Mining Lease

      THIS MINING LEASE (hereinafter referred to as the "Agreement") is made
effective this 18th day of March, 1996 (hereinafter referred to as the
"Effective Date") between Island Investment Corp., a Nevada corporation
qualified to conduct business in the State of Colorado, or its nominee, whose
address is 1717 [Illegible] (Island or its nominee hereinafter referred to as
"lsland") and Charles R. Rugg and Cindy McCollum (McCollum being the
Lessor/optionor as to the Mascott Lode claim only), whose address is P.O. Box
790, Nederland, Colorado 80466 (hereinafter referred to as "Rugg").

                                    Recitals

      Rugg owns certain patented lode mining claims and other interests in
property situated in Boulder County, Colorado, (the "Property") which claims and
interest are more fully described in Exhibit A to this Agreement. Island desires
to lease the Property from Rugg, and Rugg is willing to lease the Property to
Island, on the terms and conditions herein specified.

      NOW, THEREFORE, for and in consideration of the mutual covenants herein
contained, the sufficiency of which are hereby acknowledged, the parties agree
as follows:
<PAGE>

      "Anniversary Date" shall mean March 18th occurring in each year
subsequent to the effective date of this Agreement, so long as this Agreement
shall continue in force and effect. "Monthly Anniversary Date" shall mean the 
18th day of each Lease Month.

      "Lease Year" shall mean the twelve (12) month period of time commencing
upon the effective date of the Agreement or annually thereafter on the
Anniversary Date thereof, as the case may be, and continuing through the last
day prior to the next occurring Anniversary Date.

      "Minerals" shall mean any and all minerals, or materials of every kind and
character whatsoever, except oil, gas and associated liquid or gaseous
hydrocarbons, whether surface or sub-surface in, upon, under or which may be
produced from the Property.

      "In Operation" shall mean that exploration, development, mining, milling
or processing operations are occurring on the leased property or properties
accessed by or through that structure known as the Mogul Tunnel, being all
workings accessed through the Mogul Tunnel Portal, or other structures located
or to be located on the leased ground. The word "occurring" as used in this
section shall mean any month in which ore or waste materials are taken from the
leased properties or through the Mogul Tunnel.


                                       -2-
<PAGE>

            1. Grant of Lease. Subject to the reservations, exceptions,
exclusions, limitations, conditions, and other provisions contained in this
Agreement, Rugg hereby grants and leases exclusively to Island, its successors
and assigns, all rights (including but not limited to the rights set forth
below in this Section 1), titles, interests, and estates now owned or hereafter
acquired by Rugg in and to the Property for the purpose of exploring,
developing, working, mining, milling, beneficiating, concentrating, extracting,
leaching, treating, smelting, refining, storing, removing, transporting, and
selling or otherwise disposing of any and all minerals situated on, in, or under
the Property or other lands, to have and to hold for the term set forth in
Section 27 below.

      The grant made in this Section 1 includes, but is not limited to, the
rights to:

                  a. explore for, develop, work, mine, mill, beneficiate,
concentrate, extract, leach, treat, smelt, refine, store, remove, transport, and
sell or otherwise dispose of all minerals collectively referred to as "work"
situated on, in, or under the Property, and including minerals contained in
existing dumps or stockpiles on or in the Property, performing such work in any
manner deemed necessary or convenient by Lessee;


                                       -3-
<PAGE>

                  b. mine the Property by such methods and in such manner as
Island shall elect, including but not limited to stripping, open-cut, open-pit,
pit, shaft, underground, block caving, solution, or other methods heretofore
known or hereafter developed, including the right to store or to dispose of
minerals, water, waste, or other materials, whether produced from the Property
or other lands, on or in the Property, in accord with laws and regulations
governing such activities;

                  c. place and use excavations, openings, shafts, ditches,
flumes and drains on or below the surface of the Property, and to construct,
erect, install, maintain, repair, use, replace, or remove roads, haulageways,
buildings, structures, machinery, equipment, and facilities of any nature
whatsoever, both on or below the surface of the Property as necessary or
desirable to effectuate the purposes hereof, including, but not limited to
roads, haulageways, trackage, conveyors, pipelines, crushers, mills,
concentrators, leach pads, treatment facilities, smelters, refineries, and other
processing facilities, water, fuel, power, and communications facilities,
storage facilities, stockpiles, waste piles, tailings ponds, settling ponds,
dams, sump pits, flumes and sluices, loading and shipment facilities, offices
for the conduct of operations hereunder, residences for persons employed in the
accomplishment of the purposes hereof, and other ancillary and support
facilities as may be


                                       -4-
<PAGE>

allowed by law and regulation, and use of all water and water rights owned by
Lessor and appurtenant to the Property if the same exist;

                  d. occupy and use the Property as described in this Section 1
in connection with or in support of operations conducted by Island on lands
other than the Property, including other patented and unpatented lands whether
or not adjacent or contiguous;

                  e. reclaim the Property in conformance with the provisions of
this Agreement;

                  f. take any and all other actions which are deemed by Island
to be necessary or desirable in connection with or in support of operations
under this Agreement; and

                  g. to utilize any and all rights of Rugg in and to the Mogul
Tunnel and Mogul Tunnel portal area and/or the Swarthmore Tunnel and Swarthmore
Tunnel portal area as may have been acquired by Rugg by deed, quiet title action
or adverse usage and occupancy, and as listed in Exhibit A, the "Property."


                                       -5-
<PAGE>

            2. Surface Uses Reserved. Rugg reserves the right to enter the
surface of the granted property for the purpose of hiking and horseback riding,
including specifically the right of Cindy McCollum or her assigns to lead
commercial or personal trail rides on Spencer Mountain outside of the area of
actual mining operations which might present a mining safety hazard to man or
horse. Such reserved rights shall be in addition to the right of inspection
reserved herein, and such reserved rights shall terminate upon exercise and
closing of the purchase option granted herein.

            3. Mining Rights and Access. During the term this Agreement is in
effect, Island shall have free and unrestricted access to the Property and shall
have the exclusive right (subject only to Rugg's rights as reserved herein) to
enter upon and occupy the Property for all purposes reasonably incident to
exploring for, developing, mining (by underground mining, surface mining or any
other method, including any method hereafter developed), extracting, milling,
stockpiling, storing, processing, removing and marketing therefrom all ores,
minerals and materials of every nature or sort (which ores, minerals and
materials are herein designated as Mineral Substances"), including the right of
placing, constructing, maintaining, using and, thereafter, removing such
structures, facilities, equipment, roadways, haulageways and other improvements
as may be necessary, useful or convenient for the full enjoyment


                                       -6-
<PAGE>

of all of the rights granted to Island herein. Island shall also have such
rights with regard to the cross-mining rights granted in Section 4 below.

            4. Cross Mining. Island is further granted the exclusive right of
producing, depositing, treating, stockpiling or transporting Minerals in and
upon the Property and of mining ores, minerals, materials, waste and overburden
from the Property or from other lands and the right of mining and removing of
such Minerals from the Property or from other lands through or by means of
shafts, openings or pits which may be made in or upon adjoining or nearby
property. Island's operations hereunder, and its mining of adjoining or nearby
lands, may be conducted upon the Property and upon such other lands as a single
mining operation to the same extent as if the Property and all such other
properties constituted a single tract of land. The cross mining rights granted
herein shall specifically include the right to utilize the Mogul Tunnel and the
Mogul Tunnel portal area, together with any and all Interest of Rugg in and to
the Swarthmore Tunnel or portal area, and all workings now or in the future
accessible through the Mogul Tunnel, subject to termination or continuation as
hereinafter provided.

            5. Commingling. Commingling of ores from the Mogul Tunnel with ores
extracted by means of exercise of the cross mining rights, or other


                                       -7-
<PAGE>

ores of Island or any other entity, shall not be allowed absent a signed written
agreement between the parties establishing an agreed method for measuring,
sampling and weighing the ores prior to commingling.

            5. Representations and Warranties. Rugg makes the following
representations and warranties effective the date hereof:

                  a. With respect to any portion of the Property listed in
Exhibit A comprised of fee land or patented mining claims, Rugg represents and
warrants that Rugg is the sole owner and has the exclusive possession thereof,
and has good and merchantable title to such property, including the surface and
mineral estates, free and clear of all claims, liens, title defects or
encumbrances, subject only to those matters specifically set forth in Exhibit A,
if any, or as specifically limited below. "Free and clear of all claims, liens,
and title defects" as used in this sub-section, and as the same governs Rugg's
obligation to defend title, shall be limited to such claims or title defects
which are material in nature, meaning those having the ability to substantially
impair Rugg's ability to deliver title to Island or to impair Island's ability
to conduct mining operations hereunder free of the claims of others which would
impair the ability to mine or to take possession of minerals mined. Rugg makes
no warranty or representation as to any liens or encurnbrances created by or
through Thames


                                       -8-
<PAGE>

Hartley or Durango Metals, Inc., whether choate or inchoate: Rugg makes no
warranty with regard to any claims by others of extralateral rights in the
Property which might in the future be asserted, and makes no warranty with
regard to the Mascott lode claim, this to which was acquired in 1995.

                  Rugg represents that he has the lawful right to lease the
property and will defend at his own expense (except as may be limited or
otherwise agreed herein) such title and peaceable enjoyment by Island of the
estate granted herein, against all claims which might be asserted which would or
could substantially impair the ability of Island to explore, develop or mine the
Property, or to take possession of minerals mined from the Property.

                  b. Within ten (10) days after the execution hereof, Rugg shall
deliver to island all title information in Rugg's possession. Within one hundred
and twenty (120) days after the execution hereof, Rugg shall deliver to Island
a lessee's title insurance policy in the name of Island in the amount of $1.5
million, if such coverage is available through Commonwealth Land Title Insurance
Company or other regular commercial sources within Boulder County, Colorado. If
such coverage is unavailable the parties shall obtain such a title insurance
policy from some other agreed source. Prior to paying the policy


                                       -9-
<PAGE>

premium thereon, Rugg shall deliver a copy of the title commitment to Island for
examination ("title commitment delivery").

                  If Island finds that there are material or substantial defects
which would impair its ability to explore, develop and mine the Property, its
remedies in addition to any other legal or equitable rights it may have to cure
title defects in its own steed and/or its own name shall be as follows:

                  a. To request Rugg cure those defects of title which might be
curable without legal action; and/or

                  b. To request Rugg to file a quiet title suit to eliminate
material and substantial defects to the title to which a claim to cure may
exist, the costs and expenses of such quiet title suit (including attorney fees)
to be advanced by Island, with all of such costs advanced subject to offset
against the Purchase Price in the event of the exercise of the Purchase Option
granted herein: and/or

                  c. To propose to Rugg an equitable adjustment of any and all
terms in this Agreement, and if the parties fail to agree to such equitable


                                      -10-
<PAGE>

adjustment, than Island shall have the option to elect to terminate this
Agreement subject only to any accrued obligations hereunder, including any
obligation to make Guaranteed Payments, the monthly payments, and its other
accrued obligations, specifically including the reclamation obligation.

                  The parties specifically state and agree that Rugg and his
family predecessors have controlled the Property (except the Mascott Lode claim)
for such an extensive period of time, and paid property taxes for such an
extensive period of time, that in all likelihood material and substantial
defects, if any, would be curable by quiet title action. If Island is continues
to be dissatisfied with the Rugg title after the conclusion of any quiet title
action, it may elect to terminate this Agreement pursuant to option C above.

                  d. There are no pending or threatened actions, suits, claims
or proceedings with respect to the Property, other than that certain lawsuit
entitled Durango v. Rugg (Case No. 94 CV 1470, Boulder District Court) which
lawsuit the parties have this day stipulated to dismiss with prejudice.

                  Said litigation concerned, inter alia, a  certain predecessor
lease from Rugg to Durango Metals, Inc. of 31 of the patented


                                      -11-
<PAGE>

claims included in the Property, which lease has been terminated pursuant to a
certain "Novation Agreement" attached hereto as Exhibit B.

            7. Title Defects. In the event of adverse claim or claims or defects
of title affecting all or a portion of the Property, Island may, all at its own
expense, take immediate steps to defend against such claim or claims until such
adverse claim or claims is or are judicially or otherwise fully settled and
determined or such defects are otherwise cured, in which effort Rugg shall
cooperate fully, Island may, without affecting Rugg's obligations under the
preceding sentence, at Island's sole election, take steps to cure such defects.
Island will advise and consult with Rugg with regard to steps it may propose to
take to cure any title defect, including, but not limited to, bringing a quiet
title suit, if necessary, in the name of Rugg and/or Island.

            8. Lesser Interest. It Rugg owns a lesser interest in the Property,
or any part thereof, than the entire and undivided fee simple estate, then the
Guaranteed Payments, payments of Production Royalty and other consideration
herein provided for shall be paid Rugg only in the manner in which it is
equitably adjusted, which may include payment only in the proportion which its
interest bears to the whole and undivided fee simple estate in the Property.


                                      -12-
<PAGE>

                  There shall be no reduction in the amount of production
royalty paid unless Rugg has a lesser interest in the particular claim from
which ores or Minerals were produced. The parties agree that the Purchase Price
stated in the Option to Purchase shall not be proportionately reduced in
consideration of the one hundred and twenty (120) day title examination period
provided for, and the fact that the Purchase Price has not been made the subject
of a inflation adjustment during the Lease Term.

            9. Use of Water. Island shall have the right to use, in operations
hereunder, any and all wells, ditches, drains, and reservoirs on or presently
serving the Property, and may use the water and water rights on and appurtenant
to the Property to the same extent as Rugg might do, or has the legal, equitable
or other right or opportunity, to do. Island may construct and maintain water
lines and water systems useful in its operations anywhere upon the Property.
Rugg makes no representation that water rights exist which are appurtenant to
the Property.

            10. Operations

                  a. During the term of this Agreement. Island shall have free
and unrestricted access to the Property, for purposes granted in this Agreement
or specified in Section 1.


                                      -13-
<PAGE>

                  b. Island shall conduct all operations on the Property in a
good and minerlike manner and in accordance with generally accepted industry
practices as understood by Island. All decisions with respect to exploration,
development, and mining of the Property and the selling of ores, minerals,
concentrates, or other products from the ores, minerals, concentrates, or other
products from the Property, including all decisions regarding the commencement,
suspension, resumption, or termination of any operations, shall be made by
Island in its sole discretion. Island may sell ores, minerals, concentrates, or
other products, and may stockpile ores, minerals, concentrates or other products
for any length of time before selling the same. There are no covenants or
agreements regarding these matters other than those expressly set forth herein,
subject only to the obligation to continue making monthly payments and or
Guaranteed Payments as provided for herein.

                  c. Island shall substantially comply with all applicable laws
and regulations governing its operations on the Property, and in effect as of
the execution date of this Lease Agreement, specifically including the Colorado
workmen's compensation law, if applicable, and reclamation and water quality
laws. If this Agreement is inconsistent with or contrary to any such law or
regulation, the law or regulation shall control and this Agreement shall be
deemed to be modified accordingly. Island shall keep Rugg advised on


                                      -14-
<PAGE>

a regular basis of its efforts to obtain permits for the Property, and to
address compliance issues, if any, as they arise, or with respect to any new or
revised or reissued law or regulation or binding interpretation of any existing
law or regulation in a manner which changes or modifies the same, and its
efforts to address such new law or regulation, and to continue lease operations.

                  d. As a special operational covenant, the panics agree that
Thames Hartley and J. Wayne Tatman shall not be entrusted with or perform
operational responsibilities or tasks at or within the Mogul Mine. Island
further agrees that it shell not attempt to circumvent this special covenant by
contract, agreement, the creation of new business entities or any form of
subterfuge. Rugg agrees that Thames Hartley may function at the Mine in an
advisory role for the first ninety (90) days after the execution hereof, which
period shall be known as the "transition period," but not thereafter. After the
transition period, Hartley and/or Tatman shall have no operational
responsibilities at the Mogul Mine site.

            11. Governmental Approvals.

                  Island shall be solely responsible for obtaining any and all
licenses, permits, and other approvals required by any federal, state, or local


                                      -15-
<PAGE>

governmental entity which are applicable to operations under this Agreement;
provided, however, that (a) Rugg in good faith shall give such consents to
Island's proposed operations as may be required before a governmental entity
will issue a license, permit, or other approval to Island and (b) Rugg, when
reasonably requested to do so by island, shall support the proposed operations
of Island and otherwise assist Island in its efforts to obtain approval of its
proposed operations, specifically including approvals required by Boulder
County, or any other unit of any local government. If and when Rugg, at the
request of island, supports the proposed operations of Island or otherwise
assists Island in its efforts to obtain approval of its proposed operations,
Island shall have no obligation to reimburse Rugg for all out-of-pocket costs
incurred by Rugg in so supporting the proposed operations of Island or otherwise
assisting Island in its efforts to obtain approval of its proposed operations,
provided island is in operation under the terms of this Lease or its exercised
option to purchase the Property.

            12. No Implied Covenants. The parties expressly agree that no
implied covenant or condition whatsoever shall be read into this Agreement
relating to the exploration, development, mining of the Property or processing
Mineral Substances from the Property or the time therefor, or to any operations
of Island hereunder or to the measure of diligence thereof.


                                      -16-
<PAGE>

            13. Payment of Taxes and Encumbrances. Island shall pay when due and
before delinquent all taxes required by this Agreement to be paid by Island,
specifically including property taxes for the year 1996 payable in 1997, and
all personal property taxes for equipment or fixtures installed by Island or its
predecessor Lessee upon the Property. Island shall furnish Rugg with receipts or
other evidence of such payments. If at any time during the term of this
Agreement it appears that any one or more third parties may have a claim against
the Property by reason of any tax, mortgage, or other lien (other than back
taxes, mortgages or liens created by the predecessor Lessee, Durango Metals,
Inc. or Thames Hartley, for which Island agrees to be responsible) Island may
pay any past due payments and shall be subrogated to all rights of the holder
against Rugg.

                  If Island makes any payments to one or more third parties as a
result of any tax, mortgage, or lien, either by way of contract, settlement,
compromise, pursuant to final judgment of any court of record, which item was
created by or otherwise the direct responsibility of Rugg, Island shall recover
from Rugg or from any payments thereafter to become due to Rugg hereunder the
amount of any payment and all costs, expenses (including reasonable attorney
fees), and interest at the prime rate then applicable incurred by Island


                                     -17-
<PAGE>

in connection with the tax, mortgage or lien created by or the direct
responsibility of Rugg.

            14. Voluntary Termination by Island. Island shall have the
continuing right to terminate this Agreement with respect to all of the Property
at any time without further obligation, except for those obligations which have
accrued as of the date of termination (specifically including the Guaranteed
Payments, the monthly payments, and reclamation and other obligations), and to
relinquish and surrender all of the Property to Rugg, by giving Rugg written
notice thereof. If this Agreement has been terminated with respect to all or a
portion of the Property, Island shall release or quitclaim to Rugg all of its
rights with respect to such terminated interests, as provided in the Section
entitled "Evidence of Release."

                  The parties specifically agree that upon termination, the
cross-mining rights granted herein, and Mogul Tunnel and portal usage rights,
shall terminate. The development of adjacent or other property pursuant to
exercise of the cross-mining rights hereunder shall not be deemed to create
claims or rights to access that theretofore did not exist, or which came into
existence only pursuant to the exercise of rights under this Agreement, subject
to the following exception to termination:


                                      -18-
<PAGE>

                  In the event that this Agreement remains in effect for a
minimum period of five (5) years, with all payments due thereunder made on a
regular basis, and should this Agreement thereafter be terminated, Island shall
retain a non-exclusive right to pass across or through the leased Property and
to utilize the Mogul Tunnel, Swarthmore Tunnel, and associated workings for
haulage purposes upon a monthly payment to Rugg of a haulage fee of Two Thousand
Dollars ($2,000.00) per month, which haulage fee shall escalate on an annual
basis by One Hundred Twenty-Five Dollars ($125.00) per month, said new monthly
rate to take effect on an annual basis in the month following the annual
anniversary of termination, said charge to be paid to Rugg on a monthly basis
within fifteen (15) days after the monthly anniversary of termination.
"Non-exclusive" as used herein shall mean a right to pass through the Mogul
Tunnel, Swarthmore Tunnel, and associated workings together with Rugg or his
lessees or optionees, if any, including, at the election of Rugg or his
successors, to share the use and maintenance costs of the rail haulage line on a
pro-rata basis tied to usage. This section shall survive termination of this
Agreement if this Agreement remains in effect for a minimum five (5) year
period, and shall terminate upon the failure to make two consecutive monthly
payments of the haulage charge thereafter, or upon the cessation or abandonment
of the use of the Mogul Tunnel.


                                      -19-
<PAGE>

            15. Termination by Lessor. Failure by Island to perform or comply
with the express terms and provisions of this Lease, including provisions
concerning timeliness of payments, shall not automatically terminate this Lease
or any sublease hereunder, nor render the Lease null an void; but in the case of
such default, Rugg may notify Island in writing specifying the nature and
particulars of such default, and Island shall have a period of ninety (90) days
after receipt of such notice or, if contested by Island, after entry of a final
judgment adverse to Island by a court of competent jurisdiction, in which to
commence efforts to cure such default which shall be diligently pursued in good
faith and, except as otherwise provided herein, if such default shall not have
been cured within such time, Lessor may terminate this Lease, except that with
regard to Island's failure to make a Monthly Payment or Guaranteed Payment when
due, the period for cure after receipt of written notice by Rugg shall be thirty
(30) days.

                  It shall be deemed that Minerals are being mined and that
Island is in operation and not in default under the terms of this Lease if
mining operations or other required activities are suspended or are prevented or
prohibited by law, ordinance or other governmental regulation, restraint or
court order, by inability to obtain permits or licenses, by scarcity or
inability to obtain equipment, material, power, fuel or favorable market for the
Minerals, by strike.


                                     -20-
<PAGE>

lockout or industrial disturbance, by failure of carriers to transport or
furnish facilities for transportation, by operation of force majeure (including,
without limitation, lightening, earthquake, fire, storm, flood, washout), by
breakage or accident to machinery or facilities, or by any cause beyond Island's
control; provided, however, that Island shall exercise reasonable diligence to
resume mining operations. This Section shall not suspend Island's obligation to
make monthly payments or any Guaranteed Payment during periods when Operations
are suspended.

            Upon final termination of the Lease, Island shall surrender
possession of the Property to Rugg and shall execute and deliver to Rugg a
recordable written release of all of Island's right, title end interest in this
Lease.

            16. Island's Liability Following Termination. Upon termination of
this Agreement, Island shall be under no further liability to Rugg as a result
of Island's activities on the Property or as a result of the terms of this
Agreement from and after the date of such termination, except for liabilities
and obligations to Rugg accrued prior to the date of such termination and
Island's obligations hereunder arising upon termination as a result of
operations upon the Property by Island, but only by reason thereof.


                                      -21-
<PAGE>

            17. Worker's Compensation and Other Laws. Island shall observe and
comply with all applicable federal and state laws and mine safety regulations
and shall insure and keep insured all persons employed by Island under the
provisions of the Workmen's Compensation Law or equivaIent law of the State in
which the Property is situated.

            18. Compliance with Insurance. Island shall procure such insurance,
including comprehensive general liability insurance, on the Property, or on any
portions of the surface and sub-surface which Island is using, as in its sole
judgment is adequate, but in no case less than combined total coverage limits of
$500,000 per person, $1,000,000 per incident for bodily injury, and $1,000,000
for property damage for each incident or accident, to which policy or policies
Rugg shall be a named co-insured, and provided on a regular basis with copies of
a certificate of insurance so stating, beginning no later than twenty (20) days
after the execution hereof.

            19. Inspection. Rugg or its authorized agents shall have the right,
on a semi-annual basis during the term of this Agreement (being no more often
than twice during any Lease Year), and after forty-eight (48) hours written
notice, to enter upon and inspect the Property and all underground workings
thereof and structures thereon, and to make any survey Rugg may deem


                                      -22-
<PAGE>

necessary, either for the purpose of checking the amount of ore mined or for an
examination of the physical condition of the Property and workings and the
manner and conduct of the mining operations, and for the purpose of taking
samples or specimens of any ore or material produced therefrom. For the purpose
of such semi-annual inspection and sampling, all hoists, ladderways and other
means of ingress and egress shall be open to Rugg or its authorized agents
during all ordinary working hours. Rugg shall also be authorized to enter and to
inspect any areas developed as a result of exercise of the cross-mining rights
granted herein. Rugg and his agents may enter the mine at their own risk, and
Island shall offer its reasonable cooperation in conducting such inspection.

                  Any additional rights of entry and inspection shall be
dependent upon the existence of a dispute between the parties regarding the
payment of royalty or the operation of the mine pursuant to the terms of this
Agreement. In the event of such dispute, Rugg shall request entry in writing,
and Island shall arrange inspection at such reasonable time(s) as may be
required, and at such places as may be necessary, for the resolution of such
dispute, including, if necessary to such resolution, measuring, surveying or
sampling as Rugg may conduct at its own expense.


                                      -23-
<PAGE>

            20. Taxes. Rugg shall pay when due all general and ad valorem taxes
levied and assessed against, upon or measured by Advance Royalty or Production
Royalty payments to Rugg. Island shall pay when due all taxes lawfully assessed
and levied against improvements and equipment placed upon the Property by
Island, upon production from the Property except such portions thereof as are
payable for Production Royalty paid to Rugg and upon other rights, property and
operations of Island; provided, however, that nothing contained herein shall
impose upon either party any obligation to pay any taxes levied or assessed
against the other party in the nature of an income tax.

            21. Liens. Island shall promptly pay all wages due its workmen and
employees and pay for all materials and supplies furnished for its mining
operations hereunder and shall defend and protect Rugg from and against all
claims, liens and liabilities which may arise as a result of Island's failure
so to do. In the event that any mechanic's, materialmen's or laborer's liens may
arise and are filed against the Property as a result of Island's operations
hereunder, Island shall take reasonable steps to promptly and diligently obtain
the discharge thereof.

            22. Indemnity. Island shall indemnify and save harmless Rugg from
and against any and all claims, demands, suits or causes of action in law


                                      -24-
<PAGE>

or equity for damages and injuries occurring on or about the Property and
arising solely and directly out of Island's negligence.

            23. Guaranteed Payments and Monthly Payments.

                  a. Guaranteed Payments. Concurrently with the execution of
this Agreement, Island shall pay Rugg the sum of Twenty Five Thousand Dollars
($25,000.00). An additional Twenty Five Thousand Dollars ($25,000) shall be held
in escrow by Island's law firm, and released to Rugg upon the delivery to it by
Rugg of the title commitment. On the third (3rd) monthly anniversary of the
effective date of this Agreement, Island shall pay Rugg the sum of Fifty
Thousand Dollars ($50,000.00), which three initial payments of a total of One
Hundred Thousand Dollars ($100,000) are guaranteed, and which shall not be
terminated or waived by the termination of this Agreement.

                  If this Agreement is in effect as of the sixth (6th) monthly
anniversary date, or any monthly anniversary date thereafter when the Mogul Mine
is in operation (but no later than the eighteenth monthly anniversary date),
Island shall make an additional payment of Fifty Thousand Dollars ($50,000.00)
to Rugg. Island shall be under no obligation (and Island does not guarantee) to
make this third (3rd) payment of Fifth Thousand Dollars


                                      -25-
<PAGE>

($50,OOO.OO) if this Agreement is terminated prior to eighteenth (18th) monthly
anniversary date, having not resumed Operations within the Mogul Mine since
prior to the sixth (6th) monthly anniversary date. Nothing herein shall suspend
the obligation to make Monthly Payments as herein provided while this Agreement
remains in effect.

                  The parties agree that Rugg shall, from the proceeds of the
first Twenty Five Thousand Dollars ($25,000.00) payment identified above, pay
the chaining charges and search fees associated with preparing the title
commitment provided for in Section 6 above, and shall pay the policy premium of
the Lessee title insurance policy also provided for in such section. In the
event that Island determines that there exist material and substantial defects
in Rugg's title which do or could impair its ability to mine, and which defects
Rugg cannot cure without benefit of a quiet title suit as provided for in
Section 6, Island shall, if Rugg so requests, advance all of the costs and
expenses of such quiet title litigation, with the amount of such advances to be
offset as a credit against the Purchase Price in the event of the exercise of
the Purchase Option.

            b. Monthly Payments. Beginning on the effective date hereof, and on
every monthly anniversary date thereafter during the term of this Agreement,
Island shall pay to Rugg the minimum monthly amount ("the


                                      -26-
<PAGE>

Minimum Monthly Payment") of Two Thousand Dollars ($2000.00), provided that
during each and every lease month when the Property is in Operation, including
operations on other properties pursued in the exercise of Cross-Mining rights
granted herein, the required payment ("Operating Monthly Payment" in the nature
of Advance Royalty) shall be Five Thousand Dollars ($5000.00). If upon the
monthly anniversary date only the Minimum Monthly Payment was made, and
Operations subsequently commence during Lease month, the remainder (being Three
Thousand Dollars ($3,000.00) of the Operating Monthly Payment shall be remitted
to Rugg within ten (10) business days after such commencement.

                  The Operating Monthly Payment shall be paid to Rugg in months
when Operations are conducted on other properties pursuant to the Cross Mining
rights herein granted. The applicability of the Operating Monthly Payment to
operations conducted on other or adjacent properties through the Mogul Tunnel
facilities shall be in lieu of any haulage payment or royalty for such
operations under the cross mining rights granted herein. Nothing hereunder shall
be deemed to require the payment of production royalty for production from other
or adjacent properties under that certain Section of this Agreement labelled
"Production Royalty".


                                      -27-
<PAGE>

                  The parties agree that the Minimum Monthly Payment shall be a
minimum holding cost, and shall not be credited as advance royalty to be offset
against future amounts of production royalty which might thereafter become due.
During any lease month when the Operating Monthly Payment of (Five Thousand
Dollars) $5,000.00 is paid (including a late commencement payment as provided
for above), said amount shall be credited as advance royalty, and available for
offset against future production royalties which may become due.

                  In the event that the purchase option herein is exercised, all
amounts paid to Rugg as Operating Monthly Payments or as Production Royalty
under the section governing Production Royalty, shall be cumulated, and
available for offset against the Purchase Price at Closing, and may cumulate to
the extent of the full Purchase Price, as the case may be.

            24. Records. Island shall keep books and accounts showing the amount
of ores extracted from the Property, the amount of ores shipped, sold or
treated, and the amount of money received from the sale of the ore. Island shall
keep similar records for properties mined utilizing cross mining rights granted
herein.


                                      -28-
<PAGE>



                  Island shall keep accurate maps of all drifts, crosscuts,
raises, slopes and other workings created by Island during its operations for
the Property under this Agreement, and shall mark on such maps any geological
findings which may be significant with regard to future mining or development of
the Property or the calculation of production royalty.

                  Island shall keep records and maps of its core drilling,
longhole drilling, sampling, channel sampling and other test or assay results
obtained in or from within the Property. Island shall also maintain records of
its milling of ores from the Property, including head, tail and concentrate
assays from any milling facility used or controlled by it. Island shall also
maintain and make available for inspection or review by Rugg smelter settlement
sheets, shipping records, umpire assay results or like records related to ores
or concentrates from the Property which are shipped to either a commercial or
captive smelter or other buyer of any type for the purpose of verifying
Production Royalty payments due.

                  Island shall also make available to Rugg at Rugg's expense
legible full size copies of any underground or surface surveys performed in
whole or part upon the Property.


                                      -29-
<PAGE>

            26. Inspection of Records. Island shall maintain true and correct
records of all Minerals mined and sold from the Property, and Island shall
permit Rugg to inspect, at Rugg's expense, the books and records of Island which
are pertinent to the determination of the Production Royalty, at any reasonable
time during normal business hours, provided such inspection is conducted by Rugg
or by an accounting firm of recognized standing, at least one of whose members
is a member of the American Institute of Certified Public Accountants, and
provided such inspection does not interfere unreasonably with Island's
operations or procedures.

            28. Confidentiality. Rugg agrees that all information developed or
acquired as a result of activities by Island under this Agreement, including but
not limited to information relating to mineral discoveries, ore reserves, mining
methods, plans and production schedules and other information, including assays,
cost and production cost, and all income and receipts, data, and information,
and including the terms of this Agreement, shall be kept strictly confidential
and shall not be released or made public (with the exception of Rugg's counsel
and professional tax advisors) without Island's express prior written consent
during such period that this Agreement is in effect; provided, however, that
nothing herein shall be construed to interfere with any responsibility of Rugg
to make reasonable disclosures required under applicable


                                      -30-
<PAGE>

securities or other laws. In the event Rugg deems it necessary to make such
disclosures for the reasons stated, Rugg agrees to provide advance written
notice and reasonable opportunity to confer with Island no less than ten (10)
days prior to making such disclosures, which request shall not be unreasonably
refused.

            27. Term. Subject to Section 15 regarding termination and default,
this Agreement shall continue in full force and effect for a period of ten (10)
years from the Effective Date hereof. At any time during the initial ten year
term hereof, Island, at its sole option, may elect in writing to extend this
Agreement for a second ten (10) year term. Such election may be made at any time
this Agreement is in good standing.

            28. Zoning and Land Use Reputation. If the Property should be or
become zoned or otherwise regulated so as to prevent or restrict the operations
contemplated by Island hereunder, or if any covenant so preventing or
restricting such operations is found to apply to the Property, Island shall have
the right to seek change thereof, in which event Rugg will cooperate with Island
in obtaining such change. Rugg will not attempt to change the zoning or land use
regulations presently applicable to the Property, if the change could prevent,
restrict or adversely impact operations contemplated by Island. Rugg


                                      -31-
<PAGE>

agrees to cooperate with and support Island in creating and maintaining good
relations and support for mining the Property with all federal, state, and local
governmental entities.



            29. Surrender of Possession on Termination. Upon termination of this
Agreement for any reason, Island will surrender peaceable possession of the
Property, and Rugg shill thereupon have the right to take full and complete
possession thereof, subject to the rights of Island to go upon the Property for
a period not to exceed six months for the purpose of removing and disposing of
the machinery, equipment and supplies situated thereon and therein. Within a
reasonable time after termination, Island agrees to provide Rugg with copies of
all factual data generated by Island's activities on the Property prior to
termination except as previously provided to Rugg; however, Island shall not be
liable to Rugg for the completeness or accuracy thereof.



                  Upon such termination, Island shall not be obligated to leave
any mine workings or openings in the Property, including ventilation openings,
in any particular condition or state of repair, except with regard to the Mogul
Tunnel as it existed on the date of execution, which shall remain open and
unobstructed, or as otherwise required by law. Permission is specifically not


                                      -32-
<PAGE>

granted here to cave or close the Mogul Tunnel as part of any reclamation plan
absent exercise and Closing of the Purchase Option granted herein.

            30. Evidence of Release. In the event of termination of the
Property, Island shall surrender peaceably to Rugg possession of such Property
and shall, at the request of Rugg, record in the county where the Property is
situated such documents as are necessary to release the Property from this
Agreement. Island shall deliver to Rugg a copy of such instrument us recorded
within fifteen (15) days after recording.

            31. Reclamation. Island shall reclaim the Property in accordance
with local, state, and federal laws relating to reclamation of mined land. Prior
to obtaining any necessary governmental approval of a reclamation plan for the
Property, Island will submit such reclamation plan for review by Rugg, approval
of which shall not be unreasonably withheld. The obligations set forth in this
Section shall survive termination of this Agreement.

            32. Assignment. The rights of Island hereunder may not be assigned
or transferred, in whole or in part, to Thames Hartley, Durango Metals, J. Wayne
Tatmen, or to any entity under their direct control. Island Covenants not to use
a subterfuge or device to evade the proscription of this non-transfer


                                      -33-
<PAGE>

provision. Island shall have the right at any time, without consent, to assign
or transfer its rights and interest; under this Agreement to a subsidiary or
parent company or to a subsidiary of its parent company or to any affiliated
company provided that such company execute and provide to Rugg written
evidence of its acceptance of the terms hereof. No such assignment or transfer
shall operate to enlarge the obligations or to diminish the rights of either
party. No such change in ownership or interest shall be binding upon Rugg until
the expiration of ten (10) days after Rugg shall have received satisfactory
written evidence, in recordable form, thereof. The rights of Island hereunder
and/or this Lease may otherwise be assigned with the Consent of Rugg, which
consent will not be unreasonably withheld, which shall become effective upon
written notice to Rugg, and shall thereafter bind the heirs, executors,
administrators, successors, and assigns of the parties, provided and subject to
such assignee's executing and providing to Rugg written evidence of its
acceptance of the terms hereof.

            33. Encumbrances Non-Sale Transfers, and Sales.

                  a. Non-Sale Transfers. Any transfer or assignment of any
interest in or subject to this Agreement shall be made expressly subject to this
Agreement and shall require the transferee to assume and agree in writing to


                                      -34-
<PAGE>

perform all of the obligations of the transferor under this Agreement as relate
to the interest assigned. In case of transfer by mortgage or deed of trust,
however, such assumption of obligations shall not be required, but should such
mortgage or deed of trust be foreclosed, the purchaser on foreclosure shall take
subject to this Agreement. No transfer shall be effective as between the parties
until the first day of the next month following the delivery of the non-
transferring party or satisfactory evidence of such transfer.

            b. Sales. Rugg may convey or sell part or all of the Property to a
financially responsible buying party who agrees to be bound by the terms and
conditions of this Agreement; provided, however, prior to sale Rugg shall first
give sixty (60) days' prior written notice to Island of Rugg's desire to sell
its interest. The notice shell specify the name of the buying party and the
terms and conditions of the proposed sale. Within the sixty (60) day period,
Island shall have the first right to purchase the interest being sold on the
terms and conditions specified in the notice. If Island does not exercise such
right within the sixty (60) day period, then Rugg may sell its interest on the
terms and conditions specified in the notice within thirty (30) days after the
expiration of the sixty (60) day period.


                                     - 35 -
<PAGE>

      34. Production Royalty. Island shall pay to Rugg a Production Royalty of
five percent (6%) of the net smelter returns from all ores including crude ores
concentrates, minerals, or other products shipped or removed from the Property
and sold. As used herein, "net smelter returns" means the net proceeds of such
ores, concentrates, minerals, or other products as shown by the liquidation
sheets, settlement sheets, purchase sheets, or other evidences of receipt of
payment furnished by the mill, smelter, ore buyer, or purchaser treating,
purchasing, and paying for such ores and products, after allowing deductions for
costs of sampling and assaying, including, umpire charges, freight costs to the
smelter or other purchaser, smelting, refining, and other treatment costs,
specifically excluding milling costs.

      35. Production Rovalty Definitions. As used in this Agreement, the words
and phrases set forth below shall have the following meanings:

            a. "Concentrates" means the product derived from the Crude Ore after
waste materials have been removed through leaching, milling or other
beneficiation.

            b. "Crude Ore" means minerals mined and removed from the Property by
Island that have not, except for sizing or crushing, been subject


                                      -36-
<PAGE>

to further processing or concentration prior to "direct shipping" to a smelter
or other purchaser.

            c. "Transportation Costs" means the expenses and charges actually
incurred by Island in transporting the Crude Ore or Concentrates from the mine
to the smelter, refinery or other place of processing and/or sale. Such expenses
shall include, but not be limited to, freight, shipment insurance, handling,
port, delay, demurrage, lighterage, tug, forwarding costs and transportation
taxes, but specifically not including transportation costs from the mine to a
mill.

      36. Sales to Affiliate Smelters. Any smelter owned or controlled by Island
or an Affiliate of Island shall be deemed to be a custom smelter for purposes of
this Agreement, and the Net Smelter Returns from such ores, concentrates, and
derivatives shall be computed and determined in accordance with usual custom
smelting practices the same as if sold to such smelter by a third party, but Net
Smelter Returns shall not be less than would have been realized by Island if
such ores, concentrates, or derivatives had been sold to any smelter not owned
or controlled by Island or an Affiliate.


                                     - 37-
<PAGE>

      37. Payment of Production Royalty. All payments of Production Royalty
shall be made on or before the twentieth (2Oth) day of the month following the
calendar month in which payment is received for such ores, minerals, or other
products. All royalty payments shall be accompanied by a statement indicating
the amount of ores, minerals, concentrates or other products sold or processed
and the computation of the royalty being paid. Upon request made by Rugg within
three (3) months following payment of a monthly Production Royalty, Island will
allow Rugg access to its production records for such quarter for Rugg's review
and informal audit of such records. The time and place of such review and audit
shall be determined by mutual agreement of the parties.

      38. Manner of Payment. All payments of Advance Royalty or Production
Royalty due or payable to Rugg hereunder may be made by check or draft mailed or
delivered on or before the due date to Rugg in the name of the person designated
and at the address provided in the Section entitled "Notices."



      39. Royalty on Stockpiled Ore. If Island stockpiles any ores, minerals or
other products on or off the Property for a period longer than three (3)
consecutive months, Island shall pay Rugg a provisional royalty of three and one
half percent (3.5%) of the amount which Island estimates in good faith


                                     - 38 -
<PAGE>

would be due to Rugg as Production Royalty if such ores, minerals or other
products wore sold in an arm's length transaction. When such ores, minerals, or
other products are sold or processed by Island, Island shall pay to or recover
from Rugg the difference between the provisional royalty paid to Rugg pursuant
to this Section and the amount of Production Royalty determined as provided in
Section 39.

     40. No Liability for Metal Losses. Island may, but is not obligated to,
beneficiate, mill, sort, concentrate, refine, smelt, or otherwise process or
upgrade the ores and concentrates produced from ores mined from the Property
prior to sale, transfer, or conveyance to a purchaser, user, or consumer other
than Island. Island shall not be liable for Production Royalties on such losses
or for mineral values lost in such processing except for losses resulting from
the bad faith or gross negligence of Island. Island shall be affirmatively
obligated to attempt to maintain recovery ratios for precious metals which
accord with generally accepted industry standards for milling and concentrating.

      41. Grant of Option. Rugg hereby grants to Island the sole, exclusive, and
irrevocable option to purchase, at any time during the term of this Agreement,
all right, title, and interest now owned or hereafter acquired by Rugg in and to
the Property on the terms and conditions hereinafter provided,


                                     - 39 -
<PAGE>

for a Purchase Price ("the Purchase Price") of One Million Five Hundred Thousand
Dollars ($1,500,000.00). At Closing, Island may offset against the Purchase
Price any accumulated payments of Production Royalty or Operation Monthly
Payments as a credit against the Purchase Price

      42. Exercise of Option. Written notice of election to exercise the Option,
accompanied by a certified check for One Hundred Thousand Dollars ($100,000.00),
shall be sent to Rugg prior to the termination of this Agreement, in the manner
provided in this Agreement for the giving of notice. The balance of the Purchase
Price shall be paid at Closing, Closing to occur within thirty (30) days after
the mailing of notice of exercise at the offices of Commonwealth Land Title
Insurance Company, Boulder, Colorado 80302, or such alternate closing agent as
may be designated by Rugg within Boulder or environs. Attached to the Notice
shall be an accounting for Accumulated Advance Royalty and Operating Monthly
Payments which Island proposes to offset against the Purchase Price.

      43. Conveyance of Title. Upon receiving the first payment and notice that
Island intends to exercise the Option, Rugg shall promptly deposit in escrow
with Commonwealth Title a special warranty deed sufficient in all respects to be
entitled to recordation, conveying to Island the Property, with


                                      -40-
<PAGE>

instructions to Commonwealth Title to deliver the deed to Island upon receipt at
Closing of the remaining Purchase Price in the form of a certified check in
accordance with the terms hereof for the account of Rugg. Rugg shall also
promptly have prepared and delivered to island a title insurance commitment
update covering the Property, bringing the Commitment current to date of
closing, certified by a licensed title insurer, and shall deliver to Island
after closing a paid policy of title insurance in the amount of the Purchase
Price. The parties agree to cooperate in attempting to reduce the charges for
converting the Lessee policy previously issued to an Owner's policy at Closing.
Island shall not be heard to object to the title of Rugg except to the extent
that Rugg be found to have conveyed, encumbered or caused defects in the title
after the period provided for herein for the initial title examination by
Island.

      44. Amendment. This Agreement shell not be altered, amended or otherwise
modified except pursuant to an instrument in writing signed by both of the
parties hereto.

      45 Attorney's Fees. In any litigation between the parties or persons
claiming under them resulting from, arising out of, or in connection with this
Agreement or the construction or enforcement thereof, the substantially
prevailing party shall be entitled to recover all reasonable Costs,


                                     - 41 -
<PAGE>

expenses and attorneys' fees incurred by it in connection with such litigation,
including such costs, expenses and fees incurred prior to the commencement of
the litigation or in connection with any appeals.

      46. Construction. The Section Titles used herein are for convenience of
reference only and shall not be taken or construed to define or limit any of the
terms or provisions hereof. Unless otherwise provided, or unless the context
shall otherwise require, words importing the singular number shall include the
plural number, words importing the masculine gender shall include the feminine
gender, and vice versa.

      47. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.

      48. Entire Agreement. This Agreement constitutes the entire agreement
between the parties pertaining to the subject matter hereof and supersedes all
prior agreements, understandings and representations of the parties with respect
thereto.


                                      - 42 -
<PAGE>

      49. Further Assurances. Each of the parties agrees to take from time to
time such actions and execute such additional instruments as may be reasonably
necessary or convenient to implement and carry out the intent and purpose of
this Agreement.

      50. Governing Law. The interpretation, construction, performance and venue
in regard to any matter arising out of this Agreement shall be governed by the
laws of the State of Colorado. Jurisdiction and venue shall be in the First or
Twentieth Judicial District in the State of Colorado to resolve any dispute
involving the formation, existence, meaning, interpretation, application, or
enforcement of this Agreement or any term or provision of this Agreement.

      51. No Waiver. The failure of either of the parties to insist on the
strict performance of any provision of this Agreement or to exercise any right,
power or remedy upon a breach hereof shall not constitute a waiver of any
provision of this Agreement or limit either party's right thereafter to enforce
any provision or exercise any right hereunder. A waiver of any provision of this
Agreement shall not be effective unless in writing and signed by the party
against whom it is to be enforced.


                                     - 43 -
<PAGE>

      52. Notices. All notices and other required communications ("Notices") to
the parties to this Agreement shall be in writing, and shall be addressed
respectively as follows:


                Island:        Bradley Campbell Carney & Madsen
                               C/O Earl K. Madsen or Timothy Campbell
                               1717 Washington Avenue
                               Golden, Colorado 80401 - 1994
                              
                 Rugg:         Charles A. Rugg
                               P.O. Box 790
                               Nederland, CO 80466
                              
        with a copy to:        Vranesh and Ralsch, LLC
                               C/O John R. Henderson
                               P.O. Box 871
                               Boulder, Colorado 80306
                                 
Notices shall be given (a) by personal delivery to the other party, or (b) by
electronic communication, with a confirmation sent by registered or certified
mail, return receipt requested, or (c) by registered or certified mail, return
receipt requested. All Notices shall be effective and shall be deemed delivered
(a) if by personal delivery on the date of delivery if delivered during normal
business hours, and, if not delivered during normal business hours, on the next
business day following delivery, (b) if by electronic communication on the next
business day following receipt of the electronic communication, and (c) if
solely


                                     - 44 -
<PAGE>

by mail three (3) business days after mailing. A party may change its address by
Notice to the other party.

      53. Recording of Agreement Permitted. This Agreement may be recorded in
the real property records of the county in which the Property is located by
either of the parties.

      54. Rule Against Perpetuities. As to any provision in this Agreement, the
parties hereto do not intend that there shall be any violation of the rule
against perpetuities or any related rule. If any such violation should
inadvertently occur, it is the intent of the parties hereto that the appropriate
court shall reform the provision in such a way as to approximate most closely to
the intent of the parties hereto within the limits permissible under such rule
or related rules.

      55. Severance of Provisions. If any clause or provision of this Agreement
or application hereof shall be determined to be invalid or unenforceable, for
any reason, the remainder of this Agreement and any other application of such
provision shall not be affected thereby.


                                     - 45 -
<PAGE>

      64. Short Form of Agreement. At the request of island, a form of this
Agreement omitting the financial terms hereof may be recorded in lieu of
recordation of the full agreement. Such election shall be made within five (5)
days after execution.

      IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers, all as of the day and year
first above written.

                                /s/Charles R. Rugg
                                ---------------------------------------
                                   Charles R. Rugg
                               
                                /s/Cindy mcCollum
                                ---------------------------------------
                                   Cindy McCollum
                              
                               
                               
                               
                                 ISLAND INVESTMENT CORP.
                               
                               
                               
                                 By: /s/  Earl K. Madsen
                                          --------------
                    

                                     - 46 -
<PAGE>

STATE OF COLORADO 
                    ss.
COUNTY OF BOULDER


      The foregoing instrument was acknowledged before me this 18th day of
March, 1996, by Charles A. Rugg and Cindy McCollum.

      WITNESS my hand and official seal.

                                         /s/ Doris F. Drager
                                         -------------------
                                         Notary Public
NOTARY                                  
SEAL                                     My Commission Expires: August 30, 1999
                          
STATE OF COLORADO 
                    ss.

COUNTY OF BOULDER


      The foregoing instrument was acknowledged before me this 18th day of
March, 1996, by Earl K. Madson, on behalf of Island Investment Corp.

                      WITNESS my hand and official seal.


                                                         
                                         /s/ Doris F. Drager
                                         ------------------
                                         Notary Public
NOTARY
SEAL                                      My Commission Expires August 30, 1999


                                     - 47 -
<PAGE>

                                  MOGUL CLAIMS
Claim                                                        MINERAL SURVEY NO.
-----                                                        ------------------

Gold Fleece #1. only that portion                 
which is south of Middle Boulder Creek                           13305 Amended
Gold Fleece #2 (less part sold)                                  13305 Amended
Gold Fleece #3 (less part sold)                                  13305 Amended
Protection #1                                                       12791
Protection #2                                                       12791
Protection #3                                                       12791
Swarthmore #1 (part)                                                18349
Swarthmore #2                                                       18349
Red Bird Lode                                                       11568
Gold Dust Lode                                                      12355
Little Stranger Lode                                                13119
Bobtail Lode                                                        12557
Grover Cleveland Lode                                               12161
Clara Lode                                                          12791
Enterprise Lode                                                     12557
Enterprise Extension Lode                                           12545
Arapahoe Jim Lode                                                   18628
Memphis Lode                                                        12941


                                                                    Mogul claims
March 18, 1996                                                       PAGE 1 OF 3
                                    EXHIBIT A
<PAGE>

Southern Boy Lode                                                   12545
Uncle Sam Lode                                                      11568
Sommerset Lode                                                      12160
Village Bell Lode                                                   12381
Bird's Neat Lode                                                    12060
Virginia Lode                                                       12686
Satilla Lode                                                        13096
Mendota Lode                                                        15679
Mary Jane Lode                                                      12636
Gold Coin Lode                                                      12689
Mary EE Protection #1                                               12113
1/2 Mogul Lode                                                      14175
                                                                 
Lady Alice a/k/a Lady Allis (less part sold,
        and less 50' x 150' Tract)                                  12786

                                  MCCOLLUM CLAIM
Mascott Lode (.9 ac/more or less)                                    M.S. 11959

                                 UNPATENTED CLAIM
"Merle C" Lode Mining Claim          Film 2052                    R.N. #01518100


                                                                    Mogul claims
March 18, 1996                                                       PAGE 2 OF 3
                                    EXHIBIT A
<PAGE>

                    EASEMENT FOR DUMP PURPOSES OVER TOWN LOTS
                               ENCUMBERED BY DUMPS

      Any and all parts of Blocks 12, 18, and 19, town of Eldora, as may now or
hereafter be owned by Rugg, and now covered or encroached upon by Mogul Tunnel
Mine dumps, including an additional area extending twenty-five (25) feet north
from the toe of such dumps as they now exist (but such additional area not
including the bed of Boulder Creek or any road presently existing). The area of
this easement may be surveyed by Island at its cost, and Rugg agrees to amend
this description to conform to such a true survey. Upon exercise end Closing of
the Purchase Option, the area described shall be made the subject of a
permanent easement grant for mining, milling, mine dump, haulage, storage, and
related purposes.

All subject to exceptions or reservations contained in the respective U.S.
mineral patents end easements of record together with any and all veins, lodes
and mineral deposits now owned or hereafter acquired by Rugg extending from or
into, or contained in, the above mining claims and properties, all ores and
minerals therein, whether now owned or hereafter acquired by Rugg, all rights,
title and interest of Rugg, now owned or hereafter acquired, in and to the
surface and sub-surface hereof, all water, water rights, easements, and
rights-of-way now or hereafter owned or held by Rugg if any, in, upon or under,
the above mining claims and properties, or in any way pertaining thereto, and
all tenements, hereditaments and appurtenances thereof, all of the above
described mining claims and all other property, rights and interests of Rugg set
forth hereinafter collectively are called the "Claims," together with any and
all rights of Rugg in and to and to use the Mogul Tunnel and/or the Swarthmore
Tunnel, whether through deed, gift, devise, adverse or open and notorious use
legal action, quiet title action or otherwise, together with the hoist,
headframes and buildings on the Birds Nest mine, which shall be subject to this
agreement.

                                                                    Mogul claims
March 18, 1996                                                       PAGE 3 OF 3
                                    EXHIBIT A