Coeur d'Alene Mines Corporation (the “Company” or “Coeur”) 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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