TD research note last Friday....in play again ??
Pan American Silver Corp. (PAA-T, PAAS-Q)
Pan American filed a preliminary short form shelf prospectus allowing the company to issue common shares, warrants, debt securities, and subscription receipts of up to US$200 million over the next two years.
The company stated that the use of proceeds were to “fund acquisitions, development programs on existing or acquired mineral properties, working capital requirements, repayment of
outstanding indebtedness from time-to-time or for other general corporate purposes.”
Pan American is already well financed – it has US$100mm on tap to support capital spending and working capital requirements (US$30mm cash + US$70mm available credit line) and we expect the company will be able to generate appx. US$30mm of FCF in 2009.
We therefore think the company may be preparing to fund an acquisition and we think Aquiline may be the most likely target. Pan American acquired a toe-hold position of 1.5 million shares and 1.5 million warrants of AQI in November and it operates the Manantial Espejo project in neighbouring Santa Cruz province.
Aquiline Background
-Flagship asset: Navidad silver/lead project in Chubut, Argentina
-Total resources of over 600 million ounces of silver and 3.5 billion pounds of lead in a series of seven zones
-October Scoping Study estimated potential production of 15 million ounces per year at total net cash costs of US$5.22/oz
-We believe the study understated the potential and that a major would build a project capable of producing at least 20 million ounces per year (PAAS is expected to produce 21.5 million ounces this year)
-AQI currently has a market cap of US$100mm and project development costs are likely to reach US$300mm
Feel free to contact us for further details.
Equity Research Website ·Contact · Important Disclosures
Daniel Earle
Analyst, Metals & Minerals
TD Newcrest - Equity Research
TD Tower, 66 Wellington St. W, 7th Fl., Toronto M5K 1A2
T: 416-308-7906 ¦ F: 416-307-0512 ¦ C: 416-558-5301
daniel.earle@tdsecurities.com
Shey Ylonen
Associate, Metals & Minerals
TD Newcrest - Equity Research
TD Tower, 66 Wellington St. W, 7th Fl., Toronto M5K 1A2
T: 416-308-2360 ¦ F: 416-307-0512
shey.ylonen@tdsecurities.com
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