Junior Eureka turns to lithium in face of challenging gold market

TORONTO (miningweekly.com) – TSX-V-listed Eureka Resources has entered into a letter of agreement with fellow Canadian explorer Nevada Sunrise to acquire a 50% working interest in a lithium exploration property close to the Clayton Valley mine, in Nevada – the only current lithium producer in North America.

"We have made this strategic move to diversify the company's property portfolio in the face of a challenging gold market. Lithium is a commodity unlike most others in that its price has increased in the past year," stated Eureka CEO Michael Sweatman.

Vancouver-based Eureka's main asset is the Frasergold project, located about 100 km east of Williams Lake, in British Columbia, which has a National Instrument 43-101-compliant measured and indicated resource of 614 000 oz of gold, and an inferred resource of about 1.23-million ounces when using a 0.3 g/t cutoff grade.

Indeed, lithium had been somewhat of a bright spot in an otherwise gloomy commodities market of late, with annual price increases accelerating in recent years as the US lithium-ion battery market was expanding at an unprecedented pace.

Under terms of the agreement, Eureka would have the right to acquire half of the Gemini lithium project, located in the western Lida Valley, by paying Nevada Sunrise $42 500 – half of Gemini’s acquisition costs. These included staking costs, data acquisition and processing, as well as claims registration fees payable to Esmeralda County and the Bureau of Land Management.

Eureka would also issue Nevada Sunrise with 500 000 common shares as a prospect fee, with 300 000 shares to be issued on receiving TSX-V approval.

The two firms would also form a joint venture partnership, with Nevada Sunrise acting as operator of exploration, in exchange for a 10% management fee.

Eureka advised that the transaction was subject to executing definitive documentation, completing due diligence and director and regulatory approval. The transaction would constitute a ‘non-arms length’ transaction under TSX-V policies, as Eureka and Nevada Sunrise had certain directors and officers in common, who would abstain from voting on the proposed transaction.

Nevada Sunrise had staked claim to the 2 000 ha Gemini project in November and December, where detailed Lida Valley gravity survey results had indicated strong gravity lows within two faulted sub-basins about 7 km apart, each interpreted to be hundreds of metres deep.

Nevada Sunrise next planned to undertake geophysical exploration to determine the presence of conductive horizons that might host lithium brines, followed by exploratory drilling, if warranted. There were no known drill holes at Gemini for lithium brines exploration.

The Silver Peak lithium mine operation, acquired by NYSE-listed Albemarle in 2015, had continuously extracted lithium minerals from brines since 1966.

Other juniors were scrambling to secure lithium projects in the state, basically just down the road from Tesla’s new Gigafactory, which was being built in Reno. Among these explorers counted Pure Energy Minerals (which had signed an offtake agreement with Tesla Motors), Western Lithium, Dajin Resources and Lithium Corp.