MINERAL PROPERTY INTEREST

3 Months Ended

Mar. 31, 2022

Extractive Industries [Abstract]

MINERAL PROPERTY INTEREST

3. MINERAL PROPERTY INTEREST

The Company’s mineral property interest was in a group of thirty-one claims known as the “Goldfield Bonanza Project” (the “Property”), in the State of Nevada. Pursuant to an option agreement dated October 14, 2014, as amended October 31, 2019 (“Option Agreement”), with Lode-Star Gold INC. (“LSG”), a private Nevada corporation, the Company acquired an initial 20% undivided interest in and to the mineral claims owned by LSG and an option to earn a further 60% interest in the claims. LSG received 35,000,000 shares of the Company’s common stock and is its controlling shareholder. Until the Company has earned the additional 60% interest, the net smelter royalty will be split 79.2% to LSG, 19.8% to the Company and 1% to the former Property owner.

The exercise of the 60% option was segregated into two separate 30% options, such that the Company may earn a 30% interest in the Property (for a total of 50%) (the “Second Option”) by completing the following actions:

● paying LSG $5 million in cash from the Property’s mineral production proceeds in the form of a NSR royalty (the “Initial Payment”);

● paying LSG all accrued and unpaid penalty payments under the Option Agreement;

● repaying to LSG (i) all loans, advances or other payments made by LSG to the Company and (ii) all expenditures on the Property funded by or on behalf of LSG until the date on which the Initial Payment has been completed; and

● funding all expenditures on the Property until the date on which the Initial Payment has been completed.

Following the exercise of the Second Option, the Company may earn an additional 30% interest in the Property (for a total of 80%) (the “Third Option”) by completing the following actions:

● paying LSG a further $5 million in cash from the Property’s mineral production proceeds in the form of an NSR royalty (the “Final Payment”); and

● funding all expenditures on the Property from the date on which the Second Option is exercised until the date on which the Final Payment has been completed.

If the Company fails to make any cash payments to LSG within one year of the date of the option agreement, it is required to pay LSG an additional $100,000, and in any subsequent years in which the Company fails to complete the payment of the entire $5 million, it must make quarterly cash payments to LSG of $25,000.

On January 11, 2017, LSG agreed to defer payment of all amounts due in accordance with the mineral option agreement until further notice, however $25,000 per quarter plus interest on amounts due will still be accrued. On January 17, 2017, the Company and LSG agreed that as of January 1, 2017, all outstanding balances shall carry a compound interest rate of 5% per annum. It was further agreed that the ongoing payment deferral shall apply to both interest and principal. The total amount of such fees due at December 31, 2020 was $623,913, with total interest due in the amount of $88,716.

Termination of the Option Agreement

On January 14, 2022, the Company executed a settlement and termination agreement (the “Settlement Agreement”) with LSG to terminate the Option Agreement between the parties. Pursuant to the Settlement Agreement, the Company and LSG have agreed to the immediate termination of the Option Agreement (other than certain standard provisions that will survive according to their terms), with the result that the Company will return its 20% undivided interest in and to the Property to LSG. In exchange, LSG agreed to forgive all amounts owing by the Company to LSG under the Option Agreement, which includes $2,246,146 in accrued, unpaid penalties and other payments. The Settlement Agreement also includes a broad mutual release.

The full terms of the Settlement Agreement were agreed to between the parties prior to December 31, 2021, with the formal execution to be completed as soon as the documentation was prepared. Therefore, the impact of the Settlement Agreement was reflected in the financial statements for the year ended December 31, 2021, to most accurately report the Company’s financial position on December 31, 2021.