SilverCrest talks legal action over bought deal financing

SilverCrest Metals Inc. [SIL-TSXV; SVCMF-OTCQX] said Wednesday March 18 that it has received notice from National Bank Financial Inc. that the bank is purporting to terminate its obligations pursuant to a $75 million bought deal financing announced on March 11, 2020.

In its March 11 announcement, SilverCrest said the underwriting syndicate led by National Bank Financial had agreed to purchase 9.1 million common shares of SilverCrest for $8.25 per share. The underwriters were granted a green shoe option to purchase an additional 15% of the shares offered under the bought deal.

Proceeds from the financing were earmarked for the continued exploration and development of SilverCrest’s Las Chispas Project in Sonora, Mexico.

However, since terms of the financing was announced, the value of SilverCrest shares plunged from $8.29 on March 11, 2020, to a low of $4.71 on March 16, 2020. After clawing back some of that lost ground, the shares were down 1.2% or $0.08 to $6.54, Wednesday, on volume of 1.7 million.

The shares are currently trading in a 52-week range of $3.99 and $10.98.

In a press release on Wednesday, SilverCrest said it was advised by National Bank Financial that the reason for the purported termination was based on the “disaster out” clause of the agreement.

SilverCrest also issued the following statement:

“The agreement between SilverCrest and National Bank Financial created a binding legal obligation on the part of National Bank Financial to complete the transaction as is customary in Canada for bought-deal financings.”

SilverCrest is of the view that National Bank Financial is not entitled to terminate the agreement. In SilverCrest’s opinion, the novel coronavirus pandemic considered by National Bank Financial as a basis for terminating this agreement was fully evident when the bought deal financing was agreed upon with expectations that the precious metals market would respond positively to this known risk.

Accordingly, SilverCrest intends to pursue its legal remedies against National Bank Financial for National Bank Financial’s obligations under the agreement.”

Las Chispas is the third highest grade primary silver deposit in the world. According to a preliminary economic assessment announced in May, 2019, it is expected to produce an average of 13.7 million ounces of silver equivalent annually during the first four years of operations at an all-in-sustaining cost of US$4.89 an ounce. The initial capital expenditure is forecast at US$100.5 million.

Those estimates assume a silver price of US$16.68 an ounce and a gold price of US$1,269 an ounce.

The Las Chispas property is located approximately 180 km northeast of Hermosillo. It consists of 28 concessions totalling 1,400 hectares.

Between 1880 and 1930, several mines on the property are thought to have yielded approximately 100 million ounces of silver and 200,000 ounces of gold.

Mineralization occurs in 0.5 to five-metre wide veins with adjacent stockwork and breccias trending northwest-southeast for one to 1.5 km. The company says 14 epithermal veins have previously been defined on the property, of which three have had notable production. The producing veins include Las Chispas, William Tell and Babicanora.

SilverCrest is the first company to successfully drill-test the historic Las Chispas Project, a move that resulted in numerous discoveries that are being evaluated for economic viability and potential production in the future.