Riverside, Hochschild forge alliance

VANCOUVER — Vancouver-based project-generator Riverside Resources (RRI-V) is adding to its partnerships in Mexico with a $2.5-million alliance with London-based precious-metal producer Hochschild Mining (HOC-L).

According to Riverside president and CEO John-Mark Staude, Riverside’s property portfolio in Sonora, its experienced technical team and established exploration pedigree make it a natural fit with Hochschild, which has been looking to fund exploration in a relatively stable and prolific precious metals district.

Under the alliance Hochschild will provide Riverside with $750,000 annually over a three-year period, with grassroots exploration efforts focused on the Mojave-Sonora megashear belt, which 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-N) San Francisco gold mine.

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

“One involves identifying grassroots 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 says the company has signed confidentiality agreements and maintains a short list of prospective companies.

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

If Riverside makes a discovery under the alliance, Hochschild can opt to label a property as a “designated project,” which triggers an earn-in agreement wherein it must spend at least $5 million on exploration within four years to get a 65% interest. If it completes this earn-in Hochschild would make a one-time, $3-million payment to Riverside, and the project would become a conventional joint venture.

Staude argues there are three reasons why Sonora is attractive to the Riverside-Hochschild alliance.

The first concerns the Sonora megashear belt, which is emerging as a prolific production area with long-term mining opportunities for developers.

The second reason is 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 has a relatively strong safety record and good working environment, which makes exploration and development 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 range of 10 to 15 million oz. gold.

Staude draws comparisons with the recent exploration shift in the Yukon, and points out that major producers have often established high-grade mining operations in orogenic-style systems.

Riverside is developing a modus operandi for exploring similar systems in Sonora where most precious metal mineralization occurs under cover, with 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 says, adding that it’s often a costly 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 identify the geologic units and begin making a map under cover, we can look for structure and alteration before drilling for grade,” he says.

At press time, Riverside had a $7 million in cash and 35 million shares outstanding for a $14-million market capitalization. The company jumped 10% — or 4¢ per share — after news of its alliance with Hochschild, before closing at 44¢ on April 16. At press time shares traded at 40¢.