<PAGE>

                                     EXHIBIT 10.7


                                                           Form Approved 8/16/85

                         SPECIAL USE LEASE AGREEMENT NO. 707

                                                      Fund: School

The STATE OF UTAH, acting by and through the DIVISION OF STATE LANDS &
FORESTRY, LESSOR, hereby leases to Kelmine Corporation, LESSEE, P.O. Box 1383,
Moab, UT 84532, the following described tract of State land in San Juan County,
Utah, to-wit:


                             T30S, R25E SLB&M  San Juan
                             ----------------
                             Sec. 36: NW4 (portions within,
                                      NE4SW4 (portions within)

                             Containing 55.25 acres

    TO HAVE AND TO HOLD for a term of Sixteen (16) years, beginning as of
August 1, 1986, subject to any and all existing valid rights in said land and
subject also to the following terms and conditions. LESSOR and LESSEE enter into
this Special Use Lease Agreement for the purpose that LESSEE develop the land in
the manner hereinafter described and consistent with the principles and
objectives of land development expressed and implicit in the Enabling Act of
Utah (Act of July 16, 1894, Ch. 138, 28 Stat. 107) and Article X of the
Constitution of the State of Utah.

    1.   The subject tract shall be used by LESSEE for the purpose of a copper
ore processing plant. All improvements constructed on the subject tract shall
comply with the applicable provisions of the Uniform Building Code, Current
Edition, International Conference of Building Officials.

    2.   LESSEE shall pay, to the LESSOR as rental, for the subject tract the 
sum of $1000.00 per annum for the first year period of this lease. LESSOR 
acknowledges the receipt of $1000.00 which is payment of this rental for the 
year August 1, 1986 through July 31, 1987, plus the $50.00 application fee. 
Failure to pay the rental for a period of one month from the date such rent 
is due, and upon expiration of a written notice from LESSOR to LESSEE 
requiring performance within thirty (30) days, shall work a forfeiture of 
this lease.

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SULA 707
Page No. 2

    3.   LESSEE agrees that LESSOR shall have the right to adjust the annual
rentals as provided for in PARAGRAPH 2 at the end of each one (1) year period as
LESSOR shall deem to be reasonably necessary in the best interest of the State.

    LESSEE also agrees that at the end of five (5) years from the date of this
lease, and, if necessary, for each two (2) year period thereafter, LESSEE has
not developed the land as proposed in Paragraph (1), LESSEE shall then be
required to appear before the Board of State Lands and show that it has
exercised due diligence toward development of the land. If LESSEE fails to show
due diligence, then LESSEE agrees that LESSOR may at its option, terminate this
lease agreement as to any or all the land leased hereunder. In the event LESSOR
so terminates, LESSEE's interest in the land shall revert to the State.

    4.   LESSEE, in exercising the privileges granted by this lease, shall
comply with the provisions of all valid Federal, State, County, and Municipal
laws, ordinances, and regulations which are applicable to the subject tract and
operations covered by this lease.

    5.   The acquisition or assumption by another party under an agreement with
the LESSEE of any right or obligation of the LESSEE under this lease shall be
ineffective as to the LESSOR unless and until LESSOR shall have been notified of
such agreement and shall have recognized and approved the same in writing, and
in no case shall such recognition or approval: (i) operate to relieve the LESSEE
of the responsibilities or liabilities assumed to LESSOR as hereunder; or (ii)
be given unless such other party is acceptable to LESSOR as a lessee, and
assumes in writing all of the obligations of the LESSEE under the terms of this
lease as to the balance of the term thereof, or acquires the rights in trust as
security and subject to such conditions as be necessary for protection of the
public interests.

    6.   LESSEE shall be bound by all of the provisions, conditions, and
prohibitions of Chapter 14 of Title 73, Utah Code Annotated (1953) as amended.
No waste or by-products shall be discharged which contain any substance in
concentrations which will result in substantial harm to fish and wildlife, or to
human water supplies. Storage facilities for materials capable of causing water
pollution, if accidentally discharged, shall be located so as to prevent any
spillage into waters, or channels leading into water, that would result in
substantial harm to fish and wildlife or to human water supplies.

    7.   LESSEE shall take reasonable precautions to protect, in place, all
public land survey monuments and private property corners.


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SULA NO. 707
Page No. 3

    8.   LESSEE agrees to permit LESSOR free and unrestricted access to and
upon the subject tract at all reasonable times for all lawful and proper
purposes not inconsistent with the intent of this lease or with the reasonable
exercise and enjoyment by the LESSEE of the rights and privileges granted
herein.

    9.   It is hereby understood and agreed that all treasure-trove and all
articles of antiquity in or upon the subject lands are and shall remain the
property of the of Utah. LESSEE shall report any discovery of a "site" or
"specimen" to the Division of State History in compliance with the provisions of
Section 63-18-27, Utah Code Annotated (1953), as amended.

    10.  This lease may be terminatee by LESSOR upon breach of any conditions
hereof. If LESSOR determines that the LESSOR, its assigns or successors in
interest have breached any conditions of this lease, LESSOR shall notify the
breaching party (parties) in writing by certified mail, return receipt
requested, specifying the particular breach. The breaching party (parties) shall
have thirty, (30) days from the date of such notice, or such longer period as
may be required under the circumstances as approved by the Division to correct
such breach. If breaching party (parties) fails (fail) to correct such breach
within such period, LESSOR may terminate this lease upon thirty (30) days
notice; provided, however, such termination shall not release breaching party
(parties) from liability for damage prior to such termination.

    11.  This lease is made pursuant to the provisions of all applicable laws
and subject to the rules and regulations of the departments and agencies of the
State of Utah presently in effect and to such laws, rules and regulations as may
be hereafter promulgated by the State.

    12.  LESSEE agrees at the time of commencement of construction to furnish a
bond with an approved corporate surety company authorized to transact business
in the State of Utah, or such other surety as may be acceptable to the LESSOR,
in the penal sum of not more than Five Thousand Dollars ($5,000.00) conditioned
upon full compliance with all terms and conditions of this lease and the Rules
and Regulations relating hereto.

    13.  LESSEE shall permit any authorized representative cf the LESSOR
to examine all books and records pertaining to its operations and royalties
payable to LESSOR under the lease at their regular place of business with
reasonable notice, and to make copies of and extracts from such books and
records if desired.

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SULA 707
Page No. 4

    14.  LESSEE shall neither commit nor permit any waste on the said leased
lands.  LESSEE shall maintain said lands in good condition and at its own
expense, free  from any nuisance. Surface areas will be cleaned of all trash
and debris to the  satisfaction of the LESSOR. LESSEE shall maintain the leased
premises to  standards of repair, orderliness, neatness, sanitation, and safety
as required by law and applicable regulations.

    15.  LESSEE shall have the right to remove any improvements and any
personal property placed on the lands by LESSEE, provided that the same shall be
removed within sixty (60) days after the expiration of the term of this lease,
provided that the LESSEE shall properly restore any damage caused thereby to the
subject tract or any improvements remaining thereof; provided further, that
LESSOR shall also have the right to retain without compensation to LESSEE, but
with costs of removal and disposal chargeable to LESSEE, those improvements and
items of personal property left upon the leased premises beyond sixty (60) days
after the expiration of this lease.

    16.  LESSEE assumes liability for and agrees to indemnify LESSOR for and
against any and all liability, including attorney's fees, of any nature imposed
upon, incurred by, or asserted against LESSOR which in any way relates to or
arises out of the activity or presence upon the premises of LESSEE, its
servants, employees, agents, sublessees, assignees or invitees.

    17.  LESSEE shall not assign this lease, in whole or in part, nor sublease
the leased premises, nor allow unauthorized or commercial use of the premises
without obtaining the prior written consent of LESSOR.

    18.  LESSEE expressly reserves the right to lease said lands to third
parties for mineral exploration and/or development purposes together with the
right to grant the mineral lessee reasonable access by ingress and egress to and
from the mineral estate through the surface estate in connection with mineral
exploration and/or develonment, but without damage to improvements made by
LESSEE.

    19.  LESSOR claims titlia in fee simple, but does not warrant to LESSEE the
validity of title to the leased premises. LESSEE shall have no claim from
damages or refund against the LESSOR for any claimed failure or deficiency of
LESSOR's title to said lands or for interference by any third party.

    20.  If LESSEE shall initiate or establish any water rights on the leased
premises, such right shall become an appurtenance of the leased premises. LESSEE
agrees that any existing application to appropriate water on said State land
shall be transferred to the Division of State Lands after the application has
been completed,


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SULA NO. 707
Page No. 5

without any cost to the State. It is expressly understood and agreed that this
lease does not confer any rights upon LESSEE to use any water presently
developed on the subject lands.

    21.  LESSEE shall at all times observe reasonable precautions to prevent 
fire on the leased premises and shall comply with all applicable laws and 
regulations of any governmental agency having jurisdiction. In the event of a 
fire on the leased premises proximately caused by LESSEE, its servants, 
employees, agents, sublessees, assignees or licensees which necessitates 
suppression action by the State Forester, LESSEE agrees to reimburse LESSOR 
for the cost of such fire suppression action.

    22.  LESSEE shall comply with any and all valid sanitation and pollution
regulations prescribed by any governmental agency having jurisdiction; and the
LESSEE agrees to indemnify LESSOR for any damage which LESSOR may suffer which
arises out of the improper or unlawful disposal of refuse associated with said
land.

    23.  LESSEE may fence the leased premises at his own expense, but if there
is no fence erected, LESSEE shall have no right of action against any other
State grazing permittee by reason of a trespass upon the leased premises.

    24.  In the event of any breach of this agreement, the party at fault shall
pay all costs of enforcing the same, including reasonable attorney's fees.

    25.  Any notice contemplated herein to be served upon LESSEE shall be in
writing and shall be deemed sufficient if deposited in the United State mail,
postage prepaid and certified or registered, and addressed as follows:

                             Kelmine Corporation
                             P.O. Box 1383
                             Moab, UT 84532

or at any such other address as LESSEE may from time to time designate by
written notice to LESSOR.

    26.  The provisions hereof shall inure to and be binding upon the
successors and assigns of LESSEE.


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SULA NO. 707
Page No. 6

    27.  IN WITNESS WHEREOF, the Director of the Utah Division of State Lands
and Forestry has executed this instrument as of the 15th day of December, 1986,
by authority of a resolution of the Board of State Lands, dated January 20,
1982.

                                  LESSOR:   STATE OF UTAH
                                            DIVISION OF STATE LANDS AND
                                            FORESTRY
                                            355 West North Temple
                                            3 Triad Center, Suite 400
                                            Salt Lake City, UT 84180

                                      By:   /s/ Ralph A. Miles
                                                ------------------------

                                  LESSEE:   Kelmine Corporation
                                            P.O. Box 1383
                                            Moab, UT 84532


                                      By:   /s/ [Illegible]
                                                ------------------------

STATE OF UTAH           )
                        :  SS.
                        )
COUNTY OF SALE LAKE

    On the 15th day of December, 1986, personally appeared before me Ralph A.
Miles, who being by me duly sworn did say that he is the Director of the
Division of State Lands and Forestry of the State of Utah, and that said
instrument was signed in behalf of said Board by resolution of the Board, and
said Ralph A. Miles acknowledged to me that said Board executed the same in
behalf of the State of Utah.

    Given under my hand and seal this 15th of December, 1986.

                                  /s/ Cherrie Clay
                                  ----------------------------------
                                  Notary Public, residing at: [Illegible]

My Commission Expires: 6/26/88

APPROVED AS TO FORM:
UTAH ATTORNEY GENERAL
DAVID L. WILKINSON

BY: /S/ David S. Christensen
    -------------------------------


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SULA NO. 707
Page No. 7

    28.

STATE OF UTAH        )
                     : SS
COUNTY OF            )

    On the 5th day of December, 1986, personally appeared before me Charles 0.
Keller who being duly sworn did say that he is the President of Kelmine
Corporation, and said Charles 0. Keller acknowledge to me that said company
executed the same. 

    Given under my hand and seal this 5th day of December, 1986.


                                  /s/ [Illegible]
                                  -------------------------------
                                  Notary Public, residing at:



My Commission Expires: