Santander Deal commentsWell the market does not seem to like this deal as the share price has dropped 9.3% today so far...
Total consideration is approximately US$5 million including CAD$, shares, contingent considerationa nd a NSR (see below).
With share consolidation, your average share cost is now ten times higher (is Trevali really a $2.00 per share stock as this moment?) Certain investment funds have restrictions that barr them from investing in penny stocks so this may improve the market's general interest / appetite for Trevali shares...
Trevali management
has one less mine to manage - so this may be a good thing for all involved!
No more CAPEX, exploration costs, environmental rehabilitation expenditures and no potential Care & Maintenance expenditures in the future - this is a good thing.
However, in reviewing Pasco Resources 'transaction rationale' (see Page 4
Pasco Resources - Presentations) Pasco sees significant value in the Santander Mine:
- Acquire a profitable mine with potential to grow operating cash flow and significant exploration upside
- Currently producing 52 Mlbs/yr of payable zinc, 4Mlbs/yr payable lead & 290koz/yr payable silver at an AISC of USD1.08-1.14/lb (Guidance 2021)
- Steady-state, fully permitted operation with, stable workforce and good community relations
- Modern processing plant with a replacement value of over USD50M, which could eventually be moved to Cerro de Pasco or be used to treat / toll-mill third party ores
- Substantial remaining Mineral Resources on a 44km2 land package, largely unexplored and surrounded by mines and properties owned by major producers such as Pan American Silver, Volcan and Newmont
- Significant tailings resource which can be retreated at the end of the life of mine
- CDPR plans to develop the Santander Pipe orebody by linking the existing underground mine, increasing payable zinc equivalent metal and reducing AISC after 2 years.
- Offtake agreement (Glencore) applicable only to the existing Magistral Mine production
Selling Price (page 2)
- CAD1 Million in cash (about US$ 0.8 million cash or an approximately the annual salary of the Trevali CEO!)
- 10 million CDPR Shares (at CDN$ 0.35 per share or approximately USD$ 2.7 million with 9 million shares held in escrow with 1.5 million shares released every six months after closing)
- A 1% Net Smelter Return (NSR) royalty payable quarterly to Trevali for any payable metal produced from parts of the concession area not already explored/drilled (NSR is on new finds not current ones)
- USD2.5M to be repaid 12 months after closing if the average zinc price remains above USD1.30/lb during this period (although $7.5M working capital is included in the deal / left in Peru)
Cerro de Pasco Resources Inc. (“CDPR”) is a resource management company with the purpose of
treating and reprocessing all dumps, tailings, mining waste and material resources in the Cerro de Pasco Region in Peru.
Pasco Resources - About Cerro de Pasco Resources