First Majestic Adds Ounces With Normabec Takeover

Silver producer First Majestic Silver (FR-T, FRMSF-O) is expanding its footprint in Mexico with the acquisition of Normabec Mining Resources (NMB-V, NBEMF-O) and its past-producing Real de Catorce property, in San Luis Potosi state.

The acquisition adds to First Majestic’s portfolio of three mines and two exploration projects in Mexico.

The friendly all-share deal will see each Normabec share exchanged for 0.060425 of a First Majestic share, and 0.25 of a share in a spinoff public company. The new company will hold Normabec’s Quebec gold assets, including the Pitt property, where drilling last year returned up to 5 metres grading 11.52 grams gold.

The deal values Normabec at 18.06¢ per share and represents a 47.7% premium to the junior’s shares, based on both companies’ trading prices for the 20 trading days before Sept. 11.

The boards of both companies have signed lockup agreements supporting the transaction.

“Based on our due diligence, we believe the Real de Catorce silver project is an excellent fit and has the potential to become another asset for our company,” said Keith Neumeyer, First Majestic’s president and CEO, in a statement.

The spinoff company will be run by current Normabec management, and once the deal closes, First Majestic has agreed to invest $300,000 in the company for a stake of roughly 10%, via a private placement.

“By this agreement, we feel that our shareholders will participate not only in the development of this key asset (Real de Catorce), but also in other divisions of First Majestic in production,” said Normabec president and CEO Robert Ayotte in a statement.

The deal, expected to close in early November, requires two-thirds of Normabec’s shares to be tendered go through.

Real de Catorce, in the western foothills of the Sierra Madre Oriental Mountains, is situated about 25 km west of the town of Matehuala.

Measured and indicated resources at the project (including in tailings) are 5.1 million tonnes grading between 90 grams silver per tonne (in tailings) and 316 grams silver for a total of 33.7 million oz. silver. Inferred silver resources stand at 1.9 million tonnes grading 220 grams silver for 13.1 million oz. The project also con- tains zinc and lead resources.

Between the 1770s and 1990, an estimated 230 million oz. were produced at the property.

First Majestic expects production from its three mines — La Encantada (which is in the midst of an expansion, slated for completion by year-end) in Coahuila state, La Parrilla in Durango state, and San Martin in Jalisco state — to come in at around 5 million silver- equivalent oz. this year. The company also owns the Del Toro silver project, in Zacatecas state, where a prefeasibility study is under way, and the Cuitaboca silver project, in Sinaloa state.

First Majestic’s properties host a total of 47.9 million oz. silver in proven and probable reserves.

The company recently closed a non-brokered private placement of 4.2 million units at $2.30 apiece for proceeds of $9.6 million, which will be used as general working capital at its mines. Each unit consisted of one share and half a warrant, with each full warrant exercisable at $3.30 per share for two years. The company also announced it recently settled current liabilities totalling $2.7 million. The liabilities related to outstanding payables owed to drilling and development partners and debts owed by the company’s subsidiaries and consisted of share issuances of nearly 2.6 million shares at a deemed price of $2.30 each.

At presstime, First Majestic shares traded at $2.45 in a 12-month range of 87¢-$3.15. The company has 87.7 million shares outstanding.