Pan Am adds Morococha

Pan American Silver (PAA-T) has inked a deal to acquire a 92% stake in the Morococha underground silver mine in Peru.

Under the deal, Pan Am will fork over US$35 million in return for 92% of the voting shares of Compania Minera Argentum. In turn, Argentum will acquire the Anticona and Manuelita mining units, which constitute Morococha, from Sociedad Minera Corona.

Situated 150 km northeast of Lima, Morococha has historically produced around 3.5 million oz. of silver annually, plus byproduct zinc, copper and lead. Cash costs, net of byproduct credits, ring in below US$3 per oz. silver. The mine lies 80 km from Pan Am’s 4.5 million-oz.-per-year Huaron silver mine.

The 66.5-sq-km land package is home to a prolific network of veins and replacement bodies. At last count, proven and probable reserves stood at about 1.1 million tonnes running 269 grams silver per tonne plus 4.9% zinc, 1.9% lead, and 0.4% copper, or 9.2 million contained ounces of silver.

Measured and indicated resources amount to 624,637 tonnes of 285 grams silver , 4% zinc, 1.5% lead, and 0.4% copper, for 5.7 million contained silver ounces. Another 5.1 million tonnes of inferred material runs 242 grams silver, 4.1% zinc, 2.1% lead, and 0.25% copper.

Pan Am says the acquisition will immediately boost its expected 2004 silver production by about 30% to 13 million oz.; cash costs are expected to fall below US$3.50 per oz., with anticipated total costs slipping to around US$4 per oz.

Pan Am plans to accelerate mine development and mill upgrades with an eye toward maintaining long-term production of 3.9 million oz. of silver at a cash cost below US$2.50 per oz.

Says Pan Am’s CEO, Ross Beaty, “Morococha is a rare opportunity – low cost, long life and in Peru, a great mining country where we already have an important presence.

“It is an excellent addition to Pan American’s assets and will help us achieve our mission of becoming the world’s leading primary silver producer in the near future. This acquisition is a perfect fit with our existing Peruvian asset base and is immediately accretive by every measure. I particularly like the mine’s great exploration potential, which we intend to evaluate aggressively,” he added.