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Pan American Posts Q4 Output, Gives Outlook

Zacks Equity Research

Pan American Silver Corp. (NASD:PAAS) has achieved the top end of its silver production guidance for 2013, setting a new consolidated production record of 26 million silver ounces for the year, a 4% rise over 2012. It achieved a silver production of 6.8 million silver ounces in the fourth quarter, the second highest in the company’s history.


Pan American also exceeded its revised annual gold production guidance for 2013 with a record production of 46,200 ounces in the fourth quarter, a 42% rise over fourth-quarter 2012, bringing the total gold production for the full year to 149,800 ounces, a 33% rise over 2012.


In addition to silver and gold, Pan American also produced 42,100 tons of zinc, 13,500 tons of lead and 5,500 tons of copper, ahead of the company's full-year 2013 guidance for base metals production.


For 2013, silver production for La Colorada and Dolores mines were 4.6 million and 3.5 million ounces respectively. La Colorada and Dolores mines produced 26,000 and 652,000 ounces of gold respectively, for the same year. Alamo Dorado mine produced 5.1 million silver ounces and 176,000 ounces of gold in 2013.


Under the ongoing costs control measures and improved by-product production, the company has achieved  cash costs of $9.56 per ounce of silver in the fourth quarter and $10.81 per ounce of silver in 2013, 19% and 10% below the same periods in 2012, respectively. 


For 2014, Pan American expects silver production to rise modestly from 2013 and be in the range of 25.75– 26.75 million ounces. The company estimates gold production to increase to between 155,000 and 165,000 ounces, on the strength of higher gold grades at Manantial Espejo.


For 2014, Pan American expects its consolidatedbase metals production to be consistent with 2013 levels and to range between 39,500 tons and 42,500 tons of zinc, 12,700 tons and 13,700 tons of lead, and 5,200 tons and 5,700 tons of copper.


For 2014, cash costs are expected to be between $11.70 and $12.70 per ounce of silver, net of by-product credits, an increase at the mid-point of roughly 13% from 2013. It also expects gold price to be $1,200 per ounce for estimating gold by-product credits, 15% below the average realized price of 2013.


For 2014, Pan American forecasts capital expenditure to be $162.5 million, out of which $95.5 million will be spent on sustaining capital and a further $67 million on long term projects including La Colorada and Dolores. 


Pan American currently carries a Zacks Rank #3 (Hold).


Other companies in the mining industry with favorable Zacks Rank are Alexco Resource Corp. (AMEX:AXU), Hochschild Mining PLC (OTC:HCHDF) and Golden Star Resources, Ltd. (AMEX:GSS). While Alexco Resource holds a Zacks Rank #1 (Strong Buy), Hochschild Mining and Golden Star Resources retain a Zacks Rank #2 (Buy).

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