Avino buys back La Preciosa royalties for $22M

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Avino Silver & Gold Mines (TSX, NYSE-A: ASM) said Monday it has bought down and extinguished all royalties and remaining payments for full ownership of its La Preciosa project in Durango, Mexico.

It paid $13.25 million up front and agreed to an $8.75 million deferred payment in a year. The move is aimed at lowering the project’s operating cost profile ahead of mining to start this year. Management views the transaction as beneficial for net asset value. It says it simplifies La Preciosa’s cost structure and retains more value for shareholders and communities.

“This cornerstone asset is now materially unencumbered,” CEO David Wolfin said in a press release. “This transaction represents a unique investment opportunity for Avino, as operators rarely get the chance to increase project value through the purchase of previously granted royalties.”

In Mexico, producers have been consolidating and adding growth projects, underlining focus on high‑grade, near‑mill feed and clear paths to cash flow. Endeavour Silver (NYSE: EXK; TSX: EDR) is ramping its new Terronera mine in Jalisco toward 1,900–2,000 tonnes per day. Pan American Silver (TSX, NYSE: PAAS), which won Mexican competition clearance for its acquisition of MAG Silver (TSX, NYSE: MAG) and the Juanicipio interest, reflects the market’s push for scale and long‑life silver ounces.

Silver gains

Silver is up 30% from a year ago on rate‑cut expectations and industrial demand, lifting silver‑miner equities, analysts have noted. Silver prices held steady around $38.80 per oz. on Monday, hovering near their highest levels since 2011 amid bets on US Federal Reserve policy easing next month.

Silver price touches $39 as market weighs rate cut outlook

Avino shares rose 6% or C$0.34 on Monday afternoon in Toronto to C$5.92. The stock has more than quadrupled this year and has a market capitalization of C$869 million.

The buyback removes a 1.25% net smelter returns royalty on the Gloria and Abundancia areas and a 2% gross value royalty elsewhere, Avino said. It also eliminated a discovery-linked payment of $0.25 per silver‑equivalent oz. on new reserves declared outside the resource area.

The company used its about $48 million in cash on hand for the up-front cheque. It says the deferred payment is like a production payment it plans to make within a year of starting production from the deposit.

The royalty clean‑up aligns La Preciosa with that backdrop and with Avino’s plan to shift to a mainly silver mix as it brings Gloria and Abundancia online.

Coeur completed a feasibility study on La Preciosa in 2014, but that open-pit plan doesn’t represent Avino’s development concept. The company has a plan to grow from one to three producing assets by the end of the decade.

The news follows on the bonanza silver exploration results reported this month at La Preciosa.

The company is driving the 360‑metre San Fernando access decline toward the Gloria and Abundancia veins and plans to add La Preciosa material into its mine plan.

More drilling

Surface drilling at La Preciosa is slated to run to the end of October to support mine planning and modelling. Avino aims to update the Avino and La Preciosa mineral resources and publish initial reserves as it moves it into production.

La Preciosa hosts a 2023 indicated resource of 17.4 million tonnes grading 176 grams silver per tonne and 0.34 gram gold per tonne for a silver-equivalent grade of 202 grams per tonne. The deposit holds 99 million oz. silver and 189,000 oz. gold, or 24 million silver-equivalent ounces.

It holds another 4.4 million tonnes inferred at 151 grams silver and 0.25 gram gold for 170 grams per tonne silver-equivalent, for 21 million oz. silver and 35,000 oz. gold, or 24 million oz. silver-equivalent.

Including the Avino mine and its planned oxide leach expansion, the company has global measured and indicated resources of 53.1 million tonnes grading 100 grams silver per tonne and 0.47 gram gold per tonne (162 grams per tonne silver-equivalent) for 171 million oz. silver and 799 million oz. gold, or 277 million oz. silver-equivalent.