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No Deductions: It is expressly understood and agreed that none of Lessee's <br /> exploration, mining, production or processing costs, including but not limited to <br /> costs for materials, labor, overhead, distribution, transportation, loading, <br /> crushing, processing, or general and administrative activities, may be deducted <br /> in computing Lessor's royalty. All such costs shall be entirely borne by Lessee <br /> and are anticipated by the rate of royalty set forth in this Lease. <br /> Paymen : The production royalty shall be due and payable on or before the <br /> last day of each calendar month during the term of this Lease for ores, minerals <br /> and other materials mined and removed for sale by Lessee during the <br /> preceding calendar month. Reporting of production royalty that is credited <br /> against AMR is also due on or before the last day of each calendar month <br /> following the month of production. Payment shall be accompanied by a <br /> settlement sheet indicating the calculation of the production royalty by the <br /> Lessee and stating the number of units of product mined and removed, the <br /> Gold Index Price, the royalty rate, and the royalty payment due the Lessor. <br /> SamQfing: Royalty shall be due on any minerals extracted or removed from <br /> the property for the purposes of sampling, testing, analysis or evaluation in <br /> order to determine mineral values of the property, when such materials of <br /> value are sold or used. <br /> Royalty Rate Adjustment: Within 60 days prior to the termination of the first <br /> 5-year period this Lease is in effect, Lessor may reasonably adjust the rate of <br /> production royalty to be paid during each year of the second 5-year period. <br /> Failure to comply with any new royalty rate set by Lessor may subject this Lease <br /> to cancellation by 30-day written notice by Lessor. <br /> 7. EXIEN,SLQN: There will be no extension to the ten-year term of this Lease. <br /> 8. DEVELOPMENT: Lessee will diligently explore and develop the Leased Premises <br /> by utilizing methods of exploration commonly used in the industry, such as <br /> mapping, sampling, drilling, trenching, geophysical exploration, and laboratory <br /> analysis. <br /> i xai ratign Plan: An Exploration Plan detailing the methods to be used for <br /> exploration and the timing of exploration activities, consistent with the plan <br /> outlined in Lessee's response to Lessor's Solicitation of Offers, shall be submitted <br /> to Lessor within 6 months after the Effective Date of this Lease. No surface <br /> disturbance shall occur prior to receipt of written approval of the Exploration Plan <br /> from the Lessor. A reclamation plan for all areas disturbed during exploration <br /> shall be included in the Exploration Plan. Lessor shall notify Lessee within 30 <br /> days if it finds, in its sole discretion, that the Exploration Plan is inadequate to <br /> Page 5 of 20 <br />