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Nevada Sunrise negotiates settlement agreement with Albemarle over Clayton Valley water right permit

Published by , Assistant Editor
Global Mining Review,

Nevada Sunrise Gold Corporation (Nevada Sunrise) has negotiated a settlement agreement (the Agreement) with Albemarle Corporation of Charlotte (North Carolina), whereby the motion of forfeiture initiated by Albemarle against the company’s Clayton Valley water right Permit 44411 (the Permit) will be withdrawn.

Nevada Sunrise has agreed to certain conditions in the agreement that excludes drilling of water wells by the company in certain areas of the Clayton Valley that could impact Albemarle’s lithium brine mining operations at Silver Peak in Nevada.

“This agreement is a landmark moment for Nevada Sunrise,” said Warren Stanyer, President and CEO of Nevada Sunrise.

“After three years of litigation, the company is now able to create partnerships with other companies active in Esmeralda County that can use fresh water from our Permit for their mining operations.”

As a result of Nevada Sunrise and Albemarle signing the agreement and a corresponding stipulation with the Nevada State Engineer (the State Engineer), the water rights under the Permit now enjoy the same good standing status as when they were first purchased by the company in March 2016.

Accordingly, hearings that were scheduled by the Nevada Division of Water Resources (the NDWR) later this month to review evidence on the validity of the Permit will now be cancelled. Although the parties have signed the Agreement, the various terms and conditions agreed to will be finalised in the coming weeks. About Permit 44411 Nevada Sunrise’s wholly-owned subsidiary, Intor Resources Corp. (Intor) acquired the Permit, which allows for 1770 acre-feet of water use for mining and milling per year, from an arms-length vendor (the Vendor) prior to commencing exploration for lithium brines in the Clayton Valley. In December 2015, Nevada Sunrise received a written appraisal from an independent appraiser certified in the State of Nevada.

According to the appraisal report, the Clayton Valley basin is currently ‘over-appropriated’ and that any new applications to use water in an over-appropriated basin would be carefully reviewed by the NDWR. Consistent with the conclusions of the appraisal report, and with the exception of a single application to appropriate 50 acre-feet annually that is limited solely for a five year period, all applications for new water rights allocations made in the past two years by other junior lithium explorers in the Clayton Valley have been denied by the NDWR.

Nevada Sunrise exercised its option for acquisition of the Permit by executing a purchase agreement with the Vendor (see Nevada Sunrise news release dated 20 March 2016). As consideration for its purchase of the Permit, to date Nevada Sunrise has paid to the Vendor US$422 500 in cash by installments toward an agreed purchase price of US$1.3 million, and has issued 1.1 million common shares (of an agreed 2 million shares to be issued over a five year period) and a total of 2.25 million common share purchase warrants exercisable over a five year period.

In June 2016, Albemarle filed a motion with the NDWR to forfeit the Permit based on alleged nonuse of the water rights under the Permit. Albemarle argued that the Permit had been automatically forfeited by alleging that there was no beneficial use of water for the statutory five-year period. Intor opposed Albemarle’s forfeiture motion on legal grounds, and requested a hearing with the NDWR to present evidence of water use to defend its Permit. Intor argued that the State Engineer must first provide a notice letter to a water right holder prior to initiating forfeiture proceedings as required by Nevada law. However, the State Engineer did not provide Intor with the required notice, and similarly did not give Intor the benefit of a hearing to present evidence of water use and cross-examine Albemarle’s witnesses.

Consequently, on 29 November 2016, the State Engineer granted Albemarle’s motion and issued a ruling forfeiting the Permit. Intor appealed the ruling to the Fifth Judicial District Court of Nevada (the Court), and proceeded to make legal arguments and methodically gather evidence of historical water use in order to defend the validity of the Permit. After the parties fully briefed the matter, the Court finally heard the appeal in April and May of 2018, after which the Court ordered that the forfeiture ruling be vacated and the matter remanded for a full evidentiary administrative hearing before the State Engineer. As stated above, this matter has now been settled, the Permit’s good standing status has been restored, and Intor is able to place the water under the Permit to beneficial use in accordance with the Permit and the terms of the Agreement.

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