Pan American Silver — Mixed Q2 results, Escobal progress

Pan American Silver (NASDAQ: PAAS)

Currency in USD

Last close As at 02/02/2023

USD18.47

−0.28 (−1.49%)

Market capitalisation

USD3,948m

Research: Metals & Mining

Pan American Silver — Mixed Q2 results, Escobal progress

PAAS reported mixed Q222 results that were heavily affected by one-off items stemming from the grade and production underperformance at Dolores. As a result, the company incurred US$155m in non-cash impairments and inventory revaluation charges. FY22 production is now guided towards the lower end of the original expectations and the gold segment cash costs at the top end. On a positive note, the annual mineral resources update revealed good resource replacement rates in the silver segment, and the company announced that Escobal is moving into the next stage of the ILO 169 consultation process. We have revised down our estimates, lowering our valuation to US$27.5/share.

Written by

Andrey Litvin

Supervisory analyst

Metals & Mining

Pan American Silver

Mixed Q2 results, Escobal progress

Quarterly results update

Metals & mining

18 August 2022

Price

US$16.8

Market cap

US$3,536m

Net cash (US$m) at Q222, excluding short-term investments

131.6

Shares in issue

210.5m

Free float

100%

Code

PAAS

Primary exchange

TSX

Secondary exchange

NYSE

Share price performance

%

1m

3m

12m

Abs

(8.1)

(24.1)

(34.0)

Rel (local)

(16.9)

(27.4)

(31.3)

52-week high/low

US$29.95

US$16.79

Business description

Pan American Silver is one of the largest global primary silver producers and a sizeable gold miner with operations in North, Central and South America since 1994. The company owns eight producing operations, the currently suspended top-tier Escobal silver mine and a number of large-scale advanced exploration projects.

Next events

La Colorada Skarn mineral resources update

Q322

Analysts

Andrey Litvin

+44 (0)20 3077 5700

Lord Ashbourne (formerly Charles Gibson)

+44 (0)20 3077 5700

Pan American Silver is a research client of Edison Investment Research Limited

PAAS reported mixed Q222 results that were heavily affected by one-off items stemming from the grade and production underperformance at Dolores. As a result, the company incurred US$155m in non-cash impairments and inventory revaluation charges. FY22 production is now guided towards the lower end of the original expectations and the gold segment cash costs at the top end. On a positive note, the annual mineral resources update revealed good resource replacement rates in the silver segment, and the company announced that Escobal is moving into the next stage of the ILO 169 consultation process. We have revised down our estimates, lowering our valuation to US$27.5/share.

Year end

Revenue (US$m)

EBITDA
(US$m)

EPS*
(US$)

DPS
(US$)

P/E
(x)

Yield
(%)

12/20

1,338.8

469.1

0.57

0.22

29.5

1.3

12/21

1,632.8

593.2

0.60

0.34

28.0

2.0

12/22e

1,614.9

400.1

0.17

0.47

98.8

2.8

12/23e

1,581.1

509.5

0.61

0.64

27.5

3.8

Note: *EPS is normalised, excluding exceptional items.

Q222 distorted by non-cash one-off items

PAAS reported Q222 EBITDA of US$18m and an adjusted net loss of US$6.5m. All operations performed in line with management expectations except for Dolores, whose underperformance resulted in write downs and the suspension of the underground mining. PAAS expects FY22 production to be at the lower end of the maintained guidance and second half weighted. Cost guidance for the silver segment remains unchanged, while the gold segment AISC expectations were raised. We have updated our estimates to reflect the Q2 results, lower commodity prices and slightly higher costs, reducing our FY22 EBITDA by 29%. The company remains well capitalised and declared a Q2 dividend of US$0.11/share.

Strong silver replacement rates; Escobal progress

As of June 2022, the company’s total measured and indicated resource saw an increase of 21Moz of contained silver (Ag), while the total inferred resource was 47Moz higher compared to June 2021. These increases came on the back of the strong resource replacement rates at the company’s producing silver operations, with La Colorada adding an impressive 58Moz of contained Ag in total resources. At Escobal, the ILO 169 consultation process has progressed to the main consultation stage, with the pre-consultation phase completed after eight meetings.

Valuation: Lower on commodities, production, costs

We lower our valuation of PAAS from US$29.5/share to US$27.5/share on the back of the revised earnings estimates. While investors’ focus at present seems to be mainly on the near-term operational challenges, cost inflation and the weak global economy, silver’s longer-term role as one of the energy transition metals and beneficiaries of decarbonisation should not be overlooked. We believe that PAAS represents an attractive exposure to the commodity due to its quality project portfolio and the relatively long life and low-cost nature of its core silver operations.

Mixed Q222 results marred by one-off items

PAAS’s Q222 results were affected by higher costs, lower commodity prices and sales as well as non-cash one-off items. The company saw revenue falling 22.6% q-o-q to US$340.5m and EBITDA coming in at just US$17.9m, a reduction of 86% versus Q122. Sequentially, production was broadly flat for both silver and gold, however sales were down 13.0% q-o-q for silver and 19.4% for gold. Coupled with the industrywide cost pressures and a single-digit quarterly reduction in silver and gold prices, this has resulted in a visible squeeze in profits (see Exhibit 1). At the project level, all operations performed broadly in line with management expectations, except for Dolores, which underperformed in terms of both open-pit grades and production and where the decision was taken to suspend underground mining operations due to cost escalation. As a result, PAAS incurred a one-off adjustment to the net realisable value of inventories (NRV) and an impairment charge, in total amounting to US$155m. Adjusted for these items, the Q2 net loss was US$6.5m.

While the P&L was heavily affected by one-off items, the company’s cash flow performance in Q2 was more positive, as it reported operating cash flow before tax of US$63m (US$21m post tax). However, with capex of US$72m, the free cash outflow for the quarter was US$51m.

PAAS remains well capitalised with a net cash position of US$178m (including short-term investments of US$46.4m and gross cash of US$195m) at end June 2022 and US$500m in an available sustainability linked credit facility. In line with its dividend policy, the company declared a cash dividend of US$0.11/share for the quarter.

Exhibit 1: PAAS Q222 results summary

 US$m

Q222

Q221

Difference, %

Q122

Difference, %

Silver production, koz

4,537

4,484

1.2

4,619

-1.8

Silver sales, koz

4,252

4,044

5.1

4,890

-13.0

Silver segment cash cost, US$/oz

12.1

12.7

-4.8

10.2

18.3

Silver segment AISC, including NRV adjustments, US$/oz

17.3

16.4

5.7

13.4

29.0

Realised silver price, US$/oz

22.0

26.9

-18.2

24.0

-8.3

 

 

 

 

Gold production, koz

128.3

142.3

-9.8

131.0

-2.1

Gold sales, koz

119.3

126.2

-5.5

148.1

-19.4

Gold segment cash cost, US$/oz

1,132

857

32.1

1,069

5.9

Gold segment AISC, including NRV adjustment, US$/oz

2,051

1,163

76.4

1,502

36.6

Realised gold price, US$/oz

1,850

1,809

2.3

1,880

-1.6

 

 

 

 

Revenue

340.5

382.1

-10.9

439.9

-22.6

Cash production costs

(288.3)

(199.4)

44.6

(278.8)

3.4

D&A

(74.3)

(68.5)

8.4

(84.5)

-12.1

Other operating costs*

(131.7)

(20.3)

547.3

14.1

N/A

EBIT, reported

(153.8)

93.8

N/A

90.6

N/A

EBITDA

17.9

152.3

-88.2

127.9

-86.0

PBT

(166.8)

100.8

N/A

88.3

N/A

Net profit attributable to equity holders

(174.0)

70.9

N/A

76.5

N/A

Adjusted net profit, Edison calculations**

(67.3)

60.3

N/A

29.1

N/A

DPS, US$/share

0.11

0.10

10.0

0.12

-8.3

Source: PAAS, Edison Investment Research. Note: *Q222 includes US$99m in impairments. **Edison adjustments include investment income and impairments but exclude NRV revaluations.

Silver segment: Good production momentum and cost control

The silver segment maintained its strong production momentum in Q2, as the company’s flagship La Colorada project continued its operational recovery on the back of the improved ventilation rates, which allowed access to higher grade zones and higher throughput. Having produced 1,675koz of silver (1,419koz in Q122), La Colorada reported an impressive cash cost of US$9.4/oz (Q122: US$9.7/oz) and an all-in sustaining cost (AISC) of US$13.3/oz. Among other projects that contributed to the segment’s strong performance was San Vincente, which saw a 36% q-o-q increase in silver production and a reduction in cash cost to US$12.0/oz (Q122: US$19.4/oz). At the same time, the project that detracted the most from the performance was Manantial Espejo; its silver production and costs were affected by lower grades.

Despite some inevitable increase in production costs, the silver segment demonstrated an impressive cost performance, with an overall cash cost of US$12.1/oz (Q122: US$10.2/oz; Q221: US$12.7/oz) and an AISC of US$17.3/oz (Q122: US$13.4/oz; Q221: US$16.4/oz).

Gold segment: Dolores disappoints

The gold segment’s performance was mixed, with Timmins and Shahuindo delivering solid operational and financial results, while Dolores was disappointing, which caused an impairment, the revision to mineral reserves and resources and the suspension of underground mining at the project. The segment’s overall cash cost was US$1,132/oz in Q222 versus US$1,070/oz in Q122, while the AISC adjusted for NRV inventory revaluations was US$1,540/oz.

Gold production at Shahuindo was down 8% q-o-q to 31.6koz, mainly due to the lower estimated gold recovery, while payable gold sales were 11% lower at 30.1koz. The project’s cash cost came in at US$1,032/oz versus US$915/oz in Q122. Compared to Q221, gold production was up 4% as a result of higher throughput. At Timmins, gold production was up 19% q-o-q to 37.8koz thanks to the higher gold grades, while payable sales were down 2% to 34.8/oz. The project’s cash cost was down 9% q-o-q to US$1,288/oz, while the AISC was 8% lower at US$1,556/oz.

According to the company, Dolores has underperformed year to date in terms of both silver and gold production due to the lower than expected open-pit grades. In addition, inflationary cost pressures have led PAAS to suspend underground mining operations at the project and reclassify its underground reserves into resources. In H122, Dolores produced 1.1Moz of silver, a reduction of 13% versus H121, and 80koz of gold (-13% y-o-y). The project’s Q222 cash cost was US$1,066/oz (Q122: US$977/oz), while AISC jumped to US$3,138/oz (Q122: US$1,683/oz). Stripping out the US$58m NRV inventory adjustment, AISC was US$1,446/oz (Q122: US$1,362/oz).

In the latest technical report on Dolores published by the company in March 2017 (effective December 2016), the project was estimated to have 64.1Mt in proven and probable reserves at 0.73g/t gold (Au) and 54g/t Ag, comprising 53Mt in open-pit ore, 4Mt in underground ore and 7Mt in stockpiles. Both open-pit and underground mining was initially expected to continue until 2024, with stockpiles processed for another two years. Nominal processing rates were envisaged at 20ktpd, including 14.4ktpd (c 5.3mtpa) in the crushing circuit and 5.6ktpd (c 2.0mtpa) in the pulp agglomeration circuit. Underground ore was expected to be processed through the agglomeration circuit at a rate of c 0.6mtpa, with the open-pit ore and stockpiles processed via both pulp agglomeration and crushing.

As of June 2022, Dolores was reported to have proven and probable reserves (both open-pit and stockpiles) of 17Mt at 0.58g/t Au and 20g/t of Ag. Assuming the agglomeration circuit remains fully utilised, at full nominal processing capacity the updated reserves would allow production for about another two years. It also remains to be seen to what extent the suspension of the underground mining will affect production costs, as open-pit mining costs and crushing circuit processing costs are significantly lower compared to underground and pulp agglomeration. In its updated FY22 guidance, the company reported that it expects Dolores’s H222 AISC to be US$1,275–1,375/oz (excluding NRV adjustments), which given the Q2 AISC of US$1,446/oz implies a reduction of US$71–171/oz.

Escobal: Consultation moving into the next stage

One of the positive highlights of the results announcement was that the ILO 169 consultation process for the Escobal mine has progressed to the consultation stage. The pre-consultation phase consisted of eight meetings, with the final one held on 20 July 2022. To recap, the purpose of pre-consultation was to define and agree the terms, timelines and mechanisms under which the consultation will take place. The process is led by the Ministry of Energy and Mines and includes various parties along with the Xinka indigenous community and PAAS. The current consultation phase represents the formal dialogue process, with the aim of reaching final agreements among the main participants. The final stage of the process is the Supreme Court verification. The first meeting of the consultation phase is scheduled for 21 August.

Escobal is a large-scale, top-tier silver project in Guatemala that is capable of producing on average 15Moz of silver per annum over 20 years. The project is currently on care and maintenance pending the completion of the ILO 169 consultation process, and once its licence is restored, we understand it could take a few months to resume production. In our model, we continue to assume that Escobal is restarted in 2024.

Reserves and resources update

Along with its Q222 financial results, PAAS has also reported its latest mineral reserves and resources estimates as at June 2022. The company’s overall proven and probable reserves stood at 515Moz of contained Ag and 3.6Moz of contained Au, compared to 529Moz of silver and 4.2Moz of gold as of June 2021. In terms of contained silver, the total measured and indicated resource saw an increase of 21Moz, while the total inferred resource was 47Moz higher than June 2021. These increases came on the back of the strong resource replacement rates at the company’s producing silver operations. Contained gold estimates were marginally lower in both measured and indicated and inferred resource categories.

Exhibit 2: PAAS combined mineral reserves and resources (as at June 2022)

  

Tonnes (mt)

Ag (g/t)

Contained Ag (Moz)

Au (g/t)

Contained Au (koz)

2022

2021

2022

2021

2022

2021

2022

2021

2022

2021

Proven and probable

Silver segment

54

54

275

278

480

485

0.3

0.4

376

413

Gold segment

174

189

9

11

35

44

0.6

0.6

3,255

3,799

Total

 

228

243

91

89

515

529

0.5

0.6

3,632

4,211

Measured and indicated

Silver segment

185

183

138

137

826

803

0.3

0.3

216

172

Gold segment

770

808

9

7

13

15

0.3

0.3

7,922

8,123

Total

 

955

991

113

101

839

818

0.3

0.3

8,138

8,294

Inferred

 

Silver segment

179

171

79

74

453

404

0.3

0.4

183

142

Gold segment

225

247

13

13

55

57

0.8

0.71

5,492

5,654

Total

 

404

417

51

47

508

460

0.7

0.7

5,675

5,796

Source: PAAS, Edison Investment Research

In the silver segment, producing operations drove a significant increase in the mineral resources, which saw an increase of 50Moz of contained Ag, while mineral reserves were down 5Moz. At the project level, Huaron enjoyed a healthy boost to both mineral reserves and resources, adding 2.8Moz of contained Ag in proven and probable reserves and 9.1Moz in combined measured and indicated and inferred resources. At La Colorada, proven and probable reserves remained broadly flat, while total mineral resources increased by an impressive 58Moz of contained Ag.

Mineral resources for non-producing operations were unchanged. The published resource update did not include any changes to the mineral resources at the company’s development La Colorada Skarn project. The company plans to provide a resource update on this project in Q322.

Exhibit 3: Silver segment mineral reserves and resources

 

Tonnes
(mt)

Ag
(g/t)

Contained Ag (Moz)

Au
(g/t)

Contained Au (koz)

Producing operations

 

 

 

 

 

Proven and probable

30

226

215

0.29

98

Measured and indicated

14

188

83

0.51

106

Inferred

31

182

182

0.25

129

Escobal

 

 

 

 

 

Proven and probable

25

333

265

0.35

278

Measured and indicated

17

208

110

0.20

110

Inferred

2

180

11

0.90

54

Navidad

 

 

 

 

 

Measured and indicated

155

127

632

0.00

0

Inferred

46

81

119

0.00

0

La Colorada Skarn

 

 

 

 

 

Inferred

100

44

141

0.00

0

Silver segment total

 

 

 

 

 

Proven and probable

54

274

480

0.32

376

Measured and indicated

185

138

826

0.29

216

Inferred

179

79

453

0.32

183

Source: PAAS, Edison Investment Research

In the gold segment, producing operations saw a reduction in the proven and probable reserves of 0.5Moz of contained Au, with measured and indicated and inferred resources falling by 0.3Moz compared to June 2021. Of note however is that at La Arena the company replaced 46% of mined production and extended the mine life by six months, at Shahuindo 81% of mined production was replaced, while at Timmins the reserves replacement rate was 26%.

Exhibit 4: Gold segment mineral reserves and resources

 

Tonnes
(mt)

Ag
(g/t)

Contained Ag (Moz)

Au
(g/t)

Contained Au (koz)

Producing operations

 

 

 

 

 

Proven and probable

174

9

35

0.58

3,255

Measured and indicated

35

8

7

0.94

1,064

Inferred

125

14

51

0.76

3,071

Other

 

 

 

 

 

Measured and indicated

734

9

6

0.29

6,858

Inferred

100

8

3

0.75

2,421

Gold segment total

 

 

 

 

 

Proven and probable

174

9

35

0.58

3,255

Measured and indicated

770

9

13

0.32

7,922

Inferred

225

13

55

0.76

5,492

Source: PAAS, Edison Investment Research

FY22 guidance: Silver on track; gold cost pressures

The company maintained its FY22 production outlook provided in February, noting that production is likely to be towards the lower end of the range for both silver (19.0–20.5Moz) and gold (550–605koz) and is also expected to be second-half weighted. With the exception of Dolores, production in H122 was consistent with the company’s original operational outlook. Cost performance in the silver segment has also been in line with management expectations and the cost guidance for the segment has therefore been reiterated at US$10.7–12.2/oz (H122: US$11.1/oz) for cash cost and US$14.5–16.0/oz (US$15.2/oz) for AISC. In the gold segment, due to the underperformance of Dolores, cash costs are now expected to be at the higher end of the original guidance (US$970–1,070/oz), while AISC expectations have been raised to US$1,450–1,550/oz from US$1,240–1,365/oz, before NRV adjustments. This compares to the segment H122 cash cost and AISC before NRV adjustments of US$1,097/oz and US$1,467/oz, respectively.

In addition, the company revised its FY22 capital expenditure guidance from US$280–305m to US$295–310m (H122: US$140m), with the sustaining capital estimate increased from US$200–210m to US$240–250m (US$112.5m). The main reason for this revision is the company’s decision to fund a number of investment projects (in particular at La Arena and Shahuindo) internally rather than via construction loans. This decision affects the timing of the expected cash outflows, but not the overall capital spend on the projects.

Earnings lower on production, costs and commodities

We have updated our earnings estimates to reflect the Q222 results, revised guidance and the recent commodity price fluctuations. We now assume an average silver price of US$21.9/oz in FY22, a reduction of 5% versus our prior estimate, and a gold price of US$1,830/oz, down 1%. We have also slightly adjusted our production expectations factoring in management’s revised guidance and now expect FY22 silver production of 19.3Moz (from 20.0Moz) and gold production of 570koz (from 584koz). In addition, we have slightly adjusted our cost estimates. While our silver segment cash cost forecast remains broadly unchanged at US$11.1/oz, we raise our gold segment cash cost estimate from US$1,048/oz to US$1,090/oz, slightly above the top end of the company’s guidance range. Our revised gold segment AISC excluding NRV adjustments is US$1,453/oz (US$1,582/oz after NRV), at the lower end of the company’s revised guidance.

The above adjustments lower our FY22 revenue estimate by 6% to US$1,615m and our EBITDA estimate by 29% to US$400m. Our revised estimates compare with FY22e consensus revenues of US$1,583m and EBITDA of about US$369m (source: Refinitiv). We have also lowered our FY23 estimates, with EBITDA down 12% to US$510m, mainly due to the higher cost expectations as a result of the higher FY22 cost base.

Exhibit 5: PAAS estimates revisions

 US$m

FY21

FY22e old

FY22e new

Difference, %

2023e old

2023e new

Difference, %

Silver price, US$/oz

25.1

23.0

21.9

-5.0

23.6

23.6

0.0

Silver production, Moz

19.2

20.0

19.3

-3.4

19.9

20.0

0.6

Silver segment cash cost, US$/oz

11.5

11.0

11.1

1.3

9.3

10.2

9.8

Silver segment AISC (incl. NRV adjustments), US$/oz

15.6

14.6

15.1

3.8

12.7

13.5

6.7

 

 

 

 

 

 

Gold price, US$/oz

1,799

1,850

1,830

-1.1

1,749

1,749

0.0

Gold production, koz

579

584

570

-2.5

603

577

-4.3

Gold segment cash cost, US$/oz

899

1,048

1,090

4.0

963

1,020

5.9

Gold segment AISC (incl. NRV adjustments), US$/oz

1,214

1,334

1,582

18.6

1188

1,286

8.2

 

 

 

 

Revenue

1,632.8

1,710.5

1,614.9

-5.6

1,629.9

1,581.1

-3.0

Cash production costs

(925.5)

(1,015.8)

(1,078.9)

6.2

(923.1)

(942.0)

2.0

Royalties

(36.4)

(40.3)

(40.1)

-0.5

(40.0)

(37.5)

-6.1

D&A

(303.0)

(300.9)

(297.8)

-1.0

(283.5)

(291.7)

2.9

Exploration, care and maintenance

(42.9)

(46.0)

(55.2)

20.0

(46.5)

(52.5)

12.9

G&A

(34.9)

(43.7)

(40.6)

-7.1

(39.9)

(39.5)

-1.0

EBIT normalised

290.2

263.8

102.3

-61.2

296.9

217.8

-26.6

EBITDA

593.2

564.7

400.1

-29.2

580.4

509.5

-12.2

Source: Edison Investment Research, PAAS


Valuation update: Long term silver attraction

We reduce our combined valuation of PAAS from US$29.5/share to US$27.5/share on the back of the revised earnings estimates. We maintain our resource-based valuation of the La Colorada Skarn project while we await the release of the updated resource estimates later in the quarter. PAAS shares have come under renewed pressure recently after somewhat disappointing Q2 results and are now trading c 30% down year-to-date. Commodity prices remain volatile as investors continue to digest a flow of mixed economic news, gauging the severity of the global economic downturn as well as the speed of monetary tightening and the potential reduction in inflation. Having gained some support recently, the silver price is now c 12% below the levels seen at the beginning of the year, while the gold price is down only 3%, with the gold/silver ratio still elevated at c 86x. While slower economic growth and lower disposable incomes will undoubtedly affect industrial and physical silver consumption in the near term, some support could come from the booming solar photovoltaic (PV) industry, relatively resilient electric vehicle demand as well as inflation hedging on the investment side. Based on the latest data from Refinitiv, total silver ETF physical holdings have recently shown some signs of stabilisation after falling c 5% year-to-date (10% from the 2022 peak). The gold price remains supported by current expectations of the slower interest rates increases due to global macroeconomic risks, but the inevitable monetary tightening should continue to put pressure on gold in the medium term. We continue to model a gold price (real) of US$1,749/oz in FY23.

On our updated estimates, PAAS is trading on FY22e EV/EBITDA of 8.4x, falling to just 6.6x in FY23e. Despite the currently reduced short-term earnings visibility, this appears to be a relatively undemanding multiple compared to silver peers. While investors’ focus at present seems to be mainly on the near-term operational challenges, cost inflation and weak global economy, we believe that silver’s longer-term role as one of the energy transition metals and a strong beneficiary of decarbonisation should not be overlooked by investors. In our view, PAAS represents an attractive exposure to the commodity due to its quality project portfolio and the relatively long-life and low-cost nature of its core silver operations.

Exhibit 6: Financial summary

$'m

2020

2021

2022e

2023e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

1,338.8

1,632.8

1,614.9

1,581.1

Cash production costs

(696.7)

(925.5)

(1,078.9)

(942.0)

DD&A

(254.5)

(303.0)

(297.8)

(291.7)

Royalties

(27.5)

(36.4)

(40.1)

(37.5)

Gross Profit

360.2

367.9

198.1

309.8

G&A

(36.4)

(34.9)

(40.6)

(39.5)

Other operating costs

(109.2)

(42.9)

(55.2)

(52.5)

Operating profit (before amort. and excepts.)

 

 

214.6

290.2

102.3

217.8

EBITDA

 

 

469.1

593.2

400.1

509.5

Other operating expenses

(5.5)

30.7

4.3

0.0

Exceptionals

0.0

0.0

(54.5)

0.0

Reported operating profit

209.1

320.9

52.2

217.8

Net Interest and finance expense

(20.1)

(16.2)

(21.6)

(19.0)

Profit Before Tax (norm)

 

 

194.5

274.0

80.8

198.9

Investment income (loss)

63.0

(59.7)

(4.8)

0.0

Profit Before Tax (reported)

 

 

252.0

245.0

25.8

198.9

Reported tax

(75.6)

(146.4)

(43.7)

(69.6)

Profit After Tax (norm)

118.9

127.6

37.1

129.3

Profit After Tax (reported)

176.5

98.6

(17.9)

129.3

Minority interests

(1.4)

1.1

1.2

1.5

Net income (normalised)

120.4

126.5

35.9

127.8

Net income (reported)

177.9

97.4

(19.1)

127.8

Average Number of Shares Outstanding (m)

210

210

211

211

EPS - basic normalised ($)

 

 

0.57

0.60

0.17

0.61

EPS - normalised fully diluted ($)

 

 

0.57

0.60

0.17

0.61

EPS - basic reported ($)

 

 

0.85

0.46

(0.09)

0.61

Dividend ($)

0.22

0.34

0.47

0.64

BALANCE SHEET

Fixed Assets

 

 

2,577.0

2,517.4

2,456.0

2,375.8

Tangible assets

2,415.0

2,344.6

2,238.1

2,157.9

Investments

71.6

78.7

123.7

123.7

Other

90.4

94.2

94.2

94.2

Current Assets

 

 

856.9

1,001.2

908.3

967.9

Inventories

406.2

500.5

472.9

464.5

Receivables

127.8

128.2

141.6

138.6

Cash

167.1

283.6

204.8

275.7

ST investments

111.9

51.7

51.7

51.7

Other

43.9

37.3

37.3

37.3

Current Liabilities

 

 

(361.8)

(387.7)

(376.7)

(351.3)

Creditors

(281.9)

(306.1)

(325.2)

(309.7)

Short term borrowings and leases

(12.8)

(14.1)

(14.1)

(14.1)

Other

(67.0)

(67.5)

(37.5)

(27.5)

Long Term Liabilities

 

 

(466.3)

(494.9)

(469.9)

(469.9)

LT debt and leases

(20.7)

(31.8)

(31.8)

(31.8)

Other long term liabilities

(445.5)

(463.1)

(438.1)

(438.1)

Net Assets

 

 

2,605.8

2,636.0

2,517.7

2,522.5

Minority interests

(3.3)

(4.5)

(5.7)

(7.2)

Shareholders' equity

 

 

2,602.5

2,631.6

2,512.0

2,515.3

CASH FLOW

Operating Cash Flow

176.5

98.6

(17.9)

129.3

D&A, exceptionals, other

280.5

498.9

490.9

377.3

Working capital movement

97.0

(71.1)

(45.3)

(4.1)

Tax

(81.6)

(129.2)

(98.7)

(69.6)

Net Interest

(10.0)

(5.1)

(6.4)

(5.7)

Net operating cash flow

 

 

462.3

392.1

322.5

427.1

Capex

(178.6)

(243.5)

(290.4)

(211.5)

Acquisitions/disposals

22.5

45.8

0.0

0.0

Equity financing

4.7

0.6

0.0

0.0

Dividends

(46.2)

(71.5)

(98.9)

(134.7)

Other

59.1

(2.3)

0.0

0.0

Net Cash Flow

323.8

121.2

(66.7)

80.9

Opening net debt/(cash), including ST investments

 

 

77.9

(245.5)

(289.4)

(210.7)

FX and other

(0.5)

(77.3)

(12.0)

(10.0)

Closing net debt/(cash), including ST investments

 

 

(245.5)

(289.4)

(210.7)

(281.6)

Closing net debt/(cash), excluding ST investments

(133.5)

(237.7)

(158.9)

(229.9)

Source: Pan American Silver, Edison Investment Research


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Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

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60325 Frankfurt

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London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

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United States of America

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General disclaimer and copyright

This report has been commissioned by Pan American Silver and prepared and issued by Edison, in consideration of a fee payable by Pan American Silver. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for ‘wholesale clients’ within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the ‘FPO’) (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

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Edison relies upon the ‘publishers' exclusion’ from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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