Jinteng Mining, a subsidiary of Zijin Mining Group, took over as new owner of Pan American Silver‘s (TSE: PAAS) (NYSE: PAAS) La Arena open-pit mine in Peru.
The story of the acquisition started in May, and only received approval from Investment Canada in Ottawa in last month.
The all-cash deal includes Zijin doling out USD$245 million to Pan American, and includes a 1.5 per cent life of mine gold net smelter (NSR) return royalty from the La Arena II project. Zijin will also make an extra contingent cash payment of USD$50 million once commercial production starts.
Pan American retains the right to acquire 60 per cent of the future copper concentrate produced from La Arena II under commercial terms. This arrangement positions the company to supply North American markets once production begins.
Located in Peru’s La Libertad province, the La Arena property includes the La Arena copper-gold mine and the advanced exploration project, La Arena II. The open-pit mine has operated since 2011, processing 36,000 tonnes of ore daily and producing nearly three tonnes of gold annually. The mine’s remaining life is three years.
Since acquiring the mine from Tahoe Resources in 2019, Pan American has added 535,521 ounces of gold through exploration and extended the mine’s life from 2021 to 2026, with potential for further extension.
Pan American operates silver and gold mines across the Americas, maintaining active operations in Canada, Mexico, Peru, Brazil, Bolivia, Chile, and Argentina. The company also owns the Escobal mine in Guatemala, which remains closed while officials complete an ongoing consultation process for a potential restart.
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Pan American has been selling non-core assets
Zijin Mining has strengthened its resource base in copper and gold with this acquisition, aligning with its strategy to increase production and achieve its five-year targets. Furthermore, the La Arena II project, which is currently in the preliminary study stage, is expected to use open-pit mining and flotation processes. Additionally, its location in a renowned mineralization belt offers significant potential for resource expansion.
Lately, Pan American has been selling non-core assets to optimize its portfolio following its recent acquisition of Yamana Gold Inc in a USD$4.8 billion deal. The company recently completed the planned divestment of its 56.2 per cent stake in the Mara project in Argentina and its 92.3 per cent interest in the Morococha mine in Peru.
Glencore International AG paid USD$475 million in cash for the Mara project and granted Pan American a life-of-mine copper net smelter return royalty of 0.75 per cent, which Pan American retains the right to transfer freely. The sale reduced Pan American’s annual costs for project development, reclamation, and care and maintenance, which for the Mara project and Morococha mine totalled USD$15.7 million in the second quarter of 2023.
joseph@mugglehead.com
