Coeur acquires JDS’ Silvertip Mine in British Columbia: deal to close in October

Aerial view of the Silvertip mine, located in northern British Columbia. — Photo courtesy Yukon Prospectors Association website

Coeur Mining, Inc. is pleased to announce that it has entered into a definitive agreement (the “Arrangement Agreement”) to acquire privately-owned JDS Silver Holdings, Ltd. and its wholly-owned subsidiary, JDS Silver Inc. (“JDS Silver”), which owns the high-grade silver-zinc-lead Silvertip mine (“Silvertip”) located in northern British Columbia, Canada, adding a sixth producing mine to Coeur’s North American-focused platform. Under the Arrangement Agreement, the Company will pay initial consideration of US$200 million, consisting of US$146.5 million of cash, US$38.5 million of Coeur shares (approximately 4.3 million new shares), and will assume US$15 million in existing debt. Additional potential payments of up to US$50 million are contingent upon achieving specific future permitting and exploration milestones at Silvertip.

Overview of Silvertip

The Silvertip mine is one of the industry’s newest and highest-grade silver-zinc-lead mines with a silver-equivalent1 indicated resource grade of 1,166 grams per tonne (g/t), comprised of 352 g/t silver, 9.4% zinc, and 6.7% lead, and a silver-equivalent1 inferred resource grade of 1,155 g/t, comprised of 343 g/t silver, 9.8% zinc, and 6.2% lead. Located just below the Yukon border, the operation sits within a highly prospective 93,000-acre (37,650 hectares) land package. Silvertip commenced production during the fourth quarter of 2016.

Upon expected completion of the transaction in late October, Coeur intends to invest US$25 – US$35 million in surface infrastructure, accelerated underground development and drilling and mill optimization over a six-month period and recommence commercial production by the end of the first quarter of 2018. Once an anticipated daily average mining rate of 1,000 tonnes per day is achieved, Coeur expects Silvertip to produce an average of approximately ten million silver equivalent1 ounces annually consisting of approximately three million ounces of silver, 45-50 million pounds of zinc, and 40-45 million pounds of lead over an estimated 7.5-year initial mine life.

Key Transaction Highlights

• Significant, high-quality near-term production growth – Expected average annual silver equivalent1 production from Silvertip of approximately ten million ounces represents a significant potential increase to Coeur’s overall production profile compared to Coeur’s 2017 production guidance range of 38 - 41 million silver equivalent1 ounces.
• High-grade resource – Silvertip’s silver equivalent1 indicated and inferred resource grades of 1,166 g/t and 1,155 g/t, respectively, represent increases of 27% and 12% to Coeur’s measured and indicated and inferred resource grades, respectively, as adjusted to give effect to the transaction.
• Substantial, high-margin cash flow – Silvertip is expected to generate an average annual EBITDA2 margin of over 50%, which is over twice Coeur’s 2016 adjusted EBITDA2 margin. Based on US$17.50/oz silver, US$1.13/lb lead and US$1.40/lb zinc, Silvertip is expected to generate average annual EBITDA2 of approximately US$70 million.
• Low expected AISC – At full capacity of approximately 1,000 tonnes per day, Silvertip’s all-in sustaining costs (AISC)2 are expected to average approximately US$10.50 - US$11.50/oz on a silver equivalent1 basis.
• Accretive transaction – The Silvertip acquisition is expected to be accretive to Coeur’s stockholders on all key operational and financial metrics.
• Newly-constructed operation with significant prior capital investment – Significant amount of prior investment has taken place at Silvertip, including a newly-installed processing facility, dry stack tailings facility, a 26 km access road, over 4 km of underground development, 86,000 meters of drilling, two bulk sample programs, and twenty years of environmental baseline data. For minimal incremental capital, Coeur anticipates optimizing several aspects of this new operation before recommencing production by the end of the first quarter of 2018.
• Top mining jurisdiction – The addition of Silvertip enhances Coeur’s geographic and political risk profile by adding British Columbia, Canada, a top-tier mining jurisdiction, to its North American-focused asset portfolio.
• Attractive metals mix – Silvertip’s revenues are expected to be derived equally among silver, zinc and lead, shifting Coeur’s pro forma metals mix3 to 51% gold, 37% silver, 7% zinc, and 5% lead.
• Significant resource and large, underexplored land position – Prospective 93,000-acre (37,650 hectares) land position where less than 5% has been explored provides opportunities for resource growth and new discoveries. Current high-grade resource represents a near-term opportunity to convert a significant portion to reserves with infill drilling and an optimized mine plan.

“The acquisition of the Silvertip mine represents a unique opportunity to significantly enhance our portfolio of operations and it satisfies all our acquisition criteria – it provides expected near-term, low-cost, high margin cash flow from an attractive jurisdiction and it is accretive on all key operational and financial metrics,” said Mitchell J. Krebs, Coeur's President and Chief Executive Officer. “Over the past several years, we have repositioned our existing portfolio of mines, achieved greater geographic and operational balance and generated industry-leading cost reductions and cash flow growth. The acquisition of Silvertip – one of the highest-grade and newest operations in the sector with a tremendous amount of exploration potential – should serve to further accelerate these positive trends while providing us with an important foundation in British Columbia. We look forward to working with the Government of British Columbia and partnering with the Kaska Nation and members of the British Columbia and Yukon Indigenous communities in our efforts to make Silvertip a successful operation.”

About Coeur

Coeur Mining, Inc. is a well-diversified, growing precious metals producer with five precious metals mines in the Americas employing approximately 2,000 people. Coeur produces from its wholly-owned operations: the Palmarejo silver-gold complex in Mexico, the Rochester silver-gold mine in Nevada, the Kensington gold mine in Alaska, the Wharf gold mine in South Dakota, and the San Bartolomé silver mine in Bolivia. In addition, the Company owns the La Preciosa project in Mexico, a silver-gold exploration stage project. Coeur conducts exploration activities in North and South America.

About JDS Silver

JDS Silver is a private mining company that owns the Silvertip mine in Northern British Columbia. JDS Silver is affiliated with JDS Energy & Mining, Inc., a company that delivers mining project concepts from inception to full operations – a process it has executed for operations throughout Canada and the world, including the Minto Mine in the Yukon, the Gahcho Kue Mine located in the Northwest Territories, and most recently the Silvertip mine.

Cautionary Statements and Forward Looking Statements Apply