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Despite lower silver prices, Vancouver's Pan American Silver Corp. (Nasdaq: PAAS) reported strong earnings yesterday (Thursday) that sent its shares soaring 6.28% over the day – and up to an 8.35% gain through Friday.
At first glance, Pan American's story may appear grim. In 2013, silver prices fell 35.7%, and Pan American shares fell right alongside, for a remarkably similar 35.57% loss across the year.
Thursday's earnings posted a net loss of $293.1 million, or $1.94 per share, during Q4 2013.
However, this is mainly attributable to a considerable net loss for the company – which owns and operates several mines across the Americas – from a one-time impairment charge of $540 million in that quarter related to its Dolores Mine.
Notwithstanding lower silver prices and the impairment charge, PAAS was able to boost its silver and gold production to record 26 million ounces of silver, up from 25 million ounces a year ago in the same period, and 149,800 ounces of gold, compared to 112,283 ounces in 2013.
"Our fourth quarter financials were blemished by the need to recognize an impairment on our Dolores mine and non-cash deferred tax charges related to increased tax rates in Mexico," Pan American Silver President and CEO Geoff Burns said along with earnings release. "However, thanks to our excellent production and lower cost base we generated strong net operating cash flows of $0.40 per share during the quarter and were able to increase our year-end cash position to over $422 million, even after paying our industry-leading dividend."
Pan American is presently paying an industry-high dividend yield of 3.4%, which pays out a 1.9% dividend.
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The company's balance sheet appears extremely robust, with a working capital position of $689 million that provides a buffer of stability for any hiccups it may experience. And current assets are higher than total liabilities.
In 2014, Pan American expects to produce 25.75 to 26.75 million ounces of silver and 155,000 to 165,000 ounces of gold at consolidated cash costs of between $11.70 and $12.70 per ounce of silver, net of by-product credits. It will invest a projected $95.5 million in sustaining capital and will spend a projected $67 million on long-term projects dealing with mine expansions.
Silver prices are up 12.67% so far this year, providing an additional boost to Pan American shares – concerns about a volatile U.S. economy have ignited renewed interest in precious metals, as reluctant investors hedge their bets.
And silver's headed even higher in 2014…
"I think silver will close the year higher than it started, and a 50% gain to the $30 range is not out of the question," Money Morning Resource Specialist Peter Krauth recently said. "Bullish price action in both gold and silver, the out-of-whack gold/silver ratio, extreme pessimism of speculators, record coin sales, and sticky ETF holdings are all converging toward a higher silver price."
Pan American stock presently sits at $15.28 per share, up 2.48% on the day as of 3:30 p.m. EST. It's 52-week low is $9.78 per share, with a high of $17.50 per share not seen since early 2013.
Pan American Silver:
Fourth Quarter and Full Year 2013 Financial Results