MINING LEASE
THIS MINING LEASE
(“Agreement”) is hereby made and entered into as of the
27 th day of May, 2004 (the "Effective Date") by and
between: NEVADA NORTH RESOURCES (U.S.A.), INC., hereinafter called
"Lessor", and MIRANDA U.S.A., INC., a Wyoming corporation
hereinafter called "Lessee or Miranda". THIS MINING LEASE
(“Agreement”) supercedes the previous Agreement which
encompassed four properties (Red Hill, CONO, BPV and Coal Canyon)
and provides separate leases for each of the four properties under
the mutual promises and covenants set below.
WITNESSETH :
In
consideration of the mutual promises and covenants set forth
herein, Ten Dollars ($10.00) in hand paid and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Lessee and Lessor (sometimes referred to
hereinafter as a "Party" or collectively as the "Parties") agree as
follows:
I. GRANT OF LEASE
1.1 Grant of Lease.
(a)Lessor
hereby grants and conveys unto Lessee, its successors and assigns,
subject to Section 5.1, below, an exclusive lease unto the Property
on the terms and conditions set forth in this Agreement. As used in
this Agreement, the term "Property" means Lessor's entire interest
in the Red Hill property described in Exhibit A, attached hereto
and made a part hereof, together with all minerals, mineral
substances, mineral rights, water rights and all surface, access,
and other rights associated with or appurtenant to such
Property.
1.2
Term. The initial term of this Agreement shall be
twenty (20) years from the Effective Date, unless sooner terminated
according to the provisions of this Agreement. This Agreement shall
remain in effect after the initial term for so long as mining,
processing, construction of mine facilities, development of ore
reserves or exploration activities ("Mining Related Activities")
continue on the Property or other adjacent or contiguous properties
owned or controlled by Lessee within each anniversary of this
Agreement. It shall not be required that Mining Related Activities
be continuous in order for this Agreement to be extended beyond the
initial term hereof.
(a)
Minimum term. Miranda commits to a two (2) year option on the
property made up of the initial payment and the first year
anniversary payments.
1.3 Grant of Rights. During the term of this
Agreement, Lessor grants to Lessee the following exclusive
rights:
(a)
the right of entry;
(b)
by whatever method is now known or subsequently developed, to
survey, explore, prospect, sample, drill, develop, mine (including
without limitation by surface, open pit, underground, solution or
any other method whatsoever), cross-mine, stockpile, remove,
transport, leach, concentrate, mill, smelt, beneficiate, process,
treat, ship, market and sell all minerals, whether extracted or
removed from the Property or other properties;
(c)
to construct, use, maintain, repair, replace and relocate
buildings, roads, pipelines, ore bins, shafts, declines, inclines,
tunnels, drifts, adits, open pits, openings, haulage ways, mine
workings, leach pads, mineral treatment facilities, tailings ponds,
waste dumps, ore stockpiles, reservoirs, power and communication
lines and any other structures, facilities or improvements of any
kind or description whatsoever;
(d)
to use the Property for the storage or permanent disposal of
minerals, overburden, waste, tailings, water or other by-products
of materials produced from the Property or from other
properties;
(e)
to use all easements, rights-of-way and means of access for ingress
and egress to, from, across and through the Property;
(f)
to take, develop, or use water, whether surface, underground, or
artesian, by any lawful taking or development, without restriction
as to the place or places of Lessee's use of the waters, except
that such use may not interfere with Lessor's domestic or
agricultural use of water to which Lessor has a right of
use;
(g)
to extract, process, test, remove and dispose of any minerals and
mineral substances for testing purposes (including, without
limitation, for bulk samples) without payment of any Production
Royalty or other additional consideration whatsoever to Lessor,
provided that Lessee shall pay Production Royalty on any such
minerals removed from the Property for testing purposes for which
it receives actual sales revenues;
(h)
to use the Property for all of the purposes stated in this Section
1.3 in connection with or in furtherance of Lessee's activities on
other properties; and
(i)
to exercise all other rights that are incidental to or customarily
associated with any or all of the rights granted expressly or
implicitly to Lessee in this Agreement.
II. PAYMENTS TO LESSOR
2.1 Advance Minimum Royalties. Advance royalties as
used herein means the amount required to be paid by Lessee to
Lessor, as set forth below, to provide for a specific minimum
payment in such periods. During the term of this Agreement, Lessee
shall pay to Lessor advance minimum royalties ("Advance Royalties")
as follows:
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Upon exercise
of this Lease: (already paid)
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$6,250
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On or before
the first
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anniversary of
the Effective Date
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$12,500
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On or before
the second
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anniversary of
the Effective Date
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$12,500
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On or before
the third
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anniversary of
the Effective Date
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$20,000
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On or before
the fourth
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anniversary of
the Effective Date
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$20,000
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On or before
the fifth
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anniversary of
the Effective Date
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$25,000
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On or before
the sixth
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anniversary of
the Effective Date
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$30,000
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On or before
the seventh
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anniversary of
the Effective Date
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$40,000
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On or before
the eighth
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anniversary of
the Effective Date
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$40,000
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On or before
the ninth
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anniversary of
the Effective Date
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$50,000
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On or before
the tenth
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anniversary of
the Effective Date
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$50,000
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On or before
each subsequent
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anniversary of
the Effective Date
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$60,000*
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* Beginning on the eleventh
anniversary of the Agreement, the Advance Royalty of $60,000 shall
be adjusted for inflation increases according to the United States
Department of Labor Consumer Price Index. The beginning index shall
be the index published for April 2015. However, in no case will the
Advance Royalty drop below the Advance Royalty base amount of
$60,000.
Subject to Section 2.2(a),
Advance Royalties shall be paid on or before the date due. Lessee
shall not be responsible or liable for Advance Royalties that
become due subsequent to termination or expiration of this
Agreement. Advance Royalties paid hereunder shall be credited
against and fully recoupable from any and all Production Royalty
that may accrue under Section 2.2, regardless of whether such
Production Royalty accrues or is made in the same or any subsequent
year to the year of payment of
the Advance
Royalties.
2.2
Production Royalty.
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(a)
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Percentage and Calculation.
Subject to applicable credits and
adjustments, Lessee, in accordance with its usual practice, shall
pay to Lessor a production royalty (the "Production Royalty") equal
to the applicable percentage of Net Value as defined, calculated
and paid as set forth in Exhibit B, attached hereto and by this
reference made a part hereof. Said percentages shall be as
follows:
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Gold
Price
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Royalty
Percentage
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$275 or less
per ounce
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2.5%
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$275.01 to $
375 per ounce
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3.0%
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$375.01 to $
475 per ounce
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4.0%
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$475.01 or
greater
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5.0%
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(b)
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Option to
Reduce Production Royalty. At any time during the term of this Lease and as
to all Production Royalty payments not yet paid, Lessee shall have
the right to reduce the Production Royalty by purchasing a portion
of the Lessor’s Production Royalty such that the Lessor
retains a minimum 2% Production Royalty. The purchase price of the
Production Royalty shall be $1,000,000 US for each 1% Production
Royalty, $500,000 for each .5% Production Royalty, and $250,000 for
each .25% Production Royalty. Such a Production Royalty buy down
may take place all at one time or piecemeal.
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The right to
purchase the said Production Royalty interest shall be exercised by
Lessee providing the Lessor with notice of the purchase accompanied
by payment in full for the amount of the Production Royalty
interest being purchased for each project on which Lessee is
purchasing the Production Royalty.
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If only a
portion of the Production Royalty is purchased, then in the event
of changes in the gold price the Lessor shall retain the remaining
unpurchased Production Royalty percentage points on the sliding
scale Production Royalty, as outlined in Section 2.2 (a)
herein.
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(c)
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U.S.
Government Tax or Royalty. If the United States mining laws are hereafter
amended or a new federal law is enacted requiring the payment of a
royalty, a percentage of gross or net profits, a severance tax or
any other form of compensation to the United States based upon the
production of minerals
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from the
Property or any portion thereof (a "U.S. Government Tax or
Royalty”), then the purchase price of the Production Royalty
shall be half of the purchase price described above in this Section
2.2 (b). For clarity, the purchase price of the Production Royalty
would then be $500,000 US for each 1% Production Royalty, $250,000
for each .5% Production Royalty, and $125,000 for each .25%
Production Royalty. Furthermore, Lessor’s Production Royalty
shall not be reduced under this provision below two percent (2.0%).
If only a portion of the Production Royalty is purchased, then in
the event of changes in the gold price the Lessor shall retain the
remaining unpurchased Production Royalty percentage points on the
sliding scale Production Royalty, as outlined in Section 2.2 (a)
herein.
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This Section on
US Government Tax on Royalties is not intended to be triggered by a
general increase in personal or corporate income taxes.
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(d)
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Disputes. Lessor shall be deemed to have waived any right
it may have had to dispute any payment of Production Royalty unless
Lessor notifies Lessee in writing of such dispute within six (6)
months after the date of Lessee's payment, providing reasonable
detail as to the nature of the dispute.
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III. OPERATIONS
3.1 No Implied Covenants. Lessee does not make, and
the Advance Royalties and other obligations of Lessee under this
Agreement exclude and negate, any express or implied covenant or
duty of Lessee to conduct any activity upon or for the benefit of
the Property, including without limitation any activities related
to the exploration, development or mining of the Property. Whether
or not any such exploration, development, mining or other
activities shall at any time (including, without limitation, during
the primary term or any extended term of this Agreement) be
conducted and the location, manner, method, extent, rate and timing
of such activities (if any) shall be determined within the sole and
absolute discretion of Lessee.
3.2 Compliance with Law: Reclamation. In
connection with its activities upon the Property, Lessee shall
endeavor in good faith to comply with applicable provisions of
Federal, State and local laws and regulations. Upon expiration or
termination of this Agreement, Lessee shall reclaim all portions of
the Property disturbed by its operations (i.e., to the extent and
only to the extent of Lessee's disturbance) in accordance with all
applicable governmental laws, regulations and orders. Lessee shall
have the right, without payment of any additional consideration to
Lessor, to enter upon the Property subsequent to termination of
this Agreement for purposes of performing such reclamation
work.
3.3 Permits and Approvals. Lessor understands
that Lessee may make efforts to obtain permits, licenses, rights,
approvals or authorizations from governmental or private persons or
entities in connection with the exercise by Lessee of its rights
under this Agreement. Upon request by Lessee, Lessor shall assist
and cooperate fully with Lessee
in any such
endeavor, including, without limitation, the execution of pertinent
documents and the making of verbal endorsements for Lessee's
related activities.
3.4 Liens. Lessee shall keep the title to the
Property free and clear of all mechanic's and supplier's liens
resulting from its operations under this Agreement. Lessee may
refuse, however, to pay any claims asserted against it which Lessee
disputes in good faith. Lessee may contest any suit commenced to
enforce such a claim, but under no circumstances shall Lessee allow
the Property or any portion thereof to be sold as a result of
foreclosure of such a lien.
3.5 Indemnity. Each Party covenants and agrees
to indemnify the other from and against any and all liability,
claims, damages (including attorneys' fees) and causes of action
for injury to or death of persons, and damage to or loss or
destruction of property and environmental liabilities resulting
from the indemnifying Party' s use or occupancy of the Property or
its operations hereunder.
3.6 Commingling. Lessee shall have the right
to commingle minerals produced from the Property ("Subject Ore")
with minerals produced from other tracts ("Other Ore") for any
purposes whatsoever, including, without limitation, processing or
conversion to another product. In the event that Lessee commingles
Subject Ore with Other Ore pursuant to this Section 3.6, Lessee
shall perform sufficient sampling, weighing and assaying, in
accordance with standards and practices generally accepted or
employed within the industry, to determine the grades and
quantities of minerals removed and sold from the Property. Without
limiting the foregoing, in the event that Lessee commingles Subject
Ore with Other Ore then, for purposes of determining Production
Royalty payable to Lessor, the percentages of valuable minerals
ultimately recovered from the commingled ore (i.e., from the
commingled Subject Ore and Other Ore as a whole) shall conclusively
be deemed applicable to the Subject Ore included therein. Lessor
has the right, at its own expense, to take independent samples of
commingled ores, upon reasonable advance notice to Lessee and in a
manner that will not interrupt Lessee's operations.
3.7
Taxes, Cooperation and Maintenance Payments.
(a)
Taxes. Lessor shall promptly pay when due all ad
valorem and real property taxes and assessments levied upon,
assessed against or relating to the Property, provided, however,
that Lessee shall reimburse Lessor for any increases in or advance
payments of such real property taxes or assessments that are
attributable to any enhancement in the value of the Property
resulting from Lessee's activities under this Agreement, including,
without limitation, deferred agricultural property taxes. Each of
Lessee and Lessor shall be responsible for all taxes and
assessments levied or assessed upon or against their respective
personal property located on or about the Property. Each of Lessee
and Lessor shall be responsible for payment of income taxes on
their own respective incomes. If Lessor fails to timely pay such
taxes, Lessee shall have the right, but not the duty, to pay such
taxes on Lessor's behalf and deduct such amounts from any amounts
due Lessor hereunder.
(b)
Cooperation. Lessor shall promptly furnish to Lessee
all bills, demands, notices, assessments or statements received by
Lessor which relate to any tax, assessment or fee for which Lessee
is responsible, in whole or in part, pursuant to this Section 3.7.
Each Party shall provide the other Party with copies of all checks
and other documentation evidencing the timely payment of all taxes,
assessments and fees for which it is responsible pursuant to
Section 3.7A.
(c)
Maintenance Payments. Lessee shall pay those federal
claim maintenance fees due on the Property by September 1, 2004 and
any associated county recordation fees. For each year this
Agreement remains in effect past June 1 of the then current year,
Lessee shall timely and properly pay federal maintenance fees and
county recordation fees pertaining to the Property leased hereunder
to Lessee.
IV. TITLE
4.1 Provision of Information. Upon request by Lessee,
Lessor shall furnish to Lessee copies of all information in its
possession or under its control relating to title to or description
of the Property, including without limitation copies of all
abstracts, certificates of title, title insurance policies,
commitments for title insurance, title reports, memorandum or
opinions of counsel, prior deeds, contracts, maps, surveys and
documents filed with any local, state or federal governmental
agency. Lessee shall promptly reimburse Lessor for the costs of
such copies. Upon execution of this Agreement, Lessor shall provide
to Lessee any and all information in its possession or under its
control regarding any existing or past industrial, milling,
manufacturing, waste storage, exploration, development, mining,
processing or beneficiating use of the Property. Pursuant to this
Section 4.1, Lessor shall only be obligated to provide to Lessee
information that is in its possession or under its control and
Lessor shall not be obligated to obtain or provide any other
information or documents.
4.2 Representations. Lessor represents to Lessee that
to the best of Lessor's knowledge and belief, as of the Effective
Date and as of the date of execution of this Agreement
that:
(a)
Subject to the paramount title of the United States, Lessor is the
sole legal and equitable owner of a one hundred percent (100%)
undivided ownership interest in those unpatented lode mining claims
described as Property herein, without limitation or restriction
whatsoever;
(b)
The Property is free and clear of all leases, liens, encumbrances,
adverse claims, burdens on production and royalty
interests;
(c)
Any and all taxes and assessments that have been levied or assessed
against or upon the Property that are due and owing have been
paid;
(d)
Lessor (and the individual who is executing this Agreement on
Lessor’s behalf) has the full right, power and authority to
execute and enter into this Agreement and such execution and
performance shall not violate any contract or other obligation of
Lessor;
(e)
Lessee shall have the quiet and peaceful possession and enjoyment
of the Property, and, upon request by Lessee, Lessor shall defend
title to the Property, and Lessee's quiet and peaceful possession
and enjoyment thereof against any and all persons or entities who
may claim any right, title or interest in or to the Property or any
portion thereof;
(f)
There is and has been no violation of any applicable federal, state
or local law or regulation, including, without limitation, those
concerning zoning, land use or environmental protection, with
respect to the Property or activities relating thereto;
(g)
No actions, claims or proceedings have been brought, asserted or
threatened concerning the ownership or right to possession of the
Property or any portion thereof or otherwise concerning the
Property or activities relating thereto; and
(h)
All unpatented mining claims included in the Property have been
properly staked according to industry standards and maintained and
are validly existing in accordance with applicable law.
4.3 Indemnity. In the event that any of Lessor's
representations set forth in Section 4.2 is less than represented,
Lessor shall indemnify and hold Lessee harmless from and against
any and all damage, liability, obligation, claim, demand, judgment,
action, cost, loss and expense, including, without limitation,
reasonable attorneys' fees arising directly or indirectly as a
result of said misrepresentation.
4.4
Title Curative Measures.
A.
Title Defects. If title to any part of the Property is
defective or less than as represented in Section 4.2, Lessee shall
have the right, but not the obligation, to undertake to cure any
such defects or to defend or to initiate litigation to perfect,
defend or cure title to the Property, but only after Lessor has
been offered the opportunity to take any necessary curative
measures.
B. Crediting of Costs. Lessee shall have the
right to credit against any and all payments to Lessor under this
Agreement ("Payments"), including without limitation Advance
Royalties, Production Royalty and all costs and expenses incurred
by Lessee at Lessor's request in connection with any action to
cure, defend or perfect title pursuant to Section 4.4. A. Such
costs and expenses may include, without limitation, those relating
to title research, court costs, surveying and attorneys'
fees.
C. Redemption. Lessee, at its option, shall
have the right to pay off, discharge or redeem, in whole or in
part, any or all mortgages, liens, encumbrances or unpaid taxes on,
against or affecting the Property. If Lessee pays any such
mortgage, lien, encumbrance or unpaid taxes created or caused by
Lessor, Lessee shall be subrogated to the rights of the
holder
thereof and shall have the right to retain and repay itself from
any or all Payments to Lessor hereunder.
D. Liability. Lessee at any time may withdraw
from or discontinue any action or activity undertaken or initiated
by it to cure, defend or perfect title to the Property pursuant to
Section 4.4. A. Lessee shall not be liable to Lessor in any way if
Lessee is unsuccessful in, withdraws from or discontinues any such
action or activity.
4.5 Additional and After-Acquired Title. If
Lessor now owns or subsequently acquires any further right, title
or interest in or to the Property, Lessor shall promptly provide
Lessee with written notice thereof and such right, title and
interest shall, without payment of additional consideration, be
part of the Property subject to all of the terms and conditions of
this Agreement.
4.6 Lesser Title. If Lessor owns less than the
entire and undivided estate in those lands described as the
Property (including, without limitation, the minerals therein,
thereon and thereunder), as warranted in Section 4.2(a), then
Lessee shall have the right to reduce all Payments to Lessor, so
that such Payments are made to Lessor only in the proportion that
Lessor's actual interests bears to the entire undivided interest.
Lessee shall be entitled to offset all overpayments or monies
erroneously paid to Lessor against any and all subsequent Payments
to Lessor.
4.7 Third Party Claims. In the event that any
person or entity (other than Lessor) makes a bona fide claim or
asserts or appears to hold any right, title or interest whatsoever
in or to the Property (including, without limitation, the minerals
therein, thereon or thereunder) production therefrom or this
Agreement, then the following shall apply:
(i)
Lessee may deposit in a special escrow account any Payments
otherwise due Lessor;
(ii)
the sum deposited shall remain in the special escrow account until
the claim or controversy is resolved or until there has been a
final determination by a court or administrative body of competent
jurisdiction and all appeals have been exhausted or periods for
appeal have expired; and
(iii)
Lessee shall have the right to deduct from any Payments to Lessor
any amounts that Lessee is required to pay to such third parties or
that Lessee reasonably elects to pay to such third parties in
satisfaction of their claims.
V. LESSOR’S USE, INSPECTIONS, RECORDS
AND CONFIDENTIALITY
5.1
Lessor’s Use and Inspections.
( a) During the term of this Agreement Lessor shall have the
right of entry and use of the Property for purposes that do not
interfere with the current and anticipated activities of Lessee.
Lessor acknowledges and agrees that Lessee’s use of the
Property shall prevail in the event of any conflict between the use
or proposed use of the Property by Lessee and Lessor. Lessor agrees
to assume all liability for, and to indemnify, protect and hold
harmless Lessee from and against any and all damage, loss,
liability, obligation, claim, demand, cost or expense (including
attorneys' fees) which it incurs or to which it becomes subject as
a result of or arising out of any such entry use or the presence or
actions of Lessor (or its agents or invitees) upon the Property,
including, without limitation, those relating to death, personal
injury or property damage.
(b)
Subject to compliance with applicable federal, state and local
health and safety laws and regulations, and requirements of
Lessee's health and safety program, Lessor shall have the right,
upon not less than forty-eight (48) hours prior written notice to
Lessee, at a mutually convenient time and during normal business
hours
