Pan American Silver's La Colorada Project Unveils Robust Economics in New Study

Pan American Silver's updated study for La Colorada Skarn reveals a 37-year mine with a $2.6B NPV, 17% IRR, and negative AISC, funded internally from cash flow.

Pan American Silver Corp. has released an updated preliminary economic assessment for its La Colorada Skarn project in Zacatecas, Mexico, revealing a substantial, multi-decade mining operation with compelling financial metrics. The ambitious development plan outlines a significant capital investment to be funded internally.

A Long-Term Asset with Integrated Operations

Central to the updated plan is the construction of a new processing facility designed to handle 15,000 tonnes of material per day. This plant will integrate the skarn deposit with the existing vein operations, which are expected to continue production throughout the construction phase. The mine life for the combined operation is projected to extend for 37 years.

At peak production, modeled to begin in 2034, the operation is forecast to yield 19.1 million ounces of silver annually. The skarn deposit alone is anticipated to contribute 15.8 million ounces per year during the first five years of operation, supplemented by an additional 3.3 million ounces from the current underground mine.

Strong Financial Returns with Upside Potential

The total initial capital investment is estimated at $1.9 billion, which Pan American Silver intends to finance over six years using cash flow from its ongoing operations. Using a base-case silver price assumption of $45 per ounce, the study calculates an after-tax net present value of $2.6 billion at a 5% discount rate. This scenario also indicates an internal rate of return of 17% and a payback period of four years.

A more bullish price scenario, using $75 per ounce silver, dramatically improves the economics. In this case, the net present value jumps to $5.2 billion with an internal rate of return of 25%. Given current market conditions for silver, this is not considered a purely theoretical exercise.

A further key metric underscores the project's robust economics: All-in sustaining costs for the first five years of the expanded operation are projected to be negative $22.67 per ounce. This notably low cost structure points to substantial by-product revenue from zinc and lead.

Development Pathway and Resource Foundation

In the near term, the company plans to commence development of a ramp from the 588 level to provide access to the skarn resources. The deposit boasts a substantial resource base, comprising 265.4 million tonnes of indicated resources and an additional 61.7 million tonnes of inferred resources, providing a long-term foundation for the project.

Pan American Silver's shares currently trade approximately 24% below their 52-week high reached in February, suggesting the market may not have fully priced in the potential value outlined in this latest study for the La Colorada Skarn project.