When Pan American Silver (PAAS) decided to sell Juby at the end of 2019, it solicited statements of interest and ran a normal sales process in which many companies took part. Up to 12 went under CA and while they didn’t all eventually bid, several did. Then came Covid-19 and the process, well underway come the end of 1q20, was put on ice. Nothing was heard for a while, then one fine day PAAS told those participating that it had changed its mind on selling Juby (which, to be accurate, is the sale of the Juby project plus its 25% of the “Knight JV” project next door to Juby). That is of course PAAS’s right and with gold at that point moving up hard, it stands to reason that precious metals assets would be re-priced upwards. PAAS would be a bit silly to sell a gold asset in 2q20 at 4q19 prices, no?
However, it seems they are a bit silly. On May 21st Pan American Silver decided to sell Juby. Which is of course weird, but the way it happened was even weirder:
- Pan American Silver (PAAS) decided that the winner of the tender to buy Juby was a private holding company called “South American Resources Corp” (SARC). SARC agreed to pay PAAS U$10m (and again for accuracy, that was U$9.5m for Juby and U$0.5m for the adjoining Knight JV 25%)
- At the same time, SARC was bought by Caldas Gold (CGC.v) for 20m shares of CGC.
- In other words, the buyer of Juby (CGC) paid 20m shares and $10m cash, a total of around U$45m at today’s prices. The seller of Juby (PAAS) received $10m cash. And the 20m shares of CGC currently worth U$35m were given to the private owners of the private company SARC, their identities still a mysterious secret.
In short, PAAS has failed in its fiduciary duty. Instead of negotiating directly with CGC and getting a package worth U$45m for its land assets, it decided to enter and close a deal in which it got $10m…from the exact same seller! What’s more, this desk also is reliably informed that even during the original sales process there were other bids that were substantially higher than the U$10m accepted by PAAS. At this point, you too are probably wondering about the names of the principals at SARC, because it’s for no small reason they want to keep themselves out the picture. The two this desk can confirm are Brian Paes-Braga (Frank Giustra’s mini-me, he who couldn’t keep his big mouth shut) and Tim Young, close friend and business associate of PAAS chairman Ross Beaty. These people have questions to answer.
UPDATE: Could not agree more with the comment from Canuckman, below:
The corporate governance on this deal seems to be non-existent. How could any one of the Caldas board members approve this? Issuing US$35 million in stock so you can acquire a project for $10 million more? Insane. And same for the Pan American board. You approve the sale for $10 million and miss out on the extra US$35 million? Considering the fees these corporate clowns are paid for being blind a___oles – this is really incredible. Did they get kick backs to vote?