Last close As at 05/08/2026
USD48.24
▲ 3.33 (7.41%)
Market capitalisation
USD20,120m
Research: Metals & Mining
Pan American Silver (PAAS) released a preliminary economic assessment (PEA) of the La Colorada Skarn project, confirming its potential to become a large-scale operation producing an average 17.2Moz of silver per annum over the first 10 years of its 17-year mine life. At a base case throughput rate of 50ktpd, the company estimates the project’s post-tax NPV8 at US$1.1bn, with an IRR of 14% and a payback period of 4.3 years. We intend to update our valuation shortly to incorporate the PEA and the prevailing stronger than expected gold and silver prices.
Pan American Silver |
Skarn PEA confirms its early potential |
Project update |
Metals and mining |
20 December 2023 |
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) released a preliminary economic assessment (PEA) of the La Colorada Skarn project, confirming its potential to become a large-scale operation producing an average 17.2Moz of silver per annum over the first 10 years of its 17-year mine life. At a base case throughput rate of 50ktpd, the company estimates the project’s post-tax NPV8 at US$1.1bn, with an IRR of 14% and a payback period of 4.3 years. We intend to update our valuation shortly to incorporate the PEA and the prevailing stronger than expected gold and silver prices.
Year end |
Revenue |
EBITDA |
EPS* |
DPS |
P/E |
Yield |
12/21 |
1,632.8 |
593.2 |
0.60 |
0.34 |
25.7 |
2.4 |
12/22 |
1,494.7 |
272.0 |
(0.54) |
0.45 |
N/A |
3.1 |
12/23e |
2,303.3 |
674.6 |
0.21 |
0.41 |
73.3 |
2.8 |
12/24e |
2,645.3 |
908.7 |
0.38 |
0.40 |
40.5 |
2.8 |
Note: *EPS is normalised, excluding exceptional items.
La Colorada Skarn’s PEA envisages processing 50ktpd of ore to produce an average 17.2Moz of silver, 427kt of zinc and 218kt of lead pa over the initial 10 years of operation, with the overall mine life of 17 years. The estimated life of mine (LOM) is based on mineral resource as at December 2022 and therefore does not take into account the 2023 drilling results. With the construction period of six years and overall pre-production capital expenditure of US$2.8bn, Skarn is expected to generate an after-tax IRR of 14% and to have a payback period of just 4.3 years (undiscounted). At a LOM silver price of US$22/oz (US$2,800/t for zinc and US$2,200/t for lead), PAAS estimates the project’s after-tax NPV8 at US$1.1bn.
While the PEA is an early-stage assessment, it clearly demonstrates Skarn’s potential and opens the way for the company to seek development partners, in particular in relation to the zinc portion of projected output. To put the potential scale of the project in perspective, Skarn’s estimated annual silver production represents c 80% of PAAS’s guided FY23 silver output at midrange, while for zinc it is c 10x above FY22 output. Its average annual silver production over first 10 years is also broadly in line with Escobal’s feasibility study based silver output. Putting the project into production will require additional permitting and it is expected to use some of the current La Colorada vein silver mine’s infrastructure.
We plan to update our model shortly to incorporate the results of the PEA and revise our valuation, which at present includes the resource-based value of the Skarn project. We also note the current strength of commodity prices, with both silver and gold prices exceeding our near-term expectations. The company plans to provide its FY24 outlook in mid-January.
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Research: TMT
Filtronic’s strong end to 2023 has continued, with the announcement of a $6m (£4.8m) contract to supply Solid State Power Amplifiers (SSPAs) to a leading supplier of low orbit Earth (LEO) satellite equipment. The contract provides evidence of Filtronic’s capability and growing standing within the space market, in our view. Meanwhile, the company’s £4.5m defence win, announced yesterday, demonstrates continued progress in the business’s traditional defence and telecoms verticals. We are not changing our estimates at this stage but see clearer scope for upside. Continued execution could open the potential for a sustained acceleration in growth with demand for high-end radio frequency systems growing and Filtronic has rare capabilities in this field. The company’s rating is now starting to factor in an acceleration in growth and margin expansion, but given recent progress, this looks entirely merited.