Pan American Silver Q2 2025 Earnings Call Transcript

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Provided by Quartr
August 7, 2025

Key Takeaways

  • Positive Sentiment: Pan American delivered record Q2 results with $811.9 million in revenue, $189.6 million in net earnings (US$0.52/share) and a record free cash flow of $233 million, boosting cash on hand to $1.1 billion.
  • Positive Sentiment: The company has agreed to acquire MAG Silver’s Fénix asset, a top‐tier high‐grade silver mine expected to immediately uplift production and reduce consolidated silver segment costs, pending Mexican antitrust clearance in 2025.
  • Positive Sentiment: Pan American reaffirmed its 2025 guidance for silver production of ~20 million ounces at AISC of US$19–20/oz and gold output of ~700 thousand ounces, noting gold will be weighted toward H2.
  • Positive Sentiment: The board approved a 20% dividend increase to US$0.12 per share and the company repurchased US$11.1 million of stock in Q2, bringing year‐to‐date returns to shareholders to US$103.5 million.
  • Negative Sentiment: The Escobal project remains subject to the ILO 169 consultation process with Guatemala’s MEM and the Schinka Parliament, with no defined completion date, maintaining regulatory uncertainty.
AI Generated. May Contain Errors.
Earnings Conference Call
Pan American Silver Q2 2025
00:00 / 00:00

There are 11 speakers on the call.

Operator

Thank you for standing by. This is the conference operator. Welcome to the Pan American Silver Second Quarter twenty twenty five Results Conference Call. I would now like to turn the conference over to Sue Ann Kiseki, Vice President, Investor Relations. Please go ahead, Ms.

Operator

Kiseki.

Speaker 1

Thank you for joining us today for Pan American Silver's conference call and webcast to discuss our second quarter twenty twenty five results. This call includes forward looking statements and information and references to non GAAP measures. Please see the cautionary statements in our MD and A, news release and presentation slides for the Q2 twenty twenty five results, all of which are available on our website. I'll now turn the call over to Michael Steinmann, Pan American's President and CEO.

Speaker 2

Thank you and good morning everyone. I'm glad you could join us to discuss Pan American's Q2 twenty twenty five results. Today, I'm pleased to report another quarter of record setting results. Top line revenue of $811,900,000 reflects solid operating performance and the benefit of supportive price environment. Net earnings were a record of $189,600,000 or zero five two dollars per share, largely driven by record mine operating earnings of $273,300,000 Adjusted earnings were $155,400,000 or $0.43 per share.

Speaker 2

Cash flow from operations before non cash working capital changes was also a record of $287,900,000 after $68,300,000 in cash taxes paid. After non cash working capital changes, operating cash flow totaled $293,400,000 Free cash flow was a record of $233,000,000 increasing our cash balance to a record high of $1,100,000,000 at the end of Q2. Our capital allocation framework remain unchanged, maintain our strong balance sheet, sustain and grow the business and return capital to shareholders. Given our strong balance sheet, we are focused on growing the business and in Q2, we significantly advanced that objective with our proposed acquisition of MagSilver. The top tier Fonicipio silver asset is expected to provide an immediate uplift to Pan American silver production and free cash flow generation, while meaningfully reducing our consolidated silver segment costs.

Speaker 2

It also represents further opportunities to grow our silver production through the exploration potential of the asset. NAC shareholders approved the transaction in July and we are now awaiting the clearance under Mexican antitrust laws. The transaction is expected to close in the 2025. In addition to the acquisition, we invested $73,700,000 in sustaining and project capital in Q2. Project capital was invested in the La Colorada mine and Tuscan project and the Varon, Timmins and Jacobina mines.

Speaker 2

At Jacobina, in addition to advancing mine and plant optimization studies, we have invested in improvements to plant availability and equipment reliability. In terms of the La Colorada Skarn project, our discussions around potential partnerships for the development are progressing well and we expect to share more on our plans for the Skarn in the coming month. We have also delivered on the third priority of our capital allocation approach, returning capital to shareholders. Yesterday, we announced a 20% dividend increase from $0.10 to $0.12 per common shares with respect to Q2 twenty twenty five. We also repurchased just under $05,000,000 common shares at an average price of $24.22 per share for a total consideration of $11,100,000 in Q2.

Speaker 2

During the first half of this year, we have returned approximately $103,500,000 in dividends and share buybacks to our shareholders. Total available liquidity at the end of Q2 was roughly $1,900,000,000 affording us ample flexibility to pursue our organic and inorganic growth opportunities even after accounting for the $500,000,000 of cash that will be paid as part of the consideration for MAG Silver. Turning now to operations. We produced 5,100,000 ounces of silver in Q2 within our guidance range for the quarter. Our silver segment achieved all in sustaining costs of $19.69 per ounce excluding energy adjustments, which was at the low end of our guidance range.

Speaker 2

La Colorada once again led to performance in the silver segment following the improvement to ventilation from the new infrastructure installed in mid-twenty twenty four. Throughput reached an average of 2,130 tonnes per day in Q2 relative to the 2,000 tonnes per day that we were targeting. As a result, silver production at La Quebrada was up nearly 50% and cash costs per silver ounce down by nearly 25% compared with the 2024. We are maintaining our guidance for silver production and costs in 2025. Gold production of 178,700 ounces in Q2 was slightly below our guidance range, while gold segment all in sustaining costs excluding NRE adjustments of $16.11 dollars were within guidance.

Speaker 2

The gold segment was impacted by lower throughput and grades at Timmins, primarily as a result of additional backfill and hanging wall dilution. At El Penon, production was impacted by mine and development sequencing into lower gold and higher silver grades. These impacts were partially offset by stronger performance at Chawinda from higher gold grades and positive mine grade reconciliations. And at Dolores with the leach cycle delivering more production than originally planned in Q2. Gold production in the 2025 was in line with our guidance and we are maintaining our outlook for gold production and all in sustaining costs.

Speaker 2

However, we now expect gold production to be more heavily weighted to the 2025 than originally indicated in our 2025 quarterly operating outlook. At Escobal, the Schinker Parliament issued a statement in May 2025 with respect to the ILO 169 consultation process. The Guatemalan Ministry of Energy and Mines or MEM has now delivered a response to that statement describing the proposals to address the concerns the Schinke Parliament had raised. These documents can be reviewed on the MEM website. The MEM has indicated that they will continue to hold working meetings and maintain dialogue with the Schinker Parliament as they work towards completing the ILO one hundred sixty nine consultation, although a date for completing the consultation has not been specified.

Speaker 2

As we consider the global backdrop for precious metals, we see very supportive environment for gold and silver prices. Global photovoltaic installations and electronic applications continue to drive industrial demand growth for silver, while mine supply is largely flat. The silver market is in its fifth consecutive year of structural deficit and this deficit is expected to persist in the coming years depleting above ground stocks further, a very supportive backdrop for silver prices. We view the MagSilver acquisition as a high quality addition to our portfolio to capitalize on this outlook for silver. In summary, Pan American Silver has delivered record financial results in the 2025.

Speaker 2

Our operating teams are focused on meeting our production targets and maintaining strong control over costs. We are on track to achieve our guidance for 2025. We look forward to continuing to deliver robust free cash flow and returning capital to our shareholders. I will now be happy to take your questions together with other members of our management team.

Operator

Thank you. We'll now begin the question and answer session. Our first question is from Ovais Habib with Scotiabank. Please go ahead.

Speaker 3

Thank Thank you, operator. Hi, Michael and Pan American team. Congrats on Q2 beat. A couple of questions from me. In Q2, on Cerro Moro, El Penon, Timmins, Mineral, Florida, essentially all experienced either negative grade reconciliation or geotechnical issues.

Speaker 3

First part of the question is, have these issues been resolved going into Q3? I believe you said Q3 is expected to be a weakest quarter with Q4 being your strongest quarter in terms of the gold production. And part two of the question is, do you think Jacobina can make up for the loss of ounces if it comes to that? Essentially, I'm going to ask Michael is how confident are you with meeting the gold production guidance?

Speaker 2

Yes. Good morning, Oves. I have Steve here next to me who will answer your question.

Speaker 4

Yes. Good morning, Obis. For the most part, issues we faced in terms of grade reconciliations at most of those operations and the geotechnical issues, we are addressing aggressively. We do anticipate some of it to linger into Q3. That's why we're kind of pushing the gold guidance heavier into Q4.

Speaker 4

That's kind of where we raise that note. But we're feeling pretty confident. Generally, what we see when we have a quarter of low reconciliations, we do generally see it come back. Our drill data on average, we're comfortable with the reserve information. It's just these swings of highs and lows quarter to quarter and it kind of hit those operations you mentioned during Q2.

Speaker 4

Geotechnically, we're having some good success in Timmins addressing particularly some of the production drill hole squeezing issues we've had. We're drilling larger diameter holes. We're using an additive that's been pretty unique and it's been pretty helpful in maintaining those holes open. And we've added quite a bit of ground support even dynamic support along some of the key developments in the high stress areas. So we're feeling pretty good that we're overcoming those issues there.

Speaker 4

So yeah, so that's why we kind of favored pushing some of the gold into Q4, but we remain incredibly confident that we'll come in within guidance on gold production and certainly on silver and cost.

Speaker 3

Thanks for the color on that Steve. And I mean most of these operations have kind of achieved at least about 40% to 50% of production year to date. So in terms of kind of getting over that hump, it does seem like you guys should be able to hit those numbers. Thanks for that color. Just wanted to see if I can move on to non core asset sales.

Speaker 3

Michael, team has done an excellent job in kind of selling non core asset sales over the past couple of years. Should we expect more to come going into the second half or even the next twelve months?

Speaker 2

Yes. Definitely, are working on some of the deals that are mostly smaller things. So don't expect like big, big sales like we've seen over the last eighteen months. But there's quite a few smaller things that we are working on and we'll release those obviously when they're done. I would expect that the few will close here from now to the end of the year.

Speaker 3

Mean, Michael, maybe in terms of a little bit detail, I mean, those operating assets or are they more exploration assets that you're looking to sell?

Speaker 2

No, they're not operating assets. There's a lot of like mid to later stage exploration plays that we are finding new homes for in all kind of different jurisdictions and also different constellations. You should expect maybe some straight out sales, some participation in other companies, etcetera.

Speaker 3

Sounds good. Thanks for that color Michael. That's it for me. Thanks for taking my questions and again congrats on a good quarter.

Speaker 2

Thanks, Uwaiz.

Operator

The next question is from Fahad Tariq with Jefferies. Please go ahead.

Speaker 5

Hi. Thanks for taking my question. On Jacobina, in the quarter there was a comment in the MD and A about mine sequencing to lower grade gold grade ores. Can you just talk about expectations for the second half of the year on grades?

Speaker 4

Yes. Fahid, this is Steve. We are trying to move towards mining at Jacobina reserve grades, which are actually a little bit lower than what we saw even in Q2. With that said, we have access to some higher grades during the rest of the year that we will be tapping into. So we won't that push towards lower grade will come as part of the optimization study we're working on where we'll start to push more tons at lower grades and kind of maintain or expand the gold production to a limited degree.

Speaker 4

But again, we remain confident that we'll deliver to our guidance Jacobina according to what we showed there.

Speaker 5

Okay. Thanks. And then on Escobal and the consultation process, can you just give a bit more color about the types of meetings that are happening I guess over the coming weeks and months? Is it Pan American being involved in those meetings directly with the Zynqa Parliament? Or is it the government meeting with them and Pan American providing information and where needed?

Speaker 2

Just keep in mind that the consultation is between the government led by the Ministry of Mines and the Schinker and it's not led by Pan American. So that's you have to keep that in mind. But I have Sean here who is leading our efforts in Guatemala who can give us more details on this.

Speaker 6

Yes. Good morning. What we're seeing now is a series of working meetings that are being planned. So we expect to see the government meet with Sheikah Parliament over the coming weeks. They did have a meeting on the July 29.

Speaker 6

So those meetings are ongoing and we will be called in to participate in the future. We expect that to happen. We have ongoing meetings with the MEM and the government at the same time in parallel when they have questions and issues that they want to resolve with us. But I'd expect that we would have a few meetings this quarter. And so we'll update that in the Q3 update.

Speaker 5

Okay, great. Thank you.

Operator

The next question is from Lawson Winder with Bank of America Securities. Please go ahead.

Speaker 7

Thank you very much, operator. And hello, Michael and team, thank you for today's update. Nice quarter. I wanted to ask about Skarn. Something you said in your prepared remarks, Michael, and then follow-up on that.

Speaker 7

Did you say that you expected an update in in in the a month, like, in in in like, in in terms, like, a singular month? Or do you do you mean months? And then because that would be a lot sooner than the prior guide for the year end. And then what are the current permutations of monetization that look most likely at this point?

Speaker 2

Yes. First that was probably my Swiss English. That several months that was plural, not singular month. That will be very soon, as you mentioned. Look, interesting development on this karn.

Speaker 2

I don't know if you recall, we started showing maybe late last year first kind of intersects on very high grade veins above the Skarn further to the east. There were exceptional intercepts. Published a few in the press release there and we kept drilling there very actively over the last like eight months, ten months. And we are looking at actually tapping into that as well and look at synergies between this Kvaerna and those hybrid intercepts. And with Cryptic here, that's one of the release we will put out when we have all the data together, which will happen.

Speaker 2

You should expect that coming in the next few months to discuss those results and then that will be included in our updated resource and reserve calculation as well. So that's probably the beside the infill drill and the Skarn, obviously, we know by now a lot about the Skarn, but that's it's definitely the most interesting and additional information that will come into the project when you look at La Colorada entirely and how we move forward with the Skarn project and with La Colorada adding those very, very high grade veins to the east. So just stay tuned. Sorry, I don't have all the details that I can share right now with you, but it's definitely part of the several updates that we're going to see during the rest of the year on La Colorada and on the Skarn.

Speaker 7

Okay. And then just to be clear, one of those updates could be some sort of monetization or partnership transaction?

Speaker 2

Look, discussions are ongoing and of course those additional veins and synergies will play into the partnership negotiations as well. So that will come after. So I can't promise yet when that will come out. But as I said, we're working hard on that. And whenever it's ready, we will share.

Speaker 2

But the first few steps here will be the reserve update, resource update on it and then the inclusion of those high grade veins. And then the next step will be to include that in our negotiations with potential partners.

Speaker 7

Okay. Yes, fantastic. Thank you for clearing that up. And then just since you brought it up, the reserve and reserves update, could you give us an idea of the timing on when that update would come? And then thinking about gold and silver price assumptions in that update, I mean, would you say you'd have a fairly high level of confidence in replacing reserves this year?

Speaker 7

And to the extent that the change in the gold and silver price assumptions might be quite material, could we be looking at some impacts on the current mine plans?

Speaker 2

Yes. Look, mean, if you recall when you look at our reserve resource updates, we never use just one price fits all. I'm a strong believer that you have to depending on the mine life, if you look at a short term mine life and obviously we're sitting on a very high metal price environment, in order to optimize your return, you obviously should use higher prices in those assets in very long life assets like Jacobina for example, you would use lower prices. We have that done all the time. When you look at our reserve resource tables, there is actually a whole page with different prices that we use for different assets.

Speaker 2

So that will remain. We will do use a similar approach this year. There will be obviously a few assets where we use slightly higher prices, but I think we are still very, very conservative. Think on the price side to really maintain and take advantage of big margins that we can create with this metal price environment, the result you see obviously in our strong cash flow that we delivered last quarter. So that kind of the same theme continues, but of course we have probably about $1,500 higher gold price than last year.

Speaker 2

So you have to adapt a little bit not to leave really high paying material behind. So it's an interesting year definitely to use and define metal prices for your reserve and resources. As you know, we are one of the few companies to do it mid year because we want to have a new reserve and resource money going to the budgeting season. But you should expect that press release coming out over the next few weeks definitely before I would say mid September.

Speaker 7

Okay. That's all. Thanks very much guys. Enjoy the rest of your summers.

Speaker 2

Thank you. You too.

Operator

The next question is from Cosmos Chiu with CIBC. Please go ahead.

Speaker 8

Thanks, Michael and team. Maybe going back to the various geotechnical mine sequencing and negative grade reconciliation issues at the various properties, El Penon, Cerro Moro, Timmins and Florida. I seem to notice that a number of these operations came from the Yamana portfolio. I would say these are normal issues underground, but would it also be related to the fact that some of these operations were operated by a previous operator and that's why some of these issues came up?

Speaker 4

Yes. Cosmo, Steve here.

Speaker 8

Hi Steve. No, I

Speaker 4

would have to say no. There's no specific bias towards those Humana assets in terms of this reconciliation issue. It is a factor of narrow vein mining. I'd say we favor narrow vein mining certainly at El Penon and Monero Florida. When you look at that Cerro Moro as well, those are pretty variable, highly variable narrow veins and it's a characteristic of those type of deposits that we face.

Speaker 4

They are challenges that we've dealt with, but some of the Pan American silver operations. So again, we're confident this is a quarterly blip and it comes and goes. We're not concerned about our overall reserve estimates. It's just the timing and spatial locations of these estimates that we have to hone in. We're looking as we go into budgeting season for 2026, we are looking at potentially enhancing some of the drill density in some of these narrow vein zones to try to reduce that variability going into next year.

Speaker 4

But I don't see any bias towards just Humana operations.

Speaker 2

We have just to add to this, we have seen obviously this kind of result as Steve said, which is often the result of high very high grade narrow vein mining. Do you have more variability obviously than a larger massive like the Skarn for example or porphyry. So you have more variability and we see the same kind of results sometimes at Guaran or San Vicente or other assets. A matter of fact, obviously, narrow structures at La Colorada in the past. These are normally short term issues and we deal with them.

Speaker 2

So nothing specific to being Xiamen assets. Own the assets now for quite a while. I'm sure you have noticed that over quarter on quarter on quarter all these assets have been our strongest cash flowers in our portfolio.

Speaker 8

I do know this. Maybe as a follow-up in terms of these issues here, are they related to like new areas that you're entering at these different assets, maybe new structures that you might not have previously been aware of that could maybe potentially lead to a more sustained impact on mining or am I thinking too much into it?

Speaker 4

Yes, think a little bit too much. I mean, you're on a bit. It's more towards the extremity of the known veins that we have been mining. As we reach the extremities of those reserves and go deeper on those, we generally are seeing a bit more variability, a little less density of information, which also drives a bit more variability in our results.

Speaker 8

Maybe my next question will be going back to what I'm actually good at numbers. On that sustaining CapEx here, you've budgeted $270,000,000 to $280,000,000 per year. I seem to see that so far you've done about 122,000,000 certainly not hitting 50% for some of the assets like Jacobina, Shibundo. Can you maybe talk about that CapEx budget for the year and where you're going to be planning on spending more of that CapEx in Q3 and Q4?

Speaker 9

Morning. Me, Cosmo, Scott Campbell here. Yes, we had a few delays starting off our capital our major capital projects at Shadowindo this year. Some are weather related, permitting related and the awards process took a little bit longer to the tender process, but full speed ahead with those. And so we do intend to our CapEx will be in line with our forecast.

Speaker 8

Great. And maybe one last question here on the dividend. It's great to see that it's increased. It's great to see the very robust free cash flow in Q2. But to confirm, based on the mechanics of the dividend, how you calculate the variable component, once you use a part of your cash on the balance sheet to pay for MEG silver, there's potential for that dividend to decrease again.

Speaker 8

Is that correct?

Speaker 2

Well, there's obviously dividend policy as you mentioned, but just keep in mind that we generate a lot of free cash flow, so thus MEG and there will be cash obviously coming to us when we close the transaction. So I think it's too early to say, but I don't think so that we're going to see a big impact on our look forward here.

Speaker 8

Okay. And then on the MEG transaction, as you mentioned, it's been approved by MEG Silver's shareholders and you're still waiting for the antitrust sort of not the permit, but the approval. Is that like the last hurdle? And how should we view it?

Speaker 2

Yes. That's absolutely the last hurdle. I would expect that once we got that okay from Mexico, it will let me just split in all the transactions we did in the past that was required and was always the last piece of the transaction. And I would expect to probably close a few days later after we receive that approval.

Speaker 8

Okay. And nothing more complicated to this transaction compared to what you've done in the past, correct, Michael?

Speaker 2

Everything is completely moving normal here. You saw very clear vote of confidence by the Match shareholders. So really looking forward to add that operational piece of operation to our portfolio, which has very strong production there as well, very strong silver at very low cost. That's obviously the reason why we are interested in and are very interested in that acquisition looking at one of the highest quality, highest grade, lowest cost silver mine on the planet with in my view probably one of the biggest exploration upside as well.

Speaker 8

And then maybe a bit premature, but on the MagSilver transaction, once it closes, have you determined how you're going to account for it given that it is a 44% minority interest? Is it going to be some kind of equity pickup, equity accounting sort of one line pickup in your income statement? Have you thought about how you're to account for it?

Speaker 10

Cosmos. It's Ignacio here. Yes, we're still doing the analysis, but taking nice talking to you. A good point of reference would be the way MAG accounted for the Fani CPO JV interest, which was, as you mentioned, an equity pickup. In addition to that, I can also point you to the MAG info search.

Speaker 10

There's pro form a financial statements there. And then there's already some assumptions on what the accounting is going to look like. So yes, everything is pointing towards an equity pickup.

Speaker 8

Once again. Those are all the questions I have, Michael, Steve, Ignacio and Scott. And thanks for answering all my questions. Thank you.

Speaker 2

No problem. Thanks, Cosmos.

Operator

This concludes the question and answer session. I'd like to turn the conference back over to Michael Steinmann for any closing remarks.

Speaker 2

Thanks, operator, and thank you everyone for calling in here. Beautiful summer day at least here in Vancouver. Another great quarter for Pan American and beat across the board on our strong financial results. Really looking forward to the rest of this year, looking forward to add 20 CPOPs to our portfolio as well later this year. And as I mentioned, we'll release the reserve and resource update as of mid year and that should be quite an active second half or last four months, only five months of the year with news flows on various topics for the company.

Speaker 2

Looking forward to that and looking forward to update you in November on our Q3 results. Until then, enjoy the rest of December. Thank you, everyone.

Operator

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

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