Pan American Silver’s record buybacks meet gold test
Strong silver output and accelerated share repurchases cushioned weaker gold production and higher costs.
Pan American Silver (TSX, NYSE: PAAS) delivered a record $300 million in shareholder returns during the second quarter, despite weaker gold output and higher costs affecting earnings. The Canadian precious metals miner reported $1.1 billion in revenue, a 38% year-on-year increase, and adjusted earnings of $308 million, or $0.73 per share.
These results fell short of analyst expectations, with gold sales lagging and production costs higher than anticipated. Silver production reached 6.5 million ounces, meeting upper guidance, primarily from La Colorada and Juanicipio mines. However, gold output of 165,900 ounces fell below expectations. Pan American anticipates gold production to be at the lower end of the 2026 guidance range, with gold segment AISC expected to be at the higher end.
Analysts noted a split in the company's operations, with silver outperforming while gold production struggles to meet annual targets. The company maintained guidance for silver production between 25 million and 27 million ounces at AISC of $15.75 to $18.25 per ounce, while gold guidance remains 700,000 to 750,000 ounces at AISC of $1,700 to $1,850 per ounce.
Analysts predicted gold production to track toward the lower end of guidance due to weaker output at Jacobina and El Peñon mines, causing the gold AISC of $1,984 per ounce to surpass the $1,918 consensus estimate. Pan American's largest silver mine expanded, yet the operational miss was offset by a significant acceleration in shareholder returns.
The company repurchased about 7.3 million shares for $358 million at an average $49.22 per share and declared a $0.184-per-share quarterly dividend payable Sept. 4. As of Aug. 11, Pan American had returned approximately 48% of attributable free cash flow to shareholders so far this year, exceeding its 35% to 40% target. Despite the weaker-than-expected results, Pan American shares declined over 9% in New York trading to $47.57 and 8% in Toronto to C$67.10, resulting in a market capitalization of C$28.6 billion.
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