Coeur Mining to buy Silvercrest in US$1.7B deal

Coeur Mining (NYSE: CDE) has reached an agreement to acquire Canadian precious metals producer Silvercrest Metals (TSX: SIL; NYSE: SILV) in an all-share deal valued at US$1.7 billion. 

The addition of Silvercrest’s Las Chispas mine in Mexico, one of the world’s lowest-cost, highest-grade silver operations, is expected to make Coeur a leading global silver miner with 21 million oz. of the metal and 432,000 oz. of gold a year, Coeur said on Friday. 

The merged company will own five mines in North America, with three of them considered top silver producers —Rochester, in Nevada; Palmarejo in Mexico’s Chihuahua; and Las Chispas in Sonora state.

Las Chispas mine, which began production in late 2022, has shown strong operational performance, Coeur’s president and CEO, Mitchell J. Krebs, told investors on a conference call on Friday morning. The executive said that in 2023, the mine’s first full-year of operations, it produced over 10.25 million silver-equivalent 0z. at a cash cost of US$7.73 per ounce.

Shares mixed

SilverCrest shares rose nearly 10% on Friday morning to $10.81 apiece in Toronto for a market value of $2 billion. They’ve traded in a 52-week range of $5.86 to $14.04 and increased 60% so far this year. 

Coeur’s have soared 117.2% year-to-date through Thursday, as gold prices have risen to record highs. But they fell nearly 10% on Friday to US$6.40 each, valuing the company at US$2.6 billion. Their range has been US$2 to US$7.72.

Coeur’s proposed acquisition price of $11.34 per share represents an 18% premium over the 20-day volume-weighted average prices of both companies as of closing on Oct. 3. It also implies a 22% premium to SilverCrest’s closing price on the NYSE American that same day.

Upon completion, Coeur shareholders will own 63% of the merged company, while SilverCrest shareholders will control 37%.

Both companies’ boards have unanimously endorsed the deal, urging their shareholders to vote in favour. The agreement includes break fees of up to US$100 million if the transaction doesn’t proceed.

The transaction also still requires approval from regulatory authorities, including Mexican antitrust approval. The companies plan to close the deal in early 2025.

Silver prices have climbed nearly 35% this year, hitting a 12-year high in late September. The white metal, essential in industries such as solar panels and electronics, not only has become one of the year’s best-performing major commodities. It has also sparked a race among miners to secure reserves. Last month, First Majestic Silver (TSX: AG) agreed to acquire Mexico-focused Gatos Silver (NYSE: GATO) for US$970 million, marking a major consolidation in the silver mining sector.

The silver market experienced a 15% supply deficit last year and between 2020 and 2024, is expected to face a cumulative deficit of 1.1 billion ounces.