2017-04-10_REVISION - M2016081 - Laserfiche WebLink

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each calendar month following mining. Payment shalt be accompanied by a settlement sheet from the refiner stating the number of units of product sold, or deemed sold, and the payment or deemed payments received by the Lessee from the refiner. It is expressly understood and agreed that none of Lessee's exploration, mining, production or processing costs, including but not limited to costs for materials, labor, overhead, distribution, transportation, loading, crushing, processing, or general and administrative activities, may be deducted in computing Lessor's royalty. All such costs shall be entirety borne by Lessee. Further, at the end of each five-year period, commencing from the original lease date, for so long as this lease remains in effect, Lessor may increase the rate or amount of production royalty to be paid by Lessee during each year of the succeeding 5-year period Failure to comply with any new royalty rate set by Lessor may subject this lease to cancellation by thirty-day written notice by Lessor. 3. EXTENSION -- Lessee may have a preferential right to renew the lease or to receive a new lease, whichever may be determined by Lessor to be in the best interest of the State, under the following conditions: A. An advance minimum royalty, the amount to be negotiated before expiration of the lease, will be due and payable annually commencing on the date this tease is renewed or a new lease is executed and shalt continue until the expiration of the new or renewed lease. This amount may be adjusted by Lessor at the end of each five-year period of the renewed or new lease. B. Lessee shall furnish to Lessor satisfactory evidence of plans for mining during the term of the renewed lease or during the term of a new lease. C. Lessee shalt furnish adequate geological evidence to Lessor that the acreage subject to the renewed or new lease is in fact an integral part of and contains reserves in a logical mining unit. Whether the acreage is or is not a part of a logical mining unit will be determined by Lessor. D. An extension of this Lease as determined by Lessor would be in the best interest of Lessor. 4. EXTENSION BY PRODUCTION -The Lease may continue in effect for a Secondary Term of 5 years to the 121h day of May, 2026 as long as Minerals are being produced in paying quantities from the Leased Premises. Paying quantities is defined as production and sales of a quantity sufficient to return to Lessor production royalty payments of a minimum of $10,000 per year. 5. ANCILLARY USE -- Lessee may remove approved Minerals, and place on the Leased Premises stock piles of material mined from the Leased Premises and other such equipment as is approved by Lessor for this removal and processing. All other ancillary uses will be subject to the approval of Lessor and will require a yearly rental payment of no less than five hundred and no/100 Dollars ($ 500.00 ) per acre affected. Haut roads and/or access roads which do not directly benefit the Leased Premises will be subject to a separate permit and approval of Lessor. 6. REPORTS AND RECORDS -- After operations begin, it is agreed that on or before the last day of each month during the term of this lease Lessee shall submit a sworn, verified, written report to Lessor, in which report shall be entered and set down the exact amount in weight of all products and the assay thereof mined and removed from said Leased Premises during the preceding calendar month. Lessee agrees to keep and to have in possession complete and accurate books and records showing the production and disposition of any and all substances produced on the Leased Premises and to permit Lessor at all reasonable hours, to examine the same or to furnish copies of same to Lessor within 60 110324 Revised 5/2016 Page 3 of 14