Endeavour Silver Corp (TSE:EDR) is lining up to buy Oro Silver Resources, a wholly-owned subsidiary of Canarc Resource Corp (TSE:CCM), in an all shares deal.
The gold and silver miner has entered into a definitive agreement with Canarc to buy Oro Silver, which holds the El Compas gold-silver mine property in Zacatecas, Mexico.
Oro Silver also has a five-year renewable lease on the 500 tonnes per day (tpd) La Plata ore processing plant in Zacatecas.
The consideration for the purchase will be 2.15mln Endeavour shares at a deemed issue price of C$4.89, placing a value of C$10.5mln on Oro Silver.
Endeavour shares have significant upside potential that could further increase Canarc's treasury, Canarc said.
Endeavour will assume Canarc's obligation to pay an aggregate of 165 troy ounces of gold from production to Marlin Gold Mining Ltd.
The transaction provides Endeavour with the opportunity to acquire a high quality, permitted gold-silver mine and a modern leased plant nearby, Endeavour told investors.
Endeavour is also looking at recommencing exploration and fast-tracking development of the asset.
The El Compas gold-silver mine project has good exploration potential to expand resources and good acquisition potential to consolidate stranded resources and exploration targets within the Zacatecas mining district to extend the life of mine.
The 500 tpd La Plata plant, which last operated in October 2014, was constructed by the Zacatecas state government in September 2013 for processing minerals available from local small miners in the state.
It was leased to Oro Silver in January 2016, and has fully-permitted crushing, grinding, flotation and tailings circuits, located within 20 km on mostly-paved roads from the mine.
The 3,990 hectare El Compas property consists of 28 concessions fully permitted for mining. Of these, 22 concessions are subject to a 1.5% net smelter return (NSR) royalty, while six concessions are subject to a 3.0% NSR royalty.
Capital costs are estimated at less than US$10 million, Endeavour said, and the time-frame to develop the mine and refurbish the plant for production is estimated to be less than one year.
Endeavour's short-term goal at El Compas will be to invest in exploration to upgrade and expand the resource, consolidate properties in the district to extend mine life, refurbish the plant, re-evaluate the economics to develop the mine, and complete a NI 43-101 report this year. If successful, Endeavour would commence production at El Compas in 2017.
"We are pleased to add another high quality mining property to our project portfolio, and we look forward to unfolding the full potential at El Compas and starting a new mining operation in another historic silver district in Mexico,” said Godfrey Walton, president and chief executive officer of Endeavour.
“El Compas should help our production and cash flow profiles while we develop our exciting new Terronera silver-gold mining project," Walton added.