Pan American Silver Corp. (NASDAQ: PAAS) (TSX: PAAS) reports fourth quarter financial results and audited financial results for the year ended December 31, 2022.

Michael Steinmann, President and Chief Executive Officer commented: “As expected, our 2022 production was back-end loaded with strong output in Q4, led by Shahuindo and La Arena. Our 2022 silver production was at the top of the revised range provided in November, while gold production was in line with our original operating outlook. World-wide inflationary pressures, and supply chain shortages and delays impacted production costs across our operations. Revenue in Q4 was reduced by approximately $45 million to $50 million from a build-up of finished goods inventory due to the timing of sales at the end of December. Additionally, the build-up of finished good inventories of zinc also contributed to higher costs due to the reduction in by-product credits.”

Added Mr. Steinmann: “In January, shareholders of both Pan American and Yamana overwhelmingly approved the arrangement for Pan American to acquire Yamana and its Latin American Assets. Transaction related costs of $157.3 million were expensed in Q4 2022, and are accounted for in our earnings and cash flow statements for the period, while the remainder of Transaction closing costs are expected to be recorded in Q1 2023. Following the completion of the Transaction, expected in Q1 2023, Pan American will be a markedly different company. The integration of Yamana’s assets further strengthens and diversifies our portfolio. We see tremendous opportunity to optimize our expanded base of operations in Latin America to capture synergies, increase cash flow generation and focus on high-value growth projects.”

Q4 2022 and FY 2022 Highlights:

• The Company, Yamana Gold Inc. and Agnico Eagle Mines Limited entered into an arrangement agreement dated November 4, 2022, whereby the Company agreed to acquire all of the issued and outstanding common shares of Yamana following the sale by Yamana of its Canadian assets, including certain subsidiaries and partnerships which hold Yamana’s interests in the Canadian Malartic mine, to Agnico Eagle, by way of a plan of arrangement under the Canada Business Corporations Act. The Transaction is expected to close in the first quarter of 2023, subject to receipt of approval from the Mexican Federal Economic Competition Commission and satisfaction or waiver of certain other closing conditions. Following completion of the Transaction, the Company will add a number of assets to its portfolio, including: the Jacobina mine in Brazil; the El Peñón and Minera Florida mines in Chile; and the Cerro Moro mine in Argentina as well as several development projects in Argentina and Chile.
• Silver production was 4.8 million ounces in Q4 2022 and 18.5 million ounces in FY 2022. Gold production of 164.4 thousand ounces in Q4 2022 was the second highest on record, and totaled 552.5 thousand ounces in FY 2022. Silver production was within the revised guidance range provided on November 9, 2022 while gold production was within the original guidance range provided on February 23, 2022.
• Revenue was $375.5 million in Q4 2022 and $1.5 billion for FY 2022. Revenue in Q4 2022 excluded finished goods inventory build-ups of 418 thousand ounces of silver and 17 thousand ounces of gold.
• Net loss of $172.1 million, or $0.82 basic loss per share in Q4 2022 and $340.1 million, or $1.62 basic loss per share for FY 2022. In Q4 2022, the Company incurred $157.3 million in expenses related to the Transaction, primarily attributable to the Company advancing $150.0 million to Yamana toward the termination fee paid by Yamana to Gold Fields Limited in connection with the now terminated arrangement agreement between Yamana and Gold Fields.
• Adjusted loss was $4.8 million, or $0.02 basic adjusted loss per share in Q4 2022 and adjusted earnings were $17.9 million, or $0.09 basic adjusted earnings per share for FY 2022.
• Cash flow used in operating activities was $112.1 million in Q4 2022, primarily reflecting Transaction expenses of $157.3 million. Q4 2022 cash flow was also reduced by $29.1 million of cash used for working capital. Cash flow generated from operating activities was $31.9 million for FY 2022.
• Silver Segment Cash Costs were $14.41 and $12.72 per ounce in Q4 2022 and FY 2022, respectively. Silver Segment all-in sustaining costs (“AISC”), excluding NRV adjustments, were $19.47 and $16.56 per ounce in Q4 2022 and FY 2022, respectively. FY 2022 Silver Segment Cash Costs and AISC were above the 2022 Original Operating Outlook ranges, largely due to inflationary cost pressures, supply chain shortages and delayed logistics.
• Gold Segment Cash Costs were $1,077 and $1,113  per ounce in Q4 2022 and FY 2022, respectively. Gold Segment AISC, excluding NRV adjustments, were $1,422 and $1,459 per ounce in Q4 2022 and FY 2022, respectively. FY 2022 Gold Segment Cash Costs were above the 2022 Original Operating Outlook range and Gold Segment AISC were at the low end of the revised guidance range provided on August 10, 2022.
• Capital expenditures totaled $290.4 million in 2022, comprised of $223.8 million of sustaining capital and $66.6 million of project capital, which was largely directed to the La Colorada Skarn project. Total capital expenditures were within the 2022 Original Operating Outlook.
• At December 31, 2022, the Company had cash and short-term investment balances of $142.3 million (excluding long-term investments), working capital of $423.5 million, and $340.0 million available under its revolving Sustainability-Linked Credit Facility (“SL-Credit Facility”). Total debt of $226.8 million was related to SL-Credit Facility, lease liabilities and construction loans in Peru.
• A cash dividend of $0.10 per common share has been declared, payable on or about March 17, 2023, to holders of record of Pan American’s common shares as of the close on March 6, 2023. The dividends are eligible dividends for Canadian income tax purposes.
• Pan American was included in the S&P Global Sustainability Yearbook 2023 recognizing our improvement in ESG performance. S&P Global’s annual Sustainability Yearbook aims to distinguish individual companies, within their industries, that have demonstrated strengths in corporate sustainability. Pan American was placed in the S&P top 10% in the Metals & Mining industry in 2022.

ILO 169 Consultation for the Escobal Mine

In Q4 2022, two meetings were held under the ILO 169 consultation process for the Escobal mine in Guatemala. During these meetings, the Health and Cultural Ministries delivered project information to the Xinka representatives and their expert consultants. In December 2022, the Ministry of Energy and Mines (“MEM”) and Xinka representatives delivered a progress report on the ILO 169 process to the Guatemalan Supreme Court of Justice.

The MEM is leading the ILO 169 consultation process, and further details regarding the process are available on the MEM’s web site: https://mem.gob.gt/pueblo-indigena-xinka/. No timeline has been set for the conclusion of the ILO 169 consultation process, nor a potential restart of operations at the Escobal mine.

Disposition of Shares in Maverix Metals

Pan American sold its remaining interest in Maverix Metals Inc. in January 2023, following the acquisition by Triple Flag Precious Metals Corp. of all the outstanding common shares of MMX for share and cash consideration. Pan American realized net proceeds of $105.3 million on the sale of its shareholdings, which represented approximately 17.6% of the issued and outstanding shares of MMX. In May 2020, Pan American had sold a portion of its holdings in MMX for aggregate gross proceeds of  $45.5 million. In total, Pan American has realized $150.7 million for its interest in MMX, crystallizing value for the 19 royalties, precious metal streams and payment agreements that Pan American sold in total from its portfolio: 13 of these were sold in 2016 to create MMX and an additional six royalties were sold in 2021.

2023 Operating Outlook

Pan American plans to provide its 2023 operating outlook and guidance following the completion of the Transaction, which is expected to occur later in the first quarter of 2023. Management intends to provide a 2023 operating outlook inclusive of the Latin American assets acquired through the Transaction, as well as a consolidated forecast for annual general and administrative, exploration and project development costs.

The 2023 operating outlook will reflect the end of mine life at Pan American’s Manantial Espejo operation in Argentina, with the asset being placed on care and maintenance at the end of 2022.

CONSOLIDATED RESULTS

Fourth Quarter Consolidated Income Statements
(unaudited)

Fourth Quarter Consolidated Statements of Cash Flows
(unaudited)

About Pan American

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. Pan American provides enhanced exposure to silver through a large base of silver reserves and resources, as well as major catalysts to grow silver production. We have a 29-year history of operating in Latin America, earning an industry-leading reputation for sustainability performance, operational excellence and prudent financial management.