In the terms of the agreement, FMMP has the exclusive right and option to acquire a 70% ownership interest in the Cave Peak project by paying 2011 land holding costs on behalf of Quaterra and by subsequently spending $5m on exploration over four years ending in 2015.
Except for the 2011 land holding costs, which are a firm commitment, all other exploration expenditures are optional.
Upon FMMP earning a 70% interest in the Cave Peak project, the parties have agreed to joint venture further exploration and, if warranted, development of the project on a 70/30 basis with FMMP either funding Quaterra’s share of costs through to delivery of a bankable feasibility study or converting its interest to a 1% net smelter returns royalty if it determines not to deliver such a feasibility study.
The joint venture will be on standard terms including dilution for failure to contribute a party’s share of costs, and FMMP will be the initial operator under the joint venture.
The Cave Peak property covers 523.7 acres located 35 miles north of Van Horn in Culberson County, Texas, and includes all or parts of three breccia pipes, one of which was drilled in the 1960s by Union Carbide Corporation and contains significant molybdenum mineralization.
