Investors were happy today as Coeur d'Alene Mining (NYSE: CDE, Stock Forum) announced that it had entered into a merger agreement with Paramount Gold and Silver (TSX: PZG, Stock Forum) in an all-stock transaction valued at $146.0 million.
According to the news release, just prior to the completion of the transaction, Paramount will spin off to its existing shareholders a separate, publicly traded company, expected to be named Paramount Nevada Gold, a subsidiary that owns the Sleeper Gold Project and other assets in Nevada.
After completion, Paramount shareholders will hold 24% of the outstanding shares in Coeur and 95.1% of the spin off company.
Couer will provide $10.0 million in cash to the spun off entity and will receive the remaining 4.9% common share interest in the spin off.
As a result of the transaction, Coeur will gain Paramount's San Miguel Project which covers 121,000 hectares surrounding Coeur's Palmarejo mine complex located in Chihuahua, Mexico.
The San Miguel Project includes the high-grade gold and silver Don Ese deposit which is located approximately 800 metres from Coeur's Guadalupe deposit and represents the southeast extension of Coeur's Independencia structure.
Coeur intends to develop Don Ese at an initial cost next year of $15.0 million and expects initial production at the deposit to commence by the end of 2015, ramping up to 2,500 tons per day by the end of 2017 with estimated recovery rates of approximately 80% silver and 95% gold.
Combined production from the Don Ese and Guadalupe deposits could reach on average 6.0 million ounces of silver and 110,000 ounces of gold annually over the next eight years.
Coeur's President and CEO, Mitchell J. Krebs, commented, “By adding Paramount's San Miguel Project and particularly the Don Ese deposit to the ongoing mining activities at our Guadalupe deposit, Palmarejo will be well-positioned to remain one of the world's top producing silver and gold mines with significantly higher grades and lower costs.”
He then concluded, “Paramount's Mexican assets strengthen the long-term viability of Palmarejo throughout the price cycle and enhance Coeur's growth profile. We expect the transaction to lower our overall unit costs, improve our free cash flow in the current metal price environment, and provide near-term growth while preserving our liquidity.”
Paramount Gold and Silver was in the news recently when the company announced continued high grade intersections at Don Ese a week ago.
Shares in Paramount climbed 29.49% on the news to $1.01 per share.
Currently there are 162.0m outstanding shares with a market cap of $163.6 million.