Amendment to Exploration and Mining Lease for Calista’s Donlin Creek PropertyOn March 4, 2010, it was announced that Calista Corporation and Donlin Creek LLC (DCLLC) have come to an agreement on an amendment to the 1995 lease for subsurface and surface rights in connection with the Donlin Creek property.
Four specific terms in the amendment are of note:
1) Calista Corporation is now leasing an additional 12,000 acres to DCLLC. Because the project was in the early stage of exploration at the time of the original agreement, the mine's layout and conceptual design were not complete. The additional acreage will allow for roads, mill and other related infrastructure needed for the mine to be developed and operate.
2) The lease terms are extended until April 30, 2031. This extension provides additional time to conduct exploration, permitting and development activities as well as production. As long as mining operations are carried out in good faith the lease will continue to be extended. If operations are not carried out, then DCLLC may extend the lease past April 30, 2031, by paying Calista an advance minimum royalty of $3,000,000 (subject to adjustment for increases in the Consumer Price Index) for each such year.
3) Calista Corporation has negotiated additional royalty payments. The original lease includes a net smelter royalty which provides for royalty payments when the mine is operational. This net smelter royalty provision remains unchanged in the current lease and Calista has been receiving advance minimum royalty payments since 1995. The original lease also provided for an option for Calista to "buy into" a portion of the project. Calista has chosen to exchange this option to receive an eight-percent net proceeds royalty once capital, operational and certain carrying costs are recovered.
4) Calista will receive increased advance minimum royalty payments from Donlin. Advance minimum royalty payments to Calista prior to production have increased and will continue to escalate until production begins. The lease amendment also provides an increase in minimum payments during production.
"The Calista Corporation Board of Directors approved these amendments to the 1995 lease agreement because they maximize our Shareholders' reward, minimize the corporation's risk and provide for responsible development of our natural resources," said Calista Board of Directors Chairman Art Heckman. The Donlin Creek project is significant to the Alaska's future and has the potential to provide income, jobs and capital to the Region and all Alaska Native Claims Settlement Act (ANCSA) regional and village corporations across the state. All royalty revenue is subject to ANCSA 7(i) revenue sharing.
Posted: March 15, 2010
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