Endeavour Silver Corp. (EXK, Financial) acquired gold and silver exploration and mining rights at 2,000 meters above sea level (MASL) elevation and higher on the Toro del Cobre concessions, according to the news release published Sept. 11 on its website.
The Toro del Cobre concessions are located on a 181-hectare area and are owned by Capstone Mining Corp. (TSX:CS, Financial), a Canadian metallic mining company with assets in the Americas. Capstone Mining is also an explorer for copper, zinc, lead, molybdenum, silver and gold resources.
In exchange, Capstone Mining received from Endeavour the permission to explore and mine basic metals such as copper, lead and zinc on the Calicanto concessions, which are held by Endeavour and at an elevation which is below 2,000 MASL.
The two properties of Toro del Cobre and Calicanto are adjacent to each other and are located in the Mexican state of Zacatecas.
The agreement’s figures determing the value of the metal contained in the mineralized areas are based on the geological and mining history of Zacatecas, one of the most prolific lands in Mexico in terms of precious and base metals produced and sold, and in terms of average grade of metal contained in one ton of mineralized rock.
The agreement envisions Endeavour will pay to Capstone a 1% net smelter revenue –”‹ NSR –”‹Â on the production and sale of gold and silver from the Toro del Cobre property and receive a 1% NSR computed on the volume of copper, lead and zinc that Capstone Mining will produce and sell from the Calicanto concessions.
The agreement also envisages that the two mining companies will be granted the right to explore and mine more than 60% of the metal ores above/below 2,000 MASL elevation if explorations hint an extension of the mineralized area on the two concessions. This is a logical consequence of the fact that the agreement between Endeavour and Capstone Mining has been based on more than 60% NSR value in metals for the mineralized areas’ definition.
We will see whether and how the stock market will welcome this news in terms of impact on the market value of Endeavour that is trading at $2.58 per share with a market capitalization of $314.28 million, a price-book (P/B) ratio of 2.32 and an EV-EBITDA ratio of 13.66.
Whether Endeavour’s market value will be significantly impacted by this news only the next trading days will tell, but analysts foresee a nearly 90% upside in the share price of the silver stock within the next 12 trading months hitting an average price of $4.65 per share. The target price is a mean of five estimates of analysts who were surveyed and who defined a $2.86 to $6.00 range. Therefore, the consensus for Endeavour cannot but tend to a buy recommendation with a rating of 2.3 out of 5.
The company ended the most recent quarter of fiscal 2017 with an amount of $52.43 million in cash on hand and securities and with only $4 million in total debt.
GuruFocus gives Endeavour a financial strength rating of 7 out of 10.
Capstone Mining is trading at 1.41 Canadian dollars ($1.16) per share with a capitalization of 551.75 million Canadian dollars, a P/B ratio of 0.77 and a P/S ratio of 1.01. Considering that the company has 391.31 million shares outstanding for an expected revenue per share of 1.27 Canadian dollars for full fiscal 2017 and an expected revenue per share of 1.33 Canadian dollars for full fiscal 2018 – assuming the company will hold the number of shares outstanding constant until the end of fiscal 2018 – Capstone Mining is trading at an estimated 1.11x to 1.06x its forward sales.
Disclosure: I have no positions in any stock mentioned in this article.
