GR Silver Mining (GRSL.V) has now signed a definitive agreement with First Majestic Silver (AG, FR.TO) to acquire the Plomosas silver project from the latter. Plomosas is a silver-gold-lead-zinc project near the town of La Rastra in the Rosario mining district in Mexico’s Sinaloa province. Plomosas is a past producing mine for a 15 year period. The project has been subject to almost 100,000 meters of drilling (completed by Grupo Mexico, Aurcana and First Majestic Silver). It has always been a secondary (or even tertiary) project for First Majestic, and GR Silver will be the first company in the modern mining era to make it part of its flagship project with dedicated and focused exploration plans.
The deal makes a lot of sense from a strategic point of view as the consolidation of the district was inevitable. Either First Majestic Silver would have had to acquire San Marcial from GR Silver, or the latter would have to acquire Plomosas, which has now occurred. One could interpret this as First Majestic ‘giving up’ on the district but we have a different opinion: as First Majestic retains a stake of almost 20% in GR Silver (and only a minimal cash payment of US$100,000 will have to be made on top of a 2% Net Smelter Royalty). As First Majestic is accepting payment in stock, we have the impression the company is still very much interested in the district and is now letting GR Silver do the heavy lifting to prove up viable silver and gold resources. And with a 20% stake in GR Silver, First Majestic is in the drivers seat to pursue M&A on the corporate level should GR Silver’s exploration programs be successful.
But of course, the drill bit will have to speak first, and we are looking forward to see GR Silver’s exploration plans for 2020.
Disclosure: The author has a long position in GR Silver.
