Coeur takes a shine to Martha

Coeur d’Alene Mines (CDE-N) has reached an agreement in principle to acquire a 100% interests in the high-grade Martha underground silver mine on the Bacon property in the southern Patagonia region of Santa Cruz, Argentina.

Under the deal, the Idaho-based company would acquire 100% of Yamana-owned Compania Minera Polimet, an Argentinean company that owns the Martha mine and other silver exploration properties for US$2.5 million in cash.

Coeur will make the cash payment to Northgate Exploration (NGX-T) in order to satisfy Yamana’s debt owed to Northgate.

Yamana’s debt to Northgate goes back to the mine’s original project financing.

The Martha mine lies about 270 miles east of the Coeur’s Cerro Bayo mine, and is situated on the Veta Martha silver shoot, a 200-metre segment of the regionally extensive Veta Martha fissure vein system.

At last count, Martha’s resource was estimated at 4,993 tonnes averaging 428 oz. of equivalent silver per tonne, or about 2.1 million contained equivalent silver oz. About 600,000 of the oz. are contained in pillars and remnants and may not be immediately mineable without impeding access to new resources.

Sixteen holes sunk last September confirmed existing resources in one zone, or pocket, and added new resources in another. At Pocket 1 West, drilling confirmed a resource of 440 tonnes averaging 804 oz. silver-equivalent. Farther to the west, deeper and outside the resource area, drilling returned 0.5 metre grading 744 oz. silver and 0.5 metre running 388 oz. silver per tonne. Another seven holes have extended Pocket 3 East by 20 metres to the east and to a depth of 30 metres.

Outside Martha’s four known pockets, drilling has indicated that resources at Bacon are 4.7 million equivalent oz. averaging 42.4 oz. per tonne.

Yamana says that the vein system remains incompletely tested and has exploration potential for 40 million equivalent oz.

Also under the deal, Coeur would buy 10 million shares, or about 10% on a fully diluted basis, of Yamana, US$600,000. Coeur’s president and CEO Dennis Wheeler would also join Yamana’s board of directors.

Says Wheeler: “This transaction will expand our exciting Cerro Bayo operation by adding over 2.5 million ounces of silver production in 2002 at extremely low cash costs. Martha’s low-cost ounces will increase Coeur’s 2002 forecast of total silver production by approximately 20% to nearly 16 million ounces and generate an estimated US$9.0 million of additional cash flow from existing reserves and resources at Martha.”

Once the deal wraps up, Coeur plans to immediately begin shipping Martha’s stockpiled high-grade ore to its Cerro Bayo mine in southern Chile, for processing.

Cerro Bayo is schedule for a May startup with 2002 production forecast at 82,000 gold-equivalent ounces at a cash cost of less than US$150 per oz. At last count, the property’ s reserves stood at 582,000 tons averaging 0.18 oz. gold and 9.7 oz. silver per ton, and resources of 585,000 tons grading 0.08 oz gold and 5 oz. silver. With added feed from Martha, Cerro Bayo’s 2002 production is expected to climb by 50% to 123,000 gold equivalent oz. and cash costs are expected to drop.

Overall, Coeur expects that Martha’s low-cost oz. will increase forecast silver production this year by nearly 20% to 16 million oz.

Also included in the deal are several silver properties mostly in the Bacon silver district. Yamana will retain a 10% net proceeds interest in all of the silver properties outside the immediate 42-hectare Martha mine area.

The deal is subject to due diligence, regulatory approval and the signing of definitive agreements.