Silver Bow Mining (NYSEAMERICAN:SBMT) said it has entered into a definitive agreement to acquire the Jefferson County Metallurgical Complex in Montana, a past-producing processing site located about 55 miles by road from the company’s Rainbow Block project in Butte.
Chairman and Chief Executive Officer Travis Naugle said the proposed acquisition is intended to add processing infrastructure and development flexibility while leaving the Rainbow Block as the company’s primary focus. The transaction remains subject to bankruptcy court approval, shareholder approval, NYSE American approval, governmental approvals, permit transfers and other closing conditions.
Processing Complex and Rainbow Block Strategy
The Jefferson County complex includes a 15,000-ton-per-day crushing, grinding and flotation plant designed for polymetallic ores, as well as a 1,000-ton-per-day gold mill, tailings facilities and associated infrastructure. Naugle said the company believes the complex may be suitable for mineralization from Rainbow Block, which contains silver, gold, zinc and lead.
Silver Bow said it will need to complete technical, engineering, metallurgical, environmental and regulatory work before determining whether and how the facility could be incorporated into a future Rainbow Block development plan. President Doug Stiles said the site is not a fully permitted, turnkey facility and would require rehabilitation and additional permitting before processing Rainbow Block material.
“The metallurgical facility is largely intact,” Stiles said. “There will be some refurbishment necessary in order to make it operational,” including work on control systems, wiring and lighting. He added that the mill has not been stripped and that its primary components remain in place.
Naugle cited an independent fairness opinion that assigned the facility and associated infrastructure an estimated replacement value of approximately $350 million. He cautioned that this figure does not mean the facilities can be immediately restarted or that the acquisition eliminates future capital requirements.
Rainbow Block currently hosts an inferred mineral resource of approximately 11.48 million tons grading 4.3 ounces per ton of silver, 0.05 ounces per ton of gold, 4.6% zinc and 1.3% lead, according to Naugle. He said the resource is not a mineral reserve and does not have demonstrated economic viability.
The company is conducting a 25,000-foot surface drilling program, rehabilitating the Chief Joseph portal and underground decline, and advancing geological, engineering, environmental and permitting work at Rainbow Block. Naugle also said Silver Bow has mobilized three drills to the property and has commenced initial surface work toward establishing a second underground access point, called the Rainbow Portal.
Transaction Consideration and Commitments
At initial closing, Silver Bow expects to fund approximately $28.6 million to address obligations associated with the acquired assets. Naugle said this includes cash payments of $4.27 million to Jefferson County and $20.8 million to the Montana Department of Environmental Quality. The DEQ payment is intended to bring an environmental reclamation bond into good standing, he said, adding that the total bond amount is $41 million in restricted cash.
At final closing, Silver Bow expects to issue 3.5 million contingent value rights, or CVRs, each convertible into one common share subject to their terms and required approvals. The company also agreed to issue up to 11.5 million deferred CVRs tied to future Montana Tunnels M pit milestones.
- 6.25 million deferred CVRs are tied to an M pit construction decision, subject to specified timing provisions following a positive feasibility study.
- 5.25 million deferred CVRs are tied to M pit production milestones, including commercial production of 10,000 ounces of gold from the M pit or specified timing after a positive construction decision.
Naugle said Silver Bow is evaluating financing alternatives and prefers structures that minimize dilution to existing shareholders. He said the company has the financial capacity to meet closing and ongoing obligations but is considering how best to preserve financial flexibility.
M Pit and Environmental Work
The acquisition includes the historic Montana Tunnels M pit and related property interests. Stiles said historical resource estimates for the M pit are publicly available but are dated and are not treated by Silver Bow as current mineral resources. The company plans to engage independent qualified persons to prepare a current resource estimate.
Following final closing, Silver Bow has committed to a $5 million work program for an independent M pit feasibility study. The agreement calls for commercially reasonable efforts to complete the study within nine months, though Stiles said the arrangement provides flexibility for matters requiring further technical assessment or verification.
The company also committed to a separate $3 million program for engineering and permitting work related to the Clancy Creek bypass channel. That work is expected to begin no later than six months after final closing, followed by a commitment to initiate construction within nine months after receiving regulatory authorizations.
Stiles said the company will work with the Montana DEQ and Bureau of Land Management on next steps for the complex. The state operating permit is currently suspended by DEQ, while the site has a Bureau of Land Management Record of Decision and associated reclamation bond.
Management said it plans to continue prioritizing Rainbow Block exploration and development evaluation while assessing whether the acquired processing infrastructure can support a future project in the Butte Mining District.
About Silver Bow Mining (NYSEAMERICAN:SBMT)
Silver Bow Mining Corporation (NYSE American: SBMT) is a mineral exploration and development company focused on acquiring, exploring and advancing mineral properties. The company concentrates on precious and base metals, with an emphasis on commodities commonly produced by hard-rock mining such as copper, silver and gold. Its activities encompass early-stage exploration through the definition and development of mineral resources.
Silver Bow’s work typically includes geological exploration, drilling programs, resource modeling and advancing projects through technical studies and permitting processes necessary for development.
