Pan American reaps benefits of Yamana acquisition

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Pan American Silver Corp. [PAAS-TSX, NASDAQ] said its second quarter 2023 results show significant enhancement in the scale and quality of its portfolio following the recent acquisition of Yamana Gold Inc. in a US$4.8 billion deal.

The company said production rose 55% for silver and 102% for gold compared to the previous quarter, while the addition of three now low-cost producers provided tangible benefits to the company’s cost structure.

“Based on year-to-date production and costs, we are maintaining our guidance for 2023,’’ said Pan American President and CEO Michael Steinmann.

The company reported second quarter adjusted earnings per share of $0.04, which was below consensus estimates of $0.07 on silver production of 6.02 million ounces and 248,200 ounces of gold respectively. Pan American has guided investors to anticipated 2023 silver production of 21-23 million ounces at an all-in-sustaining cost (AISC) of US$14-US$16 an ounce and gold production of 870,000 to 970,000 ounces at AISC of US$1,275 to US$1,425 an ounce.

At this time, however, no date has been set for the potential restart of operations at the Escobal mine, which is located in Guatemala.

On Thursday, Pan American shares rose 1.4% or 28 cents to $20.45 on volume of 172,330. The shares currently trade in a 52-week range of $27.45 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.

Under the arrangement deal, Pan American acquired all the issued and outstanding shares of Yamana, which then sold certain subsidiaries and partnerships holding Yamana’s interests in its Canadian assets to Agnico. That included a 50% interest in the Canadian Malartic mine.

The Yamana acquisition established Pan American as a major precious metals producer in Latin America. The combined portfolio consisted of 12 operations concentrated in Latin America. The deal also gave Agnico-Eagle operational control of the Canadian Malartic mine during the remaining development of the Odyssey project at Canadian Malartic and future projects nearby.

Steinmann said Pan American’s second quarter results deliver on the benefits that the company had expected from the Yamana transaction, and have allowed the company to repay a net US$55.4 million of debt and distribute US$36.4 million in dividends in the past quarter. “We are also on track to meet our target of realizing US$40 million to US$60 million in synergies through the transaction,’’ he said.

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