Pan American Silver Corp.

Good morning, my name is Joanna and I will be your conference operator today. At this time, I would like to welcome everyone to Pan America Silver's second quarter 2023 conference call. Siren, you may begin your conference.

Thank you for joining us today for Pan American Silver's Q2 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 Q2 2023 unaudited results, all of which are available on our website. I'll now turn the call over to Michael Steinman, Pan American President and CEO.

Thanks, Siren, and thank you everyone for joining our call today. The second quarter is the first period we are reporting results inclusive of the assets acquired through the Yamana transaction. which closed on March 31st. The results clearly deliver on the benefits we had expected through the strategic acquisition, enhancing both the scale and quality of our portfolio. With the contribution of the new assets, production in Q2 was up 102% for gold and 55% for silver relative to Q1. Consolidated Q2 silver production of 6 million ounces was at the high end of our 2023 quarterly guidance and consolidated record gold production of 248,200 ounces also approached the upper end of the range. Silver and gold segment all in sustaining costs per ounce of $15.70 and $1,342 respectively are within our full year cost guidance. With a strong performance year to date, we have reaffirmed our original 2023 operating guidance provided in our Q1 2023 MD&A. As indicated with that guidance, our production is back and weighted, particularly for gold in the fourth quarter. Please see the quarterly operating outlook provided in the Q1 MD&A for the slides that accompany this call for the detail. The strong production and sales volumes resulted in Q2 revenue of $639.9 million. Net loss in Q2 was $47.4 million, or 13 cents per share. This reflects non-cash accounting impacts, notably the $33.3 million impairment charge, net of tax, related to the sale of our 92.3% interest in Morococha for cash consideration of $25 million, as per our news release from July 31st. The net loss also includes $26.1 million net of tax for fair value adjustments on finished goods inventories that were expensed during the quarter. As these inventory adjustments are related to the Yamana transaction and more one time in nature from purchase price accounting, we have adjusted them from the earnings. The adjusted earnings were $14.7 million or 4 cents per share. Cash flow from operations totaled $117 million, net of $50.5 million in taxes paid. Our annual tax payments are typically the highest in Q1 and Q2. We repaid $55.4 million of debt in Q2 and exited the quarter in a strong financial position with $470 million available under the Sustainability Link credit facility and cash and short-term investment of $409.2 million. This includes the $192.9 million of cash that is restricted to the MARA project. Our financial position improves further with the divestment of non-core assets we announced on July 31st, 2023. The sale of our interest in the MARA project in Argentina, the Morococha mine in Peru, and the Agua de la Falda project in Chile, together with the divestment of non-core equity investments, is expected to yield total cash proceeds of $593 million. The sale of the equity investments have already been completed, and we expect the other three asset sales to be completed in the third quarter of 2023. In addition to the cash proceeds, Pan American will retain future upside through the retention of copper and gold royalties with strong counterparties. The divestment of the MARA project and Morococha mine will also allow meaningful reductions in our annual project development, reclamation and care maintenance costs for 2023 and going forward. As for our capital allocation objectives, we intend to fully repay the $280 million drawn on our credit facility as of June 30th, 2023. A reminder of the proceeds will increase our cash balance further strengthening our balance sheet, and position us to advance our growth projects, including the LaGuardia's current project, as well as paying dividends to the shareholders. We announced yesterday a 10 cent per share dividend with respect to Q2, equivalent to $36.4 million in aggregate dividends. Optimizing our portfolio was an important and stated objective following the Emana transaction, and I'm pleased with our progress to date. Turning to the LaGuardia SCARN project, work continues on the Preliminary Economic Assessment, or PEA, which we aim to release as part of an updated LaGuardia property technical report later this year. The PEA will include our view of project development, operating and capital cost estimates for the SCARN. At the La Colorado mine, the concrete line ventilation shaft advanced to a depth of about 420 meters at the end of July, and is expected to reach shaft bottom by the end of this year. Once the two exhaust fans are installed next year, we expect to see significant improvement in ventilation in the high-grade east candelaria area of the mine. Until this new system is operating, we are restricting development and mining rates in the higher grade deep eastern portion of the Candelaria deposit, as reflected in our year-to-date results and our guidance for 2023. The new ventilation infrastructure, which includes a refrigeration unit that was commissioned in 2022, will also provide benefits to the development of the SCARN project. At the Escobar Mining Guatemala, three meetings were held in the second quarter under the ILO 169 consultation process being led by the Guatemalan government. We also took part in a working meeting in late June with participation of the Xinka Parliament, their advisors, and Guatemala government institutions. During the meeting, we presented details on the dry-stack tailings facility management of water and vibration from blasting activities when the mine was in operation. Following the meeting, we responded to requests for additional information and continued to work with MEM, the Ministry of Energy and Mines, in the process. Now that all parties have delivered their institutional presentations, the MEM considers that the information transfer process for phase two of the consultation is complete. The MAM has established several dates for working meetings with the parties involved in the consultation. We continue to participate in the ILO consultation process in good faith and respecting the constitutional court order. Escobar continues under the care maintenance and at this time no date has been set for a potential restart of the operations. Please see the Ministry of Energy and Mines website for further information, activities, and the timeline for the Escobar ILO 169 process. A link is provided on our website on the Escobar page. Our second quarter results show the successful transformation of Pan American into a major precious metal producer with more diversified operations across the Americas and a strong focus on silver. The integration of the IMAN assets is progressing well, and we are on track to capture the $40 to $60 million of annual synergies we had identified through the transaction. We are committed to maintaining operational efficiencies and delivering on our targets, and I look forward to updating you next quarter as we continue to evolve into the new Pan American Silver. Before we move on to questions, a few housekeeping items. We are currently working on an updated reserve and resource report, inclusive of our Yamana acquisition properties, which should be released in the next few weeks. I would also like to note that we have revised the date for our ESG call. The call will now be on October 19, 2023, at 8 a.m. Pacific Time, 11 a.m. Eastern Time. We will provide further details closer to that date. Together with the other members of our management team, we will now be happy to take your questions.