Endeavour Silver sells Bolañitos mine to Guanajuato in $50M deal

Endeavour Silver (NYSE: EXK; TSX: EDR) has agreed to sell its Bolañitos mine to Guanajuato Silver Company (TSXV: GSVR) in a deal worth up to $50 million, as it looks to focus more on its other assets in Mexico.

The base consideration will consist of $30 million in cash and $10 million in Guanajuato shares, each with a deemed price of about $0.27, representing the stock’s volume-weighted average price for the 10 days prior to the agreement.

There is also $10 million in contingent payments tied to production from Bolañitos, with $5 million paid on the first 2 million oz. of silver-equivalent (AgEq) produced and another $5 million on the next 2 million oz. Each contingent payment will be satisfied equally by cash and shares.

Focused on core assets

Commenting on the mine sale, Endeavour Silver chief executive Dan Dickson said this would allow the company to focus resources on its “core silver assets in Mexico” such as the Terronera mine and Pitarrilla project.

The Terronera underground mine in Jalisco state, in particular, is expected to become Endeavour’s flagship asset. Operations at Terronera started in July of this year, and last month, it reached commercial production. According to a feasibility study, it is forecast to deliver annual production of 4 million oz. silver and 38,000 oz. gold over a 10-year mine life.

The Pitarrilla project is also expected to form one of the key cornerstones of Endeavour’s long-term growth profile. The project is host to one of the world’s largest undeveloped silver resources, amounting to 491.6 million oz. in the measured and indicated categories. It also has a large endowment of lead and zinc, at 1.1 billion lb. and 2.6 billion lb. respectively.

The Bolañitos mine, meanwhile, has been under Endeavour’s portfolio since 2007. Last year, it produced about 450,000 oz. of silver and 25,000 oz. of gold. The property is located in Guanajuato, the second largest historic silver mining district in Mexico.

Guanajuato’s new addition

The acquisition of Bolañitos adds a fifth operating asset to Guanajuato Silver’s Mexico-based portfolio, which comprises three primary silver mines (Topia, Valenciana, and El Cubo) and a gold mine (San Ignacio).

Bolañitos has a land package of 25.4 sq. km covering 26 mining concessions and three producing deposits: San Miguel, La Luz and Lucero. Together, they would add about 7.5 million oz. of silver and 132,000 oz. of gold (measured and indicated) to Guanajuato’s resource base.

Importantly, the company noted the potential synergy between Bolañitos and its San Ignacio mine, as the former surrounds the latter on three sides and would be able to process the San Ignacio mined material at low costs.

“The numerous advantages of integrating our San Ignacio mine into the Bolañitos mines complex are obvious; we have already begun preparations to ensure seamless integration of this asset into our production portfolio, allowing us to quickly realize the economic rewards from this acquisition,” James Anderson, chairman and CEO of Guanajuato Silver, stated in a press release.

The transaction also includes the historic Cebada mine, which is located to the north of the company’s Valenciana mines complex (VMC). Post acquisition, Guanajuato intends to reactive the mine, which is currently on care and maintenance.