Mineral exploration option agreements (also known
variously as "option agreements", "earn-in
agreements" or "farm-in agreements") are agreements
which have not often been examined by our courts. The recently
decided British Columbia Court of Appeal decision in Illidge v. Sona Resources
Corporation ("Illidge") illustrates a
number of points to keep in mind when negotiating and drafting
these agreements.
The Decision: Illidge v. Sona Resources
Corporation
Illidge concerned two option agreements (the
"Agreements") that were entered into in 2002 between Sona
Resources Corporation ("Sona") and the owners of several
mineral properties (the "Owners"). Under the Agreements,
the Owners granted Sona options to acquire full ownership of the
mineral properties. Sona's right to exercise the options was
subject to the satisfaction of certain conditions, including
payment of a yearly advance royalty and completion of a
"bankable-quality" feasibility study. Sona paid
