Xali Gold has signed a legally binding LOI with Rio Verde Resources, granting exclusive rights to explore and extract minerals from the El Oro mining concessions in Mexico.

The initial five-year agreement, with a possible five-year extension, involves a 3% net smelter return (NSR) to Xali Gold and retains Xali Gold's ownership of mineral bodies below the 2,400m level.

Rio Verde's initial focus will be on an exploration target identified in 1993 by Luismin-Hillsborough.

The LOI pertains to five specific mining concessions, with Rio Verde responsible for maintaining them in good standing, including payment of fees and government royalties.

In addition to the NSR, Rio Verde will fund the payment of concession fees and collaborate with Xali Gold to negotiate a payment plan for mineral rights fees owed to the Mexican Tax Authority.

Rio Verde also gains the right to appoint a board member and chair when holding more than 20% of Xali Gold's shares, subject to current board approval.

Xali Gold president and CEO Joanne Freeze said: “There couldn’t be a better time, since we acquired the property in 2006 and gold prices were much lower than the current $2,400 per ounce, to be monetising the mineralisation left behind in the historic workings and to be exploring for new mineral bodies.

“This new partnership will allow us to keep all the exploration upside we have demonstrated by our previous drilling underneath the historic workings, while we work together with Rio Verde to test exploration concepts and get underground access for future drilling as well as pay back our debts on the mineral rights.”