Monday Morning News – First Majestic Silver, SilverCrest Mines, and Galantas Gold

POSTED ON July 27, 2015 BY James Fraser
CATEGORY First Majestic Silver, SilverCrest Mines, Stories,

Santa Elena mine portal. The key asset of SilverCrest Mines. (Image: SilverCrest Mines)

A look at a few mining press releases that caught my eye to start the week and a few additional comments on each.

First Majestic Silver (FR:TSX) and SilverCrest Mines (SVL:TSX) - First Majestic Silver has announced a definitive agreement to acquire SilverCrest Mines. SilverCrest shareholders have been offered 0.2769 of a common share of First Majestic plus 0.001 cent in cash per SilverCrest common share. The deal implied value of $1.30 represents a 35% premium to the closing price of SilverCrest shares on July 24th.

SilverCrest shareholders might feel they are getting the short end of the stick as the stock has been well above $1.30 for most of 2015. The recent share price has crashed following the decline in the price of silver. Shareholders do get the opportunity to participate in a much larger silver company when/if the market does recover.

BENEFITS TO FIRST MAJESTIC SHAREHOLDERS


--  Enhances First Majestic's leading position in Mexico, one of the world's
    most prolific silver and gold regions
--  Accretive to First Majestic's net asset value per share, reserves and
    total resources per share and production per share
--  SilverCrest's Santa Elena Mine will be First Majestic's sixth producing
    silver mine adding further growth potential to First Majestic's
    portfolio of Mexican projects
--  Strengthens First Majestic's balance sheet by adding approximately C$30
    million in cash and further enhances the working capital position
--  Provides operational and production synergies with the potential for
    additional cost cutting
--  Further diversifies production and cash flow across a robust portfolio
    of producing mines

BENEFITS TO SILVERCREST SHAREHOLDERS


--  Provides SilverCrest shareholders with a highly attractive premium to
    current market price
--  Opportunity to participate in a leading silver producer through an all-
    share transaction
--  Gain access to First Majestic's operational and underground mining
    expertise
--  Diversifies SilverCrest's single asset risk profile and provides
    exposure to First Majestic's broad portfolio of Mexican assets
--  Increased leverage to silver with First Majestic's primarily silver
    resource base
--  Enhances capital markets presence with a pro forma market capitalization
    in excess of C$700 million based on current share prices including
    increased analyst coverage, trading liquidity and a broader
    institutional investor base
--  Provides SilverCrest shareholders with ownership in New SilverCrest, a
    well-capitalized exploration company created to leverage SilverCrest
    management's exploration expertise

Keith Neumeyer, President & CEO of First Majestic, stated: "We believe this transaction provides an excellent opportunity for the shareholders of both First Majestic and SilverCrest. Shareholders stand to gain significant upside in the combined company with production of well over 20 million silver equivalent ounces per year while maintaining one of the lowest production costs and highest purity to silver in the industry."

J. Scott Drever, CEO of SilverCrest, stated: "We believe the inclusion of SilverCrest's Santa Elena mine into First Majestic's portfolio of operating mines provides the combined company greater flexibility in the current difficult metals market and creates a strong platform from which First Majestic can continue its corporate growth to the benefit of both sets of shareholders. SilverCrest shareholders will benefit from First Majestic's liquidity in the market place, the diversity provided by six mines and Management's long history of successful operations in Mexico. First Majestic shareholders will benefit from SilverCrest's strong balance sheet, free cash flow and low cost silver production."

A five year chart of First Majestic Silver is a good example of the volatility in the mining space.

It has been awhile since I have seen a silver takeover. Part of the reason is because at sub $18 silver very few mines are making money worldwide.

SilverCrest in my opinion is the perfect fit for First Majestic. The Santa Elena mine is a lower cost producer (profitable in Q1) and fits in with First Majestic's focus of being in Mexico.

Of note is that Sandstorm Gold (SSL:TSX) owns a 20% gold stream on the life of the Santa Elena Mine.

If the deal closes First Majestic will take another big step to becoming one of the world's largest silver producers (20 million silver equivalent ounces). Any rebound in silver you would have to think First Majestic would be a go to name in the space.

Read: First Majestic Announces Friendly Acquisition of Silvercrest Mines

Galantas Gold - (GAL:TSXV) - Galantas Gold has announced the successful closure of a $2.4 million dollar private placement at 12 cents. Normally this would not be significant news but I noticed legendary resource investor/financier Ross Beaty took 16 million of the 20 million shares.

Any time Mr. Beaty invests resource investors tend to take notice due to his track record in the space. In the past year Ross has made several investments in the space which I detailed in an earlier post this year which can be found here.

I admit Galantas has not been on my radar and I will take a look now.

Roland Phelps, president and chief executive officer, Galantas Gold, said: "Ross Beaty has an impressive and well-known investment record. I'm delighted that he has chosen to invest in our operation. It is a vote of confidence."

Glantas is a thinly traded company that is working on developing the Omagh gold mine, situated in County Tyrone, Northern Ireland. The mine was previously worked by open pit methods but has now received planning consent for underground.

A technical study was released on the project in the fall of 2014 showing a fairly small resource of 32,202 (measured), 147,874 (indicated), and 341,123 (indicated) ounces. The grade is good though at ~7 grams per tonne gold.

I believe this is the second junior mining related investment Mr. Beatty has made in Ireland following a stake in Dalradian Resources.

Read: Galantas Closes Ross Beaty Placement

Discuss in CEO Live

Thanks for reading.

This is not investment advice. All facts are to be checked and verified by reader. As always please do your own due diligence.

James Fraser

Mr. Fraser joined CEO.ca in October 2014. He is passionate about the mining industry. His passion led to co-authoring the e-book "Mining Stocks Investor Guide: A Guide to Investing in Mining Companies." He has a finance background and has completed his Canadian Securities Course (CSC) and Conduct and Practices Handbook (CPH). When Fraser is not "digging" up the latest mining stock, he can be found enjoying a wide variety of sports or travelling the world. More →

Twitter: @miningstocks

james@miningstocksguide.com

James Fraser

Twitter: @miningstocks

james@miningstocksguide.com

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