Reduces Cost Guidance for the Second Time in
2019
VANCOUVER, Nov. 6, 2019
/CNW/ - Pan American Silver Corp. (NASDAQ: PAAS) (TSX:
PAAS) today reported unaudited results for the third quarter ended
September 30, 2019 ("Q3 2019"). Pan American's unaudited
condensed interim consolidated financial statements and notes
("financial statements"), as well as Pan American's management's
discussion and analysis ("MD&A") for the three and nine months
ended September 30, 2019, are available on Pan American's
website at panamericansilver.com and on SEDAR
at www.sedar.com.
"Our operations performed well in Q3, generating $81.9 million in operating cash flow," said
Michael Steinmann, President and
Chief Executive Officer. "We are reducing our cost guidance for the
second time this year, and we remain on track to achieve the
production guidance for 2019, as revised on August 7, 2019. Our priorities are asset
optimization, debt reduction and brownfield exploration. Strong
free cash flow has allowed us to repay $20
million on our credit facility and advance the skarn
discovery at La Colorada, where we
encountered exceptional drill intercepts in the quarter."
Consolidated Q3 2019 Highlights:
- Effective Q3 2019, Timmins West
and Bell Creek (together, "Timmins")
are no longer classified as held for sale, and the net income
generated by Timmins is now included in the Company's income
statement in the normal course of business.
- Revenue was $352.2 million;
revenue in Q3 2019 excludes revenue associated with a build in
metal inventory during Q3 2019, estimated at $17.8 million, which is expected to be realized
in the fourth quarter of 2019.
- Net income of $37.7 million
($0.18 basic earnings per share)
reflects strong mine operating earnings and an increase in
investment income. Net income was reduced by a one-time, non-cash
$15.6 million adjustment for
depletion and amortization expenses related to the reclassification
of Timmins.
- Adjusted earnings were $74.2
million ($0.35 basic adjusted
income per share).
- Net cash generated from operations was $81.9 million.
- Silver production of 6.7 million ounces and gold production of
150.2 thousand ounces are on track to achieve management's guidance
for 2019, as revised on August 7,
2019.
- Silver Segment Cash Costs and All-in Sustaining Costs ("AISC")
were $5.47 and $8.80 per silver ounce sold, respectively.
Management has lowered its annual guidance for 2019 Silver Segment
Cash Costs and AISC to between $6.00
and $7.00 and between $9.50 and $11.00
per silver ounce, respectively.
- Gold Segment Cash Costs and AISC were $729 and $920 per
gold ounce sold, respectively. Management has lowered its annual
guidance for 2019 Gold Segment Cash Costs and AISC to between
$725 and $775 and between $1,000 and $1,100
per gold ounce, respectively.
- Consolidated Silver Basis Cash Costs and AISC were ($8.66) and $(0.11)
per silver ounce sold, respectively. Management has lowered its
annual guidance for 2019 Consolidated Silver Basis Cash Costs and
AISC to between ($5.50) and
($3.80) per ounce and between
$6.00 and $7.50 per ounce, respectively.
- The Company is maintaining its annual guidance for 2019 capital
expenditures issued on August 7,
2019, with sustaining capital estimated at $203 to $213
million and project capital estimated at $45 million.
- At September 30, 2019, the Company had a cash and
short-term investment balance of $177.0
million and working capital of $459.3
million. Total debt was $360.5
million (including $45.5
million of lease liabilities).
- The Board of Directors has approved a cash dividend
of $0.035 per common share, or approximately $7.3 million in aggregate cash dividends, payable
on or about November 29, 2019, to
holders of record of Pan American's common shares as of the close
on November 18, 2019. 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.
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.
On October 30, 2019, Pan American
released results from 14,300 metres of drilling completed during Q3
2019 on the La Colorada skarn
discovery in Mexico. The drill
results included some of the highest grade intercepts recorded to
date, with widths up to 379 metres. Preliminary metallurgical
testing of samples indicated high recoveries across all metals can
be expected.
CONSOLIDATED FINANCIAL RESULTS
|
|
|
September
30,
2019
|
December 31,
2018
|
Weighted average
shares during period (millions)
|
|
|
209.5
|
153.3
|
Shares outstanding
end of period (millions)
|
|
|
209.6
|
153.4
|
|
|
|
|
|
|
|
|
Three months
ended
September 30,
|
|
|
|
2019
|
2018
|
|
|
|
|
|
Revenue
|
|
|
$
|
352,187
|
$
|
187,717
|
Mine operating
earnings
|
|
|
$
|
63,850
|
$
|
(4,412)
|
Net
earnings
|
|
|
$
|
37,719
|
$
|
(9,234)
|
Basic earnings per
share(1)
|
|
|
$
|
0.18
|
$
|
(0.06)
|
Adjusted
earnings(2)
|
|
|
$
|
74,232
|
$
|
(4,673)
|
Basic adjusted
earnings per share(1)
|
|
|
$
|
0.35
|
$
|
(0.03)
|
Net cash generated
from operating activities
|
|
|
$
|
81,948
|
$
|
41,699
|
Net cash generated
from operating activities before changes in working
capital(2)
|
|
|
$
|
96,842
|
$
|
37,515
|
Sustaining capital
expenditures(2)
|
|
|
$
|
42,256
|
$
|
26,870
|
Project capital
expenditures(2)
|
|
|
$
|
11,788
|
$
|
8,799
|
Cash dividend per
share
|
|
|
$
|
0.035
|
$
|
0.035
|
Average realized
prices
|
|
|
|
|
Silver
($/ounce)(3)
|
|
|
17.16
|
14.88
|
Gold
($/ounce)(3)
|
|
|
1,477
|
1,212
|
Zinc
($/tonne)(3)
|
|
|
2,276
|
2,472
|
Lead
($/tonne)(3)
|
|
|
2,002
|
2,072
|
Copper
($/tonne)(3)
|
|
|
5,780
|
6,105
|
|
|
(1)
|
Per share amounts are
based on basic weighted average common shares.
|
(2)
|
Non- GAAP measures:
adjusted earnings, basic adjusted earnings per share, and net cash
generated from operating activities before changes in working
capital are non-GAAP financial measures. Please refer to the
"Alternative Performance (non-GAAP) Measures" section of this news
release for further information on these measures.
|
(3)
|
Metal prices stated
are inclusive of final settlement adjustments on concentrate
sales.
|
OPERATING PERFORMANCE
Production
|
|
Silver
Production
(ounces '000s)
|
Gold
Production
(ounces '000s)
|
|
|
Three months
ended
September 30,
|
Three months
ended
September 30,
|
|
|
2019
|
2018
|
2019
|
2018
|
Silver
Segment:
|
|
|
|
|
|
La
Colorada
|
|
2,091
|
2,020
|
1.2
|
1.1
|
Dolores
|
|
1,496
|
967
|
33.1
|
33.1
|
Huaron
|
|
975
|
922
|
0.3
|
0.2
|
Morococha(1)
|
|
588
|
758
|
0.3
|
0.4
|
San
Vicente(2)
|
|
860
|
867
|
0.1
|
0.1
|
Manantial
Espejo
|
|
606
|
718
|
5.4
|
7.1
|
Gold
Segment:
|
|
|
|
|
|
Shahuindo(3)
|
|
37
|
|
40.6
|
|
La
Arena(3)
|
|
6
|
|
31.0
|
|
Timmins(3)
|
|
5
|
|
38.3
|
|
Total(4)
|
|
6,665
|
6,253
|
150.2
|
42.1
|
|
|
(1)
|
Morococha data
represents Pan American 92.3% interest in the mine's
production.
|
(2)
|
San Vicente data
represents Pan American 95.0% interest in the mine's
production.
|
(3)
|
Reflects production
results subsequent to the February 22, 2019 closing date of the
acquisition of these mines pursuant to the Tahoe Resources Inc.
transaction
|
(4)
|
Totals may not add
due to rounding.
|
|
Base Metal
Production (tonnes '000s)
|
|
Three months
ended
September 30,
|
|
2019
|
2018
|
Zinc
|
16.8
|
16.7
|
Lead
|
6.8
|
5.7
|
Copper
|
2.3
|
2.6
|
Cash Costs and AISC
|
Cash
Costs(1)
($ per
ounce)
|
AISC(1)
($ per
ounce)
|
Three months
ended
September 30,
|
Three months
ended
September 30,
|
2019
|
2018(2)
|
2019
|
2018(3)
|
La
Colorada
|
$
|
2.82
|
$
|
4.46
|
$
|
4.03
|
$
|
6.27
|
Dolores
|
$
|
0.00
|
$
|
(2.91)
|
$
|
7.45
|
$
|
25.52
|
Huaron
|
$
|
5.32
|
$
|
3.55
|
$
|
8.69
|
$
|
11.03
|
Morococha
|
$
|
5.66
|
$
|
(0.97)
|
$
|
11.36
|
$
|
6.39
|
San
Vicente
|
$
|
13.04
|
$
|
9.07
|
$
|
15.21
|
$
|
11.12
|
Manantial
Espejo
|
$
|
24.22
|
$
|
13.23
|
$
|
21.35
|
$
|
24.78
|
Silver Segment
Consolidated
|
$
|
5.47
|
$
|
4.41
|
$
|
8.80
|
$
|
12.76
|
Shahuindo
|
$
|
552
|
$
|
—
|
$
|
775
|
$
|
—
|
La Arena
|
$
|
738
|
$
|
—
|
$
|
988
|
$
|
—
|
Timmins
|
$
|
922
|
$
|
—
|
$
|
1,026
|
$
|
—
|
Gold Segment
Consolidated(4)
|
$
|
729
|
$
|
—
|
$
|
920
|
$
|
—
|
Consolidated
metrics per silver ounce sold(5):
|
|
|
|
|
All
Operations
|
$
|
(8.66)
|
$
|
4.41
|
$
|
(0.11)
|
$
|
13.93
|
All Operations
before NRV inventory adjustments
|
$
|
(8.66)
|
$
|
4.41
|
$
|
1.07
|
$
|
10.25
|
|
|
(1)
|
Cash Costs and AISC
are non-GAAP measures. Please refer to the section "Alternative
Performance (Non-GAAP) Measures" of the MD&A for the period
ended September 30, 2019 for a detailed description of these
measures and where appropriate a reconciliation of the measures to
the Q3 2019 Financial Statements.
|
(2)
|
Silver Segment Cash
Costs are calculated based on Cash Costs, net of by-product
credits, divided by per ounce of silver sold; therefore, they are
different from previously reported Q3 2018 "Cash Costs", which were
calculated based on Cash Costs net of by-product credits divided by
payable silver ounces produced. The Q3 2018 Cash Costs per
ounce sold included in the table above have been calculated and
presented as comparative amounts to conform to the methodology used
by the Company to calculate the Q3 2019 Cash Costs per ounce
sold.
|
(3)
|
2018 AISC per ounce
sold in the table above have been calculated and presented as
comparative amounts to conform to the methodology used by the
Company to calculate the 2019 AISC per ounce sold. The change in
methodology relates to the sustaining capital calculation to
account for the adoption of IFRS 16, with sustaining capital now
including lease payments. Previously, leased assets were included
as sustaining capital in the period of acquisition, while future
related lease payments were excluded.
|
(4)
|
Gold Segment Cash
Costs and AISC are calculated net of credits for realized silver
revenues divided by per ounce of gold sold.
|
(5)
|
Consolidated silver
basis total is calculated per silver ounce sold with total gold
revenues included within by-product credits. G&A costs are
included in the consolidated AISC, but are not allocated in
calculating AISC for each operation.
|
2019 GUIDANCE
The following table provides management's guidance for 2019, as
at November 6, 2019. Relative
to the guidance provided on August 7,
2019, management has reduced its estimates for Cash Costs
and AISC, based on actual Cash Costs and AISC for the nine months
ended September 30, 2019 ("YTD 2019"), an increased gold price
assumption and the expected results for the remainder of 2019.
The production estimates for 2019 reflect a full year of
production for the Silver Segment mines and from February 22, 2019, to December 31, 2019, for the Gold Segment
mines.
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.
|
Silver
Production
(million ounces)
|
Gold
Production
(thousand
ounces)
|
Cash
Costs
($ per
ounce)(1)
|
AISC ($ per
ounce)(1)
|
|
|
|
|
|
Silver
Segment(2)
|
25.2 -
26.2
|
140.5 -
152.5
|
6.00 -
7.00
|
9.50 -
11.00
|
Gold
Segment(2)
|
0.1
|
409.5 -
447.5
|
725 - 775
|
1,000 -
1,100
|
Consolidated
Silver Basis(2)(3)
|
25.3 -
26.3
|
550.0 -
600.0
|
(5.50) -
(3.80)
|
6.00 -
7.50
|
|
|
(1)
|
Cash Costs and AISC
are non-GAAP measures. Please refer to the section "Alternative
Performance (Non-GAAP) Measures" of the MD&A for the period
ended September 30, 2019, for a detailed description of these
measures and where appropriate a reconciliation of the measure to
the Q3 2019 Financial Statements. The Cash Costs and AISC guidance
assume realized metal prices for YTD 2019 and the following metal
prices for the remainder of 2019 of $17.25/oz for silver,
$2,400/tonne ($1.09/lb) for zinc, $2,150/tonne ($0.98/lb) for lead,
$5,750/tonne ($2.61/lb) for copper, and $1,475/oz for gold; and
average annual exchange rates relative to 1 USD of 19.50 for the
Mexican peso ("MXN"), 3.33 of the Peruvian sol ("PEN"), 41.80 for
the Argentine peso ("ARS"), 6.91 for the Bolivian boliviano
("BOL"), and $1.30 for the Canadian dollar ("CAD").
|
(2)
|
As shown in the
detailed quantification of consolidated AISC, included in the
"Alternative Performance (Non-GAAP) Measures" section of the
MD&A for the period ended September 30, 2019, corporate G&A
costs, and exploration and project development expenses are
included in Consolidated Silver Basis AISC, but are not allocated
in calculating AISC for the Silver and Gold Segments.
|
(3)
|
Totals may not add
due to rounding.
|
Management's guidance for zinc, lead and copper production
remains unchanged, as provided in the following table.
|
Consolidated Base
Metal Production
|
|
(tonnes
'000s)
|
Zinc
|
65.0 -
67.0
|
Lead
|
24.0 -
25.0
|
Copper
|
9.8 - 10.3
|
Capital Expenditures
The following table summarizes
capital expenditures YTD 2019 compared to guidance. Due to the
delay in development of the COSE and Joaquin projects, on
August 7, 2019, Management increased
its estimate for project capital from $40
million to $45 million.
(in millions of
USD)
|
YTD 2019
Actual
|
2019
Guidance
|
Sustaining
Capital
|
132.9
|
203.0 -
213.0
|
Project
Capital
|
35.1
|
45.0
|
Total
Capital
|
168.0
|
248.0 -
258.0
|
Third Quarter 2019 Unaudited Results Conference Call and
Webcast
Date:
|
November 7,
2019
|
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 Silver is the world's second largest primary silver
producer, providing enhanced exposure to silver through a
diversified portfolio of assets, large reserves and growing
production. We own and operate mines in Mexico, Peru,
Canada, Argentina and Bolivia. In addition, we own the Escobal mine
in Guatemala that is currently not
operating. In 2019, we celebrate our silver anniversary: 25 years
of operating in Latin America,
earning an industry-leading reputation for operational excellence
and corporate social responsibility. We are headquartered in
Vancouver, B.C. and our shares
trade on NASDAQ and the Toronto Stock Exchange under the symbol
"PAAS".
Learn more at panamericansilver.com.
For more information contact:
Siren Fisekci
VP, Investor Relations & Corporate Communications
Ph: 604-806-3191
Email: ir@panamericansilver.com
Technical Information
Scientific and technical
information contained in this news release have been reviewed and
approved by Martin Wafforn, P.Eng., Senior Vice President Technical
Services and Processing Optimization, and Christopher Emerson, FAusIMM, Vice President
Business Development and Geology, each of whom are Qualified
Persons, as the term is defined in Canadian National Instrument
43-101 - Standards of Disclosure of Mineral Projects ("NI
43-101").
For more detailed information regarding the Company's material
mineral properties as at December 31,
2018, and technical information related thereto, including a
complete list of current technical reports applicable to such
properties, please refer to the Company's Annual Information Form
dated March 12, 2019, filed at
www.sedar.com or the Company's most recent Form 40-F filed with the
SEC.
Alternative Performance (Non-GAAP) Measures
In this news 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. 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.
- Adjusted earnings and basic adjusted earnings per share. The
Company believes that these measures better reflect normalized
earnings as they eliminate items that in management's judgment are
subject to volatility as a result of factors, which are unrelated
to operations in the period, and/or relate to items that will
settle in future periods.
- All-in Sustaining Costs per silver or gold ounce sold, net of
by-product credits ("AISC"). The Company has adopted AISC 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.
- Total debt is calculated as the total current and non-current
portions of: long-term debt, finance lease liabilities and loans
payable. Total debt does not have any standardized meaning
prescribed by GAAP and is therefore unlikely to be comparable to
similar measures presented by other companies. The Company and
certain investors use this information to evaluate the financial
debt leverage of the Company.
- Working capital is calculated as current assets less current
liabilities. Working capital does not have any standardized meaning
prescribed by GAAP and is therefore unlikely to be comparable to
similar measures presented by other companies. The Company and
certain investors use this information to evaluate whether the
Company is able to meet its current obligations using its current
assets.
Readers should refer to the "Alternative Performance (non-GAAP)
Measures" section of the Company's Management's Discussion and
Analysis for the period ended September 30, 2019, 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 2019, our estimated Cash Costs and AISC in 2019; the ability of
the Company to successfully complete any capital projects, the
expected economic or operational results derived from those
projects, and the impacts of any such projects on the Company; the
approval or the amount of any future cash dividends; the future
results of exploration activities, including with respect to the
skarn exploration program at La
Colorada; and our portfolio growth profile.
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: our
ability to realize the anticipated benefits and opportunities as a
result of the acquisition of Tahoe; 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 resource 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; our
ability to secure and maintain title and ownership to properties
and the surface rights necessary for our operations; 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 PEN, MXN, ARS, BOL, GTQ and CAD
versus the USD); 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; changes in national and local government, legislation,
taxation, controls or regulations and political, legal or economic
developments in Canada,
the United States, Mexico, Peru,
Argentina, Bolivia, Guatemala or other countries where the Company
may carry on business, including legal restrictions relating to
mining, including in Chubut, Argentina, risks relating to expropriation,
and risks relating to the constitutional court-mandated ILO 169
consultation process in Guatemala;
risks of liability relating to our past sale of the Quiruvilca mine
in Peru; 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, as well as those factors
identified in the section entitled "Risk Factors" in the Company's
management information circular dated December 4, 2018 with respect to the
Arrangement, each 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.
View original
content:http://www.prnewswire.com/news-releases/pan-american-silver-reports-earnings-per-share-of-0-18-for-the-third-quarter-of-2019--300953295.html
SOURCE Pan American Silver Corp.