Pan American Silver reports Q1 2021 results

May 12, 2021

VANCOUVER, BC, May 12, 2021 /CNW/ - Pan American Silver Corp. (NASDAQ: PAAS) (TSX: PAAS) ("Pan American" or the "Company") today reported unaudited results for the quarter ended March 31, 2021 ("Q1 2021"). Pan American's unaudited condensed interim consolidated financial statements ("financial statements"), as well as Pan American's management's discussion and analysis ("MD&A") for the three months ended March 31, 2021, are available on Pan American's website at panamericansilver.com and on SEDAR at www.sedar.com.

"Q1 was a challenging quarter, as the COVID-19 pandemic continues to grip Latin America, impacting our workforce, communities and operations. At La Colorada, we experienced large inventory build-ups and a blockage of a ventilation project that occurred during commissioning, which reduced Q1 sales and production. These are transitory issues expected to be resolved during the remainder of 2021, with the roll-out of vaccination programs across our operating jurisdictions alleviating some of the impact of the pandemic," said Michael Steinmann, President and Chief Executive Officer. "In Q1, we also made large tax payments totaling $61.3 million."

"Concentrate inventories are back to normal levels at La Colorada, and we anticipate that the majority of the Q1 inventory build, which reduced operating cash flow by $39.9 million and resulted in lower revenue, will be mostly sold in the second quarter of 2021. At La Colorada, we are implementing a by-pass of the blockage in the ventilation raise, which should allow ventilation to improve and throughput rates to increase later in the year. We continue to expect annual production and cash flows to be back-end loaded in 2021," added Mr. Steinmann.

Q1 2021 Highlights:

A large inventory build impacted revenue, cash flows, and Silver Segment Cash Costs and All-in Sustaining Costs ("AISC"). The inventory primarily related to a three-month build-up of concentrate production at La Colorada due to extended negotiations with a transport supplier and changes to smelting contracts. That inventory is expected to be sold and recognized in revenue over Q2 2021 and Q3 2021. In addition, a build-up in inventory occurred at Dolores from leach pad kinetics, which delayed production later into 2021.
Protocols to protect health and safety during the COVID-19 pandemic reduce throughput rates across Pan American's operations, and have had a disproportionate impact on its La Colorada and Manantial Espejo operations, which contribute a significant portion of the Company's silver production. This is due to COVID-19 related shortfalls in workforce deployments at these operations.
Consolidated silver production of 4.6 million ounces primarily reflects reduced production at La Colorada and Dolores. In addition to the COVID-19 related impact, noted above, at La Colorada, the bottom 42 metres of the new ventilation raise from surface to the 345 metre level became blocked from sloughing of the raise wall during shotcreting and commissioning in Q1 2021, restricting mining rates. Pan American is currently working to bypass the blockage through drifting from a nearby ramp and additional raise boring. This work is expected to be completed in Q3 2021, enabling mining rates to improve later this year. At Dolores, lower silver production reflects mine sequencing into higher gold grades and lower silver grades, as expected.
Consolidated gold production of 137.6 thousand ounces reflects reduced production at Timmins where we adjusted mining to address geotechnical conditions in a section of the Bell Creek mine, and at Shahuindo from lower tonnes placed, grades and extraction rates due to mine sequencing. As expected, Dolores benefited from mine sequencing into higher gold grades, albeit at a lower ratio of ounces recovered to stacked due to temporary leach constraints during the current stage of pad construction.
Revenue of $368.1 million was impacted by the $39.9 million inventory increase noted above.
A Net loss of $7.6 million ($0.04 basic loss per share) was recorded, impacted by an investment loss of $39.0 million, primarily related to the mark-to-market fair-value adjustment of the Company's investment in New Pacific Metals.
Adjusted earnings were $37.4 million ($0.18 basic adjusted earnings per share). The primary adjustment was removing the $39.0 million investment loss. Commencing in Q1 2021, the Company will no longer include in adjusted earnings the gains and losses recognized in relation to certain equity investments owned by the Company.
Net cash generated from operations of $29.9 million includes $61.3 million in income taxes paid and $47.4 million use of cash from working capital changes, driven mainly by the inventory build-ups noted above.
Silver Segment Cash Costs were $12.30 per ounce, reflecting lower gold by-product credits from the move of Dolores into the Gold Segment, reduced throughput and grades at La Colorada from the temporary ventilation constraints, the inventory build-up at La Colorada, an increase in operating costs at Manantial Espejo due to the ramp-up of mining activities at COSE and Joaquin, and greater COVID-19 related costs. Costs benefited from strong by-product base metal production and prices at Huaron.
Silver Segment AISC were $16.99, including net realizable value ("NRV") inventory adjustments that increased Silver Segment AISC by $0.51 per ounce. Silver Segment AISC was significantly distorted by the ventilation constraints and inventory build-up at La Colorada, and is expected to normalize over 2021.
Gold Segment Cash Costs of $846 per ounce benefited from the move of Dolores to the Gold Segment and strong production at La Arena, while costs were negatively impacted by the lower throughput and grades at Timmins and Shahuindo.
Gold Segment AISC were $1,058 per ounce, including NRV inventory adjustments at Dolores that reduced Gold Segment AISC by $75 per ounce.
Consolidated AISC, including gold by-product credits from the Gold Segment mines, were $(5.23) per silver ounce sold.
Capital expenditures totaled $51.0 million, comprised of $45.2 million of sustaining capital and $5.7 million of non-sustaining capital, the majority of which was directed to project capital for exploration drilling activities at the La Colorada skarn project and the Wetmore project at Timmins.
The Company's liquidity and capital position at March 31, 2021, was comprised of cash and short-term investment balances of $206.4 million, an equity investment in Maverix Metals Inc. with a market value of $134.3 million, working capital of $513.0 million, and $500.0 million available on its revolving credit facility (the "Credit Facility"). Total debt of $30.8 million was related to lease liabilities.
The Board of Directors has approved a cash dividend of $0.07 per common share, or approximately $14.7 million in aggregate cash dividends, payable on or about June 7, 2021, to holders of record of Pan American's common shares as of the close on May 25, 2021. Pan American's dividends are designated as eligible dividends for the purposes of the Income Tax Act (Canada). As is standard practice, the amounts and specific distribution dates of any future dividends will be evaluated and determined by the Board of Directors on an ongoing basis.
Pan American is revising Guidance for 2021 annual silver production to between 20.50 to 22.00 million ounces and Silver Segment Cash Costs to a range of $9.60 to $11.60 per ounce and Silver Segment AISC to a range of $14.25 to $15.75 per ounce. The revisions reflect extended ventilation constraints at La Colorada while completing the by-pass of the blockage in the new ventilation raise, as well as greater than originally anticipated COVID-19 related production impacts at Manantial Espejo. There are no changes to estimated 2021 annual gold production of 605.0 to 655.1 thousand ounces and estimated Gold Segment Cash Costs or AISC. The estimated range for consolidated sustaining capital has been reduced to between $230.0 million and $245.0 million while estimated project capital is unchanged at $55.0 million to $60.0 million. Further details are provided in the "Guidance" section of this news release.

Cash Costs, AISC, adjusted earnings, basic adjusted earnings per share, sustaining capital, project capital, working capital, and total debt are not generally accepted accounting principle ("non-GAAP") financial measures. Please refer to the "Alternative Performance (non-GAAP) Measures" section of this news release for further information on these measures.

2021 GUIDANCE

The following tables provide management's guidance for 2021, as at May 12, 2021. These estimates are forward-looking statements and information that are subject to the cautionary note associated with forward-looking statements and information at the end of this news release.

Annual Production Guidance

Based on year-to-date production results and the expected production for the remainder of the year, management has lowered its estimate for annual consolidated silver production to between 20.50 to 22.00 million ounces from 22.50 to 24.00 million ounces, reflecting:

an approximately 20% to 25% reduction in estimated 2021 silver production at La Colorada due to ventilation constraints while the Company completes a by-pass of the blockage in the bottom 42 metres of the primary ventilation raise, as well as lower than originally anticipated workforce deployments due to severe regional COVID-19 epidemic conditions; and

an approximately 8 to 10% reduction in estimated 2021 silver production at Manantial Espejo, reflecting higher than originally anticipated COVID-19 related shortfalls in workforce deployments.

Management has also revised its estimates for zinc, lead and copper production to reflect the expected production shortfalls at La Colorada, which are expected to be partially offset by better than expected production at Huaron and Morococha.

The Company's estimate for annual 2021 gold production is unchanged.

Cash Costs and AISC Guidance

(1) Cash Costs and AISC are non-GAAP measures. Please refer to the "Alternative Performance (non-GAAP) Measures" section of this news release for further information on these measures.

(2) The Cash Costs and AISC forecasts assume realized metal prices for Q1 2021 and the following metal prices for the remainder of 2021: of $24.00/oz for silver, $2,850/tonne ($1.28/lb) for zinc, $2,000/tonne ($0.91/lb) for lead, $9,500/tonne ($4.20/lb) for copper, and $1,750/oz for gold; and average annual exchange rates relative to 1 USD of 20.00 for the Mexican peso ("MXN"), 3.50 for the Peruvian sol ("PEN"), 96.67 for the Argentine peso ("ARS"), 7.00 for the Bolivian boliviano ("BOB"), and $1.25 for the Canadian dollar ("CAD").

(3) Corporate general and administrative expense, and exploration and project development expense are included in Consolidated Silver Basis AISC, but are not allocated amongst the operations and thus are not included in either the silver or gold segment totals.

(4) Consolidated Silver Basis AISC is calculated per silver ounce sold with gold revenues included in the by-product credits.

Silver Segment Cash Costs and AISC guidance have been revised to incorporate the revisions to production forecasts and base metal prices realized in Q1 2021.

Capital Expenditures Guidance

Estimated sustaining capital in 2021 has been reduced from a range of $245 million to $260 million to a range of $230 million to $245 million, reflecting the timing of cash outflows for projects at Shahuindo.

Estimated project capital in 2021 is unchanged.

First Quarter 2021 Unaudited Results Conference Call and Webcast

Date: May 13, 2021

Time: 11:00 am ET (8:00 am PT)

Dial-in numbers:

1-800-319-4610 (toll-free in Canada and the U.S.)

+1-604-638-5340 (international participants)

Webcast: panamericansilver.com

Callers should dial in 5 to 10 minutes prior to the scheduled start time. The live webcast and presentation slides will be available on the Company's website at panamericansilver.com. An archive of the webcast will also be available for three months.

About Pan American Silver

Pan American owns and operates silver and gold mines located in Mexico, Peru, Canada, Argentina and Bolivia. We also own the Escobal mine in Guatemala that is currently not operating. As the world's second largest primary silver producer with the largest silver reserve base globally, we provide enhanced exposure to silver in addition to a diversified portfolio of gold producing assets. Pan American has a 27-year history of operating in Latin America, earning an industry-leading reputation for corporate social responsibility, operational excellence and prudent financial management. We are headquartered in Vancouver, B.C. and our shares trade on NASDAQ and the Toronto Stock Exchange under the symbol "PAAS".

Source: https://www.panamericansilver.com/news/news-releases/detail/169/2021-05-12-pan-american-silver-reports-q1-2021-results

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Pan American Silver reports Q1 2021 results