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Pan American Silver Adjusted Profit Declines But Just Above Estimates

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Pan American Silver Corp. (Nasdaq, TSX: PAAS), one of the world’s largest primary silver producers, reported a decline in third-quarter earnings Wednesday on lower output and prices for silver and gold.

Net earnings totaled $17.8 million, or 11 cents per share, compared with $43.4 million, or 28 cents, in the third quarter of 2016. The decrease was largely the result of lower revenue and higher exploration and project development costs, partly offset by lower income-tax expense, Pan American said.

Adjusted earnings were $23.3 million, or 15 cents per share, down from $46.7 million, or 31 cents, in the year-ago period. But while lower, adjusted earnings per share came in slightly above the 13-cent consensus estimate, according to BMO Capital Markets.

Revenue fell to $190.8 million from $233.6 million, reflecting less silver and gold sold and lower prices. This was partially offset by higher base-metals prices and sales volumes, Pan American said.

“In addition to fully funding our operations and growth capital projects, we repaid all of our bank debt and ended Q3 2017 with $186.3 million of cash and short-term investments," said Michael Steinmann, president and chief executive officer. "We see potential for robust cash-flow generation with the ongoing ramp-up in production from our mine expansions in Mexico."

Silver production of 5.89 million ounces was down from 6.36 million in the third quarter of 2016. Increasing production from the La Colorada mine expansion was offset by discontinued production from Alamo Dorado and decreased production at San Vicente and Manantial Espejo, Pan American said. Based on an anticipated ramp-up of Dolores production and improvement in silver grades at San Vicente, management reaffirmed its forecast production range of 24.5 million to 26 million silver ounces for 2017.

Gold output fell to around 40,800 ounces from 50,400 a year ago, primarily due to completion of open-pit mining at Manantial Espejo. Pan American reaffirmed its guidance range of 155,000 to 165,000 gold ounces for this year.

Zinc, lead and copper production were up from a year ago. Management increased its estimate for 2017 copper production by 46%, with modest adjustments for zinc and lead output.

For the third quarter, cash costs per payable ounce of silver, after by-product credits, fell to $3.12 from $4.89 recorded a year ago. Much of this reflects higher by-product credits from improved base-metals prices plus increased zinc and lead production at La Colorada and increased copper production at Morococha and Huaron, Pan American said. The company lowered its full-year cost estimate for the second time, now projecting cash costs to come in between $4.50 and $5.20.

Consolidated all-in sustaining costs per silver ounce sold rose to $8.69 from $6.34 a year ago. Pan American said this reflects the impact of net realizable value inventory adjustments and a decrease in silver ounces sold, partially offset by lower direct operating costs. Management reaffirmed its 2017 forecast range of $10.50 to $11.50.

The board of directors declared a quarterly cash dividend of $0.025 per common share, payable around Dec. 1 to shareholders of record as of the close on Nov. 20. The dividend was the same as at the end of the second quarter.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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