Q1 2021 Pan American Silver Corp Earnings Call
No need to mute.
[music] okay.
Thank you operator, and welcome everyone to Pan American Silver's first quarter 2021 conference call media and other participants on the call 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 that 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 first quarter results.
It was a challenging quarter operationally, which obviously translated into our financial results I'd like Nevada, advancing several ventilation projects to provide ventilation for our longer term operating and development plans.
Including development of discount deposit and to regain access to the highest grade areas of the mine.
In Q1 during commissioning of the new surface to 345 from me at the level of race day.
What I'm forty-two meet yourself that Reis became blocked.
Working to bypass that blockage true drifting from a nearby ramp and additional raise boring.
We expect that that work to be completed late in Q3, leading to improved grades throughput rates and mine sequencing late in 2021.
In addition, most of the zinc and lead concentrate we produced at Laclede out in Q1 was not shipped until after the quarter closed delaying base metal and silver sales.
The inventory buildup was the result of an extended negotiation with the domestic transport contractor, where we upped it to withhold transporting concentrate on total we could come to a mutual agreement craveable terms.
Well from transitioning to our new 2021 lots smelter customers based in Europe.
Sentra shipment resumed in early April 'twenty, 'twenty, one and our site inventory levels have returned to normal levels with all of the Vitol concentrate from Q1 2021 now having been shipped.
The delayed sales from the build in inventory will be commercialized over the next two quarters.
The combination of the ventilation blockage and the delay in shipping concentrate production resulted in highly distorted the all in sustaining costs at La Colorado in Q1, which will be low worth a reminder, off the year with the accumulator coupon concentrate stocks having been shipped.
The temporary buildup in inventories also occurred at the low rise due to ore stockpiling in preparation for the rainy season, which prevents us from mining the high grade ore at the bottom of the open pit.
That's well leach sequencing constraints during the current stage of pad construction led to a buildup.
In pad inventory delaying some production later into the year.
Together the inventory buildups Luckily it out on Dolores chat window led to a $39 $9 million buildup at cost in inventories, which resulted in revenue of $368 $1 million for the quarter.
Operating cash flow was $29 $9 million.
Reflecting both the impact of inventory buildup in working capital.
$61 $3 million of cash taxes paid in the quarter. That's our tax payments are typically weighted to the first quarter after a year.
We recorded a net loss of $7 $6 million of four cents per share in Q1, including a $39 million noncash mark to market loss on some of our short term investments, mostly in new Pacific metals, which owns the large silver sand project in Bolivia.
Adjusted for the $39 million investment loss.
The earnings for 37 $4 million or <unk> 18 per share.
Probably worth mentioning that our short term investments at the end of Q1 had a market value of $72 $9 million, which is well above the $24 million cost base.
And that new Pacific Metro share price have substantially recovered since Q1.
Our financial position remains solid with $206 $4 million in cash and short term investments.
$500 million line of credit remains Undrawn.
Our board approved a quarterly dividend of seven cents per common share unchanged from last quarter.
Q1, consolidated silver production totaled four 6 million ounces impacted by the ventilation issues at La Colorado mine sequencing and the inventory buildup at the Lotus onto window and lower production and expect that that line until this painful.
While the COVID-19 pandemic continues to restrict throughput rates at our underground operations.
<unk> had an outsized effect in some jurisdictions, Argentina is one of them for interprovincial travel restrictions have reduced workforce deployment for our mono Taylor special operations to a greater extent than we expected.
Sales of our segment cash cost in Q1 were $12 on 30 science and all in sustaining costs were $16 99 per silver ounce sold these costs have been heavily impacted by the lower amount of ounces sold due to the inventory buildup and lower production at La Colorado mine until this vehicle.
Due to the delays in establishing ventilation at local rather and our expectation of prolonged shortfalls in workforce deployment that non non teller cycle, we have revised our silver production forecast for 2021 to a range between 25 to 22 million ounces from.
From our original guidance of $22 five to 24 million ounces.
Correspondingly our estimated four silver segment cash cost increased to a range of $9 six day to $11 60 per ounce and $14 25 to $15 75 per ounce for all in sustaining costs from previous guidance of $8 50 to $10.
And $12 50 to $14 respectively.
Q1 consolidated gold production totaled 137600 ounces.
Our payments, we reduced mining rates about 10% below plan during the quarter to address the geotechnical conditions in a section of the Bell Creek mine discussed last quarter, while advancing development and lower level.
It will enable increasing mining rates back to normal around midyear.
That's a window production was impacted by lower pounds placed grades and extraction rates due to mine sequencing into a new area of the Pip.
Just more fine grain toast rock.
The higher clay content.
We stockpiled approximately 335000 tons of these fine grained material equivalent to about 11% of D. O remind during Q1, which will be blended the coarser ore to be mined later in the year for placement on the heaps.
At Dolores higher gold grades from mine sequencing growth, partially offset by the buildup in inventories mentioned previously which resulted in a production being delayed later into 'twenty or 'twenty one.
All of these issues are transitory and we continue to expect steadily increased gold production rates during the remainder of the year.
Coal segment cash costs in Q1 were $846 and all in sustaining costs were $1058 per gold ounce sold given the throughput improvements expected by payments on shop window through the reminder of the year.
Maintaining 2021 annual gold production guidance of 605 to 655000 ounces and estimate the coal segment cash cost and <unk> cost of 825 to $925 per ounce and 1001 under 35 to $1250.
Per ounce respectively.
Inclusive of $15 million reduction in sustaining capital expenditure to a range of $230 million to $245 million due to deferred timing of certain expenditures at shop window.
We continue to expect throughput rates and production in 2021 to improve based on the assumption that the impact of COVID-19 will diminish over the year modulation and Bruce had luck Laredo through our ongoing ventilation projects more corso or sort of a reminder, shall window, allowing blending with the stockpiled fine grained doors.
And lower mining Languish are opened at the Bell Creek mine in tenants given the large tax payment is behind us and strong metal prices, we look forward to generating strong cash flow backend loaded in the year.
Yesterday, we also issued a news release on our local Alot Com project, reducing some impressive thriller results from the 65000 meter infill and expansion of the rail program.
We are advancing discount project targeting a preliminary economic assessment technical report or P. A at the end of 2021 in.
In addition to surface and underground infill diamond drilling.
Commencing.
Geotechnical and ventilation backfill to chemistry, and patio geological field evaluations, along with mine plant and infrastructure designed studies.
Metallurgical testing continues to demonstrate favorable flotation results and expansion of baseline environmental data collecting is ongoing.
You have already submitted permit applications for certain site infrastructure projects that will assist in advancing this con project beyond the P E, which in some cases he'll also simultaneously benefit the existing lock what are the main operations.
These include projects such as camp expansions access road upgrades potential underground access from and shaft excavation entrances ventilation systems in mind, calling to address the natural increasing rock temperatures with that.
I'd ask about the start for the pre consultation meetings have been moved from April 2021 to may 21st because of the rise of COVID-19 cases in Guatemala, and resulting government decree to restrict gatherings and movement from them.
American Silver has been requested to participate in the process, which is led by the ministry of energy and mines in Guatemala.
We look forward to an inclusive consultation process respecting the shrink of people tried to consultation on the day principle up good faith mutual respect transparency without pressure or conditioning from parties.
Before we move on to the Q&A section I would like to mention that last week, we released our 2020 sustainability report.
This year's report takes into consideration the Tcf D and SaaS peer reporting frameworks.
The report is available on our website for those interested to learn more about our commitment to sustainable mining practices and with that I would like to open the call for questions.
Thank you.
Begin the question and answer session.
He joined the question you May Press Star then one on your telephone keypad, you'll hear a tone acknowledging your request.
You're using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then true.
Our first question is from Tyler Langton with JP Morgan.
Your line is open.
Good morning, Thanks for taking my questions I guess just to start with the the impact from COVID-19 in the Colorado and Banacci out I mean is it just trying to get a sense if the situation sort of.
Got worse, you know say versus last quarter, and then I know you know with your guidance you kind of you said it was based on sort of the COVID-19 related restrictions easing is it something where.
You know by the end of the year, there's sort of no more restrictions I'm just trying to get a sense of you know you know what level of restrictions you kind of maybe still expect.
To carry on through the end of the year.
Yes, Tyler Michael here.
Of course at the beginning of the year when we did our budget to be kind of assumed you know straight line improvement, 25% kind of every every quarter you already knew that you know, we don't know exactly how the pandemic evolves and how all that happens it looks like in some of our operations day Q1 impact of a stronger than me.
Then we expect it.
That doesn't mean that it doesn't get much faster better at the end of the year I just I just don't know at this time or it's going.
Potent dimension here Tyler.
It's really on the underground operations that do we see the impact not in our open pits.
Most of our silver is produced in our underground mine.
And especially local that and mono day other special day impact on the silver is much bigger than on the Gulf production. So that's really the main reason for that but locally when you look at it. It's most countries. We are working and have kind of a what.
They call it the traffic light system, our system, our day look regionally how'd, you outbreaks move around and under our regional restrictions.
That's come in place automatically so it's not any more like countrywide shut downs, but there are restrictions that make it harder sometimes in one place than in another line, its really really moving a bit around depending where the pandemic. So it was more cases are in each country or each region of the country, but.
Yeah, very important to mention that the ing.
Pact is really mostly seen on the on the underground, but you know.
Vaccines are rolling out faster now istar slower start like in many countries in the world and I think that will accelerate during the year undeveloped will improve the situation, but as for for Q1 is a.
Probably slightly more impact than we expected, especially as local it out on my non tail, maybe Steve you went out so yeah, just a Tyler this is Steve here.
Impact is more severe than we expected down on sales.
They all do too as Michael said, the inter provincial travel restrictions that require us to do.
True put our people through quarantine and testing both coming into the province, because many of them that work from outside the province, but also when they leave so it really extends the shifts schedules out really limits. How many people we can actually bring on the site to do the mining. So we just don't have the full staff of people that.
We expect that we expected some impacts but they were more severe in Argentina, we think that when we look at the epidemic outbreak there it's been fairly strong in Lasalle and we think that's going to continue for a while that's why we made an adjustment there at la Colorado, we saw a bit of a spike in cases during.
Q1, probably peak sometime in early mid March and we've seen it starting to come off there or we're more optimistic moving there.
Over on the other side of the curve.
After Q1 in La Colorado.
Okay. No. That's that's very helpful. And then just the FOP with be the ventilation blockage at La Colorado.
I just you know in terms of.
Q2 and Q3.
How should production because from cosmic in those quarters and compare day kind of Q1 had sort of a full impact and then I guess you kind of mentioned that.
You won't have that resolved.
In Q3 should kind of production to be back to normal and then does that kind of I guess impact sort of any of those sort of the longer term you know improvements that you were sort of expecting them from the ventilation system.
So this is Steven and where you expect to <unk>.
Indicated complete the.
Bypass of the blockage of the range that.
Incurred during Q1 by the end of Q3, we will immediately put the ventilation fan that was already in process of being installed when we have the sloughing in the blockage that occurred.
So that'll go fairly quickly and that'll open up that east area before.
Before we get that opened up we're really limited on how much diesel equipment. We can run in the mine given the limitations on ventilation and particularly in that East high grade zone. So currently we expect will be will be restricted to about 1500 to 1600 tonnes per day mining rates at La Colorado.
So until that ventilation is repaired and then by the end of the year will be back up to the 2200 2400 tons. A day that we typically saw one ventilation is in order and because we're not in that high grade zone or grades. During this period of restriction was also lower we're probably in the <unk>.
$2 75 to 300 Gram silver head grades.
And again once that ventilation opens up we get back over into that East High grade zone, we expect the grades to come more normal towards reserve grades at 300 330 Gram.
Groups.
Perfect. That's very helpful. Thanks, so much.
The next question is from Cosmos, <unk> with CIBC Cosmo Jamie Your line is open.
Hi, Thanks, Thanks, Michael and team.
Certainly a tough Q1, but at least it looks like things will get better in the second half.
Maybe my first question is also on La Colorado could you maybe talk a bit more about what happened was he you know slogging of the the range wall here was it you know.
I'll, just a bit more fracture a fragmented than you had expected have you fixed that portion, yes, that'd be shot treat them cautioned our slogging, yet and then I guess you know as you talked about you're trying to bypass to the area. That's plugged. So are you going to raise bore through that section and then kind of.
Like shocked creep that section right away can you maybe talk a bit more about you know how you're going to fix it.
Sure Cosmos. This is Steve and then maybe stepping back a little bit just for everybody's benefit.
The main two of our main ventilation raises at La Colorado.
There were nearly 10 years old.
It had eroded had sloughed had block between 2018 and the last one in late 2019 and at that time that restricted our ventilation capacity restricted our ability to mine in that eastern of high grade lower candle area zone. So we started to do an extensive.
Program and looking at alternatives of how to replace those ventilation raises.
And we came up with this program that had been implemented in many mines in Mexico, a pre conditioning the ground, where the res would go with grouting and we entered an extensive grounding program for six months starting in March of 2020 and between the grouting in the ground Foundation preparation.
<unk> for the raise boring.
That program took us through to October of 2020.
And it looked pretty solid we were pretty pleased with the results of that grounding program and actually we were able to successfully complete the raised bore quite quickly from November to mid January we had that three one meter diameter raised four pulled through that pre grouting ground.
<unk> successfully went quite smoothly and we immediately started to short creep that raise with using a robotic shot machine that we lower down into the hole.
We were we were having good success and suddenly we started getting sloughing non in the walls of this whole and I should mention this ground is very very challenging it's a volcanic day site material.
What we believe is happening is there is some clay zones within our material and it's just it doesn't absorb the growth. It just doesn't it doesn't hold the stability of the growth and so we started to observe some sloughing coming off the walls.
And actually in a couple of instances damaged and destroyed the robotic shot creep machine, we had to pull it out rebuild it put it back in so we spent between January and late March.
Grouting and it was during that period of the grouting.
Part of the Sloughing came down plugged the bottom of the raise.
We decided to leave it plugs, so that we could complete the grouting and stopped that sloppy and indeed, that's what we've seen today.
Sloughing has quieted down we havent seen any additional sloughing, we're very happy with the grouting that's on that raise yeah.
Solidify so we went in late March to open up the bottom of that and between March and April we spent quite a bit of time true.
Turning to drill that plug from the side, obviously, you don't want anybody up underneath there. So we're controlling and shooting at from our side and we just by the end of the April decided it was kind of a futile attempt we weren't going to get it out that way and we made a decision that we're going to cross cut from from a nearby wrap up.
Towards the top of the plug that supported two meters off the bottom of the range and that's what we're doing now and once we get to the top of that plug will build a raise bore chamber that's off to the side of the current raise bore and it'll actually be a bypass range from the from the 42 meters above down to the bottom.
As I said that'll take us through the end of Q3 to complete the project and we will have a full ventilation circuit down on that eastern side.
Of course, and then in terms of I believe you know this one that raise as part of <unk>.
Three I believe that raises that you were trying to construct does this now pushed back the timeline for the others is this number one number two that you've completed this line.
And does that change the timeline for the other ones.
Yeah, Gregg Krug from Cosmos. This is number two actually number one was from the $3 45 level down to the $5 28 level that was the second stage in this area that one was completed that's what limestone rock hosted raise so we don't have near the problems in limestone that were doing the day sites. So that one was completed.
Were quite happy its functional once we get those upper stage fixed. So this is the second one.
The third one we're putting in over on what we call better trades better three and we're pre grouting that grown now to run a raise bore there and it's quite challenging ground were seen in the ground and program.
Real challenges that we're facing there we're not sure we're going to be able to successfully graph that ground or not and as such we're starting to consider an alternative raise that takes us even further to the east which is our most favorable ground from a mining perspective. It's also the most broken up ground, which is probably.
By nature, that's why it's broken up into various mineralized.
So we're gonna go further east and we're actually looking at a number of alternative technologies for that raise but to be honest, we're seriously considering a conventional shaft concrete line blind shaft excavation. There. We think that's the one that will be the most certain it'll be the most.
Supportive and and Ah and actually it looks quite favorable to do that project. So we're hoping to announce that over the next quarter.
Quarter, or so, but that's kind of where its heading at this point.
Okay, great Thanks, Steve well.
Maybe switching gears a little bit at Dolores as we've talked about in the MD&A. There were you know I'm certain.
Not issues, but production was delayed due to the leach pad kinetics.
Could you maybe talk a bit more about that as well is it anything related to the club a pulp agglomeration or is it really you know the hype of the height of the heap at this point in time, if I worked it out you know in terms based on your numbers.
Looks like recovery for silver was about 56%.
In the quarter, which was comparable to the 53% last year.
Hold was lower 58%.
<unk> versus 73% last year. So I guess my question is you know what what's what's the factor behind our Leach pad kinetics and is it just really impacting the gold.
Yeah very good question Cosmo first off I'd like to say that that inventory build at Dolores. The majority of that about two thirds of that roughly was really stockpiling of high grade from the pit and that's a strategy. We're deploying this year. So that we keep high grade available for the pulp agglomeration plant during.
The rainy season, when it when the rainy season. So there is a bottom benches of the pit, which is where the high grade as is inaccessible. So we're stockpiling that or not that's the majority of that inventory increase relative to the leach pad kinetics, and you're right, we're a little bit off mostly on gold on that kinetics and interestingly.
Got it.
It has to do with this connection between two of our Leach pads pad three in pad, one and it's in an area that that does not that deep with or it's in an area, that's pretty shallow with or an adjusted tricky area to to make that connection the topography. There. The terrain there is very challenging and so what.
As we have to load and leach very quickly and get off of it and we're going through a number of cycles, there and trying to stabilize the heap as it builds and connects to those two areas. So we have to move through their very quick and cut our leach cycle times down and that's the effect of what we're saying.
Okay, great. So I guess the inventory buildup isn't all exactly related to recovery of part of it is mine sequencing as well without the high agree exactly exactly a big part of it is mine sequencing.
Got it Okay, and then maybe one last question Meningeal as day, how I see that guidance has been lowered by about 8% to 10% I think you know I asked a question during the Q4 call as well Michael you know a big part of that our previous guidance was dependent on sort of the startup of COVID-19.
Joachim.
You know with our lowered our production guidance now from Atlanta has stale.
How much have you factored in in terms of you know potential delays or setbacks that that cozy and walking.
Yeah, Cosmos, Steve again actually ice cream.
Where we're mining pretty well in closing, marking our limitation is getting enough miners in there to get the tonnage out there we want and we're mining kind of the early stopes on the fringe of the deposit. So we have seen lower grades and then we were anticipating and so it makes it.
Much more important to mine more tonnes of which were limited to because of people and it's really the tonnage concern that we have is why we we we don't see that relaxing and the next.
Foreseeable future for the next few months anyway, and that's what really drove us to we've got to reduce the tonnage come on on a closer and walking from what we originally anticipated and make it up with lower grades coming out of Manhattan deals fail and that's the net effect of that change and just maybe to add here that for people who are not.
Familiar with south and Patagonia for underground mining that you know most of the mining companies, including ourselves resource to underground miners from different provinces us awhile.
And something obviously from the province, but its a open pit miners are are available in the province, and then underground miners many companies resource to other provinces as well and that's really about it but the issue lies that are the enter provincial travel it has very restricted in Argentina and ER.
It makes it harder for us to use up to do to get the Tom side from the underground operations. There. So that's the reason for that for that change.
Thanks, again, Michael and team and Steve and those are all the questions I have thanks for answering my questions. Thanks Cosmos.
Yeah.
The next question is from Tech travel Turnbull Scotiabank Trevor Turnbull Your line is open.
Thank you and thank you Michael.
I had a question I guess with respect to Bell Creek. It got touched on at the end of last quarter, you were making some geotechnical modifications to accommodate it sounds like wider or and I'm. Just wondering if it is simple is it as simple as just adding more support more rock bolting that too.
A thing or is there more significant planning element to how you approach. These areas and the reason I was asking is it seems as if the remedy is going to take some time you were talking about it getting kind of back to where you want. It later this year and so to me that it seemed like maybe it was more than just applying a more hardware.
The problem.
Hi, Trevor Steve here, Yeah. So what we're seeing there is some some.
Instabilities from ground.
Control issues on the sill pillar of a couple of the stopes that we restarted mining late last year. The wider zone is actually an opportunity for us and it's in the lower the next levels of development at Bell Creek. So we're anxious to get into that lower development, because we had to slow down the mining true to put.
Greater ground support greater monitoring of seismic activity greater controls around the stope sill pillar, if you will and so it slowed down the mining in that area. So that's what took us down late last year or as we indicated last year, where we're evaluating.
Ensign on this wider zone, that's the next levels down and so we're anxious to get into that towards mid year. This year to get our tonnage rates back up and all the while we're redesigning the silt pillars to try to avoid you know with the mining sequencing them to support the combination of those two factors to avoid having those problems.
In the future.
Okay.
And then maybe just a quick question on costs.
Your costs went down at many of the silver segment operations, obviously with the exception of La Colorado, and you've talked about my non T. L. A but the others you actually lowered the cost guidance going forward you've kept your base metal assumptions unchanged. So that doesn't seem to be the factor I was just curious what's driving those.
Numbers.
Yeah, Ken or Rob Doyle and good morning.
Yeah, I mean, we.
Are seeing seems been byproduct credits coming through which is helping that which is the main factor behind that in and and you know strong base metal production, we haven't changed our basement guidance at all so it's really on the byproduct side, where we're seeing the benefits.
Okay, Great. That's all I had thanks guys. Thanks.
Thanks Trevor.
Yeah.
The next question is from Don Demarco with National Bank Financial Dawn to Michael Your line is open.
Okay. Yeah. Thank you operator, and thank you Michael and team maybe.
Maybe I'll start off with.
She window.
The when I look at the gold guidance hasn't changed which is great to see get yet we did see it.
Some of the softer production coming out of tenants, which has already been discussed on the call, but I also see swindle seem to be running below the <unk>.
The run rate can you just remind me about maybe the seasonal impacts on onshore window or Ah are confirmed my.
The expectations for an accentuated backend loaded year.
Yes, Hi, Donald C.
So what's what happened in Q1 is that our mine sequencing, we got into opening a new phase of the mine and we encountered more finer grain more clay like materials than we had anticipated and that's.
Right now our current objective is to blend that kind of material with good quality rock before we placed on the leach pad to ensure good permeability for leaching and.
And we didn't have enough rock in this new section of the pit. So we've stockpiled as Michael said 335000 tons, so about 10 or 11% of what we mined during the quarter went into stockpile that wasn't anticipated as we get into the rock in that section of the pit will be able to pick up that stockpile and blend it with better.
Rock and put it on the heap. So that's why we expect ex.
I ended production rates as we work our way through the year, which windows issue.
Okay.
Okay, that's great and then maybe just returning to.
The question about the impacts of COVID-19 Wang.
And I appreciate the color that Michael had provided with regard to the focus on the underground operations, but to get a little bit more granular is it the is it social distancing requirements, it's causing issues or potential supply chain slowdowns like what is it on the ground level that is.
That that's impacting production performance and in what indications do you have that this can be addressed by way of a vaccine or whatever other measures are being implemented.
Yeah, Dan This is Steve again.
So one of the big factors in limiting our deployment of personnel during COVID-19 and the underground is really camp space and we have to spread everybody out in accounts and we find that you know the open pit mines, we we've had enough construction camps and things like that those big.
So we can spread everybody off pretty easily in these underground mines, we didn't have that flexibility to have an excess camp capacity, we have been building excess camp capacity at all of them. Many of the underground operations, but that's really been the constraint and they also we have seen as I mentioned earlier.
There are.
Some spikes in the epidemic in the regions. That's been predominantly I don't know why around some of our underground mines like La Colorado, and we pick that up through our testing as we mobilize people, where just find a lot a lot of people don't pass those screenings when there is an epidemic occurring.
So it's reduced our workforce and our ability to deploy there. So that's why we think with the vaccine rollout.
You know once we can relieve some of that physical distancing open you know more capacity in our camps and not and they're not screen as many people out as they come to work that will really enhance our production through the years is how we predicted but it's still kind of in that vein I weigh in here as well as for example, local or out of.
We have very large drill programs going on for not only for the exploration of a fortress garden side for the infill drilling for the P. Eight.
That requires many more people on site as you can imagine many more contractors.
A lot of specialists that help us to collect the data for.
For the P E and obviously everything gets more complicated when you have more people on site as Steve said, everybody gets tested people some people don't pass screening.
So there's definitely complications.
On all side by New York.
In the reach of our routers, you know big bigger outbreaks and assets up just kind of moves around from region or country to country as Youll see when you look at the you know what that at the virus map over the last year. So we see that the country is suddenly have bigger outbreaks. We've just experienced up in Canada, where we now coming off.
Isn't that a third wave I guess.
So it's the same thing happens in Latin America, you asked about the vaccine and receive vaccine rollouts happening slowly but everywhere in all the countries. We are working I believe.
Some are some are quicker some are a bit slower AR, obviously I cant make statements on the effectiveness on that vaccine I can just see what happened in the rest of the world and it seems that the countries that have a high vaccine right a C or a very large effectiveness very important effectiveness of type of vaccine.
I see that you know in Israel and day U K and the U S. I think we see starting gripping here in Canada, as well and I. Obviously, you would assume that we see the same around the globe and are also in the countries. We are working in Latin America. So that was really what I was referring to with my with my comment on the on the vaccination.
Roll outs.
Okay, well, thanks for that and shifting over to the La Colorado Karnes. My final question certainly this is a.
The catalyst that are quite significant and then you really some drilling update.
The financials last night, so what I see is that there was a highlight hall.
Reported 11, 7% zinc equivalent over 150 meters.
This is about what we calculated an average grade somewhere on the order of around 8% or something on other than yourselves.
How do you find the day are you getting really high grade hits like this then and what are the implications on the proximity to infrastructure potentially sequencing some high grade zones are or whatnot.
Any additional color on this particular highlight would be appreciated.
Yeah, I don't it's Chris here, Yes, no I mean, we were obviously.
Infill drilling so.
We were hoping to get high grades.
This is all going to plan in inverted commas.
Sure.
Is I mean, the person you mentioned nice 30 drill holes on the one specifically relating to is in that core which is very close to the intrusive. It's why we've got.
This XO skol and it's it's it's why that the fluids have come up and then sort of anticipated out so really around these higher grade core which is gonna be the emphasis on the P. Eight and wherever with the infill drilling is happening as we were expecting to see these these high grade areas.
As we move out off to the west and going to the mall with the bright true so.
This this is in between that the trend intrusive and this is why we were expecting to see those high grades.
Specifically as we stepped out beyond need the brake share on your 40, which we then started to see additional scope, which is really pleasing for for the team and certainly for the expansion of its perfect going forwards.
I'll weigh in here too I mean.
It's very impressive of course, when you look at the infill drilling that's what about the gross up that way you know the arable to use for the P. A but it.
It shouldn't be missed idea those step out holes.
To divest or southwest.
Passing that broadcom, they finding more wide high grade intercepts of Scone in areas that we actually did not identify before.
We are as I said in the call and in the press release, we do focus on day infill drilling right now because we already have over 100 million tonnes of resource. So we can advance it to P. A but it definitely it looks like that this economy amortization will continue to the west we don't know yet how far vehicles there.
Actually currently drilling there and I'm still hitting high grade wide intercept so it's wide open there and you know us as soon as we have to information available for the P. A.
I'm sure Chris and his team can't wait to do to explore further to divest index fantasize after off the current resource.
Okay. Okay, well. Thank you for that that's all from me and good luck rebounding and production and costs through the rest of the year.
Yeah.
The next question is from Lawson Winder with Bank of America Securities Lawson Winder. Your line is open.
Great. Thank you operator, Hello, and thank you for the.
Update Michael Steve Jim.
You sound very confident that the ventilation issues at La Colorado will get resolved and that confidence makes perfect sense to me. However, I'd like to maybe just drill down a little bit more and I know we've talked about it a lot just in terms of timing and cost impacts around that.
And just just to ask.
How much current ventilation is there at la Colorado, and how long could you continue to mind, just with what ventilation you have up and running and working.
Yeah, Thanks loss from.
Currently in round numbers, we're extracting about 350000 CFM through the whole operation and that's what limits us to the 500 to 600 tonnes per day capacity, we have plenty of reserves.
Within the levels that we can access at the ventilation flow rate.
For quite a while again, it's lower grade.
It's just to operate at that we don't see any you know future constrictions of that that we can continue that as.
As we open up these new ventilation raises I'm the one that's blocked from.
Some of the others were hoping to get up to about 900000 CFM.
Which is what we want to be up to 'twenty to 'twenty 400 tons, a day and again I want to highlight you know.
The issue is in this volcanic day site material all historically.
<unk> raises at La Colorado were simply a range for we didn't put any people or equipment down the holes and support them and those were adequate at the higher levels of mining at La Colorado.
They held together fine their flow rates were low enough, we didnt see any conditions I've had eroding overtime as we get deeper and deeper on this ore body the temperatures do increase.
Condensation low humidity increases and our flow rates to increase, particularly with the higher production rates. We have so as we put more air hotter air wetter or through these raises in the day sites, we're seeing them starting to erode. So clearly long term this is Ben.
I say this has been a great learning tool for us as we look forward to the scar and because we have to develop a lot of infrastructure through this kind of material for the scar. So what we've learned here is an immensely valuable as we look forward to that storm project and we learned that you have to we have to have fully line.
And supported races. We can have on line raises anymore through this day cited material and so that's why we're looking at alternative technologies and potentially even blind blind shaft excavations are we do future races with those we have all the confidence that we need to get.
The flow rates, we need to keep this operation going well into the scorn and big production rates of the skull.
I think Lawson you asked about the cost of them I believe we started on this race with probably bore.
$5 million with all of the additional work, we are probably going to be around the $6 million range. So it's.
No. It's it's the solution that is.
A much lower cost, but as we as we learn.
Even with the crowding can cause some problems are Steve subsidies.
Confidence for the concrete line Baker blind shaft excavation because they have a full day line shaft that we use for extraction, which is over 600 meters long that we build on our two.
2017 2017.
You know that's obviously working every day they use third party extraction after after yard to fully concrete line.
Large diameter pipe from me that five pan.
Diameter shaft. So of course that comes at a higher cost, but we know that they can belt that thunder when we look at scone and much much larger throughput at La Colorado, that's property about attaching too.
Yes.
Okay. That's great color. So the incremental costs just to do the additional shot creek shot creating in the existing raises is actually quite small.
Now what would be the incremental cost if you had to go to a blind raises for us.
For all the future ventilation, just if you were to take the existing assets.
The most recently completed ventilation shaft.
What would that cost be vs.
Our fully blind cost.
Because it causes a blind range, yes, and just to clarify that $6 million were talking about those include the development and the bypassed reservoirs as well it's not just the short Caribbean alone.
But but we don't we haven't done an estimate of the new of the new blinds shaft, yet we're working on that diligently right now, but what I can point to is what Michael brought up as our existing shop, which is a five one meter diameter 620 meter deep shaft fully concrete line that shaft.
Is fully equipped with a hoist and all the gear head frame. So I mean, we wouldn't look at that for a ventilation shaft. It would just be the concrete lining without all of the hoist and everything in the background, but that shaft. We did 2016 2017 that was $38 million to do that Chow.
In about 12 months once we started doing the blind.
Blind excavations so clearly without the hoist and headframe all the gear for rock handling that's going to be less but.
But we don't have an estimate yet that I'm prepared to give out at this time.
And of course, this kind of infrastructure. If you look at this kind of diameter and large.
Deep ventilation shaft.
It's not only for the current.
Production from the range for lack of a router, but parcels per day up.
Our solar development for you know for the future production from this con that we'll need for sure huge and very big.
Diameter line.
Long shaft for ventilation for a much increased tonnage. So that's kind of the first step I would call it off of expanding or working on the mine towards desk arm development.
Yeah, Oh, Okay. That's that's that's great color.
Then Steve you just mentioned that are in.
In response to my last question or my original question that in fact, there were lots of the lower grade reserves in front end and I just.
Yeah, I'm I'm guessing you're talking years as opposed to quarters. When you say lots of reserves, yes years yeah.
Okay.
Okay, well that that.
It certainly gives me pleasure that accompany some forgot don't forget we have currently I believe about 11 yourself.
Reserves in veins sustained the veins ahead of us probably about a similar amount of years in resources that every year.
Chris on this theme is converting a slice deeper down into a reserve from the resource, but yeah. I think we're sitting at around 11 years of reserves, obviously that will have come out with our reserve and resource update midyear like like we do now every year.
Okay, Great and then.
Just finally on the clay.
Have you guys started now doing the necessary.
<unk> and other drilling and.
Just to understand where that clay is and perhaps you can sort of model the controls out on that clay you can you can predict where it might be in and to hopefully avoid it.
As possible in the future.
Yeah, Great question Lawson, we did do an extensive amount of geotechnical drilling before we started this ruiz that's what led us to design the the pre grouting program that we implemented.
We have not been able to map clay zones per se to where we could bypass or move away from them, they're kind of intermixed in there and they're very erotic. Unfortunately, it it's the kind of material and as we move further east that only gets worse, it's the kind of material, we're going to have that.
Figure out a way to deal with that's just the way it is.
Okay, and hence the discussion about potentially.
Potentially doing fully caught created blend ratios, okay that that that makes sense.
Alright, thanks, very much guys that clears a lot up and I appreciate your time today.
Thank you.
The next question is from Brian Thompson with BMO, Brian Thompson. Your line is open.
Yeah, Hey, guys. Thanks for the update.
Just a couple of questions on the sort of let's call it social political legal side of things I noticed in your disclosure that there was recently a legal proceeding brought it Escobar could you just give us a little bit of color on that and if there's any sort of yep.
Central for delays on the Ilo 169 consultation process ore, but this legal proceeding sort of run in parallel to that.
Yes.
Start with.
And capacity from Hector.
Christopher Laminates as well I.
I don't really see a delay in the the free consultation.
And because of that.
Really what happened for the for the day Les as you know, we announced last last quarter I think our last call that you know the free consultation was planned for April it's not planned for later this month and the reason was really its about probably about five days or a week before it should have started.
The government of Guatemala put out the new decree really limiting our congregations of people aren't on travel.
Of course in that case, the government cannot cannot proceed and have large meeting for a pre consultation. So it was really due to it.
From the second base there I don't Yeah, secondly from COVID-19 that we've seen in Guatemala, That's you know.
Took a strong grip. So that's what's really the reason for the delay on you know, we're really really looking forward to to go into this free consultation hopefully later this month now.
And I you know I.
I don't really see this as a as another reason for delay its radio COVID-19 related to tissue that that we've seen last time.
Got it okay.
Yeah, Hi, Ryan its Christopher 11, I'm General counsel with the Pan American Silver.
This claim is by a small community near Askable and.
It's like a lot of claims that we deal with throughout all of our operations and it certainly won't impact the consultation process and we will we'll deal with the claim and mountain tried defenses and we don't we don't foresee any problems with defending it.
Got it okay. Thank you.
Then maybe just switching over to Peru, obviously, there's a lot of chatter there.
Political front and the narrative seems to be changing.
Changing every day. It seems just wondering if you could provide any sort of comment.
Comment on.
What you are seeing or hearing from sort of boots on the ground in Peru.
<unk> election in early June.
Well look I mean in general obviously, we have elections everywhere.
We're working every four or five years, depending on the country.
And it's just a normal democratic process, where you know in this case the population of Peruvian Elekta and ex later on and a long long time here in Peru since 94 since the start of the company and our you know with the.
Peru is a good place and that's always a good place I think the work and we'll work with the new leader and the new government are the new but you know the same way that we work with.
But with the outgoing.
Administrations, so no I cant give you obviously you can look at polls or not I don't know.
Looking around at the at the elections across the globe.
I you know how predictable the polls actually are or not they can.
Discuss about it all day long so I don't want to make my predictions, obviously here because we will just wait and see what happens.
And and assets up this is in the hands of the.
Peruvian population electing the IMAX theatre as it should be.
Okay. Thanks, Thanks for that and then maybe just just lastly, obviously copper prices or.
Looking pretty pretty good here can you just give us any sort of update.
A bit on my range to I know, there's been some father.
I thought I had before are you seeing.
Increased interest or can you just provide any sort of update on line.
Sure.
Of course, a lot of interesting copper and how it's going.
It's it's going wherever I I thought that's going on a lot of people I'm not I'm not the only one and obviously that's heat up to have a strong recovery after the pandemic kind of old.
The economy, we have.
A large post towards electrification in the world, which will require us I always had a lot of copper, but it would require also a lot of silver it will require a lot of battery metals as well silver will be essential here for all of the electronics of course.
And the clean energy production. So it's doing what we thought it's going to go I think and I think we're going to see that strong demand.
Ongoing yourself, probably the report from the silver in Q4 last year, where every obviously saw a decrease in the demand from the silver side for for the industrial side on children side due to the pandemic, but it wasn't actually not that Pecos I I thought about ethics backed up and is recovering very nicely.
Actually saw record inflows.
E T piece on the divestment side. So of course, that's a reason why silver price sits from a route.
This right now looking at Lorain, well I you know I've said many times that we are still drilling there we keep finding more.
More and more gold reserves it will be very interesting to got the update that mid year on the on the reserve there, but we you know we already announced that.
No I think we're still sitting right now at least another three years of production from the gold oxide. So there's still quite a bit away from the.
From the from from from the sulfides from all of the porphyry below but that's definitely more interesting approach act like La arena with the copper price is so you can imagine.
Diligently they literally are advanced to protect on the exploration side to define obviously, how our production plan is advancing over the coming years and then you know parallel look at a possible divestment after off the porphyry, which is a much different approach.
Much much further down the road and property further down the road and that science is where you have longer and longer reserve some day.
The oxide saipem done than we initially expected.
Got it got it perfect. Thanks, Thanks, a lot Michael that's that's all I had today.
Dave.
This concludes the question and answer session.
Like to turn the conference back over to Michael Steinmann for closing remarks.
That came out thank you very much for calling in today are looking forward to ups.
Update you on our Q2 results, which will be somewhere in in August right in summer So stay stay safe stay healthy.
And looking forward to catch up in a few months. Thank you very much.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
Yeah.
Yeah.
[music].
Okay.
[music].
Okay.
Yeah.
Yes.
Yeah.
Yeah.
Yeah.
Yeah.
[music].
Yeah.
[music].
Yeah.