Pan American strikes $2.1B deal to buy MAG Silver

Pan American Silver (TSX, NYSE: PAAS) agreed to buy MAG Silver (TSX, NYSE: MAG) for about $2.1 billion in cash and stock to gain a stake in Mexico’s large-scale Juanicipio mine. MAG shares jumped while Pan American’s plunged.MAG shareholders will receive the equivalent of $20.54 per share, based on Friday’s closing price on the New York Stock Exchange, according to a release on Monday. The deal, which calls for Vancouver-based Pan American to pay $500 million in cash and 0.755 share for each share of MAG, is expected to close in the second half of the year. Pan American expects to issue about 60 million shares to MAG shareholders at closing.Adding MAG will let Pan American – the operator of 10 mines in seven countries – boost its revenue and give it a chance to benefit from ongoing exploration efforts in Mexico. Juanicipio, which is 44% owned by MAG, generated free cash flow of $77.4 million in the first quarter, almost triple the year-ago level. MAG shareholders, meanwhile, will benefit from becoming investors in a larger, more diversified silver producer, according to Scotia Capital mining analyst Ovais Habib.“In our opinion, this deal is a strategic transaction and logical fit for both companies,” Habib said Monday in a note to clients.‘Overdue’ consolidationThe transaction builds on M&A activity in the silver mining industry since September. It follows First Majestic Silver’s (TSX, NYSE: AG) $970 million purchase of fellow Canadian explorer and developer Gatos Silver (TSX, NYSE: GATO), Coeur Mining’s (NYSE: CDE) $1.7 billion acquisition of Canadian precious metals producer Silvercrest (TSX: SIL; NYSE: SILV) and Endeavour Silver’s (TSX: EDR) $145 million deal for Peruvian miner Minera Kolpa, which closed earlier this month.Consolidation among silver miners was “arguably long overdue,” MAG Silver founder Peter Megaw told The Northern Miner Monday via email.“This is a great step into one of the world’s great silver companies,” he said of MAG Silver’s sale to Pan American. The deal “gives investors a geologically and jurisdictionally diverse silver giant to invest in at a level comparable in scale, if not dollar value, to the gold giants.”MAG stock jumped 6.8% to C$25.18 in Toronto trading Monday afternoon, giving the company a market value of about C$2.6 billion. Pan American plunged 16% to C$31.98, cutting the company’s market value to about C$11.6 billion.Silver and goldAcquiring MAG will also allow Pan American to increase cash flow generation and lift mineral reserves. Juanicipio is expected to generate free cash flow of about $200 million this year.Juanicipio produced 4.5 million oz. of silver in the first quarter, as well as 10,200 oz. of gold, 10,600 tons of lead and 16,900 tons of zinc. It had all-in sustainable costs of $10.64 per oz. of silver equivalent.For all of 2025, Juanicipio is forecasted to produce between 14.7 million oz. and 16.7 million oz. of silver.Mexico City-based miner Fresnillo (LSE: FRES) controls Juanicipio with a 56% stake. It also operates the mine, which is located in Mexico’s Fresnillo silver trend.MAG reported net income of $28.7 million, or 28¢ a share, in the first quarter.21% premiumPan American’s offer represents a 21% premium over MAG’s closing price in New York Friday. It also represents a 27% premium on the 20-day volume-weighted average price of the stock on the NYSE through Friday.Two-thirds of MAG shareholders will need to approve the deal at a special meeting, which will probably be held in July.Approval of the deal by Pan American’s shareholders will not be required, nor will the transaction require review and approvals under the Investment Canada Act, according to the company.While a rival offer from a third party “is always a possibility, we believe the potential of an interloper scenario is less likely as the interloper will need to scale the hurdle of getting the buy-in of the Juanicipio and Fresnillo management teams,” Scotia Capital’s Habib said. “A superior offer will require a larger deal premium with a better cash consideration.”14% ownershipOnce the acquisition has been completed, existing MAG shareholders will own about 14% of Pan American shares on a fully diluted basis.“Our acquisition of MAG brings into Pan American’s portfolio one of the best silver mines in the world,” Pan American CEO Michael Steinmann said in a statement.“Juanicipio is a large-scale, high-grade, low-cost silver mine that will meaningfully increase Pan American’s exposure to high-margin silver ounces. Furthermore, we see future growth opportunities through the significant exploration potential at Juanicipio as well as MAG’s Deer Trail and Larder properties.”Exploration could further boost Juanicipio’s potential, since only 10% of the property has been explored, Pan American said. MAG also holds exploration rights for the Deer Trail project in Utah and the Larder project in northern Ontario.Weiter zum vollständigen Artikel bei Mining.com Weiter zum vollständigen Artikel bei Mining.com