Pan American Silver Corp. PAAS reported second-quarter 2021 adjusted earnings per share of 22 cents, missing the Zacks Consensus Estimate of 33 cents. The company had reported adjusted earnings per share of 28 cents in the year-ago quarter.

Including one-time items, the company reported earnings per share of 34 cents in the second quarter compared with the year-ago quarter’s 10 cents.

Pan American Silver’s revenues improved 53.2% year over year to $382 million in the quarter under review. The top line, however, lagged the Zacks Consensus Estimate of $457 million. Average realized silver price during the quarter jumped 62% year over year to $26.88 per equivalent ounce. Average realized gold price also increased 5.9% year over year to $1,809 per equivalent ounce. Revenues in the reported quarter were affected by increase in inventory. The company noted a build-up of in-heap gold inventories at Dolores and Shahuindo. This is expected to normalize in the back half of the year and result in higher revenues and cash flows.

Pan American Silver Corp. Price, Consensus and EPS Surprise

Pan American Silver Corp. price-consensus-eps-surprise-chart | Pan American Silver Corp. Quote

Operational Update

Consolidated silver production for the quarter was 4.5 million ounces, up 61% year over year. Consolidated gold production of 142.3 thousand ounces in the reported quarter reflects year-over-year growth of 47.3%.

Silver segment’s cash costs were $12.71 per ounce in the second quarter, up 104% from the year-ago period. The segment’s all-in sustaining costs (AISC) costs were up 30.5% year over year to $16.36 per ounce in the quarter. Gold segment’s cash costs were $857 per ounce, down 5% from the year-earlier quarter. The segment AISC costs amounted to $1,163 per ounce in the April-June period, reflecting year-over-year increase of 14.6%.

Pan American Silver reported mine-operating earnings of $103 million for the quarter, highlighting year-over-year improvement of 113%.

Financial Position

At the end of the second quarter, Pan American Silver had cash and short-term investment balances of $240.4 million, working capital of $603.1 million, and $500.0 million available on its revolving credit facility. It has an equity investment in Maverix Metals Inc. with a market value of $140 million. Total debt was at $47.7 million. Net cash generated from operations was $87.1 million in the reported quarter.

The company increased its quarterly dividend by 43% to 10 cents per share, marking the third dividend hike in the past 18 months.

Guidance

Pan American Silver maintains annual silver production guidance for the current year between 20.50 million ounces and 22 million ounces. Silver segment cash costs are expected to be $9.60-$11.60 per ounce. AISC is estimated between $14.25 per ounce and $15.75 per ounce for the ongoing year.

It expects 2021 annual gold production between 605 thousand ounces and 655.1 thousand ounces. Gold segment cash costs are projected in the range of $825 per ounce to $925 per ounce. AISC is forecast between $1,135 per ounce and $1,250 per ounce. Capital expenditure for 2021 is anticipated in the range of $285 million to $305 million.

The company expects cash flows to improve in the second half of the year, with the anticipated rise in throughput rates at La Colorada along with the normalization of inventory levels that were built up during the first half of 2021.

Price Performance

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Shares of the company have fallen 21.7% over the past year compared with the industry’s decline of 16.8%.

Zacks Rank & Stocks to Consider

Pan American Silver currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space include Nucor Corporation NUE, Cabot Corporation CBT and Dow Inc. DOW.

Nucor has a projected earnings growth rate of 455% for 2021. The company’s shares have soared 160% in the past year. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Cabot has an expected earnings growth rate of 137% for the current fiscal year. The company’s shares have gained 33% in a year’s time. It currently sports a Zacks Rank #1.

Dow has an estimated earnings growth rate of 403% for the current year. In the past year, the company’s shares have gained 42%. It currently carries a Zacks Rank #2 (Buy).

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