A Business Consolidation to Realize Unprecedented Leaps in Silver Production

Coeur Mining, Inc. has officially announced the acquisition of SilverCrest Metals Inc.  Under the agreed terms, Coeur will offer 1.6022 Coeur common shares for each SilverCrest common share, implying an Exchange Ratio of $11.34 per SilverCrest common share, based on the closing price of Coeur common shares on the New York Stock Exchange on October 3, 2024.

Markedly enough, this represents an 18% premium based on 20-day volume-weighted average prices of Coeur and SilverCrest each as at October 3, 2024 on the NYSE and NYSE American. Furthermore, it indicates a 22% premium to the October 3, 2024 closing price of SilverCrest on the NYSE American.

Not just that, the numbers also imply a total equity value of approximately $1.7 billion based on SilverCrest’s common shares outstanding.

Anyway, upon completion of the transaction, existing Coeur stockholders and SilverCrest shareholders will own approximately 63% and 37% of the outstanding common stock of the combined company, respectively.

Talk about the possible byproducts of this deal, they begin from the chance to create a leading global silver company. You see, with Coeur’s already growing silver production thanks to its recently expanded Rochester mine in Nevada and its Palmarejo underground mine in northern Mexico, the arrival of SilverCrest will generate peer-leading 2025 silver production of approximately 21 million ounces from five North American operations. approximately 56% of revenue generated from U.S.-based mines and approximately 40% of revenue from silver. On top of that, the combined company is expected to produce approximately 432,000 ounces of gold next year.

“The acquisition of SilverCrest creates a leading global silver company by adding low-cost silver and gold production and significant free cash flow to our rapidly growing production and cash flow,” said Mitchell J. Krebs, Chairman, President and Chief Executive Officer of Coeur. “Together with SilverCrest’s large and growing cash balance and no debt, our balance sheet is expected to be materially strengthened on day one. This immediate deleveraging, along with the significant combined expected free cash flow, will allow for rapid debt repayment and investment in other organic growth opportunities.”

We touched on SilverCrest’s arrival, but what we didn’t touch on was how it also brings the company’s Las Chispas underground mine in Sonora, Mexico, a mine which oversees one of the world’s highest-grade, lowest cost, and highest-margin silver and gold operations. Having started its journey in late 2022, the mine has successfully delivered strong operational and financial results in 2023, selling approximately 10.25 million silver equivalent ounces at average cash costs of $7.73 per ounce.

Moving on, the acquisition will give Coeur finances a major boost, as the collective company is expected to generate approximately $700 million of EBITDA, along with $350 million of free cash flow in 2025 at lower overall costs and higher overall margins.

Keeping that in mind, the deal will also accelerate Coeur’s deleveraging initiatives. In essence, SilverCrest’s strong balance made up with total treasury assets of $122 million (cash and equivalents position of $98 million and $24 million of bullion), no debt, as well as its strong cash flow profile is likely to expedite Coeur’s debt reduction initiative. In fact, the whole development is projected to realize an immediate 40% expected reduction in Coeur’s leverage ratio upon closing.

The acquisition will even see two of SilverCrest’s directors joining Coeur’s board. These directors happen to include the company’s Chief Executive Officer and Director, N. Eric Fier and one other current SilverCrest Director.

Adding further justification to the stated deal is the companies’ shared commitment to ESG with a specific focus on water usage, emissions, community and workforce development, and leading governance practices.

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