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Pan American Silver Is Now Debt Free

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  • The Canadian company reported a fourth quarter profit of $168.89 million ($0.80 earnings per share). The adjusted income was $0.57 per share or $120.5 million.
  • Quarterly production was 152.9K Au Oz and 4,872K Ag Oz, or a total production for 2020 of 522.4K Au ounces and 17.3 million Ag ounces.
  • PAAS should be accumulated at or below $32.
  • Looking for a helping hand in the market? Members of The Gold And Oil Corner get exclusive ideas and guidance to navigate any climate. Get started today »

Source: Pan American Silver Corp. La Colorada Mine.

Investment Thesis

Vancouver-based Pan American Silver Corp. (NYSE:PAAS) released its fourth quarter of 2020 on Feb. 17, 2021.

Pan American posted better-than-expected earnings in the fourth quarter as the surge in gold and silver prices mitigated the negative effects of COVID-19 induced mine suspensions and lower ore production. However, gold and silver production was below guidance.

The company is a good play in gold and silver (which took the spotlight recently).

However, as you can see, the market is extremely volatile and unpredictable. Hence it is crucial to trade a large part (about 40%) of your short-term position. I call it trading your long position.

PAAS follows the iShares Silver Trust ETF (NYSEARCA:SLV) and is up 56% on a one-year basis, as we can see below.

Reminder: Pan American Silver is now more a gold miner than a silver miner after acquiring Tahoe. It was a timely acquisition that paid off handsomely.

However, the recent rally in silver, which is now above $24, will benefit the stock even, so the silver price has retreated from its high at $29+ in August.

PAAS - Company Balance Sheet And Production In 4Q 2020 - The Raw Numbers

Pan American Silver 4Q'19 1Q'20 2Q'20 3Q'20 4Q'20
Total revenue in $ Million 404.38 358.43 249.51 300.41 430.46
Net Income in $ Million 21.44 -76.81 20.06 65.74 168.89
EBITDA $ Million 135.76 57.18 87.72 148.91 239.86
EPS diluted in $/share 0.25 -0.37 0.10 0.31 0.80
Operating Cash flow in $ Million 129.47 114.05 62.75 114.94 170.57
CapEx in $ million 50.32 55.75 30.34 38.83 53.64
Free Cash Flow in $ Million 79.15 58.30 32.41 76.11 116.94
Total cash $ Million 238.34 239.17 261.57 231.63 279.06

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This article was written by

Fun Trading profile picture
Fun Trading is a retired engineer and independent investor. In addition to writing on investing in all aspects of gold, oil, and gas, he runs his own portfolio..

Analyst’s 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.

I started again in a mid-term position and will accumulate on weakness.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (73)

If we get the week to close >$35, that'd be great.
Fun Trading profile picture
@Peter 81

Watch tomorrow for profit-taking...
@Fun Trading Probably need some positive action in silver to get it done. Or Escobal...
"PAAS should be accumulated at or below $32."

Why? Why $32? I view PAAS shares as being worth $45+ with Escobal in operation, however perhaps only around $20 or less without Escobal. A price of $32 is around midway between these two scenarios. At around $32, Imo PAAS shares are too risky. The stock was downgrades by Deutsche bank on 1/13. I'm long PAASF rights. I used to have many PAAS shares, but sold them and put around 1/3 of the profits in PAASF rights, and bought many SBSW shares. Here is a chart of the ratio of SBSW divided by PAAS. A rising chart shows SBSW outperforming PAAS. SBSW also pays much higher dividends than PAAS. SBSW will likely have a dividend yield of over 6% of the current price for this year, vs around 1% for PAAS. I have many SBSW shares now, many PAASF rights, and no PAAS shares. If PAAS declines to around $22 I might buy a few PAAS shares, and much more if it gets under $20. PAAS is now trading at over 16 times 2021 expected earnings vs around 5x for SBSW. SBSW is now the largest miner of both rhodium and platinum, second largest palladium miner, and also gets around 1/4 of its revenue from gold. After Escobal reopens, PAAS might become the largest silver miner. For now though they get more than twice as much revenue from gold than from silver.
Rhodium keeps hitting new all time highs. The gold price has been weak lately.



I advised people last summer to sell the PAAS shares at around $36, buy 10 PAASF rights at around 75 cents for each PAAS share sold, and put the rest of the money in SBSW shares at around $11. Holding those PAAS shares gave a negative return as they declined from $36 to $31, however making the exchange outlined above would now give around $60 value for each PAAS share exchanged then. Lets see how the value of 2.6 SBSW shares plus 10 PAASF rights compares to the price of a PAAS share as time goes by. When Escobal reopens, the 10 PAASF becomes 0.497 PAAS.
Fun Trading profile picture

Be careful not to fall in love with a stock or a sector, it makes your argumentation weak.
Fun Trading profile picture

PAASF could be a potential but it is not for me.
Doc 224899 profile picture
If we take a longer view of the chart, we might think of the period since July 2020 as a consolidation stage, in a trading range, which would be necessary to protect all the gains that grew so rapidly from March 2020 to July 2020.

Or, we can think of it as a period of increasing price volatility, crashing through support, building up to a disastrous crash.

Your call, oh Great And Powerful Oz.
If you follow the news more carefully, you can make sense of the PAASF trading.
Fun Trading profile picture

Thank you for the link.
@Fun Trading The natives who oppose the operation of Escobal mine appears to be advised by some anti mining NGOs. The publications by those organizations view every well intentioned move with big suspicion. They even slammed PAAS for providing the community around the mine with face masks, food and other essential things during the covid - 19 break out last year.
Fun Trading profile picture
@Easy Al

They are not playing a fair game, as you know. Of course, there are issues about water pollution, etc., but the situation is clearly politicized and far from helping the community. I am sure this problem could be solved in less than a week, and many people could be working as we speak earning a good salary.
Nice article, PAAS is a buy under 32$.
Fun Trading profile picture

Thank you.
@dnikosd, congratulations - your orders were filled.
Chris Guenther profile picture
Agreed, this is a great way to play the silver bull market which has a long way to go IMO, with a quality company with great assets and lots of upside
SA-NJ52 profile picture

I don't remember, but I am sure it was something shiney...LOL.

BuffteethrBlog profile picture
Great company and good article.
Doc 224899 profile picture
The bid for PAAS is 30.68 right now, PAAS is debt free, silver dropped below 26, gold is falling, tech is tanking, and the sky is falling. The only question is how will we know when the bottom is in.
jimklawyer profile picture
@Doc 224899

This looks to me like just some normal rotation and high level nervousness. Growth and momentum plays, at least today, are out. Tech has undperformed since last October A few food stocks, say, BGS and TSN, are in, at least today.

When interest rates start moving up and the price of crude oil does too, what are investors to think? They probably think that inflation and/or slower growth are on the horizon. As for tech, if distance learning in schools may soon be a thing of the past, for the most part, and nearly everyone who needs a new device has one, that may account for the relative weakness in tech.
Fun Trading profile picture
@Doc 224899

It will happen and you will know it without a doubt. Volume and RSI help.
@Doc 224899 . One excellent indicator of when bottom is in , is the level of participation in articles like this one. I can notice that the number of comments has shrunk to extremely low levels over the past few weeks. It's as if no one is interested anymore . This shows a extreme bearish sentiment, Even though gold ,silver price is way above the march 2020 price.
jimklawyer profile picture
Accumulate PAAS below $32? Today it's $30 and change. My read on support levels is $27-$28 but incrementally I agree, at $30-$31 PAAS is a bargain.

The price of silver is, as always with PAAS, a determining factor--note, not *the* determining factor now that PAAS is debt free. All of which is just my humble opinion, on the fundamentals and technicals.
Fun Trading profile picture

Yes, accumulation always precedes support. In my chart above I have indicated an accumulation between 31.50 and 30.70. It is what I have done now.
@Fun Trading, excellent piece - I did the same, adding more @ $ 30.90 to an already full position.
Fun Trading profile picture
@Miners to the Moon

Thank you. Gold should be close to the bottom now. Watch for a big jump with high volume at one time maybe next week.
SA-NJ52 profile picture
I followed Josh Brown's advice yesterday. He gave up on PAAS and bought the metal.

I have done the same thing for the same reasons he gave.

Fun Trading profile picture

What metal?
Vooter profile picture
@Fun Trading
Fun Trading profile picture

PAAS is a gold miner as well...
BlueTower5000 profile picture
Excellent summary. I keep adding but I’m not hopeful in a gold/silver rebound until the Federal Reserve steps in with another QE package upgrade. Sad state of affairs when a $2 trillion dollar stimulus package isn’t providing more rocket fuel to get back to August highs. Accumulate and wait I suppose.
Fun Trading profile picture

Thank you. Yes, gold is weak and the gold/silver miners are weak as well. I see it as an excellent accumulation period.
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