Pan American sells Peru gold mine for US$245 million cash upfront

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Pan American Silver Corp. [PAAS-TSX, NASDAQ] 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 in Peru to Jinteng (Singapore) Mining Pte. Ltd., a subsidiary of 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.

The La Arena property is located in the La Libertad province of Peru and is comprised of the La Arena gold mine and the La Arena 11 project. Since acquiring the mine from Tahoe Resources Inc. in 2019, Pan American said it has added 535,521 ounces of gold through exploration, and extended the mine life from 2021 to 2026, with the potential for a further expansion.

Under the agreement, Zijin will pay US$245 million in cash and 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. in a US$4.8 billion deal.

“With the sale of La Arena, we continue to deliver on our strategy to optimize our portfolio, following the Yamana transaction, while maintaining future upside through the retention of royalties,’’ said Pan American President and CEO Michael Steinmann.

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.

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 also agreed to sell a 57.74% interest in the Agua de la Falda S.A. project in Chile to a subsidiary of Rio Tinto Plc [RIO-NYSE] for US$45.5 million in cash. Under the deal, a Pan American subsidiary was granted 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 production from certain mineral concessions.

On Wednesday, Pan American shares rose 0.27% or $0.07 to $25.46. The shares trade in a 52-week range of $28.31 and $16.50.

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