Pan American Silver sees a 10% resource decline despite Yamana additions

Pan American Silver (TSX: PAAS; NASDAQ: PAAS) has recorded a 10% year-on-year decrease in its gold-equivalent reserves and resources, an analysis by Canaccord Genuity mining analyst Carey MacRury has found.

The latest data from Pan American includes reserves and resources from the non-core MARA (Argentina), Jeronimo (Peru), and Morococha (Chile) assets, all of which are slated for divestment by the end of September. After accounting for these impending sales and the recently acquired Yamana assets, the firm’s resource base has seen a marked dip, MacRury noted.

In a high-stakes bid last November, Pan American, in collaboration with Agnico Eagle Mines (TSX: AEM; NYSE: AEM), outmaneuvered Gold Fields’ (NYSE: GFI; JSE: GFI) proposal for Yamana with a joint offer of US$4.8 billion. This deal was successfully finalized on March 31.

MacRury detailed that Pan American’s silver reserves stand at 577 million oz. However, this figure drops to 487 million oz. when adjusted for the forthcoming asset sales. The silver reserves acquired from Yamana, totalling 44 million oz., virtually balanced the 39 million oz. reduction (roughly 8%) witnessed across the remainder of Pan American’s holdings.

The company’s gold reserves are pegged at 12.9 million ounces. Upon excluding the divestitures, the tally is 7.7 million oz., a figure bolstered by the 4.6 million oz. added through the Yamana deal. This influx helped counterbalance a drop of about 500,000 oz. (around 14%) in Pan American’s reserves.

When juxtaposed with Yamana’s year-end 2022 reserve figures, there’s a slight decline from 5.5 million oz. to 5.2 million oz. in gold equivalent for the Yamana assets. This is presumably due to resource depletion since December, given that Pan American’s stewardship of these assets began only in late March.

Moreover, after discounting the asset sales, Pan American’s silver resources total 1.75 billion oz., a decrease from 1.8 billion oz. in the previous year. Even with the addition of 120 million oz. from Yamana and another 86 million oz. from the announced Colorada Skarn project, the net total dwindled, partly because of the exclusion of 45 million oz. linked to the economically unviable Shahuindo sulphides project in Peru.

Gold resources for Pan American, excluding asset sales, plunged from 17.4 million oz. the previous year to 14.1 million oz. This accounts for a 2.3 million oz. dip due to the Shahuindo, offset by a 17.5 million oz. injection from the Yamana assets, culminating in 31.6 million ounces.

Pan American vice president of exploration Christopher Emerson is upbeat about the Yamana asset additions, saying the company’s exploration and geology teams are currently designing the drill programs across the combined portfolio, emphasizing near-site exploration and further resource conversion. The company plans to complete over 480,000 metres of drilling in 2023.

Pan American shares were down 1% to $21.36 on Friday, translating to a steady year-on-year performance, with shares ranging between $18.14 and $26.54 over the year. The company boasts a market capitalization of $7.8 billion.