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 a significant increase in mineral reserves and resources estimates, for gold in particular, on the back of the Yamana transaction. Inclusive of MARA, Morococha and Jeronimo, the company’s total proven and probable (P&P) reserves grew 12% y-o-y to 577Moz of contained silver (Ag) and 259% to 13Moz of contained gold (Au). PAAS plans an extensive drilling and exploration campaign for 2023 in order to further upgrade and extend the resource base. While our financial estimates remain unchanged, we have slightly revised our valuation down to US$22.0/share to reflect the reported reserves and resources data.
Pan American Silver |
Yamana assets boost mineral resources |
Mineral resources update |
Metals and mining |
30 August 2023 |
Share price performance
Business description
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Analysts
Pan American Silver is a research client of Edison Investment Research Limited |
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Pan American Silver (PAAS) reported a significant increase in mineral reserves and resources estimates, for gold in particular, on the back of the Yamana transaction. Inclusive of MARA, Morococha and Jeronimo, the company’s total proven and probable (P&P) reserves grew 12% y-o-y to 577Moz of contained silver (Ag) and 259% to 13Moz of contained gold (Au). PAAS plans an extensive drilling and exploration campaign for 2023 in order to further upgrade and extend the resource base. While our financial estimates remain unchanged, we have slightly revised our valuation down to US$22.0/share to reflect the reported reserves and resources data.
Year end |
Revenue |
EBITDA |
EPS* |
DPS |
EV/EBITDA |
Yield |
12/21 |
1,632.8 |
593.2 |
0.60 |
0.34 |
10.5 |
2.1 |
12/22 |
1,494.7 |
272.0 |
(0.51) |
0.45 |
22.8 |
2.7 |
12/23e |
2,439.1 |
740.7 |
0.36 |
0.41 |
8.4 |
2.5 |
12/24e |
2,873.2 |
1,085.0 |
0.74 |
0.40 |
5.7 |
2.4 |
Note: *EPS is normalised, excluding exceptional items.
Robust headline mineral resource numbers
Excluding MARA, Morococha and Jeronimo, which are currently being divested, PAAS reported total P&P reserves of 487Moz of contained Ag (482Moz as of June 2022, excluding Morococha) and 7.7Moz of contained Au (3.6Moz) as of June 2023. On the same basis, combined measured and indicated (M&I) resources were reported at 945Moz of Ag (833Moz as of June 2022, excluding Morococha) and 16.1Moz of Au (8.1Moz). Not surprisingly, reserves and resources for some of the Yamana assets were reported at more conservative levels, with Cerro Moro, for example, having seen a reduction in combined P&P reserves and M&I resources to 19.5Moz of Ag (vs 24.8Moz reported by Yamana as of December 2022). On the other hand, Jacobina enjoyed an increase in reserves and M&I resources of 0.7Moz of Au to 7.85Moz. Of note is that PAAS used higher gold prices and slightly higher silver prices in its resources estimation for the Yamana assets compared to the December 2022 data. In terms of the other assets, the biggest disappointment came from Shahuindo, which saw a visible reduction in reserves and resources, in part due to the removal of sulphides following metallurgical test works. PAAS is undertaking an extensive exploration campaign in 2023, with over 480,000m of drilling, in order to upgrade and extend the resource base. In other news, the company is looking to release a preliminary economic assessment and an updated mineral resource estimate for the La Colorada Skarn project towards the end of 2023.
Valuation: Significant upside remains intact
We have updated our valuation of PAAS to incorporate the reported reserves and resources data, reducing our NPV-based value of the company to US$22.0 per share from US$22.2 per share. The main driver behind the reduction in the valuation is the shorter estimated mine life for the Shahuindo project. On our financial estimates, which we maintain at this stage, the stock continues to trade on an FY23e EV/EBITDA multiple of 8.4x, falling to just 5.7x in FY24e. Applying average gold and silver peer group multiples for FY23 and FY24e implies a value of US$24.5 per share.
Exhibit 1: Financial summary
$'m |
2020 |
2021 |
2022 |
2023e |
2024e |
||
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
|||||||
Revenue |
|
|
1,338.8 |
1,632.8 |
1,494.7 |
2,439.1 |
2,873.2 |
Cash production costs |
(696.7) |
(925.5) |
(1,094.4) |
(1,498.7) |
(1,589.9) |
||
DD&A |
(254.5) |
(303.0) |
(316.0) |
(516.5) |
(557.1) |
||
Royalties |
(27.5) |
(36.4) |
(35.9) |
(62.2) |
(64.4) |
||
Gross Profit |
360.2 |
367.9 |
48.4 |
361.7 |
661.9 |
||
G&A |
(36.4) |
(34.9) |
(29.0) |
(68.0) |
(70.0) |
||
Other operating costs |
(109.2) |
(42.9) |
(63.5) |
(101.7) |
(64.0) |
||
Operating profit (before amort. and excepts.) |
|
|
214.6 |
290.2 |
(44.1) |
224.2 |
527.9 |
EBITDA |
|
|
469.1 |
593.2 |
272.0 |
740.7 |
1,085.0 |
Other operating expenses |
(5.5) |
30.7 |
(6.4) |
4.9 |
0.0 |
||
Exceptionals |
0.0 |
0.0 |
(211.8) |
(66.8) |
0.0 |
||
Reported operating profit |
209.1 |
320.9 |
(262.3) |
130.1 |
527.9 |
||
Net Interest and finance expense |
(20.1) |
(16.2) |
(22.5) |
(90.8) |
(88.2) |
||
Profit Before Tax (norm) |
|
|
194.5 |
274.0 |
(66.6) |
133.4 |
439.7 |
Investment income (loss) |
63.0 |
(59.7) |
(16.2) |
0.0 |
0.0 |
||
Profit Before Tax (reported) |
|
|
252.0 |
245.0 |
(301.0) |
39.3 |
439.7 |
Reported tax |
(75.6) |
(146.4) |
(39.1) |
(14.9) |
(167.1) |
||
Profit After Tax (norm) |
118.9 |
127.6 |
(105.7) |
118.4 |
272.6 |
||
Profit After Tax (reported) |
176.5 |
98.6 |
(340.1) |
24.3 |
272.6 |
||
Minority interests |
(1.4) |
1.1 |
1.7 |
1.2 |
2.0 |
||
Net income (normalised) |
120.4 |
126.5 |
(107.4) |
117.2 |
270.6 |
||
Net income (reported) |
177.9 |
97.4 |
(341.8) |
23.1 |
270.6 |
||
Average Number of Shares Outstanding (m) |
210 |
210 |
211 |
326 |
364 |
||
EPS - basic normalised ($) |
|
|
0.57 |
0.60 |
(0.51) |
0.36 |
0.74 |
EPS - normalised fully diluted ($) |
|
|
0.57 |
0.60 |
(0.51) |
0.36 |
0.74 |
EPS - basic reported ($) |
|
|
0.85 |
0.46 |
(1.62) |
0.07 |
0.74 |
Dividend ($) |
0.22 |
0.34 |
0.45 |
0.41 |
0.40 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
2,577.0 |
2,517.4 |
2,444.1 |
6,436.4 |
6,263.3 |
Tangible assets |
2,415.0 |
2,344.6 |
2,226.4 |
6,257.0 |
6,083.9 |
||
Investments |
71.6 |
78.7 |
121.2 |
0.0 |
0.0 |
||
Other |
90.4 |
94.2 |
96.6 |
179.4 |
179.4 |
||
Current Assets |
|
|
856.9 |
1,001.2 |
804.4 |
1,654.9 |
1,813.2 |
Inventories |
406.2 |
500.5 |
471.6 |
691.1 |
734.9 |
||
Receivables |
127.8 |
128.2 |
136.6 |
160.4 |
188.9 |
||
Cash |
167.1 |
283.6 |
107.0 |
662.8 |
748.8 |
||
ST investments |
111.9 |
51.7 |
35.3 |
41.7 |
41.7 |
||
Other |
43.9 |
37.3 |
53.8 |
98.9 |
98.9 |
||
Current Liabilities |
|
|
(361.8) |
(387.7) |
(380.8) |
(617.9) |
(633.3) |
Creditors |
(281.9) |
(306.1) |
(308.1) |
(479.7) |
(510.1) |
||
Short term borrowings and leases |
(12.8) |
(14.1) |
(27.3) |
(51.6) |
(36.6) |
||
Other |
(67.0) |
(67.5) |
(45.5) |
(86.6) |
(86.6) |
||
Long Term Liabilities |
|
|
(466.3) |
(494.9) |
(666.0) |
(2,555.5) |
(2,396.8) |
LT debt and leases |
(20.7) |
(31.8) |
(199.5) |
(835.4) |
(826.7) |
||
Other long term liabilities |
(445.5) |
(463.1) |
(466.5) |
(1,720.1) |
(1,570.1) |
||
Net Assets |
|
|
2,605.8 |
2,636.0 |
2,201.6 |
4,917.8 |
5,046.4 |
Minority interests |
(3.3) |
(4.5) |
(6.1) |
(5.0) |
(7.0) |
||
Shareholders' equity |
|
|
2,602.5 |
2,631.6 |
2,195.5 |
4,912.8 |
5,039.4 |
CASH FLOW |
|||||||
Operating Cash Flow |
176.5 |
98.6 |
(340.1) |
24.3 |
272.6 |
||
D&A, exceptionals, other |
280.5 |
498.9 |
555.2 |
633.5 |
812.3 |
||
Working capital movement |
97.0 |
(71.1) |
(42.0) |
(71.6) |
(42.0) |
||
Tax |
(81.6) |
(129.2) |
(137.8) |
(164.9) |
(317.1) |
||
Net Interest |
(10.0) |
(5.1) |
(3.4) |
(61.3) |
(56.9) |
||
Net operating cash flow |
|
|
462.3 |
392.1 |
31.9 |
360.0 |
669.0 |
Capex |
(178.6) |
(243.5) |
(274.7) |
(392.6) |
(312.7) |
||
Acquisitions/disposals |
22.5 |
45.8 |
8.7 |
957.9 |
0.0 |
||
Equity financing |
4.7 |
0.6 |
0.9 |
0.0 |
0.0 |
||
Dividends |
(46.2) |
(71.5) |
(94.7) |
(130.4) |
(145.8) |
||
Other |
59.1 |
(2.3) |
20.0 |
(20.0) |
(15.0) |
||
Net Cash Flow |
323.8 |
121.2 |
(307.9) |
774.9 |
195.6 |
||
Opening net debt/(cash), including ST investments |
|
|
77.9 |
(245.5) |
(289.4) |
84.5 |
182.5 |
FX and other |
(0.5) |
(77.3) |
(66.0) |
(872.9) |
(85.9) |
||
Closing net debt/(cash), including ST investments |
|
|
(245.5) |
(289.4) |
84.5 |
182.5 |
72.8 |
Closing net debt/(cash), excluding ST investments |
(133.5) |
(237.7) |
119.9 |
224.3 |
114.5 |
Source: Pan American Silver, Edison Investment Research
|
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Research: Healthcare
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