Mining Sublease and Option to Purchase Agreement

Mining Sublease and Option to Purchase Agreement

           This Mining Sublease and Option to Purchase Agreement (“Agreement”) is made and entered into by and between Goodsprings Development Corporation, a Nevada Corporation (“Owner”), and Entourage USA Inc., a wholly owned subsidiary of Entourage Mining Ltd. (Lessee), a British Columbia corporation. Entourage Mining Ltd. hereby accepts the financial responsibility of Entourage USA Inc.’s commitments under the terms and conditions of this agreement.

Recitals

           A.       Owner leases the Black Warrior patented mining claim USMS 40 and Sunrise USMS 41, and the unpatented mining claims BW1-BW5 and BWX1-BWX4, and has located the GBW group of unpatented claims situated in T. 1 S., R. 39 E., MDB&M, Esmeralda County, Nevada, more particularly described in Exhibit A attached to and by this reference incorporated in this Agreement (collectively the “Property”).

           B.      Owner desires to sublease the Property to Lessee and to grant to Lessee the option to purchase the Property on the terms and conditions of this Agreement.

           Now, therefore, in consideration of their mutual promises, the parties agree as follows:

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

               1.1 “Area of Interest” means the geographic area within two (2) mile from the exterior boundaries of the Property.

               1.2 “Closing Date” means the date on which Lessee’s purchase of the Property is closed in accordance with Section 5.

               1.3 “Effective Date” means June 1, 2004.

               1.4 “Governmental Regulations” means all directives, laws, orders, ordinances, regulations and statutes of any Federal, state or local agency, court or office.

               1.5 “Interest Rate” means twelve percent (12%) per annum compounded on an annual basis.

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

               1.7 “Lessee” means Entourage USA Inc., a wholly owned subsidiary of Entourage Mining Ltd., a British Columbia corporation, and its successors and assigns.

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               1.8 “Minerals” means all minerals and mineral materials, including gold, silver, platinum, and platinum group metals, base metals (including antimony, chromium, cobalt, copper, lead, manganese, mercury, nickel, molybdenum, titanium, tungsten, zinc), and other metals and mineral materials which are on, in or under the Property.

               1.9 "Net Smelter Returns" means the net smelter returns from the production of Minerals from the Property as calculated and determined in accordance with Exhibit 1 to Exhibit B, the conveyance to be executed and delivered in accordance with Section 5.5.

               1.10 “Option” means the Option granted by Owner to Lessee to purchase the Property.

               1.11 “Owner” means Goodsprings Development Corporation, a Nevada corporation, and its successors and assigns.

               1.12 “Property” means the Black Warrior patented mining claim USMS 40 and Sunrise USMS 41, and the unpatented mining claims BW1 - BW5, and BWX1-BWX4, and the GBW unpatented mining claims situated in T.1 S., R.39 E., MDB&M, Esmeralda County, Nevada, plus such additional unpatented mining claims which are made subject to this Agreement.

               1.13 “Purchase Price” means the purchase price for the Property described in Section .

               1.14 “Rental Payments” means the rental payments payable by Lessee in accordance with Section 4.1.

               1.15 "Royalty" means the production royalty payable by Lessee to Owner in accordance with Section 4.2.

               1.16 "Underlying Agreements" means the Lease and Option to Purchase Agreement between Owner and Apex 76 Deep Mines Co., a Nevada corporation, concerning the Black Warrior patented mining claim USMS 40 and Sunrise USMS 41, and the unpatented mining claims BW1 - BW5, and BWX1-BWX4.

2.           Lease and Grant of Rights. Owner leases the Property to Lessee and grants Lessee the rights and privileges described in this Section.

                2.1 Lease and Sublease . Owner leases the Black Warrior group of claims and owns the GBW group of claims and hereby subleases both groups of claims, subject to the Underlying Agreement, to Lessee for the purpose of exploration for Minerals, provided, however, that Lessee shall have no right to construct, develop or operate a mine on the Property without first having exercised and closed the Option. Lessee agrees and covenants to perform all of Owner's obligations under the Underlying Agreements which accrue during the term of this Agreement.

                2.2 Water Rights. Subject to the regulations of the State of Nevada concerning the appropriation and taking of water, Lessee 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 Lessee in its operations on the Property. If Lessee acquires or files any applica-

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tion for appropriation or a permit, it shall cause each such application and permit to be taken jointly in the names of Owner and Lessee. On termination of this Agreement, except on Lessee’s exercise and closing of the Option, Lessee shall assign and convey to Owner all permits and water rights appurtenant to the Property which are acquired by Lessee during the term of this Agreement. If Lessee exercises and closes the Option, Owner shall assign and convey to Lessee all permits and water rights appurtenant to the Property.

3.           Term. The initial term of this Agreement shall commence on the Effective Date and shall expire ten (10) years after the Effective Date, unless this Agreement is sooner terminated, canceled or extended. Owner grants to Lessee and Lessee shall have the option and right to extend the term of this Agreement for ten (10) additional extension terms of one (1) year each on the express condition that Lessee is conducting exploration activities on the Property at the expiration of the term immediately preceding the proposed extension term and Lessee is current in its performance of all of its obligations under this Agreement, including, expressly, Lessee’s payment obligations. If Lessee elects to extend the term of this Agreement, Lessee shall notify Owner not less than thirty (30) days before expiration of the term immediately preceding the proposed extension term.

4.           Payments. Lessee shall make the following payments to Owner:

                4.1      Rental Payments. On the dates described below, Lessee shall pay to Owner the sums described below:

The Rental Payments shall be credited against the Purchase Price.

               4.2       Production Royalty . Lessee shall pay to Owner a production royalty equal to three percent (3%) of the Net Smelter Returns from the production or sale of Minerals from the Property. Lessee shall calculate and pay the Royalty in accordance with Exhibit 1 to Exhibit B attached to and by this reference incorporated into this Agreement, to be executed and delivered by Owner in accordance with section 5.5. Lessee shall pay the Royalty within one month after the last day of each month during which Lessee sells or ships any Minerals, materials or ores. Lessee shall have he option to purchase one third of the Royalty representing a one percent (1%) Net Smelter Return Royalty, for one million dollars ($1,000,000.00), in accordance with the terms of the conveyance to be executed and delivered in accordance with Section 5.5. Lessee may exercise its option to purchase such part of the Royalty at any time during the term of this Agreement or during the time prescribed in the conveyance.

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                4.3       Payment of Mining Claim Staking and Maintenance Costs . Not less than sixty (60) days before (a) the legal or regulatory deadlines for payment of the Federal annual mining claim maintenance fees, performance of annual assessment work, if required, and the filing or recording of proof of payment of such fees or of intent to hold the mining claims which comprise the Property; and (b) the payments payable by Owner pursuant to the Underlying Agreements, Lessee shall pay to Owner the sums for such maintenance, work, filing and recording fees, and underlying payments in order that Owner may timely pay and perform such obligations. Lessee also agrees to pay for the staking and recording of any new claims contiguous with the Property, or to reimburse Owner for its costs in staking and recording any new claims contiguous with the Property

                4.4      Method of Payment. All payments by Lessee to Owner shall be paid by check delivered to Owner at its address for notice purposes or by wire transfer to an account designated by Owner.

                4.5      Late Charge and Interest. If Lessee does not timely pay any Rental Payment or any other amount payable by Lessee under this Agreement within ten (10) days after the date on which such payment is due, Lessee shall pay to Owner a late charge equal to ten percent (10%) of such overdue amount. Owner’s acceptance of the late charge payment shall not constitute a waiver of Lessee’s default regarding such overdue amount, nor prevent Owner from exercising any of Owner’s other rights and remedies granted under this Agreement. If any Rental Payment or other amount payable by Lessee remains delinquent for a period in excess of thirty (30) days, Lessee shall pay to Owner, in addition to the late charge, interest from and after the due date at the Interest Rate. Lessee’s payment of such interest shall not excuse or cure any default by Lessee.

                4.6      Currency . All monetary sums referred to in this Agreement are in United States currency.

5.           Option. Owner grants to Lessee the exclusive right to purchase the Property, subject to the Royalty reserved by Owner and subject to Lessee’s obligations under the conveyance executed and delivered by Owner on the closing of the Option. The Purchase Price for the Property shall be Four Hundred Thousand Dollars ($ 400,000.00) . The Rental Payments paid by Lessee to Owner shall be credited against the Purchase Price.

                5.1      Notice of Election. If Lessee elects to exercise the Option, Lessee shall deliver written notice to Owner. On Owner’s receipt of Lessee’s notice of exercise of the Option, the parties shall make diligent efforts to close the conveyance of the Property, as applicable, within thirty (30) days after Owner’s delivery of the notice.

                5.2      Real Property Transfer Taxes. Lessee shall pay the real property transfer taxes, if any, the costs of escrow and all recording costs incurred in closing of the Option.

                5.3       Proration of Taxes. Payment of any and all state and local real property and personal property taxies levied on the property and not otherwise provided for in this Agreement shall be prorated between the parties as of the closing of any transaction on the basis of a thirty (30) day month.

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                5.4      Payment on Closing. On closing of the Option, Lessee shall pay the balance of the Purchase Price to Owner, in cash or by wire transfer to an account designated by Owner.

                5.5      Conveyance on Closing. If Lessee exercises and closes the Option, Owner shall execute and deliver to Lessee a conveyance of the Property in the form of Exhibit B. Owner and Lessee shall execute and deliver such other written assurances and instruments as are reasonably necessary for the purpose of closing the purchase of the Property. The execution, delivery and recording of the conveyance shall not constitute a merger of Lessee's obligations under this Agreement which shall survive the closing of the Option.

                5.6      Effect of Closing. On closing of the Option, Lessee shall own the Property, subject to the Royalty reserved by Owner, and Lessee's other obligations as stated in the conveyance of the Property.

6.           Compliance With the Law. Lessee shall, at Lessee’s sole cost, promptly comply with all Governmental Regulations relating to the condition, use or occupancy of the Property by Lessee, including but not limited to all exploration and development work performed by Lessee during the term of this Agreement. Lessee shall, at its sole cost, promptly comply with all applicable Governmental Regulations regarding reclamation of the Property and Lessee shall defend, indemnify and hold harmless Owner from any and all actions, assessments, claims, costs, fines, liability and penalties arising from or relating to Lessee’s failure to comply with any applicable Governmental Regulations. Owner agrees to cooperate with Lessee in Lessee’s application for governmental licenses, permits, and approvals, the costs of which shall be borne by Lessee. Promptly following the Effective Date, Lessee shall apply and diligently prosecute its application for a special use permit for mining operations on the Property.

7.           Lessee's Work Practices and Reporting.

                7.1       Work Practices. Lessee shall act as operator of the property and shall work the Property in a miner-like fashion. Lessee has a right to sub-contract work on the property providing that any sub-contractor or consultant agrees, in performing the work, to be bound by the terms of this agreement as though it were the lessee.

                7.2       Inspection of Data. During the term of this Agreement, Owner shall have the right to examine and make copies of all data regarding the Property in Lessee’s possession during reasonable business hours and upon prior notice, provided, however, that the rights of the Owner to examine such data shall be exercised in a manner that does not interfere with the operations of Lessee.

                7.3       Reports. On or before February 1 each year this Agreement is in effect, Lessee shall deliver to Owner a comprehensive report of all of Lessee's activities conducted on the Property during the previous year.

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8.           Scope of Agreement. This Agreement shall extend to and include the unpatented mining claims described in Exhibit A of this Agreement and in the exhibits which are part of this Agreement, and all other interests, mining claims and property rights made part of and subject to this Agreement in accordance with this Section. All unpatented mining claims located by Owner or Lessee which are partially or wholly in the Area of Interest shall be located in Owner’s name and shall be part of and subject to this Agreement. On location by a party of any mining claims in the Area of Interest, the locating party shall promptly notify the other party. The parties shall execute and deliver an amendment of this Agreement, in recordable form, which provides that the newly located unpatented mining claims are part of the Property and are subject to this Agreement. The amendment made be recorded by either party.

9.           Liens and Notices of Non-Responsibility. Lessee agrees to keep the Property at all times free and clear of all liens, charges and encumbrances of any and every nature and description done made or caused by Lessee, and to pay, and defend, indemnify and hold harmless Owner from and against, all indebtedness and liabilities incurred by or for Lessee which may or might become a lien, charge or encumbrance; except that Lessee need not discharge or release any such lien, charge or encumbrance so long as Lessee disputes or contests the lien, charge or encumbrance and posts a bond sufficient to discharge lien acceptable to Owner. Subject to Lessee’s right to post a bond in accordance with the foregoing, if Lessee does not within thirty (30) days following the imposition of any such lien, charge or encumbrance, cause the same to be released of record, Owner shall have, in addition to Owner’s contractual and legal remedies, the right, but not obligation to cause the lien to be released by such manner as Owner deems proper, including payment of the claim giving rise to such lien, charge or encumbrance. All sums paid by Owner for and all expenses incurred by it in connection with such purpose, including court costs and attorney fees, shall be paid by Lessee to Owner on demand with interest at the Interest Rate. Notwithstanding the provisions of this Section, Lessee shall have the right to grant a lien and security interest in the Property for the purpose of obtaining financing for the development of a mine on the Property.

10.           Taxes.

                10.1       Real Property Taxes. Owner shall pay any and all taxes assessed and due against the Property before the execution of this Agreement. Lessee shall pay promptly before delinquency all taxes and assessments, general, special, ordinary and extraordinary, that may be levied or assessed during the term of this Agreement upon the Property. All such taxes for the year in which this Agreement is executed and for the year in which this Agreement terminates shall be prorated between the Owner and Lessee, except that neither the Owner nor Lessee shall be responsible for the payment of any taxes which are based upon income, net proceeds, production or revenues from the Property assessed solely to the other party.

                10.2       Personal Property Taxes. Each party shall promptly when due pay all taxes assessed against such party’s personal property, improvements or structures placed or used on the Property.

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                10.3       Income Taxes. Owner shall not be liable for any taxes levied on or measured by income or net proceeds, or other taxes applicable to Lessee, based upon payments under this Agreement or under the conveyance executed and delivered by Owner on the Closing of the Option.

                10.4       Delivery of Tax Notices. If Owner receives tax bills or claims which are Lessee’s responsibility, Owner shall promptly forward them to Lessee for payment.

11.           Insurance and Indemnity.

                11.1       Lessee’s Liability Insurance. Lessee shall, at Lessee’s sole cost, keep in force during this Agreement term a policy of commercial general liability insurance covering property damage and liability for personal injury occurring on or about the Property, with coverage in amounts considered reasonable under Nevada mineral exploration practices and standards, and with contractual liability endorsement insuring Lessee’s performance of Lessee’s indemnity obligations of this Agreement.

                11.2       Form and Certificates. The policy of insurance required to be carried by Lessee pursuant to this Section shall be with a company approved by Owner and shall have a Best’s Insurance Rating of at least A-VII. Such policy shall name Owner as an additional insured and contain a cross-liability and sever ability endorsement. Lessee’s insurance policy shall also be primary insurance without right of contribution from any policy carried by Owner. A certificate of insurance and a copy of Lessee’s insurance policy shall be provided to Owner before any entry by Lessee or its agents or employees on the Property and shall provide that such policy is not subject to cancellation, expiration or change, except upon thirty (30) days prior written notice to Owner. The Owner shall not unreasonably refuse to approve an insurance Company or policy secured by the lessee.

                11.3       Waiver of Subrogation. Lessee and Owner each waives any and all rights of recovery against the other, and against the partners, members, officers, employees, agents and representatives of the other, for loss of or damage to the Property or injury to person to the extent such damage or injury is covered by proceeds received under any insurance policy carried by Owner or Lessee and in force at the time of such loss or damage.

                11.4       Waiver and Indemnification. Owner shall not be liable to Lessee and Lessee waives all claims against Owner for any injury to or death of any person or damage to or destruction of any personal property or equipment or theft of property occurring on or about the Property or arising from or relating to Lessee’s business conducted on the Property. Lessee shall defend, indemnify and hold harmless Owner and its members, officers, directors, agents and employees from and against any and all claims, judgments, damage, demands, losses, expenses, costs or liability arising in connection with injury to person or property from any activity, work, or things done, permitted or suffered by Lessee or Lessee’s agents, partners, servants, employees, invitees or contractors on or about the Property, or from any breach or default by Lessee in the performance of any obligation on the part of Lessee to be performed under the terms of this Agreement (all of the foregoing collectively referred to hereinafter as General Indemnity Claims). Lessee agrees to defend all General Indemnity Claims on behalf of Owner, with counsel reasonably acceptable to Owner. The obligations of Lessee contained in this Section shall survive the expiration of the term or sooner termination of this Agreement.

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12.           Environmental.

                12.1       Definitions. Hazardous Materials means any material, waste, chemical, mixture or byproduct which: (a) is or is subsequently defined, listed or designated under Applicable Environmental Laws (defined below) as a pollutant, or as a contaminant, or as toxic or hazardous; or (b) is harmful to or threatens to harm public health, safety, ecology, or the environment and which is or hereafter becomes subject to regulation by any Federal, state or local governmental authority or agency. Applicable Environmental Laws means any applicable Federal, state, or local governmental law (including common law), statute, rule, regulation, ordinance, permit, license, requirement, agreement or approval, or any applicable determination, judgment, injunction, directive, prohibition or order of any governmental authority with jurisdiction at any level of Federal, state, or local government, relating to pollution or protection of the environment, ecology, natural resources, or public health or safety.

                12.2       Lessee Hazardous Material Activities. Lessee shall limit any use, generation, storage, treatment, transportation, and handling of Hazardous Materials in connection with Lessee’s use of the Property (collectively “Lessee Hazardous Materials Activities”) to those Hazardous Materials, and to quantities of them, that are necessary to perform activities permitted under this Agreement. Lessee Hazardous Materials Activities include, without limitation, all such activities on or about the Property by Lessee’s employees, partners, agents, invitees, contractors and their subcontractors. Lessee shall not cause or permit any Hazardous Materials to be disposed or abandoned at the Property. Lessee shall cause all Lessee Hazardous Materials Activities to be performed in strict conformance to Applicable Environmental Laws. Lessee shall promptly notify Owner of any actual or claimed violation of Applicable Environmental Laws in connection with Lessee Hazardous Materials Activities, and Lessee shall promptly and thoroughly cure any violation of Applicable Environmental Laws in connection with Lessee Hazardous Materials Activities. If any governmental approval, consent, license or permit is required under Applicable Environmental Laws for Lessee to perform any portion of its work at the Property, including without limitation any air emission permits, before commencing any such work, Lessee shall be solely responsible, at Lessee expense, for obtaining and maintaining, and providing copies of, each approval, consent, license or permit. All Lessee Hazardous Materials Activities shall be performed by qualified personnel who have received proper training with respect to Hazardous Materials, including compliance with applicable OSHA laws and regulations. Lessee shall cause all Hazardous Materials present at the Property in connection with Lessee Hazardous Materials Activities to be safely and securely stored, using double containment. Lessee agrees that neither its use of the Property nor Lessee Hazardous Materials Activities shall result in contamination of the environment.

                12.3       Spills of Hazardous Materials. Lessee shall promptly notify Owner and each governmental regulatory entity with jurisdiction of any spills, releases, or leaks of Hazardous Materials that occur in connection with Lessee Hazardous Materials Activities or Lessee’s use of

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the Property, including but not limited to any contamination of the environment (collectively “Lessee Contamination”). Lessee further shall promptly notify Owner of any claims of which Lessee becomes aware regarding any actual or alleged Lessee Contamination. Lessee shall be solely responsible at its expense for promptly, diligently and thoroughly investigating, monitoring, reporting on, responding to, and cleaning up to completion any and all such Lessee Contamination, in full conformance to Applicable Environmental Laws (collectively the “Lessee Environmental Response Work”). All Lessee Environmental Response Work shall be reported to each governmental regulatory entity with jurisdiction on an ongoing basis, and Lessee shall diligently attempt to attain written concurrence each such regulatory entity that all Lessee Environmental Response Work has been satisfactorily performed and completed. Lessee at its expense shall keep Owner timely informed of Lessee’s progress in responding to any Lessee Contamination, including but not limited to providing Owner with copies, at Lessee’s expense, of all reports, work plans, and communications with governmental entities.

                12.4       Removal of Stored Hazardous Materials. Before the expiration or termination of this Agreement, and not withstanding any other provision of this Agreement, and in full conformance to Applicable Environmental Laws, Lessee shall: (a) cause to be properly removed from the Property all Hazardous Materials stored at the Property in connection with Lessee’s use of the Property or in connection with Lessee Hazardous Materials Activities; and (b) cause to be properly dismantled, closed and removed from the Property all devices, drums, equipment and containments used for handling, storing or treating Hazardous Materials Activities. As part of the closure and removal activities described in the preceding sentence, Lessee shall cause to be performed representative environmental sampling of areas of the Property where such handling, storing or treating of Hazardous Materials occurred, to confirm that no contamination of the environment has resulted from any Lessee Hazardous Materials Activities. Such sampling shall be performed by a qualified environmental consultant acceptable to Owner, and such consultant shall promptly issue a written report which describes the consultant’s data, findings and conclusions, a copy of which shall be provided to Owner at Lessee’s expense. If any Lessee Contamination is discovered, Lessee shall immediately initiate Lessee Environmental Response Work as prescribed in this Agreement.

                12.5       Environmental Indemnity. Lessee shall promptly reimburse, defend, indemnify (with legal counsel acceptable to Owner, whose consent shall not unreasonably be withheld) and hold harmless Owner, its employees, assigns, successors-in-interest, agents and representatives from any and all claims, liabilities, obligations, losses, causes of action, demands, governmental proceedings or directives, fines, penalties, expenses, costs, (including but not limited to reasonable attorney's fees, consultant's fees, and other expert's fees and costs), and damages which arise from or relate to: (a) Lessee Hazardous Materials Activities; (b) Lessee Contamination; ( c ) any non- compliance with Applicable Environmental Laws resulting directly from the Lessee’s use of the Property or (d) a breech of any obligation of Lessee under this Section. The Lessee shall not be responsible for hazardous material activities, breach of applicable environmental law or contamination incurred primarily by another party or incurred primarily before or after the terms of this agreement.

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                12.6       Survival. The provisions of this Section shall survive expiration or termination of this Agreement .

13.           Work Obligations and Conversion of Claims.

                13.1       Work Obligations.

                          13.1.1 Annual Assessment Work. To the extent required by law, beginning with the annual assessment work period of September 1, 2004, to September 1, 2005, and for each following annual assessment work year commencing during the term of this Agreement, Lessee shall perform for the benefit of the Property work of a type customarily deemed applicable as assessment work and of sufficient value to satisfy the annual assessment work requirements of all applicable Federal, state and local laws, regulations and ordinances, if any, and shall prepare evidence of the same in form proper for recordation and filing, and shall timely record and/or file such evidence in the appropriate Federal, state and local office as required by applicable Federal, state and local laws, regulations and ordinances. If Lessee elects to terminate this Agreement more than two (2) months before the deadline for performance of annual assessment work for the following annual assessment year, Lessee shall have no obligation to perform annual assessment work nor to prepare, record and/or file evidence of the same for the following annual assessment year. Lessee’s obligation, if any, to perform the annual assessment work for the assessment work period September 1, 2004 to September 1, 2005, is an unconditional obligation of Lessee which shall survive termination of this Agreement.

                          13.1.2 Federal Mining Claim Maintenance Fees. If under applicable Federal laws and regulations Federal annual mining claim maintenance fees are required to be paid for the unpatented mining claims which constitute all or part of the Property, beginning with the annual assessment work period of September 1, 2004, to September 1, 2005, Lessee shall timely and properly pay the Federal annual mining claim maintenance fees and shall execute and record or file, as applicable proof of payment of the Fed