(All amounts in US$ unless otherwise indicated.
Financial information is based on International Financial Reporting
Standards ("IFRS"). Results are unaudited.)
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" contained in this news
release.
VANCOUVER, May 11, 2016 /PRNewswire/ - Pan American
Silver Corp. (NASDAQ: PAAS; TSX: PAA) ("Pan American", or the
"Company") today reported unaudited results for the three months
ended March 31, 2016.
Strategic Achievements First Quarter ("Q1") 2016 vs Q1
2015
Operating and Financial
- Increased silver production 6% to 6.42 million
ounces
- Increased gold production 10% to 41,200
ounces
- Reduced consolidated cash costs(1) 31% to $8.03 per payable ounce of silver, net of
by-product credits
- Reduced consolidated All-In Sustaining Costs per Silver Ounce
Sold(2) ("AISCSOS") 8% to $13.12, net
of by-product credits
- Generated $1.9 million in net
earnings, compared to a loss of $19.8
million
- Adjusted earnings(3) were $3.5
million ($0.02 per share),
compared to an adjusted loss(3) of $19.9
million ($0.13 per
share)
- Increased operating cash flows before working capital changes
to $28.4 million, or $0.19 per share, from $7.4
million, or $0.05 per
share
Project Development
- La Colorada expansion – project remains on budget and on
schedule for the planned production increase to 1,800 tonnes
per day by the end of 2017
- Dolores expansion – project remains on budget and on schedule
for the pulp agglomeration plant and underground operations to
reach full design capacity by the end of 2017
(1)
|
Cash cost per payable
ounce of silver, net of by-product credits ("cash costs") is not a
generally accepted accounting principle (a "non-GAAP") measure.
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. Readers should refer to the "Alternative Performance
(non-GAAP) Measures" section of the Company's management's
discussion and analysis for the three months ended March 31, 2016
(the "Q1 2016 MD&A") for a more detailed discussion of this
measure and its calculation.
|
(2)
|
All-In Sustaining
Costs per Silver Ounce Sold ("AISCSOS") is a non-GAAP measure. 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. AISCSOS does not
have a standardized meaning prescribed by GAAP, and readers should
refer to the "Alternative Performance (non-GAAP) Measures" section
of the Q1 2016 MD&A for a more detailed discussion of this
measure and its calculation.
|
(3)
|
Adjusted earnings
(loss), and adjusted earnings (loss) per share, are non-GAAP
measure that the Company considers to better reflect normalized
earnings as it eliminates items that may be volatile from period to
period relating to positions that will settle in future periods,
and items that are non-recurring. Readers should refer to the
"Alternative Performance (non-GAAP) Measures" section of the Q1
2016 MD&A for a more detailed discussion of these measures and
their calculation.
|
Michael Steinmann, President and
Chief Executive Officer of the Company commented on the first
quarter 2016 results, "We are off to a very good start in 2016,
delivering robust production and a respectable financial
performance. We produced more silver, gold and base metals as
compared to the same quarter of last year, significantly reduced
our costs, generated adjusted earnings of $0.02 per share and cash flow from operations of
$28.4 million (before changes in
working capital). These results were achieved in spite of lower
prices on our silver and gold sales than in Q1 2015, which trimmed
our revenue by nearly $20 million."
Steinmann continued, "Our two expansion projects at La Colorada and
Dolores are advancing on schedule and on budget, funded completely
by our strong balance sheet, as we progress steadily towards
becoming an even lower cost producer".
Consolidated Financial Results
|
Three months
ended
March
31,
|
(Unaudited in
thousands of U.S. Dollars,
except per share and per ounce figures)
|
|
2016
|
|
2015
|
Revenue
|
$
|
158,275
|
$
|
178,125
|
Mine operating
earnings
|
$
|
16,698
|
$
|
2,630
|
Net earnings (loss)
for the period
|
$
|
1,875
|
$
|
(19,785)
|
Adjusted earnings
(loss) for the period(1)
|
$
|
3,455
|
$
|
(19,907)
|
Operating cash flow
excluding changes in
non-cash working capital
|
$
|
28,371
|
$
|
7,424
|
All-in sustaining
cost per silver ounce sold(2)
|
$
|
13.12
|
$
|
14.24
|
Net earnings (loss)
per share attributable to
common shareholders (basic)
|
$
|
0.01
|
$
|
(0.13)
|
Adjusted earnings
(loss) per share
attributable to common shareholders (basic)
|
$
|
0.02
|
$
|
(0.13)
|
Operating cash flow
excluding changes in
non-cash working capital per share
|
$
|
0.19
|
$
|
0.05
|
|
|
(1)
|
Adjusted earnings
(loss), and adjusted earnings (loss) per share, are non-GAAP
measures that the Company considers to better reflect normalized
earnings as it eliminates items that may be volatile from period to
period relating to positions that will settle in future periods,
and items that are non-recurring. Readers should refer to the
"Alternative Performance (non-GAAP) Measures" section of the Q1
2016 MD&A for a more detailed discussion of these measures and
their calculation.
|
(2)
|
AISCSOS is a non-GAAP
measure and does not have a standardized meaning prescribed by
GAAP. Readers should refer to the "Alternative Performance
(non-GAAP) Measures" section of the Q1 2016 MD&A for a more
detailed discussion of this measure and its calculation.
|
First Quarter Consolidated Financial Results – Q1 2016 vs. Q1
2015
Pan American's Q1 2016 revenue declined 11% from Q1 2015 largely
on account of lower metal prices, and to a lesser extent, due to
lower quantities of metals sold. Higher treatment and refining
charges during Q1 2016 were offset by positive settlement
adjustments on previously shipped concentrates.
During Q1 2016, Pan American realized average prices of
$14.86 per ounce of silver and
$1,177 per ounce of gold, 10% and 4%
lower than in Q1 2015, respectively. The prices realized for zinc
and copper declined 17% and 13% from Q1 2015, respectively, while
realized lead prices were 5% higher.
Net earnings of $1.9 million
during Q1 2016 rose by $21.7 million
from the net loss of $19.8 million
that was incurred in Q1 2015. The improvement in earnings was due
to a significant reduction in production costs, particularly at La
Colorada, Alamo Dorado, Manantial Espejo and Morococha, as well as
lower depreciation and amortization charges, partially offset by
lower revenue.
Adjusted earnings for Q1 2016 were $3.4
million, or $0.02 per share,
representing a $23.4 million increase
compared to the adjusted loss reported in Q1 2015. Adjusting items
in Q1 2016 included net realizable value changes, unrealized gains
and losses on commodity contracts and foreign exchange.
Net cash generated from operating activities, before changes in
working capital during Q1 2016, was $28.4
million, $20.9 million more
than in Q1 2015. The improvement in operating cash flows was driven
by lower cash production costs, and declines in income taxes and
interest paid, partially offset by lower revenues.
Consolidated AISCSOS during Q1 2016 declined 8%, or $1.12, from Q1 2015 to $13.12 per ounce. The decline was directly
attributable to the lower production costs previously mentioned,
partially offset by lower by-product credits and higher sustaining
capital costs. The increase in sustaining capital was primarily at
the Dolores mine, where the Company is investing in a significant
leach pad expansion.
During Q1 2016, Pan American paid $1.9
million in cash dividends to its shareholders and made
repayments of $2.0 million on its
short-term debt and lease obligations. Total debt at the end of Q1
2016 was $59.5 million.
At March 31, 2016, Pan American
had $177.6 million in cash and short
term investments and $383.7 million
in working capital.
Consolidated Operational Results – Q1 2016 vs. Q1
2015
|
Q1 2016
Production
|
Q1 2015
Production
|
|
Ag
(Moz)
|
Au
(koz)
|
Cash
Costs(1) $
|
Ag
(Moz)
|
Au
(koz)
|
Cash
Costs (1) $
|
La
Colorada
|
1.37
|
0.7
|
6.34
|
1.26
|
0.6
|
7.75
|
Dolores
|
1.07
|
21.4
|
6.10
|
0.99
|
18.2
|
8.79
|
Alamo
Dorado
|
0.56
|
3.3
|
11.85
|
0.69
|
3.1
|
15.98
|
Huaron
|
0.95
|
0.2
|
7.95
|
0.90
|
0.3
|
11.87
|
Morococha
|
0.70
|
0.7
|
5.24
|
0.52
|
0.6
|
17.11
|
San
Vicente
|
1.09
|
n/a
|
11.84
|
0.97
|
n/a
|
12.57
|
Manantial
Espejo
|
0.68
|
14.9
|
8.13
|
0.75
|
14.7
|
13.75
|
TOTAL
(2)
|
6.42
|
41.2
|
8.03
|
6.08
|
37.5
|
11.71
|
|
|
(1)
|
Average by-product
metal prices for Q1 2016 were Au $1,183/oz, Zn $1,679/tonne, Pb
$1,744/tonne, and Cu $4,672/tonne. Cash costs is a non-GAAP measure
and cash costs does not have a standardized meaning prescribed by
IFRS as an indicator of performance. Readers should refer to
the "Alternative Performance (non-GAAP) Measures" section of the Q1
2016 MD&A for a more detailed discussion of this measure and
its calculation.
|
(2)
|
Totals may not add up
due to rounding.
|
Silver production in Q1 2016 rose 6% from Q1 2015 on account of
increased production at all of the Company's operations, with the
exception of Alamo Dorado where previously stockpiled material is
now being processed following the completion of open pit mining
activities, and Manantial Espejo due to harder ore encountered in
the Concepcion open pit.
Gold production during Q1 2016 rose 10% from Q1 2015, driven
mainly by increased production at Dolores, and more ounces produced
at Alamo Dorado as the mill processed higher gold grade ore from
the stockpiles.
Cash costs in Q1 2016 were 31% lower than in Q1 2015 as a result
of lower operating costs per ounce at all mines, as well as
increased by-product metals production, partially offset by lower
by-product metals prices.
During Q1 2016, the Company produced 12,800 tonnes of zinc,
4,800 tonnes of lead, and 3,900 tonnes of copper, 38%, 37% and 26%
more than in Q1 2015, respectively. Base metals production
increased primarily due to higher grades and increased recoveries
at the Company's Peruvian operations.
Sustaining Capital and Project Development – Q1 2016 vs. Q1
2015
During Q1 2016, Pan American spent $22.9
million in sustaining capital at its operating mines, an
increase of 39% from the sustaining capital spent during Q1 2015.
The increase was primarily due to higher capital spending at
Dolores for the expansion of the heap leach pad and at La Colorada
for mining equipment, exploration drilling, road upgrades and the
expansion of the tailings storage facility.
Pan American invested a total of $22.5
million in long term project capital in Q1 2016,
$9.9 million more than in Q1 2015. At
La Colorada, the Company spent over $12.7
million during Q1 2016 to advance the new sulphide
processing plant to approximately 85% completion and the new shaft
to approximately 65% completion. The expansion project is
progressing on budget and on schedule for the mine to reach the new
increased production rate of 1,800 tonnes per day by the end of
2017.
At Dolores, Pan American invested $9.7
million during Q1 2016. The new high voltage power line to
the site was approximately 90% complete by the end of Q1 and the
underground ramp advanced as planned. The Company anticipates that
construction of the new pulp agglomeration plant will start in Q2
2016. The Dolores expansion project is advancing on budget and on
schedule for the pulp agglomeration plant to start operations in
mid-2017, and for the underground mine operation to reach its
design capacity of 1,500 tonnes per day by the end of 2017.
Current and Future Dividends
Today, the Board of Directors approved a quarterly cash dividend
in the amount of $0.0125 per common
share. The cash dividend will be payable on or about Monday, June 6, 2016, to holders of record of
common shares as of the close on Tuesday,
May 24, 2016. 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.
Subsequent Events
On April 18, 2016, Pan American
and MacMillan Minerals Inc. jointly announced they had reached
agreement to launch Maverix Metals Inc. as a new publicly traded
royalty and streaming company by way of a reverse take-over
transaction. Maverix will consolidate and expose to market
valuation, a portfolio of 13 precious metals royalties and streams,
previously widely dispersed and largely unappreciated within Pan
American's asset base. When the transaction is completed, Pan
American will hold a 54% (63% fully diluted) majority ownership
position in Maverix and therefore retain meaningful upside exposure
and leverage to these assets and to Maverix's ability to grow and
diversify the portfolio.
Pan American (Peru) S.A.C.
("PAS Peru"), a wholly-owned subsidiary of Pan American Silver, has
completed the sale of 75% of the shares in Compania Minera
Shalipayco S.A.C. ("Shalipayco") to Votorantim Metais –
Cajamarquilla S.A. ("Votorantim") for $15
million in cash and a one percent (1%) net smelter returns
royalty. Votorantim will also provide PAS Peru with a free carry of
its remaining 25% ownership interest to commercial production.
Shalipayco is the owner of the large Shalipayco zinc development
project located in the departments of Pasco and Junin, Peru. The project consists of 49 mining
concessions covering an area of 21,000 hectares. Pan American
Silver and Votorantim initially entered an exploration and purchase
option agreement for this base metal project in 2006. Votorantim
has informed Pan American Silver that over the last eight years it
has drilled 241 diamond holes for a total of over 88,911 metres on
the project.
2016 Full Year Operational Forecast
Given the previously described operating results, the Company
remains confident that it will achieve its full year 2016
operational forecasts. In 2016, Pan American expects to produce
between 24.0 million and 25.0 million ounces of silver and between
175,000 and 185,000 ounces of gold.
In addition, Pan American's 2016 base metals production is
expected to be between 46,000 and 48,000 tonnes of zinc, 15,000 to
15,500 tonnes of lead and 13,000 to 13,500 tonnes of copper.
Consolidated cash costs for the full year 2016 are expected to
be between $9.45 and $10.45 per ounce
of silver, net of by-product credits, and consolidated AISCSOS are
expected to be between $13.60 and
$14.90, net of by-product credits. The Company has assumed
by-product prices of Au $1,100/oz, Zn
$1,700/tonne, Pb $1,600/tonne and Cu $4,600/tonne in the calculation of the forecast
2016 cash costs and AISCSOS.
Pan American currently intends to spend between $65.0 million and $75.0 million in sustaining
capital at its operating mines in 2016. In addition, the Company
expects to invest between $135.0 million and
$140.0 million in project development at its La Colorada and
Dolores mines.
Please refer to the Company's news release issued on
January 19, 2016, for details of the
Company's production and cash costs forecast by mine.
Technical information contained in this news release with
respect to Pan American has been reviewed and approved by Martin
Wafforn, P.Eng., VP Technical Services, 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.
Pan American will
host a conference call to discuss these results on Thursday, May
12, 2016, at 11:00 am EST (08:00 am PST). To participate in the
conference, please dial toll number 604-638-5340.
A live audio webcast
and PowerPoint presentation will be available at
https://meet.panamericansilver.com/ir/L1QJ3L42. The audio and
PowerPoint webcast will also be available for replay by visiting
the Events page of the Company's website at
www.panamericansilver.com/Investors/Events.
|
About Pan American Silver
Pan American Silver's 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
has seven operating mines in Mexico, Peru,
Argentina and Bolivia. Pan American also owns several
development projects in Mexico,
USA, Peru and Argentina.
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: OUR ESTIMATED PRODUCTION OF SILVER,
GOLD AND OTHER METALS IN 2016; OUR ESTIMATED CASH COSTS AND AISCSOS
PER PAYABLE OUNCE OF SILVER IN 2016; OUR ESTIMATED CAPITAL
INVESTMENTS AND SUSTAINING CAPITAL FOR 2016; 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; AND ANY ANTICIPATED LEVEL OF FINANCIAL AND OPERATIONAL
SUCCESS IN 2016 OR FUTURE YEARS.
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
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 IN OR INTERRUPTIONS IN
SCHEDULED PRODUCTION; ALL NECESSARY PERMITS, LICENCES 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
METALS 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 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; 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
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 AND 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 AND
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.