Northair and Kootenay Combining to Create Mexican Silver Consolidator

Northair Silver Corp (TSXV.INM) has a NI43-101 compliant silver resource at its La Cigarra project in Chihuaua State, Mexico; only 20 kilometers from two large producing mines which have been mining silver for hundreds of years. The organization also has 2 million dollars in its treasury and it is President & CEO, Andrea Zaradic is confident that La Cigarra will “be a mine one day”.

So how come a combination with Kootenay Silver Inc. (TSXV.KTN)  another Mexican silver explorer with two promising silver assets in Sonora State, seem sensible at this time in the market cycle?

Zaradic, a mechanical engineer by training, took over as CEO of Northair in 2014 but she has had her eye around the company for much longer. “In 2012, as i was the CEO of a company called Troon Ventures Ltd., which was a cashed up shell, looking to acquire mining assets, I traveled to the Parral Mining District in Mexico to go to Northair’s La Cigarra silver project.  It quickly became apparent that this was a good thing with substantial merits and really separated itself.”

Shortly thereafter, Zaradic led Troon Ventures right into a successful merger with Grenville Strategic Royalty Corp (TSXV: GRC) where she currently serves as an independent director.  Now free of her Troon CEO duties, she was able to transition into Northair once the very long time CEO decided to retire in 2014. “I was very looking forward to the opportunity at Northair and the potential to make further discoveries at La Cigarra.  Soon after registering with work with the organization, a window opened out to complete a financing and that we managed raise $4 million dollars. These new funds allowed Northair to update the mineral resource estimate in January 2015 increasing the tons and grade of the deposit, develop a metallurgical program which we reported in June 2015 in addition to conducting an airborne geophysics program, which identified several new exploration targets around the property.  In addition to having a great project, Northair is based on the neighborhood community which is considered a mining friendly jurisdiction and home to people who’ve been mining all their lives.”

But there was a problem. Silver prices had been steadily declining with them the Northair share price. “We were a little distraught due to the silver price. We had to take serious steps due to the market. We cut our overhead, our staff, our G&A. That has left us two million dollars in our treasury.”

Zaradic is really a deal maker. She set the wheels moving for the reverse takeover of Troon, and she was instrumental in the merger of Magma Energy & Plutonic Power (now Alterra Power). She is also something of a student of economic history.

“Silver consolidation works.” she said. “Silver Standard, First Majestic and Pan American are caused by silver consolidation once the cost of silver was depressed in the early 2000’s. Pan American went from $2.50 a be part of 2000 to $41.00 per share in 2008, First Majestic went from $.05 to $23 and Silver Standard went from $1.25 to 37 dollars all for the reason that same period.”

With metal prices low, Zaradic believes that what went down from 2000 to 2008 could happen again in gold and silver. “We see First Mining Finance (TSXV: FF) within the gold sector buying gold assets, climbing to a market cap of +$100 million in an exceedingly short time. The marketplace likes consolidation. Since we announced our deal with Kootenay on January 13 our share price has doubled.”

For the consolidation strategy to work Zaradic believes companies have to grow once the metal prices are depressed so they are large enough to leverage what she sees being an inevitable rebound within the silver price. When silver prices dragged along in 2015, Zaradic, like a strategic exercise started to take a look at other silver companies just as those companies were looking at Northair to find a fit.

Kootenay Silver was certainly a fit on an asset basis and geographically having its flagship silver property in Mexico too. At that time the transaction was announced Zaradic stated, “La Negra and La Cigarra represent two of the highest profile new silver discoveries amongst non-majors in Mexico. The continued exploration successes at our flagship projects put the combined company inside a strong position, distinguishing us from our peers.”

Zaradic says “The combined company come in a powerful financial position to complete its consolidation plan while simultaneously advancing its flagship assets.  A situation that will be bolstered by a $2,000,000 investment into Kootenay by Pan American included in a choice agreement on Kootenay’s Promontorio Mineral Belt silver properties. An agreement which brings not only the investment but also as much as $16 million US of expenditures and payments to Kootenay plus a pathway to production in the form of a 25% carried to production interest.”

The option agreement between Kootenay and Pan American was announced February 16, with closing anticipated early March 2016 and also the direct investment by Pan American may increase to nearly $3.3 million post-Northair acquisition closing. “Pan American is one of the largest silver producers in Mexico.” said Zaradic “It has tremendous operating experience in Mexico and Kootenay’s Le Negra deposit is extremely attractive given its closeness to one of Pan American’s operations which is starting to run out of material.”

Upon closing of the transaction with Kootenay, Northair shareholders will get, for each common share of Northair held, 0.35 common shares of Kootenay, plus 0.15 of the tradable warrant to buy Kootenay common shares at an exercise cost of $0.55 for five years from closing. Upon completing the Transaction, Northair will end up a wholly-owned subsidiary of Kootenay, and former shareholders of Northair will hold approximately 40% from the shares of Kootenay with an outstanding shares basis.  If Zaradic is right about silver consolidation and if the history of the 2000 to 2008 run were to repeat itself, the company shares have significant homer potential.

Once the transaction forwards and backwards companies is finished, plans call for further consolidation along with drilling and exploration at La Cigarra underneath the Kootenay management team and growth of the Promontorio Mineral Belt silver resources underneath the option agreement with Pan American.

Zaradic herself will keep her involvement like a director of Kootenay. “This is the initial step within our growth means of silver consolidation.” said Zaradic, “We likely have turned the corner around the silver price. In a year or two or maybe three the price of silver should rise.”

When it does, Northair shareholders will be in position to take full benefit of the potentially explosive growth in a well leveraged Mexican silver consolidator.

At duration of writing Northair was trading at $.09 with 150.A million shares outstanding and a market cap of $13.51 million. Kootenay was trading at $.26 with 79.4 million shares outstanding and a market cap of $20.25 million.

[Both Northair and Kootenay is going to be attending the PDAC Conference in Toronto March 6-9. Andrea Zaradic is going to be presenting at the National Post Investor Forum Monday March 7.]