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Pan American Silver Corp. Message Board

  • tradingexpert4me tradingexpert4me Feb 16, 2013 6:42 PM Flag

    DOWNSIDE could easily take us below 15, but I wouldn't count out a new 52 week low either.


    Growth is a real issue and I don't see a reversal anytime soon.


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    • dcpayne1 Feb 18, 2013 10:15 AM Flag

      Don't you just love the leverage? Now that we're getting bullish, I am considering using the leverage that has put the odds much more in my favor! Bullish at bottoms? Have been since puberty!

      Sentiment: Strong Buy

    • I see my reply was incomplete without addressing “growth” issue.

      Shortly speaking, this sector is not a growth anymore (it was in 2003-08). It is value time outside, meaning different rules of the investment game. Playing in value sectors (harshly depressed stocks with miserable valuations) means buying at rock bottom. The latter includes safety point: you buy equities protected against default, i.e. having strong balance sheet and positive cash flow.

      It means no more room for dream buying. This sector has too many dream plays (no revenues, no cash, silver goes to $50 tomorrow and everyone becomes a billionaire). It is quite possible that attrition will start soon and it will not be nice. It is better to play it safe now. Stronger sector players will survive and, likely, take advantage of weakling misfortunes.

    • What’s your point? Yes, this is stock market; anything can happen and this sector is under big pressure. If silver price continues trending down then all silver stocks suffer. Also, PAAS can miss earning estimates and announce Navidad write-off.

      At the same time, PAAS has one of the strongest fundamental sets in this industry. It is profitable (no gimmicks) and mining costs are under control. Colorada and Dolores should see increase in production during next 1-2 years and Peruvian costs peaked in 2012, promising gradual decrease and return to profitability in Peru. It leaves Argentinean and Bolivian operations that did not contribute essential profits anyway.

      PAAS has one of the strongest balance sheets in the industry. Net cash position is about $500M and it is growing. At the same time, company does not have big capital expenditures in near term. Capex is projected at $157M in 2013; it is very modest comparing to cash generated by operations.

      It is estimated that company makes $1.64/share (GAAP-adjusted earnings) in 2013, i.e. about $250M. About $30M will be paid out as dividends. Annual depreciation is about $120M. It means about $340M in cash to use by company thus making about $180M cushion over capex spending, just in case earnings are lower than expected. Many companies in the sector do not create enough cash to cover capex.

      The numbers above indicate safe investment, comparing to peers (many of the latter are on brink of destruction). It means in market terms that any drop in stock price here will be met by aggressive buying.

15.10+0.51(+3.46%)May 6 4:00 PMEDT