Pan American Silver Corp.

Thank you for standing by. This is the conference operator. Welcome to the Pan American Silver fourth quarter and year-end 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 Saren Feseke, VP, Investor Relations. Please go ahead, Ms. Feseke.

Thank you for joining us today to discuss Pan American Silver's Q4 2022 results. This call includes forward-looking statements and information and makes reference to non-GAAP measures. Please see the cautionary statements in our MD&A for the period ended December 31, 2022 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 for joining our call today. I'm looking forward to discussing with you the major event of 2022, which is our transaction to acquire the Latin American assets of Yamana Gold. Shareholders of both Pan American and Yamana overwhelmingly approved the transaction in January, and we expect it to close sometime this quarter. But first, let's recap Pan America's 2022 results. Pan American produced 18.5 million ounces of silver and 552,500 ounces of gold in 2022. Silver production came in at the top end of the revised range we issued in November, while gold production was in line with our original operating outlook. Gold production in the fourth quarter was the second highest on record, driven by back-end loaded production from Shawindo and La Reina as we had expected and communicated. Both silver and gold production were impacted by reserve grade shortfalls in Phase 9b of the open pit at the Dolores mine, while silver production was further impacted by mine sequencing into lower silver grade stoves at La Colorada in the second half of 2022. Ventilation conditions in the La Clarada underground mine improved in the second half of 2022, following the installation of two booster fans and the commissioning of a refrigeration plant. We expect to complete sinking of the new concrete line shaft late this year and equip the shaft with ventilation fans during 2024, which will further improve access to the higher grade zones of the La Clarada vein deposit. Operating costs came in above our original guidance range, as we indicated they would, largely reflecting the global inflationary environment. Total capital expenditures were in line with our original operating outlook. We made significant progress on our major capital project to advance the La Clarada SCARM. In 2022, we completed 32,000 meters of exploration drilling discovering a high-grade zone of mineralization that we announced mid-year, and about 46,000 meters of infill drilling, enabling us to update the mineral resource estimate for the SCARN in September. We also advanced construction of the new concrete line ventilation shaft, reaching a depth of 88 meters by the end of the year. We have included a couple of photos in the slides that accompany this call. and we completed and put into service the refrigeration plant. This new infrastructure will benefit the existing La Corada mine, as well as future development of the SCARN. At our Escobar mine in Guatemala, progress was made on the ILO 169 consultation. In 2022, the pre-consultation phase was completed, and the Ministry of Energy and Mines and CHINCA representatives delivered a progress report to the Guatemalan Supreme Court of Justice. As you know, we cannot provide a timeline for completion of the consultation or potential restart of the mine. Revenue in 2022 totaled $1.5 billion. During Q4, we had a buildup in silver and gold finished good inventories, valued at about $45 to $50 million, which reduced the amount that could be booked to revenue due to timing of shipment at the end of December. Cash flow and earnings in Q4 and for the full year were distorted by expenses related to the amount of transaction. In Q4, we expensed $157.3 million for transaction costs, primarily for the $150 million we advanced to Yamana for the termination fee paid to Goldfields Limited. We are expecting to record additional expense related to the transaction in Q1 2023. The other significant factor affecting earnings in 2023 was the impairment and NRE inventory charges related to the reserve grade shortfall of the Dolores Phase 9P open pit, which we reported in Q2. On an adjusted basis, earnings were $17.9 million, or $0.09 per share, in 2022. We exited 2022 with cash and short-term investment balances of $142 million and total available liquidity of $482 million. We drew down our revolving credit facility by $160 million to fund costs related to the Yamana transaction. We maintain a dividend of $0.10 per share for Q4. Pan American liquidated its remaining equity interest in Mavericks Metals Inc. in January 2023 in connection with the acquisition of Mavericks Metals by Triple Flag Precious Metals Corp., realizing net proceeds of $105.3 million. Previously, in May 2020, we had sold a portion of our equity holdings in Mavericks for $45.4 million. Therefore, in total, we have crystallized $150.7 million value for the 19 royalties, precious metal streams, and payment agreements that had been sold from our portfolio to Mavericks Metals. We are in a solid financial position entering 2023 and expect our financial performance to further improve over the coming year as we integrate the Latin American assets we will acquire through our transaction with Yamana. The Humana transaction will strengthen our competitive advantage in Latin America, where we have nearly 30 years of operating experience. With an expanded and more diversified portfolio, plus a suite of highly promising development projects and exploration properties, we see opportunities for growth and operational and administrative synergies. We are planning to provide our operating outlook for 2023 following the completion of the transaction, which is expected to occur later in the first quarter of 2023. The outlook will include the Latin American assets acquired through the transaction, as well as consolidated forecasts for annual general and administrative exploration and project development costs. It will also reflect the Manantial Espejo operation in Argentina being placed on current maintenance after reaching the end of its mine life at the end of 2022. The transaction with Yamana is truly transformative and builds on Pan America's core operating strength. The new Pan American is a stronger, larger, and more diversified company that are able to internally fund and advance our growth projects. I'm proud of what our team has accomplished in 2022, positioning the company and our stakeholders for a very promising future. I would now be happy to take your questions.