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 six months ended June 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, Aug. 11, 2016 /CNW/ - Pan American Silver
Corp. (NASDAQ: PAAS; TSX: PAA) ("Pan American", or the
"Company") today reported unaudited results for the second quarter
ended June 30, 2016 ("Q2 2016"). Net
earnings were $34.2 million
($0.22 per share) compared with a net
loss of $7.3 million ($0.05 loss per share) recorded in the second
quarter of 2015 ("Q2 2015"). The $41.5
million increase in net earnings was largely driven by lower
production costs, as reflected by a 41% drop in quarter over
quarter cash costs to $5.57 per
payable ounce of silver in Q2 2016. The increase in net earnings
also reflects the sale of certain non-core mineral property assets
in Peru.
"We generated $66 million of
operating cash flow in the second quarter, the highest level since
the fourth quarter of 2012. Even more impressive is the fact that
the increase was largely driven by reduced costs across all of our
operations," said Michael Steinmann,
President and Chief Executive Officer of the Company. "The cash
generated fully funded all of our capital requirements, including
our expansion projects, and increased our cash and short-term
investment position to over $204
million."
Mr. Steinmann added: "The outlook for the remainder of the year
is very encouraging. We've lowered our guidance for cash costs and
all-in sustaining costs per ounce by 30% and 16%, respectively, for
2016. We're on pace to meet our production targets, and we're
pleased too that silver prices have improved substantially in
recent months."
Highlights for Q2 2016:
- Silver production was 6.33 million ounces, down slightly
from 6.65 million ounces produced in Q2 2015. The decrease reflects
anticipated production declines from sequencing at the Dolores,
Alamo Dorado, and Manantial Espejo mines, partially offset by
increased production at all other operations. Silver production for
the first half of 2016 totaled 12.75 million ounces, and is on pace
to achieve our annual forecast of 24.0 to 25.0 million ounces.
- Gold production increased 9% in both the three and
six-month periods ending June 30,
2016 to 48.4 thousand ounces and 89.6 thousand ounces,
respectively, over the comparable periods of 2015. The increase in
gold production was anticipated, as mine sequencing at Dolores
resulted in higher grades.
- Consolidated cash costs declined to $5.57 per payable ounce of silver compared with
$9.44 in Q2 2015. The 41% decrease in
cash costs was achieved through lower operating costs at all mines
and increased production of by-product metals. With cash costs in
the first half of 2016 of $6.81 per
ounce, Pan American is reducing its guidance for annual 2016 cash
costs to a range of $6.50 to $7.50
per ounce.
- Consolidated All-In Sustaining Costs per Silver Ounce Sold
("AISCSOS") were down 22% to $11.31, net of by-product credits, compared with
Q2 2015. The decline resulted mainly from lower production costs,
increased by-product credits and positive net realizable value
adjustments at the Manantial Espejo and Dolores mines. With AISCSOS
in the first half of 2016 of $12.21,
Pan American is reducing its guidance for annual 2016 AISCSOS to
range between $11.60 and $12.60 per
ounce.
- Operating cash flow before changes in non-cash operating
working capital was $53.5
million, a $35.6 million
increase from Q2 2015, largely due to increased revenues and
decreases in production costs and income taxes paid.
- Net earnings increased to $34.2
million ($0.22 per share)
compared with a net loss of $7.3
million ($0.05 net loss per
share) in Q2 2015. The increase in net earnings was primarily
attributable to decreased cost of sales, increased revenues, and
gains on the sale of interests in exploration properties related to
the transaction with Votorantim Metais – Cajamarquilla S.A.
("Votorantim"), partially offset by higher income
taxes.
- Adjusted earnings were $19.9
million ($0.13 per share)
compared with a loss of $11.2 million
($0.07 per share loss) in Q2 2015.
The most significant adjustment to earnings in Q2 2016 was removal
of the gain related to the transaction with Votorantim.
- Liquidity position strengthened over Q2 2016 with a
$26.6 million increase in cash and
cash equivalents and short-term investment balances, and a
$15.6 million increase in working
capital. At June 30, 2016, cash and
cash equivalents and short-term investment balances were
$204.2 million, the working capital
position was $399.3 million and total
debt outstanding was $58.8
million.
- Capital investment totaled $52.8
million compared with $29.6
million in Q2 2015, largely reflecting the increase in
project capital at the Dolores and La Colorada mines.
- The exploration budget for 2016 is increasing by 38% to
$14.5 million, with the Company
targeting diamond drilling at its operating mines and greenfield
exploration activities at selected projects.
- A quarterly cash dividend of $0.0125 per common share, which will equate to
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, September 6, 2016, to holders of record
of Pan American's common shares as of the close on Tuesday, August 23, 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.
Consolidated Financial Results
|
Three months ended
June 30,
|
Six months ended
June 30,
|
(Unaudited in thousands of U.S. Dollars,
except as noted)
|
2016
|
2015
|
2016
|
2015
|
Revenue
|
192,258
|
174,189
|
350,533
|
352,314
|
Mine operating earnings (loss)
|
44,730
|
(952)
|
61,428
|
1,678
|
Net earnings (loss) for the period
|
34,226
|
(7,299)
|
36,101
|
(27,084)
|
Adjusted earnings (loss) for the
period(1)
|
19,931
|
(11,239)
|
23,386
|
(31,145)
|
Net cash generated from operating
activities
|
66,019
|
20,577
|
66,790
|
32,425
|
Operating cash flow before changes in non-cash
operating working capital
|
53,542
|
17,981
|
81,913
|
25,308
|
All-in sustaining cost per silver ounce
sold(1)
|
11.31
|
14.46
|
12.21
|
14.35
|
Net earnings (loss) per share attributable to
common shareholders (basic)
|
0.22
|
(0.05)
|
0.23
|
(0.18)
|
Adjusted earnings (loss) per share attributable
to
common shareholders (basic)(1)
|
0.13
|
(0.07)
|
0.15
|
(0.21)
|
Operating cash flow before changes in non-cash
operating working capital per share
|
0.35
|
0.12
|
0.54
|
0.17
|
|
|
(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 June 30,
2016
|
Three months ended June 30,
2015
|
|
Production
|
Cash
Costs(1)
$
|
Production
|
Cash
Costs(1)
$
|
|
Ag
(Moz)
|
Au
(koz)
|
Ag
(Moz)
|
Au
(koz)
|
La Colorada
|
1.37
|
0.67
|
7.66
|
1.32
|
0.67
|
7.85
|
Dolores
|
0.97
|
25.36
|
(0.64)
|
1.12
|
20.17
|
8.34
|
Alamo Dorado
|
0.53
|
2.34
|
13.54
|
0.77
|
2.81
|
15.25
|
Huaron
|
0.95
|
0.23
|
5.70
|
0.94
|
0.30
|
8.96
|
Morococha
|
0.58
|
0.59
|
1.35
|
0.56
|
0.99
|
9.78
|
San Vicente
|
1.15
|
n/a
|
12.27
|
1.04
|
n/a
|
11.44
|
Manantial Espejo
|
0.79
|
19.20
|
(2.40)
|
0.90
|
19.45
|
6.18
|
TOTAL
|
6.33
|
48.39
|
5.57
|
6.65
|
44.39
|
9.44
|
|
Average by-product metal prices for Q2 2016 were Au
$1,260/oz, Zn $1,918/tonne, Pb $1,719/tonne, and Cu $4,729/tonne.
Totals may not add up due to rounding.
|
|
Six months ended June 30,
2016
|
Six months ended June 30,
2015
|
|
Production
|
Cash
Costs(1)
$
|
Production
|
Cash
Costs(1)
$
|
|
Ag
(Moz)
|
Au
(koz)
|
Ag
(Moz)
|
Au
(koz)
|
La Colorada
|
2.75
|
1.35
|
7.00
|
2.58
|
1.28
|
7.80
|
Dolores
|
2.04
|
46.80
|
2.91
|
2.10
|
38.35
|
8.55
|
Alamo Dorado
|
1.09
|
5.62
|
12.68
|
1.46
|
5.87
|
15.59
|
Huaron
|
1.91
|
0.41
|
6.83
|
1.84
|
0.62
|
10.39
|
Morococha
|
1.28
|
1.30
|
3.51
|
1.08
|
1.62
|
13.27
|
San Vicente
|
2.23
|
n/a
|
12.06
|
2.01
|
n/a
|
11.99
|
Manantial Espejo
|
1.46
|
34.09
|
2.47
|
1.65
|
34.14
|
9.63
|
TOTAL
|
12.75
|
89.57
|
6.81
|
12.72
|
81.88
|
10.53
|
|
Average by-product metal prices for the six months
ended June 30, 2016 were Au $1,221/oz, Zn $1,799/tonne, Pb
$1,731/tonne, and Cu $4,701/tonne. 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.
|
Project Development Update
Pan American's organic growth plans continued to progress over
the second quarter through the expansions at the La Colorada and
Dolores mines. The new sulphide plant at the La Colorada mine has
begun processing ore, and the mine shaft was completed and
outfitted down to the loading pocket level at a depth of 588 metres
at the end of June 2016. The focus is
now on completing the shaft loading equipment installations, the
remaining step before commissioning of shaft hoisting, which is
expected to occur by the end of August
2016.
During Q2 2016, progress at the Dolores expansion was marked by
90% completion of the detailed engineering and the start of major
earthworks on the new agglomeration plant. The construction of the
new 98-kilometre power line and 684 metres of additional
underground development was also completed. Commissioning of the
power line is pending completion of the tie-in and inspections with
the national power company, which is expected to occur in the third
quarter of 2016.
Both expansion projects remain on budget and on schedule, and
are expected to further improve operating margins when completed at
the end of 2017.
Strategic Initiatives
Pan American progressed its strategic initiative to realize
value for certain assets embedded in the Company. On July 11, 2016, the Company completed the sale of
13 royalties, precious metals streams and payment agreements to
Maverix Metals Inc. ("Maverix"). Pan American holds a 54% (63%
fully diluted) majority ownership position in Maverix, retaining
upside exposure to these assets and to Maverix's ability to grow
and diversify the portfolio.
In addition, the Company completed the sale of 75% of the shares
in Compañia Minera Shalipayco S.A.C. to Votorantim for $15 million in cash and a 1% net smelter return
royalty. Votorantim will also provide Pan American with a
free carry of its remaining 25% ownership interest to commercial
production in this large zinc development project located in
Peru.
2016 Full Year Forecast
Pan American is on track to achieve its production forecasts for
2016, and is reaffirming its targets for silver of between 24.0
million and 25.0 million ounces, and for gold of between 175,000
and 185,000 ounces. Estimates for zinc, lead, and copper production
also remain at 46,000 tonnes to 48,000 tonnes, 15,000 tonnes to
15,500 tonnes, and 13,000 tonnes to 13,500 tonnes,
respectively.
Pan American is reducing its annual 2016 cash costs guidance by
30% to range between $6.50 and $7.50
per ounce. The revision reflects cash costs in the first half of
2016 of $6.81 per ounce and expected
results for the remainder of 2016.
Pan American is also reducing its forecast for annual 2016
AISCSOS by 16% to $11.60 to $12.60
per ounce. The revision reflects AISCSOS of $12.21 in the first half of 2016 and expected
results for the remainder of the year.
The revised cash costs and AISCSOS forecasts assume by-product
credit prices of $2,000/tonne
($0.91/lb) for zinc, $1,750/tonne ($0.79/lb) for lead, $4,700/tonne ($2.13/lb) for copper, and $1,300/oz. for gold.
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.
Conference Call on Friday, August 12 Pan
American will host a conference call to discuss the second quarter
2016 results on Friday, August 12, 2016, at 1:00 pm EST (10:00 am
PST). 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 on the website until September
12, 2016.
|
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 six months ended June 30, 2016 (the "Q2 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.