Pan American Silver Corp.

This call has been recorded on Thursday, August 8, 2024. I would now like to turn the conference over to Saran Fasecki, VP Investor Relations. Please go ahead.

Thank you for joining us today for Pan American Silver's Q2 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 Q2 2024 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, Erin, and thank you, everyone, for joining the call. Our operations generated record cash flow before changes in working capital of $203.3 million in Q2. This resulted in $102.1 million free cash flow in Q2. Balance sheet strength further improved with cash balances rising to $337.2 million at June 30th, an increase of $36.1 million from the previous quarter. This strong financial performance was impacted by an unusual income tax expense. driven primarily by foreign currency exchange rate fluctuations in the quarter, namely evaluations of the Brazilian real and the Mexican peso, which reduced foreign-dominated deductible tax attributes, as well as inflation adjustments on monetary liabilities in Argentina. Reported net loss in Q2 of $21.4 million, or $0.06 per share, was significantly impacted by the $93.1 million in income tax expense and the $26.7 million net realizable value inventory expense. Adjusted earnings were $40 million, or $0.11 per share. The impact of the inflation-driven Argentine income tax, which was not adjusted, reduced adjusted earnings by $0.03 per share. Turning to operations, silver production of 4.57 million ounces in Q2 must be lower our expected range of 5.36 to 5.78 million ounces for the quarter, as continued ventilation constraints at Laco Varada affect the silver grades and throughput. I'm very pleased to report that the new ventilation infrastructure was completed at the end of June, and commissioning and startup of the new fans started on July 11, 2024. As scheduled, and ventilation conditions in the deeper eastern areas of the mine have improved significantly. We are currently accelerating mine rehabilitation and development rates, which has steadily increased access to the higher grade deep eastern Candelaria production areas. As a result, we are expecting to achieve higher throughput and grades in the second half of 2024 as planned. The slides that accompany this call, available on our website, include a brief video that shows the operations of the new ventilation fans that were installed at the surface of the shaft. The fully concrete lined 5.5-meter diameter by 580-meter deep water group of ventilation shafts that was completed last December. I'd like to congratulate the team on the successful completion of this large, complex project. Silver production was also impacted by weather-related disruptions at Dolores and Salamoro. At Dolores, open pits, geotechnical challenges hampered ore tons mined and unusually prolonged fire conditions limited water availability, which impacted the leaching cycle. This resulted in lower grade and low ratio of ounces recovered to ounces stacked during the quarter. We now expect to extend ore stacking activities and increase heat irrigation rates throughout Q3, even some stockpile processing at the start of the rainy season. At Cerro Moro, heavy precipitation in southern Argentina restricted access to the satellite NADI zone, impacting throughput and grade. We have regained access to NAATI and expect to make up the Q2 shortfall in production during the remainder of the year. At Minera, Florida, unusual heavy rains restricted access to the site and resulted in a 10-day suspension of ore processing during the quarter. We have now upgraded the road access to both Cerro Moro and Minera, Florida, which should reduce the impact of heavy rainfall events in the future. We produced 220.4 thousand ounces of gold in Q2, slightly below our expected range of 221 to 252 thousand ounces. Continued strong performance at Jacobina and higher gold grades and recoveries at El Peñon helped offset the weather-related impacts at Cerro Moro, Tolores, and Minera, Florida. Costs in Q2 came in better than expected, with all-in sustaining costs excluding NRV adjustments for both the silver and gold segment below our guidance ranges for the quarter. Silver segment oil and sustaining costs were $18.12 per ounce, excluding an NRV adjustment that increased costs by $0.95 per ounce. Gold segment oil and sustaining costs were $1,465 per ounce, excluding NRV adjustments that increased costs by $119 per ounce. In total, $26.7 million of NRV adjustments were included in Q2 production costs. The NRV adjustments are primarily related to projections of higher future unit costs at Dolores to extract the in-heat inventories once all stacking activities have been completed. They're on track with our major projects for the year. The new dry stack tailing storage facility at Guarón is on schedule to be completed in the second half of 2024 and will be commissioned thereafter. The construction of the paste plant project at Timmins is on schedule to be completed in Q3 2024. This will enhance ore extraction and improve mine stability at the Bell Creek mine. At Chacobina, we continue to advance plant upgrades into stabilizing throughput at 8,400 tons per day and recoveries at 96%. They're also progressing the optimization study to optimize the long-term economic and growth potential of Chacobina. At Escobar, we met with several Guatemalan government institutions to support the LL169 consultation process over Q2 and into Q3. During this period, we also hosted compliance visits by the Ministry of Energy and Mines and Ministry of Environment under the Care and Maintenance Program for Escobar. The appointment of the Vice Minister of Sustainable Development, who will assume responsibility for overseeing the consultation process, remains pending. Given the successful commissioning of the substantial Lackawatta Ventilation System upgrade in July, we are maintaining our operating outlook for production cash costs, the audit sustaining costs, and capital expenditures in 2024. While we anticipate silver and gold production to fall within our original guidance range, we expect production for both to be more heavily weighted to the fourth quarter of 2024 than originally indicated in our quarterly operating outlook, and for annual silver production to be towards the low end of the annual guidance range. With improvements in our balance sheet, WQ2, net debt declined to $472.3 million. We maintain our base cash dividend at 10 cents per common share. We look forward to increasing levels of free cash flow from back half weighted production in 2024. Together with the other members of our management team, we would now be happy to take your questions.