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                                                                    EXHIBIT 10.7

                                                                          DS-470
                                                                    Revised 1/99

                                STATE OF MONTANA

                    METALLIFEROUS MINERAL OR GEM MINING LEASE

                                  NO. M-1947-99

         This indenture of lease made and entered into by and between the State
of Montana, acting through its State Board of Land Commissioners, hereinafter
referred to as lessor, and the person, persons, company or corporation herein
named and hereinafter referred to as lessee, under and pursuant to the terms and
provisions of Part 1, Chapter 3, Title 77, MCA, as amended and rules adopted
pursuant thereto,

         The lessor, in consideration of the annual rentals provided for herein,
the royalties to be paid, and the covenants to be kept and performed by the
lessee, leases to the lessee for the purpose of mining metalliferous minerals
and or gems as described below, all the lands described as follows:

Date this lease takes effect: JUNE 21, 1999

Name of Lessee:   PETER C. ELLSWORTH           Address:  265 BENTON AVENUE
                                                         MISSOULA, MT  59801

Land Located in   PETROLEUM                                   County:

Description of Land:       TOWNSHIP 15 NORTH, RANGE 25 EAST
                           --------------------------------
                           SECTION 30:   SE1/4

Total number of acres 160.00, more or less, belonging to UNIVERSITY Grant.

Minerals authorized to be mined:    SAPPHIRES, DIAMONDS, AND ASSOCIATED GOLD

Royalty:          5% PLUS AN ANNUAL ADVANCE ROYALTY OF $250.00

Bond:             $1,000.00


         To have and to hold these premises unto said lessee and successors,
legal representatives or assigns, for the primary term of' ten (10) years, and
as long thereafter as the minerals hereinabove designated are being produced in
paying quantities from said premises, the royalties and rents provided for
herein are being paid, and all other obligations are fully kept and performed.

         It is mutually understood, agreed and covenanted by and between the
parties to this lease as follows:

         1. The lessor expressly reserves the right to lease, sell, or otherwise
dispose of the surface of the lands hereby leased, under existing law or laws
hereafter enacted, insofar as the surface is not necessary for the use of the
lessee in connection with operations under this lease; and lessee agrees to
comply with all statutory requirements, rules, and regulations thereunder made
by the lessor if the lands embraced hereby have been or shall hereafter be sold,
leased, or disposed of.

         2. The lessee shall pay to the lessor an annual money rental in the
amount of $ 1.00 per acre for the first three year period, $2.50 per acre for
the next two years, and thereafter annually $3.00 per acre. This is in addition
to any bonus which may be required as a condition of obtaining the lease.

         3. Lessee shall prospect and explore with minimum disturbance to the
surface of the land which is required to adequately explore the property. All
mining operations shall be conducted in such a manner as to protect property and
resources from disturbance which is not reasonably necessary in order to
efficiently and economically remove the mineral deposit.

         4. The lessee shall obtain the consent of the Department of Natural
Resources and Conservation before cutting any timber upon this land for use in
their operations; and shall pay the lessor the customary charges made by the
lessor for timber thereafter cut.

         5. The lessee shall not assign this lease without the consent of the
lessor.

         6. The lessee shall cover or enclose all shafts, mines or openings of
any kind in such manner as to remove danger to human beings or livestock.

         7. The lessee shall fully comply with all applicable state and federal
laws, rules and regulations, including but not limited to those concerning
safety, environmental protection and reclamation. The lessee shall conduct and
reclaim the operation in


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accordance with the performance and reclamation standards of applicable mine
reclamation laws. The exemption of lessee's operations from applicable
reclamation laws does not relieve the lessee from the obligation to conduct and
reclaim the operations in accordance with the performance and reclamation
standards of those laws. All disturbances must be reclaimed prior to release of
any bond.

         8. If the surface of the land has been sold or leased prior to issuance
of this lease. the mineral lessee shall be responsible for damages to the
surface, the leasehold interest and any improvements.

         9. The lessee shall furnish to the Department of Natural Resources and
Conservation, upon request, but not more than once each calendar year an
exploration and development report. The report shall include a description of
any work completed to date, a plat showing the location of any work and shall
include a complete geologic log and electric log (if done) of any test holes.

         10. The lessee shall have the right at the termination of any rental
year, by giving at least thirty (30) days previous notice in writing to the
Director of Natural Resources and Conservation, to surrender and relinquish this
lease and thereupon be discharged from any obligation not theretofore accrued.

         11. At the termination of this lease, for any cause, the lessee shall
immediately surrender the premises and shall, within sixty (60) days, remove
machinery, tools or equipment that the lessee may have placed thereon.

         12. The lessee shall pay a royalty in cash unless the lessor requests
that it be delivered in kind. The royalty rate as specified above shall be based
upon the applicable percentage of returns from the metalliferous minerals or
gems being mined but in no case shall be less than 5 percent of the fair market
value of the metalliferous minerals or gems recovered. The returns are defined
as the net amount received by the shipper after deducting reasonable
transportation costs to the closest feasible point of sale, smelting charges and
deductions and other treatment costs, not including as a deduction any cost of
producing or treating at the mine. The fair market value is the value of the
minerals or gems in raw crude form as recovered at the mine site.

         13. The lessee shall, upon commencement of mining, make a report on or
before the last day of each quarter concerning the operations for the latest 3
months for which records are available but in no case more than 3 months
preceding the report. The report shall be on the form prescribed by the
department and shall provide sufficient information to determine the royalty as
well as any other pertinent information requested by the department. The royalty
for the quarter reported shall accompany the report.

         14. The lessee has filed a bond with the lessor in the penal sum as
specified above, conditioned upon compliance with all lease terms and in order
to protect the rights of any prior purchasers or surface lessees. Additional
bonds may be required at any time during the period of the lease.

         15. The lease is subject to cancellation for failure to comply with the
terms of the lease, applicable state statutes concerning metalliferous and gem
leases and rules enacted pursuant to those statutes, as amended. The lessee
shall be notified of any failure to comply and allowed a reasonable time to
comply. If the lessee fails to comply within a reasonable time, the lease shall
be canceled.

         16. All the terms and conditions hereof which are applicable to the
lessee shall likewise be applicable to the heirs, executors, administrators,
assigns, and other successors in interest of the lessee to the same extent as
though they had been specifically mentioned in connection with each of such
terms and conditions and the provisions of this lease shall be binding upon and
inure to the benefit of such heirs, executors, administrators, assigns and other
successors in interest of the lessee.

         17. Special conditions:

                           SEE ATTACHMENT 'A'


         IN WITNESS WHEREOF, the State of Montana and the lessee have caused
this lease to be executed in duplicate and the Director of the Department of
Natural Resources and Conservation, pursuant to the authority granted him by the
State Board of Land Commissioners of the State of Montana, has hereunto set his
hand and affixed the seal of the Board of Land Commissioners this 31st day of
AUGUST, year of 1999.

/s/ Arthur R. Clinch
-------------------------------------
ARTHUR R. CLINCH
Director of the Department of Natural
Resources & Conservation

                                       /s/ Peter Ellsworth
                                       -----------------------------------------
                                                       Lessee
                                           Peter C. Ellsworth
                                       Address:  265 BENTON AVENUE
                                                 MISSOULA, MT  59802




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                                                             Lease No. M-1947-99

                                 ATTACHMENT "A"

ANNUAL REPORT

1.       Lessee shall submit to the Department of Natural Resources and
         Conservation a verified report showing in detail what work the lessee
         has done and performed under this lease during the preceding year and
         the location and character of the same, a plat showing all development
         work and improvements on the leased lands, and shall furnish such
         additional information relating thereto as the Director shall require,
         and in case it is advisable to prospect by test holes or other testing
         methods an itemized statement of actual cost of testing, location of
         test holes and other relating information with a report as to all
         buildings, structures or other work placed in or upon leased lands,
         together with a statement as to the amount and grade of minerals and/or
         gems produced and sold and the amount received therefor by operations
         hereunder.

OPERATING PLAN

2.       If the Lessee intends to conduct mining and/or milling activities or
         exploration activities, including road building, trenching, dumping, or
         other activities which result in land disturbance on the leased
         premises, it shall submit to the Department of Natural Resources and
         Conservation, Minerals Management Bureau two copies of an Operating
         Plan or Amendment to an existing Operating Plan, describing its
         proposed activities. No activities shall occur on the tract until an
         Operating Plan or Amendments have been approved, in writing, by the
         Minerals Management Bureau. The Plan or Amendment shall include the
         following:

         a.       A complete description of each activity planned, locations of
                  each activity, scheduled starting date, and expected duration
                  on each.

         b.       Maps (1:24,000 scale or larger) showing use and/or
                  reconstruction of existing access routes, the location of
                  proposed new road construction, pipelines, utilities and other
                  uses and improvements.

         c.       Drawings showing road construction plans, including width,
                  drainage, cut/fill slopes and other details, as well as
                  detailed topographic drawings showing mine and/or mill site
                  development and layout, and water supply and disposal system.

         d.       Plans, to include resource protection measures for mining,
                  milling, waste disposal, sanitation, wildfire prevention, soil
                  erosion and air and water pollution; emergency actions
                  covering mining or milling related spills; and land
                  reclamation procedures.

         e.       Other information necessary for the Department to assess
                  probable impacts upon surface and other resources.

         Submittal of plans of operation to other departments and Divisions of
         State Government including but not limited to the Environmental
         Management Bureau of the Department of Environmental Quality does not
         satisfy this provision. Original copies of all plans, maps and
         amendments must be delivered by the lessee hereunder to the Minerals
         Management Bureau.

ACTIVITIES MAY BE DENIED

3.       The Department reserves the right to deny all activity that would
         result in material disturbance to the leased premises.



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RECORDS

4.       Representatives of the Lessor shall at all reasonable times have the
         right to enter into and upon the premises and all of the workings and
         shafts and tunnels or buildings thereon and all parts thereof for the
         purpose of inspecting and examining the same.

         The lessee agrees to keep books of account showing the amount of
         metalliferous minerals and/or gems extracted from the leased lands; the
         amount of such minerals and/or gems produced, saved, treated, shipped
         or marketed collectively or individually; and the amount of money
         received from the sale of the minerals and/or gems or the value
         extracted from them; and from and out of the values extracted from
         them.

         Representatives of the Lessor shall also at all reasonable hours have
         free access to all books, accounts, records and papers of the Lessee
         insofar as they shall relate to the production of the mineral for which
         this lease is issued, or the price received therefore or any agreements
         relating thereto.

REMOVAL OF GEMS AND/OR MINERALS

5.       The lessee shall not, during the prospecting period or any continuation
         thereof, remove any metalliferous minerals and/or gems from the leased
         premises except as may be permitted by the Department. When the lessee
         has discovered metalliferous minerals and/or gems in commercial
         quantities he shall notify the Director of the Department that the
         prospecting period is terminated, and request permission to dispose of
         the metalliferous minerals and/or gems as provided in this lease.

FINANCIAL AGREEMENTS

6.       All contracts made in relation to the mineral interest granted herein,
         such as but not limited to, assignments, subleases, joint ventures,
         overriding royalties, operating agreements, project financing, back-in
         rights, or other similar agreements, whether verbal or written between
         the lessee herein and any other person or corporation must be approved
         by the Director. The Department reserves the right to deny any
         agreement that may impair the productive capability of the trust asset.
         It will be the Department's sole discretion whether the proposed
         agreement is approved. The Department may consider payment of a
         reasonable compensatory bonus as adequate mitigation for the proposed
         agreement.

DILIGENCE

7.       The lessee agrees to commence actual prospecting operations under the
         land embraced herein promptly after the execution of this lease and
         thereafter diligently prospect, develop and mine in or upon the leased
         land unless consent to suspend operations temporarily is granted by the
         Department annually.

ADVANCE ROYALTY

8.       In addition to the yearly rental, lessee shall pay an advance minimum
         royalty of $250.00 per year. This amount is payable each year on the
         anniversary date of this lease. This minimum royalty is not refundable
         in the event that actual production royalty is less than $250.00 per
         year. In the event such actual production royalty is greater, lessee is
         obligated to pay the greater amount.

RENT AND ROYALTY REVIEW

9.       The rate of the rental shall be reviewed at the end of each five (5)
         year period of the lease, and may be adjusted at such time at the
         discretion of the Department.



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         The rate of royalty and any advance royalty shall be reviewed at the
         end of each five (5) year period of the lease, and may, after
         negotiation between lessor and lessee be adjusted at such time.

WATER RIGHTS

10.      Lessee may not interfere with any existing water right owned or
         operated by any person. Lessee shall hold Lessor harmless against all
         claims, including attorney fees, for damages claimed by any person
         asserting interference with a water right.

WASTE PROHIBITED

11.      All mining operations shall be done in good and workmanlike manner in
         accordance with approved methods and practices using such methods to
         insure the extraction of the greatest amount of mineral, having due
         regard for the prevention of waste of the minerals developed on the
         land, the protection of the environment and all natural resources, the
         preservation and conservation of the property for future uses, and for
         the health and safety of workmen and employees. If the Lessor has
         reasonable belief that the operations are not so being conducted, he
         shall so notify the lessee in writing, and if compliance is not
         promptly obtained and the delinquency fully satisfied, the Lessor may
         at its option, after thirty (30) days notice by registered mail to the
         Lessee, cancel the lease.

SURRENDER OF DATA

12.      All geological data, including reports, maps, logs and other pertinent
         data regarding Trust resources shall be given to the Department upon
         surrender or expiration of the lease. Bond will not be released until
         surrender of such data to the Department. All drill core and/or splits
         of drill cuttings shall be saved. Upon surrender or expiration of the
         lease lessee will contact the Department for instructions on the
         required disposition of drill core and/or cuttings.

STREAMBED PRESERVATION

13.      Prior to the commencement of any activities within the ordinary high
         water mark of perennial streams on the leased premises, the lessee
         shall obtain a 310 Permit, if required, from the appropriate
         Conservation District. A copy of such permit shall be submitted to the
         Department.

FIELD NOTIFICATION

14.      The Department of Natural Resources and Conservation Unit Manager (or
         his representative) who may be contacted regarding matters pertaining
         to the leased premises is:

         Unit Manager, Lewistown Unit Office, DNRC, Suite E, 613 NE Main Street,
         Lewistown, MT 59457-1020  Phone (406) 538-7789

         The lessee shall also contact the surface lessee, Teigen Land &
         Livestock Co., Box 1 Hwy 200, Teigen, MT 59084, prior to entry onto any
         portion of the leased area. Any problems or questions regarding access
         to the described property must be addressed prior to entry upon the
         property, except that reasonable access for the purpose herein
         described may not be withheld pending resolution.

WEED CONTROL

15.      Lessee shall be responsible for controlling any noxious weeds
         introduced by Lessee's activity on State-owned land and shall prevent
         or eradicate the spread of noxious weeds onto land adjoining the leased
         premises. The Lessee's methods of control must be reviewed by the
         Department's Area Field Office that has jurisdiction for that locale.



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CONFIDENTIALITY WAIVED

16.      The Lessee is required to contact the Department of Environmental
         Quality regarding requirements of the Hard Rock Act prior to the
         commencement of any activities on the leased premises. In order to
         provide the Department of Natural Resources and Conservation with
         information regarding exploration activities important to Trust
         resources and to protect the confidentiality of the Lessee's
         exploration activities, the Lessee hereby agrees that the Trust Lands
         Management Division staff are hereby authorized to review any records
         pertaining to Small Miners Exclusion Statement and/or Exploration
         License obtained by the Department of Environmental Quality.

SPECIAL CONDITIONS

17.      DNRC-Trust Land Management Division (TLMD) will complete an initial
         review for cultural resources and, where applicable, paleontological
         resources of the area intended for disturbance and may require a
         resources inventory. Based on the results of the inventory, the TLMD
         may restrict surface activity for the purpose of protecting significant
         resources- located on the lease premises.

         Vehicular traffic is restricted to existing roads and to periods when
         the soil moisture is low enough (generally below 20 percent) to prevent
         rutting unless otherwise authorized by TLMD.

         All vehicles and equipment must be washed, particularly the underside,
         prior to entry onto the property to minimize the spread of noxious
         weeds.

         Material disturbed in emplacing exploration sampling holes will be
         replaced in the holes immediately on completion of sampling.

         Soil disturbance within 100 feet of springs, wetlands, and/or the
         ordinary high water mark of streams is not permitted without prior
         approval by the Department of Natural Resources and Conservation, Trust
         Land Management Division.

         Shrub or brush removal is not permitted without prior approval by the
         Department of Natural Resources and Conservation, Trust Land Management
         Division.

NON-WARRANTY OF TITLE

18.      Regardless of any of the above provisions of the said lease, actual or
         implied, the State of Montana does not warrant title to its lands.



                                       /s/ Peter Ellsworth
                                       -----------------------------------------
                                       PETER C. ELLSWORTH




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