Royalty Deed between Arthur Leger and Pershing Royalty Company dated May 24, 2012

Recording Requested by:
WHEN RECORDED MAIL TO:

 

Affirmation Statement:

 

The undersigned hereby affirm that this document does not contain the personal information of any person or persons.

 

THIS ROYALTY DEED (“Deed”) is made and entered into this 24th day of May, 2012, by and between Arthur Leger, an individual (“Leger”), whose address is 2338 Sunrise Drive, Reno, Nevada 89509, and Pershing Royalty Company, a Delaware corporation (“Pershing Royalty”), whose address is 1656 Cole Blvd., Building 6, Suite 210, Lakewood, Colorado 80401.

 

 

A.           Leger is the sole owner of those certain unpatented mining claims located in Lander County, Nevada, as more particularly described on Exhibit A attached hereto and incorporated herein by reference (the “Claims”).

 

B.           Leger has agreed to grant to Pershing Royalty a one percent (1.0%) net smelter returns production royalty on all minerals produced from the Claims on the terms and conditions set forth herein.

 

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Leger hereby grants, bargains, sells, transfers, assigns and conveys to Pershing Royalty, its successors and assigns, a non-participating, non-executive perpetual production royalty, as set forth in Exhibit B attached hereto and incorporated herein by reference, of one percent (1.0%) of the Net Smelter Returns (as defined in Exhibit B) from any and all Valuable Minerals (as defined in Exhibit B) produced and sold from the Claims (the “Production Royalty”).  The terms of payment of the Production Royalty and other agreements of the parties pertaining to the Production Royalty are set forth in Exhibit B.

 

 

Leger acknowledges and represents to Pershing Royalty that (i) he has good title to and is the sole owner of the Claims (subject to the paramount title of the United States of America), the Claims are free and clear of any and all encumbrances, the Claims were located, monumented and recorded with the appropriate governmental agencies as required by law and have been continuously maintained since location or relocation by the performance of assessment work or timely payment of claim maintenance fees and filing/recording of evidentiary documents as required by law, and he is not a party to any other agreements with respect to any production royalties from the Claims; (ii) he has agreed to grant to Pershing Royalty a payment of the Production Royalty in connection with the transactions contemplated by that certain Agreement and Plan of Merger by and among Valor Gold Corp., Valor Gold Acquisition Corp., Red Battle Corp., and Pershing Gold Corporation dated as of May 22, 2012, (iii) that granting the Production Royalty to Pershing Royalty is a condition to the closing of such transactions that is required to be satisfied by Valor Gold Corp. and Valor Gold Acquisition Corp.; and (iv) that he has received good, valuable and sufficient consideration from Valor Gold Corp. or Valor Gold Acquisition Corp. for granting the Production Royalty.

 

The parties intend that the Production Royalty granted by Leger in this Deed shall be a covenant running with the Claims, and the parties agree that any conveyance of all or any portion of the Claims shall not be effective unless it includes an express covenant by the transferee to recognize and pay the Production Royalty.  The parties agree that Pershing Royalty may record this Deed in the official records of Lander County, Nevada.

 

TO HAVE AND TO HOLD the Production Royalty unto Pershing Royalty, its successors and assigns forever.

 

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IN WITNESS WHEREOF, the parties have executed this Royalty Deed as of the date first set forth above.

 

 

 

The foregoing instrument was acknowledged before me on this _______ day of May, 2012, by Arthur Leger.

 

Witness my hand and official seal.

 

_______________________________

 

Notary Public

 

My Commission expires:

 

_______________________________

 

 

STATE OF ____________	)
	) ss.
COUNTY OF __________	)

 

The foregoing instrument was acknowledged before me on this _______ day of May, 2012, by ______________________, as _____________________ of Pershing Royalty, a Delaware corporation.

 

Witness my hand and official seal.

 

 

 

 

 

 

 

 

 

 

		COUNTY RECORDING INFORMATION
CLAIM NAME	BLM SERIAL NO. (NMC)	BOOK	PAGE	DOC. NO.
LS#l	863271	526	498	230790
LS#2	863272	526	499	230791
LS#3	863273	526	500	230792
LS#4	863274	526	501	230793
LS#5	863275	526	502	230794
LS#6	863276	526	503	230795
LS#7	863277	526	504	230796
LS#8	863278	526	505	230797
LS#9	863279	526	506	230798
LS#11	863280	526	507	230799
LS#13	863281	526	508	230800
LS#15	863282	526	509	230801
LS#17	863283	526	510	230802
LS#19	863284	526	511	230803
LS#20	863285	526	512	230804
LS#21	863286	526	513	230805
LS#22	863287	526	514	230806
LS#23	863288	526	515	230807
LS#24	863289	526	516	230808
LS#25	863290	526	517	230809
LS#26	863291	526	518	230810
LS#27	863292	526	519	230811
LS#28	863293	526	520	230812
LS#29	863294	526	521	230813
LS#30	863295	526	522	230814
LS#31	863296	526	523	230815
LS#32	863297	526	524	230816
LS#33	863298	526	525	230817
LS#34	863299	526	526	230818
LS#36	863300	526	527	230819
LS#38	863301	526	528	230820

 

 

 

 

 

Payor shall pay to Royalty Holder a non-participating, non-executory perpetual royalty (the “Production Royalty”) of one percent (1.0%) of the Net Smelter Returns from all Valuable Minerals mined and removed from the Claims and sold or deemed to have been sold by or for Payor, on the following terms and conditions:

 

(a)           As used herein, “Payor” means the person or entity obligated to pay the Production Royalty to the Royalty Holder, who initially shall be Leger, and shall include all of Payor’s successors-in-interest who acquire an ownership interest in all or any portion of the Claims or to whom Payor assigns the obligation to pay the Production Royalty, including, without limitation, any lessee of the Claims.

 

(b)           As used herein, “Royalty Holder” means the person or entity entitled to receive the Production Royalty, which initially shall be Pershing Royalty, and shall include all of the Royalty Holder’s successors-in-interest, including without limitation assignees, partners, joint venture partners, lessees and, when applicable, mortgagees and affiliated companies having an interest in the Production Royalty.

 

(c)           As used herein, “Net Smelter Returns” means the Gross Returns from the Valuable Minerals, less all Allowable Deductions.

 

(d)           As used herein, “Gross Returns” has the following meanings for the following categories of the Valuable Minerals:

 

(i)           If refined gold that meets or exceeds the generally accepted commercial standards for refined gold is produced by an independent third-party refinery from ores mined from the Claims, for purposes of determining the Production Royalty, the refined gold shall be deemed to have been sold in the calendar month in which it was produced at the Monthly Average Gold Price for that month.  The Gross Returns from such deemed sales shall be determined by multiplying Gold Production during the month by the Monthly Average Gold Price.  As used herein, “Gold Production” means the quantity of refined gold that is outturned to Payor’s account by the refinery during the calendar month on either a provisional or final settlement basis.  If outturn of refined gold is made by the refinery on a provisional basis, the Gross Returns shall be based upon the amount of such provisional settlement, but shall be adjusted in subsequent statements to account for the amount of refined metal established by final settlement by the refinery. As used herein, “Monthly Average Gold Price” means the average London Bullion Market Association P.M. Gold Fix, calculated by dividing the sum of all such prices reported for the month by the number of days for which such prices were reported.  If the London Bullion Market Association P.M. Gold Fix ceases to be published, the Monthly Average Gold Price shall be determined by reference to prices for refined gold for immediate delivery in the most nearly comparable established market selected by Payor as such prices are published in “Metals Week” or a similar publication.

 

 

(ii)           If refined silver that meets or exceeds the generally accepted commercial standards for refined silver is produced by an independent third-party refinery from ore mined from the Claims, for purposes of determining the Production Royalty, the refined silver shall be deemed to have been sold in the calendar month in which it was produced at the Monthly Average Silver Price for that month.  The Gross Returns from such deemed sales shall be determined by multiplying Silver Production during the calendar month by the Monthly Average Silver Price.  As used herein, “Silver Production” shall mean the quantity of refined silver that is outturned to Payor’s account by the refinery during the calendar month on either a provisional or final settlement basis.  If outturn of refined silver is made by the refinery on a provisional basis, the Gross Returns shall be based upon the amount of such provisional settlement, but shall be adjusted in subsequent statements to account for the amount of refined metal established by final settlement by the refinery.  As used herein, “Monthly Average Silver Price” shall mean the average New York Silver Price as published daily by Handy & Harman, calculated by dividing the sum of all such prices reported for the calendar month by the number of days for which such prices were reported.  If the Handy & Harman quotation ceases to be published, the Monthly Average Silver Price shall be determined by reference to prices for refined silver for immediate delivery in the most nearly comparable established market selected by Payor as published in “Metals Week” or a similar publication.

 

(iii)           If refined metals (other than refined gold and refined silver), doré or concentrates are produced from ores mined from the Claims or ores from the Claims and sold, the Gross Returns for such refined metals shall be the proceeds actually received by Payor from their sale.  If such sales are to an affiliated party of Payor, the refined metals, doré, concentrates or ore shall be deemed, solely for the purpose of computing Gross Returns, to have been sold at prices and on terms no less favorable to Payor than those which would have been received under similar circumstances from an unaffiliated third party.

 

(iv)           Gross Returns shall also include all insurance proceeds received by Payor for the loss of any Valuable Minerals.

 

(e)           As used herein, “Allowable Deductions” means the following costs, charges, and expenses incurred by Payor:

 

(i)           If Payor sells refined gold or refined silver:

 

(A)           all costs, charges and expenses for smelting and refining doré or concentrates to produce the refined gold or refined silver (including handling, processing, and provisional settlement fees, sampling, assaying costs, umpire charges and penalties); and

 

 

(B)           all costs, charges, and expenses for transportation of the doré or concentrates from the Claims to the refinery or smelter and then to the place of sale (including freight, insurance, security, transaction taxes, handling, port, demurrage, delay, and forwarding expenses incurred by reason of or in the course of such transportation).

 

(ii)           If Payor sells refined metals (other than refined gold or refined silver), doré, concentrate or ores:

 

(A)           all costs, charges, and expenses for (i) beneficiation, processing or treatment of such materials at any plant or facility more than five (5) miles from the exterior boundary of the Claims and (ii) smelting or refining to produce a refined metal (including handling, processing, and provisional settlement fees, sampling, assaying and representation costs, penalties, and other processor deductions); and

 

(B)           all costs, charges, and expenses for transportation of ores, minerals, doré, concentrates or other products from the Claims (i) to the place of sale, and (ii) if such ores, materials are beneficiated, processed, treated, smelted or refined at any plant or facility more than five (5) miles from the exterior boundary of the Claims, to such plant or facility and then to the place of sale (including freight, insurance, security, transaction taxes, handling, port, demurrage, delay, and forwarding expenses incurred by reason of or in the course of such transportation).

 

(iii)           All sales, use, severance, and ad valorem taxes and any other tax or governmental levy or fee on or measured by mineral production from the Claims (other than taxes based on income); provided, however, that each of Payor and Royalty Holder shall bear and be responsible for its proportionate share of Nevada net proceeds taxes, and Payor’s share of the same shall not be deducted from Gross Returns.

 

(f)           As used herein, “Valuable Minerals” means any and all ores, metals, minerals, and other materials, of whatever kind and nature, howsoever characterized or defined, that are in, on, under or upon the surface or subsurface of the Claims (or any part thereof), or derived from extralateral rights associated with the Claims, and all doré, concentrates, by-products, co-products and other mineral products, metals or minerals which are derived therefrom

 

(g)           Payor shall have the right to market and sell or refrain from selling refined gold, refined silver and other Valuable Minerals from the Claims in any manner it may elect, including the right to engage in forward sales, future trading or commodity options trading, and other price hedging, price protection, and speculative arrangements (“Trading Activities”) which may involve the possible delivery of gold, silver or other mineral products from the Claims.  With respect to Production Royalty payable on refined gold and refined silver, Royalty Holder shall not be entitled to participate in the proceeds or be obligated to share in any losses generated by Payor’s actual marketing or sales practices or by its Trading Activities and no such profits or losses shall be included in Gross Returns.

 

 

(h)           The obligation to pay the Production Royalty shall accrue upon the outturn of refined gold or silver meeting the requirements of the specified standard to Payor’s account with a smelter or refiner or the sale of other refined metals, doré, concentrates, ores or other mineral products, as the case may be.  The Production Royalty shall become due and payable monthly on the last day of each month following the last day of the calendar month in which the same accrued.  Production Royalty payments shall be made by check or wire transfer.  All payments shall be sent by registered or certified mail, return receipt requested, to Royalty Holder at the address set forth in the Deed to which this Exhibit B is attached, or by wire transfer to an account designated by and in accordance with written instructions from Royalty Holder.  The date of placing such payment in the United States mail by Payor, registered or certified with return receipt requested, properly addressed, with postage prepaid, or the date the wire transfer process is initiated, shall be the date of such payment.  Payments of Production Royalty by Payor in the manner herein provided shall discharge fully Payor’s obligation with respect to such payment, and Payor shall have no duty to apportion or allocate any payment due to Royalty Holder, its successors or assigns.

 

(i)           All payments of the Production Royalty shall be accompanied by a statement showing in reasonable detail the quantities and grades of the refined metals, doré, concentrates, ores or other mineral products produced and sold or deemed sold by Payor in the preceding calendar month, the Monthly Average Gold Price, the Monthly Average Silver Price, the proceeds of sale for other mineral products on which Production Royalty is due, Allowable Deductions, and other pertinent information in sufficient detail to explain the calculation of the Production Royalty payment.

 

(j)           Royalty Holder, at its sole election and expense, shall have the right, not more frequently than twice annually following the close of each calendar year, to audit Payor’s books and records relating to payment of the Production Royalty.  Any such audit shall be conducted during regular business hours, at a mutually convenient time, and upon reasonable advance written notice to Payor.  All payments of Production Royalty made in any calendar year shall be considered final and in full satisfaction of all obligations of Payor with respect thereto, unless Royalty Holder gives written notice describing and setting forth a specific objection to the calculation thereof within twenty-four (24) months following the close of that calendar year.  Payor shall account for any agreed upon deficit or excess in the payment of Production Royalty made to Royalty Holder by adjusting the next quarterly payment to account for such deficit or excess.

 

(k)           Not later than March 1 following the end of each calendar year, Payor shall provide Royalty Holder with an annual report of all activities and operations conducted upon or with respect to the Claims during the preceding calendar year.  Such annual report shall include estimates of proposed expenditures upon, anticipated production from, and estimated remaining ore resources/reserves within the Claims for the then current calendar year.  Additionally, and within 30 days of the end of each calendar quarter, Payor shall provide Royalty Holder with a summary of production and all related activities on or with respect to the Claims during the calendar quarter just ended, and access to all data and information pertaining thereto.

 

 

(l)           Royalty Holder, or its agents or representatives, on not less than three (3) business days’ notice to Payor, may enter upon the Claims for the purpose of inspecting the Claims and all improvements and operations thereon.  Royalty Holder, or its agents or representatives, shall enter the Claims at Royalty Holder’s own risk and expense, and in compliance with Payor’s normal safety procedures, and may not unreasonably hinder operations on or pertaining to the Claims.

 

(m)           Royalty Holder shall not, without the express written consent of Payor, which consent shall not be unreasonably withheld or delayed, disclose any data or information concerning the operations conducted on the Claims or obtained under this Deed which is not already in the public domain; provided, however, that Royalty Holder may disclose data and information obtained under this Deed without the consent of Payor: (i) if required for compliance with applicable laws, rules, regulations or orders of any governmental agency or stock exchange having jurisdiction over Royalty Holder or any of its parent or affiliate entities; (ii) to any of Royalty Holder’s consultants or advisors; (iii) to any third party to whom Royalty Holder, in good faith, is considering selling or assigning any portion of the Production Royalty; or (iv) to a prospective lender to whom an interest in Production Royalty payments to be made to Royalty Holder hereunder is proposed to be granted as security, provided that any such consultant, advisor or third party shall have agreed in writing to keep such information confidentially in accordance with the provisions of this paragraph (m).  Royalty Holder shall not issue any press release pertaining to the Claims except upon giving Payor three (3) business days’ advance notice of the contents thereof, and the opportunity to comment on the same.  Royalty Holder shall not, without Payor’s consent, issue any press release that implies or infers that Payor endorses or joins in Royalty Holder’s statements or representations contained in any such press release.

 

(n)           All tailings, residues, waste rock, spoiled leach materials and other materials (collectively “Materials”) resulting from Payor’s operations and activities on the Claims shall be the sole property of Payor, but shall be burdened by the obligation to pay the Production Royalty should the same be processed or reprocessed, as the case may be, in the future and result in the production of Valuable Minerals.

 

(o)           In the event any Production Royalty payment is not made with the time provided in paragraph (h), unless within fifteen (15) days after the due date of such payment Royalty Holder shall have received such payment, then Payor shall pay interest on the delinquent payment at the rate of twelve percent (12%) per annum which shall accrue from the day the delinquent payment was due to the date of payment of the required Production Royalty payment and accrued interest.

 

(p)           Reasonable attorney fees and costs shall be paid to the prevailing party by the other party in the event of disputes arising over payments of Production Royalties.

 

 

(q)           The Payor shall have the right to commingle, either underground, at the surface, or at processing or other treatment facilities, Valuable Minerals mined and removed from the Claims from which Valuable Minerals are to be produced, with ore, concentrates, minerals and other material mined and removed from other lands and properties; provided, however, that before any Valuable Minerals produced from the Claims are commingled with Valuable Minerals from other properties, the Payor shall calculate from representative samples of ore produced from the Claims the average grade thereof and other measures as are appropriate, and shall weigh (or calculate by volume) the material before commingling.  In obtaining representative samples, calculating the average grade of the ore and average recovery percentages, the Payor may use any procedures accepted in the mining and metallurgical industry which it believes suitable for the type of mining and processing activity being conducted and, in the absence of fraud, its choice of such procedures shall be final and binding on the Royalty Holder.  In addition, comparable procedures may be used by the Payor to apportion among the commingled materials all penalty and other charges and deductions, if any, imposed by the smelter, refiner, or purchaser of such material.  Detailed records shall be kept by Payor showing measures, assays of metal, commercial minerals, and other appropriate content and penalty substances, and gross metal content of the Valuable Minerals.  From this information, Payor shall determine the amount of Production Royalty due and payable to Royalty Holder from Valuable Minerals produced from the Claims that has been commingled with ore from other properties.  Following the expiration of the period for objection described above in paragraph (j), and absent timely objection, if any, made by Royalty Holder, Payor may dispose of the materials and data required to be kept and produced by this paragraph.

 

(r)           All determinations with respect to:  (i) whether ore will be beneficiated, processed or milled by Payor or sold in a raw state; (ii) the methods of beneficiating, processing, milling or leaching any such ore; (iii) the constituents to be recovered therefrom; and (iv) the purchasers to whom any Valuable Minerals may be sold, shall be made by Payor in its sole and absolute discretion.

 

(s)           The mineral content of all Valuable Minerals mined and removed from the Claims (excluding ore leached in place) and the quantities of constituents recovered by Payor shall be determined by Payor, or with respect to Valuable Minerals which are sold, by the mill or smelter to which the Valuable Minerals are sold, in accordance with standard sampling and analysis procedures, and shall be weighted average based on the total amount of ore crushed and sampled, or the constituents recovered, during an entire calendar quarter.

 

(t)           The Production Royalty shall attach to any amendments, relocations or conversions of any of the Claims, or any real property interests which replace the Claims which are created by amendments to or replacements of federal or state mining laws.  The Production Royalty shall be a real property interest that runs with the Claims and shall be a legal and binding obligation of the Payor and its successors and assigns.  If Payor conveys, transfers, or assigns all or any portion of its interest in the Claims (other than in connection with a pledge of the Claims for financing purposes) it shall require the party or parties acquiring such interest to assume in writing the obligation to pay the Production Royalty in accordance with the terms hereof, and provide a copy of the same to Royalty Holder.