Tocvan Ventures has signed a letter of intent (LoI) for the acquisition of 2,172.7 hectares (ha) across three title blocks in Sonora, Mexico, from a private title owner.

The area is located immediately adjacent to and north of Tocvan Ventures’ Pilar gold-silver project.

Under the LoI, Tocvan Ventures will make cash payments totalling $4m (C$5.3m) and issue 2.5 million common shares over a period of five years.

Tocvan will also incur a total minimum work commitment of $1m over the agreement.

Furthermore, the title owner will retain a 2% net smelter royalty (NSR) on the acquired properties.

Following the initial five-year term, Tocvan can decide to extend the agreement by an additional ten years by commencing royalty payments or purchase full title ownership by making an additional $500,000 cash payment.

Upon closing of a definitive agreement, Tocvan will make an initial payment of $250,000.

Tocvan CEO Brodie Sutherland said: "This is a company-changing event that provides us access to what we believe is a highly prospective area adding significantly to the development potential of Pilar.

"Applying the knowledge we have gained from evaluating Pilar over the last few years gives us a huge advantage in quickly defining new areas of mineralisation that can not only expand Pilar but also identify the potential for a new gold-silver district in Sonora.

“The addition also provides us ample space for future mine development infrastructure that will greatly reduce future capital expenditures.”

The 2,172.7ha area includes highly prospective zones, where limited exploration was conducted so far.

Tocvan said the recent placer mining in the area suggested untested gold and silver potential.