Monday, May 30, 2016

Endeavour Silver Closes The Acquisition Of El Capitan

Today Endeavour Silver completed the acquisition of Oro Silver Resources, a subsidiary of Canarc Resources. Oro Silver holds the El Compas gold - silver property. The company paid Canarc C$10.5 million by issuing 2.1 million shares. 

Well, in my opinion, it is a good deal for Endeavour. For C$10 million it acquired 100% of a very decent property. According to the Preliminary Economic Assessment, the El Compas project should deliver an internal rate of return of 97% at current gold prices ($1,200 per ounce):

On the other hand, it is a small project. Its after-tax NPV of US$39.5 million (indeed, it will be lower - Endeavour paid the acquisition price of around US$8 million, which increases capital costs from US$7.7 million to US$15.5 million) does not make any difference for the company (current market capitalization of US$329  million).

Fortunately, El Compas is open for further exploration so who knows...there is a chance that Endeavour will scale this property up. 

On the other hand, it is symptomatic what Endeavour had bought. El Compas is a low sulfidation style epithermal vein system, similar to vein systems demonstrated by all three Endeavour mines. The only difference is that El Compas has more gold than silver while the company's operating mines are mostly silver-bearing properties. Anyway, Endeavour is an expert in this type of mineralization. What is more, Bradford Cooke, CEO of Endeavour, is also the Chair of Canarc (it was a very-friendly deal). 

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