Pan American Silver, the mining company headquartered in Canada is reportedly acquiring precious metal mining firm Tahoe Resources, based in Reno, Nevada, in a $1.07 billion cash and stock deal. The transaction will create on the world’s biggest silver producers as Pan American is presently the second-largest primary silver miner in the world.
Citing reliable sources, Pan American will be able to almost double its silver reserves after the acquisition, as Tahoe Resources owns the key but troubled Escobal silver mine in Guatemala, besides gold mines in Canada and Peru. Escobal, the world’s third largest silver mine, started producing commercially in 2014, with a record 21.2 million ounces of silver concentrate produced in 2016.
Escobal, records indicate, is an underground operations and has been closed since July 2017 after appeals from CALAS, the environment and human rights agency, led to Guatemala’s Supreme Court giving provisional orders to shut it down.
Pan American claims that through this deal, its investors would own nearly three-fourths of the merged entity, whereas shareholders of Tahoe will be holding the remaining share. The might also elect to receive 0.2403 Pan American share or $3.40 in cash for every Tahoe share they hold.
The $3.40 per share base purchase price denotes a premium of approx. 55% on Tahoe’s last close. The price is limited to $275 million in maximum cash consideration as well as maximum 56 million Pan American shares to be issued. The deal also includes contingent value rights for Tahoe shareholders to be paid when the mine starts operating again, sources confirmed.
The total consideration of the deal would be $4.10 per share, accounting for base purchase price and the conditional payment. Recently, silver prices fell below $14 an ounce which is its lowest level since 2009. Apparently. the board of directors of both the mining companies have given approval for the merger and the transaction is anticipated to close in the first quarter of 2019.