Vizsla Silver (TSX, NYSE: VZLA) said it agreed to buy the Santa Fe project in western Mexico, south of its Panuco silver-gold property, from a local investor. Shares jumped.Vancouver-based Vizsla will have the option to acquire a 100% interest in certain production concessions that comprise Santa Fe by spending $4 million on exploration over five years, paying $1.5 million in cash and issuing the seller about 1.37 million shares, according to a statement issued Thursday. A 350 tonne-per-day mill that produces silver and gold is also included in the transaction.Based on Wednesday’s New York Stock Exchange closing price of $2.25, the deal for the production concessions is worth about $8.6 million.While the transaction is “not material in terms of consideration,” it “has potential for measurable resource accretion and supplemental production over medium- to longer-term timeframes,” National Bank Financial mining analyst Don DeMarco said in a note Thursday. Permitting for Panuco remains the focus, he added.Raising profileSanta Fe’s production concessions “will provide an opportunity to increase Vizsla’s annual production profile beyond Panuco’s recent preliminary economic assessment if the option is exercised,” BMO Capital Markets mining analyst Kevin O’Halloran said in a note.Vizsla jumped 5.8% to C$3.31 in late morning trading Thursday in Toronto. That gave the company a market capitalization of about C$973 million.The announcement comes as Vizsla conducts a 10,000-metre drill program – started late last year – to test several veins in five priority targets across the Panuco district. Panuco, the company’s flagship project, is located in southern Sinaloa, near the city of Mazatlán.H2 feasibility studyVizsla is working to deliver a feasibility study for Panuco in the second half of the year. It’s targeting first production in late 2027.“With an option agreement now in place on the Santa Fe production concessions, Vizsla Silver has the potential to bolster its overall production profile well beyond the 20.2 million oz. of silver equivalent of initial annual production envisioned for Panuco Project No. 1,” CEO Michael Konnert said in the statement.Santa Fe’s land package, which covers 122.3 sq. km, includes both production and exploration concessions. It’s located 22 km southeast of Panuco and adjacent to the south of Vizsla’s San Enrique property.Exploration concessionsVizsla also agreed to buy exploration concessions at Santa Fe for $1.43 million in cash and about 2.75 million shares. The seller, Mexican investor Eduardo de la Peña Gaitán, will receive the El Coco processing plant as part of the deal. Vizsla will also pay 50% of mining duties due, representing about $395,000.Only 12% of the land package at Santa Fe has been tested so far, “highlighting Vizsla’s substantial exploration upside as the company continues to accumulate prospective land in the region,” O’Halloran said.Canada’s Starcore International Mines had originally signed a letter of intent in November 2017 to buy Santa Fe but scrapped the deal seven months later after doing due diligence. It didn’t elaborate on the reasons for its decision.
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