Pan American hit by COVID challenges in Q3

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Pan American Silver Corp. [PAAS-TSX, NASDAQ] on Wednesday reported sharply lower than expected third quarter 2021 earnings as the company continues to grapple with the negative impact of COVID-related restrictions.

The company reported third quarter adjusted income of US$37.8 million or 18 cents per share, which was well below the consensus estimate among analysts of 34 cents. It also reported 4.8 million ounces of consolidated silver and 142,600 ounces of gold production in the quarter.

As a result, full year production guidance has been revised downwards to an estimated 19-20 million ounces of silver and 560,000-588,000 ounces of gold. Full-year all in sustaining cost forecasts for silver have increased to US$15.75-US$16.75 an ounce, the company said in a press release.

Gold segment cost forecasts remain on unchanged from previous guidance.

Pan American recently acquired Tahoe Resources Inc. [THO-TSX, NYSE] in a US$1 billion transaction that created the world’s second largest primary silver producer. The company owns and operates mines in Mexico, Peru, Canada, Argentina and Bolivia. Its portfolio includes the Escobal mine in Guatemala, which is not operating right now.

Last year, Pan American reported consolidated annual silver and gold production of 25.9 million ounces and 559,200 ounces respectively.

Earlier this year this year, the company suspended operations at its La Colorada and Delores operations after Mexico’s Ministry of Health issued an Executive Order calling for the immediate suspension of non-essential activities, including mining. The government decree was aimed at stemming the impact of the COVID-19 pandemic.

“We have continued to face challenges with availability of qualified labour and costs related to the COVID pandemic,” said Pan American President and CEO Michael Steinmann. “Vaccination rates have been increasing at all of our operations, and we expect to see an improvement in productivity over the coming quarters, especially at La Colorada,” he said.

In the third quarter of 2021, silver production fell short of targeted levels specifically due to lower grades at San Vicente (Bolivia), ventilation access issues at La Colorada and delayed leaching at Dolores.  Lower gold production is due to a build-up of inventories at Dolores from the delayed heap leach pad construction and at Shahuindo (Peru) where an increase in stacked ore has not been recovered through the leach cycle.

On Wednesday, Pan American shares rose 1.56% or 52 cents to $33.86 on volume of 526,340. The shares are currently trading in a 52-week range of $50.70 and $27.97.

The company reported record revenue in the quarter of US$460.3 million due to the sale of dore and concentrate inventories built up from prior periods.


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