Endeavour Silver (TSX: EDR) is expanding into the country of Peru as it looks to grow its portfolio. The producer this morning indicated it is acquiring Compania Minera Kolpa S.A., also known as Minera Kolpa, and its Huachocolpa Uno mine.
The transaction will see Endeavour pay total consideration of $145 million, comprised of $80 million in cash and $65 million in common shares. An additional $10 million in contingent payments have been agreed to upon certain events occurring, while Endeavour will also take on $20 million in debt in connection with the transaction.
The purchase will see Endeavour acquire operations in the Huachocolpa and Santa Ana in the Huancavelica province of Peru. The operations, which cover over 25,000 hectares, consist of an underground mine and a 1,800 tpd concentrator plant, with permitting underway to expand the operation to 2,500 tpd.
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Last year the mine produced 2.0 million ounces of silver, 19,820 tonnes of lead, 12,554 tonnes of zinc and 518 tonnes of copper, which translates to 5.1 million silver equivalent ounces. That metal was produced at cash costs of $12.58 an ounce on a by-product basis, while all in sustaining costs totaled $22.80 an ounce.
Current resources amount to 21.4 million ounces of silver, 216,500 tonnes of lead, 212,400 tonnes of zinc and 17,500 tonnes of copper within the measured and indicated category. A further 14.6 million ounces of silver, 152,300 tonnes of lead, 170,000 tonnes of zinc and 12,100 tonnes of copper exist within the inferred resource category.
Funding for the purchase by Endeavour is to come from a mix of cash on hand, a new copper purchase agreement with Versamet, and a bought deal financing.
The copper purchase agreement will see Versamet provide $35 million as prepayment to Endeavour, with the company to purchase the greater of 95.8% of producer copper, and refined copper equal to 0.03 pounds per pound of produced lead. The purchase obligation steps down to 71.85% once 6,000 tonnes of copper have been delivered, and then down to 47.9% once 10,500 tonnes have been delivered. Versanet is to pay the spot purchase price of copper under the arrangement, with 90% of the price to come from the upfront deposit, while 10% will be paid in cash. Once the deposit is reduced to zero, Versamet will pay just 10% the spot price of copper.
The bought deal financing meanwhile will see Endeavour raise US$40 million through the sale of 10.32 million shares at US$3.88 per share. A 15% over-allotment option is also in play on the financing.
Closing of the transaction is expected to occur within the next 60 days.
Endeavour Silver last traded at $6.14 on the TSX.
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