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CHIRANO GOLD MINE
Ownership
The Chirano Mine and the mining lease on which it is based are owned 100% by CGML, a Ghanaian subsidiary of Red Back. CGML is currently 100% owned by Red Back through its intermediate subsidiary, Red Back Mining (Ghana) Limited. On April 8, 2004, CGML was issued a mining lease (PL2/56) in respect of the Chirano Project valid for a period of 15 years. The Government of Ghana retains the right to back-in to a 10% carried interest in the Chirano Project under Section 8 of the Ghana Mining Act, which interest may be increased to 30% by negotiation and arbitration. This 10% interest would represent a portion of CGM's 100% interest. The mining lease is exclusive to CGML, and is not subject to any option or joint venture arrangement. No back-in rights are held by any party other than the Government of Ghana.
A royalty is payable to the Government of Ghana equal to 3% of gross revenue. An additional royalty equal to 0.6% of gross revenue is payable in relation to minerals extracted from Ghana's productive forest reserves. Production from most of the Chirano Project is subject to this extra royalty. The Government of Ghana retains the right to take a 10% interest in the project under Section 8 of the Ghanaian Mining Act.
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