Mithril Resources (ASX: MTH) is set to gain a working interest in the high-grade Copalquin gold-silver project in western Mexico on completion of a proposed friendly takeover of Australian private exploration company Sun Minerals Pty Ltd.
Sun holds an exclusive option to earn a 100% interest in the project, located within the Sierra Madre gold-silver trend which hosts numerous world-class gold silver discoveries.
Copalquin comprises six mineral concessions over 70 square kilometres and contains 32 known historic gold and silver underground workings including the La Soledad and El Refugio mines.
Historic drilling results have confirmed the project’s exploration potential with multiple high-grade drill intercepts including 17.77m at 45.16 grams per tonne gold and 118.2g/t silver from 30.98m, and 7.9m at 6.54g/t gold and 140g/t silver from 143.10m.
The consideration payable by Mithril for the purchase of Sun comprises an aggregate total of 6.7 million fully paid ordinary Mithril shares, which will account for 40% of the expanded share capital of Mithril following completion of the transaction.
Mithril will also pay Sun a $150,000 cash exclusivity payment to be used solely for expenditure on Copalquin.
Completion of the transaction will see Mithril’s current managing director resign and Sun Minerals nominees appointed to Mithril’s board and a lead project management role.
Mithril will also conduct a $4.9 million capital raising to primarily fund a planned drilling program.
The Copalquin project lies within the Sierra Madre Occidental physiographic province of north-western Mexico.
It hosts multiple low-sulfidation epithermal vein and stockwork deposits hosted in andesite and there has been notable past production of gold and silver from a number of underground mines with bonanza grades.
Mines at Copalquin were first developed in the mid-1800s and are reported to have produced more than 250,000 ounces of gold.
Modern exploration in the 1990s and 2000s has consisted of soil sampling programs and drilling of 70 diamond core holes by Bell Coast Capital Corp and UC Resources.
The work was reportedly stalled by the challenging logistics of a remote project and financial difficulties of previous companies.
Previous drilling at Copalquin identified three areas – El Refugio, La Soledad and El Cometa – with underground mineable grades over potentially mineable widths.
Sun Minerals’ 2020 drilling campaign will systematically test each of these high-priority areas and will also begin drill exploration at the Los Reyes, Los Pinos, La Constancia and San Manuel targets.
The company is planning to drill 29 holes for 4,490m, with work commencing at El Refugio.
Mithril said the program will aim for “discovery, not resource definition”.
“The best targets currently identified on the property will be tested and if any of the targets other than the top three produce favourable results, Sun Minerals will have met its objective,” it said.
At midday, shares in Mithril were up 71.43% to $0.012.