RE:RE:RE:RE:RE:RE:RE:Mercedes There's no question that Premier is substantially undervalued. If you look at their assets outside of Mercedes, one can easily get to a C$8+ share-price. HardRock /Centerra overhang removal and continued high quality drill results will likely be the catalysts to get things moving in that direction...
As for Mercedes, production & grade has gone from:
2016: 22,481 / 4.27
2017: 82,534 / 3.93
2018: 68,719 / 3.34
2019: 59,901 / 2.91
Mercedes Q1 2020 production was 11,587oz (vs. 17,614 in Q1 '19) with a grade of 2.36 (vs. 3.18 in Q1 '19), based on ~2k tons of ore mined / day. New guidance, according to press release, is 1,200oz/day ore mined until they get grades back up. I'd imagine fewer people needed given less ore/day so that combined with higher grades should, in theory, make profitability / profits better.
THIS IS IMPORTANT: Premier purchased Mercedes from Yamana Gold in 2016 (see details below).
Orion, now Premiers largest shareholder, provided them with the "financing" for this pig of an asset. Coincidentatlly (or maybe not a coincidence at all), Yamana Gold and Orion recently partnered to form Nomad Royalties and two key assets used were the Mercedes silver stream and gold loan that Premier signed over to fund Mercedes. One has to wonder if Orion knew exactly what they were doing and took advantage of Premier, both then and more recently.
DETAILS OF MERCEDES TRANSACTION:
Pursuant to a share purchase agreement dated July 28, 2016, Premier has acquired all of the shares of Yamana's indirect wholly-owned Mexican subsidiaries, which own a 100% interest in the Mercedes Mine, for total consideration consisting of:
| a) | US$122.5 million in cash (the "Cash Purchase Price"); |
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| b) | 6.0 million common shares to Yamana in the capital of Premier (each a "Common Share"); and |
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| c) | 3.0 million warrants to Yamana (each a "Yamana Warrant") to acquire up to 3.0 million Common Shares. Each Yamana Warrant entitles Yamana to purchase one Common Share upon the exercise thereof at the price of C$4.75 per Common Share until 5:00 p.m. (Toronto time) on September 30, 2018. |
In connection with the Acquisition, Premier granted Yamana a 1.0% net smelter return royalty on production from the current land package relating to the Mercedes Mine on the earlier of: (a) the date on which 450,000 ounces of gold equivalent has been produced by the Mercedes Mine following September 30, 2016; and (b) September 30, 2022. Yamana was also granted a 2.0% net smelter return royalty on the La Silla property in Sinaloa, Mexico and the La Espera property in Sonora, Mexico.
The Cash Purchase Price was provided pursuant to a financing package (the "Financing") from Orion Mine Finance ("Orion"). The Financing is comprised of the following:
| a) | Senior Secured Gold Prepay Credit Facility of US$ 42.2 million pursuant to which Premier will deliver to Orion 2,450 troy ounces of gold per quarter for a period of 15 consecutive quarters commencing December 31, 2016 in repayment of principal, plus cash interest payments at an interest rate of 6.5%. Subject to certain exceptions, Premier has the option to satisfy four interest payments in Common Shares issued at the then 10 day volume weighted average closing price; |
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| b) | Senior Secured Silver Stream of US$11.5 million pursuant to which Premier will deliver to Orion 50% of the silver production from the Mercedes Mine for the first year following closing, 60% for the subsequent year, and 70% thereafter until the delivery of 1.25 million ounces of silver, after which the delivery will be reduced to 25% of the silver production until the delivery of 2.0 million ounces, and reduced further to 12.5% thereafter. Orion will pay an ongoing cash purchase price equal to 20% of the prevailing silver price; |
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| c) | An increase of US$15 million in Premier's existing unsecured credit facility with Orion to US$45 million. The interest rate associated with this facility remains unaltered at 6.0%; |
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| d) | A subscription of 10,958,333 Common Shares by Orion for gross proceeds of US$35 million; |
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| e) | 1,000,000 warrants (each an "Orion Warrant") to acquire up to 1,000,000 Common Shares. Each Orion Warrant entitles Orion to purchase one Common Share upon the exercise thereof at the price of $5.46 per Common Share until June 30, 2018; and |
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| f) | An amendment to Premier's existing offtake obligations with Orion to sell up to an additional 20,000 ounces of gold annually relating exclusively to production from the Mercedes Mine, subject to an annual aggregate maximum of 35,000 ounces of gold from all of Premier's producing projects. |