2018-05-01_REVISION - M1982058 (3)

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Pik ADVANCE MINIMUM ROYALTY -- As minimum and advance royalty, without relation to the amount of minerals mined from the leased premises,Lessee shall pay annually in advance to Lessor the following amounts: LEASE YEAR AMR 1999 and each year thereafter $5.00 per acre that the lease is in full force and effect if Lessee does not extract minerals from the Leased Premises sufficient to return to the Lessor the minimum amounts above specified, it is nevertheless understood that the above sums of money arc due and payable to Lessor whether or not minerals are mined.but that such advance minimum royalty shall be credited upon the first royalties due as herein provided for minerals actually produced from the Leased Premises In the absence of production of minerals in continuous paying quantities before the expiration date of the lease, all advance minimum royalties and all rentals shall be forfeited to Lessor Acreage changes resulting from surrender or partial assignment will not reduce the advance minimum royalty Further, at the end of each five-year period, Lessor shall increase the rate or amount of advance minimum royalty to be paid by Lessee by the rate of increase of the average Producer's Price Index for the product, or other similar product, for the previous five year period,as published by the U S. Department of Labor, Bureau of Labor Statistics The first such five-year period will terminate on November I, 2004. Failure to comply with any new advance minimum royalty rate set by Lessor may subject this lease to cancellation by thirty day written notice by Lessor. In case of assignment of this lease,all advance minimum royalty paid to the state shall be carried forward and credited to the new assignee. 2. PRODUCTION ROYALTY -- Lessor reserves as royalty, and Lessee agrees to pay to Lessor on or before the last day of each calendar month following the month of production, a production royalty for all ores hearing metalliferous minerals whatever which are mined,saved,sold and/or removed from the leased premises based on the following: Gross Mine Mouth Royalty Ten percent t 10% 1 of the Gross Mine Mouth Market Value at the first point of sale Gross Market Value shall mean the value of the ore or products after extraction and at the mine. A. Payment. Royalty shall he due and payable on or before the last day of each calendar month during the term of this lease for ores,minerals and other materials mined and removed for sale by Lessee during the preceding calendar month. Reporting of production royalty that is credited against advanced minimum royalty is also due on or before the last day of each calendar month following mining Payment shall he accompanied by a settlement sheet indicating the calculation of the net smelter returns royalty by the lessee and stating the number of units of product sold,or deemed sold,the payment or deemed payments received and the amount of deductions. B. Payment in Kind Lessor may elect, upon 60 days written notice to Lessee, to receive any net smelter returns royalty due in kind by directing a refiner to deposit into a separate consignment account, in Lessor's name, an amount of refined gold or silver, equal in value to the net smelter returns royalty' owed. The value of gold or silver shall he its fair market value as defined in Subsection 3 t B)(9) C Sampling No royalty shall be due on any minerals extracted or removed from the property for the purposes of sampling,testing,analysis or evaluation in order to determine mineral values of the property, unless materials of value are sold or used Reporting of production royalty that is credited against advanced minimum royalty is due on or before the last day of each calendar month for mining during the preceding calendar month, 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 shall increase the rate or amount of production royalty to be paid by Lessee during each year of the succeeding five-year period, by a rate of 2% of the previous year's per ton royalty rate or the rate of increase of the average Producer's Price Index for the product, or other similar product. for the previous five year period, as published by the U.S Department of Labor. Bureau of Labor Statistics, which ever is greater. The first such five-year period will terminate on November 17. 2(X)4 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 he in the best interest of the State,under the following conditions. Page 2 of 8