Coeur d’Alene Mines Corp., a large U.S. silver producer, has reached an agreement to acquire Vancouver’s Orko Silver Corp., wresting the large Mexican silver deposit from the grasp of a Canadian rival.
Idaho-based Coeur, with mines and projects on three continents, agreed to pay the $350-million in cash and stock for Orko, breaking up a deal with First Majestic Silver Corp., another Vancouver miner.
Orko’s key property is called La Preciosa, a term Mexicans use to refer to their daughter, wife, or a prized possession. So it’s fitting perhaps that the silver property is at the centre of the bubbling takeover battle.
The deal was small for an industry used to multibillion-dollar acquisitions. But its significance goes beyond the price tag, marking a trend toward acquisitions of large, early-stage projects that are too expensive to develop by cash-strapped owners.
“As a buyer we see a lot of opportunity right now in these non-producing companies, where the capital markets have been mostly unavailable to them and where they don’t seem to be receiving the same kind of value as they have been, especially in this price environment, so we see that as a terrific opportunity,” said Coeur chief executive officer Mitchell Krebs.
Canadian mining has seen a pickup in deal making in recent months.
Inmet Mining Corp. is the target of a $5.1-billion hostile takeover offer from Vancouver’s First Quantum Minerals Ltd. and Aurizon Mines Ltd. is fighting off a $780-million, unsolicited offer from Alamos Gold Inc. Both companies say they’re seeking higher offers from third parties.
Orko had been shopping around for a deal since last year and had signed confidentiality agreements with several interested parties. It first agreed in December to sell to First Majestic, a $2-billion company with several producing silver mines in Mexico.
Key points to that deal, as well as the subsequent agreement with Coeur, were the financial and technical strengths the buyer brought to the table.
“Coeur has the financial and operational resources necessary to realize the true value of La Preciosa and we look forward to working with them to complete the transaction as expeditiously as possible,” Orko CEO Gary Cope said takeover deal.
It will have to pay First Majestic $11.6-million as a penalty for breaking the deal. It would have to pay an equal termination fee to break the deal with Coeur.
Coeur sees La Preciosa as a bet that demand for silver, both as an industrial metal and a precious metal, will rise in coming years as emerging economies in Asia, especially China and India, become more affluent.
A preliminary economic assessment is still pending on the project, but Coeur hopes to build La Preciosa by the end of 2016, and expects the open-pit operation to produce as much as nine million ounces of silver a year for over 19 years.
The new mine will become a top five silver producer, Mr. Krebs said, boosting output for the firm just as production plateaus.
“For us this is an opportunity to add a very meaningful silver project in a really great jurisdiction there in the state of Durango, in Mexico,” he said.
Mining has a long tradition in Mexico, but it has drawn increased attention in recent years as miners shied from other jurisdictions – in Latin America and on the African continent – as resource nationalism gained momentum.