WATER RIGHTS LEASE AND WATER PIPELINE EASEMENT AGREEMENT

After Recording, Return To:

Crown Mines, L.L.C.

P. O. Xxx 000000

Xxxxxx, Xxxxx  00000-0000

WATER RIGHTS LEASE AND

WATER PIPELINE EASEMENT AGREEMENT

This Water Right Lease and Water Pipeline Easement Agreement (“Agreement”) is entered into between CROWN MINES, L.L.C., a Texas limited liability company, with an address of P. X. Xxx 000000, Xxxxxx, Xxxxx  00000-0000 (“Crown Mines”), and DEER TRAIL MINING COMPANY, L.L.C. , a Nevada limited liability company, with an address of 8880 Rio San Diego Drive, 8^th Floor, Xxx Xxxxx, Xxxxxxxxxx 00000 (“DTMC”) this 30^th  day of July, 2007 (“Effective Date”).  Crown Mines and DTMC may be referred to herein individually as a “Party” and collectively as the “Parties.”

RECITALS

A.

Crown Mines has been the owner of Water Right No. 63-37, being more particularly described as having a maximum flow of 0.25 cubic feet per second and a maximum annual diversion of 180.995 acre feet of water from Three Mile Spring for year-round mining purposes at the Deer Trail Mine and Mill Site situated in Piute County, State of Utah (the “Spring Right”).

B.

Water from the Spring Right is conveyed via a pipeline approximately 7,510 feet long located on an associated right-of-way extending from Three Mile Spring to the Deer Trail Mine and Mill Site (“Three Mile Spring Pipeline”).

C.

Concurrently with the Effective Date, Crown Mines has conveyed a fifty percent portion of the Spring Right to DTMC, said portion being more particularly described as having a maximum flow of 0.125 cubic feet per second and a maximum annual diversion of 90.5 acre feet of water from Three Mile Spring for year-round mining purposes.

D.

Concurrently with the Effective Date, Crown Mines has retained a fifty percent portion of the Spring Right, said portion being more particularly described as having a maximum flow of 0.125 cubic feet per second and a maximum annual diversion of 90.5 acre feet of water from Three Mile Spring for year-round mining purposes (the “Retained Right”).

E.

Crown Mines also owns a contractual right to use water diverted under Water Right No. 63-3043 as evidenced and described in the Agreement between Cottonwood Irrigation Company and Deer Trail Development Corporation, dated July 28, 1977 (the “Contractual Right”), a copy of which is attached to this Agreement as Exhibit A.

F.

Concurrently with the Effective Date, crown Mines has assigned a fifty percent portion of its Contractual Right to DTMC.

1

G.

Concurrently with the Effective Date, Crown Mines has retained a fifty percent portion of the Contractual Right (the “Retained Contractual Right”).  The Retained Right and the Retained Contractual Right are referred to collective herein as the “Water Rights.”

H.

Concurrently with the Effective Date, Crown Mines conveyed to DTMC certain patented and unpatented mining claims and mill sites and dumps situated in Piute County, State of Utah, described in the attached Exhibit B (the “Claims”).

I.

DTMC desires to use the Water Rights and Three Mile Spring Pipeline in its operation of the Claims through a lease of the Water Rights and Three Mile Spring Pipeline from Crown Mines.

J.

Crown Mines desires to acquire a perpetual non-exclusive Pipeline Easement over and across the Claims for construction of a future pipeline for the transportation of water.

AGREEMENT

NOW, THEREFORE, in consideration of their mutual covenants and promises described herein, including, but not limited to, the perpetual non-exclusive Pipeline Easement described herein, the Parties agree as follows:

1.

Recordation of Agreement.  This Agreement may be recorded by a Party with any governmental agency, including in the offices of the County Recorder of Piute County, Utah, and Xxxxxx County, Utah.

2.

Lease of Water Right and Pipeline ..  Crown Mines hereby leases the Water Rights and the use of the Three Mile Spring Pipeline to DTMC for purposes consistent with the approved uses of the Water Rights (the “Lease”).

3.

Term.  The term of the Lease is five (5) years from the Effective Date, unless earlier terminated or extended as provided herein.  

4.

Extension of Lease.  DTMC may provide written notice to Crown Mines of its desire to extend the term of the Lease for successive periods of up to five (5) years each.  DTMC shall provide notice to Crown Mines of its desire to extend the term of the Lease at least 6 months prior to the end of the term or any extension thereof.  Crown Mines shall extend the term of the Lease as requested by DTMC, provided that: (i) Crown Mines has determined, in its sole and absolute discretion but exercising reasonable commercial judgment, that the Water Rights are not required for operation and development of any of its mining claims or for other uses which may by law be permitted during the period of extension requested by DTMC; and (ii) the Parties have negotiated additional terms, including a price for the lease of the Water Rights, as Crown Mines may have determined to be appropriate, in its sole and absolute discretion but exercising reasonable commercial judgment, for the period of extension requested by DTMC.  In the event that Crown Mines determines that the Water Rights are necessary for operation and development of its mining claims or for other uses which may by law be permitted, Crown Mines shall so

2

notify DTMC in writing no later than 4 months prior to the end of the term or any extension thereof.

5.

Rent.  The Water Rights shall be leased to DTMC at no cost during the initial term of the Lease.  The Parties shall negotiate in good faith the rental for the Water Rights for each period during which the Lease is proposed to be extended.

6.

Duty to Use Water.  DTMC shall divert and fully use the water available under the Water Rights consistent with their approved uses.  Within 120 days of the Effective Date, DTMC shall submit a water use plan to Crown Mines, including, but not limited to, a description of the diversion and conveyance facilities, the amount of water that it reasonably expects to use, the timing of the proposed use, and a description of the operations that will use the water in its mining and development of the Claims.

7.

Diversion and Use Records.  DTMC shall measure its water diversions and keep records of all water diverted, used, and returned under the Water Rights.  The water diversion and use records maintained by DTMC shall be considered confidential and shall not be disclosed to anyone but Crown Mines without Crown Mines’ express written permission.  On each anniversary of the Effective Date, DTMC shall provide a report of its diversion and use of water under the Water Rights to Crown Mines.

8.

Filing of Change Applications Restricted.  DTMC shall not file any permanent or temporary change applications on the Water Rights without the express prior written permission of Crown Mines.

9.

Termination of Lease.  Crown Mines may terminate the Lease upon 12 months’ written notice to DTMC if Crown Mines determines, in its sole and absolute discretion but exercising reasonable commercial judgment, that the use of the Water Rights are necessary for the mining and development of its claims or for other uses which may by law be permitted.  Termination of the Lease shall have no effect on the perpetual pipeline easement granted by DTMC to Crown Mines herein, which is expressly intended to survive termination of the Lease.

10.

Pipeline Easement.  DTMC hereby grants to Crown Mines a perpetual, non-exclusive easement (“Pipeline Easement”) over and across the Claims at any reasonable point to locate, survey a route, construct, entrench, maintain, protect, inspect and operate a surface or an underground pipeline for the transportation of water, together with necessary valves and other appurtenances.  The easement hereby granted is a burden on the Claims for the benefit of Crown Mines, which burden shall run with the Claims and shall be binding upon successor owners of the Claims or any portion thereof and constitute an easement in gross in favor of Crown Mines and its successors and assigns.  The Pipeline Easement shall be 20 feet in width being 10 feet on each side of the centerline of the pipeline.  The use of the Pipeline Easement shall not unreasonably interfere with DTMC’s mining activities on the Claims, and the Pipeline Easement is in addition to and not in derogation of any other rights of access available to Crown Mines by law.

11.

Notices.  All notices, payments and other required communications (“Notices”) to the Parties shall be in writing, and shall be addressed as follows:

3

If to Crown Mines:

Crown Mines, L.L.C.

P. O. Xxx 000000

Xxxxxx, Xxxxx  00000-0000

With a Copy to:

Xxxxxxx X. Xxxxxxxx

Xxxxxxx Xxxxxx L.L.P.

000 Xxxx Xxxxxx, Xxxxx 0000

Xxxxxx, Xxxxx  00000

If to DTMC:

Deer Trail Mining Company, L.L.C.

0000 Xxx Xxx Xxxxx Xxxxx, 0^xx Xxxxx

Xxx Xxxxx, Xxxxxxxxxx  00000

With a Copy to:

Xxxxxx X. Xxxxxxxxx, Esq.

00 Xxxx Xxxxx Xxxxxx, Xxxxx 0000

Xxxx Xxxx Xxxx, Xxxx  00000

All Notices shall be given by personal delivery, by electronic communication or facsimile, with a confirmation sent by registered or certified mail return receipt requested, or by commercial courier service.  All Notices shall be effective and shall be deemed delivered on the date of delivery if delivered during normal business hours, and if not , delivered during normal business hours, on the next business day following delivery.  A Party may change its address by Notice to the other Party.

12.

Authority.  Each of Crown Mines and DTMC represents and warrants to the other that its undersigned officer has been duly authorized, and has the power and authority, to execute this Agreement on its behalf.

13.

Successors and Assigns.  This Agreement and the covenants contained herein shall be binding upon and inure to the benefit of the Parties, their successors and assigns.

IN WITNESS WHEREOF, the parties have caused this Agreement to be properly executed by persons thereunto duly authorized for the purposes therein stated.

EXECUTED as of the date first above written.

DEER TRAIL MINING COMPANY, L.L.C. ,

CROWN MINES, L.L.C.,

a Nevada limited liability company

a Texas limited liability company

By:  _/s/ Xxxx X. Lopez___________

By:  _/s/ I.N. Fehr______________

Its:  _Manager___________________

Its:  _Manager_________________

4

STATE OF CALIFORNIA

)

: ss.

COUNTY OF

SAN DIEGO

)

The foregoing instrument was acknowledged before me this 31 day of July, 2007, by Xxxx X. Xxxxx, Manager of DEER TRAIL MINING COMPANY, L.L.C. , a Nevada limited liability company.

[NOTARY SEAL]

_/s/ Xxxxxx X. Harris____________

Notary Public

STATE OF TEXAS

)

: ss.

COUNTY OF

DALLAS

)

The foregoing instrument was acknowledged before me this 30^th day of July, 2007, by I.N. Xxxx, the President of CROWN MINES, L.L.C., a Texas limited liability company.

[NOTARY SEAL]

_/s/ Xxxxxx X. Bartos____________

Notary Public

5

EXHIBIT A

To Water Rights Lease and Water Pipeline Easement Agreement

Agreement between Cottonwood Irrigation Company and

Deer Trail Development Corporation, dated July 28, 1977

6

7

8

9

10

11

EXHIBIT B

To Water Rights Lease and Water Pipeline Easement Agreement

PART 1

Crown Mines L.L.C. Claims Purchased by Deer Trail Mining Company, L.L.C.

Patented Claims Located in Piute County, Utah

CLAIM NAME		MINERAL SURVEY NUMBER
CLIFF		MS 00
XXXX XXXXX		XX 42 A
DEER TRAIL	#01	MS 0000 X
XXXX XXXXX	#00 XXXXXXXX	XX 0000 X
XXXX XXXXX	#00	XX 0000 X
XXXX XXXXX	#00 XXXXXXXX	XX 0000 X
XXXX XXXXX	#00	XX 0000 X
XXXX XXXXX	#00 XXXXXXXX	XX 0000 X
XXXX XXXXX	#00	XX 0000
XXXX XXXXX	#00	XX 0000 X
XXXX XXXXX	#00 XXXXXXXX	XX 0000 X
XXXX XXXXX	#00	XX 0000 X
XXXX XXXXX	#00	XX 0000
XXXX XXXXX	#00	XX 0000
XXXX XXXXX	#00	XX 0000
XXXX XXXXX	#00	XX 0000
XXXX XXXXX	#00	XX 0000
XXXX XXXXX	#00	XX 0000
XXXX XXXXX	#00	XX 0000
XXXX XXXXX	#00	XX 0000
XXXX XXXXX	#00	XX 0000
XXXX XXXXX	#00	XX 0000
XXXX XXXXX	#00	XX 0000
XXXX XXXXX XXXX.		XX 0000
XXXX XXXXX XXXXXXXX		XX 42 B
XXXXXX & XXXXXXXX		MS 52 A
*XXXXXX & FERSUSON MILLSITE		MS 52 B
GREEN EYED MONSTER		MS 43 A
MONSTER APEX		MS 5972
MONSTER APEX #2		MS 5972
PLUTO		MS 46
SPHINX		MS 6397

TOTAL CLAIMS     32

*XXXXXX & XXXXXXXX MILLSITE MINERAL RIGHTS ONLY

12

EXHIBIT B

To Water Rights Lease and Water Pipeline Easement Agreement

PART II

Crown Mines L.L.C. Claims Purchased by Deer Trail Mining Company, L.L.C.

Unpatented Claims Located in Piute County, Utah

CLAIM NAME	RECORDED BOOK	RECORDED PAGE	AMENDED BOOK PAGE	BLM SERIAL NUMBER
APEX XXXX	X	000		00000
XXXXXXX	X	423		95580
BUSTER	G	459		95585
BUSTER XX.0	X	000		00000
XXXXXX XX.0	X	000		00000
XXXXXX NO.3	G	461		95588
BUSTER XX.0	X	000		00000
XXXXXX XX.0	X	000		00000
XXXXXX XX.0	X	000		00000
XXXXXX XX.0	X	000		00000
XXXXXX XX.0	X	000		00000
XXXXXX XX.0	X	000		00000
XXXXXXXXX XXXX	X	000		00000
XXXXXXXX XXXX	D	584		95599
CLIFF XX. 0	X	000		00000
XXXXX XX. 0	X	372		95601
CLIFF XX. 0	X	000		00000
XXXXX XX. 0	X	373		95603
CLIFF XX. 0	X	000		00000
CLIFF XX. 0	X	000		00000
XXXXX XX. 0	X	374		95606
CLIFF XX. 0	X	000		00000
XXXXXXXXX XXXX	X	586		95608
CREST LODE	D	452		00000
XXXX XXXXX XXX.	C	250		00000
XXXX XXXXX XXX. NO. 01	C	250		00000
XXXX XXXXX XXX. NO. 02	C	250		00000
XXXX XXXXX XXX. NO. 03	C	251		00000
XXXX XXXXX XXX. NO. 04	C	251		00000
XXXX XXXXX XXX. NO. 05	C	252		00000
XXXX XXXXX XXX. NO. 06	C	252		00000
XXXX XXXXX XXX. NO. 07	C	253		00000
XXXX XXXXX XXX. XX. 00	X	000		00000

00

XXXX XXXXX XXX. NO. 09	C	253		00000
XXXX XXXXX XXX. NO. 10	C	254		00000
XXXX XXXXX XXX. NO. 11	C	254		00000
XXXX XXXXX XXX. NO. 12	ll	710	JJ               65	000000
XXXX XXXXX XXX. NO. 13	ll	711		000000
XXXX XXXXX XXX. NO. 14	ll	772		000000
XXXX XXXXX XXX. NO. 15	ll	713		000000
XXXX XXXXX XXX. NO. 24	ll	722		000000
XXXX XXXXX XXX. NO. 25	ll	723		000000
XXXX XXXXX XXX. NO. 26	ll	724		000000
XXXX XXXXX XXX. NO. 27	ll	725		000000
XXXX XXXXX XXX. NO. 28	ll	726		000000
XXXX XXXXX XXX. NO. 29	ll	727		000000
XXXX XXXXX XXX. NO. 30	ll	728		000000
XXXX XXXXX XXX. NO. 31	ll	729		000000
XXXX XXXXX XXX. NO. 32	ll	730		000000
XXXX XXXXX XXX. NO. 33	ll	731		000000
XXXX XXXXX XXX. NO. 34	ll	732		000000
XXXX XXXXX XXX. NO. 35	ll	733		000000
XXXX XXXXX XXX. NO. 36	ll	734		000000
XXXX XXXXX XXX. NO. 37	ll	735		000000
XXXX XXXXX XXX. NO. 38	ll	736		000000
XXXX XXXXX XXX. NO. 39	ll	737		000000
XXXX XXXXX XXX. NO. 40	ll	738		000000
XXXX XXXXX XXX. NO. 41	ll	739		000000
XXXX XXXXX XXX. NO. 42	ll	740		000000
XXXX XXXXX XXX. NO. 43	ll	741		000000
XXXX XXXXX XXX. NO. 44	ll	742		000000
XXXX XXXXX XXX. NO. 45	ll	743		000000
XXXX XXXXX XXX. NO. 46	ll	744		000000
XXXX XXXXX XXX. NO. 47	ll	745		000000
XXXX XXXXX XXX. NO. 48	ll	746		000000
XXXX XXXXX XXX. NO. 49	ll	747		000000
XXXX XXXXX XXX. NO. 50	ll	748		000000
XXXX XXXXX XXX. NO. 51	ll	749		000000
XXXX XXXXX XXX. NO. 52	ll	750		354022
DEER TRAIL NO. 11	A	135		00000
XXXX XXXXX NO. 12	A	142		00000
XXXX XXXXX NO. 13	A	142		00000
XXXX XXXXX NO. 14	A	143		00000
XXXX XXXXX XX. 00	X	000		00000
XXXX XXXXX XX. 00	A	144		95617

00

XXXX XXXXX XX. 00	A	144		00000
XXXX XXXXX NO. 18	A	145		00000
XXXX XXXXX NO. 19	A	145		00000
XXXX XXXXX NO. 21	24	114		95621
DEER TRAIL NO. 22	24	114		95622
DEER TRAIL NO. 23	24	115		95623
DEER TRAIL NO. 24	24	116		95624
DEER TRAIL NO. 25	24	117		95625
DEER TRAIL NO. 26	24	117		95626
DEER TRAIL NO. 27	24	118		95627
DEER TRAIL NO. 28	24	119		95628
DEER TRAIL NO. 29	24	120		95629
DEER TRAIL NO. 31	1	599		95630
DEER TRAIL NO. 32	24	122		95631
DEER TRAIL XX. 00	X	00		00000
XXXX XXXXX XX. 00	X	100		00000
XXXX XXXXX XX. 00	X	000		00000
XXXX XXXXX XX. 00	X	101		00000
XXXX XXXXX XX. 00	X	000		00000
XXXX XXXXX XX. 00	X	246		00000
XXXX XXXXX XX. 00	X	000		00000
XXXX XXXXX XX. 00	X	245		00000
XXXX XXXXX NO. 47	B	246		00000
XXXX XXXXX XX. 00	X	000		00000
XXXX XXXXX XX. 00	X	322		00000
XXXX XXXXX NO. 50	B	322		00000
XXXX XXXXX XX. 00	X	000		00000
XXXX XXXXX XX. 00	X	323		00000
XXXX XXXXX XX. 00	X	000		00000
XXXX XXXXX XX. 00	X	324		00000
XXXX XXXXX XX. 00	X	000		00000
XXXX XXXXX XX. 00	G	227		00000
XXXX XXXXX XX. 00	X	000		00000
XXXX XXXXX XX. 00	G	229		00000
XXXX XXXXX NO. 59	G	229		00000
XXXX XXXXX XX. 00	X	000		00000
XXXX XXXXX XX. 00	G	231		00000
XXXX XXXXX XX. 00	X	000		00000
XXXX XXXXX XX. 00	G	232		00000
XXXX XXXXX NO. 64	G	233		00000
XXXX XXXXX XX. 00	X	000		00000
XXXX XXXXX XX. 00	G	234		95659

00

XXXX XXXXX XX. 00	G	234		00000
XXXX XXXXX XX. 00	X	000		00000
XXXX XXXXX XX. 00	G	235		00000
XXXX XXXXX XX. 00	X	000		00000
XXXX XXXXX XX. 00	G	237		00000
XXXX XXXXX XX. 00	X	000		00000
XXXXXX XXXX	X	584		95681
FIRE FLY LODE	D	584		95682
GOLDEN XXXXX XXXX	X	000		00000
XXXXX XXXX	X	453		95697
GRAND VIEW XXXX	X	000		00000
XXXXXX TREASURE AMENDED	D	589		95701
XXXXXXX XXXX	D	587		95705
XXXXXXX	X	000		00000
XX XXXXXX	D	587		95707
XXXXX PLACER	N	000		00000
LOWER CONTACT	D	000		00000
MONSTER #3	B	123		95719
MONSTER #4	B	123		95720
MONSTER #5	B	124		95721
MONSTER #6	B	124		95722
MONSTER #7	B	125		95723
MONSTER #8	B	125		95724
MONSTER #9	B	126		95725
MOUNTAIN CHIEF AMENDED	D	589		95726
MOUNTAIN CHIEF XX. 0	X	000		00000
MOUNTAIN CHIEF XX. 0	X	000		00000
XXX XXXXXXX XXXX	X	464		95747
OLD CHANNEL LODE XX. 0	X	00		00000
XXXXXXXXX XXXX	X	588		95742
PORTAL XXXX	X	000		00000
XXXXXX XX. 0	X	00		00000
XXXXXX XX. 0	X	00		00000
XXXXXX XXXX	X	585		95729
RED XXXXX XXXX	X	000		00000
XXXXX XXXXX	X	464		95735
SILVER WEDGE	D	422		95737
SLOPE XX. 0	X	000		00000
XXXXX XX. 0	X	000		00000
XXXXX XX. 0	X	000		00000

00

XXXXX XX. 0	X	00		00000
XXXXX XX. 0	X	000		00000
XXXXX XX. 0	X	000		00000
XXXX XXXX XXXX	X	583		95760
XXXXXX PLACER	N	126		95763
TAMARAC XXXX	X	000		00000
XXX XXXX XXXX	X	588		95732
TOMAHAWK XXXX	X	000		00000
XXXXX XXXX	D	587		95768
VICTORY LODE	D	586		95771
WHITE FLINT LODE	D	423		95776
WILD CAT XXXX	X	000		00000
XXXXXXXX LODE	D	451		95759
TOTAL CLAIMS	170

17