The 5 year lease for $400 per acre would pay it up-front so that there isn’t an annual payment. For example, 10 acres would be a single $4,000 payment to cover the first 5 years. If it doesn’t go into production during that time, at the end of year 5, they could exercise their option to extend it for 10 years, and would have to pay the annual rental of $75/acre each year to keep that extension effective, or get it into production and start paying royalties, which would serve to extend it by royalty payments. If they don’t start producing and paying royalties, or exercise the option and pay the annual payment, then the lease would expire after 5 years, or when they stop paying the rental. I like to think of it like an apartment, if they pay the rent, they get to stay. Rent can be paid by a paid-up bonus (the initial $400 per acre), royalty, or the extension option annual rental fee. If they stop paying, the lease will expire and you are free to lease it to someone else.
Thank you so much for explaining that so even I can understand. Really, really appreciate it>
Extension period seems very long and why not have payment indexed to inflation - $75 in 2025 as base, plus inflation factor by 2030 and each subsequent year.
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the lithium is so new were not making a move on any of it yet, this was the beginning of the talks with Exxon Mobile.