Pan American Silver (NSYE:PAAS) has announced a $2.1 billion acquisition of MAG Silver in a cash-and-stock deal that will significantly expand its footprint in the silver mining industry. The agreement, revealed Sunday, will give Pan American a 44% interest in the Juanicipio mine, a high-grade underground silver operation located in Zacatecas, Mexico. Fresnillo plc, which currently operates the mine, holds the remaining 56% stake.

The Juanicipio mine is recognized as one of the highest-grade and lowest-cost silver operations in the world. With the acquisition, Pan American increases its exposure to silver production through an asset already generating considerable returns. The company said Juanicipio is expected to produce between 14.7 and 16.7 million ounces of silver in 2025. Based on the 44% interest Pan American is acquiring, its share of production will range between 6.5 and 7.3 million ounces.

Pan American’s president and CEO, Michael Steinmann, said in a statement that the acquisition adds a significant high-margin asset to the company’s portfolio. “Juanicipio is a large-scale, high-grade, low-cost silver mine that will meaningfully increase Pan American’s exposure to high margin silver ounces,” he said. Steinmann also pointed to the strategic nature of the deal, highlighting its alignment with Pan American’s focus on operations throughout the Americas.

The terms of the deal include a payment of $500 million in cash and 0.755 Pan American shares for each MAG share. Based on recent closing prices, the offer values MAG Silver at $20.54 per share, a 21% premium over its most recent market price and a 27% premium over its 20-day volume-weighted average as of May 9. Once the transaction closes, MAG shareholders will own about 14% of Pan American on a fully diluted basis.

MAG Silver CEO George Paspalas described the deal as a strong outcome for shareholders. He said the acquisition offers “an immediate premium” while giving MAG investors continued exposure to silver through Pan American’s larger and more diversified portfolio. Paspalas also noted that Pan American’s track record and scale bring further potential for growth and financial stability, especially in a volatile commodities market.

The transaction is structured as a plan of arrangement. It will not require shareholder approval from Pan American or a review under the Investment Canada Act. MAG shareholders who are residents of Canada will have access to a tax rollover option if they choose to receive Pan American shares as part of their compensation.

Pan American expects that its share of free cash flow from Juanicipio will reach $98 million in 2025, based on full-year production and silver prices, with the mine projected to generate around $200 million in free cash flow in total. Additionally, the company will add 58 million ounces of silver to its reserves through this acquisition.

The deal also strengthens Pan American’s position as one of the leading silver producers in the Americas. The company has focused heavily on silver-rich assets across the region, and the addition of Juanicipio—operated by Fresnillo, one of the most experienced miners in Mexico—fits that strategy. Company officials also acknowledged the cooperative nature of negotiations and recent site visits with Fresnillo and the mine’s management.

The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a licensed professional for investment advice. The author is not an insider or shareholder of any of the companies mentioned above.

Pan American Silver (TSX:PAAS) and Agnico Eagle Mines (TSX:AEM) have agreed to buy Yamana Gold (TSX:YRI) in a $4.8 billion transaction including cash and shares. The deal was made on Tuesday after Gold Fields (NYSE:GFI) waived its right to match any rival bid on Monday.

The board recommended that shareholders reject the Gold Fields takeover at a vote on November 21. Gold Fields responded by noting that it is disappointed in the outcome: “We continue to believe that the transaction was a financially and strategically superior offer for shareholders of both Gold Fields and Yamana,” the company said.

Due to the lack of a deal with Gold Fields, Yamana will have to pay a $300 million break fee to Gold Fields since it has walked out of the deal just two business days before it was set to close. In a statement, Yunus Suleman, chair of Gold Fields said: “The emergence of another bid highlighted the value of [Yamana’s] assets and the need to respond to systemic strategic challenges facing the gold industry. However, we are disciplined in how we assess the value of assets and opportunities, and we were not prepared to be drawn into a bidding war which would have been value destructive for our shareholders.”

On Friday, Pan American and Agnico Eagle revealed the rival offer, which also which might split up Yamana’s assets in Canada and Latin America between the two companies. While the new deal is large, the previously considered Yamana-Gold Fields transaction would have made the fourth-largest gold miner in the world, passing even the value of Agnico Eagle.

Pan American will solidify its current position as a top precious metals producer in Latin America with this latest deal. For Agnico Eagle, the deal will mean consolidating ownership of the Canadian Malartic gold mine in Quebec, one of the world’s biggest.

Dealmaking has slowed in the mining industry this year, with this marking one of the biggest deals of the year. Gold mining companies have struggled to keep up with demand due to a variety of factors.

The first is declining gold grades across existing projects. This happens because as gold is mined, it becomes more difficult to extract and the amount of ore that can be mined per day decreases.

The second is the lack of new projects to replace ageing mines that are nearing the end of mine life. Costs have also risen, with companies spending more as extraction becomes more costly.

The third is the impact of China’s slowdown. China is the world’s second-largest consumer of precious metals, and its slowdown has had a ripple effect across the industry.