EX-99 2 paasq42018newsrelease2019-.htm EXHIBIT 99 Exhibit
paaslogo2017a01.jpg
 
Q4 2018 NEWS RELEASE

All amounts expressed in U.S. dollars unless otherwise indicated
Unaudited tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted


Pan American Silver Reports Unaudited 2018 Annual and Fourth Quarter Results

All financial figures are in U.S. dollars unless otherwise indicated.
Vancouver, B.C. - February 20, 2019 - Pan American Silver Corp. (NASDAQ: PAAS) (TSX: PAAS) today reported unaudited financial results for the year-ended December 31, 2018 ("YE 2018") and the fourth quarter ("Q4 2018"). These results are preliminary and could change based on final audited results. Preliminary operating results were previously reported on January 21, 2019.

•
Annual revenue totaled $784.5 million, and net cash generated from operating activities was $155.0 million.
•
Annual net earnings of $12.0 million ($0.07 basic earnings per share), and adjusted annual earnings of $59.4 million ($0.39 basic adjusted earnings per share).
•
Annual silver production totaled 24.8 million ounces with all-in sustaining costs per silver ounce sold (“AISCSOS”) of $10.73, or $9.68 excluding net realizable value ("NRV") inventory adjustments.
•
Cash costs per payable ounce of silver, net of by-product credits ("cash costs") of $3.35 per ounce in 2018.
•
Advanced the COSE and Joaquin mine developments for initial production in 2019.
•
At December 31, 2018, the Company had cash and short-term investment balances of $212.5 million and working capital of $397.8 million. Year-end debt of $6.7 million related entirely to lease liabilities.

“Pan American's operations demonstrated solid performance in 2018, highlighted by the lowest cash costs on record since 2006. This performance resulted in strong cash flow generation and a healthy financial position at year end," said Michael Steinmann, President and Chief Executive Officer of the Company. "Importantly, we advanced our strategy of developing new catalysts to generate value for shareholders. Our acquisition of Tahoe Resources will result in a more diversified Pan American with a strong portfolio of cash-generating assets and superior growth opportunities. In addition, our major exploration discovery at La Colorada demonstrates a significant opportunity for long-term organic growth."

Consolidated Q4 2018 Highlights:
•
Revenue in Q4 2018 was $173.4 million, reflecting lower prices for all metals and lower quantities of silver, gold, and copper sold due to a build in inventories at San Vicente and La Colorada (approximate revenue impact of $8.4 million), as well as lower production at Dolores.
•
Net cash generated from operating activities was $11.9 million.
•
Net loss was $63.6 million ($0.42 basic loss per share), which included a $27.8 million impairment charge related to the Manantial Espejo/COSE/Joaquin assets, a $13.3 million reduction from NRV inventory adjustments, $10.2 million in costs related to the Tahoe Resources Inc. ("Tahoe") transaction, $8.2 million in tax expense from changes in foreign exchange rates, and a $4.7 million credit loss related to a third party refinery.
•
The impairment of the Manantial Espejo/COSE/Joaquin assets reflects the impact of the new export tax introduced in Argentina in late 2018, and the decline in short-term consensus metal prices.
•
Adjusted loss was $2.0 million ($0.01 basic adjusted loss per share).
•
Silver production was 6.1 million ounces at cash costs of $6.12 per ounce. Q4 2018 cash costs were impacted by lower by-product metal prices and reduced gold production.
•
AISCSOS were $15.86 in Q4 2018, or $13.36 excluding NRV inventory adjustments. AISCSOS were impacted by less silver ounces sold, lower by-product metal prices and higher sustaining capital expenditures.
•
The Board of Directors has approved a cash dividend of $0.035 per common share, or approximately $5.4 million in aggregate cash dividends, payable on or about March 15, 2019, to holders of record of Pan American Silver's common shares as of the close on March 4, 2019. Pan American Silver's dividends are

 
PAN AMERICAN SILVER CORP.
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paaslogo2017a01.jpg
 
Q4 2018 NEWS RELEASE

All amounts expressed in U.S. dollars unless otherwise indicated
Unaudited tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted

designated as eligible dividends for the purposes of the Income Tax Act (Canada). As is standard practice, the amounts and specific distribution dates of any future dividends will be evaluated and determined by the Board of Directors on an ongoing basis.

The foregoing contains measures that are not generally accepted accounting principle ("non-GAAP") financial measures. Please refer to the "Alternative Performance (non-GAAP) Measures" section of this news release for further information on these measures.

Amended and Restated Credit Agreement
On February 1, 2019, the Company entered into an Amending and Restating Credit Agreement with a syndicate of banks to extend and increase its existing credit facility. In conjunction with the closing of the Tahoe transaction, the credit facility is expected to increase to $500 million and would mature on February 1, 2023.

Tahoe transaction
All required regulatory, shareholder and court approvals have been received for the plan of arrangement (the "Arrangement"), whereby Pan American will acquire all of the outstanding shares of Tahoe. The Arrangement is anticipated to be completed on or about February 22, 2019.

Pan American receives award for social and environmental responsibility
Pan American is pleased to announce that Matt Andrews, Vice President Environment and Sustainability, and Monica Moretto, Director Sustainability, are the 2018 recipients of the Robert R. Hedley Award for Excellence in Social and Environmental Responsibility from the Association for Mineral Exploration (AME). In the AME's news release, dated December 6, 2018, announcing the 2018 winners, the organization states that Mr. Andrews' and Ms. Moretto's leadership "has created an environment within Pan American Silver Corp. of respect for social and environmental principles on all its projects".

 
PAN AMERICAN SILVER CORP.
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paaslogo2017a01.jpg
 
Q4 2018 NEWS RELEASE

All amounts expressed in U.S. dollars unless otherwise indicated
Unaudited tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted

CONSOLIDATED RESULTS
 
 
 
December 31,
2018

December 31,
2017

Shares outstanding (millions)
 
 
153,448

153,303

 
 
 
 
 
 
Three months ended
December 31,
Year ended
December 31,
 
2018
2017
2018
2017
FINANCIAL
 
 
 
 
Revenue
$
173,357

$
226,031

$
784,495

$
816,828

Mine operating (loss) earnings
$
(4,666
)
$
43,285

$
100,897

$
168,760

Net (loss) earnings
$
(63,577
)
$
49,664

$
12,041

$
123,451

       Per share (1)
$
(0.42
)
$
0.32

$
0.07

$
0.79

Adjusted (loss) earnings (2)
$
(2,022
)
$
19,219

$
59,434

$
77,705

       Per share (1)
$
(0.01
)
$
0.13

$
0.39

$
0.51

Net cash generated from operating activities
$
11,930

$
79,291

$
154,978

$
224,559

Net cash generated from operating activities before changes in working capital (2)
$
16,827

$
64,098

$
159,239

$
212,850

Sustaining capital expenditures
$
31,329

$
28,668

$
105,229

$
84,420

Project capital expenditures
$
11,849

$
13,650

$
41,292

$
61,429

Dividend per share
$
0.035

$
0.025

$
0.14

$
0.10

OPERATIONAL
 
 
 
 
Production
 
 
 
 
       Silver (thousand ounces)
6,128

6,579

24,776

24,979

       Gold (thousand ounces)
37.2

43.7

178.9

160.0

       Zinc (thousand tonnes)
18.5

14.7

64.8

55.3

       Lead (thousand tonnes)
6.3

5.4

22.4

21.5

      Copper (thousand tonnes)
2.2

3.0

9.8

13.4

Average realized prices
 
 
 
 
       Silver ($/ounce)
$
14.35

$
16.65

$
15.61

$
16.99

       Gold ($/ounce)
$
1,232

$
1,276

$
1,272

$
1,257

       Zinc ($/tonne)
$
2,508

$
3,282

$
2,846

$
2,929

       Lead ($/tonne)
$
1,914

$
2,472

$
2,189

$
2,351

      Copper ($/tonne)
$
6,098

$
6,811

$
6,519

$
6,174

Cash costs (per payable ounce of silver, net of by-product credits)(2)
$
6.12

$
3.18

$
3.35

$
4.55

All-in sustaining costs per silver ounce sold(2)
$
15.86

$
10.86

$
10.73

$
10.79

All-in sustaining costs per silver ounce sold, excluding NRV inventory adjustments(2)
$
13.36

$
10.03

$
9.68

$
10.28

(1)
Per share amounts are based on basic weighted average common shares.
(2)
Non-GAAP measures: adjusted (loss) earnings, basic adjusted (loss) earnings per share, net cash generated from operating activities before changes in working capital, cash costs, and all-in sustaining costs per silver ounce sold (inclusive and exclusive of NRV inventory adjustments) are not generally accepted accounting principle ("non-GAAP") financial measures. Please refer to the "Alternative Performance (non-GAAP) Measures" section of this news release for further information on these measures.


 
PAN AMERICAN SILVER CORP.
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paaslogo2017a01.jpg
 
Q4 2018 NEWS RELEASE

All amounts expressed in U.S. dollars unless otherwise indicated
Unaudited tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted

MINE OPERATING RESULTS
 
Three Months Ended
December 31, 2018
 
Three Months Ended
December 31, 2017
 
Production
Cash Costs(1)
 
Production
Cash Costs(1)
 
Ag (Moz)
Au (koz)
 
Ag (Moz)
Au (koz)
La Colorada
2.1

1.2

$1.73
 
1.9

1.3

$0.43
Dolores
0.8

29.4

$7.06
 
1.3

31.2

($3.93)
Alamo Dorado
—

—

 NA
 
—

0.1

$2.09
Huaron
1.0

0.2

$2.82
 
1.0

0.2

$2.08
Morococha (2)
0.7

0.2

$0.61
 
0.7

0.8

($7.42)
San Vicente (3)
0.9

0.1

$9.23
 
1.1

0.1

$9.04
Manantial Espejo
0.6

6.2

$25.53
 
0.6

10.0

$26.52
TOTAL
6.1

37.2

$6.12
 
6.6

43.7

$3.18

 
Year Ended
December 31, 2018
 
Year Ended
December 31, 2017
 
Production
Cash Costs(1)
 
Production
Cash Costs(1)
 
Ag (Moz)
Au (koz)
 
Ag (Moz)
Au (koz)
La Colorada
7.6

4.4

$2.02
 
7.1

4.3

$2.08
Dolores
4.1

136.6

($1.87)
 
4.2

103.0

($1.65)
Alamo Dorado
—

—

 NA
 
0.6

2.1

$16.49
Huaron
3.6

0.8

$1.63
 
3.7

1.1

$1.35
Morococha(2)
2.9

2.1

($4.34)
 
2.6

3.5

($5.34)
San Vicente(3)
3.5

0.5

$10.12
 
3.6

0.5

$11.85
Manantial Espejo
3.1

34.6

$13.91
 
3.1

45.3

$18.25
TOTAL
24.8

178.9

$3.35
 
25.0

160.0

$4.55
Totals may not add up due to rounding.
(1)
Cash costs is a non-GAAP measure. Please refer to the "Alternative Performance (non-GAAP) Measures" section of this news release for further information on this measure.
(2)
Morococha data represents Pan American Silver's 92.3% interest in the mine's production.
(3)
San Vicente data represents Pan American Silver's 95.0% interest in the mine's production.







 
PAN AMERICAN SILVER CORP.
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Q4 2018 NEWS RELEASE

All amounts expressed in U.S. dollars unless otherwise indicated
Unaudited tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted

CAPITAL EXPENDITURES(1) 
 
Annual Forecast(2)
Year ended
December 31,
(in millions of USD)
2018
2018
2017
La Colorada
17.5 – 18.5

16.9

13.3

Dolores
42.0 – 44.0

48.5

38.4

Huaron
17.0 – 17.5

15.9

8.8

Morococha
14.5 – 15.0

14.1

12.5

San Vicente
6.5 – 7.0

7.0

8.1

Manantial Espejo
2.5 – 3.0

2.8

3.3

Sustaining Capital Total(1)
100.0 - 105.0

105.2

84.4

Mexico project capital
15.5

15.9

56.8

Joaquin and COSE projects(3)
24.5

25.4

4.7

Project Capital Total(1)
40.0

41.3

61.5

Consolidated Total
140.0 – 145.0

146.5

145.9

(1)
The total sustaining capital amounts capitalized in 2018 were $0.8 million less than the $106.0 million of 2018 sustaining capital cash outflows. Project capital amounts capitalized in 2018 were $3.4 million less than the $44.7 million of 2018 project capital cash outflows. The sustaining capital cash outflows are included in the 2018 AISCSOS calculation, shown in the “Alternative Performance (non-GAAP) Measures” section of this news release, and in the tables included for the individual mines in the "Mine Operating Results" section of this news release; these amounts are different than the amounts capitalized in the period, which are provided in the table above. These differences are due to the timing difference between the cash payment of capital investments compared with the period in which investments are capitalized.
(2)
Forecast amount per Q3 2018 MD&A dated November 6, 2018.
(3)
Total expenditures of $9.7 million were incurred in 2017 for the Joaquin and COSE projects, of which $5.0 million was expensed as part of 2017 exploration and project development expenses, and the remaining $4.7 million was capitalized. All Joaquin and COSE project expenditures were capitalized in 2018.

Sustaining capital of $105.2 million in 2018 was slightly above our forecast range of $100 to $105 million, reflecting higher pre-stripping and leach pad expansionary activities at Dolores, largely offset with savings on the tailings storage facility expansion at Huaron and deferral of certain exploration spending, infrastructure upgrades and equipment procurements.

Project capital of $41.3 million, compared with a forecast of $40 million, was directed at the COSE and Joaquin mine developments in Argentina, as well as investments at Dolores and La Colorada.



 
PAN AMERICAN SILVER CORP.
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paaslogo2017a01.jpg
 
Q4 2018 NEWS RELEASE

All amounts expressed in U.S. dollars unless otherwise indicated
Unaudited tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted

2019 GUIDANCE
There are no revisions to the guidance for 2019 that Pan American provided in its news release dated January 21, 2019, as provided in the table below. The guidance does not include the assets to be acquired under the Arrangement with Tahoe. Management intends to update the guidance to include these assets and allocation of new general and administrative costs in the second quarter of 2019. We may also revise guidance during the year to reflect actual results to date and those anticipated for the remainder of the year.
 
2019 Guidance
Production
 
Silver (million ounces)
26.5 - 27.5

Gold (thousand ounces)
162.5 - 172.5

Zinc (thousand tonnes)
65.0 - 67.0

Lead (thousand tonnes)
24.0 - 25.0

Copper (thousand tonnes)
9.8 - 10.3

Cash Costs(1)($/ounce)
6.50 - 7.50

AISCSOS(1) ($)
10.80 - 12.30

Sustaining capital ($millions)
85 - 90

Project capital ($millions)
30

Assumptions used to forecast total cash costs and AISCSOS for 2019
 
Metal prices
 
Silver ($/ounce)
14.50

Gold ($/ounce)
1,250

Zinc ($/tonne)
2,600

Lead ($/tonne)
1,950

Copper ($/tonne)
6,150

Average annual exchange rates relative to 1.00 U.S. dollar
 
Mexican peso
19.50

Peruvian sol
3.33

Argentine peso
41.80

Bolivian boliviano
6.91

(1)
Cash Costs and AISCSOS are non-GAAP measures.  Please refer to the “Alternative Performance (non-GAAP) Measures” section of this news release for further information on these measures.

Additional details on the Company's 2019 guidance can be found in the January 21, 2019 news release entitled, "Pan American Silver Announces Preliminary 2018 Operating Results and Guidance for 2019" available at www.panamericansilver.com and as filed on SEDAR at www.sedar.com.


 
PAN AMERICAN SILVER CORP.
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paaslogo2017a01.jpg
 
Q4 2018 NEWS RELEASE

All amounts expressed in U.S. dollars unless otherwise indicated
Unaudited tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted

Fourth Quarter and Year End 2018 Unaudited Results Conference Call and Webcast
Date:
February 21, 2019
Time:
11:00 am ET (8:00 am PT)
Dial-in numbers:
1-800-319-4610 (toll-free in Canada and the U.S.)
 
+1-604-638-5340 (international participants)
Webcast:
www.panamericansilver.com
Callers should dial in 5 to 10 minutes prior to the scheduled start time. The live webcast and presentation slides will be available on the Company's website at www.panamericansilver.com. An archive of the webcast will also be available for three months.

Corporate Office:
625 Howe Street, Suite 1440
Vancouver, British Columbia
V6C 2T6 Canada

Tel: +1 604 684-1175
Fax: +1 604 684-0147

About Pan American Silver
Pan American Silver Corp. is the world’s second largest primary silver producer, providing enhanced exposure to silver through a diversified portfolio of assets, large reserves and growing production. We own and operate six mines in Mexico, Peru, Argentina and Bolivia. Pan American Silver maintains a strong balance sheet, has an established management team with proven operating expertise, and is committed to responsible development. Founded in 1994, the Company is headquartered in Vancouver, B.C. and our shares trade on NASDAQ and the Toronto Stock Exchange under the symbol "PAAS".

For more information, visit: www.panamericansilver.com.

For more information contact:
Siren Fisekci
VP, Investor Relations & Corporate Communications
Ph: 604-806-3191
Email: ir@panamericansilver.com

Alternative Performance (Non-GAAP) Measures
In this news release we refer to measures that are not generally accepted accounting principle ("non-GAAP") financial measures. These measures are widely used in the mining industry as a benchmark for performance, but do not have a standardized meaning as prescribed by IFRS as an indicator of performance, and may differ from methods used by other companies with similar descriptions. These non-GAAP financial measures include:

•
Cash costs per payable ounce of silver, net of by-product credits ("cash costs"). The Company's method of calculating cash costs may differ from the methods used by other entities and, accordingly, the Company's cash costs may not be comparable to similarly titled measures used by other entities. Investors are cautioned that cash costs should not be construed as an alternative to production costs, depreciation and amortization, and royalties determined in accordance with IFRS as an indicator of performance.
•
Adjusted earnings (loss) and adjusted earnings (loss) per share. The Company believes that these measures better reflect normalized earnings as they eliminate items that in management's judgment are subject to volatility as a result of factors which are unrelated to operations in the period, and/or relate to items that will settle in future periods.

 
PAN AMERICAN SILVER CORP.
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paaslogo2017a01.jpg
 
Q4 2018 NEWS RELEASE

All amounts expressed in U.S. dollars unless otherwise indicated
Unaudited tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted

•
All-in sustaining costs per silver ounce sold ("AISCSOS"). The Company has adopted AISCSOS as a measure of its consolidated operating performance and its ability to generate cash from all operations collectively, and the Company believes it is a more comprehensive measure of the cost of operating our consolidated business than traditional cash costs per payable ounce, as it includes the cost of replacing ounces through exploration, the cost of ongoing capital investments (sustaining capital), general and administrative expenses, as well as other items that affect the Company's consolidated earnings and cash flow.
•
Net cash generated from operating activities before changes in working capital is calculated as "Net cash generated from operating activities" less "Changes in non-cash operating working capital", as shown on the Consolidated Statements of Cash Flows. The Company believes the exclusion of changes in non-cash operating working capital better reflects the cash from operating activities generated in the period. Net cash generated from operating activities before changes in working capital does not have any standardized meaning prescribed by GAAP and is therefore unlikely to be comparable to similar measures presented by other companies.

Readers should refer to the "Alternative Performance (non-GAAP) Measures" section following the Consolidated Statements of Cash Flows included in this news release for a more detailed discussion of these and other non-GAAP measures and their calculation.
Technical information contained in this news release with respect to Pan American has been reviewed and approved by Martin Wafforn, P.Eng., Senior Vice President, Technical Services & Process Optimization, who is the Company's Qualified Person for the purposes of National Instrument 43-101. For additional information about the Company's material mineral properties, other than the Joaquin property, please refer to the Company's Annual Information Form dated March 22, 2018, filed at www.sedar.com. Mineral resources that are not mineral reserves have no demonstrated economic viability.

Cautionary Note Regarding Forward-Looking Statements and Information
Certain of the statements and information in this news release constitute "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and "forward-looking information" within the meaning of applicable Canadian provincial securities laws. All statements, other than statements of historical fact, are forward-looking statements or information. Forward-looking statements or information in this news release relate to, among other things: future financial or operational performance, including our estimated production of silver, gold and other metals in 2019, our estimated Cash Costs and AISCSOS in 2019, and our expectations with respect to future metal prices and exchange rates; the ability of the Company to successfully complete any capital projects, the expected economic or operational results derived from those projects, and the impacts of any such projects on the Company, the approval or the amount of any future cash dividends; our growth profile and opportunities as results of the Arrangement; the increase of our credit facility and the timing thereof; the anticipated completion date of the Arrangement; and any update of our guidance subsequent to completion of the Arrangement, and the disclosure and timing of any such update.

These forward-looking statements and information reflect the Company's current views with respect to future events and are necessarily based upon a number of assumptions that, while considered reasonable by the Company, are inherently subject to significant operational, business, economic and regulatory uncertainties and contingencies. These assumptions include: the completion date of the Arrangement; the ability of the Company to realize the anticipated benefits and opportunities as a result of the Arrangement; access to capital and other financing, if required; tonnage of ore to be mined and processed; ore grades and recoveries; prices for silver, gold and base metals remaining as estimated; currency exchange rates remaining as estimated; capital, decommissioning and reclamation estimates; our mineral reserve and resource estimates and the assumptions upon which they are based; prices for energy inputs, labour, materials, supplies and services (including transportation); no labour-related disruptions at any of our operations; no unplanned delays or interruptions in scheduled production; all necessary permits, licenses and regulatory approvals for our operations are received in a timely manner; and our ability to comply with environmental, health and safety laws. The foregoing list of assumptions is not exhaustive.

The Company cautions the reader that forward-looking statements and information involve known and unknown risks, uncertainties and other factors that may cause actual results and developments to differ materially from those

 
PAN AMERICAN SILVER CORP.
8


 
 
 

expressed or implied by such forward-looking statements or information contained in this news release and the Company has made assumptions and estimates based on or related to many of these factors. Such factors include, without limitation: fluctuations in silver, gold and base metal prices; fluctuations in prices for energy inputs, labour, materials, supplies and services (including transportation); fluctuations in currency markets (such as the Canadian dollar, Peruvian sol, Mexican peso, Argentine peso and Bolivian boliviano versus the U.S. dollar); operational risks and hazards inherent with the business of mining (including environmental accidents and hazards, industrial accidents, equipment breakdown, unusual or unexpected geological or structural formations, cave-ins, flooding and severe weather); risks relating to the credit worthiness or financial condition of suppliers, refiners and other parties with whom the Company does business; inadequate insurance, or inability to obtain insurance, to cover these risks and hazards; employee relations; relationships with, and claims by, local communities and indigenous populations; our ability to obtain all necessary permits, licenses and regulatory approvals in a timely manner; changes in laws, regulations and government practices in the jurisdictions where we operate, including environmental, export and import laws and regulations; legal restrictions relating to mining, including in Chubut, Argentina; risks relating to expropriation; diminishing quantities or grades of mineral reserves as properties are mined; increased competition in the mining industry for equipment and qualified personnel; and those factors identified under the caption "Risks Related to Pan American's Business" in the Company's most recent form 40-F and Annual Information Form, as well as those factors identified in the section entitled “Risk Factors” in the Company’s management information circular dated December 4, 2018 with respect to the Arrangement, each filed with the United States Securities and Exchange Commission and Canadian provincial securities regulatory authorities, respectively. Although the Company has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated, described or intended. Investors are cautioned against undue reliance on forward-looking statements or information. Forward-looking statements and information are designed to help readers understand management's current views of our near and longer term prospects and may not be appropriate for other purposes. The Company does not intend, nor does it assume any obligation to update or revise forward-looking statements or information, whether as a result of new information, changes in assumptions, future events or otherwise, except to the extent required by applicable law.



 
PAN AMERICAN SILVER CORP.
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Q4 2018 NEWS RELEASE

Consolidated Statements of Financial Position
(Unaudited in thousands of U.S. dollars)



 
 
December 31,
2018

 
December 31,
2017

Assets
 
 

 
 

Current assets
 
 

 
 

Cash and cash equivalents
 
$
138,510

 
$
175,953

Short-term investments
 
74,004

 
51,590

Trade and other receivables
 
96,091

 
109,746

Income taxes receivable
 
13,108

 
16,991

Inventories
 
214,465

 
218,715

Derivative financial instruments
 
640

 
1,092

Assets held for sale
 
—

 
7,949

Prepaid expenses and other current assets
 
11,556

 
13,434

 
 
548,374

 
595,470

Non-current assets
 
 

 
 
Mineral properties, plant and equipment
 
1,301,002

 
1,336,683

Long-term refundable tax
 
70

 
80

Deferred tax assets
 
12,244

 
2,679

Investment in associates
 
70,566

 
55,017

Other assets
 
2,163

 
346

Goodwill
 
3,057

 
3,057

Total Assets
 
$
1,937,476

 
$
1,993,332

 
 
 
 
 
Liabilities
 
 

 
 

Current liabilities
 
 

 
 

Accounts payable and accrued liabilities
 
$
131,743

 
$
139,698

Loans payable
 
—

 
3,000

Derivative financial instruments
 
51

 
1,906

Current portion of provisions
 
5,072

 
8,245

Current portion of finance lease
 
5,356

 
5,734

Income tax payable
 
8,306

 
26,131

 
 
150,528

 
184,714

Non-current liabilities
 
 

 
 

Long-term portion of provisions
 
70,083

 
61,248

Deferred tax liabilities
 
148,819

 
171,228

Long-term portion of finance lease
 
1,320

 
1,825

Deferred revenue
 
13,288

 
12,017

Other long-term liabilities
 
25,425

 
26,954

Share purchase warrants
 
14,664

 
14,295

Total Liabilities
 
424,127

 
472,281

 
 
 
 
 
Equity
 
 

 
 

Capital and reserves
 
 

 
 

Issued capital
 
2,321,498

 
2,318,252

Share option reserve
 
22,573

 
22,463

Investment revaluation reserve
 
208

 
1,605

Deficit
 
(836,067
)
 
(825,470
)
Total Equity attributable to equity holders of the Company
 
1,508,212

 
1,516,850

Non-controlling interests
 
5,137

 
4,201

Total Equity
 
1,513,349

 
1,521,051

Total Liabilities and Equity
 
$
1,937,476

 
$
1,993,332



 
PAN AMERICAN SILVER CORP.
10


paaslogo2017a01.jpg
 
Q4 2018 NEWS RELEASE

Consolidated Income Statements
(Unaudited in thousands of U.S. dollars except per share amounts)




 
 
Three months ended
December 31,
 
Year ended
December 31,
 
 
2018

 
2017

 
2018

 
2017

Revenue
 
$
173,357

 
$
226,031

 
$
784,495

 
$
816,828

Cost of sales
 
 

 
 

 
 
 
 
Production costs
 
(132,334
)
 
(139,697
)
 
(511,793
)
 
(500,670
)
Metal inventory loss(1)
 
(4,670
)
 
—

 
(4,670
)
 
—

Depreciation and amortization
 
(36,418
)
 
(34,240
)
 
(146,462
)
 
(122,888
)
Royalties
 
(4,601
)
 
(8,809
)
 
(20,673
)
 
(24,510
)
 
 
(178,023
)
 
(182,746
)
 
(683,598
)
 
(648,068
)
Mine operating (loss) earnings
 
(4,666
)
 
43,285

 
100,897

 
168,760

 
 
 
 
 
 
 
 
 
General and administrative
 
(5,450
)
 
(4,732
)
 
(22,649
)
 
(21,397
)
Exploration and project development
 
(3,509
)
 
(4,269
)
 
(11,138
)
 
(19,755
)
Foreign exchange gains (losses)
 
406

 
1,052

 
(9,326
)
 
1,823

Impairment (charges) reversals
 
(27,789
)
 
61,554

 
(27,789
)
 
61,554

Gains (losses) on commodity and foreign currency contracts
 
524

 
(1,841
)
 
4,930

 
606

(Losses) gains on sale of mineral properties, plant and equipment
 
(56
)
 
(794
)
 
7,973

 
191

Share of (loss) income from associate and dilution gain
 
(182
)
 
259

 
13,679

 
2,052

Transaction costs
 
(10,229
)
 
—

 
(10,229
)
 
—

Other expense
 
(2,795
)
 
(4,011
)
 
(3,659
)
 
(5,505
)
(Loss) earnings from operations
 
(53,746
)
 
90,503

 
42,689

 
188,329

 
 
 
 
 
 
 
 
 
(Loss) gain on derivatives
 
(60
)
 
64

 
(1,078
)
 
64

Investment (loss) income
 
(1,428
)
 
658

 
(284
)
 
1,277

Interest and finance expense
 
(2,305
)
 
(2,353
)
 
(8,139
)
 
(7,185
)
(Loss) earnings before income taxes
 
(57,539
)
 
88,872

 
33,188

 
182,485

Income tax expense
 
(6,038
)
 
(39,208
)
 
(21,147
)
 
(59,034
)
Net (loss) earnings for the period
 
$
(63,577
)
 
$
49,664

 
$
12,041

 
$
123,451

 
 
 
 
 
 
 
 
 
Attributable to:
 
 

 
 

 
 
 
 
Equity holders of the Company
 
$
(63,809
)
 
$
48,892

 
$
10,294

 
$
120,991

Non-controlling interests
 
232

 
772

 
1,747

 
2,460

 
 
$
(63,577
)
 
$
49,664

 
$
12,041

 
$
123,451

 
 
 
 
 
 
 
 
 
(Loss) earnings per share attributable to common shareholders
 
 

 
 

 
 
 
 
Basic (loss) earnings per share
 
$
(0.42
)
 
$
0.32

 
$
0.07

 
$
0.79

Diluted (loss) earnings per share
 
$
(0.42
)
 
$
0.32

 
$
0.07

 
$
0.79

Weighted average shares outstanding (in 000’s) Basic
 
153,352

 
153,207

 
153,315

 
153,070

Weighted average shares outstanding (in 000’s) Diluted
 
153,504

 
153,434

 
153,522

 
153,353

 
 
 
 
 
 
 
 
 
(1)
Relates to certain doré metal inventory held at a refinery used by the Company that filed for bankruptcy in November, 2018. The inventory write-down was comprised of $3.9 million of production costs and $0.8 million of depreciation and amortization.

 
PAN AMERICAN SILVER CORP.
11


paaslogo2017a01.jpg
 
Q4 2018 NEWS RELEASE

Consolidated Statements of Comprehensive Income
(Unaudited in thousands of U.S. dollars)




 
 
Three months ended
December 31,
 
Year ended
December 31,
 
 
2018

 
2017

 
2018

 
2017

Net (loss) earnings for the period
 
$
(63,577
)
 
$
49,664

 
$
12,041

 
$
123,451

Items that may be reclassified subsequently to net earnings:
 
 
 
 
 
 

 
 

Unrealized net gains on short-term investments (net of $nil tax in 2018 and 2017)
 
332

 
1,376

 
993

 
810

Reclassification adjustment for realized (gains) losses on short-term investments to earnings
 
(294
)
 
250

 
(788
)
 
361

Total comprehensive (loss) earnings for the period
 
$
(63,539
)
 
$
51,290

 
$
12,246

 
$
124,622

 
 
 
 
 
 
 
 
 
Total comprehensive (loss) earnings attributable to:
 
 

 
 

 
 
 
 
Equity holders of the Company
 
$
(63,771
)
 
$
50,518

 
$
10,499

 
$
122,162

Non-controlling interests
 
232

 
772

 
1,747

 
2,460

 
 
$
(63,539
)
 
$
51,290

 
$
12,246

 
$
124,622



 
PAN AMERICAN SILVER CORP.
12


paaslogo2017a01.jpg
 
Q4 2018 NEWS RELEASE

Consolidated Statements of Cash Flows
(Unaudited in thousands of U.S. dollars)




 
 
Three months ended
December 31,
 
Year ended
December 31,
 
 
2018

 
2017

 
2018

 
2017

Cash flow from operating activities
 
 

 
 

 
 
 
 
Net (loss) earnings for the period
 
$
(63,577
)
 
$
49,664

 
$
12,041

 
$
123,451

 
 
 
 
 
 
 
 
 
Current income tax expense
 
9,999

 
26,706

 
53,901

 
62,877

Deferred income tax (recovery) expense
 
(3,961
)
 
12,502

 
(32,754
)
 
(3,843
)
Interest expense (recovery)
 
117

 
284

 
(678
)
 
(1,179
)
Depreciation and amortization
 
37,245

 
34,240

 
147,289

 
122,888

Impairment charges (reversals)
 
27,789

 
(61,554
)
 
27,789

 
(61,554
)
Accretion on closure and decommissioning provision
 
1,631

 
1,493

 
6,524

 
5,973

Unrealized (gains) losses on foreign exchange
 
(348
)
 
362

 
10,337

 
(383
)
Loss (gain) on sale of mineral properties, plant and equipment
 
56

 
794

 
(7,973
)
 
(191
)
Project development write-down
 
—

 
—

 
—

 
1,898

Other operating activities
 
19,824

 
7,697

 
17,724

 
12,663

Changes in non-cash operating working capital
 
(4,897
)
 
15,193

 
(4,261
)
 
11,709

Operating cash flows before interest and income taxes
 
$
23,878

 
$
87,381

 
$
229,939

 
$
274,309

 
 
 
 
 
 
 
 
 
Interest paid
 
(417
)
 
(413
)
 
(1,684
)
 
(2,367
)
Interest received
 
561

 
414

 
1,944

 
1,462

Income taxes paid
 
(12,092
)
 
(8,091
)
 
(75,221
)
 
(48,845
)
Net cash generated from operating activities
 
$
11,930

 
$
79,291

 
$
154,978

 
$
224,559

 
 
 
 
 
 
 
 
 
Cash flow from investing activities
 
 

 
 

 
 
 
 
Payments for mineral properties, plant and equipment
 
$
(42,302
)
 
$
(36,473
)
 
$
(144,348
)
 
$
(142,232
)
Acquisition of mineral interests
 
—

 
—

 
(7,500
)
 
(20,219
)
Net purchase of short-term investments
 
(10,020
)
 
(703
)
 
(25,554
)
 
(14,267
)
Proceeds from sale of mineral properties, plant and equipment
 
4

 
36

 
15,781

 
1,674

Purchase of shares in associate
 
—

 
—

 
—

 
(2,473
)
Net proceeds (payments) from commodity, diesel fuel swaps, and foreign currency contracts
 
1,289

 
348

 
2,449

 
(304
)
Net cash used in investing activities
 
$
(51,029
)
 
$
(36,792
)
 
$
(159,172
)
 
$
(177,821
)
 
 
 
 
 
 
 
 
 
Cash flow from financing activities
 
 

 
 

 
 
 
 
Proceeds from issue of equity shares
 
$
—

 
$
28

 
$
1,081

 
$
2,606

Distributions to non-controlling interests
 
(1,158
)
 
(314
)
 
(2,020
)
 
(1,052
)
Dividends paid
 
(5,366
)
 
(3,830
)
 
(21,284
)
 
(15,314
)
Repayment of credit facility
 
—

 
—

 
—

 
(36,200
)
Proceeds from (repayment of) short-term loans
 
—

 
3,000

 
(3,000
)
 
3,000

Payment of equipment leases
 
(2,223
)
 
(1,344
)
 
(7,911
)
 
(4,542
)
Net cash used in financing activities
 
$
(8,747
)
 
$
(2,460
)
 
$
(33,134
)
 
$
(51,502
)
Effects of exchange rate changes on cash and cash equivalents
 
(68
)
 
(80
)
 
(115
)
 
(164
)
Net (decrease) increase in cash and cash equivalents
 
(47,914
)
 
39,959

 
(37,443
)
 
(4,928
)
Cash and cash equivalents at the beginning of the period
 
186,424

 
135,994

 
175,953

 
180,881

Cash and cash equivalents at the end of the period
 
$
138,510

 
$
175,953

 
$
138,510

 
$
175,953


 
PAN AMERICAN SILVER CORP.
13


paaslogo2017a01.jpg
 
Q4 2018 NEWS RELEASE

All amounts expressed in U.S. dollars unless otherwise indicated
Unaudited tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted

ALTERNATIVE PERFORMANCE (NON-GAAP) MEASURES
All-In Sustaining Costs per Silver Ounce Sold ("AISCSOS")
AISCSOS is a non-GAAP financial measure. AISCSOS does not have any standardized meaning prescribed by IFRS and is therefore unlikely to be comparable to similar measures presented by other companies. We believe that AISCSOS reflects a comprehensive measure of the full cost of operating our consolidated business given it includes the cost of replacing silver ounces through exploration, the cost of ongoing capital investments (sustaining capital), general and administrative expenses, as well as other items that affect the Company’s consolidated cash flow. To facilitate a better understanding of this measure as calculated by the Company, the following table provides the detailed reconciliation of this measure to the applicable cost items, as reported in the consolidated income statements for the respective periods:
 
 
 
 
Three months ended
December 31,
 
Year ended
December 31,
(In thousands of USD, except as noted)
 
 
 
2018

 
2017

 
2018

 
2017

Direct operating costs
 
 
 
$
119,070

 
$
134,202

 
$
487,462

 
$
488,363

Inventory Net Realizable Value ("NRV") adjustments
 
A
 
13,263

 
5,495

 
24,330

 
12,307

Production costs
 
 
 
$
132,334

 
$
139,697

 
$
511,793

 
$
500,670

Royalties
 
 
 
4,601

 
8,809

 
20,673

 
24,510

Direct selling costs(1)
 
 
 
14,614

 
19,408

 
53,119

 
69,344

Less by-product credits(1)
 
 
 
(107,454
)
 
(131,679
)
 
(483,325
)
 
(462,663
)
Cash cost of sales net of by-products (2)
 
 
 
$
44,095

 
$
36,235

 
$
102,259

 
$
131,862

Sustaining capital (3) 
 
 
 
$
29,377

 
$
25,573

 
$
106,030

 
$
84,215

Exploration and project development(4)
 
 
 
3,509

 
4,269

 
11,137

 
17,858

Reclamation cost accretion
 
 
 
1,631

 
1,493

 
6,524

 
5,973

General and administrative expense  
 
 
 
5,450

 
4,732

 
22,649

 
21,397

All-in sustaining costs (4)
 
B
 
$
84,062

 
$
72,303

 
$
248,600

 
$
261,304

Payable ounces sold (in thousands)
 
C
 
5,299

 
6,659

 
23,160

 
24,212

All-in sustaining cost per silver ounce sold, net of by-products
 
B/C
 
$
15.86

 
$
10.86

 
$
10.73

 
$
10.79

All-in sustaining cost per silver ounce sold, net of by-products (excludes NRV inventory adjustments)
 
(B-A)/C
 
$
13.36

 
$
10.03

 
$
9.68

 
$
10.28

(1)
Included in the revenue line of the interim consolidated income statements, and for by-product credits are reflective of realized metal prices for the applicable periods.
(2)
Totals may not add due to rounding.
(3)
Please refer to the table below. Further, Q4 2018 and 2018 annual sustaining capital cash outflows included in this table were $2.0 million less and $0.8 million more than the and $31.3 million and $105.2 million of sustaining capital expenditures capitalized in Q4 2018 and 2018, respectively, as shown in the Consolidated Results table included in this news release (Q4 2017 and 2017, $3.1 million and $0.2 million less than the $28.7 million and $84.4 million capitalized). The difference is due to the timing difference between the cash payment of capital investments compared with the period in which investments are capitalized.
(4)
The amounts for year-to-date 2017 exclude $1.9 million from non-cash project development write-downs.

As part of the AISCSOS measure, sustaining capital is included while expansionary or acquisition capital (referred to by the Company as non-sustaining capital) is not. Inclusion of sustaining capital only is a measure of capital costs associated with current ounces sold as opposed to project capital, which is expected to increase future production. For the periods under review, the items noted below are associated with the La Colorada and Dolores projects and are considered to be investment capital projects.

 
PAN AMERICAN SILVER CORP.
14


paaslogo2017a01.jpg
 
Q4 2018 NEWS RELEASE

All amounts expressed in U.S. dollars unless otherwise indicated
Unaudited tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted

Reconciliation of payments for mineral properties,
plant and equipment and sustaining capital
 
Three months ended
December 31,
 
Year ended
December 31,
(in thousands of USD)
 
2018

 
2017

 
2018

 
2017

Payments for mineral properties, plant and equipment(1)
 
$
42,302

 
$
36,473

 
144,348

 
142,232

Add/(Subtract)
 
 
 
 

 
 
 
 
Advances received for leases
 
450

 
1,385

 
7,028

 
5,000

Non-Sustaining capital
 
(13,375
)
 
(12,284
)
 
(45,346
)
 
(63,017
)
Sustaining Capital(2)
 
$
29,377

 
$
25,573

 
106,030

 
84,215

(1)
As presented on the unaudited interim consolidated statements of cash flows.
(2)
Totals may not add due to rounding.

 
PAN AMERICAN SILVER CORP.
15


paaslogo2017a01.jpg
 
Q4 2018 NEWS RELEASE

All amounts expressed in U.S. dollars unless otherwise indicated
Unaudited tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted

Three months ended December 31, 2018
 
La Colorada
Dolores
Huaron
Morococha
San
Vicente
Manantial
Espejo
PASCORP
Consolidated
Direct operating costs
16,947

39,667

19,707

16,096

6,984

19,671

 
119,070

NRV inventory adjustments
—

11,440

—

—

—

1,822

 
13,263

Production costs
16,947

51,107

19,707

16,096

6,984

21,494

 
132,334

Royalties
130

1,642

—

—

2,554

275

 
4,601

Direct selling costs
2,050

31

6,061

2,524

1,816

2,132

 
14,614

Less by-product credits
(14,749
)
(35,862
)
(23,682
)
(19,013
)
(6,231
)
(7,917
)
 
(107,454
)
Cash cost of sales net of by-products(1)
4,378

16,919

2,087

(394
)
5,123

15,984

 
44,095

Sustaining capital
5,364

13,255

5,653

3,039

1,628

436

 
29,377

Exploration and project development
711

241

7

123

—

51

2,375

3,509

Reclamation cost accretion
114

351

152

87

63

708

156

1,631

General & administrative expense  
—

—

—

—

—

—

5,450

5,450

All-in sustaining costs(1)
10,567

30,766

7,899

2,855

6,814

17,178

7,981

84,062

Payable ounces sold (thousand)
1,780

870

858

674

502

615

 
5,299

 
 
 
 
 
 
 
 
 
All-in sustaining cost per silver ounce sold, net of by-products
$
5.93

$
35.36

$
9.21

$
4.24

$
13.57

$
27.94

 
$
15.86

All-in sustaining cost per silver ounce sold, net of by-products (excludes NRV inventory adjustments)
5.93

22.21

9.21

4.24

13.57

24.98

 
13.36

(1)
Totals may not add due to rounding.
Three months ended December 31, 2017
 
La Colorada
Dolores
Alamo
Dorado
Huaron
Morococha
San
Vicente
Manantial
Espejo
PASCORP
Consolidated
Direct operating costs
16,580

35,739

3,957

19,551

16,931

10,484

30,960



134,202

NRV inventory adjustments
—

4,098

(1,916
)
—

—

—

3,313



5,495

Production costs
16,580

39,838

2,041

19,551

16,931

10,484

34,273



139,697

Royalties
106

1,966

—

—

—

6,105

633



8,809

Direct selling costs
4,066

31

248

6,659

5,014

3,383

8



19,408

Less by-product credits
(18,316
)
(39,317
)
(61
)
(24,653
)
(26,767
)
(6,969
)
(15,595
)


(131,679
)
Cash cost of sales net of by-products(1)
2,435

2,518

2,227

1,557

(4,823
)
13,002

19,319



36,235

Sustaining capital
2,576

13,303

—

3,548

3,162

1,939

1,045



25,573

Exploration and project development
73

564

—

428

543

—

936

1,726

4,269

Reclamation cost accretion
112

296

89

162

105

56

619

54

1,493

General & administrative expense  
—

—

—

—

—

—

—

4,732

4,732

All-in sustaining costs(1)
5,196

16,682

2,317

5,695

(1,013
)
14,998

21,918

6,511

72,303

Payable ounces sold (thousand)
1,847

1,225

133

813

658

1,218

766



6,659

 
 
 
 
 
 
 
 
 
 
All-in sustaining cost per silver ounce sold, net of by-products
$
2.81

$
13.62

$
17.45

$
7.00

$
(1.54
)
$
12.31

$
28.63



$
10.86

All-in sustaining cost per silver ounce sold, net of by-products (excludes NRV inventory adjustments)
$
2.81

$
10.27

$
31.89

$
7.00

$
(1.54
)
$
12.31

$
24.30



$
10.03

(1)
Totals may not add due to rounding.

 
PAN AMERICAN SILVER CORP.
16


paaslogo2017a01.jpg
 
Q4 2018 NEWS RELEASE

All amounts expressed in U.S. dollars unless otherwise indicated
Unaudited tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted

Year ended December 31, 2018
 
La Colorada
Dolores
Huaron
Morococha
San
Vicente
Manantial
Espejo
PASCORP
Consolidated
Direct operating costs
70,248

154,598

75,382

68,068

33,461

85,705



487,462

NRV inventory adjustments


24,567







(238
)


24,330

Production costs
70,248

179,165

75,382

68,068

33,461

85,468

0

511,793

Royalties
616

7,991

—

—

9,943

2,124



20,673

Direct selling costs
8,537

129

21,326

13,313

7,451

2,363



53,119

Less by-product credits
(63,442
)
(170,337
)
(91,155
)
(93,142
)
(20,829
)
(44,420
)


(483,325
)
Cash cost of sales net of by-products(1)
15,959

16,949

5,553

(11,761
)
30,026

45,534



102,259

Sustaining capital
15,462

48,842

17,109

14,840

6,949

2,827



106,030

Exploration and project development
880

1,594

660

598

—

744

6,661

11,137

Reclamation cost accretion
457

1,405

609

347

252

2,832

622

6,524

General & administrative expense  
—

—

—

—

—

—

22,649

22,649

All-in sustaining costs(1)
32,758

68,790

23,931

4,024

37,227

51,937

29,932

248,600

Payable ounces sold (thousand)
7,069

4,205

3,094

2,652

3,054

3,086



23,160

 
 
 
 
 
 
 
 
 
All-in sustaining cost per silver ounce sold, net of by-products
$
4.63

$
16.36

$
7.73

$
1.52

$
12.19

$
16.83



$
10.73

All-in sustaining cost per silver ounce sold, net of by-products (excludes NRV inventory adjustments)
4.63

10.52

7.73

1.52

12.19

16.91



9.68

(1)
Totals may not add due to rounding.

Year ended December 31, 2017
 
La Colorada
Dolores
Alamo
Dorado
Huaron
Morococha
San
Vicente
Manantial
Espejo
PASCORP
Consolidated
Direct operating costs
67,170

116,104

20,477

75,551

63,967

34,731

110,362

 
488,363

NRV inventory adjustments


6,847

(2,598
)






8,058

 
12,307

Production costs
67,170

122,951

17,879

75,551

63,967

34,731

118,420

 
500,670

Royalties
475

6,501

79

—

—

14,321

3,134

 
24,510

Direct selling costs
12,235

93

479

26,238

18,770

10,740

789

 
69,344

Less by-product credits
(64,133
)
(128,351
)
(3,467
)
(97,715
)
(94,233
)
(16,278
)
(58,485
)
 
(462,663
)
Cash cost of sales net of by-products(1)
15,748

1,194

14,970

4,074

(11,496
)
43,513

63,858

 
131,862

Sustaining capital
13,970

36,071

—

10,267

12,428

8,146

3,333

 
84,215

Exploration and project development
251

2,444

—

1,713

1,629

—

4,588

7,232

17,858

Reclamation cost accretion
448

1,186

357

646

420

225

2,474

216

5,973

General & administrative expense  
—

—

—

—

—

—

—

21,397

21,397

All-in sustaining costs(1)
30,417

40,894

15,327

16,701

2,981

51,884

74,254

28,845

261,304

Payable ounces sold (thousand)
6,853

4,089

867

3,181

2,448

3,603

3,171

 
24,212

 
 
 
 
 
 
 
 
 
 
All-in sustaining cost per silver ounce sold, net of by-products
$
4.44

$
10.00

$
17.69

$
5.25

$
1.22

$
14.40

$
23.42

 
$
10.79

All-in sustaining cost per silver ounce sold, net of by-products (excludes NRV inventory adjustments)
$
4.44

$
8.33

$
20.68

$
5.25

$
1.22

$
14.40

$
20.88

 
$
10.28

(1)
Totals may not add due to rounding.

 
PAN AMERICAN SILVER CORP.
17


paaslogo2017a01.jpg
 
Q4 2018 NEWS RELEASE

All amounts expressed in U.S. dollars unless otherwise indicated
Unaudited tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted

Cash Costs per Ounce of Silver, Net of By-Product Credits
Pan American produces by-product metals incidentally to our silver mining activities. We have adopted the practice of calculating the net cost of producing an ounce of silver, our primary payable metal, after deducting revenues gained from incidental by-product production, as a performance measure. This performance measurement has been commonly used in the mining industry for many years and was developed as a relatively simple way of comparing the net production costs of the primary metal for a specific period against the prevailing market price of that metal. 
Cash costs per ounce metrics, net of by-product credits, is used extensively in our internal decision making processes. We believe the metric is also useful to investors because it facilitates comparison, on a mine-by-mine basis, notwithstanding the unique mix of incidental by-product production at each mine, of our operations’ relative performance on a period-by-period basis, and against the operations of our peers in the silver industry on a consistent basis. Cash costs per ounce is conceptually understood and widely reported in the silver mining industry. However, cash cost per ounce of silver is a non-GAAP measure and does not have a standardized meaning prescribed by GAAP and the Company’s method of calculating cash costs may differ from the methods used by other entities.

To facilitate a better understanding of these measures as calculated by the Company, the following table provides the detailed reconciliation of these measures to the production costs, as reported in the consolidated income statements for the respective periods:
Total Cash Costs per ounce of Payable Silver, net of
by-product credits
Three months ended
December 31,
Year ended
December 31,
(in thousands of U.S. dollars except as noted)
2018

2017

2018

2017

Production costs(1)
 
$
136,177

$
139,697

$
515,636

$
500,670

Add/(Subtract)
 
 
 




Royalties
 
4,601

8,809

20,673

24,510

Smelting, refining, and transportation charges
 
14,736

18,469

57,137

73,222

Worker’s participation and voluntary payments
 
(616
)
(1,374
)
(3,506
)
(5,067
)
Change in inventories
 
5,922

(12,776
)
16,581

(16,011
)
Other
 
(1,090
)
555

(8,866
)
1,559

Non-controlling interests (2)
 
(456
)
(64
)
(875
)
(1,126
)
Inventory net realizable value (“NRV”) adjustments
 
(13,263
)
(5,495
)
(24,330
)
(12,307
)
Cash Operating Costs before by-product credits(3)
 
146,012

147,820

572,449

565,450

Less gold credit
 
(44,609
)
(54,648
)
(224,716
)
(196,649
)
Less zinc credit
 
(42,270
)
(40,826
)
(162,646
)
(137,826
)
Less lead credit
 
(11,482
)
(12,687
)
(46,501
)
(46,948
)
Less copper credit
 
(12,707
)
(20,026
)
(60,706
)
(77,348
)
Cash Operating Costs net of by-product credits (3)
A
34,945

19,633

77,881

106,678

Payable Silver Production (koz)
B
5,710

6,172

23,258

23,444

Cash Costs per ounce net of by-product credits
A/B
$
6.12

$
3.18

$
3.35

$
4.55

(1)
2018 annual and Q4 2018 production costs include $3.9 million of costs to produce certain doré metal inventory that was subsequently written-off in full as a result of the inventory being held at a refinery that filed for bankruptcy in November of 2018.
(2)
Figures presented in the reconciliation table above are on a 100% basis as presented in the consolidated financial statements with an adjustment line item to account for the portion of the Morococha and San Vicente mines owned by non-controlling interests, an expense item not included in operating cash costs. The associated tables below are for the Company’s share of ownership only.
(3)
Figures in this table and in the associated tables below may not add due to rounding.


 
PAN AMERICAN SILVER CORP.
18


paaslogo2017a01.jpg
 
Q4 2018 NEWS RELEASE

All amounts expressed in U.S. dollars unless otherwise indicated
Unaudited tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted

Three months ended December 31, 2018 (1)
(in thousands of USD except as noted)
 
 
La
Colorada
Dolores
Alamo
Dorado
Huaron
Morococha
San
Vicente
Manantial
Espejo
Consolidated
Total
Cash Costs before by-product credits
A
$
20,448

$
41,872

$
—

$
25,721

$
18,147

$
15,422

$
22,527

$
144,136

Less gold credit
b1
(1,223
)
(36,065
)
—

—

298

(63
)
(7,578
)
(44,631
)
Less zinc credit
b2
(11,342
)
—

—

(10,426
)
(12,845
)
(6,251
)
—

(40,865
)
Less lead credit
b3
(4,492
)
—

—

(3,991
)
(2,593
)
(179
)
—

(11,255
)
Less copper credit
b4
—

—

—

(8,930
)
(2,617
)
(893
)
—

(12,441
)
Sub-total by-product credits
B=( b1+ b2+ b3+ b4)
$
(17,058
)
$
(36,065
)
$
—

$
(23,346
)
$
(17,757
)
$
(7,386
)
$
(7,578
)
$
(109,192
)
Cash Costs net of by-product credits
C=(A+B)
$
3,390

$
5,807

$
—

$
2,374

$
390

$
8,036

$
14,948

$
34,945

 
 
 
 
 
 
 
 
 
 
Payable ounces of silver (thousand)
D
1,955

823

—

841

636

870

586

5,710

 
 
 
 
 
 
 
 
 
 
Cash cost per ounce net of by-products
C/D
$
1.73

$
7.06

 NA

$
2.82

$
0.61

$
9.23

$
25.53

$
6.12

(1) Totals may not add due to rounding.

Year ended December 31, 2018(1)
(in thousands of USD except as noted)
 
 
La
Colorada
Dolores
Alamo Dorado
Huaron
Morococha
San
Vicente
Manantial Espejo
Consolidated
Total
Cash Costs before by-product credits
A
$
81,578

166,048

$
—

$
96,464

$
75,836

$
56,973

$
87,074

$
563,974

Less gold credit
b1
(4,802
)
(173,657
)
—

(3
)
(1,673
)
(284
)
(44,142
)
(224,561
)
Less zinc credit
b2
(43,777
)
—

—

(41,422
)
(54,392
)
(17,573
)
—

(157,164
)
Less lead credit
b3
(18,459
)
—

—

(16,786
)
(9,819
)
(584
)
—

(45,648
)
Less copper credit
b4
—

—

—

(33,193
)
(20,658
)
(4,868
)
—

(58,719
)
Sub-total by-product credits
B=( b1+ b2+ b3+ b4)
$
(67,038
)
$
(173,657
)
$
—

$
(91,405
)
$
(86,542
)
$
(23,309
)
$
(44,142
)
$
(486,093
)
Cash Costs net of by-product credits
C=(A+B)
$
14,541

$
(7,608
)
$
—

$
5,060

$
(10,706
)
$
33,664

$
42,932

$
77,883

 
 
 
 
 
 
 
 
 
 
Payable ounces of silver (thousand)
D
7,196

4,075

—

3,107

2,467

3,326

3,086

23,258

 
 
 
 
 
 
 
 
 
 
Cash cost per ounce net of by-products
C/D
$
2.02

$
(1.87
)
 NA

$
1.63

$
(4.34
)
$
10.12

$
13.91

$
3.35

(1) Totals may not add due to rounding.

Three months ended December 31, 2017(1)
(in thousands of USD except as noted)
 
 
La
Colorada
Dolores
Alamo Dorado
Huaron
Morococha
San
Vicente
Manantial Espejo
Consolidated
Total
Cash Costs before by-product credits
A
$
18,708

34,778

$
136

$
26,440

$
20,276

$
15,300

$
29,800

$
145,437

Less gold credit
b1
(1,377
)
(39,708
)
(90
)
(9
)
(625
)
(79
)
(12,704
)
(54,592
)
Less zinc credit
b2
(11,337
)
—

—

(12,296
)
(12,205
)
(3,767
)
—

(39,605
)
Less lead credit
b3
(5,232
)
—

—

(4,758
)
(2,361
)
(131
)
—

(12,483
)
Less copper credit
b4
—

—

—

(7,671
)
(9,585
)
(1,868
)
—

(19,124
)
Sub-total by-product credits
B=( b1+ b2+ b3+ b4)
$
(17,947
)
$
(39,708
)
$
(90
)
$
(24,733
)
$
(24,776
)
$
(5,845
)
$
(12,704
)
$
(125,804
)
Cash Costs net of by-product credits
C=(A+B)
$
761

$
(4,930
)
$
46

$
1,706

$
(4,500
)
$
9,455

$
17,095

$
19,633

 
 
 
 
 
 
 
 
 
 
Payable ounces of silver (thousand)
D
1,777

1,254

22

821

607

1,046

645

6,172

 
 
 
 
 
 
 
 
 
 
Cash cost per ounce net of by-products
C/D
$
0.43

$
(3.93
)
$
2.09

$
2.08

$
(7.42
)
$
9.04

$
26.52

$
3.18

(1) Totals may not add due to rounding.

 
PAN AMERICAN SILVER CORP.
19


paaslogo2017a01.jpg
 
Q4 2018 NEWS RELEASE

All amounts expressed in U.S. dollars unless otherwise indicated
Unaudited tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted


Year ended December 31, 2017(1)
(in thousands of USD except as noted)
 
 
La
Colorada
Dolores
Alamo Dorado
Huaron
Morococha
San
Vicente
Manantial Espejo
Consolidated
Total
Cash Costs before by-product credits
A
$
75,407

122,532

$
12,666

$
101,588

$
76,085

$
55,286

$
113,726

$
557,291

Less gold credit
b1
(4,477
)
(129,503
)
(2,498
)
(148
)
(2,639
)
(305
)
(56,842
)
(196,411
)
Less zinc credit
b2
(37,967
)
—

—

(46,080
)
(39,402
)
(10,522
)
—

(133,972
)
Less lead credit
b3
(18,994
)
—

—

(19,039
)
(7,573
)
(672
)
—

(46,278
)
Less copper credit
b4
—

—

(46
)
(32,059
)
(38,315
)
(3,533
)
—

(73,952
)
Sub-total by-product credits
B=( b1+ b2+ b3+ b4)
$
(61,438
)
$
(129,503
)
$
(2,544
)
$
(97,327
)
$
(87,929
)
$
(15,032
)
$
(56,842
)
$
(450,614
)
Cash Costs net of by-product credits
C=(A+B)
$
13,970

$
(6,971
)
$
10,123

$
4,261

$
(11,844
)
$
40,254

$
56,884

$
106,677

 
 
 
 
 
 
 
 
 
 
Payable ounces of silver (thousand)
D
6,709

4,225

614

3,164

2,219

3,396

3,117

23,444

 
 
 
 
 
 
 
 
 
 
Cash cost per ounce net of by-products
C/D
$
2.08

$
(1.65
)
$
16.49

$
1.35

$
(5.34
)
$
11.85

$
18.25

$
4.55

(1) Totals may not add due to rounding.



 
PAN AMERICAN SILVER CORP.
20


paaslogo2017a01.jpg
 
Q4 2018 NEWS RELEASE

All amounts expressed in U.S. dollars unless otherwise indicated
Unaudited tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted

Adjusted Earnings and Basic Adjusted Earnings Per Share
Adjusted earnings and basic adjusted earnings per share are non-GAAP measures that the Company considers to better reflect normalized earnings as it eliminates items that in management's judgment are subject to volatility as a result of factors which are unrelated to operations in the period, and/or relate to items that will settle in future periods. Certain items that become applicable in a period may be adjusted for, with the Company retroactively presenting comparable periods with an adjustment for such items and conversely, items no longer applicable may be removed from the calculation. The Company adjusts certain items in the periods that they occurred but does not reverse or otherwise unwind the effect of such items in future periods. Neither adjusted earnings nor basic adjusted earnings per share have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other companies.

The following table shows a reconciliation of adjusted loss and earnings for the year and three months ended December 31, 2018 and 2017, to the net earnings for each period.
 
 
Three Months Ended
December 31,
 
Year ended
December 31,
(In thousands of USD, except as noted)
 
2018

 
2017

 
2018

 
2017

Net (loss) earnings for the period
 
$
(63,577
)
 
$
49,664

 
$
12,041

 
$
123,451

Adjust for:
 
 
 
 
 
 
 
 
Loss (gain) on derivatives
 
60

 
(64
)
 
1,078

 
(64
)
Impairment charges (reversals)
 
27,789

 
(61,554
)
 
27,789

 
(61,554
)
Write-down of project development costs
 
—

 
—

 
—

 
1,898

Unrealized foreign exchange (gains) losses
 
(348
)
 
362

 
10,337

 
(383
)
Net realizable value adjustments to heap inventory
 
12,977

 
4,936

 
24,082

 
10,060

Unrealized losses (gains) on commodity and foreign currency contracts
 
765

 
2,190

 
(2,481
)
 
(909
)
Mine operation severance costs
 
—

 
—

 
—

 
3,509

Share of loss (income) from associate and dilution gain
 
182

 
(259
)
 
(13,679
)
 
(2,052
)
Reversal of previously accrued tax liabilities
 
—

 
—

 
(1,188
)
 
(2,793
)
Metal inventory loss
 
4,670

 
—

 
4,670

 
—

Transaction costs
 
10,229

 
—

 
10,229

 
—

Losses (gains) on sale of mineral properties, plant and equipment
 
56

 
794

 
(7,973
)
 
(191
)
Closure and decommissioning liability adjustment
 
2,832

 
4,515

 
2,832

 
8,388

Adjust for effect of taxes relating to the above
 
$
(5,832
)
 
$
6,046

 
$
(9,914
)
 
$
2,273

Adjust for effect of foreign exchange on taxes
 
8,175

 
12,589

 
1,611

 
(3,928
)
Adjusted (loss) earnings for the period
 
$
(2,022
)
 
$
19,219

 
$
59,434

 
$
77,705

Weighted average shares for the period
 
153,352

 
153,207

 
153,315

 
153,070

Adjusted (loss) earnings per share for the period
 
$
(0.01
)
 
$
0.13

 
$
0.39

 
$
0.51



 
PAN AMERICAN SILVER CORP.
21


paaslogo2017a01.jpg
 
Q4 2018 NEWS RELEASE

All amounts expressed in U.S. dollars unless otherwise indicated
Unaudited tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted

INDIVIDUAL MINE OPERATION HIGHLIGHTS

Mexico - La Colorada mine
 
Three months ended
December 31,
Year ended
December 31,
 
2018

2017

2018

2017

Tonnes milled - kt
187.4

170.7

726.0

655.3

Average silver grade – grams per tonne
375

374

358

368

Average zinc grade - %
3.10

2.88

2.83

2.81

Average lead grade - %
1.50

1.54

1.40

1.54

Average silver recovery - %
91.7

91.1

91.2

91.1

Average zinc recovery - %
87.5

84.1

86.5

83.7

Average lead recovery - %
86.8

86.2

87.2

86.9

Production:
 

 

 
 
Silver – koz
2,074

1,870

7,617

7,056

Gold – koz
1.16

1.26

4.40

4.29

Zinc – kt
5.09

4.14

17.79

15.44

Lead – kt
2.44

2.26

8.84

8.80

 
 
 
 
 
Cash cost per ounce net of by-products
$
1.73

$
0.43

$
2.02

$
2.08

 
 
 
 
 
AISCSOS
$
5.93

$
2.81

$
4.63

$
4.44

 
 
 
 
 
Payable silver sold - koz
1,780

1,847

7,069

6,853

 
 
 
 
 
Sustaining capital -  (’000s)
$
5,364

$
2,576

$
15,462

$
13,970


Mexico - Dolores mine
 
Three months ended
December 31,
Year ended
December 31,
 
2018

2017

2018

2017

Tonnes placed - kt
1,818.5

1,785.1

6,903.3

6,604.9

Average silver grade – grams per tonne
25

39

31

38

Average gold grade – grams per tonne
0.68

0.76

0.85

0.66

Average silver produced to placed ratio - %
55.6

55.5

59.2

51.7

Average gold produced to placed ratio - %
73.4

71.8

72.2

70.7

Production:
 

 

 
 
Silver – koz
824

1,256

4,081

4,232

Gold – koz
29.4

31.2

136.6

103.0

 
 
 
 
 
Cash cost per ounce net of by-products
7.06

(3.93
)
(1.87
)
(1.65
)
 
 
 
 
 
AISCSOS
35.36

13.62

16.36

10.00

 
 
 
 
 
Payable silver sold - koz
870

1,225

4,205

4,089

 
 
 
 
 
Sustaining capital -  (’000s)
$
13,255

$
13,303

$
48,842

$
36,071


 
PAN AMERICAN SILVER CORP.
22


paaslogo2017a01.jpg
 
Q4 2018 NEWS RELEASE

All amounts expressed in U.S. dollars unless otherwise indicated
Unaudited tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted

Peru- Huaron mine
 
Three months ended
December 31,
Year ended
December 31,
 
2018

2017

2018

2017

Tonnes milled - kt
252.0

231.5

935.0

928.1

Average silver grade – grams per tonne
142

152

142

146

Average zinc grade - %
2.49

2.58

2.44

2.70

Average lead grade - %
1.22

1.15

1.18

1.23

Average copper grade - %
0.78

0.70

0.76

0.84

Average silver recovery - %
83.0

84.1

82.7

85.2

Average zinc recovery - %
76.4

77.8

76.0

77.6

Average lead recovery - %
70.4

76.6

73.2

77.7

Average copper recovery - %
77.6

74.5

76.9

78.5

Production:
 

 

 
 
Silver – koz
965

951

3,561

3,684

Gold – koz
0.22

0.19

0.79

1.15

Zinc – kt
4.82

4.64

17.38

19.37

Lead – kt
2.16

2.03

8.05

8.77

Copper – kt
1.52

1.21

5.44

6.09

 
 
 
 
 
Cash cost per ounce net of by-products
$
2.82

$
2.08

$
1.63

$
1.35

 
 
 
 
 
AISCSOS
$
9.21

$
7.00

$
7.73

$
5.25

 
 
 
 
 
Payable silver sold – koz
858

813

3,094

3,181

 
 
 
 
 
Sustaining capital - (’000s)
$
5,653

$
3,548

$
17,109

$
10,267



























 
PAN AMERICAN SILVER CORP.
23


paaslogo2017a01.jpg
 
Q4 2018 NEWS RELEASE

All amounts expressed in U.S. dollars unless otherwise indicated
Unaudited tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted

Peru - Morococha mine(1) 
 
Three months ended
December 31,
Year ended
December 31,
 
2018

2017

2018

2017

Tonnes milled – kt
163.0

170.6

672.0

676.9

Average silver grade – grams per tonne
154

145

149

137

Average zinc grade  - %
4.02

3.25

3.80

3.01

Average lead grade  - %
1.09

0.84

0.92

0.78

Average copper grade  - %
0.44

1.07

0.66

1.20

Average silver recovery - %
91.9

91.0

90.7

89.2

Average zinc recovery - %
88.4

81.2

87.4

79.6

Average lead recovery - %
78.7

71.0

76.5

66.6

Average copper recovery - %
63.1

83.4

75.7

83.9

Production:
 

 

 
 
Silver – koz
740

721

2,881

2,634

Gold – koz
0.19

0.82

2.09

3.53

Zinc – kt
5.78

4.49

22.17

16.13

Lead – kt
1.40

1.00

4.69

3.46

Copper – kt
0.45

1.49

3.30

6.64

 
 
 
 
 
Cash cost per ounce net of by-products
$
0.61

$
(7.42
)
$
(4.34
)
$
(5.34
)
 
 
 
 
 
AISCSOS
$
4.24

$
(1.54
)
$
1.52

$
1.22

 
 
 
 
 
Payable silver sold (100%) - koz
674

658

2,652

2,448

 
 
 
 
 
Sustaining capital (100%) -  (’000s)
$
3,039

$
3,162

$
14,840

$
12,428

(1)
Production figures are for Pan American’s 92.3% share only, unless otherwise noted.

Bolivia - San Vicente mine(1) 
 
Three months ended
December 31,
Year ended
December 31,
 
2018

2017

2018

2017

Tonnes milled – kt
88.3

89.5

332.9

328.1

Average silver grade – grams per tonne
372

406

362

374

Average zinc grade - %
3.66

2.01

2.77

1.94

Average lead grade - %
0.32

0.25

0.34

0.29

Average silver recovery - %
90.7

93.9

92.7

92.6

Average zinc recovery - %
88.2

77.7

81.5

68.7

Average lead recovery - %
78.5

79.1

64.8

80.1

Production:
 

 

 
 
Silver – koz
937

1,102

3,544

3,610

Gold – koz
0.12

0.14

0.50

0.51

Zinc – kt
2.82

1.40

7.47

4.36

Lead – kt
0.26

0.11

0.78

0.47

Copper – kt
0.22

0.33

1.02

0.63

 
 
 
 
 
Cash cost per ounce net of by-products
$
9.23

$
9.04

$
10.12

$
11.85

 
 
 
 
 
AISCSOS
$
13.57

$
12.31

$
12.19

$
14.40

 
 
 
 
 
Payable silver sold (100%) - koz
502

1,218

3,054

3,603

 
 
 
 
 
Sustaining capital (100%) -  (’000s)
$
1,628

$
1,939

$
6,949

$
8,146

(1)
Production figures are for Pan American’s 95.0% share only, unless otherwise noted.

 
PAN AMERICAN SILVER CORP.
24


paaslogo2017a01.jpg
 
Q4 2018 NEWS RELEASE

All amounts expressed in U.S. dollars unless otherwise indicated
Unaudited tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted

Argentina - Manantial Espejo mine
 
Three months ended
December 31,
Year ended
December 31,
 
2018

2017

2018

2017

Tonnes milled - kt
198.5

205.1

804.4

793.5

Average silver grade – grams per tonne
95

107

135

134

Average gold grade – grams per tonne
0.98

1.62

1.42

1.88

Average silver recovery - %
90.0

89.7

88.0

90.6

Average gold recovery - %
93.1

93.5

93.4

93.8

Production:
 

 

 
 
Silver – koz
587

646

3,092

3,123

Gold – koz
6.19

9.98

34.55

45.34

 
 
 
 
 
Cash cost per ounce net of by-products
$
25.53

$
26.52

$
13.91

$
18.25

 
 
 
 
 
AISCSOS
$
27.94

$
28.63

$
16.83

$
23.42

 
 
 
 
 
Payable silver sold - koz
615

766

3,086

3,171

 
 
 
 
 
Sustaining capital -  (’000s)
$
436

$
1,045

$
2,827

$
3,333




 
PAN AMERICAN SILVER CORP.
25