Pan American Silver Corp.

Good morning, ladies and gentlemen, and welcome to the Pan American Silver First Quarter 2024 Unaudited Results Conference Call and Webcast. At this time, all lines are in the 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. Also note that this call is being recorded on Thursday, May 9, 2024, and I would like to turn the conference over to Saran Feseke, VP Investor Relations.

Please go ahead. Thank you for joining us today for Pan American Silver's Q1 2024 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 2024 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, Hiram, and thank you everyone for joining us today. Our Q1 operating results were in line or better than expected. Silver and gold production were within our guided ranges, and I am particularly pleased with our strong performance on controlling costs. Cash costs and all in sustaining costs excluding net realizable value inventory adjustments for both silver and gold segments were lower than our quarterly guidance. Operations generated $133.2 million of cash flow before working capital changes in Q1. This includes $41.1 million in cash taxes paid, with Q1 typically being the quarter with the highest cash tax payments. We recorded a $30.8 million net loss, or $0.08 loss per share in Q1, which includes a $34.4 million tax expense, of which $15.2 million is related to an inflation adjustment in Argentina, $14.4 million of net realizable value inventory expense, and a $10.8 million non-cash investment loss, largely due to the decrease of the New Pacific Metals Corp. share price. Adjusted earnings were $4.7 million, or one cent per share. We exited Q1 in a strong financial position. Cash and investments totaled $331.4 million, and we have the full $750 million available under our undrawn credit facility. Total available liquidity is $1.1 billion. This strong financial position allowed us to return $58 million of capital to shareholders in Q1, $36.5 million in total cash dividends paid, and $21.5 million in share buybacks. Following the approval of our share buyback program on March 4, 2024, we repurchased approximately 1.7 million shares at an average price of $14.16 per share for cancellation. inclusive of shares that settled in April. We intend to continue to take an opportunistic approach to future share buybacks. We maintained the dividend, announcing yesterday a cash dividend of 10 cents per common shares. In addition to maintaining a robust shareholder returns framework, we're investing in our operations for safe and efficient improvements in performance. Operations performed largely in line with expectations. Although Dolores was weaker than expected due to lower grades and heavy rains that required us to reduce irrigation rates, resulting in a lower ratio of ounces recovered to ounces stacked. NRV adjustments at Dolores also increased all its sustaining costs by $838 per ounce, excluding NRV adjustments to lower its all-in sustaining costs for $1,529 per ounce. At La Glorada, the new ventilation infrastructure is on track for completion in mid-2024. We expect this will lead to significant improvement in the ventilation conditions in the mine, which will allow us to accelerate the development rates by opening more areas for production. This is expected to lead to higher mining rates returning to approximately 2,000 tons per day by the end of the year from the roughly 1,300 to 1,400 tons per day rate currently. They're also advancing the La Clarada SCARN project. On April 7, 2024, we announced additional drill results from our ongoing exploration program at the SCARN. These drill results returned some of the highest grade intercepts to date. including a stunning 22.5 meters at 1,435 grams per ton silver, 31.9% lead, and 20.5% zinc. We will provide an updated mineral resource estimate for this corn in August together with our mid-year corporate mineral reserve and resource report. We continue to engage in discussions with parties who have expressed an interest in a potential partnership in this corn. Ideally, we'd like to structure a partnership that would enable us to retain exposure to the silver with an estimated annual production of 17.2 million ounces in the first 10 years, and the partner would retain exposure to the zinc. We're also excited by the potential at Jacobina. The study is underway to evaluate alternative mining methods and upgrades to the processing facilities. The aim is to identify opportunities to optimize the long-term economics of the mine. At the Estobel Mine in Guatemala, the IOL 169 consultation process has experienced delays since the new government took office in January 2024. During meetings held in Q1 2024 between Pan American, the Ministry of Energy and Mines, or MEM, and other institutions, the government confirmed its commitment to completing the ESCOBOL ILO 169 consultation process that has not provided an update on the timeline. On April 29, 2024, the MEM released the Vice Minister of Sustainable Development, who was responsible for overseeing and coordinating the ESCOBOL ILO 169 consultation process. The MEM has not yet designated a replacement for this post. On May 1st, 2024, we announced that we have agreed to sell the La Reina gold mine, as well as the La Reina II project in Peru, to subsidiary of the Zijin Mining Group. Under the terms of the agreement, at closing, Zijin will pay $245 million in cash and will grant Pan American a life of mine, gold, net smelter return royalty, of 1.5% for the Larena 2 project. Additionally, upon commencement of commercial production from the Larena 2 project, the agreement provides for an additional payment from the GIN of $50 million in cash. We expect the Larena transaction to close in Q3, pending satisfaction of the customary conditions and regulatory approvals. The divestment is aligned with our commitment after the Yamana transaction to divest properties that are not aligned with our long-term strategy while strengthening our financial position to invest in high-quality growth opportunities, reduce debt, and to return capital to our shareholders. With the expected close of the Lorena transaction, we will have generated $837 million in cash from asset sales following the acquisition of Yamana. In addition, we will have retained four high-quality royalties with industry-leading partners, as well as contingent payments of $50 million. Last but not least, the divestments also expect to reduce our annual care maintenance costs by over $70 million. In closing, Pan American delivered strong performance in Q1, and we are on track to achieve our operating outlook for the year. We expect free cash flow to increase through 2024, particularly in the second half of the year, based on our view of higher production and lower costs weighted towards the second half of 2024 and supportive metal prices. We look forward to providing our customary mid-year update on our mineral reserves and resources in August. And with that, I would like to open the call for questions.