Pan American releases US$593 million asset sale update

Pan American Silver Corp. [PAAS-TSX, NASDAQ] has released an update on previously announced non-core asset sales that were expected to yield cash proceeds of US$593 million.

The company said it has completed the previously announced divestment of its 56.2% stake in the Mara project in Argentina and its 92.3% interest in the Morococha mine in Peru.

Pan American said the sale of these non-core assets is aligned with its stated aim of optimizing its portfolio following the recent acquisition of Yamana Gold Inc. in a US$4.8 billion deal.

The transaction will allow Pan American to reduce its annual project development, reclamation and care and maintenance costs, which for the Mara project and Morococha mine amounted to US$15.7 million in the second quarter of 2023.

Under the terms of the agreement for the Mara sale, Glencore International AG, paid US$475 million in cash and granted to Pan American a life-of-mine copper net smelter return royalty of 0.75%. Pan American has the right to freely transfer the royalty. Glencore has assumed 100% ownership of the Mara project following completion of the transaction on September 20, 2023.

Under the terms of the agreement for the Morococha sale, Alpayana S.A. paid US$25 million in cash for the 92.3% interest in Compania Minera Argentum S.A., a Pan American subsidiary that owned the Morococha mine. Pan American placed the Morococha mine on care and maintenance in early 2022 following the closure of the Amistad processing plant.

Meanwhile, the sale of Pan American’s 57.74% interest in the Agua de la Falda S.A. project in Chile, that is held by a subsidiary of Pan American is expected to be completed in the fourth quarter of 2023. Under the terms of the agreement, a subsidiary of Rio Tinto [RIO-NYSE] will pay US$45.5 million in cash upon closing and will grant to Pan American’s subsidiary a net smelter return royalty of 1.25% on all precious metals and a net smelter return royalty of 0.2% on all base metals, on a pro rata basis in accordance with the interest acquired by the Rio Tinto subsidiary, on production from certain mineral concessions.

Pan American shares were virtually unchanged on the news, gaining 0.05% or $0.01 to $20.53. The shares trade in a 52-week range of $26.54 and $18.14.

Pan American was recently in the news when it and Agnico Eagle Mines Ltd. (AEM-TSX, AEM-NYSE) acquired Yamana Gold, a move that ensured that Canada’s largest gold mine  – The Canadian Malartic – remained under Canadian ownership.

Yamana was a Canadian precious metals producer with significant gold and silver production, development stage properties and exploration properties in the Americas, including Brazil, Argentina, Chile, Mexico and Canada.

Its key asset was a 50% interest in the Canadian Malartic mine, a Quebec operation which ranked as Canada’s largest gold mine and Yamana’s biggest producer. The mine was held jointly by Agnico-Eagle and Yamana.