Option Terms

Centenera has entered into a property option agreement (the “Agreement”) with Yamana Gold Inc. (“Yamana”), whereby Yamana, through a subsidiary, has been granted an option (the “Option”) to acquire an initial 70% interest in the Company’s Organullo Gold Project (the “Project” or “Organullo”).  Organullo is located in Salta Province, northwestern Argentina.

Under the terms of the Agreement, Yamana may exercise the Option by the (i) preparation and delivery of a Pre-Feasibility Study (“PFS”) prepared in accordance with National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”) that reports an aggregate Measured and Indicated Mineral Resource of a minimum of 1,000,000 gold-equivalent ounces^ by the 6th anniversary of the effective date of the Agreement; (ii) completion of property-related expenditures of at least US $5,000,000 in the aggregate; and (iii) cash payments of US $1,250,000 in the aggregate, as follows:

Date

US$ Cash Payments

US$ Expenditure Commitments

NI 43-101 Report

On Signing of Agreement

$100,000 (paid)

 

 

First Anniversary

$100,000

 

 

Second Anniversary

$150,000

$1,250,000

 

Third Anniversary

$200,000

 

 

Fourth Anniversary

$200,000

$3,750,000

 

Exercise of Option

$500,000

 

Pre-Feasibility Study

Total

$1,250,000

$5,000,000

 

Yamana shall be responsible for funding all exploration expenditures incurred during the Option period.  Upon the exercise of the Option, Yamana and Centenera shall be deemed to have formed a joint venture (the “Joint Venture”) with the initial Joint Venture interests being 70% as to Yamana and 30% as to Centenera; provided that prior to or concurrently with the exercise of the Option, Yamana shall have a top-up right (the “Top-up Right”) to acquire an additional 5% interest in the Project (being 75% in aggregate) by making a cash payment to Centenera equal to US $3.00 per gold equivalent ounce of Measured and Indicated Mineral Resources reported in the PFS. 

Yamana and Centenera shall each fund exploration and/or development work programs in proportion to their Joint Venture ownership percentage; provided that if either party contributes less than its proportionate interest to a work program, that party's interest in the Joint Venture shall be adjusted in accordance with the party's contribution.  If as a result, such party dilutes their interest to 10% or less, the diluted party’s ownership interest shall automatically convert to a 2% net smelter returns (“NSR”) royalty.  The non-diluting party may repurchase 1% of the NSR royalty within 30 days of a production decision being made on the Project for US$5,000,000.

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