2011-08-09_REVISION - M1981185 (51)

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• • fa (b) If Grantor elects to process Subject Minerals or ores or products containing Subject Minerals through a smelter or other processing facility, the Production Royalty shall be equal to three and one half percent (3.5 %) of the "value" of such Subject Minerals. As used herein, "value" shall mean the gross ' amount received from the smelter or other purchaser, plus any purchaser credits received from the smelter or other processing facility, less (i) actual transportation costs from the mine to the smelter or other point of sale, (ii). actual smelting or other processing costs (to the extent the smelter or other processor has not already deducted them before making payment), and (iii) penalties and sampling or assaying costs imposed by the smelter or other processing facility. No deductions shall be made for mining or milling costs. • (c) If any sale of Subject Minerals on which Production Royalty is payable hereunder is not made in a bona fide, arms' length transaction with an independent third party, the fair market value of the Subject Minerals sold shall be used for the purposes of determining the Production Royalty to be paid to the Grantee. • (d) Production Royalty payments shall accrue monthly at the end of each month, and shall become due and payable monthly on the 15th day of the following month. Production Royalty payments shall be . accompanied by a settlement sheet showing.in reasonable detail the quantities and grades of Subject Minerals processed for the preceding month, the proceeds of sale, costs and other deductions, and other pertinent information in sufficient detail to explain the calculation of the Production Royalty payments, . including data pertaining to the weighing, sampling, and assaying of ore produced from the Premises for the calculation of the. Production Royalty due hereunder. 3. Inspection. Grantee and its duly authorized agents may enter upon the Premises and adjacent mining workings at its own risk•and expense to inspect the same at all reasonable times during normal business hours and upon reasonable notice to Grantor, provided such inspection will not unreasonably hinder or interrupt the operations and activities of Grantor. Grantor will make available to Grantee for and copying all factual and interpretative information concerning drill holes, assays and other data, geologists' reports and mine engineers' reports, pertaining to the Premises or Subject Minerals in the Premises. In addition, whenever mineral exploration or development or activities have taken place during the preceding six months, Grantor agrees to prepare and deliver reasonably complete summaries to Grantee not less frequently than semi - annually. 4. Nature of Interest. The parties hereto agree that the interest herein granted shall run with the Premises, but the parties agree that the Grantee's respective heirs, successors, or assigns, shall not have the privilege or power to enter on the Premises, nor the right to drill for or produce any Subject-Minerals from the Premises, nor the executive right to execute leases or other operating agreements regarding production, removal, oX.other operating agreements regarding the production, removal, or sale of Subject Minerals from the Premises, nor any right to seek partition of the mineral estate in the Premises. Further, the parties hereto agree that the Production Royalty interests conveyed hereby shall be cost -free, and the Grantor agrees to pay all costs, expenses, and taxes (including severance taxes) on production. The Grantee shall be liable for and pay all income taxes on money paid to it. 5. Warranty of Title. Grantor represents and warrants to the Grantee, and the Grantee's respective successors, heirs, and assigns that the Production Royalty is free and clear of all liens and encumbrances created or suffered by Grantor or by any person or persons claiming by, through, or under Grantor. Any exceptions to this warranty are as follows: NONE. • • • 2