All amounts are expressed in US$ unless otherwise indicated.
Results are unaudited and could change based on final audited
financial results. This news release contains forward-looking
information about expected future events and financial and
operating performance of the Company. Readers should refer to the
risks and assumptions set out in the "Cautionary Note Regarding
Forward-Looking Statements and Information" at the end of this news
release.
This news release refers to measures that are not generally
accepted accounting principle ("non-GAAP") financial measures,
including cash costs per payable ounce of silver ("Cash Costs") and
all-in sustaining costs per silver ounce sold ("AISCSOS"). Please
refer to the section titled "Alternative Performance (non-GAAP)
Measures" at the end of this news release for further information
on these measures.
VANCOUVER, Jan. 12, 2017 /CNW/ - Pan American Silver
Corp. (NASDAQ: PAAS; TSX: PAA) ("Pan American", or the
"Company") today reports its preliminary operating results for the
fourth quarter ("Q4") and full year 2016, and announces its
three-year outlook for production and costs. The Company plans to
release its unaudited financial results for Q4 and full year 2016
on February 14, 2017.
"Pan American has achieved the successful transformation to a
low-cost silver producer in 2016. In addition to beating our
guidance on annual silver production, Cash Costs of $6.29 per ounce came in well below our original
guidance provided in January 2016,"
said Michael Steinmann, President
and Chief Executive Officer of the Company. "Our three-year outlook
will build on the progress we made in 2016, with the potential for
strong production growth and further cost reductions stemming from
our mine expansions and continued capital spending discipline."
Consolidated Preliminary 2016 Operating Results
|
Q4
2016
|
Full Year
2016
|
Silver production
(million ounces)
|
6.3
|
25.4
|
Gold production
(thousand ounces)
|
43.9
|
183.9
|
Zinc production
(thousand tonnes)
|
13.2
|
51.9
|
Lead production
(thousand tonnes)
|
5.5
|
20.2
|
Copper production
(thousand tonnes)
|
3.1
|
14.4
|
Cash
Costs(1) ($/ounce)
|
6.66
|
6.29
|
(1)
|
Preliminary Cash
Costs per payable ounce of silver, net of by-product credits.
Average by-product metal prices for 2016 were: Au $1,251/oz, Zn
$2,095/tonne, Pb $1,872/tonne, and Cu $4,860/tonne. Cash Costs is a
non-GAAP measure and readers should refer to the information under
the heading "Alternative Performance (non-GAAP) Measures" at the
end of this news release for more information.
|
2016 Operating Highlights:
- Silver production of 25.4 million ounces exceeded the
original forecast provided in January
2016 (the "Original Forecast") of 24.0 to 25.0 million
ounces, and was within the revised range provided on November 14, 2016 (the "Revised Forecast").
Record annual silver production at La
Colorada and San Vicente
and year-over-year production growth at Huaron and Morococha were
offset by annual silver production declines at Dolores, Alamo Dorado and Manantial
Espejo.
- Record annual gold production of 183.9 thousand ounces
was within the Original Forecast range of 175.0 thousand to 185.0
thousand ounces, with record-breaking annual gold production at
Dolores.
- Base metals production beat the Company's Original
Forecast. Relative to the Revised Forecast, zinc and lead
production was within the forecast while Copper production was
slightly below. New annual production records were achieved for
both zinc and lead with 51.9 thousand tonnes and 20.2 thousand
tonnes produced in 2016, respectively. Copper production of 14.4
thousand tonnes in 2016 was also strong. La Colorada broke its annual production record
for both zinc and lead, while Huaron broke its annual zinc
production record.
- Annual consolidated Cash Costs of $6.29 were 37% below the midpoint of the Original
Forecast of $9.45 to $10.45, and at
the lower end of the Revised Forecast. Dolores recorded its lowest ever annual Cash
Costs while La Colorada, Huaron
and Morococha achieved their lowest annual Cash Costs in more than
7 years.
- Major projects were well advanced during 2016, with Pan
American achieving its targeted milestones for its two mine
expansions in Mexico. At
La Colorada, the new sulphide
processing plant and mineshaft were commissioned, and development
of the underground mine progressed as planned. At Dolores, progress on construction of the new
pulp agglomeration plant and development of the new underground
mine were achieved, while a new power line connecting the mine to
the national grid was completed and energized.
Preliminary 2016 Operating Results by Mine
Mine
|
Silver
Production
(million ounces)
|
Gold
Production
(thousand ounces)
|
Cash Costs
($/ounce)(1)
|
La
Colorada
|
5.80
|
2.93
|
6.15
|
Dolores
|
3.84
|
102.76
|
-1.08
|
Alamo
Dorado
|
1.86
|
8.38
|
16.02
|
Huaron
|
3.81
|
0.81
|
5.79
|
Morococha
(92.3%)(2)
|
2.54
|
2.14
|
4.21
|
San Vicente
(95%)(2)
|
4.43
|
n/a
|
11.95
|
Manantial
Espejo
|
3.14
|
66.89
|
4.28
|
Total(3)
|
25.42
|
183.92
|
6.29
|
(1)
|
Preliminary Cash
Costs per payable ounce of silver, net of by-product credits.
Average by-product metal prices for 2016 were: Au $1,251/oz, Zn
$2,095/tonne, Pb $1,872/tonne, and Cu $4,860/tonne. Cash Costs is a
non-GAAP measure and readers should refer to the information under
the heading "Alternative Performance (non-GAAP) Measures" at the
end of this news release for more information.
|
(2)
|
Reflects Pan
American's ownership in the operation.
|
(3)
|
Totals may not add up
due to rounding.
|
|
|
2017 Guidance by Mine
Mine
|
Silver
Production
(million ounces)
|
Gold
Production
(thousand ounces)
|
Cash Costs
($/ounce)(1)
|
La
Colorada
|
6.4 - 6.9
|
3.3 - 3.5
|
3.35 -
3.95
|
Dolores
|
4.0 - 4.5
|
109.1 -
115.0
|
1.25 -
2.25
|
Alamo
Dorado
|
0.3
|
1.4 - 1.5
|
18.00 -
20.00
|
Huaron
|
3.7 - 3.8
|
0.3 - 0.4
|
5.95 -
6.95
|
Morococha
(92.3%)(2)
|
2.5 - 2.6
|
2.9 - 3.1
|
3.15 -
4.15
|
San Vicente
(95%)(2)
|
4.4 - 4.5
|
0.5 - 0.6
|
10.90 -
11.90
|
Manantial
Espejo
|
3.3 - 3.4
|
37.5 -
41.0
|
15.35 -
16.25
|
Total(3)
|
24.5 -
26.0
|
155.0 -
165.0
|
6.45 -
7.45
|
(1)
|
Cash Costs is a
non-GAAP measure and readers should refer to the information under
the heading "Alternative Performance (non-GAAP) Measures" at the
end of this news release for more information.
|
(2)
|
Reflects Pan
American's ownership in the operation.
|
(3)
|
Totals may not add up
due to rounding.
|
Three-year Outlook
The following table provides Pan American's outlook for the
years 2017 to 2019 (the "Three-year Outlook"):
|
2017
Guidance
|
2018
Outlook
|
2019
Outlook
|
Silver production
(million ounces)
|
24.5 –
26.0
|
26.0 -
28.0
|
26.5 –
29.5
|
Gold production
(thousand ounces)
|
155 - 165
|
170 - 185
|
175 - 200
|
Zinc production
(thousand tonnes)
|
56.5 -
58.5
|
59.0 -
63.0
|
55.0 -
65.0
|
Lead production
(thousand tonnes)
|
19.0 -
20.0
|
23.0 -
26.0
|
23.0 -
27.0
|
Copper production
(thousand tonnes)
|
8.75 -
9.25
|
6.00 -
8.00
|
4.00 -
4.20
|
Cash
Costs(1)($/ounce)
|
6.45 -
7.45
|
5.60 -
7.10
|
5.20 –
6.80
|
Sustaining capital ($
millions)
|
82 - 88
|
75 - 85
|
75 - 90
|
AISCSOS(1)
($/ounce)
|
11.50 -
12.90
|
10.00 -
12.20
|
9.30 -
11.60
|
(1)
|
Cash Costs and
AISCSOS are non-GAAP measures. Please refer to the section
titled "Alternative Performance (non-GAAP) Measures" at the end of
this news release for further information on these
measures.
|
The following table provides the price and foreign exchange rate
assumptions used to forecast total Cash Costs and AISCSOS in the
Three-year Outlook:
|
2017, 2018 and
2019
|
Metal
prices
|
|
Silver
($/ounce)
|
17.00
|
Gold
($/ounce)
|
1,200
|
Zinc
($/tonne)
|
2,500
|
Lead
($/tonne)
|
2,100
|
Copper
($/tonne)
|
5,400
|
Average annual
exchange rates relative to 1 USD
|
|
Mexican
peso
|
20
|
Peruvian
sol
|
3.30
|
Argentine
peso
|
17.05
|
Bolivian
boliviano
|
7
|
Outlook Highlights:
- The La Colorada mine is
expected to ramp up to full design processing rates of 1,800 tonnes
per day by the end of 2017. Annual silver production from this mine
is expected to rise to 6.4 to 6.9 million ounces in 2017.
- The new underground mine at Dolores is expected to reach design-extraction
rates of 1,500 tonnes per day by the end of 2017. Commissioning of
the new pulp agglomeration plant is targeted for mid-2017. Annual
production at Dolores is expected
to rise to 4.0 to 4.5 million ounces of silver and 109.1 to 115.0
thousand ounces of gold in 2017.
- We expect steady-state operations at our Huaron, Morococha, and
San Vicente mines. The production
ramp-up at La Colorada along with
mine sequencing at Huaron, Morococha and San Vicente are expected to result in higher
zinc production and lower copper and lead output in 2017.
- The Alamo Dorado mine has reached the end of its life and the
processing of stockpile inventory is expected to be completed
during the first quarter of 2017. During 2017, we plan to fully
transition this mine from the production phase to the reclamation
phase.
- We had anticipated completing open-pit mining at Manantial
Espejo in mid-2016, but improved economic conditions and
exploration success has extended the timeframe into early 2017.
Following the completion of open-pit mining, we will be treating
low-grade stockpiles. Underground mining at Manantial Espejo is
expected to continue into 2019. In 2017, exploration and site
reclamation work are also planned at Manantial Espejo.
- Capital expenditures are expected to total $140 to $150 million in 2017, comprised of
$82 to $88 million in sustaining
capital and $58 to $62 million in
project capital related to the current mine expansions at
La Colorada and Dolores; 2017 is expected to be the final year
of project capital related to these expansions.
- Sustaining capital levels over the Three-year Outlook period
are consistent. In 2017, sustaining capital is directed at:
equipment purchases, replacements and rebuilds; continued
expansions of the leach pad at Dolores; and expansions of the tailings
storage facilities at San Vicente,
Huaron and La Colorada. Sustaining
capital will also fund an active exploration program within Pan
American's current mining operations to replace reserves, define
new resources and test new structures.
- We anticipate spending approximately $21
million on near-site and regional exploration in 2017. Near
mine exploration will be carried out at all of the Company's active
mines, except Alamo Dorado, and will include both underground and
surface targets. The drilling program will total approximately
110,000 metres. Regional exploration is planned in Mexico and Peru, focusing on Pan American's Greenfield
projects as well as advancing option projects, such as the one with
Kootenay Silver Inc.
- The Company expects silver and gold production to rise
significantly in the second half of 2017 following commissioning of
the Dolores pulp agglomeration
plant and the continued ramp-up of production from the La Colorada expansion. Accordingly, we expect
Cash Costs to be above the full-year 2017 Guidance range during the
first half of the year before moving lower in the second half, as
the benefits of the Dolores and
La Colorada expansions are
realized.
- The improving profile for consolidated operations over the
Three-year Outlook period reflects the full-year benefits achieved
from the La Colorada and
Dolores mine expansions. The
potential impact of mining industry cost inflation on Pan
American's costs is expected to be mitigated by the higher
throughputs and efficiencies gained from these expansions.
- Pan American's silver and gold production remains
unhedged.
Technical information contained in this news release with
respect to Pan American has been reviewed and approved by Martin
Wafforn, P.Eng., Senior Vice President, Technical Services &
Process Optimization, who is the Company's Qualified Person for the
purposes of National Instrument 43-101. For additional information
about the Company's material mineral properties, please refer to
the Company's Annual Information Form dated March 24, 2016, filed at www.sedar.com.
Unaudited Q4 and full year 2016 Results Release and
Conference Call
Pan American plans to release its unaudited
results for the fourth quarter and year-ended December 31, 2016 on Tuesday, February 14, 2017 after market
close.
A conference call to discuss the results is planned for
Wednesday, February 15 at
1:00 pm ET (10:00 am PT). To participate, please dial:
toll-free in Canada and the U.S.
at 1-800-319-4610, and International at 604-638-5340.
A live audio webcast will be available on the Company's website
at www.panamericansilver.com. A replay of the webcast will also be
available shortly after the call on the website.
About Pan American Silver
Pan American Silver Corp. is
one of the largest primary silver producers in the world. We own
and operate seven mines located in Mexico, Peru,
Argentina and Bolivia. Pan
American also owns several development projects in the USA, Mexico,
Peru and Argentina. Our mission is to be the world's
pre-eminent silver producer, with a reputation for excellence in
discovery, engineering, innovation and sustainable
development. The Company is headquartered in Vancouver, B.C. and our shares trade on NASDAQ
(PAAS) and the Toronto Stock Exchange (PAA).
For more information, visit: www.panamericansilver.com.
Alternative Performance (non-GAAP) Measures
In this press release we refer to measures that are not
generally accepted accounting principle ("non-GAAP") financial
measures. These measures are widely used in the mining
industry as a benchmark for performance, but do not have a
standardized meaning as prescribed by IFRS as an indicator of
performance, and may differ from methods used by other companies
with similar descriptions. These non-GAAP financial measures
include:
- Cash Costs per payable ounce of silver, net of by-product
credits ("Cash Costs"). Cash Costs does not have a standardized
meaning prescribed by IFRS as an indicator of performance. The
Company's method of calculating Cash Costs may differ from the
methods used by other entities and, accordingly, the Company's Cash
Costs may not be comparable to similarly titled measures used by
other entities. Investors are cautioned that Cash Costs should not
be construed as an alternative to production costs, depreciation
and amortization, and royalties determined in accordance with IFRS
as an indicator of performance.
- All-in sustaining costs per silver ounce sold ("AISCSOS"). The
Company has adopted AISCSOS as a measure of its consolidated
operating performance and its ability to generate cash from all
operations collectively, and the Company believes it is a more
comprehensive measure of the cost of operating our consolidated
business than traditional Cash Costs per payable ounce, as it
includes the cost of replacing ounces through exploration, the cost
of ongoing capital investments (sustaining capital), general and
administrative expenses, as well as other items that affect the
Company's consolidated earnings and cash flow.
Readers should refer to the "Alternative Performance (non-GAAP)
Measures" section of the Company's management's discussion and
analysis for the three and nine months ended September 30, 2016 (the "Q3 2016 MD&A") for a
more detailed discussion of these and other non-GAAP measures and
their calculation.
Cautionary Note Regarding Forward-Looking Statements and
Information
Certain of the statements and information in
this news release constitute "forward-looking statements" within
the meaning of the United States Private Securities Litigation
Reform Act of 1995 and "forward-looking information" within the
meaning of applicable Canadian provincial securities laws. All
statements, other than statements of historical fact, are
forward-looking statements or information. Forward-looking
statements or information in this news release relate to, among
other things: future financial or operational performance,
including our estimated production of silver, gold and other metals
in 2017 and beyond, and our estimated Cash Costs and AISCSOS in
2017 and beyond; the ability of the Company to successfully
complete any capital investment programs and projects, and the
impacts of any such programs and projects on the Company, including
with respect to production; and the expenditures and success
related to any future exploration or development programs.
These forward-looking statements and information reflect the
Company's current views with respect to future events and are
necessarily based upon a number of assumptions that, while
considered reasonable by the Company, are inherently subject to
significant operational, business, economic and regulatory
uncertainties and contingencies. These assumptions include: tonnage
of ore to be mined and processed; ore grades and recoveries; prices
for silver, gold and base metals remaining as estimated; currency
exchange rates remaining as estimated; capital, decommissioning and
reclamation estimates; our mineral reserve and recourse estimates
and the assumptions upon which they are based; prices for energy
inputs, labour, materials, supplies and services (including
transportation); no labour-related disruptions at any of our
operations; no unplanned delays or interruptions in scheduled
production; all necessary permits, licenses and regulatory
approvals for our operations are received in a timely manner; and
our ability to comply with environmental, health and safety laws.
The foregoing list of assumptions is not exhaustive.
The Company cautions the reader that forward-looking statements
and information involve known and unknown risks, uncertainties and
other factors that may cause actual results and developments to
differ materially from those expressed or implied by such
forward-looking statements or information contained in this news
release and the Company has made assumptions and estimates based on
or related to many of these factors. Such factors include, without
limitation: fluctuations in silver, gold and base metal prices;
fluctuations in prices for energy inputs, labour, materials,
supplies and services (including transportation); fluctuations in
currency markets (such as the Canadian Dollar, Peruvian Sol,
Mexican Peso, Argentine Peso and Bolivian Boliviano versus the U.S.
Dollar); operational risks and hazards inherent with the business
of mining (including environmental accidents and hazards,
industrial accidents, equipment breakdown, unusual or unexpected
geological or structural formations, cave-ins, flooding and severe
weather); risks relating to the credit worthiness or financial
condition of suppliers, refiners and other parties with whom the
Company does business; inadequate insurance, or inability to obtain
insurance, to cover these risks and hazards; employee relations;
relationships with, and claims by, local communities and indigenous
populations; our ability to obtain all necessary permits, licenses
and regulatory approvals in a timely manner; changes in laws,
regulations and government practices in the jurisdictions where we
operate, including environmental, export and import laws and
regulations; legal restrictions relating to mining, including in
Chubut, Argentina; risks relating
to expropriation; diminishing quantities or grades of mineral
reserves as properties are mined; increased competition in the
mining industry for equipment and qualified personnel; and those
factors identified under the caption "Risks Related to Pan
American's Business" in the Company's most recent form 40-F and
Annual Information Form filed with the United States Securities and
Exchange Commission and Canadian provincial securities regulatory
authorities, respectively. Although the Company has attempted to
identify important factors that could cause actual results to
differ materially, there may be other factors that cause results
not to be as anticipated, estimated, described or intended.
Investors are cautioned against undue reliance on forward-looking
statements or information. Forward-looking statements and
information are designed to help readers understand management's
current views of our near and longer term prospects and may not be
appropriate for other purposes. The Company does not intend, nor
does it assume any obligation to update or revise forward-looking
statements or information, whether as a result of new information,
changes in assumptions, future events or otherwise, except to the
extent required by applicable law.
SOURCE Pan American Silver Corp.