Tocvan Ventures Corp said it has signed a definitive assignment agreement with Millrock Resources Inc regarding Tocvan’s El Picacho gold project in the Caborca orogenic belt, Sonora state, Mexico.
The agreement comes after a previously announced Letter of Commitment and the successful completion of a 60-day due diligence period by Tocvan.
Additionally, Millrock has reinstated a previously held Option Agreement with concession owners, the Suarez Brothers, and has now assigned the option rights and obligations to Tocvan.
READ: Tocvan finalizes agreement for the transfer of the El Picacho gold-silver property option in Sonora, Mexico
In return, Tocvan has paid back taxes owed by the Suarez Brothers on the mineral concessions and has granted Millrock certain royalty rights in the Assignment Agreement.
Part of the deal states that if Tocvan chooses to exercise its option to purchase a 100% interest from the Suarez brothers, Millrock will vest with a 2% Net Smelter Returns (NSR) royalty. There is also a caveat allowing Tocvan to purchase back 1% of the royalty for US$1-million.
“The royalty contains a provision for an annual Advance Minimum Royalty (AMR) that will be triggered if Tocvan exercises the Option Agreement,” the company said. “The initial AMR payment to Millrock would be US$25,000.”
From there, The AMR’s amount will double each year until commercial production occurs. Any AMR payments made can be deducted from NSR royalty payments.
"El Picacho has great exploration potential for large-tonnage, bulk minable gold deposits, and higher-grade, vein-hosted deposits. We had previously dropped our option on the project, but it was readily reinstated,” Millrock president and CEO Gregory Beischer said in the statement.
Beischer went on to note: “In turn, we are very pleased to assign our rights to Tocvan in exchange for royalty interests that may begin cash flowing in a relatively short time period. Further, in the event that Tocvan does not complete the underlying option with the concession owners, the option rights will be returned to Millrock. Each of these royalty agreements that Millrock makes is accretive to the overall value of the company. Millrock's Hermosillo-based staff have extensive knowledge of the Project and have offered exploration services to Tocvan."
The project, which is located 140 kilometres north of Hermosillo in Sonora, Mexico and is fully accessible by road, has been the subject of extensive historical surface exploration which defined five gold targets on the Project. Both Millrock and Tocvan believe these targets will be ready for drill testing with surface confirmation via trenching.
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