Coeur d’Alene Mines Corporation (the “Company” or “Coeur”) (NYSE: CDE)(TSX: CDM) today announced that it has entered into a letter of intent with XDM Royalty Corp. (“XDM”) to sell its interest in the silver production and reserves from the Endeavor mine in Australia (the “Endeavor silver stream”) and the royalty from the Cerro Bayo gold and silver mine in southern Chile (the “Cerro Bayo royalty”) for up to US$67 million in total cash and XDM equity consideration.
The letter provides that XDM will pay US$45 million in cash and issue US$10 million in common equity to Coeur at closing, subject to adjustment for cash flow to Coeur from the Endeavor silver stream since January 1, 2013 which will be for XDM’s account. The letter also provides for two additional contingent cash payments totaling US$12 million for the Endeavor silver stream upon achieving certain milestones related to future potential reserve increases and mine development.
Mitchell J. Krebs, President and Chief Executive Officer of Coeur, said, “This sale of non-core assets presents a compelling and accretive transaction for Coeur shareholders. The XDM consideration, even without the contingent payments, unlocks significant value that has not been reflected in Coeur’s current share price. The proceeds from this transaction will provide Coeur with additional capital to selectively invest in high-return internal and external opportunities, including our ongoing share repurchase program.”
Of the US$55 million in total consideration payable by XDM to Coeur at closing, US$40 million is allocated to the Endeavor silver stream and US$15 million in cash is allocated to the Cerro Bayo royalty.
Closing is currently expected in the second quarter of 2013, subject to an XDM financing condition and the negotiation and execution of definitive agreements, in addition to customary conditions. The sale of the Cerro Bayo royalty is subject to a right of first refusal held by Mandalay Resources Corporation (“Mandalay”), the owner and operator of the Cerro Bayo mine. In the event Mandalay exercises its right of first refusal, XDM would still be obligated to acquire the Endeavor silver stream.
In May 2005, the Company paid US$44 million for all of the silver production and reserves (up to 20 million payable ounces) contained at the Endeavor mine in New South Wales, Australia. As of March 31, 2013, approximately 102% of the original purchase price has been recovered. In 2012, Endeavor produced 665,816 payable ounces of silver at cash operating costs of US$17.27 per ounce.
In August 2010, the Company sold its subsidiary that controlled the Cerro Bayo mine to Mandalay. Under the terms of the agreement, Coeur received the following consideration: (i) US$6 million in cash; (ii) 17,857,143 common shares of Mandalay; (iii) 125,000 ounces of silver to be delivered in six equal quarterly installments commencing in the third quarter of 2011 which had an estimated fair value of US$2.3 million; (iv) a 2% net smelter royalty on production from the Cerro Bayo mine in excess of a cumulative 50,000 ounces of gold and 5,000,000 ounces of silver which had an estimated fair value of US$5.4 million as of December 31, 2012; and (v) existing value added taxes of US$3.5 million. As part of the transaction, Mandalay also agreed to pay US$6 million of reclamation costs associated with Coeur’s nearby Furioso property.
Raymond James Ltd. is acting as financial advisor and Gibson, Dunn & Crutcher LLP is acting as legal advisor to Coeur d’Alene Mines Corporation. Haywood Securities Inc. is acting as financial advisor and Norton Rose Canada LLP is acting as legal counsel to XDM Royalty Corp.
XDM is a private emerging precious metals streaming and royalty company that has transformed from an early stage exploration company with a joint venture in the Solomon Islands with AngloGold Ashanti (70% AngloGold / 30% XDM). XDM’s strategy is to become cash flow positive through the acquisition of a diversified portfolio of various precious metal streams/royalties, targeting small to mid-sized assets with precious metal streams. Recently, XDM acquired a 1.0% net smelter royalty on Gold Standard’s Railroad Project in Nevada. XDM has a team of senior professionals and board members led by Oliver Lennox-King, Executive Chairman and Director, and Will Ansley, Chief Operating Officer.
Coeur d’Alene Mines Corporation is the largest U.S.-based primary silver producer and a growing gold producer. The Company has four precious metals mines in the Americas generating strong production, sales and cash flow in continued robust metals markets. Coeur produces from its wholly owned operations: the Palmarejo silver-gold mine in Mexico, the San Bartolomé silver mine in Bolivia, the Rochester silver-gold mine in Nevada and the Kensington gold mine in Alaska. The Company also conducts ongoing exploration activities in Mexico, Argentina, Nevada, Alaska and Bolivia. In addition, the Company owns strategic investment positions in eight silver and gold development companies with projects in North and South America.
This news release contains forward-looking statements within the meaning of securities legislation in the United States and Canada and which are based on the expectations, estimates and projections of management of the parties as of the date of this news release unless otherwise stated. Forward-looking statements are generally identifiable by use of the words “expect”, “anticipate”, “continue”, “estimate”, “objective”, “ongoing”, “may”, “will”, “project”, “should”, “believe”, “plans”, “intends” or the negative of these words or other variations on these words or comparable terminology. More particularly, and without limitation, this news release contains forward-looking statements and information concerning expectations regarding the consideration to be received pursuant to the transaction, the ability of Coeur and XDM to negotiate and execute definitive agreements for the transaction, the ability of XDM to obtain financing for the transaction, the ability of the parties to consummate the transaction on the terms and in the manner contemplated thereby, the anticipated benefits of the transaction, the timing and anticipated receipt of required regulatory approvals for the transaction, and the intended use of proceeds received from the transaction. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include, among others, the uncertainties and risk factors set out in filings made from time to time with the United States Securities and Exchange Commission, and the Canadian securities regulators, including, without limitation, Coeur’s most recent reports on Form 10-K and Form 10-Q. Actual results, developments and timetables could vary significantly from the estimates presented. Readers are cautioned not to put undue reliance on forward-looking statements. Coeur disclaims any intent or obligation to update publicly such forward-looking statements, whether as a result of new information, future events or otherwise. Additionally, Coeur undertakes no obligation to comment on analyses, expectations or statements made by third parties in respect of Coeur, its financial or operating results or its securities.