Pan American Silver Corp

Pan American Silver is one of the largest silver producers, but they are currently primarily a gold producer. They get about 20% of their revenue from silver production and about 65% from gold. The rest comes from base metals (zinc, lead, and copper). They acquired Tahoe Resources and joined the ranks of silver miners who have diversified into gold. Note that they have 1 billion oz's of silver, and if they can restart Escobal (20 million oz of production in Guatemala) and build Navidad (20 million oz in Argentina), their silver revenue could come close to their gold revenue.

Pan American's resources are huge. They have about 1.1 billion oz. of silver and 26 million oz. of gold. In 2026, they will produce about 26 million oz. of silver and 725,000 oz of gold. Plus, this does not include their Escobal mine in Guatemala, which has had political issues. If Escobal resumes production, that adds 20 million oz of annual silver production at low cash costs. Plus, the Navidad project in Argentina is also huge (with 700M oz of silver), and could potentially get permitted.

In 2023, they added 4 producing mines acquired from Yamana. This gives them 11 operating properties in 7 countries in the Americas. No single operation provides more than 20% of production, giving them diversification if they lose a mine.

It has a few red flags. They mine in Mexico, Guatemala, Bolivia, Argentina, Chile, Peru, and Canada. So, the location risk is significant, but I have confidence that management can find a way to grow. Also, currently, their all-in (break-even) cost per oz for silver is around $34. That’s not low. But if Escobal comes back online, their overall costs will be much lower.

They have $850M in debt. However, they also have $1.6B in cash, and none of the debt is due until 2027. Gold production is currently giving them solid cash flow from their expected 725,000 oz of production in 2026, with all-in (break-even) costs around $2800 per oz.

Looking at potential free cash flow at higher gold/silver prices, Pan American is a standout. Currently, their run-rate is around $2.5 billion in annual free cash flow. Their FD market cap is $24 billion. That makes their FCF multiple less than 10.

If they can get Navidad in Argentina permitted, that project has 600M oz (120 gpt AG) of M&I silver. That's a huge potential mine, but permits won't be easy for a mine of that size. I'm not giving them any value for Navidad. If it gets built, along with Escobal coming back online, then they are extremely cheap. I am expecting Escobal to restart and include its production in its future valuation.

Their Chairman (Ross Beaty), who is known to be shareholder-friendly and is considered to be one of the best minds in gold/silver mining. I consider the company to be in good hands under his control.

They were pessimistic about when they could begin mining Escobal in the near term. It looks like several more years. They were not happy with the winner of the recent Guatemala elections. However, in the long term, Escobal will likely get restarted. It's huge mine with a lot of high-paying jobs.


DD