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<SEC-DOCUMENT>0000917225-10-000019.txt : 20100901
<SEC-HEADER>0000917225-10-000019.hdr.sgml : 20100901
<ACCEPTANCE-DATETIME>20100901113206
ACCESSION NUMBER:		0000917225-10-000019
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		3
CONFORMED PERIOD OF REPORT:	20100826
ITEM INFORMATION:		Entry into a Material Definitive Agreement
ITEM INFORMATION:		Unregistered Sales of Equity Securities
ITEM INFORMATION:		Financial Statements and Exhibits
FILED AS OF DATE:		20100901
DATE AS OF CHANGE:		20100901

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			SOLITARIO EXPLORATION & ROYALTY CORP.
		CENTRAL INDEX KEY:			0000917225
		STANDARD INDUSTRIAL CLASSIFICATION:	GOLD & SILVER ORES [1040]
		IRS NUMBER:				841285791
		STATE OF INCORPORATION:			CO
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-32978
		FILM NUMBER:		101051704

	BUSINESS ADDRESS:	
		STREET 1:		4251 KIPLING STREET
		STREET 2:		SUITE 390
		CITY:			WHEAT RIDGE
		STATE:			CO
		ZIP:			80033
		BUSINESS PHONE:		3035341030

	MAIL ADDRESS:	
		STREET 1:		4251 KIPLING STREET
		STREET 2:		SUITE 390
		CITY:			WHEAT RIDGE
		STATE:			CO
		ZIP:			80033

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	SOLITARIO RESOURCES CORP
		DATE OF NAME CHANGE:	20000711
</SEC-HEADER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>ely8k.htm
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<B><P ALIGN="CENTER">UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION</B> </P>
<B><P ALIGN="CENTER">Washington, D.C. 20549</B> </P>
<B><P ALIGN="CENTER">Form&nbsp;8-K</P>
</B><FONT SIZE=2><P ALIGN="CENTER">CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)<BR>
OF THE SECURITIES EXCHANGE ACT OF 1934 </P>
<P ALIGN="CENTER">Date of Report (Date of earliest event reported): August 26, 2010 </P>
</FONT><B><P ALIGN="CENTER">SOLITARIO EXPLORATION &amp; ROYALTY CORP.</P>
</B><FONT SIZE=2><P ALIGN="CENTER">(Exact name of registrant as specified in its charter) </P></FONT>
<P ALIGN="CENTER"><CENTER><TABLE BORDER=0 CELLSPACING=0 WIDTH=503>
<TR><TD WIDTH="38%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">Colorado<BR>
(State or other jurisdiction of<BR>
incorporation or organization) </FONT></TD>
<TD WIDTH="26%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">001-32978<BR>
(Commission<BR>
File Number) </FONT></TD>
<TD WIDTH="36%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">84-1285791<BR>
(I.R.S. Employer<BR>
Identification No.)</FONT></TD>
</TR>
</TABLE>
</CENTER></P>

<FONT SIZE=2><P ALIGN="CENTER">4251 Kipling Street, Suite 390<BR>
Wheat Ridge, CO 80033<BR>
(Address of principal executive offices) </P></FONT>
<P ALIGN="CENTER"><CENTER><TABLE BORDER=0 CELLSPACING=0 WIDTH=484>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Registrant's telephone number, including area code:</FONT></TD>
<TD WIDTH="34%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">(303) 534-1030</FONT></TD>
</TR>
</TABLE>
</CENTER></P>

<FONT SIZE=2><P ALIGN="CENTER">Not Applicable <BR>
(Former name or former address, if changed since last report) </P>
<P ALIGN="LEFT">Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: </P></FONT>
<P ALIGN="CENTER"><CENTER><TABLE BORDER=0 CELLSPACING=0 WIDTH=572>
<TR><TD WIDTH="2%" VALIGN="TOP">
<FONT FACE="Wingdings" SIZE=2><P ALIGN="LEFT">o</FONT></TD>
<TD WIDTH="98%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Written communications pursuant to Rule&nbsp;425 under the Securities Act (17&nbsp;CFR 230.425)</FONT></TD>
</TR>
</TABLE>
</CENTER></P>

<P ALIGN="CENTER"></P>
<P ALIGN="CENTER"><CENTER><TABLE BORDER=0 CELLSPACING=0 WIDTH=572>
<TR><TD WIDTH="2%" VALIGN="TOP">
<FONT FACE="Wingdings" SIZE=2><P ALIGN="LEFT">o</FONT></TD>
<TD WIDTH="98%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Soliciting material pursuant to Rule&nbsp;14a-12 under th Exchange Act (17&nbsp;CFR 240.14a-12)</FONT></TD>
</TR>
</TABLE>
</CENTER></P>

<P ALIGN="CENTER"></P>
<P ALIGN="CENTER"><CENTER><TABLE BORDER=0 CELLSPACING=0 WIDTH=572>
<TR><TD WIDTH="2%" VALIGN="TOP">
<FONT FACE="Wingdings" SIZE=2><P ALIGN="LEFT">o</FONT></TD>
<TD WIDTH="98%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Pre-commencement communications pursuant to Rule&nbsp;14d-2(b) under the Exchange Act (17&nbsp;CFR&nbsp;240.14d-2(b))</FONT></TD>
</TR>
</TABLE>
</CENTER></P>

<P ALIGN="CENTER"></P>
<P ALIGN="CENTER"><CENTER><TABLE BORDER=0 CELLSPACING=0 WIDTH=572>
<TR><TD WIDTH="2%" VALIGN="TOP">
<FONT FACE="Wingdings" SIZE=2><P ALIGN="LEFT">o</FONT></TD>
<TD WIDTH="98%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Pre-commencement communications pursuant to Rule&nbsp;13e-4(c) under the Exchange Act (17&nbsp;CFR&nbsp;240.13e-4(c))</FONT></TD>
</TR>
</TABLE>
</CENTER></P>

<P ALIGN="LEFT"></P>
<P ALIGN="CENTER">1</P>
<P ALIGN="LEFT">&lt;PAGE&gt;</P>
<P ALIGN="LEFT"></P>
<TABLE BORDER=0 CELLSPACING=0 WIDTH=624>
<TR><TD WIDTH="13%" VALIGN="TOP" HEIGHT=30>
<B><FONT SIZE=2><P ALIGN="LEFT">ITEM 1.01</B></FONT></TD>
<TD WIDTH="87%" VALIGN="TOP" HEIGHT=30>
<B><FONT SIZE=2><P ALIGN="LEFT">Entry into a Material Definitive Agreement</B></FONT></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="LEFT">On August 26, 2010, Solitario Exploration &amp; Royalty Corp. ("Solitario") and Ely Gold &amp; Minerals Inc. ("Ely") entered into a binding letter of intent ("LOI") between Solitario and Ely to joint venture Ely's Mt. Hamilton gold project situated at the southern end of the prolific Battle Mountain gold trend in eastern Nevada (the "Joint Venture")  The Mt. Hamilton project is an advanced gold project where over 314 drill holes have defined the Centennial gold deposit.  Under the LOI, Solitario may earn up to an 80% interest in the project by completing various staged commitments.</P>
<P ALIGN="LEFT">On signing the LOI, Solitario subscribed for a private placement of 3,333,333 units of Ely at a price of CDN$0.15 per Unit for an aggregate consideration of approximately CDN$500,000.  Each unit consists of one common share and one-half share purchase warrant entitling the holder of a whole warrant to purchase an additional share of Ely for CDN$0.25, with such warrant expiring two years from the subscription date.  The private placement consists of two tranches:  the first tranche of CDN$250,000 is to be funded on or before August 31, 2010, subject to TSX Venture Exchange ("TSX-V") acceptance; the second tranche will be funded upon Ely shareholder and TSX-V approval of the Joint Venture anticipated no later than late-October 2010.  </P>
<P ALIGN="LEFT">Solitario will be conducting due diligence on the Mt. Hamilton project through the date of TSX-V approval after Ely shareholder approval and may elect to terminate the LOI for any reason prior to the receipt of such approvals.  Thereafter, unless the LOI has already been terminated, Solitario will be committed to spend $1.0 million on exploration and feasibility work and to pay US$300,000 in an advanced royalty payment. After completing these initial commitments, Solitario may elect to terminate its interest in the Joint Venture at any time and will have no further earn-in obligations on the project. Prior to receipt of the approval of its shareholders, Ely may terminate the LOI in order to pursue an alternative proposal if deemed superior to the transactions contemplated by the LOI, provided that Ely pays Solitario a US$300,000 termination fee. </P>
<P ALIGN="LEFT">To earn its full 80% interest in the Joint Venture and fulfill other LOI commitments Solitario is further required to:</P><DIR>
<DIR>

<P ALIGN="LEFT">Make cash payments to DHI Minerals (U.S.) Ltd., the subsidiary of Ely which will hold Ely's interest in the Joint Venture, totaling US$2.75 million in cash, issue 300,000 shares of Solitario common stock, and subscribe to US$2.50 million worth of Ely common stock at market, all of which are scheduled from 2011 through mid-2015.</P>
<P ALIGN="LEFT">Make payments of US$300,000 per year in advanced royalty payments that are deductable against future production royalties to the underlying royalty owner, and prior to commercial production, pay $5.0 million to reduce the NSR royalty rate from 8% to 3%.</P>
<P ALIGN="LEFT">Complete a bankable feasibility study. </P>
<P ALIGN="LEFT">Upon request, arrange 100% project financing for development of the Mt. Hamilton project after completion of a bankable feasibility study.  Construction and permitting costs incurred after feasibility will be shared pro-rata, however, Ely may elect to have Solitario fund all costs with such costs, plus interest, to be repaid by the Joint Venture to Solitario out of 80% of Ely's share of net proceeds from the Joint Venture.</P></DIR>
</DIR>

<P ALIGN="LEFT">The foregoing description of the LOI does not purport to be complete and is qualified in its entirety by reference to the LOI, which is filed as Exhibit 99.1 hereto and incorporated into this report by reference.</P>
<B><P ALIGN="LEFT">ITEM 3.02&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;UNREGISTERED SALES OF EQUITY SECURITIES</P>
</B></FONT><P ALIGN="LEFT"></P>
<FONT SIZE=2><P ALIGN="LEFT">Subject to the terms and conditions of the LOI, including Ely shareholder and TSX-V approval of the Joint Venture, and assuming Solitario does not elect to terminate the LOI or its interest in the Joint Venture prior to issuance, Solitario will issue to DHI Minerals (U.S.) Ltd., up to 300,000 of its common stock in the amounts and on the dates set forth in the LOI pursuant to an exemption from registration under Section 4(2) of the Securities Act of 1933, as amended.</FONT></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=2>&nbsp;</TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P ALIGN="LEFT">ITEM 9.01&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FINANCIAL STATEMENTS AND EXHIBITS</B></FONT></TD>
</TR>
<TR><TD WIDTH="13%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="87%" VALIGN="TOP">&nbsp;</TD>
</TR>
<TR><TD WIDTH="13%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="LEFT"> Exhibits</U></FONT></TD>
<TD WIDTH="87%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="LEFT">Exhibit Description</U> </FONT></TD>
</TR>
<TR><TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">99.1</FONT></TD>
<TD WIDTH="87%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Letter of intent between Solitario Exploration &amp; Royalty Corp. and Ely Gold and Minerals Inc. regarding private placement and the Joint Venture.  </FONT></TD>
</TR>
<TR><TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">99.2</FONT></TD>
<TD WIDTH="87%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Solitario Exploration &amp; Royalty Corp. press release dated August 27 , 2010</FONT></TD>
</TR>
</TABLE>

<B><P ALIGN="CENTER">2</P>
<P ALIGN="LEFT">&lt;PAGE&gt;</P>
<P ALIGN="CENTER">SIGNATURES</B> </P>
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized. </P>
<P ALIGN="LEFT">August 31, 2010 </P></FONT>
<P ALIGN="RIGHT"><TABLE BORDER=0 CELLSPACING=0 WIDTH=288>
<TR><TD VALIGN="TOP" COLSPAN=3>
<FONT SIZE=2><P ALIGN="LEFT">Solitario Exploration &amp; Royalty Corp.</FONT></TD>
</TR>
<TR><TD WIDTH="7%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">&nbsp; </FONT></TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;</FONT></TD>
<TD WIDTH="91%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;</FONT></TD>
</TR>
<TR><TD WIDTH="7%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">By: </FONT></TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;</FONT></TD>
<TD WIDTH="91%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="LEFT">/s/&nbsp;James R. Maronick</U></FONT></TD>
</TR>
<TR><TD WIDTH="7%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;</FONT></TD>
<TD WIDTH="91%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">James R. Maronick, Chief Financial Officer</FONT></TD>
</TR>
</TABLE>
</P>

<P ALIGN="LEFT"></P>
<B><P ALIGN="CENTER">EXHIBIT INDEX</P></B>
<TABLE BORDER=0 CELLSPACING=0 WIDTH=624>
<TR><TD WIDTH="13%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="LEFT">Exhibits</U></FONT></TD>
<TD WIDTH="87%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="LEFT">Exhibit Description</U> </FONT></TD>
</TR>
<TR><TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">99.1</FONT></TD>
<TD WIDTH="87%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Letter of intent between Solitario Exploration &amp; Royalty Corp. and Ely Gold and Minerals Inc. regarding private placement and the Joint Venture.  </FONT></TD>
</TR>
<TR><TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">99.2</FONT></TD>
<TD WIDTH="87%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Solitario Exploration &amp; Royalty Corp. press release dated August 27 , 2010</FONT></TD>
</TR>
</TABLE>

<B><FONT SIZE=2><P ALIGN="LEFT"></P>
<P ALIGN="CENTER">3</P>
<P ALIGN="LEFT"></P></B></FONT></BODY>
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<TYPE>EX-99.2
<SEQUENCE>2
<FILENAME>exh992.htm
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<B><FONT FACE="Arial" SIZE=3><P ALIGN="RIGHT">Exhibit 99.2</P>
<P ALIGN="RIGHT">August 26, 2010</P>
</FONT><U><FONT FACE="Arial"><P ALIGN="CENTER">SOLITARIO MAKES PRIVATE PLACEMENT INTO ELY GOLD &amp; MINERALS AND <BR>
SIGNS LETTER OF INTENT TO JOINT VENTURE<BR>
 ELY GOLD &amp; MINERALS' MT. HAMILTON GOLD PROJECT IN NEVADA </U> </P>
</FONT><FONT FACE="Calibri"><P ALIGN="JUSTIFY">Denver, Colorado:  </B>Solitario Exploration &amp; Royalty Corp. ("Solitario;" NYSE Amex: <B>XPL;</B> TSX: <B>SLR</B>) and Ely Gold &amp; Minerals Inc. ("Ely;" TSX.V: <B>ELY</B>) announced Solitario has arranged a private placement in Ely of CDN$250,000 for units, described below.  This placement is part of a Letter of Intent ("LOI") between Solitario and Ely to joint venture Ely's Mt. Hamilton gold project situated at the southern end of the prolific Battle Mountain gold trend in eastern Nevada.  The Mt. Hamilton project is an advanced gold project where over 314 drill holes have defined the Centennial gold deposit.  Under the LOI, Solitario may earn up to an 80% interest in the project by completing various staged commitments.</P>
<P ALIGN="JUSTIFY">Chris Herald, President and CEO, stated, "We are delighted to partner with Ely on this very attractive advanced gold project and commend Ely in its efforts to bring the project to this stage.  Solitario's core strategy remains exploration and royalty generation through net profit royalty structured joint ventures.  We believe the Mt. Hamilton project has good exploration potential."  </P>
<P ALIGN="JUSTIFY">Trey Wasser, EVP of Ely, stated, we are very excited to be partnering on the Mt Hamilton Project with Solitario. This investment and joint venture provides the capital to fast track the development of a significant asset in Nevada. In a difficult market environment, we are pleased to have a partner with the proven track record and the financial strength of Solitario.</P>
<B><U><P ALIGN="JUSTIFY">Terms of the LOI</P>
</B></U><P ALIGN="JUSTIFY">On signing the LOI, Solitario subscribed for a private placement of 3,333,333 units of Ely at a price of CDN$0.15 per Unit for an aggregate consideration of approximately CDN$500,000.  Each unit consists of one common share and one-half share purchase warrant entitling the holder of a whole warrant to purchase an additional share of Ely for CDN$0.25, with such warrant expiring two years from the subscription date.  The private placement consists of two tranches:  the first tranche of CDN$250,000 is to be funded on or before August 31, 2010, subject to TSX Venture Exchange acceptance; the second tranche will be funded upon Ely shareholder and exchange approval of the joint venture arrangement anticipated no later than late-October 2010.  </P>
<P ALIGN="JUSTIFY">Solitario will be conducting due diligence on the Mt. Hamilton project through the date of shareholder approval.  Thereafter, Solitario will be committed to spend $1.0 million on exploration and feasibility work and to pay US$300,000 in an advanced royalty payment. After completing these initial commitments, Solitario may elect to terminate its interest in the Mt. Hamilton project at any time and will have no further earn-in obligations on the project. </P>
<P ALIGN="JUSTIFY">To earn its full 80% interest in the project and fulfill other LOI commitments Solitario is further required to:</P><DIR>
<DIR>

<P ALIGN="JUSTIFY">Make cash payments to the subsidiary of Ely which will hold Ely's joint venture interest totaling US$2.75 million in cash, issue 300,000 shares of Solitario common stock, and subscribe to US$2.50 million worth of Ely common stock at market, all of which are scheduled from 2011 through mid-2015.</P></DIR>
</DIR>

<P ALIGN="CENTER">1</P>
<P ALIGN="LEFT">&lt;PAGE&gt;</P><DIR>
<DIR>

<P ALIGN="JUSTIFY">Make payments of US$300,000 per year in advanced royalty payments that are deductable against future production royalties to the underlying royalty owner, and prior to commercial production, pay $5.0 million to reduce the NSR royalty rate from 8% to 3%.</P>
<P ALIGN="JUSTIFY">Complete a bankable feasibility study. </P>
<P ALIGN="JUSTIFY">Upon request, arrange 100% project financing for development of the Mt. Hamilton project after completion of a bankable feasibility study.  Construction and permitting costs incurred after feasibility will be shared pro-rata, however, Ely may elect to have Solitario fund all costs with such costs, plus interest, to be repaid by the joint venture to Solitario out of 80% of Ely's share of net proceeds from the joint venture.</P></DIR>
</DIR>

<P ALIGN="JUSTIFY">The prpposed Joint Venture remains subject to Ely shareholder approval and final acceptance by the TSX Venture Exchange.</P>
<P ALIGN="JUSTIFY">For a more complete list of the terms and conditions under the LOI, a copy of the LOI is available online at www.sedar.com, www.solitarioxr.com &amp; www.elygoldandminerals.com</P>
</FONT><B><FONT FACE="Arial" SIZE=3><P ALIGN="JUSTIFY">About Solitario</P>
</B></FONT><FONT FACE="Calibri"><P ALIGN="JUSTIFY">Solitario is a gold, silver, platinum-palladium, and base metal exploration and royalty company actively exploring in Brazil, Mexico, and Peru.  Solitario has significant business relationships with Votorantim Metais, Compa&ntilde;ia de Minas Buenaventura S.A.A. Anglo Platinum, and Newmont Mining.  Solitario has approximately US$15 million in cash and marketable securities.  Solitario is traded on the NYSE Amex ("XPL") and on the Toronto Stock Exchange ("SLR").  Additional information about Solitario is available online at www.solitarioxr.com</P>
</FONT><B><FONT FACE="Arial" SIZE=3><P ALIGN="JUSTIFY">About Ely</P>
</B></FONT><FONT FACE="Calibri"><P ALIGN="JUSTIFY">Ely is focused on acquisition and development of gold resources in North America. The Company is currently working toward production from the Centennial Gold Deposit, a project located on the Company's 100% owned Mount Hamilton property, Ely is traded on the TSX Venture Exchange ("ELY").  Additional information about Ely is available online at </FONT><FONT FACE="Calibri">www.elygoldandminerals.com</FONT></A></P>
<FONT FACE="Calibri"><P ALIGN="CENTER">2</P>
<P ALIGN="LEFT">&lt;PAGE&gt;</P>
<P ALIGN="JUSTIFY">F</FONT><FONT FACE="Arial" SIZE=3>OR MORE INFORMATION AT SOLITARIO, CONTACT:</P>
</FONT><FONT FACE="Arial"><P ALIGN="LEFT"></P></FONT>
<TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=324>
<TR><TD WIDTH="59%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=3><P ALIGN="LEFT">Debbie  Mino-Austin<BR>
Director - Investor <BR>
Relations </FONT></TD>
<TD WIDTH="41%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=3><P ALIGN="LEFT"></P>
<P ALIGN="LEFT">(800) 229-6827</FONT></TD>
</TR>
<TR><TD WIDTH="59%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=3><P ALIGN="LEFT">Christopher E. Herald<BR>
President &amp; CEO</FONT></TD>
<TD WIDTH="41%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=3><P ALIGN="LEFT"></P>
<P ALIGN="LEFT">(303) 534-1030</FONT></TD>
</TR>
</TABLE>

<FONT FACE="Arial" SIZE=3><P ALIGN="LEFT">FOR MORE INFORMATION AT ELY, CONTACT:</P></FONT>
<TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=324>
<TR><TD WIDTH="59%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=3><P ALIGN="LEFT">Steve Kenwood<BR>
President</FONT></TD>
<TD WIDTH="41%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=3><P ALIGN="LEFT"></P>
<P ALIGN="LEFT">(604) 488-1104</FONT></TD>
</TR>
<TR><TD WIDTH="59%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=3><P ALIGN="LEFT">Trey Wasser<BR>
EVP Corp Development</FONT></TD>
<TD WIDTH="41%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=3><P ALIGN="LEFT"></P>
<P ALIGN="LEFT">(940) 365-1314</FONT></TD>
</TR>
</TABLE>

<I><FONT FACE="Arial" SIZE=2><P ALIGN="JUSTIFY">This press release includes certain "Forward-Looking Statements" within the meaning of section 21E of the United States Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact, included herein, including without limitation, statements regarding potential mineralization and reserves, exploration results and future plans and objectives of Solitario, are forward-looking statements that involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Development of  Solitario's properties are subject to the success of exploration, completion and implementation of an economically viable mining plan, obtaining the necessary permits and approvals from various regulatory authorities, compliance with operating parameters established by such authorities and political risks  s
uch as higher tax and royalty rates, foreign ownership controls and our ability to finance in countries that may become politically unstable. Important factors that could cause actual results to differ materially from Solitario's expectations are disclosed under the heading "Risk Factors" and elsewhere in Solitario's documents filed from time to time with Canadian Securities Commissions and the United States Securities and Exchange Commission.</P><DIR>
<DIR>

</I><P ALIGN="LEFT"><A NAME="RANGE!C5:K25"></A></P></DIR>
</DIR>

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<div class=Section1>

<p align=right style='text-align:right'><b>Exhibit
99.1</b></p>

<p align=center style='text-align:center'>
Solitario
Exploration &amp; Royalty Corp.<br>
</b>4251 Kipling Street, Suite 390; Wheat
Ridge, CO 80033 <br>
Tel: 303-534-1030; Fax: 303-534-1809

<p>August 26, 2010</p>

<p>Trey , Executive Vice President and Director<br>
Ely Gold &amp; Minerals Inc.<br>
680 - 789 West Pender Street<br>
Vancouver, BC V6C1H2</p>

<p>John , President and Director<br>
DHI Minerals (U.S.) Ltd.<br>
680 - 789 West Pender Street<br>
Vancouver, BC V6C1H2</p>

<p>Re: Private Placement and Mount Hamilton Project</p>

<p>Mr. :</p>

<p>In regard to your recent discussions with Mr. Christopher E. Herald, the
following are the terms for this binding Letter of Intent to be effective
August 26, 2010 by and among  Exploration
&amp; Royalty Corp., a Colorado corporation (&quot;Solitario&quot;),
Ely Gold &amp; Minerals Inc., an Alberta corporation (&quot;Ely&quot;) and DHI
Minerals (U.S.) Ltd., a Nevada corporation (&quot;DHI US&quot;). After
execution of this Letter of Intent, Solitario, Ely
and DHI US shall diligently proceed with the negotiation and execution of
definitive agreements (the &quot;Agreements&quot;) sufficient to effectuate the
terms set out herein, which Agreements shall include such other provisions as
are necessary or customary for agreements of such type and as are acceptable to
the parties. Consummation of the transactions set forth in this Letter of
Intent and the execution of the Agreements shall be subject to obtaining all
necessary or desirable regulatory and securities exchange approvals and third
party assignments and approvals, including without limitation approval of the
Joint Venture contemplated hereby by Ely's shareholders (&quot;Shareholder
Approval&quot;), either by written consent of holders of more than 50% of Ely's
outstanding shares or by favourable vote of more than
50% of the shares voted at a General Meeting of Shareholders to be held not
later than October 22, 2010. Ely confirms that the Joint Venture is supported
by management of Ely and has been approved by a unanimous vote of the Board of
Directors of Ely, and that Ely will recommend to its shareholders that the
Joint Venture be approved.</p>

<p align=center style='text-align:center'>1</p>

<p>&lt;PAGE&gt;</p>

<p>1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Private Placements</u>. Upon execution of
this Letter of Intent, Solitario will execute and
deliver a subscription agreement pursuant to which it will subscribe for
3,333,333 units (the &quot;Units&quot;) of Ely at the price of CDN$0.15 per
Unit for an aggregate consideration of CDN$499,999.95 (the &quot;Private
Placement Funds&quot;). Each Unit shall consist of one (1) common share (a
&quot;Share&quot;) in the capital of Ely and one-half (1/2) of a share purchase
warrant (each full warrant a &quot;Warrant&quot;). Each Warrant will entitle
the holder to purchase one (1) additional Share (a<b> </b>&quot;Warrant
Share&quot;) for CDN$0.25 at any time prior to 4:30 p.m. (Vancouver time) on
August 26, 2012, at which time the Warrants will expire; provided that if at
any time after December 26, 2010, Ely's Shares have a closing price equal to or
higher than CDN$0.35 per Share for twenty (20) consecutive trading days on the
TSX Venture Exchange (the &quot;TSXV&quot;), Ely shall thereafter be entitled
to give notice to the holders of Warrants, including Solitario,
by news release and letter sent to the most recent address of the holder on
Ely's records, that the Warrants will expire at 4:30 p.m. (Vancouver time) on
that date which is 10 days after the date of such news release unless exercised
before the expiry of that period, and in such event all unexercised Warrants
will expire at 4:30 p.m. (Vancouver time) on the last day of such 10 day
period. Units are immediately severable into their constituent Shares and
Warrants. Payment of the Private Placement Funds and issuance of the Units
shall occur in two tranches as follows:
CDN$250,000 (the &quot;First Tranche&quot;) upon conditional acceptance by the
TSXV of a filing to be made in respect of the Joint Venture and conditional
acceptance (subject only to customary conditions and specifically not subject
to Shareholder Approval) by the TSXV of a filing to be made in respect of the
First Tranche; and (ii) CDN$249,999.95 (the &quot;Second Tranche&quot;) upon
final acceptance by the TSXV, after Shareholder Approval, of a filing to be
made in respect of the Joint Venture(&quot;Final Exchange Acceptance&quot;).
Out of the Private Placement Funds from the First Tranche, Ely will immediately
pay US$250,000 to Augusta Resources Ltd. (&quot;Augusta&quot;) before August
31, 2010. On or before June 1, 2013, Solitario will
execute and deliver a subscription agreement pursuant to which it will
subscribe for US$750,000 of Ely's Shares (the &quot;Third Tranche&quot;) at a
price equal to the 20 day weighted moving average price on the TSX-V (the
&quot;WMAP&quot;). On or before June 1, 2014, Solitario
will execute and deliver a subscription agreement pursuant to which it will
subscribe for US$750,000 of Ely's Shares (the &quot;Fourth Tranche&quot;) at
the WMAP. On or before June 1, 2015, Solitario will
execute and deliver a subscription agreement pursuant to which it will
subscribe for US$1,000,000 of Ely's Shares (the &quot;Fifth Tranche&quot;) (the
Third Tranche, the Fourth Tranche and the Fifth Tranche collectively, the
&quot;Additional Tranches&quot;) at the WMAP. Ely shall utilize the proceeds of
the Additional Tranches to make all required payments to Augusta which are due
on or after June 1, 2013.</p>

<p align=center style='text-align:center'>2</p>

<p>&lt;PAGE&gt;</p>

<p>2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Joint Venture</u>. Subject to Final
Exchange Acceptance, on or before November 19, 2010, Solitario
and DHI US shall form a joint venture, in the form of a Colorado<b> </b>limited
liability company taxed as a partnership (the &quot;Joint Venture&quot;) and
negotiate in good faith and enter into a limited liability company operating
agreement to effectuate the terms set out herein, which will generally follow
the form of the most recent discussion draft of Rocky Mountain Mineral Law
Foundation, Form 5LLC-5, including Form 5-C as Exhibit C with respect to tax
matters (the &quot;Joint Venture Agreement&quot;). Among other things, the
Joint Venture Agreement shall provide: (i) that,
unless Solitario has resigned as a member of the
Joint Venture prior to completion of Phase-I Earn-in, Solitario
will have sole authority to conduct and control the Mt. Hamilton Project (as
hereafter defined) activities of the Joint Venture until (a) completion of a
Bankable Feasibility Study, as described in Exhibit A, or (b) the failure of
Solitario to make any payment required to complete Phase-II
Earn-in or the Phase-III Earn-in, and that thereafter a management committee
will be formed consisting of two representatives appointed by DHI US and two
representatives appointed by Solitario with each
member, acting through its representatives, having a vote proportional to their
respective membership interests in the Joint Venture; (ii) for a two-mile area
of interest; (iii) for payment of a management fee to Solitario
of 3% of all allowable expenditures by the Joint Venture or by
Solitario for the benefit of the Joint Venture (the
&quot;Management Fee&quot;), other than payments to Centennial Minerals
Company, LLC (&quot;Centennial&quot;); and (iv) for binding arbitration of
disputes. Subject to Final Exchange Acceptance, if the Joint Venture Agreement
has not been entered into by November 19, 2010, either party can require the
agreement to be completed pursuant to a binding arbitration conducted in
accordance with Section 7 of this Letter of Intent, except that the cost of
such arbitration shall be borne equally by Solitario
and DHI US and the requirement of a 60 day pre-arbitration negotiation to
attempt to resolve a dispute shall not be applicable.</p>

<p align=center style='text-align:center'>3</p>

<p>&lt;PAGE&gt;</p>

<p style='margin-left:1.0in'>a) <u>Initial Contributions.</u> Subject to final
Exchange Acceptance, on or before November 19, 2010, DHI US and
Solitario shall make their initial contributions to the
Joint Venture pursuant to a limited liability contribution agreement, negotiated
and entered into in good faith, which will generally follow the form of the
most recent discussion draft of Rocky Mountain Mineral Law Foundation, Form
5LLC-4 (the &quot;Contribution Agreement&quot;). Among other things, the
Contribution Agreement shall provide for: (i) the
contribution of the additional assets not contemplated by such form and contain
provisions relating to the contribution of such additional assets as are
customarily included in agreements which provide for the conveyance of such
types of assets; and (ii) additional representations and warranties of DHI US
satisfactory to Solitario with respect to the absence
of undisclosed liabilities or agreements affecting or relating to the Mt.
Hamilton Project. As its initial contribution to the Joint Venture, DHI US
shall contribute all of its right, title and interest in and to the properties,
claims, water rights, underlying agreements, existing data and other assets, of
every kind and description and which relate to the mineral property identified
as the Mt. Hamilton mineral property in the publicly filed financial statements
of Ely as at December 31, 2009 and 2008 and for the years then ended (the
&quot;Mt. Hamilton Project&quot;). Prior to DHI US's initial contribution to
the Joint Venture (the &quot;Property Contribution&quot;), Ely shall assign,
transfer and convey to DHI US all of its right, title and interest to any of
the Mt. Hamilton Project. The Joint Venture shall take the Property
Contribution subject to the payment obligations of DHI US to Centennial. As its
initial contribution to the Joint Venture, Solitario
shall contribute US$300,000 and cause the Joint Venture to pay, or in lieu
thereof shall pay such amount directly to, Centennial in satisfaction of the
US$300,000 payment due Centennial on or before such date (the &quot;Initial
Centennial Payment&quot;). Solitario's initial
membership interest in the Joint Venture shall be 10% and DHI US's initial
membership interest in the Joint Venture shall be 90%.</p>

<p align=center style='text-align:center'>4</p>

<p>&lt;PAGE&gt;</p>

<p style='margin-left:1.0in'>b) <u>Phase-I Earn-in</u>.
Solitario may elect to complete Phase-I Earn-in by
making the following expenditures and payments. On or before August 23, 2011,
Solitario shall fund, through contributions to the Joint
Venture and or by paying such expenditures directly, no less than US$1,000,000
in Exploration Expenditures on and for the direct benefit of the Mt. Hamilton
Project (the &quot;Phase-I Exploration Expenditures&quot;). &quot;Exploration
Expenditures&quot; will include all expenses incurred toward ascertaining the
existence, location, quantity, quality or commercial value of mineral deposits
in, under, upon or which may be produced from the Mt. Hamilton Project
including, without limitation, expenses for geophysical surveys, drilling,
sampling, assaying and geochemical analysis, metallurgical and engineering
work, geological consultants, assessment and/or maintenance payments for the
property (other than payments to Centennial), environmental studies/permit
acquisition, and any and all other expenditures towards completion of a
Bankable Feasibility Study. On or before November 19, 2011, Solitario
shall contribute US$300,000 to the Joint Venture and cause the Joint Venture to
pay, or in lieu thereof shall pay such amount directly to, Centennial in
satisfaction of the US$300,000 payment due Centennial on or before such date
(the &quot;Phase-I Centennial Payment&quot;). Solitario
shall make the following payments to DHI US (the &quot;Phase-I DHI US
Payments&quot;): (i) on or before February 23, 2011,
US$100,000 and 25,000 shares of Solitario common
stock; (ii) on or before June 1, 2011, US$500,000; (iii) on or before August
23, 2011, US$100,000 and 25,000 shares of Solitario
common stock; (iv) on or before February 23, 2012, US$150,000 and 25,000 shares
of Solitario common stock; (v) on or before June 1,
2012, US$750,000; and (vi) August 23, 2012, US$150,000 and 25,000 shares of
Solitario common stock. Upon completion of the Phase-I
Exploration Expenditures, the Phase-I Centennial Payment, and the Phase-I DHI
US Payments, Solitario shall have completed Phase-I
Earn-in and Solitario's membership interest in the
Joint Venture shall increase to 51% and DHI US's membership interest in the
Joint Venture shall decrease to 49%. In the event that Solitario
fails to complete the Phase-I Exploration Expenditures or fails to make any
payment required to complete Phase-I Earn-in, Solitario
shall relinquish its entire membership interest in the Joint Venture.</p>

<p align=center style='text-align:center'>5</p>

<p>&lt;PAGE&gt;</p>

<p style='margin-left:1.0in'>c) <u>Phase-II Earn-in.</u>
Following completion of Phase-I Earn-in, Solitario
may elect to complete Phase-II Earn-in by making the following payments. On or
before November 19, 2012, Solitario shall contribute
US$300,000 to the Joint Venture and cause the Joint Venture to pay, or in lieu
thereof shall pay such amount directly to, Centennial in satisfaction of the
US$300,000 payment due Centennial on or before such date (the &quot;Phase-II
Centennial Payment&quot;). Solitario shall make the
following payments to DHI US (the &quot;Phase-II DHI US Payments&quot;): (
i) on or before February 23, 2013, US$250,000 and 50,000
shares of Solitario common stock; and (ii) on or
before August 23, 2013, US$250,000 and 50,000 shares of Solitario
common stock. Upon completion of the Phase-II Centennial Payment and the
Phase-II DHI US Payments, Solitario shall have
completed Phase-II Earn-in and Solitario's membership
interest in the Joint Venture shall increase to 70% and DHI US's membership
interest in the Joint Venture shall decrease to 30%. In the event that
Solitario fails to make any payment required to complete
Phase-II Earn-in, Solitario's membership interest in
the Joint Venture shall decrease to 49% and DHI US's membership interest in the
Joint Venture shall increase to 51% and DHI US may assume sole authority to
conduct and control the Mt. Hamilton Project activities of the Joint Venture.</p>

<p style='margin-left:1.0in'>d) <u>Phase-III Earn-in</u>. Following completion
of Phase-II Earn-in, Solitario may elect to complete
Phase-III Earn-in by making the following payments. On or before November 19,
2013, Solitario shall contribute US$3,800,000 to the
Joint Venture and cause the Joint Venture to pay, or in lieu thereof shall pay
such amount directly to, Centennial in satisfaction of the US$300,000 payment
due Centennial on or before such date and the US$2,000,000 first royalty
reduction option and the US$1,500,000 second royalty reduction option. On or
before November 19, 2014, Solitario shall contribute
US$1,800,000 to the Joint Venture and cause the Joint Venture to pay, or in
lieu thereof shall pay such amount directly to, Centennial in satisfaction of
the US$300,000 payment due Centennial on or before such date and the
US$1,500,000 third royalty reduction option (both of the foregoing payments,
the &quot;Phase-III Centennial Payments&quot;). The full benefit of all
Centennial payments, whether advance royalty or royalty reduction payments
shall accrue to the Joint Venture. Solitario shall
make the following payments to DHI US (the &quot;Phase-III DHI US
Payments&quot;): (i) on or before February 23, 2014,
US$250,000 and 50,000 shares of Solitario common
stock; and (ii) on or before August 23, 2014, US$250,000 and 50,000 shares of
Solitario common stock. Upon completion of the Phase-III
Centennial Payments and the Phase-III DHI US Payments, Solitario
shall have completed Phase-III Earn-in and Solitario's
membership interest in the Joint Venture shall increase to 80% and DHI US's
membership interest in the Joint Venture shall decrease to 20%. In the event
that Solitario fails to make any payment required to
complete Phase-III Earn-in, Solitario's membership
interest in the Joint Venture shall decrease to 49% and DHI US's membership
interest in the Joint Venture shall increase to 51% and DHI US may assume sole
authority to conduct and control the Mt. Hamilton Project activities of the
Joint Venture. </p>

<p align=center style='text-align:center'>6</p>

<p>&lt;PAGE&gt;</p>

<p style='margin-left:1.0in'>e) <u>Notice of Solitario's
Election to not make any Payment</u>. After Final Exchange Acceptance,
Solitario shall give DHI US at least 60 days' advance
written notice of its election to not make any payment required to complete
Phase-I, Phase-II or Phase-III Earn-in (the &quot;Opt-out Notice&quot;).</p>

<p style='margin-left:1.0in'>f) <u>Sole Funding Obligation by
Solitario and Project Financing</u>. Until such time as
Solitario has given the Opt-out Notice, Solitario
shall fund, through contributions to the Joint Venture and or by paying such
expenditures directly, all Exploration Expenditures required to complete a
Bankable Feasibility Study. Following completion of a Bankable Feasibility
Study, all costs of the Joint Venture shall be funded by Solitario
and DHI US in proportion to their membership interests in the Joint Venture
except as set forth in the next sentence. Upon completion of a Bankable
Feasibility Study, unless Solitario has given the
Opt-out Notice prior to completion of a Bankable Feasibility Study,
Solitario shall be deemed to have completed Phase-I,
Phase-II and Phase-III Earn-in, however any expenditure or payment which would
have been required to complete Phase-I, Phase-II or Phase-III Earn-in shall
continue to be funded solely by Solitario (the
&quot;Continuing Payment Obligations&quot;). Following completion of a Bankable
Feasibility Study, unless Solitario has given the
Opt-out Notice prior to completion of a Bankable Feasibility Study,
Solitario shall, at DHI US's option, without diluting DHI
US's membership interest in the Joint Venture, solely fund, or arrange for
third party project financing to the Joint Venture to fund, all Joint Venture
expenditures until commencement of commercial production. Upon commencement of
commercial production, funding of Joint Venture expenditures shall again be
funded by Solitario and DHI US in proportion to their
membership interests in the Joint Venture. In the event DHI US's share of such
post-Bankable Feasibility Study Joint Venture expenditures are funded by
Solitario, Solitario shall
recover all Joint Venture expenditures made on DHI US's behalf (excluding the
Continuing Payment Obligations), plus interest at a commercially competitive
rate, exclusively from eighty percent (80%) of DHI US's share of distributions
from the Joint Venture. Unless Solitario has given
the Opt-out Notice prior to completion of a Bankable Feasibility Study,
Solitario shall fund any and all bonding obligations to
place the Mt. Hamilton Project into commercial production. Solitario
shall be entitled to receive all of such funds released upon completion of
reclamation and release of the bond. All other reclamation liabilities and
costs shall be funded by Solitario and DHI US in
proportion to their membership interests in the Joint Venture, except that if
Solitario has given the Opt-out Notice prior to completion
of a Bankable Feasibility Study Solitario shall be
solely responsible for funding of all reclamation liabilities and costs
associated with the activities of the Joint Venture to the date that the
Opt-out Notice was given, but not any activities conducted or conditions
existing prior to the date of the Contribution Agreement. </p>

<p align=center style='text-align:center'>7</p>

<p>&lt;PAGE&gt;</p>

<p style='margin-left:1.0in'>g) <u>Dilution</u>. Following completion of a
Bankable Feasibility Study, if Solitario or DHI US
elects not to contribute its proportionate share of any monetary contribution
to the Joint Venture, such party's interest shall be subject to straight-line
dilution, based upon the formula contained in the Joint Venture Agreement. If
either party elects to make, but then fails to make such contribution, the
amount of dilution shall be equal to twice the dilution that would have
occurred had the defaulting party initially elected not to contribute.</p>

<p style='margin-left:1.0in'>h) <u>Standstill.</u> Neither DHI US nor Ely shall
amend or modify any existing agreement or instrument relating to or affecting
in any way the Mt. Hamilton Project without the prior written consent of
Solitario.</p>

<p style='margin-left:1.0in'>i) <u>Payments to
Augusta.</u> Ely shall make all required payments to Augusta and shall cause
DHI US and/or DHI Minerals Ltd. to distribute to Ely, whether in the form of
loan repayments, loans, dividends, or other form of distributions, any and all
funds necessary to enable Ely to make any and all payments to Augusta which are
due before June 1, 2013.</p>

<p style='margin-left:1.0in'>j) <u>Right to Accelerate Augusta Payments</u>. At
Solitario's request Ely shall have the obligation to
negotiate with Augusta to seek a discounted payoff of any and all payments to
Augusta. However, Ely shall not amend or modify any existing agreement or
instrument or enter into any new agreement relating to or affecting in any way
the payments to Augusta without the prior written consent of
Solitario. Any discount from the total amount of payments
to Augusta shall reduce, on a dollar-for-dollar basis, the obligation of
Solitario to subscribe for the Additional Tranches.</p>

<p style='margin-left:1.0in'>k) <u>Right to Accelerate Other Payments</u>.
Solitario shall have the right, but not the obligation to
accelerate any payment required to complete Phase-I, Phase-II or Phase-III
Earn-in and to procure and retain for itself the full benefit of any discount
that it may be able to negotiate with the recipient of any such payment, except
that the full benefit of any royalty reduction shall accrue to the Joint
Venture.</p>

<p align=center style='text-align:center'>8</p>

<p>&lt;PAGE&gt;</p>

<p style='margin-left:1.0in'>l) <u>Tax Partnership</u>.:
Solely for U.S. federal and applicable state income tax
purposes the relationship of DHI US and Solitario
under this Letter of Intent shall constitute a tax partnership within the
meaning of Section 761(a) of the United States Internal Revenue Code of 1986,
as amended (the &quot;Code&quot;), from and after the date that
Solitario first incurs costs with respect to the mineral
properties subject to this Letter of Intent (the &quot;Tax Partnership&quot;),
and the Tax Partnership shall be governed by the provisions of Exhibit B
hereto. For U.S. federal income tax purposes, the transfer by DHI US of the
mineral properties to the Tax Partnership shall be treated as a tax-free
contribution by DHI US under Section 721 of the Code. Following formation of
the Joint Venture, the Joint Venture shall be treated for U.S. federal and
applicable state tax purposes as a continuation of the Tax Partnership.
Solitario shall have a 1% ownership interest in the
property of the tax partnership, which it shall relinquish to DHI US if
Solitario does not make its initial contribution to the
Joint Venture in accordance with the provisions of this Letter of Intent.
Solitario's payments required to complete Phase-I, Phase-II
and Phase-III Earn-in shall, upon completion of each such phase of earn-in, be
treated as part purchases from DHI US (to the extent of payments to be made
directly by Solitario to DHI US) and part
contributions (to the extent of funds contributed into the Joint Venture or
paid directly to third parties for the benefit of the Joint Venture). The terms
of the Tax Partnership following the formation of the Joint Venture shall be
set forth in the Joint Venture Agreement, including Exhibit C thereof as based
generally on Rocky Mountain Mineral Law Foundation Form 5-C; provided, however,
that tax deductions arising from costs expended by the Joint Venture shall be
allocated to the party that funds such costs; Solitario
shall be the tax matters partner of the Joint Venture, and shall be entitled to
choose tax elections for the Joint Venture for any period during which it has
contributed the majority of costs funded by or on behalf of the Joint Venture;
the Joint Venture shall elect to adjust the basis of its property in accordance
with Code Section 754; and no party who transfers an interest in the Joint
Venture shall be required to indemnify the other party or parties for any
termination of the Joint Venture for U.S. federal income tax purposes resulting
from such transfer.</p>

<p style='margin-left:1.0in'>m) <u>Capital Accounts</u>.
 For purposes of the Tax Partnership, upon any relinquishment or
reduction of a party's interest under any provision of this Letter of Intent, a
percentage of the capital account of the party whose interest has been reduced
equivalent to the percentage reduction in the interest of that party shall be
transferred to the other party to the Tax Partnership. Upon any relinquishment,
termination or elimination of a party's interest under any provision of this
Letter of Intent, that party's capital account shall be transferred to the
other party to the Tax Partnership.</p>

<p style='margin-left:.5in'>3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Solitario</u><u>
Shares</u>. With respect to the shares of Solitario
common stock to be received by DHI US as part of the Phase-I, Phase-II and
Phase-III DHI US Payments (the &quot;Solitario
Shares&quot;), DHI US hereby represents, warrants, covenants and acknowledges
as follows.</p>

<p align=center style='text-align:center'><u>9</u></p>

<p><u>&lt;PAGE&gt;</u></p>

<p style='margin-left:1.0in'>a) <u>Investment Intent</u>. It is receiving the
Solitario Shares for its own account for investment
purposes only and not with a view to resale or distribution in any manner that
is in violation of the United States Securities Act of 1933, as amended (the
&quot;US Securities Act&quot;) or any applicable state securities laws (the
&quot;State Securities Laws&quot;). </p>

<p style='margin-left:1.0in'>b) <u>Sophistication</u>. It has, alone or
together with its professional advisors, such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of an investment in the Solitario Shares.</p>

<p style='margin-left:1.0in'>c) <u>Access to Information</u>. It has had access
to and reviewed all publicly available information concerning
Solitario.</p>

<p style='margin-left:1.0in'>d) <u>Restrictions on Resale</u>. It understands
that the Solitario Shares have not been registered
under either the US Securities Act or the State Securities Laws and, therefore,
cannot be resold or otherwise transferred unless they are registered under the
US Securities Act and the applicable State Securities Laws or unless an
exemption from such registration is available, in which event the undersigned
might still be limited as to the amount of the Solitario
Shares that may be sold. It understands that it has no rights to require
registration of the Solitario Shares under the US
Securities Act or the State Securities Laws at any time.</p>

<p style='margin-left:1.0in'>e) <u>Acknowledgment of Restrictive Legend</u>. It
acknowledges that the certificates representing theSolitario
Shares, when delivered, will have appropriate orders restricting transfer
placed against them on the records of the transfer agent for the
Solitario Shares, and will have placed upon them an
appropriate restrictive legend. It agrees not to attempt any transfer of any of
the Solitario Shares without first complying with the
substance of said legend, and that satisfaction of the requirements set forth
in such legend may, if Solitario so requests, depend
in part upon an opinion of counsel reasonably acceptable in form and substance
to Solitario. In addition, such legend shall include
the following: THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE LISTED ON THE
TORONTO STOCK EXCHANGE (&quot;TSX&quot;); HOWEVER, THE SAID SECURITIES CANNOT
BE TRADED THROUGH THE FACILITIES OF TSX SINCE THEY ARE NOT FREELY TRANSFERABLE,
AND CONSEQUENTLY ANY CERTIFICATE REPRESENTING SUCH SECURITIES IS NOT &quot;GOOD
DELIVERY&quot; IN SETTLEMENT OF TRANSACTIONS ON TSX. UNLESS PERMITTED UNDER
CANADIAN SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE
SECURITY IN CANADA BEFORE THE DATE THAT IS [date that is 4 months and one day
after the date of issue]. </p>

<p style='margin-left:.5in'>4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Ely Shares</u>.
With respect to the Ely Shares to be subscribed for pursuant to the Additional
Tranches, Solitario hereby represents, warrants,
covenants and acknowledges as follows.</p>

<p style='margin-left:1.0in'>a) <u>Investment Intent</u>. It is receiving the
Ely Shares for its own account for investment purposes only and not with a view
to resale or distribution in any manner that is in violation of the US
Securities Act or the State Securities Laws. </p>

<p align=center style='text-align:center'>10</p>

<p>&lt;PAGE&gt;</p>

<p style='margin-left:1.0in'>b) <u>Sophistication</u>. It has, alone or
together with its professional advisors, such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of an investment in the Ely Shares.</p>

<p style='margin-left:1.0in'>c) <u>Access to Information</u>. It has had access
to and reviewed all publicly available information concerning Ely.</p>

<p style='margin-left:1.0in'>d) <u>Restrictions on Resale</u>. It understands
that the Ely Shares have not been registered under either the US Securities Act
or the State Securities Laws and, therefore, cannot be resold or otherwise
transferred unless they are registered under the US Securities Act and the
applicable State Securities Laws or unless an exemption from such registration
is available, in which event the undersigned might still be limited as to the
amount of the Ely Shares that may be sold. It understands that it has no rights
to require registration of the Ely Shares under the US Securities Act or the
State Securities Laws at any time.</p>

<p style='margin-left:1.0in'>e) <u>Acknowledgment of Restrictive Legend</u>. It
acknowledges that the certificates representing the Ely Shares, when delivered,
will have appropriate orders restricting transfer placed against them on the
records of the transfer agent for the Ely Shares, and will have placed upon
them an appropriate restrictive legend. It agrees not to attempt any transfer
of any of the Ely Shares without first complying with the substance of said
legend, and that satisfaction of the requirements set forth in such legend may,
if Ely so requests, depend in part upon an opinion of counsel reasonably
acceptable in form and substance to Ely. In addition, such legend shall include
the following: THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE LISTED ON THE
TORONTO STOCK EXCHANGE (&quot;TSX&quot;); HOWEVER, THE SAID SECURITIES CANNOT
BE TRADED THROUGH THE FACILITIES OF TSX SINCE THEY ARE NOT FREELY TRANSFERABLE,
AND CONSEQUENTLY ANY CERTIFICATE REPRESENTING SUCH SECURITIES IS NOT &quot;GOOD
DELIVERY&quot; IN SETTLEMENT OF TRANSACTIONS ON TSX. UNLESS PERMITTED UNDER CANADIAN
SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY
IN CANADA BEFORE THE DATE THAT IS [date that is 4 months and one day after the
date of issue].</p>

<p align=center style='text-align:center'>11</p>

<p>&lt;PAGE&gt;</p>

<p style='margin-left:.5in'>5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Termination.</u>
At any time prior to Final Exchange Acceptance, Solitario
may terminate this Letter of Intent upon written notice to DHI US and this
Letter of Intent shall thereupon be null and void and of no further force or
effect. At any time after Final Exchange Acceptance, but prior to its entering
into the Contribution Agreement, Solitario may
terminate this Letter of Intent upon written notice to DHI US and this Letter
of Intent shall thereupon be null and void and of no further force or effect,
except that Solitario shall still be obligated to
make the Initial Centennial Payment and to fund the Phase-I Exploration
Expenditures provided that DHI US or Ely are not in material breach of any
provision of this Letter of Intent or any representation or warranty made by DHI
US or Ely in this Letter of Intent. Any subscription agreement entered into
prior to termination of this Letter of Intent shall remain in full force and
effect. The subscription agreement for the Units shall provide that the
subscription for the Second Tranche shall terminate and be null and void and of
no further effect in the event of and upon Solitario's
or Ely's termination of this Letter of Intent. In the event that
Solitario gives the Opt-out Notice, Solitario's
obligation to enter into subscription agreements for any of the Additional
Tranches occurring after the date of the Opt-out Notice shall immediately
terminate and be null and void and of no further effect.</p>

<p style='margin-left:.5in'>Ely may, upon written notice to Solitario,
at any time prior to receipt of Shareholder Approval, terminate this Letter of
Intent in order to pursue an alternative acquisition proposal (including,
without limitation, a merger, amalgamation,&nbsp;plan of arrangement,
reorganization, takeover, sale of all or substantially all of its assets, alternative
joint venture transaction concerning its material assets, or other like
transaction involving Ely or its subsidiaries) which&nbsp;Ely's board of
directors, acting in good faith and&nbsp;upon the advice of its professional
advisors, determines to be superior in value to Ely and its shareholders than
the transactions contemplated by this Letter of Intent; provided that within
one business day of so notifying Solitario and
terminating this Letter of Intent, it shall pay or cause to be paid to
Solitario a termination fee of $300,000 (the &quot;<b>Termination
Fee</b>&quot;) in immediately available funds to an account designated by
Solitario. Ely hereby acknowledges that the Termination Fee
is a payment of liquidated damages which are a genuine pre-estimate of the
damages which Solitario will suffer or incur as a
result of the termination of this Letter Intent in the manner contemplated
hereby and the resultant non-completion of the Joint Venture and is not a
penalty. Ely hereby irrevocably waives any right it may have to raise as a
defence that any such liquidated damages are excessive or
punitive. Upon such termination, Solitario shall be
relieved of any further obligations arising under this Letter of Intent or in
the transactions contemplated hereby. </p>

<p style='margin-left:.5in'>6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Governing Law.</u>
The Agreement will be governed by the laws of the State of Colorado, USA
without regard to conflicts of laws principles that would require application
of any other law.</p>

<p align=center style='text-align:center'>12</p>

<p>&lt;PAGE&gt;</p>

<p style='margin-left:.5in'>7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Dispute
Resolution.</u> Disputes of the parties shall be resolved by binding arbitration
in Denver, Colorado in accordance with, in the case of disputes involving Ely,
the International Rules of the American Arbitration Association (the
&quot;International Rules&quot;), and in the case of disputes not involving
Ely, the Commercial Rules of the International Arbitration Association (the
&quot;Commercial Rules&quot;). For a period of at least 60 days prior to
submission of a matter to arbitration, an executive officer of each of the
parties to the dispute will attempt to resolve the dispute, failing which any party
may refer the matter to arbitration by written notice to the other party or
parties. For disputes involving amounts of US$2 million dollars or less, the
parties shall attempt, by mutual agreement, to nominate a sole arbitrator
within 30 days from the date of the initiating party's written notice to the
other party or parties. If the parties cannot agree upon a sole arbitrator
within such 30 day period, or in the case of disputes involving amounts of more
than US$2 million dollars, the arbitration shall be carried out by a panel of
three arbitrators with one arbitrator being selected by Solitario,
one arbitrator being selected by Ely and/or DHI US and the third arbitrator
being selected by mutual agreement of such two arbitrators. If such two
arbitrators cannot agree within 30 days upon the appointment of the third
arbitrator, the third arbitrator shall be appointed by the AAA in accordance
with the Rules. Moreover, if any party shall fail to appoint an arbitrator
within the specified time period, such arbitrator and the third arbitrator
shall be appointed by the AAA in accordance with the Rules. Notwithstanding the
foregoing, the arbitrator or arbitrators, as the case may be, shall be English
speaking lawyers with at least ten year's experience with international mining
joint venture transactions, trained in the common law tradition. Judgment upon
the award rendered by the arbitrator(s) may be entered in any court having
jurisdiction.</p>

<p style='margin-left:.5in'>8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Representations
and Warranties of Ely</u>. With respect to the Mt. Hamilton Project, Ely hereby
represents and warrants as follows.</p>

<p style='margin-left:1.0in'>a) <u>No undisclosed material facts</u>. It is not
aware of any material facts or circumstances that have not been disclosed to
Solitario, that
should be disclosed in order to prevent the public disclosure and descriptions
by Ely of the Mt. Hamilton Project from being materially misleading.</p>

<p style='margin-left:1.0in'>b) <u>No undisclosed agreements, encumbrances,
conditions, claims or liabilities</u>. It is not aware of any agreements,
encumbrances, conditions, or asserted or unasserted claims or liabilities
relating to the Mt. Hamilton Project that have not been disclosed to
Solitario.</p>

<p align=center style='text-align:center'>13</p>

<p>&lt;PAGE&gt;</p>

<p style='margin-left:.5in'>9.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Press Releases. </u>The
parties understand that public disclosure may be required pursuant to
applicable securities laws or regulations of an applicable stock exchange. To
the extent that any disclosure hereof is determined to be necessary, such
disclosure shall only be made with prior notice to, and consultation with, in
the case of Solitario, Ely, and in the case of Ely,
Solitario. Further, Solitario and
Ely agree to co-operate with one another regarding the timing and contents of
any public disclosure regarding the entering into of any of the Agreements.
Each of Solitario and Ely agree that it will provide
the other party with a reasonable period for review and pre-approval of any
proposed disclosure by it. This Letter of Intent is entered into
and effective as of the date first written above. This
Letter of Intent contains the entire understanding of the parties relating to
the specific subject matter hereof, and supersedes all prior agreements and
understandings between the parties. The parties have the necessary power and
authority to enter into this Letter of Intent which shall be binding upon and
inure to the benefit of the respective successors and assigns of the parties
hereto. Any amendments hereto shall be in writing and signed by the parties
hereto. </p>

<p><b>Solitario</b><b> Exploration &amp; Royalty
Corp.</b></p>

<p>By: <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;/s/ Christopher E.
Herald&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br>
</u>Name: Christopher E. Herald<br>
Title: President and Chief Executive Officer</p>

<p><b>Ely Gold &amp; Minerals Inc.</b></p>

<p>By:<u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;/s/ Trey Wasser&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br>
</u>Name: Trey Wasser<br>
Title: Executive Vice President and Director</p>

<p><b>DHI Minerals (U.S.) Ltd.</b><b></b></p>

<p>By:<u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;/s/ John Brownlie&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br>
</u>Name: John Brownlie<br>
Title: President and Director</p>

<p align=center style='text-align:center'>14</p>



<p align=center style='text-align:center'><b>Exhibit A</b></p>

<p align=center style='text-align:center'>BANKABLE FEASIBILITY STUDY</p>

<p><b>A.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&quot;Bankable
Feasibility Study&quot; means a detailed report that recommends the development
of a mine and includes at least the following information:</b></p>

<p>1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A description
of the property to be covered by the proposed mine;</p>

<p>2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The estimated
recoverable reserves of minerals and the estimated composition and content
thereof;</p>

<p>3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The proposed
procedure for development and mining production;</p>

<p>4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Results of ore
amenability tests (if any);</p>

<p>5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The nature and
extent of the mine facilities proposed to be acquired which may include mill
facilities, if the size, extent and location of the ore body makes such mill
facilities feasible, in which event the report shall also include a preliminary
design for such mill;</p>

<p>6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The total
costs, including capital budget, which are reasonably required to purchase,
construct and install all structures, machinery and equipment required for the
proposed mine, including a schedule of timing of such requirements;</p>

<p>7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Assessment of
environmental studies, permitting requirements, and associated costs required
to initiate construction;</p>

<p>8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The period in
which it is proposed that the property be brought into commercial production;
and</p>

<p>9.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Such other
data and information as are reasonably necessary to substantiate the existence
of a mineral deposit of sufficient size and grade to justify development of a
mine, taking into account all relevant business, tax and other economic
considerations.</p>

<p>Which Bankable Feasibility Study is in such form as is necessary to
substantially meet the standards of North American financial institutions for
the purpose of determining the advisability of providing project financing on a
commercial competitive basis taking into consideration all relevant criteria
deemed to be both normal and prudent for the mining industry at that time.</p>

<p align=center style='text-align:center'>15</p>

<p>&lt;PAGE&gt;</p>

<p align=center style='text-align:center'><b>Exhibit B</b></p>

<p align=center style='text-align:center'>TAX MATTERS<br>
ARTICLE I<br>
<u>EFFECT OF THIS EXHIBIT</u></p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Exhibit
shall govern the relationship of DHI Minerals (U.S.) Ltd., a Nevada corporation
(&quot;DHI US&quot;) and Solitario Exploration &amp;
Royalty Corp., a Colorado corporation (&quot;Solitario&quot;)
(collectively, the &quot;Participants&quot;) with respect to tax matters and
the other matters addressed herein. Except as otherwise indicated, capitalized
terms used in this Exhibit shall have the meanings given to them in the binding
Letter of Intent to which the Exhibit is attached (the &quot;Agreement&quot;).
In the event of a conflict between this Exhibit and the other provisions of the
Agreement, the terms of this Exhibit shall control.</p>

<p align=center style='text-align:center'>ARTICLE II<br>
<u>TAX MATTERS PARTNER</u></p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Designation
of Tax Matters Partner</u>. Solitario is hereby
designated the tax matters partner (hereinafter &quot;<b>TMP</b>&quot;) as
defined in Section 6231(a)(7) of the Internal Revenue Code of 1986 (&quot;<b>the
Code</b>&quot;) and shall be responsible for, make elections for, and prepare
and file any federal and state tax returns or other required tax forms
following approval of the Management Committee. In the event of any change in
TMP, the Participant serving as TMP at the end of a taxable year shall continue
as TMP with respect to all matters concerning such year unless the TMP for that
year is required to be changed pursuant to applicable Treasury Regulations. The
TMP and the other Participant shall use reasonable best efforts to comply with
the responsibilities outlined in this Article II and in Sections 6221 through
6233 of the Code (including any Treasury regulations promulgated
thereunder) and in doing so shall incur no liability to any
other party.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Notice</u>.
Each Participant shall furnish the TMP with such information (including
information specified in Section 6230(e) of the Code) as it may reasonably
request to permit it to provide the Internal Revenue Service with sufficient
information to allow proper notice to the Participants in accordance with
Section 6223 of the Code. The TMP shall keep each Participant informed of all
administrative and judicial proceedings for the adjustment at the partnership
level of partnership items in accordance with Section 6223(g) of the Code.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Inconsistent
Treatment of Partnership Item</u>. If an administrative proceeding contemplated
under Section 6223 of the Code has begun, and the TMP so requests, then each
Participant shall notify the TMP of its treatment of any partnership item on
its federal income tax return that is inconsistent with the treatment of that
item on the partnership return.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.4&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Extensions
of Limitation Periods</u>. The TMP shall not enter into any extension of the
period of limitations as provided under Section 6229 of the Code without first
giving reasonable advance notice to the other Participant of such intended
action.</p>

<p align=center style='text-align:center'>16</p>

<p>&lt;PAGE&gt;</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.5&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Requests
for Administrative Adjustments</u>. Neither Participant shall file, pursuant to
Section 6227 of the Code, a request for an administrative adjustment of
partnership items for any partnership taxable year without first notifying the
other Participant. If the other Participant agrees with the requested
adjustment, the TMP shall file the request for administrative adjustment on
behalf of the partnership. If consent is not obtained within thirty (30) days
after notice from the proposing Participant, or within the period required to
timely file the request for administrative adjustment, if shorter, either
Participant, including the TMP, may file that request for administrative
adjustment on its own behalf.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.6&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Judicial
Proceedings</u>. Either Participant intending to file a petition under Section
6226, 6228 or other sections of the Code with respect to any partnership item,
or other tax matters involving the tax partnership, shall notify the other
Participant of such intention and the nature of the contemplated proceeding. If
the TMP is the Participant intending to file such petition, then such notice
shall be given within a reasonable time to allow the other Participant to
participate in the choosing of the forum in which such petition will be filed.
If a deadlock results, then the TMP shall choose the forum. If either
Participant intends to seek review of any court decision rendered as a result
of a proceeding instituted under the preceding part of this Paragraph, then
such Participant shall notify the other Participant of such intended action.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.7&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Settlements</u>.
The TMP shall not bind the other Participant to a settlement agreement without
first obtaining the written consent of any such Participant. Either Participant
who enters into a settlement agreement for its own account with respect to any
partnership items, as defined by Section 6231(a)(3) of the Code, shall notify
the other Participant of such settlement agreement and its terms within ninety
(90) days from the date of settlement.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.8&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Fees
and Expenses</u>. The TMP shall not engage legal counsel, certified public
accountants, or others without the prior consent of the DHI US provided that
the TMP may engage legal counsel, certified public accountants, or others at
its sole cost and expense. </p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.9&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Survival</u>.
The provisions of the foregoing paragraphs shall survive the termination of the
tax partnership or the termination of either Participant's interest in the tax
partnership and shall remain binding on the Participants for a period of time
necessary to resolve with the Internal Revenue Service or the Department of the
Treasury any and all matters regarding the federal income taxation of the tax
partnership for the applicable tax year(s).</p>

<p align=center style='text-align:center'>17</p>

<p>&lt;PAGE&gt;</p>

<p align=center style='text-align:center'>ARTICLE III<br>
<u>TAX ELECTIONS AND ALLOCATIONS</u></p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Tax
Partnership Election</u>. It is understood and agreed that the Participants
intend to create a partnership for United States federal and state income tax
purposes with respect to the mineral properties subject to the Agreement from
and after the date that Solitario incurs expenditures
with respect to such properties, and, unless otherwise agreed to hereafter by
both Participants, neither Participant shall make an election to be, or have
the arrangement evidenced hereby, excluded from the application of any
provisions of Subchapter K of the Code, or any equivalent state income tax
provision. It is understood and agreed that the Participants intend to create a
partnership for federal and state income tax purposes only (a &quot;<b>tax
partnership</b>&quot;). The TMP shall file with the appropriate office of the
Internal Revenue Service a partnership income tax return covering the
operations subject to the Agreement (the &quot;Operations&quot;). The
Participants recognize that this Agreement may be subject to state income tax
statutes. The TMP shall file with the appropriate offices of the state agencies
any required partnership state income tax returns. Each Participant agrees to
furnish to the TMP any information it may have relating to the Operations as
shall be required for proper preparation of such returns. The TMP shall furnish
to the other Participant for its review a copy of each proposed income tax
return at least two weeks prior to the date the return is filed.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Tax
Elections</u>. The tax partnership shall make the following elections for purposes
of all partnership income tax returns:</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
use the accrual method of accounting.<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to the provisions at Section 706(b)(1) of the Code, to
use as its<br>
taxable year the calendar year. In this connection, Solitario
represents that its taxable year is the <br>
calendar year and DHI US represents that its taxable year is the calendar year.<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
deduct currently all development expenses to the extent possible under <br>
Section 616 of the Code. or to defer such expenses
under Section 616(b) of the Code.<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
the election of the TMP, which may vary on an asset-by-asset basis, to <br>
compute the allowance for depreciation in respect of depreciable assets using the
150% declining <br>
balance method and the shortest life permissible or the units of production
method of <br>
depreciation, or such other method as determined by the TMP.<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
treat advance royalties as deductions from gross income for the year paid <br>
or accrued to the extent permitted by law.<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
adjust the basis of tax partnership property under Section 754 of the Code <br>
at the request of either Participant;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
To amortize over the shortest permissible period all
organizational <br>
expenditures and business start-up expenses under Sections 195 and 709 of the
Code;</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any other
election required or permitted to be made by the tax partnership under the Code
or any state tax law shall be made as determined by the TMP.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Participant
shall elect under Section 617(a) of the Code to deduct currently all
exploration expenses. Each Participant reserves the right to capitalize its
share of development and/or exploration expenses of the tax partnership in
accordance with Section 59(e) of the Code, provided that a Participant's
election to capitalize all or any portion of such expenses shall not affect the
Participant's Capital Account.</p>

<p align=center style='text-align:center'>18</p>

<p>&lt;PAGE&gt;</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Allocations
to Participants</u>. Allocations for Capital Account purposes shall be in
accordance with the following:</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[
intentionally omitted].<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exploration
expenses and development cost deductions shall be allocated <br>
among the Participants in accordance with their respective contributions to
such expenses and<br>
costs.<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation
and amortization deductions with respect to a depreciable asset <br>
shall be allocated among the Participants in accordance with their respective
contributions to the<br>
adjusted basis of the asset which gives rise to the depreciation, amortization
or loss deduction.<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Production
and operating cost deductions shall be allocated among the <br>
Participants in accordance with their respective contributions to such costs.<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deductions
for depletion shall be allocated in the following order and priority:<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(
i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Excess percentage depletion
deductions shall be allocated to the Members in accordance with the allocation
of gross income from the mineral property from which such deductions are
derived. The term &quot;excess percentage depletion&quot; shall mean the
excess, if any, of deductions for percentage depletion as determined for
purposes of maintaining the Capital Accounts over the book value at which the
depletable property is recorded in the Capital Accounts<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
the extent of the amount of depletion deductions that would have been
determined for Capital Account purposes if only cost depletion were allowable
for federal income tax purposes from the inception of the tax partnership, any
remaining depletion deductions shall be allocated to the Participants in
accordance with their respective contributions to the adjusted basis of the
depletable property; <br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
remaining depletion deductions shall be allocated to the Participants so that,
to the extent possible, the Participants receive the same total amounts of
percentage depletion as they would have received if percentage depletion were
allocated to the Participants in proportion to their respective shares of the
gross income used as the basis for calculating the federal income tax deduction
for percentage depletion. Subject to Subparagraph 3.3(h) below, gross income on
the sale of production shall be allocated in accordance with the Participants'
rights to share in the proceeds of such sale.<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
as provided in Subparagraph 3.3(h) below, gain or loss on the sale of a <br>
depreciable or depletable asset shall be allocated so
that, to the extent possible, the net amount <br>
reflected in the Participants' Capital Account (as defined in
Subparagraph&nbsp;4.1 below) with <br>
respect to such property (taking into account the cost of such property,
depreciation, <br>
amortization, depletion or other cost recovery deductions and gain or loss)
most closely reflects <br>
the Participants' ownership interests.<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gains
and losses on the sale of all or substantially all the assets of the tax <br>
partnership shall be allocated so that, to the extent possible, the
Participants' resulting Capital <br>
Account balances are in the same ratio as their ownership interests at the time
of such sale.</p>

<p align=center style='text-align:center'>19</p>

<p>&lt;PAGE&gt;</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Participants acknowledge that expenses and deductions allocable under <br>
the preceding provisions of this Paragraph may be required to be capitalized
into production <br>
under Section 263A of the Code. With respect to such capitalized expenses or
deductions, the <br>
allocation of gross income on the sale of production shall be adjusted, in any
reasonable manner <br>
consistently applied by the TMP, so that the same net amount (subject possibly
to timing <br>
differences) is reflected in the Capital Accounts as if such expenses or
deductions were instead <br>
deductible and allocated pursuant to the preceding provisions of this
Paragraph.<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(
i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All deductions and losses
that are not otherwise allocated in this Paragraph shall be allocated among the
Participants in accordance with their respective contributions to the <br>
costs producing each such deduction or to the adjusted basis of the asset
producing each such <br>
loss.<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
recapture of exploration expenses under Section 617(b)(1)(A) of the <br>
Code, and any disallowance of depletion under Section 617(b)(1)(B) of the Code,
shall be borne<br>
by the Participants in the same manner as the related exploration expenses were
allocated to, or <br>
claimed by, them.<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
other items of income and gain shall be allocated to the Participants in <br>
accordance with their ownership interests.<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
a reduced ownership interest is restored, then the TMP shall
endeavour to <br>
allocate items of income, gain, loss, and deduction (in the same year as the
restoration of such <br>
ownership interest or, if necessary, in subsequent years) so as to cause the
Capital Account<br>
balances of the Participants to be the same as they would have been if the
restored ownership <br>
interest had never been reduced.<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the Participants' ownership interests change during any taxable year of the <br>
tax partnership, then the distributive share of items of income, gain, loss and
deduction of each <br>
Participant shall be determined in any manner (1) permitted by Section 706 of
the Code, and (2)<br>
agreed on by both Participants. If the Participants cannot agree on a method,
then the method <br>
shall be determined by the TMP in consultation with the tax partnership's tax
advisers, with <br>
preference given to the interim closing-of-the-books method except where
application of that<br>
method would result in undue administrative expense in relationship to the
amount of the items <br>
to be allocated.</p>

<p align=center style='text-align:center'>20</p>

<p>&lt;PAGE&gt;</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&quot;Nonrecourse
deductions,&quot; as defined by Treas. Reg. subsection 1.704 2(b
)(1) <br>
shall be allocated between the Participants in proportion to their ownership
interests.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.4&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Regulatory
Allocations</u>. Notwithstanding the provisions of Paragraph 3.3 to the
contrary, the following special allocations shall be given effect for purposes
of maintaining the Participants' Capital Accounts.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
either Participant unexpectedly receives any adjustments, allocations, or
distributions described in Treas. Reg. subsection 1.704-1(b)(2)(ii)(d)(4),
subsection 1.704-1(b)(2)(ii)(d)(5) or subsection 1.704-1(b)(2)(ii)(d)(6), which
result in a deficit Capital Account balance, then items of income and gain
shall be specially allocated to each such Participant in an amount and manner
sufficient to eliminate, to the extent required by the Treasury Regulations,
the Capital Account deficit of such Participant as quickly as possible. For the
purposes of this Paragraph, each Participant's Capital Account balances shall
be increased by the sum of the amount such Participant is obligated to restore
pursuant to any provision of the Agreement, and the amount such Participant is
deemed to be obligated to restore pursuant to the penultimate sentences of
Treas. Reg. subsection 1.704-2(g)(1) and 1.704-2(
i)(5).<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
&quot;minimum gain chargeback&quot; and &quot;partner minimum gain
chargeback&quot; provisions of Treas. Reg. subsection 1.704-2(f) and 1.704-2(
i)(4), respectively, are incorporated herein by reference
and shall be given effect. In accordance with Treas. Reg. subsection 1.704 2(
i)(1), deductions attributable to
a &quot;partner nonrecourse liability&quot; shall be allocated to the
Participant that bears the economic risk of loss for such liability.<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the allocation of deductions to either Participant would cause such Participant
to have a deficit Capital Account balance at the end of any taxable year of the
tax partnership (after all other allocations provided for in this Article III
have been made and after giving effect to the adjustments described in
Subparagraph 3.4(a)), then such deductions shall instead be allocated to the
other Participant.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.5&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Curative
Allocations</u>. The allocations set forth in Paragraph 3.4 (the &quot;<b>Regulatory
Allocations</b>&quot;) are intended to comply with certain requirements of the
Treasury Regulations. It is the intent of the Participants that, to the extent
possible, all Regulatory Allocations shall be offset either with other
Regulatory Allocations or with special allocations of other items of income,
gain, loss or deduction pursuant to this Paragraph. Therefore, notwithstanding
any other provisions of this Article III (other than the Regulatory Allocations),
the TMP shall make such offsetting special allocations of income, gain, loss or
deduction in whatever manner it determines appropriate so that, after such
offsetting allocations are made, each Participant's Capital Account balance is,
to the extent possible, equal to the Capital Account balance such Participant
would have had if the Regulatory Allocations were not part of this Agreement
and all items were allocated pursuant to Paragraph 3.3 without regard to
Paragraph 3.4.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.6&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Tax
Allocations</u>. Except as otherwise provided in this Paragraph, items of
taxable income, deduction, gain and loss shall be allocated in the same manner
as the corresponding item is allocated for book purposes under Paragraphs 3.3,
3.4 and 3.5 of the corresponding item determined for Capital Account purposes.</p>

<p align=center style='text-align:center'>21</p>

<p>&lt;PAGE&gt;</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Recapture
of tax deductions arising out of a disposition of property shall, to the extent
consistent with the allocations for tax purposes of the gain or amount realized
giving rise to such recapture, be allocated to the Participants in the same
proportions as the recaptured deductions were originally allocated or claimed.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
the extent required by Section 704(c) of the Code, income, gain, loss, and
deduction with respect to property contributed to the tax partnership by a
Participant shall be shared among both Participants so as to take account of
the variation between the basis of the property to the tax partnership and its
fair market value at the time of contribution. The Participants intend that
Section 704(c) shall effect no allocations of tax items that are different from
the allocations under Paragraphs 3.3, 3.4 and 3.5 of the corresponding items
for Capital Account purposes. However, to the extent that allocations of tax
items are required pursuant to Section 704(c) of the Code to be made other than
in accordance with the allocations under Paragraphs 3.3, 3.4 and 3.5 of the
corresponding items for Capital Account purposes, Section 704(c) shall be
applied in accordance with the &quot;traditional method without curative
allocations&quot; under Treas. Reg. subsection 1.704-3(b).</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depletion
deductions with respect to contributed property shall be determined without
regard to any portion of the property's basis that is attributable to
precontribution expenditures by DHI US<b> </b>that were
capitalized under Code Sections 616(b), 59(e) and 291(b). Deductions
attributable to precontribution expenditures by DHI
US shall be calculated under such Code Sections as if DHI US continued to own
the depletable property to which such deductions are
attributable, and such deductions shall be reported by the tax partnership and
shall be allocated solely to DHI US.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Participants understand the allocations of tax items set forth in this
Paragraph, and agree to report consistently with such allocations for federal
and state tax purposes.</p>

<p align=center style='text-align:center'>22</p>

<p>&lt;PAGE&gt;</p>

<p align=center style='text-align:center'>ARTICLE IV<br>
<u>CAPITAL ACCOUNTS; LIQUIDATION</u></p>

<ol start=1 type=1>
 <ol start=1 type=1>
  <li class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:
      auto;mso-list:l0 level2 lfo1;tab-stops:list 1.0in'>
      &nbsp;&nbsp;&nbsp;&nbsp;<u>Capital
      Accounts</u>.</li>
 </ol>
</ol>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
separate capital account (the &quot;<b>Capital Account</b>&quot;) shall be
established and maintained by the TMP for each Participant. Such Capital
Account shall be increased by (i) the amount of money
contributed by the Participant to the tax partnership, (ii) the fair market
value of property contributed by the Participant to the tax partnership (net of
liabilities secured by such contributed property that the partnership is
considered to assume or take subject to under Code Section 752) and (iii)
allocations to the Participant under Paragraphs 3.3, 3.4 and 3.5 of tax
partnership income and gain (or items thereof), including income and gain
exempt from tax; and shall be decreased by (iv) the amount of money distributed
to the Participant by the tax partnership, (v) the fair market value of
property distributed to the Participant by the tax partnership (net of
liabilities secured by such distributed property and that the Participant is
considered to assume or take subject to under Code Section 752), (vi) allocations
to the Participant under Paragraphs 3.3, 3.4 and 3.5 of expenditures of the tax
partnership not deductible in computing its taxable income and not properly
chargeable to a Capital Account, and (vii) allocations of tax partnership loss
and deduction (or items thereof), excluding items described in (vi) above and
percentage depletion to the extent it exceeds the adjusted tax basis of the
depletable property to which it is attributable. The
Participants agree that the net fair market value of the property contributed
by DHI US to the tax partnership pursuant to Section 2(l) of the Agreement is
$3,000,000. <br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the Capital Accounts of the Participants are computed with reference to the
book value of any asset which differs from the adjusted tax basis of such
asset, then the Capital Accounts shall be adjusted for depreciation, depletion,
amortization and gain or loss as computed for book purposes with respect to
such asset in accordance with Treasury Regulation Section 1.704 1(b
)(2)(iv)(g).<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
any interest in the tax partnership is transferred in accordance with the terms
of this Agreement, then the transferee shall succeed to the Capital Account of
the transferor to the extent it relates to the transferred interest, except as
provided in Treasury Regulation Section 1.704 1(b)(2)(iv)(1).<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
property, other than money, is distributed to a Participant, then the Capital
Accounts of the Participants shall be adjusted to reflect the manner in which
the unrealized income, gain, loss and deduction inherent in such property (that
has not been reflected in the Capital Accounts previously) would be allocated
among the Participants if there was a taxable disposition of such property for
the fair market value of such property (taking Section 7701(g) of the Code into
account) on the date of distribution. For this purpose the fair market value of
the property shall be determined as set forth in Paragraph 4.2(a) below.</p>

<p align=center style='text-align:center'>23</p>

<p>&lt;PAGE&gt;</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DHI
US may be contributing to the Agreement certain depletable
properties with respect to which DHI US currently has an adjusted tax basis
which may consist in part of depletable expenditures
and in part of expenditures capitalized under Code Sections 616(b), 291(b)
and/or 59(e). For purposes of maintaining the Capital Accounts, the tax
partnership's deductions with respect to contributed property in each year for
depletion, deferred development expenditures under Section 616(b) attributable
to pre-contribution expenditures, amortization under Section 291(b)
attributable to pre-contribution expenditures, and amortization under Section
59(e) attributable to pre-contribution expenditures shall be the amount of the
corresponding item determined for tax purposes pursuant to Subparagraph 3.6(c)
multiplied by the ratio of the book value at which the contributed property is
recorded in the Capital Accounts to the adjusted tax basis of the contributed
property (including basis resulting from capitalization of pre-contribution
development expenditures under Sections 616(b), 291(b), and 59(e)). <br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
foregoing provisions, and the other provisions of the Agreement relating to the
maintenance of Capital Accounts and the allocations of income, gain, loss,
deduction and credit, are intended to comply with Treasury Regulations Section
1.704 1(b), and shall be interpreted and applied in a manner consistent with
such Regulations. If the Management Committee shall determine that it is
prudent to modify the manner in which the Capital Accounts, or any debits or
credits thereto, are computed in order to comply with such Regulations, then
the Management Committee may make such modification, provided that it is not
likely to have a material effect on the amount distributable to either
Participant upon liquidation of the tax partnership pursuant to Paragraph 4.2.<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the Participants so agree, upon the occurrence of an event described in Treas.
Reg. subsection 1.704-1(b)(2)(iv)(5), then the Capital Accounts shall be restated in
accordance with Treas. Reg. subsection 1.704-1(b)(2)(iv)(f) to reflect the manner in
which unrealized income, gain, loss or deduction inherent in the assets of the
tax partnership (that has not been reflected in the Capital Accounts
previously) would be allocated among the Participants if there were a taxable
disposition of such assets for their fair market values, as determined in
accordance with Section 4.2(a). For purposes of Paragraph 3.3, a Participant
shall be treated as contributing the portion of the book value of any property
that is credited to the Participant's Capital Account pursuant to the preceding
sentence. Following a revaluation pursuant to this Subparagraph 4.1(g), the
Participants' shares of depreciation, depletion, amortization and gain or loss,
as computed for tax purposes, with respect to property that has been revalued
pursuant to this Subparagraph 4.1(g) shall be determined in accordance with the
principles of Code Section 704(c) as applied pursuant to the final sentence of
Subparagraph 3.6(b).</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Liquidation</u>.
If the partnership is &quot;liquidated&quot; within the meaning of Treasury
Regulation Section 1.704 1(b)(2)(ii)(g), then, notwithstanding any other
provision of the Agreement to the contrary, the following steps shall be taken
(after taking into account any transfers of Capital Accounts pursuant to
Section 2(m) of the Agreement):</p>

<p align=center style='text-align:center'>24</p>

<p>&lt;PAGE&gt;</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Capital Accounts of the Participants shall be adjusted to reflect any gain or
loss which would be realized by the partnership and allocated to the
Participants pursuant to the provisions of Article III of this Exhibit B if the
assets of the tax partnership had been sold at their fair market value at the
time of liquidation. The fair market value of the assets of the tax partnership
shall be determined by agreement of both Participants; provided, however, that
in the event that the Participants fail to agree on the fair market value of
any asset, its fair market value shall be determined by a nationally recognized
independent engineering firm or other qualified independent party approved by
both Participants.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After
making the foregoing adjustments and/or contributions, all remaining assets of
the tax partnership shall be distributed to the Participants in accordance with
the balances in their Capital Accounts (after taking into account all
appropriate allocations, including Subparagraph 3.3(h)). Unless otherwise
expressly agreed on by both Participants, each Participant shall receive an
undivided interest in each and every asset determined by the ratio of the
amount in each Participant's Capital Account to the total of both of the
Participants' Capital Accounts. Assets of the tax partnership distributed to
the Participants shall be deemed to have a fair market value equal to the value
assigned to them pursuant to Subparagraph 4.2(a) above.<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
distributions to the Participants in respect of their Capital Accounts shall be
made in accordance with the time requirements of Treasury Regulation Sections
1.704 1(b)(2)(ii)(b)(2) and (3).</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Survival
of Tax Partnership</u>. The tax partnership shall survive until it has been
liquidated in accordance with the provisions of Section 4.2, above. The
termination of the Agreement shall not result in the termination of the tax
partnership until it shall have terminated in accordance with the provisions of
this Exhibit or until a Participant has relinquished its entire interest in the
tax partnership; provided that the provision of this Exhibit shall be
superseded by the applicable provisions of the Joint Venture Agreement when the
Participants enter into the Joint Venture Agreement in accordance with the
provisions of the Agreement.</p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Deemed
Terminations</u>. Notwithstanding the provisions of Paragraph 4.2, if the
&quot;liquidation&quot; of the tax partnership results from a deemed
termination under Section 708(b)(1)(B) of the Code, then (i)
Subparagraphs 4.2(a) and (b) shall not apply, (ii) the tax partnership shall be
deemed to have distributed its assets in accordance with the relative Capital
Account balances of the Participants as adjusted pursuant to Subparagraph
4.2(a), (iii) the Participants shall be deemed for tax purposes to have
contributed those assets to a new partnership pursuant to the terms of this
Exhibit, and (iv) the new tax partnership shall continue pursuant to the terms
of this Agreement and this Exhibit.</p>

<p align=center style='text-align:center'>25</p>

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