On January 28, 2016, Nevada Sunrise Gold Corporation (“Nevada Sunrise”) announced that it had executed a letter agreement with an unnamed seller for the option to purchase a 1,770 AF/year water right in Nevada’s Clayton Valley.
Clayton Valley, an over-appropriated basin in Esmeralda County on Nevada’s western border, is seeing a high level of lithium mining. Nevada Sunrise began purchasing lithium properties in September 2015 and is securing the necessary water for a lithium exploration and development.
Upon execution of the letter agreement, Nevada Sunrise paid $50,000 for an exclusive 60-day due diligence period. Execution of a definitive agreement will trigger payment of another $75,000 in cash, plus 200,000 common shares, and 2.25 million common share purchase warrants. A schedule of additional payments of cash and common shares over five years brings the total purchase price to $1.3 million in cash, plus 2 million in common shares, and 2.25 million in common share purchase warrants. An independent appraiser valued the water permit at $1.42 million (or approximately $800/AF).
In addition to the payment terms, the parties agreed that additional key terms will be included in the definitive agreement:
- If Nevada Sunrise sells the water permit to a third party within 10 years of executing the definitive agreement, the seller will receive 50% of the proceeds of the sale, less amounts already paid in cash and common shares.
- If, within the first year from execution of the letter agreement, any regulation or statute constrains Nevada Sunrise from fully utilizing the water permit, the $75,000 in cash and 200,000 in common shares will be refunded to the company.
- Nevada Sunrise has the right to accelerate the timing of cash payments and common share payments.
Nevada Sunrise has six lithium properties in or proximal to the Clayton Valley and three key gold assets in various locations throughout state.
Written by Marta L. Weismann