Xali Gold Corp. ("Xali Gold" or "the Company") announced that it has signed a legally binding Letter of Intent ("LOI") with Rio Verde Resources ("Rio Verde") concerning portions of five mining concessions within the El Oro Mining District ("El Oro 5 Concessions") in the states of Mexico and Michoacán de Ocampo, Mexico.
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In exchange for paying Xali Gold a 3% Net Smelter Return ("NSR"), Rio Verde has been given the sole right to explore and mine gold, silver, and any other economically valuable minerals that may be found above the 2400 m level in the historic workings covered by the El Oro 5 Concessions. The initial contract has a five-year term that can be prolonged for an extra five years, provided that Xali Gold receives benefits of $1 million annually. All mineral bodies found or defined below the 2400 m level are owned exclusively by Xali Gold.
There couldn’t be a better time, since we acquired the property in 2006 and gold prices were much lower than the current $2400 per ounce, to be monetizing the mineralization left behind in the historic workings and to be exploring for new mineral bodies. Rio Verde is well known for their ability to get into production in record time, to make good profits, and to discover mineral deposits.
Joanne Freeze, President and CEO, Xali Gold Corp.
Joanne Freeze adds, “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.”
Rio Verde's Keith Piggott has highlighted that the exploration target Luismin-Hillsborough identified in 1993 will initially be the primary focus of their production. The Hillsborough Luismin 762,000 ounces ("ozs") of gold ("Au") and 9.8 million ounces of silver ("Ag") (6.89 million tons grading 3.44 g/t Au and 44 g/t Ag) were estimated to be present in the historic workings following examination of 2,600, 2 m interval mine level plans with grades, sections, and production documentation in addition to eight new drill holes. Since the mineralization had grades lower than the historical cut-off of 8 g/t Au, it is believed to have been left behind in in-situ veins, pillars, and backfill.
Concession fee funds will be awarded as Xali Gold private placement participation under the following conditions: A unit made up of half a warrant and one share will cost CAD $0.05. A full warrant may be exercised at CAD $0.10 per share for two years. Rio Verde will have the right to participate in further private placements from Xali Gold, subject to conditions determined by the state of the market when the funds are made available.
These funds, anticipated to come from the operations revenue on the five concessions, will help Xali Gold settle the outstanding fees for the remaining portion of the El Oro Property.
Rio Verde has also been given the authority to designate a new member to the Xali Gold Board of Directors and the Chair of the Board if Rio Verde owns more than 20% of the outstanding shares of the Company, as long as the existing Xali Gold Board approves the new member.