Jerritt Canyon has been in operation since 1981 and has produced more than 9.5 million ounces of gold.
It currently operates as an underground mine and has one of three permitted gold processing plants in Nevada using roasting for ore treatment, with a capacity of 4,500 tonnes per day. It is currently operating at about 2,200tpd due to limited ore production. In 2020, Jerritt Canyon produced 112,749oz at a cash cost of $1,289/oz.
First Majestic said it had identified opportunities to enhance both the cost and production profile of Jerritt Canyon, as well as near-term brownfield potential and long-term property-wide exploration potential.
The transaction marks diversification by First Majestic from its three operating silver mines in Mexico, while preserving its cash.
Sprott will receive 26.7 million shares and 5 million warrants, exercisable for three years at $20 each. Concurrent with the acquisition, Eric Sprott, president of Sprott Mining, will complete a $30 million private placement investment in First Majestic, buying 1.7 million shares priced at $15.69 each, which will bring his holding in First Majestic to 32.9 million shares or some 13.1% of the company.
Sprott made one of his biggest individual investments in a silver company by buying 5 million shares of First Majestic Silver for C$78 million in September 2020.
"We are delighted to add another cornerstone asset to our portfolio. While we remain focused on maintaining our peer-leading exposure to silver, Jerritt Canyon is a unique opportunity to create value for First Majestic's shareholders and provides a new geographic operating platform while preserving our pristine balance sheet," said First Majestic Silver CEO Keith Neumeyer.
"We … see this as a big step forward for Jerritt Canyon where it can flourish under the larger umbrella of First Majestic," said Sprott Mining president Eric Sprott.
First Majestic produced 11.6Moz of silver and 100,081oz of gold in 2020 at an all-in sustaining cost of $13.92/oz per payable silver, achieving net earnings of $23.1 million. It ended the year with record cash and cash equivalents of $238.6 million.
Shares in First Majestic Silver are trading at $16.33, valuing the company at $3.6 billion.