Pan American Silver Corp. (PAAS) logged a net loss of $293.1 million (or $1.94 per share) on a reported basis in the fourth quarter of 2013, higher than a net loss of $31.5 million (or 23 cents a share) recorded in the year-ago quarter.
The loss in the reported quarter resulted from a non-cash impairment charge of $218.1 million (net of tax) on the Dolores mine and an $86 million deferred tax charge due to tax rate changes in Mexico.
Adjusted (excluding one-time items) loss was 56 cents per share in the fourth quarter compared with adjusted earnings of 37 cents earned in the year-ago quarter. The results missed the Zacks Consensus Estimate of earnings of 7 cents.
Revenues decreased roughly 22% year over year to $192.4 million in the fourth quarter from $247.3 million registered in the year-ago quarter. The results also missed the Zacks Consensus Estimate of $200 million. The decrease in the top line was due to lower realized prices for silver and gold, partly offset by greater quantities of metals sold.
For full-year 2013, adjusted loss were 32 cents per share, missing the Zacks Consensus Estimate of earnings of 37 cents. Reported net loss totaled $445.8 million or $2.94 per share versus earnings of $78.4 million or 56 cents per share in 2012.
For full-year 2013, revenues decreased 11% to $824.5 million from $928.6 million in 2012 and also missed the Zacks Consensus Estimate of $834 million.
Realized silver and gold price declined 25% and 16% year over year to $23.29 per ounce of silver and $1,398 per ounces of gold, respectively, in 2013.
Pan American produced 6.8 million ounces of silver in the reported quarter and a record of 26 million ounces of silver in full-year of 2013. The full-year silver production was 4% higher than the same-period last year. The increase was attributable to production gains at La Colorada, Huaron, Morococha and San Vicente, partially offset by small production declines at Alamo Dorado and Manantial Espejo.
Pan American produced a record 46,200 ounces of gold in the fourth quarter. Record gold production of 149,800 ounces for 2013 represents an increase of roughly 33% from 65,230 ounces produced a year ago. The year over year increase was primarily due to improved production at Dolores and Manantial Espejo mines as a result of improved grades and recoveries and higher tons processed.
Production costs increased 7.5% year over year to $136.2 million from $126.7 million recorded in the year-ago quarter. Consolidated cash costs declined 19% year over year to $9.56 per ounce of silver (net of by-product credits) from the same period in the last year. All-in sustaining costs per silver ounce sold also declined 33% year over year to $17.03 per ounce in the reported quarter.
Financial Overview
Cash and cash equivalent decreased 28% to $249.9 million as of Dec 31, 2013, from $346.2 million as of Dec 31, 2012. Long-term debt declined roughly 17% year over year to $34.3 million.
Developmental Projects
On Dec 18, 2013, Pan American decided to continue with the production expansion project at the La Colorada mine, depending on positive results of preliminary economic assessment (PEA). The expansion is expected to increase the mine's silver production rate to roughly 7.7 million ounces of silver annually by 2017 at an incremental capital investment of $80 million, the maximum part of which will be spent from 2014 until 2017.
Outlook
Pan American has provided its 2014 production target of 25.75 million to 26.75 million ounces of silver and 155,000 to 165,000 ounces of gold. A consolidated cash cost has been forecast between $11.70 and $12.70 per ounce of silver, net of by-product credits.
The company also expects to produce 39,500 to 42,500 tons of zinc, 12,700 to 13,700 tons of lead and 5,200 to 5,700 tons of copper in 2014.
For 2014, Pan American forecasts capital expenditure to be $162.5 million, out of which $95.5 million will be spent on sustaining capital and a further $67 million on long term projects including La Colorada and Dolores.
Pan American currently carries a Zacks Rank #3 (Hold).
Other companies in the mining industry worth considering are Franco-Nevada Corporation Inc. (FNV), Gold Fields Ltd. (GFI) and Hochschild Mining PLC (HCHDF). While Franco-Nevada carries a Zacks Rank #1 (Strong Buy), both Gold Fields and Hochschild Mining hold a Zacks Rank #2 (Buy).
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