First Majestic buys Nevada gold mine from Sprott

First Majestic Silver (TSX: FR; NYSE:AG) is buying the Jerritt Canyon gold mine in Elko County, Nevada, from Sprott Mining for US$470 million in shares and five million share purchase warrants.

As part of the deal, Sprott Mining President Eric Sprott will complete a US$30 million private placement investment in First Majestic.

The Canadian miner said it had identified opportunities to enhance the mine’s cost and production profile, as well as near-term brownfield potential between the SSX and Smith mines.

Jerritt Canyon was discovered in 1972 and has been in production since 1981. The asset has delivered more than 9.5 million ounces of gold. Last year, it produced 112,749 ounces of gold at a cash cost of US$1,289 per ounce.

Nevada took this year the title of world’s top mining destination in the latest survey of resource and exploration companies released in February by the Fraser Institute.

Together with the area’s known gold and silver potential, Nevada’s lithium deposits have been in the spotlight in recent years, especially due its proximity to North America’s only lithium mine – Albermarle’s (NYSE: ALB) Silver Peak.

First Majestic initiated arbitration proceedings earlier this month against the government of Mexico, which is seeking more than US$500 million from the company in allegedly owed taxes.

The Vancouver-based miner had warned the López Obrador administration last year of its intention to ask the International Centre for Settlement of Investment Disputes to mediate. The move triggered a 90-day period for the Mexican government to enter into negotiations with the company.

At the time, the company said that Mexico had ignored an advanced pricing agreement (APA) with its subsidiary Primero Empresa Minera. The deal, it said, set up the basis for taxing silver sales from the San Dimas mine between 2010-2014. 

The government, which has made cracking down on tax breaks a priority, claims that First Majestic’s subsidiary artificially kept its silver prices low over the past decade to pay less taxes.

The miner, which refutes those claims, said it has attempted to initiate talks with Mexican authorities, but noted they have refused to engage.