Pan American Silver Corp. (NASDAQ: PAAS) (TSX: PAAS) and Tahoe Resources Inc. (NYSE:TAHO) (TSX:THO) today announced that they have entered into a definitive agreement for Pan American to acquire all of the outstanding shares of Tahoe pursuant to a plan of arrangement, creating the world’s premier silver mining company. Shareholders of Tahoe will be entitled to elect to receive common shares of Pan American and/or cash in exchange for their shares of Tahoe. Additional consideration will be in the form of the right to a contingent payment in common shares of Pan American tied to the restart of the Escobal mine in Guatemala.

Highlights of the combined entity:

• World-class primary silver asset portfolio, diversified across the Americas.
• World’s largest silver reserve base and silver measured and indicated resource base.
• Largest publicly-traded silver mining company by free float.
• Superior operating metrics with industry-leading production, growth and margins.
• Robust growth profile with the restart of the Escobal silver mine following completion of the consultation process and community engagement. Escobal is a well built, turn-key operation with minimal capital outlay and development risk. The mine produced 21Moz of Ag at US$8.63/oz Ag AISC during its last four quarters of undisturbed production.
• Additional upside through expansion of the La Colorada mine following the recent exploration discovery and potential development of Navidad, one of the world’s largest undeveloped primary silver deposits.
• Gold assets well positioned to deliver low-cost production following recent capital investments.
• Management team with a 25-year proven track record of responsibly building and operating mines in Latin America.
• Strong financial position and access to capital, enabling the Company to advance key growth projects.
• Potential non-core asset sales and operating synergies to provide further strengthening of the balance sheet.

Transaction Terms

Pursuant to the Arrangement, Tahoe shareholders may elect to receive US$3.40 in cash or 0.2403 Pan American shares for each Tahoe share, subject in each case to pro-ration based on a maximum cash consideration of US$275 million and a maximum number of Pan American shares issued of 56.0 million, totaling US$1,067 million. The Base Purchase Price represents a premium of 34.9% to Tahoe’s volume weighted average price for the 20-day period ending on November 13, 2018.

In addition, Tahoe shareholders will receive contingent consideration in the form of contingent value rights that will be exchanged for 0.0497 Pan American shares for each Tahoe share, currently valued at US$221 million, and payable upon first commercial shipment of concentrate following restart of operations at the Escobal mine. The CVRs will be transferable and have a term of 10 years. The total consideration, including the Base Purchase Price and the Contingent Purchase Price, is US$4.10 per share representing a premium of 62.8% to Tahoe’s VWAP for the 20-day period ending on November 13, 2018.

At closing, existing Pan American and Tahoe shareholders will own approximately 73% and 27% of Pan American, respectively. Upon satisfaction of the payment conditions under the terms of the CVR, Pan American and Tahoe shareholders will own approximately 68% and 32%, respectively, of the combined company (based upon the number of Pan American shares outstanding following completion of the Transaction).

Each of Tahoe’s directors and senior officers, who together hold or exercise control or direction over approximately 5.3 million common shares of Tahoe, representing approximately 1.7% of Tahoe’s issued and outstanding common shares, have entered into support agreements with Pan American, agreeing to vote their Tahoe shares in favour of the Transaction.

Pan American has sufficient cash on hand and available under existing credit arrangements to finance the cash portion of the consideration for the Transaction.

Commenting on the transaction, Michael Steinmann, President and Chief Executive Officer of Pan American Silver, said: “The combination of Pan American and Tahoe will establish the world’s premier silver mining company with an industry-leading portfolio of assets, superior growth opportunities and attractive operating margins. This transaction doubles our silver reserves and further improves our cost profile. We will build on that strong foundation, optimizing these high-quality assets to deliver profitable growth and superior returns.”

Added Mr. Steinmann: “We are proud of our 25-year track record of operating mines in Latin America in an ethical, collaborative and sustainable way. Our reputation as a responsible operator reflects our ability to build successful partnerships with the communities around our operations, respecting the diversity of local populations and safeguarding the natural environment. We are looking forward to applying this experience at Escobal, and working with the local communities towards concluding the consultation process and gaining their support to enable the restart of the mine.”

Kevin McArthur, Executive Chair of Tahoe Resources, said: “This transaction allows our shareholders to participate in the creation of the world’s premier silver company with the contribution of the world-class Escobal mine to Pan American’s existing asset base. In addition to the upfront premium, we will continue to participate in the upside inherent in a restart of Escobal through the CVRs. Pan American’s excellent track record of developing mines and fostering strong, mutually beneficial relationships with local stakeholders gives us confidence that the combined company will be best positioned to maximize value for shareholders.”

Board of Directors’ Recommendations

The Board of Directors of Pan American has unanimously approved the Transaction. The Board of Directors of Tahoe, on the unanimous recommendation of a Committee of Independent Directors of Tahoe, has unanimously approved the Transaction. The Board of Directors of each of Pan American and Tahoe unanimously recommend that Pan American and Tahoe shareholders vote in favor of the Transaction.

BMO Capital Markets and Trinity Advisors Corporation have each provided a fairness opinion to the Independent Committee of the Board of Directors of Tahoe. CIBC World Markets Inc. and TD Securities have each provided a fairness opinion to Pan American’s Board of Directors.

Each of the directors and senior officers of Pan American, holding approximately 3.3 million of Pan American’s common shares, representing approximately 2.2% of Pan American’s issued and outstanding common shares have entered into agreements to support the Transaction.

Transaction Conditions and Timing

The Transaction will be implemented by way of a court-approved plan of arrangement under the Business Corporations Act (British Columbia) and will require the approval of: (i) 66 ²/₃% of the votes cast by the holders of Tahoe’s common shares present in person or represented by proxy, and (ii) if applicable, a simple majority of the votes cast by the holders of Tahoe’s common shares after excluding any votes of “related parties” and “interested parties’ and other persons required to be excluded under Canadian Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions, all at a special meeting to consider the Transaction.

The completion of the Transaction will also require approval of a simple majority of Pan American shareholders in respect of the share issuance in connection with the Transaction and approval from 66 ²/₃% of Pan American’s shareholders to an increase in Pan American’s authorized share capital.

The completion of the Transaction will also be subject to regulatory approvals and closing conditions customary in transactions of this nature. The Arrangement Agreement provides for customary deal-protection provisions, including mutual non-solicitation covenants and rights to match superior proposals. The Arrangement Agreement includes a reciprocal termination fee of US$38 million, payable by Tahoe to Pan American, or Pan American to Tahoe, as the case may be, under certain circumstances.

It is anticipated that the special shareholder meetings of Tahoe and Pan American shareholders to consider the Transaction will be held in January 2019. The Transaction is expected to close in the first quarter of 2019.

None of the securities to be issued pursuant to the Arrangement Agreement have been or will be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), or any state securities laws, and any securities issued in the Arrangement are anticipated to be issued in reliance upon available exemptions from such registration requirements pursuant to Section 3(a)(10) of the U.S. Securities Act and applicable exemptions under state securities laws.  This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities.

Advisors and Counsel

CIBC World Markets Inc. is acting as lead financial advisor to Pan American in connection with the Transaction and TD Securities has provided a fairness opinion to Pan American’s Board of Directors. Borden Ladner Gervais LLP is serving as Canadian counsel and Skadden, Arps, Slate, Meagher & Flom LLP is acting as U.S. counsel to Pan American.

Trinity Advisors Corporation is acting as financial advisor to Tahoe in connection with the Transaction and BMO Capital Markets has provided a fairness opinion to Tahoe’s Board of Directors. Cassels Brock & Blackwell LLP is serving as Canadian counsel to the Committee of Independent Directors of Tahoe and Neal Gerber Eisenberg LLP is acting as U.S. counsel to Committee of the Independent Directors of Tahoe.

Transaction Documents

Documents related to the Transaction will be available on Pan American Silver’s website at www.panamericansilver.com. The Company has posted a new corporate video “Creating a New Global Leader in Silver” on the website. Shareholder meeting circulars, which will incorporate material information related to the Transaction, are expected to be mailed to shareholders of Tahoe and Pan American on or about December 6, 2018.

About Pan American Silver

Pan American Silver Corp. is the world’s second largest primary silver producer, providing enhanced exposure to silver through a diversified portfolio of assets, large reserves and growing production. We own and operate six mines in Mexico, Peru, Argentina and Bolivia. Pan American Silver maintains a strong balance sheet, has an established management team with proven operating expertise, and is committed to responsible development. Founded in 1994, the Company is headquartered in Vancouver, B.C.

About Tahoe Resources

Tahoe Resources is a mid-tier precious metals company with a diverse portfolio of mines and projects in Canada, Guatemala and Peru. Tahoe is led by experienced mining professionals dedicated to creating sustainable value for all of its stakeholders through responsible mining.