Analyst Actions: Pan American Silver Corp. Target Cut $3, But Keeps Outperform at Credit Suisse


Credit Suisse says: Q1 EPS Light; Opex and Capex Under Review; Lowering Estimates and Target Price to C$20 (from C$23)

PAA reported adjusted 1Q13 FD EPS of $0.23. "Results compare with our estimate of $0.27 (consensus $0.26). Adjusted results exclude an $18.3Mln impairment charge related to sales of non-core gold assets, as well as various derivative/FX adjustments (GAAP FD EPS of $0.10). Compared to our adjusted EPS, lower gold sales (30Koz vs. our 38Koz), was partially offset by a 5% improvement in average unit operating costs and lower taxes."

View: "Mixed results; average unit operating costs in 1Q13 decreased ~5% QoQ, but unit costs still face upward pressures. PAA reported slightly lower silver/gold production of 6.3Moz/32Koz relative to our 6.4Moz/38Koz, offset by lower cash costs ($11.33/oz vs. our $13.73/oz) due to lower than expected operating costs and higher by-product production. Lower silver production at Dolores due to mining lower grade zones and lower tonnes stacked was partially offset by stronger production at La Colorado (better grade) and San Vicente (higher throughput). Construction of Leach Pads #2 and #3 at Dolores are near completion and stacking should commence in 2Q13 and 4Q13, respectively, with improving performance expected in 4Q13."

Catalysts: "FY13 guidance maintained, with opex and capex under review. PAA re-iterated FY13 silver production guidance of 25-26Moz/140-150Koz, as well as FY13 zinc/lead/copper production of 36-39/11.5-12.5/3.5-4.0Kt. PAA noted that significant declines in by-product metal prices subsequent to 1Q13 could negatively impact cash costs. As a result, PAA has put the balance of its FY13 opex/capex budgets under review, with an updated expected in 2Q13."

Valuation: "Lowering EPS & TP on higher opex and tax rate assumptions. Our revised TP of C$20 (from $23) is based on 1x our revised cash-adjusted NAVPS estimate of C$20.46 (from C$22.61). We are lowering our 2013/2014/2015 EPS estimates to C$0.92/C$1.19/C$1.72 (from C$1.16/C$1.36/C$1.92) respectively."

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

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This article appears in: Investing , Commodities

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