KAT Exploration Inc (KATX)

[Rick-UK]

The way you have explained this deal is technically accurate yet nevertheless could be misleading for some here.

What this deal with VALE means for KAT Exploration is that VALE will assume the exploration costs at Lucky up to $750,000 - money that is relatively easy for them to find compared to for us. This means that VALE will take on all the risk at Lucky and we can focus our own finances on our other properties.

In return for this, if VALE do find an economic deposit at Lucky then they can take up their option for anything up to 80% of Lucky. Whatever % they take up they will also need to meet that % of the development costs.

Worst case scenario for KAT is that VALE do not find anything at Lucky - but at least it will not have cost us multiple $100k to find this out. The down side is that by moving the risk and cost from us to VALE we have also had to part with up to 80% of the potential value of Lucky if something is found there. OTOH we retain at least 20% and only have to meet that proportion of any development fees.

Is it the best deal ever in the world of junior exploration? No probably not, but neither is it a bad deal. It's a deal that gives us the potential of many tens of millions of dollars revenue down the line for Lucky, yet it will cost us little or nothing further in exploration.