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Pan American Silver (PAAS) Completes Yamana Gold Acquisition

Pan American Silver PAAS announced that it has closed the acquisition of Yamana Gold Inc. AUY. This adds four producing mines to Pan American's portfolio - the Jacobina mining complex in Brazil, the El Peñón and Minera Florida mines in Chile, and the Cerro Moro mine in Argentina. It also adds the MARA development project in Argentina.

On Nov 8, 2022, Pan American Silver and Agnico Eagle Mines AEM announced an arrangement agreement with Yamana Gold, whereby PAAS would acquire all the issued and outstanding common shares of AUY. Also, per the agreement, AUY sold its Canada assets, including certain subsidiaries and partnerships that hold interests in the Canada Malartic mine (one of North America’s biggest gold operations), to AEM.

In January 2023, shareholders of Pan American Silver and Yamana approved the arrangement. PAAS recorded transaction-related costs of $157.3 million in the fourth quarter of 2022. Last week PAAS received the approval of the Mexican Federal Economic Competition Commission that cleared the final hurdle for the deal.

For each share held in Yamana, its shareholders received $1.0406 in cash paid by Agnico Eagle, 0.0376 of a common share of Agnico Eagle and 0.1598 of a common share of Pan American. Existing Pan American shareholders own approximately 58% of the Pan American shares and former Yamana Shareholders own approximately 42% of the Pan American shares.

This is a transformational and strategic transaction for Pan American Silver, which will strengthen its position as the leader in silver and gold production in Latin America. This deal will add long-life, low-cost assets and boost PAAS’ portfolio to 12 operating mines. This includes the Cerro Moro gold-silver mine and the Mara copper project in Argentina, El Peñón gold-silver operation and Minera Florida gold mine in Chile and the Jacobina gold complex in northeastern Brazil.  

Following this acquisition, PAAS’ silver production is expected to increase 50%, whereas gold production will double. Considering the strong cash flow generating abilities of these assets, the deal will strengthen PAAS’ financial position.

Pan American Silver reported an adjusted loss per share of 2 cents in the fourth quarter of 2022 due to weak precious metal prices, as well as inflated costs. PAAS had reported adjusted earnings per share of 19 cents in the year-ago quarter.

Pan American Silver’s revenues declined 11% year over year to $375 million in the quarter under review. The top line missed the Zacks Consensus Estimate of $392 million. The average realized silver price in the quarter was $21.17 per ounce, down 9% from $23.33 in the prior-year quarter. The average realized gold price was down 3% year over year to $1,736 per ounce.

Silver production in the quarter was 4.7 million ounces, down 10% year over year. Gold production was 164.4 thousand ounces in the reported quarter, reflecting a year-over-year increase of 5%.

Price Performance

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Zacks Investment Research

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Shares of Pan American Silver have lost 34.5% in the past year compared with the industry’s 25.8% decline.

Zacks Rank & Another Stock to Consider

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

A top-ranked stock in the basic materials space is Olympic Steel ZEUS, It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Olympic Steel’s fiscal 2023 earnings per share is pegged at $3.50. Earnings estimates have moved 61% north in the past 60 days. ZEUS has a trailing four-quarter earnings surprise of 26.2%, on average. Its shares have gained 41.2% in the past year.

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