TD Cowen downgrades Pan American Silver stock rating on operational challenges

TD Cowen downgraded Pan American Silver to Hold from Buy and cut its price target to Cdn$45 from Cdn$52, citing operational challenges at Jacobina and uncertainty around the flagship mine. The firm estimates average Jacobina output of 158,000 ounces per year at mine-site all-in sustaining costs of $1,755 per ounce through 2029, versus 191,000 ounces produced in 2025 at $1,306 per ounce. Separately, the article reports Q3 2026 adjusted EPS of $0.69 and revenue of $1.01 billion, below expectations of $0.72 and $1.08 billion; the stock was down nearly 30% over six months.

Analysis

Investment read-through: The key risk is not simply lower ounces: a multi-year reduction in higher-grade production alongside elevated unit costs can weaken PAAS’s operating leverage to gold and make a recovery in the headline metal price less effective at restoring mine-level cash generation. Remediation, permitting and optimization also compete for management attention and could absorb capital that otherwise supports growth or shareholder returns; the scale of that trade-off is not established in the article and needs verification. Weak results and downward estimate revisions increase the chance that investors apply a discount for execution uncertainty rather than treat Jacobina’s issues as a temporary interruption.

Horizon and countercase: Near term, further estimate cuts or cautious guidance could pressure the shares, although a roughly 30% six-month decline raises the risk that a downgrade is partly reflected. Over 1–3 months, watch mine-rate, cost and full-year guidance updates. Over 6–18 months, the thesis turns on whether remediation and permitting milestones translate into safe access to higher-grade areas and a credible cost trajectory. A sustained gold-price rise could cushion the earnings effect, but would not resolve operating constraints. The contrary case is that investors extrapolate current disruption too far; profitability alone does not establish undervaluation.

Falsifiers: Evidence of improving underground rates, on-schedule remediation, stable or lower Jacobina costs, and no further guidance reductions would weaken the bearish view. Delays, additional cost inflation or another miss would reinforce it.

Key Decisions for Investors

• Prefer a relative-value expression over an outright short after the material share-price decline: modestly short PAAS against a diversified precious-metals-miner basket, scaling only if upcoming operating disclosures confirm continued deterioration. Keep exposure limited; a gold rally or faster-than-expected recovery could squeeze the trade.
• Do not add to PAAS solely on an “undervalued” characterization. Reassess after management provides measurable updates on mine rates, remediation timing, permitting, costs and any capital requirements for the optimization plan.
• Set a thesis review trigger at the next results/guidance update: improving production access and cost performance argues to cover the relative short; further estimate cuts, delayed remediation or weaker guidance supports maintaining it. Verify whether the reported earnings and analyst figures are comparable periods and scopes before treating them as a trend.