Location

All financial figures are in U.S. dollars unless otherwise indicated.

VANCOUVERFeb. 20, 2019 /CNW/ – Pan American Silver Corp. (NASDAQ: PAAS) (TSX: PAAS) today reported unaudited financial results for the year-ended December 31, 2018 (“YE 2018”) and the fourth quarter (“Q4 2018”). These results are preliminary and could change based on final audited results. Preliminary operating results were previously reported on January 21, 2019.

  • Annual revenue totaled $784.5 million, and net cash generated from operating activities was $155.0 million.
  • Annual net earnings of $12.0 million ($0.07 basic earnings per share), and adjusted annual earnings of $59.4 million ($0.39 basic adjusted earnings per share).
  • Annual silver production totaled 24.8 million ounces with all-in sustaining costs per silver ounce sold (“AISCSOS”) of $10.73, or $9.68 excluding net realizable value (“NRV”) inventory adjustments.
  • Cash costs per payable ounce of silver, net of by-product credits (“cash costs”) of $3.35 per ounce in 2018.
  • Advanced the COSE and Joaquin mine developments for initial production in 2019.
  • At December 31, 2018, the Company had cash and short-term investment balances of $212.5 million and working capital of $397.8 million. Year-end debt of $6.7 million related entirely to lease liabilities.

 

“Pan American’s operations demonstrated solid performance in 2018, highlighted by the lowest cash costs on record since 2006. This performance resulted in strong cash flow generation and a healthy financial position at year end,” said Michael Steinmann, President and Chief Executive Officer of the Company. “Importantly, we advanced our strategy of developing new catalysts to generate value for shareholders. Our acquisition of Tahoe Resources will result in a more diversified Pan American with a strong portfolio of cash-generating assets and superior growth opportunities. In addition, our major exploration discovery at La Coloradademonstrates a significant opportunity for long-term organic growth.”

Consolidated Q4 2018 Highlights:

  • Revenue in Q4 2018 was $173.4 million, reflecting lower prices for all metals and lower quantities of silver, gold, and copper sold due to a build in inventories at San Vicente and La Colorada (approximate revenue impact of $8.4 million), as well as lower production at Dolores.
  • Net cash generated from operating activities was $11.9 million.
  • Net loss was $63.6 million ($0.42 basic loss per share), which included a $27.8 million impairment charge related to the Manantial Espejo/COSE/Joaquin assets, a $13.3 million reduction from NRV inventory adjustments, $10.2 million in costs related to the Tahoe Resources Inc. (“Tahoe”) transaction, $8.2 millionin tax expense from changes in foreign exchange rates, and a $4.7 million credit loss related to a third party refinery.
  • The impairment of the Manantial Espejo/COSE/Joaquin assets reflects the impact of the new export tax introduced in Argentina in late 2018, and the decline in short-term consensus metal prices.
  • Adjusted loss was $2.0 million ($0.01 basic adjusted loss per share).
  • Silver production was 6.1 million ounces at cash costs of $6.12 per ounce. Q4 2018 cash costs were impacted by lower by-product metal prices and reduced gold production.
  • AISCSOS were $15.86 in Q4 2018, or $13.36 excluding NRV inventory adjustments. AISCSOS were impacted by less silver ounces sold, lower by-product metal prices and higher sustaining capital expenditures.
  • The Board of Directors has approved a cash dividend of $0.035 per common share, or approximately $5.4 million in aggregate cash dividends, payable on or about March 15, 2019, to holders of record of Pan American Silver’s common shares as of the close on March 4, 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.

 

The foregoing contains measures that 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.

Amended and Restated Credit Agreement

On February 1, 2019, the Company entered into an Amending and Restating Credit Agreement with a syndicate of banks to extend and increase its existing credit facility. In conjunction with the closing of the Tahoe transaction, the credit facility is expected to increase to $500 million and would mature on February 1, 2023.

Tahoe transaction

All required regulatory, shareholder and court approvals have been received for the plan of arrangement (the “Arrangement”), whereby Pan American will acquire all of the outstanding shares of Tahoe. The Arrangement is anticipated to be completed on or about February 22, 2019.

Pan American receives award for social and environmental responsibility

Pan American is pleased to announce that Matt Andrews, Vice President Environment and Sustainability, and Monica Moretto, Director Sustainability, are the 2018 recipients of the Robert R. Hedley Award for Excellence in Social and Environmental Responsibility from the Association for Mineral Exploration (AME). In the AME’s news release, dated December 6, 2018, announcing the 2018 winners, the organization states that Mr. Andrews’ and Ms. Moretto’s leadership “has created an environment within Pan American Silver Corp. of respect for social and environmental principles on all its projects”.

CONSOLIDATED RESULTS

   

December 31,

2018

 

December 31,

2017

 

Shares outstanding (millions)

  

153,448

 

153,303

 
     
 

Three months ended

December 31,

Year ended

December 31,

 

2018

2017

2018

2017

FINANCIAL

    

Revenue

$

173,357

 

$

226,031

 

$

784,495

 

$

816,828

 

Mine operating (loss) earnings

$

(4,666)

 

$

43,285

 

$

100,897

 

$

168,760

 

Net (loss) earnings

$

(63,577)

 

$

49,664

 

$

12,041

 

$

123,451

 
 

Per share (1)

$

(0.42)

 

$

0.32

 

$

0.07

 

$

0.79

 

Adjusted (loss) earnings (2)

$

(2,022)

 

$

19,219

 

$

59,434

 

$

77,705

 
 

Per share (1)

$

(0.01)

 

$

0.13

 

$

0.39

 

$

0.51

 

Net cash generated from operating activities

$

11,930

 

$

79,291

 

$

154,978

 

$

224,559

 

Net cash generated from operating activities before changes in working capital (2)

$

16,827

 

$

64,098

 

$

159,239

 

$

212,850

 

Sustaining capital expenditures

$

31,329

 

$

28,668

 

$

105,229

 

$

84,420

 

Project capital expenditures

$

11,849

 

$

13,650

 

$

41,292

 

$

61,429

 

Dividend per share

$

0.035

 

$

0.025

 

$

0.14

 

$

0.10

 

OPERATIONAL

    

Production

    
 

Silver (thousand ounces)

6,128

 

6,579

 

24,776

 

24,979

 
 

Gold (thousand ounces)

37.2

 

43.7

 

178.9

 

160.0

 
 

Zinc (thousand tonnes)

18.5

 

14.7

 

64.8

 

55.3

 
 

Lead (thousand tonnes)

6.3

 

5.4

 

22.4

 

21.5

 
 

Copper (thousand tonnes)

2.2

 

3.0

 

9.8

 

13.4

 

Average realized prices

    
 

Silver ($/ounce)

$

14.35

 

$

16.65

 

$

15.61

 

$

16.99

 
 

Gold ($/ounce)

$

1,232

 

$

1,276

 

$

1,272

 

$

1,257

 
 

Zinc ($/tonne)

$

2,508

 

$

3,282

 

$

2,846

 

$

2,929

 
 

Lead ($/tonne)

$

1,914

 

$

2,472

 

$

2,189

 

$

2,351

 
 

Copper ($/tonne)

$

6,098

 

$

6,811

 

$

6,519

 

$

6,174

 

Cash costs (per payable ounce of silver, net of by-product credits)(2)

$

6.12

 

$

3.18

 

$

3.35

 

$

4.55

 

All-in sustaining costs per silver ounce sold(2)

$

15.86

 

$

10.86

 

$

10.73

 

$

10.79

 

All-in sustaining costs per silver ounce sold, excluding NRV inventory adjustments(2)

$

13.36

 

$

10.03

 

$

9.68

 

$

10.28

 

(1)

Per share amounts are based on basic weighted average common shares.

(2)

Non-GAAP measures: adjusted (loss) earnings, basic adjusted (loss) earnings per share, net cash generated from operating activities before changes in working capital, cash costs, and all-in sustaining costs per silver ounce sold (inclusive and exclusive of NRV inventory adjustments) 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.

 

MINE OPERATING RESULTS

 

Three Months Ended

December 31, 2018

 

Three Months Ended

December 31, 2017

 

Production

Cash Costs(1)

 

Production

Cash Costs(1)

 

Ag (Moz)

 

Au (koz)

  

Ag (Moz)

 

Au (koz)

 

La Colorada

2.1

 

1.2

 

$1.73

 

1.9

 

1.3

 

$0.43

Dolores

0.8

 

29.4

 

$7.06

 

1.3

 

31.2

 

($3.93)

Alamo Dorado

 

 

 NA

 

 

0.1

 

$2.09

Huaron

1.0

 

0.2

 

$2.82

 

1.0

 

0.2

 

$2.08

Morococha (2)

0.7

 

0.2

 

$0.61

 

0.7

 

0.8

 

($7.42)

San Vicente (3)

0.9

 

0.1

 

$9.23

 

1.1

 

0.1

 

$9.04

Manantial Espejo

0.6

 

6.2

 

$25.53

 

0.6

 

10.0

 

$26.52

TOTAL

6.1

 

37.2

 

$6.12

 

6.6

 

43.7

 

$3.18

 

 

Year Ended

December 31, 2018

 

Year Ended

December 31, 2017

 

Production

Cash Costs(1)

 

Production

Cash Costs(1)

 

Ag (Moz)

 

Au (koz)

  

Ag (Moz)

 

Au (koz)

 

La Colorada

7.6

 

4.4

 

$2.02

 

7.1

 

4.3

 

$2.08

Dolores

4.1

 

136.6

 

($1.87)

 

4.2

 

103.0

 

($1.65)

Alamo Dorado

 

 

 NA

 

0.6

 

2.1

 

$16.49

Huaron

3.6

 

0.8

 

$1.63

 

3.7

 

1.1

 

$1.35

Morococha(2)

2.9

 

2.1

 

($4.34)

 

2.6

 

3.5

 

($5.34)

San Vicente(3)

3.5

 

0.5

 

$10.12

 

3.6

 

0.5

 

$11.85

Manantial Espejo

3.1

 

34.6

 

$13.91

 

3.1

 

45.3

 

$18.25

TOTAL

24.8

 

178.9

 

$3.35

 

25.0

 

160.0

 

$4.55

Totals may not add up due to rounding.

(1)

Cash costs is a non-GAAP measure. Please refer to the “Alternative Performance (non-GAAP) Measures” section of this news release for further information on this measure.

(2)

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

(3)

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

 

CAPITAL EXPENDITURES(1)

 

Annual

Forecast(2)

Year ended

December 31,

(in millions of USD)

2018

 

2018

 

2017

 

La Colorada

17.5 – 18.5

 

16.9

 

13.3

 

Dolores

42.0 – 44.0

 

48.5

 

38.4

 

Huaron

17.0 – 17.5

 

15.9

 

8.8

 

Morococha

14.5 – 15.0

 

14.1

 

12.5

 

San Vicente

6.5 – 7.0

 

7.0

 

8.1

 

Manantial Espejo

2.5 – 3.0

 

2.8

 

3.3

 

Sustaining Capital Total(1)

100.0 – 105.0

 

105.2

 

84.4

 

Mexico project capital

15.5

 

15.9

 

56.8

 

Joaquin and COSE projects(3)

24.5

 

25.4

 

4.7

 

Project Capital Total(1)

40.0

 

41.3

 

61.5

 

Consolidated Total

140.0 – 145.0

 

146.5

 

145.9

 

(1)

The total sustaining capital amounts capitalized in 2018 were $0.8 million less than the $106.0 million of 2018 sustaining capital cash outflows. Project capital amounts capitalized in 2018 were $3.4 million less than the $44.7 million of 2018 project capital cash outflows. The sustaining capital cash outflows are included in the 2018 AISCSOS calculation, shown in the “Alternative Performance (non-GAAP) Measures” section of this news release, and in the tables included for the individual mines in the “Mine Operating Results” section of this news release; these amounts are different than the amounts capitalized in the period, which are provided  in the table above. These differences are due to the timing difference between the cash payment of capital investments compared with the period in which investments are capitalized.

(2)

Forecast amount per Q3 2018 MD&A dated November 6, 2018.

(3)

Total expenditures of $9.7 million were incurred in 2017 for the Joaquin and COSE projects, of which $5.0 million was expensed as part of 2017 exploration and project development expenses, and the remaining $4.7 million was capitalized. All Joaquin and COSE project expenditures were capitalized in 2018.

 

Sustaining capital of $105.2 million in 2018 was slightly above our forecast range of $100 to $105 million, reflecting higher pre-stripping and leach pad expansionary activities at Dolores, largely offset with savings on the tailings storage facility expansion at Huaron and deferral of certain exploration spending, infrastructure upgrades and equipment procurements.

Project capital of $41.3 million, compared with a forecast of $40 million, was directed at the COSE and Joaquin mine developments in Argentina, as well as investments at Dolores and La Colorada.

2019 GUIDANCE

There are no revisions to the guidance for 2019 that Pan American provided in its news release dated January 21, 2019, as provided in the table below. The guidance does not include the assets to be acquired under the Arrangement with Tahoe. Management intends to update the guidance to include these assets and allocation of new general and administrative costs in the second quarter of 2019. We may also revise guidance during the year to reflect actual results to date and those anticipated for the remainder of the year.

 

2019 Guidance

Production

 

Silver (million ounces)

26.5 – 27.5

Gold (thousand ounces)

162.5 – 172.5

Zinc (thousand tonnes)

65.0 – 67.0

Lead (thousand tonnes)

24.0 – 25.0

Copper (thousand tonnes)

9.8 – 10.3

Cash Costs(1)($/ounce)

6.50 – 7.50

AISCSOS(1) ($)

10.80 – 12.30

Sustaining capital ($millions)

85 – 90

Project capital ($millions)

30

   

Assumptions used to forecast total cash costs and AISCSOS for 2019

 

Metal prices

 

Silver ($/ounce)

14.50

Gold ($/ounce)

1,250

Zinc ($/tonne)

2,600

Lead ($/tonne)

1,950

Copper ($/tonne)

6,150

Average annual exchange rates relative to 1.00 U.S. dollar

 

Mexican peso

19.50

Peruvian sol

3.33

Argentine peso

41.80

Bolivian boliviano

6.91

(1)

Cash Costs and AISCSOS are non-GAAP measures.  Please refer to the “Alternative Performance (non-GAAP) Measures” section of this news release for further information on these measures.

 

Additional details on the Company’s 2019 guidance can be found in the January 21, 2019 news release entitled, “Pan American Silver Announces Preliminary 2018 Operating Results and Guidance for 2019” available at www.panamericansilver.com and as filed on SEDAR at www.sedar.com.

Fourth Quarter and Year End 2018 Unaudited Results Conference Call and Webcast

Date:

February 21, 2019

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:

www.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 www.panamericansilver.com. An archive of the webcast will also be available for three months.

Corporate Office:

625 Howe Street, Suite 1440
Vancouver, British Columbia
V6C 2T6 Canada

Tel: +1 604 684-1175
Fax: +1 604 684-0147

About Pan American Silver

Pan American Silver Corp. is the world’s second largest primary silver producer, providing enhanced exposure to silver through a diversified portfolio of assets, large reserves and growing production. We own and operate six mines in MexicoPeruArgentina and Bolivia. Pan American Silver maintains a strong balance sheet, has an established management team with proven operating expertise, and is committed to responsible development. Founded in 1994, the Company is headquartered in Vancouver, B.C. and our shares trade on NASDAQ and the Toronto Stock Exchange under the symbol “PAAS”.

For more information, visit: www.panamericansilver.com.

Alternative Performance (Non-GAAP) Measures

In this news release we refer to measures that are not generally accepted accounting principle (“non-GAAP”) financial measures. These measures are widely used in the mining industry as a benchmark for performance, but do not have a standardized meaning as prescribed by IFRS as an indicator of performance, and may differ from methods used by other companies with similar descriptions. These non-GAAP financial measures include:

  • Cash costs per payable ounce of silver, net of by-product credits (“cash costs”). The Company’s method of calculating cash costs may differ from the methods used by other entities and, accordingly, the Company’s cash costs may not be comparable to similarly titled measures used by other entities. Investors are cautioned that cash costs should not be construed as an alternative to production costs, depreciation and amortization, and royalties determined in accordance with IFRS as an indicator of performance.
  • Adjusted earnings (loss) and adjusted earnings (loss) per share. The Company believes that these measures better reflect normalized earnings as they eliminate items that in management’s judgment are subject to volatility as a result of factors which are unrelated to operations in the period, and/or relate to items that will settle in future periods.
  • All-in sustaining costs per silver ounce sold (“AISCSOS”). The Company has adopted AISCSOS as a measure of its consolidated operating performance and its ability to generate cash from all operations collectively, and the Company believes it is a more comprehensive measure of the cost of operating our consolidated business than traditional cash costs per payable ounce, as it includes the cost of replacing ounces through exploration, the cost of ongoing capital investments (sustaining capital), general and administrative expenses, as well as other items that affect the Company’s consolidated earnings and cash flow.
  • Net cash generated from operating activities before changes in working capital is calculated as “Net cash generated from operating activities” less “Changes in non-cash operating working capital”, as shown on the Consolidated Statements of Cash Flows. The Company believes the exclusion of changes in non-cash operating working capital better reflects the cash from operating activities generated in the period. Net cash generated from operating activities before changes in working capital does not have any standardized meaning prescribed by GAAP and is therefore unlikely to be comparable to similar measures presented by other companies.

 

Readers should refer to the “Alternative Performance (non-GAAP) Measures” section following the Consolidated Statements of Cash Flows included in this news release for a more detailed discussion of these and other non-GAAP measures and their calculation.

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 the Company’s Qualified Person for the purposes of National Instrument 43-101. For additional information about the Company’s material mineral properties, other than the Joaquin property, please refer to the Company’s Annual Information Form dated March 22, 2018, filed at www.sedar.com. Mineral resources that are not mineral reserves have no demonstrated economic viability.

Cautionary Note Regarding Forward-Looking Statements and Information

Certain of the statements and information in this news release constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995 and “forward-looking information” within the meaning of applicable Canadian provincial securities laws. All statements, other than statements of historical fact, are forward-looking statements or information. Forward-looking statements or information in this news release relate to, among other things: future financial or operational performance, including our estimated production of silver, gold and other metals in 2019 our estimated Cash Costs and AISCSOS in 2019, and our expectations with respect to future metal prices and exchange rates; the ability of the Company to successfully complete any capital projects, the expected economic or operational results derived from those projects, and the impacts of any such projects on the Company, the approval or the amount of any future cash dividends; our growth profile and opportunities as results of the Arrangement; the increase of our credit facility and the timing thereof; the anticipated completion date of the Arrangement; and any update of our guidance subsequent to completion of the Arrangement, and the disclosure and timing of any such update.

These forward-looking statements and information reflect the Company’s current views with respect to future events and are necessarily based upon a number of assumptions that, while considered reasonable by the Company, are inherently subject to significant operational, business, economic and regulatory uncertainties and contingencies. These assumptions include: the completion date of the Arrangement; the ability of the Company to realize the anticipated benefits and opportunities as a result of the Arrangement; access to capital and other financing, if required; tonnage of ore to be mined and processed; ore grades and recoveries; prices for silver, gold and base metals remaining as estimated; currency exchange rates remaining as estimated; capital, decommissioning and reclamation estimates; our mineral reserve and resource estimates and the assumptions upon which they are based; prices for energy inputs, labour, materials, supplies and services (including transportation); no labour-related disruptions at any of our operations; no unplanned delays or interruptions in scheduled production; all necessary permits, licenses and regulatory approvals for our operations are received in a timely manner; and our ability to comply with environmental, health and safety laws. The foregoing list of assumptions is not exhaustive.

The Company cautions the reader that forward-looking statements and information involve known and unknown risks, uncertainties and other factors that may cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements or information contained in this news release and the Company has made assumptions and estimates based on or related to many of these factors. Such factors include, without limitation: fluctuations in silver, gold and base metal prices; fluctuations in prices for energy inputs, labour, materials, supplies and services (including transportation); fluctuations in currency markets (such as the Canadian dollar, Peruvian sol, Mexican peso, Argentine peso and Bolivian boliviano versus the U.S. dollar); operational risks and hazards inherent with the business of mining (including environmental accidents and hazards, industrial accidents, equipment breakdown, unusual or unexpected geological or structural formations, cave-ins, flooding and severe weather); risks relating to the credit worthiness or financial condition of suppliers, refiners and other parties with whom the Company does business; inadequate insurance, or inability to obtain insurance, to cover these risks and hazards; employee relations; relationships with, and claims by, local communities and indigenous populations; our ability to obtain all necessary permits, licenses and regulatory approvals in a timely manner; changes in laws, regulations and government practices in the jurisdictions where we operate, including environmental, export and import laws and regulations; legal restrictions relating to mining, including in Chubut, Argentina; risks relating to expropriation; diminishing quantities or grades of mineral reserves as properties are mined; increased competition in the mining industry for equipment and qualified personnel; and those factors identified under the caption “Risks Related to Pan American’s Business” in the Company’s most recent form 40-F and Annual Information Form, as well as those factors identified in the section entitled “Risk Factors” in the Company’s management information circular dated December 4, 2018 with respect to the Arrangement, each filed with the United States Securities and Exchange Commission and Canadian provincial securities regulatory authorities, respectively. Although the Company has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated, described or intended. Investors are cautioned against undue reliance on forward-looking statements or information. Forward-looking statements and information are designed to help readers understand management’s current views of our near and longer term prospects and may not be appropriate for other purposes. The Company does not intend, nor does it assume any obligation to update or revise forward-looking statements or information, whether as a result of new information, changes in assumptions, future events or otherwise, except to the extent required by applicable law.

 

  

December 31,

2018

  

December 31,

2017

 

Assets

    

Current assets

    

Cash and cash equivalents

 

$

138,510

  

$

175,953

 

Short-term investments

 

74,004

  

51,590

 

Trade and other receivables

 

96,091

  

109,746

 

Income taxes receivable

 

13,108

  

16,991

 

Inventories

 

214,465

  

218,715

 

Derivative financial instruments

 

640

  

1,092

 

Assets held for sale

 

  

7,949

 

Prepaid expenses and other current assets

 

11,556

  

13,434

 
  

548,374

  

595,470

 

Non-current assets

    

Mineral properties, plant and equipment

 

1,301,002

  

1,336,683

 

Long-term refundable tax

 

70

  

80

 

Deferred tax assets

 

12,244

  

2,679

 

Investment in associates

 

70,566

  

55,017

 

Other assets

 

2,163

  

346

 

Goodwill

 

3,057

  

3,057

 

Total Assets

 

$

1,937,476

  

$

1,993,332

 
     

Liabilities

    

Current liabilities

    

Accounts payable and accrued liabilities

 

$

131,743

  

$

139,698

 

Loans payable

 

  

3,000

 

Derivative financial instruments

 

51

  

1,906

 

Current portion of provisions

 

5,072

  

8,245

 

Current portion of finance lease

 

5,356

  

5,734

 

Income tax payable

 

8,306

  

26,131

 
  

150,528

  

184,714

 

Non-current liabilities

    

Long-term portion of provisions

 

70,083

  

61,248

 

Deferred tax liabilities

 

148,819

  

171,228

 

Long-term portion of finance lease

 

1,320

  

1,825

 

Deferred revenue

 

13,288

  

12,017

 

Other long-term liabilities

 

25,425

  

26,954

 

Share purchase warrants

 

14,664

  

14,295

 

Total Liabilities

 

424,127

  

472,281

 
     

Equity

    

Capital and reserves

    

Issued capital

 

2,321,498

  

2,318,252

 

Share option reserve

 

22,573

  

22,463

 

Investment revaluation reserve

 

208

  

1,605

 

Deficit

 

(836,067)

  

(825,470)

 

Total Equity attributable to equity holders of the Company

 

1,508,212

  

1,516,850

 

Non-controlling interests

 

5,137

  

4,201

 

Total Equity

 

1,513,349

  

1,521,051

 

Total Liabilities and Equity

 

$

1,937,476

  

$

1,993,332

 

 

  

Three months ended

December 31,

 

Year ended

December 31,

  

2018

  

2017

  

2018

  

2017

 

Revenue

 

$

173,357

  

$

226,031

  

$

784,495

  

$

816,828

 

Cost of sales

        

 Production costs

 

(132,334)

  

(139,697)

  

(511,793)

  

(500,670)

 

 Metal inventory loss(1)

 

(4,670)

  

  

(4,670)

  

 

 Depreciation and amortization

 

(36,418)

  

(34,240)

  

(146,462)

  

(122,888)

 

 Royalties

 

(4,601)

  

(8,809)

  

(20,673)

  

(24,510)

 
  

(178,023)

  

(182,746)

  

(683,598)

  

(648,068)

 

Mine operating (loss) earnings

 

(4,666)

  

43,285

  

100,897

  

168,760

 
         

General and administrative

 

(5,450)

  

(4,732)

  

(22,649)

  

(21,397)

 

Exploration and project development

 

(3,509)

  

(4,269)

  

(11,138)

  

(19,755)

 

Foreign exchange gains (losses)

 

406

  

1,052

  

(9,326)

  

1,823

 

Impairment (charges) reversals

 

(27,789)

  

61,554

  

(27,789)

  

61,554

 

Gains (losses) on commodity and foreign currency contracts

 

524

  

(1,841)

  

4,930

  

606

 

(Losses) gains on sale of mineral properties, plant and equipment

 

(56)

  

(794)

  

7,973

  

191

 

Share of (loss) income from associate and dilution gain

 

(182)

  

259

  

13,679

  

2,052

 

Transaction costs

 

(10,229)

  

  

(10,229)

  

 

Other expense

 

(2,795)

  

(4,011)

  

(3,659)

  

(5,505)

 

(Loss) earnings from operations

 

(53,746)

  

90,503

  

42,689

  

188,329

 
         

(Loss) gain on derivatives

 

(60)

  

64

  

(1,078)

  

64

 

Investment (loss) income

 

(1,428)

  

658

  

(284)

  

1,277

 

Interest and finance expense

 

(2,305)

  

(2,353)

  

(8,139)

  

(7,185)

 

(Loss) earnings before income taxes

 

(57,539)

  

88,872

  

33,188

  

182,485

 

Income tax expense

 

(6,038)

  

(39,208)

  

(21,147)

  

(59,034)

 

Net (loss) earnings for the period

 

$

(63,577)

  

$

49,664

  

$

12,041

  

$

123,451

 
         

Attributable to:

        

Equity holders of the Company

 

$

(63,809)

  

$

48,892

  

$

10,294

  

$

120,991

 

Non-controlling interests

 

232

  

772

  

1,747

  

2,460

 
  

$

(63,577)

  

$

49,664

  

$

12,041

  

$

123,451

 
         

(Loss) earnings per share attributable to common shareholders

        

Basic (loss) earnings per share

 

$

(0.42)

  

$

0.32

  

$

0.07

  

$

0.79

 

Diluted (loss) earnings per share

 

$

(0.42)

  

$

0.32

  

$

0.07

  

$

0.79

 

Weighted average shares outstanding (in 000’s) Basic

 

153,352

  

153,207

  

153,315

  

153,070

 

Weighted average shares outstanding (in 000’s) Diluted

 

153,504

  

153,434

  

153,522

  

153,353

 
         

(1)

Relates to certain doré metal inventory held at a refinery used by the Company that filed for bankruptcy in November, 2018.  The inventory write-down was comprised of $3.9 million of production costs and $0.8 million of depreciation and amortization.

 

  

Three months ended

December 31,

 

Year ended

December 31,

  

2018

  

2017

  

2018

  

2017

 

Net (loss) earnings for the period

 

$

(63,577)

  

$

49,664

  

$

12,041

  

$

123,451

 

Items that may be reclassified subsequently to net earnings:

        

 Unrealized net gains on short-term investments (net of $nil tax in 2018 and 2017)

 

332

  

1,376

  

993

  

810

 

 Reclassification adjustment for realized (gains) losses on short-term investments to earnings

 

(294)

  

250

  

(788)

  

361

 

Total comprehensive (loss) earnings for the period

 

$

(63,539)

  

$

51,290

  

$

12,246

  

$

124,622

 
         

Total comprehensive (loss) earnings attributable to:

        

Equity holders of the Company

 

$

(63,771)

  

$

50,518

  

$

10,499

  

$

122,162

 

Non-controlling interests

 

232

  

772

  

1,747

  

2,460

 
  

$

(63,539)

  

$

51,290

  

$

12,246

  

$

124,622

 

 

  

Three months ended

December 31,

 

Year ended

December 31,

  

2018

  

2017

  

2018

  

2017

 

Cash flow from operating activities

        

Net (loss) earnings for the period

 

$

(63,577)

  

$

49,664

  

$

12,041

  

$

123,451

 
         

Current income tax expense

 

9,999

  

26,706

  

53,901

  

62,877

 

Deferred income tax (recovery) expense

 

(3,961)

  

12,502

  

(32,754)

  

(3,843)

 

Interest expense (recovery)

 

117

  

284

  

(678)

  

(1,179)

 

Depreciation and amortization

 

37,245

  

34,240

  

147,289

  

122,888

 

Impairment charges (reversals)

 

27,789

  

(61,554)

  

27,789

  

(61,554)

 

Accretion on closure and decommissioning provision

 

1,631

  

1,493

  

6,524

  

5,973

 

Unrealized (gains) losses on foreign exchange

 

(348)

  

362

  

10,337

  

(383)

 

Loss (gain) on sale of mineral properties, plant and equipment

 

56

  

794

  

(7,973)

  

(191)

 

Project development write-down

 

  

  

  

1,898

 

Other operating activities

 

19,824

  

7,697

  

17,724

  

12,663

 

Changes in non-cash operating working capital

 

(4,897)

  

15,193

  

(4,261)

  

11,709

 

Operating cash flows before interest and income taxes

 

$

23,878

  

$

87,381

  

$

229,939

  

$

274,309

 
         

Interest paid

 

(417)

  

(413)

  

(1,684)

  

(2,367)

 

Interest received

 

561

  

414

  

1,944

  

1,462

 

Income taxes paid

 

(12,092)

  

(8,091)

  

(75,221)

  

(48,845)

 

Net cash generated from operating activities

 

$

11,930

  

$

79,291

  

$

154,978

  

$

224,559

 
         

Cash flow from investing activities

        

Payments for mineral properties, plant and equipment

 

$

(42,302)

  

$

(36,473)

  

$

(144,348)

  

$

(142,232)

 

Acquisition of mineral interests

 

  

  

(7,500)

  

(20,219)

 

Net purchase of short-term investments

 

(10,020)

  

(703)

  

(25,554)

  

(14,267)

 

Proceeds from sale of mineral properties, plant and equipment

 

4

  

36

  

15,781

  

1,674

 

Purchase of shares in associate

 

  

  

  

(2,473)

 

Net proceeds (payments) from commodity, diesel fuel swaps, and foreign currency contracts

 

1,289

  

348

  

2,449

  

(304)

 

Net cash used in investing activities

 

$

(51,029)

  

$

(36,792)

  

$

(159,172)

  

$

(177,821)

 
         

Cash flow from financing activities

        

Proceeds from issue of equity shares

 

$

  

$

28

  

$

1,081

  

$

2,606

 

Distributions to non-controlling interests

 

(1,158)

  

(314)

  

(2,020)

  

(1,052)

 

Dividends paid

 

(5,366)

  

(3,830)

  

(21,284)

  

(15,314)

 

Repayment of credit facility

 

  

  

  

(36,200)

 

Proceeds from (repayment of) short-term loans

 

  

3,000

  

(3,000)

  

3,000

 

Payment of equipment leases

 

(2,223)

  

(1,344)

  

(7,911)

  

(4,542)

 

Net cash used in financing activities

 

$

(8,747)

  

$

(2,460)

  

$

(33,134)

  

$

(51,502)

 

Effects of exchange rate changes on cash and cash equivalents

 

(68)

  

(80)

  

(115)

  

(164)

 

Net (decrease) increase in cash and cash equivalents

 

(47,914)

  

39,959

  

(37,443)

  

(4,928)

 

Cash and cash equivalents at the beginning of the period

 

186,424

  

135,994

  

175,953

  

180,881

 

Cash and cash equivalents at the end of the period

 

$

138,510

  

$

175,953

  

$

138,510

  

$

175,953

 
                  

 

 

ALTERNATIVE PERFORMANCE (NON-GAAP) MEASURES

All-In Sustaining Costs per Silver Ounce Sold (“AISCSOS”)

AISCSOS is a non-GAAP financial measure. AISCSOS does not have any standardized meaning prescribed by IFRS and is therefore unlikely to be comparable to similar measures presented by other companies. We believe that AISCSOS reflects a comprehensive measure of the full cost of operating our consolidated business given it includes the cost of replacing silver ounces through exploration, the cost of ongoing capital investments (sustaining capital), general and administrative expenses, as well as other items that affect the Company’s consolidated cash flow. To facilitate a better understanding of this measure as calculated by the Company, the following table provides the detailed reconciliation of this measure to the applicable cost items, as reported in the consolidated income statements for the respective periods:

    

Three months ended

December 31,

 

Year ended

December 31,

(In thousands of USD, except as noted)

   

2018

  

2017

  

2018

  

2017

 

Direct operating costs

   

$

119,070

  

$

134,202

  

$

487,462

  

$

488,363

 

Inventory Net Realizable Value (“NRV”) adjustments

 

A

 

13,263

  

5,495

  

24,330

  

12,307

 

Production costs

   

$

132,334

  

$

139,697

  

$

511,793

  

$

500,670

 

Royalties

   

4,601

  

8,809

  

20,673

  

24,510

 

Direct selling costs(1)

   

14,614

  

19,408

  

53,119

  

69,344

 

Less by-product credits(1)

   

(107,454)

  

(131,679)

  

(483,325)

  

(462,663)

 

Cash cost of sales net of by-products (2)

   

$

44,095

  

$

36,235

  

$

102,259

  

$

131,862

 

Sustaining capital (3)

   

$

29,377

  

$

25,573

  

$

106,030

  

$

84,215

 

Exploration and project development(4)

   

3,509

  

4,269

  

11,137

  

17,858

 

Reclamation cost accretion

   

1,631

  

1,493

  

6,524

  

5,973

 

General and administrative expense

   

5,450

  

4,732

  

22,649

  

21,397

 

All-in sustaining costs (4)

 

B

 

$

84,062

  

$

72,303

  

$

248,600

  

$

261,304

 

Payable ounces sold (in thousands)

 

C

 

5,299

  

6,659

  

23,160

  

24,212

 

All-in sustaining cost per silver ounce sold, net of by-products

 

B/C

 

$

15.86

  

$

10.86

  

$

10.73

  

$

10.79

 

All-in sustaining cost per silver ounce sold, net of by-products 
(excludes NRV inventory adjustments)

 

(B-A)/C

 

$

13.36

  

$

10.03

  

$

9.68

  

$

10.28

 

(1)

Included in the revenue line of the interim consolidated income statements, and for by-product credits are reflective of realized metal prices for the applicable periods.

(2)

Totals may not add due to rounding.

(3)

Please refer to the table below.  Further,  Q4 2018 and 2018 annual sustaining capital cash outflows included in this table were $2.0 million less and $0.8 million more than the and $31.3 million and $105.2 million of sustaining capital expenditures capitalized in Q4 2018 and 2018, respectively, as shown in the Consolidated Results table included in this news release (Q4 2017 and 2017, $3.1 million and  $0.2 million less than the $28.7 million and $84.4 million capitalized). The difference is due to the timing difference between the cash payment of capital investments compared with the period in which investments are capitalized.

(4)

The amounts for year-to-date 2017 exclude $1.9 million from non-cash project development write-downs.

 

As part of the AISCSOS measure, sustaining capital is included while expansionary or acquisition capital (referred to by the Company as non-sustaining capital) is not. Inclusion of sustaining capital only is a measure of capital costs associated with current ounces sold as opposed to project capital, which is expected to increase future production. For the periods under review, the items noted below are associated with the La Colorada and Dolores projects and are considered to be investment capital projects.

Reconciliation of payments for mineral properties,

plant and equipment and sustaining capital

 

Three months ended

December 31,

 

Year ended

December 31,

(in thousands of USD)

 

2018

  

2017

  

2018

  

2017

 

Payments for mineral properties, plant and equipment(1)

 

$

42,302

  

$

36,473

  

144,348

  

142,232

 

Add/(Subtract)

        

Advances received for leases

 

450

  

1,385

  

7,028

  

5,000

 

Non-Sustaining capital

 

(13,375)

  

(12,284)

  

(45,346)

  

(63,017)

 

Sustaining Capital(2)

 

$

29,377

  

$

25,573

  

106,030

  

84,215

 

(1)

As presented on the unaudited interim consolidated statements of cash flows.

(2)

Totals may not add due to rounding.

 

Three months ended December 31, 2018

 

La

Colorada

Dolores

Huaron

Morococha

San

Vicente

Manantial

Espejo

PASCORP

Consolidated

Direct operating costs

16,947

 

39,667

 

19,707

 

16,096

 

6,984

 

19,671

  

119,070

 

NRV inventory adjustments

 

11,440

 

 

 

 

1,822

  

13,263

 

Production costs

16,947

 

51,107

 

19,707

 

16,096

 

6,984

 

21,494

  

132,334

 

Royalties

130

 

1,642

 

 

 

2,554

 

275

  

4,601

 

Direct selling costs

2,050

 

31

 

6,061

 

2,524

 

1,816

 

2,132

  

14,614

 

Less by-product credits

(14,749)

 

(35,862)

 

(23,682)

 

(19,013)

 

(6,231)

 

(7,917)

  

(107,454)

 

Cash cost of sales net of by-products(1)

4,378

 

16,919

 

2,087

 

(394)

 

5,123

 

15,984

  

44,095

 

Sustaining capital

5,364

 

13,255

 

5,653

 

3,039

 

1,628

 

436

  

29,377

 

Exploration and project development

711

 

241

 

7

 

123

 

 

51

 

2,375

3,509

 

Reclamation cost accretion

114

 

351

 

152

 

87

 

63

 

708

 

156

1,631

 

General & administrative expense

 

 

 

 

 

 

5,450

5,450

 

All-in sustaining costs(1)

10,567

 

30,766

 

7,899

 

2,855

 

6,814

 

17,178

 

7,981

84,062

 

Payable ounces sold (thousand)

1,780

 

870

 

858

 

674

 

502

 

615

  

5,299

 

All-in sustaining cost per silver ounce sold, net of 

by-products

$

5.93

 

$

35.36

 

$

9.21

 

$

4.24

 

$

13.57

 

$

27.94

  

$

15.86

 

All-in sustaining cost per silver ounce sold, net of 

by-products (excludes NRV inventory adjustments)

5.93

 

22.21

 

9.21

 

4.24

 

13.57

 

24.98

  

13.36

 
                        

(1)

Totals may not add due to rounding.

 

Three months ended December 31, 2017

 

La

Colorada

Dolores

Alamo

Dorado

Huaron

Morococha

San

Vicente

Manantial

Espejo

PASCORP

Consolidated

Direct operating costs

16,580

 

35,739

 

3,957

 

19,551

 

16,931

 

10,484

 

30,960

  

134,202

 

NRV inventory adjustments

 

4,098

 

(1,916)

 

 

 

 

3,313

  

5,495

 

Production costs

16,580

 

39,838

 

2,041

 

19,551

 

16,931

 

10,484

 

34,273

  

139,697

 

Royalties

106

 

1,966

 

 

 

 

6,105

 

633

  

8,809

 

Direct selling costs

4,066

 

31

 

248

 

6,659

 

5,014

 

3,383

 

8

  

19,408

 

Less by-product credits

(18,316)

 

(39,317)

 

(61)

 

(24,653)

 

(26,767)

 

(6,969)

 

(15,595)

  

(131,679)

 

Cash cost of sales net of by-products(1)

2,435

 

2,518

 

2,227

 

1,557

 

(4,823)

 

13,002

 

19,319

  

36,235

 

Sustaining capital

2,576

 

13,303

 

 

3,548

 

3,162

 

1,939

 

1,045

  

25,573

 

Exploration and project development

73

 

564

 

 

428

 

543

 

 

936

 

1,726

4,269

 

Reclamation cost accretion

112

 

296

 

89

 

162

 

105

 

56

 

619

 

54

1,493

 

General & administrative expense

 

 

 

 

 

 

 

4,732

4,732

 

All-in sustaining costs(1)

5,196

 

16,682

 

2,317

 

5,695

 

(1,013)

 

14,998

 

21,918

 

6,511

72,303

 

Payable ounces sold (thousand)

1,847

 

1,225

 

133

 

813

 

658

 

1,218

 

766

  

6,659

 

All-in sustaining cost per silver ounce

sold, net of by-products

$

2.81

 

$

13.62

 

$

17.45

 

$

7.00

 

$

(1.54)

 

$

12.31

 

$

28.63

  

$

10.86

 

All-in sustaining cost per silver ounce

sold, net of by-products (excludes NRV 

inventory adjustments)

$

2.81

 

$

10.27

 

$

31.89

 

$

7.00

 

$

(1.54)

 

$

12.31

 

$

24.30

  

$

10.03

 

(1)

Totals may not add due to rounding.

 

Year ended December 31, 2018

 

La

Colorada

Dolores

Huaron

Morococha

San

Vicente

Manantial

Espejo

PASCORP

Consolidated

Direct operating costs

70,248

 

154,598

 

75,382

 

68,068

 

33,461

 

85,705

  

487,462

 

NRV inventory adjustments

 

24,567

    

(238)

  

24,330

 

Production costs

70,248

 

179,165

 

75,382

 

68,068

 

33,461

 

85,468

 

0

511,793

 

Royalties

616

 

7,991

 

 

 

9,943

 

2,124

  

20,673

 

Direct selling costs

8,537

 

129

 

21,326

 

13,313

 

7,451

 

2,363

  

53,119

 

Less by-product credits

(63,442)

 

(170,337)

 

(91,155)

 

(93,142)

 

(20,829)

 

(44,420)

  

(483,325)

 

Cash cost of sales net of by-products(1)

15,959

 

16,949

 

5,553

 

(11,761)

 

30,026

 

45,534

  

102,259

 

Sustaining capital

15,462

 

48,842

 

17,109

 

14,840

 

6,949

 

2,827

  

106,030

 

Exploration and project development

880

 

1,594

 

660

 

598

 

 

744

 

6,661

11,137

 

Reclamation cost accretion

457

 

1,405

 

609

 

347

 

252

 

2,832

 

622

6,524

 

General & administrative expense

 

 

 

 

 

 

22,649

22,649

 

All-in sustaining costs(1)

32,758

 

68,790

 

23,931

 

4,024

 

37,227

 

51,937

 

29,932

248,600

 

Payable ounces sold (thousand)

7,069

 

4,205

 

3,094

 

2,652

 

3,054

 

3,086

  

23,160

 

All-in sustaining cost per silver ounce sold, net of 

by-products

$

4.63

 

$

16.36

 

$

7.73

 

$

1.52

 

$

12.19

 

$

16.83

  

$

10.73

 

All-in sustaining cost per silver ounce sold, net of 

by-products (excludes NRV inventory adjustments)

4.63

 

10.52

 

7.73

 

1.52

 

12.19

 

16.91

  

9.68

 
                        

(1)

Totals may not add due to rounding.

 

Year ended December 31, 2017

 

La

Colorada

Dolores

Alamo

Dorado

Huaron

Morococha

San

Vicente

Manantial

Espejo

PASCORP

Consolidated

Direct operating costs

67,170

 

116,104

 

20,477

 

75,551

 

63,967

 

34,731

 

110,362

  

488,363

 

NRV inventory adjustments

 

6,847

 

(2,598)

    

8,058

  

12,307

 

Production costs

67,170

 

122,951

 

17,879

 

75,551

 

63,967

 

34,731

 

118,420

  

500,670

 

Royalties

475

 

6,501

 

79

 

 

 

14,321

 

3,134

  

24,510

 

Direct selling costs

12,235

 

93

 

479

 

26,238

 

18,770

 

10,740

 

789

  

69,344

 

Less by-product credits

(64,133)

 

(128,351)

 

(3,467)

 

(97,715)

 

(94,233)

 

(16,278)

 

(58,485)

  

(462,663)

 

Cash cost of sales net of by-products(1)

15,748

 

1,194

 

14,970

 

4,074

 

(11,496)

 

43,513

 

63,858

  

131,862

 

Sustaining capital

13,970

 

36,071

 

 

10,267

 

12,428

 

8,146

 

3,333

  

84,215

 

Exploration and project development

251

 

2,444

 

 

1,713

 

1,629

 

 

4,588

 

7,232

17,858

 

Reclamation cost accretion

448

 

1,186

 

357

 

646

 

420

 

225

 

2,474

 

216

5,973

 

General & administrative expense

 

 

 

 

 

 

 

21,397

21,397

 

All-in sustaining costs(1)

30,417

 

40,894

 

15,327

 

16,701

 

2,981

 

51,884

 

74,254

 

28,845

261,304

 

Payable ounces sold (thousand)

6,853

 

4,089

 

867

 

3,181

 

2,448

 

3,603

 

3,171

  

24,212

 

All-in sustaining cost per silver ounce 

sold, net of by-products

$

4.44

 

$

10.00

 

$

17.69

 

$

5.25

 

$

1.22

 

$

14.40

 

$

23.42

  

$

10.79

 

All-in sustaining cost per silver ounce 

sold, net of by-products (excludes NRV 

inventory adjustments)

$

4.44

 

$

8.33

 

$

20.68

 

$

5.25

 

$

1.22

 

$

14.40

 

$

20.88

  

$

10.28

 

(1)

Totals may not add due to rounding.

 

Cash Costs per Ounce of Silver, Net of By-Product Credits
Pan American produces by-product metals incidentally to our silver mining activities. We have adopted the practice of calculating the net cost of producing an ounce of silver, our primary payable metal, after deducting revenues gained from incidental by-product production, as a performance measure. This performance measurement has been commonly used in the mining industry for many years and was developed as a relatively simple way of comparing the net production costs of the primary metal for a specific period against the prevailing market price of that metal.

Cash costs per ounce metrics, net of by-product credits, is used extensively in our internal decision making processes. We believe the metric is also useful to investors because it facilitates comparison, on a mine-by-mine basis, notwithstanding the unique mix of incidental by-product production at each mine, of our operations’ relative performance on a period-by-period basis, and against the operations of our peers in the silver industry on a consistent basis. Cash costs per ounce is conceptually understood and widely reported in the silver mining industry. However, cash cost per ounce of silver is a non-GAAP measure and does not have a standardized meaning prescribed by GAAP and the Company’s method of calculating cash costs may differ from the methods used by other entities.

To facilitate a better understanding of these measures as calculated by the Company, the following table provides the detailed reconciliation of these measures to the production costs, as reported in the consolidated income statements for the respective periods:

Total Cash Costs per ounce of Payable Silver, net of

by-product credits

Three months ended

December 31,

Year ended

December 31,

(in thousands of U.S. dollars except as noted)

2018

 

2017

 

2018

 

2017

 

Production costs(1)

 

$

136,177

 

$

139,697

 

$

515,636

 

$

500,670

 

Add/(Subtract)

     

Royalties

 

4,601

 

8,809

 

20,673

 

24,510

 

Smelting, refining, and transportation charges

 

14,736

 

18,469

 

57,137

 

73,222

 

Worker’s participation and voluntary payments

 

(616)

 

(1,374)

 

(3,506)

 

(5,067)

 

Change in inventories

 

5,922

 

(12,776)

 

16,581

 

(16,011)

 

Other

 

(1,090)

 

555

 

(8,866)

 

1,559

 

Non-controlling interests (2)

 

(456)

 

(64)

 

(875)

 

(1,126)

 

Inventory net realizable value (“NRV”) adjustments

 

(13,263)

 

(5,495)

 

(24,330)

 

(12,307)

 

Cash Operating Costs before by-product credits(3)

 

146,012

 

147,820

 

572,449

 

565,450

 

Less gold credit

 

(44,609)

 

(54,648)

 

(224,716)

 

(196,649)

 

Less zinc credit

 

(42,270)

 

(40,826)

 

(162,646)

 

(137,826)

 

Less lead credit

 

(11,482)

 

(12,687)

 

(46,501)

 

(46,948)

 

Less copper credit

 

(12,707)

 

(20,026)

 

(60,706)

 

(77,348)

 

Cash Operating Costs net of by-product credits (3)

A

34,945

 

19,633

 

77,881

 

106,678

 

Payable Silver Production (koz)

B

5,710

 

6,172

 

23,258

 

23,444

 

Cash Costs per ounce net of by-product credits

A/B

$

6.12

 

$

3.18

 

$

3.35

 

$

4.55

 

(1)

2018 annual and Q4 2018 production costs include $3.9 million of costs to produce certain doré metal inventory that was subsequently written-off in full as a result of the inventory being held at a refinery that filed for bankruptcy in November of 2018.

(2)

Figures presented in the reconciliation table above are on a 100% basis as presented in the consolidated financial statements with an adjustment line item to account for the portion of the Morococha and San Vicente mines owned by non-controlling interests, an expense item not included in operating cash costs. The associated tables below are for the Company’s share of ownership only.

(3)

Figures in this table and in the associated tables below may not add due to rounding.

 

Three months ended December 31, 2018 (1)

(in thousands of USD except as noted)

  

La

Colorada

Dolores

Alamo

Dorado

Huaron

Morococha

San

Vicente

Manantial

Espejo

Consolidated

Total

Cash Costs before by-product credits

A

$

20,448

 

$

41,872

 

$

 

$

25,721

 

$

18,147

 

$

15,422

 

$

22,527

 

$

144,136

 

Less gold credit

b1

(1,223)

 

(36,065)

 

 

298

 

(63)

 

(7,578)

 

(44,631)

 

Less zinc credit

b2

(11,342)

 

 

(10,426)

 

(12,845)

 

(6,251)

 

 

(40,865)

 

Less lead credit

b3

(4,492)

 

 

(3,991)

 

(2,593)

 

(179)

 

 

(11,255)

 

Less copper credit

b4

 

 

(8,930)

 

(2,617)

 

(893)

 

 

(12,441)

 

Sub-total by-product credits

B=( b1+ 

b2+ b3+ 

b4)

$

(17,058)

 

$

(36,065)

 

$

 

$

(23,346)

 

$

(17,757)

 

$

(7,386)

 

$

(7,578)

 

$

(109,192)

 

Cash Costs net of by-product credits

C=(A+B)

$

3,390

 

$

5,807

 

$

 

$

2,374

 

$

390

 

$

8,036

 

$

14,948

 

$

34,945

 
          

Payable ounces of silver (thousand)

D

1,955

 

823

 

841

 

636

 

870

 

586

 

5,710

 
          

Cash cost per ounce net of by-products

C/D

$

1.73

 

$

7.06

 

 NA

$

2.82

 

$

0.61

 

$

9.23

 

$

25.53

 

$

6.12

 

(1)

Totals may not add due to rounding.

 

Year ended December 31, 2018(1)

(in thousands of USD except as noted)

  

La

Colorada

Dolores

Alamo

Dorado

Huaron

Morococha

San

Vicente

Manantial 

Espejo

Consolidated

Total

Cash Costs before by-product credits

A

$

81,578

 

166,048

 

$

 

$

96,464

 

$

75,836

 

$

56,973

 

$

87,074

 

$

563,974

 

Less gold credit

b1

(4,802)

 

(173,657)

 

(3)

 

(1,673)

 

(284)

 

(44,142)

 

(224,561)

 

Less zinc credit

b2

(43,777)

 

 

(41,422)

 

(54,392)

 

(17,573)

 

 

(157,164)

 

Less lead credit

b3

(18,459)

 

 

(16,786)

 

(9,819)

 

(584)

 

 

(45,648)

 

Less copper credit

b4

 

 

(33,193)

 

(20,658)

 

(4,868)

 

 

(58,719)

 

Sub-total by-product credits

B=( b1+ 

b2+ b3+ 

b4)

$

(67,038)

 

$

(173,657)

 

$

 

$

(91,405)

 

$

(86,542)

 

$

(23,309)

 

$

(44,142)

 

$

(486,093)

 

Cash Costs net of by-product credits

C=(A+B)

$

14,541

 

$

(7,608)

 

$

 

$

5,060

 

$

(10,706)

 

$

33,664

 

$

42,932

 

$

77,883

 
          

Payable ounces of silver (thousand)

D

7,196

 

4,075

 

3,107

 

2,467

 

3,326

 

3,086

 

23,258

 
          

Cash cost per ounce net of by-products

C/D

$

2.02

 

$

(1.87)

 

 NA

$

1.63

 

$

(4.34)

 

$

10.12

 

$

13.91

 

$

3.35

 

(1)

Totals may not add due to rounding.

 

Three months ended December 31, 2017(1)

(in thousands of USD except as noted)

  

La

Colorada

Dolores

Alamo

Dorado

Huaron

Morococha

San

Vicente

Manantial 

Espejo

Consolidated

Total

Cash Costs before by-product credits

A

$

18,708

 

34,778

 

$

 

136

$

26,440

 

$

20,276

 

$

15,300

 

$

29,800

 

$

145,437

 

Less gold credit

b1

(1,377)

 

(39,708)

 

(90)

(9)

 

(625)

 

(79)

 

(12,704)

 

(54,592)

 

Less zinc credit

b2

(11,337)

 

 

(12,296)

 

(12,205)

 

(3,767)

 

 

(39,605)

 

Less lead credit

b3

(5,232)

 

 

(4,758)

 

(2,361)

 

(131)

 

 

(12,483)

 

Less copper credit

b4

 

 

(7,671)

 

(9,585)

 

(1,868)

 

 

(19,124)

 

Sub-total by-product credits

B=( b1+ 

b2+ b3+ 

b4)

$

(17,947)

 

$

(39,708)

 

$

 

(90)

$

(24,733)

 

$

(24,776)

 

$

(5,845)

 

$

(12,704)

 

$

(125,804)

 

Cash Costs net of by-product credits

C=(A+B)

$

761

 

$

(4,930)

 

$

 

46

$

1,706

 

$

(4,500)

 

$

9,455

 

$

17,095

 

$

19,633

 
          

Payable ounces of silver (thousand)

D

1,777

 

1,254

 

22

821

 

607

 

1,046

 

645

 

6,172

 
          

Cash cost per ounce net of by-products

C/D

$

0.43

 

$

(3.93)

 

$

 

2.09

$

2.08

 

$

(7.42)

 

$

9.04

 

$

26.52

 

$

3.18

 

(1)

Totals may not add due to rounding.

 

Year ended December 31, 2017(1)

(in thousands of USD except as noted)

  

La

Colorada

Dolores

Alamo 

Dorado

Huaron

Morococha

San

Vicente

Manantial 

Espejo

Consolidated

Total

Cash Costs before by-product credits

A

$

75,407

 

122,532

 

$

 

12,666

$

101,588

 

$

76,085

 

$

55,286

 

$

113,726

 

$

557,291

 

 Less gold credit

b1

(4,477)

 

(129,503)

 

(2,498)

(148)

 

(2,639)

 

(305)

 

(56,842)

 

(196,411)

 

 Less zinc credit

b2

(37,967)

 

 

(46,080)

 

(39,402)

 

(10,522)

 

 

(133,972)

 

 Less lead credit

b3

(18,994)

 

 

(19,039)

 

(7,573)

 

(672)

 

 

(46,278)

 

 Less copper credit

b4

 

 

(46)

(32,059)

 

(38,315)

 

(3,533)

 

 

(73,952)

 

Sub-total by-product credits

B=( b1+ 

b2+ b3+ 

b4)

$

(61,438)

 

$

(129,503)

 

$

 

(2,544)

$

(97,327)

 

$

(87,929)

 

$

(15,032)

 

$

(56,842)

 

$

(450,614)

 

Cash Costs net of by-product credits

C=(A+B)

$

13,970

 

$

(6,971)

 

$

 

10,123

$

4,261

 

$

(11,844)

 

$

40,254

 

$

56,884

 

$

106,677

 
          

Payable ounces of silver (thousand)

D

6,709

 

4,225

 

614

3,164

 

2,219

 

3,396

 

3,117

 

23,444

 
          

Cash cost per ounce net of by-products

C/D

$

2.08

 

$

(1.65)

 

$

 

16.49

$

1.35

 

$

(5.34)

 

$

11.85

 

$

18.25

 

$

4.55

 

(1)

Totals may not add due to rounding.

 

Adjusted Earnings and Basic Adjusted Earnings Per Share

Adjusted earnings and basic adjusted earnings per share are non-GAAP measures that the Company considers to better reflect normalized earnings as it eliminates items that in management’s judgment are subject to volatility as a result of factors which are unrelated to operations in the period, and/or relate to items that will settle in future periods. Certain items that become applicable in a period may be adjusted for, with the Company retroactively presenting comparable periods with an adjustment for such items and conversely, items no longer applicable may be removed from the calculation. The Company adjusts certain items in the periods that they occurred but does not reverse or otherwise unwind the effect of such items in future periods. Neither adjusted earnings nor basic adjusted earnings per share have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other companies.

The following table shows a reconciliation of adjusted loss and earnings for the year and three months ended December 31, 2018 and 2017, to the net earnings for each period.

  

Three Months Ended

December 31,

 

Year ended

December 31,

(In thousands of USD, except as noted)

 

2018

  

2017

  

2018

  

2017

 

Net (loss) earnings for the period

 

$

(63,577)

  

$

49,664

  

$

12,041

  

$

123,451

 

Adjust for:

        

Loss (gain) on derivatives

 

60

  

(64)

  

1,078

  

(64)

 

Impairment charges (reversals)

 

27,789

  

(61,554)

  

27,789

  

(61,554)

 

Write-down of project development costs

 

  

  

  

1,898

 

Unrealized foreign exchange (gains) losses

 

(348)

  

362

  

10,337

  

(383)

 

Net realizable value adjustments to heap inventory

 

12,977

  

4,936

  

24,082

  

10,060

 

Unrealized losses (gains) on commodity and foreign currency contracts

 

765

  

2,190

  

(2,481)

  

(909)

 

Mine operation severance costs

 

  

  

  

3,509

 

Share of loss (income) from associate and dilution gain

 

182

  

(259)

  

(13,679)

  

(2,052)

 

Reversal of previously accrued tax liabilities

 

  

  

(1,188)

  

(2,793)

 

Metal inventory loss

 

4,670

  

  

4,670

  

 

Transaction costs

 

10,229

  

  

10,229

  

 

Losses (gains) on sale of mineral properties, plant and equipment

 

56

  

794

  

(7,973)

  

(191)

 

Closure and decommissioning liability adjustment

 

2,832

  

4,515

  

2,832

  

8,388

 

Adjust for effect of taxes relating to the above

 

$

(5,832)

  

$

6,046

  

$

(9,914)

  

$

2,273

 

Adjust for effect of foreign exchange on taxes

 

8,175

  

12,589

  

1,611

  

(3,928)

 

Adjusted (loss) earnings for the period

 

$

(2,022)

  

$

19,219

  

$

59,434

  

$

77,705

 

Weighted average shares for the period

 

153,352

  

153,207

  

153,315

  

153,070

 

Adjusted (loss) earnings per share for the period

 

$

(0.01)

  

$

0.13

  

$

0.39

  

$

0.51

 

 

INDIVIDUAL MINE OPERATION HIGHLIGHTS

Mexico – La Colorada mine

 

Three months ended

December 31,

Year ended

December 31,

 

2018

 

2017

 

2018

 

2017

 

Tonnes milled – kt

187.4

 

170.7

 

726.0

 

655.3

 

Average silver grade – grams per tonne

375

 

374

 

358

 

368

 

Average zinc grade – %

3.10

 

2.88

 

2.83

 

2.81

 

Average lead grade – %

1.50

 

1.54

 

1.40

 

1.54

 

Average silver recovery – %

91.7

 

91.1

 

91.2

 

91.1

 

Average zinc recovery – %

87.5

 

84.1

 

86.5

 

83.7

 

Average lead recovery – %

86.8

 

86.2

 

87.2

 

86.9

 

Production:

    

 Silver – koz

2,074

 

1,870

 

7,617

 

7,056

 

 Gold – koz

1.16

 

1.26

 

4.40

 

4.29

 

 Zinc – kt

5.09

 

4.14

 

17.79

 

15.44

 

 Lead – kt

2.44

 

2.26

 

8.84

 

8.80

 
     

Cash cost per ounce net of by-products

$

1.73

 

$

0.43

 

$

2.02

 

$

2.08

 

AISCSOS

$

5.93

 

$

2.81

 

$

4.63

 

$

4.44

 

Payable silver sold – koz

1,780

 

1,847

 

7,069

 

6,853

 

Sustaining capital –  (‘000s)

$

5,364

 

$

2,576

 

$

15,462

 

$

13,970

 

 

Mexico – Dolores mine

 

Three months ended

December 31,

Year ended

December 31,

 

2018

 

2017

 

2018

 

2017

 

Tonnes placed – kt

1,818.5

 

1,785.1

 

6,903.3

 

6,604.9

 

Average silver grade – grams per tonne

25

 

39

 

31

 

38

 

Average gold grade – grams per tonne

0.68

 

0.76

 

0.85

 

0.66

 

Average silver produced to placed ratio – %

55.6

 

55.5

 

59.2

 

51.7

 

Average gold produced to placed ratio – %

73.4

 

71.8

 

72.2

 

70.7

 

Production:

    

 Silver – koz

824

 

1,256

 

4,081

 

4,232

 

 Gold – koz

29.4

 

31.2

 

136.6

 

103.0

 

Cash cost per ounce net of by-products

7.06

 

(3.93)

 

(1.87)

 

(1.65)

 

AISCSOS

35.36

 

13.62

 

16.36

 

10.00

 

Payable silver sold – koz

870

 

1,225

 

4,205

 

4,089

 

Sustaining capital –  (‘000s)

$

13,255

 

$

13,303

 

$

48,842

 

$

36,071

 
             

 

Peru– Huaron mine

 

Three months ended

December 31,

Year ended

December 31,

 

2018

 

2017

 

2018

 

2017

 

Tonnes milled – kt

252.0

 

231.5

 

935.0

 

928.1

 

Average silver grade – grams per tonne

142

 

152

 

142

 

146

 

Average zinc grade – %

2.49

 

2.58

 

2.44

 

2.70

 

Average lead grade – %

1.22

 

1.15

 

1.18

 

1.23

 

Average copper grade – %

0.78

 

0.70

 

0.76

 

0.84

 

Average silver recovery – %

83.0

 

84.1

 

82.7

 

85.2

 

Average zinc recovery – %

76.4

 

77.8

 

76.0

 

77.6

 

Average lead recovery – %

70.4

 

76.6

 

73.2

 

77.7

 

Average copper recovery – %

77.6

 

74.5

 

76.9

 

78.5

 

Production:

    

Silver – koz

965

 

951

 

3,561

 

3,684

 

Gold – koz

0.22

 

0.19

 

0.79

 

1.15

 

Zinc – kt

4.82

 

4.64

 

17.38

 

19.37

 

Lead – kt

2.16

 

2.03

 

8.05

 

8.77

 

Copper – kt

1.52

 

1.21

 

5.44

 

6.09

 

Cash cost per ounce net of by-products

$

2.82

 

$

2.08

 

$

1.63

 

$

1.35

 

AISCSOS

$

9.21

 

$

7.00

 

$

7.73

 

$

5.25

 

Payable silver sold – koz

858

 

813

 

3,094

 

3,181

 

Sustaining capital – (‘000s)

$

5,653

 

$

3,548

 

$

17,109

 

$

10,267

 

 

Peru – Morococha mine(1)

 

Three months ended

December 31,

Year ended

December 31,

 

2018

 

2017

 

2018

 

2017

 

Tonnes milled – kt

163.0

 

170.6

 

672.0

 

676.9

 

Average silver grade – grams per tonne

154

 

145

 

149

 

137

 

Average zinc grade  – %

4.02

 

3.25

 

3.80

 

3.01

 

Average lead grade  – %

1.09

 

0.84

 

0.92

 

0.78

 

Average copper grade  – %

0.44

 

1.07

 

0.66

 

1.20

 

Average silver recovery – %

91.9

 

91.0

 

90.7

 

89.2

 

Average zinc recovery – %

88.4

 

81.2

 

87.4

 

79.6

 

Average lead recovery – %

78.7

 

71.0

 

76.5

 

66.6

 

Average copper recovery – %

63.1

 

83.4

 

75.7

 

83.9

 

Production:

    

Silver – koz

740

 

721

 

2,881

 

2,634

 

Gold – koz

0.19

 

0.82

 

2.09

 

3.53

 

Zinc – kt

5.78

 

4.49

 

22.17

 

16.13

 

Lead – kt

1.40

 

1.00

 

4.69

 

3.46

 

Copper – kt

0.45

 

1.49

 

3.30

 

6.64

 

Cash cost per ounce net of by-products

$

0.61

 

$

(7.42)

 

$

(4.34)

 

$

(5.34)

 

AISCSOS

$

4.24

 

$

(1.54)

 

$

1.52

 

$

1.22

 

Payable silver sold (100%) – koz

674

 

658

 

2,652

 

2,448

 

Sustaining capital (100%) –  (‘000s)

$

3,039

 

$

3,162

 

$

14,840

 

$

12,428

 

(1)

Production figures are for Pan American’s 92.3% share only, unless otherwise noted.

 

Bolivia – San Vicente mine(1)

 

Three months ended

December 31,

Year ended

December 31,

 

2018

 

2017

 

2018

 

2017

 

Tonnes milled – kt

88.3

 

89.5

 

332.9

 

328.1

 

Average silver grade – grams per tonne

372

 

406

 

362

 

374

 

Average zinc grade – %

3.66

 

2.01

 

2.77

 

1.94

 

Average lead grade – %

0.32

 

0.25

 

0.34

 

0.29

 

Average silver recovery – %

90.7

 

93.9

 

92.7

 

92.6

 

Average zinc recovery – %

88.2

 

77.7

 

81.5

 

68.7

 

Average lead recovery – %

78.5

 

79.1

 

64.8

 

80.1

 

Production:

    

 Silver – koz

937

 

1,102

 

3,544

 

3,610

 

 Gold – koz

0.12

 

0.14

 

0.50

 

0.51

 

 Zinc – kt

2.82

 

1.40

 

7.47

 

4.36

 

 Lead – kt

0.26

 

0.11

 

0.78

 

0.47

 

 Copper – kt

0.22

 

0.33

 

1.02

 

0.63

 

Cash cost per ounce net of by-products

$

9.23

 

$

9.04

 

$

10.12

 

$

11.85

 

AISCSOS

$

13.57

 

$

12.31

 

$

12.19

 

$

14.40

 

Payable silver sold (100%) – koz

502

 

1,218

 

3,054

 

3,603

 

Sustaining capital (100%) –  (‘000s)

$

1,628

 

$

1,939

 

$

6,949

 

$

8,146

 

(1)

Production figures are for Pan American’s 95.0% share only, unless otherwise noted.

 

Argentina – Manantial Espejo mine

 

Three months ended

December 31,

Year ended

December 31,

 

2018

 

2017

 

2018

 

2017

 

Tonnes milled – kt

198.5

 

205.1

 

804.4

 

793.5

 

Average silver grade – grams per tonne

95

 

107

 

135

 

134

 

Average gold grade – grams per tonne

0.98

 

1.62

 

1.42

 

1.88

 

Average silver recovery – %

90.0

 

89.7

 

88.0

 

90.6

 

Average gold recovery – %

93.1

 

93.5

 

93.4

 

93.8

 

Production:

    

Silver – koz

587

 

646

 

3,092

 

3,123

 

Gold – koz

6.19

 

9.98

 

34.55

 

45.34

 

Cash cost per ounce net of by-products

$

25.53

 

$

26.52

 

$

13.91

 

$

18.25

 

AISCSOS

$

27.94

 

$

28.63

 

$

16.83

 

$

23.42

 

Payable silver sold – koz

615

 

766

 

3,086

 

3,171

 

Sustaining capital –  (‘000s)

$

436

 

$

1,045

 

$

2,827

 

$

3,333

 

 

SOURCE Pan American Silver Corp.

Original Article: https://www.panamericansilver.com/investors/news-releases/detail/74/2019-02-20-pan-american-silver-reports-unaudited-2018-annual-and-fourth-quarter-results

 

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Maza Drilling is a Mexican company established in 2007 in Mazatlán, Sinaloa. Our Canadian founder, Mr. Guy de Launiere, has over 20 years of international experience managing diverse drilling operations. Maza Drilling strives to compete at the highest levels in terms of recovery, effectiveness, efficiency, and affordability at every project while keeping at the forefront of technology to meet our customer’s needs in this demanding market.