Endeavour Silver expands into Peru with $145M mine

Endeavour Silver (NYSE: EXK; TSX: EDR) is expanding its operations into Peru with the acquisition of the Kolpa mine in Huancavelica in a $145-million (C$207-million) cash and shares deal.

The transaction adds a third producing asset to Endeavour’s portfolio, which has two precious metals mines in Mexico and another on its way. It also brings the company closer to becoming a senior silver producer and would lead to a “material increase” in the company’s production, Endeavour CEO Dan Dickson said on Tuesday.

Endeavour plans to add 5 million silver-equivalent oz annually, which represents two-thirds of Endeavour’s production of 7.6 million oz. last year, Dickson said in a release. 

The Kolpa mine is a fully funded primary silver mine located about 74 km south of Huancavelica City. It started off as a small-scale operation 75 years ago and has since undergone several expansions to reach its current installed capacity of 1,800 tonnes per day (tpd), with permitting in progress for expansion to 2,500 tpd. For the last 25 years, Kolpa has been in continuous production.

Transaction details

Compañia Minera Kolpa is a private Peruvian firm owned by affiliates of Arias Resource Capital Management and Grupo Raffo. In 2022, Compañia Minera Kolpa offered to buy Canada’s Sierra Metals (TSX: SMT), majority owner of the Yauricocha polymetallic mine located near Kolpa, but failed in its attempt.

The new consideration for Kolpa mine consists of $80 million cash and $65 million in Endeavour shares. The number of shares to be issued is based on a deemed price of $4.618, the volume-weighted average price of its NYSE-listed shares for the 10 business days prior to the offer.

Endeavour has also agreed to pay up to $10 million in milestone payments and add $20 million in net debt owed by Compañia Minera Kolpa.

To fund the acquisition, Endeavour has entered into a streaming agreement with Versamet — the royalties company created by Sandbox Royalties and B2Gold (TSX: BTO; NYSE-A: BTG) — who will make a $35 million prepayment for the copper produced from Kolpa.

Endeavour will also complete a $45-million bought deal financing by issuing shares priced at $3.88 apiece, a 9% discount on the previous day’s closing price of $4.27. The stock traded at $3.80 by mid-Tuesday in New York, for a market capitalization of $1.1 billion.