Q2 2025 Pan American Silver Corp Earnings Call

Thank you for joining us. This is the conference operator. Welcome to the Pan American Silver second quarter 2025 results conference call.

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I would now like to turn the conference over to Sue and khaki, vice, president investor relations. Please go ahead. Miss keki.

Thank you for joining us today for Pan-American Silvers conference call and webcast to discuss our second quarter 2025 results.

This call includes forward-looking statements and information, as well as references to non-GAAP measures.

Please see the cautionary statements in our mdna news, release and presentation, slides for the Q2, 2025 results, all of, which are available on our website. I'll now turn the call over to Michael Steinman Pan-American, president and CEO.

Thank you and good morning, everyone. I'm glad you could join us to discuss Pan American Silver Corp's Q2 2025 results.

Today, I'm pleased to report another quarter of record setting results.

Topline revenue of 811.9 million, reflects solid operating performance and the benefit of supportive price environment.

Net earnings were a record of 189.6 million or 52 cents per share. Largely driven by record mine, operating earnings of 273.3 million.

Adjusted earnings were $155.4 million, or 43 cents per share.

Cash flow from operations before. Non-cash working capital changes was also a record of 287.9 million after 68.3 million in cash, taxes paid.

After non-cash working capital changes, operating cash flow total 293.4 million.

Free cash flow was a record of 233 million increasing our cash balance to a record high of 1.1 billion dollars at the end of Q2.

Our Capital allocation framework remained unchanged. Maintain our strong balance sheet, sustain and grow the business and return Capital shareholders.

Even our strong balance sheets, we are focused on growing the business and in Q2 May significantly Advanced that objective it our proposed acquisition of Max silver.

The top tier for a CPO. Silver asset is expected to provide an immediate uplift to Pan-American, silver production, and free cash flow generation.

While meaningfully reducing our consolidated silver segment costs.

It also represents further opportunities to grow our silver production through the expiration, potential of the asset.

Max shareholders approved, the transaction in July and we are now awaiting the clearance under Mexican antitrust laws.

The transaction is expected to close in the second half of 2025.

In addition to the acquisition, we invested 73.7 million in sustaining and project capital in Q2.

Project Capital was invested in the llora mine and this current project and to our own payments and Shekinah Minds.

And Shaco in addition to advancing mine and planned optimization studies. We have invested in improvements to plant, availability and the equipment reliability.

In terms of the L's, current project, our discussions around potential Partnerships for the development. Our progressing. Well, and we expect to share more on our plans for this Con in the coming month.

We have also delivered on the third priority of our Capital, allocation approach returning Capital to shareholders.

Yesterday we announced that 20% dividend increase from 10 cents to 12 cents per common shares with respect to Q2 2025.

We also repurchased just under half a million common chairs at an average price of $4.22 per share.

For a total consideration of $11.1 million in Q2.

During the first half of this year, we have returned approximately 103.5 million in dividends and share BuyBacks to our shareholders.

Total available liquidity at the end of Q2 was roughly $1.9 billion, giving us ample flexibility to pursue our organic and inorganic growth opportunities.

Even after accounting for the $500 million of cash, that will be paid as part of the consideration for Max over.

Turning now to operations, we produced 5.1 million ounces of silver in Q2, within our guidance range for the quarter. Our silver segment achieved all in sustaining costs of $19.69 per ounce, excluding NRV adjustments, which was at the low end of our guidance range.

La, la, la once again led to performance in the silver segment, following the improvement of ventilation from the new infrastructure installed in mid-2024.

Throughput reached an average of 2,130 tons per day in Q2 relative to the 2,000 tons per day that we were targeting.

as a result, silver production at lerata, was up nearly 50% and cascos per silver ants down by nearly 25% compared with the first half of 2024,

the are maintaining our guidance for silver production and costs in 2025.

Both production of 178,700 oz in Q2 was slightly below our guidance range, while all-in sustaining costs in the gold segment, excluding NRV adjustments of 1,611, were within guidance.

The gold segment was impacted by lower throughput, and creates a Tims, primarily as a result of additional back fill and thanking all dilution.

Was impacted by mine and development sequencing into lower gold and higher silver grades.

These impacts were partially off-site but stronger performance at shallow window from higher gold grades and positive mind grades reconciliations. And at the lores with the Lee cycle, delivering more production than originally planned in Q2.

Hope production in the first half of 2025 was in line with our guidance.

And we are maintaining our outlook for gold production and all in sustaining costs.

However, we now expect gold production to be more heavily weighted to the fourth quarter of 2025 than originally indicated, in our 2025, quarterly operating Outlook

At escobal, the sheikah parliament issued a statement in May 2025 with respect to the ILO 169 consultation process.

The Guatemalan Ministry of energy and Minds on ma'am, has now delivered a response to that statement describing the proposals to address the concerns the shinka parliament had raised.

These documents can be reviewed on the man website.

The members indicated that they will continue to hold working meetings and maintain dialogue with the shinka parliament as they work towards completing the ILO 169 consultation. Although a date for completing the consultation has not been specified.

As we consider the global backdrop for precious metals, we see very supportive environment for gold and silver prices.

Global photovoltaic installations and electronic applications continue to drive industrial demand growth for silver while. Mine Supply is largely flat.

The silver market is in its fifth consecutive year of structural deficit. And this deficit is expected to persist in the coming years, depleting above ground stocks further.

A very supportive backdrop for silver prices.

We view the max silver acquisition as a high quality, addition to our portfolio to capitalize on this outlook for silver.

In summary Pan-American, silver has delivered record Financial results in the first half of 2025, our operating teams have focused on meeting our production targets and maintaining strong control over costs.

They're untracked to achieve our guidance for 2025.

We look forward to continuing to deliver robust free cash flow and returning capital to our shareholders.

I will now be happy to take your questions together with other members of our management team.

Thank you. We'll now begin the question and answer session.

To join the question queue. You may press star then 1 on your telephone keypad. You'll hear a tone acknowledging your request. If you're using a speaker-phone, please pick up your handset before pressing any keys to withdraw. Your question press star then to

our first question is from oh habits Scotia Bank. Please go ahead.

Thank you, operator. Hi, Michael and Pan American team. Uh, congrats on a Q2 beat, uh, couple of, uh, questions from me, um, in Q2, um, you know, on Sarah Moro. Alpinion timings Mira Florida. Essentially all experienced either negative grade reconciliation or geotechnical issues. Um, first part of the question is, have these issues been resolved going into Q3? Um, I believe you said Q3 is expected to be a weakest quarter with Q4 bring your strongest quarter uh, in terms of the gold production and and part 2 of the question is, do you think jacobina can make up for the loss of Oz? If, if it comes to, that is actually when I'm going to ask Michael is

How confident are you with meeting the goal production guidance?

Yeah, good morning. Uh, always I have Steve here next to me. Who will answer your question? Yeah, good morning Novis, um, in for the most part, those those issues we faced in terms of grade, reconciliations at most of those operations, and the geotechnical issues, we are addressing aggressively. We do anticipate some of it to linger into Q3. That's why we're kind of pushing the gold guidance heavier into Q4. That's kind of where we raise that note, but we're feeling pretty confident generally what we see when we have a quarter of low. Reconciliations, we do generally see it, come back, our drill data on average it, we're comfortable with the reserve information. It's just these swings of highs and lows quarter to quarter and it and it kind of hit those operations. You mentioned during Q2 gee technically we're having some good success in Timmins at addressing you know particularly some of the production drill hole squeezing issues.

We've had, we're drilling larger diameter holes, we're using an additive that's been pretty unique and it's been pretty helpful in maintaining those holes open and we've added quite a bit of um, ground support even Dynamic support along some of the key developments in the in the high stress areas. So we're feeling pretty good. That we're overcoming those issues there.

So, yeah. So that's why we kind of favorite pushing some of the gold into Q4, but we remain. Incredibly confident that we'll come in, within guidance, on gold production and certainly on Silver and cost.

Thanks for the color on that, Stephen. And, and, and I mean most of these, uh, uh, you know, operations have kind of achieved at least about 42. You know, 50% of production year to date. So, in terms of kind of getting over that hump, um, you know, it, it does seem like, uh, you guys should be able to hit those numbers. So, so thanks for that color. Um, just uh, wanted to see if I can move on to, you know, non-core asset sales, uh, Michael your team is in an excellent job, uh, in in kind of selling non-core asset sales over the past couple of years.

Should we expect more to come uh, going into the second half or even uh, the next 12 months?

Uh, yeah, definitely, we are working on some on some of, uh, the deals that are mostly smaller things. So don't expect, like, you know, big, uh, big big sales like we've seen on what the last 18 months? Uh, but there's quite a few smaller things that we're working on and uh, we'll, we'll release those obviously when they're done. I I would expect that the fuel will close here, uh, from now to to the end of the year.

I mean um like maybe in terms of a little bit details, I mean are those operating assets or are they more exploration? Uh, assets that you're looking to sell.

Uh, no, they're not operating assets. Uh, there's a lot of like mid to later stage expiration plays. Uh, that we are finding new homes for, uh, in all kind of different. Uh,

Uh, jurisdictions and also different constellations. Uh, you know, you should expect maybe some, some straight out sales. Some, some participation in other companies, etc, etc,

Sounds good. Thanks for that color, Michael. Uh, that's it for me. Uh, thanks for taking my questions and, uh, again, congrats on a good quarter.

Thanks always.

The next question is from sahad to week with Jeffrey's. Please go ahead.

Uh in the quarter there was a comment in the mdna about mine sequencing to lower grade, uh, gold grade ores. Can you just talk about expectations for the second half of the year on grades?

Yeah, but he this is Steve. Um we are for we're trying to move towards mining.

That pushed towards lower grade will come as part of the optimization study, we're working on where we'll start to push more tons at lower grades, and kind of maintain, or expand the gold production to a limited degree. Um, but but again, we remain confident, that we'll deliver to our guidance Jack being a, um, according to what we showed their

Okay. Thanks. And then on escobal and the consultation process can you just give a bit more color about the types of meetings that are happening? I guess over the coming weeks and months is that is it

Is a Pan-American being involved in those meetings directly uh with the zinca parliament or is it the government meeting with them in Pan-American? Providing information and where needed?

Just just, just keep in mind that the consultation is between the government led by the minister of Minds uh, Ministry of minds and and to think, and uh, it's not that not led by Pan-American. So that's that's, that's uh, you have to keep that in mind. But I have Sean here who's leading our efforts in Guatemala. Can give us more details on this. Yes. Good morning. Uh, what we're seeing now is uh, a series of working meetings that are being planned. So we expect to see the government meet with Sheena Parliament. Over the coming weeks. They did have a meeting on the 29th of July, uh, so those meetings are ongoing and we will be called called into participate in the future. We expect that to happen and we have ongoing meetings with with the man and the government at the same time in parallel, uh, when they have questions and issues that they want to resolve with us, but I'd expect that we would have a few meetings this quarter. Um and so we'll we'll update that uh, in the uh Q3 update.

Okay, great. Thank you.

The next question is from Lawson. Were with Bank of America Securities. Please go ahead.

Thank you very much, operator. And, uh, hello, Michael and team. Thank you for today's update. Next quarter.

I wanted to ask about, uh, scarn, uh, something you said in your prepared remarks, Michael and then, and then follow up on that. Did you say that you expected an update in the, in, in a month? Like, in in in, in like, in in terms like a singular month? Or did you, did you mean months and then? Uh, because that would be a lot sooner than, uh, the prior guy for a year end.

and then, what are the, uh, the current permutations of of monetization that look, most likely at this point,

Yeah, no, no. First, that was probably in my Swiss English. Uh, the several months that was plural, not singular month. Uh, I would be very soon, as you mentioned, look very, very interesting, developments on, on this Con. I don't know if you recall, we, uh, we started showing maybe late last year. Uh first uh kind of intersect some very high grade veins above this Con further to the east. Uh, the work exceptional intercepts. We we published a few in a, in a priority is there. And we kept drilling, they're very actively over the last like, 8 months, 10 months and uh,

And, uh, you know, we are looking at actually tapping into that as well. And, and, and, and look at synergies between this car and those hybrid intercepts. So, and, and cryptic here, as that's, uh, one of the, uh, of the release we will put out when we have all the data together, which will, you know, happen issues. You should expect that coming in the next few months, uh, to, uh, uh, to discuss those results. Uh, and then that will be included in our updated resource and reserve calculation as well. So that's probably the, you know, beside the infill drill and, and, and the scar, obviously, we know by now a lot about this current. But that's, it's definitely the, uh, the most interesting and additional information that will come into the project when you look at Lada entirely and how we move forward with this Con project. And with lack of, uh, adding those very, very...

Part of the several updates that we're going to see during the rest of the year on local Colorado and on the scan.

Okay. And then just to be clear, one of those updates could be some sort of monetization or partnership transaction.

Um, look this this discussions are ongoing and and of course uh uh those additional veins and and and synergies will play into the the partnership negotiations as well. Uh so that will come after. So I can promise you that when that will come out. But uh as I said, we're working hard on that and uh, whenever it's ready, we will share. But uh the first few steps here will be the reserve update resource update on it and and then uh the inclusion of those high-grade veins. And then the next step will be to include that in our negotiations with with potential partners.

Okay. Yeah, fantastic. Thank you for clearing that up and then, you know, just since you brought it up the reserve and Reserve update, Could you, um, give us an idea of the training and when that update would come and then thinking about gold and silver price assumptions in that update, I mean, would you say you'd have a fairly high level of confidence in replacing reserves this year and, you know, to the extent that the change in the gold and silver prices assumptions? Might be quite material. Could we be looking at some some impact on? Uh, the current mine plans?

Yeah look, I mean if you recall when you look at our resource resource updates we never use just 1 price for it to all be. You know, I'm a strong believer that you have depending on the Mind life if you look at a shorter mind life and obviously we sitting on a in a very high metal price environment. Uh you in order to optimize your return, you obviously should use higher prices in in those assets in very long, life assets. Like, like, like jacobina. For example, uh, you would use lower prices, we have that done all the time and you look at our Reserve resource uh, tables. There is actually a whole page with different prices that we use for different assets. So so that will remain uh we will do this, you know, use a similar approach uh this year's. Uh there will be obviously a few assets where we use slightly higher prices but I think we are still very very conservative, I think on the on the price side to really maintain and and take advantage of of big margins that

That that that we can create with this metal price environment.

Uh, you know, the result you see, obviously in our strong cash flow that that that we delivered last quarter so that kind of the same theme continues. But of course we we, you know, we have probably what 1500 dollar higher gold price than than last year. So you have to adapt a little bit not to not to leave really high paying uh, material behind so it's a, it's a, an interesting year definitely to to

Use a defined metal prices for your reserving resources. As you know, we are 1 of the few companies who do it mid year because we want to have a new reserved resource when they go into the budgeting season. Um, but you should expect that process is coming out over the next few weeks definitely before I would say mid-september.

Of your Summers.

Thank you, you too.

Once again, if you have a question, please press star then 1.

The next question is from Cosmos 2 with CIBC. Please go ahead.

Thanks, uh, Michael and team. Um, maybe going back to the, uh, various geotechnical mind sequencing and negative grade reconciliation issues at the various properties, helping you on zero tomorrow, 2 minutes and Flora.

You know, I seem to notice that a number of these operations came from the young Mana portfolio. You know, I would say these are normal issues underground, but you know what? I'll also relate that to the fact that some of these operations were operated by a previous operator, and that's why some of these issues came up.

Yeah, hi Cosmo. Steve here, hi. Steve know I I I would have to say no, there's no specific. Um you know bias towards those you Mana Assets in terms of this reconciliation issue. It it is it is a factor of narrow vein mining. You know, I'd say we favor narrow vein mining, certainly at El pain and minera florita. Um, when you look at that ceremonial as well, those are pretty variable, highly variable narrow veins. And it's a, it's a characteristic of those type of deposits that we face.

No, this is uh, this is a quarterly blip and and it comes and goes, we're not concerned about our overall Reserve estimates. It's just the timing and spatial locations of these estimates that we have to hone in. We're we're looking as as we go into budgeting season for 2026, we are looking at potentially enhancing some of the drill density and some of these narrow veins to try to reduce that variability going into the next year. But I don't see any bias towards just human operations there. You know, we have just to add to this. Uh, we have seen, obviously this kind of resolved, as Steve said, which is, you know, uh, often the result of high very high grade narrow vein mining. Do you have more variability obviously than in a in a larger massive? Uh, at the scan for example, or or a port for it? So you have more variability and we, you know, we see the same kind of, um,

Uh, results sometimes that were on or some Vicente or other assets. Uh, you know, as a matter of fact, obviously in more narrow structures at Lac Colorado in the past. So, you know, these are normally short-term, uh, short-term issues and, uh, and we deal with them. So, nothing specific to being maximum assets. You know, we, we own the assets now for quite a while. Uh, I’m sorry you have noticed that over quarter and quarter and quarter. All these assets have been our strongest.

Cash flow or they're not with portfolio.

I I I do know this uh maybe as a follow-up uh, in terms of these um, you know, issues here. Are they related to like new areas that you're entering at these different assets? Maybe new structures that you might not have previously been aware of, um, that could maybe potentially lead to a more sustained impact on mining, or am I thinking too much into it?

Yeah I think a little bit too much I mean you're you're on a bit. Um it's it's more towards the extremity of the known of the uh veins that we have been mining as we reached the extremities of those reserves that and go deeper on those. We we generally are seeing a bit more variability, a little less density of information, which also drives a bit more variability in our results.

Okay, maybe even my next question will be going back to what I'm actually good at numbers. Um, on that uh, you know, sustaining topics here uh, you've budgeted 270 to 280 million dollars per year. Um, I seem to see that so far, you've done about 122 million, um, you know, certainly not hitting 50% for some of the assets like jacobina, she window can. So can you maybe talk about, you know that uh capex budget for the year and and where are you going to be planning on spending more that capex and Q?

324.

Yes, good morning, excuse me, Cosmo Scott Campbell here. Yes, we're uh, we had a few delays, uh, starting off our our top alarm our major capital projects that show window this year. Um, some are weather related, permitting related, and the awards process took a little bit longer to the tender process, but Full Speed Ahead with those. And so we we do intend to, uh, to to, you know, our capex will be in line with our with our forecast.

Great. Uh, and maybe 1 last question here on the dividend it's great to see that it's increased. It's great to see the you know, very robust free cash flow in Q2. Um but to confirm based on the mechanics of the dividend how you calculate the variable component, once you, you know, use a part of your cash on the balance sheet to pay for make silver. There's potential for that dividend to decrease again. Is that? Is that correct?

Well, there's a obviously a dividend policy as, as you mentioned, uh, but just keep in mind that, you know, we generate a lot of free cash flow so does Mac, and there will be, you know, cash obviously coming to us when we close the transaction. Uh, so I think it's too early to say but I, I don't think so that we're going to see, ah, in our big impact and I look forward to hearing.

Okay. And then on the uh, Meg transaction, as you mentioned, it's been approved by, you know, Max Silvers shareholders. And you're still waiting for the uh antitrust. Um, sort of, um, you know, the not the permits, but the approval uh is that like the last hurdle and and uh, you know, how should we view it?

So, the transaction and I would expect to, to probably closed a few days later after we receive that. And that, that, that approval,

Okay, and nothing more complicated to this transaction compared to what you've done in the past. Correct, Michael.

No, everything is completely moving normal here. You saw very clear vote of confidence by by the match shareholders. Uh, so really looking looking forward to to that, you know, that that, that, that operation or piece of operation to our portfolio. Which uh, you know, is very, very strong production there as well. Very strong silver at very low cost. And that's obviously the reason, uh, why we are interested in in our very interested in that acquisition, looking at 1 of the highest quality, highest grade lowest cost, silver mine on the planet with, uh, you know, in my, in my view, probably 1 of the biggest exploration outside as well.

Mhm. And then, uh, maybe a bit premature, but on the Make Silver transaction, once it closes, have you determined how you're going to account for it? You know, given that it is a 44% minority interest. Is it going to be some kind of equity pickup, equity accounting, sort of one-line pickup in your income statement? Have you thought about how you're going to account for it?

Hi Colin, this is Honest here. So yeah, we're still doing the analysis, but...

Hey, nice. Nice, talking to you. A good point of reference, would be the way mag accounted for the funny CPO. Um, uh, JV interest, which was, as you mentioned an equity pickup in addition to that, I can also point you to the

To the in to the mag info store, there's a performer, financial statements there, and then there are already some assumptions on what the accounting is going to look like. So, yeah, everything's pointing towards an equity pickup.

Great. Uh, thanks. Once again. Those are the questions I have uh, Michael Steve Ignacio and Scott, uh, and thanks for answering all my questions. Thank you.

No problem. Thanks Cosmos.

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

Thanks operator. And thank you everyone for calling in here. In a beautiful summer day at least here in Vancouver. Uh, another great quarter for paname beat the cross the board, and I have a strong financial results.

Uh really looking forward to the rest of of of this year looking forward to to at uh 20 CPS to our portfolio as well later this year. And as I mentioned we will release the reserve and resource update as of mid year and that should be quite a, you know, an active second second half of our last 4 months on the 5 months of the year uh with with with with

News flows on, on, on various topics for the company. So, okay. Forward to that. And looking forward to update. You in a moment November on our Q3 results until then, enjoy the rest of December. Thank you anyone.

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