Mike Fagan's Precious Portfolio: Special Alert No. 14: Tier-2 Portfolio Addition
Alert No. 14
March 30, 2021
Special Alert: Tier-2 Portfolio Addition
Dear Precious Portfolio subscriber,
In today’s alert, we’re announcing a new portfolio addition for Tier-2 (Mid-Tiers) — Pan American Silver Corp.
Pan American Silver offers speculators exposure to silver and gold via a diversified portfolio of producing mines in Mexico, Peru, Canada, Bolivia, and Argentina along with significant exploration upside.
Precious Portfolio Alert #14:
Tier-2: Pan American Silver Corp. (NASDAQ: PAAS)(TSX: PAAS)
Tier-2: Pan American Silver Corp. (NASDAQ: PAAS)(TSX: PAAS)
Founded in 1994 by mining legend and current chairman Ross Beaty, Pan American Silver is the world's second largest primary silver producer, boasting the world's largest silver reserves and resources. The company is also a significant gold producer.
The company produced 17.3 million ounces of silver and 522.4 thousand ounces of gold in 2020 versus 25.9 million ounces of silver and 559.2 thousand ounces of gold in 2019.
The shortfall in production was primarily due to temporary COVID-related mine suspensions in Mexico, Peru, and Bolivia. The company has since resumed operations [at varying levels of capacity] at its Huaron, Morococha, La Arena, and Shahuindo operations in Peru; its La Colorada and Dolores operations in Mexico; and at its San Vicente operations in Bolivia.
Despite the clear challenges posed by COVID-19, the company was able to produce record revenues of $403.5 million in Q4 2020 and $1.3 billion for FY 2020 -- and record operating cash flow of $170.6 million in Q4 2020 and $462.3 million for FY 2020.
Pan American Silver president & CEO, Michael Steinmann, commented via press release:
“Pan American delivered strong financial performance in 2020, generating a record $462.3 million in operating cash flow, which enabled us to fully repay all bank debt, double our quarterly dividend to shareholders, and grow our cash balance at year end. Our operating teams helped deliver these strong results despite the exceptional challenges presented by the COVID-19 pandemic. We continue to support our workforce and communities during this difficult time, and look forward to the deployment of vaccination programs during 2021.”
Pan American Silver is considered a low-cost silver and gold producer, which has enabled the company to maintain a strong financial position throughout the COVID-19 crisis.
Last year, the company’s total silver production came in at All-in Sustaining Costs (AISC) of $11.38 per ounce [silver is currently trading around $24 an ounce]. Gold production came in at AISC of $1,011 per ounce [gold is currently trading around $1,685 an ounce].
Outgoing chairman, Ross Beaty, who is retiring from the board in May stated:
“I am so proud and grateful to have worked with our wonderful and dedicated team in building this great company. I would also like to thank our shareholders, who have supported my vision of creating a world-class silver mining company. Pan American Silver has never been in a better financial and operating condition, with many prospects for growth. I have full confidence in the Company's leadership team and its employees to continue creating value for all stakeholders well into the future. Managed succession is part of good governance, and I'm very pleased Gill [Gillian Winckler] has agreed to take on the role of Chair. She is a highly experienced mining professional with a strong background in environmental, social and governance matters.”
La Colorada Silver Mine
The company’s largest producing mine is the La Colorada Silver Mine located in Zacatecas, Mexico.
The mine boasts an inferred mineral resource estimate of 100.4 million tonnes with grades averaging 44 g/t silver, 0.20% copper, 1.77% lead, and 4.29% zinc and containing 141.0 million ounces of silver, 4.3 million tonnes of zinc, 1.8 million tonnes of lead, and 199 thousand tonnes of copper.
The company released an updated inferred mineral resource estimate at La Colorada last summer representing a 38% increase in tonnes and an equivalent increase in silver ounces from the initial estimate provided in 2019.
Recent drill highlights include:
- 29 grams per tonne silver over 223 meters
- 139 grams per tonne silver over 23 meters
In addition to its 10 operating mines, Pan American Silver owns:
- The non-operating Escobal Silver Deposit [264 Moz Ag] in Guatemala, which is currently in the midst of a court ordered suspension in regard to rights associated with the indigenous Xinka peoples;
- and the Navidad Silver Project in Argentina — one of the world’s largest undeveloped silver assets comprising 8 individual mineral deposits in 3 separate mineralized trends.
Pan American Silver is well-funded with cash and short-term investments [at 31 December 2020] of US$279.1 million and working capital of US$495.2 million.
Additionally, the company was able to repay a net $275 million on its revolving US$500 million Credit Facility in 2020 and currently has no amounts drawn on that facility.
Pan American Silver has approximately 210 million shares outstanding for a current market cap of approximately US$6.4 billion and pays shareholders a quarterly cash dividend of US$0.07 per common share.
With 10 operating mines in the Americas and a strong financial position, Pan American Silver is well-positioned to capitalize on rising silver and gold prices and offers excellent exploration upside by way of multiple projects, including the aforementioned Navidad project in Argentina and a large polymetallic brownfield project nearby to its La Colorada mine in Zacatecas, Mexico.
Current price: US$29.40 per PAAS share: Buy up to US$29.50
Establish your Pan American Silver (NASDAQ: PAAS)(TSX: PAAS) position incrementally and look for opportunities to buy additional shares on any intermittent weakness. Learn more about Pan American Silver Corp. at www.panamericansilver.com.
Yours In Profits,
Editor, Precious Portfolio
Mike Fagan has mining in his blood. As a teenager he staked countless gold and silver properties in Nevada alongside his dad Brian Fagan, who created the Prospect Generator model that’s still widely used today in the resource space. One of those staking projects was put into production by a major Canadian mining company — a truly rare and profitable experience. That background uniquely qualifies him as a mining stock speculator. One of the most well-known names in the business, Mike is now putting that experience to use for the benefit of Resource Stock Digest, Hard Asset Digest, and Mike Fagan's Precious Portfolio readers.