Pan American Silver Corp.

Thank you for standing by. This is the conference operator. Welcome to the Pan American Silver third quarter 2022 results conference call. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Sirin Feseke, BP Investor Relations. Please go ahead.

Thank you for joining us today to discuss Pan American Silver's Q3 2022 results and our agreement with Agnico Eagle Mines Limited to acquire Humana Gold. This call includes forward-looking statements and information and makes reference to non-GAAP measures. Please see the cautionary statements in our Q3 2022 MD&A and news release. and the presentation slides for our call today, all of which are available on our website. I'll now turn the call over to Michael Steinman, Pan American's President and CEO.

Thank you, Sharon, and thank you for joining our call today. We have been looking forward to this call and being able to finally discuss our agreement with Agnico to acquire Yamana. But before we get into the discussion, let me first provide a brief recap of our Q3 results. The underlying performance of our gold segment operations was in line with our expectations, although production came in below our quarterly guidance range because of an in-heap inventory buildup of 28,900 ounces of gold, largely at Chavindo and at La Reina. At Chavindo, the buildup was partially related to lower rainfall rates, which reduced irrigation flow rates and recovered ounces during the quarter. despite stacked ounces exceeding the plan by 18%. At La Reina Gold Production, not only modestly exceeded plan in the quarter, but ounces stacked also surpassed expectations by 25%, with greater tons placed at higher grades. The above plan contained ounces placed on the heaps at Jawindo and La Reina during Q3 positions us to reaffirm our annual gold production guidance towards the lower end of 550 to 605,000 ounces. We are also reaffirming our estimates for gold segmental and sustaining costs of between $1,450 and $1,550 that we provided with our Q2 results. We are revising the estimate for full year 2022 silver production to be between 18 to 18.5 million ounces from the 19 to 20.5 million ounces we provided in our original operating outlook. The revision is largely due to lower production from lower grade ores in Phase IXb open pit at Dolores and revising our mine sequencing into lower grade silver ores at La Clarada during the second half of 2022. Re-establishing mining from the higher grade ore zones at La Cuerada has proven more challenging given our ground control systems have been compromised to a greater extent than expected from the prolonged exposure to high heat and humidity during the constrained ventilation we faced between 2017 and early 2022. During Q3, we deployed additional resources with two development contractors to accelerate ground control system upgrades necessary to access the higher-grade ores in the deeper portions of the eastern Candelaria deposit. We expect to re-establish near-reserve grade ore mine sequencing towards the end of 2022. We are pleased with the current ventilation conditions in the mine The progress on sinking the new ventilation shaft that will further secure long-term ventilation systems and the accelerated ground control system replacements and development advances to access the higher-grade ore zones. Cost inflation and supply disruptions continue to be an industry-wide issue. which has led us to expect that silver segment cash costs and all-in sustaining costs could be marginally above the high end of the range in our 2022 Original Operating Outlook, which indicated an all-in sustaining cost for silver segment of $14.50 to $16 per ounce in 2022. Our financial position remains strong with cash and short-term investment of $187.2 million and an undrawn line of credit of $500 million at close of Q3. We declared a dividend of 10 cents per share, in line with our dividend policy. In September, we updated our La Corada's corn mineral resource. We now have 95.9 million tons in the indicated category, containing 94.4 million ounces of silver, 2.7 million tons of zinc and 1.2 million tons of lead. In addition, we estimate an inferred mineral resource of 147.8 million tons containing 132.9 million ounces of silver, 3.4 million tons of zinc and 1.5 million tons of lead. This mineral resource estimate does not include trill results released on November 1, 2022, and on July 21, 2022, that indicate the high-grade silver zone of mineralization, which will be part of the next resource update. This morning, Triple Flag Metals Corp. announced the acquisition of all of the outstanding shares of Mavericks Metals for share and cash consideration. In July 2016, Mavericks acquired a portfolio of 13 royalties, precious metal streams, and payment agreements from Pan American Silver. As consideration for that portfolio, Pan American received at that time 42.85 million common shares and 20 million common share purchase warrants. Pan America's strategy for divesting this portfolio was to crystallize value for a group of assets in Pan America's mining portfolio that was largely unrecognized by the market at that time. Over the years, Maverick continued to grow the value of its portfolio through acquisitions and additional metal streams and royalties. On May 28, 2020, Pan American sold a portion of its shares for gross proceeds of $45.4 million. With the transaction announced today, Pan American will receive approximately $102 million in Triple Flag shares and cash. Using our royalty portfolio, To start Mavericks Metals in 2016 has been a very successful way to create value for our shareholders from assets largely unrecognized by the market. Let's now move on to the Pan American and Agnico arrangement agreement with Yamana. On November 4, 2022, Pan American and Agnico Eagle Limited announced that we had delivered a definitive binding offer to the Board of Directors of Yamana Gold. Under the proposal, Pan American would acquire all of the issued and outstanding common shares of Yamana, and Yamana would sell certain subsidiaries and partnerships that hold Yamana's interest in its Canadian assets to Agnico Eagle, including the Canadian Malarctic mine. On November 8, 2022, Pan American and Agnico Eagle further announced that the arrangement agreement among Pan American, Agnico Eagle, and Yamana became effective. upon determination of the agreement between Yamana and Goldfields. To summarize a few of the terms of the transaction, the total consideration was $4.8 billion or $5.02 per Yamana share as of November 4th, 2022, when we announced the binding proposal. The consideration is made up of $1 billion in cash funded by Agnico Eagle, approximately 36.1 million shares of Agnico Eagle, and approximately 153.5 million shares of Pan American Silver. Pan American will retain all Yamana's Latin American assets. The transaction requires Pan American and Yamana shareholder approval, as well as certain other regulatory approvals. It is important to note that Agnico Eagle has committed to provide market support to the purchase of up to $150 million of Pan American shares. Pan American will appoint three independent directors of Yamana to be added to the current Pan American board. And Pan American will work corporatively with Yamana to integrate Yamana management into Pan America's management team. Finally, as far as timing is concerned, we would exceed we would expect Pan American and Yamana shareholder votes to take place in late January next year, with closing sometimes in Q1 2023. The transaction would increase Pan American's portfolio to 12 operating mines and is estimated to increase our silver production by approximately 50% and coal production by approximately 100%. Pan American has over 28 years of approval and expertise and experience building and operating mines in Latin America. Yamana has built a portfolio of long life assets with extensive exploration and potential and we have been impressed by the quality of their mining and management teams during our due diligence. The combination of our two teams and assets will create the leading silver and gold producer concentrated in Latin America well suited to realize further value from the combined portfolio and producing mines and development assets. The transaction would also be expected to enhance Pan American's overall financial position and improve its ability to internally fund growth projects. It presents multiple opportunities for operational and administrative synergies particularly between Pan America's and Humana's corporate offices in Canada. The transaction is accreted per share to key financial and operating metrics and will make Pan American a lower-cost producer with anticipated annual operating cash flows of over $650 million for the first five years. It will also add significantly to our proven and proven silver and gold reserves and could increase our annual revenues to over $2.5 billion. The enlarged company will benefit from further geographical diversification and create opportunities for future portfolio optimizations. As before, Pan American will maintain a strong balance sheet. Total debt, including the two Yamana bonds and the Pan American equipment leases, will be around $850 million with a debt to EBITDA ratio of only 0.8 times. Total liquidity will be over $680 million, including our sustainability linked revolving credit facility. This is a very exciting opportunity for Pan American and Yamana shareholders to create the strong leader in precious metals concentrated in Latin America with unparalleled exposure to silver. And with that, I will be happy to take your questions.