Q4 2020 Pan American Silver Corp Earnings Call
Thank you for standing by this is the conference operator, welcome to the Pan American Silver full year and fourth quarter, two and three times.
And the audited results conference call and webcast.
As a reminder, all participants are in listen only mode and the conference is being recorded after the presentation, there will be and opportunity to ask questions to join the question queue. You May Press Star then one on your telephone keypad share do you need assistance during the conference call you may signal, an operator by pressing star and zero I would now.
I would like to turn the conference over to surrender for Secchi VP Investor Relations for opening remarks. Please go ahead.
Thank you operator, and welcome everyone to Pan American Silver's fourth quarter, and full year, 'twenty and 'twenty conference call media and other participants on the line are invited to participate in listen only mode.
We released our results after yesterday's market close and a copy of the news release MD&A and presentation slides for today's call are available on our website.
And what material on today's call contains certain statements and information that constitute forward looking statements and information.
Please review the cautionary statements included in our news release and presentation as well as the risk factors described in our most recent form 40 F and annual information form.
I will now turn the call over to Pan American's, President and CEO, Michael Steinmann, who will provide a brief review of our results. We will then open the call to questions and answers.
Thank you for joining us today to discuss our fourth quarter and full year 'twenty and 'twenty results.
We finished the year with a strong financial quarter revenue in Q4 was a quarterly record of $435 million driven by the rise and precious metal prices.
Q4, net earnings were $169 million or 80 cents per share driven by record quarterly mine operating earnings of $137 $2 million.
Earnings in Q4 benefited from the recognition of $41 million and deferred tax assets.
Net income of $37 million and from the sale of exploration properties and gains on fuel and currency hedges.
The deferred tax assets recognized relates to extend mine lives at the payments and Bahrain operations due to have exploration success and our ability to utilize tax attributes.
Adjusted earnings in Q4 were $125 million or 57 cents per share the.
And the most significant adjustments, where the removal of $22 $2 million related to currency movement that reduced tax expense.
Dilution gain relating to our interest and Mavericks and the gain on the sale of exploration properties.
Full year, 'twenty and 'twenty net earnings totaled $176 $5 million or 85 cents per share.
Full year, 'twenty and 'twenty adjusted earnings were 243, and $4 million per $1 on 16 cents per share.
And plenty of 'twenty, our operations generated record cash flow of $462 $3 million, we fully repaid the amounts drawn on our corporate credit facility and we doubled the quarterly dividend.
As at December 31st 2020, our cash and short term investment balance has increased to 200 on 79 $1 billion.
Keep in mind that we achieved these strong financial results. Despite the significant impact COVID-19 had on our operations and.
Clothing, and cutting mine care and maintenance costs of about $75 million for the COVID-19 related mine suspensions.
As previously announced and produced 17 per 3 million ounces of silver and 522000 ounces of gold and 2020.
It's largely reflects the government mandated suspension of operations and Latin America and throughput restrictions across all operations due to COVID-19 pandemic.
Silver cash cost and 2020 for $7 on five cents and all in sustaining costs were $11.38 per silver ounce sold.
Coal segment cash costs, and 'twenty 'twenty were $797 and all in sustaining costs were $1011 per gold ounce sold.
Capital expenditures total approximately 191 $7 billion.
About 50 to 60 million dollar of capital spending plus deferred into 2021.
COVID-19 has delayed our ability to progress certain capital projects.
We are expecting production in 'twenty and 'twenty, one to improve markedly over 'twenty and 'twenty based on the assumption that the impact of COVID-19 will diminish over the year as indicated in our guidance for 'twenty and 'twenty one issued on January 19.
That means production will be backend loaded to the second half of 2021.
In addition mine ventilation improvement protracted Luckily IATA and that's why I left mine on heap Leach sequencing at Dolores and impact production of those operations and the first half of 'twenty or 'twenty one.
And Luckily we are preparing the new surface to 345 meter level of rates for commissioning in Q2 2021.
And there are also advancing several other ventilation projects to provide ventilation for all our long term operating and development plans, including development of the scar and deposit.
But 'twenty 'twenty, one and we're expecting silver production of 22, five so plenty 4 million ounces, the roughly 35 per cent increase over 2020.
And record gold production of 600, and and five to 655000 ounces.
We're not forecasting any production from basketball.
What the mall and government advances the Ilo 169 consultation.
Further details on our forecast for 2021 are available in our MD&A and have not changed from the forecast we provided on January 19th 2021.
And then our guidance assumptions for 'twenty and 'twenty, one and we expect to generate robust levels of free cash flow, especially in the second half of 2021 based on the outlook for production and I just described and the fact that most of our cash taxes are paid in Q1 and Q2.
We believe the best use for our free cash flow now that our credit facility is fully repaid.
And invest in projects that will provide attractive long term returns like our luck Laredo scar and discovery or other exploration projects.
And yes that exploration success has always been an important value driver for us we have a strong track record of replacing reserves and extending mine lives at many of our operations.
Luckily IATA statements on La Arena.
We have exceptional silver growth assets and our portfolio.
Regarding the novel approach at the government and Chubut, Argentina has proposed modification to the mining law to permit the open pit mining and certain zones of the province.
Vinci legislature has not voted on this low modification yet.
I do believe that properly permitted unregulated mining activity and interest.
Stable mining practices, both benefit the province, and the people have to book.
And ask about Guatemala Ministry of energy and mines and the shrink of Parliament and have agreed to begin the pre consultation meetings in April 2021.
As an important step and respecting the shrink of People's fried for consultation as required under I L O one and six nine.
Expect that process will take time, and they're not able to provide a timeline for the restart of the mine.
We are advancing development of our world class local artist can deposit and looking forward to providing a preliminary economic assessment at the end of this year.
And with that I would like to open the call for questions.
We will now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad and you will hear atone and acknowledging your request. If you are using a speakerphone. Please pick up your handset before pressing any keys to withdraw your.
A question. Please press Star then two.
We will pause for a moment as callers join the queue.
The first question comes from Tyler Langton with J P. Morgan. Please go ahead.
Hey, good morning, and thanks for taking my question.
I guess just first on the guidance I know it sort of.
And is based on the impacts of Covid kind of diminishing throughout the year kind of with <unk>.
Q1 equal to Q4, and then kind of Q2 around 75%.
And I know, it's sort of early in the year, but did.
With so far in Q1 is Q1 kind of sort of is the impact sort of similar to Q4 and do you have a sense what things could look like heading into Q2.
I don't know, which way if at this now and even more second wave or go into third place in many places.
You know strong waste and in Peru, and Mexico, and many other countries around the globe. So thats our assumption of course, we don't know what's going to happen.
Through the year.
So luckily seed after vaccination programs and countries.
And she is already quite a high percentage and vaccination programs really really help here on and bring those numbers down and so we are very.
Positive that's during the year and with the rollout of those programs.
And so we'll start getting overdose, but right now in Q1 of course, there is no.
A lot of programs in place and Latin America. Some vaccination has started.
So we'll see how that goes but yeah, I would say Q1 and as we assumed in our budget will be similar to Q.
Q4 of last year.
Okay. Thanks, that's helpful and then just.
And sort of in the release, you kind of talked about inflationary pressures and packing costs, especially on the go.
Old side at a show and day, and Lorain, and and I guess could you talk a little bit about what youre seeing and kind of you know whether those if you continue to see higher cost and it's a risk to the cost guidance.
And that area or do you see kind of risk to any of the the other operations.
Yeah, So just in general and something to the cost and then I'll pass it onto Steve.
And of course every given year or most of the years, you're going to see a difference between how we ended the year and how we guide for the next day Air and that's just simply the fact that we have to assume so on metal prices for the following year and our budget.
Which are lower than what we just experienced and in the past year or to say well maybe it can become you know plug and higher costs than what we've just seen in the past.
Because our costs are dependent on byproduct credits and that's all.
Automatically increases our costs and our guidance always debate at the beginning of the year and you know that will be normalized during the year, depending where metal prices coal if metal prices.
Go higher up of course, we have more byproduct credits and vice versa, but for sure. We see some from some pressure I guess on and on.
On especially the salary side total pass on to Steve to comment on that Yeah, Hi, Tyler Steve here, Yes generally.
Forecast and you know nominally 3% to 5% and inflation for 2021, we are seeing pressures in wages as Michael said, we generally negotiate collective bargaining with all of our sites towards between March April.
May June or the heavy months and a lot of those are retroactive back to January 1st. So we don't know exactly where theyre going to be but we're forecasting and that range and the other thing I'd raise as we have been seeing some very high.
Ocean freight costs for our materials coming in and we haven't seen pretty sharp escalations and that and and the energy cost and of course with the oil price is going up that generally.
Relates directly to our costs as well for our energy components. One thing I'd also alert you to relative dish window of La Arena and Delores are open pits has to pay attention to the waste movement and the strip ratios.
With the mine planning.
For instance, Dolores strip ratios go on their reduced 32% over where it was in 'twenty and 'twenty.
And whereas your window and La arena are increasing.
19, and 33%, respectively and net.
It's just mine plans and sequencing we added life at La Arena, we added life and Windows those come with a little higher strip ratio as we get into those those waste someone's day stripped down to that or so that's the other thing to pay attention to.
The loss on the.
Costs from my side hopefully.
Subsiding pandemic during the year, that's let's be hopeful for that a little.
And we'll probably see or hopefully see loss cost directly related to you know to depend on making for testing quarantining and etcetera.
As we stated I think it was about $75 million range.
And for care and maintenance and I think and about seven to $17 million to $20 million range of direct costs.
Costs from the pandemic, so as I said, let's see how that how that advances two and a year, but that should be obviously a reduction on on on the cost from from those items.
Great. Thanks, so much.
The next question comes from Justin Stevens with Pi financial Please go ahead.
Hey, guys and probably a couple of questions for Steve mostly I'm wondering if you can give a sort of a ballpark in terms of what we might expect and just sort of the grade change percentage could be like how long on that once that new res is commissioned.
I'd like to step all between H, one and H two.
Yeah, Hi, Justin.
Generally for the full year, we're looking to get up to about 330 or 335 Gram per tonne silver we kind of average 2023 310, three O. Eight so I think it's going to be the kind of the same picture as the code.
But you know we're going to be at that three O. Eight early on and then you'll see it increase in Q2, Q3, and Q4 and average out the year at the 335.
Got it yeah, I can like and I can back into those numbers and then that's pretty helpful and it's mostly going to be a great impact right. It's not that you guys are not going to have any trouble I think keeping the mill filled.
Just with some lower grade material and until that centrally.
Stimulation and started right well.
It does affect how many times, where you can get out of the mine because it limits the deployment of underground equipment, we have to maintain a certain ratio of equipment to the ventilation and flow rates that we have available. So it does impact throughput as well to some degree so we will see lower throughput and the first part of the year increasing throughout the year.
Sure.
Got it.
Perfect. That's very helpful and if you could just quickly given updates on live on how things are going up the lawyers, particularly with the underground and the pulp agglomeration.
Yeah.
Both are running well the underground.
It was running you know with the kind of 80 to 90 per cent range that we had in Q4 with.
And with the Covid impacts, we're seeing that type of impact the open pits running more closer to the full design capacity and we have you know with the mine sequencing as I mentioned earlier quite a bit less waste to move this year. So that helps relieve some of that the pulp agglomeration plant has been running well.
You know close to the 5500 tonnes per day, and 5300 tons per day average rates and that's been going well, we do experience in the mine plan bolt on.
Low grade because of mine sequencing and early in the year higher grades towards the end and we also have some heap leach sequencing and going on.
The slower and the first part of the year high up on the heaps and then moving out later in the year will get better and more more quicker extractions, if you will.
Got it.
No that sounds great alright, thanks, so much.
Thank you.
The next question comes from Lee <unk> with Scotiabank. Please go ahead.
Hi, everyone. Thank you for taking my question I have a question regarding the Bascom and income thousands free play at all.
Plenty plenty of I believe it's $60 million were approximately on behalf of bi.
But as they play out.
Fly.
Correct me, if I'm wrong, but I don't think.
On realized pricing up the investment income has been adjusted out of E R and adjusted earnings.
And so if that's the case.
Is it possible to provide some guidance on maybe the breakdown of the security information and have the gangs.
And it showed good good morning, it's Rob Doyle here.
You are correct and make any adjustments for our investment income and.
Adjusted earnings are we.
We consistently that as part of our core earnings and.
Debt to that game that you referred to the 63 four for the year it's.
Entirely.
And the is the it's the mark to markets on on our strategic positions in and mostly new Pacific and.
Or are true and Europe Korea, and various other investment positions that we have so it's almost entirely a mark to market and unrealized.
So just just to give some more background here of course, the reason why we have investments, especially the larger ones like like new Pacific is because.
They like projects like that and we obviously like new discoveries large silver discoveries and and and jurisdictions, where we are already active in this case, it's Bolivia and that's part of our business our business too.
You know, how and growing those assets with our investment and on.
On financing because there's two ways to do it we can obviously do our own exploration and have been very successful with that too but.
I think other companies, making discoveries and we help to finance that you know gives us many more opportunities to explore and look at deposits. So it's really part of our core business to make those kind of investments are in and potential large silver discoveries.
Maybe I'll just add one more thing it's important to note that our investment to our position and Maverix is not included in that.
We have come from Ebix as a as an associate and therefore, we don't mark to market on large physician and Mavericks. So that's just on on short term investments.
Okay, great. Thanks, a lot.
The next question.
<unk> comes from John Tumazos, with John Tumazos, very independent research. Please go ahead.
Thank you very much for taking my question.
Just to review this coming April would be the first consultation.
And then.
Resumed process do you have any idea.
How many consultation share months or years to process might take you.
And you didn't mention Argentina.
With all the Lockdowns there I presume.
Nothing has happened or resumed and show growth process.
And with the net cash position.
Would you confirm whether or not you're still a property seller of any pieces of the <unk>.
And <unk> acquisition or other assets.
And what are your investment priorities would be and addition to the la Colorado.
Oh, okay.
Let me see if I remember right so much interest.
And and that's okay.
And you're right that there.
And with the announced that and it's not the start of the consultation, but the pre consultation and Guatemala in April So we'll see how that goes and I see you know this is a government run process run by the Ministry of mines and Guatemala for this idea of low 169 consultation process.
And <unk>, which we are just a party to it we're not running it and so we don't have control over the time line. So I cant tell you how many meetings will be required of how long it will take time will tell.
But you know, we're obviously happy to see that debt after understandable delay for a COVID-19. This this is picked up again and if you want to say like that.
Meetings are.
As we know every country and of all of that has been impacted very hard by Covid and all the countries are have been and still are very focused of course to keep everyone safe and their country and make sure that there was enough.
Hospital bats, and on and treatment possibilities available for the population.
And two but that's all.
Set and and and and and my tax their debt.
Uh huh.
The change and the law has been proposed and this this cost us as we know there is a lot of information out there on a on that and to vote, but the legislature did not vote on this yet and.
And the Guy and I don't have a day on on a went out and I would happen.
And not so well just have to be patient and wait for that but that's definitely discussions going on on.
On that well, let's see what its called Zonification via the law would basically identify areas and the in the province.
That would potentially allow open pit mining and and and other areas not so just just to make one point clear and Theres a lot of a lot of information out there even if that law will be approved this is another direct proof of love and now with our approach on but it would allow us to actually up.
Ply for permits right. This is just this if this law is intended to set basically the base to actually apply for permits mining permits in certain areas of the province, it's not and approval up to circle approach on.
Regarding.
Divestments you asked.
Look we're very very very happy with the dollar gold assets from.
From the Tahoe side, 12, and have already happened with any of the gold assets, we havent the silver assets, but as.
As you know we have been very successful with the exploration and and Loren on payments, especially where we added to the already for many years off of more production and so.
The situation looks quite a bit different than when we did the purchase and close to purchase and we actually for example, and Laredo, we assumed at that time that 'twenty 'twenty, one will be the last year off of production from the oxides and it looks like now we have at least another three years, so 'twenty 'twenty four and.
And we're still exploring and thrilling and we're still finding very interesting intercept and.
By the way I think we use like 30 and 50 of floating on the goal.
And so those reserves. So it's not just a reflection of higher gold price, it's a pretty conservative gold price that we used I believe for a short term.
And I sat for the reserves, but needless to say that this is a good time to.
To divest some of our smaller assets, we announced that earlier on and we'll continue doing that we have plenty of money smaller assets that came to us over the last let's call. It 15 20 years from many acquisitions.
And and for sure and well try to divest some of them.
Over this year or next year, depending how the demand will be for those assets. Those are assets that are too small for us to.
And to build but you know could be interesting for a smaller company, obviously to do something with it and then I think there was another question on the fourth one channel and I forgot about that one I'm sorry, what was it.
And what are the capex or investment priorities and in addition to the La Colorado scarring.
Yeah.
As I've always said that there's three kind of buckets, but they always pay back our debt.
Investing in high quality projects and return.
Cash to shareholders most likely in the form of dividends I think we have been very successful last year and achieving all of that repaid all our debt is $275 million and and a very difficult year last year with the COVID-19 impact and pretty strong.
We doubled our dividend actually increased it twice in a total it was a double of our dividend during the year on debt that bucket is still there are of course they'd like to return.
Cash dollar share holders, we pay dividend uninterrupted since 2010 and the actual return up to date I I think without the payment that's coming up and March average.
Nearly half a billion dollars of cash.
Due to our shareholder some kind of share buyback, but mostly dividend. So that definitely will continue and you know us we don't have to pay back line of credit or on your death, right now or bank debt Oh for sure have a hard look again at the dividend as the year progresses, but as I always thought and the best return.
And so he was a shareholder is investment and high quality high return project.
Focus on unlock a lot of other this is as you know a multiyear project and investment are bringing it now first to our P. A level and then you.
You know advanced approach at a further so that will require capital not a huge number this year, but as we go forward. The following year. So that the number will obviously increase with a lot of underground development on surface infrastructure for that for that approach on.
But we're very active on the exploration side and other projects we are exploring.
A few new projects around the payments are assets that we are exploring.
Around.
So window on and Laura and now where we have been very successful and you know I count those as well as the addition of high quality protests are on.
And use of capital is of course every time, we expand to reserve and just pick up on pets. It will require more heap leach space and more stripping, which you will see it reflected and our sustaining capital needs.
At $4 copper or you're starting to like La arena copper gold sulfides anymore.
You know I I, I, I always like Florida, and sulfides, a lot and not too as it's called which is a copper gold project.
Always liked debt as approach up but I still believe that it's probably not the right protract for Pan American silver and it's a very large copper porphyry.
And I have a perfect our approach on for a for a for a large base metal producer and and so.
So that's that.
Okay.
Available and so you know, there's obviously more and more interest with a weighted today's copper prices are we are right now really focused on the oxides and that's outside we added already quite a few years of production there.
Thank you.
Thank you John.
The next question comes from Cosmos <unk> with CIBC. Please go ahead.
Hi, Thanks, Michael and Steve, Rob Stewart, and and team great to see you or seven cents per share dividend and a very strong balance sheet too.
And maybe my first question is on Dolores as you mentioned and your 'twenty and 'twenty one guidance.
Gold grades are going to be higher silver grades are a bit lower due to mine sequencing can you remind me you know how long are you going to be in this zone in terms of higher grade gold and lower grades silver and then again remind me once again as you go deeper is it.
Gold grade come up and all areas or was this just one specific area that we're looking at.
Yeah, Hi, Cosmos, Steve here.
Hi, Steve, Yes, yes, and.
So it's a nice zone down there for sure at the bottom of that pit, we've been waiting years to get done or the gold grades down and that bottom we see areas where were mining large tonnage is a plus one and a half to two and a half gram gold very nice, but there is very low silver what those were.
Cash and you know and something less than 20 Gram per ton silver this year versus we've seen up 30, even 40 gram up higher and the deposit that debt high gold zone that lower part of this pit, which we've been stripping on for you know ever since we bought the assets and in 2002.
<unk>.
It's it's it's a big zone and we'll be in that zone for the next probably two and a half years and reality will be mining zone for the rest of the mine life of Dolores, but but the tonnage does start to come off after we get that initial few benches and it gets pretty tight on at the bottom of the pit towards the end.
I still suggest going back to the 43, one on one.
It gives a good profile of what that looks like.
It's out of sequence a little bit we're a little behind what that sequence was and afforded to remote on one but it's still a good indication of what the grades do towards from now towards the end of the mine life and that's Cosmos. So that's the reason of course and just to remind everyone on the call why we moved the Dolores assets from <unk>.
For silver.
<unk>.
Segment are when we look at the cost and production to our gold segment, just because the gold production.
From now on to the end of that asset will outlay to silver production. So it's tough and it's something that is there to stay and that's why we moved it over to the gold segment, which makes it a bit harder to compare apples to apples on the cost side, but if you look at mine to mine of course here you you still got the real picture.
So Michael on follow up I guess, it's gonna be and the gold segment for the foreseeable future and not just 'twenty and 'twenty, one but beyond low disorder.
For the end of the life and up on the change it back.
Got it.
And maybe again on Dolores you know following up on the underground question I think it's been a while since I've asked about the underground and the last time I asked it was going from a 1000 tonnes per day to 500 tons per day.
And how is it going so far where are you at right now and and is it also hitting some of those high grade gold lower grade silver or is it and some other area.
Yeah, it's it's.
We haven't got to the 500 tonnes a day, yet we were disrupted and the ramp up with Covid and with all of the complications of 2020 and the suspensions and things like that so we are still running about 1200 tonnes per day at this time, we're not really intending to push that because we don't really want to be more.
The lives and more people to the site at this time again, given the COVID-19 constraints and and risks or.
So it will probably stay at that kind of rate for the rest of the year. The grades are a little bit different and the underground and theres a little bit more silver Hum you know what average as well and it's kind of funny, we kind of look at it as a gold equivalent basis underground it will average about two and a half gram gold equivalent basis.
But it's about it's about a 60% gold 40 per cent silver kind of split on that.
Mhm, great and it's in a different areas its not its not directly underneath the pit at this time, it's more adjacent and downstream.
Okay. Thanks, Steve.
Switching gears a little bit.
And 19 O S Bay Hill.
And you talked about a more broadly and I'll, Michael and COVID-19 impact I think and one other things you talked about and <unk> be willing to pass was labor and a constraint around labor coming from the northern part of the country.
I guess you know again this might be too early at this point in time, but it's you know youre looking at 'twenty and 'twenty. One production that is higher than 2020, and part of you know and some of these constraints lifting and 2021, how's that going so far and I guess, it's a bit more complicated and now just given the fact that you have and all three mining areas with.
You know different grades higher grades coming from cozy and Joaquin.
On that can you remind us whats the contribution coming in terms of tonnage from each of those assets that you factored into your 2000 and 'twenty one guidance.
Yeah.
And I start on Argentina, and handed over to Steve for Martin on the on on the tonnages, but.
Youre right. The complication is obviously still there and we are only about six weeks into the into the year. So nothing nothing has really changed on on that and.
That's what we and that's what we assumed and in our budget and so when you look at the budget the numbers for the year I think that's that's what we are on track for right now as I said, it's very early days.
And we'll see what happens, but we obviously budgeted for that complication.
And that's one part of that plan that we have that debt is improving.
During the year and one one other reason why our production and there's more back end loaded.
And in 'twenty and 'twenty, one so we are assuming that that's getting.
Getting bad debt, you and D area, you're absolutely right. This is a combination of modern day, all itself plus COSE and Joaquin in two high grade underground operations our debt.
The material to our two hour plant a month, so a lot of complications during COVID-19 you can imagine with a lot of moving parts to it.
Yeah, maybe I'll start and and I'll turn it over to Martin for a little bit more of the distribution, but one thing I would like to say Cosmos. It's really interesting is kochi, which is our smallest tonnage and we keep it small specifically because it's a bit of a it's a bit of a challenge to mill this or.
Got a unique opportunity and banana monocular scale with a massive tonnage of low grade and then the high grade from the underground and banana yellow and the high grade from marking that whole blend lends itself amenable to accept more cozy or it would be very difficult to process cosey by itself. It has to be blended because it consumes.
Much oxygen through the plant, so we're getting better extraction and rates than we expected actually but we have to keep that and breed of production and articles he fairly low given its high grades and Martin maybe you can give a distribution of them yeah.
Hi Cosmos.
Hi, Martin.
First of all.
Yeah, the Argentinian and you.
And operations has been pretty impacted with the coronavirus and the and the shutdown that we had around the end of the year there.
But cosi typically and.
Plans for this year is debt to get to into the 80 to 100 tonnes. A day type of range, that's kind of where we've been and and then accelerated and as we get a little bit later on and the year.
And Joaquin is is more than that it's if memory serves it's are you getting to around 400 tons. A day is our is our plan for this year is about the best we can do and then we have still some residual residual production from the and then on T O underground.
And that's <unk>.
And again and that type of Joaquin and types of production type range and.
And then the Ranger and the plant capacity is is taken up with.
And with the stockpiles and we still have the low grade stockpiles that were made on the mine pit.
Great. Thanks Martin.
Maybe a question on the financials here.
You know as you mentioned earlier and Michael you talked about.
On the input costs, increasing but at the same time, we've seen better byproduct credits coming from the base metals.
And also you talked about I think your assumption that you used was $3 36 per pound copper and we're almost four bucks an ounce or four bucks a pound copper and now you.
You know I guess my question is what's what's your hedging strategy here in terms of say you know diesel and then some of the other fields and also would you consider hedging some of the byproduct credits two to lock in some of those potential gains you could you could you maybe give us a bit more color.
And that.
And also it's too Ralph adjusted the hatching strategy first of all we are absolutely on had some process models. So no hatch on silver and gold are via hatching somebody's muscles and Ralph can give you. Some details there via hatching from currencies in countries, where the currency is that already.
Basic and important for us, which is mostly Peruvian Sol and Mexican peso and Canadian dollar.
And we had seen some diesel fuel and off.
And very successful actually doing so we'd have to start we put in place last year.
But that's that's.
That's about it so as I said, absolutely unmatched on precious metals, and Iraq and give us some details on debt on the base metal space.
Sure.
Yeah, I think Michael covered most of it day Kosmos and.
And the there is a we do have and.
Some some modest base metal programs in place and and actually all of those details are on the MD&A, So and I'd refer you to that and and you know if you want to and detailed breakdown on the positions I can sit and you provide that to you, but yeah. The main thing is that we do and be ready for.
And so on the currencies and and the byproduct credits and precious metals.
The table and noise.
Just to remind everyone that we.
And we look at revenue obviously, it depends on the base metal prices, but I guess about 12% to 15% or 14% of revenue is coming at the moment from base metals.
And and I guess on debt Robin and Michael would you consider increasing your position in terms of those base metal hedges as he said well you know theyre, they're fairly modest at this point and time.
Yeah. They are and you know, there's there's always some and some some taken the kennedys when it comes to hedging and the base metals and that.
They are we produce the base metals in the form of concentrates are there as you know the nuances of concentrate terms and various tax impacts are typically with UNC is hedging more than 50 day maximum 60% of our payable production at any point in time.
Of course, maybe one last question again on the financial side here.
And Michael as you mentioned in your opening remarks.
And some other tax payments can be a bit lumpy.
If I remember correctly and I think you mentioned this as well a lot of it is in Q1 and Q2 could you remind me how much of that are you know total year annual tax payment and is gonna be paid in Q1, and Q2 and I can see that there is definitely an impact on the cash flow, but can you remind me. If there's also an impact on the on the income.
State and then expenses as well.
Sure Cosmos I can I can take that force.
And not and impact on the income statement. We of course, we would accrue for any tax expense and in the period.
We don't expect any lumpy treatment on the on the income statement and.
And on the cash flow for sure and just the timing of payments typically in the countries. We operate we have catch up payments are based on the last year's income tax generated in.
And in March of each year March April so if you look at our balance sheet, you'll see under current liabilities, we've got about $54 million of income taxes payable and so we expect most of that to be paid in in the first quarter. That's usually.
More than half about total tax payments for the year came in in that first our first period of the year. So after that it smoothed out and it really just is made up of installment payments, which we make them.
On on on each of our operations.
Great and I guess, if I remember correctly and it's based on I guess it would be higher this year, because silver prices have increased and so you need to catch up the true up is a bit more than usual is that is that correct and is that how it works debt.
And that's exactly how it works and we of course, we've made and installment payments throughout 2020, but because our income tax.
Was much higher than than the year before because of the strong economic performance we.
We do have this catch up payment. So it it's always there's always this one year lag that we have in our and our tax payments and on from time to time, we do get a refund if we've ever paid and our installments, but of course this year, it's gonna be a catch up payment.
Great. Thanks, a lot those are the questions I have thanks once again.
Cosmos.
The next question comes from Ryan Thompson with BMO. Please go ahead.
Hey, guys my.
My questions were sort of asked but maybe I'll just asks and a quick follow ups.
Sure so on probably for Rob, but just on on the topic on the <unk>.
Investment gains and the mark to market and obviously it creates a bit of volatility and your earnings is there any thought of adjusting that out going forward or are you happy desserts and stick with the how you did it last year.
Hi, Ryan E. M E. Yeah. It is it is debated internally you know consistently we've we haven't adjusted that out.
As we touched on that as we see that as part of our core business.
You know I think dependent and we always review that policy without what did committee said it may change going forward in 'twenty and 'twenty, one but at this point in time and it's clearly disclosed.
And anyone can and can make whatever adjustments they feel.
And fit to do so.
Okay.
That's helpful and maybe just switching gears and and following up on on the question about the sulfides at.
And at La Arena. The poetry can you just describe like is that porphyry is it sitting below.
The current pit or and sort of off to the side like if someone wants to come in and acquire that project do they have to effectively wait for from mining to be completed on on the oxides and and I know you said you'd sort of extended the life beyond.
On the 'twenty 'twenty, one timeframe you originally had and buy and so if you could just comment on on what that would potentially look like or how it a deal could potentially be structured there.
Yeah, it's a very large porphyry sitting below and on the side of it that much much larger of course, then the and the oxide portion of the deposit so.
To answer your question, Yeah, No you cannot mind porphyry and the oxide at the same time, but that will not happen anyway, because and others.
There is.
Building such a large.
Porphyry copper mine.
And I will go to.
On a multi year of engineering, and permitting and getting ready and.
While we have been very successful and Laura and now we are adding oxides and how it will come to and and at one point and and at the end as I indicated I think that debt.
The sulfide copper porphyry piece.
And it will be better and hands off a large base metal company Vanda handover would happen and who gets paid for which part of the oxide and that's just all part of a negotiation.
I don't see it up and I really complicated situation, but at the moment as I said, there's ample time for us to mine and the oxide and mind, the additional oxide, which they are discovering and there will be ample time for somebody to come in and started working at engineering and permitting for the Sulphides.
Okay. Yeah. That's helpful. And then maybe just one last question from me sort of switching back to I guess quasi had the new Pacific investment and and Deere operation and bogie and San Vicente.
There's been a change and governments and.
Yeah can you just.
Make any comments that you can regarding our debt that change and government and if that's had any impact on.
And at San per center and drove the relationships on both yeah.
And I look we are working and very happily working and Bolivia since 95.
Our son of a center as being a very great contributor for our silver production and and I'm still on still is and that's the reason why we are interested to look at other projects and Bolivia and tower investment and new Pacific.
I don't see any any reason to change that with the with the new government Oh. Its a its you know for US has been a good jurisdiction to work and.
Okay.
That's all I had thanks, thanks, a lot from their tickets.
Yeah.
Once again, if you have a question. Please please press star then one.
Yeah.
The next question comes from Lawson Winder with Bank of America Securities. Please go ahead.
Thank you operator, and Hello, everybody I Hope you guys are all well.
And so.
A couple of follow ups for me so first off first off on the La Colorado scarring.
And your release you discussed the day.
And the cooling installations and the heat that's being generated underground there.
And I'd just be curious to know if he is being generated there is that is it just from the high concentration of of sulfide in the rock or are there. Other geological features that are causing that.
Yes, Hi, Hi, Chris Harris, Yeah on.
I mean the.
The U S. As you know, we've drilled and being drilling deep down into and so that's gone zone to the east and the vein sitting further up top and yes, we've gone into a I pull free.
And there are groundwater, there, which which are have a thermal gradient and of course and so it's it's not really geological and in that respect yes. There are.
And systems and.
And hydro systems, which are bringing and he obviously you've got heat from from the operations as it is as it stands today, but in terms of the sulfide content and is that creating a heat not noticed essentially.
And I might add too.
Loss from that.
The refrigeration plant I mean, because of the temperature gradient.
We're pretty confident as we go on to the scar and we're gonna need cooling and today as Chris alluded to we see now and they're in areas of hot water that we intersect we're able to pump that out we're able to ventilate. It we're able to overtime cool that area off so we see an opportunity if we can get that refresh.
Duration planned and early it gives us more speed and getting into areas that are hot now, even though we don't necessarily we could probably survive without and it will help the current operation and that's why we're kind of pushing on a project Portland.
And I imagine it and it is also part of planning for one.
And ultimate development decision as well.
Yes.
Yeah. Thank you for that and also Steve you mentioned that the strip ratios at La Arena, and she window, where I might have and the backwards, but I believe you said, 19% and 33% respectively by any chance are you able to provide what those strip ratios are expected to be in 'twenty and 'twenty one.
Sure and and she window and it's the other way around she windows up 19% from one point or one point too.
La Arena is up 33% from 2.1 to two point when comparing 2020 actual into 'twenty and 'twenty one plan.
Okay.
And then you also mentioned the strip ratio at Dolores was down 18% net.
What is that down to.
Down 32% from three eight in 'twenty and 'twenty to two point now and in 'twenty and 'twenty one.
Okay and now that's that's fantastic.
And I also wanted to ask about.
The current reserve at La Arena.
Does it include any of the satellite pits and what I'm, referring to you. If you think back to like the real also days they were finding a lot of mineralization and the satellite pits around the main pit.
And and and I, just wasn't sure whether or not any of those had been included in the current reserve and resource statement.
Hi, Hi losses and margin here no no. They haven't it's just the main line arena.
Is that and area of focus free exploration at all Chris.
We when we did the purchase of Tahoe, We obviously went through the exploration portfolio. Yes. There are some a series of targets sitting around la arena, but no there and not a target for us at them on.
And so any potential upside you would expect to come in and around the existing pit would that be sir.
Yeah, that's correct I mean, most of the drilling the exploration drilling and that's been happening has been in pit and it's really those central structures. The feeder veins has come up and <unk>.
That's why we're getting some certain amount of success and you can imagine focus was on immediate life mine life expansion as I sat is initially when we purchased the assets.
Planned on our plan was to the two half 'twenty 'twenty. One is the loss production here. So the focus was on immediate life expansion, which which are of courses and to pet.
Okay. That's that's great and then just one final question on.
Some of the I'll call them non core assets that I know theres already been and number of questions on them already but one that hasn't been addressed directly yet.
Shelley Michael.
Where does that stand right now.
And are you in Nashville, looking at potentially developing it and is it and.
Assets that are Pan American and might be.
Interested in participating in.
Or just Pan American still look at that as.
And non core assets that would hopefully be sold at some point.
Yeah, if if and when I look at the development pipeline for Saudi Banco you really have to look at the next.
Publications, and and and and press releases on.
And there I've seen somebody talking about and Sally pack of course is one of their approach and we actually have a they're holding at 25% carried interest.
And two into production. So it's a it's a large zinc deposit no. We're not planning to you know we don't have to financially participate because it's a free carry into commercial production.
But very happy to have that it was one of our.
And protect and and next up took an option on this many years ago and did a lot of work great work on this on on this deposit and ER and.
That's where it stands and they took over and are kind of didn't and running the show on the Audi operator on and as I said, we will keep holding our our 25% carried interest.
Great and it looks like so much John sorry, and I do understand that they all continue with technical studies on that project and I believe yes, as Mike mentioned, if you look at their they're a website et cetera, and we'll give you some more flavor.
Yep.
Fantastic. Thank you everyone for the day answers today and and all the best.
Okay.
Yeah.
This concludes the question and answer session I would like to turn the conference back over to Michael Steinmann for any closing remarks.
And thank you operator, and thank you everyone for calling in.
This is all the time it and we have for this call have a place if you have additional questions and I'll come up with new questions like always feel free to call IR sand emails to share and they'll be happy they'll be happy to answer those questions. In due course, just a few words to the silver market, we're not we're not close.
And here you have seen probably.
Some of the releases that.
And I came on February 10th from the Silver Institute talking about and outlook on Silver 2011, I think really important therapy side, obviously, the use of silver as Oh, sorry I.
And as I had to have inflation or store of value or however, you want to call. It a.
Silver is a very very important industrial model.
And especially.
And as the world's going into clean energy on more clean energy production and electrification.
Silver like Cup, we're gonna be or is a very essential model to have.
The silver and to deal with this looking at probably a 10% to 11% increase this year as a forecast on the industrial side of silver and it makes a lot of sense.
On a different administration and the U S. A lot of focus on on clean energy that will be a lot of and you know production.
Production and installation of solar panels and outside.
Would assume and also electric cars will consume quite a bit more silver and copper.
Combustion engine car, so just keeping an eye on that too and it's just that there's always there's two sides of silver one is of course that the investment or financial assets.
But on the side on the industrial side, which is more than 50% of the after use of silver just on the industrial side and.
That does not include the jewelry, etc.
And as Fastly growing and of course, we'll grow more while the world is coming out of this pandemic and.
Oh pretty going back here to normal AR as we rollout two vaccinations.
And even with that I will close our call and thanks, everyone for calling in and looking forward to update you again in May on our Q1 2021 have a good day.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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