Pan American Silver reports third quarter 2022 results

Press Release

VANCOUVER, BC, Nov. 9, 2022– Pan American Silver Corp. (NASDAQ: PAAS) (TSX: PAAS) (“Pan American” or the “Company”) today reported unaudited results for the quarter ended September 30, 2022 (“Q3 2022”).

“Our Q3 results reflect the industry-wide challenge of softening precious metal prices combined with inflationary cost pressures,” said Michael Steinmann, President and Chief Executive Officer.

Added Mr. Steinmann: “On November 4, 2022, we announced a proposed acquisition of Yamana Gold by Pan American and Agnico Eagle. This accretive and transformational transaction would increase our silver production by approximately 50% and double our gold production through the addition of long-life, low-cost assets in Latin America, our core operating region. These assets generate strong cash flow, which would further strengthen our financial position and help establish an exciting future for growth and value creation for our stakeholders.”

Consolidated Q3 2022 Highlights:

• Silver production of 4.5 million ounces and gold production of 128.8 thousand ounces.
• Revenue of $338.9 million, inclusive of a negative $4.8 million adjustment on open concentrate shipments, largely related to the decline in metal prices towards the end of Q3 2022.
• Net loss of $71.2 million ($0.34 basic loss per share), impacted by: $15.1 million in net realizable value (“NRV”) inventory adjustments, primarily at Dolores; $12.6 million in investment losses on our short-term investments; and mine closure severance provisions of $9.4 million recorded for Manantial Espejo.
• Adjusted loss of $2.8 million ($0.01 basic adjusted loss per share) excludes the impact from the NRV inventory adjustments related to the Dolores heap inventory, investment losses and the Manantial Espejo severance provisions, among other adjustments.
• Operations generated $54.4 million of cash flow, net of $20.4 million in tax payments.
• Silver Segment Cash Costs and All-in Sustaining Costs (“AISC”) per silver ounce were $14.62 and $17.97, respectively. Excluding NRV inventory adjustments, Silver Segment AISC was $18.46 per ounce.
• Gold Segment Cash Costs and AISC per gold ounce were $1,184 and $1,614, respectively. Excluding NRV inventory adjustments, Gold Segment AISC was $1,482 per ounce.
• As at September 30, 2022, Pan American’s financial position remains strong with working capital of $422.1 million, inclusive of cash and short-term investment balances of $187.2 million; a long-term investment in Maverix Metals Inc. (“Maverix”) with a fair value of $87.0 million; and $500.0 million available under our sustainability-linked credit facility. Total debt of $68.5 million was related to lease liabilities and construction loans.
• A cash dividend of $0.10 per common share has been declared, payable on or about December 2, 2022, to holders of record of Pan American’s common shares as of the close on November 21, 2022. The dividends are eligible dividends for Canadian income tax purposes.
• Management is revising its estimate for full-year 2022 silver production to be between 18.0 and 18.5 million ounces from the 19.0 to 20.5 million ounces provided in the 2022 Original Operating Outlook. We expect the estimate for Silver Segment Cash Costs and AISC could be marginally above the high-end of the range in our 2022 Original Operating Outlook. Management reaffirms the 2022 Original Operating Outlook for gold production, and reaffirms the revised estimates for Gold Segment AISC provided in the Company’s MD&A for the period ended June 30, 2022. Gold Segment Cash Costs are now expected to be above the high end of the of the 2022 Original Operating Outlook. Please see the “2022 Guidance” section of this news release for further details.
• The ILO 169 consultation process for the Escobal mine continues to progress with two meetings completed in October 2022. At this time, no date has been set for a potential restart of operations at Escobal.
• At the La Colorada Skarn project, we updated our estimate for the mineral resource, with 95.9 million tonnes now in the indicated category containing 94.4 million ounces of silver, 2.7 million tonnes of zinc and 1.2 million tonnes of lead. In addition, the estimated inferred mineral resource totals 147.8 million tonnes containing 132.9 million ounces of silver, 3.4 million tonnes of zinc and 1.5 million tonnes of lead. This mineral resource estimate does not include drill results released on November 1, 2022 and July 21, 2022 that indicate a high-grade silver zone of mineralisation.

CONSOLIDATED RESULTS

	Three months ended September 30, 2022		Twelve months ended December 31, 2021
Weighted average shares during period (millions)	210.5		210.3
Shares outstanding end of period (millions)	210.5		210.5
	Three months ended September 30,
	2022		2021
FINANCIAL
Revenue	$	338,889	$	460,349
Mine operating (loss) earnings	$	(21,788)	$	98,887
Net (loss) earnings	$	(71,202)	$	20,219
Basic (loss) earnings per share(1)	$	(0.34)	$	0.10
Adjusted (loss) earnings(2)	$	(2,755)	$	37,780
Basic adjusted (loss) earnings per share(1)	$	(0.01)	$	0.18
Net cash generated from operating activities	$	54,418	$	157,017
Net cash generated from operating activities before changes in working capital(2)	$	32,814	$	134,010
Sustaining capital expenditures(2)	$	48,710	$	52,908
Non-sustaining  capital expenditures(2)	$	26,239	$	13,277
Cash dividend paid per share	$	0.11	$	0.10
PRODUCTION
Silver (thousand ounces)	4,537		4,831
Gold (thousand ounces)	128.8		142.6
Zinc (thousand tonnes)	8.9		12.7
Lead (thousand tonnes)	4.4		4.2
Copper (thousand tonnes)	0.9		2.1
CASH COSTS(2) ($/ounce)
Silver Segment	14.62		11.92
Gold Segment	1,184		922
AISC(2) ($/ounce)
Silver Segment	17.97		16.30
Gold Segment	1,614		1,176
AVERAGE REALIZED PRICES(3)
Silver ($/ounce)	18.76		24.16
Gold ($/ounce)	1,705		1,782
Zinc ($/tonne)	3,232		2,989
Lead ($/tonne)	1,944		2,286
Copper ($/tonne)	7,707		9,399

(1)	Per share amounts are based on basic weighted average common shares.
(2)	Non-GAAP measure; please refer to the “Alternative Performance (non-GAAP) Measures” section of this news release for further information on these measures.
(3)	Metal prices stated are inclusive of final settlement adjustments on concentrate sales.

Cash Costs, AISC, adjusted earnings, basic adjusted earnings per share, sustaining and non-sustaining capital, working capital, total debt and net cash 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.

This news release should be read in conjunction with Pan American’s unaudited Condensed Interim Consolidated Financial Statements and our Management’s Discussion and Analysis for the three and nine months ended September 30, 2022. This material is available on Pan American’s website at panamericansilver.com, on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.

SUBSEQUENT EVENT:  PAN AMERICAN AND AGNICO EAGLE ARRANGEMENT AGREEMENT WITH YAMANA

On November 4, 2022, Pan American and Agnico Eagle Limited (“Agnico Eagle”) announced that they had delivered a definitive binding offer to the board of directors of Yamana Gold Inc. (“Yamana”) pursuant to which Pan American would acquire all of the issued and outstanding common shares of Yamana and Yamana would sell certain subsidiaries and partnerships which hold Yamana’s interests in its Canadian assets to Agnico Eagle, including the Canadian Malartic mine (the “Proposed Transaction”).

On November 8, 2022, Pan American and Agnico Eagle further announced that the arrangement agreement among Pan American, Agnico Eagle, and Yamana (the “Pan American – Agnico Arrangement Agreement”) became effective upon the termination by Gold Fields Limited (“Gold Fields”) of the arrangement agreement between Yamana and Gold Fields entered into on May 31, 2022 (the “Gold Fields Arrangement Agreement”). The Pan American-Agnico Arrangement Agreement and terms of the Proposed Transaction remain the same as previously announced by Pan American and Agnico Eagle on November 8, 2022, and on November 4, 2022. Copies of the previously issued press releases are available under the SEDAR profiles (www.sedar.com) of Pan American and Agnico Eagle.

The previously scheduled special meeting of Yamana shareholders for November 21, 2022 in connection with the Gold Fields Arrangement Agreement has been cancelled, and Yamana will pay a termination fee of $300 million to Gold Fields in accordance with the terms of the Gold Fields Arrangement Agreement. Pursuant to the terms of the Pan American-Agnico Arrangement Agreement, Pan American will fund $150 million in cash to Yamana to pay a portion of such termination fee.

The Pan American – Agnico Proposed Transaction would, if completed, increase Pan American’s portfolio to 12 operating mines and is estimated to increase silver production by approximately 50% and gold production by approximately 100%. Pan American has 28 years of proven expertise and experience building and operating mines in Latin America, making it well suited to realize more value from Yamana’s mines in this region, and offer an enlarged pipeline of potential growth projects within Latin America. The Pan American – Agnico Proposed Transaction would also be expected to enhance the Company’s overall financial position and improve its ability to internally fund its growth projects, and presents multiple opportunities for operational and administrative synergies, particularly between Pan American’s and Yamana’s corporate offices in Canada.

CONFERENCE CALL AND WEBCAST

Pan American will discuss the Proposed Transaction and Pan American – Agnico Arrangement Agreement in conjunction with the conference call to discuss the Company’s Q3 2022 unaudited results. Details are as follows:

Date:		November 10, 2022
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:		https://services.choruscall.com/mediaframe/webcast.html?webcastid=OACOqFfL

The live webcast, presentation slides and the Management’s Discussion and Analysis for the period ended September 30, 2022 will be available at panamericansilver.com. An archive of the webcast will also be available for three months on Pan American’s website.

2022 GUIDANCE

Based on YTD results and the expected results for the remainder of the year, Management reaffirms the 2022 Original Operating Outlook for gold production, as provided in the Company’s 2021 MD&A dated February 23, 2022. Management is revising its estimate for full-year 2022 silver production to be between 18.0 and 18.5 million ounces from the 19.0 to 20.5 million ounces provided in the 2022 Original Operating Outlook. The revision is largely due to lower production at Dolores and mine sequencing at La Colorada during the second half of 2022 into lower silver grade ore zones. Reestablishing mining from the higher grade ores affected by the ventilation constraints previously reported has proven more challenging than expected. During Q3 2022, the Company deployed additional resources with two development contractors to accelerate accesses to the higher grade ores in the deeper portions of the eastern Candelaria deposit, and the Company now expects to reestablish near reserve grade ore mine sequencing towards the end of 2022.

Based on YTD 2022 results, Management reaffirms the 2022 Original Operating Outlook for Silver Segment Cash Costs and AISC. However, we are continuing to assess the adverse impact supply chain disruptions and market distortions are having on the Company’s input costs, which could result in Silver Segment costs being marginally above the high-end of the range in our 2022 Original Operating Outlook.

Based on YTD 2022 Cash Costs and the Inflationary and Supply Chain Cost Increases impacting the price of the Company’s input costs, we now expect Gold Segment Cash Costs to be above the high-end of the 2022 Original Operating Outlook of between $970 to $1,070 per ounce. Management reaffirms the August 2022 Revised Operating Outlook for Gold Segment AISC of between $1,450 to $1,550 per ounce, which had incorporated Inflationary and Supply Chain Cost Increases and the added capital spending in Shahuindo and La Arena due to timing of cash outflows.

These estimates are forward-looking statements and information that are subject to the cautionary note associated with forward-looking statements and information at the end of this news release.

The following tables provide Management’s 2022 Guidance forecasts, as at November 9, 2022.

Annual Production

Silver – Moz	18.0 – 18.5
Gold – koz	550.0 – 605.0
Zinc – kt	35.0 – 40.0
Lead – kt	15.0 – 17.0
Copper – kt	5.5 – 6.5

Cash Costs and AISC

	Cash Costs(1)(2) ($ per ounce)	AISC(1)(2) ($ per ounce)
Silver Segment Total	10.70 – 12.20	14.50 – 16.00
Gold Segment Total, excluding NRV adjustments(3)	970 – 1,070	1,450 – 1,550

(1)	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.
(2)	The Cash Costs and AISC forecasts assume average metal prices of $22.50/oz for silver, $1,750/oz for gold, $3,000/tonne ($1.36/lb) for zinc, $2,200/tonne ($1.00/lb) for lead, and $9,200/tonne ($4.17/lb) for copper; and average annual exchange rates relative to 1 USD of 20.00 for the Mexican peso (“MXN”), 4.10 for the Peruvian sol (“PEN”), 122.17 for the Argentine peso (“ARS”), 7.00 for the Bolivian boliviano (“BOB”), and $1.25 for the Canadian dollar (“CAD”).
(3)	Gold Segment AISC guidance provided excluding NRV adjustments due to Dolores heap inventory NRV adjustment YTD 2022 of $87.7 million driven by the updated life of mine plan and reserves, which drove the Dolores impairment in Q2 2022.

Capital Expenditures

	(in millions of USD)
Sustaining Capital	240.0 – 250.0
Project Capital	55.0 – 60.0
Total Capital	295.0 – 310.0

About Pan American

Pan American owns and operates silver and gold mines located in Mexico, Peru, Canada, Argentina and Bolivia. We also own the Escobal mine in Guatemala that is currently not operating. Pan American provides enhanced exposure to silver through a large base of silver reserves and resources, as well as major catalysts to grow silver production. We have a 28-year history of operating in Latin America, earning an industry-leading reputation for sustainability performance, operational excellence and prudent financial management. We are headquartered in Vancouver, B.C. and our shares trade on NASDAQ and the Toronto Stock Exchange under the symbol “PAAS”.
Learn more at panamericansilver.com

Technical Information

Scientific and technical information contained in this news release have been reviewed and approved by Martin Wafforn, P.Eng., Senior Vice President Technical Services and Process Optimization, and Christopher Emerson, FAusIMM, Vice President Business Development and Geology, each of whom are Qualified Persons, as the term is defined in Canadian National Instrument 43-101 – Standards of Disclosure for Mineral Projects.

For additional information about Pan American’s material mineral properties, please refer to Pan American’s Annual Information Form dated February 23, 2022, filed at www.sedar.com, or the Company’s most recent Form 40-F filed with the Securities and Exchange Commission.

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