Ottawa approves Pan American’s Peru mine sale to Zijin subsidiary
Pan American Silver Corp. [PAAS-TSX, NASDAQ] has received Government of Canada approval for the sale of its 100% interest in La Arena SA, which owns the La Arena gold mine as well as the La Arena 11 project in Peru to Jinteng (Singapore) Mining Pte. Ltd., a subsidiary of China’s Zijin Mining Group Co. Ltd.
Pan American is selling the asset for US$245 million cash up front and a US$50 million contingent payment. It has received approval for the sale from the government of Canada under the Investment Canada Act, which was necessary because La Arena carries a large copper component. Copper is considered a strategic metal in Canada.
The approval is subject to a joint undertaking from Pan American and Zijin to enter into an offtake agreement in respect of the La Arena 11 project, which will enable Pan American to secure 60% of the future copper concentrate supply from the La Arena 11 project on commercial terms for sale in North American markets, following the commencement of commercial production.
The transaction now has all of the necessary regulatory approvals and is expected to close by the end of the fourth quarter of 2024.
Pan American shares eased 4.1% or $1.29 to $29.86. The shares trade in a 52-week range of $36 and $16.50.
Under the agreement, Pan American said it has agreed to sell its 100% interest in La Arena SA, which owns the La Arena gold mine as well as the La Arena 11 project for US$245 million cash up front and a US$50 million contingent payment.
Under the agreement, Zijin will grant Pan American a life-of-mine gold net smelter return royalty of 1.5% for the La Arena 11 project. Upon commencement of commercial production from the Arena 11 project, the agreement provides for an additional contingent payment from Zijin of US$50 million in cash. The deal is expected to close in the third quarter of 2024.
Pan American has been selling non-core assets in keeping with its stated aim of optimizing its portfolio following the recent acquisition of Yamana Gold Inc. [YRI-TSX, AUY-NYSE] in a US$4.8 billion deal.
The company recently 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.
That transaction allowed 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.
Glencore International AG, paid US$475 million in cash for the Mara project 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.