Texas Mineral Resources Corp. 10-K 


 


 


Exhibit
10.3


 


Mining
Lease dated November 2011 with the State of Texas


 





 


Austin,
Texas


 


MINING
LEASE


M-113629


 


WHEREAS,
pursuant to Chapter 53, Subchapter C of the Texas Natural Resources Code, the following described land:


 


SW/4
of SE/4 of SE/4 of Section 12, Block 72, T-7, T&P Ry. Co., and N/2 of the NE/4 of Section·13, Block 72, T-7,
T&P Ry. Co. containing 90 acres, more or less, in Hudspeth County, Texas, (hereinafter referred to as the
“leased premises”)


 


was subject to 1ease by the State of Texas acting by and through its agent, Texas Rare
Earth Resources Corp. of 304 Inverness Way South, Suite 365, Englewood, Colorado 80112, said agent hereinafter
referred to as “the owner of the soil” (whether one or more).


 


WHEREAS,
the owner of the soil of the leased premises has executed and recorded in Hudspeth County, Texas, and has filed in the
General Land Office Mineral File for this lease, its Affidavit of Waiver of Agency Rights wherein said owner of the soil, inter
alia, warrants to the State that said owner is duly authorized to waive all surface owner rights associated with the leased premises
without joinder of any other person or entity and wherein said owner waives any right to receive compensation from any lease on
the above described land. Texas Rare Earth Resources Corp. has properly made application for a Mining Lease. Pursuant to
Chapter 53, Subchapter C of the Natural Resources Code and the title opinion furnished by the owner of the soil, the School Land
Board of the State of Texas has approved and accepted this lease under the following terms and conditions:


 


NOW,
THEREFORE, this mining lease is made and entered into this 1st day of November, 2011 between the
State of Texas (hereinafter referred to as “LESSOR”, “State of Texas” or “State”), acting by and
through the Commissioner of the General Land Office (hereinafter referred to as “COMMISSIONER”) and Texas Rare Earth
Resources Corp. of 304 Inverness Way South Suite 365 Englewood Colorado 80112 (hereinafter referred to as “LESSEE”).
LESSEE, as used herein, shall also include any successor, assignee, devisee, legal representative or heir who acquires any right
or obligation initially held by this named LESSEE under this lease.


 


l.              GRANTING
CLAUSE: For and in consideration of the amounts stated below and of the covenants and agreements of this lease hereby
agreed to be paid, kept and performed by LESSEE, the State of Texas hereby grants, leases and lets unto LESSEE the leased premises,
for the sole and only purpose of prospecting for, exploring for, producing, developing, mining (by drilling, boring, open pit,
underground mining, strip mining, solution mining, or any other method permitted herein), extracting, milling, removing, and marketing
the following: beryllium, uranium, rare earth elements, all other base and precious metals, industrial minerals and construction
materials of all kinds and all other minerals excluding oil, gas, coal, lignite, sulphur, salt and potash, hereinafter referred
to as the “named material”, and the rocks, minerals and mineral substances that are contained in or are necessarily
and actually produced in conjunction with or incidental to the named material (the named material and the other rocks, minerals
and mineral substances granted herein are hereinafter collectively referred to as the “leased minerals”), and no other
material or mineral.


 


Additionally,
there is hereby excepted and reserved to LESSOR the full use of the property covered hereby and all rights with respect to the
surface and subsurface thereof for any and all purposes except those granted and to the extent herein granted to the LESSEE, together
with the rights of ingress and egress arid use of said lands by LESSOR and its mineral lessees, for purposes of exploring for
and producing the minerals which are not covered by the terms of this lease, but which may be located within the surface boundaries
of the leased area. All of the rights in and to the leased premises retained by LESSOR and all of the rights in and to the leased
premises granted to LESSEE shall be exercised in such a manner that neither shall unduly interfere with the operations of the
other.


 


The
bonus consideration paid for this lease is as follows:


 


To
the State of Texas: Twenty thousand seven hundred and no/100 Dollars ($20 700.00)


 


To
the owner of the soil: None


 


The
total bonus consideration paid represents a bonus of Two hundred thirty and No/100 Dollars($ 230.00) per acre, on
90 net acres.


 


2.             TERM:
Subject to the other provisions in this lease, this lease shall be for a term of nineteen (19) years from this date (hereinafter
called “primary term”), and as long thereafter as the named material shall be produced in paying quantities from the
land hereby leased. As used in this lease, the term “produced in paying quantities” shall be defined to mean that the
receipts from the sale of the named material and the market value (as defined in this lease) of any named material used by LESSEE
in a manner authorized by the COMMISSIONER (excluding those amounts allocable to the State’s royalties provided for in this lease
and including those amounts attributable to the working interest as of the date of this lease) exceed out of pocket operational
expenses for the twelve months past. Out of pocket operational expenses, as used in this lease, shall be defined as those costs
directly associated with the current costs of operations. Specifically, this definition shall not include the costs of capital
improvements to leased premises and fixtures affixed thereto, and it shall not include non-cash items, such as depreciation expenses
and depletion allowances. If after the expiration of the 20 year term this lease is not producing in paying quantities as defined
above, then a rebuttable presumption Shall arise that this lease has terminated for failure to so produce.


 






     


     


    

 


3.             DELAY
RENTAL: If production in paying quantities of the named material has not been obtained on or before one (1) year after the
date of this lease, then this lease shall terminate unless LESSEE, on or before that date, pays in the manner prescribed in Section
27 of this lease the following sum:


 


	Per Acre Amount	 	Total Amount
	 	$	50.00	 	 	 	$	4,500.00	 



 


In
a like manner and upon payment of the amounts set out below on or before the corresponding anniversary dates of this lease, LESSEE
may defer the commencement of said production for successive periods of one (1) year each during the primary term hereof:


 


	 	 	Per Acre Amount	 	Total Amount
	Anniversary Date 2013 -2014	 	 	$	50.00	 	 	 	$	4
    500.00	 
	Anniversary Date 2015 - 2019	 	 	$	75.00	 	 	 	$	6
    750.00	 
	Anniversary Date 2020 - 2024	 	 	$	150.00	 	 	 	$	13
    500.00	 
	Anniversary Date 2025 - 2029	 	 	$	200.00	 	 	 	$	18
    000.00	 







  


Payments
under this section shall act as a rental and shall cover the privilege of deferring commencement of production in paying quantities
of the named material for one (1) year from the corresponding anniversary date.


 


4.             MINIMUM
ADVANCE ROYALTY: Immediately upon the sale of the leased minerals, if such sale occurs on the lease premises, or the removal
of the leased minerals in commercial quantities from the leased premises, LESSEE shall par in the same manner prescribed in Section
28 of this lease a sum of Fifty Thousand and No/100 Dollars ($50 000.00) as minimum advance royalty. This Section
4 shall not apply to the production of waste materials as defined in Section 14(g). The payment of the initial minimum advance
royalty shall be considered timely if it is received by the COMMISSIONER, at Austin, on or before seven (7) days after the date
of the initial commencement of production. Thereafter, this royalty is to be so paid and received on or before the anniversary
date of this lease, in advance, for each lease year (as determined by the anniversary date of this lease) in which the leased
minerals are produced from the leased premises. It is understood and agreed that this minimum advance royalty is due and payable
for every year that the leased minerals are produced from the leased premises, regardless of the amount of actual production.


 


Should
LESSEE cease production and later re-commence production, then payment of a minimum advance royalty shall be due and payable
immediately upon re- commencement of production in the same manner as if LESSEE were initially commencing production.
However, should LESSEE so re-commence production within the same lease year for which a minimum advance royalty has already
been properly paid to the COMMISSIONER, then a payment shall not be due upon the re- commencement but shall be due and
payable thereafter by LESSEE in the manner described above on or before the anniversary date of this lease, in advance, for
each lease year in which the leased minerals are produced from the leased premises.


 


If
applicable, a minimum advance royalty paid will be credited against the first royalty due as hereinafter provided for the leased
minerals actually produced from the leased premises during the lease year for which such minimum advance royalty was paid.


 


5.             PLAN
OF OPERATIONS: Before LESSEE commences any activities associated with mineral exploration or development that require substantially
disturbing or destroying the surface or subsurface of the leased premises, LESSEE agrees to submit to and obtain approval from
the COMMISSIONER and, upon request, submit to any surface lessee of the leased premises, for said lessee’s information, a plan
of operations in compliance with all current and future General Land Office administrative rules relating to the procedure for
filing, obtaining approval and complying with of any such plan of operations. LESSEE also agrees to so submit amended and supplemental
plans of operations as required by said rules. The General Land Office reserves the right to require LESSEE to furnish a bond
as a condition to approval of a plan of operations. The current and future General Land Office administrative rules relating to
plans of operations and conduct of exploration and mining operations shall determine when and how LESSEE may commence and conduct
any activities on, in, or under the leased premises.


 


LESSEE
is expressly placed on notice of the National Historical Preservation Act of 1966, (PB-89-66, 80 Statute 915; 16 U.S.C.A §470)
and the Antiquities Code of Texas, Chapter 191, Tex. Nat. Res. Code Ann. (Vernon 1996 Supp.). Befo.re breaking ground at a project
location, lessee shall notify the Texas Historical Commission, P.O. Box 12276, Austin, Texas 78711. An archaeological survey might
be required by the commission before construction of the project can commence. Further, in the event that any site, object, location,
artifact or other feature of archaeological, scientific, educational, cultural or historic interest is encountered during the
activities authorized by this lease, lessee will immediately notify LESSOR and the Texas Historical Commission so that adequate
measures may be undertaken to protect or recover such discoveries or findings, as appropriate.


 


6.             EXPLORATION:
It is understood and agreed that LESSEE owes LESSOR a duty to take all steps a reasonably prudent operator would take to explore
the leased premises for the named material and to delineate the reserves thereof.,


 


7.             DUTY
TO MAKE MARKETABLE, PROCESS, ETC.: (a) If the leased minerals are capable of being economically produced by the LESSEE in
commercial quantities, it is understood and agreed that LESSEE owes I,.ESSOR a duty to take all steps necessary to put the leased
minerals into a marketable condition. This may include crushing, separating, concentrating, processing or other forms of preparing
the leased minerals for sale. It is understood and agreed that LESSEE has the duty to undertake and/or arrange to have undertaken
all operations a reasonably prudent operator would undertake in order to produce, process, and make marketable the most valuable
component or components of the leased minerals. No cost incurred in meeting these duties is deductible in the computation of the
royalty due under this lease except where expressly allowed in this lease. Should LESSEE not put the leased minerals into a marketable
condition as required herein, royalty due under this lease will nevertheless be calculated upon the market value, as defined herein,
of the leased minerals in a marketable condition. Should LESSEE not put the leased minerals into their most valuable component
or components as required herein, royalty due under this lease will nevertheless be calculated upon the market value, as defined
herein, of this most valuable component or components in a marketable condition. Neither the bonus, rentals, nor royalties paid
or to be paid hereunder shall relieve LESSEE from any of the obligations herein expressed. The point at which these said duties
have or could have been complied with shall define “the mine” as that phrase is used in this lease for the purposes
of royalty calculation.


 






     


     


    

 


(b)
Should LESSEE, in performance of those duties required in Section 7(a) of this lease, transport the leased minerals to a location
away from the leased premises, LESSEE may deduct, for the purposes of royalty calculation, the transportation cost, as defined
by Generally Accepted Accounting Principles, incurred in and directly allocable to that transportation of the leased minerals
from the leased premises, and no other costs, as follows:


 


If
LESSEE actually incurs this transportation cost pursuant to a bona fide transaction entered into at arm’s length with a non-affiliated
party (as defined in Section 8(a) of this lease) of adverse economic interests, then this transportation cost, if reasonable,
may be deducted for the purposes of royalty calculation. If this transportation cost is incurred pursuant to other than the above-described
transaction, including by means of LESSEE-owned facilities, then this deduction shall be determined by the reasonable costs that
(1) are actually incurred by the party or parties. (whether that party is LESSEE and/or some other party) that actually performs
the transportation service (hereinafter referred to in this subsection (b) as the “transporter”) and (2) are directly
allocable to this transportation of the leased minerals. Therefore, the deduction allowed in this second type of transaction (i.e.
non arm’s length, etc.) shall not include any profit margin, commission or any other similar charge that is charged by any transporter
for the performance of this transportation service. In no event shall any transportation deduction discussed in this subsection
(b) include any transportation cost incurred for transportation within the leased premises. In no event shall any deduction discussed
in this subsection (b) be greater than the State or Federal tariff, whichever was legally applicable, that was in effect at the
time the leased minerals were transported and that was for comparable movement of minerals. The deduction discussed in this subsection
(b) is subject at any time to the COMMISSIONER’s review and audit. LESSEE must be able to document these deductions to the COMMISSIONER’s
satisfaction, should the COMMISSIONER at any time request such verification, in order to properly deduct these costs.


 


(c)
LESSEE shall also have the duty to diligently market the leased minerals that are produced, processed and made marketable as required
above. (See Section 8(a) for an explanation of the allowed deductions for the costs incurred in meeting this duty for royalty
calculation purposes.)


 


8.             PRODUCTION
ROYALTY: As a production royalty LESSEE agrees to pay in the manner prescribed in Section 27 of this lease a sum equal to
Eight percent (8%) of the Market Value (as defined below) of the uranium and other fissionable minerals, and Six and
25/100 percent (6.25%) of the Market Value (as defined below) of all other leased minerals at “the mine”
(as defined in Section 7(a)) produced from the leased premises. (For the treatment of waste material, see Section 13.) Notwithstanding
anything contained herein, it is expressly provided in accordance with Texas Natural Resources Code, §53.018 that if production
is obtained, the state shall receive not less than one-sixteenth (6.25%) of the value of the leased minerals produced from the
leased premises.


 


(a)
Market Value Definition and Procedure. Market value, as that Phrase is used in this lease, shall be defined to mean the higher
of, at the option of the COMMISSIONER: (1) gross proceeds received by LESSEE (e.g., the gross price paid or offered LESSEE) from
the sale of the leased minerals and including any reimbursements for severance taxes and production related costs, or (2) highest
price for materials or minerals (a) produced from the leased premises or from other mines and (b) that are comparable in quality
to the produced leased minerals. Price shall be determined by any generally accepted method of pricing chosen by the COMMISSIONER,
including, but not limited to, comparable sales (e.g. prices paid’ or offered), published prices plus premium, and values/costs
reported to a regulatory agency. Provided, however, that in no event shall the royalty due the State be less than the minimum
royalty amounts set out in this lease.


 


For
purposes of computing and paying royalties under this lease, the market value shall be presumed to be the gross proceeds received
by LESSEE pursuant to a bona fide transaction entered into at arms’ length with a non-affiliated party, as defined hereafter,
of adverse economic interests. An affiliated party is defined for the purposes of this lease as a subsidiary, or parent of LESSEE
or other entity in which LESSEE or an owner of LESSEE has a financial interest by stock ownership or otherwise of ten percent
or more or one related to LESSEE or an owner of LESSEE by blood, marriage or common business enterprise. A non-affiliated party
is defined, for the purposes of this lease, as one without any of the above described characteristics of an affiliated party.
This presumption may be overcome and additional royalties may be assessed under Section 8(a)(2) of this lease when a different
price is established by any of the methods set out in that section.


 


Should
LESSEE incur post-“mine” costs, i.e. costs other than those incurred as a result of the LESSEE’s performance of those
duties required in Section 7(a) of this lease, then, at the option of the COMMISSIONER, the market value of the leased minerals
at “the mine” shall be determined by the market value of the leased minerals, as defined above, after some or all of
these post-“mine” costs have been incurred, less these post-“mine” costs, as defined by this lease and Generally
Accepted Accounting Principles, actually incurred in and directly allocable to out of pocket costs, charges and expenses incurred
by LESSOR in: (1) transporting run of the mine ore from the portal, pit opening or shaft collar to the mill or other place where
beneficiation, concentration or refining takes place; (2) concentrating, including the cost of milling, floatation, thickening,
regrinding, and filtering; (3) roasting; (4) loading and shipping; and (5) handling tailings and mine waste, (such activities
are hereinafter referred to in this paragraph as “marketing”), and no other costs, as follows: If these marketing costs
are actually incurred by LESSEE pursuant to a bona fide transaction entered into at arms’ length with a non-affiliated party
(as defined in Section 8(a) of this lease) of adverse economic interests, then these actual marketing costs, if reasonable, may
be deducted for the purposes of royalty calculation. If these marketing costs are incurred pursuant to other than the above described
transaction, including by means of LESSEE-owned facilities, then this marketing deduction shall be determined by the reasonable
costs that (1) are actually incurred by the party or parties (whether that party is LESSEE and/or some other party) that actually
perform the post-“mine” marketing services (hereinafter referred to in this paragraph as the “marketer”) and
(2) are directly allocable to this marketing of the leased minerals. Therefore, the deduction allowed in this second type of transaction
(i.e. non arm’s length, etc.) shall not include any profit margin, commission or any other similar charge that is charged by any
marketer for the performance of these marketing services. In no event shall any deduction discussed in this paragraph be greater
than the lowest charge available for comparable services or products from an unaffiliated party (defined in Section 8(a) of this
lease) with economic interests adverse to those of LESSEE. In no event shall any transportation deduction discussed in this paragraph
include any transportation cost incurred for transportation within the “the mine”: A deduction for the costs of post-“mine”
transportation shall not exceed the State or Federal tariff, whichever was legally applicable, that was in effect at the time
the leased minerals were transported and that was for comparable movement of minerals. All deductions discussed in this paragraph
are subject at any time to the COMMISSIONER’s review and audit. LESSEE must be able to document these deductions to the COMMISSIONER’s
satisfaction, should the COMMISSIONER at any time request such verification, in order to properly deduct these costs.


 


(b)
Gross Proceeds Definition and Procedure. For the purpose of determining gross proceeds, the following will apply: When a LESSEE
sells or otherwise transfers the leased minerals to a purchaser or .transferee by other than a bona fide transaction entered into
at arm’s length with a non-affiliated party of adverse economic interests, the COMMISSIONER, at his option, may choose to use
(1) such purchaser’s or transferee’s gross proceeds received from its sale of the leased minerals or (2) the total financial benefit
accruing to the LESSEE and the purchaser or transferee for the purposes of royalty calculation instead of the LESSEE’s
gross proceeds received from the sale or transfer to said purchaser or transferee. LESSEE agrees to obtain and provide the COMMISSIONER
all information requested by the COMMISSIONER for the purposes of determining the affiliation or relationship of LESSEE and a
purchaser or transferee of the leased minerals. As in the case of royalty calculation based on the LESSEE’s gross proceeds, no
costs incurred as required under this lease are deductible for the purposes of calculating the royalty due under this lease except
where expressly allowed in this lease. Upon satisfactory evidence provided to the COMMISSIONER and subject to the COMMISSIONER’s
discretion, the purchaser’s or transferee’s gross proceeds or the total of the financial benefit accruing to LESSEE and the purchaser
or transferee will not be used for royalty calculation purposes if LESSEE demonstrates that during the relevant time period either:
(1) the purchaser or transferee was legitimately in the business of purchasing and processing or marketing the leased minerals
at issue from parties other than those w:ith which it is affiliated, as defined above, and that its transaction with the LESSEE
was an arms’ length transaction or (2) the transaction at issue contained terms equivalent to those Of comparable transactions
between non-affiliated parties. In the event LESSEE sells or transfers title to a material and/or mineral covered by this lease
and retains a financial interest or benefit to be returned at some later date, the Commissioner may elect to calculate royalty
due upon the total value eventually returned to LESSEE.


 






     


     


    

 


(c)
Minimum Royalty. Provided, however, in no event shall the royalty due under this lease be less than One Dollar ($1.00)
per pound of the U308 (yellow cake) and Forty Cents ($0.40) per pound of the BeO
(beryllium oxide), contained in the ore produced from leased premises.


 


(d)
In Kind Royalty. Notwithstanding anything contained herein to the contrary, COMMISSIONER may at the COMMISSIONER’s option, upon
not less than 60 days’ notice to LESSEE, require at any time or from time to time that payment of all or any portion of
the royalties accruing to the State under this lease be made in kind (i.e. Six and 25/100 percent (6.25%)) of the
gross production of the leased minerals) at “the mine” without any deduction (including, but not limited to, deduction
for the cost of producing, separating, treating, concentrating, processing, or storing said leased minerals or otherwise meeting
the duties set out in Section 7 of this lease). Any leased minerals taken in kind shall be loaded at LESSEE’s expense upon the
transportation provided by LESSOR at “the mine”. The COMMISSIONER may, at the COMMISSIONER’s option, so require such
in kind payment to be so made at a point prior to “the mine”. In kind payments of the leased minerals made ready for
in kind delivery during a given calendar month shall be made on or before, at the COMMISSIONER’s discretion, the last day of the
following calendar month.


 


(e)
Payments and Reports. Unless the COMMISSIONER elects to take the royalties stipulated in this lease in kind, all royalties not
taken in kind are to be received by the COMMISSIONER, at Austin, on or before the last day of each calendar month for the leased
minerals produced during the preceding calendar month. For the purposes of the prior sentence only, “produced” shall
be defined in the applicable administrative rule effective when the leased minerals on which royalty is owed were physically extracted
from the leased premises. The royalty payment shall be accompanied by an affidavit of the LESSEE or his authorized representative
completed in the following form and manner: The report shall be based on LESSEE’s samples, assays, analyses, measurements and
records and shall set forth, using the appropriate measurements, the type and exact amount of all materials and/or minerals produced
from the leased premises during the preceding calendar month and the amount of royalty being submitted. If any materials and/or
minerals produced from the leased premises have been sold during the preceding calendar month, then the report shall also set
out the type and exact amount of each material and/or mineral sold during the preceding calendar month, the gross amount received
for and the market value of the same (including the method and figures used to calculate this value as shown by any relevant documents,
records, reports or schedules), and to whom sales were made. If these sales were made to an affiliated or related party, the report
shall set out the details of such affiliation or relationship. In addition, the report shall be accompanied by production _records,
ore records, sales receipts, invoices, weight receipts, records of mill, mint, refinery or smelter settlements, and other pertinent
returns or documents which shall substantiate the selling price of the materials and/or minerals and the compliance of LESSEE
with the royalty or other provisions of this lease and any other report, record, or document the COMMISSIONER may require to verify
such compliance. If any materials and/or minerals produced from the leased premises have been used by LESSEE during the preceding
calendar month, then the report must also indicate the type and exact amount of each material and/or mineral so used and the method
and figures used by LESSEE to calculate the value of each material and/or mineral so used as shown by any relevant documents,
records, reports or schedules. Each royalty payment shall be accompanied by a check stub, schedule, summary or other remittance
advice showing, by the assigned General Land Office lease number, the amount of royalty being paid on each lease. Even if royalty
payments are not due or are taken in kind, an affidavit of the LESSEE or his authorized representative, completed in the same
form and manner as described in this paragraph, shall be filed with the General Land Office on or before the last day of each
calendar month.


 


(f)
Penalty and Interest. Delinquent royalty payments and reports shall accrue penalty and/or interest as determined by Texas Natural
Resources Code §53.024 or its successor and any applicable administrative rule in effect at the time the royalty payments
or reports were due. As of the date of this lease, the following are the current key penalty and interest provisions under which
this lease shall operate: If LESSEE pays royalty on or before thirty (30) days after the royalty payment was due, then LESSEE
owes a penalty of 5% on the royalty due or $25.00, whichever is greater. A royalty payment which is over thirty (30) days delinquent
shall accrue a penalty of 10% of the royalty due or $25.00 whichever is greater. In addition to a penalty, royalties shall accrue
interest at a rate of 12% per year; such interest will begin to accrue 60 days after the due date. Documents which are required
under this lease or by law and not filed when due shall incur a penalty in an amount set by the General Land Office administrative
rules. The LESSEE shall bear all responsibility for paying royalties or causing such royalties to be paid in the manner prescribed
in this lease. Payment of the delinquency penalty shall in no way opera e to prohibit the State’s right of forfeiture as provided
by law and by this lease nor act to postpone the date on which royalties were originally due. The above penalty Provisions shall
not apply in cases of title dispute as to the State’s portion of the royalty or to that portion of the royalty in dispute as to
fair market value.


 


9.             SHUT-IN
ROYALTY: If at the expiration of the primary term or at any time thereafter: (1) the leased premises is capable of producing
the named minerals in paying quantities, and (2) this lease is not otherwise being maintained in force and effect, then LESSEE
may, at LESSEE’s option, pay as a shut-in royalty, in the same manner prescribed in Section 28 of this lease, an amount equal
to Fifty Thousand and No/100 Dollars ($ 50,000.00). To be effective, any shut-in royalty must be received by LESSOR
on or before: (l) the expiration of the primary term, or (2) not more than sixty days after LESSEE ceases to produce the named
minerals in paying quantities from the leased premises, or (3) not more than sixty days after LESSEE completes a mining or rehabilitation
operation on the leased premises in accordance with an approved plan of operations, whichever date is latest and must be in the
full amount set out above and this lease must have theretofore been maintained in force and effect. The shut-in royalty payment
shall be accompanied by (1) a statement by LESSEE describ4tg the circumstances requiring the use of this shut-In provision and
(2) an affidavit by LESSE that the mine is shut-in and not producing in paying quantities.


 


If
the shut-in royalty is properly paid and received, this lease shall be considered to be a producing lease and the shut-in payment
shall hold this lease in force and effect for a period of one year from the end of the primary term or from the first day of the
month following the month in which production in paying quantities ceased or in which said mining or rehabilitation operations
were completed, whichever date is later. After that one year period, if the above listed conditions still exist, LESSEE may, at
LESSEE’s option, continue to hold this lease in force and effect by shut-in royalty payments for additional and successive periods
of one year each if the LESSOR receives the same shut-in royalty amount set out above each year on or before the expiration of
the previously held one year period. If the due date of a shut-in royalty payment should fall on a Saturday, Sunday or a legal
state or federal holiday, the due date shall be extended to the next calendar day which is not a Saturday, Sunday, or such a holiday.
It is provided, however, that shut-in royalty cannot serve to hold this lease in force and effect for more than five years from
the date this lease is initially shut-in (i.e. from the first date of the first shut-in period of this lease). LESSEE may proportionately
reduce any shut-in payment that if made will hold this lease in effect for less than a full year because of this five (5) year
maximum.


 


None
of these provisions shall relieve LESSEE of the obligation of reasonable development. Neither receipt nor retention by the LESSOR
of an improperly paid shut-in payment shall operate as a ratification or a re-grant of the interest covered by this lease if this
lease terminated because of improper payment, nor shall such receipt or retention estop LESSOR from asserting the termination
of this lease. Minimum advance royalty that has been paid shall not be credited against a shut-in payment Lessee chooses to make.
Shut-in royalty payment shall not be credited against any production royalty due as provided in this lease for the leased minerals
actually produced during any shut-in period or thereafter.


 


10.           MEASURING,
ASSAYING AND ANALYZING: LESSEE shall install and use scales, meters, or any other measuring device reasonably necessary to
accurately measure the produced leased minerals, prior to said leased minerals being moved from the leased premises. It is understood
and agreed that the COMMISSIONER may, with reasonable notice, require the LESSEE, at any time and at the LESSEE’s expense, to
assay and/or analyze the produced leased minerals in a manner consistent with standard techniques of the industry to determine
its material or mineral content and/or its quality.


 






     


     


    

 


11.           INSPECTIONS:
The books, accounts, weights, wage contracts and records, correspondence, records, contracts and other documents relating to the
production, transportation, assaying, analyzing, processing, recovery, use, sale, and marketing of the leased minerals shall at
all times be subject to inspection and examination by the COMMISSIONER, or the COMMISSIONER’S authorized representative,
and copies of such records shall be forwarded to the COMMISSIONER at Austin, Texas upon request.


 


LESSEE’s
mining, milling, and processing operations shall be subject at any time to inspection by the COMMISSIONER or the COMMISSIONER’S
authorized representative. This inspection right shall include, but shall not be limited to, the following: the COMMISSIONER or
the COMMISSIONER’S authorized representative is authorized (1) to check scales, sampling and assaying procedures as to their accuracy,
(2) to have full access to any of the entries, shafts, pits, stopes or workings on the leased premises and to any of LESSEE’s
other mining, milling and processing operations, and (3) to examine, inspect, survey and take measurements of same and to examine
all books and weight sheets, records and any other documents that relate to these operations or that may show in any way the material
or mineral output of the leased premises or any other aspect of compliance with the covenants or conditions of this lease, whether
express or implied. Copies of any records or other documents pertaining to these operations shall be furnished to the COMMISSIONER
upon written request. LESSEE shall cooperate in such manner as shall be reasonably necessary for said inspection, survey, or examination.
All inspections, examinations, and the like provided for herein may be performed at any time and without any requirement of prior
notice.


 


12.           LIEN:
By acceptance of this lease, LESSEE grants the State, in addition to any applicable statutory lien, an express contractual lien
on and security interest in all leased minerals in and extracted from the leased premises, all proceeds which may accrue to LESSEE
from the sale of such leased minerals, whether such proceeds are held by LESSEE or by a third party, and all fixtures on and improvements
to the leased premises used in connection with the production or processing of such leased minerals in order to secure the payment
of all royalties or other amounts due or to become due under this lease and to secure payment of any damages or loss that LESSOR
may suffer by reason of LESSEE’s breach of any covenant or condition of this lease, whether express or implied. This lien and
security interest may be foreclosed with or without court proceedings in the manner provided in Title 1, Chapter 9 of the Texas
Business and Commerce Code.


 


LESSEE
agrees that the COMMISSIONER may require LESSEE to execute and record such instruments as may be reasonably necessary to acknowledge,
attach or perfect this lien. LESSEE hereby represents that there are no prior or superior liens arising from and relating to LESSEE’s
activities upon the above-described property or from LESSEE’s acquisition of this lease. Should the COMMISSIONER at any time determine
that this representation is not true, then the COMMISSIONER may declare this lease forfeited as provided in Section 18 of this
lease.


 


13.           REQUIRED
FILINGS: A log, sample analysis, or other information obtained from each test drilled or area sampled on the area covered
by this lease shall be filed with the General Land Office upon request. Within ninety (90) days after any sampling, drilling,
mining or other evaluation program shall have been completed or abandoned, LESSEE shall file in the General Land Office an evaluation
map or plat showing all geological formations penetrated, the depth, thickness, grade, and mineral character of all ore bodies,
the water bearing strata, the elevation and location of all test holes, and other pertinent information. Tue correctness of such
map or plat shall be sworn to by LESSEE or his representative. Further, LESSEE must furnish annually on the anniversary date of
this lease a map or plat showing all activities and workings conducted on or in association with this lease. The filings discussed
in this section shall be required notwithstanding the fact that this lease may have subsequently terminated, been forfeited or
been released.


 


14.           DEVELOPMENT:
If the leased minerals are capable of being economically produced by the LESSEE in commercial quantities, LESSEE agrees to diligently
develop the leased premises into a viable mine and to mine the leased minerals in such a manner as is consistent with good mining
practice including, but not limited to, in a manner consistent with General Land Office and Railroad Commission rules and regulations.
Neither bonus, rentals nor royalties paid or to be paid hereunder shall relieve the LESSEE from any of the obligations herein
expressed. Such methods -of mining must be used as will insure the extraction of the greatest possible amounts of the leased minerals
consistent with prevailing good mining practice. Specific examples of compliance with the above include, but are not limited to:


 


		(a)	LESSEE
                                         agrees to slope the sides of all surface pits, excavations and subsidence areas in a
                                         manner consistent with good mining practices. Such sloping is to become a normal part
                                         of the operation;





		(b)	Whenever
                                         practicable, all surface pits, excavations and subsidence areas shall not be allowed
                                         to become a hazard to persons, wildlife or livestock;





		(c)	LESSEE
                                         agrees to mine the leased minerals in such a manner as to leave as much level surface
                                         as is reasonable and consistent with prevailing good mining practices; All development
                                         shall be done in such a manner as to prevent the pollution of water.





		(d)	In
                                         underground workings, all shafts, inclines, and drifts must be adequately supported and
                                         all parts of workings, where minerals commercially minable are not exhausted, shall be
                                         k pt free from water and waste materials to the extent reasonably possible;





		(e)	Underground
                                         workings are to be protected against fire, floods, creeps and squeezes. If such events
                                         do occur, they shall be checked by LESSEE to the extent and in a manner which is in keeping
                                         with good methods of mining;





		(f)	If
                                         relevant, LESSEE shall take all steps a reasonably prudent operator would take to adequately
                                         protect the leased minerals from drainage by operations on other lands or this lease
                                         shall be subject to forfeiture by the COMMISSIONER; and





		(g)	As
                                         governed by the duties and standards set out in Section 7 of this lease, all leased minerals
                                         produced by LESSEE from the leased premises that cannot be so marketed (herein called
                                         “waste materials”) will be used to fill the pits, shafts and excavations on
                                         the leased premises and no royalty shall be due thereon ·at that time. No other
                                         use of these waste materials or any leased mineral is allowed unless the LESSEE obtains
                                         the COMMISSIONER’s prior written consent to such other use. However, should another use
                                         of the leased minerals be permitted, royalty shall be due for these used leased minerals
                                         in accordance with Sections 7 and 8 of this lease and, should another use of the waste
                                         materials be permitted, the waste material royalty exception of this subsection shall
                                         not apply and royalty shall be due for these used waste materials in accordance with
                                         sections 7 and 8 of this lease. The LESSEE’s duty regarding the leased minerals as set
                                         out in Section 7 of this lease is a continuing duty. Should changing technology or market
                                         conditions render any component of former waste materials marketable, then LESSEE shall
                                         (1) process, make marketable and market those former waste materials as set out in Section
                                         7 of this lease and (2) pay royalty thereon in accordance with Sections 7 and 8 of this
                                         lease. The state reserves the title to all minerals contained in these waste materials
                                         both during the term of this lease, subject to LESSEE’s duty set out above, and upon
                                         the expiration, surrender, or termination of this lease.



 


Nothing
in this section shall be construed to give LESSEE the right to sell or otherwise dispose of minerals or substances other than
those covered hereby.


 


In
the event LESSEE, in the interest of economy or efficiency of mining operations or for other valid reasons, intends to conduct
mining operations on or within the leased premises in conjunction with mining operations on or within any other land (whether
state or privately owned), for example by commingling production, then prior thereto LESSEE must obtain the COMMISSIONER’s approval
of such plan of operations, which shall not unreasonably be withheld.


 






     


     


    

 


15.           RECLAMATION:
By the end of the term of this lease, LESSEE shall grade the leased premises so that the grade of the leased premises shall approximate
the grade of the surrounding topography. Upon completion of the required grading, the surface shall be reseeded with a seed mixture
approved by the COMMISSIONER. Should this obligation not be met by the end of the term of this lease, it shall nevertheless survive
and continue beyond the term of this lease and shall be an obligation owed to the state. This obligation is owed by LESSEE in
addition to any other obligation imposed upon LESSEE by this lease, including, but not limited to, the requirements of Section
6 hereof and LESSEE’s plan of operations.


 


16.           TRANSFERS
(E.G. ASSIGNMENTS): After obtaining written approval by the COMMISSIONER, which shall not unreasonably be withheld, this lease
may be transferred at any time. All transfers must reference the lease by the file number and must be recorded in any county in
which any portion of the leased premises is located, and each such recorded transfer or a certified copy of each such recorded
transfer shall be filed in the General Land Office within ninety (90) days after the execution of the transfer, as provided by
Texas Natural Resources Code §52.026, accompanied by the appropriate filing fee. A transfer is not effective until these
required documents are properly filed in the General Land Office. Failure to properly file these required documents in the General
Land Office shall subject this lease to forfeiture. The filing fee due under this section shall be determined by the applicable
statute and/or administrative rule in effect at the time the transfer is filed in the General Land Office.


 


Upon
any assignment of this lease, in whole or in part, the assignee will succeed to all rights and be subject to all liabilities,
claims, obligations, penalties, and the like, theretofore incurred by the assignor, including any liabilities to the State for
unpaid royalties. However, such assignment will not have the effect of releasing the assignor from any liability, claim, obligation,
penalty, Or the like, theretofore accrued in favor of the State. In addition, upon any assignment of this lease, the assignee
assumes, for the benefit of the State, the obligation to fulfill all provisions and covenants of this lease, both expressed and
implied. Assignee, as used in this section, shall also include any successor, devisee, legal representative or heir of an assignee
who acquires any right or obligation initially held by that assignee under this lease.


 


Upon
assignment of any divided part of this lease, whether divided by acreage, zone, horizon, vein, mineral or other similar method,
said assigned interest shall become segregated from the remaining portion of this lease so that from the date of such assignment
or assignments, the provisions hereof shall extend and be applicable severally and separately to each segregated portion of the
land covered hereby and so assigned, so that performance or lack of performance of the provisions hereof as to any segregated
portion of this lease shall not benefit or prejudice any other segregated portion, to the same extent as if each segregated portion
of the lands covered hereby are under separate leases. It is understood and agreed that the effect of such an assignment is to
create two separate leases, both of which must comply with their lease terms in order to keep their leases in force.


 


In
the case of ownership or assignment of any undivided interest in this lease, no covenant or condition thereof, implied or expressed,
is divisible. Anything less than complete compliance with said covenants or conditions shall render this lease subject to forfeiture
and/or termination as provided by the lease’s provisions.


 


17.           RELEASES:
The LESSEE may release all or any portion of this lease to the State at any time. To release this lease, LESSEE must record the
relevant instrument or instruments evidencing such release in each county where the leased premises are located and mail a certified
copy of each such recorded release to the General Land Office, accompanied by the appropriate filing fee. Any release will not
have the effect of releasing LESSEE from any liability, claim, obligation, penalty, or the like, theretofore accrued in favor
of the State nor will it have the effect of reducing any amount due under this lease. A release is not effective until the required
certified copies of that release are filed in the General Land Office. Failure to file the required certified copies of a release
in the General Land Office shall subject this lease to forfeiture. The filing fee due under this section shall be determined by
the applicable statute and/or administrative rule in effect at the time the release is filed with the General Land Office.


 


18.           AUTHORITY
OF MANAGER OR AGENT: When required by the COMMISSIONER, the authority of a manager or agent to act for LESSEE must be filed
in the General Land Office.


 


19.           FORFEITURE:
If LESSEE shall fail or refuse to make payment of any sum due, or if LESSEE or LESSEE’s agent should refuse the COMMISSIONER
or his authorized representative access to the records or other data pertaining to the operations under this lease, or if LESSEE
or LESSEE’s agent should knowingly make any false return or false report concerning this lease, or if any of the material
terms of this lease should be violated, then this lease and all rights hereunder shall be subject to forfeiture by the COMMISSIONER,
and the COMMISSIONER may declare this forfeiture when sufficiently informed of the facts which authorize a forfeiture, and, in
such event, the COMMISSIONER shall write on the wrapper containing the papers relating to this lease words declaring the .forfeiture
and sign it · officially; and this lease, and all rights under this lease, together with all payments made under it, shall
thereupon be forfeited. Notice of the forfeiture shall be mailed forthwith to the person or persons shown by the records of the
General Land Office to be the owner of the forfeited lease at their last known addresses as shown by said records. However, nothing
herein shall be construed as waiving the automatic termination of this lease by operation of law or by reason of any term or condition
arising hereunder.


 


20.           REINSTATEMENT:
A forfeiture may be set aside and all rights under this lease may be reinstated before the rights of another party intervene,
upon satisfactory evidence to the COMMISSIONER of future compliance with the provisions of the law, this lease, and any rules
adopted applicable to this lease and with any conditions placed upon the reinstatement. LESSEE shall offer the evidence required
for reinstatement within 30 days after the date the notice of forfeiture was mailed and after such 30 days, LESSEE shall have
no future opportunity for reinstatement.


 


21.           FORCE
MAJEURE: When, after effort is made in good faith, LESSEE is prevented from complying with any express or implied covenant
of this lease or from producing and mining the named material from the leased premises by reason of storm, flood, or other acts
of God, fire, war, rebellion, insurrection, riot, strikes, or as result of any valid order, rule or regulation of any court or
governmental authority having jurisdiction, or litigation required to gain access to the lands described in this lease under the
power of eminent domain as provided in §11.079, Texas Natural Resources Code, effective September 1, 1987 (for the period
beginning with the filing of the action in a court of competent jurisdiction until a final non-appealable order is entered in
such action but not including periods of pre-filing discussions or negotiations), then upon written application by LESSEE and
upon written approval thereof by the COMMISSIONER, LESSEE’s obligation to comply with such covenant shall be suspended while
LESSEE is so prevented; and LESSEE shall not be liable for damages for failure to comply with such covenant while LESSEE is so
prevented; and this lease shall be extended while and so long as LESSEE is so prevented from producing and mining the named material
from the leased premises. Provided, however, that nothing in this section shall be construed to suspend the ·condition
of paying delay rentals as set out in Section 3 hereof. As dictated by 31 Texas Administrative Code §10.3(d)(l), the term
of this lease may not be extended by this Section to exceed twenty (20) years.


 


22.           USE
OF WATER: LESSEE shall have the right to use water produced during operations under this lease as is reasonably necessary
for operations under this lease except water from wells or tanks of the surface owner or any surface lessee; provided, however,
LESSEE shall not use potable water or water suitable for livestock or irrigation purposes for operations without the prior written
consent of the COMMISSIONER.


 


23.           DAMAGE
PAYMENTS FOR PERSONAL PROPERTY, IMPROVEMENTS, LIVESTOCK AND CROPS: LESSEE shall pay damages caused by its operations to all
personal property, improvements, livestock and crops on said land to the owner of said items.


 






     


     


    

 


24.           SURFACE
USE: Subject to the obligation to pay surface damages as set out in Section 33 of this lease, and to any reservation in favor
of LESSOR, LESSEE shall have the right to occupy within the limits of this lease so much of the surface as may be reasonably necessary
for the development of leased minerals; and shall have the right of ingress and egress over and across the area embraced herein.


 


25.           SURFACE
USE LIMITATIONS: LESSEE shall not drill or mine, erect buildings or conduct any mining operations within three hundred (300)
feet of improvements without reasonably compensating the owner of said improvements.


 


26.           REMOVAL
OF EQUIPMENT AND FIXTURES: LESSEE shall not be permitted to remove any casing or wellhead from any well or bore hole during
the life of this lease or after the termination, expiration, or forfeiture of this lease without the written consent of the COMMISSIONER
or his authorized representative. LESSEE shall have the right to remove all equipment, machinery, tools, supplies, and installations,
excluding the casing and wellhead, placed by LESSEE on the leased premises during the life of this lease and for a period of three
hundred sixty-five (365) days after the termination, expiration or forfeiture of this lease, unless an extension in writing of
such three hundred sixty-five (365) day period has been obtained from the COMMISSIONER or some other written agreement is reached
between all parties to this lease.


 


27.           FILING
REQUIREMENTS: LESSEE shall record this executed lease in each county in which the lease premises is located. After such recordation,
LESSEE shall obtain a certified copy of the recorded lease from the county clerk. LESSEE shall send such certified copies to the
General Land Office within ninety days of the date of recordation.


 


28.           PAYMENTS,
NOTICES AND OTHER REQUIRED DOCUMENTS: Unless otherwise expressly provided for herein, all payments provided for in this lease
shall be payable to the COMMISSIONER of the General Land Office at Austin, Texas, for the use and benefit of the State of Texas.


 


All
notices, payments and other documents required or due hereunder shall be given to the parties at their respective addresses as
follows and shall be deemed received only upon actual receipt, unless ’‘receipt” is otherwise defined by an applicable Texas
Statute or Administrative Rule:


 





	 	(a)  If to LESSOR, COMMISSIONER,
    General Land Office, State or State of Texas:
	 	 	General Land Office	 
	 	 	1700 North Congress	 
	 	 	Austin, Texas 78701	 
	 	 	Attn: Minerals Leasing Division	 
	 	 	 	 
	 	(b)  If to LESSEE:	Texas Rare Earth Resources Inc.	Tax Payer ID # __________
	 	 	304 Inverness Way South, Suite 365	 
	 	 	Englewood, Colorado 80112	 




 


or
addressed to any of the above parties at such other addresses as such party shall hereafter furnish to the other parties in Writing.
Any notice of change of address shall not be binding on a party until the expiration of 30 days after the receipt of such notification
by that party. Such notification must be in writing, delivered or mailed by registered or certified mail.


 


29.           APPLICABLE
LAW: The law of the United States and the State of Texas shall apply to and govern this lease in any and all matters whatsoever.
For the purposes of this lease, such law shall include, but shall not be limited to, Texas Water Code §61.117 and all current
and future General Land Office and/or School Land Board administrative rules governing State minerals other than oil and gas that
are not in direct conflict with the provisions contained in this lease. In addition, mining operations in submerged areas are
further subject to the applicable laws of the United States regarding mining in such submerged areas.


 


30.           BINDING
EFFECT: This lease and the provisions hereof shall be binding upon and inure to the benefit of State and LESSEE and their
respective heirs, devisees, legal representatives, successors and assigns.


 


31.           IMPLIED
COVENANTS: Neither payment of bonus, rental, royalties nor compliance with any other covenant or condition of this lease shall
relieve the LESSEE from any obligation expressed in this lease or implied by law unless this lease expressly so relieves the LESSEE.


 


32.           REMEDIES:
The remedies provided for in this lease are not exclusive and in no way shall limit any other lawful claim or remedy available
to the State under law.


 


33.           PAYMENT
OF DAMAGES FOR USE OF SURFACE: Upon the issuance of this lease, LESSEE shall pay, in the manner prescribed in Section 27 of
this lease, surface damages to the LESSOR in the amount of Dollars ($. QJ for the use of the surface of the leased premises
in prospecting for, exploring, developing, or producing the leased minerals during the first year of this lease. On or before
one (1) year after the date of this lease, if this lease is still held in effect on that anniversary date, LESSEE shall pay, in
a like manner, surface damages to LESSOR in a like amount for like use of the surface of the leased premises during the second
year of this lease. On or before two (2) years after the date of this lease (ie. on the 20 NA anniversary date), if this
lease is still held in effect on that anniversary date, LESSEE shall pay, in a like manner, surface damages to LESSOR in a like
amount for like use of the surface of the leased premises during the third year of this lease. In no event shall any payments
for damages for use of the surface be paid to any party other than LESSOR, nor production royalty or any other benefit reserved
to LESSOR in this lease.


 


34.           SEVERABILITY:
If any section of this lease or its application to any person or circumstance shall be held to be invalid by a court of competent
jurisdiction, such invalidity shall not affect any other section of this lease, or any application thereof, that can be given
effect without the invalid section or application. To this end, the sections of this lease, or any portion thereof, are declared
to be severable.


 


35.           LEASE
SECURITY: LESSEE shall take the degree of care and all proper safeguards a reasonably prudent operator would take to protect
the leased premises and to prevent theft of all materials and/or minerals produced from the leased premises. This includes, but
is not limited to, the installation of all necessary equipment, seals, locks, or other appropriate protective devices on or at
all access points at the lease’s production, gathering and storage systems where theft of said materials and/or minerals can occur.
LESSEE shall be liable for the loss of any of said materials and/or minerals resulting from theft and shall pay the State royalties
thereon as provided in this lease on all leased minerals lost by reason of theft.


 






     


     


    

 


36.           ANTIQUITIES
CODE: In the event that any foundation, site, item, or the feature of archaeological, scientific, or historic interest is
encountered during the activities authorized by this lease, LESSEE will immediately cease such activities and will immediately
notify the LESSOR and the Texas Antiquities Committee so that adequate measures may be undertaken to protect or recover such discoveries
or findings, as appropriate. In this regard, LESSEE is expressly placed on notice of the National Historical Preservation Act
of 1966, (PB-89-66, 80 Statute 915; 16 U.S.C.A. 470) and the Antiquities Code of Texas, Chapter 191, Natural Resources Code.


 


37.           INDEMNIFICATION:
Lessee hereby releases and discharges the State of Texas, its officers, employees, partners, agents, contractors, subcontractors,
guests, invitees, and their respective successors and assigns, of and from all and any actions and causes of action of every nature,
or other harm, including environmental harm, for which recovery of damages is sought, including, but not limited to, all losses
and expenses which are caused by the activities of Lessee, its officers, employees, and agents arising out of, incidental to,
or resulting from, the operations of or for Lessee on the leased premises hereunder, or that may arise out of or be occasioned
by Lessee’s breach of any of the terms or provisions of this Agreement, or by any other negligent or strictly liable act or omission
of Lessee. Further, Lessee hereby agrees to be liable for, exonerate, indemnify, defend and hold harmless the State of Texas,
its officers, employees and agents, their successors or assigns, against any and all claims, liabilities, losses, damages, actions,
personal injury (including death), costs and expenses, or other harm for which recovery of damages is sought, under any theory
including tort, contract, or strict liability, including attorneys’ fees and other legal expenses, including those related to
environmental hazards, on the leased premises or in any way related to Lessee’s failure to comply with any and all environmental
laws; those arising from or in any way related to Lessee’s operations or any other of Lessee’s activities on the leased premises;
those arising from Lessee’s use of the surface of the leased premises; and those that may arise out of or b-e occasioned by Lessee’s
breach of any of the terms or provisions of this Agreement or any other act or omission of Lessee, its directors·, officers,
employees, partners, agents, contractors, subcontractors, guests, invitees, and their respective successors and assigns. Each
assignee of this Agreement, or an interest therein, agrees to be liable for, exonerate, indemnify, defend and hold harmless the
State of Texas and its officers, employees, and agents in the same manner provided above in connection with the activities of
Lessee, its officers, employees, and agents as described above. EXCEPT AS OTHERWISE EXPRESSLY LIMITED HEREIN, ALL OF THE INDEMNITY
OBLIGATIONS AND\OR LIABILITIES ASSUMED UNDER THE TERMS OF THIS AGREEMENT SHALL BE WITHOUT LIMITS AND WITHOUT REGARD TO THE CAUSE
OR CAUSES THEREOF (EXCLUDING PRE-EXISTING CONDITIONS), STRICT LIABILITY, OR THE NEGLIGENCE OF ANY PARTY OR PARTIES (INCLUDING
THE NEGLIGENCE OF THE INDEMNIFIED PARTY), WHETHER SUCH NEGLIGENCE BE SOLE, JOINT, CONCURRENT, ACTIVE, OR PASSIVE. NOTWITHSTANDING
THE FOREGOING, THE LESSEE SHALL NOT BE LIABLE TO INDEMNIFY WITH REGARD TO ANY CLAIM OR MATTER ARISING THROUGH THE GROSS NEGLIGENCE
OF THE LESSOR OR ANY AGENT, REPRESENTATIVE OR SERVANT OF THE LESSOR.


 


38.           EXECUTION:
This hard mineral lease must be signed and acknowledged by the LESSEE before it is filed of record in the county records and in
the General Land Office of the State of Texas.


 





	 	 	/s/  Daniel
    E. Gorski for Texas Rare Earth Resources
	 	 	LESSEE
	 	 	 
	 	 	BY:  Daniel E. Gorski
	 	 	 
	 	 	TITLE:  Chief Operating Officer
	 	 	 
	 	 	DATE:  2 December 2011







 


IN
TESTIMONY WHEREOF, witness the signature of the Commissioner of the General Land Office, under the seal of the General Land Office.


 





	 	 	/s/  Jerry
    E. Patterson
	 	 	COMMISSIONER OF THE GENERAL LAND OFFICE OF THE
    STATE OF TEXAS
	 	 	 
	 	 	APPROVED
	 	 	 
	 	 	Minerals		
	 	 	Legal		
	 	 	Dep. Com.		 
	 	 	Chief Clerk		 
	 	 	 







 






     


     


    

 


STATE
OF TEXAS (CORPORATION ACKNOWLEDGMENT)


 


COUNTY
OF HUDSPETH


 


BEFORE
ME, the undersigned authority, on this day personally appeared Daniel E. Gorski known to me to be the person whose name is subscribed
to the foregoing instrument, as he and acknowledged to me that he executed the same for the purposes and consideration therein
expressed, in the capacity stated, and as the act and deed of said corporation.


 


Given
under my hand and seal of office this the 2nd day of December, 2011.


 





	 	/s/  L. Kay Scarbrough	 
	 	 
	 	Notary Public, in and for Hudspeth County, Texas
	 	 
	 	My commission expires:  May 7, 2014




 






     


     


    

 





	State of Texas	§	Affidavit of Waiver	 
	County of Hudspeth	§	of Agency Rights	 




 


Know
all men by these presents, that whereas, the undersigned


 


Texas
Rare Earth Resources of 304 Inverness Way S., Englewood, CO 80112 


(Mailing
Address)


 


is
the owner of the entire surface estate of the tract of mineral classified land described in Exhibit “A” attached hereto,
(said tract hereinafter referred to as “the land”); and


 


Whereas,
pursuant to Tex. Nat. Res. Code Ann. § 53.061 et seq. (Vernon 1982, Supp. 1996), the undersigned is designated as the state’s
agent for the leasing of the land for the exploration and production of minerals other than oil and gas; and


 


Whereas,
the undersigned desires to waive the right and duty to act as the state’s agent for the leasing of the land for the exploration
and production of minerals other than oil and gas, such waiver being subject to the following conditions:


 


1.          This
waiver must be filed for record in each county where any portion of the land is situated. A certified copy of each recorded waiver
must be filed in the General Land Office.


 


2.          The
undersigned, having waived the right and duty to act as agent for the state, and any assignee, heir or anyone else succeeding
to all or part of the undersigned’s surface estate interest in the land, are not the state’s agents and are not entitled to receive
any part of the bonus, rental, royalty and other consideration which would ordinarily accrue to the owner of the soil under Subchapter
C of Chapter 53 of the Texas Natural Resources Code as long as a lease issued under the provisions of Section 53.081, of the Natural
Resources Code is in effect.


 


3.          Upon
the expiration, termination or forfeiture of a lease issued pursuant to the provisions of Section 53.081 of the Natural Resources
Code, the agency rights and duties of the undersigned as owner of the soil are reinstated without the necessity for further action
by the owner of the soil, the board or the commissioner.


 


Now,
therefore, I the undersigned do hereby waive my right and duty to act as agent for the state in the leasing of the land for the
exploration and production of minerals other than oil and gas, and my right to receive any part of the bonus, rental, royalty
and other consideration which would ordinarily accrue to the owner of the soil under Subchapter C of Chapter 53 of the Natural
Resources Code, and do hereby acknowledge that this waiver is governed by and subject to the conditions contained herein, as well
as any applicable statute, administrative rule, or law of this state and all amendments thereto.


 


In
witness whereof, I have set my hand this the 2nd day of December, 2011.


 





	 	/s/
Daniel E. Gorski	 


 


SWORN
TO AND ACKNOWLEDGED BEFORE ME this 2nd day of December, 2011, by


 





	 	 	/s/
    L. Kay Scarbrough	 
	 	 	NOTARY PUBLIC, STATE OF TEXAS