Pan American Silver Corp.

Good morning, ladies and gentlemen, and welcome to the Pan American Silver Third Quarter 2023 and Audited Results Conference Call and Webcast. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call, you require immediate assistance, please press star zero for the operator. This call is being recorded on Wednesday, November 8, 2023. I would now like to turn the conference over to Siren Feseke. Vice President of Investor Relations, please go ahead.

Thank you for joining us today for Pan American Silver's Q3 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 Q3 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, Hiran, and thank you everyone for joining our call today. Let me begin with an update on our progress integrating the assets we acquired through the Amana transaction that closed on March 31st. I'm happy to report that we have integrated the four new operations into Pan American's organization and advanced on streamlining the new company with the sale of non-core assets. We have also reorganized the Yamana Latin American regional offices in line with focusing support to the mine operations and continuing to enhance corporate oversight, leadership, systems, policies, and procedures by taking advantage of substantial synergies and business improvement opportunities. Working with the new teams, we are evaluating many optimizations and mine life extension opportunities. We look forward to sharing more with you on that in the coming quarters as we advance detailed studies and near mine exploration programs and update the life of mine plants. We committed to rationalizing our portfolio following this transformative transaction, and we have made significant progress on that objective. earlier than I think most would have expected, and with additional opportunities yet to come. In Q3, we completed the sale of our interest in the MARA project in Argentina and the Morococha mine in Peru. And on Monday, we completed the sale of our interest in the Agua de la Falda project in Chile. In Q2, we divested certain non-controlling equity investments, which are largely inherited from Yamaha. We increased our equity interest in New Pacific in Q3 to 11.6% of New Pacific's outstanding common shares, helping to further advance interesting Bolivian silver projects by leveraging our long-standing operating success we have enjoyed at San Vicente over the past 24 years. We also committed to paying down certain higher interest that incurred for the Yamana transaction. We repaid the amounts drawn on the sustainability linked credit facility. And as of September 30th, have the full $750 million available on our credit facility. In addition to working capital of $832 million, which includes cash and short term investments of $386 million. Total debt of 809 million is largely related to two senior Pan American assumed to the amount of transaction as well as lease and construction loans. These notes have attractive terms. $500 million with a coupon of 2.63% maturing in 2031 and $283 million with a coupon of 4.625% maturing in 2027. Pan American has an annual strong balance sheet which gives us the flexibility to manage business cycles and capitalize on growth opportunities. The steps we have taken to diverse non-core assets and repay debt will also significantly reduce costs going forward. We expect to save approximately $90 million in cash annually, primarily from the elimination of care, maintenance, project development, and reclamation costs associated with MARA and Morococha. in addition to interest expenses from having repaid the $280 million that was drawn on the credit facility at the end of June 30, 2023. We expect further savings from the amount acquisition in the form of synergies, which we continue to estimate will be about $40 to $60 million annually. Finally, it is important to remember that we retain future upside on both the MARA and the Agua de la Falda projects through the precious and base metal royalties we retained with the strong counterparties in those projects. With that, let's move on to our results for the third quarter. Acquisition of the four Yamano operating mines has provided a significant increase in production with reduced unit operating costs and enhanced diversification. We produced 5.7 million ounces of silver and 244,200 ounces of gold in Q3, all in sustaining costs for the silver segment were $18.19 per ounce and $1,451 per ounce for the gold segment. While operating performance at most of our mines was in line with expectations, two operations faced unique challenges which weighted on Q3 results. In the silver segment, La Colorada continued to be impacted by ventilation constraints. These constraints resulted in reduced throughput, limited access to higher grade zones of the mine, and required intensive ground support renovations in areas where high heat and humidity have rendered older ground support methods ineffective. We do not expect an improvement in La Querada's performance until the new ventilation infrastructure is completed around mid-2024, and we are able to increase development and mining rates in the deep east part of the mine thereafter. We are making good progress on that work. The excavation of the concrete-lined shaft reached a depth of 522 meters by the end of Q3 2023 and is expected to be fully excavated to a depth of 593 meters by year-end. The expected installation of two large exhaust fans on the surface of the shaft will be completed by mid-2024. Commissioning of this large primary ventilation system will deliver the refrigerated fresh air we currently produce directly to the heat source in the deep eastern area workfaces and immediately exhaust vertically to the fully concrete line shaft. This will avoid sending hot air back through the mine where it is damaging our ground support systems. In the gold segment, mine gold grates were lower than we were expecting at El Peñon. Based on recent reconciliation data, we have initiated a review of our mining sequence in certain sections of the mine to achieve a more stable gold production. Over the next several months, we will be adapting to the mine development scatter for El Peñon that should provide more flexibility when encountering unexpected great shortfalls in this highly variable deposit. The delineation drilling strategy has been reviewed to reduce the grade variation risk we are currently encountering. El Peñon remains one of our core assets with excellent exploration potential and excess milk capacity, supporting that mine as being an important contributor to the company's future cash flow. Given year-to-date production and our outlook for the next two months, We are reaffirming our annual 2023 guidance ranges for silver and gold production, with the expectation that production for both will come in at the low end of the ranges. We expect the gold segment cash costs and oil and sustaining costs to be within our guidance ranges from 2023. We expect silver segment cash costs and oil and sustaining costs to be marginally above our guidance range, largely due to ventilation constraints at La Colorado I mentioned earlier. And the two weeks expansion of operations at that mine in early October to address security concerns as previously disclosed. We are maintaining our 2023 guidance for base metal production and sustaining and project capital expenditures as well. We reported a net loss of $22.7 million in Q3 or a basic loss per share of $0.06. Adjusted earnings were $3.1 million or one cent per share. Operating cash flow was $114.6 million, net of $35.8 million taxes paid. Including the cash dividend of 10 cents per common share we declared yesterday, we will have paid $130.5 million in total dividends this year. Turning to the LaGuardia SCARM project, we are on track to release the preliminary economic study by year-end. The study will be based on using a sub-level caving mining method, which we believe offers superior economic benefits given the size and geometry of the large silver-bearing polymetallic deposit. We will carefully consider potential alternatives for the optimum funding structure for this current project once the preliminary economic study is released and all of the development details, risks, and opportunities can be thoroughly discussed and debated. The ILO 169 consultation process for the Escobar Mining Guatemala continued to progress in Q3. Pan American has now hosted three visits to the mine for Xink indigenous representatives and their advisors, and several other meetings have been held. This included working meetings with SINCA representatives and Guatemala's Ministry of Energy and Mines, or MEM for short. I know many of you check MEM's website for the Escobar consultation, which does provide very transparent reporting on the process. I noted that the MEM had intended to complete the consultation by the end of October. Although the schedule was not met, all the participants continued to engage in a peaceful, comprehensive, transparent, and good faith consultation process. The next consultation meeting is scheduled for November 10th, and as usual, we are not providing a timeframe for completion of the consultation or potential restart of the mine. While the consultation process moves ahead, we are also continuing with our care and maintenance activities for Escobar. I would like to congratulate the Pan American team in Guatemala for receiving first place in the environment category from Guatemala's Chamber of Industry for their work on reforestation and conservation projects. The project involves an innovative approach to reproduction of oak trees within the Escobar mine area with the primary objective of revitalizing forest regions the mine property and transforming them into protected valuable evidence for floor and farm. If you'd like to learn more about this, we have a video posted on Pan American's LinkedIn page where we regularly post updates on some of our company's initiatives and developments. In closing, we are pleased with our progress on the integration of the amount of assets which is delivering Pan American with significant production growth and reduced unit costs. We are currently preparing our plans for 2024, focusing on safe, reliable, cost-efficient operations and the development of additional value-enhancing future growth opportunities. We will continue to evaluate ways to streamline our overall portfolio with the aim of remaining the world's premier silver mining company. Together with the other members of our management team, we would now be happy to take your questions.