[LETTERHEAD FOR GEMS & MINERALS CORP.]

                                                              September 5, 1996

Mrs. Audrey I. Hayden
240 Hemlock Street
Broomfield, Co. 80020

     RE: Purchase of Mineral Rights for Property in Clear Creek County, Colorado

Dear Mrs. Hayden:

     On behalf of Gems & Minerals Corporation ("Gems"), this letter Purchase
Agreement provides for the transfer of equitable title and ownership of the
mineral rights and property rights described below to Gems. It is expressly
understood that Gems will acquire title and ownership of these mineral rights
and property rights subject to confirmation of your legal title to the Property
(see below) pursuant to a title insurance commitment from the Clear Creek-Gilpin
Abstract & Title Corporation, Georgetown, Colorado. In the event that a title
opinion or title commitment questions your legal title to any of the Property to
be conveyed and transferred pursuant to this Purchase Agreement, you agree to an
equitable adjustment in the terms and compensation to be paid in consideration
of the transfer of ownership of the mineral and property rights to Gems &
Minerals Corporation. The terms of our purchase agreement are as follows:

     1. Property. Subject to the terms and conditions of that certain Mineral
Lease and Option to Purchase dated November 12, 1975, between Audrey I. Hayden
(`Seller"), as Lessor, and Gold Developers and Producers, Incorporated, as
Lessee, as the same way have been amended and modified (the "Mineral Lease"),
the property herein purchased transferred and conveyed consists of all the
right, title and interest of Seller in and to all mining claims and mining
properties, as well as all of the Seller's right and interest of Lessor under
the Mineral Lease, and all of Seller's right, title and interest in and to all
mines, minerals, lodes and veins, dips and spurs, dump, plants, fixtures,
improvements, water rights and/or any and all other rights, casements, and/or
appurtenances whatsoever relating thereto, including, without limitation, all of
the exclusive right, title and interest of Seller to mine, extract, explore,
develop, mill, beneficiate, store, remove and market all of the minerals,
metals, ores, materials of whatsoever nature or sort found either on, in under,
upon and/or belonging to or associated with or used or useable in connection
with the property, rights and interest or relating in any way to the subsurface
of that certain property located in the County of Clear Creek, in the State of
Colorado, more fully described in attached Exhibit A (the "Property").

     2. Purchase Price: Extension of Mineral Lease.

          (a) Purchaser agrees to pay and Seller agrees to accept as sufficient
good and valuable consideration, the sum of seventy-five thousand ($75,000)
dollars as the purchase price for the Property (the "Purchase Price"). Seller
hereby further acknowledges receipt of Five Thousand ($5,000) dollars on or
about December 21, 1995 as an initial payment made toward the Purchase Price
(the "Initial Payment").

<PAGE>

Gems & Minerals Corp.
Purchase of Mineral Rights for Property

          (b) Seller hereby acknowledged that, as of the date hereof, all
payments under the Mineral Lease are current and Seller forever waives and
releases Purchasers and any other parties, including any parties under the
Mineral Lease, from any claims for back lease payments. Purchaser further agrees
to guarantee to Seller, the payments in the sum of One Thousand ($1,000) dollars
per month (the "Monthly Payments") due and owing to Sell under the terms and
conditions of the Mineral Lease.

          (c.) On the date upon which the final payment of the Monthly payment
is made, Purchaser will pay Seller the Purchase Price less the Initial Payment
(the "Final Payment"). Purchaser may, at its option, prepay in whole or in part,
the Final Payment at any time without penalty.

     3. Closing: The execution of this Purchase Agreement and the Payment of all
monies owed to Seller as set forth in paragraph 2 above shall constitute the
closing and consummation of the sale and purchase of the Property, which shall
be for all purposes effective to convey equitable title to the Property as of
the date of this Purchase Agreement. Full legal title will be conveyed by
appropriate deeds and conveyance instructions to Purchaser within ten (10) days
from Purchaser's acceptance of evidence of title (see paragraph 4(a) infra).
Seller and Purchaser expressly agree that equitable title to all property to be
conveyed by this Purchase Agreement will provide Purchaser with all right, title
and interest to mine, mill, beneficiate, operate, mortgage, convey, or otherwise
deal with the Property with respect to any and all third parties and state or
federal governmental entity or representative as the owner of such Property.
Seller further agrees that Seller will not in any manner or in any action or
omission interfere with these rights of equitable ownership of Purchaser as
stated herein, and will cooperate in any manner deemed necessary or appropriate
and as may be requested by Purchaser.

     4. Conditions of Closing: The obligations of Purchaser incident to this
closing are subject to the following conditions:

     a. Within a reasonable time, not to exceed one hundred twenty (120) days
from the date of this Purchase Agreement, Seller shall provide Purchaser with
evidence acceptable to Purchaser in the form of a title commitment from the
Clear Creek-Gilpin Abstract and Title Corporation, Georgetown, Colorado,
confirming that Seller is fully vested with all right, title and interest in and
to the Property free and clear of any and all liens and encumbrances other than
the Mineral Lease and such other exceptions to title as are acceptable to
Purchaser.

     b. Within a reasonable time, not to exceed one hundred twenty (120) days
from the date of this Purchase Agreement, Purchaser shall have satisfied itself
that the property to be conveyed hereunder includes all of the rights to utilize
water rights, under, but not limited to, the Silver Age Loan Mining Claim, U.S.
Survey No. 4648 for mining, milling, manufacturing, mechanical, power and other
beneficial uses as required by Purchaser and such uses must be acceptable to
Purchaser and must not have been abandoned. If prior to the date set forth
above, Purchaser, in its sole and absolute discretion, determines that any of
the foregoing conditions shall not have been fulfilled, then Purchaser may
demand an equitable adjustment in the purchase price and/or other terms and
conditions of this Agreement, and failing to reach agreement with Seller or such
equitable adjustment, then may declare this Purchase Agreement to be null and
void and of not further effect, and convey by quit claim deed all right, title
and interest in and to the Property to Seller, and to execute any necessary or
appropriate instruments to fully effect such return to Seller.

     5. Remedies: In the event that following the Closing Purchaser shall fail
to perform any of its obligations in respect to the payment of any sums due to
Seller following the Closing, Seller's sole remedy on account thereof shall be
as against the Property (i.e.) the definitive agreement shall be non-recourse to
Purchaser) and seller shall be entitled to retain all amounts therefore paid to
Seller by Purchaser.


                                        2
<PAGE>

Gems & Minerals Corp.
Purchase of Mineral Rights for Property

     6. Confidentiality: Neither the Seller nor the Purchaser shall disclose to
any party the existence or terms of this Purchase Agreement. This obligation
shall survive the Closing.

     7. Binding Effect: The foregoing embodies all the terms and conditions of
the Purchase Agreement by which title to the Property is and has been
transferred this day from Seller to Purchaser.

     8. Counterpart Originals. This Purchase Agreement may be executed in
counterpart originals, each of which shall be deemed an original, with the same
effect as if the signatures thereto were on the same instrument.

     9. Prior Agreement Void: This Purchase Agreement supersedes any and all
agreements(s), in writing or otherwise, between the parties prior to the date of
this Purchase Agreement, and all such prior agreements shall be and are null and
void and of no force or effect.

     If the foregoing is acceptable to you, kindly indicate by signing and
forwarding to the undersigned the enclosed copy of this Purchase Agreement.

                                           Very truly yours,

                                           GEMS & MINERALS CORP.


                                           /s/ Anthony DiMatteo
                                           ------------------------------------
                                           Anthony DiMatteo
                                           Secretary Treasurer of Corporation

ACCEPTED AND AGREED TO THIS
16th DAY OF Sept, 1996


/s/ Audry I. Hayden
----------------------------
AUDREY I. HAYDEN


                                       3

<PAGE>

                  [LETTERHEAD FOR FRANKLIN CONSOLIDATED MINING
                                 COMPANY, INC.]

                                                      September 12, 1996

Mrs. Audrey I. Hayden
240 Hemlock Street
Broomfield, Co. 80020

          RE:  Extension of the Mineral Lease and Option to Purchase, dated
               November 12, 1975, as the same has been amended from time to time
               (the "Mineral Lease")

Dear Mrs. Hayden:

     Reference is made to that certain Mineral Lease hereinabove referenced,
between you and Franklin Consolidated Mining Co., Inc. (the "Company") as a
successor in interest to Gold Developers and Producers, Incorporated. Reference
is further made to that certain Purchase Agreement, dated September 5, 1996 by
an between you and Gems & Minerals Corp. ("Gems") pursuant to which you have
agreed to sell your interest in and to the Mineral Lease (the "Hayden Interest")
to Gems for an aggregate purchase price of $75,000 (the "Purchase Agreement").
We submit this letter agreement to you to further qualify the relationships of
the parties as they relate to the Mineral Lease and the Purchase Agreement.

     The Company hereby acknowledges and consents to the sale of the Hayden
Interest to Gems upon the terms and conditions of the Purchase Agreement. In
consideration of such consent and for other good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged, you hereby agree to
extend the term of the Mineral Lease for one year such extended term to expire
in December, 1997 (the "Extended Termination Date") Further, the Company agrees
to continue to make the required royalty payment of $1,000 to you as per the
terms and conditions of the Mineral Lease on or before the 15th day of each
month until the Extended Termination Date. In the event that the Company shall
default on such payment and Gems shall not have made such payment on behalf of
the Company as per its agreements in the Purchase Agreement, then the default
provision and cure periods set forth in the Mineral Lease shall apply.

<PAGE>

FKCM
Extension of Mineral Lease & Option To Purchase
Page 2

     If the foregoing accurately reflects our understanding, please so indicate
by executing this letter agreement in the space so provided.

                                                Very truly yours,


                                                /s/ Robert J. Levin
                                                -------------------------------
                                                Robert J. Levin, 
                                                Vice President

RJL:  js

Agreed and Accepted this 16th day
of September, 1996


/s/ Audrey I. Hayden
----------------------------------
Audrey Hayden