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Materials extracted from each property shall be weighed prior to commingling on certified conveyor <br />belts scales upon removal from the relevant property. Records will be kept as to theJonnages <br />removed from each property, and the total production for each calendar month will be attributed to <br />each property pro-rata, after adjustment of the total tonnage of pit run from all properties for washed <br />fines -and tailings pursuant to Paragraph S.D. below. Materials from one property added to a <br />stockpile at any time during a calendar month shall be deemed added simultaneously and pro rata <br />with Materials from any other Property. The quantity of material determined to be in the stockpile as <br />of the commencement of any calendar month shall be deemed sold and removed, on. .a first-in <br />first-out basis, prior to the sale of any Materials added to the stockpile during a subsequent calendar <br />month The Company's measurement and determination shall be conclusive. <br />D. Allowance for Tailings. Tonnage for purposes of calculation of Production <br />Royalty shall be based on processed Materials sold. If Materials are not being commingled from <br />separate properties, then the tonnage sold shall be calculated pursuant to Paragraph S.A. Above. If <br />due to commingling, Materials are weighed as pit run before processing and sale by the Company <br />pursuant to Paragraph S.A., above, the weight of tailings and washed fines shall be deducted from the <br />total pit. run weight of the Materials attributed to each property for purposes of calculating Sales <br />Royalties. Both parties agree that as much as approximately twenty percent (20%) of the minable in <br />situ (in place, in the ground) sand and gravel onsite may need to be rejected as washed fines or <br />tailings or otherwise in order to meet commercial specifications for salable Material. <br />6. Water Augmentation and Dewatering. Lessor shall be responsible for any <br />augmentation plan made necessary by the Company's surface exposure of groundwater, dewatering <br />or mining operations on the Property. If the State Engineer determines that a temporary plan is <br />necessary for the Company's operations on the Property, Lessor shall provide the water required for <br />the Company to implement any such temporary substitute supply or augmentation plan. If Lessor <br />fails to obtain the necessaryplan of augmentation, or substitute source ofsupply, or otherwise fails to <br />supply necessary water and water rights, the Company may do so and charge the cost thereof to <br />Lessor. Such estimated cost shall be amortized by renegotiation of the annual Advance Minimum <br />Royalty and the Production Royalty rate, applied to the estimated Material to be removed, over the <br />life of the deposit on the Property." <br />7. Operations. <br />A. The Company shall conduct its operations on the Property in a prudent and <br />workmanlike manner and in accordance with good and accepted mining and business practices and <br />in compliance with all applicable federal, state and local laws, rules and regulations and all <br />applicable permits. The timing, nature, manner and extent ofmining operations, processing and sales <br />shall be within the sole discretion of the Company, and the Company shall not be required to mine, <br />preserve or protect in its operations any Materials which, under good mining practices, cannot be <br />mined or sold at a reasonable profit to the Company at the time they are encountered. <br />B. The Company shall have the right to construct, maintain, and use roads, pipe <br />lines, power lines, telephone lines, and stockpile areas and any right-of-way it deems necessary or <br />-4-