Pan American Drops On Expansion and Ownership Announcement; Blackmont Remains Bullish

Pan American Silver Corp. (PAAS) shares were down significantly following the company's announcement Wednesday it was buying an additional 40% in the San Vicente silver-zinc mine in Bolivia for US$9-million, bringing its total interest to 95%.

The company also announced a mine expansion at the site that, once complete, is expected to produce 2.8 million ounces of silver per year at a cost of U.S.$2 per ounce, net of zinc by-product credits. The cost of the expansion is expected to be US$40.5 million.

Richard Grey, analyst at Blackmont Capital, increased his production estimates by 1.5-million ounces and increased his net asset value from C$21 to C$21.25.

However, he added that Pan American's expansion and ownership increase also raises the company's exposure in Bolivia, a country with high political risk.

He maintained his "buy" rating on the stock and left his C$40 price target unchanged.