Pan American Silver (TSX: PAAS; NYSE: PAAS) is selling its La Arena gold mine in Peru to China’s Zijin Mining for US$245 million cash upfront and a US$50 million contingent payment.
The La Arena property is in the country’s northwest La Libertad province and holds the mine and the La Arena II project, which is in advanced exploration. The open-pit mine has operated since 2011.
Zijin grants Pan American a life-of-mine gold net smelter return royalty of 1.5% for the La Arena II project, Pan American said on Wednesday. Jinteng Mining, a Singapore-based subsidiary of Zijin, will oversee the property, the companies said.
“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,” Pan American CEO Michael Steinmann said in a release.
“Proceeds from the transaction will further strengthen our financial position and allow us to deliver on our capital allocation priorities of investing in high-quality assets, debt reduction and returning capital to our shareholders.”
Mine life added
Since acquiring the mine from Tahoe Resources in 2019, Pan American said it has added 535,521 oz. of gold through exploration and extended the mine life to 2026 from 2021, with the potential for further extension.
Pam American completed its acquisition of Yamana Gold’s assets a year ago March. Pan American collaborated with Agnico Eagle Mines (TSX: AEM; NYSE: AEM) to buy Yamana with a joint offer of US$4.8 billion.
The deal added four mines to Pan American portfolio: the Jacobina mining complex in Brazil, the El Peñón and Minera Florida mines in Chile, and the Cerro Moro mine in Argentina. It also added the MARA development project in Argentina.
Shares in Pan American Silver closed little changed in Toronto on Wednesday at $25.57 apiece, valuing the company at $9.3 billion.
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