Pan American-Agnico to activate Yamana takeover

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Pan American Silver Corp. [PAAS-TSX, NASDAQ] and Agnico-Eagle Mines Ltd. (AEM-TSX, AEM-NYSE) are set to acquire Yamana Gold Inc. [YRI-TSX, AUY-NYSE] in a US$4.8 billion deal, ensuring that Canada’s largest gold mine  – The Canadian Malartic – remains under Canadian ownership.

The move follows the termination of a rival deal that would have seen Yamana being acquired by Gold Fields of South Africa in a deal that was worth US$6.7 billion when it was announced on May 31, 2022.

Yamana said it will now pay a US$300 million termination fee to Gold Fields.

News that that the Agnico-Pan American arrangement agreement has been activated came after the close of trading on November 8, 2022, when Yamana shares closed at $6.75. The shares are currently trading in 52-week range of range of $4.78 and $8.05.

Yamana is 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 is a 50% interest in the Canadian Malartic mine, which ranks as Canada’s largest gold mine and Yamana’s biggest producer. The mine is currently held jointly by Agnico-Eagle and Yamana.

Under the arrangement deal, Pan American will acquire all the issued and outstanding shares of Yamana, which would then sell certain subsidiaries and partnerships holding Yamana’s interests in its Canadian assets to Agnico. That would include a 50% interest in the Canadian Malartic mine, which is expected to produce 320,000 ounces of gold this year.

Assuming it proceeds, the Pan American-Agnico arrangement would establish Pan American as a major precious metals producer in Latin America, with approximately 28.5 to 30 million ounces of annual silver production and approximately 1.1 to 1.2 million ounces of annual gold production, based on Pan American’s and Yamana’s 2022 guidance.

The combined portfolio would consist of 12 operations concentrated in Latin America. The deal would also give Agnico-Eagle operational control of the Canadian Malartic mine during the remaining development of the Odyssey project at Canadian Malartic and future projects nearby.

Canadian Malartic, Yamana’s prized asset, is located in the Abitibi region of Quebec, near the town of Val d’Or.

Canadian Malartic is currently an open-pit mine, but the operation is advancing a large underground project known as the Odyssey project that will transition Canadian Malartic into an underground operation by approximately 2028 with a mine life that runs until at least 2039.

The Odyssey project hosts three main underground mineralized zones, East Gouldie, East Malartic and Odyssey. As of December 31, 2021, the Odyssey Project is estimated to contain 2.35 million ounces of gold in indicated resources and 13.15 million ounces of inferred resources.

From 2029 to 2039, the underground operation is expected to be in full production, producing an expected 500,000 to 600,000 ounces of gold annually (on a 100% basis).

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