Pan American Silver has profitable Q3

Escobal Mine in Guatemala. Source: Pan American Silver

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Pan American Silver Corp. [PAAS-TSX, NASDAQ] on Thursday November 7 reported a profit of US$37.71 million or 18 cents per share in the third quarter of 2019, a result that reflects strong mine operating earnings, and an increase in investment income.

However, the company said net income in the quarter was reduced by a one-time, non-cash US$15.6 million adjustment for depletion and amortization related to the reclassification of its Timmins, Ontario operations.

Effective third quarter, 2019, the company said its Timmins West and Bell Creek (together Timmins) are no longer classified as held for sale, and net income generated by Timmins is now included in the company’s income statement in the normal course of business. Ore from both mines is processed at the Bell Creek mill.

“Our operations performed well in Q3, generating US$81.9 million in operating cash flow,” said Pan American President and CEO Michael Steinmann. “We are reducing our cost guidance for the second time this year, and we remain on track to achieve the production guidance for 2019, as revised on August 7, 2019,” he said.

Pan American recently acquired Tahoe Resources Inc. 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. It also owns the Escobal mine in Guatemala, which is not operating right now.

Strong free cash flow has allowed Pan American to repay US$20 million on its credit facility and advance the skarn discovery at the La Colorada mine in Zacatecas, Mexico, where the company said it encountered exceptional drill intercepts in the quarter.

Third quarter silver production of 6.7 million ounces and gold production of 150,200 ounces have put the company on track to achieve management’s guidance for 2019, which was revised on August 7, 2019. The company has guided the market to anticipate silver production this year of between 25.3 and 26.3 million ounces and gold production to between 550,000 and 600,000 ounces.

The adjustment reflected the postponement of commercial production from the COSE and Joaqun projects in Argentina by about three months, mine scheduling adjustments at Morococha in Peru and better than expected performance at Shahuindo, Peru during the first six months of 2019.

Pan American posted revenue of US$352.2 million in the third quarter of 2019, a number that excludes revenue associated with a build in metal inventory during the third quarter, estimated at US$17.8 million, which is expected to be released in the fourth quarter of 2019. All-in-sustaining costs came in at US$5.47 for silver and US$729 for gold respectively during the third quarter.

Pan American Silver shares advanced on the news, rising 1.9% or 42 cents to $22.57 on volume of over one million shares. The 52-week range is $13.83 and $25.99.


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