Pershing Merger Was An Opportunity That Couldn't Be Missed - Americas Silver
Correction: An error was made in the company's ideal timeline for the Relief Canyon project. Blasutti said that he sees mine construction starting by the second half of 2019. The article has been corrected corrected.
(Kitco News)- With gold and silver prices near the bottom, now is the timeto be looking for opportunities that could add value to your company, accordingto one mining executive.
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| Darren Blasutti, CEO of Americas Silver Corp |
This type of thinking was the biggest reason behind AmericasSilver decision to merge with Pershing Gold Corporation (Nasdaq: PGLC, TSX: PGLC), Americas Silver Corp, (NYSE: USAS, TSX: USA) CEO Darren Blasutti told Kitco News.
Blasutti explained that the opportunity to acquire Pershing’sRelief Canyon project in Nevada was something that couldn’t be passed up.
The project has proven reserves of 308,500 ounces of goldwith probability of 326,500 ounces of gold.
“Simply put, this is a great project from our perspective,”he said. “There are very few oxide heap-leach, open-pit mines with low capitalintensity available today,” he said. “Whether the gold price is good or bad,the rational to own this mine is there.”
Blasutti said that unfortunately, in the current marketconditions, single-project companies like Pershing Gold, face significantdevelopment risks when trying to bring a project online. However, he added thatAmericas Silver will be able to leverage its current production and cash flowto overcome potential development risks.
“We are building a $28 million capital project on the top ofa $160 million company,” he said. “I think it could take us less than a year toget this project up and running in one of the best jurisdictions in the world.”
Blasutti explained that the project’s low capital costsmeans the company will see a strong return on its investment even if pricesremain at current levels.
“Even with acquisition costs and after building the mine, westill expect to see a return of more than 15% and that is just something youdon’t see in this business,” he said. “We think this project will be able tofund itself.”
Blasutti said that they would look to build the mine using acombination of free cash flow and bank financing; however, he said that thosedecisions will depend on market conditions.
Looking at gold and silver prices, Blasutti said that thecompany is positioning itself for when the market turns around. He added thatit is impossible to tell when that will happen, but noted that the currentprices are unsustainable.
“I would say that we are near the bottom of the market,” hesaid. “Gold and silver have a lot more upside potential than downside. I don’tthink gold is going to go below $1,100 an ounce,” he said.
Blasutti highlighted that “in a perfect world,” pendingshareholder approval, the company will be in construction at Relief Canyon by thesecond half of 2019.
While Blasutti sees the merger as a win for hiscompany, Pershing shareholders also see some benefits. Pershing shareholderswill receive 0.715 common shares of Americas Silver for each common share ofPershing, presenting a 40% premium from Friday’s closing price.
By Neils ChristensenFor Kitco News
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nchristensen@kitco.comwww.kitco.com Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.