EXHIBIT 10.5
MINERAL LEASE
This Mineral Lease, entered into as of the of 26th day of October, 1992, by
and between Steve Kosanke and Mary Lou Kosanke ("LESSOR"), whose mailing address
is P.O. Box 193, La Sal, Utah, 84530, and MLP Associates, A Colorado Limited
Partnership ("LESSEE"), whose mailing address is 12836 N. 60th Street,
Scottsdale, Arizona 85254.
MINERAL LEASE
The "LEASED PREMISES are described in APPENDIX A
hereto, and a part hereof.
1. For and in consideration of the mutual covenants and
agreements hereinafter set forth, in further consideration of good and valuable
consideration received by LESSOR from LESSEE, LESSOR does hereby lease to LESSEE
all of the right, title and interest of LESSOR in and to the LEASED PREMISES and
LESSOR hereby grants exclusively to LESSEE all rights of LESSOR to occupy, use,
and enjoy the LEASED PREMISES, including, but not limited to, the following:
1.a. To explore for minerals.
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.
1.c. To dispose of or deposit waste material and or tailings on
the LEASED PREMISES but only if mining is being done on the LEASED PREMISES.
Reasonable industry accepted precautions shall be taken to determine that no
such waste material or tailings are place on unmined ore.
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 structure of all kinds, roads, shafts, inclines,
tunnels, drifts, open pits, pipelines, telephone lines, electric transmission
lines and transportation facilities and other utilities.
1.e. 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.
1.f. 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 which are not in conflict with applicable state and federal
laws and regulations.
1.g. LESSEE may freely bargain, assign and transfer its rights
titles and interest hereunder, provided however that Asignee complies with all
covenants and agreements of this Lease.
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2. This MINERALS LEASE is conditioned upon LESSEE proceeding
diligently and with all reasonable dispatch to explore and develop minerals on
the LEASED PREMISES, and to seek to place the subject property in production.
with a minimum requirement that LESSEE cause to be drilled no less than 300 feet
of core hole or reverse circulation hole within the first 18 months of this
Mineral Lease.
3. LESSOR and LESSEE agrees to execute such additional
documents as are reasonable and necessary in recordable form, and amendment or
amendments to this MINERALS LEASE or any other documents which better describe
the LEASED PREMISES.
4. This MINERALS LEASE shall commence on the date first
above set forth in this instrument, run thereafter for a primary term of six
(6) years and continue thereafter as long as production royalties are being
paid 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 MINERAL 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 minimum advance royalty hereinafter
provided.
5. LESSEE shall pay LESSOR a royalty equal to the percentage
(hereinafter set forth) of the NET PROCEEDS (hereinafter defined) received for
all ores, 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.
The royalty percentage shall be two and one half percent (2.5%). 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.
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.
6. LESSEE shall prepare and maintain such records as are
reasonable necessary to calculate the royalty due LESSOR hereunder and LESSEE
shall, on written request of LESSOR, furnish copies of such records to LESSOR.
7. Commencing with the date of this Mineral Lease, and on
each anniversary thereafter, LESSEE shall pay LESSOR an annual minimum
advance royalty. The amount of said royalty shall be seven hundred dollars
($700.00) upon execution and $700.00 upon the first anniversary thereof, then
$1400.00 on the 2nd anniversary, $2100.00 on the 3rd anniversary, and
$2800.00 on the 4th and subsequent anniversaries so long as this lease shall
remain in effect. LESSEE shall be entitled to
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credit this minimum advance royalty against the production royalty to which the
LESSOR is entitled as set forth above.
8. 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:
8.a. LESSOR agrees that WASTE MATERIAL may be mined or
otherwise extracted without obligation upon LESSEE to return same to the place
from which extracted. At no time during the term of this MINERAL 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, including those governing
toxic or hazardous waste, in full force and effect on or before the termination
of this MINERAL LEASE.
8.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 MINERAL LEASE is surrendered or terminated.
9. With respect to taxes on the LEASED PREMISES:
9.a. LESSEE agrees to pay all taxes levied and assessed against
any improvements placed on the LEASED PREMISES by LESSEE.
9.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 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
on sales or production, as per paragraph 5. 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 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 MINERALS LEASE) LESSEE
may, but shall not be obligated to, pay such taxes, assessments or levies,
together 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
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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 minimum advance royalty provided above) thereafter due
and payable to LESSOR until the amount of royalty withheld equals the
reimbursement due LESSEE.
10. LESSOR shall have the right to claim the depletion
allowance applicable to the royalty paid LESSOR hereunder.
11. With respect to liens, damages, liability and insurance:
11.a. LESSEE agrees to indemnify LESSOR against, and hold
LESSOR harmless from any and all claims or liability for injury to or death
of persons or for damages to property resulting from LESSEE'S operations
hereunder. LESSEE further agrees to indemnify LESSOR against and hold LESSOR
harmless from any and all claims or liability for materials or labor
resulting from LESSEE'S operations hereunder on the LEASED PREMISES. LESSOR
agrees to notify LESSEE of the existence of such claim as soon as it becomes
known to LESSOR, and further to notifies LESSEE of the institution of any
action, suit or legal proceeding on such claim as soon as the institution of
such action, suit, or other proceedings become known to LESSOR and LESSEE is
given the sole right to defend and/or settle any such claim with attorneys of
its own selection.
11.b. LESSEE further agrees to maintain workman's compensation
as required by Utah State law.
11.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 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 mortgage or lien or the holder of such encumbrance had against the LESSOR
immediately prior to the time of such payment, satisfaction or discharge.
12. 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.
13. LESSEE will conduct its operations on the LEASED
PREMISES in accordance with applicable governmental laws, rules and
regulations LESSEE makes no express or implied warranty, covenant or
agreement relating to the exploration, development, mining or other
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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.
14. LESSEE may, at any time and from time to time during the
term of this Lease terminate with respect the LEASED PREMISES, and LESSEE shall
be relieved of all obligations, liability or responsibility of every character
whatsoever thereafter accruing with respect to the LEASED PREMISES by providing
thirty days written notice to LESSOR.
15. LESSOR shall have no right to terminate this MINERALS
LEASE unless LESSEE shall fail to perform according to the terms of this MINERAL
LEASE and LESSOR shall give written notice 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 MINERAL LEASE shall terminate. In the event
this lease is terminated, LESSEE shall provide recordable notice of termination
to LESSOR
16. Surrender or termination of this 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 minimum advance royalty), to pay its share of the taxes as
above provided and to perform the reclamation work as above provided.
17. LESSEE shall have the right at any time within sixty (60)
days following the surrender or termination of this 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.
18. LESSEE will maintain the DATA and supply for
examination and copying to 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.
19. 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:
Steve Kosanke and
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Mary Lou Kosanke
P.O. Box 193 La Sal Utah 84530
To LESSEE:
MLP /Associates
% Charles E. Carlson
12836 N. 60th Street
Scottsdale, AZ 85254
20. LESSEE'S failure to perform or comply with a particular provision
of this MINERAL 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, governmental orders or regulations, fire accident,
explosion, flood, lockouts, differences with workman, delays of carriers,
commandeering or requisitioning by the government. 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 MINERALS LEASE. No
circumstances or conditions shall excuse LESSEE from its obligation to pay
minimum advance royalty under Section 9.
21. LESSOR ("OPTIONOR") hereby grants to LESSEE ("OPTIONEE")
an irrevocable exclusive option to purchase all of the OPTIONOR'S rights, titles
and interest in and to the property comprising the LEASED PREMISES:
21.a. The option is exercised at any time while this MINERALS
LEASE is in full force and effect, for the sum of one hundred thousand dollars
($100,000.00) in cash or certified funds.
21.b. Simultaneous with the exercise of the option, OPTIONOR
shall execute and deliver to OPTIONEE such deeds, assignments and other
instruments, as are necessary to convey the LEASED PREMISES to OPTIONEE.
21.c. The purchase price shall be reduced by sum of all
royalties paid under section (5.) of this lease.
22. This MINERALS LEASE shall be governed by and construed and
enforced in accordance with the laws of the State of Utah.
23. LESSEE shall comply and conform with all requirements of
federal, local and state government relating to annual assessment work and fees
in effect as of the date of this lease. Additionally, LESSEE agrees to perform
the Sept. 1, 1992-1993 assessment work and Federal Fees of $100.00 per claim for
the Sept. 1, 1992-1293, year, and LESSEE will perform said assessments and pay
said $100.00 per claim fees for each subsequent year in which the lease
continues in effect.
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24. This MINERAL 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 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.
25. This MINERAL LEASE may be executed in counterpart.
IN WITNESS WHEREOF, the parties hereto have executed this Minerals
Lease as of the day and year first above written.
LESSOR
Steve Kosanke and Mary Lou Kosanke
/s/ Steve Kosanke
-------------------------------------
/s/ Mary Lou Kosanke
-------------------------------------
LESSEE
MLP ASSOCIATES, LTD.
By /s/ Charles E. Carlson
-----------------------------------
Charles E. Carlson, General Partner
STATE OF UTAH )
: ss.
County of San Juan )
On this 28th day of October, 1992, personally appeared before me
Steve Kosanke and Mary Lou Kosanke, signer of the foregoing instrument.
/s/ Jacque Bane
[SEAL] -------------------------------------
Notary Public
Residing at La Sal, Utah
-------------------------
My Commission Expires:
March 4, 1996
- ----------------
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STATE OF ARIZONA )
: ss.
County of Maracopa )
On this 2 day of November, 1992, 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 on behalf of MLP Associates, A
Colorado Limited Partnership.
/s/ Melanie Konski
--------------------------------------
Notary Public
Residing at Phoenix, AZ
--------------------------
My Commission Expires:
[SEAL]
7-27-95
- -------
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MINERAL LEASE APPENDIX A
Leased Premises
The following unpatented mining claims are located in San Juan County Utah, and
duly recorded on the books of the County Recorder, San Juan County, Utah
Claim name Book Page UMC#
Oxide I 707 734 330928
Oxide 2 707 735 330929
Oxide 3 705 119 327778
Oxide 4 705 120 327779
Oxide 5 705 121 327780
Oxide 6 705 122 327781
Oxide Fraction 708 345 331632
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