Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

Pan American Silver Corp. plans to create a silver-producing powerhouse with the proposed $1.5-billion acquisition of Mexico-focused Minefinders Corp. But investors weren't impressed, driving down Pan American shares 10 per cent on Monday.

Pan American is offering cash or shares – or both – for fellow Vancouver-based company Minefinders, owner of the Dolores silver and gold mine in northern Mexico and the nearby La Bolsa property set to begin production later this year.

The deal will create a combined company valued at $4-billion and double Pan American's silver production to 50 million ounces by 2015, with eight mines across Latin America.

Story continues below advertisement

Still, Pan American shareholders showed concern about the dilution of their shares as a result of the transaction.

Minefinders investors have three options: 0.55 of a Pan American share and $1.84 in cash; or 0.6235 of a share; or $15.60 in cash. The $15.60 per-share proposal is a 36 per-cent premium to Minefinders' Friday closing price of $11.50 on the Toronto Stock Exchange.

"There was some expectation of a settle relative to a transaction where you are issuing shares and providing a premium," Pan American chief executive officer Geoff Burns said of the share price drop on Monday.

He also acknowledged that the deal strays from the company's previous organic-growth strategy, but also cited the scarcity of silver assets available around the world to help fuel growth as reason for making the company's largest acquisition to date.

"They just aren't out there," Mr. Burns said. "To us, it really has become a look at assets where we can see additional value to where they currently have been valued in the market. My view is that Minefinders' assets qualify."

Minefinders' shares rose 22 per cent on Monday to close at $14.06, still far off its record of $18.90 in September. The price of silver, alongside other industrial metals, has fallen 36 per cent from a record of just under $50 set last spring amid growing worries over Europe's debt crisis and a slowdown in the robust Chinese economy.

While silver is also valued as a currency, about half of its demand comes from industrial uses, ranging from cars to cellphones, which makes it more volatile as compared to its sister metal.

Story continues below advertisement

The two companies have been talking about a possible transaction for year, but talks started to get serious early last year, Mr. Burns said.

Minefinders wasn't in play, its CEO Mark Bailey said Monday, but has entertained interested parties in the past.

"We believe that the addition of the Dolores deposit along with a strong portfolio of exploration and development projects and a dedicated team of employees provides a significant contribution to the future growth and success of Pan American," Mr. Bailey said.

Minefinders produced about 3.6 million ounces of silver last year and about 74,000 ounces of gold, with annual sales of $241-million. It has targeted production will grow 80 per cent by 2015, once the La Bolsa mine starts pumping out metal.

Pan American currently has seven silver mines in Peru, Mexico, Argentina and Bolivia, as well as the Navidad project in Argentina, one of the largest undeveloped silver deposits in the world. It also has a joint venture with Orko Silver Corp. in the La Preciosa silver project in Mexico.

Analysts warned the deal might weigh on Pan American shares, but many saw the move as a necessary for the company to find future production growth.

Story continues below advertisement

"We view the transaction somewhat favourably," said Raymond James analyst Brad Humphrey, noting the move fills the near-term production growth gap and diversifies Pan American's assets in Latin America.

"We see this as modestly dilutive," Dahlman Rose & Co. analyst Adam Graf said in a note to clients, " but it should give it additional scale and gold exposure."

The deal is subject to the approval of shareholders from both companies, and if granted is expected to close by the end of March. It also requires regulatory approval from the Mexican government.

Pan American (PAA)

Close: $22.40, down $2.62

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the author of this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies