Pan American Silver (PAAS, Financial) recently approved its fourth quarter cash dividend for the year of $0.125 per common share, and made its total cash dividend distribution for fiscal year 2014 of $0.50 per common share.
Pan American has been successfully able to minimize the negative impacts of the rising cash costs into its quarterly and yearly dividends.
A closer look at operations
The Peruvian operations of Pan American transformed significantly from its maximum-cost operations to approximately its minimum-cost operations. Both Morococha and Huaron registered quarterly cash costs less than $8 per ounce, net of by-products.
In the third quarter, the company’s Peruvian operation witnessed a significant enhancement in base metal grades, mainly copper where nearly 60% growth in production was recorded over last year. Year-to-date, the production of copper, lead and zinc are all exceeding the company expectations and Pan expects to exceed its earlier production guidance declared at the start of the year.
The improvement in both the overall cash costs and production grades is believed to robustly position Pan ahead of its key competitors and allow it greater room to expand its top and bottom lines.
Pan looks attractive to the investors considering it's the fourth-largest silver stock by market cap. It has also added huge silver to the reserves than produced in the last 10 years, adding roughly 270 million ounces of silver, which is 20% greater than the amount of silver mined. The exploration and addition of fresh reserves combined with comparatively smaller cash costs and a robust balance sheet, make Pan an excellent choice for short-term investments considering the solid expectations of the increasing silver price.
Key mines to drive growth
The Dolores mine is situated in Chihuahua, Mexico and is 100% owned by it being an open-pit mine that produces gold and silver dore. In the beginning of 2015, Dolores had established and possible reserves of 1.685 Moz of gold and 68.78 Moz of silver.
The Alamo-Dorado mine of Pan is situated in Sonora, Mexico and is 100% owned by it being an open-pit mine that also produces gold and silver dore. In the start of 2015, Alamo-Dorado had recognized and feasible reserves net 37.2 koz gold and 8.23 Moz of silver.
The solid probable reserves of gold and silver at its key mines of Dolores and Alamo-Dorado are estimated to drive increased profitability for the mining major.
The La Colorada mine of Pan is located in Zacatecas, Mexico and is 100% owned by it being an underground mine that produces gold and silver dore along with solid zinc, lead and silver concentrates. The verified and expected reserves are 76.42 Moz silver and 72.8Koz gold at the beginning of 2015.
The Huaron mine of Pan is situated in Cerro de Pasco, Pasco Province, Peru and is 100% owned by it being an underground mine that produces silver contained copper, lead and zinc concentrates. The established and possible reserves at the start of 2015 are 58.97 Moz of silver.
The robust expected reserves of silver and gold mines of La Colorada and Huaron are expected to significantly benefit Pan in the long run.
The Morococha mine of Pan located in Yauli Province, Pasco, Peru and is 92.3% owned by it being an underground polemically mine that produces silver contained copper, lead, and zinc concentrates. The confirmed and likely reserves at the beginning of 2015 are net 32.03 Moz of silver.
The San Vicente mine of Pan is situated in Sud-Chicas Province, Potosi, Bolivia and is 95% owned by it being an underground mine that produces gold and silver dore. The established and possible reserves in the start of 2015 are total of 33.55 Moz of silver.
The impressive reserves of gold and silver mines of Morococha and San Vicente are believed to significantly enhance the company’s top line and bottom line, going forward.
The Manantial Espejo mine of Pan is located in Santa Cruz, Argentina and is 100% owned by it being an underground/ open pit mine that produces gold and silver dore. The confirmed and feasible reserves in the beginning of 2015 are 222.6 Koz of gold and 15.48 Moz of silver.
Conclusion
Overall, Pan doesn’t have a trailing P/E as it is reeling with poor commodity prices. Still, the forward P/E of 512.00 illustrates solid earnings growth. However, the company performance looks unsatisfactory in long-term with declining earnings against the solid long-term industry earnings growth. Therefore, the short-term investors can pick the stock encouraged by the recovering silver and gold prices and near term growth plans of the company.
