Adrian Day, a leading commodity sector specialist and editor of Global Analyst, reiterates his buy ratings on two silver mining firms — both with developing news regarding global mining operations.
Pan American Silver (PAAS) reported a 35% increase in resource at its La Colorada skarn deposit in Mexico, with indicated and inferred 870 million ounces of silver equivalent. The deposit remains open in all directions.
In my meeting with CEO Michael Steinmann, he was cautiously optimistic on the current consultations over the halted Escobal mine in Guatemala between the government and the local indigenous group.
The consultation is scheduled to be completed in February when the recommendation will go to the Supreme Court, after which the ministry of mines could approve Pan American’s permit to operate the mine. I do not believe a restart of Escobal is reflected in the stock price.
Steinmann noted that Mexico's Dolores underground, which suspended operations earlier, could come back online if prices moved higher, though that was not their base case at present. The impairment and quarterly loss came from one phase of the open pit, not the underground suspension.
In anticipation of Pan American receiving the green light to restart Escobal, the stock, very close to a more-than two-year low, is a buy
Fortuna Silver (FSM) reported that the Séguéla mine construction in Ivory Coast is 78% complete, with most of the “riskier” parts of the build complete. The mine remains on schedule and on budget, a rarity among recent mine builds. The first gold pour is expected in the middle of next year.
I asked CEO Jorge Ganoza how Fortuna was able to build a mine on schedule and on budget amid so many failures. He noted the company had a good construction team that had worked together two or three times before.
He also emphasized planning; the company took the time to plan the build and assemble personnel before commencing actual construction. Lastly, he said that West Africa in general and Ivory Coast in particular was a place where a mine could be build efficiently.
Ganoza also noted that, Paul Criddle, who stepped down in August as West Africa COO, remains a consultant to the company. Both Séguéla and Argentina's Lindero can exhibit 10 years of reserves ahead, and, while the company continues to look at opportunities, it has “lots of value to be harvested” from its existing portfolio, particularly in West Africa. Fortuna is a buy.
