EXHIBIT 10.1
TERMINATION OF EXISTING MINERALS LEASE,
BILL OF SALE, AND NEW MINERALS LEASE
This Termination of Existing Minerals Lease, Bill of Sale and New
Minerals Lease made and entered into as of the 20th day of April, 1988, by
and between Lisbon Copper Ltd., a Utah limited partnership ("LESSOR"), whose
mailing address is c/o Raymond E. Kunkel, 33 Holiday Haven, Moab, Utah 84532;
Kelmine Corporation ("KELMINE"), also known as Kelmine Corp., a Colorado
corporation, whose mailing address is 11930 West 44th Avenue, Wheatridge,
Colorado 80033; and MLP Associates Ltd. ("LESSEE") a Colorado limited
partnership, whose address is 2801 Youngfield St., Suite 221, Golden,
Colorado 80401.
WITNESSETH:
I. TERMINATION OF MINERALS LEASE.
I.A. Recitals.
I.A.1. Raymond E. Kunkel ("RAY") and Paul B. Clemons
("CLEMONS"), as lessors, and KELMINE, as lessee, entered into a Minerals Lease
(the "KUNKEL-KELMINE LEASE") dated February 15, 1985, covering an interest in
the following:
I.A.1.a. The hereinafter named unpatented lode mining
claims situated in San Juan County, State of Utah, which are more particularly
described in the notice of location and amended notice of location for each
claim, a copy of which is recorded in the Recorder's office of San Juan County,
State of Utah (the "RECORDER'S OFFICE"), and the Bureau of Land Management
Serial Number (the "BLM NO.") of which are as follows:
BLM NO.
Name of Claim Book Page (UMC)
------------- ---- ---- -------
Camel 25 453
(amended) 231 261 129728
Cow 25 454
(amended) 231 262 129732
Cat 25 454
(amended) 231 262 129729
Colt 25 455
(amended) 231 263 129730
Cougar 25 455
(amended) 231 263 129731
Cub 25 456
(amended) 231 264 129734
Coyote 25 456
(amended) 231 264 129733
Sentinal 1 47 44
(amended) 231 256 129718
Sentinal 2 47 45
(amended) 231 257 129719
Sentinal 3 47 45
(amended) 231 257 129720
Sentinal 4 47 46
(amended) 231 258 129721
Sentinal 5 47 46
(amended) 231 258 129722
Sentinal 6 47 47
(amended) 231 259 129723
Sentinal 7 47 47
(amended) 231 259 129724
Sentinal 8 47 48
(amended) 231 260 129725
Sentinal 9 47 48
(amended) 231 260 129726
Sentinal 10 47 49
(amended) 231 261 129727
Security 3 377 402 140827
Security 5 377 403 140607
Security 7 377 404 140608
2
BLM NO.
Name of Claim Book Page (UMC)
------------- ---- ---- -------
Security 9 377 405 140609
Security 11 377 406 140610
Security 14 377 407 140611
Security 15 377 408 140612
Security 16 377 409 140613
Security 18 377 410 140614
Security 19 377 411 140615
Security 20 377 412 140616
Security 25 377 413 140617
Security 26 377 414 140618
Security 27 377 415 140619
Security 28 377 416 140620
Security 29 377 417 140621
Security 30 377 418 140622
Security 31 377 419 140623
Security 32 377 420 140624
Security 33 377 421 140625
Security 34 377 422 140626
Security 35 377 423 140627
Security 36 377 424 140628
Security 37 377 425 140629
Security 38 377 426 140630
Security 39 377 427 140631
Security 40 377 428 140632
Security 41 377 429 140633
Security 42 377 430 140634
Security 43 377 431 140635
Security 44 377 432 140636
Security 45 377 433 140637
Security 46 377 434 140638
Security 47 377 435 140639
Security 48 377 436 140640
Security 49 378 341 140641
Security 50 378 342 140642
Security 51 378 343 140643
Security 52 378 344 140644
Security 53 378 345 140645
Security 54 378 346 140646
Security 55 378 347 140647
Security 56 378 348 140648
Climax No. 1 R-2 382
Climax No. 2 R-2 382
Alpha No. 1 63 96
3
BLM NO.
Name of Claim Book Page (UMC)
------------- ---- ---- -------
(amended) 169 463
(amended) 270 83 129765
Alpha No. 2 63 96
(amended) 169 463
(amended 270 83 129766
Alpha No. 3 63 97
(amended) 169 464
(amended) 270 84 129767
Alpha No. 4 63 97
(amended) 169 464
(amended) 270 84 129768
Alpha No. 5 63 98
(amended) 169 465
(amended) 270 85 129769
Alpha No. 6 63 98
(amended) 169 465
(amended) 270 85 129770
Alpha No. 7 63 99
(amended) 169 466
(amended) 270 86 129771
Alpha No. 8 63 99
(amended) 169 466
(amended) 270 86 127992
CW 1 510 62 129811
CW 2 510 63 129812
CW 3 510 64 129813
CW 4 510 65 129814
CW 5 510 66 129815
CW 6 510 67 129816
CW 7 510 68 129817
CW 8 510 69 129818
CW 9 510 70 129819
CW 10 510 71 129820
CW 11 510 72 129821
CW 12 510 73 129822
CW 13 510 74 129823
CW 14 510 75 129824
CW 15 511 596 129825
CW 16 511 597 129826
CW 19 511 598
(amended) 521 8 129827
CW 22 511 599
(amended) 521 9 129828
4
BLM NO.
Name of Claim Book Page (UMC)
------------- ---- ---- -------
KWR 1 487 130 129789
KWR 2 487 131 129790
KWR 3 487 132 129791
KWR 4 487 133 129792
KWR 5 487 134 129793
KWR 6 487 135 129794
KWR 7 487 136 129795
KWR 8 487 137 129796
KWR 9 Fraction 501 345 129797
KWR 10 501 346 129798
KWR Fraction 501 347 129799
KWR 11 Fraction 521 469 129802
KWR 12 Fraction 501 348 129800
KWR 13 Fraction 501 349 129801
CWG Fraction 517 275 129786
CWG Fraction #1 517 276 129787
CWG Fraction #2 517 277 129788
CD 1 509 508 129773
CD 2 Fraction 509 509 129778
CD 3 Fraction 509 510 129779
CD 4 Fraction 509 511 129780
CD 5 Fraction 509 512 129781
CD 6 Fraction 509 550 129737
Globe #1 486 16
(amended) 489 392 129782
Globe #2 486 17
(amended) 489 393 129783
Globe #9 486 24
(amended) 489 400 129784
Globe #10 486 25
(amended) 489 401 129785
I.A.1.b. The following described fee land (the "FEE LAND")
situated in San Juan County, State of Utah, to-wit:
PATTERSON RANCH
TOWNSHIP 31 SOUTH, RANGE 25 EAST, SLM
Section 1: Lots 1, 2, 3 and 4
5
I.A.1.c. Water and water rights for use upon the property
covered by the KUNKEL-KELMINE LEASE.
I.A.1.d. The stockpile of mixed oxide-sulphide copper ore
(the "STOCKPILE") estimated to contain 35,000 to 40,000 tons containing
approximately 2% copper which is situated on the following described tract of
land situated in San Juan County, State of Utah, to-wit:
TOWNSHIP 30 SOUTH, RANGE 25 East, SLM
Section 36: SE 1/4
I.A.1.e. All mining claims and other property acquired by
the parties to the KUNKEL-KELMINE LEASE within one (1) mile of any part of the
property above described which is covered by the KUNKEL-KELMINE LEASE, except
State of Utah Metalliferous Lease Number 20569 (the "STATE LEASE"), covering the
following described tracts of land situated in San Juan County, State of Utah,
to-wit:
TOWNSHIP 30 SOUTH, RANGE 25 EAST, SLM
Section 36: NW 1/4, E 1/2
I.A.2. On the date of the KUNKEL-KELMINE LEASE, the interest of
the lessors in that lease and in the property covered by that lease, was divided
between the individual lessors as follows:
6
Name of Lessor Undivided Interest Owned
-------------- ------------------------
RAY 95%
CLEMONS 5%
I.A.3. Since the date of the KUNKEL-KELMINE LEASE, the following
transfers affecting the interest of the lessors in that lease have occurred,
to-wit:
I.A.3.a. By Deed and Assignment dated December 17, 1985,
and recorded in the RECORDER'S OFFICE on December 18, 1985, in Book 673 at pages
479-484, RAY conveyed the undivided interest set opposite the names of the
persons hereinafter set forth in and to the property covered by the
KUNKEL-KELMINE LEASE and the interest of the lessors in that lease as follows:
Name of Grantee Undivided Interest Conveyed
--------------- ---------------------------
Albert S. Gilles ("GILLES") 5%
Burton F. Kunkel ("BURTON") 10%
A. E. Dearth ("DEARTH") 10%
I.A.3.b. By Deed and Assignment dated November 20, 1986,
and recorded in the RECORDER'S OFFICE on December 15, 1986, in Book 682 at pages
615-619, CLEMONS conveyed his interest in the KUNKEL-KELMINE LEASE and the
property covered by that lease to Nancy Brown ("BROWN").
I.A.4. By Deed and Assignment dated as of
7
April 1, 1988, RAY, BROWN, GILLES, BURTON and DEARTH conveyed their interest in
the KUNKEL-KELMINE LEASE and the property covered thereby to LESSOR so that
LESSOR now owns the interest of the lessors in that lease and the property
covered thereby.
I.A.5. KELMINE continues to hold all of the interest of the
lessee in the KUNKEL-KELMINE LEASE and such interest is not encumbered in any
way.
I.A.6. LESSOR asserts that the KUNKEL-KELMINE LEASE has been
terminated for failure of KELMINE to pay the monthly minimum royalty of
$5,000.00 under Section II.G. of the KUNKEL-KELMINE LEASE and KELMINE denies
that the lease has terminated.
I.A.7. Since the execution of the KUNKEL-KELMINE LEASE, RAY has
delivered to KELMINE certain information relating to the property covered by the
lease. In addition, KELMINE, from its own operations, has accumulated data which
should be made available to LESSOR under Section II.R. of the KUNKEL-KELMINE
LEASE. The information and data provided by RAY to KELMINE and the information
and data accumulated by KELMINE with respect to which LESSOR is entitled to
access is hereinafter collectively referred to as the "DATA". The DATA is
presently located at the office (the "KELMINE OFFICE") of KELMINE in Moab, Utah.
8
I.A.8. LESSOR and KELMINE desire to compromise and resolve their
differences and terminate the KUNKEL-KELMINE LEASE by agreement and provide for
the preservation and accessibility to LESSOR and LESSEE of the DATA.
I.B. AGREEMENT.
In consideration of the premises and particularly in
consideration of the acts and undertakings of the parties hereinafter set forth,
the execution of the BILL OF SALE and the execution of the NEW MINERALS LEASE,
and for other good and valuable consideration, the receipt of which is hereby
acknowledged by LESSOR and KELMINE, LESSOR and KELMINE hereby agree and do as
follows:
I.B.1. The KUNKEL-KELMINE LEASE is terminated effective as of
the date of this instrument and is of no further force and effect.
I.B.2. LESSOR and KELMINE release all claims against each other
under the KUNKEL-KELMINE LEASE and acknowledge that each has no claim against
the other with respect to that lease.
I.B.3. KELMINE agrees to maintain the DATA at the KELMINE OFFICE
and to deliver the same to LESSEE as soon as LESSEE is willing to take
possession of the same.
I.B.4. Irrespective of anything else set
9
forth herein, the termination provided herein shall not operate to relieve
LESSOR and KELMINE from their obligation to pay their respective share of taxes
under the KUNKEL-KELMINE LEASE and the obligation of KELMINE to perform the
reclamation work under the KUNKEL-KELMINE LEASE.
II. BILL OF SALE
II.A. RECITALS.
II.A.1. Under the KUNKEL-KELMINE LEASE, KELMINE acquired
equipment and machinery (the "SX-EW") described as follows:
Four Solvent Extraction Tanks
Two 350 Kilowatt Rectifiers
Approximately Thirty Concrete Electro-Winning Cells
for the processing of the copper bearing ores produced from the property covered
by the KUNKEL-KELMINE LEASE. The SX-EW is presently stored near the entrance of
the Cub uranium mine which is also on the land with respect to which the copper
mining rights are subject to the KUNKEL-KELMINE LEASE.
II.A.2. Section II.Q. of the KUNKEL-KELMINE LEASE makes
provision that upon termination of that lease the SX-EW can become the property
of the LESSOR if it accepts the same.
II.A.3. LESSOR and KELMINE desire to implement the provisions of
the KUNKEL-KELMINE LEASE by providing that LESSOR shall acquire SX-EW from
KELMINE.
10
II.B. BILL OF SALE
II.B.1. KELMINE, for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by KELMINE, and in
further consideration of the termination of the KUNKEL-KELMINE LEASE as above
set forth and the execution of the NEW MINERALS LEASE, hereby sells, conveys,
sets over and delivers to the LESSOR the SX-EW.
II.B.2. LESSOR hereby accepts the Bill of Sale set forth herein.
III. NEW MINERALS LEASE.
III.A. RECITALS.
III.A.1. RAY and CLEMONS are the Grantees in the following
described deeds (the "DEEDS"):
III.A.1.a. Quit-Claim Deed from G. M. Wallace & Co. dated
September 30, 1976, which was recorded in the RECORDER'S OFFICE on April 27,
1977, in Book 577 at pages 391-398.
III.A.1.b. Quit-Claim Deed from Wallace Resources Inc.
dated May 29, 1980, which was recorded in the RECORDER'S OFFICE on July 22,
1980, in Book 618 at page 891.
III.A.1.c. Deed (the "COSTANZA-KUNKEL DEED") from Joseph F.
Costanza and Joyce L. Costanza (collectively "COSTANZA") dated January 5, 1983,
which was
11
recorded in the RECORDER'S OFFICE on July 17, 1984, in Book 661 at pages
294-296.
III.A.2. LESSOR believes, but does not warrant or represent,
that under the foregoing deeds it has the following rights, to-wit:
III.A.2.a. The right to mine and process the copper bearing
ores down to a depth of 500 feet from the hereinafter named unpatented
lode mining claims situated in San Juan County, State of Utah, which are more
particularly described in the notice of location and amended notice of location
for each claim, a copy of which is recorded in the RECORDER'S OFFICE and the BLM
NO. of which is as follows:
BLM NO.
Name of Claim Book Page (UMC)
------------- ---- ---- -------
Camel 25 453
(amended) 231 261 129728
Cow 25 454
(amended) 231 262 129732
Cat 25 454
(amended) 231 262 129729
Colt 25 455
(amended) 231 263 129730
Cougar 25 455
(amended) 231 263 129731
Cub 25 456
(amended) 231 264 129734
Coyote 35 456
(amended) 231 264 129733
Sentinal 1 47 44
12
BLM NO.
Name of Claim Book Page (UMC)
------------- ---- ---- -------
(amended) 231 256 129718
Sentinal 2 47 45
(amended) 231 257 129719
Sentinal 3 47 45
(amended) 231 257 129720
Sentinal 4 47 46
(amended) 231 258 129721
Sentinal 5 47 46
(amended) 231 258 129722
Sentinal 6 47 47
(amended) 231 259 129723
Sentinal 7 47 47
(amended) 231 259 129724
Sentinal 8 47 48
(amended) 231 260 129725
Sentinal 9 47 48
(amended) 231 260 129726
Sentinal 10 47 49
(amended) 231 261 129727
Gamma 1 71 490
(amended) 85 499
Gamma 2 71 490
(amended) 85 499
CD #6 Fraction 509 550
Security 3 377 402 140827
Security 5 377 403 140607
Security 7 377 404 140608
Security 9 377 405 140609
Security 11 377 406 140610
Security 14 377 407 140611
Security 15 377 408 140612
Security 16 377 409 140613
Security 18 377 410 140614
Security 19 377 411 140615
Security 20 377 412 140616
Security 25 377 413 140617
Security 26 377 414 140618
Security 27 377 415 140619
Security 28 377 416 140620
Security 29 377 417 140621
Security 30 377 418 140622
Security 31 377 419 140623
Security 32 377 420 140624
13
BLM NO.
Name of Claim Book Page (UMC)
------------- ---- ---- -------
Security 33 377 421 140625
Security 34 377 422 140626
Security 35 377 423 140627
Security 36 377 424 140628
Security 37 377 425 140629
Security 38 377 426 140630
Security 39 377 427 140631
Security 40 377 428 140632
Security 41 377 429 140633
Security 42 377 430 140634
Security 43 377 431 140635
Security 44 377 432 140636
Security 45 377 433 140637
Security 46 377 434 140638
Security 47 377 435 140639
Security 48 377 436 140640
Security 49 378 341 140641
Security 50 378 342 140642
Security 51 378 343 140643
Security 52 378 344 140644
Security 53 378 345 140645
Security 54 378 346 140646
Security 55 378 347 140647
Security 56 378 348 140648
III.A.2.b. The right to mine and process the ores bearing
copper and some other minerals from the following:
III.A.2.b.(1) The hereinafter named unpatented lode
mining claims situated in San Juan County, state of Utah, which are more
particularly described in the notice of location and amended notice of location
for each claim which is recorded in the RECORDER'S OFFICE and the BLM NO. of
which is as follows:
14
BLM NO.
Name of Claim Book Page (UMC)
------------- ---- ---- -------
Climax No. 1 R-2 382
(amended) 487 185 129763
Climax No. 2 R-2 382
(amended) 487 186 129764
Alpha No. 1 63 96
(amended) 169 463
(amended) 270 83 129765
Alpha No. 2 63 96
(amended) 169 463
(amended) 270 83 129766
Alpha No. 3 63 97
(amended) 169 464
(amended) 270 84 129767
Alpha No. 4 63 97
(amended) 169 464
(amended) 270 84 129768
Alpha No. 5 63 98
(amended) 169 465
(amended) 270 85 129769
Alpha No. 6 63 98
(amended) 169 465
(amended) 270 85 129770
Alpha No. 7 63 99
(amended) 169 466
(amended) 270 86 129771
Alpha No. 8 63 99
(amended) 169 466
(amended) 270 86 129772
G. M. Wallace Fraction
(amended) 487 129 129829
CW 1 510 62 129811
CW 2 510 63 129812
CW 3 510 64 129813
CW 4 510 65 129814
CW 5 510 66 129815
CW 6 510 67 129816
CW 7 510 68 129817
CW 8 510 69 129818
CW 9 510 70 129819
CW 10 510 71 129820
CW 11 510 72 129821
CW 12 510 73 129822
CW 13 510 74 129823
15
BLM NO.
Name of Claim Book Page (UMC)
------------- ---- ---- -------
CW 14 510 75 129824
CW 15 511 596 129825
CW 16 511 597 129826
CW 19 511 598
(amended) 521 8 129827
CW 22 511 599
(amended) 521 9 129828
KWR 1 487 130 129789
KWR 2 487 131 129790
KWR 3 487 132 129791
KWR 4 487 133 129792
KWR 5 487 134 129793
KWR 6 487 135 129794
KWR 7 487 136 129795
KWR 8 487 137 129796
KWR 9 Fraction 501 345 129797
KWR 10 501 346 129798
KWR Fraction 501 347 129799
KWR 11 Fraction 521 469 129802
KWR 12 Fraction 501 348 129800
KWR 13 Fraction 501 349 129801
CWG Fraction 517 275 129786
CWG Fraction #1 517 276 129787
CWG Fraction #2 517 277 129788
CD 1 509 508 129773
CD 2 Fraction 509 509 129778
CD 3 Fraction 509 510 129779
CD 4 Fraction 509 511 129780
CD 5 Fraction 509 512 129781
CD 6 Fraction 509 550 129737
Globe #1 486 16
(amended) 489 392 129782
Globe #2 486 17
(amended) 489 393 129783
Globe #9 486 24
(amended) 489 400 129784
Globe #10 486 25
(amended) 489 401 129785
III.A.2.b.(2) The FEE LAND.
III.A.2.b.(3) The STOCKPILE.
16
III.A.3. Such rights as LESSOR has in all the above described
unpatented lode mining claims are hereinafter referred to as the "MINING
CLAIMS."
III.A.4. Such right to water available for use in processing
copper bearing ores from the property above described as the LESSOR has is
hereinafter referred to as the "WATER RIGHT".
III.A.5. LESSOR has acquired the rights of KELMINE in the SX-EW
under the BILL OF SALE.
III.A.6. COSTANZAS hold the STATE LEASE. COSTANZAS, in the
COSTANZA-KUNKEL DEED, intended to convey to RAY and CLEMONS the right to mine
copper on the STATE LEASE to a depth of 500 feet. The State of Utah did not
accept that deed and required that COSTANZAS make a separate assignment to RAY
and CLEMONS. Such an assignment was made by COSTANZAS and approved by the State
of Utah. LESSOR believes that it can acquire the interest of RAY, CLEMONS,
BROWN, GILLES, BURTON and DEARTH in the STATE LEASE.
III.A.7. All of the right, title, interest and expectancy of the
LESSOR in the MINING CLAIMS, the FEE LAND, the WATER RIGHT, the SX-EW, the STATE
LEASE, the STOCKPILE and all mining claims and other property (the "OTHER
PROPERTY") acquired by LESSOR and/or LESSEE within one mile of any part of
17
the MINING CLAIMS, the FEE LAND and the STATE LEASE are hereinafter collectively
referred to as the "LEASED PREMISES".
III.A.8. LESSOR desires to lease the LEASED PREMISES to LESSEE
and LESSEE desires to lease the LEASED PREMISES from LESSORS.
III.B. LEASE.
III.B.1. For and in consideration of the mutual covenants and
agreements hereinafter set forth, in further consideration of the termination of
the KUNKEL-KELMINE LEASE and the execution of the BILL OF SALE, and for other
good and valuable consideration received by LESSOR from LESSEE, LESSOR does
hereby lease, let and demise exclusively to LESSEE all of the right, title and
interest of the LESSOR in and to the LEASED PREMISES and LESSOR hereby grants
exclusively to LESSEE any and all rights of LESSOR to occupy, use, enjoy and
possess the LEASED PREMISES, including, but not limited to, the following:
III.B.1.a. To explore for minerals.
III.B.1.b. To mine or otherwise extract, to mill, treat or
otherwise process, and to store, stockpile, remove, market, sell or otherwise
dispose of ore and minerals.
III.B.1.c. To dispose of or deposit waste material and
tailings on the LEASED PREMISES.
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III.B.1.d. To construct, use, maintain, repair, replace and
relocate in or upon the LEASED PREMISES buildings, shops, plants, machinery,
mills, facilities, ore bins and structures of all kinds, roads, shafts,
inclines, tunnels, drifts, open pits, pipelines, telephone lines, electric
transmission lines and transportation facilities and other utilities.
III.B.1.e. To use any underground water now existing or
subsequently discovered or developed in or upon the LEASED PREMISES.
III.B.1.f. To exercise any and all other rights and
privileges which are incidental to or which may be useful, desirable or
convenient in LESSEE's exercise of any or all of the rights hereinabove
specified which are not in conflict with applicable state and federal laws and
regulations.
III.B.1.g. LESSEE may use and enjoy the LEASED PREMISES and
exercise any of the rights granted hereunder by any methods now or heretofore
known or hereafter developed.
III.B.2. This NEW MINERALS LEASE is conditioned upon:
III.B.2.a. LESSEE proceeding diligently and with all
reasonable dispatch to secure the necessary state and federal approval of mining
and operating plans.
19
III.B.2.b. LESSEE diligently commencing and continuing to
work on a copper processing facility to process copper ores from the LEASED
PREMISES.
III.B.2.c. LESSEE commencing production from the LEASED
PREMISES in commercial quantities within five (5) years after such approval is
secured.
III.B.2.d. LESSOR using its best efforts to acquire all the
right, title and interest of RAY, CLEMONS, BROWN, GILLES, BURTON and/or DEARTH
in the STATE LEASE, including, but not limited to, the securing of the approval
of the state of Utah to the transfer to LESSOR.
III.B.3. Upon the execution of this NEW MINERALS LEASE by the
LESSOR, LESSEE shall immediately pay to LESSOR the sum of $1,500.00 which shall
not be recoverable by LESSEE out of the production royalty hereinafter provided.
III.B.4. LESSOR and LESSEE agrees to execute such additional
documents as are reasonably necessary to insure and confirm that the OTHER
PROPERTY is covered by this NEW MINERALS LEASE. Without limiting the foregoing,
LESSOR agrees that, promptly upon the request of LESSEE, LESSOR shall make,
execute, acknowledge and deliver to LESSEE, in recordable form, an amendment or
amendments to this MINERALS LEASE or any other documents which better describe
the LEASED PREMISES.
20
III.B.5. The rights of LESSOR as to some of the LEASED PREMISES
are in the form of an ownership of the copper and some other minerals and in
other parts of the LEASED PREMISES the rights are in the form of leases and
subleases so that while this instrument is characterized as a "lease" it is a
lease as to some portions of the LEASED PREMISES and a sublease as to the
balance.
III.B.6. This NEW MINERALS LEASE shall commence on the date
first above set forth in this instrument, run thereafter for a primary term of
ten (10) years and continue thereafter as long as minerals are being produced
from the LEASED PREMISES in commercial quantities, unless sooner terminated or
surrendered as hereinafter set forth; provided, however, that in the event
production of minerals in commercial quantities occurred during the primary term
and thereafter ceases because it is no longer commercially feasible to continue
the production of minerals from the LEASED PREMISES, this NEW MINERALS LEASE
shall continue beyond the expiration of the primary term without the necessity
of production of minerals and/or metals in commercial quantities as long as it
is not commercially feasible to continue production and as long as LESSEE
performs all the covenants it is obligated to perform hereunder including, but
not limited to, the covenant to pay the monthly minimum advance royalty
hereinafter
21
provided.
III.B.7. LESSEE shall pay LESSOR a royalty equal to the
percentage (hereinafter set forth) of the NET PROCEEDS (hereinafter defined)
received for all mineral, and/or metals, mined and removed from the LEASED
PREMISES and processed and sold in any chemical, mineral or metallic form,
hereinafter referred to as the "PRODUCT." The percent of the royalty shall be
determined by the amount of NET PROCEEDS per pound of PRODUCT sold during the
calendar month. If the NET PROCEEDS per pound of PRODUCT sold during the
calendar month is less than $1.00, the royalty percentage shall be five percent
(5%). If the NET PROCEEDS per pound of PRODUCT sold during the calendar month is
from $1.00 up to and including $1.20, the royalty percentage shall be five and
one-half percent (5 1/2%). If the NET PROCEEDS per pound of PRODUCT sold during
the calendar month is more than $1.20, the royalty percentage shall be six
percent (6%). The term "NET PROCEEDS" means the gross amount received by LESSEE,
after deducting freight and handling charges from the point of final treatment
to the point of final sale, from an arms-length bona fide sale of PRODUCT to a
purchaser which has no financial interest of any kind in the LESSEE or its
operations on the LEASED PREMISES or to a purchaser in which the LESSEE has no
financial interest of any kind. If the LESSEE makes a sale which
22
is not arms-length and bona fide and/or to a purchaser which has a financial
interest in the LESSEE or its operations on the LEASED PREMISES Or to a
purchaser in which the LESSEE has a financial interest, the NET PROCEEDS shall
be based upon the MARKET VALUE of the contained metals and/or minerals in the
PRODUCT. The term MARKET VALUE of contained metals and/or minerals shall mean
the average of U.S. Producer or major Suppliers prices, as quoted in Metals Week
and as published in Engineering and Mining Journal (E&MJ) for the month in
which the metals and/or minerals are sold.
III.B.8. LESSEE shall pay all royalties previously reserved and
all royalties due and owing on the underlying leases and subleases with respect
to the LEASED PREMISES. LESSEE shall perform all other obligations which LESSOR
and RAY, BROWN, GILLES, BURTON and DEARTH, and/or any of them, are obligated to
perform in those leases and subleases. Without in any way limiting the
foregoing, LESSEE shall pay all royalty on the STOCKPILE which may be owing the
State of Utah or any other person or entity.
III.B.9. LESSEE shall be entitled to deduct the royalty which
it pays under Section III.B.8 (other than the royalty which it pays on the
STOCKPILE for which it shall not be entitled to any deduction) on a
particular PRODUCT from the
23
royalty due LESSOR under Section III.B.7. on that same PRODUCT, provided that
the percentage of the royalty due LESSORS on that particular PRODUCT shall not,
in any event, be reduced to less than one and one-half percent (1 1/2%) so that
irrespective of the amount of the underlying royalty paid by LESSEE on a
particular PRODUCT, LESSOR shall always receive a royalty of at least one and
one-half percent (1 1/2%) on that PRODUCT. As an example and by way of
illustration, the percentage of the underlying royalty on the FEE LAND is six
percent (6%) and based on net smelter returns. If the NET PROCEEDS from PRODUCT
from the FEE LAND for a calendar month is such that the underlying royalty under
Section III.B.S. is more than the amount of royalty due LESSOR under Section
III.B.7., LESSEE would be obligated to pay LESSOR on that PRODUCT, in addition
to the underlying royalty to be paid to the persons or entities entitled
thereto, a royalty of one and one-half percent (1 1/2%) under Section III.B.7.
III.B.10. LESSEE shall prepare and maintain such records as are
reasonably necessary to calculate the royalty due LESSORS hereunder and the
royalty due on the underlying leases and subleases. LESSEE shall, on written
request of LESSORS, furnish copies of such records to LESSOR.
III.B.11. Commencing with the month of April, 1988, LESSEE shall
pay LESSOR a monthly minimum advance
24
royalty, which shall be due and payable on the first day of each month, as
follows:
For the months commencing with the month of April, 1988, and continuing
through the month of March, 1989, the sum of $1,250.00 per month;
For the months commencing with the month of April, 1989, and continuing
through the month of March, 1990, the sum of $1,500.00 per month;
For the months commencing with the Month of April, 1990, and continuing
through the month of March, 1991, the sum of $2,000.00 per month;
For the months commencing with the month of April, 1991, and continuing
through the month of March 1992, the sum of $2,500.00 per month; and
For each and every month after March, 1992, and continuing as long as this
NEW MINERALS LEASE remains in effect, the sum of $3,000.00 per month.
LESSEE shall be entitled to credit this monthly minimum advance royalty against
the production royalty to which the LESSOR is entitled as set forth above.
LESSEE shall not be entitled to any credit for the minimum payments made by
KELMINE under the KUNKEL-KELMINE LEASE.
III.B.12. The following provisions shall be applicable to "WASTE
MATERIAL" which is defined as material mined or extracted from the LEASED
PREMISES which LESSEE in its sole discretion determines not to sell because of
its mineral content, and LESSEE'S determination shall be final and conclusive:
III.B.12.a. LESSOR agrees that WASTE MATERIAL may be mined
or otherwise extracted without obligation upon LESSEE to replace the same. At no
time during the term of
25
this NEW MINERALS LEASE or at any time thereafter shall LESSEE be required to
remove any WASTE MATERIAL deposited by LESSEE on the LEASED PREMISES, except as
otherwise provided by applicable governmental laws, rules and regulations in
full force and effect on or before the termination of this NEW MINERALS LEASE.
III.B.12.b. All WASTE MATERIAL on the LEASED PREMISES prior
to surrender or termination of this MINERALS LEASE shall be the property of
LESSEE, and LESSOR shall have no right, title or interest whatsoever therein and
thereto until this NEW MINERALS LEASE is surrendered or terminated.
III.B.12.c. All WASTE MATERIAL on the LEASED PREMISES after
surrender or termination of this NEW MINERALS LEASE shall be the property of
LESSOR, and LESSEE shall have no right, title or interest whatsoever therein or
thereto after this MINING LEASE is surrendered or terminated.
III.B.13. With respect to taxes:
III.B.13.a. LESSEE agrees to pay all taxes levied and
assessed against the SX-EW, all equipment of LESSEE on the LEASED PREMISES, and
any improvements placed on the LEASED PREMISES by LESSEE.
III.B.13.b. The relationship (in terms of percentage) which
the total royalty which LESSOR receives hereunder during a given taxing period
bears to the total NET
26
PROCEEDS for the same period shall be established by dividing the total royalty
received by LESSOR by the total NET PROCEEDS. LESSOR agrees to pay that
established percentage and LESSEE agrees to pay the balance of such taxes,
assessments, or other governmental levies which are assessed, levied or imposed:
III.B.13.b.(1) Against the LEASED PREMISES solely by
reason of LESSEE's operations on the LEASED PREMISES.
III.B.13.b.(2) Against the minerals in or on the
LEASED PREMISES in an unsevered state.
III.B.13.b.(3) Any occupation, severance, production
or net proceeds of mines taxes, if any, imposed for, resulting from or measured
by reference to the removal of ore and or minerals by the LESSEE.
III.B.13.c. LESSEE shall not be obligated to pay any taxes
levied, imposed or assessed against, or measured by reference to operations upon
the LEASED PREMISES which are not conducted by or on behalf of LESSEE under the
terms of this NEW MINERALS LEASE. In the event LESSOR fails to pay when due any
taxes, assessments or other governmental levy against the LEASED PREMISES (which
LESSOR is obligated to pay under this NEW MINERALS LEASE) LESSEE may, but shall
not be obligated to, pay such taxes, assessments or levies, together
27
with any penalty that may be imposed for failure to pay such when due. LESSOR
agrees to reimburse LESSEE for any payments made for LESSOR hereunder, together
with interest at the rate of 10% per annum from the date such payment is made by
LESSEE, which reimbursement shall be made within ten (10) days after LESSEE has
given written notice to LESSOR that LESSEE has paid such taxes, assessments or
levies. LESSEE shall specify the amount of such taxes, assessments or levies in
its notice to LESSOR. If such reimbursement is not made as provided herein,
LESSEE shall have the right to withhold payment of and retain as its sole
property any and all royalty (including the monthly minimum advance royalty
provided above) thereafter due and payable to LESSOR until the amount of royalty
withheld equals the reimbursement due LESSEE.
III.B.14. LESSOR shall have the right to claim the depletion
allowance applicable to the royalty paid LESSORS hereunder.
III.B.15. With respect to liens, damages, liability and
insurance:
III.B.15.a. LESSEE agrees to indemnify LESSORS against, and
hold LESSOR harmless from any and all claims or liability for injury to or death
of persons or for damages to property other than the LEASED PREMISES, resulting
from LESSEE's
28
ations hereunder. LESSEE further agrees to indemnify LESSOR
nst and hold LESSOR harmless from any and all claims or
ility for materials or labor resulting from LESSEE's
ations hereunder on the LEASED PREMISES. LESSEE's
gations hereunder shall not apply to any claim unless LESSOR
fy LESSEE of the existence of such claim as soon as it
mes known to LESSOR, and further notifies LESSEE of the
itution of any action, suit or legal proceeding on such claim
oon as the institution of such action, suit, or other
eedings become known to LESSOR and LESSEE is given the sole
t to defend and/or settle any such claim with attorneys of
own selection.
III.B.15.b. LESSEE further agrees to
tain workmen's compensation and tenant liability insurance
ed by a company or companies acceptable to LESSOR, covering
operations by LESSEE under this NEW MINERALS LEASE, showing
limits of the insurers liability to be not less than:
BODILY INJURY:
Each Person $500,000
Each Accident $1,000,000
Property Damage $500,000
Combined Limit $1,000,000
or to the commencement of any work upon the LEASED
PREMISES,
29
LESSEE shall deliver to LESSOR certificates of all insurance required under this
insurance clause.
III.B.15.c. If LESSOR shall fail to pay any and all amounts
due hereunder, or duly to satisfy and discharge any mortgage or lien on the
LEASED PREMISES, or shall suffer or permit any lien or encumbrance to be imposed
upon the LEASED PREMISES, LESSEE may, at its own option, but shall not be
obligated to, pay any or all unpaid amounts due and payable under, or satisfy
and discharge any such mortgage, lien or encumbrance which is unpaid and payable
and LESSEE may reimburse itself for any such payment of any such amount so paid
or for payments and costs of paying, satisfying and discharging any such
mortgage, lien or encumbrance, by withholding and retaining as its sole property
from royalties (including the monthly minimum advance royalty) due and payable
hereunder the amounts paid by LESSEE. In case of payment, discharge or
satisfaction of a mortgage, lien or encumbrance LESSEE shall have all the rights
and remedies against LESSOR which the mortgagee or lienor or the holder of such
encumbrance had against the LESSOR immediately prior to the time of such
payment, satisfaction or discharge. Upon the request of LESSEE, LESSOR shall
promptly make, execute, acknowledge and deliver to LESSEE any and all
instruments which LESSEE in its sole judgment shall deem necessary or desirable
to
30
effectuate fully the provisions of this Section.
III.B.16. LESSOR, or their representative, at their sole risk
and at their sole cost and expense, and subject to such reasonable safety
regulations as may be prescribed by LESSEE, may have access to the LEASED
PREMISES during regular business hours solely for the purpose of inspection of
LESSEE's operations on the LEASED PREMISES.
III.B.17. LESSEE will conduct its operations on the LEASED
PREMISES in accordance with applicable governmental laws, rules and regulations.
Without in any way limiting the foregoing, LESSEE will strictly comply with all
reclamation requirements and all MSHA requirements now in effect or which may
later become applicable and particularly those relating to safety training and
record keeping. LESSEE makes no express or implied warranty, covenant or
agreement relating to the exploration, development, mining or other operation of
or upon the LEASED PREMISES or the marketing of any ore or mineral therefrom.
The conduct of any such exploration, development, mining or other operations, or
marketing, and the nature, manner or extent thereof, shall be matters to be
determined within the sole discretion of LESSEE. LESSEE shall have no
obligation, liability or responsibility whatsoever to LESSOR for damages or
injury to the LEASED PREMISES arising out of, or caused by or in any way
31
connected with the operations conducted by LESSEE upon, in and through the
LEASED PREMISES.
III.B.18. LESSEE may, at any time and from time to time during
the term of this Lease, execute and deliver to LESSORS, in accordance with the
notice provisions hereinafter set forth, or deliver for recording to the
RECORDER'S OFFICE a quitclaim deed, quitclaiming to LESSOR or its successors in
interest all or any part of the LEASED PREMISES and immediately upon such
delivery this NEW MINERALS LEASE shall terminate with respect to such part or
all, as the case may be, of the LEASED PREMISES, and LESSEE shall be relieved of
all obligations, liability or responsibility of every character whatsoever
thereafter accruing with respect to that part of all, as the case may be, of the
LEASED PREMISES. If such delivery is to the RECORDER'S OFFICE, LESSEE shall
deliver a copy of such quitclaim deed to LESSORS.
III.B.19. LESSOR shall have no right to terminate this NEW
MINERALS LEASE unless LESSEE shall fail to perform according to the terms of
this NEW MINERALS LEASE and LESSOR shall give written to LESSEE specifying the
nature of the default. If LESSEE shall not correct such default within thirty
(30) days after said notice is given, this NEW MINERALS LEASE shall terminate.
32
III.B.20. Surrender or termination of this NEW MINERALS LEASE as
provided herein shall not relieve the LESSEE of its obligations hereunder which
remain unperformed at the time of the surrender or termination including, but
not limited to, the obligation to pay all accrued royalties (including the
monthly minimum advance royalty) , to pay its share of the taxes as above
provided and to perform the reclamation work as above provided.
III.B.21. LESSEE shall make every reasonable effort to care for
the SX-EW and particularly to protect the electrical parts. In the event LESSEE
does not use the SX-EW, or any part thereof, for the purpose for which it was
acquired, that is, to process leach solutions from the LEASED PREMISES, within
five years of the date of this NEW MINERALS LEASE, at the sole discretion of
LESSOR the unused part shall no longer be a part of the LEASED PREMISES and
LESSOR may, at its sole discretion, remove and dispose of the same upon written
notice to the LESSEE. Subject to the above, LESSEE shall have the right at any
time within sixty (60) days following the surrender or termination of this NEW
MINERALS LEASE, with respect to all or any parts of the LEASED PREMISES to
remove any and all buildings, structures, plants, shops, mills, machinery
equipment, lines and facilities.
III.B.22. LESSEE will maintain the DATA and
33
make available for examination and copying by LESSOR, or its duly authorized
representatives, the DATA, all additional survey maps, drill hole data,
including drill hole chip boards, ore reserve calculations, mining plans,
reclamation plans and supporting data used to obtain state and/or federal
environmental and operating or mining permits, assay, metallurgical and
feasibility reports relating to the LEASED PREMISES and any maps or diagrams or
mine workings upon the LEASED PREMISES which LESSEE has in its possession
or-control.
III.B.23. Any notice or communication to the parties hereto, or
quitclaim deed shall be deemed to have been sufficiently given for all purposes
hereof if mailed by U. S. Registered or Certified mail, postage prepaid, return
receipt requested, addressed as follows, and the date on the U. S. Post office
receipt shall be deemed to be the date of mailing:
To LESSOR: To LESSEE:
Lisbon Copper Ltd. MLP Associates, Ltd.
c/o Raymond E. Kunkel 2801 Youngfield Street, Suite 221
33 Holiday Haven Golden, Colorado 80401
Moab, Utah 84532
III.B.24. LESSEE agrees that it will not assign, sublease or
transfer all or any of its rights under this lease without first obtaining the
written consent of LESSOR. LESSOR agrees that it will not unreasonably withhold
that
34
consent.
III.B.25. LESSEE's failure to perform or comply with a
particular provision of this NEW MINERALS LEASE shall be excused if such failure
to perform or comply with that particular provision is caused by circumstances
or conditions beyond the reasonable control of LESSEE, including but not limited
to the following: severe weather, unusual mining casualty, civil or military
orders, regulations or authority, insurrections, riots, strikes, acts of God,
war or hostilities between any nations, embargoes, governmental orders or
regulations, fire accident, explosion, flood, lockouts, differences with
workman, delays of carriers, lack of transportation facilities, commandeering or
requisitioning by the government, inability to obtain raw materials or the
insurance required hereon, curtailment of or failure in obtaining sufficient
electrical power. Circumstances or conditions which prevent the performance of a
particular provision herein shall only excuse performance of the particular
provision, the performance of which is prevented by those circumstances or
conditions, and shall not excuse the performance of any of the other provisions
of this NEW MINERALS LEASE. No circumstances or conditions shall excuse LESSEE
from its obligation to pay the monthly minimum advance royalty under Section
III.B.11.
35
III.B.26. LESSOR hereby grants to LESSEE an irrevocable
exclusive option to purchase the property comprising the LEASED PREMISES at the
time the option is exercised, without warranty or representation of any kind, at
any time while this NEW MINERALS LEASE is in full force and effect, all as set
forth in a separate instrument.
III.B.27. This NEW MINERALS LEASE shall be governed by and
construed and enforced in accordance with the laws of the State of Utah.
III.B.28. This NEW MINERALS LEASE contains the entire agreement
by and between LESSOR and LESSEE and no oral agreement, promise, statement or
representation which is not contained herein shall be binding on LESSOR or
LESSEE. No amendment or modification of this NEW MINERALS LEASE shall become
effective unless and until the same shall have been reduced to writing and duly
signed, executed and acknowledged by the parties hereto.
III.B.29. This NEW MINERALS LEASE may be executed in
counterpart.
IN WITNESS WHEREOF, the parties hereto have executed this Termination
of Existing Minerals Lease, Bill of Sale and New Minerals Lease as of the day
and year first above written.
36
LESSOR
LISBON COPPER LTD.
By /s/ Raymond E. Kunkel
------------------------------------------
Raymond E. Kunkel, General Partner
By /s/ Burton F. Kunkel
------------------------------------------
Burton F. Kunkel, General Partner
KELMINE
KELMINE CORPORATION
By /s/ C. O. Keller
------------------------------------------
C. O. Keller, President
LESSEE
MLP ASSOCIATES, LTD.
By /s/ Charles E. Carlson
------------------------------------------
Charles E. Carlson, General Partner
STATE OF UTAH )
: ss.
County of San Juan )
On this 12th day of April, 1988, personally appeared before me Raymond
E. Kunkel, one of the signers of the foregoing instrument, who duly acknowledged
to me that he executed the same on behalf of Lisbon Copper Ltd., a
37
limited partnership, as one of the general partners in said limited partnership.
/s/ illegible
---------------------------------------
Notary Public
Residing at Monticello, Utah
---------------------------
My Commission Expires:
March 26, 1989
- -----------------------
STATE OF UTAH )
: ss.
County of Box Elder )
----------
On this 14 day of April, 1988, personally appeared before me
Burton F. Kunkel, one of the signers of the foregoing instrument, who duly
acknowledged to me that he executed the same on behalf of Lisbon copper Ltd.,
a limited partnership, as one of the general partners in said limited
partnership.
/s/ illegible
---------------------------------------
Notary Public
Residing at illegible
---------------------------
My Commission Expires:
1 June 1991
- -----------------------
38
STATE OF COLORADO )
: ss.
County of Jefferson )
----------
On this 20th day of April, 1988, personally appeared before me C. 0.
Keller, who being first duly sworn, deposes and says that he is the President of
Kelmine Corporation, a Colorado corporation, and that he executed the foregoing
instrument in behalf of said corporation by authority of a resolution of its
board of directors; and said C. 0. Keller duly acknowledged to me that said
corporation executed same.
/s/ illegible
---------------------------------------
Notary Public
Residing at 2801 Youngfield
---------------------------
Golden, CO 80401
My Commission Expires:
Aug. 16, 1998
- -----------------------
STATE OF COLORADO )
: ss.
County of Jefferson )
On this 20th day of April, 1988, personally appeared before me Charles
E. Carlson, one of the signers of the foregoing instrument, who duly
acknowledged to me that he executed the same in behalf of MLP Associates, Ltd.,
a
39
Colorado limited partnership, as one of the general partners in said limited
partnership.
/s/ illegible
---------------------------------------
Notary Public
Residing at 2801 Youngfield
---------------------------
Golden, CO 80401
My Commission Expires:
Aug. 16, 1998
- -----------------------
TERM.RLK
40
MLP ASSOCIATES LTD.
12936 NORTH 60TH STREET
PHOENIX AZ, 85254
602-443-0284
July 23, 1993
JULY, 1993
AMENDMENT TO NEW MINERAL LEASE
DATED APRIL 20, 1988
RECITALS:
The parties Desire to amend the NEW MINERAL LEASE dated April 20, 1988, by
and between Lisbon Copper, Ltd. (LESSOR) and MLP Associates, (LESSEE).
AMENDMENT:
Section 111.B.11 is hereby amended only as to the amount of monthly
minimum advanced royalty that shall be paid by LESSEE, which amount shall be
one thousand five hundred dollars ($1,500.00) per month for each of 12 months
beginning July 1, 1993 and running through June 1, 1994; then $2,500.00 per
month for 12 months beginning July 1, 1994 and running through June 1, 1995.
Commencing July 1,1995 and thereafter the monthly minimum advanced royalties
shall revert to $3,000.00 as provided for in the NEW MINERAL LEASE.
Except as provided for herein, all provisions of the NEW MINERAL LEASE dated
April 20, 1986, as amended, shall remain and are in full force and effect.
Agreed this 24th day of July, 1993, by:
LESSOR:
LISB0N COPPER, LTD.
By /s/ Raymond E. Kunkel
------------------------------------
Raymond E. Kunkel, General Partner
LESSEE:
MLP ASSOCIATES, LTD.
BY /s/ Charles E. Carlson
------------------------------------
Charles E. Carlson, General Manager