Pan American Silver Corp.

Thank you for standing by. This is the conference operator. Welcome to the Pan American Silver first quarter 2025 results conference call. As a reminder, all participants are in listen-only mode. The conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star then zero. I would now like to turn the conference over to Siren Susaki, VP, Investor Relations. Please go ahead, Ms. Susaki.

Thank you for joining us today for Pan American Silver's conference call and webcast to discuss our results for the first quarter of 2025. 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 Q1 2025 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.

Hello, everyone. I'm glad you could join us to discuss our Q1 results. 2025 is off to a strong start. with Pan American posting another quarter of solid operating performance, building on the momentum from last year. Mine operating earnings have been increasing over each quarter in 2024, and this trend continued for the first quarter of 2025, reaching a record of $250.8 million in mine operating earnings. The improvements in metal prices have certainly contributed to margin expansions But I would like to acknowledge the work of our teams in not only maintaining a focus on safe, efficient operations, but also carefully managing costs in order to deliver the margin improvements that resulted in the record mine operating earnings for the quarter. La Colorado is contributing strongly to these results. The improvement in mine ventilation conditions has allowed us to accelerate development rates and increase the number of production areas, which is leading to higher throughput and lower per unit costs. In Q1, we produced just over 5 million ounces of silver production, slightly above our guidance range for the quarter. On cost, the performance was even better, lower than anticipated production costs across the silver segment contributed to all-in sustaining costs of $13.94 per ounce, well below our guided range. The low silver segment all-in sustaining costs also benefited from higher than expected byproduct credits, from higher gold production at Cerro Moro, and higher zinc and lead production across our polymetallic operations, as well as some lower capital expenditures. Gold production in Q1 of 182,200 ounces was in line with our guidance, while gold segment all-in sustaining costs, excluding NRV adjustments of $1,485 per ounce, were better than expected. The main drivers of the strong cost performance in the gold segment were higher than expected gold and silver production from residual leaching at Dolores and higher silver byproduct credits at El Peñon. Revenue in Q1 was $773 million, while net earnings in Q1 totaled $169 million, or 47 cents per share. Adjusted earnings were $153 million, or 42 cents per share. Operating cash flow before non-cash working capital changes was $240 million, including $95 million cash taxes. The taxes paid in Q1 represent roughly one-third of the cash tax we expect to pay in 2025. After working capital changes, operating cash flow totaled approximately $175 million. At the end of Q1, our cash and short-term investments increased to a record balance of $923 million, and free cash flow for the quarter was $112.6 million. Keep in mind that this increase in cash over the quarter is net of the $95 million in taxes paid, $81 million invested in our sustaining and growth projects, inclusive of lease and loan payments, and $56 million we return to shareholders through dividends and the share buyback. The cash generated by our operations fully funded our business needs, provided returns to shareholders, and further improved our balance sheet. Including our undrawn line of credit, we have approximately $1.7 billion of total available liquidity, which gives us plenty of capacity to pursue our growth objectives. Our largest organic growth opportunity, the La Clarada's corn project, continues to move ahead. Over Q1, we advanced engineering work and continued with exploration and infiltrating. We're also continuing to discuss potential partnerships for development of the project. We expect those discussions to take several quarters given the size and long life nature of the project. Our aim is to retain maximum exposure to the silver in this deposit. We're also investing at the LaGuardia vein mine operations to explore extensions to the mineral resource in the higher-grade Candelaria zone to the east and southeast of our current operation. At Escobar, Pan American had four working meetings with the Guatemalan government during Q1 2025 as part of the ILO 169 consultation process. Currently, there is no date for the completion of the consultation process or the potential restart of operations at Escobar. The comprehensive mine and plant optimization studies at Jacobina are progressing well, and we expect to include the findings of the first phase in early August 2025. The initial findings will include evaluations of modifying mining and tailings disposal methods to maximize the long-term value for this flagship asset. In closing, 2025 is off to a very strong start. Operating performance is in line or better than expected, and our forecast shows higher production over the balance of 2025, as per the quarterly guidance we provided in February. We are maintaining the guidance we provided in February for consolidated production, cost, and annual expenditures. That outlook, combined with today's favorable precious metal prices, points to the potential of generating very strong profit margins this year. We generated $112.6 million of free cash flow in Q1 alone, and gold prices are currently trading substantially higher than the average in Q1. This is an incredibly exciting time to be impressed with metals and invested in Pan American. I would now be happy to take your questions together with the other members of our management team.

We will now begin the question and answer session. To join the question queue, you may press star, then one on your telephone keypad. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then two. The first question comes from Ove Sabib with Scotiabank. Please go ahead.

Thank you, operator. Good morning, Michael and Pan American team. Congrats to a strong start to the year, especially on cost. Michael, a couple of questions for me, just starting off with just remaining on the cost side. So costs both at the silver and the gold segments really outperformed the quarterly guidance that was provided. Now with Q1 trending ahead of guidance, should we expect subsequent quarters to adjust for this cost improvement? how should we be looking at cost kind of going into Q2 and kind of beyond?

Yeah, good morning. I'll have Scott answering the question. But just in general, obviously, you know, great performance on the cost, as you mentioned. You know, we normally don't make adjustments after one quarter, but we're pretty happy with what we're seeing. But I'll let Scott answer the rest of the question, please.

Yes, good morning. Scott Campbell here. Yeah, we're very encouraged by the strong cost performance in both silver and gold segment operations. That's in large part a function of our commitment to cost control, the high byproduct metal prices, and in some cases, favorable exchange rates in the countries where we operate. We're maintaining our cost guidance for the year, and as Michael said, we don't usually make an adjustment after only one quarter, but we're encouraged by our cost performance so far this year, and we think this will continue, provided metal prices and exchange rates maintain their levels. While we're on, we'll see a cost increase on a per ounce basis as we get into the placement and compaction of our thickened tailings from our new tailings filtration plant. And sustaining capital spending will also increase at several operations, specifically Chawindo, as we get into the dry season and large capital projects begin.

Thanks for that, Scott. So, essentially, we get a little bit of an uptick in Q2, but as kind of production increases going into the second half, you know, your per ounce cost essentially should come down in the second half? Is that how we should look at it?

I think if, you know, as Scott said, if everything stays the same, right, as you know, our costs have different important inputs. One, of course, is our operation and how we perform there. The other one, because this is not a byproduct credit, the other big input is byproduct metal prices, which we all know are really high right now. So if that continues, of course, it has a positive impact to our cost. And the last big one is exchange rates. And as we have some favorable exchange rates in some of the countries at the moment, that helps us as well. So if those Those inputs that are out of our control maintain their position, and of course, we will continue to have very strong control of our costs on-site, and you're right, Owais.

Perfect. Thanks for that, Michael and Scott. Then just moving on to in terms of gold and silver sold, that seemed to be the high this quarter. as compared to previous quarters. Are you able to give any sort of information on what the drivers were on that?

Hi, Ove. This is Ignacio speaking. Yes, the main driver there was, as you remember, we had a very strong Q4 production, and a lot of that production came in late in December. So we did sell in January that extra production from December, and you'll see in some of our slides, I think it's over 445,000 ounces of gold inventory that we sold in Q1.

Really just, you know, Timing of shipment, which happens many quarters sometimes. There is an increase of inventory, sometimes a decrease, depending on how the production ends at the end of the month. Obviously, a little bit easier to control timing on the Doré shipment. A bit harder sometimes with the concentrate that we sell there, where we have to wait for ships and ports to be ready. So that's just kind of the normal process. course of business at the end of each quarter. And as I said, sometimes it's a bit more, sometimes less. But as Ignacio said, after a very strong Q4, that's kind of the rest of selling that went on there in January.

That's great. Thanks for that. And just one more question. At Monterrey, Florida, you're talking about costs that were high, and you noted that absenteeism as one of the causes. Are you able to kind of shed some more light on what's happening there and how should we kind of position ourselves going into Q2?

Yes. Manera, Florida had a rough quarter. Certainly, we were affected by mine sequencing, some lower grade than expected, some absenteeism out of operation there, and delays regarding plant and equipment delivery, mobile equipment delivery. We expect to claw that loss of production back and get those costs per ounce back in line in Q3 and Q4.

Yeah, this is Steve. If I can just add on the absenteeism, January is the big month for holidays in Chile. And this year, it was a particularly hard hit month in terms of the number of holidays that we had our people out on. That's really what affected us in Q1 at Florida.

Got it. That's great, Frederick. And maybe that's it for me, guys. Again, congrats on a great quarter, and thanks for taking my questions.

Thanks, Owais.

The next question comes from Cosmo Shu with CIBC. Please go ahead.

Hi, thanks, Michael and team. Congrats on the, I agree, very strong start, very strong Q1. Maybe if I can ask about Bell Creek. I read that there were some geotechnical challenges at Bell Creek in the quarter. And then I actually went back to the commentary in Q1 2024, and there were some challenging ground conditions at that time as well. So is this a continuing kind of issue? Could you maybe give us a bit more colour in terms of what's happening? I know it's not your largest asset, but I'm just wondering if you can give us a bit more colour.

Yeah, I'll start. Maybe Martin can add in a little bit as well, Cosmo. But yeah, that central zone of Bell Creek, which is where our high grade and our little bit bigger stopes are for the Bell Creek mine, it's been challenging. We've been seeing some seismicity there, and we have to manage that carefully as we mine, and we put in some dynamic support as we enter into that area. And it's just, it's a more challenging area than we expected. We thought we were putting in some programs that we did see some benefits last year. Last year, what we were seeing was a lot of hole squeezing. We were reporting hole squeezing on our drill holes. We have gotten some additives and things we're doing there that has helped a lot, but we're still facing some ground movements, ground seismicity in the area that we have to manage very carefully and has slowed us down more than we expected in Q1. I don't know, Martin, if you had any more you wanted to add.

No, that's a great answer, Steve. As we get deeper in the mine, certainly seismicity is there. It's sort of with us all the time. The guys do a fantastic job of managing that and dealing with it. We've had to increase our support in some areas, But it's with us, and it does cause us at times to change our production plans during the quarter when you see that with the grades going up and down a bit as we have to change up some things in our plan. But, you know, we're sort of used to it now, and we've got systems in place to deal with it as it happens, and it's part of our mining process there at the mine.

Thanks. Maybe switching gears to Escobar. Michael, as you mentioned, there were four working meetings with the Guatemalan government in the quarter. Is that what you had expected? Are you happy with that progress? I know you can't give us any kind of timing at this point in time, but I'm just wondering, you know, were you happy with what happened in Q1?

Yeah, good morning. This is Sean. We had those meetings. They were Yeah, it's good to talk to you. Yeah, we had those meetings during the quarter. You know, things have been moving very slowly, and it's always been hard to predict the rhythm of the meetings and the larger meetings, but they were good meetings, lots of dialogue around the main concerns in the process, which, again, focus around water, environmental health concerns, and blasting vibrations from the mine. So, you know, we expect... to have some more working meetings in the coming weeks and months and provide an update at the next results call.

Great. And then on the county side, some questions here. Number one, I know that when you talk about unsustaining costs, you still talk about the NRV adjustment. But just to confirm, that should be, that is going to become less and less important as Dolores comes off. And, you know, at some point in time, will you stop talking about the NRV adjustment?

Hi, Cosmos. It's Ignacio here. Yeah, no, I think you've got that right. Obviously, if you look at our previous results, a lot of the NRV adjustments that we had were due to Dolores. Now that Dolores is in full leech mode, that will become less of an issue. So we should see that those numbers disappear. However, we do have other Mines that have large heap leeches and large inventories and heap leeches like Shawindo. So now Shawindo has very good margins. But, yeah, in theory that we could see NRV adjustments in Shawindo in the future. But, yes, now that Dolores is winding down and in leech, those numbers should taper as well.

Great. And then maybe one last question following up on my buddy Oves' question here. You know, asked a different way in terms of guidance. I know you've maintained for your guidance. But my question is, you know, previously you had guided in Q2 to 1950 to 2125 announced. In Q3, you've guided to 1425 to 1625 announced on sustaining costs. At this point in time, are those still good goals posed to use in terms of, you know, us modeling Q2 and Q3?

Hi, Cosmos. Steve here. Yeah, we feel that guidance is still in line. our quarterly guidance. So I think that's a good gauge. You know, as we mentioned, there's some sustaining capital projects that start picking up steam, things like that. We've got some, you know, the tailings compaction that we're on, some developments picking up steam. So those are good guidance as we look forward. And as production comes up and the costs come down, we think that quarterly guidance still is in line.

Yeah.

And maybe if I can just do it.

Sorry, Michael, but most obviously, just to reiterate here, of course, that all depends where metal prices and exchange rates stand, right? I mean, because those cost guidance have been calculated with the metal prices that we used at the time in our guidance, so you have to look at that. And, of course, when we have higher byproduct metal prices and more favorable exchange rate, that will be and has right now a positive impact to our costs. So, When you look at the guidance, just have a look at the model prices and exchange rates that we use for that guidance as well.

Of course, we'll definitely adjust for those different input factors here. And then, Michael, since I have you here, maybe if I can slip in one more question. In the MD&A, you don't talk much about Navidad. I know there's still a lot of questions about, you know, the province of Chubut. But from my industry sources, it does seem like Argentina is becoming a better place to do business. And so any comments that you can make on Navidad?

I mean, we are a long time working in Argentina, many decades. And of course, we have operations in Santa Cruz and had operations in Santa Cruz for a long time. So things are changing in Argentina on many fronts. But I think it's still too early to talk about. Now with that, obviously, we will see, hopefully, continued positive changes here over the years under the new administration. We see the positive impact already on Cerro Moro, and hopefully that will continue. We are very happy to have some long-term pipeline projects with us. that are there and, you know, there's very little cost to hold on on this project and one of the largest solar resources on the planet. So we'll just monitor and watch and see how Argentina evolves over the next, I would say, 12 to 24 months.

Great. Thanks, Michael and Tim. Those are all the questions I have. Congrats once again on a strong Q1 and we look forward to that continuing for the rest of 2025. Thanks, Carlos.

Once again, if you have a question, please press star, then 1. The next question comes from Don DeMarco with National Bank. Please go ahead.

Thank you, Operator, and good morning, Michael and team. Great quarter, certainly on costs. On costs, and I'll start off with that. In response to a previous question, you mentioned a few drivers, the commitment to cost control, favorable FX rates, strong byproducts. Do you have a sense of the approximate benefit of each of these categories on the aggregate outperformance in Q1?

That's quite complicated to answer, Don, because just on the exchange rate, for example, right, there is a lot of different pieces depending where we buy different services and products and equipment from, from which country that comes in, et cetera. So I don't have a detailed Number on that obviously the the byproduct credit is a bit easier I think if you just look at the set you look at the metal prices that we used and our cost calculation for the guidance at the beginning of the year and then looking at the result with that with that with the higher metal prices now and But as I said, those exchange rates and obviously cost control at the side are all very tightly intertwined. So I think it's quite difficult to get your exact numbers on how much is coming from each side.

Okay. Okay, well, that's helpful nonetheless. But then maybe shift into my next question. It's on capital allocation. So your balance sheet is continuing to improve. You've got cash over $900 million. You mentioned $1.7 billion in liquidity. So what are your priorities on capital allocation? Like considering the different range of options, you've got debt repayment, do you see opportunity to increase the NCIB or dividends or maybe see a better ROI by deploying cash into pending SCARN development that's pending?

Most of them, what you just mentioned, probably debt repayment is not really urgent for us. Just for everybody to remember, we have two bonds. They're very, very favorable bonds on their interest rates. I think the $500 million bond is about at 2.65%. And then the rest up to the 800, so that's about $280 million. Some are sitting around 4.6%. So these are very favorable bonds. I don't think there's no hurry to to pay those back. By the way, the larger one, the $500 million bond, only matures in 2031, so 2.65% interest rates until 2031. You know, I think we can obviously, with that money, provide better return to shareholders than buying back that debt. So that leads us to the rest of the buckets that you mentioned, and yes, shareholder return is always on our radar. You know, It's close to, as you know, we have a policy in place that adds a special or additional dividend to our base dividend of 10 cents per share per quarter. Depending on our net cash, we're very close there. I think it starts kicking in at $100 million net cash. We're just a little bit shy of that. I would expect to cross that threshold here pretty soon. And then our dividend will automatically increase. There's a graph. and the table in our MD&A explaining that. I think it goes as high as about 18 cents depending on how much net cash we have. So automatically the dividend will increase. You saw that we were buying back shares in January. Now we will continue that thing during the year. We just extended or renewed our NCIB and we'll continue the same thing to be very opportunistic in buying back stock. There's always pullbacks and opportunities to do that, and we'll jump in the market and do that. So very strong return in total to shareholders of $56 million in Q1. And then, of course, the best return is investment in our business, and that goes from strong exploration results, investment in exploration to replace our reserves or add new resources to our assets, continued development of the SCARN obviously comes to mind which is a gigantic a very big very very interesting life long life asset for for the company you know those those kind of projects of course will provide the best return to our shareholders but kind of the combination is obviously what makes it so interesting I think to be a shareholder in Pan American where you have all of this taking care of such a strong business on this site in Q1, where we can not only obviously pay for our sustaining capital, but invest money in special projects, and there's a whole list in the press release that we are taking care of. You know, a lot of exploration, we normally spend during the year mostly close to site, I would call it exploration, but probably close to $100 million. which, of course, the SCARN is one result of that, a very strong result, and still have sufficient funds to return it to shareholders and have quite a big cash balance, which can always come very handy when opportunities arise in the market.

Certainly. Okay, well, thanks for that. And then you mentioned the SCARN, and with that, the negotiations, you're looking to maintain maximum silver are you happy with the level of silver in your portfolio right now as relative to gold and can you share your thoughts on the different levers that you have to increase silver the scar being on escobar you know with cosmos's question you touched on navidad maybe this potential m a so how do you feel about that level right now where it is well look i mean this is our silver gold

let's call it our silver-gold ratio within Pan American, not the gold ratio that people normally talk about on prices, you know, varies, goes up and down depending on the constellation of our assets. So, you know, I remember back maybe quite a few years, maybe 15 years, we had a very, very large zinc production when we still had Morogocha In our portfolio and think was a very important model and you know silver became went back to probably around 50 55 percent of revenue of course now silver is less and again for several reasons once We purchased together with some interesting silver production obviously in Argentina and Chile also some very strong gold production and the gold price is outperforming at the moment the silver price strongly and And that's obviously skewing kind of the percentages of all the four metals or five metals we produce on our revenue. So it's just a picture in time. But you mentioned, look, we have the largest reserve and the largest resource of silver in the world in our portfolio. That's a large number of big projects, you know, just as gone. probably an average of about 17 million ounces of silver a year. Of course, Escobar has the potential to produce 20 to 22 million ounces a year. As I mentioned, Navidad, the largest silver resource in the world, one of the largest, and probably not right now ready, but a very interesting resource there. So there's plenty of opportunity, and you mentioned M&A as well, so there's plenty of opportunity for us you know, to change in the future that silver-gold ratio that we have internally. So lots of silver projects there, but at the moment, of course, very strong cash flow generations from outperforming gold.

Okay, great. Thank you for your thoughts on that. And, well, that's all for me, and good luck with the rest of Q2.

Thank you, Don.

This concludes the question and answer session. I would like to turn the conference back over to Michael Steinman for any closing remarks. Please go ahead.

Yeah, thanks everyone for calling in today. Great result, great quarter, great start of the year. Really looking forward to Q2 and beyond. Just one item I would like to mention here. At the end of this month, we will release our 2024 sustainability report. Our ESG performance is core to our business and really look forward to updating you on our progress in that area with our report that's out there annually. You can look at probably the last 12 years of report on our website and get a very good idea of what we are doing on this really important project that we do on the ESG side. Thanks, everyone, for calling in, and looking forward to talk to you in August for Q2. Thank you, everyone.

This brings to a close today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.