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Royalty shall be due and payable ono • fore 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 for mining during the preceding calendar month. Within sixty days prior to the termination of each and every five-year period for so long as this lease remains in effect, Lessor may reappraise the property herein leased and fix and determine the rate of production royalty to be paid during each year of the succeeding five-year period. Failure to comply with any new royalty rate set by Lessor may subject Chis lease to cancellation by thirty-day written notice by Lessor. 3. W IGH - It is agreed that all ores, minerals and other materials mined and taken from the leased premises shall be weighed and assayed and Che weight and assay thereof shall be entered in due form in weight and assay records kept for such purposes by Lessee. Toter means 2000 pounds. Ton shall be determined by official scales or by weight determined at the mine tipple, or by weightometer. 4. EXTENSION -- Lessee may have a preferential right to renew the lease or to receive a new :lease under one or more of the following conditions: A. (1) Lessee aha:ll furnish to Lessor satisfactory evidence of plans for mining during the term of the renewed lease or during the term of a new lease. (2) Lessee sha:Ll 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. (3) An extension of this lease would, as determined by Lessor, be in the best interest of the State. At the time of expiration of this primary lease, the following may be considered in the determination of the conditions of an extension or a new lease. B. (1) An advance: minimum royalty, the amount to be negotiated at the time of this extension, will ba due and payable annually commencing on the date this lease is renewed or a new lease is executed and shall 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. (2) At the end of the primary lease term or at any time during this primary lease term when a permit is issued by the Mined Land Reclamation Division for a mining operation on a specific parcel of these described lands, Lessee may be required to apply to Lessor for one or more individual mineral leases of not more Chan 640 acres if State mineral rights stand alone, or not more than 1,280 acres if State mineral rights have a common boundary, but in no case not more than the acreage of this lease. Type of lease will be det~armined by Lessor at that time based on Lessor's mineral classification system. 5. EXTENSION BY PROD C ON -- This lease may not be held in perpetuity; however, the lease will continue in effect for so long as minerals are produced in paying quantities. Cessation of production for a period in excess of 180 consecutive days will automatically remove lease from producing status unless otherwise agreed to in writing by Lessor. Lessee shall notify Les:;or of each cessation of production, the reasons therefor, and the tame period during which production will or did cease. Paying auantiti.es means production sufficient to return royalties to Lessor equal to the advance minimum royalty but in no event Less than one hundred and n 00 dollars. 6, PENALTIES -- A penalty shall be imposed for, but not limited to, late payments, improper payments, violations of any covenants of this lease, or any false statements made to Lessor. Penalties shall be determined by Lessor and may be in the form of, but not limited to, interest, fees, and fines. 3