The Thompson Nickel Belt (TNB) is a geological region located in north central Manitoba known to host large deposits of nickel sulphides. Since discovery in the 1950s, the belt has produced more than four billion pounds of nickel from several mines operated at one point or another by either Inco Limited or Falconbridge Limited (now Xstrata Nickel). Two deposits owned and operated by Inco (Thompson and Birchtree) are currently in production.
CaNickel Mining Limited (Formerly "Crowflight Minerals Inc.") holds under option from Xstrata an interest in ownership of the second-largest land package in the TNB. Under the terms of a jointly signed Exploration Agreement ("Agreement") dated July 11, 2007, the Company has the right to earn a 100% interest in Xstrata's TNB Properties (formerly referred to as the TNB North and TNB South Exploration Properties), which includes approximately 580 square kilometers of exploration ground by incurring $13.2 million by December 31, 2013. In 2010, the Company was not able to fulfill the exploration expenditures requirements and entered into an Exploration Option Amending Agreement ("Amending Agreement") with Xstrata. Pursuant to the Amending Agreement, the Company paid Xstrata the amount of $500,000 in 2010 and is required to incur $12.7 million option expenditures before December 31, 2013.
The Company's 100% interest in the TNB is subject to a back-in right whereby should CaNickel outline a threshold deposit or deposits, each of which exceed 500,000,000 pounds of nickel in measured and indicated resources, Xstrata has the right to back-in for a 50% interest and become the operator of the threshold deposit or deposits by incurring expenditures on the property in an amount equal to two times the aggregate of all expenditures which were incurred by the Company in carrying out mining operations on the property prior to the back-in, provided that if Xstrata exercises more than one back-in right, then in calculating the required back-in expenditures for each subsequent back-in right expenditures relating to any previously exercised back-in right are excluded from such expenditure calculation.