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(a) If Lessee does not extract Minerals from the Leased Premises sufficient to return to the Lessor <br /> the minimum amounts above specified, it is nevertheless understood that the above sums of <br /> money are due and payable to Lessor whether or not Minerals are mined, but that such advance <br /> minimum royalty shall be credited upon the first royalties due as herein provided for Minerals <br /> actually produced from the Leased Premises. In the absence of production of Minerals in <br /> continuous paying quantities before the expiration date of the lease, all advance minimum <br /> royalties and all rentals shall be forfeited to Lessor. <br /> (b) Acreage changes resulting from surrender or partial assignment do not reduce the advance <br /> minimum royalty proportionately. Further, at the end of each five-year period, commencing <br /> from the original lease date, the AMR may be increased or decreased to equal 30% of the <br /> average annual production for the previous five (5) years. In no case shall the AMR be less than <br /> $100,000. Failure to comply with any new advance minimum royalty rate set by Lessor may <br /> subject this lease to cancellation by thirty day written notice by Lessor. <br /> (c) In case of assignment of this Lease, all advance minimum royalty paid to the state shall be <br /> carried forward and credited to the new assignee. <br /> 2. PRODUCTION ROYALTY -- Lessor reserves as royalty, and Lessee agrees to pay to Lessor on or before <br /> the last day of each calendar month following the month of production the following amounts: <br /> • Any product with less than 35% passing the 1/4' sieve by specification will be classified as stone <br /> and paid at a royalty rate of$0.55/ton (2000 pounds) sold. <br /> • Any product with 90%or greater passing the 1/4'sieve by specification will be classified as fines <br /> and paid at a royalty rate of$0.20/ton (2000 pounds) sold . <br /> • The royalty rate shall be $0.40 per ton (2000 pounds) of Minerals that are a blend of the above <br /> two categories. This royalty rate applies to products that consist of 35% to 90% of Minerals <br /> passing the 1/" sieve by specification that are produced and sold from the Leased Premises. <br /> All Sales tonnage will be reported monthly and royalty calculations shall be based on Specification <br /> Average and not the average of production of gradation tests. At the end of each five-year period, <br /> commencing from the original Lease date, for so long as this Lease remains in effect, Lessor may <br /> increase the rate or amount of production royalty to be paid by Lessee by a rate not to exceed the rate <br /> of increase of the average Producer's Price Index for Construction Sand, Gravel and Crushed Stone for <br /> the previous 5-year period, as published by the U.S. Department of Labor, Bureau of Labor Statistics. <br /> Failure to comply with any new royalty rate set by Lessor may subject this Lease to cancellation by <br /> thirty-day written notice by Lessor. <br /> Reporting of production royalty that is credited against AMR is also due on or before the last day of <br /> each calendar month for mining during the preceding calendar month. <br /> 3. EXTENSION - The Life of the mine is expected to be more than fifty (50) years, but the Lease must be <br /> reviewed by the Lessor at the end of the Secondary Term. At that time, Lessee may have a <br /> preferential right to extend the Lease or to receive a new lease, whichever may be determined by <br /> Lessor to be in the best interest of the State, under the following conditions: <br /> Page 3 of 15 <br /> 12470 2 <br />