INDENTURE OF LEASE

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Exhibit 10.5

P.L. #20
Amended April 6, 2000

STATE OF WYOMING
COAL MINING LEASE

        THIS INDENTURE OF LEASE ENTERED INTO THIS 2nd day of May, 2004, A.D. by and between the STATE OF WYOMING, acting by and through its Board of Land Commissioners (Board), party of the first part, hereinafter called the lessor, and

Antelope Coal Company

party of the second part, hereinafter called the lessee.

        Section 1.     PURPOSES.     The lessor, in consideration of the rentals and royalties to be paid and the covenants and agreements hereinafter contained and to be performed by the lessee, does hereby grant and lease to the lessee the exclusive right and privilege to mine, extract and remove all of the coal deposits in or under the following described land, to wit:

        640.00 All Section 36, Township 41 North, Range 71 West, 6 ^th  p.m.

consisting of 640,00 acres, more or less, Converse county, together with the right to construct, and maintain thereon all works, buildings, plants, waterways, roads, telegraph, telephone and power lines, tipples, hoists or other structures necessary to the full enjoyment thereof, including the right to transport coal through the underground workings on the premises above described, subject however, to the conditions hereinafter set forth.

        Section 2.     TERM OF LEASE.     This lease, unless terminated at an earlier date as hereinafter provided, shall remain in force and effect for a term of ten (10) years beginning on the 2nd day of May, 2004 and expiring on the 1st day of May, 2014.

        Section 3.     IN CONSIDERATION OF THE FOREGOING, THE LESSEE COVENANTS AND AGREES:     

        (a)     BOND     When actual operations for coal is to be commenced, and for all operations thereafter, a bond shall be furnished in an amount determined by the Director of the Office of State Lands and Investments to be advisable in the premises. The operating bond shall preferably be a corporate surety bond, executed by the lessee, the surety being authorized to do business in the State of Wyoming. Other bond may be furnished on the consent of the Office of State Lands and Investments if the lessee is unable to obtain a corporate surety bond as per Chapter 19 of the rules of the Board of Land Commissioners. The State will require two executed copies of the bond, therefore, as many additional copies should be made as will be required by the lessee and the bonding company.

        (b)     PAYMENTS     To make all payments accruing hereunder to the Wyoming Office of State Lands and Investments, Herschler Building 3 ^rd  Floor West, 122 West 25th Street, Cheyenne, Wyoming 82002-0600.

        (c)     RENTALS     Prior to the discovery of commercial quantities of coal in the lands hereby leased, to pay the lessor in advance, beginning with the effective date hereof, an annual rental of ONE DOLLAR ($1.00) PER ACRE OR FRACTION THEREOF PER YEAR for the 1st through the 5th years inclusive and TWO DOLLARS ($2.00) PER ACRE OF FRACTION THEREOF PER YEAR for the 6th through 20th years inclusive, THREE DOLLARS ($3.00) PER ACRE OR FRACTION THEREOF PER YEAR for the 21 ^st  through 30 ^th  years inclusive, and FOUR DOLLARS ($4.00) PER ACRE OR FRACTION THEREOF for any year beyond the 30 ^th  lease year; provided, however, that if the said lands are not on a commercial mining basis and so operated at the end of two (2) years from the date hereof, such rental may be increased at the option of the lessor, to such an amount as the lessor may decide to be fair and equitable. After

the discovery of commercial quantities of coal in the lands herein leased to pay to the lessor in advance, beginning with the first day of the lease year succeeding the lease year in which commercial discovery was made, an annual rental of TWO DOLLARS ($2.00) PER ACRE OR FRACTION THEREOF PER YEAR through and including the 20 ^th  year of the lease term, THREE DOLLARS ($3.00) PER ACRE OF FRACTION THEREOF for the 21 ^st  through 30 ^th  years, and FOUR DOLLARS ($4.00) PER ACRE THEREAFTER.

        Annual rentals on all leases shall be payable in advance for the first year and each year thereafter. No Notice of Rental Due shall be sent to the lessee. If the rental is not received in this office on or before the date it becomes due, Notice of Default will be sent to the lessee and a penalty of ONE DOLLAR ($1.00) per acre or fraction thereof for late payment will be assessed.

        After initial submission of the increased annual rental required by the lease upon the discovery of coal in paying quantities, lessees are exempt from submission of subsequent annual creditable lease annual rentals for so long as annual royalties paid meet or exceed the required annual rental amount. The annual rental shall be held for a credit on annual royalty in any year the annual royalty does not equal the required annual rental (minimum royalty) amount. Any credit amount used in making up the difference in royalty paid and the minimum lease royalty due must be paid within thirty (30) days following the next lease anniversary date to continue the lease. The Office shall notify lessees of any minimum royalty amount due after the lease anniversary for which a shortfall occurs.

        The lessee is not legally obligated to pay either the rental or the penalty, but if the rental and penalty are not received in this office within thirty (30) days after the Notice of Default has been received by the lessee, the lease will terminate automatically by operation of law. Termination of the lease shall not relieve the lessee of any obligation incurred under the lease other than the obligation to pay rental or penalty. The lessee shall not be entitled to a credit on royalty due for any penalty paid for late payment of rental on an operating lease.

        (d)     ROYALTY     To pay a royalty on all coal mined from the land herein leased, either in kind or value as the lessor may elect of 12 ¹ / 2 % on coal mined by surface mining operations and 8% on coal mined by underground mining operations.

        Royalty shall be payable on the gross mine realization value per ton at the mine, on all coal mined. Gross mine realization for the purpose of royalty calculation means the sum of all the unit sales or contract prices times the number of tons sold at each price divided by the total tons sold. In calculating this gross value, the sales prices shall be prima facia evidence of value, however, any additional consideration received by lessee or its affiliates, regardless of the location or time of received, shall also be considered as the gross mine realization value of production. No deduction shall be allowed for fees, taxes, assessments or similar levies imposed by the State of Wyoming, its political subdivisions, any other state or the federal government, nor for the expense of mining, processing and loading the coal in merchantable condition at the mine ready for shipment. If the coal is not sold and valued at the mine, reasonable actual transportation from the mine to the point of sale or delivery may be deducted in determining value. In the event there is no sale of the coal or the Board of Land Commissioners determines that the sales price does not truly reflect the value of the coal, it shall make its own determination of value, and require that royalties be paid on the basis of the value as determined.

        If the lessor elects to take its royalty in kind, royalty coal shall be good merchantable coal delivered for shipment at the mine.

        (e)     MONTHLY PAYMENTS AND STATEMENTS     Unless a different time schedule is approved by the Board of Land Commissioners, to make payment on or before the thirtieth (30th) day of the calendar month succeeding the month of production, for royalties on all coal mined from the land; and to furnish monthly statements therewith showing in tons, the amount of all coal

2

mined, accompanied by the mine weights; and such other information as may be called for by the form of report prescribed by the lessor. These statements are to be subject to verification by examination of books and records of the lessee.

        (f)     UNDERGROUND WORKINGS     That in the underground workings for coal all shafts, inclines and tunnels shall be supported through accepted standard underground engineering/mining practices for coal, that all underground timbering placed in the mine shall be kept in good condition and at no time shall timbering be removed unless al of the coal in the lands have been removed; that at the termination of this lease all underground timberings shall become the property of the lessor without compensation therefor to the lessee; that all parts or workings, where the coal is not exhausted and for good reasons not being worked, will be kept free from water and waste material; and that the underground workings shall be protected against fire and flood and should creeps and squeezes occur they shall be checked without delay; to leave such solid blocks of coal as may be necessary to support the cover and protect the slopes, air-courses, manways, and hauling roads to permit the lessee to mine coal from any lands which he may own or become owner of in adjacent sections of land; and the lessee shall have the use of the slopes, air-courses, manways and hauling roads for the purpose of mining in the adjacent sections provided the lessee shall pay the royalty for the blocks of coal so left for support for protection, if it shall be agreed that the blocks of coal so left shall be more for the benefit of the lessee than to the State of Wyoming, and all coal so paid for may be removed subsequently during the term of this lease without subjecting the lessee to the payment of an additional royalty therefor.

        (g)     STRIP WORKINGS     That all strip workings shall be operated in such a manner so as to remove all coal in the vein or veins worked; that strip mining shall be continuous across the property according t