Engineering & Mining Journal

DEC 2018

Engineering and Mining Journal - Whether the market is copper, gold, nickel, iron ore, lead/zinc, PGM, diamonds or other commodities, E&MJ takes the lead in projecting trends, following development and reporting on the most efficient operating pr

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NEWS-LEADING DEVELOPMENTS 6 E&MJ • DECEMBER 2018 www.e-mj.com Pan American Silver, Tahoe Resources Create Diversified Silver Miner Pan American Silver Corp. announced it has entered into a definitive agreement to acquire all of the outstanding shares of Tahoe Resources, creating a new mid- tier precious metals mining company, the two companies said. Shareholders of Tahoe will be entitled to elect to receive common shares of Pan American and/ or cash in exchange for their shares of Tahoe. Additional consideration will be in the form of the right to a contingent payment in common shares of Pan Amer- ican tied to the restart of the Escobal mine in Guatemala. Tahoe Resources owns and operates the Escobal silver mine in Guatemala, the La Arena and Shahuindo gold mines in Peru, and the Timmins West and Bell Creek gold mines in Canada. The company will have a robust growth profile with the restart of the Escobal silver mine following completion of the consultation process and community en- gagement, Pan American said. Escobal produced 21 million ounces (oz) of sil- ver during its last four quarters of undis- turbed production. Pursuant to the arrangement, Tahoe shareholders may elect to receive US$3.40 in cash or 0.2403 Pan Amer- ican shares for each Tahoe share, subject in each case to pro-ration based on a maximum cash consideration of US$275 million and a maximum number of Pan American shares issued of 56 million, totaling US$1.067 billion. In addition, Tahoe shareholders will receive contin- gent consideration in the form of contin- gent value rights, that will be exchanged for 0.0497 Pan American shares for each Tahoe share, currently valued at US$221 million, and payable upon first commer- cial shipment of concentrate following restart of operations at the Escobal mine. At closing, existing Pan American and Tahoe shareholders will own approx- imately 73% and 27% of Pan American, respectively. Upon satisfaction of the payment conditions, Pan American and Tahoe shareholders will own approximate- ly 68% and 32%, respectively, of the combined company. Michael Steinmann, president and CEO of Pan American Silver, said, "The combination of Pan American and Tahoe will establish the world's premier silver mining company with an industry-leading portfolio of assets, superior growth oppor- tunities and attractive operating margins. This transaction doubles our silver reserves and further improves our cost profile. We will build on that strong foundation, opti- mizing these high-quality assets to deliver profitable growth and superior returns." Kevin McArthur, executive chair of Tahoe Resources, said, "This transaction allows our shareholders to participate in the creation of the world's premier sil- ver company with the contribution of the world-class Escobal mine to Pan Ameri- can's existing asset base." He added, "Pan American's excellent track record of developing mines and fostering strong, mutually beneficial rela- tionships with local stakeholders gives us confidence that the combined company will be best positioned to maximize value for shareholders." The Pan American-Tahoe combination will create a more geographically diverse portfolio. The transaction is expected to maintain silver exposure while doubling the silver reserves.

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