Patriot Minefinders (OTCBB:PROF) says it has inked a letter of intent agreement with Bearing Resources (CVE:BRZ) to acquire up to a 75 per cent interest in the Kilometer 66 silver-gold-lead-zinc property in Durango, Mexico.
The project, which will be Patriot's second in central Mexico, has a deposit with NI 43-101 compliant resource of 22.3 million silver equivalent ounces.
Patriot said the deal will turn the company into a major explorer in the region.
“This new venture together with La Buena project located 5.6 miles to the north of Goldcorp’s Penasquito mine will allow our company to become a major explorer in the prolific silver-gold belt of Central Mexico," adds CEO, John H. Schweitzer.
"The company believes that the silver-gold-lead-zinc mineralization identified to date on the Km 66 property may well be indicative of a larger system under shallow cover while the newly discovered Victorinos target illustrates the excellent exploration potential in the region."
The Km 66 property is located 100 kilometres from the Peñoles smelter at Torreon, and is bisected by a paved highway and power lines.
It covers a five kilometre-long trend of mineralization that includes the La Gloria and Las Palmitas epithermal silver-gold-lead-zinc deposits. Great Panther Silver, which previously held an option to acquire Km 66, filed a technical report containing an NI 43-101 compliant mineral resource estimate for these two deposits in 2008.
The report calculated a total of 22.3 million silver equivalent ounces in the indicated category and a further 6.3 million silver equivalent ounces in the inferred category using a cut-off grade of 50 grams per tonne (g/t) silver equivalent.
Patriot said that it has not done sufficient work to classify this resource as current, and therefore is considering it a historical estimate.
Aside from the La Gloria and Las Palmitas zones, drilling by previous option holder Great Panther found quartz-molybdenite veins in the Bull's Eye zone, and carbonate replacement deposits in the North zone.
In addition, recent work by Bearing has outlined a new target at Victorinos, Patriot said, some 5 kilometres east of La Gloria, where soil sampling and prospecting have defined a 500 by 600 metre gold-silver-lead-zinc soil anomaly.
Under the terms of the preliminary option agreement, Patriot will have the right to earn a 75 per cent stake by assuming the remaining obligations of the underlying option agreement with the Mexican vendors, who retain a 3% net smelter royalty.
The terms include a US$150,000 payment on signing the definitive agreement and 1.2 million Patriot shares, along with a series of staged payments annually over a five year stretch. The company can choose to buy the property outright on the first anniversary for US$5.57 million, after the second year for US$5.87 million, or after the third year for US$6.87 million.
It also can purchase up to 1% of the net smelter royalty for US$650,000 per half per cent, and holds a right of first refusal to purchase the remaining 2%.
The company must also spend a total of US$2.0 million on exploration work before April 23, 2015, and complete a bankable feasibility study after eight years.
Patriot's first project is La Buena, which is located only 5.6 miles north of Goldcorp's (TSE:G) Peñasquito Mine. The company also has an option to earn 50 per cent of the La Buena project through an option agreement with a Canadian mining exploration company.
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