Newmont and Kirkland Lake Gold announced on Aug. 18 the signing of a strategic alliance agreement facilitating exploration opportunities within Kirkland Lake’s Holt Complex and Newmont’s Timmins properties.

According to Kirkland Lake, the agreement will allow both companies to cooperate in identifying regional exploration opportunities in the area, which they would be able to advance together as well. Kirkland Lake will take on the role of manager of strategic alliance activities in the partnership.

Back in July, Kirkland Lake announced that it would be suspending operations at the Holt Complex indefinitely after initially being halted in April due to COVID-19 and announced plans to offer severance packages to over half its employees at the complex. The company said that Holt’s future was in question even before the pandemic, as high costs and lowering grades were resulting in negative cash flows.

At the time, Kirkland Lake CEO Tony Makuch said, “going forward, [the company] will continue to review strategic options for the Holt Complex properties, including the potential for additional exploration activities in the area.”

Related: Over 200 employees at Kirkland Lake Gold’s Holt complex have been reassigned to new positions as the company keeps operations suspended

In exchange for access to its Timmins, Ontario, properties, the agreement allows Newmont to pay Kirkland Lake US$75 million to acquire an option on certain mining and mineral rights at Kirkland Lake’s Holt mine which, according to Newmont, can be exercised “only in the event Kirkland intends to restart operations at the Holt mine and process material subject to the Holt royalty.” The option will only cover the Holt mine, and does not include the other Holt Complex assets such as the Holloway and Taylor mines.

Kirkland Lake will also be able to assume Newmont’s obligations under the royalty at any time, in which case the option would terminate. According to Newmont, this allows it to have no additional liability on the royalty.

The benefit of this arrangement, according to Newmont, is that the company expects to remove a liability for the Holt royalty worth approximately US$350 million, which would result in a gain of US$275 million in net income for Newmont’s third quarter.

As for Kirkland Lake, Newmont says that the alliance will provide them with the capital needed to continue “[to evaluate] strategic alternatives for the future of the Holt mining complex, explore on its existing properties, and evaluate other regional opportunities where Kirkland and Newmont may cooperate in the future.”