It’s been a bumpy ride for the Pan American Silver (NASDAQ: PAAS) share price since the beginning of 2021. Trading has been choppy as conflicting signals concerning the Covid-19 fight have caused silver prices to shake.
Movements in silver have certainly been wilder than gold so far this year. This is because the grey metal plays an important role as both investment and industrial metal. Thus silver prices have been highly sensitive to signals concerning the fight against Covid-19 and the global economic recovery.
The price has been more robust, above $27 per ounce, in recent sessions. But the Pan American Silver share price hasn’t fared anywhere near as well. In fact, it plummeted following the release of first-quarter numbers on Thursday. At $29.82 per share, the company closed yesterday at its cheapest since 31 March, falling 11% on the day. However, it has recovered some ground since.
Results miss expectations
A falling stock price is hardly a shock when a company releases worse-than-expected financials. But Pan American Silver, the world’s second-largest primary silver producer, missed market predictions by quite a sizeable margin.
Adjusted earnings per share at the business — which operates a string of precious metals mines across Mexico, Peru, Canada, Argentina, Bolivia and Guatemala — clocked in at 18 cents for the three months to March. This was up 80% year-on-year. But this fell well short of analyst forecasts of around 30 cents.
Revenues at Pan American Silver, while up 2.7% year-on-year at $368.1m, were adversely impacted by an inventory build up in quarter one. The company’s realised average silver price for the period rose by a much more impressive 60.1% from the corresponding 2020 period. This clocked in at $26.41 per ounce. Realised gold prices meanwhile averaged $1,788 an ounce, up 13.2% year-on-year.
Pan American Silver downgrades forecasts
Those disappointing sales and earnings results aren’t the only downward drivers of Pan American Silver’s share price however. The mining giant also slipped after it downgraded production forecasts for the full year.
Pan American Silver now expects to produce between 20.5m and 22m ounces in 2021. This is down from the targeted 22.5m-24m ounces the company had previously earmarked. More happily, the business left its gold output expectations unchanged.
Production problems
At its La Colorada mine in Mexico, Pan American Silver suffered from “lower than originally anticipated workforce deployments” in the first quarter, due to coronavirus conditions in the region. Production has also been affected by a blockage that occurred during commissioning of a ventilation project.
La Colorada production in 2021 is expected to come in 20-25% shy of forecasts as a result of these problems. On top of this, output at its Manantial Espejo project in Argentina is predicted to come in between 8-10% short of earlier predictions, again because of coronavirus-related workforce shortfalls.
Chief executive Michael Steinmann said: “Quarter one was a challenging quarter, as the Covid-19 pandemic continues to grip Latin America, impacting our workforce, communities and operations.”
