PERU PAN AMERICAN SILVER has closed the acquisition of an 88% interest in Peru's Morococha silver operation for US$36 million from local polymetallic miner CORONA, the company said late last month. The deal includes the small, nearby Natividad silver mine, which had a price tag of US$1.5 million, said Pan American spokesperson Brenda Radies.
The deal involved Pan American buying voting rights in MINERA ARGENTUM, the new company Corona set up earlier this year to hold Morococha. The remaining 12% interest is in the hands of Corona's owners, Peru's Gubbins family.
In the year-to-date, Morococha and Natividad have produced more than 2 million oz of silver plus "significant" amounts of byproduct zinc, copper and lead at a cash cost of US$3/oz silver, net of byproduct credits.
Pan American plans to carry out a program of increased mine development and mill upgrades to enable long-term production of approximately 4 million oz/year of silver at a cash cost below US$2.50/oz. Radies said a tentative budget of US$2 million has been set for work on the mine and US$1 million on the mill.
The company also intends to spend at least US$1 million on a two-year exploration drill program which will total 46,000 metres, she said. The aim is to convert resources of 5 million tonnes grading 242 g/t Ag and 4% Zn into reserves and to test new targets on the 11,620-hectare Morococha property.
Under the acquisition agreement, Minera Argentum has held the profits generated by Morococha since the beginning of the year and, at closing, had more than US$5.2 million in working capital before tax. Pan American said it expected Morococha's addition would help reduce the company's consolidated cash costs to below US$3.50/oz on production of 11.4 million oz of silver in 2004. Last year, Pan American produced 8.64 million oz silver at cash costs of US$4.09/oz. The company's website is at www.PanAmericanSilver.com.