A year ago, I asked Fools to wake me up when silver mining became a profitable enterprise once more. It's a good thing I didn't oversleep, because my phone never rang.
If you're dialed into the silver market, then you're well aware that silver miners have catapulted back into profitability in a very big way. Silver Wheaton (NYSE: SLW ) delivered a flawless third quarter, Coeur d'Alene Mines (NYSE: CDE ) is singing in celebration, and Hecla Mining's (NYSE: HL ) low production costs have made that miner a favorite among Foolish silver enthusiasts. With so many companies delivering exciting results, it's entirely too easy to overlook the considerable strength of Pan American Silver (Nasdaq: PAAS ) .
Third-quarter numbers from Pan American were no less impressive than those of its (mostly smaller) rivals. With two recently commissioned developments performing beautifully, Pan American achieved: a 31% increase in silver production to a record 6.4 million ounces, a 331% increase in gold production, a 26% cost reduction to $4.91 per payable silver ounce, a 49% bump in revenue to a record $118.6 million, and a 172% increase in net earnings with $17.4 million -- all compared with year-ago numbers.
Thanks in part to robust operating cash flow of $43.3 million, the company's treasury of cash and short-term investments rose to $149.5 million. With mine commissioning complete at Manantial Espejo and the San Vicente expansion, Pan American's capital spending will remain minimal until a production decision is reached for the La Preciosa project about a year from now. That means that continued strength in silver prices is likely to translate into healthy free cash flow to drive shareholder value.
Meanwhile, Pan American awaits the result of its bid for a friendly takeover of Aquiline Resources that would bring another world-class silver mine into the company's fold. With measured and indicated resources of 632 million ounces of silver, Aquiline's Navidad project in Argentina would be "transformational to Pan American's growth profile and have the potential to propel our annual silver production to an entirely new level." With zero debt, working capital of $258 million, and valuable development experience in Argentina, Pan American is well positioned to drive this buried treasure into production.
Your spotlight on silver
Silver has continued to lag gold considerably since I first tagged the metal as a relative bargain some 20 months ago. Is the silver slingshot drawn and ready to fire? Will the iShares Silver Trust (NYSE: SLV ) outperform the venerable SPDR Gold Shares (NYSE: GLD ) over the coming years? Please take our Motley Poll and share your comments below.
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