Pan American Silver — Yamana transaction fully approved

Pan American Silver (NYSE: PAAS)

Last close As at 19/04/2024

USD19.06

0.16 (0.85%)

Market capitalisation

USD6,951m

More on this equity

Research: Metals & Mining

Pan American Silver — Yamana transaction fully approved

Pan American Silver (PAAS) has reported that the Mexican Federal Economic Competition Commission approved the company’s plan of arrangement with Yamana and Agnico Eagle. This is the final regulatory approval that paves the way for the completion of the transaction, which is guided to occur by end March, in line with management’s expectations. In other news, PAAS recommended a Q123 cash dividend of US$0.10 per share, implying a 2.2% yield on an annualised basis.

Written by

Andrey Litvin

Energy and Resources Analyst

Macro Pyrite mineral_pan american

Metals & Mining

Pan American Silver

Yamana transaction fully approved

Company update

Metals and mining

27 March 2023

Price

US$18.0

Market cap

US$3,789m

Net debt (US$m) at FY22 (excluding short-term investments)

118

Shares in issue

210.5m

Free float

100%

Code

PAAS

Primary exchange

TSX

Secondary exchange

NYSE

Share price performance

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 seven producing operations, the currently suspended top-tier Escobal silver mine and a number of large-scale advanced exploration projects.

Analysts

Andrey Litvin

+44 (0)20 3077 5700

Andrew Keen

+44 (0)20 3077 5700

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

Pan American Silver (PAAS) has reported that the Mexican Federal Economic Competition Commission approved the company’s plan of arrangement with Yamana and Agnico Eagle. This is the final regulatory approval that paves the way for the completion of the transaction, which is guided to occur by end March, in line with management’s expectations. In other news, PAAS recommended a Q123 cash dividend of US$0.10 per share, implying a 2.2% yield on an annualised basis.

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

31.6

1.2

12/21

1,632.8

593.2

0.60

0.34

30.0

1.9

12/22

1,494.7

272.0

(0.51)

0.45

N/A

2.5

Note: *EPS is normalised, excluding exceptional items.

PAAS announced that the Mexican Federal Economic Competition Commission approved its plan of arrangement to buy all non-Canadian assets of Yamana Gold. As part of the transaction, PAAS will issue up to 156.9m shares (c US$2.8bn at the current share price) to acquire all outstanding share capital of Yamana Gold, following the sale of Yamana’s Canadian assets to Agnico Eagle for US$1.0bn in cash and shares (c US$2.8bn in total consideration). This is the final regulatory approval and the transaction is now expected to be completed by the end of March 2023.

In other news, PAAS declared a cash dividend of US$0.10 per share for Q123 with the record date on 14 April 2023. The dividend announcement was made ahead of the release of the company’s Q123 financial results to harmonise the dividend payment schedule with that of Yamana. On an annualised basis, it implies a dividend yield of 2.2%.

Despite the recent recovery in the share price against the backdrop of generally supportive performance of gold and silver prices and the consistent execution of the Yamana transaction, we believe that the PAAS shares still do not fully reflect the accretive nature of the deal. The stock is currently trading at a consensus proforma FY23e EV/EBITDA of 8.2x (assuming new shares to be issued by PAAS, PAAS net debt at FY22 and Yamana net debt at Q322), which appears to be an undemanding multiple. We look forward to the release of the combined production and financial guidance by PAAS in the coming weeks, which might provide some welcome visibility for investors. Our estimates and valuation remain under review.

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.

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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 2023 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

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

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.

United States

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.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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