Pan American Makes Friendly Move On Aquiline

Pan American Silver (PAA-T, PAAS-Q) is looking to acquire Aquiline Resources (AQI-T, AQLNF-O) and its large Navidad silver project via a friendly all-share takeover.

The deal values Aquiline at an implied $626 million and would aid in Pan American’s stated mission to continually grow and replace its silver production ounces.

If acquired, Navidad’s measured and indicated resource of 155.2 million tonnes grading 150 grams silver equivalent per tonne for a total of 632 million oz., would triple Pan American’s measured and indicated silver resources to 945 million oz.

Navidad — which was the object of an intense legal battle between Aquiline and IMA Exploration just two years ago — is in Argentina’s Patagonia region and is considered to be one of the world’s largest undeveloped silver deposits.

While there is little debate over the project’s richness, there is considerable debate over how, or if, the ore will be mined.

The province of Chubut — where Navidad is located — has banned open-pit mining and the use of cyanide.

The move amounts to a bet by Pan American that such a ban will soon be lifted, as the company freely admits that it sees Navidad as an open-pit project only and has no plans to develop it as an underground mine.

Clearly Pan American would never make such a bold move unless talks with government officials in the country gave it reason for optimism.

The governor of Chubut is said to favour mining development in parts of the region.

Pan American has already established a presence in the country through the opening of its Manantial Espejo silver mine at the end of last year.

The company is offering 0.2495 of a Pan American common share, plus 0.1 of a Pan American common share purchase warrant for each Aquiline share.

That values Aquiline shares at $7.47 — a 37% premium over Aquiline’s closing price the day before the offer was made public.

If Aquiline shareholders approve, the deal, it would leave them holding roughly 19% of the new Pan American. To pass, 67% of Aquiline shares need to be tendered to the deal. The companies expect the merger to close by the end of the year.

Pan American Silver was founded by noted geologist and entrepreneur Ross Beaty as an unhedged silver producer. Beaty still serves as company chairman.

The break fee is $18 million and Pan American has the right to match any superior offer.

News of the offer sent Aquiline shares up 20% to $6.52 on 9 million shares traded, while Pan American shares fell 6% to $25.12 on 1.6 million shares traded.