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.
Transaction for Clayton Valley Water Right
On December 8, 2021, Nevada Sunrise announced the completion of the sale of its water rights in Clayton Valley, Nevada (the “Transaction”) through its wholly-owned Nevada subsidiary company Intor Resources Corporation to Cypress Development Corp. of Vancouver, BC, Canada (TSX-V: CYP) (OTCQB: CYDVF) (Frankfurt: C1Z1) (“Cypress”).
The Transaction represents a major milestone for Cypress’ Clayton Valley Lithium Project, near Silver Peak, Nevada and provides an opportunity for Nevada Sunrise to share in future success gained by Cypress’ efforts to develop a new lithium mine in Esmeralda County. The total purchase price of US$3.0 million included an initial cash deposit of US$150,000, and a final payment of US$2.85 million (the “Closing Payment”). The Closing Payment comprised US$2.0 million in cash and the issuance of Cypress’ common shares to the value of US$850,000.
State of Nevada water Permit 44411 allows for the appropriation of public waters in the amount of 1,770 acre-feet of groundwater per year for mining, milling and domestic applications. This amount represents the largest single volume of permitted water available in the Clayton Valley, which is a fully appropriated hydrogeographic basin.
Net proceeds received by the Company from the Transaction were used to retire legal liabilities totaling approximately US$500,000 incurred during the water rights litigation from 2016 to 2019 (see Nevada Sunrise news releases dated May 16, 2016 and September 30, 2019), and for payment of the balance owing to the underlying vendor of the water rights of approximately US$800,000 (see Nevada Sunrise news release dated March 21, 2016).
History of Nevada Sunrise Ownership of Clayton Valley Water Right
On January 28, 2016, Nevada Sunrise announced an agreement for an option to purchase Permit 44411 (the “Permit”). The pre-existing, certificated water right allows for 1,770 acre/feet of water use for mining and milling per year. Acquisition of water rights is an important step for any mining and milling activities in the Clayton Valley.
In December 2015, Nevada Sunrise had 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 “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 operates the only producing lithium mine in the United States at Silver Peak. 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, was the only remaining appropriation of groundwater in the Clayton Valley.
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 Permit. 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 immediately defended the Permit and filed evidence of water use that the NDWR required.
On April 26, 2018 and May 1, 2018, 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. On August 15, 2018, the Fifth Judicial District Court of the State of Nevada ruled that Nevada Sunrise must receive a formal hearing with the State of Nevada on the matter of the forfeiture, which was later scheduled for June 2019.
On July 15, 2019, Nevada Sunrise announced a settlement agreement (the “Settlement Agreement”) with Albemarle whereby the motion of forfeiture initiated by Albemarle against the Permit was withdrawn. Nevada Sunrise agreed to certain conditions in the Settlement Agreement that excludes drilling of water wells by the Company in certain areas of the Clayton Valley that could impact Albemarle’s lithium brine mining operations at Silver Peak.
As a result of Nevada Sunrise and Albemarle signing the Settlement Agreement and a corresponding stipulation with the State Engineer, the water rights under the Permit now enjoy the same good standing status as when they were first purchased by the Company in March 2016. Accordingly, hearings that were scheduled by the NDWR to review evidence on the validity of the Permit were cancelled. On August 9, 2019, the State of Nevada dismissed the forfeiture motion and in 2020 granted an extension of time for beneficial use of the Permit to August 28, 2021, allowing Nevada Sunrise or its exploration partners to use its water right for mining and milling activities in the Clayton Valley subject to certain geographical conditions contained in the Settlement Agreement.
2021 Purchase Agreement and Extension of Time
On May 10, 2021, Nevada Sunrise announced the signing of a purchase and sale agreement for the Permit (the “Agreement”) with Cypress Development Corp. of Vancouver, BC, Canada (TSX-V: CYP) (OTCQB: CYDVF) (Frankfurt: C1Z1) (“Cypress”).
The agreed purchase price for the Permit is US$3.0 million to be paid in a combination of cash and Cypress’ common shares. The purchase price includes an initial non-refundable cash payment of US$150,000 (paid), and a final payment of US$2.85 million on receipt of all necessary approvals and transfer of the Permit to Cypress (the “Closing Payment”). The Closing Payment comprises US$2.0 million in cash and the issuance of Cypress’ common shares to the value of US$850,000 (the “Share Issuance”).
On November 3, 2021, Nevada Sunrise announced the granting of an extension of time by the NDWR for the Permit to August 28, 2022, which supported a successful closing of the purchase of the Permit by Cypress in December 2021. The Permit will form an essential component of Cypress’ plans for the development of a new lithium mine in Esmeralda County.
Other Lithium Projects and Water Rights in Esmeralda County
Nevada Sunrise adopted an exploration strategy targeting desert basins 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. The Company holds two lithium brine projects in the Lida Valley, located to the south and west of the Clayton Valley, and in 2017, was granted a water right by the State of Nevada totaling 80.09 acre/feet/year for the purpose of mining and milling.
Jackson Wash Lithium Project
Jackson Wash consists of 28 unpatented placer claims totaling approximately 560 acres (227 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. Nevada Sunrise owns a 100% interest in Jackson Wash.
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 has developed a drilling plan for the Jackson Wash basin to test specific structural and stratigraphic targets believed prospective for lithium brine deposits.
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 in the borehole. A series of drill targets remain at Jackson Wash that are planned for testing, and are currently being evaluated by Nevada Sunrise.
Gemini Lithium Project
Gemini is located approximately 6 miles (10 kilometres) east of the town of Lida, Nevada, and consists of 39 placer claims totaling 780 acres (316 hectares). Gemini is adjacent to the Gold Point Solar Energy Zone, a BLM designated land reserve for solar power generation. Nevada Sunrise acquired Gemini by claim staking in 2015 with no applicable royalties, and currently holds a 100% interest in the project.
Nevada Sunrise made the decision to acquire Gemini claims after reviewing the results of a proprietary gravity survey by the the University of Texas, Dallas, in conjunction with recognizing favourable local geology, namely late Miocene felsic volcanic tuffs adjacent to Gemini. These rocks could 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 early 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. Gemini has yet to be drill tested.
Nevada Sunrise has a current permit for drilling to test for lithium brines at Gemini. The drilling permit was recently extended to June 2022.
Gemini Transaction With KORE Mining Ltd. (formerly Eureka Resources Inc.)
On January 20, 2016, the Company entered into an interim agreement with Eureka Resources Inc. (succeeded by KORE Mining Ltd., “KORE”) to sell a 50% participating interest in Gemini. Pursuant to the terms of the interim agreement, KORE had the right to acquire a 50% participating interest in Gemini by reimbursing the Company for 50% of the Gemini acquisition and evaluation costs ($96,794 received).
In August 2019, KORE agreed to relinquish its 50% interest in Gemini in exchange for cancellation of an amount of US$16,389.92 owed to the Company by KORE for property maintenance costs and miscellaneous expenses incurred at Gemini, whereupon Nevada Sunrise regained a 100% interest in Gemini.
Robert M. Allender, Jr., CPG, RG, SME, is the Company’s designated Qualified Persons within the meaning of NI 43-101 and has reviewed and approved the technical information contained herein.