Mining Lease and Agreement dated February 25, 2004



 Exhibit 10.4 
  
 MINING LEASE AND AGREEMENT 
  

									
	Dated:	  	February 25, 2004	  	 	  	 	  	 
					
	Between:	  	Mineral Mountain Mining and Milling Company, an Idaho Corporation, Lessor,	  	 	  	“Mineral Mountain”	  	 
					
	 	  	                    And	  	 	  	 	  	 
					
	 	  	 Sterling Mining Company,
 an Idaho Corporation,
Lessee.
	  	 	  	“Sterling”	  	 

  
 RECITALS: 

 
 1. Mineral Mountain is the owner of certain patented claims in Shoshone
County, as more particularly set forth in Exhibit “A” attached hereto. Mineral Mountain hereby leases those patented claims and subsurface mineral rights to Sterling for the purposes of exploration, development and mining. The rights and
obligations of each party are set forth herein, and the parties agree that the whole agreement between them is herein written. 
  
 2. Any prior leases and agreements between the parties, including all amendments thereto are hereby cancelled and this Lease shall constitute the sole
agreement between Sterling and Mineral Mountain. 
  
 THE PARTIES
HERETO AGREE AS FOLLOWS: 
  
 Section 1. Definitions.

  
 Unless the context otherwise specifies or requires, the terms
defined in this Section 1 shall for all purposes of this Lease have the meanings herein specified, the following definitions to be equally applicable to both singular and plural forms of any of the terms herein defined. 
  
 1.1 The Term “Sterling” means Sterling Mining Company, Inc, an
Idaho corporation, the Lessee and operator pursuant to this Lease and Agreement. 
  
 1.2 The Term “Mineral Mountain” means Mineral Mountain Mining and Milling Company, an Idaho corporation the Lessor under the terms of this Lease and Agreement. 
  
 1.3 The term “Property” means all rights, title and interest,
including the surface thereof, of Mineral Mountain including all mineral and ore in place in that portion of Mineral Mountain’s property described in Exhibit “A” located in Shoshone County, Idaho. 
  
 1.4 The term “Effective Date” means February 24, 2004.

  
 1.5 The term “Lease” means this Mining Lease and
Agreement. 
  
 1.6 The term “Operating Expenses” or
“Costs” means all costs, obligations, liabilities and expenses of any nature which shall be incurred by Sterling in connection with or for the 








 
benefit of the property in the prospecting, exploring, equipping, development and mining of the property; the costs of milling or otherwise beneficiating
ores produced from the property; the transportation costs or charges incurred in connection with transporting of ores to be milled and in transporting ore, concentrates or other products from the property for treatment or sale, and without limiting
the generality of the foregoing, includes: 
  
 1.6.1 Any expenditure, whether or not of a capital nature, made for construction, acquisition or installation of buildings, equipment, machinery or other improvements. 
  
 1.6.2 Wages, supplies, salaries, rentals, royalties or other service costs incurred by Sterling for the
benefit of the Property regardless of where the same are incurred, including social security, unemployment taxes, workmen’s compensation costs, vacation and holiday pay, disability benefits, life insurance, health and accident insurance,
pension costs and all other fringe benefits related to wages and salaries paid and chargeable as an operating cost. 
  
 1.6.3 An administrative overhead charge equal to seven percent (7%) of the total of all other monthly operating expenses defined in
this Section 1.6 in lieu of all other general or corporate expenses of Sterling, except salaries paid to officers who are residents at the property. 
  
 1.6.4 All insurance expense for liability, casualty, workmen’s compensation, business interruption, and any other insurance required
by Mineral Mountain or deemed by Sterling prudent for insuring operations on the property. 
  
 1.6.5 All taxes attributable to the property as set forth in Section 12 except Federal and State Income Taxes. 
  
 1.7 The term “Net Profits” means the Net returns received by
Sterling from products produced from the Property, together with any other revenue from the Property, if any, less all current Operating Expenses or Costs as set forth in 1.6 above. 
  
 1.8 The term “Net Losses” means the excess of Operating Expenses over Net Returns. 
  
 1.9 The term “Net Returns” means the net amount of money or other
net proceeds received from the sale of ore, concentrates, sponge, bullion, or any other form in which minerals or materials (metallic or non-metallic) are produced from the Property after deduction of all treatment charges, penalties, cost of ore in
transit, smelter charges, transportation costs or other charges made by a purchaser of the product and all umpire charges which Sterling may be required to pay. 
  

1.9.1 Cost of ore in transit means an amount equal to the provisional value of the concentrates shipped times the prime rate of
interest charged by    (name a bank)    , not to exceed 120 days. 
  
 1.10 The term “ Advance Royalty” shall have the meaning set forth in Section 7 hereof. 
  

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 Section 2. Lease; Possession; Control. 
  
 2.1 Mineral Mountain hereby leases, demises and assigns to Sterling all of
its right, title and interest to the Property including all mineral and ore in place and any other mineral values. 
  
 2.2 On the Effective Date and subject to the terms and conditions of this Lease, Sterling shall have exclusive possession, management and control of the
Property, surface and subsurface, through the term of the Lease and any extension thereof, unless the term of this Lease is terminated pursuant to Sections 14 or 16 hereof. 
  
 2.2.1 During the term of this Lease the rights granted to Sterling include the exclusive right to explore,
develop and mine the Property; to extract ore; to mill the same; to apply such other metallurgical processes as are deemed necessary; and to market the ore or concentrates derived from the Property, and to retain the proceeds from the sale of such
ore, concentrates or other substances subject to provisions of section 7. 
  
 2.2.2 Sterling may remove timber when necessary to conduct mining operations on the Property and the net proceeds thereof shall be considered Net Returns as set firth in paragraph 1.9, above, and treated in the same
manner as products produced from the Property. General commercial logging of the Property shall not occur without express written permission of Mineral Mountain, and if permission is given, an allocation of the net logging proceeds shall be
negotiated between the parties. 
  
 2.3 Mineral Mountain
acknowledges that during the term of this Lease all decisions with respect to exploration, development and mining of the Property,. and with respect to the character of the work performed thereon by Sterling under the terms of this Lease shall be
solely those of Sterling, whose only obligation to Mineral Mountain in this regard is that such work will be performed in a sound miner-like manner. No other obligations are intended or implied, in fact or law, between the parties. Sterling shall be
the operator of the Property. 
  
 2.4 Mineral. Mountain
acknowledges and agrees that all ore, concentrates, metals or other mineral substances produced from the Property shall be the property of Sterling, subject only to Sterling’s obligation to pay Cost and Royalties as set forth herein from Net
Returns resulting from the sale thereof. Sterling shall dispose of such ore, concentrates, metals or other mineral substances in such manner and by such means as Sterling, in its sole judgment, may determine to provide the optimum Net Returns for
the Property, and for the mutual benefit of Sterling and Mineral Mountain. Should Sterling consume the product internally, it shall credit the Property with Net Returns equal to then-prevalent terms offered to other sellers of similar products in
similar quantities by Sterling. 
  
 2.5 Sterling shall have the
right to occupy the surface of the Property and is subject to any obligation or lease of such surface or subsurface by Mineral Mountain in effect prior to November 14, 2003. 
  

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 Section 3. Term; Renewal. 
  
 3.1 Subject to termination as provided herein, this Lease shall be for a of twenty five (25) years commencing on the
Effective Date and ending on February 25, 2029. 
  
 3.2 This
Lease shall be renewable for an additional twenty five (25) years on the same terms and conditions as set forth herein upon Sterling having notified Mineral Mountain in writing of its intention to continue this Lease for the extended term; such
notice of extension to be given to Mineral Mountain at least ninety (90) days prior to the expiration of the original term as set forth in Section 3.1. 
  
 Section 4. Representations and Warranties of Mineral Mountain. 
  
 4.1 Mineral Mountain represents and warrants to Sterling that: 

 
 4.1.1 It has possessory title to the Property free and
clear of all equities, encumbrances or claims of adverse ownership, except as set forth herein. 
  
 4.1.2 It is acknowledged by Sterling that as to the Mineral Mountain group of properties, Chester Mining Company holds an undivided 1/3
interest in the mineral estate only of said claims set forth in Exhibit “B” attached hereto. 
  
 4.1.3 So long as Sterling shall perform the covenants required to be performed by it hereunder, Sterling shall have peaceful and quiet use
and possession of the Property without hindrance on the part of Mineral Mountain, and Mineral Mountain warrants and defends Sterling in such peaceful and quiet use and possession at the sole cost and expense of Mineral Mountain. 
  
 4.1.4 On the Effective Date, this Lease shall have been
fully authorized and approved by a majority of the Board of Directors of Mineral Mountain, and supported by an opinion of counsel in form and substance satisfactory to Sterling that shareholder approval is not required. 
  
 Section 5. Advances by Sterling; Reimbursement. 
  
 5.1 Sterling shall advance all funds as it in its sole mining and business
judgment deems necessary for the exploration, development and mining of the Property, except as provided in Section 6 below, and shall be entitled to be reimbursed for all costs and expenditures incurred by it in the manner provided in this
Lease. 
  
 5.2 Sterling shall retain and own all ore and
concentrates produced from mining operations conducted on the Property and shall retain all Net Returns realized from the Property, except as provided in Section 7 below, until the amounts so retained have reimbursed Sterling for all advances
and expenditures incurred by it including but not limited to the following: 
  
 5.2.1 In examining, equipping, exploring, developing and mining the Property, and in all matters connected therewith. 
  

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 5.2.2 All Advance Royalties paid to Mineral Mountain. 
  
 5.2.3 All Operating Expenses set forth in Section 1.6.

  
 5.2.4 All Net Losses incurred by Sterling in
the mining of the Property which can only be recovered from the future Net Profits. 
  
 Section 6. Sterling’s Minimum Work Obligation. 
  
 6.1 Sterling shall have no work obligations. Mineral Mountain acknowledges and understands the Sunshine Mine and Mill, which is leased to Sterling, is not in operation. Sterling is using its best efforts to re-open
the Mine and Mill but makes no promises or warrantees that it will be successful in its efforts. 
  
 Section 7. Consideration; Royalties. 
  
 7.1 As and for consideration for entering into this Lease, Sterling shall immediately deliver 30,000 shares of Sterling’s restricted common Shares to
Mineral Mountain. 
  
 7.1.1 Mineral Mountain
hereby grants to Sterling, during the term of this Lease, an option to purchase up to One Million (1,000,000) shares of Mineral Mountain’s restricted common stock for Fifty Cents (.50¢) per share. Sterling may exercise this option by
providing five (5) days written notice to Mineral Mountain of its intent to purchase. 
  
 7.2 Sterling shall pay the following advance royalties to Mineral Mountain: 
  
 7.2.1 Commencing on the Effective Date and annually thereafter an Advance Royalty of Three Thousand Six Hundred Dollars ($3600.00) per
year until such time as Net Profits Royalties are payable. 
  
 7.2.2 Advance Royalties shall terminate at the time Mineral Mountain commences to receive Net Profit Royalties, as provided in Section 7.3 or Section 7.4, unless such Net Profit Royalty is less that the
amount of the Advance Royalty provided for herein, and in that event the Advance Royalty shall be the difference between the Advance Royalty amount and the Net Profit Royalty payable. 
  
 7.3 Thirty (30) days after the end of any quarter in which Net Profits are generated from the Property, Sterling shall
pay a Net Profit Royalty to Mineral Mountain equal to three percent (3%) of total Net Profits generated during that calendar quarter from the operations on the Property, subject to minimum royalty provision of 7.2.1 
  
 7.4 Thirty (30) days after the end of any quarter in which Net Profits
are generated from the Property, and provided that Sterling has been fully reimbursed for all recoverable Costs, Expenses, Royalties and working capital retentions, consisting of an amount equal to three times the average monthly costs incurred for
the Property in the preceding calendar quarter adjusted at the beginning of each quarter, Sterling shall pay a Net Profit Royalty to Mineral Mountain equal to three percent (3%) of total Net Profits generated during such calendar quarter from
operations on the Property. It is expressly agreed that Royalties payable pursuant to this section are in lieu of and not in addition to Royalties provided for in section 7.3 above. 
  

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 Section 8. Cost of Property; Operating Expenses: Certain Allocations. 
  
 8.1 The Costs, as defined in Section 1.6 of all exploration,
development, mining and any other work which is done for the benefit of the Property shall be charged to and accounted for as a cost of the Property. 
  
 8.2 Prior to the commencement of any work that will jointly benefit Mineral Mountain and another property operated by Sterling, Sterling shall make an
equitable allocation of such cost to the properties involved, and advise Mineral Mountain of such allocation and the basis therefore. 
  
 8.3 All direct, indirect and allocable cost incurred for the benefit of the Property, whether on or off the Property, including but not limited to
exploration, acquisition, rehabilitation, development, construction, mining, milling, processing, transportation, marketing and taxes ( except income taxes of the separate parties) shall be charged to the Property. 
  
 8.4 All such Costs of the property and Advance Royalties shall be accrued and
carried forward for offset against Net Profits until fully extinguished subject to the minimum royalty provision of paragraph 7.2.2 
  
 8.5 In the event ore form the Property is milled at the Sunshine Mine Mill, all milling cost incurred at such mill will be charged to the Property on a
pro rata basis per Section 8.5.1. 
  
 8.5.1
The aggregate monthly milling costs including allocation for recovery of only the unamortized capital costs of the Sunshine Mill and its ancillary facilities including tailings ponds shall be divided by the total tons of ore milled each month and
the resulting cost per ton shall be multiplied by the tons of ore milled form the Property. 
  
 Section 9. Progress Repots; Inspection. 
  
 9.1 Within thirty (30) days after the end of each calendar quarter commencing with the first quarter that Sterling reopens the Sunshine Mine and Mill and commences production therefrom, Sterling shall furnish to
Mineral Mountain progress reports showing the character and amount of work preformed by Sterling during the preceding calendar year on the Property, which reports shall identify the place or places where said work was performed. 
  
 9.1.1 Sterling shall maintain at its office all sample data,
geological amps, and other items of information resulting from such work. Mineral Mountain shall have the right to make and remove copies of all such data but Mineral Mountain shall no remove original documents without written consent of Sterling.

  
 9.1.2 Sterling shall retain samples splits,
drill core, mill retainers or other samples as are dictated by good geologic, mining or metallurgical practice. Such samples shall be the property of Mineral Mountain, but shall not be removed from Sterling’s control until termination of this
Lease, at which time they shall be promptly removed by Mineral Mountain. 
  

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 9.1.3 Mineral Mountain hereby agrees that it shall only publish such results, data and
information from Sterling’s work as are required by law and rules and regulations of the Securities and Exchange Commission, unless it first obtains Sterling’s prior agreement and consent in writing. 
  
 9.2 Mineral Mountain’s authorized representatives may during normal
business hours inspect the information or samples required to be kept by Sterling pursuant to Section 9.1, and on at least five (5) day’s notice may enter upon the Property and inspect the work performed by Sterling pursuant to this
Lease. 
  
 9.2.1 Entry upon the Property by
Mineral Mountain or its authorized representatives shall be at Mineral Mountain’s sole risk. Mineral Mountain indemnifies and holds Sterling harmless from any claim, damage, or demand by reason of injury to Mineral Mountain’s
representatives, invitees or the like, incurred as a result of their inspecting the Property. 
  
 Section 10. Books and Records; Statements. 
  
 10.1 Sterling shall maintain at the office of the Sunshine Mine or such other office within the County of Shoshone, records and account consistent with those ordinarily kept by mining ventures, covering operations on
the Property, including the mining, milling, or other metallurgical processing, sale and disposal of ores and concentrates; such books,. records and accounts to be kept in accordance with generally accepted principals and practices of accounting.

  
 10.2 Within thirty (30) days after the end of each
calendar quarter commencing with the first quarter that Sterling reopens the Sunshine Mine and Mill and commences production therefrom, Sterling shall furnish Mineral Mountain statements showing in reasonable detail the financial results of
operations conducted on or associated with the Property or the products mined there from during the preceding quarter. 
  
 10.3 If with twenty (20) days after receipt by Mineral Mountain of any statement rendered to it by Sterling, Mineral Mountain does not object in
writing to said statement, there shall be conclusively deemed to be an account stated between the parties, and such account shall be conclusively deemed correct. 
  
 10.4 The books and records of Sterling insofar as they relate to operations on the Property pursuant to this Lease shall be
open to the inspection of Mineral Mountain or its duly authorized representatives during regular business hours of Sterling. 
  
 10.4.1 Once during each calendar year Mineral Mountain, may at its sole cost and expense, make or have make an audit of the accounts and
records of Sterling concerning operations on the Property, provided Mineral Mountain notifies Sterling of its intention to cause such an audit to be made thirty (30) days in advance of such date. 
  

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 Section 11. Plant and Equipment. 
  
 11.1 All machinery; equipment, buildings, inventory or other supplies acquired by Sterling after the Effective Date
exclusively for operations on the Property subject to this Lease shall be charged as an Operating Expense of the Property, but the ownership thereof shall rest solely in Sterling. 
  
 11.1.1 The proceeds from any disposition of such property during the life of this lease shall be credited as
Net Proceed of the Property. 
  
 11.2 On the termination of this
lease all property acquired pursuant to Section 11.1 shall be subject to an option in Mineral Mountain to purchase the same within sixty (60) days form the date of termination at its market value determined by an independent appraisal.

  
 11.2.1 In the event Mineral Mountain does not
elect to purchase the property, Sterling shall have one hundred eighty (180) days after the expiration of Mineral Mountain’s option to remove the same from the Property 
  
 11.2.2 All property not removed within the one hundred eighty (180) day period shall be deemed
abandoned to Mineral Mountain. 
  
 11.3 Notwithstanding
Section 11.2, all underground pipe, tracks, wiring and mine timbers in place shall remain on the Property on termination, and ownership thereof shall vest in Mineral Mountain free of any claims of Sterling. 
  
 Section 12. Taxes; Liens; Compliance with Laws. 
  
 12.1 Sterling and Mineral Mountain shall each pay its own Federal and State
taxes on its share of income attributable to the Property and any other tax in the nature of an excise. 
  
 12.2 Sterling shall pay before delinquency all ad valorem, property taxes and other governmental charges which if failed to be paid when due could result
in a lien upon the Property. Mineral Mountain shall promptly forward all ad valorem tax notices to Sterling. 
  
 12.3 Sterling shall keep the Property free and clear of all liens and encumbrances, but may in good faith contest the validity or amount of any lien which
may be levied against the Property. 
  
 12.4 Sterling in
conduction operations on the Property shall comply with all Federal, State and Local laws and regulations pertaining to operations on the Property. 
  
 Section 13. Open Ground Within Property. 
  
 13.1 In the event it is subsequently discovered that mineral rights to parcels of ground within the Property herein leased to Sterling are open or
otherwise not under the control of Mineral Mountain, Sterling shall, at its sole option, locate, acquire or other wise gain control of the same in the name of Mineral Mountain, and the same shall automatically become a part of the Property.

  

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 13.2 Sterling shall have the right in the name of Mineral Mountain to remedy any defects of title in
Mineral Mountain as Sterling, in its sole judgment, shall deem necessary to secure Mineral Mountain tenure and sublet. 
  
 13.3 In the event that adverse or favorable claims of extralateral rights appear which may act to the detriment or benefit of the Property, Sterling shall
have the right to defend or pursue such claims in the name of Mineral Mountain to the extent that Sterling, in its sole judgment shall deem advisable. Sterling shall immediately notify Mineral Mountain in writing of the extralateral rights conflict
and its decision concerning further litigation of the problem. Mineral Mountain shall at its own expense have the right to retain its own independent counsel to participate in any proceedings, including litigation, and Sterling’s counsel shall
work with and keep Mineral Mountain’s counsel fully advised of all phases of the proceedings and shall make available to Mineral Mountain’s counsel all records, .files, research and other information required to permit Mineral Mountain to
make sound judgments in these proceedings. Sterling shall consult with Mineral Mountain during the defense or pursuit of such claims, and Mineral Mountain shall hold Sterling harmless for Sterling’s actions or omissions in the defense or
pursuit of such claims or in the recognition and knowledge of such claims. In no event will Mineral Mountain’s portion of any adverse judgment exceed Mineral Mountain’s total share of net profits received to date of any judgment as
settlement. Any excess shall be paid by Sterling and recovered out of Mineral Mountain’s share of future net profits. 
  
 13.3.1 Should Sterling elect not to defend or pursue such claims as come to its attention, or to withdraw from such defense or pursuit,
Sterling will promptly notify Mineral Mountain. Mineral Mountain may then defend or pursue such claims at its sole discretion; bearing all costs, suffering all penalties or enjoying all recoveries as it may effect. 
  
 13.4 All costs, expenses, settlements or judgments which may be incurred or
recovered by Sterling pursuant to this Section 13 shall be an Operating Expense or Net Return of the Property. 
  

	 	Section	14. Sterling’s Right to Terminate. 

  
 14.1 Sterling shall have the right to terminate this Lease and to surrender the Property to Mineral Mountain by giving Mineral Mountain written notice
thereof at least ninety (90) days prior to the date of termination, provided: 
  
 14.1.1 Upon such termination the Property will revert to Mineral Mountain free of any liens or encumbrances incurred after the Effective
Date and as a result of Sterling’s operations on the Property. 
  
 14.1.2 In the event Sterling has initiated any legal proceeding on behalf of Mineral Mountain it shall conclude such action, notwithstanding termination of this agreement, and shall be entitled to participate in and
be entitled to recover its costs and expenses (including attorney fees) in obtaining such judgment or settlement. 
  
 14.1.3 If requested by Mineral Mountain within the notice period stated above, Sterling agrees to deliver to Mineral Mountain one legible
copy of all factual data then in 

  

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Sterling’s possession, which Sterling deems to be applicable (at time of termination) to that portion of property being terminated at no cost to Mineral
Mountain. Mineral Mountain shall also have a reasonable time to inspect the originals and color its copies. 
  
 14.1.4 Sterling shall leave all underground openings in such condition as fully complies with Federal, State and County laws, rules,
regulations and ordinances. 
  
 14.1.4.1 Provided
that the Property is accessible, within twenty (20) days of termination or accessibility, Mineral Mountain and Sterling shall conduct a joint inspection of the underground openings to determine Sterling’s compliance with section 14.1.4.
Failure by Mineral Mountain to object in writing to Sterling within thirty (30) days of such inspection shall constitute Mineral Mountain’s assent to Sterling’s compliance with such section. 
  
 14.1.4.2 If Sterling has conducted any surface activities on
the Property, Sterling shall be responsible for any reclamation related thereto than may be required by Federal, State and County laws, rules, regulations and ordinances. Further, Sterling shall return . the surface to its condition as existed on
the Effective Date, reasonable wear and tear excepted. 
  
 14.2 In
the event Sterling terminates this Lease, evidence of such termination shall be in recordable form. 
  
 Section 15. Force Majeure. 
  
 15.1 If Sterling should be prevented or delayed from performing any of the obligations of this lease by reason of acts of nature, strike or threat of
strike, fire, flood, delay in transportation or insurrection, mob violence, requirement or regulation of government, unavoidable casualties, shortage of labor, equipment, material, plant breakdown, third party litigation or other disabling causes or
for any reason which cannot be reasonably overcome by the means normally employed in performance or any other reasonable cause or causes, then in such event any such failure to perform shall be excused and not be deemed a breach of this Lease, and
performance of said obligations shall be suspended during such period of disability, and the time for performance of said obligations shall be extended for a period equal to the period of disability. 
  
 15.2 The invocation of this section shall not be construed to suspend the
payment of Advance Royalties. 
  
 Section 16. Default;
Mineral Mountain’s Right on Default. 
  
 16.1 This Lease
is upon and subject to the condition that, if Sterling shall: 
  
 (a) Fail to make a required payment of money to Mineral Mountain in full within sixty (60) days after the same shall become due, and the amount is not being contested in good faith by Sterling, and within fifteen
(15) days after Mineral Mountain shall have given written notice of deficiency therein; or 
  

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 (b) Fail to observe and perform faithfully any of the other covenants or agreements
herein contained, and on the part of Sterling to be observed and performed, and any such default shall continue for a period of ninety (90) days after Mineral Mountain shall give Sterling written notice of such failure; or 
  
 (c) Abandon the property for a period of thirty
(30) days after a written notice by Mineral Mountain; 
  
 that, after the
expiration, of such periods of time Mineral Mountain may declare Sterling in default. 
  
 16.2 In the event of default by Sterling pursuant to Section 16.1, and such default is not cured within the terms provided in said Section, Mineral Mountain may at once enter into and upon the Property or any
pert thereof and declare a forfeiture and cancellation of this Lease. 
  
 16.3 Except for Sterling’s failure to make payment of Advance Royalties or issue the restricted stock required in Section 7.1.1, or discharge of costs or obligations which could result in a lien on the Property, the sole remedy of
Mineral Mountain for Sterling’s failure to perform this Lease shall be termination of this agreement and Mineral Mountain waives any claims for damage it may have against Sterling for its failure to perform this Lease. 
  
 16.4 In the event Sterling is contesting any claimed default by Mineral
Mountain in good faith, and the same is unresolved for a period of one hundred twenty (120) days, either party may seek a judicial determination with respect to the alleged default, but in such event no action with respect to curing any alleged
default needs be taken by Sterling and Sterling shall be entitled to peaceful and quiet possession of the Property until the matter is finally adjudicated or otherwise resolved. 
  
 Section 17. Recordation. 
  
 17.1 On the Effective Date a good and sufficient memorandum of this Lease shall be placed of record in the records of
Shoshone County, Idaho. 
  
 Section 18. Notice.

  
 18.1 Notices to the parties to this Lease shall be in writing
and shall be effective when delivered, or if mailed, shall be effective on the date .following mailing by certified mail addressed to the party indicated below or at such other address as the party may indicate to other in writing: 
  

			
	Sterling:	  	 Sterling Mining Company
 411 Coeur d’ Alene Ave.,
Suite 1-A
 Coeur d’ Alene, Idaho 83873

		
	Mineral Mountain:	  	 Mineral Mountain Mining Company
 P.O. Box
2196
 Coeur d’Alene, ID 83816-2196


  

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 Section 19. Inurement; Assignment; Option to Lessor; Option to Lessee. 
  
 19.1 This lease shall be binding upon and inure to the benefit of the
parties hereto and their successors and assigns. 
  
 19.2 Sterling
may assign any portion of its interest in this Lease to any third party provided the third party shall accept and covenant to Mineral Mountain that it will perform the obligations of said Lease as if it were the original Lessee. 
  
 19.3 For a period of five (5) years after Sterling first pays
undiminished Net Profits Royalties as provided in Section 7.4, Mineral Mountain may elect to become a fully participating, non-operating owner of a three percent (3%) working interest in all ores, concentrates, metals or other mineral
substances produced under this Lease form the Property by notifying Sterling of its intention and tendering the consideration and accepting the obligations set forth below: 
  
 19.3.1 Mineral Mountain may acquire a three percent (3%) working interest by releasing Sterling from
the obligation to pay Net Profits Royalty and by tendering an amount of cash equal to three percent (3%) of the then-current working capital fund. 
  
 19.3.2 Mineral Mountain shall, after election of this option, make its proportionate contribution to Costs and working capital funds and
receive its proportionate share of Net Returns monthly as though it were substitute proportionally for Sterling herein. 
  
 19.3.3 The election by Mineral Mountain to exercise its option hereunder shall not vest Mineral Mountain with any rights or powers
pertaining to operation of the Property which it does not otherwise have under this Agreement. Sterling shall, however, make provision for consultation with Mineral Mountain regarding the ongoing operation of the Property. 
  
 19.3.4 The election by Mineral Mountain to exercise its
option herein shall vest in Mineral Mountain ownership of a proportionate share of all ores, concentrates, metals or other mineral substances produced from the Property. Mineral Mountain may receive its product in kind subject to payment of any
additional cost associated with delivery in kind. However, Sterling shall, as agent for Mineral Mountain, market Mineral Mountain’s share of product and pay over to Mineral Mountain its share of the proceeds. Sterling shall not enter into any
binding commitment for sale of Mineral Mountain’s share of the product which will encumber the share of the product for more than one (1) year without the consent of Mineral Mountain; provided that Sterling may renew such an agreement from
year to year unless Mineral Mountain shall give Sterling notice at least on hundred eighty (180) days before expiration of Mineral Mountain’s intent to make alternative provision for sale of its product. 
  
 19.4 In the event Mineral Mountain determines to transfer its interest in the
Property to any third party by sale, exchange, or any other bona fide devices effecting a change of ownership including corporate merger or consolidation it shall first notify Sterling of the terms of the 

  

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proposed sale, exchange or device affecting change of ownership and Sterling, at its sole option, may acquire the Property by offering within sixty
(60) days consideration equivalent to the terms then acceptable to Mineral Mountain. Should opinions differ between Mineral Mountain and Sterling as to the value of terms or consideration offered, then Mineral Mountain and Sterling shall submit
the issue to binding arbitration by panel of three (3) qualified investment bankers, one chosen by each party and the third by the first two, with costs of the arbitration to be shared equally by each party. 
  
 Section 20. Court of Competent Jurisdiction. 
  
 20.1 If any question shall at any time or times arise between the parties
hereto with respect to any matter or thing whatsoever covered by or pertaining to this Agreement, such question or questions shall be settled and disposed of, if possible, by an exchange of letters between the parties involved; but if such question
or questions cannot be so settled and disposed of within three (3) months, or such longer period agreed upon by the parties, then and in such event either party may submit such question or questions by bringing appropriate action in the lowest
Idaho court of competent jurisdiction. Venue shall be in Shoshone County. The decision by such shall be final unless a party who shall not be satisfied with such decision shall, within the time allowed for appeals by the Idaho Rules of Appellate
Procedure, resort to further court action. 
  
 20.2 With respect
to any dispute hereunder, no violation by any party. hereto of any of the terms of this Agreement shall be deemed to have occurred unless and until a decision to such effect shall have been rendered by such court. 
  
 20.3 For any action the prevailing party shall be entitled to reasonable
attorney’s fees and costs of litigation. 
  
 Section 21.
Perpetual Easement. 
  
 21.1 Sterling shall have the
perpetual right to use any shafts and all other openings which now exist in the Property or which Sterling hereafter constructs in the Property under the terms of this Agreement or subsequent to this Agreement, for any and all purposes in connection
with any and all mining operations which Sterling might wish to conduct in any other property. The use of such openings by Sterling as described in this Sections 21 shall be without payment other than that provided for in this Section and shall
continue perpetually even though this Agreement may become terminated or surrendered, such rights granted under this Article constituting covenants running with the land. 
  
 21.2 Sterling’s operations pursuant to the easement outlined Section 21.1 above shall be so conducted as not to
unreasonably interfere with operations conducted by Mineral Mountain following termination of this Agreement. 
  
 21.3 In exercising the rights acquired in this Section 21, Sterling shall pay Mineral Mountain a facilities charge of $1.00 per ton of ore
transported through such openings and a facilities charge of fifty cents ($.50) for a ton for all mine waste material transported through said openings and/or stored on the Property. 
  

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 Section 22. Liabilities - Not a Partnership. 
  
 22.1 The liability of the parties to this Agreement shall be several and not
joint or collective, and this agreement shall not be construed under any circumstances as creating a partnership. Each party shall be responsible only for its proportionate share of the obligations as provided herein. The parties agree to and hereby
elect to be excluded form the application of Sub-chapter K of Chapter I of the Internal Revenue Code of 1954,_ or such part thereof as may be permitted or authorized by the Treasury of the United States or his delegates. Sterling agrees to file the
election necessary to be excluded from Subchapter K for the first year in which such election is required and the election will be attached to a partnership return and a copy of this Agreement, as more specifically provided in Section 761 of
the Internal Revenue Code of 1954, or any amendments to said Code or Regulations promulgated thereunder. 
  
 Section 23. Miscellaneous. 
  
 23.1 This Agreement shall be governed and interpreted in accordance with the laws of the State of Idaho. 
  
 23.2 This Lease shall be executed in one or more counterparts, each of which
shall constitute one and the same agreement. 
  
 23.3 The headings
or captions contained in each section of this lease are for ease of reference and convenience only, and shall not be considered in connection with the construction of this Agreement or any section hereof. 
  
 IN WITNESS WHEREOF the parties hereto have executed this Mining Lease and
Agreement the day and year shown above by the undersigned thereunto duly authorized. 
  

			
	STERLING MINING COMPANY, INC
		
	 By:
	 	 /s/ Raymond DeMotte


	 	 	 Raymond DeMotte, President
 Printed Name and
Title



  

	
	ATTEST:
	
	 /s/ Carol Stephan


	Carol Stephan
	Printed Name, Secretary

  

 14 









			
	 MINERAL MOUNTAIN MINING AND
 MILLING
COMPANY

		
	By:	 	 /s/ Delaine H.Gruber


	 	 	Delaine H.Gruber, President
	 	 	Printed Name and Title


  

	
	ATTEST:
	
	  


	  


	Printed Name, Secretary

  

					
	State of Idaho	  	)	 	 
	  	  	:	 	ss.
	County of Shoshone	  	)	 	 

  
 On this 25th day of
February, 2004, before me, a Notary Public in and for the State of Idaho, personally appeared Raymond DeMotte and Carol Stephan, President and Secretary, respectively, of Sterling Mining Company, the corporation that executed the within and
foregoing instrument, and acknowledged the said instrument, and acknowledged the said instrument to be the free and voluntary act and deed of said corporation, for the uses and purposes therein mentioned, and each on oath stated that he was
authorized to execute said instrument. 
  
 SUBSCRIBED AND SWORN to
before me this 25th day of February, 2004. 
  

	
	 /s/ Pamela J. Goodson


	 Notary Public in and for the State of Idaho

	 Residing at: Worley, Idaho

	 My Commission Expires: 5/17/2007



  

					
	State of Idaho	  	)	 	 
	 	  	:	 	ss.
	County of Shoshone	  	)	 	 

  
 On this 25th day of
February, 2004, before me, a Notary Public in and for the State of Idaho, personally appeared Delaine Gruber and             , President and Secretary, respectively, of Mineral
Mountain Mining and Milling Company, the corporation that executed the within and foregoing instrument, and acknowledged the said instrument, and 

  

 15 








 
acknowledged the said instrument to be the free and voluntary act and deed of said corporation, for the uses and purposes therein mentioned, and each on oath
stated that he was authorized to execute said instrument. 
  
 SUBSCRIBED AND SWORN to before me this 25th day of February, 2004. 
  

	
	 /s/ Carol Stephan


	Notary Public in and for the State of Idaho
	Residing at: Bonner Co.
	My Commission Expires: 3/08/2008


  

 16 








 EXHIBIT “A” 
  
 MINERAL MOUNTAIN MINING AND MILLING COMPANY’S PATENTED CLAIMS 
  

			
	 Patented Claim Name

	  	 Mineral Survey Number


	Dipper	  	3310
	Monitor	  	3240
	Little Giant	  	3240
	Instructive	  	3240