Executive Summary / Key Takeaways

• Pan American Silver Corp. ($PAASF) is demonstrating robust financial and operational performance, marked by record revenues, net earnings, and free cash flow in Q2 2025, underpinned by solid operations and a supportive precious metals environment.
• The company is strategically expanding its high-quality silver portfolio through the proposed acquisition of MAG Silver , which is expected to immediately boost silver production and free cash flow while reducing consolidated costs.
• Operational enhancements, such as the new ventilation infrastructure at La Colorada, are yielding significant benefits, including nearly 50% higher silver production and 25% lower cash costs in Q2 2025 compared to the first half of 2024.
• With a strong balance sheet, ample liquidity, and a disciplined capital allocation framework, Pan American Silver is well-positioned for organic growth initiatives like the La Colorada Skarn project and continued shareholder returns.
• The persistent structural deficit in the global silver market, driven by industrial demand and flat mine supply, creates a highly favorable pricing backdrop for the company's silver-centric growth strategy.

A Foundation of Precious Metals Leadership and Strategic Evolution

Pan American Silver Corp. has forged a distinguished history since its incorporation in 1979, evolving into a leading producer of silver, gold, zinc, lead, and copper across the Americas. The company's enduring commitment to exploration, mine development, and responsible reclamation has been a cornerstone of its strategy. Over the past fifteen years, Pan American has consistently replenished its reserves through brownfield and on-site exploration, notably discovering the significant Escobal deposit. This long-term vision extends to its shareholders, with over $1 billion returned in dividends and share buybacks since 2010, a testament to its disciplined financial management without resorting to public equity offerings.

A pivotal moment in Pan American's trajectory was the strategic acquisition of the Yamana assets in 2023, following the earlier Tahoe acquisition. This move was designed to streamline and enhance the quality of its portfolio, leading to a subsequent divestment of smaller, non-core assets. This rationalization has positioned the company with a robust balance sheet, enabling it to pursue both organic and inorganic growth opportunities with a disciplined approach, focusing on accretive, high-quality, long-life assets that align with its stringent cost structure. The broader industry landscape is currently highly supportive for precious metals, with global photovoltaic installations and electronic applications driving industrial demand for silver. This, coupled with largely flat mine supply, has resulted in the silver market experiencing its fifth consecutive year of structural deficit, a trend expected to persist and further deplete above-ground stocks, creating a very favorable pricing environment for silver.

Operational Excellence and Technological Edge Driving Efficiency

Pan American Silver's operational strategy is deeply intertwined with continuous improvement and targeted technological investments, which serve as critical differentiators in a competitive mining landscape. A prime example is the new ventilation infrastructure at its flagship La Colorada mine, completed in mid-2024. This operational enhancement has delivered tangible and quantifiable benefits, leading to a nearly 50% increase in silver production and a corresponding nearly 25% reduction in cash costs per silver ounce in Q2 2025 compared to the first half of 2024. Throughput at La Colorada reached an average of 2,130 tonnes per day in Q2 2025, surpassing its 2,000 tonnes per day target. This improvement directly contributes to Pan American's competitive moat by enhancing efficiency and profitability at a key silver asset.

Further operational advancements include the successful commissioning of a new filtration plant and filter stack tailings storage facility at Huaron, expected to be in full operation by the end of Q1 2025. At Timmins, a new paste backfill plant has been commissioned, which, while not immediately reducing costs, allows for greater reserve recovery for every meter of development, thereby extending the asset's life and optimizing resource utilization. The company is also investing in comprehensive mine and plant optimization studies at Jacobina, with initial findings expected in early August 2025. These studies aim to maximize the long-term value of this high-margin gold operation by evaluating modifications to mining and tailings disposal methods. These initiatives underscore Pan American's commitment to leveraging operational innovation to drive sustainable value and maintain a competitive edge.

Competitive Strength and Strategic Expansion

Pan American Silver holds a prominent position within the silver mining industry, distinguishing itself through a diversified portfolio and a strategic focus on high-quality assets. Compared to more geographically concentrated peers like First Majestic Silver Corp. (AG), whose operations are primarily in Mexico, or Hecla Mining Company (HL), largely focused on North America, Pan American's broader operational footprint across Canada, Mexico, Peru, Bolivia, Argentina, Chile, and Brazil provides greater resilience against regional disruptions and offers access to a wider array of mining opportunities. This diversification extends beyond geography to its metal output, including gold, zinc, lead, and copper, which provides more balanced revenue streams compared to pure-play silver producers.

The company's strategic M&A approach is a key competitive advantage. Its proposed acquisition of MAG Silver , with its top-tier Juanicipio silver asset, exemplifies this discipline. Management views Juanicipio as "one of the highest quality, highest grade, lowest cost silver mine on the planet with, in my view, probably one of the biggest exploration upside as well." This acquisition is expected to provide an immediate uplift to Pan American's silver production and free cash flow, while meaningfully reducing consolidated Silver segment costs, thereby enhancing its competitive standing. While larger, gold-focused entities like Agnico Eagle Mines Limited (AEM) may possess greater overall scale, Pan American's dedicated focus on silver, coupled with its diversified polymetallic production, allows it to be more attuned to silver-specific market dynamics and capitalize on the current structural deficit. The company's disciplined approach to divesting smaller, non-core assets, as seen with the sale of La Arena, further refines its portfolio quality and simplifies operations, contrasting with smaller, more agile but potentially less stable producers like Endeavour Silver Corp. (EXK).

Financial Momentum and Disciplined Capital Allocation

Pan American Silver has delivered exceptional financial results, reflecting its operational effectiveness and the favorable metal price environment. In Q2 2025, the company reported record-setting figures, including top-line revenue of $811.9 million, net earnings of $189.6 million ($0.52 per share), and adjusted earnings of $155.4 million ($0.43 per share). Mine operating earnings reached a record $273.3 million.

Cash flow from operations before non-cash working capital changes was a record $287.9 million, contributing to a record free cash flow of $233 million. These strong results have bolstered the company's financial position, with cash and short-term investments increasing to a record $1.1 billion at the end of Q2 2025. Total available liquidity stood at approximately $1.9 billion, providing substantial flexibility for strategic initiatives, even after accounting for the $500 million cash consideration for the MAG Silver acquisition.

The company's capital allocation framework remains steadfast: maintaining a strong balance sheet, sustaining and growing the business, and returning capital to shareholders. In Q2 2025, Pan American invested $73.7 million in sustaining and project capital, while also increasing its dividend by 20% to $0.12 per common share. Additionally, it repurchased nearly 0.5 million common shares for $11.1 million. In the first half of 2025, approximately $103.5 million was returned to shareholders through dividends and share buybacks. This balanced approach underscores the company's ability to generate significant cash flow, fund its growth ambitions, and reward investors.

Outlook and Growth Trajectory

Pan American Silver is maintaining its robust guidance for 2025, anticipating silver production between 20 to 21 million ounces and gold production between 735,000 to 800,000 ounces. All-in sustaining costs for the silver segment are projected to be between $16.25 and $18.25 per ounce, and for the gold segment, between $1,525 to $1,625 per ounce. Production is expected to be more heavily weighted to the fourth quarter of 2025, a common seasonal trend for the company, and also reflects the resolution of some operational issues and mine sequencing. Management remains "incredibly confident that we'll come in within guidance on gold production and certainly on silver and cost."

The company's growth strategy is multifaceted. The La Colorada Skarn project, its largest organic growth opportunity, continues to advance with engineering work and exploration. The indicated mineral resource for the Skarn project increased by 53% to 265 million tons, with silver grades improving by 10%, zinc by 2%, and lead by 4%, containing an estimated 309 million ounces of silver in the indicated category. Discussions for potential partnerships are progressing, with the aim of retaining maximum exposure to the silver in this long-life deposit. An updated resource and reserve calculation, incorporating new high-grade vein intercepts discovered east of the Skarn, is expected before mid-September. The MAG Silver acquisition, awaiting Mexican antitrust clearance, is poised to be a significant inorganic growth driver, immediately enhancing silver production and free cash flow.

Risks and Considerations

Despite a strong outlook, investors should consider several factors. Operational challenges, particularly those inherent in narrow vein mining, can lead to variability in grades and production, as experienced in Q2 2025 at operations like Timmins, El Peñon, Cerro Moro, and Minera Florida. Geotechnical issues, such as production drill hole squeezing at Timmins and seismicity at Bell Creek, require ongoing management and can impact production sequencing. The Escobal mine remains on care and maintenance, with no specified timeline for the completion of the ILO 169 consultation process or a restart of operations, representing a significant potential asset that remains dormant. Furthermore, while the current metal price environment is supportive, the company's profitability and cost structure remain sensitive to fluctuations in commodity prices and foreign exchange rates.

Conclusion

Pan American Silver Corp. stands as a compelling investment opportunity, strategically positioned to capitalize on the robust precious metals market. Its recent record financial performance, driven by operational excellence and a supportive price environment, underscores its capacity for significant cash flow generation and shareholder returns. The company's disciplined approach to growth, exemplified by the accretive MAG Silver (MAG) acquisition and the advancement of the high-potential La Colorada Skarn project, promises to further enhance its silver-centric portfolio and reduce costs. With a strong balance sheet, a commitment to operational innovation, and a clear strategic roadmap, Pan American Silver is well-equipped to unlock substantial long-term value for its investors, solidifying its leadership in the silver mining sector.