Earlier this month, Riverside Resources (RRI.V) has updated the market on the status of the La Union gold-silver project in Mexico’s Sonora state. Despite encountering encouraging mineralization in the early exploration phase on the property, Hochschild (HOC.L) decided to drop the option on the project less than six months after signing the initial agreement. In fact, Riverside disclosed in its Q2 report Hochschild already initiated the termination of the exploration earn-in agreement on July 18. That’s literally 62 days after announcing the agreement so we feel there are different factors at play here, and seeing Hochschild walk likely has nothing to do with the merits of the La Union project.
Although Riverside did not comment on the reason why Hochschild dropped the option (it appears to be too soon to be solely based on assay results as Hochschild only spent a fraction of the required US$8M in the first five years of the option agreement, so there likely are some internal factors at play here), it did confirm Hochschild parted ways in a very correct manner. Riverside has been reimbursed for taxes and fees while Hochschild also picked up the tab for the US$0.5M in exploration and consolidation work completed on the asset.
Those initial exploration activities helped to define the main structural and lithological controls of the mineralization, resulting in the interpretation of a subvertical structure in a North-North-West orientation that acted as conducts for mineralizing fluids. Although the partners only spent a few months on exploration this year, the field work has defined three interesting targets. Hopefully Riverside Resources can attract a new joint venture partner to further advance the project.
Fortunately Riverside’s balance sheet is in a good shape and as of the end of June, the balance sheet shows a positive working capital position of C$3.3M although there was an additional C$1M in receivables (IVA recoverables in Mexico) and the vast majority of the current liabilities consists of exploration advances from BHP (BHP) as the copper exploration joint venture is obviously still active.
Disclosure: The author has a long position in Riverside Resources. Please read our disclaimer.
