Estimate of 1.0 million Gold Ounces
(1) Minimum expenditure commitment required by Newcrest if it elects to enter into the Option Phase
(2) If Newcrest elects to terminate Stage 2 or does not earn the additional 14%, Newcrest’s interest in Appaloosa will decrease to a 49% interest
Investigation and Option Phases
Gunpoint received US$250,000 upon signing the Newcrest Agreement. Newcrest will have until January 21, 2023, to investigate and explore Appaloosa. Newcrest may then elect to enter into the Option Phase and continue to explore Appaloosa by providing a US$750,000 cash payment to the Company and undertaking a minimum US$2.0 million in exploration expenditures. The Option Phase is an 18 month period from signing the Newcrest Agreement. Newcrest will not earn a vested interest in Appaloosa during the Investigation and Option Phases.
Terms of Earn-In Agreement
The earn-in phase (“Earn-in Phase”) consists of three stages whereby Newcrest can earn up to a 75% interest in Appaloosa over an eight year period. Newcrest will act as manager during the earn-in phase.
Stage 1 Phase
Newcrest may elect to earn a 51% interest by providing a cash payment to Gunpoint of US$1.5 million and funding US$10.0 million in exploration expenditures over 3 years. The Stage 1 Phase may be extended by Newcrest for one year on payment to Gunpoint of US$250,000 or for force majeure.
Stage 2 Phase
Upon Newcrest’s election, Newcrest may earn an additional 14% interest for a total of 65% by making a cash payment to Gunpoint of US$1.0 million and spending an additional US$23.0 million over 3 years in exploration expenditures (total of US$35.0 million). To earn the additional 14% interest, Newcrest is required to spend US$5.0 million in exploration expenditures per twelve month period during the 3 years. If Newcrest does not make such election or does not earn the additional 14% interest in Appaloosa in Stage 2, then Newcrest’s interest will decrease to 49% and Gunpoint will have the right to elect to purchase the 49% interest for Fair Value. The Stage 2 Phase may be extended by Newcrest for one year on payment to Gunpoint of US$250,000 or for force majeure.
Stage 3 Phase
If Newcrest elects to proceed to the Stage 3 Phase of the earn-in, it will make a US$1.5 million cash payment to the Company and have the right to earn an additional 10% interest (75% total) by delivering a JORC or National Instrument 43-101 compliant indicated mineral resource of at least 1.0 million gold ounces. The Stage 3 Phase may be extended by Newcrest for one year on payment to Gunpoint of US$250,000 or for force majeure.
Purchase Option
If Newcrest has earned a 75% interest in Appaloosa, Newcrest will have the option, within 120 days, to acquire Gunpoint’s remaining 25% interest for the greater of Fair Value and US$25.0 million.
Additional Terms
The Agreement contains the following additional terms:
-
A joint venture will be formed by Newcrest and Gunpoint when Newcrest acquires its 51% interest in
the Project.
-
After the Earn-in Phase, funding will be pro rata, however, prior to a decision to mine, a party may elect
to dilute instead of providing funding in which case straight line dilution shall apply, otherwise a failure Page 3