COMMITMENTS

9 Months Ended

Sep. 30, 2012

COMMITMENTS

COMMITMENTS

NOTE 9 – COMMITMENTS

Mining Properties

During the year ended December 31, 2009 the Company entered into a Joint Venture Agreement with the Moeller Family Trust for the leasing of the Trust’s Yellow Hammer property in the Gold Hill Mining District of Utah.  Pursuant to the agreement, Moeller Family Trust received 250,000 shares of the Company’s restricted common stock.  If the Company does not place the Yellow Hammer property into commercial production within a three year period it will be required to make annual lease payments to the Trust of $50,000.  Under the terms of the Joint Venture agreement, the Company will be required to pay a 6% net smelter royalty on the production of base metals and a net smelter royalty on gold and silver based on a sliding scale of between 2% and 15% based on the price of gold and silver, as applicable.  The Company put the property into commercial production in 2011 which resulted in royalty payments to the Moeller Family Trust in the amount of $90,360 during 2011.  Operations have been temporarily suspended and royalties are not currently accruing.

Also during the year ended December 31, 2009, the Company entered into a Joint Venture Agreement with the Clifton Mining Company and the Woodman Mining Company for the leasing of their property interests in the Gold Hill Mining District of Utah. Under the terms of the Joint Venture agreement, the Company will be required to pay a 4% net smelter royalty on base metals in all other areas except for production from the Kiewit gold property and a net smelter royalty on gold and silver, except for production from the Kiewit gold property, based on a sliding scale of between 2% and 15% based on the price of gold or silver, as applicable.  The Company will also be required to pay a 6% net smelter return on any production from the Kiewit gold property.  Additionally, if the Company did not place the Kiewit, Clifton Shears/smelter tunnel deposit, and the Cane Springs deposits into commercial production within the  three year period ending July 24, 2012, it was required to make annual lease payments to Clifton Mining in the amount of $50,000 per each of the three locations.  The terms of this lease were renegotiated on June 30, 2012 and payment due dates for the properties for 2012 have been extended as shown below.  The July 24, 2012 and October 24, 2012 payments were timely made.  Negotiations regarding the December 24, 2012 Cane Springs property lease payment are currently ongoing.

Kiewit property	July 24, 2012
Clifton Shears/smelter tunnel property	October 24, 2012
Cane Springs property	December 24, 2012

In September 2009, the Company acquired all of the rights and interests of Clifton Mining in a $42,802 reclamation contract and cash surety deposit with the State of Utah Division of Oil, Gas and Mining for the property covered by the joint venture. As consideration for Clifton Mining selling its interest in the reclamation contract and surety deposit, the Company issued 60,824 shares to Clifton Mining. For a period of two years the Company had the right to repurchase the shares for $48,000 or during the 180-day period after this two year period, Clifton Mining had the option to put the shares to the Company for $48,000.  In connection with the issuance of this put option, management concluded that the 60,824 shares should be recorded as a derivative liability, and not as equity.  The put option expired March 30, 2012.

Employment Agreements

In September 2010, the Company entered into employment agreements with its Chief Executive Officer (“CEO”) and its President and entered into a consulting agreement with one of its directors.  Each agreement is for an initial term of between three months and four years and provides for base salary or fees of $120,000 per year.  As of September 30, 2012, the salaries and payments under these contracts are accruing rather than being paid.  As of September 30, 2012, the total amount included in accrued expenses for officer wages is $75,000 and for director consulting fees is $30,000.