Pan American Silver (NASDAQ:PAAS) company will produce significant gains in 2017 based on the substantial price appreciation trends from all its metal production as compared to last year. Silver price is up 21% and gold price is up 5% year over year. I would anticipate the stock price ($19.20) will move toward $30 as investors and ETF snap up shares based on a tremendous year over year earnings jump.
Pan American Silver released fabulous 4th quarter and 2016 year end results, that include earnings at $.66 per share for the year compared to a loss of $1.49 in 2015. All in sustaining costs per ounce of silver, dropped 32% year over year.
2017 silver spot price is $18.42 per ounce as opposed to the first quarter of 2016-where the average price was $14.86. Gold spot price is at $1,257 per ounce today compared to an average realized price of $1,177 in Q1 of 2016.
The company is projecting a 15% increase in 2017 lead production right in the tailwind of surging lead price of $2,284 per ton compared to $1,744 per ton in Q1 of 2016. Zinc price has risen to $2,885 per ton vs. an average price of $1,679 in Q1 of 2016. On the cost side of the ledger, the company projects all in sustaining costs to hold steady around $12.00 per ounce of silver produced.
Pan American continues to fund their capital expenditures and operating costs out of cash flow, which is no easy feat in the capital intensive mining industry. The treasury holds $218 million-which might be an appealing target for a potential takeover or merger. Many competitors have to allocate cash toward paying down debt, while Pan American is able to invest in replenishing reserves, and buying additional production from those in need of cash. The company announced their purchase of satellite production from Coeur Mining, at a location in proximity to their existing mine.
The Federal Reserve chart shows U.S debt climbed from $8 to $20 trillion dollars through late 2016 and the workforce participation rate has plunged accordingly. I am not aware of a country that has ever prospered by creating mountains of debt, but that seems to be the current strategy of Central Banks across the globe. Absent a complete reversal of these damaging policies, the rush to precious metals and hard assets, should continue for a long time. Pan American Silver will benefit as the physical supply deficit (130 million ounces in 2015) becomes more pronounced.
Disclosure: I am/we are long PAAS.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.