MINING LEASE AGREEMENT
Parties:
Lessor: Strategic
Minerals, Inc., a Nevada corporation, XX Xxx 0000, Xxxxxxxxxxxx, Xxxxxx
00000
Lessee: Dutch
Mining Canada Ltd.., a British Columbia, Canada corporation, 000 Xxxx Xxxxxxxx
Xxxxxx, Xxx 00, Xxxxx 0000, X0X 0X0
Dated
Effective: May
31
2006
Recitals:
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A.
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The
Lessor owns the Mineral Rights on certain Properties located in Townships
6 North and 7 North, Range 16 West, Principal Meridian, Granite County,
State of Montana, in and near Basin Gulch, all of which are collectively
referred to in this Mining Lease Agreement (Agreement) as the Property,
and are described on the attached Schedule
“A”.
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| B. |
The Lessee desires to acquire
from the
Lessor, and Lessor desires to lease to Lessee, the Property, all
as
described on the terms, provisions, and conditions of this
Agreement.
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LEASE
1. LEASE
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1.1
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LEASE.
In consideration of the foregoing recitals, which are made a part
hereof,
the payment of the initial signing payment, issuance of 20M shares
of
Dutch Mining Canada Ltd. Stock, advanced production royalties, and
production royalties agreed to be paid, and the performance of the
covenants and agreements herein contained on the part of the Lessee
to be
kept and performed, Lessor does hereby takes and leases from Lessor,
the
Property.
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1.2
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TERM.
The term of this Agreement and Lessee’s right to possession and Lessee’s
obligation under this Agreement shall be for a period of Ten (10)
years
commencing at 12:00:00 am on May 31, 2006, and terminating at 11:59.59pm
on May 31, 2016, unless sooner terminated under the terms of this
Agreement. Notwithstanding following commencement of production as
provided in paragraph 9, this Agreement shall continue in full force
and
effect so long as the payment described therein are made; furthermore,
prior to commencement of production, this Agreement may be extended
on the
same terms for unlimited successive periods of Ten (10) years on
the same
terms following timely notice given to Lessor by
Lessee.
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2. EXPLORATION
AND EVALUATION.
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In
consideration of the sum of TEN THOUSAND US DOLLARS ($10,000) as
initial
payment, the receipt and sufficiency of which are hereby acknowledged,
and
commencing on the Effective Date, Lessor hereby grants to Lessee
an
unrestricted and absolute right of ingress and egress in and to the
Property, and to have possession of the Property, for the purpose
of
exploring, evaluating, developing, and mining the Property, including
all
necessary associated activities commensurate with such exploring,
evaluating, developing, and mining. Such activities shall be conducted
with the necessary approvals from the appropriate government agencies
and
in compliance with all laws and mining regulations. Lessee shall
timely
provide Lessor with data generated by this
work.
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Lessee
shall appraise Lessor as to exploration procedures during the first year of
this
agreement. Lessee will report to Lessor regarding the results of Lessee’s
exploration activities on a quarterly basis. Final decisions regarding all
exploration procedures shall be at the sole discretion of Lessee.
Within
sixty (60) days upon termination of this Agreement, Lessee shall deliver to
Lessor a report of all exploration conducted by Lessee on the Premises. This
report shall show the location of all such exploration work, assays and
analyses, and mineral and metallurgical studies regarding the Premises. Lessee
shall not be required to disclose information concerning, or which might tend
to
reveal processes, techniques or equipment developed by or for Lessee, or with
which it may be experimenting, or with which it is under obligation to any
other
person or company not to reveal.
3. ADVANCE
PRODUCTION ROYALTIES.
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In
the event that Lessee decides to continue to evaluate and develop
the
minerals on the Property, Lessee shall pay Lessor the sum of FIFTEEN
THOUSAND US DOLLARS ($15,000) not later than 11:59:59 pm on June
10, 2006
and the sum of TWENTY FIVE THOUSAND US DOLLARS on September 10th
to
conclude the first payment amount of FIFTY THOUSAND US DOLLARS.
Thereafter, commencing on November 30, 2006, Lessee shall pay Lessor
as
advance production royalties the sum of FIFTY THOUSAND US DOLLARS
($50,000) twice annually during the Agreement term until production
shall
have commenced as provided in paragraph 9 below. The advance royalty
payments shall be due March 10 and September 10 of each year after
2006.
All advance production royalties shall be due and payable without
any
deduction or offset whatsoever and prior to notice or demand, to
Lessor at
the address listed above, or at such other place as Lessor may from
time
to time designate in writing.
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4.
RIGHT
TO
MINE.
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During
the Term of this Mining Lease Agreement and commencing the date of
first
payment of advance production royalty specified in paragraph 3, Lessor
hereby grants to Lessee an unrestricted and absolute right of ingress
and
egress in and to the Property, and to have possession of the Property,
for
the purpose of mining and processing the ore therein. Lessee shall
have
the right to such ore and to remove same from the Property so long
as
Lessee is not in default. Lessee further shall have the right to
construct
buildings, make excavations, stockpiles, dumps, drains, roads, powerlines,
pipelines, and other improvements as may be necessary, subject, however,
to all existing easements and rights to way of third parties and
the
rights of Lessor, if applicable, which rights shall not interfere
with
Lessee’s right to mine. Any activity conducted by Lessee pursuant hereto
on the land on the Property is wholly at Lessee’s own
risk.
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All
of Lessee’s operations including exploration and mining hereunder shall be
conducted in a careful and workmanlike manner, in accordance with
accepted
practices of the mineral industry in Montana, without committing
any
unusual permanent waste or injury to any mine on the Premises, or
interference with the subsequent operation thereof, if not reasonably
necessary in Lessee’s operations.
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Lessee
shall deliver, each year during the term of hereof after production
commences to Lessor, copies of such maps, cross sections and other
engineering data concerning the quality and location of ore and material
removed from the Premises as Lessee customarily prepares or obtains
for
its own records, which information shall not require preparation
of
special records or reports by Lessee. This information shall be furnished
on or before the first day of March in each year during the term
hereof,
and the data contained therein shall be stated as it existed at the
close
of the preceding calendar year.
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2
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Lessee
shall not be required to disclose its own estimates and calculations
of
the grade and tonnage of ore reserves. If Lessor or its agents or
representatives disclose to a third party, without written authorization
from Lessee, information furnished by Lessee in its reports to Lessor,
or
obtained by Lessor through inspection or audit, Lessee thereafter
may
withhold any information it deems
confidential.
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5.
RIGHT
TO
ENTER.
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Lessor
shall have the right to enter on the Property at any reasonable time
for
the purpose of inspection of, among other things, possible soil and
water
contamination and gold production records, the foregoing not being
an
exclusive list during the term of this Mining Lease
Agreement.
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6.
HOLD
HARMLESS PROVISION.
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Lessee
shall protect, defend, and hold Lessor harmless from any loss, liability,
or damage to persons or Property arising out of or related to Lessee’s
activities on the Property. If Lessee defaults on this Mining Lease
Agreement and this Agreement is terminated, Lessee shall be fully
responsible for any lien, encumbrance, or change on it attributable
to
Lessee’s activities.
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7.
PERMITS.
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Lessee
shall, at Lessee’s sole expense, obtain all permits, prepare all plans,
and keep all records required by any municipal, county, state, federal,
or
other public authority in order for Lessee to use the
Property.
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8.
PRODUCTION
ROYALTIES.
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Upon
commencement of production of ore from the Property, the advance
production royalties described in paragraph 2 or terminated, effective
the
due date following the date of commencement of production, whereupon
Lessor shall be paid the greater of the annual sum of ONE HUNDRED
THOUSAND
DOLLARS US, in payments of $50,000 each six months, or a production
royalty of Three percent (3%) of the gross sales receipts of the
gold and
silver sold, paid semi-annually on the same schedule as is described
in
paragraph 3. If after commencement of production such production
royalties
shall be suspended for a period of six (6) months or longer, the
semi-annual payments shall resume and shall be payable semi-annually
on
the same schedule as in described in paragraph
2.
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9.
CAP
ON
PAYMENTS.
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The
absolute total amount of payments, whether semi-annual rent payments
or
production royalties, or otherwise, to be paid to Lessee shall not
exceed
the sum of EIGHT MILLION US DOLLARS ($8,000,000). Upon this sum payment
of
$8,000,000 by Lessee or Lessor, Lessee shall have purchased the mineral
rights to the Property, however, Lessee shall retain surface rights
to the
Property. This Lease shall continue in full force and effect
notwithstanding payment of the absolute total amount until Lessee
shall
have ceased production or otherwise terminated this
lease.
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10.
LIABILITY
INSURANCE.
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Lessee
shall maintain public liability and property damage insurance in
a
responsible company with limits of not less than $1,000,000 per
occurrence. Such insurance shall cover all risks arising directly
or
indirectly out of Lessee’s activities on the Property whether not related
to the occurrence caused or contributed to by Lessee’s negligence. Such
policy shall be placed in force throughout the term of this Agreement.
Lessor shall be named as an additional insured on said policy and
be
provided with evidence that such insurance is being maintained on
a yearly
basis.
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Prior
to commencement of operations hereunder, Lessee shall obtain all
xxxxxxx’x
compensation insurance, and policies of insurance against fire and
other
risks for which insurance is customarily obtained in similar operations
which may include Lessee’s self-insured programs or plans. All such
insurance shall be maintained by Lessee at its own expense
throughout the duration of this Agreement, and whenever Lessor reasonably
so requests, Lessee shall furnish to Lessor evidence that such insurance
is being maintained.
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3
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Lessee
covenants and agrees to indemnify and save harmless Lessor from any
and
all liability, claims, and causes of action for injury to, or death
of,
persons, and damage to, or loss or destruction of, property, resulting
from its use or occupancy of the Premises or its operations hereunder,
excepting, however, any liability, claims or causes of action resulting
from, or attributable, wholly or in part, to the exercise of rights
reserved hereunder to Lessor, its agents, or those claiming under
them, or
about the Premises, it being the intent of this Agreement that Lessee
shall have no additional risk or liability by reason of the exercise
of
such reserved rights.
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11.
LESSEE’S
FURTHER RESPONSIBILITES WITH REGARD TO THE PROPERTY.
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11.1
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WORKMANLIKE
MANNER. During the term of this Agreement all work done on the Property
by
Lessee shall be done in a workmanlike manner, following good mining
practices, and at Lessee’s sole cost and
expense.
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11.2
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COMPLY
WITH LAWS. During the term of this Agreement, Lessee shall comply
with all
laws, ordinances, regulations, directions, rules, and requirements
of all
governmental authorities.
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11.3
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PROPERTY
TO BE MAINTAINED LIEN-FREE. The Lessee shall so deal with his suppliers,
workmen and creditors at to permit no mechanics’ or other type lien to be
filed against the property here involved. In the event such a lien
is
filed, the Lessee shall immediately cause it to be removed by payment
or
shall, if he desires to contest the claim of lien, take immediate
action
to save Lessor and said properties absolutely harmless as to said
claim of
lien in the event it is adjudicated to be valid or is not removed
from
said property within a reasonable
time.
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11.4
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TIMBER
ON PREMISES. The Lessee shall only be permitted to cut and use such
timber
growing on the land described in this agreement as is required for
exploration, mining and road purposes. The Lessee shall not cut timber
for
use on any other claim not here involved or for sale or permit such
use or
sale. All marketable cut timbers shall belong to
Lessor.
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11.5
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XXXXXXX’X
COMPENSATION. The Lessee shall at all times during the term of this
lease
maintain effective coverage for all its operations and all employees
in
said operations under this Lease, including exploration, under one
of the
authorized plans of the Xxxxxxx’x Compensation
Act.
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11.6
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Lessee
shall be responsible for all taxes assessed against the property,
and
Lessee starting with the year 2006. Lessee shall pay promptly before
delinquency all taxes as assessments, general, special, ordinary
and
extraordinary, that may be levied upon or assessed upon the Premises
and
upon all ore and mineral product therefrom while Lessee is engaged
in
exploration and mining activities under this Agreement. Lessee shall
promptly reimburse Lessor for such payments upon receipt of a duplicate
receipt evidencing payment, provided, however, that Lessor may, at
its
election , forward tax statements to Lessee for payment and Lessee
shall
pay such taxes upon the failure of Lessor to do so while this Agreement
is
in effect. After any improvement, and upon notice of the same by
Lessee to
Lessor, Lessee shall pay all of the above taxes and assessments promptly
upon the Premises and before
delinquency.
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Lessee
shall pay or reimburse Lessor for all taxes or assessments levied
or
assessed against the Premises for the portion of the year in which
the
Agreement is terminated or expired according to the portion of the
year
that has expired prior to
termination.
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4
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Lessee
shall have the right to contest in the courts or otherwise, in its
own
name or in the name of the Lessor, the validity or amount of any
such
taxes or assessments, if it deems the same necessary to secure a
cancellation, reduction, readjustment, or equalization thereof, before
it
shall be required to pay the same. Lessee shall not permit or suffer
the
Premises or any part thereof to be conveyed, or title lost to Lessor,
as
the result of nonpayment of such taxes or assessments. Lessee shall
furnish duplicated receipts for all such taxes and assessments when
paid.
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Lessee
shall not be liable for any taxes levied on or measured by income,
or
taxes applicable to Lessor, based upon royalties or payments under
this
agreement.
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11.7
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Nothing
in the foregoing shall be construed to obligate Lessee to pay such
portion
of any tax as is based upon the value of improvements, structures
or
personal property made, placed or used on any part or parts of the
Premises, by or for Lessor or by any owner or lessee of surface rights
other than Lessee. If Lessee received tax bills or claims which are
the
responsibility of Lessee hereunder, the same shall be promptly forwarded
to Lessee for appropriate action.
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11.8
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Lessor
shall at all times have, possess, and hold a lien upon all ore and
Product
mined from the Premises and shipped therefrom but not sold to a bonafide
purchaser, and upon all improvements place upon the Premises by Lessee,
as
security for any unpaid balance of money due hereunder and as security
for
the performance by the Lessee of each and all of Lessee’s covenants
hereunder. This lien may be enforced against any such property in
like
manner as liens conferred by chattel mortgages, or as any other lien
security may be enforced under true laws of Montana. Nothing herein
contained, however, is intended or shall be usual course of business,
not
to prevent the removal of tools, machinery, equipment or other property
at
any time when Lessee is not in default. This lien shall not apply
to ore
or Product sold to third parties.
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12.
QUIET
ENJOYMENT AND LESSOR’S ACCESS.
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12.1
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LESSOR’S
WARRANTY. Lessor warrants that it is the owner of the Mineral Rights
and
leases on certain Properties which are referred to on Schedule “A” of this
Agreement and has the right to lease the Property free of all encumbrances
except easements of record.
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12.2
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LESSOR’S
RIGHT TO INSPECT. Lessor and Lessor’s agents shall have the right to enter
upon any part of the Property at all reasonable hours for the purpose
of
inspecting the same and the operations conducted thereon or for doing
or
performing any act required or permitted by Lessor under this
Agreement.
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12.3
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LESSOR’S
RECREATIONAL ACCESS. Lessee shall not restrict Lessor’s access to, or use
of Lessor’s cabin on the property and will not restrict Lessor’s right to
conduct recreational activities, including recreational gold mining
and
timber operations including fire worod harvest, so long as Lessor’s
recreational activities do not interfere with Lessee’s mining and
exploration related activities or violate mining laws or regulations.
Lessor has historically conducted limited placer mining periodically
utilizing a small xxxxxxx and backhoe. It is the intent of the parties
that Lessor will continue to have a right to conduct such recreational
mining provided it is conducted without violation of any governmental
regulations. Lessor will conduct all such recreational activities
at
Lessor’s sole right.
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5
| 12.4 | NO RIGHT TO XXXX. Neither Lessee nor any of Lessee’s employees, contractors or associates will have the right to xxxx on the Property without first obtaining written permission from Lessor. |
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12.5
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WEED
SPRAYING. Lessee will spray or contract to spray noxious weeds in
all
areas distributed by Lessee’s activities twice annually. Such weed
spraying will continue for a period of two years after cessation
of
activities.
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13.
POSSESSION.
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Lessee
is entitled to possession of the Property for the purpose of exploration
and mining on the effective date of this Agreement and shall be entitled
to remain in possession until the end of the term of this Agreement
or
until Lessee is in default under this Agreement. Lessor shall remain
the
owner of the surface rights to the Property. Exercise of such surface
rights by Lessor shall not interfere with the rights of the Lessee
too
explore, develop and mine the minerals and metals from the
Property.
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14.
WASTE
ROCK, SPOIL, AND TAILINGS.
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The
ore, mine waters, or other products or compounds of minerals mined
or
extracted from the Property shall be the property of Lessee subject
to the
production royalty as provided herein. Lessee shall not be liable
for
mineral values lost in mining or pressing pursuant to sound mining
and
metallurgical engineering practices. Any stockpile, residue, tailing
or
waste remaining on the property after termination of this Agreement
shall
at the time become the sole and exclusive property of Lessor, subject
to
Lessee’s duty to perform reclamation as required by
law.
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15.
SURRENDER.
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Upon
expiration or other termination of this Agreement, Lessee shall surrender
the Property.
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16.
DEFAULT
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Time
is of the essence of this Agreement. Each of the following shall
be a
default by Lessee and a breach of this
Agreement:
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Failure
to pay advance production royalties or any other money required to
be paid
by Lessee hereunder or any part thereof within 30 days after notice
of the
default has been given to Lessee.
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Failure
to comply with any term or fulfill any obligation of the Agreement,
other
than payment of advance production royalties within 90 days after
written
notice by Lessor. If the default is of such a nature that it cannot
be
completely remedied within the 90 day period, this provision shall
be
complied with if Lessee begins correction of the default within the
90 day
period and thereafter proceeds with reasonable diligence and in good
faith
to effect the remedy as soon as
practicable.
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17. TERMINATION.
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If
the Property is abandoned by Lessee in connection with a default,
termination shall be automatic and without
notice.
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18. WRITTEN
NOTICE.
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18.1
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Any
notices permitted or required pursuant to this Agreement shall be
in
writing and shall be deemed “given” upon the date of personal delivery
thereof or forty-eight (48) hours after deposit in the United States
mail,
postage fully prepaid, certified mail return receipt requested, of
such
notice addressed to the party to whom such notice is to be given
at the
address set forth for such party in this Agreement or at any other
address
that such party may, from time to time, designate by notice
given
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6
in
compliance with this Section 18. Any such notice shall be deemed “delivered”
upon the date of personal delivery of the same to the party to whom the notice
is given or forty-eight (48) hours after such party refuses to accept and sign
for a postage prepaid, certified mail, return receipt letter delivered to the
party’s notice address set forth herein or any other address as such party may,
from time to time, designate by notice given in compliance with this Section
18.
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18.2
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Until
changed, the addresses above shall be the notice address for any
notices
to the parties permitted or required pursuant to this
Agreement.
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19.
OPERATOR
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The
operator of the mine shall be Lessee or its
designee.
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20.
WAIVER
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Failure
of either party at any time to require performance of any provision
of
this Agreement shall not limit the party’s right to enforce the provision,
nor shall any waiver of any breach of any provision constitute a
waiver of
any succeeding breach of that provision or a waiver of that provision
or
any other provision.
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21.
SUCCESSOR
INTEREST.
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This
Agreement shall be binding upon and inure to the benefit of the parties,
their successors, and assigns (where
permitted).
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22.
BOUNDARY
INTERESTS.
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For
all purposes of this Agreement, the term “Boundary Interest” shall mean
any and all Unpatented mining claims located by Lessee under the
general
mining laws, any part or parts of which are within an area within
on mile
of the Premises.
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If
any Boundary Interests are located by Lessee prior to the expiration
or
termination of the Agreement, said Boundary Interests shall be made
part
of the Premises, as though specifically described in the description
of
the Premises in this Agreement with the right, at Lessee’s option, to
explore and develop the same. Within 30 days after expiration or
termination of this Agreement, Lessee will convey to Lessor by Quit
Claim
Deed all of Lessee’s rights, title and interest in any Boundary Interest
under this Agreement.
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Lessee
shall have no obligation to Lessor or others concerning any Boundary
Interest, except payment of Production
Royalty.
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23.
PRIOR
AGREEMENTS
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This
Agreement is the entire, final and complete agreement of the parties
pertaining to the transactions contemplated therein, and they supersede
and replace all prior or existing written or oral agreements or
understandings between the parties or their representatives relating
thereto. Except as otherwise provided herein, no subsequent amendment,
change, or alteration to this Agreement shall be binding upon the
parties
unless reduced to writing and signed by both
parties.
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24.
APPLICABLE
LAW
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This
Agreement has been entered into in Montana. The parties agree that
the
laws of Montana shall be used in construing and enforcing this
Agreement.
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25.
COSTS
AND
ATTORNEY FEES
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In
the event either party shall take any action, judicial or otherwise,
to
enforce or interpret any of the provisions of this Agreement, the
prevailing party shall be entitled to recover from the other party
all
expenses which it may reasonably incur in taking such action, including
by
not limited to costs incurred in searching records, the cost of reports,
expert fees, and attorney fees, whether incurred in a civil action
or
appeal from a judgment therein and including attorney fees for post
judgment enforcement.
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7
26.
NUMBER,
GENDER, AND CAPTIONS.
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As
used herein, the singular shall include the plural, and the plural
the
singular. The masculine and neuter each shall include the masculine,
feminine, and neuter, as the context requires. All captions are intended
solely for convenience of reference
only.
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27.
PARTIAL
INVALDITY
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If
any term, provision, covenant, or condition of this Agreement should
be
held by a court of competent jurisdiction to be invalid, void, or
unenforceable, the remainder of this Agreement shall continue in
full
force and effect and in no way shall be affected, impaired, or invalidated
thereby.
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28.
VENUE
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Venue
for any action to enforce, construe, or interpret this Agreement
shall be
the appropriate Court for the State of Montana for Granite
County.
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Dated
this 31st
day of
May, 2006
| Lessor: Strategic Minerals Inc. | Lessee: Dutch Mining Canada Ltd. | ||
| /s/ Xxxxxxx X. Xxxxxxxxx | /s/ Xxxxx Xxxxxx | ||
|
Xxxxxxx X. Xxxxxxxxx, Principal |
Xxxxx Xxxxxx, CEO |
||
Witness:
__________________________
__________________________________
(Print
Name)
8
SCHEDULE
"A"
Attached
to and forming part of the Basin Gulch Lease Agreement among Strategic Minerals
Inc. and Dutch Mining Canada Ltd.., dated the 31st day of March,
2006.
List
of Located Claims
The
claims are all located in south-central Granite County, in portions of Section
34, Township 7 North, Range 16 West, and Sections 3, 4, and 9, Township 6 North,
Range 16 West (Appendix I, Figure 2).
The
patented mining claims making up the Basin Gulch Group include the
following:
|
q Xxxxxx
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(Mineral
Survey 5565)
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q Shylock
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(Mineral
Survey 6354)
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q Xxxxxxx
|
(Mineral
Survey 5755)
|
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q Quartz
Hill
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(Mineral
Survey 5564)
|
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q Spencerian
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(Mineral
Survey 8140)
|
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q Gold
Hill 5
|
(Mineral
Survey 5755)
|
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q Basin
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(Mineral
Survey 9026)
|
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q Blue
Xxxx Lode
|
(Mineral
Survey 9530)
|
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q White
Pine
|
(Mineral
Survey 8137)
|
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q Yellow
Pine
|
(Mineral
Survey 8139)
|
|
q Xxxx
Xxxxx
|
(Mineral
Survey 8138)
|
Recorded: ________________________
