Adamera Minerals (ADZ.V) has now completed its negotiations with Hochschild Mining (HOC.L) allowing the later to earn a 75% interest in the Cooke Mountain project in Washington state.
Hochschld can earn an initial 60% stake by spending US$8M on exploration in a first five year period with a minimum spend of US$0.5M in the first two years of the agreement and US$1M in years 3-5. During this earn-in period, Adamera will remain the operator of the project and will very likely retain an operator fee (usually 5-10%) which will help to keep the company funded.
Should Hochschild establish its 60% stake and want to step it up a notch, it can earn an additional 15% in the project by funding a feasibility study within three years after completing the first earn-in phase. If Hochschild needs more time than those three years, it can ‘buy time’ by paying US$0.2M, US$0.3M and US$0.5M for each additional year it needs to complete that feasibility study to earn a 75% ownership of the project.
What’s interesting (and this seems to be an excellent point negotiated by Adamera) is that if Hochschild does not complete the feasibility study, its interest will drop to a 2% NSR (so Hochschild would lose the initial 60% is would have already established as well). However, should Hochschild decide after earning 60% it will not officially commence the second phase of the earn-in agreement, it will retain its 60% stake in the project and a 60/40 joint venture will be formed. An interesting agreement and Hochschild must be fairly certain it will be able to complete a feasibility study should it elect to go ahead with the second phase of the earn in.
Disclosure: The author has no position in Adamera Minerals nor Hochschild Mining.
