Midland Exploration Inc. executed an alliance agreement between Midland, its wholly-owned subsidiary, Midland Base Metals Inc., and Rio Algom Ltd., a subsidiary of BHP. The alliance’s main objective is to identify, test and develop high-quality exploration targets to find new significant nickel deposits within the Nunavik territory, Quebec. The new alliance’s initial funding will be provided by BHP.
BHP and Midland are combining their efforts by forming a technical steering committee and pooling their large historical databases, including geological, geophysical and geochemical data.
During the first phase of the alliance, BHP will fund at 100%, up to C$1.4 million on an annual basis for a minimum of two years. Midland will act as operator.
The main objective is to generate, identify and secure exploration projects to be advanced to a drill-ready stage through further exploration work. BHP may propose additional exploration work for up to C$700,000 before advancing an identified project to the second phase.
Following the first phase, one or more specific exploration targets may be advanced to a second phase to be further developed as a separate designated project. Each designated project will have its own work program and budget to test and further develop the identified targets, mainly through drilling. Midland will act as operator during the testing phase, subject to BHP’s right to become the operator of any designated project.
For each designated project, the testing phase will last up to four years, with a total budget of up to C$4 million with a minimum of C$700,000 to be spent during the first year.
During this second phase, BHP and Midland will fund 75% and 25%, respectively, for approved work programs. For each designated project, BHP will pay Midland a designated project fee: C$250,000 on or before the first anniversary, C$250,000 on or before the second anniversary and C$500,000 on or before the third anniversary, of the testing phase, for a maximum of C$1 million per designated project.
BHP has the right to cease contributing its share of the funding of a designated project in which case Midland would have the right to retain a 100% interest of the designated project and BHP would receive a net smelter returns royalty interest.
BHP may decide to advance any designated project to the third phase as a (70/30, BHP: Midland) joint-venture project. Both parties would contribute to the expenses pro-rata to their participating interests. BHP would be the operator for all JV projects. For each JV project, BHP will pay to Midland a joint venture success fee of C$200,000 after the formation of the JV. If a party’s participating interest in the JV is diluted below 10%, the interest would be converted into a net smelter returns royalty interest.
