Junior Picks Up La Guitarra for Shares


Mexico is thought for “la plata”, and silver has been mined there since Spanish colonial instances. One aggressive junior explorer simply pulled the set off on a deal to accumulate a past-producing mine that administration is aware of intimately (perhaps much more than the earlier operators). The acquisition simply must be authorised by regulators and shareholders.

Sierra Madre Gold and Silver Ltd. (SM:TSX.V) is seeking to play an previous however acquainted tune with its all-share deal to accumulate the 34-sq.-kilometer La Guitarra silver-gold property — which accommodates two sizeable past-producing mines — from First Majestic Silver Corp. (FR:TSX; AG:NYSE; FMV:FSE).

The proposed deal, topic to regulatory and shareholder approval, would make First Majestic Sierra Madre’s largest shareholder and presumably flip Sierra Madre right into a mid-tier silver producer.

At its necessities this can be a reverse-takeover that may see Sierra Madre purchase all of the excellent shares of La Guitarra Compania Minera S.A. de C.V. — a completely owned subsidiary of First Majestic that owns La Guitarra.

La Guitarra mill.  Supply: First Majestic Silver Corp.

The bonus is that La Guitarra Compania comes with all the required permits for mining and processing, together with an working license, water use allow, an Environmental Affect Authorization for the La Guitarra and Coloso mines, and exploration permits for the next properties within the land bundle: Nazareno, Tlacotal, Trancas, La Guitarra NW, Temascaltepec, and San Simon.

The worth? Sierra Madre will concern to First Majestic 69,063,076 widespread shares at CA$0.65 or CA$0.09 decrease than the closing worth the day earlier than the deal was introduced. The shares have an combination worth of US$35 million (US$35M).

Sierra Madre had barely lower than 64 million shares excellent earlier than the acquisition, so it could greater than double the junior’s variety of excellent shares. Sierra Madre Government Chairman and Chief Working Officer Gregory Liller and President and Chief Government Officer Alex Langer had some prolonged discussions earlier than pulling the set off.

“Alex [Langer] and I appeared on the numbers, and we checked out what wouldn’t it take to place us on this very same place. We knew we must have made a giant acquisition to do this. I feel that is most likely the most important undeveloped silver district in Mexico,” Liller informed Streetwise Stories.

He added: “If we are able to get to that fifty to 100 million ounce (useful resource) stage — hopefully the higher finish of that — in pretty brief order, then I would say it was value it.”

Sierra Madre administration expects to get exploration drills turning as soon as the deal is authorised.

If the deal receives approval, it could mark the second time La Guitarra has come below Liller’s purview.

In April 2003, as president of the now-defunct Genco Assets, Liller spearheaded a deal to accumulate a 73-sq.-kilometer land bundle that contained La Guitarra. Liller and Sierra Madre’s Director of Exploration and Growth, Luis Saenz, operated La Guitarra from 2006 to 2009 when a administration change led to a Genco merger with one other junior silver firm.

La Guitarra is about 130 kilometers southwest of Mexico Metropolis. It operated properly after the Genco days till mid-2018 and there may be nonetheless an on-site 500-tonne-per-day mill and a flotation restoration circuit.

The property hosts two underground centres — La Guitarra and Coloso — that stay on care and upkeep in addition to three past-producing zones: Nazareno, Mina de Agua and El Rincón (care and upkeep signifies that there are individuals who commonly keep the mill and different infrastructure to verify it’s by no means removed from being able to swing again into manufacturing).

Previous manufacturing between 2015 and 2018 was 1 to 1.5 Moz silver-equivalent yearly. The primary-ever manufacturing was from high-grade mines on the jap portion of the land bundle through the Spanish colonial interval.

“If (First Majestic) did not assume we may do that factor justice, they might by no means have accomplished the deal. I imply, they nicknamed this (transaction) the Phoenix. So that they’re hoping we are able to make it rise from the ashes,” Liller informed Streetwise Stories.

2014 Useful resource Estimate

 

A technical report filed by First Majestic late in 2014 acknowledged that the Measured and Indicated useful resource at La Guitarra was 1.15 million tonnes in sulphides at 318 grams per tonne silver (318 g/t Ag) and 1.65 g/t gold (Au) or 412 silver-equivalent oz (Ag eq) for a complete of 11.73 million oz (11.73 Moz) silver or 15.2 Moz Ag eq.

Sierra Madre property location mapThe Inferred useful resource, in the meantime, tallies 739,000 tonnes in sulphides at 197 g/t Ag and 1.23 g/t Au or 267 g/t Ag eq for a complete of 4.67 Moz Ag or 6.34 Moz Ag eq.

The Nationwide Instrument 43-101-compliant useful resource was calculated utilizing $22/oz silver and $1,350/oz gold, and recoveries of 85% for silver and 79% for gold.

As soon as the transaction closes (which appears seemingly), Sierra Madre could have three valuable metals initiatives in Mexico: Tepic and La Tigra, two early-stage exploration initiatives, and La Guitarra, which the corporate hopes to place again into manufacturing, presumably by the top of the yr.

Particulars of the Deal

 

Any of the 69,063,076 Sierra Madre shares issued to First Majestic in extra of 19.9% could be distributed to First Majestic shareholders.

The remaining shares that comprise First Majestic’s 19.9% stake are topic to a number of maintain intervals. Twenty-five % of the shares issued to the silver producer can’t be offered for six months; 25% have to be held for 12 months; 25% can be topic to an 18-month restriction; and the ultimate 25% can’t be offered for twenty-four months (all intervals are from the date of closing).

After closing, First Majestic would have the suitable to take part in additional financings to keep up its curiosity in Sierra Madre, as much as 19.9%.

The deal doesn’t include a board seat for First Majestic, however a clause within the deal says that the mid-tier producer should vote its shares with the junior’s board.

First Majestic additionally retains a 2% web smelter return (NSR) royalty on all manufacturing from La Guitarra. Sierra Madre would have the suitable to purchase again 1% of the royalty for $2M.

Sierra Madre additionally intends to finish a non-public placement to lift as much as CA$10M.

Now on the OTCQX

 

The junior lately certified to commerce on the OTCQX Finest Market, a step up from the OTCQB Enterprise Market. It trades below the image SMDRF.

U.S. buyers can discover present monetary disclosures and real-time Degree 2 quotes for the corporate on the OTC Markets web site.

To qualify for the OTCQX, corporations should meet excessive monetary requirements, comply with finest follow company governance, and show compliance with relevant securities legal guidelines.

“We now have sturdy U.S. investor assist, and we proceed to extend our advertising and investor consciousness campaigns in Canada, the U.S., and Europe,” Langer stated in a launch.

London-based VSA Capital offers Sierra Madre a “speculative purchase” score.

It presently trades in a 52-week vary of CA$0.39 and CA$0.90.

 


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Disclosures

1) Brian Sylvester compiled this text for Streetwise Stories LLC and offers providers to Streetwise Stories as an unbiased contractor/worker. They or members of their family personal securities of the next corporations talked about within the article: None. They or members of their family are paid by the next corporations talked about on this article: None. Their firm has a monetary relationship with the next corporations referred to on this article: None.

2) The next corporations talked about on this article are billboard sponsors of Streetwise Stories: Sierra Madre Gold and Silver Ltd. Click on right here for vital disclosures about sponsor charges. The knowledge offered above is for informational functions solely and isn’t a advice to purchase or promote any safety.

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4) Every now and then, Streetwise Stories LLC and its administrators, officers, staff or members of their households, in addition to individuals interviewed for articles and interviews on the positioning, might have a protracted or brief place in securities talked about. Administrators, officers, staff or members of their instant households are prohibited from making purchases and/or gross sales of these securities within the open market or in any other case from the time of the choice to publish an article till three enterprise days after the publication of the article. The foregoing prohibition doesn’t apply to articles that in substance solely restate beforehand revealed firm releases. As of the date of this text, officers and/or staff of Streetwise Stories LLC (together with members of their family) personal securities of Sierra Madre Gold and Silver Ltd., an organization talked about on this article.

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