YRI:CC - Pan American Silver: A More Significant Producer In 2023

Summary

• Pan American produced 552.5K Au ounces and 18.456 Moz in 2022. Gold production was down 4.6%, and silver production was down 3.8% on a yearly basis.
• Pan American Silver's shareholders are about to vote on the merger with Yamana Gold. PAAS will be a more significant producer in 2023.
• I recommend buying PAAS between $16.5 and $17, with likely lower support at $15.45 (if the Fed hikes interest rates by 50 points). Short-term sell LIFO at $21.

Introduction

Vancouver-based Pan American Silver Corp. ( PAAS ) released its fourth quarter and full year 2022 production results on January 17, 2022.

Note: I have been covering PAAS regularly quarterly since June 2019. This article is an update of my preceding article , published on August 13, 2022.

Fourth Quarter and Full-year Gold and Silver Production Commentary

1 - 2022 Gold and Silver Production

Pan American produced 552.5K Au ounces and 18.456 Moz in 2022. Gold production was down 4.6%, and silver production was down 3.8% YoY. Production was within production guidance.

Also, Pan American Silver produces lead, zinc, and copper.

• 2022 production of zinc was 38K tonnes
• 2022 production of lead was 18K tonnes
• 2022 production of copper was 5K tonnes

The company said that the consolidated silver production in 2022 was within the revised guidance range of 18.0 million to 18.5 million ounces provided on November 9, 2022, and only modestly below the original guidance of 19.0 million to 20.5 million ounces provided on February 23, 2022.

Also, the consolidated gold production in 2022 was 552.5K Oz, within the original guidance range of 550.0K to 605.0K ounces provided on February 23, 2022.

2 - Gold and Silver Prices in 2022

Silver is still underperforming gold, but gold and silver prices did quite well recently, as we can see below:

Gold and silver prices are highly contingent on the Fed's next interest rate decision. The consensus amongst analysts is that the Fed will increase interest rates by 25 points at least two times in 2023, showing that the Fed is turning dovish, which is good news for gold and silver.

3 - Fourth Quarter of 2022 Production of Gold and Silver and Details Per Mine

The fourth quarter production was 164.4K Au ounces and 4.763 million Ag ounces. It was a good quarter of production, especially for gold, which was up YoY and sequentially, as shown in the chart above.

Michael Steinmann, President and Chief Executive Officer, said in the press release:

I am very pleased with our team's efforts to deliver production results in line with our guidance for 2022. Q4 2022 results were led by strong production at Shahuindo and La Arena, as expected.

PAAS is producing gold and silver from eight mines indicated below:

Shahuindo and La Arena gold mines performed very well sequentially, with increased production of 38.4% and 68.4%, respectively.

PAAS also produces by-product metals (zinc, lead, and copper). Production per metal is indicated below:

4 - Merger Between Yamana Gold and Pan American Silver (Update From my Preceding Article)

On November 8, 2022, Pan American Silver Corp. and Agnico Eagle Mines Ltd. ( AEM ) entered into an arrangement agreement with Yamana Gold Inc. ( AUY ).

Pan American acquires all of the issued and outstanding common shares of Yamana, and Yamana sells certain subsidiaries and partnerships which hold Yamana's interests in its Canadian assets to Agnico Eagle, including the Canadian Malartic mine.

Pan American keeps all of Yamana's mines and properties in Latin America and any remaining assets and liabilities (including cash and debt).

After the merger, silver production is expected to increase by 63% and gold production by 104%, pushing PAAS further to become a primary gold producer.

The company announced in this press release that Pan American's shareholders would decide on January 31, 2022 on the proposed merger with Yamana Gold and authorize the issuance of up to an additional 157 million shares:

Pan American would like to remind shareholders of the special meeting of shareholders scheduled to take place on January 31, 2023 to consider an ordinary resolution to authorize the issuance of up to 156,923,287 Pan American common shares to the shareholders of Yamana as consideration in respect of the Arrangement. Shareholders of record on December 14, 2022 will be eligible to vote at the Meeting. A meeting of Yamana shareholders is scheduled to be held concurrently on January 31, 2023.

The shares outstanding diluted after the merger will be approximately 367.45 million, up 74.5% from the third quarter of 2022.

Yamana Gold released its fourth quarter and full-year production on January 17, 2022. It indicated production per producing mine, and we can estimate approximately the gold and silver production to PAAS.

Production attributed to PAAS will be 148,633 Au ounces (excluding the Canadian Malartic, which will be sold to AEM) and 2,433,413 Ag ounces. However, if we took the average per mine in 2022, we have a quarterly production of 141,356 Au Oz and 2,279,818 Ag Oz.

Below is Yamana Gold production per quarter in 2022, with a quarterly average per mine in 2022.

Thus, because of a highly volatile environment in the gold and silver sector with uncertainty regarding the Fed, your investment in PAAS requires short-term trading using the LIFO method to turn it profitable and less risky.

The solution is to trade PAAS short-term LIFO using at least 50% of your entire position while keeping a core long-term position for an eventual much higher target.

This two-level strategy is recommended in my marketplace, "The Gold And Oil Corner," and I believe it is the most rewarding way to profit.

Technical Analysis (Short-Term) and Commentary

PAAS forms an ascending channel pattern, with resistance at $19.3 and support at $16.9.

Ascending channel patterns or rising channels are short-term bullish in that a stock moves higher within an ascending channel, but these patterns often form within longer-term downtrends as continuation patterns. The ascending channel pattern is often followed by lower prices.

I regularly recommend keeping a core long-term position and using about 50% to trade PAAS short-term LIFO. I promote this simple but profitable strategy in my marketplace, "The Gold And Oil Corner." It allows you to wait for a higher final price target for your core long position, which I see above $25.

I suggest selling partially between $19.25 and $19.50, with possible upper resistance at $21 and waiting for a retracement between $16.5 and $17, with likely lower support at $15.45 (if the Fed hikes interest rates by 50 points).

Thus, watch the gold and silver prices like a hawk.

Warning: The TA chart must be updated frequently to be relevant. It is what I am doing in my stock tracker. The chart above has a possible validity of about a week. Remember, the TA chart is a tool only to help you adopt the right strategy. It is not a way to foresee the future. No one and nothing can.

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