LSMG Lode Star Mining Inc (PK)

On October 31, 2019, Lode-Star Mining Inc. (the “Company”) entered into an amendment (the “Amendment”) to the Company’s mineral option agreement with Lode Star Gold, Inc., a private Nevada corporation and the controlling shareholder of the Company (“LSG”), dated October 4, 2014 (the “Option Agreement”).

Pursuant to the Option Agreement, the Company acquired the sole and exclusive option to earn up to an 80% undivided  interest in and to those mineral claims owned by LSG and located in the State of Nevada known as the Goldfield Bonanza Project (the “Property”). On December 11, 2014 (the “Closing Date”), the Company acquired a 20% undivided interest in and to the Property by issuing 35,000,000 shares of its common stock to LSG. In order to earn the additional 60% interest in the Property, the Company is required to fund all expenditures on the Property and pay LSG $5 million in cash from the Property’s mineral production proceeds in the form of a net smelter returns (“NSR”) royalty, each beginning on the Closing Date. Until such time as the Company earns the additional 60% interest, the NSR royalty will be split as to 79.2% to LSG and 19.8% to the Company since the Property is subject to a pre-existing 1% NSR royalty in favor of a third party.

The Option Agreement also provides that if the Company fails to make any cash payments to LSG within one year of the Closing Date, the Company is required to pay LSG an additional $100,000, and in any subsequent years in which the Company fails to complete the payment of the entire $5 million described above, it must make quarterly cash payments to LSG of $25,000 until such time as the Company has earned the additional 60% interest in the Property.

Under the Amendment, the exercise of the 60% option was restructured into two separate 30% options, such that the Company may now earn a 30% interest in the Property (for a total of 50%) (the “Second Option”) by completing the following actions:

Following the exercise of the Second Option, the Company may earn an additional 30% interest in the Property (for a total of 80%) (the “Third Option”) by completing the following actions:

The primary effect of the Amendment is therefore to increase to the purchase price for the additional 60% interest in the Property from $5 million to $10 million, while at the same time separating it into tranches.

The Amendment also corrects a number of inconsistences in the Option Agreement, updates the defined terms to accommodate the creation of the Second Option and Third Option, and includes acknowledgements of the Company regarding accrued and unpaid penalty payments and amounts owing by the Company to LSG as of September 30, 2019.

The foregoing description of the Amendment includes a summary of all the material provisions but is qualified in its entirety by reference to the complete text of the Amendment included as Exhibit 10.8 to this report and incorporated herein by reference.