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<br />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 />PRODUCTION ROYALTY -- ~i'he royalty for any products whatever which are mined, saved, sold <br />and/or removed from the leased premises shall be based on one of the following, whichever is greater: <br />A. one and no/100 -dollar ($ 1.00 )per ton of 2,00011, <br />or five percent (5%) of the gross sales less transports[ion, whichever is greater. <br />All accounting shall be validated and verified. <br />Net Returns and Gross Market Value aze defined as follows: <br />Net Remrns means the net amount received by Lessee from the sales of the products after processing, <br />where processing is necessary for commercial use, less the actual cost of transportation from the mine <br />to the closest feasible point of sale, less costs of processing including smelting charges and deductions <br />and other treatment costs. <br />Gross Market Value means the value of the ore or products after extraction and at the mine. (See <br />39-6-106)(E)(h)-CRS). <br />Royalty shall be due and payable on or before the last day of each calendar month during the <br />term of this lease for ores, minerals and other materials mined and removed for sale by Lessee during <br />the preceding calendar month. <br />Reporting of production royalty that is credited against advanced minimum royalty is also due <br />on or before the last day of each calendar month for mining during the preceding calendar month. <br />Within sixty days prior to the fourth and tenth year of this lease and of each and every five-year <br />period thereafter for so long as this lease remains in effect, Lessor may reappraise the property herein <br />leased and fix and determine the rate of production royalty to be paid during each year of the <br />succeeding five-year period. Failure to comply with any new royalty rate set by Lessor may subject <br />this lease to cancellation by thirty-day written notice by Lessor. <br />3. ~'/EIGHTS -- ]t is agreed that all ores, minerals and other materials mined and taken from the leased <br />premises shall be weighed and assayed and the <br />v.~eight and assay thereof sha!1 be entered in due form in weight and assay records kept for such <br />purposes by Lessee. <br />Ton means 2000 pounds. Ton shall be determined by official scales or by weight determined <br />at the mine tipple, or by weightometer. <br />4. EXTENSION -- Lessee may have a preferential right to renew the lease or to receive a new lease under <br />one or more of the following conditions: <br />A. (I) Lessee shall furnish to Lessor satisfactory evidence of plans for mining during the term of the <br />renewed lease or during the term of a new lease. <br />Page 3 of 10 <br />