Nevada Sunrise began acquisitions of Nevada lithium brine exploration properties in September 2015, which include options to earn 100% interests in the Neptune and Clayton Northeast projects in the Clayton Valley area, and the Jackson Wash and Atlantis projects located proximal to the Clayton Valley. The Aquarius project in the Clayton Valley and the Gemini project in the Lida Valley have been acquired by staking.
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, 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, 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 Corporation’s (“Albemarle”, NYSE: ALB) 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 has filed an official protest with the Nevada Division of Water Resources against the Company’s application to transfer the Place of Use and Point of Diversion of the Permit.
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. Nevada Sunrise will respond to Albemarle’s protest in due course and outline the reasons why its application to transfer a certificated water right should not be unfairly prejudiced by Albemarle’s action.
The Neptune property is the Company’s first lithium property acquisition and is located approximately 37 miles (55 kilometres) southwest of Tonopah, Nevada in an active area of lithium exploration and mining. The Silver Peak lithium mine, owned by Albemarle has extracted lithium minerals from brines continuously since 1966, approximately 10 miles (15 kilometres) to the north of Neptune. Neptune consists of a block of 316 unpatented placer claims totaling approximately 6,320 acres (2,557 hectares).
Nevada Sunrise has acquired historical geophysical data that indicates Neptune has the potential to host lithium-bearing brines in subterranean aquifers beneath the Clayton Valley floor.
On January 4, 2016, Nevada Sunrise announced the receipt of a drill permit from the U.S. Bureau of Land Management (the “BLM”) for Neptune. The BLM has approved 10 exploration drill hole locations, and Nevada Sunrise plans to drill 3 vertical holes as an initial phase, each up to 380 to 480 metres deep into the interpreted sub-basin, with follow-up drilling if warranted.
On May 31, 2016, Nevada Sunrise announced Phase 1 exploration results from its drilling program at Neptune.
Two exploration holes were completed by late March 2016. Drill targets were generated from the integration of the results of: (1) a detailed gravity survey by a previous operator that outlined a deep, faulted sub-basin, and (2) a controlled source audio magneto telluric (“CSAMT”) follow-up survey that detected conductive horizons within the sub-basin. In each of the completed holes, permeable sedimentary, lacustrine strata interbedded with volcanic ash and ejecta was logged at various levels throughout the holes. This type of sedimentary strata is interpreted as a requisite host horizon for lithium-bearing brines as seen in the northern Clayton Valley. A total of 45 water samples and 256 sediment cuttings samples were collected and submitted for multi-element analysis.
Preliminary analytical results indicate the water samples collected from the two completed holes contain sub-economic contents of lithium. However, in hole N-2016-1, the composited samples collected from the intersected strata contained lithium-bearing sediments that averaged 156 parts per million (“ppm”) lithium over 215 feet (65.5 metres) from 1285 feet (392.7 metres) to the end of hole at 1,500 feet (457.2 metres), reaching a peak value of 217 ppm lithium from 1365 to 1385 feet. An sharp increase of acidity was noted in several of the last water samples of hole N-2016-1, which Nevada Sunrise interprets as a potentially fertile leaching environment for the creation of lithium-bearing brines.
A third hole up to 2,000 metres deep is planned approximately 1 mile (1.6 kilometres) to the east of hole N-2016-1 in an area interpreted from a 2016 geophysical survey to be a potential trap where denser, lithium-bearing brines could migrate and pool. If results from the third hole warrant, a drill pad and access road have been prepared for a fourth hole location.
Neptune 2016 Initial
The southern Clayton Valley area demonstrates enrichment in lithium in the nearby mountain ranges, desert sediments and in local plants. Nevada Sunrise has carried out ASTER spectral analysis of satellite imagery over Neptune and surrounding areas of the Clayton Valley. Results indicate lithium-bearing clay is derived from bedrock in areas to the north, west and southeast of Neptune. Biogeochemical data collected by the Company in October 2015 has confirmed anomalous lithium concentrations ranging from 11 ppm up to 35 ppm in a specific desert plant common to the Clayton Valley and sampled near the planned Neptune drill holes.
For an option to purchase a 100% interest in Neptune, Nevada Sunrise has agreed to issue to the vendors up to 1,000,000 common shares of the Company, with 200,000 common shares to be issued upon execution of the definitive agreement and TSX Venture Exchange (“TSXV”) acceptance of the definitive agreement (accepted October 2015 – shares issued), and further share issuances on subsequent anniversaries of the effective date of the definitive agreement, as follows:
- 1st Anniversary: 300,000 common shares
- 2nd Anniversary: 500,000 common shares
Neptune is subject to a 3.0% gross overriding royalty (“GOR”). On the 3rd
anniversary of the effective date of the definitive agreement, Nevada
Sunrise would have the right to purchase 1.0% of the GOR for US$1,000,000.
On March 4, 2016, Nevada Sunrise announced a letter agreement with Resolve Ventures Inc. (“Resolve”, TSXV: RSV) of Vancouver, BC, Canada, for Resolve to earn up to a 50% working interest in Neptune. On May 4, 2016, the Company announced the signing of the definitive agreement with Resolve.
Under the terms of the definitive agreement, Resolve can earn an initial 25% interest in Neptune by making cash and share payments to Nevada Sunrise, and funding exploration expenditures, on the following schedule (all funds in Canadian dollars):
• $50,000 cash upon execution of the interim agreement (paid);
• $50,000 cash upon delivery by Nevada Sunrise of a co-addressed National Instrument 43-101 (“NI 43-101”) compliant Technical Report (the “Report”) in a form acceptable to the TSXV (the Report has been delivered and cash paid);
• 200,000 shares of Resolve issued to Nevada Sunrise on the execution of the Definitive Agreement (shares received); and
• $300,000 cash in advance in respect of exploration expenditures to be incurred by Nevada Sunrise according to the recommendations in the Report, payable upon receipt of TSXV acceptance for the definitive agreement (paid).
Nevada Sunrise will act as operator and will charge a 10% operatorship fee on exploration expenditures. All claim maintenance payments due by September 1, 2016 would be split 75-25 between the two parties.
In order to proceed with its second option, Resolve must provide notice to Nevada Sunrise 60 days before the 1st anniversary of TSXV acceptance of the definitive agreement. If Resolve does not elect to proceed with the second option, a standard dilution formula will apply to its 25% interest should additional expenditures be incurred.
Upon an election to proceed to the second option, Resolve can earn an additional 25% interest in Neptune by making additional cash or share payments to Nevada Sunrise, and funding exploration expenditures, as follows:
• A payment to Nevada Sunrise of either $100,000 cash or 300,000 shares of Resolve, at Resolve’s option; and
• Incurring $700,000 in exploration expenditures at Neptune on or before the 2nd anniversary of TSXV acceptance of the definitive agreement, which Resolve may satisfy by paying such amount in cash to Nevada Sunrise on or before the 1st anniversary of TSXV acceptance of the definitive agreement.
After completion of the exploration expenditures for Year 1 and Year 2 totaling $1,000,000 and the payment of cash and shares as listed above, Resolve would earn a 50% working interest in Neptune, and a joint venture would be formed. In the event a joint venture is formed, Nevada Sunrise would act as operator of exploration.
About Neptune and the Clayton Valley
Neptune is located in the southwest corner of the Clayton Valley flanked by the Silver Peak Mountains to the west, the Palmetto Mountains to the south, and the Clayton Ridge and Montezuma Mountains to the east. The Clayton Valley playa is characterized as an immature clastic salar, or salt flat. Other than the 2011 geophysical surveys carried out by a previous operator, historical exploration for lithium brines at Neptune is sparse. A large scale ground gravity survey by the United States Geological Service (“USGS”) in 1980 outlined two gravity lows in the south end of the Clayton Valley – the “South Central Low” underlies land controlled by Pure Energy, and the “Southwest Low” underlies Neptune. (Source: from R. M. Allender, Jr., “Technical Report on the Clayton Deep Lithium Brine Project, Clayton Valley, Esmeralda County, Nevada, USA”, 2011).
Schematic Cross-section of Aquifers in the Clayton Valley (Zampirro, 2004)
In 2013, the USGS released a paper describing the Clayton Valley’s potential to host lithium deposits based on the hypothesis that lithium is liberated by weathering of host rocks or derived from hydrothermal fluids from a variety of rock sources within a closed basin. The floor of Clayton Valley has an area of about 100 square kilometers and a catchment of about 1,400 square kilometres, and is the topographically lowest of at least five adjacent basins that are hydrologically linked by groundwater flow (Zampirro, 2004). It is the combined area of all five linked catchments that is significant, making the effective area of the Clayton Valley lithium-brine system much larger than the footprint of the Clayton Valley proper (Source: from USGS Open File 13-1006, 2013).
Aquarius consists of 83 unpatented placer claims totaling 1,660 acres (672 hectares) located in the Clayton Valley, approximately 3 miles (5 kilometres) southwest of the Silver Peak Mine. Nevada Sunrise owns a 100% interest in the property with no applicable royalties.
Aquarius was staked in early 2016 following a review of the results of proprietary gravity surveys carried out by a geological team led by Dr. John Oldow of the University of Texas, Dallas, which outlined a strong gravity low indicative of a deep, faulted sub-basin. A follow-up time domain electromagnetic (“TDEM”) survey carried out by Nevada Sunrise in March 2016 detected conductive horizons at depths ranging between 250 and 450 metres.
Nevada Sunrise has submitted a permit application to the BLM for a drill program to test for lithium brines at Aquarius.
Clayton Northeast Project
The Clayton Northeast property (“Clayton NE”) comprises 1,000 acres (405 hectares) and is located in the Clayton Valley contiguous to the eastern boundary of the Silver Peak Mine. Several lithium brine production wells are situated within 100 metres west of the Clayton NE claim boundary.
It is reported in the United States Geological Survey (“USGS”) Open-File Report 82-415 (1982) that a historical drill-hole (CV-5) is located on the property. CV-5 was drilled to a depth of 479 feet and encountered lithium values in ground water ranging from 24 parts per million (“ppm”) to 110 ppm, averaging 69.3 ppm for a group of 11 samples, and averaging 65.75 ppm for another group of 12 samples, analyzed both in the laboratory and in the field. The hole was part of a 1977 regional drilling program carried out by the USGS. Nevada Sunrise believes that drilling deeper holes at Clayton NE could intersect additional aquifers potentially hosting brines of similar or better contents of lithium than were encountered in the relatively shallow historical hole.
For an option to earn up to a 100% interest in Clayton NE, Nevada Sunrise has agreed to pay a total of 500,000 common shares of Nevada Sunrise to the vendors upon signing a definitive agreement for the property, and on subsequent anniversaries of the definitive agreement:
- Upon signing: 100,000 common shares
- 1st Anniversary: 150,000 common shares
- 2nd Anniversary: 250,000 common shares
A 1.5 mile (2.25 kilometer) area of interest applies to Clayton NE and the property is subject to a 3.0% gross overriding royalty (“GOR”). On the 3rd anniversary of the signing of the definitive agreement for Clayton NE, Nevada Sunrise would have the right to purchase 1.0% of the GOR for US$1,000,000.
In June 2016, Nevada Sunrise submitted a permit application to the BLM for a 6-hole drill program to test for lithium brines at Clayton NE. A drilling permit, good for two years, was granted by the BLM in July 2016.
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 Project
Jackson Wash consists of 166 unpatented placer claims totaling approximately 3,300 acres (1,335 hectares) and is located 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.
Historical exploration 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., 2011). 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 is planning the first test of the Jackson Wash basin with a 3 to 4-hole drill program of holes 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.
For an option to earn up to a 100% interest in Jackson Wash, Nevada Sunrise has agreed to pay a total of 500,000 common shares of Nevada Sunrise to the vendors upon signing a definitive agreement for the property, and on subsequent anniversaries of the definitive agreement:
- Upon signing: 100,000 common shares
- 1st Anniversary: 150,000 common shares
- 2nd Anniversary: 250,000 common shares
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.
On February 18, 2016, Nevada Sunrise announced the signing of a definitive agreement for an option to purchase a 100% interest in the Atlantis lithium property (“Atlantis”) located in the Fish Lake Valley in Esmeralda County, Nevada. Atlantis is comprised of unpatented placer association claims totaling 2,900 acres (1,174 hectares) located approximately 25 miles (38 kilometres) northwest of the Silver Peak lithium brine mine.
For an option to purchase a 100% interest in Atlantis, Nevada Sunrise has agreed to pay a total of 500,000 common shares of the Company to the vendor upon signing the definitive agreement for Atlantis, and on subsequent anniversaries of the definitive agreement, as follows:
• On signing the definitive agreement: 100,000 common shares (paid)
• 1st Anniversary: 150,000 common shares
• 2nd Anniversary: 250,000 common shares
A 1.5 mile (2.25 kilometer) area of interest applies to the Property. Atlantis is subject to a 3.0% GOR. On the 3rd anniversary of the signing of the definitive agreement for Atlantis, Nevada Sunrise would have the right to purchase 1.0% of the GOR for US$1.0 million.
On March 16, 2016, Nevada Sunrise announced an agreement with 1065604 BC Ltd., a private British Columbia company (“1065604”), for an option to earn an undivided 80% interest in Atlantis, by making cash and share payments to the Company and incurring exploration expenditures as follows:
• US$48,000 cash on the closing date of the transaction (paid);
• CDN$100,000 cash on or before the date which is the later of 30 days from the closing date and the date on which the 1065604 receives satisfactory evidence of the recording of claims newly-staked by Nevada Sunrise (paid);
• Incurring exploration expenditures of not less than US$1,000,000, consisting of US$100,000 on or before the 1st anniversary of the closing date, an additional US$250,000 on or before the 2 year anniversary of the closing date, and an additional US$650,000 on or before the 3rd anniversary of the closing. Any shortfalls in exploration expenditures in any year may be paid to Nevada Sunrise in cash to keep the option in good standing. Any excess amounts of exploration expenditures incurred in a year shall be applied to future years;
• Completion of a “going public” transaction resulting in a listing of 1065604 on a recognized Canadian stock exchange (the “Resulting Issuer”);
• Issuance of 1,250,000 common shares of the Resulting Issuer, with 250,000 common shares issuable on or before the date that is 60 days following the completion of a “going public” transaction, 500,000 common shares issuable on or before the 2nd anniversary of a the closing date for the transaction, and 500,000 common shares issuable on or before the 3rd anniversary of the closing date of the transaction. It is a condition of the option agreement that the common shares of the Resulting Issuer be subject to no more than a four month hold period in Canada from their date of issue.
On May 9, 2016, American Lithium Corp. (TSXV: LI) announced the acquisition of 1065604, and on May 17, 2016 announced completion of the acquisition, thereby meeting the obligation for 1065604 to achieve a “going public” transaction. American Lithium Corp. subsequently issued 250,000 of its common shares due to the Company according to the terms of the option agreement with 1065604 and assumes the obligation for the remaining share payments due to Nevada Sunrise. American Lithium Corp. will operate exploration at Atlantis.
Nevada Sunrise made the decision to acquire Atlantis after a review of geological mapping that shows the presence of lithium-bearing rocks in the ranges draining into Atlantis, anomalous to economic contents of lithium reported in surface and historical drill hole brines in the Fish Lake Valley within 3 miles of the Property, and historical ground gravity data that shows a distinct gravity low in the heart of the Atlantis claims. Dr. John Oldow’s detailed gravity survey work in Esmeralda County has better defined the historical gravity low at the Property as a deep, sub-basin, which led Nevada Sunrise to staking additional claims at Atlantis in January 2016.
Electromagnetic geophysical surveys at Atlantis considered to be the next step of exploration in order to determine if conductive brines are present at depth, followed by exploratory drilling of interpreted geophysical targets.
As part of a regional lithium exploration program, the USGS reported in Open-File Report 81-962 (1981) that historical drill hole FL-11a is located outside the eastern boundary of Atlantis, approximately 3 miles (4.5 kilometres) east of the centre of the interpreted sub-basin. Hole FL-11a was drilled to a depth of 450 feet (147 metres) and encountered lithium values in sediments ranging from 10 ppm to 115 ppm and averaging 61.7 ppm for 67 samples analyzed. Lithium in sampled ground water ranged from trace at the end of the hole to 21 ppm at a depth of 55 feet (18 metres). Nevada Sunrise believes that drilling deeper holes at Atlantis within the area of the interpreted sub-basin could intersect aquifers potentially hosting trapped brines with higher contents of lithium than were encountered in the relatively shallow USGS hole drilled to the east of the gravity low anomaly. Also reported in USGS Open File Report 77-54 (1977) were the collection of 10 surface brine samples with lithium contents ranging 37 – 350 mg/l (ppm), and averaging 159 mg/l (ppm) to the north of the sub-basin.
Gemini is located approximately 6 miles (10 kilometres) east of the town of Lida, Nevada, and consists of 247 placer claims totaling 4,940 acres (2,000 hectares). Gemini flanks the Gold Point Solar Energy Zone, a BLM land reserve for solar power generation. The Lida Valley is a flat, desert basin with a similar geological setting to the better-known Clayton Valley basin.
On January 21, 2016, Nevada Sunrise announced that it had entered into a letter agreement to grant a 50% working interest on the Gemini Lithium Project (“Gemini”) to Eureka Resources Inc. (“Eureka”, TSXV: EUK). Nevada Sunrise acquired Gemini by claimstaking in November and December 2015 with no applicable royalties.
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.
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. The companies also agreed that a definitive joint venture agreement would be entered into on or before September 30, 2016, or such other date as may be mutually agreed to by the companies.
All approvals of the independent directors of each company have been obtained, and the letter agreement and its addendum has been 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.
John R. Kerr, P. Eng., is the Company’s designated Qualified Person within the meaning of NI 43-101 and has reviewed and approved the technical information contained herein.