Riverside sees latent potential in Mexico

VANCOUVER — During a period when junior explorers are feeling a cash crunch and limiting expenditures, Vancouver-based Riverside Resources (RRI-V) is notably busy in its capacity as a project generator and early-stage explorer. With a focus on Mexico, the company believes its exploration model may lead to a second generation of discoveries in one of the world’s most active mining jurisdictions.

Perhaps the biggest advantage Riverside enjoys is an alliance agreement with Cliffs Natural Resources (CLF-N), which allows the junior access to exploration funding in pursuit of iron-oxide gold (IOCG) deposits throughout Mexico’s western provinces. Riverside announced on July 31 that Cliffs had agreed to extend the agreement for an additional year — including a funding contribution of $750,000.

“We’re doing generative exploration under the Cliff’s alliance in Baja at the moment,” explains Riverside’s vice-president of exploration Howard Davies during an interview. “It extends through the majority of the state of Baja California. Before we stake we’ll identify multiple opportunities and present them before we decide whether they’ll become designated properties, at which point we look at exploration budgets.”

Davies is a relatively new addition to Riverside’s team, having joined the company in May 2011 after he moved back into the junior sphere following terms with major companies AngloGold Ashanti (AU-N, AGG-A), Teck Resources (TCK.B-T, TCK-N), and Falconbridge.

Riverside’s early-stage activities include mapping, stream sediment sampling, and airborne geophysics typical amongst junior explorers, but the partnership with Cliffs comes into play once the company finds a promising drill target.

Davies uses the La Huerta target in Jalisco province, Mexico, as an example. After Huerta was identified as a potential project, Cliffs supplied Riverside with US$330,000 to complete a 5-hole drill program over 1,086 metres.

“The results were not spectacular, so we turned it over,” Davies comments. “For us it’s a process and a long-term commitment. It’s that procedure where if you get it running smoothly, and we have, you’ll turn it over and find those successes eventually. We don’t live or fall on one project.”

Under the alliance agreement Cliffs has an option to label a “designated property” with Riverside, wherein the major company can opt to earn up to a 70% interest by spending US$4 million in exploration, completing 3,000 metres of drilling over a four-year period. Cliffs can then increase its interest to 90% by bringing the project to the bankable feasibility stage within a subsequent four-year term. Assuming Cliffs advances the project to the 70% level and then opts out of the agreement it would owe Riverside a one-time payment of US$2 million.

“We’re hoping to have another presentation for Cliffs in October,” Davies continues. “We’re looking at setting up a constant pipeline of prospective projects we can get to them. The benefit for us is that we’re running a business development and geographic information system analysis in both our Vancouver and Mexican offices, so those complement each other and support our results.”

Next up in the pipeline is the Naranjo target, which is located in close proximity to Huerta along the same IOCG belt. Davies says Riverside is aiming at a drill campaign at Naranjo by the fourth quarter after the company identified a series of discrete airborne anomalies.

A big part of Riverside’s strategy is to move away from outcrop-based exploration and look more closely at anomalies that lie under surface cover. According to Davies, the extent of Mexico’s exploration history means a lot of the surface mineralization has already been identified, though that leaves opportunity to look at less obvious targets that previous exploration campaigns may have overlooked due to costs or technology restraints.

“We view the ground cover as a positive for us,” Davies says. “The benefit of working with a major company is that they have the funds and the vision to look at larger targets under cover, whereas that can be difficult for juniors. We can find these good magnetic targets under cover and drill them, with the pipeline continuing to feed in potential projects.”

And that exploration strategy carries over to Riverside’s own portfolio of gold prospects in Mexico’s northern Sonora state. The company is assembling a land package with a different outlook than some of its peers, focusing on areas of strong mineralization and structure that may have been overlooked due to a lack of outcropping. The goal is to develop a system of low-cost techniques that allow for exploration despite any overburden. Davies says he believes there may be a “second generation of deposits in Sonora that are just waiting for discovery.”

Riverside is developing drill targets at its Tajitos property along the Sonora-Mohave megashear, where it has identified alterations and anomalous geochemistry. Magnetics have shown not only major intersections of north-west trends, but also subsidiary trends heading north-east. The company is aiming to have a drill turning on the property by early 2013.

Farther southeast sits Riverside’s Sierra Salada property, which is close to a number of historic placer mining operations.

“It is a nice package that is hosting known historic workings,” Davies comments. “The targets we have are developing well. We’ve had some good grab sample numbers around there that lead us to believe we might be looking at a source for the placer activity. Other companies have mapped east-west shear zones that extend onto our property as well, both on surface and under cover.”

Riverside remains in a solid cash position with US$9 million in the bank, and Davies says the climate for early-stage project acquisitions is promising as other juniors run into capital shortages. The company maintains a tight equity structure with 35 million shares outstanding, and has traded in the 60¢ to 70¢ range over the second quarter on average daily trade volumes of 20,000 shares.