Pan American Silver Q4 2024 Earnings Call Transcript

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February 20, 2025

There are 10 speakers on the call.

Operator

Thank you for standing by. This is the conference operator. Welcome to the Pan America Silver Fourth Quarter and Year End twenty twenty four Results Conference Call. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions.

Operator

I would now like to turn the conference over to Soren Peseky, VP, Investor Relations. Please go ahead, Ms. Peseky.

Speaker 1

Thank you for joining us today for Pan American Silver's conference call and webcast to discuss our Q4 financial results, our audited financial results for the 2024 year and our outlook for 2025. This call includes forward looking statements and information and makes reference to non GAAP measures. Please see the cautionary statements in our MD and A, news release and presentation slides for our 2024 audit results, all of which are available on our website. I'll now turn the call over to Michael Steinman, Pan American's President and CEO.

Speaker 2

Thank you, Seren, and hello, everyone. I'm glad you could join us to discuss Pan American's twenty twenty four results and our outlook for 2025. We are very pleased with the company's performance over the past year. Revenue was a record of $815,100,000 in Q4 and $2,800,000,000 in 2024, reflecting the contribution of a full year of production from the acquired Yamana mines and strong metal prices. We achieved our production guidance for 2024.

Speaker 2

Silver production totaled 21,100,000 ounces and gold production was a company record of 892,000 ounces. All in sustaining costs for the Silver segment, excluding NLV inventory adjustments, were $18.98 per ounce in 2024, slightly above the guidance. Gold segment all in sustaining costs, excluding NOV inventory adjustments in 2024, were $15.00 $1 per ounce and were within the guidance. In 2024, we completed several major projects, notably the new ventilation infrastructure at La Colorada. We are now seeing the benefits in terms of higher throughput at La Colorada, achieving our target 2,000 tonnes at the end of last year and lower per ounce operating costs.

Speaker 2

We finished construction of the new filtration plant and filter stack tailing storage facility at Varon and the pace backfill plant at Timmins. These investments have set those assets up well for the future, while today our operations are generating record cash flows. Cash flow generated from operations was a record $274,100,000 in Q4 and also a record of $724,100,000 for the full year, reflecting strong margins. We also achieved record free cash flow of $196,200,000 in Q4 or $445,100,000 for the full year. We recorded net earnings of $107,800,000 or $0.3 per share in Q4.

Speaker 2

Full year net earnings were $112,700,000 or $0.31 per share in 2024. Net earnings in Q4 reflect the gain from the sale of La Reina being almost entirely offset by adjustments at Dolores to the closure anti commissioning liability and to the net realizable value of the inventory. The adjustments at Dolores reflect the completion of mining and the transition to the residual leaching phase and active reclamation. Based on our most recent estimates for residual heap leaching in the post mining phase, we expect economic production to continue at decreasing rates through mid to late twenty twenty six. Again from the Varenna sale and the adjustments at Dolores were adjusted from earnings.

Speaker 2

This resulted in adjusted earnings of $126,900,000 or $0.35 per share in Q4. Full year adjusted earnings were $286,700,000 or $0.79 per share. FedAmerican is entering 2025 in a strong financial position. We are now in a net cash position with $887,000,000 cash and short term investments against roughly $800,000,000 of debt, largely related to the two long term bonds we acquired through the Yamana transaction. Our credit facility remains undrawn, giving us $1,600,000,000 of total available liquidity.

Speaker 2

This is a great position to be able to pursue our growth objectives while returning capital to shareholders. Yesterday, we announced a $0.1 per share dividend with respect to Q4. In the first quarter of twenty twenty five, we also repurchased approximately $20,000,000 or roughly 900,000 shares under the share buyback plan. That brings total share repurchases since introducing the share buyback plan last March to roughly 2,600,000.0 shares. Total dividends paid over 2024 were $145,400,000 I'm very proud that we have been able to return over $1,000,000,000 in dividends and share buybacks to investors since 2010, but investing in growth, maintaining a strong balance sheet and not issuing any equity through public offerings.

Speaker 2

Moving on to our guidance for this year. In 2025, we are expecting largely steady state operations with the notable changes relative to 2024 being the sale of La Reina, the lower center in the residual leach phase and improved operations at La Colorada following the ventilation upgrade. We are expecting to produce between 20,000,000 to 21,000,000 ounces of silver and seven thirty five thousand to 800,000 ounces of gold in 2025. We expect both silver and gold production to be weighted to the second half of the year with corresponding effects of lower per unit costs over that period. Please see our Q4 news release and MD and A for quarterly production and cost estimates.

Speaker 2

Average all in sustaining costs for the Silver segment in 2025 are expected to be between $16.25 and $18.25 per ounce. For the Gold segment, we expect all in sustaining costs of between $15.25 dollars to $16.25 dollars per ounce in 2025. Sustaining capital is forecasted to be between $270,000,000 to $285,000,000 and project capital between $90,000,000 to $100,000,000 Project capital includes investment at La Colorada and the current vein mine operation aimed at opening production access to 13 new veins. These discoveries will expand high grade zones in the eastern part of the mine and were highlighted in our 12/09/2024 annual exploration update news release. For the La Colorados current project, we plan to invest $39,000,000 to $42,000,000 in exploration and infill drilling and to advance the technical studies to determine the optimum development scenario for the company.

Speaker 2

We are also investing project capital at Timmins for the construction of the Stage six tailing storage facility and exploration of satellite deposits. At Jacovina, we are directing project capital to advance the comprehensive mine and plant optimization study, expecting to describe some initial value enhancement projects by midyear. As we're on, we have some residual project capital related to the new tailings filtration plant and filter stack tailings storage, which have been successfully commissioned and ramping up to full operation. We plan to invest about $80,000,000 on exploration in 2025, mostly for reserve replacement. We are forecasting cash taxes of two forty million dollars to $260,000,000 with approximately one third to be paid in the first quarter of twenty twenty five.

Speaker 2

Car maintenance costs are estimated to total between $20,500,000 to $24,000,000 mostly related to Escobar. Working meetings amongst the participants in the consultation process for Escobar resumed in late January after the Christmas break. We will continue to work with the government of Guatemala and the Cinco Representatives to advance the consultation process. The government has not yet published the timeline for completion of the consultation and there is no date for restart of the operation. Heading into 2025, Pan American is well positioned to benefit from the strong metal price environment we are in.

Speaker 2

The mines we acquired through the Yamana transaction and the strong operating teams managing them are now well integrated in our organization. We made significant strides in rationalizing the portfolio, and we will continue with a focus on safe, efficient and sustainable mining operations. We will continue to build an even better and stronger company that offers investors unique upside to silver with expanding margins in a rising metal price environment. We're well on track with that goal, and I look forward to keeping you informed of our progress. I will be happy now to take your questions.

Operator

Thank you. We will now begin the question and answer session. The The first question comes from Cosmos Hsu with CIBC. Please go ahead.

Speaker 3

Thanks, Michael and team. Maybe my first question is on La Colorada. I see that your 2025 guidance is 5,500,000 ounces to 5,800,000 ounces. I would have thought that could have been slightly higher just given that you produced 1,600,000 ounces in Q4. But I guess now everything is in a straight line.

Speaker 3

So could you maybe comment on 2025 guidance for La Callehua?

Speaker 2

Sure, Cosmos. Good morning. And I'll let Steve answer that question.

Speaker 4

Yes. Good morning, Cosmos. Thank you for that question. If you recall in December, we put out a press release that highlighted some of the really significant exploration intercepts we're seeing off to the east side of that area on Candelaria. What we decided to do is there's a bit of a balancing going on.

Speaker 4

We're trying to reduce a little bit the burden we've got a capacity burden in the system on waste movement and we want to develop out into this new area to bring long term value to that operation. So we're balancing what kind of impacts do we want to see next year compared to trying to get that aggressively opening up that new area and understanding better the potential reserves out in that area. So it was kind of a happy medium we chose for 2025, take a little bit of short term pain for long term gain there. And I'll let Chris talk a little bit about what we're seeing out there and why we're doing it. But before that, I just also want to mention that along the way going out to that east, we do cross a section of concession that belongs to one of our neighbors.

Speaker 4

So we will be mining through a concession there and there seems to be some more there and we'll share some of the profits with that concession owner as we pass through there. So that has a bit of an impact on the cost and the production as well. But it's really the waste constraint. We want to develop that area. We only have so much capacity to move more in waste.

Speaker 4

So something's got to give as we open up that area and we think long term it's going to bring substantial additional value to the company and I'll let Chris kind of highlight on that.

Speaker 3

Yes. Hi, Chris, this is Chris here.

Speaker 5

Yes, as Mike mentioned yes. Hi. As Mike mentioned, you have 13 new structures, which was highlighted in the December exploration press release. We've been alluding to this over last year. We put a lot of effort into sort of moving a lot of the exploration over to that East portion.

Speaker 5

We have some of the major structures, the NC2 etcetera. But if you remember, the La Colorada mine has been deepening. And as we know that through these systems, it becomes more polymetallic risk. So finding new structures and finding new areas higher up in the system is obviously beneficial. And that's why we're really concentrating on that Eastern portion and Southeast of the Skagen area, which is at depth as well.

Speaker 5

But we've had some great results as you can see in that press release and certainly something to look forward to for the future of the company.

Speaker 3

Great. And maybe same type of question for Jacobina as well. You're guiding to 185,000 to 195,000 ounces in 2025. I thought that could have gone higher potentially as well, just given that you did a record 52.4% in Q4 twenty twenty four. Could you maybe comment on that and also maybe comment on I believe there's some optimization studies ongoing at Jacobina.

Speaker 3

How that's going so far as well?

Speaker 4

Yes, Cosmos, Steve here again. Yes, we had a remarkable year and a remarkable Q4 at Jacobina. We're very, very happy with the way that operation is debottlenecking, continues to debottleneck. With that said, there are some projects that are underway during 2025 outside of the optimization study to try to firm up the plant and give us stability. We got some screens that are undersized.

Speaker 4

We're pushing them too hard. So we're replacing some screens in the crushing plant as well as the grinding circuit. We're doing some upgrades on our CIP carbon and pulp tanks to give us that sustainable run rate, but those projects won't be done till late in the year. So we didn't want to forecast the kind of production throughputs we had during Q4 for the whole first nine months given those projects. Once those projects are done, we're quite confident and as part of the optimization work that I'll talk about next, we're quite confident mid year we'll be able to come out with some looking forward beyond '25 as to how we can push that plant up a little bit.

Speaker 4

Relative to the optimization study, that work it's going really well. There's a few projects that are going to come out. We're going to be announcing them later in 2025 mid year that deals with handling of this concept of this PACE plant that we've been talking about for the underground mine that allow us to get a better recovery of the reserve and resources that exist there. But also in the longer term picture, we got to change the way we're handling some of the tailings. So we're looking at a filter plant there too.

Speaker 4

So the optimization studies is kind of starting to break up into different phases. The first phase will focus on getting those projects out along with getting this mill sustained at the kind of throughputs we saw in Q4. And then we see future potential is really starting to get exciting there as well too as to what we can do during 'twenty six and 'twenty seven.

Speaker 3

And maybe one last question, sort of bigger picture. Michael, I'm sure you've noticed that Neumar has now sold their Timmins assets. Does this now change how you view your Timmins assets? And then also can you remind us of the book value you have for these assets?

Speaker 2

Look, these assets are doing really, really well as you can imagine. But I think we talked about that in the past that I'm a strong believer and we are strong believers that that district, the entire Timmins District can generate way more value in a maybe a bit of different form looking at a, you know, not know yet how that will look like, but working together on many fronts. There are lots of trucks and transportation going all different directions between Newmont or soon Discovery Silver and ourselves. So I think there's a lot to optimize. It's probably a bit early to talk about that, but I think there's a lot we can do that helps our shareholders and probably helps Discovery shareholders as well.

Speaker 2

And that was obviously the reason why they did a deal with Newmont. I think that's a great district in Canada, great producer of coal. And don't forget, it's not only our two operations there, but I think we shared in the past some results from some of the more satellite exploration programs that Chris is doing at Whitney and Gold River we have as well. So there are some very, very interesting additional satellites and I think everything will play in, in those decisions. So I think it's a very exciting time for Timmins.

Speaker 3

Great. Thanks again, Michael, Steve, Chris, Arun and team, those are the questions I have. Thank you. Thanks, Cosmos.

Operator

The next question comes from Don DeMarco with National Bank Financial. Please go ahead.

Speaker 6

Thank you, operator, and good morning, Michael and team. Yes, constructive guidance really shows some stability in the ops.

Speaker 2

Thank

Speaker 6

you. So a few questions. Can you hear me okay?

Speaker 2

We do, yes. Go ahead.

Speaker 6

Okay, great. So I jumped in a little bit late. You may have talked a bit about Jacobina, but what is the timing of the optimization study? And what details can you share now about the throughput increases or mine life extensions, things like that, that had been talked about at one point?

Speaker 4

Yes. Hi, Don. Steve here. Yes, we had a great Q4 at Jacobina. We were able to accomplish kind of a target we set ourselves of trying to get the throughput through the mine and the plant at 275,000 tons or just at 9,000 tons a day.

Speaker 4

We accomplished that. We were very pleased with that. But we do have some projects that we have to complete in the plant. We are changing some screens in the crusher. We are changing some screens in the grinding circle.

Speaker 4

We are upgrading some of the tanks and some of the tailings pumping that will give us stability and sustainability of that kind of throughput is what we are seeing. So a big part of the optimization study as those projects are done, it will capture those values and give us sustainability late into 'twenty five and certainly into 2026. And we will kind of disclose what those numbers are looking like mid year. Now mid year, the optimization study is starting to split off into different phases and we are seeing Phase one where we're looking at this PACE plant that we've talked about over the last year or so bringing that in to allow us to recover more of the reserves. And also we got a longer term tailings disposal alternatives which the PACE plant helps us with, but also we are looking at a filter plant for tailings disposal too.

Speaker 4

So that will kind of be the Phase one optimization. We will announce kind of some projects around that and what the returns are investments are. We're targeting mid year in this year to do that. And then beyond that, we'll move into Phase two, which once we understand how those feed in, we've got some really interesting optimizations that we're going to be continuing on that will bring value into 2026, '20 '20 '7, '20 '20 '8 that will be a Phase II program later.

Speaker 6

Okay. Thank you for that. And Steve, while I have your ear here, on El Penon, we're seeing stable production year over year, costs are stable and attractive ASIC midpoint of December, actually even slightly lower year over year. It's does this mean that those sort of initial integration hiccups are really in the rearview mirror and you're feeling comfortable with this asset now?

Speaker 4

Absolutely. Yes. Great question, Don. And yes, we're very pleased with the stability of that. We're focusing a lot of effort on exploration.

Speaker 4

We want to extend that mine life. It's a great cash flowing asset for us. Costs are stable. The operation is stable. I'll remind you, it's at 130,000 ounces a year gold production levels.

Speaker 4

It was a little less than what we aggressively pursued in 2023, but that kind of dialing that in, we feel very comfortable with that operation and that's performing incredibly well.

Speaker 6

Okay. It

Speaker 2

was a I mean, if you recall, it was really the spacing of some of the drilling and some of the stopes that we saw that impact at the beginning. And I wouldn't call it really an integration hiccup. I think the team at Pennant is doing an unbelievable job and integrated very easily into our company and our system. So did the other Yamane assets. So not really an issue on the integration, but really that space drilling and Chris and his team did a lot of work drilling that out and I think we're seeing the result of that now.

Speaker 6

Okay. Good to see. And so Michael, last question on Escobar. So you mentioned that the government hasn't published a timeline for completion of the consultation process. What is your sense here?

Speaker 6

It's been a stalemate for about a year now, but there's probably other meetings going on. Are there reasons to be optimistic for 2025? Or what are your thoughts on Eskolol?

Speaker 2

Yes, I wouldn't call it the stalemate. And there's a lot of meetings going on. As you recall with the new government coming in just about a year ago, there was kind of a slow startup last year to get there, but there's a lot of work going on in the background between the actors. So I wouldn't call it a stalemate. We had kind of some timings for meetings published years ago by the government.

Speaker 2

And I think that's really didn't really bring that much as it just put pressure on actors as not necessary. So we rather just continue with as many meetings, as many discussions we can on the way to hopefully a positive solution here. So yes, I wouldn't call it the stalemate. I think there's probably well, maybe let me have Sean giving an update, quick update here. There's quite a lot going on.

Speaker 7

Yes. Well, thank you, Michael. There was those changes in government last year and so they did change out the Vice Minister of Sustainable Development who leads the process. So that was a key in some of the delays last year, but the meetings are ongoing into Q4. We had several meetings with the government as well as Chinca Parliament's meetings with the government.

Speaker 7

So those were good. And then things always slow down over the holidays and into early January. And then we just started picking up again with some meetings with the government. So I feel like there's going to be a lot more activity in the coming weeks and months and hopefully we're able to provide a more meaningful update of some of the developments after the Q1 results into May. So I'm looking forward to that.

Speaker 6

Okay. Okay, excellent. Thank you for that. That's all for me. Good luck with Q1 and the rest of the year.

Speaker 2

Thank you.

Operator

This concludes the question and answer session. I would like to turn the conference back over to Michael Steinman for any closing remarks. Please go ahead.

Speaker 2

Sorry, operator. I just see that a question came in. Could we answer that, please?

Operator

Yes, of course. The next question comes from Oveys Habib with Scotiabank. Please go ahead.

Speaker 8

Hi, Michael and the panel booking team. Just a couple of questions for me. Sorry, if you've already touched upon some of these as I've been bouncing between a couple of calls. Michael, just first question in regards to the guidance, I believe production in cost of second half weighted. Any kind of color that you can provide in terms of what assets would drive the split between the first and second half?

Speaker 2

Yes, I will let Steve do that. But just in general, for the listener, this is obviously a recurring theme in Pan American and it's largely driven, partially driven by the weather. So by the seasons, rainy seasons, dry seasons, cold winters in the Far South, as you remember, we are in whole different kind of climates. You saw the same last year, obviously in the year before and you saw the really strong production we had in Q4. Nothing obviously we can do with the climate there.

Speaker 2

That's just what it is for the assets that are distributed so widely over different climate zones. But I'll have Steve give you a bit more details.

Speaker 4

Yes. Thanks, Elvis. And one of the bigger drivers is Cerro Moro, and not just mine sequencing as we're opening up the naughty open pit, we're getting into higher grade later in the year. That's really driving a big part of it. Shawinda, as Michael mentioned, is very, very weather dependent.

Speaker 4

So we generally see better production going in late in the year there as well. I think those are probably the two bigger drivers. There's a bit of that at El Penon, but it's again, it's just mine sequence.

Speaker 8

Perfect. Thanks for that, Steve and Michael as well. And my next question is more the fact that, again, you had a great Q4, generated a lot of free cash flow in Q4 that based on operations kind of it looks like they are stabilizing going into 2025 as well. So that's really good to see. Now that kind of you've integrated all those Yamana assets, you've done a great job on the non core as well.

Speaker 8

Is it time now to start focusing on more on exploration side or how should we look at 2025 in terms of exploration?

Speaker 2

Well, we never really slowed down on exploration. You see there's a substantial budget for exploration. We tend to even results. As you know, I am a geologist by trade and strong exploration results always will be rewarded with more investments. This is really the bread and butter of our business.

Speaker 2

And obviously, you have the plant already built and the mine is already developed largely. So in each place replacing that reserve is incredibly important and generates a lot of value. So exploration always a very big focus, but our exploration as you know is we focused on brownfields, so close to our sites, reserve addition, maybe some truckable distance where we're looking at some truckable satellites in some places. I think Cerro Mora comes to mind where we are actually mining at one zone right now. We just discovered another one that Chris and his team are drilling out.

Speaker 2

So exploration is always a very core to us. If you look back, we have been incredibly successful, replacing hundreds of millions of ounces of silver over the last, I would say, fifteen years with brownfield exploration, on-site exploration. And don't forget, our exploration program discovered the Skarn deposit. So there will always be a big focus on that.

Speaker 8

That's perfect. Thanks, Michael, for that and thanks for taking my questions and looking forward to seeing you during PDAC.

Speaker 2

Thank you. See you then.

Operator

The next question comes from Adrian Day with Adrian Day Asset Management. Please go ahead.

Speaker 9

Yes, good morning. Just a follow-up, if I may, on Esquibel, but taking a different direction. Once you get the approval to reopen and of course, you'll obviously get an indication it's coming probably before it actually happens. But how soon before you're producing a gain and how soon before it's fully ramped back up?

Speaker 2

Yes. Hi, Adrian. Look, I think it would take probably a good quarter to two to start up the first stope. As you know or probably remember from the time with the Tahoe when the asset was in production, those stopes are very sizable, produce a lot of silver. So that would start, I guess, one stope at Escobar should be equivalent to about 5,000,000 to 6,000,000 ounces of silver per year.

Speaker 2

So that's already a strong start up. I think thereafter probably about a part of a year to bring it, but what would it take to bring it back to the full production, which was somewhere in the range of 20,000,000 to 22,000,000 ounces a year.

Speaker 9

Okay, okay. That's helpful. And just once the approval is granted, are you as a company, are you ready to start? Or would you say, well, we've got other things going on, we'll leave it a few months now?

Speaker 4

It's

Speaker 2

obviously an incredible mine and project. So of course, all our focus are on this. There's always a lot going on. We have a very accomplished team that can handle many assets at the same time. I think that we have shown that year over year over year.

Speaker 2

So but of course that will be a number one focus. You probably noticed over the past years that we normally spend probably as much as $24,000,000 in the past, maybe now more between $18,000,000 and $20,000,000 in care and maintenance at that asset to make sure that everything is in top shape and the restart can happen or could happen as quickly as possible.

Speaker 9

Okay. I appreciate that. Thank you.

Speaker 2

Thank you.

Operator

This concludes the question and answer session. I would like to turn the conference back over to Michael Stadman for any closing remarks, please.

Speaker 2

Thank you, operator, and thanks for everyone calling in today. Yes, these are exciting times for Pan American Silver, very high metal prices, very strong cash flow generation and great returns to our shareholders. So, you know, we will really, really focus and maintain a rigorous control on our costs to maintain those great margins that we are enjoying right now. And I'm really looking forward to update you in our Q1 call in May. Until then, have a good day.

Speaker 2

Thank you, everyone.

Operator

This brings to close today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.

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Pan American Silver Q4 2024
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