EX-99..1 2 paasq42019newsrelease2020-.htm EXHIBIT 99..1 Exhibit
paaslogo2017a01.jpg
 
Q4 2019 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 Record Quarterly Cash Flow from Operations of $129.5 Million in Q4 2019
Quarterly Dividend Increased by 43%

All financial figures are in U.S. dollars unless otherwise indicated.

Vancouver, B.C. - February 19, 2020 - Pan American Silver Corp. (NASDAQ: PAAS) (TSX: PAAS) today reported unaudited financial results for the year-ended December 31, 2019 ("FY 2019") and the fourth quarter ("Q4 2019"). These results are preliminary and could change based on final audited results. Preliminary production results were previously reported on January 15, 2020.

“Strong, low cost production generated operational cash flow of $282 million in 2019, which allowed Pan American to retire $60 million of debt, dividend approximately $29 million to shareholders, invest in new projects such as our La Colorada skarn discovery, and increase our cash position," said Michael Steinmann, President and Chief Executive Officer of the Company. "In 2020, we are expecting silver and gold production growth of approximately 7% and 16%, respectively. Given our business outlook and strong financial position, Pan American's Board of Directors has increased the quarterly dividend by 43% to $0.05 per common share."

Q4 2019 and FY 2019 Highlights:
•
Revenue in Q4 2019 and FY 2019 totaled $404.4 million and $1,350.8 million, respectively.
•
Net cash generated from operating activities in Q4 2019 of $129.5 million was the highest in the Company's history. Net cash generated from operating activities in FY 2019 was $282.0 million.
•
Net earnings in Q4 2019 and FY 2019 were $51.7 million ($0.25 basic earnings per share) and $111.2 million ($0.55 basic earnings per share), respectively. Net earnings in Q4 2019 included a $40.1 million impairment charge related to the Manantial Espejo mine in Argentina due to the increase in export taxes and the challenging business environment in Argentina; partially offset by $33.7 million in investment income, largely related to our approximately 17% equity interest in New Pacific Metals Corp.
•
Adjusted earnings in Q4 2019 and FY 2019 were $68.9 million ($0.33 basic adjusted earnings per share) and $158.0 million ($0.78 basic adjusted earnings per share), respectively.
•
Consolidated annual silver and gold production was 25.9 million ounces and 559.2 thousand ounces, respectively, as previously disclosed on January 15, 2020.
•
Silver Segment Cash Costs and All-in Sustaining Costs ("AISC") in FY 2019 were $6.39 and $10.46 per silver ounce sold, respectively, both of which were within the Company's 2019 annual guidance.
•
Gold Segment Cash Costs and AISC in FY 2019 were $712 and $948 per gold ounce sold, respectively, both of which were below the Company's annual guidance for 2019.
•
Consolidated Silver Basis AISC in FY 2019 was $4.44 per silver ounce sold, which was well below the Company's 2019 annual guidance range of $6.00 to $7.50 per ounce.
•
At December 31, 2019, the Company had a cash and short-term investment balance of $238.3 million and $275.0 million of bank debt. Working capital was $517.2 million.
•
In 2019, Pan American paid $29.3 million in dividends ($0.14 per share).
•
The Board of Directors has approved an increase in the cash dividend from $0.035 to $0.05 per common share, for approximately $10.5 million in aggregate cash dividends, payable on or about March 12, 2020, to holders of record of Pan American’s common shares as of the close on March 2, 2020. Pan American's dividends are 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.


 
PAN AMERICAN SILVER CORP.
1

paaslogo2017a01.jpg
 
Q4 2019 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, AISC, adjusted earnings, basic adjusted earnings per share, and working capital 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.

Fourth Quarter and Year End 2019 Unaudited Results Conference Call and Webcast
Date:
February 20, 2020
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:
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 panamericansilver.com. An archive of the webcast will also be available for three months.

 
PAN AMERICAN SILVER CORP.
2

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Q4 2019 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,
2019

December 31,
2018

Weighted average shares during period (millions)
 
 
201.4

153.3

Shares outstanding end of period (millions)
 
 
209.8

153.4

 
 
 
 
 
 
Three months ended
December 31,
Year ended
December 31,
 
2019
2018
2019
2018
FINANCIAL
 
 
 
 
Revenue
$
404,379

$
173,357

$
1,350,759

$
784,495

Mine operating earnings (loss)
$
98,610

$
(4,666
)
$
229,288

$
100,897

Net earnings (loss)
$
51,706

$
(63,577
)
$
111,244

$
12,041

       Basic earnings (loss) per share (1)
$
0.25

$
(0.42
)
$
0.55

$
0.07

Adjusted earnings (loss) (2)
$
68,908

$
(2,022
)
$
157,987

$
59,434

       Basic adjusted earnings (loss) per share (1)
$
0.33

$
(0.01
)
$
0.78

$
0.39

Net cash generated from operating activities
$
129,473

$
11,930

$
282,028

$
154,978

Net cash generated from operating activities before changes in working capital (2)
$
124,727

$
16,827

$
309,972

$
159,239

Sustaining capital expenditures
$
46,187

$
31,150

$
179,096

$
106,913

Project capital expenditures
$
9,504

$
13,151

$
43,627

$
44,702

Cash dividend per share
$
0.035

$
0.035

$
0.140

$
0.140

PRODUCTION
 
 
 
 
Silver (thousand ounces)
6,622

6,127

25,886

24,775

Gold (thousand ounces)
173.9

37.2

559.2

178.9

Zinc (thousand tonnes)
16.6

18.5

67.6

64.8

Lead (thousand tonnes)
7.2

6.3

27.3

22.4

Copper (thousand tonnes)
2.3

2.2

8.7

9.8

CASH COSTS (2) ($/ounce)
 
 
 
 
Silver Segment
7.80

5.82

6.39

3.36

Gold Segment
693

n/a

712

n/a

AISC (2) ($/ounce)
 
 
 
 
Silver Segment
11.37

14.69

10.46

9.48

Gold Segment
901

n/a

948

n/a

Consolidated Silver Basis
1.04

16.19

4.44

10.77

Average realized prices
 
 
 
 
       Silver ($/ounce)(3)
17.84

14.35

16.34

15.61

       Gold ($/ounce)(3)
1,479

1,232

1,406

1,272

       Zinc ($/tonne)(3)
2,325

2,508

2,535

2,846

       Lead ($/tonne)(3)
2,078

1,914

1,997

2,189

      Copper ($/tonne)(3)
5,840

6,098

5,973

6,519

(1)
Per share amounts are based on basic weighted average common shares.
(2)
Non- GAAP measures: Cash Costs, All-in Sustaining Costs (AISC), adjusted earnings, basic adjusted earnings per share, and net cash generated from operating activities before changes in working capital are non-GAAP financial measures. Please refer to the "Alternative Performance (non-GAAP) Measures" section of this news release for further information on these measures.
(3)
Metal prices stated are inclusive of final settlement adjustments on concentrate sales.

 
PAN AMERICAN SILVER CORP.
3

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Q4 2019 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 Annual Results Compared to 2019 Forecast
The Company's 2019 annual production, Cash Costs, AISC and capital expenditures compared to Management's most recent annual forecast amounts are as follows:
 
2019 Actual
Forecast Range (1)
Production
 
 
Silver (million ounces)
25.9

25.3 - 26.3
Gold (thousand ounces)
559.2

550.0 - 600.0
Zinc (thousand tonnes)
67.6

65.0 - 67.0
Lead (thousand tonnes)
27.3

24.0 - 25.0
Copper (thousand tonnes)
8.7

9.8 - 10.3
Cash Costs(2) ($/ounce)
 
 
Silver Segment
6.39

6.00 - 7.00
Gold Segment
712

725 - 775
Consolidated Silver Basis
(4.89
)
(5.50) - (3.80)
AISC(2) ($/ounce)
 
 
Silver Segment
10.46

9.50 - 11.00
Gold Segment
948

1,000 - 1,100
Consolidated Silver Basis
4.44

6.00 - 7.50
Capital Expenditures ($ millions)
 
 
Sustaining Capital
179.1

203.0 - 213.0
Project Capital
43.6

45.0
Total Capital
222.7

248.0 - 258.0
(1)
Forecast amounts represent Management's most recent annual forecasts made or reaffirmed in the Company's Management Discussion and Analysis (MD&A) for the third quarter of 2019, dated November 6, 2019.
(2)
Cash Costs and AISC are non-GAAP measures. Please refer to the section “Alternative Performance (Non-GAAP) Measures” of this news release for a detailed description of these measures and where appropriate a reconciliation.

 
PAN AMERICAN SILVER CORP.
4

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Q4 2019 NEWS RELEASE

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



 
 
December 31,
2019

 
December 31,
2018

Assets
 
 

 
 

Current assets
 
 

 
 

Cash and cash equivalents
 
$
120,564

 
$
138,510

Short-term investments
 
117,776

 
74,004

Trade and other receivables
 
168,753

 
96,091

Income taxes receivable
 
17,209

 
13,108

Inventories
 
346,507

 
214,465

Derivative financial instruments
 
1,272

 
640

Prepaid expenses and other current assets
 
16,838

 
11,556

 
 
788,919

 
548,374

Non-current assets
 
 

 
 
Mineral properties, plant and equipment
 
2,504,901

 
1,301,002

Inventories
 
24,209

 
—

Long-term refundable tax
 
17,900

 
70

Deferred tax assets
 
36,447

 
12,244

Investment in associates
 
84,319

 
70,566

Goodwill & other assets
 
4,987

 
5,220

Total Assets
 
$
3,461,682

 
$
1,937,476

 
 
 
 
 
Liabilities
 
 

 
 

Current liabilities
 
 

 
 

Accounts payable and accrued liabilities
 
$
225,330

 
$
131,743

Derivative financial instruments
 
—

 
51

Current portion of provisions
 
7,372

 
5,072

Current portion of lease obligations
 
14,198

 
5,356

Income tax payable
 
24,770

 
8,306

 
 
271,670

 
150,528

Non-current liabilities
 
 

 
 

Long-term portion of provisions
 
188,012

 
70,083

Deferred tax liabilities
 
176,808

 
148,819

Long-term portion of lease obligations
 
27,010

 
1,320

Debt
 
275,000

 
—

Deferred revenue
 
12,542

 
13,288

Other long-term liabilities
 
27,754

 
25,425

Share purchase warrants
 
15,040

 
14,664

Total Liabilities
 
993,836

 
424,127

 
 
 
 
 
Equity
 
 

 
 

Capital and reserves
 
 

 
 

Issued capital
 
3,123,514

 
2,321,498

Reserves
 
94,274

 
22,573

Investment revaluation reserve
 
—

 
208

Deficit
 
(754,689
)
 
(836,067
)
Total Equity attributable to equity holders of the Company
 
2,463,099

 
1,508,212

Non-controlling interests
 
4,747

 
5,137

Total Equity
 
2,467,846

 
1,513,349

Total Liabilities and Equity
 
$
3,461,682

 
$
1,937,476



 
PAN AMERICAN SILVER CORP.
5

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Q4 2019 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,
 
 
2019

 
2018

 
2019 (1)

 
2018

Revenue
 
$
404,379

 
$
173,357

 
$
1,350,759

 
$
784,495

Cost of sales
 
 

 
 

 
 
 
 
Production costs
 
(229,594
)
 
(136,177
)
 
(841,297
)
 
(515,636
)
Depreciation and amortization
 
(68,239
)
 
(37,245
)
 
(253,453
)
 
(147,289
)
Royalties
 
(7,936
)
 
(4,601
)
 
(26,721
)
 
(20,673
)
 
 
(305,769
)
 
(178,023
)
 
(1,121,471
)
 
(683,598
)
Mine operating earnings (loss)
 
98,610

 
(4,666
)
 
229,288

 
100,897

 
 
 
 
 
 
 
 
 
General and administrative
 
(10,009
)
 
(5,450
)
 
(31,752
)
 
(22,649
)
Exploration and project development
 
(2,562
)
 
(3,509
)
 
(11,684
)
 
(11,138
)
Mine care and maintenance
 
(8,008
)
 
—

 
(23,662
)
 
—

Foreign exchange gains (losses)
 
2,970

 
406

 
(5,003
)
 
(9,326
)
Impairment charges
 
(40,050
)
 
(27,789
)
 
(40,050
)
 
(27,789
)
Gains on commodity and foreign currency contracts
 
1,564

 
524

 
3,315

 
4,930

Gains (losses) on sale of mineral properties, plant and equipment
 
1,040

 
(56
)
 
3,858

 
7,973

Share of income (loss) from associate and dilution gain
 
14,246

 
(182
)
 
15,245

 
13,679

Transaction and integration costs
 
197

 
(10,229
)
 
(7,515
)
 
(10,229
)
Other expense
 
(5,754
)
 
(2,795
)
 
(4,936
)
 
(3,659
)
Earnings (loss) from operations
 
52,244

 
(53,746
)
 
127,104

 
42,689

 
 
 
 
 
 
 
 
 
Loss on derivatives
 
—

 
(60
)
 
(14
)
 
(1,078
)
Investment income (loss)
 
33,741

 
(1,428
)
 
84,704

 
(284
)
Interest and finance expense
 
(8,327
)
 
(2,305
)
 
(29,282
)
 
(8,139
)
Earnings (loss) before income taxes
 
77,658

 
(57,539
)
 
182,512

 
33,188

Income tax expense
 
(25,952
)
 
(6,038
)
 
(71,268
)
 
(21,147
)
Net earnings (loss) for the period
 
$
51,706

 
$
(63,577
)
 
$
111,244

 
$
12,041

 
 
 
 
 
 
 
 
 
Attributable to:
 
 

 
 

 
 
 
 
Equity holders of the Company
 
51,927

 
(63,809
)
 
110,738

 
10,294

Non-controlling interests
 
(221
)
 
232

 
506

 
1,747

 
 
$
51,706

 
$
(63,577
)
 
$
111,244

 
$
12,041

 
 
 
 
 
 
 
 
 
Earnings (loss) per share attributable to common shareholders
 
 

 
 

 
 
 
 
Basic earnings (loss) per share
 
$
0.25

 
$
(0.42
)
 
$
0.55

 
$
0.07

Diluted earnings (loss) per share
 
$
0.25

 
$
(0.42
)
 
$
0.55

 
$
0.07

Weighted average shares outstanding (in 000’s) Basic
 
209,671

 
153,352

 
201,397

 
153,315

Weighted average shares outstanding (in 000’s) Diluted
 
209,873

 
153,504

 
201,571

 
153,522

(1)
The purchase price allocation (“PPA") for the Tahoe acquisition was finalized in Q4 2019, and the previously reported $30.5 million bargain purchase gain was removed from 2019 net income; as such, net income for the three months ended March 31, 2019 (“Q1 2019”) will be restated to reflect this $30.5 million reduction to previously reported Q1 2019 net income.


 
PAN AMERICAN SILVER CORP.
6

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Q4 2019 NEWS RELEASE

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




 
 
Three months ended
December 31,
 
Year ended
December 31,
 
 
2019

 
2018

 
2019

 
2018

Net earnings (loss) for the period
 
$
51,706

 
$
(63,577
)
 
$
111,244

 
$
12,041

Items that may be reclassified subsequently to net earnings:
 
 
 
 
 
 

 
 

Unrealized net gains on short-term investments (net of $nil tax in 2019 and 2018)
 
—

 
332

 
—

 
993

Reclassification adjustment for realized gains on short-term investments to earnings
 
—

 
(294
)
 
(208
)
 
(788
)
Total comprehensive earnings (loss) for the period
 
$
51,706

 
$
(63,539
)
 
$
111,036

 
$
12,246

 
 
 
 
 
 
 
 
 
Total comprehensive earnings (loss) attributable to:
 
 

 
 

 
 
 
 
Equity holders of the Company
 
$
51,927

 
$
(63,771
)
 
$
110,530

 
$
10,499

Non-controlling interests
 
(221
)
 
232

 
506

 
1,747

 
 
$
51,706

 
$
(63,539
)
 
$
111,036

 
$
12,246



 
PAN AMERICAN SILVER CORP.
7

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Q4 2019 NEWS RELEASE

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




 
 
Three months ended
December 31,
 
Year ended
December 31,
 
 
2019

 
2018

 
2019

 
2018

Cash flow from operating activities
 
 

 
 

 
 
 
 
Net earnings (loss) for the period
 
$
51,706

 
$
(63,577
)
 
$
111,244

 
$
12,041

 
 
 
 
 
 
 
 
 
Current income tax expense
 
36,433

 
9,999

 
92,129

 
53,901

Deferred income tax recovery
 
(10,481
)
 
(3,961
)
 
(20,861
)
 
(32,754
)
Interest expense (recovery)
 
4,762

 
117

 
16,879

 
(678
)
Depreciation and amortization
 
68,239

 
37,245

 
253,453

 
147,289

Impairment charges
 
40,050

 
27,789

 
40,050

 
27,789

Accretion on closure and decommissioning provision
 
2,583

 
1,631

 
9,903

 
6,524

Unrealized foreign exchange (gains) losses
 
(1,395
)
 
(348
)
 
6,057

 
10,337

(Gain) loss on sale of mineral properties, plant and equipment
 
(1,040
)
 
56

 
(3,858
)
 
(7,973
)
Other operating activities
 
(47,630
)
 
19,824

 
(96,277
)
 
17,724

Changes in non-cash operating working capital
 
4,746

 
(4,897
)
 
(27,944
)
 
(4,261
)
Operating cash flows before interest and income taxes
 
$
147,973

 
$
23,878

 
$
380,775

 
$
229,939

 
 
 
 
 
 
 
 
 
Interest paid
 
(4,038
)
 
(417
)
 
(16,944
)
 
(1,684
)
Interest received
 
75

 
561

 
776

 
1,944

Income taxes paid
 
(14,537
)
 
(12,092
)
 
(82,579
)
 
(75,221
)
Net cash generated from operating activities
 
$
129,473

 
$
11,930

 
$
282,028

 
$
154,978

 
 
 
 
 
 
 
 
 
Cash flow from investing activities
 
 

 
 

 
 
 
 
Payments for mineral properties, plant and equipment
 
$
(50,319
)
 
$
(42,302
)
 
$
(205,807
)
 
$
(144,348
)
Tahoe acquisition (1)
 
—

 
—

 
(247,479
)
 
—

Acquisition of mineral interests
 
—

 
—

 
(1,545
)
 
(7,500
)
Net (purchase of) proceeds from sale of short-term investments
 
(1,849
)
 
(10,020
)
 
39,727

 
(25,554
)
Proceeds from sale of mineral properties, plant and equipment
 
103

 
4

 
10,267

 
15,781

Net proceeds from commodity, diesel fuel swaps, and foreign currency contracts
 
518

 
1,289

 
2,669

 
2,449

Net cash used in investing activities
 
$
(51,547
)
 
$
(51,029
)
 
$
(402,168
)
 
$
(159,172
)
 
 
 
 
 
 
 
 
 
Cash flow from financing activities
 
 

 
 

 
 
 
 
Proceeds from issue of equity shares
 
$
1,171

 
$
—

 
$
2,781

 
$
1,081

Distributions to non-controlling interests
 
(10
)
 
(1,158
)
 
(924
)
 
(2,020
)
Dividends paid
 
(7,337
)
 
(5,366
)
 
(29,332
)
 
(21,284
)
Proceeds from credit facility
 
—

 
—

 
335,000

 
—

Repayment of credit facility
 
(40,000
)
 
—

 
(185,000
)
 
—

Repayment of short-term loans
 
—

 
—

 
—

 
(3,000
)
Payment of lease obligations
 
(5,726
)
 
(2,223
)
 
(19,270
)
 
(7,911
)
Net cash (used in) generated from financing activities
 
$
(51,902
)
 
$
(8,747
)
 
$
103,255

 
$
(33,134
)
Effects of exchange rate changes on cash and cash equivalents
 
(173
)
 
(68
)
 
(1,061
)
 
(115
)
Net increase (decrease) in cash and cash equivalents
 
25,851

 
(47,914
)
 
(17,946
)
 
(37,443
)
 Cash and cash equivalents at the beginning of the period
 
94,713

 
186,424

 
138,510

 
175,953

 Cash and cash equivalents at the end of the period
 
$
120,564

 
$
138,510

 
$
120,564

 
$
138,510

(1)
On February 22, 2019, the Company completed the acquisition of 100% of the issued and outstanding shares of Tahoe Resources Inc. ("Tahoe"). The cash invested represents consideration paid to Tahoe shareholders of $275 million net of cash received.

 
PAN AMERICAN SILVER CORP.
8

paaslogo2017a01.jpg
 
Q4 2019 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 RESULTS
The operating metrics, Cash Costs, AISC, and sustaining capital cash outflows for each of the Company's operating mines for the three and twelve months ending December 31, 2019, and 2018, are included in the following tables. Cash Costs and AISC are non-GAAP financial measures that do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. A detailed description and reconciliation of these measures to cost of sales is included in the "Alternative Performance (Non-GAAP) Measures" section of this news release.
La Colorada mine
 
Three months ended
December 31,
Year ended
December 31,
 
2019

2018

2019

2018

Tonnes milled - kt
197.1

187.4

768.7

726.0

Average silver grade – grams per tonne
358

375

361

358

Average zinc grade - %
2.85

3.10

3.10

2.83

Average lead grade - %
1.70

1.50

1.65

1.40

Production:
 

 

 
 
Silver – koz
2,080

2,074

8,206

7,617

Gold – koz
1.28

1.16

4.61

4.40

Zinc – kt
4.85

5.09

20.97

17.79

Lead – kt
2.92

2.44

11.15

8.84

 
 
 
 
 
Cash cost per ounce net of by-products
$
4.30

$
2.46

$
2.99

$
2.26

Sustaining capital -  (’000s)
$
1,957

$
5,364

$
9,721

$
15,462

AISC
$
5.80

$
5.93

$
4.54

$
4.63

Payable silver sold - koz
1,770

1,780

7,583

7,069


Dolores mine
 
Three months ended
December 31,
Year ended
December 31,
 
2019

2018

2019

2018

Tonnes placed - kt
1,856.7

1,818.5

6,777.0

6,903.3

Average silver grade – grams per tonne
42

25

38

31

Average gold grade – grams per tonne
0.62

0.68

0.60

0.85

Production:
 

 

 
 
Silver – koz
1,287

824

5,122

4,081

Gold – koz
26.1

29.4

117.6

136.6

 
 
 
 
 
Cash cost per ounce net of by-products
$
2.64

$
6.30

$
3.09

$
(1.81
)
Sustaining capital -  (’000s)
$
8,106

$
13,255

$
49,660

$
48,842

AISC
$
9.33

$
35.36

$
15.45

$
16.36

Payable silver sold - koz
1,402

870

4,924

4,205


 
PAN AMERICAN SILVER CORP.
9

paaslogo2017a01.jpg
 
Q4 2019 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



Huaron mine
 
Three months ended
December 31,
Year ended
December 31,
 
2019

2018

2019

2018

Tonnes milled - kt
252.3

252.0

994.0

935.0

Average silver grade – grams per tonne
140

142

142

142

Average zinc grade - %
2.49

2.49

2.38

2.44

Average lead grade - %
1.32

1.22

1.22

1.18

Average copper grade - %
0.85

0.78

0.81

0.76

Production:
 

 

 
 
Silver – koz
935

965

3,796

3,561

Gold – koz
0.21

0.22

0.97

0.79

Zinc – kt
4.95

4.82

18.07

17.38

Lead – kt
2.50

2.16

9.22

8.05

Copper – kt
1.57

1.52

6.02

5.44

 
 
 
 
 
Cash cost per ounce net of by-products
$
5.34

$
2.42

$
4.15

$
1.79

Sustaining capital cash outflows - (’000s)
$
2,834

$
6,099

$
10,936

$
17,761

AISC
$
9.44

$
9.71

$
7.74

$
7.95

Payable silver sold – koz
736

858

3,253

3,094


Morococha mine(1) 
 
Three months ended
December 31,
Year ended
December 31,
 
2019

2018

2019

2018

Tonnes milled – kt
176.5

163.0

686.2

672.0

Average silver grade – grams per tonne
112

154

126

149

Average zinc grade  - %
3.55

4.02

3.76

3.80

Average lead grade  - %
1.17

1.09

1.21

0.92

Average copper grade  - %
0.44

0.44

0.44

0.66

Production:
 

 

 
 
Silver – koz
554

740

2,456

2,881

Gold – koz
0.23

0.19

1.39

2.09

Zinc – kt
5.46

5.78

22.50

22.17

Lead – kt
1.61

1.40

6.56

4.69

Copper – kt
0.46

0.45

1.83

3.30

 
 
 
 
 
Cash cost per ounce net of by-products
$
10.85

$
(0.58
)
$
4.35

$
(4.43
)
Sustaining capital (100%) -  (’000s)
$
3,945

$
4,357

$
12,599

$
15,038

AISC
$
18.83

$
6.19

$
10.08

$
1.59

Payable silver sold (100%) - koz
515

674

2,335

2,652

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

 
PAN AMERICAN SILVER CORP.
10

paaslogo2017a01.jpg
 
Q4 2019 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



San Vicente mine(1) 
 
Three months ended
December 31,
Year ended
December 31,
 
2019

2018

2019

2018

Tonnes milled – kt
91.1

88.3

349.7

332.9

Average silver grade – grams per tonne
328

372

345

362

Average zinc grade - %
1.80

3.66

2.16

2.77

Average lead grade - %
0.15

0.32

0.14

0.34

Average copper grade - %
0.30

0.37

0.31

0.40

Production:
 

 

 
 
Silver – koz
877

937

3,528

3,544

Gold – koz
0.13

0.12

0.48

0.50

Zinc – kt
1.31

2.82

6.01

7.47

Lead – kt
0.13

0.26

0.42

0.78

Copper – kt
0.22

0.22

0.85

1.02

 
 
 
 
 
Cash cost per ounce net of by-products
$
14.38

$
10.20

$
11.77

$
9.83

Sustaining capital (100%) -  (’000s)
$
2,048

$
1,637

$
4,960

$
6,983

AISC
$
16.50

$
13.59

$
13.08

$
12.20

Payable silver sold (100%) - koz
1,001

502

4,003

3,054

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

Manantial Espejo mine
 
Three months ended
December 31,
Year ended
December 31,
 
2019

2018

2019

2018

Tonnes milled - kt
186.5

198.5

708.6

804.4

Average silver grade – grams per tonne
150

95

127

135

Average gold grade – grams per tonne
1.21

0.98

1.08

1.42

Production:
 

 

 
 
Silver – koz
817

587

2,599

3,092

Gold – koz
6.71

6.19

22.41

34.55

 
 
 
 
 
Cash cost per ounce net of by-products
$
15.47

$
23.03

$
19.59

$
14.83

Sustaining capital -  (’000s)
$
696

$
436

$
2,757

$
2,827

AISC
$
16.94

$
27.94

$
18.43

$
16.83

Payable silver sold - koz
928

615

2,460

3,086


 
PAN AMERICAN SILVER CORP.
11

paaslogo2017a01.jpg
 
Q4 2019 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



Gold Segment Mines
 
Three months ended
December 31, 2019
Year ended
December 31, 2019
 
Shahuindo

La Arena

Timmins(1)

Shahuindo

La Arena

Timmins(1)

Tonnes milled - kt
3,449.4

5,311.8

473.9

11,218.8

11,189.7

1,480.7

Average silver grade – grams per tonne
7

—

—

8

—

—

Average gold grade – grams per tonne
0.58

0.41

3.17

0.60

0.41

3.18

Production:
 
 
 
 
 
 
Silver – koz
54.21

10.81

5.53

136.62

26.16

17.53

Gold – koz
43.52

48.43

47.33

145.37

122.52

143.77

 
 
 
 
 
 
 
Cash cost per ounce net of by-products
$
605

$
580

$
884

$
570

$
644

$
904

Sustaining capital -  (’000s)
$
14,156

$
8,382

$
4,066

$
29,873

$
47,557

$
11,035

AISC
$
970

$
764

$
984

$
807

$
1,042

$
998

Payable gold sold - koz
39.85

48.06

46.40

133.30

124.21

143.30

(1)
Timmins refers to the Timmins West and Bell Creek mines.
ALTERNATIVE PERFORMANCE (NON-GAAP) MEASURES
Per Ounce Measures

Cash Costs and AISC are non-GAAP financial measures that do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies.

Pan American produces by-product metals incidentally to our silver and gold mining activities. We have adopted the practice of calculating a performance measure with the net cost of producing an ounce of silver and gold, our primary payable metals, after deducting revenues gained from incidental by-product production. 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. 

Silver segment Cash Costs and AISC are calculated net of credits for realized revenues from all metals other than silver ("silver segment by-product credits"), and are calculated per ounce of silver sold. Gold segment Cash Costs and AISC are calculated net of credits for realized silver revenues ("gold segment by-product credits"), and are calculated per ounce of gold sold. Consolidated Cash Costs and AISC are based on total silver ounces sold and are net of by-product credits from all metals other than silver ("silver basis consolidated by-product credits").

Prior period cash costs per ounce reported in previous news releases and MD&As were based on cash costs per ounce of payable silver produced and were net of by-product credits calculated with average market prices applied to all metals produced other than silver. Given the increased complexity of the business with the addition of the new gold operations, the Company determined that conforming the calculation of Cash Costs with a consistent method to that used for AISC, using realized by-product sales as by-product credits and based on per ounce of silver sold, would provide a more consistent per-ounce measure; as such, the comparative Cash Costs amounts in this MD&A have been quantified using the current methodology and are different from those previously reported. As shown in the detailed quantification of consolidated AISC below, corporate general and administrative expense, and exploration and project development expenses are included in the calculation of consolidated (silver basis) AISC, but are not allocated amongst the operations and thus are not included in either the silver or gold segment AISC totals. In prior years these costs were similarly included only in the consolidated all-in-sustaining costs per silver ounce sold ("AISCSOS") metrics and not allocated to each mine's AISCSOS amount; as such, consolidated AISCSOS in previous years included such costs, where total silver segment AISC in the current period does not. A

 
PAN AMERICAN SILVER CORP.
12

paaslogo2017a01.jpg
 
Q4 2019 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



detailed description of how previously reported Cash Costs were quantified is provided in the Company's prior period MD&As.

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. Cash costs per ounce is conceptually understood and widely reported in the mining industry.

We believe that AISC, also calculated net of by-products, is a comprehensive measure of the full cost of operating our business, given it includes the cost of replacing silver and gold 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 these measure as calculated by the Company, the following tables provide the detailed reconciliation of these measure to the applicable cost items as reported in the consolidated financial statements for the respective periods. All operating results from the mines acquired in the Tahoe acquisition only include results from February 22, 2019 to December 31, 2019 and the year-to-date amounts do not represent a full twelve months of operations.

 
PAN AMERICAN SILVER CORP.
13

paaslogo2017a01.jpg
 
Q4 2019 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 Cash Costs and AISC:
 
Three months ended
December 31, 2019
 
Three months ended
December 31, 2018(1)
(In thousands of USD, except as noted)
Silver Segment
 
Gold Segment
 
Corporate
 
Consolidated
(silver basis)(2)
 
Silver Segment
 
Corporate
 
Consolidated
(silver basis)
Production Costs
136,443


93,151





229,594

 
132,334

 



132,334

Purchase Price Allocation Inventory Fair Value Adjustment



(1,683
)




(1,683
)
 


 





Net Realizable Value Adjustments
(486
)

—





(486
)
 
(13,263
)
 



(13,263
)
Direct Operating Costs
135,957


91,468





227,425

 
119,070

 



119,070

Royalties
6,024


1,912





7,936

 
4,601

 



4,601

Smelting, refining and other direct selling charges (3)
21,148


326





21,474

 
14,614

 



14,614

Cash Costs before By-product Credits
163,129


93,706





256,835

 
138,285

 



138,285

Silver segment by-product credits (3)
(113,555
)

—





—

 
(107,468
)
 





Gold segment by-product credits (3)
—


(690
)




—

 
—

 





Consolidated silver basis by-product credits (3)
—


—





(312,015
)
 
—

 



(107,468
)
Cash Costs
49,573


93,016





(55,180
)
 
30,817

 



30,817













 


 





Net Realizable Value Adjustments
486


—





486

 
13,263

 



13,263

Sustaining capital (1)
19,584


26,603





46,187

 
31,150

 



31,150

Exploration
929


633


1,000


2,562

 
1,133

 
2,375


3,509

Reclamation cost accretion
1,652


777


154


2,583

 
1,475

 
156


1,631

General & Administrative expense
—


—


10,009


10,009

 


 
5,450


5,450

All In Sustaining Costs
72,225


121,029


11,163


6,648

 
77,839

 
7,981


85,821













 


 





Silver Segment Silver Ounces Sold
6,352


—





—

 
5,299

 



—

Gold Segment Gold Ounces Sold
—


134





—

 
—

 



—

Total Silver Ounces Sold
—


—





6,392

 
—

 



5,299

Cash Costs per Ounce Sold (4)
7.80


693





(8.63
)
 
5.82

 



5.82

All-In Sustaining Costs per Ounce Sold
11.37


901





1.04

 
14.69

 



16.19

All-In Sustaining Costs per Ounce Sold (Excludes NRV Adj.) (6)
11.29


901





0.96

 
12.19

 



13.69

(1)
2018 AISC per ounce sold included in the table above have been calculated and presented as comparative amounts to conform to the methodology used by the Company to calculate the 2019 AISC per ounce sold. The change in methodology relates to the sustaining capital calculation to account for the adoption of IFRS 16, and the inclusion of lease payments. Previously, leased assets were included as sustaining capital in the period of acquisition, while future related lease payments were excluded.
(2)
Consolidated silver basis calculated by treating all revenues from metals other than silver, including gold, as a by-product credit in Cash Costs. Total silver basis consolidated by-product credits include all silver segment by-product credits, as well as gold revenues from the Gold Segment mines as by-products. Total silver ounces sold likewise includes silver ounces sold from Gold Segment operations.
See next page for Notes 3, 4, 5 and 6.

 
PAN AMERICAN SILVER CORP.
14

paaslogo2017a01.jpg
 
Q4 2019 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, 2019(5)
 
Year ended
December 31, 2018(1)
(In thousands of USD, except as noted)
Silver Segment
 
Gold Segment (5)
 
Corporate
 
Consolidated
(silver basis)(2)
 
Silver Segment
 
Corporate
 
Consolidated
(silver basis)
Production Costs
516,642


324,655





841,297

 
511,793

 


 
511,793

Purchase Price Allocation Inventory Fair Value Adjustment



(43,395
)




(43,395
)
 


 


 


Net Realizable Value Adjustments
356


—





356

 
(24,329
)
 


 
(24,329
)
Direct Operating Costs
516,998


281,260





798,257

 
487,463

 


 
487,463

Royalties
21,413


5,308





26,721

 
20,673

 


 
20,673

Smelting, refining and other direct selling charges (3)
72,898


953





73,851

 
53,119

 


 
53,119

Cash Costs before By-product Credits
611,309


287,521





898,829

 
561,255

 


 
561,255

Silver segment by-product credits (3)
(454,472
)

—





—

 
(483,325
)
 


 


Gold segment by-product credits (3)
—


(1,968
)




—

 
—

 


 


Consolidated silver basis by-product credits (3)
—


—





(1,019,548
)
 
—

 


 
(483,325
)
Cash Costs
156,836


285,553





(120,718
)
 
77,930

 


 
77,930













 


 


 


Net Realizable Value Adjustments
(356
)

—





(356
)
 
24,329

 


 
24,329

Sustaining capital (1)
90,632


88,464





179,096

 
106,913

 


 
106,913

Exploration
3,195


3,404


3,204


9,803

 
4,476

 
6,661

 
11,138

Reclamation cost accretion
6,605


2,637


661


9,903

 
5,902

 
622

 
6,524

General & Administrative expense






31,752


31,752

 


 
22,649

 
22,649

All In Sustaining Costs
256,913


380,058


35,617


109,480

 
219,551

 
29,932

 
249,484













 


 


 


Silver Segment Silver Ounces Sold
24,559


—





—

 
23,160

 


 
—

Gold Segment Gold Ounces Sold
—


401





—

 
—

 


 
—

Total Silver Ounces Sold
—


—





24,676

 
—

 


 
23,160

Cash Costs per Ounce Sold (4)
6.39


712





(4.89
)
 
3.36

 


 
3.36

All-In Sustaining Costs per Ounce Sold
10.46


948





4.44

 
9.48

 


 
10.77

All-In Sustaining Costs per Ounce Sold (Excludes NRV Adj.) (6)
10.48


948





4.45

 
8.43

 


 
9.72

Notes 1 and 2 provided on previous page.
(3)
Included in the revenue line of the consolidated income statements. By-product credits are reflective of realized metal prices for the applicable periods.
(4)
Cash costs per ounce sold are calculated based on Cash Costs, net of by-product credits divided by per ounce of silver sold and are therefore different than previously reported 2018 "Cash Costs" which were calculated based on cash costs net of by-product credits divided by payable silver ounces produced. The 2018 cash costs per ounce sold included in the table above have been calculated and presented as comparative amounts to conform to the methodology used by the Company to calculate the 2019 Cash Cost per ounce sold.
(5)
All operating results from the mines acquired in connection with the acquisition of Tahoe Resources Inc. are only from February 22, 2019 to December 31, 2019, and do not represent a full twelve months of operations.
(6)
The Company makes net realizable value ("NRV") adjustments, when necessary, to ensure inventory costs do not exceed their estimated selling prices less the estimated costs of completion and sale.

 
PAN AMERICAN SILVER CORP.
15

paaslogo2017a01.jpg
 
Q4 2019 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




Sustaining capital is included in AISC, while capital related to growth projects or acquisitions (referred to by the Company as project or investment capital) is not. Inclusion of only sustaining capital in the AISC measure reflects the capital costs associated with current ounces sold as opposed to project capital, which is expected to increase future production.
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)
 
2019

 
2018

 
2019

 
2018

Payments for mineral properties, plant and equipment(1)
 
50,319


42,302

 
205,807


144,348

Add/(Subtract)
 





 



Advances received for leases
 
5,726


2,223

 
19,270


7,911

Non-Sustaining capital
 
(9,857
)

(13,375
)
 
(45,980
)

(45,346
)
Sustaining Capital
 
46,187


31,150

 
179,096


106,913

(1)
As presented on the unaudited interim consolidated statements of cash flows.

 
PAN AMERICAN SILVER CORP.
16

paaslogo2017a01.jpg
 
Q4 2019 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



Silver Segment Cash Costs and AISC by mine:
SILVER SEGMENT
Three months ended December 31, 2019
(In thousands of USD, except as noted)
La Colorada
Dolores
Huaron
Morococha
San
Vicente
Manantial
Espejo
Consolidated
Silver Segment
Production Costs
18,049

42,949

19,680

19,787

12,336

23,642

136,443

NRV inventory adjustments
—

(435
)
—

—

—

(51
)
(486
)
On-site direct operating costs
18,049

42,513

19,680

19,787

12,336

23,591

135,957

Royalties
179

2,126

—

—

3,494

224

6,024

Smelting, refining & direct selling costs
4,775

21

5,592

4,091

4,509

2,160

21,148

Cash Costs before by-product credits
23,003

44,660

25,272

23,878

20,339

25,975

163,128

Silver segment by-product credits
(15,399
)
(40,958
)
(21,339
)
(18,296
)
(5,942
)
(11,621
)
(113,555
)
Cash Costs
7,604

3,702

3,934

5,582

14,396

14,354

49,572

 














NRV inventory adjustments
—

435

—

—

—

51

486

Sustaining capital
1,957

8,106

2,834

3,945

2,048

696

19,584

Exploration and project development
565

274

—

51

—

39

929

Reclamation cost accretion
144

560

181

109

78

580

1,652

All-in sustaining costs
10,269

13,077

6,949

9,687

16,522

15,720

72,224

 














Silver segment silver ounces sold (koz)
1,770

1,402

736

515

1,001

928

6,352

Cash cost per ounce sold
4.30

2.64

5.34

10.85

14.38

15.47

7.80

AISC per ounce sold
5.80

9.33

9.44

18.83

16.50

16.94

11.37

AISC per ounce sold (excluding NRV inventory adjustments)
5.80

9.02

9.44

18.83

16.50

16.88

11.29


SILVER SEGMENT(1)
Three Months Ended December 31, 2018
(In thousands of USD, except as noted)
La Colorada
Dolores
Huaron
Morococha
San
Vicente
Manantial
Espejo
Consolidated
Silver Segment
Production Costs
16,947

51,107

19,707

16,096

6,984

21,494

132,334

NRV inventory adjustments
—

(11,440
)
—

—

—

(1,822
)
(13,263
)
On-site direct operating costs
16,947

39,667

19,707

16,096

6,984

19,671

119,070

Royalties
130

1,642

—

—

2,554

275

4,601

Smelting, refining & direct selling costs
2,050

31

6,061

2,524

1,816

2,132

14,614

Cash Costs before by-product credits
19,127

41,340

25,768

18,620

11,354

22,078

138,285

Silver segment by-product credits
(14,749
)
(35,862
)
(23,696
)
(19,013
)
(6,231
)
(7,917
)
(107,468
)
Cash Costs
4,378

5,479

2,073

(394
)
5,123

14,161

30,817

 








NRV inventory adjustments
—

11,440

—

—

—

1,822

13,263

Sustaining capital
5,364

13,255

6,099

4,357

1,637

436

31,150

Exploration and project development
711

241

7

123

—

51

1,133

Reclamation cost accretion
114

351

152

87

63

708

1,475

All-in sustaining costs
10,567

30,766

8,331

4,173

6,823

17,178

77,839

 








Silver segment silver ounces sold (koz)
1,780

870

858

674

502

615

5,299

Cash cost per ounce sold(2)
2.46

6.30

2.42

(0.58
)
10.20

23.03

5.82

AISC per ounce sold
5.93

35.36

9.71

6.19

13.59

27.94

14.69

AISC per ounce sold (excluding NRV inventory adjustments)
5.93

22.21

9.71

6.19

13.59

24.98

12.19


 
PAN AMERICAN SILVER CORP.
17

paaslogo2017a01.jpg
 
Q4 2019 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



SILVER SEGMENT
Year ended December 31, 2019
(In thousands of USD, except as noted)
La Colorada
Dolores
Huaron
Morococha
San
Vicente
Manantial
Espejo
Consolidated
Silver Segment
Production Costs
74,544

183,058

76,962

73,396

46,456

62,226

516,642

NRV inventory adjustments
—

(7,885
)
—

—

—

8,240

356

On-site direct operating costs
74,544

175,174

76,962

73,396

46,456

70,466

516,998

Royalties
595

8,264

—

—

11,348

1,206

21,413

Smelting, refining & direct selling costs
17,420

106

21,088

15,675

11,871

6,738

72,898

Cash Costs before by-product credits
92,559

183,544

98,050

89,071

69,675

78,410

611,309

Silver segment by-product credits
(69,905
)
(168,333
)
(84,544
)
(78,907
)
(22,573
)
(30,211
)
(454,472
)
Cash Costs
22,654

15,211

13,506

10,164

47,102

48,200

156,836

 














NRV inventory adjustments
—

7,885

—

—

—

(8,240
)
(356
)
Sustaining capital
9,721

49,660

10,936

12,599

4,960

2,757

90,632

Exploration and project development
1,445

1,105

13

327

—

305

3,195

Reclamation cost accretion
576

2,240

723

436

311

2,319

6,605

All-in sustaining costs(1)
34,396

76,100

25,178

23,526

52,373

45,341

256,913

 














Silver segment silver ounces sold (koz)
7,583

4,924

3,253

2,335

4,003

2,460

24,559

Cash cost per ounce sold
2.99

3.09

4.15

4.35

11.77

19.59

6.39

AISC per ounce sold
4.54

15.45

7.74

10.08

13.08

18.43

10.46

AISC per ounce sold (excluding NRV inventory adjustments)
4.54

13.85

7.74

10.08

13.08

21.78

10.48

SILVER SEGMENT(1)
Year ended December 31, 2018
(In thousands of USD, except as noted)
La Colorada
Dolores
Huaron
Morococha
San
Vicente
Manantial
Espejo
Consolidated
Silver Segment
Production Costs
70,248

179,165

75,382

68,068

33,461

85,468

511,793

NRV inventory adjustments


(24,567
)






238

(24,329
)
On-site direct operating costs
70,248

154,598

75,382

68,068

33,461

85,705

487,463

Royalties
616

7,991

—

—

9,943

2,124

20,673

Smelting, refining & direct selling costs
8,537

129

21,326

13,313

7,451

2,363

53,119

Cash Costs before by-product credits
79,401

162,718

96,708

81,381

50,855

90,192

561,256

Silver segment by-product credits
(63,442
)
(170,337
)
(91,155
)
(93,142
)
(20,829
)
(44,420
)
(483,325
)
Cash Costs
15,959

(7,618
)
5,553

(11,761
)
30,026

45,772

77,931

 








NRV inventory adjustments
—

24,567

—

—

—

(238
)
24,329

Sustaining capital
15,462

48,842

17,761

15,038

6,983

2,827

106,913

Exploration and project development
880

1,594

660

598

—

744

4,476

Reclamation cost accretion
457

1,405

609

347

252

2,832

5,902

All-in sustaining costs
32,758

68,790

24,583

4,222

37,261

51,937

219,552

 








Silver segment silver ounces sold (koz)
7,069

4,205

3,094

2,652

3,054

3,086

23,160

Cash cost per ounce sold(2)
2.26

(1.81
)
1.79

(4.43
)
9.83

14.83

3.36

AISC per ounce sold
4.63

16.36

7.95

1.59

12.20

16.83

9.48

AISC per ounce sold (excluding NRV inventory adjustments)
4.63

10.52

7.95

1.59

12.20

16.91

8.43

(1)
2018 AISC per ounce sold included in the table above have been calculated and presented as comparative amounts to conform to the methodology used by the company to calculate the 2019 AISC per ounce sold. The change in methodology relates to the sustaining capital calculation to account for the adoption of IFRS 16, and sustaining capital now includes lease payments. Previously leased assets were included as sustaining capital in the period of acquisition, while future related lease payments were excluded.
(2)
Cash costs per ounce sold are calculated based on Cash Costs, net of by-product credits divided by per ounce of silver sold and are therefore different from previously reported 2018 "Cash Costs" which were calculated based on cash costs net of by-product credits divided by payable silver ounces produced. The 2018 cash costs per ounce sold included in the table above have been calculated and presented as comparative amounts to conform to the methodology used by the company to calculate the 2019 cash cost per ounce sold.

 
PAN AMERICAN SILVER CORP.
18

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Q4 2019 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



Gold Segment Cash Costs and AISC by mine:
GOLD SEGMENT
Three months ended December 31, 2019
(In thousands of USD, except as noted)
Shahuindo
La Arena
Timmins(1)
Total
Production Costs
25,375

28,603

39,173

93,151

Purchase Price Allocation Inventory Fair Value Adjustment
(916
)
(750
)
(17
)
(1,683
)
NRV inventory adjustments
—

—

—

—

On-site direct operating costs
24,459

27,853

39,156

91,468

Royalties
—

—

1,912

1,912

Smelting, refining & direct selling costs
173

118

35

326

Cash Costs before by-product credits
24,632

27,971

41,103

93,706

Gold segment by-product credits
(507
)
(92
)
(91
)
(690
)
Cash Costs of Sales
24,125

27,879

41,012

93,016

 








NRV inventory adjustments
—

—

—

—

Sustaining capital
14,156

8,382

4,066

26,603

Exploration and project development
82

33

518

633

Reclamation cost accretion
290

447

40

777

All-in sustaining costs
38,653

36,740

45,636

121,030

 








Gold segment gold ounces sold
39,849

48,062

46,400

134,310

Cash cost per ounce sold
605

580

884

693

AISC per ounce sold
970

764

984

901

AISC per ounce sold (excluding NRV inventory adjustments)
970

764

984

901

GOLD SEGMENT
Year ended December 31, 2019
(In thousands of USD, except as noted)
Shahuindo
La Arena
Timmins(1)
Total
Production Costs
90,877

99,915

133,863

324,655

Purchase Price Allocation Inventory Fair Value Adjustment
(14,003
)
(19,978
)
(9,414
)
(43,395
)
NRV inventory adjustments
—

—

—

—

On-site direct operating costs
76,874

79,937

124,449

281,260

Royalties
—

—

5,308

5,308

Smelting, refining & direct selling costs
501

345

107

953

Cash Costs before by-product credits
77,375

80,282

129,864

287,521

Gold segment by-product credits
(1,411
)
(278
)
(279
)
(1,968
)
Cash Costs of Sales
75,964

80,004

129,585

285,553

 








NRV inventory adjustments
—

—

—

—

Sustaining capital
29,873

47,557

11,035

88,464

Exploration and project development
787

358

2,259

3,404

Reclamation cost accretion
983

1,515

139

2,637

All-in sustaining costs
107,607

129,434

143,019

380,059

 








Gold segment gold ounces sold
133,298

124,206

143,300

400,804

Cash cost per ounce sold
570

644

904

712

AISC per ounce sold
807

1,042

998

948

AISC per ounce sold (excluding NRV inventory adjustments)
807

1,042

998

948

(1)
Timmins refers to the Timmins West and Bell Creek mines.


 
PAN AMERICAN SILVER CORP.
19

paaslogo2017a01.jpg
 
Q4 2019 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, 2019 and 2018, to the net earnings for each period.
 
 
Three months ended
December 31,
 
Year ended
December 31,
(In thousands of USD, except as noted)
 
2019

 
2018

 
2019

 
2018

Net earnings (loss) for the period
 
$
51,706

 
$
(63,577
)
 
$
111,244

 
$
12,041

Adjust for:
 
 
 
 
 
 
 
 
Loss on derivatives
 
—

 
60

 
14

 
1,078

Impairment charges
 
40,050

 
27,789

 
40,050

 
27,789

Write-down of project development costs
 
—

 
—

 
1,882

 
—

Unrealized foreign exchange (gains) losses
 
(1,395
)
 
(348
)
 
6,057

 
10,337

Net realizable value adjustments to heap inventory
 
4,128

 
12,977

 
29,833

 
24,082

Unrealized (gains) losses on commodity and foreign currency contracts
 
(1,046
)
 
765

 
(646
)
 
(2,481
)
Share of (income) loss from associate and dilution gain
 
(14,246
)
 
182

 
(15,245
)
 
(13,679
)
Reversal of previously accrued tax liabilities
 
—

 
—

 
—

 
(1,188
)
Metal inventory loss
 
—

 
4,670

 
—

 
4,670

(Gains) losses on sale of mineral properties, plant and equipment
 
(1,040
)
 
56

 
(3,858
)
 
(7,973
)
Closure and decommissioning liability adjustment
 
—

 
2,832

 
—

 
2,832

Transaction and integration costs
 
(197
)
 
10,229

 
7,515

 
10,229

Adjust for effect of taxes relating to the above
 
$
(1,455
)
 
$
(5,832
)
 
$
(11,208
)
 
$
(9,914
)
Adjust for effect of foreign exchange on taxes
 
(7,597
)
 
8,175

 
(7,651
)
 
1,611

Adjusted earnings (loss) for the period
 
$
68,908

 
$
(2,022
)
 
$
157,987

 
$
59,434

Weighted average shares for the period
 
209,671

 
153,352

 
201,397

 
153,315

Adjusted earnings (loss) per share for the period
 
$
0.33

 
$
(0.01
)
 
$
0.78

 
$
0.39


 
PAN AMERICAN SILVER CORP.
20

 
 
 

About Pan American Silver
Pan American 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 mines in Mexico, Peru, Canada, Argentina and Bolivia. In addition, we own the Escobal mine in Guatemala that is currently not operating. Pan American has a 25-year history of operating in Latin America, earning an industry-leading reputation for operational excellence and corporate social responsibility. We are headquartered in Vancouver, B.C. and our shares trade on NASDAQ and the Toronto Stock Exchange under the symbol "PAAS".

Learn more at panamericansilver.com.

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

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 Pan American's material mineral properties, please refer to Pan American's Annual Information Form dated March 12, 2019, filed at www.sedar.com, or Pan American's most recent Form 40-F furnished to the SEC.

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 2020, our estimated Cash Costs and AISC in 2020 and future operating margins and cash flow; 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; the future results of exploration activities; and our portfolio growth profile.

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: our ability to realize the anticipated benefits and opportunities as a result of the acquisition of Tahoe; 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 development projects are completed and perform in accordance with current expectations; 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; our ability to secure and maintain title and ownership to properties and the surface rights necessary for our operations; 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 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 such as the Canadian dollar, Peruvian sol, Mexican peso, Argentine peso, Bolivian boliviano, and Guatemalan quetzal 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

 
PAN AMERICAN SILVER CORP.
21

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Q4 2019 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



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; changes in national and local government, legislation, taxation, controls or regulations and political, legal or economic developments in Canada, the United States, Mexico, Peru, Argentina, Bolivia, Guatemala or other countries where the Company may carry on business, including legal restrictions relating to mining, including those in Chubut, Argentina, risks relating to expropriation, and risks relating to the constitutional court-mandated ILO 169 consultation process in Guatemala; risks of liability relating to our past sale of the Quiruvilca mine in Peru; 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, 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.
22