Espiritu Santo is located 130 km west of Guadalajara and 50 km east of Puerto Vallarta in Jalisco State, Mexico. Lying within a northwest corridor defined by numerous, predominantly gold/silver, low sulphidation mineralised occurrences; this prolific zone hosts several active exploration projects, including Endeavour Silver Corporation's San Sebastian development project to the northwest and Soltoro Ltd's El Rayo Project to the southeast (Figure 1).
Cerro Resources’ concessions cover an area of 5,800 hectares, within the Mascota-Navidad Mining District, and are surrounded by two old mining sub-districts of San Sebastian del Oeste (20km north west) and Navidad. Espiritu Santo is positioned in the northern part of the Navidad section. The mining concession is composed of three tenements - Tao, Sao and Vale.
The Company holds exploration rights and a contracted option to acquire 100% of the mining concessions. The commercial terms consist of multiple option payments which form part of the purchase price.
Payments are as follows:
(a) An initial payment made of US$150,000;
(b) 1 March 2012 US$100,000;
(c) 1 September 2012 US$100,000;
(d) 1 March 2013 US$150,000;
(e) 1 September 2013 US$200,000;
(f) 1 March 2014 US$300,000;
(g) 1 September 2014 US$400,000;
(h) 1 March 2015 US$500,000;
(i) 1 September 2015 US$2,100,000 – includes the final payment in exchange for title of the concession.
The seller will retain a 3% Net Smelter Royalty and Cerro Resources has the right to acquire one half of that royalty for US$2,000,000 at any time up to 1 September 2016.
Additionally Cerro Resources will pay the vendor US$1,000,000 for the first 1M ounces of gold (or gold equivalent) falling into the JORC Measured and Indicated category and US$500,000 for each additional five hundred thousand ounces (of gold or gold equivalent) up to a maximum of US$5,000,000.
Cerro Resources may withdraw from the option at any time without any further liability and has access to the mineral concessions during the option periods to undertake exploration work.