Shares of Pan American Silver (PAAS, Financial) had a great start in 2015 with the stock rallying around 30% in the month of January itself. However, the euphoria couldn’t last and the stock again fell to its 52-week low as the company posted its fourth quarter results, which reported year over year decline in revenue with widened losses. The numbers were mainly affected by the falling metal prices, which continue to be a matter of concern, not just for the company but the industry as a whole. Let’s see in detail all the factors that would affect its future stock performance that would guide investors to take a better stand on the company.
A look at the performance
During the quarter its revenue declined 15% from a year ago period to $163.1 million, while losses adjusted for impairment charges reduced to 14 cents a share compared to 51 cents last year. But considering the impairment charges on its assets the losses more than doubled to $3.48 a share. These charges are mounting heavy financial burden on its balance sheet, and has reached the point that the management is now considering whether or not to approve further quarterly dividends in the same amounts it paid previously. The company’s Board of Directors approved its first quarterly cash dividend of the year in the amount of $0.125 per common share. But how long will this continue is a matter of big question.
How the future could look like
On the positive side the company has a strong asset portfolio, which delivered record production during the quarter. For example, its La Colorado mine has now become the company’s largest silver producer, with its record 5 million ounces of silver produced in 2014. A Similar result was reported at its Dolores mine, which stood as the second largest silver producing mine during the year. In addition to these the company has other mines as well, with strong reserves, which will prove beneficial in the long run.
However, there seems to be no immediate relief from the falling metal prices even as negative cues are coming from the market. According to a report:
Silver remains in a downward trend. The strong dollar is driving silver prices lower. Bearish sentiments and market conditions are weak for silver. The market forecast for silver is also lower. Silver closed marginally lower on March 9, 2015. It was led by the consensus of a Federal Reserve rate hike due to strong labor data and a strong dollar.”
Going forward, the company projected its silver production for 2015, which is expected to fall between 25.5 million ounces to 26.5 million ounces at a cash cost ranging between $10.80 per ounce to $11.80 per ounce, which is more or less in line with the present numbers. Although the long term prospects of the company seem good, but it’s near term weakness cannot be neglected.
Conclusion
It currently does not have any signs of trailing or forward P/E because of its year over year losses. Therefore in the light of these facts it seems prudent for investors to watch this stock from side lines and see where the metal prices are heading as it will be a key deciding factor for its future performance.
