The recent financial results for silver miners all share a common theme: low silver prices are having a negative impact on their bottom line. While some companies saw their production increase, they also saw revenues decline. Added to these factors are industry-wide price pressures that are driving up many producers' costs. Even so, miners still appear confident.
Pan American Silver (NASDAQ: PAAS,TSX:PAA) is one company that had a strong quarter in terms of the volume of metal it mined. With a 14 percent increase compared to Q2 2011, Pan American reported its second-highest quarterly production in the company's history. Yet revenue declined from $231.9 million in Q2 2011 to $200.6 million in the past quarter, and adjusted earnings declined from $75.4 million to $17.1 million.
According to Pan American's quarterly report, “revenue and adjusted earnings were directly impacted by a marked decline in realized prices of silver and base metals.”
In addition to silver prices that fell 23 percent, from $38.21 during Q2 last year to $29.53 this year, the company also experienced notable declines in the prices of zinc, lead and copper.Pan American also reported a $9.6 million negative price adjustment on sales that were recorded in the previous quarter, but settled or marked to market in the current quarter. Other miners reported similar issues. In addition to having its Lucky Friday mine closed since January, Hecla Mining (NYSE:HL) had to deal with lower-than-expected grades at its Greens Creek mine, along with lower silver and base metals prices. The company raked in an average of $35.80 per ounce in Q2 2011, but only $27.05 this year. Hecla incurred a negative adjustment to provisional settlements of $2.4 million “largely due to a decrease in prices in the time period between the shipment of concentrate and the final settlement.”