Kenorland Minerals (TSXV: KLD) announced on Monday that it has entered into a property option agreement with Barrick Gold (TSX: ABX; NYSE: GOLD) with respect to the company's South Uchi project in Ontario.
Under the option agreement, Barrick can earn an initial 70% interest in the project by spending a total of C$6 million on mineral exploration within six years, of which C$3 million are guaranteed expenditures within the first three years.
The gold major must also deliver an NI 43-101 compliant technical report on the project that establishes a mineral resource of at least one million ounces.
As part of its exploration expenditures, Barrick will reimburse Kenorland for its sunk costs in relation to the South Uchi project, as well as costs incurred in exercising an underlying option that comprises part of the project.
Following the earning of a 70% interest, Barrick and Kenorland will form a joint venture on the project, though Kenorland will have the option to forego a minority JV interest and immediately vest a net smelter returns royalty interest.
Should a JV be formed, Barrick will then have an option to earn an additional 10% interest in the project (for a total of 80%) by solely funding a feasibility study by the 10th anniversary of the option agreement.
The South Uchi project is located within the Birch-Uchi greenstone belt, covering over 65,000 hectares in the Red Lake mining district of Northwestern Ontario.
The property covers a portion of Confederation Assemblage volcanic rocks, as well as the boundary between the volcanic-dominated Uchi subprovince to the north and the sedimentary-dominated English River subprovince to the south.
The majority of gold deposits in the Red Lake district are located on the northern margin of the Confederation Assemblage. However, according to Kenorland, recent discoveries such as the LP Fault Zone on the Dixie project by Great Bear Resources highlight the prospectivity of the entire Confederation Assemblage along the southern margin of the Uchi subprovince.
In addition to the gold prospectivity, the company believes the project meets many of the criteria for potential lithium pegmatite deposits, including the presence of the large Alison Lake batholith (a fertile peraluminous granite), which is partly covered by the project.
Shares of Kenorland Minerals jumped 5.7% by 2 p.m. Toronto time. The Canadian mining junior has a market capitalization of C$34.3 million.
This article first appeared on Mining.com.