Coeur Silver AcquisitionCoeur's purchase has two positive implications for SAC.
First, it shows the value of silver properties - paying over $1 billion for a development project.
The press release highlights one project Coeur is developing is in Bolivia. They already have operations in Bolivia, but as importantly, they are willing to invest more. Bolivia isn't that bad, especially for foreign companies that build assets from the ground-up (there has been little controversy here - the bruhaha is mostly recently privatized assets). And Coeur is now a behemoth in the silver business. They could be a potential buyer of SAC once SAC further develops its project. Importantly, many investors look at Coeur and its presence in Bolivia could draw light on relatively unknown SAC.
Coeur buying 2 juniors for $1.1-billion
Reuters
May 3, 2007 at 12:32 PM EDT
OTTAWA — — Coeur d'Alene Mines Corp. [CDE-N] said Thursday it will buy junior miners Bolnisi Gold NL and Palmarejo Silver and Gold Corp. [PJO-X] in a friendly deal worth $1.1-billion (U.S.) to create the world's leading primary silver producer.
The prize is a major silver project in Chihuahua, Mexico, the world's second-biggest silver producing country. Production at the Palmarejo project, currently under construction, is seen starting in late 2008 at an annual rate of 12 million ounces of silver and 110,000 ounces of gold.
That almost matches Coeur's own 2007 production forecast of 13 million ounces of silver and 110,000 ounces of gold.
Coeur, based in Coeur d'Alene, Idaho, and listed in New York and Toronto, has been hunting for deals in Mexico for the past two years, chief executive officer Dennis Wheeler told Reuters, but had not found anything with similar growth potential.
Coeur says it is confident it can boost Palmarejo's resources and plans to increase exploration efforts. It has also raised the construction cost estimate for the project to $125-million from $85-million to add underground operations to the surface mine plan.
Year to date, the spot silver price has gained about 3 per cent, last quoted at about $13.27 an ounce. It hit a high of $14.72 on Feb. 26 before a tumultuous selloff in global markets, and touched a low of $12.00 on Jan. 8.
“Silver is today's metal,” Mr. Wheeler told Reuters. “It's got more uses than any other metal known to man ... in areas of technology, medicine, electronic applications, clean water applications, you can get silver on your Band-Aids now because it's an effective killer of bacteria.”
The transaction, Coeur's biggest ever, will see its resource base expand to 364 million ounces of measured and indicated silver resources and 3.4 million ounces of measured and indicated gold resources.
After the deal is completed, likely in the third quarter of 2007, Coeur expects to produce about 32 million ounces of silver and 290,000 ounces of gold in 2009.
“That's why we're doing the deal today – it cements Coeur as the undisputed leader in silver. The new Coeur will have an unrivalled platform of silver mines and projects and will provide substantial growth at low cost,” Mr. Wheeler told analysts on a conference call.
Cash holdings of the combined company will be $382-million, Coeur said, adequate to fund development at its three key projects without equity dilution. It wants to build mines at its San Bartolome silver project in Bolivia, Kensington gold project in Alaska, and Palmarejo.
Under the proposed arrangement, Coeur is offering 0.682 of a share for each share of Australia's Bolnisi, and 2.715 Coeur shares for each share of Toronto-listed Palmarejo.
Bolnisi is the majority shareholder in Palmarejo, with a 74 per cent stake.
Coeur expects to issue 271.3 million new shares under the transaction. Based on Coeur's stock price at market close on May 2, Bolnisi shareholders will get the equivalent in cash and shares of $3.35 Australian ($3.05 Canadian) for each share. Palmarejo shareholders will receive the equivalent of $12.20 per share, Coeur said.
The agreed terms represent a 9-per-cent premium over Bolnisi's closing price of May 1, and a 14-per cent premium over the volume-weighted average price of the shares over the last 60 trading days. It is a 40-per-cent premium over Palmarejo's closing price May 1, and 32-per-cent premium over the 60-day average, Coeur said.