SilverCrest raises $101M after National Bank Financial bails

Less than a month after National Bank Financial said it was terminating a $75 million bought-deal financing deal with SilverCrest Metals (TSX: SIL; NYSE-AM: SLV) due to the COVID-19 pandemic, the mining company announced it would raise the same amount of money and possibly more through a non-brokered private placement.

SilverCrest announced on April 13 that it would issue 10 million common shares at a price of $7.50 per share, and said it was reserving the right to increase the issue to 13.33 million common shares for a total raise of $100 million.

The company closed the financing on April 17 — raising a total of $101 million — representing an over-subscription of about $26 million.

Under the bought-deal financing that National Bank Financial cancelled on March 18, 9.1 million SilverCrest shares would have been sold at $8.25 apiece. The deal would have been lucrative for the bankers, which would have grossed 5% of the $75 million, or about $3.75 million, plus further potential commission under a 15% over-allotment option to place up to an additional 1.37 million shares if there was investor appetite.

After NBF terminated the brokered deal, SilverCrest said it would pursue legal options. The company disputed the bank’s pandemic justification as the situation “was fully evident when the bought-deal financing was agreed upon with expectations that the precious metals market would respond positively to this known risk.”

The funds raised in the financing announced on April 13 will be used for exploration and development of SilverCrest’s Las Chispas project in Mexico and for general working capital.

A drill site a SilverCrest Metals’ Las Chispas silver project in Sonora, Mexico. Credit: SilverCrest Metals.

The project is 180 km northeast of Hermosillo in the state of Sonora and consists of 28 concessions totalling 14 square kilometres. The company has 16 drill rigs at the vein-hosted silver deposit and plans to complete a feasibility study before the end of the year.

A preliminary economic assessment (PEA) last year outlines a 1,250 tonne per day production rate and an initial mine life of 8.5 years. The study forecast average annual production of 5.38 million oz. silver and 55,700 oz. gold, or 9.6 million silver-equivalent oz.,  over the life-of-mine, with higher production rates envisioned over the initial four years.

Initial capital expenditure came in at US$100.5 million, and the study estimates the high-margin project would deliver a short payback period of nine months, an after-tax internal rate of return of 78%, and an after-tax net present value of US$406.9 million.

The company says drilling to date has only tested 10 of the 36 known veins on Las Chispas, and it is budgeting about US$16 million for its full-year 2020 drill program of about 125,000 metres.

SSR Mining (TSX: SSRM; NASDAQ: SSRM) owns 7.6%, a position secured when it invested in SilverCrest in late 2018, and under the non-brokered private placement announced April 13 has a right to maintain its ownership interest and up to 9.9%.

At press time in Toronto, shares of SilverCrest were trading at $8.72 within a 52-week trading range of $3.99 and $10.98.

The company has 109 million common shares outstanding for a $953-million market capitalization.