Pan American Silver tops CIBC's silver producer list

On May 9, Pan American Silver Corp. (PAAS:TSX; PAAS:NASDAQ) released its unaudited Q1 financials, reporting net earnings of $20 million, compared to $1.9 million for Q1/16. According to the company, "the increase largely reflects stronger mine operating earnings attributable to the increase in revenue, partially offset by higher cost of sales expense."

The net cash generated from operating activities, the company reported, was "$38.6 million compared with $0.8 million in Q1 2016. The increase reflects the growth in revenue and less use of cash in the quarter for working capital changes, offset by an $18.0 million increase in income tax payments and higher cash production costs."

Cosmos Chiu, an analyst with CIBC, noted that Pan American reported in-line Q1 results. Chiu stated, "More importantly, the expansion projects at Dolores and La Colorada (both in Mexico) remain on track and on budget, with increased production beginning in the second half of 2017. Pan American Silver remains our top pick amongst silver producers under coverage."

Expanding on the status of Delores, Chiu stated that the underground mine development is "scheduled for completion in 2017. Construction of the pulp agglomeration plant is 80% complete, with commissioning by mid-2017." He also noted that "PAAS maintains a strong balance sheet, with cash and cash equivalents and short-term investments of $205.4 million (down slightly by $12.2 million Q/Q), and minimal debt. The Q/Q decrease is due to higher cash taxes of ~$25 million in the quarter and to continued capex at Dolores and La Colorada."

CIBC has a 12-to-18-month target price of $22 for Pan American; the company is currently trading around $16.75.

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Disclosures from CIBC, Pan American Silver Corp., May 10, 2017

Analyst Certification: Each CIBC World Markets Corp./Inc. research analyst named on the front page of this research report, or at the beginning of any subsection hereof, hereby certifies that (i) the recommendations and opinions expressed herein accurately reflect such research analyst's personal views about the company and securities that are the subject of this report and all other companies and securities mentioned in this report that are covered by such research analyst and (ii) no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by such research analyst in this report.

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In addition to 1% ownership positions in covered companies that are required to be specifically disclosed in this report, CIBC World Markets Corp./Inc. may have a long position of less than 1% or a short position or deal as principal in the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon.

Recipients of this report are advised that any or all of the foregoing arrangements, as well as more specific disclosures set forth below, may at times give rise to potential conflicts of interest.

Important Disclosure Footnotes for Pan American Silver Corp. (PAAS):

CIBC World Markets Inc. expects to receive or intends to seek compensation for investment banking services from Pan American Silver Corp. in the next 3 months.

Source: The Gold Report (5/12/17)