Pan American Silver Q3 2024: Record Cash Flow Overshadowed by Tax Setbacks
Pan American Silver Corp. (TSX: PAAS) recently reported its third-quarter financial results for 2024, toplined by a revenue of $716.1 million, representing a gain over last year’s $616.3 million in the same period, marking a 16.2% increase year-over-year. This growth aligns with industry-wide trends of rising commodity prices, particularly in precious metals.
While revenue rose, Pan American’s cost of sales saw a slight decline, falling to $540.4 million from $549.6 million in Q3 2023. Operating earnings saw a much stronger shift, with mine operating earnings jumping from $66.7 million in Q3 2023 to $175.7 million in Q3 2024, a nearly threefold increase. This improvement can largely be attributed to the combined impact of enhanced production output and the favorable rise in market prices, with silver averaging $29.52 per ounce in the quarter, up from $23.11 per ounce a year earlier.
Despite these gains, Pan American’s tax expense rose significantly to $73.3 million in Q3 2024, up from $32.9 million in Q3 2023. This increase includes a net $40.5 million related to prior tax filings in Mexico and $6.3 million for Argentina, partially offset by the reversal of a $26.5 million inflation-driven tax expense from Argentina recorded in the first half of 2024. The company has indicated expectations of additional cash tax payments in Q4, projected at $70–$90 million, partly driven by its recent Mexican tax settlement, which could pressure cash reserves going into 2025.
The company’s net earnings surged to $57.1 million, or $0.16 per share, from a net loss of $20.6 million, or -$0.05 per share, in the same period last year. Adjusted earnings similarly climbed to $115.1 million, or $0.32 per share, compared to just $5.2 million, or $0.01 per share, in Q3 2023.
Cash flow from operations reached $235.8 million in Q3 2024, a marked improvement over the $119.9 million generated in Q3 2023. This 96.6% increase indicates stronger operational performance and improved cash generation, although it also includes a significant $30 million build-up in inventories.
The surge in cash flow is one of the quarter’s highlights and a crucial metric for investors monitoring the company’s liquidity position, which stood at $469.9 million in cash and short-term investments as of September 30, 2024. This liquidity position marks an increase of $101.3 million from the previous quarter.
One area that saw notable improvement was the company’s free cash flow, which hit a record high of $151.5 million, reflecting the combined effects of increased production and favorable pricing. However, with capital expenditures expected to increase in Q4 as the company completes projects like Huaron’s new tailings storage facility and Timmins’ paste plant, free cash flow could see downward pressure in the near term, limiting flexibility.
Pan American’s debt profile also remained stable with total debt at $815.2 million, tied mainly to senior notes and other project financing. With $750 million available under an undrawn credit facility, the company retains significant borrowing capacity to fund future capital expenditures or acquisitions.
Silver production for Q3 2024 totaled 5.47 million ounces, down slightly from 5.69 million ounces in Q3 2023, while gold production stood at 225,000 ounces, a decrease from 244,200 ounces in the same quarter last year. This decline in output, particularly in gold, was offset by improved operational efficiencies and higher average realized prices.
Cash costs for silver averaged $15.88 per ounce, compared to $13.13 per ounce in Q3 2023, reflecting a notable rise in production costs even as AISC for silver increased from $18.19 to $19.63. Gold segment cash costs rose marginally to $1,195 per ounce from $1,187 per ounce, while AISC for gold increased to $1,496 per ounce from $1,451 per ounce.
Pan American declared a quarterly dividend of $0.10 per share, maintaining the payout level from the prior year. Total dividend payouts for Q3 amounted to $36.3 million.
Pan American last traded at $31.15 on the TSX.
Information for this briefing was found via Sedar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
