BMO Capital Markets explained the mine acquisition deal in British Columbia and its likely benefits for this precious metals miner.
A report dated Sept. 11, 2017, reported Coeur Mining Inc. (CDE:NYSE) announced it is acquiring JDS Silver, the private mine development firm that owns Silvertip in British Columbia (B.C.). Silvertip is “a high-grade silver-lead-zinc Indicated resource of 2.35 Mt grading 352 g/t silver, 9.41% zinc and 6.73% lead,” described Andrew Kaip, analyst with BMO Capital. Also, the mine “has a 1 Ktpd mill on site, which is undergoing commissioning.”
The $200 million purchase price is viewed “as fair, as we estimate a value of ~$248M for the asset,” added Kaip.
As far as the details of the transaction, Coeur “will pay $146.5M in cash, $38.5M in shares and assume $15M in debt,” the analyst explained. “The company will also “pay an additional $25M contingent on receiving expansion permits and $25M contingent on resource expansion. CDE is expected to fund the cash portion with cash on hand and with a new $200M revolver (expects to draw $100M).”
Kaip said BMO views the deal favorably for a few reasons. “The acquisition makes sense,” he added. “It will help boost the company’s production profile and offset declining production at San Bartolomé.”
The deposit’s “high grades (and low costs) will help to improve operating margins and bolster diversification, as Coeur will have six producing assets upon closing,” Kaip said. Silvertip also “will add lead and zinc to CDE’s revenue mix.”
Another plus is Silvertip’s “large (38,000 hectare), unexplored land package in a good jurisdiction,” wrote Kaip. “We see the potential for exploration upside.”
Coeur and JDS are in “discussions with the B.C. Ministry of Energy and Mining to increase mining/milling rates to 1 Ktpd year-round,” Kaip noted. “Current permits allow for mining/milling at only 70 Kt/year (500 tpd).”
BMO Capital has an Outperform rating and $11 per share target price on Coeur Mining. The company is trading at around $9.26 per share.
Want to read more Gold Report articles like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see a list of recent articles and interviews with industry analysts and commentators, visit our Streetwise Interviews page.
Disclosure:
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Streetwise Reports does not accept stock in exchange for its services. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article.
