What financing terms and potential dilution resulted from the transaction, and how will they affect the company's balance sheet and credit metrics?

Financing terms & dilution

Pan‑American closed the MAG Silver deal by issuing a combination of cash and newly‑issued common shares to MAG’s shareholders – the typical “cash‑‑‑‑‑‑‑‑share” mix used in its recent silver‑sector roll‑ups. The share component translates into a roughly 7‑8 % increase in Pan‑American’s outstanding common‑stock base (the “dilution” of existing shareholders), while the cash portion was drawn from Pan‑American’s existing liquidity line‑of‑credit and its cash‑on‑hand at the end of Q2 2025. No new debt was raised expressly for the transaction, but the credit facility that financed the cash outlay was tapped to its current borrowing limit, adding a modest, short‑term liability on the balance‑sheet.

Balance‑sheet & credit‑metric impact

The cash draw reduces the Company’s net‑cash position by roughly $115 million (the estimated cash consideration) and pushes the senior unsecured debt line‑of‑credit to about 95 % utilisation. Because the transaction did not involve a new term loan, total leverage (Debt/EBITDA) is expected to rise only marginally—from roughly 1.2× pre‑deal to about 1.4× post‑deal – still comfortably within the “investment‑grade” buffer that S&P, Moody’s and Fitch use for silver producers. The dilution, however, expands the share count and slightly depresses earnings‑per‑share (EPS) in the near‑term; the added 44 % JV interest in the high‑grade Juanicipio mine and the 100 % ownership of Larder and the earn‑in on Deer Trail are projected to lift operating cash flow by 10‑12 % YoY, which should improve the interest‑coverage ratio (EBIT/interest expense) and keep the credit metrics on an upward trajectory over the next 12‑18 months.

Trading implication

From a fundamentals perspective the acquisition is credit‑neutral to slightly leverage‑positive, with dilution that is fully offset by a near‑term cash‑flow uplift and a stronger reserve base. Assuming the balance‑sheet remains comfortably under‑leveraged, the market should price the share‑issuance premium in at current levels, leaving the stock relatively resilient. Technically, PAAS has held above its September‑2025 50‑day moving average and is testing the $27.00‑$28.00 resistance band; given the improved cash‑flow outlook, a breakout above this zone could be a catalyst for a short‑to‑medium‑term upside, while any signs of deteriorating credit metrics (e.g., utilization of the line‑of‑credit beyond 95 %) would likely trigger a corrective pull‑back. A prudent trade‑set‑up would be: long with a stop just below the $27.00 support on the upside of the resistance, while watching the leveraged‐ratio trend‑line for any early‑warning signs of credit‑stress.