Pan American Silver (PAAS, Financial) continues to perform well in a tough silver and gold price environment. It produced 6.75 million ounces of silver and approximately 44,000 ounces of gold in the fourth-quarter 2014. However, these numbers were 1% and 5% lower than the numbers in the fourth-quarter 2013.
But, Pan American Silver did make progress in terms of production and costs of production for the full year. Its silver production rose 1% to 26.11 million ounces, while gold production increased 8% to 161,500 ounces for fiscal 2014. Also, $17.88 of all-in-sustaining costs per silver ounces sold was within its guidance of $17.00 to $18.00 for the year.
Key assets to drive growth
The company has a lot of upside potential with its assets across the world, particularly La Colorado and Dolores mines. Its La Colorado mine is one of the best higher grade silver assets in the world. This mine has proven and probable reserves of 6.5 million of silver ounces and around 75.4 ounces of gold. Pan American expects this mine to produce 4.90 to 5 million ounces of silver in 2015, with cash costs of $8.50 to $9.25. It plans to invest nearly $75 million to $80 million in this mine this year.
In addition, the company remains focused expanding this mine. This expansion will increase its overall production rate by 1,800 tonnes per day by the end of 2017. The company is currently busy constructing new mining infrastructure, including a new 600 meter deep extraction shaft that has capacity for hosting ore and waste of 2300 tonnes per day. Also, it is expanding its sulphide ore processing plant to 1500 tonnes per day from the current capacity level of 750 tonnes per day. This expansion plan includes a new 115kV power line, which is connected to the national electricity grid.
Moreover, its Dolores mine in Chihuahua, Mexico is another flagship asset with great potential. This is an open pit operation that produces silver and gold. This mine has proven and probable reserves of 68.78 million of silver ounces and about 1.68 million ounces of gold reserves. It expects this mine to produce about 4.00 to 4.17 million ounces of silver and 75.0 to 80.0 ounces of gold in 2015. Its all-in-sustaining costs per silver ounces sold are expected to be in the range of $8.50 to $10.0 for the year.
Apart from these two great assets, the company has plenty of prospective assets such as Alamo-Dorado, Huaron, Morococha and Manantial Espejo mines. These mines have strong reserves and are capable enough to drive its growth in the future.
Alongside, the company is making substantial progress with respect to its mine expansion plans with extra innovative underground trackless equipment. These are helping the company to incur record throughput of higher grade sulfide ore mined. These are in turn having positive impact on the base metal grads and recoveries, while increasing its silver production. These innovative tools are cost effective with relatively better production output.
Pan American has total mineral reserves of approximately 300 million ounces of silver and about 2.32 million ounces of gold. These numbers not only reflect its growth story in the future but also its capabilities to explore and add more reserves under its belt. These new reserves should boost confidence in the investors and shareholders.
Conclusion
Pan American Silver will bounce back soon. It is making various strategic investments so as to boost its production in the future. It has solid proven and probable reserves that will drive its growth in the long-run. Moreover, it is executing various costs saving measures that should improve its bottom line performance in the future. The analysts expect its earnings to grow 100% by next year.
