First Majestic Silver Corp. [FR-TSX; AG-NYSE, Mexico; FMV-FSE] has agreed to acquire from Gold Canyon Resources Inc., a wholly owned subsidiary of First Mining Gold Corp. [FF-TSX; FFMGF-OTCQX; FMG-FSE], a stream on 50% of payable silver produced from the Springpole gold project located 110 km northeast of the town of Red Lake, northwest Ontario.
First Majestic will pay First Mining total consideration of $22.5-million in cash and shares, over three payments, for the silver stream which covers the life of the project. In addition, First Majestic will make continuing 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.
First Mining is also granting First Majestic 30 million common share purchase warrants, each of which will entitle the company to purchase one share of First Mining at 40 cents for five years commencing at closing.
According to the 2019 preliminary economic assessment (PEA), average silver production from Springpole in years two through nine of the mine plan is expected to be 2.4 million ounces of silver per year. A total of 22 million ounces of silver are expected to be recovered over the life of the project of which 50% would be purchased by First Majestic.
Springpole is one of Canada’s largest, undeveloped gold projects with permitting under way and the results of a prefeasibility study anticipated in early 2021. The project contains NI 43-101 compliant resources of 24.19 million ounces of silver in the indicated category and 1.12 million ounces of silver in the inferred category, plus 4.67 million ounces of gold in the indicated category and 230,000 ounces of gold in the inferred category.
The Springpole Project offers substantial exploration upside over its large landholdings of 41,913 hectares which are fully encompassed under the silver streaming agreement.
The transaction increases First Majestic’s silver exposure and is the company’s first investment outside of Mexico
“This new silver stream gives First Majestic significant upside potential to higher silver prices while minimizing risks and costs,” said Keith Neumeyer, President and CEO of First Majestic Silver. “With approximately 22 million ounces of silver expected to be produced over the life of the project, and additional exploration upside, Springpole has both the scale and location to make this an ideal investment for our long-term portfolio. In addition, this silver stream marks our first investment outside of Mexico in the company’s 18-year history.”
Upon closing of the transaction, First Majestic will make an upfront payment to First Mining of $10.0-million consisting of $2.5-million in cash and $7.5-million in First Majestic common shares.
Upon the completion and public announcement by First Mining of the results of a prefeasibility study for Springpole, First Majestic shall pay an additional $7.5-million to First Mining consisting of $3.75-million in cash and $3.75-million in First Majestic common shares.
Upon receipt by First Mining of a federal or provincial environmental assessment approval for Springpole, First Majestic shall pay an additional $5.0-million to First Mining consisting of $2.5-million in cash and $2.5-million in First Majestic common shares.
First Mining can repurchase 50% of the silver stream for $22.5-million at any time prior to the start of production at Springpole leaving the company with a reduced silver stream of 25%.
The Springpole Project has a 72-person camp, winter road access, and nearby logging road and power lines.