COVID-19 scuttles SilverCrest mining deal

billion over six years to continue production at Kennecott until 2032. The expansion would allow mining to continue into new areas of the ore body and would help the mine produce an estimated 1,000,000 tonnes of refined copper from 2026 to 2032. The company also declared that it would cut the mine’s carbon footprint by permanently closing its coal-fired power plant and sourcing renewable energy certificates.

Kennecott produced 186,800 tonnes of mined copper and produced 184,600 tonnes of refined copper in 2019, representing an eight per cent and five per cent drop respectively compared to the full-year 2018. According to Rio Tinto’s fourth-quarter report, this was due to increased grade variability, reduced copper concentrate availability as well as planned and unplanned maintenance at the smelter. – Matthew Parizot

Syndicate of financial firms backs out of $75 million agreement to invest in junior miner

By Carolyn Gruske

Even though it finally managed to close a $101 million non-brokered private placement of common shares, SilverCrest Metals Inc. experienced first-hand the challenges COVID-19 presents to companies looking for investment deals, as an earlier agreement collapsed due to concerns about how the virus would affect the mining industry and the markets.

On April 17, Vancouver-based SilverCrest issued a statement saying that the current deal, which was originally announced on April 13 for $75 million was oversubscribed, and that the final details saw the company issue 13,465,001 common shares at a price of $7.50 per share resulting in gross proceeds of $100,987,507.50.

This happened roughly a month after an agreement between the miner and some institutional investors initially came together and fell apart, all over the course of one week in March.

When the Vancouver-based exploration company with a focus on the Las Chispas mining district in Sonora, Mexico issued a statement on March 11, everything was positive: a syndicate of underwriters led by National Bank Financial Inc., Eight Capital Corp. and Scotia Capital Inc. had agreed to purchase 9,100,000 common shares of the SilverCrest on a bought-deal basis at a price of $8.25 per share. In total, the deal was worth a minimum of $75,075,000 with the potential for an even greater investment as provisions were included for the purchase of an additional 15 per cent of the SilverCrest shares.

SilverCrest planned to use the funding to continue exploration and development of its Las Chispas project (a feasibility study is currently underway SilverCrest planned to use the funding to continue exploration and development of its Las Chispas project in Mexico.

and a decision about starting construction is expected to be made this summer) and for general working capital and administrative purposes. That plan, however, is now in jeopardy. On March 18, the miner issued a statement explaining that “it has received notice from National Bank Financial Inc. purporting to terminate its obligations.”

The reason cited for the change of heart is COVID-19. The pandemic is being used to trigger what is known as the “disaster out” clause in the offering agreement. March 11 was also the day the World Health Organization formally declared the outbreak of the virus a pandemic noting at that point there were 118,000 confirmed cases in 114 countries.

“Our decision to exercise this clause, along with Scotia and Eight Capital – our collective decision – was not because of the company. This is not a reflection on SilverCrest. It is however, a reflection, really, on what has changed and changed very dramatically since March 11,” said Toronto-based Brian Davis, co-president and co-CEO of National Bank Financial Inc. “What we identified in particular was how the epidemic has spread and became, later that evening, designated as a pandemic by the World Health Organization. That has led to border closures, travel restrictions, declarations of states of emergency. These measures affect us domestically and internationally. And they have clearly, profoundly, adversely affected the financial markets in general.

FROM THE WIRE

Compiled by Tijana Mitrovic

Suresh Kalathil has left Guyana Goldfields as its COO and senior vicepresident. President and CEO Alan Pangbourne thanked Kalathil for his contributions to the company, which plans to soon be acquired by Silvercorp Metals.

Ivanhoe Mines CFO Marna Cloete has been promoted to President, a role she will take on in addition to her current one. The Ivanhoe Mines board of directors has also promoted Matthieu Bos and Peter Zhou to executive vice presidents of Africa and China, respectively.

John Baird has joined Osisko Gold Royalties’ board of directors. Baird has served as an MPP in Ontario for ten years, a member of parliament in Ottawa for three terms and as Canada’s Foreign Affairs Minister for four years.

Drew Anwyll has joined Generation Mining as its new COO. Anwyll has previously worked with Detour Gold, Barrick Gold and Placer Dome and has extensive experience with both open-pit and underground mining operations.

Chris Stewart has left his position of president and COO of McEwen Mining. The company announced it will distribute his responsibilities among its management team.

Mary-Lynn Oke has joined Anaconda Mining’s board of directors. Oke has over 23 years of experience in tax, finance and leadership, and currently acts as a senior financial advisor. The company also announced that Maruf Raza has resigned as a company director after eight years.

Jessica McDonald has stepped down as chair and member of Trevali Mining’s board of directors. Jill Gardiner, currently a director and the chair of Trevali’s compensation and human resources committee, will serve as board chair. Trevali president and CEO Ricus Grimbeek will join the board to fill the vacant seat. It is for all those reason – and I absolutely say I wish we weren’t put in this position – we chose, along with Scotia and Eight Capital, and with the support of the rest of the syndicate for that matter, to exercise the disaster out clause.”

Davis explained that under the terms of the underwriting agreement – terms that are typical for any similar agreement – the underwriters (in this case National Bank Financial, Eight Capital, Scotia Capital and the other investors in the syndicate) have the ability to terminate their obligations “at any time prior to the closing of the offering ‘if there shall develop, occur or come into existence or be announced any event, action, state, condition of national or international consequence or any law, action or regulation or other occurrence of any nature whatsoever, which, in the opinion of an underwriter, materially adversely affects or involves the financial markets generally or the condition of the company.’”

While the agreement may have provisions for the parties involved to terminate it, executives from SilverCrest Metals do not believe the termination provisions were properly enacted and have stated their intentions to take legal action to hold the National Bank Financial and its partners to the original intent of the deal. The company issued a statement outlining that viewpoint.

“The agreement between SilverCrest and NBF created a binding legal obligation on the part of NBF to complete the transaction as is customary in Canada for ‘bought deal’ financings. SilverCrest is of the view that NBF is not entitled to terminate the agreement. In SilverCrest’s opinion, the novel coronavirus pandemic considered by NBF as the basis for terminating this agreement was fully evident when the ‘bought deal’ financing was agreed upon with expectations that the precious metals market would respond positively to this known risk. Accordingly, SilverCrest intends to pursue its legal remedies against NBF for breach of NBF’s obligations under the terms of the agreement.”

Getting lawyers involved in a business deal is not something that Eric Fier, CEO and director of SilverCrest said he wants to do, especially since SilverCrest Metals and his earlier mining company SilverCrest Mines (located next door to the current Las Chispas Project), have been long-term clients of the National Bank. Asserting SilverCrest’s legal position, however, something he feels he is being forced to do.

“I’m well versed in everything that is going on in the world, but a bought deal is a bought deal and this was eyes wide open. Everybody knew what was going on in the world. It’s our reputation too, so I want to protect that,” he said.

“We feel that National Bank is legally obligated to this bought deal, and we intend to pursue our rights to protect our shareholders and our stakeholders. We’re long-term clients of National Bank, and as a client, we are very disappointed in their lack of insight into the situation, and the support they are giving us – support they are supposed to give to key clients when the going gets tough.”

Fier stated that SilverCrest isn’t dependent on the syndicate’s financing to continue operations, even though over the course of the next two years, the goal was to raise $110 million to complete its financing. Currently, he said that the company has US$90 million in the bank and a burn rate of US$4 million per month, mainly for underground development. Up until January, there were 20 drills on site. Now there are 12, and that number may be reduced further due to the changing circumstances and pressures caused by COVID-19.

According to Fier, the timing of the National Bank-led deal was convenient as it would have helped them de-risk decisions about construction, and it came before the company had to go into a blackout period prior to disclosing the latest updated resources and reserves figures to the public. Financing however, should still be available, as Fier believes that good projects can find investors or debt financing, even in challenging financial times.

“I don’t want to be tainted by National Bank breaking this deal for what they think may be a good reason. That shouldn’t happen,” Fier said. “This project is a wonderful project … and it’s going to move forward.”

Admittedly, Fier said he has concerns about the effects of COVID-19 on the project, on his employees and on the supply chain, but he said he is trying to take those in stride.

“We’re dedicated to working through these problems. I like to always remind my team, most of whom are engineers and geologists that we were built – it’s in our DNA – to solve problems. They should be in the height of their glory moving forward.” CIM

Endeavour and SEMAFO to merge in US$1 billion deal

Endeavour Mining Corporation announced on Mar. 23 that it will purchase all shares of Montreal-based SEMAFO, creating a top-15 gold producer worldwide in a deal worth US$1 billion.

The combined company would have control of four operating mines in the West African nation of Burkina Faso –Boungou, Mana, Karma and Houndé – as well as the Ity and Agbaou mines in Côte D’Ivoire. Together the companies also have several development projects in Burkina Faso and the neighbouring country of Mali.

“This transaction has received strong support from our key shareholders who recognize it as an exciting value creating opportunity to bring together two companies with common values and share culture built on decades of successful West African experience,” SEMAFO president and CEO Benoit Desormeaux said in the press release.

According to both companies, the combined operations would produce over one million ounces in 2020 based on current guidelines with all-in sustaining costs below US$900 per ounce. Also stated in the press release is the claim that the combined company would also have strong cash flow profile and enhances the ability for the company to manage risks at its operations.

“This combination offers a rare opportunity to bring together two leading West African mine operators with a shared strategic vision, complementary assets and management teams with a proven track record,” Endeavour president and CEO Sébastien de Montessus said in the press release. “We believe this transaction represents a compelling value equation for both sets of shareholders with the potential for a meaningful re-rating, whilst providing increased asset diversification and enhancing our ability to manage risks within the business.”

This focus on risk management is deserved. Employees working at SEMAFO’s Boungou and Mana mines have been the victims of several terrorist attacks during convoys to the mines. On Aug. 11, 2018, five gendarmes and one sub-contractor employee were killed in an ambush on the way to Boungou. Six days later, on Aug. 17, an employee bus heading to Mana was held up by bandits, where one of the company’s national employees and one sub-contractor were killed.

Most recently, on Nov. 6, a convoy of five buses were struck by an improvised explosive device while on the way to Boungou. As a result, 39 people were killed with 60 more wounded, and mining operations were suspended. A February 2020 update put the mine’s restart sometime in the fourth quarter, while employees employed at the mine’s processing plant were transported by helicopter to the mine site to process the remaining ore stockpiles until mining could resume.

According to the press release, during the discussions between the two companies, Endeavour’s management team “completed on-site due diligence at SEMAFO’s operations in Burkina Faso during February 2020, including a comprehensive assessment of security, operations and exploration.” Following a majority approval vote, Endeavour and SEMAFO shareholders will own approximately 70 and 30 per cent of the combined business, respectively. Holding company La Mancha, which currently owns 31 per cent of Endeavour, has committed to invest US$100 million in the transaction and will control 25 per cent of the combined entity. Both shareholder meetings are expected to be held in the second quarter of 2020. Matthew Carr has joined Core Gold’s board of directors. Carr is currently an executive director of Titan Minerals, Core Gold’s majority shareholder, and the non-executive chairman of Andina Resources. Leonard Clough resigned from the company’s board of directors, where he had been a director since 2011.

Jacques Perron has joined Pretium Resources as president and CEO. The board also intends to appoint him as a director following the company’s general meeting. He succeeds Joseph Ovsenek, who has acted as president and CEO since 2017.

Osisko Mining has appointed Andrée St-Germain to its board of directors. St-Germain has experience in mining finance, banking and financial management and has served on the board of Barkerville Gold Mines, IDM Mining and currently sits on the boards of Ascot Resources and AME.

Andrew Cormier is joining Orla Mining as its new COO. Cormier has over 27 years of experience in the mining industry, having held positions at Alamos Gold, AuRico Gold Barrick Gold and more. He is succeeding Hans Smit, who retired as COO and will continue to serve the company as a consultant.

Robbert Borst has retired as COO of Marathon Gold. Borst first joined the company in 2017 and will remain a consultant for the Valentine Gold project. The company has also appointed James Powell as vicepresident of regulatory and government affairs, an expansion to his previous role as director of environment and stakeholder engagement.

Tony Giardini has joined Trilogy Metals as its new president and CEO. Giardini first joined the company in 2012 as a director, and has extensive executive experience from his previous positions at Ivanhoe Mines and Kinross Gold. James Gowans will finish his tenure as interim president and CEO and will remain as a company director.