Q3 2021 Pan American Silver Corp Earnings Call

Thank you for standing by this is the conference operator, welcome to the Pan American Silver third quarter 2020 results conference call.

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I would now like to turn the conference over to surrender exactly Vice President Investor Relations and corporate Communications. Please go ahead Ms. Becky.

Welcome to Pan American Silver's third quarter, 2021 conference call media and other participants on the call are invited to participate in listen only mode. We released our third quarter 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 web site.

Not 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. Please also note that we use non-GAAP measures.

Please refer to the alternative performance non-GAAP measures section of the news release and presentation for further information on these measures.

Joining the call today from Pan American, our President and CEO, Michael Steinmann, Steve Busby, Chief Operating Officer, Rob Doyle, Chief Financial Officer, Martin Walker, Senior VP technical services and process optimization, and Chris Emerson VP business development and geology.

I'll now turn the call over to Michael for a brief overview of the results before opening the call for questions.

Thank you Sharon and thank you for joining us today to discuss our third quarter result.

Revenue in Q3 of $463 million was a new quarterly record.

The realized price per ounce for silver was $24.16 and $1782 per ounce of gold.

Net earnings were $22 million in Q3, or 10 cents per share, which included noncash mark to market losses on short term investments of $25 $3 million, primarily for our investment in new Pacific Metals Corp.

The realized gain on the sale of our Waterloo early exploration Uh huh.

$28 $5 million and income tax expense of $54 million. The tax expense includes $6 $8 million of expense related to the Waterloo sale.

That's $9 $9 million related to changes in deductibles tax attributes driven by changes in foreign exchange rates.

Adjusted earnings were $37 $8 million or 18 cents per share.

Strong Q3 cash flow from operations of $157 million was more than sufficient to fund sustaining capital investments and dividend payments.

And contributed to a $75 million increase to cash and short term investment balance at September 30.

Turning to operations, we produced 4.8 million ounces of silver in Q3.

Silver production for the last 18 months has been hindered by ventilation constraints at La Colorado as disclosed previously.

In Q3, we removed the blockage that I've had for during the commissioning of a primary ventilation raise and.

Q3, we also completed several race bore replacement and upgrade approach us all being fully lined with Chuck creates ground support.

Overall mine ventilation air volumes now exceeds pre 2019 rates by 44% successfully lowering temperatures and humidity in many parts of the mine.

We expect mine development, some mining rates had luckily it ought to continue increasing over the coming quarters steadily ramping up to the throughput rates of approximately 2000 tonnes per day by mid 2022.

The improvement in ventilation will also allow us to increase underground exploration drilling rates, particularly for the scar on deposit.

We produced 142006 hundred ounces of gold in Q3.

That's 10 minutes, we continue to mine at lower rates and grades as we adjust the mining methods and the upgrades ground support systems to adapt to the wider or extensions in this section of the mine plan.

It'll be debottlenecking and increasing the capacity of our new cement Rockville plant during Q4, 2021 which has been limiting our mining rates in the wider ore zones to a greater extent than expected.

At Dolores, we had and in heap gold inventory buildup of 8100 ounces during the quarter and 37000 ounces year to date.

The inventory build as a result of heap sequencing necessary to accommodate a delayed completing construction of leach pad, one south which results in leach sequencing into relatively deeper sections of the heap.

For longer periods than originally expected.

We will be loading ore on the new pad one south by the end of November which will benefit the heap kinetics in late 'twenty or 'twenty, one and moving into early 2022.

That's a window, we had an increase in pad inventories of 5900 ounces in Q3 for a total of 16100 ounces for the year to date 2021.

He had been stockpiling fine grained material until they could mine, the coarser grind or for mixing and placing on the heap.

You have to just as our mine sequencing and they're now accessing coarser or which is allowing greater blending for the final brand or including blending in some of the previously stockpiled ores.

Silver cash cost in Q3 were $11.92 and all in sustaining costs were $16 30 per silver ounce sold.

Spending was elevated at local rather for the ventilation book.

Pensive Shockwave support and for mine mechanization towards greater long hole stoping production rates.

We believe the investment in mine mechanization will benefit benefit safety productivity and costs over the next few years as we accelerate developments to capture the full benefits of our long hole stope mining methods.

All in sustaining costs of luck, let out I should come down a throughput rates rise over the coming quarters.

Clothing, that's realizable value inventory adjustments silver all in sustaining costs were $16 per silver ounce sold.

Coal segment cash costs in Q3 with $922 and all in sustaining costs were $1176 per gold ounce sold.

Excluding net realizable value inventory adjustments gold all in sustaining costs were $1168 per gold ounce sold.

Overall, our operating performance is being impacted by qualified labor and supervision shortages.

Additional costs related to COVID-19 protocols and cost inflation pressures, particularly for fuels and logistics.

Based on operating results year to date and expectations for the reminder of the year you have to be biased our guidance for 2021.

Now expect to produce 19 to 20 million ounces of silver rich.

The reduction from the guidance provided on May 12 is due to lowered unexpected celebrates a ton with Santa due to narrowing vein structure, resulting in reduced productivity and increased dilution.

The extensive shot create support development advances at La Colorado that's.

Lower heap Leach kinetics, given the delay in completing construction of pad, one south leach pad at Dolores.

We now expect to produce 560 to 588000 ounces of gold in 2021.

The reduced estimate is primarily due to lower than expected production had a window in Bell Creek.

That's a window to find grant or resulted in reduced solution application rates.

Which in turn lapsed to a buildup in gold inventory and the heaps heap Leach pads.

<unk> to revision to the mine sequence and lower grades.

To encounter more course material for planting.

Bell Creek additional ground support and increased cement Rockville, that's required in the weather areas of the ore body.

There was a settlement cash costs are estimated to between 11, and 16 12 50 per ounce and all in sustaining cost between 50, and 75 and 16 75.

Coal segment cash costs are estimated to between 825 to $925 per ounce and all in sustaining cost between 1001 under 35 to $1250.

The impact of a lower gold production estimates is offset by deferred spending on capital project and timing.

Discretionary spending within operating costs.

We have also reduced our estimate for total capital spending.

Range between 261, and $271 million, including project spending of $43.5 million to $45 million.

Project capital is largely directed advancing the exploration and development studies for the luck, let us current project.

Advancing construction of the new concrete line ventilation shaft and referenced duration slammed with local at ATA and divert more exploration project in Timmins.

Details of our revised guidance are provided in our Q3 M D N a.

And America is in a strong financial position, we have a total available liquidity of $815 million comprised of a fully undrawn $500 million.

Under our revolving credit facility and $315 $4 million in cash and short term investments at the end of Q3.

Operations are generating strong levels of free cash flow and we expect a meaningful improvement in operating performance in Q4 in line with our revised guidance.

Our capital allocation priorities remain on investing in high return projects and returning cash to shareholders through dividends.

Over the past 18 months, we have increased the dividend three times, returning $86 $2 million to shareholders during that period.

Yesterday, we announced a quarterly dividend of 10 cents per share.

We will continue to evaluate dividend payout levels in light of a requirement to fund growth projects that will deliver high returns to our shareholders.

Yesterday, we also announced thrilled results from 39, new infill and step out holes at the local alot com.

The expansion of the Karnes Karnes mineralization footprint is highlighted by the exceptional grade and thickness of S 62 21.

70, 121 on the eastern side of the deposit.

200 meters from the nearest thrilled hole.

Exploration hole S 70 121.

Earned 77.1 meters.

119 grams per ton silver, 7.7% lead and $13 six 2% zinc.

Also thrilled hold use 67 21 thrilled to divest off the Bradshaw expanded the resource 200 meters with 115 meter interval, a handwritten 33 grams silver three 6% lead and 4.83% zinc.

Pulse it remains open to the west to the east and southeast.

In consideration of the expanded footprint of the mineral resource and the high grades in some of the step out holes Pan American has decided to expand the scope of the preliminary economic assessment and not released the technical report at year end as anticipated. These studies will include additional drilling.

After deposit and.

Review of Florida or scale mining methods.

So sub level caving versus long haul open stoping.

They ask about Protract the third pre consultation meeting was held in October at the next one is set for November 27.

The Guatemalan Ministry of finished your minds is resuming monthly meetings following a lengthy delay in holding the third meeting due to a resurgence in COVID-19 cases in Guatemala.

The Ministry of energy and mines, who is leading this consultation have setup of upside that's a repository for information related to the consultation.

The link to that upside is provided on the slides that accompany this call.

At the beginning of this year, we estimate that the impact of Covid on our operations will steadily reduced over the course of the year with no impact starting in Q1 2022.

Vaccination rates have substantially improved in Latin America over the past few months.

We are still experiencing COVID-19 related impacts in terms of lower workforce deployment levels shipment delays supply chain interruptions and related cost pressures.

These headwinds will continue at least through the first part of 2022 and will be taken into account in our budget and forecast for the next year.

Before we open the call to questions I would like to thank Rob Doyle for his 18 years of service to the company.

As we announced yesterday, a rope has informed us of his plans to retire as chief financial Officer of the company effective March 31st 2022.

Rob has been an integral part of our team and they have greatly appreciate that these efforts, which have their own pan American reputation for prudent financial management.

They're following our succession plan to ensure an orderly transition.

And with that I would like to open the call for questions.

Thank you well now begin the question and answer session.

She joined the question queue. You May Press Star then one on your telephone keypad, you'll hear a tone acknowledging your request if youre using a speakerphone. Please pick up your handset before pressing any key.

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Our first question is from Tyler Langton with J P. Morgan. Please go ahead.

Good morning, Thanks for taking my question and our best wishes for your retirement Rob.

I guess just to start with with costs at La Colorado, I think you mentioned they were impacted by our you know the ventilation upgrades the shock Creek in there the long hole mining investments.

You have a rough sense.

How much did those those added to costs in the quarter and then you know should we expect those to sort of.

Ease over the next several quarters or will some coffee and still remain sort of throughout the balance of 2022.

Yeah, Hi, Tyler Steve here one.

Good morning.

Currently we're we're kind of still putting our our thoughts together for next year in our budgets for next year and trying to roll in our current understanding of some of the inflationary factors on some of our inputs.

I think from a standpoint of catching up on the shot creating we should be.

Seeing that start to taper off during Q1 Q2 of next year and where our investments on the long haul mining that's really pushing ramps out ahead, because it allows us to go basically three sub levels for each stope versus what we've been doing with the cut and fill mining.

So that's going to take us most of 'twenty to 'twenty two to keep those ramps pushed out ahead on an accelerated basis. So it's not we're not prepared to give an indication yet of what our costs are going to be next year. We will do that in January but those are some of the factors are we'll see and it's just how much.

That inflation is going to hit US overall, we'll see that come January we'll give some numbers.

Got it that's helpful. And then just sort of sticking with cost me do you have a rough sense I know, it's hard to quantify but it's sort of the higher cost that you continue to see is that right. Now at least is that more from you know COVID-19 related restrictions or is it also a sort of any impact from inflationary pressures.

Yeah, I'd say COVID-19 related restrictions that are really it's the protocols the cost of doing the testing of that that is just starting to come off we do anticipate that to drop off early part of next year pretty substantially from the levels were up now so it's really mostly inflationary in these.

He's kind of catch up projects, if you will on the short creating in their ramp with Barrington.

Sorry, it's Michael just just in general for sure we do like the whole world will see some pressure on wages.

Call it COVID-19 related or after COVID-19 related recovery.

But we definitely we definitely see that on.

Just as a reminder to everyone our exposure to foreign currencies or if it's a big driver for cost up and down obviously, depending where they go foreign currency for US includes Canadian dollars as we report in U S dollars and then the other two big ones are Mexican peso Peruvian Sol, So you know moving up and down and up.

With those currencies have an impact on our cost are we see some devaluation right now in Peru, which.

It gives us some tailwind on the cost side with the Peruvian Sol are of course, if there's kind of devaluation stay longer and are not just transitory done.

Normally see kind of a clawback later on and especially on the wage side. So just keep that in mind when you look at the cost.

Perfect. Thanks, so much.

The next question is from Cosmos <unk> with CIBC. Please go ahead.

Hi, Thanks, a Michael and team and congrats Rob hopefully we can stay in touch.

Thanks, Rob maybe my first question is on <unk> you know as you talked about are you currently in the process of budgeting it sounds like you're putting out guidance in January 'twenty 'twenty. Two Michael are you anticipating potentially giving a three year guidance longer longer term guidance as well.

I know, it's more challenging given you know cost inflation and you.

COVID-19 impacts, but is that something that you're considering.

I think once everything normalizes with call. It we can start looking at that again I mean as you remember at the beginning of this year. If we kind of had a straight line. We didn't really know in January 2021 word about the pandemic is going like nobody knows them and we assumed improvements constant improvements during the year.

Of course, that's happened in a certain way, but not in a straight line for sure and I'm, probably not as fast as we as we all hoped for.

We see no really big catch up on the vaccination rates in Latin America. So I really hope that you know after.

After the first couple of quarters or so next year.

We are at that that that that the new spot, where you know where we have less or nearly no impact from COVID-19, but I really don't know right now, where it's where it's going so well well keep it really close eye on that but I think we really have to.

I have a normalized situation they've gone from from the pandemic before we can go to a lower longer guidance.

Of course, and then you know in terms of inflation, Michael you know you're in a unique position you have operations underground open pit in Latin America and Canada.

To the extent possible can you maybe talk about inflationary pressures, where you're seeing it a is it underground versus open pit or is it Canada versus let's say in Mexico any comments that you can make.

I will make some general commentary and then pass it onto Steve as well, but you know as I said before I mean, we for sure see some.

Inflationary pressure.

On wages.

Yeah.

You know, it's just a shortage of people are so so you experience as everybody is experiencing the world.

We are not immune to that and that puts a pressure on wages as we come out of this you know of this pandemic and with the recovery does obviously, obviously gonna be shortage.

A lot of a lot of activity in lots of countries. We are we are working while there's still a lot of restrictions in many countries. We are working so is this you know kind of difficult situations, where there's a lot of demand for people and theres a lot of restrictions still in place. So as I said I really hope that.

And Q2 or somebody a Midland next year that that starts to normalize but that's what we that's what we all learned over the last two years. This that this pandemic has been very unpredictable and it's new to all of us. So.

You know, we make predictions and then and then Oh.

Adapted to the reality of a fib launch went off stuff the virus, but that's a vaccination rates are advancing really strongly now in Latin America, So that's very encouraging and I.

I really believe that you're going to see a strong improvements here, but then we see large disruptions in the world a supply chain disruption transport disruption shortage of shipping a ship some campaigners etcetera etcetera.

You know I would say this is probably more of a transitory I think when that normalizes.

That's.

Hopefully normalizing with between with the with the recovery from the pandemic.

And I don't think so that that will be a longer term issue of wage inflation, it's obviously a bit more difficult right. Once a month here or there, it's not not not very easy to come.

Come back from it.

When we look at the other goods are probably pass it onto Steve what he sees you know not on let's say cyanide or are there other suppliers, but yeah. I mean next to labor fuel as fuel and energy would be our next highest cost input for the company and generally speaking kind of the global fuel and energy cost.

Are going up pretty dramatically you know, we do see some offsets to that in some of our jurisdictions. We do have some subsidies that come in and kind of dilute that increase and then beyond that yeah. Some of our consumables some of our reagents.

Particularly the transport to get reagents to the site that cost is going up.

We've seen some in the neighborhood of as high as I'll say, 10% is kind of the projection for next year, probably on average it's more like a six or 7% for a lot of them are input spare parts and lime and cyanide and things like that.

Dave It's probably worth mentioning that we are partially hedged on our diesel consumption. We put in a 24 month program in 2020. So we do have some coverage on our on our diesel needs through this the balance of this year and and costs 2022 as well and so so we do have an offset that sits in the derivative.

Nine.

Great.

Thanks, maybe I'm switching gears, a little bit her diving deeper into delores in Q3, I guess there was a continued build in inventory.

As he said in Q2 I thought you.

You know some of that was going to be recognized as production in the second half, but it seems like it's been delayed.

Due to the pilot one south construction could you walk me through that again in terms of how that works is it you know you're now expecting it to be recognized as production in 2022 is it more based on you know stocking of the part one south and so the the leach.

You know time is gonna be quicker or is it waiting for what you've been stacking or the old pod and waiting for that to come out in 'twenty 'twenty. Two in due time could you maybe give me a bit more color.

Yeah sure Cosmos, it's a combination of the two obviously when we go to stocking on the on the new pad directly on the liner will put our highest grade or we can find on that so we get pretty quick recovery compared to where we are stocking now in pad three were up stocking kind of dip.

Final list of that pad, so we've got depths.

Much as 120 830 meters of ore that we have to soak through to recover that at the bottom of the the pad on that area, but what happens to us as we're stacking up pad three on the final list. Those those cells that were loading are fairly small and surface area. So we have to redo.

Our primary leach cycle time, and what happens as we load restart to leach we up to we have to stop that leaching early because we don't have enough area and let a drain before we start another load on so we've got multiple of layoffs that have been partially leach. So as we start to stack on pad one so we'll be able to keep it.

Irrigation on full time on that pad three that'll start to release all those ounces that we built during the year. In addition to getting there quicker ounces all powered ones though.

Okay I got it now it's always a combination of both.

And maybe one last question you know bigger picture.

Michael you know, we've seen sort of M&A pick up in the gold space you know to the extent that you have any comments.

Do you think that's going to translate and do you think it's going to happen in the silver space as well.

Well look I mean, I I'm I'm, a strong believer on them on a stronger companies are I think we have proven that with the acquisition of Tahoe and on what happened to two Pan American I would refer everybody to the slides that are attached to that call on Thursday.

Slide in there with total net cash position and what happened since the acquisition of tower, where we improved our net position of about $559 million, while paying to our shareholders $119 million dividend and put about $100 million into new projects, mostly exploration of of this garnered local thereafter.

So Oh of course, you have you don't have to last over how do you save a lot of money on their T. N day, when you build a bigger and stronger company you have to find the right targets of course [laughter] if not it doesn't make any sense you have to find a target that that gives you that you know that that's strong consolidation in an unsafe.

So before roughly and you know similar preferred but in similar or close by jurisdictions et cetera et cetera. So there's not just a blanket answer to that that's you know it's very complicated.

But the timing, but in general I I think that's all happened you know I think in the future we are going to see the trend to larger and stronger company not only on the gold's up on the silver side as well.

Great. Thanks, again, Michael Steve Robinson, and those are all the questions I have.

Thanks Cosmos.

The next question is from Trevor Turnbull with Scotiabank. Please go ahead.

Yeah. Thank you.

My first question I guess is related to la Colorado scarring and the update.

You were talking about a potentially larger scope project and the investigation of bulk mining with sub level caving and I just wondered what this means in terms of the processing plant. If there's upgrades in terms of capacity that you're considering or just general upgrades to the facilities that would have to go hand in hand with this.

So yeah, whatever you could tell us a bit about that place short drive around you know they put out the press release. This morning before market opened with almost no really astonishing drill holes I think I mean, even look at the what's on the grades of the drill holes.

It's amazing in and some of them are to them to meet their stockpile. So he decided to the to the northeast and southwest. So that's a large potential to increase that resource and as you know kind of all we need to drill more right now and redo the resource them and basically look at even bigger bulk.

Honorable ore bodies. So that's that that's really what what what happened. So all good news there it's the.

The infill drilling so its very good continuity of the of the main ore body. So a very very encouraging.

Just to be clear are you know this is gonna be if you look at the size of the ore body not just an expansion of the current plant that that's going to require at one point a much much larger plant to treat outdoor so while we may be you can look at it.

The shorter time charter timeline here, depending when we get access to the ore, but you know if we look at this large bulk mineable ore bodies.

We cannot just increase the current plant by me know by percentage jumped on three that there is a bid for government. They require a new a new facility and maybe Martin you want to weigh in here no absolutely Michael completely agree with your comments. The it's a blank page in terms of looking at new plants, new infrastructure for <unk>.

Project of this magnitude and and it just keeps getting bigger, which which is leading us to look at these different alternatives in terms of the mining methods, but.

But definitely much larger scale than we're doing now with the existing La Colorado mine, where mining these fairly small veins and where you know where 2000 tons a day kind of size frame. We're looking at are significantly larger than that for either either long haul long haul stoping ore as it continues to.

<unk> continues to expand and get bigger and bigger even even more a larger or more bulk here less selective type mining methods like sub sub level caving would require another another incremental gain and the and the size of that the processing of the infrastructure that we would need to put in place to deal with it.

Yeah.

Shortly but what we're really doing right now is focus on drilling to see if you have I think about 16 rigs on site.

A lot of drilling going on you see there in the numbers in the press release and a lot of trading plan for next year as well, which obviously will give further stop out some more information to the engineers for Martin's group to you know to answer to answer all those questions.

No I appreciate that Michael I was trying to get a sense also kind of thinking about the M&A question that was asked you know something like this would transform la Colorado to such a degree that potentially it would help to it would help with sustainability.

Across the board with with your assets, maybe one last question just on La Colorado, you talked about the twin ramps coming down to the top of the ore body do you have a timeline for how long that might take to get down there and or any costs scoped out just for those declines.

Hi, Trevor Steve Your we're still working on those plans. So we're not prepared to put timelines out yeah.

We're kind of developing that and as Martin said, we're looking at different.

Different.

Ways to approach that mine that mining method may dictate how old were you actually enter into a true. So how long those rents will be where we want to access that ore body is still kind of up in the air. So we don't want to put any time lines.

But the you know to be clear that we have we.

We know where we want to start with the ramps, there's a very clear clear starting point and as you can imagine this is gonna be a long term project.

And it ramps down there so the sooner we start the <unk>.

Had we got with the broker side, so that's really the thinking here.

And I guess, we would see at least some capex starting to get allocated as early as next year's budget for forgetting. These these getting moving on this well the ramp and also the the ventilation shaft. The concrete jobs that we discussed last quarter. If you remember.

Right.

And then I only have one last question and that's about Escobar not consultation process you talked about in the MD&A that there I think it's been there's been three meetings and I think they're referred to as pre consultations and I just wondered what the difference between the pre consultation meetings and what I assume are there.

Consultation meetings are and if you have any.

Sense of how many of each of those type of meetings need to happen before that process is concluded.

So under our Idaho 169, what happens is you have a pre consultation phase.

Very come to certain agreements like in our case a definition, how the consultation will be around exactly on the timelines et cetera.

And there's no and then you go into the consultation so there's no preset amount of meetings for for either a pre consultation in order consultation that's really you know depending how that advances.

Thus it is run by the Ministry of mines, and nobody else I as I sat that you know I can't give you a timing or.

A number of meetings that are required.

You know I'm encouraged as we continue these meetings, obviously I mentioned, we had one in October November 27th will be there will be an excellent. So it looks like we are back on kind of a amongst lease schedule here there was definitely a lengthy.

A lengthy delay because of Covid, there's meetings are in person and in large groups. So.

There was nobody is delayed because of COVID-19, but I think we are you know back when this monthly a sketch Alonso so looking forward to continue with this very inclusive meeting sometime in <unk>.

Voting time for sure.

And so I'm, just trying to understand a bit better with the pre consultations. It sounds like you mentioned these are kind of a chance to set out the parameters with I guess the leadership of the of the zinc of communities and and then the consultations will be what more of a public forum, where where people.

Then can come in using the guidelines that have been agreed to to to voice their concerns or to ask questions.

I think no I think it's it's you know it's the same people are involved in the pre consultation that consultation.

Our group that then the group the group is defined in house meetings together, it's more like during the meetings are.

And you know it would encourage everyone to go on the website that actually set up already got all the details on each of the meetings.

You know definition of who's doing what kind of technical reports.

Liver for the future meetings who's doing that one they will be delivered etcetera and in what form are and that will all form part of the you know of the information that will be provided for the for the consultation meetings. So it's more just kind of a definition of structure and I'm.

And then timing.

Okay I'll leave it there. Thank you very much Michael Thank you.

Our next question is from John Tumazos with John Tumazos very independent research. Please go ahead.

So Rob I hope that my paid you enough and you made enough on the Pan am stock that you can ride your bike was a police escorts or some motorists doesn't wipe out good luck.

Thank you Josh.

And my God.

Some of these earlier questions about M&A stuff upset me I'm a shareholder.

And I hope that you don't have a minute to look at M&A.

Because there's nothing better.

Then building, Colorado scarring getting your assets up to capacity restarting esque eyeball.

And.

Building off of that.

So you know those guys was the M&A fees, you don't have to listen.

[laughter] well show them. Those all you Gotta do is run your own business and everybody is gonna be so happy.

There's obviously a reason why are we didn't do anything because I agree with you that we have a very strong pipeline.

There's questions I mean determine day questions are always very general because of course, even if I would look at something I would not I would not talk talk about it in this and it is for sure there's interaction.

I see I, just seen China rolled out you know, there's lots of single asset companies out there or or or let's call. It companies that need more help on the on the financial side and you know in general I I see that there will be consolidation in one form or the other in the industry. Just you know to find a home for those assets on.

I'm Bill bigger companies that that was really my my my comment.

Concerning the delayed technical study on Colorado scarring.

Is it purely a third resource statement.

To upgrade 100.4 million metric tons inferred so that you have them and I to understand design and understand the mining method or would it be.

A P a or pre fees too.

Well, yeah, we need more information.

Definitely I mean, I think the current resource we have out there is 100 million tons I think are pretty easy when you look at the drill results drill results there too.

Do see the potential for further growth of that of that resource and that's really where you know when you look at the results on the wide intercept into rate a very high grades that we hit over the last few months.

That you know one is focus on some of those areas of expansion and I'm thrilled more holes and definitely move some of that resource or as much as we can into higher until logical categories.

So is it too early to try to guess how many tons per day in the mining method and do a pea or definitive fees until you get the surge resource out.

It's I mean.

When we do more drilling we can release, a new resource for sure, but it's definitely too early right now to put a pay down on the mining method. It's attractive one of the reasons why it got so big and as Martin mentioned we.

We can really look at much bigger much more bulk mining mining methods like sub level caving and see what that would do how that would work. So it's just too early you're right to you know to put opinion on that.

Should we be putting there.

La Colorado Scarring mine into our models as first output 2025, because it's so big and require so much study and the bigger it is the more drilling and infill drilling and ramping you have to do.

What year.

Well, that's that's all part of the off the studies funded twenty-five will come pretty quick here about that but you know give us the time next year to drill for to come out with a new resource Ah I think that's really well defined much rather the size of this ore body and give a bit more time to market and to come up with.

Mount that that'll dictate how much development, we have to do underground and how we buy stocks ASP at the or do we need to ask us at first to actually define a mining matador all kind of do that are without a doubt docs us and sun goldstrike based around the right spot on startup.

Underground development. So there's a lot of open questions as you can see and I think a lot of time kind of the answer and finally 22.

Yeah.

I have a.

Real simple algebra question about $19 5 million ounce guidance.

That midpoint that implies 5.6 million ounces for the fourth quarter.

And we just came in at 483 in the September quarter.

So I guess, we're gonna get almost a three quarter of million ounce bump this quarter.

Is it going to come mostly from Delores are la Colorado are.

Usually you got to stick your neck out that far Mike, but you're saying this quarter's going to be a lot better.

Yeah. John This is Steve just to add onto that I mean, we have seen October numbers and September was pretty strong for us. So we are predicting a strong quarter in Q4, I think the the location of where that silver is going to come from is fairly spread through the organization.

Through our outfit our silver assets La Colorado, we're anticipating a you know it had a great ramp up in Q3 from Q2, we think we got a little bit more to go in Q4, there Delores certainly with the Leach pad, we will start to see that released from that inventory.

But we have silvers as slow leach there. So it takes some time.

Well most of that will come in 2022 but we will see a little bit there and we're having some pretty good runs in a more coach and more on that as well. So I think and Menotti. All included I think we'll see a spread of those additional ounces in Q4.

If I could ask one last one in.

In these tough years, 'twenty to 'twenty, and 2020 one.

Man show a sparrow.

There's been no one mine that produced more.

So that's the one that has the least documented life with satellites.

What are the odds that we continue in 2020 456, and find a little more in Argentina.

But you're right that this this might not tell did quite well into production is that because of the high grades that we mine, especially of course you know we added in the mine plan, we knew that the satellites are high grade that's why.

We were able to mine them in truck them to do the mine, they're relatively small ore bodies and I mean, our reserves are up to stay out there.

At Mana until you know.

We're still exploring in some places and see what we can do to expand it at the moment, that's who said it hasn't been pretty short mine life.

Thank you and thanks for letting me kid around a little bit Mike.

Thank you have a good day.

Yeah.

Our next question is from Lawson Winder with Bank of America. Please go ahead.

Hello, Good morning, and thank you for the update Rob Congratulations on an outstanding career with Pan American definitely I'll get back in the future.

Olson.

Yeah, if I might I would like to turn back to the La Colorado start and just yeah, Yeah, maybe follow up on anything you've learned from the 36000 meters of additional infill drilling.

You guys have done for example.

Have you learned any more about the continuity.

Perhaps even more connected them and everybody than you thought or are perhaps less.

Yeah, absolutely hi, its Chris here.

It's already through last couple of years and the resource that came out in 2020.

The the infill drilling as we were driving towards the D.

The resource and the P eight, but obviously with extended step out trends of the exploration we.

We have seen that the continuity is there a model works, which is really pleasing as a geologist.

And obviously the really pleasing is the the western portion of of this deposit as it as it builds out from the breccia going west and.

Now, we're seeing more scala and and and the higher grades which potentially gives us another center. So all to play for them and certainly.

Ah we're looking forward to next year and continue the drilling.

Right.

And also thanks very much Chris.

Could you maybe give us an idea of like what percent of the ore body is going to be breccia and what percent is going to be sort of more company scarring.

Yeah, absolutely I mean, obviously it's.

It's an inferred resource at the moment and the infill drilling as we drill through that center towards the Scone area to the east.

We could certainly be looking at a potential split of around 50.

<unk> 50 ish at the moment, 50% either way, but of course with this listing drilling that's going to change completely and that's something that we'll be working towards as we as we build it out.

But in general yes, it does.

Gone, obviously mineralized high grade breccia mineralized Ah you know that they are both fairly competent rock down there we're not in a in the dacite anymore foreign down into the limestones. So it doesn't vary I mean, if your question is yes.

Brett you are or or.

What has gone on competency of the rock Guy you know, there's there's not a big that's not a big difference.

Yeah as you mentioned.

<unk> attitude to that great and certainly from the recent drilling yeah, we're seeing that really high grade, which which is that's gone.

Yeah, that's super helpful guys. Thank you.

Hmm.

Maybe just a quick quick one on <unk>.

Obviously, it's been impacted by the the ground condition. So you have to spend more money on support you mentioned that.

If you Havent used a lot more consolidated.

Are cemented rock fill.

With the increased spending.

Do you see the scope for the the greatest start to pick up in the fourth.

<unk> or whereas the Greg and it continue to trend sort of where it's been trading for the first.

Nine months of the year.

Yeah, Austin, Steve here, we're not we're not expecting to see a great increase or it's pretty flat and our mine plans are truly tonnage that we're after and the tons are being hampered by the.

Cement at Rockville, as you mentioned and trying to get that plant up to full capacity. So that's really where we're focused.

Mm Hmm. Okay. So then that begs. The question then you know do you expect in the fourth quarter you could start to see a pick up in that tonnage or is that something we would expect to happen more in 2020.

Right now, we're kind of pushing that off into 'twenty 'twenty. Two you know we're we're look we're actually looking at bringing a second Rockville, Samantha Rockville plant into to help boost production there that's going to take us a little bit more time, so we're not expecting a big change in Q4 then.

Okay, Great. Yeah. That's that's helpful. Steve and then finally I just wanted to follow up on one comment you made about ESG and your greenhouse gas emission reduction targets mentioned there was a policy change at the federal government level in Mexico can you maybe just elaborate on what that policy change was and also how that.

The impact of the tiny so now when do you expect to hit those.

Greenhouse gas emission reductions that's it for me thanks.

Oh, Yeah, I think you're referring to the potential law change on N.

T S E T F E. R. If it's if it stopped I couldn't give you an update on update on that it's actually not not not down. It is not approved so it's a there's no final change or law that we can't discuss I think at the moment the government is.

Just trying to give.

Give more control to the to the government owned power company Cfe and everything would run through there while at the moment do you actually have a private provide yourself most renewable power S. Wild that you that you can purchase that we purchase are attractive.

I tried to purchase obviously as well.

So we'll have to wait and see how that law changes and then what the change is gonna be to purchase that renewable power to cfe or if it continues that he can't purchases from private provider. So it's a bit too early we don't know yet.

I'll change, if it's gonna change to where it's going but.

But I I would guess over the next quarter or two we should have more clarity.

On that side from the government and Danville update.

Yeah, that's what I was referring to you thanks very much guys yeah.

Thank you.

Yeah.

Our next question is from Don Demarco with National Bank Financial. Please go ahead.

Well, thank you operator, and good morning, Michael and team.

Well.

I'll ask a couple of questions on scarring, if I may I mean, it's.

All my other questions have been answered already.

But our guys.

Can you provide some indication on the timing of the release of the scar in P E and I apologize if you've answered this previously.

I know I didn't answer it because right now I'm I don't have a final answer to that as you saw in the press release. This this is growing.

So quickly and on and on so.

So much on the especially on the grain side, the really really big improvement that you know we need to drill quite a bit next year to get the new understanding of making new resource and then kind of do the decided on the mining method. So it will take a bit more time, but there will be of course information.

Coming out during the year advancing that project. Its you know its one.

Sure the biggest the most important project one of the most important projects, we have and you know all eyes are on on that exploration and.

For the engineering team on an definition on mining methods and access is etcetera. So it's a little bit early to give you the timing right now.

Okay fair enough.

Well, we look forward to those updates in an updated resource and I think just the number of questions. On this just reflects our curiosity and and you know we were looking forward to details on the P. A but certainly the reason to postpone it or are certainly valid.

But just in an attempt to maybe get a little color is there any other mining projects across the current landscape that you might consider as an analog to the scarring like for example, I look to the Arizona mining tailored appalled at similar large tonnage sub level open stoping someone chipotle proposed mining method.

And I see the Capex, there was about 500 million or so but this goes back a few years ago.

Are there analogs and in or are we kind of in terms of capex like is that order of magnitude is there any at this early stage.

Can you provide color on.

You know as we await further details to be confirmed later.

Well there you know, it's it's tough to keep it unlocked because there's no money deposits in that size, and and and and and and grades are to look at in the world. It's also deep seated deposits like black money annuity policies are deep seated of course over the last you know.

Now on the year to be you know as a mining as a mining industry in mind a lot of the deposits closer to surface. Then we go deeper and deeper down so that changes and uncomplicated, obviously situations for for all the deposit so it's kind of a bit difficult to just to compare one with the other because they're so different situations off the geology of the.

Conditions.

The size.

So I think I really would look at you know each separate tie you know I don't have all the details on the Taylor deposit for sure.

We're looking at it the you know to put the power of it let alone on size and great.

I don't know if you look at size of Softish kind of deposits.

And I don't want to jump out here for Martin, but I'm pretty sure that $500 million rental not due to develop any of those kind of deposits five thus far north of that but we don't have a number yet to share you with you.

Okay.

Okay gentlemen, that's all for me. Thank you very much. Thank you.

Yeah.

Our next question is from Craig Hutchison with TD Securities. Please go ahead.

Hey, good morning, guys.

Does.

Just in terms of the the lower than expected silver grades you had a sentence that they obviously that was due to narrowing vein structures and this is a very high grade resource. When do you guys expect to kind of get back into more like hotter higher grade material or just.

You know narrow vein structure is expected to persist through Q4 and kind of enter into next year.

Yeah. Good question Craig.

As we mentioned in the release the ore deposits are narrowing and right now we're looking at right. The equipment. We have deployed at San Vicente was really designed for the larger you know even plus five major why veins and so we're looking at.

Alternative mining methods.

I hate to use the word potentially resuming mining message even to try to bring that grade back from what we've seen over the last quarter or two we're not ready to predict what that may.

Turn out for us yet.

We come out with their projections for 2022 and January you'll get a better feel for that and we'll have a better sense, but right now it's it's it's coming down to how can we mind that best given the equipment that we got to Florida.

Yeah.

Okay. Thanks, and then just turning to La Colorado.

We're beating a dead horse here, but just you.

No.

Some of the best real results you've had or your report. This morning are kind of 200 meter step outs.

How long is it going to sort of take to get a resource update you know should we expect it to be towards the back half next year, just given how much drilling you plan for 2020 two.

Yeah look a lot of them in an instant channery normally would come out mid January with the forecast for the year, we will have all our box with all of the thrilling that'll be for sure a big program again.

Drilling at La Colorado.

You're not beating a dead horse here it really really alive for some under you know an unbelievable.

Belief or discovery Antipasto does he know.

You know we published the first hole in that I mean, what was it three and a half years ago, probably so.

When we discovered with the first half that's gone so.

It goes beyond our imagination on size and and and now one grade that were hit as well. So it will take it will take a while to thrilled at that now, but I definitely plant you know to give to give you a kind of an updated resource at some point next year and that will just be another point in time I'm sure that.

Deposits dwell just continues to surprise us on.

And we'll grow bigger because that's we don't unless we know and as I mentioned in the call. It's still open on most sites even off the door step outs that were going to fall off a follow up with that with the current program.

Okay great.

And maybe just one last question you guys were planning to put the P. A L sort of kind of Q4 here.

Can you give us a sense of what throughput you were looking at originally and that P. A.

Well that's about.

It's again that will all change again, so I'm not I don't want to really be paying down our debt at a tonnage but.

It's multiple of what we do now.

But probably somewhere you know, let's call it as a starting point at the maybe eight to 10000 times somewhere in that grade range, but as I sat. This is also subject to change that's the because we were looking at are bigger than <unk>.

Potentially high grade deposit and different mining methods. So.

Will all change next year.

I appreciate the color and great results. This morning on the Wisconsin.

Thank you very much.

This concludes the question and answer session I'd like to turn the conference back over to Michael Steinmann for closing remarks.

Thank you everyone for calling in looking forward too.

Well I'll talk to Q4 and next year. So I have to go to the end of the year stay safe and stay healthy. Thank you everyone.

Yep.

This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.

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