Pan American Silver Announces Preliminary 2019 Production Results and 2020 Operating Guidance

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Algemeen advies 15/01/2020 13:31
All amounts are expressed in US$ unless otherwise indicated. Results are unaudited and could change based on final audited financial results. This news release contains forward-looking information about expected future events and financial and operating performance of Pan American. Readers should refer to the risks and assumptions set out in the "Cautionary Note Regarding Forward-Looking Statements and Information" at the end of this news release.

VANCOUVER, Jan. 15, 2020 /CNW/ - Pan American Silver Corp. (NASDAQ: PAAS) (TSX: PAAS) ("Pan American") today announced preliminary production results for the fourth quarter ("Q4 2019") and full year 2019 ("FY 2019"). Pan American today also provided its guidance for production, costs and expenditures in 2020.

"2019 was a transformative year for Pan American and one of the most important in our 25-year history. We completed the Tahoe transaction and successfully integrated the new assets into our portfolio, capturing $25 to $30 million in annual G&A synergies. Pan American is now a much larger, stronger and more profitable company," said Michael Steinmann, President and Chief Executive Officer of Pan American. "Robust cash flow generation allowed us to repay a further $40 million to our line of credit in Q4 2019, continuing the rapid deleveraging of our balance sheet post closing of the Tahoe transaction. In addition, we advanced our skarn discovery at La Colorada and published an initial resource estimate of 72.5 million tonnes of polymetallic mineralization. In 2020, Pan American is well positioned for strong, low cost production. Combined with current metal prices, that should result in a rewarding year for our shareholders."

Preliminary 2019 Production Results
Production in 2019 reflects a full year of production for the Silver Segment mines and from February 22, 2019 to December 31, 2019 for the Gold Segment mines.

Figures are preliminary and subject to final adjustment. The final figures will be provided in Pan American's financial results for the fourth quarter and year ended December 31, 2019. Pan American plans to release its unaudited financial results for Q4 and FY 2019 after market close on February 19, 2020.

Silver Production
(ounces '000s)
Gold Production
(ounces '000s)
Q4 2019 FY 2019 Q4 2019 FY 2019
Silver Segment:
La Colorada 2,080 8,206 1.3 4.6
Dolores 1,287 5,122 26.1 117.6
Huaron 935 3,796 0.2 1.0
Morococha(1) 554 2,456 0.2 1.4
San Vicente(2) 877 3,528 0.1 0.5
Manantial Espejo/COSE/Joaquin 817 2,599 6.7 22.4

Gold Segment:
Shahuindo(3) 54 137 43.5 145.4
La Arena(3) 11 26 48.4 122.5
Timmins (3) 6 18 47.3 143.8
Total (4) 6,622 25,886 173.9 559.2

Morococha data represents Pan American's 92.3% interest in the mine's production.

San Vicente data represents Pan American's 95.0% interest in the mine's production.

Reflects production results subsequent to the February 22, 2019, closing date of the acquisition of Tahoe Resources Inc., as described in the "Acquisition of Tahoe" section of Pan American's management's discussion and analysis ("MD&A") for the period ended September 30, 2019.

Totals may not add due to rounding.

Consolidated Base Metal Production (tonnes '000s)

Q4 2019 FY 2019
Zinc 16.6 67.6
Lead 7.2 27.3
Copper 2.3 8.7

2019 Highlights:

Silver production of 25.9 million ounces was in line with the revised guidance(1) range of 25.3 million to 26.3 million ounces provided on August 7, 2019.
Gold production of 559.2 thousand ounces was in line with the revised guidance(1) range of 550 thousand to 600 thousand ounces provided on August 7, 2019.
Zinc, lead and copper production was 67.6, 27.3 and 8.7 thousand tonnes, respectively, compared with original guidance provided on January 21, 2019, of 65.0 - 67.0, 24.0 - 25.0 and 9.8 - 10.3 thousand tonnes, respectively.
The La Colorada mine achieved an average mining and processing rate of over 2,100 tonnes per day, exceeding the targeted rate of 2,000 tonnes per day for 2019 and resulting in record annual silver, zinc and lead production. Pan American continues to achieve greater than expected efficiencies from the mine expansion completed in 2017, which had a design throughput rate of 1,800 tonnes per day.
Pan American achieved several records in operating performance: annual open pit mining rates at Dolores; annual mining and processing rates at La Colorada, Huaron, and Morococha; annual zinc and lead plant recovery rates at Morococha, driving record annual zinc production at that mine; and, annual mining and processing rates at San Vicente, which largely offset an increase in operating costs per tonne due to the mining of narrower ore bodies than in previous years.
Pan American released an initial inferred mineral resource estimate for the La Colorada skarn deposit of 72.5 million tonnes, averaging 44 grams per tonne silver, 0.17% copper, 2.02% lead and 4.40% zinc, assuming a cut-off value of $60 per tonne after accounting for transportation, smelting and refining costs. Please refer to Pan American's news release dated December 11, 2019, for further details.
Pan American repaid $60 million of debt during 2019, including $40 million repaid in Q4 2019. As at December 31, 2019, Pan American had $275 million drawn under its revolving credit facility and $238.3 million in cash and short-term investments.

Pan American initially provided its guidance for 2019 on January 21, 2019 (the "original guidance"), and subsequently revised the guidance on May 8, 2019, to include certain forecast amounts for the mines acquired from Tahoe Resources Inc. for the period February 22, 2019 to December 31, 2019. Pan American revised its guidance again on August 7, 2019, reducing 2019 annual consolidated silver and gold production to between 25.3 and 26.3 million ounces and between 550.0 and 600.0 thousand ounces, respectively, primarily due to the postponement of commercial production from the COSE and Joaquin project.

The estimates below are forward-looking in nature. Please refer to the cautionary note at the end of this news release. Management may revise guidance during the year to reflect actual and anticipated results.

Silver Production
Gold Production
Cash Costs

(million ounces) (thousand ounces) ($ per ounce)(1) ($ per ounce)(1)

Silver Segment:
La Colorada 8.5 - 8.7 4.0 -5.0 3.00 - 4.00 5.50 - 6.50
Dolores 4.5 - 5.0 133.5 - 143.5 (8.50) - (5.50) 4.25 - 6.25
Huaron 3.8 - 3.9 0.5 9.25 - 11.00 12.50 - 14.25
Morococha (92.3%)(2) 2.6 - 2.8 1.3 - 1.5 9.50 - 11.75 13.50 - 15.50
San Vicente (95.0%)(3) 3.5 -3.6 0.5 14.00 - 15.00 16.00 - 17.00
Manantial Espejo/COSE/Joaquin 4.0 - 4.3 33.2 - 36.5 16.75 - 17.75 18.50 - 19.50
Total(4,5) 26.8 - 28.3 173.0 - 187.5 5.75 - 7.50 10.25 - 11.75

Gold Segment:
Shahuindo 0.2 162.0 - 172.5 700 - 750 1,070 - 1,150
La Arena — 125.0 - 135.0 800 - 850 1,120 - 1,200
Timmins — 165.0 - 180.0 950 - 1,000 1,090 - 1,170

Total(4,5) 0.2 452.0 - 487.5 820 - 870 1,090 - 1,170

Total Production(4,5) 27.0 - 28.5 625.0 - 675.0

Consolidated Silver Basis
n/a(6) 4.50 - 6.50

Cash Costs and AISC are non-GAAP measures. Please refer to the "Alternative Performance (Non-GAAP) Measures" section of this news release for further information on these measures. The Cash Costs and AISC forecasts assume average metal prices of $17.50/oz for silver, $1,525/oz for gold, $2,350/tonne ($1.07/lb) for zinc, $2,000/tonne ($0.91/lb) for lead, and 6,150/tonne ($2.79/lb) for copper; and average annual exchange rates relative to 1 USD of 19.50 for the Mexican peso ("MXN"), 3.34 of the Peruvian sol ("PEN"), 73.64 for the Argentine peso ("ARS"), 6.91 for the Bolivian boliviano ("BOL"), and $1.30 for the Canadian dollar ("CAD").

Morococha data represents Pan American's 92.3% interest in the mine's production.

San Vicente data represents Pan American's 95.0% interest in the mine's production.

As shown in the detailed quantification of consolidated AISC, included in the "Alternative Performance (Non-GAAP) Measures" section of the MD&A for the period ended September 30, 2019, corporate general and administrative costs, and exploration and project development expenses are included in Consolidated Silver Basis AISC, but are not allocated in calculating AISC for the Silver and Gold Segments.

Totals may not add due to rounding.

Pan American will no longer be providing guidance for Cash Costs on a Consolidated Silver Basis, determining that AISC guidance is a more appropriate measure of reflecting costs on a Consolidated Silver Basis.

Expenditures ($ millions)
Sustaining Capital
La Colorada 15.5 - 16.5
Dolores 55.0 - 58.0
Huaron 9.0 - 10.0
Morococha 7.5 - 9.0
San Vicente 6.0 - 7.0
Manantial Espejo/COSE/Joaquin 4.0 - 5.5
Shahuindo 63.0 - 65.0
La Arena 42.0 - 44.0
Timmins 23.0 - 25.0
Sustaining Capital Sub-total 225.0 - 240.0
Project Capital 22.0 - 27.0

Total Capital 247.0 - 262.0

Care & Maintenance
Escobal 19.0 - 20.0
Navidad 2.5 - 3.0
Greenfield Exploration(1) 11.5 - 12.5
Corporate General & Administrative(2) 35.0 - 37.0

Regional exploration focused on early-stage projects, and excludes brownfield exploration for reserve replacement, which is included in Sustaining Capital.

Includes stock-based compensation.

2020 Guidance Highlights:

Project capital expenditures relate mostly to: (1) the drilling program, early stage engineering and metallurgical testing for the La Colorada skarn discovery; and (2) an approximate 20% expansion of the Bell Creek mine in Timmins, with the purchase of additional mine equipment and debottlenecking of the plant to optimize improved efficiencies resulting from the commissioning of the Bell Creek shaft in February 2019. Pan American is also focused on capturing additional debottlenecking opportunities at Shahuindo and La Colorada.
Pre-production underground development at both the COSE and Joaquin mines progressed during 2019 along with the purchase of the necessary mining equipment and the completion of the infrastructure and facilities. Both mines will enter the production phase in early 2020, with no further project capital spending anticipated.
Sustaining capital expenditures include: (1) completion of the substantial heap leach pad expansions at Dolores and Shahuindo, (2) work on the waste rock storage facilities at La Arena and Shahuindo, (3) expansion of tailings storage facilities at La Colorada and Timmins, (4) advancing open pit mine waste pre-stripping activities at Dolores and La Arena; and (5) underground mine development at Huaron and Morococha.
Exploration expenditures total $37.5 to $39.5 million, comprised of: (1) $18.5 million to $19.5 million for 186,000 metres of near-mine brownfield exploration drilling for reserve replacement, which is included in sustaining capital, (2) $11.5 to $12.5 million in regional, greenfield exploration in Peru, Mexico and Canada; and (3) $7.5 million for 44,000 metres of drilling on the La Colorada skarn discovery, which is included in project capital.

Retirement of Board Member
The Company announces that Kevin McArthur has decided not to stand for re-election as a director at Pan American's 2020 Annual General Meeting on May 6, 2020. Mr. McArthur was appointed director following Pan American's acquisition of Tahoe Resources Inc. in February 2019. We thank Kevin for his contributions to the Board, and in particular, for his contributions during our successful integration of Tahoe.

Technical information contained in this news release with respect to Pan American has been reviewed and approved by Martin Wafforn, P.Eng., Senior Vice President, Technical Services & Process Optimization, who is Pan American's Qualified Person for the purposes of National Instrument 43-101. For additional information about Pan American's material mineral properties, please refer to Pan American's Annual Information Form dated March 12, 2019, filed at, or Pan American's most recent Form 40-F furnished to the SEC.

Q4 and Full Year 2019 Unaudited Results

Pan American plans to release its unaudited financial results for Q4 and FY 2019 after market close on February 19, 2020.

Conference Call and Webcast

February 20, 2020
11:00 am ET (8:00 am PT)
Dial-in numbers:
1-800-319-4610 (toll-free in Canada and the U.S.)

+1-604-638-5340 (international participants)


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