MINING LEASE AND AGREEMENT

A.

Shoshone is the owner of and in possession of certain unpatented mining claims situated in Shoshone County, Idaho described in Exhibit A attached to and by this reference incorporated in this agreement.

B.

Shoshone desires to grant to Sterling certain rights in and to a portion of two (2) unpatented mining claims.

C.

Sterling desires to examine the mineral potential of a portion of two (2) unpatented mining claims and possibly to develop commercial mines thereon.

1.

Definitions : The following defined terms, wherever used in this Agreement, shall have the meanings described below:

1.1.

“Effective Date” shall mean January 19, 2004.

1.2.

“Shoshone” shall mean Shoshone Silver Mining Co.

1.3.

“Sterling” shall mean Sterling Mining Co.

1.4.

“Lease Year” shall mean each one (1) year period following the Effective Date and each anniversary of the Effective Date.

1.5.

“Minerals” shall mean gold, silver, platinum, antimony, mercury, copper, lead, zinc, and all other mineral elements and mineral compounds, and geothermal resources, whether the same are known to exist on the Property or are discovered on the Property after the Effective Date and regardless of the method of extraction, mining, or processing the same, whether known to exist or invented or developed after the Effective Date.

1.6.

“Exploration and Mining Operations” shall mean every kind of work done on or in respect of the Property or the product derived from the same including, but not limited to, the work of assessment; geophysical, geochemical and geological surveys; studies and mapping; drilling, tunneling and shaft-sinking.

1.7.

“Net Proceeds” shall mean the net proceeds calculation as provided for in Exhibit B of this Agreement.

1.8.

“Ore” shall mean materials from the Property, the nature and composition of which, in the sole judgment of Sterling justifies either (a) mining or removing from place and shipping and selling the same, or delivering the same to a processing plant for physical or chemical treatment; or (b) leaching in place.

1.9.

“Product” shall mean: (a) all Ore shipped and sold prior to treatment; and (b) all concentrates, precipitates and products produced by or for Sterling from Ore.

1.10.

“Property” shall mean a portion of an unpatented mining claim described in Exhibit A of this Agreement.

1.11.

“Waste” shall mean all earth, rock or any other material mined or removed from the Property during the term of this Agreement, but which is not Ore.

2.

Grant of Exploration Privilege, Leases, Uses and Water Rights:

2.1.

Grant of Exploration Privilege : Subject to the terms and conditions of this Agreement and to the extent permitted by applicable federal, state and local laws, regulations and ordinances, Shoshone grants to Sterling the exclusive right and privilege to enter on the Property for the purposes of exploration and prospecting for minerals, mineral substances, metals, ore-bearing materials and rocks of every kind, including the right of ingress and egress for personnel, machinery, equipment, supplies and products and the right to use so much of the surface and water located thereon as may be reasonable needed for such purposes.

2.2.

Lease : Subject to the terms and conditions of this Agreement and to the extent permitted by applicable federal, state and local laws, regulations and ordinances, Shoshone leases exclusively to Sterling the Property for the purposes of development, production, removal and sale of all Minerals, mineral substances, metals, ore-bearing materials and rocks of every kind. The rights subject to this Agreement include all the right, title and interest of Shoshone in the Property, lands and mining claims described in this Agreement, including, but not limited to, the surface and subsurface, all Ores, Minerals, mineral elements and compounds, and mineral rights; all water and water rights; geothermal resources and geothermal water, in, upon and under the Property; all of the interests of Shoshone in all options, contracts, easements and rights-of-way reserved or granted in, upon or pertaining to the Property; and all tenements, hereditaments and appurtenances.

2.3.

Uses : Sterling is granted the right, in so far as Shoshone may lawfully grant the right, to use the Property including, but without being limited to, the full right, authority and privilege of placing and using excavations, open pit mines, injection and production wells, openings, shafts, ditches and drains, and of constructing, erecting, maintaining, using and, at its election, removing any and all buildings, structures, plants, roadways, pumps, pipelines, electrical power lines and facilities, stockpiles, waste piles, heap leach pads, tailings ponds and facilities, settling ponds, and all other improvements, property and fixtures for mining, removing, beneficiating, concentrating, smelting, extracting, leaching (in place or otherwise), refining and shipping of Ores, Minerals or Product, or for any incidental activities, whether presently contemplated or known to be used in the mining, extraction, production or processing of Minerals, water or geothermal resources, or energy resources, or to any of the rights or privileges of Sterling hereunder. Sterling is further

granted the right, insofar as Shoshone lawfully may grant the right, to divert streams, to remove lateral and subjacent supports, to use, cave, subside, consume, or destroy the surface of any part thereof, to deposit earth, rocks, waste lean Ore and materials on any part of the Property, to leach the same, and to commit waste.

2.4.

Water Rights : Shoshone leases to Sterling all of Shoshone’s water rights appurtenant to the Property. Subject to the regulations of the state in which the Property is situated concerning the appropriation and taking of water, Sterling shall have the right to appropriate and use water, to drill wells for the water on the Property and to lay and maintain all necessary water lines as may be required by Sterling in its operations on the Property.

3.

Relationship of the Parties :

3.1.

Limitation : Sterling’s performance of its duties and obligations under this Agreement shall not obligate Sterling to perform any additional services to Shoshone. Sterling may, without notice to Shoshone, explore, conduct geological, geochemical and geophysical investigations, sample, drill or otherwise explore for, in the manner and to the extent that Sterling, in its sole discretion, deems advisable, to locate and develop Ores, Minerals and Metal in and on the Property. Sterling may, in its sole discretion and without notice to Shoshone terminate its exploration, development, mining, and processing activities on the Property and commence reclamation as required by applicable laws, regulations and the terms and conditions of any governmental plan of operations, permit, license or approval. Only the express duties and obligations described in this Agreement are binding upon Sterling.

3.2.

No Partnership : This Agreement shall not be deemed to constitute any party, in its capacity as such, the partner, agent or legal representative of any other party, or to create any partnership, mining partnership or other partnership relationship, or fiduciary relationship between them, for any purpose whatsoever.

3.3.

Competition : Except as expressly provided in this Agreement each party shall have the free and unrestricted right independently to engage in and receive the full benefits of any and all business endeavors of any sort whatsoever outside the Property or outside the scope of this Agreement whether or not competitive with the endeavors contemplated herein without consulting the other or inviting or allowing the other therein. In particular, without limiting the foregoing, neither party to this Agreement shall have any obligation to the other as to any opportunity to acquire any money, property, interest or right offered to it outside the scope of this Agreement.

4.

Term : The term of this Agreement shall be from the Effective Date for twenty (20) years unless terminated or canceled, and for so long thereafter as Sterling produces or processes minerals from the Property.

5.

Minimum Work Obligations :

5.1.

Sterling shall undertake a four (4) year Exploration and Mining Operation project, in such manner as Sterling in its sole discretion shall determine, on the Property. Such Exploration and Mining Operations shall begin within five (5) years of the Effective Date of this Agreement. The minimum amount of expenditures shall be $50,000 in the first year, $75,000 in the second year and $100,000 in each of the third and fourth years. Sterling may choose to forego Exploration and Mining Operation in any or all years provided cash payments equal to the minimum expenditures are tendered to Shoshone by the end of the Lease Year in which Exploration and Mining Operation would have been performed.

6.

Payments : Sterling shall make the following payment to Shoshone:

6.1.

Production Royalty : Sterling shall pay to Shoshone a production royalty equal to ten percent (10%) of the Net Proceeds from the production of Minerals from the Property and $1,000 per year minimum Net Proceed Royalty. Payment of Net Proceed Royalty shall commence at the beginning of the fifth Lease Year. Payments of the Net Proceeds shall be made in accordance with the provisions of Exhibit B hereto.

6.2.

Method of Payment : All payments made by Sterling to Shoshone shall be paid in accordance with the provisions of Exhibit B hereto.

6.3.

Audit : Shoshone or its authorized agents shall have a right to audit and inspect Sterling’s accounts and records used in calculating production royalty payments, which right may be exercised as to each payment at any reasonable time during a period of ninety (90) days from the date on which the payment was made by Sterling. If no such audit is performed during such period, such accounts, records and payments shall be conclusively deemed to be true, accurate and correct.

7.

Compliance with the Law : The exercise by Sterling of any rights, privileges, grants and uses under this Agreement shall confirm at all times with the applicable laws and regulations of the state in which the Property is situated and the United States of America. Sterling shall be fully responsible for compliance with all applicable federal, state and local reclamation statutes, regulations and ordinances relating to such work, all at Sterling’s cost, and Sterling shall indemnify and hold harmless Shoshone from any and all claims, assessments, fines and actions arising from Sterling’s failure to perform the foregoing obligations. Shoshone agrees to cooperate with Sterling in Sterling’s application for governmental licenses, permits and approvals, the costs of which shall be borne by Sterling.

8.

Mining Practices; Inspection of Data: Reports:

8.1.

Inspection of Data : During the term of this Agreement, Sterling shall have the right to examine non-interpretive factual data regarding the Property in Sterling’s possession during reasonable business hours and upon prior notice, provided, however, that the rights of Shoshone to examine such data shall be exercised in a manner such that such inspection does not unreasonable interfere with the operations of Sterling.

8.2.

Reports : Sterling shall deliver to Shoshone, on or before the nineteenth (19 ^th ) day after the end of each calendar year, a summary report of all exploration or development work conducted by Sterling on the Property for the previous year. Notwithstanding the foregoing, Sterling shall not be required in its reports to disclose proprietary information or information concerning, or which might tend to reveal, processes, techniques or equipment which Sterling is under a contractual obligation not to reveal.

8.3.

Measurement Analysis : Sterling shall measure Ore and grade and take and analyze samples in accordance with industry practice, and shall keep accurate records thereof as a basis for computing the production royalty payments. These records shall be available for inspection and copy by Shoshone at all reasonable times subject to the provisions of this Agreement regarding accounts, records and payments.

9.

Measurement Analysis : Sterling shall keep accurate records of the sale or shipment of Product from the Property, and these records shall be available for inspection and copy by Shoshone at all reasonable times.

10.

Consolidation of Operations :

10.1.

Cross Mining : Sterling is granted the right to mine and remove Ore, Minerals, Product and materials from the Property through or by means of shafts, openings or pits which may be in or upon adjoining or nearby lands owned or controlled by Sterling. Sterling may use the Property and any shafts, openings and pits on the Property for the mining, removal, treatment and transportation of ores and materials from adjoining or nearby lands, or for any purpose connected with such activities. Sterling shall have the right to treat or process, in any manner (including in situ or solution mining), any Ore, Minerals, material and products mined or produced from the Property and from other lands. Such treatment may be conducted wholly or in part at facilities established or maintained on the Property of on other lands. The tailings and residue from such treatments shall be deemed waste and may be deposited on the property or on other lands and Sterling shall have no obligation to remove such waste from the property, nor to return to the property waste resulting from the processing of ores or materials from the property.

10.2.

Unitization : Sterling’s operations on the Property and its operations on other lands may be conducted upon the Property and upon any and all such other lands as a single mining operation, to the same extent as if all such properties constituted a single tract of land.

10.3.

Boundary Areas : Shoshone waives all rights, statutory and otherwise, to require Sterling to maintain adjacent support for the Property and any contiguous property owned, leased, or controlled by Sterling or any other party. Shoshone waives its right to prohibit Sterling from mining within any minimum distance of any boundary line of the Property and contiguous lands and grants to Sterling the authority to enter agreements with the owners of contiguous properties so as to allow mining of all ores located on or under the boundary of the Property. Sterling shall secure the necessary consents and

agreements from the owners of contiguous properties and the requisite approvals of any governmental authorities.

11.

Stockpiling:

11.1.

Stockpiling : To the extent permitted by applicable federal, state and local laws, regulations and ordinances, Sterling shall have the right to stockpile on the Property or on other lands any Ore, Minerals, Materials or Waste mined or produced from the Property at such place or places as Sterling may elect, without the obligation to remove them from where stockpiled or to return them to the Property. The stockpiling of Ore or materials from the Property on other lands shall not be deemed a removal or shipment thereof requiring payment in respect of Shoshone interest. Shoshone agrees to recognize the rights and interests of others in such ores, materials and waste stockpiled on the Property and to permit their removal by Sterling or the owner of such ores and materials.

11.2.

Waste : Waste, overburden, surface stripping and other materials from the Property may be deposited on or of the Property. Nothing in this Section shall limit the provisions of this Agreement concerning stockpiling Product on or off the Property.

12.

Mixing : Sterling shall have the right to commingle Ore from the Property or from other properties. Before commingling, the Ore from the Property and other ore shall be measured and sampled by Sterling in accordance with sound mining and metallurgical practice for mineral content. Representative sampl