EXHIBIT 10.4
MINING LEASE AND
OPTION TO PURCHASE
Mining Lease and Option to Purchase (this "Lease") made Dec. 1, 2001,
between Crown Mines, L.L.C., successor in interest to Deer Trail Development
Corporation ("Crown Mines" or "Lessor") of X.X. Xxx 000000, Xxxxxx, Xxxxx
00000-0000, as Lessor, and Unico, Incorporated, an Arizona corporation "Unico"
or "Lessee") of X.0. Xxx 000, Xxxxxxx, Xxxxxxxxxx 00000, as Lessee.
WHEREAS Crown Mines is the owner of certain mining claims more fully
described below (the "Claims") and desires to lease the Claims to Unico and
Unico desires to lease the Claims from Crown Mines;
THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Property Leased and Purchase Option.
(a) Property Leased.
In consideration of the royalties, covenants and agreements hereinafter
expressed to be paid, kept and performed by Unico, Crown Mines hereby leases
to Unico the following premises near Marysvale, Utah, County of Piute,
consisting of patented and unpatented mining claims and mill sites:
See attached Exhibit A
The leased premises includes within its bounds, but is not limited to,
those workings commonly known as the "Deer Trail Mine", the "PTH tunnel" and
premises, the "Xxxxxx and Lucky Boy mines" and the "deep target"
molybdenum-copper prospect potential believed by the U.S. Geological Service
to exist, to the extent that the "deep target" lies beneath the claim groups
described on Exhibit A. Lessor has informed Lessee that Lessor is attempting
to patent one or more unpatented claims at or near the PTH tunnel portal (the
"Subject Claims") by exchanging certain other patented claims owned by Lessor
(not included in the Claims) with the U.S. Forest Service. If Lessor causes
the Subject Claims to become patented claims, Lessor agrees that such patented
claims will be covered by the Lease and constitute part of the Claims. Lessor
and Lessee agree that if Lessor owns property contiguous to the Claims (the
"Contiguous Property"), Lessee shall have extralateral rights (e.g. up to, but
not beyond, any point where a fault breaks the continuity of the vein being
actively mined) into the Contiguous Property with respect to those Claims
where it is actively mining; provided, that Lessee pays all royalties provided
for in this Lease with respect to the ore so mined and complies with any and
all common law and statutory obligations of subjacent or sublateral support.
(b) Purchase Option.
As additional consideration for the payment of the advance royalty,
royalties and other commitments of Lessee found herein, Lessor hereby grants
to Lessee an option to purchase all of the Claims and mill sites as described
herein and on Exhibit A attached hereto including all dumps equipment and
personal property contained therein, for a price equal to $4,000,000, provided
that in any event Lessor shall retain a carried interest of 3% of net smelter
returns (the "Minimum Royalty") from the Claims in perpetuity. Net smelter
returns shal1 be based on the Gross Value (as defined in Exhibit B hereto)
received by Unico from sale of the mineral in the ore taken from the leased
premises computed in the manner described in Exhibit B hereto, less any
assaying, weighing, treatment and special sampling charges.
Upon exercise of the purchase option and payment therefor in cash or
certified funds, Lessor agrees to convey good and marketable title to the
above described leased premises to Lessee free and clear of any liens,
encumbrances, overriding royalties, carried interests or other interests,
except such as may have arisen on account of Lessee's operation and lease of
the premises and the Minimum Royalty. Upon exercise of the Purchase Option and
payment therefor by Lessee, Lessee shall become the fee title owner of the
above described leased premises, subject, however to the Minimum Royalty.
(c) Option to Obtain Additional Royalty.
Lessee shall give Lessor 30 days advance written notice of its intention
to exercise the purchase option above described. Upon receipt of Lessee's
notice of purchase, Lessor may at its option for 30 days, elect to retain in
addition to the Minimum Royalty, a carried interest of an additional 5% of net
smelter returns (the "Additional Royalty") from the Claims in perpetuity in
lieu of the cash payment offered by Lessee for the Claims. Net smelter returns
allocable to said carried interest shall be computed in the same manner as the
3% royalty referred to in paragraph 1(a) above. Lessor shall advise Lessee in
writing by the 30th day after receipt of Lessee's purchase notice of its
intent to take the Additional Royalty in lieu of the cash payment. If Lessee
has not received notice of election by Lessor by the thirtieth day, then it
shall pay the applicable purchase price by the sixtieth day after the delivery
of its original purchase notice and Lessor shall transfer fee title ownership
of the Claims to Lessee while retaining only the Minimum Royalty. In the event
Lessor gives notice of its election to take the Additional Royalty Lessee may
within 30 days thereafter at its sole option, and upon notice to Lessor, elect
to nonetheless pay the $4,000,000 instead of the Additional Royalty, in which
event it shal1 pay $4,000,000 to Lessor at the end of such 30 day period (i.e.
on the sixtieth day after delivery of its original purchase price).
(d) Information.
Lessor has previously furnished to Lessee copies of (or made available
for copying by Lessee) all maps, drawings reports and any available mine
history, showing the location of drill holes, drifts driven, stockpiles,
blocked out reserves, probable and or possible reserve estimates, assays,
assay reports, development and other data, as were reasonably available to
Lessor. Lessee agrees to return any and all such information to Lessor upon
termination of this Lease. Lessor also previously furnished Lessee copies of
drilling reports on the property, which shall also be returned to Lessor upon
termination of this Lease. At any termination of this Lease, Lessee agrees to
furnish any similar data or information as to its development of the Claims to
Lessor on the same basis. Lessee agrees to accept the property "as is" and to
indemnify and hold Lessor harmless for any damages incurred by Lessor arising
out of damage to property or person by the employees or agents of Lessee, or
any other person (other than the Lessor and those acting in Lessor's behalf)
where such damage arises on account of or in connection with the use,
operation or development of the property by Lessee. Lessee agrees to have in
effect at the Effective Date (as defined below) and during the term of this
lease a public liability insurance policy in a reasonable amount, being at
least $1,000,000 per occurrence insuring against liability for damage to
person or property which may arise from operation of the Lease.
(e) Approval by Lessor's Board.
Lessor agrees, warrants and represents that its board of managers has
taken all action necessary to enter into this Lease and that member approval
of this Lease is not necessary. Lessor further agrees, warrants and represents
that neither the execution of this document nor the exercise of the purchase
option by Lessee would result in the disposition of all or substantially all
of the assets of Lessor so as to require member approval under Utah law.
Further Lessor agrees, warrants and represents that in the event any member of
Lessor threatens to contest or contests, by court action or otherwise, the
grant or validity of this Lease or the grant, validity or exercise of the
purchase option thereunder, in any manner that it will indemnify and hold
harm1ess Lessee from any and all damages, costs and attorneys fees it may
suffer as a result of such contest and Lessor and I.N. Xxxx individually each
agree to use their best efforts to obtain (and I.N. Xxxx agrees to vote all
membership interests he owns or controls in favor of) any member approval or
consent which may be determined to be required and in such event, Lessor and
I.N. Xxxx agree to recommend in writing approval of the Lease to the members
of Crown Mines. Lessor further agrees to provide a legal opinion or such
further assurances as Lessee may require during the term of this Lease as to
the agreements, representations and warranties contained in this paragraph.
2. Term; Assignment. Unico shall hold the leased premises for the
purpose of mining all kinds of minerals and ores for a period commencing on
the date of this Lease (the "Effective Date") continuing until June 1, 2004,
so long as the minimum royalty payments described below are being made and the
work condition described below is being satisfied, unless the Lease is sooner
terminated under any provision contained herein. Each party, with the prior
written consent of the other, which consent shall not be unreasonably
withheld, shall have the power to assign or sublet this Lease or any interest
hereunder.
3. Duties of Lessee; Royalty. Unico agrees to perform all work in a
thorough and workmanlike manner, to keep underground workings securely
timbered, drained, and clear of loose rock and rubbish, to properly dispose of
loose rock outside the mine, to assume payment of utility costs and taxes on
the Claims estimated to be approximately $25,000 per year plus any increase
due to Lessee's operations and normal cost increases over time (without
limiting the foregoing, Lessee agrees that Lessee will cause all utility
suppliers to open accounts in Lessee's name so that all utility costs can be
paid directly by Lessee, with evidence of such payment delivered to Lessor if
Lessor so requests); to keep accurate accounts, to render necessary statements
to Crown Mines showing the amount and character of production; and to pay to
Crown Mines, or its designated agent as rental for the leased Claims a five
percent (5%) royalty upon all ore taken and sold from the premises. Royalty
payments shall be based on the Gross Value (as defined in Exhibit B hereto)
received by Unico from sales of the mineral in the ore taken from the leased
premises computed in the manner set forth in Exhibit B attached hereto, less
any assaying, weighing, treatment and special sampling charges. Payments of
all royalties by Unico shall be made to Crown Mines at the above address, or
its designated agent or bank by the l5th of the month next succeeding the
calendar month during which Unico shall have received payment for such
shipment as more fully described in Exhibit B attached hereto. Lessor agrees
that it has no objection to Lessee's employing the services of its employee
Xxxx Xxxxxxxxx on a part time basis to assist in maintenance of the Claims.
4. Minimum Royalty. Unico shall pay a minimum royalty of $10,000 per
month to Crown Mines, regardless of the amount of actual production from the
Lease during a given month.
5. Rate of Production. Unico agrees to use its best efforts to mine and
remove mineral ores from the leased premises beginning upon the Effective Date
or as soon thereafter as is feasible as rapidly and in such quantities each
month as reasonably can be done, unavoidable delays, shortages of fuel and
labor, market conditions, adverse weather and other conditions beyond the
control of Unico to be taken into consideration as well as reasonable start-up
time. Unico agrees that as a condition to continuing this Lease, Unico shall
timely comply with and perform the work plan attached hereto as Exhibit C, and
shall deliver to Crown Mines evidence reasonably satisfactory to Crown Mines,
at Crown Mine's request from time to time, that such work plan is being timely
performed.
6. Right of Access. Crown Mines or its designated representative, shall
have the right, upon reasonable notice, to enter upon the leased premises to
inspect the same or take samples therefrom, and Lessee will render to Crown
Mines reasonable assistance in its power in so doing. Without limiting the
foregoing, Lessee agrees that Lessor shall continue to have access to the
surface of the leased premises (which right sha11 continue if and after Lessee
exercises its purchase option herein) so long as such access does not
interfere with Lessee's operations on the leased premises.
7. Taxes and Assessments. Unico agrees to pay when due all taxes and
assessments levied against the demised premises on account of the production
of ore under this Lease. All assessment work shall be performed and affidavits
of labor recorded by Lessee in due time as may be required by law. To the
extent that Lessee's operating expenditures on the premises exceed the minimum
required to qualify for assessment work on the unpatented claims included in
the leased premises, the excess may be reported by Lessor to qualify as
assessment work on its contiguous unpatented claims as permitted by law.
8. Default by Lessee. Unico agrees that in case of its failure in any
substantial respect to keep and fulfill any one or more of the covenants or
agreements herein or its failure to pay the minimum monthly royalty or perform
the work condition required by paragraph 5 above, it shall then be lawful for
Lessor to declare this Lease ended. Upon any default by Lessee, Lessor shall
give Lessee written notice of such default and Lessee shall have thirty (30)
days thereafter to correct such default. In the event of an uncorrected
default, (and also upon termination of this lease), Lessee agrees to surrender
and deliver the Lessor quiet and peaceable possession of the leased premises.
Upon termination of this Lease, for any reason, Lessee shall have a period of
120 days in which to remove any and all of its own mining equipment being used
in operating the leased premises or transporting ore from such operations.
9. Successors and Assigns. All covenants and agreements contained
herein shall extend to and be binding upon the heirs, legal representatives,
successors and assigns of the parties.
10. Termination. Lessee may, at any time, surrender and terminate this
Lease upon giving to Lessor sixty (60) days notice in writing and paying all
royalties owing through the effective date of termination. The parties may
also terminate this Lease by mutual agreement. This Lease shall terminate as
provided in paragraph 2 above or upon execution of the purchase option and
payment of the purchase price by Lessee subject to the carried interest to be
retained by Lessor as provided above. Lessor may terminate this Lease as
described in paragraph 8 above or otherwise as permitted by law.
11. Mining Equipment. Unico shall be entitled to use Crown Mines'
on-site equipment, consisting of air pumps, ore cars, electrical stations,
compressors, duct works, fans, trams, rails, hoists, excavating equipment and
other equipment in the mine or located on the mining claims comprising the
leased premises and shall upon termination of the Lease, return such Equipment
to Crown Mines in as good a condition as received reasonable wear and tear
excepted. Unico shall conduct all maintenance and repair of such equipment
during the term of the lease. Unico agrees not to remove such on site
equipment from the leased premises.
12. Compliance with Laws. All operations of Lessee shall be conducted
so as to comply with the laws of the State of Utah and with all rules,
regulations and requirements of federal authorities and Lessee agrees to
indemnify and hold harmless Lessor for any obligations, liens or similar
liabilities arising as a result of the operations of Lessee and constituting a
lien or obligation against the premises. The parties understand and agree that
the mine is an underground mine and that no significant reclamation of the
mine site is anticipated following normal mining procedures on the Claims.
Lessor is not aware of any notice of non-compliance from any governmental
agency regarding the property, except as described on Exhibit D, which
Exhibit and the agreement contained therein is incorporated herein by
reference. Each party to this Lease shall be responsible for any
environmental, pollution or aesthetic requirements or liability legitimately
made or assessed by a governmental entity attributable to each party's
respective period of occupancy and operation of the Claims. To the extent
permitted by law, Lessee shall be entitled to any depletion allowance on the
property as a result of its mining activities.
13. Entire Agreement; Governing Law. This Lease replaces in its
entirety that certain Mining Lease and Option to Purchase (the "Existing
Lease"), dated March 30, 1992, executed by Deer Trail Development Corporation,
as lessor, and Unico, as lessee, and contains the entire agreement between the
parties hereto and any amendments thereto shall be in writing. The Existing
Lease is terminated as of the effective date of this Lease. This Lease sha1l
be governed and construed under the laws of the State of Utah.
EXECUTED as of the date first above written.
LESSEE: LESSOR:
Unico, Incorporated Crown Mines, L.L.C.
/s/ Xxx Xxxxx /s/ I.N. Xxxx
By:__________________________ By:___________________________
Xxx Xxxxx, President I.N. Xxxx, President and Sole
Manager
As to the agreements, representations and warranties in the last paragraph of
paragraph one of this agreement:
/s/ I.N. Xxxx
_____________________________
I.N. Xxxx, individually and
as an authorized officer of
Lessor
State of California )
: ss.
County of Butte )
Personally appeared before me, Xxx Xxxxx, ____ this day of ___________ 2001,
who declared to me that he is the President of Unico, Incorporated and
acknowledged that he executed the foregoing lease on behalf of said
corporation by authority of a resolution of its board of directors or bylaws.
_____________________________
NOTARY PUBLIC
Commission Expires:
Residing At:
State of Texas )
: ss.
County of Dallas )
Personally appeared before me, I.N. Xxxx, this 16th day of Nov. 2001, who
declared to me that he is the President and Sole Manager of Crown Mines, L.C.
and acknowledged to me that he executed the foregoing lease on behalf of said
corporation by authority of a resolution of its managers or bylaws.
/s/ Xxxxxx X. Xxxxxx
NOTARY PUBLIC
Commission Expires: [NOTARY SEAL]
Residing At:
State of Texas )
: ss.
County of Dallas )
Personally appeared before me, I.N. Xxxx, this 16th day of Nov. 2001, who
acknowledged to me that he executed the foregoing lease as to the last
paragraph of paragraph one in his individual capacity.
/s/ Xxxxxx X. Xxxxxx
NOTARY PUBLIC
Commission Expires: [NOTARY SEAL]
Residing At:
EXHIBIT A PART II-U
CROWN MINES L.L.C. CLAIMS LEASED TO UNICO
Unpatented Claims Located in Piute County, Utah
------------------------------------------------------------------------------
RECORDED AMENDED BLM SERIAL
CLAIM NAME RECORD BOOK PAGE BOOK PAGE NUMBER
APEX XXXX X 000 00000
XXXXXXX X 423 95580
BUSTER G 459 95585
BUSTER XX. 0 X 000 00000
BUSTER XX. 0 X 000 00000
BUSTER XX. 0 X 000 00000
BUSTER XX. 0 X 000 00000
BUSTER XX. 0 X 000 00000
BUSTER XX. 0 X 000 00000
BUSTER XX. 0 X 000 00000
BUSTER XX. 0 X 000 00000
BUSTER XX. 0 X 000 00000
XXXXXXXXX XXXX X 588 95596
CINNABAR LODE D 584 95599
CLIFF XX. 0 X 000 00000
XXXXX XX. 0 X 372 95601
CLIFF XX. 0 X 000 00000
XXXXX XX. 0 X 373 95603
CLIFF XX. 0 X 000 00000
XXXXX XX. 0 X 373 95605
CLIFF XX. 0 X 000 00000
CLIFF XX. 0 X 000 00000
XXXXXXXXX XXXX X 586 95608
CREST LODE D 452 00000
XXXX XXXXX XXX. C 250 00000
XXXX XXXXX XXX. NO. 01 C 250 00000
XXXX XXXXX XXX. NO. 02 C 250 00000
XXXX XXXXX XXX. NO. 03 C 251 00000
XXXX XXXXX XXX. NO. 04 C 251 00000
XXXX XXXXX XXX. NO. 05 C 252 00000
XXXX XXXXX XXX. NO. 06 C 252 00000
XXXX XXXXX XXX. NO. 07 C 253 00000
XXXX XXXXX XXX. NO. 08 C 253 00000
XXXX XXXXX XXX. NO. 09 C 253 00000
XXXX XXXXX XXX. NO. 10 C 254 00000
XXXX XXXXX XXX. NO. 11 C 254 00000
XXXX XXXXX XXX. XX. 00 00 000 XX 65 000000
XXXX XXXXX XXX. NO. 13 11 711 000000
XXXX XXXXX XXX. NO. 14 11 772 000000
XXXX XXXXX XXX. NO. 15 11 713 000000
XXXX XXXXX XXX. NO. 24 11 722 000000
XXXX XXXXX XXX. NO. 25 11 723 000000
XXXX XXXXX XXX. NO. 26 11 724 000000
XXXX XXXXX XXX. NO. 27 11 725 000000
XXXX XXXXX XXX. NO. 28 11 726 000000
XXXX XXXXX XXX. NO. 29 11 727 000000
XXXX XXXXX XXX. NO. 30 11 728 000000
XXXX XXXXX XXX. NO. 31 11 729 000000
XXXX XXXXX XXX. NO. 32 11 730 000000
XXXX XXXXX XXX. NO. 33 11 731 000000
XXXX XXXXX XXX. NO. 34 11 732 000000
XXXX XXXXX XXX. NO. 35 11 733 000000
XXXX XXXXX XXX. NO. 36 11 734 000000
XXXX XXXXX XXX. NO. 37 11 735 000000
XXXX XXXXX XXX. NO. 38 11 736 354008
-----------------------------------------------------------------------------
DEER TRAIL EXT. NO. 39 11 737 000000
XXXX XXXXX XXX. NO. 40 11 738 000000
XXXX XXXXX XXX. NO. 41 11 739 000000
XXXX XXXXX XXX. NO. 42 11 740 000000
XXXX XXXXX XXX. NO. 43 11 741 000000
XXXX XXXXX XXX. NO. 44 11 742 000000
XXXX XXXXX XXX. NO. 45 11 743 000000
XXXX XXXXX XXX. NO. 46 11 744 000000
XXXX XXXXX XXX. NO. 47 11 745 000000
XXXX XXXXX XXX. NO. 48 11 746 000000
XXXX XXXXX XXX. NO. 49 11 747 000000
XXXX XXXXX XXX. NO. 50 11 748 000000
XXXX XXXXX XXX. NO. 51 11 749 000000
XXXX XXXXX XXX. NO. 52 11 750 354022
XXXX XXXXX XX. 00 A 135 00000
XXXX XXXXX NO. 12 A 142 00000
XXXX XXXXX NO. 13 A 142 00000
XXXX XXXXX NO. 14 A 143 00000
XXXX XXXXX NO. 15 A 143 00000
XXXX XXXXX NO. 16 A 144 00000
XXXX XXXXX NO. 17 A 144 00000
XXXX XXXXX NO. 18 A 145 00000
XXXX XXXXX NO. 19 A 145 00000
XXXX XXXXX NO. 21 24 114 95621
DEER TRAIL NO. 22 24 114 95622
DEER TRAIL NO. 23 24 115 95623
DEER TRAIL NO. 24 24 116 95624
DEER TRAIL NO. 25 24 117 95625
DEER TRAIL NO. 26 24 117 95626
DEER TRAIL NO. 27 24 118 95627
DEER TRAIL NO. 28 24 119 95628
DEER TRAIL NO. 29 24 120 95629
DEER TRAIL NO. 31 1 599 95630
DEER TRAIL NO. 32 24 122 95631
DEER TRAIL XX. 00 X 00 00000
XXXX XXXXX XX. 00 X 100 00000
XXXX XXXXX XX. 00 X 000 00000
XXXX XXXXX XX. 00 X 101 00000
XXXX XXXXX NO. 43 B 245 00000
XXXX XXXXX XX. 00 X 000 00000
XXXX XXXXX XX. 00 X 247 00000
XXXX XXXXX XX. 00 X 000 00000
XXXX XXXXX XX. 00 X 246 00000
XXXX XXXXX NO. 48 B 270 00000
XXXX XXXXX XX. 00 X 000 00000
XXXX XXXXX XX. 00 X 322 00000
XXXX XXXXX NO. 51 B 323 00000
XXXX XXXXX XX. 00 X 000 00000
XXXX XXXXX XX. 00 X 324 00000
XXXX XXXXX NO. 54 B 224 00000
XXXX XXXXX XX. 00 X 000 00000
XXXX XXXXX XX. 00 G 227 00000
XXXX XXXXX XX. 00 X 000 00000
XXXX XXXXX XX. 00 G 229 00000
XXXX XXXXX NO. 59 G 229 00000
XXXX XXXXX XX. 00 X 000 00000
XXXX XXXXX XX. 00 G 231 95654
-----------------------------------------------------------------------------
DEER TRAIL XX. 00 X 000 00000
XXXX XXXXX XX. 00 G 232 00000
XXXX XXXXX XX. 00 X 000 00000
XXXX XXXXX XX. 00 G 233 00000
XXXX XXXXX XX. 00 X 000 00000
XXXX XXXXX XX. 00 G 234 00000
XXXX XXXXX NO. 68 G 235 00000
XXXX XXXXX XX. 00 X 000 00000
XXXX XXXXX XX. 00 G 236 00000
XXXX XXXXX NO. 71 G 237 00000
XXXX XXXXX XX. 00 X 000 00000
XXXXXX XXXX X 584 95681
FIRE FLY LODE D 584 95682
GOLDEN XXXXX XXXX X 000 00000
XXXXX XXXX X 463 95697
GRAND VIEW XXXX X 000 00000
XXXXXX TREASURE AMENDED D 589 95701
XXXXXXX XXXX D 587 95705
XXXXXXX X 000 00000
XX XXXXXX D 587 95707
XXXXX PLACER N 125 95709
LOWER CONTRACT D 450 95714
MONSTER #3 B 123 95719
MONSTER #4 B 123 95720
MONSTER #5 B 124 95721
MONSTER #6 B 124 95722
MONSTER #7 B 125 95723
M6NSTER #8 B 125 95724
MONSTER #9 B 126 95725
MOUNTAIN CHIEF AMENDED D 589 95726
MOUNTAIN CHIEF XX. 0 X 000 00000
MOUNTAIN CHIEF XX. 0 X 000 00000
XXX XXXXXXX XXXX X 464 95747
OLD CHANNEL LODE XX. 0 X 00 00000
XXXXX FRACTION N 273 95741
PORCUPINE XXXX X 000 00000
XXXXXX XXXX X 000 00000
XXXXXX XX. 0 X 00 00000
XXXXXX XX. 0 X 00 00000
XXXXXX XXXX X 585 95729
RED XXXXX XXXX X 000 00000
XXXXX XXXXX X 464 95735
SILVER WEDGE D 422 95737
SLOPE XX. 0 X 000 00000
XXXXX XX. 0 X 000 00000
XXXXX XX. 0 X 000 00000
XXXXX XX. 0 X 00 00000
XXXXX XX. 0 X 000 00000
XXXXX XX. 0 X 000 00000
XXXX XXXX XXXX X 583 95760
XXXXXX PLACER N 126 95763
TAMARAC XXXX X 000 00000
XXX XXXX XXXX X 588 95732
TOMAHAWK XXXX X 000 00000
XXXXX XXXX D 587 95768
VICTORY LODE D 586 95771
WHITE FLINT LODE D 423 95776
WILD CAT XXXX X 000 00000
XXXXXXXX XXXX D 451 95759
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TOTAL CLAIMS 171
Mining Lease Agreement between Crown Mines L.L.C., Owner
And Unico, Incorporated, Lessee
EXHIBIT B
Gross value Computation
1. Definitions.
1.1 "Gold Production" means the quantity of refined gold
outturned to Lessee's account by an independent third party refinery for gold
produced from the Property during the calendar month on either a provisional
or final settlement basis.
1.2 "Gross Value" shall be determined on a calendar month basis
and have the following meanings with respect to the following Minerals:
1.2.1 Gold
(a) If Lessee sells unprocessed gold ores, or gold dore or gold
concentrates produced from Minerals, then Gross Value shall be equal to the
proceeds received by Lessee during the calendar month from such sales. Lessee
shall have the right to sell such unprocessed gold ores, gold dore and gold
concentrates to an affiliated party, except that such sales shall be
considered to have been sold at prices and on terms no less favorable than
those that would be obtained from an unaffiliated third party in similar
quantities and under similar circumstances.
(b) If Lessee produces refined gold (meeting the specifications of the
London Bullion Market Association) from Minerals, and if Section 1.2.1(a)
above is not applicable, then for purposes of determining Gross Value, the
refined gold shall be deemed to have been sold at the Monthly Average Gold
Price for the month in which it was refined. The Gross Value shall be
determined by multiplying Gold Production during the calendar month by the
Monthly Average Gold Price.
1.2.2 Silver.
(a) If Lessee sells unprocessed silver ores, or silver dore or silver
concentrates produced from Minerals, then Gross Value shall be equal to the
proceeds received by Lessee during the calendar month from such sales. Lessee
shall have the right to sell such unprocessed silver ores, silver dore and
silver concentrates to an affiliated party, provided that such sales shall be
considered to have been sold at prices and on terms no less favorable than
those that would be obtained from an unaffiliated third party in similar
quantities and under similar circumstances.
(b) If Lessee produces refined silver (meeting the specifications for
refined silver subject to the New York Silver Price published by Handy &
Xxxxxx) from Minerals, and if Section 1.2.2(a) above is not applicable, the
refined silver shall be deemed to have been sold at the Monthly Average Silver
Price for the month in which it was refined. The Gross Value shal1 be
determined by multiplying Silver Production during the calendar month by the
Monthly Average Silver Price.
1.2.3 All Other Minerals.
(a) If Lessee sells unprocessed ores, dore or concentrates of any
Minerals other than gold or silver, then the Gross value shall be equal to the
amount of proceeds received by Lessee during the calendar month from such
sales. Lessee shall have the right to sell such unprocessed ores, dore or
concentrates to an affiliated party, provided that such sales shall be
considered, solely for the purpose of determining Gross Value, to have been
sold at prices and on terms no less favorable than those that would be
obtained from an unaffiliated third party in similar quantities and under
similar circumstances.
(b) If Lessee produces refined or processed metals from Minerals other
than refined gold or refined silver, and if Section 1.2.3(a) above is not
applicable, then Gross Value shall be equal to the amount of the proceeds
received by Lessee during the calendar month from the sale of such refined or
processed metals. Lessee shall have the right to sell such refined or
processed metals to an affiliated party, provided that such sales shall be
considered to have been sold at prices and on terms no less favorable than
those that would be obtained from an unaffiliated third party in quantities
and under similar circumstances.
1.3 "Minerals" means gold, silver, platinum, antimony, mercury,
copper, lead, zinc, and all other mineral, base and precious metals, elements
and mineral compounds, which are contemplated to exist on the Property or
which are after the effective date of the Lease (the "Effective Date")
discovered on the Property and which can be extracted, mined or processed by
any method presently known or developed or invented after the Effective Date.
1.4 "Monthly Average Gold Price" means the average London Bullion
Market Association Afternoon Gold Fix, calculated by dividing the sum of all
such prices reported for the calendar month by the number of days for which
such prices were reported during that month. If the London Bullion Market
Association Afternoon Gold Fix ceases to be published, all such references
shall be replaced with references to prices of gold for immediate sale in
another established market selected by Lessee, as such prices are published in
Metals Week magazine.
1.5 "Monthly Average Silver Price" means the average New York Silver
Price as published daily by Handy & Xxxxxx, calculated by dividing the sum of
all such prices reported for the calendar month by the number of days in such
calendar month for which such prices were reported. If the Handy & Xxxxxx
quotations cease to be published, all such references shall be replaced with
references to prices of silver for immediate sale in another established
market selected by Lessee as published in Meta1s Week magazine.
1.6 "Property' means the real property and patented and unpatented
mining claims described in Exhibit A to the Lease to which this exhibit is
attached.
1.7 "Silver Production" means the quantity of refined silver
outturned to Lessee's account by an independent third-party refinery for
silver produced from the Property during the calendar month on either a
provisional or final settlement basis.
2. Payment Procedures.
2.1 Accrual of Obligation. Lessee's obligation to pay the royalty
provided in the Lease shall accrue upon the sale of unrefined metals, dore,
concentrates, ores or other Minerals products or, if refined metals are
produced, upon the outturn of refined metals meeting the requirements of the
specified published price to Lessee's account.
2.2 Futures or Forward Sales, Etc. Except as provided in Sections
1.2.1(a), 1.2.2(a) and 1.2.3 above (with respect to sales of unprocessed gold
and silver and sales of Minerals other than gold and silver), Gross Value
shall be determined, irrespective of any actual arrangements for the sale or
other disposition of Minerals by Lessee, specifically including but not
limited to forward sales, futures trading or commodities options trading, and
any other price hedging, price protection, and speculative arrangements that
may involve the possible delivery of gold, silver or other metals produced
from Minerals.
2.3 Monthly Calculations and Payments. The royalties shall be
determined on a calendar month basis. The royalties required to be paid
pursuant to the Lease shall be paid on or before the date specified in the
Lease.
2.4 Statements. At the time of payment of the royalty required to be
paid pursuant to the Lease, Lessee shall accompany such payment with a
statement showing in reasonable detail the quantities and grades of refined
gold, silver or other metals or dore, concentrates or ores produced and sold
or deemed sold by Lessee in the preceding calendar month; the Monthly Average
Gold Price and Monthly Average Silver Price, as applicable; costs and other
deductions, and other pertinent information in reasonable detail to explain
the calculation of the royalty payment with respect to such calendar month.
Payment shall be made to the address provided in the Lease to which this
Exhibit is attached for purposes of notices.
2.5 Inventories and Stockpiles. Lessee shall include in all monthly
statements a description of the quantity and quality of any gold or silver
dore that has been retained as inventory for more than ninety (90) days:
Lessor shall have thirty (30) calendar days after receipt of the statement to
either (a) elect that the dore be deemed sold, with Gross Value to be
determined as provided in Sections 1.2.1(b), with respect to gold, and
1.2.2(b), with respect to silver, as of such thirtieth (30th) day utilizing
the mine weights and assays for such dore and utilizing a reasonable recovery
rate for refined metal and reasonable deemed charges for any deductions
specified in the Lease, or (b) elect to wait until such time as royalties
otherwise would become payable pursuant to Sections 1.2.1(b) and 1.2.2(b).
The failure of Owner to respond within such time shall be deemed to
be an election to use the methods described in Sections 1.2.l(b) and l.2.2(b).
No royalty shall be due with respect to stockpiles of ores or concentrates
unless and until such ores or concentrates are actually sold.
2.6 Final Settlement. All royalty payments shall be considered final
and in full satisfaction of Lessee's obligations with respect thereto, unless
Lessor gives Lessee written notice describing a specific objection to the
calculation thereof within two years after receipt by Lessor of the monthly
statement provided for in 2.5 above. If Lessor objects to a particular monthly
statement, it shall have the right, for a period of thirty (30) days after
Lessee's receipt of such objection, upon reasonable notice and at a reasonable
time, to have Lessee's accounts and records relating to the calculation of the
royalty payment with respect to the calendar month in question audited by an
independent certified public accountant. If such audit determines that there
has been a deficiency or an excess in the payment made to Lessor, such
deficiency or excess shall be resolved by adjusting the next monthly royalty
payment due Lessor. Lessor shall pay all costs of such audit unless a
deficiency of five percent (5%) or more of the royalty due for the calendar
month in question is determined to exist. Lessee shall pay the costs of such
audit if a deficiency of five percent (5%) or more of the amount due for the
calendar month in question is determined to exist. All books and records used
by Lessee to calculate the royalties due hereunder shall be kept in accordance
with generally accepted accounting principles.
2.7 Transfer or Encumbrance of Royalty. Lessor may transfer, pledge,
mortgage, charge or otherwise encumber all or any part of its right, title and
interest in and to the royalty to which it is entitled under the Lease, except
that Lessee shall be under no obligation to make its payments to such
assignee, transferee, pledgee or other third party until Lessee's receipt of
written notice concerning the assignment, transfer or pledge.
LEASE MADE DEC. 1, 2001, BETWEEN CROWN MINES,
AS LESSOR, AND UNICO, INCORPORATED, AS LESSEE
EXHIBIT C
In order to fully develop the Deer Trail deposits it is deemed necessary to
excavate a new haulage/access tunnel. This new access tunnel will be located
within the leased premises and in an area that will give the greatest
advantage to cost effectively extract future production from the Deer Trail
deposits.
This access will be an inclined tunnel at no more than 12% grade. To be
complete with all service lines, i.e. compressed air, water, ventilation
ducts, electrical and communication lines. To be complete where necessary with
proper ground control measures such as rock bolts, mesh, steel sets
and/or timbers and to be in compliance with all MSHA (Mine Safety and Health
Administration) standards. The inclined tunnel will be large enough to
accommodate rubber tired mining equipment such as scoop trams, jumbo drills,
underground haulage trucks, and exploration equipment. The new tunnel will
also be large enough to extract in excess of 400 tons per day.
Construction of the new access tunnel is to be started prior to May 31, 2002,
and shall be completed within the first year of this signed Lease, with
extensions given for force majeure delays.
EXHIBIT D
NONE
