Pan American Silver Corp.

Good morning, ladies and gentlemen, and welcome to the Pan American Silver Corp First Quarter 2023 Unaudited Results Conference Call and Webcast. At this time, online journalists are in only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call, we require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, May 11, 2023. I would now like to turn the conference over to Saren Fisiksar, VP, Investor Relations. Please go ahead.

Thank you for joining us today for Pan American Silver's Q1 2023 conference call. This call includes forward-looking statements and information and makes reference to non-GAAP measures. Please see the cautionary statements in our MD&A, news release, and presentation slides for our Q1 2023 unaudited results, all of which are available on our website. I'll now turn the call over to Michael Steinman, Pan American's President and CEO.

Thanks, Siren, and thank you everyone for joining our call today. The first quarter was transformational for Pan American. With the closing of the Yamana acquisition on March 31st, and the resultant increase in scale and quality across our portfolio as outlined in our recently released consolidated 2023 operating guidance. Due to the timing of closing, the addition of Yamana assets is not reflected in our Q1 production and cost numbers, but Yamana's cash and debt have been added to our balance sheet at the end of the quarter. While Q1 excludes the benefits of the Yamana acquisition, Our continued focus on operational excellence helped us to deliver results ahead of expectations despite ongoing inflationary pressures. In Q1, we sold nearly 4.5 million ounces of silver and 133,000 ounces of gold. Silver segments all in sustaining costs were $14.13 per ounce and $1,196 per ounce of gold segments. Silver segment Q1 production costs and our 2023 guidance reflect the restricted mining rates in the high grade zone of the La Corada mine until the new shaft ventilation project is commissioned. Thinking of the 5.5 meter diameter concrete lined ventilation shaft reached a depth of 228 meters by the end of Q1 and is on track to be completed by the end of this year. The shaft will be equipped with ventilation fans connected with the adjacent deep underground east Candelaria workings and commissioned to significantly improve ventilation rates in this high-grade area of the mine around mid-2024. This new ventilation infrastructure will benefit both the long-term development of the SCARN project as well as the current Wayne system operation. Until this new system is operating, we are restricting mining rates in the higher grade, deep eastern portion of the Candelaria deposit, which is reflected in our guidance for 2023. Gold segment production and costs were impacted by leach sequencing at Dolores and La Reina. In addition, production was interrupted for seven days at Dolores, but local contractor terms were revised in preparation for the completion of mining and the transition to a multi-year leach cycle, which we expect will begin in late 2024. Like last year, production at La Arena is back and weighted as the higher rates of waste mining extend into Q3, followed by higher rates of ore mining and production in the last quarter of the year. A Large Net Realizable Value, or NRV, inventory adjustment at Dolores decreased oil and sustaining costs at that operation by $775 per ounce and lowered consolidated gold segment all in sustaining costs by $165 per ounce. As a reminder, NRV inventory adjustments are accounting adjustments to recognize the production costs of heat breach inventory relative to the market value of that inventory at a time of assessment. NRV inventory adjustments are non-cash movements and do not affect cash costs. Revenue in Q1 was $390.3 million, which included finished goods inventory drawdowns of 779,500 ounces of silver and 11,300 ounces of gold. Net earnings in Q1 were $16.5 million, or eight cents per share. This includes $18.9 million in transaction and integration costs related to the Amana transaction and $12.7 million in severance provisions. Adjusted earnings were 21.2 million or 10 cents per share in Q1. Cash flow from operations totaled $51.3 million, which includes $30.7 million in cash taxes. Our annual tax payments are typically the highest in Q1 and Q2. We are in a strong financial position with a cash and short-term investment balance of $513 million and $425 million available under the sustainability linked credit facility. We assumed two senior notes, one for $283 million and another one for $500 million as part of the AMANA acquisition. both with attractive coupon rates, and have $325 million drawn on our credit facility. Our capital allocation priorities for the expected increase in cash flow generation from the expanded portfolio are consistent with our history. Reduce debt, invest in growth, and provide dividends to shareholders. With respect to Q1, we announced a dividend of 10 cents per common share in March. a bit earlier than normal, in order to align with Yamana's timing for dividends. Future dividend declarations will revert back to Pan America's previous schedule. We have been paying dividends consistently since 2010 as an important means of returning capital to shareholders. Moving on to growth projects, earlier this month we released additional trill results for the La Corada's GARN. We completed nearly 14,122 meters of infill and exploration drilling on the SCARN in a quarter. The new drill holes both extend the 902 zone and confirm that there are multiple zones of higher grade within the limestone and SCARN, which align with surrounding porphyry intrusives and epithermal veins. Some of the drill holes return spectacular grades, like 64.3 meters, at 391 grams per tonne silver, 10.8% lead and 8.5% zinc, including 23.25 metres at 914 grams per tonne silver, 25.2% lead and 16.7% zinc. We have now drilled over 20 holes into this area, which remains open to the west and northwest. An infill and expiration program of 28,000 meters from surface and underground rail stations is currently underway. We also progressed other projects for the SCARN, including engineering work associated with the Preliminary Economic Assessment, or PEA. We are planning to provide an updated technical report on the LaGuardia property in the second half of 2023 that will include a PEA of the SCARN deposit describing our view of project development, operating costs, and capital estimates, and overall economics. In 2023, Project Capital will also be invested in completing Yamana's plant upgrades at Jacobina, construction of new dry-stack tailing storage facility at Waron, and installing a paced backfill plant at our Bell Creek mine interments. At Escobar, the ILO 169 consultation progress is progressing well. The consultation meetings held in March and April and the next meeting planned for later this month. The 2023 guidance detailed in our Q1 disclosure is largely the same as the guidance we provided on April 27th. The only change was an increase in project capital for the LaGuardia's current project to reflect updated estimates for completing the PEA and advancing exploration drilling. The guidance provided in our Q1 disclosure now includes a forecast for G&A, care and maintenance, and exploration expense in 2023. We are expecting to produce 21 to 23 million ounces of silver in 2023 and 870,000 to 970,000 ounces of gold. We expect all in sustaining costs of between $14 to $16 per ounce for the silver segment and $1,275 to $1,425 per ounce for the gold segment. Please note, this reflects nine-month ownership of the mines we acquired from Yamana and the full 12 months for Pan American's original mines. You can see estimates for individual mines and quarterly breakdown of consolidated production costs in our Q1 MD&A. We plan on releasing our 2022 sustainability report later in Q2, which will report on the performance on environmental, social, and governance metrics for Pan America's original assets and our goals in these areas. Information on all former Yamana assets following the Yamana acquisition will be included in the 2023 sustainability report that will be published next year. Before I hand the call over for questions, I would like to address our integration efforts for the former Yamana assets. Integration is advancing very well in a timely fashion, and we have started harvesting the $40 to $60 million of annual synergies we announced earlier. We have welcomed a large group of new colleagues that joined Pan American at the end of March, and it is an absolute pleasure working with the new team. And with that, I would like to open the call for questions.