All amounts are expressed in US$ unless otherwise indicated.
Financial information is based on International Financial Reporting
Standards ("IFRS"). Results are unaudited.
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, all-in sustaining
costs per silver ounce sold, and adjusted earnings (losses). Please
refer to the section titled "Alternative Performance (non-GAAP)
Measures" contained in this news release for further information on
these measures.
This news release should be read in conjunction with the
Company's unaudited condensed interim consolidated financial
statements for the three and nine months ended September 30, 2016 and 2015, and related notes
contained therein, and the related management's discussion and
analysis, which have been filed on SEDAR and are available at
www.sedar.com and on the Company's website at
www.panamericansilver.com.
VANCOUVER, Nov. 14, 2016 /PRNewswire/ - Pan American
Silver Corp. (NASDAQ: PAAS; TSX: PAA) ("Pan American", or the
"Company") today reported unaudited results for the third quarter
ended September 30, 2016 ("Q3 2016").
Net earnings were $43.4 million
($0.28 basic earnings per share)
compared with a net loss of $67.5
million ($0.44 basic net loss
per share) recorded in the third quarter of 2015 ("Q3 2015").
"Cash costs of $4.89 per payable
ounce of silver in the third quarter helped generate impressive
mine operating earnings of $88.5
million - almost double the earnings generated last
quarter," said Michael Steinmann,
President and Chief Executive Officer of the Company. "Cash flow
from operations of over $102 million
exceeded our funding requirements for our growth projects,
sustaining capital and dividend, which enabled us to reduce our
modest debt and increase our cash and short term investment
position to over $245 million. With
an exceptionally strong balance sheet, we are well positioned to
take advantage of growth opportunities, both within our suite of
assets and outside our portfolio."
"Operations continue to perform well across all of our mines,
leading us to increase our production outlook and further reduce
our cost estimates for the year. We now expect to produce 25 to
25.7 million ounces of silver in 2016 at a cash cost of
$6.25 to $7.00 per ounce."
Highlights for the three and nine-month periods ended
September 30, 2016:
- Silver production in Q3 2016 was 6.36 million ounces
compared with 6.61 million ounces in Q3 2015. The decrease reflects
anticipated production declines at Alamo Dorado, with the mine
reaching the end of its life, and at Dolores due to lower grades from mine
sequencing. The decreases at these mines were partially offset by
higher silver production at La
Colorada, Morococha and Huaron. For the nine-month period,
silver production totaled 19.11 million ounces in 2016 compared
with 19.34 million ounces in the same period of 2015. Silver
production in 2016 is pacing ahead of plan, and we are now raising
our outlook for silver production in 2016 to 25.0 to 25.7 million
ounces.
- Gold production was 50.4 thousand ounces in the third
quarter of 2016 and 140.0 thousand ounces in the nine-month period
of 2016, in line with guidance.
- Consolidated cash costs dropped 44% to $4.89 per payable ounce of silver in Q3 2016
compared with Q3 2015. For the nine-month period, cash costs were
$6.17 per ounce, down 38% from the
same period of 2015. The reduction in costs reflects increased
by-product credits, export incentives at Manantial Espejo, and
lower direct operating costs. Given cash costs are below the low
end of our guidance, we are reducing the estimate for 2016
consolidated cash costs to between $6.25 and
$7.00 per ounce. This is the second reduction in the outlook
for 2016 cash costs, representing a decline of 33% from original
guidance.
- Consolidated All-In Sustaining Costs per Silver Ounce Sold
("AISCSOS") were $6.34 in Q3
2016, down 61% from Q3 2015. For the nine-month period, AISCSOS was
$10.10, down 33% from the same period
of 2015. The decline in quarter-over-quarter AISCSOS resulted
mainly from: positive net realizable value ("NRV") inventory
adjustments at Manantial Espejo and Dolores, increased by-product credits, export
incentives at Manantial Espejo, and cost reductions at Dolores and Morococha. We are reducing our
estimate for AISCSOS for the second time this year to between
$10.75 and $11.50 per ounce,
representing a total reduction of 22% from original guidance.
- Revenue was $233.6
million, up 47% from Q3 2015, reflecting higher metals
prices and quantities sold, except copper, and positive variances
in settlement adjustments on concentrate shipments. Most
significant was a 34% quarter-over-quarter increase in silver
prices to an average of $19.69 per
ounce in Q3 2016.
- Net cash generated from operating activities was
$102.3 million, up 211% from Q3 2015,
largely due to increased revenues and decreases in production costs
and income taxes paid.
- Net earnings increased to $43.4
million ($0.28 per share)
compared with a net loss of $67.5
million ($0.44 loss per share)
in Q3 2015. The increase reflects higher revenue, lower costs and
no impairment charges in Q3 2016 versus a $28.8 million impairment charge in Q3 2015,
partially offset by higher income taxes.
- Adjusted earnings were $37.0
million ($0.24 basic adjusted
earnings per share) compared with an adjusted net loss of
$9.3 million ($0.06 basic loss per share) in Q3 2015.
- Liquidity position continued to strengthen over Q3 2016,
with a $41.1 million increase in cash
and short-term investments. At September 30,
2016, cash and cash equivalents and short-term investment
balances were $245.3 million, the
working capital position was $434.2
million and total debt outstanding was $47.0 million.
- Capital expenditures totaled $48.5 million in Q3 2016, including project
capital for the Dolores and
La Colorada mine expansions.
- A quarterly cash dividend of $0.0125 per common share, approximately
$1.9 million in aggregate cash
dividends, has been approved by the Board of Directors. The
dividend will be payable on or about Tuesday, December 6, 2016, to holders of record
of Pan American's common shares as of the close on Friday, November 25, 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.
- Unlocked value with the Maverix Metals Inc. transaction
close. During Q3 2016 the Company closed a plan of arrangement
(the "Arrangement") with Maverix Metals Inc. ("Maverix"), which
commenced trading on the TSX Venture Exchange on July 12, 2016, under the stock symbol "MMX".
Pursuant to the Arrangement, Maverix acquired from the Company a
portfolio of royalties, precious metals streams and payment
agreements, that prior to the transaction were essentially unvalued
within the Company's asset portfolio, in exchange for a 54% equity
interest in Maverix (63% fully diluted). The Company recognized a
$6.6 million gain ($0.6 million after tax) during Q3 2016 in
relation to this transaction.
Consolidated Financial Results
|
Three months
ended
September
30,
|
Nine months
ended
September
30,
|
(Unaudited in
thousands of U.S. Dollars,
except as
noted)
|
2016
|
2015
|
2016
|
2015
|
Revenue
|
233,646
|
159,414
|
584,179
|
511,728
|
Mine operating
earnings (loss)
|
88,495
|
(25,996)
|
149,923
|
(24,318)
|
Net earnings (loss)
for the period
|
43,440
|
(67,514)
|
79,541
|
(94,598)
|
Adjusted earnings
(loss) for the period(1)
|
36,961
|
(9,306)
|
60,346
|
(40,451)
|
Net cash generated
from operating activities
|
102,346
|
32,866
|
169,136
|
65,291
|
All-in sustaining
cost per silver ounce sold(1)
|
6.34
|
16.29
|
10.10
|
14.99
|
Net earnings (loss)
per share attributable to
common shareholders
(basic)
|
0.28
|
(0.44)
|
0.51
|
(0.62)
|
Adjusted earnings
(loss) per share attributable to
common shareholders
(basic)(1)
|
0.24
|
(0.06)
|
0.40
|
(0.27)
|
|
|
(1)
|
Adjusted earnings
(loss) and all-in sustaining costs per silver ounce sold are
non-GAAP measures. Please refer to the section titled
"Alternative Performance (non-GAAP) Measures" contained in this
news release for further information on these measures.
|
Consolidated Operational Results
|
Three months ended
September 30, 2016
|
Three months ended
September 30, 2015
|
|
Production
|
Cash
Costs(1)
$
|
Production
|
Cash
Costs(1)
$
|
|
Ag
(Moz)
|
Au
(koz)
|
Ag
(Moz)
|
Au
(koz)
|
La
Colorada
|
1.39
|
0.72
|
6.58
|
1.32
|
0.70
|
6.76
|
Dolores
|
0.90
|
27.14
|
(5.26)
|
1.20
|
22.58
|
8.70
|
Alamo
Dorado
|
0.37
|
1.36
|
18.55
|
0.69
|
6.59
|
9.58
|
Huaron
|
0.97
|
0.20
|
4.92
|
0.88
|
0.20
|
11.51
|
Morococha
|
0.69
|
0.41
|
4.41
|
0.56
|
0.83
|
12.59
|
San
Vicente
|
1.15
|
n/a
|
12.40
|
1.03
|
n/a
|
11.23
|
Manantial
Espejo
|
0.90
|
20.59
|
(1.75)
|
0.93
|
22.72
|
4.16
|
TOTAL
|
6.36
|
50.42
|
4.89
|
6.61
|
53.62
|
8.74
|
|
Nine months ended
September 30, 2016
|
Nine months ended
September 30, 2015
|
|
Production
|
Cash
Costs(1)
$
|
Production
|
Cash
Costs(1)
$
|
|
Ag
(Moz)
|
Au
(koz)
|
Ag
(Moz)
|
Au
(koz)
|
La
Colorada
|
4.13
|
2.07
|
6.86
|
3.90
|
1.98
|
7.45
|
Dolores
|
2.94
|
73.94
|
0.40
|
3.30
|
60.93
|
8.61
|
Alamo
Dorado
|
1.46
|
6.97
|
14.16
|
2.15
|
12.45
|
13.66
|
Huaron
|
2.88
|
0.61
|
6.19
|
2.72
|
0.81
|
10.75
|
Morococha
|
1.96
|
1.70
|
3.83
|
1.64
|
2.45
|
13.04
|
San
Vicente
|
3.38
|
n/a
|
12.18
|
3.04
|
n/a
|
11.73
|
Manantial
Espejo
|
2.36
|
54.68
|
0.87
|
2.60
|
56.86
|
7.66
|
TOTAL
|
19.11
|
139.97
|
6.17
|
19.34
|
135.48
|
9.92
|
Totals may not add up
due to rounding.
|
|
|
(1)
|
Cash costs are a
non-GAAP measure. Please refer to the section titled
"Alternative Performance (non-GAAP) Measures" contained in this
news release for further information on these measures.
|
By-Product Results
Production
|
Three months ended
September 30
|
Nine months ended
September 30
|
|
2016
|
2015
|
2016
|
2015
|
Gold - ounces '000s
("koz")
|
50.4
|
53.6
|
140.0
|
135.5
|
Zinc - tonnes '000s
("kt")
|
13.1
|
10.7
|
38.7
|
29.2
|
Lead - kt
|
5.0
|
3.5
|
14.9
|
10.5
|
Copper -
kt
|
3.2
|
3.6
|
11.4
|
11.0
|
Prices
|
Three months ended
September 30
|
Nine months ended
September 30
|
|
2016
|
2015
|
2016
|
2015
|
Gold
$/ounce
|
1,335
|
1,124
|
1,260
|
1,178
|
Zinc
$/tonne
|
2,255
|
1,847
|
1,955
|
2,035
|
Lead
$/tonne
|
1,873
|
1,714
|
1,780
|
1,818
|
Copper
$/tonne
|
4,772
|
5,259
|
4,725
|
5,699
|
Mine expansions in Mexico
achieve new milestones
Major milestones were achieved at both of Pan American's mine
expansions in Mexico during Q3
2016. At La Colorada, the new
sulphide ore processing plant began full production in early
August. As well, the new 618-metre deep mine shaft was fully
commissioned in early September, ahead of schedule. We expect ore
production to ramp up in Q4 2016 and into 2017, as development of
the underground mine progresses. By the end of 2017 when the
project is scheduled to be completed, processing rates are expected
to increase to 1,800 tonnes per day, resulting in annual
silver production increasing to approximately 7.7 million ounces.
The La Colorada project is
expected to be completed approximately 5% to 10% under budget.
At Dolores, the new 98
kilometre, 115 kV power line that connects the mine to the national
power grid was energized in early September. The power line was
completed on budget and is expected to result in annual savings of
about $9 million. Significant
progress was achieved on development of the underground mine, with
a total of 866 metres of development advanced in Q3 2016. At the
new pulp agglomeration plant site, civil earthworks were completed
and concrete forming and pouring has commenced. When fully
commissioned before the end of 2017, average annual production from
Dolores is estimated to increase
40% for silver and 52% for gold during the first 5 years, while
associated operational efficiencies help reduce cash costs.
2016 Full Year Forecast
Pan American has made the following revisions to its guidance
for 2016:
- Silver production increased to 25.0 to 25.7 million ounces from
24.0 to 25.0 million ounces.
- Zinc, lead, and copper production increased to 48.0 to 53.0
thousand tonnes for zinc, 18.8 to 20.7 thousand tonnes for lead,
and 14.8 to 15.2 thousand tonnes for copper from previous guidance
of 46.0 to 48.0 thousand tonnes, 15.0 to 15.5 thousand tonnes, and
13.0 to 13.5 thousand tonnes, respectively.
- Cash costs reduced for the second time in 2016 to between
$6.25 and $7.00 per ounce from
$6.50 to $7.50 per ounce announced on August 11, 2016.
- AISCSOS reduced to between $10.75 and
$11.50 (assumes by-product credit prices in Q4 of
$2,300/tonne (1.04/lb) for zinc,
$2,000/tonne (0.91/lb.) for lead,
$4,700/tonne (2.13/lb.) for copper,
and $1,250/oz. for gold).
- Capital expenditures reduced to $185 to
$200 million from $200 to
$215 million. The revision reflects
reduced major projects spending at La
Colorada and Dolores,
partially offset by higher sustaining capital. Sustaining capital
was increased to $80 to $85 million
from prior guidance of $64 to $75
million. The increase in sustaining capital is related to
additional exploration programs across the Company, additional
mobile equipment replacements in the Peruvian mines and greater
pre-stripping at Dolores.
The Company is reaffirming its outlook for gold production of
175.0 to 185.0 thousand ounces in 2016.
Technical information contained in this news release with
respect to Pan American has been reviewed and approved by Martin
Wafforn, P.Eng., SVP 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. For further technical
information relating to the La
Colorada and Dolores
expansion projects, please refer to the National Instrument 43-101
technical reports entitled "Technical Report - Preliminary Economic
Analysis for the Expansion of the La Colorada Mine, Zacatecas, Mexico," with an effective date of
December 31, 2013, and "Technical
Report for the Dolores Property, Chihuahua, Mexico - Preliminary Economic
Assessment of a Pulp Agglomeration Treatment and Underground
Option", with an effective date of May 31,
2014, both of which are filed on SEDAR at www.sedar.com. The
results of preliminary economic assessments are preliminary in
nature, in that they include inferred mineral resources that are
considered too geologically speculative to have the economic
considerations applied to them that would enable them to be
categorized as mineral reserves, and there is no certainty that the
assessment will be realized. Mineral resources that are not mineral
reserves have no demonstrated economic viability.
Conference Call on
Tuesday, November 15
Pan American will
host a conference call to discuss the third quarter 2016 results on
Tuesday, November 15 at 10:00 am ET (7:00 am PT). To participate in
the conference, please dial 604-638-5340.
A live audio webcast
and PowerPoint presentation 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 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.
- Adjusted earnings (loss), and adjusted earnings (loss) per
share. The Company believes that these measures better reflect
normalized earnings as they eliminate items that may be volatile
from period to period relating to positions that will settle in
future periods, and items that are non-recurring.
- 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 2016, and our estimated cash costs
and AISCSOS in 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, including
with respect to margins and production; the realization of benefits
from any transactions and the financial and operational impacts of
any such transactions on the Company; and the approval or the
amount of any future cash dividends.
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.