Impact: Mildly Positive
CMC Metals has entered into a share purchase option agreement with Sailfish Royalty Corp. (TSXV:FISH, Not Rated) to acquire all of the issued and outstanding shares of Swordfish Silver Corp., which holds the mineral rights for the Gavilanes Ag property in Durango, Mexico. In our view, this acquisition provides CMC with an opportunity to conduct year-round drilling, which complements its Yukon and Northern BC projects. We are pleased to see that Gavilanes is permitted for drilling and that prior operators had surface access agreements with the local Ejido – key aspects of successfully operating in Mexico. However, we are of the opinion that CMC needs to clearly lay out its strategy for advancing its numerous projects considering the lack of success with the drill bit in the Yukon/northern BC and the slow pace of exploration work over the past several years. We believe this acquisition provides an opportunity for CMC to pivot and could potentially help counteract the sharp sell-off of the stock following its recent update and exploration outlook press release on December 15th.
