AGORACOM Small-cap Investor Relations Blog

Chilean Metals Inc. (“Chilean Metals,” “CMX” or the “Company”) (TSXV:CMX)(SSE:CMX)(MILA:CMX) s pleased to announce it has received TSXV conditional approval on its announced agreement to acquire 80% of the NISK property via a series of option payments and work commitments as further detailed below.

Option Terms:

Grant of first option

Critical Elements Lithium Corp. (“Critical Elements”) (CRE)(CRECF)(F12) has granted to Chilean Metals, as the “Optionee”, the exclusive right and option to acquire, on or before the date that is three (3) years from the TSX.V approval (the “Effective Date”) (the “First Option Period“), an initial 50% Earned Interest in the Property (the “First Option“), free and clear of all Encumbrances other than the Permitted Encumbrances and the Royalty, subject to the terms and conditions in this Agreement.

Requirements to Exercise the First Option

In order to acquire the 50% Earned Interest under the First Option, the Optionee must:

a. make cash payments totaling $500,000 to Critical Elements (the “Cash Payments“) on or before the dates set out below:
i. a non-refundable amount of $25,000 on the date of execution of the agreement; (COMPLETED)
ii. an amount of $225,000 within a delay of five (5) Business Days following the Effective Date; and (COMPLETED)
iii. an amount $250,000 within a delay of six (6) months from the Effective Date;
b. issue to Critical Elements within five (5) Business Days following the Effective Date, 12,051,770 Shares (the “Share Payment“) of the Optionee. The Shares issued will be issued as fully paid and non-assessable free and clear of all liens, charges, and Encumbrances, and subject only to a four-month and one-day resale restriction under applicable Securities Laws and the policies of the TSXV;
c. incur an aggregate of $2,800,000 of Work Expenditures on the Property on or before the dates set out below:
i. $500,000 in Work Expenditures on or before the date that is one (1) year from Effective Date;
ii. $800,000 in Work Expenditures on or before the date that is two (2) years from Effective Date; and
iii. $1,500,000 in Work Expenditures on or before the date that is three (3) years from Effective Date; and

Upon the Optionee having completed the Cash Payments, the Share Payment and incurred or funded the Work Expenditures on or before the expiry of the First Option Period, the Optionee may exercise the First Option by delivering notice to Critical Elements to that effect and confirming exercise of the First Option (the “First Option Exercise Notice“). Upon delivery of the First Option Exercise Notice, the Optionee shall have earned a 50% Earned Interest in the Property.

Grant of second option

Subject to the Optionee having exercised the First Option, Critical Elements also grants to the Optionee the exclusive right and option (the “Second Option”) to increase its Earned Interest in and to the Property from 50% to 80% by incurring or funding additional Work Expenditures for an amount of $2,200,000, including the delivery of a Resource Estimate, for a period commencing on the delivery of the First Option Exercise Notice and ending on the date that is four (4) years from Effective Date (the “Second Option Period”).

Following the exercise of the Second Option, until such time as a definitive Feasibility Study (the “Definitive Feasibility Study“) regarding extraction and production activities on the Property is delivered to the Joint Venture, Critical Elements shall maintain a 20% non-dilutive interest in the Joint Venture and shall not contribute to any Joint Venture costs.

Operatorship

During the currency of the Agreement, except as otherwise contemplated under the Agreement, Chilean Metals shall act as the operator (the “Operator“), and as such, shall be responsible for carrying out and administering the Work Expenditures on the Property, in accordance with work programs (the “Programs“) approved by the Technical Committee. The Operator shall be entitled to receive a management fee equal to 10% of the amount of Work Expenditures incurred on internal work and equal to 5% of the amount of Work Expenditures incurred on contract work carried by third-party contractors or consultants.

In the event, Chilean Metals exercises the First Option and subsequently elects not to exercise the Second Option, or in the event, the Second Option is terminated, whichever the case, Chilean Metal’s right to act as Operator shall immediately terminate and Critical Elements shall become the Operator for the future conduct of Work Expenditures and Programs on the Property.

Royalty

Following the exercise of the First Option by Chilean, and in addition to the obligations of Chilean under the First and Second Option, if applicable, Critical Elements shall receive, in the event of a Lithium discovery, a royalty equal to 2% net smelter returns (the “Royalty“) resulting from the extraction and production of Lithium products, including Lithium ore, concentrate and chemical, resulting from the extraction and production activities on the Property, including transformation into chemical products. Chilean shall have the right at any time to purchase 50% of the Royalty and thereby reduce the Royalty to 1% by paying to Critical Elements a total cash amount of $2,000,000.

Read More: https://agoracom.com/ir/ChileanMetals/forums/discussion/topics/756056-chilean-metals-closes-nisk-acquisition-providing-the-company-a-high-grade-historical-nickel-copper-cobalt-pge-resource/messages/2305331#message