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Graphite One Resources Inc.(TSXV:GPH,OTCQX:GPHOF) reported that its wholly owned subsidiary, Graphite One (Alaska) Inc., executed a definitive long-term lease agreement with Kougarok LLC for its 24 unpatented federal mining claims. These 24 claims, and certain adjoining state mining claims already owned by the Company collectively make up Graphite One’s Graphite Creek Property.
As quoted in the press release:
Kougarok LLC, a member-managed Alaska limited liability company, optioned the Leased Claims to the Company in 2012. Key provisions of the final Lease include the following:
- Term: an initial 20 year term, commencing effective as of January 1, 2014, with provisions to extend for two successive 20 year periods and, ultimately, for as long as production continues from the Property.
- Advance Royalty: US $30,000 paid upon execution of the Lease and US $30,000 payable on or before January 1 and every anniversary through January 2019, then increasing by US $10,000 each year thereafter until production commences. All advance royalties paid may be recouped from production royalties.
- Production Royalties: a percentage of the net smelter returns on production derived from lands, as follows: from lands in the 4 federal claims located in 1943 (the “Oldest 4 Federal Claims”) – 5%; from lands within the other 20 federal claims (the “Other Federal Claims”) – 2.5%; from lands within state claims staked by the Company within the area of interest – 5%; and from lands within state claims acquired by the Company within the area of interest– 2.5%. The Company has the option during the Lease term to reduce all production royalties by up to 2% by paying US $2 million for each 1% reduction.
- Conditional Relinquishment: the Company may elect to relinquish one or more of the Leased Claims and thereafter to rely on its state mining claims, under the terms set forth in the Lease.
The Company announced on March 3, 2014, that it had earned the right to enter into the Lease as a result of having satisfied its obligations under the Graphite Creek Option Agreement with Kougarok LLC. The Company estimates that over 90% of the 17.95 million tonnes of indicated resources (grading 6.3% graphitic carbon using a 3% Cg cut-off grade) announced on March 17, 2015, are situated within the Oldest 4 Federal Claims.
The United States Department of the Interior, Bureau of Land Management (“BLM”) has advised Graphite One that the 20 Other Federal Claims were located when federal claims could be initiated only for “metalliferous minerals” and graphite is not a metalliferous mineral. The State of Alaska has selected all of the lands within the Leased Claims, however, and Graphite One owns the senior state mining claims covering the same ground. As a result, if any of the Leased Claims are abandoned or relinquished, the State of Alaska can acquire the affected lands as part of its statehood entitlement and recognize Graphite One’s state claims as the senior state claims covering the new state lands. Under the State’s mining law and the current land status, the Company’s Owned Claims, as the senior state claims on the ground, would automatically extend to the new state lands formerly within any abandoned or relinquished federal claims, and the Company would enjoy rights similar to those granted by the federal mining law to the holders of valid federal claims, including the exclusive right to mine and remove the graphite resources contained within such lands, subject only to certain royalties owing to the State of Alaska and Kougarok and others recognized by the Company.
The Company’s Owned Claims comprise 28 state mining claims acquired by the Company in January 2012 (the “Acquired State Claims”) and 77 state claims originally staked by the Company in 2012. In September 2014, a competing claimant advised Graphite One that he believed the 28 Acquired State Claims had been improperly located and thus junior to his 28 state mining locations made later, in October 2012, on the same lands. This competing claimant has alleged that the locator of the 28 Acquired State Claims was not qualified to locate the claims and that such locations were therefore null and void from the beginning, as opposed to being merely voidable until they were acquired in January 2012 by the Company (an Alaska corporation qualified to own state claims).
Graphite One has investigated the allegations of the competing claimant and believes that the best interpretation of the state law relating to qualifications as applied to this situation is identical to that which would follow if federal mining law applied in this situation, namely that (a) state mining locations made by an unqualified person are voidable, not void, and (b) acquisition of such locations by a qualified owner such as Graphite One (Alaska) Inc. cured any defect in the locations due to the original locator’s lack of qualifications. Graphite One will vigorously assert its rights as against this or any other competing claimant, if the matter cannot be resolved by agreement.
Click here to read the Graphite One Resources Inc. (TSXV:GPH,OTCQX:GPHOF) press release
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