Pan American Agrees To Acquire Tahoe Resources For $1.07 Billion
(Kitco News) -Pan American SilverCorp. (Nasdaq, TSX: PAAS), the world’s second-largest primary silver producer,will acquire Tahoe Resources Inc. (NYSE: TAHO;TSX: THO) in a $1.07 billionstock-cash deal announced by the two companies Wednesday.
Officials said themerger will create the world’s largest publicly traded silver-mining companyand will have the world’s largest silver reserve base and silver measured andindicated resource base.
Under the deal,Tahoe shareholders can elect to receive $3.40 in cash or 0.2403 Pan Americanshares for each Tahoe share, subject to a pro-ration based on a maximum cashtotal of $275 million and a maximum number of Pan American shares issued of 56 million,the companies said. The $1.07 billion purchase price represents a premium of34.9% to Tahoe’s volume-weighted average price for the 20-day period ending onTuesday.
In addition, thecompanies announced a contingency in which Tahoe shareholders would alsoreceive 0.0497 Pan American shares for each Tahoe share, which would be valuedat a total of $221 million, after the first commercial shipment of concentratefollowing a restart of operations at Tahoe’s giant Escobal silver mine inGuatemala. With this contingency, Tahoe shareholders would be receiving $4.10per share, which would be a 62.8% premium to the 20-day volume-weighted averageprice as of Tuesday, the companies said.
Guatemala’s SupremeCourt shut down the mine last year over a dispute on whether the Ministry ofEnergy and Mines properly consulted surrounding indigenous communities on theproject. The Constitutional Court has provided a resolution for a process thatcan lead to a restart of the mine, although there is no timeline.
Tahoe reported nosilver production in the third quarter due to the shutdown of the mine, whileconsolidated gold output elsewhere was 91,000 ounces. The Escobal mine produced21 million ounces of silver at all-in sustaining costs of $8.63 during its lastfour quarters of undisturbed production, Tahoe said.
During the thirdquarter, Pan American listed silver production of 6.3 million ounces and goldoutput of 42,100 ounces. Zinc, lead and copper production were 16,700 tonnes,5,700 tonnes, and 2,600 tonnes, respectively. The company projects 2018 silveroutput of 25 million to 26.5 million ounces, with gold output of 175,000 to185,000 ounces.
“The combination ofPan American and Tahoe will establish the world’s premier silver-mining companywith an industry-leading portfolio of assets, superior growth opportunities andattractive operating margins,” said Michael Steinmann, president and chiefexecutive officer of Pan American Silver. “This transaction doubles our silverreserves and further improves our cost profile.”
Pan American saidit has sufficient cash on hand to finance the cash portion of the transaction.The boards of directors for both companies have unanimously approved themerger, which will be subject to a number of conditions, including shareholderapproval. Both companies are aiming to have shareholder meetings to considerthe deal in January. If approved, the transaction is expected to close in thefirst quarter.
Pan American andTahoe shareholders would own 73% and 27% of Pan American. With the contingencyafter reopening of the Escobal mine, the ownership percentages would be 68% and32%, respectively.
"Thistransaction allows our shareholders to participate in the creation of theworld's premier silver company with the contribution of the world-class Escobalmine to Pan American's existing asset base,” said Kevin McArthur, executivechair of Tahoe Resources.
By Allen SykoraFor Kitco News
Follow @AllenSykora
asykora@kitco.com Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication. |