Despite Deferral Of Underground Mine, Canaccord Raises Price Target For Pan American Silver

Canaccord analyst John Kratochwil yesterday reiterated a “Hold” rating on Pan American Silver Corp (PAAS) and increased his price target to $18.75 (from $17.75) following positive results for Dolores’ preliminary economic assessment.

Kratochwil comments: “Annual silver production is expected to increase by 38% in the first 10 years, due largely to a 21% increase in throughput and better recoveries (~7% for both gold and silver). While an underground resource has not been provided, we estimate 5.25 Mtonnes (based on 1,500 tpd for 9.5 years of operations) containing approximately 11 Moz silver and 0.3 Moz gold”. However, the production of the underground mine has recently been deferred 9-12 months “to proceed with additional studies and continue the delineation of underground mineralization”.

The analyst continued, “We have revised our target to C$18.75 from C$17.75 based on 1.05x our 5%/operational NAVPS estimate of C$13.85 (previously C$13.09) plus net debt and other corporate adjustments. Our 2014 EPS estimate has been revised to $0.28 from $0.15 following the incorporation of Q1/14 results and revised 2014 cash cost estimates”.

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