Cerrado buys idled Argentina mine for $20M, eyes restart

Cerrado Gold (TSXV: CERT) acquired Pan American Silver’s (TSX, NYSE: PAAS) idled Manantial Espejo gold-silver operation in Argentina for $20 million (C$28.5 million), targeting a return to production in 2027. The stock rose.

The acquisition, announced Friday, includes a 2,500-tonne-per-day mill in Santa Cruz province. Cerrado paid $10 million upfront, with two $5-million instalments due on the first and second anniversaries of closing. Pan American receives a 1% net smelter return royalty on all future production to settle intercompany debt.

Cerrado bought all shares of Minera Tritón Argentina, the mine’s owner. Its Minera Don Nicolás subsidiary will fund the purchase and restart. Some concessions also carry a pre-existing 0.5% net smelter return royalty.

“With funds available in Argentina to support our development plans, we believe this opportunity should enhance shareholder value without shareholder dilution,” Cerrado CEO Mark Brennan said Friday.

Cerrado shares climbed 5% to C$2.23 Friday morning in Toronto, valuing the company at about C$318 million ($224 million). The stock has ranged between C$1.31 and C$2.83 in the past year.

Provincial footprint

The purchase expands Cerrado’s presence in Santa Cruz, where it operates Minera Don Nicolás. Existing infrastructure offers a route back to production, but refurbishment and an economic supply of mill feed remain essential. Cerrado hasn’t provided a restart budget or production targets.

The buyer assumes historical, current and future liabilities, including closure obligations and a required $13.8-million financial guarantee.

Certain permits will require updating or renewal before mining resumes. Mining ended in late 2022, with residual processing completed in January 2023.

Refurbishment first

The mine lies about 160 km west of Puerto San Julián. Dewatering and refurbishment could take up to six months, with initial mill throughput targeted at 1,000 tonnes daily. Cerrado plans to process low-grade stockpiles first, then blend in newly mined underground material.

About 40,000 metres of drilling are planned in 2027 to support an initial resource estimate, Cerrado said. Restarting without a feasibility study based on reserves carries a higher risk of technical or economic failure, the company cautioned.

Santa Cruz’s provincial government welcomed the ownership change on Friday, identifying rehabilitation, dewatering and equipment repairs as the first tasks. Exploration and geological evaluation would proceed alongside that work, the government said.

Governor Claudio Vidal’s administration has made recovering the operation a provincial objective, tying the proposed restart to employment and local investment. Its statement described a recovery program leading towards a future reopening, without announcing a production date or output target.

Rising output

The acquisition comes amid improving output at Cerrado’s existing Argentine operations. Minera Don Nicolás produced 16,685 gold-equivalent oz. in the third quarter, 21% more than a year earlier, bringing nine-month output to 44,942 gold-equivalent oz., Cerrado said in its October operating update.

Cerrado then expected full-year production near the upper end of its 50,000 to 60,000 gold-equivalent-oz. target range. Exploration at the recently acquired Falcon and Calandrias II properties is intended to support a new preliminary economic assessment for Minera Don Nicolás by late March.

The existing operation has both carbon-in-leach and heap-leach processing, allowing it to treat material of different grades. Cerrado has made regional acquisitions part of its strategy to expand that resource base and extend operating life.