Precious metals stocks (and their underlying commodities) have become a mixed bag, especially with some global uncertainties seemingly cleared up, but Pan American Silver (PAAS) is pushing ahead nonetheless thanks to some company-specific catalysts in addition to higher gold and silver prices, explains Mike Cintolo, editor of Cabot Top Ten Trader.
As the name suggests, the company is one of the larger silver mining outfits in the world (mines in Canada, Mexico and South America), but the firm has diversified its output, partly through its acquisition of Tahoe Resources in February 2019; this year, about half of the firm’s revenues will come from gold.
Still, long-term, silver is the attraction, and investors are thinking the future could bring big growth when Pan American is able to reopen the huge Escobal mine in Guatemala (been closed for a couple of years due to local politics, though Tahoe originally thought it could reopen by year-end), which has years worth of reserves.
And Pan American’s La Colorada (Mexico) and Navidad (Argentina) deposits have yet to be tapped but have giant potential. In the meantime, the company has plenty of mines up and running (6.7 million ounces of silver and 150,000 ounces of gold in Q3), is benefiting from higher sales prices (up 15% for silver, up 22% for gold) and is cutting costs (and debt) following the Tahoe acquisition.
Analysts see sales (up 28%) and earnings (up 61%) surging next year, though the prices of gold and silver will obviously play a role. All told, Pan American is doing quite well today and has lots of upside as it makes progress on bringing other mines on-line.
PAAS got going with its peers near the end of May, nearly doubling in just over three months. The correction after that was quick, and then the stock began to show plenty of support; since the start of November, the buyers have been in control, with the stock decisively moving to new highs on solid volume. Dips of a point or so would be tempting.
