Americas Silver Corporation Acquires Option on San Felipe Property in Sonora, Mexico

TORONTO--(BUSINESS WIRE)-- Americas Silver Corporation (TSX: USA) (NYSE MKT: USAS) (“Americas Silver” or the “Company”) is pleased to announce that it has entered into an agreement with Impulsora Minera Santacruz S.A. de C.V. (“Impulsora”), a wholly-owned subsidiary of Santacruz Silver Mining Ltd. (“Santacruz”), (the “Option Acquisition Agreement”) to acquire an option agreement (the “San Felipe Option Agreement”) between Impulsora and Minera Hochschild Mexico S.A. de C.V. (“Hochschild”). By acquiring the San Felipe Option Agreement, the Company will have the right to acquire a 100% interest in the San Felipe property located in Sonora, Mexico (the “Property”) for total consideration of $15 million in cash, payable in two staged payments. All amounts are in U.S. dollars unless otherwise indicated.

Highlights of the Acquisition

• Adds an additional high quality silver-zinc development project in a safe, mining-friendly jurisdiction
• Potential for low capital, highly profitable silver and zinc production without shareholder dilution
• Further increases silver and zinc leverage per share
• Attractive acquisition value of 31 cents per silver equivalent ounce (99 cents/indicated resource ounce and 46 cents/inferred resource ounce)¹ is highly accretive to overall asset portfolio based on the most recently published NI 43-101 technical report (described below)
• Free cash flow from San Rafael supports San Felipe advancement

Darren Blasutti, President and Chief Executive Officer of Americas Silver, stated, “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.”

Overview of the San Felipe Project

The San Felipe silver-zinc-lead project is located 130 km northeast of Hermosillo City, Sonora State in Mexico. A preliminary economic assessment (the “PEA”) was completed on the Property in 2014 and amended in June 2016, which envisioned an open pit and underground operation producing low cost silver, zinc and lead production. The PEA offered attractive returns despite being modelled at significantly lower zinc and lead prices than current spot.

Following the successful approach used by Americas Silver when it acquired San Rafael, the Company will be conducting a detailed evaluation program over the remainder of the year to re-assess the San Felipe property and advance the project towards a pre-feasibility study. The Company’s near-term evaluation program will be primarily focused on: (i) reviewing and improving the resource modelling; (ii) conducting geotechnical drilling and studies; and (iii) advancing the permitting process.

A summary of the current mineral resources for the Property (as disclosed in the NI 43-101 Technical Report entitled "2014 Resource Estimate and Preliminary Economic Assessment, San Felipe Project, Sonora, Mexico” authored by Hans Smit, Fletcher M. Bourke, Gary Giroux, Greg Blaylock, Deepak Malhotra, and Mark E. Smith filed by Santacruz on its SEDAR profile) is presented below:

Terms of the Acquisition

As outlined in the San Felipe Option Agreement, as amended on February 28, 2017, Impulsora was entitled to acquire 100% of the Property upon making the following cash payments, including applicable value added taxes (“VAT”):

(i) $2,000,000 on or before March 3, 2017 (the “Initial Payment”)
(ii) $8,000,000 on or before December 15, 2017 (the “Final Payment”)

Pursuant to the Option Acquisition Agreement, 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 exchange for total cash payments of $7,000,000, plus applicable VAT, as follows:

(i) $2,000,000, plus applicable VAT, to Hochschild, satisfying the Initial Payment,
(ii) $4,250,025 to JMET, LLC, a lender to Santacruz, and
(iii) $749,975, plus applicable VAT, to Santacruz.

Upon completion of the Final Payment to Hochschild of $8,000,000 plus applicable VAT on December 15, 2017, 100% of the Property will have been acquired by the Company, free of any underlying net smelter return royalties.

Americas Silver has funded the initial $7,000,000 cash payment with cash on hand. As at December 31, 2016, the Company had a cash balance of US$24.1 million and on January 30, 2017, the Company further strengthened its balance sheet by entering into a US$15 million concentrate pre-payment facility with Glencore PLC. With the operating cash flows expected to be generated at current spot prices, the Company anticipates having sufficient capital to complete construction at San Rafael and continue its growth strategy without dilution to shareholders. The Company will update the market on the progress of the San Rafael project at the end of the first quarter.

Medalist Capital Ltd. is acting as financial advisor to Americas Silver.

About Americas Silver Corporation

Americas Silver is a silver mining company focused on growth in precious metals from its existing asset base and execution of targeted accretive acquisitions. It owns and operates the Cosalá Operations in Sinaloa, Mexico and the Galena Complex in Idaho, USA.

Daren Dell, Chief Operating Officer and a Qualified Person under Canadian Securities Administrators guidelines, has approved the applicable contents of this news release. For further information please see SEDAR or americassilvercorp.com.