Fresh Off Acquisition, Pan American Finds High-Grade Silver Reserves in Mexico

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Pan American Silver Corp. (PAAS:TSX; PAAS:NASDAQ) announced that it has finalized its previously announced acquisition of all issued and outstanding common shares of MAG Silver Corp. through a plan of arrangement.

This acquisition grants Pan American a 44% joint venture interest in the large-scale, high-grade Juanicipio silver mine in Zacatecas, Mexico, operated by Fresnillo Plc, as well as full ownership of the Larder exploration project and a 100% earn-in interest in the Deer Trail exploration project, Pan American noted in a release.

The transaction bolsters Pan American’s standing as a leading global silver producer, enhances its top-tier silver reserve base, and offers significant near-term cash flow growth and long-term exploration opportunities.

"The Juanicipio Mine is a high-quality addition to our portfolio that will contribute meaningfully to our silver production, reserves, and cash flow," said President and Chief Executive Officer of Pan American Michael Steinmann. "We are pleased to welcome MAG shareholders to Pan American, who now benefit from participation in a larger, diversified, and growth-oriented silver and gold producer. We also look forward to working collaboratively with Fresnillo, the mine's operator, to advance the potential of the Juanicipio asset for the benefit of all stakeholders."

The inclusion of the Juanicipio asset adds approximately 5 million ounces (Moz) per annum of attributable silver production to Pan American Silver Corp.'s output, marking a ~22% increase, noted BMO Capital Markets Analyst Matthew Murphy in an updated research note on September 4.

This asset contributes around US$170 million in annual free cash flow at current market prices, lowers the company's all-in sustaining costs (AISC), and elevates silver production to about 22% of revenue amid silver's price outperformance, said the analyst, who raised the firm's target price to CA$45 and maintained its Market Perform rating.

"Juanicipio's performance in 2024 made it the largest scale and lowest-cost primary silver mine globally," Murphy wrote. "Costs are low due to substantial by-product credits, with AISC guided this year at US$6-8/oz. … The acquisition adds 58 Moz of attributable silver reserves to PAAS' existing ~203Moz of operating asset reserves, with an additional 19 Moz of attributable M&I resources and ~35Moz of attributable Inferred resources. The asset has significant exploration potential considering only 10% of the property has been explored and the Valdecanas vein system still offers considerable upside."

New Results for La Colorada Mine

On September 8, Pan American announced new drilling results for its La Colorada mine in Zacatecas, Mexico, revealing multiple high-grade veins that suggest potential for expanding silver mineral resources, extending the mine's life, and enhancing its economic prospects. These results build on the success of Pan American's exploration program focused on the eastern zone of the La Colorada mine.

"Our exploration efforts have identified high-grade intercepts below and along the strike of the known La Colorada vein system, east of the defined mineral resource footprint demonstrating opportunities for further mineral resource expansion," said Christopher Emerson, Pan American's senior vice president of Exploration and Geology. "The discovery of a new high-grade replacement style of mineralization, and vein style mineralization, particularly in the San Geronimo and Cristina zones in the southeastern portion of the property, will be reflected in an update to the estimated mineral resources for the La Colorada mine when the Company reports its annual mineral reserves and mineral resources as (of) June 30, 2025."

The highlighted drill results reflect the exploration program at La Colorada from November 2024 to June 2025, with approximately 65,000 meters drilled across 170 holes.

Analyst Carey MacRury of Canaccord Genuity Capital Markets has rated the stock a Buy with a price target of US$38 and especially hit on the newly discovered mineralization style.

Infill and exploration drilling at the La Colorada mine continue to delineate multiple high-grade silver and base metal intercepts, significantly extending mineralization eastward along the NC2 and parallel Mariana vein systems, as well as into secondary structures located east of the current underground production area, Pan American said.

The Mariana vein now spans an approximate strike length of 1,000 meters with a vertical extent exceeding 350 meters, while the NC2 vein system extends over 2,000 meters on strike with a vertical extent of more than 500 meters. Exploration development on four levels of the mine, between 1,900 to 2,100 meters above sea level, has progressed over 300 meters east.

Notably, the company said recent drill results indicate higher gold grades, prompting further evaluation of the gold potential in future mine production. The mineralized structures remain open laterally and at depth, indicating significant opportunity for continued mineral resource expansion.

The Mariana, NC2 Vein Systems

Highlights from the Mariana and NC2 vein systems include:

• S-77-25: 3.66 meters at 3,844 grams per tonne silver (g/t Ag), 2.30 g/t gold (Au), 4.53% Pb (lead), 11.05% Zn (zinc) (Mariana vein)
• U-84-25: 11.61 meters at 811 g/t Ag, 0.86 g/t Au, 8.21% Pb, 22.31% Zn (Mariana vein)
• U-117-25: 13.12 meters at 387 g/t Ag, 0.47 g/t Au, 4.33% Pb, 12.50% Zn (Mariana vein)
• U-99-25: 2.27 meters at 5,876 g/t Ag, 0.56 g/t Au, 3.36% Pb, 3.19% Zn (NC2 vein)
• U-59-25: 10.61 meters at 729 g/t Ag, 2.99 g/t Au, 1.88% Pb, 3.83% Zn (NC2 vein)
• S-74-25: 0.42 meters at 12,309 g/t Ag, 9.70 g/t Au, 2.16% Pb, 3.60% Zn (NC2 vein)

The NC2-Mariana system showcases appealing vein features, including substantial widths, high grades, and extensive strike lengths, according to Pan American. Drill hole S-10-25 intersected both the NC2 and Mariana veins about 400 meters east of known mineralization, affirming the potential for expanding mineral resources along these structures.

Furthermore, skarn mineralization was encountered at depth below the vein systems, 450 meters east of the 903 mineralized body, indicating a new skarn exploration target for future evaluation.

Results from hole S-10-25 included 1.26 meters at 718 g/t Ag, 0.24 g/t Au, 8.60% Pb, 9.85% Zn (NC2 vein); 3.22 meters at 445 g/t Ag, 0.10 g/t Au, 1.02% Pb, 2.97% Zn (Mariana vein); 3.75 meters at 287 g/t Ag, 0.33 g/t Au, 4.07% Pb, 12.19% Zn (Carbonate Replacement Deposit - CRD); and 42.30 meters at 48 g/t Ag, 0.05 g/t Au, 1.51% Pb, 2.95% Zn (Skarn).

San Geronimo and Cristina Veins

Exploration drilling in the southeast sector of the La Colorada mine successfully extended the Cristina and San Geronimo vein systems, Pan American said. High-grade mineralization has been defined through 32 diamond drill holes. The area of mineralization covering both vein systems now extends approximately 500 meters along strike and 500 meters vertically, with varying vein widths.

Drill hole result highlights include:

• S-226-24: 0.15 meters at 11,076 g/t Ag, 0.93 g/t Au, 6.56% Pb, 6.90% Zn (SG1 vein)
• S-08-25: 0.57 meters at 1,325 g/t Ag, 0.55 g/t Au, 8.34% Pb, 24.70% Zn (SG1 vein)
• S-186-24: 1.69 meters at 86 g/t Ag, 1.80 g/t Au, 3.66% Pb, 10.59% Zn (Ramal SG vein) and 1.38 m @ 283 g/t Ag, 0.40 g/t Au, 1.67% Pb, 8.17% Zn (SG1 vein)
• S-36-25: 0.51 meters at 1,550 g/t Ag, 0.50 g/t Au, 0.71% Pb, 0.91% Zn (Cristina vein)
• S-182-24: 0.86 meters at 661 g/t Ag, 0.76 g/t Au, 0.64% Pb, 2.03% Zn (Cristina vein)
• S-47-25 1.07 meters at 1,058 g/t Ag, 0.19 g/t Au, 3.34% Pb, 6.95% Zn (Splay vein)
• S-37-25: 0.52 meters at 1,035 g/t Ag, 2.33 g/t Au, 4.34% Pb, 2.54% Zn (San Geronimo vein)
• S-205-24: 0.43m at 626 g/t Ag, 0.47 g/t Au, 0.15% Pb, 0.35% Zn (Cristina vein)

A New Style of Mineralization

Recent exploration drilling has uncovered a new style of high-grade silver and base metal replacement mineralization at the contact between volcanic and sedimentary host rocks in the southeastern area of the mine, according to the company. This discovery introduces a new type of mineralization for the La Colorada vein system.

Several historic drill holes have been incorporated into the following list of drill results to aid in geological reinterpretation, emphasizing the importance of this new finding. This contact-related mineralization style represents a high-potential exploration target south of the current mine, near the Cristina/San Geronimo corridor.

It also offers the potential for expanding inferred mineral resources, which will be included in Pan American’s annual mineral reserves and resources as of June 30, 2025, the company said. The zone of contact-related mineralization remains largely open for expansion in most directions.

Drill Hole Result Highlights:

• S-99-24: 50.30 meters at 258 g/t Ag, 0.12 g/t Au, 0.62% Pb, 0.42% Zn (Historic)
• S-20-24: 23.15 meters at 382 g/t Ag, 0.18 g/t Au, 1.36% Pb, 3.10% Zn
• S-182-24: 7.80 meters at 413 g/t Ag, 0.37 g/t Au, 3.60% Pb, 8.67% Zn
• S-168-24: 5.85 meters at 528 g/t Ag, 0.50 g/t Au, 3.04% Pb, 5.54% Zn (Historic)
• S-172-24: 7.30 meters at 275 g/t Ag, 0.24 g/t Au, 3.60% Pb, 8.14% Zn (Historic)
• S-179-24: 0.60 meters at 8,840 g/t Ag, 29.40 g/t Au, 4.52% Pb, 11.10% Zn

Expert: Acquisition 'Prescient'

Pan American's Q2 production and AISC for both silver and gold met the quarterly guidance, according to an updated report by Edison analysts Andrew Keen and Andrey Litvin on August 14. They revised their valuation of the stock, which was US$31.66 per share at the time of writing, from US$33.70 per share to US$38 per share.

"Despite some sequential increase in costs and slightly lower sales, stronger commodity prices have led to a 10% increase in EBITDA and record operating cash flow, resulting in a higher net cash position and a 2c increase in its quarterly dividend," the analyst wrote. "We have upgraded our estimates on higher commodity prices and raised our discounted cash flow (DCF)-based valuation to US$38.0/share."

Analyst Carey MacRury of Canaccord Genuity Capital Markets has rated the stock a Buy with a price target of US$38 and especially hit on the newly discovered mineralization style.

"The eastern extensions of NC2/Mariana, the Cristina-San Geronimo corridor, and the contact-related replacement discovery collectively point to meaningful near-mine resource growth potential, MacRury wrote. "With emerging gold credits in select structures and multiple open directions, the program supports longer mine life and potential economics improvement ahead of the June 30, 2025, reserve/resource update."

In a September 4 Daily Bulletin on the company, National Bank of Canada Analyst Don DeMarco not the upcoming mineral resource estimate (MRE) update as a catalyst and maintained his Outperform rating and increased his target price to CA$62 from CA$52.50.

DeMarco called Pan American's acquisition of MAG "prescient" and said it "lifts silver reserves and high-margin silver production in a constructive silver tape against a backdrop of diminishing remaining silver M&A targets while adding compelling exploration opportunity."

Global Analyst Adrian Day, writing on September 16, noted that Pan American's closing of the agreement with MAG adds about 5 Moz of production per year for the company, an increase of a little over 20%.

Last year, "Juanicipio was the world's lowest-cost primary silver mine, and is thought to have considerable exploration potential," Day wrote.

The Catalyst: Silver Prices Continue Surge

Silver continued its upward momentum for the third consecutive session on Friday, driven by the increased likelihood of a Federal Reserve rate cut next week, which boosted the precious metal's appeal, according to a staff report on Mining.com on September 12.

Spot prices surged another 1.6%, surpassing the US$42/oz mark, with an intraday high of US$42.46, the highest since 2011. This brought silver’s weekly gains to over 3%, as the anticipated Fed decision on interest rates heightened the attractiveness of non-yielding assets like silver. Recent U.S. jobs data indicating an economic slowdown further solidified market expectations of a 25-basis-point rate cut.

"Weaker employment and spotty inflation … priced in with the Fed having to cut rates is pushing metals higher because there is the risk of longer-term inflation," Daniel Pavilonis, senior market strategist at RJO Futures, noted in a Reuters report, according to Mining.com.

Looking ahead, analysts see further potential for growth, the piece noted. A new report by Sprott presents a bullish outlook for precious metals, forecasting a strategic move away from the U.S. dollar and Treasuries in the current climate, favoring hard assets instead. For silver, the case is particularly strong, as its fundamentals are supported by significant structural factors, including a prolonged supply deficit and a tightening physical market. In 2025, silver prices have climbed by more than 43%, even outpacing gold, making it one of the top-performing assets of the year.

Silver is currently shining as a standout commodity, experiencing a resurgence in investor interest and strong fundamentals that have driven its prices to the highest levels in 14 years, according to a Mining.com report from July 31. Some analysts believe this upward trend is just beginning, making silver an appealing investment option, as noted in the report.

On the supply side, HSBC anticipates that silver mine production will continue to grow at a gradual pace, with their supply-demand model predicting a silver shortfall of 206 million ounces (Moz) in 2025 and 126 Moz in 2026, compared to a 167 Moz deficit in 2024, according to the report. HSBC also noted that a weaker dollar this year is favorable for silver, while ongoing discussions about Federal Reserve rate cuts and central bank strategies could impact future prices.

Ownership and Share Structure

According to Refinitiv, less than 1% of the company is owned by insiders and management and about 55% is owned by institutions, leaving the rest in retail.

Top shareholders include Van Eck Associates Corp. with 7.05%, The Vanguard Group with 3.33%, Mirae Asset Global Investments with 2.47%, Pan American Silver Corp. with 2.15%, and Invesco Advisers Inc. with 2.11%.

Its market cap is US$21.44 billion with 421.98 million shares outstanding. It trades in a 52-week range of US$25.46 and US$51.