Canada-based Pan American Silver Corp has completed the sale of its first operating asset in the northern Andean region of Peru to Quiruvilca Ltd, a subsidiary of Southern Peaks Mining.

Under the terms of the sale agreement, effective 1 June 2012, Pan American sold 100% of its ownership interest in Pan American Silver S.A. Mina Quiruvilca (Quiruvilca), the company that owns the Quiruvilca mine.

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Pan American Silver Corp president and CEO Geoff Burns said the company’s first asset provided a cornerstone that enabled it to grow its silver production and strengthen its operating capabilities.

“Quiruvilca had become a higher-cost producer that was increasingly reliant on base metals and no longer fit in our portfolio of operating assets,” said Burns.

“After a thorough evaluation process, we are satisfied that the purchaser is capable of operating Quiruvilca in a professional and responsible manner, which will be a longer term benefit for the mine’s workers, the nearby communities, the local government and the environment.”

Quiruvilca Ltd has agreed to pay $2m, which is subject to certain conditions, in exchange for 100% of the assets and the assumption of all liabilities of Quiruvilca.

The company will also pay, on a quarterly basis, either a 2% net smelter returns royalty on all saleable metals, or the price difference between $23 per ounce of silver and the market price on 50% of Quiruvilca’s future payable silver production for the applicable quarter. This is based on an agreement that such payments will be capped at $3 million in any 12-month period until Quiruvilca generates $25 million.

Pan American will receive a net gain of about $11.3m on the disposition of the mine’s assets and liabilities.