PAAS Raises 2025 Silver Guidance, But Valuation Concerns Persist

What happened

Pan American Silver has lifted its 2025 silver production guidance to 22-25 million ounces, driven by contributions from the Juanicipio mine, higher output at other operations, and a strong start to the year. This update follows the completion of the MAG Silver acquisition, which has bolstered PAAS's low-cost silver portfolio and contributed to record free cash flow in recent quarters. The company maintains a robust financial position with near-zero net debt and ample liquidity, supporting growth projects like La Colorada Skarn. However, the stock has surged 162% over the past year to around $56, trading at elevated multiples such as a P/E of 33.4x, reflecting crowded bullish sentiment and discounting near-record silver prices. The DeepValue report cautions that PAAS is overvalued, rating it a 'POTENTIAL SELL' and highlighting limited margin of safety at current levels.

Implication

The raised guidance confirms PAAS's operational strength and cost advantages from Juanicipio, but at current valuations, the stock fully incorporates near-record silver prices and flawless execution. Silver prices are historically high, with bank projections suggesting a mean reversion to the $30s, which could compress PAAS's earnings and cash flow, triggering a 20-35% share price decline despite its resilient cost base. While the company's financial health and growth pipeline provide downside protection, the unfavorable risk-reward asymmetry favors trimming positions above $60 or waiting for a correction to the low $40s for new entries. This news reinforces PAAS's status as a high-beta silver proxy, requiring disciplined risk management rather than chasing momentum. Investors should prioritize valuation over short-term operational wins, aligning with the DeepValue report's 'POTENTIAL SELL' stance.

Thesis delta

The news article confirms the operational progress and raised guidance already detailed in the DeepValue report, with no material shift in the investment thesis. PAAS remains a low-cost, well-financed silver miner, but the stock is overvalued and exposed to silver price mean reversion, maintaining the recommendation for caution and better entry points. This update reinforces the need to avoid new purchases at current levels and to monitor silver price trends closely.