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Pan American Silver Corp. Message Board

  • polegoat polegoat May 21, 2001 6:16 PM Flag

    lock in a profit

    us little people generally can't short shares under $5, but what about institutions and those clients who have a commitment for a certain number of shares out of the institutions. If you're a good client sell short now, lock in a quick 25% profit and then use the newly issued shares to cover the short.
    As long as there is margin coverage in the account for the purchase of the new shares most
    firms margin depts would consider it IMO a covered position. Precious metals still engender a lot of skepticism with the general investing public. Another possible play, sell short and allow the small continuous sales to drive the price down, close the short just prior to share issuance and if precious metals are still in vouge, ride the rebound up again when the selling pressure is gone. I'm not saying this is happening, just offering food for thought.

    I sure would like more information on how, when and why this shelf offering came when it did.

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    • It looks like they are in a negative working capital position but appear to be in a position to borrow based on the balance sheet. Perhaps there is not enough interest coverage to get a decent loan?

      • 1 Reply to molipha
      • PAAS does use debt financing to build out mine properties. The problem with debt is that the lenders usually want covenants that require forward sales of silver. PAAS policy allows forward selling of by-product metals e.g. zinc, but NEVER of silver. (That's why we're all long PAAS, right?) So there are many times when PAAS says no thanks to debt because of the strings attached. This is why La Colorada is not being built out full-scale right now -- La Colorada could have been debt financed but this would have required hedging of silver.

        No shareholder likes to see dilution, but the equity raise is probably the best way to go in a market in which silver languishes well below US$5 for the indefinite future. The cash raised can be used not just to sustain operations, but to acquire additional, attractive properties in the current distressed market. If management uses the $9 million proceeds of this secondary offering as well as they have used cash to buy properties in the past, then we who are diluted now will be repaid many times as the price of silver rises, as eventualy it must.

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