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Pan American Silver reports record operating cash flow of $462.3 million in 2020

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Pan American Silver Corp. (NASDAQ: PAAS) (TSX: PAAS) reported audited financial results for the year ended December 31, 2020 and the fourth quarter. Preliminary production results were previously reported on January 19, 2021. Pan American’s audited consolidated financial statements, as well as Pan American’s Management’s Discussion and Analysis for the three and twelve months ended December 31, 2020, and the Company’s Annual Information Form for the year ended December 31, 2020, are available on Pan American’s website at panamericansilver.com and on SEDAR at www.sedar.com.

 

“Pan American delivered strong financial performance in 2020, generating a record $462.3 million in operating cash flow, which enabled us to fully repay all bank debt, double our quarterly dividend to shareholders, and grow our cash balance at year end,” said Michael Steinmann, President and Chief Executive Officer. “Our operating teams helped deliver these strong results despite the exceptional challenges presented by the COVID-19 pandemic. We continue to support our workforce and communities during this difficult time, and look forward to the deployment of vaccination programs during 2021.”

 

Q4 2020 and FY 2020 Highlights:

 

  • Revenue was a record $430.5 million in Q4 2020 and totaled $1.3 billion for FY 2020. The rise in realized precious metal prices over 2020 helped mitigate the impact of COVID-19 related mine suspensions and throughput reductions on quantities of metal sold.
  • Net earnings were $169.0 million ($0.80 basic earnings per share) and $176.5 million ($0.85 basic earnings per share) in Q4 2020 and FY 2020, respectively. Net earnings in Q4 2020 were driven by record mine operating earnings of $137.2 million and the recognition of deferred income tax assets, including $41.0 million relating primarily to mine life extensions at the Timmins and La Arena operations.
  • Adjusted earnings in Q4 2020 were $120.5 million ($0.57 basic adjusted earnings per share). FY 2020 adjusted earnings were $243.4 million ($1.16 basic adjusted earnings per share).
  • Record net cash generated from operating activities of $170.6 million in Q4 2020 and $462.3 million for FY 2020.
  • As previously announced, consolidated FY 2020 silver and gold production was 17.3 million ounces and 522.4 thousand ounces, respectively. FY 2020 production was largely impacted by the COVID-19 related mine suspensions and throughput reductions. Silver production was further impacted by an inability to access high-grade ore at La Colorada due to ventilation issues, which are being remedied, and lower grades at Dolores and San Vicente from mine sequencing.
  • FY 2020 Silver Segment Cash Costs and All-in Sustaining Costs of $7.05 and $11.38 per silver ounce sold, respectively, were in line with the Revised 2020 Forecast(1).
  • FY 2020 Gold Segment Cash Costs and AISC of $797 and $1,011 per gold ounce sold, respectively, were below the Revised 2020 Forecast(1).
  • FY 2020 Consolidated AISC, including gold by-product credits from the Gold Segment mines, of $(3.29) per silver ounce sold was below the Revised 2020 Forecast(1).
  • Sustaining capital was $52.0 million and $162.0 million in Q4 2020 and FY 2020, respectively. Project capital was $3.8 million and $21.5 million in Q4 2020 and FY 2020, respectively. Approximately $50.0 million to $60.0 million of capital expenditures were deferred into 2021 due to COVID-19.
  • In 2020, Pan American repaid a net $275 million on its revolving Credit Facility. At December 31, 2020, the Company had cash and short-term investment balances of $279.1 million, working capital of $495.2 million, and no amounts drawn on its $500 million Credit Facility.
  • The Board of Directors has approved a cash dividend of $0.07 per common share, or approximately $14.7 million in aggregate cash dividends, payable on or about March 11, 2021, to holders of record of Pan American’s common shares as of the close on March 1, 2021. 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.
(1) Due to the uncertainties regarding the impact of COVID-19 on our operations, in May 2020, the Company withdrew its 2020 annual production, Cash Costs, AISC and capital expenditure forecasts, as provided in the 2019 annual MD&A dated March 12, 2020 (the “Original 2020 Forecasts”). The Company subsequently issued a new 2020 annual forecast on August 5, 2020 (the “August 2020 Forecast”). On November 4, 2020, management further revised forecasts for 2020 annual silver production and capital expenditures  (the “Revised 2020 Forecast”).

 

Cash Costs, AISC, adjusted earnings, basic adjusted earnings per share, sustaining capital, project capital, working capital, total debt, and total available liquidity 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.

 

 

 

CONSOLIDATED RESULTS

 

 

December 31,
2020
December 31,
2019
Weighted average shares during period (millions) 210.1 201.4
Shares outstanding end of period (millions) 210.3 209.8
Three months ended
December 31,
Year ended
December 31,
2020 2019 2020 2019
FINANCIAL
Revenue $ 430,461 $ 404,379 $ 1,338,812 $ 1,350,759
Mine operating earnings $ 137,172 $ 98,610 $ 360,177 $ 229,288
Net earnings $ 169,018 $ 51,706 $ 176,455 $ 111,244
Basic earnings per share(1) $ 0.80 $ 0.25 $ 0.85 $ 0.55
Adjusted earnings(2) $ 120,488 $ 68,908 $ 243,382 $ 157,987
Basic adjusted earnings (loss) per share(1) $ 0.57 $ 0.33 $ 1.16 $ 0.78
Net cash generated from operating activities $ 170,571 $ 129,473 $ 462,315 $ 282,028
Net cash generated from operating activities before changes in
working capital(2)
$ 151,995 $ 124,727 $ 365,333 $ 309,972
Sustaining capital expenditures $ 52,007 $ 46,187 $ 162,047 $ 179,096
Project capital expenditures $ 3,753 $ 9,578 $ 21,545 $ 44,734
Cash dividend per share $ 0.070 $ 0.035 $ 0.220 $ 0.140
PRODUCTION
Silver (thousand ounces) 4,872 6,622 17,312 25,886
Gold (thousand ounces) 152.9 173.9 522.4 559.2
Zinc (thousand tonnes) 14.2 16.6 40.2 67.6
Lead (thousand tonnes) 5.4 7.2 15.7 27.3
Copper (thousand tonnes) 2.3 2.3 5.2 8.7
CASH COSTS(2) ($/ounce)
Silver Segment 6.15 7.80 7.05 6.39
Gold Segment 763 693 797 712
AISC(2) ($/ounce)
Silver Segment 10.37 11.37 11.38 10.46
Gold Segment 1,023 901 1,011 948
Consolidated Silver Basis (7.28) 1.04 (3.29) 4.44
AVERAGE REALIZED PRICES(3)
Silver ($/ounce) 24.72 17.84 20.60 16.34
Gold ($/ounce) 1,874 1,479 1,758 1,406
Zinc ($/tonne) 2,566 2,325 2,288 2,535
Lead ($/tonne) 1,922 2,078 1,851 1,997
Copper ($/tonne) 7,234 5,840 6,412 5,973
(1) Per share amounts are based on basic weighted average common shares.
(2) Non- GAAP measures: cash 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.

 

 

INDIVIDUAL MINE OPERATION PERFORMANCE

 

 

Silver Production
(ounces ‘000s)
Gold Production
(ounces ‘000s)
Three months ended
December 31,
Three months ended
December 31,
2020 2019 2020 2019
Silver Segment:
La Colorada 1,186 2,080 0.8 1.3
Dolores 764 1,287 30.5 26.1
Huaron 892 935 0.3 0.2
Morococha(1) 527 554 0.2 0.2
San Vicente(2) 663 877 0.1 0.1
Manantial Espejo 742 817 8.0 6.7
Gold Segment:
Shahuindo 83 54 33.6 43.5
La Arena 11 11 41.4 48.4
Timmins 4 6 38.1 47.3
Total(3) 4,872 6,622 152.9 173.9
(1) Morococha data represents Pan American 92.3% interest in the mine’s production.
(2) San Vicente data represents Pan American 95.0% interest in the mine’s production.
(3) Totals may not add due to rounding.

 

Cash Costs(1)

 ($ per ounce)

AISC(1)

($ per ounce)

Three months ended
December 31,
Three months ended
December 31,
2020 2019 2020 2019
La Colorada 7.07 4.30 11.78 5.80
Dolores (9.79) 2.64 (2.17) 9.33
Huaron 2.03 5.34 3.35 9.44
Morococha 11.85 10.85 18.29 18.83
San Vicente 17.67 14.38 20.89 16.50
Manantial Espejo 18.72 15.47 19.24 16.94
Silver Segment Consolidated(2) 6.15 7.80 10.37 11.37
Shahuindo 619 605 842 970
La Arena 556 580 873 764
Timmins 1,126 884 1,355 984
Gold Segment Consolidated(2) 763 693 1,023 901
Consolidated Silver Basis(3) (7.28) 1.04
Consolidated Silver Basis, before net realizable value inventory adjustments(3) (5.85) 0.96
(1) Cash costs and AISC are non-GAAP measures. See the section “Alternative Performance (Non-GAAP) Measures” of the MD&A for the period ended December 31, 2020 for a detailed description of these measures and where appropriate a reconciliation of the measure to the Q4 2020 Financial Statements.
(2) 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. Corporate general and administrative expense, and exploration and project development expense are included in consolidated (silver basis) AISC, but are not allocated amongst the operations and thus are not included in either the silver or gold segment consolidated amounts.
(3) Consolidated silver basis is calculated by treating all revenues from metals other than silver, including gold, as a by-product credit.

 

Silver Production
(ounces ‘000s)
Gold Production
(ounces ‘000s)
Twelve months ended
December 31,
Twelve months ended
December 31,
2020 2019 2020 2019
Silver Segment:
La Colorada 5,025 8,206 3.5 4.6
Dolores 3,779 5,122 98.0 117.6
Huaron 2,148 3,796 0.5 1.0
Morococha(1) 1,173 2,456 0.6 1.4
San Vicente(2) 2,320 3,528 0.3 0.5
Manantial Espejo 2,547 2,599 23.4 22.4
Gold Segment:
Shahuindo 268 137 142.4 145.4
La Arena 33 26 105.4 122.5
Timmins 18 18 148.4 143.8
Total(3) 17,312 25,886 522.4 559.2
(1) Morococha data represents Pan American 92.3% interest in the mine’s production.
(2) San Vicente data represents Pan American 95.0% interest in the mine’s production.
(3) Totals may not add due to rounding.

 

Cash Costs(1)

 ($ per ounce)

AISC(1)

($ per ounce)

Twelve months ended
December 31,
Twelve months ended
December 31,
2020 2019 2020 2019
La Colorada 6.99 2.99 10.80 4.54
Dolores (2.48) 3.09 6.17 15.45
Huaron 3.77 4.15 6.53 7.74
Morococha 11.40 4.35 18.38 10.08
San Vicente 15.54 11.77 17.94 13.08
Manantial Espejo 15.68 19.59 15.80 18.43
Silver Segment Consolidated(2) 7.05 6.39 11.38 10.46
Shahuindo 588 570 750 807
La Arena 721 644 1,109 1,042
Timmins 1,061 904 1,213 998
Gold Segment Consolidated(2) 797 712 1,011 948
Consolidated Silver Basis(3) (3.29) 4.44
Consolidated Silver Basis, before net realizable value inventory adjustments(3) (2.35) 4.45
(1) Cash costs and AISC are non-GAAP measures. See the section “Alternative Performance (Non-GAAP) Measures” of the MD&A for the period ended December 31, 2020 for a detailed description of these measures and where appropriate a reconciliation of the measure to the Q4 2020 Financial Statements.
(2) 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. Corporate general and administrative expense, and exploration and project development expense are included in consolidated (silver basis) AISC, but are not allocated amongst the operations and thus are not included in either the silver or gold segment consolidated amounts.
(3) Consolidated silver basis is calculated by treating all revenues from metals other than silver, including gold, as a by-product credit.

 

2020 ANNUAL RESULTS COMPARED TO FORECAST

 

The Company’s 2020 annual production, Cash Costs, AISC and capital expenditures compared to management’s most recent annual forecast amounts are as follows:

 

 

2020 Actual Forecast Range(1)
Production
Silver (million ounces) 17.3 18.0 – 19.0
Gold (thousand ounces) 522.4 525.0 – 575.0
Zinc (thousand tonnes) 40.2 40.0 – 43.0
Lead (thousand tonnes) 15.7 17.0 – 18.0
Copper (thousand tonnes) 5.2 4.3 – 4.9
Cash Costs(2) ($/ounce)
Silver Segment 7.05 6.20 – 7.70
Gold Segment 797 800 – 860
AISC(2) ($/ounce)
Silver Segment 11.38 10.50 – 12.50
Gold Segment 1,011 1,050 – 1,125
Consolidated Silver Basis (3.29) (3.00) – 0.75
Capital Expenditures ($ millions)
Sustaining Capital 162.0 175.0 – 180.0
Project Capital 21.5 20.0 – 21.0
Total Capital 183.5 195.0 – 201.0
(1) The Forecast Range reflects the revised 2020 forecast provided on November 4, 2020.
(2) Cash Costs and AISC are non-GAAP measures. See the section “Alternative Performance (Non-GAAP) Measures” section of this news release for a detailed description of these measures.

 

Q4 and FY 2020 Audited Results

 

Pan American plans to release its audited results for Q4 and FY 2020 on February 17, 2021, after market close. A conference call and webcast will be held on February 18, 2021.

 

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 February 18, 2021

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