Dangers Of A Self-Drafted Letter Agreement

Court Unwilling to Impose a Reasonableness Limit on Expenditures

Exploration expenditures incurred to earn into a mining claim did not have to be reasonable, the B.C. Court of Appeal recently held in American Creek Resources Ltd v Teuton Resources Corp, 2015 BCCA 170 [American Creek], in interpreting a short letter agreement drafted without counsel.

In American Creek, Teuton Resources Corp., a mineral "prospect generator" company, entered into an option agreement with American Creek Resources, whereby American Creek would earn a 51-percent undivided interest in a mineral claim upon making "exploration expenditures" of $5,000,000. American Creek incurred over $5,000,000 in expenditures from 2007-2009 and included these amounts in assessment reports accepted by the B.C. Mineral Titles Branch. When American Creek sought to trigger its 51-percent interest, Teuton refused, asserting that some of the expenditures were unreasonable because, in part, of an alleged "lack