What's Happening?
Deterra Royalties has announced the sale of its non-core La Preciosa silver assets in Mexico to Avino Silver & Gold Mines for $22 million. This transaction marks the end of Deterra's royalty interests in the project, with Avino agreeing to pay $13.25 million at completion and an additional $8.75 million in cash 12 months later. Deterra will also pay Coeur Mining a deferred consideration of $1 million within the first five business days of the contingent milestone payment or on the first anniversary of the project's first silver production. CEO Julian Andrews stated that precious metals are not central to Deterra's strategic focus, which is on base, bulk, and battery commodities. The company expects to realize a pre-tax profit of over $6 million from this disposal, aligning with its strategy to acquire royalties from high-quality assets.
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Why It's Important?
The sale of La Preciosa silver assets is significant as it reflects Deterra's strategic shift away from precious metals towards commodities that align with its core focus. This move is expected to enhance Deterra's financial position, with a projected pre-tax profit of $6 million, indicating a 31% pre-tax internal rate of return. The transaction also highlights the strong demand for silver, driven by a global output increase and favorable market conditions. Mexico's leading role in silver production further underscores the importance of this commodity in the global market. The deal with Avino Silver & Gold Mines is mutually beneficial, leveraging Avino's success in developing La Preciosa amid a robust silver price environment.
What's Next?
Following the sale, Deterra will continue to focus on its strategic investment in base, bulk, and battery commodities. The company will likely explore further opportunities to divest non-core assets and optimize its portfolio. Avino Silver & Gold Mines will proceed with the development of La Preciosa, capitalizing on the strong silver market. The transaction may prompt other companies in the sector to reassess their asset portfolios and strategic focus, potentially leading to more mergers and acquisitions in the industry.
