Pan American Silver (PAAS) project unsafe as mining law repealed

The future of Pan American Silver Corp.The PAAS Navidad silver project remains uncertain on December 20 after the Chubut Province executive in Argentina repealed the mining law approved earlier this month. The law had raised expectations that after an 18-year wait, the company could begin the project – one of the largest undeveloped silver deposits in the world.

Chubut Province passed a law (“Law 5001”) in 2003 banning opencast mining and the use of cyanide in mineral processing throughout the province. This effectively prevented development of the 100% owned Pan American Navidad silver project. However, the company remained committed to the development of Navidad. It contributed to the positive economic and social development of Chubut Province while waiting for the adoption of a favorable legal framework.

On December 15, 2021, the legislature of the province of Chubut in Argentina passed a draft law that would amend the mining law to allow open pit mining in certain areas of the departments of Gastre and Telsen. This new law was promulgated on December 16, 2021 by the Governor of Chubut, Mariano Arcioni. This had indicated that the company may be able to start the Navidad Silver Project. However, due to violent protests by local communities, the provincial government decided to repeal the mining law. This dealt a blow to the mining sector, as the law would have removed a bottleneck for companies operating in the region, which had previously stalled due to restrictions.

Pan American Silver acquired the Navidad Silver Project in 2010 after purchasing Aquiline Resources Inc. The Navidad properties are located in the north-central province of Chubut, Argentina. It is within the designated zone that would potentially allow open pit mining. By law, any mining project, including Navidad, would have to undergo relevant review processes and apply for approval under provincial law. Pan American Silver owns and operates silver and gold mines in Mexico, Peru, Canada, Argentina, and Bolivia. It owns the Escobal mine in Guatemala, which is not currently operational.

Pan American recently reported adjusted earnings per share of 18 cents for the third quarter of 2021, which fell short of Zacks’ consensus estimate of 35 cents. The company reported an adjusted EPS of 28 cents in the same quarter of the previous year.

Pan American Silver revenue rose 53.2% year over year to a record $ 460 million for the quarter, but fell short of Zacks’ consensus estimate of $ 462 million. The average realized silver price declined 2.5% quarter over quarter to $ 24.16 an ounce. The average realized gold price also fell 6.9% year-on-year to $ 1,782 an ounce. Sales in the quarter under review benefited from the sale of dore and concentrate stocks that had been built up in previous periods. This was partially offset by increases in on-pad inventory at Dolores and Shahuindo.

Pan American Silver expects silver production between 19 million ounces and 20 million ounces for the current year. Annual gold production is projected at 560,000 to 588,000 ounces.

Value for money

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The company’s shares are down 27.5% so far this year, compared to the industry’s 29% decline.

Zack’s rank & stocks to consider

Pan American Silver is currently ranked # 3 in Zacks (Hold).

Some of the better valued stocks in the commodities sector are Nutrien Ltd. NTR, The Chemours Company CC and AdvanSix Inc. ASIX. All of these stocks are currently ranked # 1 Zacks (strong buy). You can see the full list of current Zacks # 1 Rank stocks here.

Nutrien has an expected earnings growth rate of 233.3% for the current year. The Zacks consensus estimate for the current year’s NTR earnings has been revised upwards by 16.3% over the past 60 days.

Nutrien outperformed the Zacks Consensus Estimate for three of the past four quarters. The company has posted an average earnings surprise of around 73.5% over the past four quarters. The NTR share has gained 55.7% since the beginning of the year.

Chemours expects an earnings growth rate of 105.1% for the current year. The Zacks consensus estimate for CC earnings for the current year has been revised upwards by 10% over the past 60 days.

Chemours has exceeded the Zacks Consensus Estimates for earnings for each of the past four quarters, the average surprise averaging 34.2%. So far this year it’s up 27.9%.

AdvanSix has a projected earnings growth rate of 194.5% for the current year. The Zacks Consensus Estimate for ASIX’s earnings for the current year has been revised upwards by 5.9% over the past 60 days.

AdvanSix outperformed the Zacks Consensus Estimate for earnings for each of the past four quarters with an average surprise of 46.9%. So far this year, ASIX is up 126%.

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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.

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