VANCOUVER (miningweekly.com) – Private equity firm Denham Capital has agreed to sell its 100% stake in silver producer JDS Silver to Coeur Mining – the largest US-based primary silver producer – in a transaction worth up to $250-million.
The transaction will see Coeur gain access to the high-grade Silvertip silver/zinc/lead mine, in northern British Columbia, as well as a foothold in one of the best mining-friendly jurisdictions in the world.
In its first Canadian foray, Denham Capital agreed to back the private project developer in September last year, providing $65-million to complete construction and bring into production the Silvertip mine.
At a 30% zinc-equivalent grade, the Silvertip project has one of the highest-grade zinc deposits globally, in addition to silver and lead. JDS started construction in December 2015, with production starting last October.
Coeur said that, for $25-million to $35-million of added capital, it expects to reposition Silvertip for long-term success and achieve commercial production by the first quarter of 2018. The asset is forecast to lift Coeur's silver-equivalent output 22% to 54-million ounces this year, on a pro forma basis.
Silvertip will add 88-million ounces of silver equivalent in the measured and indicated categories, and add 17-million silver-equivalent ounces in the inferred resource category.
“We are delighted at the outcome of this investment in the Canadian mining sector and have greatly enjoyed the experience of working with [CEO Jeff Stibbard] and his team. Our partnership with JDS Silver once again illustrates our management team-driven investment approach, and we look forward to replicating this successful approach again in Canada,” stated Denham Capital director Caroline Donally in a press release.
Under the arrangement agreement, the $200-million initial payment received by JDS and its affiliates will, after repayment of JDS Silver debt, comprise 75% cash, 25% Coeur shares and the assumption of $15-million in existing debt.
Coeur will also pay a further cash consideration of up to $50-million based on achieving certain performance-linked measures; Denham will retain an existing royalty on the property.
The transaction, which is expected to close before the end of October, is subject to customary regulatory approvals and other closing conditions.
Maxit Capital served as exclusive financial adviser to JDS Sliver.