Silverco to acquire La Negra silver mine in Mexico
Silverco Mining Ltd. [SICO-TSXV, SICOF-OTCQB] has entered into a definitive agreement that will see the company acquiring all of the outstanding shares of privately-owned Nuevo Silver Inc. by way of a share exchange transaction.
Nuevo holds a 100% interest in a producing silver mine known as La Negra and is located in Queretaro, Mexico. It was recently operating at 55% capacity and shifts Silverco from developer to cash-flow producing status. Nuevo recently acquired the mine for US$50 million.
Under the agreement, existing shareholders of Nuevo will receive 16.8 million Silverco shares. Also, Silverco will assume Nuevo’s existing debt of approximately US$11 million, associated with the La Negra Mine.
Silverco will also assume US$12.5 million in milestone payments and US$5.0 milllion in contingent payments potentially payable to the former owner of the La Negra Mine.
It is anticipated that once the transaction is complete, Nuevo shareholders will hold approximately 31% of the outstanding shares of Silverco, while Silverco shareholders will hold 69% of the outstanding shares of Nuevo.
Certain insiders of Silverco are Nuevo shareholders, including President and CEO Mark Ayranto, Chief Financial Officer Sean Falls, and Eric Sprott (who currently holds 10% or more of Silverco shares). The Silverco insiders’ collective ownership in Nuevo is approximately 7.35%. As a result, the deal is considered to be a “related party transaction.
On Monday, Silverco shares rose 3.15% or 31 cents to $10.12. The shares currently trade in a 52-week range of $16.37 and $3.58.
Silverco recently confirmed in a preliminary economic assessment (PEA) of the Cusi mine in Mexico that a low-capital restart and annual production of 2.5 million ounces of silver are possible. Restart of processing is targeted for late 2026 with a full-year ramp up by 2027.
The mine has an after-tax net present value of $104 million and an internal rate of return of 94% with payback in nine months at base case silver price of US$44.58 an ounce. “We believe the PEA confirms Cusi as one of the most compelling primary silver restart opportunities globally,’’ said Ayranto.
The Cusi underground mine is located approximately 120 kilometres west of the city of Chihuahua and 20 kilometres south of Cuauhtomoc city. The location allows for access to an experience labour pool with a population of more than 1.0 million people. Ore will be transported from the mine via 30-tonne highway trucks to the company’s existing 1,200 tonne per day processing facility, located approximately 40 kilometres from the mining areas. The mine utilizes a conventional comminution and flotation circuit designed to produce a high-value bulk lead-silver concentrate.
In its final year of production prior to being placed on care and maintenance, Cusi achieved record output of 1.5 million silver equivalent (AgEq) ounces in 2022 with an all-in-sustaining cost of US$23.20 an ounce. Mill utilization that year was only 63%.