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Alberto Abaterusso
Alberto Abaterusso
Articles (1382) 

Pan American Silver Jumps 53% in Net Earnings

Stock soars 8% in trading after company beats consensus on earnings and revenues

August 09, 2018 | About:

Pan American Silver Corp. (NASDAQ:PAAS) has updated the market with results on operations and financials for the second quarter of fiscal 2018.

Pan American Silver posted 23 cents at the bottom line of its income statement as adjusted net profit per share and beat consensus by 9 cents. On a year-over-year basis, the result represented growth of 53.3%. The beat determined a 64.3% positive surprise.

The stock was up more than 8% in early Thursday trading to more than $17 a share.

The adjusted net income of 23 cents or approximately $35.43 million was backed on a revenue of $216.46 million. The turnover grew 7.5% from the comparable of fiscal 2017. Pan American also beat consensus on revenue by nearly $6 million.

These results of earnings and revenue will likely have a positive impact on the market value of the stock. It traded at $15.93 per share for a market capitalization of $2.45 billion. The chart of GuruFocus indicated that the current share price is underneath the 200, 100 and 50-SMA lines. The share price was nearly $2 off the 52-week low of $13.99 and 23% from the 52-week high of $19.56 per share. The common stock is composed of 153.26 million shares outstanding.

Pan American was able to beat consensus and show impressive growth as a result of strong performance at each of its mines.

At the La Colorada and Dolores mines in Mexico, the mining team has increased throughput with an undoubtful benefit for the quarterly economics of the miner since fixed costs were spread over a larger base. The achievement was a result of successful expansion activities the team carried out at the two Mexican sites.

The company is currently producing the metal at six mines, totaling 6.29 million ounces of silver and 53,370 ounces of gold in the second quarter. The output is the following: La Colorada in Mexico: 29.7% silver and 2% gold; Dolores in Mexico: 17.3% silver and 74.5% gold; Huaron in Peru: 11.8% silver and 0.3% gold; Morococha in Peru: 10.3% silver and 1.2% gold; San Vincente in Bolivia: 15.6% silver and 0.3% gold; Manantial Espejo in Argentina: 15.3% silver and 21.8% gold.

A year-over-year upside of 3.7% in the average realized price of $1,304 per ounce of gold sold was supportive, as well as a record-low cash cost of 92 cents per payable ounce of silver and a 41.5% growth in the production of silver. The higher volume of silver produced and sold in the second quarter more than offset the decline in the average realized price of $16.40 per ounce of silver sold.

Pan American Silver also produces and sells gold and base metals. In the second quarter, Pan American Silver produced 14,900 tons of zinc, 5,100 tons of lead and 2,000 tons of copper. Zinc production increased 1,200 tons from the prior-year quarter while lead and copper were down 7.3% and nearly 43%. The grey metal is the main income source and represents its primary production source. The miner is on track to reach a volume of 25 million to 26.5 million ounces of silver in full fiscal of 2018. Gold production is predicted at 175,000 to 185,000 ounces.

The company lowered the guidance on cash costs by 25% to a range of $2.8 to $3.8 per ounce of payable silver and by 7.6% for the All-in-Sustaining-Cost, or AISC, per ounce of silver sold to a range of $8.50 to $10.

The cash flow from operations was robust with inflows of nearly $67 million, a 56% growth from the prior-year quarter.

As of June 30, Pan American Silver has a total liquidity of $550 million. The amount included line of credit and cash on hand and securities. The total debt was $9.7 million.

Pan American Silver has a recommendation rating of 2.3 out of 5 and an average target price of $20.10 per share.

The stock has a forward annual dividend of 14 cents yielding 0.78%. The next quarterly cash dividend of 3.5 per share will be paid on Aug. 31 to those shareholders who will have acquired ordinary shares of Pan American Silver not later than Aug. 20.

(Disclosure: I have no positions in Pan American Silver Corp.)

About the author:

Alberto Abaterusso
If somebody asks what being a value investor means, Alberto Abaterusso would answer, “The value investor is not just the possessor of the security that represents the company, but he is the owner of that company. As an owner of the company the value investor is actively involved in the dynamics of that company and his first concern is how to have sales progressively growing. Also, the value investor is probably one of the most demanding persons in the world concerning sales.”

Abaterusso is a freelance writer based in The Netherlands. He primarily writes about gold, silver and precious metals mining stocks. His articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. Alberto holds an MBA from Università degli Studi di Bari (Italy), Aldo Moro.

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