Pan American Silver Corp. (NASDAQ: PAAS) * Enterprise Value: $833.83M | * Enterprise Value/Oz.: $1.36 | * Industry: Silver Production | * Symbol: PAAS | * Production: 19,330,000 (9 months) | * Market Capital: $1.03B (as on 7/1/16) | * Revenue: $511,728,000 (9 months) | * Share Price: $6.81 (as on 7/1/16) | * Net Income: $ (9.46)M (as on 30/9/15) | * P/E Ratio: N/A |

Pan American Silver Corp. is a Canadian company focusing on silver mining in Mexico, Peru, Bolivia and Argentina with corporate office in Vancouver. The company is trading on the Toronto Stock Exchange under the SYM: PAA and SYM: PAAS on the NASDAQ. Founded in 1994, the company acquired its first operation, the Quiruvilca mine in Peru, in 1995. It has grown into an established and respected mine builder and operator through the acquisition and reengineering of existing mines, or through the development of late-stage exploration assets that they successfully permitted, built and put into ongoing mining operations. In two decades, with constant increase in production and reserve year after year the company has become the world’s second largest primary silver producer.
Mines and Claims
Pan American Silver owns seven operating mines and six development and exploration projects. All the projects and five of the seven operating mines are under 100% ownership of the company. The operating mines and development projects are all located in Mexico, Peru, Bolivia and Argentina.
La Colorada is an underground polymetallic silver mine located in Zacatecas, Mexico, and was acquired by Pan American in 1998. An expansion project was approved in December 2013, which was started in 2014 and is expected to increase the annual mine’s production by approximately 67% by 2018. In 2014, silver production at La Colorada rose to a record 4.98 million ounces, making La Colorada their largest silver producer. The La Colorada mine produced 5% more silver in Q3 2015 than in Q3 2014, primarily as a result of increased throughput and silver grades. The Nine Months ended 30 September 2015 cash costs of $7.45 per ounce were lower than the $9.51 per ounce cash costs in Nine Months ended 30 September 2014. Average silver grade – grams per tonne increased from 372 to 363.
Dolores is an open pit silver gold mine located in Chihuahua, Mexico and was acquired in 2012. The scope of the Project remains virtually unchanged from the PEA dated effective May 31, 2014, with construction of a 5,600 tpd pulp agglomeration plant estimated over a period of approximately 18 months and development of a 1,500 tpd underground mine over 24 months. Underground development of the mine access ramp has already started and will continue through 2017 to access the high grade material, with underground production expected to reach capacity of 1,500 tpd in 2018. After Project completion, annual silver production will increase approximately 40% to 6.3 million ounces and gold production will rise approximately 52% to 205,700 ounces for the first five years. During the third quarter of 2015, Dolores produced 1.20 million ounces of silver at cash costs per ounce of $8.70. Silver production rose 24% from the same quarter of 2014 on account of higher throughput and better grades. The gold production also increased by 46% from 48.83koz to 60.93koz by the end of 30 September 2015. Cash costs of $8.70 per ounce in Q3 2015 were $5.87 per ounce lower than in Q3 2014.
Alamo Dorado is an open pit silver-gold mine located in Sonora, Mexico. As expected, in 2014, the mine’s silver production declined from 5.08 million ounces to 3.47 million ounces due to the planned processing of lower silver grade ores, combined with lower silver recoveries. Increased throughput rates helped to partially offset lower silver grades. 2014 gold production of 17,560 ounces was similar to 2013 production due to higher average gold grades. Alamo Dorado has continued to decline production in 2015. Cash costs of $9.58 per ounce in Q3 2015 were $7.46 per ounce lower than in Q3 2014.
Huaron is an underground polymetallic silver mine located in the department of Pasco, in the Peruvian central Andes. The mine was acquired by Pan American in 2001. In 2014, Huaron’s mill throughput rose 11% relative to 2013, which more than offset a 3% decrease in average silver grades and resulted in a 10% rise in silver production to a record 3.64 million ounces. Increased mining and milling rates at Huaron are expected to continue in 2015; as a result, silver production is expected to rise modestly to between 3.70 million and 3.80 million ounces from 3.64 million ounces in 2014. Q3 2015 silver production at Huaron was 6% lower in Q3 2015 than in Q3 2014, primarily as a result of decreased throughput rates caused from an unscheduled mill shut-down in September which has since been resolved. Cash costs of $11.51 per ounce in Q3 2015 were $0.77 per ounce higher than in Q3 2014.
Morococha is an underground polymetallic silver mine located in the district of Yauli, in the central Andes of Peru. Pan American entered into an agreement in 2004 to purchase the mine and currently has a total ownership interest of approximately 92.3%. Morococha produced 2.37 million ounces of silver in 2014, 1% less than in 2013 due to slightly lower throughput rates. Morococha’s 2015 silver production is expected to be relatively consistent with 2014 levels due to similar throughput, silver grades and recoveries as compared to 2014. The Morococha mine produced 11% less silver from 564koz 637koz in Q3 2015 than in Q3 2014. Cash costs of $12.59 per ounce in Q3 2015 were $4.16 per ounce higher than those in Q3 2014.
San Vicente is an underground silver-zinc mine located in the department of Potosí, in Southern Bolivia. Pan American holds a 95% interest in PASB (Pan American Silver Bolivia). The remaining 5% of PASB is owned by an affiliate of Trafigura Baheer B.V. PASB owns a 50% joint venture interest in, and is the operator of, the San Vicente project. San Vicente’s 2014 silver production of 3.95 million ounces was consistent with the prior year as throughput rates, silver recoveries, and grades all remained stable. The steady throughput in 2014 was achieved despite a two-week shutdown in July that resulted from a strike at the mine. The output of 2015 is consistent that of 2014. Silver production at the San Vicente mine in Q3 2015 was 273,000 ounces, or 36%, more than that produced in Q3 2014. The increased silver production was primarily attributable to the 27% increase in throughput. San Vicente’s Q3 2015 cash costs of $11.23 per ounce were $4.82 per ounce lower than the $16.05 per ounce cash costs in Q3 2014.
Manantial Espejo is an open pit and underground silver-gold mine in the province of Santa Cruz, Argentina and is 100% owned by Pan American. In 2014, Manantial Espejo produced 3.7 million ounces of silver, 18% more than in 2013. 2014’s production rose as a result of an 11% increase in throughput rates, 5% higher silver grades, and 1% higher silver recoveries largely achieved through successful plant optimization.
The Company recognized an after-tax reduction to the carrying value of its Manantial Espejo property in Argentina of $53.5 million in Q3 2015. The write-down was taken in recognition of lower short-term consensus price forecasts and the continued challenging operating environment in Argentina. The reduction in carrying value was reflected in an impairment charge to property, plant and equipment of $28.8 million, a net-realizable value (“NRV”) write down of stockpile inventories of $ 21.0 million and a valuation allowance on deferred income tax assets of $3.7 million.
Manantial Espejo’s Q3 2015 silver production was 5% less than in Q3 2014 due to the combined result of a 9% decrease in throughput due to an unscheduled mill break-down in September. Gold production in the quarter was 9,500 ounces or 72% more than in Q3 2014, the result of processing higher gold grades from mine sequencing. Cash costs of $4.16 per ounce in Q3 2015 were $11.38 per ounce lower than those in Q3 2014 The 73% decrease in cash costs was the combined result of a $10.12 per ounce increase in byproduct credits and a $1.26 per ounce decrease in direct costs.
Waterloo Project in California, La Virginia and La Bolsa Project in Mexico, Pico Machay Project in Peru and Calcatreu Project in Argentina are all in exploration stage while Navidad Project in Argentina is in development stage which produce small amount of silver.

Reserves & Resources
Over the last 11 years the company has added over 279 million new silver ounces to the mineral reserves, excluding acquisitions, more than the approximately 257.5 million ounces mined during the same period. As on 12/31/2014 Pan American has combined Resources of 1316.9M ounces of silver, of which, 299.9Moz is Proven & Probable, 731.5Moz is Measured and Indicated and 285.5Moz is Inferred. The company also has combined Resources of Resources of 5,253,900 oz of gold, of which 2,322,500 oz is Proven & Probable, 1,800,600 oz is Measured and Indicated and 1,130,800 oz is Inferred. Decline in mineral reserve is observed in 2014 but the average reserve silver grade increased by 4.1% and the average reserve gold grade rose by 5.5%.

Production
Pan American Silver has increased production every year since it has started its production. The expansion projects and the development projects are expected to increase the company’s production in the upcoming years. The annual silver production during 2013 fiscal year was 26 million ounces which increased to 26.1 million ounces in F/Y 2014. There was also a significant increase in the gold production from 149.8 thousand ounces in F/Y 2013 to 161.5 thousand ounces in F/Y 2014.

The La Colorada expansion project commenced in January 2014 and is expected to increase the mine’s annual silver production by approximately 67% to approximately 7.7 million ounces by 2018. After completion of Dolores expansion project, annual silver production will increase approximately 40% to 6.3 million ounces and gold production will rise approximately 52% to 205,700 ounces for the first five years. The Project will boost silver production by approximately 8.9 million ounces and gold production by 257,400 ounces.
In F/Y 2015 silver production in 1st. quarter is 6.08 million ounces. In 2nd quarter it is 6.65 million ounces, 1% higher than a year ago and 9% higher than in the first quarter of 2015 and in 3rd quarter 6.61 million ounces, 7% higher than a year ago. Gold production increased in all the three quarters from 37,500 ounces in 1st quarter to 44,400 ounces, 18% higher than both a year ago and the first quarter of 2015 and in the 3rd quarter record gold production of 53,600 ounces, 57% higher than a year ago is observed.
Year-to-date, Pan American has produced 19.33 million ounces of silver and 135,500 ounces of gold. For the full-year 2015, the Company reaffirms its annual silver production forecast of between 25.50 million and 26.50 million ounces of silver; however, Pan American now expects 2015 annual gold production to increase to between 175,000 and 180,000 ounces, up from the Company’s original annual production forecast of between 165,000 ounces and 175,000 ounces.
The Company’s consolidated year-to-date cash costs per ounce of silver were $9.92. Based on this, and on the expectation of a modest increase in gold production and by-product credits during the final quarter of 2015, Pan American now expects full-year consolidated cash costs to be in the range of $10.00 to $10.50 per ounce, well below the original 2015 forecast of $10.80 to $11.80 per ounce.
Year-to-date All-in sustaining costs per silver ounce sold (AISCSOS) of $14.99 was below the full-year forecast of $15.50 to $16.50. Based on the performance for the first nine months of 2015 and provided metal prices remain at or near current levels, the Company now believes that full-year consolidated AISCSOS will be below the original annual guidance, and as a result has reduced its full-year forecast for AISCSOS to between $15.00 and $15.50.

Management
Pan American has an experienced Management Team and Board of Directors. Ross J. Beaty the founder and chairman of the company is a geologist and resource company entrepreneur with more than 40 years of experience in the international minerals industry.
Michael Steinmann, President & CEO, joined Pan American Silver in 2004. His last assignment before joining Pan American was with Glencore in Peru, where he worked six years as Manager, Geology South America. He has extensive experience managing the geological function of a wide range of base and precious metal mines and green and brownfield exploration projects. He has evaluated mines and projects throughout South and Central America, Mr. Steinmann is responsible for the Company’s business development activities, production geology, and resource and reserve estimations as well as for the greenfield and brownfield exploration programs of Pan American Silver.
Mr. Beaty formed an experienced Management Team which through hard work along with a wonderful team of mines builders, mine operators and support personnel has grown to become the world’s second largest primary silver mining company.
PAAS Management holds roughly 2% of the company’s stock. Institutional ownership accounts for 47% with Van Eck Associates Corp. having the highest percentage.

Financial Information
As on 09/30/2015 Pan American had Total Assets of $1.88B (including a Cash Balance of $155.3M) and Total Liabilities of $434.5M, Current Assets equaled $619M and Current Liabilities of $199M. Total Liabilities represents 23.16% of Total Assets and Current Liabilities is only 32.13% of Current Assets. At the end of the third quarter of 2015, Pan American had succeeded in keeping its assets value more than its liabilities. By the end of the year 2015 decrease in Total Liabilities is expected.
Pan American generated $159.4 million in revenue during the third quarter of 2015, a decline of 11% compared to the same quarter of 2014. The main reason for the revenue decrease in the reporting quarter was the significant price deterioration for all metals produced by the Company, in addition to increased treatment and refining charges, partially offset by increased quantities of gold and copper sold.
Inclusive of negative settlement adjustments on concentrate sales totaling $5.1 million, the Company realized markedly lower prices for all metals produced. During the third quarter of 2015 the Company received an average of $14.75 per ounce of silver sold and $1,122 per ounce of gold sold, 22% and 13% lower respectively than in the same quarter of 2014. Base metals were also lower compared to a year ago; lead decreased 29% to $1,576 per tonne, while zinc and copper declined 24% to $1,747; and 26% to $5,141 per tonne, respectively. During the third quarter of 2015, Pan American generated a net loss of $67.5 million, or $(0.44) per share, compared to a net loss of $20.2 million, or $(0.13) per share in the comparable quarter of 2014.
The net loss generated in the current quarter was primarily the result of a $53.5 million write-down of the carrying value of the Manantial Espejo mine. The Company recorded an adjusted loss of $9.3 million, or $(0.06) per share during the reporting quarter, after adjusting for: the write-down of assets at Manantial Espejo in the amount of $47.4 million, a $5.2 million write-down of a receivable related to contracted services, a $3.2 million unrealized foreign exchange loss, a negative $1.0 million adjustment on the value of Dolores’ heap inventory, and an unrealized $1.8 million loss on commodity contracts. The current quarter’s adjusted loss was largely due to the continued decline in the prices of the metals that the Company produces, offset in part by increased gold and copper production, a 5% reduction in direct production costs, and a $1.9 million reduction in general and administration expenses.
With a current Enterprise Cost of only $833.83M Pan American is priced at a discount compared to its Market Cap $1.03B and its Enterprise Cost per Ounce is $2.07. Though the company is suffering loss in the last few years due to reduction in metal price still it had the ability to keep its Current assets to 618.99M while the Current Liabilities dropped to 198.9M. With the increase in the price of silver and gold the company has incredible opportunity to gain profit as their production is increasing every year.

Financial Highlights Fiscal Year | Fiscal Year Ends: | December 31 | Most Recent Quarter (mrq): | September 30, 2015 |

Profitability | Operating Profit Margin : | 17.51% | |

|

Income Statement | Revenue (mrq): | 511.73M | EBITDA (ttm): | 73.59M |

Balance Sheet | Total Cash (mrq): | 155.29M | Debt Ratio (mrq): | 0.23 | Debt-Equity ratio (mrq): | 0.30 | Current Ratio (mrq): | 3.11 | Quick Ratio (mrq): | 2.02 | Net Working Capital Ratio (mrq): | 0.22 |

Abbreviation Guide:
K = Thousands; M = Millions; B = Billions mrq = Most Recent Quarter (as of Sep 30, 2015)
Ttm = Trailling twelve months
EBITDA - Earnings before Interest, Taxes, Depreciation and Amortization

SWOT Analysis
Strengths
* The production of the company is increasing marginally every year. In 2014 the company produced 26.1 million ounces of silver and in 2015 it is expected to produce 26.5 million ounces. By 2018, with the expansion of two largest producing mines La Colorada and Dolores in Mexico, significant increase in production will be observed. * Experienced Management Team of the company through immense hard work has grown to become the world’s second largest primary silver mining company. * A significant reducing in average cash cost from $11.46 in 2014 to $8.74 in Q3 2015 was observed and if the trend remains which is beneficial for the company. * The company has a strong financial history and it has shown its ability to grow. Presently it is the second largest producer of silver and has preserved an international goodwill.
Weaknesses
* From 2013 the resources and reserves of the company are decreasing. In 2013 the resources decreased to 1039 Moz from 1052.2 Moz in 2012 and it further decreases to 1031.4 Moz in 2014. One of the mines, Alamo Dorado in Mexico is in matured stage so the production of that particular mine is decreasing and is expected to decrease further in the upcoming year. In 2014, the mine’s silver production declined from 5.08 million ounces to 3.47 million ounces.
Opportunities
* In the past the company had acquired new mines and development and exploration projects. Waterloo Project in California, La Virginia and La Bolsa Project in Mexico, Pico Machay Project in Peru and Calcatreu Project in Argentina are all in exploration stage while Navidad Project in Argentina is in development stage .These projects upon completion will add to the Company’s resources and production. * Growing demand of silver in industrial purposes will help the company to have more industrial buyers.
Threats
* Falling of metal prices can affect the Company’s income. The price of the silver is now $13.85 per ounce which is approximately 70% lower than the price of silver in 2011 which was $45.83 per ounce. The Company derives its revenue from the sale of silver, gold, lead, copper, and zinc. The Company’s sales are directly dependent on metal prices that have shown extreme volatility and are beyond the Company’s control. * The Company has long-term concentrate contracts. Concentrate contracts are common business practice in the mining industry. The terms of the concentrate contracts may require the Company to deliver concentrate that has a value greater than the payment received at the time of delivery, thereby introducing the Company to credit risk of the buyers of the concentrates. * The Company’s sales are denominated in USD and a portion of the Company’s operating costs and capital spending are in local currencies, the Company is negatively impacted by strengthening local currencies relative to the USD.
Conclusion
Pan American Silver Corp. is a strong mining company that has shown an ability to clear all its debts. The company has the capability to lower the cost of production. It is suffering loss due to fall in metal price. Debt-Equity ratio of the company is only 0.3 this shows that it is in a risk free position as it has enough cash. With the increase in metal price the company is expected to generate profits as the production of the company is consistently increasing year after year.