskauga Project, nor has the Beskauga Project been shown to contain proven or probable mineral reserves. Investors should not assume that the Mineral Resource estimates described in “Item 4. Information on the Company—Property, Plants and Equipment—Beskauga Project” will ever be extracted. We cannot assure you that any mineral deposits we identify on the Beskauga Project will qualify as an ore body that can be legally and economically exploited or that any particular level of recovery of gold, copper or other minerals from discovered mineralization will in fact be realized. Most exploration projects do not result in the discovery of commercially mineable ore deposits. Even if the presence of reserves is established at a project, the legal and economic viability of the project may not justify exploitation.

Mineral resource estimates may not be reliable.

There are numerous uncertainties inherent in estimating quantities of Mineral Resources such as gold, copper, silver and zinc, including many factors beyond our control, and no assurance can be given that the recovery of Mineral Resources will be realized. In general, estimates of Mineral Resources are based upon a number of factors and assumptions made as of the date on which the estimates were determined, including:

· geological and engineering estimates that have inherent uncertainties;
· the assumed effects of regulation by governmental agencies;
· the judgment of the engineers preparing the estimate;
· estimates of future metals prices and operating costs;
· the quality and quantity of available data;
· the interpretation of that data; and
· the accuracy of various mandated economic assumptions, all of which may vary considerably from actual results.

 

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All estimates are, to some degree, uncertain. For these reasons, estimates of the recoverable Mineral Resources prepared by different engineers or by the same engineers at different times may vary substantially. As such, there is significant uncertainty in any Mineral Resource estimate, and actual deposits encountered and the economic viability of a deposit may differ materially from our estimates.

Our business plan is highly speculative, and its success largely depends on the successful exploration of our Beskauga concessions.

Our business plan is focused on exploring the Beskauga Property to identify reserves and, if appropriate, to ultimately develop the property. Although we have reported Mineral Resources on the Beskauga Project, we have not established any reserves and remain in the exploration stage. We may never enter the development or production stage. Exploration of mineralization and determination of whether the mineralization might be extracted profitably is highly speculative, and it may take a number of years until production is possible, during which time the economic viability of the project may change. Substantial expenditures are required to establish reserves, extract metals from ore and construct mining and processing facilities.

The Beskauga Project is subject to all of the risks inherent in mineral exploration and development. The economic feasibility of any mineral exploration and/or development project is based upon, among other things, estimates of the size and grade of mineral reserves, proximity to infrastructures and other resources (such as water and power), anticipated production rates, capital and operating costs, and metals prices. To advance from an exploration project to a development project, we will need to overcome various hurdles, including completing favorable feasibility studies, securing necessary permits, and raising significant additional capital to fund activities. There can be no assurance that we will be successful in overcoming these hurdles. Because of our focus on the Beskauga Project, the success of our operations and our profitability may be disproportionately exposed to the impact of adverse conditions unique to the Pavlodar, Kazakhstan region due to the Beskauga Project’s proximity to these locales.

We are uncertain that we will be able to maintain sufficient cash to accomplish our business objectives.

We are not engaged in any revenue producing activities, and we do not expect to be in the near future. Currently, our potential sources of funding consist of the sale of additional equity securities, entering into joint venture agreements or selling a portion of our interests in our assets. There is no assurance that any additional capital that we will require will be obtainable on terms acceptable to us, if at all. Failure to obtain such additional financing could result in delays or indefinite postponement of further exploration of our projects. Additional financing, if available, will likely result in substantial dilution to existing shareholders.

Our exploration activities require significant amounts of capital that may not be recovered.

Mineral exploration activities are subject to many risks, including the risk that no commercially productive or extractable resources will be encountered. There can be no assurance that our activities will ultimately lead to an economically feasible project or that we will recover all or any portion of our investment. Mineral exploration often involves unprofitable efforts, including drilling operations that ultimately do not further our exploration efforts. The cost of minerals exploration is often uncertain, and cost overruns are common. Our drilling and exploration operations may be curtailed, delayed or canceled as a result of numerous factors, many of which are beyond our control, including title problems, weather conditions, protests, compliance with governmental requirements, including permitting issues, and shortages or delays in the delivery of equipment and services.

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Our financial condition could be adversely affected by changes in currency exchange rates, especially between the U.S. dollar and the Kazakh tenge (“KZT”) and the U.S dollar and the Canadian dollar given our focus on the Beskauga Project in Kazakhstan, and our corporate office in Vancouver, Canada.

Our financial condition is affected in part by currency exchange rates, as portions of our exploration costs in Kazakhstan and general and administration costs in Canada are denominated in the local currency. Although many Kazakh contracts have an adjustment provision to address substantial changes in foreign currency exchange rates, a weakening U.S. dollar relative to the KZT and Canadian dollar may have the effect of increasing exploration costs and general and administration costs, while a strengthening U.S. dollar may have the effect of reducing exploration costs and general and administration costs. The exchange rates between the Canadian dollar and the U.S. dollar and between the KZT and U.S. dollar have fluctuated widely in response to international political conditions, general economic conditions and other factors beyond our control.

Our success depends on developing and maintaining relationships with local communities and other stakeholders.

Our ongoing and future success depends on developing and maintaining productive relationships with the communities surrounding our operations and other stakeholders in our operating locations. We believe that our operations can provide valuable benefits to surrounding communities, in terms of direct employment, training and skills development. In addition, we seek to maintain our partnerships and relationships with local communities and stakeholders in a variety of ways, including in-kind contributions, sponsorships and donations. Notwithstanding our ongoing efforts, local communities and stakeholders can become dissatisfied with our activities or the level of benefits provided, which may result in legal or administrative proceedings, civil unrest, protests, direct action or campaigns against us. Any such occurrences could materially and adversely affect our financial condition, results of operations and cash flows.

Compliance with laws is costly and may result in unexpected liabilities.

The Company is headquartered in Vancouver, Canada and its mineral properties are located in Kazakhstan. The Company’s business is subject to various laws and regulations in Canada and Kazakhstan. These laws include compliance with the Extractive Sector Transparency Measures Act (Canada), which requires companies to report annually on payments made to all levels of governments both in Canada and abroad. The Company is also required to comply with anti-corruption and anti-bribery laws, including the Corruption of Foreign Public Officials Act (Canada).

The legal and regulatory requirements in Kazakhstan are different from those in Canada. The Company relies, to a great extent, on the Company’s local advisors in respect of legal, environmental compliance, banking, financing and tax matters in order to ensure compliance with material legal, regulatory and governmental developments as they pertain to and affect the Company’s operations in Kazakhstan. Despite these resources and the Company’s efforts to comply, the Company may fail to comply with a legal or regulatory requirement in Kazakhstan, which may lead to the revocation of certain rights or to penalties or fees and in enforcement actions thereunder.

We are exposed to information systems and cybersecurity risks.

Arras’s information systems (including those of any of its counterparties) may be vulnerable to the increasing threat of continually evolving cybersecurity risks. Unauthorized parties may attempt to gain access to these systems or the Company’s information through fraud or other means of deception. Arras’s operations depend, in part, on how well the Company and its counterparties protect networks, equipment, information technology systems and software against damage from threats. The failure of information systems or a component of information systems could, depending on the nature of any such failure, adversely impact the Company’s reputation and results of operations. There can be no assurance that Arras or its counterparties will not incur such losses in the future. The Company’s risk and exposure to these matters cannot be fully mitigated because of, among other things, the evolving nature of these threats. As a result, cybersecurity and the continued development and enhancement of controls, processes and practices designed to protect systems, computers, software, data and networks from attack, damage or unauthorized access remain an area of attention.

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We need and rely upon key personnel.

Presently, we employ a limited number of full-time employees, utilize outside consultants, and in large part rely on the efforts of our officers and directors. Our success will depend, in part, upon the ability to attract and retain qualified employees. In particular, we have only two executive officers, Timothy Barry and Christopher Richards, and the loss of the services of any of these two persons would adversely affect our business.

We face general risks in respect of our option and joint venture agreements.

The Company has and may continue to enter into option agreements and/or joint ventures as a means of acquiring property interests. Any failure of any partner to meet its obligations to the Company or other third parties, or any disputes with respect to third parties’ respective rights and obligations could have a material adverse effect on the Company’s rights under such agreements. Furthermore, the Company may be unable to exert direct influence over strategic decisions made in respect of properties that are subject to the terms of these agreements, and the result may be a materially adverse impact on the strategic value of the underlying mineral claims.

We are subject to specific risks associated with joint venture agreements.

The Company holds its interest in the Stepnoe and Ekidos properties through the Stepnoe and Ekidos JV Agreement, and the Akkuduk property through the Maikain JV Agreement (as defined below). The existence or occurrence of one or more of the following circumstances and events could have a material adverse impact on the Company’s profitability or the viability of the Company’s interest in the Stepnoe, Ekidos, and Akkuduk properties, which could have a material adverse impact on the Company’s future cash flows, earnings, results of operations and financial condition:

· disagreement amongst joint venture parties on how to conduct business;
· inability of joint venture parties to meet their obligations to the joint venture or third parties;
· litigation arising between joint venture shareholders;
· inability to exert influence over certain strategic decisions;
· inability of the Company to make its required contributions under the Stepnoe and Ekidos JV Agreement, which may result in dilution to the Company’s interest in the joint venture; and
· decisions under the dispute resolution provisions of the Stepnoe and Ekidos JV Agreement may not be resolved in the Company’s favor.

The Company may expand into other geographic areas, which could increase the Company’s operational, regulatory and other risks.

While currently all of the Company’s exploration activities are in Kazakhstan, the Company may in the future expand into other geographic areas, which could increase the Company’s operational, regulatory, compliance, reputational and foreign exchange rate risks. The failure of the Company’s operating infrastructure to support such expansion could result in operational failures and regulatory fines or sanctions. Future international expansion could require the Company to incur a number of up-front expenses, including those associated with obtaining regulatory approvals, as well as additional ongoing expenses, including those associated with infrastructure, staff and regulatory compliance. The Company may not be able to successfully identify suitable acquisition and expansion opportunities, or integrate such operations successfully with the Company’s existing operations.

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Risks Relating to the Mineral Exploration Industry

There are inherent risks in the mineral exploration industry.

We are subject to all of the risks inherent in the minerals exploration industry, including, without limitation, the following:

· we are subject to competition from a large number of companies, most of which are significantly larger than we are, in the acquisition, exploration, and development of mining properties;
· we might not be able raise enough money to pay the fees and taxes and perform the labor necessary to maintain our concessions in good status;
· exploration for minerals is highly speculative, involves substantial risks and is frequently unproductive, even when conducted on properties known to contain significant quantities of mineralization, and our exploration projects may not result in the discovery of commercially mineable deposits of ore;
· our operations are subject to a variety of existing laws and regulations relating to exploration and development, permitting procedures, safety precautions, property reclamation, employee health and safety, air quality standards, pollution and other environmental protection controls, and we may not be able to comply with these regulations and controls; and
· a large number of factors beyond our control, including fluctuations in metal prices, inflation, and other economic conditions, will affect the economic feasibility of mining.

Metals prices are subject to extreme fluctuation.

Our activities are influenced by the prices of commodities, including gold, copper, silver, zinc, lead and other metals. These prices fluctuate widely and are affected by numerous factors beyond our control, including interest rates, expectations for inflation, speculation, currency values (in particular, the strength of the U.S. dollar), global and regional demand, political and economic conditions and production costs in major metal-producing regions of the world.

Our ability to establish reserves through our exploration activities, our future profitability and our long-term viability depend, in large part, on the market prices of gold, copper, silver, zinc, lead and other metals. The market prices for these metals are volatile and are affected by numerous factors beyond our control, including:

· global or regional consumption patterns;
· supply of, and demand for, gold, copper, silver, zinc, lead and other metals;
· speculative activities and producer hedging activities;
· expectations for inflation;
· political and economic conditions; and
· supply of, and demand for, consumables required for production.

Future weakness in the global economy could increase volatility in metals prices or depress metals prices, which could in turn reduce the value of our properties, make it more difficult to raise additional capital, and make it uneconomical for us to continue our exploration activities.

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Our future operations will require additional permits from various governmental authorities.

Our operations are and will continue to be governed by laws and regulations governing prospecting, mineral exploration, exports, taxes, labor standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety, mining royalties and other matters. There can be no assurance that we will be able to acquire all required licenses, permits or property rights on reasonable terms or in a timely manner, or at all, that such terms will not be adversely changed, that required extensions will be granted, or that the issuance of such licenses, permits or property rights will not be challenged by third parties.

Title to our properties may be challenged or defective.

We attempt to confirm the validity of our rights of title to, or contract rights with respect to, each mineral property in which we have a material interest. However, we cannot guarantee that title to our properties will not be challenged. The Beskauga Property may be subject to prior unregistered agreements, interests or native land claims, and title may be affected by undetected defects. There may be valid challenges to the title of any of the claims comprising the Beskauga Property that, if successful, could impair possible development and/or operations with respect to such properties in the future. Challenges to permits or property rights (whether successful or unsuccessful), changes to the terms of permits or property rights, or a failure to comply with the terms of any permits or property rights that have been obtained could have a material adverse effect on our business by delaying or preventing or making continued operations economically unfeasible.

A title defect could result in Arras losing all or a portion of its right, title, and interest to and in the properties to which the title defect relates. Title insurance generally is not available, and our ability to ensure that we have obtained secure title to individual mineral properties or mining concessions may be severely constrained. In addition, we may be unable to operate our properties as permitted or to enforce our rights with respect to our properties. As of June 18, 2021, we are not aware of any challenges from the government or from third parties.

We are subject to complex environmental and other regulatory risks, which could expose us to significant liability and delay and potentially the suspension or termination of our exploration efforts.

Our mineral exploration activities are subject to federal, state and local environmental regulations in Kazakhstan. These regulations mandate, among other things, the maintenance of air and water quality standards and land reclamation. They also set forth limitations on the generation, transportation, storage and disposal of solid and hazardous waste. No assurance can be given that environmental standards imposed by the government of Kazakhstan will not be changed, thereby possibly materially adversely affecting our proposed activities. Compliance with these environmental requirements may also necessitate significant capital outlays or may materially affect our earning power.

Environmental legislation is evolving in a manner that will require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects, and a heightened degree of responsibility for companies and their officers, directors and employees.

Future changes in environmental regulations in Kazakhstan may adversely affect our exploration activities, make them prohibitively expensive, or prohibit them altogether. Environmental hazards may exist on the properties in which we currently hold interests, or may hold interests in the future, that are unknown to us at present and that have been caused by us or previous owners or operators, or that may have occurred naturally. We may be liable for remediating any damage that we may have caused. The liability could include costs for removing or remediating the release and damage to natural resources, including ground water, as well as the payment of fines and penalties.

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Our industry is highly competitive, attractive mineral properties and property concessions are scarce, and we may not be able to obtain quality properties or concessions.

We compete with other mining and exploration companies in the acquisition of mineral properties and property concessions. There is competition for a limited number of attractive mineral property acquisition opportunities, some of which is with other companies having substantially greater financial resources, staff and facilities than we do. As a result, we may have difficulty acquiring quality mineral properties or property concessions.

Our operations are subject to various hazards.

We are subject to risks and hazards, including environmental hazards, possible encounters with unusual or unexpected geological formations, cave-ins, flooding and earthquakes, and periodic interruptions due to inclement or hazardous weather conditions. These occurrences could result in damage to, or the destruction of, mineral properties or future production facilities, personal injury or death, environmental damage, delays in our exploration activities, asset write-downs, monetary losses and possible legal liability. We may not be insured against all losses or liabilities, either because such insurance is unavailable or because we have elected not to purchase such insurance due to high premium costs or other reasons. Although we maintain insurance in an amount that we consider to be adequate, liabilities might exceed policy limits, in which event we could incur significant costs that could adversely affect our activities. The realization of any significant liabilities in connection with our activities as described above could negatively affect our activities.

Social and environmental activism can negatively impact exploration, development and mining activities

There is an increasing level of public concern relating to the effects of mining on the natural landscape, on communities and on the environment. Certain non-governmental organizations, public interest groups and reporting organizations (“NGOs”) who oppose resource development can be vocal critics of the mining industry. In addition, there have been many instances in which local community groups have opposed resource extraction activities, which have resulted in disruption and delays to the relevant operation. While the Company seeks to operate in a socially responsible manner and believes it has good relationships with local communities in the regions in which it operates, NGOs or local community organizations could direct adverse publicity against and/or disrupt the operations of the Company in respect of one or more of its properties, regardless of its successful compliance with social and environmental best practices, due to political factors, activities of unrelated third parties on lands in which the Company has an interest or the Company’s operations specifically. Any such actions and the resulting media coverage could have an adverse effect on the reputation and financial condition of the Company or its relationships with the communities in which it operates, which could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

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Risks Relating to Foreign Operations

There are inherent risks with foreign operations.

Our business activities are primarily conducted in Kazakhstan, and as such, our activities are exposed to various levels of foreign political, economic and other risks and uncertainties. These risks and uncertainties include, but are not limited to, terrorism, hostage taking, military repression, extreme fluctuations in currency exchange rates, high rates of inflation, labor unrest, war or civil unrest, expropriation and nationalization, renegotiation or nullification of existing concessions, licenses, permits, approvals and contracts, illegal mining, changes in taxation policies, restrictions on foreign exchange and repatriation, changing political conditions, currency controls and governmental regulations that favor or require the rewarding of contracts to local contractors or require foreign contractors to employ citizens of, or purchase supplies from, a particular jurisdiction.

Changes, if any, in mining or investment policies or shifts in political attitude in Kazakhstan may adversely affect our exploration and possible future development activities. We may also be affected to varying degrees by government regulations with respect to, but not limited to, foreign investment, maintenance of claims, environmental legislation, land use, land claims of local people, water use and mine safety. Failure to comply strictly with applicable laws, regulations and local practices relating to mineral right applications and tenure could result in loss, reduction or expropriation of entitlements, or the imposition of additional local or foreign parties as joint venture partners with carried or other interests.

The occurrence of these various factors and uncertainties cannot be accurately predicted and could have an adverse effect on our operations. In addition, legislation in Canada or Kazakhstan regulating foreign trade, investment and taxation could have a material adverse effect on our financial condition.

We face risks as a result of operating in Kazakhstan.

The Beskauga Project is in Kazakhstan. As is typical of an emerging market, Kazakhstan’s business, legal and regulatory infrastructure has been subject to substantial political, economic and social change. Our business in Kazakhstan is subject to Kazakhstan-specific laws and regulations, including with respect to tax, anti-corruption, and foreign exchange controls. Such laws are often rapidly changing and are unpredictable. Our failure to manage the risks associated with doing business in Kazakhstan could have a material adverse effect upon our results of operations.

The Company’s only project is the Beskauga Project, and any adverse development affecting the Beskauga Project, including the Company’s interests, licenses and permits relating thereto, could be expected have a material adverse effect on the Company, its businesses, prospects, assets, results of operations and condition (financial or otherwise).

The Company has obtained permits from the Government of Kazakhstan that enable it to conduct exploration activities. Notwithstanding these arrangements, the Company’s ability to conduct exploration activities is subject to changes in government regulations or shifts in political attitudes over which the Company has no control.

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There can be no assurance that industries deemed of national or strategic importance to Kazakhstan such as mineral production will not be nationalized. Government policy may change to discourage foreign investment, renationalization of mining industries may occur and other government limitations, restrictions or requirements not currently foreseen may be implemented. There can be no assurance that the Company’s assets in Kazakhstan will not be subject to nationalization, requisition or confiscation, whether legitimate or not, by any authority or body. Similarly the Company’s operations may be affected in varying degrees by government regulations with respect to restrictions on production, price controls, export controls, income taxes, expropriation of property, environmental legislation, mine safety and annual payments to maintain mineral properties in good standing. There can be no assurance that the laws of Kazakhstan protecting foreign investments will not be amended or abolished or that these existing laws will be enforced or interpreted to provide adequate protection against any or all of the risks detailed above. There can be no assurance that any agreements with the government of Kazakhstan will prove to be enforceable or provide adequate protection against any or all of the risks described above.

Existing contracts or licenses with respect to the Company’s operations may be subject to selective or arbitrary government action.

The Company’s contracts and licenses in Kazakhstan may be susceptible to arbitrary revision and termination. Legal redress for such actions may be uncertain, delayed or unavailable. In addition, it is often difficult to determine from governmental records whether statutory and corporate actions have been properly completed by the parties or applicable regulatory agencies. In some cases, failure to follow the actions may call into question the validity of the entity or the action taken. Examples include corporate registration or amendments, capital contributions, transfers of assets or issuances or transfers of capital stock. Ensuring the Company’s ongoing rights to mineral properties will require a careful monitoring of performance of its contracts and other licenses and monitoring the evolution of the laws and practices of Kazakhstan. Failure to comply with the terms of the necessary licenses or contracts or show compliance against official records may result in their revocation which may have an adverse effect on the Company’s operations.

Changes in the political environment in Kazakhstan could have a material impact on the Company’s business, prospects, results of operations and financial condition.

Since Kazakhstan declared its independence in 1991 after the dissolution of the Soviet Union, Kazakhstan has had political stability as an independent nation. Yet, there is potential for social, political, economic, legal and fiscal instability. The Company cannot predict the possibility of any future changes in the political environment in Kazakhstan that would have an impact on Kazakh laws and regulations, their interpretation or enforcement, or the effect of such changes on the Company’s business, prospects, results of operations and financial condition. The risks include, among other things:

· local currency devaluation;
· exchange controls or availability of hard currency;
· changes in export and transportation regulations relating to metals;
· changes in national fiscal regulations;
· changes in anti-monopoly legislation or its exercise;
· nationalization or expropriation of property; and
· interruption or blockage of the export of metals.

There can be no assurance that changes in the political environment will not affect governmental regulation and policy.

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The Company relies on international advisors and consultants.

The legal and regulatory requirements in Kazakhstan with respect to conducting mineral exploration and mining activities, banking system and controls, as well as local business culture and practices are different from those in Canada and the United States. The officers and directors of the Company must rely, to a great extent, on the Company’s local legal counsel and local consultants retained by the Company in order to keep abreast of material legal, regulatory and governmental developments as they pertain to and affect the Company’s business operations, and to assist the Company with its governmental relations. The Company must rely, to some extent, on those members of management and the Company’s board of directors who have previous experience working and conducting business in Kazakhstan in order to enhance its understanding of and appreciation for the local business culture and practices. The Company also relies on the advice of local experts and professionals in connection with current and new regulations that develop in respect of banking, financing, labor, litigation and tax matters in this jurisdiction. Any developments or changes in such legal, regulatory or governmental requirements or in local business practices are beyond the control of the Company. The impact of any such changes may adversely affect the business of the Company.

Risks Relating to the Spin-off

We share certain key officers and directors with Silver Bull, which means that those officers do not devote their full time and attention to our affairs, and the overlap may give rise to conflicts of interest.

Our President and Chief Executive Officer, Timothy Barry, also serves as President and Chief Executive Officer of Silver Bull, and our Chief Financial Officer, Christopher Richards, also serves as Chief Financial Officer of Silver Bull. As a result, our executive officers do not devote their full time and attention to the Company’s affairs. There may be circumstances in which our executive officers are compelled to spend a significant portion of their time and attention to Silver Bull’s affairs, which may mean that they are unable to devote sufficient time to the Company’s affairs. Furthermore, our Executive Chairman, Brian Edgar, also serves as Executive Chairman of Silver Bull, and four members of our board of directors (including Timothy Barry and Brian Edgar) are also directors of Silver Bull. The overlapping officers and directors may have actual or apparent conflicts of interest with respect to matters involving or affecting each company. For example, conflicts may arise if there are issues or disputes under commercial arrangements that may exist between Silver Bull and us, including with respect to allocation of costs for salaries of overlapping officers and common office-related overhead expenditures. Any failure of the directors or officers of the Company to address these conflicts in an appropriate manner or to allocate opportunities that they become aware of to the Company could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

We may not achieve some or all of the expected benefits of the Spin-off, and the Spin-off may adversely affect our business.

We may not be able to achieve some or all of the strategic, financial, operational, marketing or other benefits expected to result from the Spin-off, or such benefits may be delayed or not occur at all. The Spin-off is expected to provide the following benefits, among others:

· provide investors with the potential for greater value than a single company by unlocking a premium value for the Beskauga and Sierra Mojada projects separately;
· provide the market with two separate companies that have clear commodity and regional demarcation, allowing for targeted branding and marketing;
· allow each company flexibility in allocating resources and deploying capital in a manner consistent with the separate business strategies;

 

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· broaden the appeal of the potential investor base for both companies, with Kazakhstan potentially appealing to European and Middle Eastern investors and Mexico potentially appealing to North American investors; and
· facilitate the ability of the companies to separately finance the Beskauga and Sierra Mojada projects based on the unique characteristics of each project and jurisdiction.

We may not achieve these and other anticipated benefits for a variety of reasons, including, among others:

· potential disruption to the businesses of Arras and Silver Bull;
· management distraction due to the significant amount of time and effort required;
· the significant one-time costs of separating the two companies;
· challenges for management who will continue to have operational responsibilities for Silver Bull;
· incremental costs on the resulting companies, including, among others, the costs of being a stand-alone company and potential tax inefficiencies;
· greater susceptibility to market fluctuations and other adverse events as a stand-alone company, including as a result of reduced business diversification; and
· risk that the Spin-off is not consummated or does not achieve its intended benefits.

We cannot predict with certainty when the benefits expected from the Spin-off will occur or the extent to which they will be achieved. If we fail to achieve some or all of the benefits expected to result from the Spin-off, or if such benefits are delayed, our business, financial condition and results of operations could be adversely affected.

Our historical financial information is not necessarily representative of the results we would have achieved as a stand-alone company and may not be a reliable indicator of our future results.

Our historical financial statements have been derived (carved out) from the Silver Bull financial statements and accounting records. This derived information does not necessarily reflect the financial position, results of operations, and cash flows we would have achieved as a stand-alone company during the period presented, or those that we will achieve in the future.

This is primarily because of the following factors:

· For the period covered by our financial statements, our business was operated as a subsidiary of Silver Bull.
· Our financial statements include an allocation from Silver Bull of certain corporate-related general and administrative expenses that we would incur as a stand-alone company that we have not previously incurred. The allocation of these additional expenses, which are included in the financial statements, may not be indicative of the actual expense that would have been incurred had we operated as a stand-alone company for the period presented therein.
· In connection with the Spin-off, Silver Bull expects to incur one-time costs of approximately $0.3 million during fiscal year ending October 31, 2021, of which approximately $0.2 million is attributable to the Arras business.

Therefore, our historical financial information may not necessarily be indicative of our future financial position, results of operations or cash flows, and the occurrence of any of the risks discussed in this “Risk Factors” section, or any other event, could cause our future financial position, results of operations or cash flows to materially differ from our historical financial information. Moreover, because the Company was formed in February 2021, we only have presented historical financial statements from that date through April 30, 2021. This brief period of time may not be indicative of the actual future financial performance of the Company.

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The Spin-off could result in significant tax liability to certain shareholders.

The receipt of our common shares pursuant to the Spin-off should be treated, for U.S federal income tax purposes, as a taxable distribution in an amount equal to the fair market value on the distribution date of the common shares received. This distribution will be treated as a dividend to the extent of the current and accumulated earnings and profits of Silver Bull, as determined for United States federal income tax purposes. To the extent that the amount of the distribution exceeds Silver Bull’s current and accumulated earnings and profits for the taxable year of the distribution, the distribution will first be treated as a tax-free return of capital, causing a reduction in the adjusted basis of the holder’s Silver Bull shares, and to the extent the amount of the distribution exceeds the holder’s adjusted tax basis, the excess will be treated as capital gain. While we reasonably anticipate Silver Bull not having any accumulated earnings and profits for the taxable year of the distribution, Silver Bull likely will have current earnings and profits for the taxable year of the distribution, and therefore the distribution will be treated as a taxable dividend to the extent of such current (and any accumulated) earnings and profits. In addition, to the extent the distribution is in excess of Silver Bull’s current and accumulated earnings and profits, it will only be treated as a non-taxable return of capital to the extent of the holder’s basis in its Silver Bull shares and thereafter will be treated as capital gain. To the extent the distribution of our common shares results in taxable income to a shareholder, such shareholder may have income tax liabilities without any source of cash being received from Silver Bull or the Company with which to pay such liabilities.

The receipt of our common shares pursuant to the Spin-off will be treated, for Canadian income tax purposes, as a taxable dividend in kind in an amount equal to the fair market value on the distribution date of the common shares received. This will have tax consequences to shareholders resident in Canada.

For a more detailed discussion, see “Item 10. Additional Information—Taxation.”

Risks Relating to Our Common Shares

There is no existing public market for our common shares.

There is currently no existing public market for our common shares. Our common shares are not currently listed or quoted on any stock exchange or market in Canada or elsewhere. The Company cannot offer assurances that one will develop or be sustained after the Spin-off. If an active trading market does not develop, shareholders may have difficulty selling any of their common shares. If an active trading market does develop, the Company cannot predict the prices at which our common shares will trade. In addition, in Canada, our shareholders will be able to trade their shares only pursuant to an exemption from prospectus requirements. See also “Item 4. Information on the Company—The Spin-off—Trading of Arras Shares.”

Further equity financings may lead to the dilution of our common shares.

In order to finance future operations, we may raise funds through the issuance of common shares or the issuance of debt instruments or other securities convertible into common shares. We cannot predict the size of future issuances of common shares or the size and terms of future issuances of debt instruments or other securities convertible into common shares or the effect, if any, that future issuances and sales of our securities will have on the market price of our common shares. Any transaction involving the issuance of previously authorized but unissued shares, or securities convertible into common shares, would result in dilution, possibly substantial, to present and prospective security holders. Demand for equity securities in the mining industry has been weak; therefore, equity financing may not be available on attractive terms and, if available, will likely result in significant dilution to existing shareholders.

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We may lose our “foreign private issuer” status in the future, which could result in additional costs and expenses to us.

We are a “foreign private issuer,” as such term is defined in Rule 405 under the Securities Act and are not subject to the same requirements that are imposed upon U.S. domestic issuers by the SEC. We may in the future lose foreign private issuer status if a majority of our common shares are held in the United States and we fail to meet the additional requirements necessary to avoid loss of foreign private issuer status, such as if (i) a majority of our directors or executive officers are U.S. citizens or residents; (ii) a majority of our assets are located in the United States; or (iii) our business is administered principally in the United States. The regulatory and compliance costs to us under U.S. securities laws as a U.S. domestic issuer will be significantly more than the costs incurred as a Canadian foreign private issuer. If we are not a foreign private issuer, we may be required to file periodic and current reports and registration statements on U.S. domestic issuer forms with the SEC, which are generally more detailed and extensive than the forms available to a foreign private issuer. In addition, we may lose the ability to rely upon exemptions from corporate governance requirements that are available to foreign private issuers. Further, if we engage in capital raising activities after losing foreign private issuer status, there is a higher likelihood that investors may require us to file resale registration statements with the SEC as a condition to any such financing.

We are subject to risks associated with evolving corporate governance and public disclosure regulations.

The Company is subject to changing rules and regulations promulgated by the United States and Canadian governmental and self-regulated organizations, including the SEC, the CSA, any exchange or marketplace on which Arras’s securities are listed or trade, and the Financial Accounting Standards Board. These rules and regulations continue to evolve in scope and complexity making compliance more difficult and uncertain. The Company’s efforts to comply with these and other new and existing rules and regulations have resulted in, and are likely to continue to result in, increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities.

No dividends are anticipated.

At the present time, we do not anticipate paying dividends, cash or otherwise, on our common shares in the foreseeable future. Future dividends will depend on our earnings, if any, our financial requirements and other factors. There can be no assurance that we will pay dividends.

The Company may be a passive foreign investment company for U.S. federal income tax purposes.

The Company may be, or could become, a passive foreign investment company within the meaning of Section 1297 of the Internal Revenue Code of 1986, as amended, which could result in certain potentially adverse U.S. federal income tax consequences to certain U.S. taxpayers with respect to such taxpayer’s ownership and disposition of our common shares. See “Item 10. Additional Information—Taxation—Material U.S. Federal Income Tax Considerations—Passive Foreign Investment Company Rules.”

ITEM 4. INFORMATION ON THE COMPANY.

Business Overview

Arras is an exploration stage company, engaged in the business of mineral exploration. The Company’s exploration is focused on discovering and delineating Mineral Resources at the Company’s material property, the Beskauga Project, which is comprised of three contiguous licenses located in Kazakhstan. We have not realized any revenues. We have not established any reserves with respect to our exploration projects and may never enter into the development stage with respect to any of our projects.

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Organizational Structure

We are currently a subsidiary of Silver Bull, which holds approximately 88% of our outstanding shares, with the remaining shares of Arras being held by certain investors following the completion of a private placement of common shares on April 1, 2021. Immediately following the Spin-off, Silver Bull will retain an approximately 4% ownership interest in Arras. We do not own any interest in another entity, whether wholly or partially.

History and Development of the Company

The Spin-off

On February 5, 2021, the Company was incorporated under the Business Corporations Act (British Columbia) as a wholly owned subsidiary of Silver Bull. Arras was formed to hold Silver Bull’s interests in the Beskauga Project located in Kazakhstan. On March 19, 2021, Silver Bull transferred its Kazakh assets to the Company pursuant to the terms of an Asset Purchase Agreement (the “APA”) in exchange for the issuance of 36,000,000 common shares of the Company to Silver Bull (the “Asset Transfer”). The transferred assets included an option agreement with respect to the Beskauga Property, a joint venture agreement with respect to the Stepnoe and Ekidos properties and loans payable by Ekidos Minerals LLP (“Ekidos LLP”) to Silver Bull. On May 25, 2021, Silver Bull announced plans to spin-off substantially all of its shares of Arras to the Silver Bull shareholders. On                , 2021, Silver Bull expects to distribute approximately 34.2 million of our common shares issued to Silver Bull in respect of the Asset Transfer to its shareholders by way of a special dividend, on the basis of one common share for each share of common stock in the capital of Silver Bull (the “Distribution,” and together with the Asset Transfer, the “Spin-off”). The Spin-off is not expected to be tax-free to the Silver Bull shareholders (see “Item 10. Additional Information—Taxation”).

Beskauga Option Agreement

Pursuant to the APA, Silver Bull transferred its interest in an option agreement (the “Beskauga Option Agreement”) among Silver Bull, Copperbelt AG (“Copperbelt”) and Dostyk LLP (“Dostyk,” and together with Copperbelt, “CB”) to Arras.

Silver Bull entered into the Beskauga Option Agreement on August 12, 2020. Upon the execution of the Beskauga Option Agreement, Silver Bull paid Copperbelt $30,000. In addition, Silver Bull paid Copperbelt $40,000 upon completion of its due diligence on the Beskauga Project on January 26, 2021 (the “Option Closing Date”).

Pursuant to the Beskauga Option Agreement, Arras has the exclusive right and option (the “Beskauga Option”) to acquire CB’s right, title and 100% interest in the Beskauga property located in Kazakhstan (the “Beskauga Property”), which consists of the Beskauga Main project (the “Beskauga Main Project”) and the Beskauga South project (the “Beskauga South Project,” and together the Beskauga Main Project, the “Beskauga Project”).

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The Beskauga Option Agreement provides that subject to its terms and conditions, in order to maintain the effectiveness of the Beskauga Option, the Company must incur $2,000,000 in cumulative exploration expenditures on the Beskauga Project by January 26, 2022 (the first anniversary of the Option Closing Date), $5,000,000 in cumulative exploration expenditures on the Beskauga Project by January 26, 2023 (the second anniversary of the Option Closing Date), $10,000,000 in cumulative exploration expenditures on the Beskauga Project by January 26, 2024 (the third anniversary of the Option Closing Date), and $15,000,000 in cumulative exploration expenditures on the Beskauga Project by January 26, 2025 (the fourth anniversary of the Option Closing Date) (collectively, the “Exploration Expenditures”). The Beskauga Option Agreement provides that, subject to its terms and conditions, after the Company or its affiliate has incurred the Exploration Expenditures, the Company or its affiliate may exercise the Beskauga Option and acquire (i) the Beskauga Project by paying CB $15,000,000 in cash, (ii) only the Beskauga Main Project by paying CB $13,500,000 in cash, or (iii) only the Beskauga South Project by paying CB $1,500,000 in cash.

In addition, the Beskauga Option Agreement provides that subject to its terms and conditions, the Company or its affiliate may be obligated to make the following bonus payments (collectively, the “Bonus Payments”) to Copperbelt if the Beskauga Main Project or the Beskauga South Project is the subject of a bankable feasibility study in compliance with National Instrument 43-101 indicating gold equivalent resources in the amounts set forth below, with (i) (A) 20% of the Bonus Payments payable after completion of the bankable feasibility study or after the Mineral Resource statement is finally determined and (B) the remaining 80% of the Bonus Payments due within 15 business days of commencement of on-site construction of a mine for the Beskauga Main Project or the Beskauga South Project, as applicable, and (ii) up to 50% of the Bonus Payments payable in shares of Silver Bull common to be valued at the 20-day volume-weighted average trading price of the shares on the TSX calculated as of the date immediately preceding the date such shares are issued:

Gold equivalent resources   Cumulative Bonus Payments ($)
Beskauga Main Project
3,000,000 ounces   $2,000,000  
5,000,000 ounces   $6,000,000  
7,000,000 ounces   $12,000,000  
10,000,000 ounces   $20,000,000  
Beskauga South Project
2,000,000 ounces   $2,000,000  
3,000,000 ounces   $5,000,000  
4,000,000 ounces   $8,000,000  
5,000,000 ounces   $12,000,000  

 

The Beskauga Option Agreement may be terminated under certain circumstances, including (i) upon the mutual written agreement of the Company and CB; (ii) upon the delivery of written notice by the Company, provided that at the time of delivery of such notice, unless there has been a material breach of a representation or warranty given by CB that has not been cured, the Beskauga Property is in good standing; or (iii) if there is a material breach by a party of its obligations under the Beskauga Option Agreement and the other party has provided written notice of such material breach, which is incapable of being cured or remains uncured.

Stepnoe and Ekidos JV Agreement

Additionally, in connection with the Spin-off and pursuant to the APA, Silver Bull transferred its interest in the Stepnoe and Ekidos JV Agreement to Arras.

On September 1, 2020, Silver Bull entered into the Stepnoe and Ekidos JV Agreement in connection with, among other things, mineral license applications (the “Stepnoe and Ekidos Licenses”) for, and further exploration and evaluation of certain properties, including the Stepnoe and Ekidos properties located in Kazakhstan. The exploration licenses for the Stepnoe and Ekidos properties were granted on October 22, 2020.

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Pursuant to the Stepnoe and Ekidos JV Agreement, Ekidos LLP was incorporated on behalf of Copperbelt for the purpose of applying for the Stepnoe and Ekidos Licenses with the funding previously provided by Silver Bull. Pursuant to the terms of the Stepnoe and Ekidos JV Agreement and in connection with the Asset Transfer, it is expected that 100% of the equity interests in Ekidos LLP will be transferred to the Company in the near future.

The Company (through Ekidos LLP) and Copperbelt have initial participating interests in the joint venture of 80% and 20%, respectively. Pursuant to the Stepnoe and Ekidos JV Agreement, once the Company spends a minimum of $3,000,000 on either the Stepnoe or Ekidos property, the Company has the option to acquire Copperbelt’s participating interest in such property for $1,500,000.

The Stepnoe and Ekidos JV Agreement shall terminate automatically upon there being one participant in the joint venture, or by written agreement between the parties, provided that Copperbelt’s loan obligations under the agreement shall only terminate in accordance with the SVB Loans (as defined below).

Maikain JV Agreement

On May 20, 2021, Ekidos LLP entered into the Maikain Joint Venture Agreement (the “Maikain JV Agreement”) with Orogen LLP, a company incorporated under the laws of Kazakhstan, in connection with, among other things, mineral license applications for, and further exploration and evaluation of, certain properties in an area of interest, including the Akkuduk property located in Kazakhstan. The exploration license for the Akkuduk property was granted on February 2, 2021.

The Company (through Ekidos LLP) and Orogen LLP have initial participating interests in the Maikain joint venture of 80% and 20%, respectively. Pursuant to Maikain JV Agreement, once the Company spends a minimum of $3,000,000 on a property in the area of interest, the Company has the option to acquire Orogen LLP’s participating interest in such property for $1,500,000.

The Maikain JV Agreement shall terminate automatically upon the earlier of (i) there being one participant in the joint venture, (ii) by written agreement between the parties, or (iii) May 20, 2024.

Loan Agreements

In connection with the Spin-off, Silver Bull transferred its interest in three loan agreements to Arras pursuant to the terms of the APA.

Silver Bull entered into (i) a loan agreement with Ekidos LLP dated August 20, 2020 whereby Silver Bull loaned to Ekidos LLP $360,000, which was subsequently amended on October 30, 2020 and January 21, 2021 (collectively, “SVB Loan 1”), (ii) a loan agreement with Ekidos LLP dated December 21, 2020 whereby Silver Bull loaned to Ekidos LLP $400,000 (“SVB Loan 2”) and (iii) a loan agreement with Ekidos LLP dated February 23, 2021 in the amount of $450,000, of which Silver Bull sent $225,000 to Ekidos LLP (“SVB Loan 3,” and together with SVB Loan 1 and SVB Loan 2, the “SVB Loans”).

Additionally, the Company entered into (i) a loan agreement with Ekidos LLP dated April 22, 2021, whereby Arras loaned to Ekidos LLP $450,000 (“Arras Loan 1”), and (ii) a loan agreement with Ekidos LLP dated May 19, 2021 in the amount of $480,000, of which Arras has sent $394,500 to Ekidos LLP (“Arras Loan 2”).

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The SVB Loans and Arras Loan 1 are interest free and are repayable on June 30, 2021.

Arras Loan 2 is interest free and is repayable on July 31, 2021.

Completion of the Spin-off is subject to the satisfaction, or waiver by the Silver Bull Board, of a number of conditions.

Financings and Issuances of the Company’s Securities

As noted above, on March 19, 2021, Silver Bull transferred its Kazakh assets to Arras in exchange for the issuance of 36,000,000 Arras common shares to Silver Bull pursuant to the terms of the APA.

On April 1, 2021, Arras entered into a series of substantially similar subscription agreements (each, a “Subscription Agreement”) pursuant to which Arras issued and sold to certain investors an aggregate of 5,035,000 Arras common shares at a price of CDN$0.50 per share, for gross proceeds of CDN$2,517,500. The private placement included subscriptions from certain members of the board of directors and management team (and their respective affiliates) of Arras and Silver Bull for an aggregate of 415,000 Arras common shares (CDN$207,500). All Arras common shares issued in the private placement are subject to a hold period under applicable Canadian securities laws, which will expire on August 2, 2021, and are restricted securities under U.S. securities laws. The Company relied on the exemption from registration under Section 4(a)(2) of the Securities Act, or Rule 506 of Regulation D, or Regulation S, for purposes of the private placement.

See also “Item 6. Directors, Senior Management and Employees—Compensation” and “Item 6. Directors, Senior Management and Employees—Share Ownership—Compensation Plans—Arras Minerals Corp. Equity Incentive Plan” for other issuances of securities of Arras under its equity incentive plan.

Property, Plants and Equipment

Beskauga Project

Location, Access and Infrastructure

The Beskauga Project is located in the Pavlodar Region of northeastern Kazakhstan, approximately 300 km from the Kazakhstan capital, Nur-Sultan (formerly Astana), approximately 70 kilometers southwest of the city of Pavlodar (population of approximately 330,000), and approximately 65 kilometers east of the town of Ekibastuz (population of approximately 125,000). There is an international airport at Nur-Sultan. Access to the project area is via sealed road from Pavlodar.

The property comprises three licenses, the Beskauga mineral license (67.8 square kilometers) in the center of the property, which has been the subject of all work carried out thus far, and the Stepnoe (425 square kilometers) and Ekidos (425 square kilometers) mineral exploration licenses.

The region has sufficient infrastructure to host large-scale mining operations and is a sophisticated transportation and communication node with a local economy dominated by activity in the mining and industrial sectors. Some 40% of all of Kazakhstan’s power-generating capacity comes from the region, which contains six power stations, three of which are in Pavlodar. Fresh water is supplied to the area from the Irtysh River/Karaganda Canal, and there is a large, well-trained labor force to draw upon for any future mining activities.

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The map below shows the location of the Beskauga Project:

Property History, Title and Ownership Rights

The Beskauga deposit was discovered by a regional shallow drilling program conducted during the Soviet-era in the 1980s. Dostyk maintains minerals rights for the Beskauga deposit based on License No. 785 (series MG) dated January 8, 1996, and a series of subsequent contracts and addendums as per the Republic of Kazakhstan legislation.

The Beskauga mineral exploration license was issued under Kazakhstan’s previous mining code, which was based on a contract arrangement whereby a company agrees to meet certain milestones and expenditures with the government. Despite a new mining code being in place since June 2018, obligations under existing contracts and licenses are still enforced. Dostyk has a mineral exploration license providing for the right to explore for all minerals (except uranium) on the Beskauga property. In order to maintain the exploration license in good standing, Dostyk is required to spend the following:

· 2021: $1,801,000
· 2022: $2,726,000
· 2023: $4,700,000

Before the end of the three-year period ending December 31, 2023, the Beskauga exploration license will need to be converted to a mining license. A mining license has a provision to allow for another three-year exploration period before an economic study needs to be completed on the project. Pursuant to the Beskauga Option Agreement with Copperbelt and the Beskauga mineral exploration license held by Dostyk, Arras has the exclusive right and option to acquire Dostyk’s right to explore for all minerals (except uranium) on the Beskauga property until December 31, 2023.

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Geology and Mineralization

The Beskauga Project is located in northeastern Kazakhstan, an area underlain by the rocks of the Altaid tectonic collage or Central Asian Orogenic Belt (CAOB), an extensive Palaeozoic subduction–accretion complex made up of fragments of sedimentary basins, island arcs, accretionary wedges and tectonically bounded terranes that was progressively developed from the late Neoproterozoic Era, through the Palaeozoic Era to the early Mesozoic Era, and which extends eastwards into Russia, Mongolia and China as the Transbaikal–Mongolian orogenic collage. These tectonic collages contain several major porphyry copper-gold/molybdenum and epithermal gold deposits formed over an extensive period from the Ordovician to the Jurassic and associated with the various magmatic arcs.

Beskauga is thought to be located in the lower Boshchekul–Chingiz volcanic arc, part of the Kipchak arc system. Island-arc volcanism was calc-alkaline in nature, evolving from are more sodic chemistry to more potassic in later stages and formed small hypabyssal intrusive bodies of gabbro, diorites, granodiorite and sodic granite. These intrusives are responsible for the formation of the copper-gold porphyry deposits in the region.

Beskauga is a copper-gold porphyry deposit with elevated grades of molybdenum and silver. The Beskauga Project area is predominantly underlain by sedimentary and volcanogenic-sedimentary rocks of Ordovician age. These have been intruded by small stock-like intrusive bodies of porphyry ranging in composition from granodiorite to quartz diorite to gabbro-diorite, also interpreted to be Ordovician in age. Dikes of diorite porphyry, diabase and graniteporphyry also cut the host sequence. The host rocks are hornfelsed proximal to intrusive contacts. The deposit area is covered by 10–40 meters of younger sediments of upper Eocene and Quaternary age.

The Beskauga Main porphyry-style copper-gold mineralization is largely hosted within granodiorite porphyry, whereas the Beskauga South gold mineralization is hosted within diorite porphyry and may represent an epithermal overprint. The diorite is interpreted to cut and postdate the granodiorite. Diabase is also interpreted to cut granodiorite. Intrusive relationships and timing relative to mineralization have not been clearly established.

Porphyry-style mineralization is hosted in granodiorite and plagiogranite intrusions that have elongated sheet-like shapes, often with offshoots. Mineralized zones are affected by stockwork veining and hydrothermal alteration and dip steeply. Alteration is represented by albitization, sericitization and pyritization, with the most intensive alteration at a depth of 250–500 meters. Tourmaline has also been described. Potassic alteration is described from mineralogical work. Sericite-pyrophyllite-quartz alteration and silicification in steeply dipping alteration zones is also described, indicating a degree of epithermal overprint.

Pyrite and chalcopyrite are the dominant sulphide minerals at Beskauga, with smaller amounts of bornite, chalcocite, tennantite, enargite, and molybdenite, with magnetite and hematite also described. Sulphides occur as fine-grained disseminations as well as in stockwork veins and veinlets, consisting of quartz-carbonate, quartz-carbonate-chlorite, and quartz-pyrite.

Mineral Resource Estimate

We retained CSA Global Consultants Canada Ltd. to prepare an independent technical report summary on the Beskauga Project (the “Technical Report Summary”). The purpose of the Technical Report Summary is to support the disclosure of Mineral Resource estimates for the Beskauga Project. The Technical Report Summary conforms to SEC Modernized Property Disclosure Requirements for Mining Registrants as described in Item 1300 of Regulation S-K, Disclosure by Registrants Engaged in Mining Operations (“S-K 1300”) and Item 601(b)(96) (Technical report summary) of Regulation S-K.

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To demonstrate potential of the Beskauga deposit for eventual economic extraction, a preliminary pit optimization study was completed. A net smelter return (“NSR”) formula was developed and applied to the block model that incorporates metal prices, concentrate sales terms and metallurgical recoveries that were developed from metallurgical reports available for the Beskauga Project. The NSR formula applied was

NSR $/t = (38.137 + 11.612 x Cu%) x Cu% + (0.07 + 0.0517 x Ag g/t) x Ag g/t + (19.18 + 12.322 x Au g/t) x Au g/t.

The Mineral Resource estimate has been reported for all blocks in the resource model that fall within a pit shell that was developed for an alternative case with NSR multiplied by factor of 1.25 and NSR value exceeding $5.70/tonne. The entire Mineral Resource estimate has reasonable prospects for eventual economic extraction, and is a realistic inventory of mineralization, which, under assumed and justifiable technical and economic conditions, might, in whole or in part, become economically extractable.

Mineral Resources were classified in accordance with Item 1302(d)(1)(iii)(A) of Regulation S-K into Indicated and Inferred Mineral Resources. The classification is based upon an assessment of geological and mineralization continuity and quality assurance/quality control (“QAQC”) results, considering the level of geological understanding of the deposit, and specific requirements concerning the minimum number of samples and minimum number of drillholes used for grade interpolation for each block as carried out for each search pass. The classification of the Mineral Resources takes into account all uncertainties related to geological interpretation, mineralization continuity and geostatistical analysis, sampling method and sample and data security, drill sample control and quality, data quality and reliability, density, and topographic reliability.

In the Qualified Person’s opinion, further drilling and evaluation work is expected to improve classification of the Mineral Resource and provide better resolution of technical and economic factors that are likely to influence the prospect of economic extraction.

Beskauga Deposit—Summary of Mineral Resources as of January 28, 2021

Category   Tonnage (million tonnes or Mt)   Copper (Cu) (%)   Gold (Au) (grams/tonne or g/t)   Silver (Ag) (grams/tonne or g/t)
Measured Mineral Resources     —         —         —         —    
Indicated Mineral Resources     207       0.23       0.35       1.09  
Measured + Indicated Mineral Resources     207       0.23       0.35       1.09  
Inferred Mineral Resources     147       0.15       0.33       1.02  

 

· A NSR $/t cut-off of $5.70/t was used, and the NSR formula is: NSR $/t = (38.137+11.612 x Cu%) x Cu% + (0.07 + 0.0517 x Ag g/t) x Ag g/t + (19.18 + 12.322 x Au g/t) x Au g/t.
· The NSR formula incorporates variable recovery formulae. Average copper recovery was 81.7% copper and 51.8% for both gold and silver.
· Metal prices considered were $2.80/pound for copper, $17.25/ounce for silver and $1,500/ounce for gold.
· The Mineral Resource is stated within a pit shell that considers a 1.25 factor above the NSR.
· Mineral resources are estimated and reported in accordance with the definitions for Mineral Resources in Item 1302(d)(1)(iii)(A) of Regulation S-K into Indicated and Inferred Mineral Resources, which is consistent with the CIM Definition Standards for Mineral Resources and Mineral Reserves adopted on May 10, 2014.
· Serik Urbisinov (MAIG), CSA Global Principal Resource Geologist, is the independent Qualified Person with respect to the Mineral Resource estimate.

 

 

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· The Mineral Resource is not believed to be materially affected by any known environmental, permitting, legal, title, taxation, socio-economic, marketing, political or other relevant factors.
· These Mineral Resources are not mineral reserves as they do not have demonstrated economic viability.
· The quantity and grade of reported inferred resources in this Mineral Resource estimate are uncertain in nature and there has been insufficient exploration to define these inferred resources as indicated or measured; however, it is reasonably expected that a majority of the inferred Mineral Resources could be upgraded to indicated Mineral Resources with continued exploration.
· See also pages 6 and 7 of the Technical Report Summary (filed as Exhibit 17.1 to this Form 20-F) for the material assumptions and criteria for the Mineral Resource estimate.

Sample Preparation, Analyses and Security

Sample preparation was carried out at the Dostyk facility in Ekibastuz. Half-core samples were dried, weighed, and crushed and screened to −2 millimeters, and a ~1 kilogram split was milled to 200 mesh fineness (−90 µm). Milled pulps were split and sent to the Stewart Assay and Environmental Laboratory (“SAEL”) in Kara-Balta, Kyrgyzstan for analysis. All equipment used for sample crushing and milling was cleaned and blown with compressed air after each sample, and after each batch of samples a clean blank material was passed though the equipment. The sample preparation area was subject to compulsory wet cleaning once a day. The split core and crushed duplicate sample are stored in the specifically equipped sample storage facility in Ekibastuz, which can be locked and has on-site security.

SAEL has been utilized by Dostyk as the primary laboratory since 2007. SAEL is internationally accredited and independent of Dostyk. Umpire assays were carried out at Genalysis Laboratory in Perth, Australia (“Genalysis”). At both SAEL and Genalysis, samples were analyzed for gold using fire assay (“FA”) with an atomic absorption spectrometry (“AAS”) finish. A 30 gram bead was used in the FA process. A further 33 elements were determined by an aqua regia digest followed by inductively coupled plasma-optical emission spectrometry (ICP-OES) measurement of elemental concentrations.

QAQC samples comprised certified reference materials (“CRMs”), blanks, duplicates, and umpire assays. CRMs used were OREAS 209, OREAS 501b, OREAS 502b, OREAS 503b, and OREAS 54Pa. A total of 187 gold CRMs and 124 copper CRMs were analyzed, representing 0.52% and 0.34%, respectively, of the 36,271 samples in the database, below the recommended amount of 5% of CRMs. A total of 318 blank samples (0.9% of all samples) were submitted for analysis. Of all the blank material sampled, the majority had below detection or very low values reported, indicating that there is very little contamination overall. In 2013, 97 pulp duplicates were submitted for re-assay, and the results show relatively good repeatability. However, this only represents one year and 0.27% of all samples, and no core duplicates have been submitted; this represents a significant gap in QAQC.

External control check assays at Genalysis were completed on 966 samples (2.7% of all assays), and results show relatively good repeatability and similar distribution for gold and copper, although there is a slight positive bias towards the original results, especially for the copper grades.

It is the Qualified Person’s opinion that sample preparation and analyses were done in line with industry standards and are satisfactory. Although the number of CRM, duplicate, and blank samples are lower than what is considered standard, the quality of assays is considered to be adequate to be used for the Mineral Resource estimate.

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2021 Exploration Program

We have commenced an exploration program in the second calendar quarter of 2021 on the Beskauga Property. This involves a geological mapping and sampling program of key select areas, as well as a diamond drilling program targeting extensions to the known mineralization in the second half of calendar year 2021. The exploration program’s design is being determined based historical geological information in the area and an airborne geophysics program that has recently been completed. The continuation of the exploration drilling program to the end of the calendar year 2021 is subject to obtaining adequate financing.

Capital Expenditures

As the Company’s activities are at the exploration stage, minimal capital expenditures are required, with minor costs in setting up the program infrastructure, such as computers, tools and equipment, to be used by the Company’s geologists in Kazakhstan, and a vehicle for fieldwork purposes. Such expenditures have been financed by net proceeds received from the Company’s private placement completed on April 1, 2021.

Seasonality

The Company’s mineral exploration activities may be subject to seasonality due to adverse weather conditions including, without limitation, inclement weather, frozen ground and restricted access due to snow, ice or other weather-related factors. In addition, the mining and mineral exploration business is subject to global economic cycles effecting, among other things, the marketability and price of mineral products in the global marketplace.

Competition

The mineral exploration and mining industry is competitive in all phases of exploration, development and production. The Company competes with a number of other entities and individuals in the search for and the acquisition of attractive mineral properties. As a result of this competition, the Company may not be able to acquire attractive properties in the future on terms it considers acceptable. The Company may also encounter competition from other mining companies in efforts to hire experienced mining professionals. Increased competition could adversely affect the Company’s ability to attract necessary funding or acquire suitable properties or prospects for mineral exploration in the future. See “Risk Factors—Risks Relating to the Mineral Exploration Industry.”

Social and Environmental Policies

The Company is committed to conducting its operations in accordance with sound social and environmental practices. At present, the scale of operations has not required the adoption of formal policies. The Company will re-evaluate this position if and when necessary.

The Company is subject to the laws and regulations relating to environmental matters in all jurisdictions in which it operates, including provisions relating to property reclamation, discharge of hazardous materials and other matters. The Company may also be held liable should environmental problems be discovered that were caused by former owners and operators of its properties. The Company conducts its mineral exploration activities in compliance with applicable environmental protection legislation.

Employees

As of the date hereof, the Company has two employees, both of whom are located at the Company’s project site in Kazakhstan. The officers of the Company are not formally employed by the Company but currently hold the same positions with Silver Bull, and Silver Bull is charging an allocation of its costs on a pro-rata cost recovery basis to the Company. The Company also relies on consultants and contractors to carry on its business activities and, in particular, to supervise and carry out mineral exploration on the Beskauga Property.

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Corporate Offices

The Company is domiciled in Canada and its registered office is located at Suite 2600, Three Bentall Centre, 595 Burrard Street, Vancouver, British Columbia V7X 1L3, Canada. Our principal executive offices are located at 777 Dunsmuir Street, Suite 1610, Vancouver, British Columbia V7Y 1K4, Canada, and the Company’s telephone number is (604) 687-5800.

Available Information

The SEC maintains an Internet website that contains reports and other information about issuers, like us, that file electronically with the SEC. The address of that website is www.sec.gov.

Regulatory Overview

Kazakhstan Mining Law

Kazakhstan has recently updated its mining code and all new licenses are issued under this code. The new mining code, the Code on Subsoil and Subsoil Use (the “SSU Code”) was ratified on June 29, 2018 and is based on the Western Australian model. Under the SSU Code, Kazakhstan transferred from a contractual regime to a licensing regime for solid minerals (except for uranium, which remains under a contractual regime). The purpose has been to boost investment in exploration and mining in Kazakhstan and remove administrative burdens for subsoil users. The mining industry in Kazakhstan accounts for about 14% of gross domestic product and more than 20% of exports and is seen as a key industry.

Under the Kazakhstan Constitution, the subsoil is owned by the state. In regulating the mining sector, the state is represented by the competent authority, the Ministry of Industry and Infrastructural Development (“MIID”), which is authorized to grant and terminate subsoil use rights (“SURs”) and control compliance obligations related to SURs. Under the new mining code, SURs are granted under subsoil use licenses, either for exploration or mining. Under the previous regime, SURs were granted under contracts for the right of exploration, mining, or combined exploration and mining.

Exploration licenses are granted for up to six years with the possibility of an extension for five more years and provide an exclusive right to use the subsoil for the purpose of exploration and for assessment of resources and reserves for subsequent mining. If a deposit is discovered, the exploration license holder has an exclusive right to obtain a mining license if the discovery is confirmed by a report on estimation of resources and reserves of solid minerals. The SSU Code entitles subsoil users to estimate resources and reserves under the KAZRC standard, which is aligned with the CRIRSCO, JORC and CIM reporting codes.

Under the older contractual permitting system, a company agreed to meet certain milestones and expenditure. Despite a new mining code being in place, obligations under existing contracts are still enforced. Should a company fail to meet its obligations as stated in the contract, or the company needs to extend or change the terms, the company can approach the government and add an “Addendum” to the contract.

The SSU Code is the principal law regulating the mining sector, with detail provided by a number of government decrees and ministerial orders. Mining of precious metals is also affected by the Law on Precious Metals and Precious Stones (the “Precious Metals Law”) under which the Kazakhstan National Bank can exercise a priority right to buy fine gold.

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Beskauga Project

Arras’s Beskauga Project consists of three licenses: the Beskauga license, which was issued under the older permitting system; and the Ekidos and Stepnoe licenses, which were issued under the new SSU Code in October 2020. The Beskauga license is held by Dostyk, a Kazakh entity 100% owned by Copperbelt, a private mineral exploration company registered in Switzerland with which Arras has an option agreement. The Ekidos and Stepnoe licenses are held by Ekidos LLP, to which Arras has made loans totaling $1.435 million as at April 30, 2021.

Beskauga License

Dostyk maintains minerals rights for the Beskauga deposit based on License No. 785 (series MG) dated January 8, 1996, a contract dated October 11, 2001 and a series of subsequent addendums as per the Republic of Kazakhstan legislation.

The subsoil right for the Beskauga area was initially acquired by Goldbelt Resources Ltd in 1996 as part of a much larger License No. 785 (Mykubinsk), issued to its 80% subsidiary, Dostyk, under the old permitting system. In 2000, Goldbelt Resources Ltd sold its interest in Dostyk to Celtic Resources, a London-listed company.

Exploration rights under License No. 785 including Beskauga were re-issued to Dostyk in October 2001 as Contract No. 759 for the Maikuben area. No drilling at the Beskauga deposit was conducted by Goldbelt Resources Ltd or Celtic Resources.

Via its option agreement with Copperbelt, Arras has acquired the right to explore for “All Minerals” (except uranium) on the remaining Dostyk license including the Beskauga deposit. The present contract set forth its validity period as until the last day of validity of License MG No. 785, January 8, 2021, with an ability to extend until the full depletion of resources.

On February 8, 2021, the MIID granted an extension of the exploration rights to Dostyk until February 8, 2024. Under this addendum, Arras via its agreement with Copperbelt will be required to spend the following over three years to keep the license in good standing:

· 2021: $1.801 million;
· 2022: $2.726 million; and
· 2023: $4.7 million.

At the end of this three-year period in February 2024, the Beskauga exploration contract will need to be converted to a mining license.

Stepnoe, Ekidos and Akkuduk Exploration Licenses

Ekidos LLP holds three exploration licenses: the Ekidos (No. 875-EL) and Stepnoe (No. 876-EL) licenses, which were granted on October 22, 2020 to Ekidos LLP; and the Akkuduk (No. 1178-EL) license, which was granted on February 2, 2021. All three licenses were applied for under the SSU Code. Under the new code, the licenses are granted for “All Minerals” (except uranium) for an initial six-year period. The licenses can be extended once for an additional five years.

An annual exploration commitment for each license is calculated based on the number of 2.5 km2 “blocks” contained within the license. The exploration commitment for each block is calculated based on a “minimum wage index” (MRP) by the Kazakh State which is then multiplied by the index established by the SSU Code. The rates will vary slightly from year to year due to changing MRP indices, but the annual expenditure commitment for 2021 for the Stepnoe, Ekidos and Akkuduk licenses is calculated via a formula outlined in the SSU Code to be approximately $15,600 for each license. It is not expected that this annual exploration commitment cost will materially vary over the first three years.

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In addition to the annual exploration commitment costs, there is an annual “land lease” fee, which is calculated using the formula “15MRP x No. of blocks.” It is estimated this fee will equate to approximately $21,000 each per year for the Ekidos and Stepnoe licenses, and $19,000 each year for the Akkuduk license.

The annual expenditure commitment in a given year can be covered by expenditure accrued over the years where the exploration expenditure exceeds the calculated commitment amount. The annual expenditure commitment can be reduced by ceding ground.

Maikain JV Agreement

On May 20, 2021, Ekidos LLP entered into the Maikain JV Agreement with Orogen LLP in connection with, among other things, mineral license applications for, and further exploration and evaluation of, certain properties in an area of interest, including the Akkuduk property located in Kazakhstan. The exploration license for the Akkuduk property was granted on February 2, 2021.

The Company (through Ekidos LLP) and Orogen LLP have initial participating interests in the Maikain joint venture of 80% and 20%, respectively. Pursuant to Maikain JV Agreement, once the Company spends a minimum of $3,000,000 on a property in the area of interest, the Company has the option to acquire Orogen LLP’s participating interest in such property for $1,500,000.

The Maikain JV Agreement shall terminate automatically upon the earlier of (i) there being one participant in the joint venture, (ii) by written agreement between the parties, or (iii) May 20, 2024.

Tax Code

In late-2017, Kazakhstan announced substantial changes to its Tax Code (the “Tax Code”) effective as of January 2018, with a mix of generally applicable changes and measures targeted at mining. The new Tax Code includes specific mineral taxation provisions and lists special taxes imposed on subsoil use in addition to such general taxes as the corporate income tax and value added tax, as well as import- and export-related taxes. Notably, several taxes and payments applicable to the mining sector have been removed from the new Tax Code, including the excess profit tax, historical cost payments, and the requirement to pay a commercial discovery bonus.

These reforms are aligned with the SSU Code which will require geological data to be published after a specified period.

Environmental Code

Kazakhstan’s Environmental Code (the “Environmental Code”) was introduced in 2007 and was followed by various changes to the country’s environmental legislation, including the adoption of the Law on Supporting the Use of Renewable Sources of Energy in 2009 and the Law on Energy Saving and Energy Efficiency in 2012. Water resources and related matters are also discussed in separate water legislation. The new Environmental Code takes effect on July 1, 2021.

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The SSU Code requires subsoil users’ compliance with all relevant environmental legislation.

The Environmental Code separately obliges companies to perform an environmental impact assessment which is reviewed by “the competent environmental authorities” and, in the case of high-risk operations, by the Ministry of Ecology, Geology and Natural Resources. Extending the assessment to involve an initial environmental screening could be considered, as within the current framework the assessment takes place only once the project plans are well advanced.

An environmental permit is available for subsoil operators in Kazakhstan, setting out limits for emissions of pollutants according to a set of emission limit values (“ELVs”). The new Environmental Code refers to the permit which allows operators to legally emit pollutants into the environment within certain limits. The complex mechanisms of calculating ELVs involve a large number of different pollutants, creating challenges for operators seeking to comply with ELVs even through the application of best available techniques (BATs) for managing emissions. The ELVs also form the basis of environmental taxes for an operator, but these and other taxation issues are not covered by the new SSU Code and instead addressed in the Tax Code.

The Spin-off

When and How You Will Receive Arras Shares

Silver Bull will distribute to holders of Silver Bull shares, as a pro rata dividend, one Arras share for each Silver Bull share such shareholders hold and do not sell or otherwise dispose of prior to the close of business on                , 2021, the record date for the Spin-off. The actual number of our common shares that will be distributed will depend on the total number of issued Silver Bull shares (excluding treasury shares held by Silver Bull and its subsidiaries) as of the record date.

Olympia Trust Company, as the Silver Bull share registrar and U.S. transfer agent, will arrange for the distribution of our common shares to holders of Silver Bull shares. For purposes of and following the Spin-off, Olympia Trust Company will act as our share registrar and U.S. transfer agent.

If Silver Bull shareholders own Silver Bull shares as of 5:00 p.m., New York City time, on the record date, the Arras shares that Silver Bull shareholders are entitled to receive in the Distribution will be issued electronically on the distribution date to Silver Bull shareholders in direct registration form or to Silver Bull shareholders’ bank or brokerage firm on Silver Bull shareholders’ behalf. If a Silver Bull shareholder is a registered holder of Silver Bull shares, Olympia Trust Company will mail the Silver Bull shareholder a direct registration account statement that reflects the Silver Bull shareholder’s Arras shares. If Silver Bull shareholders hold their Silver Bull shares through a bank or brokerage firm, their bank or brokerage firm will credit their account for their Arras shares. Direct registration form refers to a method of recording securities ownership when no physical certificates are issued, as is the case in the Distribution. It is expected that, if Silver Bull shareholders sell Silver Bull shares prior to the date that is one trading day before the record date (i.e., in the “regular way” market), Silver Bull shareholders will be selling their right to receive Arras shares in the Distribution. Consequently, it is expected that investors acquiring or selling Silver Bull shares after this time will be trading “ex-distribution,” which means that such trades will be of Silver Bull shares that do not carry the entitlement to receive Arras shares in the Distribution. Please contact your bank or broker for further information if you intend to engage in any such transaction.

We will become a stand-alone company on                , 2021, the distribution date for the Spin-off.

Depending on your bank or broker and whether you hold Silver Bull shares, it is expected that your Arras shares will be credited to your applicable securities account either on or shortly after the distribution date. See also “—Trading of Arras Shares” below.

In the event there are any changes to the record date or the distribution date, or new material information relating to the distribution of our common shares becomes available, Silver Bull will publish any such changes or updates in a press release that will also be furnished with the SEC by Silver Bull on a Form 8-K and by us on a Form 6-K.

Under Nevada law, the Spin-off does not require shareholder approval. We are not asking you for a proxy, and we request that you not send us a proxy. The number of outstanding Silver Bull shares will not change as a result of the Spin-off.

If you hold and do not sell or otherwise dispose of your Silver Bull shares prior to the close of business on the record date, the Arras shares that you are entitled to receive in the Spin-off are expected to be distributed to you as described below.

Holders of Silver Bull shares held in book-entry form with a bank or broker. Most Silver Bull shareholders hold their Silver Bull shares through a bank or brokerage firm. In such cases, the bank or brokerage firm would be said to hold the shares in “street name,” and ownership would be recorded on the bank’s or brokerage firm’s books. If a Silver Bull shareholder holds his, her or its Silver Bull shares through a bank or brokerage firm, his, her, or its bank or brokerage firm will credit his, her or its account for the Arras shares that he, she or it is entitled to receive in the Distribution. If Silver Bull shareholders have any questions concerning the mechanics of having shares held in “street name,” they should contact their bank or brokerage firm.

Holders of Silver Bull physical share certificates. In connection with the Spin-off, all registered Silver Bull shareholders holding physical share certificates will be issued Arras shares in book-entry form only, which means that no physical share certificates will be issued. For questions relating to the transfer or mechanics of the distribution, please contact Olympia Trust Company by telephone at 1-833-684-1546 (toll free in North America) or by online inquiry at cssinquiries@olympiatrust.com. See also “Summary—The Spin-off—Questions and Answers about the Spin-off—Where can I get more information?”

Trading Between the Record Date and the Distribution Date

We expect that, beginning one trading day before the record date and continuing up to and including the distribution date, the Silver Bull shares on the OTCQB marketplace and the TSX will trade “ex-distribution,” as opposed to “regular way.” Silver Bull shares that trade “regular way” trade with an entitlement to Arras shares distributed pursuant to the Distribution. Silver Bull shares that trade “ex-distribution” will trade without an entitlement to Arras shares distributed pursuant to the Distribution. Therefore, if Silver Bull shareholders sell Silver Bull shares up to the date that is one trading day prior to the record date (i.e., in the “regular way” market), they will be selling their right to receive our common shares in the Distribution.

If Silver Bull shareholders own Silver Bull shares at 5:00 p.m., New York City time, on the record date and sell those shares thereafter “ex-distribution,” they will receive Arras shares that they are entitled to receive pursuant to their ownership as of the record date of the Silver Bull shares.

Number of Arras Shares You Will Receive

You will receive one Arras share for each Silver Bull share you hold and do not sell or otherwise dispose prior to the close of business on the record date.

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Results of the Spin-off

After the Spin-off, we will be a stand-alone company. Immediately following the Spin-off, we expect to have approximately 41 million Arras shares outstanding. The actual number of our common shares that Silver Bull will distribute in the Spin-off will depend on the actual number of issued Silver Bull shares, excluding treasury shares held by Silver Bull and its subsidiaries, on the record date. The Spin-off will not affect the number of outstanding Silver Bull shares or any rights of holders of any outstanding Silver Bull shares, although we expect the trading price of Silver Bull shares following the Spin-off to be lower than prior to the Spin-off because the trading price of Silver Bull shares will no longer reflect the value of the Arras business. In addition, Silver Bull shares sold “ex-distribution” (as opposed to “regular way”) will trade without the entitlement to receive the distribution of our common shares in the Spin-off and will reflect an ownership interest solely in Silver Bull, but may not yet accurately reflect the value of such Silver Bull shares excluding the Arras business.

In order to minimize salaries and office-related overhead costs, Silver Bull will continue to incur these costs and will charge Arras for a portion of these costs on a pro-rata cost-recovery basis until our common shares are listed or trade on a stock exchange or other market or some other outside date to be agreed upon by Silver Bull and Arras. At that time, it is expected that separate employment agreements will be put in place, and a formal service agreement will be completed for common office-related overhead costs.

Prior to completion of the Spin-off, we intend to enter into a Separation and Distribution Agreement and possibly other agreements with Silver Bull related to the Distribution and the Spin-off. The Separation and Distribution Agreement and any other agreements will govern the relationship between us and Silver Bull up to and after completion of the Spin-off, including the treatment of certain contracts and outstanding Silver Bull warrants, among other items.

Trading of Arras Shares

As of the date of this Form 20-F, we are a subsidiary of Silver Bull, which owns approximately 88% of our shares outstanding. Accordingly, no public market for our shares currently exists. No securities of the Company will be listed or posted for trading on any stock exchange or market upon consummation of the Spin-off. Until our common shares are listed or posted for trading on a stock exchange or other market, the Arras shares distributed to Silver Bull shareholders will be illiquid and shareholders may have difficulty selling their Arras shares.

If we fail to list our common shares on an exchange or another market, the liquidity for our common shares may be significantly impaired, which may significantly decrease the value of our common shares.

In addition, in Canada, our shareholders will be able to trade their shares only pursuant to an exemption from prospectus requirements.

Olympia Trust Company will act as our share registrar and transfer agent.

We currently expect that our issued shares will be held in the following forms:

· Shares held via Depository Trust Company (“DTC”). Holders may hold their entitlements to our common shares in book-entry form via the DTC system through custody accounts with custodian banks or brokers that are direct participants in the DTC system. Such shares will be held in the name of DTC’s nominee, Cede & Co., through Olympia Trust Company. Such holders’ entitlements to our common shares will be recorded in their custodian banks’ or brokers’ records. Such holders may effect the transfer of their entitlements to our common shares through their custodian banks or brokers and will receive written confirmations of any purchase or sales of our common shares and any periodic account statements from such custodian banks or brokers.

 

· Directly registered shares held through Olympia Trust Company. Holders may directly hold their ownership interests in us in the form of uncertificated shares that will be registered in the names of such holders directly on the books of Olympia Trust Company. Holders will receive periodic account statements from Olympia Trust Company evidencing their holding of our common shares.

As a result of the Spin-off, Silver Bull expects the trading prices of Silver Bull shares at market open on                , 2021 to be lower than the trading prices at market close on                , 2021, because the trading prices will no longer reflect the value of the Arras business. See “Item 3. Key Information—Risk Factors—Risks Relating to the Spin-off” for more detail.

Treatment of Outstanding Silver Bull Options

Silver Bull stock options issued to employees and other service providers will remain outstanding following the Spin-off but will be adjusted to account for the Spin-off’s effect on the trading price of Silver Bull shares. The adjustment will be designed to maintain the same “spread” in the Silver Bull options (i.e., the difference between the exercise price and the fair market value of Silver Bull’s stock) both before and after the Spin-off. The exact adjustment mechanism has yet to be determined but may include a reduction in the exercise price per share, or an adjustment to both the exercise price per share and the number of Silver Bull shares subject to each outstanding option.

Treatment of Outstanding Silver Bull Warrants

Silver Bull intends to offer holders of outstanding Silver Bull warrants who exercise them after the Distribution the right to receive, instead of solely Silver Bull shares, one Silver Bull share and one Arras common share in exchange for the original exercise price, subject to compliance with applicable securities laws. In order to take advantage of this offer, a Silver Bull warrantholder, at the time of exercise, would be required to sign an amendment to the warrant that would (i) amend the consideration to be deliverable upon the warrant’s exercise to one Silver Bull share and one Arras share; (ii) waive the application of the warrant’s provision providing for an automatic adjustment to the exercise price to reflect the fair market value of the Arras shares distributed in the Distribution; and (iii) ensure that the issuance of Arras common shares to the Silver Bull warrantholder was in compliance with applicable securities laws. Holders of outstanding Silver Bull warrants who do not want to accept this offer, or are not able to do so due to applicable securities laws or other reasons, can instead exercise their warrants in accordance with their original terms, which provide for, among other things, an automatic adjustment to the exercise price effective immediately following the record date for the Spin-off to reflect the fair market value of the Arras shares distributed in the Distribution.

For example, if the total market capitalization of Silver Bull on the record date for the Spin-off were $32.3 million (based on the approximate market capitalization of Silver Bull on June 18, 2021) and the Silver Bull Board decided that the fair market value of the Arras shares distributed in the Distribution was $13.8 million (based on a Distribution of 34.2 million Arras shares and an assumed CDN$0.50 price per Arras share based on the subscription price in the Company’s private placement completed on April 1, 2021 (converted into U.S. dollars based on the foreign currency exchange rate as of June 18, 2021 (CDN$1.00 = US$0.8065)), then the new exercise price of the currently outstanding $0.59 exercise price Silver Bull warrants issued in October and November 2020 pursuant to the warrants’ automatic adjustment provision would be approximately $0.34 per share (i.e., $0.59 x ($32,300,000 −$13,800,000) / $32,300,000). This calculation of the adjusted exercise price of the Silver Bull warrants pursuant their automatic adjustment provision is meant for illustration purposes only and does not purport to show an estimate of the actual future adjusted exercise price of such warrants. This calculation is based on numerous assumed prices and share amounts. The actual price and share amounts may vary materially from those assumed for purposes of this illustrative calculation.

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Conditions to the Spin-off

We expect the Spin-off will be effective on the distribution date, provided that the following conditions shall have been satisfied or waived by Silver Bull:

· the Silver Bull Board providing final approval of all material aspects of the Spin-off;
· all corporate and other action necessary to execute, deliver and perform the Separation and Distribution Agreement and to consummate the transactions contemplated thereby by each of us and Silver Bull having been obtained;
· the SEC declaring this Form 20-F effective under the Exchange Act, and no stop order suspending the effectiveness of this Form 20-F being in effect and no proceedings for that purpose being pending before or threatened by the SEC;
· copies of this Form 20-F, or a notice of Internet availability thereof, having been mailed to record holders of Silver Bull shares as of the record date;
· any other actions necessary or appropriate under U.S. federal or state, Canadian federal or province, or other securities laws or blue sky laws having been taken or made;
· the receipt of all necessary government approvals required to consummate the Spin-off; and
· no order, injunction or decree issued by any governmental authority of competent jurisdiction or other legal restraint or prohibition preventing consummation of the Spin-off being in effect.

We are not aware of any material federal, foreign or state regulatory requirements with which we must comply, other than SEC rules and regulations, or any material approvals that we must obtain, other than the SEC’s declaration of the effectiveness of this Form 20-F, in connection with the Spin-off.

The fulfillment of these conditions will not create any obligation on Silver Bull’s part to effect the Distribution and complete the Spin-off, and Silver Bull has reserved the right to amend, modify or abandon any and all terms of the Spin-off and the related transactions at any time prior to the distribution date, at the direction of the Silver Bull Board. Silver Bull does not intend to notify its shareholders of any modifications to the terms or the conditions to the Spin-off that, in the judgment of the Silver Bull Board, are not material. To the extent that the Silver Bull Board determines that any such modifications materially change the terms and conditions of the Spin-off, Silver Bull will notify its shareholders in a manner reasonably calculated to inform them of such modifications with a press release, current report on Form 8-K or other similar means.

Canadian Securities Laws Matters

Silver Bull is a reporting issuer in the following jurisdictions in Canada: British Columbia, Alberta and Ontario. Shares of Silver Bull common stock currently trade on the TSX in Canada. Upon consummation of the Spin-off, Arras will not be a reporting issuer in Canada and its common shares will not be listed for trading on any exchange or market.

The distribution of Arras shares pursuant to the Spin-off will constitute a distribution of securities that is exempt from the prospectus requirements of Canadian securities legislation. The first trade in Arras shares in Canada will be a distribution for the purposes of Canadian securities laws and subject to prospectus requirements unless the following conditions are satisfied: (i) Arras is and has been a reporting issuer in a jurisdiction in Canada for the four months preceding the trade; (ii) such trade is not a “control distribution” as defined in National Instrument 45-102 - Resale of Securities of the Canadian Securities Administrators; (iii) no unusual effort is made to prepare the market or create a demand for those securities; (iv) no extraordinary commission or consideration is paid to a person or company in respect of the trade; and (v) if the selling security holder is an insider or officer of Arras, the insider or officer has no reasonable grounds to believe that Arras is in default of securities legislation. Accordingly, until all conditions listed above are satisfied, Arras shares may only be resold in Canada pursuant to an exemption from prospectus requirements.

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Material U.S. Federal Income Tax Consequences of the Spin-off

The receipt of our common shares pursuant to the Spin-off should be treated, for U.S federal income tax purposes, as a taxable distribution in an amount equal to the fair market value on the distribution date of the common shares received. This distribution will be treated as a dividend to the extent of the current and accumulated earnings and profits of Silver Bull, as determined for United States federal income tax purposes. To the extent that the amount of the distribution exceeds Silver Bull’s current and accumulated earnings and profits for the taxable year of the distribution, the distribution will first be treated as a tax-free return of capital, causing a reduction in the adjusted basis of the holder’s Silver Bull shares, and to the extent the amount of the distribution exceeds the holder’s adjusted tax basis, the excess will be treated as capital gain. While we reasonably anticipate Silver Bull not having any accumulated earnings and profits for the taxable year of the distribution, Silver Bull will likely have current earnings and profits for the taxable year of the distribution, and therefore the distribution of our common shares will be treated as a taxable dividend to the extent of such current (and any accumulated) earnings and profits. Silver Bull will not be able to determine the amount of the distribution that will be treated as a dividend until after the close of the taxable year of the Spin-off because its current year earnings and profits will be calculated based on its income for the entire taxable year in which the distribution occurs. However, based on current projections, it is reasonably expected that a portion of the distribution of our common shares should be treated as a return of capital rather than a dividend. The foregoing discussion is qualified in its entirety by the discussion set forth in “Item 10. Additional Information—Taxation—Material U.S. Federal Income Tax Considerations—Tax Consequences of the Spin-off.”

Material Canadian Income Tax Consequences of the Spin-off

For Canadian tax purposes, the Spin-off of Arras shares will be considered a dividend in kind on the Silver Bull shares to shareholder’s resident in Canada. Such shareholders will be required to include the fair market value of such shares in computing their income for a taxation.

A dividend in kind of the Arras shares paid in respect of the Silver Bull shares to a shareholder who is not a resident of Canada will not be subject to Canadian withholding tax or other income tax under the Income Tax Act (Canada). The foregoing discussion is qualified in its entirety be the discussion set forth in “Item 10. Additional Information—Taxation—Material Canadian Federal Income Tax Considerations.”

Reasons for Furnishing this Form 20-F

We are furnishing this Form 20-F solely to provide information to Silver Bull shareholders who will receive our common shares in the Spin-off. You should not construe this Form 20-F as an inducement or encouragement to buy, hold or sell any of our securities or any securities of Silver Bull. We believe that the information contained in this Form 20-F is accurate as of the date set forth on the cover. Changes to the information contained in this Form 20-F may occur after that date, and neither we nor Silver Bull undertakes any obligation to update the information except in the normal course of our respective public disclosure obligations and practices.

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ITEM 4A. UNRESOLVED STAFF COMMENTS.

Not applicable.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS.

Operating Results

For the period from inception on February 5, 2021 to April 30, 2021, the Company had a net loss of $563,061. The loss for this period is likely not indicative of the Company’s expected operations going forward as the Company’s exploration activities at the Beskauga Project have only recently commenced. Additionally, these costs include an allocation from Silver Bull of certain corporate-related general and administrative expenses that we would incur as a stand-alone company that we have not previously incurred. The allocation of these additional expenses may not be indicative of the actual expense that would have been incurred had we operated as a stand-alone company for the period presented.

Liquidity and Capital Resources

As of April 30, 2021, the Company had cash of $1,562,570. The source of this cash was from the completion of the Company’s private placement of 5,035,000 common shares at a price of $CDN 0.50 per share for gross proceeds of $CDN 2,517,500 on April 1, 2021. No placement agent or finder’s fees were paid in connection with the private placement. The Company incurred other offering costs associated with the private placement of $18,646.

In April 2021, the Arras Board approved an exploration budget for the Beskauga Property of $8.0 million for the period from April to December 2021, dependent upon the Company’s ability to raise additional funding. This exploration budget most significantly includes the undertaking of a 30,000-meter drilling program at Beskauga.

Additional financing will be required to advance the Company’s exploration projects in Kazakhstan. Management has successfully pursued equity financings in the past and believes that this alleviates any substantial doubt that the Company can continue operations for the next 12 months as a going concern. However, there is no assurance that management will be successful in pursuing these plans.

As future additional financing in the near term will likely be in the form of proceeds from issuances of equity securities, it is likely that there will be dilution to our existing shareholders. Moreover, we may incur fees and expenses in the pursuit of such financings, which will increase the rate at which our cash and cash equivalents are depleted.

Safe Harbor

This Form 20-F contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act and as defined in the Private Securities Litigation Reform Act of 1995. See “Cautionary Statement Regarding Forward-Looking Statements.”

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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.

Directors and Senior Management

Board of Directors

We are currently a wholly owned subsidiary of Silver Bull. Following the Spin-off, the Arras Board will be comprised of five seats, four of which will be filled by the current members of the Silver Bull Board. At the time of the Spin-off, a majority of the members of the Arras Board will be independent based on applicable Canadian securities laws and non-U.S. persons.

The following table sets forth certain summary information in respect of the current directors of the Company.

Name and
place of residence

Position(s)/title

Date first
became a director

Principal occupation(s)
for the past five years

Brian D. Edgar
Vancouver, British Columbia 		Director February 5, 2021 Corporate Director
Timothy T. Barry
Squamish, British Columbia 		Director, President and Chief Executive Officer February 5, 2021 Chief Executive Officer of Silver Bull (a mining company)
G. Wesley Carson
Vancouver, British Columbia 		Director April 1, 2021 Vice President, Mining Operations at Wheaton Precious Metals Corp. (since 2017); and Vice President, Project Development at Sabina Gold & Silver Corp. (from 2012 to 2017).
John A. McClintock
Vancouver, British Columbia 		Director April 1, 2021 President of McClintock Geological Management (a management services company)
Daniel J. Kunz
Boise, Idaho 		Director April 1, 2021 President and Chief Executive Officer of Prime Mining Corp. (a mining company) (since June 2020); and Managing Member of Daniel Kunz & Associates, LLC (an advisory and engineering services company) (since 2014).

 

Brian D. Edgar

Mr. Edgar has served as Chairman of the Silver Bull Board since April 2010. Mr. Edgar has broad experience working in junior and mid-size natural resource companies. He served as Dome’s President and Chief Executive Officer from February 2005 to April 2010, when Dome was acquired by Silver Bull. Further, Mr. Edgar served as a director of Dome (1998–2010), Lucara Diamond Corp. (2007–May 2020), BlackPearl Resources Inc. (2006–December 2018), and ShaMaran Petroleum Corp. (2007–June 2019). He has served as a director of Denison Mines Corp. since 2005 and of numerous public resource companies over the last 30 years. Mr. Edgar practiced corporate/securities law in Vancouver, British Columbia, Canada for 16 years.

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Timothy T. Barry

Mr. Barry has served as a director, President and Chief Executive Officer of Silver Bull since March 2011. From August 2010 to March 2011, he served as Silver Bull’s Vice President – Exploration. Between 2006 and August 2010, Mr. Barry spent five years working as Chief Geologist in West and Central Africa for Dome. During this time, he managed all aspects of Dome’s exploration programs and oversaw corporate compliance for Dome’s various subsidiaries. Mr. Barry also served on Dome’s board of directors. In 2005, he worked as a project geologist in Mongolia for Entree Gold, a company that has a significant stake in the Oyu Tolgoi mine in Mongolia. Between 1998 and 2005, Mr. Barry worked as an exploration geologist for Ross River Minerals Inc. on its El Pulpo copper/gold project in Sinaloa, Mexico, for Canabrava Diamonds Corporation on its exploration programs in the James Bay lowlands in Ontario, Canada, and for Homestake Mining Company on its Plutonic Gold Mine in Western Australia. He has also worked as a mapping geologist for the Geological Survey of Canada in the Coast Mountains, and as a research assistant at the University of British Columbia, where he examined the potential of CO2 sequestration in Canada using ultramafic rocks. Mr. Barry received a bachelor of science degree from the University of Otago in Dundein, New Zealand and is a Chartered Professional Geologist (CPAusIMM).

G. Wesley Carson

Mr. Carson, BASc., P.Eng., has over 20 years of experience in the mining industry and has held a variety of leadership roles in operations, project development and engineering with both junior and major mining companies, including multiple M&A integrations. Since June 2017, he has been the Vice President, Mining Operations at Wheaton Precious Metals Corp. From June 2012 to June 2017, Mr. Carson was the Vice President – Project Development with Sabina Gold & Silver Corp. He also worked with Thompson Creek Metals Company Inc. as Vice President and General Manager for the Mt. Milligan project in Central British Columbia from October 2010 to February 2012, and for Terrane Metals Corp. as its Director, Mining from November 2007 to November 2010. Prior to this, he worked for Cominco Ltd., Teck Corporation, Placer Dome Inc. and Barrick Gold Corporation in a variety of operating roles in both North America and Africa. Mr. Carson received his Bachelor of Applied Science, Mining and Mineral Process Engineering at the University of British Columbia, and is a registered Professional Engineer in the Province of British Columbia.

Daniel J. Kunz

Mr. Kunz has more than 35 years of experience in international mining, energy, engineering and construction, including in executive, business development, management, accounting, finance and operations roles. He has served as a member of the Silver Bull Board since April 2011. In June 2020, he was appointed President and Chief Executive Officer of Prime Mining Corp., a mine development company. Since 2014, he has been the managing member of Daniel Kunz & Associates, LLC, an advisory and engineering services company focused on the natural resources sector. From 2013 to 2018, he was the Chairman and Chief Executive Officer of Gold Torrent, Inc., a mine development company. In addition, Mr. Kunz is the founder, and from 2003 until he retired in April 2013 was the President and Chief Executive Officer and a director, of U.S. Geothermal, Inc., a renewable energy company that owns and operates geothermal power plants in Idaho, Oregon, and Nevada and was sold to Ormat Technologies, Inc. in 2018. Mr. Kunz was Senior Vice President and Chief Operating Officer of Ivanhoe Mines Ltd. from 1997 to October 2000, and served as its President and Chief Executive Officer and as a director from November 2000 to March 2003. He was part of the team that discovered Oyu Tolgoi, one of the world’s largest copper-gold deposits. From March 2003 to March 2004, Mr. Kunz served as President and Chief Executive Officer of China Gold International Resources Corp. Ltd. and served as a director from March 2003 to October 2009. Mr. Kunz was a founder of MK Resources LLC, formerly known as the NASDAQ-listed company MK Gold Corporation, and directed the company’s 1993 initial public offering as the President and Chief Executive Officer and a director. For 17 years, he held executive positions with NYSE-listed Morrison Knudsen Corporation (including Vice President and Controller). Mr. Kunz holds a Masters of Business Administration and a Bachelor of Science in Engineering Science. He is currently a director of Raindrop Ventures Inc., Prime Mining Corp., Greenbriar Capital Corp., and Gunpoint Exploration Ltd.

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John A. McClintock

Mr. McClintock has a significant amount of experience in all facets of the mineral exploration business, which has come from managing large exploration organizations. He has served as a member of the Silver Bull Board since February 2012. Since November 2005, he has served as the President of McClintock Geological Management, which provides ongoing management services to NorthIsle Copper and Gold Inc., of which he served as President, Chief Executive Officer and a director from October 2011 to September 2020. From February 2007 to November 2008, Mr. McClintock served as President and Chief Executive Officer of Savant Explorations Ltd., a publicly traded company on the TSX Venture Exchange. From January 2006 to February 2007, he served as President and COO of Canarc Resources Corp., where he negotiated, among other things, a large land purchase in Mexico. From November 2004 to December 2005, Mr. McClintock served as an Exploration Manager for BHP Group plc, where he ensured that the $80 million exploration budget focused on areas and commodities with maximum potential for corporate growth. He has served as a director of Blue Moon Zinc Corp. since May 2017 and as a director of NorthIsle Copper and Gold Inc. since October 2011. Mr. McClintock holds an MBA from Simon Fraser University and an undergraduate degree in geology, with honors, from the University of British Columbia. He is a member of the Professional Engineers of British Columbia, the Prospectors and Developers Association of British Columbia, and the Association of Mineral Exploration of British Columbia.

Public Company Directorships

The following directors currently serve on the board of directors of the public companies set out below:

Name

Public company directorship(s)

Brian D. Edgar Denison Mines Corp. and Silver Bull
Timothy T. Barry Silver Bull
G. Wesley Carson Prosper Gold Corp.
Daniel J. Kunz Greenbriar Capital Corp., Gunpoint Exploration Ltd., Prime Mining Corp., Raindrop Ventures Inc. and Silver Bull
John A. McClintock Blue Moon Zinc Corp., NorthIsle Copper and Gold Inc. and Silver Bull

 

Senior Management

The following table sets forth certain summary information in respect of our senior management as of the date of this Form 20-F.

Name and
place of residence

Position(s)/title

Principal occupation(s)
for the past five years

Timothy T. Barry
Squamish, British Columbia 		President and
Chief Executive Officer 		Chief Executive Officer of Silver Bull (a mining company)
Christopher Richards
Vancouver, British Columbia 		Chief Financial Officer Chief Financial Officer of Silver Bull (a mining company) (since September 2020); Vice President of Finance for Great Panther Mining Limited (a mining company) (from June 2018 until February 2020); self-employed senior financial consultant (January 2017 until May 2018); and Vice President of Finance and Corporate Secretary of Kyzyl Gold Ltd. (a mining company) (December 2013 until December 2016).

 

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Timothy T. Barry, President and Chief Executive Officer

See “—Directors and Senior Management—Board of Directors” above.

Christopher Richards, Chief Financial Officer

Mr. Richards was appointed as Silver Bull’s Chief Financial Officer effective as of September 28, 2020. Mr. Richards most recently served as the Vice President of Finance for Great Panther Mining Limited, a U.S. and Canadian dual-listed gold and silver producer, from June 2018 to February 2020. From January 2017 to May 2018, he was self-employed as a senior financial consultant, advising public and private companies in the mining and natural resources industries. Prior to that, Mr. Richards served as the Vice President of Finance and Corporate Secretary (December 2013–December 2016) and Group Controller (April 2009–November 2013) of Kyzyl Gold Ltd., a wholly owned subsidiary of London Stock Exchange-listed Polymetal International plc, engaged in the development of the Kyzyl Gold Mine located in Kazakhstan. From July 2015 to October 2016, he served as the Chief Financial Officer of TSX Venture Exchange-listed True North Gems Inc. Previously, Mr. Richards served as the Corporate Controller of U.S. and Canadian dual-listed NovaGold Resources Inc. and as a Senior Manager of Audit for KPMG LLP. He is a CPA (Chartered Professional Accountant, British Columbia), CA, and received a Bachelor of Business Administration degree from Simon Fraser University in 2000 and a certificate in mining studies from the University of British Columbia in 2014.

Arrangements Concerning Election of Directors; Family Relationships

We are not a party to, and are not aware of, any arrangements pursuant to which any our senior management members or directors was selected as such. In addition, there are no family relationships among our senior management members or directors.

Compensation

Directors and Senior Management

Because we are a newly incorporated entity, we have not previously provided any cash compensation to our directors or senior management. With the exception of G. Wesley Carson, who is not currently a director of Silver Bull, the board of directors of Arras will initially be the same as the Silver Bull Board. In addition, the management team of Arras will initially consist of the same individuals who serve as officers of Silver Bull. The following table presents, in the aggregate, all compensation that Silver Bull paid to those of our directors who served as directors of Silver Bull (in their capacities as directors) and to our senior management team members who served as officers of Silver Bull for the year ended October 31, 2020.

Compensation Expenses for the Year Ended October 31, 2020

 

Salary and related benefits

Pension, retirement and other similar benefits

Share-based compensation

Total

Non-executive directors as a group (2 persons) $52,000 $nil $nil $52,000
Senior management as a group (3 persons) 320,908 nil nil 320,908
Total $372,908 $nil $nil $372,908

 

In addition, the following table presents, in the aggregate, the allocated costs from Silver Bull of compensation expenses for our directors and senior management team members that we would incur as a stand-alone company for the period from inception on February 5, 2021 to April 30, 2021 (based on a 50/50 split of such expenses between Silver and us during the period). The allocation of these compensation-related expenses may not be indicative of the actual expense that would have been incurred had we operated as a stand-alone company for the period presented.

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Compensation Expenses for the Period from Inception on February 5, 2021 to April 30, 2021

 

Salary and related benefits

Pension, retirement and other similar benefits

Share-based compensation (1)

Total

Non-executive directors as a group (3 persons) $3,542 $nil $67,270 $70,812
Senior management as a group (3 persons) 60,693 nil 171,913 232,606
Total $64,235 $nil $239,183 $303,418

 

(1) In accordance with IFRS, the fair value of each stock option granted during the period was based on the grant date fair value of the vested portion of each award using the Black-Scholes option pricing model.

 

We will be required to disclose the compensation paid to our senior management on an individual basis in all annual reports on Form 20-F that we file with the SEC once that information is required to be disclosed under Canadian law or is otherwise publicly disclosed.

In order to minimize salaries to our senior management, Silver Bull will continue to incur these costs and will charge Arras for a portion of these costs on a pro-rata cost-recovery basis until our common shares are listed or trade on a stock exchange or other market or some other outside date to be agreed upon by Silver Bull and Arras. At that time, it is expected that separate employment agreements will be put in place, the terms of which may differ from the agreements currently in effect with Silver Bull. In the interim period, the salary amounts that will be charged to Arras will depend, in part, on how much time is spent by our senior management team on each of the Company’s and Silver Bull’s affairs.

Each of our independent directors is compensated CDN$25,000 per year, paid in quarterly installments, and is issued additional stock option grants for his services. In addition, the person serving as the Chair of the Audit Committee of the Arras Board receives an annual cash fee of CDN$5,000 (payable in quarterly installments), and the Compensation Committee Chair and Nominations and Corporate Governance Committee Chair receive an annual cash fee of CDN$2,500 each (payable in the same manner), in each case in consideration for its respective service as the chairs of such committees.

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Share-based Compensation

On April 15, 2021, the Arras Board approved the issuance to each of the following persons, in his capacity as a director and/or officer or employee of Arras, of non-qualified options to purchase Arras common shares under the Arras Minerals Corp. Equity Incentive Plan (the “Arras Equity Plan”) in the amounts set forth below:

Name and principal position   Number of Arras common shares underlying option award
Brian D. Edgar
Executive Chairman 		    800,000  
Timothy T. Barry
President and Chief Operating Officer 		    1,000,000  
Christopher Richards
Chief Financial Officer 		    500,000  

 

The options have a term of five years and an exercise price of CDN$0.50 per share. One-third of each grant will vest on each of the grant date and the first and second anniversaries of the grant date.

Also on April 15, 2021, each of the following independent directors, who are not officers of the Company, were issued in partial compensation for his services as a director options to purchase Arras common shares under the Arras Equity Plan in the amounts set forth below:

Name   Number of Arras common shares underlying option award
G. Wesley Carson     300,000  
Daniel J. Kunz     300,000  
John A. McClintock     300,000  

 

The options have a term of five years and an exercise price of CDN$0.50 per share. One-third of each grant vests on each of the grant date and the first and second anniversaries of the grant date.

Board Practices

On February 5, 2021, Brian Edgar and Timothy Barry were confirmed as the first directors of the Company to hold office until the Company’s next annual general meeting of shareholders or until the directors cease to hold office. On March 31, 2021, G. Wesley Carson, Daniel Kunz and John McClintock were confirmed as additional directors of the Company to hold office until the Company’s next annual general meeting of shareholders or until the directors cease to hold office.

Audit Committee

The Company has a separately designated standing Audit Committee. The following persons currently serve on our Audit Committee: Daniel Kunz (Chair) and John McClintock. The Board has not yet adopted a written charter for the Audit Committee.

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Compensation Committee

The Company’s Compensation Committee currently consists of John McClintock (Chair), Daniel Kunz and G. Wesley Carson. The Board has not yet adopted a written charter for the Compensation Committee.

Nominations and Corporate Governance Committee

The Company’s Nominations and Corporate Governance Committee currently consists of John McClintock, Daniel Kunz and G. Wesley Carson. The Board has not yet adopted a written charter for the Nominations and Corporate Governance Committee.

Employees

As of the date hereof, the Company has two employees, both of whom are geologists located at the Company’s project site in Kazakhstan. The officers of the Company are not formally employed by the Company but currently hold the same positions with Silver Bull, and Silver Bull is charging an allocation of its costs on a pro-rata cost recovery basis to the Company. The Company also relies on consultants and contractors to carry on its business activities and, in particular, to supervise and carry out mineral exploration at the Beskauga Property.

Share Ownership

Share Ownership of Directors and Management

The information below describes the beneficial ownership of our shares prior to and immediately after the completion of the Spin-off by each director and member of senior management of the Company.

We based the share amounts on such person’s beneficial ownership of Silver Bull shares on June 18, 2021, according to the Silver Bull share register and certain ownership disclosure notifications received by Silver Bull, giving effect to a distribution ratio of one Arras share for each Silver Bull share held by such person as of the close of business on the record date. Immediately following the Spin-off, we estimate that approximately 41,035,100 Arras shares will be issued and outstanding.

The following sets forth the beneficial ownership of Silver Bull shares by each director and member of senior management of the Company based on 33,827,367 Silver Bull shares outstanding and 41,035,100 Arras shares outstanding, in each case as of June 18, 2021.

    Pre- and
Post-Spin-off 		  Pre-Spin-off   Post-Spin-off
Holder   Silver Bull shares   Arras
shares 		  Arras
shares 		  Percentage Arras ownership
Brian D. Edgar (1)     1,499,266       316,666       1,334,432       3.23 %
Timothy T. Barry (2)     586,247       383,333       575,830       1.39 %
Daniel J. Kunz (3)     341,864       250,000       424,364       1.03 %
Christopher Richards (4)     24,000       186,666       202,666       *  
John A. McClintock (5)     122,739       105,000       132,239       *  
G. Wesley Carson (6)    

nil

      120,000       120,000      

*

 
Directors and senior management as a group (6 persons)     2,574,116       1,361,665       2,789,531       6.63 %

 

* The percentage of Arras common shares beneficially owned is less than one percent (1%).

 

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(1) Pre- and post-Spin-off holdings of Silver Bull shares (i) include (A) 768,164 shares of Silver Bull common stock held directly, (B) 375,000 stock options that are vested or will vest within 60 days, (C) warrants to purchase 106,500 shares of Silver Bull common stock, and (D) 249,602 shares of Silver Bull common stock owned by Tortuga Investments Corp., a company wholly owned by Mr. Edgar but (ii) exclude (A) 425,000 shares of Silver Bull common stock and (B) warrants to purchase 212,500 shares of Silver Bull common stock, in each case that are owned by 0893306 B.C. Ltd., a company wholly owned by Mr. Edgar’s spouse, and of which Mr. Edgar disclaims beneficial ownership. Pre-Spin-off holdings of Arras shares (i) include (A) 50,000 Arras common shares held directly and (B) 266,666 stock options that are vested or will vest within 60 days but (ii) exclude (A) 50,000 Arras common shares that are owned by Mr. Edgar’s spouse and of which Mr. Edgar disclaims beneficial ownership and (B) 533,334 stock options that will not vest within 60 days.
(2) Pre- and post-Spin-off holdings of Silver Bull shares (i) include (A) 192,497 shares of Silver Bull common stock held directly and (B) 393,750 stock options that are vested or will vest within 60 days but (ii) exclude (A) 319,000 shares of Silver Bull common stock and (B) warrants to purchase 159,500 shares of Silver Bull common stock, in each case that are owned by Mr. Barry’s spouse, and of which Mr. Barry disclaims beneficial ownership. Pre-Spin-off holdings of Arras shares include (i) 50,000 Arras common shares held directly and (ii) 333,333 stock options that are vested or will vest within 60 days but exclude 666,667 stock options that will not vest within 60 days.
(3) Pre- and post-Spin-off holdings of Silver Bull shares include (i) 174,364 shares of Silver Bull common stock held directly, (ii) 87,500 stock options that are vested or will vest within 60 days, and (iii) warrants to purchase 80,000 shares of Silver Bull common stock. Pre-Spin-off holdings of Arras shares include (i) 150,000 Arras common shares held directly and (ii) 100,000 stock options that are vested or will vest within 60 days but exclude 200,000 stock options that will not vest within 60 days.
(4) Pre- and post-Spin-off holdings of Silver Bull shares include (i) 16,000 shares of Silver Bull common stock held directly and (ii) warrants to purchase 8,000 shares of Silver Bull common stock. Pre-Spin-off holdings of Arras shares include (i) 20,000 Arras common shares held directly and (ii) 166,666 stock options that are vested or will vest within 60 days but exclude 333,334 stock options that will not vest within 60 days.
(5) Pre- and post-Spin-off holdings of Silver Bull shares include (i) 27,239 shares of Silver Bull common stock held directly, (ii) 87,500 stock options that are vested or will vest within 60 days, and (iii) warrants to purchase 8,000 shares of Silver Bull common stock. Pre-Spin-off holdings of Arras shares include (i) 5,000 Arras common shares held directly and (ii) 100,000 stock options that are vested or will vest within 60 days but exclude 200,000 stock options that will not vest within 60 days.(6) Pre-Spin-off holdings of Arras shares include (i) 20,000 Arras common shares held directly and (ii) 100,000 stock options that are vested or will vest within 60 days but exclude 200,000 stock options that will not vest within 60 days.

 

To the extent our directors, officers and employees own Silver Bull shares as of the close of business on the record date, they will participate in the Spin-off on the same terms as other holders of Silver Bull shares.

Except as otherwise noted, each person or entity identified above has sole voting and investment or dispositive power with respect to the securities they hold.

Prior to the Spin-off, approximately 88% of our issued share capital is owned by Silver Bull.

As of April 15, 2021, based on the Silver Bull share register and excluding treasury shares, approximately 43.4% of our outstanding shares are expected to be held of record by residents of the United States immediately following the Spin-off.

Beneficial ownership is determined in accordance with the rules and regulations of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, we have included shares that such person has the right to acquire within 60 days, including through the exercise of any option, warrant or other right or the conversion of any other security. These shares, however, are not included in the computation of the percentage ownership of any other person.

We are not aware of any arrangement that may, at a subsequent date, result in a change of our control.

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Compensation Plans

Arras Minerals Corp. Equity Incentive Plan

As of April 30, 2021, we had one formal equity compensation plan under which equity securities were authorized for issuance to our officers, directors, employees and consultants: the Arras Equity Plan. The maximum number of shares of Arras issuable pursuant to grants made under the Arras Equity Plan, together with all other security-based compensation arrangements of Arras, is 10.0% of the total outstanding shares of Arras from time to time or such other number as may be approved by any applicable stock exchange and the shareholders of Arras from time to time, subject to adjustments as provided under the Arras Equity Plan. As of April 30, 2021, there were 4,103,510 Arras common shares reserved for issuance under the Arras Equity Plan. As of April 30, 2021, options issued under the Arras Equity Plan were outstanding to acquire 4,160,000 Arras common shares, which exceeds the number of shares reserved for issuance under the Arras Equity Plan by 56,490 shares. In accordance with the Arras Equity Plan, the issuance of options to purchase 56,490 Arras common shares will need to be approved by Arras shareholders.

The Arras Equity Plan was adopted and approved by the Arras Board on April 15, 2021.

Under the Arras Equity Plan, Arras may grant incentive or nonqualified stock options, restricted share units (“RSUs”) or performance share units (“PSUs”), and restricted stock to employees (including officers), directors, and consultants of Arras or any subsidiary thereof.

The maximum number of shares of Arras that may be reserved for issuance to any one participant under the Arras Equity Plan, together with all other security-based compensation arrangements of Arras, is 5.0% of the total issued and outstanding shares of Arras from time to time. The maximum number of shares of Arras that may be issued to a director or officer of Arras or other “insider” within any one-year period, or that may be issuable to such persons at any time, under the Arras Equity Plan, or when combined with all other security-based compensation arrangements of Arras, is 10.0% of the total issued and outstanding shares of Arras from time to time.

For so long as Arras common shares are listed or trade on a stock exchange or other market, options granted under the Arras Equity Plan must have an exercise price that is not less than 100% of the “fair market value” on the grant date. With respect to any incentive stock options granted to a person owning more than 10.0% of the total voting securities of Arras or certain parent or subsidiary corporations, the exercise price of such options must be at a price of not less than 110% of the fair market value on the grant date, and the exercise period of such options must not exceed five years. Options may be exercised on a cash or cashless basis. Unless otherwise designated by the board of directors of Arras in the applicable grant agreement, one-third of the options granted under the Arras Equity Plan must vest on each of the grant date and the first and second anniversaries of the grant date, subject to acceleration in certain circumstances. The exercise period of any option must not exceed 10 years from the grant date. Subject to the terms of the applicable grant agreement and the board of directors’ discretion, upon the termination of an optionholder’s employment or other relationship with Arras, including as a result of death or disability, outstanding options held by such person are subject to accelerated expiry, as follows: (i) upon the death or disability of an optionholder, vested options shall continue to be exercisable for 12 months while unvested options shall be forfeited; (ii) upon a resignation from Arras by an optionholder or termination of an optionholder without cause, vested options shall continue to be exercisable for 90 days while unvested options shall be forfeited; and (iii) upon the termination of an optionholder for cause, all outstanding options (vested or unvested) shall be forfeited.

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Settlement of RSUs and PSUs must be made by the issuance of one share for each RSU or PSU being settled, a cash payment equal to the market price on the vesting date of the RSUs or PSUs being settled, or a combination of shares and cash, all as determined by the board of directors of Arras or as specified in the applicable grant agreement. Unless the applicable grant agreement specifies that RSUs and PSUs must be settled through the issuance of shares, settlement will occur upon or as soon as reasonably practicable following vesting and, in any event, on or before December 31 of the third year following the year in which the participant performed the services to which the grant of RSUs or PSUs relates. Subject to the terms of the applicable grant agreement and the board of directors’ discretion, upon the termination of the employment or other relationship with Arras, including as a result of death or disability, of a holder of RSUs or PSUs, all unvested entitlements shall be forfeited.

Unless otherwise specified in the grant agreement in respect of a particular award, awards granted pursuant to the Arras Equity Plan are not assignable other than by testamentary disposition or the laws of intestate succession.

The Arras Equity Plan, and any grant made pursuant to the Arras Equity Plan, may be amended without approval of the Arras shareholders, except (i) no amendment to the Arras Equity Plan or any grant made pursuant to the Arras Equity Plan may be made without the consent of a participant in the Arras Equity Plan if it adversely alters or impairs the rights of such participant in respect of any previous grant to such participant; (ii) Arras shareholder approval will be required to (A) increase the maximum number of shares issuable pursuant to the Arras Equity Plan, (B) reduce the exercise price of an outstanding option, except as permitted by the Arras Equity Plan, (C) extend the maximum term of any grant made under the Arras Equity Plan, except as permitted by the Arras Equity Plan, (D) amend the assignment provisions of the Arras Equity Plan, (E) increase the number of shares issuable to “insiders” of Arras or removing the restriction on “insider” participation in the Arras Equity Plan, (F) include other types of equity compensation involving the issuance of shares of Arras under the Arras Equity Plan or (G) amend the amendment provisions of the Arras Equity Plan or to grant additional powers to the board of directors of Arras to amend the Arras Equity Plan without shareholder approval.

The following table sets forth the outstanding equity awards for each of the following officers of Arras at April 30, 2021.

Outstanding Equity Awards at April 30, 2021

    Number of securities underlying unexercised options (1)   Option exercise   Option expiration
Name   Exercisable   Unexercisable   price (2)   date
Timothy T. Barry     333,333       666,667     $ 0.40     4/15/2026
Christopher Richards     166,666       333,334     $ 0.40     4/15/2026
Brian D. Edgar     266,666       533,334     $ 0.40     4/15/2026

 

(1) Options vest in three equal installments: one-third on the grant date, one-third on the first anniversary of the grant date and one-third on the second anniversary of the grant date.
(2) Exercise price of CDN$0.50 was converted based on the foreign currency exchange rate as of April 15, 2021 (CDN$1.00 = US$0.7986).

The following table gives information about our common shares that may be issued upon the exercise of options, warrants and rights under our compensation plans as of April 30, 2021.

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Equity Compensation Plan Information

Plan category   Number of securities to be issued upon exercise of outstanding options, warrants and rights   Weighted average exercise price of outstanding options, warrants and rights   Number of securities remaining available for future issuance
Equity compensation plans approved by security holders     —       $ —         —    
Equity compensation plans not approved by security holders     4,160,000 (1)   $ 0.40 (2)     nil  
Total     4,160,000     $ 0.40       nil  
                         

 

(1) The number of securities to be issued upon exercise of outstanding options, warrants and rights exceeds the number of shares reserved for issuance under the Arras Equity Plan by 56,490 shares. In accordance with the Arras Equity Plan, the issuance of options to purchase 56,490 Arras common shares will need to be approved by Arras shareholders.
(2) Exercise price of CDN$0.50 was converted based on the foreign currency exchange rate as of April 15, 2021 (CDN$1.00 = US$0.7986).

Arras Minerals Corp. Management Retention Bonus Plan

On April 15, 2021, the Arras Board adopted and approved the Arras Minerals Corp. Management Retention Bonus Plan (the “Arras Retention Plan”) in order to encourage the retention of the management team of Arras amidst the mining industry’s highly competitive market for talent and to align the team’s interests with those of the shareholders of Arras.

Pursuant to the Arras Retention Plan, Arras will pay cash bonuses to each of the following persons in the amounts set forth in the following table upon Arras reaching a market capitalization target for five consecutive trading days as set forth in the table (it being understood that that the common shares of Arras are not currently listed or posted for trading on any stock exchange or market):

Name and

principal position

  CDN$250 million market capitalization   CDN$500 million market capitalization   CDN$1 billion market capitalization   Total bonus opportunity
Brian D. Edgar
Executive Chairman 		  CDN$750,000   CDN$750,000   CDN$1,500,000   CDN$3,000,000
Timothy T. Barry
President and Chief Operating Officer 		  CDN$1,125,000   CDN$1,125,000   CDN$2,250,000   CDN$4,500,000
Christopher Richards
Chief Financial Officer 		  CDN$375,000   CDN$375,000   CDN$750,000   CDN$1,500,000

 

The Arras Retention Plan further provides that if Arras is the subject of a successful takeover bid that exceeds CDN$250 million, Arras must pay to Mr. Edgar, Mr. Barry, and Mr. Richards cash bonuses equal to 0.45%, 0.30%, and 0.15%, respectively, of the takeover bid amount, less any cash bonuses that may have previously been paid to such persons pursuant to the market capitalization targets noted above. The market capitalization targets or takeover bid must be achieved or completed by April 15, 2027 in order for any officer or employee of Arras to earn the applicable bonus payment described above. Any bonus payable in the future to an officer or employee of Arras will be cancelled (subject to the discretion of the board of directors of Arras) if such officer or employee is not employed directly or indirectly by Arras when such bonus is earned and becomes payable. If Arras lacks sufficient funds to pay any cash bonus under the Arras Retention Plan, then compounded interest at 5.0% per annum will accrue until such bonus plus interest is fully paid, provided that Arras may elect to make any bonus payment under the Arras Retention Plan in the form of Arras common shares, with such shares to be valued, for the purpose of calculating the number of shares to be issued, at the 20-trading day volume-weighted average price on a trading market as of the day prior to the issuance of such shares, less 5.0%.

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ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS.

Major Shareholders

The information below describes the beneficial ownership of our shares prior to and immediately after the completion of the Spin-off by each person or entity that we know beneficially owns or immediately following the Spin-off will (based on the assumptions described below), beneficially own 5% or more of our shares.

We based the share amounts on such person’s beneficial ownership of Silver Bull shares on June 18, 2021, according to the Silver Bull share register and certain ownership disclosure notifications received by Silver Bull, giving effect to a distribution ratio of one Arras share for each Silver Bull share held by such person as of the close of business on the record date. Immediately following the Spin-off, we estimate that approximately                 Arras shares will be issued and outstanding.

There is no person or entity that we know that beneficially owns 5% or more of our shares based on 33,827,367 Silver Bull shares outstanding and 41,035,100 Arras shares outstanding, in each case as of June 18, 2021.

Related Party Transactions

On March 19, 2021, Silver Bull transferred its Kazakh assets to the Company pursuant to the terms of the APA in exchange for the issuance of 36,000,000 common shares of the Company to Silver Bull. The transferred assets included an option agreement with respect to the Beskauga Property, a joint venture agreement with respect to the Stepnoe and Ekidos properties and loans payable by Ekidos Minerals LLP (“Ekidos LLP”) to Silver Bull. See “Item 4. Information on the Company—History and Development of the Company” for further details regarding the APA and transferred assets.

In order to minimize salaries and office-related overhead costs, Silver Bull has incurred and will continue to incur these costs and charges Arras for a portion of these costs on a pro-rata cost-recovery basis until our common shares are listed or trade on a stock exchange or other market, or some other outside date to be agreed upon by Silver Bull and Arras. At that time, it is expected that separate employment agreements will be put in place, and a formal service agreement will be completed for common office-related overhead costs. From the period of inception on February 5, 2021 to April 30, 2021, Silver Bull invoiced the Company $118,668 for such costs.

Prior to completion of the Spin-off, we intend to enter into a Separation and Distribution Agreement and possibly other agreements with Silver Bull related to the Distribution and the Spin-off. The Separation and Distribution Agreement and any other agreements will govern the relationship between us and Silver Bull up to and after completion of the Spin-off, including the treatment of certain contracts and outstanding Silver Bull warrants, among other items.

Interests of Experts and Counsel

Not applicable.

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ITEM 8. FINANCIAL INFORMATION.

Consolidated Statements and Other Financial Information

Please refer to pages F-1 through F-22 of this Form 20-F.

Significant Changes

A discussion of significant changes in our business can be found under “Item 4. Information on the Company—History and Development of the Company” and “Item 5. Operating and Financial Review and Prospects—Operating Results.”

ITEM 9. THE OFFER AND LISTING.

Offer and Listing Details

Our common shares are being distributed by Silver Bull to its shareholders. Our common shares do not have any price history.

Plan of Distribution

Not applicable.

Markets

No securities of the Company will be listed or posted for trading on any stock exchange or market upon consummation of the Spin-off. Until our common shares are listed or posted for trading on a stock exchange or other market, the Arras shares distributed to Silver Bull shareholders will be illiquid and shareholders may have difficulty selling their Arras shares.

We plan to apply to have our common shares listed on the TSX Venture Exchange. If we fail to list our common shares on the TSX Venture Exchange or another market, the liquidity for our common shares may be significantly impaired, which may significantly decrease the value of our common shares.

Selling Shareholders

Not applicable.

Dilution

Not applicable.

Expenses of the Issue

Not applicable.

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ITEM 10. ADDITIONAL INFORMATION.

Share Capital

Our authorized share capital consists of an unlimited number of common shares without par value. As of June 18, 2021, we had 41,035,100 common shares issued and outstanding. On the record date, we had                 common shares issued and outstanding. We currently have only one class of issued and outstanding shares, which have identical rights in all respects and rank equally with one another.

The summary below of the rights, privileges, restrictions and conditions attaching to our common shares is subject to and qualified in its entirety by reference to our articles, which is incorporated by reference as an exhibit to this Form 20-F, and will be available under our profile on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.

Common Shares

All of our common shares rank equally as to voting rights, participation in a distribution of the assets of the Company on a liquidation, dissolution or winding-up of the Company and entitlement to any dividends declared by the Company. The holders of our common shares are entitled to receive notice of, and to attend and vote at, all meetings of shareholders (other than meetings at which only holders of another class or series of shares are entitled to vote). Each common share carries the right to one vote. In the event of the liquidation, dissolution or winding-up of the Company, or any other distribution of the assets of the Company among its shareholders for the purpose of winding-up its affairs, the holders of our common shares will be entitled to receive, on a pro rata basis, all of the assets remaining after the payment by the Company of all of its liabilities. The holders of our common shares are entitled to receive dividends as and when declared by the Arras Board in respect of the common shares on a pro rata basis.

Any alteration of the rights, privileges, restrictions and conditions attaching to our common shares under the Company’s articles must be approved in accordance with the articles of the Company and the Business Corporations Act (British Columbia).

For further information on our shares, see “—Memorandum and Articles of Association” below.

Memorandum and Articles of Association

Set out below is a description of certain provisions of our Articles of Incorporation (our “Articles”) that are relevant to your ownership of our shares, as well as related provisions of the Business Corporations Act (British Columbia) (as currently in effect) (the “Act”). This description is only a summary and does not purport to be complete and is qualified by reference to the full text of the articles, which is incorporated by reference as an exhibit to this Form 20-F.

Incorporation

The Company was incorporated under the Act on February 5, 2021. Our British Columbia incorporation number is BC1287773.

Objects and Purposes of Our Company

Our Articles do not contain a description of the Company’s objects and purposes. We are entitled under the Act to carry on all lawful businesses which can be carried on by a natural person.

Conflicts of Interest and Director Compensation

The directors of the Company manage and supervise the management of the affairs and business of the Company and have authority to exercise all such powers of the Company as are not, under the Act or by our Articles, required to be exercised by the Company’s shareholders.

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Under our Articles, any director or senior officer who holds any office or possesses any property, right or interest that could result, directly or indirectly, in the creation of a duty or interest that materially conflicts with that individual’s duty or interest as a director or senior officer, must disclose the nature and extent of the conflict as required by the Act. Such director or senior officer that has a disclosable interest in a contract shall be liable to account to the Company for any profits that accrue to the director or senior officer under or as a result of the contract or transaction unless disclosure is made thereof and the contract or transaction is approved in accordance with the provisions of the Act. A director is not allowed to vote on any transaction or contract with the Company in which he or she has a disclosable interest unless all directors have a disclosable interest in that transaction or contract, in which case all of these directors may vote on such resolution.

The directors are entitled to the remuneration for acting as directors, if any, as the directors may from time to time determine, or, if the directors so decide, as determined by the shareholders of the Company. If any director performs any professional or other services for the Company that in the opinion of the directors are outside the ordinary duties of a director, or if any director is otherwise specially occupied in or about the Company’s business, he or she may be paid remuneration fixed by the directors, or, at the option of that director, fixed by a resolution passed at a meeting of shareholders by a simple majority (an “ordinary resolution”), and such remuneration may be either in addition to, or in substitution for, any other remuneration that he or she may be entitled to receive. A director or senior officer does not hold a disclosable interest in a contract or transaction merely because the contract or transaction relates to the remuneration of the director or senior officer in that person’s capacity as director, officer, employee or agent of the Company or of an affiliate of the Company.

Borrowing Powers

Our Articles provide that, if authorized by the Arras Board, the Company may:

· borrow money in the manner and amount, on the security, from the sources and on the terms and conditions that the Arras Board considers appropriate;
· issue bonds, debentures and other debt obligations either outright or as security for any liability or obligation of the Company or any other person and at such discounts or premiums and on such other terms as the Arras Board considers appropriate;
· guarantee the repayment of money by any other person or the performance of any obligation of any other person; and
· mortgage, charge, whether by way of specific or floating charge, grant a security interest in, or give other security on, the whole or any part of the present and future assets and undertaking of the Company.

Qualifications of Directors

Under our Articles, a director is not required to hold common shares as qualification for his or her office but must be qualified as required by the Act to become, act or continue to act as a director. There are no age limit requirements pertaining to the retirement or non-retirement of directors of the Company.

Share Rights

See “Share Capital” in Item 10 of this Form 20-F for a summary of our authorized capital and the rights attached to our common shares.

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Procedures to Alter Share Rights 

Our Articles state that, subject to compliance with the Act, the Company may, by a resolution passed at a meeting of shareholders by at least two-thirds of the votes cast on the resolution (a “special resolution”), (a) create one or more classes or series of shares or, if none of the shares of a class or series of shares are allotted or issued, eliminate that class or series of shares; (b) increase, reduce or eliminate the maximum number of shares that the Company is authorized to issue out of any class or series of shares or establish a maximum number of shares that the Company is authorized to issue out of any class or series of shares for which no maximum is established; (c) subdivide or consolidate all or any of its unissued, or fully paid issued, shares; (d) if the Company is authorized to issue shares of a class of shares with par value: (i) decrease the par value of those shares; or (ii) if none of the shares of that class of shares are allotted or issued, increase the par value of those shares; (e) change all or any of its unissued, or fully paid issued, shares with par value into shares without par value or all or any of its unissued shares without par value into shares with par value; (f) alter the identifying name of any of its shares; (g) otherwise alter its shares or authorized share structure when required or permitted to do so by the Act; (h) create special rights or restrictions for, and attach those special rights or restrictions to, the shares of any class or series of shares, whether or not any or all of those shares have been issued; or (i) vary or delete any special rights or restrictions attached to the shares of any class or series of shares, whether or not any or all of those shares have been issued. Pursuant to our Articles, if the Act does not specify the type of resolutions and the Articles do not specify another type of resolution, the Company may, by special resolution, alter the Articles.

Meetings

Each director holds office until our next annual general meeting or until his or her office is earlier vacated in accordance with our Articles or with the provisions of the Act. A director appointed or elected to fill a vacancy on the Arras Board also holds office until our next annual general meeting. The Articles provide that our annual meetings of shareholders must be held at least once in each calendar year and not more than 15 months after the last annual general meeting at such time and place as the Arras Board may determine. The Company’s directors may, at any time upon proper notice, call a meeting of our shareholders. Pursuant to the Act, shareholders who hold in the aggregate at least five percent of our issued shares that carry the right to vote at a general meeting may, in accordance with the Act, requisition a general meeting of shareholders for the purposes stated in the requisition. Our Articles state that in addition to those persons who are entitled to vote at a meeting of the shareholders, the only other persons entitled to be present at the meeting are the directors, the president (if any), the secretary (if any), the assistant secretary (if any), any lawyer for the Company, the auditor of the Company and any persons invited to be present at the meeting by the directors. An extraordinary meeting of shareholders may be called at any time upon proper notice for the transaction of any business the general nature of which is specified in the notice calling the meeting. Under our Articles, the quorum for the transaction of business at a meeting of shareholders is two persons who are, or who represent by proxy, shareholders who, in the aggregate, hold at least 5% of the issued shares entitled to be voted at the meeting. If there is only one shareholder entitled to vote at a meeting of shareholders, the quorum is that shareholder, present in person or by proxy.

Limitations on Ownership of Securities

Except as provided in the Investment Canada Act (Canada) (the “Investment Canada Act”), there are no limitations specific to the rights of non-Canadians to hold or vote our common shares under the laws of Canada or British Columbia or in the Company’s charter documents.

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Change in Control

There are no provisions in our Articles or in the Act that would have the effect of delaying, deferring or preventing a change in the control of the Company, and that would operate only with respect to a merger, acquisition, arrangement or corporate restructuring involving the Company or its subsidiaries.

Ownership Threshold

Our Articles and the Act do not contain any provisions governing the ownership threshold above which shareholder ownership must be disclosed.

Material Contracts

For information concerning our material contracts, please refer to the following sections in this Form 20-F:

Section

Material Contract(s)

“Item 4. Information on the Company—History and Development of the Company”

·         the APA

·         the Beskauga Option Agreement

·         the Stepnoe and Ekidos JV Agreement

·         the SVB Loans

·         the Subscription Agreements

“Item 6. Directors, Senior Management and Employees—Share Ownership—Compensation Plans”

·         the Arras Equity Plan

·         the Arras Retention Plan

“Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions” ·         the Separation and Distribution Agreement *

 

*       To be provided by amendment to this Form 20-F.

 

Exchange Controls

We are not aware of any laws, decrees or regulations in Canada relating to restrictions on the export or import of capital, or affecting the remittance of interest, dividends or other payments to non-resident holders of our common shares.

Taxation

Material U.S. Federal Income Tax Considerations

The following is a discussion of certain U.S. federal income tax consequences to the U.S. and Non-U.S. Holders (each as defined below) of the receipt of our common shares in the Spin-off, and, in the case of U.S. Holders, of the ownership and disposition of such common shares. This discussion is not a complete analysis or listing of all of the possible tax consequences of such transactions and does not address all tax considerations that might be relevant to particular beneficial owners of our common shares in light of their personal circumstances or to persons that are subject to special tax rules. In particular, this description of the material U.S. federal income tax consequences does not address the tax treatment of special classes of beneficial owners of Silver Bull shares that will become beneficial owners of our common shares, such as:

· financial institutions;
· regulated investment companies;

 

 

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· real estate investment trusts;
· subchapter S corporations;
· tax exempt entities;
· insurance companies;
· persons that do not hold their Silver Bull shares, or will not hold our common shares, as capital assets, within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the “Code”);
· persons holding Silver Bull shares, or will hold our common shares, as part of an integrated or conversion transaction or a constructive sale or a straddle;
· persons that own, have owned or will own (directly, indirectly, or by attribution) 10% or more of the total combined voting power or value of the outstanding common stock of Silver Bull or of our outstanding common shares;
· U.S. expatriates;
· dealers or traders in securities; or
· a person whose functional currency is not the U.S. dollar.

This summary does not address the alternative minimum tax, U.S. federal estate and gift tax consequences or tax consequences under any state, local or non-U.S. laws.

For purposes of this discussion, a person is a “U.S. Holder” if it is a beneficial owner of Silver Bull shares that receives our common shares in the Spin-off by reason of holding such Silver Bull shares that is: (1) an individual citizen or resident alien of the United States for U.S. federal income tax purposes; (2) a corporation, or other entity treated as a corporation for U.S. federal income tax purposes, created or organized under the laws of the United States, any state thereof, or the District of Columbia; (3) an estate the income of which is subject to U.S. federal income taxation regardless of its source; or (4) a trust (A) if a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have authority to control all substantial decisions of the trust or (B) that has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person.

For purposes of this discussion, a Non-U.S. Holder means a beneficial owner of Silver Bull shares that receives our common shares in the Spin-off by reason of holding such Silver Bull shares that is neither a U.S. Holder nor a partnership (or other entity treated as a partnership for U.S. federal income tax purposes).

If a partnership, or other pass through entity or arrangement treated as a partnership for U.S. federal income tax purposes, is a beneficial owner of Silver Bull shares or will be the beneficial owner of our common shares as a result of the Spin-off, the U.S. federal income tax consequences to the partners (or other owners) will generally depend upon the status of the partners (or other owners) and the activities of the entity. Partners (or other owners) of a partnership or other pass through entity that holds Silver Bull shares, or that will hold our common shares as a result of the Spin-off, should consult with their tax advisors regarding the tax consequences of the receipt of our common shares in the Spin-off and of owning and disposing of such common shares.

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The following discussion is based upon the Code, U.S. judicial decisions, administrative pronouncements and existing and proposed Treasury Regulations, all as in effect as of the date hereof. All of the preceding authorities are subject to change, possibly with retroactive effect, so as to result in U.S. federal income tax consequences different from those discussed below. We have not requested, and will not request, a ruling or other guidance from the U.S. Internal Revenue Service (the “IRS”) with respect to any of the U.S. federal income tax consequences described below, and as a result there can be no assurance that the IRS will not disagree with or challenge any of the conclusions described herein.

The following discussion is for general information only and is not intended to be, nor should it be construed to be, legal or tax advice to any beneficial owner of Silver Bull shares or our common shares and no opinion or representation with respect to the U.S. federal income tax consequences to any such beneficial owner is given. Holders of Silver Bull shares and prospective holders of our common shares to be received in the Spin-off are urged to consult their tax advisors as to the particular consequences to them under U.S. federal, state and local, and any applicable non-U.S., tax laws of the receipt of our common shares in the Spin-off and of owning and disposing of such common shares.

Tax Consequences of the Spin-off

Consequences to U.S. Holders

A U.S. Holder who receives our common shares pursuant to the Spin-off will be considered to have received a taxable distribution in an amount equal to the fair market value on the distribution date of such common shares. This distribution will be treated as a dividend, taxable as ordinary income, to the extent of such holder’s share of the current and accumulated earnings and profits of Silver Bull, as determined for United States federal income tax purposes. To the extent that the amount of the distribution exceeds Silver Bull’s current and accumulated earnings and profits for the taxable year of the distribution, the distribution will first be treated as a tax-free return of capital, causing a reduction in the adjusted basis of such holder’s Silver Bull common stock, and to the extent the amount of the distribution exceeds such holder’s adjusted tax basis, the excess will be taxed as capital gain recognized on a sale or exchange of the U.S. Holder’s Silver Bull common stock.

Silver Bull will not be able to determine the amount of the distribution that will be treated as a dividend until after the close of the taxable year of the Spin-off, because its current year earnings and profits will be calculated based on its income for the entire taxable year in which the distribution occurs. In addition to Silver Bull’s operating results for that year, which will not include the earnings and expenses of the Arras business after the separation, other factors that are not knowable at this time will affect Silver Bull’s earnings and profits for the taxable year of the Spin-off. Those factors include the extent, if any, to which the value of Arras at the time of the Spin-off exceeds Silver Bull’s tax basis in Arras, resulting in recognition of a gain that will increase Silver Bull’s earnings and profits. However, based on current projections, it is reasonably expected that a portion of the distribution should be treated as a return of capital rather than a taxable dividend. Silver Bull currently intends to cause its shareholders to be provided with a determination of the portion of the distribution constituting a taxable dividend as soon as practicable after its earnings and profits for the taxable year in which the distribution occurs are calculated. This information may not be available until after U.S. holders file their income tax returns for that taxable year, and such U.S. holders may need to file amended tax returns to reflect the amount of the taxable dividend as finally determined.

The amount of the distribution treated as a dividend received by non-corporate U.S. Holders generally will be “qualified dividend income” subject to reduced rates of U.S federal income tax. The amount of any dividend received by corporate U.S. Holders generally will be eligible for the dividends received deduction allowed to corporations under the Code. In either case, however, U.S. Holders that have not met a minimum holding period requirement with respect to their Silver Bull shares during which they are not protected from the risk of loss or that elect to treat the dividend income as “investment income” will not be eligible for the reduced rates of taxation available to non-corporate U.S. Holders or the dividends received deduction available to corporate U.S. Holders. In addition, neither the rate reduction nor the dividends received deduction will apply if the recipient is obligated to make related payments with respect to positions in substantially similar or related property. This disallowance applies even if the minimum holding period requirement has been met. U.S. Holders should consult their own tax advisors regarding the application of these rules to their particular circumstances.

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To the extent that the distribution of our common shares constitutes an “extraordinary dividend” with respect to a particular U.S. Holder, special rules may apply. In general, a dividend constitutes an “extraordinary dividend” if the amount of the dividend exceeds 10% of that U.S. Holder’s tax basis in its stock. For purposes of this calculation, only the portion of a distribution treated as a dividend, rather than the full amount of the distribution, is taken into account. If the portion of the distribution treated as a dividend constitutes an extraordinary dividend to a corporate U.S. holder that both (i) claimed a dividends-received deduction with respect to the distribution and (ii) held its Silver Bull shares for two years or less, such U.S. holder will reduce its tax basis in its Silver Bull shares by an amount determined by reference to the dividends received deduction claimed. If any corporate U.S. Holder’s basis would be reduced below zero as a result of these rules, any excess would be treated as capital gain. In addition, if the portion of the distribution treated as a dividend qualifies as an extraordinary dividend to a non-corporate U.S. holder who had claimed a reduced rate for qualified dividend income on the distribution, such non-corporate U.S. holder may be required to treat a portion of any loss on a subsequent sale of its Silver Bull shares as long-term capital loss, regardless of its actual holding period.

A U.S. Holder will have a basis in our common shares received in the Spin-off equal to the fair market value of such common shares on the distribution date, and the holding period for such common shares received in the Spin-off will begin on the distribution date.

In general, information reporting will apply to the distribution of our common shares to a U.S. Holder within the United States (and in certain cases, outside the United States), unless such holder is an exempt recipient.

Backup withholding may apply to the distribution of our common shares to a U.S. Holder that fails to provide a taxpayer identification number or certification of other exempt status. If backup withholding applies to the distribution of our common shares to a U.S. Holder, the applicable withholding agent will be required to remit any such backup withholding in cash to the IRS. Depending on the circumstances, the applicable withholding agent may obtain the funds necessary to remit such backup withholding by asking the U.S. Holder to provide the funds, by using funds in the U.S. Holder’s account with the applicable withholding agent or by selling (on the U.S. Holder’s behalf) all or a portion of our common shares received by the U.S. Holder in the Spin-off. Backup withholding is not an additional tax, and any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against the U.S. Holder’s U.S. federal income tax liability provided the required information is timely furnished to the IRS.

Consequences to Non-U.S. Holders

A Non-U.S. Holder who receives our common shares pursuant to the Spin-off will be considered to have received a taxable distribution in an amount equal to the fair market value on the distribution date of such common shares. This distribution will be treated as a dividend to the extent of such holder’s share of the current and accumulated earnings and profits of Silver Bull, as determined for U.S. federal income tax purposes.

The portion of the distribution treated as a dividend for U.S. federal income tax purposes will generally be subject to U.S. federal gross-basis income tax at a rate of 30%, or a lower rate specified in an applicable income tax treaty. This tax is generally collected by way of withholding. Because the amount of the distribution constituting a dividend for U.S. federal income tax purposes will not be known at the time of the distribution, for purposes of determining required withholding, Silver Bull or its withholding agent is generally required by IRS regulations to treat the entire amount of the distribution as a dividend, and withhold tax from that amount, unless it elects instead to withhold based on a reasonable estimate of Silver Bull’s earnings and profits. To the extent it is required to withhold tax, Silver Bull or the applicable withholding agent may obtain the funds necessary to remit any such withholding tax by asking the Non-U.S. Holder to provide the funds, by using funds in the Non-U.S. Holder’s account with the applicable withholding agent or by selling (on the Non-U.S. Holder’s behalf) the portion of our common shares otherwise distributable to such Non-U.S. Holder needed to pay that tax, together with associated expenses. Non-U.S. holders would generally be eligible to obtain a refund of any excess amounts withheld (which would be the entire amount withheld to pay tax if Silver Bull determines, after the end of the taxable year of the Spin-off that it had no earnings and profits) by filing an appropriate claim for refund with the IRS. To receive the benefit of a reduced treaty rate, a Non-U.S. holder must furnish to Silver Bull or its paying agent a valid IRS Form W-8BEN, W-8BEN-E or other applicable form certifying such holder’s qualification for the reduced rate. This certification must be provided to Silver Bull or its paying agent prior to the distribution of our common shares.

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Dividends that are treated as “effectively connected” with a U.S. trade or business conducted by a Non-U.S. Holder (and, if an applicable income tax treaty so provides, are also attributable to a U.S. permanent establishment of such Non-U.S. Holder) are not subject to the withholding tax, provided the Non-U.S. Holder satisfies certain certification and disclosure requirements. Instead, such dividends, net of specified deductions and credits, are taxed at the same graduated U.S. federal income tax rates applicable to U.S. persons. Any such effectively connected dividends received by a Non-U.S. Holder that is a corporation may, under certain circumstances, be subject to an additional “branch profits tax” at a 30% rate or such lower rate as specified by an applicable income tax treaty.

In addition, any capital gains recognized (including capital gains arising from the amount of the distribution exceeding current and accumulated earnings and profits as well as basis in such Non-U.S. Holder’s Silver Bull shares) may be subject to U.S. net income tax (and in respect of corporate non-U.S. holders, branch profits tax) if the gain is effectively connected with a trade or business of the Non-U.S. Holder in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment or fixed base of the Non-U.S. Holder within the United States). Additionally, a Non-U.S. Holder that is an individual who is present in the United States for 183 days or more in the taxable year of the disposition and meets certain other requirements will be subject to a flat 30% tax on the amount of capital gains together with certain other U.S. source capital gains realized during such year, to the extent that they exceed certain U.S. source capital losses realized during such year.

Tax Consequences to U.S. Holders of the Ownership and Disposition of Our Common Shares

The following discussion is subject in its entirety to the rules described below under the heading “—Passive Foreign Investment Company Rules.”

Taxation of Distributions on Our Common Shares

A U.S. Holder that receives a distribution, including a constructive distribution, with respect to our common shares generally will be required to include the amount of such distribution in gross income as a dividend (without reduction for any foreign income tax withheld from such distribution) to the extent such distribution is paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). If a distribution with respect to our common shares exceeds our current and accumulated earnings and profits, the excess will be treated as a tax free return of the capital up to such U.S. Holder’s tax basis in our common shares. Any remaining excess distribution generally will be treated as capital gain. However, the Company may not maintain the calculations of its earnings and profits in accordance with U.S. federal income tax principles, and each U.S. Holder may have to assume that any distribution with respect our common shares will constitute ordinary dividend income.

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Dividends received with respect to our common shares by corporate U.S. Holders generally will not be eligible for the “dividends received deduction.” Provided that we are eligible for the benefits of the Canada–United States Tax Convention (1980) (the “Canada–U.S. Tax Convention”) or that our common shares are “readily tradable” on a U.S. securities market, dividends paid by us to non-corporate U.S. Holders generally will be eligible for the preferential tax rates applicable to long-term capital gains for dividends, provided certain holding period and other conditions are satisfied, including that we will not be classified as a PFIC (as defined below) in the tax year of distribution or in the preceding tax year.

Foreign Tax Credit

In general, any Canadian withholding tax imposed on dividend payments in respect of our common shares will be treated as a foreign income tax eligible for credit against a U.S. Holder’s U.S. federal income tax liability (or, at a U.S. Holder’s election, may, in certain circumstances, be deducted in computing taxable income). Dividends paid with respect to our common shares will generally be treated as foreign-source income, and generally will be treated as “passive category income” for U.S. foreign tax credit purposes. The Code applies various complex limitations on the amount of foreign taxes that may be claimed as a credit by U.S. taxpayers. U.S. Holders are urged to consult their own tax advisors with respect to the amount of foreign taxes that can be claimed as a credit.

Sale or Other Taxable Disposition of Our Common Shares

A U.S. Holder will generally recognize capital gain or loss upon the sale or other taxable disposition of our common share in an amount equal to the difference between the U.S. Holder’s tax basis in such common shares disposed of and the amount realized on the disposition. Gain or loss realized by a U.S. Holder on the sale or other taxable disposition of our common shares will be capital gain or loss for U.S. federal income tax purposes, and will be long term capital gain or loss if the U.S. Holder’s holding period for such common shares is more than one year. In the case of a non-corporate U.S. Holder, long term capital gains will be subject to reduced rates of taxation. The deductibility of capital losses is subject to limitations.

Receipt of Foreign Currency

The amount of any distributions on or proceeds on the sale, exchange or other taxable disposition of our common shares paid to a U.S. Holder in foreign currency, generally will be equal to the U.S. dollar value of such foreign currency based on the exchange rate applicable on the date of receipt, regardless of whether such foreign currency is converted into U.S. dollars at that time. A U.S. Holder will have a basis in the foreign currency equal to its U.S. dollar value on the date of receipt. Any U.S. Holder who converts or otherwise disposes of the foreign currency after the date of receipt may have a foreign currency exchange gain or loss that would be treated as ordinary income or loss, and generally will be U.S. source income or loss for foreign tax credit purposes. Different rules apply to U.S. Holders who use the accrual method of tax accounting. U.S. Holders are urged to consult their own tax advisors regarding the U.S. federal income tax consequences of receiving, owning, and disposing of foreign currency.

Medicare Tax

An additional 3.8% Medicare tax is imposed on the “net investment income” of certain U.S. Holders who are individuals, estates or trusts. Among other items, “net investment income” generally includes gross income from dividends, and certain net gains from sales or other taxable dispositions of our common shares. Special rules apply to PFICs (as defined below). U.S. Holders are urged to consult their tax advisors with respect to the Medicare tax and its applicability in their particular circumstances to income and gains in respect of the ownership and disposition of our common shares.

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Backup Withholding and Information Reporting

In general, information reporting will apply to payments made with respect to our common shares through a U.S. paying agent or U.S. intermediary to a U.S. Holder other than certain exempt recipients, such as corporations. In the event that a U.S. Holder fails to file any such required form, the U.S. Holder could be subject to significant penalties. In general, payments to U.S. Holders may be subject to backup withholding, currently at a rate of 24%, if the U.S. Holder fails to provide its taxpayer identification number or otherwise comply with the backup withholding rules. Backup withholding is not an additional tax. Any amounts withheld from payments to a U.S. Holder under the backup withholding rules will be allowed as a credit against such U.S. Holder’s U.S. federal income tax liability and may entitle such U.S. Holder to a refund, provided the required information is furnished to the IRS. Each U.S. Holder is urged to consult its own tax advisor regarding the information reporting and backup withholding tax rules.

Owners of “specified foreign financial assets” with an aggregate value in excess of $50,000 (and in some circumstances, a higher threshold), may be required to file an information report with respect to such assets with their tax returns. “Specified foreign financial assets” generally include any financial accounts maintained by foreign financial institutions, as well as any of the following, but only if they are not held in accounts maintained by financial institutions: (i) stocks and securities issued by non-U.S. persons, (ii) financial instruments and contracts held for investment that have non-U.S. issuers or counterparties and (iii) interests in foreign entities. U.S. Holders are urged to consult their own tax advisors regarding this legislation and any other information reporting that may be required in connection with their ownership of our common shares.

Passive Foreign Investment Company Rules

If we were to be classified as a “passive foreign investment company” (“PFIC”) for any year during a U.S. Holder’s holding period, then certain potentially adverse rules would affect the U.S. federal income tax consequences to a U.S. Holder resulting from the acquisition, ownership and disposition of our common shares.

PFIC Status of the Company

The Company generally will be a PFIC if, for a given tax year, (a) 75% or more of the gross income of the Company for such tax year is passive income or (b) 50% or more of the assets held by the Company either produce passive income or are held for the production of passive income, based on the fair market value of such assets. “Gross income” generally includes all income less the cost of goods sold, and “passive income” includes, for example, dividends, interest, certain rents and royalties, certain gains from the sale of stock and securities, and certain gains from commodities transactions. Active business gains arising from the sale of commodities generally are excluded from passive income if substantially all (85% or more) of a foreign corporation’s commodities are stock in trade or inventory, depreciable property used in a trade or business, or supplies regularly used or consumed in a trade or business.

For purposes of the PFIC income test and asset test described above, if the Company owns, directly or indirectly, 25% or more of the total value of the outstanding shares of another corporation, the Company will be treated as if it (a) held a proportionate share of the assets of such other corporation and (b) received directly a proportionate share of the income of such other corporation. In addition, for purposes of the PFIC income test and asset test described above, “passive income” does not include any interest, dividends, rents or royalties that are received or accrued by the Company from a “related person” (as defined in Section 954(d)(3) of the Code), to the extent such items are properly allocable to the income of such related person that is not passive income.

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Under certain attribution rules, if the Company is a PFIC, U.S. Holders will be deemed to own their proportionate share of any subsidiary of the Company which is also a PFIC (a “lower-tier PFIC”), and will be subject to U.S. federal income tax on (a) a distribution on the shares of a lower-tier PFIC and (b) a disposition of shares of a lower-tier PFIC, both as if the U.S. Holder directly held the shares of such lower-tier PFIC.

The Company may (or may not) be a PFIC for the current tax year and may (or may not) be a PFIC in subsequent years. The determination of whether the Company (or a subsidiary of the Company) was, or will be, a PFIC for a tax year depends, in part, on the application of complex U.S. federal income tax rules, which are subject to differing interpretations. In addition, whether the Company (or subsidiary) will be a PFIC for any tax year depends on the assets and income of the Company (and each such subsidiary) over the course of each such tax year and, as a result, cannot be predicted with certainty as of the date of this Form 20-F. Accordingly, there can be no assurance that the IRS will not challenge any determination made by the Company (or subsidiary) concerning its PFIC status or that the Company (and any subsidiary) was not, or will not be, a PFIC for any tax year. U.S. Holders should consult their own tax advisors regarding the PFIC status of the Company and any subsidiary of the Company.

Default PFIC rules under Section 1291 of the Code

If the Company is a PFIC, the U.S. federal income tax consequences to a U.S. Holder of the acquisition, ownership and disposition of our common shares will depend on whether such U.S. Holder makes a “qualified electing fund” or “QEF” election (a “QEF Election”) or makes a mark-to-market election under Section 1296 of the Code (a “Mark-to-Market Election”) with respect to our common shares. A U.S. Holder that does not make either a QEF Election or a Mark-to-Market Election will be referred to in this summary as a “Non-Electing U.S. Holder.”

A Non-Electing U.S. Holder will be subject to the rules of Section 1291 of the Code with respect to (a) any gain recognized on the sale or other taxable disposition of our common shares and (b) any excess distribution paid on our common shares. A distribution generally will be an “excess distribution” to the extent that such distribution (together with all other distributions received in the current tax year) exceeds 125% of the average distributions received during the three preceding tax years (or during a U.S. Holder’s holding period for our common shares, if shorter).

If the Company is a PFIC, under Section 1291 of the Code any gain recognized on the sale or other taxable disposition of our common shares (including an indirect disposition of shares of a lower-tier PFIC), and any excess distribution paid on our common shares (or a distribution by a lower-tier PFIC to its shareholder that is deemed to be received by a U.S. Holder) must be ratably allocated to each day of a Non-Electing U.S. Holder’s holding period for our common shares, as applicable. The amount of any such gain or excess distribution allocated to the tax year of disposition or excess distribution and to years before the Company became a PFIC, if any, would be taxed as ordinary income. The amounts allocated to any other tax year would be subject to U.S. federal income tax at the highest tax rate applicable to ordinary income in each such year without regard to the U.S. Holder’s other tax attributes, and an interest charge would be imposed on the tax liability for each such year, calculated as if such tax liability had been due in each such year. A Non-Electing U.S. Holder that is not a corporation must treat any such interest paid as “personal interest,” which is not deductible.

If the Company is a PFIC for any tax year during which a Non-Electing U.S. Holder holds our common shares, the Company will continue to be treated as a PFIC with respect to such Non-Electing U.S. Holder, regardless of whether the Company ceases to be a PFIC in one or more subsequent years. If the Company ceases to be a PFIC, a Non-Electing U.S. Holder may terminate this deemed PFIC status with respect to our common shares by electing to recognize gain (which will be taxed under the rules of Section 1291 of the Code discussed above) as if such common shares were sold on the last day of the last tax year for which the Company was a PFIC.

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QEF Election

If the Company is a PFIC and a U.S. Holder makes a QEF Election for the first tax year in which its holding period of our common shares begins, such U.S. Holder generally will not be subject to the rules of Section 1291 of the Code discussed above with respect to our common shares. However, a U.S. Holder that makes a QEF Election will be subject to U.S. federal income tax on such U.S. Holder’s pro rata share of (a) the net capital gain of the Company, which will be taxed as long-term capital gain to such U.S. Holder, and (b) the ordinary earnings of the Company, which will be taxed as ordinary income to such U.S. Holder. Generally, “net capital gain” is the excess of (i) net long-term capital gain over (ii) net short-term capital gain, and “ordinary earnings” are the excess of (i) “earnings and profits” over (ii) net capital gain. A U.S. Holder that makes a QEF Election will be subject to U.S. federal income tax on such amounts for each tax year in which the Company is a PFIC, regardless of whether such amounts are actually distributed to such U.S. Holder by the Company. However, a U.S. Holder that makes a QEF Election may, subject to certain limitations, elect to defer payment of current U.S. federal income tax on such amounts, subject to an interest charge. If such U.S. Holder is not a corporation, any such interest paid will be treated as “personal interest,” which is not deductible.

A U.S. Holder that makes a QEF Election generally (a) may receive a tax-free distribution from the Company to the extent that such distribution represents “earnings and profits” of the Company that were previously included in income by the U.S. Holder because of such QEF Election and (b) will adjust such U.S. Holder’s tax basis in our common shares to reflect the amount included in income or allowed as a tax-free distribution because of such QEF Election. In addition, a U.S. Holder that makes a QEF Election generally will recognize capital gain or loss on the sale or other taxable disposition of our common shares.

The procedure for making a QEF Election, and the U.S. federal income tax consequences of making a QEF Election, will depend on whether such QEF Election is timely. A QEF Election will be treated as timely if it is made for the first year in the U.S. Holder’s holding period for our common shares in which the Company was a PFIC. A U.S. Holder may make a timely QEF Election by filing the appropriate QEF Election documents at the time such U.S. Holder files a U.S. federal income tax return for such year.

A QEF Election will apply to the tax year for which such QEF Election is made and to all subsequent tax years, unless such QEF Election is invalidated or terminated or the IRS consents to revocation of such QEF Election. If a U.S. Holder makes a QEF Election and, in a subsequent tax year, the Company ceases to be a PFIC, the QEF Election will remain in effect (although it will not be applicable) during those tax years in which the Company is not a PFIC. Accordingly, if the Company becomes a PFIC in a subsequent tax year, the QEF Election will be effective, and the U.S. Holder will be subject to the QEF rules described above during a subsequent tax year in which the Company qualifies as a PFIC.

The Company will use commercially reasonable efforts to make available to U.S. Holders, upon their written request, for each year in which the Company may be a PFIC, all information and documentation that a U.S. Holder making a QEF Election with respect to the Company, and any lower-tier PFIC in which the Company owns, directly or indirectly, more than 50% of such lower-tier PFIC’s total aggregate voting power, is required to obtain for U.S. federal income tax purposes in the event it is a PFIC. However, U.S. Holders should be aware that the Company provides no assurances that it will attempt to provide any such information relating to any lower-tier PFIC in which the Company owns, directly or indirectly, 50% or less of such lower-tier PFIC’s aggregate voting power. Because the Company may own shares in one or more lower-tier PFICs, and may acquire shares in one or more lower-tier PFICs in the future, they will continue to be subject to the rules discussed above with respect to the taxation of gains and excess distributions with respect to any lower-tier PFIC for which the U.S. Holders do not obtain the required information. U.S. Holders should consult their tax advisors regarding the availability of, and procedure for making, a QEF Election with respect to the Company and any lower-tier PFIC.

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Mark-to-Market Election

A U.S. Holder may make a Mark-to-Market Election only if our common shares are marketable stock. Our common shares generally will be “marketable stock” if they are regularly traded on (a) a national securities exchange that is registered with the SEC; (b) the national market system established pursuant to Section 11A of the Securities and Exchange Act of 1934; or (c) a foreign securities exchange that is regulated or supervised by a governmental authority of the country in which the market is located, provided that (i) such foreign exchange has trading volume, listing, financial disclosure and other requirements and the laws of the country in which such foreign exchange is located, together with the rules of such foreign exchange, ensure that such requirements are actually enforced; and (ii) the rules of such foreign exchange ensure active trading of listed stocks. If such stock is traded on such a qualified exchange or other market, such stock generally will be “regularly traded” for any calendar year during which such stock is traded, other than in de minimis quantities, on at least 15 days during each calendar quarter. It is anticipated that our common shares will not initially be marketable stock, but may become marketable stock in the future if the conditions described above are met.

A U.S. Holder that makes a Mark-to-Market Election with respect to our common shares generally will not be subject to the rules of Section 1291 of the Code discussed above. However, if a U.S. Holder does not make a Mark-to-Market Election beginning in the first tax year of such U.S. Holder’s holding period for our common shares or such U.S. Holder has not made a timely QEF Election, the rules of Section 1291 of the Code discussed above will apply to certain dispositions of, and distributions on, our common shares.

A U.S. Holder that makes a Mark-to-Market Election will include in ordinary income, for each tax year in which the Company is a PFIC, an amount equal to the excess, if any, of (a) the fair market value of our common shares, as of the close of such tax year over (b) such U.S. Holder’s tax basis in such common shares. A U.S. Holder that makes a Mark-to-Market Election will be allowed a deduction in an amount equal to the excess, if any, of (i) such U.S. Holder’s adjusted tax basis in our common shares over (ii) the fair market value of such common shares (but only to the extent of the net amount of previously included income as a result of the Mark-to-Market Election for prior tax years).

U.S. Holders that make a Mark-to-Market Election generally also will adjust their tax basis in our common shares to reflect the amount included in gross income or allowed as a deduction because of such Mark-to-Market Election. In addition, upon a sale or other taxable disposition of our common shares, a U.S. Holder that makes a Mark-to-Market Election will recognize ordinary income or loss (not to exceed the excess, if any, of (a) the amount included in ordinary income because of such Mark-to-Market Election for prior tax years over (b) the amount allowed as a deduction because of such Mark-to-Market Election for prior tax years).

A Mark-to-Market Election applies to the tax year in which such Mark-to-Market Election is made and to each subsequent tax year, unless our common shares cease to be “marketable stock” or the IRS consents to revocation of such election. U.S. Holders should consult their own tax advisors regarding the availability of, and procedure for making, a Mark-to-Market Election.

Although a U.S. Holder may become eligible in the future to make a Mark-to-Market Election with respect to our common shares, no such election may be made with respect to the stock of any lower-tier PFIC that a U.S. Holder is treated as owning because such stock would not be marketable. Hence, the Mark-to-Market Election will not be effective to eliminate the interest charge described above with respect to deemed dispositions of lower-tier PFIC stock or distributions from a lower-tier PFIC.

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Other PFIC Rules

Under Section 1291(f) of the Code, the IRS has issued proposed Treasury Regulations that, subject to certain exceptions, would cause a U.S. Holder that had not made a timely QEF Election to recognize gain (but not loss) upon certain transfers of our common shares that would otherwise be tax-deferred (e.g., gifts and exchanges pursuant to corporate reorganizations) in the event the Company is a PFIC during such U.S. Holder’s holding period for the relevant shares. However, the specific U.S. federal income tax consequences to a U.S. Holder may vary based on the manner in which our common shares are transferred.

Certain additional adverse rules will apply with respect to a U.S. Holder if the Company is a PFIC, regardless of whether such U.S. Holder makes a QEF Election. For example, under Section 1298(b)(6) of the Code, a U.S. Holder that uses our common shares as security for a loan will, except as may be provided in Treasury Regulations, be treated as having made a taxable disposition of such common shares.

If the Company were a PFIC, a U.S. Holder would be required to attach a completed IRS Form 8621 to its tax return every year in which it recognized gain on a disposition of our common shares or received an excess distribution. In addition, subject to certain rules intended to avoid duplicative filings, U.S. Holders may also be required to file an annual information return on IRS Form 8621 with respect to each PFIC in which the U.S. Holder holds a direct or indirect interest. U.S. Holders should consult their own tax advisors regarding their filing obligations with respect to such information returns.

In addition, a U.S. Holder who acquires our common shares from a decedent will not receive a “step up” in tax basis of such common shares to fair market value unless such decedent had a timely and effective QEF Election in place.

Special rules also apply to foreign tax credits that a U.S. Holder may claim on a distribution from a PFIC.

The PFIC rules are complex, and U.S. Holders should consult their own tax advisors regarding the PFIC rules and how they may affect the U.S. federal income tax consequences of the ownership, and disposition of our common shares in the event the Company is a PFIC at any time during the holding period for such common shares.

THE ABOVE SUMMARY IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL U.S. FEDERAL INCOME TAX CONSIDERATIONS APPLICABLE WITH RESPECT TO THE RECEIPT OF OUR COMMON SHARES IN THE SPIN-OFF OR OF THE OWNERSHIP AND DISPOSITION OF SUCH COMMON SHARES. NON-U.S. HOLDERS AND U.S. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX CONSIDERATIONS APPLICABLE TO THEM IN THEIR OWN PARTICULAR CIRCUMSTANCES.

Material Canadian Income Tax Considerations

The following summarizes certain Canadian federal income tax considerations under the Income Tax Act (Canada) (the “Tax Act”), as at the date hereof, generally applicable to Silver Bull shareholders in respect of the Spin-off of Arras shares to Silver Bull shareholders.

Comment is restricted to Silver Bull shareholders who, for purposes of the Tax Act, (i) hold their Silver Bull shares and will hold their Arras shares solely as capital property and (ii) deal at arm’s length with and are not affiliated with the Silver Bull and Arras (each such shareholder, a “Holder”).

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Generally, shares will be considered to be capital property to a Holder thereof provided that the Holder does not use the shares in the course of carrying on a business of trading or dealing in securities and such Holder has not acquired such shares in one or more transactions considered to be an adventure or concern in the nature of trade.

This summary does not apply to a Holder that:

· is a “financial institution” for the purposes of the mark-to-market rules in the Tax Act or a “specified financial institution” as defined in the Tax Act;
· is a person or partnership an interest in which is a “tax shelter investment” for purposes of the Tax Act;
· has elected to report its Canadian federal income tax results in a currency other than Canadian currency;
· has entered into or will enter into a “derivative forward agreement,” a “synthetic disposition arrangement,” or a “synthetic equity arrangement” as those terms are or are proposed to be defined in the Tax Act;
· is a “foreign affiliate,” as defined in the Tax Act, of Silver Bull; or
· is otherwise a Holder of special status or in special circumstances.

All such Holders should consult their own tax advisors with respect to the consequences of the Spin-off.

Additional considerations, not discussed herein, may be applicable to a Holder that is a corporation resident in Canada or a corporation that does not deal at arm’s length, for purposes of the Tax Act, with a corporation resident in Canada, and is, or becomes as part of a transaction or event or series of transactions or events, controlled by a non-resident person, or a group of non-resident persons not dealing with each other at arm’s length, for purposes of the “foreign affiliate dumping” rules in section 212.3 of the Tax Act. Such Holders should consult their tax advisors.

This summary is based on the current provisions of the Tax Act, the regulations thereunder (the “Regulations”), and our understanding of the current published administrative practices and policies of the Canada Revenue Agency (the “CRA”). This summary takes into account all specific proposals to amend the Tax Act and Regulations (the “Proposed Amendments”) announced by the Minister of Finance (Canada) prior to the date hereof. It is assumed that the Proposed Amendments will be enacted as currently proposed and that there will be no other change in law or administrative or assessing practice, whether by legislative, governmental, or judicial action or decision, although no assurance can be given in these respects. This summary does not take into account provincial, territorial or foreign income tax considerations, which may differ materially from the Canadian federal income tax considerations discussed below.

This summary is of a general nature only and is not and should not be construed as legal or tax advice to any particular person (including a Holder as defined above). Each person who may be affected by the Spin-off should consult the person’s own tax advisors with respect to the person’s particular circumstances.

Residents of Canada

The following portion of this summary is generally applicable to a Holder who, for the purposes of the Tax Act, is resident or deemed to be resident in Canada at all relevant times (each, a “Resident Holder”). Certain Resident Holders whose Arras shares might not otherwise qualify as capital property may be entitled to make an irrevocable election pursuant to subsection 39(4) of the Tax Act to have the Arras shares, and every other “Canadian security” (as defined by the Tax Act) owned by such Resident Holder in the taxation year of the election and in all subsequent taxation years, deemed to be capital property. Resident Holders should consult their own tax advisors for advice as to whether an election under subsection 39(4) of the Tax Act is available or advisable in their particular circumstances. This election does not apply to Silver Bull shares.

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Spin-off of Arras Shares

The spin-off of Arras shares will be considered a dividend in kind on the Silver Bull shares to a Resident Holder. A Resident Holder will be required to include in computing such Resident Holder’s income for a taxation year the amount of such dividend (equal to the fair market value of the Arras shares received), including amounts deducted for U.S. withholding tax, if any, received on the Silver Bull shares. Such dividend in kind received on the Silver Bull shares by a Resident Holder who is an individual will not be subject to the gross-up and dividend tax credit rules in the Tax Act normally applicable to taxable dividends received from taxable Canadian corporations. A Resident Holder that is a corporation will be required to include the dividend in kind received on the Silver Bull shares in computing its income and will not be entitled to deduct the amount of such dividends in computing its taxable income.

To the extent that U.S. withholding tax is payable by a Resident Holder in respect of any dividend in kind received on the Silver Bull shares, the Resident Holder may be eligible for a foreign tax credit or deduction under the Tax Act to the extent and under the circumstances described in the Tax Act. Resident Holders should consult their own tax advisors regarding the availability of a foreign tax credit or deduction in their particular circumstances.

A Resident Holders adjusted cost base of the Arras shares will be equal to such shares fair market value at the time the shares are distributed as a dividend in kind.

Taxation of Arras Shares

Taxation of Dividends

Dividends received or deemed to be received on the Arras shares will be included in computing a Resident Holder’s income. In the case of a Resident Holder who is an individual (including certain trusts), dividends (including deemed dividends) received on the Arras shares will be included in the Resident Holder’s income and be subject to the gross-up and dividend tax credit rules applicable to taxable dividends received by an individual from taxable Canadian corporations, including the enhanced gross-up and dividend tax credit for “eligible dividends,” if any, that are properly designated as such by Arras. There may be limitations on the ability of Arras to designate dividends as eligible dividends.

In the case of a Resident Holder that is a corporation, dividends (including deemed dividends) received on the Arras shares will be included in the Resident Holder’s income and will normally be deductible in computing such Resident Holder’s taxable income, subject to all restrictions under the Tax Act. In certain circumstances, subsection 55(2) of the Tax Act will treat a taxable dividend received by a Resident Holder that is in a corporation as proceeds of disposition or a capital gain. Resident Holders that are corporations should consult their own tax advisors having regard to their own circumstances.

A Resident Holder that is a “private corporation” or “subject corporation” (as such terms are defined in the Tax Act) may be liable to pay a refundable tax under Part IV of the Tax Act on dividends received or deemed to be received on the Arras shares to the extent that such dividends are deductible in computing the Resident Holder’s taxable income for the year.

Dividends received by a Resident Holder who is an individual (including certain trusts) may result in such Resident Holder being liable for minimum tax under the Tax Act. Resident Holders who are individuals should consult their own tax advisors in this regard.

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Disposition of Arras Shares

A Resident Holder who disposes of, or is deemed to have disposed of, an Arras share (other than to Arras, unless purchased by Arras in the open market in the manner in which shares are normally purchased by any member of the public in the open market) will realize a capital gain (or incur a capital loss) equal to the amount by which the proceeds of disposition in respect of the Arras share exceed (or are exceeded by) the aggregate of the adjusted cost base to the Resident Holder of such Arras share immediately before the disposition or deemed disposition and any reasonable expenses incurred for the purpose of making the disposition. The adjusted cost base to a Resident Holder of an Arras share will be determined by averaging the cost of that Arras share with the adjusted cost base (determined immediately before the acquisition of the Arras share) of all other common shares of Arras held as capital property at that time by the Resident Holder. The tax treatment of capital gains and capital losses is discussed in greater detail below under the subheading “Taxation of Capital Gains and Losses.”

Taxation of Capital Gains and Losses

Generally, one-half of any capital gain (a “taxable capital gain”) realized by a Resident Holder must be included in the Resident Holder’s income for the taxation year in which the disposition occurs. Subject to and in accordance with the provisions of the Tax Act, one-half of any capital loss incurred by a Resident Holder (an “allowable capital loss”) must generally be deducted from taxable capital gains realized by the Resident Holder in the taxation year in which the disposition occurs. Allowable capital losses in excess of taxable capital gains for the taxation year of disposition generally may be carried back and deducted in the three preceding taxation years or carried forward and deducted in any subsequent year against taxable capital gains realized in such years, in the circumstances and to the extent provided in the Tax Act.

A capital loss realized on the disposition of an Arras share by a Resident Holder that is a corporation may in certain circumstances be reduced by the amount of dividends which have been previously received or deemed to have been received by the Resident Holder on the Arras share. Similar rules may apply where a corporation is, directly or indirectly through a trust or partnership, a member of a partnership or a beneficiary of a trust that owns Arras shares. A Resident Holder to which these rules may be relevant is urged to consult its own tax advisor.

A Resident Holder that is throughout the relevant taxation year a “Canadian-controlled private corporation” (as defined in the Tax Act) may be liable to pay an additional refundable tax on its “aggregate investment income” (as defined in the Tax Act) for the year, which is defined to include an amount in respect of taxable capital gains.

Capital gains realized by a Resident Holder who is an individual (including certain trusts) may result in such Resident Holder being liable for minimum tax under the Tax Act. Resident Holders who are individuals should consult their own tax advisors in this regard.

Non-Residents of Canada

The following portion of this summary is generally applicable to a Holder who, for purposes of the Tax Act and at all relevant times, is neither resident nor deemed to be resident in Canada and does not use or hold, and will not be deemed to use or hold, Arras shares in a business carried on in Canada (each, a “Non-Resident Holder”). The term “U.S. Holder,” for the purposes of this summary, means a Non-Resident Holder who, for purposes of the Canada–U.S. Tax Convention, is at all relevant times a resident of the United States and is a “qualifying person” within the meaning of the Canada–U.S. Tax Convention eligible for the full benefits of the Canada–U.S. Tax Convention. In some circumstances, persons deriving amounts through fiscally transparent entities (including limited liability companies) may be entitled to benefits under the Canada–U.S. Tax Convention. U.S. Holders are urged to consult their own tax advisors to determine their entitlement to benefits under the Canada–U.S. Tax Convention and related compliance requirements based on their particular circumstances.

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Special considerations, which are not discussed in this summary, may apply to a Non-Resident Holder that is an insurer that carries on an insurance business in Canada and elsewhere or an “authorized foreign bank” (as defined in the Tax Act). Such Non-Resident Holders should consult their own advisors.

Spin-off of Arras Shares

A dividend in kind of the Arras shares paid in respect of the Silver Bull shares to a Non-Resident Holder will not be subject to Canadian withholding tax or other income tax under the Tax Act.

Taxation of Arras Shares

Taxation of Dividends

Subject to an applicable tax treaty or convention, dividends paid or credited, or deemed to be paid or credited, to a Non-Resident Holder on the Arras shares will be subject to Canadian withholding tax under the Tax Act at the rate of 25% of the gross amount of the dividend. Such rate is generally reduced under the Canada–U.S. Tax Convention to 15% of the gross amount of the dividend if the beneficial owner of such dividend is a U.S. Holder. The rate of withholding tax is generally further reduced to 5% if the beneficial owner of such dividend is a U.S. Holder that is a company that owns, directly or indirectly, at least 10% of the voting stock of Arras. Non-Resident Holders should consult their own tax advisors to determine their entitlement to benefits under any applicable tax treaty or convention based on their particular circumstances.

Disposition of Arras Shares

A Non-Resident Holder will not be subject to tax under the Tax Act in respect of any capital gain realized by such Non-Resident Holder on a disposition of Arras shares, unless the Arras shares constitute “taxable Canadian property” (as defined in the Tax Act) of the Non-Resident Holder at the time of the disposition and are not “treaty-protected property” (as defined in the Tax Act) of the Non-Resident Holder at the time of the disposition.

Generally, the Arras shares will not constitute taxable Canadian property of a Non-Resident Holder, unless at any time during the 60-month period immediately preceding the disposition more than 50% of the fair market value of the Arras shares was derived directly or indirectly from one or any combination of real or immovable property situated in Canada, “Canadian resource properties,” “timber resource properties” (each as defined in the Tax Act), and options in respect of or interests in, or for civil law rights in, any such property (whether or not such property exists). Notwithstanding the foregoing, Arras shares may also be deemed to be “taxable Canadian property” of a Non-Resident Holder in other circumstances under the Tax Act.

The Arras shares of a U.S. Holder will generally constitute “treaty-protected property” for purposes of the Tax Act unless the value of the Arras shares is derived principally from real property situated in Canada. For this purpose, “real property” has the meaning that term has under the laws of Canada and includes any option or similar right in respect thereof and in any case, includes usufruct of real property, rights to explore for or to exploit mineral deposits, sources and other natural resources and rights to amounts computed by reference to the amount or value of production from such resources.

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If Arras shares are taxable Canadian property of a Non-Resident Holder and are not treaty-protected property of the Non-Resident Holder at the time of their disposition, the consequences above under “Residents of Canada—Disposition of Arras Shares” and “Residents of Canada—Taxation of Capital Gains and Losses” will generally apply.

Non-Resident Holders whose Arras shares may constitute taxable Canadian property should consult their own advisors.

Dividends and Paying Agents

We have not, since the date of our incorporation, declared or paid any dividends on our common shares and do not currently have a policy with respect to the payment of dividends. We currently intend to retain any future earnings to fund the development and growth of our business and do not currently anticipate paying dividends on our common shares. Any determination to pay dividends in the future will be at the discretion of the Arras Board and will depend on many factors, including our financial condition, current and anticipated cash requirements, contractual restrictions and financing agreement covenants, solvency tests imposed by corporate law and other factors that the Arras Board may deem relevant. Accordingly, we have not appointed any paying agent. See “Risk Factors—Risks Relating to Our Common Shares—No dividends are anticipated.”

Statement by Experts

The financial statements of Arras as of April 30, 2021 and for the period from the Company’s inception on February 5, 2021 to April 30, 2021 included in this Form 20-F have been audited by Smythe LLP, Chartered Professional Accountants, an independent registered public accounting firm located at #1700 – 475 Howe Street, Vancouver, British Columbia, Canada V6C 2B3, as stated in its report appearing herein, and have been so included in reliance upon such report given the authority of Smythe LLP as an expert in auditing and accounting.

The estimates of our Mineral Resources with respect to the Beskauga Project included in this Form 20-F have been prepared by CSA Global Consultants Canada Ltd., with an office located at 1111 West Hastings Street, 15th Floor, Vancouver, British Columbia V6E 2J3, Canada, as stated in its Technical Report Summary appearing herein, and have been so included in reliance upon such report. Serikjan Urbisinov, B.Sc., MAIG, a Qualified Person as defined by NI 43-101, is a co-author of the Technical Report Summary. Mr. Urbisinov is a Principal Resource Geologist at CSA Global Pty Ltd., with an office located at Level 2, 3 Ord Street, West Perth, WA 6005, Australia. Andrew Sharp, B.Eng. (Mining). P.Eng., a Qualified Person as defined by NI 43-101, is a co-author of the Technical Report Summary. Mr. Sharp is a Principal Mining Engineer at CSA Global Consultants Canada Ltd., with an office located at 1111 West Hastings Street, 15th Floor, Vancouver, British Columbia V6E 2J3, Canada. Georgiy Freiman, Ph.D., FAIG, a Qualified Person as defined by NI 43-101, is a co-author of the Technical Report Summary. Mr. Freiman is the Chief Executive Officer of GeoMineProject LLP, located at Musabaev Street, 3, 050052, Almaty, Republic of Kazakhstan. None of Messrs. Urbisinov, Sharp and Freiman is an employee of the Company, and none of them or their respective employers is affiliated with the Company or another entity that has an ownership, royalty, or other interest in the Beskauga Project that is the subject of the Technical Report Summary.

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Documents on Display

Any statement in this Form 20-F about any of our contracts or other documents is not necessarily complete. If the contract or document is filed as an exhibit to the Form 20-F, the contract or document is deemed to modify the description contained in this Form 20-F. You must review the exhibits themselves for a complete description of the contract or document.

Upon completion of the Spin-off, we will become subject to the informational requirements of the Exchange Act. Accordingly, we will be required to file reports and other information with the SEC, including annual reports on Form 20-F and periodic reports on Form 6-K. The SEC maintains an Internet website that contains reports and other information about issuers, like us, that file electronically with the SEC. The address of that website is www.sec.gov.

As an FPI, we will be exempt under the Exchange Act from, among other things, the rules prescribing the furnishing and content of proxy statements, and our executive officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we will not be required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act. However, we intend to furnish or make available to our shareholders annual reports containing our financial statements prepared in accordance with IFRS. Our annual report will contain an “Operating and Financial Review and Prospects” section for the relevant periods.

Subsidiary Information

We do not own any interest in another entity, whether wholly or partially. Pursuant to the Stepnoe and Ekidos JV Agreement, Ekidos LLP, a company incorporated under the laws of Kazakhstan, was incorporated on behalf of Copperbelt for the purpose of applying for the Stepnoe and Ekidos Licenses with the funding previously provided by Silver Bull. Pursuant to the terms of the Stepnoe and Ekidos JV Agreement and in connection with the Asset Transfer, it is expected that 100% of the equity interests in Ekidos LLP will be transferred to the Company in the near future.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, foreign currency exchange rate risk and other price risk. The Company is not currently exposed to any significant interest rate risk or other price risk. The Company is exposed to foreign currency exchange rate risk with respect to cash denominated in Canadian dollars. As at April 30, 2021, a 15% strengthening (weakening) of the Canadian dollar against the U.S. dollar would have increased (decreased) the Company’s comprehensive loss by approximately $226,000 for the period from inception on February 5, 2021 to April 30, 2021.

For additional information about the effects of foreign currency translation and foreign currency exchange rate risk on the Company’s financial statements, see the statement of cash flows on page F-7 of our financial statements and “Note 13. Financial Instruments” on page F-21 of our financial statements and related notes included elsewhere in this Form 20-F.

81 
 
 

 

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.

Debt Securities

Not applicable.

Warrants and Rights

Not applicable.

Other Securities

Not applicable.

American Depositary Shares

Not applicable.

82 
 
 

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.

Not applicable.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS.

Not applicable.

ITEM 15. CONTROLS AND PROCEDURES.

Not applicable.

ITEM 16. [RESERVED].

Not applicable.

ITEM 16A. AUDIT COMMITTEE AND FINANCIAL EXPERT.

Not applicable.

ITEM 16B. CODE OF ETHICS.

Not applicable.

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Not applicable.

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.

Not applicable.

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.

Not applicable.

ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT.

None.

ITEM 16G. CORPORATE GOVERNANCE.

Not applicable.

ITEM 16H. MINE SAFETY DISCLOSURE.

Not applicable.

83 
 
 

PART III

ITEM 17. FINANCIAL STATEMENTS.

Historical Financial Statements

Please refer to pages F-1 through F-22 of this Form 20-F.

ITEM 18. FINANCIAL STATEMENTS.

Not applicable.

ITEM 19. EXHIBITS.

We have filed the following documents as exhibits to this Form 20-F:

 

Exhibit No.   Description
1.1   Notice of Articles of Arras Minerals Corp.
1.2   Articles of Incorporation of Arras Minerals Corp.
4.1   Option Agreement, dated as of August 12, 2020, by and among Silver Bull Resources, Inc., Copperbelt AG, and Dostyk LLP
4.2   Joint Venture Agreement, dated as of September 1, 2020, by and between Silver Bull Resources, Inc. and Copperbelt AG
4.3   Loan Agreement, dated as of August 20, 2020, by and between Ekidos Minerals LLP and Silver Bull Resources, Inc., as amended by Additional Agreement No. 1 to the Loan Agreement, dated as of October 30, 2020, by and between Silver Bull Resources, Inc. and Ekidos Minerals LLP, as further amended by Additional Agreement No. 2 to the Loan Agreement, dated as of January 21, 2021, by and between Silver Bull Resources, Inc. and Ekidos Minerals LLP
4.4   Loan Agreement No. 2, dated as of December 21, 2020, by and between Ekidos Minerals LLP and Silver Bull Resources, Inc.
4.5   Loan Agreement No. 3, dated as of February 23, 2021, by and between Ekidos Minerals LLP and Silver Bull Resources, Inc.
4.6   Loan Agreement No. 1, dated as of April 22, 2021, by and between Ekidos Minerals LLP and Arras Minerals Corp.
4.7   Loan Agreement No. 2, dated as of May 19, 2021, by and between Ekidos Minerals LLP and Arras Minerals Corp.
4.8   Asset Purchase Agreement, dated as of March 19, 2021, by and between Silver Bull Resources, Inc. and Arras Minerals Corp.
4.9   Form of Arras Minerals Corp. Subscription Agreement, dated as of April 1, 2021
4.10*   Form of Separation and Distribution Agreement
4.11+   Arras Minerals Corp. Equity Incentive Plan, dated as of April 15, 2021
4.11.1+   Form of Stock Option Grant Agreement under Arras Minerals Corp. Equity Incentive Plan
4.12+‡   Arras Minerals Corp. Management Retention Bonus Plan, dated as of April 15, 2021
15.1   Consent of Smythe LLP
15.2   Consent of CSA Global Consultants Canada Ltd.
17.1   Technical Report Summary
99.1*   Form of Notice of Internet Availability of Materials

 

  * To be provided by amendment to this Form 20-F.
  + Indicates a management contract or compensatory plan, contract or arrangement.
‡ Portions of this exhibit have been omitted in accordance with Form 20-F. The omitted information is not material and would likely cause competitive harm to the registrant if publicly disclosed. The registrant hereby agrees to furnish supplementally an unredacted copy of this exhibit to the Securities and Exchange Commission upon request.

 

84 
 
 

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this registration statement on its behalf.

ARRAS MINERALS CORP.

 

 

By: /s/ Timothy T. Barry

Name: Timothy T. Barry

Title: Chief Executive Officer

 

 

By: /s/ Christopher Richards

Name: Christopher Richards

Title: Chief Financial Officer

 

Date: June 24, 2021

 

85 
 
 

 

 

Arras Minerals Corp.

 

Financial Statements

Period from Inception on February 5, 2021 to April 30, 2021

(Expressed in United States dollars)

 

 

 

 

 
 
 

 

 

 

 

 

Index Page
Report of Independent Registered Public Accounting Firm F-2
Financial Statements  
Statement of Financial Position F-4
Statement of Comprehensive Loss F-5
Statement of Changes in Shareholders’ Equity F-6
Statement of Cash Flows F-7
Notes to the Financial Statements

F-8 – F-22

 

 

   
   
F-1 
 
 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

TO THE SHAREHOLDERS AND DIRECTORS OF ARRAS MINERALS CORP.

 

Opinion on the Financial Statements

 

We have audited the accompanying statement of financial position of Arras Minerals Corp. (the “Company”) as of April 30, 2021, and the related statements of comprehensive loss, changes in shareholders’ equity, and cash flows for the period from inception on February 5, 2021 to April 30, 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of April 30, 2021, and the results of its operations and its cash flows for the period from inception on February 5, 2021 to April 30, 2021, in conformity with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board.

 

Material Uncertainty Related to Going Concern

 

Without modifying our opinion, we draw attention to Note 1 of the financial statements, which indicates that the Company incurred a net loss during the period from inception on February 5, 2021 to April 30, 2021 and has not yet commenced revenue producing operations. As stated in Note 1 to the financial statements, these conditions, along with other matters as set forth in Note 1, indicate that a material uncertainty exists that casts substantial doubt on the Company’s ability to continue as a going concern.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

 

 

 

F-2 
 
 

 

Critical Audit Matters

 

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

 

Going Concern Assessment

 

As described in Note 1 of the financial statements, the financial statements are prepared on a going concern basis, which assumes that the Company will continue its operation for the foreseeable future and, accordingly, will be able to realize its assets and discharge its liabilities in the normal course of operations. As at April 30, 2021, the Company has not earned any cash inflows from operations and expects to incur additional losses in the future. The ability of the Company to continue as a going concern is dependent on raising capital to fund its exploration plans and ultimately to attain profitable operations.

 

We identified the assessment of going concern as a critical audit matter. Auditing management’s going concern assessment is challenging as it involves subjective assumptions about the ability to raise future financing and future cash outflows relating to planned exploration activities and other ongoing operating and administrative expenditures that are inherently uncertain.

 

The following are the primary procedures we performed to address this critical audit matter. We evaluated the appropriateness of the inputs and key assumptions used in the cash flow forecasts, specifically the assumption of cash flows related to exploration activities, taking into consideration the Company’s commitments under option agreements. In addition, we assessed management’s plan and ability to raise future financing by observing past financing ability and through discussion with management. We also assessed the accuracy and completeness of the disclosures around the going concern uncertainty in Note 1 of the financial statements.

 

 

 

 

 

/s/ Smythe LLP

Smythe LLP, Chartered Professional Accountants

 

 

We have served as the Company's auditor since 2021.

 

Vancouver, Canada

June 23, 2021

 

F-3 
 
 

ARRAS MINERALS CORP.
Statement of Financial Position
(Expressed in United States Dollars)

 

   

April 30,

2021

     
Assets        
Current        
Cash   $ 1,562,570  
Loans to Ekidos Minerals LLP (Notes 3 and 7)     1,435,000  
Total Current Assets     2,997,570  
Office and equipment (Notes 3 and 8)     50,151  
Mineral properties (Notes 3 and 6)     327,690  
Total Assets   $ 3,375,411  

 

Liabilities

       
Current        
Accounts payable and accrued liabilities (Note 11)   $ 163,553  
Due to related party (Note 11)     118,668  
Total Liabilities     282,221  

 

Shareholders’ Equity

       
Share capital (Note 9)     3,350,375  
Reserves (Note 9)     305,876  
Deficit     (563,061 )
Total Shareholders’ Equity     3,093,190  
Total Liabilities and Shareholders’ Equity   $ 3,375,411  

 

Nature of operations and going concern (Note 1)

Subsequent events (Note 16

 

On behalf of the Board:

/s/ Brian Edgar     /s/ Daniel Kunz
Director     Director

 

 

 

 

 

The accompanying notes are an integral part of these financial statements.

 

 

F-4 
 
 

ARRAS MINERALS CORP.

Statement of Comprehensive Loss

(Expressed in United States Dollars)

 

 

   

For the Period from Inception on

February 5, 2021 to April 30, 2021

Expenses

   
     Depreciation (Note 8)   $ 4,827  
     Directors’ fees (Notes 9 and 11)     140,553  
Exploration (Notes 6 and 9)     81,804  
Personnel (Notes 9 and 11)     201,576  
Professional services     156,098  
Office and administrative     12,281  
Foreign exchange gain     (34,078 )
      563,061  

Net Loss and Comprehensive Loss for the Period

    (563,061 )
Basic and Diluted Loss per Common Share     (0.03 )

Weighted Average Number of Common Shares Outstanding

    19,738,275  
         

 

 

The accompanying notes are an integral part of these financial statements.

 

 

F-5 
 
 

 

ARRAS MINERALS CORP.

Statement of Changes in Shareholders’ Equity

(Expressed in United States Dollars)

 

 

      Share Capital                      
      Common Shares       Amount      

Reserves

Options

      Deficit      

Shareholders’

Equity

 
Shares issued upon inception
(February 5, 2021) (Notes 1 and 9) 		    100       1     $ —         —       $ 1  
Shares issued pursuant to asset purchase agreement (Note 3)     36,000,000       1,367,668       —         —         1,367,668  
Private placement, net of share issue costs (Note 9)     5,035,000       1,982,706       —         —         1,982,706  
Net loss for the period     —         —         —         (563,061 )     (563,061 )
Share-based payment (Note 9)     —         —         305,876       —         305,876  
Balance, April 30, 2021     41,035,100       3,350,375     $ 305,876       (563,061 )   $ 3,093,190  

 

The accompanying notes are an integral part of these financial statements.

 

 

F-6 
 
 

ARRAS MINERALS CORP.

Statement of Cash Flows

(Expressed in United States Dollars)

 

    For the Period from Inception on February 5, 2021 to April 30, 2021
Operating Activities        
Net loss for the period   $ (563,061 )
Items not affecting cash        
Depreciation     4,827  
Unrealized foreign exchange gain     (32,013 )
Share-based payment     305,876  
      (284,371 )
Changes in non-cash working capital        
Due to related party     118,668  
Accounts payable and accrued liabilities     145,015  
      263,683  
Cash Used in Operating Activities     (20,688 )
Financing Activity        
Issuance of common shares, net of share issue costs     2,001,245  
Cash Provided by Financing Activity     2,001,245  
Investing Activity        
Loans to Ekidos Minerals LLP     (450,000 )
Cash Used in Investing Activity     (450,000 )
Effect of Foreign Currency Translation on Cash     32,013  
Net Change in Cash     1,562,570  
Cash, Beginning of Period     —    
Cash, End of Period   $ 1,562,570  
 Supplemental Cash Flow Information (Note 12)        

 

 

F-7 
 
 

 

Arras Minerals Corp.

Notes to the Financial Statements

For the Period from Inception (February 5, 2021) to April 30, 2021

 

 

 

 

1.                   NATURE OF OPERATIONS AND GOING CONCERN

Arras Minerals Corp. (the “Company”) was incorporated on February 5, 2021 under the Business Corporations Act (British Columbia) as part of an asset purchase agreement to reorganize Silver Bull Resources, Inc. (“Silver Bull”) as described in Note 3. The Company’s head office is located at 1610-777 Dunsmuir Street, Vancouver, BC, V7Y 1K4, Canada.

The Company is engaged in the acquisition, exploration, and development of mineral property interests. The Company’s assets consist primarily of the option to acquire a 100% interest in the Beskauga property (“Beskauga”) in Kazakhstan, and loans made to Ekidos Minerals LLP (“Ekidos”), who holds exploration licenses for properties located in Kazakhstan.

The Company has not yet determined whether the properties contains mineral reserves where extraction is both technically feasible and commercially viable. The business of mining and the exploration for minerals involves a high degree of risk and there can be no assurance that such activities will result in profitable mining operations.

The Company has incurred operating losses to date and has no current sources of revenue or cash inflows from operations. The Company relies on share issuances in order to fund its exploration and other business objectives. Since inception, the Company has raised Canadian dollar (“$CDN”) $2.5 million (United States dollars of $2 million) through the issuance of common shares, and as at April 30, 2021 has cash of $1.6 million which, based on current forecasts is not sufficient to fund the Company’s planned exploration activities and general and administrative costs for the next twelve months.

The Company’s ability to continue as a going concern is dependent upon successful execution of its business plan, raising additional capital or evaluating strategic alternatives for its mineral property interests. The Company expects to continue to raise the necessary funds primarily through the issuance of common shares. There can be no guarantees that future equity financing will be available in which case the Company may need to reduce its exploration activities. There can be no assurance that management’s plan will be successful. If the going concern assumption was not appropriate for these financial statements, then adjustments would be necessary to the carrying values of assets and liabilities, the reported expenses and the balance sheet classifications used. Such adjustments could be material.

On March 11, 2020, the novel coronavirus outbreak (“COVID-19”) was declared a pandemic by the World Health Organization. While, other than travel restriction to the Company’s exploration projects, the Company has not been significantly impacted by COVID-19, the situation is dynamic and the ultimate duration and magnitude of the impact on the economy and the Company’s business are not known at this time. These impacts could include an impact on the Company’s ability to obtain equity financing to fund additional exploration activities as well as the Company’s ability to explore and conduct business.

 

2. BASIS OF PRESENTATION

 

a) Statement of compliance

 

These financial statements were prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”) appliable to the preparation of financial statements.

 

These financial statements are presented in United States dollars, which is the Company’s functional currency.

 

F-8 
 
 

Arras Minerals Corp.

Notes to the Financial Statements

For the Period from Inception (February 5, 2021) to April 30, 2021

 

 

 

 

b) Basis of presentation

 

These financial statements have been prepared on a historical cost basis, except for certain financial instruments which are measured at fair value. In addition, these financial statements have been prepared using the accrual basis of accounting, except for cash flow information.

 

c) Approval of the financial statements

 

These financial statements were authorized for issue by the Board of Directors on June 22, 2021.

 

3. ASSET PURCHASE AGREEMENT

 

On March 19, 2021, pursuant to an asset purchase agreement with Silver Bull, a majority shareholder (88% interest) and related party, Silver Bull transferred all of its rights, title and interest in and to the Beskauga Option Agreement, as described in Note 6, to the Company. The consideration payable by the Company to Silver Bull was $1,367,668, paid through the issuance of 36,000,000 common shares of the Company.

 

The fair value of the assets at the date of transfer was as follows:

Mineral properties   $ 327,690  
Mining equipment     45,647  
Computer equipment and software     9,331  
Loans to Ekidos Minerals LLP (“Ekidos”)     985,000  
         
Net assets acquired   $ 1,367,668  

 

4. USE OF JUDGMENTS AND ESTIMATES

 

The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ materially from those estimates.

Measurement of the Company’s assets and liabilities is subject to risks and uncertainties, including ones related to: reserve and resource estimates; title to mineral properties; future commodity prices; estimated costs of future production; future costs of restoration provisions; changes in government legislation and regulations; estimated future income tax amounts; the availability of financing; and various operational factors.

Judgments that have the most significant effect on the amounts recognized in the Company`s financial statements are as follows:

 

a) Determination of functional currency

 

The determination of the Company’s functional currency is a matter of judgment based on an assessment of the specific facts and circumstances relevant to determining the primary economic environment of the Company. The Company reconsiders the functional currencies used when there is a change in events and conditions considered in determining the primary economic environment of the Company.

 

F-9 
 
 

Arras Minerals Corp.

Notes to the Financial Statements

For the Period from Inception (February 5, 2021) to April 30, 2021

 

 

 

 

b) Going concern

 

The assessment of whether the going concern assumption is appropriate requires management to take into account all available information about the future, which is at least, but not limited to, 12 months from the end of the reporting period. The Company is aware that material uncertainties exist related to events or conditions that may cast substantial doubt upon the Company’s ability to continue as a going concern.

 

c) Asset acquisitions versus business combinations

 

Management had to apply judgement with respect to whether the acquisitions through the asset purchase agreement (as discussed in Note 6) were asset acquisitions or business combinations. The assessments required management to assess the inputs, processes and outputs of the companies acquired at the time of the acquisition. Pursuant to the assessment, the asset purchase agreement was considered to be an asset acquisition.

 

Estimates that have the most significant effect on the amounts recognized in the Company`s financial statements are as follows:

 

d) Valuation of mineral properties

 

The Company carries the acquisition costs of its mineral properties at cost less any provision for impairment. The Company undertakes periodic reviews of the carrying values of mineral properties and whenever events or changes in circumstances indicate that their carrying values may exceed their fair value. In undertaking these reviews, management of the Company is required to make significant estimates. These estimates are subject to various risks and uncertainties, which may ultimately have an effect on the expected recoverability of the carrying values of the mineral properties and related expenditures.

 

e) Share-based payment

 

The Company uses the Black-Scholes option pricing model for the valuation of share-based payment. Option pricing models require the input of the subjective assumptions including expected price volatility, interest rate and forfeiture rate. Changes in the input assumptions can materially affect the fair value estimate and the Company’s net loss and share-based payment reserve.

 

f) Fair value of net assets acquired

 

The Company makes estimates in determining the fair value of the assets and liabilities acquired as part of an acquisition. Management exercises judgment in estimating the probability and timing of when cash flows are expected to be achieved, which is used as the basis for estimating fair value. Future performance results that differ from management’s estimates could result in changes to liabilities recorded, which are recorded as they arise through profit or loss. The fair value of identified intangible assets is determined using appropriate valuation techniques which are generally based on a forecast of the total expected future net cash flows of the acquiree. Valuations are highly dependent on the inputs used and assumptions made by management regarding the future performance of these assets and any changes in the discount rate applied. Acquisitions that do not meet the definition of a business combination are accounted for as asset acquisitions. Consideration paid for an asset acquisition is allocated to the individual identifiable assets acquired and liabilities assumed based on their relative fair values. Asset acquisitions do not give rise to goodwill.

 

g) Recoverability of loans to Ekidos Minerals LLP

 

Estimates are inherent in the on-going assessment of the recoverability of its loans to Ekidos Minerals LLP. The Company is not able to predict changes in financial conditions of its loan holders and the Company’s judgment related to the recoverability of its loans receivable may be material.

 

F-10 
 
 

Arras Minerals Corp.

Notes to the Financial Statements

For the Period from Inception (February 5, 2021) to April 30, 2021

 

 

 

 

5. SIGNIFICANT ACCOUNTING POLICIES

 

The accounting policies set out below have been applied in these financial statements.

 

a) Foreign currency translation

 

These financial statements are presented in United States Dollars (“USD”) which is the functional currency of the Company.

 

Statement of financial position: monetary assets and liabilities are translated into USD using period end exchange rates. Non-monetary assets and liabilities are translated into USD using historical exchange rates.

 

Statement of comprehensive loss: income, expenses, and other comprehensive income are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions).

 

Statement of changes in shareholders’ equity: all resulting exchange differences are recognized as a separate component of equity and in other comprehensive loss.

 

b) Financial instruments

 

Recognition and measurement of financial assets

The Company recognizes a financial asset when it becomes a party to the contractual provisions of the instrument.

 

Classification of financial assets

The Company classifies financial assets at initial recognition as financial assets: measured at amortized cost, measured at fair value through other comprehensive income or measured at fair value through profit or loss.

 

i. Financial assets measured at amortized cost

A financial asset that meets both of the following conditions is classified as a financial asset measured at amortized cost.

 

· The Company’s business model for the such financial assets, is to hold the assets in order to collect contractual cash flows.
· The contractual terms of the financial asset gives rise on specified dates to cash flows that are solely payments of principal and interest on the amount outstanding.

 

A financial asset measured at amortized cost is initially recognized at fair value plus transaction costs directly attributable to the asset. After initial recognition, the carrying amount of the financial asset measured at amortized cost is determined using the effective interest method, net of impairment loss, if necessary. The Company classifies its loans to Ekidos Minerals LLP as amortized cost.

 

ii. Financial assets measured at fair value through other comprehensive income (“FVTOCI”)

A financial asset measured at fair value through other comprehensive income is recognized initially at fair value plus transaction cost directly attributable to the asset. After initial recognition, the asset is measured at fair value with changes in fair value included as “financial asset at fair value through other comprehensive income” in other comprehensive income.

 

F-11 
 
 

Arras Minerals Corp.

Notes to the Financial Statements

For the Period from Inception (February 5, 2021) to April 30, 2021

 

 

 

 

iii. Financial assets measured at fair value through profit or loss (“FVTPL”)

A financial asset measured at fair value through profit or loss is recognized initially at fair value with any associated transaction costs being recognized in profit or loss when incurred. Subsequently, the financial asset is re-measured at fair value, and a gain or loss is recognized in profit or loss in the reporting period in which it arises. The Company classifies its cash as fair value through profit or loss.

 

Derecognition of financial assets

The Company derecognizes a financial asset if the contractual rights to the cash flows from the asset expire, or the Company transfers substantially all the risks and rewards of ownership of the financial asset. Any interests in transferred financial assets that are created or retained by the Company are recognized as a separate asset or liability. Gains and losses on derecognition are generally recognized in the statement of comprehensive loss. However, gains and losses on derecognition of financial assets classified as FVTOCI remain within accumulated other comprehensive income (loss).

 

Recognition and measurement of financial liabilities

The Company recognizes financial liabilities when it becomes a party to the contractual provisions of the instruments.

 

Classification of Financial Liabilities

The Company classifies financial liabilities at initial recognition as financial liabilities: measured at amortized cost or measured at fair value through profit or loss.

 

i. Financial liabilities measured at amortized cost

A financial liability at amortized cost is initially measured at fair value less transaction cost directly attributable to the issuance of the financial liability. Subsequently, the financial liability is measured at amortized cost based on the effective interest rate method. The Company classifies its accounts payable and accrued liabilities and due to related party as amortized cost.

 

ii. Financial liabilities measured at fair value through profit or loss

A financial liability measured at fair value through profit or loss is initially measured at fair value with any associated transaction costs being recognized in profit or loss when incurred. Subsequently, the financial liability is re-measured at fair value, and a gain or loss is recognized in profit or loss in the reporting period in which it arises.

 

Derecognition of financial liabilities

The Company derecognizes a financial liability when the financial liability is discharged, cancelled or expired. Generally, the difference between the carrying amount of the financial liability derecognized and the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognized in the statement of comprehensive loss.

 

Offsetting financial assets and liabilities

Financial assets and liabilities are offset and the net amount is presented in the statement of financial position only when the Company has a legally enforceable right to set off the recognized amounts and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

 

All financial assets except for those at fair value through profit or loss are subject to review for impairment at least at each reporting date. Financial assets are impaired when there is any objective evidence that a financial asset or a group of financial assets is impaired. Different criteria to determine impairment are applied for each category of financial assets, which are described above.

 

F-12 
 
 

Arras Minerals Corp.

Notes to the Financial Statements

For the Period from Inception (February 5, 2021) to April 30, 2021

 

 

 

 

c) Fair value hierarchy

 

Fair value measurements of financial instruments are required to be classified using a fair value hierarchy that reflects the significant of inputs used in making the measurements. The levels of the fair value hierarchy are defined as follows:

 

Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 – Inputs for assets or liabilities that are not based on observable market data.

 

The Company’s financial instruments classified as Level 1 in the fair value hierarchy are cash, loans to Ekidos Minerals LLP, accounts payable and accrued liabilities and due to related party. The carrying values approximate the fair values due to the short-term maturity of these instruments.

 

d) Mineral properties

 

Costs directly related to the acquisition of mineral properties are capitalized. Option payments are considered acquisition costs if the Company has the intention of exercising the underlying option.

 

Exploration, evaluation and property maintenance costs incurred on sites without an existing mine and on areas outside the boundary of a known mineral deposit which contains proven and probable reserves are expensed as incurred up to the date of establishing that property costs are economically recoverable and that the project is technically feasible.

 

Mineral properties are not subject to depletion or amortization, but rather are tested for impairment when circumstances indicate that the carrying value may not be recoverable.

 

Development expenditures are those incurred subsequent to the establishment of economic recoverability and after receipt of project development approval from the Board of Directors. The approval from the Board of Directors will be dependent upon the Company obtaining sufficient financial resources, permits, and licenses to develop the mineral property. Development costs are capitalized and included in the carrying amount of the related property.

 

Mineral property and mine development costs capitalized are amortized using the units-of-production method over the estimated life of the proven and probable reserves.

 

e) Office and equipment

 

Items of office and equipment are recorded at cost less accumulated depreciation. Cost includes all expenditures incurred to bring assets to the location and condition necessary for them to be operated in the manner intended by management, including estimated decommissioning and restoration costs and, where applicable, borrowing costs. If significant parts of an item of office and equipment have different useful lives, then they are accounted for as separate items (major components) of office and equipment.

 

No depreciation is recorded until the asset is substantially complete and ready for use. Office and equipment are depreciated over their estimated useful lives as follows:

 

Mining equipment Straight-line over five years
Computer equipment and software Straight-line over one year

 

 

F-13 
 
 

Arras Minerals Corp.

Notes to the Financial Statements

For the Period from Inception (February 5, 2021) to April 30, 2021

 

 

 

 

f) Impairment of non-financial assets

 

The Company reviews the carrying amounts of its non-financial assets, including mineral properties and office and equipment every reporting period. If there is any indication that the assets or Cash-Generating Units (the “CGU”) may not be fully recoverable, the recoverable amount of the asset or CGU is estimated in order to determine the extent of the impairment loss, if any. CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflow from other assets or group of assets.

 

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows to be derived from continuing use of the asset or CGU are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Fair value less cost to sell is the amount obtainable from the sale of an asset or CGU in an arm’s length transaction between knowledgeable, willing parties, less the cost of disposal. When a binding sale agreement is not available, fair value less costs to sell is estimated using a discounted cash flow approach with inputs and assumptions consistent with those at market. If the recoverable amount of an asset or CGU is estimated to be less than its carrying amount, the carrying amount of the asset or CGU is reduced to its recoverable amount. An impairment loss is recognized immediately in net income. Where an impairment loss subsequently reverses, the carrying amount of the asset or CGU is increased to the revised estimate of its recoverable amount, such that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized.

 

g) Restoration provisions

 

The Company recognizes liabilities for legal, contractual and constructive obligations for decommissioning and restoration when those obligations result from the acquisition, construction, development or normal operation of the asset. Provisions are measured at the present value of the expected expenditures required to settle the obligation using a discount rate reflecting the time value of money and risks specific to the liability. Upon initial recognition of the liability, the corresponding decommissioning and restoration cost is capitalized to the carrying amount of the related asset and amortized as an expense over the useful life of the related asset. Following the initial recognition of the restoration provision, the carrying amount of the liability is increased for the passage of time and adjusted for changes to the current market-based discounted rate and the amount or timing of cash flows needed to settle the obligation.

 

h) Other provisions

 

Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of past events, and it is probable that an outflow of resources that can be reliably estimated will be required to settle the obligation. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation.

 

i) Income taxes

 

Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to taxation authorities. The tax rates and tax laws used are those that are enacted or substantively enacted by the reporting date.

 

 

F-14 
 
 

Arras Minerals Corp.

Notes to the Financial Statements

For the Period from Inception (February 5, 2021) to April 30, 2021

 

 

 

 

 

Deferred income tax is provided for based on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax liabilities are generally recognized for all taxable temporary differences, and deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such assets and liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition of assets and liabilities in a transaction that is not a business combination and affects neither the taxable profit nor the accounting profit. The change in the net deferred income tax asset or liability is included in net income (loss) except for deferred income tax relating to equity items, which are recognized directly in equity. Deferred income tax assets and liabilities are measured using the substantively enacted statutory income tax rates which are expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled.

 

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

 

Deferred income tax assets and liabilities are offset only if a legally enforceable right exists to offset current tax assets against liabilities and the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on the same taxable entity.

 

The determination of current and deferred taxes requires interpretation of tax legislation, estimates of expected timing of reversal of deferred tax assets and liabilities, and estimates of future earnings.

 

j) Share-based payment

 

The Company’s stock option plan (Note 9) allows the Company’s employees, directors, officers and service providers to acquire shares of the Company. The fair value of options granted is recognized as share-based payment expense with a corresponding increase in reserves. An individual is classified as an employee when the individual is an employee for legal or tax purposes (direct employee) or provides services similar to those performed by a direct employee. Where stock options are subject to vesting, each vesting tranche is considered a separate award with its own vesting period and grant date fair value. The fair value of each tranche is measured at the grant date using the Black-Scholes option pricing model, taking into account the terms and conditions upon which the options were granted. Share-based payment expense is recognized over the tranche’s vesting period by a charge to profit or loss. At each financial position reporting date, the amount recognized as an expense is adjusted to reflect the actual number of stock options that are expected to vest. In situations where equity instruments are issued to service providers and some or all of the goods or services received by the entity as consideration cannot be specifically identified, they are measured at the fair value of the share-based payment. Otherwise, share-based payments are measured at the fair value of goods or services received.

 

k) Loss per share

 

Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of shares outstanding during the reporting period. Diluted loss per share is computed similarly to basic loss per share except that the weighted average shares outstanding are increased to include additional shares for the assumed exercise of stock options and warrants, if dilutive. The number of additional shares is calculated by assuming that outstanding stock options and warrants were exercised and that the proceeds from such exercises were used to acquire common shares at the average market price during the reporting periods.

 

l) Non-monetary transactions

 

Shares issued for consideration other than cash are valued at the fair value of assets received or services rendered. If the fair value of assets received or services rendered cannot be reliably measured, shares issued for consideration will be valued at the quoted market price at the date of issuance.

 

F-15 
 
 

 

Arras Minerals Corp.

Notes to the Financial Statements

For the Period from Inception (February 5, 2021) to April 30, 2021

 

 

 

 

m) New standards not yet adopted

 

The following standards and pronouncements have been issued by the IASB and have not yet been adopted by the Company. The Company is currently evaluating the impact the new and amended standards are expected to have on its financial statements. Pronouncements that are not applicable to the Company have been excluded from those described below.

 

Property, Plant and Equipment—Proceeds before Intended Use (Amendments to IAS 16)

 

These amendments will prohibit the Company from deducting net proceeds from selling any items produced while bringing an item of property, plant and equipment to the location and condition necessary for it to be capable of operating in a manner intended by management. The amendments require retrospective application and effective for annual reporting periods beginning on or after January 1, 2022, with earlier application permitted.

 

6. BESKAUGA OPTION AGREEMENT

On August 12, 2020, Silver Bull entered into the Beskauga Option Agreement with Copperbelt AG (“Copperbelt”) pursuant to which it has the exclusive right and option to acquire Copperbelt’s right, title and 100% interest in the Beskauga property located in Kazakhstan. 

On March 19, 2021, pursuant to an asset purchase agreement, Silver Bull transferred all its rights, title and interest in and to the Beskauga Option Agreement to the Company. The consideration payable by the Company to Silver Bull for the purchased assets was $1,367,668, paid through the issuance of 36,000,000 common shares of common shares in the capital of the Company (Note 3).

 

Under the terms of the Beskauga Option Agreement, the Company must incur the following exploration expenditures:

Date     Amount  
Within 1 year from Closing Date     $2 million  
Within 2 years from Closing Date     $3 million  
Within 3 years from Closing Date     $5 million  
Within 4 years from Closing Date     $5 million  

 

As of April 30, 2021, approximately $850,000 of the required expenditures have been incurred under the Beskauga Option Agreement, via the loans made to Ekidos. Ekidos is an unrelated third-party Kazakh entity, which was incorporated by Copperbelt to hold the Beskauga property interests. The funds advanced will be used for the acquisition of mineral property concessions in Kazakhstan and expenditures incurred in relation to the Beskauga Option Agreement. The Company incurred an additional $230,000 of exploration expenditures in May 2021, through an additional loan of $265,000 to Ekidos (Note 16).

 

The Beskauga Option Agreement also provides that subject to the terms and conditions set forth in the Beskauga Option Agreement, after the Company or its affiliate has incurred the exploration expenditures (outlined above), the Company or its affiliate may exercise the Beskauga Option and acquire (i) the Beskauga Property by paying Copperbelt $15,000,000 in cash, (ii) the Beskauga Main Project only by paying Copperbelt $13,500,000 in cash, or (iii) the Beskauga South Project only by paying Copperbelt $1,500,000 in cash.

F-16 
 
 

Arras Minerals Corp.

Notes to the Financial Statements

For the Period from Inception (February 5, 2021) to April 30, 2021

 

 

 

 

In addition, the Beskauga Option Agreement provides that subject to the terms and conditions set forth in the Beskauga Option Agreement, the Company or its affiliate may be obligated to make the following bonus payments (collectively, the “Bonus Payments”) to Copperbelt if the Beskauga Main Project or the Beskauga South Project is the subject of a bankable feasibility study in compliance with Canadian National Instrument 43-101 indicating gold equivalent resources in the amounts set forth below, with (i) (A) 20% of the Bonus Payments payable after completion of the bankable feasibility study or after the mineral resource statement is finally determined and (B) the remaining 80% of the Bonus Payments due within 15 business days of commencement of on-site construction of a mine for the Beskauga Main Project or the Beskauga South Project, as applicable, and (ii) up to 50% of the Bonus Payments payable in shares of the Company’s common shares to be valued at the 20-day volume-weighted average trading price of the shares on the Toronto Stock Exchange calculated as of the date immediately preceding the date such shares are issued:

Gold equivalent resources   Cumulative Bonus Payments
Beskauga Main Project    
3,000,000 ounces   $ 2,000,000  
5,000,000 ounces   $ 6,000,000  
7,000,000 ounces   $ 12,000,000  
10,000,000 ounces   $ 20,000,000  
Beskauga South Project        
2,000,000 ounces   $ 2,000,000  
3,000,000 ounces   $ 5,000,000  
4,000,000 ounces   $ 8,000,000  
5,000,000 ounces   $ 12,000,000  

 

The Beskauga Option Agreement may be terminated under certain circumstances, including (i) upon the mutual written agreement of the Company and Copperbelt; (ii) upon the delivery of written notice by the Company, provided that at the time of delivery of such notice, unless there has been a material breach of a representation or warranty given by Copperbelt that has not been cured, the Beskauga Property is in good standing; or (iii) if there is a material breach by a party of its obligations under the Beskauga Option Agreement and the other party has provided written notice of such material breach, which is incapable of being cured or remains uncured.

 

7. LOANS TO EKIDOS MINERALS LLP

 

On March 19, 2021, pursuant to an asset purchase agreement, Silver Bull transferred $985,000 of loan receivable from Ekidos to the Company (Note 3). On April 21, 2021, the Company loaned an additional $450,000 to Ekidos. The loan is non-interest bearing and is payable on June 30, 2021.

 

 

F-17 
 
 

Arras Minerals Corp.

Notes to the Financial Statements

For the Period from Inception (February 5, 2021) to April 30, 2021

 

 

 

 

8. OFFICE AND EQUIPMENT

 

    Mining Equipment   Computer Equipment and Software   Total
Cost                        
Assets acquired on acquisition   $ 45,647     $ 9,331     $ 54,978  
Balance, April 30, 2021     45,647       9,331       54,978  
                         
Depreciation                        
Depreciation for the period     2,282       2,545       4,827  
Balance, April 30, 2021     2,282       2,545       4,827  
                         
Carrying amounts                        
Balance, April 30, 2021   $ 43,365     $ 6,786     $ 50,151  
                         

During the period from inception on February 5, 2021 to April 30, 2021, the Company acquired mining equipment and computer equipment and software of $54,978 pursuant to an asset purchase agreement with Silver Bull (Note 3).

 

9. SHARE CAPITAL

 

a) Authorized

 

Unlimited number of common shares and an unlimited number of preferred shares, without par value.

 

b) Issued and outstanding

 

Preferred shares

 

No preferred shares have been issued.

 

Common shares

 

As of April 30, 2021, there are 41,035,100 common shares issued and outstanding.

 

During the period from inception on February 5, 2021 to April 30, 2021, the following transactions occurred:

 

On February 5, 2021, the Company issued 100 common shares at a price of $0.01 per common share for gross proceeds of $1 in connection with the incorporation of the Company.

 

On March 19, 2021, the Company issued 36,000,000 common shares at a price of $0.38 per common share as consideration for an asset purchase agreement (Note 3).

 

On April 1, 2021, the Company completed a private placement for 5,035,000 common shares at a price of $CDN 0.50 per common share for gross proceeds of $CDN 2,517,500 ($2,001,352). No placement agent or finder’s fees were paid in connection with the private placement. The Company incurred other offering costs associated with the private placement of $18,646, of which $18,538 is included in accounts payable and accrued liabilities at April 30, 2021.

 

F-18 
 
 

Arras Minerals Corp.

Notes to the Financial Statements

For the Period from Inception (February 5, 2021) to April 30, 2021

 

 

 

 

c) Stock options

 

Pursuant to the Company’s Equity Incentive Plan (the “Plan”), which has been approved by the Board of Directors, the Company grants stock options to employees, directors, officers and advisors. Under the Plan, options can be granted for a maximum term of ten years and vesting of stock options is required to occur in three equal installments, with one third of the options vesting on each of the grant date, the first-year anniversary of the grant date and the second anniversary of the grant date. Further, the exercise price shall not be less than the price of the Company’s common shares on the date of the stock option grant.

During the period from inception on February 5, 2021 to April 30, 2021, the Company granted options to acquire 4,160,000 common shares with a weighted-average grant-date fair value of $0.40 per share and an exercise price of $CDN 0.50 per share.

 

No options were exercised during the period from inception on February 5, 2021 to April 30, 2021. Stock option transactions are summarized as follows:

 

    Number of Options   Weighted Average Exercise Price
  Balance, February 5, 2021       —         —    
  Issued       4,160,000       0.40  
  Balance, April 30, 2021       4,160,000       0.40  
                     

 

The following options were outstanding and exercisable at April 30, 2021:

 

Grant Date   Expiry Date   Exercise Price   Number of Options Outstanding   Number of Options Exercisable
April 15, 2021   April 14, 2026     $CDN 0.50       4,160,000       1,353,332  

  

The weighted average remaining contractual life for options outstanding at April 30, 2021 is 4.96 years.

 

The total fair value of options granted during the period from inception on February 5, 2021 to April 30, 2021 was $927,882, of which $305,876 was recognized stock-based payment in the statement of comprehensive loss with a corresponding increase in reserves. The remaining amount of $622,006 will be expensed as the remaining unvested options vest.

 

The Company applies the fair value method using the Black-Scholes option pricing model in accounting for its stock options granted. Accordingly, share-based payments of $257,869 were recognized as general and administrative for options granted to employees and directors and $48,007 was recognized as exploration for options granted to employees and consultants.

 

 

F-19 
 
 

Arras Minerals Corp.

Notes to the Financial Statements

For the Period from Inception (February 5, 2021) to April 30, 2021

 

 

 

 

A summary of the range of assumptions used to value stock options granted for the period from inception on February 5, 2021 to April 30, 2021 is as follows:

         
Options     For the Period from Inception on February 5, 2021 to April 30, 2021  
Expected volatility     75% - 79%  
Risk-free interest rate     0.46% - 0.90%  
Dividend yield     —    
Expected term (in years)     3 – 5  

 

The expected volatility assumption is based on the historical and implied volatility of the comparable companies’ common share price. The risk-free interest rate assumption is based on yield curves on government zero-coupon bonds with a remaining term equal to the stock options’ expected life. The Company has not paid and does not anticipate paying dividends on its common stock. Companies are required to utilize an estimated forfeiture rate when calculating the expense for the reporting period. Based on the best estimate, management applied the estimated forfeiture rate of 0% in determining the expense recorded in the accompanying statements of comprehensive loss.

 

10. INCOME TAXES

 

Income tax expense differs from the amount that would be computed by applying the Canadian statutory income tax rate of 27.00% to loss before income taxes.

 

   

For the Period from Inception on

February 5, 2021 to April 30, 2021

     
Loss before income taxes   $ (563,000 )
Statutory income tax rate     27.00 %
         
Income tax benefit computed at statutory tax rate     (152,000 )
Items not deductible for income tax purposes     83,000  
Unrecognized benefit of deferred income tax assets     69,000  
         
Income tax benefit   $ —    

 

Significant unrecognized tax benefits and unused tax losses for which no deferred tax asset is recognized as of April 30, 2021 are as follows:

 

   

For the Period from Inception on

February 5, 2021 to April 30, 2021

     
Share issuance costs   $ 15,000  
Mineral properties     34,000  
Office and equipment     5,000  
Non-capital losses carried forward     252,000  
         
Unrecognized deductible temporary differences   $ 306,000  

 

The Company has available approximate net operational losses of $252,000 that may be carried forward until 2041.

 

F-20 
 
 

Arras Minerals Corp.

Notes to the Financial Statements

For the Period from Inception (February 5, 2021) to April 30, 2021

 

 

 

 

11. RELATED PARTY TRANSACTIONS

 

Included in accounts payable and accrued liabilities at April 30, 2021 is $5,526 due to officers and directors of the Company.

 

As at April 30, 2021, due to related party consists of $118,668 payable to Silver Bull for rent and shared office expenditures.

 

During the period from inception on February 5, 2021 to April 30, 2021, the Company paid or accrued the following amounts to officers, directors or companies controlled by officers and/or directors:

 

 

 

   

For the Period from Inception on

February 5, 2021 to April 30, 2021

Share-based payment   $ 257,869  
Directors fees     13,487  
Personnel     78,075  
    $ 349,431  

 

12. SUPPLEMENTAL CASH FLOW INFORAMATION

 

   

For the Period from Inception on

February 5, 2021 to April 30, 2021

     
Supplemental information    
Interest paid   $ -
Income taxes paid   $ -
Non-cash investing and financing activities        
    Offering costs included in accounts payable and liabilities   $ 18,538  
    Acquisition of assets for common shares   $ 1,367,668  
         

 

13. FINANCIAL INSTRUMENTS

 

The Company’s financial instruments consist of cash, loans to Ekidos Minerals LLP, accounts payable and accrued liabilities and due to related party. The Company’s risk exposure and the impact on the Company’s financial instruments are summarized below.

 

a) Credit risk

 

Credit risk is the risk of financial loss to the Company if a counter party to a financial instrument fails to meet its payment obligations. The Company is exposed to credit risk with respect to its cash and loans to Ekidos Minerals LLP. Management believes that the credit risk concentration with respect to cash is remote as it maintains accounts with highly rated financial institutions. The Company’s loans to Ekidos Minerals LLP are subject to the expected credit loss model. The carrying amount of the loans to Ekidos Minerals LLP represent the maximum credit exposure.

 

F-21 
 
 

Arras Minerals Corp.

Notes to the Financial Statements

For the Period from Inception (February 5, 2021) to April 30, 2021

 

 

 

 

b) Liquidity risk

 

Liquidity risk is the risk that the Company will encounter difficulty in satisfying its financial obligations as they become due. The Company manages its liquidity risk by forecasting cash flows from operations and anticipating investing and financing activities. As at April 30, 2021, the Company had working capital of $2,715,349. All of the Company’s liabilities are due within 90 days of April 30, 2021.

 

c) Market risk

 

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, foreign currency risk and other price risk. The Company is not currently exposed to any significant interest rate risk or other price risk. The Company is exposed to foreign currency risk with respect to cash denominated in Canadian dollars. As at April 30, 2021, a 15% strengthening (weakening) of the Canadian dollar against the United States dollar would have increased (decreased) the Company’s comprehensive loss by approximately $226,000 for the period from inception on February 5, 2021 to April 30, 2021.

 

14. CAPITAL MANAGEMENT

 

The Company defines it capital as shareholders’ equity. Capital requirements are driven by the Company’s general operations and exploration. To effectively manage the Company’s capital requirements, the Company monitors expenses and overhead to ensure costs and commitments are being paid. The Company is not subject to any externally imposed capital requirements. The Company did not change its approach to capital management during the period from inception on February 5, 2021 to April 30, 2021.

 

15. SEGMENTED INFORMATION

 

The Company’s exploration and evaluation activities are located in Kazakhstan, with its head office function in Canada. As at April 30, 2021, all of the Company’s non-current assets are located in Kazakhstan.

 

16. SUBSEQUENT EVENTS

 

On May 19, 2021, the Company entered an additional loan agreement with Ekidos to loan up to $480,000 related to the exploration activities in Kazakhstan. The loan is interest free and is to be repaid by July 31, 2021. Of this amount, the Company has advanced $265,000 to date.

 

F-22 
 
 

Exhibit 1.1

 

 

 

 

 

 

 

 

 
 
 

 

 

 

Exhibit 1.2

 

 

TABLE OF CONTENTS

BUSINESS CORPORATIONS ACT

ARTICLES

OF

Arras Minerals Corp.

Page

Article 1 INTERPRETATION
1.1   Definitions 1
1.2   Business Corporations Act and Interpretation Act Definitions Applicable 1
Article 2 SHARES AND SHARE CERTIFICATES
2.1   Authorized Share Structure 1
2.2   Form of Share Certificate 1
2.3   Shareholder Entitled to Certificate or Acknowledgement 1
2.4   Delivery by Mail 2
2.5   Replacement of Worn Out or Defaced Certificate or Acknowledgement 2
2.6   Replacement of Lost, Stolen or Destroyed Certificate or Acknowledgement 2
2.7   Splitting Share Certificates 2
2.8   Certificate Fee 2
2.9   Recognition of Trusts 2
Article 3 ISSUE OF SHARES
3.1   Directors Authorized 3
3.2   Commissions and Discounts 3
3.3   Brokerage 3
3.4   Conditions of Issue 3
3.5   Share Purchase Warrants and Rights 3
Article 4 SHARE REGISTERS
4.1   Central Securities Register 3
4.2   Closing Register 4

 

 

 

 

 
 
 

 

Article 5 SHARE TRANSFERS
5.1   Registering Transfers 4
5.2   Form of Instrument of Transfer 4
5.3   Transferor Remains Shareholder 4
5.4   Signing of Instrument of Transfer 4
5.5   Enquiry as to Title Not Required 4
5.6   Transfer Fee 5
Article 6 TRANSMISSION OF SHARES
6.1   Legal Personal Representative Recognized on Death 5
6.2   Rights of Legal Personal Representative 5
Article 7 PURCHASE OF SHARES
7.1   Company Authorized to Purchase Shares 5
7.2   Purchase When Insolvent 5
7.3   Sale and Voting of Purchased Shares 5
Article 8 BORROWING POWERS
8.1   Borrowing Powers 5
Article 9 ALTERATIONS
9.1   Alteration of Authorized Share Structure 6
9.2   Special Rights and Restrictions 6
9.3   Change of Name 7
9.4   Other Alterations 7
Article 10 MEETINGS OF SHAREHOLDERS
10.1   Annual General Meetings 7
10.2   Resolution Instead of Annual General Meeting 7
10.3   Calling of Meetings of Shareholders 7
10.4   Notice for Meetings of Shareholders 7
10.5   Record Date for Notice 7
10.6   Record Date for Voting 8
10.7   Failure to Give Notice and Waiver of Notice 8
10.8   Notice of Special Business at Meetings of Shareholders 8
10.9   Location of Meetings of Shareholders 8

 

 

 
 
 

 

Article 11 PROCEEDINGS AT MEETINGS OF SHAREHOLDERS
11.1   Special Business 8
11.2   Special Majority 9
11.3   Quorum 9
11.4   One Shareholder May Constitute Quorum 9
11.5   Other Persons May Attend 9
11.6   Requirement of Quorum 9
11.7   Lack of Quorum 9
11.8   Lack of Quorum at Succeeding Meeting 10
11.9   Chair 10
11.10   Selection of Alternate Chair 10
11.11   Adjournments 10
11.12   Notice of Adjourned Meeting 10
11.13   Decision by Show of Hands or Poll 10
11.14   Declaration of Result 10
11.15   Motion Need Not be Seconded 11
11.16   Casting Vote 11
11.17   Manner of Taking Poll 11
11.18   Demand for Poll on Adjournment 11
11.19   Chair Must Resolve Dispute 11
11.20   Casting of Votes 11
11.21   Demand for Poll 11
11.22   Demand for Poll Not to Prevent Continuance of Meeting 11
11.23   Retention of Ballots and Proxies 11
11.24   Meeting by Telephone or Other Communications Medium 12
Article 12 VOTES OF SHAREHOLDERS
12.1   Number of Votes by Shareholder or by Shares 12
12.2   Votes of Persons in Representative Capacity 12
12.3   Votes by Joint Holders 12
12.4   Legal Personal Representatives as Joint Shareholders 12
12.5   Representative of a Corporate Shareholder 12
12.6   Proxy Provisions Do Not Apply to All Companies 13
12.7   Appointment of Proxy Holders 13
12.8   Alternate Proxy Holders 13
12.9   When Proxy Holder Need Not Be Shareholder 13

 

 

 
 
 

 

12.10   Deposit of Proxy 14
12.11   Validity of Proxy Vote 14
12.12   Form of Proxy 14
12.13   Revocation of Proxy 15
12.14   Revocation of Proxy Must Be Signed 15
12.15   Production of Evidence of Authority to Vote 15
Article 13 DIRECTORS
13.1   First Directors; Number of Directors 15
13.2   Change in Number of Directors 16
13.3   Directors’ Acts Valid Despite Vacancy 16
13.4   Qualifications of Directors 16
13.5   Remuneration of Directors 16
13.6   Reimbursement of Expenses of Directors 16
13.7   Special Remuneration for Directors 16
13.8   Gratuity, Pension or Allowance on Retirement of Director 16
Article 14 ELECTION AND REMOVAL OF DIRECTORS
14.1   Election at Annual General Meeting 17
14.2   Consent to be a Director 17
14.3   Failure to Elect or Appoint Directors 17
14.4   Places of Retiring Directors Not Filled 17
14.5   Directors May Fill Casual Vacancies 18
14.6   Remaining Directors Power to Act 18
14.7   Shareholders May Fill Vacancies 18
14.8   Additional Directors 18
14.9   Ceasing to be a Director 18
14.10   Removal of Director by Shareholders 18
14.11   Removal of Director by Directors 18
Article 15 POWERS AND DUTIES OF DIRECTORS
15.1   Powers of Management 19
15.2   Appointment of Attorney of Company 19
Article 16 DISCLOSURE OF INTEREST OF DIRECTORS
16.1   Obligation to Account for Profits 19
16.2   Restrictions on Voting by Reason of Interest 19
16.3   Interested Director Counted in Quorum 19

 

 

 
 
 

 

16.4   Disclosure of Conflict of Interest or Property 19
16.5   Director Holding Other Office in the Company 20
16.6   No Disqualification 20
16.7   Professional Services by Director or Officer 20
16.8   Director or Officer in Other Corporations 20
Article 17 PROCEEDINGS OF DIRECTORS
17.1   Meetings of Directors 20
17.2   Voting at Meetings 20
17.3   Chair of Meetings 20
17.4   Meetings by Telephone or Other Communications Medium 21
17.5   Calling of Meetings 21
17.6   Notice of Meetings 21
17.7   When Notice Not Required 21
17.8   Meeting Valid Despite Failure to Give Notice 21
17.9   Waiver of Notice of Meetings 21
17.10   Quorum 21
17.11   Validity of Acts Where Appointment Defective 22
17.12   Consent Resolutions in Writing 22
Article 18 EXECUTIVE AND OTHER COMMITTEES
18.1   Appointment and Powers of Executive Committee 22
18.2   Appointment and Powers of Other Committees 22
18.3   Obligations of Committees 23
18.4   Powers of Board 23
18.5   Committee Meetings 23
Article 19 OFFICERS
19.1   Directors May Appoint Officers 23
19.2   Functions, Duties and Powers of Officers 23
19.3   Qualifications 24
19.4   Remuneration and Terms of Appointment 24
Article 20 INDEMNIFICATION
20.1   Definitions 24
20.2   Mandatory Indemnification of Directors and Former Directors 24
20.3   Indemnification of Other Persons 25
20.4   Non-Compliance with Business Corporations Act 25

 

 

 
 
 

 

20.5   Company May Purchase Insurance 25
Article 21 DIVIDENDS
21.1   Payment of Dividends Subject to Special Rights 25
21.2   Declaration of Dividends 25
21.3   No Notice Required 25
21.4   Record Date 25
21.5   Manner of Paying Dividend 25
21.6   Settlement of Difficulties 25
21.7   When Dividend Payable 26
21.8   Dividends to be Paid in Accordance with Number of Shares 26
21.9   Receipt by Joint Shareholders 26
21.10   Dividend Bears No Interest 26
21.11   Fractional Dividends 26
21.12   Payment of Dividends 26
21.13   Capitalization of Surplus 26
Article 22 DOCUMENTS, RECORDS AND REPORTS
22.1   Recording of Financial Affairs 26
22.2   Inspection of Accounting Records 26
Article 23 NOTICES
23.1   Method of Giving Notice 27
23.2   Deemed Receipt of Mailing 27
23.3   Certificate of Sending 28
23.4   Notice to Joint Shareholders 28
23.5   Notice to Trustees 28
Article 24 SEAL AND EXECUTION OF DOCUMENTS
24.1   Who May Attest Seal 28
24.2   Sealing Copies 28
24.3   Mechanical Reproduction of Seal 28
24.4   Execution of Documents Generally 29
Article 25 PROHIBITIONS
25.1   Definitions 29
25.2   Application 29
25.3   Consent Required for Transfer of Shares of Designated Securities 29

 

 

 

 

 
 
 

 

 

Certificate of Incorporation Number:________________

BUSINESS CORPORATIONS ACT

ARTICLES

of

Arras Minerals Corp.

 

Article 1
INTERPRETATION 

1.1                          Definitions. In these Articles, unless the context otherwise requires:

“board of directors”, “directors” and “board” mean the directors or sole director of the Company for the time being;

“Business Corporations Act” means the Business Corporations Act (British Columbia) from time to time in force and all amendments thereto and includes all regulations and amendments thereto made pursuant to that Act;

“legal personal representative” means the personal or other legal representative of the shareholder;

“registered address” of a shareholder means the shareholder’s address as recorded in the central securities register;

“seal” means the seal of the Company, if any.

1.2                          Business Corporations Act and Interpretation Act Definitions Applicable. The definitions in the Business Corporations Act and the definitions and rules of construction in the Interpretation Act, with the necessary changes, so far as applicable, and unless the context requires otherwise, apply to these Articles as if they were an enactment. If there is a conflict between a definition in the Business Corporations Act and a definition or rule in the Interpretation Act relating to a term used in these Articles, the definition in the Business Corporations Act will prevail in relation to the use of the term in these Articles. If there is a conflict between these Articles and the Business Corporations Act, the Business Corporations Act will prevail.

Article 2
SHARES AND SHARE CERTIFICATES

2.1                          Authorized Share Structure. The authorized share structure of the Company consists of shares of the class or classes and series, if any, described in the Notice of Articles of the Company.

2.2                          Form of Share Certificate. Each share certificate issued by the Company must comply with, and be signed as required by, the Business Corporations Act.

2.3                          Shareholder Entitled to Certificate or Acknowledgement. Each shareholder is entitled, without charge, to (a) one share certificate representing the shares of each class or series of shares registered in the shareholder’s name or (b) a non-transferable written acknowledgement of the shareholder’s right to obtain such a share certificate, provided that in respect of a share held jointly by several persons, the Company is not bound to issue more than one share certificate and delivery of a share certificate for a share to one of several joint shareholders or to one of the shareholders’ duly authorized agents will be sufficient delivery to all.

 

 
 
 

2.4                          Delivery by Mail. Any share certificate or non-transferable written acknowledgement of a shareholder’s right to obtain a share certificate may be sent to the shareholder by mail at the shareholder’s registered address and neither the Company nor any director, officer or agent of the Company is liable for any loss to the shareholder because the share certificate or acknowledgement is lost in the mail or stolen.

2.5                          Replacement of Worn Out or Defaced Certificate or Acknowledgement. If the directors are satisfied that a share certificate or a non-transferable written acknowledgement of the shareholder’s right to obtain a share certificate is worn out or defaced, they must, on production to them of the share certificate or acknowledgement, as the case may be, and on such other terms, if any, as they think fit:

(a) order the share certificate or acknowledgement, as the case may be, to be cancelled; and
(b) issue a replacement share certificate or acknowledgement, as the case may be.

2.6                          Replacement of Lost, Stolen or Destroyed Certificate or Acknowledgement. If a share certificate or a non-transferable written acknowledgement of a shareholder’s right to obtain a share certificate is lost, stolen or destroyed, a replacement share certificate or acknowledgement, as the case may be, must be issued to the person entitled to that share certificate or acknowledgement, as the case may be, if the directors receive:

(a) proof satisfactory to them that the share certificate or acknowledgement is lost, stolen or destroyed; and
(b) any indemnity the directors consider adequate.

2.7                          Splitting Share Certificates. If a shareholder surrenders a share certificate to the Company with a written request that the Company issue in the shareholder’s name two or more share certificates, each representing a specified number of shares and in the aggregate representing the same number of shares as the share certificate so surrendered, the Company must cancel the surrendered share certificate and issue replacement share certificates in accordance with that request.

2.8                          Certificate Fee. There must be paid to the Company, in relation to the issue of any share certificate under Articles 2.5, 2.6 or 2.7, the amount, if any and which must not exceed the amount prescribed under the Business Corporations Act, determined by the directors.

2.9                          Recognition of Trusts. Except as required by law or statute or these Articles, no person will be recognized by the Company as holding any share upon any trust, and the Company is not bound by or compelled in any way to recognize (even when having notice thereof) any equitable, contingent, future or partial interest in any share or fraction of a share or (except as by law or statute or these Articles provided or as ordered by a court of competent jurisdiction) any other rights in respect of any share except an absolute right to the entirety thereof in the shareholder.

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Article 3
ISSUE OF SHARES

3.1                          Directors Authorized. Subject to the Business Corporations Act and the rights of the holders of issued shares of the Company, the Company may issue, allot, sell or otherwise dispose of the unissued shares, and issued shares held by the Company, at the times, to the persons, including directors, in the manner, on the terms and conditions and for the issue prices (including any premium at which shares with par value may be issued) that the directors may determine. The issue price for a share with par value must be equal to or greater than the par value of the share.

3.2                          Commissions and Discounts. The Company may at any time, pay a reasonable commission or allow a reasonable discount to any person in consideration of that person purchasing or agreeing to purchase shares of the Company from the Company or any other person or procuring or agreeing to procure purchasers for shares of the Company.

3.3                          Brokerage. The Company may pay such brokerage fee or other consideration as may be lawful for or in connection with the sale or placement of its securities.

3.4                          Conditions of Issue. Except as provided for by the Business Corporations Act, no share may be issued until it is fully paid. A share is fully paid when:

(a) consideration is provided to the Company for the issue of the share by one or more of the following:
(i) past services performed for the Company;
(ii) property; or
(iii) money; and
(b) the value of the consideration received by the Company equals or exceeds the issue price set for the share under Article 3.1.

3.5                          Share Purchase Warrants and Rights. Subject to the Business Corporations Act, the Company may issue share purchase warrants, options and rights upon such terms and conditions as the directors determine, which share purchase warrants, options and rights may be issued alone or in conjunction with debentures, debenture stock, bonds, shares or any other securities issued or created by the Company from time to time.

Article 4
SHARE REGISTERS

4.1                          Central Securities Register. As required by and subject to the Business Corporations Act, the Company must maintain in British Columbia a central securities register. The directors may, subject to the Business Corporations Act, appoint an agent to maintain the central securities register. The directors may also appoint one or more agents, including the agent which keeps the central securities register, as transfer agent for its shares or any class or series of its shares, as the case may be, and the same or another agent as registrar for its shares or such class or series of its shares, as the case may be. The directors may terminate such appointment of any agent at any time and may appoint another agent in its place.

 

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4.2                          Closing Register. The Company must not at any time close its central securities register.

Article 5
SHARE TRANSFERS

5.1                          Registering Transfers. A transfer of a share of the Company must not be registered unless:

(a) a duly signed instrument of transfer in respect of the share has been received by the Company;
(b) if a share certificate has been issued by the Company in respect of the share to be transferred, that share certificate has been surrendered to the Company; and
(c) if a non-transferable written acknowledgement of the shareholder’s right to obtain a share certificate has been issued by the Company in respect of the share to be transferred, that acknowledgement has been surrendered to the Company.

5.2                          Form of Instrument of Transfer. The instrument of transfer in respect of any share of the Company must be either in the form, if any, on the back of the Company’s share certificates or in any other form that may be approved by the directors from time to time.

5.3                          Transferor Remains Shareholder. Except to the extent that the Business Corporations Act otherwise provides, the transferor of shares is deemed to remain the holder of the shares until the name of the transferee is entered in a securities register of the Company in respect of the transfer.

5.4                          Signing of Instrument of Transfer. If a shareholder, or his or her duly authorized attorney, signs an instrument of transfer in respect of shares registered in the name of the shareholder, the signed instrument of transfer constitutes a complete and sufficient authority to the Company and its directors, officers and agents to register the number of shares specified in the instrument of transfer or specified in any other manner, or, if no number is specified, all the shares represented by the share certificates or set out in the written acknowledgements deposited with the instrument of transfer:

(a) in the name of the person named as transferee in that instrument of transfer; or
(b) if no person is named as transferee in that instrument of transfer, in the name of the person on whose behalf the instrument is deposited for the purpose of having the transfer registered.

5.5                          Enquiry as to Title Not Required. Neither the Company nor any director, officer or agent of the Company is bound to inquire into the title of the person named in the instrument of transfer as transferee or, if no person is named as transferee in the instrument of transfer, of the person on whose behalf the instrument is deposited for the purpose of having the transfer registered or is liable for any claim related to registering the transfer by the shareholder or by any intermediate owner or holder of the shares, of any interest in the shares, of any share certificate representing such shares or of any written acknowledgement of a right to obtain a share certificate for such shares.

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5.6                          Transfer Fee. There must be paid to the Company, in relation to the registration of any transfer, the amount, if any, determined by the directors.

Article 6
TRANSMISSION OF SHARES

6.1                          Legal Personal Representative Recognized on Death. In case of the death of a shareholder, the legal personal representative, or if the shareholder was a joint holder, the surviving joint holder, will be the only person recognized by the Company as having any title to the shareholder’s interest in the shares. Before recognizing a person as a legal personal representative, the directors may require proof of appointment by a court of competent jurisdiction, a grant of letters probate, letters of administration or such other evidence or documents as the directors consider appropriate.

6.2                          Rights of Legal Personal Representative. The legal personal representative has the same rights, privileges and obligations that attach to the shares held by the shareholder, including the right to transfer the shares in accordance with these Articles, provided the documents required by the Business Corporations Act and the directors have been deposited with the Company.

Article 7
PURCHASE OF SHARES

7.1                          Company Authorized to Purchase Shares. Subject to Article 7.2, the special rights and restrictions attached to the shares of any class or series and the Business Corporations Act, the Company may, if authorized by the directors, purchase or otherwise acquire any of its shares at the price and upon the terms specified in such resolution.

7.2                          Purchase When Insolvent. The Company must not make a payment or provide any other consideration to purchase or otherwise acquire any of its shares if there are reasonable grounds for believing that:

(a) the Company is insolvent; or
(b) making the payment or providing the consideration would render the Company insolvent.

7.3                          Sale and Voting of Purchased Shares. If the Company retains a share redeemed, purchased or otherwise acquired by it, the Company may sell, gift or otherwise dispose of the share, but, while such share is held by the Company, it:

(a) is not entitled to vote the share at a meeting of its shareholders;
(b) must not pay a dividend in respect of the share; and
(c) must not make any other distribution in respect of the share.

Article 8
BORROWING POWERS

8.1                          Borrowing Powers. The Company, if authorized by the directors, may:

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(a) borrow money in the manner and amount, on the security, from the sources and on the terms and conditions that they consider appropriate;
(b) issue bonds, debentures and other debt obligations either outright or as security for any liability or obligation of the Company or any other person and at such discounts or premiums and on such other terms as they consider appropriate;
(c) guarantee the repayment of money by any other person or the performance of any obligation of any other person; and
(d) mortgage, charge, whether by way of specific or floating charge, grant a security interest in, or give other security on, the whole or any part of the present and future assets and undertaking of the Company.

Article 9
ALTERATIONS

9.1                          Alteration of Authorized Share Structure. Subject to Article 9.2 and the Business Corporations Act, the Company may by special resolution:

(a) create one or more classes or series of shares or, if none of the shares of a class or series of shares are allotted or issued, eliminate that class or series of shares;
(b) increase, reduce or eliminate the maximum number of shares that the Company is authorized to issue out of any class or series of shares or establish a maximum number of shares that the Company is authorized to issue out of any class or series of shares for which no maximum is established;
(c) subdivide or consolidate all or any of its unissued, or fully paid and issued, shares;
(d) if the Company is authorized to issue shares of a class of shares with par value:
(i) decrease the par value of those shares; or
(ii) if none of the shares of that class of shares are allotted or issued, increase the par value of those shares;
(e) change all or any of its unissued, or fully paid and issued, shares with par value into shares without par value or any of its unissued shares without par value into shares with par value;
(f) alter the identifying name of any of its shares; or
(g) otherwise alter its shares or authorized share structure when required or permitted to do so by the Business Corporations Act.

9.2                          Special Rights and Restrictions. Subject to the Business Corporations Act, the Company may by special resolution:

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(a) create special rights or restrictions for, and attach those special rights or restrictions to, the shares of any class or series of shares, whether or not any or all of those shares have been issued; or
(b) vary or delete any special rights or restrictions attached to the shares of any class or series of shares, whether or not any or all of those shares have been issued.

9.3                          Change of Name. The Company may by special resolution authorize an alteration of its Notice of Articles in order to change its name.

9.4                          Other Alterations. If the Business Corporations Act does not specify the type of resolution and these Articles do not specify another type of resolution, the Company may by special resolution alter these Articles.

Article 10
MEETINGS OF SHAREHOLDERS

10.1                       Annual General Meetings. Unless an annual general meeting is deferred or waived in accordance with the Business Corporations Act, the Company must hold its first annual general meeting within 18 months after the date on which it was incorporated or otherwise recognized, and after that must hold an annual general meeting at least once in each calendar year and not more than 15 months after the last annual reference date at such time and place as may be determined by the directors.

10.2                       Resolution Instead of Annual General Meeting. If all the shareholders who are entitled to vote at an annual general meeting consent by a unanimous resolution under the Business Corporations Act to all of the business that is required to be transacted at that annual general meeting, the annual general meeting is deemed to have been held on the date of the unanimous resolution. The shareholders must, in any unanimous resolution passed under this Article 10.2, select as the Company’s annual reference date a date that would be appropriate for the holding of the applicable annual general meeting.

10.3                       Calling of Meetings of Shareholders. The directors may, whenever they think fit, call a meeting of shareholders.

10.4                       Notice for Meetings of Shareholders. The Company must send notice of the date, time and location of any meeting of shareholders, in the manner provided in these Articles, or in such other manner, if any, as may be prescribed by ordinary resolution (whether previous notice of the resolution has been given or not), to each shareholder entitled to attend the meeting, to each director and to the auditor of the Company, unless these Articles otherwise provide, at least the following number of days before the meeting:

(a) if and for so long as the Company is a public company, 21 days;
(b) otherwise, 10 days.

10.5                       Record Date for Notice. The directors may set a date as the record date for the purpose of determining shareholders entitled to notice of any meeting of shareholders. The record date must not precede the date on which the meeting is to be held by more than two months or, in the case of a general meeting requisitioned by shareholders under the Business Corporations Act, by more than four months. The record date must not precede the date on which the meeting is held by fewer than:

(a) if and for so long as the Company is a public company, 21 days;

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(b) otherwise, 10 days.

If no record date is set, the record date is 5 p.m. on the day immediately preceding the first date on which the notice is sent or, if no notice is sent, the beginning of the meeting.

10.6                       Record Date for Voting. The directors may set a date as the record date for the purpose of determining shareholders entitled to vote at any meeting of shareholders. The record date must not precede the date on which the meeting is to be held by more than two months or, in the case of a general meeting requisitioned by shareholders under the Business Corporations Act, by more than four months. If no record date is set, the record date is 5 p.m. on the day immediately preceding the first date on which the notice is sent or, if no notice is sent, the beginning of the meeting.

10.7                       Failure to Give Notice and Waiver of Notice. The accidental omission to send notice of any meeting to, or the non-receipt of any notice by, any of the persons entitled to notice does not invalidate any proceedings at that meeting. Any person entitled to notice of a meeting of shareholders may, in writing or otherwise, waive or reduce the period of notice of such meeting.

10.8                       Notice of Special Business at Meetings of Shareholders. If a meeting of shareholders is to consider special business within the meaning of Article 11.1, the notice of meeting must:

(a) state the general nature of the special business; and
(b) if the special business includes considering, approving, ratifying, adopting or authorizing any document or the signing of or giving of effect to any document, have attached to it a copy of the document or state that a copy of the document will be available for inspection by shareholders:
(i) at the Company’s records office, or at such other reasonably accessible location in British Columbia as is specified in the notice; and
(ii) during statutory business hours on any one or more specified days before the day set for the holding of the meeting.

10.9                       Location of Meetings of Shareholders. Meetings of shareholders of the Company may be held at such other location outside of British Columbia that the board of directors, by resolution, may determine.

Article 11
PROCEEDINGS AT MEETINGS OF SHAREHOLDERS

11.1                       Special Business. At a meeting of shareholders, the following business is special business:

(a) at a meeting of shareholders that is not an annual general meeting, all business is special business except business relating to the conduct of or voting at the meeting;
(b) at an annual general meeting, all business is special business except for the following:

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(i) business relating to the conduct of or voting at the meeting;
(ii) consideration of any financial statements of the Company presented to the meeting;
(iii) consideration of any reports of the directors or auditor;
(iv) the setting or changing of the number of directors;
(v) the election or appointment of directors;
(vi) the appointment of an auditor;
(vii) the setting of the remuneration of an auditor;
(viii) business arising out of a report of the directors not requiring the passing of a special resolution or an exceptional resolution;
(ix) any other business which, under these Articles or the Business Corporations Act, may be transacted at a meeting of shareholders without prior notice of the business being given to the shareholders.

11.2                       Special Majority. The majority of votes required for the Company to pass a special resolution at a meeting of shareholders is two-thirds of the votes cast on the resolution.

11.3                       Quorum. Subject to the special rights and restrictions attached to the shares of any class or series of shares, the quorum for the transaction of business at a meeting of shareholders is two persons who are, or who represent by proxy, shareholders who, in the aggregate, hold at least 5% of the issued shares entitled to be voted at the meeting.

11.4                       One Shareholder May Constitute Quorum. If there is only one shareholder entitled to vote at a meeting of shareholders:

(a) the quorum is one person who is, or who represents by proxy, that shareholder, and
(b) that shareholder, present in person or by proxy, may constitute the meeting.

11.5                       Other Persons May Attend. The directors, the president (if any), the secretary (if any), the assistant secretary (if any), any lawyer for the Company, the auditor of the Company and any other persons invited by the directors are entitled to attend any meeting of shareholders, but if any of those persons does attend a meeting of shareholders, that person is not to be counted in the quorum and is not entitled to vote at the meeting unless that person is a shareholder or proxy holder entitled to vote at the meeting.

11.6                       Requirement of Quorum. No business, other than the election of a chair of the meeting and the adjournment of the meeting, may be transacted at any meeting of shareholders unless a quorum of shareholders entitled to vote is present at the commencement of the meeting, but such quorum need not be present throughout the meeting.

11.7                       Lack of Quorum. If, within one-half hour from the time set for the holding of a meeting of shareholders, a quorum is not present:

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(a) in the case of a general meeting requisitioned by shareholders, the meeting is dissolved, and
(b) in the case of any other meeting of shareholders, the meeting stands adjourned to the same day in the next week at the same time and place.

11.8                       Lack of Quorum at Succeeding Meeting. If, at the meeting to which the meeting referred to in Article 11.7(b) was adjourned, a quorum is not present within one-half hour from the time set for the holding of the meeting, the person or persons present and being, or representing by proxy, one or more shareholders entitled to attend and vote at the meeting constitute a quorum.

11.9                       Chair. The following individual is entitled to preside as chair at a meeting of shareholders:

(a) the chair of the board, if any; or
(b) if the chair of the board is absent or unwilling to act as chair of the meeting, the president, if any.

11.10                    Selection of Alternate Chair. If, at any meeting of shareholders, there is no chair of the board or president present within 15 minutes after the time set for holding the meeting, or if the chair of the board and the president are unwilling to act as chair of the meeting, or if the chair of the board and the president have advised the secretary, if any, or any director present at the meeting, that they will not be present at the meeting, the directors present must choose one of their number to be chair of the meeting or if all of the directors present decline to take the chair or fail to so choose or if no director is present, the shareholders entitled to vote at the meeting who are present in person or by proxy may choose any person present at the meeting to chair the meeting.

11.11                    Adjournments. The chair of a meeting of shareholders may, and if so directed by the meeting must, adjourn the meeting from time to time and from place to place, but no business may be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place.

11.12                    Notice of Adjourned Meeting. It is not necessary to give any notice of an adjourned meeting or of the business to be transacted at an adjourned meeting of shareholders except that, when a meeting is adjourned for 30 days or more, notice of the adjourned meeting must be given in the same manner of the original meeting.

11.13                    Decision by Show of Hands or Poll. Subject to the Business Corporations Act, every motion put to a vote at a meeting of shareholders will be decided on a show of hands unless a poll, before or on the declaration of the result of the vote by show of hands, is directed by the chair or demanded by at least one shareholder entitled to vote who is present in person or by proxy.

11.14                    Declaration of Result. The chair of a meeting of shareholders must declare to the meeting the decision on every question in accordance with the result of the show of hands or the poll, as the case may be, and that decision must be entered in the minutes of the meeting. A declaration of the chair that a resolution is carried by the necessary majority or is defeated is, unless a poll is directed by the chair or demanded under Article 11.13, conclusive evidence without proof of the number or proportion of the votes recorded in favour of or against the resolution.

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11.15                    Motion Need Not be Seconded. No motion proposed at a meeting of shareholders need be seconded unless the chair of the meeting rules otherwise, and the chair of any meeting of shareholders is entitled to propose or second a motion.

11.16                    Casting Vote. In case of an equality of votes, the chair of a meeting of shareholders does not, either on a show of hands or on a poll, have a second or casting vote in addition to the vote or votes to which the chair may be entitled as a shareholder.

11.17                    Manner of Taking Poll. Subject to Article 11.18, if a poll is duly demanded at a meeting of shareholders:

(a) the poll must be taken:
(i) at the meeting, or within seven days after the date of the meeting, as the chair of the meeting directs; and
(ii) in the manner, at the time and at the place that the chair of the meeting directs;
(b) the result of the poll is deemed to be the decision of the meeting at which the poll is demanded; and
(c) the demand for the poll may be withdrawn by the person who demanded it.

11.18                    Demand for Poll on Adjournment. A poll demanded at a meeting of shareholders on a question of adjournment must be taken immediately at the meeting.

11.19                    Chair Must Resolve Dispute. In the case of any dispute as to the admission or rejection of a vote given on a poll, the chair of the meeting must determine the dispute, and his or her determination made in good faith is final and conclusive.

11.20                    Casting of Votes. On a poll, a shareholder entitled to more than one vote need not cast all the votes in the same way.

11.21                    Demand for Poll. No poll may be demanded in respect of the vote by which a chair of a meeting of shareholders is elected.

11.22                    Demand for Poll Not to Prevent Continuance of Meeting. The demand for a poll at a meeting of shareholders does not, unless the chair of the meeting so rules, prevent the continuation of a meeting for the transaction of any business other than the question on which a poll has been demanded.

11.23                    Retention of Ballots and Proxies. The Company must, for at least three months after a meeting of shareholders, keep each ballot cast on a poll and each proxy voted at the meeting, and, during that period, make them available for inspection during normal business hours by any shareholder or proxy holder entitled to vote at the meeting. At the end of such three month period, the Company may destroy such ballots and proxies.

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11.24                    Meeting by Telephone or Other Communications Medium. A shareholder or proxy holder may participate in a meeting of the shareholders in person or by telephone if all shareholders or proxy holders participating in the meeting, whether in person or by telephone or other communications medium, are able to communicate with each other. A shareholder or proxy holder may participate in a meeting of the shareholders by a communications medium other than telephone if all shareholders or proxy holders participating in the meeting, whether in person or by telephone or other communications medium, are able to communicate with each other and if all shareholders or proxy holders who wish to participate in the meeting agree to such participation. A shareholder or proxy holder who participates in a meeting in a manner contemplated by this Article 11.24 is deemed for all purposes of the Business Corporations Act and these Articles to be present at the meeting and to have agreed to participate in that manner.

Article 12
VOTES OF SHAREHOLDERS

12.1                       Number of Votes by Shareholder or by Shares. Subject to any special rights or restrictions attached to any shares and to the restrictions imposed on joint shareholders under Article 12.3:

(a) on a vote by show of hands, every person present who is a shareholder or proxy holder and entitled to vote on the matter has one vote; and
(b) on a poll, every shareholder entitled to vote on the matter has one vote in respect of each share entitled to be voted on the matter and held by that shareholder and may exercise that vote either in person or by proxy.

12.2                       Votes of Persons in Representative Capacity. A person who is not a shareholder may vote at a meeting of shareholders, whether on a show of hands or on a poll, and may appoint a proxy holder to act at the meeting, if, before doing so, the person satisfies the chair of the meeting, or the directors, that the person is a legal personal representative or a trustee in bankruptcy for a shareholder who is entitled to vote at the meeting.

12.3                       Votes by Joint Holders. If there are joint shareholders registered in respect of any share:

(a) any one of the joint shareholders may vote at any meeting, either personally or by proxy, in respect of the share as if that joint shareholder were solely entitled to it; or
(b) if more than one of the joint shareholders is present at any meeting, personally or by proxy, and more than one of them votes in respect of that share, then only the vote of the joint shareholder present whose name stands first on the central securities register in respect of the share will be counted.

12.4                       Legal Personal Representatives as Joint Shareholders. Two or more legal personal representatives of a shareholder in whose sole name any share is registered are, for the purposes of Article 12.3, deemed to be joint shareholders.

12.5                       Representative of a Corporate Shareholder. If a corporation, that is not a subsidiary of the Company, is a shareholder, that corporation may appoint a person to act as its representative at any meeting of shareholders of the Company, and:

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(a) for that purpose, the instrument appointing a representative must:
(i) be received at the registered office of the Company or at any other place specified in the notice calling the meeting for the receipt of proxies at least the number of business days specified in the notice for the receipt of proxies, or if no number of days is specified, two business days before the day set for the holding of the meeting; or
(ii) be provided at the meeting to the chair of the meeting or to a person designated by the chair of the meeting;
(b) if a representative is appointed under this Article 12.5:
(i) the representative is entitled to exercise in respect of and at that meeting the same rights on behalf of the corporation that the representative represents as that corporation could exercise if it were a shareholder who is an individual, including, without limitation, the right to appoint a proxy holder; and
(ii) the representative, if present at the meeting, is to be counted for the purpose of forming a quorum and is deemed to be a shareholder present in person at the meeting.

Evidence of the appointment of any such representative may be sent to the Company by written instrument, fax or any other method of transmitting legibly recorded messages.

12.6                       Proxy Provisions Do Not Apply to All Companies. Articles 12.7 to 12.15 do not apply to the Company if and for so long as it is a public company or a pre-existing reporting company which has the Statutory Reporting Company Provisions as part of its Articles or to which the Statutory Reporting Company Provisions apply.

12.7                       Appointment of Proxy Holders. Every shareholder of the Company, including a corporation that is a shareholder but not a subsidiary of the Company, entitled to vote at a meeting of shareholders of the Company may, by proxy, appoint one or more (but not more than five) proxy holders to attend and act at the meeting in the manner, to the extent and with the powers conferred by the proxy.

12.8                       Alternate Proxy Holders. A shareholder may appoint one or more alternate proxy holders to act in the place of an absent proxy holder.

12.9                       When Proxy Holder Need Not Be Shareholder. A person must not be appointed as a proxy holder unless the person is a shareholder, although a person who is not a shareholder may be appointed as a proxy holder if:

(a) the person appointing the proxy holder is a corporation or a representative of a corporation appointed under Article 12.5;
(b) the Company has at the time of the meeting for which the proxy holder is to be appointed only one shareholder entitled to vote at the meeting;

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(c) the shareholders present in person or by proxy at and entitled to vote at the meeting for which the proxy holder is to be appointed, by a resolution on which the proxy holder is not entitled to vote but in respect of which the proxy holder is to be counted in the quorum, permit the proxy holder to attend and vote at the meeting; and
(d) if approved by the Board, the person is a director or officer of the Company.

12.10                    Deposit of Proxy. A proxy for a meeting of shareholders must:

(a) be received at the registered office of the Company or at any other place specified in the notice calling the meeting for the receipt of proxies at least the number of business days specified in the notice, or if no number of days is specified, two business days before the day set for the holding of the meeting; or
(b) unless the notice provides otherwise, be provided at the meeting to the chair of the meeting or to a person designated by the chair of the meeting.

A proxy may be sent to the Company by written instrument, fax or any other method of transmitting legibly recorded messages.

12.11                    Validity of Proxy Vote. A vote given in accordance with the terms of a proxy is valid notwithstanding the death or incapacity of the shareholder giving the proxy and despite the revocation of the proxy or the revocation of the authority under which the proxy is given, unless notice in writing of that death, incapacity or revocation is received:

(a) at the registered office of the Company at any time up to and including the last business day before the day set for the holding of the meeting at which the proxy is to be used; or
(b) by the chair of the meeting before the vote is taken.

12.12                    Form of Proxy. A proxy, whether for a specified meeting or otherwise, must be either in the following form or in any other form approved by the directors or the chair of the meeting:

[Name of Company]

(the “Company”)

The undersigned, being a shareholder of the Company, hereby appoints [name] or, failing that person, [name], as proxy holder for the undersigned to attend, act and vote for and on behalf of the undersigned at the meeting of shareholders of the Company to be held on [month, day, year] and at any adjournment of that meeting.

Number of shares in respect of which this proxy is given (if no number is specified, then this proxy if given in respect of all shares registered in the name of the shareholder): _______________.

Signed this ______ day of __________, _____.

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  (Signature of shareholder)
   
   
  (Name of shareholder - printed)

 

12.13                    Revocation of Proxy. Subject to Article 12.14, every proxy may be revoked by an instrument in writing that is:

(a) received at the registered office of the Company at any time up to and including the last business day before the day set for the holding of the meeting at which the proxy is to be used; or
(b) provided, at the meeting, to the chair of the meeting prior to the vote being taken.

12.14                    Revocation of Proxy Must Be Signed. An instrument referred to in Article 12.13 must be signed as follows:

(a) if the shareholder for whom the proxy holder is appointed is an individual, the instrument must be signed by the shareholder or his or her legal personal representative or trustee in bankruptcy;
(b) if the shareholder for whom the proxy holder is appointed is a corporation, the instrument must be signed by the corporation or by a representative appointed for the corporation under Article 12.5.

12.15                    Production of Evidence of Authority to Vote. The chair of any meeting of shareholders may, but need not, inquire into the authority of any person to vote at the meeting and may, but need not, demand from that person production of evidence as to the existence of the authority to vote.

Article 13
DIRECTORS

13.1                       First Directors; Number of Directors. The first directors are the persons designated as directors of the Company in the Notice of Articles that applies to the Company when it is recognized under the Business Corporations Act. The number of directors, excluding additional directors appointed under Article 14.8, is set at:

(a) subject to paragraphs (b) and (c), the number of directors that is equal to the number of the Company’s first directors;
(b) if the Company is a public company, the greater of three and the most recently set of:
(i) the number of directors set by ordinary resolution (whether or not previous notice of the resolution was given); and
(ii) the number of directors set under Article 14.4;
(c) if the Company is not a public company, the most recently set of:

 

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(i) the number of directors set by ordinary resolution (whether or not previous notice of the resolution was given); and
(ii) the number of directors set under Article 14.4.

13.2                       Change in Number of Directors. If the number of directors is set under Articles 13.1(b)(i) or 13.1(c)(i):

(a) the shareholders may elect or appoint the directors needed to fill any vacancies in the board of directors up to that number;
(b) if the shareholders do not elect or appoint the directors needed to fill any vacancies in the board of directors up to that number contemporaneously with the setting of that number, then the directors may appoint, or the shareholders may elect or appoint, directors to fill those vacancies.

13.3                       Directors’ Acts Valid Despite Vacancy. An act or proceeding of the directors is not invalid merely because fewer than the number of directors set or otherwise required under these Articles is in office.

13.4                       Qualifications of Directors. A director is not required to hold a share in the capital of the Company as qualification for his or her office but must be qualified as required by the Business Corporations Act to become, act or continue to act as a director.

13.5                       Remuneration of Directors. The directors are entitled to the remuneration for acting as directors, if any, as the directors may from time to time determine. If the directors so decide, the remuneration of the directors, if any, will be determined by the shareholders. That remuneration may be in addition to any salary or other remuneration paid to any officer or employee of the Company as such, who is also a director.

13.6                       Reimbursement of Expenses of Directors. The Company must reimburse each director for the reasonable expenses that he or she may incur in and about the business of the Company.

13.7                       Special Remuneration for Directors. If any director performs any professional or other services for the Company that in the opinion of the directors are outside the ordinary duties of a director, or if any director is otherwise specially occupied in or about the Company’s business, he or she may be paid remuneration fixed by the directors, or, at the option of that director, fixed by ordinary resolution, and such remuneration may be either in addition to, or in substitution for, any other remuneration that he or she may be entitled to receive.

13.8                       Gratuity, Pension or Allowance on Retirement of Director. Unless otherwise determined by ordinary resolution, the directors on behalf of the Company may pay a gratuity or pension or allowance on retirement to any director who has held any salaried office or place of profit with the Company or to his or her spouse or dependants and may make contributions to any fund and pay premiums for the purchase or provision of any such gratuity, pension or allowance.

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Article 14
ELECTION AND REMOVAL OF DIRECTORS

14.1                       Election at Annual General Meeting. At every annual general meeting and in every unanimous resolution contemplated by Article 10.2:

(a) the shareholders entitled to vote at the annual general meeting for the election of directors must elect, or in the unanimous resolution appoint, a board of directors consisting of the number of directors for the time being set under these Articles; and
(b) all the directors cease to hold office immediately before the election or appointment of directors under paragraph (a), but are eligible for re-election or re-appointment.

14.2                       Consent to be a Director. No election, appointment or designation of an individual as a director is valid unless:

(a) that individual consents to be a director in the manner provided for in the Business Corporations Act;
(b) that individual is elected or appointed at a meeting at which the individual is present and the individual does not refuse, at the meeting, to be a director; or
(c) with respect to first directors, the designation is otherwise valid under the Business Corporations Act.

14.3                       Failure to Elect or Appoint Directors. If:

(a) the Company fails to hold an annual general meeting, and all the shareholders who are entitled to vote at an annual general meeting fail to pass the unanimous resolution contemplated by Article 10.2, on or before the date by which the annual general meeting is required to be held under the Business Corporations Act; or
(b) the shareholders fail, at the annual general meeting or in the unanimous resolution contemplated by Article 10.2, to elect or appoint any directors;

then each director then in office continues to hold office until the earlier of:

(c) the date on which his or her successor is elected or appointed; and
(d) the date on which he or she otherwise ceases to hold office under the Business Corporations Act or these Articles.

14.4                       Places of Retiring Directors Not Filled. If, at any meeting of shareholders at which there should be an election of directors, the places of any of the retiring directors are not filled by that election, those retiring directors who are not re-elected and who are asked by the newly elected directors to continue in office will, if willing to do so, continue in office to complete the number of directors for the time being set pursuant to these Articles until further new directors are elected at a meeting of shareholders convened for that purpose. If any such election or continuance of directors does not result in the election or continuance of the number of directors for the time being set pursuant to these Articles, the number of directors of the Company is deemed to be set at the number of directors actually elected or continued in office.

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14.5                       Directors May Fill Casual Vacancies. Any casual vacancy occurring in the board of directors may be filled by the directors.

14.6                       Remaining Directors Power to Act. The directors may act notwithstanding any vacancy in the board of directors, but if the Company has fewer directors in office than the number set pursuant to these Articles as the quorum of directors, the directors may only act for the purpose of appointing directors up to that number or of summoning a meeting of shareholders for the purpose of filling any vacancies on the board of directors or, subject to the Business Corporations Act, for any other purpose.

14.7                       Shareholders May Fill Vacancies. If the Company has no directors or fewer directors in office than the number set pursuant to these Articles as the quorum of directors, the shareholders may elect or appoint directors to fill any vacancies on the board of directors.

14.8                       Additional Directors. Notwithstanding Articles 13.1 and 13.2, between annual general meetings or unanimous resolutions contemplated by Article 10.2, the directors may appoint one or more additional directors, but the number of additional directors appointed under this Article 14.8 must not at any time exceed:

(a) one-third of the number of first directors, if, at the time of the appointments, one or more of the first directors have not yet completed their first term of office; or
(b) in any other case, one-third of the number of the current directors who were elected or appointed as directors other than under this Article 14.8.

Any director so appointed ceases to hold office immediately before the next election or appointment of directors under Article 14.1(a), but is eligible for re-election or re-appointment

14.9                       Ceasing to be a Director. A director ceases to be a director when:

(a) the term of office of the director expires;
(b) the director dies;
(c) the director resigns as a director by notice in writing provided to the Company or a lawyer for the Company; or
(d) the director is removed from office pursuant to Articles 14.10 or 14.11.

14.10                    Removal of Director by Shareholders. The Company may remove any director before the expiration of his or her term of office by special resolution. In that event, the shareholders may elect, or appoint by ordinary resolution, a director to fill the resulting vacancy. If the shareholders do not elect or appoint a director to fill the resulting vacancy contemporaneously with the removal, then the directors may appoint or the shareholders may elect, or appoint by ordinary resolution, a director to fill that vacancy.

14.11                    Removal of Director by Directors. The directors may remove any director before the expiration of his or her term of office if the director is convicted of an indictable offence; or if the director ceases to be qualified to act as a director of the Company and does not promptly resign, and the directors may appoint a director to fill the resulting vacancy.

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Article 15
POWERS AND DUTIES OF DIRECTORS

15.1                       Powers of Management. The directors must, subject to the Business Corporations Act and these Articles, manage or supervise the management of the business and affairs of the Company and have the authority to exercise all such powers of the Company as are not, by the Business Corporations Act or by these Articles, required to be exercised by the shareholders of the Company.

15.2                       Appointment of Attorney of Company. The directors may from time to time, by power of attorney or other instrument, under seal if so required by law, appoint any person to be the attorney of the Company for such purposes, and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the directors under these Articles and excepting the power to fill vacancies in the board of directors, to remove a director, to change the membership of, or fill vacancies in, any committee of the directors, to appoint or remove officers appointed by the directors and to declare dividends) and for such period, and with such remuneration and subject to such conditions as the directors may think fit. Any such power of attorney may contain such provisions for the protection or convenience of persons dealing with such attorney as the directors think fit. Any such attorney may be authorized by the directors to sub-delegate all or any of the powers, authorities and discretions for the time being vested in him or her.

Article 16
DISCLOSURE OF INTEREST OF DIRECTORS

16.1                       Obligation to Account for Profits. A director or senior officer who holds a disclosable interest (as that term is used in the Business Corporations Act) in a contract or transaction into which the Company has entered or proposes to enter is liable to account to the Company for any profit that accrues to the director or senior officer under or as a result of the contract or transaction only if and to the extent provided in the Business Corporations Act.

16.2                       Restrictions on Voting by Reason of Interest. A director who holds a disclosable interest in a contract or transaction into which the Company has entered or proposes to enter is not entitled to vote on any directors’ resolution to approve that contract or transaction, unless all the directors have a disclosable interest in that contract or transaction, in which case any or all of those directors may vote on such resolution.

16.3                       Interested Director Counted in Quorum. A director who holds a disclosable interest in a contract or transaction into which the Company has entered or proposes to enter and who is present at the meeting of directors at which the contract or transaction is considered for approval may be counted in the quorum at the meeting whether or not the director votes on any or all of the resolutions considered at the meeting.

16.4                       Disclosure of Conflict of Interest or Property. A director or senior officer who holds any office or possesses any property, right or interest that could result, directly or indirectly, in the creation of a duty or interest that materially conflicts with that individual’s duty or interest as a director or senior officer, must disclose the nature and extent of the conflict as required by the Business Corporations Act.

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16.5                       Director Holding Other Office in the Company. A director may hold any office or place of profit with the Company, other than the office of auditor of the Company, in addition to his or her office of director for the period and on the terms (as to remuneration or otherwise) that the directors may determine.

16.6                       No Disqualification. No director or intended director is disqualified by his or her office from contracting with the Company either with regard to the holding of any office or place of profit the director holds with the Company or as vendor, purchaser or otherwise, and no contract or transaction entered into by or on behalf of the Company in which a director is in any way interested is liable to be voided for that reason.

16.7                       Professional Services by Director or Officer. Subject to the Business Corporations Act, a director or officer, or any person in which a director or officer has an interest, may act in a professional capacity for the Company, except as auditor of the Company, and the director or officer or such person is entitled to remuneration for professional services as if that director or officer were not a director or officer.

16.8                       Director or Officer in Other Corporations. A director or officer may be or become a director, officer or employee of, or otherwise interested in, any person in which the Company may be interested as a shareholder or otherwise, and, subject to the Business Corporations Act, the director or officer is not accountable to the Company for any remuneration or other benefits received by him or her as director, officer or employee of, or from his or her interest in, such other person.

Article 17
PROCEEDINGS OF DIRECTORS

17.1                       Meetings of Directors. The directors may meet together for the conduct of business, adjourn and otherwise regulate their meetings as they think fit, and meetings of the directors held at regular intervals may be held at the place, at the time and on the notice, if any, as the directors may from time to time determine.

17.2                       Voting at Meetings. Questions arising at any meeting of directors are to be decided by a majority of votes and, in the case of an equality of votes, the chair of the meeting does not have a second or casting vote.

17.3                       Chair of Meetings. The following individual is entitled to preside as chair at a meeting of directors:

(a) the chair of the board, if any;
(b) in the absence of the chair of the board, the president, if any, if the president is a director; or
(c) any other director chosen by the directors if:
(i) neither the chair of the board nor the president, if a director, is present at the meeting within 15 minutes after the time set for holding the meeting;
(ii) neither the chair of the board nor the president, if a director, is willing to chair the meeting; or

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(iii) the chair of the board and the president, if a director, have advised the secretary, if any, or any other director, that they will not be present at the meeting.

17.4                       Meetings by Telephone or Other Communications Medium. A director may participate in a meeting of the directors or of any committee of the directors in person or by telephone if all directors participating in the meeting, whether in person or by telephone or other communications medium, are able to communicate with each other. A director may participate in a meeting of the directors or of any committee of the directors by a communication medium other than telephone if all directors participating in the meeting, whether in person or by telephone or other communications medium, are able to communicate with each other. A director who participates in a meeting in a manner contemplated by this Article 17.4 is deemed for all purposes of the Business Corporations Act and these Articles to be present at the meeting and to have agreed to participate in that manner.

17.5                       Calling of Meetings. A director may, and the secretary or an assistant secretary of the Company, if any, on the request of a director must, call a meeting of the directors at any time.

17.6                       Notice of Meetings. Other than for meetings held at regular intervals as determined by the directors pursuant to Article 17.1, reasonable notice of each meeting of the directors specifying the place, day and time of that meeting must be given to each of the directors by any method set out in Article 23.1 or orally or by telephone.

17.7                       When Notice Not Required. It is not necessary to give notice of a meeting of the directors to a director if:

(a) the meeting is to be held immediately following a meeting of shareholders at which that director was elected or appointed, or is the meeting of the directors at which that director is appointed; or
(b) the director has waived notice of the meeting.

17.8                       Meeting Valid Despite Failure to Give Notice. The accidental omission to give notice of any meeting of directors to, or the non-receipt of any notice by, any director does not invalidate any proceedings at that meeting.

17.9                       Waiver of Notice of Meetings. Any director may send to the Company a document signed by him or her waiving notice of any past, present or future meeting or meetings of the directors and may at any time withdraw that waiver with respect to meetings held after that withdrawal. After sending a waiver with respect to all future meetings and until that waiver is withdrawn, no notice of any meeting of the directors need be given to such director and all meetings of the directors so held are deemed not to be improperly called or constituted by reason of notice not having been given to such director.

17.10                    Quorum. The quorum necessary for the transaction of the business of the directors may be set by the directors and, if not so set, is deemed to be set at two directors or, if the number of directors is set at one, is deemed to be set at one director, and that director may constitute a meeting.

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17.11                    Validity of Acts Where Appointment Defective. Subject to the Business Corporations Act, an act of a director or officer is not invalid merely because of an irregularity in the election or appointment or a defect in the qualification of that director or officer.

17.12                    Consent Resolutions in Writing. A resolution of the directors or of any committee of the directors consented to in writing by all of the directors entitled to vote on it, whether by signed document, fax, email or any other method of transmitting legibly recorded messages, is as valid and effective as if it had been passed at a meeting of the directors or of the committee of the directors duly called and held. Such resolution may be in two or more counterparts which together are deemed to constitute one resolution in writing. A resolution passed in that manner is effective on the date stated in the resolution or on the latest date stated on any counterpart. A resolution of the directors or of any committee of the directors passed in accordance with this Article 17.12 is deemed to be a proceeding at a meeting of directors or of the committee of the directors and to be as valid and effective as if it had been passed at a meeting of the directors or of the committee of the directors that satisfies all the requirements of the Business Corporations Act and all the requirements of these Articles relating to meetings of the directors or of a committee of the directors.

Article 18
EXECUTIVE AND OTHER COMMITTEES

18.1                       Appointment and Powers of Executive Committee. The directors may, by resolution, appoint an executive committee consisting of the director or directors that they consider appropriate, and this committee has, during the intervals between meetings of the board of directors, all of the directors’ powers, except:

(a) the power to fill vacancies in the board of directors;
(b) the power to remove a director;
(c) the power to change the membership of, or fill vacancies in, any committee of the directors; and
(d) such other powers, if any, as may be set out in the resolution or any subsequent directors’ resolution.

18.2                       Appointment and Powers of Other Committees. The directors may, by resolution:

(a) appoint one or more committees (other than the executive committee) consisting of the director or directors that they consider appropriate;
(b) delegate to a committee appointed under paragraph (a) any of the directors’ powers, except:
(i) the power to fill vacancies in the board of directors;
(ii) the power to remove a director;
(iii) the power to change the membership of, or fill vacancies in, any committee of the directors; and

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(iv) the power to appoint or remove officers appointed by the directors; and
(c) make any delegation referred to in paragraph (b) subject to the conditions set out in the resolution or any subsequent directors’ resolution.

18.3                       Obligations of Committees. Any committee appointed under Articles 18.1 or 18.2, in the exercise of the powers delegated to it, must:

(a) conform to any rules that may from time to time be imposed on it by the directors; and
(b) report every act or thing done in exercise of those powers at such times as the directors may require.

18.4                       Powers of Board. The directors may, at any time, with respect to a committee appointed under Articles 18.1 or 18.2:

(a) revoke or alter the authority given to the committee, or override a decision made by the committee, except as to acts done before such revocation, alteration or overriding;
(b) terminate the appointment of, or change the membership of, the committee; and
(c) fill vacancies in the committee.

18.5                       Committee Meetings. Subject to Article 18.3(a) and unless the directors otherwise provide in the resolution appointing the committee or in any subsequent resolution, with respect to a committee appointed under Articles 18.1 or 18.2:

(a) the committee may meet and adjourn as it thinks proper;
(b) the committee may elect a chair of its meetings but, if no chair of a meeting is elected, or if at a meeting the chair of the meeting is not present within 15 minutes after the time set for holding the meeting, the directors present who are members of the committee may choose one of their number to chair the meeting;
(c) a majority of the members of the committee constitutes a quorum of the committee; and
(d) questions arising at any meeting of the committee are determined by a majority of votes of the members present, and in case of an equality of votes, the chair of the meeting does not have a second or casting vote.

Article 19
OFFICERS

19.1                       Directors May Appoint Officers. The directors may, from time to time, appoint such officers, if any, as the directors determine and the directors may, at any time, terminate any such appointment.

19.2                       Functions, Duties and Powers of Officers. The directors may, for each officer:

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(a) determine the functions and duties of the officer;
(b) entrust to and confer on the officer any of the powers exercisable by the directors on such terms and conditions and with such restrictions as the directors think fit; and
(c) revoke, withdraw, alter or vary all or any of the functions, duties and powers of the officer.

19.3                       Qualifications. No officer may be appointed unless that officer is qualified in accordance with the Business Corporations Act. One person may hold more than one position as an officer of the Company. Any person appointed as the chair of the board or as the managing director must be a director. Any other officer need not be a director.

19.4                       Remuneration and Terms of Appointment. All appointments of officers are to be made on the terms and conditions and at the remuneration (whether by way of salary, fee, commission, participation in profits or otherwise) that the directors think fit and are subject to termination at the pleasure of the directors, and an officer may in addition to such remuneration be entitled to receive, after he or she ceases to hold such office or leaves the employment of the Company, a pension or gratuity.

Article 20
INDEMNIFICATION

20.1                       Definitions. In this Article 20:

(a) “eligible penalty” means a judgment, penalty or fine awarded or imposed in, or an amount paid in settlement of, an eligible proceeding;
(b) “eligible proceeding” means a legal proceeding or investigative action, whether current, threatened, pending or completed, in which a director or former director of the Company (an “eligible party”) or any of the heirs and legal personal representatives of the eligible party, by reason of the eligible party being or having been a director of the Company:
(i) is or may be joined as a party; or
(ii) is or may be liable for or in respect of a judgment, penalty or fine in, or expenses related to, the proceeding;
(c) “expenses” has the meaning set out in the Business Corporations Act.

20.2                       Mandatory Indemnification of Directors and Former Directors. Subject to the Business Corporations Act, the Company must indemnify a director or former director of the Company and his or her heirs and legal personal representatives against all eligible penalties to which such person is or may be liable, and the Company must, after the final disposition of an eligible proceeding, pay the expenses actually and reasonably incurred by such person in respect of that proceeding. Each director is deemed to have contracted with the Company on the terms of the indemnity contained in this Article 20.2.

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20.3                       Indemnification of Other Persons. Subject to any restrictions in the Business Corporations Act, the Company may indemnify any person.

20.4                       Non-Compliance with Business Corporations Act. The failure of a director or officer of the Company to comply with the Business Corporations Act or these Articles does not invalidate any indemnity to which he or she is entitled under this Article 20.

20.5                       Company May Purchase Insurance. The Company may purchase and maintain insurance for the benefit of any person (or his or her heirs or legal personal representatives) who:

(a) is or was a director, officer, employee or agent of the Company;
(b) is or was a director, officer, employee or agent of a corporation at a time when the corporation is or was an affiliate of the Company;
(c) at the request of the Company, is or was a director, officer, employee or agent of a corporation or of a partnership, trust, joint venture or other unincorporated entity;
(d) at the request of the Company, holds or held a position equivalent to that of a director or officer of a partnership, trust, joint venture or other unincorporated entity;

against any liability incurred by him or her as such director, officer, employee or agent or person who holds or held such equivalent position.

Article 21
DIVIDENDS

21.1                       Payment of Dividends Subject to Special Rights. The provisions of this Article 21 are subject to the rights, if any, of shareholders holding shares with special rights as to dividends.

21.2                       Declaration of Dividends. Subject to the Business Corporations Act and the rights of the holders of issued shares of the Company, the directors may from time to time declare and authorize the payment of such dividends as they may deem advisable.

21.3                       No Notice Required. The directors need not give notice to any shareholder of any declaration under Article 21.2.

21.4                       Record Date. The directors may set a date as the record date for the purpose of determining shareholders entitled to receive payment of a dividend. The record date must not precede the date on which the dividend is to be paid by more than two months. If no record date is set, the record date is 5 p.m. on the date on which the directors pass the resolution declaring the dividend.

21.5                       Manner of Paying Dividend. A resolution declaring a dividend may direct payment of the dividend wholly or partly by the distribution of specific assets or of fully paid shares or of bonds, debentures or other securities of the Company, or in any one or more of those ways.

21.6                       Settlement of Difficulties. If any difficulty arises in regard to a distribution under Article 21.5, the directors may settle the difficulty as they deem advisable, and, in particular, may:

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(a) set the value for distribution of specific assets;
(b) determine that cash payments in substitution for all or any part of the specific assets to which any shareholders are entitled may be made to any shareholders on the basis of the value so fixed in order to adjust the rights of all parties; and
(c) vest any such specific assets in trustees for the persons entitled to the dividend.

21.7                       When Dividend Payable. Any dividend may be made payable on such date as is fixed by the directors.

21.8                       Dividends to be Paid in Accordance with Number of Shares. All dividends on shares of any class or series of shares must be declared and paid according to the number of such shares held.

21.9                       Receipt by Joint Shareholders. If several persons are joint shareholders of any share, any one of them may give an effective receipt for any dividend, bonus or other money payable in respect of the share.

21.10                    Dividend Bears No Interest. No dividend bears interest against the Company.

21.11                    Fractional Dividends. If a dividend to which a shareholder is entitled includes a fraction of the smallest monetary unit of the currency of the dividend, that fraction may be disregarded in making payment of the dividend and that payment represents full payment of the dividend.

21.12                    Payment of Dividends. Any dividend or other distribution payable in cash in respect of shares may be paid by cheque, made payable to the order of the person to whom it is sent, and mailed to the address of the shareholder, or in the case of joint shareholders, to the address of the joint shareholder who is first named on the central securities register, or to the person and to the address the shareholder or joint shareholders may direct in writing. The mailing of such cheque will, to the extent of the sum represented by the cheque (plus the amount of the tax required by law to be deducted), discharge all liability for the dividend unless such cheque is not paid on presentation or the amount of tax so deducted is not paid to the appropriate taxing authority.

21.13                    Capitalization of Surplus. Notwithstanding anything contained in these Articles, the directors may from time to time capitalize any surplus of the Company and may from time to time issue, as fully paid, shares or any bonds, debentures or other securities of the Company as a dividend representing the surplus or any part of the surplus.

Article 22
DOCUMENTS, RECORDS AND REPORTS

22.1                       Recording of Financial Affairs. The directors must cause adequate accounting records to be kept to record properly the financial affairs and condition of the Company and to comply with the Business Corporations Act.

22.2                       Inspection of Accounting Records. Unless the directors determine otherwise, or unless otherwise determined by ordinary resolution, no shareholder of the Company is entitled to inspect or obtain a copy of any accounting records of the Company.

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Article 23
NOTICES

23.1                       Method of Giving Notice. Unless the Business Corporations Act or these Articles provides otherwise, a notice, statement, report or other record required or permitted by the Business Corporations Act or these Articles to be sent by or to a person may be sent by any one of the following methods:

(a) mail addressed to the person at the applicable address for that person as follows:
(i) for a record mailed to a shareholder, the shareholder’s registered address;
(ii) for a record mailed to a director or officer, the prescribed address for mailing shown for the director or officer in the records kept by the Company or the mailing address provided by the recipient for the sending of that record or records of that class;
(iii) in any other case, the mailing address of the intended recipient;
(b) delivery at the applicable address for that person as follows, addressed to the person:
(i) for a record delivered to a shareholder, the shareholder’s registered address;
(ii) for a record delivered to a director or officer, the prescribed address for delivery shown for the director or officer in the records kept by the Company or the delivery address provided by the recipient for the sending of that record or records of that class;
(iii) in any other case, the delivery address of the intended recipient;
(c) sending the record by fax to the fax number provided by the intended recipient for the sending of that record or records of that class;
(d) sending the record by email to the email address provided by the intended recipient for the sending of that record or records of that class;
(e) physical delivery to the intended recipient; or
(f) as otherwise permitted by any securities legislation (together with all regulations and rules made and promulgated thereunder and all administrative policy statements, blanket orders and rulings, notices, and other administrative directions issued by securities commissions or similar authorities appointed thereunder) in any province or territory of Canada or in the federal jurisdiction of the United States or in any state of the United States that is applicable to the Company.

23.2                       Deemed Receipt of Mailing. A record that is mailed to a person by ordinary mail to the applicable address for that person referred to in Article 23.1 is deemed to be received by the person to whom it was mailed on the day, Saturdays, Sundays and holidays excepted, following the date of mailing.

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23.3                       Certificate of Sending. A certificate signed by the secretary, if any, or other officer of the Company or of any other corporation acting in that behalf for the Company stating that a notice, statement, report or other record was addressed as required by Article 23.1, prepaid and mailed or otherwise sent as permitted by Article 23.1 is conclusive evidence of that fact.

23.4                       Notice to Joint Shareholders. A notice, statement, report or other record may be provided by the Company to the joint shareholders of a share by providing the notice to the joint shareholder first named in the central securities register in respect of the share.

23.5                       Notice to Trustees. A notice, statement, report or other record may be provided by the Company to the persons entitled to a share as a consequence of the death, bankruptcy or incapacity of a shareholder by:

(a) mailing the record, addressed to them:
(i) by name, by the title of the legal personal representative of the deceased or incapacitated shareholder, by the title of trustee of the bankrupt shareholder or by any similar description; and
(ii) at the address, if any, supplied to the Company for that purpose by the persons claiming to be so entitled; or
(b) if an address referred to in paragraph (a)(ii) has not been supplied to the Company, by giving the notice in a manner in which it might have been given if the death, bankruptcy or incapacity had not occurred.

Article 24
SEAL AND EXECUTION OF DOCUMENTS

24.1                       Who May Attest Seal. Except as provided in Articles 24.2 and 24.3, the Company’s seal, if any, must not be impressed on any record except when that impression is attested by the signatures of:

(a) any two directors;
(b) any officer, together with any director;
(c) if the Company only has one director, that director; or
(d) any one or more directors or officers or persons as may be determined by the directors.

24.2                       Sealing Copies. For the purpose of certifying under seal a certificate of incumbency of the directors or officers of the Company or a true copy of any resolution or other document, despite Article 24.1, the impression of the seal may be attested by the signature of any director or officer.

24.3                       Mechanical Reproduction of Seal. The directors may authorize the seal to be impressed by third parties on share certificates or bonds, debentures or other securities of the Company as they may determine appropriate from time to time. To enable the seal to be impressed on any share certificates or bonds, debentures or other securities of the Company,

 

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whether in definitive or interim form, on which facsimiles of any of the signatures of the directors or officers of the Company are, in accordance with the Business Corporations Act or these Articles, printed or otherwise mechanically reproduced, there may be delivered to the person employed to engrave, lithograph or print such definitive or interim share certificates or bonds, debentures or other securities one or more unmounted dies reproducing the seal and the chair of the board or any senior officer together with the secretary, treasurer, secretary-treasurer, an assistant secretary, an assistant treasurer or an assistant secretary-treasurer may in writing authorize such person to cause the seal to be impressed on such definitive or interim share certificates or bonds, debentures or other securities by the use of such dies. Share certificates or bonds, debentures or other securities to which the seal has been so impressed are for all purposes deemed to be under and to bear the seal impressed on them.

24.4                       Execution of Documents Generally. The Directors may from time to time by resolution appoint any one or more persons, officers or Directors for the purpose of executing any instrument, document or agreement in the name of and on behalf of the Company for which the seal need not be affixed, and if no such person, officer or Director is appointed, then any one officer or Director of the Company may execute such instrument, document or agreement.

Article 25
PROHIBITIONS

25.1                       Definitions. In this Article 25:

(a) “designated security” means:
(i) a voting security of the Company;
(ii) a security of the Company that is not a debt security and that carries a residual right to participate in the earnings of the Company or, on the liquidation or winding up of the Company, in its assets; or
(iii) a security of the Company convertible, directly or indirectly, into a security described in paragraph (i) or (ii);
(b) “security” has the meaning assigned in the Securities Act (British Columbia);
(c) “voting security” means a security of the Company that:
(i) is not a debt security, and
(ii) carries a voting right either under all circumstances or under some circumstances that have occurred and are continuing.

25.2                       Application. Article 25.3 does not apply to the Company if and for so long as it is a public company or a pre-existing reporting company which has the Statutory Reporting Company Provisions as part of its Articles or to which the Statutory Reporting Company Provisions apply.

25.3                       Consent Required for Transfer of Shares or Designated Securities. No share or designated security may be sold, transferred or otherwise disposed of without the consent of the directors and the directors are not required to give any reason for refusing to consent to any such sale, transfer or other disposition.

 

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Full name and signature of incorporator Date of signing
SILVER BULL RESOURCES, INC.



By: /s/ Christopher Richards     
      Authorized Signatory 		February 5, 2021       

Name of Incorporator: Silver Bull Resources, Inc.

 

 

 

 

 

 

 

 

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Exhibit 4.1

 

 

OPTION AGREEMENT

 

THIS AGREEMENT made the 12th day of August, 2020

BETWEEN:

SILVER BULL RESOURCES, INC., a corporation existing under the laws of the State of Nevada, USA, having an office at Suite 1610, 777 Dunsmuir Street, Vancouver, British Columbia, V7Y 1K4

(hereinafter referred to as “SVB”)

AND:

COPPERBELT AG a corporation existing under the laws of Switzerland having its registered office at Gartenstrasse 3, 6300 Zug, Switzerland, under business identification number of CHE-115.266.895

(hereinafter referred to as “CB Parent”)

AND:

DOSTYK LLP a corporation existing under the laws of Kazakhstan and a wholly-owned subsidiary of CB Parent, having an office at Republic of Kazakhstan, Almaty, 158 Panfilova Street, office #1

(hereinafter referred to as “CB Sub”, and collectively with CB Parent, hereinafter referred to as “CB”)

WHEREAS CB is the legal and beneficial owner of a 100% interest in and to those certain rights, claims, permits and license forming the Beskauga property (the “Beskauga Property”) as more particularly described as the Beskauga Area in Schedule “A” attached hereto. The Beskauga Property consists of the Beskauga Main project (the “Beskauga Main Project”) and the Beskauga South project (the “Beskauga South Project”);

AND WHEREAS SVB and CB Parent intend to enter into a concurrent agreement with respect to exploration activities on the Stepnoe and Ekidos properties located in Kazakhstan;

AND WHEREAS CB wishes to grant to SVB the exclusive right and option to acquire its right, title and 100% interest in the Beskauga Property (as hereinafter defined), including possibly by way of acquisition of all of the issued and outstanding securities of CB Sub, on the terms and conditions set forth herein;

 

 
 
 

 

NOW THEREFORE THIS AGREEMENT WITNESSES THAT in consideration of the respective covenants and agreements of the parties hereinafter contained and for other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged by each party), the parties agree as follows:

ARTICLE 1
INTERPRETATION

1.1              Definitions

For the purposes of this Agreement (including the recitals and the Schedules hereto), unless the context otherwise requires, the following terms shall have the respective meanings set out below and grammatical variations of such terms shall have corresponding meanings:

“Area of Interest” means the area on the ground between a line which is five kilometers outside the outermost boundaries of the Beskauga Property as constituted at any given time, all as shown as the Beskauga Area on the map set out in Schedule “A” attached hereto;

“Bankable Feasibility Study” means a detailed report in compliance with Canadian National Instrument 43-101, in form and substance sufficient for presentation to arm’s length institutional lenders considering project financing, showing the feasibility of placing any part of the Beskauga Property into commercial production as a mine and shall include a reasonable assessment of the various categories of mineral reserves and their amenability to metallurgical treatment, a complete description of the work, equipment and supplies required to bring such part of the Beskauga Property into commercial production and the estimated cost thereof, a description of the mining methods to be employed and a financial appraisal of the proposed operations;

“Beskauga Property” has the meaning set out in the Recitals.

“Business Day” means any day, other than (a) a Saturday, Sunday or statutory holiday in British Columbia, Canada or Nur-Sultan, Kazakhstan and (b) a day on which banks are generally closed in the Province of British Columbia or Nur-Sultan, Kazakhstan;

“Closing Date” means the date on which the conditions in sub-paragraphs 2.1(a)(ii)(x) and (y) are satisfied;

“Commercial Production” means the operation of all or part of the Beskauga Property as a producing mine, but does not include bulk sampling or milling for the purpose of testing or milling by a pilot plant, and will be deemed to have commenced on the first day of the month following the first 30 consecutive days during which Minerals have been produced from a mine at an average rate of not less than 75% of the initial rated capacity if a plant is located on the Beskauga Property or if no plant is located on the Beskauga Property, the last day of the first period of 15 consecutive days during which ore has been shipped from the Beskauga Property on a reasonably regular basis for the purpose of earning revenues, whether to a plant or facility constructed for that purpose or to a plant or facility already in existence;

 

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“Construction Commencement” means the date on which on-site construction commences of a mine on the Beskauga Property that will, on completion, result in Commercial Production.

“Effective Date” means the date of this Agreement written above;

“Encumbrance” means any lien, charge, hypothec, pledge, mortgage, title retention agreement, security interest of any nature, adverse interest, adverse claim, exception, reservation, easement, right of occupation, any matter capable of registration against title, option, right of pre-emption, privilege, other third party interest or other encumbrance of any nature, or any agreement, instrument or other commitment to create any of the foregoing;

“Environmental Law” means all requirements of the common law or of the environmental, health or safety statutes, regulations, rules, ordinances, policies, orders, approvals, notices, licenses, permits or directors of any federal, territorial, state or local judicial, regulatory or administrative agency, board or governmental authority applicable to the Beskauga Property;

“Mineral Rights” means the rights to work upon lands for the purpose of searching for, developing or extracting Minerals granted under those exploration licenses, mining claims, mining leases, mining licenses, mineral concessions and other forms of mineral tenure within the Beskauga Area in Schedule “A” attached hereto;

“Minerals” means all ores, and concentrates or metals derived therefrom, of precious, base and industrial minerals and which are found in, on or under the Beskauga Property and may lawfully be explored for, mined and sold;

“Operations” includes:

(a) every kind of work done on or with respect to the Beskauga Property; and
(b) without limiting the generality of the foregoing, includes the work of assessment, geophysical, geochemical and geological surveys, studies and mapping, investigating, drilling, designing, examining, equipping, improving, surveying, shaft sinking, raising, cross-cutting and drifting, searching for, digging, trucking, sampling, working, procuring, selling and transporting minerals, ores and metals, in surveying and bringing any mineral claims to lease or patent, in doing all other work usually considered to be prospecting, exploration, development, mining work, milling, concentration, beneficiation or ores and concentrates, as well as the separation and extraction of Minerals;

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“Option” means the option granted by CB to SVB to acquire its right, title and 100% interest in and to the Property in the proportions and on the terms and conditions set out in this Agreement;

“Option Period” means the period commencing on the date hereof and ending on the earlier of (i) the date that the Option is exercised by SVB in accordance with the terms and conditions of this Agreement, and (ii) the date that this Agreement is terminated pursuant to its terms; and

“Ordinary Course of Business” when used in relation to the taking of any action by, or in respect of, CB Sub means that the action:

(a) is consistent in nature, scope and magnitude with the past practices of CB Sub and is taken in the ordinary course of normal day-to-day operations of CB Sub;
(b) is similar in nature, scope and magnitude to actions customarily taken in the ordinary course of the normal day-to-day operations of other persons or entities that are in the same line of business as CB Sub; and
(c) does not require the authorization of the shareholders of CB Sub or any other separate or special authorization of any nature.

“Project” means the exploration of the Beskauga Property and potentially the development, operation and closure and remediation of mining operations on the Beskauga Property or any part thereof.

1.2              Interpretation

In this Agreement:

(a) the terms “Agreement”, “this Agreement”, “the Agreement”, “hereto”, “hereof”, “herein”, “hereby”, “hereunder” and similar expressions refer to this Agreement in its entirety and not to any particular provision hereof;
(b) references to an “Article”, “Section” or “Schedule” followed by a number or letter refer to the specified Article, Section of or Schedule to this Agreement;
(c) the division of this Agreement into articles and sections and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement;
(d) words importing the singular number only shall include the plural and vice versa and words importing the use of any gender shall include all genders;
(e) the word “including” is deemed to mean “including without limitation”;

 

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(f) the terms “party” and the “parties” refer to a party or the parties to this Agreement;
(g) any reference to this Agreement means this Agreement as amended, modified, replaced or supplemented from time to time;
(h) any reference to a statute, regulation or rule shall be construed to be a reference thereto as the same may from time to time be amended, re-enacted or replaced, and any reference to a statute shall include any regulations or rules made thereunder;
(i) all dollar amounts refer to US dollars unless stated otherwise;
(j) any time period within which a payment is to be made or any other action is to be taken hereunder shall be calculated excluding the day on which the period commences and including the day on which the period ends; and
(k) whenever any action is required to be taken or period of time is to expire on a day other than a Business Day, such action shall be taken or period shall expire on the next following Business Day.

1.3              Schedules

The following schedules attached to this Agreement (the “Schedules”) shall form part of this Agreement:

Schedule A – The Beskauga Property

Schedule B – Expenditures Required to Keep the Beskauga Property in Good Standing

ARTICLE 2
THE OPTION

2.1              Option

(a) CB hereby grants SVB the sole and exclusive right and option (the “Option”) to acquire its 100% interest in the Beskauga Property in consideration for the following:
(i) SVB shall pay $30,000 to CB Parent upon the execution of this Agreement;
(ii) SVB shall pay $40,000 to CB Parent following (x) SVB being able to access the Beskauga Property to conduct due diligence in a manner that complies with governmental recommendations and advisories with respect to the global COVID-19 pandemic and ensures the health and safety of its employees, consultants and representatives in SVB’s sole discretion and (y) the results of SVB’s due diligence on the Beskauga Property are satisfactory to SVB, in its sole discretion (with a maximum of 60 days due diligence period after (x) is satisfied), with such payment being made within five Business Days of a satisfactory due diligence report developed pursuant to (y);

 

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(iii) SVB shall incur a total of $2,000,000 in exploration expenditures on the Beskauga Property by no later than the first anniversary of the Closing Date, and SVB shall use its reasonable best efforts to commence exploration expenditures within 10 Business Days from the Closing Date;
(iv) SVB shall incur a total of $3,000,000 in exploration expenditures on the Beskauga Property by no later than the second anniversary of the Closing Date;
(v) SVB shall incur a total of $5,000,000 in exploration expenditures on the Beskauga Property by no later than the third anniversary of the Closing Date; and
(vi) SVB shall incur a total of $5,000,000 in exploration expenditures on the Beskauga Property by no later than the fourth anniversary of the Closing Date.
(b) It is the stated intention of SVB to spend approximately $10 million exploring the Beskauga Property over the first three years from the Closing Date, if exploration results are, in its judgement, favourable, as the exploration program is executed. The above exploration expenditures shall be spent through CB Sub as a sole Beskauga licenceholder and shall be based on the mutually agreed exploration program aiming to bring Beskauga to the pre-development stage. If the parties cannot agree on any proposed exploration program, the recommendation of SVB shall prevail. The parties acknowledge and agree that, concurrently with the execution of this Agreement, SVB and CB Parent will execute an agreement concerning the Stepnoe and Ekidos projects (the “Stepnoe and Ekidos Agreement”) and the exploration expenditures required in paragraph 2.1(a) above shall qualify as, and be counted towards, the exploration expenditures contemplated to be made by SVB under the Stepnoe and Ekidos Agreement. For greater certainty, the exploration expenditures on Stepnoe and Ekidos mineral properties will be made at the sole discretion of SVB. For greater certainty, funds under paragraph 2.1(a) not allocated to the Beskauga Licence Property may be allocated to the Stepnoe an Ekidos mineral properties at the sole discretion of SVB.

2.2              Option Payments and Expenditures

Payments and exploration expenditures incurred and paid which exceed the above amounts in any given period shall be cumulative and credited to the subsequent periods.

 

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2.3             Exercise of the Option

(a) Not later than 90 Business Days following the satisfaction of its obligations in Section 2.1, SVB may exercise the Option by delivering written notice (the “Exercise Notice”) to CB and:
(i) in order to acquire the Beskauga Property, pay to CB an amount equal to $15,000,000 in cash; or
(ii) in order to acquire the Beskauga Main Project only, pay to CB an amount equal to $13,500,000 in cash; or
(iii) in order to acquire the Beskauga South Project only, pay to CB an amount equal to $1,500,000 in cash.

Upon such payments being made, SVB shall be deemed to exercise the Option and automatically acquire a 100% interest in the relevant portion of the Beskauga Property, free and clear of any Encumbrances. CB shall take all such action as necessary or advisable to transfer the relevant portion of the Beskauga Property to a Kazakhstan subsidiary of SVB, or such other designee as SVB identifies.

 

2.4             Option Only

This Agreement is an option only and except as herein specifically provided otherwise, nothing herein contained shall be construed as obligating SVB to do any acts, issue any securities or make any payments hereunder, and any act, issuance or payment as shall be made hereunder shall not be construed as obligating SVB to do any further act or make any further issuance or payment.

2.5             Transference of Option Agreement

During the option period, SVB may not sell, transfer, assign this agreement without the prior written consent of CB, such consent not to be unreasonably withheld. Notwithstanding the foregoing, SVB shall be permitted to assign this Agreement to an “affiliate” or “associate” as those terms are defined in the Business Corporations Act (British Columbia). It will be a condition of any assignment under this Agreement that such assignee shall agree in writing to be bound by the terms of this Agreement applicable to the assignor.

2.6             Termination before Deemed Exercise of the Option

SVB shall be entitled to terminate the Option prior to exercise upon notice in writing to CB. If the Option is terminated prior to it being exercised then:

(a)               SVB shall have no obligation to make any further payment to CB hereunder;

(b)               no party will have any further obligation to the other hereunder, except those obligations which survive termination of this Agreement; and

(c)               SVB shall have earned no interest in or assumed any liabilities with respect to the Beskauga Property.

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2.7              Registration of Interest and Structure of Transaction

(a)              Forthwith after execution of this Agreement, SVB may, at its expense, register on title to the Beskauga Property, or elsewhere as permitted by applicable law, notice of its interest in this Option and its right to acquire the Beskauga Property.

(b) To the extent that CB is not able to transfer any Mineral Rights comprising the Beskauga Property in a reasonably prompt and commercial manner, CB shall agree to restructure the Option to enable SVB to acquire all of the issued and outstanding securities of CB Sub on exercise of the Option, on terms and conditions which achieve the same economic, commercial and technical terms as set out herein to the extent possible.

(c)              If the Option is restructured as contemplated in Section 2.7(b), CB Parent shall assume all liabilities of CB Sub, other than the liabilities directly arising out of the Mineral Rights which SVB would have assumed if it acquired the Mineral Rights directly (the "Excluded Liabilities”), and CB Parent shall indemnify and hold harmless SVB from all such liabilities other than Excluded Liabilities.

2.8              Bonus Payments to CB – Beskauga Main

If SVB acquires the Beskauga Main Project, SVB shall remit to CB Parent the bonus payments in accordance with this Section 2.8, with 20% of such bonus payments being due (x) if CB does not challenge the mineral resource statement in accordance with this Section 2.8, not later than 60 Business Days after completion of the Bankable Feasibility Study on the Beskauga Main Project, or (y) if CB challenges the mineral resource statement in accordance with this Section 2.8, no later than 10 Business Days after the mineral resource statement is finally determined in accordance with this Section 2.8, and the remaining 80% of such bonus payments being due within 15 Business Days of Construction Commencement on the Beskauga Main Project:

(a) if the Beskauga Main Project is the subject of a Bankable Feasibility Study indicating gold equivalent resources of at least 3 million ounces, a payment of $2,000,000, payable in cash or a combination of cash and common shares in the capital of SVB (the “SVB Shares”), at SVB’s election with a maximum of 50% of such payment being made in SVB Shares, provided that if SVB elects to issue any SVB Shares to CB, such SVB Shares shall be valued at the 20-day volume weighted average trading price of the SVB Shares on the Toronto Stock Exchange (the “20-Day VWAP”) calculated as at the date immediately preceding the date of the issue of such SVB Shares;
(b) if the Beskauga Main Project is the subject of a Bankable Feasibility Study indicating gold equivalent resources of at least 5 million ounces, a payment of $4,000,000, payable in cash or a combination of cash and SVB Shares, at SVB’s election with a maximum of 50% of such payment being made in SVB Shares, provided that if SVB elects to issue any SVB Shares to CB, such SVB Shares shall be valued at the 20-Day VWAP calculated as at the date immediately preceding the date of the issue of such SVB Shares;

 

 

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(c) if the Beskauga Main Project is the subject of a Bankable Feasibility Study indicating gold equivalent resources of at least 7 million ounces, a payment of $6,000,000, payable in cash or a combination of cash and SVB Shares, at SVB’s election with a maximum of 50% of such payment being made in SVB Shares, provided that if SVB elects to issue any SVB Shares to CB, such SVB Shares shall be valued at the 20-Day VWAP calculated as at the date immediately preceding the date of the issue of such SVB Shares; or
(d) if the Beskauga Main Project is the subject of a Bankable Feasibility Study indicating gold equivalent resources of at least 10 million ounces, a payment of $8,000,000, payable in cash or a combination of cash and SVB Shares, at SVB’s election with a maximum of 50% of such payment being made in SVB Shares, provided that if SVB elects to issue any SVB Shares to CB, such SVB Shares shall be valued at the 20-Day VWAP calculated as at the date immediately preceding the date of the issue of such SVB Shares;.

For the avoidance of doubt, the above bonus payments are cumulative and, once a lump sum bonus payment is paid to CB Parent in respect of the Beskauga Main Project, CB Parent will not be entitled to any further bonus payments in respect of any additional gold equivalent resources that are on the Beskauga Main Project. By way of example only, if 5 million ounces of gold equivalent resources are detailed in the Bankable Feasibility Study on the Beskauga Main Project, CB Parent will be entitled to a bonus payment equal to $6,000,000 in respect of the Beskauga Main Project and once paid, CB Parent will not be entitled to any further bonus payments in respect of the Beskauga Main Project. Nothing in this Section 2.8 shall prevent a bonus payment being paid in respect of the Beskauga South Project in accordance with Section 2.9.

 

CB shall have a right to engage independent consultants to review the mineral resource statement contained in the Bankable Feasibility Study for the Beskauga Main Project (the “BMP Review”) and CB may, within 15 Business Days of completion of the Bankable Feasibility Study by SVB, notify SVB that it is undertaking the BMP Review and challenging the mineral resource statement contained in such Bankable Feasibility Study. If there is a discrepancy in the mineral resource statement between such Bankable Feasibility Study and BMP Review of more than 3%, then the parties shall mutually agree on an independent third party consultant to review the mineral resource statements contained in such Bankable Feasibility Study and BMP Review to determine the mineral resource statement applicable to the Beskauga Main Project for the purposes of the bonus payments payable under this Section 2.8 (the “BMP Independent Review”). In the event that the parties are unable to agree on such independent third party consultant within 20 Business Days, SVB shall be entitled to select the independent third party consultant to perform the BMP Independent Review. If there is a discrepancy in the mineral resource statements between the Bankable Feasibility Study and BMP Review of 3% or less, the mineral resource statement with the greater mineral resources shall be used for the purposes of determining the bonus payments payable under this Section 2.8.

 

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(e) If SVB acquires the Beskauga Main Project and conveys the interest in the property to any third party (including a sale of the mineral rights and/or by assigning its interest in this agreement) before a Bankable Feasibility Study is completed, the transferee agrees to be bound by the terms and conditions applicable to SVB pursuant to this agreement and SVB shall not transfer Beskauga Main Project without this clause in the agreement with the transferee. SVB shall inform CB by written notice immediately (a) once it has determined to proceed with such transfer and (b) after execution of any such transfer of the property by disclosing name and address of the transferee.

2.9              Bonus Payments to CB – Beskauga South

If SVB acquires the Beskauga South Project, SVB shall remit to CB Parent the bonus payments in accordance with this Section 2.9, with 20% of such bonus payments being due (x) if CB does not challenge the mineral resource statement in accordance with this Section 2.9, not later than 60 Business Days after completion of the Bankable Feasibility Study on the Beskauga South Project, or (y) if CB challenges the mineral resource statement in accordance with this Section 2.9, no later than 10 Business Days after the mineral resource statement is finally determined in accordance with this Section 2.9, and the remaining 80% of such bonus payments being due within 15 Business Days of Construction Commencement on the Beskauga South Project:

(a) if the Beskauga South Project is the subject of a Bankable Feasibility Study indicating gold equivalent resources of at least 2 million ounces, a payment of $2,000,000, payable in cash or a combination of cash and SVB Shares, at SVB’s election with a maximum of 50% of such payment being made in SVB Shares, with the number of such SVB Shares to be calculated based on the 20-Day VWAP calculated as at the date immediately preceding the date of the issue of such SVB Shares;
(b) if the Beskauga South Project is the subject of a Bankable Feasibility Study indicating gold equivalent resources of at least 3 million ounces, a payment of $3,000,000, payable in cash or a combination of cash and SVB Shares, at SVB’s election with a maximum of 50% of such payment being made in SVB Shares, with the number of such SVB Shares to be calculated based on the 20-Day VWAP calculated as at the date immediately preceding the date of the issue of such SVB Shares;
(c) if the Beskauga South Project is the subject of a Bankable Feasibility Study indicating gold equivalent resources of at least 4 million ounces, a payment of $3,000,000, payable in cash or a combination of cash and SVB Shares, at SVB’s election with a maximum of 50% of such payment being made in SVB Shares, with the number of such SVB Shares to be calculated based on the 20-Day VWAP calculated as at the date immediately preceding the date of the issue of such SVB Shares; or

 

 

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(d) if the Beskauga South Project is the subject of a Bankable Feasibility Study indicating gold equivalent resources of at least 5 million ounces, a payment of $4,000,000, payable in cash or a combination of cash and SVB Shares, at SVB’s election with a maximum of 50% of such payment being made in SVB Shares, with the number of such SVB Shares to be calculated based on the 20-Day VWAP calculated as at the date immediately preceding the date of the issue of such SVB Shares.

For the avoidance of doubt, the above bonus payments are cumulative and, once a lump sum bonus payment is paid to CB Parent in respect of the Beskauga South Project, CB Parent will not be entitled to any further bonus payments in respect of any additional gold equivalent resources that are on the Beskauga South Project. By way of example only, if 5 million ounces of gold equivalent resources are detailed in the Bankable Feasibility Study on the Beskauga South Project, CB Parent will be entitled to a bonus payment equal to $12,000,000 in respect of the Beskauga South Project and once paid, CB Parent will not be entitled to any further bonus payments in respect of the Beskauga South Project. Nothing in this Section 2.9 shall prevent a bonus payment being paid in respect of the Beskauga Main Project in accordance with Section 2.8.

CB shall have a right to engage independent consultants to review the mineral resource statement contained in the Bankable Feasibility Study for the Beskauga South Project (the “BSP Review”) and CB may, within 15 Business Days of completion of the Bankable Feasibility Study by SVB, notify SVB that it is undertaking the BSP Review and challenging the mineral resource statement contained in such Bankable Feasibility Study. If there is a discrepancy in the mineral resource statement between such Bankable Feasibility Study and BSP Review of more than 3%, then the parties shall mutually agree on an independent third party consultant to review the mineral resource statements contained in such Bankable Feasibility Study and BSP Review to determine the mineral resource statement applicable to the Beskauga South Project for the purposes of the bonus payments payable under this Section 2.9 (the “BSP Independent Review”). In the event that the parties are unable to agree on such independent third party consultant within 20 Business Days, SVB shall be entitled to select the independent third party consultant to perform the BSP Independent Review. If there is a discrepancy in the mineral resource statements between the Bankable Feasibility Study and BSP Review of 3% or less, the mineral resource statement with the greater mineral resources shall be used for the purposes of determining the bonus payments payable under this Section 2.9.

 

(e) If SVB acquires the Beskauga South Project and conveys the interest in the property to any third party (including a sale of the mineral rights and/or by assigning its interest in this agreement) before a Bankable Feasibility Study is completed, the transferee agrees to be bound by the terms and conditions applicable to SVB pursuant to this agreement and SVB shall not transfer Beskauga South Project without this clause in the agreement with the transferee. SVB shall inform CB by written notice immediately (a) once it has determined to proceed with such transfer and (b) after execution of any such transfer of the property by disclosing name and address of the transferee.

 

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2.10          Property Boundaries

Should SVB decide to exercise the option for either Beskauga Main or Beskauga South only, the parties acknowledge that the boundaries between Beskauga Main and Beskauga South will be determined before the end of the option period based on geochemical analysis of available drilling results. For greater certainty mineralization with characteristics similar to drill holes BgS43 through to BgS92 will be used to define Beskauga South boundaries, and mineralization with characteristics similar to drill holes Bg-31 through to Bg-85 will be used to define Beskauga Main boundaries.

ARTICLE 3
REPRESENTATIONS AND WARRANTIES

3.1              Representations, Warranties and Covenants of CB

Each of CB Parent and CB Sub hereby jointly and severally represent, warrant and covenant to SVB, and acknowledge that SVB is relying on such representations, warranties and covenants in entering into this Agreement and performing its obligations hereunder, that as of the date of this Agreement:

(a) it is a company duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation;
(b) it has full power and authority to carry on its business and to enter into this Agreement and any agreement or instrument referred to herein or contemplated hereby and to consummate the transactions contemplated hereby;
(c) neither the execution and delivery of this Agreement, nor any of the agreements referred to herein or contemplated hereby, nor the consummation of the transactions hereby contemplated conflict with, result in the breach of or accelerate the performance required by, any agreement to which it is a party;
(d) the execution and delivery of this Agreement and the agreements referred to herein or contemplated hereby will not violate or result in the breach of the laws of any jurisdiction applicable to it or its constating documents;
(e) all corporate authorizations have been obtained for the execution of this Agreement and for the performance of its obligations hereunder;
(f) this Agreement constitutes a legal, valid and binding obligation of it enforceable against it in accordance with its terms;
(g) no approval, authorization, consent or order of, and no filing, registration or recording with, any governmental authority is required of CB in connection with the execution and delivery or with the performance by CB of this Agreement other than such as have been obtained;

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(h) the Beskauga Property is properly and accurately described in Schedule “A”;
(i) the Mineral Rights comprising the Beskauga Property have been duly and validly recorded pursuant to all applicable laws and regulations and are in good standing;
(j) CB has good title to its 100% interest the Mineral Rights comprised in the Beskauga Property, free and clear of all Encumbrances, or other claims whatsoever and, without limiting the generality of the foregoing, other than this Agreement, there are not any agreements or options to grant or convey any interest or rights in the Beskauga Property or to pay any royalties with respect to the Beskauga Property in force as of the date hereof;
(k) CB Parent is the legal and beneficial holder of 100% of the outstanding securities of CB Sub, free and clear of all Encumbrances or other claims whatsoever;
(l) none of the Mineral Rights comprising the Beskauga Property are subject to any area of common interest or similar obligation to or with a third person;
(m) it has provided SVB or its representatives access to all information in its possession and control relating to the Beskauga Property, whether in tangible or electronic form, including without limitation all maps, assays, surveys, drill logs, samples and metallurgical, geological, geophysical, geochemical and engineering data in respect thereof;
(n) there are no adverse claims, challenges, suits, actions, prosecutions, investigations or proceedings filed or, to the best of its knowledge, pending or threatened against it or its ownership of or rights or title to the Beskauga Property or any portion thereof;
(o) all taxes, assessments, levies or other payments relating to the Mineral Rights to the Beskauga Property and required to be made on or before the date hereof have been made and Schedule B sets out a true and complete list of all taxes, assessments, levies or other payments relating to the Mineral Rights to the Beskauga Property that are required to keep the Mineral Rights in good standing from time to time, and that such taxes, assessments, levies or other payments shall remain the same;
(p) to the best of its knowledge, there are no claims under any Environmental Law in respect of the Beskauga Property, nor to the best of its knowledge have any activities of it or on its behalf been in material violation of any applicable Environmental Law, regulations or regulatory prohibition or order, and conditions on and relating to the Beskauga Property are in compliance with such Environmental Law, regulations, prohibitions and orders in all material respects;

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(q) to the best of its knowledge, there are no pending or ongoing actions taken by or on behalf of any native or indigenous persons pursuant to the assertion of any land claims with respect to the Beskauga Property;
(r) any and all operations of CB and its subsidiaries have been conducted in accordance with good industry practices and in material compliance with applicable laws, rules, regulations, orders and directions of government and other competent authorities; and
(s) CB (i) has consulted with its professional and legal advisors and is capable of evaluating the merits and risks of receiving the SVB common shares issued to it in accordance with this Agreement; (ii) will be able to bear the economic risk of receiving such SVB common shares; (iii) acknowledges that it has not received a prospectus or an offering memorandum from SVB in connection with receiving such SVB common shares, that subscription for such SVB common shares has not been made through or as a result of, and the distribution thereof is not being accompanied by, any advertisement, without limitation, printed public media, radio, television or telecommunications, including electronic display, or as part of a general solicitation, and that it has relied entirely on the publicly available information and documents of SVB, and on its own investigation in making the decision to receive such SVB common shares as consideration; (iv) is acquiring such SVB common shares as principal and not as agent and is acquiring such SVB common shares not with a view to the resale or distribution; and (v) acknowledges such shares will be subject to such legends and transfer restrictions as may be required under applicable securities law.

3.2              Representations, Warranties and Covenants of SVB

SVB hereby represents, warrants and covenants to CB, and acknowledges that CB is relying on such representations, warranties and covenants in entering into this Agreement and performing its obligations hereunder, that as of the date of this Agreement:

(a) SVB is a company duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation;
(b) SVB has full power and authority to carry on its business and to enter into this Agreement and any agreement or instrument referred to or contemplated by this Agreement and to consummate the transactions contemplated hereby;
(c) neither the execution and delivery of this Agreement, nor any of the agreements referred to herein or contemplated hereby, nor the consummation of the transactions hereby contemplated conflict with, result in the breach of or accelerate the performance required by, any agreement to which it is a party;
(d) all corporate authorizations have been obtained for the execution of this Agreement and for the performance of its obligations hereunder;

 

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(e) this Agreement constitutes a legal, valid and binding obligation of SVB enforceable against it in accordance with its terms; and
(f) no approval, authorization, consent or order of, and no filing, registration or recording with, any governmental authority is required of SVB in connection with the execution and delivery or with the performance by SVB of this Agreement other than such as have been obtained, other than such approvals as may be required to list the shares of SVB with the appropriate stock exchange and any filing under securities laws in connection with the issuance of such shares; and
(g) any common shares of SVB issued pursuant to this Agreement, will, when issued, be duly authorized and validly issued as fully paid and non-assessable securities common shares in the capital of SVB, free of any lien, right of first refusal, preemptive right, subscription right or other similar right with respect thereto.

ARTICLE 4
COVENANTS

4.1              Operations

According to Subsoil Use Law of Kazakhstan, the CB Sub "Dostyk" will be appointed as the operator of the Project (the “Operator”). The exploration expenditures shall be spent through the CB Sub as the sole Beskauga licenceholder with exploration activities being conducted in a sound and workmanlike manner in accordance with sound mining and engineering practices. During the Option Period, the Operator shall maintain adequate insurance coverage in accordance with normal industry standards and practice, naming the parties hereto as insured and protecting the parties from third party claims, and shall provide reasonable satisfactory evidence of such insurance at the request of the parties, provided that such insurance is available on reasonable terms as determined by SVB in its sole discretion. All work done during the Option Period shall be done pursuant to programs and budgets approved by SVB.

4.2              Covenants of the Operator

During the Option Period, the Operator will:

(a) maintain the Beskauga Property in good standing and pay all costs in respect thereof, provided that neither the Operator or SVB (whether or not it is the Operator) shall be required to make any expenditures in connection with the preparation of independent studies to be filed with a governmental body of Kazakhstan;
(b) comply with all applicable laws with respect to its activities on the Beskauga Property;
(c) keep CB and SVB, as applicable, reasonably informed as to the activities with respect to the Beskauga Property;

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(d) provide CB and SVB, as applicable, with an annual report on the Beskauga Property within 90 days of the end of the work programs conducted in each year;
(e) allow CB and SVB, as applicable, to conduct site visits on the Beskauga Property upon reasonable notice at their sole risk and expense; and
(f) provide CB and SVB, as applicable, access to all Beskauga Property-related information, including financial information.

4.3              Covenants of CB

During the Option Period, CB will:

(a) cooperate with SVB in its efforts to obtain any permitting required;
(b) remain the registered owner of a 100% interest in the Beskauga Property during the Option Period and not transfer, pledge or in any way encumber the Beskauga Property;
(c) operate CB Sub in the Ordinary Course of Business in compliance with applicable law and the terms and conditions of all contracts, permits, licenses, authorizations and other governmental or regulatory authorizations to which CB Sub is a party, and in a manner that maintains CB Sub’s relations with suppliers, government and regulatory authorities and contractual counterparties in accordance with past custom and practice;
(d) ensure that CB Parent remains the legal and beneficial owner of 100% of the outstanding securities of CB Sub, free and clear of all Encumbrances or other claims whatsoever;
(e) refrain from agreeing to any amendment to or waiver in respect of the terms of the Mineral Rights comprised in the Beskauga Property and any other agreement related to the Beskauga Property, without the written consent of SVB;
(f) promptly deliver to SVB any notice, demands, third-party offers or inquiries or other material communications it receives relating to the Beskauga Property;
(g) not solicit offers or engage in any discussions with a third party relating to the ownership or development of the Project; and
(h) take any action or refrain from any action, as the case may be, as may be required in furtherance of or in support of the terms of this Agreement.

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4.4              Area of Interest

(a) If, during the term of this Agreement, any party, directly or indirectly, has the opportunity to stake or otherwise acquire any mineral interest or right of any nature whatsoever, located wholly or in part in the Area of Interest, the party who has such opportunity (in this Section 4.4, the “Acquiring Party”) shall notify the other party (the “Other Party”) in writing of that opportunity without undue delay, and, in any event, within 10 days of the opportunity arising, including the terms on which the mineral interest or right of any nature whatsoever is able to be acquired and an assessment of the likely benefits to the parties. An Acquiring Party may stake a mineral interest or right in its own name if the Acquiring Party believes it is necessary to do so in order to preserve the opportunity to acquire such mineral interest or right. In such event the Acquiring Party will be staking the mineral claim subject to the right of the party who is not the Acquiring Party under this Section 4.4(a) and if a decision is made to stake or acquire the mineral interest or right pursuant to Section 4.4(b), such mineral claim shall become subject to this Agreement and form part of the Property on the basis contemplated by Section 4.4(b).
(b) The Other Party shall within 15 days from the date that the notice is given by the Acquiring Party pursuant to Section 4.4(a) decide whether the mineral interest or right of any nature whatsoever should be staked or acquired on behalf of the parties. If a decision is made to stake or acquire any mineral interest or right wholly or in part in the Area of Interest, the parties shall use commercially reasonable efforts to acquire or stake such mineral interest or right of any nature whatsoever which shall become subject to this agreement and form part of the Property (the “Additional Property”). The costs associated with staking or acquiring the Additional Property shall be included in the program and budget for work on the Property approved by SVB.

(c)               If the Other Party decides the mineral right or interest in the Area of Interest should not be acquired as stated pursuant to Section 4.4(b), the Acquiring Party may itself acquire or stake such mineral claim on terms not more favourable to the Acquiring Party than those specified in the notice referred to in Section 4.4(a) within three months of the giving of such notice.

4.5              Right of First Refusal

If CB receives a bona fide offer (the “Offer”) from an arms-length third party (the “Offeror”) to purchase either all of its interest in the Beskauga Property or only the interest in the Beskauga Main Project or Beskauga South Project (the “ROFR Interest”), which CB intends to accept, the following provisions shall apply:

(a) CB shall, by notice (the “ROFR Notice”), advise SVB of its intention to accept such Offer, and include in such ROFR Notice the identity of the Offeror, the price or other consideration of the Offer, the proposed effective date and closing date of the transaction, a copy of the Offer, evidence that the board of directors of CB has approved the acceptance of such Offer, and any other information respecting the transaction which it reasonably believes would be material to the exercise of the other party’s rights hereunder.

 

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(b) If the consideration described in the ROFR Notice cannot be matched in kind, the ROFR Notice shall include CB’s bona fide estimate of the value, in cash, of such consideration. If SVB objects as to the reasonableness of such estimate of the cash value of the consideration described in the ROFR Notice, it will so advise CB and the dispute will be submitted for determination to an independent Canadian national firm of chartered accountants mutually agreed to by CB and SVB (and, failing such agreement between CB and SVB within a further period of five Business Days, such independent national firm of chartered accountants will be designated by SVB, and the election period provided herein to the other party shall be suspended until such matter is resolved by settlement or determination).
(c) Within the later of: (i) 90 days from the receipt of the ROFR Notice, as modified by any suspension described above; or (ii) if applicable, 15 days from any determination or settlement reached as described above, SVB may give notice to CB that it elects to purchase the ROFR Interest described in the ROFR Notice for the applicable price (a “Notice of Acceptance”). A Notice of Acceptance shall create a binding contractual obligation upon CB to sell, and upon SVB to purchase, for the applicable price, all of the ROFR Interest included in such ROFR Notice on the terms and conditions set forth in the ROFR Notice.
(d) If the ROFR Interest described in the ROFR Notice is not disposed of to SVB as described above, CB may transfer such ROFR Interest to the Offeror identified in such ROFR Notice at any time within 180 days from the issuance of such ROFR Notice, provided that (i) such transfer is not on terms that are more favourable to such purchaser than those offered in the ROFR Notice; (ii) and the transferee agrees in writing to be bound by the terms and conditions applicable to CB pursuant to this Agreement.
(e) Following a transfer or 180 days from the issuance of a ROFR Notice from which a transfer did not result, as the case may be, the provisions of this clause shall once again apply to the ROFR Interest described in the ROFR Notice.

ARTICLE 5
TERMINATION; INDEMNITY; DEFAULT

5.1              Termination

This Agreement shall terminate:

(a) upon the mutual written agreement of CB and SVB; or
(b) upon the delivery of written notice by SVB, provided that at the time of delivery of written notice, unless there has been a material breach of a representation or warranty given by CB which has not been cured, the Beskauga Property is in good-standing;

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(c) if there is a material breach by a party of its obligations under the Option Agreement (the “Breaching Party”), and the other party (the “Non-Breaching Party”) has provided written notice of such material breach (“Breach Notice”) to the Breaching Party, upon the date which is (i) 30 days after the Breach Notice is delivered, if such material breach is capable of being cured and remains uncured, or (ii) 60 days after the Breach Notice is delivered, if such material breach is incapable of being cured and the parties have not otherwise agreed in writing, and in either event provided that the Non-Breaching Party is not in material breach of the Agreement at the date of the Breach Notice or at any time thereafter; or
(d) if the Closing Date does not occur within 12 months of the Effective Date, upon the delivery of a written notice by either party thereafter.

5.2              Indemnity and Survival of Representations

(a) The representations and warranties set out herein are conditions on which the parties have relied in entering into this Agreement and shall survive for a period of three years after the date of this Agreement. Each of CB and SVB will indemnify and save the other harmless from and against any and all claims, judgments, liabilities, loss, cost, expense or damage, of any kind or nature whatsoever (including legal costs on a solicitor and his own client basis), arising out of or in connection with any breach of any representation, warranty, covenant, agreement or condition made by it and contained in this Agreement.
(b) The provisions of Section 5.2 of this Agreement shall survive termination of this Agreement.

5.3              Default

Notwithstanding anything in this Agreement to the contrary, if any party (a “Defaulting Party”) is in default of any requirement herein set forth, the party affected by such default shall give written notice to the Defaulting Party specifying the default. The Defaulting Party shall have 30 days after the receipt of such notice of default to cure the default specified in such notice. If the Defaulting Party fails within such period to cure any such default, the affected party will be entitled to seek any remedy it may have on account of such default including terminating this agreement and/or seeking the remedies of specific performance, injunction or damages.

ARTICLE 6
MISCELLANEOUS

6.1              Confidentiality

The parties agree to hold in confidence all data and information obtained in respect of the Beskauga Property or otherwise in connection with this Agreement except to the extent: (i) such data and information is or becomes generally available to the public (other than as a result of a disclosure by a party or its representatives in breach of this Agreement); (ii) such data and information is derived solely from SVB’s activities in respect of the Beskauga Property in which case it may be disclosed by SVB; or (iii) such data or information is required to be disclosed by law or by the rules and regulations of any regulatory authority or stock exchange having jurisdiction, in which case the party making such disclosure will consult with the other party prior to making any statement or news release and the parties will use all reasonable efforts, acting expeditiously and in good faith, to provide the other party with a copy of any proposed disclosure at least 72 hours, or if such period is not reasonably practicable, as soon as possible, prior to public release in order to agree upon a text for such statement or release which is satisfactory to each party. Failure by a non-disclosing party to provide comment on any proposed disclosure within 72 hours of receipt from the disclosing party shall be deemed a waiver of such receiving party’s rights pursuant to this section. If the parties fail to agree upon such text, the party making the disclosure will make only such public statement or release as its counsel advises is legally required to be made or is otherwise reasonable in the circumstances.

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6.2              Assignment

During the Option Period (a) neither CB may sell, transfer, assign, mortgage, pledge or otherwise encumber their interest in this Agreement; and (b) CB may not, directly or indirectly, sell, transfer, assign, mortgage, pledge or otherwise encumber its interest in the Property, without the prior written consent of SVB. Notwithstanding the foregoing, CB shall be permitted to assign this Agreement to an “affiliate” or “associate” as those terms are defined in the Business Corporations Act (British Columbia). It will be a condition of any assignment under this Agreement that such assignee shall agree in writing to be bound by the terms of this Agreement applicable to the assignor.

6.3              Force Majeure

(a) The obligations of a party hereunder shall be suspended to the extent and for the period that performance, exploration, development or operations, as applicable, is prevented by any cause, whether foreseeable or unforeseeable, beyond its reasonable control, including labour disputes (however arising and whether or not employee demands are reasonable or within the power of the party to grant); acts of God; laws, instructions or requests of any government or governmental entity; judgments or orders of any court; inability to obtain on reasonably acceptable terms any public or private licence, permit or other authorisation; curtailment or suspension of activities to remedy or avoid an actual or alleged, present or prospective violation of Environmental Laws; action or inaction by any federal, provincial or local agency that delays or prevents the issuance or granting of any approval or authorisation required to conduct operations beyond the reasonable expectations of the party seeking the approval or authorisation; acts of war or conditions arising out of or attributable to war, whether declared or undeclared; riot; civil strife, terrorism, insurrection or rebellion; fire, explosion, earthquake; delay or failure by suppliers or transporters of materials, parts, supplies, services or equipment or by contractors’ or subcontractors’ shortage of, or inability to obtain, labour, transportation, materials, machinery, equipment, supplies, utilities or services; accidents; breakdown of equipment, machinery or facilities; actions by native rights groups, environmental groups, or other similar special interest groups; pandemics, epidemics or other public health emergencies (including those resulting from diseases, influenzas and other viruses) and governmental actions relating thereto (including quarantines, business closures and travel restrictions relating to public health emergencies); or any other cause whether similar or dissimilar to the foregoing (an “Intervening Event”). Notwithstanding the foregoing, and for greater certainty, neither lack of funds nor the inability of any party to obtain financing shall be an Intervening Event.

 

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(b) A party relying on the provisions of Subsection 6.3(a) shall promptly give written notice to the other party of the particulars of the Intervening Event and all time limits imposed by this Agreement shall be extended from the date of delivery of such notice by a period equivalent to the period of delay resulting from an Intervening Event.
(c) A party relying on the provisions of Subsection 6.3(a) shall take all reasonable steps to eliminate any Intervening Event and, if possible, shall perform its obligations under this Agreement as far as commercially practical, but nothing herein shall require such party to settle or adjust any labour dispute or to question or to test the validity of any law, rule, regulation or order of any duly constituted governmental authority or to complete its obligations under this Agreement if an Intervening Event renders completion commercially impracticable. A party relying on the provisions of Subsection 6.3(a) shall give written notice to the other party as soon as such Intervening Event ceases to exist.

6.4              Notice

Any notice, direction or other instrument required or permitted to be given under this Agreement will be in writing and may be given by the delivery of the same or by sending the same by email or other similar form of communication (provided that if a method of notice other than email is selected, the notice shall also be sent by email), in each case addressed as follows:

(a) If to CB at:

Copperbelt AG

Gartenstrasse 3

6300 Zug

Switzerland

 

Attention: Dr. Waldemar Mueller

Email: [***]

 

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with a copy (which does not constitute notice) to:

 

NEOVIUS AG

Hirschgaesslein 30

4010 Basel

Switzerland

 

Attention: Peter Goeggel

Email: [***]

 

(b) If to SVB at:

Silver Bull Resources, Inc.

777 Dunsmuir Street, Suite 1610

Vancouver, British Columbia

V7Y 1K4

Attention: Tim Barry

Email: [***]

and

Attention: Sean Fallis

Email: [***]

 

with a copy (which does not constitute notice) to:

 

Blake, Cassels & Graydon LLP

595 Burrard Street

Suite 2600, Three Bentall Centre

Vancouver, British Columbia

V7X 1L3

 

Attention: Susan Tomaine

Email: [***]

 

Any notice, direction or other instrument will (i) if delivered by hand, be deemed to have been given and received on the day it was delivered; and (iii) if sent by email or other similar form of communication, be deemed to have been given and received on the Business Day following the day it was so sent. Any party may at any time change its address for service from time to time by giving notice to the other parties in accordance with this Section 6.4.

6.5              Further Assurances

Each of the parties hereto shall, from time to time hereafter and upon any reasonable request of the other, promptly do, execute, deliver or cause to be done, executed and delivered all further acts, documents and things as may be required or necessary for the purposes of giving effect to this Agreement.

 

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6.6              Entire Agreement

This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions, whether written or oral, including the draft term sheet. There are no conditions, covenants, agreements, representations, warranties or other provisions, express or implied, collateral, statutory or otherwise, relating to the subject matter hereof except as provided herein.

6.7              Governing Law

This Agreement will be governed by and construed in accordance with the laws of the Province of British Columbia and the laws of Canada applicable therein. The parties hereto hereby irrevocably attorn to the jurisdiction of the Courts of British Columbia.

6.8              Dispute Resolution

Any disputes under this Agreement shall be resolved through arbitration which will take place in Vancouver, British Columbia pursuant to the Commercial Arbitration Act (British Columbia).

6.9              Enurement

This Agreement shall enure to the benefit of and shall be binding on and enforceable by and against the parties and their respective successors or heirs, executors, administrators and other legal personal representatives, and permitted assigns.

6.10          Severability

If any provision of this Agreement is determined by a court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, all other provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby are not affected in any manner materially adverse to any party hereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties hereto as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible.

6.11          Amendments

No amendment or waiver of any provision of this Agreement shall be binding on any party unless consented to in writing by such party. No waiver of any provision of this Agreement shall constitute a waiver of any other provision, nor shall any waiver of any provision of this Agreement constitute a continuing waiver unless otherwise expressly provided.

 

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6.12          Time of Essence

Time shall be of the essence of this Agreement.

6.13          Counterparts

This Agreement and all documents contemplated by or delivered under or in connection with this Agreement may be executed and delivered in any number of counterparts (including counterparts delivered by email), with the same effect as if all parties had signed and delivered the same document, and all counterparts shall be construed together to be an original and will constitute one and the same agreement.

 

 

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IN WITNESS WHEREOF this Agreement has been executed by the parties as of the date first above written.

COPPERBELT AG

 By: /s/ Waldemar Mueller
Name: Waldemar Mueller
Title: President & CEO

 By: /s/ Peter Goeggel
Name: Peter Goeggel
Title: Director

 

DOSTYK LLP

 By: /s/ Irma Nuss
Name: Irma Nuss
Title: Managing Director

 

SILVER BULL RESOURCES, INC.

 By: /s/ Timothy Barry
Name: Timothy Barry
Title: President & CEO

 

 

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Exhibit 4.2

 

 

 

 

SLIVER BULL RESOURCES, INC.

 

and

 

COPPERBELT AG

 

 

 

 

JOINT VENTURE AGREEMENT

 

 

 

 

September 1, 2020

 

 

 

 
 
 

 

Table of Contents

 

 

  Page
Article 1 DEFINITIONS AND CROSS-REFERENCES 1
1.1   Definitions 1
1.2   Cross-References 1
Article 2 NAME, PURPOSES AND TERM 1
2.1   General 1
2.2   Name 1
2.3   Purposes 1
Article 3 REPRESENTATIONS AND WARRANTIES; TITLE TO ASSETS; INDEMNITIES 2
3.1   Representations and Warranties of Both Participants 2
3.2   Disclosures 2
3.3   Record Title 3
3.4   Loss of Title 3
Article 4 RELATIONSHIP OF THE PARTICIPANTS 3
4.1   No Partnership 3
4.2   Tax Operator 3
4.3   Other Business Opportunities 3
4.4   Waiver of Rights to Partition or Other Division of Assets 3
4.5   Transfer or Termination of Rights to Properties 3
4.6   Implied Covenants 3
4.7   No Third Party Beneficiary Rights 4
Article 5 CONTRIBUTIONS BY PARTICIPANTS 4
5.1   Initial Contributions 4
Article 6 INTERESTS OF PARTICIPANTS 4
6.1   Initial Participating Interests 4
6.2   Changes in Participating Interests 4
6.3   Documentation of Adjustments to Participating Interests 5
6.4   Guarantee of Kazco Loan 5
Article 7 MANAGER 5
7.1   Appointment 5
7.2   Powers and Duties of Manager 5
7.3   Resignation 6
7.4   Payments To Manager 6
Article 8 WITHDRAWAL AND TERMINATION 6
8.1   Termination by Expiration or Agreement 6
8.2   Withdrawal 6
8.3   Disposition of Assets on Termination 6
8.4   Continuing Authority 6
Article 9 ACQUISITIONS WITHIN AREA OF INTEREST 7
9.1   General 7
9.2   Notice to Non-Acquiring Participant 7

 

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Table of Contents (continued)

 

9.3   Option Exercised 7
9.4   Option Not Exercised 7
Article 10 TRANSFER OF INTEREST; RIGHT OF FIRST REFUSAL 7
10.1   General 7
10.2   Limitations on Free Transferability 7
10.3   Right of First Refusal 8
10.4   Sale by SVB. 8
10.5   Permitted Transfers by SVB. 8
Article 11 DISPUTES 8
11.1   Governing Law 8
11.2   Arbitration. 9
Article 12 CONFIDENTIALITY 9
12.1   Permitted Disclosure of Confidential Business Information 9
12.2   Disclosure Required By Law 9
12.3   Public Announcements 10
Article 13 GENERAL PROVISIONS 10
13.1   Notices 10
13.2   Currency 11
13.3   Headings 11
13.4   Waiver 11
13.5   Modification 11
13.6   Force Majeure 11
13.7   Rule Against Perpetuities 12
13.8   Further Assurances 12
13.9   Entire Agreement; Successors and Assigns 12
13.10   Counterparts 12

 

 

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JOINT VENTURE AGREEMENT

This Agreement is made as of September 1, 2020 (“Effective Date”) between Silver Bull Resources Inc. (“SVB”), and Copperbelt AG (“CB”), a corporation incorporated under the laws of Switzerland. At the request of SVB, CB has taken the necessary measures to incorporate in Kazakhstan Ekidos Minerals LLP (“Kazco”).

RECITALS

A. CB has identified two mineral properties (each, a “Property” and together, the “Properties”) located in Kazakhstan available for mineral license application (each, a “License” and together, the “Licenses”), which are more fully described in Exhibit A.
B. The parties now wish to enter into this Agreement and form a joint venture between SVB and CB for the application of the Licenses, and for further exploration and evaluation within the Properties (which Properties, for greater certainty, include the Licenses).

NOW THEREFORE, in consideration of the covenants and conditions contained herein, SVB and CB agree as follows:

Article 1
DEFINITIONS AND CROSS-REFERENCES

1.1               Definitions. The terms defined in Exhibit B and elsewhere shall have the defined meaning wherever used in this Agreement, including in Exhibits.

1.2               Cross-References. References to “Exhibits,” “Articles,” “Sections” and “Subsections” refer to Exhibits, Articles, Sections and Subsections of this Agreement. References to “Paragraphs” and “Subparagraphs” refer to paragraphs and subparagraphs of the referenced Exhibits.

Article 2
NAME, PURPOSES AND TERM

2.1               General. SVB and CB hereby agree to associate and participate in a joint venture for the purposes hereinafter stated and agree that all of the rights and obligations of the Participants in connection with the Properties, Assets or the Area of Interest and all Operations shall be subject to and governed by this Agreement.

2.2               Name. The Assets shall be managed and operated by under the name of the Ekidos Minerals Joint Venture.

2.3               Purposes. This Agreement is entered into for the following purposes and for no others, and shall serve as the exclusive means by which each of the Participants accomplishes such purposes:

(a) to apply for the Licenses;
(b) to conduct exploration within the Properties and Area of Interest,
(c) to evaluate the possible development and mining of the Properties,
(d) to engage in Operations on the Properties,
(e) to complete and satisfy all Environmental Compliance obligations and Continuing Obligations affecting the Properties, and

 

 
 
 

 

 

(f) to perform any other activity necessary, appropriate, or incidental to any of the foregoing.

2.4               Formation of Kazco. On behalf of CB, Ms. Irma Nuss, a Managing Director of CB Sub, acting as a private person, has caused the incorporation of Kazco with the intention in due course on advice of SVB and CB to submit the applications for the Licenses with the funding previously advanced by SVB for this purpose. CB and Ms. Nuss have agreed that after issue of the Licenses to Kazco, Ms. Nuss shall transfer 100% of the equity interests in Kazco to SVB free and clear of all encumbrances and liens whatsoever. CB agrees with SVB that CB will cause all of the issued and outstanding equity interests of Kazco to be transferred to SVB free and clear of all encumbrances and liens whatsoever. Immediately following this transfer SVB shall, and shall be permitted to, transfer all of its right, title and interest in this Agreement to Kazco (for the avoidance of doubt, without complying with the limitations set out in Article 10).

Article 3
REPRESENTATIONS AND WARRANTIES; TITLE TO ASSETS; INDEMNITIES

3.1               Representations and Warranties of Both Participants. As of the Effective Date, each Participant warrants and represents to the other, and CB warrants and represents on behalf of Kazco to SVB that:

(a) it is a corporation duly organized and in good standing in its jurisdiction of incorporation and is qualified to do business and is in good standing in those jurisdictions where necessary in order to carry out the purposes of this Agreement;
(b) it has the capacity to enter into and perform this Agreement and all transactions contemplated herein and that all other actions required to authorize it to enter into and perform this Agreement have been properly taken;
(c) no consent or approval of any third party or governmental agency is required for the execution, delivery or performance of this Agreement or the transfer or acquisition of any interest in the Assets or, if such consent or approval is required, such consent or approval has been obtained by the party required to obtain it and evidence thereof delivered to the other party hereto;
(d) it will not breach any other agreement or arrangement by entering into or performing this Agreement;
(e) it is not subject to any governmental order, judgment, decree, sanction or Laws that would preclude the granting of the Licenses, or the permitting or implementation of Operations under this Agreement;
(f) this Agreement has been duly executed and delivered by it and is valid and binding upon it in accordance with its terms;
(g) in the case of CB, the Properties are available for application of the Licenses and are free and clear of all liens, charges, encumbrances, security interests and adverse claims; and
(h) in the case of CB, Kazco was formed on July 1, 2020; all of the equity interests in Kazco are owned by Ms. Irma Nuss; since its formation Kazco has not conducted any business and it has no assets or liabilities other than those related to incorporation of Kazco.

3.2               Disclosures. Each of the Participants represents and warrants that it is unaware of any material facts or circumstances that have not been disclosed in this Agreement, which should be disclosed to the other Participant in order to prevent the representations and warranties in this Article from being materially misleading.

 

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3.3               Record Title. The Licenses and legal title to the Properties and Assets shall be held by Kazco and shall be beneficially owned by SVB and CB in accordance with their Participating Interests.

3.4               Loss of Title. Any failure or loss of the Licenses or title to the Properties or Assets, and all costs of defending title, shall be charged to Kazco, except that all costs and losses arising out of or resulting from breach of the representations and warranties of CB as to title to its Initial Contribution (including the representation and warranty in Section 3.1(g)) shall be charged to CB. The failure of CB to pay these costs within 30 days of written demand shall cause CB’s 20% beneficial interest in the Licenses to be forfeited to Kazco.

Article 4
RELATIONSHIP OF THE PARTICIPANTS

4.1               No Partnership. Nothing contained in this Agreement shall be deemed to constitute either Participant the partner of the other, or, except as otherwise herein expressly provided, to constitute either Participant the agent or legal representative of the other, or to create any fiduciary relationship between them.

4.2               Tax Operator.

(a) Upon the assignment of all of SVB’s right, title and interest in this Agreement to Kazco as contemplated in Section 2.4, Kazco shall be automatically appointed as “operator” of the Property for the purposes of carrying out all exploration and development programs and collecting, remitting and administering all value added tax in respect of the business and operations of the Properties, including, without limitation, applying for any applicable input tax credits, subject to applicable law and until changed by Kazco.
(b) CB hereby authorizes and grant a limited power of attorney to Kazco for the purposes of completing any forms or documents required by the Kazakhstan government agency or ministry responsible for taxes and any modification, replacement or successor thereto in order for Kazco to act as the operator. CB agrees to provide such additional information as is necessary for the completion of the forms or documents required by the applicable Kazakhstan government agency or ministry.

4.3               Other Business Opportunities. Except as expressly provided in this Agreement, each Participant shall have the right to engage in and receive full benefits from any independent business activities or operations, whether or not competitive with this Business, without consulting with, or obligation to, the other Participant.

4.4               Waiver of Rights to Partition or Other Division of Assets. The Participants hereby waive and release all rights of partition, or of sale in lieu thereof, or other division of Assets, including any such rights provided by Law.

4.5               Transfer or Termination of Rights to Properties. Except as otherwise provided in this Agreement, neither Participant shall Transfer all or any part of its interest in the Licenses, the Properties, the Assets or this Agreement or otherwise permit or cause such interests to terminate.

4.6               Implied Covenants. There are no implied covenants contained in this Agreement other than those of good faith and fair dealing.

4.7               No Third Party Beneficiary Rights. This Agreement shall be construed to benefit the Participants and their respective successors and assigns only, and shall not be construed to create third party beneficiary rights in any other party or in any governmental organization or agency.

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Article 5
CONTRIBUTIONS BY PARTICIPANTS

5.1               Initial Contributions.

As its Initial Contribution:

(a) CB hereby contributes to the Joint Venture the identification of the Properties; and
(b) SVB hereby agrees to contribute such funds required for incorporation of Kazco, to apply for the Licenses and fund such other exploration activities on the Properties as it deems appropriate, in its sole discretion.

Article 6
INTERESTS OF PARTICIPANTS

6.1               Initial Participating Interests. The Participants shall have the following initial Participating Interests:

SVB – 80%

CB – 20%

6.2               Changes in Participating Interests. The Participating Interests shall be eliminated or changed as follows:

(a) Upon withdrawal or deemed withdrawal as provided in Article 8;
(b) Upon Transfer by either Participant of part or all of its Participating Interest in accordance with Article 10;
(c) SVB shall be entitled to acquire CB’s entire Participating Interest in respect of a Property (including any corresponding License) by undertaking the below steps. This option may be exercised at any time after a minimum of US$3,000,000 has been spent on a Property by SVB, the results of which are to be provided to both SVB and CB.
(i) SVB providing written notice to CB of SVB’s decision to acquire CB’s Participating Interest in the Property; and
(ii) within 60 days of the date of such notice making a cash payment of $1,500,000,

and for the avoidance of doubt:

(iii) upon acquisition of CB’s Participating Interest in respect of a Property in accordance with subparagraphs (i) and (ii) above, 100% of the legal and beneficial interest in such Property (including any corresponding License) shall be owned by SVB and shall no longer form part of the Properties or Assets subject to this Agreement; and
(iv) the payment referred to in subparagraph (ii) shall only entitle SVB to acquire CB’s Participating Interest in one Property (and any corresponding License), and to the extent SVB wishes to acquire CB’s Participating Interest in any additional Property (including any corresponding License) that forms part of the Assets, SVB may acquire such interest by providing a notice and make such payment to CB in accordance with subparagraphs (i) and (ii) above; and

 

 

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(d) SVB may not enter into a transaction to dispose of a 100% interest in the Properties for sixty (60) days following exercise of the option set out in Section 6.2(c).

6.3               Documentation of Adjustments to Participating Interests. Adjustments to the Participating Interests need not be evidenced during the term of this Agreement by the execution and recording of appropriate instruments, but each Participant’s Participating Interest balance shall be shown in the accounting records of the Manager. However, either Participant, at any time upon the request of the other Participant, shall execute and acknowledge instruments necessary to evidence such adjustments in form sufficient for filing and recording in the jurisdiction where the Properties are located.

6.4               Guarantee of Kazco Loan. CB hereby guarantees the obligations of Kazco pursuant to the loan agreement dated August 20, 2020 between Kazco and SVB (the “Loan Agreement”). Wherever the Loan Agreement requires Kazco to take any action or make any payment, CB undertakes to, or cause Kazco to, take such action or make such payment and guarantee the performance or payment thereof.

Article 7
MANAGER

7.1               Appointment. Upon the assignment of SVB’s rights and obligations under this Agreement to Kazco, as contemplated in Section 2.4, Kazco shall automatically be appointed as the Manager with overall management responsibility for Operations. Kazco hereby agrees to serve until it resigns as provided in Section 7.3.

7.2               Powers and Duties of Manager. The Manager shall have the following powers and duties:

(a) The Manager shall manage, direct and control Operations, including preparing any Programs and Budgets pertaining to the Properties as it deems advisable from time to time.
(b) The Manager may make any expenditures funded by Kazco and contemplated by a Budget or necessary to carry out Programs as it deems advisable from time to time.
(c) The Manager may amend Budgets and Programs as it deems advisable from time to time.
(d) The Manager may conduct such title examinations of the Properties and cure such title defects pertaining to the Properties as may be advisable in its reasonable judgment.
(e) The Manager may: (i) make or arrange for all payments required by leases, licenses, permits, contracts and other agreements related to the Assets; (ii) pay all taxes, assessments and like charges on Operations and Assets except taxes determined or measured by a Participant’s sales revenue or net income and taxes, including production taxes, attributable to a Participant’s share of Products, and shall otherwise promptly pay and discharge expenses incurred in Operations; and (iii) do all other acts reasonably necessary to maintain the Assets.
(f) The Manager may: (i) apply for all necessary permits, licenses and approvals; (ii) take actions as may be appropriate to comply with all Laws; and (iii)  prepare and file all reports or notices required for or as a result of Operations.
(g) The Manager may prosecute, defend and initiate as it considers appropriate, all litigation or administrative proceedings arising out of Operations.
(h) The Manager may obtain and maintain insurance for itself and the other Participants.
(i) The Manager may dispose of Assets, whether by abandonment, surrender, or Transfer in the ordinary course of business.

 

 

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(j) The Manager shall have the right to carry out its responsibilities hereunder through agents, Affiliates or independent contractors.
(k) The Manager shall keep and maintain all required accounting and financial records in accordance with customary cost accounting practices in the mining industry.
(l) The Manager may undertake all other activities reasonably necessary to fulfill the foregoing.

7.3               Resignation. The Manager may resign upon not less than two weeks’ prior notice to CB, in which case Kazco may elect another party (including a related party) to become the new Manager by notice to CB within thirty days after the notice of resignation.

7.4               Payments To Manager. The Manager may charge reasonable management fees for its services.

Article 8
WITHDRAWAL AND TERMINATION

8.1               Termination by Expiration or Agreement. This Agreement shall terminate:

(a)                Automatically upon there being one Participant in the Joint Venture, including as a result in the change in the Participating Interests contemplated by Section 6.2 or withdrawal as contemplated by Section 8.2; or

(b) by written agreement of the Participants,

provided that CB’s obligations pursuant to Section 6.4 shall only terminate on repayment of the loan in accordance with the Loan Agreement.

 

8.2               Withdrawal. A Participant may elect to withdraw from the Business by giving notice to the other Participant of the effective date of withdrawal, which shall be (30) days after the date of the notice. Upon such withdrawal or election, the Business shall terminate, and the withdrawing Participant shall be deemed to have transferred to the remaining Participant all of its Participating Interest, including all of its interest in the Assets, without cost and free and clear of all Encumbrances arising by, through or under such withdrawing Participant. The withdrawing Participant shall execute and deliver all instruments as may be necessary in the reasonable judgment of the other Participant to effect the transfer of its interests in the Assets to the other Participant.

8.3               Disposition of Assets on Termination. Promptly after termination under Section 8.1, the Manager shall take all action necessary to wind up the activities of the Business. All costs and expenses incurred in connection with the termination of the Business in excess of funds raised from Asset dispositions shall be expenses chargeable to Kazco.

8.4               Continuing Authority. On termination of the Business under Sections 8.1 or 8.2, the Participant which was the Manager prior to such termination or withdrawal (or the other Participant in the event of a withdrawal by the Manager) shall have the power and authority to do all things on behalf of both Participants which are reasonably necessary or convenient to: (a) wind up Operations and (b) complete any transaction and satisfy any obligation, unfinished or unsatisfied, at the time of such termination or withdrawal, if the transaction or obligation arises out of Operations prior to such termination or withdrawal. The Manager shall have the power and authority to grant or receive extensions of time or change the method of payment of an already existing liability or obligation, prosecute and defend actions on behalf of both Participants and the Business, encumber Assets, and take any other reasonable action in any matter with respect to which the former Participants continue to have, or appear or are alleged to have, a common interest or a common liability.

 

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Article 9
ACQUISITIONS WITHIN AREA OF INTEREST

9.1               General. Any interest or right to acquire any interest in real property or water rights related thereto within the Area of Interest either acquired or proposed to be acquired during the term of this Agreement by or on behalf of either Participant (“Acquiring Participant”) or any Affiliate of such Participant shall be subject to the terms and provisions of this Agreement. Kazco and CB and their respective Affiliates for their separate account shall be free to acquire lands and interests in lands outside the Area of Interest and to locate mining claims outside the Area of Interest. Failure of any Affiliate of either Participant to comply with this Article 9 shall be a breach by such Participant of this Agreement.

9.2               Notice to Non-Acquiring Participant. Within thirty (30) days after the acquisition or proposed acquisition, as the case may be, of any interest or the right to acquire any interest in real property or water rights wholly or partially within the Area of Interest (except real property acquired by the Manager pursuant to a Program) (the “New Interest”), the Acquiring Participant shall notify the other Participant of such acquisition by it or its Affiliate; provided further that if the acquisition of any interest or right to acquire any interest pertains to real property or water rights partially within the Area of Interest, then all such real property (i.e., the part within the Area of Interest and the part outside the Area of Interest) shall be subject to this Article 9. If SVB or an Affiliate of SVB acquires or proposes to acquire a New Interest, upon notification to CB in accordance with this Section 9.2 and acquisition of the New Interest by SVB, the New Interest shall become part of the Properties. If CB or an Affiliate of CB acquires or proposes to acquire a New Interest, CB shall notify SVB in accordance with this Section 9.2, and SVB may elect, in its sole discretion, to purchase the New Interest such that the New Interest shall become part of the Properties.

9.3               Option Exercised. Within thirty (30) days after receiving the Acquiring Participant’s notice, the other Participant may notify the Acquiring Participant of its election to accept a proportionate interest in the acquired interest equal to its Participating Interest. Promptly upon such notice, the Acquiring Participant shall convey or cause its Affiliate to convey to the Participants, in proportion to their respective Participating Interests, by special warranty deed with title held as described in Section 3.3, all of the Acquiring Participant’s (or its Affiliate’s) interest in such acquired interest, free and clear of all Encumbrances arising by, through or under the Acquiring Participant (or its Affiliate) other than those to which both Participants have agreed. The acquired interests shall become a part of the Properties for all purposes of this Agreement immediately upon such notice. The other Participant shall promptly pay to the Acquiring Participant its proportionate share of the latter’s actual out-of-pocket acquisition costs.

9.4               Option Not Exercised. If the other Participant does not give such notice within the thirty (30) day period set forth in Section 9.3, it shall have no interest in the acquired interests, and the acquired interests shall not be a part of the Assets or continue to be subject to this Agreement.

Article 10
TRANSFER OF INTEREST; RIGHT OF FIRST REFUSAL

 

10.1           General. A Participant shall have the right to Transfer to a third party its Participating Interest, including an interest in this Agreement or the Assets, solely as provided in Section 2.4 and this Article 10.

10.2           Limitations on Free Transferability. Subject to Sections 10.3, 10.4 and 10.5, any Transfer by either Participant under Section 10.1 shall be subject to the following limitations:

(a) Neither Participant shall Transfer any interest in this Agreement or the Assets (including, but not limited to, any royalty, profits, or other interest in the Products) except in conjunction with the Transfer of all of its Participating Interest;

 

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(b) No transferee of all or any part of a Participant’s Participating Interest shall have the rights of a Participant unless and until the transferring Participant has provided to the other Participant notice of the Transfer, and, except as provided in this Section 10.2, the transferee, as of the effective date of the Transfer, has committed in writing to assume and be bound by this Agreement to the same extent as the transferring Participant;
(c) Neither Participant, without the consent of the other Participant, shall make a Transfer that shall violate any Law, or result in the cancellation of any permits, licenses, or other similar authorization (including the Licenses); and
(d) No Transfer permitted by this Article 10 shall relieve the transferring Participant of its share of any liability, whether accruing before or after such Transfer, which arises out of Operations conducted prior to such Transfer or exists on the Effective Date, provided that if such transferee is deemed by the remaining Participant as creditworthy and assumes in writing all such liabilities of the transferring Participant, the transferring Participant shall no longer be responsible for such liabilities.

10.3           Right of First Refusal. Any Transfer by CB under Section 10.1 and any Transfer by an Affiliate of CB shall be subject to a right of first refusal of SVB to the extent provided in Exhibit C. Failure of CB’s Affiliate to comply with this Article 10 and Exhibit C shall be a breach by CB of this Agreement.

10.4           Sale by SVB. Notwithstanding any other provision of this Agreement, SVB is permitted to sell 100% of the legal and beneficial interest in the Properties to a third party on arms’ length terms (which shall include CB’s Participating Interest), provided that:

(i) SVB provides notice of such sale, or proposed sale, prior to execution of the sale agreement in respect of the Properties, which shall describe the consideration and its monetary equivalent (based upon the fair market value of the nonmonetary consideration and stated in terms of cash or currency); and
(ii) CB receives a portion of the proceeds of any such sale equal to its Participating Interest.

10.5           Permitted Transfers by SVB. Notwithstanding any other provision of this Agreement, SVB is permitted to Transfer all or any part of its Participating Interest:

(a) to an Affiliate;
(b) by way of corporate merger or amalgamation involving SVB by which the surviving entity or amalgamated company shall possess all of the stock or all of the property rights and interests, and be subject to substantially all of the liabilities and obligations of SVB; or
(c) by way of the transfer of Control of SVB by an Affiliate of SVB to another Affiliate of SVB.

Article 11
DISPUTES

11.1           Governing Law. This Agreement shall be governed by and interpreted in accordance with the laws of the Province of British Columbia and the federal laws of Canada applicable therein, without regard for any conflict of laws or choice of laws principles that would permit or require the application of the laws of any other jurisdiction.

 

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11.2           Arbitration.

(a) All disputes, disagreements, controversies, questions or claims arising out of or relating to this Agreement, or in respect of any legal relationship associated with or arising from this Agreement, including with respect to this Agreement’s formation, execution, validity, application, interpretation, performance, breach, termination or enforcement, shall be determined by arbitration.
(b) The number of arbitrators shall be one.
(c) The arbitration shall be in Vancouver, British Columbia in the English language.
(d) The Participant commencing the arbitration shall include in its written notice the names of three individuals who are acceptable to it to serve as a sole arbitrator. Within 10 days of the receipt of the notice, the other Participant shall give written notice that it accepts the appointment of one of the three individuals or shall name three other individuals who are acceptable to it to serve as sole arbitrator. If the Participants are unable to agree upon a sole arbitrator within a further 10 days, the appointment of a sole arbitrator shall be made by the ADR Institute of Canada, Inc. in accordance with that institution’s rules and procedures.
(e) Any award or determination of the sole arbitrator shall be final and binding on the Participants and there shall be no appeal on any ground, including for greater certainty, any appeal on a question of law, a question of fact, or a question of mixed fact and law.

 

Article 12
CONFIDENTIALITY

12.1           Permitted Disclosure of Confidential Business Information. Either Participant may disclose Business Information that is Confidential Information: (a) to a Participant’s officers, directors, partners, members, employees, Affiliates, shareholders, agents, attorneys, accountants, consultants, contractors, subcontractors or advisors, for the sole purpose of such Participant’s performance of its obligations under this Agreement; (b) to any party to whom the disclosing Participant contemplates a Transfer of all or any part of its Participating Interest, for the sole purpose of evaluating the proposed Transfer; (c) to any actual or potential lender, underwriter or investor for the sole purpose of evaluating whether to make a loan to or investment in the disclosing Participant; or (d) to a third party with whom the disclosing Participant contemplates any independent business activity or operation.

The Participant disclosing Confidential Information pursuant to this Section 12.1, shall disclose such Confidential Information to only those parties who have a bona fide need to have access to such Confidential Information for the purpose for which disclosure to such parties is permitted under this Section 12.1 and who have agreed in writing supplied to, and enforceable by, the other Participant to protect the Confidential Information from further disclosure, to use such Confidential Information solely for such purpose and to otherwise be bound by the provisions of this Article 12. Such writing shall not preclude parties described in Section 12.1 from discussing and completing a Transfer with the other Participant. The Participant disclosing Confidential Information shall be responsible and liable for any use or disclosure of the Confidential Information by such parties in violation of this Agreement and such other writing.

12.2           Disclosure Required By Law. Notwithstanding anything contained in this Article 12, a Participant may disclose any Confidential Information if, in the opinion of the disclosing Participant’s legal counsel: (a) such disclosure is legally required to be made in a judicial, administrative or governmental proceeding pursuant to a valid subpoena or other applicable order; or (b) such disclosure is legally required to be made pursuant to the rules or regulations of a stock exchange or similar trading market applicable to the disclosing Participant.

 

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Prior to any disclosure of Confidential Information under this Section 12.2, the disclosing Participant shall give the other Participant at least ten (10) days prior written notice (unless less time is permitted by such rules, regulations or proceeding) and, in making such disclosure, the disclosing Participant shall disclose only that portion of Confidential Information required to be disclosed and shall take all reasonable steps to preserve the confidentiality thereof, including, without limitation, obtaining protective orders and supporting the other Participant in intervention in any such proceeding.

12.3           Public Announcements. Prior to making or issuing any press release or other public announcement or disclosure of Business Information that is not Confidential Information, a Participant shall first consult with the other Participant as to the content and timing of such announcement or disclosure, unless in the good faith judgment of such Participant, there is not sufficient time to consult with the other Participant before such announcement or disclosure must be made under applicable Laws; but in such event, the disclosing Participant shall notify the other Participant, as soon as possible, of the pendency of such announcement or disclosure, and it shall notify the other Participant before such announcement or disclosure is made if at all reasonably possible. Any press release or other public announcement or disclosure to be issued by either Participant relating to this Business shall also identify the other Participant.

Article 13
GENERAL PROVISIONS

13.1           Notices. All notices, payments and other required or permitted communications (“Notices”) to either Participant shall be in writing, and shall be addressed respectively as follows:

If to SVB:

 

   
 

c/o Silver Bull Resources, Inc.

777 Dunsmuir Street, Suite 1610

Vancouver, British Columbia

V7Y 1K4

         
  Attention: Tim Barry
  Email: tbarry@silverbullresources.com
         
  Attention: Sean Fallis
  Email: sfallis@silverbullresources.com

with a copy (which does not constitute notice) to:

 

 

Blake, Cassels & Graydon LLP

595 Burrard Street

Suite 2600, Three Bentall Centre

Vancouver, British Columbia

V7X 1L3

         
  Attention: Susan Tomaine
  Email: susan.tomaine@blakes.com
         

 

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If to CB:

 

 
 

Copperbelt AG

6300 Zug

Switzerland

         
  Attention: Dr. Waldemar Mueller
  Email: wkm7685@gmail.com
         

 

 

With a Copy to:

 

 

NEOVIUS AG

Hirschgaesslein 30

4010 Basel

Switzerland

         
  Attention: Peter Goeggel
  Email: peter.goeggel@neovius.ch
         

 

All Notices shall be given (a) by personal delivery to the Participant, (b) by electronic communication, capable of producing a printed transmission, (c) by registered or certified mail return receipt requested; or (d) by overnight or other express courier service. All Notices shall be effective and shall be deemed given on the date of receipt at the principal address if received during normal business hours, and, if not received during normal business hours, on the next business day following receipt, or if by electronic communication, on the date of such communication. Either Participant may change its address by Notice to the other Participant.

13.2           Currency. All references to “dollars” or “$” herein shall mean lawful currency of the United States.

13.3           Headings. The subject headings of the Sections and Subsections of this Agreement and the Paragraphs and Subparagraphs of the Exhibits to this Agreement are included for purposes of convenience only, and shall not affect the construction or interpretation of any of its provisions.

13.4           Waiver. The failure of either Participant to insist on the strict performance of any provision of this Agreement or to exercise any right, power or remedy upon a breach hereof shall not constitute a waiver of any provision of this Agreement or limit such Participant’s right thereafter to enforce any provision or exercise any right.

13.5           Modification. No modification of this Agreement shall be valid unless made in writing and duly executed by both Participants.

13.6           Force Majeure. Except for the obligation to make payments when due hereunder, the obligations of a Participant shall be suspended to the extent and for the period that performance is prevented by any cause, whether foreseeable or unforeseeable, beyond its reasonable control, including, without limitation, labour disputes (however arising and whether or not employee demands are reasonable or within the power of the Participant to grant); acts of God; Laws, instructions or requests of any government or governmental entity; judgments or orders of any court; inability to obtain on reasonably acceptable terms any public or private license, permit or other authorization; curtailment or suspension of activities to remedy or avoid an actual or alleged, present or prospective violation of federal, provincial or local environmental standards; action or inaction by any federal, provincial or local agency that delays or prevents the issuance or granting of any approval or authorization required to conduct Operations beyond the reasonable expectations of the Participant seeking the approval or authorization; acts of war or conditions arising out of or attributable to war, whether declared or undeclared; riot, civil strife, insurrection or rebellion; fire, explosion, earthquake,

 

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storm, flood, sink holes, drought or other adverse weather condition; delay or failure by suppliers or transporters of materials, parts, supplies, services or equipment or by contractors’ or subcontractors’ shortage of, or inability to obtain, labour, transportation, materials, machinery, equipment, supplies, utilities or services; accidents; breakdown of equipment, machinery or facilities; actions by First Nations rights groups, environmental groups, or other similar special interest groups; pandemics, epidemics or other public health emergencies (including those resulting from diseases, influenzas and other viruses) and governmental actions relating thereto (including quarantines, business closures and travel restrictions relating to public health emergencies); or any other cause whether similar or dissimilar to the foregoing. The affected Participant shall promptly give notice to the other Participant of the suspension of performance, stating therein the nature of the suspension, the reasons therefor, and the expected duration thereof. The affected Participant shall resume performance as soon as reasonably possible.

13.7           Rule Against Perpetuities. The Participants do not intend that there shall be any violation of the Rule Against Perpetuities or any similar rule. Accordingly, if any right or option to acquire any interest in the Properties, in a Participating Interest, in the Assets, or in any real property exists under this Agreement, such right or option must be exercised, if at all, so as to vest such interest within time periods permitted by applicable rules. If, however, any such violation should inadvertently occur, the Participants hereby agree that a court shall reform that provision in such a way as to approximate most closely the intent of the Participants within the limits permissible under such rules.

13.8           Further Assurances. Each of the Participants shall take, from time to time and without additional consideration, such further actions and execute such additional instruments as may be reasonably necessary or convenient to implement and carry out the intent and purpose of this Agreement or as may be reasonably required by lenders in connection with project financing obtained for the purpose of placing a mineral deposit situated on the Properties into commercial production.

13.9           Entire Agreement; Successors and Assigns. This Agreement contains the entire understanding of the Participants and supersedes all prior agreements and understandings between the Participants relating to the subject matter hereof. This Agreement shall be binding upon and inure to the benefit of the respective successors and permitted assigns of the Participants.

13.10        Counterparts. This Agreement may be executed in any number of counterparts, and it shall not be necessary that the signatures of both Participants be contained on any counterpart. Each counterpart shall be deemed an original, but all counterparts together shall constitute one and the same instrument.

[Signature page follows.]

 

 

 

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date.

 

SILVER BULL RESOURCES, INC.

 

By /s/ Timothy Barry          
Name: Timothy Barry
Title: President & CEO

 

COPPERBELT AG

  

By /s/ Waldemar Mueller          
Name: Waldemar Mueller
Title: President & CEO

 

 

COPPERBELT AG

 

 

By /s/ Peter Goeggel       
Name: Peter Goeggel
Title: Director

 

 

 


 
 
 

EXHIBIT A

ASSETS AND AREA OF INTEREST

 

 

1.1       DESCRIPTION OF PROPERTIES AND AREA OF INTEREST

 

Once granted, the Licenses will form part of the Properties set out below:

 

 

 

 

The one kilometer line surrounding the Properties above defines the Area of Interest. In addition the grid above is in the GK Zone 13 Pulkovo 1942.

 

1.2 PERMITTED ENCUMBRANCES

No encumbrances.

 
 
 

EXHIBIT B 

DEFINITIONS

 

 

“Affiliate” means any person, partnership, limited liability company, joint venture, corporation, or other form of enterprise which Controls, is Controlled by, or is under common Control with a Participant.

 

“Agreement” means this Joint Venture Agreement, including all amendments and modifications, and all schedules and exhibits, all of which are incorporated by this reference.

 

“Area of Interest” means the area described in Paragraph 1.1 of Exhibit A.

 

“Assets” means the Properties, Products, Business Information, and all other real and personal property, tangible and intangible, including existing or after-acquired properties and all contract rights held for the benefit of the Participants hereunder.

 

“Budget” means a detailed estimate of all costs to be incurred with respect to a Program.

 

“Business” means the contractual relationship of the Participants under this Agreement.

 

“Business Information” means the terms of this Agreement, and any other agreement relating to the Business, the Existing Data, and all information, data, knowledge and know-how, in whatever form and however communicated (including, without limitation, Confidential Information), developed, conceived, originated or obtained by either Participant in performing its obligations under this Agreement. The term “Business Information” shall not include any improvements, enhancements, refinements or incremental additions to Participant Information that are developed, conceived, originated or obtained by either Participant in performing its obligations under this Agreement.

 

“Confidential Information” means all information, data, knowledge and know-how (including, but not limited to, formulas, patterns, compilations, programs, devices, methods, techniques and processes) that derives independent economic value, actual or potential, as a result of not being generally known to, or readily ascertainable by, third parties and which is the subject of efforts that are reasonable under the circumstances to maintain its secrecy, including without limitation all analyses, interpretations, compilations, studies and evaluations of such information, data, knowledge and know-how generated or prepared by or on behalf of either Participant.

 

“Continuing Obligations” mean obligations or responsibilities that are reasonably expected to continue or arise after Operations on a particular area of the Properties have ceased or are suspended, such as future monitoring, stabilization, or Environmental Compliance.

 

“Control” used as a verb means, when used with respect to an entity, the ability, directly or indirectly through one or more intermediaries, to direct or cause the direction of the management and policies of such entity through (i) the legal or beneficial ownership of voting securities or membership interests; (ii) the right to appoint managers, directors or corporate management; (iii) contract; (iv) operating agreement; (v) voting trust; or otherwise; and, when used with respect to a person, means the actual or legal ability to control the actions of another, through family relationship, agency, contract or otherwise; and “Control” used as a noun means an interest which gives the holder the ability to exercise any of the foregoing powers.

 

“Effective Date” means the date set forth in the preamble to this Agreement.

 

 

 
 
 

 

 

“Encumbrance” or “Encumbrances” means mortgages, deeds of trust, security interests, pledges, liens, net profits interests, royalties or overriding royalty interests, other payments out of production, or other burdens of any nature.

 

“Environmental Compliance” means actions performed during or after Operations to comply with the requirements of all Environmental Laws or contractual commitments related to reclamation of the Properties or other compliance with Environmental Laws.

 

“Environmental Laws” means Laws aimed at reclamation or restoration of the Properties; 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 substances; releases or threatened releases of pollutants, contaminants, chemicals or industrial, toxic or hazardous substances as wastes into the environment, including without limitation, ambient air, surface water and groundwater; and all other Laws relating to the manufacturing, processing, distribution, use, treatment, storage, disposal, handling or transport of pollutants, contaminants, chemicals or industrial, toxic or hazardous substances or wastes.

 

“Existing Data” means maps, drill logs and other drilling data, core tests, pulps, reports, surveys, assays, analyses, production reports, operations, technical, accounting and financial records, and other material information developed in operations on the Properties prior to the Effective Date.

 

“Initial Contribution” means that contribution each Participant has made or agrees to make pursuant to Section 5.1 of the Agreement.

 

“Law” or “Laws” means all applicable federal, provincial and local laws, rules, ordinances, regulations, grants, concessions, franchises, licenses, orders, directives, judgments, decrees, and other governmental restrictions, including permits and other similar requirements, whether legislative, municipal, administrative or judicial in nature.

 

“Manager” means the Participant appointed under Article 7 of the Agreement to manage Operations, or any successor Manager.

 

“Operations” means the activities carried out under this Agreement.

 

“Participant” means initially SVB or CB, or any permitted successor or assign of SVB or CB under the Agreement.

 

“Participant Information” means all information, data, knowledge and know-how, in whatever form and however communicated (including, without limitation, Confidential Information but excluding the Existing Data), which, as shown by written records, was developed, conceived, originated or obtained by a Participant: (a) prior to entering into this Agreement, or (b) independent of its performance under the terms of this Agreement.

 

“Participating Interest” means the percentage interest representing the beneficial ownership interest of a Participant in the Assets, and all other rights and obligations arising under this Agreement, as such interest may from time to time be adjusted hereunder. The initial Participating Interests of the Participants are set forth in Section 6.1 of the Agreement.

 

“Products” means all ores, minerals and mineral resources produced from the Properties.

 

“Program” means a description in reasonable detail of Operations to be conducted and objectives to be accomplished by the Manager for a period.

 

 

 
 
 

 

 

 

“Properties” means each of the interests in real property described in Paragraph 1.1 of Exhibit A and all other interests in real property within the Area of Interest that are acquired and held subject to the Agreement.

 

“Transfer” means, when used as a verb, to sell, transfer, grant, assign, create an Encumbrance, pledge or otherwise convey, or dispose of or commit to do any of the foregoing, or to arrange for substitute performance by an Affiliate or third party (except as permitted under Subsection 7.2(j) of the Agreement), either directly or indirectly; and, when used as a noun, means such a sale, grant, assignment, Encumbrance, pledge or other conveyance or disposition, or such an arrangement.

 

 

 

 

 
 

EXHIBIT C

RIGHT OF FIRST REFUSAL

 

1.1       Right of First Refusal.

 

(a) If CB intends to Transfer all or any part of its Participating Interest, or an Affiliate of CB intends to Transfer Control of CB (“Transferring Entity”), CB shall promptly notify Kazco of such intentions. The notice shall state the price and all other pertinent terms and conditions of the intended Transfer, and shall be accompanied by a copy of the offer or the contract for sale. If the consideration for the intended transfer is, in whole or in part, other than monetary, the notice shall describe such consideration and its monetary equivalent (based upon the fair market value of the nonmonetary consideration and stated in terms of cash or currency). Kazco shall have thirty (30) days from the date such notice is delivered to notify the Transferring Entity (and the Participant if its Affiliate is the Transferring Entity) whether it elects to acquire the offered interest at the same price (or its monetary equivalent in cash or currency) and on the same terms and conditions as set forth in the notice. If it does so elect, the acquisition by the other Participant shall be consummated promptly after notice of such election is delivered;
(b) If Kazco fails to so elect within the period provided for above, the Transferring Entity shall have sixty (60) days following the expiration of such period to consummate the Transfer to a third party at a price and on terms no less favorable to the Transferring Entity than those offered by the Transferring Entity to Kazco in the aforementioned notice;
(c) If the Transferring Entity fails to consummate the Transfer to a third party within the period set forth above, the right of first refusal of the other Participant in such offered interest shall be deemed to be revived. Any subsequent proposal to Transfer such interest shall be conducted in accordance with all of the procedures set forth in this Paragraph.

 

1.2       Exceptions to Right of First Refusal. Paragraph 1.1 above shall not apply to the following:

 

(a) Transfer by CB of all or any part of its Participating Interest to an Affiliate;
(b) Corporate merger or amalgamation involving CB by which the surviving entity or amalgamated company shall possess all of the stock or all of the property rights and interests, and be subject to substantially all of the liabilities and obligations of CB; or
(c) the transfer of Control of CB by an Affiliate of CB to another Affiliate of CB;

Exhibit 4.3

 

LOAN AGREEMENT

Between

 

Ekidos Minerals LLP

as Debtor

 

and

 

Silver Bull Resources, Inc.

as Creditor

 

 
 
 

THIS LOAN AGREEMENT (the “Agreement”) is made on August 20, 2020 between:

(1) Silver Bull Resources, Inc., a company incorporated and existing under the laws of the State of Nevada, the United States of America, entity No. C13854-1993, located at: Suite 1610, 777 Dunsmuir Street, Vancouver, Canada, V7Y 1K4, as lender (the “Creditor”); and
(2) Ekidos Minerals Limited Liability Partnership, a company incorporated and existing under the laws of the Republic of Kazakhstan, BIN 200740000204, located at: apt. 1, 158 Panfilov Street, Almalinsky District, Almaty 050000, Republic of Kazakhstan, as borrower (the “Debtor”), represented by Irma Nuss, Director, acting under the charter,

the Debtor and the Creditor hereinafter referred to collectively as the “Parties” and separately as a “Party”.

NOW IT IS HEREBY AGREED AS FOLLOWS:

1. Interpretation
1.1 In this Agreement the following capitalized terms have, except where the context otherwise requires, the meanings respectively shown opposite them:

Agreement: this loan agreement as may be amended and/or supplemented from time to time;

Effective Date: the date of the transfer of the amount of the Loan into the Debtor’s bank account;

Loan: has the meaning stipulated in Clause 2.1.

1.2 Any reference in this Agreement to:

a “business day” shall be construed as a reference to a day on which banks are generally open for business in Canada, Kazakhstan, and the United States of America;

“indebtedness” includes any obligation (whether incurred as principal debtor, co-debtor, surety or otherwise) for the payment or repayment of money, whether present or future, actual or contingent;

a “month” means a period beginning in one calendar month and ending in the next calendar month on the day numerically corresponding to the day of the calendar month on which it commences or, where there is no date in the next calendar month numerically corresponding as aforesaid, the last day of such calendar month, and “months” and “monthly” shall be construed accordingly;

the “Parties” shall be construed so as to include their respective and any subsequent successors, transferees and assignees in accordance with their respective interests;

a “person” includes any individual, firm, company, institution, government, state or agency of a state or subdivision of a state or any association or partnership (whether or not having separate legal personality) of two or more of the foregoing;

“tax” includes any present or future tax, levy, impost, duty or other charge of a similar nature (including, without limitation, any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same); and

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the “winding-up” of a legal person includes the amalgamation, reconstruction, reorganization, dissolution, liquidation, merger or consolidation of that legal person, and any equivalent or analogous procedure under the law of any jurisdiction in which that legal person is incorporated, domiciled or resident or carries on business or has assets.

1.3 Save where expressions are expressly defined, in this Agreement accounting terms shall be determined in accordance with accounting principles generally accepted in the United States of America.
1.4 The headings in this Agreement are inserted for convenience only. Unless the context requires otherwise, terms defined in the plural include the singular and vice versa. References to “Clauses” are to be construed as references to the clauses in this Agreement.
1.5 Save where the contrary is indicated, any reference in this Agreement to:
(a) this Agreement or any other agreement or document shall be construed as a reference to this Agreement or, as the case may be, such other agreement or document as the same may have been, or may from time to time be, amended, varied or supplemented;
(b) a law shall be construed as a reference to such law as the same may have been, or may from time to time be, amended or re-enacted; and
(c) a time of day shall be construed as a reference to Nur-Sultan time.
2. Loan
2.1 Subject to the terms and conditions herein, the Creditor has agreed to make available to the Debtor an interest free loan in the amount of USD$360,000 (three hundred and sixty thousand) (the “Loan”). The Creditor will make the Loan available to the Debtor at a date and time determined at the sole discretion of the Creditor.
2.2 The Loan shall be provided to the Debtor in accordance with Clause 2.3 for the exclusive purpose of retaining funds in the Ekidos Bank Account (as herein defined) to facilitate the application for certain mineral exploration licenses in accordance with the joint venture agreement between the Creditor and Copperbelt AG dated on or about the date of this Agreement (the “JV Agreement”), and the Loan shall not be transferred from the Ekidos Bank Account or otherwise used by the Debtor for any other purpose (except to repay the Loan in accordance with Clause 3.1).
2.3 The Loan will be provided via wire transfer to the bank account of the Debtor as specified in Clause 16 of this Agreement (the “Ekidos Bank Account”).

3. Repayment

3.1 The Debtor shall repay the Loan in full on the first business day that occurs upon or after the passing of 35 calendar days following the Effective Date to the bank account of the Creditor as specified in Clause 17 of this Agreement.
4. Taxes
4.1 All payments (whether of principal, interest or otherwise) to be made by the Debtor to the Creditor hereunder shall be made without set-off or counterclaim and free and clear of and without deduction for any present or future taxes, duties, fees, deductions, withholdings, restrictions or conditions of any nature, other than deductions totaling no more than the aggregate maximum amount of USD$2,000 in respect of any bank fees or other costs associated with the repayment of the Loan by the Debtor.
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5. Partial Invalidity
5.1 The illegality, invalidity of unenforceability of any provision of this Agreement or any part thereof under the law of any jurisdiction shall not affect its legality, validity or enforceability under the law of any other jurisdiction nor the legality, validity or enforceability of any other provision. Any illegal, invalid or unenforceable provision shall have the effect of a provision that would be valid, the purpose of which conforms to the first mentioned provision to such an extent that it must be assumed that such provision would have been included in this Agreement if the first mentioned provision had been omitted in view of its illegality, invalidity or unenforceability.
6. Representations and Warranties
6.1 As of the date of this Agreement and the Effective Date, each Party represents and warrants to the other Party that:
(a) it is a corporation duly organized and in good standing in its jurisdiction of incorporation and is qualified to do business and is in good standing in those jurisdictions where necessary in order to carry out the purposes of this Agreement;
(b) it has the capacity to enter into and perform this Agreement and all transactions contemplated herein and that all other actions required to authorize it to enter into and perform this Agreement have been properly taken;
(c) no consent or approval of any third party or governmental agency is required for the execution, delivery or performance of this Agreement;
(d) it will not breach any applicable law or other agreement or arrangement by entering into or performing this Agreement; and
(e) this Agreement has been duly executed and delivered by it and is valid and binding upon it in accordance with its terms.
7. Counterparts
7.1 This Agreement may be executed in any number of counterparts (including counterparts delivered by email) and this will have the same effect as if the signatures on the counterparts were on a single copy of this Agreement. This Agreement is not effective until each Party has executed at least one counterpart.
8. Law
8.1 This Agreement and any non-contractual obligations arising out of or in connection with it are governed by the laws of the Province of British Columbia and the federal laws of Canada applicable therein.
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9. Jurisdiction
9.1 Each of the Parties irrevocably agrees that all disputes arising out of this Agreement, including but not limited to a dispute relating to the existence, validity, or termination of this Agreement or arising out of any non-contractual obligations arising out of or in connection with this Agreement, shall be submitted to a competent court in the Province of British Columbia.
9.2 The submission to the jurisdiction of the court referred to in Clause 9.1 shall not (and shall not be construed so as to) limit the right of the Creditor to institute proceedings against the Debtor in any other court of competent jurisdiction nor shall the instituting of proceedings by the Creditor in any one or more jurisdictions preclude the instituting of proceedings by the Creditor in any other jurisdiction, whether concurrently or not.
10. Further Assurance
10.1 The Parties shall, and shall procure that their agents, employees and subcontractors shall, do all things reasonably necessary, including executing any additional documents and instrument, to give full effect to the terms and conditions of this Agreement.
11. Entire Agreement
11.1 This Agreement constitutes the entire agreement between the Parties and supersedes and extinguishes all previous agreements, promises, assurances, warranties, representations and understandings between them, whether written or oral, relating to its subject matter. This Agreement shall be binding upon and inure to the benefit of the respective successors and permitted assigns of the Parties.
12. Assignment
12.1 The Debtor may not transfer, assign, novate or otherwise dispose of their interest in this Agreement without the prior written consent of the Creditor.
13. Waiver
13.1 The failure of either Party to insist on the strict performance of any provision of this Agreement or to exercise any right, power or remedy upon a breach hereof shall not constitute a waiver of any provision of this Agreement or limit such Party’s right thereafter to enforce any provision or exercise any right.
14. Modification
14.1 No modification of this Agreement shall be valid unless made in writing and duly executed by both Parties.
15. Severability
15.1 If any provision of this Agreement is determined by a court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, all other provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby are not affected in any manner materially adverse to any Party hereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties hereto as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible.
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16. Ekidos Bank Account

The details for the bank account for Ekidos Minerals LLP are as follows:

Bank: XXXXXXXXXXXXXXXX

Bank Address: XXXXXXXXXXXXXXXXXXXX

Account: XXXXXXXXXXXXXXXXX

SWIFT: XXXXXXXX

17. Silver Bull Bank Account

The details for the bank account for Silver Bull Resources, Inc. are as follows:

Bank: XXXXXXXXXXXXX

Bank Address: XXXXXXXXXXXXXXXXXXX

Account: XXXXXXXXXXXXXXXX

SWIFT: XXXXXXXXX

18. Notices
18.1 Any notice, direction or other instrument required or permitted to be given under this Agreement will be in writing and may be given by the delivery of the same or by sending the same by email or other similar form of communication (provided that if a method of notice other than email is selected, the notice shall also be sent by email), in each case addressed as follows:
(a) If to Creditor, at:

Silver Bull Resources, Inc.

777 Dunsmuir Street, Suite 1610

Vancouver, British Columbia

V7Y 1K4

 

Attention: Tim Barry

Email: tbarry@silverbullresources.com 

and

Attention: Sean Fallis

Email: sfallis@silverbullresources.com

 

 

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with a copy (which does not constitute notice) to:

 

Blake, Cassels & Graydon LLP

595 Burrard Street

Suite 2600, Three Bentall Centre

Vancouver, British Columbia

V7X 1L3

Attention: Susan Tomaine

Email: susan.tomaine@blakes.com

(b) If to Debtor, at:

Ekidos Minerals Limited Liability Partnership

Apt. 1, 158 Panfilov Street

Almalinsky District, Almaty 050000

Republic of Kazakhstan

 

Attention: Irma Nuss

Email: irina.dostyk@gmail.com

 

Any notice, direction or other instrument will (i) if delivered by hand, be deemed to have been given and received on the day it was delivered; and (ii) if sent by email or other similar form of communication, be deemed to have been given and received on the business day following the day it was so sent. Any party may at any time change its address for service from time to time by giving notice to the other parties in accordance with this Clause 18.1.

19. Language
19.1 This Agreement may be translated into Russian from English, and such Russian version may be executed by one or more of the Parties. To the extent that there is any inconsistency between the English version of this Agreement and Russian version of this Agreement, the English version of this Agreement shall prevail.
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IN WITNESS WHEREOF, this Agreement has been executed by the Parties as of the date first written above:

 

Debtor Creditor
Ekidos Minerals Limited Liability Partnership Silver Bull Resources, Inc.

 

/s/ Irma Nuss                    

 

/s/ Timothy Barry                      

Name: Irma Nuss

Title: Director

Name: Timothy Barry

Title: President and Chief Executive Officer

   

 

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Additional Agreement No 1

to the LOAN AGREEMENT

 

On 30 October 2020

 

Silver Bull Resources, Inc., company established in accordance with the laws of the State Nevada, the United States on America, Entity No.C13854-1993, located at: Suite 1610, 777 Dunsmuir Street, Vancouver, Canada, V7Z 1K4, represented by CEO Mr. Tim Barry, acting on the basis of the Articles, hereinafter referred to as the “Creditor”, on one part,

 

and

 

Ekidos Minerals LLP, a limited liability partnership established in accordance with the laws of the Republic of Kazakhstan, BIN 191040035309, located at: Republic of Kazakhstan, Almaty, 050000, Panfilov Street 158, Office 1, Almaty, represented by Director, Mrs. Irma Nuss, acting on the basis of the Charter, hereinafter referred to as the “Debtor”, on the other part,

 

hereinafter collectively referred to as the “Parties” and individually as “Party”,

 

have concluded this Additional Agreement №1 to the Loan Agreement between Ekidos Minerals LLP as Debtor and Silver Bull Resources, Inc. as Creditor dated 20 August 2020 (hereinafter – the “Agreement”) as follows:

 

1. Clause 2.2 of Section 2 of the Agreement to be revised as follows:

 

“The Loan shall be provided to the Debtor in accordance with Clause 2.3 for the exclusive purposes of facilitating Debtor’s application for certain mineral exploration licenses and related expenditures, including:

- expenditures related to payment of SPC GEOKEN LLP’s services under airborne magnetic survey;

- the administrative costs of the Debtor.

 

The Loan shall not be transferred from Debtor’s Bank Account or otherwise used by the Debtor for any other purpose (except to repay the Loan an accordance with Clause 3.1)”.

 

2. Clause 3.1 of Section 3 of the Agreement to revised as follows:

 

“The repayment of the amount of the Loan specified in this Agreement shall be made by the Debtor until 31 January 2021”.

 

3. In all other matters that are not regulated by the terms of this Additional Agreement, the Parties are guided by the provisions of the Agreement.

 

4. This Additional Agreement enters into force on the date of its signing.

 

SIGNATURES AND REQUISITES OF THE PARTIES:

 

 

On behalf of the Lender   On behalf of the Borrower
     
Silver Bull Resources, Inc.   Ekidos Minerals LLP
     
/s/ Timothy Barry   /s/ Irma Nuss

Timothy Barry

President and Chief Executive Officer

 

Irma Nuss

Director

     

 

 

A1-1
 
 

Additional Agreement No. 2

to the LOAN AGREEMENT

 

On 21 January 2021

 

Silver Bull Resources, Inc., company established in accordance with the laws of the State Nevada, the United States on America, Entity No.C13854-1993, located at: Suite 1610, 777 Dunsmuir Street, Vancouver, Canada, V7Z 1K4, represented by CEO Mr. Tim Barry, acting on the basis of the Articles, hereinafter referred to as the “Creditor”, on one part,

 

and

 

Ekidos Minerals LLP, a limited liability partnership established in accordance with the laws of the Republic of Kazakhstan, BIN 200740000204, located at: Republic of Kazakhstan, Almaty, 050000, Panfilov Street 158, Office 1, Almaty, represented by Director, Mrs. Irma Nuss, acting on the basis of the Charter, hereinafter referred to as the “Debtor”, on the other part,

 

hereinafter collectively referred to as the “Parties” and individually as “Party”,

 

have concluded this Additional Agreement №2 to the Loan Agreement between Ekidos Minerals LLP as Debtor and Silver Bull Resources, Inc. as Creditor dated 20 August 2020 (hereinafter – the “Agreement”) as follows: 

 

1. Clause 2.2 of Section 2 of the Agreement to be revised as follows:

“The Loan shall be provided to the Debtor exclusively for the purposes agreed by the Creditor in writing prior to Debtor’s transfer of any amount to third parties.

 

The Loan shall not be transferred from Ekidos Bank Account or otherwise used by the Debtor for any purpose which was not agreed by the Creditor in writing (except to repay the Loan an accordance with Clause 3.1)”.

 

2. Clause 3.1 of Section 3 of the Agreement to revised as follows:

“The repayment of the amount of the Loan specified in this Agreement shall be made by the Debtor on or before 30 June 2021”.

 

3. In all other matters that are not regulated by the terms of this Additional Agreement #2, the Parties are guided by the provisions of the Agreement.

 

4. This Additional Agreement #2 enters into force on the date of its signing.

 

SIGNATURES AND REQUISITES OF THE PARTIES:

 

 

 

On behalf of the Lender   On behalf of the Borrower
     
Silver Bull Resources, Inc.   Ekidos Minerals LLP
     
/s/ Timothy Barry   /s/ Irma Nuss

Timothy Barry

President and Chief Executive Officer

 

Irma Nuss

Director

     

 

 

A2-2
 
 

 

 

 

 

 

Exhibit 4.4

 

LOAN AGREEMENT

No 2

Between

 

Ekidos Minerals LLP

as Debtor

and

 

Silver Bull Resources, Inc.

as Creditor

 

 
 
 

THIS LOAN AGREEMENT #2 (the “Agreement”) is made on 21 December 2020 between:

(1) Silver Bull Resources, Inc., a company incorporated and existing under the laws of the State of Nevada, the United States of America, entity No. C13854-1993, located at: Suite 1610, 777 Dunsmuir Street, Vancouver, Canada, V7Y 1K4, as lender (the “Creditor”); and
(2) Ekidos Minerals Limited Liability Partnership, a company incorporated and existing under the laws of the Republic of Kazakhstan, BIN 200740000204, located at: apt. 1, 158 Panfilov Street, Almalinsky District, Almaty 050000, Republic of Kazakhstan, as borrower (the “Debtor”), represented by Irma Nuss, Director, acting under the charter,

the Debtor and the Creditor hereinafter referred to collectively as the “Parties” and separately as a “Party”.

NOW IT IS HEREBY AGREED AS FOLLOWS:

1. Interpretation
1.1 In this Agreement the following capitalized terms have, except where the context otherwise requires, the meanings respectively shown opposite them:

Agreement: this loan agreement as may be amended and/or supplemented from time to time;

Effective Date: the date of the transfer of the amount of the Loan into the Debtor’s bank account;

Event of Default: any event which is or may become (with the passage of time and/or the giving of notice and/or the making of any determination) one of those events specified in Clause; and

Loan: has the meaning stipulated in Clause 2.1.

1.2 Any reference in this Agreement to:

a “business day” shall be construed as a reference to a day on which banks are generally open for business in Canada, Kazakhstan, and the United States of America;

2 
 
 

 

“indebtedness” includes any obligation (whether incurred as principal debtor, co-debtor, surety or otherwise) for the payment or repayment of money, whether present or future, actual or contingent;

a “month” means a period beginning in one calendar month and ending in the next calendar month on the day numerically corresponding to the day of the calendar month on which it commences or, where there is no date in the next calendar month numerically corresponding as aforesaid, the last day of such calendar month, and “months” and “monthly” shall be construed accordingly;

the “Parties” shall be construed so as to include their respective and any subsequent successors, transferees and assignees in accordance with their respective interests;

a “person” includes any individual, firm, company, institution, government, state or agency of a state or subdivision of a state or any association or partnership (whether or not having separate legal personality) of two or more of the foregoing;

“tax” includes any present or future tax, levy, impost, duty or other charge of a similar nature (including, without limitation, any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same); and

the “winding-up” of a legal person includes the amalgamation, reconstruction, reorganization, dissolution, liquidation, merger or consolidation of that legal person, and any equivalent or analogous procedure under the law of any jurisdiction in which that legal person is incorporated, domiciled or resident or carries on business or has assets.

1.3 Save where expressions are expressly defined, in this Agreement accounting terms shall be determined in accordance with accounting principles generally accepted in the United States of America.

1.4 The headings in this Agreement are inserted for convenience only. Unless the context requires otherwise, terms defined in the plural include the singular and vice versa. References to “Clauses” are to be construed as references to the clauses in this Agreement.
1.5 Save where the contrary is indicated, any reference in this Agreement to:

 

3 
 
 

 

(a) this Agreement or any other agreement or document shall be construed as a reference to this Agreement or, as the case may be, such other agreement or document as the same may have been, or may from time to time be, amended, varied or supplemented;
(b) a law shall be construed as a reference to such law as the same may have been, or may from time to time be, amended or re-enacted; and
(c) a time of day shall be construed as a reference to Nur-Sultan time.
2. Loan
2.1

Subject to the terms and conditions herein, the Creditor has agreed to make available to the Debtor an interest free loan in the amount of USD 400,000 (four hundred thousand US Dollars) (the “Loan”). The Creditor will make the Loan available to the Debtor at a date and time determined at the sole discretion of the Creditor.

2.2

The Loan shall be provided to the Debtor in accordance with Clause 2.3 for the exclusive purposes of

1)  funding certain exploration operations agreed in writing by the Creditor and

2) retaining certain funds in the Ekidos Bank Account (as herein defined) to facilitate the application for certain mineral exploration licenses in accordance with the joint venture agreement between the Creditor and Copperbelt AG dated on or about the date of this Agreement (the “JV Agreement”). The Loan shall not be transferred from the Ekidos Bank Account or otherwise used by the Debtor for any other purpose (except to repay the Loan in accordance with Clauses 3.1) unless instructed otherwise by the Creditor in writing.

 

2.3 The Loan will be provided via wire transfer to the bank account of the Debtor as specified in Clause 16 of this Agreement (the “Ekidos Bank Account”).

 

3. Repayment

3.1

The Debtor shall repay the Loan in full on or before 30 June 2021 to the bank account of the Creditor as specified in Clause 17 of this Agreement.

 

4 
 
 

 

4. Taxes
4.1 All payments (whether of principal, interest or otherwise) to be made by the Debtor to the Creditor hereunder shall be made without set-off or counterclaim and free and clear of and without deduction for any present or future taxes, duties, fees, deductions, withholdings, restrictions or conditions of any nature, other than deductions totaling no more than the aggregate maximum amount of USD$2,000 in respect of any bank fees or other costs associated with the repayment of the Loan by the Debtor.
5. Partial Invalidity
5.1 The illegality, invalidity of unenforceability of any provision of this Agreement or any part thereof under the law of any jurisdiction shall not affect its legality, validity or enforceability under the law of any other jurisdiction nor the legality, validity or enforceability of any other provision. Any illegal, invalid or unenforceable provision shall have the effect of a provision that would be valid, the purpose of which conforms to the first mentioned provision to such an extent that it must be assumed that such provision would have been included in this Agreement if the first mentioned provision had been omitted in view of its illegality, invalidity or unenforceability.
6. Representations and Warranties
6.1 As of the date of this Agreement and the Effective Date, each Party represents and warrants to the other Party that:
(a) it is a corporation duly organized and in good standing in its jurisdiction of incorporation and is qualified to do business and is in good standing in those jurisdictions where necessary in order to carry out the purposes of this Agreement;
(b) it has the capacity to enter into and perform this Agreement and all transactions contemplated herein and that all other actions required to authorize it to enter into and perform this Agreement have been properly taken;

 

5 
 
 

 

(c) no consent or approval of any third party or governmental agency is required for the execution, delivery or performance of this Agreement;
(d) it will not breach any applicable law or other agreement or arrangement by entering into or performing this Agreement; and
(e) this Agreement has been duly executed and delivered by it and is valid and binding upon it in accordance with its terms.
7. Counterparts
7.1 This Agreement may be executed in any number of counterparts (including counterparts delivered by email) and this will have the same effect as if the signatures on the counterparts were on a single copy of this Agreement. This Agreement is not effective until each Party has executed at least one counterpart.
8. Law
8.1 This Agreement and any non-contractual obligations arising out of or in connection with it are governed by the laws of the Province of British Columbia and the federal laws of Canada applicable therein.
9. Jurisdiction
9.1 Each of the Parties irrevocably agrees that all disputes arising out of this Agreement, including but not limited to a dispute relating to the existence, validity, or termination of this Agreement or arising out of any non-contractual obligations arising out of or in connection with this Agreement, shall be referred to the Kazakhstan International Arbitration in accordance with the current Rules. The number of arbitrators is one arbitrator appointed by the Kazakhstan International Arbitration. The place of dispute settlement is Almaty, Kazakhstan. The language of the arbitration shall be English. The decision made by the arbitration is binding upon the parties and may be enforced.
9.2 The submission to the jurisdiction of the court referred to in Clause 9.1 shall not (and shall not be construed so as to) limit the right of the Creditor to institute proceedings against the Debtor in any other court of competent jurisdiction nor shall the instituting of proceedings by the Creditor in any one or more jurisdictions preclude the instituting of proceedings by the Creditor in any other jurisdiction, whether concurrently or not.

 

6 
 
 

 

10. Further Assurance
10.1 The Parties shall, and shall procure that their agents, employees and subcontractors shall, do all things reasonably necessary, including executing any additional documents and instrument, to give full effect to the terms and conditions of this Agreement.
11. Entire Agreement
11.1 This Agreement constitutes the entire agreement between the Parties and supersedes and extinguishes all previous agreements, promises, assurances, warranties, representations and understandings between them, whether written or oral, relating to its subject matter. This Agreement shall be binding upon and inure to the benefit of the respective successors and permitted assigns of the Parties.
12. Assignment
12.1 The Debtor may not transfer, assign, novate or otherwise dispose of their interest in this Agreement without the prior written consent of the Creditor.
13. Waiver
13.1 The failure of either Party to insist on the strict performance of any provision of this Agreement or to exercise any right, power or remedy upon a breach hereof shall not constitute a waiver of any provision of this Agreement or limit such Party’s right thereafter to enforce any provision or exercise any right.
14. Modification
14.1 No modification of this Agreement shall be valid unless made in writing and duly executed by both Parties.
15. Severability
15.1 If any provision of this Agreement is determined by a court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, all other provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby are not affected in any manner materially adverse to any Party hereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties hereto as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible.
7 
 
 
16. Ekidos Bank Account

The details for the bank account for Ekidos Minerals LLP are as follows:

Bank: XXXXXXXXXXXXXXXX

Bank Address: XXXXXXXXXXXXXXXXXXXX

Account: XXXXXXXXXXXXXXXXX

SWIFT: XXXXXXXX

17. Silver Bull Bank Account

The details for the bank account for Silver Bull Resources, Inc. are as follows:

Bank: XXXXXXXXXXXXX

Bank Address: XXXXXXXXXXXXXXXXXXX

Account: XXXXXXXXXXXXXXXX

SWIFT: XXXXXXXXX

18. Notices
18.1 Any notice, direction or other instrument required or permitted to be given under this Agreement will be in writing and may be given by the delivery of the same or by sending the same by email or other similar form of communication (provided that if a method of notice other than email is selected, the notice shall also be sent by email), in each case addressed as follows:
(a) If to Creditor, at:

Silver Bull Resources, Inc.

777 Dunsmuir Street, Suite 1610

Vancouver, British Columbia

V7Y 1K4

 

Attention: Tim Barry

Email: tbarry@silverbullresources.com 

and

Attention: Sean Fallis

Email: sfallis@silverbullresources.com

 

 

8 
 
 

 

 

with a copy (which does not constitute notice) to:

 

Blake, Cassels & Graydon LLP

595 Burrard Street

Suite 2600, Three Bentall Centre

Vancouver, British Columbia

V7X 1L3

Attention: Susan Tomaine

Email: susan.tomaine@blakes.com

(b) If to Debtor, at:

Ekidos Minerals Limited Liability Partnership

Apt. 1, 158 Panfilov Street

Almalinsky District, Almaty 050000

Republic of Kazakhstan

 

Attention: Irma Nuss

Email: irina.dostyk@gmail.com

 

Any notice, direction or other instrument will (i) if delivered by hand, be deemed to have been given and received on the day it was delivered; and (ii) if sent by email or other similar form of communication, be deemed to have been given and received on the business day following the day it was so sent. Any party may at any time change its address for service from time to time by giving notice to the other parties in accordance with this Clause 18.1.

9 
 
 

IN WITNESS WHEREOF, this Agreement has been executed by the Parties as of the date first written above:

 

Debtor Creditor
Ekidos Minerals Limited Liability Partnership Silver Bull Resources, Inc.

 

/s/ Irma Nuss                    

 

/s/ Timothy Barry                      

Name: Irma Nuss

Title: Director

Name: Timothy Barry

Title: President and Chief Executive Officer

   

 

10 
 
 

 

Exhibit 4.5

 

LOAN AGREEMENT

No. 3

Between

 

Ekidos Minerals LLP

as Debtor

and

 

Silver Bull Resources, Inc.

as Creditor

 

 
 
 

THIS LOAN AGREEMENT (the “Agreement”) is made on 23 February 2021 between:

(1) Silver Bull Resources, Inc., a company incorporated and existing under the laws of the State of Nevada, the United States of America, entity No. C13854-1993, located at: Suite 1610, 777 Dunsmuir Street, Vancouver, Canada, V7Y 1K4, as lender (the “Creditor”); and
(2) Ekidos Minerals Limited Liability Partnership, a company incorporated and existing under the laws of the Republic of Kazakhstan, BIN 200740000204, located at: apt. 1, 158 Panfilov Street, Almalinsky District, Almaty 050000, Republic of Kazakhstan, as borrower (the “Debtor”), represented by Irma Nuss, Director, acting under the charter,

the Debtor and the Creditor hereinafter referred to collectively as the “Parties” and separately as a “Party”.

NOW IT IS HEREBY AGREED AS FOLLOWS:

1. Interpretation
1.1 In this Agreement the following capitalized terms have, except where the context otherwise requires, the meanings respectively shown opposite them:

Agreement: this loan agreement as may be amended and/or supplemented from time to time;

Effective Date: the date of the transfer of the amount of the Loan into the Debtor’s bank account;

Loan: has the meaning stipulated in Clause 2.1.

1.2 Any reference in this Agreement to:

a “business day” shall be construed as a reference to a day on which banks are generally open for business in Canada, Kazakhstan, and the United States of America;

2 
 
 

 

“indebtedness” includes any obligation (whether incurred as principal debtor, co-debtor, surety or otherwise) for the payment or repayment of money, whether present or future, actual or contingent;

a “month” means a period beginning in one calendar month and ending in the next calendar month on the day numerically corresponding to the day of the calendar month on which it commences or, where there is no date in the next calendar month numerically corresponding as aforesaid, the last day of such calendar month, and “months” and “monthly” shall be construed accordingly;

the “Parties” shall be construed so as to include their respective and any subsequent successors, transferees and assignees in accordance with their respective interests;

a “person” includes any individual, firm, company, institution, government, state or agency of a state or subdivision of a state or any association or partnership (whether or not having separate legal personality) of two or more of the foregoing;

“tax” includes any present or future tax, levy, impost, duty or other charge of a similar nature (including, without limitation, any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same); and

the “winding-up” of a legal person includes the amalgamation, reconstruction, reorganization, dissolution, liquidation, merger or consolidation of that legal person, and any equivalent or analogous procedure under the law of any jurisdiction in which that legal person is incorporated, domiciled or resident or carries on business or has assets.

1.3 Save where expressions are expressly defined, in this Agreement accounting terms shall be determined in accordance with accounting principles generally accepted in the United States of America.

1.4 The headings in this Agreement are inserted for convenience only. Unless the context requires otherwise, terms defined in the plural include the singular and vice versa. References to “Clauses” are to be construed as references to the clauses in this Agreement.
1.5 Save where the contrary is indicated, any reference in this Agreement to:

 

3 
 
 

 

(a) this Agreement or any other agreement or document shall be construed as a reference to this Agreement or, as the case may be, such other agreement or document as the same may have been, or may from time to time be, amended, varied or supplemented;
(b) a law shall be construed as a reference to such law as the same may have been, or may from time to time be, amended or re-enacted; and
(c) a time of day shall be construed as a reference to Nur-Sultan time.
2. Loan
2.1

Subject to the terms and conditions herein, the Creditor has agreed to make available to the Debtor an interest free loan in the amount not exceeding USD 450,000 (four hundred fifty thousand US Dollars) (the “Loan”).. The Creditor will make the Loan available to the Debtor at a date and time determined at the sole discretion of the Creditor.

2.2

The Loan shall be provided to the Debtor exclusively for the purposes agreed by the Creditor in writing prior to Debtor’s transfer of any amount to third parties.

The Loan shall not be transferred from Ekidos Bank Account or otherwise used by the Debtor for a purpose which was not agreed by the Creditor in writing (except to repay the Loan an accordance with Clause 3.1).

2.3 The Loan will be provided via wire transfer to the bank account of the Debtor as specified in Clause 16 of this Agreement (the “Ekidos Bank Account”).

 

3. Repayment

3.1

The Debtor shall repay the Loan in full on or before 30 June 2021 to the bank account of the Creditor as specified in Clause 17 of this Agreement.

 

4 
 
 

 

4. Taxes
4.1 All payments (whether of principal, interest or otherwise) to be made by the Debtor to the Creditor hereunder shall be made without set-off or counterclaim and free and clear of and without deduction for any present or future taxes, duties, fees, deductions, withholdings, restrictions or conditions of any nature, other than deductions totaling no more than the aggregate maximum amount of USD$2,000 in respect of any bank fees or other costs associated with the repayment of the Loan by the Debtor.
5. Partial Invalidity
5.1 The illegality, invalidity of unenforceability of any provision of this Agreement or any part thereof under the law of any jurisdiction shall not affect its legality, validity or enforceability under the law of any other jurisdiction nor the legality, validity or enforceability of any other provision. Any illegal, invalid or unenforceable provision shall have the effect of a provision that would be valid, the purpose of which conforms to the first mentioned provision to such an extent that it must be assumed that such provision would have been included in this Agreement if the first mentioned provision had been omitted in view of its illegality, invalidity or unenforceability.
6. Representations and Warranties
6.1 As of the date of this Agreement and the Effective Date, each Party represents and warrants to the other Party that:
(a) it is a corporation duly organized and in good standing in its jurisdiction of incorporation and is qualified to do business and is in good standing in those jurisdictions where necessary in order to carry out the purposes of this Agreement;
(b) it has the capacity to enter into and perform this Agreement and all transactions contemplated herein and that all other actions required to authorize it to enter into and perform this Agreement have been properly taken;

 

5 
 
 

 

(c) no consent or approval of any third party or governmental agency is required for the execution, delivery or performance of this Agreement;
(d) it will not breach any applicable law or other agreement or arrangement by entering into or performing this Agreement; and
(e) this Agreement has been duly executed and delivered by it and is valid and binding upon it in accordance with its terms.
7. Counterparts
7.1 This Agreement may be executed in any number of counterparts (including counterparts delivered by email) and this will have the same effect as if the signatures on the counterparts were on a single copy of this Agreement. This Agreement is not effective until each Party has executed at least one counterpart.
8. Law
8.1 This Agreement and any non-contractual obligations arising out of or in connection with it are governed by the laws of the Province of British Columbia and the federal laws of Canada applicable therein.
9. Jurisdiction
9.1 Each of the Parties irrevocably agrees that all disputes arising out of this Agreement, including but not limited to a dispute relating to the existence, validity, or termination of this Agreement or arising out of any non-contractual obligations arising out of or in connection with this Agreement, shall be referred to the Kazakhstan International Arbitration in accordance with the current Rules. The number of arbitrators is one arbitrator appointed by the Kazakhstan International Arbitration. The place of dispute settlement is Almaty, Kazakhstan. The language of the arbitration shall be English. The decision made by the arbitration is binding upon the parties and may be enforced.
9.2 The submission to the jurisdiction of the court referred to in Clause 9.1 shall not (and shall not be construed so as to) limit the right of the Creditor to institute proceedings against the Debtor in any other court of competent jurisdiction nor shall the instituting of proceedings by the Creditor in any one or more jurisdictions preclude the instituting of proceedings by the Creditor in any other jurisdiction, whether concurrently or not.

 

6 
 
 

 

10. Further Assurance
10.1 The Parties shall, and shall procure that their agents, employees and subcontractors shall, do all things reasonably necessary, including executing any additional documents and instrument, to give full effect to the terms and conditions of this Agreement.
11. Entire Agreement
11.1 This Agreement constitutes the entire agreement between the Parties and supersedes and extinguishes all previous agreements, promises, assurances, warranties, representations and understandings between them, whether written or oral, relating to its subject matter. This Agreement shall be binding upon and inure to the benefit of the respective successors and permitted assigns of the Parties.
12. Assignment
12.1 The Debtor may not transfer, assign, novate or otherwise dispose of their interest in this Agreement without the prior written consent of the Creditor.
13. Waiver
13.1 The failure of either Party to insist on the strict performance of any provision of this Agreement or to exercise any right, power or remedy upon a breach hereof shall not constitute a waiver of any provision of this Agreement or limit such Party’s right thereafter to enforce any provision or exercise any right.
14. Modification
14.1 No modification of this Agreement shall be valid unless made in writing and duly executed by both Parties.
15. Severability
15.1 If any provision of this Agreement is determined by a court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, all other provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby are not affected in any manner materially adverse to any Party hereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties hereto as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible.
7 
 
 
16. Ekidos Bank Account

The details for the bank account for Ekidos Minerals LLP are as follows:

Bank: XXXXXXXXXXXXXXXX

Bank Address: XXXXXXXXXXXXXXXXXXXX

Account: XXXXXXXXXXXXXXXXX

SWIFT: XXXXXXXX

17. Silver Bull Bank Account

The details for the bank account for Silver Bull Resources, Inc. are as follows:

Bank: XXXXXXXXXXXXX

Bank Address: XXXXXXXXXXXXXXXXXXX

Account: XXXXXXXXXXXXXXXX

SWIFT: XXXXXXXXX

18. Notices
18.1 Any notice, direction or other instrument required or permitted to be given under this Agreement will be in writing and may be given by the delivery of the same or by sending the same by email or other similar form of communication (provided that if a method of notice other than email is selected, the notice shall also be sent by email), in each case addressed as follows:
(a) If to Creditor, at:

Silver Bull Resources, Inc.

777 Dunsmuir Street, Suite 1610

Vancouver, British Columbia

V7Y 1K4

 

Attention: Tim Barry

Email: tbarry@silverbullresources.com 

and

Attention: Sean Fallis

Email: sfallis@silverbullresources.com

 

 

8 
 
 

 

 

with a copy (which does not constitute notice) to:

 

Blake, Cassels & Graydon LLP

595 Burrard Street

Suite 2600, Three Bentall Centre

Vancouver, British Columbia

V7X 1L3

Attention: Susan Tomaine

Email: susan.tomaine@blakes.com

(b) If to Debtor, at:

Ekidos Minerals Limited Liability Partnership

Apt. 1, 158 Panfilov Street

Almalinsky District, Almaty 050000

Republic of Kazakhstan

 

Attention: Irma Nuss

Email: irina.dostyk@gmail.com

 

Any notice, direction or other instrument will (i) if delivered by hand, be deemed to have been given and received on the day it was delivered; and (ii) if sent by email or other similar form of communication, be deemed to have been given and received on the business day following the day it was so sent. Any party may at any time change its address for service from time to time by giving notice to the other parties in accordance with this Clause 18.1.

9 
 
 

IN WITNESS WHEREOF, this Agreement has been executed by the Parties as of the date first written above:

 

Debtor Creditor
Ekidos Minerals Limited Liability Partnership Silver Bull Resources, Inc.

 

/s/ Irma Nuss                    

 

/s/ Timothy Barry                      

Name: Irma Nuss

Title: Director

Name: Timothy Barry

Title: President and Chief Executive Officer

   

 

10 
 
 

 

Exhibit 4.6

 

LOAN AGREEMENT

No. 1

between

 

Ekidos Minerals LLP

as Debtor

and

 

Arras Minerals Corp.

 

as Creditor

 

 
 
 

THIS LOAN AGREEMENT No. 1 (the “Agreement”) is made on 22 April 2021 between:

(1) Arras Minerals Corp., a company incorporated and existing under the laws of the Province of British Columbia, Canada, entity No. BC1287773, located at: Suite 1610, 777 Dunsmuir Street, Vancouver, Canada, V7Y 1K4, as lender (the “Creditor”); and
(2) Ekidos Minerals Limited Liability Partnership,a company incorporated and existing under the laws of the Republic of Kazakhstan, BIN 200740000204, located at: apt. 1, 158 Panfilov Street, Almalinsky District, Almaty 050000, Republic of Kazakhstan, as borrower (the “Debtor”), represented by Irma Nuss, Director, acting under the charter,

the Debtor and the Creditor hereinafter referred to collectively as the “Parties” and separately as a “Party”.

NOW IT IS HEREBY AGREED AS FOLLOWS:

1. Interpretation
1.1 In this Agreement the following capitalized terms have, except where the context otherwise requires, the meanings respectively shown opposite them:

Agreement: this loan agreement as may be amended and/or supplemented from time to time;

Effective Date: the date of the transfer of the amount of the Loan into the Debtor’s bank account;

Loan: has the meaning stipulated in Clause 2.1.

1.2 Any reference in this Agreement to:

a “business day” shall be construed as a reference to a day on which banks are generally open for business in Canada, Kazakhstan, and the United States of America;

2 
 
 

 

“indebtedness” includes any obligation (whether incurred as principal debtor, co-debtor, surety or otherwise) for the payment or repayment of money, whether present or future, actual or contingent;

a “month” means a period beginning in one calendar month and ending in the next calendar month on the day numerically corresponding to the day of the calendar month on which it commences or, where there is no date in the next calendar month numerically corresponding as aforesaid, the last day of such calendar month, and “months” and “monthly” shall be construed accordingly;

the “Parties” shall be construed so as to include their respective and any subsequent successors, transferees and assignees in accordance with their respective interests;

a “person” includes any individual, firm, company, institution, government, state or agency of a state or subdivision of a state or any association or partnership (whether or not having separate legal personality) of two or more of the foregoing;

“tax” includes any present or future tax, levy, impost, duty or other charge of a similar nature (including, without limitation, any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same); and

the “winding-up” of a legal person includes the amalgamation, reconstruction, reorganization, dissolution, liquidation, merger or consolidation of that legal person, and any equivalent or analogous procedure under the law of any jurisdiction in which that legal person is incorporated, domiciled or resident or carries on business or has assets.

1.3 Save where expressions are expressly defined, in this Agreement accounting terms shall be determined in accordance with accounting principles generally accepted in the United States of America.

1.4 The headings in this Agreement are inserted for convenience only. Unless the context requires otherwise, terms defined in the plural include the singular and vice versa. References to “Clauses” are to be construed as references to the clauses in this Agreement.
1.5 Save where the contrary is indicated, any reference in this Agreement to:

 

3 
 
 

 

(a) this Agreement or any other agreement or document shall be construed as a reference to this Agreement or, as the case may be, such other agreement or document as the same may have been, or may from time to time be, amended, varied or supplemented;
(b) a law shall be construed as a reference to such law as the same may have been, or may from time to time be, amended or re-enacted; and
(c) a time of day shall be construed as a reference to Nur-Sultan time.
2. Loan
2.1

Subject to the terms and conditions herein, the Creditor has agreed to make available to the Debtor an interest free loan in the amount not exceeding USD 450,000 (four hundred fifty thousand US Dollars) (the “Loan”). The Creditor will make the Loan available to the Debtor in full or in part and at dates and time determined at the sole discretion of the Creditor.

2.2

The Loan shall be provided to the Debtor exclusively for the purposes agreed by the Creditor in writing prior to Debtor’s transfer of any amount to third parties.

The Loan shall not be transferred from Ekidos Bank Account or otherwise used by the Debtor for a purpose which was not agreed by the Creditor in writing (except to repay the Loan an accordance with Clause 3.1).

2.3 The Loan will be provided via wire transfer to the bank account of the Debtor as specified in Clause 16 of this Agreement (the “Ekidos Bank Account”).

3. Repayment

3.1

The Debtor shall repay the Loan in full on or before 30 June 2021 to the bank account of the Creditor as specified in Clause 17 of this Agreement.

 

4 
 
 

 

4. Taxes
4.1 All payments (whether of principal, interest or otherwise) to be made by the Debtor to the Creditor hereunder shall be made without set-off or counterclaim and free and clear of and without deduction for any present or future taxes, duties, fees, deductions, withholdings, restrictions or conditions of any nature, other than deductions totaling no more than the aggregate maximum amount of USD$2,000 in respect of any bank fees or other costs associated with the repayment of the Loan by the Debtor.
5. Partial Invalidity
5.1 The illegality, invalidity of unenforceability of any provision of this Agreement or any part thereof under the law of any jurisdiction shall not affect its legality, validity or enforceability under the law of any other jurisdiction nor the legality, validity or enforceability of any other provision. Any illegal, invalid or unenforceable provision shall have the effect of a provision that would be valid, the purpose of which conforms to the first mentioned provision to such an extent that it must be assumed that such provision would have been included in this Agreement if the first mentioned provision had been omitted in view of its illegality, invalidity or unenforceability.
6. Representations and Warranties
6.1 As of the date of this Agreement and the Effective Date, each Party represents and warrants to the other Party that:
(a) it is a corporation duly organized and in good standing in its jurisdiction of incorporation and is qualified to do business and is in good standing in those jurisdictions where necessary in order to carry out the purposes of this Agreement;
(b) it has the capacity to enter into and perform this Agreement and all transactions contemplated herein and that all other actions required to authorize it to enter into and perform this Agreement have been properly taken;

 

5 
 
 

 

(c) no consent or approval of any third party or governmental agency is required for the execution, delivery or performance of this Agreement;
(d) it will not breach any applicable law or other agreement or arrangement by entering into or performing this Agreement; and
(e) this Agreement has been duly executed and delivered by it and is valid and binding upon it in accordance with its terms.
7. Counterparts
7.1 This Agreement may be executed in any number of counterparts (including counterparts delivered by email) and this will have the same effect as if the signatures on the counterparts were on a single copy of this Agreement. This Agreement is not effective until each Party has executed at least one counterpart.
8. Law
8.1 This Agreement and any non-contractual obligations arising out of or in connection with it are governed by the laws of the Province of British Columbia and the federal laws of Canada applicable therein.
9. Jurisdiction
9.1 Each of the Parties irrevocably agrees that all disputes arising out of this Agreement, including but not limited to a dispute relating to the existence, validity, or termination of this Agreement or arising out of any non-contractual obligations arising out of or in connection with this Agreement, shall be referred to the Kazakhstan International Arbitration in accordance with the current Rules. The number of arbitrators is one arbitrator appointed by the Kazakhstan International Arbitration. The place of dispute settlement is Almaty, Kazakhstan. The language of the arbitration shall be English. The decision made by the arbitration is binding upon the parties and may be enforced.
9.2 The submission to the jurisdiction of the court referred to in Clause 9.1 shall not (and shall not be construed so as to) limit the right of the Creditor to institute proceedings against the Debtor in any other court of competent jurisdiction nor shall the instituting of proceedings by the Creditor in any one or more jurisdictions preclude the instituting of proceedings by the Creditor in any other jurisdiction, whether concurrently or not.

 

6 
 
 

 

10. Further Assurance
10.1 The Parties shall, and shall procure that their agents, employees and subcontractors shall, do all things reasonably necessary, including executing any additional documents and instrument, to give full effect to the terms and conditions of this Agreement.
11. Entire Agreement
11.1 This Agreement constitutes the entire agreement between the Parties and supersedes and extinguishes all previous agreements, promises, assurances, warranties, representations and understandings between them, whether written or oral, relating to its subject matter. This Agreement shall be binding upon and inure to the benefit of the respective successors and permitted assigns of the Parties.
12. Assignment
12.1 The Debtor may not transfer, assign, novate or otherwise dispose of their interest in this Agreement without the prior written consent of the Creditor.
13. Waiver
13.1 The failure of either Party to insist on the strict performance of any provision of this Agreement or to exercise any right, power or remedy upon a breach hereof shall not constitute a waiver of any provision of this Agreement or limit such Party’s right thereafter to enforce any provision or exercise any right.
14. Modification
14.1 No modification of this Agreement shall be valid unless made in writing and duly executed by both Parties.
15. Severability
15.1 If any provision of this Agreement is determined by a court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, all other provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby are not affected in any manner materially adverse to any Party hereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties hereto as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible.
7 
 
 
16. Ekidos Bank Account

The details for the bank account for Ekidos Minerals LLP are as follows:

Bank: XXXXXXXXXXXXXXXX

Bank Address: XXXXXXXXXXXXXXXXXXXX

Account: XXXXXXXXXXXXXXXXX

SWIFT: XXXXXXXX

17. Arras Minerals Corp. Account

The details for the bank account for Arras Minerals Corp. are as follows:

Bank: XXXXXXXXXXXXX

Bank Address: XXXXXXXXXXXXXXXXXXX

Account: XXXXXXXXXXXXXXXX

SWIFT: XXXXXXXXX

18. Notices
18.1 Any notice, direction or other instrument required or permitted to be given under this Agreement will be in writing and may be given by the delivery of the same or by sending the same by email or other similar form of communication (provided that if a method of notice other than email is selected, the notice shall also be sent by email), in each case addressed as follows:
(a) If to Creditor, at:

Arras Minerals Corp.

777 Dunsmuir Street, Suite 1610

Vancouver, British Columbia

V7Y 1K4

 

Attention: Tim Barry

Email: tbarry@silverbullresources.com 

and

Attention:Christopher Richards

Email: crichards@silverbullresources.com

 

 

8 
 
 

 

 

with a copy (which does not constitute notice) to:

 

Blake, Cassels & Graydon LLP

595 Burrard Street

Suite 2600, Three Bentall Centre

Vancouver, British Columbia

V7X 1L3

Attention: Susan Tomaine

Email: susan.tomaine@blakes.com

(b) If to Debtor, at:

Ekidos Minerals Limited Liability Partnership

Apt. 1, 158 Panfilov Street

Almalinsky District, Almaty 050000

Republic of Kazakhstan

 

Attention: Irma Nuss

Email: irina.dostyk@gmail.com

 

Any notice, direction or other instrument will (i) if delivered by hand, be deemed to have been given and received on the day it was delivered; and (ii) if sent by email or other similar form of communication, be deemed to have been given and received on the business day following the day it was so sent. Any party may at any time change its address for service from time to time by giving notice to the other parties in accordance with this Clause 18.1.

9 
 
 

IN WITNESS WHEREOF, this Agreement has been executed by the Parties as of the date first written above:

 

Debtor Creditor
Ekidos Minerals Limited Liability Partnership Arras Minerals Corp.

 

/s/ Irma Nuss                    

 

/s/ Timothy Barry                      

Name: Irma Nuss

Title: Director

Name: Timothy Barry

Title: President and Chief Executive Officer

   

 

10 
 
 

 

Exhibit 4.7

 

LOAN AGREEMENT

No. 2

between

 

Ekidos Minerals LLP

as Debtor

and

 

Arras Minerals Corp.

 

as Creditor

 

 
 
 

THIS LOAN AGREEMENT No.2 (the “Agreement”) is made on on 19 May 2021 between:

(1) Arras Minerals Corp., a company incorporated and existing under the laws of the Province of British Columbia, Canada, entity No. BC1287773, located at: Suite 1610, 777 Dunsmuir Street, Vancouver, Canada, V7Y 1K4, as lender (the “Creditor”); and
(2) Ekidos Minerals Limited Liability Partnership,a company incorporated and existing under the laws of the Republic of Kazakhstan, BIN 200740000204, located at: apt. 1, 158 Panfilov Street, Almalinsky District, Almaty 050000, Republic of Kazakhstan, as borrower (the “Debtor”), represented by Irma Nuss, Director, acting under the charter,

the Debtor and the Creditor hereinafter referred to collectively as the “Parties” and separately as a “Party”.

NOW IT IS HEREBY AGREED AS FOLLOWS:

1. Interpretation
1.1 In this Agreement the following capitalized terms have, except where the context otherwise requires, the meanings respectively shown opposite them:

Agreement: this loan agreement as may be amended and/or supplemented from time to time;

Effective Date: the date of the transfer of the amount of the Loan into the Debtor’s bank account;

Loan: has the meaning stipulated in Clause 2.1.

1.2 Any reference in this Agreement to:

a “business day” shall be construed as a reference to a day on which banks are generally open for business in Canada, Kazakhstan, and the United States of America;

2 
 
 

 

“indebtedness” includes any obligation (whether incurred as principal debtor, co-debtor, surety or otherwise) for the payment or repayment of money, whether present or future, actual or contingent;

a “month” means a period beginning in one calendar month and ending in the next calendar month on the day numerically corresponding to the day of the calendar month on which it commences or, where there is no date in the next calendar month numerically corresponding as aforesaid, the last day of such calendar month, and “months” and “monthly” shall be construed accordingly;

the “Parties” shall be construed so as to include their respective and any subsequent successors, transferees and assignees in accordance with their respective interests;

a “person” includes any individual, firm, company, institution, government, state or agency of a state or subdivision of a state or any association or partnership (whether or not having separate legal personality) of two or more of the foregoing;

“tax” includes any present or future tax, levy, impost, duty or other charge of a similar nature (including, without limitation, any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same); and

the “winding-up” of a legal person includes the amalgamation, reconstruction, reorganization, dissolution, liquidation, merger or consolidation of that legal person, and any equivalent or analogous procedure under the law of any jurisdiction in which that legal person is incorporated, domiciled or resident or carries on business or has assets.

1.3 Save where expressions are expressly defined, in this Agreement accounting terms shall be determined in accordance with accounting principles generally accepted in the United States of America.

1.4 The headings in this Agreement are inserted for convenience only. Unless the context requires otherwise, terms defined in the plural include the singular and vice versa. References to “Clauses” are to be construed as references to the clauses in this Agreement.
1.5 Save where the contrary is indicated, any reference in this Agreement to:

 

3 
 
 

 

(a) this Agreement or any other agreement or document shall be construed as a reference to this Agreement or, as the case may be, such other agreement or document as the same may have been, or may from time to time be, amended, varied or supplemented;
(b) a law shall be construed as a reference to such law as the same may have been, or may from time to time be, amended or re-enacted; and
(c) a time of day shall be construed as a reference to Nur-Sultan time.
2. Loan
2.1

Subject to the terms and conditions herein, the Creditor has agreed to make available to the Debtor an interest free loan in the amount not exceeding USD 480,000 (four hundred eighty thousand US Dollars) (the “Loan”). The Creditor will make the Loan available to the Debtor in full or in part and at dates and time determined at the sole discretion of the Creditor.

2.2

The Loan shall be provided to the Debtor exclusively for the purposes agreed by the Creditor in writing prior to Debtor’s transfer of any amount to third parties.

 

The Loan shall not be transferred from Ekidos Bank Account or otherwise used by the Debtor for a purpose which was not agreed by the Creditor in writing (except to repay the Loan an accordance with Clause 3.1).

2.3 The Loan will be provided via wire transfer to the bank account of the Debtor as specified in Clause 16 of this Agreement (the “Ekidos Bank Account”).

3. Repayment

3.1

The Debtor shall repay the Loan in full on or before 31 July 2021 to the bank account of the Creditor as specified in Clause 17 of this Agreement.

 

4 
 
 

 

4. Taxes
4.1 All payments (whether of principal, interest or otherwise) to be made by the Debtor to the Creditor hereunder shall be made without set-off or counterclaim and free and clear of and without deduction for any present or future taxes, duties, fees, deductions, withholdings, restrictions or conditions of any nature, other than deductions totaling no more than the aggregate maximum amount of USD$2,000 in respect of any bank fees or other costs associated with the repayment of the Loan by the Debtor.
5. Partial Invalidity
5.1 The illegality, invalidity of unenforceability of any provision of this Agreement or any part thereof under the law of any jurisdiction shall not affect its legality, validity or enforceability under the law of any other jurisdiction nor the legality, validity or enforceability of any other provision. Any illegal, invalid or unenforceable provision shall have the effect of a provision that would be valid, the purpose of which conforms to the first mentioned provision to such an extent that it must be assumed that such provision would have been included in this Agreement if the first mentioned provision had been omitted in view of its illegality, invalidity or unenforceability.
6. Representations and Warranties
6.1 As of the date of this Agreement and the Effective Date, each Party represents and warrants to the other Party that:
(a) it is a corporation duly organized and in good standing in its jurisdiction of incorporation and is qualified to do business and is in good standing in those jurisdictions where necessary in order to carry out the purposes of this Agreement;
(b) it has the capacity to enter into and perform this Agreement and all transactions contemplated herein and that all other actions required to authorize it to enter into and perform this Agreement have been properly taken;

 

5 
 
 

 

(c) no consent or approval of any third party or governmental agency is required for the execution, delivery or performance of this Agreement;
(d) it will not breach any applicable law or other agreement or arrangement by entering into or performing this Agreement; and
(e) this Agreement has been duly executed and delivered by it and is valid and binding upon it in accordance with its terms.
7. Counterparts
7.1 This Agreement may be executed in any number of counterparts (including counterparts delivered by email) and this will have the same effect as if the signatures on the counterparts were on a single copy of this Agreement. This Agreement is not effective until each Party has executed at least one counterpart.
8. Law
8.1 This Agreement and any non-contractual obligations arising out of or in connection with it are governed by the laws of the Province of British Columbia and the federal laws of Canada applicable therein.
9. Jurisdiction
9.1 Each of the Parties irrevocably agrees that all disputes arising out of this Agreement, including but not limited to a dispute relating to the existence, validity, or termination of this Agreement or arising out of any non-contractual obligations arising out of or in connection with this Agreement, shall be referred to the Kazakhstan International Arbitration in accordance with the current Rules. The number of arbitrators is one arbitrator appointed by the Kazakhstan International Arbitration. The place of dispute settlement is Almaty, Kazakhstan. The language of the arbitration shall be English. The decision made by the arbitration is binding upon the parties and may be enforced.
9.2 The submission to the jurisdiction of the court referred to in Clause 9.1 shall not (and shall not be construed so as to) limit the right of the Creditor to institute proceedings against the Debtor in any other court of competent jurisdiction nor shall the instituting of proceedings by the Creditor in any one or more jurisdictions preclude the instituting of proceedings by the Creditor in any other jurisdiction, whether concurrently or not.

 

6 
 
 

 

10. Further Assurance
10.1 The Parties shall, and shall procure that their agents, employees and subcontractors shall, do all things reasonably necessary, including executing any additional documents and instrument, to give full effect to the terms and conditions of this Agreement.
11. Entire Agreement
11.1 This Agreement constitutes the entire agreement between the Parties and supersedes and extinguishes all previous agreements, promises, assurances, warranties, representations and understandings between them, whether written or oral, relating to its subject matter. This Agreement shall be binding upon and inure to the benefit of the respective successors and permitted assigns of the Parties.
12. Assignment
12.1 The Debtor may not transfer, assign, novate or otherwise dispose of their interest in this Agreement without the prior written consent of the Creditor.
13. Waiver
13.1 The failure of either Party to insist on the strict performance of any provision of this Agreement or to exercise any right, power or remedy upon a breach hereof shall not constitute a waiver of any provision of this Agreement or limit such Party’s right thereafter to enforce any provision or exercise any right.
14. Modification
14.1 No modification of this Agreement shall be valid unless made in writing and duly executed by both Parties.
15. Severability
15.1 If any provision of this Agreement is determined by a court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, all other provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby are not affected in any manner materially adverse to any Party hereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties hereto as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible.
7 
 
 
16. Ekidos Bank Account

The details for the bank account for Ekidos Minerals LLP are as follows:

Bank: XXXXXXXXXXXXXXXX

Bank Address: XXXXXXXXXXXXXXXXXXXX

Account: XXXXXXXXXXXXXXXXX

SWIFT: XXXXXXXX

17. Arras Minerals Corp. Account

The details for the bank account for Arras Minerals Corp. are as follows:

Bank: XXXXXXXXXXXXX

Bank Address: XXXXXXXXXXXXXXXXXXX

Account: XXXXXXXXXXXXXXXX

SWIFT: XXXXXXXXX

18. Notices
18.1 Any notice, direction or other instrument required or permitted to be given under this Agreement will be in writing and may be given by the delivery of the same or by sending the same by email or other similar form of communication (provided that if a method of notice other than email is selected, the notice shall also be sent by email), in each case addressed as follows:
(a) If to Creditor, at:

Arras Minerals Corp.

777 Dunsmuir Street, Suite 1610

Vancouver, British Columbia

V7Y 1K4

 

Attention: Tim Barry

Email: tbarry@silverbullresources.com 

and

Attention:Christopher Richards

Email: crichards@silverbullresources.com

 

 

8 
 
 

 

 

with a copy (which does not constitute notice) to:

 

Blake, Cassels & Graydon LLP

595 Burrard Street

Suite 2600, Three Bentall Centre

Vancouver, British Columbia

V7X 1L3

Attention: Susan Tomaine

Email: susan.tomaine@blakes.com

(b) If to Debtor, at:

Ekidos Minerals Limited Liability Partnership

Apt. 1, 158 Panfilov Street

Almalinsky District, Almaty 050000

Republic of Kazakhstan

 

Attention: Irma Nuss

Email: irina.dostyk@gmail.com

 

Any notice, direction or other instrument will (i) if delivered by hand, be deemed to have been given and received on the day it was delivered; and (ii) if sent by email or other similar form of communication, be deemed to have been given and received on the business day following the day it was so sent. Any party may at any time change its address for service from time to time by giving notice to the other parties in accordance with this Clause 18.1.

9 
 
 

IN WITNESS WHEREOF, this Agreement has been executed by the Parties as of the date first written above:

 

Debtor Creditor
Ekidos Minerals Limited Liability Partnership Arras Minerals Corp.

 

/s/ Irma Nuss                    

 

/s/ Timothy Barry                      

Name: Irma Nuss

Title: Director

Name: Timothy Barry

Title: President and Chief Executive Officer

   

 

10 
 
 

 

Exhibit 4.8

 

 

 

SILVER BULL RESOURCES, INC.

- and -

ARRAS MINERALS CORP.

ASSET PURCHASE AGREEMENT

DATED March 19, 2021

 
 
 

TABLE OF CONTENTS

 

    Page

Article 1

PURCHASE OF ASSETS

1.1   Purchase and Sale     2  
1.2   Assumed Liabilities     2  
1.3   Purchase Price     2  
1.4   Payment of Purchase Price     2  
1.5   Allocation of Purchase Price     2  
1.6   Tax Treatment     2  
1.7   Bare Trustee     2  

Article 2

REPRESENTATIONS AND WARRANTIES

2.1   Representations and Warranties of the Vendor     3  
(1)   Incorporation and Corporate Power of the Vendor     3  
(2)   Authorization and Enforceability     3  
(3)   Books and Records     3  
(4)   Title to and Sufficiency of Purchased Assets     3  
(5)   Leases and Contracts     4  
(6)   The Loans     4  
(7)   Licenses and Compliance with Applicable Law     4  
(8)   Compliance with Anti-Corruption Laws     4  
(9)   Legal Proceedings and Orders     4  
(10) Environmental Matters     4  
(11) Taxes and Tax Returns     5  
2.2   Representations and Warranties of the Purchaser     5  
(1)   Incorporation and Corporate Power     5  
(2)   Authorization and Enforceability     5  
2.3   Commissions     5  
2.4   No Waiver     5  

Article 3

CLOSING ARRANGEMENTS

3.1   Closing     5  
3.2   Purchaser’s Conditions     5  
(1)   Representations and Warranties     6  
(2)   Vendor’s Compliance and Deliverables     6  
(3)   No Law     6  
3.3   Condition Not Fulfilled     6  
3.4   Vendor’s Conditions     6  
(1)   Representations and Warranties     6  
(2)   Purchaser’s Compliance and Deliverables     7  
(3)   No Law     7  
3.5   Condition Not Fulfilled     7  
3.6   Termination     7  

 

 

i
 
 

 

TABLE OF CONTENTS

(continued)

 

 

    Page
3.7   Effect of Termination     7  

Article 4

SURVIVAL AND INDEMNIFICATION

4.1   Survival     8  
4.2   Indemnity by the Vendor     8  
4.3   Indemnity by the Purchaser     9  
4.4   Claim Notice     9  
4.5   Time Limits for Claim Notice for Breach of Representations and Warranties     9  
(1)   Notice by the Purchaser     9  
(2)   Notice by the Vendor     10  
4.6   Calculation of Damages     10  
4.7   Agency for Non-Parties     11  
4.8   Direct Claims     11  
4.9   Third Party Claims     11  
(1)   Rights of Indemnifying Party     11  
(2)   Other Rights of Indemnified Party     11  
4.10   Interest on Damages     11  

Article 5

GENERAL

5.1   Actions on Non-Business Days     11  
5.2   Currency and Payment Obligations     11  
5.3   Calculation of Interest     12  
5.4   Calculation of Time     12  
5.5   Schedules and Exhibits     12  
5.7   Payment of Taxes     12  
5.8   Public Announcements     12  
5.9   Notices     12  
(1)   Mode of Giving Notice     12  
(2)   Deemed Delivery of Notice     13  
(3)   Change of Address     13  
5.10   Time of Essence     13  
5.11   Further Assurances     14  
5.12   Co-operation in Filing of Tax Returns     14  
5.13   Entire Agreement     14  
5.14   Amendment     14  
5.15   Waiver     14  
5.16   Severability     14  
5.17   Remedies Cumulative     14  
5.18   Attornment     14  
5.19   Governing Law     15  
5.20   Successors and Assigns; Assignment     15  

 

 

ii
 
 

 

 

TABLE OF CONTENTS

(continued)

 

 

    Page
5.21   Third Party Beneficiaries     15  
5.22   Counterparts     15  
5.23   Language     15  

 

 

 

 

iii
 
 

ASSET PURCHASE AGREEMENT

This Asset Purchase Agreement dated 19th day of March, 2021 is made

B E T W E E N

SILVER BULL RESOURCES, INC., (the “Vendor”)

- and -

ARRAS MINERALS CORP. (the “Purchaser”)

RECITALS

A.       On August 12, 2020, the Vendor, Copperbelt AG (“CB Parent”) and its subsidiary Dostyk LLP executed an option agreement (the “Option Agreement”) pursuant to which the Vendor was granted the sole and exclusive option (the “Option”) to acquire up to a 100% interest in the Beskauga property located in Kazakhstan (the “Beskauga Property”).

B.       On September 1, 2020, the Vendor and CB Parent executed a joint venture agreement (the “JV Agreement”) in connection with mineral license applications for exploration and evaluation of the Stepnoe and Ekidos properties located in Kazakhstan (the “Stepnoe & Ekidos Property”, and, together with the Beskauga Property, the “Project”).

C.       Pursuant and subject to Section 2.5 of the Option Agreement, the Vendor is permitted to transfer all of its right, title and interest in and to the Option and the Option Agreement to the Purchaser by virtue of the Purchaser being an “affiliate” (as that term is defined in the Business Corporations Act (British Columbia)) of the Vendor.

D.       Pursuant to Section 10.5(a) of the JV Agreement, the Vendor is permitted to transfer all of its right, title and interest in and to the JV Agreement to the Purchaser by virtue of the Purchaser being an “Affiliate” (as that term is defined in the JV Agreement) of the Vendor.

E.       Prior to the date hereof, the Vendor entered into (i) a loan agreement with Ekidos Minerals LLP dated August 20, 2020 whereby the Vendor loaned to Ekidos Minerals LLP US$360,000, which was subsequently amended on October 30, 2020 and January 21, 2021 (collectively, “Loan 1”), (ii) a loan agreement with Ekidos Minerals LLP dated December 21, 2020 whereby the Vendor loaned to Ekidos Minerals LLP US$400,000 (“Loan 2”) and (iii) a loan agreement with Ekidos Minerals LLP dated February 23, 2021 whereby the Vendor loaned to Ekidos Minerals LLP US$225,000 (“Loan 3” and, together with Loan 1 and Loan 2, the “Loans”).

F.       The Vendor wishes to sell to the Purchaser and the Purchaser wishes to purchase from the Vendor all of the Vendor’s right, title and interest in and to the Option Agreement, the JV Agreement and the Loans (the “Purchased Assets”) on the terms and conditions set forth herein (the “Transaction”).

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Certain definitions and other clauses pertaining to the interpretation of this Agreement are set out in Schedule 1.

For good and valuable consideration, the receipt and adequacy of which are hereby acknowledged by each Party, the Parties agree as follows:

Article 1
PURCHASE OF ASSETS

1.1          Purchase and Sale. At the Closing Time, on and subject to the terms and conditions of this Agreement, the Vendor shall sell to the Purchaser, and the Purchaser shall purchase from the Vendor, the Purchased Assets.

1.2          Assumed Liabilities. At the Closing Time, on and subject to the terms and conditions of this Agreement, the Purchaser shall assume and agree to pay when due and perform and discharge in accordance with their terms, the liabilities of the Vendor associated with the Purchased Assets (the “Assumed Liabilities”). Notwithstanding any other provision of this Agreement, the Purchaser shall not be liable for any Liability of the Vendor other than the Assumed Liabilities. The Retained Liabilities shall remain the sole responsibility of, and shall be retained, paid and performed solely by, the Vendor.

1.3          Purchase Price. The consideration payable by the Purchaser to the Vendor for the Purchased Assets (the “Purchase Price”) shall be $1,367,668.

1.4          Payment of Purchase Price. The Purchase Price shall be paid and satisfied by the issuance by the Purchaser of 36,000,000 common shares in the capital of the Purchaser to the Vendor (the “Consideration Shares”).

1.5          Allocation of Purchase Price. The Parties shall use commercially reasonable efforts to mutually agree on an allocation of the Purchase Price among the Purchased Assets as soon as possible after Closing. The Purchaser and the Vendor shall report an allocation of the Purchase Price among the Purchased Assets in a manner entirely consistent with the allocation agreed upon after Closing and shall not take any position inconsistent therewith in the filing of any Tax Returns or in the course of any audit by any Governmental Authority, Tax review or Tax proceeding relating to any Tax Returns.

1.6          Tax Treatment. For U.S. federal income Tax purposes, the Parties intend that the Transaction be treated as an exchange under Section 351 of the Internal Revenue Code of 1986, as amended. None of the Parties shall take any position that is inconsistent with the treatment contemplated by this paragraph unless required by Applicable Law.

1.7          Bare Trustee. To the extent that any of the Purchased Assets are not transferred to the Purchaser by the Vendor at Closing, or are unable to be registered in the name of the Purchaser at Closing, the Vendor shall hold its interest in all such Purchased Assets as bare trustee, in trust for and on behalf of the Purchaser, until such time as all such interests to all of the Purchased Assets have been transferred to the Purchaser or registered in the name of the Purchaser, as applicable. Vendor agrees that when holding any of the Purchased Assets as bare trustee, in trust for and on behalf of the Vendor, such interests shall be used solely for the purposes of the business of the Purchaser. While so holding the Purchased Assets as bare trustee, Vendor shall not mortgage, transfer, assign or otherwise encumber the Purchased Assets.

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Article 2
REPRESENTATIONS AND WARRANTIES

2.1          Representations and Warranties of the Vendor. As a material inducement to the Purchaser’s entering into this Agreement and completing the Transaction and acknowledging that the Purchaser is entering into this Agreement in reliance upon the representations and warranties of the Vendor set out in this Section 2.1, the Vendor represents and warrants to the Purchaser as follows:

(1)          Incorporation and Corporate Power of the Vendor. The Vendor is a corporation incorporated, organized and subsisting under the laws of Nevada, United States. The Vendor has the corporate power, authority and capacity to execute and deliver this Agreement and all other agreements and instruments to be executed by it as contemplated herein and to perform its obligations hereunder and under all such other agreements and instruments.

(2)          Authorization and Enforceability. The execution and delivery of this Agreement and all agreements and instruments to be executed and delivered hereunder have been duly authorized by all necessary corporate action on the part of the Vendor and this Agreement constitutes the valid and binding obligation of the Vendor enforceable against the Vendor in accordance with its terms.

(3)          Books and Records. The Vendor has made available to the Purchaser all books and records material to the Purchased Assets, including financial data and information and all business records and information, whether in paper form or stored electronically, digitally or on computer related media. All financial records with respect to the Purchased Assets accurately reflect the revenues and expenses associated with such Purchased Assets. All books and records relating to the Purchased Assets are in the full possession and exclusive control of, and are owned exclusively by, the Vendor and are not dependent on any computerized or other system, program or device that is not exclusively owned and controlled by the Vendor.

(4)          Title to and Sufficiency of Purchased Assets. The Vendor has good and marketable legal and beneficial title to the Purchased Assets, free and clear of any and all liens, charges, encumbrances and claims of any other Person and there is no agreement, option or other right or privilege outstanding in favour of any Person for the purchase from the Vendor of it’s interest in the Project or any part thereof or any of the Purchased Assets. The Purchased Assets constitute all of the property and assets used or held for use in connection by the Vendor in connection with the Project, and there are no other contract or leases to which the Vendor is a party that relate to or arise from the Option Agreement, the JV Agreement, the Loans or the Vendor’s interest in the Project. The Purchased Assets are sufficient to permit the continued development of the Project (to the extent such development involves the Vendor) in substantially the same manner as conducted as of the date hereof.

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(5)          Leases and Contracts. The Vendor is not in default under the Option Agreement, the JV Agreement, the Loans or any other lease or contract included in the Purchased Assets, to the knowledge of the Vendor no other party is in default under the Option Agreement, the JV Agreement, the Loans or any other such lease or contract and there has not occurred any event which, with the lapse of time or giving of notice or both, would constitute a default under the Option Agreement, the JV Agreement, the Loans or any other lease or contract included in the Purchased Assets. Other than the notices required to be given to the counterparties under the Option Agreement and the JV Agreement, no Consent is required nor is any notice required to be given under the Option Agreement, the JV Agreement, the Loans or any other lease or contract included in the Purchased Assets by any Person in connection with the completion of the Transaction in order to maintain all rights of the Vendor under the Option Agreement, the JV Agreement, the Loans and any other lease or contract included in the Purchased Assets. The completion of the Transaction will not result in any default under the Option Agreement, the JV Agreement, the Loans or any other lease or contract included in the Purchased Assets nor afford any Person the right to terminate the Option Agreement, the JV Agreement, the Loans or any other lease or contract included in the Purchased Assets or other contract nor will the completion of the Transaction result in any additional or more onerous obligation on the Vendor under the Option Agreement, the JV Agreement, the Loans or any other lease or contract included in the Purchased Assets. The Option Agreement, the JV Agreement, the Loans and any other lease or contract included in the Purchased Assets are in full force and effect, unamended and the Vendor is entitled to the full benefit and advantage of each of the Option Agreement, the JV Agreement, the Loans and any other lease or contract included in the Purchased Assets in accordance with its terms.

(6)          The Loans. Each of the Loans is a valid obligation which arose in the ordinary course of business of the Vendor and will be collected in the ordinary course of business at its full face value and is not subject to any set-off or counterclaim.

(7)          Licenses and Compliance with Applicable Law. There are no licenses, permits, authorizations, approvals or other evidences of authority of any Governmental Authority required to be transferred to the Vendor which are required for the continued development of the Project (to the extent such development involves the Vendor) in substantially the same manner as conducted as of the date hereof. No consent of, filing with, notice to or waiver from any Governmental Authority is required to be obtained or made by the Vendor in connection with the consummation of the Transaction or to permit the Purchaser to carry on the development of the Project (to the extent such development involves the Purchaser) in substantially the same manner as carried on as of the date hereof.

(8)          Compliance with Anti-Corruption Laws. None of the Vendor, or any of its Representatives or joint venture partners, in carrying out the development of the Project, have violated the Corruption of Foreign Public Officials Act (Canada), the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act 2010, or the anti-corruption laws of any other jurisdiction applicable to the Vendor or the Project.

(9)          Legal Proceedings and Orders. There is no Legal Proceeding in progress, pending or Threatened against or affecting the Purchased Assets or the Vendor’s title thereto. There is no Legal Proceeding in progress, pending or Threatened against or affecting the Vendor which Legal Proceeding would impede or prevent the Vendor from completing the Transaction. There is no factual or legal basis on which any such Legal Proceeding might be commenced with any reasonable likelihood of success. There is no Order outstanding against or affecting the Project or any of the Purchased Assets. There is no Order outstanding against or affecting the Vendor which Order would impede or prevent the Vendor from completing the Transaction.

(10)        Environmental Matters. The Project has been operated in compliance with all Environmental Laws.

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(11)        Taxes and Tax Returns. All Tax Returns required to have been filed with respect to the Purchased Assets have been duly filed and all such Tax Returns are true, complete and correct in all material respects. All Taxes related to the Purchased Assets that have become due and payable have been properly paid in full. Vendor has not received any written notice of any notice of deficiency or assessment of proposed deficiency or assessment from any Governmental Authority for Taxes relating to the ownership or operation of the Purchased Assets. There are no audits or other claims relating to any liability for Taxes pending or, to the knowledge of the Vendor, threatened with respect to the Purchased Assets. The Purchased Assets are not subject to any Tax liens.

2.2          Representations and Warranties of the Purchaser. As a material inducement to the Vendor’s entering into this Agreement and completing the Transaction and acknowledging that the Vendor is entering into this Agreement in reliance upon the representations and warranties of the Purchaser set out in this Section 2.2, the Purchaser represents and warrants to the Vendor as follows:

(1)          Incorporation and Corporate Power. The Purchaser is a corporation incorporated, organized and subsisting under the laws of the province of British Columbia. The Purchaser has the corporate power, authority and capacity to execute and deliver this Agreement and all other agreements and instruments to be executed by it as contemplated herein and to perform its obligations under this Agreement and under all such other agreements and instruments.

(2)          Authorization and Enforceability. The execution and delivery of this Agreement and all other agreements and instruments to be executed and delivered hereunder have been duly authorized by all necessary corporate action on the part of the Purchaser. This Agreement constitutes the valid and binding obligation of the Purchaser enforceable against the Purchaser in accordance with its terms.

2.3          Commissions. Each Party represents and warrants to the other Party that such other Party will not be liable for any brokerage commission, finder’s fee or other similar payment in connection with the Transaction because of any action taken by, or agreement or understanding reached by, that Party.

2.4          No Waiver. No investigations, inspections, surveys or tests made by or on behalf of the Purchaser at any time, and no updates to information from the Vendor to the Purchaser shall, or shall be deemed to, affect, mitigate, modify, waive, diminish the scope of or otherwise affect any representation or warranty made by the Vendor in or pursuant to this Agreement, amend any Schedule hereto, or affect any remedies available to the Purchaser, unless in each case agreed to by the Purchaser in writing.

Article 3
CLOSING ARRANGEMENTS

3.1          Closing. The Closing shall take place at 9:00 a.m. (Vancouver Time) on the Closing Date at the offices of the Purchaser’s Counsel in Vancouver, British Columbia, or at such other time on the Closing Date or such other place as may be agreed orally or in writing by the Vendor and the Purchaser.

3.2          Purchaser’s Conditions. The Purchaser shall not be obligated to complete the Transaction unless, at or before the Closing Time, each of the conditions listed below in this Section 3.2 has been satisfied, it being understood that the said conditions are included for the exclusive benefit of the Purchaser. The Vendor shall take all such actions, steps and proceedings as are reasonably within its control as may be necessary to ensure that the conditions listed below in this Section 3.2 are fulfilled at or before the Closing Time.

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(1)          Representations and Warranties. The representations and warranties of the Vendor in Section 2.1 shall be true and correct at the Closing.

(2)          Vendor’s Compliance and Deliverables. The Vendor shall have performed and complied with all of the terms and conditions in this Agreement on its part to be performed or complied with at or before the Closing Time and shall have executed and delivered or caused to have been executed and delivered to the Purchaser at the Closing:

(a) a general conveyance and assumption of liabilities agreement,
(b) evidence of corporate proceedings having been taken by the Vendor to approve this Agreement and the Transaction;
(c) a bring-down certificate of a senior officer of the Vendor confirming the truth of the representations and warranties in Section 2.1; and
(d) all other assurances, consents, agreements, elections, documents and instruments as may be contemplated by this Agreement or as reasonably required by the Purchaser to complete the transactions provided for in this Agreement,

all of which shall be in form and substance satisfactory to the Purchaser, acting reasonably.

(3)          No Law. No Governmental Authority shall have enacted, issued or promulgated any Law which has the effect of (i) making the Transaction illegal or (ii) otherwise prohibiting, preventing or restraining the consummation of the Transaction.

3.3          Condition Not Fulfilled. If any condition in Section 3.2 has not been fulfilled at or before the Closing Time or if any such condition is, or becomes, impossible to satisfy prior to the Closing Time, other than as a result of the failure of the Purchaser to comply with its obligations under this Agreement, then the Purchaser in its sole discretion may, without limiting any rights or remedies available to the Purchaser at law or in equity, either:

(a) terminate this Agreement by notice to the Vendor, as provided in Section 3.6; or
(b) waive compliance with any such condition without prejudice to its right of termination in the event of non-fulfilment of any other condition.

3.4          Vendor’s Conditions. The Vendor shall not be obligated to complete the Transaction unless, at or before the Closing Time, each of the conditions listed below in this Section 3.4 has been satisfied, it being understood that the said conditions are included for the exclusive benefit of the Vendor. The Purchaser shall take all such actions, steps and proceedings as are reasonably within the Purchaser’s control as may be necessary to ensure that the conditions listed below in this Section 3.4 are fulfilled at or before the Closing Time.

(1)          Representations and Warranties. The representations and warranties of the Purchaser in Section 2.2 shall be true and correct at the Closing.

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(2)          Purchaser’s Compliance and Deliverables. The Purchaser shall have performed and complied with all of the terms and conditions in this Agreement on its part to be performed or complied with at or before the Closing Time, including the issuance of the Consideration Shares to the Vendor, and shall have executed and delivered or caused to have been executed and delivered to the Vendor at the Closing:

(a) a general conveyance and assumption of liabilities agreement,
(b) evidence of corporate proceedings having been taken by the Purchaser to approve this Agreement and the Transaction;
(c) a bring-down certificate of a senior officer of the Purchaser confirming the truth of the representations and warranties in Section 2.2; and
(d) all other assurances, consents, agreements, elections, documents and instruments as may be contemplated by this Agreement or as reasonably required by the Vendor to complete the transactions provided for in this Agreement,

all of which shall be in form and substance satisfactory to the Vendor, acting reasonably.

(3)          No Law. No Governmental Authority shall have enacted, issued or promulgated any Law which has the effect of (i) making the Transaction illegal, or (ii) otherwise prohibiting, preventing or restraining the consummation of the Transaction.

3.5          Condition Not Fulfilled. If any condition in Section 3.4 has not been fulfilled at or before the Closing Time or if any such condition is, or becomes, impossible to satisfy prior to the Closing Time, other than as a result of the failure of the Vendor to comply with its obligations under this Agreement, then the Vendor in its sole discretion may, without limiting any rights or remedies available to the Vendor at law or in equity, either:

(a) terminate this Agreement by notice to the Purchaser as provided in Section 3.6; or
(b) waive compliance with any such condition without prejudice to its right of termination in the event of non-fulfilment of any other condition.

3.6          Termination. This Agreement may be terminated on or prior to the Closing Date:

(a) by the mutual written agreement of the Vendor and the Purchaser;
(b) by written notice from the Purchaser to the Vendor as permitted in Section 3.3; or
(c) by written notice from the Vendor to the Purchaser as permitted in Section 3.5.

3.7          Effect of Termination. If this Agreement is terminated:

(a) by the Vendor or by the Purchaser under Section 3.6, subject to Section 3.7(b), all further obligations of the Parties under this Agreement shall terminate, except for the obligations under Sections 5.6 and 5.8, which shall survive such termination; or

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(b) by a Party under Section 3.6(b) or 3.6(c) and the right to terminate arose because of a breach of this Agreement by the other Party (including a breach by the other Party resulting in a condition in favour of the terminating Party failing to be satisfied), then, the other Party shall remain fully liable for any and all Damages sustained or incurred by the terminating Party directly or indirectly as a result thereof.

Article 4
SURVIVAL AND INDEMNIFICATION

4.1          Survival. All provisions of this Agreement and of any other agreement, certificate or instrument delivered pursuant to this Agreement, other than the conditions in Article 3, shall not merge on Closing but shall survive the execution, delivery and performance of this Agreement, the Closing and the execution and delivery of any transfer documents or other documents of title to the Purchased Assets and all other agreements, certificates and instruments delivered pursuant to this Agreement and the payment of the consideration for the Purchased Assets.

4.2          Indemnity by the Vendor. The Vendor shall indemnify the Purchaser’s Indemnified Parties and save them fully harmless against, and will reimburse them for, any Damages arising from, in connection with or related in any manner whatsoever to:

(a) any incorrectness in or breach of any representation or warranty of the Vendor contained in this Agreement or in any other agreement, certificate or instrument executed and delivered pursuant to this Agreement;
(b) any breach or any non-fulfilment of any covenant or agreement on the part of the Vendor contained in this Agreement or in any other agreement, certificate or instrument executed and delivered pursuant to this Agreement;
(c) any Liability arising from the ownership of the Vendor’s interest in the Project or the Purchased Assets prior to the Closing Date, other than a Liability that is an Assumed Liability;
(d) any Legal Proceeding to which the Vendor is a party that is related to the Purchased Assets or the Project at any time on or prior to the Closing Date or any Legal Proceeding related to the Purchased Assets or the Project which arises after the Closing Date from facts or circumstances that existed at any time on or prior to the Closing Date; and
(e) any breach or alleged breach of the Option Agreement, the JV Agreement, the Loans or any other lease or contract included in the Purchased Assets which occurred prior to or on the Closing Date or any breach of the Option Agreement, the JV Agreement, the Loans or any other lease or contract included in the Purchased Assets which occurs after the Closing Date but arises out of a continuation of a course of conduct which commenced prior to the Closing Date.

 

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For greater certainty and without limiting the generality of the provisions of Sections 4.2(a) and (b), the indemnity provided for in Sections 4.2(b) through (e) shall extend to any Damages arising from any act, omission or state of facts that occurred or existed prior to the Closing Time, and whether or not disclosed in any Schedule to this Agreement. The rights to indemnification of the Purchaser’s Indemnified Parties under this Section 4.2 shall apply notwithstanding any inspection or inquiries made by or on behalf of any of the Purchaser’s Indemnified Parties, or any knowledge acquired or capable of being acquired by any of the Purchaser’s Indemnified Parties or facts actually known to any of the Purchaser’s Indemnified Parties (whether before or after the execution and delivery of this Agreement and whether before or after Closing). The waiver of any condition based upon the accuracy of any representation and warranty or the performance of any covenant shall not affect the right to indemnification, reimbursement or other remedy based upon such representation, warranty or covenant.

4.3          Indemnity by the Purchaser. The Purchaser shall indemnify the Vendor’s Indemnified Parties and save them fully harmless against, and will reimburse them for, any Damages arising from, in connection with or related in any manner whatsoever to:

(a) any incorrectness in or breach of any representation or warranty of the Purchaser contained in this Agreement or in any other agreement, certificate or instrument executed and delivered pursuant to this Agreement; and
(b) any breach or non-fulfilment of any covenant or agreement on the part of the Purchaser contained in this Agreement or in any other agreement, certificate or instrument executed and delivered pursuant to this Agreement.

4.4          Claim Notice. If an Indemnified Party becomes aware of any act, omission or state of facts that may give rise to Damages in respect of which a right of indemnification is provided for under this Article 4, the Indemnified Party shall promptly give written notice thereof (a “Claim Notice”) to the Indemnifying Party. The Claim Notice shall specify whether the potential Damages arise as a result of a claim by a Person against the Indemnified Party (a “Third Party Claim”) or whether the potential Damages arise as a result of a claim directly by the Indemnified Party against the Indemnifying Party (a “Direct Claim”), and shall also specify with reasonable particularity (to the extent that the information is available):

(a) the factual basis for the Direct Claim or Third Party Claim, as the case may be; and
(b) the amount of the potential Damages arising therefrom, if known.

If, through the fault of the Indemnified Party, the Indemnifying Party does not receive a Claim Notice in time effectively to contest the determination of any liability susceptible of being contested or to assert a right to recover an amount under applicable insurance coverage, then the liability of the Indemnifying Party to the Indemnified Party under this Article 4 shall be reduced only to the extent that Damages are actually incurred by the Indemnifying Party resulting from the Indemnified Party’s failure to give the Claim Notice on a timely basis. Nothing in this Section 4.4 shall be construed to affect the time within which a Claim Notice must be delivered pursuant to Sections 4.5(1) and 4.5(2) in order to permit recovery pursuant to Section 4.2(a) or 4.3(a) as the case may be.

4.5          Time Limits for Claim Notice for Breach of Representations and Warranties.

(1)          Notice by the Purchaser. No Damages may be recovered from the Vendor pursuant to Section 4.2(a) unless (subject to the fraud exception below) a Claim Notice is delivered by the Purchaser in accordance with the timing set out below:

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(a) with respect to the representations and warranties in Sections 2.1(1), (2) and (4), at any time after Closing;
(b) with respect to the representations and warranties in Section 2.1(11), at any time before the date that is 90 days after the relevant Governmental Authorities are no longer entitled to assess or reassess the Taxes in question, having regard, without limitation, to:
(i) any waiver given before the Closing Date in respect of such Taxes; and
(ii) any entitlement of a Governmental Authority to assess or reassess in respect of such Taxes without limitation in the event of fraud or misrepresentation attributable to neglect, carelessness or willful default; and
(c) with respect to all other representations and warranties, on or before the date that is 24 months following the Closing Date,

provided, however, that in the event of fraud relating to a representation and warranty of the Vendor in this Agreement, then notwithstanding the foregoing time limitations, the Purchaser Indemnified Parties shall be entitled to deliver a Claim Notice at any time for purposes of such a claim. Unless (subject to the fraud exception above) a Claim Notice has been given in accordance with the timing set out in Section 4.5(1)(b) or 4.5(1)(c), with respect to the representations and warranties referred to in any such Section, the Vendor shall be released on the date set out in Section 4.5(1)(b) or 4.5(1)(c) from all obligations in respect of representations and warranties referenced in those Sections and from the obligation to indemnify the Purchaser’s Indemnified Parties in respect thereof pursuant to Section 4.2(a). This Section 4.5(1) shall not be construed to impose any time limit on the Purchaser’s right to assert a claim to recover Damages under Sections 4.2(b) through (e), whether or not the basis on which such a claim is asserted could also entitle the Purchaser to make a claim for Damages pursuant to Section 4.2(a).

(2)          Notice by the Vendor. No Damages may be recovered from the Purchaser pursuant to Section 4.3(a) unless a Claim Notice is delivered by the Vendor on or before the date that is 24 months following the Closing Date. Unless a Claim Notice has been given on or before the date that is 24 months following the Closing Date in respect to each particular representation and warranty, the Purchaser shall be released on the date that is 24 months following the Closing Date from all obligations in respect of that particular representation and warranty and from the obligation to indemnify the Vendor’s Indemnified Parties in respect thereof pursuant to Section 4.3(a). This Section 4.5(2) shall not be construed to impose any time limit on the Vendor’s right to assert a claim to recover Damages under Section 4.3(b), whether or not the basis on which such a claim is asserted could also entitle the Vendor to make a claim for Damages pursuant to Section 4.3(a).

4.6          Calculation of Damages. For greater certainty, for the purpose only of calculating the amount of Damages under this Article 4, the representations and warranties of the Parties contained in this Agreement or in any other agreement, certificate or instrument executed and delivered pursuant to this Agreement shall be deemed to have been made without qualifications as to materiality where the words or phrases “material”, “immaterial”, “in all material respects” or words or phrases of similar import are used, such that the amount of Damages payable to an Indemnified Party is not subject to any deduction in respect of amounts below the level of materiality stated in the relevant representation and warranty. Further, the calculation of such amount shall not be affected by any inspection or inquiries made by or on behalf of the Party entitled to be indemnified under this Article 4.

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4.7          Agency for Non-Parties. Notwithstanding Section 5.21, each Party hereby accepts each indemnity in favour of each of its Indemnified Parties who are not Parties as agent and trustee of that Indemnified Party. Each Party may enforce an indemnity in favour of any of that Party’s Indemnified Parties on behalf of each such Indemnified Party.

4.8          Direct Claims. In the case of a Direct Claim, the Indemnifying Party shall have 60 days from receipt of a Claim Notice in respect thereof within which to make such investigation as the Indemnifying Party considers necessary or desirable. For the purpose of such investigation, the Indemnified Party shall make available to the Indemnifying Party the information relied upon by the Indemnified Party to substantiate its right to be indemnified under this Article 4, together with all such other information as the Indemnifying Party may reasonably request. If the Parties fail to agree at or before the expiration of such 60 day period (or any mutually agreed upon extension thereof), the Indemnified Party shall be free to pursue such remedies as may be available to it.

4.9          Third Party Claims.

(1)          Rights of Indemnifying Party. In the event a Claim Notice is delivered with respect to a Third Party Claim, the Indemnifying Party shall have the right, at its expense, to participate in but not control the negotiation, settlement or defence of the Third Party Claim, which control shall rest at all times with the Indemnified Party.

(2)          Other Rights of Indemnified Party. The Indemnified Party shall have the exclusive right to contest, settle or pay the amount claimed and the Indemnifying Party shall be bound by the results obtained by the Indemnified Party with respect to such Third Party Claim.

4.10       Interest on Damages. The amount of any Damages which is subject to indemnification hereunder shall bear interest from and including the date the Indemnified Party was notified of the claim for Damages at the Prime Rate calculated from and including such date to but excluding the date reimbursement of such Damages by the Indemnifying Party is made, compounded monthly, and the amount of such interest shall be deemed to be part of such Damages.

Article 5

GENERAL

5.1          Actions on Non-Business Days. If any payment is required to be made or other action (including the giving of notice) is required to be taken pursuant to this Agreement on a day which is not a Business Day, then such payment or action shall be considered to have been made or taken in compliance with this Agreement if made or taken on the next succeeding Business Day.

5.2          Currency and Payment Obligations. Except as otherwise expressly provided in this Agreement:

(a) all dollar amounts referred to in this Agreement are stated in Canadian Dollars; and
(b) any payment contemplated by this Agreement shall be made by cash, certified cheque or any other method that provides immediately available funds.

 

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5.3          Calculation of Interest. In calculating interest payable under this Agreement for any period of time, the first day of such period shall be included and the last day of such period shall be excluded.

5.4          Calculation of Time. In this Agreement, a period of days shall be deemed to begin on the first day after the event which began the period and to end at 5:00 p.m. Vancouver time on the last day of the period. If any period of time is to expire hereunder on any day that is not a Business Day, the period shall be deemed to expire at 5:00 p.m. Vancouver time on the next succeeding Business Day.

5.5          Schedules and Exhibits. The Schedules and Exhibits listed below and attached to this Agreement are incorporated herein by reference and deemed to be part of this Agreement.

Schedules

1.0 - Definitions and Interpretation

 

5.6          Expenses. Except as otherwise expressly provided herein, each Party shall be responsible for all costs and expenses (including any Taxes imposed on such expenses) incurred by it in connection with the negotiation, preparation, execution, delivery and performance of this Agreement and the Transaction (including the fees and disbursements of legal counsel, bankers, investment bankers, accountants, brokers and other advisers).

5.7          Payment of Taxes. Except as otherwise provided in this Agreement, the Purchaser shall pay all Taxes applicable to, or resulting from the Transaction (other than Taxes payable by the Vendor under Applicable Law) and any filing, registration, recording or transfer fees payable in connection with the instruments of transfer provided for in this Agreement.

5.8          Public Announcements. Except to the extent otherwise required by Applicable Law or with the prior consent of the other Party, neither Party shall make any public announcement regarding this Agreement or the Transaction.

5.9          Notices.

(1)          Mode of Giving Notice. Any notice, direction, certificate, consent, determination or other communication required or permitted to be given or made under this Agreement shall be in writing and shall be effectively given and made if (i) delivered personally, (ii) sent by prepaid courier service or mail, or (iii) sent by fax, e-mail (return receipt requested) or other similar means of electronic communication, in each case to the applicable address set out below:

(a) if to the Vendor, to:

Silver Bull Resources, Inc.

777 Dunsmuir Street, Suite 610

Vancouver, BC

V7Y 1K4

 

Attention: Timothy Barry

Email: Tbarry@silverbullresources.com

 

 

12 
 
 

with a copy (which shall not constitute notice) to:

Blake, Cassels & Graydon LLP

595 Burrard St.,

Suite 2600, Three Bentall Centre

Vancouver, BC,

V7X 1L3

 

Attention: Susan Tomaine

Email: susan.tomaine@blakes.com

 

(b) if to the Purchaser, to:

595 Burrard St.,

Suite 2600, Three Bentall Centre

Vancouver, BC,

V7X 1L3

 

Attention: Christopher Richards

Email: CRichards@silverbullresources.com

 

with a copy (which shall not constitute notice) to:

Blake, Cassels & Graydon LLP

595 Burrard St.,

Suite 2600, Three Bentall Centre

Vancouver, BC,

V7X 1L3

 

Attention: Susan Tomaine

Email: susan.tomaine@blakes.com

 

(2)          Deemed Delivery of Notice. Any such communication so given or made shall be deemed to have been given or made and to have been received on the day of delivery if delivered, or on the day of faxing, e-mailing or sending by other means of recorded electronic communication, provided that such day in either event is a Business Day and the communication is so delivered, faxed, e-mailed or sent before 4:30 p.m. on such day. Otherwise, such communication shall be deemed to have been given and made and to have been received on the next following Business Day. Any such communication sent by mail shall be deemed to have been given and made and to have been received on the fifth Business Day following the mailing thereof; provided, however, that no such communication shall be mailed during any actual or apprehended disruption of postal services. Any such communication given or made in any other manner shall be deemed to have been given or made and to have been received only upon actual receipt.

(3)          Change of Address. Any Party may from time to time change its address under this Section 5.9 by notice to the other Party given in the manner provided by this Section 5.9.

5.10       Time of Essence. Time shall be of the essence of this Agreement in all respects.

13 
 
 

 

5.11       Further Assurances. Each Party shall from time to time promptly execute and deliver or cause to be executed and delivered all such further documents and instruments and shall do or cause to be done all such further acts and things in connection with this Agreement that the other Party may reasonably require as being necessary or desirable in order to effectively carry out or better evidence or perfect the full intent and meaning of this Agreement or any provision hereof.

5.12       Co-operation in Filing of Tax Returns. The Purchaser agrees to provide to the Vendor all reasonable co-operation following the Closing Date in connection with the filing of Tax Returns of the Vendor in respect of which the books and records delivered to the Purchaser pursuant to this Agreement are relevant.

5.13       Entire Agreement. This Agreement constitutes the entire agreement between the Parties pertaining to the subject matter of this Agreement and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written. There are no conditions, representations, warranties, obligations or other agreements between the Parties in connection with the subject matter of this Agreement (whether oral or written, express or implied, statutory or otherwise) except as explicitly set out in this Agreement.

5.14       Amendment. No amendment of this Agreement shall be effective unless made in writing and signed by the Parties.

5.15       Waiver. A waiver of any default, breach or non-compliance under this Agreement shall not be effective unless in writing and signed by the Party to be bound by the waiver and then only in the specific instance and for the specific purpose for which it has been given. No waiver shall be inferred from or implied by any failure to act or delay in acting by a Party in respect of any default, breach or non-observance or by anything done or omitted to be done by the other Party. The waiver by a Party of any default, breach or non-compliance under this Agreement will not operate as a waiver of that Party’s rights under this Agreement in respect of any continuing or subsequent default, breach or non-observance (whether of the same or any other nature).

5.16       Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction will, as to that jurisdiction, be ineffective to the extent of such prohibition or unenforceability and will be severed from the balance of this Agreement, all without affecting the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.

5.17       Remedies Cumulative. The rights, remedies, powers and privileges herein provided to a Party are cumulative and in addition to and not exclusive of or in substitution for any rights, remedies, powers and privileges otherwise available to that Party.

5.18       Attornment. Each Party agrees (a) that any Legal Proceeding relating to this Agreement may (but need not) be brought in any court of competent jurisdiction in the Province of British Columbia, and for that purpose now irrevocably and unconditionally attorns and submits to the jurisdiction of such British Columbia court; (b) that it irrevocably waives any right to, and shall not, oppose any such Legal Proceeding in the Province of British Columbia on any jurisdictional basis, including forum non conveniens; and (c) not to oppose the enforcement against it in any other jurisdiction of any Order duly obtained from an British Columbia court as contemplated by this Section 5.18.

14 
 
 

 

5.19       Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Province of British Columbia the laws of Canada applicable in such Province and this Agreement shall be treated, in all respects, as a British Columbia contract.

5.20       Successors and Assigns; Assignment. This Agreement shall enure to the benefit of, and be binding on, the Parties and their respective successors and permitted assigns. Neither Party may assign or transfer, whether absolutely, by way of security or otherwise, all or any part of its respective rights or obligations under this Agreement without the prior written consent of the other Party.

5.21       Third Party Beneficiaries. This Agreement is for the sole benefit of the Parties, and except as specifically provided for in Section 4.7, nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

5.22       Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original and both of which taken together shall be deemed to constitute one and the same instrument. To evidence its execution of an original counterpart of this Agreement, a Party may send a copy of its original signature on the execution page hereof to the other Party by facsimile, e-mail in pdf format or by other electronic transmission and such transmission shall constitute delivery of an executed copy of this Agreement to the receiving Party.

5.23       Language. The Parties have required that this Agreement and all deeds, documents and notices relating to this Agreement be drawn up in the English language. Les parties aux présentes ont exigé que le présent contrat et tous autres contrats, documents ou avis afférents aux présentes soient rédigés en langue anglaise.

IN WITNESS WHEREOF the Parties have executed this Agreement as of the date first above written.

SILVER BULL RESOURCES, INC.
By: /s/ Timothy Barry
  Name:  Timothy Barry
  Title:  President & CEO
   
   
   
ARRAS MINERALS CORP.
By: /s/ Brian Edgar
  Name: Brian Edgar
  Title: Director

 

 

 

 

15 
 
 

SCHEDULE 1.0
DEFINITIONS AND INTERPRETATION

1. Definitions.

“Affiliate” means, with respect to any Person, any other Person who directly or indirectly controls, is controlled by, or is under direct or indirect common control with, such Person, and includes any Person in like relation to an Affiliate. A Person shall be deemed to “control” another Person if such Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such other Person, whether through the ownership of voting securities, by contract or otherwise; and the term “controlled” shall have a similar meaning.

“Agreement” means the Asset Purchase Agreement to which this Schedule 1.0 is attached, together with all Schedules attached thereto.

“Applicable Law” means, with respect to any Person, property, transaction, event or other matter, (a) any foreign or domestic constitution, treaty, law, statute, regulation, code, ordinance, principle of common law or equity, rule, municipal by-law, Order or other requirement having the force of law, (b) any policy, practice, protocol, standard or guideline of any Governmental Authority which, although not necessarily having the force of law, is regarded by such Governmental Authority as requiring compliance as if it had the force of law (collectively, in the foregoing clauses (a) and (b), “Law”) in each case relating or applicable to such Person, property, transaction, event or other matter and also includes, where appropriate, any interpretation of Law (or any part thereof) by any Person having jurisdiction over it, or charged with its administration or interpretation.

“Assumed Liabilities” has the meaning set out in Section 1.2.

“Business Day” means any day except Saturday, Sunday or any day on which banks are generally not open for business in the City of Vancouver.

“Canadian Dollars” means the lawful currency of Canada.

“Claim Notice” has the meaning set out in Section 4.4.

“Closing” means the completion of the purchase and sale of the Purchased Assets in accordance with the provisions of this Agreement.

“Closing Date” means March __, 2021 or such earlier or later date as may be agreed to in writing by the Parties.

“Closing Time” means the time of Closing on the Closing Date provided for in Section 3.1.

“Consent” means any consent, approval, permit, waiver, ruling, exemption or acknowledgement from any Person (other than the Vendor) which is provided for or required: (a) pursuant to the terms of any lease or other contract of the Vendor; or (b) under any Applicable Law, in either case in connection with the sale of the Purchased Assets to the Purchaser on the terms contemplated in this Agreement, to permit the Purchaser to use the Purchased Assets after Closing, or which is otherwise necessary to permit the Parties to perform their obligations under this Agreement.

 

 
 
 

 

“Damages” means, whether or not involving a Third Party Claim, any loss, cost, liability, claim, interest, fine, penalty, assessment, Taxes, damages available at law or in equity (including incidental, consequential, special, aggravated, exemplary or punitive damages), expense (including consultant’s and expert’s fees and expenses and reasonable costs, fees and expenses of legal counsel on a full indemnity basis, without reduction for tariff rates or similar reductions and reasonable costs, fees and expenses of investigation, defence or settlement) or diminution in value.

“Direct Claim” has the meaning set out in Section 4.4.

“Environmental Law” means Applicable Law in respect of the protection of the natural environment or any species or organisms that make use of it, public or occupational health or safety or the manufacture, importation, handling, transportation, storage, disposal and treatment of Hazardous Substances.

“Governmental Authority” means:

(a) any domestic or foreign government, whether national, federal, provincial, state, territorial, municipal or local (whether administrative, legislative, executive or otherwise);
(b) any agency, authority, ministry, department, regulatory body, court, central bank, bureau, board or other instrumentality having legislative, judicial, taxing, regulatory, prosecutorial or administrative powers or functions of, or pertaining to, government;
(c) any court, tribunal, commission, individual, arbitrator, arbitration panel or other body having adjudicative, regulatory, judicial, quasi-judicial, administrative or similar functions; and
(d) any other body or entity created under the authority of or otherwise subject to the jurisdiction of any of the foregoing, including any stock or other securities exchange or professional association.

“GST/HST” means all goods and services tax and harmonized sales tax imposed under Part IX of the Excise Tax Act (Canada).

“Hazardous Substance” means any solid, liquid, gas, odour, heat, sound, vibration, radiation or combination of them that may impair the natural environment, injure or damage property or plant or animal life or harm or impair the health of any individual and includes any contaminant, waste or substance or material defined, prohibited, regulated or reportable pursuant to any Environmental Law.

“Indemnified Party” means a Person whom the Vendor or the Purchaser, as the case may be, is required to indemnify under Article 4.

 
 
 

 

“Indemnifying Party” means, in relation to an Indemnified Party, the Party that is required to indemnify such Indemnified Party under Article 4.

“ITA” means the Income Tax Act, R.S.C. 1985, c.1 (5th Supplement).

“Law” has the meaning set out in the definition of “Applicable Law”.

“Legal Proceeding” means any litigation, action, application, suit, investigation, hearing, claim, complaint, deemed complaint, grievance, civil, administrative, regulatory or criminal, arbitration proceeding or other similar proceeding, before or by any Governmental Authority, and includes any appeal or review thereof and any application for leave for appeal or review.

“Liability” means, with respect to any Person, any liability or obligation of such Person of any kind, character or description, whether known or unknown, absolute or contingent, accrued or unaccrued, disputed or undisputed, liquidated or unliquidated, secured or unsecured, joint or several, due or to become due, vested or unvested, executory, determined, determinable or otherwise, and whether or not the same is required to be accrued on the financial statements of such Person.

“Order” means any order, directive, judgment, decree, injunction, decision, ruling, award or writ of any Governmental Authority.

“Party” means a party to this Agreement and any reference to a Party includes its successors and permitted assigns and “Parties” means every Party.

“Person” is to be broadly interpreted and includes an individual, a corporation, a partnership, a trust, an unincorporated organization, a Governmental Authority, and the executors, administrators or other legal representatives of an individual in such capacity.

“Prime Rate” means the prime rate of interest per annum quoted by the Canadian Imperial Bank of Commerce from time to time as its reference rate of interest for Canadian dollar demand loans made to its commercial customers in Canada and which the Canadian Imperial Bank of Commerce refers to as its “prime rate”, as such rate may be changed from time to time.

“Purchase Price” has the meaning set out in Section 1.3.

“Purchased Assets” has the meaning set forth in the Recitals to this Agreement.

“Purchaser” has the meaning set out in the preamble to the Agreement.

“Purchaser’s Counsel” means Blake, Cassels & Graydon LLP.

“Purchaser’s Indemnified Parties” means the Purchaser and the Purchaser’s Affiliates and their respective Representatives.

“Representative” when used with respect to a Person means each director, officer, employee, consultant, financial adviser, legal counsel, accountant and other agent, adviser or representative of that Person.

“Retained Liabilities” means all Liabilities of the Vendor other than the Assumed Liabilities.

 
 
 

 

“Tax Returns” means all returns, information returns, reports, declarations, elections, notices, filings and statements in respect of Taxes that are required to be filed with any applicable Governmental Authority, including all amendments, schedules, attachments or supplements thereto and whether in tangible or electronic form.

“Taxes” means, with respect to any Person, all supranational, national, federal, provincial, state, local or other taxes, including income taxes, branch taxes, profits taxes, capital gains taxes, gross receipts taxes, windfall profits taxes, value added taxes, severance taxes, ad valorem taxes, property taxes, capital taxes, net worth taxes, production taxes, sales taxes, use taxes, licence taxes, excise taxes, franchise taxes, environmental taxes, transfer taxes, withholding or similar taxes, payroll taxes, employment taxes, employer health taxes, pension plan premiums and contributions, social security premiums, workers’ compensation premiums, employment insurance or compensation premiums, stamp taxes, occupation taxes, premium taxes, alternative or add-on minimum taxes, GST/HST, sales taxes, customs duties or other taxes of any kind whatsoever imposed or charged by any Governmental Authority, together with any interest, penalties, or additions with respect thereto and any interest in respect of such additions or penalties.

“Third Party Claim” has the meaning set out in Section 4.4.

“Threatened”, when used in relation to a Legal Proceeding or other matter, means that a demand or statement (oral or written) has been made or a notice (oral or written) has been given that a Legal Proceeding or other matter is to be asserted, commenced, taken or otherwise pursued in the future.

“Vendor” has the meaning set out in the preamble to the Agreement.

“Vendor’s Indemnified Parties” means the Vendor, the Vendor’s Affiliates and their Representatives.

2. Additional Rules of Interpretation.

(1)          Gender and Number. In this Agreement, unless the context requires otherwise, words in one gender include all genders and words in the singular include the plural and vice versa.

(2)          Headings and Table of Contents. The inclusion in this Agreement of headings of Articles and Sections and the provision of a table of contents are for convenience of reference only and are not intended to be full or precise descriptions of the text to which they refer.

(3)          Section References. Unless the context requires otherwise, references in this Agreement to Articles, Sections or Schedules are to Articles or Sections of this Agreement, and Schedules to this Agreement.

(4)          Words of Inclusion. Wherever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation” and the words following “include”, “includes” or “including” shall not be considered to set forth an exhaustive list.

 
 
 

 

(5)          References to this Agreement. The words “hereof”, “herein”, “hereto”, “hereunder”, “hereby” and similar expressions shall be construed as referring to this Agreement in its entirety and not to any particular Section or portion of it.

(6)          Statute References. Unless otherwise indicated, all references in this Agreement to any statute include the regulations thereunder, in each case as amended, re-enacted, consolidated or replaced from time to time and in the case of any such amendment, re-enactment, consolidation or replacement, reference herein to a particular provision shall be read as referring to such amended, re-enacted, consolidated or replaced provision and also include, unless the context otherwise requires, all applicable guidelines, bulletins or policies made in connection therewith.

(7)          Document References. All references herein to any agreement (including this Agreement), document or instrument mean such agreement, document or instrument as amended, supplemented, modified, varied, restated or replaced from time to time in accordance with the terms thereof and, unless otherwise specified therein, includes all schedules and exhibits attached thereto.

(8)          Knowledge. Where any representation, warranty or other statement in this Agreement is expressed to be made by the Vendor to its knowledge or is otherwise expressed to be limited in scope to facts or matters known to the Vendor or of which the Vendor is aware, it shall mean such knowledge as is actually known to, or which would have or should have come to the attention of, the officers or employees of the Vendor who have overall responsibility for or knowledge of the matters relevant to such statement.

 

Exhibit 4.9

 

 

 


ARRAS MINERALS CORP.

 

PRIVATE PLACEMENT SUBSCRIPTION AGREEMENT

 

INSTRUCTIONS TO PURCHASERS

 

HAVE YOU COMPLETED THIS SUBSCRIPTION AGREEMENT PROPERLY?

The following items in this Subscription Agreement must be completed.
(Please initial each box.)

All Purchasers
o All Purchasers must complete all the information in the boxes on pages 3 to 4 and sign where indicated . The purpose of the form is to determine whether you meet the standards for participation in a private placement under NI 45-106 (as defined herein).

 

Canadian Purchasers

 

All Purchasers resident in Canada must complete either Schedule “A” or Schedule “B”

 

 

Schedule A - “Accredited Investors”

o All Purchasers resident in Canada purchasing as “Accredited Investors” must complete and sign the Accredited Investor Certificate for All Accredited Investors attached hereto as Schedule “A”.
o Purchasers relying on exemption (j) (k) or (l) of the Accredited Investor Certificate for All Accredited Investors, must also complete and sign the Individual Accredited Investor Risk Acknowledgement Form attached hereto as Appendix “1” to Schedule “A”.
   
Schedule B - “Family, Friends and Business Associates”
o Purchasers resident in Canada purchasing as "Family, Friends and Business Associates" must complete Schedule B - Qualified Investor Certificate on pages B-1 to B-2 including, if resident in Ontario, Appendix 1 to Schedule B or if resident in Saskatchewan, Appendix 2 to Schedule "B".
   

 

 

U.S. Purchasers
o All Purchasers resident of or otherwise subject to the securities laws of the United States (as defined herein) must complete and sign the Accredited Investor Certificate for All Accredited Investors attached hereto as Schedule ”A”.
o All Purchasers resident of or otherwise subject to the securities laws of the United States (as defined herein), must also complete and sign the United States Accredited Investor Certificate attached hereto as Schedule “C”. The purpose of the form is to determine whether you meet the standards for participation in a private placement under the U.S. Securities Act (as defined herein).

Please return this executed Subscription Agreement and all applicable Schedules together with payment as described herein to the Company as follows:

Arras Minerals Corp.

777 Dunsmuir Street, Suite 1610

Vancouver, B.C. V7Y 1K4

Attention: Christopher Richards, Chief Financial Officer

Email: crichards@silverbullresources.com.

 

 
 
 

 

 

 

SUBSCRIPTION AGREEMENT

(Canada, United States and Offshore Purchasers)

TO: ARRAS MINERALS CORP.

The undersigned (referred to herein as the “Purchaser”), hereby irrevocably subscribes to purchase from Arras Minerals Corp. (the “Company”) the number of common shares (the “Purchased Shares”) set out below for a subscription price of $0.50 per Common Share (the “Offering”).

This subscription plus the attached terms and conditions (the “Terms and Conditions”), completed and executed Subscriber Certificates (as defined in the Terms and Conditions) and the appendices attached hereto and thereto, are collectively referred to as the “Subscription Agreement”. The Purchaser agrees to be bound by the Terms and Conditions and agrees that the Company may rely upon the covenants, representations and warranties of the Purchaser contained in the Subscription Agreement.

Number of Purchased Shares:   Aggregate Subscription Amount:

Name and Address of Purchaser:

 

  Registration Instructions (if different):

________________________________________________

Name of Purchaser (please print)

 

________________________________________________

Name

     
By: __________________________________________Authorized Signature  

________________________________________________

Account Reference, if applicable

 

________________________________________________

Official Capacity or Title (please print)

 


________________________________________________

 

   

________________________________________________

 

________________________________________________

(Please print name of signatory if different from the name of the Purchaser printed above.)

 

________________________________________________

Address, including postal code

     

 

Purchaser’s Address, including province:

 

 

Delivery Instructions (if different):

     

________________________________________________

 

 

________________________________________________

Name

 

 

 

 

________________________________________________

Account Reference, if applicable

Telephone Number: ____________________________  

 

________________________________________________

 

Fax Number: __________________________________  

________________________________________________

 

E-mail Address: _______________________________  

________________________________________________

Address, including postal code

   

________________________________________________

Telephone Number

               

2 
 
 

 

Beneficial Purchaser Information (if applicable)

Name and Address of beneficial purchaser (“Beneficial Purchaser”) (if not the same as Purchaser):

 

____________________________________________

(Name of Beneficial Purchaser)

 

____________________________________________

(Beneficial Purchaser’s Residential Address)

 

____________________________________________

 

____________________________________________

(Beneficial Purchaser’s Telephone Number)

 

 

 

Present Ownership of Securities

The Purchaser either [check appropriate box]:

☐ owns, directly or indirectly, or exercises control or direction over, no Common Shares or securities convertible into Common Shares; or

☐ owns, directly or indirectly, or exercises control or direction over,                Common Shares and convertible securities entitling the Purchaser to acquire an additional                             Common Shares.

 

Insider Status

The Purchaser either [check appropriate box]:

☐ is an “Insider” of the Company as defined in the applicable Canadian securities law, namely:

(a)          a director or an officer of the Company;

(b)          a director or an officer of a person that is itself an insider or subsidiary of the Company;

(c)           a person that has

(i)    direct or indirect beneficial ownership of;

(ii)   control or direction over; or

(iii)  a combination of direct or indirect beneficial ownership of and of control or direction over

securities of the Company carrying more than 10% of the voting rights attached to all the Company’s outstanding voting securities, excluding, for the purpose of the calculation of the percentage held, any securities held by the person as underwriter in the course of a distribution; or

(d)           the Company itself, if it has purchased, redeemed or otherwise acquired any securities of its own issue, for so long as it continues to hold those securities; or

☐ is not an Insider of the Company.

 

Registrant Status

The Purchaser either [check appropriate box]:

☐ is a “registrant” as defined under applicable Canadian securities law: “registrant” means a person registered or required to be registered under applicable Canadian securities law, or

☐ is not a “registrant”.

 

3 
 
 

 

INSTRUCTIONS FOR PURCHASERS

The Purchaser must:

(1) Read this Subscription Agreement;

(2) Complete and execute pages 3-4 of this Subscription Agreement;

(3) Each Purchaser must read, complete and sign the applicable Schedules to this Subscription Agreement;

(4) Make payment for the Purchased Shares as required by Section 2 of the Terms and Conditions; and

(5) Deliver the signed documents as required by Section 3 of the Terms and Conditions.

ACCEPTANCE: The Company hereby accepts the above subscription subject to the Terms and Conditions of this Subscription Agreement.

DATED this _____ day of _________________, 2021

ARRAS MINERALS CORP.

 

Per: ________________________________________

Name: Christopher Richards
Title: Chief Financial Officer

   

 

 

 

4 
 
 

SUBSCRIPTION AGREEMENT

TERMS AND CONDITIONS

1. Acceptance
1.1 The Company may, in its sole discretion, accept or reject this Subscription Agreement in whole or in part at any time prior to the Closing Time (as defined herein) and the Company has the right to allot to any Purchaser less than the amount of Purchased Shares subscribed for.
1.2 The Company shall forward to the Purchaser confirmation of acceptance or rejection of this Subscription Agreement promptly after the acceptance or rejection of this Subscription Agreement by the Company. If this Subscription Agreement is rejected in whole, the Purchaser understands that any funds, certified cheques and bank drafts delivered by the Purchaser to the Company representing the purchase price for the Purchased Shares will be promptly returned to the Purchaser without interest. If this Subscription Agreement is accepted only in part, the Purchaser understands that a cheque representing the portion of the purchase price for that portion of its subscription for the Purchased Shares that is not accepted will be promptly delivered to the Purchaser without interest.
2. Payment

The Purchaser shall deliver the aggregate amount payable in respect of the Purchased Shares subscribed for hereby to the Company, as soon as possible and in any event no later than 4:00 p.m. (Vancouver time) on the Business Day (as defined herein) immediately preceding the Closing Date (as defined herein), by certified cheque or bank draft drawn on a Canadian chartered bank or trust company in Canadian dollars and payable in immediately available funds to “Arras Minerals Corp.” or by wire transfer (which subscription amount shall include any wire transfer fee payable or payable in such other manner as may be specified by the Company) or by any other manner acceptable to the Company.

The wire transfer instructions are as follows:

Beneficiary bank:

Beneficiary bank address:

 

Transit:

Institution:

SWIFT Code:

For credit to:

 

 

Beneficiary Account:

Canadian Clearing Code:

XXXXXXXXXXX

XXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXXXXXXXXXXXXX

XXXXXX

XXX

XXXXXXXXXXXX

XXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXXXXXXXX

XXXXXXX

XXXXXXXXXXX

 

3. Additional Deliveries and Conditions for Acceptance
3.1 The Purchaser acknowledges that the Company’s obligation to sell the Purchased Shares to the Purchaser is subject to, among other things, the conditions that the Purchaser shall complete, sign and return to the Company, Christopher Richards, Chief Financial Officer as soon as possible and in any event no later than 4:00 pm (Vancouver time) on the date that is two Business Days immediately preceding the Closing Date:
(a) one completed and executed copy of this Subscription Agreement;
(b) if the Purchaser is resident in Canada, either:
(i) if the Purchaser is purchasing as an “accredited investor”, one completed and executed copy of the “Accredited Investor Certificate for All Accredited Investors” in the form attached hereto as Schedule “A” (the “Accredited Investor Certificate for All Accredited Investors”) and if applicable, the Individual Accredited Investor Risk Acknowledgement Form for Accredited Investors who are Individuals attached hereto as Appendix “1” to Schedule “A”; or

 

5 
 
 

(ii) if the Purchaser is purchasing as purchasing as “family, friends and business associates”, one completed and executed copy of the “Qualified Investor Certificate” in the form attached hereto as Schedule “B” (the “Qualified Investor Certificate”) including, if resident in Ontario, Appendix 1 to Schedule “B” or if resident in Saskatchewan, Appendix 2 to Schedule “B”;
(c) if the Purchaser is a U.S. Purchaser, one completed and executed copy of the Accredited Investor Certificate for All Accredited Investors and one completed and executed copy of the “United States Accredited Investor Certificate” attached hereto as Schedule “C” (together with the Accredited Investor Certificate for All Accredited Investors and the Qualified Investor Certificate, the “Subscriber Certificates”); and
(d) any other document required by applicable Securities Laws (as defined herein) which the Company requests.

The Purchaser acknowledges and agrees that such documents, when executed and delivered by the Purchaser, will form part of and will be incorporated into this Subscription Agreement with the same effect as if each constituted a representation and warranty or covenant of the Purchaser hereunder in favour of the Company. The Purchaser acknowledges and agrees that this offer, the purchase price and any other documents delivered in connection herewith will be held by the Company until such time as the conditions set out in this Subscription Agreement are satisfied.

 

3.2 Any obligation of the Company to sell the Purchased Shares to the Purchaser is subject to (a) performance by the Purchaser of, or compliance by the Purchaser with, its covenants, agreements and conditions under and in accordance with this Subscription Agreement, prior to the Closing (as defined herein); (b) the truth and correctness, at the time of acceptance and at the Closing Date, of the Purchaser’s representations and warranties in this Subscription Agreement (including the representations and warranties made in any Appendix or Schedule hereto, as applicable); (c) the sale of the Purchased Shares to the Purchaser being exempt from the requirement to file a prospectus or registration statement and the requirement to prepare and deliver an offering memorandum or similar document under applicable Securities Laws; (d) the Company having obtained all required regulatory approvals to permit the completion of such sale, prior to the Closing; and (e) the Purchaser executing and delivering all requisite documentation as required by this Subscription Agreement, the applicable Securities Laws (including but not limited to the Subscriber Certificates, and all appendices attached thereto, with respect to the Purchased Shares).
3.3 The Purchaser understands that the information provided herein will be relied upon by the Company for purposes of determining the eligibility of the Purchaser to purchase the Purchased Shares. The Purchaser agrees to provide upon request any additional information that the Company determines necessary or appropriate in determining the Purchaser’s eligibility to purchase such Purchased Shares.
3.4 For the purposes hereof;
(a) “Business Day” means any day except Saturday, Sunday or a statutory holiday in Vancouver, British Columbia, Canada;
(b) “Securities Laws” means any and all securities laws including, statutes, rules, regulations, instruments, by-laws, policies, guidelines, orders, decisions, rulings and awards, applicable in the jurisdictions in which the Purchased Shares will be offered, sold and issued;

 

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(c) “U.S. Person” has the meaning ascribed to such term in Rule 902(k) of Regulation S promulgated under the U.S. Securities Act (as defined herein), which definition includes, but is not limited to, an individual resident in the United States, an estate or trust of which any executor or administrator or trustee is a U.S. Person, and any partnership or corporation organized or incorporated under the laws of the United States; and
(d) “U.S. Purchaser” means any Purchaser who is a U.S. Person, a person in the United States or a person purchasing the Purchased Shares for the account or for the benefit of a U.S. Person or a person in the United States, or a person who is otherwise subject to the securities laws of the United States.
4. Closing
4.1 Closing of this subscription for the Purchased Shares (the “Closing”) will be completed at the offices of Blake, Cassels & Graydon LLP, counsel to the Company, at Suite 2600, 595 Burrard Street, Vancouver, B.C., V7X 1L3, at 11:00 a.m. (Vancouver time) (the “Closing Time”) on Wednesday, March 31, 2021 (the “Closing Date”), or at such other places, times and dates as may be determined by the Company, and may occur in one or more tranches.
4.2 If the Closing does not occur on or before Friday, April 30, 2021 the Company shall return this Subscription Agreement and any funds, certified cheques and bank drafts delivered by the Purchaser to the Company representing the purchase price for the Purchased Shares, without interest, to the Purchaser.
4.3 The Purchaser acknowledges that the Offering may close in one or more tranches in one or more Closings.
5.4 The Purchaser appoints the Company, with full power of substitution, as his, her or its true and lawful attorney and agent with full power and authority in its place and stead to:
(a) act as the Purchaser’s representative at the Closing and to swear, execute, file and record in the Purchaser’s name on the Purchaser’s behalf any document necessary to accept delivery of the Purchased Shares on the Closing Date;
(a) approve any documents addressed to the Purchaser;

(b) waive, in whole or in part, any representations, warranties, covenants or conditions for the benefit of the Purchaser;
(c) complete or correct any errors or omissions in this Subscription Agreement on behalf of the Purchaser; and
(d) receive, on the Purchaser’s behalf, any certificates representing the Purchased Shares subscribed for hereunder.
5. Representations, Warranties and Covenants of the Purchaser

By executing this Subscription Agreement, the Purchaser, on its behalf, and if applicable, on behalf of a Beneficial Purchaser, represents, warrants and covenants to the Company and acknowledges that the Company is relying thereon that:

 

(a) the Purchaser understands that the Purchased Shares subscribed for by the Purchaser hereunder form part of a larger Offering by the Company, upon and are subject to the terms and conditions set forth herein;
(b) the Purchaser acknowledges that the Company may complete additional financings at prices, on terms and in amounts as may be determined by the Company, from time to time in the future, and that any such future financings may have a dilutive effect on current securityholders and the Purchaser, but there is no assurance that such financings will be available on reasonable terms or at all;

 

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(c) the Purchaser understands that the Offering is not subject to any minimum aggregate subscription amount, and the Company may close the Offering for less than the maximum aggregate amount indicated or may increase the size of the Offering;
(d) the Purchaser is aware that the offer made by this subscription is irrevocable and requires acceptance by the Company and will not become an agreement between the Purchaser and the Company until accepted by the Company signing in the space above;
(e) the Purchaser has completed, executed and delivered as principal, the Subscriber Certificates, as applicable, and the appendices attached thereto, as necessary;
(f) the Purchaser acknowledges that the Purchased Shares are being offered for sale only on a “private placement” basis;
(g) the Purchaser is aware of the characteristics of the Purchased Shares and the risks relating to an investment therein and agrees that the Purchaser must bear, and is able to bear, the economic risk of his, her or its investment in the Purchased Shares. The Purchaser has been advised to consult his, her or its own legal advisors with respect to the hold periods imposed by the applicable Securities Laws or other resale restrictions applicable to such securities. The Purchaser understands that he, she or it will not be able to resell any of the Purchased Shares until the expiry of the applicable hold period under applicable Securities Laws, except in accordance with limited exemptions and compliance with other requirements of applicable Securities Laws, and the Purchaser (and not the Company) is responsible for compliance with applicable resale restrictions or hold periods and will comply with all relevant Securities Laws in connection with any resale of the Purchased Shares;
(h) the Purchaser acknowledges and agrees with the Company that the Purchaser’s ability to transfer the Purchased Shares is limited by, among other things, applicable Securities Laws. In particular, the Purchaser acknowledges having been informed that the Purchased Shares are subject to resale restrictions under National Instrument 45-102 – Resale of Securities (“NI 45-102”) and may not be sold or otherwise disposed of for a period of four months and one day from the later of: (i) the date of distribution of the Purchased Shares; and (ii) the date the Company became a reporting issuer in any province or territory, unless a statutory exemption is available or a discretionary order is obtained under applicable Securities Laws allowing the earlier resale thereof, and may be subject to additional resale restrictions if such sale or other disposition would be a “control distribution” as that term is defined in NI 45-102 or otherwise. If the Purchaser is not resident in Canada, additional resale restrictions may apply;
(i) the Purchaser acknowledges that there is no market for the Purchased Shares. The Purchaser has been advised to consult the Purchaser’s own legal advisors with respect to the merits and risks of an investment in the Purchased Shares and with respect to applicable resale restrictions, and the Purchaser further acknowledges that the Company’s legal counsel are acting solely as counsel to the Company and not as counsel to the Purchaser;
(j) the Purchaser has such knowledge or experience in financial and business affairs as to be capable of evaluating the merits and risks of the Purchaser’s proposed investment in the Purchased Shares, and the Purchaser or, if applicable, any Beneficial Purchaser for whom the Purchaser is subscribing for the Purchased Shares, is able to bear the economic risks of the investment in the Purchased Shares;
(k) the Purchaser has had access to such information, if any, concerning the Company, as the Purchaser considers necessary with its investment decision to invest in the Purchased Shares, including receiving satisfactory answers to any questions the Purchaser asked the management of the Company;

 

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(l) the Purchaser will execute and deliver within the applicable time periods all documentation as may be required by applicable Securities Laws to permit the purchase of the Purchased Shares on the terms set forth herein and, if required by applicable Securities Laws or stock exchange rules, the Purchaser will execute, deliver and file or assist the Company in obtaining and filing such reports, undertakings and other documents relating to the purchase of the Purchased Shares by the Purchaser as may be required by any applicable Securities Laws, securities commission, stock exchange or other regulatory authority;
(m) the Purchaser acknowledges that it has been advised to consult its own legal advisors with respect to applicable resale and transfer restrictions, that it is solely responsible for complying with such restrictions and it agrees to comply with the restrictions referred to in paragraph (s) above and all other applicable resale and transfer restrictions. The Purchaser will comply with all applicable Securities Laws concerning the subscription, purchase, holding and resale of the Purchased Shares and will not resell any of the Purchased Shares except in accordance with the provisions of applicable Securities Laws. In this regard, the Subscriber acknowledges that any certificates representing the Purchased Shares will contain the following legend:

“UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS 4 MONTHS AND A DAY AFTER THE LATER OF (I) [INSERT THE DISTRIBUTION DATE], AND (II) THE DATE THE IS ISSUER BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY.

(n) the Purchaser acknowledges and agrees with the Company that the Toronto Stock Exchange (“TSX”) or the TSX Venture Exchange (“TSXV”) may require escrow requirements and resale restrictions on the Purchased Shares and agrees to promptly execute and deliver all documentation and agreements as may be required by the TSX or TSXV;
(o) if the Purchaser is an individual, he or she has attained the age of majority in the jurisdiction in which he or she is resident and is legally competent to execute this Subscription Agreement and to take all actions required pursuant hereto;
(p) if the Purchaser is a corporation, partnership, unincorporated association or other entity, the Purchaser has the legal capacity and competence to execute this Subscription Agreement and to take all actions required pursuant hereto and the individual signing this Subscription Agreement has been duly authorized to execute and deliver this Subscription Agreement;
(q) if the Purchaser is not an individual, the Purchaser has not been created solely or primarily to use exemptions from the registration and prospectus exemptions under applicable Securities Laws and has a pre-existing purpose other than to use such exemptions;
(r) the execution and delivery of this Subscription Agreement and the performance and compliance with the terms hereof will not result in any breach of, or be in conflict with, or constitute a default under, or create a state of facts which after notice or lapse of time or both, would constitute a default under, any term or provision of any constating documents, by-laws or resolutions of the Purchaser or any indenture, contract, agreement (whether written or oral), instrument or other document to which the Purchaser is a party or subject, or any judgment, decree, order, statute, rule or regulation applicable to the Purchaser;

 

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(s) this Subscription Agreement has been duly and validly authorized, executed and delivered by, and upon acceptance by the Company constitutes a legal, valid, binding and enforceable obligation of, the Purchaser and, if the Purchaser is signing this Subscription Agreement on behalf of a Beneficial Purchaser, also against such Beneficial Purchaser, in each case in accordance with the terms hereof;
(t) if the Purchaser is contracting hereunder as trustee, agent, representative or nominee for one or more Beneficial Purchasers, the Purchaser has due and proper authority to execute and deliver this Subscription Agreement and all other necessary documentation on behalf of each such Beneficial Purchaser and to act on behalf of each such Beneficial Purchaser in connection with the transactions contemplated hereby and acknowledges that the Company may be required by law to disclose to certain regulatory authorities the identity of each Beneficial Purchaser of Purchased Shares for whom the Purchaser may be acting;
(u) the Purchaser has not received, nor has the Purchaser requested, nor does the Purchaser have any need to receive, any prospectus, sales or advertising literature, offering memorandum or any other document describing or purporting to describe the business and affairs of the Company which has been prepared for delivery to, and review by, prospective purchasers in order to assist them in making an investment decision in respect of the Purchased Shares pursuant to the Offering;
(v) the Purchaser has relied only upon publicly available information relating to the Company and not upon any verbal or written representation as to fact, and the Purchaser acknowledges that the Company has not made any written representations, warranties or covenants in respect of such publicly available information except as set forth in this Subscription Agreement. Without limiting the generality of the foregoing, except as may be provided herein, no person has made any written or oral representation to the Purchaser that any person will resell or repurchase the Purchased Shares, or refund any of the purchase price of the Purchased Shares, or that the Purchased Shares will be listed on any exchange or quoted on any quotation and trade reporting system, or that application has been or will be made to list the Purchased Shares on any exchange or quote the Purchased Shares on any quotation and trade reporting system, and no person has given any undertaking to the Purchaser relating to the future value or price of the Purchased Shares;
(w) the Purchaser represents and warrants that the Purchaser is not acquiring the Purchased Shares as a result of being aware of any material information about the affairs of the Company that has not been publicly disclosed, including knowledge of a “material fact” or a “material change” (as those terms are defined in applicable Securities Laws) about the affairs of the Company;
(x) the Purchaser represents and warrants that the Purchaser did not become aware of the offering and sale of the Purchased Shares as a result of, nor has it seen, any form of general solicitation or general advertising, including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or broadcast over radio, television or the internet or any seminar or meeting whose attendees have been invited by general solicitation or general advertising;
(y) if the Purchaser has not completed Schedule “C”, the Purchaser, whether acting as principal, trustee or agent, is neither (i) a “U.S. Person” (as defined in Rule 902(k) of Regulation S promulgated under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”)), which definition includes, but is not limited to, an individual resident in the United States, an estate or trust of which any executor or administrator or trustee is a U.S. Person and any partnership or corporation organized or incorporated under the laws of the United States, nor (ii) purchasing the Purchased Shares for the account of a U.S. Person or a person in the United States or for resale in the United States, and the Purchased Shares have not been offered to the Purchaser in the United States and the Purchaser was not in the United States when the order was placed or when this Subscription Agreement was executed and delivered;
(z) the Purchaser agrees that it is solely responsible for obtaining such legal, tax, investment and other professional advice as the Purchaser considers appropriate in connection with the execution, delivery and performance of this Subscription Agreement and the transactions contemplated hereunder (including the resale and transfer restrictions referred to herein);

 

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(aa) unless the Purchaser is a U.S. Purchaser, the Purchaser is neither (i) a U.S. Person nor (ii) purchasing the Purchased Shares for the account or benefit of a U.S. Person or a person in the United States or for resale in the United States, and the Purchased Shares have not been offered to the Purchaser in the United States and the Purchaser was not in the United States when the order was placed or when this Subscription Agreement was executed and delivered;
(bb) the Purchaser will not offer or sell the Purchased Shares in the United States or to a U.S. Person, unless such securities are registered under the U.S. Securities Act and the laws of all applicable states of the United States or an exemption from such registration requirements is available, and further that the Purchaser will not resell the Purchased Shares, except in accordance with the provisions of applicable Securities Laws;
(cc) the Purchaser is entitled under applicable Securities Laws to purchase the Purchased Shares without the benefit of a prospectus qualified under such Securities Laws;
(dd) the Purchaser is resident, or if not an individual has its head office in the jurisdiction set forth on the face page hereof as the “Purchaser’s Address”, and such address was not obtained or used solely for the purpose of acquiring the Purchased Shares;
(ee) the Purchaser is purchasing the Purchased Shares with the benefit of the prospectus exemption provided by National Instrument 45-106 – Prospectus Exemptions;
(ff) the Purchaser is purchasing the Purchased Shares:
(i) as principal for its own account and not for the benefit of any other person, or is deemed to be purchasing the Purchased Shares as principal for its own account in accordance with applicable Securities Laws; or
(ii) as agent for a Beneficial Purchaser disclosed on the execution page of this Subscription Agreement, and is an agent or trustee with proper authority to execute all documents required in connection with the purchase of the Purchased Shares on behalf of such Beneficial Purchaser and such Beneficial Purchaser is purchasing the Purchased Shares as principal and not for the benefit of any other person, or is deemed to be purchasing the Purchased Shares as principal;
(gg) the funds representing the purchase price for the Purchased Shares which will be advanced by or on behalf of the Purchaser to the Company hereunder do not represent proceeds of crime for the purposes of the United States Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (the “PATRIOT Act”), and the Purchaser acknowledges that the Company may in the future be required by law to disclose the Purchaser’s name and other information relating to this Subscription Agreement and the Purchaser’s subscription hereunder, on a confidential basis, pursuant to the PATRIOT Act, and no portion of the purchase price for the Purchased Shares to be provided by the Purchaser (i) has been or will be derived from or related to any activity that is deemed criminal under the laws of the United States of America, or any other jurisdiction, or (ii) is being tendered on behalf of a person or entity that has not been identified to or by the Purchaser; and the Purchaser shall promptly notify the Company if the Purchaser discovers that any of such representations ceases to be true and provide the Company with appropriate information in connection therewith;

 

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(hh) the funds representing the aggregate purchase price in respect of the Purchased Shares which will be advanced by or on behalf of the Purchaser to the Company hereunder do not represent proceeds of crime for the purposes of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada) (for the purposes of this Section 6, the “PCMLTFA”) and the Purchaser acknowledges and agrees that the Company may be required by law to disclose the name of the Purchaser and, if applicable, names of Beneficial Purchasers, and other information relating to this Subscription Agreement and the subscription hereunder, on a confidential basis, pursuant to the PCMLTFA. To the best of the Purchaser’s knowledge (a) none of the subscription funds provided by or on behalf of the Purchaser (i) have been or will be derived directly or indirectly from or related to any activity that is deemed criminal under the laws of Canada, the United States, or any other jurisdiction, or (ii) are being tendered on behalf of a person or entity who has not been identified to the Purchaser and, (b) the Purchaser will promptly notify the Company if the Purchaser discovers that any of such representations cease to be true, and shall provide the Company with appropriate information in connection therewith;
(ii) the Company is relying on an exemption from the requirement to provide the Purchaser with a prospectus under the applicable Canadian Securities Laws and, as a consequence of acquiring the Purchased Shares pursuant to such exemption:
(i) certain protections, rights and remedies provided by the applicable Securities Laws, including statutory rights of rescission and certain statutory remedies against an issuer, underwriters, auditors, directors and officers that are available to investors who acquire securities offered by a prospectus, will not be available to the Purchaser;
(ii) the common law may not provide investors with an adequate remedy in the event that they suffer investment losses in connection with securities acquired in a private placement;
(iii) the Purchaser may not receive information that would otherwise be required to be given under the applicable Securities Laws; and
(iv) the Company is relieved from certain obligations that would otherwise apply under the applicable Securities Laws;
(jj) the Purchaser acknowledges that there is no government or other insurance covering the Purchased Shares;
(kk) the Purchaser acknowledges that no agency, governmental authority, regulatory body, stock exchange or other entity (including, without limitation, any securities commission or other regulatory authority) has reviewed, passed on or made any finding or determination as to the merit for investment in the Purchased Shares, nor have any such agencies or governmental authorities made any recommendation or endorsement with respect to such securities;
(ll) if the Purchaser is a U.S. Purchaser, the Purchaser confirms, represents and warrants that:
(i) the Purchaser is resident in the United States, in the jurisdiction set out as the “Purchaser’s Address” on the face page hereof, which is the address at which the Purchaser received and accepted the offer to purchase the Purchased Shares;
(ii) the Purchaser is an “accredited investor” (a “U.S. Accredited Investor”), as such term is defined in Rule 501(a) of Regulation D under the U.S. Securities Act, and the Purchaser has concurrently completed and executed Schedule “C” to this Subscription Agreement, indicating which category of U.S. Accredited Investor the Purchaser satisfies;
(iii) the Purchaser understands, recognizes and acknowledges that the Purchased Shares have not and will not be registered under the U.S. Securities Act or the Securities Laws of any state of the United States in which the Purchaser is resident and that the sale contemplated hereby is being made in reliance on a private placement exemption to U.S. Accredited Investors;

 

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(iv) the Purchaser acknowledges that the offer and sale of the Purchased Shares was made to the Purchaser exclusively by the Company;
(v) the Purchaser acknowledges that it has not purchased the Purchased Shares as a result of any “general solicitation” or “general advertising” (as such terms are used in Regulation D under the U.S. Securities Act), including but not limited to, any advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or on the internet or broadcast over radio or television or the internet, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising;
(vi) the Purchaser has no contract, undertaking, agreement or arrangement with any person to sell, transfer or pledge to such person, or anyone else, the Purchased Shares, or any part thereof, or any interest therein, and the Purchaser has no present plans to enter into any such contract, undertaking, agreement or arrangement;
(vii) the Purchaser agrees that if it decides to offer, sell or otherwise transfer any of the Purchased Shares (or any securities issuable upon the exchange thereof), it will not offer, sell, pledge or otherwise transfer any of such securities, directly or indirectly, unless such offer, sale, pledge or transfer is made:
(A) to the Company; or
(B) outside the United States in a transaction in accordance with the requirements of Rule 904 of Regulation S under the U.S. Securities Act and in compliance with applicable local laws and regulations; or
(C) within the United States in accordance with (I) Rule 144A under the U.S. Securities Act, or (II) Rule 144 under the U.S. Securities Act, if available; or
(D) in another transaction that does not require registration under the U.S. Securities Act or any applicable state securities laws,

and, in the case of transfers pursuant to (C)(II) or (D) (and if required by the transfer agent of the Purchased Shares, (B) above), after it has furnished the Company an opinion of counsel of recognized standing in form and substance reasonably satisfactory to the Company to such effect;

(viii) the Purchaser acknowledges and agrees that the Purchased Shares (and any securities issuable upon the exchange thereof) will be “restricted securities” within the meaning of Rule 144 (a)(3) of the U.S. Securities Act;
(ix) in addition to the Canadian legend as set out in Subsection 5(m), the Purchaser understands and acknowledges that upon the original issuance thereof, and until such time as the same is no longer required under applicable requirements of the U.S. Securities Act or applicable state securities laws, certificates representing the Purchased, and all certificates issued in exchange therefor or in substitution thereof, shall bear a restrictive legend substantially in the following form (the “U.S. Legend”):

 

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“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”), OR ANY STATE SECURITIES LAWS. THE HOLDER HEREOF, BY PURCHASING OR OTHERWISE HOLDING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE COMPANY THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED, DIRECTLY OR INDIRECTLY, ONLY (A) TO THE COMPANY, (B) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT, AND IN COMPLIANCE WITH LOCAL LAWS AND REGULATIONS, (C) WITHIN THE UNITED STATES IN ACCORDANCE WITH (1) RULE 144A UNDER THE U.S. SECURITIES ACT, OR (2) RULE 144 UNDER THE U.S. SECURITIES ACT, IF AVAILABLE AND, IN EACH CASE, IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS, OR (D) IN ANOTHER TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE U.S. SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS, AFTER, IN THE CASE OF (C)(2) OR (D) ABOVE, THE SELLER FURNISHES TO THE COMPANY AN OPINION OF COUNSEL OF RECOGNIZED STANDING IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY TO SUCH EFFECT. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE “GOOD DELIVERY” IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA.”

provided that the U.S. Legend may be removed by providing a declaration to the Company (and any transfer agent of the Purchased Shares), in the form attached hereto as Schedule “D”, or as the Company may prescribe from time to time;

provided further that, notwithstanding the foregoing, any transfer agent for the Purchased Shares may impose additional requirements for the removal of the U.S. Legend from such securities in accordance with Rule 904 of Regulation S under the U.S. Securities Act (which may include, without limitation, an opinion of counsel of recognized standing in form and substance reasonable satisfactory to the Company and such transfer agent) to the effect that the U.S. Legend is no longer required under the applicable requirements of the U.S. Securities Act;

provided further that, if the Purchased Shares are being sold pursuant to Rule 144 under the U.S. Securities Act, the U.S. Legends may be removed by delivery to the Company (and any transfer agent of the Purchased Shares) of an opinion of counsel of recognized standing in form and substance reasonably satisfactory to the Company (and such transfer agent) to the effect that the U.S. Legend is no longer required under the applicable requirements of the U.S. Securities Act;

(x) the Purchaser understands and acknowledges that the Company has no obligation or present intention to file a registration statement under the U.S. Securities Act in respect of the Purchased Shares or any securities issued upon the exchange thereof and, accordingly, the Purchaser acknowledges that there are substantial restrictions on the transferability of the Purchased Shares and that it will not be possible for the Purchaser to readily liquidate his, her or its investment in case of any emergency and the Purchaser has not been supplied with all of the information that would be found in the applicable registration statement if the Purchased Shares were registered under the U.S. Securities Act;
(xi) the Purchaser is aware that (i) purchasing, holding and disposing of the Purchased Shares may have tax consequences under the laws of both Canada and the United States, (ii) the tax consequences for prospective investors who are resident in, or citizens of, the United States under United States, state, local or foreign tax law are not described in this Subscription Agreement, and (iii) it is solely responsible for determining the tax consequences applicable to its particular circumstances and should consult its own tax advisors concerning investment in the Purchased Shares;

 

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(xii) notwithstanding the foregoing paragraph and anything else contained herein, the Purchaser acknowledges that (A) it has been encouraged, and has had the opportunity, to obtain independent income tax advice with respect to its subscription for the Purchased Shares (including, without limitation, with respect to the applicability of United States federal income tax rules related to “passive foreign investment companies” (a “PFIC”) under the U.S. Internal Revenue Code of 1986, as amended); (B) if the Company were to be deemed to be a PFIC in respect of any year in which the Purchaser owns the Purchased Shares, the Purchaser may be subject to adverse United States federal income tax consequences that it might not be able to mitigate unless the Company takes certain actions to assist the Purchaser with such mitigation, and that the Company is under no obligation to take, and has no present intention of taking, any action to assist the Purchaser in mitigating such adverse tax consequences (in particular, and without limitation, the Company has no obligation to provide the information or to take the actions necessary to permit the Purchaser to make a “qualified electing fund” election within the meaning of such term in the U.S. Internal Revenue Code of 1986, as amended); (C) the Company expects to be a PFIC in each taxable year; and (D) no representation has been made to the Purchaser by the Company or any person acting on its behalf as to the tax consequences to the Purchaser of the Purchaser’s purchase of the Purchased Shares;
(xiii) the Purchaser understands that the Company is incorporated under the laws of British Columbia, Canada, and that most or all of the Company’s assets are located outside the United States and most or all of its directors and officers are residents of countries other than the United States; as a result, it may be difficult for Purchasers to effect service of process within the United States upon the Company or such directors and officers, or to realize in the United States upon judgments of courts of the United States predicated upon civil liability of the Company and its directors and officers under the U.S. federal securities laws;
(xiv) the Purchaser consents to the Company making a notation on its records or giving instruction to the registrar and transfer agent of the Issuer in order to implement the restrictions on transfer and exercise with respect to the Purchased Shares set forth and described herein;
(xv) the Purchaser is acquiring the Purchased Shares for itself for investment purposes only and not with a view to any resale, distribution or other disposition of the Purchased Shares in violation of United States federal or state securities laws, and the Purchaser acknowledges that the exemption from registration under the U.S. Securities Act and applicable state securities laws depends, among other things, upon the bona fide nature of the investment intent expressed herein.
(mm) if the Purchaser is an “accredited investor” in reliance on paragraph (m) of the definition of “accredited investor” in Section 1.1 of NI 45-106, the Purchaser was not created or used solely to purchase or hold securities as an accredited investor under that paragraph (m);
(nn) the Purchaser either (A) is not an “insider” of the Company or a “registrant” (each as defined under applicable Securities Laws) or (B) has identified itself to the Company as either an “insider” or a “registrant” (each as defined under applicable Securities Laws). The Purchaser acknowledges that it is bound by the provisions of applicable Securities Laws which impose obligations on a person who becomes an “insider” of an issuer, or on a person who holds sufficient securities exercisable into voting securities of an issuer to become an “insider”. The Purchaser acknowledges that such obligations may include, but are not limited to: the filing of insider reports on the System for Electronic Disclosure by Insiders (SEDI); the filing of early warning reports; the filing of reports of acquisitions; and the filing of a Personal Information Form or similar document with applicable stock exchanges. The Purchaser further acknowledges that it has been advised to consult its own legal advisors with respect to such obligations, and that it is solely responsible for complying with such obligations, and covenants and agrees with the Company that it will comply with all of such obligations, if applicable to the Purchaser, in a timely manner, whether arising at or after the Closing;

 

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(oo) if the Purchaser is resident in or otherwise subject to applicable Securities Laws of a jurisdiction other than Canada or the United States, the Purchaser confirms, represents and warrants that:
(i) the Purchaser is knowledgeable of, or has been independently advised as to, the applicable Securities Laws of the jurisdiction in which the Purchaser is resident (the “International Jurisdiction”) and which would apply to this Subscription Agreement;
(ii) the Purchaser is purchasing the Purchased Shares pursuant to exemptions from the prospectus, financial promotion and/or registration requirements or equivalent requirements under applicable Securities Laws or, if such is not applicable, the Purchaser is permitted to purchase the Purchased Shares under the applicable Securities Laws of the International Jurisdiction without the need to rely on any exemptions;
(iii) all acts of solicitation, conduct or negotiations directly or indirectly in furtherance of the purchase of the securities occurred outside of Canada and the United States;
(iv) no offer was made to the Purchaser in Canada or the United States and the buy order in respect of the subscription was not placed from within Canada or the United States;
(v) the applicable Securities Laws of the International Jurisdiction do not require the Company to make any filings or seek any approvals of any kind whatsoever from any securities regulator of any kind whatsoever in the International Jurisdiction in connection with the issue and sale or resale of the Purchased Shares (and any securities issued upon the exchange or transfer thereof);
(vi) the delivery of this Subscription Agreement, the acceptance hereof by the Company and the purchase of the Purchased Shares by the Purchaser complies with all applicable laws of the International Jurisdiction and all other applicable laws and does not trigger: (i) any obligation to prepare and file a prospectus or similar document, or any other report or notice with respect to such purchase in the International Jurisdiction or to register the Purchased Shares (and any securities issued upon the exchange or transfer thereof); or (ii) any continuous disclosure reporting obligations of the Company in the International Jurisdiction; and
(vii) the Purchaser will, if requested by the Company, or its counsel, deliver to the Company a certificate or opinion of local counsel from the International Jurisdiction which will confirm the matters referred to in subsections (ii) to (vi) above to the satisfaction of the Company and its counsel, acting reasonably.
6. Reliance Upon Representations, Warranties and Covenants by the Company

The Purchaser acknowledges that the representations, warranties and covenants made by the Purchaser in this Subscription Agreement (including without limitation those made in each Subscriber Certificates, and all appendices attached thereto, to be executed and delivered in accordance with this Subscription Agreement) are made with the intent that they may be relied upon by the Company and its counsel to, among other things, determine the Purchaser’s eligibility to purchase the Purchased Shares, including without limitation the availability of exemptions from the registration and prospectus requirements of applicable Securities Laws in connection with the issuance of the Purchased Shares to the Purchaser. The Purchaser further covenants that by accepting the Purchased Shares, the Purchaser shall be representing and warranting that such representations and warranties are true as at the Closing Date with the same force and effect as if they had been made by the Purchaser at the Closing Date and that the covenants of the Purchaser made by it in this Subscription Agreement to be performed prior to the Closing Date have been performed. The Purchaser further agrees to indemnify the Company and its respective directors, officers, employees, advisers, affiliates, shareholders and agents, and their respective counsel, against all losses, claims, costs, expenses, damages and liabilities which any of them may suffer or incur and which are caused by or arise from any inaccuracy in, or breach or misrepresentation by the Purchaser of, any such representations, warranties and covenants. The Purchaser undertakes to immediately notify the Company of any change in any statement or other information relating to the Purchaser set forth herein or in a Subscriber Certificates, and all appendices attached thereto, that takes place prior to the Closing Date.

 

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7. Representations, Warranties and Covenants of the Company

By executing this Subscription Agreement, the Company represents, warrants and covenants to the Purchaser that:

 

(a) the Company is now and at the Closing Time will be a corporation validly subsisting under the laws of the Province of British Columbia;
(b) the Company has all necessary corporate power, authority and capacity to enter into and carry out its obligations under this Subscription Agreement and all other agreements and instruments to be executed by the Company and the Purchaser as contemplated by this Subscription Agreement;
(c) the execution and delivery of this Subscription Agreement and such other agreements and instruments and the consummation of the transactions contemplated by this Subscription Agreement and such other agreements and instruments have been duly and validly authorized by the Company;
(d) the Purchased Shares have been duly authorized for issuance and upon issuance pursuant to the provisions hereof, the Common Shares will be validly issued and fully paid as non-assessable common shares in the capital of the Company;
(e) this Subscription Agreement constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms subject, however, to the customary limitations with respect to bankruptcy, insolvency or other laws affecting creditors’ rights generally and to the availability of equitable remedies; and
(f) the execution and delivery of this Subscription Agreement and the compliance by the Company with the terms hereof will not result in any breach, or be in conflict with, or constitute a default under, or create a state of facts which after notice or lapse of time or both would constitute a default under, any term or provision of the Company’s constating documents or resolutions of the directors of the Company;
(g) no approval, authorization, consent or order of, and no filing, registration or recording with, any governmental authority is required of the Company in connection with the execution and delivery or with the performance by the Company of this Subscription Agreement other than compliance with the applicable Securities Laws;
(h) the Company has good and marketable title to or beneficial ownership of all real property and good title to all personal property owned by it and material to its business, in each case, free and clear of all liens, encumbrances or restrictions of any kind, except such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company, and no other property rights are necessary for the conduct of the business of the Company as currently conducted; and
(i) the Company is not currently prohibited, directly or indirectly, from paying any dividends, from making any other distribution on its common shares, or other securities, or from paying any interest or repaying any loans, advances or other indebtedness of the Company.

 

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8. Survival

This Subscription Agreement, including without limitation the representations, warranties, covenants and indemnities contained herein and in each Subscriber Certificate, and all appendices attached thereto, shall survive and continue in full force and effect and be binding upon the Company and the Purchaser, notwithstanding the completion of the purchase of the Purchased Shares by the Purchaser pursuant hereto or the subsequent disposition of the Purchased Shares by the Purchaser.

 

9. Personal Information Authorization

By executing this Subscription Agreement, the Purchaser hereby consents to the collection, use and disclosure of the personal information provided herein and other personal information provided by the Purchaser or collected by the Company or its agents as reasonably necessary in connection with the Purchaser’s subscription for the Purchased Shares (collectively, “personal information”) as follows: (a) the Company may use personal information and disclose personal information to intermediaries such as the Company’s legal counsel and withholding and/or transfer agents for the purposes of determining the Purchaser’s eligibility to invest in the Purchased Shares and for managing and administering the Purchaser’s investment in the Purchased Shares; (b) the Company and its agents may use the Purchaser’s social insurance number for income reporting purposes in accordance with applicable law; (c) the Company, its agents and advisors, may each collect, use and disclose personal information for the purposes of meeting legal, regulatory, self-regulatory, security and audit requirements (including any applicable tax, securities, money laundering or anti-terrorism legislation, rules or regulations) and as otherwise permitted or required by law, which disclosures may include disclosures to tax, securities or other regulatory or self-regulatory authorities in Canada and/or in foreign jurisdictions, if applicable, in connection with the regulatory oversight mandate of such authorities; (d) the Company and its agents and advisors may use personal information and disclose personal information to parties connected with the proposed or actual transfer, sale, assignment, merger or amalgamation of the Company or its business or assets or similar transactions, for the purpose of permitting such parties to evaluate and/or proceed with and complete such transaction. Purchasers, assignees and successors of the Company or its business or assets may collect, use and disclose personal information as described in this Subscription Agreement. The Purchaser acknowledges that the Company’s agents or intermediaries may be located outside of Canada, and personal information may be transferred and/or processed outside of Canada for the purposes described above, and that measures the Company may use to protect personal information while handled by agents, intermediaries or other third parties on its behalf, and personal information otherwise disclosed or transferred outside of Canada for the purposes described above, are subject to legal requirements in foreign countries applicable to the Company or such third parties, for example lawful requirements to disclose personal information to government authorities in those countries.

 

If the Purchaser is subject to the applicable securities legislation of Ontario and/or British Columbia, the Purchaser acknowledges: (i) the delivery to the Ontario Securities Commission and British Columbia Securities Commission, as applicable, of the Purchaser’s full name, residential address and telephone number, the number and type of securities purchased by the Purchaser, the total purchase price, the exemption relied on, and the date of distribution (and the Purchaser’s insider or registrant status, in the case of the British Columbia Securities Commission); (ii) that such information is being collected indirectly by the Ontario Securities Commission and British Columbia Securities Commission under the authority granted to it in securities legislation; (iii) that such information is being collected for the purposes of the administration and enforcement of the securities legislation of Ontario and British Columbia; and (iv) that the Administrative Support Clerk at the Ontario Securities Commission, Suite 1903, Box 55, 20 Queen Street West, Toronto, Ontario M5H 3S8, telephone (416) 593-3684 and the British Columbia Securities Commission, Box 10142, Pacific Centre, 701 West Georgia Street, Vancouver, British Columbia, V7Y 1L2, telephone at (604) 899-6500 or 1-800-373-6393 can be contacted to answer questions about the Ontario and British Columbia Securities Commissions’ indirect collection of such information. The Purchaser hereby authorizes the indirect collection of such information by the Ontario Securities Commission and British Columbia Securities Commission, as applicable.

 

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10. Governing Law

This Subscription Agreement shall be governed by and construed in accordance with the laws of the Province of British Columbia and the federal laws of Canada applicable therein. The Purchaser hereby irrevocably attorns to the non-exclusive jurisdiction of the courts of the Province of British Columbia with respect to any matters arising out of this Subscription Agreement.

 

11. Independent Legal Advice

The Purchaser acknowledges and agrees that Blake, Cassels & Graydon LLP (“Blakes”) has acted as legal counsel only to the Company and that Blakes is not protecting the rights and interests of the Purchaser. The Purchaser acknowledges and agrees that the Company and Blakes have given the Purchaser the opportunity to seek, and have recommended that the Purchaser obtain, independent legal advice with respect to the subject matter of this Subscription Agreement and, further, the Purchaser hereby represents and warrants to the Company and Blakes that the Purchaser has sought independent legal advice or waives such advice.

12. Costs

All costs and expenses incurred by the Purchaser, including, without limitation, legal fees and disbursements relating to the purchase by the Purchaser of the Purchased Shares, shall be borne by the Purchaser.

 

13. Assignment

This Subscription Agreement shall enure to the benefit of and be binding on the Company, the Purchaser and their respective heirs, administrators, executors, successors and permitted assigns. This Subscription Agreement may not be assigned by the Company and may only be transferred or assigned by the Purchaser: (i) subject to compliance with applicable Securities Law, and (ii) with the prior written consent of the Company.

 

14. Entire Agreement

This Subscription Agreement constitutes the entire agreement between the parties hereto pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written. There are no conditions, representations, warranties, covenants or other agreements between the parties hereto relating to the subject matter hereof, except as specifically set out, referred to or incorporated by reference herein.

 

15. Amendments and Waivers

No amendment to this Subscription Agreement will be valid or binding unless set forth in writing and duly executed by the parties hereto. No waiver of any breach of any provision of this Subscription Agreement will be effective or binding unless made in writing and signed by the waiving party.

 

16. Language

The parties hereto confirm their express wish that this Subscription Agreement and all documents and agreements directly or indirectly relating hereto be drawn up in the English language. Les parties reconnaissent leur volonté expresse que la présente ainsi que tous les documents et contrats s’y rattachant directmente ou indirectmente soient rédigés en anglais.

 

17. Time of Essence

Time shall be of the essence of this Subscription Agreement.

 

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18. Deliveries and Counterparts

The Company shall be entitled to rely on delivery by facsimile or electronic transmission of a copy, in portable document format or otherwise, of this Subscription Agreement executed by the Purchaser, and acceptance by the Company of such executed Subscription Agreement shall be legally effective to create a valid and binding agreement between the Purchaser and the Company in accordance with the terms hereof. In addition, this Subscription Agreement may be executed in counterparts, each of which shall be deemed to be an original and all of which shall constitute one and the same document.

 

19. Extended Meanings and Headings

In this Subscription Agreement words importing the singular number include the plural and vice versa, words importing any gender include all genders and words importing persons include individuals, partnerships, associations, trusts and unincorporated associations. The headings contained herein are for convenience of reference only and shall not affect the construction or interpretation hereof.

 

20. Currency

Unless otherwise stated, all references to currency herein are to lawful money of Canada.

 

21. Further Assurances

Each of the parties hereto shall from time to time execute and deliver all such further documents and instruments and do all acts and things as the other party may, either before or after the closing of the transactions contemplated hereby, reasonably require to effectively carry out or better evidence or perfect the full intent and meaning of this Subscription Agreement.

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SCHEDULE “A”

ACCREDITED INVESTOR CERTIFICATE FOR ALL ACCREDITED INVESTORS

TO: Arras Minerals Corp. (the “Company”)

 

RE: SUBSCRIPTION FOR SHARES OF THE COMPANY

All capitalized terms not defined herein shall have the meaning given to them in the Subscription Agreement to which this Schedule “A” is attached and in Appendix 1 to this Schedule “A” (collectively, the “Subscription Agreement”).

The undersigned Purchaser/duly authorized representative of the Purchaser (or in the case of a trust, the trustee or an officer of the trustee of the trust) hereby certifies, represents and warrants that:

1. he/she has read the Subscription Agreement and understands that the offering of the Purchased Shares is being made on a prospectus-exempt basis; and
2. the Purchaser and, if applicable, the disclosed principal on whose behalf the Purchaser is purchasing the Purchased Shares, is an “accredited investor” as defined in NI 45-106, by virtue of satisfying one or more of the categories of “accredited investor” set forth below, which the Purchaser has correctly marked:

[please initial beside each category that applies to the Purchaser.]

a. _____ except in Ontario, a Canadian financial institution, or a Schedule III bank,*
b. _____ except in Ontario, the Business Development Bank of Canada incorporated under the Business Development Bank of Canada Act (Canada),*
c. _____ except in Ontario, a subsidiary of any person referred to in paragraphs (a) or (b), if the person owns all of the voting securities of the subsidiary, except the voting securities required by law to be owned by directors of that subsidiary,*
d. _____ except in Ontario, a person registered under the securities legislation of a jurisdiction of Canada as an adviser or dealer,*
e. _____ an individual registered under the securities legislation of a jurisdiction of Canada as a representative of a person referred to in paragraph (d),

e.1. _____ an individual formerly registered under the securities legislation of a jurisdiction of Canada, other than an individual formerly registered solely as a representative of a limited market dealer under one or both of the Securities Act (Ontario) or the Securities Act (Newfoundland and Labrador),

 

f. _____ except in Ontario, the Government of Canada or a jurisdiction of Canada, or any crown corporation, agency or wholly owned entity of the Government of Canada or a jurisdiction of Canada,*
g. _____ except in Ontario, a municipality, public board or commission in Canada and a metropolitan community, school board, the Comité de gestion de la taxe scolaire de l’île de Montréal or an intermunicipal management board in Québec,*
h. _____ except in Ontario, any national, federal, state, provincial, territorial or municipal government of or in any foreign jurisdiction, or any agency of that government,*
i. _____ except in Ontario, a pension fund that is regulated by the Office of the Superintendent of Financial Institutions (Canada), a pension commission or similar regulatory authority of a jurisdiction of Canada,*
j. _____ an individual who, either alone or with a spouse, beneficially owns, financial assets having an aggregate realizable value that before taxes, but net of any related liabilities‚, exceeds CDN$1,000,000, If the Purchaser chooses this category, it must complete, initial and sign the Risk Acknowledgement Form in Appendix 1.

 

A-1 
 
 

[_] By initialing this box, the Purchaser confirms that s/he has discussed this investment with the salesperson identified in Appendix 1 hereof and such salesperson explained the calculation of the financial assets test and asked questions to confirm that the Purchaser met such threshold.

j.1 _____ an individual who beneficially owns financial assets having an aggregate realizable value that, before taxes but net of any related liabilities‚, exceeds CDN$5,000,000,

[_] By initialing this box, the Purchaser confirms that s/he discussed this investment with __________________ (name of salesperson) of __________________ (name of firm of salesperson) and such salesperson explained the calculation of financial assets before taxes and net of any related liabilities and asked questions to confirm that the Purchaser and, if applicable, the Purchaser’s spouse met such threshold.

k. _____ an individual whose net income before taxes exceeded CDN$200,000 in each of the two most recent calendar years or whose net income before taxes combined with that of a spouse exceeded CDN$300,000 in each of the two most recent calendar years and who, in either case, reasonably expects to exceed that net income level in the current calendar year, If the Purchaser chooses this category, it must complete, initial and sign the Risk Acknowledgement Form on Appendix 1.

[_] By initialing this box, the Purchaser confirms that s/he discussed this investment with the salesperson identified on Appendix 1 hereof and such salesperson explained the calculation of the net income before taxes and asked questions to confirm that the Purchaser and, if applicable, the Purchaser’s spouse met such threshold.

l. _____ an individual who, either alone or with a spouse, has net assets of at least CDN$5,000,000, If the Purchaser chooses this category, it must complete, initial and sign the Risk Acknowledgement Form in Appendix 1.

[_] By initialing this box, the Purchaser confirms that s/he discussed this investment with the salesperson identified on Appendix 1 hereof and such salesperson explained the calculation of the net assets and asked questions to confirm that the Purchaser and, if applicable, the Purchaser’s spouse met such threshold.

m. _____ a person (including a corporate entity), other than an individual or investment fund, that has net assets of at least CDN$5,000,000 as shown on its most recently prepared financial statements,
n. _____ an investment fund that distributes or has distributed its securities only to:

(i)       a person that is or was an accredited investor at the time of the distribution,

(ii) a person that acquires or acquired securities in the circumstances referred to in sections 2.10 [Minimum amount investment] or 2.19 [Additional investment in investment funds] of NI 45-106, or
(iii) a person described in paragraph (i) or (ii) that acquires or acquired securities under section 2.18 [Investment fund reinvestment] of NI 45-106,
o. _____ an investment fund that distributes or has distributed securities under a prospectus in a jurisdiction of Canada for which the regulator or, in Québec, the securities regulatory authority, has issued a receipt,
p. _____ a trust company or trust corporation registered or authorized to carry on business under the Trust and Loan Companies Act (Canada) or under comparable legislation in a jurisdiction of Canada or a foreign jurisdiction, acting on behalf of a fully managed accountƒ managed by the trust company or trust corporation, as the case may be,

 

A-2 
 
 

 

q. _____ a person (including a corporate entity) acting on behalf of a fully managed accountƒ managed by that person, if that person is registered or authorized to carry on business as an adviser or the equivalent under the securities legislation of a jurisdiction of Canada or a foreign jurisdiction,
r. _____ a registered charity under the Income Tax Act (Canada) that, in regard to the trade, has obtained advice from an eligibility adviser or an adviser registered under the securities legislation of the jurisdiction of the registered charity to give advice on the securities being traded,
s. _____ an entity organized in a foreign jurisdiction that is analogous to any of the entities referred to in paragraphs (a) to (d) or paragraph (i) in form and function,
t. _____ a person (including a corporate entity) in respect of which all of the owners of interests, direct, indirect or beneficial, except the voting securities required by law to be owned by directors, are persons that are accredited investors,„
u. _____ an investment fund that is advised by a person registered as an adviser or a person that is exempt from registration as an adviser,
v. _____ a person (including a corporate entity) that is recognized or designated by the securities regulatory authority or, except in Ontario and Quebec, the regulator as an accredited investor, or
w. _____ a trust established by an accredited investor for the benefit of the accredited investor’s family members of which a majority of the trustees are accredited investors and all of the beneficiaries are the accredited investor’s spouse, a former spouse of the accredited investor or a parent, grandparent, brother, sister, child or grandchild of that accredited investor, of that accredited investor’s spouse or of that accredited investor’s former spouse;

The Company may follow up with the Purchaser in order to verify their accredited investor status by obtaining further information in order satisfy the Company’s obligations under applicable Securities Laws.

 For the purposes of NI 45-106 and this Certificate, the term “financial assets” means (a) cash; (b) securities or (c) a contract of insurance, a deposit or an evidence of a deposit that is not a security for the purposes of securities legislation. The value of the Purchaser’s personal residence or other real estate is not included in the calculation of financial assets. These financial assets are generally liquid or relatively easy to liquidate.
‚ For the purposes of NI 45-106 and this Certificate, the term “related liabilities” means (a) liabilities incurred or assumed for the purpose of financing the acquisition or ownership of financial assets or (b) liabilities that are secured by financial assets.
ƒ For the purposes of NI 45-106 and this Certificate, the term “fully managed account” means an account of a client for which a person makes the investment decisions if that person has full discretion to trade in securities for the account without requiring the client’s express consent to a transaction.
„ In British Columbia, an indirect interest in a person means an economic interest in the person.

 

*NOTE: If the Purchaser has selected this category, and the Purchaser is an Ontario resident or otherwise subject to the laws of Ontario for the purposes of his, her or its subscription of securities in this agreement, then the Purchaser must request from the Company an accredited investor certificate applicable to such Purchaser, and complete and sign such requested certificate and provide the same to the Company.

The statements made in this Schedule are true and will be true on the Closing Date.

The Company may follow up with the Purchaser at the telephone number provided below in order to verify their accredited investor status by obtaining further information in order satisfy the Company’s obligations under applicable Securities Laws.

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DATED ___________________________, 20____.

 
________________________________________

Signature of Purchaser

________________________________________
Name of Purchaser

________________________________________
Telephone Number of Purchaser

 

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APPENDIX “1”

INDIVIDUAL ACCREDITED INVESTOR RISK ACKNOWLEDGMENT FORM

Form 45-106F9

Risk Acknowledgement Form for Accredited Investors who are Individuals

 

WARNING!

This investment is risky. Don’t invest unless you can afford to lose all of the money you pay for this investment.

 

Section 1 – TO BE COMPLETED BY THE COMPANY OR SELLING SECURITY HOLDER
1. About your investment
Type of Securities: Purchased Shares Company:  Arras Minerals Corp. (the “Company”)
Purchased from: The Company  
Sections 2 to 4 – TO BE COMPLETED BY THE PURCHASER
2. Risk acknowledgement
This investment is risky.  Initial that you understand that: Your Initials
Risk of loss – You could lose your entire investment of CDN$ ___________ [Insert total dollar amount of the Investment]  
Liquidity risk – You may not be able to sell your investments quickly – or at all.  
Lack of information – You may receive little or no information about your investment.  
Lack of advice – You will not receive advice from the salesperson about whether this investment is suitable for you unless the salesperson is registered.  The salesperson is the person who meets with, or provides information to, you about making this investment.  To check whether the salesperson is registered, go to www.aretheyregistered.ca.  
3. Accredited investor status
You must meet at least one of the following criteria to be able to make this investment.  Initial the statement that applies to you (you may initial more than one statement).  The person identified in section 6 is responsible for ensuring that you meet the definition of accredited investor.  That person, or the salesperson identified in section 5, can help you if you have questions about whether you meet these criteria. Your Initials
Your net income before taxes was more than CDN$200,000 in each of the 2 most recent calendar years, and you expect it to be more than CDN$200,000 in the current calendar year.  (You can find your net income before taxes on your personal income tax return.)  
Your net income before taxes combined with your spouse’s was more than CDN$300,000 in each of the 2 most recent calendar years, and you expect your combined net income before taxes to be more than CDN$300,000 in the current calendar year.  
Either alone or with your spouse, you own more than CDN$1 million in cash and securities, after subtracting any debt related to the cash and securities.  
Either alone or with your spouse, you have net assets worth more than CDN$5 million.  (Your net assets are your total assets (including real estate) minus your total debt).  
4. Your name and signature
By signing this form, you confirm that you have read this form and you understand the risks of making this investment as identified in this form.
First and Last Name (please print):
Signature:
Date:
Section 5 – TO BE COMPLETED BY THE SALESPERSON
5. Salesperson information
[Instruction:  The salesperson is the person who meets with, or provides information to, the purchaser with respect to making this investment.  That could include a representative of the Company or selling security holder, a registrant or a person who is exempt from the registration requirement.]
First and Last Name of Salesperson (please print):
Telephone: Email:
Name of Firm (if registered):
Section 6 – TO BE COMPLETED BY THE COMPANY OR SELLING SECURITY HOLDER
6.  For more information about this investment

 

For more information about this investment/ the Company:

Arras Minerals Corp.

777 Dunsmuir Street, Suite 1610

Vancouver, B.C. V7Y 1K4

Attention: Christopher Richards, Chief Financial Officer

Email: crichards@silverbullresources.com.

 

For more information about prospectus exemptions, contact your local securities regulator. You can find contact information at www.securities-administrators.ca.

       

 

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SCHEDULE “B”

QUALIFIED INVESTOR CERTIFICATE

FOR PURCHASERS RESIDENT IN A PROVINCE OR TERRITORY OF CANADA

TO: Arras Minerals Corp. (the “Company”)

RE: SUBSCRIPTION FOR SHARES OF THE COMPANY

 

All capitalized terms not defined herein shall have the meaning given to them in the Subscription Agreement to which this Schedule “B” is attached (collectively, the “Subscription Agreement”).

In connection with the purchase by the undersigned Purchaser of Purchased Shares of the Company, the Purchaser hereby represents, warrants, covenants and certifies to the Company that the Purchaser as at the date of this Certificate and as of the date of Closing is and will be resident in a province or territory of Canada as set out on page (ii) of the Subscription Agreement and is purchasing the Purchased Shares as principal for its own account, pursuant to the family, friends and business associates exemptions in Section 2.5, 2.6 or 2.6.1 of National Instrument 45-106, as applicable, by virtue of satisfying one of the indicated criteria as set out below and as so marked by the Purchaser, AND:

(a) if resident in Ontario, the Purchaser has completed and signed the Ontario Form 45-106F12 - Risk Acknowledgement Form for Family, Friend and Business Associate Investors in Ontario attached hereto as Appendix 1; or
(b) if resident in Saskatchewan, the Purchaser has completed and signed the Saskatchewan Form 45-106F5 - Risk Acknowledgement Saskatchewan Close Personal Friends and Close Business Associates attached hereto as Appendix 2.

 

CHECK APPROPRIATE CATEGORY:

_____ (a) a director, executive officer or control person of the Company or of an affiliate of the Company;
_____ (b) a spouse, parent, grandparent, brother, sister, child or grandchild of a director, executive officer or control person of the Company, or of an affiliate of the Company, being __________________________________;
_____ (c) a parent, grandparent, brother, sister, child or grandchild of the spouse of a director, executive officer or control person of the Company or of an affiliate of the Company, being ______________________________;
_____ (d) a close personal friend of a director, executive officer or control person of the Company or of an affiliate of the Company, being ______________________________ (complete (1) below); or
_____ (e) a close business associate of a director, executive officer or control person of the Company or of an affiliate of the Company, being ________________________________ (complete (1) below);
_____ (f) a founder of the Company or a spouse, parent, grandparent, brother, sister, child, grandchild, close personal friend or close business associate of a founder of the Issuer, being _______________________________ (if applicable, complete (1) below);
_____ (g) a parent, grandparent, brother, sister, child or grandchild of a spouse of a founder of the Company, being ___________________________________________;
_____ (h) a person of which a majority of the voting securities are beneficially owned by, or a majority of the directors are, persons described in paragraphs (a) to (g), being _____________________________ (if applicable, complete (1) below); or
_____ (i) a trust or estate of which all of the beneficiaries or a majority of the trustees or executors are persons described in paragraphs (a) to (g), being _____________________________ (if applicable, complete (1) below).

 

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(1) If you are a close personal friend or close business associate of a director, executive officer, founder or control person of the Issuer, please indicate how long you have known the individual and describe the nature of your relationship, including how you are in a position to assess the capabilities and trustworthiness of the individual.

Dated:____________ , 2021    
    Print name of Purchaser
     
    By:
    Signature
   

 

 

    Print name of Authorized Signatory for a Corporate Purchaser
   

 

 

    Title of Authorized Signatory

 

Ontario Investors

If the Purchaser is resident in Ontario, it has executed and delivered to the Company an Ontario Form 45-106F12 Risk Acknowledgement Form for Family, Friend and Business Associate Investors in Ontario in the form attached hereto as Appendix 1 to Schedule D.

Saskatchewan Investors

If the Purchaser is resident in Saskatchewan, it has executed and delivered to the Company a Saskatchewan Risk Acknowledgement Form in the form attached hereto as Appendix 2 to Schedule D.

For the purposes hereof:

“close business associate” means an individual who has had sufficient prior business dealings with a director, executive officer, founder or control person of the Company to be in a position to assess their capabilities and trustworthiness. An individual is not a close business associate solely because the individual is: (a) a member of the same club, organization, association or religious group; (b) a co-worker, colleague or associate at the same workplace; (c) a client, customer, former client or former customer; (d) a mere acquaintance; or (e) connected through some form of social media, such as Facebook, Twitter or LinkedIn.

The relationship between the individual and the director, executive officer, founder or control person must be direct. For example the exemption is not available for a close business associate of a close business associate of a director of the Company.

A relationship that is primarily founded on participation in an internet forum is not considered to be that of a close business associate.

 

 

B-2 
 
 

“close personal friend” means an individual who knows the director, executive officer, founder or control person well enough and has known them for a sufficient period of time to be in a position to assess their capabilities and trustworthiness. The term “close personal friend” can include a family member who is not already specifically identified in the exemptions if the family member satisfies the criteria described above.

An individual is not a close personal friend solely because the individual is: (a) a relative; (b) a member of the same club, organization, association or religious group; (c) a co-worker, colleague or associate at the same workplace; (d) a client, customer, former client or former customer; (e) a mere acquaintance; or (f) connected through some form of social media, such as Facebook, Twitter or LinkedIn.

The relationship between the individual and the director, executive officer, founder or control person must be direct. For example the exemption is not available to a close personal friend of a close personal friend of a director of the Company.

A relationship that is primarily founded on participation in an internet forum is not considered to be that of a close personal friend.

“control person” means (a) a person who holds a sufficient number of the voting rights attached to all outstanding voting securities of the Company to affect materially the control of the Company; or (b) each person in a combination of persons, acting in concert by virtue of an agreement, arrangement, commitment or understanding, which holds in total a sufficient number of the voting rights attached to all outstanding voting securities of the Company to affect materially the control of the Company, and, if a person or combination of persons holds more than 20% of the voting rights attached to all outstanding voting securities of the Company, the person or combination of persons is deemed, in the absence of evidence to the contrary, to hold a sufficient number of the voting rights to affect materially the control of the Company.

“executive officer” means an individual who is: (a) a chair, vice-chair or president; (b) a vice-president in charge of a principal business unit, division or function including sales, finance or production; (c) an officer of the Company or any of its subsidiaries and who performs a policy-making function in respect of the Company; or (d) performing a policy-making function in respect of the Company.

“founder” means a person who: (a) acting alone, in conjunction, or in concert with one or more persons, directly or indirectly, takes the initiative in founding, organizing or substantially reorganizing the business of the Company; and (b) at the time of the trade is actively involved in the business of the Company.

 

 

B-3 
 
 

APPENDIX 1

Ontario Form 45-106F12
Risk Acknowledgement Form for Family, Friend and Business Associate Investors in Ontario

WARNING!
This investment is risky. Don’t invest unless you can afford to lose all the money you pay for this investment.

 

SECTION 1 TO BE COMPLTED BY THE ISSUER
1.       About your investment
Type of securities: Purchased Shares Issuer: Arras Minerals Corp.

Purchased from: Arras Minerals Corp.

 

SECTIONS 2 TO 4 TO BE COMPLETED BY THE PURCHASER
2.       Risk acknowledgement
This investment is risky.  Initial that you understand that: Your initials
Risk of loss – You could lose your entire investment of $______________. [Instruction: Insert the total dollar amount of the investment.]  
Liquidity risk – You may not be able to sell your investment quickly – or at all.  
Lack of information – You may receive little or no information about your investment.  The information you receive may be limited to the information provided to you by the family member, friend or close business associate specified in section 3 of this form.  

 

 

B-1-1 
 
 

 

3.       Family, friend or business associate status
You must meet one of the following criteria to be able to make this investment.  Initial the statement that applies to you: Your initials

A)     You are:

1)       [check all applicable boxes]

[_]       a director of the issuer or an affiliate of the issuer

[_]       an executive officer of the issuer or an affiliate of the issuer

[_]       a control person of the issuer or an affiliate of the issuer

[_]       a founder of the issuer

OR

2)       [check all applicable boxes]

[_]       a person of which a majority of the voting securities are beneficially owned by, or a majority of the directors are, (i) individuals listed in (1) above and/or (ii) family members, close personal friends or close business associates of individuals listed in (1) above

[_]       a trust or estate of which all of the beneficiaries or a majority of the trustees or executors are (i) individuals listed in (1) above and/or (ii) family members, close personal friends or close business associates of individuals listed in (1) above

 

B)     You are a family member of __________________________________________ [Instruction: Insert the name of the person who is your relative either directly or through his or her spouse], who holds the following position at the issuer or an affiliate of the issuer: ____________________________________.

 

You are the _________________________________ of that person or that person’s spouse.

[Instruction: To qualify for this investment, you must be (a) the spouse of the person listed above or (b) the parent, grandparent, brother, sister, child or grandchild of that person or that person’s spouse.]

 

C)     You are a close personal friend of __________________________________________ [Instruction: Insert the name of your close personal friend], who holds the following position at the issuer or an affiliate of the issuer: ____________________________________.

 

You have known that person for _________ years.

 

D)     You are a close business associate of __________________________________________ [Instruction: Insert the name of your close business associate], who holds the following position at the issuer or an affiliate of the issuer: ____________________________________.

 

You have known that person for _________ years.

 

 

 

B-1-2 
 
 

 

4.       Your name and signature
By signing this form, you confirm that you have read this form and you understand the risks of making this investment as identified in this form.  You also confirm that you are eligible to make this investment because you are a family member, close personal friend or close business associate of the person identified in section 5 of this form.
First and last name (please print):

Signature:

 

Date:
SECTION 5 TO BE COMPLETED BY THE PERSON WHO CLAIMS THE CLOSE PERSONAL RELATIONSHIP, IF APPLICABLE
5.       Contact person at the issuer or an affiliate of the issuer

[Instruction: To be completed by the director, executive officer, control person or founder with whom the purchaser has a close personal relationship indicated under sections 3B, C or D of this form.]

 

By signing this form, you confirm that you have, or your spouse has, the following relationship with the purchaser: [check the box that applies]

[_]       family relationship as set out in section 3B of this form

[_]       close personal friendship as set out in section 3C of this form

[_]       close business associate relationship as set out in section 3D of this form

 

First and last name of contact person (please print):
Position with the issuer or affiliate of the issuer (director, executive officer, control person or founder):
Telephone: Email:

Signature:

 

 

Date:
SECTION 6 TO BE COMPLETED BY THE ISSUER
6.       For more information about this investment

Arras Minerals Corp.

777 Dunsmuir Street, Suite 1610

Vancouver, B.C. V7Y 1K4

Attention: Christopher Richards, Chief Financial Officer

Email: crichards@silverbullresources.com.

For more information about prospectus exemptions, contact your local securities regulator. You can find contact information at www.securities-administrators.ca.

Signature of executive officer of the issuer (other than the purchaser):

 

Date:
         

 

B-1-3 
 
 

 

Form instructions:

1. This form does not mandate the use of a specific font size or style but the font must be legible.
2. The information in sections 1, 5 and 6 must be completed before the purchaser completes and signs the form.
3. The purchaser, an executive officer who is not the purchaser and, if applicable, the person who claims the close personal relationship to the purchaser must sign this form. Each of the purchaser, contact person at the issuer and the issuer must receive a copy of this form signed by the purchaser. The issuer is required to keep a copy of this form for 8 years after the distribution.
4. The detailed relationships required to purchase securities under this exemption are set out in section 2.5 of National Instrument 45-106 Prospectus and Registration Exemptions. For guidance on the meaning of “close personal friend” and “close business associate”, please refer to sections 2.7 and 2.8, respectively, of Companion Policy 45-106CP Prospectus and Registration Exemptions.

 

 

 

B-1-4 
 
 

Appendix 2

Saskatchewan Form 45-106F5

 

Risk Acknowledgement

Saskatchewan Close Personal Friends and Close Business Associates

I acknowledge that this is a risky investment:

· I am investing entirely at my own risk.
· No securities regulatory authority has evaluated or endorsed the merits of these securities.
· The person selling me these securities is not registered with a securities regulatory authority and has no duty to tell me whether this investment is suitable for me.
· I will not be able to sell these securities for 4 months.
· I could lose all the money I invest.
· I do not have a 2-day right to cancel my purchase of these securities or the statutory rights of action for misrepresentation I would have if I were purchasing the securities under a prospectus. I do have a 2-day right to cancel my purchase of these securities if I receive an amended offering document.

I am investing $____________ [total consideration] in total; this includes any amount I am obliged to pay in future.

I am a close personal friend or close business associate of __________________________ [state name], who is a _________________________ [state title - founder, director, senior officer or control person] of Arras Minerals Corp. or an affiliate of Arras Minerals Corp.

I acknowledge that I am purchasing based on my close relationship with ____________________ [state name of founder, director, senior officer or control person] whom I know well enough and for a sufficient period of time to be able to assess her/his capabilities and trustworthiness.

I acknowledge that this is a risky investment and that I could lose all the money I invest.

 

     
Date   Signature of Subscriber
     
    Print name of Subscriber

 

 

Sign 2 copies of this document. Keep one copy for your records.

 

 

 

 

 

B-2-1 
 
 

SCHEDULE “C”

UNITED STATES ACCREDITED INVESTOR CERTIFICATE

TO: Arras Minerals Corp. (the “Company”)

RE: SUBSCRIPTION FOR SHARES OF THE COMPANY

Reference is made to the subscription agreement between the Company and the undersigned (referred to herein as the “Purchaser”) dated as of the date hereof (the “Subscription Agreement”). Upon execution of this United States Accredited Investor Certificate, this United States Accredited Investor Certificate shall be incorporated into and form a part of the Subscription Agreement. Terms not otherwise defined herein have the meanings attributed to them in the Subscription Agreement.

In connection with the purchase of the Purchased Shares by the Purchaser, the Purchaser represents, warrants and covenants (on its own behalf or, if applicable, on behalf of those for whom the Purchaser is contracting under the Subscription Agreement) and certifies to the Company and acknowledges that the Company is relying thereon that the Purchaser has read the following definition of an “accredited investor” (“U.S. Accredited Investor”) under Rule 501(a) of Regulation D under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), and certifies that the Purchaser is a U.S. Accredited Investor that satisfies one or more of the categories indicated below (check one):

 

“U.S. Accredited Investor” shall mean any of (check one):

(a) £ A bank, as defined in Section 3(a)(2) of the U.S. Securities Act, or savings and loan association or other institution as defined in Section 3(a)(5)(A) of the U.S. Securities Act, whether acting in its individual or fiduciary capacity;  
(b) £ A broker or dealer registered pursuant to Section 15 of the United States Securities Exchange Act of 1934, as amended;  
(c) An investment adviser registered pursuant to Section 203 of the United States Investment Advisers Act of 1940, as amended (the “U.S. Investment Advisers Act”), or registered pursuant to the laws of a state;  
(d) An investment adviser relying on the exemption from registering with the United States Securities and Exchange Commission under Section 203(l) or (m) of the U.S. Investment Advisers Act;  
(e) £ An insurance company (as defined in Section 2(a)(13) of the U.S. Securities Act);  
(f) £ An investment company registered under the United States Investment Company Act of 1940, as amended (the “U.S. Investment Company Act”);  
(g) £ A business development company (as defined in Section 2(a)(48) of the U.S. Investment Company Act);  
(h) £ A Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the United States Small Business Investment Act of 1958, as amended;  
(i) A rural business investment company (as defined in Section 384A of the Consolidated Farm and Rural Development Act);  
(j) £ A plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of US$5,000,000;  

 

 

 
 
 

 

(k) £ An employee benefit plan within the meaning of the United States Employee Retirement Income Security Act of 1974, as amended (“ERISA”) (1) whose investment decision is made by a plan fiduciary as defined in Section 3(21) of ERISA, which is either a bank, savings and loan association, insurance company or registered investment advisor, or (2) having total assets in excess of US$5,000,000, or (3) if a self-directed plan, with investment decisions made solely by persons that are “accredited investors”, as defined in Rule 501(a) of Regulation D under the U.S. Securities Act;  
(l) £ A private business development company as defined in Section 202(a)(22) of the United States Investment Advisers Act;  
(m) £ An organization described in Section 501(c)(3) of the United States Internal Revenue Code of 1986, as amended, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the Purchased Shares, with total assets in excess of US$5,000,000;  
(n) £ A director or executive officer of the Company;  
(o) £

A natural person with individual “net worth”, or joint “net worth” with his or her spouse, at the time of purchase in excess of US$1,000,000;

Note: For purposes of calculating “net worth” under this paragraph:

(i)       The person’s primary residence shall not be included as an asset;

(ii)       Indebtedness that is secured by the person’s primary residence, up to the estimated fair market value of the primary residence at the time of the sale of securities, shall not be included as a liability (except that if the amount of such indebtedness outstanding at the time of the sale of the Purchased Shares exceeds the amount outstanding 60 days before such time, other than as a result of the acquisition of the primary residence, the amount of such excess shall be included as a liability); and

(iii)       Indebtedness that is secured by the person’s primary residence in excess of the estimated fair market value of the primary residence at the time of the sale of the Purchased Shares shall be included as a liability.

 
(p)£ A natural person who had an individual income in excess of US$200,000 in each of the last two years or joint income with his or her spouse in excess of US$300,000 in each of those years, and who reasonably expects to reach the same income level in the current year;  
(q) A natural person who holds, in good standing, one of the following professional licenses: the General Securities Representative license (Series 7), the Private Securities Offerings Representative license (Series 82), or the Investment Adviser Representative license (Series 65);  
(r) £ A trust, with total assets in excess of US$5,000,000, not formed for the specific purpose of acquiring the Purchased Shares, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) under the U.S. Securities Act; or  
(s) £ An entity in which all of the equity owners are U.S. Accredited Investors.  

 

The Purchaser acknowledges that if it is an individual U.S. Accredited Investor that is relying on the net worth or income eligibility qualifications set forth in (o) or (p) above, such Purchaser shall also complete and deliver to the Company a U.S. Individual Accredited Investor Questionnaire in the form attached as Appendix I to this Schedule “C”.

 

 

 
 
 

 

The representations, warranties, statements and certifications made in this United States Accredited Investor Certificate are true and accurate as of the date of this United States Accredited Investor Certificate and will be true and accurate as of the Closing Date and the Purchaser acknowledges that this certificate is incorporated into and forms part of the subscription agreement to which it is attached. If any such representation, warranty, statement or certification becomes untrue or inaccurate prior to the Closing Date, the undersigned Purchaser shall give the Company immediate written notice thereof.

 

 

 

 

 

Signature of Purchaser of Authorized Signatory of Purchaser
 
Name of Purchaser [Please Print]
Name and Office of Authorized Signatory of Purchaser [Please Print]

 

 

 
 
 

APPENDIX I TO SCHEDULE “C”

U.S. INDIVIDUAL ACCREDITED INVESTOR QUESTIONNAIRE

I understand that in order to be accepted as an “accredited investor”, I must satisfy certain of the following standards. The undersigned hereby represents and warrants to Arras Minerals Corp. (the “Company”) as follows:

 

GENERAL INFORMATION REQUIRED OF EACH PROSPECTIVE INVESTOR:

 

1. General Information

Name(s):        
Principal Residence:        
         
         
         
Business Hours Telephone:        
Home Telephone:        
Email:        
         

2. Financial Status. Please answer the following questions concerning your financial status by marking the appropriate box and filling in the blanks.

 

2.1 Does your individual or joint (together with your spouse) net worth exceed US$1,000,000? For the purpose of calculating your individual or joint (together with your spouse) net worth, (i) your primary residence shall not be included as an asset, (ii) indebtedness that is secured by your primary residence, up to the estimated fair market value of the primary residence as of the date hereof, shall not be included as a liability (except that if the amount of such indebtedness outstanding as of the date hereof exceeds the amount outstanding 60 days before the date hereof, other than as a result of the acquisition of the primary residence, the amount of such excess shall be included as a liability) and (iii) indebtedness that is secured by your primary residence in excess of the estimated fair market value of your primary residence as of the date hereof shall be included as a liability:

 

[_] Yes [_] No

2.1.1 If you answered “No” to Question 2.1, please indicate the actual amount of individual or joint (together with your spouse) net worth (calculated in accordance with the instructions provided in Question 2.1 above).

 


US$ ______________

 


2.2 Please indicate, for each of the two most recent years, what your individual income (or joint income together with your spouse) was, and for the current year what your individual income (or joint income together with your spouse) is expected to be.


2017 Individual ____________________ Joint ______________________

2018 Individual ____________________ Joint ______________________

2019 Individual ____________________ Joint ______________________

 

3. Financial Background. Please respond to the following questions, supplying as much detail as possible in order to make your answers complete.

 

3.1 Indicate by check mark which of the following categories best describes the extent of your prior experience in the areas of investment listed below:

 

No Experience Some Experience Substantial Experience  
[_] [_] [_] Marketable Securities
[_] [_] [_] Securities for which no public market exists
       



3.2 For those investments for which you indicated “Substantial Experience” or “Some Experience” in question 3.1 above, please answer the following additional question:

How often do you make your own investment decisions with respect to such investments?

 

C-1 
 
 

3.3 Do you have adequate means of providing for your current needs and personal contingencies and have no need for liquidity in such investments?

[_] Yes [_] No

4. Prior Purchases of Securities. Have you made prior purchases of securities sold in reliance on the private offering exemption from registration under the U.S. Securities Act?

[_] Yes [_] No


I hereby represent and warrant that:

(a) I, individually or together with my spouse, have a net worth (i.e., a total assets in excess of total liabilities, as calculated in accordance with the instructions provided in Question 2.1 above) of at least US$1,000,000; or

(b) I, individually (without my spouse), have had an income of not less than US$200,000 (or, jointly with my spouse, US$300,000) during each of the last two years, and reasonably expect that I will have an income of at least US$200,000 (or US$300,000, together with my spouse) during the present year.


The foregoing representations and warranties and all other information which I have provided to the Company concerning myself and my financial condition are true and accurate as of the date hereof. If in any respect, such representations, warranties, or information shall not be true and accurate, I will give written notice of such fact to the Company specifying which representations, warranties or information are not true and accurate, and the reasons therefor.

I understand that the information contained herein is being furnished by me in order for the Company to determine my suitability as an “accredited investor”, may be accepted by the Company in light of the requirements of Section 4(a)(2) of the U.S. Securities Act and that the Company will rely on the information contained herein for purposes of such determination.

 

 

IN WITNESS WHEREOF, the undersigned has executed this U.S. Individual Accredited Investor Questionnaire as of the day of _______________________, 2021.

 

___________________________________
Print or Type Name

 


X___________________________________
Signature

 

 

C-2 
 
 

SCHEDULE “D”

CERTIFICATION OF U.S. PURCHASER

Form of Declaration for Removal of Legend

TO: Arras Minerals Corp. (the “Company”) (and any future transfer agent thereof)

The undersigned (a) acknowledges that the sale of ____________ of the Company to which this declaration relates, represented by certificate number _______________(the “Securities”), is being made in reliance on Rule 904 of Regulation S (“Regulation S”) under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), and (b) certifies that (1) it is not (A) an “affiliate” (as defined in Rule 405 under the U.S. Securities Act) (an “Affiliate”) of the Company, (B) a “distributor” (as defined in Regulation S) (a “Distributor”), (C) an Affiliate of a Distributor or (D) acting on behalf of any of the persons set forth in (A), (B) or (C) above, (2) the offer of the Securities was not made to a person in the United States, and either (A) at the time the buy order was originated, the buyer was outside the United States, or the seller and any person acting on its behalf reasonably believed that the buyer was outside the United States, or (B) the transaction was executed in, on or through the facilities of the Toronto Stock Exchange or the TSX Venture Exchange (or another designated offshore securities market) and neither the seller nor any person acting on its behalf knows that the transaction has been prearranged with a buyer in the United States, (3) neither the seller nor any Affiliate of the seller nor any person acting on any of their behalf has engaged or will engage in any “directed selling efforts” in the United States in connection with the offer and sale of the Securities, (4) the sale of the Securities is bona fide and not for the purpose of “washing off” the resale restrictions imposed because the Securities are “restricted securities” (as such term is defined in Rule 144(a)(3) under the U.S. Securities Act), (5) the seller does not intend to replace the Securities with fungible unrestricted securities, and (6) the contemplated sale of the Securities is not a transaction, or part of a series of transactions which, although in technical compliance with Regulation S under the U.S. Securities Act, is part of a plan or scheme to evade the registration provisions of the U.S. Securities Act. Terms used herein have the meanings given to them by Regulation S under the U.S. Securities Act.

 

     
Date   Signature of Subscriber
     
    Print name of Signatory (if different from Purchaser)
     
    Title

 

 

 

D-1
 
 

 

 

Exhibit 4.11

 

 

ARras Minerals Corp.

EQUITY Incentive PLAN

April 15, 2021

 

 

 
 
 

 

PART I – GENERAL PROVISIONS

 

1. PREAMBLE AND DEFINITIONS
1.1 Title and Parts.

The Plan described in this document shall be called the “Arras Minerals Corp. Equity Incentive Plan”.

The Plan is divided into four Parts. This Part I contains provisions of general application to all Grants; Part II applies specifically to Options; Part III applies specifically to Share Units; and Part IV applies specifically to Restricted Stock and other Share-based awards.

1.2 Eligibility

Only Eligible Persons shall be eligible to receive Grants under this Plan.

1.3 Purpose of the Plan.

The purposes of the Plan are:

(a) to promote a further alignment of interests between officers, employees and other eligible service providers and the shareholders of the Corporation;
(b) to associate a portion of the compensation payable to officers, employees and other eligible service providers with the returns achieved by shareholders of the Corporation; and
(c) to attract and retain officers, employees and other eligible service providers with the knowledge, experience and expertise required by the Corporation.
1.4 Definitions.
1.4.1 “affiliate” means “affiliated corporations” and a corporation shall be deemed to be an affiliate of another corporation if one of them is the Subsidiary of the other or if both are Subsidiaries of the same corporation or if each of them is controlled by the same Person and also includes those issuers that are similarly related, whether or not any of the issuers are corporations, partnerships, limited partnerships, trusts, income trusts or investment trusts or any other organized entity issuing securities.
1.4.2 “Applicable Law” means any applicable provision of law, domestic or foreign, including, without limitation, applicable securities legislation, together with all regulations, rules, policy statements, rulings, notices,
1 
 
 

orders or other instruments promulgated thereunder, and Stock Exchange Rules.

1.4.3 “associate”, where used to indicate a relationship with a Person, means:
(a) any corporation of which such Person beneficially owns, directly or indirectly, voting securities carrying more than 10 per cent of the voting rights attached to all voting securities of the corporation for the time being outstanding;
(b) any partner of that Person;
(c) any trust or estate in which such Person has a substantial beneficial interest or as to which such Person serves as trustee or in a similar capacity;
(d) any relative of that Person who resides in the same home as that Person;
(e) any Person who resides in the same home as that person and to whom that Person is married or with whom that Person is living in a conjugal relationship outside marriage; or
(f) any relative of a Person mentioned in clause (e) who has the same home as that Person.
1.4.4 “Beneficiary” means, subject to Applicable Law, an individual who has been designated by a Participant, in such form and manner as the Board may determine, to receive benefits payable under the Plan upon the death of the Participant, or, where no such designation is validly in effect at the time of death, the Participant’s legal representative.
1.4.5 “Blackout Period” means a period of time when, pursuant to any policies of the Corporation, any securities of the Corporation may not be traded by certain persons as designated by the Corporation, including any holder of a Grant.
1.4.6 “Board” means the Board of Directors of the Corporation.
1.4.7 “Cause” means:
(a) subject to (b) or (c), as applicable, below, “just cause” or “cause” for Termination by the Corporation or a Subsidiary of the Corporation as determined under Applicable Law;
(b) where a Participant has a written employment agreement with the Corporation or a Subsidiary of the Corporation, “Cause” as defined in such employment agreement, if applicable; or
2 
 
 
(c) where a Participant provides services as an independent contractor pursuant to a contract for services with the Corporation or a Subsidiary of the Corporation, any material breach of such contract.
1.4.8 “Change in Control” means:
(a) the acquisition by any “offeror” (as defined in the Securities Act (Ontario)) of beneficial ownership of more than 50% of the outstanding voting securities of the Corporation, by means of a take-over bid or otherwise;
(b) any consolidation, reorganization, merger, amalgamation or statutory amalgamation or arrangement of the Corporation with or into another corporation, a separation of the business of the Corporation into two or more entities, or pursuant to which Shares would be converted into cash, securities or other property, other than a merger of the Corporation in which shareholders immediately prior to the merger have the same proportionate ownership of stock of the surviving corporation immediately after the merger;
(c) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Corporation;
(d) the approval by the shareholders of any plan of liquidation or dissolution of the Corporation; or
(e) the replacement by way of election or appointment at any time of one-half or more of the total number of the then incumbent members of the Board, unless such election or appointment is approved by 50% or more of the Board in office immediately preceding such election or appointment in circumstances where such election or appointment is to be made other than as a result of a dissident public proxy solicitation, whether actual or threatened.
1.4.9 “Code” means the United States Internal Revenue Code of 1986, as amended, and any applicable United States Treasury Regulations and other binding regulatory guidance thereunder.
1.4.10 “Control” means:
(a) when applied to the relationship between a Person and another Person, the beneficial ownership by that first Person, directly or indirectly, of voting securities or other interests in such second Person entitling the holder to exercise control and direction in fact over the activities of such second Person, including by way of electing a majority of the members of the board of the second Person; and
(b) notwithstanding the foregoing, when applied to the relationship between a Person and a partnership, limited partnership or joint
3 
 
 

venture, means the contractual right to direct the affairs of the partnership, limited partnership or joint venture; and

the words “Controlled by”, “Controlling” and similar words have corresponding meanings; provided that a Person who Controls a second Person will be deemed to Control a third Person which is Controlled by such second Person and so on.

1.4.11 “Corporation” means Arras Minerals Corp., and includes any successor corporation thereof.
1.4.12 “Director” means a director of the Corporation from time to time.
1.4.13 “Disability” means:
(a) subject to (b) below, a Participant’s physical or mental incapacity that prevents him/her from substantially fulfilling his or her duties and responsibilities on behalf of the Corporation or, if applicable, a Subsidiary of the Corporation as determined by the Board and, in the case of a Participant who is an employee of the Corporation or a Subsidiary of the Corporation, in respect of which the Participant commences receiving, or is eligible to receive, disability benefits under the Corporation’s or Subsidiary’s long-term disability plan; or
(b) where a Participant has a written employment agreement with the Corporation or a Subsidiary of the Corporation, “Disability” as defined in such employment agreement, if applicable.
1.4.14 “Disability Date” means, the date of a Participant’s Termination as a result of a Disability.
1.4.15 “Eligible Person” means an individual Employed by the Corporation or any Subsidiary of the Corporation, a Director, Officer and a Service Provider, who, by the nature of his or her position or job is, in the opinion of the Board, in a position to contribute to the success of the Corporation.
1.4.16 “Employed” means, with respect to a Participant, that:
(a) the Participant is rendering services to the Corporation or a Subsidiary of the Corporation (excluding services exclusively as a Director) including as a Service Provider (referred to in Section 1.4.42 as “active Employment”); or
(b) the Participant is not actively rendering services to the Corporation or a Subsidiary of the Corporation due to vacation, temporary illness, maternity or parental leave or leave on account of Disability or other authorized leave of absence (provided, in the case of a US Taxpayer, that the Participant has not incurred a “Separation From Service”, within the meaning of Section 409A of the Code).

and “Employment’ has the corresponding meaning.

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1.4.17 “Exercise Price” means, with respect to an Option, the price payable by a Participant to purchase one Share on exercise of such Option, which shall not be less than one hundred percent (100%) of the Market Price on the Grant Date of the Option covering such Share, subject to adjustment pursuant to Section 5.
1.4.18 “Grant” means a grant or right granted under the Plan consisting of one or more Options, RSUs or PSUs, shares of Restricted Stock or such other award as may be permitted hereunder.
1.4.19 “Grant Agreement” means an agreement between the Corporation and a Participant evidencing a Grant and setting out the terms under which such Grant is made, together with such schedules, amendments, deletions or changes thereto as are permitted under the Plan.
1.4.20 “Grant Date” means the effective date of a Grant.
1.4.21 “Insider” means:
(a) a director or officer of the Corporation;
(b) a director or officer of a Person that is itself an insider or subsidiary of the Corporation;
(c) a Person that has,
(i) beneficial ownership of, or control or direction over, directly or indirectly, securities of the Corporation carrying more than 10 per cent of the voting rights attached to all the Corporation’s outstanding voting securities, excluding, for the purpose of the calculation of the percentage held, any securities held by the Person as underwriter in the course of a distribution; or
(ii) a combination of beneficial ownership of, and control or direction over, directly or indirectly, securities of a reporting issuer carrying more than 10 per cent of the voting rights attached to all the Corporation’s outstanding voting securities, excluding, for the purpose of the calculation of the percentage held, any securities held by the Person as underwriter in the course of a distribution;
(d) the Corporation in the event that it has purchased, redeemed or otherwise acquired a security of its own issue, for so long as it continues to hold that security;
(e) a Person designated as an insider under the Securities Act (Ontario); and
(f) an associate or affiliate of any of the foregoing.
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1.4.22 “Market Price” means, with respect to any particular date:
(a) if the Shares are listed on only one Stock Exchange, the volume weighted average trading price per Share on such Stock Exchange during the five (5) immediately preceding Trading Days;
(b) if the Shares are listed on more than one Stock Exchange, the Market Price as determined in accordance with paragraph (a) above for the primary Stock Exchange on which the greatest volume of trading of the Shares occurred during the five (5) immediately preceding Trading Days; and
(c) if the Shares are not listed for trading on a Stock Exchange, a price which is determined by the Board in good faith to be the fair market value of the Shares.
1.4.23 “Officer” means an officer of the Corporation or any Subsidiary of the Corporation from time to time.
1.4.24 “Option” means an option to purchase a Share granted by the Board to an Eligible Person in accordance with Section 3 and Section 8.1.
1.4.25 “Participant” means an Eligible Person to whom a Grant is made and which Grant or a portion thereof remains outstanding.
1.4.26 “Performance Conditions” means such financial, personal, operational or transaction-based performance criteria as may be determined by the Board in respect of a Grant to any Participant or Participants and set out in a Grant Agreement. Performance Conditions may apply to the Corporation, a Subsidiary of the Corporation, the Corporation and its Subsidiaries as a whole, a business unit of the Corporation or group comprised of the Corporation and some Subsidiaries of the Corporation or a group of Subsidiaries of the Corporation, either individually, alternatively or in any combination, and measured either in total, incrementally or cumulatively over a specified performance period, on an absolute basis or relative to a pre-established target or milestone, to previous years’ results or to a designated comparator group, or otherwise, and may incorporate multipliers or adjustments based on the achievement of any such performance criteria.
1.4.27 “Performance Period” means, with respect to PSUs, a period specified by the Board for achievement of any applicable Performance Conditions as a condition to Vesting.
1.4.28 “Performance Share Unit” or “PSU” means a right granted to an Eligible Person in accordance with Section 3.1(c) and (d) and Section 11.1 to receive a Share or the Market Price, as determined by the Board, that generally becomes Vested, if at all, subject to the attainment of certain Performance Conditions and satisfaction of such other conditions to Vesting, if any, as may be determined by the Board.
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1.4.29 “Person” means an individual, corporation, company, cooperative, sole proprietorship, partnership, limited partnership, limited liability partnership, joint venture, venture capital fund, limited liability company, unlimited liability company, trust, trustee, executor, administrator, legal personal representative, estate, unincorporated association, organization or syndicate, entity with juridical personality or governmental authority or body, or other entity, whether or not having legal status, however designated or constituted, and pronouns which refer to a Person shall have a similarly extended meaning.
1.4.30 “Plan” means this Arras Minerals Corp. Equity Incentive Plan, including any schedules or appendices hereto, as may be amended from time to time.
1.4.31 “Restricted Share Unit” or “RSU” means a right granted to an Eligible Person in accordance with Section 3.1(c) and (d) and Section 11.1 to receive a Share or the Market Price, as determined by the Board, that generally becomes Vested, if at all, following a period of continuous Employment of the Participant.
1.4.32 “Restricted Stock” means Shares granted to an Eligible Person that are subject to a Restriction (as defined in Section 15).
1.4.33 “Restrictive Covenant” means any obligation of a Participant to the Corporation or a Subsidiary of the Corporation to (A) maintain the confidentiality of information relating to the Corporation or the Subsidiary of the Corporation and/or its business, (B) not engage in employment or business activities that compete with the business of the Corporation or the Subsidiary of the Corporation, (C) not solicit employees or other service providers, customers and/or suppliers of the Corporation or the Subsidiary of the Corporation, whether during or after employment with the Corporation or Subsidiary of the Corporation, and whether such obligation is set out in a Grant Agreement issued under the Plan or other agreement between the Participant and the Corporation or Subsidiary of the Corporation, including, without limitation, an employment agreement, or otherwise.
1.4.34 “Security Based Compensation Arrangement” means an option, option plan, security based appreciation right, employee unit purchase plan, restricted, performance of deferred unit plan, long-term incentive plan or any other compensation or incentive mechanism, in each case, involving the issuance or potential issuance of Shares to one or more directors or officers of the Corporation or a Subsidiary of the Corporation, current or past full-time or part-time employees of the Corporation or a Subsidiary of the Corporation, Insiders or Service Providers of the Corporation or any Subsidiary of the Corporation including a Share purchased from treasury by one or more officers, directors or officers of the Corporation or any Subsidiary of the Corporation, current or past full-time or part-time employees of the Corporation or a Subsidiary of the Corporation, Insiders or Service Providers of the Corporation or a Subsidiary of the Corporation which is financially assisted by the
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Corporation or a Subsidiary of the Corporation by way of a loan, guarantee or otherwise, but a Security Based Compensation Arrangement does not include an arrangement that does not involve the issuance from treasury or potential issuance from treasury of Shares or other equity securities of the Corporation.

1.4.35 “Service Provider” means a Person, other than an employee, officer or director of the Corporation or a Subsidiary of the Corporation, that:
(a) is engaged to provide, on a bona fide basis, for an initial, renewable or extended period of twelve (12) months or more, services to the Corporation or a Subsidiary of the Corporation, other than services provided in relation to a distribution of securities;
(b) provides the services under a written contract between the Corporation or a Subsidiary of the Corporation and the Person;
(c) in the reasonable opinion of the Corporation, spends or will spend a significant amount of time and attention on the affairs and business of the Corporation or a Subsidiary of the Corporation;

and includes

(d) for an individual Service Provider, a corporation of which the individual Service Provider is an employee or shareholder, and a partnership of which the individual Service Provider is an employee or partner; and
(e) for a Service Provider that is not an individual, an employee, executive officer, or director of the Service Provider, provided that the individual employee, executive officer, or director spends or will spend a significant amount of time and attention on the affairs and business of the Corporation or a Subsidiary of the Corporation.
1.4.36 “Share” means a common share of the Corporation or, in the event of an adjustment contemplated by Section 5.1, such other security to which a Participant may be entitled upon the exercise or settlement of a Grant as a result of such adjustment.
1.4.37 “Share Unit” means either an RSU or a PSU, as the context requires.
1.4.38 “Specified Officer” means, for the Corporation, an individual who is:
(a) the chief executive officer or chief financial officer;
(b) any “executive officer” (as defined under applicable Canadian securities laws) of the Corporation; or
(c) a vice-president of the Corporation.
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1.4.39 “Stock Exchange” means the Toronto Stock Exchange and such other stock exchange on which the Shares are listed, or if the Shares are not listed on any stock exchange, then on the over-the-counter market.
1.4.40 “Stock Exchange Rules” means the applicable rules of any Stock Exchange upon which Shares of the Corporation are listed.
1.4.41 “Subsidiary” means, in respect of a Person, another Person that is Controlled directly or indirectly by such Person and includes a Subsidiary of that Subsidiary.
1.4.42 “Termination” means (i) the termination of a Participant’s Employment with the Corporation or a Subsidiary of the Corporation (other than in connection with the Participant’s transfer to Employment with the Corporation or another Subsidiary), which shall occur on the date on which the Participant ceases to render services to the Corporation or Subsidiary, as applicable, whether such termination is lawful or otherwise (including, without limitation, by reason of resignation, death, frustration of contract, termination for cause, termination without cause, or constructive dismissal), without giving effect to any pay in lieu of notice (paid by way of lump sum or salary continuance), severance pay, benefits continuance or other termination-related payments or benefits to which the Participant may be entitled pursuant to the common law or otherwise (except as may be expressly required to satisfy the minimum requirements of applicable employment or labour standards legislation), but, for greater certainty, a Participant’s absence from active work during a period of vacation, temporary illness, maternity or parental leave, leave on account of Disability or any other authorized leave of absence shall not be considered to be a “Termination”, and (ii) in the case of a Participant who does not return to active Employment with the Corporation or a Subsidiary of the Corporation immediately following a period of absence due to vacation, temporary illness, maternity or parental leave, leave on account of Disability or other authorized leave of absence, such cessation shall be deemed to occur on the last day of such period of absence as approved by the Corporation or a Subsidiary of the Corporation; provided, in each case, that, in the case of any Grant that constitutes deferred compensation subject to Section 409A of the Code that is issued to a US Taxpayer, the Termination constitutes a “Separation From Service”, within the meaning of Section 409A of the Code, and “Terminated” and “Terminates” shall be construed accordingly.
1.4.43 “Time Vesting” means any conditions relating to the passage of time or continued service with the Corporation or Subsidiary of the Corporation for a period of time in respect of a Grant, as may be determined by the Board.
1.4.44 “Trading Day” means a day on which the Stock Exchange is open for trading and on which the Shares actually traded.
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1.4.45 “US Taxpayer” means an individual who is subject to tax under the Code in respect of any Grants, amounts payable or Shares deliverable under this Plan.
1.4.46 “Vested” means, with respect to any Option, Share Unit, share of Restricted Stock or other award included in a Grant, that the applicable conditions with respect to Time Vesting, achievement of Performance Conditions and/or any other conditions established by the Board have been satisfied or, to the extent permitted under the Plan, waived, whether or not the Participant’s rights with respect to such Grant may be conditioned upon prior or subsequent compliance with any Restrictive Covenants (and any applicable derivative term shall be construed accordingly).
1.4.47 “Vesting Date” means the date on which the applicable Time Vesting, Performance Conditions and/or any other conditions for an Option, Share Unit, share of Restricted Stock or other award included in a Grant becoming Vested are met, deemed to have been met or waived as contemplated in Section 3.1.
2. CONSTRUCTION AND INTERPRETATION
2.1 Gender, Singular, Plural.

In the Plan, references to one gender include all genders; and references to the singular shall include the plural and vice versa, as the context shall require.

2.2 Severability.

If any provision or part of the Plan is determined to be void or unenforceable in whole or in part, such determination shall not affect the validity or enforcement of any other provision or part thereof.

2.3 Headings and Sections.

Headings wherever used herein are for reference purposes only and do not limit or extend the meaning of the provisions herein contained. A reference to a section or schedule shall, except where expressly stated otherwise, mean a section or schedule of the Plan, as applicable.

3. ADMINISTRATION
3.1 Administration by the Board.

The Plan shall be administered by the Board in accordance with its terms and subject to Applicable Law. Subject to and consistent with the terms of the Plan, in addition to any authority of the Board specified under any other terms of the Plan, the Board shall have full and complete discretionary authority to:

(a) interpret the Plan and Grant Agreements;
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(b) prescribe, amend and rescind such rules and regulations and make all determinations necessary or desirable for the administration and interpretation of the Plan and instruments of grant evidencing Grants;
(c) determine those Eligible Persons who may receive Grants as Participants, grant one or more Grants to such Participants and approve or authorize the applicable form and terms of the related Grant Agreement;
(d) determine the terms and conditions of Grants granted to any Participant, including, without limitation, as applicable (i) Grant Value and the number of Shares subject to a Grant, (ii) the Exercise Price for Shares subject to a Grant, (iii) the conditions to the Vesting of a Grant or any portion thereof, including, as applicable, the period for achievement of any applicable Performance Conditions as a condition to Vesting, and conditions pertaining to compliance with Restrictive Covenants, and the conditions, if any, upon which Vesting of any Grant or any portion thereof will be waived or accelerated without any further action by the Board, (iv) the circumstances upon which a Grant or any portion thereof shall be forfeited, cancelled or expire, including in connection with the breach by a Participant of any Restrictive Covenant, (v) the consequences of a Termination with respect to a Grant, (vi) the manner of exercise or settlement of the Vested portion of a Grant, (vii) whether, and the terms upon which, a Grant may be settled in cash, newly issued Shares or a combination thereof, and (viii) whether, and the terms upon which, any Shares delivered upon exercise or settlement of a Grant must be held by a Participant for any specified period of time;
(e) determine whether, and the extent to which, any Performance Conditions or other conditions applicable to the Vesting of a Grant have been satisfied or shall be waived or modified;
(f) make such rules, regulations and determinations as it deems appropriate under the Plan in respect of any leave of absence or disability of any Participant. Without limiting the generality of the foregoing, the Board shall be entitled to determine:
(i) whether or not any such leave of absence shall constitute a Termination within the meaning of the Plan;
(ii) the impact, if any, of any such leave of absence on Grants issued under the Plan made to any Participant who takes such leave of absence (including, without limitation, whether or not such leave of absence shall cause any Grants to expire and the impact upon the time or times such Grants shall be exercisable);
(g) amend the terms of any Grant Agreement or other documents evidencing Grants; and
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(h) determine whether, and the extent to which, adjustments shall be made pursuant to Section 5 and the terms of such adjustments.
3.2 All determinations, interpretations, rules, regulations, or other acts of the Board respecting the Plan or any Grant shall be made in its sole discretion and shall be conclusively binding upon all persons.
3.3 Subject to Section 6.5, the Board may, from time to time, amend the Plan for the purpose of establishing one or more sub-plans for the benefit of Eligible Persons who are subject to the laws of a jurisdiction other than Canada in connection with their participation in the Plan.

The Board may also prescribe terms for Grant Agreements in respect of Eligible Persons who are subject to the laws of a jurisdiction other than Canada in connection with their participation in the Plan that are different than the terms of the Grant Agreements for Eligible Persons who are subject to the laws of Canada in connection with their participation in the Plan, and/or deviate from the terms of the Plan set out herein, for purposes of compliance with Applicable Law in such other jurisdiction or where, in the Board’s opinion, such terms or deviations are necessary or desirable to obtain more advantageous treatment for the Corporation, a Subsidiary of the Corporation or the Eligible Person in respect of the Plan under the Applicable Law of the other jurisdiction.

Notwithstanding the foregoing, the terms of any Grant Agreement authorized pursuant to this Section 3.3 shall be consistent with the Plan to the extent practicable having regard to the Applicable Law of the jurisdiction in which such Grant Agreement is applicable and in no event shall contravene the Applicable Law of Canada.

3.4 The Board may, in its discretion, subject to Applicable Law, delegate its powers, rights and duties under the Plan, in whole or in part, to a committee of the Board, a person or persons, as it may determine, from time to time, on terms and conditions as it may determine, except that the Board shall not, and shall not be permitted to delegate any such powers, rights or duties (i) with respect to the grant, amendment, administration or settlement of any Grant to the extent delegation is not consistent with Applicable Law and any such purported delegation or action shall not be given effect, and (ii) provided that the composition of the committee of the Board, person or persons, as the case may be, shall comply with Applicable Law. In addition, provided it complies with the foregoing, the Board may appoint or engage a trustee, custodian or administrator to administer or implement the Plan or any aspect of it.
4. SHARE RESERVE
4.1 Subject to Section 4.4 and any adjustment pursuant to Section 5.1, the aggregate number of Shares that may be issued pursuant to Grants made under the Plan together with all other Security Based Compensation Arrangements of the Corporation shall be equal to ten percent (10.0%) of the outstanding Shares from time to time or such other number as may be approved by the applicable stock exchange and the shareholders from time to time.
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4.2 The aggregate number of Shares reserved for issuance to any one Participant under the Plan, together with all other Security Based Compensation Arrangements of the Corporation, must not exceed five percent (5.0%) of the aggregate issued and outstanding Shares.
4.3 The maximum number of Shares of the Corporation
(a) issued to Insiders within any one year period, and
(b) issuable to Insiders, at any time,

under the Plan, or when combined with all of the Corporation’s other Security Based Compensation Arrangements, shall not exceed ten percent (10.0%) of the number of the aggregate issued and outstanding Shares.

4.4 For purposes of computing the total number of Shares available for grant under the Plan or any other Security Based Compensation Arrangement of the Corporation, Shares subject to any Grant (or any portion thereof) that are forfeited, surrendered, cancelled or otherwise terminated, prior to the issuance of such Shares shall again be available for grant under the Plan.
5. Alteration of Capital And Change In Control
5.1 Notwithstanding any other provision of the Plan, and subject to Applicable Law, in the event of any change in the Shares by reason of any dividend (other than dividends in the ordinary course), split, recapitalization, reclassification, amalgamation, arrangement, merger, consolidation, combination or exchange of Shares or distribution of rights to holders of Shares or any other relevant changes to the authorized or issued capital of the Corporation, if the Board shall determine that an equitable adjustment should be made, such adjustment shall, subject to Applicable Law, be made by the Board to (i) the number of Shares subject to the Plan; (ii) the securities into which the Shares are changed or are convertible or exchangeable; (iii) any Options then outstanding; (iv) the Exercise Price in respect of such Options; and/or (v) with respect to the number of Share Units outstanding under the Plan, and any such adjustment shall be conclusive and binding for all purposes of the Plan.
5.2 No adjustment provided for pursuant to Section 5.1 shall require the Corporation to issue fractional Shares or consideration in lieu thereof in satisfaction of its obligations under the Plan. Any fractional interest in a Share that would, except for the provisions of this Section 5.2, be deliverable upon the exercise of any Grant shall be cancelled and not deliverable by the Corporation.
5.3 In the event of a Change in Control prior to the Vesting of a Grant, and subject to the terms of a Participant’s written employment agreement or contract for services with the Corporation or a Subsidiary of the Corporation and the applicable Grant Agreement, the Board shall have full authority to determine in its sole discretion the effect, if any, of a Change in Control on the Vesting, exercisability, settlement, payment or lapse of restrictions applicable to a Grant, which effect may be specified in the applicable Grant Agreement or determined at a subsequent time. Subject to Applicable Law, rules and regulations, the Board shall, at any time prior
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to, coincident with or after the effective time of a Change in Control, take such actions as it may consider appropriate, including, without limitation: (i) provide for the acceleration of any Vesting or exercisability of a Grant; (ii) provide for the deemed attainment of Performance Conditions relating to a Grant; (iii) provide for the lapse of restrictions relating to a Grant; (iv) provide for the assumption, substitution, replacement or continuation of any Grant by a successor or surviving corporation (or a parent or subsidiary thereof) with cash, securities, rights or other property to be paid or issued, as the case may be, by the successor or surviving corporation (or a parent or subsidiary thereof); (v) provide that that a Grant shall terminate or expire unless exercised or settled in full on or before a date fixed by the Board; or (vi) terminate or cancel any outstanding Grant in exchange for a cash payment (provided that, if as of the date of the Change in Control, the Board determines that no amount would have been realized upon the exercise or settlement of the Grant, then the Grant may be cancelled by the Corporation without payment of consideration).

6. MISCELLANEOUS
6.1 Compliance with Laws and Policies.

The Corporation’s obligation to make any payments or deliver (or cause to be delivered) any Shares hereunder is subject to compliance with Applicable Law. Each Participant shall acknowledge and agree (and shall be conclusively deemed to have so acknowledged and agreed by participating in the Plan) that the Participant will, at all times, act in strict compliance with Applicable Law and all other laws and any policies of the Corporation applicable to the Participant in connection with the Plan including, without limitation, the Insider Trading Policy of the Corporation, and furnish to the Corporation all information and undertakings as may be required to permit compliance with Applicable Law.

6.2 Withholdings.

So as to ensure that the Corporation or a Subsidiary of the Corporation, as applicable, will be able to comply with the applicable obligations under any federal, provincial, state or local law relating to the withholding of tax or other required deductions, the Corporation or the Subsidiary of the Corporation shall withhold or cause to be withheld from any cash amount payable to a Participant, either under this Plan, or otherwise, such amount as may be necessary to permit the Corporation or the Subsidiary of the Corporation, as applicable, to so comply. The Corporation and any Subsidiary of the Corporation may also satisfy any liability for any such withholding obligations, on such terms and conditions as the Corporation may determine in its sole discretion, by (a) selling on such Participant’s behalf, or requiring such Participant to sell, any Shares issued under this Plan, and retaining any amount payable which would otherwise be provided or paid to such Participant in connection with any such sale, or (b) requiring, as a condition to the delivery of Shares hereunder, that such Participant make such arrangements as the Corporation may require so that the Corporation and its Subsidiaries can satisfy such withholding obligations, including requiring such Participant to remit an amount to the Corporation or a Subsidiary of the Corporation in advance, or reimburse the Corporation or any Subsidiary of the Corporation for, any such withholding obligations.

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6.3 No Right to Continued Employment.

Nothing in the Plan or in any Grant Agreement entered into pursuant hereto shall confer upon any Participant the right to continue in the employ or service of the Corporation or any Subsidiary of the Corporation, to be entitled to any remuneration or benefits not set forth in the Plan or a Grant Agreement or to interfere with or limit in any way the right of the Corporation or any Subsidiary of the Corporation to terminate Participant’s employment or service arrangement with the Corporation or any Subsidiary of the Corporation.

6.4 No Additional Rights.

Neither the designation of an individual as a Participant nor the Grant of any Options, Share Units, Restricted Stock or other award to any Participant entitles any person to the Grant, or any additional Grant, as the case may be, of any Options, Share Units, Restricted Stock or other award under the Plan. For greater certainty, the Board’s decision to approve a Grant in any period shall not require the Board to approve a Grant to any Participant in any other period; nor shall the Board’s decision with respect to the size or terms and conditions of a Grant in any period require it to approve a Grant of the same or similar size or with the same or similar terms and conditions to any Participant in any other period. The Board shall not be precluded from approving a Grant to any Participant solely because such Participant may have previously received a Grant under this Plan or any other similar compensation arrangement of the Corporation or a Subsidiary. No Eligible Person has any claim or right to receive a Grant except as may be provided in a written employment or services agreement between an Eligible Person and the Corporation or a Subsidiary of the Corporation.

6.5 Amendment, Termination.

The Plan and any Grant made pursuant to the Plan may be amended, modified or terminated by the Board without approval of shareholders, provided that no amendment to the Plan or Grants made pursuant to the Plan may be made without the consent of a Participant if it adversely alters or impairs the rights of the Participant in respect of any Grant previously granted to such Participant under the Plan, except that Participant consent shall not be required where the amendment is required for purposes of compliance with Applicable Law. Notwithstanding the foregoing, the Board may amend the Plan and any Grant without approval for shareholders or Participants in order to satisfy the requirements of any Stock Exchange.

For greater certainty, the Plan may not be amended without shareholder approval in accordance with the requirements of the Stock Exchange to do any of the following:

(a) increase in the maximum number of Shares issuable pursuant to the Plan and as set out in Section 4.1;
(b) reduce the Exercise Price of an outstanding Option, except as set forth in Section 5;
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(c) extend the maximum term of any Grant made under the Plan, except pursuant to Section 8.6;
(d) amend the assignment provisions contained in Section 6.11;
(e) increase the number of Shares that may be issued or issuable to Insiders above the restriction or deleting the restriction on the number of Shares that may be issued or issuable to Insiders contained in Section 4.3;
(f) include other types of equity compensation involving the issuance of Shares under the Plan; or
(g) amend this Section 6.5 to amend or delete any of (a) through (k) or grant additional powers to the Board to amend the Plan or entitlements without shareholder approval.

For greater certainty and without limiting the foregoing, shareholder approval shall not be required for the following amendments and the Board may make the following changes without shareholder approval, subject to any regulatory approvals including, where required, the approval of any Stock Exchange:

(h) amendments of a “housekeeping” nature;
(i) a change to the Vesting provisions of any Grants;
(j) a change to the termination provisions of any Grant that does not entail an extension beyond the original term of the Grant; or
(k) amendments to the provisions relating to a Change in Control.
6.6 Currency.

All references in the Plan to currency refer to lawful Canadian, U.S. or other currency as determined from time to time by the Board in its sole discretion, failing which the reference shall be deemed to be to Canadian currency except where the context otherwise requires. To the extent that any amounts referenced in this Plan are denominated in a currency other than Canadian dollars or U.S. dollars, and are determined by the Board in its sole discretion to be converted to Canadian dollars, U.S. dollars or other currency, such amounts shall be converted at the applicable Bank of Canada daily exchange rate on the date as of which the converted amount is required to be determined.

6.7 Administration Costs.

The Corporation will be responsible for all costs relating to the administration of the Plan.

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6.8 Designation of Beneficiary.

Subject to the requirements of Applicable Law, a Participant may designate a Beneficiary, in writing, to receive any benefits that are provided under the Plan upon the death of such Participant. The Participant may, subject to Applicable Law, change such designation from time to time. Such designation or change shall be in such form as may be prescribed by the Board from time to time. A Beneficiary designation under this Section 6.8 and any subsequent changes thereto shall be filed with the general counsel of the Corporation.

6.9 Governing Law.

The Plan and any Grants pursuant to the Plan shall be governed by and construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein, and with respect to Participants who are US Taxpayers, with the Code and applicable federal laws of the US. The Board may provide that any dispute to any Grant shall be presented and determined in such forum as the Board may specify, including through binding arbitration. Any reference in the Plan, in any Grant Agreement issued pursuant to the Plan or in any other agreement or document relating to the Plan to a provision of law or rule or regulation shall be deemed to include any successor law, rule or regulation of similar effect or applicability. To the extent applicable, with respect to Participants who are US Taxpayers, this Plan shall be interpreted in accordance with the requirements of Code Sections 409A and the regulations, notices, and other guidance of general applicability issued thereunder.

6.10 Assignment.

The Plan shall inure to the benefit of and be binding upon the Corporation, its successors and assigns.

6.11 Transferability.

Unless otherwise provided in the Plan or in the applicable Grant Agreement, no Grant, and no rights or interests therein, shall or may be assigned, transferred, sold, exchanged, encumbered, pledged or otherwise hypothecated or disposed of by a Participant other than by testamentary disposition by the Participant or the laws of intestate succession. No such interest shall be subject to execution, attachment or similar legal process including without limitation seizure for the payment of the Participant’s debts, judgments, alimony or separate maintenance.

7. EFFECTIVE DATE
7.1 The Plan is established effective April 15, 2021.

 

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PART II – OPTIONS

8. Options
8.1 The Corporation may, from time to time, make one or more Grants of Options to Eligible Persons on such terms and conditions, consistent with the Plan, as the Board shall determine. In granting such Options, subject to the provisions of the Plan, the Corporation shall specify,
(a) the maximum number of Shares which the Participant may purchase under the Options;
(b) the Exercise Price at which the Participant may purchase his or her Shares under the Options; and
(c) the term of the Options, to a maximum of ten (10) years from the Grant Date of the Options, the Vesting period or periods within this period during which the Options or a portion thereof may be exercised by a Participant and any other Vesting conditions (including Performance Conditions).
8.2 The Exercise Price for each Share subject to an Option shall be fixed by the Board but under no circumstances shall any Exercise Price be less than one hundred percent (100%) of the Market Price on the Grant Date of such Option.
8.3 Unless otherwise designated by the Board in the applicable Grant Agreement, the Options included in a Grant shall Vest in three equal installments over a three (3) year period, with one third of the Options vesting on each of the Grant Date, the first anniversary of the Grant Date, and the second anniversary of the Grant Date, and, subject to Section 8.6, any such Options shall expire on the tenth anniversary of the Grant Date (unless exercised or terminated earlier in accordance with the terms of the Plan or the Grant Agreement).
8.4 Subject to the provisions of the Plan and the terms governing the granting of the Option, and subject to payment or other satisfaction of all related withholding obligations in accordance with Section 6.2, Vested Options or a portion thereof may be exercised from time to time by delivery to the Corporation at its registered office of a notice in writing signed by the Participant or the Participant’s legal personal representative, as the case may be, and addressed to the Corporation. This notice shall state the intention of the Participant or the Participant’s legal personal representative to exercise the said Options and the number of Shares in respect of which the Options are then being exercised and must be accompanied by payment in full of the Exercise Price under the Options which are the subject of the exercise.
8.5 Notwithstanding Section 8.4, the Board may permit a Participant, in lieu of paying the aggregate exercise price in cash, to indicate in the exercise notice that such Participant intends to transfer and dispose of the Options (the “Surrender”) for
18 
 
 

cancellation and, in such case, the Participant shall surrender the Options being exercised and elect to receive that number of Shares calculated using the following formula, subject to acceptance of a notice of Surrender (“Surrender Notice”) by the Board and provided that arrangements satisfactory to the Corporation have been made to pay any applicable withholding taxes:

X = (Y*(A-B))/A

Where:

X = the number of Shares to be issued to the Participant upon surrendering such Options; provided that if the foregoing calculation results in a negative number, then no Shares shall be issued.

Y = the number of Shares underlying the Options to be Surrendered.

A = the Market Value of the Shares as at the date of the Surrender.

B = the Exercise Price of such Options.

8.6 If the normal expiry date of any Option falls within any Blackout Period or within ten (10) business days (being a day other than a Saturday, Sunday or other than a day when banks in Toronto, Ontario are not generally open for business) following the end of any Blackout Period, then the expiry date of such Option shall, without any further action, be extended to the date that is ten (10) business days following the end of such Blackout Period. The foregoing extension applies to all Options whatever the Grant Date and shall not be considered an extension of the term of the Options as referred to in Section 6.5.
9. Termination of Employment, Death, AND Disability – Options
9.1 Outstanding Options held by a Participant as of the Participant’s Termination shall be subject to the provisions of this Section 10, as applicable; except that, in all events, the period for exercise of Options shall end no later than the last day of the maximum term thereof established under Section 8.1(c), 8.6, or 9.4, as the case may be. Options that are not exercised prior to the expiration of the exercise period, including any extended exercise period authorized pursuant to this Section 9.1, following a Participant’s date of Termination or Disability Date, as the case may be, shall automatically expire on the last day of such period.
9.2 Subject to the applicable Grant Agreement and Section 9.1, in the case of a Participant’s Termination due to death or Disability, (i) the Participant's outstanding Options that have become Vested prior to the Participant’s Termination due to death or Disability shall continue to be exercisable during the twelve (12) month period following the Participant’s date of Termination due to death or Disability Date, and (ii) the Participant’s outstanding Options that are unvested on the Participant’s date of Termination due to death or Disability Date shall be forfeited.
9.3 Subject to the applicable Grant Agreement and Section 9.1, in the case of a Participant's Termination due to resignation (including the voluntary withdrawal of services by a Participant who is not an employee under Applicable Law) or
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Termination without Cause (including by way of constructive dismissal), (i) the Participant's outstanding Options that have become Vested prior to the Participant’s Termination shall continue to be exercisable during the ninety (90) day period following the Participant’s Termination, and (ii) the Participant’s outstanding Options that are unvested on the Participant’s Termination shall be forfeited.

9.4 In addition to the Board’s rights under Section 3.1, the Board may, at the time of a Participant’s Termination or Disability Date, extend the period for exercise of some or all of the Participant’s Options, but not beyond the original expiry date, and/or allow for the continued Vesting of some or all of the Participant’s Options during the period for exercise or a portion of it.
9.5 Notwithstanding any other provision hereof or in any Grant Agreement, in the case of a Participant’s Termination for Cause, any and all then outstanding Vested and unvested Options granted to the Participant shall be immediately forfeited and cancelled, without any consideration as of the Termination.
9.6 For greater certainty, a Participant shall have no right to receive Shares or a cash payment, as compensation, damages or otherwise, with respect to any Options that do not become Vested, that have been forfeited, or that are not exercised before the date on which the Options expire, whether related or attributable to any contractual or common law termination entitlements or otherwise.
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PART III – SHARE UNITS

10. DEFINITIONS
10.1 “Grant Value” means the dollar amount allocated to an Eligible Person in respect of a Grant of Share Units.
10.2 “Share Unit Account” has the meaning set out in Section 12.1.
10.3 “Valuation Date” means the date as of which the Market Price is determined for purposes of calculating the number of Share Units included in a Grant, which unless otherwise determined by the Board shall be the Grant Date.
10.4 “Vesting Period” means, with respect to a Grant of Share Units, the period specified by the Board, commencing on the Grant Date and ending on the last Vesting Date for such Share Units.
11. Eligibility and Grant Determination.
11.1 The Board may from time to time make one or more Grants of Share Units to Eligible Persons on such terms and conditions, consistent with the Plan, as the Board shall determine, provided that, in determining the Eligible Persons to whom Grants are to be made and the Grant Value for each Grant, the Board shall take into account the terms of any written employment agreement or contract for services between an Eligible Person and the Corporation or any Subsidiary of the Corporation and may take into account such other factors as it shall determine in its sole and absolute discretion.
11.2 The Board shall determine the Grant Value and the Valuation Date (if not the Grant Date) for each Grant under this Part III. The number of Share Units to be covered by each such Grant shall be determined by dividing the Grant Value for such Grant by the Market Price of a Share as at the Valuation Date for such Grant, rounded up to the next whole number.
11.3 Each Grant Agreement issued in respect of Share Units shall set forth, at a minimum, the type of Share Units and Grant Date of the Grant evidenced thereby, the number of RSUs or PSUs subject to such Grant, the applicable Vesting conditions, the applicable Vesting Period(s) and the treatment of the Grant upon Termination and may specify such other terms and conditions consistent with the terms of the Plan as the Board shall determine or as shall be required under any other provision of the Plan. The Board may include in a Grant Agreement under this Part III terms or conditions pertaining to confidentiality of information relating to the Corporation’s operations or businesses which must be complied with by a Participant including as a condition of the grant or Vesting of Share Units.
12. ACCOUNTS AND DIVIDEND EQUIVALENTS
12.1 Share Unit Account.

An account, called a “Share Unit Account”, shall be maintained by the Corporation, or a Subsidiary of the Corporation, as specified by the Board, for each

21 
 
 

Participant who has received a Grant of Share Units and will be credited with such Grants of Share Units as are received by a Participant from time to time pursuant to Section 11 and any dividend equivalent Share Units pursuant to Section 12.2. Share Units that fail to Vest to a Participant and are forfeited pursuant to Section 13, or that are paid out to the Participant or his or her Beneficiary, shall be cancelled and shall cease to be recorded in the Participant’s Share Unit Account as of the date on which such Share Units are forfeited or cancelled under the Plan or are paid out, as the case may be. For greater certainty, where a Participant is granted both RSUs and PSUs, such RSUs and PSUs shall be recorded separately in the Participant’s Share Unit Account.

12.2 Dividend Equivalent Share Units.

Except as otherwise provided in the Grant Agreement relating to a Grant of RSUs or PSUs, if and when cash dividends (other than extraordinary or special dividends) are paid with respect to Shares to shareholders of record as of a record date occurring during the period from the Grant Date under the Grant Agreement to the date of settlement of the RSUs or PSUs granted thereunder, a number of dividend equivalent RSUs or PSUs, as the case may be, shall be credited to the Share Unit of Account of the Participant who is a party to such Grant Agreement. The number of such additional RSUs or PSUs will be calculated by dividing the aggregate dividends or distributions that would have been paid to such Participant if the RSUs or PSUs in the Participant’s Share Unit Account had been Shares by the Market Price on the date on which the dividends or distributions were paid on the Shares. The additional RSUs or PSUs granted to a Participant will be subject to the same terms and conditions, including Vesting and settlement terms, as the corresponding RSUs or PSUs, as the case may be.

13. VESTING AND SETTLEMENT OF SHARE UNITS
13.1 Vesting.

Subject to this Section 13 and the applicable Grant Agreement, Share Units subject to a Grant and dividend equivalent Share Units credited to the Participant’s Share Unit Account in respect of such Share Units shall Vest in such proportion(s) and on such Vesting Date(s) as may be specified in the Grant Agreement governing such Grant provided that the Participant’s Employment has not Terminated on the relevant Vesting Date.

13.2 Settlement.

A Participant’s RSUs and PSUs, adjusted in accordance with the applicable multiplier, if any, as set out in the Grant Agreement, and rounded down to the nearest whole number of RSUs or PSUs, as the case may be, shall be settled, by a distribution as provided below to the Participant or his or her Beneficiary following the Vesting thereof in accordance with Section 13.1 or 13.6, as the case may be, subject to the terms of the applicable Grant Agreement. In all events, unless the Grant Agreement specifies that RSUs and PSUs must be settled through the issuance of Shares, settlement will occur upon or as soon as reasonably practicable following Vesting and, in any event, on or before December 31 of the third year following the year in which the Participant performed the services to

22 
 
 

which the Grant of RSUs or PSUs relates. Settlement shall be made by the issuance of one Share for each RSU or PSU then being settled, a cash payment equal to the Market Price on the Vesting Date of the RSUs or PSUs being settled in cash (subject to Section 13.3), or a combination of Shares and cash, all as determined by the Board in its discretion, or as specified in the applicable Grant Agreement, and subject to payment or other satisfaction of all related withholding obligations in accordance with Section 6.2.

13.3 Postponed Settlement.

If a Participant’s Share Units would, in the absence of this Section 13.3 be settled within a Blackout Period applicable to such Participant, such settlement shall be postponed until the earlier of the tenth Trading Day following the date on which such Blackout Period ends (or as soon as practicable thereafter) and the otherwise applicable date for settlement of the Participant’s Share Units as determined in accordance with Section 13.2, and the Market Price of any RSUs or PSUs being settled in cash will be determined as of the earlier of the Trading Day on which the Blackout Period ends and the day prior to the settlement date.

13.4 Failure to Vest.

Subject to the terms of the Grant Agreement and this Section 13, all Share Units that are not Vested and do not become Vested on the Participant’s Termination shall be immediately forfeited. For greater certainty, a Participant shall have no right to receive Shares or a cash payment, as compensation, damages or otherwise, whether related or attributable to any contractual or common law notice period or otherwise, with respect to any RSUs or PSUs that do not become Vested or are forfeited hereunder.

13.5 Resignation, Death and Disability.

Subject to the applicable Grant Agreement and Section 13.7, in the event a Participant’s employment is Terminated as a result of the Participant’s resignation (which is not in connection with a constructive dismissal by the Corporation or a Subsidiary of the Corporation), death or Disability, no Share Units that have not Vested prior to such Termination, including dividend equivalent Share Units in respect of such Share Units, shall Vest and all such Share Units shall be forfeited immediately.

13.6 Termination of Employment without Cause.

Subject to the applicable Grant Agreement and Section 13.7, in the event a Participant’s Termination without Cause (which shall include a constructive dismissal by the Corporation or a Subsidiary of the Corporation), no Share Units that have not Vested prior to such Termination, including dividend equivalent

23 
 
 

Share Units in respect of such Share Units, shall Vest and all such Share Units shall be forfeited immediately.

13.7 Extension of Vesting.

The Board may, at the time of Termination or a Disability Date, extend the period for Vesting of Share Units, but not beyond the original end of the applicable Vesting Period.

13.8 Termination of Employment for Cause.

In the event a Participant’s employment is Terminated for Cause by the Corporation or a Subsidiary, no Share Units that have not Vested prior to the date of the Participant’s Termination for Cause, including dividend equivalent Share Units in respect of such Share Units, shall Vest and all such Share Units shall be forfeited immediately, except only as may be required to satisfy the express minimum requirements of applicable employment or labour standards legislation. The Participant shall have no further entitlement to Share Units following the Termination and waives any claim to damages in respect thereof whether related or attributable to any contractual or common law termination entitlements or otherwise.

14. SHAREHOLDER RIGHTS
14.1 No Rights to Shares.

Share Units are not Shares and a Grant of Share Units will not entitle a Participant to any shareholder rights, including, without limitation, voting rights, dividend entitlement or rights on liquidation.

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PART IV – RESTRICTED STOCK

15. DEFINITIONS
15.1 “Restriction” means any restriction on a Participant’s free enjoyment of the Shares granted as Restricted Stock. Restrictions may be based on the passage of time or the satisfaction of Performance Conditions or the occurrence of one or more events or conditions, and shall lapse separately or in combination upon satisfaction of such conditions and at such time or times, in instalments or otherwise, as the Board shall specify.
16. Restricted Stock
16.1 Grants.

The Board may from time to time make one or more Grants of Restricted Stock to Eligible Persons in such amounts and subject to such terms and conditions as the Board may determine.  Upon the delivery of such Shares, the Participant shall have the rights of a shareholder with respect to the Restricted Stock, subject to the Restrictions.

16.2 Dividends; Voting.

While any Restriction applies to any Participant’s Restricted Stock, (i) unless the Board provides otherwise, the Participant shall receive the dividends paid on the Restricted Stock and shall not be required to return those dividends to the Corporation in the event of the forfeiture of the Restricted Stock, (ii) the Participant shall receive the proceeds of the Restricted Stock in the event of any change in the Shares in respect of which the Board has determined that an equitable adjustment should be made pursuant to Section 5.1, which proceeds shall automatically and without need for any other action become Restricted Stock and be subject to all Restrictions then existing as to the Participant’s Restricted Stock, and (iii) the Participant shall be entitled to vote the Restricted Stock during the Restriction period.

16.3 Transfer Restrictions.

The Participant shall not have the right to sell, transfer, assign, convey, pledge, hypothecate, grant any security interest in or mortgage on, or otherwise dispose of or encumber any shares of Restricted Stock or any interest therein while the Restrictions remain in effect. The Board may require, as a condition of a Grant of Restricted Stock, that the Participant deposit the shares of Restricted Stock into an escrow account.

16.4 Forfeiture.

Grants of Restricted Stock shall be forfeited if the applicable Restriction does not lapse prior to such date or the occurrence of such event or the satisfaction of such other criteria as is specified in the Grant Agreement. Further, unless expressly

25 
 
 

provided for in the Grant Agreement, or as otherwise determined by the Board, any Restricted Stock held by the Participant at the time of the Participant’s Termination shall be forfeited by the Participant to the Corporation and the Participant shall have no claim to damages in lieu thereof, whether related or attributable to any contractual or common law termination entitlements or otherwise.

16.5 Evidence of Share Ownership.

Restricted Stock will be book-entry Shares only unless the Board decides to issue certificates to evidence shares of the Restricted Stock.

 

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Exhibit “A”

Arras Minerals Corp. Equity Incentive Plan

Special Provisions Applicable to US Taxpayer

This Exhibit sets forth special provisions of the Arras Minerals Corp. Equity Incentive Plan (the “Plan”) that apply to Participants who are US Taxpayers. This Exhibit shall apply to such Participants notwithstanding any other provisions of the Plan. Terms defined elsewhere in the Plan and used herein shall have the meanings set forth in the Plan, as may be amended from time to time.

1. Definitions

“Disability” means, (i) solely with respect to Incentive Stock Options, a Participant’s total and permanent disability within the meaning of Section 22(e)(3) of the Code, or (ii) solely with respect to an award that constitutes deferred compensation subject to Section 409A of the Code that includes Disability as a payment date, a “disability” as defined under Section 409A of the Code.

“Eligible Person” means, solely with respect to Options, an individual Employed by the Corporation or any of its subsidiaries who, by the nature of his or her position or job is, in the opinion of the Board, in a position to contribute to the success of the Corporation; provided, however, that only officers and employees of the Corporation or Subsidiary shall be eligible to receive Incentive Stock Options.

“Greater than 10% Shareholder” means an Eligible Person who, effective as of the Grant Date of an Incentive Stock Option, owns (directly or indirectly, within the meaning of Section 424(d) of the Code) more than ten percent (10%) of the total combined voting power of all classes of stock of the Corporation (or any subsidiary or parent of the Corporation within the meaning of Sections 424(e) and 424(f) of the Code).

“Incentive Stock Option” means an Option awarded under the Plan to a US Taxpayer that is intended to be an “incentive stock option” as defined in Section 422 of the Code.

“Market Price” means, solely with respect to the term “Exercise Price”, (a) if the Shares are listed on the Stock Exchange, the closing price per Share on the Stock Exchange on the Grant Date; (b) if the Shares are listed on more than one Stock Exchange, the fair market value as determined in accordance with paragraph (a) above for the primary Stock Exchange on which the Shares are listed, as determined by the Board; and (c) if the Shares not listed for trading on a Stock Exchange, a price which is determined by the Board in good faith to be the fair market value of the Shares in compliance with Section 409A of the Code.

“Nonqualified Stock Option” means an Option granted under the Plan that is not intended to be, and does not otherwise qualify as, an Incentive Stock Option.

“Separation From Service” shall have the meaning assigned to it in Section 1.409A-1(h), which generally means that an individual’s employment or service with the Corporation and any entity that is to be treated as a single employer with the Corporation for purposes of United States Treasury Regulation Section 1.409A-1(h) terminates such that it is reasonably anticipated that no further services will be performed or that the level of bona fide services performance would

A-1 
 
 

decrease to no more than 20% of the average level of bona fide services performed over the immediately preceding 36-month period.

“Specified Employee” means a US Taxpayer who meets the definition of “specified employee,” as defined in Section 409A(a)(2)(B)(i) of the Code.

“Subsidiary” shall have the meaning assigned to it in Section 424(f) of the Code with respect to any Incentive Stock Option.

2. Options

 

a. Grant Date. The Grant Date for any Options granted to a US Taxpayer may not be earlier than the date that the Board approves the Grant.

 

b. Shares Available. The aggregate number of Shares that may be issued to US Taxpayers under the Plan shall be 1,000,000 Shares, all of which may be issued pursuant to Incentive Stock Options.

 

c. Grant of Incentive Stock Options. The Board may grant Incentive Stock Options to Eligible Persons that are US Taxpayers under the Plan. If an Incentive Stock Option is granted to a Greater than 10% Shareholder, then the Exercise Price may not be less than 110% of the Market Value on the Grant Date, and the expiration of the exercise period shall not be later than the fifth anniversary of the Grant Date. Any Option that is intended to be an Incentive Stock Option, but fails to so qualify for any reason, including, without limitation, the portion of an Option becoming exercisable in any year in excess of the $100,000 limitation described in Treasury Regulation Section 1.422-4, shall be treated as Nonqualified Stock Options. Neither the Corporation nor the Board shall have any liability to a US Taxpayer, or any other party, if an Option (or any part thereof) which is intended to qualify as an Incentive Stock Option fails to qualify as such for any reason.

 

d. Shareholder Approval for Incentive Stock Options. Incentive Stock Options may only be granted under the Plan if the Corporation’s shareholders approve the Plan within twelve (12) months of the Effective Date. Any Incentive Stock Options granted under the Plan prior to such approval shall be conditioned on such approval. No Incentive Stock Options may be granted after then tenth (10th) anniversary of the Effective Date of the Plan unless the Corporation’s shareholders approve an extension of the Plan for such purpose.

 

e. Notice of Disposition of Shares Acquired from Incentive Stock Options. A Participant shall give prompt notice to the Corporation of any disposition or other transfer of any Shares acquired upon exercise of an Incentive Stock Option if such disposition is made before the earlier of (i) the second anniversary of the Grant Date and (ii) the first anniversary of the date the Shares were issued upon exercise. Such notice shall specify the date of such disposition or transfer and the amount realized by the Participant as a result of such disposition or transfer.

 

3. Transferability.

Notwithstanding anything in the Plan or Grant Agreement to the contrary, Incentive Stock Options may only be exercised during a Participant’s lifetime by the Participant, and may only be

A-2 
 
 

transferred by will or pursuant to the laws of descent and distribution. Any other awards may only be transferred by will, the laws of descent and distribution, or as permitted by Rule 701 of the Securities Act of 1933, as amended.

4. Impact of Blackout on Exercise or Settlement of Awards.

Section 8.6 of the Plan shall not apply to Options granted to US Taxpayers. Section 13.3 of the Plan shall not apply to Share Units granted to US Taxpayers that are deferred compensation subject to the rules of Code Section 409A unless permitted by Treas. Reg. Section 1.409A-2(b)(7)(ii).

5. Change in Control Treatment

Notwithstanding anything to the contrary, if the Change in Control event does not constitute a change in ownership or effective control of the Corporation or a change in ownership of a substantial portion of the assets of the Corporation under Section 409A of the Code, and if the Corporation determines any award under the Plan constitutes deferred compensation subject to Section 409A of the Code, then as determined in the sole discretion of the Board, the vesting of such award may be accelerated as of the effective date of the Change in Control, but the Corporation shall pay such award in accordance with the original terms and conditions of the award as if the Change of Control had not occurred.

6. Adjustments

Any adjustments made to an award granted to a US Taxpayer under Section 5 of the Plan shall be intended to comply with the requirements of Section 422 of the Code with respect to Incentive Stock Options and Section 409A of the Code with respect to any other awards to the extent needed for the award to continue to be exempt from, or comply with, Section 409A of the Code.

7. Compliance with Section 409A

The intent of the parties is that payments and benefits under this Plan comply with or be exempt from Section 409A of the Code, and accordingly, to the maximum extent permitted, this Plan shall be interpreted and administered in accordance with such intent. Notwithstanding anything contained herein to the contrary, to the extent required in order to avoid accelerated taxation and/or tax penalties under Section 409A of the Code, a Participant shall not be considered to have terminated employment with the Corporation for purposes of this Plan unless the Participant would be considered to have incurred a Separation from Service from the Corporation. Each amount to be paid or benefit to be provided under this Plan shall be construed as a separate identified payment for purposes of Section 409A of the Code, and any payments described in this Plan that are due within the “short term deferral period” as defined in Section 409A of the Code shall not be treated as deferred compensation unless applicable law requires otherwise. Without limiting the foregoing and notwithstanding anything contained herein to the contrary, to the extent required in order to avoid accelerated taxation and/or tax penalties under Section 409A of the Code, deferred compensation amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to this Plan (or any other plan or agreement of the Corporation) during the six (6) month period immediately following the Specified Employee’s Separation from Service shall instead be paid on the first business day after the date that is six (6) months following the Specified Employee’s Separation from Service (or death, if earlier). The Plan and any award agreements issued thereunder may be amended in any respect deemed by the Board to be necessary in order to preserve compliance with Section 409A of the Code. The Corporation

A-3 
 
 

makes no representation that any or all of the payments described in this Plan will be exempt from or comply with Section 409A of the Code and makes no undertaking to preclude Section 409A of the Code from applying to any such payment. Each Participant shall be solely responsible for the payment of any taxes and penalties incurred under Section 409A of the Code.

 

A-4 
 
 

 

 

Exhibit 4.11.1

 

 

STOCK OPTION GRANT AGREEMENT

ARRAS MINERALS CORP. EQUITY INCENTIVE PLAN

This Stock Option Grant Agreement (the “Grant Agreement”), which includes the Notice of Grant (the “Notice of Grant”) and the Terms and Conditions of Stock Option Grant, attached hereto as Exhibit A, is made and entered into effective on the Grant Date set forth in the Notice of Grant by and between Arras Minerals Corp. (the “Corporation”), and the individual named in the Notice of Grant (the “Participant”), pursuant to the Arras Minerals Corp. Equity Incentive Plan (the “Plan”). Unless otherwise defined herein, the capitalized terms used in this Grant Agreement shall have the meanings ascribed to such terms under the Plan.

NOTICE OF GRANT

Participant:  
Grant Date:  
Number of Options:  
Exercise Price: $      per Share
Vesting Dates: The Participant shall become vested in the Option in three equal installments over a two (2) year period, with one third of the Options vesting on each of the Grant Date, the first anniversary of the Grant Date, and the second anniversary of the Grant Date
Expiration Date: Fifth anniversary of the Grant Date

 

The Participant and the Corporation agree that this award of Options is granted under and governed by the terms and conditions of the Plan and this Grant Agreement, including the Terms and Conditions of Stock Option Grant, attached hereto as Exhibit A, all of which are incorporated into this Grant Agreement.

 

ARRAS MINERALS CORP.

By:                                             

 Name:

 Title:

PARTICIPANT:

                                           

Name:

   
   
 
 
 

 

EXHIBIT A

TERMS AND CONDITIONS OF STOCK OPTION GRANT

1.            Grant. The Corporation hereby grants the Participant such number of options set forth in the Notice of Grant (the “Options”) to purchase Shares at the exercise price per Share (the “Exercise Price”) set forth in the Notice of Grant, subject to the terms and conditions set forth herein and the provisions of the Plan, the terms of which are incorporated herein by reference. Capitalized terms used but not otherwise defined in this Agreement shall have the meanings as set forth in the Plan. The Participant agrees to be bound by the terms and conditions of the Plan, which control in case of any conflict with this Grant Agreement, except as otherwise specifically provided in the Plan. The Participant agrees that the Board may amend this Agreement without the Participant’s consent if required by any Stock Exchange.

2.            Vesting and Exercise.

(a)          General. Except as otherwise provided in this Grant Agreement, the Options shall vest and become exercisable in accordance with the vesting schedule set forth in the Notice of Grant, provided that the Participant remains in the Employment of the Corporation or any of its Subsidiaries through the applicable Vesting Date. Subject to Section 8.6 of the Plan, once Vested, Options may be exercised in whole or in part until the earlier of (i) the Expiration Date set forth in the Notice of Grant, and (ii) the end of the applicable exercise period set out below depending on the circumstances of the Participant’s Termination. To the extent not exercised within such period of time, the Option shall be cancelled.

(b)          Death and Disability. Notwithstanding the vesting schedule set forth in the Notice of Grant, in the event of a Participant’s Termination due to death or Disability, (i) the Participant's outstanding Options that have become Vested prior to the Participant’s Termination due to death or Disability shall continue to be exercisable during the twelve (12) month period following the Participant’s date of Termination due to death or Disability Date, and (ii) the Participant’s outstanding Options that are unvested on the Participant’s date of Termination due to death or Disability shall be forfeited.

(c)           Resignation or Termination without Cause. Notwithstanding the vesting schedule set forth in the Notice of Grant, in the event of Participant’s Termination due to resignation (including the voluntary withdrawal of services by the Participant who is not an employee under Applicable Law) or Termination without Cause (including by way of constructive dismissal), (i) the Participant's outstanding Options that have become Vested prior to the Participant’s Termination shall continue to be exercisable during the ninety (90) day period following the Participant’s Termination, and (ii) the Participant’s outstanding Options that are unvested on the Participant’s Termination shall be forfeited.

(d)          Termination for Cause. In the case of the Participant’s Termination for Cause, any and all outstanding Vested and unvested Options granted to the Participant shall be immediately forfeited and cancelled, without any consideration as of the Termination.

(e)          Change In Control. Notwithstanding the vesting schedule set forth in the Notice of Grant, the Options shall be subject to the applicable provisions of the Plan in the event that a Change in Control occurs while the Participant is Employed.

 
 
 

3.            Forfeiture. For greater certainty, the Participant shall have no right to receive Shares or a cash payment, as compensation, damages or otherwise, with respect to any Options that do not become Vested, that have been forfeited, or that are not exercised before the date on which the Options expire, whether related or attributable to any contractual or common law entitlements or otherwise.

4.            Definitions.

For purposes of this Grant Agreement,

(a)          “Disability” means (i) subject to (ii), the Participant’s physical or mental incapacity that prevents him/her from substantially fulfilling his or her duties and responsibilities on behalf of the Corporation or, if applicable, a Subsidiary of the Corporation as determined by the Board and, in the case of a Participant who is an employee of the Corporation or a Subsidiary of the Corporation, in respect of which the Participant commences receiving, or is eligible to receive, disability benefits under the Corporation’s or Subsidiary’s long-term disability plan, or (ii) where the Participant has a written employment agreement with the Corporation or a Subsidiary of the Corporation, “Disability” as defined in such employment agreement, if applicable.

(b)          “Employment” means (i) the Participant’s rendering of services to the Corporation of a Subsidiary of the Corporation (excluding services exclusively as a Director, and including as a Service Provider), or (ii) the Participant is not actively rendering services to the Corporation or a Subsidiary of the Corporation due to vacation, temporary illness, maternity or parental leave or leave on account of Disability or other authorized leave of absence. The terms “employ” and “employed” shall have their correlative meanings.

(c)           “Termination” means (i) the termination of the Participant’s Employment with the Corporation or a Subsidiary of the Corporation (other than in connection with the Participant’s transfer to Employment with the Corporation or another Subsidiary), which shall occur on the date on which the Participant ceases to render services to the Corporation or Subsidiary, as applicable, whether such termination is lawful or otherwise (including, without limitation, by reason of resignation, death, frustration of contract, termination for cause, termination without cause, or constructive dismissal), without giving effect to any pay in lieu of notice (paid by way of lump sum or salary continuance), severance pay, benefits continuance or other termination-related payments or benefits to which the Participant may be entitled pursuant to the common law or otherwise (except as may be expressly required to satisfy the minimum requirements of applicable employment or labour standards legislation), but, for greater certainty, the Participant’s absence from active work during a period of vacation, temporary illness, maternity or parental leave, leave on account of Disability or any other authorized leave of absence shall not be considered to be a “Termination”, and (ii) in the case of the Participant who does not return to active Employment with the Corporation or a Subsidiary of the Corporation immediately following a period of absence due to vacation, temporary illness, maternity or parental leave, leave on account of Disability or other authorized leave of absence, such cessation shall be deemed to occur on the last day of such period of absence as approved by the Corporation or a Subsidiary of the Corporation; provided, in each case, that, in the case of Options that are deferred compensation subject to Section 409A of the Code and that are issued to a US Taxpayer, the Termination constitutes a “Separation of Service”, within the meaning of Section 409A of the Code, and “Terminated” and “Terminates” shall be construed accordingly.

 
 
 

5.            Method of Exercise.

(a)          A Vested Option may be exercised, in whole or in part, by delivering to the Corporation at its registered office an executed exercise notice in the form set out in Schedule A hereto (the “Option Exercise Notice”) or by such other form or means as the Board may permit or require (including via electronic means). This notice shall state the intention of the Participant or the Participant’s legal personal representative to exercise the said Options and the number of Shares in respect of which the Options are then being exercised (the “Exercised Shares”) and must be accompanied by payment in full of the Exercise Price under the Options which are the subject of the exercise. Upon exercise of the Option by the Participant and prior to the delivery of such Exercised Shares, the Corporation shall have the right to require the Participant to satisfy applicable federal, provincial, state or local income tax withholding requirements and the Participant’s share of other applicable statutory withholdings in a method satisfactory to the Corporation.

(b)          The Participant may satisfy payment of the Exercise Price and/or the applicable statutory withholding for the Options which are the subject of the Option Exercise Notice (i) through the delivery of cash, wire, other method of payment acceptable to the Corporation, (ii) by the Participant delivering to the Corporation a properly executed Option Exercise Notice together with irrevocable instructions to a broker to promptly deliver to the Corporation cash or a check payable and acceptable to the Corporation to pay the aggregate Exercise Price and/or statutory withholding amount, provided that in the event the Participant chooses to pay the aggregate Exercise Price as so provided, the Participant and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Corporation shall prescribe as a condition of such payment procedure, or (iii) a combination of (i) and (ii) above.

(c)           Notwithstanding the foregoing, no Exercised Shares shall be issued unless such exercise and issuance complies with the requirements relating to the administration of stock option plans and other applicable equity plans under Canadian securities laws, U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Shares are listed or quoted, and the applicable laws of any foreign country or jurisdiction; assuming such compliance, for income tax purposes the Exercised Shares shall be considered transferred to the Participant on the date the Option is exercised with respect to such Shares.

6.            Covenants Agreement. It is a condition of the grant of the Option that the Participant complies with any agreement between the Participant and the Corporation with respect to noncompetition, non-solicitation, assignment of inventions and contributions and/or nondisclosure obligations of the Participant. The Option shall be subject to forfeiture at the election of the Corporation in the event of a breach of such agreement by the Participant.

7.            Taxes. By executing this Grant Agreement, Participant acknowledges and agrees that Participant is solely responsible for the satisfaction of any applicable taxes that may be imposed on Participant that arise as a result of the grant, vesting or exercise of the Option (including without limitation alternative minimum taxes and any taxes arising under Section 409A of the Code), and that neither the Corporation nor the Board shall have any obligation whatsoever to pay such taxes or otherwise indemnify or hold Participant harmless from any or all of such taxes.

8.            Non-Transferability of Option. Unless otherwise consented to in advance in writing by the Board in accordance with the Plan, the Option may not be transferred in any manner other than by testamentary disposition by the Participant or the laws of intestate succession. The terms of

 
 
 

the Plan and this Grant Agreement shall be binding upon the executors, administrators, heirs, successors and, if applicable, permitted assigns (as defined in Division 4 of National Instrument 45-106 Prospectus Exemptions) of the Participant.

9.            Other Plans. No amounts of income received by the Participant pursuant to this Grant Agreement shall be considered compensation for purposes of any pension or retirement plan, insurance plan or any other employee benefit plan of the Corporation or its subsidiaries, unless otherwise expressly provided in such plan.

10.          No Guarantee of Employment. The Participant acknowledges and agrees that the right to exercise the Option pursuant to the exercise schedule hereof is earned only by continuing Employment (and not through the act of being hired, being granted an option or purchasing Shares hereunder). The Participant further acknowledges and agrees that this Grant Agreement, the transactions contemplated hereunder and the exercise schedule set forth herein do not constitute an express or implied promise of continued Employment for the exercise period or for any other period, and shall not interfere with the Participant’s right or the right of the Corporation or its Subsidiaries to terminate the Participant’s Employment at any time, with or without Just Cause, subject to the terms of any written employment agreement that the Participant may have entered into with the Corporation or any of its Subsidiaries.

11.          Entire Agreement. The Plan is incorporated herein by reference. The Plan and this Grant Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Corporation and the Participant with respect to the subject matter hereof, and may not be modified adversely to the Participant’s interest except by means of a writing signed by the Corporation and the Participant. In the event of any conflict between this Grant Agreement and the Plan, the Plan shall be controlling.

12.          Governing Law. This grant agreement and actions taken hereunder shall be governed by and construed in accordance with the laws of the province of Ontario, without reference to the principles of conflict of laws, and the federal laws of Canada, as applicable.

13.          Opportunity for Review. Participant and the Corporation agree that the Option is granted under and governed by the terms and conditions of the Plan and this Grant Agreement. The Participant has reviewed the Plan and this Grant Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Grant Agreement and fully understands all provisions of the Plan and this Grant Agreement. The Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board upon any questions relating to the Plan and this Grant Agreement. The Participant further agrees to notify the Corporation upon any change in the residence address indicated herein.

14.          Electronic Acceptance. The Participant shall be deemed to have accepted and agreed to the terms and conditions of this Grant Agreement by accepting the Grant Agreement by such electronic means as the Corporation may permit.

 
 
 

 

SCHEDULE “A”

TO
STOCK OPTION GRANT AGREEMENT

ARRAS MINERALS CORP.

NOTICE OF EXERCISE

TO:              Arras Minerals Corp. (the “Corporation”)

 

DATE:          __________________

 

RE:              Arras Minerals Corp. Equity Incentive Plan (the "Plan")

I refer to the option (the “Option”) granted to me under the Plan and evidenced by a Grant Agreement dated ______, 20___, under which I was granted, subject to the
terms of that Grant Agreement, an option to subscribe for Shares in the capital of the Corporation (the “Shares”).

I hereby subscribe for                   Shares under the Option at $                per Share, payment for which in the aggregate amount of $                accompanies this subscription.

I authorize the Corporation to make any statutorily required withholding arising from the exercise of stock option from any after cash amounts payable to me or to satisfy such withholdings in accordance with Section 6.2 of the Plan or I enclose a cheque in the amount of $____________________ to satisfy such statutorily required withholding.

Will you please cause those Shares to be registered as follows:

 
 
 
 
 
 
 

 (Insert full name and address of purchaser including postal code.)

and forward the relevant certificate to the registered holder at the address shown above.

Signed,
(Signature)
 
 
(Name of Participant)

 

 

 
 
 

Exhibit 4.12

 

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS EXHIBIT BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.

 

ARRAS MINERALS CORP.

MANAGEMENT RETENTION BONUS PLAN

 

 

This Agreement is made and dated for reference the 15th day of April, 2021

 

BETWEEN:

 

 

ARRAS MINERALS CORP. of Suite 1610, 777 Dunsmuir St., Vancouver BC, Canada (“Arras” or the “Company”); and

 

TIMOTHY BARRY of Suite 1610, 777 Dunsmuir St., Vancouver, BC, Canada (“Barry”); and

 

BRIAN EDGAR of Suite 1610, 777 Dunsmuir St., Vancouver, BC, Canada (“Edgar”); and

 

CHRISTOPHER RICHARDS of Suite 1610, 777 Dunsmuir St., Vancouver, BC, Canada (“Richards”); and

 

DAVID XUAN of Suite 1610, 777 Dunsmuir St., Vancouver, BC, Canada (“Xuan”).

 

WHEREAS:

 

  1. Silver Bull Resources, Inc. (“SB”) employs Barry, Edgar, Richards and Xuan (collectively, “Management”) to manage the day-to-day affairs of Arras, with the intention that Arras will employ Management in due course independently of SB; and

  1. Members of Management have worked very hard for, in some cases over a decade, to advance the exploration project known as Sierra Mojada, during perhaps the most difficult times for mineral exploration in memory culminating in attracting South 32 to participate in the project through a joint venture agreement; and

  1. Members of Management were instrumental in sourcing and contracting outstanding mineral exploration opportunities in Kazakhstan resulting in the incorporation of Arras as a subsidiary of SB solely focussed on exploring and developing all acquired assets in Kazakhstan; and

  1. Members of Management have for over a decade taken only modest cash compensation and have never been able to materially capitalize on stock option appreciation; and

  1. Members of Management have made significant investments in SB in the past, at $4.00/share (post 1-for-8 share consolidation) and higher resulting in material paper losses; and

  1. Going forward, Management needs not only to continue to manage Sierra Mojada but to manage and finance Arras; and

  1. SB and Arras have concluded that Management is best equipped to manage SB’s and Arras’ affairs into the future and desires to implement this bonus plan to provide part of the compensation package designed to motivate and retain Management.

 

 
 
 

 

NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the premises and other good and valuable consideration the receipt and sufficiency whereof is hereby acknowledged by the Parties, the Parties hereby agree as follows:

 

1.       Arras hereby established its Management Retention Bonus Plan (the “Plan”) under the following terms.

 

2.       [***], and Arras agrees to pay Management a cash bonus of $2,500,000 CDN (all funds herein are $CDN) when and if Arras’ market capitalization reaches at least $250,000,000 for 5 consecutive trading days being 1% of such market capitalization.

 

3.       In addition, Arras agrees to pay Management a cash bonus of $2,500,000 when and if Arras’ market capitalization reaches at least $500,000,000 for 5 consecutive trading days being 1% of Arras’ market capitalization appreciation from $250,000,000.

 

4.       In addition, Arras agrees to pay Management a cash bonus of $5,000,000 when and if Arras’ market capitalization reaches at least $1,000,000,000 for 5 consecutive trading days being 1% of Arras’ market capitalization appreciation from $500,000,000.

 

5.       In the event that Arras is the subject of a successful takeover bid, the 1% bonus shall be paid if the bid exceeds $250,000,000 and be equal to 1% of the bid price less any 1% bonus that may have been previously paid.

 

6.       Management shall share the above bonuses as follows:

a.) Barry 45%
b.) Edgar 30%
c.) Richards 15%
d.) Xuan 10%

 

7.        This Agreement has a term of 6 years and in order for Management to earn bonus payments, the market capitalization minimums (or takeover bid) described above must be achieved within 6 years of the date hereof.  Thereafter, no bonus will be payable.

 

8.        The Plan is in addition to any other compensation that may be offered to Management in the future by either SB or Arras.

 

9.        As stated above a key goal of creating the Plan is retention and any bonus payable in the future to a Party will be cancelled (subject to the discretion of the Board) if a Party is not employed directly or indirectly by Arras when a bonus is earned and becomes payable.

 

10.        Arras shall not be obligated to pay a bonus under this agreement if it lacks funds at the time.  In such case, interest at 5% per annum compounded shall accrue until the bonus plus interest is fully paid.  Arras may elect to settle any bonus debt by issuing and delivering shares of Arras for such debt valued at the 20 trading day VWAP for Arras’ shares on the market calculated up to the day before the issue of the shares, less 5%.

 

 

[***] INDICATES THAT INFORMATION HAS BEEN REDACTED

 

 

 
 
 

 

11.       Time shall be the essence of this agreement.

 

12.       All notices to be given by the Parties shall be hand delivered to the above address or delivered by email to a Party’s SB or Arras email address.  Any such notice shall be deemed delivered the day after delivery.  A Party may change his address by notice to the other Parties.

 

13.       This is a British Columbia, Canada agreement and the laws and courts of such Province shall have exclusive jurisdiction in settling any disputes concerning this agreement.

 

14.       This agreement may not be assigned.

 

IN WITNESS WHEREOF the Parties have executed this Agreement as of the date and year first above written.

 

 

ARRAS MINERALS CORP.

 

 

Per: /s/ John McClintick

John McClintock 

 

SIGNED, SEALED AND DELIVERED:

 

 

Timothy Barry /s/ Timothy Barry 

 

Witness: /s/ Christopher Richards

 

 

Brian Edgar /s/ Brian Edgar   

 

Witness: /s/ Christopher Richards

 

 

Christopher Richards /s/ Christopher Richards  

 

Witness: /s/ David Xuan

 

 

David Xuan /s/ David Xuan   

 

Witness: /s/ Christopher Richards

 

 

Exhibit 15.1

 

 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

We hereby consent to the incorporation by reference in this Registration Statement on Form 20-F of Arras Minerals Corp. (the “Company”) of our report dated June 23, 2021 with respect to the financial statements of the Company as of April 30, 2021 and for the period from the Company’s inception on February 5, 2021 to April 30, 2021. We also consent to the reference to us under the heading “Statement by Experts” in this Registration Statement.

 

 

 

 

/s/ Smythe LLP

Smythe LLP, Chartered Professional Accountants

 

 

Vancouver, Canada

June 24, 2021

Exhibit 15.2

 

 CONSENT OF CSA GLOBAL CONSULTANTS CANADA LTD.

 

We, CSA Global Consultants Canada Ltd., in connection with Arras Minerals Corp.’s Registration Statement on Form 20-F, dated June 24, 2021 (the “Form 20-F”), consent to:

 

 

 

 

Date: June 24, 2021 CSA GLOBAL CONSULTANTS CANADA LTD.
   
   By: /s/ Neal Reynolds
    Name: Neal Reynolds, PhD BSc. FAusIMM, MAIG, FSEG
Title: Partner – Americas

 

Exhibit 17.1

 

 

 

 

 

 

 
 
 

Report prepared for

Client Name Arras Minerals Corp.
Project Name/Job Code SVBLMRE01
Contact Name Tim Barry
Contact Title CEO
Office Address Suite 1610, 777 Dunsmuir Street, Vancouver, BC, V7Y 1K4, Canada

Report issued by

CSA Global Office

CSA Global Consultants Canada Limited

1111 W Hastings Street, 15th Floor
Vancouver, B.C., V6E 2J3
CANADA

T +1 604 981 8000

E info@csaglobal.com

Division Resources

Report information

Filename R260.2021 Arras Minerals Beskauga S-K 1300_FINAL 20210621
Last Edited 2021-06-23 3:06:00 PM
Report Status Final

 

Coordinating Author

Serik Urbisinov

BSc Geology, BSc Computer Science, MAIG

[“SIGNED AND SEALED”]

{Luke Longridge}

 

Contributing Author

Georgiy Freiman

PhD, FAIG

[“SIGNED AND SEALED”]

{ Georgiy Freiman}

 

Contributing Author

Andrew Sharp

BEng PEng, FAusIMM

[“SIGNED AND SEALED”]

{Andrew Sharp}

 

Peer Review and CSA Global Authorization

Neal Reynolds

PhD FAusIMM MAIG

Partner

[“SIGNED AND SEALED”]

{Neal Reynolds}

 

 

© Copyright 2021

 

i 
 
 

 

Contents

Report prepared for I
Report issued by I
Report information I
1   Executive Summary 1
1.1   Introduction 1
1.2   Property Description 1
1.3   Accessibility, Climate, Local Resources, Infrastructure and Physiography 1
1.4   History 2
1.5   Geology and Mineralization 2
1.6   Exploration 3
1.7   Sample Preparation, Analyses and Security 4
1.8   Mineral Processing and Metallurgical Testing 4
1.9   Mineral Resource Estimate 5
1.10   Adjacent Properties 7
1.11   Interpretation and Conclusions 7
1.12   Recommendations 8
2   Introduction 9
2.1   Sources of Information 9
2.2   Qualified Persons 10
2.3   Qualified Person Property Inspection 10
2.4   Previous Technical Reports/Estimates. 10
3   Property Description 11
3.1   Location of Property 11
3.2   Area of Property 12
3.3   Mineral Tenure 12
3.3.1   Kazakhstan Mining Code 12
3.3.2   Beskauga Project 13
3.3.3   Beskauga Licence 13
3.3.4   Stepnoe and Ekidos Exploration Licences 15
3.4   Tenure Agreements and Encumbrances 15
3.4.1   Beskauga Mineral Licence Option Agreement 15
3.4.2   Ekidos-Stepnoe JV agreement 16
3.5   Environmental Liabilities 17
3.6   Risks 17
4   Accessibility, Climate, Local Resources, Infrastructure and Physiography 18
4.1   Topography, Elevation and Vegetation 18
4.2   Access to Property 18
4.3   Climate 18

 

ii 
 
 
4.4   Infrastructure 19
4.4.1   Sources of Power 19
4.4.2   Water 19
4.4.3   Local Infrastructure, Supplies and Mining Personnel 19
4.4.4   Property Infrastructure 20
4.4.5   Adequacy of Property Size 20
5   History 22
5.1   Property Ownership 22
5.2   Historical Exploration 22
5.2.1   Soviet Period 22
5.2.2   Goldbelt Resources 22
5.3   Previous Exploration by Copperbelt 23
5.4   Historical Mineral Resource Estimates 23
6   Geological Setting, Mineralization and Deposit 24
6.1   Regional Geology and Metallogeny 24
6.1.1   Central Asian Orogenic Belt in Northeastern Kazakhstan 26
6.2   Property Geology 28
6.3   Mineralization and Alteration 30
6.4   Deposit Type 33
6.4.1   Mineralization Styles 34
6.4.2   Conceptual Models 35
7   Exploration 37
7.1   Geophysics 37
7.2   Diamond Drilling 38
7.2.1   Collar Surveying 42
7.2.2   Downhole Surveying 42
7.2.3   Core Logging and Photography 43
7.2.4   Core Sampling 43
7.2.5   Significant Intervals 43
7.2.6   Interpretation 44
7.3   KGK Drilling 44
7.3.1   Sampling and Results 44
7.4   Hydrogeology Studies 48
7.5   Geotechnical Studies 48
7.6   Regional Evaluation 50
8   Sample Preparation, Analyses and Security 51
8.1   Sample Preparation and Security 51
8.2   Analytical Method 52
8.3   Quality Assurance and Quality Control 52
8.3.1   Internal Laboratory QAQC 53
8.3.2   Certified Reference Materials 54
8.3.3   Blanks 65
8.3.4   Duplicates 65

 

iii 
 
 
8.3.5   Laboratory Umpire Analysis 65
8.4   Author’s Opinion on Sample Preparation, Security and Analytical Procedures 69
9   Data Verification 70
9.1   Site Visit 70
9.2   Data Validation 70
10   Mineral Processing and Metallurgical Testing 71
10.1   Sample Selection 71
10.1.1   2009 Kazmekhanbor Metallurgical Composite Sample 71
10.1.2   2010 ALS Ammtec Metallurgical Composite Sample 71
10.1.3   2015 WAI Metallurgical Composite Sample Grade 71
10.2   Metallurgical Test Results 72
10.2.1   Mineralogy 72
10.2.2   Bench-Scale Testwork 73
10.2.3   Flotation Testwork 73
10.2.4   Cyanidation Leach Testing 76
10.2.5   Copper/Molybdenum Separation Testing 77
10.2.6   Toowong Process Test Program 77
10.3   Conclusions, Risks and Other Factors 77
11   Mineral Resource Estimates 79
11.1   Data Import and Validation 79
11.2   Geological Interpretation 79
11.2.1   Lithology 79
11.2.2   Mineralization 80
11.2.3   Topography 84
11.3   Sample Domaining 84
11.3.1   Domain Coding 84
11.3.2   Sample Length Analyses 84
11.4   Sample Compositing 84
11.5   Statistical Analyses 85
11.6   Geostatistical Analysis 87
11.7   Density 95
11.8   Block Model 95
11.9   Grade Interpolation 96
11.10   Model Validation 97
11.11   Mineral Resource Classification 105
11.12   Prospects for Eventual Economic Extraction 105
11.12.1   Input Parameters 105
11.12.2   Pit Optimization Process 107
11.13   Mineral Resource Reporting 107
12   Mineral Reserve Estimates 109
13   Mining Methods 110

 

iv 
 
 
14   Process and Recovery Methods 111
15   Infrastructure 112
16   Market Studies 113
17   Environmental Studies, Permitting and Plans, Negotiations or Agreements with Individuals or Groups 114
18   Capital and Operating Costs 115
19   Economic Analysis 116
20   Adjacent Properties 117
21   Other Relevant Data and Information 118
22   Interpretation and Conclusions 119
23   Recommendations 120
24   References 121
25   Reliance on Information by the Registrant 123
26   Date and Signature Page 124
27   Abbreviations and Units of Measurement 125

 

Figures

Figure 1:    Location of the Beskauga Project in Kazakhstan in relation to the major cities (coordinate grid is WGS84, geographic coordinates) 11
Figure 2:    Location of the Beskauga Project licences (coordinates are WGS84/UTM Zone 43N). 12
Figure 3:   Drilling on the Beskauga deposit 19
Figure 4:   Location of the town of Ekibastuz in relation to the Beskauga Project mineral licences 20
Figure 5:    Simplified tectonic map of the Altaid and Transbaikal-Mongolian orogenic collage in central Eurasia 25
Figure 6:    Geotectonic map of the Paleozoic of Kazakhstan and contiguous China, showing the location of the Beskauga deposit (from Windley et al., 2007) 26
Figure 7:   Schematic tectonic map of the CAOB in northeast Kazakhstan showing mineral deposits 27
Figure 8:   Location of the Beskauga prospect within the larger Beskauga Project area 28
Figure 9:    Stratigraphic column showing the Beskauga sedimentary-volcanic succession 29
Figure 10:    Beskauga igneous suite of rocks. 30
Figure 11:    Geological map of the Beskauga deposit area 31
Figure 12:    Cross section through the Beskauga deposit – Fence 5 (section location is shown on Figure 11) 32
Figure 13:    Plot of gold grade vs total resources for selected gold-rich porphyry projects globally 34
Figure 14:    Cartoon cross-section of a porphyry copper deposit 35
Figure 15:    Anatomy of a porphyry mineral system 36
Figure 16:    Magnetic anomaly map (Total Magnetic Intensity) and grid points for the magnetic survey 37
Figure 17:    IP anomaly map of chargeability over the Beskauga deposit – depth slice at 300 m. 38
Figure 18:   Beskauga Main drill collars 42
Figure 19:    Location of the shallow KGK holes drilled by Dostyk between 2007 and 2017 45
Figure 20:    Cu geochemical anomalies from KGK drilling and Soviet drilling 46
Figure 21:    Au geochemical anomalies from KGK drilling 47

 

v 
 
 
Figure 22:    Dostyk LLP storage facility with core and crushed duplicate samples 52
Figure 23:    Laboratory Certification
Figure 23:    Legend for Shewhart control charts 54
Figure 24:    OREAS 209 Shewhart Control Chart for gold 56
Figure 25:    OREAS 501b Shewhart Control Chart for gold 57
Figure 26:    OREAS 501b Shewhart Control Chart for copper 58
Figure 27:    OREAS 502b Shewhart Control Chart for gold 59
Figure 28:    OREAS 502b Shewhart Control Chart for copper 60
Figure 29:    OREAS 503b Shewhart Control Chart for gold 61
Figure 30:    OREAS 503b Shewhart Control Chart for copper 62
Figure 31:    OREAS 54Pa Shewhart Control Chart for gold 63
Figure 32:    OREAS 54Pa Shewhart Control Chart for copper 64
Figure 33:    Linear regression of gold for duplicates 66
Figure 34:    Linear regression of copper for duplicates 67
Figure 35:    Linear regression of silver for duplicates 68
Figure 36:    QEMSCAN® modal mineralogy for the sulphide phases 72
Figure 37:    Ammtec “Average Grade” rougher/scavenger grade-recovery curves 74
Figure 38:    Ammtec “Average Grade” cleaner grade-recovery curves 75
Figure 39:   Histogram of unrestricted copper grade distribution 80
Figure 40:    Histogram of unrestricted gold grade distribution 80
Figure 41:    Example of interpreted strings 82
Figure 42:    Example of the gold wireframe model – oblique view looking towards the southwest 83
Figure 43:   Histogram of sample lengths 84
Figure 44:   Log histogram for copper values within copper mineralization wireframes 85
Figure 45:    Log histogram for gold values within gold mineralization wireframes 86
Figure 46:    Histogram of gold grade distribution within the gold mineralized domain showing the chosen top cut of 5 g/t Au 87
Figure 47:    Semi-variogram model for the second direction – copper mineralization 89
Figure 48:    Semi-variogram model for the second direction – copper mineralization 90
Figure 49:    Semi-variogram model for the third direction – copper mineralization 91
Figure 50:    Semi-variogram model for the first direction – copper mineralization 92
Figure 51:    Semi-variogram model for the second direction – copper mineralization 93
Figure 52:    Semi-variogram model for the third direction – gold mineralization 94
Figure 53:    Plot of specific gravity vs gold and copper values 95
Figure 54:    Visual validation of block model grades vs drillhole grades 98
Figure 55:    Swath plot by easting (copper) 99
Figure 56:    Swath plot by northing (copper) 100
Figure 57:    Swath plot by 20 m bench (copper) 101
Figure 58:    Swath plot by easting (gold) 102
Figure 59:    Swath plot by northing (gold) 103
Figure 60:    Swath plot by 20 m bench (gold) 104
Figure 61:    Location of the salt mine within the Beskauga Project area (coordinates are WGS/UTM Zone 43N) 117

 

Tables

Table 1:    Mineral Resource estimate for the Beskauga deposit with an effective date of 28 January 2021 6
Table 2:   Qualified Persons – report responsibilities 10
Table 3:    License table for Beskauga outlining the validity of the licences 13
Table 4:   Bonus payments under the Beskauga Option Agreement 16
Table 5:    Historical Mineral Resource estimates at the Beskauga Project 23
Table 6:    Summary table of the diamond drilling conducted by Dostyk between 2007 and 2017 39
Table 7:    Collar positions, lengths, and orientations of all diamond drillholes at Beskauga Main used for the Mineral Resource estimate 39
Table 8:    Significant intervals drilled at Beskauga (>100 m intervals at >0.3 g/t Au) 43

 

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Table 9:    Summary table of the KGK drilling conducted by Dostyk between 2011 and 2014 45
Table 10:    CRM grades 54
Table 11:    Blank assay results 65
Table 12:    Correlation coefficient and precision values for pulp duplicates 65
Table 13:    Results of optimal WAI rougher tests for three different samples 75
Table 14:    Results of optimal WAI cleaner tests for three different samples 76
Table 15:    Summary of WAI locked cycle test results for all samples 76
Table 16:    Drillhole database files 79
Table 17:    Number of wireframe models and their volume 84
Table 18:    COV values for copper and gold within mineralized domains 86
Table 19:    Semi-variogram (relative) parameters – copper mineralization 87
Table 20:    Semi-variogram (relative) parameters – gold mineralization 88
Table 21:    Block model dimensions and parameters 96
Table 22:    Interpolation parameters for OK 96
Table 23:    Comparison of grades between block model and composites 97
Table 24:    Pit optimization parameters (base case) 106
Table 25:    Mineral Resource estimate for the Beskauga Project with an effective date of 28 January 2021. 108
Table 26:   Work program estimate 120

 

 

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Beskauga Copper-Gold Project – S-K 1300 Technical Report Summary

 

 

1 Executive Summary
1.1 Introduction

Arras Minerals Corp. (Arras or the Issuer) is a Canadian based mineral exploration company that is a majority owned subsidiary of Silver Bull Resources Inc. (Silver Bull). Silver Bull is listed on the Toronto Stock Exchange (stock ticker SVB) and on the OTCQB Stock Exchange (stock ticker SVBL).

On 17 August 2020, Silver Bull announced that it had entered into an agreement to acquire a 100% interest in the Beskauga Copper-Gold Project (Beskauga or the Project) located in Pavlodar Province, north-eastern Kazakhstan from Copperbelt AG (Copperbelt), a private mineral exploration company registered in Zug, Switzerland. Silver Bull commissioned CSA Global Consultants Canada Limited (CSA Global), an ERM Group company, to complete a Mineral Resource estimate and prepare a NI 43-101 Technical Report on the Beskauga Project. The NI 43-101 Technical Report was lodged on SEDAR, the electronic filing system for the disclosure documents of issuers in Canada, in February 2021.

On March 19, 2021, Silver Bull transferred its Kazakh assets, including the Beskauga Project, to Arras pursuant to the terms of an Asset Purchase Agreement (APA) in exchange for the issuance of 36,000,000 common shares of Arras to Silver Bull.

In May 2021, CSA Global was retained by Arras to prepare an independent Technical Report Summary on the Beskauga Project. The purpose of this Technical Report Summary is to support the disclosure of a Mineral Resource estimates for the Beskauga Project. This Technical Report Summary conforms to United States Securities and Exchange Commission (SEC) Modernized Property Disclosure Requirements for Mining Registrants as described in Subpart 229.1300 of Regulation S-K, Disclosure by Registrants Engaged in Mining Operations (S-K 1300) and Item 601 (b)(96) Technical Report Summary.

1.2 Property Description

The Beskauga Project is located in Pavlodar Region, north-eastern Kazakhstan, approximately 70 km southwest of the city of Pavlodar (population ~330,000). The property comprises three contiguous licences, the Beskauga licence (67.8 km2) in the centre of the property, which has been the subject of all work carried out thus far, and the Stepnoe (425 km2) and Ekidos (425 km2) licences. The centre of the property lies at approximately 51° 47'N, 76° 17'E (WGS84, Geographic Coordinates).

Kazakhstan has recently updated its mining code and all new licences are issued under this code. The new Code on Subsoil and Subsoil Use (“the SSU Code”) was ratified on 29 June 2018 and is based on the Western Australian model. The Beskauga licence was issued under the older contract permitting system in Kazakhstan and gives Silver Bull, via its agreement with the private company, Copperbelt, the right to explore for “All Minerals” (except uranium) until 31 December 2023. The March 2021 transfer of Silver Bull’s Kazakh assets to Arras encompasses the Copperbelt agreement.

The Stepnoe and Ekidos exploration licences were both granted to Ekidos Minerals LLP (Ekidos LLP) on 22 October 2020 under the new mining code for an initial six-year period. Pursuant to the terms of Silver Bull’s Ekidos Joint Venture agreement with Copperbelt and in connection with the March 19, 2021 transfer of Silver Bull’s Kazakh assets to Arras, it is expected that 100% of the equity interests in Ekidos LLP will be transferred to Arras in the near future.

1.3 Accessibility, Climate, Local Resources, Infrastructure and Physiography

The Beskauga deposit is located approximately 300 km from the Kazakhstan capital, Nur-Sultan (formerly Astana), which has all modern service and a well-connected international airport. Access to the Project area is

 

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Beskauga Copper-Gold Project – S-K 1300 Technical Report Summary

 

 

via sealed highway from Ekibastuz (population ~125,000), some 40 km to the west of the Project area, or from Pavlodar, some 70 km to the northeast of the Project area. Ekibastuz is about four hours drive from Nur-Sultan. Pavlodar is serviced by an international airport. Access around the Project area is by gravel tracks of moderate to good quality which may be closed as a result of winter weather.

The climate in the Beskauga Project region is characteristic of arid steppe with hot summers and cold winters. Precipitation is generally low, with an average annual total of 200–280 mm. Majority of the precipitation falls in the summer. Seasonally appropriate mineral exploration activities may be conducted year-round, mine operations can operate year-round with supporting infrastructure.

The region has sufficient infrastructure to host large-scale mining operations and is a sophisticated transportation and communication node with a local economy dominated by activity in the mining and industrial sectors. Some 40% of all of Kazakhstan’s power generating capacity comes from the region. Fresh water is supplied to the area from the Irtysh River via the Karaganda Canal. There is a large, well-trained labour force to draw upon for any future mining activities.

1.4 History

The Beskauga deposit was discovered by a regional shallow drilling program conducted during the Soviet period in the 1980s. Following privatisation, Licence No. MG 785 (Maikuben) issued to Goldbelt Resources via its 80% subsidiary, Dostyk LLP (Dostyk), included the Beskauga Project area. Goldbelt Resources divested its interest in Dostyk to Celtic Resources in 2000. Neither Goldbelt Resources nor Celtic Resources conducted exploration at Beskauga.

Dostyk was acquired by Cigma Metals in 2007 and by Copperbelt in 2009. Cigma Metals and Copperbelt conducted exploration at Beskauga, as well as other targets in the larger licence area. Copperbelt’s current 67.8 km2 licence only covers the Beskauga deposit; the other prospects were relinquished or divested. Two previous Mineral Resource estimates were completed for Copperbelt on the Beskauga Project by CSA Global in 2013 and by Geosure Exploration and Mining Solutions in 2015, both reported in accordance with the Joint Ore Reserves Committee Code 2012 Edition (JORC Code). Neither Mineral Resource estimate was publicly reported.

1.5 Geology and Mineralization

The Beskauga Project is located in northeastern Kazakhstan, an area underlain by the rocks of the Altaid tectonic collage or Central Asian Orogenic Belt (CAOB), an extensive Palaeozoic subduction-accretion complex made up of fragments of sedimentary basins, island arcs, accretionary wedges, and tectonically bounded terranes that was progressively developed from the late Neoproterozoic, through the Palaeozoic to the early Mesozoic, and which extends eastwards into Russia, Mongolia and China as the Transbaikal-Mongolian orogenic collage. These tectonic collages contain several major porphyry copper-gold/molybdenum and epithermal gold deposits formed over an extensive period from the Ordovician to the Jurassic and associated with the various magmatic arcs.

Beskauga is thought to be located in the lower Boshchekul-Chingiz volcanic arc, part of the Kipchak arc system. Island-arc volcanism was calc-alkaline in nature, evolving from are more sodic chemistry to more potassic in later stages and formed small hypabyssal intrusive bodies of gabbro, diorites, granodiorite, and sodic granite. These intrusives are responsible for the formation of the copper-gold porphyry systems in the region.

The Project area is predominantly underlain by sedimentary and volcanogenic-sedimentary rocks of Ordovician age. These have been intruded by small stock-like intrusive bodies of porphyry ranging in composition from granodiorite to quartz diorite to gabbro-diorite, also interpreted to be Ordovician in age. Dikes of diorite porphyry, diabase and granite-porphyry also cut the host sequence. The host rocks are hornfelsed proximal to intrusive contacts. The deposit area is covered by 10–40 m cover of younger sediments of upper Eocene and Quaternary age.

 

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Beskauga Copper-Gold Project – S-K 1300 Technical Report Summary

 

 

The Beskauga Project hosts a gold-rich porphyry-style copper-gold system with probable epithermal overprint, associated with calc-alkaline intrusions related to island arc volcanism during the Lower Palaeozoic within the highly endowed CAOB. The Beskauga Main deposit is a copper-gold porphyry deposit with elevated grades of molybdenum and silver largely hosted within granodiorite porphyry. The Beskauga South gold mineralization is hosted within diorite porphyry and may represent an epithermal overprint. The diorite is interpreted to cut and postdate the granodiorite. Diabase is also interpreted to cut granodiorite. Intrusive relationships and timing relative to mineralization have not been clearly established.

Porphyry-style mineralization is hosted in granodiorite and plagiogranite intrusions that have elongated sheet-like shapes, often with offshoots. Mineralized zones are affected by stockwork veining and hydrothermal alteration and dip steeply. Alteration is represented by albitization, sericitization and pyritization, with the most intensive alteration at a depth of 250–500 m. Tourmaline has also been described. Potassic alteration is described from mineralogical work. Sericite-pyrophyllite-quartz alteration and silicification in steeply dipping alteration zones is also described indicating a degree of epithermal overprint.

Pyrite and chalcopyrite are the dominant sulphide minerals at Beskauga include with smaller amounts of bornite, chalcocite, tennantite, enargite, and molybdenite, with magnetite and hematite also described. Sulphides occur as fine-grained disseminations as well as in stockwork veins and veinlets, consisting of quartz-carbonate, quartz-carbonate-chlorite, and quartz-pyrite.

The work required to understand the geometry and zonation of alteration and mineralization within a porphyry-epithermal mineralization system like Beskauga has not been completed. This represents a substantial gap in the Project and also presents an opportunity to improve modelling and resource extension targeting.

1.6 Exploration

In 2009–2010, a ground-based magnetic and dipole-dipole induced polarization (IP) survey was carried out over the Beskauga deposit area. The IP survey showed a good correlation with the mineralization defined by the drilling and indicated the mineralizing system may be much larger. Increasing chargeability values with depth suggests that the deposit drilled thus far lies on the upper part of the “pyritic” halo of a mineralized porphyry system with an insignificant erosional truncation. However, the deeper extensions of the deposit have never been drill-tested.

Between 2007 and 2017, Dostyk undertook both diamond and KGK (hydraulic-core lift) drilling at Beskauga. A total of 118 diamond drillholes, totalling 45,605.8 m was completed over this period at either HQ or NQ diameter, with hole depths between 150 m and 815 m. Collar coordinates were determined by using a high precision global positioning system (GPS). All drillholes have downhole surveys completed every 20 m downhole. Core was cut using a diamond saw and half-core was sampled on the basis of geological contacts; sample length was generally between 0.5 m and 1 m, with a lesser proportion up to 2 m.

KGK, or hydraulic-core lift drilling, is a system designed to drillholes for geochemical sampling and geological mapping of cover sediments and basement rocks. The method was developed in the Soviet Union and is in general similar to “wet” reverse circulation (RC) drilling. KGK drilling was carried out between 2011 and 2014 to collect geochemical samples through the Quaternary cover. The depths of drillholes ranged from 22 m to 65 m and holes were typically terminated within 5 m of intersecting bedrock. A total of 1,606 holes were drilled for 52,580 m, and 2,496 samples were taken and analysed. Geochemistry defined the outlines of the mineralized intrusive and a map of primary (in-bedrock) dispersion haloes of copper, gold, molybdenum, zinc, and other associated elements was compiled.

 

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1.7 Sample Preparation, Analyses and Security

Sample preparation was carried out at the Dostyk facility in Ekibastuz. Half-core samples were dried, weighed, and crushed and screened to -2 mm, and a ~1 kg split was milled to 200 mesh fineness (-90 µm). Milled pulps were split and sent to the Stewart Assay and Environmental Laboratory (SAEL) in Kara-Balta, Kyrgyzstan for analysis. All equipment used for sample crushing and milling was cleaned and blown with compressed air after each sample, and after each batch of samples a clean blank material was passed though the equipment. The sample preparation area was subject to compulsory wet cleaning once a day. The split core and crushed duplicate sample are stored in the specifically equipped sample storage facility in Ekibastuz, which can be locked and has on-site security.

SAEL has been utilized by Dostyk as the primary laboratory from 2007 to now. Umpire assays were carried out at Genalysis Laboratory in Perth, Australia. At both SAEL and Genalysis, Samples were analyzed for gold using FA with an atomic absorption spectrometry (AAS) finish. A 30 g bead was used in the FA process. A further 33 elements were determined by an aqua regia digest followed by ICP-OES measurement of elemental concentrations.

Quality assurance/quality control (QAQC) samples comprised certified reference materials (CRMs), blanks, duplicates, and umpire assays. CRMs used were OREAS 209, OREAS 501b, OREAS 502b, OREAS 503b, and OREAS 54Pa. A total of 187 gold CRMs and 124 copper CRMs were analysed, representing 0.52% and 0.34% of the 36,271 samples in the database, below the recommended amount of 5% of CRMs. A total of 318 blank samples (0.9% of all samples) were submitted for analysis. Of all the blank material sampled, majority had below detection or very low values reported, indicating that there is very little contamination overall. In 2013, 97 pulp duplicates were submitted for re-assay and the results show relatively good repeatability. However, this only represents one year and 0.27% of all samples, and no core duplicates have been submitted; this represents a significant gap in QAQC.

External control check assays at Genalysis, were completed on 966 samples (2.7% of all assays) and results show relatively good repeatability and similar distribution for gold and copper, although there is a slight positive bias towards the original results, especially for the copper grades.

It is the Qualified Person’s opinion that sample preparation and analyses were done in line with industry standards and are satisfactory. Although the number of CRM, duplicate, and blank samples are lower than what is considered standard, the quality of assays is considered to be adequate to be used for the Mineral Resource estimate.

1.8 Mineral Processing and Metallurgical Testing

Six metallurgical testing programs have been conducted on the mineralization at Beskauga between 2009 and 2017, including initial evaluation of flotation testing on a master composite (2009), mineralogical evaluation and flotation response on average grade metallurgical composite (2010), flotation response on high grade metallurgical composite (2011), comminution and flotation optimization testing on various metallurgical composites (2015), gold optimization testing on bulk product (2017), and Toowong Process amenability testing (2017). Testing was carried out at Kazmekhanbor (Almaty, Kazakhstan), ALS Ammtec (Perth, Australia), Wardell Armstrong International (Cornwall, United Kingdom) and HRL Testing (Brisbane, Australia).

Initial laboratory testing showed copper recovery of 78.44% and concentrate grades of 18.48% Cu that were lower than desired, as well as identifying high arsenic levels in the final copper concentrate arising from the presence of tennantite. Subsequent bench-scale testwork focused on testing of a starter pit composite and an average copper grade composite and entailed a rougher/scavenger stage to recover most of the mineralization into a low concentrate mass (at a primary grind size P80 of 120 µm), followed by regrinding the rougher/ scavenger concentrate and then utilising three-stage cleaning to produce a final copper concentrate. Concentrate grades of >22% Cu were achieved for all samples, with recoveries between 78.18% and 87.58%.

 

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Beskauga Copper-Gold Project – S-K 1300 Technical Report Summary

 

 

Locked cycle tests carried out on each of the Beskauga Main metallurgical composites showed that copper concentrate grades of >20% were achieved at recoveries ranging from 82.66% to 89.06%.

Gold at Beskauga Main is primarily associated with chalcopyrite but also occurs in pyrite, and cyanide leach testing was carried out on rougher and first cleaner scavenger tail products. Results showed there is a high portion of cyanide soluble gold in the rougher tail and first cleaner scavenger tail products and that good recoveries (52.8% and 60.4%, respectively) could be achieved. It is proposed to include a pyrite flotation stage on the rougher tailings stream to produce a gold-bearing pyrite concentrate.

The Toowong Process is an emerging hydrometallurgical treatment process designed to remove arsenic, antimony and other penalty or hazardous elements from base and precious metal concentrates. Preliminary benchtop leaching testwork on a final copper concentrate sample indicated that the Beskauga Main concentrate is amenable to removal of the penalty element arsenic by the Toowong process.

1.9 Mineral Resource Estimate

The drillhole database was provided to CSA Global in Microsoft Excel format and was checked using macros and processes designed to detect any errors. No issues were found. The topographic surface for the deposit was constructed from the drillhole collar elevations.

Modelling of the geology and mineralized domains was completed using Micromine 2016.1 software. The Qualified Person was provided with lithological descriptions of the drillhole sample intervals and constructed a set of strings for the major lithological units, such as barren dikes and overburden zones. Appropriate mineralization cut-offs of 0.12% Cu and 0.15 g/t Au were determined using a statistical analysis of all samples, and grade shells for both copper and gold were interactively interpreted using grade composites viewed across 18 cross sections. Grade composites were generated using minimum composite lengths of 5 m. Composite lengths for interpolation were 1.0 m length.

Classical statistical analysis carried out for samples within the mineralization wireframe shows approximately lognormal distribution of copper and gold grades, with a slightly positive skew for gold. There is no evidence for mixing of populations for either gold or copper grades. A top cut value of 5 g/t was applied to gold, and no top cuts were applied to copper.

Semi-variograms were evaluated for copper and gold. For copper, the maximum ranges were 245 m, 130 m and 80 m in the directions 108°/00°, 198°/66° and 018°/24°, respectively. For gold, a spherical variogram was determined with a maximum range of 200 m.

Bulk density values were assigned to block model cells using a single bulk density value of 2.76 t/m3.

An empty block model was created within the closed wireframe mineralized envelopes. Block sizes were 20 m x 20 m x 20 m, with sub-celling near domain boundaries to a minimum size of 2 m x 2 m x 2 m. All blocks that fell into the copper domain were coded as copper mineralization blocks and all blocks that fell into the gold domain were coded as gold mineralization blocks. Copper, gold and silver grades were interpolated into the block model using both Ordinary Kriging (OK) and Inverse Distance Weighting (IDW). Interpolation was carried out separately for copper and gold. A first-pass search used radii equal to two-thirds of the semi-variogram long ranges in all directions. A second pass interpolation used search radii equal to the semi-variogram ranges in all directions. A third pass with search radii equal to twice the semi-variogram ranges was carried out for blocks that did not receive grades from the first two passes. Blocks were interpolated using only assay composites restricted by the wireframe models, and which belonged to a corresponding wireframe (i.e. each wireframe was estimated individually). De-clustering was performed during the interpolation process by using four sectors within the search neighbourhood.

 

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Beskauga Copper-Gold Project – S-K 1300 Technical Report Summary

 

 

Validation was completed using comparison of the block model and composite mean grades for each domain, visual checks on screen in sectional view, swath plots comparing input and output grades in a semi-local sense, and comparison of the block model volume with the combined wireframe volume. There is a degree of smoothing as expected from the estimation method used, particularly evident in areas of wide spaced drilling. However, the general trend in the composites is reflected in the block model.

Mineral Resources were classified in accordance with § 229.1302(d)(1)(iii)(A) (Item 1302(d)(1)(iii)(A) of Regulation S-K of the SEC into Indicated and Inferred Mineral Resources. The classification is based upon an assessment of geological and mineralization continuity and QAQC results, as well as considering the level of geological understanding of the deposit. Classification was done by colour coding the interpolation run, with blocks falling within the first two interpolation runs classified as Indicated. Boundaries between the resource classes were interactively interpreted in both plan view and cross sections. The interpreted boundaries were then wireframed and used to code the block model for the Indicated Mineral Resource class.

The classification of the Mineral Resources takes into account all uncertainties related to geological interpretation, mineralization continuity and geostatistical analysis, sampling method and sample and data security, drill sample control and quality, data quality and reliability, density, and topographic reliability.

It is emphasised that an Inferred Mineral Resource is that part of a Mineral Resource for which quantity and grade or quality are estimated on the basis of limited geological evidence and sampling. As a result, an Inferred mineral Resource has substantial inherent uncertainty.

To demonstrate potential of the Beskauga deposit for eventual economic extraction, a preliminary pit optimization study was completed. A net smelter return (NSR) formula was developed and applied to the block model that incorporates metal prices, concentrate sales terms and metallurgical recoveries that were developed from metallurgical reports available for the Project. The NSR applied was:

· NSR $/t = (38.137+11.612 x Cu%) x Cu% + (0.07 + 0.0517 x Ag g/t) x Ag g/t + (19.18 + 12.322 x Au g/t) x Au g/t.

The pit optimization was carried out using the Mining module of the Micromine version 18.0 software application using the Lerch-Grossman algorithm.

The Mineral Resource estimate has been reported for all blocks in the resource model that fall within a pit shell that was developed for an alternative case with NSR multiplied by factor 1.25 and NSR value exceeding $5.70/t. The entire Mineral Resource estimate has reasonable prospects for eventual economic extraction, and is a realistic inventory of mineralization which, under assumed and justifiable technical and economic conditions, might, in whole or in part, become economically extractable.

Table 1: Mineral Resource estimate for the Beskauga deposit with an effective date of 28 January 2021
Category Tonnage (Mt) Cu (%) Au (g/t) Ag (g/t)
Indicated 207 0.23 0.35 1.09
Inferred 147 0.15 0.33 1.02

Notes:

·       An NSR $/t cut-off of $5.70/t was used, and the NSR formula is: NSR $/t = (38.137+11.612 x Cu%) x Cu% + (0.07 + 0.0517 x Ag g/t) x Ag g/t + (19.18 + 12.322 x Au g/t) x Au g/t.

·       The NSR formula incorporates variable recovery formulae. Average copper recovery was 81.7% copper and 51.8% for both gold and silver.

·       Metal prices considered were $2.80/lb copper, $17.25/oz silver and $1,500/oz gold.

·       The Mineral Resource is stated within a pit shell that considers a 1.25 factor above the NSR.

·       Mineral Resources are estimated and reported in accordance with the definitions for Mineral Resources in §229.1302(d)(1)(iii)(A) (Item 1302(d)(1)(iii)(A) of Regulation S-K) into Indicated and Inferred Mineral Resources which is consistent with the CIM Definition Standards for Mineral Resources and Mineral Reserves adopted 10 May 2014.

·       Serik Urbisinov (MAIG), CSA Global Principal Resource Geologist, is the independent Qualified Person with respect to the Mineral Resource estimate.

 

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·       The Mineral Resource is not believed to be materially affected by any known environmental, permitting, legal, title, taxation, socio-economic, marketing, political or other relevant factors.

·       These Mineral Resources are not Mineral Reserves as they do not have demonstrated economic viability.

·       The quantity and grade of reported Inferred Resources in this MRE are uncertain in nature and there has been insufficient exploration to define these Inferred Resources as Indicated or Measured; however, it is reasonably expected that majority of the Inferred Mineral Resources could be upgraded to Indicated Mineral Resources with continued exploration.

The optimisation approach ensures that all Mineral Resource that may ultimately be converted to a Mineral Reserve is captured and reported. Based on the work completed, the Qualified Persons considers that additional work will resolve current uncertainties related to potential for economic extraction, specifically additional drilling and sampling to improve classification of the Mineral Resource and additional metallurgical testwork to optimise recoveries and confirm the Toowong process for reduction of deleterious elements.

1.10 Adjacent Properties

There is a working salt mine run by a private company immediately south of the Beskauga mineral licence that covers an area of 21.3 km2. The Ekidos and Stepnoe exploration licences surround the salt mining licence. There are no other mineral licences adjacent to the licence package.

1.11 Interpretation and Conclusions

The Beskauga deposit is a large porphyry copper-gold deposit within a magmatic arc terrain of the CAOB, a belt that has demonstrated pedigree for economic porphyry deposits. This Mineral Resource estimate has been completed for the Beskauga Main porphyry-style mineralization, not for the Beskauga South gold mineralization which may represent an epithermal overprint to the system. The indications of epithermal overprint, limited potassic and predominant phyllic alteration, suggest that drilling to date may only have tested the upper part of the porphyry system.

The work required to understand the geometry and zonation of alteration and mineralization at Beskauga has not been completed, as would normally be the case for a porphyry-epithermal mineralization system. This represents a substantial gap in the Project and presents an opportunity to improve modelling and resource extension targeting. The deposit is not well understood and has not been drill tested thoroughly based on understanding the architecture of the system, including the gold-only Beskauga South zone. The available information suggests substantial upside potential.

The proposed work program will substantially improve understanding of the geology and economic characteristics of the Project and advance it towards an economic assessment studies. These work programs will address a number of possible risks to the Mineral Resource estimate and project economics identified in the current study. These include the following:

· Limited geological understanding to support deposit modelling.
· Limited density data are available and measurement procedures and data have not been reviewed. A single average density value of 2.78 g/cm3 has been used, which although appropriate for the granodioritic host rock, represents a potential source of risk to the estimated tonnage.
· Although the results of QAQC are acceptable, the low number of QAQC samples and general lack of duplicates represents a risk to the project.
· Comparison of original and umpire samples show a slight positive bias to the original samples analysed at SAEL, which has not been investigated further and which represents a risk to the grade of the Mineral Resource estimate.
· Concentrates contain elevated levels of arsenic that may affect the saleability of the concentrate. Although the concentrates show amenability to further processing via the Toowong Process, which removes arsenic

 

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and other deleterious elements from the concentrate, the cost of this process has not been determined and thus the presence of arsenic presents a project risk.

1.12 Recommendations

The authors recommend an additional work program by Arras on the Beskauga Project that should include:

· An extensive exploration program to fully test the entire mineralizing system at Beskauga.
· Collection of multi-element and hyperspectral data from a selection of historical pulps and drill core and, on this basis, design of routine analytical protocol for all additional drilling.
· Relogging of all available drill core including detailed alteration and vein logging, and development of an appropriate Standard Operating Procedure for logging for future drilling.
· Review and re-processing of IP and magnetic data collected by Copperbelt.
· Submission of additional QAQC samples (~5% pulp duplicates and 5% umpire samples), together with CRMs in order to improve the quality control data, and design of a routine QAQC protocol for ongoing drilling.
· A comprehensive density testing program to confirm the density value used in the Mineral Resource estimate.
· Additional infill drilling to improve definition of the geology and mineralization and to support improved classification of additional Mineral Resources to the Measured or Indicated classification.
· Integrated geological, structural, alteration, and litho-geochemical and hyperspectral study to support improved understanding, three-dimensional (3D) geological model, and a geometallurgical domain model.
· Additional metallurgical testwork to confirm recovery and comminution parameters, deleterious element mitigation, with sample selection based on geometallurgical domains.
· Follow up on regional targets with geophysics and prospect drilling.
· Geotechnical drilling to confirm appropriate slope angles for future open pit design work and initial hydrogeological assessment.
· Detail power and water sources, requirements, and begin all permitting processes.
· Address any other gaps to be filled to advance the Project towards a Mineral Resource update and Preliminary Economic Assessment.

These items should be carried out concurrently as a single phase of work. The authors estimate that the total cost of the next phase work program is approximately US$5.7 million.

 

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2 Introduction

Arras Minerals Corp. (Arras or the Issuer) is a Canadian based mineral exploration company that is a majority owned subsidiary of Silver Bull Resources Inc. (Silver Bull). Silver Bull is a Canadian-based mineral exploration company engaged in exploring and developing the Sierra Mojada silver-zinc-lead project located in Coahuila, Mexico. Silver Bull is listed on the Toronto Stock Exchange (stock ticker SVB) and on the OTCQB Stock Exchange (stock ticker SVBL).

On 17 August 2020, Silver Bull announced that it had entered into an agreement to acquire a 100% interest in the Beskauga Copper-Gold Project located in in the Pavlodar Province in northeastern Kazakhstan from Copperbelt, a private mineral exploration company registered in Zug, Switzerland.

Silver Bull commissioned CSA Global Consultants Canada Limited (CSA Global), an ERM Group company, to complete a Mineral Resource estimate and prepare a NI 43-101 Technical Report on the Beskauga Project. The NI 43-101 Technical Report was lodged on Sedar in February 2021.

On March 19, 2021, Silver Bull transferred its Kazakh assets, including the Beskauga Project, to Arras pursuant to the terms of an Asset Purchase Agreement (APA) in exchange for the issuance of 36,000,000 common shares of Arras to Silver Bull.

In May 2021, CSA Global was retained by Arras to prepare an independent Technical Report Summary on the Beskauga Project. The purpose of this Technical Report Summary is to support the disclosure of a Mineral Resource estimate for the Beskauga Project. This Technical Report Summary conforms to United States Securities and Exchange Commission (SEC) Modernized Property Disclosure Requirements for Mining Registrants as described in Subpart 229.1300 of Regulation S-K, Disclosure by Registrants Engaged in Mining Operations (S-K 1300) and Item 601 (b)(96) Technical Report Summary.

The principal author of this report is Serikjan Urbisinov, CSA Global Principal Resource Geologist. Mr. Urbisinov has more than five years’ experience in the field of porphyry copper-gold deposits and is a Qualified Person according to NI 43-101 standards.

The Effective Date of this report is 28 January 2020. The report is based on technical information known to the authors and CSA Global at that date.

Arras reviewed draft copies of this report for factual errors. Any changes made because of these reviews did not include alterations to the interpretations and conclusions made. Therefore, the statements and opinions expressed in this document are given in good faith and in the belief that such statements and opinions are not false and misleading at the date of this report.

2.1 Sources of Information

This report is based, in part, on internal technical reports, maps, and consultants’ reports provided to CSA Global by Silver Bull and Arras, and on public information, as listed in Section 24 (References) of this Technical Report. Previous Mineral Resource estimates for the Beskauga Project have been reported under the JORC Code (2012 Edition) by CSA Global in November 2013 and by Geosure Exploration and Mining Solutions Pty Ltd in January 2015. As Copperbelt is a private company, these estimates have not been publicly reported.

The various studies and reports have been collated and integrated into this report by the principal author (Serikjan Urbisinov) of CSA Global. The MRE has also been carried out by Serik Urbisinov. The authors have taken reasonable steps to verify the information provided, where possible.

 

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The Qualified Persons have not conducted detailed land status evaluations, and have relied upon previous qualified reports, public documents and statements by Silver Bull and Arras regarding Property status and legal title to the Beskauga Project.

The authors also had discussions with the management and consultants of the Issuer, including Mr. Tim Barry (Chief Executive Officer, Silver Bull) regarding the geology and tenure of the Project.

This report includes technical information that requires calculations to derive subtotals, totals, and weighted averages, which inherently involve a degree of rounding and, consequently, introduce a margin of error. Where this occurs, the authors do not consider it to be material.

2.2 Qualified Persons

This report was prepared by the Qualified Persons listed in Table 2.

Table 2: Qualified Persons – report responsibilities
Qualified Person Report section responsibility
Serik Urbisinov (MAIG), Principal Resource Geologist, CSA Global 1, 2, 6, and 11–27 inclusive
Andrew Sharp (P.Eng.), Principal Mining Engineer, CSA Global Sections 10 and 11.12
Georgiy Freiman (FAIG), Chairperson, GeoMineProject LLP (Almaty) Sections 3, 4, 5, 7, 8, and 9; property visit in 2017

The authors are Qualified Persons with the relevant experience, education, and professional standing for the portions of the report for which they are responsible.

CSA Global conducted an internal check to confirm that there is no conflict of interest in relation to its engagement in this project or with Arras and that there is no circumstance that could interfere with the Qualified Persons’ judgement regarding the preparation of the Technical Report.

2.3 Qualified Person Property Inspection

A two-day visit to the Beskauga Project was completed by Georgiy Freiman on 22 and 23 January 2017 as detailed in Section 9.1. Serik Urbisinov and Andrew Sharp did not visit the Beskauga Project. No significant work has been conducted on the Project since 2017 and the Qualified Persons consider Georgiy Freiman’s 2017 site visit current under section 6.2 of NI 43-101.

2.4 Previous Technical Reports/Estimates.

No previous reports have been filed on this property. However, Mineral Resource estimates have been completed on this deposit and reported in accordance with the JORC Code, 2012 Edition:

· In 2014 by CSA Global (Urbisinov, 2014) and;
· In 2015 by Geosure Exploration and Mining Solutions (Montgomery, 2015).

The details of these historical resource estimates are shown in Table 5.

 

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3 Property Description
3.1 Location of Property

The Beskauga Project is located in Pavlodar region, north-eastern Kazakhstan, approximately 300 km east-northeast of Nur-Sultan (formerly Astana), the capital of Kazakhstan (Figure 1) and approximately 70 km southwest of the city of Pavlodar (population ~330,000), and approximately 65 km east of the town of Ekibastuz (population ~125,000). The property comprises three contiguous licences, the Beskauga mineral licence in the centre of the property (which has been the subject of all work carried out thus far) and two additional mineral exploration licences, termed “Stepnoe” and “Ekidos” (Figure 2). The centre of the property lies at approximately 51°47'N, 76°17'E (WGS84, geographic coordinates).

 

Figure 1: Location of the Beskauga Project in Kazakhstan in relation to the major cities (coordinate grid is WGS84, geographic coordinates)

 

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Figure 2: Location of the Beskauga Project licences (coordinates are WGS84/UTM Zone 43N).

The missing block is a salt mine not held by Arras.

3.2 Area of Property

The Beskauga licence is 67.8 km2 (6,780 hectares) in area, and the Stepnoe and Ekidos licences are each 425 km2 (42,500 hectares) in area, bringing the total area held or under option to 917.8 km2 (91,780 hectares).

3.3 Mineral Tenure
3.3.1 Kazakhstan Mining Code

Kazakhstan has recently updated its mining code and all new licences are issued under this code. The new mining code, the Code on Subsoil and Subsoil Use (“the SSU Code”) was ratified on 29 June 2018 and is based on the Western Australian model. Under the SSU Code, Kazakhstan transferred from a contractual regime to a licensing regime for solid minerals (except for uranium, which remains under a contractual regime). The purpose has been to boost investment in exploration and mining in Kazakhstan and remove administrative burdens for subsoil users. The mining industry in Kazakhstan accounts for about 14% of gross domestic product and more than 20% of exports and is seen as a key industry.

Under the Kazakhstan Constitution, the subsoil is owned by the state. In regulating the mining sector, the state is represented by the competent authority, the Ministry of Industry and Infrastructural Development (MIID), which is authorised to grant and terminate subsoil use rights (SURs) and control compliance obligations related to SURs. Under the new mining code, SURs are granted under subsoil use licences (SULs), either for exploration

 

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or mining. Under the previous regime, SURs were granted under contracts for the right of exploration, mining, or combined exploration and mining (SUCs).

Exploration licences are granted for up to six years with the possibility of an extension for five more years and provide an exclusive right to use the subsoil for the purpose of exploration and for assessment of resources and reserves for subsequent mining. If a deposit is discovered, the exploration licence holder has an exclusive right to obtain a mining licence if the discovery is confirmed by a report on estimation of resources and reserves of solid minerals. The SSU Code entitles subsoil users to estimate resources and reserves under the KAZRC standard, which is aligned with the CRIRSCO, JORC, CIM and S-K 1300 reporting codes.

Under the older contractual permitting system, a company agreed to meet certain milestones and expenditure. Despite a new mining code being in place, obligations under existing contracts are still enforced. Should a company fail to meet its obligations as stated in the contract, or the company needs to extend or change the terms, the company can approach the government and add an “Addendum” to the contract.

The SSU Code is the principal law regulating the mining sector, with detail provided by a number of government decrees and ministerial orders. Mining of precious metals is also affected by the Law on Precious Metals and Precious Stones (the “Precious Metals Law”) under which the Kazakhstan National Bank can exercise a priority right to buy fine gold. Other relevant legislation includes the Tax Code, the Land Code, and the Environmental Code.

3.3.2 Beskauga Project

Arras’s Beskauga Project consists of three licences: the Beskauga licence which was issued under the older permitting system, and the Ekidos and Stepnoe licences which were issued under the new SSU Code in October 2020. The Beskauga licence is held by Dostyk, a Kazakh entity 100% owned by Copperbelt, a private mineral exploration company registered in Switzerland with which Arras has an option agreement (see Section 3.4.1). The Ekidos and Stepnoe licences are held by Ekidos Minerals LLP (Ekidos LLP), a Kazakh entity established as part of the Ekidos Joint Venture agreement between Copperbelt and Silver Bull (Table 3 and section 3.4.2). Pursuant to the terms of the joint venture agreement and in connection with the March 2021 transfer of Silver Bull’s Kazakh assets to Arras, it is expected that 100% of the equity interests in Ekidos LLP will be transferred to Arras in the near future.

Table 3: License table for Beskauga outlining the validity of the licences
Licence Name Licence Number Issue Date Expiry Date Comment
Beskauga Contract No. 759 October 21, 2001 February 8, 2024 To be converted to a mining licence at the end of the exploration period in February 2024
Ekidos 875-EL October 22, 2020 October 22, 2026 6 Year exploration period. Can be renewed for an additional 5 years
Stepnoe 876-EL October 23, 2020 October 22, 2026 6 Year exploration period. Can be renewed for an additional 5 years
3.3.3 Beskauga Licence

Dostyk maintains minerals rights for the Beskauga deposit based on Licence No. 785 (series MG) dated 8 January 1996, and a series of subsequent contracts and addendums as per the Republic of Kazakhstan legislation.

 

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The subsoil right for the Beskauga area was initially acquired by Goldbelt Resources Ltd in 1996 as part of a much larger Licence No. 785 (Mykubinsk), issued to its 80% subsidiary, Dostyk, under the old permitting system. In 2000, Goldbelt Resources Ltd sold its interest in Dostyk to Celtic Resources, a London listed company.

Exploration rights under Licence No. 785 including Beskauga were re-issued to Dostyk in October 2001 as Contract No. 759 for the Maikuben area. No drilling at the Beskauga deposit was conducted by Goldbelt Resources Ltd or Celtic Resources.

In 2007, Cigma Metals, a Vancouver-based company, purchased 80% of Dostyk from Celtic Resources and, later that year, the remaining 20%. Relinquishment of areas considered to be poorly prospective in 2008 reduced the contract area to five plots totalling 2,723.87 km2. In 2009, the ownership of Dostyk was fully transferred to Copperbelt from Cigma Metals.

Following exploration results from work programs from 2007 to 2010 on the Beskauga, Karagandyozek and Ushtagan prospects, Dostyk was issued rights in 2011 for further exploration/appraisal works for a reduced 419.76 km2 area. After relinquishment of areas in 2017 (23.23 km2) and in 2020 (328.73 km2), the current remaining area is 67.8 km2.

White and Case (2020) report the following amendments to the subsoil use contract:

a. Amendment No. 1 dated 7 December 2004 which, inter alia:
§ amended section 16 (Taxes and Other Mandatory Payments) to reflect provisions of the 2001 Tax Code; and
§ introduced a provision stating that guaranties of stability of laws do not apply in respect of military, national security, and people's health laws.
b. Amendment No. 2 dated 31 October 2006 which, inter alia, extended the exploration period for two years (until 31 December 2007).
c. Amendment No. 3 dated 14 May 2008 which, inter alia:
§ extended the exploration period for two years (until 31 December 2009);
§ introduced an obligation to comply with the memorandum of understanding under EITI; and
§ harmonized section 29 (Termination of the Contract) with the Subsoil Use Law.
d. Amendment No. 4 dated 6 September 2010 which, inter alia:
§ extended the exploration period for one year (until 31 December 2010);
§ introduced local content obligations; and
§ introduced a provision stating that guaranties of stability of laws do not apply in respect of environment and tax laws (in addition to military, national security, people's health).
e. Amendment No. 5 dated 13 February 2014 which, inter alia:
§ extended the exploration period (an appraisal stage) until 31 December 2015;
§ introduced a provision on applicability of provisions of the Subsoil Use Law to the Contract; and
§ introduced payment obligations for research and development ("R& D") and training of staff.
f. Amendment No. 6 dated 16 March 2016 which, inter alia:
§ extended the exploration period (an appraisal stage) until 31 December 2018; and
§ amended the obligation for training of staff by making it 0.1 % of production costs.
g. Amendment No. 7 dated 26 May 2017 which, inter alia:
§ extracted the Ushtagan deposit from the Contract to a separate subsoil use contract;
§ amended the obligation for training of staff by making it 1% of exploration investments and 0.1% of production costs;
§ amended the obligation for R&D by making it 1% of annual profit;
§ introduced obligations to follow governmental rules for procurement of goods/works/services.
h. Amendment No. 8 dated 27 February 2019 which, inter alia:
§ extended the exploration period (an appraisal stage) until 31 December 2020;
§ approved a new work program; and

 

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§ introduced an obligation on payment for social and economic development of the region in the amount of 0.64% of appraisal costs.

Via its option agreement with Copperbelt, Arras has acquired the right to explore for “All Minerals” (except uranium) on the remaining Dostyk licence including the Beskauga deposit. The present contract set forth its validity period as until the last day of validity of Licence MG No. 785, 8 January 2021, with an ability to extend until the full depletion of resources.

On 14 January 2021, the Competent Authority, the MIID, granted an extension of the exploration rights to Dostyk until 31 December 2023. Under this addendum, Arras via its agreement with Copperbelt will be required to spend the following over three years to keep the licence in good standing:

· 2021: US$1.801 million
· 2022: US$2.726 million
· 2023: US$4.7 million.

At the end of this three-year period in 2023, the Beskauga exploration licence will need to be converted to a mining licence. A mining licence has provision to allow for another three-year exploration period before an economic study needs to be completed on the Project.

3.3.4 Stepnoe and Ekidos Exploration Licences

The Ekidos (No. 875-EL) and Stepnoe (No. 876-EL) licences were granted on 22 October 2020 to Ekidos LLP under the new SSU Code. Under the new code, the licences are granted for “All Minerals” (except uranium) for an initial six-year period. The licence can be extended once for an additional 5 years.

Pursuant to the terms of the Ekidos Joint Venture agreement with Copperbelt (section 3.4.2) and in connection with the March 19, 2021 transfer of Silver Bull’s Kazakh assets to Arras, it is expected that 100% of the equity interests in Ekidos LLP will be transferred to Arras in the near future.

An annual exploration commitment for each licence is calculated based on the number of 2.5 km2 “blocks” contained within the licence. The exploration commitment for each block is calculated based on a “Minimum wage index” (“MRP”) by the Kazakh State which is then multiplied by the exchange rate of the Kazakh Tenge to the United States dollar (US$). The rates will vary slightly from year to year due to changing exchange rates, but the annual expenditure commitment for 2021 for the Stepnoe and Ekidos licences is calculated via a formula outlined in the mining code to be approximately US$15,584 for each licence. It is not expected this annual exploration commitment cost will materially vary over the first three years.

In addition to the annual exploration commitment costs there is also an annual “land lease” fee which is calculated using the formula “15MRP x No. of blocks”. It is calculated this fee will equate to approximately US$21,000 each per year for the Ekidos and Stepnoe licences.

The annual expenditure commitment in a given year can be covered by expenditure accrued over the years where exploration expenditure exceeds the calculated commitment amount. The annual expenditure commitment can be reduced by ceding ground.

3.4 Tenure Agreements and Encumbrances
3.4.1 Beskauga Mineral Licence Option Agreement

A summary of the option agreement entered between Silver Bull and Copperbelt on the Beskauga licence is outlined below.

On execution of the option agreement, Silver Bull paid Copperbelt US$30,000. An additional US$40,000 was paid to Copperbelt following the closing of the deal on 26 January 2021.

 

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Commencing on 26 January 2021, Silver Bull has four years to conduct exploration on the property. A cumulative US$15 million in exploration expenditure on the Beskauga licence, as well as the Ekidos and Stepnoe exploration licences (see Section 3.4.2 Ekidos-Stepnoe JV agreement below) is required to keep the option in good standing over the four year period. Minimum expenditures each year are as follows: US$2 million in year one, US$3 million in year two, US$5 million in year three and US$5 million in year four, for a total exploration spend of US$15 million over four years.

The Beskauga Option Agreement also provides that subject to its terms and conditions, after Silver Bull has incurred the exploration expenditures, it may exercise the Beskauga Option and acquire the Beskauga Property for a US$15 million cash payment.

In addition to the $15 million cash payment, the Beskauga Option Agreement provides that, subject to its terms and conditions, Silver Bull may be obligated to make additional bonus payments to Copperbelt if the Beskauga Main Project or the Beskauga South Prospect is the subject of a bankable feasibility study in compliance with Canadian National Instrument 43-101 indicating gold equivalent resources in the amounts in Table 4. Twenty percent of the Bonus Payments is payable after completion of the bankable feasibility study and the remaining 80% is payable within 15 business days of commencement of on-site construction of a mine at Beskauga Main or Beskauga South. Up to 50% of the bonus payments is payable in shares of Silver Bull’s common stock valued at the 20-day volume-weighted average trading price of the shares on the Toronto Stock Exchange calculated as of the date immediately preceding the date such shares are issued.

Table 4: Bonus payments under the Beskauga Option Agreement
Gold equivalent resources  Cumulative Bonus Payments
Beskauga Main Project
3,000,000 ounces $2,000,000
5,000,000 ounces $6,000,000
7,000,000 ounces $12,000,000
10,000,000 ounces $20,000,000
Beskauga South Prospect
2,000,000 ounces $2,000,000
3,000,000 ounces $5,000,000
4,000,000 ounces $8,000,000
5,000,000 ounces $12,000,000

The Beskauga Option Agreement may be terminated under certain circumstances, including (i) upon the mutual written agreement of Silver Bull and Copperbelt; (ii) upon the delivery of written notice by Silver Bull in its sole discretion; or (iii) if there is a material breach by a party of its obligations under the Beskauga Option Agreement and the other party has provided written notice of such material breach, which is incapable of being cured or remains uncured.

Pursuant to the March 19, 2021 transfer of Silver Bull’s Kazakh assets to Arras, the Beskauga Mineral Licence Option Agreement has been transferred to Arras.

3.4.2 Ekidos-Stepnoe Joint Venture Agreement

On September 1, 2020, Silver Bull entered into an 80:20 joint venture with Copperbelt on the “Stepnoe” and “Ekidos” exploration licences (the Ekidos Joint Venture agreement ) via ownership in Kazakh company, Ekidos LLP, that was established under the agreement to acquire the licences. Under the terms of the agreement, Silver Bull is to manage and fund all exploration activities on the properties. Silver Bull can acquire Copperbelt’s 20% interest in Ekidos LLP and the Stepnoe and Ekidos licences for $1.5 million each in cash. Exploration expenditures

 

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on these licences under the joint venture can contribute to Silver Bull’s US$15 million expenditure commitment under the Beskauga option agreement.

Pursuant to the terms of the joint venture agreement with Copperbelt and in connection with the March 19, 2021 transfer of Silver Bull’s Kazakh assets to Arras, it is expected that 100% of the equity interests in Ekidos LLP will be transferred to Arras in the near future.

No other liens or royalties are reported by Silver Bull or Arras management.

3.5 Environmental Liabilities

To the Qualified Person’s knowledge, there are no known environmental liabilities at the Project. The deposit is under cover and no past mining has been undertaken.

3.6 Risks

The Qualified Persons are not aware of any significant factors or risks that may affect title or access and the ability to perform work on the property. A number of drilling campaigns have been previously conducted and the property title has a history of title renewal. There is no indication that this situation will change in the future.

 

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4 Accessibility, Climate, Local Resources, Infrastructure and Physiography
4.1 Topography, Elevation and Vegetation

The Project is located within the vast western steppe ecoregion of central Asia that is characterized by grassland plains without trees apart from those near rivers and lakes. The project area consists of low-lying plains with numerous depressions that form lakes. Topography is gentle and the landscape is dominated by sloping hills and ridges of the Irtysh River flood plain. Elevations range from 100 m above sea level to 150 m above sea level.

The Irtysh is a major river that rises from the glaciers on the southwestern slopes of the Altai Mountains in the Uygur Autonomous Region of Xinjiang in far northwestern China. The Ob-Irtysh drainage basin is one of the largest in central Asia, encompassing most of Western Siberia, northeastern Kazakhstan, and the Altai Mountains.

Permanent river systems are rare to absent in the Project area but there are numerous stream beds of an ephemeral nature, of which the largest one is Karagandyozek River. The area is rich in lakes, large shallow depressions that fill with saline water during periods of snow melt.

Soils in the region are light-chestnut colour and often saline in character and lacking in nutrients. The overburden cover on the site is an approximately 40 m sheet of loose Cenozoic sediments, primarily alluvial sands, and lacustrine sediments. Vegetation is scarce and dominated by grasses. Fauna sparsely populates the Project area.

4.2 Access to Property

The Beskauga deposit is located approximately 300 km from the Kazakhstan capital, Nur-Sultan (formerly Astana), which has a population of over one million. The international airport at Nur Sultan is serviced by multiple international commercial airlines.

The larger towns of Ekibastuz, Maykain and Bayanaul are within 30–50 km of the licence area. Several smaller villages occur in the vicinity of the Project, including Tortkuduk and Kudyakol which are serviced by rail lines and sealed highways.

Access to the Project area is via sealed highway from Ekibastuz (population ~125,000), some 40 km to the west of the Project area, or from Pavlodar, some 70 km to the northeast of the Project area. Ekibastuz is about four hours drive from Nur-Sultan (Astana) via the P4 and A17 highways. Pavlodar is serviced by an international airport.

Access around the Project area is gained by gravel tracks of moderate to good quality. Roads are accessible by two-wheel drive vehicles; however, they are often subject to seasonal closure as a result of winter weather.

4.3 Climate

The climate in the Beskauga Project region is characteristic of arid steppes (prairies). Summers (May to September) are dry and hot with daytime temperatures ranging between 20°C and 35°С, although majority of the precipitation falls in the summer. Winters (November to March) are cold, with average temperatures between 0°C and -20°C with the coldest temperatures in January and February. Winters typically last for three to four months and feature light snow falls.

Precipitation is generally low, with an average annual total of 200–280 mm. The Project region is characterized by moderate winds, with occasional wind gusts, which prevail from the west and southwest. Snow is common in

 

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winter, but the ground coverage is inconsistent. Snow cover has an average depth of 0.3 m and soils generally freeze to depths of 2.0–2.5 m.

Seasonally appropriate mineral exploration activities may be conducted year-round at the Project. Mine operations in the region can operate year-round with supporting infrastructure.

Figure 3: Drilling on the Beskauga deposit
4.4 Infrastructure
4.4.1 Sources of Power

The region provides some 40% of all power generating capacity of Kazakhstan with six power stations, three of which are in Pavlodar, two in Ekibastuz, and one in Aksu. Power transmission lines run to various regions of Kazakhstan and Russia. Power generation was developed based on mining of coal from Devonian rocks in the Ekibastuz basin.

4.4.2 Water

Generally, the region has a lack of water resources. Water courses typically have low flow rates and disappear over the summer months. Fresh water is supplied to the area from Irtysh River via the Irtysh-Karaganda Canal with water inflow of approximately 250,000 m3 per hour. The canal runs through Ekibastuz and passes approximately 18 km from the Beskauga deposit.

Water resources are considered sufficient for a large-scale mining project.

4.4.3 Local Infrastructure, Supplies and Mining Personnel

The Ekibastuz–Pavlodar region is a major transportation and communication node transected by highways, railways, power transmission lines, and Kazakhstan’s largest oil pipeline which travels to Shymkent in the south of the country. The northern boundary of the licence is the Astana/Ekibastuz/Pavlodar/Barnaul rail line and the Astana/Pavlodar highway. Rail lines connect this centre with Russia and various parts of Kazakhstan.

The local economy is dominated by activity in the mining and industrial sectors, agriculture contributes to a much lesser extent. The Pavlodar region is one the major industrial regions of Kazakhstan with many large industrial companies focused on exports. The region is rich in natural resources and has a well-developed industrial and

  

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social infrastructure, up to date transport and communications, foreign investment, and the availability of state-run development programs. A well-developed market for construction materials such as limestone, gravel and quarry stone can be found in the region.

The significant mining activities in the area include the coal mines around Ekibastuz as well as metal mines. KAZ Minerals major Bozshakol open pit porphyry copper mine is located 72 km west of Ekibastuz. The substantial mining industry means that there is a large, well-trained labour force to draw upon for any future mining activities.

The region has sufficient infrastructure and resources to host large-scale mining operations. All supplies and services for exploration and mining are available locally or can be readily sourced and supplied to the project area via the well developed transport infrastructure.

4.4.4 Property Infrastructure

The Project has no infrastructure apart from gravel roads. However, a 1,100 kVA powerline passes through the property (Figure 4).

Figure 4: Location of the town of Ekibastuz in relation to the Beskauga Project mineral licences

Also shown are roads, rail, and power infrastructure in the immediate area.

4.4.5 Adequacy of Property Size

The area of the claims making up the Beskauga Project at this time appear to be sufficiently large for the proposed exploration activities and for the infrastructure necessary for potential future mining operations (including

 

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potential tailings storage areas, potential waste disposal areas, and potential processing plant sites) should a mineable mineral deposit be delineated at the Project.

 

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5 History
5.1 Property Ownership

The Beskauga deposit was initially discovered during state-funded exploration when Kazakhstan was part of the Soviet Union. Following privatization, the subsoil rights in the Maikuben licence area including the Beskauga Project area were held from 1996 to 1999 by Canadian company, Goldbelt Resources, under Licence No. MG 785, via its 80% subsidiary, Dostyk. Goldbelt explored the area in 1996 and 1997 but relinquished or divested all its Kazakh assets by 2001, including its interest in Dostyk which was sold to Celtic Resources, a UK-listed company, in 2000.

Dostyk was acquired by Vancouver-based Cigma Metals in 2007 when exploration at Beskauga commenced. In 2009, Copperbelt acquired Dostyk from Cigma Metals and continued to undertake exploration at Beskauga, as well as other targets in the larger licence area. Copperbelt’s current 67.8 km2 licence only covers the Beskauga deposit, the other prospects were relinquished or divested by Copperbelt.

5.2 Historical Exploration
5.2.1 Soviet Period

Geological investigation began in the district in the late 1920s when Kazakhstan was part of the Soviet Union. In the 1960s, regional scale mapping outlined some promising areas of alteration and geophysical anomalies that were worthy of follow up work. In the 1970s and the 1980s, continued regional-scale mapping and exploration further delineated zones of interest.

Between 1981 and 1990, the Beskauga area saw ground magnetic and IP surveys and shallow drilling programs. Shallow drilling on a 200 m x 200 m grid (partially infilled at 200 m x 100 m) through the overlying Quaternary cover targeted geophysical and geochemical anomalies. A total of 411 holes were drilled during this period for a total of 15,063 m. This drilling was performed by URB-2A (KGK-100) and SBU-ZIF-150 drill-rigs. The drillholes were generally 30–40 m deep with a few reaching depths between 60 m and 80 m, with the primary aim of obtaining bedrock information, including geochemistry. The drilling method is not known.

A further 20 holes to depths of 100–200 m were also drilled during this period. These 20 holes totalled 3,818 m. Drilling was performed by ZIF-300, ZIF-650 and SBA-500 drill rigs and used tungsten carbide and diamond bits. The hole diameter was 59 mm. These drillholes were drilled at angles between 75° and 80° towards the southeast. Core recovery in all drillholes drilled in 1981–1990 was between 60% and 80%.

This initial drilling identified Beskauga as an area of interest, but no significant mineralized intercepts were obtained, and the area was not followed up until Dostyk commenced drilling in 2007.

Drillhole locations and drilling and analytical data from this period are not available and have not been considered in the preparation of this Technical Report.

5.2.2 Goldbelt Resources

In 1996, Goldbelt Resources, via Dostyk, acquired the Maikuben exploration licence that included the Beskauga area. Goldbelt Resources defined about 20 prospects areas of interest and conducted work programs in these areas in 1996 and 1997. Based on the results of this program, Goldbelt relinquished approximately 25% of the area covered by Licence MG No. 785.

There is no documentation of any exploration at Beskauga by Goldbelt Resources. It is understood the exploration focus was on other targets within the extensive licence area and that no significant work was

 

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completed at Beskauga. Data from exploration by Goldbelt Resources have not been obtained and have not been considered in the preparation of this report.

5.3 Previous Exploration by Copperbelt

Exploration and drilling completed on the Beskauga Project by Copperbelt between 2007 and 2017 is described in Sections 7.

5.4 Historical Mineral Resource Estimates

Two historical Mineral Resource estimates have previously been completed for Copperbelt on the Beskauga Project, namely by CSA Global in November 2013 (reported by Urbisinov, 2014) and by Geosure Exploration and Mining Solutions Pty Ltd in January 2015 (Montgomery, 2015; Table 5). Both estimates were completed and reported in accordance with the JORC Code (2012 Edition). Neither Mineral Resource estimate was publicly reported as the work was completed for a private company, Copperbelt.

The JORC Code is closely aligned with the CIM Definition Standards for Mineral Resources and Mineral Reserves, adopted by the CIM Council on 10 May 2014 and with the definitions for Mineral Resources in §229.1302(d)(1)(iii)(A) (Item 1302(d)(1)(iii)(A) of Regulation S-K). However, the estimates have not been reported according to S-K 1300 standards of disclosure. Most significantly, the estimates have not been constrained by an open pit as would normally be the case when reporting under S-K 1300 or NI 43-101 to support potential for eventual economic extraction.

For this reason, and because they have been superseded by the current estimate based on additional drilling, the reader is cautioned that the Mineral Resource estimates presented in Table 5 are considered to be historical. They are presented for historical context and informational purposes only and the Issuer is not treating the historical estimates as current Mineral Resources.

Table 5: Historical Mineral Resource estimates at the Beskauga Project
Author Classification Tonnes (Mt) Au (g/t) Cu (%)
CSA Global (2013) Indicated 226 0.4 0.25
Inferred 273 0.36 0.15
Geosure Exploration and Mining Solutions Pty Ltd (2015) Indicated 248 0.42 0.3
Inferred 306 0.37 0.2

 

 

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6 Geological Setting, Mineralization and Deposit
6.1 Regional Geology and Metallogeny

The Beskauga Project is located in northeastern Kazakhstan, an area underlain by rocks forming part of the Altaid tectonic collage or CAOB (Sengör et al., 1993; Jahn et al., 2000) which extends eastwards into Russia, Mongolia and China as the Transbaikal-Mongolian orogenic collage (Yakubchuk, 2002). The CAOB is the most extensive and long-lived accretionary orogenic collage globally, progressively developed from the late Mesoproterozoic through the Paleozoic to the early Mesozoic by accretion of magmatic arcs, ophiolites, microcontinents, and accretionary wedges.

The CAOB collage formed during Rodinia break-up predominantly on the Paleotethys Ocean margin of the Siberian craton and proto-Asian continent, but also on the adjacent Paleo-Pacific margin and associated with the closure of rifted back-arc basins behind the ocean-facing margins (Seltmann and Porter, 2005). The CAOB collage is made up of fragments of sedimentary basins, island arcs, accretionary wedges and tectonically bounded terranes composed of Neoproterozoic to Cenozoic rocks (Figure 5), the product of a complex sequence of processes resulting from subduction, collision, transcurrent movement and continuing tectonism over the interval from the Neoproterozoic to the present (Seltmann and Porter, 2005). The pattern was further complicated by the late overprint of the Alpine-Himalayan deformation related to Indo-Asian collision between Gondwana and Asia (Yakubchuk et al., 2002).

Models involving either a single long-lived arc system (Sengör et al., 1993) or multiple arc and back-arc systems (Yakubchuk, 2002) that collided with the Baltic and Siberian cratons have been suggested, and Windley et al. (2007) suggests several independent and short-lived arc systems that were welded together by a process of consecutive collisions, and that many of these arcs appear to be characterized by relatively short periods of volcanic activity and were not synchronous.

The CAOB collage is highly endowed with mineral deposits, as is typical of accretionary orogenic belts, including volcanic and sedimentary massive sulphide deposits, epithermal and orogenic gold deposits, and porphyry copper-gold/molybdenum deposits.

The CAOB contains several major porphyry copper-gold/molybdenum and epithermal gold deposits formed over an extensive period from the Ordovician to the Jurassic and associated with the various magmatic arcs of this complex, including the huge Devonian Oyu Tolgoi deposit in Mongolia. Eastern Kazakhstan also hosts a cluster of large porphyry deposits including Kounrad in the Balkhash belt and Bozshakol in Pavlodar, ~180 km west of Beskauga. The Bozshakol deposit is currently mined by London Stock Exchange-listed KAZ Minerals and has a published resource of 991.9 Mt at 0.36% Cu, 0.15 g/t Au and 1.1 g/t Ag in Measured and Indicated classification (https://www.kazminerals.com/our-business/mineral-resources/).

 

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Figure 5: Simplified tectonic map of the Altaid and Transbaikal-Mongolian orogenic collage in central Eurasia

Shows the location of selected porphyry copper-gold/molybdenum deposits, after removal of Mesozoic-Cenozoic basins and superficial cover (from Seltmann and Porter, 2005). Beskauga location shown by yellow star.

 

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6.1.1 Central Asian Orogenic Belt in Northeastern Kazakhstan

In the region of northern Kazakhstan, several microcontinents and island arcs are separated by suture zones of deep, marine, volcanic, and sedimentary formations and ophiolites (Windley et al., 2007). The Maikain-Kyziltas ophiolitic suite (Figure 6) represents such a suture and comprises a serpentinite melange with abyssal and terrigenous siliceous sediments, tholeiitic, basalt and ferrobasalt, various gabbroids, and gabbro-amphibolitic bodies, representing oceanic crustal rocks. Sedimentary formations are represented by a thick pile of deformed volcanogenic-terrigenous strata, often having limestones at their base, and are typical of island arc settings.

Figure 6: Geotectonic map of the Paleozoic of Kazakhstan and contiguous China, showing the location of the Beskauga deposit (from Windley et al., 2007)

PR, Proterozoic; Cm, Cambrian; O, Ordovician; S, Silurian; D, Devonian; C, Carboniferous; P, Permian; PZ, Paleozoic; MZ, Mesozoic; CZ, Cenozoic. Subscripts 1, 2, 3 refer to Early, Middle, Late.

Beskauga is thought to be located in the lower Boshchekul-Chingiz volcanic arc, part of the Kipchak arc system, marginal to the Maikain-Kyziltas ophiolitic melange belt. Island-arc volcanism was calc-alkaline in nature, evolving from are more sodic chemistry to more potassic in later stages and formed small hypabyssal intrusive bodies of gabbro, diorites, granodiorite, and sodic granite. These intrusives are responsible for the formation of the copper-gold porphyry systems in the magmatic arc belts. No significant porphyry-style deposits are found within the accretionary complexes of the sutured back-arc and intra-arc basins, although they do host large and giant, non-arc related orogenic gold deposits within fold and thrust belts (Seltmann and Porter, 2005).

These rocks being of early Ordovician age in Boschekulskaya zone (Chagan complex) and later Ordovician or Silurian age in Kendiktinskaya and Maikain-Aleksandrovskaya zones (Zharlikol complex). Often these intrusive systems are closely related to porphyry copper gold mineralization.

Within the Project area, later stage (early to late Permian age) granitic intrusive bodies are also present.

 

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Owing to the fact that that the Beskauga area is overlain by a 10–40 m thick cover of younger sediments, and the fact that several belts of magmatic arc rocks and accretionary volcano-sedimentary units are juxtaposed in close proximity on northeastern Kazakhstan (Figure 7), the precise age of the rocks underlying the Beskauga area is unclear – the Bozshakol deposit 160 km to the west is Cambrian-Ordovician (481 Ma), but younger arc-related rocks are also found in the area. The Nukazgan porphyry deposit (290 km to the southwest) has been dated at lower Silurian and the Aktogai deposits (600 km to the southeast) are thought to be Carboniferous in age. See the stratigraphic columns for the sedimentary sequence in Figure 9 and the stratigraphic column for the igneous intrusive suite in Figure 10 overleaf.

Figure 7: Schematic tectonic map of the CAOB in northeast Kazakhstan showing mineral deposits

From Shen et al., 2016

 

 

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6.2 Property Geology

The Beskauga Project includes the Beskauga and Beskauga South mineralized zones within the larger Beskauga Project licence area (Figure 8). The prospective Ordovician geology is concealed by a thin cover of Cenozoic sediments throughout the project area.

Figure 8: Location of the Beskauga prospect within the larger Beskauga Project area

The prospective Ordovician is concealed by a thin cover of younger Cenozoic sediments. Google Earth image, drill holes shown in green on inset map.

 

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The project area is predominantly underlain by sedimentary rocks of upper Ordovician age, termed the Oroiskaya and Angrensorskaya suites, and volcanogenic-sedimentary rocks, termed the Biikskaya suite (Figure 9). These have been intruded by small stock-like intrusive bodies of porphyry ranging in composition from gabbro-diorite to quartz diorite and granodiorite and referred to as the Shangirau complex (Figure 10). Thin (1–5 m), short (100–200 m) dikes of diorite porphyry, diabase and granite-porphyry (and rarely granodiorite and syenodiorite) also cut the host sequence. The host rocks are hornfelsed proximal to intrusive contacts.

Figure 9: Stratigraphic column showing the Beskauga sedimentary-volcanic succession

 

 

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Figure 10: Beskauga igneous suite of rocks.

The Beskauga mineral system is related to a Late Ordovician Shangirau suite intrusive centre that cuts the Ordovician sediments and volcanics. The reported Late Ordovician ages of the volcanics and intrusives suggests a broadly co-magmatic sequence in a magmatic arc setting.

The Beskauga Main porphyry-style copper-gold mineralization is largely hosted within Shangirau suite granodiorite, whereas the Beskauga South gold mineralization is hosted within diorite porphyry and appears to represent an epithermal overprint within a telescoped mineralization system. Note that Beskauga South has been drilled but has not been included in the Mineral Resource estimate.

Intrusive rocks represent the major portion of the deposit area. The northern main zone of the deposit is represented by a complex hypabyssal intrusive body of granitoid composition with stockwork mineralization. The western, eastern, and southern parts of the area are mainly composed of sedimentary rocks of upper Ordovician age (siltstone, sandstone, and tuffaceous sandstone with rare conglomeratic and limestone interbeds) and minor andesite, andesitic tuff, andesite-dacite and basalt. The southern part of the deposit area (Beskauga South) is represented by hypabyssal-subvolcanic diorite porphyry and eruption breccia with gold mineralization.

The diorite is interpreted to cut and postdate the granodiorite. Diabase is also interpreted to cut granodiorite. Intrusive relationships and timing relative to mineralization have not been clearly established; however, it is possible that the diorite porphyry is the causative intrusion.

The Project area is covered by a 10 m (southern part) to 40 m (northern part) thick cover of younger sediments (Figure 9). This includes upper Eocene Tavda Formation consisting of dark-gray bluish-greenish clay with lignite and aleurolite (siltstone) with interlayers and lenses of inequigranular quartz sand. Younger lower to middle Quaternary cover consists of lacustrine-alluvial sand-gravel-pebble sediments.

The deposit is described as fresh beneath the young sedimentary cover, without weathering or oxidation.

6.3 Mineralization and Alteration

Beskauga is a copper-gold porphyry deposit with elevated grades of molybdenum and silver, related to granodiorite and plagiogranite porphyry intrusions. A map of the deposit area is shown in Figure 11 and a cross-section through the deposit is shown in Figure 12.

 

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Figure 11: Geological map of the Beskauga deposit area

Shows the location of the Beskauga Main and Beskauga South deposits and drillhole collars. Section line 5+ (Figure 12) is also shown.

 

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Figure 12: Cross section through the Beskauga deposit – Fence 5 (section location is shown on Figure 11)

 

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Porphyry-style mineralization is hosted in granodiorite and plagiogranite intrusions that have elongated sheet-like shapes, often with offshoots. Mineralized zones are affected by stockwork veining and hydrothermal alteration and dip steeply, broadly parallel with the contact zone of the granodiorite-plagiogranite stock (Figure 11). Alteration is represented by albitization, sericitization and pyritization, with the most intensive alteration at a depth of 250–500 m. Tourmaline has also been described.

Although potassic alteration is not included in the geological description of the deposit, mineralogy completed for metallurgy does describe potassic alteration (Section 10).

Sericite-pyrophyllite-quartz alteration and silicification in steeply dipping alteration zones is also described mostly affecting intrusive rocks (diorite, quartz diorite and plagiogranite) indicating a degree of epithermal overprint. The altered rocks form isolated bodies in the northwest and southeast portions of the area. Alteration affects the sedimentary host rocks to a lesser extent forming lenticular bodies of various dimensions and shapes.

In the northern portion of the mineralized area, mineralization and alteration has been drilled in an area up to 2.5 km east-west and up to 3.2 km north-south. In the southern portion of the mineralized area, gold and porphyry copper mineralization and alteration appears to be rimmed by gold mineralization that extends into the volcano-sedimentary host rocks. Note that wireframed mineralized shapes greatly depend on cut-off parameters and discontinuous zones at higher cut-off grades often merge into single bodies when cut-off grades are reduced.

The principal sulphide minerals at Beskauga include pyrite, chalcopyrite, tennantite, enargite, bornite and molybdenite, with magnetite and hematite also described. QEMSCAN mineralogy completed as part of metallurgical testwork indicates that pyrite and chalcopyrite are the dominant sulphides with subordinate tennantite and chalcocite. Analysis indicates a close correlation between gold and copper grades. Sulphides occur as fine-grained disseminations as well as in stockwork veins and veinlets, 3–5 mm thick, consisting of quartz-carbonate, quartz-carbonate-chlorite, and quartz-pyrite. Free gold has been identified in polished sections and microprobe analysis showed high fineness (gold – 83.41%, silver – 12.63%). Sulphides are also seen to a much lesser extent in weakly altered granitoids and near contacts with hornfelsed sedimentary rocks.

The work required to understand the geometry and zonation of alteration and mineralization at Beskauga has not been completed, as would normally be the case for a porphyry-epithermal mineralization system. This would ideally include detailed logging of alteration and veining with documentation of vein type, mineralogy, and vein density (ideally using an Anaconda-type approach), multi-element litho-geochemical data analysis, and hyperspectral data acquisition and analysis. This represents a substantial gap in the Project and presents an opportunity to improve modelling and resource extension targeting.

The occurrence of significant tennantite at Beskauga is not unusual for gold-rich porphyry systems but does have metallurgical implications as discussed in Section 10. The combination with enargite may also suggest a high level in the porphyry system or a high-sulphidation overprint. Higher sulphidation-state sulphides are generated progressively upward in porphyry systems with lower temperatures and hydrolytic alteration. The fact that potassic alteration has not been described during logging at Beskauga may also reflect that drilling has mainly been in the upper phyllic part of the system, although potassic alteration was identified in mineralogical studies.

6.4 Deposit Type

The Beskauga deposit is interpreted as a porphyry-style copper-gold system, associated with calc-alkaline intrusions related to island arc volcanism during the Lower Palaeozoic. Porphyry systems host majority of the world’s major copper deposits and are typically high-tonnage and low-grade (Figure 11 and Figure 13). Several large porphyry deposits (including Kounrad, Bozshakol, Aktogai, and Koksai) are located in Kazakhstan. Kounrad has been mined out while Bozshakol, Aktogai and Koksai are currently in production or under development by KAZ Minerals.

 

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Figure 13: Plot of gold grade vs total resources for selected gold-rich porphyry projects globally

Area of circles is proportional to contained gold. Company data acquired from reports files on SEDAR and/or other publicly available data.

6.4.1 Mineralization Styles

In porphyry systems such as Beskauga, mineralization forms as vein stockworks and disseminations associated with a halo of hydrothermal alteration related to an intrusion, which may range in composition from diorite to granodiorite and granite. Owing to their relationship to hydrothermal fluids, porphyry copper deposits display a consistent, broad-scale alteration-mineralization zoning pattern related to the chemistry and evolution of these fluids.

This alteration typically comprises a core of potassic alteration (characterized by K-feldspar, biotite and muscovite) surrounded sequentially outwards by phyllic alteration (characterized by chlorite and sericite) and propylitic alteration (characterized by chlorite and epidote). The zone of potassic alteration being of primary importance for copper mineralization (Figure 14). Argillic alteration (characterized by kaolinite and montmorillonite). Mineralization occurs at shallow levels (in the upper 4 km of the crust), and the mineralizing system is closely related to underlying composite plutons at paleodepths of 5–15 km (Sillitoe, 2010). Porphyry deposits are generally large and low grade, and semicircular to elliptical in plan view.

Primary (hypogene) copper mineralization typically occurs as chalcopyrite and bornite, although copper may also occur as tennantite, enargite, and chalcocite (Berger et al., 2008). Deposits may also contain molybdenite and trace amounts of native gold. Other associated minerals may include sphalerite, galena, tetrahedrite (Berger et al., 2008).

 

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6.4.2 Conceptual Models

Porphyry deposits form as a result of precipitation of mineralization from magmatic fluids enriched in metals and derived from intrusions emplaced shallower than 4 km depth. This shallow emplacement depth results in early vapour saturation and the formation of a chlorine-enriched magmatic fluid that can effectively scavenge copper and other metals from the relatively unfractionated magma. The parental magmas need to be sufficiently water-rich to allow saturation of the magma with the fluid phase and need to be oxidized in order to suppresses magmatic sulfide which may sequester metals before they can partition into the aqueous phase (Sillitoe, 2010).

When a porphyry deposit begins to form, potassic alteration occurs in the core of the up-flow zone of the mineralizing magmatic fluid. Cooling of the fluid over the ~550°C to 350°C range, assisted by fluid-rock interaction, is largely responsible for precipitation of the mineralization at the margins of this core zone. The thermal gradient associated with this high-temperature up-flow zone leads to convection of surrounding ground waters that results in a peripheral propylitic alteration zone (Berger et al., 2008). Phyllic alteration crosscuts potassic alteration and is thought to form from a mixture of meteoric and magmatic fluids. Phyllic alteration is associated with important tonnages of ore in some deposits but is not present as a distinct alteration type in all deposits (Sillitoe, 2000).

A variety of other deposit types are spatially related to porphyry systems, including skarns, polymetallic veins and replacements, and epithermal veins (Figure 15), although none of these have yet been identified at Beskauga.

Figure 14: Cartoon cross-section of a porphyry copper deposit

Shows idealized alteration zoning and relationship to mineralization (from Berger et al., 2008).

 

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Figure 15: Anatomy of a porphyry mineral system

Shows the spatial relationship between a centrally located porphyry deposit with skarn, carbonate-replacement, sediment-hosted and epithermal vein type deposits. From Sillitoe (2010).

 

 

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7 Exploration

The following section details exploration carried out at Beskauga between 2007 and 2017 by Dostyk. Apart from drilling the primary exploration technique was geophysics.

7.1 Geophysics

In 2012, Dostyk undertook a ground-based magnetic and IP survey over the main Beskauga deposit area. Both the magnetic and IP surveys were completed SPC Geoken LLP, a local geophysical survey service provider.

The survey points for the magnetic survey were collected at 20 second intervals with a variable line spacing of 200 m to 400 m using a Proton Precession Magnetometer MM-61.

The results of the magnetic survey show a number of relative magnetic highs >1000 nT (red in Figure 16 below) which present interesting targets for follow-up exploration. Further assessment is required to determine magnetic sources related to magnetic intrusions as opposed to magnetite alteration.

 

Figure 16: Magnetic anomaly map (Total Magnetic Intensity) and grid points for the magnetic survey

Yellow outline indicates area of the main deposit.

The survey points for the IP dipole-dipole survey were taken on 100 m centres with a 400 m line spacing using a Zonge GGT 30 kW transmitter. The IP survey (Figure 17) showed a good correlation with the mineralization defined by the drilling and indicated the mineralizing system may be much larger. The anomalous area is ~9 km2, comparable to known large gold-bearing copper porphyry deposits of the world.

 

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Increasing chargeability values with depth suggests that the deposit drilled thus far lies on the upper part of the “pyritic” halo of a mineralized porphyry system with an insignificant erosional truncation. The deeper extensions of the deposit have however never been drill-tested. This accords with the mineralogy and alteration types identified in drilling to date which suggest the upper part of a system has been tested.

Figure 17: IP anomaly map of chargeability over the Beskauga deposit – depth slice at 300 m.

Yellow outline indicates area of the main deposit.

The geophysical data have not yet been acquired and reprocessed by Silver Bull or Arras. This is a priority for the next phase of work and will guide collection of additional data.

7.2 Diamond Drilling

A total of 118 diamond drillholes, totaling 45,605.8 m, were completed by Dostyk between 2007 and 2017 (Table 6). Diamond drilling was performed by SKB-5M drill rigs using Boart Longyear tooling by drilling contractor CenterGeolSyomka LLP. Drilling was done at either HQ or NQ diameter depending on the depth of the hole, which ranged from 150 m to 815 m. Core recovery was on average >90%.

Of the 118 diamond drillholes completed, 101 have been used for the Beskauga Main Mineral Resource estimate (Table 6 and Table 7). The location of drill collars at Beskauga Main is shown in Figure 18.

 

 

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Table 6: Summary table of the diamond drilling conducted by Dostyk between 2007 and 2017

Year No. of holes Drilled (m)
2007 16 4,714.3
2008 6 1,671.0
2009 7 2,130.7
2010 6 3,639.5
2011 18 7,960.1
2012 9 2,918.5
2013 8 3,806.0
2014 19 7,732.1
2017 29 11,033.6
Total 118 45,605.8
Table 7: Collar positions, lengths, and orientations of all diamond drillholes at Beskauga Main used for the Mineral Resource estimate
Hole ID X Y Z Length Azimuth Dip Year
Bg-1 588110.9 5739469 127 309 123.5 -70 2007
Bg-2 588169.4 5739454 126 333 124.5 -70 2007
Bg-3 588135.5 5739695 126 310.3 114.5 -69.5 2007
Bg-4 588399.9 5739998 126 192.5 143.5 -69.75 2007
Bg-5 588458.9 5739914 126 250.5 129.5 -69.75 2007
Bg-6 588243.5 5739610 127 304.6 116.5 -69.5 2007
BgS-7 588314.6 5738834 126 304.5 109.5 -70 2007
BgS-8 586981.7 5737959 126 307.6 49.5 -70 2007
Bg-9 588444 5739391 127 305 114.5 -70 2007
BgS-10 588208.2 5738652 126 168.1 114.5 -70 2007
BgS-11 587007.1 5737697 126 403 54.5 -70 2007
Bg-12 588075.6 5739726 127 152.2 117.5 -70 2007
BgS-13 586681.3 5738673 126 304 54.5 -69 2007
BgS-14 586660.3 5739431 126 306 77.5 -68 2007
Bg-15 588027.6 5739754 127 425 119.5 -70 2007
Bg-16 588013.4 5739494 127 339 124.5 -70 2007
Bg-17 588105.1 5739285 127 312.2 112.5 -70 2008
Bg-18 588336.1 5739060 127 276.6 112.5 -70 2008
Bg-19 588181.3 5739919 126 305.7 160.5 -70 2008
Bg-20 588239.4 5739077 127 338 97.5 -70 2008
Bg-21 588009.1 5739300 127 193.4 89.5 -70 2008
Bg-22 588341.8 5740083 127 245 164.5 -70 2008
Bg-23 587927.3 5739533 127 318.7 14.5 -70 2009
Bg-24 587937.9 5739635 127 337 14.5 -70 2009
Bg-25 587736.1 5739592 127 348 14.5 -72.5 2009
Bg-26 588226.1 5739436 127 254 111.5 -70 2009
BgS-27 588168.9 5738053 126 251 99.5 -70 2009
Bg-29 588117.4 5738051 125 301 99.5 -70 2009
BgS-30 588028.9 5738054 125 406.4 99.5 -70 2010

 

 

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Bg-31 588071.8 5739479 126 501 114.5 -71 2010
Bg-32 587967.5 5739513 126 504.1 112.5 -70 2010
Bg-33 588188.9 5739448 126 801 0 -90 2010
Bg-34 588006.4 5739252 126 741.2 100.5 -75 2010
Bg-35 587853.6 5739561 126 685.8 112.5 -75 2010
Bg-36 587987.8 5739631 127 633 119.5 -70 2011
Bg-37 588105.2 5739587 126 522.4 117.5 -70 2011
Bg-38 587694.9 5739516 126 271.6 29.5 -70 2011
Bg-39 588191.3 5739670 126 622 144.5 -75 2011
Bg-40 588207.7 5739551 126 392.3 114.5 -70 2011
Bg-41 588336 5739505 127 617.4 299.5 -70 2011
Bg-42 588641.8 5739761 127 300.4 0 -90 2011
BgS-43 587789.7 5737044 125 280.3 69.5 -72 2011
Bg-44 588097.5 5739668 126 568 124.5 -70 2011
Bg-45 588266.9 5739186 126 375.2 114.5 -70 2011
Bg-46 587989.5 5739703 126 527 122.5 -70 2011
BgS-47 587898.3 5738345 126 485 99.5 -70 2011
Bg-48 588486.8 5739753 127 355 99.5 -70 2011
BgS-49 587698.6 5737058 125 299.9 99.5 -70 2011
Bg-50 588401.3 5739386 126 605.7 299.5 -70 2011
BgS-51 587754.4 5737061 125 221.9 99.5 -70 2011
BgS-52 588078 5738150 126 350 105.5 -70 2011
Bg-53 588031.6 5739491 126 533.1 107.5 -70 2011
Bg-54 588103 5739572 126 525.4 0 -90 2012
Bg-55 588165.4 5739508 126 726 0 -90 2012
Bg-56 588117.2 5739523 126 732.1 0 -90 2013
Bg-58 588289.9 5739727 127 506.5 120.5 -90 2013
BgS-59 587580.2 5737077 126 304.3 0 -90 2012
BgS-60 587833.2 5737081 127 259 196.5 -76.2 2012
BgS-61 587672.4 5737074 126 301 259.5 -75 2012
Bg-62 588205.9 5739386 127 694.3 29.5 -90 2013
Bg-63 588209.6 5739500 127 676 29.5 -90 2013
Bg-64 588257.8 5739482 127 681.7 29.5 -90 2013
Bg-65 588067.3 5739531 127 565.5 29.5 -88.6 2013
Bg-66 588110.4 5739588 127 500 114.5 -69.9 2013
Bg-67 588190.3 5739617 128 509 294.5 -88.9 2014
Bg-68 588198 5739725 126 394.5 125.5 -89.7 2014
Bg-69 588240.6 5739698 126.5 451.5 114.5 -89.1 2014
Bg-70 588155.4 5739749 126 379 233.5 -87.8 2014
Bg-71 588181.7 5739673 126 430 124.5 -88.4 2014
BgS-72 587907.2 5737128 127 308 231.5 -76.8 2014
Bg-73 588239.7 5739643 127 510 99.5 -88.4 2014
Bg-74 588197.2 5739549 127 500 121.5 -88.8 2014
BgS-75 587569.1 5736916 125 300 71.5 -70 2014

 

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Bg-76 588109.6 5739412 127.7 659 4.5 -88.9 2014
Bg-77 588060.3 5739602 129 500 139.5 -88.8 2014
Bg-78 588283.8 5739621 127.053 300 184.5 -88.9 2014
Bg-79 588242.4 5739591 127.18 369.5 135.5 -88.8 2014
Bg-80 588039.3 5739685 126.975 500 104.5 -71.8 2014
Bg-81 588023 5739557 127.158 496.7 178.5 -89.5 2014
Bg-82 587976.7 5739635 127.22 330 339.5 -88.1 2014
Bg-83 587971 5739715 127 197.3 129.5 -88.5 2014
Bg-84 587976.3 5739567 127.339 300 194.5 -88.1 2015
Bg-85 587833.4 5739386 127.257 297.6 109.5 -78 2015
BgS-86 587518.2 5737072 126.508 147.1 0 -90 2016
BgS-87 587576.5 5737003 126.315 150.6 0 -90 2016
BgS-88 587681.9 5736997 126.407 221.3 0 -90 2017
BgS-89 587578.6 5736875 126.054 158.6 0 -90 2017
BgS-90 587829.4 5737054 126.671 161.7 0 -90 2017
BgS-91 587659.9 5736880 126.338 213.6 0 -90 2017
BgS-92 587755.6 5737030 126.401 150.4 0 -90 2017
Bg-93 588295 5739561 127.145 540.3 0 -90 2017
Bg-94 588347.2 5739497 127.084 500.4 0 -90 2017
Bg-95 587909.2 5739440 126.955 585 0 -90 2017
Bg-96 588021.7 5739434 127.038 502.2 0 -90 2017
Bg-97 587951.4 5739457 126.988 516 0 -90 2017
Bg-98 587947.7 5739404 127.055 528.7 0 -90 2017
Bg-99 587812.7 5739447 127.11 484.5 0 -90 2017
Bg-100 588223.7 5739771 127.145 275.8 0 -90 2017
Bg-101 588008 5739768 126.706 195 0 -90 2017
Bg-102 588287.1 5739674 127.248 373 0 -90 2017
Bg-103 587909 5739489 127.1 497.4 0 -90 2017

 

 

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Figure 18: Beskauga Main drill collars
7.2.1 Collar Surveying

The coordinates of points (drillholes) were determined by using high precision single-frequency 12-channel GPS Trimble R3 base station and mobile receiver with GPS antenna on a telescopic rod.

7.2.2 Downhole Surveying

All drillholes, including vertical drillholes, have downhole surveys completed by the drilling contractor using an IEM-36 survey instrument (a Soviet/Russian instrument for use in a non-magnetic environment). Surveys were completed every 20 m of the downhole length and were taken after the drilling has been completed, before closing the drillhole. All related documents are kept at the Dostyk head office in Almaty.

 

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7.2.3 Core Logging and Photography

Primary field logging was performed the Dostyk LLP base camp upon the core delivery from drilling sites. A logging geologist is responsible for tracing the mineralized zones boundaries, recording drilling runs and definition of core recovery ratios.

Prior to logging, the core is placed onto special tables where it is thoroughly washed and photographed. The core is described in the field core logs and the data are then recorded into special logging blank forms and captured digitally. The core logging is based upon a system of coding.

Intervals to be sampled were determined b the logging geologist on the basis of geological core logging. The sample length was generally between 0.5 m and 1 m, with a lesser proportion up to 2 m.

Upon completion of logging the drill core is sent for splitting and sampling.

7.2.4 Core Sampling

Core sampling was performed by splitting the core along long axis into two equal portions using a diamond saw. One half of the core was sampled and sent to the laboratory for assay, whereas the other half was retained to serve as a library sample hat could be used for future duplicate sampling, for additional testwork, or for petrography and mineralogy studies.

Between 1981 and 1990, core was divided using a manual core splitter (578 samples) whereas from 2007 to 2013 core was divided using a diamond core sawing machine (19,540 samples). Drill data prior to 2007 has not been used in the Mineral Resource estimate.

7.2.5 Significant Intervals

The following table (Table 8) provides details of the most significant intersections at Beskauga in terms of intersection length and grade. The cut-off parameters used in the table have been selected to reduce the number of reported intersections, they are not an indication of Mineral Resource reporting or economic cut-off parameters.

Table 8: Significant intervals drilled at Beskauga (>100 m intervals at >0.3 g/t Au)
Drillhole name From (m) To (m) Core length (m) Au (g/t) Cu (%)
Bg1 45.1 309 263.9 0.41 0.2
Bg2 46.2 333 286.8 0.38 0.17
Bg3 48 241.4 193.4 0.57 0.42
Bg31 46.9 501 454.1 0.6 0.29
Bg32 47 504.1 457.1 0.42 0.28
Bg33 48.5 801 752.5 0.54 0.26
Bg36 51 496.3 445.3 0.43 0.33
Bg37 46 431.7 385.7 0.81 0.53
Bg39 44.7 200.9 156.2 0.36 0.36
Bg40 45 184.6 139.6 0.32 0.18
Bg41 208.2 509.7 301.5 0.74 0.43
Bg44 47.6 230.6 183 0.68 0.59
Bg44 47.6 182.9 135.3 0.85 0.71
Bg44 337.9 568 230.1 0.35 0.26
Bg47 341 482 141 0.34 0.09
Bg53 115 352.4 237.4 0.33 0.2

 

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Bg53 399.9 533.1 133.2 0.34 0.15
Bg54 46.1 484.2 438.1 0.37 0.31
Bg55 43.5 471.2 427.7 0.58 0.3
Bg55 233.1 365.8 132.7 0.71 0.47
Bg56 62.1 267.4 205.3 0.34 0.26
Bg56 280.3 509 228.7 0.55 0.39
Bg62 45.7 694.3 648.6 0.33 0.13
Bg63 43 676 633 0.62 0.4
Bg64 46.5 681.7 635.2 0.48 0.24
Bg65 45 565.5 520.5 0.38 0.3
Bg66 49 500 451 0.79 0.54
Bg67 46 407 313.9 0.41 0.35
Bg74 42 500 398.4 0.66 0.42
Bg77 45.2 396 350.8 0.56 0.36
Bg81 125.8 302 176.2 0.35 0.33

Note that since mineralization occurs as a broad dissemination, actual core length is considered to represent true thickness.

7.2.6 Interpretation

Mineralization Orientation

Mineralization occurs as a broad, steeply west-dipping to subvertical zone that strike on average north-northeast (020°); however, this strike is locally variable between north (000°) and east-northeast (060°).

True Thickness

The zone of disseminated mineralization at Beskauga is varied between approximately 50 m and 600 m wide, extends for approximately 2.2 km along a north-northeast strike, with a depth of between 300 m and 800 m.

7.3 KGK Drilling

KGK or hydraulic-core lift drilling is a system designed to drillholes for geochemical sampling and geological mapping of cover sediments and basement rocks. The method was developed in the Soviet Union and is in general similar to “wet” RC drilling. Rocks are cut by hard alloy crown bits and the cut chips and drill mud are delivered through a dual rod by pump to the surface where the material is filtered out and collected. The method is used in the early phases of mineral exploration for a quick assessment of relatively large areas.

Between 2011 and 2014, Dostyk undertook an extensive KGK drill program for the purpose of better defining “blind” mineralized targets through the Quaternary cover. The depths of drillholes ranged from 22 m to 65 m in length and averaged around 35 m. Often the holes were terminated within 5 m of intersecting bedrock. A total of 1,606 holes were drilled for a total of 52,580 m within the area regional Beskauga area. Some 2,496 samples were taken and analysed. A summary table (Table 9) of the metres drilled each year and the locations of the drillholes are shown above the map (Figure 19) below.

7.3.1 Sampling and Results

The purpose of KGK drilling was to define areas of mineralization below the overburden, and hence these holes were only sampled at or near the contact with the underlying bedrock. Details of sampling procedures for this phase of drilling are unclear; however, these drill results have not been used for mineral resource estimation and the lack of sampling information is not considered material.

 

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The copper and gold results show strong anomalism that is coincident with known mineralization and extends into area that remain poorly drilled or undrilled (Figure 20 and Figure 21).

Table 9: Summary table of the KGK drilling conducted by Dostyk between 2011 and 2014
Year Holes Samples Drilled (m)
2011 801 1,207 28,281
2012 556 813 16,948
2014 249 476 7,351
Total 1,606 2,496 52,580

Figure 19: Location of the shallow KGK holes drilled by Dostyk between 2007 and 2017

 

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Figure 20: Cu geochemical anomalies from KGK drilling and Soviet drilling

 

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Figure 21: Au geochemical anomalies from KGK drilling

 

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7.4 Hydrogeology Studies

A hydrological study of Beskauga was completed for Dostyk by Centrgeolsyemka Ltd. in 2017 to determine the main filtration parameters of the water-bearing fractured zones of the Late Ordovician intrusions and upper-middle Ordovician volcanogenic-sedimentary rocks (Ismailov et al., 2017). Work completed consisted of rotary open-hole drilling, downhole geophysical studies, trial and test pumping-out, and analysis.

There are two water-bearing domains at Beskauga,

· shallow water-bearing aquifer in Quaternary alluvial deposits;
· moderately-water-bearing zones of fractured intrusive and sedimentary–volcanic rocks.

The domains are separated by the thick clayey layer of upper Eocene Tavda Formation.

Based on the results of test filtration works, the main parameters of water-bearing complexes have been determined.

The water-bearing zone of fractured intrusive and sedimentary–volcanic rocks has the following parameters:

· average water-conductivity factor 1.41 m2/day;
· average level-conductivity factor 608 m2/day;
· average water yield factor 0.002; average rock filtration factor (at water bearing zone thickness 61.5 m within the modelled open pit) 0.023 m/day.

Two test holes in the alluvial aquifer yielded the following parameters:

· average water-conductivity factor 303 m2/day;
· average level-conductivity factor 16 776 m2/day;
· average water yield factor 0.013; average rock filtration factor (at water bearing horizon thickness 7.5 m within the modelled open pit) 40.4 m/day.

A preliminary estimation of water inflows into the modelled open pit was completed based on these parameters, separately for alluvial and fractured rock aquifers. The geometry and open pit depth were derived from a development study by Centrgeolsyemka Ltd. completed in 2010. The predicted water-inflows to be recalculated if the open pit geometry changes. Estimation of water inflows was done using a balance method including estimation of underground water reserves in the volume subjected to dewatering while mining, natural renewable water resources and water inflow into the open pit in the course of its dewatering. The natural resources were not included in the total water balance due to unavailability of annual winter-spring precipitation recordings of the nearest meteorological station.

The predicted water-inflows into the open pit from alluvial water-bearing horizon is 1 169 m3/day, while the water-inflows from the fractured rock zone is 108.5 m3/day. Water inflows due to underwater drainage would be regular. Besides continuous water inflows, there would be temporary water inflows into the open pit due to snow-melting and shower-resulted-floods.

It was concluded that the Beskauga site displays simple hydrogeological conditions. It was noted that prior dewatering of the water-bearing alluvial horizon by the perimeter of the open pit would be necessary while doing the waste-rock-stripping operations prior to pit development.

7.5 Geotechnical Studies

SRK Consulting (UK) Limited completed a geotechnical study for Dostyk in 2018 to assess an open pit development at Beskauga (SRK, 2018). The study assessed the geotechnical characteristics of the sedimentary,

 

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volcanogenic-sedimentary and intrusive rocks that host the mineralization and the overlying low strength clays and sands which are up to 40 m thick

Five orientated drillholes (1750 m of core) were located to intersect the proposed pit shell approximately one third to half-way up the proposed slope. With the exception of one drillhole, all drillholes were drilled into the pit slope to give the best possible chance of intersection with any structures dipping out of the of the slope and into the pit. In addition, in order to remove any potential bias due to the drillhole orientation when defining structural domains and influential small scale joint sets, the drilling programme was designed to intersect the preliminary pit walls at different azimuths. Rock mass quality and structural logging was undertaken by Dostyk geologists trained in geotechnical logging and QA/QC by SRK. In addition, samples of both the overlying weak sediments and underlying competent rock were collected for strength testing which was undertaken in Kazakhstan.

Laboratory strength testing characterised the rock as strong and assessment of Rock Mass Rating (RMR89) values for the main lithologies indicated minimal variability between lithologies with mean RMR89 values ranging from 59 to 62. RMR89 reduces in zones of more intense alteration or weathering, but these zones were discrete and discontinuous; 78% of the drill core was slightly altered and 19% moderately altered, while 46% of core was fresh and 40% slightly weathered.

In addition to the faults identified by Soviet mapping, five joint sets were defined from the orientated core data that dip shallowly to moderately steeply. No specific structural domains were identified.

Finite element analysis was completed to define appropriate overall slope angles to achieve a Factor of Safety (FoS) in excess of 1.3 and a Probability of Failure (PoF) of less than 5%. Rock mass strength was determined from laboratory testing and geotechnical logging, groundwater surfaces interpreted from limited hydrogeological data, and a global Disturbance Factor of 0.3 was applied to the model to avoid masking of deeper-seated failure as a result of superficial failure within any modelled ‘disturbance’ skin close to the excavated slope. A number of models were assessed to define estimated depressurization requirements and to achieve an acceptable combination of FoS and PoF criteria.

Modelling a 500 m deep pit with three, 150 m stacks with inter-ramp angle of 55°, it would be necessary to draw back groundwater ~50 m from the face of the slope. Modelling this scenario returned an SRF value of 1.9 and a PoF slightly in excess of 5%. Kinematic assessment of structural data and finite element modelling was undertaken to develop a slope design for pit optimisation. To contain 80 % of failed material with a 20 m bench with a face angle of 70° required a 7 m berm. Inter-ramp angles within the weakly consolidated overburden should not exceed 30°.

SRK mad a number of recommendations for additional work, including:

· Complete additional geotechnical drillholes at different azimuths to confirm than no major joint sets are present in the blind areas of the structural dataset from the study completed.
· Develop a 3D large-scale structural model. Some regional and deposit scale faults had been identified and modelled, but work to identify any additional faults not intersected during geotechnical drilling was considered crucial as these zones could be critical to the overall pit slope stability due to lower rock mass quality. Further investigations using geophysics data, drillhole data and field mapping was recommended.
· Develop a 3D alteration model. Although the study indicated little variability and minimal impact from alteration on the host rocks, better understanding of the alteration domains especially in the region of the final pit slopes was recommended to provide better information on the effects of alteration on the rock mass forming interim and push-back slopes.
· Develop a 3D groundwater model Although groundwater surfaces were considered in the slope stability analysis, the inputs were limited due to the lack of a 3D model with results incorporated as pore pressure

 

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grids within finite element slope stability analysis. This would allow more detailed analysis of the sensitivity of the slopes to changes in groundwater pore pressure.

7.6 Regional Evaluation

Arras is currently integrating an abundance of information and data, both public and private, on the greater regional area around Beskauga. From the public side, the information from work conducted during the Soviet era including regional geophysical surveys and 1:250,000 geological mapping is a valuable initial basis for prospect evaluation when used with targeted stratigraphy and structural analysis. In addition, Arras has employed SRTM and Landsat ASTER images to develop remote sensed hydrothermal alteration models of selected target areas. Arras also intends to fly a high resolution airborne magnetic survey to act as a base for regional licence targeting and exploration.

Pursuant to the terms of the joint venture agreement with Copperbelt and in connection with the March 19, 2021 transfer of Silver Bull’s Kazakh assets to Arras, it is expected that 100% of the equity interests in Ekidos LLP will be transferred to Arras in the near future. Ekidos LLP has staked two additional large exploration licences, the Stepnoe and Ekidos exploration licences, each 450 km in area, with the intention of exploring the area on a more regional basis. At the time of writing, work has yet to commence on this ground.

 

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8 Sample Preparation, Analyses and Security
8.1 Sample Preparation and Security

During the 2007–2017 exploration program, samples were prepared at the Dostyk facility in Ekibastuz. The half-core samples were dried in a drying chamber and weighed using laboratory scales with a 0.05 g division value, and weights were registered in the sample receipt log. Samples were then crushed using two-stage crushing, with the first stage involving jaw crushing (to -7 mm) and the second stage using a roller crusher and screen (to -2 mm).

Following crushing, samples were split with a Jones splitter. The bulk of the sample was stored as a crush reject, and ~1 kg was milled using cup vibration mills to 200 mesh fineness (-90 µm).

The samples were then split again, with one portion sent to the Stewart Assay and Environmental Laboratory (SAEL) in Kara-Balta, Kyrgyzstan, which is Certified to ISO 9001. Upon arrival at SAEL, the samples were coded and registered in the sample coding log and then re-registered under their new codes in the sample passing log. Following registration of samples and inclusion into the operator database, the samples were sent for analysis for gold by fire assay and copper, molybdenum, and silver by 0.2 g aqua regia digestion followed by inductively coupled plasma optical emission spectrometry (ICP-OES) analysis.

A second portion of selected samples was sent to Jetysugeomining LLP laboratory, which is not internationally certified, for atomic-absorption analysis, and the remaining sample was stored as a pulp duplicate.

All equipment used for sample crushing and milling (including tables) was cleaned and blown with compressed air after each sample. After each batch of samples, a clean blank material was passed though the equipment (glass for crushers, quartz sand for mills). The sample preparation area was subject to compulsory wet cleaning once a day.

The split core and crushed duplicate sample are stored in the specifically equipped sample storage facility, a hangar with shelves (Figure 22). This facility can be locked and has on-site security.

 

 

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Figure 22: Dostyk LLP storage facility with core and crushed duplicate samples
8.2 Analytical Method

Between 2007 and 2017, Dostyk utilized various laboratories for its analytical requirements. These laboratories include:

· Quartz Chemical/Analytical Laboratory, Semipalatinsk (non-certified laboratory), Kazakhstan (2007–2008)
· Jetysugeomining Laboratory LLP (non-certified laboratory), Almaty, Kazakhstan (2009–2011)
· HelpGeo Laboratory (non-certified laboratory), Almaty, Kazakhstan (2012–2014)
· Stewart Assay and Environmental Laboratories LLC (SAEL LLC; internationally certified laboratory - Figure 23), Kara-Balta, Kyrgyzstan (2007–2017).

All laboratories are independent of Dostyk.

SAEL has been utilized by Dostyk as the primary laboratory since the commencement of the 2007 exploration program until the present. SAEL has maintained ISO 9001:2008 accreditation since 1999 and is further accredited to ISO/IEC 17025:2017 by UKAS. It should be noted that all results used for the Mineral Resource estimate were provided by SAEL.

Samples were analyzed at SAEL for gold using FA with an AAS finish. A 30 g bead was used in the FA process. A further 33 elements were determined by an aqua regia digest followed by ICP-OES measurement of elemental concentrations. The Qualified Person notes that only copper, gold, molybdenum, and silver data has been provided by Copperbelt.

Umpire assays at Genalysis Laboratory Services Pty Ltd (Perth, Australia) were performed using FA with an AAS finish. A 30 g bead was used in the FA process. A further 33 elements were determined by an aqua regia digest followed by ICP-OES measurement of elemental concentrations.

8.3 Quality Assurance and Quality Control

The quality of any exploration data depends on the sample selection, sample preparation and analytical techniques adopted, as well as implementation of a quality assurance program with collection of quality control data. QAQC programs should be implemented at all exploration stages, including drilling, collection of all types of samples, sample preparation and analysis, determination of sample density, collection of geotechnical data, data digitization, data storage and other associated aspects.

QAQC may be implemented through several steps, which may include but is not limited to adding blank samples, CRMs (or “standards”) with predetermined grades, and various duplicate samples (field duplicates, crush duplicates, pulp duplicates).

 

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For the Beskauga Project, the quality control samples were submitted during the drilling programs are outlined below. CSA Global has not been provided with a detailed breakdown, but understands that quality control sample submission varied from program to program. The description in this section is based on the information and data provided by Copperbelt without reference to specific programs.

· Pulverized duplicates of 0.0074 mm in size, produced at the second stage of the sample preparation process.
· Blank samples
· CRM samples.

In addition to these QAQC checks, the SAEL Laboratory conducted internal QAQC checks and Dostyk completed second laboratory checks at Genalysis Laboratories.

8.3.1 Internal Laboratory QAQC

The following is an outline of QAQC checks carried out by SAEL:

· All the measuring equipment is regularly tested. Daily, before work, all scales are checked with the special set of weights, and the temperature of the oven is measured by thermocouple unit.
· All standard materials are acquired from reliable suppliers that are accredited in accordance with ISO Guide 34:2000. The laboratory has a broad range of standards prepared by well-known brands, such as CANMET, CDN Resource Laboratories, Geostats, ORE, Rocklabs, and others. One standard, one blank and five duplicates are inserted every 50 samples.
· SAEL performs several routine quality control checks during the analytical process to monitor contamination, accuracy and precision. Contamination is monitored by the insertion of a blank and standard at standard intervals. Accuracy is monitored using appropriate CRMs. Precision is monitored by the duplication of samples.
· SAEL operates a three-tier quality control system. Instrument operators store data in job files, and they peruse the data to ensure analytical sequences are correct, standard values are correct and other controls also confirm that the analytical run has not been beset with problems. These staff members initiate checking of suspicious results. The second phase of quality control checking is performed either by quality control staff in each department or by the head of the department. Lastly, and before any batch of results are reported, senior staff in charge of reporting of results also peruse the data. These staff members are not directly associated with the laboratory sections generating the results; however, they may also initiate queries in relation to any work which has been carried out on a sample and they may return work for re-analysis if they are dissatisfied with analytical quality.
· All laboratory quality control data is reported within the structure of the final reports.
· Quality control limits for the CRM, blank and duplicate samples are determined according to the analytical technique employed and are automatically flagged by the laboratory information management system (LIMS) as being erroneous if they fall outside these limits by the laboratory information management system. Prior to their release, laboratory personnel validate all results and flagged errors are assessed and, if possible, the sample batch is re assayed, or the errors are reported. All data generated from quality control samples are captured for assessment.
· Quality control reports are generated and despatched with the sample result file for each laboratory job.

Montgomery (2015) described the results of the SAEL final analysis report 14K014-14K016 and found no significant issues relating to the Beskauga drill database resulting from exploration between 2007 and 2014. The SAEL Final Analysis Report 14K014-14K016 contained records for 600 samples analysed and was accompanied by 164 repeat analyses for gold (>20%). The spreadsheet also contained 30 records for blanks and 30 records for CRM analysis (5%). All blank analyses were below detection limits. Two standards were included in the CRM results, ST 4/12 (19 results) and ST 7/12 (11 results), and 164 repeat (duplicate) analyses were carried out.

 

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8.3.2 Certified Reference Materials

Several CRMs were submitted for analysis together with samples, namely OREAS 209, OREAS 501b, OREAS 502b, OREAS 503b, and OREAS 54Pa. The CRM certificates can be downloaded from the company’s website (https://www.ore.com.au/).

The reference grades and standard deviation (SD) for the CRMs are shown in Table 10. A total of 187 gold CRMs and 124 copper CRMs were analysed, representing 0.52% and 0.34% of the 36,271 samples in the database, below the recommended amount of 5% of CRMs.

Table 10: CRM grades
CRM Company Element/Test type Grade SD No. of analyses
209 OREAS Au, FA (ppm) 1.58 0.044 52
Cu, aqua regia (ppm) 76 3.7 0
501b OREAS Au, FA (ppm) 0.248 0.01 45
Cu, four-acid digestion (%) 0.26 0.011 40
502b OREAS Au, FA (ppm) 0.494 0.015 11
Cu, four-acid digestion (%) 0.773 0.02 11
503b OREAS Au, FA (ppm) 0.695 0.021 65
Cu, four-acid digestion (%) 0.531 0.023 63
54Pa OREAS Au, FA (ppm) 2.90 0.11 14
Cu, four-acid digestion (%) 1.55 0.02 10

When using control charts, upper and lower warning limits are set to identify a range of values where the process can be considered “in control”. Most of the data is expected to plot within this range. Two standard deviations (SD) are generally used to define this range.

An action limit generally represents an excess of deviation within a process that exceeds three times the SD. This represents an out-of-control situation. When a point appears outside the mean ±3 SD range, it is recommended that action be taken.

Figures below show Shewhart Control Charts for the analysed CRMs. Figure 24 provides a legend for the control charts where the warning limit 1 boundary represents one SD; the warning limit 2 boundary represents two SDs and the action limit boundary represents three SDs.

Figure 24: Legend for Shewhart control charts

OREAS 209

CRM OREAS 209 was prepared from a blend of gold-bearing Magdala ore from the Stawell Gold Mine, west-central Victoria, Australia and barren tholeiitic basalt from Epping, Victoria, Australia. The Magdala lode is

 

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intimately associated with an intensely deformed package of volcanogenic sedimentary rocks. The ore samples were taken from basalt contact lodes and are strongly chlorite-altered (± silica, stilpnomelane) carbonaceous mudstones located directly on the western margin of the Magdala basalt dome. Mineralization in the ore consists of a quartz-sericite-carbonate schist assemblage containing the sulphides arsenopyrite, pyrrhotite and pyrite. OREAS 209 is one of a suite of 11 CRMs ranging in gold content from 0.340 ppm to 9.25 ppm.

A total of 52 samples were analysed for gold and majority of samples were within three SDs and close to the actual grades (Figure 25). There were five samples that were outside of three SDs with one sample showing a significantly lower value than the reference grades (0.293 ppm Au instead of expected 1.58 ppm Au).

OREAS 501b

OREAS 501b was prepared from porphyry copper-gold ore and waste samples from a mine located in central western New South Wales, Australia with the addition of a minor quantity of copper-molybdenum concentrate.

Total of 45 samples were analysed for gold and majority of samples were within three SDs and close to the actual grades (Figure 26). There were five samples that were outside of three SDs with one sample showing a significantly lower value than the reference grades (0.026 ppm Au instead of expected 0.248 ppm Au).

A total of 40 samples were analysed for copper and majority of samples were within three SDs and close to the actual grades (Figure 27). There was one sample that was outside of three SDs and this was possibly due to the erroneous database entry.

OREAS 502b

OREAS 502b was prepared from porphyry copper-gold ore and waste samples from a mine deposit located in central western New South Wales, Australia with the addition of a minor quantity of copper-molybdenum concentrate.

OREAS 503b

OREAS 503b was prepared from porphyry copper-gold ore and waste samples from a mine located in central western New South Wales, Australia with the addition of a minor quantity of copper-molybdenum concentrate.

A total of 65 samples were analysed for gold (Figure 30) and copper (Figure 31) and majority of samples were within three SDs and close to the actual grades. There were two samples that were outside of three SDs for gold, and one sample that was outside of three SDs for copper.

OREAS 54Pa

Reference material OREAS 54Pa is a porphyry copper-gold standard prepared from ore and waste rock samples from a porphyry copper-gold deposit in central western New South Wales, Australia. Copper-gold mineralization occurs as stockwork quartz veins and disseminations associated with potassic alteration. This alteration is intimately associated spatially and temporally with the small finger-like quartz monzonite porphyries that intrude the Goonumbla Volcanics.

A total of 14 samples were analysed for gold and 10 samples for copper, and majority of the samples were within three SDs and close to the actual grades for both elements (Figure 32, Figure 33). There was one sample for both gold and copper that was outside of three SDs.

 

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Figure 25: OREAS 209 Shewhart Control Chart for gold

 

 

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Figure 26: OREAS 501b Shewhart Control Chart for gold

 

 

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Figure 27: OREAS 501b Shewhart Control Chart for copper

 

 

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Figure 28: OREAS 502b Shewhart Control Chart for gold

 

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Figure 29: OREAS 502b Shewhart Control Chart for copper

 

 

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Figure 30: OREAS 503b Shewhart Control Chart for gold

 

 

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Figure 31: OREAS 503b Shewhart Control Chart for copper

 

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Figure 32: OREAS 54Pa Shewhart Control Chart for gold

 

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Figure 33: OREAS 54Pa Shewhart Control Chart for copper

 

 

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8.3.3 Blanks

A total of 318 blank samples (0.9% of all samples) were submitted for analysis (Table 11). No information was provided by Copperbelt regarding the acquisition and preparation of the blank samples. Of all the blank material sampled, the majority had below detection or very low values reported; thus, the blank values indicate that there is very little contamination overall. However, it should be noted that only a small proportion of the whole database comprise blanks, and usually a greater number (~5% of all samples) would be expected.

Table 11: Blank assay results
Element Minimum Maximum Mean Median No. of results
Au (ppm) 0.025 0.18 0.04 0.03 313
Cu (ppm) 3 2,893 273 175 240
Ag (ppm) 0.5 3.3 0.57 0.5 318
8.3.4 Duplicates

A total of 97 pulp duplicates were submitted in 2013. The main goal of this analysis was to estimate the laboratory assay precision and to evaluate the risk of the laboratory assay precision on the estimation. No information for duplicate samples submitted in other years has been provided by Copperbelt. The duplicates were analysed for gold, silver, and copper.

The laboratory results for all analysed elements show relatively good repeatability with the statistics and plots showing similar distributions. Tests for all laboratory results were conducted with a precision of ±4.05% for gold (Figure 34), ±2.91% for copper (Figure 35), ±2.36% for silver (Figure 36), which are within the acceptable limits and poses a low risk on the assay precision. However, the available dataset represents one year and a small proportion of the complete database (only 0.27% of all assays) so that it is not possible to draw conclusions on the quality of the entire assay dataset.

There is no information on core duplicates, and it has been assumed that no core duplicate samples were collected.

The poor duplicate database represents a significant gap in QAQC for the Beskauga Project.

8.3.5 Laboratory Umpire Analysis

CRMs and blanks can only partially cover the question related to potential sample bias. Therefore, 966 sample pulps (2.7% of all assays) were selected for external control check assays and were sent to a certified Genalysis laboratory in Australia.

Table 12 shows duplicate correlation coefficient and precision results and Figure 34 to Figure 36 show linear regression graphs for umpire samples. Both precision results and graphs show relatively good repeatability and similar distribution for gold and copper; however, there is a slight positive bias towards the original results, especially for the copper grades.

Table 12: Correlation coefficient and precision values for pulp duplicates
Element No. of tests Minimum grade Maximum grade Correlation coefficient Precision
Au (ppm) 966 0.061 3.88 0.97 ±13.17
Cu 968 0.014 2.21 0.99 ±12.35

 

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Figure 34: Linear regression of gold for duplicates

 

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Figure 35: Linear regression of copper for duplicates

 

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Figure 36: Linear regression of silver for duplicates

 

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8.4 Author’s Opinion on Sample Preparation, Security and Analytical Procedures

It is the Qualified Person’s opinion that the reported sample preparation and analyses were completed in line with industry standards and are adequate for the purposes of this Mineral Resource estimate and Technical Report. Although the number of CRM, duplicate and blank samples are lower than what is considered appropriate, based on the assessment of the quality control data, the Qualified Person considers that the quality of assays is adequate and suitable to be used for the Mineral Resource estimate.

The Qualified Person does note that documentation of historical quality control data is incomplete and has identified quality control as a risk to the Mineral Resource estimate and has considered this in classification. Additional check sampling and analysis on existing drill core and pulps is recommended in the next phase of work to bring the type and proportion of data to accepted industry standards.

 

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9 Data Verification
9.1 Site Visit

A site visit was carried out by G.G. Freiman, Qualified Person and report co-author, between 22 and 23 January 2017, during which drill rigs and core storage sites were visited, and logging and sample preparation facilities and procedures inspected. All procedures observed were considered appropriate.

9.2 Data Validation

During the site visit, G.G. Freiman observed core logging and sampling procedures, reviewed sampling preparation facilities and procedures, and inspected documentation related to drilling, sampling, and assaying. No samples were collected for additional laboratory verification; however, mineralized intervals were inspected and compared with assay values for confirmation of mineralization.

Validation completed as part of the Mineral Resource estimation is described in Section 11.

It is the Qualified Persons’ opinion that the data available are a reasonable and accurate representation of the Beskauga Project and are of sufficient quality to provide the basis for the conclusions and recommendations reached in this Technical Report.

 

 

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10 Mineral Processing and Metallurgical Testing

Six metallurgical testing programs have been conducted on the mineralization at Beskauga between 2009 and 2017. The results obtained during each phase of testing indicated specific areas that needed further evaluation in subsequent phases. Larger scale (pilot plant) and downstream testing programs were also carried out as part of later phases of work, as is typical for large-scale copper porphyry projects.

The following is a summary of the chronology of the testing programs completed to date:

· 2009: Kazmekhanbor, Almaty, Kazakhstan – initial evaluation of flotation testing on a master composite
· 2010: ALS Ammtec, Perth, Australia – mineralogical evaluation and flotation response on average grade metallurgical composite
· 2011: ALS Ammtec, Perth, Australia – flotation response on high grade metallurgical composite
· 2015: Wardell Armstrong International (WAI), Cornwall, United Kingdom – comminution and flotation optimization testing on various metallurgical composites
· 2017: WAI, Cornwall, United Kingdom – gold optimization testing on bulk products.
· 2017: HRL Testing, Brisbane, Australia – Toowong Process amenability testing.

The work completed and results are summarised in this section.

10.1 Sample Selection
10.1.1 2009 Kazmekhanbor Metallurgical Composite Sample

A single master composite representing the resource grade was obtained from holes BG1 and BG3. Half HQ core samples were shipped to the Kazmekhanobr laboratory in Almaty. Twenty-five core samples were used to create 104.3 kg sample averaging 0.875 g/t Au and 0.424% Cu, 5.1 g/t Ag, and 0.05% As.

10.1.2 2010 ALS Ammtec Metallurgical Composite Sample

Two metallurgical composite samples were prepared for the 2010 metallurgical program conducted by ALS Ammtec, from holes drilled during the 2009 and 2010 drilling campaigns. The composites were as follows:

· A “resource grade” composite of 106.7 kg, created from 11 samples from holes Bg30, Bg31, Bg32, and Bg33, averaging 0.45 g/t Au and 0.2% Cu, 5.135 g/t Ag, and 0.065% As
· A 43.9 kg “high-grade” composite created from 11 samples from holes Bg23, Bg25, Bg26, and Bg27 averaging 0.67 g/t Au and 0.68% Cu, <2 g/t Ag, and 0.017% As.

Half HQ core was shipped to the Ammtec laboratory in Perth where the composite was prepared.

10.1.3 2015 WAI Metallurgical Composite Sample Grade

Three composite metallurgical samples were prepared by WAI in 2015 representing a composite sample for a potential “starter pit”, a composite sample representing the “average grade” of the resource, and a composite representing “high-grade” within the resource. The sample intervals from various drillholes are as follows:

· Starter Pit Composite: 11 samples from 11 holes totalling 217.3 kg (Bg63, Bg64, Bg65, Bg66, Bg67, Bg68, Bg71, Bg74, Bg77, Bg78 and Bg79) averaging 0.56 g/t Au and 0.38% Cu, 1.46 g/t Ag, and 0.06% As
· Average Grade Composite: 30 samples from four holes totalling 233.9 kg (Bg68, Bg74, Bg77 and Bg79) averaging 0.43 g/t Au and 0.29% Cu, 1.21 g/t Ag, and 0.044% As

 

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· High Grade Composite: 11 samples from 11 holes totalling 209.9 kg (Bg63, Bg64, Bg65, Bg66, Bg67, Bg68, Bg71, Bg74, Bg77, Bg78 and Bg79) averaging 0.91 g/t Au and 0.51% Cu, 2.13 g/t Ag, and 0.078% As.

Half HQ core was shipped to the WAI laboratory in Cornwall where composites were prepared.

The 2010 and 2015 composite samples were also used for later testwork.

10.2 Metallurgical Test Results
10.2.1 Mineralogy

An initial mineralogical assessment undertaken by Kazmekhanobr in 2010 using optical microscopy on the composite samples showed a mineralogy typical of a copper-gold porphyry. Mineralization comprised pyrite, chalcopyrite, tennantite, magnetite, and hematite (with minor molybdenite, bornite, sphalerite, galena, pyrrhotite, native gold, and silver telluride), and was seen to vary between disseminated and vein style. Mineralization was hosted in a strongly potassic-altered granite to granodiorite that was often overprinted with later silicification, sericitization, and argillic alteration.

QEMSCAN® testwork was carried out on the “Starter Pit” composite by as part of the 2015 WAI metallurgical testwork program. The sample was subdivided into four size fractions (106 μm, -106/+53 μm, -53/+20 μm, and -20/+2 μm). The aim was to determine mineralogy, mineral association and liberation characteristics, mineral deportment, and theoretical grade recovery curve information.

The testwork showed that sulphide mineralization comprises predominantly pyrite and chalcopyrite, with lesser copper arsenides, bornite, chalcocite (in slightly varying proportions depending on grain size – Figure 37), with gangue mineralogy comprising predominantly quartz and muscovite with minor K-feldspar, plagioclase feldspar, ankerite, iron/manganese carbonate, chlorite and biotite and trace barite, ilmenite, rutile, apatite, and zircon. “Cu arsenides” is assumed to include tennantite and possibly enargite.

Figure 37: QEMSCAN® modal mineralogy for the sulphide phases

 

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10.2.2 Bench-Scale Testwork

The laboratory testing program completed at Ammtec in 2010 provided encouraging copper recovery results (78.44 %). However, concentrate grades of 18.48% Cu were lower than desired. Initial open cycle cleaner tests also identified high arsenic levels in the final copper concentrate arising from the presence of tennantite (Cu12As4S13). Molybdenum grades in the feed were too low to produce a saleable molybdenum concentrate.

Subsequent bench-scale testwork by WAI in 2015 focused on testing of a starter pit composite and an average copper grade composite in order to represent the life-of-mine resource grade for the Beskauga Main zone. Additionally, a high-grade copper and gold composite was tested to determine maximum design parameters for the flotation circuit, with respect to residence time and concentrate production.

Bench-scale flotation tests at both Ammtec and WAI entailed a rougher/scavenger stage to recover most of the mineralization into a low concentrate mass (at a primary grind size P80 of 120 µm), followed by regrinding the rougher/scavenger concentrate and then utilising three-stage cleaning to produce a final copper concentrate. Regrind optimization tests showed that the optimum concentrate regrind size was a P80 of 34 µm.

Open cycle cleaner tests carried out on the Average Grade Composite indicated that a recovery of 80.3% was achievable into a concentrate mass of 0.95% by weight, assaying 23.74% Cu. Additional locked cycle tests indicated that a copper recovery of 84.8% could be achieved into a concentrate mass of 1.17% by weight, assaying 20.15% Cu. Gold recovery to the final cleaner copper concentrate was 54.6%, at a final concentrate grade of 19.8 g/t Au.

This gold recovery was considered lower than expected, and further gold optimization testwork was initiated to determine effect of pH on gold flotation performance, as well as testing of a sequential chalcopyrite-pyrite flotation with separate regrinding and cleaning of the chalcopyrite and pyrite rougher/scavenger concentrates.

10.2.3 Flotation Testwork

Flotation optimization testwork was carried out by Ammtec (2010) and WAI (2015), both carrying out open-cycle rougher and cleaner testing with WAI also carrying out locked cycle testwork. The composite samples used had similar head grades of copper (0.2% Cu – Ammtec, 0.29% Cu – WAI) and gold (0.45 g/t Au – Ammtec, 0.43 g/t Au – WAI), representing “average grade” material. However, the Ammtec sample had substantially higher total sulphur content (1.47%) than the WAI sample (0.55%), owing to a higher pyrite content in the Ammtec sample. As a result of the increased pyrite content, there is evidence of non-selectivity during the Ammtec rougher/scavenger flotation.

Ammtec Flotation Tests – 2010

Ammtec results show that highest rougher recovery (copper recovery of 90.0%) was achieved at a primary grind size P80 of 75 μm (Figure 38), with a concentrate mass of 7.29% by weight assaying 2.63% Cu. Gold recovery to the rougher/scavenger concentrate was 74.5% at 4.8 g/t Au.

Because typical low-grade copper porphyry projects require high installed grinding power requirements as a result of high throughput rates, a standard primary grind size P80 of 106 µm is probably the more suitable for future cleaner tests, as this size achieved recoveries very close to the 75 μm tests (Figure 38).

 

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Figure 38: Ammtec “Average Grade” rougher/scavenger grade-recovery curves

Ammtec also conducted a rougher/scavenger flotation test on the high-grade copper composite to determine its flotation performance. Optimal grade-recovery performance to the rougher/scavenger concentrate was achieved at pH 10.5, with 88.4% Cu recovery into a concentrate mass of 5.72%, assaying 5.30% Cu. Gold recovery was 74.7%, at 11.3 g/t Au.

Ammtec conducted two-stage cleaner tests on the average grade and high-grade copper composite samples, at various concentrate regrind sizes and pH levels.

In the most optimal two-stage cleaner test for the average grade (Figure 39), overall copper recovery was 78.44%, at a final concentrate grade of 18.48% Cu. Gold recovery to the copper concentrate was 45.59% at a gold grade of 21.9 g/t Au. The cleaner grade-recovery curves achieved by Ammtec were satisfactory; however, the high pyrite content resulted in difficulty achieving a >21% Cu target saleable copper concentrate after two stages of cleaning. In the most optimal three-stage cleaner test for the high-grade, copper recovery was 80.5%, at a final concentrate grade of 27.6% Cu. Gold recovery to the copper concentrate was 59.0% at 51.0 g/t Au.

 

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Figure 39: Ammtec “Average Grade” cleaner grade-recovery curves

WAI Flotation Tests – 2015

WAI conducted rougher optimization flotation tests on three main composites (Starter Pit, Average Grade, and High Grade) using the optimum test conditions derived from the Ammtec testing program in 2010. A series of rougher tests were conducted to determine the effect of primary grind size, collector type and flotation time on the rougher flotation performance. The primary objective of the rougher tests was to maximize both copper and gold recoveries into the rougher concentrate product.

Rougher performance improved relative to the 2010 Ammtec tests, with >90% copper recovery and >70% gold recovery achieved for all samples (Table 13), at a grind size P80 of 120 µm (coarser than that used for the 2010 testwork).

Table 13: Results of optimal WAI rougher tests for three different samples
Composite ID Test no. P80 µm Concentrate mass wt.% Grade Recovery
Cu % Au g/t % TS % Cu % Au % TS
Starter Pit FT 8 120 14.52 1.97 2.72 3.97 92.54 74.27 91.34
Average Grade FT 1 120 19.40 1.29 1.69 2.70 90.92 75.77 91.179
High Grade FT 5 120 17.49 2.59 4.03 5.99 94.66 78.78 82.14

A number of first cleaner (timed kinetics) and three-stage open cycle cleaner tests were also carried out to test several variables including re-grind size, pH and flotation time. The primary objective of the open cycle cleaner

 

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tests was to maximize copper and gold recoveries at a saleable concentrate grade of circa 22% Cu. Concentrate grades of >22% Cu were achieved for all samples, with recoveries between 78.18% and 87.58% (Table 14).

Table 14: Results of optimal WAI cleaner tests for three different samples
Composite ID Test no. Concentrate mass wt.% Grade Recovery
Cu % Au g/t % TS % Cu % Au % TS
Starter Pit FCT 16 0.93 24.72 24.76 27.03 78.18 49.50 43.52
Average Grade FCT 7 0.95 23.74 23.79 29.17 80.26 50.93 53.91
High Grade FCT 11 1.87 22.61 27.74 35.32 87.58 65.63 60.69

Locked cycle tests were carried out on each of the Beskauga Main metallurgical composites. In these tests, the cleaner tails streams from each of the cleaner stages are recycled back through to the head of the previous unit cleaner stage. The locked cycle tests were carried out for six cycles in order for equilibrium to be achieved. The objective of the locked cycle testing was to determine the final copper and gold grade recovery relationships that could be expected under actual plant conditions.

For all samples, copper grades of >20% were achieved at recoveries ranging from 82.66% to 89.06% (Table 15). A comprehensive analysis of the concentrate showed that there are potential issues with the arsenic, antimony and mercury levels in the final copper concentrate which would incur smelter penalties. However, it appears these smelter penalty elements can be removed using the Toowong leach technology (see Section 10.2.6).

Table 15: Summary of WAI locked cycle test results for all samples
Composite Product Copper Gold Total sulphur
Grade (%) Recovery (%) Grade (ppm) Recovery (%) Grade (%) Recovery (%)
Starter Pit Concentrate 21.96 82.66 22.92 56.65 26.74 52.95
Tailings 0.05 17.34 0.20 43.35 0.27 47.05
Average Grade Concentrate 20.15 84.74 19.83 54.63 27.35 61.23
Tailings 0.04 15.26 0.20 45.37 0.21 38.77
High Grade Concentrate 21.48 89.06 28.01 67.57 37.41 69.55
Tailings 0.05 10.94 0.27 32.43 0.33 30.45
10.2.4 Cyanidation Leach Testing

Gold at Beskauga Main is primarily associated with chalcopyrite, with minor pyrite and non-sulphide gangue associations, based on mineralogical investigation. Investigative testing looked to determine the potential for leaching of gold lost in the rougher and 1st cleaner scavenger tail products via a separate “add on” carbon-in-leach (CIL) circuit.

Cyanide leach testing was carried out on the rougher and 1st cleaner scavenger tail products from the 2015 WAI flotation tests, which make up the final tailings and the overall gold losses. Bulk sulphide flotation was also carried out on the rougher tail to establish the gold recovery to a pyrite concentrate.

Direct cyanidation leach tests were conducted at varying cyanide concentrations to determine potential recoveries for gold and silver. Results showed that there is a high proportion of cyanide soluble gold in the rougher tail and 1st cleaner scavenger tail products and that good recoveries (52.8% and 60.4%, respectively) could be achieved. However, owing to the large mass pull to the rougher tails (>88% by weight), it is unlikely to be viable to leach the entire rougher tail at the proposed design tonnage rate of 13 million tonnes per annum, therefore the proposed approach is to include a pyrite flotation stage on the rougher tailings stream to produce a gold-bearing pyrite concentrate. The pyrite concentrate in combination with the 1st cleaner scavenger tail would be sent to a conventional CIL circuit.

 

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10.2.5 Copper/Molybdenum Separation Testing

The recovery and upgrading of molybdenum contained in a bulk flotation concentrate was the objective of test work conducted at Ammtec Perth, Australia. Testing of the concentrate from the high-grade composite sample focused on using additional flotation stages to recovery molybdenum from bulk flotation concentrates. The key parameters evaluated included rougher flotation density, rougher flotation time, molybdenum concentrate re-grind requirements, and the number of cleaning stages required in molybdenum flotation.

The molybdenum recovery to the copper rougher concentrate, was 24.5%. Following three stages of molybdenum cleaning, a concentrate grade of 15.9% Mo with 15.2% molybdenum recovery was obtained. It was concluded that the molybdenum grade in the sulphide ore was too low to warrant incorporating a copper-molybdenum circuit.

10.2.6 Toowong Process Test Program

The Toowong Process is an emerging hydrometallurgical treatment process designed to remove arsenic, antimony and other metalloid and non-metal penalty or hazardous elements from base and precious metal concentrates. The Toowong Process has underdone numerous testwork programs including continuous pilot plant testing on concentrates from the Tampakan copper project in the Philippines, which successfully reduced the arsenic content of the concentrates from 1.1% As to 0.05% As. Although at a pilot stage, it utilises established hydrometallurgical processes. At the heart of the process is a patented Alkaline Sulphide Leaching step that solubilises key penalty impurities or metals, generating either an enrichment product or a process stream suitable for conventional downstream metal recovery.

A final copper concentrate sample produced from the 2017 WAI testwork was used to test the amenability of Beskauga concentrate for the Toowong process. Preliminary benchtop leaching testwork demonstrated that the concentrate can be treated to remove arsenic. In Test 3, arsenic was reduced from 3.69% to 0.31% after 24 hours leaching time. Antimony was reduced from 0.224% to 0.023%.

Leaching was found to be selective for arsenic and antimony with the following results for other elements:

· Gold extraction was negligible in all tests and reported with the clean concentrate product.
· Copper and iron are insoluble in the Toowong Process leaching conditions and remain in the leached concentrate (leach residue).
· Mercury was partially removed (28%) after 24 hours.
· Reagent use may be reduced by closed circuit processing and further optimizations to the process.
10.3 Conclusions, Risks and Other Factors

Several stages of testwork have demonstrated the following key findings:

· Approximately 85% or above of the copper in the Beskauga deposit can be recovered to a sulphide concentrate via flotation using a coarse grind size P80 of 120 µm, resulting in a copper concentrate >21% Cu.
· Approximately 55% of the gold contained in the Beskauga deposit reports to the copper concentrate, which grades at approximately 20 g/t Au or above.
· An additional 19.5% of the gold in the Beskauga deposit that does not report to the copper concentrate could potentially be recovered by including a pyrite flotation stage on the rougher tailings stream to produce a gold bearing pyrite concentrate. The pyrite concentrate in combination with the first cleaner scavenger tail would be sent to a conventional CIL circuit to recover the gold as a gold doré.
· The Toowong Process is a potential avenue to address penalty levels of arsenic in the copper concentrate.

 

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The high levels of deleterious elements such as arsenic, antimony and mercury in the final copper concentrate require this material to be further treated using the Toowong Process to produce a saleable copper concentrate with arsenic levels <0.5% As. Amenability tests using the Toowong Process showed that the arsenic content in the final copper concentrate was reduced from 3.69% As to 0.3% As after 24 hours of leaching. Other smelter penalty elements such as antimony and mercury were also leached from the copper concentrate during the Toowong Process.

The metallurgical testing to date has utilized sample composites that have been selected from drillholes that cover the full mineralization area and are suitable for support of the Mineral Resource estimate. A range of mineral processing techniques have been tested that are typical for the region and mineralization style. Further refined investigation has been completed on the management of contaminants in the flotation concentrate allowing this feature to be incorporated in the assessment for Mineral Resource estimation. Future evaluation of mining scoping studies will refine the metallurgical process path and will necessitate more detailed metallurgical studies on whole of mineralization composites, but will also require local variability tests for the preferred extractive methods.

The Qualified Person considers that the metallurgical results are adequate to demonstrate potential for eventual economic extraction and to report the Mineral Resource estimate included in this report.

 

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11 Mineral Resource Estimates
11.1 Data Import and Validation

The database for the Beskauga deposit comprised the following tables:

· Drillhole collar coordinate file
· Downhole survey data file
· Analytical data file (sampling intervals)
· Dike intervals data file.

The database was provided to CSA Global in Microsoft Excel format. The analytical databases were validated by specially designed processes in Micromine software. The database was then checked using macros and processes designed to detect any of the following errors:

· Duplicate drillhole names.
· One or more drillhole collar coordinates missing in the collar file.
· FROM or TO missing or absent in the assay file.
· FROM > TO in the assay file.
· Sample intervals are not contiguous in the assay file (gaps exist between the assays).
· Sample intervals overlap in the assay file.
· First sample is not equal to 0 m in the assay file.
· First depth is not equal to 0 m in the survey file.
· Several downhole survey records exist for the same depth.
· Azimuth is not between 0 and 360° in the survey file.
· Dip is not between 0 and 90° in the survey file.
· Azimuth or dip is missing in survey file.
· Total depth of the holes is less than the depth of the last sample.

No issues were found with the provided data. The list of the database files for the Beskauga deposit is given below and summarized in Table 16.

Table 16: Drillhole database files
File Description No. of records
DH_Collar.DAT Drillhole collars 101
DH_Survey.DAT Drillhole survey 1,939
DH_Assay.DAT Assay data 36,270
DH_Dykes.DAT Dike intervals 841
11.2 Geological Interpretation

Modelling of the geology and mineralized domains was undertaken by CSA Global using Micromine 2016.1 software (version 16.1.1251.2).

11.2.1 Lithology

The Qualified Person was provided with lithological descriptions of the drillhole sample intervals and constructed a set of strings for the major lithological units, such as barren dikes and overburden zones. Open strings were

 

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digitized for the overburden boundary and closed strings for the dikes. Although additional lithologies are present, these were not modelled, and mineralization was constrained using grade-shell wireframes as described below.

11.2.2 Mineralization

The appropriate mineralization cut-off was determined using a statistical analysis of all samples. Copper grades show a negative lognormal distribution; a 0.12% Cu cut-off was used as the mineralization boundary, where there is a clear break between populations (Figure 40). Gold grades show a positive lognormal distribution, and a 0.15 g/t Au cut-off grade was used as a mineralization boundary, based on a population break (Figure 41).

Figure 40: Histogram of unrestricted copper grade distribution

Figure 41: Histogram of unrestricted gold grade distribution

Following determination of copper and gold grades to use for mineralization boundaries, the Beskauga deposit was interactively interpreted using 18 cross sections, and grade composites were used to assist with interpretation.

 

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Cross sections were generated in an east-southeast direction, perpendicular to the strike of the interpreted geological structures and mineralized bodies. Distances between section vary from 50 m in densely drilled areas up to 250–400 m in sparsely drilled area. The grade composites were generated using the following parameters:

· Cut-off grade: 0.12% Cu; 0.15 g/t Au.
· Minimum composite length: 5 m.
· Minimum grade of final composite: 0.12% Cu; 0.15 g/t Au.
· Maximum total length of waste: not limited.
· Maximum consecutive length of waste: 5 m.
· Maximum gap between samples: 5 m.
· Minimum grade * length for short intervals: 0.25% Cu * m; 0.3 g/t Au * m.

Each section was displayed in Micromine’s Vizex display environment together with drillhole traces colour-coded according to the sample grades and sample grade values (Figure 42). All drillhole traces were also colour coded as hatches for the grade composites on one side and as the lithological units on the other side. Also, the interpretation was carried out in 3D (i.e. the string points were snapped to the corresponding drillhole intervals).

The following techniques were employed while interpreting the mineralization:

· Each cross section was displayed on screen with a clipping window equal to a half distance from the adjacent sections.
· All interpreted strings were snapped to the corresponding drillhole intervals (i.e. the interpretation was constrained in the third dimension).
· Internal waste within the mineralized envelopes was not interpreted and modelled. It was included in the interpreted envelopes, providing that internal waste was part of the grade composites.
· The interpretation was extended perpendicular to the corresponding first and last interpreted cross section to the distance equal to a half distance between the adjacent exploration lines.
· If a mineralized envelope did not extend to the adjacent drillhole section, it was projected halfway to the next section and terminated. The general direction and dip of the envelopes was maintained.
· If the mineralized lens was at the topographic or overburden surface, it was extended above the surface to make sure there would not be any gaps between the lens and the topographic surface when the block model is built.

The interpreted strings were used to generate 3D solid wireframes for the mineralized envelopes (Figure 43) and lithological units. Every section was displayed on the screen along with the closest interpreted section.

 

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Figure 42: Example of interpreted strings

The bright purple line represents the interpreted mineralization zone at a 0.12% Cu cut-off grade. The green line represents the interpreted overburden zone. The cyan coloured intervals along drillhole traces represent the 0.12% Cu composite.

 

 

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Figure 43: Example of the gold wireframe model – oblique view looking towards the southwest

 

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The total number of wireframe models and their volume is shown in Table 17.

Table 17: Number of wireframe models and their volume
Element No. of wireframes Volume (‘000 m3)
Copper mineralization 10 89,465
Gold mineralization 16 192,054
11.2.3 Topography

The topographic surface for the deposit was constructed from the drillhole collar elevations. Since the deposit area is relatively flat and the mineralization does not crop out at surface, this is considered sufficient for the Mineral Resource estimate.

11.3 Sample Domaining

When interpretation of mineralization and wireframing was completed, all samples were coded by wireframe models to flag samples that lie inside and outside interpreted mineralized zones.

11.3.1 Domain Coding

Based on the coding of samples as lying inside or outside mineralized wireframes, samples from within the mineralized wireframes were used to conduct a sample length analysis.

11.3.2 Sample Length Analyses

The most common sampling interval was 1 m, with >75% of all samples between 1.0 m and 1.1 m in length (Figure 44).

Figure 44: Histogram of sample lengths
11.4 Sample Compositing

Drillhole interval compositing is a standard procedure which is used to set all sampling intervals to the same length (“volume support”) so that all the samples will have the same weight during grade interpolation and geostatistical analysis. Usually, the composite interval length is selected to be close to the standard or mean sampling length, and in this case a 1.0 m composite length was used. The selected samples within each

 

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mineralized envelope were separately composited over the defined intervals, starting at the drillhole collar and progressing downhole. Compositing was stopped and restarted at all boundaries between mineralized envelopes and waste material. If a gap of less than 10 cm occurred between samples, it was included in the sample composite. If the gap was longer than 10 cm the composite was stopped, and another composite was started from the next sample.

11.5 Statistical Analyses

Classical statistical analysis was carried out for samples within the mineralization wireframe domains. The aim of the analysis was:

· To determine the type of grade distribution within mineralized zones
· To obtain statistical parameters for element grades within each domain
· To review the possible mixing of grade populations within each zone
· To review the necessity and possibility of separation of grade populations if more than one population exists
· To determine top cut values for grade interpolation
· To assess the validity of using kriging interpolation techniques.

Samples were coded separately for each mineralization zone. Visual validation was then performed to check sample coding. Log histograms and probability plots were then analysed to determine top cut grade values. Statistical analysis was performed separately for copper and gold.

The distribution of copper grades was lognormal (Figure 45). The log histogram for gold values within the mineralization is close to a lognormal distribution with a slightly positive skew (Figure 46). There is no evidence for mixing of either gold or copper grades, supporting the selected cut-off grades.

Figure 45: Log histogram for copper values within copper mineralization wireframes

 

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Figure 46: Log histogram for gold values within gold mineralization wireframes

A review of grade outliers was undertaken to ensure that extreme grades are treated appropriately during grade interpolation. Although extreme grade outliers within the grade populations of variables are real, they are potentially not representative of the volume they inform during estimation. If these values are not cut, they have the potential to result in local over-estimation of grade.

All composited drillhole data within the interpreted mineralization was selected to determine if top cuts for copper and gold were required. Histograms, log-probability plots, and coefficient of variation (COV) values were reviewed, with the aim of determining if there were any very high-grade sample results that had the potential to bias block model estimates. COV values (Table 18) are a measure of skewness, and high values (greater than 1.5) may suggest that cutting is required. The histograms were then used to identify the point at which the high-grade tail disintegrates. Following review of the histograms, a top cut value of 5 g/t was applied to gold where the histogram tails disintegrated (Figure 47). No top cuts were applied for copper.

Table 18: COV values for copper and gold within mineralized domains
Domain COV
Copper mineralization (Cu) 0.886
Gold mineralization (Au) 2.92

 

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Figure 47: Histogram of gold grade distribution within the gold mineralized domain showing the chosen top cut of 5 g/t Au
11.6 Geostatistical Analysis

The purpose of geostatistical analysis is to generate a series of semi-variograms that can be used as the input weighting mechanism for kriging algorithms. The semi-variogram ranges determined from this analysis contribute heavily to the determination of the search neighbourhood dimensions. Therefore, geostatistical analysis was conducted to meet the following objectives:

· To estimate the presence of directional anisotropy of mineralization. This can be estimated by studying the directional semi-variograms. There is a directional anisotropy if semi-variograms reach the total sill at different distances in different directions.
· To estimate the spatial continuity in the main directions of anisotropy. The continuity of grades can be estimated using the semi-variogram ranges, i.e. the distance at which the semi-variogram reaches the total sill (plateau). Accordingly, grades cannot be estimated reliably if the search radius for grade interpolation is greater than the semi-variogram range. When the semi-variogram reaches the sill, there is no correlation between the pairs of samples at that sample separation distance.
· To obtain the semi-variogram parameters (nugget effect, total sill and ranges) to be input into the interpolation process.

All variograms were calculated and modelled for the composited sample file constrained by the corresponding mineralized envelopes. Geostatistical analysis was carried out separately for the copper and gold mineralization.

Copper variogram parameters are shown in Table 19. Semi-variogram models for the main, secondary, and tertiary directions are shown in Figure 48, Figure 49, and Figure 50, respectively.

Table 19: Semi-variogram (relative) parameters – copper mineralization
Axis Azimuth Dip Nugget effect Partial sill Ranges (m)
First 108° 0° 0.0792

Structure 1 (Exponential)

Structure 2 (Spherical)

0.133

0.161

27.6

130

Second 198° 66°

20.3

245

Third 18° 24°

20.3

80

 

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Gold variogram parameters are shown in Table 20. Semi-variogram models for the main, secondary, and tertiary directions are shown in Figure 51, Figure 52, and Figure 53, respectively.

Table 20: Semi-variogram (relative) parameters – gold mineralization
Axis Azimuth Dip Nugget effect Partial sill Ranges (m)
First 48° 0° 0.0681

Structure 1 (Exponential)

Structure 2 (Exponential)

0.144

0.183

50

200

Second 138° 66°

50

200

Third 318° 24°

50

200

 

 

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Figure 48: Semi-variogram model for the second direction – copper mineralization

 

 

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Figure 49: Semi-variogram model for the second direction – copper mineralization

 

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Figure 50: Semi-variogram model for the third direction – copper mineralization

 

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Figure 51: Semi-variogram model for the first direction – copper mineralization

 

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Figure 52: Semi-variogram model for the second direction – copper mineralization

 

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Figure 53: Semi-variogram model for the third direction – gold mineralization

 

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11.7 Density

Bulk density values were assigned to block model cells using a single bulk density value for the Beskauga deposit of 2.78 t/m3. This density value is based upon densities measured by Dostyk. Densities were collected using the water immersion method. Density is determined by weighing a sample and measuring (using a graduated cylinder) the volume of water displaced when the sample is immersed in water.

A plot of specific grade vs grade (Figure 54) shows no trend related to either the gold or copper grade of the samples, and the density value used is consistent with the expected density range of granodiorite and is considered appropriate for use in the Mineral Resource estimate.

Figure 54: Plot of specific gravity vs gold and copper values
11.8 Block Model

Block modelling was carried out using Micromine 2016.1 software (version 16.1.1251.2) and included several stages. Firstly, an empty block model was created within the closed wireframe models for the mineralized envelopes interpreted and modelled using a 0.12% Cu cut-off grade and 0.15 g/t Au. All blocks that fell into the boundaries of the copper domain were coded as copper mineralization blocks and all the blocks that fell into the boundaries of gold domain were coded as gold mineralization blocks – coding of the block model was based on the separate wireframe models for deposit. The block model was then restricted with the overburden digital terrain models (DTMs) (i.e. all model cells above the overburden surface were deleted from the model file).

 

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Initial filling with parent cell size was followed by sub-celling where necessary. The sub-celling occurred near the boundaries of the mineralized bodies or where models were truncated with the DTMs of the topographic surface and/or overburden. The parent cell size was chosen based on the general morphology of mineralized bodies and in order to avoid the generation of too large block models. The sub-celling size was chosen to maintain the resolution of the mineralized bodies. The sub-cells were optimized in the models where possible to form larger cells.

The block model dimensions and parameters are shown in Table 21.

Table 21: Block model dimensions and parameters
Axis Extent (m) Block size
(m) 		Minimum sub-celling size (m)
Minimum Maximum
Easting 587729 588890 20 2
Northing 5737950 5740240 20 2
RL -710 150 20 2
11.9 Grade Interpolation

Copper and gold grades were interpolated into the empty block model using both OK and IDW. The IDW method with a power of two and three was used to support and validate the kriged estimates. Silver grades were interpolated using the same parameters as gold grades.

Interpolation was carried out separately for copper and gold and was conducted for the blocks that fell within the boundaries of the copper or gold mineralization. The radii of the search ellipsoid and orientation of axes were selected based on the results of geostatistical analysis.

Where copper and gold mineralized domains do not coincide, the interpolation of copper within the gold mineralization domain and outside the copper mineralization domain was conducted with the use of the samples that did not fall into the copper domain. A similar approach was used to interpolate gold within the copper domain, but outside the gold domain.

The first search radii for all mineralized envelopes were selected to be equal to two-thirds of the semi-variogram long ranges in all directions. Model cells that did not receive a grade estimate from the first pass interpolation run were used in the next (second pass) interpolation with search radii equal to the semi-variogram ranges in all directions. The model cells that did not receive grades from the first two passes were then estimated using a third pass with search radii equal to twice the semi-variogram ranges.

For the first two passes, when model cells were estimated a restriction of at least three samples from at least two drillholes was applied to increase the reliability of the estimates. This was relaxed for the third pass. Interpolation parameters are presented in Table 22.

Table 22: Interpolation parameters for OK
Search radii Minimum no. of samples Maximum no. of samples Minimum no. of drillholes
Less or equal to two-thirds of semi-variogram ranges 3 16 2
Less of equal to two semi-variogram ranges 3 16 2
Greater than two semi-variogram ranges 1 16 1

The blocks were interpolated using only assay composites restricted by the wireframe models, and which belonged to a corresponding wireframe (i.e. each wireframe was estimated individually).

De-clustering was performed during the interpolation process by using four sectors within the search neighbourhood. Each sector was restricted to a maximum of four points. The maximum combined number of

 

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samples allowable for the interpolation was therefore 16. Change of support was honoured by discretizing to 5-point x 5-point x 5-point kriged estimates. These point estimates are simple averages of the block estimates.

11.10 Model Validation

Validation of the Beskauga grade interpolation was completed using:

· Comparison of the block model and composite mean grades for each domain (Table 23)
· Visual checks on screen in sectional view to ensure that block model grades honour the general grade of downhole composites (Figure 55)
· Generation of swath plots to compare input and output grades in a semi-local sense, by easting, northing and elevation (copper – Figure 56 to Figure 58; gold – Figure 59 to Figure 61)
· Comparison of the block model volume with the combined wireframe volume.
Table 23: Comparison of grades between block model and composites
Average grade Block model Composites
Cu – within copper mineralization 0.25 % 0.28 %
Au – within gold mineralization 0.32 g/t 0.39 g/t

Validation histograms and probability plots were generated for composites and block model grades. Grade distribution, populations, and swath plots were reviewed and compared. They show that the distribution of block grades honours the distribution of input composite grades. There is a degree of smoothing evident, which is to be expected from the estimation method used, whereby block grades overstate on the lower grade ranges and understate on the higher-grade ranges. Smoothing is particularly evident in areas of wide spaced drilling where the number of composites was relatively low. However, the general trend in the composites is reflected in the block model.

 

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Figure 55: Visual validation of block model grades vs drillhole grades
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Figure 56: Swath plot by easting (copper)
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Figure 57: Swath plot by northing (copper)

 

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Figure 58: Swath plot by 20 m bench (copper)

 

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Figure 59: Swath plot by easting (gold)

 

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Figure 60: Swath plot by northing (gold)

 

 

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Figure 61: Swath plot by 20 m bench (gold)

 

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11.11 Mineral Resource Classification

Mineral Resources were classified in accordance with § 229.1302(d)(1)(iii)(A) (Item 1302(d)(1)(iii)(A) of Regulation S-K into Indicated and Inferred Mineral Resources. The classification is based upon an assessment of geological and mineralization continuity and QAQC results, as well as considering the level of geological understanding of the deposit. Specific requirements concerning the minimum number of samples and minimum number of drillholes used for grade interpolation for each block as carried out for each search pass were applied as detailed in Table 22.

The model cells were displayed on screen, colour coded according to the interpolation run, along with the drillhole samples and traces, and the boundary between the resource classes were then interpreted interactively for both plans and cross sections. The interpreted boundaries were then wireframed and used to code the block model for the Indicated Mineral Resource class.

Generally, the Indicated Mineral Resource class was assigned for the model cells that were within a full semi-variogram range from the recent drillholes (i.e. within the first or second pass). All other model cells were classified as Inferred.

The classification of the Mineral Resources takes into account all uncertainties related to geological interpretation, mineralization continuity and geostatistical analysis, sampling method and sample and data security, drill sample control and quality, data quality and reliability, density, and topographic reliability.

It is emphasised that an Inferred Mineral Resource is that part of a Mineral Resource for which quantity and grade or quality are estimated on the basis of limited geological evidence and sampling. As a result, an Inferred mineral Resource has substantial inherent uncertainty.

CSA Global recommends that Arras attempts to upgrade the Mineral Resources to the Measured or Indicated classification category for some of the areas and prospects of the deposit by carrying out additional infill drilling.

11.12 Prospects for Eventual Economic Extraction

To demonstrate potential of the Beskauga deposit for eventual economic extraction, a preliminary pit optimization study was completed.

The block model for the deposit was developed by CSA Global in November 2020 and all input economic parameters for the pit optimization process were developed by Andrew Sharp, Principal Mining Engineer at CSA Global and Qualified Person for this Technical Report.

Basic pit optimization produces the following information about each block in the block model:

· It determines whether the block is inside or outside the optimal (ultimate) pit.
· It determines whether the block should be processed for metal extraction (and if so, by what processing method if several methods could be used) or sent to the waste dump.

The main objective of the study was to define the potential of the Mineral Resource to be classified and ultimately mined, and if the project could potentially be profitable.

CSA Global did not estimate Ore Reserves for the deposit. The optimization study was for the sole purpose of providing information that could be used in development of a pit shell for definition of Mineral Resources for the Beskauga Project. This study is conceptual in nature and does not represent any kind of Ore Reserve estimate.

11.12.1 Input Parameters

The pit optimization study was based on the following information:

· Classified block model

 

 

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· Topographic surface
· Input economic parameters developed and based on metallurgical testwork results completed on the deposit as well as from the review of similar mines in Kazakhstan and worldwide, in particular KAZ Minerals’ Bozshakol operations which provided several regional cost confirmations
· Formula for NSR (estimated by CSA Global).

The input parameters for the base case are shown in Table 24 (all costs and prices are in US$).

Table 24: Pit optimization parameters (base case)
Parameter   Unit
Metal prices    
Calculated NSR as per the formulas per cell $/t
Mining and transport    
Mining cost 1.50 $/t for all material except overburden
Mining cost 1.00 $/t for overburden
Mining losses 0 %
Mining dilution 0 %
Processing cost    
Processing cost (including G&A) 5.70 $/t
Processing recovery included in NSR %
Administration costs and pit slopes    
Administration costs 0 $ per annum
Pit slope for overburden 35 °
Pit slope between overburden and -300 m RL 45 °
Pit slope between -300 and -450 m RL 42 °
Pit slope below -450 m RL 40 °
Density for model and waste 2.76 t/m3
Density for overburden 1.50 t/m3

The NSR formula applied was:

· NSR $/t = (38.137+11.612 x Cu%) x Cu% + (0.07 + 0.0517 x Ag g/t) x Ag g/t + (19.18 + 12.322 x Au g/t) x Au g/t.

The formula incorporates metal prices, metals concentrates sales terms and metallurgical recoveries that were developed from metallurgical reports available for the project. Several process methodologies have already been investigated and currently the flotation of a copper-gold concentrate is showing best performance. The concentrate is high in arsenic content due to the presence of tennantite, but hydrometallurgical extraction of the arsenic from the concentrate using the Toowong process has been demonstrated to be a potentially viable process option to produce a marketable concentrate.

Copper recovery was estimated using a formula as:

· Curec = 0.227 x Cu % + 0.7741 (0.24% copper = 82.7% recovery).

Gold recovery was similarly estimated using a formula depending on head grade as:

· Aurec = 0.425+0.2718*Au g/t (0.39 g/t = 53.1% recovery).

Metal concentrate sales terms were selected based on average values for copper-gold concentrate. Metal prices used were $2.80/lb copper, $17.25/oz silver, and $1,500/oz gold. Metal prices were selected based on 3-year trailing prices to November 2020. A 1.25 revenue factor was applied to the NSR because of the conservative

 

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basis for the metal prices and to ensure all potentially economically mineable material was included, especially considering the limited drill constraint on the resource.

11.12.2 Pit Optimization Process

The pit optimization was carried out using the Mining module of the Micromine version 18.0 software application using the Lerch-Grossman algorithm. The Lerch-Grossman algorithm is an industry-standard optimization technique used in mining and exploration. It is based on graph theory and is one of the widely used methods that allows the detection of the true optimum pit.

In the Lerch-Grossmann algorithm, directed arcs indicate which blocks need to be removed before a block can either be mined and processed, or be dumped as waste. Each block in the model is assigned a revenue value based on the grade of that block and metal price, and then all associated costs are subtracted from the revenue, so that all blocks are assigned a positive or negative dollar value. If the dollar value is positive, that block could potentially be mined profitably providing that all the blocks above do not make a loss if mined. The model pit slopes are specified in terms of the blocks that must be removed to provide access to each block within the block model.

Pit optimization requires that a fixed cost/value be associated with each block. The value of a waste block usually defines the cost of mining and disposal (dumping, reclaiming, etc.). A negative value indicates a loss. The value of a block selected for mineral extraction is usually defined by the profit from the mineral sale, minus the costs associated with mining and processing. A block will have a negative value if the costs are greater than the profit. It makes sense to consider a block selected for mineral extraction if the loss is less than it would be if it was treated as a waste block. In general, the pit optimization process treats negative blocks as waste, and positive blocks as selected for mineral extraction.

The pit optimization process involves the following steps:

· Block model preparation, i.e. metallurgical recoveries were calculated for copper and gold grades using provided formulas.
· A solid wireframe model was generated for the overburden material and for elevations between the overburden and -300 m RL, between -300 mRL and -450 mRL, and between -450 mRL and -1000 mRL so that correct slope angles and density values were applied.
· NSR values were calculated for each model cell as per the formulas.
· Tonnage for each cell and sub-cell was calculated, and the NSR values were then multiplied by the tonnage to calculate the block values.
· Pit optimiser set up. All provided economic parameters and output data files were set up in the process.
· Reporting of blocks within the pit shell.

The optimisation approach ensures that all Mineral Resource that may ultimately be converted to a Mineral Reserve is captured and reported. Based on the work completed, the Qualified Persons considers that additional work will resolve current uncertainties related to potential for economic extraction, specifically additional drilling and sampling to improve classification of the Mineral Resource and additional metallurgical testwork to optimise recoveries and confirm the Toowong process for reduction of deleterious elements.

11.13 Mineral Resource Reporting

The Mineral Resource estimate has been reported for all blocks in the resource model that fall within a pit shell that was developed for an alternative case with NSR multiplied by factor 1.25 and NSR value exceeding $5.70/t. The entire Mineral Resource estimate has reasonable prospects for eventual economic extraction, and is a

 

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realistic inventory of mineralization which, under assumed and justifiable technical and economic conditions, might, in whole or in part, become economically extractable (see Table 25 below).

In the Qualified Person's opinion, further drilling and evaluation work is expected to improve classification of the Mineral Resource and provide better resolution of technical and economic factors that are likely to influence the prospect of economic extraction.

Table 25: Mineral Resource estimate for the Beskauga Project with an effective date of 28 January 2021.
Category Tonnage (Mt) Cu % Au g/t Ag g/t
Indicated 207 0.23 0.35 1.09
Inferred 147 0.15 0.33 1.02

Notes:

· An NSR $/t cut-off of $5.70/t was used, and the NSR formula is: NSR $/t = (38.137+11.612 x Cu%) x Cu% + (0.07 + 0.0517 x Ag g/t) x Ag g/t + (19.18 + 12.322 x Au g/t) x Au g/t
· The NSR formula incorporates variable recovery formulae. Average copper recovery was 81.7% copper and 51.8% for both gold and silver.
· Base metal prices considered were $2.80/lb copper, $17.25/oz silver, and $1,500/oz gold.

·       The Mineral Resource is stated within a pit shell that considers a 1.25 factor above the NSR.

·       Mineral Resources are estimated and reported in accordance with the definitions for Mineral Resources in §229.1302(d)(1)(iii)(A) (Item 1302(d)(1)(iii)(A) of Regulation S-K) into Indicated and Inferred Mineral Resources which is consistent with the CIM Definition Standards for Mineral Resources and Mineral Reserves adopted 10 May 2014.

· Serik Urbisinov (MAIG), CSA Global Principal Resource Geologist, is the independent Qualified Person with respect to the Mineral Resource estimate.
· The Mineral Resource is not believed to be materially affected by any known environmental, permitting, legal, title, taxation, socio-economic, marketing, political or other relevant factors.
· These Mineral Resources are not Mineral Reserves as they do not have demonstrated economic viability.
· The quantity and grade of reported Inferred Resources in this Mineral Resource estimate are uncertain in nature and there has been insufficient exploration to define these Inferred Resources as Indicated or Measured; however, it is reasonably expected that the majority of Inferred Mineral Resources could be upgraded to Indicated Mineral Resources with continued exploration.

 

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12 Mineral Reserve Estimates

This section is not applicable to the current report.

 

 

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13 Mining Methods

This section is not applicable to the current report.

 

 

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14 Process and Recovery Methods

This section is not applicable to the current report.

 

 

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15 Infrastructure

This section is not applicable to the current report.

 

 

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16 Market Studies

This section is not applicable to the current report.

 

 

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17 Environmental Studies, Permitting and Plans, Negotiations or Agreements with Individuals or Groups

This section is not applicable to the current report.

 

 

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18 Capital and Operating Costs

This section is not applicable to the current report.

 

 

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19 Economic Analysis

This section is not applicable to the current report.

 

 

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20 Adjacent Properties

There is a working salt mine run by a private company (Pavlodar Salt company) immediately south of the Beskauga mineral licence. The Ekidos and Stepnoe exploration licences surround the salt mining licence (Figure 62) that covers an area of 6.11 km2. The licence record is Contract number 17 and valid till April 17, 2031 ( https://gis.geology.gov.kz/geo/). The mine exploits shallow material deposited in Zhamantyz salt lake.

There are no other mineral licences adjacent to the Beskauga Project licence package.

Figure 62: Location of the salt mine within the Beskauga Project area (coordinates are WGS/UTM Zone 43N)

 

 

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21 Other Relevant Data and Information

The Qualified Persons are not aware of any other relevant data or information that has not been included in this report.

 

 

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22 Interpretation and Conclusions

The Beskauga Project includes the large Beskauga porphyry copper-gold deposit within a magmatic arc terrain of the CAOB, a belt that has demonstrated pedigree for economic porphyry deposits, notably KAZ Minerals operating Bozshakol mine 160 km to the west. The maiden Mineral Resource for Beskauga Main, documented in this S-K 1300 Technical Report Summary and previously reported under Canadian NI 43-101 guidelines, represents a major milestone for the Project. The Mineral Resource has been completed for the Beskauga Main porphyry-style mineralization, not for the Beskauga South mineralization which is gold only and may represent an epithermal overprint to the system. The work completed in preparation of this Mineral Resource estimate has highlighted gaps that will be addressed in the next phase of work.

The indications of epithermal overprint, with minor enargite, and the apparently limited potassic alteration and predominant phyllic alteration, suggest that drilling to date may only have tested the upper part of the porphyry system. However, the work required to understand the geometry and zonation of alteration and mineralization at Beskauga has not been completed, as would normally be the case for a porphyry-epithermal mineralization system. This would ideally include detailed logging of alteration and veining with documentation of vein type, mineralogy, and vein density (ideally using an Anaconda-type approach), multi-element litho-geochemical data analysis, and hyperspectral data acquisition and analysis.

This represents a significant gap in the Project and presents an opportunity to improve modelling and resource extension targeting. The deposit is not well understood and has not been drill tested thoroughly based on understanding the architecture of the system, including the gold-only Beskauga South zone. The available information suggests substantial upside potential.

The proposed work program will substantially improve understanding of the geology and economic characteristics of the Project and advance it towards a Preliminary Economic Assessment.

These work programs will address a number of possible risks to the Mineral Resource estimate and project economics identified in the current study. These include the following:

· Limited geological understanding to support deposit modelling.
· Density measurement procedures and data have not been reviewed and a single density value of 2.78 g/cm3 has been used, which although appropriate for the granodioritic host rock, represents a potential source of risk to the estimated tonnage.
· Limited numbers of QAQC samples have been submitted – CRMs for gold and copper represent 0.52% and 0.34% of the total samples, respectively, blanks represent 0.9% of all samples, duplicates 0.27% of all samples and umpire samples 2.7%. Although the results of QAQC are acceptable, the low number of QAQC samples represents a risk to the Project.
· Comparison of original and umpire samples show a slight positive bias to the original samples analysed at SAEL, which has not been investigated further and which represents a risk to the grade of the Mineral Resource estimate.
· Concentrates contain elevated levels of arsenic that may affect the saleability of the concentrate. Although the concentrates show amenability to further processing via the Toowong Process, which removes arsenic and other deleterious elements from the concentrate, the cost of this process has not been determined and thus the presence of arsenic presents a project risk.

 

 

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23 Recommendations

The authors recommend an additional work program by Arras on the Beskauga Project that should include:

· An extensive exploration program in the immediate area to fully test the entire mineralizing system at Beskauga.
· Collection of multi-element litho-geochemical data and hyperspectral data from a selection of historical pulps and drill core and, on this basis, design of routine analytical protocol for all additional drilling
· Relogging of all available drill core including detailed alteration and vein-type and density logging, and development of a Standard Operating Procedure for logging to optimize data collection and understanding in a porphyry-epithermal system.
· Review and re-processing of IP and magnetic data collected by Copperbelt.
· Submission of additional QAQC samples (~5% pulp duplicates and 5% umpire samples), together with CRMs in order to improve the QC data and design of a routine QAQC protocol for ongoing drilling.
· A comprehensive density testing programme to confirm the density value used in the Mineral Resource estimate.
· Completion of additional infill drilling to improve definition of the geology and mineralization and to support improved classification of additional Mineral Resources to the Measured or Indicated classification
· Integrated geological, structural, alteration, and litho-geochemical and hyperspectral study to support an improved understanding of deposit architecture, an improved 3D geological model, and an initial geometallurgical domain model to guide additional metallurgical sampling.
· Complete additional metallurgical testwork on both the copper and gold to confirm recovery and comminution parameters, deleterious element mitigation, with sample selection based on geometallurgical domains.
· Follow up on regional targets with geophysics and prospect drilling.
· The next phase work program should include geotechnical drilling to confirm appropriate slope angles for future open pit design work and initial hydrogeological assessment.
· Detail power and water sources, requirements, and begin all permitting processes.
· Address any other gaps to be filled to advance the project towards a Mineral Resource update and Preliminary Feasibility Study.

These items should be carried out concurrently as a single phase of work (see Table 26).

The authors estimate that the total cost of the next phase work program is approximately US$5.7 million.

Table 26: Work program estimate
Item Cost in US$
Drilling of 10,000 m at Beskauga (exploration and geotechnical) and associated studies 2,000,000
Infill drilling (10,000 m) 2,000,000
Geophysics and drilling of 5,000 m to test regional targets 1,000,000
Study of infrastructure 20,000
QAQC sampling and density testing 50,000
Additional metallurgical testing 200,000
In-country general and administration and logistics 400,000
Total 5,670,000

 

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24 References

Ammtec, 2010, Flotation Testwork conducted on Beskauga Samples. Unpublished Ammtec Report No. A12741 for Dostyk Ltd, 45p.

ALS Ammtec, 2011, Metallurgical Testing conducted on High Grade Composite. Unpublished ALS Ammtec Report No. A13457 to Dostyk Resources, 37p.

Berger, B.R., Ayuso, R.A., Wynn, J.C., and Seal, R.R., 2008, Preliminary Model of Porphyry Copper Deposits. USGS Open-File Report 2008-1321, 55 p.

Brown, M. and Marshall, N., 2018, Geotechnical Pre-Feasibility Study of the Beskauga Project, Kazakhstan. Unpublished SRK report U7216 to Dostyk LLP, 50p.

Ismailov, H.K., Aspenova, Z.S., Balykbaev, S.K., Hadzhaev, B.A., and Berdongarova, R.D., 2017, Beskauga deposit Hydrogeological Study Report. Unpublished report by Centrageolsymka Ltd. for Dostyk Ltd., 29p.

Jahn, B.-M., Wu, F. and Chen, B., 2000, Granitoids of the Central Asian Orogenic Belt and continental growth in the Phanerozoic. Transactions of the Royal Society of Edinburgh, Earth Sciences, 91, 181-193.

Joint Ore Reserves Committee, 2012, Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. The JORC Code, 2012 Edition, [online], available from http://www.jorc.org (The Joint Ore Reserves Committee of The Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists, and Minerals Council of Australia).

Kazmekhanobr, 2009, Processing Test Results on Geological Sample from Beskauga Main deposit.

Montgomery, M., 2015, Modelling and Resource Estimation Report for the Beskauga Porphyry Copper/Gold Deposit, Pavlodar Province, Republic of Kazakhstan. Unpublished Geosure Exploration & Mining Solutions report to Copperbelt AG, 54p.

Seltmann, R., and Porter, T.M., 2005 - The Porphyry Cu-Au/Mo Deposits of Central Eurasia: 1. Tectonic, Geologic & Metallogenic Setting and Significant Deposits; in Porter, T.M. (Ed.), Super Porphyry Copper & Gold Deposits: A Global Perspective; PGC Publishing, Adelaide, v. 2, pp 467-512.

Sengör, A.M.C., Natal’in, B.A., and Burtman, V.S., 1993, Evolution of the Altaid tectonic collage and Paleozoic crustal growth in Eurasia. Nature, 364, 299-307.

Sillitoe, R.H., 2000, Gold-rich porphyry deposits—Descriptive and genetic models and their role in exploration and discovery. Reviews in Economic Geology, 13, 315-345.

Sillitoe, R.H., 2010, Porphyry Copper Systems. Economic Geology, 105, 3-41.

Urbisinov, 2015, Beskauga Au-Ag-Cu-Mo Project Modelling and Resource Estimation. Unpublished CSA Global Report R104.2014 to Copperbelt AG, 67p.

Wardell Armstrong International Ltd, 2015, Grinding and Flotation Testing of Samples from the Beskauga Main Deposit (Grinding Testwork Report), WAI Report No. ZT64-0493 to Dostyk LLP.

Wardell Armstrong International Ltd, 2017, Flotation Testing of Three Bulk Ore Samples from the Beskauga Main Copper-Gold Deposit, WAI Report No. ZT64-0493 to Dostyk LLP.

White and Case Kazakhstan LLP, 2020, Legal Due Diligence Report: Project Silver Bull (extracts provided by Silver Bull)

Windley, B.F., Alexeiev, D., Xiao, W., Kröner, A., and Badarch, G., 2007, Tectonic models for accretion of the Central Asian Orogenic Belt. Journal of the Geological Society, London, Vol. 164, 2007, pp. 31–47.

 

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Yakubchuk, A. 2002 - The Baikalide-Altaid and North Pacific orogenic collages: similarity and diversity of structural patterns and metallogenic zoning; in Blundell, D., Neubauer, F. and von Quadt, A., (Eds.), Geological Society, London, Special Publications, 204, 273-297.

 

 

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25 Reliance on Information by the Registrant

The authors and CSA Global have relied upon Silver Bull, Arras and its management for information related to underlying contracts and agreements pertaining to the acquisition of the mining claims and their status and information not in the public domain (Sections 3.3, 3.4, and 3.5), including extracts from a legal due diligence report (White and Case, 2020) that were provided by Silver Bull to CSA Global.

CSA Global has no reason to believe that Arras and Silver Bull have not acted in good faith in providing this information, but as a technical mining industry consultancy is not qualified to evaluate legal title matters. The Property description presented in this report is not intended to represent a legal, or any other opinion as to title.

 

 

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26 Date and Signature Page

 

This report titled “Technical Report Summary on the Beskauga Copper-Gold Project, Pavlodar Province, Republic of Kazakhstan” with an effective date of February 8, 2021 was prepared and signed by:

 

 

CSA Consulting (Canada) Ltd.

(“Signed and Sealed”) CSA Consulting (Canada) Ltd

 

Dated at Vancouver, BC

7 June, 2021

 

 

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27 Abbreviations and Units of Measurement
° degrees

°C degrees Celsius

3D three-dimensional
AAS atomic absorption spectrometry
Ag silver
Arras Arras Minerals Corp.
As arsenic
Au gold
Beskauga Beskauga Copper-Gold Project
CAOB Central Asian Orogenic Belt
CIL carbon-in-leach
CIM Canadian Institute of Mining, Metallurgy and Petroleum
Copperbelt Copperbelt AG
COV coefficient of variation
CRM certified reference material

CSA Global CSA Global Canada Consultants Limited

Cu copper
Dostyk Dostyk LLP
DTM digital terrain model
FA fire assay
g gram(s)

g/cm3 grams per cubic centimetre

g/t grams per tonne
GPS global positioning system
ICP-OES inductively coupled plasma-optical emission spectrometry
IDW inverse distance weighting
IP induced polarization

JORC Code Joint Ore Reserves Committee Code

kg kilogram(s)

km, km2 kilometre(s), square kilometre(s)

kVA kilo-volt-amperes
lb pound(s)
LIMS laboratory information management system
M million(s)

 

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m, m2 metre(s), square metre(s)

MIID Ministry of Industry and Infrastructural Development
mm millimetre(s)
Mt million tonnes

NI 43-101 National Instrument 43-101 – Standards for Disclosure for Mineral Projects

NSR net smelter return
OK ordinary kriging
oz ounce(s)
ppm parts per million
QAQC quality assurance/quality control
RC reverse circulation
SAEL Stewart Assay and Environmental Laboratory
SD standard deviation

S-K 1300 Technical Report Summary conforming to United States Securities and Exchange Commission Modernized Property Disclosure Requirements for Mining Registrants

Silver Bull Silver Bull Resources Inc.

SRTM Shuttle Radar Topography Mission

SSU Code Code on Subsoil and Subsoil Use

SUL subsoil use licence
SUR subsoil use right
t tonne(s)

t/m3 tonnes per cubic metre

the Issuer Silver Bull Resources Inc.

the Project Beskauga Copper-Gold Project

US$ United States dollars
WAI Wardell Armstrong International

 

 

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