Pan American Silver reports cash flow from operations of $114.1 million in Q1 2020; maintains quarterly dividend

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Overig advies 07/05/2020 04:42
- All amounts expressed in U.S. dollars unless otherwise indicated. Unaudited tabular amounts are in thousands of U.S. dollars except number of shares, options, warrants, and per share amounts, unless otherwise noted.

VANCOUVER, May 6, 2020 /CNW/ - Pan American Silver Corp. (NASDAQ: PAAS) (TSX: PAAS) today reported unaudited results for the first quarter ended March 31, 2020 ("Q1 2020"). Pan American's unaudited condensed interim consolidated financial statements and notes ("financial statements"), as well as Pan American's management's discussion and analysis ("MD&A") for the three months ended March 31, 2020, are available on Pan American's website at panamericansilver.com and on SEDAR at www.sedar.com.

"The COVID-19 pandemic escalated quickly over Q1 2020. Pan American took immediate steps to protect the health and safety of our people, and mobilized our business continuity plans. We are also providing support to our local communities during this very difficult time. In addition to our existing community programs, we are donating $2 million in food and hygiene supplies, as well as facilitating access to health care," said Michael Steinmann, President and Chief Executive Officer.

Added Mr. Steinmann: "Cash flow generation of $114.1 million in Q1 reflects the Company's strong operating performance before the impact of the COVID-19 related mine suspensions. However, earnings in the period were significantly impacted by non-cash, mark-to-market investment losses and non-cash tax expense due to COVID-19 related currency devaluations. We have a strong balance sheet with approximately $479 million of total available liquidity, and we have taken steps to defer or reduce non-essential expenditures to preserve our financial strength. Many of the temporary COVID-19 related suspensions are now being lifted, and we are preparing to restart those operations. Profit margins should benefit from the improvement in gold prices combined with lower costs due to currency devaluations in our operating jurisdictions."

COVID-19 Update

As previously reported, Pan American suspended normal operations at its mines in Mexico, Peru, Argentina and Bolivia in the latter part of March 2020 to comply with mandatory national quarantines imposed in response to the COVID-19 pandemic. Limited production has continued at the open pit mines from circulation of process solutions on the heap leach pad. As well, the Timmins West and Bell Creek gold mines in Canada have continued to operate at 90% of throughput capacity.

The Company has taken steps to preserve its balance sheet strength by deferring certain capital expenditures and exploration spending. As well, the Company's executive management team and board of directors have voluntarily agreed to a 20% reduction in remuneration until the situation normalizes. As a precautionary measure, in April 2020, the Company increased its cash and cash equivalents holdings with an $80.0 million draw on the Credit Facility.

The following provides a summary of the status in each of our operating jurisdictions as of today's date; the circumstances can change rapidly and are difficult to predict.

In Mexico, the government has permitted a restart of mining activities on May 18, 2020, if the mine is located in a municipality with no to few active COVID-19 cases. Our La Colorada and Dolores operations meet this requirement at this time, and we are currently developing plans for restarting both operations, pending local authorizations and acceptance.

In Argentina, we are currently restarting the Manantial Espejo operation at reduced underground mining rates and redeploying personnel for the restart of the COSE and Joaquin operations.

In Bolivia, we are currently preparing for a restart of our San Vicente operations following the government authorization that mining activities can resume on May 7, 2020.

In Peru, discussions are advancing with government officials on restarting large scale (greater than 5,000 tonnes per day) open pit mining operations at reduced capacities, which could permit the restart of our La Arena and Shahuindo operations, potentially on May 11, 2020.

The restart of our operations will be a phased approach following health guidelines and government decrees in each jurisdiction where we operate. We expect a gradual resumption of activities with modifications to accommodate greater physical distancing, and with appropriate protocols in-place to protect the health and safety of our workforce and communities.

The COVID-19 pandemic is a rapidly evolving situation and the impact on our operations cannot be predicted at this time. We are not able at this time to determine at what capacity level operations will resume, nor when we would be able to return to full-staffing and productive capacity levels. As such, the Company has withdrawn its 2020 annual guidance, as provided in the 2019 annual MD&A dated March 12, 2020. We expect to update the 2020 Guidance once sufficient clarity on the operating circumstances becomes available.

We currently have had no confirmed cases of COVID-19 at any of our Pan American Silver operations or offices.

Q1 2020 Highlights:
•Revenue was $358.4 million, which reflects the strong contribution from the Gold Segment mines with consolidated gold production totaling 156.1 thousand ounces and an average realized price of $1,580 per ounce.
•Silver production of 5.6 million ounces primarily reflects the suspensions of the Huaron, Morococha, Manantial Espejo and San Vicente operations and the failure of an underground ventilation circuit at the La Colorada operation. The Company is currently deploying an upgrade of the mine ventilation system to re-establish access to a high-grade zone within the La Colorada mine.
•Net cash generated from operations was $114.1 million, reflecting strong operating earnings from the Gold Segment mines.
•A net loss of $77.2 million ($0.37 basic loss per share) reflects: a tax expense of $52.7 million, primarily driven by non-cash devaluations of certain tax assets denominated in foreign currencies; a $28.3 million investment loss, primarily from non-cash unrealized mark to market adjustments on the Company's equity interest in New Pacific Metals Corp.; $16.0 million in care and maintenance costs; and, $8.8 million in mostly non-cash losses on foreign currency contracts.
•An adjusted loss of $7.6 million ($0.04 basic adjusted loss per share) was recorded, which includes $28.3 million ($0.13 per share) of non-cash, unrealized mark-to-market investment losses in our equity interests.
•Silver Segment Cash Costs and All-in Sustaining Costs ("AISC") were $8.18 and $15.26 per silver ounce sold, respectively.
•Gold Segment Cash Costs and AISC were $757 and $969 per gold ounce sold, respectively.
•Consolidated AISC, including gold by-product credits from the Gold Segment mines, were $3.49 per silver ounce sold.
•Project development expenditures of $8.7 million were directed at exploration drilling of the La Colorada skarn deposit, development advances on the COSE project, and expansion of the Bell Creek mine and plant at the Timmins operation.
•At March 31, 2020, the Company had cash and short-term investment balances of $239.2 million and working capital of $488.0 million. Total debt was $299.2 million (including $39.2 million of lease liabilities). During Q1 2020, the Company made a $15 million repayment of its four-year, $500 million Credit Facility, reducing the drawn amount at March 31, 2020, to $260 million.

•The Board of Directors has approved a cash dividend of $0.05 per common share, or approximately $10.5 million in aggregate cash dividends, payable on or about May 29, 2020, to holders of record of Pan American's common shares as of the close on May 19, 2020. Pan American's dividends are designated as eligible dividends for the purposes of the Income Tax Act (Canada). As is standard practice, the amounts and specific distribution dates of any future dividends will be evaluated and determined by the Board of Directors on an ongoing basis.

Cash Costs, AISC, adjusted earnings, basic adjusted earnings per share, sustaining capital, project capital, working capital, total debt and total available liquidity are not generally accepted accounting principle ("non-GAAP") financial measures. Please refer to the "Alternative Performance (non-GAAP) Measures" section of this news release for further information on these measures.

First Quarter 2020 Unaudited Results Conference Call and Webcast
Date: May 7, 2020
Time: 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)

Webcast: panamericansilver.com
Callers should dial in 5 to 10 minutes prior to the scheduled start time. The live webcast and presentation slides will be available on the Company's website at panamericansilver.com. An archive of the webcast will also be available for three months.

CONSOLIDATED RESULTs Three months ended Twelve months ended March 31, 2020
December 31, 2019
Weighted average shares during period (millions) 209.8 201.4
Shares outstanding end of period (millions) 210.0 209.8

Three months ended March 31, 2020 2019
FINANCIAL
Revenu $ 358,428 $ 253,699
Mine operating earnings $ 50,058 $ 15,770
Net (loss) earnings $(77,235) $ 3,320
Basic (loss) earnings per share(1) $ (0.37) $ 0.02
Adjusted (loss) earnings(2) $ (7,618) $ 4,499
Basic adjusted (loss) earnings per share(1) $ (0.04) $ 0.03
Net cash generated from operating activities $ 114,051 $ (12,911)

Net cash generated from operating activities before
changes in working capital(2) $ 75,900 $ 25,025
Sustaining capital expenditures(2) $ 50,207 $ 34,742
Project capital expenditures(2) $ 8,672 $ 9,874
Cash dividend per share $ 0.05 $ 0.035

PRODUCTION(3)
Silver (thousand ounces) 5,561 6,125
Gold (thousand ounces) 156.1 80.5
Zinc (thousand tonnes) 13.1 16.8
Lead (thousand tonnes) 5.3 6.5
Copper (thousand tonnes) 1.9 2.0

CASH COSTS(2) ($/ounce)
Silver Segment 8.18 5.46
Gold Segment 757 777

AISC(2) ($/ounce)
Silver Segment 15.26 10.83
Gold Segment 969 1,091
Consolidated Silver Basis 3.49 10.51

AVERAGE REALIZED PRICES
Silver ($/ounce)(4) 16.50 15.52
Gold ($/ounce)(4) 1,580 1,302
Zinc ($/tonne)(4) 2,125 2,750
Lead ($/tonne)(4) 1,857 2,039
Copper ($/tonne)(4) 5,8016,207
(1)
Per share amounts are based on basic weighted average common shares.
(2)
Non- GAAP measures: adjusted earnings, basic adjusted earnings per share, and net cash generated from operating activities before changes in working capital are non-GAAP financial measures. Please refer to the "Alternative Performance (non-GAAP) Measures" section of this news release for further information on these measures.
(3)
2019 production reflects results subsequent to the February 22, 2019 closing date of the acquisition of these mines pursuant to the Tahoe Resources Inc. transaction.
(4)
Metal prices stated are inclusive of final settlement adjustments on concentrate sales.

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