Earlier this week, Barrick Gold (NYSE: GOLD) resolved a lawsuit with two junior mining companies, Red Lake Gold (CSE: RGLD) and Dixie Gold (CSE: DG), over an option agreement in the Red Lake mining camp.
The dispute arose from the termination of two exploration earn-in option agreements on Dixie’s Red Lake Project and Red Lake Gold’s Whirlwind Jack Project by the junior miners, which prompted Barrick to file a $120 million statement of claim in the Ontario Superior Court of Justice last June.
The two Vancouver-based junior miners signed earn-in agreements with Barrick in the fall of 2021, but both deals were terminated shortly after due to a disagreement over sufficient exploration work.
In the fall of 2021, Red Lake Gold decided to explore an earn-in agreement with Barrick Gold. The agreement would allow Barrick to earn an interest in a portion of the Whirlwind Jack property through exploration efforts. After formalizing the agreement, if all terms were met, Barrick could earn a 70 per cent interest in Whirlwind Jack as of November 1, 2021.
In June 2022, Barrick Gold declared a force majeure to Red Lake Gold citing community engagement work and title assertions as primary factors. The declaration instructed Red Lake Gold to take action to mitigate damages expected to be suffered by the company due to a claim loss at Whirlwind Jack resulting from an exploration work deficit.
Barrick alleged that Red Lake Gold had an obligation to maintain the claims based on a supposed good-faith demand under the exploration earn-in option agreement.
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Barrick Gold conducted 30K worth of exploration using LIDAR
A force majeure is a contractual clause that excuses a party from fulfilling its contractual obligations due to unforeseeable circumstances that are beyond their control. These circumstances include natural disasters, war, strikes, and other events that may prevent a party from performing its obligations under the contract.
Between November 1, 2021, and June 3, 2022, Barrick Gold conducted about $30,538 worth of exploration work at Whirlwind Jack through a lidar survey. This amount is relative to the government-prescribed annual assessment obligations for Whirlwind Jack, which are $416,800. The exploration work done by Barrick was intended for claims that were due to mature in May 2022, and the approval for it is still pending from the government of Ontario as of today.
On June 7, 2022, Red Lake Gold terminated the exploration earn-in option agreement with Barrick, citing various factors.
These include: Barrick’s failure to meet the force majeure threshold requirements. Also, insufficient exploration work to keep the claims of Whirlwind Jack in good standing and Barrick’s rejection of additional aerial surveys as eligible work expenditures.
Additionally, Barrick Gold demanded that Red Lake Gold use assessment credits for its exploration work for its own benefit, and asserted that Red Lake Gold had a contractual obligation to maintain the claims specifically for Barrick Gold.
Barrick also demanded that Red Lake Gold mitigate any damages Barrick might suffer due to claim loss at Whirlwind Jack.
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Red Lake Gold announced that it had reached a “termination and mutual release agreement” with Barrick, and would retain full ownership of Whirlwind Jack in a Wednesday press release.
The company stated that nothing from the original earn-in option deal remains and that a formal dismissal of the claim will be filed in the coming weeks at Barrick’s expense. Red Lake Gold claimed that Barrick did not perform any ground-based exploration at Whirlwind Jack, and that the matter is settled.
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