Endeavour Silver sells Bolañitos for $50M

Endeavour Silver (NYSE: EXK; TSX: EDR) has agreed to sell its Bolañitos mine to Guanajuato Silver (TSXV: GSVR) in a deal worth up to $50 million, as it looks to focus more on its other assets in Mexico.

The base consideration will consist of $30 million in cash and $10 million in Guanajuato shares, each with a deemed price of about $27¢, representing the stock’s volume-weighted average price for the 10 days prior to the agreement. There are also contingent payments of $10 million tied to production from Bolañitos. 

Endeavour Silver CEO Dan Dickson said the sale would allow the company to focus its resources on its “core silver assets in Mexico” such as the Terronera mine and Pitarrilla project. Guanajuato Silver said Bolañitos is a good fit with four other mines. 

Shares in Endeavour Silver gained 2% to close at C$11.03 apiece in Toronto on Tuesday, valuing the company at C$3.25 billion. Guanajuato Silver jumped 9.9% to C44¢ for a market capitalization of C$285 million. 

Fifth mine

Bolañitos adds a fifth operating asset to Guanajuato Silver’s Mexico-based portfolio, which comprises three primary silver mines (Topia, Valenciana, and El Cubo) and a gold mine (San Ignacio). 

“The numerous advantages of integrating our San Ignacio mine into the Bolañitos mines complex are obvious,” Guanajuato Silver Chairman and CEO James Anderson said in a release. “We have already begun preparations to ensure seamless integration of this asset into our production portfolio, allowing us to quickly realize the economic rewards from this acquisition.”

Terronera

Endeavour is expected to make the Terronera underground mine in Jalisco, where operations started in July, its primary asset. Last month, it reached commercial production. According to a feasibility study, it is forecast to deliver annual output of 4 million oz. silver and 38,000 oz. gold over a 10-year mine life.

The Pitarrilla project is host to one of the world’s largest undeveloped silver resources, amounting to 491.6 million oz. in the measured and indicated categories. It also has a large endowment of lead and zinc, at 1.1 billion lb. and 2.6 billion lb. respectively.

The Bolañitos mine had been under Endeavour’s portfolio since 2007. Last year, it produced about 450,000 oz. of silver and 25,000 oz. of gold. The property is located in Guanajuato, the second largest historic silver mining district in Mexico.

The new deals contingency payments include $5 million paid on the first 2 million oz. of silver-equivalent (AgEq) produced and another $5 million on the next 2 million ounces. Each contingent payment will be satisfied equally by cash and shares.

Bolañitos

Bolañitos has a land package of 25.4 sq. km covering 26 mining concessions and three producing deposits: San Miguel, La Luz and Lucero. Together, they would add about 7.5 million oz. of silver and 132,000 oz. of gold (measured and indicated) to Guanajuato’s resource base.

Importantly, the company noted the potential synergy between Bolañitos and its San Ignacio mine, as the former surrounds the latter on three sides and would be able to process the San Ignacio mined material at low costs.

The transaction also includes the historic Cebada mine, which is located to the north of the company’s Valenciana mines complex (VMC). Post acquisition, Guanajuato intends to reactive the mine, which is currently on care and maintenance.