Pan American Silver Corp.
PAAS
announced that its Huaron and Morococha operations in Peru have resumed operations, which had been put into care and maintenance effective Jul 20, 2020. The company stated that it has been gradually redeploying its workforce at the mines over the past couple of weeks following intensive health screenings and COVID-19 testing.
Pan American had suspended normal operations at its mines in Mexico, Peru, Argentina and Bolivia in March 2020 to comply with mandatory national quarantines imposed to curb the spread of the COVID-19 pandemic. However, the Timmins West and Bell Creek mines in Canada continued to operate at 90% of capacity. In May, the company restarted its Shahuindo, La Arena, San Vicente and Manantial Espejo operations followed by the resumption of operations at its Dolores and La Colorada mines in Mexico in June.
By the end of the second quarter, all of Pan American’s suspended operations had resumed production. Nonetheless, the Huaron and Morococha operations in Peru had to be put under care and maintenance on Jul 20, 2020 after several workers at the mines tested positive for the virus. Following resumption of operations in these two mines, all of Pan American mines are now back in production under comprehensive health and safety protocols.
Pan American recently reported second-quarter 2020 results. Adjusted earnings came in at 28 cents, beating the Zacks Consensus Estimate of 13 cents. The figure also improved a whopping 367% over the prior year quarter. The company delivered better-than-expected earnings in the quarter despite a year-over-year decline of 27% in revenues as strong precious metal prices helped offset the impact of the suspensions at the Latin American operations.
The company also revised its guidance for 2020. It expects to produce between 19 million to 22 million ounces of silver and gold production in the range of 525,000 to 575,000 ounces. Cash costs are expected to be $6.20-$7.70 per ounce and all-in sustaining costs per ounce sold (“AISC”) are expected to be between $10.50 and $12.50 per ounce.
Pan American owns and operates silver and gold mines located in Mexico, Peru, Canada, Argentina and Bolivia. It also owns the Escobal mine in Guatemala that is currently not in operation. It holds one of the world’s largest silver mineral resources and reserves base. As of Aug 5, 2020, the company’s proven and probable mineral reserves are estimated to contain approximately 550 million ounces of silver and 5.2 million ounces of gold. Measured and indicated mineral resources (excluding proven and probable reserves) are estimated to total approximately 806 million ounces of silver and 9.4 million ounces of gold. Additionally, inferred resources, including the La Colorada polymetallic skarn deposit, total 458 million ounces of silver and 6.9 million ounces of gold.
Pan American and other players in the
industry
like Hecla Mining Company
HL
, Fortuna Silver Mines
FSM
, Avino Silver
ASM
are poised to gain from the rise in silver prices lately. The COVID-19 pandemic induced market uncertainty renewed interest in silver as an investment vehicle. Low interest rates, continued liquidity boosts by central banks and recovery in industrial demand also contributed to the rally. The pickup in industrial activity across the globe bodes well for silver. Apart from this, the white metal’s safe-haven appeal also remains strong. The uncertainty regarding the upcoming U.S. election will continue to support safe-haven demand. Consequently, the Silver Institute predicts the global silver mine production to dip 7% in 2020 owing to the mine closures on account of the pandemic. While demand remains strong, the shortage in supply will drive silver prices this year.
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