 | Ross Beaty, the founder and current Chairman of the Board of Pan American Silver Corp. (PAAS: TSX; PAAS: NASDAQ) spoke with Metals News about the company, their current position and the status of the markets. With mines in multiple countries, Pan American Silver is one of the biggest silver producers in the world. Beaty said, “It is the second largest, primary silver mining company in the world. In 2012, we produced 25 million ounces of silver as well as copper, gold and zinc.”
The company has diversified their holdings all over the world. Beaty said, “We have mines in Mexico, Bolivia, Peru and Argentina.” These holdings have created a large management project for the company. Said Beaty, “We employ 8000 people.”
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In terms of value, Pan American has a very positive financial
situation. Beaty said, “We have a $2 billion
dollar market cap.” The company believes
that their financial strength is one of the reasons investors prefer their
stock over other investment options.
Beaty said, “We have the best balance sheet in the silver industry. We have $400 million in the bank. We are in good shape with strong cash flow.” In addition to the cash in the bank, Pan
American has projected that their production will continue to grow over
time. Said Beaty, “We expect our silver
production will continue to grow in 2014.
We will be working to increase production over the medium and long term,
too.” All of these efforts are designed
to move Pan American to the next level in the global silver market. Said Beaty, “We are aiming to be the largest
low-cost silver producer in the world.”
The company is
pursuing their growth by following their initial plans. Said Beaty, “The real goal is to stay close
to our mission. We’d like to do what we do well – build good mines, employ good
people.” One of their more recent
efforts was to buy back shares to support the value of their company. Beaty said, “We have spent $125 million
buying back our shares and we also pay a strong annual dividend of $0.50 per
share. We are returning value to our
shareholders.” This is just one of the reasons that the company is in a
financially enviable position.
Beaty believes that silver and gold will be
excellent investments for the future. He
said, “Silver and gold, being precious metals, are money. They have been driven by the same factors for
millennia. They are real assets, not
paper assets.” Beaty believes that
investors don’t always have confidence in the paper money they use on a daily
basis. He said, “People will seek out precious
metals as real assets with stable value.”
Though values for silver and gold have decreased in recent months, Beaty
doesn’t believe this will continue for long.
He said, “Silver and gold prices have come down because of
nervousness. The dollar is strong right
now. I don’t see that strength
staying. I could see gold over $2000 and
silver over $30 in the near future.”
Beaty doesn’t believe
the non-precious metals market is in as favorable a position. He said, “I’m not so favorable toward non-precious
metal prices. I think that growth will
be stressed in many places in the world.
On the supply side, gold supply is very stressed. We aren’t producing a lot of new gold. You are seeing static production rates.” These static production rates are now
impacting the price levels of gold and silver.
Said Beaty, “The mining industry has had ten years of exceptional pricing. When you have pricing doing so well, you end
up having supply catch up.” In addition
to more supply becoming available, there are also issues with the geopolitical
status of economies. Beaty said, “The
new metals supply is hitting today into a market that is nervous about world conditions,
which decreases demand. Mining equities
have been hit because of issues with capital allocations. Bad acquisitions and poor cost management have
caused investors to sell. It is quite
natural. It isn’t fair that shareholders
are blaming mining companies for all of this because some of this is currency
driven.”
Unlike many of the companies that are suffering
through a challenging market, Pan American Silver simply isn’t in that
position. Said Beaty, “Pan American
Silver is in a very strong financial position.
We pay a 4% yield. We think our
share price is dramatically undervalued.
We have $400 million in the bank and $700 million in working capital
with a great asset base.” Beaty believes that their share price isn’t
commensurate with their assets. He said,
“We have a diversified portfolio in
four countries and a very strong balance sheet with capital to do what we’d
like to do and the ability to protect ourselves in any downturn. We have portfolio development assets which
should increase our production. We have
a fabulous management team. We build and
operate all of our mines with a proven track record. The team is engaged and strong.”
Pan American Silver, the world’s second largest,
silver primary, silver producer boasts a strong balance sheet, $400 million
dollars in cash, $700 million dollars in working capital and a management team
that takes projects from the development stage to the production stage. Beaty believes the company is poised for future
growth and development, which will benefit shareholders.