Great Panther Silver Ltd. (GPR:TSX; GPL:NYSE.MKT) announced on Dec. 20 that it had reached an agreement with Nyrstar (NYR:BSE) to acquire the Coricancha gold-silver-lead-zinc-copper mine and mill complex (CMC) in Peru. According to the company, the purchase price comprises "(i) US$0.1 million to be paid on closing, (ii) an amount equal to cash on hand in Coricancha at completion, and (iii) earn-out consideration of up to US$10.0 million. Under the earn-out, Nyrstar will be paid 15% of the free cash-flow generated by the CMC during the 5-year period after which the CMC is cumulative free cash-flow positive from closing."
Heiko Ihle, an analyst with Rodman & Renshaw, noted in a Dec. 21 company update that "this transaction presents Great Panther with substantial upside, as management believes Coricancha could produce 3.0 million silver equivalent ounces per annum, while limiting downside due to the structure of the transaction." He added that Great Panther "should benefit from Coricancha's past producing nature (as recently as 2013) and corresponding infrastructure present at the site. . .management estimates that the project could be brought back into production for approximately $25.0 million, which is already fully funded."
Ihle indicated support by stating that "we applaud management's diligence with respect to acquiring assets," adding that "Great Panther's management team has remained steadfast in its commitment towards acquiring the right assets at the right price." He also stressed that "we are supporters of the new agreement as just $0.1 million in upfront capital is expected to be paid with no additional payments made to Nystar until initial capital costs are recouped and the mine is FCF positive."
Great Panther's President and CEO Robert Archer stated, "We are very excited about the prospects for the Coricancha Mine. . .the project has the potential for annual production of approximately 3 million silver equivalent ounces, which would be a significant contribution to our growth. Importantly, with more than US$54 million in cash, the Company is fully financed to bring the mine back into production."
Rodman & Renshaw sees the Coricancha acquisition as "a low-risk way to significantly add to Great Panther's consolidated production profile. Moreover, we like that the firm is evaluating assets outside of Mexico in order to add a touch of jurisdictional diversity to its portfolio of operating assets and expect the evaluation of additional assets for acquisition to continue despite the Coricancha purchase agreement," Ihle stated.
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1) Patrice Fusillo compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee. She owns, or members of her immediate household or family own, shares of the following companies mentioned in this article: None. She is, or members of her immediate household or family are, paid by the following companies mentioned in this article: None.
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Disclosures from Rodman & Renshaw Company Update, Great Panther Silver Ltd., Dec. 21, 2016
I, Heiko F. Ihle, CFA and Jake Sekelsky , certify that 1) all of the views expressed in this report accurately reflect my personal views about any and all subject securities or issuers discussed; and 2) no part of my compensation was, is, or will be directly or indirectly related to the specific recommendation or views expressed in this research report; and 3) neither myself nor any members of my household is an officer, director or advisory board member of these companies.
None of the research analysts or the research analyst’s household has a financial interest in the securities of (including, without limitation, any option, right, warrant, future, long or short position).
As of November 30, 2016 neither the Firm nor its affiliates beneficially own 1% or more of any class of common equity securities of Great Panther Silver Ltd.
Neither the research analyst nor the Firm has any material conflict of interest in of which the research analyst knows or has reason to know at the time of publication of this research report.
The research analyst principally responsible for preparation of the report does not receive compensation that is based upon any specific investment banking services or transaction but is compensated based on factors including total revenue and profitability of the Firm, a substantial portion of which is derived from investment banking services.
The Firm or its affiliates did receive compensation from Great Panther Silver Ltd. for investment banking services within twelve months before, and will seek compensation from the companies mentioned in this report for investment banking services within three months following publication of the research report.
The Firm does not make a market in Great Panther Silver Ltd. as of the date of this research report.