Southern Silver Exploration (SSV.V) has now closed the acquisition of the 60% stake in Cerro Las Minitas from Electrum Global Holdings, a deal that was originally announced in June. On the back of the announcement, Southern Silver was able to raise C$14.5M by issuing 50 million sub receipts at C$0.20 and an additional 19M sub receipts at C$0.21 (the sub receipts will be converted into units consisting of a share and half a warrant now the transaction has been completed) and a separate non-brokered placement of 1.2 million units priced at C$0.38 per unit.

That’s approximately US$11M in cash and US$5M was used to pay the initial fee while an additional 2.34M shares were issued as well. Now Southern Silver will only have to make two milestone payments of US$2M in cash  and US$2M in shares on both March 15 and September 15 2021. The cash inflow from these financings as well as the existing cash on the balance sheet should ensure the swift payment of the remaining cash payments while the total dilution by issuing shares for the share payments will remain very limited considering the SSV share price has tripled since announcing the deal, helped by a strong zinc and silver price.

Additionally, we can reasonably expect a bunch of the 25 million warrants with a strike price of C$0.25 and 9.5 million warrants with an exercise price of C$0.28 to be exercised in the next year or so. Southern Silver now has approximately 218 million shares outstanding giving it a market capitalization of approximately C$140M. Thanks to the strong zinc and silver price, the NAV of the Cerro Las Minitas project is increasing and we will be updating our economic scenario we put together last year. Using a silver price of $16.5/oz and a zinc price of $1.1 per pound, we ended up with an after-tax NPV7% of US$294M but now silver is trading above $25, we can expect a reasonable boost of the NPV of the project.

Disclosure: The author has a long position in Southern Silver and participated in the subscription receipt offering. Southern Silver is a sponsor of the website.

Leave a comment