Pan American Silver Corp. (NASDAQ: PAAS) (TSX: PAAS) reported unaudited results for the quarter ended June 30, 2022.

“Operations at our flagship asset, La Colorada, have improved significantly, with silver production rising to approximately 1.7 million ounces in Q2,” said Michael Steinmann, President and Chief Executive Officer. “However, Pan American’s Q2 results were markedly impacted by the underperformance at Dolores and our determination that recording an impairment of this asset was required. The remaining operations performed largely in line with our expectations, recovering well from the impact of the COVID-19 Omicron wave in the first quarter of 2022. We continue to expect consolidated production to be weighted to the back half of 2022, especially for the Gold Segment due to mine sequencing at Shahuindo and La Arena. Our financial position remains solid with cash and short-term investments of $241.3 million and an undrawn line of credit of $500 million.”

Consolidated Q2 2022 Highlights:

• Silver production of 4.5 million ounces and gold production of 128.3 thousand ounces.
• Revenue was $340.5 million, inclusive of a negative $9.3 million adjustment on open concentrate shipments, largely related to the decline in metal prices towards the end of Q2 2022. Revenue in Q2 2022 excluded inventory build-ups of 34.2 thousand ounces of silver and 8.5 thousand ounces of gold.
• Net loss of $173.6 million ($0.83 basic loss per share), impacted by a pre-tax impairment charge of $99.1 million recorded for Dolores and $62.8 million in net realizable value (NRV) inventory adjustments, primarily at Dolores.
• Adjusted loss of $6.5 million ($0.03 basic adjusted loss per share) excludes the impact from the Dolores impairment and the heap inventory write-down.
• Operations generated $20.8 million of cash flow, net of $42.4 million in tax payments and a $19.5 million build-up in working capital.
• Silver Segment Cash Costs and All-in Sustaining Costs (“AISC”) per silver ounce were $12.10 and $17.30, respectively. Excluding NRV inventory adjustments, Silver Segment AISC was $15.90 per ounce.
• Gold Segment Cash Costs and AISC per gold ounce were $1,132 and $2,051, respectively. Excluding NRV inventory adjustments, Gold Segment AISC was $1,540 per ounce.
• As at June 30, 2022, Pan American had working capital of $513.9 million, inclusive of cash and short-term investment balances of $241.3 million; a long-term investment in Maverix Metals Inc. (“Maverix”) with a fair value of $112.5 million; and $500.0 million available under our sustainability-linked credit facility. Total debt of $63.2 million was related to lease liabilities and construction loans.
• A cash dividend of $0.11 per common share has been declared, payable on or about September 2, 2022, to holders of record of Pan American’s common shares as of the close on August 22, 2022. Aligned with the Company’s dividend policy, the dividend is comprised of a base dividend of $0.10 per common share and a variable dividend component of $0.01 per common share. The dividends are eligible dividends for Canadian income tax purposes.
• Management has updated its Guidance for 2022. See the “2022 Guidance” section of this news release for further details, and the Company’s Management’s Discussion and Analysis for the three and six months ended June 30, 2022.

Dolores Update

Management identified the following impairment indicators at the Dolores Mine as part of our quarterly review of impairment indicators:

These factors resulted in an impairment to the mineral property, plant and equipment, as well as a net realizable value inventory adjustment, largely related to the heap inventory.

ILO 169 Consultation Process for Escobal Advances to Next Phase

The final meeting of the pre-consultation phase of the ILO 169 consultation process for the Escobal mine in Guatemala was held on July 20, 2022, and was formally announced at a joint news conference held by the Xinka Parliament and the Guatemalan Ministry of Energy and Mines. A total of eight meetings were held during the pre-consultation. The process has now advanced to the consultation phase, with the first meeting scheduled for August 21, 2022. For a description of the ILO 169 consultation process for Escobal, please see our website at https://www.panamericansilver.com/operations/north-and-central-america/escobal/.

CONSOLIDATED RESULTS

Cash Costs, AISC, adjusted earnings, basic adjusted earnings per share, sustaining and non-sustaining capital, working capital, total debt and net cash 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.

This news release should be read in conjunction with Pan American’s unaudited Condensed Interim Consolidated Financial Statements and our Management’s Discussion and Analysis for the three and six months ended June 30, 2022. This material is available on Pan American’s website at panamericansilver.com, on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.

2022 GUIDANCE

Based on results for the first six months of 2022 and the expected results for the remainder of the year, Management provides the following update to the 2022 Operating Outlook included in the Company’s 2021 MD&A dated February 23, 2022:

• The estimates for silver and gold production have been reaffirmed, but are expected to be at the low end of the ranges, primarily due to the production shortfall at Dolores.
• The estimates for Silver Segment Cash Costs and AISC have been reaffirmed.
• The estimate for Gold Segment Cash Costs is expected to be at the high end of the original guidance range and the estimate for AISC, excluding NRV adjustments, has been revised from between $1,240 and $1,365 per ounce to between $1,450 and $1,550 per ounce. The revision reflects the production shortfall at Dolores, global inflationary pressures and an increase in estimated consolidated sustaining capital spending.
• The estimate for sustaining capital has been increased from between $200.0 million and $210.0 million to between $240.0 million and $250.0 million due to a change in the financing of certain planned sustaining capital investments (funding projects directly rather than entering construction loans), which will decrease future expected cash outflows and loan obligations. The estimate for project capital has been decreased from between $80.0 million and $95.0 million to between $55.0 million and $60.0 million, based on expected delays in spending at both the La Colorada Skarn and Timmins projects. The decrease in capital for the La Colorada Skarn project is due to delaying the design and initiation of the access ramp developments to optimize alignments with the highly efficient bulk mining method designs being considered. The revisions bring the total capital expenditures anticipated for the year to between $295.0 million and $310.0 million.

These estimates are forward-looking statements and information that are subject to the cautionary note associated with forward-looking statements and information at the end of this news release. The following tables provide Management’s 2022 Guidance forecasts, as at August 10, 2022, including revised Gold Segment AISC and revised capital expenditures.

Annual Production

Cash Costs and AISC

Capital Expenditures

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. 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 28-year history of operating in Latin America, earning an industry-leading reputation for sustainability performance, operational excellence and prudent financial management. We are headquartered in Vancouver, B.C. and our shares trade on NASDAQ and the Toronto Stock Exchange.