Why Pan Am Silver Stocks Dip 12% on Aug 11

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What happened

Silver and gold miner Pan American money (NASDAQ: PAAS) dropped to 12% on August 11. The stock started the day lower and continued to move lower until about 12 p.m. EDT, when it was down about 11%. It recovered a few percentage points before starting to decline again in the early afternoon, stopping at a loss of around 12% by 2pm. German Bank.

So what

CEO Michael Steinmann kicked off the Pan American Silver second quarter earnings conference call on August 6, explaining that “the global COVID-19 pandemic has had a significant impact on our operations in the second quarter.” Rising precious metal prices helped soften the shock, allowing the company to earn $ 0.10 per share in the quarter, up from $ 0.09 in the second quarter of 2019. However, the impact of the closings of mines led Pan American Silver to reduce its silver production for the year 2020 forecast by around 40% with gold production down 15%. With precious metal prices high today, this is not a good result.

Image source: Getty Images.

It was the updated production guidelines that prompted Deutsche Bank to move the precious metal miner from the buying list to the waiting list. That said, this move was accompanied by an increase in the target share price to $ 34 per share, from the previous level of $ 28. The stock’s rapid fall took stocks a few dollars below the updated target. The main takeaway, however, is that the impact of COVID-19 on Pan American Silver’s business will persist throughout 2020.

Now what

Pan American Silver faces headwinds in production at a time when silver and gold prices are high. This is good because the high prices of raw materials will help to compensate for the lower than expected production. However, it is also bad because the company will not be able to take full advantage of price increases in the often volatile precious metals market. Worse yet, based on the fact that the change in the company’s production guidelines was linked to the impact of COVID-19, any worsening of the pandemic could potentially lead to new mine performance issues.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.


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