Exhibit
10.6


 


	
The undersigned hereby
affirms that there is no Social Security number contained in this
document

	
 


	
 

	
 


	
RECORDING REQUESTED
BY:

Stone Cabin Company,
LLC

P.O. Box 109

Boardman, OR
97818

	
 


	
 

	
 


	
AFTER RECORDATION RETURN
TO:

Stone Cabin Company,
LLC

P.O. Box 109

Boardman, OR
97818

	
 


	
 


	
SPACE ABOVE THIS LINE FOR RECORDER’S
USE






 

OPTION AND LEASE OF WATER
RIGHTS

 


By

 

Stone Cabin Company, LLC

of Boardman, OR

 

and

 

Star Gold Corporation

of Coeur d’Alene, ID

 

 

 

 

 

 

 

 

 

 



 






 





 

OPTION AND LEASE OF WATER
RIGHTS

 


	
1.

	
Background

	
1


	
2.

	
STONE CABIN
Obligations

	
1


	
3.

	
Term

	
2


	
4.

	
Rental

	
3


	
5.

	
Beneficial
Use

	
3


	
6.

	
Liability and
Indemnity

	
4


	
7.

	
Default

	
4


	
8.

	
Miscellaneous
Provisions

	
5


	
 

	
8.1

	
Notices

	
5


	
 

	
8.2

	
Sharing of
Documents

	
5


	
 

	
8.3

	
Inspection of
Facilities

	
5


	
 

	
8.4

	
Applicable
Law

	
5


	
 

	
8.5

	
Waiver

	
6


	
 

	
8.6

	
Taxes

	
6


	
 

	
8.7

	
Entire
Agreement

	
6


	
 

	
8.8

	
Captions

	
6


	
 

	
8.9

	
Expenses of
Enforcement

	
6


	
 

	
8.10

	
Pronouns

	
6








 






 





 

OPTION AND LEASE OF WATER
RIGHTS

 

For good and
valuable consideration, Stone Cabin Company, LLC (STONE CABIN) of
Boardman, Oregon and Star Gold Corporation (STAR GOLD) of Coeur
d’Alene, Idaho hereby make this Option and Lease of Water
Rights as of this 30th day of December,
2016 (“Effective Date”)

 


	
1.

	
 Background






 

1.1     STONE
CABIN is the owner with regard to certain water rights (the
“Water Rights”) listed on the annexed Exhibit A. STAR
GOLD desires to lease these Water Rights for purpose of mining and
milling use. The amount of water leased is 571.00 acre feet per
annum. STONE CABIN has appropriated the water which is the basis of
the Water Rights by means of underground sources which are located
at the Nevada State Engineer (State Engineer) approved points of
diversion.

 

1.2     The
State Engineer has approved irrigation use for the Water Rights.
STAR GOLD desires to obtain approval of the State Engineer to apply
the Water Rights to other places of use and points of diversion for
mining and milling uses.

 

1.3     STONE
CABIN desires to assure itself that the Water Rights will be
beneficially used for the life of the within lease in accordance
with the terms of this lease.

 

1.4     STAR
GOLD desires to assure itself that the Water Rights can be
beneficially used for its mining and milling purposes

 

1.5    STAR
GOLD desire to lease the Water Rights from STONE CABIN and the
parties are willing to lease the Water Rights under the terms of
this Agreement.

 


	
2.

	
 STONE CABIN
Obligations






 

STONE CABIN agrees
to the following:

 

2.1     To
support STAR GOLD’S activities by filing applications for
permits to change the point(s) of diversion, place of use, and
manner of use of the Water Rights as necessary to allow STAR GOLD
to fully utilize the Water Rights for any lawful purpose during the
term of this Agreement, at no cost to STONE CABIN.  STAR GOLD
shall furnish STONE CABIN with information regarding the point(s)
of diversion, place(s) of use of the Water Rights as necessary for
the Water Rights to be used by STAR GOLD for its
purposes.

 

2.2     STONE
CABIN, or an agent of its choosing, will be fully responsible for
all aspects of water rights management of the approved permits to
change the point(s) of diversion, place of use, and manner of use
of the Water Rights as necessary to allow STAR GOLD to fully
utilize the Water Rights for any lawful purpose during the term of
this Agreement, at no cost to STONE CABIN. This includes all State
Engineer requirements, but not limited to filing proof of
completion, proof of beneficial use, extensions of time, pumping
data submissions, and monitoring requirements. STONE CABIN will be
reimbursed by STAR GOLD for the on-going management of the water
rights.  STONE CABIN agrees to use experienced Nevada water
rights firms for the work who will charge customary
rates.



 

1






 





 

2.3     STONE
CABIN will not be responsible for any costs associated with
transferring water rights for use by STAR GOLD. STONE CABIN will be
responsible for the costs associated with transferring the water
rights back to use by STONE CABIN after the termination of this
lease.

 

2.4     STONE
CABIN will coordinate with STAR GOLD and allow it to fully review
and approve, using reasonable judgement, any and all documentation
required to be submitted to the State Engineer for all aspects of
water rights management for permits to change the point(s) of
diversion, place of use, and manner of use of the Water
Rights.

 


	
3.

	
 Term






 

3.1     The
primary term of this lease is for ten (10) years commencing on the
date from which the first ore is placed on the leach
pad.

 

3.2     STAR
GOLD is hereby granted the option of extending the lease for one
additional ten-year term. The option to extend the lease shall be
exercised by written notice to STONE CABIN given by STAR GOLD not
more than 24 months and not less than 12 months prior to the end of
the current term.

 

3.3     Should
STAR GOLD fail to notify STONE CABIN of STAR GOLD’S intent to
exercise the option of extending the lease for an additional ten
year term pursuant to the terms or conditions outlined in Section
3.2, this lease shall expire at the end of the first term. All
rights to the appropriation of the water which are the subject
matter of this lease then will revert to STONE CABIN.

 

3.4     STAR
GOLD may cancel this lease if the State Engineer denies permits to
change the point(s) of diversion, place of use, and manner of use
of the Water Rights, or if mine operating permits are not obtained
within three (3) years from the Effective Date of this lease
agreement.

 

3.5     STAR
GOLD shall pay costs incurred in applying for and obtaining
approval of any permits it needs to utilize the water leased under
this Agreement, including without loss of generality any permits
from the State Engineer for transferring the Water Rights to STAR
GOLD’S project location. These separate costs incurred are to
be paid within thirty (30) days of receipt of invoices for such
costs by STAR GOLD and are not included as part of the rents for
lease of Water Rights.

 

3.6     It
is expected that permanent change applications are to be filed with
the State Engineer’s Office to change the point(s) of
diversion, place of use, and manner of use of Water Rights as
necessary to allow STAR GOLD to fully utilize the Water Rights for
any lawful purpose during the term of this Agreement. STAR GOLD can
at its costs and discretion decide to have STONE CABIN file
temporary change applications for Water Rights. Such a request must
be submitted in writing.



 

2






 





 

3.7     If
applications to change the point(s) of diversion, place of use, and
manner of use of Water Rights are protested, STAR GOLD is solely
responsible for addressing and/or litigating said protests.
 STAR GOLD may litigate the protests but is not obligated to
do so.

 

3.8     Water
Rights and any change applications of Water Rights will remain in
STONE CABIN’s name for the duration of this
lease.

 

3.9     A
copy of this Agreement will be filed at the State Engineer’s
Office for its records.

 


	
4.

	
 Rental






 

4.1     STAR
GOLD shall pay STONE CABIN for Water Rights at the rate of $190.00
per acre-foot per annum, as adjusted. This amounts to an obligation
of $108,490.00 per
year ($27,122.50 per quarter), as adjusted, as rental for the Water
Rights. One-quarter of the annual rent shall be paid on the first
day of each quarter (January 1st, April 1st, July 1st, and October
1st), without grace, to Stone Cabin Company, LLC, P.O. Box 109,
Boardman, OR 97818. Changes to Payment Address shall be provided to
STAR GOLD in writing by STONE CABIN, no less than thirty (30) days
prior to the next scheduled payment. The first quarterly lease
payment will commence from and be paid within 10 days of the
date of the first ore being placed on the leach pad. This first
payment will be prorated according to the number of days left in
the quarter, but not more than $27,122.50. All future payments will
be made on the quarterly schedule in the amounts listed above. The
last payment of the ten year term will be $27,122.50 minus (-) the
prorated first payment amount.

 

4.2     STAR
GOLD shall pay $20,000.00 to STONE CABIN on the
Effective Date for a three (3) year option to commence lease. This
option money is not refundable. If mine operating permits are not
obtained in three (3) years from the Effective Date of this Option
and Lease, Star Gold at its sole discretion, may continue the
option and lease annually with another $20,000 payment each year
for up to three (3) additional years.  These additional
$20,000.00 payments are not refundable.

 

4.3     If
the lease is renewed at the end of the initial ten (10) year
period, the Consumer Price Index (CPI) for the previous 10 years
will be analyzed and used to calculate a new lease cost for the
next 10 years.

 

4.4     If
the Water Rights are reduced due to any regulatory reason, the
adjusted or unadjusted annual rent shall be reduced proportional to
the reduction of the Water Rights effective on the date of the
reduction.

 

4.5     STAR
GOLD shall have the right to terminate this Agreement by written
notice to STONE CABIN, if at any time during the term of this
Agreement, STAR GOLD is prevented from using the Water Rights
obtained hereunder because of judicial orders, court decrees or
local, state or federal laws, rules or regulations now or
hereinafter in effect.

 


	
5.

	
 Beneficial Use






 

5.1     STAR
GOLD shall make every effort to fully beneficially use all of the
leased Water Rights to keep them in good standing.  Until full
beneficial use is made, STAR GOLD shall provide required
information to STONE CABIN which shall file necessary applications
for extension of time.



 

3






 





 

5.2     STAR
GOLD must provide monthly pumping volume data and well level data
of all leased Water Rights (or change applications of leased Water
Rights) to STONE CABIN on a regular basis, or as requested by STONE
CABIN. STONE CABIN, or an agent of its choosing, will then analyze
this data prior to any submission of data to the State
Engineer’s Office.

 

5.3     If
STAR GOLD fails to place all 571.00 acre-feet annum of Water Rights
to beneficial use, and it has determined that it will never place
all 571.00 acre-feet annum of Water Rights to beneficial use, and
are ready to file a Proof of Beneficial Use form with the State
Engineer, then STONE CABIN has the right to file change
applications for the unused portions of the said 571.00 acre-feet
annum of Water Rights and use said unused portions as it desires.
Additionally, proof of beneficial use will not be filed until said
change applications of unused portions are approved by the State
Engineer. If STAR GOLD fails to place all 571.00 acre-feet annum of
Water Rights to beneficial use, this failure does not change the
rental charges listed in Section 4.1 of this Agreement for the
Water Rights which are put to beneficial use.

 


	
6.

	
 Liability and
Indemnity






 

6.1     STAR
GOLD hereby indemnifies STONE CABIN, its officers, employees,
servants, agents, subsidiaries or affiliates and agrees to hold
them harmless against all claims, demands, damages, personal
injury, illness, death, property damage or loss incurred by any
person, animal, fish, plant or geological or meteorological feature
as a result of or in connection with STAR GOLD’S use of the
Water Rights.

 

6.2     STAR
GOLD shall comply with all laws and regulations, whether of
federal, state or local jurisdictions, applicable to the subject
matter of this Agreement. STAR GOLD shall have sole responsibility
to dispose of water it produces hereunder. STAR GOLD is solely
responsible for all environmental and any other regulatory
requirements regarding the use of Water Rights under this
lease.

 

6.3     STONE
CABIN hereby indemnifies STAR GOLD, its officers, employees,
servants, agents, subsidiaries or affiliates and agrees to hold
them harmless against all claims, damages and losses of any kind as
a result of loss of use of the Water Rights, or any of them by
virtue of STONE CABIN’s failure to make timely filings with
the State Engineer as required herein.

 


	
7.

	
 Default






 

In the event STAR
GOLD defaults in the payment of money required hereunder and does
not cure said default within 20 days after written notice, in
addition to any other remedies provided by law, STONE CABIN may
retake possession of the water, and apply the water to other uses
at its discretion. Such retaking possession of the water and
application of the water to other uses shall not terminate this
lease, and the rental reserved hereunder shall continue to fall due
from month to month until the end of the lease, and the rental
hereunder shall only be reduced by the amount that remains after
cash revenues obtained by STONE CABIN from the use or leasing of
the Water Rights have been applied to attorney fees, costs of
repossession, costs of proceeding before the State Engineer to
reestablish beneficial uses of the water, costs incurred under this
Agreement, and costs of equipment, labor and engineering needed to
apply the water to beneficial use.



 

4






 





 


	
8.

	
 Miscellaneous
Provisions






 


	
 

	
8.1

	
 Notices.






 

All notices and
other communications required or permitted hereunder shall be in
writing and shall be deemed to have been properly given when
delivered in person to the person to whom the notice is directed or
three days after deposit in the United States mail, certified mail,
return receipt requested (addressee only), first-class postage
prepaid, postmarked no later than three days prior to the effective
day of the notice, or by telegram, cable, or acknowledged telefax,
charges prepaid, to the party addressed (or to such other address
or attention as the party to be given such notice may designate by
notice to the other party in the manner herein prescribed) as
follows:

 

If to STONE
CABIN:

Stone Cabin Company, LLC

P.O. Box 109

Boardman, OR 97818

 

If to STAR
GOLD:

Lindsay Gorrill, Chairman

Star Gold Corporation

611 East Sherman Avenue

Coeur d’Alene, ID 83814

 


	
 

	
8.2

	
 Sharing of
Documents.






 

STONE CABIN shall
furnish STAR GOLD, and STAR GOLD shall furnish STONE CABIN with
copies of all papers it submits to the State Engineer or any other
tribunal with respect to the Water Rights at the same time it
serves the papers upon parties to a proceeding or files them,
whichever is earlier.

 


	
 

	
8.3

	
 Inspection of
Facilities.






 

STONE CABIN or an
agent of its choosing may upon reasonable notice inspect the
facilities of STAR GOLD for use in management of Water
Rights.

 


	
 

	
8.4

	
 Applicable Law.






 

This Agreement
shall be construed under the laws of the state of Nevada. Except as
otherwise provided herein, all remedies at law, in equity, by
statute, or otherwise shall be cumulative and may be enforced
concurrently therewith or from time to time and the election of
anyone or more shall not constitute a waiver of the right to pursue
other available remedies.



 

5






 





 


	
 

	
8.5

	
 Waiver.






 

Forbearance in
enforcing any remedy granted by this Agreement shall not be deemed
a waiver thereof nor shall it be the basis of an inference that a
party hereto has waived any provision hereof or that a party has
waived a remedy available at law or in equity. No consent by any
party to any departure from here shall be effective unless in
writing, and then only to the extent stated in such writing. No
notice in any particular circumstance shall entitle a party to
notice in the same or similar circumstance unless notice is
required hereunder.

 


	
 

	
8.6

	
 Taxes.






 

STAR GOLD shall pay
all taxes imposed upon the Water Rights during the term
hereof.

 


	
 

	
8.7

	
 Entire Agreement.






 

This Agreement
merges all previous negotiations between the parties hereto,
supersedes all prior discussions and correspondence between the
parties, and constitutes the entire Agreement and understanding
between the parties with respect to the subject matter of this
Agreement. No alteration, modification, or change of this Agreement
shall be valid except by a written instrument executed by the
parties.

 


	
 

	
8.8

	
 Captions.






 

The captions of
this Agreement are for convenience only and shall not control or
affect the meaning or construction of any of the provisions of this
Agreement.

 


	
 

	
8.9

	
 Expenses of
Enforcement.






 

If any party starts
an action to enforce any provision of this Agreement or for damages
by reason of an alleged breach hereof, the court shall award the
prevailing party judgment for all costs and expenses, including
reasonable attorney’s fees and costs, incurred in connection
with such action, to be paid by the other party
hereto.

 


	
 

	
8.10

	
 Pronouns.






 

In this Agreement,
the singular shall include the plural, the plural the singular, and
the use of any gender shall include all genders.



 

6






 





 

EXHIBIT A

 

Water Rights of
STONE CABIN to be leased by STAR GOLD

 

Stone Cabin
Company, LLC is the current owner of the following Underground
water rights located in the State of Nevada in Nevada Hydrographic
Area No. 149 - Stone Cabin Valley, and plans on leasing them to
Star Gold Corporation per the terms of this Agreement:

 

Nevada Water Right
Permits:

 

Permit 82612 -
144.44 AFA

Permit 82613 -
131.96 AFA

Permit 82614 -
152.20 AFA

Permit 82615-
142.40 AFA

 

TOTAL = 571.00
AFA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

A-1






 





 

IN WITNESS WHEREOF,
the parties hereto have executed this Agreement to be effective
once both parties have signed and delivered signed copies to one
another.

 


	
 

	
Star Gold
Corporation of Coeur d’Alene, ID


	
 

	
 


	
 

	
By  

	



	
 

	
Name  Lindsay
Gorrill


	
 

	
Title    Chairman


	
 

	
Date    Dec
30/2016


	
 

	
 

	
 


	
 

	
Stone Cabin
Company, LLC of Boardman, OR


	
 

	
 

	
 


	
 

	
By  

	



	
 

	
Name  Vernon
Frederickson


	
 

	
Title     Member


	
 

	
Date     1/19/17






 


	
STATE OF
IDAHO

	
)


	
 

	
:
 ss.


	
COUNTY OF
KOOTENAI

	
)






 

On this 30 day of
December, 2016, personally appeared before me Lindsay Gorrill,
personally known to me to be the authorized representative of Gold
Star Corporation of Coeur d’Alene, ID, who acknowledged to me
that she signed the foregoing instrument as Authorized Agent for
said Corporation, that the seal impressed on the within instrument
is the seal of said corporation, and the said Chairman acknowledged
to me that said Corporation executed the same.

 


	


	
 

	



	



	



	
NOTARY PUBLIC

Residing at: Coeur d’Alene


	
 

	
 

	
 


	
My Commission
Expires:

	
 

	
 


	
1/29/2022

 

 

 

 

	
 

	
 








 

7






 





 


	
STATE OF
OREGON

	
)


	
 

	
:
 ss.


	
COUNTY OF
MORROW

	
)






 

On this 19 day of
January, 2016, personally appeared before me Vernon Frederickson,
personally known to me to be the authorized representative of Stone
Cabin Company, LLC of Boardman, OR, who acknowledged to me that he
signed the foregoing instrument as Authorized Agent for said LLC,
that the seal impressed on the within instrument is the seal of
said LLC, and the said Member acknowledged to me that said LLC
executed the same.

 




	


	
 

	



	



	



	
NOTARY PUBLIC

Residing at: PO Box 1275 Umafilla, OR 97882


	
 

	
 

	
 


	
My Commission
Expires:

	
 

	
 


	
October 24,
2020

 

 

 

 

 

 

 

 

 

	
 

	
 









 

8