PROJECTS - Patagonia
The CVSA Agreement
The CVSA agreement provides Exeter with the exclusive right to acquire a 100% interest in the 39 properties contained in the four projects by incurring exploration expenditures of US$3 million over five years, with minimum expenditures in years one and two of $250,000 and $500,000, respectively, followed by $750,000 in each of years three through five. Exeter completed a legal due diligence review over of the Properties in March, 2004. The agreement does not require Exeter to issue shares or make any cash payment to CVSA, other than a signature fee of US$100,000 which was paid in March and September, 2004.
Exeter exercised its option in 2007, having spent the required US$3 million on exploration. When Exeter drills 10,000 metres on any of the four projects, CVSA has the right to back into a 60% interest in that project by paying Exeter 2.5 times Exeter's expenditures on that project and carrying Exeter to the completion of a bankable feasibility study. CVSA may earn an additional 10% project interest (to bring its total interest to 70%) by financing Exeter's share of mine development costs (to be repaid at an agreed rate). Should CVSA not elect to back into a project, its interest will convert to a 2% net smelter return (NSR) from production on that project.
Exeter completed the required drilling of 10,000 metres on the Cerro Moro Project in early August, 2007. Following data collation and receipt of drilling assays, Exeter delivered CVSA a detailed report on that 10,000 metres of drilling in early September. CVSA advised in October 2007 that it would not exercise its back-in right. Under the terms of the CVSA Agreement, Exeter then acquired 100% of the Cerro Moro project. CVSA retains a 2%NSR.
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