Rio Silver has entered a letter of intent (LoI) to grant an option to Magellan Gold to earn an undivided 50% interest in the Niñobamba silver property in Peru.
The 900ha Niñobamba silver project is located 330km south-east of Lima in the Ayacucho region.
Under the LoI, Magellan can acquire a 50% interest in Niñobamba by spending an aggregate of $2m within a three-year period in direct and indirect exploration and development expenditures related to the site.
Upon completion of the exploration programmes, Magellan is expected to deliver a preliminary resource estimate for the property.
In 2001, AngloGold Peru originally explored the property and focused on an area of hydrothermal surface alteration and drilled five widely spaced core holes totalling 861m.
During its last exploration programme completed in 2012, AngloGold excavated a total of 17 trenches using a workforce from the nearby community.
Trenches were channel sampled using a rock saw and all sample intervals were later surveyed.
Trench TR-04 is located 400m west of trench TR-01 and has revealed a new gold-silver zone's vuggy-silica type alteration, indicating high sulphidation systems.
The last 21.77m of trench TR-04 returned 1.32g/t Au and 102.46g/t Ag, ending in mineralisation.
Closing the deal is subject to various conditions, including entering the definitive agreement and the satisfactory completion of due diligence review by the parties.
Other conditions include receipt of all required approvals and consents.