First Majestic acquires silver stream on First Mining's Springpole project
(Kitco News) - First Majestic Silver Corp. (NYSE: AG; TSX: FR) has agreed to acquire a stream on 50% of the payable silver produced from the Springpole gold project in Ontario, the companies announced Thursday.
First Majestic said the deal gives it "significant upside potential" to higher silver prices, while project owner First Mining Gold Corp. said the arrangement will provide it with funding to advance Springpole. First Mining's website said the Springpole project has indicated resources totaling 4.67 million ounces of gold and 24.19 million ounces of silver.
First Majestic will acquire the stream from Gold Canyon Resources Inc., a subsidiary of First Mining Gold Corp. First Majestic will pay $22.5 million in cash and shares, over three payments, for a silver stream that covers the life of the project. First Majestic will make ongoing cash payments of 33% of the silver spot price per ounce, to a maximum of $7.50 per ounce, for all silver delivered by Springpole. Further, First Mining is granting First Majestic 30 million share purchase warrants, each of which will entitle the company to purchase one share of First Mining at C$0.40 over a period of five years.
"This new silver stream gives First Majestic significant upside potential to higher silver prices while minimizing risks and costs," said Keith Neumeyer, president and chief executive officer of First Majestic. "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."
Neumeyer pointed out that the silver stream marks First Majestic's first investment outside of Mexico in the company's 18-year history.
"We are excited to enhance our strategic partnership with First Majestic to fund Springpole through the completion of the pre-feasibility and environmental assessment processes," said Dan Wilton, chief executive of First Mining Gold.
"This agreement is the result of a year-long process to explore non-dilutive financing alternatives with a number of different parties. This silver stream sale leverages Springpole's potential by-product revenue, strengthens our balance sheet, and provides a less dilutive source of funding to support our continued advancement of one of the largest undeveloped open-pit gold deposits in North America."
Springpole is one of Canada's largest, undeveloped gold projects with permitting underway and the results of a pre-feasibility study anticipated in early 2021.
First Majestic will make an initial payment upon closing of the agreement, then additional payments upon completion of a pre-feasibility study and receipt of federal and provincial environmental-assessment approval for Springpole. First Mining will have the right to repurchase 50% of the silver stream for $22.5 million at any time prior to production at Springpole, leaving First Majestic with a reduced silver stream.
First Majestic said the closing of the transaction is expected to occur in July.