Jefferies, BofA cut Pan American Silver targets on gold drop
Analysts trimmed price targets on the miner as a sharp decline in gold prices and elevated diesel costs threaten near-term margins.
Jefferies and Bank of America have both reduced their price targets on Pan American Silver this week, pointing to near-term margin pressures from falling gold prices and rising operational costs.
Jefferies lowered its target to $53 from $54 on July 6, retaining a Buy rating. The firm highlighted that gold has declined from roughly $4,700 an ounce to about $4,200 an ounce since the first quarter. Jefferies warned that this drop, alongside elevated diesel costs, is likely to result in margin contraction during the second quarter.
On July 9, BofA implemented a steeper cut, dropping its price target to $69 from $77 while also keeping a Buy recommendation. BofA linked its revision to broader reductions in commodity price forecasts for both precious and base metals. The bank expects difficult market conditions to persist through the autumn before a potential recovery occurs.
The disparity between the two Buy-rated targets—$53 versus $69—suggests analysts disagree on how quickly the company's valuation will reflect the current commodity environment. However, the retention of positive ratings indicates a consensus that the downside is limited.
Pan American Silver conducts extraction, processing, and refining across eight countries in the Americas, including Chile, Peru, Mexico, and Canada. This wide operational footprint exposes the company to the localized cost pressures, such as elevated diesel prices, cited by Jefferies.
For market participants, the dual analyst moves underscore a shifting landscape for precious metals producers. While both banks foresee an eventual rebound, the immediate focus will be on how Pan American Silver manages input costs while gold hovers near $4,200. Until the autumn recovery anticipated by BofA materializes, investors should expect sector valuations to remain constrained by compressed margins.
