Pan American Silver Reports First Quarter 2019 Results
Press Release
Guidance Updated to Include Mines Acquired Through Tahoe Transaction
All amounts expressed in U.S. dollars unless otherwise indicated. Unaudited tabular amounts are in thousands of U.S. dollars except number of shares and per share amounts.
VANCOUVER, May 8, 2019 – Pan American Silver Corp. (NASDAQ: PAAS) (TSX: PAAS) today reported unaudited results for the first quarter ended March 31, 2019 (“Q1 2019”). Pan American Silver’s unaudited condensed interim consolidated financial statements and notes (“financial statements”), as well as Pan American Silver’s Management’s Discussion and Analysis (“MD&A”) for the three months ended March 31, 2019, are available on Pan American Silver’s website at panamericansilver.com and on SEDAR at www.sedar.com.
Pan American Silver completed its previously announced acquisition of all of the issued and outstanding shares of Tahoe Resources Inc. (“Tahoe”) on February 22, 2019. Pan American Silver’s consolidated financial and operating results for the first quarter of 2019 reflect the contribution from the Tahoe mines (the “Acquired Mines”) from February 22, 2019 onwards.
- Net income of $33.8 million, equivalent to $0.19 basic earnings per share
- Adjusted income of $8.7 million, equivalent to $0.05 basic adjusted income per share
- Revenue of $232.6 million
- Production on track to achieve annual guidance
“Our mines delivered solid results in the first quarter, despite soft precious metal prices, generating $61.4 million in operating cash flow before interest, taxes and working capital changes,” said Michael Steinmann, President and Chief Executive Officer. “After closing the Tahoe transaction in February, Pan American is now a larger, more diversified company with enhanced growth prospects. As we integrate these new assets into our portfolio, we are focused on capturing synergies and maintaining low-cost, efficient operations across the company.”
“The La Colorada skarn exploration program continues to return wide, high-grade intersects and we are looking forward to advancing this discovery towards releasing a first resource estimate later in the year. We also plan on commencing production from our COSE and Joaquin mines in Argentina in the second half of 2019,” added Mr. Steinmann.
Consolidated Q1 2019 Highlights:
- Silver production was 6.1 million ounces, which was in line with management’s annual guidance.
- Gold production was 80.5 thousand ounces, which was an increase reflecting the 38-day contribution from the Acquired Mines since acquisition.
- Zinc, lead and copper production were 16.8 thousand tonnes, 6.5 thousand tonnes, and 2.0 thousand tonnes, respectively. Base metal production is on track to achieve annual 2019 production guidance.
- Cash Costs(1) were $1.80 per ounce, reflecting the contribution of by-product gold credits from the Acquired Mines.
- All-in sustaining costs per ounce sold (“AISC”)(1) were $10.45 per ounce, including net realizable value (“NRV”) inventory adjustments that increased costs by $1.33 per ounce.
- Net cash used in operating activities of $12.9 million reflects $33.8 million in tax payments and a $37.9 million use of cash from working capital changes, mostly from closing costs related to the Tahoe acquisition.
- At March 31, 2019, the Company had a cash and short-term investment balance of $121.6 million, and $165.0 million available under its $500.0 million revolving credit facility. Working capital of $771.7 million included $376.4 million of net assets relating to the Bell Creek and Timmins mines, which are being classified as discontinued operations “held-for-sale” and thus included in working capital as at March 31, 2019. Total debt was $363.1 million, reflecting $335.0 million drawn on the credit facility in Q1 2019 to fund, in part, the cash purchase price for the Tahoe acquisition and to repay Tahoe’s revolving credit facility, under which $125.0 million was outstanding at the date of acquisition. Total debt also includes $28.1 million in lease liabilities, the majority of which followed from the application of the new IFRS 16 rules.
- Drilling at the newly discovered skarn deposit at La Colorada continues to return exceptional results with wide intersects of polymetallic mineralization; further details are provided below.
- The shaft upgrade to 1,080 metres at the Bell Creek mine in Canada was completed in February and is performing at full capacity with limited material being transported via the mine ramp.
- The Board of Directors has approved a cash dividend of $0.035 per common share, or approximately $7.3 million in aggregate cash dividends, payable on or about June 3, 2019, to holders of record of Pan American Silver’s common shares as of the close on May 21, 2019. Pan American Silver’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.
(1) New Cost Reporting Measures
As a result of the Tahoe acquisition and the Company now operating three primary gold mines, we have revised reporting of Cash Costs and AISC to reflect a Silver Segment, a Gold Segment and on a Consolidated Silver Basis. Silver segment Cash Costs and AISC are calculated net of credits for realized revenues from all metals other than silver (“silver segment by-product credits”), and are calculated per ounce of silver sold. Gold segment Cash Costs and AISC are calculated net of credits for realized silver revenues (“gold segment by-product credits”), and are calculated per ounce of gold sold. Consolidated Cash Costs and AISC are based on total silver ounces sold and are net of by-product credits from all metals other than silver (“silver basis consolidated by-product credits”). Consolidated AISC includes Corporate general and administrative expense, and Exploration and project development expense. The “Cash Costs and AISC” table in this news release provides the segmented costs. For more information on these measures, please see the “Alternative Performance (non-GAAP) Measures” section of the MD&A for the period ended March 31, 2019.
Cash Costs, AISC, adjusted earnings, basic adjusted earnings per share, working capital and total debt 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.
La Colorada exploration drilling
Exploration of the skarn mineralization at La Colorada continues at depth with over 7,200 metres drilled in Q1 2019. Hole U-26-19 drilled on the same section as drill hole U-68-18 (reported in Pan American Silver’s news release dated February 20, 2019, with 308 metres of polymetallic mineralization) shows multiple thick widths of mineralized skarn over 270 metres wide. Pan American Silver’s understanding of this large mineralized system continues to evolve, as the Company works toward developing a first resource estimate late in 2019.
Recent drill highlights include:
- U-86-18: 24.5 m at 37 g/t Ag, 0.28% Cu, 1.95% Pb, 4.27% Zn;
- and 8.7 m at 25 g/t Ag, 0.08% Cu, 3.41% Pb, 4.97% Zn
- U-08-19: 61.1 m at 80 g/t Ag, 0.23% Cu, 0.41% Pb, 3.27% Zn
- U-12-19: 22.1 m at 131 g/t Ag, 0.43% Cu, 0.59% Pb, 3.24% Zn
- U-22-19: 129.2 m at 45 g/t Ag, 0.10% Cu, 1.09% Pb, 4.02% Zn;
- including 84.5 m at 63 g/t Ag, 0.13% Cu, 1.27% Pb, 5.18% Zn
- U-26-19: 276.1 m at 34 g/t Ag, 0.18% Cu, 1.69% Pb, 3.76% Zn;
- including 47 m at 31 g/t Ag, 0.17% Cu, 2.49% Pb, 4.40% Zn;
- including 151.9 m at 38 g/t Ag, 0.20% Cu, 1.73% Pb, 4.22% Zn;
- including 33.2 m @ 53 g/t Ag, 0.26% Cu, 2.32% Pb, 5.23% Zn
A summary of the drill results from the recently completed 7,200 metres of drilling is provided at the end of this new release. Results from hole U-22-19 are incomplete, as drilling continues on this hole.
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