Pan American Silver Announces Preliminary 2019 Production Results and 2020 Operating Guidance
Pan American Silver Announces Preliminary 2019 Production Results
and 2020 Operating Guidance
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 Pan American. 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.
VANCOUVER
,
Jan. 15, 2020
/CNW/ -
Pan American Silver Corp.
(NASDAQ: PAAS) (TSX: PAAS) ("Pan American") today announced preliminary
production results for the fourth quarter ("Q4 2019") and full year 2019 ("FY 2019"). Pan American today also provided its guidance for production, costs and
expenditures in 2020.
"2019 was a transformative year for Pan American and one of the most important in our 25-year history. We completed the Tahoe transaction and
successfully integrated the new assets into our portfolio, capturing
$25
to
$30 million
in annual G&A synergies. Pan American is now a much larger, stronger
and more profitable company," said
Michael Steinmann
, President and Chief Executive Officer of Pan American. "Robust cash flow generation allowed us to
repay a further
$40 million
to our line of credit in Q4 2019, continuing the rapid deleveraging of our balance sheet post closing of the Tahoe transaction. In
addition, we advanced our skarn discovery at
La Colorada
and published an initial resource estimate of 72.5 million tonnes of polymetallic mineralization. In
2020, Pan American is well positioned for strong, low cost production. Combined with current metal prices, that should result in a rewarding year for our
shareholders."
Preliminary 2019 Production Results
Production in 2019 reflects a full year of production for the Silver Segment mines and from
February 22, 2019
to
December 31, 2019
for the Gold Segment
mines.
Figures are preliminary and subject to final adjustment. The final figures will be provided in Pan American's financial results for the fourth quarter and year
ended
December 31, 2019
. Pan American plans to release its unaudited financial results for Q4 and FY 2019 after market close on
February 19, 2020
.
Silver Production
(ounces '000s)
Gold Production
(ounces '000s)
Q4 2019
FY 2019
Q4 2019
FY 2019
Silver Segment:
La Colorada
2,080
8,206
1.3
4.6
Dolores
1,287
5,122
26.1
117.6
Huaron
935
3,796
0.2
1.0
Morococha
(1)
554
2,456
0.2
1.4
San Vicente
(2)
877
3,528
0.1
0.5
Manantial Espejo/COSE/Joaquin
817
2,599
6.7
22.4
Gold Segment:
Shahuindo
(3)
54
137
43.5
145.4
La Arena
(3)
11
26
48.4
122.5
Timmins
(3)
6
18
47.3
143.8
Total
(4)
6,622
25,886
173.9
559.2
(1)
Morococha data represents Pan American's 92.3% interest in the mine's production.
(2)
San Vicente data represents Pan American's 95.0% interest in the mine's production.
(3)
Reflects production results subsequent to the February 22, 2019, closing date of the acquisition of Tahoe Resources Inc., as described in the "Acquisition of Tahoe" section of Pan American's management's discussion and analysis ("MD&A") for the period ended September
30, 2019.
(4)
Totals may not add due to rounding.
Consolidated Base Metal Production (tonnes '000s)
Q4 2019
FY 2019
Zinc
16.6
67.6
Lead
7.2
27.3
Copper
2.3
8.7
2019 Highlights:
Silver production of 25.9 million ounces was in line with the revised guidance
(1)
range of 25.3 million to 26.3 million ounces provided on
August 7, 2019
.
Gold production of 559.2 thousand ounces was in line with the revised guidance
(1)
range of 550 thousand to 600 thousand ounces provided on
August 7,
2019
.
Zinc, lead and copper production was 67.6, 27.3 and 8.7 thousand tonnes, respectively, compared with original guidance provided on
January 21, 2019
,
of 65.0 - 67.0, 24.0 - 25.0 and 9.8 - 10.3 thousand tonnes, respectively.
The
La Colorada
mine achieved an average mining and processing rate of over 2,100 tonnes per day, exceeding the targeted rate of 2,000 tonnes per
day for 2019 and resulting in record annual silver, zinc and lead production. Pan American continues to achieve greater than expected efficiencies from
the mine expansion completed in 2017, which had a design throughput rate of 1,800 tonnes per day.
Pan American achieved several records in operating performance: annual open pit mining rates at
Dolores
; annual mining and processing rates at
La
Colorada
, Huaron, and Morococha; annual zinc and lead plant recovery rates at Morococha, driving record annual zinc production at that mine; and,
annual mining and processing rates at San Vicente, which largely offset an increase in operating costs per tonne due to the mining of narrower ore
bodies than in previous years.
Pan American released an initial inferred mineral resource estimate for the
La Colorada
skarn deposit of 72.5 million tonnes, averaging 44 grams per
tonne silver, 0.17% copper, 2.02% lead and 4.40% zinc, assuming a cut-off value of
$60
per tonne after accounting for transportation, smelting and
refining costs. Please refer to Pan American's news release dated
December 11, 2019
, for further details.
Pan American repaid
$60 million
of debt during 2019, including
$40 million
repaid in Q4 2019. As at
December 31, 2019
, Pan American had
$275 million
drawn under its revolving credit facility and
$238.3 million
in cash and short-term investments.
(1)
Pan American initially provided its guidance for 2019 on January 21, 2019 (the "original guidance"), and subsequently revised the guidance on May 8, 2019, to include certain forecast amounts for the mines acquired from Tahoe Resources Inc. for the period February 22, 2019
to December 31, 2019. Pan American revised its guidance again on August 7, 2019, reducing 2019 annual consolidated silver and gold production to between 25.3 and 26.3 million ounces and between 550.0 and 600.0 thousand ounces, respectively, primarily due to the
postponement of commercial production from the COSE and Joaquin project.
2020 GUIDANCE
The estimates below are forward-looking in nature. Please refer to the cautionary note at the end of this news release. Management may revise guidance
during the year to reflect actual and anticipated results.
Silver Production
Gold Production
Cash Costs
AISC
(million ounces)
(thousand ounces)
($ per ounce)
(1)
($ per ounce)
(1)
Silver Segment:
La Colorada
8.5 - 8.7
4.0 -5.0
3.00 - 4.00
5.50 - 6.50
Dolores
4.5 - 5.0
133.5 - 143.5
(8.50) - (5.50)
4.25 - 6.25
Huaron
3.8 - 3.9
0.5
9.25 - 11.00
12.50 - 14.25
Morococha (92.3%)
(2)
2.6 - 2.8
1.3 - 1.5
9.50 - 11.75
13.50 - 15.50
San Vicente (95.0%)
(3)
3.5 -3.6
0.5
14.00 - 15.00
16.00 - 17.00
Manantial Espejo/COSE/Joaquin
4.0 - 4.3
33.2 - 36.5
16.75 - 17.75
18.50 - 19.50
Total
(4,5)
26.8 - 28.3
173.0 - 187.5
5.75 - 7.50
10.25 - 11.75
Gold Segment:
Shahuindo
0.2
162.0 - 172.5
700 - 750
1,070 - 1,150
La Arena
—
125.0 - 135.0
800 - 850
1,120 - 1,200
Timmins
—
165.0 - 180.0
950 - 1,000
1,090 - 1,170
Total
(4,5)
0.2
452.0 - 487.5
820 - 870
1,090 - 1,170
Total Production
(4,5)
27.0 - 28.5
625.0 - 675.0
Consolidated Silver Basis
n/a
(6)
4.50 - 6.50
(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. The Cash Costs and AISC forecasts assume average metal prices of $17.50/oz for
silver, $1,525/oz for gold, $2,350/tonne ($1.07/lb) for zinc, $2,000/tonne ($0.91/lb) for lead, and 6,150/tonne ($2.79/lb) for copper; and average annual exchange rates relative to 1 USD of 19.50 for the Mexican peso ("MXN"), 3.34 of the Peruvian sol ("PEN"), 73.64 for the
Argentine peso ("ARS"), 6.91 for the Bolivian boliviano ("BOL"), and $1.30 for the Canadian dollar ("CAD").
(2)
Morococha data represents Pan American's 92.3% interest in the mine's production.
(3)
San Vicente data represents Pan American's 95.0% interest in the mine's production.
(4)
As shown in the detailed quantification of consolidated AISC, included in the "Alternative Performance (Non-GAAP) Measures" section of the MD&A for the period ended September 30, 2019, corporate general and administrative costs, and exploration and project development
expenses are included in Consolidated Silver Basis AISC, but are not allocated in calculating AISC for the Silver and Gold Segments.
(5)
Totals may not add due to rounding.
(6)
Pan American will no longer be providing guidance for Cash Costs on a Consolidated Silver Basis, determining that AISC guidance is a more appropriate measure of reflecting costs on a Consolidated Silver Basis.
Expenditures ($ millions)
Sustaining Capital
La Colorada
15.5 - 16.5
Dolores
55.0 - 58.0
Huaron
9.0 - 10.0
Morococha
7.5 - 9.0
San Vicente
6.0 - 7.0
Manantial Espejo/COSE/Joaquin
4.0 - 5.5
Shahuindo
63.0 - 65.0
La Arena
42.0 - 44.0
Timmins
23.0 - 25.0
Sustaining Capital Sub-total
225.0 - 240.0
Project Capital
22.0 - 27.0
Total Capital
247.0 - 262.0
Care & Maintenance
Escobal
19.0 - 20.0
Navidad
2.5 - 3.0
Greenfield Exploration
(1)
11.5 - 12.5
Corporate General & Administrative
(2)
35.0 - 37.0
(1)
Regional exploration focused on early-stage projects, and excludes brownfield exploration for reserve replacement, which is included in Sustaining Capital.
(2)
Includes stock-based compensation.
2020 Guidance Highlights:
Project capital expenditures relate mostly to: (1) the drilling program, early stage engineering and metallurgical testing for the
La Colorada
skarn
discovery; and (2) an approximate 20% expansion of the Bell Creek mine in
Timmins
, with the purchase of additional mine equipment and
debottlenecking of the plant to optimize improved efficiencies resulting from the commissioning of the Bell Creek shaft in
February 2019
. Pan American is
also focused on capturing additional debottlenecking opportunities at Shahuindo and
La Colorada
.
Pre-production underground development at both the COSE and Joaquin mines progressed during 2019 along with the purchase of the necessary mining
equipment and the completion of the infrastructure and facilities. Both mines will enter the production phase in early 2020, with no further project capital
spending anticipated.
Sustaining capital expenditures include: (1) completion of the substantial heap leach pad expansions at
Dolores
and Shahuindo, (2) work on the waste
rock storage facilities at
La Arena
and Shahuindo, (3) expansion of tailings storage facilities at
La Colorada
and
Timmins
, (4) advancing open pit mine
waste pre-stripping activities at
Dolores
and
La Arena
; and (5) underground mine development at Huaron and Morococha.
Exploration expenditures total
$37.5
to
$39.5 million
, comprised of: (1)
$18.5 million
to
$19.5 million
for 186,000 metres of near-mine brownfield
exploration drilling for reserve replacement, which is included in sustaining capital, (2)
$11.5
to
$12.5 million
in regional, greenfield exploration in
Peru
,
Mexico
and
Canada
; and (3)
$7.5 million
for 44,000 metres of drilling on the
La Colorada
skarn discovery, which is included in project capital.
Retirement of Board Member
The Company announces that
Kevin McArthur
has decided not to stand for re-election as a director at Pan American's 2020 Annual General Meeting on
May
6, 2020
. Mr. McArthur was appointed director following Pan American's acquisition of Tahoe Resources Inc. in
February 2019
. We thank Kevin for his
contributions to the Board, and in particular, for his contributions during our successful integration of Tahoe.
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 Pan American's Qualified Person for the purposes of National Instrument 43-101. For
additional information about Pan American's material mineral properties, please refer to Pan American's Annual Information Form dated
March 12, 2019
,
filed at
www.sedar.com
, or Pan American's most recent Form 40-F furnished to the SEC.
Q4 and Full Year 2019 Unaudited Results
Pan American plans to release its unaudited financial results for Q4 and FY 2019 after market close on
February 19, 2020
.
Conference Call and Webcast
Date:
February 20, 2020
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 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. Pan American Silver has a 25-year history 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
.
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 do not have a standardized meaning prescribed by IFRS as an indicator of performance. Pan American's method of calculating cash costs
may differ from the methods used by other entities and, accordingly, Pan American'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. Silver segment Cash Costs are calculated net of credits
for realized revenues from all metals other than silver, and are calculated per ounce of silver sold. Gold segment Cash Costs are calculated net of
credits for realized silver revenues, and are calculated per ounce of gold sold.
Silver segment all-in sustaining costs ("AISC") are calculated net of credits for realized revenues from all metals other than silver, and are calculated per
ounce of silver sold. Gold segment AISC are calculated net of credits for realized silver revenues, and are calculated per ounce of gold sold.
Consolidated AISC is based on total silver ounces sold net of by-product credits from all metals other than silver. Pan American has adopted AISC as a
measure of its consolidated operating performance and its ability to generate cash from all operations collectively, and Pan American 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 Pan American's consolidated earnings and cash flow.
Readers should refer to the "Alternative Performance (non-GAAP) Measures" section of Pan American'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, 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; our 2020 forecast production
of silver, gold and other metals, and our estimated Cash Costs and AISC in 2020; the anticipated timing and commencement of commercial production at
COSE and Joaquin, as well as the impact on production anticipated for 2020; our expectations with respect to future metal prices and exchange rates; the
anticipated capital expenditures and the timing thereof and the results of any future exploration, development or expansion programs, including but not limited
to the
La Colorada
skarn discovery, expansion of the Bell Creek mine in
Timmins
, and the debottlenecking projects at Shahuindo and
La Colorada
.
These forward-looking statements and information reflect Pan American's current views with respect to future events and are necessarily based upon a
number of assumptions that, while considered reasonable by Pan American, are inherently subject to significant operational, business, economic and
regulatory uncertainties and contingencies, and such uncertainty generally increases with longer-term forecasts and outlook. 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; Pan American's
development projects are completed and perform in accordance with current expectations; currency exchange rates remaining as estimated; availability of
funds for Pan American's projects and future cash requirements; 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; no unplanned delays or interruptions in scheduled development and production; all necessary permits, licenses and regulatory
approvals 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.
Pan American 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 Pan American has made assumptions and estimates based on or related to many of these factors. Such factors include, without
limitation: fluctuations in silver and gold 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 Pan American 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, 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 Pan American may carry on business, including legal
restrictions relating to mining, such as those in Chubut,
Argentina
, and the constitutional court-mandated ILO 169 consultation process in
Guatemala
; risks
relating to expropriation; risk 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 Pan American'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 Pan American 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.
Pan American 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.
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SOURCE
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For further information:
Siren Fisekci, VP, Investor Relations & Corporate Communications, Ph: 604-806-3191, Email: [email protected]
CO: Pan American Silver Corp.
CNW 07:00e 15-JAN-20