Riverside forges alliance with Hochschild in Sonora

VANCOUVER — Vancouver-based project generator Riverside Resources (RRI-V) continues to add to its stable of strong partnerships in Mexico following a $2.5-million strategic alliance with London-based precious metal producer Hochschild Mining (HOC-L).

According to Riverside president and CEO John-Mark Staude the company’s existing property portfolio in Sonora — along with its experienced technical team and established exploration pedigree — made the partnership a natural fit for an outfit like Hochschild that was looking to fund exploration in a region that is cementing itself as a politically stable and prolific precious metals district.

Under terms of the alliance Hochschild will provide Riverside with $750,000 annually over a three-year period, with generative exploration efforts focused on the Mojave-Sonora Megashear belt, which currently hosts Fresnillo (FRES-L) and Newmont Mining‘s (NMC-T, NEM-N) Herradura gold-silver operation, as well as Timmins Gold‘s (TMM-T, TGD-X) San Francisco gold mine.

“We have three general strategies for the budget this year,” Staude says, adding that Riverside expects to start presenting proposals to Hochschild in the second quarter.

“One involves identifying grass-roots opportunities in areas that we already know about and are interested in staking and acquiring. The second involves taking that money and putting it towards developing business deals with potential partners,” he continues, explaining that the company has signed confidentiality agreements and maintains a short list of roughly five to eight prospective companies. 

“And the third avenue revolves around geochemistry and geophysics where we’re working with and compiling government data, as well as developing our own,” he concludes.

Assuming Riverside makes a discovery during its exploration activities Hochschild can opt to label a property as a “designated project”, which triggers an earn-in agreement wherein it must spend a minimum of $5 million in exploration within a four year period in order to lock down a 65% interest. If that earn-in is completed, Hochschild would then pay Riverside a one-time payment totalling $3 million and the project would proceed as a conventional joint venture.

Staude outlines three main elements that make Sonora such an attractive and highly prospective target for the Riverside-Hochschild alliance. The first revolves around the Sonora Megashear belt, which is beginning to emerge as a potentially prolific production area with long-term mining opportunities for developers.

The second element involves socio-political stability and ease of operations. In many areas of Mexico companies can be confronted with security issues as well as drought conditions or other environmental challenges, but Sonora remains an attractive jurisdiction with a strong safety record combined with a good working environment that can make exploration and development more cost effective.

The final consideration is a new geological model in Sonora that envisions larger orogenic or shear-zone gold systems that could lead to major discoveries in the ten to fifteen million ounce range. Staude draws comparisons to the recent exploration shift in the Yukon, and explains how major producers have often founded high-grade mining operations in orogenic-style systems.

Riverside is in the process of developing an exploration toolbox geared towards outlining similar systems in regions of Sonora where the majority of mineralization occurs under cover, with very limited outcrop.

“You need a major partner to pursue that type of exploration under cover, and I think that is really where the future lies in Sonora. When it comes to targets like that one of the things you focus on is trying to determine just how thick the cover is you’re dealing with,” Staude explains, pointing out it is often a cost-intensive exercise.

“We’ll use reverse-circulation drilling with some of the electrical geophysics to at least get some idea of how deep it is to bedrock. Then you drill on wide spacing for geological information. Once we can identify the geologic units and begin making a map under cover, we can look for structure and alteration before drilling for grade,” he finishes.

The project generation model has allowed Riverside to maintain a healthy cash position, with roughly $7 million at the time of writing. The company has also managed to avoid equity dilution, which has led to just 35 million shares outstanding at the time of writing and a $15 million press-time market capitalization. Riverside jumped 10% or roughly 4¢ per share following news of its alliance with Hochschild before closing at 44¢ on Apr. 16.