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Endeavour Silver to Acquire the Pitarrilla Project, One of the World’s Largest Undeveloped Silver Projects¹, Leveraging Regional Platform and Operating Expertise in Mexico

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Endeavour Silver to Acquire the Pitarrilla Project, One of the World’s Largest Undeveloped Silver Projects¹, Leveraging Regional Platform and Operating Expertise in Mexico

 

 

 

 

 

Endeavour Silver Corp. (TSX: EDR) (NYSE: EXK) has entered into a definitive agreement to purchase the Pitarrilla project in Durango State, Mexico by acquiring all of the issued and outstanding shares of SSR Durango, S.A. de C.V. from SSR Mining Inc. (NASDAQ/TSX: SSRM; ASX: SSR) for total consideration of $70 million and a 1.25% net smelter returns royalty. All references to dollars ($) in this news release are to United States dollars (US$).

 

Pitarrilla is a large undeveloped silver, lead, and zinc project located 160 kilometres north of Durango City, in northern Mexico. The Pitarrilla property consists of 4,950 hectares across five concessions and has significant infrastructure in place with direct access to utilities. SSR Mining filed a technical report prepared in accordance with National Instrument 43-101 – Standards of Disclosure for Mineral Projects titled “NI 43-101 Technical Report on the Pitarrilla Project” dated December 14, 2012. The 2012 Technical Report provided a feasibility study outlining a large, mainly open-pit operation and a mineral resource estimate, which has since been updated by SSR Mining for its Annual Information Form for the financial year ended December 31, 2020 (together, the “Historical Estimate”)2.

 

“The acquisition of Pitarrilla, one of the world’s largest undeveloped silver projects1, accelerates our vision to become a premier senior silver producer,” said Dan Dickson, Endeavour’s Chief Executive Officer. “We now have a tremendous growth pipeline, which in addition to Pitarrilla includes the Terronera and Parral projects, in a country where we have extensive experience and expertise. While Terronera is the next project to be developed, we anticipate that Pitarrilla will be a significant asset in our portfolio and may take priority over the advancement of Parral. We will be in a position to make such a decision once we complete further drilling and analyze the economics of various scales and options for production.”

 

Total Consideration

 

Total consideration payable on closing of the Transaction is $70 million, consisting of $35 million in Endeavour shares and a further $35 million in cash or in Endeavour shares at the election of SSR Mining and agreed to by Endeavour. The number of Endeavour shares to be issued will be based on a deemed price of $4.0805 per share, being the volume weighted average price of Endeavour’s common shares on the New York Stock Exchange for the 10 business days immediately preceding the date of signing the definitive agreement. The shares will be subject to a hold period of four months and one day following the date of closing.

 

SSR Mining will retain a 1.25% NSR Royalty on Pitarrilla. Endeavour will have matching rights to purchase the NSR Royalty in the event SSR Mining proposes to sell it.

 

Any cash component will be satisfied with cash on hand. As at September 30, 2021, Endeavour had $101 million in cash and cash equivalents and $129 million in working capital.

 

Strategic Rationale for Acquisition

 

  • Acquiring One of the World’s Largest Undeveloped Silver Projects
    • As outlined in the 2012 Technical Report and updated in the SSR Mining 2020 AIF, Pitarrilla has the following mineral resource estimate which Endeavour is treating as a Historical Estimate3:
      • a measured & indicated mineral resource (open-pit and underground) of 525.27 million ounces silver in 164.79 million tonnes grading 99.1 grams per tonne Ag.
      • an open-pit inferred mineral resource of 21.21 million oz Ag in 8.52 million tonnes at an average grade of 77.4 gpt and underground inferred mineral resource of 5.46 million oz Ag in 1.23 million tonnes at a grade of 138.1 gpt.
    • By way of comparison, Endeavour Silver has the following mineral reserve and resource estimates4 as outlined in its Annual Information Form for the year ended December 31, 2020:
      • a proven and probable mineral reserve of 86.3 million oz silver equivalent from 6.99 million tonnes at 380 gpt AgEq.
      • a measured & indicated mineral resource of 43.7 million oz AgEq in 4.40 million tonnes at an average grade of 309 gpt AgEq.
      • an inferred mineral resource of 87.13 million oz AgEq in 8.04 million tonnes at an average grade of 337 gpt AgEq.
  • Pitarrilla Leverages Endeavour’s Platform and Experience in Mining-Friendly Mexico
    • Acquisition is an excellent fit for Endeavour’s experienced regional team, which has a successful development, exploration and underground mining track record.
  • Accretive Acquisition at an Attractive Valuation
    • Once a current resource is defined, Pitarrilla is expected to be substantially accretive on a silver equivalent resource per share metric — anticipate announcing a current resource in 2022.
    • Endeavour expects to maintain significant silver exposure, silver beta and trading multiples.
    • Pitarrilla provides additional optionality in a rising silver price environment.
  • Enhances Endeavour’s Attractive Growth Pipeline
    • Pitarrilla, together with Endeavour’s Terronera and Parral projects, form the key cornerstones of Endeavour’s mid to long-term growth profile.
    • Over the next several years, analyze the economics of various scales of production, including underground option, and then advance towards potential development and production to strengthen Endeavour’s long-term production and free cash flow profile.
    • Currently categorized as a development asset, Pitarrilla has been de-risked by SSR Mining as follows:
      • several key exploration and mining permits have been obtained; and
      • collaboration agreements are in place with the local community.
  • Potential Exploration Upside as Land Package Remains Largely Underexplored
    • Deposit remains open with minimal drilling completed to explore the deposit at depth.
    • Significant underexplored land package with an opportunity to make new discoveries.
    • The geology at Pitarrilla and at Endeavour’s underground mines – Guanacevi and Bolanitos – is broadly similar.
    • Upside potential from upper oxide resource as well as open-pit and underground optionality.

 

Approvals and Timing

 

The Transaction has been approved by the board of directors of Endeavour.

 

Closing of the Transaction remains subject to TSX and NYSE regulatory approvals and receipt of Mexican Federal Economic Competition Commission approval, as well as customary closing conditions for a transaction of this kind, which is expected to occur in the first half of 2022.

 

On closing, Endeavour plans to prepare a current mineral resource estimate for Pitarrilla, develop exploration targets and analyze the economics of various scales of production.

 

Advisors and Counsel

 

PI Financial acted as Endeavour’s financial advisor. Koffman Kalef LLP acted as the Company’s legal counsel.

 

Endeavour Qualified Person and QA/QC

 

The scientific and technical data contained in this news release relating to the Pitarrilla project has been reviewed and approved by Dale Mah, P.Geo., a qualified person under National Instrument 43-101 – Standards of Disclosure for Mineral Projects. Mr. Mah is Vice President Corporate Development of Endeavour.

 

About Endeavour Silver

 

Endeavour Silver is a mid-tier precious metals mining company that operates two high-grade, underground silver-gold mines in Mexico. Endeavour is currently advancing the Terronera mine project towards a development decision, pending financing and final permits and exploring its portfolio of exploration and development projects in Mexico, Chile and the United States to facilitate its goal to become a premier senior silver producer.  The Company’s philosophy of corporate social integrity creates value for all stakeholders.

 

Posted January 13, 2022

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