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venerdì 31 luglio 2015

SomaBull: Pan American Silver On My Buy List

La Colorada, Zacatecas, Mexico

Seeking Alpha - Pan American Silver: On My Buy List
By Soma Bull - Jul. 27, 2015


- If I didn't believe that silver (and gold) would eventually make a substantial rebound, I would have no desire to be investing in this sector.

- If we compare cash/debt positions to other primary silver producers, you can see how formidable Pan American's balance sheet is in relation to the others.

- La Colorada and Dolores are flagship operations for Pan American, and these two mines have aggressive expansion projects in the works.

- A few of the company's other operations are in decline and are at/near the end of their mine life.

(...) No silver company really makes sense to own for the long term if silver is going to trade under $15 per ounce (which is where it is today) and remain there indefinitely.  All-in sustaining costs across the industry are averaging above that level.  In other words, we are now at the "no profit" threshold for most of these silver miners. That includes Pan American.

Trying to do valuation analysis on these companies becomes pointless, especially the more silver declines. Not much really "works" at $15 per ounce, and if the white metal moves down to $10-$12, then you might as well throw typical valuation metrics out the window. 

(...) There is still silver in the ground, and it's worth substantial sums. 

If it takes $15-$25 per ounce silver to extract economically, then so be it, but the valuation of the operation and/or deposit isn't zero simply because it can't produce a profit at current prices. 

Especially when it will produce one if silver moves up just a few bucks.

(...) First and foremost, Pan American has one of the best and cleanest balance sheets amongst its peers. Cash and short-term investments stood at $292.4 million, while debt (including capital leases) was just $65.3 million.

If we compare its cash/debt position to other primary silver producers, you can see how formidable Pan American's balance sheet is in relation to the others. 

This is a company with a substantial advantage not only in terms of being able to survive a very low silver price environment for an extended period of time, but also because it has excess capital that it can put to work

Valuations are cheap, and they will become even more tantalizing if metal prices fall further. So there are plenty of acquisition opportunities that Pan American can/should take advantage of using existing cash instead of diluting shares. Something most other companies aren't in the position to do at the moment.

Pan AmericanCoeurFirst MajesticHecla
Cash/Short-term Investments$292.4 m$180 m$45 m$196.2 m
Debt$65.3$514$24.3 m$520.7 m
Net Debt-$227.1$334 m-$20.7$324 m

(...) The Preliminary Economic Assessment estimates that La Colorada's annual production will increase 64% to approximately 7.7 million ounces of silver in 2018, with cash costs declining as well.

Over the next 13 years, from 2015-2027, La Colorada will produce over 80 million ounces of silver, all at a low AISC of around $12-$13 per ounce.

(...) We are looking at a 2-year time frame from start to finish for this expansion project at Dolores. When complete, it is expected to increase silver production by approximately 40% from 4.5 million to 6.3 million ounces, and gold production by 52% from 135,100 to 205,700 ounces in the first five years. This is why I mentioned earlier that gold production for Pan American could become a bigger percentage of total output.

The expansion project is also expected to provide significant operating costs savings. In the first five years, cash costs will be negative $11.28 per silver ounce, using the gold as a by-product credit. It will be negative $8.46 per silver ounce, net of by-product credits, over the remaining life of the mine.

(...) Given what's occurring at Pan American's two flagship operations, investors might assume that the company's production will be growing over the next several years. But it actually might not, instead we could just see stable output during that time.

The problem, and I touched on this a little in a previous article on Pan American, is a few of the company's other operations are in decline and are at/near the end of their mine life.

(...) But while Pan American might not be one of the lowest costs producers ($16 per ounce AISC expected for 2015), it's certainly not in the high end of the cost curve either. Rather, it's more middle of the pack.

A primary silver producer like First Majestic has a lower AISC, as they are projecting costs of $13.50-$14.96 per ounce for 2015. But it's not really a better company than Pan American.


L'articolo contiene una lunga analisi di cui la roba qui sopra è solo un assaggio, leggi tutto QUI

Fra l'altro ecco una bella tabellina che mostra l'aumento generalizzato delle produzioni minerarie d'argento fra  2013 e 2014

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