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 2020, 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 an opportunity to ask questions.
To join the question queue. You May Press Star then one on your telephone keypad should you need assistance during the conference call you may signal other operator by pressing star and zero I would now 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 '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.
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 2020 results.
We finished the year with a strong financial quarter revenue in Q4 was a quarterly record of $435 million driven by the rising 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 gain from the sale of exploration properties I'm getting from fuel and currency hedges.
The deferred tax assets recognized relates to extend mine lives at the payments in Bahrain operations due to other exploration success and our ability to utilize tax attributes.
Adjusted earnings in Q4 were $125 million or 57 cents per share.
The most significant adjustments or the removal of $22 $2 million related to currency movement that reduced tax expense.
Dilution gain relating to our interest in Maverix and the gain on the sale of exploration properties.
Full year 2020, net earnings totaled $176 $5 million or 85 cents per share.
Full year 2020, adjusted earnings were $243 $4 million per $1.16 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 balances increased to $279 $1 billion.
Keep in mind that we achieved these strong financial results. Despite the significant impact COVID-19 had on our operations <unk>.
Including incurring mine care and maintenance costs of about $75 million for the COVID-19 related mine suspensions.
As previously announced we produced $17 3 million ounces of silver and 522000 ounces of gold in 2020.
Largely reflects the government mandated suspension of operations in Latin America, and throughput restrictions across all operations due to COVID-19 pandemic.
Silver cash cost in 2020 were $7.05 and all in.
Sustaining costs were $11.38 per silver ounce sold.
Tuchman cash cost from 'twenty to 'twenty were $797 and all in sustaining costs were $1011 per gold ounce sold.
Capital expenditures total approximately 191 $7 billion.
But 50 to 60 million dollar of capital spending was deferred into 2021 as COVID-19 delayed our ability to progress certain capital projects.
We are expecting production in 'twenty 'twenty, one to improve markedly over 'twenty 'twenty based on the assumption that the impact of COVID-19 will diminish over the year as indicated in our guidance for 2021 issued on January 19.
That means production will be backend loaded to the second half of 'twenty or 'twenty one.
In addition mine ventilation improved from protracted Luckily or other that's why I left my non heap Leach sequencing at Dolores will impact production of those operations in the first half of 'twenty or 'twenty one.
Luckily we are preparing the new surface to 345 meter level a race for commissioning in Q2 2021.
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 in deposits.
But 'twenty 'twenty, one we're expecting silver production of $22 five to 24 million ounces, the roughly 35 per cent increase over 2020.
And record full production of 600 from five to 655000 ounces.
We are not forecasting any production from escrow Paul asked the Guatemalan 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 19 2021.
And the other guidance assumptions for 2021, we expect to generate robust levels of free cash flow.
In the second half of 'twenty 'twenty, one based on the outlook for production 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 is to invest in projects that will provide attractive long term returns like our luckily or other scar and discovery or other exploration projects.
Yes that exploration success has always been an important value driver for us.
Our strong track record of replacing reserves and extending mine lives at many of our operations, especially have Luckily IATA payments at La Arena.
We have exceptional silver growth assets in our portfolio.
Regarding the novel approach at the government in Chubut, Argentina has proposed modification to the mining law to permit the open pit mining in certain zones of the province the.
The provincial legislature has not voted on this law modification, yes, we.
We do believe that properly permitted unregulated mining activities at sustainable mining practices will benefit the province, and the people at your book.
At Escobar Guatemala's Ministry of Finance your mines and the shrink of Parliament have agreed to begin the pre consultation meetings in April 2021.
This is an important step in respecting the strength of People's fried for consultation as required under I L. O 169.
They expect the process will take time, but we are not able to provide a timeline for the restart of the mine.
We are advancing development of our world class like what other current deposit and looking forward to providing a preliminary economic assessment at the end of this year and.
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, you will hear a tone acknowledging your request. If you are using a speakerphone. Please pick up your handset before pressing any keys to withdraw your.
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, Thanks for taking my question.
I guess just first on the guidance I know, it's sort of.
It's based on the impacts of Covid kind of diminishing throughout the year kind of with Q1 equal to Q4, and then kind of Q2 around 75 per cent.
I mean, I know, it's sort of early in the year, but it 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.
Well I don't know, which way if it there's now an even more second wave or going to third place in many places.
See you know strong waves in Peru, and Mexico. Many other countries around the globe. So that's our assumption of course, we don't know what's going to happen.
Through the year, but we also luckily seed after vaccination programs in countries.
Achieved already quite a high percentage.
Generation programs really really help here and bring those numbers down so were very positive during the year and with it.
Roll out of those programs.
And although we will start getting overdose, but right now in Q1 of course there is no.
A lot of programs in place in Latin America. Some vaccination has started.
<unk>.
So we'll see how that goes but yeah I would say Q1 as we assumed in our budget will be similar to Q.
Q4 of last year.
Okay. Thanks, that's helpful. And then just sort of in the release you kind of talked about.
Inflationary pressures and packing costs, especially on.
The gold side of that showing day in Lorain and.
Could you talk a little bit about what youre seeing and kind of.
No. Other though is if you continue to see higher cost if it's a risk to the cost guidance.
In that area or do you see kind of risk to any of the the other operations.
Yeah, just in China, or something to the costs and then pass it onto Steve.
Of course every given year or most of the year, so you're going to see a difference between how we ended the year on how we guide for the next year.
Simply the fact that we have to assume some metal prices for the following year in our budget.
Which are lower.
What we just experienced in the past year or to say well maybe it can become.
Plug in higher costs than what we've just seen in the past.
Because our costs are dependent on byproduct credits.
It automatically increases our costs in our guidance always debate at the beginning of the year and that will be normalized during the year, depending where metal prices coal if metal prices are.
Go higher up of course, we have more byproduct credits and vice versa, but for sure we see some from some pressure I guess.
Especially the salary side total pass onto Steve to comment on that Yeah, Hi, Tyler Steve here, Yes generally.
Forecasted 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 in that range. The other thing I'd raise as we have been seeing some very high.
Ocean freight cost per our materials coming in we haven't seen pretty sharp escalations in that and then the energy costs 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 voice movement strip ratios.
The mine planning.
For instance, Dolores strip ratios gonna reduced 32% over where it was in 2020.
Whereas your window and La arena are increasing.
19% and 33% respectively.
That's just mine plan sequencing, we added life at La Arena, we added life at your Windows those come with a little higher strip ratio as we get into those those waste someone's to strip down to that or so that's the other thing to pay attention to.
Okay great.
The costs from my side hopefully.
Siding pandemic during the year, that's let's be hopeful for that.
We'll probably see or hopefully see less costs directly related to the pandemic for testing quality name etcetera as.
As we stated I think it was about $75 million range.
For care and maintenance and I think in about seven to $17 million to $20 million range of direct.
Costs from the pandemic, so as I said, let's see how that how that advances during the year, but that should be obviously a reduction 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 I'm, probably a couple of questions for Steve mostly wondering if can you give a sort of a ballpark in terms of what we might expect sort of the grade change percentage to be like how long run out 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 Covid you know we're going to be at that three O. Eight early on and then you'll see an increase in Q2, Q3, and Q4 and average out the year at the $3 35.
Got it yes I can.
Going back out those numbers, 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 until that centrally.
Ventilation started right well.
It does affect how many times, we 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 flow rates that we have available. So it does impact throughput as well to some degree so we will see lower throughput in the first part of the year increasing throughout the year.
<unk>.
Got it.
Perfect. That's very helpful and if you could just quickly give an update on how things are going at the Lawrence.
The underground and the pulp agglomeration.
Yeah.
Both are running well the underground.
Running you know with the kind of 80% to 90% range that we had in Q4 with.
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 5300 tons per day average rates.
That's been going well, we do experience in the mine plan.
Low grade because of mine sequencing early in the year higher grades towards the end and we also have some heap leach sequencing going on.
The slower in the first part of the year high up on the heaps and then moving out later in the year will get better more more quicker extractions, if you will.
Got it.
That sounds great alright, thanks, so much thanks Bill 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 investment income tablets, we pointed out.
Plenty of I believe it's.
$60 million, where approximately half of that was it.
In Q4.
Correct me, if I'm wrong, but I don't think.
And real life question upped the investment income has been adjusted out of our adjusted earnings.
So if that's the case is it possible to provide some guidance on maybe the breakdown of the securities naphtha gangs.
Hey, Joe Good morning, it's Rob Doyle here.
Correct, we don't make any adjustments for our investment income.
Adjusted earnings are we we consistently leave that as part of our core earnings.
Debt net gain that you referred to the 63 four for the year it's.
Entirely.
The is the it's the mark to market on our strategic positions in in mostly new Pacific.
Or a true Europe, Peru, 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.
They like projects like that to me, obviously like new discoveries large silver discoveries and in jurisdictions, where we are already active in this case, it's Bolivia.
That's part of our business our business to a you know a how growing those assets with our investment and.
Financing because there's two ways to do it we can obviously do our own exploration has been very successful with that too but.
I think other companies, making discoveries and we help to finance that are 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 locks. So what is call risk.
Maybe I'll just add one more thing it's important to note that our investment to our position in Maverix is not included in that.
We have come from Ebix as a as an associate and therefore, we don't mark to market a large position in maverix. So that's just on short term investments.
Okay, great. Thanks, a lot.
Yeah.
The next question 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 the process might take you.
You didn't mention Argentina.
With all the Lockdowns there I presume.
Nothing has happened or resumed and show good process.
And with a net cash position.
Would you confirm whether or not you're still a property seller of any pieces of the <unk>.
<unk> acquisition or other assets.
Yeah.
<unk> priorities would be in addition to the La Colorado.
Okay.
Let me see if I remember right.
Chris.
And that's okay.
Yes, youre right that there the government announced that and it's not the start of the consultation, but the pre consultation in Guatemala in April So we'll see how that goes as you know this is a <unk>.
Government run a process run by the Ministry of mines in Guatemala for decile of 169 consultation process.
Which we are just a party to it we're not running it. So we don't have control over the timeline. So I can't tell you how many meetings will be required of how long it will take time will tell.
But it's.
You know, we're obviously happy to see that debt after understandable delay for a COVID-19 that this this has.
Picked up again, and if you wanted to say like that.
Meetings are.
As we know every country in the world 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 in their country and make sure that there was enough.
Hospital beds and treatment possibilities available for that population.
And to book as I said.
And then in my tax their debt.
Uh huh.
The change in the law has been proposed standard this cost us as we know that there was a lot of information out there on that day to vote, but the legislature did not vote on this yet.
And again I don't have a date on on went out and I would happen.
So, we'll just have to be patient and wait for that but that that's definitely discussions going on on debt.
What it's called Zonification via the law would basically identify areas in the province.
That would potentially allow open pit mining and a and other areas not so just just to make one point clear theres a lot of a lot of information out there even if that law will be approved this is another direct approval of novel approach us, but it would allow us to actually up.
Fly for permits right. This is just this there's this law is intended to set basically the debate to actually apply for permits mining permits in certain areas of the province, it's not an approval after certain project.
Regarding.
Divestments you asked.
So we're very very very happy with the Diavik old assets from.
From the Tahoe side as well as they have already happened with any of the gold assets, we happened to silver assets.
As you know we have been very successful with the exploration.
And Loren on Timmins, especially where we added to the already for many years of more production.
The situation looks quite a bit different than when we did the purchase and close to purchase and we actually for example in Laredo, we assumed at that time.
'twenty 'twenty, one will be the last year of production from the oxides and it looks like now we have at least another three years. So 2024, and we are 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 Fortinet Nicole.
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 time.
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 too many.
Acquisitions.
And for sure we'll try to divest some of them.
Over this year next day, depending how the demand will be for those assets. Those are assets that are too small for us to.
Bill, but you know could be interesting for a smaller company, obviously to do something with it and then I think there was another question the fourth one channel and I forgot about that what I'm, sorry, what was it.
What are the Capex or investment priorities in addition to la Colorado scarring.
Okay, Yeah, that's what I said.
As I've always said that there's three kind of buckets, but they always pay back our debt.
Invest 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 in achieving all of that repaid all our debt is $275 million in a in a very difficult year last year with the COVID-19 impact pretty strong.
We doubled our dividend actually increased it twice in total it was a double of our dividend during the year and debt that bucket is still there are of course, we'd like to return.
Cash the other shareholders, we pay dividend uninterrupted since 2010 and the actual return up to date I think without the payment that's coming up in March average.
Nearly half a billion dollars of cash.
Due to our shareholder some kind of share buyback, but mostly dividends. So that definitely will continue and you know us we don't have to pay back line of credit or 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 said the best return.
So he was a shareholder is investment in high quality high return projects. So there's definitely a big 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.
Advanced the project further so that will require capital not a huge number this year, but as we go forward. The following year. So the number will obviously increase with a lot of underground development on surface infrastructure for that for that approach.
But we're very active on the exploration side and other projects we are exploring.
A few new projects around the payments are such that we are exploring.
Around.
So window.
And now where we have been very successful and you know I count those as well as the addition of high quality approach us.
And use of capital is of course every time, we expand to reserve interest pick up in pets. It will require more heap leach space and more stripping, which you will see it reflected in our sustaining capital needs.
At $4 copper or you're starting to like La arena copper gold sulfides anymore.
No I I I I always like La arena sulfide. So a lot of INR two as it's called which is a copper gold project.
Always liked it.
As a project, but I still believe that it's probably not the right protract for Pan American silver, it's a very large copper porphyry.
Perfect a project for a for a for a large base metal producer and.
So that's but that's still there are available.
There's obviously more and more interest with other with today's copper prices are we are right now really focused on the oxides from NASA side, we added already quite a few years of production there.
Thank you.
Thank you John.
Okay.
The next question comes from Cosmos <unk> with CIBC. Please go ahead.
Hi, Thanks, Michael Steve Robb, Ceridian and team great to see you or seven cents per share dividend in a very strong balance sheet too.
Maybe my first question is on Dolores as you mentioned in your 2021 guidance.
Gold grades are going to be higher silver grades are a bit lower due to mine sequencing can you remind me you.
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 or is it because the gold grade come up in all areas or was this just one specific area that we're looking at.
Yeah, Hi, Cosmos, Steve here.
Steve.
Yes.
It's a nice zone down there for sure at the bottom of that pit, we've been waiting years to get down there the gold grades down in 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 with those were four.
Cash and you know something less than 20 Gram per ton silver this year versus we've seen up 30, even 40 Gram up higher in 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 asset and in 2012.
Paul.
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 in reality, we'll be mining that zone for the rest of the mine life at Dolores, but but the tonnage does start to come off after we get that initial few benches, it gets pretty tight down at the bottom of the pit towards the end.
I still suggest going back to the 43, one on one day.
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 in the 43 101, 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 customer. So that's the reason of course interest to remind everyone on the call why we moved to.
Dolores assets from our Silver group segment.
When we look at the cost of production to our gold segment, just because the gold production.
From now until the end of that asset to the loudly to silver production. So it's definitely 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.
Mhm. So unlike other follow up I guess, it's going to be in a gold segment for the foreseeable future not just 2021, but beyond that.
For the end of the last we're not going to change it back.
Got it maybe.
Maybe again on Dolores following up on the underground question I think it's been a while since I've asked about the underground day last time I asked it was going from 1000 tonnes per day to 500 tons per day.
How is it going so far where are you at right now and is it also hitting some of those high grade gold lower grade silver or is it.
Some other area.
Yeah, it's it's.
We haven't got to the 500 tonnes a day, yet we were disrupted and not ramp up with Covid and with all the complications of 2020 and the suspensions and things like that so we are still running about 1000.
200 tonnes per day at this time, we're not really intending to push that because we don't really want to be mobilizing more people to the site at this time again, given the COVID-19 constraints and risks there.
So it will probably stay at that kind of rate for the rest of the year. The grades are a little bit different in the underground, there's a little bit more silver.
You know what the average is well it's kind of funny, we kind of look at it as a gold equivalent basis underground it'll average about two and a half gram gold equivalent basis, but it's about it's about a 60% gold 40% silver kind of split on that.
Mhm, great. It's in a different area, it's not it's not directly underneath the pit at this time, it's more adjacent than down strike.
Okay. Thanks, Steve maybe switching gears a little bit.
<unk> S Bay Hill.
So you talked about a more broadly you know Michael COVID-19 impact I think one other things you talked about meningeal is failing 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's higher than 2020 in part of you know in some of these constraints lifting in 2021, how's that going so far and I guess, it's a bit more complicated now just given the fact that you have in all three mining areas with.
You know different grades higher grades coming from cozy 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 2021 guidance.
Yes.
I'll start on Argentina at day 90, it over to Steve for Martin on the on the ton interest but.
Youre right. The complication is obviously is still there and we are only about six weeks into the into the year. So nothing nothing has really changed on debt.
That's what we that's what we assumed in our budget. 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.
We'll see what happens, but we obviously budgeted for that complication.
And that's one part of the plan that we have that debt is improving.
During the year and one one other reason why our production is more backend loaded.
Yeah.
In 2021, so we are assuming that that's.
Getting bad debt your India, Yeah, you're absolutely right. This is a combination of Montreal itself, plus COSE and Joaquin in two high grade underground operations 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 then 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.
We got a unique opportunity in banana monocular scale with the massive tonnage of low grade and then the high grade from the underground at 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.
How much oxygen through the plant so we're getting better extraction rates than we expected actually but we have to keep that Brady to production article she fairly low given its high grades and Martin maybe you can give a distribution of them yeah hi.
Hi Cosmos.
Hi, Martin.
First of all.
Argentina continued operations has been pretty impacted with the Corona virus and.
And the shutdown that we had around the end of the year there.
But <unk> typically the plan for this year is debt to get to into the 80 to 100 tonnes. A day type of range, that's kind of where you know what.
We've been in and then accelerating as we get a little bit later on in the year.
Joaquin is is more than that it's if memory serves its true.
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 production from the non T O underground.
That's coming.
Again in that type of Joaquin types of production type range.
Then the remainder of the plant capacity is is taken up with.
With the stockpiles that we still have the low grade stockpiles that we made when we mine the pit.
Great. Thanks, Martin maybe a question on the financials here.
You know as you mentioned earlier, Michael you talked about.
Some other input costs, increasing but at the same time, we've seen better byproduct credits coming from the base metals.
So you talked about I think your assumption that you used was $3 36 per pound copper and we're almost a cord blood to announce or four bucks a pound copper now you.
You know I guess my question is what's what's your hedging strategy here in terms of say diesel and somebody other fields and also would you consider hedging some of the byproduct credits to lock in some of those potential gains you could you could you maybe give us a bit more color yes.
Yes.
Non afterwards to Ralph but just for the hedging strategy first of all we are absolutely unhatched. Some process models. So no hard from silver and gold are via hatching somebody's muscles and Rob can give you. Some details there are there has changed from currencies in the countries. We're in other currencies that are really.
Bacon important for us, which is mostly Peruvian Sol Mexican peso Canadian dollar.
We are seeing some diesel fuel.
Very successful actually doing so we'd have just as we put in place last year.
But that's about it so as I said, absolutely unmatched some precious metals and other Ralph can give us some details on debt on the base metal space.
Sure.
Yeah, I think Michael covered most of its day Cosmos.
The range that we do have.
Some some modest base metal programs in place and actually all of those details are on the MD&A. So I'd refer you to that and you know if you want any detailed breakdown on the positions I can certainly provide debt to you, but yes. The main thing is that we do and be ready for.
So on the currencies and and the byproduct credits and other precious metals.
The table annoys that'd be.
Just to remind everyone that our if.
If you look at revenues, obviously, it depends on the base metal prices, but I guess about 12% to 15% or 14% of revenue is.
It is coming at the moment from base metals.
Mhm and I guess on debt Robin and Michael would you consider increasing your position in terms of those base metal hedges as you said, Ralph you know, they're they're fairly modest at this point in time.
Yeah. They are and you know there's there's always some some some taken a Kennedy zone chems to hedging the base metals in the day.
We produce the base metals in the form of concentrates are there as you know the nuances of the concentrate terms and various tax impacts.
Typically with UNC is hedging more than 50 day maximum 60% of our payable production at any point in time.
Mhm of course.
Maybe one last question again on the financial side here Michael.
Michael as you mentioned in your opening remarks.
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 is going to 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 statement expenses as well.
Sure Cosmos I can I can take that.
Okay.
Not an impact on the income statement, we of course, we would accrue for any tax expense in the period. So we don't expect any lumpy treatment on the on the income statement and on the cash flow for sure just the timing of payments typically in the countries. We operate we have catch up payments.
Based on the last year's income tax generated in.
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. So we expect most of that to be paid in in the first quarter. That's usually you know more than half about total tax payments for the year.
I mean 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 an all day.
Each of our operations.
Great and I guess, if I remember correctly, it's based on I guess, it would be hired as true 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. That's exactly how it works said we of course, we've made installment payments throughout 2020, but because.
Income tax.
It was much higher than than the year before because of the strong economic performance.
<unk> had this catch up payment. So it it's always there's always a one year lag that we have in our in our tax payments and on from time to time, we do get a refund if we've ever paid in our installments, but of course this year, it's gonna be a catch up payment.
Great. Thanks, a lot of those other questions I have thanks once again.
Yes.
The next question comes from Ryan Thompson with BMO. Please go ahead.
Hey, guys.
My questions were sort of asked but maybe I'll just ask from a quick follow ups.
Sure so its probably for Rob, but just on the topic of the.
Investment gains and the Mark to market, obviously, it creates a bit of volatility in your earnings is there any thought of adjusting that out going forward or are you happy to sort of 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 we always review that policy with a weighted committee said it may change going forward in 2021 bad debt.
At this point in time I mean, it's clearly disclosed so anyone can can make whatever adjustments they feel.
Fit to do so.
Okay.
That's helpful and maybe just switching gears and following up on the question about the sulfides at.
Lorraine the porphyry can you just describe is that porphyry is it sitting below.
The current pad or any sort of off to the side like if someone wants to come in and acquire that project do they have to effectively waits for from mining to be completed on the oxides and I know you said you'd sort of extended the life beyond the.
The 2021 timeframe you originally had in mind. So if you could just comment on what that would potentially it looks 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 standard than the oxide portion of the deposit so.
To answer your question Yeah, No you cannot mind porphyry onto oxide at the same time, but that will not happen anyway, because and others.
Building, such a large porphyry.
Porphyry copper mine.
We'll go to.
For a multi year of engineering and permitting and getting ready.
While we have been very successful at Lorain now with adding oxides you know it will come to an end at one point than I did at the end as I indicated I think the debt.
The sulfide copper porphyry piece.
It will be better in hands of a large base metal company Vanda handover would happen and who gets paid for which part of the oxide I mean, that's just all part of a negotiation.
I don't see that that are really complicated situation, but at the moment as I said, there's ample time for us to mine the oxide in mind day additional oxide. 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 net your operations in Bolivia and standard <unk>.
There's been a change in government.
Olivier can you just.
Make any comments that you can regarding our debt.
That change in government and if that's had any impact on.
Yeah, Sam per center in Europe.
Relationships from both yeah.
No look we are working in very happily working in Bolivia since 95.
Son of a center as being a very great contributor for for our silver production and I'm still I'm still listen.
That's the reason why we are interested to look at other project in Bolivia and tower investment in New Pacific I don't see any any reason to change that with the with the new government Oh. It's it's you know for US has been a good jurisdiction to working.
Okay.
That's all I had thanks, thanks, a lot from the update guys. Thank you.
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.
A couple of follow ups for me so first off first off on the La Colorado scarring.
In your release you discussed.
The cooling installations in the heat that's being generated underground there.
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.
I mean the.
The other as you know we've drilled I mean drilling deep down into that <unk> zone to the east the vein sitting further up top yes, we've gone into a I pull free you up there our groundwater, there, which which are have a thermal gradient of course and so it is.
It's not really a geological and in that respect yes, there are systems.
And hydro systems, which are bringing in heat 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.
I might add too.
Loss from that.
The refrigeration plant I mean, because of the temperature gradient.
We're pretty confident as we go into 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 in early it gives us more speed in getting into areas that are hot now, even though we don't necessarily we could probably survive without it it will help the current operations and that's why we're kind of pushing that project forward.
And I imagine that it is also part of planning for one.
Ultimate development decision as well.
Yes.
Okay.
Yeah. Thank you for that also.
Steve you mentioned that the strip ratios at La Arena, and she window, where I might have them backwards, but I believe you said, 19% and 33% respectively.
To answer are you able to provide what those strip ratios are expected to be in 2021.
Sure an inch window is it's the other way around windows up 19% from 1.1 0.2.
La Arena is up 33% from 2.1 to 2.8, when comparing 2020 actual to 2021 plan.
Okay.
And then you also mentioned a misstep ratio at Dolores was down 18% net.
What is that down to.
Down 32% from three eight in 2020 to 2.9 in 2021.
Okay No that's that's fantastic.
And I also wanted to ask about.
The current reserve at La Arena.
Does it include any other satellite pits and what I'm, referring to you. If you think back to like the Rio Alto days. They were finding a lot of mineralization in the satellite pets around the main pit.
And yeah, and I, just wasn't sure whether or not any of those had been included in the current reserve and resource statement.
Hi, Hi, Lawson, it's Martin here no no they haven't just the mainline.
Is that an area of focus for exploration at all Chris.
We know 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 range, but no. There are not a target for us at the moment.
And so any potential upside you would expect to come in and around the existing pit whenever you Sir.
Yeah, that's correct I mean, most of the drilling the exploration drilling that's been happening has been in pet and it's really those central structures. There's feeder veins has come up.
That's why we're getting some certain amount of success as you can imagine focus wasn't immediate life mine life expansion as I've sat is initially when we purchased the asset.
We plan our plan was to the two half 2021 us to lost production here. So the focus was on immediate life expansion, which which are of course is in the pit.
Okay. That's that's great and then just one final question on.
Some of the I'll call them non core assets I know, there's already been a number of questions on them already but one that hasn't been addressed directly yet.
Shelley Tycho.
Where does that stand right now.
Or are you in Nashville, looking at potentially developing it.
An asset that a pan American might be inter.
Interested in participating in.
Or just Pan American still look at that as.
Our non core asset debt that would hopefully be sold at some point.
Yes, if you want to look at the development pipeline for Saudi Banco you really have to look at the next.
Publications and press releases are there.
There I've seen somebody talking about Saudi Park of course is one of their approach us we actually have a they're holding at 25% carried interest.
Into 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 is a free carry into commercial production.
But very happy to have that it was one of our exploration project on an ex or took an option on this many years ago and did a lot of work great work on this on this deposit and ER and.
That's that's where expense they took over and are kind of didnt rounding to show them. The other operator.
And as I said, we will keep holding our our 25% carried interest.
Great.
John Sorry, I do understand that they are continuous technical studies on that project and I believe yes, as Mike mentioned, if you look at their they're a website et cetera, who will give you some more flavor.
Yep, that's fantastic. Thank you everyone for the day answers today and all the best.
Okay.
This concludes the question and answer session I would like to turn the conference back over to Michael Steinmann for any closing remarks.
Thank you operator, and thank you everyone for calling in.
This is all the time, we have for this call have a place if you have additional questions or come up with new questions.
Always feel free to call IR.
Send emails to Sarah and I will be happy they'll be happy to.
To answer those questions in due course, just a few words to the silver market why not why not close here you have seen probably some of the releases that.
I came out February 10th from the Silver Institute talking about an outlook on silver 2011, I think really important therapy side, obviously, the use of silver S. I saw.
As I had to have inflation or store of value or however, you want to call. It.
It's a very very important industrial metal.
Especially.
As the world's going into clean energy more clean energy production in electrification.
Silver like Cup, we're gonna be or is a very essential metal to have.
The Silver Institute this looking at probably a 10% to 11% increase this year as a forecast on the industrial side of silver makes a lot of sense. So we have a different administration in the U S. A lot of focus on on clean energy that will be a lot of.
Production in the installation of solar panels, I would assume and also electric cars will consume quite a bit more silver standard.
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 oneness of course that the investment or financial as upside.
But the side on the industrial side, which is more than 50%. After after use of silver just on the industrial side.
That does not include the jewelry, etc.
As fastly growing and of course, we'll grow more while the world is coming out of this pandemic.
Oh pretty going back here to normal AR as we rollout two vaccinations.
Anyway with that book of close our call. Thank you 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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