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Pan American Silver announces 2021 guidance and preliminary 2020 production results

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Pan American Silver Corp. (NASDAQ: PAAS) (TSX: PAAS) announced its preliminary production results for the fourth quarter and full year 2020, and provided its guidance for production, costs and certain expenditures in 2021.

 

“We are expecting a 35% increase in silver production relative to 2020 and record gold production in 2021, despite our assumption that COVID-19 will continue to have an impact on operations,” said Michael Steinmann, President and Chief Executive Officer of Pan American. “Under our 2021 guidance assumptions, we expect to be generating robust levels of free cash flow. Our ability to overcome the extraordinary challenges over the past year while managing our nine operations, generating substantial free cash flow, advancing our La Colorada skarn project, and re-paying all our bank debt is a testament to our team and the benefit of having a diversified portfolio of quality assets. I anticipate 2021 being a much stronger year across all our operations.”

 

During 2020, Pan American repaid the remaining $275.0 million outstanding on its corporate credit facility and distributed $46.2 million in dividends to shareholders, with the quarterly dividend being increased twice during the year. As at December 31, 2020, Pan American had no bank debt, while the cash and short-term investment balances increased to approximately $279.1 million.

 

Preliminary 2020 Production Results

 

Figures are preliminary and subject to final adjustment. The final figures will be provided in Pan American’s financial results for Q4 and year ended December 31, 2020. Pan American plans to release its audited financial results for Q4 2020 and FY 2020 after market close on February 17, 2021.

 

 

Silver Production
(thousand ounces)
Gold Production
(thousand ounces)
Q4 2020 FY 2020 Q4 2020 FY 2020
La Colorada 1,186 5,025 0.8 3.5
Huaron 892 2,148 0.3 0.5
Morococha(1) 527 1,173 0.2 0.6
San Vicente(2) 663 2,320 0.1 0.3
Manantial Espejo 742 2,547 8.0 23.4
Dolores 764 3,779 30.5 98.0
Shahuindo 83 268 33.6 142.4
La Arena 11 33 41.4 105.4
Timmins 4 18 38.1 148.4
Total (3) 4,872 17,312 152.9 522.4
(1) Morococha data represents Pan American’s 92.3% interest in the mine’s production.
(2) San Vicente data represents Pan American’s 95.0% interest in the mine’s production.
(3) Totals may not add due to rounding.

 

Consolidated Base Metal Production (thousand tonnes)
Q4 2020 FY 2020
Zinc 14.2 40.2
Lead 5.4 15.7
Copper 2.3 5.2

 

2020 Production Summary and Notes:

 

  • FY 2020 consolidated silver production was 17.3 million ounces compared with the guidance range(1) of 18.0 million to 19.0 million ounces.
  • FY 2020 consolidated gold production was 522.4 thousand ounces compared with the guidance range(1) of 525.0 thousand to 575.0 thousand ounces.
  • FY 2020 consolidated zinc, lead and copper production was 40.2, 15.7 and 5.2 thousand tonnes, respectively, compared with guidance(1) of 40.0 – 43.0, 17.0 – 18.0 and 4.3 – 4.9 thousand tonnes, respectively.
  • Due to government measures in response to the COVID-19 pandemic, all of Pan American’s Latin American operations were placed in care and maintenance for an average duration of approximately two months during the first half of 2020. The Huaron and Morococha operations were suspended for another approximately three months through the third quarter of 2020. Our Timmins operation in Canada continued to operate throughout 2020 at reduced rates to accommodate COVID-19 related protocols.
  • Production at La Colorada was impacted by an inability to access high-grade ore due to the COVID-19 related delay in completing an underground ventilation raise and the loss of a ventilation raise from surface in late Q4 2020.
  • In Q4 2020, the Mining Secretary in the Province of Santa Cruz, Argentina, imposed a suspension of mining operations during the holiday period to help curb the spread of COVID-19, which caused production at Manantial Espejo to be suspended between December 21, 2020 and January 7, 2021.
  • Production and costs in 2020 were further impacted by operations running below normal capacity levels to accommodate comprehensive protocols to protect health and safety during the COVID-19 pandemic.
(1) On May 6, 2020, Pan American withdrew its 2020 annual production, Cash Costs, AISC and capital expenditure forecasts, originally provided in the 2019 annual MD&A dated March 12, 2020.  The decision to withdraw the 2020 guidance was based on the uncertainties regarding the impact of the COVID-19 pandemic on our operations. Pan American subsequently revised its 2020 annual production, Cash Costs, AISC and capital expenditure forecasts on August 5, 2020. On November 4, 2020, Pan American reduced its estimate for 2020 silver production and maintained the rest of the guidance provided on August 5, 2020.

 

2021 GUIDANCE

 

The estimates below are forward-looking in nature. Please refer to the cautionary note at the end of this news release. Management may revise guidance during the year to reflect actual and anticipated results.

 

Please note that the Dolores operation has been moved from the Silver Segment to the Gold Segment.

 

 

Silver Production Gold Production Cash Costs AISC
(million ounces) (thousand ounces) ($ per ounce)(1) ($ per ounce)(1)
Silver Segment:
La Colorada 7.16 – 7.44 4.0 – 4.2 4.00 – 5.00 8.50 – 9.50
Huaron 3.61 – 3.86 0.5 4.80 – 7.90 9.50 – 12.50
Morococha (92.3%)(2) 2.25 – 2.42 0.8 – 0.9 10.00 – 14.20 13.50 – 17.50
San Vicente (95.0%)(3) 3.23 – 3.37 0.5 12.30 – 13.50 16.75 – 17.75
Manantial Espejo 3.18 – 3.46 33.2 – 35.3 16.30 – 17.30 19.00 -20.00
Silver Segment Consolidated(4,5) 19.43 – 20.55 39.0 – 41.4 8.50 – 10.00 12.50 – 14.00
Gold Segment:
Dolores 2.73 – 2.97 160.8 – 179.3 665 – 820 850 – 1,000
Shahuindo 0.29 – 0.43 153.9 – 165.0 715 – 795 1,125 – 1,250
La Arena 0.03 102.9 – 110.9 870 – 940 1,275 – 1,400
Timmins 0.02 148.4 – 158.5 1,085 – 1,160 1,375 – 1,450
Gold Segment Consolidated(4,5) 3.07 – 3.45 566.0 – 613.7 825 – 925 1,135 – 1,250
Total Production(4,5) 22.5 – 24.0 605.0 – 655.1 n/a n/a
Consolidated AISC – Silver Basis(6) (2.80) – 2.70
(1) Cash Costs and AISC are non-GAAP measures. Please refer to the “Alternative Performance (Non-GAAP) Measures” section of this news release for further information on these measures.
(2) Morococha data represents Pan American’s 92.3% interest in the mine’s production.
(3) San Vicente data represents Pan American’s 95.0% interest in the mine’s production.
(4) Silver Segment Cash Costs and AISC are calculated net of credits for realized revenues from all metals other than silver and are calculated per ounce of silver sold. Gold Segment Cash Costs and AISC are calculated net of credits for realized silver revenues and are calculated per ounce of gold sold.
(5) Totals may not add due to rounding.
(6) Consolidated AISC is calculated per silver ounce sold with total gold revenues included within by-product credits. General and administrative (“G&A”) and greenfield exploration costs are included in the consolidated AISC, but not allocated in calculating AISC for each operation.

 

2021 Guidance Assumptions

 

  • Dolores will be reported as a Gold Segment operation in 2021 given the higher gold and lower silver grades in the expected mine sequencing.
  • We assume operations will continue to be impacted by comprehensive COVID-19 protocols, which increase costs and restrict throughput levels, especially at our underground mines. The impact of COVID-19 on operations is expected to diminish over the course of 2021, as vaccinations are deployed throughout our operating jurisdictions later in the year. For the first quarter of 2021, we assume operations will experience the full effect of COVID-19 restrictions, similar to Q4 2020. We assume the impact of restrictions declines to 75% in the second quarter, 50% in the third quarter and 25% in the fourth quarter of 2021. The first quarter of 2022 is assumed to be the first period that will be free of COVID-19 restrictions, allowing operations to run at full capacity. The impact regarding the restrictions could improve or worsen relative to our assumptions, depending on how each jurisdiction manages potential outbreaks of COVID-19, the development and supply of vaccines, and the roll-out of vaccination programs in each jurisdiction.
  • The silver production guidance for 2021 reflects: the decline in silver grades and increase in gold grades at Dolores from mine sequencing; restricted mining rates at La Colorada during the first half of the year due to the replacement of ventilation infrastructure; and a continued scarcity of qualified underground mining personnel in southern Argentina due to inter-provincial travel restrictions, which results in reduced production rates at Manantial Espejo, COSE and Joaquin while extending the mine lives by approximately one year.
  • At La Colorada, Pan American plans to advance three ventilation raises to support current production, mine expansions and development of the La Colorada skarn. These raises are in addition to the underground ventilation raise completed in the third quarter of 2020 and the ventilation raise from surface to the 345 level, which was completed in early January 2021, and is now being prepared for commissioning.
  • The cash costs and AISC forecasts assume average metal prices of $23.50/oz for silver, $1,825/oz for gold, $2,700/tonne ($1.22/lb) for zinc, $1,900/tonne ($0.86/lb) for lead, and $7,400/tonne ($3.36/lb) for copper; and average annual exchange rates relative to 1 USD of 20.00 for the Mexican peso (“MXN”), 3.50 for the Peruvian sol (“PEN”), 96.67 for the Argentine peso (“ARS”), 7.00 for the Bolivian boliviano (“BOB”), and $1.30 for the Canadian dollar (“CAD”).
  • The Escobal mine is assumed to remain in care and maintenance during 2021, as Guatemala’s Ministry of Energy and Mines conducts the court-mandated ILO 169 consultation.

 

Expenditures ($ millions)
Sustaining Capital
La Colorada 27.0 – 29.5
Huaron 14.5 – 15.5
Morococha 6.0 – 7.0
San Vicente 13.5 – 14.5
Manantial Espejo 6.5 – 7.5
Dolores 26.0 – 30.0
Shahuindo 66.5 – 68.0
La Arena 44.5 – 45.0
Timmins 40.5 – 43.0
Sustaining Capital Sub-total 245.0 – 260.0
Project Capital
La Colorada skarn 50.0 – 55.0
Timmins Wetmore exploration 5.0
Project Capital Sub-total 55.0 – 60.0
Total Capital 300.0 – 320.0
Care & Maintenance
Escobal 20.0 – 21.0
Navidad 2.0 – 2.5
Total Care & Maintenance 22.0 – 23.5
Corporate General & Administrative(1) 39.0 – 42.0
(1) Includes stock-based compensation.

 

Exploration expenditures are expected to total approximately $42 million, of which $22 million is included in project capital for drilling of the La Colorada skarn and the Wetmore project.

 

Technical Information

 

Scientific and technical information contained in this news release have been reviewed and approved by Martin Wafforn, P.Eng., Senior Vice President Technical Services and Process Optimization, and Christopher Emerson, FAusIMM, Vice President Business Development and Geology, each of whom are Qualified Persons, as the term is defined in Canadian National Instrument 43-101 – Standards of Disclosure of Mineral Projects.

 

For additional information about Pan American’s material mineral properties, please refer to Pan American’s Annual Information Form dated March 12, 2020, filed at www.sedar.com, or Pan American’s most recent Form 40-F furnished to the SEC.

 

About Pan American Silver

 

Pan American owns and operates silver and gold mines located in Mexico, Peru, Canada, Argentina and Bolivia. We also own the Escobal mine in Guatemala that is currently not operating. As the world’s second largest primary silver producer with the largest silver reserve base globally, we provide enhanced exposure to silver in addition to a diversified portfolio of gold producing assets. Pan American has a 27-year history of operating in Latin America, earning an industry-leading reputation for corporate social responsibility, operational excellence and prudent financial management. We are headquartered in Vancouver, B.C. and our shares trade on NASDAQ and the Toronto Stock Exchange.

 

Posted January 19, 2021

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