Nevada Sunrise Gold (TSX-V: NEV) CEO Warren Stanyer on Reversal of Nevada Water Rights Forfeiture & Promising Drill Results at the Coronado VMS Deposit

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest, joining me today is President & CEO of Nevada Sunrise Gold (TSX-V: NEV)(OTC: NVSGF), Mr. Warren Stanyer. Warren, how are you?

Warren Stanyer: I'm good, Gerardo. How are you doing, sir?

Gerardo Del Real: I am excellent. Thank you very much for taking time on very short notice. We just got news that there's been a reversal of the Nevada water rights forfeiture and a notice of an administrative hearing. So to provide a little color and context for those that are not familiar with this process and how the litigation's played out, can you talk a bit about what happened to your water rights here, a few years back, and why today's news is very important moving forward?

Warren Stanyer: Well thanks, Gerardo. What's really important for people to understand is that we followed the letter of the law. That is, we decided we needed a water right, we looked around, we contacted the owner of one that was of the appropriate size. The next step is to check the records at the Nevada Division of Water Resources at the State Engineer's Office. We checked the records. There was no warning letter that there was anything wrong with this water right.

Since 1995, the state followed a certain protocol, that if beneficial use of water was not filed with the state of a water right for four straight years, they would send you what's called the four-year letter: "Dear Sirs, You have not used water for four years. Therefore, you have one more year to use it or lose it." So this letter didn't exist.

Then we had an appraiser look at the water right. He gave it a value of $1.42 million, which is on the low side because there were no sales in Esmeralda County because Albemarle owns most of the water, like 20,000 acre feet. And the basin yield is calculated at 20,000 acre feet, so we were slightly over the basin yield that had been decided back in 1968. That's normal in Nevada to have an over-allocation.

So all that being said, we moved forward, we purchased it, and then we decided to move it down from the mountainside where it had been used and where the water comes from, down into the playa where we can then use it for lithium brine exploration and development. Pumping, testing, doing all the things that you do with the water right. Well that's when Albemarle filed a motion of forfeiture, saying that these people haven't used this water for years, state of Nevada.

So the state of Nevada agreed with them in November of 2016, before we had a chance to have a hearing, present evidence of water use. We were in the process of gathering declarations from various people that had used this water over the years. And all of a sudden, as we say in a capricious manner, the state forfeited the right. So that came as a big shock.

We've been fighting ever since, over two years. So here we are now, from court hearings in April and May of 2018, and then another one in August, we were finally granted a hearing on April 1st, 2019. That's when it's scheduled to begin. I hope that wasn't too long and rambling.

Gerardo Del Real: No, no. I think that context is important, and these are very important water rights. You mentioned the low end of the valuation. You can't say it, I will. I keep track of the market and what's going on in the basin there, and I can tell you that there's no way that in today's market that's going to be the value assigned to that permit. I will speculate, and again, leave it to me to do so, that the current value of that permit is much higher. So my guess is that between now and April, you will be doing everything in your power to make sure that you are prepared for this hearing. Correct, Warren?

Warren Stanyer: That's right, there's a number of steps that you go through in the judicial process. In this case to prepare for the hearing, you present your witness statements, various evidence has to be exchanged between the parties. And you have to realize that we're not just up against the state of Nevada. This is Albemarle intervened in this case, and was legally allowed to intervene. It has been an uphill battle for us, literally a battle, to get this hearing. We're pleased that we're finally allowed to present our evidence, which we were denied back in 2016.

Gerardo Del Real: Now, your case isn't the only case where permits, or rights I should say, were forfeited. Recently, similar cases have been reversed on appeal and the permits have been granted back to the petitioners. Is that correct?

Warren Stanyer: Yes, it's my understanding, and I can't quote the names of each case, but in several cases where the State Engineer forfeited rights without issuing a four-year letter, those have been overturned. And therefore, then they issue the four-year letter, and then the people that own the right have a year to respond to provide water use evidence. And if you don't, but you're working on something, you can apply for an extension. And this is commonly done in Nevada, if you've got a valid reason to ask for the extension, it's usually granted. It would be rare not to get it if you had hard proof that there was something going on, a mine plan, or some use for the water, it's just taking a bit longer, funding, financing, etc.

Gerardo Del Real: Excellent. Well, I will go ahead and speculate on the record that there's likely several interested parties in these water rights, including Albemarle. And I think it would be in their best interest, obviously, to proceed in a way that is fair, factual, and we'll leave that at that. Right?

Let's pivot a little bit. Let's talk about the other recent bit of news, which was Coronado. You hit a lot of smoke. It looks like you're close to fire. We talked last time about why Coronado is such a prospective property. Your thoughts moving forward? Because my guess is, and again, I'll let you tell it, but my guess is that you feel like that target merits more testing. And let me be clear to everybody, this is a district-scale play. There are multiple targets on the property. We're talking about just one now that it looks like you just missed on.

Warren Stanyer: Well, that's the opinion of our geologists and even people that I don't know, that talk about it, see the rocks that we describe, people that are familiar with these types of deposits in Nevada, which are quite rare. But Big Mike was an unusual one, that's the small high-grade VMS deposit to the south of us.

When that was found, VMS was still a category of deposit that was being worked on, was being theorized about. There was the Kuroko deposits in Japan, which were still being explored and discovered and through the 1960s. Big Mike was found in 1969. So for Nevada, it's a bit of a rarity but the people that know, and know these types of deposits, they say we're in the right rocks. We've got the anomalies from the airborne systems that genuinely find these types of deposits, massive sulfide responses.

So, we had planned on a three-hole test. We only had time to do one before Christmas. You can't expect people to work right through the holiday season, so we put down the tools and we're preparing to go back. The BLM [Bureau of Land Management] has been closed, we have to do a permit modification, and build a small access road. As soon as we get that straightened out – and of course the government shutdown didn't help ­– then we hope to be back there in the spring.

Gerardo Del Real: Excellent. Full disclosure, I'm biased. I've participated in the last two financings. I am more than happy to write another check if that helps move forward plans to drill test the target in the next several months. Anything else that you'd like to add, Warren?

Warren Stanyer: Well, I think that our company is in a great jurisdiction. Nevada's one of the best places to explore in the world. It never fails to amaze me that the types of minerals that are available. We're looking at vanadium properties as well, not that we'll take one on. We don't know much about vanadium, but they're in Nevada. Cobalt's in Nevada. There's VMS deposits in Nevada. And then there's gold.

So we have Kinsley Mountain, there will be drilling there by Liberty Gold, listed on the TSX, our partner at Kinsley Mountain, our 79% partner. There will be more drilling at the western flank, and we look forward to some high-grade intersections there. If they're there, then Liberty Gold will find them.

Gerardo Del Real: Well, that's a lot going on. Again, for a company with a market cap of approximately $3.6 million Canadian, Warren, I think you're a nice guy. But I'm not writing checks because I think you're a nice guy. I think my checks and my shares and certificates will be worth a whole lot more at the end of 2019. Hitting at Coronado would be a heck of a way to start the year.

Warren Stanyer: It sure would be. And we appreciate your support, Gerardo.

Gerardo Del Real: Thanks again for the time today, Warren. You have a good one.

Warren Stanyer: You're welcome, have a great day.

Click here to see more from Nevada Sunrise Gold