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Pan American to buy Aquiline for Argentina silver project
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14th October 2009
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TORONTO ( - Vancouver-based Pan American Silver plans to buy TSX-listed Aquiline Resources in a friendly, paper-based transaction valued at around C$626-million, the firms announced on Wednesday.

Pan American has eight operating mines, in Mexico, Peru, Argentina and Bolivia, while Aquiline's main asset is the large silver/lead Navidad project, in Argentina.

"We believe the acquisition of Aquiline provides a perfect match with Pan American's core strength as a developer and operator of primary silver mines," Pan American CEO Geoffrey Burns said.

"The Navidad project is one of the world's largest undeveloped silver deposits and we will bring all the skills, technology and experience we have gained commissioning or expanding five new mines in the last six years to its development and operation."

Once in production, the first zone of the Navidad openpit project is expected to produce an average of 15-million ounces a year, and as much as 23-million ounces in the first full year of production, based on a preliminary economic assessment completed last year.

However, the project must first navigate the difficult regulatory environment in Argentina's Chubut province, where the laws currently ban openpit mining and the use of cyanide in mining.

Burns told analysts and investors on a conference call that he is confident the mining laws will be changed and that the project will go ahead.

“It is Pan American's belief that the laws will be modified in such a way as to allow for the development of Navidad,” he said.

“We are also confident that the political will exists today in Chubut that will ultimately allow for the responsible development of Navidad.”

Pan American has good relations in Argentina – it was named 'mining company of the year' for 2009, and the company's construction team also remains intact, having recently completed its new Manantial Espejo mine in the country, Burns added.

Pan American will offer 0,2495 of one of each shares, plus 0,1 of a share purchase warrant, for each Aquiline common share.

The company will also make formal takeover bids for each outstanding series of Aquiline warrants and Aquiline's convertible debenture.

Based on closing prices of both shares on October 13, the implied value of the share offer is C$7,47 per Aquiline common share, which represents a premium of around 36,6% for Aquiline shareholders, who will own about 19% of the enlarged Pan American.

The transaction has the backing of both boards.

The addition of Navidad and Aquiline's other projects would increase Pan American's estimated measured and indicated silver resources (including proven and probable reserves) to some 945-million ounces, the firm said.

Estimated inferred silver resources would increase to approximately 233-million ounces and the combined companies would boast approximately 1,9 million ounces of gold in estimated measured and indicated resources, plus about 817 000 oz in inferred resources.

Pan American shares slid 6,1% on Wednesday, to C$25,08 apiece by 15:51 in Toronto.

Aquiline leapt 20,8%, to C$6,61 a share.

Edited by: Liezel Hill


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Picture by: Aquiline Resources