The world of silver mining is buzzing as two prominent companies, Pan American Silver (PAAS) and First Majestic Silver (AG), vie for investor attention in 2025. Both companies are well-established in the silver mining sector with headquarters in Vancouver, Canada, providing promising exposure not just to silver but also to gold.
Silver Price Surge
In 2023, silver prices surged by 28% and gold prices increased by 29%, driven primarily by safe-haven demand amidst geopolitical tensions and escalating trade conflicts. The demand for silver has seen a particular boost due to its essential role in various industries, especially in solar energy, electronics, and electrification. These sectors now account for over half of the global silver demand, creating a robust market. Investigations into future trends indicate that the silver market may face a recurring deficit, projected at 117.6 million ounces in 2025. This continuing deficit promises to exert upward pressure on silver prices.
Performance in the Silver Mining Sector
The Zacks Mining – Silver industry has reported significant growth, climbing 34.9% year-to-date, outpacing the broader Zacks Basic Materials sector by a wide margin. In stark contrast to the S&P 500, which has seen minimal growth of just 1.2%, the silver mining sector appears to be in a robust position.
Investing Considerations: Pan American Silver vs. First Majestic Silver
In weighing the potential of Pan American Silver against First Majestic Silver, it’s essential to explore their operational fundamentals, distinct growth drivers, and potential challenges.
Pan American Silver
Pan American Silver is recognized as a leading producer of silver and gold across the Americas, operating 12 mines in countries including Canada, Mexico, and Peru. The company has strong mineral reserves, estimated at around 468 million ounces of silver and 6.7 million ounces of gold as of mid-2024. Additionally, a recent agreement to acquire MAG Silver Corp. for $2.1 billion promises to further enhance Pan American’s resource base by an added 58 million ounces of silver.
The company has successfully recorded a 28.6% year-over-year increase in revenues, totaling $773 million in Q1 2025. The rise in revenues is attributed primarily to higher prices for silver and gold, leading to increased mine operating earnings and free cash flow. AISC (All-In Sustaining Costs) for silver stood at a competitive $13.94 per ounce, supporting its profitability. The year is shaping up well for Pan American, which is on track to meet its guidance of 20-21 million ounces of silver production.
With working capital of $1.16 billion, including cash reserves, Pan American is positioned to invest approximately $360-$385 million in capital expenditures for 2025, paving the way for strategic development and exploration.
First Majestic Silver
First Majestic Silver, primarily focused on silver and gold production in Mexico and the U.S. operates four underground mines. As of December 2024, the company holds proven and probable mineral reserves estimated at 86.8 million ounces of silver and 594,000 ounces of gold. A key recent acquisition of Gatos Silver, Inc. has solidified its production capacity, adding significant silver output early in 2025.
In the first quarter of 2025, First Majestic recorded total production of 7.7 million silver-equivalent ounces, marking a remarkable 49% year-over-year increase driven by heightened silver production. The company’s Q1 revenues soared to $243.9 million, an impressive 130% rise from the previous year, fueled by the improved performance of its mines and favorable market conditions. However, First Majestic reported a substantial increase in operating costs, which could be a concern for margins moving forward.
The company ends the quarter with the highest cash balance in its history, projected to invest about $182 million in capital expenditures in 2025 aimed at future growth through exploration activities.
Stock Performance and Valuation
Over the past year, shares of Pan American Silver have appreciated by 40%, outperforming the industry’s overall growth. In contrast, First Majestic experienced a growth of 30.7%.
Currently, Pan American Silver trades at a forward P/S multiple of 3.39X, offering a relative discount compared to the industry average. In comparison, First Majestic’s stock trades at a forward P/S multiple of 4.48X, positioning it at a premium.
In terms of dividends, Pan American offers a yield of 1.38%, well surpassing First Majestic’s yield of merely 0.22%.
Analyst Perspectives and Earnings Projections
Analysts are projecting robust growth for both companies. The Zacks Consensus Estimate for Pan American Silver indicates earnings of $1.47 per share in 2025, representing an 86.1% year-over-year growth. Earnings estimates for First Majestic suggest a modest recovery with expectations of 12 cents per share in 2025, improving from a loss in previous years.
Conclusion
As Pan American Silver and First Majestic Silver navigate the growing opportunities within the silver market, both companies are in strong positions for 2025. While both stocks hold potential, Pan American Silver appears to have a competitive edge with its superior performance indicators, favorable valuation, and stronger cash flow. This, combined with its significant growth prospects supportive of increased silver prices, makes Pan American Silver a compelling investment choice for investors looking to capitalize on the silver mining sector’s current momentum.
As you consider your investment options, keeping a close eye on these developments and understanding the broader market dynamics could guide you towards making informed decisions in the evolving landscape of silver mining.
