The announcement on Monday of a business combination of silver miner Americas Silver and emerging gold producer Pershing Gold is providing a “clear path” to the development of the Relief Canyon openpit gold mine, in Nevada.

The increased financial and operating capabilities of the combined business would benefit the shovel-ready project, Pershing Gold president and CEO Steve Alfers said in a statement, announcing the transaction with the TSX- and Nasdaq-listed company.

The Relief Canyon openpit project is expected to produce about 91 000 oz/y of gold and the feasibility study has highlighted a pretax net present value, using a 5% discount of $118-million and a pretax internal rate of return of 71%.

Americas Silver president and CEO Darren Blasutti said that the Relief Canyon project represented the “next leg of growth” for the company, which has recently completed the commissioning of the San Rafael project, in Mexico.

Americas Silver operates two producing mines in Mexico and Idaho, which are expected to produce about seven-million silver-equivalent ounces. The new Nevada project, combined with the Zone 120 silver/copper/gold deposit adjacent to the San Rafael mine, provide the company with near-term precious metals production and cash flow growth in 2020.

Americas Silver said that the cash flow from San Rafael could help fund the development of Relief Canyon, which according to the May 2018 feasibility study will require $28.2-million to build.

The transaction has gained unanimous board approval and significant Pershing shareholder support, with Barry Honig having entered into an unconditional lock-up agreement, representing support for the transaction of about 31% of the outstanding common shares and 87% of the outstanding preferred shares of Pershing.

Under the terms of the agreement, holders of Pershing common shares will receive 0.715 common shares of Americas Silver for each common share of Pershing by way of a share. Based on the closing price of Americas Silver on the NYSE American on September 28, the transaction implies a value of $1.69 a share. Pershing common share, representing a 39% premium to Pershing's closing price on the Nasdaq and a 39% premium based on the volume-weighted average prices of Americas Silver and Pershing for the ten-day period ended on September 28. 

Existing shareholders of Americas Silver and Pershing will own about 64% and 36%, respectively, on an undiluted basis, of the combined company.

The combined company will be managed by the executive team of Americas Silver, led by Blasutti as president and CEO.

Alex Davidson will be the chairperson of the combined company, which will comprise nine members, including one designated by Pershing.

Meanwhile, Americas Silver said that it had secured a C$5.5-million short-term convertible loan from Pierre Lassonde and Trinity Capital Partners to fund a $4-million short-term secured first lien convertible loan that it would use to address Pershing's near-term working capital requirements, including permit advancements, ongoing property maintenance and corporate requirements. 

The transaction is expected to close in the first quarter of 2019.