First Majestic Silver Corp. [FR-TSX; AG-NYSE; FMV-FSE] said Friday March 12 it agreed to acquire all the outstanding shares of Jerritt Canyon Canada Ltd. from Sprott Mining for US$470 million in shares of First Majestic, plus 5 million First Majestic share purchase warrants.
Concurrent with the acquisition, Sprott Mining President Eric Sprott will complete a US$30 million private placement in First Majestic at US$17.59 per share for a total of 1.7 million common shares.
Jerritt Canyon owns and operates the Jerritt Canyon Gold Mine in Elko County, Nevada.
Jerritt Canyon was discovered in 1972 and has been in production since 1981. It has produced over 9.5 million ounces of gold over its 40-year history.
The mine currently operates as an underground operation and has one of three permitted gold processing plants in Nevada that use roasting in its treatment of ore. The processing plant has a capacity of 4,500 tpd and is currently operating at an average rate of approximately 2,200 tpd due to limited ore production from two underground mines. In 2020, Jerritt Canyon produced 112,749 z gold at a cash cost of US$1,289/oz.
First Majestic has identified several opportunities to enhance the cost and production profile of Jerritt Canyon as well as near-term brownfield potential between the SSX and Smith mines and property wide exploration potential.
First Majestic owns and operates the San Dimas silver-gold mine, the Santa Elena silver-gold mine and the Le Encantada silver mine, all in Mexico.
Under a streaming agreement, Wheaton Precious Metals Corp. [WPM-TSX, NYSE] receives 25% of the gold equivalent production from San Dimas.
Underpinned by its three operating mines in Mexico, First Majestic is expected the have annualized attributable gold production of 30-33 million AgEq ounces.
Under the definitive agreement, Sprott Mining will receive 26.7 million common shares of First Majestic. This represents US$470 million in share consideration based on the 20-day trading volume-weighted average price of US$17.59 on the New York Stock Exchange for the period ended March 11, 2021. Sprott will also receive 5.0 million common share purchase warrants at an exercise price of US$20 per share.
Upon completion of the acquisition and private placement, Eric Sprott, through himself or affiliated controlled companies, will own 32.9 million shares, including current shareholdings, representing a 13.1% stake in First Majestic.
First Majestic shares advanced on the news, rising 1.0% or $0.02 to $20.65 on volume of 376,970.