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                                                                    EXHIBIT 10.6

                                    AGREEMENT
                                     BETWEEN
                          GOLDEN PHOENIX MINERALS, INC.
                                       AND
                             BOREALIS MINING COMPANY

                   (BOREALIS PROPERTY, MINERAL COUNTY, NEVADA)

     THIS AGREEMENT, dated as of July 21, 2003 ("EFFECTIVE DATE"), is between
GOLDEN PHOENIX MINERALS, INC., a Minnesota corporation (hereinafter referred to
as "GOLDEN PHOENIX"), and BOREALIS MINING COMPANY, a Nevada corporation
(hereinafter referred to as "BOREALIS") which is a wholly-owned subsidiary of
Gryphon Gold Corporation, a Nevada corporation.

     FOR AND IN CONSIDERATION OF the payment by Borealis to Golden Phoenix of
US$125,000.00, the mutual covenants contained herein, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

     1.1 Definitions. The following definitions shall apply in this Agreement:

          (a) "AREA OF INTEREST" means the area described in Exhibit A hereto.

          (b) "CLAIMS" means the GP Claims and the Leased Claims.

          (c) "LEASE" means the Mining Lease described in Exhibit B hereto,
under which Golden Phoenix is the current and only lessee.

          (d) "GP CLAIMS" means the unpatented lode mining claims owned by
Golden Phoenix described in Exhibit C hereto.

          (e) "LEASED CLAIMS" means the unpatented mining claims that are
subject to the Lease, which claims are described in Exhibit D hereto.

          (f) "MINING VENTURE AGREEMENT" means the Mining Venture Agreement
attached as Exhibit E hereto, which is patterned after the Rocky Mountain
Mineral Law Foundation's Exploration, Development and Mine Operating Agreement
Model Form 5A.

          (g) "PROPERTIES" means the Claims, the Lease and any properties in the
Area of Interest that become subject to this Agreement.
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                                   ARTICLE II

                                      GRANT

     2.1 Grant. Subject to the terms and conditions of this Agreement, Golden
Phoenix hereby grants to Borealis the right to acquire up to an undivided
seventy percent (70%) interest in the Properties.

     2.2 Permitted Uses and Activities. Subject to the paramount title of the
United States in the Claims and applicable federal and state laws and
regulations, and subject to the Lease and the terms of this Agreement, Borealis
shall have the exclusive right during the term of this Agreement to enter upon
the Properties and to explore for, prospect for, develop and produce any and all
metals, ores, minerals, mineral substances and materials of all kinds which may
be found in, upon, under or within the Properties. Borealis's rights in this
regard include, but are not limited to, the following:

          (a) to construct roads and other improvements upon the surface of the
Properties for use by Borealis's personnel and equipment;

          (b) to locate upon the Properties such structures and improvements as
may be required to house Borealis's equipment, supplies and personnel;

          (c) to conduct exploration upon the Properties by whatever methods and
to whatever extent Borealis deems advisable in its sole discretion and to remove
from the Properties samples of any and all mineral substances found therein;

          (d) to conduct exploration, geological, geophysical and geochemical
evaluation and testing and assaying of the Properties;

          (e) to construct facilities and improvements for the development of
the Properties and for the production of mineral substances found within the
Properties;

          (f) to develop and produce mineral substances found within the
Properties;

          (g) to use, to the extent necessary or convenient to the exercise of
any or all of the rights granted to Borealis herein, any surface and underground
water and water rights now existing or subsequently discovered or developed in
or upon or appurtenant to the Properties and to use all reciprocal rights which
any of the Properties may have with respect to other properties in the area;

          (h) to use all easements and rights-of-way on or appurtenant to the
Properties in the exercise of rights granted to Borealis hereunder;

          (i) to do all things which are incidental to or which may be useful,
desirable or convenient in Borealis's exercise of any or all of the rights
granted to Borealis hereunder.


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          2.3 Operational Authority. Golden Phoenix also grants to Borealis all
authority and rights necessary or incident to or for the enjoyment of the rights
granted to Borealis by this Agreement, including without limitation authority to
apply for all permits, licenses and other approvals deemed necessary or
appropriate by Borealis in connection with the conduct of the activities
contemplated herein.

                                   ARTICLE III

                      GOLDEN PHOENIX'S REPRESENTATIONS AND
                            WARRANTIES; TITLE MATTERS

     3.1 Representations and Warranties. Golden Phoenix represents and warrants
as follows:

          (a) Golden Phoenix has full power and authority to enter into this
Agreement and to perform the transactions contemplated hereby. This Agreement
and the provisions hereof constitute legal and binding obligations of Golden
Phoenix enforceable in accordance with their terms. Neither the execution and
delivery of this Agreement nor compliance by Golden Phoenix with any of the
provisions hereof will conflict with or result in a breach of or default under
any of the terms, conditions or provisions of any agreement or instrument to
which Golden Phoenix is a party or of any law or governmental or administrative
regulation or restriction applicable to it.

          (b) The interests of Golden Phoenix in the Claims and the Lease, and
potentially in other lands included in the Area of Interest, are not subject to
any preferential right to purchase, right of first refusal, area of interest
provision, or the like, pursuant to which any other person or entity has any
rights to acquire an interest therein that is or will be violated or contravened
by the terms of this Agreement or the performance thereof.

          (c) There are no consents under the terms of the Lease, other than
consents that have been obtained in writing by Golden Phoenix and provided to
Borealis, that are required with respect to the grant of rights or the
conveyance of an interest to Borealis as provided herein.

          (d) There are no actions, suits, claims, proceedings, litigation or
investigations pending or, to the best of Golden Phoenix's knowledge, threatened
at law or in equity, or in arbitration, or before or by any federal, state,
municipal or other governmental instrumentality which relate to this Agreement,
or the Lease or any of the Claims, or which could, if continued, adversely
affect Golden Phoenix's ability to fulfill the obligations undertaken hereby or
Borealis's ability to explore or develop the Claims and the Lease. Golden
Phoenix knows of no requirements of federal, state or local law particular to
the Claims or the Lease that could materially and adversely affect Borealis's
ability to explore or develop the Claims or the Lease.

          (e) The Lease is valid, in good standing with all previously due
payments made, and enforceable in accordance with its terms. There has been no
act or omission by Golden Phoenix


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which could result by notice or lapse of time in the breach, termination,
abandonment, forfeiture, relinquishment or other premature termination of the
rights of Golden Phoenix in the Lease.

          (f) To the best of Golden Phoenix's knowledge, the lessors under the
Lease hold good and marketable possessory title to the Leased Claims, subject to
paramount title of the United States, free and clear of all defects, liens or
encumbrances. To the best of Golden Phoenix's knowledge, the Leased Claims have
been properly located and maintained in compliance with applicable state and
federal laws. There are no liens or encumbrances relating to the Leased Claims
arising by, through or under Golden Phoenix.

          (g) Golden Phoenix has good and marketable possessory title to the GP
Claims, subject to the paramount title of the United States. The GP Claims have
been properly located and maintained in compliance with applicable state and
federal laws. There are no liens or encumbrances relating to the GP Claims.

          (h) Golden Phoenix has good and marketable title to the leasehold
interest in the Lease as the sole lessee, free from any defects, liens or
encumbrances arising by, through or under Golden Phoenix. Golden Phoenix has no
knowledge of any claims that conflict with the Claims or of any lands covered by
the Claims that are or were not open to location.

          (i) There are no royalties, fees or monies payable or required to be
paid to persons having an interest in the Claims or in the Lease except for the
lessors under the Lease.

          (j) Golden Phoenix has delivered to Borealis all information
concerning title to the Properties in Golden Phoenix's possession or control,
including, but not limited to, true and correct copies of the Lease and any
other contracts relating to the Properties of which Golden Phoenix has
knowledge.

          (k) As of the Effective Date, there are no existing permits or
approvals in effect relating to operations and activities on the Properties from
any governmental or regulatory entity.

          (l) Except as set forth on Schedule 3.1(l), attached hereto and made a
part hereof, Golden Phoenix has no knowledge or information indicating that:

               (i) hazardous substances from any source (mining or otherwise)
have been released on the Properties; or

               (ii) any underground or above-ground site of historic or current
mining operations on the Properties could cause or constitute a release or
threat of release of hazardous substances into the environment, subject,
however, to the parties' acknowledgment that prior mining operations have
occurred on the Properties and that certain facilities, more particularly
described in Exhibit F hereto, still exist on the Properties as a consequence of
such operations; or

               (iii) any part of the Properties has been included or proposed
for inclusion on the National Priorities List (40 C.F.R. Section 300 App. B); or


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               (iv) any part of the Properties has been studied or proposed for
study by the Environmental Protection Agency and/or any state regulatory agency;
or

               (v) any site of historic or current mining, milling and/or
smelting workings on the Properties is presently in such condition as to
potentially raise liability to the past, present or future owner(s) and/or
operator(s) of the Properties pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act and amending statutes ("CERCLA"); or

               (vi) any reclamation or cleanup obligations for prior operations
on the Properties are unsatisfied.

     3.2 Cure of Defects. Borealis, without waiver of any rights or remedies,
may at its option, take any action necessary to cure any defects in the title to
the Properties without the prior written consent of Golden Phoenix; provided,
however, that any such action shall be subject to such restrictions and
requirements as exist under the Lease. Golden Phoenix agrees to cooperate with
Borealis in any such actions taken and to execute all documents and to take such
other action as may be reasonably necessary to assist Borealis but shall not
have any obligation to incur costs in so doing. Borealis may charge all
reasonable costs and expenses (including attorneys' fees) incurred by Borealis
in curing any defect in title to the Properties as Expenditures pursuant to
Article IV below. If the United States or any third person attacks the validity
of any of the unpatented mining claims included in the Properties, Borealis may,
at its option, choose to defend their validity, and in such event Borealis may
charge all reasonable costs and expenses (including attorneys' fees) incurred by
Borealis in defending the validity of such claims as Expenditures pursuant to
Article IV below. Golden Phoenix agrees to give Borealis notice promptly of any
such problems as to which it has knowledge.

     3.3 Incomplete Title. If Golden Phoenix's title is less than the full
undivided title to the Claims and the Lease, Borealis shall have, in addition to
such other rights and remedies as it may have, the right to elect to accept such
lesser title by giving written notice of such election to Golden Phoenix, in
which event all Expenditure requirements set forth in Article IV hereunder shall
be reduced to the same proportions thereof as the undivided title actually owned
by Golden Phoenix bears to the undivided title warranted herein. If Golden
Phoenix's title is less than the full undivided title to some, but not all, of
the Claims and the Lease, then the Expenditure requirements shall be reduced on
a proportionate acreage basis.

                                   ARTICLE IV
                       EXPLORATION AND DEVELOPMENT PROGRAM

     4.1 Definition of Expenditures. "EXPENDITURES" referred to herein shall
include the following:


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          (a) all direct costs incurred by Borealis incident to carrying out
activities permitted in Article II or elsewhere herein, on or in connection with
the Properties, including, but not limited to, expenditures for wages, salaries,
equipment, supplies, traveling expenses, legal expenses, photography, geologic
mapping and sampling, assays, maintenance of field offices, drilling, trenching,
sampling, assaying, conducting geophysical or geochemical surveys, permitting,
road building, engineering, planning, financing (and arranging for the same) if
such financing is for the benefit of both parties, construction of mining and
processing facilities, equipment and parts, exploration, development, mining and
processing, project administration, reclamation, payments made to Golden Phoenix
pursuant to this Agreement and pursuant to a preceding Agreement in Principle,
and property acquisition and maintenance. Property acquisition costs shall
include without limitation payments to owners of properties in the Area of
Interest that become Properties, payments for other property rights necessary to
conduct operations on the Properties, related costs of negotiating, preparing,
and completing agreements to acquire property rights or agreements needed to
conduct operations thereon, and costs of locating, relocating, amending, or
converting claims. Property maintenance costs shall include without limitation
all expenditures incurred to preserve the Properties and agreements related to
the conduct of operations thereon in good standing, specifically including the
performance of assessment work, the payment of claim maintenance fees and the
satisfaction of payment and other obligations to the lessors under the Lease or
other leases or other agreements affecting the Properties or the conduct of
operations thereon.

          (b) Expenditures shall also include (a) a payroll burden amounting to
22.5% of gross payroll costs to allow for workmens' compensation and
unemployment insurance, pensions and other employee benefits and fringe
benefits, and (b) an overhead burden amounting to 10% of direct costs
(excluding gross payroll costs and work done by independent contractors) to
allow for administration, purchasing, accounting, engineering, legal and other
services performed for the project and not directly allocated.

     4.2 Work Programs. During the term of this Agreement an annual work program
will be formulated by a joint development committee comprised of representatives
from Borealis and Golden Phoenix. The work programs shall last for one year and
shall begin and end on the anniversary of the Effective Date. Borealis will
carry out the work programs and provide its own personnel or contractors to do
so, but Borealis shall have reasonable access to Golden Phoenix personnel when
their expertise would facilitate completion of the work program, on a fully
reimbursed basis to Golden Phoenix for the hourly cost of those personnel at
normal commercial rates, which costs shall qualify as Expenditures hereunder.
Unless the parties agree otherwise, the initial work program will commence on
the Effective Date and will focus initially on completing the following
activities: evaluation and if deemed appropriate production of the old leach
pads (phase 1), further evaluation and if deemed appropriate production of the
remaining oxide ores in the district (phase 2), and evaluation and if deemed
appropriate production of the deeper, high-grade sulfide mineralization found in
numerous areas of the Properties (phase 3).

     4.3 Operations. During the term of this Agreement, Borealis shall be solely
responsible for conducting the work programs and shall have complete and
exclusive control, charge,


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supervision and management of all work program activities on or for the benefit
of the Properties and of any and all equipment, supplies, machinery or other
assets purchased or otherwise acquired for or in connection with such
activities.

     4.4 Expenditure Requirements for 50% Interest. In order to earn an initial
undivided fifty percent (50.0%) right, title and interest in and to the
Properties, Borealis must incur a total of five million dollars
(US$5,000,000.00) in Expenditures as follows:

          (a) by expending US$800,000.00 in Expenditures within twelve months
from the Effective Date of this Agreement, or by alternatively paying to Golden
Phoenix an amount equal to the difference between the Expenditures incurred by
Borealis and US$800,000.00;

          (b) by expending an additional US$1,000,000.00 in Expenditures within
twenty-four months from the Effective Date of this Agreement, or by
alternatively paying to Golden Phoenix an amount equal to the difference between
the Expenditures incurred by Borealis and US$1,800,000.00;

          (c) by expending an additional US$1,500,000.00 in Expenditures within
thirty-six months from the Effective Date of this Agreement, or by alternatively
paying to Golden Phoenix an amount equal to the difference between the
Expenditures incurred by Borealis and US$3,300,000.00; and

          (d) by expending an additional US$1,700,000.00 in Expenditures within
forty-eight months from the Effective Date of this Agreement, or by
alternatively paying to Golden Phoenix an amount equal to the difference between
the Expenditures incurred by Borealis and US$5,000,000.00.

     4.5 Declining Differential Payments; Carryover of Expenditures. With regard
to all differential payments referenced in Section 4.4 above, Golden Phoenix
shall have the right to decline payment and instead require Borealis to expend
that amount in Expenditures during the next 12 month period (in addition to
Expenditures otherwise required during that 12 month period). Any Expenditures
in excess of the amounts set forth above will be credited toward the next phase
of required Expenditures.

     4.6 Expenditures Not Mandatory. The parties agree that Borealis can
terminate this Agreement prior to incurring the Expenditures necessary to
acquire a 50% interest in the Properties, and thus is not obligated to actually
expend any particular amount of Expenditures; however, Borealis shall not earn a
50% interest in the Properties unless it does in fact timely make the
Expenditures set forth in Section 4.4 above.

     4.7 Vesting of Title to 50% Interest. At such time as Borealis has incurred
US$5,000,000.00 in Expenditures as herein provided, Borealis's right to receive
a 50% undivided interest pursuant to Section 4.4 shall vest. Borealis will give
written notice to Golden Phoenix when its interest has vested (but failure or
delay of Borealis to give such notice shall not be a condition to vesting or to
any other rights of Borealis hereunder). Golden Phoenix shall, within 15 days
after


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receiving notice from Borealis that its 50% interest has vested, assign to
Borealis an undivided 50% right, title and interest in and to the Properties
free of any defects, liens or encumbrances arising by or through Golden Phoenix
(the "50% ASSIGNMENT").

     4.8 Release Upon Prior Termination. If this Agreement is terminated prior
to Borealis's becoming vested with a 50% interest in the Properties as provided
in Section 4.7, Borealis shall execute and deliver to Golden Phoenix a
recordable release relinquishing to Golden Phoenix all of Borealis's interest in
the Properties free of any defects, liens or encumbrances arising by or through
Borealis.

     4.9 Option to Acquire Additional 20% Interest. If Borealis earns a 50%
interest as provided herein, then Borealis shall have the exclusive and
irrevocable option (the "ADDITIONAL INTEREST OPTION") to earn an additional
undivided 20% right, title and interest in and to the Properties by delivering
to Golden Phoenix a feasibility study analyzing a specific portion the
Properties, or alternatively by incurring an additional US$4,000,000.00 in
Expenditures on the Properties (or by paying to Golden Phoenix the difference
between actual Expenditures incurred and US$4,000,000.00, in which event Golden
Phoenix shall have the right to decline such payment and instead require
Borealis to expend that amount on development of the Properties during the
following 12 month period). The feasibility study, if delivered, shall be a
detailed study evaluating the technical and economic feasibility of placing a
specific portion of the Properties into commercial production with a mineable
reserve containing a threshold of at least 500,000 ounces of gold or gold
equivalent, and shall be in a form and of a scope generally acceptable to
reputable financial institutions that provide financing to the mining industry.
If Borealis prepares the feasibility study, it must be audited and confirmed by
either Pincock, Allen & Holt or Behre Dohlber, as determined by Borealis, or by
another engineering firm proposed by Borealis and approved by Golden Phoenix.
Borealis must fulfill these obligations within 18 months after the Additional
Interest Option is exercised in order to earn the additional 20% interest
(unless Golden Phoenix has declined payment and elected to require Borealis to
expend that amount in additional Expenditures as contemplated above, in which
case the 18-month period for fulfilling these obligations will be extended by 12
months). The Additional Interest Option may be exercised at any time within 30
days after Borealis receives the 50% Assignment (the "ADDITIONAL INTEREST OPTION
PERIOD"). Borealis may exercise the Additional Interest Option by giving Golden
Phoenix written notice thereof in accordance with Section 10.9 below at any time
during the Additional Interest Option Period.

     4.10 Vesting of Additional 20% Interest. At such time as Borealis has
satisfied the requirements of Section 4.9 above, Borealis's right to receive an
additional 20% undivided interest in the Properties pursuant to Section 4.9
shall vest. Borealis will give written notice to Golden Phoenix when its
additional 20% interest has vested (but failure or delay of Borealis to give
such notice shall not be a condition to vesting or to any other rights of
Borealis hereunder). Golden Phoenix shall, within 15 days after receiving notice
from Borealis that its additional 20% interest has vested, assign to Borealis an
additional undivided 20% right, title and interest in and to the Properties free
of any defects, liens or encumbrances arising by or through Golden Phoenix.

     4.11 Additional Expenditures Not Mandatory. The parties agree that,
notwithstanding Borealis's exercise of the Additional Interest Option, Borealis
shall not be obligated to prepare or


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deliver a feasibility study or to incur any additional Expenditures or make any
payments to acquire an additional 20% interest in the Properties; however,
Borealis shall not earn an additional 20% interest in the Properties unless it
does in fact timely complete the requirements set forth in Section 4.9 above.
Any failure by Borealis to earn an additional 20% interest in the Properties
shall not affect Borealis's 50% vested interest in the Properties.

                                    ARTICLE V

                                  JOINT VENTURE

     5.1 Joint Venture after 50% Interest Earned. If Borealis earns a 50%
interest in the Properties pursuant to Section 4.4 above, Golden Phoenix and
Borealis shall thereupon execute the Mining Venture Agreement, which agreement
shall thereafter govern the parties' rights and obligations with respect to the
Properties except as otherwise provided in this Article V. The parties' initial
Participating Interests as specified in Section 6.1 of the Mining Venture
Agreement shall be 50% for Borealis and 50% for Golden Phoenix. If Borealis
exercises the Additional Interest Option then Golden Phoenix shall not be
required to contribute any capital costs to the venture prior to the vesting of
Borealis's additional 20% interest, and Golden Phoenix's share of venture
revenues, if any, shall be credited against Golden Phoenix's share of operating
costs until the vesting of Borealis's additional 20% interest occurs.

     5.2 Joint Venture after 50% Interest Earned but 20% Additional Interest Not
Earned. If Borealis earns a 50% interest in the Properties and exercises the
Additional Interest Option but fails to timely complete the requirements set
forth in Section 4.9 above for earning an additional 20% interest in the
Properties, then Borealis's Participating Interest in the venture shall remain
50% and Golden Phoenix's Participating Interest in the venture shall remain 50%,
and this Agreement shall terminate at the conclusion of the time period allowed
in Section 4.9 for completing said requirements.

     5.3 Joint Venture after 70% Interest Earned. If Borealis earns a 70%
interest in the Properties pursuant to Section 4.9 above, then Borealis's
Participating Interest in the venture shall be increased to 70%, Golden
Phoenix's Participating Interest in the venture shall be decreased to 30%, and
this Agreement shall terminate.

                                   ARTICLE VI

                     CORPORATE INVOLVEMENT BY GOLDEN PHOENIX

     6.1 Board Participation. Following the execution of this Agreement and for
as long as this Agreement remains in effect, Golden Phoenix shall be entitled to
provide one person of its choice to serve on the board of directors of Borealis.
Golden Phoenix shall identify that person to Borealis in writing and that person
shall thereafter be appointed to the board of directors as soon as reasonably
possible in accordance with ordinary corporate procedures. Golden Phoenix shall
have the right to decline to provide any such board member.


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                                   ARTICLE VII

                             OPERATIONS BY BOREALIS

     7.1 Claim Maintenance. For as long as this Agreement remains in effect,
Borealis shall timely pay the necessary claim maintenance fees for all
unpatented mining claims included in the Properties and shall make all related
federal and county filings. All such payments shall qualify as Expenditures.

     7.2 Lease Maintenance. Borealis shall make all payments due under the Lease
while this Agreement is in effect. All such payments shall qualify as
Expenditures. Borealis shall comply with all the provisions of the Lease with
respect to the conduct of operations on the Properties; provided, however, that
in the event of any conflict or inconsistency between this Agreement and the
Lease as between Borealis and Golden Phoenix, this Agreement shall govern.

     7.3 Amendment, Relocation and Conversion of Claims. Borealis shall have the
right, but not the obligation, during the term of this Agreement and without the
prior consent of Golden Phoenix, but with prior notice to Golden Phoenix, to
amend or relocate the Claims and any other claims included in the Properties.
Any such action shall be subject to such restrictions and requirements as exist
under the Lease. All expenses incurred by Borealis in connection with such
amendments or relocations shall be borne by Borealis, but shall be credited as
Expenditures. Borealis shall have the right, but not the obligation, during the
term of this Agreement and without the prior consent of Golden Phoenix, but with
prior notice to Golden Phoenix, to convert the Claims and any other claims
included in the Properties as permitted under any amendment or replacement of
the federal mining laws. The rights of Borealis under this Agreement shall
extend to all amended locations and relocations of any claims included in the
Properties, and to any other interest(s) acquired by Golden Phoenix or Borealis
under the federal mining laws and any amendments or replacements thereof by
reason of their interest in the Properties.

     7.4 Insurance. Prior to the commencement of operations under this
Agreement, Borealis shall obtain workmen's compensation insurance, liability
insurance (with coverage amounts of not less than $1,000,000.00 for death or
bodily injury and not less than $100,000.00 for property damage) and policies of
insurance against other risks for which insurance is customarily obtained in
similar operations, but not less than any coverage required by the Lease. All
such insurance shall be maintained by Borealis at its own expense throughout the
duration of this Agreement, but the cost thereof shall qualify as Expenditures.
Upon request by Golden Phoenix, Borealis shall furnish to Golden Phoenix
evidence that such insurance is being maintained.

     7.5 Indemnification. Borealis shall indemnify, defend, and hold harmless
Golden Phoenix from and against any cost, loss, expense, claim or liability
resulting from work or operations on the Properties by Borealis pursuant to this
Agreement (excluding any liability resulting from breach of any warranty or
representation of Golden Phoenix), including without limitation liability,
claims and causes of action for injury to, or death of, persons, damage to
property, liens claimed or arising from work performed or things furnished, and
failure to comply, or claims of failure to comply, with applicable governmental
laws, regulations, licenses and permits.


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     7.6 Payment for Materials and Labor. Borealis shall pay for all labor
performed upon and material furnished to the Properties by or at the request of
Borealis and shall keep the Properties free and clear from any and all liens of
mechanics or materialmen in connection with services performed and material
supplied at Borealis's request; provided, however, that Borealis shall have the
right in good faith to contest the validity of any lien, claim or liability so
long as such contest does not jeopardize the Properties or the Lease or create
any burden on the interest of Golden Phoenix therein.

                                  ARTICLE VIII

                                TERM; TERMINATION

     8.1 Term. The term of this Agreement shall commence as of the Effective
Date and shall continue for the period of time allowed herein for Borealis to
complete the actions set forth in Article IV for earning a 70% interest in the
Properties, unless sooner terminated in the manner herein provided.

     8.2 Termination by Borealis. Borealis may terminate this Agreement at any
time by giving written notice of the same to Golden Phoenix. Borealis may at its
election relinquish its interest hereunder in any portion of the Properties by
giving written notice of the same to Golden Phoenix, without terminating this
Agreement as to the remaining portion of the Properties.

     8.3 Default. In the event Golden Phoenix believes Borealis to be in default
in the observance or performance of any of Borealis's covenants or obligations
hereunder, Golden Phoenix may give written notice of such alleged default,
specifying the details of the same. Borealis shall have 60 days following said
notice within which to remedy the default described therein, or with respect to
a default which cannot be cured by the payment of money, to commence action in
good faith to remedy such default. Unless Borealis shall so comply or commence
to comply this Agreement may be terminated at the option of Golden Phoenix;
provided, however, that in the event Borealis believes that it is not in
default, Borealis may give written notice to Golden Phoenix within such 60-day
period setting forth such fact. If Golden Phoenix gives written notice within 30
days of Borealis's notice that Golden Phoenix rejects Borealis's position, then
this Agreement shall not be terminable by Golden Phoenix until there is a final
judicial determination by a court of competent jurisdiction that a default
exists and shall not be terminated thereafter if Borealis shall satisfy such
judgment within 60 days following its entry (or if an appeal of such judgment is
taken, within 60 days after its affirmance by the highest court to which such an
appeal is made). Failure of Golden Phoenix to give such notice shall constitute
agreement by Golden Phoenix that Borealis is not in default. Golden Phoenix
shall not be entitled to terminate this Agreement for any default which by its
nature it not retroactively curable if Borealis has used its best efforts to
cure such a default to the extent practical or if Borealis has paid Golden
Phoenix damages for Borealis's default where damages are an appropriate remedy.


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     8.4 Personal Property. All personal property of Borealis on the Properties
shall remain the property of Borealis. Golden Phoenix shall not be responsible
for any personal property of Borealis.

     8.5 Information and Data. In this Agreement expires or is terminated by the
parties without entering into the Mining Venture Agreement, then Borealis shall,
within 60 days of such expiration or termination, furnish to Golden Phoenix one
set of copies of all available noninterpretive data which Borealis is not
prohibited from disclosing under the terms of any agreement, and which was not
previously received by Golden Phoenix pertaining to the Properties and developed
or prepared by or for Borealis, and shall authorize and permit Golden Phoenix,
within 120 days of such expiration or termination, to take possession of any
available drill core and cuttings derived from the Properties, whether or not
such material is stored on the Properties. Borealis's furnishing of such data,
core and cuttings shall be without any representations or warranties, express or
implied, as to accuracy, reliability or completeness. Golden Phoenix shall
assume all risks stemming from reliance upon such data, core and cuttings by
itself and by third parties after disclosure or disposition thereof by Golden
Phoenix and shall indemnify and hold harmless Borealis as to any claims made by
such third parties.

                                   ARTICLE IX

                                AREA OF INTEREST

     9.1 Acquired Properties. Any properties or property rights acquired by
Borealis or Golden Phoenix or any affiliate of Borealis or Golden Phoenix in the
Area of Interest while this Agreement is in effect shall be subject to the terms
of this Agreement. Any mining claims that are partially within the Area of
Interest shall be considered to be entirely in the Area of Interest. The parties
agree to execute such documents as are appropriate to provide record notice that
such new properties are subject to this Agreement. In the event that Borealis
terminates this Agreement, Borealis shall, upon Golden Phoenix's written
request, assign any properties or property rights acquired by Borealis within
the Area of Interest to Golden Phoenix, subject to any necessary approvals. If
such properties are held under leases or other grants of possessory rights from
third parties and lie partially within and partially outside the Area of
Interest, only such portion that lies within the Area of Interest shall be
assigned to Golden Phoenix unless the properties held under any such lease or
other grant are not severable.


                                      -12-
<PAGE>
                                    ARTICLE X

                               GENERAL PROVISIONS

     10.1 Compliance with Laws. Borealis shall conduct all of its operations on
the Properties in full compliance with all applicable laws and regulations and
permits, including without limitation all laws and regulations and permits
related to environmental protection and reclamation. Borealis shall have no
obligation to reclaim any disturbances existing prior to the Effective Date or
to perform any corrective, remedial or removal actions with regard to any
conditions or occurrences not solely and directly attributable to Borealis.

     10.2 Confidentiality. The parties hereto shall treat all data, reports,
records and information relating to the Properties and this Agreement as
confidential ("CONFIDENTIAL INFORMATION"). Confidential Information shall not be
released to any person or entity not a party to this Agreement, except to
auditors, counsel, engineering and other professional consultants, investment
bankers, institutional lenders and broker-dealers designated by the parties,
provided that non-party uses of Confidential Information are strictly limited to
those purposes necessary for non-party users to perform the function for which
they were retained by the parties. Notwithstanding the foregoing, Confidential
Information may be disclosed to persons other than those set forth above upon
the mutual agreement of the parties or by either party upon providing to the
other party (a) a copy of the proposed disclosure not less than 48 hours prior
to the planned date of release, and (b) a written determination in good faith by
the disclosing party that such disclosure is necessary or desirable in
connection with the disclosing party's disclosure obligations under any
securities laws, rules or regulations or stock exchange listing agreement or its
obligations in connection with existing or proposed credit arrangements.

     10.3 Memorandum of Agreement. This Agreement shall not be recorded for, by
or on behalf of either party. The parties agree, however, to execute a
memorandum of this Agreement of even date herewith, which shall be a form
suitable for recording under the state and local laws of Nevada specifying that
Borealis's interest in the Properties is subject to the terms and conditions of
this Agreement.

     10.4 Encumbrances. Each party shall keep the Properties debt free and
unencumbered throughout the term of this Agreement unless otherwise mutually
agreed. Either party may encumber its contractual interest in this Agreement for
project financing purposes, provided that any such encumbrance shall be subject
and subordinate to the terms of this Agreement.

     10.5 No Restrictions on Other Activities. This Agreement is, and the rights
and obligations of the parties are, strictly limited to the Properties, and the
parties shall have the free and unrestricted right to independently engage in
and receive the full benefits of any and all business ventures of any sort
whatsoever, whether or not competitive with the activities undertaken pursuant
hereto, without consulting the other or inviting or allowing the other to
participate therein. Neither of the parties shall be under any fiduciary or
other duty to the other which will prevent it from engaging in or enjoying the
benefits of any competing venture or ventures within the general scope of the
activities contemplated by this Agreement.


                                      -13-
<PAGE>
     10.6 Access by Golden Phoenix. During the term of this Agreement, Golden
Phoenix and its duly authorized agents, employees and representatives, at its
and their sole risk and expense, and upon giving to Borealis reasonable notice,
shall have access to the Properties to observe Borealis's activities thereon,
provided that such access and observation do not unreasonably interfere with or
delay the conduct of Borealis's activities upon the Properties.

     10.7 Force Majeure. All obligations of Borealis, other than cash payment
obligations, and all conditions to the continuation of this Agreement shall be
suspended and Borealis shall not be deemed in default or liable for damages or
other legal or equitable remedies while, but only as long as, Borealis is
prevented from complying with such obligations or conditions in whole or in part
by strikes, lockouts, acts of God, explosion, flood, epidemics, unavoidable
accidents, uncontrollable delays in transportation, inability to obtain
necessary materials or services in the open market, inability to obtain
necessary permits or approvals, unusually severe weather, any local, state or
federal law, regulation, order, arbitration, administrative or judicial action,
or any other matters beyond the reasonable control of Borealis, whether similar
to the matters herein specifically enumerated or not; provided, however, that
performance shall be resumed within a reasonable time after such cause has been
removed. The term of this Agreement shall be extended by the duration of any
such suspension. Borealis shall not be required, against its will, to adjust any
labor disputes or to question the validity or to refrain from judicially testing
the validity of any local, state or federal order, regulation or law.

     10.8 No Partnership. This Agreement is not intended and shall not be
construed to create a partnership within the meaning of the federal common law
or the applicable laws of any state or under the laws of the state in which any
party hereto is incorporated, organized or conducting business. The parties
expressly agree that neither party shall be responsible for the obligations of
the other party, each party being responsible only for its obligations arising
hereunder. It is not the purpose or intention of this Agreement to create, and
this Agreement should never be construed as creating, a relationship whereby any
of the parties shall be held liable for acts, either of omission or commission,
of any other party hereto. This Agreement shall not create any fiduciary duty on
the part of either party.

     10.9 Notices. All notices, payments and other required communications
("NOTICES") by and to the parties shall be in writing and shall be addressed
respectively as follows:

If to Borealis         Borealis Mining Company
                       1153 Bergen Parkway, Suite 290
                       Evergreen, CO 80439-9773
                       Fax: (303) 679-9589

If to Golden Phoenix   Golden Phoenix Minerals, Inc.
                       3595 Airway Drive, Suite 405
                       Reno, NV 89511
                       Fax: (775) 853-5010


                                      -14-
<PAGE>
All Notices shall be given (a) by personal delivery to the party, or (b) by
facsimile, with the original sent by certified mail return receipt requested, or
(c) by certified mail return receipt requested. All Notices shall be effective
and shall be deemed delivered (a) if by personal delivery 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, (b) if by
facsimile on the next business day following receipt of the faxed copy, and (c)
if solely by certified mail on the next business day after actual receipt. A
party may change its address by Notice to the other party.

     10.10 Costs and Expenses. Except as otherwise specifically set forth
herein, each of the parties shall bear its own expenses in connection with the
negotiation, preparation and performance of this Agreement.

     10.11 Currency. All monetary references herein are to United States
Dollars.

     10.12 Governing Law; Jurisdiction and Venue. This Agreement shall be
governed by the laws of the State of Nevada. Each of the parties hereby attorns
to the exclusive jurisdiction of the courts of the state of Nevada or the
federal district court for the District of Nevada, as may be applicable, in
respect of any disputes arising hereunder, with venue to be in the state of
Nevada.

     10.13 Headings. The titles of the Articles and Sections of this Agreement
are for the purpose of reference only and shall not in any way affect the
interpretation of this Agreement.

     10.14 Complete Agreement. This Agreement, together with its Exhibits A, B,
C, D and E, represents the entire agreement between the parties hereto and
supersedes all prior agreements and understandings concerning its subject
matter, including without limitation the Agreement in Principle dated May 8,
2003. This Agreement shall not be amended or modified except by written
instrument signed by both parties hereto. This Agreement has been carefully
reviewed and negotiated by both parties, and it shall be construed as though
both parties drafted it.

     10.15 Disputes Not to Interrupt Operations. Any disputes or differences
between the parties shall not interrupt performance of this Agreement or
continuation of the parties' rights hereunder, and operations on the Properties
may continue pending an appropriate resolution of the dispute or difference.

     10.16 Perpetuities Clause. In the event that any provision of this
Agreement is determined to be in violation of the Rule Against Perpetuities or
any related rule relating to the vesting of property interests or restraints
upon alienation, it is the intent and desire of the parties hereto that this
Agreement shall not be void or voidable, but that the appropriate court shall
reform such provision in such a way as to approximate most closely the intent of
the parties hereto within the limits permissible under such Rule or related
rule.

     10.17 Counterparts. This Agreement may be executed in multiple
counterparts, which taken together shall constitute one and the same document.


                                      -15-
<PAGE>
     10.18 Faxed Signatures. This Agreement may be executed by facsimile
signatures, each of which will be deemed an original for purposes of execution.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the Effective Date.

                                        GOLDEN PHOENIX MINERALS, INC., a
                                        Minnesota corporation


                                        By: /s/ Michael Fitzsimonds
                                            ------------------------------------
                                        Name: Michael Fitzsimonds
                                              ----------------------------------
                                        Title: President
                                               ---------------------------------


                                        BOREALIS MINING COMPANY, a Nevada
                                        corporation


                                        By: /s/ Allen Gordon
                                            ------------------------------------
                                        Name: Allen S. Gordon
                                              ----------------------------------
                                        Title: President
                                               ---------------------------------


                                      -16-
<PAGE>
                                    EXHIBIT A

                                       TO

                 AGREEMENT BETWEEN GOLDEN PHOENIX MINERALS, INC.
                           AND BOREALIS MINING COMPANY

                   (BOREALIS PROPERTY, MINERAL COUNTY, NEVADA)

                                AREA OF INTEREST

     The Area of Interest is the same as the Borealis Project Area as described
in Exhibit III of the Lease.


                                      A-1
<PAGE>
                                    EXHIBIT B

                                       TO

                 AGREEMENT BETWEEN GOLDEN PHOENIX MINERALS, INC.
                           AND BOREALIS MINING COMPANY

                   (BOREALIS PROPERTY, MINERAL COUNTY, NEVADA)

                                      LEASE

     That certain Mining Lease dated January 24, 1997 from Richard J. Cavell
TTTEE F/T Richard J. Cavell Trust Dated 2/23/94, Hardrock Mining Company, a
Nevada corporation, and John W. Whitney, as lessors, and J.D. Welsh &
Associates, Inc., a Nevada corporation, as lessee, a memorandum of which is
recorded as Entry 115828 in Book 169 at page 489 in the official records of
Mineral County, Nevada.


                                      B-1
<PAGE>
                                   EXHIBIT C

                                       TO

                AGREEMENT BETWEEN GOLDEN PHOENIX MINERALS, INC.
                          AND BOREALIS MINING COMPANY

                  (BOREALIS PROPERTY, MINERAL COUNTY, NEVADA)

                                GPM & GG CLAIMS

      The 111 GPM & GG Claims are described on the following three pages.


                                      C-1
<PAGE>

            All those certain unpatented lode mining claims commonly known as
            the GG and GPM claim groups, situated in Sections 1 & 2. T6N, R28E,
            MDBM; Sections 4, 5, 6, 7, 8, 9, 10, 11, 15, 16, 17, 20 & 21, T6N,
            R29E, MDBM; Sections 35 & 36, T7N, R28E, MDBM; and Section 31, T7N,
            R29E, MDBM, in Mineral County, Nevada. [Not yet filed with BLM or
            recorded in Mineral County]

                                        111 TOTAL CLAIMS

<TABLE>
<CAPTION>
CLAIM   DATE         DATE                                     DATE        BLM NMC
NAME   LOCATED  RECORDED-COUNTY   BOOK   PAGE   DOC. #    RECORDED-BLM    SERIAL #
-----  -------  ---------------   ----   ----   ------    ------------    --------
<S>    <C>      <C>               <C>    <C>    <C>       <C>             <C>
GG 1   5-14-03
GG 2   5-14-03
GG 3   5-14-03
GG 4   5-14-03
GG 5   5-14-03
GG 6   5-14-03
GG 7   5-14-03
GG 8   5-14-03
GG 9   5-14-03
GG 10  5-14-03
GG 11  5-14-03
GG 12  5-14-03
GG 13  5-14-03
GG 14  5-14-03
GG 15  5-14-03
GG 16  5-14-03
GG 17  5-17-03
GG 18  5-17-03
GG 19  5-17-03
GG-20  5-17-03
GG-21  5-17-03
GG-22  5-17-03
GG-23  5-17-03
GG-24  5-17-03
GG-25  5-17-03
GG-26  5-17-03
GG-27  5-17-03
GG-28  5-17-03
GG-29  5-17-03
GG 30  5-17-03
GG 31  5-17-03
GG 32  5-17-03
GG 33  5-17-03
GG 34  5-17-03
GG 35  5-17-03
GG 36  5-16-03
GG 37  5-16-03
GG 38  5-16-03
GG 39  5-16-63
GG 40  5-16-03
GG 41  5-16-03
GG 42  5-16-03
GG 43  5-16-03
GG 44  5-17-03
GG 45  5-17-03
GG 46  5-17-03
</TABLE>

                                       1
<PAGE>

<TABLE>
<CAPTION>
CLAIM   DATE         DATE                                     DATE        BLM NMC
NAME   LOCATED  RECORDED-COUNTY   BOOK   PAGE    DOC. #   RECORDED-BLM    SERIAL #
------ -------  ---------------   ----   ----    ------   ------------    --------
<S>    <C>      <C>               <C>    <C>     <C>      <C>             <C>
GG 47      5-17-03
GG 48      5-17-03
GG 49      5-17-03
GG 50      5-17-03
GG 51      5-17-03
GG 52      5-16-03
GG 53      5-16-03
GG 54      5-16-03
GG 55      5-16-03
GG 56      5-16-03
GG 57      5-16-03
GPM 1      5-15-03
GPM 2      5-15-03
GPM 3      5-15-03
GPM 4      5-15-03
GPM 5      5-15-03
GPM 6      5-15-03
GPM 7      5-15-03
GPM 8      5-15-03
GPM 9      5-15-03
GPM 10     5-15-03
GPM 11     5-15-03
GPM 12     5-15-03
GPM 13     5-15-03
GPM 14     5-15-03
GPM 15     5-15-03
GPM 16     5-15-03
GPM 17     5-15-03
GPM 18     5-15-03
GPM 19     5-15-03
GPM 20     5-15-03
GPM 21     5-15-03
GPM 22     5-15-03
GPM 23     5-15-03
GPM 24     5-15-03
GPM 25     5-18-03
GPM 26     5-18-03
GPM 27     5-18-03
GPM 28     5-18-03
GPM 29     5-18-03
GPM 30     5-18-03
GPM 31     5-18-03
GPM 32     5-18-03
GPM 33     5-18-03
GPM 34     5-18-03
GPM 35     5-18-03
GPM 36     5-18-03
GPM 37     5-18-03
GPM 38     5-18-03
GPM 39     5-18-03
GPM 40     5-18-03
GPM 41     5-18-03
GPM 42     5-18-03
GPM 43     5-18-03
GPM 44     5-18-03
</TABLE>

                                       2

<PAGE>

<TABLE>
<CAPTION>
CLAIM   DATE         DATE                                     DATE        BLM NMC
NAME   LOCATED  RECORDED-COUNTY   BOOK   PAGE    DOC. #   RECORDED-BLM    SERIAL #
------ -------  ---------------   ----   ----    ------   ------------    --------
<S>    <C>      <C>               <C>    <C>     <C>      <C>             <C>
GPM 45 5-18-03
GPM 46 5-18-03
GPM 47 5-18-03
GPM 48 5-18-03
GPM 49 5-18-03
GPM 50 5-18-03
GPM 51 5-18-03
GPM 52 5-18-03
GPM 53 5-18-03
GPM 54 5-18-03
</TABLE>

                                       3
<PAGE>
                                    EXHIBIT D

                                       TO

                 AGREEMENT BETWEEN GOLDEN PHOENIX MINERALS, INC.
                           AND BOREALIS MINING COMPANY

                   (BOREALIS PROPERTY, MINERAL COUNTY, NEVADA)

                                  LEASED CLAIMS

     The 124 Leased Claims are described on the following six pages.


                                      D-1
<PAGE>

                                   EXHIBIT A

            All those certain unpatented lode mining claims commonly known as
            the RAINBOW CABIN and SILVER NIGHT claim groups, situated in
            Sections 8, 9, 16 and 17, Township 6 North, Range 29 East, Mt.
            Diablo Base & Meridian, Mineral County, Nevada, more particularly
            described as follows:                    15 TOTAL CLAIMS

<TABLE>
<CAPTION>
                      DATE     DATE RECORDED                  DOCUMENT    DATE       BLM
   CLAIM NAME       LOCATED       COUNTY       BOOK    PAGE      NO.    FILED-BLM   NMC #
-----------------   --------   -------------   ----  -------  --------  ---------   ------
<S>                 <C>        <C>             <C>   <C>      <C>       <C>         <C>
Rainbow             07/01/53     07/01/53       14   563-564             07/31/78    25426
          amended                               58     588
        relocated   10/15/78     11/30/78       60     525      36978    12/08/78
          amended   09/01/82     09/20/82       87     323      59491    10/04/82
Rainbow One         04/16/74     04/30/74       39     471      20411    07/31/78    25429
East
          amended   09/01/82     09/20/82       87     325      59492    10/04/82
Rainbow Two         04/16/74     04/30/74       39     472      20412    07/31/78    25430
East
          amended   09/01/82     09/20/82       87     327      59493    10/04/82
Rainbow One         04/16/74     04/30/74       39     474      20414    07/31/78    25432
West
          amended   09/01/82     09/20/82       87     329      59494    10/04/82
Rainbow Two         04/16/74     04/30/74       39     473      20413    07/31/78    25431
West
          amended   09/01/82     09/20/82       87     331      59495    10/04/82
Cabin               06/27/53     07/01/53       14   562-563             07/31/78    25427
        relocated   10/15/78     11/30/78       60     526      36979    12/08/78
          amended   09/01/82     09/20/82       87     333      59496    10/04/82
Cabin One East      04/16/74     04/30/74       39     480      20420    07/31/78    25438
          amended   09/01/82     09/20/82       87     335      59497    10/04/82
Cabin Two East      04/16/74     04/30/74       39     475      20415    07/31/78    25433
          amended   09/01/82     09/20/82       87     337      59498    10/04/82
Cabin One West      04/16/74     04/30/74       39     482      20422    07/31/78    25440
          amended   09/01/82     09/20/82       87     339      59499    10/04/82
Cabin Two West      04/16/74     04/30/74       39     481               07/31/78    25439
Silver Knight                    07/01/53       14   563-564             07/31/78    25428
        relocated   10/15/78     11/30/78       60     527      36980    12/08/78
Silver Knight One   04/16/74     04/30/74       39     478      20418    07/31/78    25436
East
Silver Knight Two   04/16/74     04/30/74       39     479      20419    07/31/78    25437
East
Silver Knight One   04/16/74     04/30/74       39     477      20417    07/31/78    25435
West
Silver Knight Two   04/16/74     04/30/74       39     476      20416    07/31/78    25434
West
</TABLE>

<PAGE>


                                   EXHIBIT B

            All those certain unpatented lode mining claims commonly know as the
            BO claim group, situated in Sections 7, 8, 17, and 18, Township 6
            North, Range 29 East, Mt. Diablo Base & Meridian, Mineral County,
            Nevada, more particularly described as follows:

                                11 TOTAL CLAIMS

<TABLE>
<CAPTION>
                            DATE RECORDED                 DOCUMENT    DATE       BLM
CLAIM NAME    DATE LOCATED     COUNTY       BOOK  PAGE       NO.    FILED-BLM    NMC#
----------    ------------  -------------   ----  ----    --------  ---------   ------
<S>           <C>           <C>             <C>   <C>     <C>       <C>         <C>
BO #435          02/01/80      03/26/80      67    337     42687     03/27/80   144623
BO #436          01/31/80      03/26/80      67    338     42688     03/27/80   144624
BO #442          02/01/80      03/26/80      67    340     42690     03/27/30   144626
BO #443          01/31/80      03/26/80      67    341     42691     03/27/80   144627
BO #444          01/31/80      03/26/80      67    342     42692     03/27/80   144628
BO #448          02/01/80      03/26/80      67    343     42693     03/27/80   144629
BO #449          01/31/80      03/26/80      67    344     42694     03/27/80   144630
BO #466          02/01/80      03/26/80      67    346     42696     03/27/80   144632
BO #480          02/01/80      03/26/80      67    350     42700     03/27/80   144636
BO #481          01/30/80      03/26/80      67    351     42701     03/27/80   144637
BO #848          01/31/80      03/26/80      67    552     42902     03/27/80   144838
</TABLE>

The above-listed claims are owned by:
           Richard J. Cavell                   Hardrock Mining Company
           c/o Borealis Investment Company     Carolyn J. Lindsey, President
           1013 N. Marshall Drive              PO Box 156
           Camano Island, WA 98292             Mina, NV  89422

           John W. Whitney
           P.O. Box 20579
           Reno, NV 89510
<PAGE>

                                    EXHIBIT C

      All those certain unpatented lode mining claims commonly known as the FOX
      claim group, situated in Sections 8, 9, 10, 15 16 and 17, Township 6
      North, Range 29 East, and in Sections 35 and 36, Township 7 North, Range
      28 East, ML Diablo Base & Meridian, Mineral County, Nevada, more
      particularly described as follows:

                                         88 TOTAL CLAIMS

<TABLE>
<CAPTION>
                 DATE        DATE                  DOC.    DATA    BLM NMC
 CLAIM NAME     LOCATED RECORDED-COUNTY BOOK PAGE   #   RECDED-BLM  SERIAL#
-------------- -------- --------------- ---- ---- ----- ---------- --------
<S>            <C>      <C>             <C>  <C>  <C>   <C>        <C>
FOX #1         03/06/79                  61   680        04/10/79   58194
       amended 09/01/82    09/20/82      87   315 59487  10/04/82
FOX #2         03/06/79                  61   681        04/09/79   57755
FOX #3         03/06/79                  61   682        04/09/79   57756
       amended 09/01/82    09/20/82      87   317 59488  10/04/82
FOX #4         03/06/79                  61   683        04/09/79   57757
FOX #5         03/06/79                  61   684        04/09/79   57758
FOX #6         03/06/79                  61   685        04/09/79   57759
FOX #7         03/06/79                  61   686        04/09/79   57760
FOX #8         03/06/79                  61   687        04/09/79   57761
FOX #9         03/06/79                  61   688        04/09/79   57762
FOX #20        03/06/79                  61   699        04/09/79   57773
FOX #21        03/06/79                  61   700        04/09/79   57774
FOX #22        03/06/79                  61   701        04/09/79   57775
FOX #23        03/06/79                  61   702        04/09/79   57776
FOX #25        03/06/79                  61   703        04/09/79   57777
FOX #27        03/06/79                  61   704        04/09/79   57778
FOX #46        03/06/79                  61   711        04/09/79   57785
       amended 09/01/82    09/20/82      87   319 59489  10/04/82
FOX #47        03/06/79                  61   712        04/09/79   57786
FOX #48        03/06/79                  61   713        04/09/79   57787
FOX #49        03/06/79                  61   714        04/09/79   57788
FOX NO.50      03/06/79                  81   715        04/09/79   57789
FOX NO.51      03/06/79                  61   716        04/09/79   57790
FOX NO.56      03/06/79                  61   721        04/09/79
       amended 09/06/82    09/20/82      87   321 59490  10/04/82   57795
FOX NO.57      03/06/79                  61   722        04/09/79   57796
FOX NO.58      03/06/79                  61   723        04/09/79   57797
FOX NO.60      03/06/79                  61   725        04/09/79   57799
FOX NO.61      03/06/79                  81   726        04/09/79   57800
FOX NO.62      03/06/79                  61   727        04/09/79   57801
FOX NO.63      03/06/79                  61   728        04/09/79   57802
FOX NO.64      03/06/79                  61   729        04/09/79   57803
</TABLE>

<PAGE>

<TABLE>
<S>            <C>            <C>        <C>  <C> <C>    <C>       <C>
FOX NO.65      03/06/79                  61   730        04/09/79   57804
FOX NO.66      03/06/79                  61   731        04/09/79   57805
FOX NO.67      03/06/79                  61   732        04/09/79   57806
FOX NO.68      03/06/79                  61   733        04/09/79   57807
FOX NO.69      03/06/79                  61   734        04/09/79   57808
FOX NO.70      03/06/79                  61   735        04/09/79   57809
FOX NO.71      03/06/79                  61   736        04/09/79   57810
FOX NO.72      03/06/79                  61   737        04/09/79   57811
FOX NO.73      03/06/79                  61   738        04/09/79   57812
FOX NO.74      03/06/79                  61   739        04/09/79   57813
FOX NO.75      03/06/79                  61   740        04/09/79   57814
FOX NO.76      03/06/79                  61   741        04/09/79   57815
FOX NO.77      03/06/79                  61   742        04/09/79   57816
FOX NO.78      03/06/79                  61   743        04/09/79   57817
FOX NO.79      03/06/79                  61   744        04/09/79   57818
FOX NO.80      03/06/79                  61   745        04/09/79   57819
FOX NO.81      03/06/79                  61   746        04/09/79   57820
FOX NO.82      03/06/79                  61   747        04/09/79   57821
FOX NO.85      09/20/78       11/30/78   60   528  36981 12/08/78   44288
FOX NO.86      09/26/78       11/30/78   60   529  36982 12/08/78   44289
FOX NO.87      09/26/78       11/30/78   60   530  36983 12/08/78   44290
FOX NO.88      09/26/78       11/30/78   60   531  36984 12/08/78   44291
FOX NO.89      09/20/78       11/30/78   60   532  36985 12/08/78   44292
FOX NO.90      09/20/78       11/30/78   60   533  36986 12/08/78   44293
FOX NO.100     09/21/78       11/30/78   60   542  36995 12/08/78   44302
FOX NO.101     09/21/78       11/30/78   60   543  36996 12/08/78   44303
FOX NO.102     09/21/78       11/30/78   60   544  36997 12/08/78   44304
FOX NO.103     09/21/78       11/30/78   60   545  36998 12/08/78   44305
FOX NO.115     09/20/78       11/30/78   60   557  37010 12/08/78   44317
FOX NO.116     09/20/78       11/30/78   60   558  37011 12/08/78   44318
FOX NO.117     09/20/78       11/30/78   60   559  37012 12/08/78   44319
FOX NO.143     09/27/78       11/30/78   60   585  37038 12/08/78   44345
FOX NO.144     09/27/78       11/30/78   60   586  37039 12/08/78   44346
FOX NO.145     09/26/78       11/30/78   60   587  37040 12/08/78   44347
FOX NO.146     09/26/78       11/30/78   60   588  37041 12/08/78   44348
FOX NO.147     09/26/78       11/30/78   60   589  37042 12/08/78   44349
FOX NO.148     09/26/78       11/30/78   60   590  37043 12/08/78   44350
FOX NO.149      5/11/03        6/27/03            128496  6/30/03  844217

FOX #244       05/05/79       06/15/79   62   707  38730 06/28/79   71756
FOX #245       05/05/79       06/15/79   62   708  38731 06/28/79   71757
FOX #246       05/05/79       06/15/79   62   709  38732 06/28/79   71758
FOX #247       05/05/79       06/15/79   62   710  38733 06/28/79   71759
</TABLE>


<PAGE>

<TABLE>
<S>       <C>       <C>       <C>  <C>  <C>    <C>        <C>
FOX #248  05/05/79  06/15/79  62   711  38734  06/28/79   71760

FOX #249  05/05/79  06/15/79  62   712  38735  06/28/79   71761

FOX #288  07/25/79  09/19/79  64   455  40203  10/01/79   99775

FOX #289  07/25/79  09/19/79  64   456  40204  10/01/79   99776

FOX #290  07/25/79  09/19/79  64   457  40205  10/01/79   99777

FOX #291  07/25/79  09/19/79  64   458  40206  10/01/79   99778

FOX #292  07/25/79  09/19/79  64   459  40207  10/01/79   99779

FOX #293  07/25/79  09/19/79  64   460  40208  10/01/79   99780

FOX #294  07/25/79  09/19/79  64   461  40209  10/01/79   99781

FOX #303  07/27/79  09/19/79  64   470  40218  10/01/79   99790

FOX #304  07/27/79  09/19/79  64   471  40219  10/01/79   99791

FOX #331  09/01/79  09/19/79  64   498  40246  10/01/79   99818

FOX #332  09/01/79  09/19/79  64   499  40247  10/01/79   99819

FOX #333  09/01/79  09/19/79  64   500  40248  10/01/79   99820

FOX #334  09/01/79  09/19/79  64   501  40249  10/01/79   99821

FOX #336  11/14/79  12/07/79  65   464  41048  12/31/79  135448

FOX #338  11/14/79  12/07/79  65   466  41050  12/31/79  135450
</TABLE>

The above-listed claims are owned by:
             Richard J. Cavell                    Hardrock Mining Company
             c/o Borealis Investment Company      Carolyn J. Lindsey, President
             1013 N. Marshall Drive               PO Box 156
             Camano Island, WA 98292             Mina City, NV 89422

             John W. Whitney
             P.O. Box 20579
             Reno, NV 89510


<PAGE>

                                    EXHIBIT D

            All those certain unpatented lode mining claims commonly know as the
            LIS claim group, situated in Secs. 1, R28E, MDBM, Secs. 7, & 8, T6N,
            R29E, MDBM, Secs. 36, T7N, R28E, MDBM in Mineral County, Nevada
                                                                 10 TOTAL CLAIMS

<TABLE>
<CAPTION>
 CLAIM      DATE         DATE                                 DATE      BLM NMC
  NAME    LOCATED   RECORDED-COUNTY  BOOK  PAGE   DOC. #  RECORDED-BLM  SERIAL #
--------  --------  ---------------  ----  ----  -------  ------------  --------
<S>       <C>       <C>              <C>   <C>   <C>      <C>           <C>
LIS #86   02/08/97      04/11/97      170   173   116249    04/16/97     769845

LIS #87   02/08/97      04/11/97      170   174   116250    04/16/97     769846

LIS #88   02/08/97      04/11/97      170   175   116251    04/16/97     769847

LIS #89   02/08/97      04/11/97      170   176   116252    04/16/97     769848

LIS #90   02/08/97      04/11/97      170   177   116253    04/16/97     769849

LIS #91   02/08/97      04/11/97      170   178   116254    04/16/97     769850

LIS #96   02/08/97      04/11/97      170   183   116259    04/16/97     769855

LIS #98   02/09/97      04/11/97      170   185   116261    04/16/97     769857

LIS #100  02/09/97      04/11/97      170   187   116263    04/16/97     769859

LIS #197   2/10/97      04/11/97      170   284   116360    04/16/97     769956
</TABLE>

The above-listed claims are owned by:
              Richard J. Cavell                  Hardrock Mining Company
              c/o Borealis Investment Company    Carolyn J. Lindsey, President
              1013 N. Marshall Drive             PO Box 156
              Camano Island, WA 98292            Mina, NV 89422

              John W. Whitney
              P.O. Box 20579
              Reno, NV 89510




<PAGE>
                                    EXHIBIT E

                                       TO

                 AGREEMENT BETWEEN GOLDEN PHOENIX MINERALS, INC.
                           AND BOREALIS MINING COMPANY

                   (BOREALIS PROPERTY, MINERAL COUNTY, NEVADA)

                            MINING VENTURE AGREEMENT

                          EXPLORATION, DEVELOPMENT AND
                            MINE OPERATING AGREEMENT
            (Modified Rocky Mountain Mineral Law Foundation Form 5A)

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>             <C>                                                         <C>
ARTICLE I       DEFINITIONS AND CROSS-REFERENCES.........................
   1.1          DEFINITIONS..............................................
   1.2          CROSS-REFERENCES.........................................

ARTICLE II      NAME, PURPOSES AND TERM..................................
   2.1          GENERAL..................................................
   2.2          NAME.....................................................
   2.3          PURPOSES.................................................
   2.4          LIMITATION...............................................
   2.5          TERM.....................................................

ARTICLE III     REPRESENTATIONS AND WARRANTIES; TITLE TO ASSETS;
                INDEMNITIES..............................................
   3.1          REPRESENTATIONS AND WARRANTIES
                OF BOTH PARTICIPANTS.....................................
   3.2          REPRESENTATIONS AND WARRANTIES OF GOLDEN PHOENIX ........
   3.3          DISCLOSURES..............................................
   3.4          RECORD TITLE.............................................
   3.5          LOSS OF TITLE............................................
   3.6          ROYALTIES, PRODUCTION TAXES AND OTHER PAYMENTS
                BASED ON PRODUCTION......................................
   3.7          INDEMNITIES/LIMITATION OF LIABILITY......................
</TABLE>


                                       E-1
<PAGE>
<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>             <C>                                                         <C>
ARTICLE IV      RELATIONSHIP OF THE PARTICIPANTS.........................
   4.1          NO PARTNERSHIP...........................................
   4.2          FEDERAL TAX ELECTIONS AND ALLOCATIONS....................
   4.3          STATE INCOME TAX.........................................
   4.4          TAX RETURNS..............................................
   4.5          OTHER BUSINESS OPPORTUNITIES.............................
   4.6          WAIVER OF RIGHTS TO PARTITION OR OTHER DIVISION
                OF ASSETS................................................
   4.7          TRANSFER OR TERMINATION OF RIGHTS TO PROPERTIES .........
   4.8          IMPLIED COVENANTS........................................
   4.9          NO THIRD PARTY BENEFICIARY RIGHTS........................

ARTICLE V       CONTRIBUTIONS BY PARTICIPANTS............................
   5.1          PARTICIPANTS' INITIAL CONTRIBUTIONS......................
   5.2          VALUE OF INITIAL CONTRIBUTIONS...........................
   5.3          ADDITIONAL CONTRIBUTIONS.................................

ARTICLE VI      INTERESTS OF PARTICIPANTS................................
   6.1          INITIAL PARTICIPATING INTERESTS..........................
   6.2          CHANGES IN PARTICIPATING INTERESTS.......................
   6.3          ELIMINATION OF MINORITY INTEREST.........................
   6.4          CONTINUING LIABILITIES UPON ADJUSTMENTS
                OF PARTICIPATING INTERESTS...............................
   6.5          DOCUMENTATION OF ADJUSTMENTS TO PARTICIPATING
                INTERESTS................................................
   6.6          GRANT OF LIEN AND SECURITY INTEREST......................
   6.7          SUBORDINATION OF INTERESTS...............................

ARTICLE VII     MANAGEMENT COMMITTEE.....................................
   7.1          ORGANIZATION AND COMPOSITION.............................
   7.2          DECISIONS................................................
   7.3          MEETINGS.................................................
   7.4          ACTION WITHOUT MEETING IN PERSON.........................
   7.5          MATTERS REQUIRING APPROVAL...............................

ARTICLE VIII    MANAGER..................................................
   8.1          APPOINTMENT..............................................
   8.2          POWERS AND DUTIES OF MANAGER.............................
   8.3          STANDARD OF CARE.........................................
   8.4          RESIGNATION; DEEMED OFFER TO RESIGN......................
</TABLE>


                                       E-2
<PAGE>
<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>             <C>                                                         <C>
   8.5          PAYMENTS TO MANAGER......................................
   8.6          TRANSACTIONS WITH AFFILIATES.............................
   8.7          ACTIVITIES DURING DEADLOCK...............................

ARTICLE IX      PROGRAMS AND BUDGETS.....................................
   9.1          INITIAL PROGRAM AND BUDGET...............................
   9.2          OPERATIONS PURSUANT TO PROGRAMS AND BUDGETS..............
   9.3          PRESENTATION OF PROGRAMS AND BUDGETS.....................
   9.4          REVIEW AND ADOPTION OF PROPOSED PROGRAMS AND BUDGETS ....
   9.5          ELECTION TO PARTICIPATE..................................
   9.6          RECALCULATION OR RESTORATION OF REDUCED INTEREST
                BASED ON ACTUAL EXPENDITURES.............................
   9.7          PRE-FEASIBILITY STUDY PROGRAM AND BUDGETS................
   9.8          COMPLETION OF PRE-FEASIBILITY STUDIES AND SELECTION OF
                APPROVED ALTERNATIVES....................................
   9.9          PROGRAMS AND BUDGETS FOR FEASIBILITY STUDY...............
   9.10         DEVELOPMENT PROGRAMS AND BUDGETS; PROJECT FINANCING......
   9.11         EXPANSION OR MODIFICATION PROGRAMS AND BUDGETS...........
   9.12         BUDGET OVERRUNS; PROGRAM CHANGES.........................
   9.13         EMERGENCY OR UNEXPECTED EXPENDITURES.....................

ARTICLE X       ACCOUNTS AND SETTLEMENTS.................................
   10.1         MONTHLY STATEMENTS.......................................
   10.2         CASH CALLS...............................................
   10.3         FAILURE TO MEET CASH CALLS...............................
   10.4         COVER PAYMENT............................................
   10.5         REMEDIES.................................................
   10.6         AUDITS...................................................

ARTICLE XI      DISPOSITION OF PRODUCTION................................
   11.1         TAKING IN KIND...........................................
   11.2         FAILURE OF PARTICIPANT TO TAKE IN KIND...................
   11.3         HEDGING..................................................

ARTICLE XII     WITHDRAWAL AND TERMINATION...............................
   12.1         TERMINATION BY EXPIRATION OR AGREEMENT...................
   12.2         TERMINATION BY DEADLOCK..................................
   12.3         WITHDRAWAL...............................................
   12.4         CONTINUING OBLIGATIONS AND ENVIRONMENTAL LIABILITIES.....
</TABLE>


                                       E-3
<PAGE>
<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>             <C>                                                         <C>
   12.5         DISPOSITION OF ASSETS ON TERMINATION.....................
   12.6         NON-COMPETE COVENANTS....................................
   12.7         RIGHT TO DATA AFTER TERMINATION..........................
   12.8         CONTINUING AUTHORITY.....................................

ARTICLE XIII    ACQUISITIONS WITHIN AREA OF INTEREST.....................
   13.1         GENERAL..................................................
   13.2         NOTICE TO NON-ACQUIRING PARTICIPANT......................
   13.3         OPTION EXERCISED.........................................
   13.4         OPTION NOT EXERCISED.....................................

ARTICLE XIV     ABANDONMENT AND SURRENDER OF PROPERTIES..................

ARTICLE XV      SUPPLEMENTAL BUSINESS AGREEMENT..........................

ARTICLE XVI     TRANSFER OF INTEREST; PREEMPTIVE RIGHT...................
   16.1         GENERAL..................................................
   16.2         LIMITATIONS ON FREE TRANSFERABILITY......................
   16.3         PREEMPTIVE RIGHT.........................................

ARTICLE XVII    DISPUTES.................................................
   17.1         GOVERNING LAW............................................
   17.2         JURISDICTION AND VENUE...................................
   17.3         DISPUTE RESOLUTION.......................................

ARTICLE XVIII   CONFIDENTIALITY, OWNERSHIP, USE AND DISCLOSURE
                OF INFORMATION...........................................
   18.1         BUSINESS INFORMATION.....................................
   18.2         PARTICIPANT INFORMATION..................................
   18.3         PERMITTED DISCLOSURE OF CONFIDENTIAL
                BUSINESS INFORMATION.....................................
   18.4         DISCLOSURE REQUIRED BY LAW...............................
   18.5         PUBLIC ANNOUNCEMENTS.....................................

ARTICLE XIX     GENERAL PROVISIONS.......................................
   19.1         NOTICES..................................................
   19.2         GENDER...................................................
   19.3         CURRENCY.................................................
   19.4         HEADINGS.................................................
   19.5         WAIVER...................................................
</TABLE>


                                       E-4
<PAGE>
<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>             <C>                                                         <C>
   19.6         MODIFICATION.............................................
   19.7         FORCE MAJEURE............................................
   19.8         RULE AGAINST PERPETUITIES................................
   19.9         FURTHER ASSURANCES.......................................
   19.10        ENTIRE AGREEMENT; SUCCESSORS AND ASSIGNS.................
   19.11        MEMORANDUM...............................................
   19.12        COUNTERPARTS.............................................
</TABLE>

EXHIBIT A       ASSETS AND AREA OF INTEREST
EXHIBIT B       ACCOUNTING PROCEDURES
EXHIBIT C       TAX MATTERS
EXHIBIT D       DEFINITIONS
EXHIBIT E       NET PROCEEDS CALCULATION
EXHIBIT F       INSURANCE
EXHIBIT G       INITIAL PROGRAM AND BUDGET
EXHIBIT H       PREEMPTIVE RIGHTS
EXHIBIT I       EXISTING FACILITIES


                                      E-5
<PAGE>
              EXPLORATION, DEVELOPMENT AND MINE OPERATING AGREEMENT

     This Agreement is made as of _______________________ ("EFFECTIVE DATE")
between GOLDEN PHOENIX MINERALS, INC., a Minnesota corporation ("GOLDEN
PHOENIX"), the address of which is 3595 Airway Drive, Suite 405, Reno, NV 89511,
and BOREALIS MINING COMPANY, a Nevada corporation ("BOREALIS"), the address of
which is 1153 Bergen Parkway, Suite 290, Evergreen, CO 80439-9773.

                                    RECITALS

     A. Golden Phoenix owns or controls certain properties in Mineral County,
State of Nevada, which properties are described in EXHIBIT A and defined in
EXHIBIT D.

     B. Borealis wishes to participate with Golden Phoenix in the exploration,
evaluation and if justified the development and mining of mineral resources
within the Properties, and Golden Phoenix is willing to grant such rights to
Borealis.

     NOW THEREFORE, in consideration of the covenants and conditions contained
herein, Golden Phoenix and Borealis agree as follows:

                                    ARTICLE I
                        DEFINITIONS AND CROSS-REFERENCES

     1.1 DEFINITIONS. The terms defined in EXHIBIT D and elsewhere shall have
the defined meaning wherever used in this Agreement, including in Exhibits.

     1.2 CROSS-REFERENCES. References to "EXHIBITS," "ARTICLES," "SECTIONS" and
"SUBSECTIONS" refer to Exhibits, Articles, Sections and Subsections of this
Agreement. References to "PARAGRAPHS" and "SUBPARAGRAPHS" refer to paragraphs
and subparagraphs of the referenced Exhibits.

                                   ARTICLE II
                             NAME, PURPOSES AND TERM

     2.1 GENERAL. Golden Phoenix and Borealis hereby enter into this Agreement
for the purposes hereinafter stated. All of the rights and obligations of the
Participants in connection with the Assets or the Area of Interest and all
Operations shall be subject to and governed by this Agreement.

     2.2 NAME. The Assets shall be managed and operated by the Participants
under the name of the BOREALIS JOINT VENTURE. The Manager shall accomplish any
registration required by applicable assumed or fictitious name statutes and
similar statutes.

     2.3 PURPOSES. This Agreement is entered into for the following purposes and
for no others, and shall serve as the exclusive means by which each of the
Participants accomplishes such purposes:


                                      E-6
<PAGE>
          (a)  to conduct Exploration within the Area of Interest,

          (b)  to acquire additional real property and other interests within
               the Area of Interest,

          (c)  to evaluate the possible Development and Mining of the
               Properties, and, if justified, to engage in Development and
               Mining,

          (d)  to engage in Operations on the Properties,

          (e)  to engage in marketing Products, to the extent provided by
               ARTICLE XI,

          (f)  to complete and satisfy all Environmental Compliance obligations
               and Continuing Obligations affecting the Properties, and

          (g)  to perform any other activity necessary, appropriate, or
               incidental to any of the foregoing.

     2.4 LIMITATION. Unless the Participants otherwise agree in writing, the
Operations shall be limited to the purposes described in SECTION 2.3, and
nothing in this Agreement shall be construed to enlarge such purposes or to
change the relationships of the Participants as set forth in ARTICLE 4.

     2.5 TERM. The term of this Agreement shall be for twenty (20) years from
the Effective Date and for so long thereafter as Products are produced from the
Properties on a continuous basis, and thereafter until all materials, supplies,
equipment and infrastructure have been salvaged and disposed of, any required
Environmental Compliance is completed and accepted and the Participants have
agreed to a final accounting, unless the Business is earlier terminated as
herein provided. For purposes hereof, Products shall be deemed to be produced
from the Properties on a "CONTINUOUS BASIS" so long as production in commercial
quantities is not halted for more than _________ consecutive years.

                                   ARTICLE III
          REPRESENTATIONS AND WARRANTIES; TITLE TO ASSETS; INDEMNITIES

     3.1 REPRESENTATIONS AND WARRANTIES OF BOTH PARTICIPANTS. As of the
Effective Date, each Participant warrants and represents to the other that:

          (a) it is a corporation duly organized and in good standing in its
state of incorporation and is qualified to do business and is in good standing
in those states where necessary in order to carry out the purposes of this
Agreement;

          (b) it has the capacity to enter into and perform this Agreement and
all transactions contemplated herein and that all corporate, board of directors,
shareholder, surface and


                                      E-7
<PAGE>
mineral rights owner, lessor, lessee and other actions required to authorize it
to enter into and perform this Agreement have been properly taken;

          (c) it will not breach any other agreement or arrangement by entering
into or performing this Agreement;

          (d) it is not subject to any governmental order, judgment, decree,
debarment, sanction or Laws that would preclude the permitting or implementation
of Operations under this Agreement; and

          (e) this Agreement has been duly executed and delivered by it and is
valid and binding upon it in accordance with its terms.

     3.2 REPRESENTATIONS AND WARRANTIES OF GOLDEN PHOENIX. As of the Effective
Date, Golden Phoenix makes the following representations and warranties to
Borealis:

          (a) With respect to those Properties Golden Phoenix owns in fee
simple, if any, Golden Phoenix is in exclusive possession of and owns such
Properties free and clear of all Encumbrances or defects in title except those
specifically identified in PARAGRAPH 1.1 OF EXHIBIT A.

          (b) With respect to those Properties in which Golden Phoenix holds an
interest under leases or other contracts: (i) Golden Phoenix is in exclusive
possession of such Properties; (ii) Golden Phoenix has not received any notice
of default of any of the terms or provisions of such leases or other contracts;
(iii) Golden Phoenix has the authority under such leases or other contracts to
perform fully its obligations under this Agreement; (iv) to Golden Phoenix's
knowledge, such leases and other contracts are valid and are in good standing;
(v) Golden Phoenix has no knowledge of any act or omission or any condition on
the Properties which could be considered or construed as a default under any
such lease or other contract; and (vi) to Golden Phoenix's knowledge, such
Properties are free and clear of all Encumbrances or defects in title except for
those specifically identified in PARAGRAPH 1.1 OF EXHIBIT A.

          (c) Golden Phoenix has delivered to or made available for inspection
by Borealis all Existing Data in its possession or control, and true and correct
copies of all leases or other contracts relating to the Properties.

          (d) With respect to unpatented mining claims and millsites located by
Golden Phoenix that are included within the Properties, except as provided in
PARAGRAPH 1.1 OF EXHIBIT A and subject to the paramount title of the United
States: (i) the unpatented mining claims were properly laid out and monumented;
(ii) all required location and validation work was properly performed; (iii)
location notices and certificates were properly recorded and filed with
appropriate governmental agencies; (iv) all assessment work required to hold the
unpatented mining claims has been performed and all Governmental Fees have been
paid in a manner consistent with that required of the Manager pursuant to
SUBSECTION 8.2(K) through the assessment year ending September 1, _____; (v) all
affidavits of assessment work, evidence of payment of Governmental Fees, and
other filings required to maintain the claims in good standing have been
properly and timely recorded or filed with appropriate governmental agencies;
(vi) the claims are free and clear of Encumbrances or


                                      E-8
<PAGE>
defects in title; and (vii) Golden Phoenix has no knowledge of conflicting
mining claims. Nothing in this SUBSECTION, however, shall be deemed to be a
representation or a warranty that any of the unpatented mining claims contains a
valuable mineral deposit.

          (e) With respect to unpatented mining claims and millsites not located
by Golden Phoenix but which are included within the Properties, except as
provided in PARAGRAPH 1.1 OF EXHIBIT A and subject to the paramount title of the
United States: (i) all assessment work required to hold the unpatented mining
claims has been performed and all Governmental Fees have been paid in a manner
consistent with that required of the Manager pursuant to SUBSECTION 8.2(K)
through the assessment year ending September 1, _____; (ii) all affidavits of
assessment work, evidence of payment of Governmental Fees, and other filings
required to maintain the claims in good standing have been properly and timely
recorded or filed with appropriate governmental agencies; (iii) the claims are
free and clear of Encumbrances or defects in title; and (iv) Golden Phoenix has
no knowledge of conflicting mining claims. Nothing in this SUBSECTION, however,
shall be deemed to be a representation or a warranty that any of the unpatented
mining claims contains a valuable discovery of minerals.

          (f) With respect to the Properties, to Golden Phoenix's knowledge,
there are no pending or threatened actions, suits, claims or proceedings, and
there have been no previous transactions affecting its interests in the
Properties which have not been for fair consideration.

          (g) Except as to matters otherwise disclosed in writing to Borealis
prior to the Effective Date,

               (i) to Golden Phoenix's knowledge, the conditions existing on or
with respect to the Properties and its ownership and operation of the Properties
are not in violation of any Laws (including without limitation any Environmental
Laws), nor causing or permitting any damage (including Environmental Damage, as
defined below) or impairment to the health, safety, or enjoyment of any person
at or on the Properties or in the general vicinity of the Properties;

               (ii) to Golden Phoenix's knowledge, there have been no past
violations by it or by any of its predecessors in title of any Environmental
Laws or other Laws affecting or pertaining to the Properties, nor any past
creation of damage or threatened damage to the air, soil, surface waters,
groundwater, flora, fauna, or other natural resources on, about or in the
general vicinity of the Properties ("ENVIRONMENTAL DAMAGE"), subject, however,
to the parties' acknowledgment that prior mining operations have occurred on the
Properties and that certain facilities, more particularly described in EXHIBIT I
hereto, still exist on the Properties as a consequence of such operations.

               (iii) Golden Phoenix has not received inquiry from or notice of a
pending investigation from any governmental agency or of any administrative or
judicial proceeding concerning the violation of any Laws.

          The representations and warranties set forth above shall survive the
execution and delivery of any documents of Transfer provided under this
Agreement. For a representation or warranty made to a Participant's "KNOWLEDGE,"
the term "knowledge" shall mean


                                      E-9
<PAGE>
actual knowledge on the part of the officers, employees, and agents of the
representing Participant or of facts that would reasonably lead to the indicated
conclusions.

     3.3 DISCLOSURES. Each of the Participants represents and warrants that it
is unaware of any material facts or circumstances that have not been disclosed
in this Agreement, which should be disclosed to the other Participant in order
to prevent the representations and warranties in this ARTICLE III from being
materially misleading. Golden Phoenix has disclosed to Borealis all information
it believes to be relevant concerning the Assets and has provided to or made
available for inspection by Borealis all such information, but does not make any
representation or warranty, express or implied, as to the accuracy or
completeness of the information (except as provided in SECTION 3.2) or as to the
boundaries or value of the Assets. Each Participant represents to the other that
in negotiating and entering into this Agreement it has relied solely on its own
appraisals and estimates as to the value of the Assets and upon its own geologic
and engineering interpretations related thereto.

     3.4 RECORD TITLE. Title to the Assets shall be held by the Participants as
co-tenants for the benefit of the Business.

     3.5 LOSS OF TITLE. Any failure or loss of title to the Assets, and all
costs of defending title, shall be charged to the Business Account, except that
all costs and losses arising out of or resulting from breach of the
representations and warranties of Golden Phoenix or Borealis as to title shall
be charged to Golden Phoenix or Borealis, as the case may be.

     3.6 ROYALTIES, PRODUCTION TAXES AND OTHER PAYMENTS BASED ON PRODUCTION. All
required payments of production royalties, taxes based on production of
Products, and other payments out of production to private parties and
governmental entities shall be determined and made by each Participant in
proportion to its Participating Interest, and each Participant undertakes to
make such payments timely and otherwise in accordance with applicable laws and
agreements. If separate payment is not permitted, each Participant shall
determine and pay its proportionate share in advance to the Participant
obligated to make such payment and such Participant shall timely make such
payment. Each Participant shall furnish to the other Participant evidence of
timely payment for all such required payments. In the event that either
Participant fails to make any such required payment, the other Participant shall
have the right to make such payment and shall thereby become subrogated to the
rights of such third party; provided, however, that the making of any such
payment on behalf of the other Participant shall not constitute acceptance by
the paying Participant of any liability to such third party for the underlying
obligation.

     3.7 INDEMNITIES/LIMITATION OF LIABILITY.

          (a) Each Participant shall indemnify the other Participant, its
directors, officers, employees, agents and attorneys, or Affiliates
(collectively "INDEMNIFIED PARTICIPANT") from and against the entire amount of
any Material Loss. A "MATERIAL LOSS" shall mean all costs, expenses, damages or
liabilities, including attorneys' fees and other costs of litigation (either
threatened or pending) arising out of or based on a breach by a Participant
("INDEMNIFYING PARTICIPANT") of any representation, warranty or covenant
contained in this Agreement, including without limitation:


                                      E-10
<PAGE>
               (i) any failure by a Participant to determine accurately and make
timely payment of its proportionate share of required royalties, production
taxes and other payments out of production to third parties as required by
SECTION 3.6;

               (ii) any action taken for or obligation or responsibility assumed
on behalf of the other Participant, its directors, officers, employees, agents
and attorneys, or Affiliates by a Participant, any of its directors, officers,
employees, agents and attorneys, or Affiliates, in violation of SECTION 4.1;

               (iii) failure of a Participant or its Affiliates to comply with
the non-compete or Area of Interest provisions of SECTION 12.6 or ARTICLE XIII;

               (iv) any Transfer that causes termination of the tax partnership
established by SECTION 4.2, against which the transferring Participant shall
indemnify the non-transferring Participant as provided in ARTICLE V of EXHIBIT
C; and

               (v) failure of a Participant or its Affiliates to comply with the
preemptive right under SECTION 16.3 and EXHIBIT H.

          A Material Loss shall not be deemed to have occurred until, in the
aggregate, an Indemnified Participant incurs losses, costs, damages or
liabilities in excess of __________ Dollars ($_____) relating to breaches of
warranties, representations and covenants contained in this Agreement. Golden
Phoenix's aggregate liability to all Indemnified Participants under this SECTION
for breaches of the representations in SUBSECTION 3.2(G) shall not, however,
exceed __________ Dollars ($__________).

          (b) If any claim or demand is asserted against an Indemnified
Participant in respect of which such Indemnified Participant may be entitled to
indemnification under this Agreement, written notice of such claim or demand
shall promptly be given to the Indemnifying Participant. The Indemnifying
Participant shall have the right, but not the obligation, by notifying the
Indemnified Participant within thirty (30) days after its receipt of the notice
of the claim or demand, to assume the entire control of (subject to the right of
the Indemnified Participant to participate, at the Indemnified Participant's
expense and with counsel of the Indemnified Participant's choice), the defense,
compromise, or settlement of the matter, including, at the Indemnifying
Participant's expense, employment of counsel of the Indemnifying Participant's
choice. Any damages to the assets or business of the Indemnified Participant
caused by a failure by the Indemnifying Participant to defend, compromise, or
settle a claim or demand in a reasonable and expeditious manner requested by the
Indemnified Participant, after the Indemnifying Participant has given notice
that it will assume control of the defense, compromise, or settlement of the
matter, shall be included in the damages for which the Indemnifying Participant
shall be obligated to indemnify the Indemnified Participant. Any settlement or
compromise of a matter by the Indemnifying Participant shall include a full
release of claims against the Indemnified Participant which has arisen out of
the indemnified claim or demand.


                                      E-11
<PAGE>
                                   ARTICLE IV

                        RELATIONSHIP OF THE PARTICIPANTS

     4.1 NO PARTNERSHIP. Nothing contained in this Agreement shall be deemed to
constitute either Participant the partner or the venturer of the other, or,
except as otherwise herein expressly provided, to constitute either Participant
the agent or legal representative of the other, or to create any fiduciary
relationship between them. The Participants do not intend to create, and this
Agreement shall not be construed to create, any mining, commercial or other
partnership or joint venture. Neither Participant, nor any of its directors,
officers, employees, agents and attorneys, or Affiliates, shall act for or
assume any obligation or responsibility on behalf of the other Participant,
except as otherwise expressly provided herein, and any such action or assumption
by a Participant's directors, officers, employees, agents and attorneys, or
Affiliates shall be a breach by such Participant of this Agreement. The rights,
duties, obligations and liabilities of the Participants shall be several and not
joint or collective. Each Participant shall be responsible only for its
obligations as herein set out and shall be liable only for its share of the
costs and expenses as provided herein, and it is the express purpose and
intention of the Participants that their ownership of Assets and the rights
acquired hereunder shall be as tenants in common.

     4.2 FEDERAL TAX ELECTIONS AND ALLOCATIONS. Without changing the effect of
SECTION 4.1, the relationship of the Participants shall constitute a tax
partnership within the meaning of Section 761(a) of the United States Internal
Revenue Code of 1986, as amended. Tax elections and allocations shall be made as
set forth in EXHIBIT C.

     4.3 STATE INCOME TAX. To the extent permissible under applicable law, the
relationship of the Participants shall be treated for state income tax purposes
in the same manner as it is for federal income tax purposes.

     4.4 TAX RETURNS. After approval of the Management Committee, any tax
returns or other required tax forms shall be filed in accordance with EXHIBIT C.

     4.5 OTHER BUSINESS OPPORTUNITIES. Except as expressly provided in this
Agreement, each Participant shall have the right to engage in and receive full
benefits from any independent business activities or operations, whether or not
competitive with this Business, without consulting with, or obligation to, the
other Participant. The doctrines of "CORPORATE OPPORTUNITY" or "BUSINESS
OPPORTUNITY" shall not be applied to this Business nor to any other activity or
operation of either Participant. Neither Participant shall have any obligation
to the other with respect to any opportunity to acquire any property outside the
Area of Interest at any time, or, except as otherwise provided in SECTION 12.6,
within the Area of Interest after the termination of the Business. Unless
otherwise agreed in writing, neither Participant shall have any obligation to
mill, beneficiate or otherwise treat any Products in any facility owned or
controlled by such Participant.

     4.6 WAIVER OF RIGHTS TO PARTITION OR OTHER DIVISION OF ASSETS. The
Participants hereby waive and release all rights of partition, or of sale in
lieu thereof, or other division of Assets, including any such rights provided by
Law.


                                      E-12
<PAGE>
     4.7 TRANSFER OR TERMINATION OF RIGHTS TO PROPERTIES. Except as otherwise
provided in this Agreement, neither Participant shall Transfer all or any part
of its interest in the Assets or this Agreement or otherwise permit or cause
such interests to terminate.

     4.8 IMPLIED COVENANTS. There are no implied covenants contained in this
Agreement other than those of good faith and fair dealing.

     4.9 NO THIRD PARTY BENEFICIARY RIGHTS. This Agreement shall be construed to
benefit the Participants and their respective successors and assigns only, and
shall not be construed to create third party beneficiary rights in any other
party or in any governmental organization or agency, except to the extent
required by Project Financing and as provided in SUBSECTION 3.7(A).

                                    ARTICLE V
                          CONTRIBUTIONS BY PARTICIPANTS

     5.1 PARTICIPANTS' INITIAL CONTRIBUTIONS. The Participants, as their Initial
Contributions, hereby contribute their respective interests in the Properties to
the purposes of this Agreement.

     5.2 VALUE OF INITIAL CONTRIBUTIONS. Solely for the purposes of SECTIONS
6.3, 8.2(N), 9.5 and 10.5 of this Agreement and PARAGRAPH 4.1(A) OF EXHIBIT C,
the agreed value of the Participants' respective Initial Contributions shall be
as follows:

<TABLE>
<S>              <C>
Golden Phoenix   $5,000,000.00

Borealis         $5,000,000.00
</TABLE>

     5.3 ADDITIONAL CONTRIBUTIONS. The Participants, subject to any election
permitted by SUBSECTION 9.5(A), shall be obligated to contribute funds to
adopted Programs and Budgets in accordance with their respective Participating
Interests.

                                   ARTICLE VI
                            INTERESTS OF PARTICIPANTS

     6.1 INITIAL PARTICIPATING INTERESTS. The Participants shall have the
following initial Participating Interests:

<TABLE>
<S>              <C>
Golden Phoenix   50%

Borealis         50%
</TABLE>

     6.2 CHANGES IN PARTICIPATING INTERESTS. The Participating Interests shall
be eliminated or changed as follows:

          (a) Upon withdrawal or deemed withdrawal as provided in Section 6.3
and Article XII;


                                      E-13
<PAGE>
          (b) Upon an election by either Participant pursuant to SECTION 9.5 to
contribute less to an adopted Program and Budget than the percentage equal to
its Participating Interest, or to contribute nothing to an adopted Program and
Budget;

          (c) In the event of default by either Participant in making its
agreed-upon contribution to an adopted Program and Budget, followed by an
election by the other Participant to invoke any of the remedies in SECTION 10.5;

          (d) Upon Transfer by either Participant of part or all of its
Participating Interest in accordance with ARTICLE XVI; or

          (e) Upon acquisition by either Participant of part or all of the
Participating Interest of the other Participant, however arising.

     6.3 ELIMINATION OF MINORITY INTEREST.

          (a) A Reduced Participant whose Recalculated Participating Interest
becomes less than ten percent (10%) shall be deemed to have withdrawn from the
Business and shall relinquish its entire Participating Interest free and clear
of any Encumbrances arising by, through or under the Reduced Participant, except
any such Encumbrances listed in PARAGRAPH 1.1 OF EXHIBIT A or to which the
Participants have agreed. Such relinquished Participating Interest shall be
deemed to have accrued automatically to the other Participant. The Reduced
Participant's Capital Account shall be transferred to the remaining Participant.
The Reduced Participant shall have the right to receive ten percent (10%) of Net
Proceeds, if any, to a maximum amount of seventy percent (70%) of the Reduced
Participant's Equity Account balance as of the effective date of the withdrawal.
Upon receipt of such amount, and subject to SECTION 6.4, the Reduced Participant
shall thereafter have no further right, title, or interest in the Assets or
under this Agreement, and the tax partnership established by EXHIBIT C shall
dissolve pursuant to PARAGRAPH 4.2 OF EXHIBIT C. In such event, the Reduced
Participant shall execute and deliver an appropriate conveyance of all of its
right, title and interest in the Assets to the remaining Participant.

          (b) The relinquishment, withdrawal and entitlements for which this
SECTION provides shall be effective as of the effective date of the
recalculation under SECTIONS 9.5 or 10.5. However, if the final adjustment
provided under SECTION 9.6 for any recalculation under SECTION 9.5 results in a
Recalculated Participating Interest of ten percent (10%) or more: (i) the
Recalculated Participating Interest shall be deemed, effective retroactively as
of the first day of the Program Period, to have automatically revested; (ii) the
Reduced Participant shall be reinstated as a Participant, with all of the rights
and obligations pertaining thereto; (iii) the right to Net Proceeds under
SUBSECTION 6.3(A) shall terminate; and (iv) the Manager, on behalf of the
Participants, shall make any necessary reimbursements, reallocations of
Products, contributions and other adjustments as provided in SUBSECTION 9.6(D).
Similarly, if such final adjustment under SECTION 9.6 results in a Recalculated
Participating Interest for either Participant of less than ten percent (10%) for
a Program Period as to which the provisional calculation under SECTION 9.5 had
not resulted in a Participating Interest of less than ten percent (10%), then
such Participant, at its election within thirty (30) days after notice of the
final adjustment, may contribute an amount resulting in a revised


                                      E-14
<PAGE>
final adjustment and resultant Recalculated Participating Interest of ten
percent (10%). If no such election is made, such Participant shall be deemed to
have withdrawn under the terms of SUBSECTION 6.3(A) as of the beginning of such
Program Period, and the Manager, on behalf of the Participants, shall make any
necessary reimbursements, reallocations of Products, contributions and other
adjustments as provided in SUBSECTION 9.6(D), including of any Net Proceeds to
which such Participant may be entitled for such Program Period.

     6.4 CONTINUING LIABILITIES UPON ADJUSTMENTS OF PARTICIPATING INTERESTS. Any
reduction or elimination of either Participant's Participating Interest under
SECTION 6.2 shall not relieve such Participant of its share of any liability,
including, without limitation, Continuing Obligations, Environmental Liabilities
and Environmental Compliance, whether arising, before or after such reduction or
elimination, out of acts or omissions occurring or conditions existing prior to
the Effective Date or out of Operations conducted during the term of this
Agreement but prior to such reduction or elimination, regardless of when any
funds may be expended to satisfy such liability. For purposes of this SECTION,
such Participant's share of such liability shall be equal to its Participating
Interest at the time the act or omission giving rise to the liability occurred,
after first taking into account any reduction, readjustment and restoration of
Participating Interests under SECTIONS 6.3, 9.5, 9.6 and 10.5 (or, as to such
liability arising out of acts or omissions occurring or conditions existing
prior to the Effective Date, equal to such Participant's initial Participating
Interest). Should the cumulative cost of satisfying Continuing Obligations be in
excess of cumulative amounts accrued or otherwise charged to the Environmental
Compliance Fund as described in EXHIBIT B, each of the Participants shall be
liable for its proportionate share (i.e., Participating Interest at the time of
the act or omission giving rise to such liability occurred), after first taking
into account any reduction, readjustment and restoration of Participating
Interests under SECTIONS 6.3, 9.5, 9.6 and 10.5, of the cost of satisfying such
Continuing Obligations, notwithstanding that either Participant has previously
withdrawn from the Business or that its Participating Interest has been reduced
or converted to an interest in Net Proceeds pursuant to SUBSECTION 6.3(A).

     6.5 DOCUMENTATION OF ADJUSTMENTS TO PARTICIPATING INTERESTS. Adjustments to
the Participating Interests need not be evidenced during the term of this
Agreement by the execution and recording of appropriate instruments, but each
Participant's Participating Interest and related Equity Account balance shall be
shown in the accounting records of the Manager, and any adjustments thereto,
including any reduction, readjustment, and restoration of Participating
Interests under SECTIONS 6.3, 9.5, 9.6 and 10.5, shall be made monthly. However,
either Participant, at any time upon the request of the other Participant, shall
execute and acknowledge instruments necessary to evidence such adjustments in
form sufficient for filing and recording in the jurisdiction where the
Properties are located.

     6.6 GRANT OF LIEN AND SECURITY INTEREST.

          (a) Subject to SECTION 6.7, each Participant grants to the other
Participant a lien upon and a security interest in its Participating Interest,
including all of its right, title and interest in the Assets, whenever acquired
or arising, and the proceeds from and accessions to the foregoing.


                                      E-15
<PAGE>
          (b) The liens and security interests granted by SUBSECTION 6.6(A)
shall secure every obligation or liability of the Participant granting such lien
or security interest created under this Agreement, including the obligation to
repay a Cover Payment in accordance with SECTION 10.4. Each Participant hereby
agrees to take all action necessary to perfect such lien and security interest
and hereby appoints the other Participant its attorney-in-fact to execute, file
and record all financing statements and other documents necessary to perfect or
maintain such lien and security interest.

     6.7 SUBORDINATION OF INTERESTS. Each Participant shall, from time to time,
take all necessary actions, including execution of appropriate agreements, to
pledge and subordinate its Participating Interest, any liens it may hold which
are created under this Agreement other than those created pursuant to SECTION
6.6 hereof, and any other right or interest it holds with respect to the Assets
(other than any statutory lien of the Manager) to any secured borrowings for
Operations approved by the Management Committee, including any secured
borrowings relating to Project Financing, and any modifications or renewals
thereof.

                                   ARTICLE VII
                              MANAGEMENT COMMITTEE

     7.1 ORGANIZATION AND COMPOSITION. The Participants hereby establish a
Management Committee to determine overall policies, objectives, procedures,
methods and actions under this Agreement. The Management Committee shall consist
of three members appointed by Golden Phoenix and three members appointed by
Borealis. Each Participant may appoint one or more alternates to act in the
absence of a regular member. Any alternate so acting shall be deemed a member.
Appointments by a Participant shall be made or changed by notice to the other
members. Borealis shall designate one of its members to serve as the chair of
the Management Committee.

     7.2 DECISIONS. Each Participant, acting through its appointed member(s) in
attendance at the meeting, shall have the votes on the Management Committee in
proportion to its Participating Interest. Unless otherwise provided in this
Agreement, the vote of the Participant with a Participating Interest over fifty
percent (50%) shall determine the decisions of the Management Committee. In the
case of any tie vote, the vote of Borealis shall determine the decisions of the
Management Committee.

     7.3 MEETINGS.

          (a) The Management Committee shall hold regular meetings at least
quarterly in Reno, Nevada, or at other agreed places. The Manager shall give
thirty (30) days notice to the Participants of such meetings. Additionally,
either Participant may call a special meeting upon seven (7) days notice to the
other Participant. In case of an emergency, reasonable notice of a special
meeting shall suffice. There shall be a quorum if at least one member
representing each Participant is present; provided, however, that if a
Participant fails to attend two consecutive properly called meetings, then a
quorum shall exist at the second meeting if the other Participant is represented
by at least one appointed member, and a vote of such Participant shall be
considered the vote required for the purposes of the conduct of all business
properly noticed even if such vote would otherwise require unanimity.


                                      E-16
<PAGE>
          (b) If business cannot be conducted at a regular or special meeting
due to the lack of a quorum, either Participant may call the next meeting upon
seven (7) days notice to the other Participant.

          (c) Each notice of a meeting shall include an itemized agenda prepared
by the Manager in the case of a regular meeting or by the Participant calling
the meeting in the case of a special meeting, but any matters may be considered
if either Participant adds the matter to the agenda at least five (5) days
before the meeting or with the consent of the other Participant. The Manager
shall prepare minutes of all meetings and shall distribute copies of such
minutes to the other Participant within thirty (30) days after the meeting.
Either Participant may electronically record the proceedings of a meeting with
the consent of the other Participant. The other Participant shall sign and
return or object to the minutes prepared by the Manager within thirty (30) days
after receipt, and failure to do either shall be deemed acceptance of the
minutes as prepared by the Manager. The minutes, when signed or deemed accepted
by both Participants, shall be the official record of the decisions made by the
Management Committee. Decisions made at a Management Committee meeting shall be
implemented in accordance with adopted Programs and Budgets. If a Participant
timely objects to minutes proposed by the Manager, the members of the Management
Committee shall seek, for a period not to exceed thirty (30) days from receipt
by the Manager of notice of the objections, to agree upon minutes acceptable to
both Participants. If the Management Committee does not reach agreement on the
minutes of the meeting within such thirty (30) day period, the minutes of the
meeting as prepared by the Manager together with the other Participant's
proposed changes shall collectively constitute the record of the meeting. If
personnel employed in Operations are required to attend a Management Committee
meeting, reasonable costs incurred in connection with such attendance shall be
charged to the Business Account. All other costs shall be paid by the
Participants individually.

     7.4 ACTION WITHOUT MEETING IN PERSON. In lieu of meetings in person, the
Management Committee may conduct meetings by telephone or video conference, so
long as minutes of such meetings are prepared in accordance with SUBSECTION
7.3(C). The Management Committee may also take actions in writing signed by all
members.

     7.5 MATTERS REQUIRING APPROVAL. Except as otherwise delegated to the
Manager in SECTION 8.2, the Management Committee shall have exclusive authority
to determine all matters related to overall policies, objectives, procedures,
methods and actions under this Agreement.

                                  ARTICLE VIII
                                     MANAGER

     8.1 APPOINTMENT. The Participants hereby appoint Borealis as the Manager
with overall management responsibility for Operations. Borealis hereby agrees to
serve until it resigns as provided in SECTION 8.4.


                                      E-17
<PAGE>
     8.2 POWERS AND DUTIES OF MANAGER. Subject to the terms and provisions of
this Agreement, the Manager shall have the following powers and duties, which
shall be discharged in accordance with adopted Programs and Budgets.

          (a) The Manager shall manage, direct and control Operations, and shall
prepare and present to the Management Committee proposed Programs and Budgets as
provided in ARTICLE IX.

          (b) The Manager shall implement the decisions of the Management
Committee, shall make all expenditures necessary to carry out adopted Programs,
and shall promptly advise the Management Committee if it lacks sufficient funds
to carry out its responsibilities under this Agreement.

          (c) The Manager shall use reasonable efforts to: (i) purchase or
otherwise acquire all material, supplies, equipment, water, utility and
transportation services required for Operations, such purchases and acquisitions
to be made to the extent reasonably possible on the best terms available, taking
into account all of the circumstances; (ii) obtain such customary warranties and
guarantees as are available in connection with such purchases and acquisitions;
and (iii) keep the Assets free and clear of all Encumbrances, except any such
Encumbrances listed in PARAGRAPH 1.1 OF EXHIBIT A and those existing at the time
of, or created concurrent with, the acquisition of such Assets, or mechanic's or
materialmen's liens (which shall be contested, released or discharged in a
diligent matter) or Encumbrances specifically approved by the Management
Committee.

          (d) The Manager shall conduct such title examinations of the
Properties and cure such title defects pertaining to the Properties as may be
advisable in its reasonable judgment.

          (e) The Manager shall: (i) make or arrange for all payments required
by leases, licenses, permits, contracts and other agreements related to the
Assets; (ii) pay all taxes, assessments and like charges on Operations and
Assets except taxes determined or measured by a Participant's sales revenue or
net income and taxes, including production taxes, attributable to a
Participant's share of Products, and shall otherwise promptly pay and discharge
expenses incurred in Operations; provided, however, that if authorized by the
Management Committee, the Manager shall have the right to contest (in the courts
or otherwise) the validity or amount of any taxes, assessments or charges if the
Manager deems them to be unlawful, unjust, unequal or excessive, or to undertake
such other steps or proceedings as the Manager may deem reasonably necessary to
secure a cancellation, reduction, readjustment or equalization thereof before
the Manager shall be required to pay them, but in no event shall the Manager
permit or allow title to the Assets to be lost as the result of the nonpayment
of any taxes, assessments or like charges; and (iii) do all other acts
reasonably necessary to maintain the Assets.

          (f) The Manager shall: (i) apply for all necessary permits, licenses
and approvals; (ii) comply with all Laws; (iii) notify promptly the Management
Committee of any allegations of substantial violation thereof; and (iv) prepare
and file all reports or notices required for or as a result of Operations. The
Manager shall not be in breach of this provision if a violation


                                      E-18
<PAGE>
has occurred in spite of the Manager's good faith efforts to comply consistent
with its standard of care under SECTION 8.3. In the event of any such violation,
the Manager shall timely cure or dispose of such violation on behalf of both
Participants through performance, payment of fines and penalties, or both, and
the cost thereof shall be charged to the Business Account.

          (g) The Manager shall prosecute and defend, but shall not initiate
without consent of the Management Committee, all litigation or administrative
proceedings arising out of Operations. The non-managing Participant shall have
the right to participate, at its own expense, in such litigation or
administrative proceedings. The non-managing Participant shall approve in
advance any settlement involving payments, commitments or obligations in excess
of Twenty-Five Thousand Dollars ($25,000.00) in cash or value.

          (h) The Manager shall provide insurance for the benefit of the
Participants as provided in EXHIBIT F or as may otherwise be determined from
time to time by the Management Committee.

          (i) The Manager may dispose of Assets, whether by abandonment,
surrender, or Transfer in the ordinary course of business, except that
Properties may be abandoned or surrendered only as provided in ARTICLE XIV.
Without prior authorization from the Management Committee, however, the Manager
shall not: (i) dispose of Assets in any one transaction (or in any series of
related transactions) having a value in excess of Twenty-Five Thousand Dollars
($25,000.00); (ii) enter into any sales contracts or commitments for Product,
except as permitted in SECTION 11.2; (iii) begin a liquidation of the Business;
or (iv) dispose of all or a substantial part of the Assets necessary to achieve
the purposes of the Business.

          (j) The Manager shall have the right to carry out its responsibilities
hereunder through agents, Affiliates or independent contractors.

          (k) The Manager shall perform or cause to be performed all assessment
and other work, and shall pay all Governmental Fees required by Law in order to
maintain the unpatented mining claims, mill sites and tunnel sites included
within the Properties. The Manager shall have the right to perform the
assessment work required hereunder pursuant to a common plan of exploration and
continued actual occupancy of such claims and sites shall not be required. The
Manager shall not be liable on account of any determination by any court or
governmental agency that the work performed by the Manager does not constitute
the required annual assessment work or occupancy for the purposes of preserving
or maintaining ownership of the claims, provided that the work done is pursuant
to an adopted Program and Budget and is performed in accordance with the
Manager's standard of care under SECTION 8.3. The Manager shall timely record
with the appropriate county and file with the appropriate United States agency
any required affidavits, notices of intent to hold and other documents in proper
form attesting to the payment of Governmental Fees, the performance of
assessment work or intent to hold the claims and sites, in each case in
sufficient detail to reflect compliance with the requirements applicable to each
claim and site. The Manager shall not be liable on account of any determination
by any court or governmental agency that any such document submitted by the
Manager does not comply with applicable requirements, provided that such
document is prepared and recorded or filed in accordance with the Manager's
standard of care under SECTION 8.3.


                                      E-19
<PAGE>
          (l) If authorized by the Management Committee, the Manager may: (i)
locate, amend or relocate any unpatented mining claim or mill site or tunnel
site, (ii) locate any fractions resulting from such amendment or relocation,
(iii) apply for patents or mining leases or other forms of mineral tenure for
any such unpatented claims or sites, (iv) abandon any unpatented mining claims
for the purpose of locating mill sites or otherwise acquiring from the United
States rights to the ground covered thereby, (v) abandon any unpatented mill
sites for the purpose of locating mining claims or otherwise acquiring from the
United States rights to the ground covered thereby, (vi) exchange with or convey
to the United States any of the Properties for the purpose of acquiring rights
to the ground covered thereby or other adjacent ground, and (vii) convert any
unpatented claims or mill sites into one or more leases or other forms of
mineral tenure pursuant to any Law hereafter enacted.

          (m) The Manager shall keep and maintain all required accounting and
financial records pursuant to the procedures described in EXHIBIT B and in
accordance with customary cost accounting practices in the mining industry, and
shall ensure appropriate separation of accounts unless otherwise agreed by the
Participants.

          (n) The Manager shall maintain Equity Accounts for each Participant.
Each Participant's Equity Account shall be credited with the value of such
Participant's contributions under SECTION 5.2 and shall be credited with amounts
contributed by such Participant under SECTION 5.3. Each Participant's Equity
Account shall be charged with the cash and the fair market value of property
distributed to such Participant (net of liabilities assumed by such Participant
and liabilities to which such distributed property is subject). Contributions
and distributions shall include all cash contributions or distributions plus the
agreed value (expressed in dollars) of all in-kind contributions or
distributions. Solely for purposes of determining the Equity Account balances of
the Participants, the Manager shall reasonably estimate the fair market value of
all Products distributed to the Participants, and such estimated value shall be
used regardless of the actual amount received by each Participant upon
disposition of such Products.

          (o) The Manager shall keep the Management Committee advised of all
Operations by submitting in writing to the members of the Management Committee:
(i) monthly progress reports that include statements of expenditures and
comparisons of such expenditures to the adopted Budget; (ii) periodic summaries
of data acquired; (iii) copies of reports concerning Operations; (iv) a detailed
final report within sixty (60) days after completion of each Program and Budget,
which shall include comparisons between actual and budgeted expenditures and
comparisons between the objectives and results of Programs; and (v) such other
reports as any member of the Management Committee may reasonably request.
Subject to ARTICLE XVIII, at all reasonable times the Manager shall provide the
Management Committee, or other representative of a Participant upon the request
of such Participant's member of the Management Committee, access to, and the
right to inspect and, at such Participant's cost and expense, copies of the
Existing Data and all maps, drill logs and other drilling data, core, pulps,
reports, surveys, assays, analyses, production reports, operations, technical,
accounting and financial records, and other Business Information, to the extent
preserved or kept by the Manager, subject to ARTICLE XVIII. In addition, the
Manager shall allow the non-managing Participant, at the latter's sole risk,
cost and expense, and


                                      E-20
<PAGE>
subject to reasonable safety regulations, to inspect the Assets and Operations
at all reasonable times, so long as the non-managing Participant does not
unreasonably interfere with Operations.

          (p) The Manager shall prepare an Environmental Compliance plan for all
Operations consistent with the requirements of any applicable Laws or
contractual obligations and shall include in each Program and Budget sufficient
funding to implement the Environmental Compliance plan and to satisfy the
financial assurance requirements of any applicable Law or contractual obligation
pertaining to Environmental Compliance. To the extent practical, the
Environmental Compliance plan shall incorporate concurrent reclamation of
Properties disturbed by Operations.

          (q) The Manager shall undertake to perform Continuing Obligations when
and as economic and appropriate, whether before or after termination of the
Business. The Manager shall have the right to delegate performance of Continuing
Obligations to persons having demonstrated skill and experience in relevant
disciplines. As part of each Program and Budget submittal, the Manager shall
specify in such Program and Budget the measures to be taken for performance of
Continuing Obligations and the cost of such measures. The Manager shall keep the
other Participant reasonably informed about the Manager's efforts to discharge
Continuing Obligations. Authorized representatives of each Participant shall
have the right from time to time to enter the Properties to inspect work
directed toward satisfaction of Continuing Obligations and audit books, records,
and accounts related thereto.

          (r) The funds that are to be deposited into the Environmental
Compliance Fund shall be maintained by the Manager in a separate, interest
bearing cash management account, which may include, but is not limited to, money
market investments and money market funds, and/or in longer term investments if
approved by the Management Committee. Such funds shall be used solely for
Environmental Compliance and Continuing Obligations, including the committing of
such funds, interests in property, insurance or bond policies, or other security
to satisfy Laws regarding financial assurance for the reclamation or restoration
of the Properties, and for other Environmental Compliance requirements.

          (s) If Participating Interests are adjusted in accordance with this
Agreement the Manager shall propose from time to time one or more methods for
fairly allocating costs for Continuing Obligations.

          (t) The Manager shall undertake all other activities reasonably
necessary to fulfill the foregoing, and to implement the policies, objectives,
procedures, methods and actions determined by the Management Committee pursuant
to SECTION 7.1.

     8.3 STANDARD OF CARE. The Manager shall discharge its duties under SECTION
8.2 and conduct all Operations in a good, workmanlike and efficient manner, in
accordance with sound mining and other applicable industry standards and
practices, and in accordance with Laws and with the terms and provisions of
leases, licenses, permits, contracts and other agreements pertaining to the
Assets. The Manager shall not be liable to the other Participant for any act or
omission resulting in damage or loss except to the extent caused by or
attributable to the Manager's willful misconduct or gross negligence. The
Manager shall not be in default of any of its duties


                                      E-21
<PAGE>
under SECTION 8.2 if its inability or failure to perform results from the
failure of the other Participant to perform acts or to contribute amounts
required of it by this Agreement.

     8.4 RESIGNATION; DEEMED OFFER TO RESIGN. The Manager may resign upon not
less than six (6) months' prior notice to the other Participant, in which case
the other Participant may elect to become the new Manager by notice to the
resigning Participant within sixty (60) days after the notice of resignation. If
any of the following shall occur, the Manager shall be deemed to have resigned
upon the occurrence of the event described in each of the following Subsections,
with the successor Manager to be appointed by the other Participant at a
subsequently called meeting of the Management Committee, at which the Manager
shall not be entitled to vote. The other Participant may appoint itself or a
third party as the Manager.

          (a) The aggregate Participating Interest of the Manager and its
Affiliates becomes less than forty percent (40%);

          (b) The Manager fails to perform a material obligation imposed upon it
under this Agreement and such failure continues for a period of sixty (60) days
after notice from the other Participant demanding performance;

          (c) The Manager fails to pay or contest in good faith its bills and
Business debts as such obligations become due;

          (d) A receiver, liquidator, assignee, custodian, trustee, sequestrator
or similar official for a substantial part of its assets is appointed and such
appointment is neither made ineffective nor discharged within sixty (60) days
after the making thereof, or such appointment is consented to, requested by, or
acquiesced in by the Manager;

          (e) The Manager commences a voluntary case under any applicable
bankruptcy, insolvency or similar law now or hereafter in effect; or consents to
the entry of an order for relief in an involuntary case under any such law or to
the appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or other similar official of any substantial
part of its assets; or makes a general assignment for the benefit of creditors;
or takes corporate or other action in furtherance of any of the foregoing; or

          (f) Entry is made against the Manager of a judgment, decree or order
for relief affecting its ability to serve as Manager, or a substantial part of
its Participating Interest or its other assets by a court of competent
jurisdiction in an involuntary case commenced under any applicable bankruptcy,
insolvency or other similar law of any jurisdiction now or hereafter in effect.

Under SUBSECTIONS (D), (E) or (F) above, the appointment of a successor Manager
shall be deemed to pre-date the event causing a deemed resignation.

     8.5 PAYMENTS TO MANAGER. The Manager shall be compensated for its services
and reimbursed for its costs hereunder in accordance with EXHIBIT B.


                                      E-22
<PAGE>
     8.6 TRANSACTIONS WITH AFFILIATES. If the Manager engages Affiliates to
provide services hereunder, it shall do so on terms no less favorable than would
be the case in arm's-length transactions with unrelated persons.

     8.7 ACTIVITIES DURING DEADLOCK. If the Management Committee for any reason
fails to adopt an Exploration, Pre-Feasibility Study, Feasibility Study or
Development Program and Budget, the Manager shall continue Operations at levels
sufficient to maintain the Properties. If the Management Committee for any
reason fails to adopt an initial Mining Program and Budget or any Expansion or
Modification Programs and Budgets, the Manager shall continue Operations at
levels sufficient to maintain the then current Operations and Properties. If the
Management Committee for any reason fails to adopt Mining Programs and Budgets
subsequent to the initial Mining Program and Budget, subject to the contrary
direction of the Management Committee and receipt of necessary funds, the
Manager shall continue Operations at levels comparable with the last adopted
Mining Program and Budget. All of the foregoing shall be subject to the contrary
direction of the Management Committee and the receipt of necessary funds.

                                   ARTICLE IX
                              PROGRAMS AND BUDGETS

     9.1 INITIAL PROGRAM AND BUDGET. The Initial Program and Budget to which
both Participants have agreed is hereby adopted and is attached as EXHIBIT G.

     9.2 OPERATIONS PURSUANT TO PROGRAMS AND BUDGETS. Except as otherwise
provided in SECTION 9.13 and ARTICLE XIII, Operations shall be conducted,
expenses shall be incurred, and Assets shall be acquired only pursuant to
adopted Programs and Budgets. Every Program and Budget adopted pursuant to this
Agreement shall provide for accrual of reasonably anticipated Environmental
Compliance expenses for all Operations contemplated under the Program and
Budget.

     9.3 PRESENTATION OF PROGRAMS AND BUDGETS. Proposed Programs and Budgets
shall be prepared by the Manager for a period of one (1) year or any other
period as approved by the Management Committee, and shall be submitted to the
Management Committee for review and consideration. All proposed Programs and
Budgets may include Exploration, Pre-Feasibility Studies, Feasibility Study,
Development, Mining and Expansion or Modification Operations components, or any
combination thereof, and shall be reviewed and adopted upon a vote of the
Management Committee in accordance with SECTIONS 7.2 and 9.4. Each Program and
Budget adopted by the Management Committee, regardless of length, shall be
reviewed at least once a year at a meeting of the Management Committee. During
the period encompassed by any Program and Budget, and at least four (4) months
prior to its expiration, a proposed Program and Budget for the succeeding period
shall be prepared by the Manager and submitted to the Management Committee for
review and consideration.

     9.4 REVIEW AND ADOPTION OF PROPOSED PROGRAMS AND BUDGETS. Within thirty
(30) days after submission of a proposed Program and Budget, each Participant
shall submit in writing to the Management Committee:


                                      E-23
<PAGE>
          (a) Notice that the Participant approves any or all of the components
of the proposed Program and Budget;

          (b) Modifications proposed by the Participant to the components of the
proposed Program and Budget; or

          (c) Notice that the Participant rejects any or all of the components
of the proposed Program and Budget.

If a Participant fails to give any of the foregoing responses within the
allotted time, the failure shall be deemed to be a vote by the Participant for
adoption of the Manager's proposed Program and Budget. If a Participant makes a
timely submission to the Management Committee pursuant to SUBSECTIONS 9.4(A),
(B) or (C), then the Manager working with the other Participant shall seek for a
period of time not to exceed twenty (20) days to develop a complete Program and
Budget acceptable to both Participants. The Manager shall then call a Management
Committee meeting in accordance with SECTION 7.3 for purposes of reviewing and
voting upon the proposed Program and Budget.

     9.5 ELECTION TO PARTICIPATE.

          (a) By notice to the Management Committee within twenty (20) days
after the final vote adopting a Program and Budget, and notwithstanding its vote
concerning adoption of a Program and Budget, a Participant may elect to
participate in the approved Program and Budget: (i) in proportion to its
respective Participating Interest, (ii) in some lesser amount than its
respective Participating Interest, or (iii) not at all. In case of an election
under SUBSECTION 9.5(A)(II) or (III), its Participating Interest shall be
recalculated as provided in SUBSECTION 9.5(B) below, with dilution effective as
of the first day of the Program Period for the adopted Program and Budget. If a
Participant fails to so notify the Management Committee of the extent to which
it elects to participate, the Participant shall be deemed to have elected to
contribute to such Program and Budget in proportion to its respective
Participating Interest as of the beginning of the Program Period.

          (b) If a Participant elects to contribute to an adopted Program and
Budget some lesser amount than in proportion to its respective Participating
Interest, or not at all, and the other Participant elects to fund all or any
portion of the deficiency, the Participating Interest of the Reduced Participant
shall be provisionally recalculated as follows:

               (i) for an election made before Payout, by dividing: (A) the sum
of (1) the amount credited to the Reduced Participant's Equity Account with
respect to its Initial Contribution under SECTION 5.2, (2) the total of all of
the Reduced Participant's contributions under SECTION 5.3, and (3) the amount,
if any, the Reduced Participant elects to contribute to the adopted Program and
Budget; by (B) the sum of (1), (2) and (3) above for both Participants; and then
multiplying the result by one hundred; or


                                      E-24
<PAGE>
               (ii) for an election made after Payout, by reducing its
Participating Interest in an amount equal to two times the amount by which it
would have been reduced under SUBSECTION 9.5(B)(I) if such election were made
before Payout.

The Participating Interest of the other Participant shall be increased by the
amount of the reduction in the Participating Interest of the Reduced
Participant, and if the other Participant elects not to fund the entire
deficiency, the Manager shall adjust the Program and Budget to reflect the funds
available.

          (c) Whenever the Participating Interests are recalculated pursuant to
this SUBSECTION 9.5, (i) the Equity Accounts of both Participants shall be
revised to bear the same ratio to each other as their recalculated Participating
Interests; and (ii) the portion of Capital Account attributable to the reduced
Participating Interest of the Reduced Participant shall be transferred to the
other Participant.

     9.6 RECALCULATION OR RESTORATION OF REDUCED INTEREST BASED ON ACTUAL
EXPENDITURES.

          (a) If a Participant makes an election under SUBSECTION 9.5(A)(II) or
(III), then within sixty (60) days after the conclusion of such Program and
Budget, the Manager shall report the total amount of money expended plus the
total obligations incurred by the Manager for such Budget.

          (b) If the Manager expended or incurred obligations that were more or
less than the adopted Budget, the Participating Interests shall be recalculated
pursuant to SUBSECTION 9.5(B) by substituting each Participant's actual
contribution to the adopted Budget for that Participant's estimated contribution
at the time of the Reduced Participant's election under SUBSECTION 9.5(A).

          (c) If the Manager expended or incurred obligations of less than 80
percent (80%) of the adopted Budget, within thirty (30) days of receiving the
Manager's report on expenditures, the Reduced Participant may notify the other
Participant of its election to reimburse the other Participant for the
difference between any amount contributed by the Reduced Participant to such
adopted Program and Budget and the Reduced Participant's proportionate share (at
the Reduced Participant's former Participating Interest) of the actual amount
expended or incurred for the Program, plus interest on the difference accruing
at the rate described in SECTION 10.3 plus three (3) percentage points. The
Reduced Participant shall deliver the appropriate amount (including interest) to
the other Participant with such notice. Failure of the Reduced Participant to so
notify and tender such amount shall result in dilution occurring in accordance
with this ARTICLE IX and shall bar the Reduced Participant from its rights under
this SUBSECTION 9.6(C) concerning the relevant adopted Program and Budget.

          (d) All recalculations under this SECTION IX shall be effective as of
the first day of the Program Period for the Program and Budget. The Manager, on
behalf of both Participants, shall make such reimbursements, reallocations of
Products, contributions and other adjustments as are necessary so that, to the
extent possible, each Participant will be placed in the


                                      E-25
<PAGE>
position it would have been in had its Participating Interests as recalculated
under this SECTION been in effect throughout the Program Period for such Program
and Budget. If the Participants are required to make contributions,
reimbursements or other adjustments pursuant to this SECTION, the Manager shall
have the right to purchase or sell a Participant's share of Products in the same
manner as under SECTION 11.2 and to apply the proceeds of such sale to satisfy
that Participant's obligation to make such contributions, reimbursements or
adjustments.

          (e) Whenever the Participating Interests are recalculated pursuant to
this SECTION, (i) the Participants' Equity Accounts shall be revised to bear the
same ratio to each other as their Recalculated Participating Interests; and (ii)
the portion of Capital Account attributable to the reduced Participating
Interest of the Reduced Participant shall be transferred to the other
Participant.

     9.7 PRE-FEASIBILITY STUDY PROGRAM AND BUDGETS.

          (a) At such time as either Participant is of the good faith and
reasonable opinion that economically viable Mining Operations may be possible on
the Properties, the Participant may propose to the Management Committee that a
Pre-Feasibility Study Program and Budget, or a Program and Budget that includes
Pre-Feasibility Studies, be prepared. Such proposal shall be made in writing to
the other Participant, shall reference the data upon which the proposing
Participant bases its opinion, and shall call a meeting of the Management
Committee pursuant to SECTION 7.3. If such proposal is adopted by the Management
Committee, the Manager shall prepare or have prepared a Pre-Feasibility Study
Program and Budget as approved by the Management Committee and shall submit the
same to the Management Committee within sixty (60) days following adoption of
the proposal.

          (b) Pre-Feasibility Studies may be conducted by the Manager,
Feasibility Contractors, or both, or may be conducted by the Manager and audited
by Feasibility Contractors, as the Management Committee determines. A
Pre-Feasibility Study Program shall include the work necessary to prepare and
complete the Pre-Feasibility Study approved in the proposal adopted by the
Management Committee, which may include some or all of the following:

               (i) analyses of various alternatives for mining, processing and
beneficiation of Products;

               (ii) analyses of alternative mining, milling, and production
rates;

               (iii) analyses of alternative sites for placement of facilities
(i.e., water supply facilities, transport facilities, reagent storage, offices,
shops, warehouses, stock yards, explosives storage, handling facilities,
housing, public facilities);

               (iv) analyses of alternatives for waste treatment and handling
(including a description of each alternative of the method of tailings disposal
and the location of the proposed disposal site);

               (v) estimates of recoverable proven and probable reserves of
Products and of related substances, in terms of technical and economic
constraints (extraction and


                                      E-26
<PAGE>
treatment of Products), including the effect of grade, losses, and impurities,
and the estimated mineral composition and content thereof, and review of mining
rates commensurate with such reserves;

               (vi) analyses of environmental impacts of the various
alternatives, including an analysis of the permitting, environmental liability
and other Environmental Law implications of each alternative, and costs of
Environmental Compliance for each alternative;

               (vii) conduct of appropriate metallurgical tests to determine the
efficiency of alternative extraction, recovery and processing techniques,
including an estimate of water, power, and reagent consumption requirements;

               (viii) conduct of hydrology and other studies related to any
required dewatering; and

               (ix) conduct of other studies and analyses approved by the
Management Committee.

          (c) The Manager shall have the discretion to base its and any
Feasibility Contractors' Pre-Feasibility Study on the cumulative results of each
discipline studied, so that if a particular portion of the work would result in
the conclusion that further work based on these results would be unwarranted for
a particular alternative, the Manager shall have no obligation to continue
expenditures on other Pre-Feasibility Studies related solely to such
alternative.

     9.8 COMPLETION OF PRE-FEASIBILITY STUDIES AND SELECTION OF APPROVED
ALTERNATIVES. As soon as reasonably practical following completion of all
Pre-Feasibility Studies required to evaluate fully the alternatives studied
pursuant to Pre-Feasibility Programs, the Manager shall prepare a report
summarizing all Pre-Feasibility Studies and shall submit the same to the
Management Committee. Such report shall incorporate the following:

          (a) the results of the analyses of the alternatives and other matters
evaluated in the conduct of the Pre-Feasibility Programs;

          (b) reasonable estimates of capital costs for the Development and
start-up of the mine, mill and other processing and ancillary facilities
required by the Development and Mining alternatives evaluated (based on
flowsheets, piping and instrumentation diagrams, and other major engineering
diagrams), which cost estimates shall include reasonable estimates of:

               (i) capitalized pre-stripping expenditures, if an open pit or
surface mine is proposed;

               (ii) expenditures required to purchase, construct and install all
machinery, equipment and other facilities and infrastructure (including
contingencies) required to bring a mine into commercial production, including an
analysis of costs of equipment or supply contracts in lieu of Development costs
for each Development and Mining alternative evaluated;


                                      E-27
<PAGE>
               (iii) expenditures required to perform all other related work
required to commence commercial production of Products and, if applicable,
process Products (including reasonable estimates of working capital
requirements); and

               (iv) all other direct and indirect costs and general and
administrative expenses that may be required for a proper evaluation of the
Development and Mining alternatives and annual production levels evaluated. The
capital cost estimates shall include a schedule of the timing of the estimated
capital requirements for each alternative;

          (c) a reasonable estimate of the annual expenditures required for the
first year of Operations after completion of the capital program described in
SUBSECTION 9.8(B) for each Development alternative evaluated, and for subsequent
years of Operations, including estimates of annual production, processing,
administrative, operating and maintenance expenditures, taxes (other than income
taxes), working capital requirements, royalty and purchase obligations,
equipment leasing or supply contract expenditures, work commitments,
Environmental Compliance costs, post-Operations Environmental Compliance and
Continuing Obligations funding requirements and all other anticipated costs of
such Operations. This analysis shall also include an estimate of the number of
employees required to conduct such Operations for each alternative;

          (d) a review of the nature, extent and rated capacity of the mine,
machinery, equipment and other facilities preliminarily estimated to be required
for the purpose of producing and marketing Products under each Development and
Mining alternative analyzed;

          (e) an analysis (and sensitivity analyses reasonably requested by
either Participant), based on various target rates of return and price
assumptions requested by either Participant, of whether it is technically,
environmentally, and economically feasible to place a prospective ore body or
deposit within the Properties into commercial production for each of the
Development and Mining alternatives analyzed (including a discounted cash flow
rate of return investment analysis for each alternative and net present value
estimate using various discount rates requested by either Participant); and

          (f) such other information as the Management Committee deems
appropriate.

Within sixty (60) days after delivery of the Pre-Feasibility Study summary to
the Participants, a Management Committee meeting shall be convened for the
purposes of reviewing the Pre-Feasibility Study summary and selecting one or
more Approved Alternatives, if any.

     9.9 PROGRAMS AND BUDGETS FOR FEASIBILITY STUDY. Within sixty (60) days
following the selection of an Approved Alternative, the Manager shall submit to
the Management Committee a Program and a Budget, which shall include necessary
Operations, for the preparation of a Feasibility Study. A Feasibility Study may
be prepared by the Manager, Feasibility Contractors, or both, or may be prepared
by the Manager and audited by Feasibility Contractors, as the Management
Committee determines.


                                      E-28
<PAGE>
     9.10 DEVELOPMENT PROGRAMS AND BUDGETS; PROJECT FINANCING.

          (a) Unless otherwise determined by the Management Committee, the
Manager shall not submit to the Management Committee a Program and Budget
including Development of the mine described in a completed Feasibility Study
until sixty (60) days following the receipt by Manager of the Feasibility Study.
The Program and Budget, which includes Development of the mine described in the
completed Feasibility Study, shall be based on the estimated cost of Development
described in the Feasibility Study for the Approved Alternative, unless
otherwise directed by the Management Committee.

          (b) Promptly following adoption of the Program and Budget, which
includes Development as described in a completed Feasibility Study, but in no
event more than ninety (90) days thereafter, the Manager shall submit to the
Management Committee a report on material bids received for Development work
("BID REPORT"). If bids described in the Bid Report result in the aggregate cost
of Development work exceeding one hundred twenty percent (120%) of the
Development cost estimates that formed the basis of the Development component of
the adopted Program and Budget, the Program and Budget, which includes relevant
Development, shall be deemed to have been resubmitted to the Management
Committee based on the aggregate costs as described in the Bid Report on the
date of receipt of the Bid Report and shall be reviewed and adopted in
accordance with SECTIONS 7.2 and 9.4.

          (c) If the Management Committee approves the Development of the mine
described in a Feasibility Study and also decides to seek Project Financing for
such mine, each Participant shall, at its own cost, cooperate in seeking to
obtain Project Financing for such mine; provided, however, that all fees,
charges and costs (including attorneys and technical consultants fees) paid to
the Project Financing lenders shall be borne by the Participants in proportion
to their Participating Interests, unless such fees are capitalized as a part of
the Project Financing.

     9.11 EXPANSION OR MODIFICATION PROGRAMS AND BUDGETS. Any Program and Budget
proposed by the Manager involving Expansion or Modification shall be based on a
Feasibility Study prepared by the Manager, Feasibility Contractors, or both, or
prepared by the Manager and audited by Feasibility Contractors, as the
Management Committee determines. The Program and Budget, which include Expansion
or Modification, shall be submitted for review and approval by the Management
Committee within sixty (60) days following receipt by the Manager of such
Feasibility Study.

     9.12 BUDGET OVERRUNS; PROGRAM CHANGES. With respect to all adopted Programs
and Budgets, the Manager shall immediately notify the Management Committee of
any material departure from an adopted Program and Budget. If the Manager
exceeds an adopted Budget by more than fifteen percent (15%) in the aggregate,
then the excess over fifteen percent (15%), unless directly caused by an
emergency or unexpected expenditure made pursuant to SECTION 9.13 or unless
otherwise authorized or ratified by the Management Committee, shall be for the
sole account of the Manager and such excess shall not be included in the
calculations of the Participating Interests nor deemed a contribution under this
Agreement. Budget overruns of fifteen percent (15%) or less in the aggregate
shall be borne by the Participants in proportion to their respective
Participating Interests.


                                      E-29
<PAGE>
     9.13 EMERGENCY OR UNEXPECTED EXPENDITURES. In case of emergency, the
Manager may take any reasonable action it deems necessary to protect life or
property, to protect the Assets or to comply with Laws. The Manager may make
reasonable expenditures on behalf of the Participants for unexpected events that
are beyond its reasonable control and that do not result from a breach by it of
its standard of care. The Manager shall promptly notify the Participants of the
emergency or unexpected expenditure, and the Manager shall be reimbursed for all
resulting costs by the Participants in proportion to their respective
Participating Interests.

                                    ARTICLE X
                            ACCOUNTS AND SETTLEMENTS

     10.1 MONTHLY STATEMENTS. The Manager shall submit to the Management
Committee monthly statements of account reflecting in reasonable detail the
charges and credits to the Business Account during the preceding month.

     10.2 CASH CALLS. On the basis of each adopted Program and Budget, the
Manager shall submit prior to the last day of each month a billing for estimated
cash requirements for the next month. Within ten (10) days after receipt of each
billing, or a billing made pursuant to SECTION 9.13 or 12.4, each Participant
shall advance its proportionate share of such cash requirements. The Manager
shall record all funds received in the Business Account. The Manager shall at
all times maintain a cash balance approximately equal to the rate of
disbursement for up to sixty (60) days. All funds in excess of immediate cash
requirements shall be invested by the Manager for the benefit of the Business in
cash management accounts and investments selected at the discretion of the
Manager, which accounts may include, but are not limited to, money market
investments and money market funds.

          (a) Following the decision to commence Development or Mining on any of
the Properties, the Manager shall give the non-Manager notice of the time and
amount of the first cash call. The non-Manager shall have a period of four (4)
months from receipt of this notice in which to obtain financing to satisfy its
financial obligations under the development and mining plan. If, at the end of
that four months, the non-Manager has obtained a letter of commitment from a
lender or other financial institution to provide financing for the non-Manager's
share of expenses, the non-Manager shall have an additional period of two (2)
months in which to secure its financing and meet its cash call obligation.
During this period of four or six months, the Manager may proceed with
development of the Properties and advance the non-Manager's share of costs.
These advances by the Manager, together with interest at an annual rate equal to
two (2) percentage points over the Prime Rate, shall become a lien against the
non-Manager's share of production.

     10.3 FAILURE TO MEET CASH CALLS. A Participant that fails to meet cash
calls in the amount and at the times specified in SECTION 10.2 shall be in
default, and the amounts of the defaulted cash call shall bear interest from the
date due at an annual rate equal to three (3) percentage points over the Prime
Rate, but in no event shall the rate of interest exceed the maximum permitted by
Law. Such interest shall accrue to the benefit of and be payable to the
non-defaulting Participant, but shall not be deemed as amounts contributed by
the non-defaulting Participant in the event dilution occurs in accordance with
ARTICLE VI. In addition to any other rights and remedies


                                      E-30
<PAGE>
available to it by Law, the non-defaulting Participant shall have those other
rights, remedies, and elections specified in SECTIONS 10.4 and 10.5.

     10.4 COVER PAYMENT. If a Participant defaults in making a contribution or
cash call required by an adopted Program and Budget, the non-defaulting
Participant may, but shall not be obligated to, advance some portion or all of
the amount in default on behalf of the defaulting Participant (a "COVER
PAYMENT"). Each and every Cover Payment shall constitute a demand loan bearing
interest from the date of the advance at the rate provided in SECTION 10.3. If
more than one Cover Payment is made, the Cover Payments shall be aggregated and
the rights and remedies described herein pertaining to an individual Cover
Payment shall apply to the aggregated Cover Payments. The failure to repay such
loan upon demand shall be a default.

     10.5 REMEDIES. The Participants acknowledge that if either Participant
defaults in making a contribution required by ARTICLE V or a cash call, or in
repaying a loan, as required under SECTIONS 10.2, 10.3 or 10.4, whether or not a
Cover Payment is made, it will be difficult to measure the damages resulting
from such default (it being hereby understood and agreed that the Participants
have attempted to determine such damages in advance and determined that the
calculation of such damages cannot be ascertained with reasonable certainty).
Both Participants acknowledge and recognize that the damage to the
non-defaulting Participant could be significant. In the event of such default,
as reasonable liquidated damages, the non-defaulting Participant may, with
respect to any such default not cured within thirty (30) days after notice to
the defaulting Participant of such default, elect any of the following remedies
by giving notice to the defaulting Participant. Such election may be made with
respect to each failure to meet a cash call relating to a Program and Budget,
regardless of the frequency of such cash calls, provided such cash calls are
made in accordance with SECTION 10.2.

          (a) The defaulting Participant grants to the non-defaulting
Participant a power of sale as to all or any portion of its interest in any
Assets or in its Participating Interest that is subject to the lien and security
interest granted in SECTION 6.6 (whether or not such lien and security interest
has been perfected), upon a default under SECTIONS 10.3 or 10.4. Such power
shall be exercised in the manner provided by applicable Law or otherwise in a
commercially reasonable manner and upon reasonable notice. If the non-defaulting
Participant elects to enforce the lien or security interest pursuant to the
terms of this SUBSECTION, the defaulting Participant shall be deemed to have
waived any available right of redemption, any required valuation or appraisal of
the secured property prior to sale, any available right to stay execution or to
require a marshaling of assets, and any required bond in the event a receiver is
appointed, and the defaulting Participant shall be liable for any deficiency.

          (b) The non-defaulting Participant may elect to have the defaulting
Participant's Participating Interest diluted or eliminated as follows:

               (i) For a default occurring before Payout relating to a Program
and Budget covering in whole or in part Exploration, Pre-Feasibility Study or
Feasibility Study Operations, the Reduced Participant's Participating Interest
shall be recalculated by dividing: (X) the sum of (1) the value of the Reduced
Participant's Initial Contribution under SECTION 5.2, (2) the total of all of
the Reduced Participant's contributions under SECTION 5.3, and (3) the amount,
if any, the


                                      E-31
<PAGE>
Reduced Participant contributed to the adopted Program and Budget with respect
to which the default occurred; by (Y) the sum of (1), (2) and (3) above for both
Participants; and then multiplying the result by one hundred. For such a default
occurring after Payout, the Reduced Participant's Participating Interest shall
be reduced in an amount equal to two times the amount by which it would have
been reduced if such default had occurred before Payout. For such a default,
whether occurring before or after Payout, the Recalculated Participating
Interest shall then be further reduced:

                    (A) for a default relating exclusively to an Exploration
Program and Budget, by multiplying the Recalculated Participating Interest by
the following percentage: 90%; or

                    (B) for a default relating to a Program and Budget covering
in whole or in part Pre-Feasibility Study and/or Feasibility Study Operations,
by multiplying the Recalculated Participating Interest by the following
percentage: 80%.

The Participating Interest of the other Participant shall be increased by the
amount of the reduction in the Participating Interest of the Reduced
Participant, including the further reduction under SUBSECTIONS 10.5(B)(i)(A) or
(B).

               (ii) For a default relating to a Program and Budget covering in
whole or in part Development or Mining, at the non-defaulting Participant's
election, the defaulting Participant shall be deemed to have withdrawn and to
have automatically relinquished its interest in the Assets to the non-defaulting
Participant; provided, however, the defaulting Participant shall have the right
to receive only from ten percent (10%) of Net Proceeds, if any, and not from any
other source, an amount equal to ten percent (10%) of the defaulting
Participant's Equity Account balance at the time of such default. Upon receipt
of such amount the defaulting Participant shall thereafter have no further
right, title or interest in the Assets, but shall remain liable to the extent
provided in SECTION 6.4.

               (iii) Dilution under this SUBSECTION 10.5(B) shall be effective
as of the date of the original default, and SECTION 9.6 shall not apply. The
amount of any Cover Payment under SECTION 10.4 and interest thereon, or any
interest accrued in accordance with SECTION 10.3, shall be deemed to be amounts
contributed by the non-defaulting Participant, and not as amounts contributed by
the defaulting Participant.

               (iv) Whenever the Participating Interests are recalculated
pursuant to this SUBSECTION 10.5(B), (A) the Equity Accounts of both
Participants shall be adjusted to bear the same ratio to each other as their
recalculated Participating Interests; and (B) the portion of Capital Account
attributable to the reduced Participating Interest of the Reduced Participant
shall be transferred to the other Participant.

          (c) If a Participant has defaulted in meeting a cash call or repaying
a loan, and if the non-defaulting Participant has made a Cover Payment, then, in
addition to a reduction in the defaulting Participant's Participating Interest
effected pursuant to SUBSECTION 10.5(B), the non-defaulting Participant shall
have the right, if the indebtedness arising


                                      E-32
<PAGE>
from a default or Cover Payment is not discharged within forty-five (45) days of
the default and upon not less than thirty (30) days advance notice to the
defaulting Participant, to elect to purchase all the right, title, and interest,
whenever acquired or arising, of the defaulting Participant in the Assets,
including but not limited to its Participating Interest or interest in Net
Proceeds, together with all proceeds from and accessions of the foregoing
(collectively the "DEFAULTING PARTICIPANT'S ENTIRE INTEREST") at a purchase
price equal to eighty percent (80%) of the fair market value thereof as
determined by a qualified independent appraiser appointed by the non-defaulting
Participant. If the defaulting Participant conveys notice of objection to the
person so appointed within ten (10) days after receiving notice thereof, then an
independent and qualified appraiser shall be appointed by the joint action of
the appraiser appointed by the non-defaulting Participant and a qualified
independent appraiser appointed by the defaulting Participant; provided,
however, that if the defaulting Participant fails to designate a qualified
independent appraiser for such purpose within ten (10) days after giving notice
of such objection, then the person originally designated by the non-defaulting
Participant shall serve as the appraiser; provided further, that if the
appraisers appointed by each of the Participants fail to appoint a third
qualified independent appraiser within five (5) days after the appointment of
the last of them, then an appraiser shall be appointed by a judge of a court of
competent jurisdiction in the state in which the Assets are situated upon the
application of either Participant. There shall be withheld from the purchase
price payable, upon transfer of the Defaulting Participant's Entire Interest,
the amount of any Cover Payment under SECTION 10.4 and unpaid interest thereon
to the date of such transfer, or any unpaid interest accrued in accordance with
SECTION 10.3 to the date of such transfer. Upon payment of such purchase price,
the defaulting Participant shall be deemed to have relinquished all of the
Defaulting Participant's Entire Interest to the non-defaulting Participant, but
shall remain liable to the extent provided in SECTION 6.4.

     10.6 AUDITS.

          (a) Within sixty (60) days after the end of each calendar year, at the
request of a Participant, an audit shall be completed by certified public
accountants selected by, and independent of, the Manager. The audit shall be
conducted in accordance with generally accepted auditing standards and shall
cover all books and records maintained by the Manager pursuant to this
Agreement, all Assets and Encumbrances, and all transactions and Operations
conducted during such calendar year, including production and inventory records
and all costs for which the Manager sought reimbursement under this Agreement,
together with all other matters customarily included in such audits. All written
exceptions to and claims upon the Manager for discrepancies disclosed by such
audit shall be made not more than three (3) months after receipt of the audit
report, unless either Participant elects to conduct an independent audit
pursuant to SUBSECTION 10.6(B) which is ongoing at the end of such three (3)
month period, in which case such exceptions and claims may be made within the
period provided in SUBSECTION 10.6(B). Failure to make any such exception or
claim within such period shall mean the audit is deemed to be correct and
binding upon the Participants. The cost of all audits under this SUBSECTION
shall be charged to the Business Account.

          (b) Notwithstanding the annual audit conducted by certified public
accountants selected by the Manager, each Participant shall have the right to
have an independent audit of all Business books, records and accounts, including
all charges to the Business Account. This audit shall review all issues raised
by the requesting Participant, with all costs borne by the requesting
Participant. The requesting Participant shall give the other Participant thirty
(30) days


                                      E-33
<PAGE>
prior notice of such audit. Any audit conducted on behalf of either Participant
shall be made during the Manager's normal business hours and shall not interfere
with Operations. Neither Participant shall have the right to audit records and
accounts of the Business relating to transactions or Operations more than
twenty-four (24) months after the calendar year during which such transactions,
or transactions related to such Operations, were charged to the Business
Account. All written exceptions to and claims upon the Manager for discrepancies
disclosed by such audit shall be made not more than three (3) months after
completion and delivery of such audit, or they shall be deemed waived.

                                   ARTICLE XI
                            DISPOSITION OF PRODUCTION

     11.1 TAKING IN KIND. Each Participant shall take in kind or separately
dispose of its share of all Products in proportion to its Participating
Interest. Any extra expenditure incurred in the taking in kind or separate
disposition by either Participant of its proportionate share of Products shall
be borne by such Participant. Nothing in this Agreement shall be construed as
providing, directly or indirectly, for any joint or cooperative marketing or
selling of Products or permitting the processing of Products owned by any third
party at any processing facilities constructed by the Participants pursuant to
this Agreement. The Manager shall give notice in advance of the anticipated
delivery date upon which Products will be available.

     11.2 FAILURE OF PARTICIPANT TO TAKE IN KIND. If a Participant fails to take
its proportionate share of Products in kind, the Manager shall have the right,
but not the obligation, for a period of time consistent with the minimum needs
of the industry, but not to exceed one (1) year from the notice date described
in SECTION 11.1, to purchase the Participant's share for its own account or to
sell such share as agent for the Participant at not less than the prevailing
market price in the area. Subject to the terms of any such contracts of sale
then outstanding, during any period that the Manager is purchasing or selling a
Participant's share of production, the Participant may elect by notice to the
Manager to take in kind. The Manager shall be entitled to deduct from proceeds
of any sale by it for the account of a Participant reasonable expenses incurred
in such a sale.

     11.3 HEDGING. Neither Participant shall have any obligation to account to
the other Participant for, nor have any interest or right of participation in
any profits or proceeds nor have any obligation to share in any losses from,
futures contracts, forward sales, trading in puts, calls, options or any similar
hedging, price protection or marketing mechanism employed by a Participant with
respect to its proportionate share of any Products produced or to be produced
from the Properties.

                                   ARTICLE XII
                           WITHDRAWAL AND TERMINATION

     12.1 TERMINATION BY EXPIRATION OR AGREEMENT. This Agreement shall terminate
as expressly provided herein, unless earlier terminated by written agreement.


                                      E-34
<PAGE>
     12.2 TERMINATION BY DEADLOCK. If the Management Committee fails to adopt a
Program and Budget for twelve (12) months after the expiration of the latest
adopted Program and Budget, either Participant may elect to terminate the
Business by giving sixty (60) days notice of termination to the other
Participant.

     12.3 WITHDRAWAL. A Participant may elect to withdraw from the Business by
giving notice to the other Participant of the effective date of withdrawal,
which shall be the later of the end of the then current Program Period or thirty
(30) days after the date of the notice. Upon such withdrawal, the Business shall
terminate, and the withdrawing Participant shall be deemed to have transferred
to the remaining Participant all of its Participating Interest, including all of
its interest in the Assets, without cost and free and clear of all Encumbrances
arising by, through or under such withdrawing Participant, except those
described in PARAGRAPH 1.1 OF EXHIBIT A and those to which both Participants
have agreed. The withdrawing Participant shall execute and deliver all
instruments as may be necessary in the reasonable judgment of the other
Participant to effect the transfer of its interests in the Assets to the other
Participant. If within a sixty (60) day period both Participants elect to
withdraw, then the Business shall instead be deemed to have been terminated by
the consent of the Participants pursuant to SECTION 12.1.

     12.4 CONTINUING OBLIGATIONS AND ENVIRONMENTAL LIABILITIES. On termination
of the Business under SECTIONS 12.1, 12.2 or 12.3, each Participant shall remain
liable for its respective share of liabilities to third persons (whether such
arises before or after such withdrawal), including Environmental Liabilities and
Continuing Obligations. The withdrawing Participant's share of such liabilities
shall be equal to its Participating Interest at the time such liability was
incurred, after first taking into account any reduction, readjustment, and
restoration of Participating Interests under SECTIONS 6.3, 9.5, 9.6 and 10.5
(or, as to liabilities arising prior to the Effective Date, its initial
Participating Interest).

     12.5 DISPOSITION OF ASSETS ON TERMINATION. Promptly after termination under
SECTIONS 12.1 or 12.2, the Manager shall take all action necessary to wind up
the activities of the Business, in accordance with EXHIBIT C. All costs and
expenses incurred in connection with the termination of the Business shall be
expenses chargeable to the Business Account.

     12.6 NON-COMPETE COVENANTS. Neither a Participant that withdraws pursuant
to SECTION 12.3, or is deemed to have withdrawn pursuant to SECTIONS 6.3 or
10.5, nor any Affiliate of such a Participant, shall directly or indirectly
acquire any interest or right to explore or mine, or both, on any property any
part of which is within the Area of Interest for twenty-four (24) months after
the effective date of withdrawal. If a withdrawing Participant, or the Affiliate
of a withdrawing Participant, breaches this SECTION 12.6, such Participant shall
be obligated to offer to convey to the non-withdrawing Participant, without
cost, any such property or interest so acquired (or ensure its Affiliate offers
to convey the property or interest to the non-withdrawing Participant, if the
acquiring party is the withdrawing Participant's Affiliate). Such offer shall be
made in writing and can be accepted by the non-withdrawing Participant at any
time within ten (10) days after the offer is received by such non-withdrawing
Participant. Failure of a Participant's Affiliate to comply with this SECTION
12.6 shall be a breach by such Participant of this Agreement.


                                      E-35
<PAGE>
     12.7 RIGHT TO DATA AFTER TERMINATION. After termination of the Business
pursuant to SECTIONS 12.1 or 12.2, each Participant shall be entitled to make
copies of all applicable information acquired hereunder before the effective
date of termination not previously furnished to it, but a terminating or
withdrawing Participant shall not be entitled to any such copies after any other
termination or withdrawal.

     12.8 CONTINUING AUTHORITY. On termination of the Business under SECTIONS
12.1, 12.2 or 12.3 or the deemed withdrawal of either Participant pursuant to
SECTION 10.5, the Participant which was the Manager prior to such termination or
withdrawal (or the other Participant in the event of a withdrawal by the
Manager) shall have the power and authority to do all things on behalf of both
Participants which are reasonably necessary or convenient to: (a) wind up
Operations and (b) complete any transaction and satisfy any obligation,
unfinished or unsatisfied, at the time of such termination or withdrawal, if the
transaction or obligation arises out of Operations prior to such termination or
withdrawal. The Manager shall have the power and authority to grant or receive
extensions of time or change the method of payment of an already existing
liability or obligation, prosecute and defend actions on behalf of both
Participants and the Business, encumber Assets, and take any other reasonable
action in any matter with respect to which the former Participants continue to
have, or appear or are alleged to have, a common interest or a common liability.

                                  ARTICLE XIII
                      ACQUISITIONS WITHIN AREA OF INTEREST

     13.1 GENERAL. Any interest or right to acquire any interest in real
property or water rights related thereto within the Area of Interest either
acquired or proposed to be acquired during the term of this Agreement by or on
behalf of either Participant ("ACQUIRING PARTICIPANT") or any Affiliate of such
Participant shall be subject to the terms and provisions of this Agreement.
Golden Phoenix and Borealis and their respective Affiliates for their separate
account shall be free to acquire lands and interests in lands outside the Area
of Interest and to locate mining claims outside the Area of Interest. Failure of
any Affiliate of either Participant to comply with this ARTICLE XIII shall be a
breach by such Participant of this Agreement.

     13.2 NOTICE TO NON-ACQUIRING PARTICIPANT. Within thirty (30) days after the
acquisition or proposed acquisition, as the case may be, of any interest or the
right to acquire any interest in real property or water rights wholly or
partially within the Area of Interest (except real property acquired by the
Manager pursuant to a Program), the Acquiring Participant shall notify the other
Participant of such acquisition by it or its Affiliate; provided further that if
the acquisition of any interest or right to acquire any interest pertains to
real property or water rights partially within the Area of Interest, then all
such real property (i.e., the part within the Area of Interest and the part
outside the Area of Interest) shall be subject to this ARTICLE XIII. The
Acquiring Participant's notice shall describe in detail the acquisition, the
acquiring party if that party is an Affiliate, the lands and minerals covered
thereby, any water rights related thereto, the cost thereof, and the reasons why
the Acquiring Participant believes that the acquisition (or proposed
acquisition) of the interest is in the best interests of the Participants under
this Agreement. In addition to such notice, the Acquiring Participant shall make
any and all information concerning the relevant interest available for
inspection by the other Participant.


                                      E-36
<PAGE>
     13.3 OPTION EXERCISED. Within sixty (60) days after receiving the Acquiring
Participant's notice, the other Participant may notify the Acquiring Participant
of its election to accept a proportionate interest in the acquired interest
equal to its Participating Interest. Promptly upon such notice, the Acquiring
Participant shall convey or cause its Affiliate to convey to the Participants,
in proportion to their respective Participating Interests, by special warranty
deed with title held as described in SECTION 3.4, all of the Acquiring
Participant's (or its Affiliate's) interest in such acquired interest, free and
clear of all Encumbrances arising by, through or under the Acquiring Participant
(or its Affiliate) other than those to which both Participants have agreed. The
acquired interests shall become a part of the Properties for all purposes of
this Agreement immediately upon such notice. The other Participant shall
promptly pay to the Acquiring Participant its proportionate share of the
latter's actual out-of-pocket acquisition costs.

     13.4 OPTION NOT EXERCISED. If the other Participant does not give such
notice within the sixty (60) day period set forth in SECTION 13.3, it shall have
no interest in the acquired interests, and the acquired interests shall not be a
part of the Assets or continue to be subject to this Agreement.

                                   ARTICLE XIV
                     ABANDONMENT AND SURRENDER OF PROPERTIES

     Either Participant may request the Management Committee to authorize the
Manager to surrender or abandon part or all of the Properties. If the Management
Committee does not authorize such surrender or abandonment, or authorizes any
such surrender or abandonment over the objection of either Participant, the
Participant that desires to surrender or abandon shall assign to the objecting
Participant, by special warranty deed and without cost to the objecting
Participant, all of the abandoning Participant's interest in the Properties
sought to be abandoned or surrendered, free and clear of all Encumbrances
created by, through or under the abandoning Participant other than those to
which both Participants have agreed. Upon the assignment, such properties shall
cease to be part of the Properties. The Participant that desires to abandon or
surrender shall remain liable for its share (determined by its Participating
Interest as of the date of such abandonment, after first taking into account any
reduction, readjustment, and restoration of Participating Interests under
SECTIONS 6.3, 9.5, 9.6 and 10.5) of any liability with respect to such
Properties, including, without limitation, Continuing Obligations, Environmental
Liabilities and Environmental Compliance, whether accruing before or after such
abandonment, arising out of activities prior to the Effective Date and out of
Operations conducted prior to the date of such abandonment, regardless of when
any funds may be expended to satisfy such liability.

                                   ARTICLE XV
                         SUPPLEMENTAL BUSINESS AGREEMENT

     At any time during the term of this Agreement, the Management Committee may
determine by unanimous vote of both Participants that it is appropriate to
segregate the Area of Interest into areas subject to separate Programs and
Budgets for purposes of conducting further Exploration, Pre-Feasibility or
Feasibility Studies, Development, or Mining. At such time, the Management
Committee shall designate which portion of the Properties will comprise an area
of interest under a separate business arrangement ("SUPPLEMENTAL BUSINESS"), and
the Participants


                                      E-37
<PAGE>
shall enter into a new agreement ("SUPPLEMENTAL BUSINESS AGREEMENT") for the
purpose of further exploring, analyzing, developing, and mining such portion of
the Properties. The Supplemental Business Agreement shall be in substantially
the same form as this Agreement, with rights and interests of the Participants
in the Supplemental Business identical to the rights and interests of the
Participants in this Business at the time of the designation, unless otherwise
agreed by the Participants, and with the Participants agreeing to new Capital
and Equity Accounts and other terms necessary for the Supplemental Business
Agreement to comply with the nature and purpose of the designation. Following
execution of the Supplemental Business Agreement, this Agreement shall terminate
insofar as it affects the Properties covered by the Supplemental Business
Agreement.

                                   ARTICLE XVI
                     TRANSFER OF INTEREST; PREEMPTIVE RIGHT

     16.1 GENERAL. A Participant shall have the right to Transfer to a third
party an interest in its Participating Interest, including an interest in this
Agreement or the Assets, solely as provided in this ARTICLE XVI.

     16.2 LIMITATIONS ON FREE TRANSFERABILITY. Any Transfer by either
Participant under SECTION 16.1 shall be subject to the following limitations:

          (a) Neither Participant shall Transfer any interest in this Agreement
or the Assets (including, but not limited to, any royalty, profits, or other
interest in the Products) except in conjunction with the Transfer of part or all
of its Participating Interest;

          (b) No transferee of all or any part of a Participant's Participating
Interest shall have the rights of a Participant unless and until the
transferring Participant has provided to the other Participant notice of the
Transfer, and, except as provided in SUBSECTIONS 16.2(G) and 16.2(H), the
transferee, as of the effective date of the Transfer, has committed in writing
to assume and be bound by this Agreement to the same extent as the transferring
Participant;

          (c) Neither Participant, without the consent of the other Participant,
shall make a Transfer that shall violate any Law, or result in the cancellation
of any permits, licenses, or other similar authorization;

          (d) No Transfer permitted by this ARTICLE XVI shall relieve the
transferring Participant of its share of any liability, whether accruing before
or after such Transfer, which arises out of Operations conducted prior to such
Transfer or exists on the Effective Date;

          (e) Neither Participant, without the consent of the other Participant,
shall make a Transfer that shall cause termination of the tax partnership
established by SECTION 4.2. If such termination is caused, the transferring
Participant shall indemnify the other Participant for, from and against any and
all loss, cost, expense, damage, liability or claim therefor arising from the
Transfer, including without limitation any increase in taxes, interest and
penalties or decrease in credits caused by such termination and any tax on
indemnification proceeds received by the Indemnified Participant.


                                      E-38
<PAGE>
          (f) In the event of a Transfer of less than all of a Participating
Interest, the transferring Participant and its transferee shall act and be
treated as one Participant; provided however, that in order for such Transfer to
be effective, the transferring Participant and its transferee must first:

               (i) agree, as between themselves, that one of them is authorized
to act as the sole agent ("AGENT") on their behalf with respect to all matters
pertaining to this Agreement and the Business; and

               (ii) notify the other Participant of the designation of the
Agent, and in such notice warrant and represent to other Participant that:

                    (A) the Agent has the sole authority to act on behalf of,
and to bind, the transferring Participant and its transferee with respect to all
matters pertaining to this Agreement and the Business;

                    (B) the other Participant may rely on all decisions of,
notices and other communications from, and failures to respond by, the Agent, as
if given (or not given) by the transferring Participant and its transferee; and

                    (C) all decisions of, notices and other communications from,
and failures to respond by, the other Participant to the Agent shall be deemed
to have been given (or not given) to the transferring Participant and its
transferee.

The transferring Participant and its transferee may change the Agent (but such
replacement must be one of them) by giving notice to the other Participant,
which notice must conform to SUBSECTION 16.2(F)(II).

          (g) If the Transfer is the grant of an Encumbrance in a Participating
Interest to secure a loan or other indebtedness of either Participant in a bona
fide transaction, other than a transaction approved unanimously by the
Management Committee or Project Financing approved by the Management Committee,
such Encumbrance shall be granted only in connection with such Participant's
financing payment or performance of that Participant's obligations under this
Agreement and shall be subject to the terms of this Agreement and the rights and
interests of the other Participant hereunder (including without limitation under
SECTION 6.7). Any such Encumbrance shall be further subject to the condition
that the holder of such Encumbrance ("CHARGEE") first enter into a written
agreement with the other Participant in form satisfactory to the other
Participant, acting reasonably, binding upon the Chargee, to the effect that:

               (i) the Chargee shall not enter into possession or institute any
proceedings for foreclosure or partition of the encumbering Participant's
Participating Interest and that such Encumbrance shall be subject to the
provisions of this Agreement;

               (ii) the Chargee's remedies under the Encumbrance shall be
limited to the sale of the whole (but only of the whole) of the encumbering
Participant's Participating Interest to the other Participant, or, failing such
a sale, at a public auction to be held at


                                      E-39
<PAGE>
least ninety (90) days after prior notice to the other Participant, such sale to
be subject to the purchaser entering into a written agreement with the other
Participant whereby such purchaser assumes all obligations of the encumbering
Participant under the terms of this Agreement. The price of any preemptive sale
to the other Participant shall be the remaining principal amount of the loan
plus accrued interest and related expenses, and such preemptive sale shall occur
within sixty (60) days of the Chargee's notice to the other Participant of its
intent to sell the encumbering Participant's Participating Interest. Failure of
a sale to the other Participant to close by the end of such period, unless
failure is caused by the encumbering Participant or by the Chargee, shall permit
the Chargee to sell the encumbering Participant's Participating Interest at a
public sale; and

               (iii) the charge shall be subordinate to any then-existing debt,
including Project Financing previously approved by the Management Committee,
encumbering the transferring Participant's Participating Interest;

          (h) If a sale or other commitment or disposition of Products or
proceeds from the sale of Products by either Participant upon distribution to it
pursuant to ARTICLE XI creates in a third party a security interest by
Encumbrance in Products or proceeds therefrom prior to such distribution, such
sales, commitment or disposition shall be subject to the terms and conditions of
this Agreement including, without limitation, SECTION 6.7.

     16.3 PREEMPTIVE RIGHT. Any Transfer by either Participant under SECTION
16.1 and any Transfer by an Affiliate of Control of either Participant shall be
subject to a preemptive right of the other Participant to the extent provided in
EXHIBIT H. Failure of a Participant's Affiliate to comply with this ARTICLE XVI
and EXHIBIT H shall be a breach by such Participant of this Agreement.

                                  ARTICLE XVII
                                    DISPUTES

     17.1 GOVERNING LAW. Except for matters of title to the Properties or their
Transfer, which shall be governed by the law of their situs, this Agreement
shall be governed by and interpreted in accordance with the laws of the State of
Nevada, without regard for any conflict of laws or choice of laws principles
that would permit or require the application of the laws of any other
jurisdiction.

     17.2 JURISDICTION AND VENUE. Each of the Participants hereby attorns to the
exclusive jurisdiction of the courts of the state of Nevada or the federal
district court for the District of Nevada, as may be applicable, in respect of
any disputes arising under this Agreement, with venue to be in the state of
Nevada.

     17.3 DISPUTE RESOLUTION. All disputes arising under or in connection with
this Agreement which cannot be resolved by agreement between the Participants
shall be resolved in accordance with applicable Law. If any legal action or
other proceeding is brought for the enforcement of this Agreement, or because of
an alleged dispute, breach, default, or misrepresentation in connection with any
of the provisions of this Agreement, the successful or substantially prevailing
Participant shall be entitled to recover reasonable attorneys' fees and other


                                      E-40
<PAGE>
costs incurred in that action or proceeding, in addition to any other relief to
which it or they may be entitled.

                                  ARTICLE XVIII
          CONFIDENTIALITY, OWNERSHIP, USE AND DISCLOSURE OF INFORMATION

     18.1 BUSINESS INFORMATION. All Business Information shall be owned jointly
by the Participants as their Participating Interests are determined pursuant to
this Agreement. Both before and after the termination of the Business, all
Business Information may be used by either Participant for any purpose, whether
or not competitive with the Business, without consulting with, or obligation to,
the other Participant. Except as provided in SECTIONS 18.3 and 18.4, or with the
prior written consent of the other Participant, each Participant shall keep
confidential and not disclose to any third party or the public any portion of
the Business Information that constitutes Confidential Information.

     18.2 PARTICIPANT INFORMATION. In performing its obligations under this
Agreement, neither Participant shall be obligated to disclose any Participant
Information. If a Participant elects to disclose Participant Information in
performing its obligations under this Agreement, such Participant Information,
together with all improvements, enhancements, refinements and incremental
additions to such Participant Information that are developed, conceived,
originated or obtained by either Participant in performing its obligations under
this Agreement ("ENHANCEMENTS"), shall be owned exclusively by the Participant
that originally developed, conceived, originated or obtained such Participant
Information. Each Participant may use and enjoy the benefits of such Participant
Information and Enhancements in the conduct of the Business hereunder, but the
Participant that did not originally develop, conceive, originate or obtain such
Participant Information may not use such Participant Information and
Enhancements for any other purpose. Except as provided in SECTION 18.4, or with
the prior written consent of the other Participant, which consent may be
withheld in such Participant's sole discretion, each Participant shall keep
confidential and not disclose to any third party or the public any portion of
Participant Information and Enhancements owned by the other Participant that
constitutes Confidential Information.

     18.3 PERMITTED DISCLOSURE OF CONFIDENTIAL BUSINESS INFORMATION. Either
Participant may disclose Business Information that is Confidential Information:
(a) to a Participant's officers, directors, partners, members, employees,
Affiliates, shareholders, agents, attorneys, accountants, consultants,
contractors, subcontractors or advisors, for the sole purpose of such
Participant's performance of its obligations under this Agreement; (b) to any
party to whom the disclosing Participant contemplates a Transfer of all or any
part of its Participating Interest, for the sole purpose of evaluating the
proposed Transfer; (c) to any actual or potential lender, underwriter or
investor for the sole purpose of evaluating whether to make a loan to or
investment in the disclosing Participant; or (d) to a third party with whom the
disclosing Participant contemplates any independent business activity or
operation.

          The Participant disclosing Confidential Information pursuant to this
SECTION 18.3 shall disclose such Confidential Information to only those parties
who have a bona fide need to have access to such Confidential Information for
the purpose for which disclosure to such parties is


                                      E-41
<PAGE>
permitted under this SECTION 18.3 and who have agreed in writing supplied to,
and enforceable by, the other Participant to protect the Confidential
Information from further disclosure, to use such Confidential Information solely
for such purpose and to otherwise be bound by the provisions of this ARTICLE
XVIII. Such writing shall not preclude parties described in SUBSECTION 18.3(B)
from discussing and completing a Transfer with the other Participant. The
Participant disclosing Confidential Information shall be responsible and liable
for any use or disclosure of the Confidential Information by such parties in
violation of this Agreement and such other writing.

     18.4 DISCLOSURE REQUIRED BY LAW. Notwithstanding anything contained in this
ARTICLE XVIII, a Participant may disclose any Confidential Information if, in
the opinion of the disclosing Participant's legal counsel: (a) such disclosure
is legally required to be made in a judicial, administrative or governmental
proceeding pursuant to a valid subpoena or other applicable order; or (b) such
disclosure is legally required to be made pursuant to the rules or regulations
of a stock exchange or similar trading market applicable to the disclosing
Participant.

          Prior to any disclosure of Confidential Information under this SECTION
18.4, the disclosing Participant shall give the other Participant at least ten
(10) days prior written notice (unless less time is permitted by such rules,
regulations or proceeding) and, in making such disclosure, the disclosing
Participant shall disclose only that portion of Confidential Information
required to be disclosed and shall take all reasonable steps to preserve the
confidentiality thereof, including, without limitation, obtaining protective
orders and supporting the other Participant in intervention in any such
proceeding.

     18.5 PUBLIC ANNOUNCEMENTS. Prior to making or issuing any press release or
other public announcement or disclosure of Business Information that is not
Confidential Information, a Participant shall first consult with the other
Participant as to the content and timing of such announcement or disclosure,
unless in the good faith judgment of such Participant, there is not sufficient
time to consult with the other Participant before such announcement or
disclosure must be made under applicable Laws; but in such event, the disclosing
Participant shall notify the other Participant, as soon as possible, of the
pendency of such announcement or disclosure, and it shall notify the other
Participant before such announcement or disclosure is made if at all reasonably
possible. Any press release or other public announcement or disclosure to be
issued by either Participant relating to this Business shall also identify the
other Participant.

                                   ARTICLE XIX
                               GENERAL PROVISIONS

     19.1 NOTICES. All notices, payments and other required or permitted
communications ("NOTICES") to either Participant shall be in writing, and shall
be addressed respectively as follows:

     If to Borealis         Borealis Mining Company
                            1153 Bergen Parkway, Suite 290
                            Evergreen, CO 80439-9773
                            Tele: (303) 679-9819
                            Fax: (303) 679-9589


                                      E-42
<PAGE>
     If to Golden Phoenix   Golden Phoenix Minerals, Inc.
                            3595 Airway Drive, Suite 405
                            Reno, NV 89511
                            Tele: (775) 853-4919
                            Fax: (775) 853-5010

          All Notices shall be given (a) by personal delivery to the
Participant, (b) by electronic communication, capable of producing a printed
transmission, (c) by registered or certified mail return receipt requested, or
(d) by overnight or other express courier service. All Notices shall be
effective and shall be deemed given on the date of receipt at the principal
address if received during normal business hours, and, if not received during
normal business hours, on the next business day following receipt, or if by
electronic communication, on the date of such communication. Either Participant
may change its address by Notice to the other Participant.

     19.2 GENDER. The singular shall include the plural, and the plural the
singular wherever the context so requires, and the masculine, the feminine, and
the neuter genders shall be mutually inclusive.

     19.3 CURRENCY. All references to "DOLLARS" or "$" herein shall mean lawful
currency of the United States of America.

     19.4 HEADINGS. The subject headings of the Sections and Subsections of this
Agreement and the Paragraphs and Subparagraphs of the Exhibits to this Agreement
are included for purposes of convenience only, and shall not affect the
construction or interpretation of any of its provisions.

     19.5 WAIVER. The failure of either Participant to insist on the strict
performance of any provision of this Agreement or to exercise any right, power
or remedy upon a breach hereof shall not constitute a waiver of any provision of
this Agreement or limit such Participant's right thereafter to enforce any
provision or exercise any right.

     19.6 MODIFICATION. No modification of this Agreement shall be valid unless
made in writing and duly executed by both Participants.

     19.7 FORCE MAJEURE. Except for the obligation to make payments when due
hereunder, the obligations of a Participant shall be suspended to the extent and
for the period that performance is prevented by any cause, whether foreseeable
or unforeseeable, beyond its reasonable control, including, without limitation,
labor disputes (however arising and whether or not employee demands are
reasonable or within the power of the Participant to grant); acts of God; Laws,
instructions or requests of any government or governmental entity; judgments or
orders of any court; inability to obtain on reasonably acceptable terms any
public or private license, permit or other authorization; curtailment or
suspension of activities to remedy or avoid an actual or alleged, present or
prospective violation of Environmental Laws; action or inaction by any federal,
state or local agency that delays or prevents the issuance or granting of any
approval or authorization required to conduct Operations beyond the reasonable
expectations of the Participant seeking the


                                      E-43
<PAGE>
approval or authorization; acts of war or conditions arising out of or
attributable to war, whether declared or undeclared; riot, civil strife,
insurrection or rebellion; fire, explosion, earthquake, storm, flood, sink
holes, drought or other adverse weather condition; delay or failure by suppliers
or transporters of materials, parts, supplies, services or equipment or by
contractors' or subcontractors' shortage of, or inability to obtain, labor,
transportation, materials, machinery, equipment, supplies, utilities or
services; accidents; breakdown of equipment, machinery or facilities; actions by
native rights groups, environmental groups, or other similar special interest
groups; or any other cause whether similar or dissimilar to the foregoing. The
affected Participant shall promptly give notice to the other Participant of the
suspension of performance, stating therein the nature of the suspension, the
reasons therefor, and the expected duration thereof. The affected Participant
shall resume performance as soon as reasonably possible. During the period of
suspension the obligations of both Participants to advance funds pursuant to
SECTION 10.2 shall be reduced to levels consistent with then current Operations.

     19.8 RULE AGAINST PERPETUITIES. The Participants do not intend that there
shall be any violation of the Rule Against Perpetuities, the Rule Against
Unreasonable Restraints on the Alienation of Property, or any similar rule.
Accordingly, if any right or option to acquire any interest in the Properties,
in a Participating Interest, in the Assets, or in any real property exists under
this Agreement, such right or option must be exercised, if at all, so as to vest
such interest within time periods permitted by applicable rules. If, however,
any such violation should inadvertently occur, the Participants hereby agree
that a court shall reform that provision in such a way as to approximate most
closely the intent of the Participants within the limits permissible under such
rules.

     19.9 FURTHER ASSURANCES. Each of the Participants shall take, from time to
time and without additional consideration, such further actions and execute such
additional instruments as may be reasonably necessary or convenient to implement
and carry out the intent and purpose of this Agreement or as may be reasonably
required by lenders in connection with Project Financing.

     19.10 ENTIRE AGREEMENT; SUCCESSORS AND ASSIGNS. This Agreement contains the
entire understanding of the Participants and supersedes all prior agreements and
understandings between the Participants relating to the subject matter hereof.
This Agreement shall be binding upon and inure to the benefit of the respective
successors and permitted assigns of the Participants.

     19.11 MEMORANDUM. At the time of execution of this Agreement, a Memorandum
or short form of this Agreement, or a Financing Statement(s) (to which copies of
the Memorandum or short form of this Agreement shall be attached), shall also be
executed and acknowledged by both Participants, and delivered to the Manager for
recording and filing in those appropriate recording districts and Uniform
Commercial Code filing offices as may be necessary to provide constructive
notice of this Agreement and the rights and obligations of the Participants
hereunder. The Manager shall record and file in the proper recording districts,
county recording offices and Uniform Commercial Code filing offices, all such
documents delivered to it by the Participants. Unless both Participants agree,
this Agreement shall not be recorded.

     19.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and it shall not be necessary that the signatures of both
Participants be contained on


                                      E-44
<PAGE>
any counterpart. Each counterpart shall be deemed an original, but all
counterparts together shall constitute one and the same instrument.

          IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the Effective Date.

                                        GOLDEN PHOENIX MINERALS, INC., a
                                        Minnesota corporation


                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------


                                        BOREALIS MINING COMPANY, a
                                        Nevada corporation


                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------


                                      E-45
<PAGE>
STATE OF ___________________________)
                                    : ss.
COUNTY OF __________________________)

     This instrument was acknowledged before me on this _____ day of
___________________, 20____, by _____________________________________________ as
_____________________ of GOLDEN PHOENIX MINERALS, INC., a Minnesota corporation.


                                        ----------------------------------------
[seal]                                  NOTARY PUBLIC, residing in

                                        ----------------------------------------

My commission expires:

-------------------------------------

STATE OF ___________________________)
                                    : ss.
COUNTY OF __________________________)

     This instrument was acknowledged before me on this _____ day of
___________________, 20____, by _____________________________________________ as
_____________________ of BOREALIS MINING COMPANY, a Nevada corporation.


                                        ----------------------------------------
[seal]                                  NOTARY PUBLIC, residing in

                                        ----------------------------------------

My commission expires:

-------------------------------------


                                      E-46
<PAGE>
                                    EXHIBIT A
                                       to
              EXPLORATION, DEVELOPMENT AND MINE OPERATING AGREEMENT
                                 By and Between
                          GOLDEN PHOENIX MINERALS, INC.
                                       and
                             BOREALIS MINING COMPANY

                           ASSETS AND AREA OF INTEREST

1.1  PROPERTIES AND TITLE EXCEPTIONS

     That certain Mining Lease dated January 24, 1997 from Richard J. Cavell
TTTEE F/T Richard J. Cavell Trust Dated 2/23/94, Hardrock Mining Company, a
Nevada corporation, and John W. Whitney, as lessors, and J.D. Welsh &
Associates, Inc., a Nevada corporation, as lessee, a memorandum of which is
recorded as Entry 115828 in Book 169 at page 489 in the official records of
Mineral County, Nevada, which Mining Lease presently covers the 124 unpatented
mining claims described on the attached six pages labeled Exhibits A through D.

     The 111 unpatented mining claims described on the attached three pages
labeled Exhibit 1.

1.2  AREA OF INTEREST

     The Area of Interest is the same as the Borealis Project Area as described
in Exhibit III of the above described Mining Lease.


                                      E-47
<PAGE>
                                    EXHIBIT B
                                       to
              EXPLORATION, DEVELOPMENT AND MINE OPERATING AGREEMENT
                                 By and Between
                          GOLDEN PHOENIX MINERALS, INC.
                                       and
                             BOREALIS MINING COMPANY

                              ACCOUNTING PROCEDURES

     The financing and accounting procedures to be followed by the Manager and
the Participants under the Agreement are set forth below. All capitalized terms
in these Accounting Procedures shall have the definition attributed to them in
the Agreement, unless defined otherwise herein.

     The purpose of these Accounting Procedures is to establish equitable
methods for determining charges and credits applicable to Operations. It is the
intent of the Participants that neither of them shall lose or profit by reason
of the designation of one of them to exercise the duties and responsibilities of
the Manager. The Participants shall meet and in good faith endeavor to agree
upon changes deemed necessary to correct any unfairness or inequity. In the
event of a conflict between the provisions of these Accounting Procedures and
those of the Agreement, the provisions of the Agreement shall control.

                                    ARTICLE I
                               GENERAL PROVISIONS

     1.1 General Accounting Records. The Manager shall maintain detailed and
comprehensive cost accounting records in accordance with these Accounting
Procedures, including general ledgers, supporting and subsidiary journals,
invoices, checks and other customary documentation, sufficient to provide a
record of revenues and expenditures and periodic statements of financial
position and the results of Operations for managerial, tax, regulatory or other
financial, regulatory, or legal reporting purposes related to the Business. Such
records shall be retained for the duration of the period allowed the
Participants for audit or the period necessary to comply with tax or other
regulatory requirements. The records shall reflect all obligations, advances and
credits of the Participants.

     1.2 Cash Management Accounts. The Manager shall maintain one or more
separate cash management accounts for the payment of all expenses and the
deposit of all cash receipts for the Business.

     1.3 Statements and Billings. The Manager shall prepare statements and bill
the Participants as provided in ARTICLE X of the Agreement. Payment of any such
billings by either Participant, including the Manager, shall not prejudice such
Participant's right to protest or question the correctness thereof for a period
not to exceed twenty-four (24) months following the calendar year during which
such billings were received by such Participant. All written exceptions to and


                                      E-48
<PAGE>
claims upon the Manager for incorrect charges, billings or statements shall be
made upon the Manager within such twenty-four (24) month period. The time period
permitted for adjustments hereunder shall not apply to adjustments resulting
from periodic inventories as provided in PARAGRAPHS 5.1 and 5.2.

                                   ARTICLE II
                           CHARGES TO BUSINESS ACCOUNT

     Subject to the limitations hereinafter set forth, the Manager shall charge
the Business Account with the following:

     2.1 Property Acquisition Costs, Rentals, Royalties and Other Payments. All
property acquisition and holding costs, including Governmental Fees, filing
fees, license fees, costs of permits and assessment work, delay rentals,
production royalties, including any required advances, and all other payments
made by the Manager which are necessary to acquire or maintain title to the
Assets.

     2.2 Labor and Employee Benefits

          (a) Salaries and wages of the Manager's employees directly engaged in
Operations, including salaries or wages of employees who are temporarily
assigned to and directly employed by same.

          (b) The Manager's cost of holiday, vacation, sickness and disability
benefits, and other customary allowances applicable to the salaries and wages
chargeable under SUBPARAGRAPH 2.2(A) and PARAGRAPH 2.12. Such costs may be
charged on a "when and as paid basis" or by "percentage assessment" on the
amount of salaries and wages. If percentage assessment is used, the rate shall
be applied to wages or salaries excluding overtime and bonuses. Such rate shall
be based on the Manager's cost experience and it shall be periodically adjusted
at least annually to ensure that the total of such charges does not exceed the
actual cost thereof to the Manager.

          (c) The Manager's actual cost of established plans for employees'
group life insurance, hospitalization, pension, retirement, stock purchase,
thrift, bonus (except production or incentive bonus plans under a union contract
based on actual rates of production, cost savings and other production factors,
and similar non-union bonus plans customary in the industry or necessary to
attract competent employees, which bonus payments shall be considered salaries
and wages under SUBPARAGRAPH 2.2(A) or PARAGRAPH 2.12 rather than employees'
benefit plans) and other benefit plans of a like nature applicable to salaries
and wages chargeable under SUBPARAGRAPHS 2.2(A) or PARAGRAPH 2.12, provided that
the plans are limited to the extent feasible to those customary in the industry.

          (d) Cost of assessments imposed by governmental authority that are
applicable to salaries and wages chargeable under SUBPARAGRAPH 2.2(A) and
PARAGRAPH 2.12, including all penalties except those resulting from the willful
misconduct or gross negligence of the Manager.


                                      E-49
<PAGE>
     2.3 Materials, Equipment and Supplies. The cost of materials, equipment and
supplies (herein called "Material") purchased from unaffiliated third parties or
furnished by either Participant as provided in PARAGRAPH 3.1. The Manager shall
purchase or furnish only so much Material as may be required for immediate use
in efficient and economical Operations. The Manager shall also maintain
inventory levels of Material at reasonable levels to avoid unnecessary
accumulation of surplus stock.

     2.4 Equipment and Facilities Furnished by Manager. The cost of machinery,
equipment and facilities owned by the Manager and used in Operations or used to
provide support or utility services to Operations charged at rates commensurate
with the actual costs of ownership and operation of such machinery, equipment
and facilities. Such rates shall include costs of maintenance, repairs, other
operating expenses, insurance, taxes, depreciation and interest at a rate not to
exceed Prime Rate plus three percent (3%) per annum. Such rates shall not exceed
the average commercial rates currently prevailing in the vicinity of the
Operations.

     2.5 Transportation. Reasonable transportation costs incurred in connection
with the transportation of employees and material necessary for Operations.

     2.6 Contract Services and Utilities. The cost of contract services and
utilities procured from outside sources, other than services described in
PARAGRAPHS 2.9 and 2.13. If contract services are performed by the Manager or an
Affiliate thereof, the cost charged to the Business Account shall not be greater
than that for which comparable services and utilities are available in the open
market within the vicinity of Operations. The cost of professional consultant
services procured from outside sources in excess of Twenty-Five Thousand Dollars
($25,000.00) per annum per contract shall not be charged to the Business Account
unless approved by the Management Committee.

     2.7 Insurance Premiums. Net premiums paid for insurance required to be
carried for Operations for the protection of the Participants. When Operations
are conducted in an area where the Manager may self-insure for Worker's
Compensation and/or Employer's Liability under state law, the Manager may elect
to include such risks in its self-insurance program and shall charge its costs
of self-insuring such risks to the Business Account provided that such charges
shall not exceed published manual rates.

     2.8 Damages and Losses. All costs in excess of insurance proceeds necessary
to repair or replace damage or losses to any Assets resulting from any cause
other than the willful misconduct or gross negligence of the Manager. The
Manager shall furnish the Management Committee with written notice of damages or
losses as soon as practicable after a report thereof has been received by the
Manager.

     2.9 Legal and Regulatory Expense. Except as otherwise provided in PARAGRAPH
2.13, all legal and regulatory costs and expenses incurred in or resulting from
Operations or necessary to protect or recover the Assets of the Business,
including costs of title investigation and title curative services. All
attorneys fees and other legal costs to handle, investigate and settle
litigation or claims, and amounts paid in settlement of such litigation or
claims in excess of Twenty-


                                      E-50
<PAGE>
Five Thousand Dollars ($25,000.00) per annum shall not be charged to the
Business Account unless approved by the Management Committee.

     2.10 Audit. Cost of annual audits under SUBSECTION 10.6(A).

     2.11 Taxes. All taxes, assessments and like charges on Operations and
Assets which have been paid by the Manager for the benefit of the Participants.
Each Participant is separately responsible for taxes determined or measured by a
Participant's sales revenue or net income.

     2.12 District and Camp Expense (Field Supervision and Camp Expenses). A pro
rata portion of: (i) the salaries and expenses of the Manager's superintendent
and other employees serving Operations whose time is not allocated directly to
such Operations, and (ii) the costs of maintaining and operating an office and
any necessary suboffice, and (iii) all necessary camps, including housing
facilities for employees, used for Operations. The expense of those facilities,
less any revenue therefrom, shall include depreciation or a fair monthly rental
in lieu of depreciation of the investment. The total of such charges for all
Properties served by the Manager's employees and facilities shall be apportioned
to the Business Account on the basis of a ratio to be approved by the Management
Committee.

     2.13 Administrative Charge.

          (a) Each month, the Manager shall charge the Business Account a sum
for each phase of Operations as provided below, which shall be a liquidated
amount to reimburse the Manager for its home office overhead and general and
administrative expenses to conduct each phase of Operations, and which shall be
in lieu of any management fee and for taxes based on production of Products:

               (i) Exploration Phase - _______ percent (_____%) of Allowable
Costs up to __________ Dollars ($__________), and _____ percent (_____%) of
Allowable Costs over __________ Dollars ($__________).

               (ii) Development Phase - _______ percent (_____%) of Allowable
Costs up to __________ Dollars ($__________), and _____ percent (_____%) of
Allowable Costs over __________ Dollars ($__________).

               (iii) Major Construction Phase - _______ percent (_____%) of
Allowable Costs up to __________ Dollars ($__________), and _____ percent
(_____%) of Allowable Costs over __________ Dollars ($__________).

               (iv) Mining Phase - _____ percent (_____%) of Allowable Costs.

          (b) The term "Allowable Costs" as used in this PARAGRAPH for a
particular phase of Operations shall mean all charges to the Business Account
excluding: (i) the administrative charge referred to herein; (ii) depreciation,
depletion or amortization of tangible or intangible Assets; (iii) amounts
charged in accordance with PARAGRAPHS 2.1 and 2.9; and


                                      E-51
<PAGE>
(iv) marketing costs. The Manager shall attribute such Allowable Costs to a
particular phase of Operations by applying the following guidelines:

               (A) The Exploration Phase shall cover those Operations conducted
to ascertain the existence, location, extent or quantity of any deposit of ore
or mineral.

               (B) The Development Phase shall cover those Operations, including
Pre-Feasibility and Feasibility Study Operations, conducted to assess a
commercially feasible ore body or to extend production of an existing ore body,
and to construct or install related fixed Assets.

               (C) The Major Construction Phase shall include all Operations
involved in the construction of a mill, smelter or other ore processing
facilities.

               (D) The Mining Phase shall include all other Operations
activities not otherwise covered above, including activities conducted after
Mining Operations have ceased.

          (c) Various phases of Operations may be conducted concurrently, in
which event the administrative charge shall be calculated separately for
Allowable Costs attributable to each phase.

          (d) The monthly administration charge determined for each phase of
Operations shall be a liquidated amount to reimburse Manager for its home office
overhead and general and administrative expenses for its conduct of Operations,
and shall be equitably apportioned among all of the properties served during
such monthly period on the basis of a ratio approved by the Management
Committee.

          (e) The following is a representative list of items that constitute
the Manager's principal business office expenses that are expressly covered by
the administrative charge provided in this PARAGRAPH, except to the extent that
such items are directly chargeable to the Business Account under other
provisions of this ARTICLE II:

               (i) Administrative supervision, which includes all services
rendered by managers, department supervisors, officers and directors of the
Manager for Operations.

               (ii) Accounting, data processing, personnel administration,
billing and record keeping in accordance with governmental regulations and the
provisions of the Agreement, and preparation of reports;

               (iii) The services of tax counsel and tax administration
employees for all tax matters, including any protests, except any outside
professional fees which the Management Committee may approve as a direct charge
to the Business Account;

               (iv) Routine legal services rendered by outside sources and the
Manager's legal staff not otherwise charged to the Business Account under
PARAGRAPH 2.9,


                                      E-52
<PAGE>
including property acquisition, attorney management and oversight, and support
services provided by Manager's legal staff concerning any litigation; and

               (v) Rentals and other charges for office and records storage
space, telephone service, office equipment and supplies.

          (f) The Management Committee shall annually review the administrative
charges and shall amend the methodology or rates used to determine such charges
if they are found to be insufficient or excessive based on the principles that
the Manager shall not make a profit or suffer a loss and that it should be
fairly and adequately compensated for its costs and expenses.

     2.14 Environmental Compliance Fund. Costs of reasonably anticipated
Environmental Compliance which, on a Program basis, shall be determined by the
Management Committee and shall be based on proportionate contributions in an
amount sufficient to establish a fund, which through successive proportionate
contributions during the life of the Business, will pay for ongoing
Environmental Compliance conducted during Operations and which will aggregate
the reasonably anticipated costs of mine closure, post-Operations Environmental
Compliance and Continuing Obligations. The Manager shall invest such amounts on
behalf of the Participants as provided in SUBSECTION 8.2(R).

     2.15 Other Expenditures. Any reasonable direct expenditure, other than
expenditures which are covered by the foregoing provisions, incurred by the
Manager for the necessary and proper conduct of Operations.

                                   ARTICLE III
                      BASIS OF CHARGES TO BUSINESS ACCOUNT

     3.1 Purchases. Material purchased and services procured from third parties
shall be charged to the Business Account by the Manager at invoiced cost,
including applicable transfer taxes, less all discounts taken. If any Material
is determined to be defective or is returned to a vendor for any other reason,
the Manager shall credit the Business Account when an adjustment is received
from the vendor.

     3.2 Material Furnished by a Participant for Use in the Business. Any
Material furnished by either Participant for use in the Business or distributed
to either Participant by the Manager shall be priced on the following basis:

          (a) New Material: New Material furnished by either Participant shall
be priced F.O.B. the nearest reputable supply store or railway receiving point,
where like Material is available, at the current replacement cost of the same
kind of Material, exclusive of any available cash discounts, at the time it is
furnished (herein called "New Price").


                                      E-53
<PAGE>
          (b) Used Material.

               (i) Used Material in sound and serviceable condition and suitable
for reuse without reconditioning shall be priced as follows:

                    (A) Used Material furnished by either Participant shall be
priced at seventy-five percent (75%) of the New Price;

                    (B) Used Material distributed to either Participant shall be
priced (i) at seventy-five percent (75%) of the New Price if such Material was
originally charged to the Business Account as new Material, or (ii) at
sixty-five percent (65%) of the New Price if such Material was originally
charged to the Business Account as good used Material at seventy-five percent
(75%) of the New Price.

               (ii) Other used Material that, after reconditioning, will be
further serviceable for original function as good secondhand Material, or that
is serviceable for original function but not substantially suitable for
reconditioning, shall be priced at fifty percent (50%) of New Price. The cost of
any reconditioning shall be borne by the transferee.

               (iii) Bad-Order Material which is no longer usable for its
original purpose without excessive repair cost but further usable for some other
purpose shall be priced on a basis comparable with items normally used for that
purpose.

               (iv) All other Material, including junk, shall be priced at a
value commensurate with its use or at prevailing prices.

          (c) Obsolete Material. Any Material that is serviceable and usable for
its original function, but its condition is not equivalent to that which would
justify a price as provided above, shall be priced by the Management Committee.
Such price shall be set at a level that will result in a charge to the Business
Account equal to the value of the service to be rendered by such Material.

     3.3 Premium Prices. Whenever Material is not readily obtainable at
published or listed prices because of national emergencies, strikes or other
unusual circumstances over which the Manager has no control, the Manager may
charge the Business Account for the required Material on the basis of the
Manager's direct cost and expenses incurred in procuring such Material and
making it suitable for use. The Manager shall give written notice of the
proposed charge to the Participants prior to the time when such charge is to be
billed, whereupon either Participant shall have the right, by notifying the
Manager within ten (10) days of the delivery of the notice from the Manager, to
furnish at the usual receiving point all or part of its share of Material
suitable for use and acceptable to the Manager.

     3.4 Warranty of Material Furnished by the Manager or Participants. Neither
Participant warrants any Material furnished beyond any dealer's or
manufacturer's warranty and no credits shall be made to the Business Account for
defective Material until adjustments are received by the Manager from the
dealer, manufacturer or their respective agents.


                                      E-54
<PAGE>
                                   ARTICLE IV
                              DISPOSAL OF MATERIAL

     4.1 Disposition Generally. The Manager shall have no obligation to purchase
either Participant's interest in Material. The Management Committee shall
determine the disposition of major items of surplus Material, provided the
Manager shall have the right to dispose of normal accumulations of junk and
scrap Material either by sale or by transfer to the Participants as provided in
PARAGRAPH 4.2.

     4.2 Distribution to Participants. Any Material to be distributed to the
Participants shall be made in proportion to their respective Participating
Interests, and corresponding credits shall be made to the Business Account on
the basis provided in PARAGRAPH 3.2.

     4.3 Sales. Sales of Material to third parties shall be credited to the
Business Account at the net amount received. Any damages or claims by the
Purchaser shall be charged back to the Business Account if and when paid.

                                    ARTICLE V
                                   INVENTORIES

     5.1 Periodic Inventories, Notice and Representations. At reasonable
intervals, inventories shall be taken by the Manager, which shall include all
such Material as is ordinarily considered controllable by operators of mining
properties, and the expense of conducting such periodic inventories shall be
charged to the Business Account. The Manager shall give written notice to the
Participants of its intent to take any inventory at least thirty (30) days
before such inventory is scheduled to take place. A Participant shall be deemed
to have accepted the results of any inventory taken by the Manager if the
Participant fails to be represented at such inventory.

     5.2 Reconciliation and Adjustment of Inventories. Reconciliation of
inventory with charges to the Business Account shall be made, and a list of
overages and shortages shall be furnished to the Management Committee within six
(6) months after the inventory is taken. Inventory adjustments shall be made by
the Manager to the Business Account for overages and shortages, but the Manager
shall be held accountable to the Business only for shortages due to lack of
reasonable diligence.


                                      E-55
<PAGE>
                                    EXHIBIT C
                                       to
              EXPLORATION, DEVELOPMENT AND MINE OPERATING AGREEMENT
                                 By and Between
                          GOLDEN PHOENIX MINERALS, INC.
                                       and
                             BOREALIS MINING COMPANY

                                   TAX MATTERS

                                    ARTICLE I
                             EFFECT OF THIS EXHIBIT

     This EXHIBIT C shall govern the relationship of the Participants with
respect to tax matters and the other matters addressed herein. Except as
otherwise indicated, capitalized terms used in this EXHIBIT shall have the
meanings given to them in the Agreement. In the event of a conflict between this
EXHIBIT and the other provisions of the Agreement, the terms of this EXHIBIT
shall control.

                                   ARTICLE II
                               TAX MATTERS PARTNER

     2.1 Designation of Tax Matters Partner. The Manager is hereby designated
the tax matters partner (hereinafter "TMP") as defined in Section 6231(a)(7) of
the Internal Revenue Code of 1986 ("the Code") and shall be responsible for,
make elections for, and prepare and file any federal and state tax returns or
other required tax forms following approval of the Management Committee. In the
event of any change in Manager, the Participant serving as Manager at the end of
a taxable year shall continue as TMP with respect to all matters concerning such
year unless the TMP for that year is required to be changed pursuant to
applicable Treasury Regulations. The TMP and the other Participant shall use
reasonable best efforts to comply with the responsibilities outlined in this
ARTICLE II and in Sections 6221 through 6233 of the Code (including any Treasury
regulations promulgated thereunder) and in doing so shall incur no liability to
any other party.

     2.2 Notice. Each Participant shall furnish the TMP with such information
(including information specified in Section 6230(e) of the Code) as it may
reasonably request to permit it to provide the Internal Revenue Service with
sufficient information to allow proper notice to the Participants in accordance
with Section 6223 of the Code. The TMP shall keep each Participant informed of
all administrative and judicial proceedings for the adjustment at the
partnership level of partnership items in accordance with Section 6223(g) of the
Code.

     2.3 Inconsistent Treatment of Partnership Item. If an administrative
proceeding contemplated under Section 6223 of the Code has begun, and the TMP so
requests, each Participant shall notify the TMP of its treatment of any
partnership item on its federal income tax return that is inconsistent with the
treatment of that item on the partnership return.


                                      E-56
<PAGE>
     2.4 Extensions of Limitation Periods. The TMP shall not enter into any
extension of the period of limitations as provided under Section 6229 of the
Code without first giving reasonable advance notice to the other Participant of
such intended action.

     2.5 Requests for Administrative Adjustments. Neither Participant shall
file, pursuant to Section 6227 of the Code, a request for an administrative
adjustment of partnership items for any partnership taxable year without first
notifying the other Participant. If the other Participant agrees with the
requested adjustment, the TMP shall file the request for administrative
adjustment on behalf of the partnership. If consent is not obtained within
thirty (30) days after notice from the proposing Participant, or within the
period required to timely file the request for administrative adjustment, if
shorter, either Participant, including the TMP, may file that request for
administrative adjustment on its own behalf.

     2.6 Judicial Proceedings. Either Participant intending to file a petition
under Section 6226, 6228 or other sections of the Code with respect to any
partnership item, or other tax matters involving the tax partnership, shall
notify the other Participant of such intention and the nature of the
contemplated proceeding. If the TMP is the Participant intending to file such
petition, such notice shall be given within a reasonable time to allow the other
Participant to participate in the choosing of the forum in which such petition
will be filed. If both Participants do not agree on the appropriate forum, then
the appropriate forum shall be decided in accordance with SECTION 7.2. If a
deadlock results, the TMP shall choose the forum. If either Participant intends
to seek review of any court decision rendered as a result of a proceeding
instituted under the preceding part of this PARAGRAPH, such Participant shall
notify the other Participant of such intended action.

     2.7 Settlements. The TMP shall not bind the other Participant to a
settlement agreement without first obtaining the written consent of any such
Participant. Either Participant who enters into a settlement agreement for its
own account with respect to any partnership items, as defined by Section
6231(a)(3) of the Code, shall notify the other Participant of such settlement
agreement and its terms within ninety (90) days from the date of settlement.

     2.8 Fees and Expenses. The TMP shall not engage legal counsel, certified
public accountants, or others without the prior consent of the Management
Committee. Either Participant may engage legal counsel, certified public
accountants, or others in its own behalf and at its sole cost and expense. Any
reasonable item of expense, including but not limited to fees and expenses for
legal counsel, certified public accountants, and others which the TMP incurs
(after proper consent by the Management Committee as provided above) in
connection with any audit, assessment, litigation, or other proceeding regarding
any partnership item, shall constitute proper charges to the Business Account
and shall be borne by the Participants as any other item which constitutes a
direct charge to the Business Account pursuant to the Agreement.

     2.9 Survival. The provisions of the foregoing paragraphs, including but not
limited to the obligation to pay fees and expenses contained in PARAGRAPH 2.8,
shall survive the termination of the tax partnership or the termination of
either Participant's interest in the tax partnership and shall remain binding on
the Participants for a period of time necessary to resolve with the Internal
Revenue Service or the Department of the Treasury any and all matters regarding
the federal income taxation of the tax partnership for the applicable tax
year(s).


                                      E-57
<PAGE>
                                   ARTICLE III
                          TAX ELECTIONS AND ALLOCATIONS

     3.1 Tax Partnership Election. It is understood and agreed that the
Participants intend to create a partnership for United States federal and state
income tax purposes, and, unless otherwise agreed to hereafter by both
Participants, neither Participant shall make an election to be, or have the
arrangement evidenced hereby, excluded from the application of any provisions of
Subchapter K of the Code, or any equivalent state income tax provision. It is
understood and agreed that the Participants intend to create a partnership for
federal and state income tax purposes only (a "tax partnership"). The Manager
shall file with the appropriate office of the Internal Revenue Service a
partnership income tax return covering the Operations. The Participants
recognize that this Agreement may be subject to state income tax statutes. The
Manager shall file with the appropriate offices of the state agencies any
required partnership state income tax returns. Each Participant agrees to
furnish to the Manager any information it may have relating to Operations as
shall be required for proper preparation of such returns. The Manager shall
furnish to the other Participant for its review a copy of each proposed income
tax return at least two weeks prior to the date the return is filed.

     3.2 Tax Elections. The tax partnership shall make the following elections
for purposes of all partnership income tax returns:

          (a) To use the accrual method of accounting.

          (b) Pursuant to the provisions at Section 706(b)(1) of the Code, to
use as its taxable year the year ended ______. In this connection, Golden
Phoenix represents that its taxable year is the year ending ______ and Borealis
represents that its taxable year is the year ending _____.

          (c) To deduct currently all development expenses to the extent
possible under Section 616 of the Code.

          (d) Unless the Participants unanimously agree otherwise, to compute
the allowance for depreciation in respect of all depreciable Assets using the
maximum accelerated tax depreciation method and the shortest life permissible
or, at the election of the Manager, using the units of production method of
depreciation.

          (e) To treat advance royalties as deductions from gross income for the
year paid or accrued to the extent permitted by law.

          (f) To adjust the basis of tax partnership property under Section 754
of the Code at the request of either Participant;

          (g) To amortize over the shortest permissible period all
organizational expenditures and business start-up expenses under Sections 195
and 709 of the Code;


                                      E-58
<PAGE>
     Any other election required or permitted to be made by the tax partnership
under the Code or any state tax law shall be made as determined by the
Management Committee.

     Each Participant shall elect under Section 617(a) of the Code to deduct
currently all exploration expenses. Each Participant reserves the right to
capitalize its share of development and/or exploration expenses of the tax
partnership in accordance with Section 59(e) of the Code, provided that a
Participant's election to capitalize all or any portion of such expenses shall
not affect the Participant's Capital Account.

     3.3 Allocations to Participants. Allocations for Capital Account purposes
shall be in accordance with the following:

          (a) The Participants recognize the provision for taking production in
kind, as provided elsewhere in the Agreement, as each Participant's right to
determine a market for the sale of a proportionate share of production subject
to SUBPARAGRAPH 3.3(H) below. All items of income, gain, deduction, loss, credit
or tax attribute arising from the sale and marketing of such production shall be
allocated to the Participant who designated such market.

          (b) Exploration expenses and development cost deductions shall be
allocated among the Participants in accordance with their respective
contributions to such expenses and costs.

          (c) Depreciation and amortization deductions with respect to a
depreciable Asset shall be allocated among the Participants in accordance with
their respective contributions to the adjusted basis of the Asset which gives
rise to the depreciation, amortization or loss deduction.

          (d) Production and operating cost deductions shall be allocated among
the Participants in accordance with their respective contributions to such
costs.

          (e) Deductions for depletion (to the extent of the amount of such
deductions that would have been determined for Capital Account purposes if only
cost depletion were allowable for federal income tax purposes) shall be
allocated to the Participants in accordance with their respective contributions
to the adjusted basis of the depletable property. Any remaining depletion
deductions shall be allocated to the Participants so that, to the extent
possible, the Participants receive the same total amounts of percentage
depletion as they would have received if percentage depletion were allocated to
the Participants in proportion to their respective shares of the gross income
used as the basis for calculating the federal income tax deduction for
percentage depletion.

          (f) Subject to SUBPARAGRAPH 3.3(H) below, gross income on the sale of
production shall be allocated in accordance with the Participants' rights to
share in the proceeds of such sale.

          (g) Except as provided in SUBPARAGRAPH 3.3(H) below, gain or loss on
the sale of a depreciable or depletable asset shall be allocated so that, to the
extent possible, the net


                                      E-59
<PAGE>
amount reflected in the Participants' Capital Account with respect to such
property (taking into account the cost of such property, depreciation,
amortization, depletion or other cost recovery deductions and gain or loss) most
closely reflects the Participants' Participating Interests.

          (h) Gains and losses on the sale of all or substantially all the
Assets of the tax partnership shall be allocated so that, to the extent
possible, the Participants' resulting Capital Account balances are in the same
ratio as their Participating Interests at the time of such sale.

          (i) The Participants acknowledge that expenses and deductions
allocable under the preceding provisions of this PARAGRAPH may be required to be
capitalized into production under Section 263A of the Code. With respect to such
capitalized expenses or deductions, the allocation of gross income on the sale
of production shall be adjusted, in any reasonable manner consistently applied
by the Manager, so that the same net amount (subject possibly to timing
differences) is reflected in the Capital Accounts as if such expenses or
deductions were instead deductible and allocated pursuant to the preceding
provisions of this PARAGRAPH.

          (j) All deductions and losses that are not otherwise allocated in this
PARAGRAPH shall be allocated among the Participants in accordance with their
respective contributions to the costs producing each such deduction or to the
adjusted basis of the Asset producing each such loss.

          (k) Any recapture of exploration expenses under Section 617(b)(1)(A)
of the Code, and any disallowance of depletion under Section 617(b)(1)(B) of the
Code, shall be borne by the Participants in the same manner as the related
exploration expenses were allocated to, or claimed by, them.

          (l) All other items of income and gain shall be allocated to the
Participants in accordance with their Participating Interests.

          (m) If a reduced Participating Interest is restored pursuant to
SECTION 9.6, the Manager shall endeavor to allocate items of income, gain, loss,
and deduction (in the same year as the restoration of such Participating
Interest or, if necessary, in subsequent years) so as to cause the Capital
Account balances of the Participants to be the same as they would have been if
the restored Participating Interest had never been reduced.

          (n) If the Participants' Participating Interests change during any
taxable year of the tax partnership, the distributive share of items of income,
gain, loss and deduction of each Participant shall be determined in any manner
(1) permitted by Section 706 of the Code, and (2) agreed on by both
Participants. If the Participants cannot agree on a method, the method shall be
determined by the Manager in consultation with the tax partnership's tax
advisers, with preference given to the interim closing-of-the-books method
except where application of that method would result in undue administrative
expense in relationship to the amount of the items to be allocated.

          (o) "Nonrecourse deductions," as defined by Treas. Reg. Section
1.704-2(b)(1) shall be allocated between the Participants in proportion to their
Participating Interests.


                                      E-60
<PAGE>
     3.4 Regulatory Allocations. Notwithstanding the provisions of PARAGRAPH 3.3
to the contrary, the following special allocations shall be given effect for
purposes of maintaining the Participants' Capital Accounts.

          (a) If either Participant unexpectedly receives any adjustments,
allocations, or distributions described in Treas. Reg. Section
1.704-1(b)(2)(ii)(d)(4), Section 1.704-1(b)(2)(ii)(d)(5) or Section
1.704-1(b)(2)(ii)(d)(6), which result in a deficit Capital Account balance,
items of income and gain shall be specially allocated to each such Participant
in an amount and manner sufficient to eliminate, to the extent required by the
Treasury Regulations, the Capital Account deficit of such Participant as quickly
as possible. For the purposes of this PARAGRAPH, each Participant's Capital
Account balances shall be increased by the sum of (i) the amount such
Participant is obligated to restore pursuant to any provision of the Agreement,
and (ii) the amount such Participant is deemed to be obligated to restore
pursuant to the penultimate sentences of Treas. Reg. Sections 1.704-2(g)(1) and
1.704-2(i)(5).

          (b) The "minimum gain chargeback" and "partner minimum gain
chargeback" provisions of Treas. Reg. Sections 1.704-2(f) and 1.704-2(i)(4),
respectively, are incorporated herein by reference and shall be given effect. In
accordance with Treas. Reg. Section 1.704-2(i)(1), deductions attributable to a
"partner nonrecourse liability" shall be allocated to the Participant that bears
the economic risk of loss for such liability.

          (c) If the allocation of deductions to either Participant would cause
such Participant to have a deficit Capital Account balance at the end of any
taxable year of the tax partnership (after all other allocations provided for in
this ARTICLE III have been made and after giving effect to the adjustments
described in SUBPARAGRAPH 3.4(A)), such deductions shall instead be allocated to
the other Participant.

     3.5 Curative Allocations. The allocations set forth in PARAGRAPH 3.4 (the
"Regulatory Allocations") are intended to comply with certain requirements of
the Treasury Regulations. It is the intent of the Participants that, to the
extent possible, all Regulatory Allocations shall be offset either with other
Regulatory Allocations or with special allocations of other items of income,
gain, loss or deduction pursuant to this PARAGRAPH. Therefore, notwithstanding
any other provisions of this ARTICLE III (other than the Regulatory
Allocations), the Manager shall make such offsetting special allocations of
income, gain, loss or deduction in whatever manner it determines appropriate so
that, after such offsetting allocations are made, each Participant's Capital
Account balance is, to the extent possible, equal to the Capital Account balance
such Participant would have had if the Regulatory Allocations were not part of
this Agreement and all items were allocated pursuant to PARAGRAPH 3.3 without
regard to PARAGRAPH 3.4.

     3.6 Tax Allocations. Except as otherwise provided in this PARAGRAPH, items
of taxable income, deduction, gain and loss shall be allocated in the same
manner as the corresponding item is allocated for book purposes under PARAGRAPHS
3.3, 3.4 and 3.5 of the corresponding item determined for Capital Account
purposes.


                                      E-61
<PAGE>
          (a) Recapture of tax deductions arising out of a disposition of
property shall, to the extent consistent with the allocations for tax purposes
of the gain or amount realized giving rise to such recapture, be allocated to
the Participants in the same proportions as the recaptured deductions were
originally allocated or claimed.

          (b) To the extent required by Section 704(c) of the Code, income,
gain, loss, and deduction with respect to property contributed to the tax
partnership by a Participant shall be shared among both Participants so as to
take account of the variation between the basis of the property to the tax
partnership and its fair market value at the time of contribution. The
Participants intend that Section 704(c) shall effect no allocations of tax items
that are different from the allocations under PARAGRAPHS 3.3, 3.4 and 3.5 of the
corresponding items for Capital Account purposes. However, to the extent that
allocations of tax items are required pursuant to Section 704(c) of the Code to
be made other than in accordance with the allocations under PARAGRAPHS 3.3, 3.4
and 3.5 of the corresponding items for Capital Account purposes, Section 704(c)
shall be applied in accordance with the "traditional method without curative
allocations" under Treas. Reg. Section 1.704-3(b).

          (c) Depletion deductions with respect to contributed property shall be
determined without regard to any portion of the property's basis that is
attributable to precontribution expenditures by Golden Phoenix that were
capitalized under Code Sections 616(b), 59(e) and 291(b). Deductions
attributable to precontribution expenditures by Golden Phoenix shall be
calculated under such Code Sections as if Golden Phoenix continued to own the
depletable property to which such deductions are attributable, and such
deductions shall be reported by the tax partnership and shall be allocated
solely to Golden Phoenix.

          (d) The Participants understand the allocations of tax items set forth
in this PARAGRAPH, and agree to report consistently with such allocations for
federal and state tax purposes.

                                   ARTICLE IV
                          CAPITAL ACCOUNTS; LIQUIDATION

     4.1 Capital Accounts.

          (a) A separate Capital Account shall be established and maintained by
the TMP for each Participant. Such Capital Account shall be increased by (i) the
amount of money contributed by the Participant to the tax partnership, (ii) the
fair market value of property contributed by the Participant to the tax
partnership (net of liabilities secured by such contributed property that the
partnership is considered to assume or take subject to under Code Section 752)
and (iii) allocations to the Participant under PARAGRAPHS 3.3, 3.4 and 3.5 of
tax partnership income and gain (or items thereof), including income and gain
exempt from tax; and shall be decreased by (iv) the amount of money distributed
to the Participant by the tax partnership, (v) the fair market value of property
distributed to the Participant by the tax partnership (net of liabilities
secured by such distributed property and that the Participant is considered to
assume or take subject to under Code Section 752), (vi) allocations to the
Participant under PARAGRAPHS 3.3, 3.4 and 3.5 of expenditures of the tax
partnership not deductible in computing its taxable income and not properly


                                      E-62
<PAGE>
chargeable to a Capital Account, and (vii) allocations of tax partnership loss
and deduction (or items thereof), excluding items described in (vi) above and
percentage depletion to the extent it exceeds the adjusted tax basis of the
depletable property to which it is attributable. The Participants agree that the
net fair market value of the property contributed by Golden Phoenix to the tax
partnership pursuant to SECTION 5.2 of the Agreement is $5,000,000.00 if
Borealis earned a 50% interest in the Properties, and $3,857,142.86 if Borealis
earned a 50% interest in the Properties.

          (b) In the event that the Capital Accounts of the Participants are
computed with reference to the book value of any Asset which differs from the
adjusted tax basis of such Asset, then the Capital Accounts shall be adjusted
for depreciation, depletion, amortization and gain or loss as computed for book
purposes with respect to such Asset in accordance with Treasury Regulation
Section 1.704-1(b)(2)(iv)(g).

          (c) In the event any interest in the tax partnership is transferred in
accordance with the terms of this Agreement, the transferee shall succeed to the
Capital Account of the transferor to the extent it relates to the transferred
interest, except as provided in Treasury Regulation Section
1.704-1(b)(2)(iv)(1).

          (d) In the event property, other than money, is distributed to a
Participant, the Capital Accounts of the Participants shall be adjusted to
reflect the manner in which the unrealized income, gain, loss and deduction
inherent in such property (that has not been reflected in the Capital Accounts
previously) would be allocated among the Participants if there was a taxable
disposition of such property for the fair market value of such property (taking
Section 7701(g) of the Code into account) on the date of distribution. For this
purpose the fair market value of the property shall be determined as set forth
in PARAGRAPH 4.2(A) below.

          (e) In the event the Management Committee designates a Supplemental
Business Agreement area within the Area of Interest as described in ARTICLE XV
of the Agreement, the Management Committee shall appropriately segregate Capital
Accounts to reflect that designation and shall make such other modifications to
the Agreement as are appropriate to reflect the manner of administering Capital
Accounts in accordance with the terms of this EXHIBIT C.

          (f) Golden Phoenix is contributing to the Agreement certain depletable
properties with respect to which Golden Phoenix currently has an adjusted tax
basis which may consist in part of depletable expenditures and in part of
expenditures capitalized under Code Sections 616(b), 291(b) and/or 59(e). For
purposes of maintaining the Capital Accounts, the tax partnership's deductions
with respect to contributed property in each year for (i) depletion, (ii)
deferred development expenditures under Section 616(b) attributable to
pre-contribution expenditures, (iii) amortization under Section 291(b)
attributable to pre-contribution expenditures, and (iv) amortization under
Section 59(e) attributable to pre-contribution expenditures shall be the amount
of the corresponding item determined for tax purposes pursuant to SUBPARAGRAPH
3.6(C) multiplied by the ratio of (A) the book value at which the contributed
property is recorded in the Capital Accounts to (B) the adjusted tax basis of
the contributed property (including basis resulting from capitalization of
pre-contribution development expenditures under Sections 616(b), 291(b), and
59(e)).


                                      E-63
<PAGE>
          (g) The foregoing provisions, and the other provisions of the
Agreement relating to the maintenance of Capital Accounts and the allocations of
income, gain, loss, deduction and credit, are intended to comply with Treasury
Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner
consistent with such Regulations. In the event the Management Committee shall
determine that it is prudent to modify the manner in which the Capital Accounts,
or any debits or credits thereto, are computed in order to comply with such
Regulations, the Management Committee may make such modification, provided that
it is not likely to have a material effect on the amount distributable to either
Participant upon liquidation of the tax partnership pursuant to PARAGRAPH 4.2.

          (h) If the Participants so agree, upon the occurrence of an event
described in Treas. Reg. Section 1.704-1(b)(2)(iv)(5), the Capital Accounts
shall be restated in accordance with Treas. Reg. Section 1.704-1(b)(2)(iv)(f) to
reflect the manner in which unrealized income, gain, loss or deduction inherent
in the assets of the tax partnership (that has not been reflected in the Capital
Accounts previously) would be allocated among the Participants if there were a
taxable disposition of such assets for their fair market values, as determined
in accordance with SECTION 4.2(A). For purposes of PARAGRAPH 3.3, a Participant
shall be treated as contributing the portion of the book value of any property
that is credited to the Participant's Capital Account pursuant to the preceding
sentence. Following a revaluation pursuant to this SUBPARAGRAPH 4.1(H), the
Participants' shares of depreciation, depletion, amortization and gain or loss,
as computed for tax purposes, with respect to property that has been revalued
pursuant to this SUBPARAGRAPH 4.1(H) shall be determined in accordance with the
principles of Code Section 704(c) as applied pursuant to the final sentence of
SUBPARAGRAPH 3.6(B).

     4.2 Liquidation. In the event the partnership is "liquidated" within the
meaning of Treasury Regulation Section 1.704-1(b)(2)(ii)(g) then,
notwithstanding any other provision of the Agreement to the contrary, the
following steps shall be taken (after taking into account any transfers of
Capital Accounts pursuant to SECTION 6.3(A) or 12.3 of the Agreement):

          (a) The Capital Accounts of the Participants shall be adjusted to
reflect any gain or loss which would be realized by the partnership and
allocated to the Participants pursuant to the provisions of ARTICLE III OF THIS
EXHIBIT C if the Assets had been sold at their fair market value at the time of
liquidation. The fair market value of the Assets shall be determined by
agreement of both Participants; provided, however, that in the event that the
Participants fail to agree on the fair market value of any Asset, its fair
market value shall be determined by a nationally recognized independent
engineering firm or other qualified independent party approved by both
Participants.

          (b) After making the foregoing adjustments and/or contributions, all
remaining Assets shall be distributed to the Participants in accordance with the
balances in their Capital Accounts (after taking into account all allocations
under ARTICLE III, including SUBPARAGRAPH 3.3(H)). Unless otherwise expressly
agreed on by both Participants, each Participant shall receive an undivided
interest in each and every Asset determined by the ratio of the amount in each
Participant's Capital Account to the total of both of the Participants' Capital
Accounts. Assets distributed to the Participants shall be deemed to have a fair
market value equal to the value assigned to them pursuant to SUBPARAGRAPH 4.2(A)
above.


                                      E-64
<PAGE>
          (c) All distributions to the Participants in respect of their Capital
Accounts shall be made in accordance with the time requirements of Treasury
Regulation Sections 1.704-1(b)(2)(ii)(b)(2) and (3).

     4.3 Deemed Terminations. Notwithstanding the provisions of PARAGRAPH 4.2,
if the "liquidation" of the tax partnership results from a deemed termination
under Section 708(b)(1)(B) of the Code, then (i) SUBPARAGRAPHS 4.2(A) and (B)
shall not apply, (ii) the tax partnership shall be deemed to have distributed
its Assets in accordance with the relative Capital Account balances of the
Participants as adjusted pursuant to SUBPARAGRAPH 4.2(A), (iii) the Participants
shall be deemed for tax purposes to have contributed those Assets to a new
partnership pursuant to the terms of this EXHIBIT C, and (iv) the new tax
partnership shall continue pursuant to the terms of this Agreement and this
EXHIBIT C.

                                    ARTICLE V
                               SALE OR ASSIGNMENT

     The Participants agree that if either one of them makes a sale or
assignment of its Participating Interest under this Agreement, such sale or
assignment shall be structured so as not to cause a termination under Section
708(b)(1)(B) of the Code. If a Section 708(b)(1)(B) termination is caused, the
terminating Participant shall indemnify the non-terminating Participant and save
it harmless on an after-tax basis for any increase in taxes, interest, and
penalties or decrease in credits to the non-terminating Participant caused by
the termination of the tax partnership.


                                      E-65
<PAGE>
                                    EXHIBIT D
                                       to
              EXPLORATION, DEVELOPMENT AND MINE OPERATING AGREEMENT
                                 By and Between
                          GOLDEN PHOENIX MINERALS, INC.
                                       and
                             BOREALIS MINING COMPANY

                                   DEFINITIONS

     "AFFILIATE" means any person, partnership, limited liability company, joint
venture, corporation, or other form of enterprise which Controls, is Controlled
by, or is under common Control with a Participant.

     "AGREEMENT" means this Exploration, Development and Mine Operating
Agreement, including all amendments and modifications, and all schedules and
exhibits, all of which are incorporated by this reference.

     "APPROVED ALTERNATIVE" means a Development and Mining alternative selected
by the Management Committee from various Development and Mining alternatives
analyzed in the Pre-Feasibility Studies.

     "AREA OF INTEREST" means the area described in PARAGRAPH 1.2 OF EXHIBIT A.

     "ASSETS" means the Properties, Products, Business Information, and all
other real and personal property, tangible and intangible, including existing or
after-acquired properties and all contract rights held for the benefit of the
Participants hereunder.

     "BOREALIS" means Borealis Mining Company, a Nevada corporation.

     "BUDGET" means a detailed estimate of all costs to be incurred and a
schedule of cash advances to be made by the Participants with respect to a
Program.

     "BUSINESS" means the contractual relationship of the Participants under
this Agreement.

     "BUSINESS ACCOUNT" means the account maintained by the Manager for the
Business in accordance with EXHIBIT B.

     "BUSINESS INFORMATION" means the terms of this Agreement, and any other
agreement relating to the Business, the Existing Data, and all information,
data, knowledge and know-how, in whatever form and however communicated
(including, without limitation, Confidential Information), developed, conceived,
originated or obtained by either Participant in performing its obligations under
this Agreement. The term "Business Information" shall not include


                                      E-66
<PAGE>
any improvements, enhancements, refinements or incremental additions to
Participant Information that are developed, conceived, originated or obtained by
either Participant in performing its obligations under this Agreement.

     "CAPITAL ACCOUNT" means the account maintained for each Participant in
accordance with EXHIBIT C.

     "CONFIDENTIAL INFORMATION" means all information, data, knowledge and
know-how (including, but not limited to, formulas, patterns, compilations,
programs, devices, methods, techniques and processes) that derives independent
economic value, actual or potential, as a result of not being generally known
to, or readily ascertainable by, third parties and which is the subject of
efforts that are reasonable under the circumstances to maintain its secrecy,
including without limitation all analyses, interpretations, compilations,
studies and evaluations of such information, data, knowledge and know-how
generated or prepared by or on behalf of either Participant.

     "CONTINUING OBLIGATIONS" mean obligations or responsibilities that are
reasonably expected to continue or arise after Operations on a particular area
of the Properties have ceased or are suspended, such as future monitoring,
stabilization, or Environmental Compliance.

     "CONTROL" used as a verb means, when used with respect to an entity, the
ability, directly or indirectly through one or more intermediaries, to direct or
cause the direction of the management and policies of such entity through (i)
the legal or beneficial ownership of voting securities or membership interests;
(ii) the right to appoint managers, directors or corporate management; (iii)
contract; (iv) operating agreement; (v) voting trust; or otherwise; and, when
used with respect to a person, means the actual or legal ability to control the
actions of another, through family relationship, agency, contract or otherwise;
and "Control" used as a noun means an interest which gives the holder the
ability to exercise any of the foregoing powers.

     "COVER PAYMENT" shall have the meaning as set forth in SECTION 10.4 of the
Agreement.

     "DEVELOPMENT" means all preparation (other than Exploration) for the
removal and recovery of Products, including construction and installation of a
mill or any other improvements to be used for the mining, handling, milling,
processing, or other beneficiation of Products, and all related Environmental
Compliance.

     "EFFECTIVE DATE" means the date set forth in the preamble to this
Agreement.

     "ENCUMBRANCE" or "ENCUMBRANCES" means mortgages, deeds of trust, security
interests, pledges, liens, net profits interests, royalties or overriding
royalty interests, other payments out of production, or other burdens of any
nature.

     "ENVIRONMENTAL COMPLIANCE" means actions performed during or after
Operations to comply with the requirements of all Environmental Laws or
contractual commitments related to reclamation of the Properties or other
compliance with Environmental Laws.


                                      E-67
<PAGE>
     "ENVIRONMENTAL LAWS" means Laws aimed at reclamation or restoration of the
Properties; abatement of pollution; protection of the environment; protection of
wildlife, including endangered species; ensuring public safety from
environmental hazards; protection of cultural or historic resources; management,
storage or control of hazardous materials and substances; releases or threatened
releases of pollutants, contaminants, chemicals or industrial, toxic or
hazardous substances as wastes into the environment, including without
limitation, ambient air, surface water and groundwater; and all other Laws
relating to the manufacturing, processing, distribution, use, treatment,
storage, disposal, handling or transport of pollutants, contaminants, chemicals
or industrial, toxic or hazardous substances or wastes.

     "ENVIRONMENTAL LIABILITIES" means any and all claims, actions, causes of
action, damages, losses, liabilities, obligations, penalties, judgments, amounts
paid in settlement, assessments, costs, disbursements, or expenses (including,
without limitation, attorneys' fees and costs, experts' fees and costs, and
consultants' fees and costs) of any kind or of any nature whatsoever that are
asserted against either Participant, by any person or entity other than the
other Participant, alleging liability (including, without limitation, liability
for studies, testing or investigatory costs, cleanup costs, response costs,
removal costs, remediation costs, containment costs, restoration costs,
corrective action costs, closure costs, reclamation costs, natural resource
damages, property damages, business losses, personal injuries, penalties or
fines) arising out of, based on or resulting from (i) the presence, release,
threatened release, discharge or emission into the environment of any hazardous
materials or substances existing or arising on, beneath or above the Properties
and/or emanating or migrating and/or threatening to emanate or migrate from the
Properties to off-site properties; (ii) physical disturbance of the environment;
or (iii) the violation or alleged violation of any Environmental Laws.

     "EQUITY ACCOUNT" means the account maintained for each Participant by the
Manager in accordance with SUBSECTION 8.2(N) of the Agreement.

     "EXISTING DATA" means maps, drill logs and other drilling data, core tests,
pulps, reports, surveys, assays, analyses, production reports, operations,
technical, accounting and financial records, and other material information
developed in operations on the Properties prior to the Effective Date.

     "EXPANSION" or "MODIFICATION" means (i) a material increase in mining or
production capacity; (ii) a material change in the recovery process; or (iii) a
material change in waste or tailings disposal methods. An increase or change
shall be deemed "material" if it is anticipated to cost more than ____% of
original capital costs attributable to the Development of the mining or
production capacity, recovery process or waste or tailings disposal facility to
be expanded or modified.

     "EXPLORATION" means all activities directed toward ascertaining the
existence, location, quantity, quality or commercial value of deposits of
Products, including but not limited to additional drilling required after
discovery of potentially commercial mineralization, and including related
Environmental Compliance.


                                      E-68
<PAGE>
     "FEASIBILITY CONTRACTORS" means one or more engineering firms approved by
the Management Committee for purposes of preparing or auditing any
Pre-Feasibility Study or Feasibility Study.

     "FEASIBILITY STUDY" means a report to be prepared following selection by
the Management Committee of one or more Approved Alternatives. The Feasibility
Study shall include a review of information presented in any Pre-Feasibility
Studies concerning the Approved Alternative(s). The Feasibility Study shall be
in a form and of a scope generally acceptable to reputable financial
institutions that provide financing to the mining industry.

     "GOLDEN PHOENIX" means Golden Phoenix Minerals, Inc., a Minnesota
corporation.

     "GOVERNMENTAL FEES" means all location fees, mining claim rental fees,
mining claim maintenance payments and similar payments required by Law to locate
and hold unpatented mining claims.

     "INITIAL CONTRIBUTION" means that contribution each Participant has made or
agrees to make pursuant to SECTION 5.1 of the Agreement.

     "LAW" or "LAWS" means all applicable federal, state and local laws
(statutory or common), rules, ordinances, regulations, grants, concessions,
franchises, licenses, orders, directives, judgments, decrees, and other
governmental restrictions, including permits and other similar requirements,
whether legislative, municipal, administrative or judicial in nature.

     "MANAGEMENT COMMITTEE" means the committee established under ARTICLE VII of
the Agreement.

     "MANAGER" means the Participant appointed under ARTICLE VIII of the
Agreement to manage Operations, or any successor Manager.

     "MINING" means the mining, extracting, producing, beneficiating, handling,
milling or other processing of Products.

     "NET PROCEEDS" means certain amounts calculated as provided in EXHIBIT E,
which may be payable to a Participant under SUBSECTIONS 6.3(B) or 10.5(B)(II) of
the Agreement.

     "OPERATIONS" means the activities carried out under this Agreement.

     "PARTICIPANT" means Golden Phoenix or Borealis, or any permitted successor
or assign of Golden Phoenix or Borealis under the Agreement.

     "PARTICIPANT INFORMATION" means all information, data, knowledge and
know-how, in whatever form and however communicated (including, without
limitation, Confidential Information but excluding the Existing Data), which, as
shown by written records, was developed, conceived, originated or obtained by a
Participant: (a) prior to entering into this Agreement, or (b) independent of
its performance under the terms of this Agreement.


                                      E-69
<PAGE>
     "PARTICIPATING INTEREST" means the percentage interest representing the
ownership interest of a Participant in the Assets, and all other rights and
obligations arising under this Agreement, as such interest may from time to time
be adjusted hereunder. Participating Interests shall be calculated to three
decimal places and rounded to two decimal places as follows: Decimals of .005 or
more shall be rounded up (e.g., 1.519% rounded to 1.52%); decimals of less than
..005 shall be rounded down (e.g., 1.514% rounded to 1.51%). The initial
Participating Interests of the Participants are set forth in SECTION 6.1 of the
Agreement.

     "PAYOUT" means the date on which the Equity Account balance of each of the
Participants has become zero or a negative number, regardless of whether the
Equity Account balance of either or both Participants subsequently becomes a
positive number. If one Participant's Equity Account balance becomes zero or a
negative number before the other Participant's, "Payout" shall not occur until
the date that the other Participant's Equity Account balance first becomes zero
or a negative number.

     "PRE-FEASIBILITY STUDIES" means one or more studies prepared to analyze
whether economically viable Mining Operations may be possible on the Properties,
as described in SECTION 9.8.

     "PRIME RATE" means the interest rate quoted and published as "Prime" as
published in The Wall Street Journal, under the heading "Money Rate," as the
rate may change from day to day.

     "PRODUCTS" means all ores, minerals and mineral resources produced from the
Properties.

     "PROGRAM" means a description in reasonable detail of Operations to be
conducted and objectives to be accomplished by the Manager for a period
determined by the Management Committee.

     "PROGRAM PERIOD" means the time period covered by an adopted Program and
Budget.

     "PROJECT FINANCING" means any financing approved by the Management
Committee and obtained by the Participants for the purpose of placing a mineral
deposit situated on the Properties into commercial production, but shall not
include any such financing obtained individually by either Participant to
finance payment or performance of its obligations under the Agreement.

     "PROPERTIES" means those interests in real property described in PARAGRAPH
1.1 OF EXHIBIT A and all other interests in real property within the Area of
Interest that are acquired and held subject to the Agreement.

     "RECALCULATED PARTICIPATING INTEREST" means the reduced Participating
Interest of a Participant as recalculated under SECTIONS 9.5, 9.6 or 10.5 of the
Agreement.


                                      E-70
<PAGE>
     "REDUCED PARTICIPANT" means a Participant whose Participating Interest is
reduced under SECTIONS 9.5 or 10.5 of the Agreement.

     "TRANSFER" means, when used as a verb, to sell, grant, assign, create an
Encumbrance, pledge or otherwise convey, or dispose of or commit to do any of
the foregoing, or to arrange for substitute performance by an Affiliate or third
party (except as permitted under SUBSECTION 8.2(J) and SECTION 8.6 of the
Agreement), either directly or indirectly; and, when used as a noun, means such
a sale, grant, assignment, Encumbrance, pledge or other conveyance or
disposition, or such an arrangement.


                                      E-71
<PAGE>
                                    EXHIBIT E
                                       to
              EXPLORATION, DEVELOPMENT AND MINE OPERATING AGREEMENT
                                 By and Between
                          GOLDEN PHOENIX MINERALS, INC.
                                       and
                             BOREALIS MINING COMPANY

                            NET PROCEEDS CALCULATION

     1.1 Income and Expenses. Net Proceeds shall be calculated by deducting from
the Gross Revenue (as defined below) realized (or deemed to be realized), such
costs and expenses attributable to Exploration, Development, Mining, the
marketing of Products and other Operations as would be deductible under
generally accepted accounting principles and practices consistently applied,
including without limitation:

          (a) All costs and expenses of replacing, expanding, modifying,
altering or changing from time to time the Mining facilities. Costs and expenses
of improvements (such as haulage ways or mill facilities) that are also used in
connection with workings other than the Properties shall be charged to the
Properties only in the proportion that their use in connection with the
Properties bears to their total use;

          (b) Ad valorem real property and unsecured personal property taxes,
and all taxes, other than income taxes, applicable to Mining of the Properties,
including without limitation all state mining taxes, sales taxes, severance
taxes, license fees and governmental levies of a similar nature;

          (c) Allowance for overhead in accordance with PARAGRAPH 2.13 OF
EXHIBIT B;

          (d) All expenses incurred relative to the sale of Products, including
an allowance for commissions at rates which are normal and customary in the
industry;

          (e) All amounts payable to the remaining Participant during Mining
pursuant to any applicable operating or similar agreement in force with respect
thereto;

          (f) The actual cost of investment under the Agreement but prior to
beginning of Mining, which shall include all expenditures for Exploration and
Development of the Properties incurred by the non-withdrawing Participant both
prior and subsequent to the withdrawing Participant acquiring a Net Proceeds
interest;

          (g) Interest on monies borrowed or advanced for costs and expenses,
but in no event in excess of the maximum permitted by law;

          (h) An allowance for reasonable working capital and inventory;


                                      E-72
<PAGE>
          (i) Costs of funding the Environmental Compliance Fund as provided in
PARAGRAPH 2.14 OF EXHIBIT B;

          (j) Actual costs of Operations; and

          (k) Rental, royalty, production, and purchase payments.

     For purposes hereof, the term "Gross Revenue" shall mean the sum of (i)
gross receipts from sale of Products, less any charges for sampling, assaying,
or penalties; (ii) gross receipts from the sale or other disposition of Assets;
(iii) insurance proceeds; (iv) compensation for expropriation of Assets; and (v)
judgment proceeds. Gross receipts for sale of Products shall be determined by
multiplying spot prices for Products as quoted by The Wall Street Journal,
Reuters, E&MJ, or other reliable source on the date of a sale of Products.

     It is intended that the remaining Participant shall recoup from Gross
Revenue all of its on-going contributions for Exploration, Development, Mining,
Expansion and Modification and marketing Products before any Net Proceeds are
distributed to any person holding a Net Proceeds interest. No deduction shall be
made for income taxes, depreciation, amortization or depletion. If in any year
after the beginning of Mining of the Properties an operating loss relative
thereto is incurred, the amount thereof shall be considered as and be included
with outstanding costs and expenses and carried forward in determining Net
Proceeds for subsequent periods. If Products are processed by the remaining
Participant, or are sold to an Affiliate of the remaining Participant, then, for
purposes of calculating Net Proceeds, such Products shall be deemed conclusively
to have been sold at a price equal to fair market value to an arm's length
purchaser FOB the concentrator for the Properties, and Net Proceeds relative
thereto shall be calculated without reference to any profits or losses
attributable to smelting or refining.

     1.2 Payment of Net Proceeds. Payments of Net Proceeds shall commence in the
calendar quarter following the calendar quarter in which Net Proceeds are first
realized, and shall be made forty-five (45) days following the end of each
calendar quarter during which Net Proceeds are realized, and shall be subject to
adjustment, if required, at the end of each calendar year. The recipient of such
Net Proceeds payments shall have the right to audit such payments following
receipt of each payment by giving notice to the remaining Participant and by
conducting such audit in accordance with SECTION 10.6 of the Agreement. Costs of
such an audit shall be borne by the holder of the Net Proceeds interest
described herein.

     1.3 Definitions. All capitalized words and terms used herein have the same
meaning as in the Agreement.


                                      E-73
<PAGE>
                                    EXHIBIT F
                                       to
              EXPLORATION, DEVELOPMENT AND MINE OPERATING AGREEMENT
                                 By and Between
                          GOLDEN PHOENIX MINERALS, INC.
                                       and
                             BOREALIS MINING COMPANY

                                    INSURANCE

     The Manager shall, at all times while conducting Operations, comply fully
with the applicable worker's compensation laws and purchase, or provide
protection for the Participants comparable to that provided under standard form
insurance policies for the following risk categories: (i) comprehensive public
liability and property damage with combined limits of not less than __________
Dollars ($__________) for bodily injury and property damage; (ii) automobile
insurance with combined limits of not less than __________ Dollars
($__________); and (iii) adequate and reasonable insurance against risk of fire
and other risks ordinarily insured against in similar operations. If the Manager
elects to self-insure, it shall charge to the Business Account an amount equal
to the premium it would have paid had it secured and maintained a policy or
policies of insurance on a competitive bid basis in the amount of such coverage.
Each Participant shall self-insure or purchase for its own account such
additional insurance as it deems necessary.


                                      E-74
<PAGE>
                                    EXHIBIT G
                                       to
              EXPLORATION, DEVELOPMENT AND MINE OPERATING AGREEMENT
                                 By and Between
                          GOLDEN PHOENIX MINERALS, INC.
                                       and
                             BOREALIS MINING COMPANY

                           INITIAL PROGRAM AND BUDGET

                    [Prepare and attach at time of execution]


                                      E-75
<PAGE>
                                    EXHIBIT H
                                       to
              EXPLORATION, DEVELOPMENT AND MINE OPERATING AGREEMENT
                                 By and Between
                          GOLDEN PHOENIX MINERALS, INC.
                                       and
                             BOREALIS MINING COMPANY

                                PREEMPTIVE RIGHTS

     1.1 Preemptive Rights. If either Participant intends to Transfer all or any
part of its Participating Interest, or an Affiliate of either Participant
intends to Transfer Control of such Participant ("Transferring Entity"), such
Participant shall promptly notify the other Participant of such intentions. The
notice shall state the price and all other pertinent terms and conditions of the
intended Transfer, and shall be accompanied by a copy of the offer or the
contract for sale. If the consideration for the intended transfer is, in whole
or in part, other than monetary, the notice shall describe such consideration
and its monetary equivalent (based upon the fair market value of the nonmonetary
consideration and stated in terms of cash or currency). The other Participant
shall have ninety (90) days from the date such notice is delivered to notify the
Transferring Entity (and the Participant if its Affiliate is the Transferring
Entity) whether it elects to acquire the offered interest at the same price (or
its monetary equivalent in cash or currency) and on the same terms and
conditions as set forth in the notice. If it does so elect, the acquisition by
the other Participant shall be consummated promptly after notice of such
election is delivered;

          (a) If the other Participant fails to so elect within the period
provided for above, the Transferring Entity shall have ninety (90) days
following the expiration of such period to consummate the Transfer to a third
party at a price and on terms no less favorable to the Transferring Entity than
those offered by the Transferring Entity to the other Participant in the
aforementioned notice;

          (b) If the Transferring Entity fails to consummate the Transfer to a
third party within the period set forth above, the preemptive right of the other
Participant in such offered interest shall be deemed to be revived. Any
subsequent proposal to Transfer such interest shall be conducted in accordance
with all of the procedures set forth in this PARAGRAPH.

     1.2 Exceptions to Preemptive Right. PARAGRAPH 1.1 above shall not apply to
the following:

          (a) Transfer by either Participant of all or any part of its
Participating Interest to an Affiliate;

          (b) Incorporation of either Participant, or corporate consolidation or
reorganization of either Participant by which the surviving entity shall possess
substantially all of the stock or all of the property rights and interests, and
be subject to substantially all of the liabilities and obligations of that
Participant;


                                      E-76
<PAGE>
          (c) Corporate merger or amalgamation involving either Participant by
which the surviving entity or amalgamated company shall possess all of the stock
or all of the property rights and interests, and be subject to substantially all
of the liabilities and obligations of that Participant; provided, however, that
the value of the merging or amalgamating Participant's interest in the Assets,
evidenced by its Capital Account balance (as described in EXHIBIT C), does not
exceed ______ percent (____%) of the Net Worth of the surviving entity or
amalgamated company;

          (d) the transfer of Control of either Participant by an Affiliate to
such Participant or to another Affiliate;

          (e) subject to SUBSECTION 16.2(G) of the Agreement, the grant by
either Participant of a security interest in its Participating Interest by
Encumbrance;

          (f) the creation by any Affiliate of either Participant of an
Encumbrance affecting its Control of such Participant;

          (g) a sale or other commitment or disposition of Products or proceeds
from sale of Products by either Participant upon distribution to it pursuant to
ARTICLE XI of the Agreement; or

          (h) a transfer by an Affiliate of either Participant of Control of
such Participant to a third party, provided the value of such Participant's
Capital Account balance does not exceed __________ percent (_____%) of the Net
Worth of the transferring Affiliate, or does not exceed __________ percent
(____%) of the Net Worth of Transferee.

     For purposes hereof, the term "Net Worth" shall mean the remainder after
total liabilities are deducted from total assets. In the case of a corporation,
Net Worth includes both capital stock and surplus. In the case of a limited
liability company, Net Worth includes member contributions. In the case of a
partnership or sole proprietorship, Net Worth includes the original investment
plus accumulated and reinvested profits.


                                      E-77
<PAGE>
                                    EXHIBIT I
                                       to
              EXPLORATION, DEVELOPMENT AND MINE OPERATING AGREEMENT
                                 By and Between
                          GOLDEN PHOENIX MINERALS, INC.
                                       and
                             BOREALIS MINING COMPANY

                               EXISTING FACILITIES

     Old leach pads.


                                      E-78
<PAGE>
                                    EXHIBIT F

                                       to

                 Agreement between GOLDEN PHOENIX MINERALS, INC.
                           and BOREALIS MINING COMPANY

                   (Borealis Property, Mineral County, Nevada)

                               Existing Facilities

     Old leach pads


                                       F-1