On April 21, 2011, Sheltered Oak Resources Corp. announced that it had entered into an option agreement (“Option Agreement”) with Goldcorp Canada Ltd. (“Goldcorp”) and Goldcorp Inc. concerning the mining rights of certain leases located in Kerrs Township in the Larder Lake mining district (the “Property”) part of the Abitibi Greenstone Belt in northern Ontario.
The Property is held by the Porcupine Gold Mines Joint Venture (“PJV”) between Goldcorp and Goldcorp Inc. The LOI proposes entering into an option agreement that would give OAK the opportunity to earn a 60% interest in the Property by spending $2.6 million in exploration expenditures, completing 14,000 metres of core diamond drilling and making option payments of $150,000 prior to December 31, 2014, and issuing $900,000 worth of common shares of OAK prior to the exercise of the option. Pursuant to the Option Agreement, OAK would be committed to spending $1.1 million in exploration expenditures, completing 5,000 metres of core diamond drilling and making option payments of $100,000 prior to December 31, 2012, and issuing $300,000 worth of common shares of OAK prior to the second anniversary of signing the Option Agreement.
Once a 60% interest was earned by OAK, OAK and Goldcorp would enter into a definitive joint venture agreement. OAK would be the operator of the Property during the option term and remain the operator unless and until Goldcorp acquires a majority interest in the joint venture.
Upon OAK earning a 60% interest, Goldcorp may elect, within 90 days, to earn back from OAK a 20% interest in the Property by performing $2.6 million of exploration expenditures within two years of exercising its earn-back right. If Goldcorp successfully exercises this earn-back right OAK would then own a 40% interest.
Upon OAK earning a 60% interest and if Goldcorp does not exercise its earn-back right, following the expenditure of $5.2 million on joint venture operations on the Property, Goldcorp would have the right to exercise the right to acquire from OAK a 20% interest in the Property by paying OAK 125% of the aggregate of the total minimum qualifying expenditures incurred by OAK during the option period and OAK’s pro rata contribution to the joint venture expenditures. If Goldcorp successfully exercised this back-in right, OAK would own a 40% interest in the Property.
The Property is contiguous to the northwest boundary of OAK’s Kerrs Gold Property. Dome Exploration has explored the project area from 1977 to 1989 with fifty-five diamond drill holes totalling 10,279 m tested geophysical, stratigraphic and mineralized targets.