Discovery Harbour Resources Corp. (TSXV: DHR) has entered into an option and earn-in agreement with Newcrest Mining on the Fortuity 89 project in Nevada.
Fortuity 89 is an early-stage epithermal gold property covering close to 34 square kilometers and located approximately 4 kms west of Discovery Harbour’s Caldera property. It is characterized by limited outcrop in a large gravel-covered plain.
According to the company, the limited outcrop is strongly altered and other indications are consistent with the area being high in a potentially gold-bearing epithermal system.
Under the terms of the agreement, Newcrest must make an initial commitment of $1.5 million within 12 months before continuing onto the next stages of the earn-in.
Should Newcrest choose to proceed towards Phase 1 of the earn-in agreement, it must make an additional payment of $250,000 and incur $10 million in expenditures for up to 24 months. Satisfying these conditions would give Newcrest a 51% interest in the Fortuity 89 joint venture.
Phase 2 of the earn-in would require Newcrest to spend another $20 million in exploration, again for up to 24 months, bringing cumulative expenditures to $31.5 million and Newcrest’s ownership to 65%.
In Phase 3, Newcrest can increase its project ownership to 75% upon completion of a positive, NI 43-101 compliant preliminary economic assessment (PEA) within 24 months. This phase can be extended for another 12 months by paying Discovery Harbour $500,000.
At the end of Phase 3, Newcrest must acquire Discovery Harbour’s remaining 25% interest at a fair value based upon parameters using standard industry valuation methods.
If Newcrest elects not to proceed with Phase 3, 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, which Newcrest has the right to buy down 0.5% at fair value after completion of Phase 3.
During the option and earn-in period, Newcrest will reimburse Discovery Harbour for advance royalty payments that the latter must pay under the option to purchase agreement for the Caldera and Fortuity 89 property. Discovery Harbour will continue to focus its efforts on the drill targets developed at Caldera.
“The Fortuity 89 agreement with Newcrest further validates Discovery Harbour’s view that this area and Caldera host promising low sulphidation epithermal gold targets,” Mark Fields, Discovery Harbour president and CEO, said in a news release.
Shares of Discovery Harbour Resources jumped more than 66.6% on news of the Newcrest joint venture. The Vancouver-based junior has a market capitalization of just under C$7 million.