Q3 2024 Pan American Silver Corp Earnings Call
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Speaker Change: Good morning, ladies and gentlemen and welcome to the Pan American Silver, 3rd quarter of 2024 on Audited Results Conference Call in my past.
Speaker Change: At this time, on-line, are in less than only mode. Following the presentation, we will conduct a question in our session.
If at any time during this call, we require immediate assistance, please press 100 for the operator. This call has been recorded on Wednesday, November 6th, 2024. I would like to turn up conference over to Siren Fisekci, VP Investor Relations, please go ahead.
Siren Fisekci: Thank you for joining us today for Pan American Filbers Q3, 2020 Board Conference Call. This call includes forward-letting statements and information and makes reference to non-gap measures.
Speaker Change: Please see the cautionary statements in our MDNA, Nutri-Leaves and Presentation Slides for our Q3, 2024, unordid this result, all of which are available on our website. I'll now turn the call over to Michael Steinmann, Pan American's President and CEO.
Michael Steinmann: Thanks, Siren, and thank you everyone for joining today's call.
Michael Steinmann: Pan American delivered strong financial performance in Q3. Revenue was a record 716.1 million dollars, made due to timing of sales excluded the sale of finished goods and concentrate the inventory with a value of approximately $30 million.
Cash flow from operations before working capital changes must erected 235.8 million dollars.
Michael Steinmann: Free cash flow also reached a record of $150,000,000,000.
Michael Steinmann: At the end of Q3 cash and short-term investments of $469 million had increased by $111.3 million compared to Q2 2024.
Michael Steinmann: Net depth decreased to 376.2 million dollars.
Michael Steinmann: These record financial results for the strength and the balance sheet. At the end of Q3, we had $1.2 billion of available liquidity to invest in future growth and provide returns to shareholders.
Michael Steinmann: Yesterday, the announced a 10-cent per Saturday event with respect to Q3.
Michael Steinmann: Here today, dividend payments totaled $109.1 million. In addition, we also repurchased and cancelled shares for $24.3 million on their our SERPY back plan.
Michael Steinmann: Net earnings in Q3 were $57.1 million or $16 per share.
Michael Steinmann: This includes a one-time tax expanse for a settlement with the Mexican tax authorities and the demandment of certain Argentine income tax filings both of which relate to prior years tax filings.
Michael Steinmann: A few three tax expanse was partially offset by reversal of the inflation-driven tax expanse in Argentina that we recorded in the first half of 2020.
Michael Steinmann: A just a earnings were $115.1 million or 32 cents adjusted earnings per share.
Michael Steinmann: Yesterday we announced that we have received regulatory approval from the government of Canada for the sale of Lorraine in Peru. We expect the transactions to close later in June 4. Proceeds from the sale of 245 million dollars will further strengthen our balance sheet.
Michael Steinmann: The agreement also grants by American a life of mine, gold, nuts, military, turn royalty of 1.5% for the Larena 2 project and an additional contingent payment of $50 million and commercial production starts from the project.
Michael Steinmann: Turning to the operations, we produced 5.5 million ounces of Silver & Q3.
Michael Steinmann: That by Lackolerava, Mercerver production was up 59% and Cascos down 26% compared with Q2. Since completing the new ventilation infrastructure in Mitchell-Li, we have seen substantial improvements in minor operations.
Michael Steinmann: Two puts rates have been rising, averaging over 1,000,000 tons per day in October, and they've expected to reach 2,000 tons per day by year and.
Michael Steinmann: The improving performance at Laquerada will further increase silver production and lower cash costs.
Michael Steinmann: We produced 225,000 ounces of gold in Q3. Dr. Kovina's strong results led the gold operations, delivering robust margins with production of 50,400 ounces of gold at an all-insistaining cost of 1,1995 dollars per ounce at that price.
Michael Steinmann: A several more ago production was reduced by delayed development due to severe wind or weather in Q2 that reduced access to the site and portals and due to high-dump plan dilution in the underground mines.
Michael Steinmann: Wethering Q2 also restricted access to the Nazi zone, which is 30 km from the mill, resulting in delayed development, thereby reducing mining and processing of gold ors from this zone.
Michael Steinmann: We are now catching up on production of several motorbikes, increasing production from the nutty zone and increasing the development measures at the underground mines focusing on high-grade areas.
Michael Steinmann: At Minera Florida, surface access to some of the mine portals was affected by heavy rainfall, which delayed the development of higher gold grade zones which is now underway.
Michael Steinmann: A plan that's completed mining at the Lotus in Q3 and has been processing lower-grade stockpiles since July.
Michael Steinmann: Gold segment cascasts were within expectations in Q3. Cascos were the gold segment in Q3, were $1,195 per ounce, and all its sustaining costs were $1,516 per ounce, excluding an array of customers.
Michael Steinmann: Till Resackman, Cowskoss, in Q3, we're $15.88 per house.
Michael Steinmann: All Insustaining Costs were $20.90 per ounce, excluding a naturalizable value inventory adjustment that decreased costs by $1.27 per ounce.
Michael Steinmann: Cos for silver segment in Q3 were hired and expected largely due to lower gold by product credits from Sero Moro. They catch up on sustaining capital spending at La Colera and Guaram and high royalty costs at San Vicente from higher metal prices.
Michael Steinmann: We are on track to achieve our guidance for 2024. As indicated previously, the expected production to come in at the low end after 21 to 23 million hours range.
Michael Steinmann: We are very pleased with the progress we have made in our capital projects. The new filter plant and filter tailing storage facility at Waron is on schedule to be in full operation by the end of Q1 2025.
Michael Steinmann: The Bower Bower Creek Mind Intimence, Commissioning of the new PACE Tlaunt Project, is underway.
Michael Steinmann: At Jacobina, we are investing in upgrading the plant facility infrastructure and in a study to maximize Jacobina's long-term economic and growth potential. We expect to release this optimization study in the first half of 2025.
Michael Steinmann: We are excited by the potential of our Jacobin asset. In our most recent mineral resource update as of June 30th, 2024,
Michael Steinmann: which we released in early September, we more than replaced mine production with new mineral reserves for the eighth year in a row. In addition, exploration added 1.2 million ounces of new gold-inferred mineral resource.
Michael Steinmann: This is a long-life mine with excellent exploration potential and we believe there's opportunity to capture more value from this high margin operation.
Michael Steinmann: Our Reservant Resource Update also highlighted the potential for Lackawanna's Karn Project.
Michael Steinmann: The estimate for indicated mineral resource increased by 53% to 265 million tons and grades improved by 10% for silver, 2% for zinc and 4% for lead.
Michael Steinmann: An estimated 309 million ounces of silver are contained in the indicated mineral resource category in addition to 59 million ounces in inferred mineral resource.
Michael Steinmann: There is significant interest in this large, long-life silver and zinc project from potential partners and we continue to evaluate future agreements.
Michael Steinmann: At Escobar, the Guatemalan Ministry of Energy and Mines appointed Mr. Luis Pacheco as Vice Minister of Sustainable Development in August.
Michael Steinmann: is position responsible for overseeing the ILO 169 consultation process for the mine that's been vacant since April 29th, 2024.
Michael Steinmann: During Q3 2024, Mr. Pacheco visited the mine along with other members of MEM and held working meetings regarding the consultation process.
Michael Steinmann: The MEM has communicated to the company that the Schinkel Parliament is in the process of conducting meetings in their communities, but no new timeline has been published yet for plenary consultation meetings. The Escobol mine remains on care and maintenance and there is no date for a restart of the operation.
Michael Steinmann: That completes my brief recap of Q3. I'm pleased with the progress we have made here today, particularly at La Querada and Chacobina and on our capital projects.
Michael Steinmann: We are focused on achieving our production targets and managing costs to deliver margin expansion.
Michael Steinmann: Current metal prices are improving, profitability, and we are expecting a strong finish to the year from a back-end loaded production profile.
Michael Steinmann: I would now be happy to open the call for your questions.
Speaker Change: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press star 4 by the 1 on your telephone keypad.
Speaker Change: You will hear a three-tone prompt acknowledging a request. Questions will be taken in the order received. Should you wish to cancel a request, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment please for your first question.
Speaker Change: Your first question comes from the line of Awais Habib from Scotiabank. Please go ahead.
Awais Habib: Thanks, Operator. Good morning, Michael and Pan American team. Really, congrats on a good quarter and congrats on getting Larina's sale deal approved.
Speaker Change: Thank you.
Michael Steinmann: A couple of questions from me. My first question, staying with Lorena. Michael, with the introduction of the offtake agreement,
Michael Steinmann: Could we expect any sort of implications on the cash or contingent element of the consideration of the NSR royalty that's already been agreed upon? Any additional color you can provide on this OPTEC agreement?
Michael Steinmann: No, this is just in addition, so there is no changes on the consideration at all, neither on the cash nor on the NSR, as we put that in the press release, and we assume to close the transaction later this quarter.
Michael Steinmann: and yeah, I think it's a great outcome, it's a good outcome for everyone.
Michael Steinmann: and look forward to it. It was a great mine, Lorena. It's a great producer on the oxides. Obviously, it has been made very clear to
Michael Steinmann: The so far part is not really what we are focusing on, on this business. But, you know, I'm looking forward. I think it's a great outcome for Peru, for the mine, for the community and everybody around.
Speaker Change: Thanks, Michael, for clarifying that.
Speaker Change: And just moving on to 2024 guidance. Again, great to see that you have raised the goal guidance.
Speaker Change: again with silver production on the lower end of guidance.
Awais Habib: But is that the right way to be thinking about this or maybe, you know, what assets could you expect to drive stronger Q4 finish?
Steve: Yo, this is Steve.
Steve: Great question. I mean, we do have several of our assets, particularly Cerro Moro, and actually, and this will play a role depending on closing, La Arena, those two assets particularly have a strong finish to the year.
Steve: So those are what we're looking for. We're cautiously optimistic, you know, that we'll come closer to midpoint maybe, assuming all those assets carry through towards the end of the year and we capture all that production.
Steve: Obviously it was, just to make that clear again, what Steve mentioned, obviously depends on closer, the closing of the LARENA deal happens.
Steve: Last month of La Reina, due to the cycles, the leach cycles and the climate and weather that we have around our mine, is always the strongest month of the year. So it really depends when closure happens, therefore.
Steve: for the other details and I don't have I don't have that date yet so we have to wait for that.
Speaker Change: Sounds good. Okay, thanks for that as well. And just helping you on silver grades, they decrease going into Q3. There appeared to be about a 12% decline in gold grades. You know, can we just, can you comment on how should we be thinking about the gold and silver grades and this asset going into Q4?
Steve: Thank you.
Speaker Change: Yeah, great question. We're seeing some really interesting exploration opportunities on the silverside at El Pino.
Speaker Change: Won't so much affect this year, but looking out into the future, we see opportunities to see.
Steve: some interesting silver production increases going forward. The gold side
Steve: You know, as we've mentioned during 2023,
Speaker Change: This deposit's pretty variable, pretty spotty in terms of the high-grade distribution of gold, and we're in and out of it quite a bit. So we do expect a little bit stronger gold grade going into Q4 than we saw in Q3, but it is...
Speaker Change: Uncertain. There are some variables there in terms of when we're in and when we're out. Overall, the average, we feel good with the reserve average.
Speaker Change: Okay, thanks for that, Steve. And my last question, any sort of updates on how the partnership discussions are progressing at the Larkarora Skarn? Should we be expecting any sort of news by the end of the year?
Speaker Change: Bye. Bye.
Speaker Change: Look, there's several very large companies that are going or have been going through the data room are already completed
Speaker Change: A large part of the technical review. There's a lot of interest in a project like that. As you can imagine, it's a very large, very long life asset.
Speaker Change: I'm feeling very optimistic and happy of the group of companies that are looking at this and are interested in this. As you can imagine, this will take a while to
Speaker Change: to structure a partnership agreement for it, so I don't think that we can have something ready to make public by the end of the year, but we'll definitely continue to work on this and continue, but as I said, I'm very happy how this is shaping up.
Speaker Change: Thank you.
Speaker Change: Excellent. That's it for me, guys. Thanks for taking my questions.
Speaker Change: Thanks.
Speaker Change: Thank you. Bye-bye.
Speaker Change: Thank you and your next question comes from the line of Don DeMarco from National Bank. Please go ahead.
Don Demarco: Thank you, Operator. And good morning, Michael and team. Thanks for taking my question. Congratulations on a great quarter.
Don Demarco: And really good to see the operations back on track with read through for a strong Q4. Now, first question on Lack, Colorado. Michael, so the ASIC is significantly lower quarter to quarter. What kind of ASIC range might we expect once you're up and running at 2k time per day?
Speaker Change: Yeah, Don, this is Steve. We're still working on next year's budget, so I can't really forecast yet what the ASIC is going to look like in 2025 when we're at this kind of 2,000 ton a day running rate. You know, we're evaluating our cost structure and, you know, kind of predicting where the escalation inflation might go next year, exchange rates, things like that. So, you know, there's quite an intensive process of budgeting going on right now, and I can't really forecast out ahead. Yeah.
Speaker Change: Don, just to make clear again here, exchange rates have a huge impact.
Speaker Change: Siren Fisekci, Michael Steinmann
Speaker Change: Thank you. We see the pace weakening recently, so we'll keep an eye on that. A couple of questions on Timmins.
Don Demarco: You know, can you quantify the potential favorable cost impact from the new Pace Hill plant?
Don Demarco: And then secondly, I see it's been averaging ASIC around $2,000 an ounce this year. Previously, this might flag as a concern, but have higher gold prices reduced concerns and extended the life of this asset?
Speaker Change: Thank you. Bye-bye.
Don Demarco: there. I will say, you know, the $2,000 ACE that we're seeing there
Speaker Change: A large part of that is as we've extended the life of that asset, we've extended it quite a bit further than where we thought we would be already when we bought Tahoe back in 2018.
Speaker Change: Michael Steinmann.
Speaker Change: And one of the things that we're seeing increased cost is on tailings disposal or having to build.
Don Demarco: You know, quite a bit larger tailings facilities than we anticipated, and that's driving a significant amount of sustaining capital each year. We're looking at some opportunities there.
Don Demarco: that kind of fold in and couple. There's a.
Speaker Change: bit of a double benefit with the pace plant that maybe there's some opportunities we can go to a little bit.
Speaker Change: more of a filtered approach or other approaches on the tailings. The tailings are quite useful at both Timmins West and Bell Creek now for the pace backfill. So that allows us more and more so it does
Speaker Change: There's an offset with the cost of paste and the cost of cement that we add to the paste, which is an added cost. We get a benefit for less costs on the tailings facility.
Speaker Change: But the other big benefit, as you mentioned, is we get to mine more tons of ore resources for every meter of development.
Speaker Change: Okay, that's helpful. Thanks for that. And then as a final question...
Speaker Change: Michael, do you have any comments on the recent M&A in the solar space course?
Speaker Change: referred to Gatos and Silver Crest. You're the dominant player in the sector. Are you comfortable with your level of silver production as a percent of revenue, or are you looking at M&A from a different perspective now that these acquisitions have occurred?
Speaker Change: Well, look, uh...
Speaker Change: We are a completely different sized company obviously and when you look at our M&A strategy
Speaker Change: We are always looking around, of course. We are always interested in buying high-quality, long-life assets that fit into our cost structures.
Speaker Change: and that those are really some absolutely important parameters that NASA, you know, we look at.
Speaker Change: or go after has to fulfill. We're looking at accretive transactions and I think we have shown that very clearly with the Tahoe and very clearly with the Yamana transaction lately what we are looking for. And those
Speaker Change: that's really in our focus. So it's, of course, it's nice to find silver assets. As you know, we already have most of the very large silver assets in our portfolio, either in our reserves or in our resources.
Speaker Change: There still has obviously some work needs to be done to bring them
Speaker Change: either back or bring them into production. But, you know, we hold the biggest reserve and biggest resource of silver. And as I always say, the current picture of silver and gold production is just a picture in time. This will obviously change. And if you add to that,
Speaker Change: The Scarn with a very, very large silver production as well. You can very clearly see where this is going. So, we are not, obviously not interested in looking at smaller assets.
Speaker Change: As you noticed over the last transaction with Yamana, we divested a lot of the smaller assets.
Speaker Change: simplified and improved the quality and simplified our portfolio.
Speaker Change: I think you see the result this quarter, very, very strong financials. And, you know, that was really the path we wanted to do.
Speaker Change: Of course, continue looking around for opportunity. I think we're in an incredibly strong position.
Speaker Change: You have an incredibly strong balance sheet, especially after we closed the Lorena transaction.
Speaker Change: And, you know, we are ready. We did the integration very successfully, and I think we are.
Speaker Change: will be ready for the next transaction. But as I said, it has to be very, very disciplined in that. So it has to be accretive. It has to be of size and cost structure that fits into our company.
Speaker Change: Okay, thank you very much for that. That's all for me. Good luck with Q4.
Speaker Change: Thank you.
Speaker Change: Thank you. Once again, should you have a question, please press star and 1 on your telephone keypad.
Speaker Change: Once again, that is Tara and Juan to ask a question.
Speaker Change: No further questions at this time. I will now hand the call back to Mr. Michael Steinmann for any closing remarks.
Michael Steinmann: Thank you.
Michael Steinmann: Yeah, thanks everyone for calling in and.
Speaker Change: A very busy day for everybody.
Speaker Change: for the whole world, obviously, looking at political events.
Speaker Change: just across the board.
Speaker Change: Very strong quarter and I'm really looking forward to
Speaker Change: to Q4, which is, you know, historically always our strongest quarter as well. This is a great time to be in precious metals. It's a great time to be in silver and gold.
Speaker Change: And we are
Speaker Change: the dominant player in this space, so really looking forward to next quarter and looking forward to sharing January our annual production.
Speaker Change: Looking backwards and looking forward with our forecast for 2025 with our budget numbers. Until then, have a great time. Thank you. Everyone.
Speaker Change: Thank you and that concludes our conference today. Thank you for participating. You may all disconnect.