Pan American Silver has agreed to divest its La Arena mine in Peru to Zijin Mining Group‘s subsidiary, Jinteng (Singapore) Mining, for a total consideration of $295m (C$404.62m).

This includes a $245m cash consideration, which will be paid upfront, a $50m contingent payment and a net smelter return (NSR) royalty.

Located in the La Libertad province, the La Arena mine and the La Arena II project have been under Pan American’s ownership since 2019.

The company has significantly increased the mine’s gold reserves and extended its operational life.

At the transaction’s closing, Zijin will pay $245m in cash and provide Pan American with a 1.5% NSR royalty on the La Arena II project’s gold production.

An additional $50m contingent payment will be made upon the commencement of commercial production at La Arena II.

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The deal is expected to be finalised in the third quarter of 2024, pending regulatory approvals and the fulfilment of customary conditions.

Pan American noted that successful exploration has added more than 500,000oz of gold and extended the mine’s life by five years, with potential for further extensions.

Pan American Silver president and CEO Michael Steinmann said: “With the sale of La Arena, we continue to deliver on our strategy to optimise our portfolio, following the Yamana transaction, while maintaining future upside through the retention of royalties.

“Proceeds from the transaction will further strengthen our financial position and allow us to deliver on our capital allocation priorities of investing in high-quality assets, debt reduction and returning capital to our shareholders.”

Headquartered in Vancouver, British Columbia, Pan American Silver operates mines in Argentina, Bolivia, Brazil, Canada, Chile, Mexico and Peru. It also owns the Escobal mine in Guatemala, which is currently not operational.