Pan American Silver Announces Preliminary 2018 Operating Results and Guidance for 2019
Pan American Silver Announces
Preliminary 2018 Operating Results and
Guidance for 2019
VANCOUVER, Jan. 21, 2019 /CNW/ -
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.
Preliminary operating results for 2018 and guidance for 2019 are only for Pan American's operations and do not reflect the pl an
of arrangement (the "Arrangement") whereby Pan American will acquire all of the issued and outstanding common shares of
Tahoe Resources Inc. ("Tahoe"), announced on November 14, 2018. Pan American currently expects the Arrangement to be
completed on or about February 26, 2019.
Pan American Silver Corp. (NASDAQ: PAAS) (TSX: PAAS) ("Pan
American") today announced preliminary operating results for the
fourth quarter and full year 2018, and provided guidance for 2019.
"2018 was a pivotal year for Pan American with low cash costs, strong
cash flow, continued improvements at Morococha and Huaron, and
positive impact to the bottom line from our La Colorada and Dolores
expansions," said Michael Steinmann, President and Chief Executive
Officer of Pan American. "In addition, we made an important skarn
discovery at La Colorada and announced the transformational
acquisition of Tahoe. The acquisition is expected to close at the end of
February, and we are looking forward to updating our forecast for
2019 in the second quarter to include the Tahoe assets."
Consolidated Preliminary 2018 Operating Results
2018 Guidance(1) 2018 Revised
Guidance(2) 2018 Actual Q4 2018
Production
Silver (million ounces) 25.0 - 26.5 no change 24.8 6.1
Gold (thousand ounces) 175.0 - 185.0 no change 178.9 37.2
Zinc (thousand tonnes) 60.0 - 62.0 no change 64.8 18.5
Lead (thousand tonnes) 21.0 - 22.0 no change 22.4 6.3
Copper (thousand tonnes) 12.0 - 12.5 9.0 - 10.4 9.8 2.2
Cash Costs(3) ($/ounce) 3.60 - 4.60 2.80 - 3.80 3.35 6.12
(1) Guidance provided in the Company's news release dated January 11, 2018.
(2) Revised Guidance provided in the Company's news release dated August 8, 2018.
(3) Preliminary Cash Costs per payable ounce of silver, net of by-product credits. Average metal prices for the full 2018 year
were: Ag $15.71/oz, Au $1,268/oz, Zn $2,922/tonne, Pb $2,242/tonne, and Cu $6,523/tonne. Average metal prices for Q4
2018 were: Ag $14.54/oz, Au $1,226/oz, Zn $2,631/tonne, Pb $1,964/tonne, and Cu $6,172/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.
2018 Consolidated Operating Highlights:
• Silver production of 24.8 million ounces was modestly below the
original guidance range provided in January 2018 (the "Original
Guidance") of 25.0 million to 26.5 million ounces, primarily due to
shortfalls at Dolores and San Vicente, partially offset by higher-
than-forecast production at La Colorada and Morococha, both of
which set annual records. At Dolores, above average rainfalls
during the third quarter hampered our ability to make-up open pit
tonnages following the security-related road closures in June,
resulting in a shortfall of tonnes placed on the heap. In addition,
slower cement deliveries due to logistical challenges required
lower solution application and reduced leach rates. At San
Vicente, narrow vein mechanization efforts required additional
operator training, resulting in lower throughput and increased
dilution.
• Gold production of 178.9 thousand ounces was within the
Original Guidance range. An annual record was set for gold
production at Dolores.
• Record zinc and lead production exceeded the Original
Guidance range, with annual zinc production records set at La
Colorada, Morococha and San Vicente. La Colorada also set an
annual record for lead production. Copper production was within
the revised range provided on August 8, 2018 (the "Revised
Guidance").
• Cash costs of $3.35 per ounce of silver were within Revised
Guidance. A record low annual cash cost of $2.02 per ounce
was set at La Colorada.
PRELIMINARY 2018 MINE OPERATING RESULTS
Mine Silver Production
(million ounces)
Gold Production
(thousand ounces) Cash Costs ($/ounce)(1)
La Colorada 7.6 4.4 2.02
Dolores 4.1 136.6 (1.87)
Huaron 3.6 0.8 1.63
Morococha (92.3%)(2) 2.9 2.1 (4.34)
San Vicente (95%)(2) 3.5 0.5 10.12
Manantial Espejo 3.1 34.6 13.91
Total(3) 24.8 178.9 3.35
(1) Cash Costs is a non-GAAP measure. Please refer to the "Alternative Performance (non-GAAP) Measures" section of this
news release for further information on this measure.
(2) Reflects Pan American's ownership in the operation.
(3) Totals may not add up due to rounding.
2019 GUIDANCE
The guidance provided below is Pan American's initial guidance for
2019, and excludes the assets to be acquired under the Arrangement
with Tahoe. We intend to update the guidance to include the Tahoe
assets and allocation of new general and administrative costs
following close of the transaction, which is currently expected to be on
or about February 26, 2019. The timing for providing updated
guidance is currently anticipated to be in the second quarter of 2019.
We may also revise guidance during the year to reflect actual and
anticipated results.
2019 Guidance as at January 21, 2019
Production
Silver (million ounces) 26.5 - 27.5
Gold (thousand ounces) 162.5 - 172.5
Zinc (thousand tonnes) 65.0 - 67.0
Lead (thousand tonnes) 24.0 - 25.0
Copper (thousand tonnes) 9.8 - 10.3
Cash Costs(1)($/ounce) 6.50 - 7.50
AISCSOS(1) ($) 10.80 - 12.30
Sustaining capital ($millions) 85 - 90
Project capital ($millions) 30
Assumptions used to forecast cash costs and AISCSOS for 2019
Metal prices
Silver ($/ounce) 14.50
Gold ($/ounce) 1,250
Zinc ($/tonne) 2,600
Lead ($/tonne) 1,950
Copper ($/tonne) 6,150
Average annual exchange rates relative to 1.00 U.S. dollar
Mexican peso 19.50
Peruvian sol 3.33
Argentine peso 41.80
Bolivian boliviano 6.91
Canadian dollar 1.30
(1) Cash Costs and AISCSOS are non-GAAP measures. Please refer to the "Alternative Performance (non-GAAP)
Measures" section of this news release for further information on these measures.
The 2019 Guidance reflects certain adjustments from the outlook
provided for 2019 in our news release dated January 11, 2018. The
anticipated increase in AISCSOS is mainly due to: lower by-product
base metal prices, higher treatment and refining costs for flotation
concentrates, new export tax payments in Argentina, increased
electricity costs in Mexico, and wage inflation; partially offset by lower
sustaining capital. The anticipated decrease in silver and gold
production is due to a later startup of COSE production related to a
change in the mining method. The modification takes into account the
current ground conditions and directly transfers the existing miner
expertise from the Manantial Espejo operation. The change requires
additional upfront development, which is expected to result in an
approximate six-month delay in commencing production at COSE,
rescheduling some of the ounces originally planned for 2019 into
2020.
2019 GUIDANCE BY MINE
Mine Silver Production
(million ounces)
Gold Production
(thousand ounces) Cash Costs ($/ounce)(1)
La Colorada 8.0 - 8.2 4.1 - 4.8 2.50 - 3.50
Dolores 5.2 - 5.5 114.5 - 120.0 4.50 - 5.50
Huaron 3.6 - 3.7 0.5 6.00 - 7.00
Morococha (92.3%)(2) 2.8 - 2.9 1.2 - 1.5 3.10 - 4.00
San Vicente (95%)(2) 3.5 - 3.7 0.3 10.60 - 11.50
Manantial Espejo 3.4 - 3.6 42.0 - 45.0 17.00 - 18.50
Total(3) 26.5 - 27.5 162.5 - 172.5 6.50 - 7.50
(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.
2019 Guidance Highlights:
Pan American is focused on achieving the following objectives during
2019:
La Colorada
• Sustain throughput rates of slightly above 2,000 tonnes per day,
exceeding original design capacity rates.
• Continue to investigate additional debottlenecking opportunities,
mine mechanizations and infrastructure upgrades, aimed at
maintaining unit costs at 2018 levels despite expected modest
increases in input costs.
• Continue to explore and define the potential of the significant
skarn deposit discovered in 2018.
Dolores
• Accelerate mine pre-stripping rates to overcome the shortfalls
incurred in 2018.
• Establish new waste storage facility to reduce haulage costs.
• Ramp-up underground mining rates to 1,500 tonnes per day.
• Sustain overall throughput rates to the heap leach pad of 20,000
tonnes per day, while maximizing the pulp agglomeration plant
throughput.
• Improve and stabilize cement delivery logistics to support optimal
leach recovery.
Huaron and Morococha
• Maintain steady-state production rates and exploration efforts.
• Continue efforts towards defining additional productivity
enhancements and improve site ancillary facilities and
infrastructure.
• Continue to investigate opportunities to enhance mill
productivities and efficiencies at Morococha while designing for
the eventual relocation of the mill.
San Vicente
• Continue efforts towards gradually enhancing productivities over
the next few years through additional mechanization efforts,
enhanced mine dilution controls and improving site infrastructure
and ancillary facilities.
Manantial Espejo/COSE/Joaquin
• Bring the COSE and Joaquin mine projects on-stream to
supplement the Manantial Espejo underground mine and
stockpile ore, thereby increasing overall production rates over
the next few years. Production from COSE and Joaquin is
expected to commence in the third quarter of 2019 with a life of
mine of approximately 18 months for COSE and approximately
three years for Joaquin.
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 22, 2018, filed at
www.sedar.com.
Q4 and Full Year 2018 Unaudited Results
Pan American plans to release its unaudited financial results for Q4
and full year 2018 on February 20, 2019.
Conference Call and Webcast
Date: February 21, 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: www.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 www.panamericansilver.com. An archive of the
webcast will also be available for three months.
About Pan American Silver
Pan American Silver Corp. 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 six mines in Mexico, Peru, Argentina and Bolivia. Pan
American maintains a strong balance sheet, has an established
management team with proven operating expertise, and is committed
to responsible development. Founded in 1994, the Company is
headquartered in Vancouver, B.C. and our shares trade on NASDAQ
and the Toronto Stock Exchange under the symbol "PAAS".
For more information, visit: www.panamericansilver.com.
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 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, 2018
(the "Q3 2018 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, and may include future-oriented
financial information. 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; the
anticipated timing and announcement of our 2019 forecast and any
further revisions thereto from time to time; the expected timing and
completion of the Arrangement; the anticipated timing and
commencement of production at COSE and Joaquin, as well as the
impact on production anticipated for 2019; our estimated production of
silver, gold and other metals in 2019; our expectations with respect to
future metal prices and exchange rates; our estimated Cash Costs
and AISCSOS in 2019; the expenditures and success related to any