Maverix will make an advance payment of US$7,500,000 for the right to purchase 22.5% of the silver produced from El Mochito (the “Silver Stream”), and subject to certain conditions, a further US$7,500,000 for an additional 17.5% of the silver produced (the “Option Stream”). Maverix will pay 25% of the silver price at the time of delivery, for each silver ounce delivered.
“We are very pleased to partner with the team at Ascendant and we look forward to participating with them in the long-term potential of El Mochito,” commented Dan O’Flaherty, CEO of Maverix. “This transaction is consistent with our stated strategy of acquiring long life precious metal streams that are immediately accretive to both our cash flow and net asset value.”
Acquisition Highlights
- Immediate Increase to Cash Flow: Maverix expects average annual silver deliveries of approximately 165,000 ounces over the first three years at a Silver Stream rate of 22.5%.
- Accretive Transaction: The transaction is accretive to Maverix across all key metrics, including net asset value, cash flow, and attributable gold equivalent production.
- Long Mine Life with Meaningful Expansion and Optimization Plan: In October 2018, a preliminary economic assessment (“PEA”) for the expansion and optimization of the El Mochito Mine was completed that outlined a 10 year mine life and a plan to increase throughput by 27% to 2,800 per day (approximately 1 million tonnes per annum) and reduce all-in sustaining costs by 18% to $0.96/lb ZnEq produced.
- Attractive Exploration Potential: As of January 1, 2018, El Mochito had Measured and Indicated resources of 10.7 million ounces of silver (7.55 million tonnes at 44 g/t silver) and Inferred resources of 5.4 million ounces of silver (5.0 million tonnes at 33 g/t silver). With a significant land package of 10,000 hectares, over 70 years of operating history, and an abundance of historical data, there are several regional targets providing longer term exploration upside which could lead to further mineral resource growth.
Transaction Overview
The details of the Silver Stream and Option Stream are as follows:
- Maverix will make an upfront payment of US$7,500,000 to Ascendant as consideration for the right to purchase 22.5% of the silver produced from El Mochito.
- Maverix will make ongoing cash payments per ounce of silver delivered equal to 25% of the lesser of the average price of silver for the applicable calendar month, or the spot price of silver at the time of delivery.
- The Silver Stream will be effective from January 1, 2019.
- Subject to the satisfaction of certain conditions, including Ascendant securing additional financing to complete the expansion and optimization of El Mochito, Maverix will make an additional US$7,500,000 payment to Ascendant for the Option Stream, which provides for the purchase of an additional 17.5% of the silver production from El Mochito.
- If the Option Stream is exercised, then Maverix will be entitled to purchase a total of 40% of the silver produced from El Mochito until it has purchased a cumulative total of 3,000,000 ounces of silver at which point the silver stream percentage will decrease to 30% for the life of the mine.
Ascendant’s obligations under the Silver Stream will be secured.
Maverix will fund the transaction through a combination of cash on hand and its existing credit facility. Closing of the transaction is anticipated to occur in April 2019.
El Mochito Mine
The El Mochito Mine is located on an 10,000-hectare land package near the town of Las Vegas in north-western Honduras. It is 100% owned and operated by Ascendant, who have reinvigorated the mine and made excellent progress towards increasing production and stabilizing costs since acquiring the mine in December 2016.
El Mochito is currently a 2,300 tonnes per day, underground, zinc-lead-silver operation. The expansion and optimization PEA that was completed in October 2018 outlined a 10-year operation with increased production capacity of 2,800 tonnes per day (approximately 1 million tonnes per annum) which is expected to produce an average of nearly 600,000 ounces of silver per year.
Ascendant’s production guidance for 2019 is between 850,000 and 1,200,000 ounces of contained silver in concentrate from El Mochito.
Source: Company Press Release
