EX-10.39 8 a2204231zex-10_39.htm EX-10.39

Exhibit 10.39

MINERAL LEASE AGREEMENT

THIS Mineral Lease Agreement (“Agreement”), by and between ENERDYNE ENDY CLAIMS LLC, a New Mexico Limited Liability Company, as to an undivided one hundred-percent (100%) interest, whose address is P.O. Box 502, Albuquerque, New Mexico 87103, (hereinafter referred to as “Lessor”), and NEUTRON ENERGY, INC., a Wyoming corporation, whose mailing address is 6606 North Hillside Drive, Paradise Valley, Arizona 85253, (hereinafter referred to as “Neutron”), is entered into and made effective as of February 1, 2006.

I. RIGHTS GRANTED

Lessor grants, demises, leases, and lets to Neutron and its successors and assigns the following rights, powers, and privileges:

A. Premises. The interest in the real property described in the attached Exhibit “A” which is incorporated by this reference (“Premises”) and all rights, improvements, privileges, hereditaments, and appurtenances belonging or in any way appertaining to the Premises, including all ores, minerals, materials, and mineral rights, except oil and gas.

Mining Rights and Access.

1. The free, exclusive, unrestricted, uninterrupted right of access, ingress and egress to the Premises, and the right to enter upon and occupy the Premises for all purposes reasonably incident to exploring for, developing. mining (by underground mining, surface mining, strip mining, or any other surface or subsurface method, including any method later developed), in-situ leaching, extracting, milling, stockpiling, storing, processing, removing and marketing therefrom all merchantable and nonmerchantable ores, metals, minerals. mineral products and materials of every nature or sort, and all other materials or substances of any nature whatsoever found in natural deposits (“Mineral Substances”), and the right to place, construct, maintain, use, and thereafter remove such structures, facilities, equipment, roadways, haulage ways, and other improvements as may he necessary, useful, or convenient for the full enjoyment of all of the rights granted under this Agreement.

2. These rights are granted and may be utilized for the purpose or in the course of carrying on exploration or mining operations on any other adjoining properties to the Premises in which Neutron may have or acquire any right and/or interest and may desire to reach or mine directly or indirectly through the Premises.

C. Cross Mining.

1. The right, if it so desires, to mine and remove any Mineral Substances existing on or under the Premises through or by means of shafts, openings, or pits which may be sunk or made upon adjoining and nearby property, and the right to stockpile

any Mineral Substances from the Premises upon grounds situated upon any such properties.

2. In addition, Neutron may use the Premises for any shafts, openings, pits and stockpile-grounds sunk or made for the mining, removal, and/or stockpiling of any Mineral Substances from any adjoining or nearby property. Mineral Substances taken from the Premises shall at all times be kept entirely separate and distinct from any other ore or concentrated product until the same are measured and sampled so that the rights of Lessor shall be at all times preserved and protected.

D. Commingling. Neutron shall have the right to commingle ore and minerals from the Premises with ore from other lands and properties; provided, however, that Neutron shall calculate from representative samples the average grade of the ore and shall weigh (or calculate by volume) the ore before commingling. If concentrates, ore, or any other processed, beneficiated, or refined mineral products (“Concentrates”) are produced from the commingled ores by Neutron, Neutron shall also calculate from representative samples the average recovery percentage for all such concentrates produced during the calendar quarter and shall allocate a percentage of concentrate production to Lessor according to such calculations. In obtaining representative samples and calculating the average grade of the ore and average recovery percentages, Neutron 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 Lessor. In addition, comparable procedures may be used by Neutron to apportion among the commingled ores penalty charges, if any, imposed by the purchaser of such ore or concentrates.

E. Water Rights. The right to use any and all of Lessor’s water rights on, about. under. or which is appurtenant to the Premises or to which the Premises are riparian.

F. Deposit of Waste Materials. The right to temporarily or permanently deposit tailings slurry, waste rock, overburden, surface stripping, process solutions and all other materials from the Premises or from adjoining or nearby properties on or off the Premises, even if the sole use of the Premises may be for the placement of such materials.

G. Treatment. The right, at Neutron’s election and in any manner it deems fit, to beneficiate, concentrate, process and/or otherwise treat any Mineral Substances taken from the Premises by any physical or chemical method. In exercising this right, Mineral Substances may be removed to a plant or plants established or maintained either upon the Premises or elsewhere.

H. Amendment, Relocation, and Patent of Claims.

1. Neutron, in its sole discretion, shall have the right to amend or relocate as unpatented mining claims or unpatented millsites, in the name of Lessor, any unpatented mining claims which are subject to this Agreement. If Neutron undertakes any such activity, Neutron shall complete the same in compliance

with the applicable New Mexico State and Federal statutes and regulations and shall be liable to Lessor for any act (or failure to act) by it or any of its agents in connection with the amendment or relocation of claims that are not in governmental compliance.

2. Upon request of Neutron, at any time during the term of this Agreement, Lessor agrees to undertake to obtain patent to any or all of the mining claims which are subject to this Agreement, as designated by Neutron, Neutron shall prepare all documents, compile all data, and comply in all respects with the applicable law, all at the expense of Neutron. Lessor shall execute any documents required for this purpose and shall cooperate fully with Neutron in the patent application and proceedings, time being of the essence. If Lessor begins patent proceedings and Neutron thereafter requests Lessor to discontinue such proceedings or if this Agreement is terminated while patent proceedings are pending, Neutron shall have no further obligation with respect thereto except to pay any unpaid expenses accrued in such proceedings prior its request to discontinue, or prior to termination, whichever comes first.

II. TERM

Unless sooner terminated as provided in this Agreement, the term of this Agreement shall be for a primary period of ten (10) years from the effective date and for a secondary period for so long thereafter as Neutron continues to make advance or production royalty payments. In no event, however, shall the term of this Agreement extend past seventy-five (75) years.

III. PAYMENTS TO LESSOR

A. Signing Bonus.

Upon execution of this Agreement, Neutron shall pay Lessor a signing bonus of $315,000.00.

B. Advance Royalty Payments.

1. The advance royalty payments paid to Lessor under this Agreement shall be as follows:

Payment Due Date	Payment Amount
February 1. 2007	$	100,000.00
February 1, 2008	$	100,000.00
February 1, 2009 and every twelve months thereafter so long as this Agreement is in effect	$	75,000.00

2. The obligation of Neutron to make these advance royalty payments shall close upon the earlier of (a) Neutron’s purchase of Premises under Section XI.A.1 . or (b) termination of this Agreement under Section VI.

3. The advance royalty, when paid to Lessor, will apply to the entire Premises and shall be deductible against future production royalties to be paid to Lessor regardless of the year in which advance royalty payments are made, i.e. advance payments can be carried over and credited against subsequent years, until the amount the advance royalty has been fully recovered by Neutron. Upon commencement of commercial production and every year thereafter, Neutron shall pay Lessor the greater of (i) the advance royalty or (ii) the production royalty. Within thirty (30) days after the end of the lease year, Neutron shall pay Lessor the difference between the advance royalty payment and the production royalty payment.

4. In the event this Agreement is terminated, Neutron shall have no obligation to make any payment set forth above, the due date of which occurs after the date that this Agreement has become so terminated, and Neutron shall have no obligation to make any further payments in accordance with Paragraph C of this Section III except as to payment, if any, based upon production achieved prior to such termination but for which payment has not yet been made to Lessor.

C. Production Royalty

1. Neutron shall pay to Lessor according to Lessor; a production royalty of five percent (5%) based the gross market value of all Mineral Substances extracted from the Premises. Such royalty will be determined in the manner described in the Mineral Royalty definition which is attached as Exhibit “B” and incorporated in this Agreement and with each royalty payment acknowledged by an officer of Neutron.

2. Neutron shall, however, have the right to mine amounts of Mineral Substances reasonably necessary for sampling, assaying, metallurgical testing and evaluation of the minerals potential of the Premises without initiating the obligation to make production royalty payments.

D. Method of Making Payments.

1. Any payments required to be made by Neutron may be made in cash or by check and shall be delivered in accordance with Section IX. In the event more than one individual or entity owns an interest in the Premises, and presuming all such owners are signatories to the Agreement, Neutron shall have the right to require all such owners to designate, from amongst themselves or otherwise, an authorized agent to receive all payments from Neutron. The designation of such authorized agent shall be effectuated by all such owners executing a Power of Attorney, the original of same to be provided to Neutron upon execution. Notwithstanding the execution and delivery of such Power of Attorney,

Neutron shall have the option to pay each such owner his or her respective share of all payments, provided that all owners shall have previously signed a document evidencing their agreement concerning their respective ownership interests in the Premises. In the event that any of the owners cannot or will not accept payments, Neutron may deposit such payments in an escrow account for the benefit of such owner at a bank of Neutron’s choice located in the County of such owner’s residence, and notify such owner that such an account has been established, with the costs of establishing the escrow account deductible from the payment. Such deposit shall be deemed payment as to such owner for all purposes.

2. In the event the payments should be made to other parties because of any transfers of any of the owners’ interests, payments tendered the transferor at the address shown in Section IX shall conclusively be deemed payment to the transferee until: (i) Neutron receives notice and evidence satisfactory to it from the transferor that its interest has been transferred and that payments should be made to the transferee; and (ii) Neutron receives proof that the transferee has complied with the terms of Section XI.

IV. TITLE MATTERS

A. Representations and Warranties. Lessor represents and warrants to Neutron, which covenants and warranties shall survive any expiration or termination of this Agreement. the following: (i) that, subject to the paramount title of the United States, Lessor is lawfully seized of an estate in unpatented mining claims as set forth in Exhibit “A”; and (ii) that Lessor has the right and power to convey the same for the purposes of this Agreement; and (iii) that the same are free from all prior liens or encumbrances, other than as may be described in Exhibit “A” and the official records of McKinley County, State of New Mexico; and (iv) that Neutron shall have quiet and peaceable possession of the Premises; and (v) that Lessor has not committed, nor will Lessor in the future commit, any act or acts which will encumber or cause a lien to he placed against the Premises except subject and subordinate to the terms of this Agreement; and (vi) that Lessor has not caused or allowed the generation, treatment, storage, or disposal of hazardous substances on the Premises, except as provided by law. Lessor, after its own diligent inquiry, has no knowledge of the presence of hazardous substances on the Premises. Lessor further warrants that there are no threatened or pending environmental enforcement actions against it, and no environmental liens against the Premises.

B. Title Defects, Defense, and Protection. At the request of Neutron at any time and at Neutron’s cost, Lessor shall cause a title search to be made covering all or any part of the Premises. Neutron shall be entitled to receive the abstracts and other evidences of title. If. (i) in the opinion of Neutron, Lessor’s title to all or any part of the Premises is defective or less than as represented in this Section IV, or (ii) Lessor’s title is contested or questioned by any person or entity, and Lessor is unable or unwilling to promptly correct the alleged defects, Neutron may, without obligation, attempt to perfect or defend Lessor’s title. Neutron shall use its best efforts to defend the Premises against the Rocca

Honda mining claims asserted by David Miller in Sections 5 and 6, T. 13 N., R. 8 W. However, Neutron shall not be liable to Lessor if Neutron is unsuccessful in, withdraws from, or discontinues title litigation or other curative work. Time being of the essence, in the event Neutron does attempt to perfect or defend Lessor’s title, Lessor shall execute all documents and shall take such other actions as are reasonably necessary to assist Neutron in its efforts. If title is less than as represented in this Section IV, then one half of the costs and expenses of perfecting or defending title expended by Neutron shall be a credit against subsequent payments to be made to Lessor. Any improvement or perfection of title to the Premises shall inure to the benefit of Neutron in the same manner and to the same extent as if such improvement or perfection has been made prior to the execution of this Agreement.

C. Lesser Interest. If Lessor’s title to all or any part of the Premises is less than the interest as described in Section IV,A, Neutron shall have the right, without waiving any other rights it may have, to reduce all payments to be made to Lessor hereunder to the same proportion.

D. Acquisition of Outstanding Interest. Should Neutron, either in its own name or in the name of Lessor, institute any action for adverse possession, suit to quiet title, or other action aimed at obtaining title to the Premises, such title shall be acquired subject to this Agreement. Should Neutron elect to acquire any interest in the Premises from a party other than Lessor, the property rights so acquired shall accrue solely to Neutron. In such event, Lessor shall be entitled to no payment with respect to such property. Upon termination of this Agreement, such property shall belong to Neutron.

V. OBLIGATIONS OF NEUTRON

A. Protection from Liens. Neutron shall, at its expense, allow no lien to remain on the Premises resulting from the operations of Neutron. However, Neutron shall not be required to remove any such lien so long as it is contesting the validity or the amount thereof.

B. Indemnification and Insurance. Neutron shall protect Lessor against any damages arising out of Neutron’s operations on the Premises and shall indemnify Lessor against liability resulting from Neutron’ s operations on the Premises; provided, however, that Lessor or any agent acting on its behalf shall not have been a contributing cause to the event giving rise to any such damages. Neutron shall make Lessor a co-insured on Neutron’s comprehensive general liability insurance policy or policies, maintain such policy or policies in effect for at least so long as this Agreement remains in effect, and provide Lessor with a copy of such policy or policies. Notwithstanding any other provision of this Agreement, to the extent, if at all, that any provision requiring one party to indemnify another party or its agents or employees is found to be within the scope of or in any way subject to or conditioned upon consistency with (i) NMSA 1978, Sec. 56-7-1 (2003) for its enforceability, then such provision shall (A) not be construed or applied to require one party to indemnify, hold harmless, insure or defend the other party or its employees or agents against liability, claims, damages, losses or expenses, including attorney fees, arising out of bodily injury to persons or damage to property

caused by or resulting from, in whole or in part, the negligence, act or omission of the indemnitee, its officers, employees or agents, (B) be enforced only to the extent that it is consistent with such Sec. 56-7-1, and (C) be deemed modified, if required to conform to such Sec, 56-7-1, and/or with (ii) NMSA 1978, Sec. 56-7-2 (2003) for its enforceability, then such provision shall (A) not be considered or applied to indemnify the indemnitee against loss or liability for damages arising from the sole or concurrent negligence of the indemnitee or its agents or employees, from the sole or concurrent negligence of an independent contractor who is directly responsible to the indemnitee, or from an accident that occurs in operations carried on at the direction or under the supervision of the indemnitee, an employee or representative of the indemnitee or in accordance with methods and means specified by the indemnitee or employees or representatives of the indemnitee, (B) shall be enforced only to the extent that it is consistent with such Sec. 567-2, and (C) be deemed modified, if required, to conform to such Sec.56-7-2.

C. Taxes and Assessments.

1. Except as provided for below, Neutron hereby covenants and agrees to pay promptly before delinquency all taxes and assessments that may be assessed during the continuance of this Agreement upon the Premises resulting from Neutron’s activities and products derived therefrom. However, Neutron shall always have the right to contest, in the courts or otherwise, either in its own name or in the name of Lessor, the validity or amount of any such taxes or assessments, or to take such other steps or proceedings as it may deem necessary to secure a cancellation, reduction, re-adjustment, or equalization thereof, before it shall be required to pay such taxes or assessments. Notwithstanding the foregoing, Neutron shall not permit any part of the Premises to be conveyed and title lost as the result of nonpayment of such taxes and assessments. Neutron shall provide Lessor with copies of all receipts evidencing payment of such taxes and assessments. It is agreed that should the Lessor receive tax bills or claims which are the responsibility of Neutron, they shall be promptly forwarded to Neutron for appropriate action.

2. It is agreed that Neutron shall pay the above referenced taxes that are assessed from the date of this Agreement to its termination date. Nothing in the foregoing portion of this Section shall be construed to obligate Neutron to pay such portion of any tax as is based upon an assessment of improvements or erections made or placed on the Premises by Lessor. Neutron shall not be liable for any taxes levied or measured by income of Lessor or based upon payments made to Lessor by Neutron under this Agreement. This Section V.C. shall apply to any property owned or leased by Neutron upon which it stockpiles any mineral-bearing material whether or not such material is exclusively taken from the Premises or commingled with materials from other properties.

D. Compliance with Laws and Regulations. Neutron shall perform all of its Operations on the Premises in a good and workmanlike manner and in compliance with all applicable federal, state, and local laws and regulations, including but not limited to those relating to environmental protection, reclamation and bonding. Notwithstanding any other provision

of this Agreement, (i) this Section V.D. shall remain in effect, and Neutron shall perform all its obligations hereunder, following any expiration, termination or release of all or any part of this Agreement and (ii) Neutron shall at all times during and following the term of this Agreement be liable to Lessor for any and all expenses, claims and losses of, against or by Lessor resulting from any violation by Neutron of this Section V.D..

E. Right of Access to the Premises. Neutron shall allow Lessor and representatives of Lessor, at their sole risk, access to the Premises for the purposes of viewing or inspecting Neutron’s operations, at times which, in Neutron’s discretion, do not unreasonably interfere with its operations. Lessor agrees to indemnify, protect, save, and hold harmless Neutron and its affiliated and direct and indirect parent corporations and their respective directors, partners, officers, employees, agents and corporate affiliates from and against any and all losses, costs, damages, expenses, attorney’s fees, claims, demands, liabilities, suits, and actions of every kind and character which may be imposed upon or incurred by Neutron and its affiliated and direct and indirect parent corporations and their respective directors, partners, officers, employees, agents or corporate affiliates on account of, or arising directly or indirectly from Lessor’s rights under this Section V.E.

F. Delivery of Data. In the event of expiration or termination of this Agreement, Neutron shall furnish Lessor within 90 days after termination one (1) set of copies of all available noninterpretive data pertaining to the Premises and developed or prepared by or for Neutron and shall authorize and permit Lessor to take possession of any available core derived from the Premises, whether or not such core is stored on the Premises; provided, however, that Neutron shall in no event be liable to Lessor for loss of or damage to any such core or for the accuracy of any data furnished to Lessor.

G. Good Standing Notice. Neutron shall maintain the Premises in good standing with the United States Department of the Interior, Bureau of Land Management. Neutron shall pay all annual maintenance fees due and assessed, on the Premises, by the Bureau of Land Management while this Agreement is in effect and or conducting reclamation, on the Premises, and shall provide Lessor proof of payment notice on or before August 15, of each year that this Agreement is in effect.

H. Exploration and Development. Neutron shall be obligated to expend $250,000.00 during the twelve-month period following the execution of this Agreement and an additional $250,000.00 during the next twelve month period to explore and/or develop the Premises.

VI. TERMINATION

A. Termination by Lessor. In the event Lessor considers that Neutron has not complied with any obligation hereunder, Lessor shall notify Neutron setting out specifically in what respect it is claimed that Neutron has breached this Agreement. If the alleged breach is not cured within sixty (60) days after notice is given, or if Neutron has not within that time either commenced to cure the alleged breach and does not thereafter diligently complete such cure, or challenges the legitimacy of the allegation, Lessor may terminate this Agreement by delivering to Neutron notice of such termination. Termination of this

Agreement shall be the sole remedy of Lessor. Neither the service of any notice nor the doing of any acts by Neutron aimed to meet all or any of the alleged breaches shall be deemed an admission or presumption that Neutron has failed to perform all of its obligations under this Agreement.

B. Termination by Neutron. Neutron shall have the right to terminate this Agreement-at any time with respect to all or a portion of the Premises by giving notice to Lessor. Upon such termination, all right, title, and interest of Neutron under this Agreement shall terminate with respect to that portion of the Premises released. Neutron shall be relieved of all further obligations set forth in this Agreement on the released acreage except those obligations, if any, which this Agreement explicitly states, and which have accrued prior to such termination. Any taxes, assessments, and governmental charges shall be prorated as of the termination date.

C. Release. Upon termination of this Agreement, all properties leased hereunder will be returned to Lessor and a release, in recordable form, will be executed by Neutron for the benefit of Lessor in order to clear title to said properties.

D. Removal of Property. Upon any termination or expiration of this Agreement, Neutron shall have a period of (1) year from and after the effective date of termination in which to remove from the Premises all of its machinery, buildings, structures, facilities. equipment, and other property of every nature and description erected, placed, or situated thereon, except foundations of a permanent nature, supports, track, and pipe placed in shafts, drifts, or openings in the Premises. Any property of Neutron not removed by the end of this one-year period shall become the property of Lessor and at Lessor’s sole discretion have the property removed at Neutron’s expense. Neutron shall have the right to keep a watchman on the Premises during this one-year period.

VII. LIENS

In the event that Lessor fails to promptly pay, when due, taxes, mortgages, or other liens levied against the Premises and payable by Lessor, Neutron shall have the right (but shall not he obligated) to pay such past due amounts and, if Neutron does so, Neutron shall be subrogated to all the rights of the holders thereof and Lessor shall reimburse Neutron for all such payments and for all related costs and expenses paid or incurred by Neutron (including, without limitation, related attorneys’ fees) within three months after the same are paid or incurred by Neutron. Any payments due Lessor under this Agreement may be credited by reimbursements due Neutron under this Section. The provisions of this Section VII shall survive any termination or expiration of this Agreement.

VIII. FORCE MAJEURE

Neutron shall not be liable for failure to perform any of its obligations, other than making any payments due under this Agreement, during any period in which performance is prevented, in whole or part, by causes herein termed “force majeure- but only if and to

the extent that such causes (i) are not within the reasonable control of Neutron, (ii) are not caused by deliberate , wanton, reckless or negligent act or omission of Neutron or by failure of Neutron to perform any of its obligations under this Agreement, or (iii) could not have been prevented by Neutron acting promptly, prudently, diligently, carefully, in good faith, in accordance with this Agreement, and applicable law and regulations.. For purposes of this Agreement, the term “force majeure” shall include labor disputes; acts of God; action of the elements, including inclement weather, floods, slides, cave-ins, sinkholes, earthquakes, and drought; laws, rules, regulations, orders, directives, and requests of governmental bodies or agencies; delay, failure, or inability of suppliers or transporters of materials, parts, supplies, services, or equipment; contractor or subcontractor shortage of labor, transportation, materials, machinery, equipment, supplies, utilities, or services; accidents; breakdown of equipment, machinery, or facilities; judgments or orders of any court or federal, state or local agency; inability to obtain on reasonably acceptable terms or in reasonably acceptable time any public or private licenses, permits, or other authorizations; curtailment or suspension of activities to remedy or avoid an actual or alleged, .present, or future violation of federal, state, or local environmental standard; acts of war or conditions arising out of or contributable to war, whether declared or undeclared; riot; civil strife; fire; explosion; or any other cause whether similar or dissimilar to the foregoing, except for the inability to meet financial commitments. If Neutron desires to invoke the provisions of this Section VIII, Neutron shall give notice of the commencement of the circumstances giving rise to such force majeure. An event or occurrence shall not be deemed a “force majeure,” and no performance by Neutron shall be excused, on account of shortage or unavailability of funds or because the event or occurrence would cause performance to result in economic loss or in hardship or inequity or frustrate the purpose for which Neutron entered into this Agreement. The time for discharging Neutron’s obligations with respect to the prevented performance shall be extended for the period of force majeure. Neutron shall proceed promptly, prudently, diligently and in good faith to end any force majeure as soon as is practicable.

IX. NOTICES

Any required notice, payment, or other communication contemplated by this Agreement shall be in writing and shall be effective (i) when personally delivered at the below address; (ii) when delivered by electronic communication at Lessor’s telecopy number described below or at such other telecopy number as Lessor may designate in writing provided that such electronic communication is followed by a delivery by mail or by personal service to the below address; or (iii) when delivered by mail deposited in the United States mail, postage prepaid and registered or certified, with return receipt requested, and addressed to Lessor at the below address:

If to Lessor:	ENERDYNE ENDY CLAIMS LLC
	12812 Piru Blvd. S.E.
	Alburquerque, New Mexico 87123

	FAX No. 1-505-292-5005

If to Neutron:	NEUTRON ENERGY, INC.
	6606 North Hillside Drive
	Paradise Valley, Arizona 85253
	FAX No.: 1-602-952-8650

Either Lessor or Neutron may change its mailing address for future notices by providing written notice to that effect to the other parties.

X. CONFIDENTIALITY

Lessor shall not, without the express written consent of Neutron, disclose any information concerning the terms of this Agreement or operations conducted under this Agreement, nor issue any press releases concerning the operations. However, if Lessor contemplates selling or assigning its interest, it shall have the right to disclose such information to a potential purchaser if it first obtains an agreement in writing from such third party, satisfactory to Neutron, providing that the third party shall hold confidential the information furnished to it.

Xl. ASSIGNMENTS AND TRANSFERS OF INTEREST

A. By Lessor. Lessor shall have the right to transfer all or any portion of the Premises to others, provided that:

1. The transfer shall be subject to this Agreement and to all rights of Neutron, its successors and assigns, under this Agreement in and to the Premises and the transferee agrees to this in writing prior to the transfer, however, in the event that the Lessor proposes to transfer any or all of the Premises or interests therein to others, Lessor shall provide notice to Neutron of all terms and conditions of the proposed transfer and Neutron shall have the first right to acquire any or all of said interests in the Premises from Lessor, on the same terms and conditions agreed to between the Lessor and others, for a period of 60 days from the date that the notice is received by Neutron from the Lessor.

2. No change or division in ownership of the Premises, however accomplished, shall operate to enlarge the obligations or diminish the rights of Neutron under this Agreement.

3. No change or division in the ownership of the Premises shall be binding upon Neutron for any purpose until the person acquiring any interest has furnished Neutron with the instrument or instruments constituting his claim of title from the original seller.

B. By Neutron. Neutron shall have the right at any time to assign all or any portion of its rights under this Agreement. No assignment, however, shall release Neutron from the

performance of any of its obligations under this Agreement except if and to the extent that it is released from such obligations in a document executed by Lessor.

XII. NO EXPRESS OR IMPLIED COVENANTS

Nothing in this Agreement shall impose any obligations or covenants upon Neutron, express or implied, to conduct any mining operations upon the Premises, it being the intent of the parties that Neutron shall have the sole discretion to determine the economic feasibility, time, method, manner and rate of conducting any such operations, except as otherwise required by this Agreement.

XIII. BINDING EFFECT

The provisions of this Agreement shall inure to the benefit of and be binding upon the parties and their respective heirs, executors, administrators, personal representatives, beneficiaries, successors, and assigns.

XIV. MEMORANDUM

Neutron and LLessor shall execute a Memorandum of this Agreement in a recordable form sufficient under the laws of the State of New Mexico to give notice to third parties of the rights granted hereunder. Neutron shall have the right to record such Memorandum at any time.

XV. CONSTRUCTION OF AGREEMENT

This Agreement and its Exhibits constitute the sole understanding of the parties with respect to the Premises, all previous agreements between the parties concerning the Premises being expressly rescinded. This Agreement shall be subject to all valid and applicable provisions of statutory or common law, rules, and regulations. Should this Agreement or any of its provisions or operations be found to be contrary to any such valid law, rule, or regulation, the latter shall be deemed to control, and this Agreement shall be regarded as modified accordingly. Subject to the preceding sentence, no modification or alteration of this Agreement shall be effective unless in writing and executed by the parties.

XVI. HEADINGS

The headings appearing in this Agreement are inserted for convenient reference purposes only, and are not definitive as to the provisions contained within said Sections in the interpretation and construction of this Agreement.

XVII. RULE AGAINST PERPETUITIES

As to any provision in this Agreement, the parties do not intend that there shall be any violation of the Rule Against Perpetuities or any related Rule. if any violation should inadvertently occur, it is the wish of the parties that the appropriate court reform such provision so as to approximate most closely the intent of the parties within the limits

permissible under such Rule.

XVIII. APPLICABLE LAW

This Agreement shall be construed, interpreted and governed by the laws of the State of New Mexico.

	ENERDYNE ENDY CLAIMS LLC,
	a New Mexico Limited Liability Company
	/s/ Don C. Hanosh
	Its	Member

	NEUTRON ENERGY, INC. a Wyoming Corporation


	/s/ Kelsey L. Boltz
	Its	President

State of AZ )

County of Pima )

The foregoing instrument was acknowledged before me this 1 day of Feb, 2006 by Don C. Hanosh, the Member of Enerdyne Endy Claims LLC, on behalf of the limited liability corporation.

(Seal and Expiration Date)	/s/ Jennifer L. Buie
	Notary Public

State of AZ )

County of Pima )

The foregoing instrument was acknowledged before me this 1 day of Feb, 2006 by Kelsey L. Boltz, the President of Neutron Energy, Inc., on behalf of the corporation.

(Seal and Expiration Date)	/s/ Jennifer L. Buie
	Notary Public

EXHIBIT A TO MINERAL LEASE AGREEMENT BETWEEN ENERDYNE ENDY CLAMIS LLC AND NEUTRON ENERGY, INC., DATED JANUARY 31, 2006

McKinley

Cty Record

Claim Name

BLM Serial No.

Section

Township

Range

Book

Page

Endy 1

NMMC171172

14N

8024

Endy 2

NMMC171173

14N

8025

Endy 3

NMMC171174

14N

8026

Endy 4

NMMC171175

14N

8027

Endy 5

NMMC171176

14N

8028

Endy 6

NMMC171177

14N

8029

Endy 8

NMMC171178

14N

8030

Endy 9

NMMC171179

14N

8031

Endy 10

NMMC171180

14N

8032

Endy 11

NMMC171181

14N

8033

Endy 12

NMMC171182

14N

8034

Endy 14

NMMC171183

14N

8035

Endy 15

NMMC171184

14N

8036

Endy 16

NMMC171185

14N

8037

Endy 17

NMMC171186

14N

8038

Endy 18

NMMC171187

14N

8039

Endy 19

NMMC171188

14N

8040

Endy 20

NMMC171189

31 & 32

14N

8041

Endy 21

NMMC171190

31 & 32

14N

8042

Endy 22

NMMC171191

31 & 32

14N

8043

Endy 23

NMMC171192

31 & 32

14N

8044

Endy 24

NMMC171193

31 & 32

14N

8045

Endy 25

NMMC171194

14N

8046

Endy 26

NMMC171195

14N

8047

Endy 27

NMMC171196

14N

8048

Endy 28

NMMC171197

14N

8049

Endy 29

NMMC171198

14N

8050

Endy 30

NMMC171199

14N

8051

Endy 31

NMMC171200

13N

8052

Endy 31

14N

Endy 32

NMMC171201

14N

8053

Endy 33

NMMC171202

14N

8054

Endy 34

NMMC171203

14N

8055

Endy 35

NMMC171204

14N

8056

Endy 36

NMMC171205

14N

8057

Endy 37

NMMC171206

14N

8058

Endy 38

NMMC171207

14N

8059

Endy 39

NMMC171208

14N

8060

Endy 40

NMMC171209

14N

8061

Endy 41

NMMC171210

14N

8062

Endy 42

NMMC171211

13N

8063

Endy 42

14N

Endy 43

NMMC171212

13N

8064

Endy 44

NMMC171213

13N

8065

Endy 45

NMMC171214

13N

8066

Endy 46

NMMC171215

13N

8067

Endy 47

NMMC171216

13N

8068

Endy 48

NMMC171217

13N

8069

Endy 49

NMMC171218

13N

8070

Endy 50

NMMC171219

5 & 8

13N

8071

Endy 51

NMMC171220

14N

8072

Endy 52

NMMC171221

14N

8073

Endy 53

NMMC171222

14N

8074

Endy 54

NMMC171223

4 & 5

13N

8075

Endy 54

32 & 33

14N

Endy 55

NMMC171224

4 & 5

13N

8076

Endy 56

NMMC171225

4 & 5

13N

8077

Endy 57

NMMC171226

4 & 5

13N

8078

Endy 58

NMMC171227

4 & 5

13N

8079

Endy 59

NMMC171228

4 & 5

13N

8080

Endy 60

NMMC171229

4 & 5

13N

8081

Endy 61

NMMC171230

4 & 5

13N

8082

Endy 62

NMMC171231

4,5,8&9

13N

8083

Endy 63

NMMC171232

13N

8084

Endy 64

NMMC171233

13N

8085

Endy 65

NMMC171234

13N

8086

Endy 66

NMMC171235

13N

8087

Endy 67

NMMC171236

13N

8088

Endy 68

NMMC171237

13N

8089

Endy 69

NMMC171238

13N

8090

Endy 70

NMMC171239

4 & 9

13N

8091

Endy 71

NMMC171240

13N

8092

Endy 72

NMMC171241

13N

8093

Endy 73

NMMC171242

13N

8094

Endy 74

NMMC171243

13N

8095

Endy 75

NMMC171244

13N

8096

Endy 76

NMMC171245

14N

8097

Endy 77

NMMC171246

4 & 9

13N

8098

Endy 78

NMMC171247

13N

8099

Endy 79

NMMC171248

13N

8100

Endy 80

NMMC171249

13N

8101

Endy 81

NMMC171250

13N

8102

Endy 82

NMMC171251

13N

8103

Endy 83

NMMC171252

4 & 9

13N

8104

Endy 84

NMMC171253

13N

8105

Endy 85

NMMC171254

13N

8106

Endy 86

NMMC171255

13N

8107

Endy 87

NMMC171256

13N

8108

Endy 88

NMMC171257

3 & 4

13N

8109

Endy 89

NMMC171258

3 & 4

13N

8110

Endy 90

NMMC171259

3,4,9&10

13N

8111

Endy 91

NMMC171260

13N

8112

Endy 92

NMMC171261

13N

8113

Endy 93

NMMC171262

13N

8114

Endy 94

NMMC171263

13N

8115

Endy 95

NMMC171264

13N

8116

Endy 96

NMMC171265

13N

8117

Endy 97

NMMC171266

3 & 10

13N

8118

Endy 98

NMMC171267

5 & 8

13N

8119

Endy 104

NMMC171268

13N

8120

Endy 105

NMMC171269

3 & 10

13N

8121

Endy 112

NMMC171270

3 & 10

13N

8122

Endy 122

NMMC171271

13N

8123

Endy 123

NMMC171272

13N

8124

Endy 124

NMMC171273

13N

8125

Endy 125

NMMC171274

13N

8126

Endy 126

NMMC171275

13N

8127

Endy 127

NMMC171276

13N

8128

Endy 128

NMMC171277

13N

8129

Endy 129

NMMC171278

13N

8130

Endy 130

NMMC171279

13N

8131

Endy 131

NMMC171280

13N

8132

Endy 132

NMMC171281

13N

8133

Endy 133

NMMC171282

13N

8134

Endy 134

NMMC171283

13N

8135

Endy 135

NMMC171284

13N

8136

Endy 136

NMMC171285

13N

8137

Endy 137

NMMC171286

13N

8138

Endy 138

NMMC171287

13N

8139

Endy 139

NMMC171288

13N

8140

Endy 140

NMMC171289

11 & 12

13N

8141

Endy 141

NMMC171290

11 & 12

13N

8142

Endy 142

NMMC171291

11 & 12

13N

8143

Endy 143

NMMC171292

13N

8144

Endy 143

14N

Endy 144

NMMC171293

13N

8145

Endy 145

NMMC171294

13N

8146

Endy 146

NMMC171295

13N

8147

Endy 147

NMMC171296

13N

8148

Endy 148

NMMC171297

13N

8149

Endy 149

NMMC171298

13N

8150

Endy 150

NMMC171299

13N

8151

Endy 151

NMMC171300

6 & 7

13N

8152

Endy 152

NMMC171301

13N

8153

Endy 152

14N

Endy 153

NMMC171302

13N

8154

Endy 154

NMMC171303

13N

8155

Endy 155

NMMC171304

13N

8156

Endy 156

NMMC171305

13N

8157

Endy 157

NMMC171306

13N

8158

Endy 158

NMMC171307

13N

8159

Endy 159

NMMC171308

13N

8160

Endy 160

NMMC171309

6 & 7

13N

8161

Endy 161

NMMC171310

13N

8161 (8162)

Endy 161

14N

Endy 162

NMMC171311

13N

8163

Endy 163

NMMC171312

13N

8164

Endy 164

NMMC171313

13N

8165

Endy 165

NMMC171314

13N

8166

Endy 166

NMMC171315

13N

8167

Endy 167

NMMC171316

13N

8168

Endy 168

NMMC171317

13N

8169

Endy 169

NMMC171318

6 & 7

13N

8170

Endy 170

NMMC171319

5 & 6

13N

8171

Endy 170

31 & 32

14N

Endy 171

NMMC171320

5 & 6

13N

8172

Endy 172

NMMC171321

5 & 6

13N

8173

Endy 173

NMMC171322

5 & 6

13N

8174

Endy 174

NMMC171323

5 & 6

13N

8175

Endy 175

NMMC171324

5 & 6

13N

8176

Endy 176

NMMC171325

5 & 6

13N

8177

Endy 177

NMMC171326

5 & 6

13N

8178

Endy 178

NMMC171327

5,6,7&8

13N

8179

Endy 179

NMMC171328

13N

8180

Endy 180

NMMC171329

13N

8181

Endy 181

NMMC171330

13N

8182

Endy 182

NMMC171331

2 & 11

13N

8183

Endy 183

NMMC171333

14N

8184

Endy 184

NMMC171333

14N

8185

EXHIBIT B
ATTACHED TO THAT MINERAL LEASE AGREEMENT BETWEEN
ENERDYNE ENDY CLAIMS LLC AND NEUTRON ENERGY, INC., DATED
FEBRUARY 1, 2006

MINERAL ROYALTY

Article I. Definitions

Section 1.1 “Allowable Costs” shall mean, collectively, Allowable Sampling Costs, Allowable Taxes and Allowable Transportation Costs.

Section 1.2 “Allowable Sampling Costs” shall mean Neutron’s actual costs of weighing, sampling and assaying Products.

Section 1.3 “Allowable Taxes” shall mean production, severance, gross receipts, sales, excise, compensating, conservation, privilege and other taxes (except income and property taxes) imposed, levied or assessed on or measured by the price or value of Products and actually paid.

Section 1.4 “Allowable Transportation Costs” shall mean Neutron’s actual costs of transporting Products from the mine to a mill, ion exchange plant or other processing facility (each a “Processing Facility”) and from a Processing Facility to the point of sale (including, without limitation, actual packaging, freight, insurance, handling, demurrage, delay and forwarding costs incurred by reason of or in the course of such transportation).

Section 1.5 “By-Products” shall mean materials that do not have value chiefly for their uranium content but are derived from Mineral Substances, occur in intimate depositional relationship with uranium, and are recovered as secondary values during the mining, extraction, processing and treatment of Uranium-Bearing Products.

Section 1.6 “Mineral Substances” shall have the meaning attributed thereto in Section I.B.1. of the Mineral Lease Agreement of which this Exhibit “B” is a part (the “Agreement”).

Section 1.7 “Other Mineral Products” shall mean materials that are not By-Products and do not have value chiefly for their uranium content but are derived from Mineral Substances.

Section 1.8 “Premises” shall have the meaning attributed thereto in Section I.A. of the Agreement.

Section 1.9 “Products” shall mean, collectively, By-Products, Other Mineral Products and Uranium-Bearing Products.

Section 1.10 “Uranium-Bearing Products” shall mean the following that are derived from Mineral Substances: (i) uranium ore (“Ore”); (ii) uranium-bearing mine water, leachate, pregnant liquor, pregnant slurry, concentrated slurry and precipitate (collectively, “Liquids”); and (iii) uranium concentrate in the form commonly known as “yellowcake” and other valuable materials produced by processing Ore or Liquids in a Processing Facility (collectively, “Yellowcake”).

Article II. Definitions of Gross Market Value

Section 2.1. Uranium-Bearing Products.

(a) In the event Neutron sells Ore, “Gross Market Value” shall mean actual sale proceeds less Allowable Costs properly attributable thereto.

(b) In the event Neutron sells Liquids, “Gross Market Value” shall mean actual sale proceeds less (i) Neutron’s actual processing costs after extraction from shafts or wells but prior to sale and (ii) Allowable Costs properly attributable thereto.

(c) In the event Neutron sells neither Ore nor Liquids and instead processes the same in a Processing Facility owned or controlled by it or on a custom or toll basis and sells Yellowcake, “Gross Market Value” shall mean actual sale proceeds less (i) Neutron’s actual processing costs after extraction from shafts or wells but prior to sale and (ii) Allowable Costs properly attributable thereto.

Section 2.2 By-Products; Other Mineral Products. In the event Neutron sells By-Products or Other Mineral Products, “Gross Market Value” shall mean actual sale proceeds less (i) Neutron’s actual costs of treating, beneficiating, upgrading and processing after extraction from shafts or wells but prior to sale and (ii) Allowable Costs properly attributable thereto.

Section 2.3 Disposal Without Sale. Notwithstanding any other provision in this Exhibit B, in the event Neutron (i) sells Products to an affiliate, partner or joint venturer; (ii) further treats, beneficiates, upgrades, refines or enriches Yellowcake or Products in a Processing Facility owned or controlled by it or on a custom or toll basis; or (iii) disposes of the same in kind without a sale, such Products or Yellowcake shall be deemed to be disposed of and “Gross Market Value,” as hereinafter defined in this Section 2.4, shall apply thereto.

(a) In the event of a disposal without sale of any material that has value chiefly for its uranium content, “Gross Market Value” shall mean the “Market Value of U3O8” (as hereinafter defined in this Section 2.3(a)) multiplied by the amount (stated in pounds) of uranium oxide (U308)) contained in the Ore or Compounds from which the material was derived less (i) Neutron’s actual processing costs after extraction from shafts or wells but prior to disposition and (ii) Allowable Costs properly allocated thereto. “Market Value of U3O8” shall mean the weighted average price per pound of U3O8 received by Neutron

for sales of Yellowcake in the three-month period immediately preceding the calendar month of such disposal without sale. In the event Neutron has not sold Yellowcake during such three-month period, “Market Value of U308” shall mean the “Exchange Value (Monthly U308 Spot)” (or, if prices are no longer reported as “Exchange Value (Monthly U308 Spot),” the substantial equivalent thereof), of uranium concentrates reported in the last issue of Nuclear Review published by TradeTech, LLC of Denver, Colorado in the calendar month of such disposal without sale. In the event that such price or its substantial equivalent is not so published, then “Market Value of U308” shall mean the price for uranium concentrates offered for sale for immediate delivery reported in such other publication as is generally recognized in the uranium mining industry as accurately reflecting the price at which uranium concentrate is currently being offered for such sale. In the absence of such other publication, then “Market Value of U308” shall be the mean of the domestic prices at which uranium concentrate was most recently offered for sale for immediate delivery from the Processing Facility nearest the Premises. In the event such price is unavailable from said mill or other facility, then “Market Value of U308” shall be determined by such other means as may establish such prices at the mean of the domestic prices at which uranium concentrate is currently being offered for sale for immediate delivery.

(b) In the event of disposal without sale of By-Products or Other Mineral Products, “Gross Market Value” shall mean the “Market Value” (as hereinafter defined in this Section 2.3(b)) thereof multiplied by the amount of such By-Products or Other Mineral Products disposed of without sale less Neutron’s actual processing costs after extraction from shafts or wells but prior to disposition and (ii) Allowable Costs properly allocated thereto. “Market Value” shall mean the average weighted price received by Neutron from the sale of material of equivalent types and mineral content during the three-month period immediately preceding the calendar month of such disposal without sale. In the event Neutron has no such sale during such three-month period, “Market Value” shall mean the domestic price for such materials for immediate delivery during the month of such disposal without sale as reported in the last issue of platts Metals Week published by McGraw-Hill Companies during the calendar month of such disposal without sale. In the event that such price (or its substantial equivalent) is not so published, then “Market Value” shall be the mean of domestic prices for materials of equivalent types and mineral contents for sale for immediate delivery during the month of such disposal without sale reported in such other publication as is generally recognized in the mining industry as accurately reflecting the price at which such material is currently being offered for sale for immediate delivery. In the absence of such a publication, then “Market Value” shall be determined by such other means as may establish such prices at the mean of the domestic prices at which such material is currently being offered for sale for immediate delivery.

Section 2.4 Other Consideration Relating to Claims and Agreements. In the event Neutron or any affiliate or partner of Neutron or joint venturer with Neutron receives any monetary or other consideration as a result of any (i) judgment or settlement of any common law, contractual, statutory or administrative claim relating to the sale or other disposition of any material derived from Mineral Substances or (ii) agreement to

cancel or modify any agreement relating to such sale or other disposition, “Gross Market Value” shall mean the amount of such consideration less the actual costs and expenses incurred by Neutron or any affiliate, partner or joint venturer in obtaining such consideration.

Article III. Time for Paying Production Royalties

Production royalties payable pursuant to Section 2.1, Section 2.2 or Section 2.3 of this Exhibit B shall be paid before the last day of the month next following the month of sale or disposition without sale, as the case may be. Royalties payable pursuant to Section 2.4 shall be paid within twenty days after the end of the month in which a judgment is no longer subject to appeal or a settlement or agreement is made, as the case may be.

Article IV. Settlement Sheet to Accompany Production Royalty Payment

Each payment of production royalty shall be accompanied by a settlement sheet signed and attested to by an officer of Neutron setting forth all data required for the calculation of the royalty paid and explaining how such royalty was calculated.