As of 1:50 p.m. EST, the company’s share price was up 129.17 percent, sitting at $0.275. Primero closed at $0.12 the previous day.
The companies have entered into a definitive arrangement under which First Majestic will acquire all of Primero’s issued and outstanding common shares. Shares will be acquired on the basis of 0.03325 of a First Majestic common share for each Primero common share, and the transaction is valued at $320 million.
Keith Neumeyer, CEO of First Majestic, has described the acquisition as “transformative.” He noted in a press release that the deal “enhances First Majestic’s operating platform, adding a very high quality, long-lived asset in San Dimas, all in First Majestic’s backyard in Durango, Mexico.”
The San Dimas silver-gold mine is Primero’s primary asset. It was acquired by the company in 2010, and the company says it is one of Mexico’s most significant precious metals deposits. 2017 guidance for Primero calls for the production of 60,000 to 70,000 ounces of gold and 4.5 to 5 million ounces of silver; that works out to 75,000 to 85,000 gold equivalent ounces.
First Majestic currently owns six operating silver mines in Mexico, and it expects the acquisition of Primero to make it a leading producer of silver in the country, with pro forma annualized attributable production of 27 to 30 million silver equivalent ounces.
Neumeyer, who’s known for his bullish stance on silver, also highlighted a new stream agreement made with Wheaton Precious Metals (TSX:WPM,NYSE:WPM) in conjunction with the acquisition. Once the purchase closes, Wheaton’s current streaming interest on San Dimas will be terminated, and Wheaton will enter a new stream agreement for San Dimas with First Majestic.
He explained, “the New Stream and related amendments with WPM repositions the asset by maximizing silver exposure for our shareholders, while significantly increasing the free cash flow from San Dimas. We look forward to working with the operating team at San Dimas and with WPM.”
For his part, Primero Interim President and CEO Joseph Conway said that company shareholders will receive “an attractive premium as well as the opportunity to retain exposure to the high quality long-lived San Dimas asset that they invested in, with a significantly reduced stream.”
First Majestic’s deals with Primero and Wheaton are both expected to close in mid- to late March. First Majestic’s share price was down 3.32 percent, at $8.45, as of 1:50 p.m. EST on Friday.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
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