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Pan American Silver (PAAS) Divests Assets to Optimize Portfolio

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Pan American Silver Corp. (PAAS - Free Report) announced that it sold its 56.25% interest in the MARA project in Argentina and its 92.3% interest in the Morococha mine in Peru. This move to sell non-core assets will help the company in its ongoing endeavor to optimize its portfolio.

Pan American Silver will also be able to lower its annual project development, reclamation, and care and maintenance costs. In the second quarter of 2023, these costs for the MARA and Morococha projects were around $15.7 million.

On Jul 31, 2023, the company announced its plans to sell the MARA project, the Morococha mine and the Agua de la Falda project in Chile.  

The MARA project was sold to Glencore International AG, a subsidiary of Glencore (GLNCY - Free Report) , for a cash consideration of $475 million. Under the terms of the agreement, PAAS was granted a life-of-mine copper net smelter return royalty of 0.75%, with the right to freely transfer the royalty.

The deal was closed on Sep 20, 2023, with Glencore assuming 100% ownership of the MARA project.

Pan American Silver's  Peruvian subsidiary, Compañia Minera Argentum S.A., owns the Morococha mine. It previously entered an agreement with Alpayana S.A. to sell its interest in the mine. The deal was closed on Sep 22, 2023, with Alpayana paying $25 million in cash.

The Morococha mine was placed on care and maintenance from early 2022. PAAS has been evaluating alternative strategic opportunities for the asset.

The previously announced sale of 57.74% interest in Agua de la Falda S.A  to Rio Tinto Limited (RIO - Free Report) is expected to be closed in the fourth quarter of 2023. Rio Tinto's subsidiary will pay $45.55 million in cash upon closing.

Under the terms of the agreement, Rio Tinto will grant Pan American Silver's  subsidiary a net smelter return royalty of 1.25% on all precious metals and a net smelter return royalty of 0.2% on all base metals, pro rata in accordance with the RIO subsidiary's interest in certain mineral concessions.

The improved balance sheet strength, following the sale of the non-core assets, opens up additional opportunities for the company, allowing it to invest more capital in key strategic projects such as La Colorada Skarn Project.

Price Performance

Shares of Pan American Silver have gained 3.3% in the past year compared with the industry’s growth of 16.8%.

 

Zacks Investment Research
Image Source: Zacks Investment Research

 

Zacks Rank & Stock to Consider

Pan American Silver currently carries a Zacks Rank #3 (Hold).
One better-ranked stock from the basic materials space is Hawkins, Inc. (HWKN - Free Report) . HWKN sports a Zacks Rank #1 (Strong Buy) at present.  You can see the complete list of today’s Zacks #1 Rank stocks here.

Hawkins has an average trailing four-quarter earnings surprise of 25.5%. The Zacks Consensus Estimate for HWKN’s fiscal 2024 earnings is pegged at $3.40 per share. The consensus estimate for 2024 earnings has moved 38% north in the past 60 days. Its shares gained 58% in the last year.

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