Arian Silver (AGQ.v) announced a $32 million financing with Quintana today. If the deal closes it will be one of the first base metals (lead-zinc) streaming deals completed in the mining space. Arian Silver will use the funds to continue plant construction at the San Jose mine in Mexico.
The $32 million dollar financing will be broken down into two parts.
1. Quintana will acquire the $15.85 million dollar note currently held by Platinum Long Term Growth VIII. The note has been extended by Quintana till March 31,2015 and can be converted into shares at 76 cents per share.
2. There is a $15.63 million streaming agreement on base metal production (lead,zinc) from the San Jose mine. Quintana will receive 78.2% of all zinc and lead production until certain production levels are hit. They will also make a payment of 25 cents per pound on each metal.
* Note: many analysts are forecasting higher zinc and lead prices in the next several years.
Arian plans on entering production before the end of the year and is currently working on refurbishment and reassembly of the processing plant. At full capacity the mine will operate at 1500 tonnes per day with annual production of an estimated 3.5 million silver equivalent ounces (source: May presentation).
A 43-101 mineral resource estimate (indicated and inferred) was released in March 2010 that shows reserves of 1116 million pounds of silver, 272 million pounds of lead, and 560 million pounds of zinc.
Jim Williams, CEO of Arian Silver, commented: "Today's announcement of the wide-ranging financing agreements with Quintana marks a pivotal moment in the short history of Arian. Not only will the substantial funds provided allow Arian to complete plant construction at the San Jose mine as previously outlined in detail but also now enable accelerated mine development towards achieving the stated aim of a producing silver and lead/zinc operation at up to 1,500 tonnes per day. It is important to note that the base metal streaming agreement with Quintana only relates to byproduct lead and zinc leaving Arian completely unhedged in relation to silver."
Oliver Rodz, president of Quintana Resources Holdings LP, the parent company of the Quintana entities entering into the transactions added: "We are excited about supporting the Arian management team in making the San Jose project a successful operating mine in the near term, as well as establishing the company as a significant player in the mid-tier space."
In this tough market environment Arian shareholders should be happy to see a financing completed to finish construction at the San Jose mine. Shareholders do give up some leverage to the base metal prices but keep full exposure to the silver price going forward.
Until recently the focus in the royalty/streaming space has been on precious metals. With base metals being a by product on many mines worldwide it's possible we'll be seeing more deals like this one in the future.
Symbol: ACQ.V
Share price: $0.57
Shares outstanding: 33.68M
Market cap: $18.9M *Interesting to note that the financing ($32 million) is significantly more than the current market cap of Arian (~$19 million).
Read: Arian Silver Raises $32 million for San José
I have no position in any of the stocks mentioned. This is not investment advice. As always please do your own due diligence.