SSR Mining takes strategic stake in SilverCrest Metals

SSR Mining (TSX: SSRM; NASDAQ: SSRM) is investing $31 million for a 9.9% stake in SilverCrest Metals (TSXV: SIL; NYSE-AM: SILV) and its Las Chispas project in Sonora, Mexico.

SilverCrest Metals expects to deliver a preliminary economic assessment on Las Chispas in the first quarter of 2019, and the project has an inferred resource of 511,800 ounces of gold and 48.3 million ounces of silver contained in 4.3 million tonnes grading 3.68 grams gold per tonne and 347 grams silver per tonne.

The resource was calculated at a gold price of US$1,225 per oz. and US$18.50 per oz. silver and based on eight of 30 epithermal veins identified so far on the project, 180 km northeast of Hermosillo.

SSR Mining’s president and CEO, Paul Benson, described Las Chispas as a “compelling investment proposition,” and an “exciting high-grade development project with exploration upside in a favourable mining jurisdiction.”

Benson also noted that SilverCrest has a successful track record of discovering economic deposits that develop into operating mines.

Prior to the formation of SilverCrest Metals, CEO Eric Fier cofounded SilverCrest Mines, which was acquired by First Majestic Silver (TSX: FR; NYSE: AG) in October 2015 for its Santa Elena mine in Mexico.

With SSR Mining’s investment, SilverCrest Metals will have more than $40 million available to explore and advance Las Chispas. The company will be fully funded to complete a resource update and a PEA on Las Chispas in the first quarter of 2019. In addition, the funds will pay for construction of an exploration decline into the high-grade Area 51 zone of the Babicanora Vein, infill and expansion drilling to upgrade the resource, and undertake a prefeasibility study.

SSR Mining is acquiring 8.2 million common shares in SilverCrest Metals at $3.73 per share through a private placement that is expected to close on December 7. Under the investment agreement, SSR Mining will have participation rights to maintain its ownership interest pro rata and a right of first refusal on any proposed royalty, stream, or offtake agreement. It will also give the right of access to certain technical and scientific data on Las Chispas.

Ryan Thompson of BMO Capital Markets commented in a research note that the $31 million investment makes up only 5% of SSR Mining’s cash position and is “manageable in the context of SSR’s overall size.”

“We think the modest investment is prudent because 1) Las Chispas is still in its early days, and 2) it lays the foundation to build a relationship between the two companies,” he says.

SSR Mining owns the Marigold gold mine in Nevada, the Seebee gold operation in Saskatchewan, and has a 75%-stake in the Puna operations joint-venture with Golden Arrow Resources (TSXV: GRG; US-OTC: GARWF) in Jujuy, Argentina. It also has two feasibility stage projects, San Luis in Peru and Pitarrilla in Mexico, and exploration properties in North and South America.