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Pan American Silver (PAAS) Shares Dip Despite Q3 Earnings Beat

Shares of Pan American Silver Corp. PAAS have dipped 3% since the company reported an adjusted loss per share of 1 cent for third-quarter 2022 owing to weak precious metal prices as well as inflated costs. The Zacks Consensus Estimate was at a loss of 6 cents per share for the quarter. PAAS had reported adjusted earnings per share of 18 cents in the year-ago quarter.

Including one-time items, Pan American Silver reported a loss of 34 cents per share in the quarter against the year-ago quarter’s earnings of 10 cents.

Pan American Silver’s revenues declined 26% year over year to $339 million in the quarter under review. The figure included a negative $4.8 million adjustment on open concentrate shipments, related to the decline in metal prices towards the end of the quarter. The top line missed the Zacks Consensus Estimate of $352 million. The average realized silver price during the quarter was $18.76 per ounce, down compared with $24.16 in prior-year quarter. The average realized gold price was down 4% year over year to $1,705 per ounce.

Pan American Silver Corp. Price, Consensus and EPS Surprise

Pan American Silver Corp. Price, Consensus and EPS Surprise
Pan American Silver Corp. Price, Consensus and EPS Surprise

Pan American Silver Corp. price-consensus-eps-surprise-chart | Pan American Silver Corp. Quote

Operational Update

Silver production in the quarter was 4.5 million ounces, down 6% year over year. Gold production was recorded at 128.8 thousand ounces in the reported quarter, reflecting a year-over-year decline of 10%.

The Silver segment’s cash costs were $14.62 per ounce in the third quarter, up 23% from the year-ago period’s level. The segment’s all-in-sustaining costs (AISC) rose 10% year over year to $17.97 per ounce in the quarter.

The Gold segment’s cash costs were $1,184 per ounce, reflecting a 28% surge from the year-ago quarter. The segment’s AISC costs amounted to $1,614 per ounce in the July-Sept period, representing a year-over-year increase of 37%.

Pan American Silver reported a mine-operating loss of $21.8 million in the quarter. Earnings of $99 million were reported in the third quarter of 2021.

Financial Position

At the end of third-quarter 2022, Pan American Silver had cash and short-term investment balances of $18.2 million and $500.0 million available in its sustainability-linked credit facility. Total debt amounted to $68.5 million, related to lease liabilities and construction loans. Net cash generated from operations was $54.4 million in the quarter.

Guidance

Pan American Silver expects silver production for 2022 to be between 18 million ounces and 18.5 million ounces. Silver segment cash costs are expected to be above the high end of its prior stated range of $10.70 to $12.20 per ounce. AISC for the segment is also anticipated to be higher than the prior stated expectation between $14.50 per ounce and $16.00 for the ongoing year.

PAAS affirms 2022 annual gold production between 550,000 ounces and 605,000 ounces. Gold segment cash costs are projected to be above the high end of the previous range of $970 to $1,070 per ounce. AISC is also forecasted to be higher than the range of $1,450 per ounce to $1,550 per ounce.

Pan American and Agnico Eagle Mines AEM recently announced that they have made a definitive binding offer to the board of directors of Yamana Gold Inc. AUY. Per the offer, PAAS would acquire all of the issued and outstanding common shares of Yamana and the latter would sell certain subsidiaries and partnerships which hold interests in its Canadian assets, to Agnico Eagle, including the Canadian Malartic mine.

This deal became effective upon the termination by Gold Fields Limited GFI of the arrangement agreement between Yamana and Gold Fields entered into on May 31, 2022. Yamana will now have to pay a termination fee of $300 million to Gold Fields in accordance with the terms of the agreement. Pursuant to the terms of the Pan American-Agnico Arrangement Agreement, PAAS will fund $150 million in cash to Yamana to pay a portion of the termination fee.

This deal will add long-life, low-cost assets in Latin America, PAAS’ core operating region and boost its portfolio to 12 operating mines. Its silver production is expected to increase approximately 50% while gold production will double. Considering the strong cash flow generating abilities of these assets, the deal would strengthen PAAS’ financial position.

Price Performance

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Shares of Pan American Silver have declined 47% in the past year compared with the industry’s decrease of 32.8%.

Zacks Rank

Pan American Silver currently carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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Agnico Eagle Mines Limited (AEM) : Free Stock Analysis Report
 
Gold Fields Limited (GFI) : Free Stock Analysis Report
 
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