Vancouver— Globe and Mail Update brenda bouw
— MINING REPORTER, Published Monday, Jan. 23, 2012 1:11AM ESTPan American Silver Corp. is poised to boost production in mineral-rich Mexico through the proposed acquisition of Minefinders Corp., a fellow Vancouver-based company with an aggressive growth strategy.
Sources say Pan American, the world’s second-largest primary silver miner, struck a deal late Sunday with 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 is expected to be announced before markets open on Monday.
Pan American is expected to pay a healthy premium for Minefinders, which is valued at about $1-billion after closing at $11.50 on the Toronto Stock Exchange on Friday.
The stock reached a record $18.90 in September, but has since fallen alongside the price of its key metals, silver and gold, amid lingering worries over Europe’s debt crisis and a slowdown in the robust Chinese economy.
If the deal is approved, Pan American will be buying Minefinders at a time when silver and gold prices are off their record highs set last year, but many analysts are expecting to see a rebound as demand stays steady and reserves become increasingly scarce.
The price of silver rose 4 per cent to $31.68 (U.S.) per ounce in New York on Friday, its highest level in six weeks amid hopes steady demand for the metal in industrial applications will continue due to recent hopeful economic data from the United States and China, two of the world’s largest economies.
Silver hit a record $49.79 per ounce last spring, but since fell alongside other industrial metals amid worries of another global economic slowdown.
Gold, considered a currency and hedge against inflation, is currently trading around $1,660 an ounce, below its record above $1,900 an ounce set in September as many investors took profits to compensate for the slump in other investments.
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.
Pan American, whose chairman is well-known mining financier Ross Beaty, would count on Minefinders to help it propel growth in Mexico, the world’s largest producer of silver.
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 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.