Eureka Resources (CVE:EUK), a natural resources company, signed a letter agreement to acquire from Nevada Sunrise Gold (CVE:NEV), an exploration-stage company, a 50% working interest in a lithium exploration property proximal to the Clayton Valley in Nevada.
The Clayton Valley hosts the Silver Peak mine, which is the only current lithium producer in North America, Vancouver-based Eureka said in a statement on Thursday.
"We have made this strategic move in order to diversify the Company's property portfolio in the face of a challenging gold market,” Eureka CEO Michael Sweatman said in the statement. “Nevada Sunrise has secured a significant land position in the Nevada lithium play and this opportunity allows for an efficient way for Eureka to diversify our holdings."
He added that lithium is a commodity unlike most others in that its price has increased in the past year.
Eureka will have the right to acquire a 50% participating interest in the Gemini Lithium Project located in the western Lida Valley by reimbursing Nevada Sunrise for 50% of Gemini's acquisition costs, which are estimated at US$85,000, and issuing Nevada Sunrise an aggregate of 0.5mln shares.
These costs include staking costs, data acquisition and processing, and claims registration fees payable to Esmeralda County and the Bureau of Land Management.
Eureka will issue to Nevada Sunrise 0.5mln shares as a prospect fee, with 0.3mln shares to be issued on receipt of acceptance of the transaction by the TSX Venture Exchange and a further 0.2mln shares to be issued on the first anniversary of such acceptance.
Eureka and Nevada Sunrise will also enter into a joint venture with respect to Gemini, with Nevada Sunrise acting as operator of exploration in exchange for a 10% management fee to be charged to the joint venture.
Shares of Eureka rose 11.1% to C$0.0500 at 11:52 a.m. in Toronto. Nevada fell 6.3% to C$0.150.