The Gold Report - Fri, May 12, 2017

Pan American Silver Tops CIBC's Silver Producer List

Pan American Silver released Q1 earnings of $20 million, and CIBC reaffirmed the company's position as its top silver producer pick.

Silver globe

On May 9, Pan American Silver Corp. (PAAS:TSX; PAAS:NASDAQ) released its unaudited Q1 financials, reporting net earnings of $20 million, compared to $1.9 million for Q1/16. According to the company, "the increase largely reflects stronger mine operating earnings attributable to the increase in revenue, partially offset by higher cost of sales expense."

The net cash generated from operating activities, the company reported, was "$38.6 million compared with $0.8 million in Q1 2016. The increase reflects the growth in revenue and less use of cash in the quarter for working capital changes, offset by an $18.0 million increase in income tax payments and higher cash production costs."

Cosmos Chiu, an analyst with CIBC, noted that Pan American reported in-line Q1 results. Chiu stated, "More importantly, the expansion projects at Dolores and La Colorada (both in Mexico) remain on track and on budget, with increased production beginning in the second half of 2017. Pan American Silver remains our top pick amongst silver producers under coverage."

Expanding on the status of Delores, Chiu stated that the underground mine development is "scheduled for completion in 2017. Construction of the pulp agglomeration plant is 80% complete, with commissioning by mid-2017." He also noted that "PAAS maintains a strong balance sheet, with cash and cash equivalents and short-term investments of $205.4 million (down slightly by $12.2 million Q/Q), and minimal debt. The Q/Q decrease is due to higher cash taxes of ~$25 million in the quarter and to continued capex at Dolores and La Colorada."

CIBC has a 12-to-18-month target price of $22 for Pan American; the company is currently trading around $16.75.

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