Silver bars
Silver bars Lisi Niesner/Reuters

Canada-based Pan American Silver Corp. said Monday it will pay about $1.5 billion in cash and stock to buy Minefinders Corp. Ltd., which owns a huge silver mine in northern Mexico, among other mining assets.

Once the deal is completed, Minefinders shareholders will hold a 33 percent stake in Pan American Silver, which will see its market capitalization rise to $4 billion from the current $2.38 billion.

The newly enlarged Pan American Silver will have eight operating mines plus a number of development and exploration projects. About 52 percent of production will be from Mexico, about 21 percent from Peru, 15 percent from Argentina and 12 percent from Bolivia.

Officers of the two companies said in a statement that the combined company expects silver production by 2015 to reach more than 50 million ounces, up from the combined silver production, as of Dec. 31, 2011, of 26 million ounces of silver.

The combined entity will have a mineral reserve base of 350 million ounces of proven and probable silver mineral reserves and three million ounces of proven and probable gold mineral reserves.

Minefinders' flagship project, the Dolores Mine in northern Mexico, has minable reserves of two million ounces of gold and 114 million ounces of silver.

Given the location of Minefinders' assets, we believe this acquisition is logical and consistent with Pan American's vision to become the largest, low-cost primary producer of silver in the world, Geoff Burns, CEO of Pan American Silver said in a statement.

Silver production from Minefinders' Dolores mine has increased almost 200 percent over the last year and we expect to see further increases into the future.

Shares of Pan American Silver fell $2.14, or 8.7 percent, to $22.58 percent in midday trading. Shares of Minefinders, which is based in Canada, rose $2.77, or 24.4 percent, to $14.12.