This guy has nailed so many mining stocks moves ahead of time that i always pay close attention (and share his commentary here). Here are his comments on the Glencore acquisitions:
As for (SCZ) Santacruz Silver, it has been one of my favorite ways to play the Jr silver producer space, and was similar in many ways to (IPT) Impact Silver as the tiniest of the producers, with exploration upside, and
the biggest increases on a percentage basis to margins when the metals prices improved and went from the teens to the twenties on silver prices.
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The reason for the halt (it may last for a bit) is that they are taking over operations of a few Glencore Silver/Zinc/Lead mines, which are non-core for Glencore, but will very important to Santacruz. As David eluded to above, since it is a more material transaction for the company, and one I personally really like for SCZ, it takes more approvals from both companies to release the halt. It was a bit of a bummer to have it halted last week though, as they put out a good Q3 operations report, and silver was climbing higher so they’d have had really good rising torque to that action.
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I’m not sure what the reaction to the new larger Santacruz with more operating mines will be, but personally I like it and takes them up the food-chain into more of a mid-tier producer role, and thus will open them up to a larger pool of investors and ETF inclusion. However, it does take away some of the appeal of why I liked SCZ being so tiny and highly torqued to rising metals prices.
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However, Zinc and Lead prices have been surging lately, and if they get more mines producing successfully, then I can see how Glencore would benefit from the valuation lift that this would give Santacruz Silver. It’s similar to why Glencore spun out several non-core Zinc mines to Trevali (TV) which are finally starting to get traction on those lately, and I believe (TV) may surprise some folks over the next few quarters and by mid-2022 should be rerated much higher. It’s also similar to why (PAAS) Pan American Silver spun out their royalty assets to Maverix (MMX), because they were non-core to a company of their size, but they could realize much more value on those assets by having a strategic stake in a more junior company that would be able to realize bigger valuation jumps on those assets. In many regards, that is what I believe Glencore is doing with it’s incubators of Trevali and now Santacruz Silver.
Excelsior
Oct 23, 2021 23:55 AM
(SCZ) (SZSMF) Santacruz to Acquire Glencore’s Producing Silver Mines in Bolivia Creating a New Significant Latin American based Silver Producer
– 13 Oct 2021
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-Creation of a significant Americas-focused silver producer approaching senior status, with additional significant leverage to the zinc market
-Diversifies production across a robust portfolio of producing mines and creates a platform for future growth
-Assets include five producing mines, two exploration projects, three milling facilities, one trading company and two power plants (thermo and hydroelectric) among the most relevant
-For the nine months ended September 30, 2021, the Assets produced 6.4MM oz Ag Eq
-Immediately accretive to cash flow and all key metrics
-Majority of consideration deferred and to be funded by cash flows resulting in limited upfront dilution compared to an all-share transaction
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https://ceo.ca/@newsfile/santacruz-to-acquire-glencores-producing-silver-mines
Reply
Excelsior
Oct 23, 2021 23:57 AM
Again, to clear up any confusion, this is the reason Santacruz Silver has been halted.
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As mentioned it is a bit of a bummer, because with Silver running recently and the Silver stocks bouncing, they would have had a nice move up, especially having put out a solid Q3 operations report this week.
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