Pan American Silver Corp. said Monday that it reached a deal to buy fellow Canadian mining company Minefinders Corp. in a cash and stock deal worth about 1.5 billion Canadian dollars ($1.49 billion), creating one of the world's largest silver producers.
The news sent Minefinders' U.S. shares up $2.71, or 24 percent, to $14.06 in morning trading, while Pan American's U.S. shares fell $2.19, or 8.9 percent, to $22.53.
The combined company's production is expected to total about 26 million ounces of silver for 2011 and grow to more than 50 million ounces by 2015. About half of production will come from mines in Mexico, including Minefinders' fast-growing Dolores silver and gold mine, with the rest coming from mines in Peru, Argentina and Bolivia.
Silver and gold prices soared after the financial crisis as investors sought the precious metals' perceived safety. Since peaking in late April near $49 per ounce, silver prices have fallen by about a third.
The combined company would have a market capitalization of about 4 billion Canadian dollars.
The offer is worth a combined 15.60 Canadian dollars per Minefinders share, based on Pan American's Friday closing stock price on the Toronto Stock Exchange. It also represents a 36 percent premium over Minefinders' Friday closing stock price on the Toronto Stock Exchange.
Minefinders shareholders can choose between receiving .55 shares of Pan American and 1.84 Canadian dollars in cash, 0.6235 shares of Pan American, or 15.60 Canadian dollars in cash, for each of their Minefinders shares.
The deal has been approved by the board of both companies, but remains subject to shareholder approval and customary closing conditions. If approved by shareholders, Pan American said it expects the deal to close by the end of March.
After the deal closes, existing Minefinders shareholders will own about 33 percent of Pan American's stock, the companies said.
Both companies are based in Vancouver, British Columbia.