‘They were just tired’: Embattled Tahoe Resources sells out to create world’s biggest silver miner – by Garbriel Friedman (Financial Post – November 15, 2018)

https://business.financialpost.com/

In a deal that highlights the importance of social licence in mining, Vancouver’s Pan American Silver Corp. announced Wednesday it will purchase Tahoe Resources Inc., seizing the moment to buy a company whose stock has been in freefall amid ongoing controversies in the communities in which it operates.

Under the terms of the US$1.1 billion deal, Pan American will pay up to US$275 million in cash and an additional US$800 million in shares. That values Tahoe shares at US$3.40 — a 35 per cent premium on its 20-day volume-weighted average price — or 0.2403 of a Pan American share per Tahoe share.

Pan American said in a press release that the acquisition would create the largest silver company in the world, and pointed to its own track record of building mines and operating in Latin America — an area where Tahoe has been beset by violent conflict and legal challenges.

But early reaction to the deal was negative. By midday, Pan American’s shares had fallen more than 12 per cent. Meanwhile, some Tahoe investors were incensed that the company negotiated a sale when silver prices are soft, and when its stock is down as it struggles to restart operations at its flagship mine in Guatemala.

“I think Pan American is buying it very cheap,” said John Tumazos, of Very Independent Research, an investor and analyst. Pan American’s chief executive Michael Steinmann noted there was risk involved in taking on a company whose flagship asset is sidelined.

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