Precious metals miner Coeur Mining has agreed to acquire Northern Empire for approximately US$90 million in a deal that will allow Coeur to bolster its pipeline with high-quality projects.
Precious metals miner Coeur Mining (NYSE:CDE) agreed to acquire all of the issued and outstanding securities of Northern Empire Resources (TSX:NM) not currently owned by Coeur for the sum of approximately US$90 million, the companies announced on Thursday (August 2).
As per the agreement, the value of the transaction is inclusive of the approximately 7.4 million Northern Empire shares currently owned by Coeur, representing a premium of 40 percent to Northern Empire’s 20-day trailing volume-weighted average share price.
“The acquisition of Northern Empire, with its high-grade Sterling gold project and large, prospective land package, comes at an opportune time for us to bolster our pipeline with high-quality projects,” stated Mitchell Krebs, president and CEO of Coeur.
“The transaction, which provides a unique opportunity for Coeur to leverage its operational expertise in Nevada, a leading mining jurisdiction, and add expected near-term, high margin production and cash flow with minimal upfront capital, together with significant exploration potential, satisfies all of our acquisition criteria and is accretive on all key financial and operational metrics,” he added.
Under the agreement, each common share of Northern Empire will be exchanged for 0.1850 common shares of Coeur. Based on the closing price of Coeur’s common shares on the New York Stock Exchange on August 1, 2018, the transaction values each Northern Empire share at C$1.64.
Additionally, Coeur will acquire all of the outstanding options and warrants exercisable for Northern Empire common shares at the in-the-money value of such securities, satisfied by delivery of Coeur common shares based on the exchange ratio.
By Coeur acquiring Northern Empire, the company will have the unique opportunity to generate near-term value from expected high-margin production and cash flow at the Sterling mine and enhance its existing US-centric footprint in a top jurisdiction where it has operated open pit, heap leach operations for over 30 years.
Coeur will also gain access to the Crown Block ground, which is the core of an emerging gold district with the potential to unlock value through aggressive exploration and drilling programs.
For its part, Northern Empire will be able to provide a total return of 119 percent to investors who participated in the C$0.75 acquisition financing and 82 percent to those who participated in the most recent C$0.90 financing.
Northern Empire shareholders will have access to continued exposure to the Sterling gold project as well as the opportunity to benefit from the ownership of Coeur shares.
“Our focus has been steadfast in creating value for shareholders. Acquiring the Sterling gold project and rapidly advancing it towards an accretive transaction such as this is an exceptional outcome,” said Michael G. Allen, president, CEO and director of Northern Empire.
“We believe Coeur’s focus and expertise in the Western US will result in Sterling reaching its full potential. Northern Empire is pleased to enter into this agreement, and its board unanimously recommends the transaction to shareholders,” he added.
The deal also provides Northern Empire with a reduced investment risk by transitioning from a “single asset development” company to a balanced portfolio of high quality producing mines and near-term development projects.
At the end of July, Coeur published its Q2 2018 results, reporting that the company’s silver equivalent production increased 14 percent year-over-year to 8.8 million ounces. The increase was driven by Palmarejo, where silver equivalent production climbed 40 percent year-over-year to 4.1 million ounces.
As of 3:52 p.m. EST, Coeur was down 4.70 percent, trading at US$6.49. Meanwhile, Northern Empire was up 11.76 percent, trading at C$1.52.
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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.