IN THE SUPREME COURT OF BRITISH COLUMBIA. IN THE MATTER OF THE COMPANIES CREDITORS ARRANGEMENT ACT, R.S.C. 1985, c.

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1 No. S Vancouver Registry IN THE SUPREME COURT OF BRITISH COLUMBIA IN THE MATTER OF THE COMPANIES CREDITORS ARRANGEMENT ACT, R.S.C. 1985, c. C-36, AS AMENDED AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF BUL RIVER MINERAL CORPORATION, BIG BEAR METAL MINING CORPORATION, EARTH S VITAL EXTRACTORS LIMITED, FORT STEELE MINERAL CORPORATION, FORT STEELE METALS CORPORATION, FUSED HEAT LTD., GALLOWAI METAL MINING CORPORATION, GIANT STEEPLES MINERAL CORPORATION, GRAND MINERAL CORPORATION, INTERNATIONAL FELDSPAR LTD., JAO MINE DEVELOPERS LTD., KUTTENI DIAMONDS LTD., STANFIELD MINING GROUP OF CANADA LTD., SULLIBIN MINERAL CORPORATION, SULLIBIN MULTI METAL CORPORATION, SUPER FELDSPARS CORPORATION, WHITE CAT METAL MINING CORPORATION, ZEUS METAL MINING CORPORATION, ZEUS METALS CORPORATION and ZEUS MINERAL CORPORATION TENTH REPORT TO THE COURT SUBMITTED BY DELOITTE RESTRUCTURING INC. IN ITS CAPACITY AS MONITOR March 31, 2014

2 THE STANFIELD MINING GROUP MONITOR S TENTH REPORT TO COURT March 31, 2014 TABLE OF CONTENTS INTRODUCTION... 3 PURPOSE, QUALIFICATIONS AND RESTRICTIONS OF THIS REPORT... 4 TERMS OF REFERENCE... 5 UPDATE ON THE GROUP S OPERATIONS... 6 DIP FACILITY... 7 CASH FLOW AND LIQUIDITY... 7 EXTENDED CASH FLOW PROJECTIONS... 8 CLAIMS PROCESS... 8 RESTRUCTURING PLAN... 8 RECOMMENDATIONS APPENDIX A DIP FACILITY LETTER WITH ASIA COPPER INVESTMENT CO. LTD. DATED FEBRUARY 24, 2014 APPENDIX B RESTRUCTURING SUPPORT AGREEMENT WITH ASIA COPPER INVESTMENT CO. LTD. DATED FEBRUARY 25, 2014 APPENDIX C CUVERAS LLC / ARMEX MINING CORP AGREEMENT DATED MARCH 24, 2014 Stanfield Mining Group of Canada Ltd., et al. Tenth Report of the Court Appointed Monitor Page 2

3 INTRODUCTION 1. On May 26, 2011, Bul River Mineral Corporation, Big Bear Metal Mining Corporation, Earth s Vital Extractors Limited, Fort Steele Mineral Corporation, Fort Steele Metals Corporation, Fused Heat Ltd., Gallowai Metal Mining Corporation, Giant Steeples Mineral Corporation, Grand Mineral Corporation, International Feldspar Ltd., Jao Mine Developers Ltd., Kutteni Diamonds Ltd., Stanfield Mining Group of Canada Ltd., Sullibin Mineral Corporation, Sullibin Multi Metal Corporation, Super Feldspars Corporation, White Cat Metal Mining Corporation, Zeus Metal Mining Corporation, Zeus Metals Corporation and Zeus Mineral Corporation (the Group or the Companies or the Petitioners ) sought and obtained protection from its creditors under the Companies Creditors Arrangement Act, R.S.C c. C-36, as amended, (the CCAA ) pursuant to an order (the Initial Order ) of the Supreme Court of British Columbia, (the Court ). Deloitte & Touche Inc. was appointed as the monitor. Deloitte & Touche Inc. has since changed its name and now operates as Deloitte Restructuring Inc. (the Monitor ). 2. Pursuant to the Initial Order, inter alia, all creditors were stayed from commencing or continuing any proceedings against the Group until June 23, On June 6, 2011, the Court approved the payment of certain critical suppliers and approved substituted service of all materials and Orders in these proceedings. 4. On June 10, 2011, the Court authorized the Group to obtain Debtor-In-Possession Financing ( DIP ) from Tallinn Capital Mezzanine Limited Partnership ( First DIP Lender ) in the amount of up to $1,250,000 (the First DIP Facility ). 5. On June 23, 2011, the Court granted an extension of the stay of proceedings to October 13, On August 19, 2011, the Court issued a Claims Process Order stipulating a Claims Bar Date of October 17, On October 13, 2011, the Court granted an extension of the stay of proceedings to January 13, In addition, the Court authorized the Group to enter into an agreement with Mr. Peter Lacey ( Second DIP Lender ) to provide a second DIP facility of up to $500,000 ( Second DIP Facility ) and approved an increase in the Administration Charge to $350,000. Stanfield Mining Group of Canada Ltd., et al. Tenth Report of the Court Appointed Monitor Page 3

4 8. On October 26, 2011, the Court amended the Claims Process Order by extending the last day for delivery of a Notice of Disallowance by the Group to creditors to November 15, On December 15, 2011, the Court authorized the Group to obtain a new DIP facility of up to $6 million (the CuVeras DIP Facility ) from CuVeras, LLC ( CuVeras ). 10. On January 13, 2012, the Court granted an extension of the stay of proceedings to April 10, On April 10, 2012, the Court granted an extension of the stay of proceedings to June 26, On June 26, 2012, the Court granted an extension of the stay of proceedings to January 11, 2013 and approved the increase in the limit of the CuVeras DIP Facility to $10 million. 13. On January 10, 2013, the Court granted an extension of the stay of proceedings to March 28, On March 28, 2013, the Court granted an extension of the stay of proceedings to March 28, On February 26, 2014, the Group filed a Notice of Application returnable on March 4, 2014 seeking authorization to obtain a replacement DIP facility for the CuVeras DIP Facility from Asia Copper Investment Co. Ltd. ( ACI ) (the ACI DIP Facility ) and approval of the Restructuring Support Agreement with ACI. The hearing was initially adjourned to March 17 and 18, 2014 by consent. 16. The March 17, 2014 Court hearing was then further adjourned with consent of the parties to permit additional time for information from both ACI and CuVeras to be provided to the Monitor. 17. The Group s stay of proceedings expired on March 28, The Group s stay of proceedings was extended to April 4, 2014 in order that the Court can hear the application on March 31 and April 1, 2014 with respect to the ACI DIP Facility and Restructuring Support Agreement. The Monitor understands from the material filed that the existing DIP lender, CuVeras, opposes the approval by the Court of the ACI DIP Facility and Restructuring Support Agreement and thus the application has been scheduled for two days of argument. PURPOSE, QUALIFICATIONS AND RESTRICTIONS OF THIS REPORT 18. This report is the Monitor s tenth report ( Tenth Report ) to the Court. The Tenth Report should be read in conjunction with the Monitor s first report to the Court dated June 22, 2011 ( First Stanfield Mining Group of Canada Ltd., et al. Tenth Report of the Court Appointed Monitor Page 4

5 Report ), the Monitor s second report to the Court dated October 12, 2011 ( Second Report ), the Monitor s third report to Court dated December 14, 2011 ( Third Report ), the Monitor s fourth report to the Court dated January 12, 2012 ( Fourth Report ), the Monitor s fifth report to the Court dated April 5, 2012 ( Fifth Report ), the Monitor s sixth report to the Court dated June 25, 2012 ( Sixth Report ), the Monitor s seventh report to the Court dated January 8, 2013 ( Seventh Report ), the Monitor s eighth report to the Court dated March 26, 2013 ( Eighth Report ) and the Monitor s ninth report to the Court dated February 28, 2014 ( Ninth Report ). 19. The purpose of this Tenth Report is to provide this Honourable Court with an update on: 1. the Group s operations; 2. the balance drawn on the CuVeras DIP Facility 3. the stakeholders positions; 4. the cash flow results of the Group; 5. the Claims Process; 6. the activities of the Group and its advisors with respect to a Plan of Arrangement or Compromise (the Plan ); and 7. the Monitor s recommendation in connection with the Group s application to approve the ACI DIP Facility and the Restructuring Support Agreement. TERMS OF REFERENCE 20. In preparing this Tenth Report, the Monitor has relied upon unaudited interim financial information from the Group s books and records, and discussions with management ( Management ) and its financial and legal advisors. 21. The financial information of the Group has not been audited, reviewed or otherwise verified by the Monitor as to its accuracy or completeness, nor has it necessarily been prepared in accordance with generally accepted accounting principles and the reader is cautioned that this report may not disclose all significant matters about the Group. Additionally, none of our procedures were intended to disclose defalcations or other irregularities. Were we to perform additional procedures or to undertake an audit examination of the cash flow projection in accordance with generally accepted auditing standards, additional matters may have come to our attention. Accordingly, the Monitor does not express an opinion or provide any other form of assurance on the financial or other information presented herein. The Monitor may refine or alter its observations as further information is obtained or brought to its attention subsequent to the date of this Tenth Report. Stanfield Mining Group of Canada Ltd., et al. Tenth Report of the Court Appointed Monitor Page 5

6 22. The financial projections referenced in this Tenth Report were prepared by Management (except where noted). Although the Monitor has reviewed the assumptions underlying the projections for reasonableness, financial projections, by their nature, are dependent upon future events, which are not susceptible to verification. Actual results will vary from the information presented and the variations may be material. 23. The Monitor assumes no responsibility or liability for any loss or damage occasioned by any party as a result of the circulation, publication, reproduction or use of this Tenth Report. Any use, which any party makes of this Tenth Report, or any reliance or decision made based on this Tenth Report, is the sole responsibility of such party. 24. All dollar amounts identified in this Tenth Report are expressed in Canadian dollars, unless otherwise specified. UPDATE ON THE GROUP S OPERATIONS 25. Since the Ninth Report, the Group has remained in a cash flow positive position, based on the additional funds received by the Monitor advanced under the CuVeras DIP facility. The Group s cumulative post-filing net accounts payable, including outstanding cheques, was approximately $320,000 as at March 22, 2014 and the net cash position was approximately $31, Due to the short time period between the Ninth and Tenth Report, the Group has continued operations in a manner consistent as described in the Ninth Report. The Monitor has not been notified of any significant developments since the Ninth Report with respect to the Group s operations. 27. At this point in time, Management has not prepared a further cash flow projection as they are uncertain of the activities which they will be undertaking over the next several weeks or months given that such will be largely dependent on the Court s decision following the March 31 and April 1, 2014 hearing. The Group s latest cash flow projection to May 3 rd is attached as Appendix E to the Monitors Ninth Report and the Monitor is not aware of any significant variations to date. Stanfield Mining Group of Canada Ltd., et al. Tenth Report of the Court Appointed Monitor Page 6

7 DIP FACILITY 28. As at the date of this Tenth Report, the Group has drawn approximately $7.59 million from the CuVeras DIP Facility. The Court approved limit of the facility is $10 million. 29. Since the Ninth Report, CuVeras advanced $300,000 under the CuVeras DIP to the Monitor, which funds are to be forwarded to the Group on an as-needed basis in accordance with the cash flow. STAKEHOLDER UPDATE 30. Since the Ninth Report, the amount of the CuVeras DIP Facility has correspondingly increased as noted in the previous section. 31. The Monitor has confirmed that Group owes 2013 property taxes to the BC Ministry of Finance with respect to the mine and the camp. As of March 31, 2014, inclusive of interest and penalties, the amount outstanding will be approximately $57,000 and $6,000, respectively. CASH FLOW AND LIQUIDITY 32. The Group s net cash balance at March 22, 2014 was approximately $316,000, including funds held by the Monitor. Since the Ninth Report, the Group s accounts payable has increased to approximately $286, As noted above, CuVeras advanced a further $300,000 to the Monitor under the CuVeras DIP Facility since the March 4, 2014 Court Hearing. As at the time of the writing of this Tenth Report, only $10,000 was transferred to the Group on March 26, Additional amounts will need to be transferred for the continued operations of the Group during the week of March 31, The Group s available funds taking into account the last DIP advance, net of all post-filing liabilities and outstanding cheques, is approximately $31,000. Further DIP funding is therefore required in the immediate term to permit the Group to continue its operations. Stanfield Mining Group of Canada Ltd., et al. Tenth Report of the Court Appointed Monitor Page 7

8 EXTENDED CASH FLOW PROJECTIONS 35. Management has indicated that they are unable to provide an extended cash flow projection at this time until this Honourable Court makes a determination on the ACI DIP Facility and Restructuring Support Agreement. There are significant differences between the Restructuring Plans now proposed by ACI and CuVeras and thus future cash expenditures will be dependent upon the course taken. Accordingly, no further cash flow projections are provided with this Tenth Report. CLAIMS PROCESS 36. As reported in our Ninth Report, there are currently three claim applications which have not been resolved due to the Group s limited financial resources. The Group is still in the process of determining whether all or parts of the claims are supportable and if a settlement can be reached with the parties. The Group has confirmed that the Monitor will be consulted before any final settlements are reached. 37. The Monitor has not been notified of any significant developments since the Ninth Report with respect to the Group s claims process. RESTRUCTURING PLAN 38. As directed by the Court at the March 4, 2014 hearing, the Monitor has engaged over the last 3 weeks with both ACI and CuVeras to obtain further information with respect to their proposed restructuring plans for the Group as well as their respective financing capabilities for funding the Group through a completion of the CCAA proceedings. Several meetings and discussions have been held with both parties and respective counsel and advisers. Additional supporting documentation and information have been provided to support the capacity and capability of the parties to proceed to the permitting / production of the mine. The following summarizes the current status of the proposed ACI and CuVeras transactions. ACI 39. As reported in the Ninth Report, the Group entered into an agreement with ACI to provide the ACI DIP Facility which is subject to the approval of this Honourable Court. Attached as Appendix A is an executed copy of the ACI DIP Facility letter, which details, among other things, the following: (i) The permitted / required uses of the funds are to finance: Stanfield Mining Group of Canada Ltd., et al. Tenth Report of the Court Appointed Monitor Page 8

9 a. the repayment of all amounts outstanding under the CuVeras DIP Facility; b. the day-to-day operating requirements of the Group; c. additional steps required to be taken to move the Group s mining operations towards production, including, but not limited to obtaining the required permits from the Ministry; and d. expenses associated with the CCAA Proceedings, including the preparation of a Plan of Arrangement and all steps necessary to obtain creditor and Court approval of the Plan. (ii) The Monitor has been advised that the initial advance from ACI, which was to be approximately $7.8 million to facilitate the full repayment of the CuVeras DIP Facility, will now be higher as CuVeras has provided additional required funding since the March 4, 2014 hearing. ACI has confirmed its commitment to the repayment of the CuVeras DIP in full; (iii) Further advances to the Group will be at ACI s discretion but will be a minimum of $300,000 per month, for a maximum of three months, upon receipt of ten days prior written notice; (iv) There is a commitment fee payable of $75,000 which is due upon execution of the ACI DIP Facility and will be deducted from the first draw on the facility; and (v) A one percent facility fee will be payable and added to the principal amount, and interest will accrue at nine percent per annum, compounded monthly, and calculated daily on the daily closing principal balance. The accrued interest will be added to the principal outstanding. 40. As mentioned in the Ninth Report, as a condition of the ACI DIP Facility, the Group is required to enter into a Restructuring Support Agreement, a copy of which is attached at Appendix B. The Restructuring Support Agreement provides that a Plan will be developed on the basis that provides ACI, or a related entity, with control of the Group and/or its assets based on key terms as follows: (i) ACI will acquire not less than 87.5% of the equity interest in the Group and/or its assets; Stanfield Mining Group of Canada Ltd., et al. Tenth Report of the Court Appointed Monitor Page 9

10 (ii) As consideration, ACI will convert to equity or otherwise contribute some or all of the ACI DIP Facility and potentially provide other consideration, that it deems necessary to fund a successful Plan of Arrangement; and (iii) The existing creditors / stakeholders of the Group will be offered up to a 12.5% equity interest in the new corporate structure. There may be a further incentive for existing creditors / stakeholders to obtain up to a 20% interest in the event certain production targets and schedules are met. 41. Since the March 4, 2014 hearing, ACI has provided the Monitor with the following further information: (i) (ii) Davis LLP, counsel for ACI, has confirmed that $600,000 has been placed in trust with Davis LLP to evidence ACI s ability and willingness to fund the proposed DIP advances and transaction; The founder and ultimate owner of ACI and Shanghai Gantong Metal Limited ( SGML ), Wei Qian, has provided a bank statement of SGML to provide confirmation to the Monitor that there is funding available to ACI and Mr. Qian; (iii) Mr. Qian has advised the Monitor that ACI will be able to draw on the financial resources of SGML, which he has indicated are significant, to bring the mine into production; (iv) The equity interest to be provided to the stakeholders will include all assets of the Group; (v) The entirety of the funds required to be funded through to the emergence from CCAA will be converted as consideration for the 87.5% interest which ACI will obtain; (vi) The 12.5% interest which is to be provided to the creditors / stakeholders will not be diluted by the cost of borrowing required to achieve permitting and bring the mine into production; and (vii) ACI intends to leave the development of a Plan and the proposed allocation of the equity interest to the Group for their determination. Of course, ACI s agreement to the proposed Plan will be required. Stanfield Mining Group of Canada Ltd., et al. Tenth Report of the Court Appointed Monitor Page 10

11 42. While Mr. Qian s confirmation of funding being available from SGML for ACI provides the Monitor with comfort that ACI has the ability to continue with the work which has been undertaken by the Group and proceed to a Plan, permitting of the mine and into production, there are some areas of concern with the proposed transaction: (i) (ii) The proposed structure provides equity to the stakeholders in a private company which will not be easily traded or able to be realized upon; The stakeholders will hold a minority interest in a private company and thus will likely have limited ability to effect any changes in opposition to ACI; and (iii) While Mr. Qian has shared with the Monitor his experience and the experience of his team which operate mines in China, ACI does not have historic or current operations in Canada. There will be different requirements within the Canadian jurisdiction than in China and this may lead to uncertainty by ACI on requirements and associated costs which may not be anticipated. ACI will thus likely be reliant upon the Canadian management team and external experts to develop the mine. CuVeras / Armex Mining Corp 43. As is evident from the material filed by CuVeras in opposition to the ACI transaction, CuVeras has advised the Monitor that it believes an alternate transaction sponsored and supported by it is more beneficial to the Group and the stakeholders. Following the March 4, 2014 hearing, the Monitor further engaged with CuVeras and counsel on the details of a proposed CuVeras transaction and the following summarizes the current status. 44. CuVeras initially entered into an agreement with Armex Mining Corp. ( Armex ) dated December 16, It should be noted that the Group is not a party to this agreement. The agreement between CuVeras and Armex has now been amended and an executed copy of the current agreement dated March 24, 2014 is attached as Appendix C (the Armex Agreement ). 45. The Armex Agreement contemplates that the assets of the Group will be sold to Armex, or its nominee for $26,548,460 payable as follows: Stanfield Mining Group of Canada Ltd., et al. Tenth Report of the Court Appointed Monitor Page 11

12 (i) (ii) the sum of $7,848,460 to payout the obligations secured by the Administration Charge of $350,000 and the principal of the CuVeras DIP Facility of $7,498,460 (including up to $650,000 of additional DIP advances); the sum of $18,700,000 payable by way of the granting of a net profits interest ( NPI ) equal to 20% of the net profits generated from the mine after recovery of all capital expenditures to put the mine into production, any financing charges and otherwise in accordance with the terms and conditions contained the schedule A attached to the Armex Agreement. The NPI is to be paid in the following tiers: a. the initial sum of $3,663,500 will be paid on a pro-rata basis as follows: (i) $1,350,000 to Peter Lacey and Mike Moretti; (ii) $1,408,500 to CuVeras; (iii) $405,000 to Highlands Pacific LLC and Brendan MacMillan; and (iv) $500,000 (or such amount as represents 50%) to trade creditors. b. the next sum of $9,753,460 will be paid on a pro-rata basis as follows: (i) $1,350,000 to Peter Lacey and Mike Moretti; (ii) $405,000 to Highlands Pacific LLC and Brendan MacMillan; (iii) $500,000 (or such amount as represents 50%) to trade creditors; (iv) $7,498,460 to CuVeras; and c. the Preferred Shareholders and Unsecured Creditors will then share pro-rata the remaining available allocation which based on the numbers above would be $5,313,040. This amount will increase or decrease based on the actual amount payable to trade creditors and to CuVeras under sub-bullet (iii) and (iv) above respectively. (iii) a further 12.5% NPI, to a maximum of $15,000,000, to the Preferred Shareholders and Unsecured Creditors generated from the mineral properties comprised of the assets being Stanfield Mining Group of Canada Ltd., et al. Tenth Report of the Court Appointed Monitor Page 12

13 purchased by Armex, excluding any minerals from the existing mine or any extension of such deposit. 46. Brendan MacMillan, the President of CuVeras has advised the Monitor or stated in his sworn affidavit #3 that: (i) (ii) 90% of CuVeras investors are existing Preferred Shareholders of the Group and accordingly any distributions to CuVeras will include distribution to those investors; CuVeras will need to raise funding to advance further amounts under the CuVeras DIP Facility to sustain operations and put a Plan forward to the stakeholders. CuVeras has indicated to the Monitor that while it has been difficult at times to raise additional funds it believes that it will be able to raise funds from the existing investor base given the knowledge of the Plan which is being put forward; (iii) Mr. MacMillan, Peter Lacey and Michael Moretti are committed to funding expenditures through to the closing of the Armex transaction or to the point that CuVeras can exercise its right of first refusal, pursuant to its Letter of Intent ( LOI ) with the Group, from their own resources if necessary. However, this is subject to CuVeras being able to satisfactorily control management expenditures and decisions and a customary due diligence process; (iv) Armex will need to obtain financing to fund operations, obtain permitting and move forward with the transaction and proposed Plan. These funds will need to be raised in order for the proposed Plan to be presented to the stakeholders and the Court; (v) The distribution of the NPI will be through a preferred share structure to be issued in a TSX-V listed public company; and (vi) Armex currently has other mining operations in Canada and its principals have been in the mining business for over 20 years. 47. The need to raise funds from CuVeras investors and by Armex provides the Monitor with some concern on the ability for the mine to continue its operations as: (i) CuVeras has previously noted its concern to the Monitor that the current asset values cannot support additional DIP advances while meeting its fiduciary obligations to its stakeholders; Stanfield Mining Group of Canada Ltd., et al. Tenth Report of the Court Appointed Monitor Page 13

14 (ii) The ability to raise funding for mining projects generally has been challenging and there has been a significant drop in the price of copper which may impact on fund raising activities; and (iii) Should Armex not obtain the financing required for the Armex transaction to proceed, Mr. MacMillan has confirmed his understanding that he, Mr. Lacey and Mr. Moretti will personally commit to provide an alternative Plan to the Group to be based primarily on their understanding of the ACI transaction. In other words, CuVeras and/or Messrs. MacMillan, Lacey and Moretti will back stop the necessary funding required so as to facilitate the Group s emergence from CCAA pursuant to a Plan along the lines of the proposed ACI transaction. However it has been confirmed to the Monitor that funds will need to be raised to permit the Group to permitting and ultimately into production and this will be dilutive on the 12.5% interest to be provided to the creditors / stakeholders under a Plan, RECOMMENDATIONS 48. The stay period provided by the Order dated March 28, 2013 expired on March 28, An application was made on March 28, 2014 at which this Honourable Court granted an extension of the stay period to April 4, The Group s application to seek the approval of the ACI DIP Facility and the Restructuring Support Agreement is set to be heard by this Honorable Court on March 31 and April 1, The Group has advised the Monitor that they believe the ACI transaction is in the best interest of the Group and its creditors / stakeholders. 50. The Group continues to require ongoing DIP financing to fund its operations. The Group will need an additional cash injection this week in order to remain cash flow positive, given the accumulated payables. 51. The Monitor has engaged with ACI and CuVeras / Armex to understand their respective offers which they are presenting for the restructuring and Plan for the Group as well as DIP financing. 52. The value to stakeholders from either of the proposed transactions is based upon future events, which are uncertain. The ability to create value for the Group s stakeholders will be dependent upon permitting being obtained as quickly as possible in an efficient and economical way in order that the mine can be put into production and operated efficiently. Stanfield Mining Group of Canada Ltd., et al. Tenth Report of the Court Appointed Monitor Page 14

15 53. The necessity for the Group to enter into and obtain approval of the ACI DIP Facility was initially required as the Group had exhausted its working capital resources and required funding to proceed to permitting and to put a Plan to its stakeholders. 54. Notwithstanding the Group remains committed to the ACI transaction, the need for additional working capital requires that the validity and enforceability of the CuVeras LOI claim be settled forthwith. This is required in order to provide ACI and the Group with certainty that the ACI DIP Facility and the Restructuring Support Agreement can be approved by this Honourable Court. 55. Should this Honourable Court determine that the LOI is not binding on the Group, the Restructuring Support Agreement will need to be amended to be consistent with the information provided to the Monitor as noted in this Tenth Report. Upon finalization of the revised Restructuring Support Agreement and this Honourable Court s determination on the LOI issue, the Monitor will be in a position to make a recommendation on the approval of the ACI transaction. It is not contemplated at this time that the Monitor will make a recommendation on the CuVeras / Armex transaction as the Monitor has been advised by the Group that they wish to pursue the ACI transaction and not a transaction with Cuveras / Armex. 56. The Monitor is of the view that the Group continues to act, and is acting, in good faith and with due diligence. All of which is respectfully submitted this 31 st day of March, Deloitte Restructuring Inc. In its capacity as the Court Appointed Monitor of Stanfield Mining Group, et al. and not in its personal capacity Per: Melinda McKie, CMA, CIRP Senior Vice-President Stanfield Mining Group of Canada Ltd., et al. Tenth Report of the Court Appointed Monitor Page 15

16 APPENDIX A DIP FACILITY LETTER WITH ASIA COPPER INVESTMENT CO. LTD. DATED FEBRUARY 24, 2014 Stanfield Mining Group of Canada Ltd., et al. Tenth Report of the Court Appointed Monitor

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38 APPENDIX B RESTRUCTURING SUPPORT AGREEMENT WITH ASIA COPPER INVESTMENT CO. LTD. DATED FEBRUARY 25, 2014 Stanfield Mining Group of Canada Ltd., et al. Ninth Report of the Court Appointed Monitor

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47 APPENDIX C CUVERAS LLC / ARMEX MINING CORP AGREEMENT DATED MARCH 24, 2014 Stanfield Mining Group of Canada Ltd., et al. Ninth Report of the Court Appointed Monitor

48 ARMEX Mining Corp Granville Street 200 Granville Square Vancouver, BC Canada V6C 1S4 Tel: (604) Fax: (604) VIA CuVeras, LLC Direct: (604) March 24, 2014 Attention: Brendan MacMillan Dear Sir: Re: Bul River Project- AMMENDED FROM DECEMBER 16, 2013 Further to our discussions to date, please accept this letter as confirmation of our proposal to purchase all of the assets and undertaking of the Stanfield group of companies being comprised of Bul River Mineral Corporation, Big Bear Metal Mining Corporation, Earth s Vital Extractors Limited, Fort Steele Mineral Corporation, Fort Steele Metals Corporation, Fused Heat Ltd., Gallowai Metal Mining Corporation, Giant Steeples Mineral Corporation, Grand Mineral Corporation, International Feldspar Ltd., Jao Mine Developers Ltd., Kutteni Diamonds Ltd., Stanfield Mining Group Of Canada Ltd., Sullibin Mineral Corporation, Sullibin Multi Metal Corporation, Super Feldspars Corporation, White Cat Metal Mining Corporation, Zeus Metal Mining Corporation, Zeus Metals Corporation and Zeus Mineral Corporation (the Stanfeild Group ) including, in particular, the mineral property located near Cranbrook, British Columbia known as the Bul River Project, together with all surface and underground workings, mill, buildings, equipment, rolling stock, permits and other rights or property appurtenant thereto (the "Assets"). Upon acceptance by you, this letter will serve an interim agreement between CuVeras LLC ("you" or "CuVeras") and Armex Mining Corp. ("us" or "Armex") pending regulatory, court and other approvals and other conditions outlined here, which will be replaced by more formal documentation based on these terms and conditions and such other provisions as we may mutually agree to, all as follows: 1. Terms of Reference. It is our understanding that a. the Stanfield Group is currently subject to proceedings in BC Supreme Court, Vancouver Registry No (the Proceedings ) under the Company Creditors Arrangement Act ( CCAA ); b. Deloitte & Touche Inc. has been appointed as monitor in the Proceedings (the "Monitor") pursuant to an Order granted May 26, 2011 (the "Initial Order"); c. CuVeras is a debtor in possession pursuant to loans advanced under such Proceedings (the DIP Loan ) and is currently owed approximately $8,268,174 including interest with respect to advances thereunder (as of March ); D:\My Documents\Files\Projects\BC\Bul River\Latest Draft\Armex-CuVeras-Letter Agreement FINAL Dec12-13.doc

49 ARMEX MINING CORP. d. The Assets are subject to certain charges (the "Charges") in favour of the following parties (the "Charge Holders") listed in order of priority as follows: i. Administrative charge in favour of the Monitor of up to $500,000 pursuant to the Initial Order, as amended (the "Administrative Charge"); ii. a charge in favour of CuVeras of up to $10,000,000, ($8,268,174 was owed including interest as of March 18,_2014), with respect to amounts advanced under the DIP Loan pursuant to an order granted December 15, 2011, as amended (the "Third DIP Charge"); e. There are various trade creditors who have filed claims under the Proceedings in the approximate amount of $1,000,000 (the Trade Creditors ); f. In addition to the Trade Creditors, there are other unsecured creditors owed approximately $5,500,000 (the "Unsecured Creditors"); g. Substantially all of the investment in the Stanfield Group was made by the holders of various classes of Preferred Shares (the Preferred Shareholders ), which are entitled to payment of dividends and the proceeds of disposition on liquidation in preference to the common shareholders (the Preferred Shares ); h. CuVeras holders are due bonus shares equal to the full amount of the principal and interest due to them in cash, ($8,268,174 as of March 18, 2014), prior to the allocation of value to the Preferred Shareholders. i. The holders of common shares (the Common Shareholders ) hold all the voting rights for the companies comprising the Stanfield Group, but are entitled to proceeds of disposition only after full satisfaction of rights attaching to the Preferred Shares (the Common Shares ); j. Except for the Charges, there are no secured or preferred creditors of the Stanfield Companies other under the DIP Loan and there are no known or potential claims arising from payments due to Canada Revenue Agency, Worksafe BC, unpaid employee wages, builders liens or claims of other parties which may give rise to a statutory lien or other encumbrance on any of the Assets, subject to the Court's general discretion to admit claims or take other action in the Proceedings; k. Subject to granting of a final court order (the Final Order ) granted under the Proceedings approving the sale of the Assets under the terms of a plan of arrangement or compromise (the "Plan of Arrangement"), we will be entitled on closing of such purchase and sale (the "Closing") to receive good and marketable title to all of the Assets, free and clear of all liens, charges and encumbrances ( Liens ) other than those expressly agreed to by us and as are then provided for in the Order; l. The Stanfield Group and/or the Resulting Company and Armex or its nominee designated as the final purchaser of the Assets under the Plan of Arrangement (the "Purchaser") will make and file such elections as are necessary or advisable to Page 2 D:\My Documents\Files\Projects\BC\Bul River\Latest Draft\Armex-CuVeras-Letter Agreement FINAL Dec12-13.doc

50 ARMEX MINING CORP. minimize taxation with respect to the transaction and without limitation, will make and file such elections as are necessary to transfer to the Purchaser, all Cumulative Exploration Expense tax pools ("CEE") now held by the Stanfield Group together with and as part of the purchase and sale of the Assets; m. The Plan of Arrangement, if so required by Armex, will also provide for the short form vertical amalgamation or winding up of all of the corporations comprising the Stanfield Group into one new resulting corporation (the "Resulting Corporation") whose authorized and issued share capital immediately after the Closing will consist solely of common shares, all of will be held by the Common Shareholders, which common shares shall then be transferred immediately following the Closing to Armex or its designated nominee for the sum of $ Terms of Purchase: Subject to the Approvals and the Conditions, we propose to enter into a Plan of Arrangement whereby we or our nominee will purchase the Assets, free and clear of all Liens for the sum of up to twenty six million, five hundred fourty eight thousand, four hundred and sixty Canadian dollars $26,548,460, payable on Closing as follows: a. the sum of $7,848,460 million payable in cash as follows: i. the holders of the Administration Charge of $350,000 or the actual amount required to satisfy and discharge the charge; ii. To CuVeras, the sum of $7,498,460 million (including up to $650,000 in additional advances under the DIP Loan) or such other mutually agreed amount which is equal to the actual amount of principal then owing under the DIP Loan (the "CuVeras Payment"); b. as to the balance of $18,700,000, by granting of a net profits interest (the "NPI") over the Bul River Mine equal to 20% of the Net Profits from the Bul River Mine after recovery of all capital expenditures necessary to put the Mine into production ("CAPEX") and any financing charges associated therewith, calculated in accordance with the Terms and Conditions attached hereto as Schedule "A" up to a maximum of $18.7 million, as follows: i. To the persons set out below, the sum of $3,633,500 or such lesser amount as may be actually due after completion of the adjustments set out below, allocated in the amounts set out next to their respective names and payable to them in order of their respective priority from the first distribution of funds payable under the NPI (the "Priority Distribution"), which will be distributed pro rata based on the amounts set forth in subsection (1-4) below: 1. to Peter Lacey ( Lacey ) and Mike Moretti ( Moretti ) (to be divided between them in such manner as they direct), the sum of $1,350,000, representing 50% of the agreed amount due to them to satisfy and discharge the First DIP Charge and Second DIP Charge, respectively(37%); Page 3 D:\My Documents\Files\Projects\BC\Bul River\Latest Draft\Armex-CuVeras-Letter Agreement FINAL Dec12-13.doc

51 ARMEX MINING CORP. 2. Cuveras, the sum of $1,408,500 representing interest and other compensation due under the DIP Loan, in partial satisfaction of the Third DIP Charge plus half of the Bonus Shares due to CuVeras holders (38%); 3. Highlands Pacific LLC and Brendan MacMillan, the sum of $405,000, representing 50% of funds due to him pursuant arrangements made in conjunction with the DIP Loan, in partial satisfaction of the Third DIP Charge (11%); 4. to the Trade Creditors, $500,000, or such amount as represents 50% of amount of any claim, subject to adjustment or approval by the Monitor and the Court from the NPI (the "Creditor Claims") in partial satisfaction of such claims (14%); ii. To the persons set out below, the sum of $15,036,500 or such greater amount as is equal to the remaining amount of the NPI up to $18.7 million after deduction of the Priority Distribution (the "Remaining NPI"), with $9,753,460 allocated to the Charge Holders and the Creditors (subject to adjustment to reflect the actual amount of Creditor Claims) and the balance allocated pro-rata to the Preferred Shareholders and Unsecured Creditors, provided that such amount shall be converted to participating preferred shares with a deemed value of $1.00 each ( Participating Preferred Shares ) which shall be issued by a TSXV listed public company to be designated by Armex ("Pubco") who will hold and distribute revenue received under the Remaining NPI to the holders of the Participating Preferred Shares. Each Participating Preferred Share will entitle the holder to receive dividends or capital payments thereon of up to $1.00 per share from the Remaining NPI (or the economic equivalent thereof) after which the share shall be deemed to have been paid in full and shall be cancelled. Pubco will apply for an independent listing of the Participating Preferred Shares on the TSXV as soon as is practicable after issuance thereof. The Participating Preferred Shares will be allocated as follows (which will be distributed pro rata based on the amounts set forth in subsection (i-vi) below): 1. to Lacey and Moretti (to be divided between them in such manner as they direct), the sum of $1,350,000, representing 50% of the agreed amount due to them to, which, together with the payment set out above, will fully satisfy and discharge satisfy and discharge the First DIP Charge and Second DIP Charge, respectively (9%); 2. to Highlands Pacific LLC and Brendan MacMillan, the sum of $405,000, representing 50% of funds due to him pursuant arrangements made in conjunction with the DIP Loan which, together with the payments to him and Cuveras set out above, will fully satisfy and discharge satisfy and discharge the Third DIP Charge(2.7%); Page 4 D:\My Documents\Files\Projects\BC\Bul River\Latest Draft\Armex-CuVeras-Letter Agreement FINAL Dec12-13.doc

52 ARMEX MINING CORP. 3. to the Trade Creditors, $500,000 or such other amount as is equal to the remaining amount of the Creditor Claims, in full satisfaction of such claims (3.3%); and 4. to CuVeras, the amount which is equal to the full amount of principal due at the time of this transaction (estimated to be $7,498,460 as of June 1, 2014) (the "Bonus Shares") ("49.9%); 5. to the Preferred Shareholders and Unsecured Creditors, $5,283,040 ($15,036,500 less $9,753,460, estimated to be due to the Creditors and Charge Holders as of June 1, 2014) or such other amount as represents the actual balance of the Remaining NPI, after the Priority Distribution and the above allocations, in consideration for and in full satisfaction of their rights in, to and under the Preferred Shares which shares shall then be returned to treasury of the issuing corporation and cancelled. c. In addition to the foregoing, the Preferred Shareholders and Unsecured Creditors will be entitled to receive additional preferred shares (Series "B" Participating Preferred Shares) having substantially the same terms and conditions as the Participating Preferred Shares but providing for the payment of a 12.5% Net Profits interest with respect to the commercial production and sale of lead/zinc/silver, gold, feldspar, or other minerals from the mineral properties comprised in the Assets, excluding any minerals taken from the Bul River Mine or any extension of such deposit or which are otherwise included in the calculation of the NPI associated with the Participating Preferred Shares, up to a maximum of $15 million. d. In addition to the foregoing and notwithstanding any other provision herein, the Assets will continue after the Closing to be subject to the Director s charge of $500,000 or the actual amount required to satisfy and discharge the charge, until paid or discharged. e. The obligation to make the payments and distributions in the amounts and priorities set out in sub-sections 2(a), (b) and (c) shall survive the Closing, shall be binding upon the Purchaser and any subsequent holder of the Assets, whether acquired by purchase, merger, amalgamation, plan or arrangement or otherwise, and shall be made in priority to any distribution to holders of any other class of securities of the Purchaser or any subsequent holder of the Assets. f. The Closing shall take place in Vancouver, B.C. on or before the 90th day following the later of receipt of all Approvals (defined below) and satisfaction or waiver of all Conditions (defined below) by the party entitled to do so (or, if not falling on a business day, the first business day thereafter) at such other time and place as Armex and CuVeras may agree to (the "Termination Date"), failing which either Armex or CuVeras may terminate this Agreement by notice in writing, whereupon this Agreement shall forthwith terminate and the rights and obligations hereunder shall cease to have any further force and effect. Page 5 D:\My Documents\Files\Projects\BC\Bul River\Latest Draft\Armex-CuVeras-Letter Agreement FINAL Dec12-13.doc

53 ARMEX MINING CORP. 3. Employment/Consulting Agreements. Armex acknowledges that the Stanfield Group currently employs Tim Hewison, Rick Henderson, and Ross Hewison, all of whom had had long term involvement with the project and who together constitute its senior management (collectively, "Stanfield Management Team"). Armex confirms, subject to completion of the transactions contemplated herein, it is its intention to enter into good faith negotiations with each of the members of the Stanfield Management Team with a view to entering into an employment or consulting arrangement on mutually acceptable terms and conditions. 4. Conditions: This proposal is subject to completion or waiver by us and CuVeras of the following conditions: a. Completion of a formal Plan of Arrangement based on this Proposal, and such other terms and conditions as we may mutually agree to; b. Confirmation that either the Stanfield Group will hold sufficient cash on hand immediately prior to the Closing to fully satisfy and discharge the Administrative Charge and all of the Charges ranking in priority to the DIP Charge, or the holders of such Charges will agree to sub-ordinate payment of any deficiency to the CuVeras Payment and to instead receive payment from the Priority Distribution in the manner contemplated herein; c. Completion of such further investigations and due diligence reviews ( Due Diligence Reviews ) as we may consider advisable including, without limitation: i. Review of all existing, or pending, permits, licenses, authorizations, rights or waivers of any kind whatsoever respecting the Bul River Project or the existing or proposed operations thereon, including any applications therefore and any correspondence with respect thereto; ii. Review of all titles, rights and other intangibles comprising part of the Assets, including any tiles to real property or mineral rights; iii. Review of all tangibles comprising part of the assets including any buildings, plant, equipment, rolling stock and processing facilities; iv. Review of all available geological information and reports; v. Review of underground and surface workings at the Mine; vi. Review with appropriate persons within relevant agencies or ministries of the Province of British Columbia of any proposed permits or amendments to permits for the Mine, including proposed applications for construction and operation of a tailings disposal facility; vii. Review of all plans, drawings, reports or other available information respecting any proposed changes to the mine or related facilities including; viii. Detailed review, costing and approval of all changes, repairs, modifications or additions to the existing Mine and facilities and Mine Permits which we Page 6 D:\My Documents\Files\Projects\BC\Bul River\Latest Draft\Armex-CuVeras-Letter Agreement FINAL Dec12-13.doc

54 ARMEX MINING CORP. consider necessary or advisable for operation of the Mine including, without limitation: 1. construction of a new power sub-station; 2. construction of a tailings disposal facility; 3. construction of new sumps and water handling or treatment facilities; 4. repairs and modifications to the existing processing facilities; 5. repairs, replacement and/or additions to existing rolling stock; 6. repairs or modification to existing rail siding; ix. interviews with all existing staff; x. such other reviews and assurances as we may reasonably require; d. Receipt by us of binding financing commitments in form and substance acceptable to us and CuVeras for not less than $20 million within 75 days after completion of Due Diligence Reviews and receipt of Approvals and in any event prior to Closing and prior to June 15, 2014, unless extended or waived by us and CuVeras. In the event that these binding financing commitments are not received by June 15, 2014, the parties may agree to extend that date as they judge suitable based on evidence of progress towards adequate financing. 5. Approvals: This proposal is subject to receipt of all regulatory, Court and other approvals necessary to complete the Closing (the "Approvals"). If any of the Approvals are denied in writing, either Armex or CuVeras may terminate this Agreement by notice in writing, whereupon this Agreement shall forthwith terminate and the rights and obligations hereunder shall cease to have any further force and effect. The Approvals include the following: a. Approval by the Court; b. Approval by the respective boards of directors of the companies comprising the Stanfield Group; c. Approval by any holders of Charges ranking in priority to CuVeras; d. Approval by all parties the Court may require as a condition to granting the Order; e. Approval by the Preferred Shareholders and Common Shareholders; f. Approval by the respective boards of directors and shareholders of all other corporations which are party to the Plan of Arrangement including Pubco, the Purchaser and the Resulting Corporation; and Page 7 D:\My Documents\Files\Projects\BC\Bul River\Latest Draft\Armex-CuVeras-Letter Agreement FINAL Dec12-13.doc

55 ARMEX MINING CORP. g. Approval by the TSX Venture Exchange and any other securities regulatory authority having jurisdiction over Pubco and the Purchaser. 6. Actions of the Parties: Upon acceptance by you, you will assist us preparing a draft Plan of Arrangement and presenting same to the Stanfield Group and, in due course, the Monitor, the Court and other stakeholders for review and approval. 7. Continued Access to Property: You will ensure the Stanfield Group grants us full access to its property, assets and employees as well as any employees or (at our expense, consultants) to the extent we consider necessary to complete our Due Diligence Reviews or otherwise facilitate the transactions contemplated herein. 8. Formal Agreements: The parties hereto acknowledge and agree that this agreement will be superseded and replaced by a formal arrangement agreement and other documentation (the "Formal Agreements") which will be based on the terms and conditions set out in this letter agreement and such other terms and conditions as the parties may mutually agree to. Until such time as the Formal Agreements have been prepared and executed by all parties thereto, this letter agreement shall constitute the binding agreement of the parties with respect to all matters set out herein. Provided you are in agreement in principal with the foregoing, please so indicate same by signing and returning a copy of this letter by fax or . Upon receipt, we will commence preparation of a draft Plan of Arrangement based on the foregoing for your review and comment and, in due course presentation to the Stanfield Group and other appropriate parties for their review and approval. Yours very truly, Per: ARMEX MINING CORP. ALLEN D. LESCHERT, PRESIDENT Acknowledged and agreed to this 24th day of March, 2014 CuVeras LLC Per: Brendan S. MacMillan Page 8 D:\My Documents\Files\Projects\BC\Bul River\Latest Draft\Armex-CuVeras-Letter Agreement FINAL Dec12-13.doc