Discovery Silver to acquire Newmont’s Porcupine, Ont., gold assets
Discovery Silver Corp. [DSV-TSXV, DSVSF-OTCQX] said it has struck a definitive deal with Newmont Corp. [NGT-TSX, NEM-NYSE, ASX, PNGX] to acquire the U.S. company’s 100% interest in its Porcupine operations based in and near Timmins, Ont., for a total consideration of US$425 million.
The amount to be paid consists of US$200 million in cash and US$75 million payable in common shares of Discovery. Both amounts are payable on closing of the transaction, which also includes a deferred payment that will be paid in four annual cash payments of US$37.5 million starting on December 31, 2027.
Discovery shares rose 3.06% or $0.03 to $1.01. The shares currently trade in a 52-week range of $1.33 and 52 cents.
Discovery Silver has set out to become the mining sector’s next major silver producer by developing its 100%-owned Cordero project in Chihuahua State, Mexico.
The company is led by CEO Tony Makuch, a highly experienced mining executive who previously led the transformation of Kirkland Lake Gold Ltd., a company that was acquired in $13.5 billion deal by Agnico-Eagle Mines Ltd. (AEM-TSX, AEM-NYSE) deal in February, 2022.
To fund the Newmont transaction and provide liquidity in support of operating and growing the Porcupine Complex, Discovery has entered into a binding commitment for approximately US$555 million of financing, including US$400 million related to royalty and debt agreements with Franco Nevada Mining Corp. [FNV-TSX, NYSE] and approximately US$155 million from a bought deal offering of subscription receipts.
The deal establishes Discovery as a new Canadian gold producer with multiple operations in one of the world’s most prolific gold camps, accounting for approximately 70 million ounces of total historic production, with a large base of mineral resources remaining and substantial exploration upside.
It also adds growing gold production with anticipated average annual production of over 285,000 ounces during the next 10 years and a total expected mine life of 27 years, with substantial potential upside.
Other transaction highlights include numerous opportunities to increase production and reduce costs at the Hoyle Pond, Borden and Pamour mines, the potential to upgrade the nearly 11.0 million ounce inferred mineral resource at Dome Mine (currently closed) and a commitment to invest in drilling to realize the significant exploration upside that exists in the Timmins Camp.
The Porcupine Complex is expected to generate significant after-tax free cash flow and an attractive net present value at a 5.0% discount rate. Free cash flow is estimated at $1.3 billion in the first 10 years with a NPV of $1.2 billion at base case analyst consensus prices.
“The acquisition of the Porcupine Complex is an important step forward as we work to build a highly profitable precious metals producer,’’ Makuch said. “Through this acquisition, we are combining growing gold production at Porcupine with tremendous upside in one of the world’s great gold camps, with our Cordero project, one of the world’s leading silver development projects based on reserves and expected production.’’