Just this weekend the silver industry learned that Pan American Silver is planning to take over competitor MAG Silver for around USD 2.1 billion. Now another, in our opinion also very promising merger in the silver sector has been announced, although this time two explorers/developers are merging and not two producers. In any case, the merger of Silver47 Exploration (WKN A408EQ / TSXV AGA) and Summa Silver (WKN A2P4EE / TSXV SSVR) – two “Goldinvest.de companies” – will create a company with a total of 10 million ounces of silver equivalent in the indicated and of 236 million ounces of silver equivalent in the inferred category!

But this is just the beginning! Together, the two companies want to advance the shared goal of achieving silver equivalent deposits of 1 billion ounces or more through further consolidation in the industry and additional discoveries!

In any case, there are numerous reasons to merge Silver47’s Red Mountain project in Alaska with Summa’s Hughes project in Nevada and Mogollon project in New Mexico. The result is a portfolio of highly prospective, high-grade silver-focused projects in the US, and the new company should be even more attractive to investors given its size, greater scale of known and potential resources and even stronger focus on silver.

On a consolidated basis, the new company has resources of 10 million ounces silver equivalent (AgEq) in the indicated category at an average grade of 333 g/t AgEq and 236 million ounces AgEq at 334 g/t AgEq in the inferred category. The significant growth potential of the three US projects, in the opinion of Silver47 and Summa Silver management, positions the new company for accelerated exploration but also faster development towards silver production.

Significant Undervaluation Compared to Peer Group

It is also calculated that the merged company is currently valued on the market at just USD 0.19 per ounce of silver equivalent (enterprise value per ounce, EV/oz) if the indicated and inferred resources are taken together on a pro forma basis. This means considerable potential for a revaluation compared to comparable competitors, which is to be realized through systematic exploration, resource growth and strategic acquisitions.

New Company with Strong Cash Position

Silver47 and Summa Silver expect to benefit from greater visibility and improved access to capital through their merger and the expected higher market capitalization, especially with institutional investors who want to get involved in high-grade silver projects in the USA! Especially since the new company will have a tight share structure and can already count on the support of such renowned investors as Mr. Eric Sprott and Crescat Capital. Apart from that, the merged company will start with a strong cash position of CAD 10 million. Added to this are the net proceeds from an offer of Summa Silver Subscription Receipts (details can be found in the company’s press release), which could add a further CAD 5 million gross to the New Co.’s coffers.

Sticking with the financial theme, the future company is expected to benefit from reduced administration and overhead costs, cost savings and prioritized work programs and assets that could drive a potential re-rating, which should delight shareholders. It should also help that the combined team of the new Silver47 – as the merged company will be called while Summa Silver disappears from the market – will have members on both the Board of Directors and management team with extensive experience in the capital markets but also with great technical expertise. The new company will be led by Gary Thompson as Executive Director and Galen McNamara as CEO.

On the shareholder side, following completion of the deal, which is planned for the third quarter of this year, the existing shareholders of Silver47 will hold approximately 56% and the existing shareholders of Summa Silver approximately 44% of the outstanding shares of Silver47, prior to completion of the aforementioned financing. Summa shareholders will receive 0.452 common shares of Silver47 in exchange for each Summa common share held.

We don’t need to introduce the projects being brought into the new company to Goldinvest.de readers. However, if you still need background information, you can find it on the profile pages of Summa Silver and Silver47 Exploration.

Conclusion: In times when it is still difficult for many exploration companies to raise fresh capital despite high metal prices, we see the merger of Silver47 and Summa Silver as a positive step for this reason alone, already, as it will probably be easier to raise capital in the future as a larger company. Even if the new company will initially be in a good financial position anyway. Like the management, we also believe that the merger could accelerate further growth, including through strategic mergers and/or (project) acquisitions, as mentioned in today’s press release! We are very excited about the new Silver47 and will of course stay on the ball for you!