Coeur Mining is using its high-flying stock to buy SilverCrest for $1.7 billion

By Tomi Kilgore

Silver and gold miner Coeur's stock has more than doubled this year as gold futures have rallied to record highs

Coeur Mining Inc. announced Friday an agreement in which the gold and silver miner is using its stock, that has more than doubled this year, to buy SilverCrest Metals Inc. in a deal valued at $1.7 billion.

"The acquisition of SilverCrest creates a leading global silver company by adding low-cost silver and gold production and significant free cash flow to our rapidly growing production and cash flow driven by the recent expansion of our Rochester silver and gold mine in Nevada," said Coeur Mining Chief Executive Mitchell Krebs.

Shares of Vancouver, Canada-based SilverCrest (SILV) (CA:SIL) charged up 10.3% in afternoon trading, to put them on track to close at the highest price seen since June 10, 2021.

Meanwhile, since the acquisition is an equity deal, which would dilute current shareholders, Coeur Mining's stock (CDE) slumped 9.2%.

Under terms of the deal, SilverCrest shareholders will receive 1.6022 Coeur shares for each SilverCrest share they own.

Based on Thursday's closing prices, that would value SilverCrest shares at $11.34, a 22.1% premium. SilverCrest's stock hasn't closed as high as that price since Jan. 7, 2021.

At current prices, however, the deal values SilverCrest shares at $10.30.

Even with Friday's selloff, Coeur's stock has still rocketed 97.2% year to date, while SilverCrest shares have hiked up 56.4%.

Over the same time, continuous gold futures (GC00) have run up 28.7%, and closed at a record high of $2,694.90 on Sept. 26, according to FactSet data.

And continuous silver futures (SI00) have soared 34.6% this year, and closed at a 12-year high on Thursday.

With Coeur's silver production from its recently expanded mine in Rochester, Nev., and its mine in Palmarejo, Mexico, adding SilverCrest's Las Chispas mine in Mexico would be expected to generate a "peer-leading" 21 million ounces of silver, with 56% of revenue from U.S. mines and about 40% of revenue from silver.

In addition to the silver production, the combined companies are expected to produce about 432,000 ounces of gold in 2025.

Coeur said the combination of SilverCrest's "strong" balance sheet, with no debt and treasury assets of $122 million, including $98 million in cash and equivalents and $24 million of bullion, and strong cash flows, should help accelerate Coeur's debt-reduction initiatives.

"This immediate deleveraging, along with the significant combined expected free cash flow, will allow for rapid debt repayment and investment in other organic growth opportunities while offering shareholders an unparalleled re-rating opportunity," Coeur CEO Krebs said.

-Tomi Kilgore

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

10-04-24 1456ET

Copyright (c) 2024 Dow Jones & Company, Inc.