Pan American to buy Tahoe in all-share US$1-billion dealPan American Silver shares down 11 per cent on news of acquisition of Tahoe
Pan American Silver shares down 11 per cent on news of acquisition of Tahoe
By Kelsey Rolfe
November 14, 2018
Tahoe shareholders will receive "contingent value rights" of 0.0497 Pan American shares for each Tahoe share they own after the first commercial shipment of concentrate after Escobal restarts. Courtesy of Tahoe Resources
Pan American Silver is acquiring all of Tahoe Resources’ outstanding shares in a deal worth US$1.067 billion, the companies announced Wednesday.
Pan American said the deal will create the largest publicly traded silver mining company by free float capitalization.
“The new Pan American Silver will hold some of the most attractive silver assets in the world, boasting the largest silver reserves and indicated resources based globally,” Pan American president and CEO Michael Steinmann said in a statement.
Pan American’s TSX share price dropped more than $2 this morning on the news to $16.63 from $18.71 at closing yesterday.
Tahoe shareholders will be able to receive US$3.40 per Tahoe share in cash, or 0.2403 Pan American shares for each Tahoe share they own.
On top of the base purchase price, shareholders will also receive “contingent value rights” of 0.0497 Pan American shares for each Tahoe share they own after the first commercial shipment of concentrate after Tahoe’s flagship Escobal silver mine in Guatemala restarts. The value rights have a 10-year term. In addition to Escobal, Pan American, which operates six mines in Latin America, will also acquires a pair of gold mines in Peru, and the Bell Creek and Timmins West gold operations in Ontario, as well as exploration projects in the two countries.
Steinmann said the structuring of the deal allows the two companies to share the risk for Escobal, “which is appropriate…for the high quality of Escobal.”
With both the base purchase and the value rights, the deal represents a 62.8 per cent premium on Tahoe’s volume weighted average price for the 20-day period that ended on Nov. 13.
Operations at Tahoe’s Escobal have been halted since July 2017 when the Supreme Court of Guatemala suspended the company’s mining license pending the resolution of a lawsuit filed against Guatemala’s Ministry of Energy and Mines. The lawsuit, brought by anti-mining organization CALAS, alleged the ministry violated the Xinca Indigenous people’s right to consultation when it granted the mining license to Tahoe’s Guatemalan subsidiary, Minera San Rafael.
In early September, the Guatemalan Constitutional Court upheld the suspension until the ministry had completed consultations with the Xinca residents near the mine, in compliance with the International Labour Organization’s Convention 169 concerning Indigenous and Tribal Peoples in Independent Countries.
Tahoe CEO Jim Voorhees said in mid-September the decision gives the company “a path forward to an Escobal restart.”
Tahoe chairman Kevin McArthur said on the Wednesday conference call that the deal will “allow the new Pan American Silver to pursue new growth opportunities while we continue to make progress on the consultation with the Xinca group in Guatemala.”
The new company will also pursue the expansion of Pan American’s La Colorada mine in Mexico, the company’s largest silver mine. Pan American reported in late October “wide zones of mineralization below the current production levels” and budgeted an additional US$2.5 million in exploration drilling for the rest of the year. It also has planned a major drilling program in 2019.
Pan American is also looking at developing its Navidad project in Argentina’s north-central Chubut province. Navidad is, according to Pan American, one of the largest undeveloped silver deposits in the world.