Silver Mines (ASX:SVL) has agreed to acquire and extinguish two private royalties over its Bowdens Silver Project for $26 million to enhance long-term economics.
The company will pay $18 million cash and $8 million in shares to eliminate future royalty obligations over the New South Wales deposit.
Under binding agreements, Silver Mines will buy back a 2% net smelter royalty from Fitzroy River Resources (ASX:FZR) subsidiary Royalco Resources for $17.5 million, comprising $10 million cash and $7.5 million in shares. The royalty then reduces to 1% after the first US$5 million ($7 million) of revenue from tenement EL5920.
Silver Mines is also acquiring Asia Metals for $8.5 million, consisting of $8 million cash and $500,000 in shares. Asia Metals holds a 1% gross revenue royalty over the same tenement commencing after initial production of 20 million ounces (Moz) of silver.
Share components will be issued at $0.145 per share, matching an upcoming $50 million placement. The Fitzroy transaction involves 51.7 million shares, while Asia Metals requires 3.4 million shares.
Managing Director Jo Battershill says the acquisition and extinguishment of these two royalties is an important step for Silver Mines, reflecting the company’s confidence in the long-term value and development potential of Bowdens.
“By removing these private royalties, we are further simplifying the commercial structure of Bowdens and increasing Silver Mines’ exposure to the project’s future production and economic returns, especially with a now expanded 26-year potential operational mine life,” Battershill says.
Completion requires securing firm commitments for a placement of at least $50 million. Additionally, the Fitzroy deal requires Australian Securities Exchange confirmation that listing rules do not apply to the royalty disposal or shareholder approval if required.
Located 26km east of Mudgee, Bowdens completed a Definitive Feasibility Study in July confirming reserves of 93.5Moz of silver.
Silver Mines appointed Treadstone Resource Partners as financial adviser and Hamilton Locke as legal adviser for this transaction.
Silver Mines is focused on acquiring, exploring, and developing silver assets.
Write to Paula Fabe at Mining.com.au
Main image: Silver Mines
