Silver Co. Positions for the Future, Divesting Two Mines

Source: Streetwise Reports 09/29/2023

On Monday, Pan American Silver streamlined its portfolio following the Yamana acquisition. Read to see why two newsletter writers think this stock is a Buy.

Pan American Silver Corp. (PAAS:TSX; PAAS:NASDAQ) has announced the completion of divestment of its 56.25% interest in the MARA project in Argentina and its 92.3% interest in the Morococha mine in Peru.

This sale of non-core assets aligns with the company’s aim of optimizing its portfolio following the acquisition of Yamana Gold Inc. (YRI:TSX; AUY:NYSE; YAU:LSE), and will allow it to reduce its yearly development, reclamation, and care and maintenance costs. For the MARA project and Morococha, these costs amounted to US$15.7 million in the second quarter of 2023.

The Catalyst

As per the terms of the agreement of the MARA sale, Glencore International AG paid US$475 million in cash and has granted Pan American a life-of-mine copper net smelter return royalty of 0.75%. Pan American will also have the right to freely transfer this royalty.

Glencore now has 100% ownership over the MARA project.

The terms of the agreement for the Morococha sale detailed that Alpayana S.A. paid US$25 million cash for the 92.3% interest in Compañia Minera Argentum S.A., which is Pan American’s Peruvian subsidiary that owned the Morococha mine.

On September 24, Global Analyst Adrian Day rated Pan American as a Buy.

The company is also set to complete the sale of 57.74% interest in Agua de la Falda S.A. in the final quarter of 2023. Previously announced on July 31, 2023, a subsidiary of Rio Tinto Limited will pay US$45.55 million in cash upon closing. The subsidiary will grant to Pan American’s subsidiary a net smelter return royalty of 1.25% on all precious metals and a net smelter return royalty of 0.2% on all base metals.

According to its website, Pan American Silver Corp. “provides enhanced exposure to silver through large silver reserves and catalysts to grow silver production.” Beginning operations in 1994, it “has a diversified portfolio of mining and exploration assets located throughout the Americas,” including in Canada, Mexico, Peru, Bolivia, Argentina, Chile, and Brazil.

The company focuses on using silver to move towards decarbonization and electrification and is committed to operating sustainably. As well as its mines, it also holds interests in exploration and development projects.

Its leadership team, which includes President and CEO Michael Steinmann, COO Steve Busby, and CFO Ignacio Couturier, has decades of combined experience.

The Silver Sector

A key component in the manufacture of electrical contacts, batteries, and solder and brazing alloys, silver is constantly in demand. The Economic Times reported in April that demand for silver has increased by 38% since 2020.

In a July release, Technical Analyst Clive Maund noted “a massive and probably unprecedented rally believed to be about to start in silver” and stated that it “looks like an excellent time to load up on a wide range of silver stocks which even at this late hour are largely out of favor and ignored.”

On September 24, Global Analyst Adrian Day referenced the “10 million oz of additional silver production that came with the [Yamana] deal” and the vast amount of exploration ground and mines acquired by Pan American.

He also reported on comments made by President and CEO Michael Steinmann around the “halted mega-project in Guatemala, where the consultation process between the government and the local people is nearing an end.” It’s thought that, once back online, the Escobal project in Guatemala will “nearly double the company’s silver production.”

Day then rated Pan American as a Buy. [OWNERSHIP_CHART-521]

Ownership and Share Structure

Headquartered in Vancouver, Canada, Pan American Silver Corp. has a market cap of CA$7.4 billion.

According to Reuters, Institutions own 59.39% of shares, equal to 216.45 million shares.

Van Eck Associates Corporation owns 10.48%, equal to 38,19 million shares. The Vanguard Group, Inc. owns 3.46%, equal to 12.26 million, and BlackRock Investment Management (UK) Ltd. has 2.71%, with 9.87 million.

0.09% is with management and insiders. Director Michael Steinmann is the largest shareholder in this category. Steinmann has 0.03%, with 0.12 million shares.

The rest is held by retail investors.

The company trades at a 52-week range of CA$18.14 and CA$26.54

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Important Disclosures:

1. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Pan American Silver Corp.
2. Lauren Rickard wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor.
3. The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.

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( Companies Mentioned: PAAS:TSX; PAAS:NASDAQ,
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