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Pan American Silver Corp. (NYSE: PAAS) had a rough morning on Thursday. The company's stock dropped in premarket trading after its second-quarter 2026 results came in softer than Wall Street expected.
The numbers tell the story: adjusted earnings of 73 cents per share, well below the analyst consensus of $1.04. Revenue of $1.124 billion also missed the $1.158 billion that analysts were looking for.
On the production side, there was a bit of a mixed bag. Attributable silver production hit 6.47 million ounces, which landed at the high end of the company's quarterly outlook. Gold, however, was a different story. Production came in at 165,900 ounces, below the quarterly guidance range.
Costs were also a touch higher than expected. Silver all-in sustaining costs (AISC) were $17.80 per ounce, and gold AISC was $1,984 per ounce. Both were slightly above the company's internal expectations for the quarter.
Operating cash flow was $320 million for the quarter. Attributable free cash flow came in at $344 million, which includes Juanicipio and accounts for $205 million in tax payments made during Q2. Management noted that this quarter likely represents the highest tax-payment quarter of 2026, as it included the final settlement of 2025 taxes.
Pan American ended the quarter with a solid balance sheet: $1.8 billion in cash, cash equivalents, and short-term investments.
There's a lot happening across the company's project portfolio.
At La Colorada Skarn in Mexico, Pan American invested $20 million in the first half of 2026, mostly on exploration drilling and engineering for the 588 Decline Project. Development kicked off in August. Engineering work for the material-handling system and ventilation shafts is still on track for board approval.
At Jacobina in Brazil, the company put $22 million toward infrastructure upgrades, plant improvements, and long-term optimization studies. Construction of new carbon-in-pulp tanks is expected to wrap up in August, with substation and motor-control upgrades also underway.
At Timmins in Canada, Pan American is going after a phased resource-development plan to boost production and extend mine life. The board has approved $146 million for the first phase, which includes the Bell Creek shaft extension and exploration drifts to the Vogel and Samson deposits. An updated resource estimate is expected in Q3 2026, followed by a preliminary economic assessment in the first half of 2027.
Even with the operational challenges, Pan American is returning serious cash to shareholders. The company returned a record $300 million through dividends and share repurchases during the quarter.
Specifically, it bought back about 4.4 million shares at an average price of $51.46 per share, totaling roughly $224 million. It also paid out $76 million in dividends.
As of Aug. 11, Pan American had repurchased about 7.3 million shares at an average price of $49.22 per share, for a total of $358 million. The company also declared a second-quarter dividend of 18.4 cents per common share, payable around Sept. 4 to shareholders of record as of Aug. 24.
Now for the part that's likely weighing on the stock: the gold outlook for the rest of the year.
Management now expects full-year 2026 gold production to land near the low end of its 700,000-750,000-ounce guidance range. For Q3 specifically, gold production is expected to be 3,000-6,000 ounces below the company's 178,500-192,000-ounce quarterly range.
Lower production at Jacobina and El Peñon is expected to be partly offset by higher output at Timmins and Shahuindo.
Gold all-in sustaining costs are now expected to be near the high end of the $1,700-$1,850 per ounce range. The revised outlook reflects lower production and higher labor and consumables costs. On top of that, El Niño-related heavy rains could disrupt operations in Chile and Argentina through the end of the year.
Higher metal prices have been a double-edged sword. They've boosted profitability, but they've also increased tax expenses. Pan American raised its 2026 taxes-paid guidance to $585 million-$635 million, assuming second-half silver and gold prices of $60 and $4,000 per ounce, respectively.
At Jacobina specifically, gold production is now expected to come in about 10,000 ounces below the original 181,000-191,000-ounce range. The reduction is due to revised mine sequencing and measures to address seismic risks, including larger pillars, lower production rates, and increased development. The company is also evaluating alternative mining and backfill methods to improve operations over the longer term.
PAAS Price Action: Pan American Silver shares were down 5.59% at $49.45 during premarket trading on Thursday, according to market data.
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