The Toronto Stock Exchange (“TSX”) has accepted Pan American Silver Corp’s (PAAS - Snapshot Report) notice stating its intention to repurchase shares. The silver miner has proposed to make a normal course issuer bid for repurchasing up to 7,570,535 amount of its common stock, representing up to 5% of the company's issued and outstanding shares as of Nov 14, 2013.
Repurchase of the shares can be made through open market operations available at the TSX and the Nasdaq Global Select Market (NASDAQ) and other Canadian trading platforms. The bidding period will start from Dec 5, 2013, and will continue till Dec 4, 2014, or any earlier date if the company completes its repurchases.
Pan American decided to undertake the bid as its Board believes that the market price of its common shares, from time to time, may not fully reflect the underlying value of its mining operations, properties and future growth prospects. At such times, the outstanding common shares will appeal as an investment for Pan American since a portion of the company's excess cash generated on an annual basis can be invested for an attractive risk adjusted return on capital through the bid.
Pan American plans to pay the market price at the time of buying the common shares as per the rules and policies set by TSX and NASDAQ and applicable securities laws. Under the bid, all common shares acquired by Pan American will be cancelled and the subsequent purchases of the share will be funded by the company’s working capital. However, the company is not bound to make any purchases despite its intention to acquire its common shares pursuant to the bid.
Prior to this bid, Pan American declared another normal course issuer bid program on Aug 29, 2012, and it completed its share repurchase recently. Bidding period for the same had begun from Sep 4, 2012, and ended on Sep 3, 2013. The company acquired 1,012,900 of its common shares at an average price of $17.21.
The total number of Pan American's issued and outstanding common shares stood at 151,410,712 as of Nov 14, 2013. As per TSX, the maximum daily purchases on the TSX under the normal course issuer bid will be 91,404 shares, representing 25% of the average daily trading volume for Pan American’s common shares for the six month ended Oct 31, 2013.
As per the terms of NASDAQ, the maximum daily purchases on NASDAQ under this normal course issuer bid will be 25% of the average daily trading volume for the company's common shares.
Pan American recently posted third-quarter 2013 adjusted earnings (barring non-recurring items) of 8 cents per share, compared with earnings of 25 cents per share in the year-ago quarter. The results exceeded the Zacks Consensus Estimate of 5 cents. The decrease was due to lower revenues, higher depreciation and amortization costs, and higher losses on commodity and foreign currency contracts, partly offset by favorable currency impact.
Revenues decreased roughly 15% year over year to $213.6 million in the third quarter from $251.8 million registered in the year-ago quarter. The results were ahead of the Zacks Consensus Estimate of $194 million. The decrease in the top line was due to lower metals prices, partly offset by higher volumes of all metals produced by the company.
Pan American expects to achieve its 2013 production target of 25 million to 26 million ounces of silver and 125,000 to 135,000 ounces of gold at cash costs below the original forecast of $11.50 to $12.80, net of by-product credits.
Pan American currently carries a Zacks Rank #3 (Hold).
Other companies in the mining industry with a favorable Zacks Rank include Golden Star Resources Ltd. (GSS - Snapshot Report) , Silvercrest Mines Inc. and Agnico Eagle Mines Ltd (AEM - Analyst Report) . While Golden Star carries a Zacks Rank #1 (Strong Buy), both Silvercrest and Agnico Eagle hold a Zacks Rank #2 (Buy).