Pan American Drops 10% On Plans To Acquire Tahoe: Look for More Risk Before A Cyclical Bounce

Summary:

• Pan American Silver Corp. PAAS traded 10 percent lower on Wednesday.
• The mining company announced that it would acquire Tahoe Resources Inc TAHO, which shot 48 percent higher on the news.
• While there may be additional near-term risk, we believe Pan American is setting up for a bounce.

Pan American Silver Corporation Stock Weekly Chart

Pan American agreed to purchase Tahoe for 1.07 billion in a cash and share deal, which will make the combined entity into one of the largest silver miners in the world. The combined entity will benefit from a new cost structure and will have twice the silver reserves.

"This establish the world's premier silver mining company with an industry-leading portfolio of assets, superior growth opportunities, and attractive operating margins," explained Pan American CEO Michael Steinmann.

In analyzing the market cycles for the company, we can see it is in a declining phase with a near-term bottom due in the coming weeks. As such, the was a good spot for a capitulation. Looking forward, our projection is for the stock to test $12, which will likely be a good spot to form a bottom.

Related Links:

Mid-Afternoon Market Update: Dow Tumbles Over 300 Points; Tahoe Resources Shares Rise On Acquisition News

Deutsche Bank Downgrades Pan American Silver to Hold