Coeur Mining Inc. is now officially the owner of Silvertip, a high-grade silver mine about 10 miles south of the Yukon border in northern British Columbia.
In a deal that closed on Oct. 17, the Chicago-based miner paid US$200 million to acquire Silvertip and has agreed to pay up to another US$50 million more if certain permitting and resource expansion milestones are met.
For this investment, Coeur owns a newly built mine with 2.35 million metric tons of indicated resource averaging 352 g/t silver, 9.4 percent zinc and 6.7 percent lead; plus 460,000 metric tons of inferred resource averaging 343 g/t silver, 9.8 percent zinc and 6.2 percent lead.
This is Coeur’s first mine in Canada and is expected to become an important asset for the precious metals miner.
“Over the coming weeks and months, we plan to make meaningful investments at Silvertip to position it as a significant and sustainable cornerstone asset within our portfolio of operating mines,” said Coeur President and CEO Mitchell Krebs.
$250 million dealJDS Silver Inc., a company formed by JDS Energy & Mining Inc. in 2012, leveraged its engineering and permitting capacity to develop a mine at Silvertip.
Late in 2016, JDS achieved this goal by establishing a seasonal operation at the high-grade silver project.
Now, Coeur will apply its underground mining expertise to advancing Silvertip to a year-round commercial operation.
To gain full ownership of Silvertip, Coeur paid US$147.5 million in cash and issued US$37.5 million of Coeur common stock to acquire all issued and outstanding common shares of JDS Silver Holdings Ltd.
Coeur also assumed roughly US$15 million of JDS Silver debt and has agreed to pay the former owners of JDS Silver up to US$50 million when two milestones are met.
The first such payment would be paid when Coeur receives a permit amendment that allows for year-round operations at Silvertip’s full 1,000 metric ton per day capacity.
The second milestone payment is contingent upon the size of the Silvertip minerals resource by the end of 2019. JDS Silver will receive US$5 million for a total resource of at least 2.5 million metric tons and US$5 million for every 300,000 metric tons over that. The maximum payment of US$25 million would be paid if the total resource is at least 3.7 million metric tons.
As part of its deal with JDS Silver, Coeur agreed to invest at least US$15 million on exploration by the end of 2019.
Preparing for 2018 startWith the Silvertip acquisition complete, Coeur is getting the high-grade silver mine ready for operations early in 2018.
In September, the company said it plans to spend around US$30 million on mill optimization, underground development and exploration at its new mine over the next six months.
Once the mill is running at full capacity, Coeur anticipates Silvertip to produce roughly 3 million oz silver, 45-50 million lb zinc, and 40-45 million lb lead annually over an initial 7.5-year initial mine life.
“Once in full production, we expect Silvertip to produce about 10 million silver-equivalent-ounces annually,” Krebs said.
The all-in costs to produce an ounce of silver at Silvertip are expected to be between US$10 and US$11.
The ability to churn out high quantities of silver at lower costs in a secure mining jurisdiction is what made Silvertip a compelling acquisition for Coeur.
“We are excited about the impact Silvertip is expected to have on our production, margins, and cash flow beginning next year. We are also pleased to now have a presence in mining-friendly British Columbia and look forward to building upon the strong government and community partnerships already in place,” said the Coeur Mining CEO.
First Canadian mineLocated roughly 150 miles east of Coeur’s Kensington gold mine in Southeast Alaska, Silvertip is the company’s first operation in Canada.
BC government and First Nations leaders welcomed Coeur and look forward to the economic opportunities a Coeur-operated Silvertip Mine will bring.
“Coeur Mining's decision to invest here demonstrates that companies believe British Columbia is a good jurisdiction to invest in mining," said British Columbia Minister of Energy, Mines and Petroleum Resources Michelle Mungall. "Our government is committed to strengthening mining in this province to ensure companies like Coeur Mining continue to invest here, creating more good jobs for British Columbians.”
Kaska Dena, the First Nation whose traditional territory blankets the Silvertip Mine, congratulated Coeur on their purchase.
“The Silvertip Mine has provided many benefits to the Kaska which include employment, contracting opportunities and an economic agreement,” said Dease River First Nation Chief Ruby Johnny.
“We have established an excellent working relationship with JDS Silver and our hope is to continue and grow this relationship with Coeur Mining – the new owner of the Silvertip Mine,” Ruby, who is also a Kaska Dena Council director, added.
There are indications that Coeur could expand its presence in northwestern Canada.
Early in 2017 Coeur acquired 3.75 million shares of Rockhaven Resources Ltd., a junior exploring the Klaza gold-silver project in southern Yukon.
Situated about 250 miles northwest of Silvertip, Klaza hosts 9.42 million metric tons of inferred resource averaging 4.5 g/t (1.4 million oz) gold, 89 g/t (30 million oz) silver, 0.75 percent (155.4 million lbs.) lead and 0.95 percent (197.8 million lbs.) zinc.
A 2016 preliminary economic assessment for Klaza envisions an open-pit and underground mine feeding a 1,500-metric-ton-per-day process plant is projected to produce 630,000 oz gold, 11.4 million oz silver, 52.5 million lb zinc and 51.2 million lb lead over an initial 14-year mine life.
In addition to its financial investment, Coeur’s technical team is assisting with “the metallurgical and engineering facets of the Klaza project,” according to Rockhaven President and CEO Matt Turner.
While its investment in Rockhaven is relatively small, the road-accessible gold-silver in a mining-friendly jurisdiction would fit well in Coeur’s expanding portfolio.