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Royalty shall be due and payable on or before the last day of each <br /> calendar month during the term of this lease for ores, minerals and other <br /> materials mined and removed for sale by Lessee during the preceding <br /> calendar month. <br /> Reporting of production royalty that is credited against advanced <br /> minimum royalty is also due on or before the last day of each calendar <br /> month for mining during the preceding calendar month. <br /> Within sixty days prior to the fourth and tenth year of this lease <br /> and of each and every five-year period thereafter for so long as this <br /> lease remains in effect, Lessor may reappraise the property herein leased <br /> and fix and determine the rate of production royalty to be paid during <br /> each year of the succeeding five-year period. Failure to comply with any <br /> new royalty rate set by Lessor may subject this lease to cancellation by <br /> thirty-day written notice by Lessor. <br /> 3. WEIGHTS -- It is agreed that all ores, minerals and other materials mined <br /> and taken from the leased premises shall be weighed and assayed and the <br /> weight and assay thereof shall be entered in due form in weight and assay <br /> records kept for such purposes by Lessee. <br /> Ton means 2000 pounds. Ton shall be determined by official scales or <br /> by weight determined at the mine tipple, or by weightometer. <br /> 4. EXTENSION -- Lessee may have a preferential right to renew the lease or <br /> to receive a new lease under one or more of the following conditions: <br /> A. (1) Lessee shall furnish to Lessor satisfactory evidence of plans for <br /> mining during the term of the renewed lease or during the term of <br /> a new lease. <br /> (2) Lessee shall furnish adequate geological evidence to Lessor that <br /> the acreage subject to the renewed or new lease is in fact an <br /> integral part of and contains reserves in a logical mining unit. <br /> Whether the acreage is or is not a part of a logical mining unit <br /> will be determined by Lessor. <br /> (3) An extension of this lease would, as determined by Lessor, be in <br /> the best interest of the State. <br /> At the time of expiration of this primary lease, the following may be <br /> considered in the determination of the conditions of an extension or a <br /> new lease. <br /> B. (1) An advance minimum royalty, the amount to be negotiated at the <br /> time of this extension, will be due and payable annually <br /> commencing on the date this lease is renewed or a new lease is <br /> executed and shall continue until the expiration of the new or <br /> renewed lease. This amount may be adjusted by Lessor at the end <br /> of each five-year period of the renewed or new lease. <br /> (2) At the end of the primary lease term or at any time during this <br /> primary lease term when a permit is issued by the Mined Land <br /> Reclamation Division for a mining operation on a specific parcel <br /> of these described lands, Lessee may be required to apply to <br /> Lessor for one or more individual mineral leases' of not more than <br /> 640 acres if State mineral rights stand alone, or not more than <br /> 1,280 acres if State mineral rights have a common boundary, but in <br /> no case not more than the acreage of this lease. Type of lease <br /> will be determined by Lessor at that time based on Lessor's <br /> mineral classification system. <br /> 5. EXTENSION BY PRODUCTION -- This lease may not be held in perpetuity; <br /> however, the lease will continue in effect for so long as minerals are <br /> produced in paying quantities. Cessation of production for a period in <br /> excess of 180 consecutive days will automatically remove lease from <br /> producing status unless otherwise agreed to in writing by Lessor. Lessee <br /> shall notify Lessor of each cessation of production, the reasons <br /> therefor, and the time period during which production will or did cease. <br /> Paying quantitie means production sufficient to return royalties to <br /> Lessor equal to four and no/100 dollars ( 4.00) per acre per year. <br /> 6. PENALTIES -- A penalty shall be imposed for, but not limited to, late <br /> payments, improper payments, violations of any covenants of this lease, <br /> or any false statements made to Lessor. Penalties shall be determined by <br /> Lessor and may be in the form of, but not limited to, interest, fees, and <br /> fines. <br /> 3 <br />