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First Majestic Silver (NYSE: AG; TSX: FR) has agreed to acquire a stream on 50% of the payable silver produced from First Mining Gold’s (TSX:FF) Springpole gold project in Ontario, Canada.
“This new silver stream gives First Majestic significant upside potential to higher silver prices while minimizing risks and costs,” First Majestic president and CEO Keith Neumeyer said on the latest investment, which would be the first outside of Mexico in its 18-year history.
First Majestic will pay First Mining a total consideration of $22.5 million in cash and shares over three payments for the silver stream, which covers the life of the project.
Approximately 22 million ounces of silver are expected to be recovered over the life of the project
The first payment of $10 million will be made on closing of the agreement. Afterwards, First Majestic will pay $7.5 million upon First Mining releasing a positive pre-feasibility study (PFS) for Springpole, while the remaining $5 million will be paid upon First Mining receiving government approval for the project’s environmental assessment.
First Majestic will also make ongoing cash payments of 33% of the silver spot price per ounce, to a maximum of $7.50 per ounce, for all payable silver delivered by Springpole.
According to a 2019 preliminary economic assessment (PEA), average silver production from Springpole in years two through nine of the mine plan is estimated to reach 2.4 million ounces per year. In total, approximately 22 million ounces of silver are expected to be recovered over the life of the project.
Springpole is considered one of Canada’s largest undeveloped gold projects with an estimated resource of 24.2 million ounces of silver plus 4.67 million ounces of gold in the indicated category. Permitting is currently underway, with a PFS anticipated in early 2021.
As part of the transaction, First Mining has also granted First Majestic 30 million common share purchase warrants, each of which will entitle the company to purchase one common share of First Mining at C$0.40 over a period of five years.
Shares of First Majestic were down 6.8% on the TSX midday Thursday, while First Mining’s stock climbed 2.9% on the latest financing boost. The Canadian miners have market values of C$2.7 billion and C$218.2 million respectively.
