On March 9, 2021 Discovery Harbour Resources Corp. announced an option and earn-in agreement (“the Agreement”) with Newcrest Resources, Inc., a wholly owned subsidiary of Newcrest Mining Limited (“Newcrest”) on the Fortuity 89 property in Nevada. The deal terms are described in detail in the section “Newcrest Option/Joint Venture Terms” to follow. Key points include:
- A commitment to spend a minimum of US$1.5M in the first year, followed by, each step at Newcrest’s option;
- Paying Discovery Harbour US$250K and spending US$10M to earn 51%;
- Spending US$20M to earn 65% ownership;
- A positive preliminary economic study to earn 75%;
- Upon earning 75% Newcrest must acquire Discovery Harbour’s 25% interest at fair market value;
- If Newcrest does not proceed to earn its increasing interest at any step, the ownership reverts to Discovery Harbour having the 51% majority interest.
Location and Property Description
Discovery Harbour holds the early stage epithermal gold Fortuity 89 property, which covers close to 34 square kilometres. Caldera and Fortuity 89 are both located in a well mineralized area of southwestern Nevada with various mines and deposits in the Walker Lane and Northhumberland Gold Trends. Fortuity 89 is approximately four kilometres west of Discovery Harbour’s Caldera property.
Fortuity 89 is characterized by limited outcrop in a large gravel covered plain. The limited outcrop is strongly altered and other indications are consistent with the area being very high in a potentially gold bearing epithermal system.
Evidence supporting this includes the alteration signature of the limited outcrop, the presence of reed fragments, which indicates that this Fortuity 89 outcrop is on a paleosurface with the epithermal system preserved below, and opaline silica. Aside from the limited outcrop, less than 2km2 in the 34 km2 property, the property is largely covered by a gravel plain.
Reed cast from Fortuity 89
Alan Morris (Consultant) beside heavily brecciated rock and opaline silica on Fortuity 89
Mark Baknes (consultant) beside hydrothermally brecciated outcrop on Fortuity 89 with extensive gravel plain in background.
Newcrest Option/Joint Venture Terms
The basic terms of the Agreement for Newcrest to earn an interest are:
|Phase||Expenditures (US$)||Interest Earned by Newcrest (%)||Total Time for Each Stage|
|Initial||$ 1,500,000||Nil||12 months|
|I||$10,000,000||51||Up to 24 months|
|II||$20,000,000||65||Up to 24 months|
|III||Completion of Positive Preliminary Economic Assessment in accordance with NI 43-101 (based on minimum of 1M oz gold)||75||Up to 24 months|
- The initial US$1,500,000 is a minimum commitment (“Minimum Commitment”); Phases I, II and III are at Newcrest’s election to proceed. Should Newcrest elect to continue to Phase I, it shall also pay to Discovery Harbour US$250,000. Newcrest can withdraw from the Agreement any time after meeting the Minimum Commitment.
- The cumulative expenditure through to the end of Phase II is US$31,500,000. Any excess expenditures from a previous phase will be applied to the subsequent phase.
- Newcrest may extend the Phase III period by 12 months by paying Discovery Harbour US$500,000.
- At the end of Stage III, if Newcrest earns a 75% interest it then must acquire Discovery Harbour’s 25% interest at a fair value based upon parameters using standard industry valuation methods.
- If Newcrest earns a 65% interest in Phase II, but elects to not proceed to completion of Phase III, the respective participating interests in the joint venture will revert to Discovery Harbour owning 51% and Newcrest owning 49%.
- Discovery Harbour will retain a 2% Net Smelter Return (“NSR”) royalty in a designated area of the joint venture area, that Newcrest has the right to buy down 0.5% at fair value after completion of Phase III.
- During the option and earn-in period, Newcrest will reimburse Discovery Harbour for advance royalty payments that Discovery Harbour must pay under the Option to Purchase Agreement for its Caldera and Fortuity 89 properties.
Planned Exploration Program
Newcrest’s planned activities include a geophysical program encompassing a 675 line kilometre drone airborne magnetic survey, a 250 station ground gravity survey and a 45 line kilometre audio band magnetotellurics (AMT) resistivity survey. It is intended that geologic and alteration sampling and mapping will also be undertaken with a soil geochemical sampling program. The intended outcome of this program is to identify potential drill targets for testing this calendar year.
Newcrest Mining Limited (ASX, TSX, PNGX: NCM) is one of the world’s largest gold mining companies. Its purpose is to create a brighter future for people through safe and responsible mining. Newcrest owns and operates a portfolio of predominantly low cost, long life mines and a strong pipeline of brownfield and greenfield exploration projects – predominantly in the Asia-Pacific and North and South America.