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Pan American Silver to acquire Tahoe Resources

$1B deal will create ‘world’s premier silver mining company’
Tahoe Resources owns and operates the Timmins West gold complex, which includes the Timmins West and Bell Creek gold mines, as well as the Bell Creek Mill, all located in the Porcupine Mining Division, located 20 kilometres northeast of Timmins. (Tahoe photo)

Pan American Silver Corp. will purchase Tahoe Resources in a $1.1-billion deal, the companies announced Nov. 14.

The merger, according to a news release, would create the world’s largest silver reserve base and silver measured and indicated resource base, as well as the largest publicly traded silver mining company by free float.

In the release, Tahoe said Pan American would acquire all outstanding Tahoe shares as part of the agreement. Tahoe shareholders would be entitled to receive common shares of Pan American and/or cash in exchange for their shares of Tahoe, or they can receive payment in common shares of Pan America, which is tied to the restart of the Tahoe-owned Escobal mine in Guatemala.

"This transaction allows our shareholders to participate in the creation of the world's premier silver company with the contribution of the world-class Escobal mine to Pan American's existing asset base," said Kevin McArthur, executive chair of Tahoe Resources, in a news release.

“In addition to the upfront premium, we will continue to participate in the upside inherent in a restart of Escobal through the CVRs. 

“Pan American’s excellent track record of developing mines and fostering strong, mutually beneficial relationships with local stakeholders gives us confidence that the combined company will be best positioned to maximize value for shareholders."

Escobal, an underground silver mine, went into operation in 2013.

The operation has proven and probable reserves of 264 million ounces of silver, and another 375 million ounces of silver in the measured and indicated categories.

The facility’s mill, which went into production in 2014, has a processing capacity of 4,500 tonnes per day.

Operations at Escobal have been temporarily suspended since June 2017, pending the outcome of a legal ruling on the operation’s mining licence.

In Canada, Tahoe Resources operates the underground Timmins West and Bell Creek gold mines, along with the Bell Creek Mill, located in the Porcupine Mining Division, about 20 kilometres northeast of Timmins.

The Bell Creek Mill, which processes ore from both operations, has a capacity of 4,000 tonnes per day. Its estimated production for 2018 is 160,000 to 175,000 gold ounces.

Tahoe, which is headquartered in Nevada, acquired the Bell Creek Mine in April 2016 as part of its acquisition of Lake Shore Gold Corp. Bell Creek has been in operation since 2012. The complex is estimated to be in operation until 2024.

Headquartered in Vancouver, Pan American Silver Corp. owns and operates silver mines in Mexico, Peru, Bolivia and Argentina.

“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 opportunities and attractive operating margins,” said Michael Steinmann, Pan American’s president-CEO, in the news release. 

“This transaction doubles our silver reserves and further improves our cost profile. We will build on that strong foundation, optimizing these high-quality assets to deliver profitable growth and superior returns."

Tahoe and Pan American are expected to hold special shareholder meetings to consider the transaction in January 2019, and the deal is subject to regulatory approvals.

The acquisition is expected to close in the first quarter of 2019.