Pan American Announces Divestment of MARA, Morococha, Agua de la Falda and Non-Controlling Equity Interests
Pan American Announces Divestment of MARA, Morococha, Agua de la
Falda and Non-Controlling Equity Interests
Divestment of non-core assets advances the Company's portfolio optimization
strategy
Total cash proceeds of US$593 million strengthen the balance sheet
Reduces 2023 and future care and maintenance costs
VANCOUVER, British Columbia--(BUSINESS WIRE)--July 31, 2023--Pan American Silver
Corp. (NYSE: PAAS) (TSX: PAAS) ("Pan American" or the "Company") is pleased to
announce the status of our divestment of certain non-core assets, including the sale of our interest
in the MARA project in Argentina, the Morococha mine in Peru, and the Agua de la Falda
project in Chile.
"The sale of these non-core assets is aligned with our stated aim of optimizing our portfolio
following the Yamana acquisition. These transactions not only reaffirm our commitment to our
core business but also yield substantial and immediate value to our shareholders, while
maintaining future upside through the retention of copper and gold royalties with strong
counterparties," said Michael Steinmann, President and Chief Executive Officer of Pan
American. "The consideration for the sale of MARA, coupled with the other sales, will yield
total cash proceeds of US$593 million. The cash proceeds will allow us to both fully repay the
amount drawn on our credit facility and increase our cash position, further enhancing the
resilience of our balance sheet. These transactions will also allow Pan American to reduce its
annual project development, reclamation and care and maintenance costs, which for MARA and
Morococha amounted to US$15.7 million in Q2 2023. This improved balance sheet strength
creates enhanced opportunities for the Company, providing increased capital to advance key
strategic projects, including the La Colorada Skarn Project."
MARA
Pan American has entered into a binding agreement to sell its 56.25% interest in the MARA
Project ("MARA" or the "Project"), located in the Catamarca province of Argentina, to Glencore
International AG ("Glencore"). Pan American acquired its 56.25% interest in MARA through its
acquisition of Yamana Gold Inc. ("Yamana"), which closed on March 31, 2023. At present,
Glencore holds a 43.75% interest in MARA, and upon the completion of the transaction,
Glencore will assume 100% ownership of the Project.
MARA was initially established as a joint venture in December 2020 amongst Yamana, Glencore
and Newmont Corporation ("Newmont"), following the integration of the Minera Alumbrera
plant and mining infrastructure and the Agua Rica project. On September 23, 2022, Glencore
announced that it had acquired Newmont’s 18.75% interest in MARA, thereby increasing its
ownership in the Project to 43.75%, at that time.
Under the terms of the agreement, at closing Glencore will pay US$475 million, in cash, and will
grant Pan American a life-of-mine copper net smelter return ("NSR") royalty of 0.75%, with the
right for Pan American to freely transfer the royalty.
MARA feasibility studies, reclamation and care and maintenance ("C&M") costs for the Project
for the three-month period ending June 30, 2023, amounted to US$11.5 million for Pan
American's portion. Future C&M costs will be eliminated upon closing of the transaction. Pan
American estimated MARA feasibility studies, reclamation and C&M costs for the Project of
US$60 million to US$65 million on a 100% ownership basis for 2023, as per the Company’s
guidance provided on May 10, 2023.
The closing of the transaction is subject to customary conditions and regulatory filings. Pan
American expects the transaction to be completed in the third quarter of 2023.
Morococha
Pan American placed the Morococha mine on C&M in early 2022, while it evaluated alternative
strategic opportunities for the asset following the closure of the Amistad processing plant,
pursuant to an agreement with Aluminum Corporation of China ("Chinalco"). As previously
disclosed, in June 2010, the Company finalized a framework agreement with Chinalco that
entailed the relocation of core Morococha facilities, including the Amistad processing plant, in
stages, to facilitate the incremental expansion of Chinalco’s Toromocho open pit copper mine.
On June 19, 2023, Pan American entered into a binding agreement to sell its 92.3% interest in
Compañia Minera Argentum S.A. (“CMA”), its Peruvian subsidiary that owns the Morococha
mine, to Alpayana S.A. ("Alpayana"), also a Peruvian mining company. Alpayana owns a
number of operating mines in the region.
Under the terms of the agreement, Alpayana will acquire the shares of CMA in exchange for a
cash consideration of US$25 million, payable upon closing of the transaction. The completion of
the transaction is subject to customary conditions and regulatory approval from the Peruvian
National Institute for the Defense of Competition and Protection of Intellectual Property. Pan
American expects the transaction to be completed in the third quarter of 2023.
C&M costs for the Morococha mine for the six-month period ending June 30, 2023 amounted to
US$13.2 million. Future C&M costs will be eliminated upon closing of the transaction.
As a result of this executed agreement, the net assets of CMA, including the Morococha mine,
will be classified as "held for sale", and accordingly will be presented separately under current
assets and liabilities in the Company’s second quarter 2023 unaudited interim consolidated
financial statements. Further, a net of tax impairment charge of US$33.3 million (US$42.4
million pre tax) will be taken to the CMA net assets.
Agua de la Falda
Pan American has entered into a binding agreement with Rio Tinto Mining & Exploration Ltd.
Agencia en Chile SPA ("Rio Tinto"), a subsidiary of Rio Tinto Limited, to sell its 57.75%
interest in Agua de la Falda S.A. ("ADLF"), a Chilean company that holds the historical
Jeronimo project, located in the Atacama region of northern Chile, as well as several adjoining
concessions, that are indirectly wholly owned by Pan American. Pan American acquired its
interest in ADLF through its acquisition of Yamana. The remaining 42.25% interest is held by
Corporación Nacional del Cobre de Chile ("CODELCO").
Under the terms of the agreement, Rio Tinto will pay US$45.55 million, in cash, upon closing
and will grant Pan American a NSR royalty of 1.25% on all precious metals and a NSR royalty
of 0.2% on all base metals, on a pro rata basis in accordance with the interest acquired by Rio
Tinto, on production from certain mineral concessions.
The closing of the transaction is subject to the execution of definitive documentation and
customary conditions. No regulatory approvals or filings are required. Pan American expects the
transaction to be completed in the third quarter of 2023.
Equity Interests
During the second quarter of 2023, Pan American divested of a number of non-controlling equity
investments for a total consideration of US$47.1 million.
About Pan American Silver
Pan American Silver is a leading producer of precious metals in the Americas, operating silver
and gold mines in Canada, Mexico, Peru, Bolivia, Argentina, Chile and Brazil. We also own the
Escobal mine in Guatemala that is currently not operating, and we hold interests in exploration
and development projects. We have been operating in the Americas for nearly three decades,
earning an industry-leading reputation for sustainability performance, operational excellence and
prudent financial management. We are headquartered in Vancouver, B.C. and our shares trade on
the New York Stock Exchange and the Toronto Stock Exchange under the symbol "PAAS".
Learn more at panamericansilver.com.
Cautionary Note Regarding Forward-Looking Statements and Information
Certain of the statements and information in this news release constitute "forward-looking
statements" within the meaning of the United States Private Securities Litigation Reform Act of
1995 and "forward-looking information" within the meaning of applicable Canadian provincial
securities laws. All statements, other than statements of historical fact, are forward-looking
statements or information. Forward-looking statements or information in this news release relate
to, among other things: the receipt of any necessary regulatory approvals and successful
completion of the proposed transactions in respect of MARA, Morococha and Agua de la Falda
(the "non-core assets"), as well as the anticipated terms and timing for the completion thereof;
the anticipated use of proceeds, including to fully repay the amount drawn on our credit facility;
the anticipated benefits from the completion of the sale of the non-core assets; and the impact of
such transactions on Pan American’s future financial or operational performance.
These forward-looking statements and information reflect Pan American’s current views with
respect to future events and are necessarily based upon a number of assumptions that, while
considered reasonable by Pan American, are inherently subject to significant operational,
business, economic and regulatory uncertainties and contingencies. These assumptions include:
the ability to satisfy the closing conditions and, where necessary, receive regulatory approval, to
complete the sale of the non-core assets; the impact of inflation and disruptions to the global,
regional and local supply chains; tonnage of ore to be mined and processed; future anticipated
prices for gold, silver and other metals and assumed foreign exchange rates; the timing and
impact of planned capital expenditure projects, including anticipated sustaining, project, and
exploration expenditures; the ongoing impact and timing of the court-mandated ILO 169
consultation process in Guatemala; ore grades and recoveries; capital, decommissioning and
reclamation estimates; our mineral reserve and mineral resource estimates and the assumptions
upon which they are based; prices for energy inputs, labour, materials, supplies and services
(including transportation); no labour-related disruptions at any of our operations; no unplanned
delays or interruptions in scheduled production; all necessary permits, licenses and regulatory
approvals for our operations are received in a timely manner; our ability to secure and maintain
title and ownership to mineral properties and the surface rights necessary for our operations;
whether Pan American is able to maintain a strong financial condition and have sufficient
capital, or have access to capital through our corporate sustainability-linked credit facility or
otherwise, to sustain our business and operations; and our ability to comply with environmental,
health and safety laws. The foregoing list of assumptions is not exhaustive.
Pan American cautions the reader that forward-looking statements and information involve
known and unknown risks, uncertainties and other factors that may cause actual results and
developments to differ materially from those expressed or implied by such forward-looking
statements or information contained in this news release and Pan American has made
assumptions and estimates based on or related to many of these factors. Such factors include,
without limitation: the duration and effect of local and world-wide inflationary pressures and the
potential for economic recessions; fluctuations in silver, gold and base metal prices; fluctuations
in prices for energy inputs, labour, materials, supplies and services (including transportation);
fluctuations in currency markets (such as the PEN, MXN, ARS, BOB, GTQ, CAD, CLP and
BRL versus the USD); the duration and effects of COVID-19, and any other pandemics on our
operations and workforce, and the effects on global economies and society; operational risks and
hazards inherent with the business of mining (including environmental accidents and hazards,
industrial accidents, equipment breakdown, unusual or unexpected geological or structural
formations, cave-ins, flooding and severe weather); risks relating to the credit worthiness or
financial condition of suppliers, refiners and other parties with whom Pan American does
business; inadequate insurance, or inability to obtain insurance, to cover these risks and hazards;
employee relations; relationships with, and claims by, local communities and indigenous
populations; our ability to obtain all necessary permits, licenses and regulatory approvals in a
timely manner; changes in laws, regulations and government practices in the jurisdictions where
we operate, including environmental, export and import laws and regulations; changes in
national and local government, legislation, taxation, controls or regulations and political, legal or
economic developments in Canada, the United States, Mexico, Peru, Argentina, Bolivia,
Guatemala, Chile, Brazil or other countries where Pan American may carry on business,
including legal restrictions relating to mining, including in Chubut, Argentina, risks relating to
expropriation and risks relating to the constitutional court-mandated ILO 169 consultation
process in Guatemala; diminishing quantities or grades of mineral reserves as properties are
mined; increased competition in the mining industry for equipment and qualified personnel;
those factors identified under the caption "Risks Related to Pan American's Business" in Pan
American's most recent form 40-F and Annual Information Form filed with the United States
Securities and Exchange Commission and Canadian provincial securities regulatory authorities,
respectively; and those factors identified under the caption "Risks of the Business" in Yamana's
most recent form 40-F and Annual Information Form filed with the United States Securities and
Exchange Commission and Canadian provincial securities regulatory authorities, respectively.
Although Pan American has attempted to identify important factors that could cause actual
results to differ materially, there may be other factors that cause results not to be as anticipated,
estimated, described or intended. Investors are cautioned against undue reliance on forward-
looking statements or information. Forward-looking statements and information are designed to
help readers understand management's current views of our near- and longer term prospects and
may not be appropriate for other purposes. Pan American does not intend, nor does it assume any
obligation to update or revise forward-looking statements or information, whether as a result of
new information, changes in assumptions, future events or otherwise, except to the extent
required by applicable law.
Contacts
For more information:
Siren Fisekci
VP, Investor Relations & Corporate Communications
Ph: 604-806-3191
Email: [email protected]