Americas Silver has signed a deal to acquire an option agreement from Impulsora Minera Santacruz for the San Felipe property in Sonora, Mexico.

Americas Silver will acquire the option agreement that will give it the right to gain full interest in the property for $15m, which is payable in two tranches.

Americas Silver president and CEO Darren Blasutti said: “As we did when we acquired Scorpio Mining and the San Rafael project two years ago, we are taking a disciplined and highly accretive approach to our external growth strategy.

“The San Felipe acquisition provides our shareholders with an exciting development asset at an attractive valuation, which has the potential to add material high-margin production scale that further enhances the tremendous value proposition of Americas Silver.

“While we remain highly focused on successfully executing the development of San Rafael on time and on budget, we are extremely excited to add this project to our pipeline.

“We believe it has the potential to drive the next leg of growth for our company as we transition to a leading first quartile silver producer in 2018 and beyond.”

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“We believe it has the potential to drive the next leg of growth for our company as we transition to a leading first quartile silver producer in 2018 and beyond.”

As detailed in the San Felipe option agreement, which was amended on 28 February 2017, Impulsora was entitled to purchase 100% of the property upon making cash payments, including applicable value added taxes. An initial payment of $2,000,000 should be made before 3 March, with a final payment of $8,000,000 to be made before 15 December.

Under the option, Impulsora has assigned all of its rights, obligations and interest in the San Felipe option agreement and other agreements relating to the property to Americas Silver in return for total cash payments of $7,000,000, plus applicable VAT.

Furthermore, an initial payment of $2m plus VAT will be made to Hochschild, with a further $4.2m going to JMET, a lender to Santacruz, in addition to $749,975 and VAT going to Santacruz.

Following completion of the final payment to Hochschild of $8m plus applicable VAT due on 15 December, 100% of the property will have been acquired by Americas Silver, free of any underlying net smelter return royalties.

Americas Silver has funded the initial $7m cash payment with cash.

As of 31 December 2016, the company had a cash balance of $24.1m. As on 30 January, the company strengthened its balance sheet by entering a $15m concentrate pre-payment facility with Glencore PLC.