New Plan for Pan American Mine Forecasts Massive Silver Profits
Contributed Opinion

1. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Pan American Silver Corp., Barrick Mining Corp., Metalla Royalty & Streaming Ltd., Orogen Royalties Inc., Altius Minerals Corp., Agnico Eagle Mines Ltd., Franco-Nevada Corp., OR Royalties, Fortuna Mining Corp., Midland Exploration Inc., and Lara Exploration Ltd. 
2. Adrian Day: I, or members of my immediate household or family, own securities of: All. My company has a financial relationship with: None. My company has purchased stocks mentioned in this article for my management clients: All. I determined which companies would be included in this article based on my research and understanding of the sector.
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Pan American Silver Corp. (PAAS:TSX; PAAS:NYSE) released a revised Preliminary Economic Assessment of La Colorada Skarn deposit, transforming the huge project to smaller but lower-risk project with lower capex and higher leverage to silver. Using byproduct credit accounting, costs for the silver would be negative.

Significantly, the revised plans, unlike the 2023 study, will not use block caving (a positive since few companies have expertise in that mining method), and also does not require a partner. The company had been in discussions with several companies for a partnership, to share the capital, with Pan Am aiming to retain the silver exposure. Pan American can internally fund the entire capex of $1.9 billion.

CEO Michael Steinmann emphasized that the decision to go to a smaller project was not for lack of potential partner interest, but rather to build a lower-risk project that still delivered silver to the company. Typically, with deposits in Mexico's silver belt, there is higher-grade silver and some gold nearer the service, with more lead and zinc as the deposit goes deeper, and eventually copper, as the silver declines. Importantly, the new plan retains the option to expand the project, use block caving, and bring in a partner.

Pan American estimates average silver production from the Skarn of almost 16 million ounces for the first five years, adding to the 3.3 million from the existing La Colorada mine, with a 37-year mine life. It would be operated in conjunction with the existing mine, transforming the combined La Colorada mine into one of the largest and lowest-cost silver mines in the world.

After the first five years, production for the combined mine, drops to an average of 11 million annual ounces for the next 10 years, before declining for the rest of the mine life. Pan American has not yet targeted a date for production from the Skarn, but Steinmann said it will likely be "in or after 2027". The revised project represents about 5% of Pan American's NAV.

We are holding.

Barrick to Slow Pakistan Project

Barrick Mining Corp. (ABX:TSX; B:NYSE) is to slow development of Reko Diq, the massive copper project in Pakistan, according to an article in the Financial Times. According to the FT, Barrick has notified its partners of the decision, which was due to regional conflicts, the Pakistan-Afghanistan war, as well as the conflict in Iran, and specifically on-site security issues. Barrick confirmed the slowdown, adding it was extending the period for its review of the project until mid-2027. The slowdown may be a preliminary step towards a sale of Barrick's interest.

Analysts expected a positive market response, since the project is not popular with institutional investors and was the primary cause of Barrick's relative undervaluation, leading to the proposal for an IPO of part of its North American business. The stock's response, however, was neither positive nor significant.

Hold.

Metalla's Growth Gets Underway

Metalla Royalty & Streaming Ltd. (MTA:TSX.V; MTA:NYSE American) released annual financials, broadly in line with expectations after pre-releasing GEOs and preliminary revenue. G&A expenses increased by about 27% over 2024, more than I had expected. Some mines on which it holds royalties have experienced slower ramp-ups than expected, but slowly the growth is coming into view. The company is guiding between 3,500 and 4,500 ounces for this year, which at the mid-point represents 16% growth on last year. Growth will then pick up in 2027.

Metalla is at a self-described inflection point with several major projects hitting milestones, including First Quantum filing an updated technical report on Taca Taca, and IAMGOLD reporting extensive drilling at the Gosselin deposit, an extension to its Côté mine. Metalla ended the year with almost $10 million cash and just over $13 million drawn on its credit facility.

At its lowest price since September, Metalla is a Strong Buy.

Orogen Reports Record Revenue

Orogen Royalties Inc. (OGN:TSXV; OGNNF:OTC) reported record revenue of $13 million for the year ending December 31st, up 32% from 2024. Revenue from both the Ermitaño royalty and the company's prospect generation activities increased. As of year end, the company has $25.8 million, just slightly from the prior year.

Using production guidance from First Majestic, operator of the Santa Elena complex in Sonora, Mexico, of which Ermitaño is a part, and using Orogen's estimate that 90% of this year's production will come from its royalty land, Orogen should receive between $7.1 million and $10.3 million in royalty revenue, at the mid-point down about $1 million from last year. (All numbers are in Canadian dollars.)

Importantly, for the longer-term royalty revenue, First Majestic said it was conducting studies on developing both the Navidad and Santo Niño deposits this year. Both of these deposits are largely covered by Orogen royalties and more aggressive development by First Majestic will reduce the scale and length of a revenue drop for Orogen after Ermitaño depletes.

Separately, insiders purchased 61,600 shares in the week from March 13th to 20th at prices between $2.82 and $3.26. It is good to see insiders buying; several directors and management are in the top 10 holders.

Orogen is a Buy.

Ares Capital Hurt by Unaffiliated Fund Woes

Ares Capital Corp. (ARCC:NASDAQ) fell sharply after one of the private funds issued by its sponsor, Ares Management, posted its sharpest monthly loss two days after limiting withdrawals from the fund. As discussed before (see Bulletin #1002), Ares Capital is separate from the private funds of Ares Management, but, as discussed, problems at Ares Management's private funds would harm perception and provide us with buying opportunities for Ares Capital.

I am not asserting that if the economy deteriorates, Ares could not see lower income, forcing it to cut its dividend. But the yield would still be healthy and the recovery strong. And there is no current indication that Ares will cut its dividend.

At an almost unprecedented discount to NAV (12%) and high yield (11%)–wider only in the depths of covid lockdowns and the Great Financial Crisis–this represents a buying opportunity for long-term income investors.

Altius' Arthur Royalty Deposit Advances

Altius Minerals Corp. (ALS:TSX) received good news when AngloGold announced a technical report on its Arthur Gold Project (formerly Silicon) in Nevada. Last July, Altius sold a 1% royalty on Arthur to Franco-Nevada, retaining 0.5%. Anglo said the study showed "robust economics and strong potential", with All-In Sustaining Costs estimated at $954/oz, adding that the Arthur Project "is a cornerstone of our strategy to build a world-class, long-life production platform in the U.S." Most informed geologists are confident that the project will grow significantly over what has already been discovered and released.

The Arthur royalty is but one of several cornerstone assets for Altius, leading us to make it a core holding, though it would look for a pullback to add to positions from this near-record stock price.

TOP BUYS this week, in addition to those above, include Agnico Eagle Mines Ltd. (AEM:TSX; AEM:NYSE), Franco-Nevada Corp. (FNV:TSX; FNV:NYSE), OR Royalties (OR:TSX; OR:NYSE), Fortuna Mining Corp. (FSM:NYSE; FVI:TSX; FVI:BVL; F4S:FSE), Midland Exploration Inc. (MD:TSX.V), and Lara Exploration Ltd. (LRA:TSX.V).