Questcorp Mining has signed a letter of intent (LOI) with Riverside Resources (RRI) to acquire a 100% interest in the La Union project in Sonora, Mexico.
This agreement stipulates that Questcorp will invest $5.5m into the project over four years, with Riverside receiving $100,000 and a 19.9% stake in Questcorp.
The La Union project, previously operated by Penoles Mining Company, is a high-grade gold-zinc district with a history of drilling and mining.
Riverside has consolidated multiple production centres over five years, now controlling more than 22km² of favourable limestone host rocks and numerous drill-ready target areas. The Union and Famosa Mines are among the key immediate target areas.
Questcorp's acquisition of the project is contingent upon a series of cash payments totalling $100,000, the issuance of 19.9% of Questcorp's outstanding common shares and a commitment to $5.5m of exploration expenditures.
Riverside will continue to operate the programme during the option term, with support from its team in Hermosillo, Sonora, and Vancouver, Canada.
Upon option exercise, Riverside will retain a 2.5% NSR royalty on commercial production from the project.
Riverside said its exploration over the past year has enhanced the understanding of the project's geologic potential, including the possibility of a deeper Laramide-age porphyry Cu-Au target.
Recent surface sampling has continued to reveal gold, and tailings from past operations have indicated extensive gold zones in oxide ores.
The completion of the transaction with Questcorp is subject to several conditions including definitive documentation, a concurrent financing of at least $1.5m by Questcorp, regulatory approvals and other customary closing conditions.
Riverside has already received an initial payment of $12,500 and expects a second payment upon signing the definitive agreement.
Riverside president and CEO John Mark Staude said: “We are excited to partner this top-quality project, consolidated and worked up by Riverside. To now work with Questcorp to go forward with the exploration programme and continued development is an excellent collaboration and fits both companies' business models.”
