Coeur Mining, Inc. (“Coeur” or the “Company”) (NYSE: CDE) is
pleased to announce that it has entered into a definitive agreement
(the “Arrangement Agreement”) to acquire privately-owned JDS Silver
Holdings, Ltd. and its wholly-owned subsidiary, JDS Silver Inc.
(“JDS Silver”), which owns the high-grade silver-zinc-lead
Silvertip mine (“Silvertip”) located in northern British Columbia,
Canada, adding a sixth producing mine to Coeur’s North
American-focused platform. Under the Arrangement Agreement, the
Company will pay initial consideration of US$200 million,
consisting of US$146.5 million of cash, US$38.5 million of Coeur
shares (approximately 4.3 million new shares), and will assume
US$15 million in existing debt. Additional potential payments of up
to US$50 million are contingent upon achieving specific future
permitting and exploration milestones at Silvertip.
Overview of Silvertip
The Silvertip mine is one of the industry’s newest and
highest-grade silver-zinc-lead mines with a silver-equivalent1
indicated resource grade of 1,166 grams per tonne (g/t), comprised
of 352 g/t silver, 9.4% zinc, and 6.7% lead, and a
silver-equivalent1 inferred resource grade of 1,155 g/t, comprised
of 343 g/t silver, 9.8% zinc, and 6.2% lead. Located just below the
Yukon border, the operation sits within a highly prospective
93,000-acre (37,650 hectares) land package. Silvertip commenced
production during the fourth quarter of 2016.
Tonnage
Silver
Zinc
Lead
Category
(tonnes)
(g/t)
(%)
(%)
Indicated
2.35 352 9.41 6.73
Inferred
0.46 343 9.81
6.18 Effective September 11, 2017. See notes to Silvertip
mineral resource table included later in this release.
Upon expected completion of the transaction in late October,
Coeur intends to invest US$25 – US$35 million in surface
infrastructure, accelerated underground development and drilling
and mill optimization over a six-month period and recommence
commercial production by the end of the first quarter of 2018. Once
an anticipated daily average mining rate of 1,000 tonnes per day is
achieved, Coeur expects Silvertip to produce an average of
approximately ten million silver equivalent1 ounces annually
consisting of approximately three million ounces of silver, 45-50
million pounds of zinc, and 40-45 million pounds of lead over an
estimated 7.5-year initial mine life.
Key Transaction Highlights
- Significant, high-quality near-term
production growth – Expected average annual silver equivalent1
production from Silvertip of approximately ten million ounces
represents a significant potential increase to Coeur’s overall
production profile compared to Coeur’s 2017 production guidance
range of 38 - 41 million silver equivalent1 ounces.
- High-grade resource –
Silvertip’s silver equivalent1 indicated and inferred resource
grades of 1,166 g/t and 1,155 g/t, respectively, represent
increases of 27% and 12% to Coeur’s measured and indicated and
inferred resource grades, respectively, as adjusted to give effect
to the transaction.
- Substantial, high-margin cash
flow – Silvertip is expected to generate an average annual
EBITDA2 margin of over 50%, which is over twice Coeur’s 2016
adjusted EBITDA2 margin. Based on US$17.50/oz silver, US$1.13/lb
lead and US$1.40/lb zinc, Silvertip is expected to generate average
annual EBITDA2 of approximately US$70 million.
- Low expected AISC – At full
capacity of approximately 1,000 tonnes per day, Silvertip’s all-in
sustaining costs (AISC)2 are expected to average approximately
US$10.50 - US$11.50/oz on a silver equivalent1 basis.
- Accretive transaction – The
Silvertip acquisition is expected to be accretive to Coeur’s
stockholders on all key operational and financial metrics.
- Newly-constructed operation with
significant prior capital investment – Significant amount of
prior investment has taken place at Silvertip, including a
newly-installed processing facility, dry stack tailings facility, a
26 km access road, over 4 km of underground development, 86,000
meters of drilling, two bulk sample programs, and twenty years of
environmental baseline data. For minimal incremental capital, Coeur
anticipates optimizing several aspects of this new operation before
recommencing production by the end of the first quarter of
2018.
- Top mining jurisdiction – The
addition of Silvertip enhances Coeur’s geographic and political
risk profile by adding British Columbia, Canada, a top-tier mining
jurisdiction, to its North American-focused asset portfolio.
- Attractive metals mix –
Silvertip’s revenues are expected to be derived equally among
silver, zinc and lead, shifting Coeur’s pro forma metals mix3 to
51% gold, 37% silver, 7% zinc, and 5% lead.
- Significant resource and large,
underexplored land position – Prospective 93,000-acre (37,650
hectares) land position where less than 5% has been explored
provides opportunities for resource growth and new discoveries.
Current high-grade resource represents a near-term opportunity to
convert a significant portion to reserves with infill drilling and
an optimized mine plan.
“The acquisition of the Silvertip mine represents a unique
opportunity to significantly enhance our portfolio of operations
and it satisfies all our acquisition criteria – it provides
expected near-term, low-cost, high margin cash flow from an
attractive jurisdiction and it is accretive on all key operational
and financial metrics,” said Mitchell J. Krebs, Coeur's President
and Chief Executive Officer. “Over the past several years, we have
repositioned our existing portfolio of mines, achieved greater
geographic and operational balance and generated industry-leading
cost reductions and cash flow growth. The acquisition of Silvertip
– one of the highest-grade and newest operations in the sector with
a tremendous amount of exploration potential – should serve to
further accelerate these positive trends while providing us with an
important foundation in British Columbia. We look forward to
working with the Government of British Columbia and partnering with
the Kaska Nation and members of the British Columbia and Yukon
Indigenous communities in our efforts to make Silvertip a
successful operation.”
Summary Mine Plan
The Company’s plan assumes recommencement of commercial mining
operations at Silvertip within six months after closing. During
that time, the Company will pursue amended permits to increase
capacity from 500 tonnes to 1,000 tonnes per day on a year-round
basis, and invest US$25 – US$35 million to optimize and commission
the mill, upgrade existing surface infrastructure, and drill and
expand underground development.
Coeur believes that following these optimization efforts the
Silvertip mine would operate according to the operating parameters
and cost assumptions shown in the table below.
Operating Parameters
Total ore production M
tonnes 2.7
Initial mine life Years 7.5
Average production
rate tpd 1,000
Average annual production
Silver Equivalent
M oz AgEq 10
Silver M oz Ag 3
Zinc M lbs Zn 45 - 50
Lead M lbs Pb 40 - 45
Average Head Grade Silver
Equivalent g/t AgEq 1,177
Silver g/t Ag 364
Zinc
% Zn 9.1%
Lead % Pb 7.1%
Average Metallurgical
Recoveries Silver Equivalent % 83%
Silver % 85%
Zinc % 82%
Lead % 84%
Cost Assumptions
Pre-production capex US$M
$25 - $35
Sustaining capex US$M $55 - $65
Operating
costs Mining costs US$/tonne $95 - $100
Processing
costs US$/tonne $35 - $40
G&A US$/tonne $30 - $35
Cash costs US$/oz AgEq $9.50 - $10.50
AISC2
US$/oz AgEq $10.50 - $11.50
Notes to Summary Mine Plan: a. This economic analysis
is preliminary in nature and is based upon the current resource
estimate as set out in this press release which includes inferred
mineral resources. Inferred resources are considered too
speculative geologically to have the economic considerations
applied to them that would enable them to be categorized as mineral
reserves and there is no certainty that the economic assessment
will be realized. b. The above qualifications and assumptions have
been used by the qualified person in developing this economic
analysis. c.
The continued production of the Silvertip
mine is not based on demonstrated economic viability of mineral
reserves. As a result, there may be an increased uncertainty of
achieving any particular level of recovery of minerals or the cost
of such recovery.
Transaction Details
The acquisition of JDS Silver is expected to be completed by
Plan of Arrangement. Closing is anticipated in October 2017,
subject to requisite and customary regulatory approvals and other
conditions. Holders of 87% of JDS Silver shares have entered into
voting support arrangements with Coeur under which they have agreed
to vote in favor of the transaction.
Under terms of the Arrangement Agreement, total initial
consideration will be approximately US$200 million upon closing
consisting of approximately US$146.5 million in cash (approximately
$31 million of which will be used to retire JDS Silver’s senior
secured debt), approximately US$38.5 million in Coeur common
shares, and the assumption of approximately US$15 million in
existing debt. Exact cash and stock consideration amounts are
subject to final debt payoff amounts due at closing.
Based on a 10-day volume-weighted average Coeur stock price of
$8.94 per share, the Company anticipates issuing approximately 4.3
million new shares, representing an approximate 2% increase from
its current outstanding share count of approximately 180 million.
The Company anticipates obtaining approval of the transaction
pursuant to a Canadian court process, as a result of which the
issuance of the stock consideration will be exempt from
registration under the U.S. Securities Act.
The Company intends to use a portion of its existing cash and
equivalents, which were approximately US$250 million as of June 30,
2017, to fund the cash portion of the initial consideration. To
further boost its financial flexibility, the Company intends to
establish a new, US$200 million secured revolving credit facility
prior to closing of this transaction.
The first milestone payment of US$25 million is contingent upon
the receipt of a permit expansion allowing for a sustained mining
and milling rate of 1,000 tonnes per day on a year-round basis. The
application must be submitted to the British Columbia Ministry of
Energy and Mining by no later than June 2018.
The second milestone payment of up to US$25 million is
contingent upon the amount of resource tonnes added as of December
31, 2019. The maximum payment of US$25 million can be earned if the
total resource reaches 3.7 million tonnes. JDS Silver will receive
US$5 million for a total resource of at least 2.5 million tonnes
and US$5 million for every 0.3 million tonnes over 2.5 million
tonnes up to 3.7 million tonnes. Coeur has agreed to invest a
minimum of US$15 million in exploration between closing and
December 31, 2019 to expand the size of the resource at Silvertip.
Coeur also expects its drill program to upgrade and increase its
confidence in the resource.
Coeur’s legal advisor is Goodmans LLP and its financial advisor
is Sprott Capital Partners. JDS Silver’s legal advisors are Blake,
Cassels & Graydon LLP and Bennett Jones LLP and its financial
advisor is Maxit Capital.
Silvertip Mine Mineral Resource Estimates
Tonnage
Silver
Zinc
Lead
Silver Equivalent
Category
(tonnes)
(tons)
(g/t)
(oz/t)
(%)
(%)
(g/t)
(oz/t)
Indicated
2,349,000 2,589,326 352 10.27 9.41 6.73
1,166 34.01
Inferred
460,000 507,063 343
10.00 9.81 6.18
1,155 33.68 Notes to mineral resource
estimates: i. Effective September 11, 2017. ii. CIM
definitions were followed for mineral resources. iii. Mineral
resources are in addition to mineral reserves and do not have
demonstrated economic viability. Inferred mineral resources are
considered too speculative geologically to have the economic
considerations applied to them that would enable them to be
considered for estimation of mineral reserves, and there is no
certainty that the inferred mineral resources will be realized. iv.
Cut-off grade of 200 g/t AgEq was used for the calculation of the
resource. v. Rounding of tons and ounces, as required by reporting
guidelines, may result in apparent differences between tons, grade,
and contained metal content. vi. As described above, the
preliminary economic analysis set forth in this release is subject
to obtaining an amended permit allowing for a mining rate of 1,000
tonnes per day on a year-round basis.
Conference Call
Coeur will conduct a conference call to discuss the transaction
on September 11, 2017, at 11 a.m. Eastern Time. An accompanying
presentation will be made available on the Company’s website at
www.coeur.com.
Dial-In Numbers: (855) 560-2581 (US) (855) 669-9657
(Canada) (412) 542-4166 (International) Conference ID: Coeur Mining
Hosting the call will be Mitchell J. Krebs, President and Chief
Executive Officer of Coeur, who will be joined by Peter C.
Mitchell, Senior Vice President and Chief Financial Officer, Frank
L. Hanagarne, Jr., Senior Vice President and Chief Operating
Officer, Hans Rasmussen, Senior Vice President of Exploration, and
other members of Coeur management. A replay of the call will be
available through September 25, 2017.
Replay numbers: (877) 344-7529 (US) (855) 669-9658
(Canada) (412) 317-0088 (International) Conference ID: 101 11 953
About Coeur
Coeur Mining, Inc. is a well-diversified, growing precious
metals producer with five precious metals mines in the Americas
employing approximately 2,000 people. Coeur produces from its
wholly-owned operations: the Palmarejo silver-gold complex in
Mexico, the Rochester silver-gold mine in Nevada, the Kensington
gold mine in Alaska, the Wharf gold mine in South Dakota, and the
San Bartolomé silver mine in Bolivia. In addition, the Company owns
the La Preciosa project in Mexico, a silver-gold exploration stage
project. Coeur conducts exploration activities in North and South
America.
About JDS Silver
JDS Silver is a private mining company that owns the Silvertip
mine in Northern British Columbia. JDS Silver is affiliated with
JDS Energy & Mining, Inc., a company that delivers mining
project concepts from inception to full operations – a process it
has executed for operations throughout Canada and the world,
including the Minto Mine in the Yukon, the Gahcho Kue Mine located
in the Northwest Territories, and most recently the Silvertip
mine.
Cautionary Statements
This news release contains forward-looking statements within the
meaning of securities legislation in the United States and Canada,
including statements regarding the anticipated acquisition of the
Silvertip mine and the establishment of a revolving credit
facility, anticipated production, costs, grades, cash flow,
earnings, mine life, expenditures, mining rates and exploration
efforts. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause Coeur's
actual results, performance or achievements to be materially
different from any future results, performance or achievements
expressed or implied by the forward-looking statements. Such
factors include, among others, the risk that the Silvertip
acquisition and revolving credit facility do not close on a timely
basis or at all, the risk that anticipated production, cost, grade,
mining rates, cash flow, expense levels and other anticipated
operating parameters are not attained, the risks and hazards
inherent in the mining business (including risks inherent in
developing large-scale mining projects, environmental hazards,
industrial accidents, weather or geologically related conditions),
changes in the market prices of gold and silver and a sustained
lower price environment, the uncertainties inherent in Coeur's
production, exploratory and developmental activities, including
risks relating to permitting and regulatory delays, ground
conditions, grade variability, any future labor disputes or work
stoppages, the uncertainties inherent in the estimation of
resources, changes that could result from Coeur's future
acquisition of new mining properties or businesses, the loss of any
third-party smelter to which Coeur markets commodities, the effects
of environmental and other governmental regulations, the risks
inherent in the ownership or operation of or investment in mining
properties or businesses in foreign countries, the political risks
and uncertainties associated with operations in Bolivia, Coeur's
ability to raise additional financing necessary to conduct its
business, make payments or refinance its debt, as well as other
uncertainties and risk factors set out in filings made from time to
time with the United States Securities and Exchange Commission, and
the Canadian securities regulators, including, without limitation,
Coeur's most recent reports on Form 10-K or Form 10-Q. Actual
results, developments and timetables could vary significantly from
the estimates presented. Readers are cautioned not to put undue
reliance on forward-looking statements. Coeur disclaims any intent
or obligation to update publicly such forward-looking statements,
whether as a result of new information, future events or otherwise.
Additionally, Coeur undertakes no obligation to comment on
analyses, expectations or statements made by third parties in
respect of Coeur, its financial or operating results or its
securities.
Christopher Pascoe, Coeur's Director, Technical Services and a
qualified person under Canadian National Instrument 43-101,
approved the scientific and technical information in this news
release. In addition to information provided herein, for a
description of the key assumptions, parameters and methods used to
estimate mineral reserves and resources, as well as data
verification procedures and a general discussion of the extent to
which the estimates may be affected by any known environmental,
permitting, legal, title, taxation, socio-political, marketing or
other relevant factors, Canadian investors should refer to the
Technical Reports for each of Coeur's properties as filed on SEDAR
at www.sedar.com.
Notes
1. For purposes of silver equivalence, metals prices
of US$1250/oz gold, US $17.50/oz silver, US $1.13/lb lead and US
$1.40/lb zinc were used. 2. EBITDA and AISC are non-GAAP measures.
Please see tables in the Appendix, as applicable, for the
reconciliation to U.S. GAAP. We supplement the reporting of our
financial information determined under United States generally
accepted accounting principles (U.S. GAAP) with certain non-U.S.
GAAP financial measures, including EBITDA and AISC. We believe that
these adjusted measures provide meaningful information to assist
management, investors and analysts in understanding our financial
results and assessing our prospects for future performance. We
believe these adjusted financial measures are important indicators
of our recurring operations because they exclude items that may not
be indicative of, or are unrelated to our core operating results,
and provide a better baseline for analyzing trends in our
underlying businesses. We believe EBITDA and AISC are important
measures in assessing the Company's overall financial performance.
For additional explanation regarding our use of non-U.S. GAAP
financial measures, please refer to our Form 10-K for the year
ended December 31, 2016 and our quarterly report on Form 10-Q for
the quarter ended June 30, 2017. 3. Based on mid-point of Coeur’s
2017 production guidance and the mid-point of Silvertip’s average
expected annual production figures.
For Additional InformationCoeur Mining, Inc.104 S.
Michigan Avenue, Suite 900Chicago, Illinois 60603Attention:
Courtney Lynn, Vice President, Investor Relations and
TreasurerPhone: (312) 489-5800www.coeur.com
Adjusted EBITDA Reconciliation
(Dollars in thousands except per share amounts)
2016
Net income (loss) $ 55,352 Interest expense, net of capitalized
interest 36,920 Income tax provision (benefit) (54,239 )
Amortization 123,161
EBITDA
161,194 Fair value adjustments, net 11,581 Impairment of equity
securities 703 Foreign exchange (gain) loss 10,720 Gain on sale of
Joaquin project — (Gain) loss on sale of assets and securities
(11,334 ) Gain on repurchase of Rochester royalty — (Gain) loss on
debt extinguishment 21,365 Corporate reorganization costs —
Transaction-related costs 1,199 Asset retirement obligation
accretion 8,369 Inventory adjustments and write-downs 6,917
Write-downs 4,446
Adjusted EBITDA
$ 215,160
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170911005307/en/
Coeur Mining, Inc.Courtney Lynn, 312-489-5800Vice President,
Investor Relations and Treasurerwww.coeur.com
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