The Company and certain of its subsidiaries entered into an agreement dated September 12,
2001, as amended (the “Definitive Agreement”) with Sinchi Wayra S.A. (“Sinchi Wayra”,
formerly Compania Minera del Sur S.A.) pursuant to which, on January 11, 2002, Sinchi Wayra
acquired a controlling interest in the Company and began work to bring the Lower Mineralized
Zone (“LMZ”) of the Don Mario Mine into production.
More specifically, under the Definitive Agreement, on January 11, 2002 (the “Share Purchase
Closing Date”), Sinchi Wayra invested $4 million in return for the issuance by the Company to
Sinchi Wayra of 52,995,143 common shares, together with the right to receive additional
common shares, at no additional cost, on a one-for-one basis for each common share issued by
the Company either (i) as a result of the exercise of warrants, options or other convertible
securities of the Company outstanding on the Share Purchase Closing Date or (ii) in settlement
of liabilities and obligations owed by the Company on the Share Purchase Closing Date, up to a
maximum of 29,154,190 additional common shares. The funds invested by Sinchi Wayra were
used by the Company to finance the purchase by the Company’s subsidiary, EMIPA, from
Sinchi Wayra of the Don Mario Mine gold mill plant and equipment. In addition, under the
Definitive Agreement, Sinchi Wayra arranged additional financing for EMIPA’s purchase of
mining equipment and development of the Don Mario Mine and, subject to certain conditions,
undertook to place the LMZ of the Don Mario Mine into production within 18 months of the
Share Purchase Closing Date. In addition, on January 11, 2002, the Company issued 668,219
common shares to Sinchi Wayra in settlement of a loan advanced by Sinchi Wayra under an
interim financing arrangement.
In connection with its work to place the LMZ into production, Sinchi Wayra provided
management services to EMIPA and was reimbursed for its overhead costs arising from the
operation of EMIPA. Sinchi Wayra did not receive any other payment as compensation for its
services and, with the completion of construction and commencement of operations at the Don
Mario Mine, Sinchi Wayra completed its obligation to provide management services to EMIPA
under the Definitive Agreement.
Prior to March of 2005, Sinchi Wayra was an indirect subsidiary of Minera S.A. As part of a
corporate reorganization effected by Minera S.A., all of the Orvana common shares held by
Sinchi Wayra, together with a debenture of the Company in the amount of $92,488, were
transferred to Fabulosa Mines Limited (“Fabulosa”), a wholly-owned subsidiary of Minera S.A.
In addition, Sinchi Wayra assigned to Fabulosa its rights and obligations under the Definitive
Agreement. As a result of such transfer and subsequent issuances of common shares to
Fabulosa pursuant to the right described above, Fabulosa held 60,445,028 common shares as
at November 30, 2009, representing 52.5% of the outstanding common shares.
Under the Definitive Agreement, Fabulosa has a pre-emptive right with respect to the issuance
of additional common shares or securities convertible into common shares to other persons,
entitling Fabulosa to acquire common shares or convertible securities on the same terms and
conditions as those so issued by the Company, subject to applicable requirements of the
Toronto Stock Exchange. Fabulosa is also entitled to receive common shares in certain
circumstances in the event that it is entitled to indemnification for a breach of a representation or
warranty in the Definitive Agreement.