EXHIBIT 10.6
MINERAL LEASE
RECITALS
WHEREAS J. F. Costanza and Joyce L. Costanza are holder of valid unpatented
mineral claims known as the "Security" claims, located in San Juan County, Utah,
and
Costanzas are LESSEES under Utah State Metalliferous Lease ML 20569, and
Costanzas did, on the 5th day of January, 1983 grant, bargain and quit
claim unto Raymond E. Kunkel and Paul B. Clemons, the right to mine copper on
and under the parts of said claims within 500 feet of surface, said quit claim
being recorded on book 661, page 294-295, and
Costanzas and MLP Associates now desire to enter into a lease for the
remaining rights to mine copper and other metals, excluding vanadium and Uranium
on said Security Claims, and additionally to grant MLP Associates a option to
purchase the remaining vanadium and uranium rights retained by Costanzas, and
additionally to assign all of Costanza's rights under the Utah State
Metalliferous Lease ML 20569 unto MLP Associates,
THEREFORE:
This Mineral Lease is entered into as of the 3ed days of
August, 1992, by and between J. F. Costanza and Joyce L. Costanza ("LESSOR"),
whose mailing address is P.O. Box 813, Mazatalon, Sinoloa, Mexico, and
MLP Associates, A Colorado Limited Partnership ("LESSEE"), whose mailing address
is 12836 N. 60th Street, Scottsdale, Arizona 85254.
1. The "LEASED PREMISES shall include of the rights,
titles, interests and expectancy of the LESSOR, in and to the "SECURITY" CLAIMS
located in San Juan County, Utah, as described in APPENDIX "A" hereto and a part
hereof, as defined and Limited herein,
l.a. 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,
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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, except
the right, titles and interest in and to vanadium and uranium contained therein,
and LESSOR hereby grants exclusively to LESSEE said rights titles and interests
of LESSOR, to occupy, use, enjoy and possess the LEASED PREMISES, including, but
not limited to, the following:
1.b. To explore for, mine or otherwise extract, to mill,
treat or otherwise process, and to store, stockpile, remove, market, sell or
otherwise dispose of ore and minerals, except vanadium and uranium.
1.c. To dispose of or deposit waste material and tailings
on the LEASED PREMISES.
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 use any underground water now existing or
subsequently discovered or developed in or upon the LEASED PREMISES.
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.
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.
1.h. Notwithstanding the above, LESSEE SHALL CONDUCT ALL
EXPLORATION AND MINING ACTIVITIES IN SUCH A MANNER AS NOT TO INTERFERE WITH ANY
VANADIUM OR URANIUM MINING, EXPLORATION OR PROCESSING FACILITY EXISTING OR
TECHNICALLY PLANNED FOR AT THE TIME OF said activities is commenced,
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3. LESSOR and LESSEE agree to execute such additional
documents as are reasonable and necessary to insure and confirm that the OTHER
PROPERTY is covered by this 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, 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 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 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 monthly 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 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 percent (2%). 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. 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.
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6. 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.
7. LESSEE shall prepare and maintain such records as are
reasonably necessary to calculate the royalty due LESSOR hereunder and the
royalty due on the underlying leases and subleases. LESSEE shall, on written
request of LESSOR, furnish copies of such records to LESSOR.
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 replace the same. At no
time during the term of this 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 MINERALS 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 MINERALS LEASE is surrendered or terminated.
8.c. All WASTE MATERIAL on the LEASED PREMISES after
surrender or termination of this 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.
9. With respect to taxes and fees and assessments:
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9.a. LESSEE agrees to pay all taxes levied and assessed
against LESSEE on the LEASED PREMISES, and 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:
9.b.(l) Against the LEASED PREMISES solely by reason of
LESSEE'S operations on the LEASED PREMISES.
9.b.(2) Against the minerals in or on the LEASED PREMISES
in all unsevered state.
9.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.
9.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 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 SUCH
REIMBURSEMENT IS NOT MADE AS PROVIDED HEREIN, lessee SHALL HAVE THE RIGHT TO
WITHHOLD PAYMENT OF AND RETAIN AS ITS SOLE
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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.
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 other than the LEASED PREMISES, 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. LESSEE'S obligations hereunder shall not apply to any claim unless
LESSOR notify LESSEE of the existence of such claim as soon as it becomes known
to LESSOR, and further 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
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mortgage or lien 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 effectuate fully the provisions of this
Section.
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 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 connected with the operations
conducted by LESSEE upon, in and through the LEASED PREMISES.
14. LESSEE may, at any time and from time to time during
the term of this Lease, execute and deliver to LESSOR, 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 MINERAL 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 LESSOR.
15. LESSOR shall have no right to terminate this
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MINERALS LEASE unless LESSEE shall fail to perform according to the terms of
this 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 MINERAL LEASE shall terminate.
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
monthly minimum advance royalty), to pay its share of the taxes as above
provided, to perform assessment work, pay fees 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 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.
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:
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To LESSOR:
J. F. Costanza and Joyce L. Costanza
484 Sundial
Moab, Utah 84532
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, 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 MINERALS LEASE.
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, including but not limited to, all rights to vanadium and uranium,
under the following terms:
21.a. The option is exercised at any time while this
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MINERALS LEASE is in full force and effect, for the sum of two million dollars
($2,000,000.00) 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 the 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. As further consideration for this lease LESSOR agree
to assign all their right, titles and interest in and to UTAH STATE
METALLIFEROUS LEASE ML 20569 unto MLP Associates, and to execute such documents
as are required to carry our such assignment.
24. This 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 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 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 as of
the day and year first above written.
LESSOR
J. F. Costanza and Joyce L Costanza
/s/ J. F. Costanza /s/ Joyce L. Costanza
- ----------------------------------- ----------------------------------------
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LESSEE
MLP ASSOCIATES, LTD.
By
------------------------------------
Charles E. Carlson, General Partner
STATE OF UTAH )
: ss.
County of Grand )
On this 25 day of August, 1992, personally appeared before me
J. F. Costanza an Joyce L Costanza signer of the foregoing instrument.
/s/ J. L. McDorman
----------------------------------------
Notary Public
Residing at Moab
My Commission Expires: 6-20-96
STATE OF AZ )
: ss.
County of Maracopa)
On this 3 day of August, 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: 7-27-95
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MINERAL LEASE APPENDIX A
"SECURITY" CLAIMS
LISBON VALLEY PROSPECT
SAN JUAN COUNTY, UTAH
TOWNSHIP 30 SOUTH, RANGE 26 EAST, S.L.M.
SECTION 31
TOWNSHIP 31 SOUTH, RANGE 26 EAST, S.L.M.
SECTIONS 5, 6
Date Recorded Date BLM
Claim Name Located in County Book/Page Filing BLM UMC No.
- ---------- ------- --------- --------- ------ -----------
Security #3 12/22/65 1/18/66 377/402 10/15/79 UMC 140827
Security #5 12/22/65 1/18/66 377/403 10/15/79 UMC 140607
Security #7 12/22/65 1/18/66 377/404 10/15/79 UMC 140608
Security #9 12/22/65 1/18/66 377/405 10/15/79 UMC 140609
Security #11 12/22/65 1/18/66 377/406 10/15/79 UMC 140610
Security #14 12/22/65 1/18/66 377/407 10/15/79 UMC 140611
Security #15 12/22/65 1/18/66 377/408 10/15/79 UMC 140612
Security #16 12/22/65 1/18/66 377/409 10/15/79 UMC 140613
Security #18 12/22/65 1/18/66 377/410 10/15/79 UMC 140614
Security #19 12/22/65 1/18/66 377/411 10/15/79 UMC 140615
Security #20 12/22/65 1/18/66 377/412 10/15/79 UMC 140616
Security #25 12/22/65 1/18/66 377/413 10/15/79 UMC 140617
Security #26 12/22/65 1/18/66 377/414 10/15/79 UMC 140618
Security #27 12/22/65 1/18/66 377/415 10/15/79 UMC 140619
Security #28 12/22/65 1/18/66 377/416 10/15/79 UMC 140620
Security #29 12/22/65 1/18/66 377/417 10/15/79 UMC 140621
Security #30 12/22/65 1/18/66 377/418 10/15/79 UMC 140622
Security #31 12/22/65 1/18/66 377/419 10/15/79 UMC 140623
Security #32 12/22/65 1/18/66 377/420 10/15/79 UMC 140624
Security #33 12/22/65 1/18/66 377/421 10/15/79 UMC 140625
Security #34 12/22/65 1/18/66 377/422 10/15/79 UMC 140626
Security #35 12/22/65 1/18/66 377/423 10/15/79 UMC 140627
Security #36 12/22/65 1/18/66 377/424 10/15/79 UMC 140628
Security #37 12/22/65 1/18/66 377/425 10/15/79 UMC 140629
Security #38 12/22/65 1/18/66 377/426 10/15/79 UMC 140630
Security #39 12/22/65 1/18/66 377/427 10/15/79 UMC 140631
Security #40 12/22/65 1/18/66 377/428 10/15/79 UMC 140632
Security #41 12/22/65 1/18/66 377/429 10/15/79 UMC 140633
Security #42 12/22/65 1/18/66 377/430 10/15/79 UMC 140634
Security #43 12/22/65 1/18/66 377/431 10/15/79 UMC 140635
Security #44 12/22/65 1/18/66 377/432 10/15/79 UMC 140636
Security #45 12/22/65 1/18/66 377/433 10/15/79 UMC 140637
Security #46 12/22/65 1/18/66 377/434 10/15/79 UMC 140638
Security #47 12/22/65 1/18/66 377/435 10/15/79 UMC 140639
Security #48 12/22/65 1/18/66 377/436 10/15/79 UMC 140640
Security #49 1/28/66 2/24/66 378/341 10/15/79 UMC 140641
Security #50 1/28/66 2/24/66 378/342 10/15/79 UMC 140642
Security #51 1/28/66 2/24/66 378/343 10/15/79 UMC 140643
Security #52 1/28/66 2/24/66 378/344 10/15/79 UMC 140644
Security #53 1/28/66 2/24/66 378/345 10/15/79 UMC 140645
Security #54 1/28/66 2/24/66 378/346 10/15/79 UMC 140646
Security #55 1/28/66 2/24/66 378/347 10/15/79 UMC 140647
Security #56 1/28/66 2/24/66 378/348 10/15/79 UMC 140648