Nevada Sunrise began acquisitions of Nevada lithium brine exploration properties in September 2015 in the Clayton Valley area and the Lida Valley, located in Esmeralda County, Nevada.
Clayton Valley Water Rights
On January 28, 2016, Nevada Sunrise announced an agreement for an option to purchase water rights in the Clayton Valley. The pre-existing, certificated water right allows for 1,770 acre/feet of water use for mining and milling per year (the “Permit”). Nevada Sunrise believes that the acquisition of water rights is an important step toward development of its Clayton Valley lithium properties should lithium brines be intersected in future drilling programs.
In December 2015, Nevada Sunrise received a written appraisal from an independent appraiser certified in the State of Nevada, which valued the Permit at US$1.42 million. According to the appraisal report, the Clayton Valley basin is currently “over-appropriated”, and stated that any new application for water use in an over-appropriated basin would be carefully reviewed by the Nevada Division of Water Resources (the “NDWR”), and that it is uncertain if any new applications for water rights would be granted.
On April 22, 2016, Nevada Sunrise, through its Nevada subsidiary Intor Resources Corporation (“Intor”), filed an application to transfer the Permit from its current location in the adjacent mountain range to a location due east on the desert floor within the boundaries of the Company’s Aquarius Project. The proposed Place of Use and Point of Diversion lies directly between a road and a powerline, located approximately 5 kilometres (3 miles) from the town of Silver Peak, Nevada and Albemarle’s Silver Peak lithium mine and 8 kilometers (5 miles) from its nearest lithium brine production well. Albemarle is one of the world’s largest producers of lithium chemical products.
On May 16, 2016, Nevada Sunrise announced that Albemarle had filed an official protest with the NDWR against the Company’s application to transfer the Place of Use and Point of Diversion of the Permit.
In June 2016, Albemarle filed a petition of forfeiture to the NDWR against the Permit, citing lack of beneficial use for a period of five years, and made the argument to the NDWR that the Company should not have a hearing with NDWR to assess the validity of the Permit. Albemarle is one of the world’s largest producers of lithium chemical products and currently operates the only producing lithium mine in the United States in the Clayton Valley at Silver Peak, Nevada. Due to its use of the evaporative pond method for lithium extraction from subterranean brines, Albemarle is the largest consumer of groundwater in the Clayton Valley. The Company’s existing Permit, senior to many of Albemarle’s own water permits, is the only remaining appropriation of groundwater in the Clayton Valley that is potentially available for a lithium brine extraction operation using a modern, efficient method that consumes low amounts of water.
On December 1, 2016, Nevada Sunrise learned that the State Engineer’s office of the NDWR had issued a ruling of forfeiture (the “Ruling”) against the Company’s water right in the Clayton Valley of Nevada. The Company was surprised to receive the Ruling without the benefit of a hearing that it had requested with NDWR to restore the Permit, and filed an appeal to the Ruling. Nevada Sunrise intends to vigorously defend the Permit, has filed evidence of water use that the NDWR requires, and awaits the outcome of its appeal.
On April 26, 2018 and May 1, 2018, the Fifth Judicial District Court (the “Court”) held hearings on a petition for judicial review submitted by Intor appealing the NDWR’s declaration of a forfeiture of water rights under the Permit without holding a hearing. The Court heard the arguments presented by Intor, the State, and Albemarle, with the Honorable Steven R. Kosach declaring from the bench his intention to remand the case back to the State Engineer of NDWR to determine if there should be a forfeiture of the Permit for lack of beneficial use of the water rights.
On August 15, 2018, the Court remanded the case to the State Engineer for a hearing. Intor looks forward to presenting the extensive evidence collected by the Company to the NDWR. This evidence reflects continued water use of the Permit and such evidence was not previously considered by the State prior to the forfeiture of the Permit in 2016. The hearing date has yet to be determined.
Other Lithium Projects in Esmeralda County
Nevada Sunrise has adopted an exploration strategy targeting desert basins, or playas, that exhibit similar geological and geophysical characteristics to the Clayton Valley basin where lithium brines are known to accumulate in faulted sub-basins, or “traps”. Nevada Sunrise believes that interpreted gravity lows indicate the presence of deep, sub-basins that could host lithium-bearing brines.
Jackson Wash Lithium Project
Jackson Wash consists of 14 unpatented placer claims totaling approximately 280 acres (113 hectares) and is located in the Lida Valley on the east side of the Montezuma Range approximately 20 miles (30 kilometers) southeast of Silver Peak and 13 miles (21 kilometers) southwest of Goldfield. The Lida Valley is a flat, desert basin with a similar geological setting to the better-known Clayton Valley basin.
Prospecting at Jackson Wash in 2011 discovered widespread deposits of obsidian fragments on the valley floor, possibly derived from Tertiary felsic rhyolite and tuff volcanic rock units present in the Montezuma Range to the north and west of Jackson Wash. Fragments at six locations were sampled and returned lithium values ranging from 97.3 parts per million (“ppm”) lithium to 117.0 ppm lithium (R. M. Allender, Jr., 2016). Weathering of the felsic volcanic rocks containing lithium is believed to be a source of lithium contained in subterranean brines.
The results of a detailed gravity survey and two CSAMT lines surveyed in 2011 by a previous operator were interpreted as a layered sequence of unconsolidated, saturated alluvial sediments filling a deep basin beneath the valley floor. The Jackson Wash basin is believed to be related to north-south basin and range fault systems. Drilling and sampling of the sediments and groundwater in the interpreted basin are the next steps in the exploration process for Jackson Wash. Nevada Sunrise plans to test the Jackson Wash basin with a 3 to 4-hole drill program of boreholes up to 400 metres deep to test specific structural and stratigraphic targets believed prospective for lithium brine deposits.
A drill permit for up to 10 holes over a 2-year period was granted by the BLM in February 2016, and was extended for an additional two years in 2018. In June 2017, a borehole was drilled at Jackson Wash to a depth of 826 metres (2,710 feet) through interbedded sequences of sand, gravel, and clay. Hot fresh water was encountered in the borehole reaching a temperature of approximately 41 degrees C. (106 degrees F.) but no brines were detected.
Nevada Sunrise owns a 100% interest in Jackson Wash following the payment of 500,000 common shares of the Company to the underlying vendor.
A 1.5 mile (2.25 kilometer) area of interest applies to Jackson Wash and the property is subject to a 3.0% GOR. On the 3rdanniversary of the signing of the definitive agreement for Jackson Wash, Nevada Sunrise would have the right to purchase 1.0% of the GOR for US$1,000,000.
Gemini Lithium Project
Gemini is located approximately 6 miles (10 kilometres) east of the town of Lida, Nevada, and consists of 13 placer claims totaling 260 acres (105 hectares). Gemini is adjacent to the Gold Point Solar Energy Zone, a BLM land reserve for solar power generation. Nevada Sunrise acquired Gemini by claimstaking in November and December 2015 with no applicable royalties.
On January 21, 2016, Nevada Sunrise announced that it had entered into a letter agreement to grant a 50% working interest in Gemini to Eureka Resources Inc. (“Eureka”, TSXV: EUK).
Nevada Sunrise made the decision to acquire claims covering the available land after reviewing the results of a recent gravity survey in conjunction with favourable local geology, namely late Miocene felsic volcanic tuffs adjacent to Gemini. These rocks provide the source of lithium for trapped, lithium-rich saline ground-waters (brine) within the sub-basins.
Previous ground gravity surveys in the Lida Valley area were widely-spaced and limited in scope, however in 2012 and 2013 a geological research team led by Dr. John Oldow of the University of Texas, Dallas collected approximately 500 gravity measurements along 7 transects crossing the Lida Valley. The detailed gravity survey results indicate strong gravity lows within two, faulted sub-basins approximately 7 kilometres (4.5 miles) apart, each interpreted to be hundreds of metres deep.
In February and March 2016, Nevada Sunrise received results from two TDEM surveys carried out at Gemini. The moving-loop TDEM surveys over Gemini West and Gemini East detected conductive zones within the sub-basins defined by Dr. Oldow’s gravity surveys. The results gained from the TDEM survey are interpreted to be conductive brines at depth located well below the non-conductive alluvium (sediments) at surface.
A conductive layer 150-250 metres deep appears to cover most of Gemini West and Gemini East, and several isolated strong conductive zones were interpreted at depths from 400 to 600 metres. The conductive layers and zones are indicative of brine solutions in porous aquifers and traps within each sub-basin.
Drilling into the conductive zones within the sub-basins for lithium-bearing brines is recommended as the next step of exploration. There are no known drill holes at Gemini.
In June 2016, Nevada Sunrise submitted a permit application to the BLM for a 10-hole drill program to test for lithium brines at Gemini. A drilling permit, good for two years, was granted by the BLM in July 2016, and was extended for an additional two years in 2018.
Gemini Transaction With Eureka
Eureka has the right to acquire a 50% interest in Gemini by reimbursing Nevada Sunrise for 50% of Gemini’s acquisition costs, and issuing Nevada Sunrise an aggregate of 500,000 common shares. The reimbursable acquisition costs include staking costs, data acquisition and processing, and claims registration fees payable to Esmeralda County and BLM. Eureka will issue to Nevada Sunrise 500,000 of its common shares as a prospect fee, with 300,000 shares to be issued on receipt of acceptance of the transaction by the TSXV and a further 200,000 shares to be issued on the first anniversary of such acceptance. Eureka and Nevada Sunrise will also enter into a joint venture with respect to Gemini, with Nevada Sunrise acting as operator of exploration in exchange for a 10% management fee to be charged to the joint venture.
In May 2016, Eureka and Nevada Sunrise entered into an addendum to the Agreement in which they agreed that Eureka had completed its due diligence review on Gemini and that Nevada Sunrise had confirmed receipt of approximately CAD$97,000 from Eureka representing 50% of the acquisition and evaluation costs on Gemini as provided for in the Agreement. All approvals of the independent directors of each company were obtained, and the letter agreement and its addendum were accepted by the TSXV. In June 2016, Eureka subsequently issued 300,000 common shares to Nevada Sunrise and became the owner of a 50% interest in Gemini. The companies subsequently entered into a definitive joint venture agreement.
John R. Kerr, P. Eng., and Robert M. Allender, Jr., CPG, RG, SME, are the Company’s designated Qualified Persons within the meaning of NI 43-101 and each have reviewed and approved the technical information contained herein.