Deterra Royalties (ASX:DRR) is selling its non-core La Preciosa silver assets in Mexico to current project operator Avino Silver & Gold Mines (TSX:ASM) for US$22 million ($33.95 million).
The deal ends Deterra’s royalty interests in the project and removes its obligation to a contingent milestone payment, with Avino to pay US$13.25 million at completion and a further US$8.75 million in cash 12 months later.
Deterra will pay Coeur Mining (NYSE:CDE) a deferred consideration of US$1 million within the first five business days of the contingent milestone payment or on the first anniversary of the project’s first production of silver.
CEO Julian Andrews says the company only recently acquired the precious metals portfolio from Trident Royalties a year ago for US$14.8 million, offering 1.25% net smelter return royalty, and 2% gross value returns royalty.
“As highlighted at the time, precious metals are not core to our strategic investment focus on base, bulk, and battery and electrification commodities,” Andrews says.
“Consistent with our strategy and our disciplined management of capital, we continuously review our portfolio for opportunities to realise value from non-core assets.”
The company expects to realise a pre-tax profit of more than US$6 million from the disposal of these assets, which indicates a 31% pre-tax internal rate of return.
Andrews explains that this return aligns with the business model to acquire royalties from ‘high-quality’ assets, working in tandem with established project operators.
“Avino’s success in developing La Preciosa, coupled with the exceptionally strong silver price environment, presented an ideal opportunity to negotiate this mutually beneficial transaction,” Andrews adds.
As reported by Mining.com.au, the demand for silver is expected to continue surging following a global output increase of 0.9% by almost 820 million ounces of silver produced last year.
The Silver Institute shares that Mexico was the leading producer of the commodity in 2024, with a yearly output of 185.7 million ounces following a 2% increase from the previous year.
Trading Economics reports the current price of silver at US$38.79 per ounce on 25 August.
Write to Maddison Elliott at Mining.com.au
Images: Avino Silver & Gold Mines
