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Hi Mauri,
Yeah it looks like it's going to need the leather replaced.

I haven't replaced leather. I have refurbished strops, including some minor sanding, but never one this bad.

Maybe somone...

I can't tell much from the pic.

If the leather is not too dried and cracking, you can probably clean it up with a tallow soap (I use Williams for restoring strops).

Once you have it cleaned up...