Pan American Silver Corp. (PAAS, Financial) fell 1.36% to $14.50 per share in after-hours trading on Feb. 20 after releasing fourth-quarter and full-year 2018 results.
For the quarter, the silver miner posted a non-GAAP loss of 1 cent per share and a GAAP loss of 42 cents per share. Analysts were expecting non-GAAP earnings of 2 cents per share and GAAP earnings of 3 cents per share.
Revenue declined 23.3% to $173.4 million, missing expectations by $8.36 million.
For the year, the Canadian mining company recorded a 4% year-over-year decline in total revenue to $784.5 million, a 31% decrease in operating cash flow to $155 million and a 23.5% reduction in adjusted net profit to $59.4 million, or 39 cents per share.
The production of silver was 24.8 million ounces in 2018 versus 25 million ounces in 2017. Excluding the effects from adjustments, the all-in sustaining cost was $10.73 per ounce of silver compared to $10.79 per ounce the year prior.
Lower silver and zinc prices and lower production contributed to the weaker financial results.
From its six assets located in Mexico and Latin America, Pan American Silver produced 178,900 ounces of gold, which was flat on a year-over-year basis, and 64,800 tons of zinc, a 17.2% increase. In addition, the company produced 22,400 tons of lead, which was a 4.2% increase from the prior year, and with 9,800 tons of copper, a 26.9% decrease.
For 2019, the miner expects to produce between 26.5 million and 27.5 million ounces of silver and between 162,500 and 172,500 ounces of gold. The company's production profile will be positively impacted by the start of production at the COSE and Joaquin mines in Argentina following the successful completion of two mineral projects' development.
The AISC is forecasted to average around $11.55 per ounce of metal. The company plans to use up to $120 million in expenditures in 2019, of which 25% will be used as growth capital.
Regarding the balance sheet, the company has $121.5 million in cash on hand and securities and $6.7 million in total debt as of Dec. 31.
In regard to its acquisition of Tahoe Resources (TAHO), which was announced on Nov. 14 and is nearing completion, President and CEO Michael Steinmann said it "will result in a more diversified Pan American with a strong portfolio of cash-generating assets and superior growth opportunities."
Tahoe Resources is a Reno, Nevada-based mining company with metallic interests in the Americas. The company has proven and probable mineral reserves totaling 3.721 million ounces of gold, 287.633 million ounces of silver, 196,000 tons of lead and 320,000 tons of zinc as of Jan. 1, 2018.
The proven and probable reserves of Pan American Silver account for 90 million tons of mineral as of Dec. 31. From this total volume, silver will be produced at 94 grams of metal per ton of mineral, gold will be milked at 0.76 grams of metal per ton of mineral, zinc at 2.98%, lead at 1.31% and copper at 0.45%.
Pan American Silver’s board of directors also authorized a quarterly dividend of 3.5 cents per share. Shareholders will be paid on March 15. To benefit, investors must be on the company’s record no later than March 4; the ex-dividend date is March 1.
Based on the closing share price of $14.7 on Wednesday, the forward dividend yield is 0.93%.
The share price declined 6% over the past year through Feb. 20. It is now below the 200-day simple moving average line, but slightly above the 100 and 50-day lines. The market capitalization is approximately $2.24 billion. The 52-week range is $12.12 to $18.75.
The 14-day relative strength index is 53.26, suggesting the stock is neither oversold nor overbought.
The recommendation rating for Pan American Silver is overweight with an average target price of $18.48 per share.
Disclosure: I have no positions in any securities mentioned.
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