Nevada Lithium and Water Rights

Gemini Lithium Project

Gemini consists of 119 placer claims and 268 lode claims totaling over 5,400 acres (2,185 hectares) located approximately 6 miles (10 kilometres) east of the town of Lida, Nevada. Nevada Sunrise acquired Gemini by claim staking in 2015 with no applicable royalties and currently holds a 100% interest in the project. The Company expanded the size of the Project by staking 80 new unpatented claims in March 2022 and 268 unpatented lode claims in April 2022. Gemini is situated adjacent to the Gold Point Solar Energy Zone, a Bureau of Land Management land reserve set aside for solar and wind power generation projects until 2033. Drill pads and access roads are in place at Gemini with an active drilling permit.

Gemini Lithium Project, Lida Valley, Nevada

The Lida Valley is a flat, arid basin with a similar geological setting to the better-known Clayton Valley basin where Albermarle Corporation operates the Silver Peak lithium brine mine, which has operated continuously since 1966. Exploration at Gemini is complemented by the Company’s 80.09 acre/feet/year water right, a pre-requisite for the exploration and development of lithium brine projects in Nevada. Under the laws of Nevada, water cannot be pumped from a subterranean source without a valid water permit.

Nevada Sunrise acquired Gemini claims after reviewing the results of a proprietary gravity survey 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 groundwaters (brine) within the sub-basins, and may also provide a basin for lithium-rich sediments.

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 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.

TDEM Survey at Gemini, 2016

A conductive layer 150-250 metres deep appears to cover most of Gemini West, 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.


Gemini Project Geophysical Interpretation July 2016

2022 Drilling Program

On March 15, 2022, Nevada Sunrise announced the commencement of an inaugural drilling program at Gemini. Drilling began in the second week of March 2022 and concluded in the first week of April 2022. Two boreholes were completed for a total of 2,020 feet (615.85 metres) on drill sites located within a defined gravity low that hosts conductive layers detected by historical ground electromagnetic (“EM”) surveys.

On April 21, 2022, Nevada Sunrise announced that lithium mineralization had been intersected over significant widths in the 2022 drilling program at Gemini.

Borehole GEM22-01was drilled to a depth of 900 feet and was terminated in a black, sticky clay that impeded further drilling progress. At 320 feet (97.56 metres), Nevada Sunrise’s exploration team observed the presence of a clay layer similar to clay encountered in the Company’s 2016-2017 exploration drilling in the Clayton Valley that had carried values of up to 1,400 parts per million (“ppm”) lithium. Fourteen samples taken at 20-foot intervals between a depth of 380 feet (115.85 metres) and 520 feet (158.54 metres) from the Gemini clay layer were processed on a rush basis in April 2022 and returned a weighted-average value of1,177.6 ppm lithium over 140 feet(42.68 metres).Concentrations within this interval ranged from a low of 746.9 ppm lithium to a high value of 1,950.6 ppm lithium. This initial result represents a new discovery of lithium-bearing sediments in the western Lida Valley, which has not been historically drill tested for lithium mineralization.

A second suite of samples was subsequently submitted from the upper clay layer in borehole GEM22-01, which was observed to contain intermittent brown clays and tuffaceous ash layers. The analytical result was the recognition of another mineralized zone averaging 295.45 ppm lithium over 60 feet (18.29 metres) from 320 feet (97.56 metres) to 380 feet depth (115.85 metres). When the two consecutive layers from GEM22-01 are combined, the result is a continuously-mineralized interval of 200 feet (60.98 metres) from320 to 520 feet (97.56 to 158.54 metres) averaging 950.57 ppm lithium.


Drilling and sampling at site of borehole GEM22-01

Borehole GEM22-02was drilled to a depth of 1,120 feet (341.5 metres) at a location approximately 0.69 miles (1.1 kilometre) south of GEM22-01 and also encountered the brown clay/tuffaceous ash layer and the green clay layer. Representative samples from each layer were submitted in the second suite of rush samples and returned weighted-average values of775.9 ppm lithium over 130 feet (39.63 metres)from 390 to 520 feet (118.90 to 158.54 metres)(see Table 1 below for initial results from GEM22-01 and GEM22-02).

The initial analytical results from boreholes GEM22-01 and GEM22-02 suggest that the lithium-bearing clay layers at Gemini may be widespread. Additional drilling is planned following receipt of an amendment to the current Bureau of Land Management drilling permit, which will be required to cover the Company’s newly-expanded land position.

In April 2022, Nevada Sunrise staked 268 lode claims totaling 5,420 acres (2,193.4 hectares) over the outline of the gravity low to effectively cover the possible extent of the lithium-bearing clay layers. Follow-up geophysical surveys are planned in 2022 within the gravity low to further map the conductive layers detected by Nevada Sunrise in 2016.

Table 1. Lithium Results from Boreholes GEM22-01 and GEM22-02

GEM22-01 Lithium Mineralization
Lithium
(ppm)
Interval (ft) Length
(ft)
Interval (m) Length
(m)
From To From To
950.57 320 520 200 97.56 158.54 60.98
Including1,177.61 380 520 140 115.85 158.54 42.68
and 1,675.21 480 520 40 146.34 158.54 12.20
             
GEM22-02 Lithium Mineralization
Lithium
(ppm)
Interval (ft) Length
(ft)
Interval (m) Length
(m)
From To From To
775.9 390 520 130 118.90 158.54 39.63
Including1,133.1 480 520 40 146.34 158.54 12.20

The Company’s exploration objectives for Gemini are twofold: testing the conductive zones for lithium brines at depth and analyzing drill cuttings for lithium-in-sediments. A total of 37 sediment samples were submitted to American Assay Laboratories (“American Assay”) for analysis on a rush basis, and 210 sediment samples were submitted to ALS Group USA (“ALS”), with both laboratories located in Reno, Nevada.

Thirty-seven (37) water samples were taken at certain levels within the boreholes where the drilling encountered formation water. These samples were submitted to WETLabs in Reno, Nevada for testing of general chemical parameters and selected metals. The water flows were not significant and no brines were detected in either of the 2022 boreholes. The potential for brines exists at Gemini but may be located at greater depths than were tested in the 2022 spring drilling program.

Additional Analytical Results Received, April 2022

On April 28, 2022, Nevada Sunrise announced that a wider and higher-grade intersection of lithium mineralization has been determined in the inaugural drilling program at Gemini. Additional analyses from borehole GEM22-01 received have extended the length of the previously-reported mineralized intersection and improved the lithium grade to 1,203.41 parts ppm lithium over 580 feet (176.83 metres), including 1,578.19 ppm lithium over 300 feet (91.46 metres).

Additional samples collected over 20-foot intervals1 in borehole GEM22-01 below the 520-foot level to the end of hole at 900 feet were processed within a larger batch of 210 composite sediment samples submitted to ALS, and produced the results shown in Table 2 below:

Table 2.  Final analytical results from borehole GEM22-01

GEM22-01 Lithium Mineralization
Interval Length (ft) Interval Length (m) Li
(weighted avg. ppm)
From
(ft)
To
(ft)
From
(m)
To
(m)
320 900 580 97.56 274.39 176.83 1,203.41
including:
480 780 300 146.34 237.8 91.46 1,578.19

1 Samples are a composite of material collected from the rotary splitter in the RC drilling rig, which produces a continuous, representative 3 to 5 kilogram sample for each 20-foot interval.

The analytical results for an additional 131 samples from GEM22-02 are still pending.


Electromagnetic Survey Results Showing Conductive Zones and Drill Holes at Gemini

Sampling and Analytical QA/QC and Statement of Qualified Person

Sediment samples were shipped to American Assay and to ALS. The rush samples reported in this document were analyzed at American Assay utilizing a multi-element ICP-MS method. The additional samples reported in this document were processed by ALS on a standard turn-around and analyzed with similar multi-element ICP-MS methods. Specifically, the analytical method involves aqua regia digestion of the sample followed by the inductively coupled plasma (ICP) technique to ionize the sample, and spectrometry to determine elemental concentrations. Duplicates, field blanks, and certified reference standards were inserted at regular intervals in the sample stream to ensure accuracy of the analytical method.

The scientific and technical information contained herein has been reviewed and approved by Robert M. Allender, Jr., CPG, RG, SME and a Qualified Person for Nevada Sunrise as defined in National Instrument 43-101 – Standards of Disclosure for Mineral Projects.

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.

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.

Jackson Wash Claims Map

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.

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 (the “Permit”) 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 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.


Silver Lake – Water from NEV’s Permit 44411

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 was US$3.0 million paid in a combination of cash and Cypress’ common shares. The purchase price included an initial non-refundable cash payment of US$150,000, 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 the 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-bearing brines and sediments are known to accumulate in faulted sub-basins, or “traps”. Nevada Sunrise believes that interpreted gravity lows in the Lida Valley basin indicate the presence of such deep, sub-basins that could host lithium-bearing brines and/or sediments. The Company holds two lithium 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.