All amounts are expressed in US$ unless otherwise indicated.
Financial information is based on International Financial Reporting
Standards ("IFRS") as issued by the International Accounting
Standards Board.
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, adjusted earnings and total debt.
Please refer to the "Alternative Performance (non-GAAP) Measures"
section of this news release for further information on these
measures.
VANCOUVER, May 9, 2017 /CNW/ - Pan American Silver
Corp. (NASDAQ: PAAS; TSX: PAAS) ("Pan American", or the
"Company") today reported unaudited results for the first quarter
ended March 31, 2017 ("Q1 2017").
"Pan American continued to deliver strong results in the first
quarter of 2017, with quarter-over-quarter growth in net earnings
and cash costs down 23% to $6.18 per
ounce," said Michael Steinmann,
President and Chief Executive Officer of the Company. "The
expansion of our Dolores mine is
tracking well with commissioning of the pulp agglomeration plant
expected by mid-year. At our La
Colorada mine, we are already realizing the benefit of
higher throughput rates from the expansion, which is now
substantially complete."
Added Mr. Steinmann: "Supplementing the growth expected from our
Mexican mine expansions, we have also completed the acquisition of
the Joaquin project and announced an agreement to acquire the
Cap-Oeste Sur Este project. These smaller, high-grade silver
deposits are within trucking distance of our Manantial Espejo mine
in Argentina, enabling us to
benefit from invested capital at Manantial Espejo for potential
future silver production."
Highlights for Q1 2017:
- Silver production was 6.20 million ounces compared with
6.42 million ounces in the first quarter of 2016 ("Q1 2016"). As
anticipated, the decline primarily reflects Alamo Dorado, where
processing of stockpiled material was essentially completed in Q1
2017. The Alamo Dorado mine has now transitioned to the reclamation
phase. Higher throughput rates from the expansion project at
La Colorada drove a 19% increase
in silver production at that mine.
- Gold production was 37.7 thousand ounces compared with
41.2 thousand ounces in Q1 2016. The decline reflects lower ore
grades, as expected, at Manantial Espejo and Alamo Dorado.
- Consolidated cash costs per payable ounce of silver, net
of by-product credits ("Cash Costs") of $6.18 in Q1 2017 declined 23% from $8.03 recorded in Q1 2016, reflecting an increase
in by-product credits from improved prices for all by-product
metals.
- Consolidated All-In Sustaining Costs per Silver Ounce Sold
("AISCSOS") were $12.63 in Q1
2017 compared with $13.12 in Q1 2016.
The decline in AISCSOS reflects increased by-product credits from
higher by-product metal prices, decreased direct selling costs and
sustaining capital expenditures, and increased volumes of silver
sold in Q1 2017. These factors were partially offset by an increase
in production costs, which includes $14.6
million for inventory net realizable value adjustments.
- Revenue of $198.7 million
was 26% higher than the $158.3
million reported in Q1 2016, largely as a result of higher
metal prices. Realized silver prices averaged $17.44 per ounce in Q1 2017, up approximately 17%
over Q1 2016.
- Net cash generated from operating activities was
$38.6 million compared with
$0.8 million in Q1 2016. The increase
reflects the growth in revenue and less use of cash in the quarter
for working capital changes, offset by an $18.0 million increase in income tax payments and
higher cash production costs.
- Net earnings rose to $20.0
million ($0.13 basic earnings
per share) compared with $1.9 million
($0.01 basic earnings per share) in
Q1 2016. The increase largely reflects stronger mine operating
earnings attributable to the increase in revenue, partially offset
by higher cost of sales expense.
- Adjusted earnings were $9.0
million ($0.06 basic adjusted
earnings per share) compared with $3.3
million ($0.02 basic adjusted
earnings per share) in Q1 2016.
- Liquidity position remained strong at March 31, 2017. Cash and cash equivalents and
short-term investment balances were $205.4
million, down $12.2 million
from $217.6 million at December 31, 2016. The draw on balances
supplemented operating cash flow, primarily to help fund investment
in the Company's mines and projects and the acquisition of the
Joaquin project. The working capital position was $423.0 million and total debt outstanding was
$43.8 million.
- Capital expenditures totaled $33.1 million in Q1 2017, with $14.9 million of project capital directed mainly
at the Dolores expansion and the
remaining $18.2 million to sustaining
capital.
- The expansion of the Dolores mine is on track with the
underground mine development scheduled for completion in 2017.
Construction of the pulp agglomeration plant has reached 80%
completion, and commissioning is expected to begin in
mid-2017.
- The La Colorada
expansion is largely complete with remaining work primarily
related to development of the underground mine, which is advancing
on plan to achieve ore mining rates of 1,800 tonnes per day by
the end of 2017. The new 115kV powerline is expected to be
energized in the second quarter of 2017.
- The Company's previously announced acquisition of 100% of
the Joaquin project closed on February
10, 2017. The Joaquin project is located in the Santa Cruz province of Argentina, approximately 145 kilometres from
the Company's Manantial Espejo mine, which will have available
processing capacity once open-pit mining is completed around
mid-2017 to treat high-grade feed that can be selectively mined and
trucked from Joaquin.
- On April 25, 2017, the Company
also announced an agreement for the acquisition of 100% of the
Cap-Oeste Sur Este project, which offers similar synergies as
the Joaquin project with the Company's Manantial Espejo mine.
- A quarterly cash dividend of $0.025 per common share, approximately
$3.8 million in aggregate cash
dividends, has been approved by the Board of Directors. The
dividend will be payable on or about Monday,
June 5, 2017, to holders of record of Pan American's common
shares as of the close on Tuesday, May 23,
2017. 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
March 31,
|
(Unaudited in
thousands of U.S. Dollars,
except as
noted)
|
2017
|
2016
|
Revenue
|
198,687
|
158,275
|
Mine operating
earnings
|
32,875
|
16,698
|
Net earnings for the
period
|
19,950
|
1,875
|
Adjusted earnings for
the period(1)
|
9,024
|
3,254
|
Net cash generated
from operating activities
|
38,569
|
771
|
All-in sustaining
cost per silver ounce sold(1)
|
12.63
|
13.12
|
Net earnings per
share attributable to
common shareholders
(basic)
|
0.13
|
0.01
|
Adjusted earnings per
share attributable to
common shareholders
(basic)(1)(2)
|
0.06
|
0.02
|
(1)
|
Adjusted
earnings and all-in sustaining costs per silver ounce sold are
non-GAAP measures. Please refer to the "Alternative Performance
(non-GAAP) Measures" section of this news release for further
information on these measures.
|
(2)
|
The impact of the
unrealized foreign exchange rate changes on deferred income tax
balances has been added as a new adjusting item, along with a
modification in the quantification of the estimated effect of
taxes. For comparative purposes, Q1 2016 adjusted earnings
have been recalculated and are thus different from those originally
reported. The effect of these new adjusting items on Q1 2016
adjusted earnings was a decrease of $0.2 million from that
originally reported; the adjusted earnings per share of $0.02 was
not affected.
|
Consolidated Operational Results
|
Three months ended
March 31, 2017
|
Three months ended
March 31, 2016
|
|
Production
|
Cash
Costs(1)
$
|
Production
|
Cash
Costs(1)
$
|
|
Ag
(Moz)
|
Au
(koz)
|
Ag
(Moz)
|
Au
(koz)
|
La
Colorada
|
1.63
|
0.87
|
3.01
|
1.37
|
0.68
|
6.34
|
Dolores
|
0.96
|
24.39
|
(1.67)
|
1.07
|
21.44
|
6.10
|
Alamo
Dorado
|
0.35
|
1.33
|
21.29
|
0.56
|
3.28
|
11.85
|
Huaron
|
0.90
|
0.25
|
0.77
|
0.95
|
0.19
|
7.95
|
Morococha
(2)
|
0.64
|
0.60
|
(3.18)
|
0.70
|
0.71
|
5.24
|
San Vicente
(3)
|
0.93
|
0.12
|
12.47
|
1.09
|
n/a
|
11.84
|
Manantial
Espejo
|
0.79
|
10.13
|
20.38
|
0.68
|
14.89
|
8.13
|
TOTAL
|
6.20
|
37.70
|
6.18
|
6.42
|
41.18
|
8.03
|
Totals may not add up
due to rounding.
|
(1)
|
Cash costs are a
non-GAAP measure. Please refer to the "Alternative Performance
(non-GAAP) Measures" section of this news release for further
information on these measures.
|
(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.
|
By-Product Results
Production
|
Three months ended
March 31,
|
|
2017
|
2016
|
Gold - ounces '000s
("koz")
|
37.7
|
41.2
|
Zinc - tonnes '000s
("kt")
|
12.8
|
12.8
|
Lead - kt
|
5.3
|
4.8
|
Copper -
kt
|
3.2
|
3.9
|
Average Market
Metal Prices
|
Three months ended
March 31,
|
|
2017
|
2016
|
Gold
$/ounce
|
1,219
|
1,183
|
Zinc
$/tonne
|
2,780
|
1,679
|
Lead
$/tonne
|
2,278
|
1,744
|
Copper
$/tonne
|
5,831
|
4,672
|
2017 Guidance
Operating results in Q1 2017 are largely on track to achieve the
Company's Guidance for 2017. While Q1 2017 gold production was
slightly lower than the rate required to achieve the low end of our
2017 annual forecast range of 155.0 to 165.0 thousand ounces, the
Company has reaffirmed the current forecast range based on an
anticipated increase in gold production from the Dolores expansion and a decrease at Manantial
Espejo following the completion of open-pit mining.
There have been no revisions to Pan American's Guidance for
2017, as provided in its press release dated January 12, 2017, and in the following table:
|
2017
Guidance
|
Silver production
(million ounces)
|
24.5 -
26.0
|
Gold production
(thousand ounces)
|
155 - 165
|
Zinc production
(thousand tonnes)
|
56.5 -
58.5
|
Lead production
(thousand tonnes)
|
19.0 -
20.0
|
Copper production
(thousand tonnes)
|
8.8 - 9.3
|
Cash
Costs(1)($/ounce)
|
6.45 -
7.45
|
Sustaining capital ($
millions)
|
82 - 88
|
Project capital ($
millions)(2)
|
58 - 62
|
AISCSOS(1)
($/ounce)
|
11.50 -
12.90
|
(1)
|
Cash Costs and
AISCSOS are non-GAAP measures. Please refer to the
"Alternative Performance (non-GAAP) Measures" section of this news
release for further information on these measures.
|
(2)
|
Project capital
relates to the current mine expansions at La Colorada and Dolores;
2017 is expected to be the final year of spending on project
capital related to these expansions.
|
The following table provides the price and foreign exchange rate
assumptions used to forecast total Cash Costs and AISCSOS in the
Guidance for 2017:
Metal
prices
|
|
Gold
($/ounce)
|
1,200
|
Zinc
($/tonne)
|
2,500
|
Lead
($/tonne)
|
2,100
|
Copper
($/tonne)
|
5,400
|
Average annual
exchange rates relative to 1 USD
|
|
Mexican
peso
|
20.00
|
Peruvian
sol
|
3.30
|
Argentine
peso
|
17.05
|
Bolivian
boliviano
|
7.00
|
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, 2017, 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", with an effective date of December 31, 2016, both of which are filed on
SEDAR at www.sedar.com and available on the Company's website. 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
Wednesday, May 10
Pan American will
host a conference call to discuss the unaudited results for the
first quarter of 2017 on Wednesday, May 10 at 11:00 am ET (8:00 am
PT). To participate, please dial toll-free in Canada and the U.S.
at 1-800-319-4610. International participants please dial
+1-604-638-5340.
A live audio webcast
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 located in Mexico, Peru,
Argentina and Bolivia. Pan American also owns several
development projects in the USA,
Mexico, Peru and Argentina. Our vision 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 and the Toronto Stock
Exchange under the ticker "PAAS".
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"). 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 and adjusted earnings per share. The Company
believes that these measures better reflect normalized earnings as
they eliminate items that in management's judgement are subject to
volatility as a result of factors which are unrelated to operations
in the period, and/or relate to items that will settle in future
periods.
- 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.
- Total debt is calculated as the total current and non-current
portions of: long-term debt; finance lease liabilities; and loans
payable. Total debt does not have any standardized meaning
prescribed by GAAP and is therefore unlikely to be comparable to
similar measures presented by other companies. The Company and
certain investors use this information to evaluate the financial
debt leverage of the Company.
Readers should refer to the "Alternative Performance (non-GAAP)
Measures" section of Pan American's Management's Discussion and
Analysis for the period ended March 31,
2017, 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 2017 and beyond, and our estimated
Cash Costs and AISCSOS in 2017 and beyond; the ability of the
Company to successfully complete any capital investment programs
and projects, including whether on time, or on or below budget, and
the impacts of any such programs and projects on the Company,
including with respect to production and associated operational
efficiencies; the ability of the Company to successfully close the
Cap-Oeste Sur Este transaction and to subsequently complete the
acquisition of that project; the realization of benefits from any
transactions, including the Joaquin and Cap-Oeste Sur Este
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.