Last close As at 05/08/2026
USD48.24
▲ 3.33 (7.41%)
Market capitalisation
USD20,120m
Research: Metals & Mining
Pan American Silver (PAAS) reported Q324 results that saw a 20% quarter-on-quarter increase in silver production on the back of normalising operating performance at La Colorada. Thanks to the good cost control, mine operating earnings jumped 50% q-o-q while EBITDA increased 32% to US$280m. Strong cash flow generation led to almost doubling in free cash flow to a record US$151m. With a slight adjustment to initial terms, the La Arena transaction is now expected to close by end 2024. We are looking to revise our estimates and valuation shortly; given the persistent strength in the gold price the risks to our forecasts are on the upside.
Pan American Silver |
Q324: When (almost) everything goes to plan |
Quarterly results |
Metals and mining |
12 November 2024 |
Share price performance
Business description
Analysts
Pan American Silver is a research client of Edison Investment Research Limited |
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Pan American Silver (PAAS) reported Q324 results that saw a 20% quarter-on-quarter increase in silver production on the back of normalising operating performance at La Colorada. Thanks to the good cost control, mine operating earnings jumped 50% q-o-q while EBITDA increased 32% to US$280m. Strong cash flow generation led to almost doubling in free cash flow to a record US$151m. With a slight adjustment to initial terms, the La Arena transaction is now expected to close by end 2024. We are looking to revise our estimates and valuation shortly; given the persistent strength in the gold price the risks to our forecasts are on the upside.
Year end |
Revenue |
EBITDA |
EPS* |
DPS |
EV/EBITDA |
Yield |
12/22 |
1,494.7 |
272.0 |
(0.54) |
0.45 |
30.3 |
2.1 |
12/23 |
2,316.1 |
680.6 |
0.19 |
0.41 |
12.1 |
1.9 |
12/24e** |
2,791.1 |
924.2 |
0.41 |
0.40 |
8.9 |
1.8 |
12/25e |
2,396.2 |
803.6 |
0.50 |
0.40 |
10.2 |
1.8 |
Note: *EPS is normalised, excluding exceptional items. **FY24e EPS adjusted for non-cash tax movements.
PAAS reported a 4% q-o-q increase in revenues to US$716m in Q324, with a 1% reduction in gold sales offset by a 2% increase in silver sales and higher silver and gold prices. Gold production was up 2% to 225koz while silver output jumped 20% to 5,467koz. In the silver segment, La Colorada drove the performance with a 59% increase in silver production (1,329koz) and a 26% reduction in cash cost to US$19.6/oz. However, the overall silver segment cash cost was slightly higher quarteronquarter (and above the quarterly guidance) at US$15.9/oz as stronger performance at La Colorada was offset by higher costs at Cerro Moro (lower gold by-product credits) and Huaron. Gold segment performance in Q3 was consistent with the previous quarter, with a slight increase in production (+2% to 225koz), slightly lower sales (-1% to 218koz) and broadly flat cash cost of US$1,195/oz. The company maintained its production and cost guidance for FY24.
PAAS demonstrated good cost control during the quarter, with cash production costs, total cash cost of sales and SG&A falling 6%, 5% and 27%, respectively, compared to Q2, leading to a 50% jump in mine operating earnings and a 32% increase in EBITDA to US$280m. The company reported EPS of US$0.16 versus a negative US$0.06 in Q224 and an adjusted EPS of US$0.32 (US$0.11). At the cash flow level, net cash from operating activities grew 39% q-o-q to US$226m while free cash flow almost doubled to a record US$151m. Strong cash flow generation led to a reduction in net debt from US$441m in Q224 to US$284m.
In other news, PAAS announced that the Canadian government approved the sale of La Arena assets to Zijin under the Investment Canada Act. The initial terms of the transaction remain unchanged bar an additional requirement for PAAS to enter into an offtake with Zijin for 60% of copper concentrate from La Arena II on commercial terms. The deal is expected to close by end 2024.
We will review our estimates and valuation shortly to incorporate the Q324 results and the revised commodity prices. However, given the persistent strength in the gold price, the risks to our estimates are on the upside.
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Research: Investment Companies
Henderson Far East Income (HFEL) is an income-focused Asian investment trust, which aims to provide shareholders with growing total annual dividends and capital appreciation from a diverse portfolio of Asia-Pacific equities. As a result of efforts initiated this time last year to improve capital growth, the manager has repositioned the portfolio towards structural growth opportunities, while still protecting income. These changes are already enhancing performance. In the year to 31 October 2024, HFEL returned 17.4% on an NAV basis, a marked turnaround from the declines of the previous two years. The trust also delivered its 17th successive year of rising dividends in FY24. Thanks to strong portfolio revenues during FY24, this dividend was fully covered and HFEL’s revenue reserve reached an all-time high. The manager is positive about the portfolio’s revenue prospects, as Asian dividend payouts look set to continue rising for years, thanks to corporate reforms, especially in South Korea and China. The portfolio is positioned to benefit accordingly. The manager is also confident that the portfolio’s exposure to structural growth will keep supporting performance over 2025 and beyond.