Pan American Silver Corp. announced it has entered into a definitive agreement to acquire all of the outstanding shares of Tahoe Resources, creating the world’s premier silver 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 American 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 engagement, Pan American said. Escobal produced 21 million ounces (oz) of Ag during its last four quarters of undisturbed production.
Pursuant to the arrangement, Tahoe shareholders may elect to receive US$3.40 in cash or 0.2403 Pan American 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.o67. In addition, Tahoe shareholders will receive contingent consideration in the form of contingent 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 commercial shipment of concentrate following restart of operations at the Escobal mine.
At closing, existing Pan American and Tahoe shareholders will own approximately 73% and 27% of Pan American, respectively. Upon satisfaction of the payment conditions, Pan American and Tahoe shareholders will own approximately 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 opportunities and attractive operating margins. 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.”
Kevin McArthur, executive chair of Tahoe Resources, said, “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.”
He added, “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.”
Both boards of directors for Pan American and Tahoe have unanimously approved the transaction.
It is anticipated that the special shareholder meetings of Tahoe and Pan American shareholders to consider the transaction will be held in January. The transaction is expected to close in the first quarter of 2019.
