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Alberto Abaterusso
Alberto Abaterusso
Articles (1382) 

Pan American Silver Falls on Declining Revenues

Lower metal prices caused the company to post a loss

November 08, 2018 | About:

Pan American Silver Corp. (NASDAQ:PAAS) plunged 7.03% to $14.01 per share on Nov. 7 after releasing third-quarter results on Tuesday.

The silver miner posted a non-GAAP loss of 3 cents per share and a GAAP loss of 6 cents per share. Analysts were hoping for non-GAAP earnings of 4 cents per share and GAAP earnings of 7 cents per share.

Earnings declined from the year-ago quarter as a result of depressed metal prices, which have significantly impacted the net realizable value of adjustments in the inventory and the settlement adjustments on concentrate shipments.

Revenue declined 1.6% to $187.7 million, missing expectations by $8.03 million.

Because of lower metal prices, the operating cash flow decreased 35% to approximately $41.7 million. Regardless, it was strong enough to determine an increase in the liquidity available in cash on hand and short-term securities that stands at $252.7 million as of Sept. 30. The amount of total liquidity reflects a 1% upside from the end of the previous quarter.

During the third quarter, the company produced 6.3 million ounces of silver at an all-in sustaining cost of $13.73 per ounce, or $10.05 per ounce when non-cash net realizable value of adjustments in the inventory is not taken into consideration. The company also produces gold, zinc, lead and copper. The miner produced 42,100 ounces of gold, 16,700 tons of zinc, 5,700 tons of lead and 2,600 tons of copper.

The mining company is on track to produce 25 million to 26.5 million ounces of silver and 175,000 to 185,000 ounces of gold in full fiscal 2018, as previously guided. The all-in sustaining cost is forecasted to be $8.50 to $10 per ounce of silver sold.

Pan American Silver’s board of directors also authorized a quarterly cash dividend of 3.5 cents per ordinary share. Shareholders of the company will be paid on Nov. 30. To benefit, investors must be on the company’s record no later than Nov. 19; the ex-dividend date is scheduled for Nov. 16.

The forward yield is 0.99% according to the share price at market close on Nov. 7.

In addition, Pan American Silver announced the Joaquin project in Argentina will be completed in two months.

After Wednesday’s decline, the share price is now below the 50-day simple moving average line, as illustrated in the GuruFocus chart below. The share price decreased 7% for the 52 weeks through Nov. 7 and the market capitalization is approximately $2.32 billion. The 52-week range is $13.91 to $18.75.

The 14-day relative strength indicator is 28, suggesting it is oversold.

The price-book ratio is 1.31 versus an industry median of 1.74.

The recommendation rating is 2.3 out of 5. The average target price is $18.92 per share.

The stock was up 1.03% at $14.15 in early trading on Thursday.

Disclosure: I have no positions in any securities mentioned in this article.

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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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