Coeur Enters Into Letter of Intent to Sell Non-Core Assets for up to $67M
Coeur d'Alene Mines Corporation (the “Company” or “Coeur”) (NYSE: CDE) today announced that it has entered into a letter of intent with XDM Royalty Corp. (“XDM”) to sell its interest in the silver production and reserves from the Endeavor mine in Australia (the “Endeavor silver stream”) and the royalty from the Cerro Bayo gold and silver mine in southern Chile (the “Cerro Bayo royalty”) for up to US$67 million in total cash and XDM equity consideration.
The letter provides that XDM will pay US$45 million in cash and issue US$10 million in common equity to Coeur at closing, subject to adjustment for cash flow to Coeur from the Endeavor silver stream since January 1, 2013 which will be for XDM's account. The letter also provides for two additional contingent cash payments totaling US$12 million for the Endeavor silver stream upon achieving certain milestones related to future potential reserve increases and mine development.
Mitchell J. Krebs, President and Chief Executive Officer of Coeur, said, “This sale of non-core assets presents a compelling and accretive transaction for Coeur shareholders. The XDM consideration, even without the contingent payments, unlocks significant value that has not been reflected in Coeur's current share price. The proceeds from this transaction will provide Coeur with additional capital to selectively invest in high-return internal and external opportunities, including our ongoing share repurchase program.”
Of the US$55 million in total consideration payable by XDM to Coeur at closing, US$40 million is allocated to the Endeavor silver stream and US$15 million in cash is allocated to the Cerro Bayo royalty.
Closing is currently expected in the second quarter of 2013, subject to an XDM financing condition and the negotiation and execution of definitive agreements, in addition to customary conditions. The sale of the Cerro Bayo royalty is subject to a right of first refusal held by Mandalay Resources Corporation (“Mandalay”), the owner and operator of the Cerro Bayo mine. In the event Mandalay exercises its right of first refusal, XDM would still be obligated to acquire the Endeavor silver stream.
In May 2005, the Company paid US$44 million for all of the silver production and reserves (up to 20 million payable ounces) contained at the Endeavor mine in New South Wales, Australia. As of March 31, 2013, approximately 102% of the original purchase price has been recovered. In 2012, Endeavor produced 665,816 payable ounces of silver at cash operating costs of US$17.27 per ounce.
In August 2010, the Company sold its subsidiary that controlled the Cerro Bayo mine to Mandalay. Under the terms of the agreement, Coeur received the following consideration: (i) US$6 million in cash; (ii) 17,857,143 common shares of Mandalay; (iii) 125,000 ounces of silver to be delivered in six equal quarterly installments commencing in the third quarter of 2011 which had an estimated fair value of US$2.3 million; (iv) a 2% net smelter royalty on production from the Cerro Bayo mine in excess of a cumulative 50,000 ounces of gold and 5,000,000 ounces of silver which had an estimated fair value of US$5.4 million as of December 31, 2012; and (v) existing value added taxes of US$3.5 million. As part of the transaction, Mandalay also agreed to pay US$6 million of reclamation costs associated with Coeur's nearby Furioso property.
Raymond James Ltd. is acting as financial advisor and Gibson, Dunn & Crutcher LLP is acting as legal advisor to Coeur d'Alene Mines Corporation. Haywood Securities Inc. is acting as financial advisor and Norton Rose Canada LLP is acting as legal counsel to XDM Royalty Corp.
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