[Introduction](index=3&type=section&id=Introduction) This section clarifies the purpose of the Management's Discussion and Analysis, outlining the financial reporting standards and the use of non-GAAP measures for performance evaluation - This Management's Discussion and Analysis (MD&A) aims to clarify significant factors influencing Pan American Silver Corp.'s performance and future outlook, and should be read with the Company's 2021 Annual Financial Statements and Q3 2022 unaudited interim consolidated financial statements, with all amounts in USD and financial reporting adhering to IFRS[4](index=4&type=chunk) - The MD&A refers to non-GAAP measures like 'all-in sustaining costs per ounce sold', 'cash costs per ounce sold', 'adjusted earnings', 'basic adjusted earnings per share', 'total debt', 'capital', and 'working capital', which are used for internal evaluation and industry benchmarking, but do not have standardized IFRS meanings and are reconciled within the document[5](index=5&type=chunk)[6](index=6&type=chunk) [Core Business and Strategy](index=4&type=section&id=Core%20Business%20and%20Strategy) Pan American Silver Corp. is a leading silver and gold mining company operating across the Americas, committed to sustainable development and generating superior returns - Pan American Silver Corp. is engaged in silver and gold mining and related activities, including exploration, mine development, extraction, processing, refining, and reclamation, operating mines in Peru, Mexico, Argentina, Bolivia, and Canada, and exploring new silver deposits across the Americas, with the Escobal mine in Guatemala currently not operating[8](index=8&type=chunk) - The Company's vision is to be the world's premier silver mining company, known for excellence in discovery, engineering, innovation, and sustainable development, with a strategy focused on generating sustainable profits and superior returns, growing mineral reserves and resources, fostering positive relationships with stakeholders, continually improving asset quality, and encouraging employee innovation[9](index=9&type=chunk)[10](index=10&type=chunk) [Q3 2022 Highlights](index=5&type=section&id=Q3%202022%20Highlights) Q3 2022 saw decreased silver and gold production, significant financial losses, and increased operating costs across segments due to inflationary pressures [Operations Highlights](index=5&type=section&id=Operations_Highlights) Consolidated silver and gold production decreased in Q3 2022, leading to a downward revision of the 2022 silver production forecast while other metal outlooks were reaffirmed Q3 2022 Production (koz/kt) | Metal | Q3 2022 Production (koz/kt) | Q3 2021 Production (koz/kt) | Change (koz/kt) | % Change | | :---- | :-------------------------- | :-------------------------- | :-------------- | :------- | | Silver | 4,540 koz | 4,830 koz | (290) koz | -6.0% | | Gold | 128.8 koz | 142.6 koz | (13.8) koz | -9.7% | | Zinc | 8.9 kt | 12.7 kt | (3.8) kt | -29.9% | | Lead | 4.4 kt | 4.2 kt | 0.2 kt | 4.8% | | Copper| 0.9 kt | 2.1 kt | (1.2) kt | -57.1% | - Management revised its 2022 silver production forecast to between **18.0 to 18.5 million ounces** due to expected shortfalls at La Colorada (mine sequencing to lower silver grade stopes) and Dolores (Phase 9B reserve grade shortfalls)[12](index=12&type=chunk) - The Company reaffirmed its 2022 Original Operating Outlook for gold, zinc, lead, and copper production[14](index=14&type=chunk)[16](index=16&type=chunk) [Financial Highlights](index=5&type=section&id=Financial_Highlights) Q3 2022 revenue declined by **26%** to **$338.9 million**, resulting in a net loss of **$71.2 million** and a **$102.6 million** decrease in operating cash flow Q3 2022 Financial Highlights | Metric | Q3 2022 (USD millions) | Q3 2021 (USD millions) | Change (USD millions) | % Change | | :----- | :--------------------- | :--------------------- | :-------------------- | :------- | | Revenue| 338.9 | 460.3 | (121.4) | -26.4% | | Net Income (Loss) | (71.2) | 20.2 | (91.4) | -452.5% | | Basic EPS (Loss) | (0.34) | 0.10 | (0.44) | -440.0% | | Adjusted Earnings (Loss) | (2.8) | 37.8 | (40.6) | -107.4% | | Adjusted EPS (Loss) | (0.01) | 0.18 | (0.19) | -105.6% | | Cash Flow from Operations | 54.4 | 157.0 | (102.6) | -65.4% | - The decrease in revenue was mainly due to a **$96.4 million** decrease in quantities of metal sold and a **$33.9 million** decrease in precious metals prices, with lower quantities sold reflecting reduced gold dore inventory draw-downs, lower silver and base metal production from Morococha (care and maintenance), and lower gold quantities from other operations due to lower grades and sequencing[17](index=17&type=chunk)[18](index=18&type=chunk) - As of September 30, 2022, the Company had working capital of **$422.1 million**, including **$187.2 million** in cash and short-term investments, and **$500.0 million** available under its revolving Sustainability-Linked Credit Facility, with total debt at **$68.5 million**[21](index=21&type=chunk) [Cash Costs and AISC Highlights](index=6&type=section&id=Cash_Costs_AISC_Highlights) Inflationary pressures and supply chain shortages significantly increased Q3 2022 Cash Costs and All-In Sustaining Costs for both silver and gold segments - All operations were negatively impacted by inflationary pressures (increased prices for diesel, cyanide, explosives, steel products) and supply-chain shortages, collectively referred to as 'Inflationary and Supply Chain Cost Increases'[22](index=22&type=chunk) Q3 2022 Cash Costs and AISC per Ounce | Metric | Q3 2022 | Q3 2021 | Change | | :----- | :------ | :------ | :----- | | Silver Segment Cash Costs/oz | $14.62 | $11.92 | +$2.70 | | Silver Segment AISC/oz | $17.97 | $16.30 | +$1.67 | | Gold Segment Cash Costs/oz | $1,184 | $922 | +$262 | | Gold Segment AISC/oz | $1,614 | $1,176 | +$438 | - Silver Segment Cash Costs increased primarily due to a **$1.63/ounce** increase from Huaron (inflationary costs, lower silver ounces sold) and a **$0.88/ounce** increase from Manantial Espejo (decreased by-product credits), while Gold Segment Cash Costs increased due to lower mined grades at Timmins and Dolores, and Inflationary and Supply Chain Cost Increases[23](index=23&type=chunk)[25](index=25&type=chunk)[26](index=26&type=chunk) [Environmental, Social, and Governance (ESG)](index=8&type=section&id=Environmental,%20Social,%20and%20Governance) Pan American is committed to sustainable practices, on track for most 2022 ESG goals, and maintains strong performance ratings from S&P Global, Sustainalytics, and MSCI - Pan American is committed to responsible and sustainable business practices, focusing on environmental care, community development, safe workplaces, and transparent operations, and is on track to meet **16 of its 20 ESG goals for 2022**, but will not meet targets for zero fatalities (two fatal accidents occurred), environmental audits, biodiversity, and waste recycling[30](index=30&type=chunk)[31](index=31&type=chunk) ESG Performance Ratings | Rating Body | Score/Ranking | Comparison/Details | | :---------- | :------------ | :----------------- | | S&P Global ESG Score | 68 (out of 100) | +12 points over 2021; Top 7% in Metals & Mining industry | | Sustainalytics | 3 in Precious Metals Mining subindustry | - | | MSCI ESG Rating | BBB | - | [Operating Performance](index=9&type=section&id=Operating%20Performance) This section details Q3 2022 production volumes, grades, and cost metrics for silver, gold, and base metals, including a mine-by-mine performance analysis [Silver and Gold Production](index=9&type=section&id=Silver_Gold_Production_Operating) Consolidated silver production decreased to **4.54 million ounces** and gold production to **128.8 thousand ounces** in Q3 2022, reflecting year-over-year declines Silver and Gold Production (000s ounces) | Operation | Q3 2022 Silver | Q3 2021 Silver | YTD 2022 Silver | YTD 2021 Silver | Q3 2022 Gold | Q3 2021 Gold | YTD 2022 Gold | YTD 2021 Gold | | :-------- | :------------- | :------------- | :-------------- | :-------------- | :----------- | :----------- | :------------ | :------------ | | La Colorada | 1,494 | 1,424 | 4,589 | 3,588 | 1.0 | 0.7 | 2.6 | 1.9 | | Huaron | 855 | 888 | 2,635 | 2,675 | 0.3 | 0.2 | 0.7 | 0.8 | | Morococha | — | 547 | 324 | 1,635 | — | 0.3 | 0.1 | 0.8 | | San Vicente | 701 | 606 | 1,823 | 1,908 | — | 0.1 | 0.1 | 0.2 | | Manantial Espejo | 857 | 813 | 2,453 | 2,145 | 6.4 | 8.4 | 17.7 | 22.4 | | Dolores | 560 | 486 | 1,651 | 1,732 | 32.5 | 39.6 | 102.3 | 120.0 | | Shahuindo | 59 | 55 | 184 | 174 | 35.9 | 37.3 | 101.7 | 97.1 | | La Arena | 7 | 9 | 23 | 29 | 21.5 | 22.9 | 62.3 | 79.8 | | Timmins | 3 | 4 | 12 | 12 | 31.1 | 33.0 | 100.7 | 99.6 | | **Total** | **4,537** | **4,831** | **13,692** | **13,898** | **128.8** | **142.6** | **388.1** | **422.6** | | Total Payable Production | 4,265 | 4,508 | 12,832 | 12,921 | 128.2 | 141.9 | 386.6 | 420.4 | - Morococha was placed on care and maintenance in February 2022, significantly impacting silver and gold production figures[35](index=35&type=chunk) [Base Metal Production](index=9&type=section&id=Base_Metal_Production_Operating) Q3 2022 base metal production saw decreases in zinc and copper, while lead production remained comparable to Q3 2021 Base Metal Production (kt) | Metal | Q3 2022 Production | Q3 2021 Production | YTD 2022 Production | YTD 2021 Production | | :---- | :----------------- | :----------------- | :------------------ | :------------------ | | Zinc | 8.9 | 12.7 | 28.1 | 38.2 | | Lead | 4.4 | 4.2 | 13.7 | 14.0 | | Copper| 0.9 | 2.1 | 4.0 | 6.3 | | **Payable Production:** | | | | | | Zinc | 7.5 | 10.6 | 23.5 | 31.9 | | Lead | 4.1 | 3.9 | 12.8 | 13.1 | | Copper| 0.7 | 1.9 | 3.4 | 5.3 | [Cash Costs and AISC](index=10&type=section&id=Cash_Costs_AISC_Operating) Consolidated Silver Segment Cash Costs increased to **$14.62/ounce** and AISC to **$17.97/ounce**, while Gold Segment Cash Costs rose to **$1,184/ounce** and AISC to **$1,614/ounce** in Q3 2022 Consolidated Cash Costs and AISC ($ per ounce) | Segment | Metric | Q3 2022 | Q3 2021 | YTD 2022 | YTD 2021 | | :------ | :----- | :------ | :------ | :------- | :------- | | Silver | Cash Costs | $14.62 | $11.92 | $12.21 | $12.28 | | Silver | AISC | $17.97 | $16.30 | $16.09 | $16.51 | | Gold | Cash Costs | $1,184 | $922 | $1,127 | $879 | | Gold | AISC | $1,614 | $1,176 | $1,703 | $1,135 | - Cash Costs and AISC are non-GAAP measures, with detailed descriptions and reconciliations provided in the 'Alternative Performance (Non-GAAP) Measures' section[38](index=38&type=chunk)[39](index=39&type=chunk) [Individual Mine Performance](index=11&type=section&id=Individual_Mine_Performance) This section analyzes Q3 2022 individual mine performance, highlighting production changes, increased Cash Costs and AISC due to inflation and sequencing, and shifts in sustaining capital [La Colorada Operation](index=11&type=section&id=La_Colorada_Operation) La Colorada's silver production increased by **5%** in Q3 2022 due to higher throughput, while Cash Costs slightly decreased and AISC remained comparable La Colorada Key Performance Indicators | Metric | Q3 2022 | Q3 2021 | Change | | :----- | :------ | :------ | :----- | | Silver Production (koz) | 1,494 | 1,424 | +5% | | Zinc Production (kt) | 2.54 | 2.70 | -6% | | Cash Costs ($/silver oz) | $12.43 | $12.65 | -$0.22 | | AISC ($/silver oz) | $18.50 | $18.48 | +$0.02 | | Sustaining Capital ($ thousands) | 8,452 | 7,992 | +$460 | [Huaron Operation](index=12&type=section&id=Huaron_Operation) Huaron's silver production decreased by **4%** in Q3 2022, while Cash Costs surged by **$6.24/ounce** and AISC increased by **$8.46/ounce** due to inflation and lower payable silver Huaron Key Performance Indicators | Metric | Q3 2022 | Q3 2021 | Change | | :----- | :------ | :------ | :----- | | Silver Production (koz) | 855 | 888 | -4% | | Lead Production (kt) | 2.76 | 1.54 | +79% | | Zinc Production (kt) | 4.09 | 3.49 | +17% | | Copper Production (kt) | 0.78 | 1.44 | -46% | | Cash Costs ($/silver oz) | $10.93 | $4.69 | +$6.24 | | AISC ($/silver oz) | $16.09 | $7.63 | +$8.46 | | Sustaining Capital ($ thousands) | 3,753 | 2,744 | +$1,009| [Dolores Operation](index=13&type=section&id=Dolores_Operation) Dolores saw a **15%** increase in silver production but an **18%** decrease in gold production in Q3 2022, with Cash Costs rising by **$426/ounce** and AISC by **$873/ounce** due to grade and cost issues Dolores Key Performance Indicators | Metric | Q3 2022 | Q3 2021 | Change | | :----- | :------ | :------ | :----- | | Silver Production (koz) | 560 | 486 | +15% | | Gold Production (koz) | 32.5 | 39.6 | -18% | | Cash Costs ($/gold oz) | $1,193 | $767 | +$426 | | AISC ($/gold oz) | $1,899 | $1,026 | +$873 | | Sustaining Capital ($ thousands) | 5,310 | 11,214 | -$5,904| [Shahuindo Operation](index=14&type=section&id=Shahuindo_Operation) Shahuindo's gold production decreased by **4%** in Q3 2022, with Cash Costs increasing by **$260/ounce** and AISC by **$434/ounce** due to inflationary pressures and higher capital spending Shahuindo Key Performance Indicators | Metric | Q3 2022 | Q3 2021 | Change | | :----- | :------ | :------ | :----- | | Gold Production (koz) | 35.9 | 37.3 | -4% | | Cash Costs ($/gold oz) | $1,023 | $763 | +$260 | | AISC ($/gold oz) | $1,385 | $951 | +$434 | | Sustaining Capital ($ thousands) | 12,027 | 8,269 | +$3,758| [La Arena Operation](index=15&type=section&id=La_Arena_Operation) La Arena's gold production decreased by **6%** in Q3 2022, while Cash Costs increased by **$198/ounce** and AISC by **$302/ounce** due to inflationary pressures and higher sustaining capital La Arena Key Performance Indicators | Metric | Q3 2022 | Q3 2021 | Change | | :----- | :------ | :------ | :----- | | Gold Production (koz) | 21.5 | 22.9 | -6% | | Cash Costs ($/gold oz) | $1,128 | $930 | +$198 | | AISC ($/gold oz) | $1,542 | $1,240 | +$302 | | Sustaining Capital ($ thousands) | 9,679 | 8,258 | +$1,421| [Timmins Operation](index=16&type=section&id=Timmins_Operation) Timmins' gold production decreased by **6%** in Q3 2022 due to lower grades, with Cash Costs increasing by **$51/ounce** and AISC by **$7/ounce**, partially offset by productivity gains Timmins Key Performance Indicators | Metric | Q3 2022 | Q3 2021 | Change | | :----- | :------ | :------ | :----- | | Gold Production (koz) | 31.1 | 33.0 | -6% | | Cash Costs ($/gold oz) | $1,382 | $1,331 | +$51 | | AISC ($/gold oz) | $1,625 | $1,618 | +$7 | | Sustaining Capital ($ thousands) | 8,249 | 9,634 | -$1,385| [Other Operations (Morococha, San Vicente, Manantial Espejo)](index=17&type=section&id=Other_Operations) Morococha was placed on care and maintenance, San Vicente improved cost performance, and Manantial Espejo saw decreased gold but increased silver production - Morococha mine was placed on care and maintenance in February 2022 to complete the closure of the Amistad processing plant, while strategic alternatives are evaluated[77](index=77&type=chunk) - San Vicente's Q3 2022 performance improved with higher silver and lead grades and reduced sustaining capital expenditures compared to Q3 2021[77](index=77&type=chunk) - Manantial Espejo saw decreased gold production due to lower gold grade ores after COSE mining completion in April 2022, but silver production increased from higher ore mining rates at the underground operation and Joaquin mine[78](index=78&type=chunk) [2022 Annual Operating Outlook](index=18&type=section&id=2022%20Annual%20Operating%20Outlook) This section compares year-to-date performance against the revised 2022 operating outlook, detailing production, costs, and capital expenditure forecasts [Actual Relative to August 2022 Revised Operating Outlook](index=18&type=section&id=Actual_vs_Revised_Outlook) YTD 2022 silver production is below the revised outlook, while Gold Segment Cash Costs are above the high-end, and Gold Segment AISC (excl. NRV) is within the revised outlook YTD 2022 Actual vs. August 2022 Revised Operating Outlook | Metric | August 2022 Revised Operating Outlook | YTD 2022 Actual | | :----- | :------------------------------------ | :-------------- | | Silver – Moz | 19.00 - 20.50 | 13.69 | | Gold – koz | 550.0 - 605.0 | 388.1 | | Zinc – kt | 35.0 - 40.0 | 28.1 | | Lead – kt | 15.0 - 17.0 | 13.7 | | Copper – kt | 5.5 - 6.5 | 4.0 | | Silver Segment Cash Costs | 10.70 - 12.20 | 12.21 | | Silver Segment AISC | 14.50 - 16.00 | 16.09 | | Gold Segment Cash Costs | 970 - 1,070 | 1,127 | | Gold Segment AISC (excl. NRV) | 1,450 - 1,550 | 1,472 | - Q3 2022 production results were **below the low end of quarterly guidance** due to mine sequencing at La Colorada (silver) and open pit mine/leach sequencing at Shahuindo and La Arena (gold)[83](index=83&type=chunk) - Management revised full-year silver production to **18.0-18.5 million ounces** due to lower production at Dolores and mine sequencing at La Colorada, while the gold production outlook for 2022 was reaffirmed[84](index=84&type=chunk)[86](index=86&type=chunk)[87](index=87&type=chunk) [2022 Original Operating Outlook for Silver & Gold Production](index=18&type=section&id=2022%20Original%20Operating%20Outlook%20for%20Silver%20%26%20Gold%20Production) The original 2022 quarterly expectations outlined projected ranges for silver and gold production, Cash Costs, and AISC, based on specific metal price and exchange rate assumptions 2022 Original Quarterly Expectations | Metric | Q1 | Q2 | Q3 | Q4 | FY 2022 | | :----- | :------------- | :------------- | :------------- | :------------- | :-------------- | | Silver Production (Moz) | 4.49 - 4.87 | 4.69 - 5.07 | 4.89 - 5.27 | 4.94 - 5.30 | 19.00 - 20.50 | | Gold Production (koz) | 133.0 - 146.4 | 124.9 - 137.7 | 135.2 - 148.8 | 157.0 - 172.2 | 550.0 - 605.0 | | Silver Segment Cash Costs | 11.10 - 12.75 | 11.20 - 12.80 | 10.55 - 12.00 | 9.80 - 11.30 | 10.70 - 12.20 | | Silver Segment AISC | 17.00 - 18.50 | 16.00 - 17.50 | 13.00 - 14.50 | 12.00 - 13.50 | 14.50 - 16.00 | | Gold Segment Cash Costs | 980 - 1,080 | 990 - 1,090 | 995 - 1,095 | 915 - 1,005 | 970 - 1,070 | | Gold Segment AISC | 1,365 - 1,465 | 1390 - 1,490 | 1,240 - 1,340 | 1,025 - 1,115 | 1,240 - 1,365 | - Forecasts were based on assumptions including silver at **$22.50/oz**, gold at **$1,750/oz**, and specific exchange rates for MXN, PEN, ARS, BOB, and CAD[82](index=82&type=chunk) [Capital Expenditures Relative to Forecast](index=20&type=section&id=Capital_Expenditures_Outlook) YTD 2022 sustaining capital expenditures are below the revised outlook, while project capital is above due to accelerated progress on the La Colorada Skarn project 2022 Capital Expenditures ($ millions) | Category | August 2022 Revised Operating Outlook | YTD 2022 Actual | | :------- | :------------------------------------ | :-------------- | | Sustaining Capital Sub-total | 240.0 - 250.0 | 161.2 | | Project Capital Sub-total | 55.0 - 60.0 | 52.1 | | Total Capital | 295.0 - 310.0 | 213.3 | - Sustaining capital for Shahuindo and La Arena is expected to be **below the revised outlook** due to securing lease-like construction loan financing for heap leach facility expansions[90](index=90&type=chunk) [Project Development Update](index=21&type=section&id=Project%20Development%20Update) In Q3 2022, the Company invested **$24.6 million** in project development, primarily advancing the La Colorada Skarn project and exploration activities Project Development Capital (thousands of USD) | Project | Q3 2022 | Q3 2021 | YTD 2022 | YTD 2021 | | :------ | :------ | :------ | :------- | :------- | | La Colorada projects | 23,986 | 10,759 | 49,946 | 22,942 | | Timmins projects | 465 | 1,827 | 1,725 | 6,160 | | Other projects | 156 | 164 | 468 | 477 | | **Total** | **$24,607** | **$12,750** | **$52,139** | **$29,579** | - During Q3 2022, the Company invested **$24.6 million** in project development, primarily focused on exploration and advancing the La Colorada Skarn project, including the construction of a new concrete-lined ventilation shaft[92](index=92&type=chunk) [Overview of Q3 2022 Financial Results](index=21&type=section&id=Overview%20of%20Q3%202022%20Financial%20Results) This section provides a comprehensive overview of Q3 2022 and YTD 2022 financial performance, highlighting revenue, net earnings, cash flows, and adjusted earnings [Selected Annual and Quarterly Information](index=21&type=section&id=Selected_Financial_Info) Q3 2022 financial results show declining revenue, a net loss, decreased operating cash flow, and reductions in total assets and shareholders' equity compared to prior periods Selected Quarterly Financial Results (USD thousands, except per share) | Metric | Q1 2022 | Q2 2022 | Q3 2022 | Q4 2021 | FY 2021 | | :----- | :------ | :------ | :------ | :------ | :------ | | Revenue | $439,888 | $340,469 | $338,889 | $422,170 | $1,632,750 | | Mine operating earnings (loss) | $66,755 | $(31,652) | $(21,788) | $76,039 | $367,938 | | Earnings (loss) for the period attributable to equity holders | $76,517 | $(173,982) | $(71,527) | $14,036 | $97,428 | | Basic (loss) earnings per share | $0.36 | $(0.83) | $(0.34) | $0.06 | $0.46 | | Cash flow from operating activities | $68,758 | $20,835 | $54,418 | $118,098 | $392,108 | | Total assets | $3,540,297 | $3,323,568 | $3,199,559 | $3,518,584 | $3,518,584 | | Total attributable shareholders' equity | $2,683,201 | $2,472,502 | $2,357,600 | $2,631,554 | $2,631,554 | [Income Statement: Q3 2022 vs. Q3 2021](index=23&type=section&id=Income_Statement_Q3_2022_vs_Q3_2021) Pan American reported a **$71.2 million** net loss in Q3 2022, a **$91.4 million** decline from Q3 2021, primarily due to **$121.5 million** lower revenue and increased production costs Q3 2022 vs. Q3 2021 Net Earnings Variance (USD thousands) | Factor | Impact on Net Earnings | | :----- | :--------------------- | | Net earnings, Q3 2021 | $20,219 | | Total decrease in revenue | $(121,460) | | Total decrease in cost of sales | $785 | | Decreased income tax expense | $48,465 | | Decreased investment loss | $12,610 | | Increased other income | $7,373 | | Decreased gains on sale of mineral properties, plant and equipment | $(29,068) | | Increased care and maintenance costs | $(5,195) | | Increased losses on derivatives | $(4,802) | | Other | $(129) | | **Net loss, Q3 2022** | **$(71,202)** | - Revenue decreased by **$121.5 million**, with **$96.4 million** from lower metal quantities sold (gold **-21%**, silver **-12%**, copper **-66%**) and **$33.9 million** from lower precious metals prices (silver **-22%**, gold **-4%**), partially offset by lower direct selling costs and positive settlement adjustments[102](index=102&type=chunk)[103](index=103&type=chunk) - Production and royalty costs increased by **$4.5 million**, mainly due to **$12.6 million** from NRV inventory adjustments (increased heap inventory write-downs at Dolores) and **$11.0 million** from Silver Segment mines (severance provisions, higher quantities sold), partially offset by an **$18.7 million** reduction in Morococha production costs due to care and maintenance[107](index=107&type=chunk) [Statement of Cash Flows: Q3 2022 vs. Q3 2021](index=25&type=section&id=Cash_Flows_Q3_2022_vs_Q3_2021) Q3 2022 operating cash flow decreased by **$102.6 million** to **$54.4 million**, while investing activities used **$67.7 million** and financing activities used **$26.4 million** Q3 Cash Flow Summary (USD millions) | Activity | Q3 2022 | Q3 2021 | Change | | :------- | :------ | :------ | :----- | | Cash flow from operations | $54.4 | $157.0 | $(102.6) | | Changes in working capital (excl. cash) | $21.6 | $23.0 | $(1.4) | | Investing activities | $(67.7) | $(29.9) | $(37.8) | | Financing activities | $(26.4) | $(25.3) | $(1.1) | - The decrease in operating cash flow was mainly due to a **$121.5 million** decrease in revenue and a **$5.2 million** increase in care and maintenance costs for Morococha[108](index=108&type=chunk) - Investing activities included **$24.6 million** in project development capital and **$69.1 million** spent on mineral properties, plant and equipment (MPP&E)[110](index=110&type=chunk) [Adjusted Earnings: Q3 2022 vs Q3 2021](index=25&type=section&id=Adjusted_Earnings_Q3_2022_vs_Q3_2021) Adjusted earnings shifted from a **$37.8 million** profit in Q3 2021 to a **$2.8 million** loss in Q3 2022, reflecting a significant decline in operational profitability Adjusted Earnings (Loss) (USD thousands) | Metric | Q3 2022 | Q3 2021 | | :----- | :------ | :------ | | Adjusted (loss) earnings for the period | $(2,755) | $37,780 | | Adjusted (loss) earnings per share | $(0.01) | $0.18 | [Income Statement: YTD 2022 vs. YTD 2021](index=27&type=section&id=Income_Statement_YTD_2022_vs_YTD_2021) YTD 2022 saw a net loss of **$168.0 million**, a substantial decline from YTD 2021 earnings, driven by lower revenue, increased production costs, and a **$99.1 million** impairment charge YTD 2022 vs. YTD 2021 Net Earnings Variance (USD thousands) | Factor | Impact on Net Earnings | | :----- | :--------------------- | | Net earnings, YTD 2021 | $83,898 | | Total decrease in revenue | $(91,334) | | Total decrease in cost of sales | $(187,250) | | Decreased income tax expense | $97,730 | | Increased gains and income from associates | $40,975 | | Decreased investment loss | $36,171 | | Increased impairment charges | $(99,064) | | Decreased gains on sale of mineral properties, plant and equipment | $(34,023) | | Increased care and maintenance costs | $(12,131) | | Increased foreign exchange loss | $(4,781) | | Other | $1,806 | | **Net loss, YTD 2022** | **$(168,003)** | - Revenue decreased by **$91.3 million**, driven by lower metal quantities sold (gold **-7%**, zinc **-25%**, copper **-37%**) and a **15%** decline in silver prices, partially offset by increased silver sales (**+8%**) and appreciation in zinc and gold prices[119](index=119&type=chunk)[120](index=120&type=chunk) - Production and royalty costs increased by **$177.3 million**, largely due to **$105.2 million** from NRV inventory adjustments (Dolores heap inventory write-downs), **$59.8 million** from Gold Segment mines (higher waste-to-ore rates, grade-driven production decreases), and **$36.7 million** from Silver Segment mines (higher quantities sold, mine closure severances), partially offset by a **$41.1 million** reduction from Morococha being on care and maintenance[124](index=124&type=chunk) [Statement of Cash Flows: YTD 2022 vs. YTD 2021](index=30&type=section&id=Cash_Flows_YTD_2022_vs_YTD_2021) YTD 2022 operating cash flow decreased by **$130.0 million** to **$144.0 million**, with investing activities utilizing **$187.2 million** and financing activities using **$84.3 million** YTD Cash Flow Summary (USD millions) | Activity | YTD 2022 | YTD 2021 | Change | | :------- | :------- | :------- | :----- | | Cash flow from operations | $144.0 | $274.0 | $(130.0) | | Changes in working capital (excl. cash) | $(13.0) | $(61.4) | $48.4 | | Investing activities | $(187.2) | $(120.3) | $(66.9) | | Financing activities | $(84.3) | $(60.9) | $(23.4) | - The decrease in operating cash flow was mostly related to a **$91.3 million** decrease in revenue, a **$55.4 million** increase in production costs (excluding NRVs), **$17.4 million** in mine closure severances, and a **$14.7 million** increase in income taxes paid[126](index=126&type=chunk) - Investing activities included **$52.1 million** of project development capital and **$202.3 million** spent on mineral properties, plant and equipment[128](index=128&type=chunk) [Adjusted Earnings: YTD 2022 vs YTD 2021](index=30&type=section&id=Adjusted_Earnings_YTD_2022_vs_YTD_2021) YTD 2022 adjusted earnings significantly decreased to **$22.7 million** (**$0.11** basic adjusted EPS) from **$121.8 million** in YTD 2021, reflecting reduced normalized profitability Adjusted Earnings (Loss) (USD thousands) | Metric | YTD 2022 | YTD 2021 | | :----- | :------- | :------- | | Adjusted earnings for the period | $22,734 | $121,839 | | Adjusted earnings per share | $0.11 | $0.58 | [Liquidity Position and Capital Resources](index=31&type=section&id=Liquidity%20Position%20and%20Capital%20Resources) This section assesses the Company's liquidity, capital resources, and share structure, highlighting changes in cash, working capital, and debt [Liquidity and Capital Measures](index=31&type=section&id=Liquidity_Capital_Measures) Cash and short-term investments decreased by **$54.1 million** in Q3 2022, and working capital by **$191.4 million** YTD, though the Company remains compliant with its undrawn **$500 million** credit facility Liquidity and Capital Measures (USD thousands) | Metric | Sep 30, 2022 | Jun 30, 2022 | Dec 31, 2021 | Q3 2022 Change | YTD 2022 Change | | :----- | :----------- | :----------- | :----------- | :------------- | :-------------- | | Cash and cash equivalents | $153,079 | $194,829 | $283,550 | $(41,750) | $(130,471) | | Short-term Investments | $34,091 | $46,430 | $51,723 | $(12,339) | $(17,632) | | Cash and Short-term investments | $187,170 | $241,259 | $335,273 | $(54,089) | $(148,103) | | Working Capital | $422,097 | $513,921 | $613,494 | $(91,824) | $(191,397) | | SL-Credit Facility committed amount | $500,000 | $500,000 | $500,000 | — | — | | Shareholders' equity | $2,357,600 | $2,472,502 | $2,631,554 | $(114,902) | $(273,954) | | Total debt | $68,465 | $63,223 | $45,861 | $5,242 | $22,604 | | Capital | $2,238,895 | $2,294,466 | $2,342,142 | $(55,571) | $(103,247) | - The Company's investment objectives for cash balances are capital preservation, liquidity, and maximizing returns, achieved by investing in fixed income instruments and diversifying currencies[134](index=134&type=chunk)[135](index=135&type=chunk) - As of September 30, 2022, the Company was in compliance with all financial covenants under its **$500 million** revolving SL-Credit Facility, which was undrawn[137](index=137&type=chunk) [Outstanding Share Amounts](index=32&type=section&id=Outstanding_Share_Amounts) As of November 9, 2022, **210.5 million** common shares and **0.2 million** stock options were outstanding, alongside **313.9 million** CVRs convertible into **15.6 million** common shares Outstanding Shares and Options as at November 9, 2022 | Instrument | Amount | | :--------- | :----- | | Common shares | 210,538,209 | | Options | 201,774 | | **Total** | **210,739,983** | - Approximately **0.2 million** stock options were outstanding, with exercise prices ranging from **CAD $9.76 to CAD $39.48** and a weighted average life of **3.6 years**, with **0.2 million** options vested and exercisable at an average weighted exercise price of **CAD $19.29**[142](index=142&type=chunk) - **313,883,990 CVRs** were outstanding as of September 30, 2022, convertible into **15,600,034** common shares upon the first commercial shipment from the Escobal mine[143](index=143&type=chunk) [Closure and Decommissioning Cost Provision](index=33&type=section&id=Closure%20and%20Decommissioning%20Cost%20Provision) Estimated future closure and decommissioning costs are based on regulatory requirements and environmental policies, with Q3 2022 revisions driven by inflation, discount rates, and site disturbance - The estimated future closure and decommissioning costs are based on regulatory requirements and the Company's environmental policies, measured using management's assumptions and estimates for future cash outflows, discounted using specific rates[144](index=144&type=chunk) Closure and Decommissioning Cost Provision (USD millions) | Metric | Sep 30, 2022 | Dec 31, 2021 | | :----- | :----------- | :----------- | | Total inflated and undiscounted amount | $508.1 | $413.0 | | Inflated and discounted provision (statement of financial position) | $238.0 | $242.9 | - Revisions in Q3 2022 were primarily due to increased inflation rates, higher discount rates from government debt yields, increased site disturbance, and updated estimates from periodic reviews, with accretion of the discount charged as finance expense being **$3.7 million** in Q3 2022 and **$11.1 million** YTD 2022[145](index=145&type=chunk)[146](index=146&type=chunk) [Related Party Transactions](index=33&type=section&id=Related%20Party%20Transactions) Maverix Metals Inc. ceased to be a related party after March 31, 2022, with no other related party transactions reported for the periods - Maverix Metals Inc. ceased to be a related party after March 31, 2022, as the Company no longer held significant influence, and there were no other related party transactions for the three and nine months ended September 30, 2022 and 2021[147](index=147&type=chunk) [Alternative Performance Measures (Non-GAAP)](index=33&type=section&id=Alternative%20Performance%20Measures%20(Non-GAAP)) This section defines and reconciles various non-GAAP measures, including Cash Costs, AISC, adjusted earnings, total debt, capital, and working capital, providing detailed segment and mine-level breakdowns [Per Ounce Measures (Cash Costs and AISC)](index=33&type=section&id=Per_Ounce_Measures) Cash Costs and AISC are non-GAAP measures used for performance evaluation and industry benchmarking, calculated net of by-product credits, with AISC reflecting the full cost of operating - Cash Costs and AISC are non-GAAP measures without standardized IFRS meanings, used for internal decision-making and industry comparison[148](index=148&type=chunk)[151](index=151&type=chunk) - Silver segment Cash Costs and AISC are calculated net of realized revenues from all metals other than silver, per ounce of silver sold, while Gold segment Cash Costs and AISC are calculated net of realized silver revenues, per ounce of gold sold[150](index=150&type=chunk) - AISC is considered a comprehensive measure of the full cost of operating, including exploration and sustaining capital, reflecting the cost of replacing silver and gold ounces[152](index=152&type=chunk) [Reconciliation of Cash Costs and AISC (Q3 2022 vs Q3 2021)](index=35&type=section&id=Reconciliation_Cash_Costs_AISC_Q3) Q3 2022 Silver Segment Cash Costs were **$53.1 million** (**$14.62/oz**) and AISC **$65.3 million** (**$17.97/oz**), while Gold Segment Cash Costs were **$151.5 million** (**$1,184/oz**) and AISC **$206.4 million** (**$1,614/oz**) Q3 2022 vs Q3 2021 Cash Costs and AISC Reconciliation (USD thousands, except per ounce) | Metric | Silver Segment Q3 2022 | Silver Segment Q3 2021 | Gold Segment Q3 2022 | Gold Segment Q3 2021 | | :----- | :--------------------- | :--------------------- | :------------------- | :------------------- | | Production costs | $89,271 | $110,733 | $176,475 | $158,695 | | On-site direct operating costs | $91,058 | $109,462 | $159,592 | $157,392 | | Royalties | $3,842 | $3,379 | $3,883 | $5,471 | | Smelting, refining and direct selling charges | $11,595 | $17,149 | $75 | $40 | | Cash Costs before by-product credits | $106,496 | $129,990 | $163,550 | $162,903 | | By-product credits | $(53,367) | $(79,789) | $(12,065) | $(15,859) | | **Cash Costs** | **$53,129** | **$50,201** | **$151,485** | **$147,044** | | NRV inventory adjustments | $(1,787) | $1,270 | $16,883 | $1,185 | | Sustaining capital | $13,444 | $15,532 | $35,266 | $37,376 | | Exploration and project development | — | $1,136 | — | $773 | | Reclamation cost accretion | $528 | $504 | $2,812 | $1,129 | | **All-in sustaining costs** | **$65,314** | **$68,643** | **$206,445** | **$187,507** | | Silver ounces sold (koz) | 3,634 | 4,211 | — | — | | Gold ounces sold (koz) | — | — | 128 | 160 | | Cash costs per ounce sold | $14.62 | $11.92 | $1,184 | $922 | | AISC per ounce sold | $17.97 | $16.30 | $1,614 | $1,176 | [Reconciliation of Cash Costs and AISC (YTD 2022 vs YTD 2021)](index=36&type=section&id=Reconciliation_Cash_Costs_AISC_YTD) YTD 2022 Silver Segment Cash Costs were **$140.1 million** (**$12.21/oz**) and AISC **$184.5 million** (**$16.09/oz**), while Gold Segment Cash Costs were **$428.8 million** (**$1,127/oz**) and AISC **$647.9 million** (**$1,703/oz**) YTD 2022 vs YTD 2021 Cash Costs and AISC Reconciliation (USD thousands, except per ounce) | Metric | Silver Segment YTD 2022 | Silver Segment YTD 2021 | Gold Segment YTD 2022 | Gold Segment YTD 2021 | | :----- | :---------------------- | :---------------------- | :-------------------- | :-------------------- | | Production costs | $279,665 | $277,552 | $545,239 | $384,486 | | On-site direct operating costs | $275,006 | $277,730 | $457,588 | $396,692 | | Royalties | $13,543 | $15,280 | $13,472 | $14,547 | | Smelting, refining and direct selling charges | $41,529 | $52,317 | $153 | $138 | | Cash Costs before by-product credits | $330,079 | $345,327 | $471,214 | $411,376 | | By-product credits | $(190,009) | $(218,123) | $(42,461) | $(52,574) | | **Cash Costs** | **$140,069** | **$127,204** | **$428,752** | **$358,802** | | NRV inventory adjustments | $4,659 | $(179) | $87,651 | $(12,755) | | Sustaining capital | $38,084 | $40,211 | $123,094 | $111,132 | | Exploration and project development | — | $2,289 | — | $2,756 | | Reclamation cost accretion | $1,706 | $1,513 | $8,435 | $3,387 | | **All-in sustaining costs** | **$184,519** | **$171,037** | **$647,932** | **$463,323** | | Silver ounces sold (koz) | 11,469 | 10,361 | — | — | | Gold ounces sold (koz) | — | — | 381 | 408 | | Cash costs per ounce sold | $12.21 | $12.28 | $1,127 | $879 | | AISC per ounce sold | $16.09 | $16.51 | $1,703 | $1,135 | [Reconciliation of Payments for Mineral Properties, Plant and Equipment and Sustaining Capital](index=37&type=section&id=Reconciliation_MPPE_Sustaining_Capital) This section reconciles MPP&E payments to sustaining capital, which was **$48.7 million** for Q3 2022 and **$161.2 million** for YTD 2022 Reconciliation of MPP&E Payments to Sustaining Capital (USD thousands) | Metric | Q3 2022 | Q3 2021 | YTD 2022 | YTD 2021 | | :----- | :------ | :------ | :------- | :------- | | Payments for mineral properties, plant and equipment | $69,073 | $62,190 | $202,326 | $173,331 | | Lease Payments | $4,240 | $3,145 | $11,130 | $8,980 | | Repayment of loans | $1,635 | $850 | $3,596 | $850 | | Investment (non-sustaining) capital | $(26,239) | $(13,277) | $(55,874) | $(31,819) | | **Sustaining Capital** | **$48,710** | **$52,908** | **$161,178** | **$151,342** | - Sustaining capital is included in AISC, while capital related to growth projects or acquisitions (project or investment capital) is excluded, as it is expected to increase future production[164](index=164&type=chunk) [Silver Segment Cash Costs and AISC by mine (Q3 2022 vs Q3 2021)](index=38&type=section&id=Silver_Segment_Cash_Costs_AISC_by_mine_Q3) Q3 2022 Silver Segment mine-by-mine Cash Costs and AISC show decreases at La Colorada and San Vicente, but increases at Huaron and Manantial Espejo Silver Segment Cash Costs and AISC by Mine (Q3 2022 vs Q3 2021) | Mine | Q3 2022 Cash Cost/oz | Q3 2021 Cash Cost/oz | Q3 2022 AISC/oz | Q3 2021 AISC/oz | | :--- | :------------------- | :------------------- | :-------------- | :-------------- | | La Colorada | $12.43 | $12.65 | $18.50 | $18.48 | | Huaron | $10.93 | $4.69 | $16.09 | $7.63 | | Morococha | N/A | $8.41 | N/A | $12.76 | | San Vicente | $12.98 | $16.84 | $13.49 | $21.16 | | Manantial Espejo | $23.69 | $19.33 | $22.80 | $22.71 | | **Consolidated Silver Segment** | **$14.62** | **$11.92** | **$17.97** | **$16.30** | [Silver Segment Cash Costs and AISC by mine (YTD 2022 vs YTD 2021)](index=39&type=section&id=Silver_Segment_Cash_Costs_AISC_by_mine_YTD) YTD 2022 Silver Segment mine-by-mine Cash Costs and AISC show improvements at Huaron, Morococha, and San Vicente, but increases at La Colorada and Manantial Espejo Silver Segment Cash Costs and AISC by Mine (YTD 2022 vs YTD 2021) | Mine | YTD 2022 Cash Cost/oz | YTD 2021 Cash Cost/oz | YTD 2022 AISC/oz | YTD 2021 AISC/oz | | :--- | :-------------------- | :-------------------- | :--------------- | :--------------- | | La Colorada | $10.49 | $10.20 | $14.57 | $18.50 | | Huaron | $4.97 | $4.08 | $9.84 | $7.26 | | Morococha | $5.68 | $11.22 | $7.08 | $15.22 | | San Vicente | $14.65 | $16.54 | $17.92 | $18.26 | | Manantial Espejo | $20.43 | $21.25 | $23.91 | $23.76 | | **Consolidated Silver Segment** | **$12.21** | **$12.28** | **$16.09** | **$16.51** | [Gold Segment Cash Costs and AISC by mine (Q3 2022 vs Q3 2021)](index=40&type=section&id=Gold_Segment_Cash_Costs_AISC_by_mine_Q3) All Gold Segment mines experienced increases in both Cash Costs and AISC per ounce in Q3 2022 compared to Q3 2021 Gold Segment Cash Costs and AISC by Mine (Q3 2022 vs Q3 2021) | Mine | Q3 2022 Cash Cost/oz | Q3 2021 Cash Cost/oz | Q3 2022 AISC/oz | Q3 2021 AISC/oz | | :--- | :------------------- | :------------------- | :-------------- | :-------------- | | Dolores | $1,193 | $767 | $1,899 | $1,026 | | Shahuindo | $1,023 | $763 | $1,385 | $951 | | La Arena | $1,128 | $930 | $1,542 | $1,240 | | Timmins | $1,382 | $1,331 | $1,625 | $1,618 | | **Consolidated Gold Segment** | **$1,184** | **$922** | **$1,614** | **$1,176** | [Gold Segment Cash Costs and AISC by mine (YTD 2022 vs YTD 2021)](index=41&type=section&id=Gold_Segment_Cash_Costs_AISC_by_mine_YTD) All Gold Segment mines experienced increases in both Cash Costs and AISC per ounce in YTD 2022 compared to YTD 2021 Gold Segment Cash Costs and AISC by Mine (YTD 2022 vs YTD 2021) | Mine | YTD 2022 Cash Cost/oz | YTD 2021 Cash Cost/oz | YTD 2022 AISC/oz | YTD 2021 AISC/oz | | :--- | :-------------------- | :-------------------- | :--------------- | :--------------- | | Dolores | $1,071 | $699 | $2,207 | $844 | | Shahuindo | $989 | $759 | $1,289 | $964 | | La Arena | $1,056 | $742 | $1,620 | $1,178 | | Timmins | $1,362 | $1,325 | $1,626 | $1,620 | | **Consolidated Gold Segment** | **$1,127** | **$879** | **$1,703** | **$1,135** | [Adjusted Earnings](index=42&type=section&id=Adjusted_Earnings_NonGAAP) Adjusted earnings, a non-GAAP measure, shifted to a **$2.8 million** loss in Q3 2022 and decreased to **$22.7 million** for YTD 2022, reflecting reduced normalized profitability - Adjusted earnings and basic adjusted earnings per share are non-GAAP measures that eliminate items subject to volatility or unrelated to current period operations to better reflect normalized earnings[179](index=179&type=chunk) Adjusted Earnings Reconciliation (USD thousands, except per share) | Metric | Q3 2022 | Q3 2021 | YTD 2022 | YTD 2021 | | :----- | :------ | :------ | :------- | :------- | | Net (loss) earnings for the period | $(71,202) | $20,219 | $(168,003) | $83,898 | | Total adjustments | $68,447 | $17,561 | $190,737 | $37,941 | | **Adjusted (loss) earnings for the period** | **$(2,755)** | **$37,780** | **$22,734** | **$121,839** | | Adjusted (loss) earnings per share | $(0.01) | $0.18 | $0.11 | $0.58 | [Total Debt](index=42&type=section&id=Total_Debt_NonGAAP) Total debt is a non-GAAP measure used to assess financial leverage, encompassing long-term debt, lease liabilities, and loans payable - Total debt is a non-GAAP measure calculated as the total current and non-current portions of long-term debt (including amounts drawn on the SL-Credit Facility), lease liabilities, and loans payable[182](index=182&type=chunk) [Capital](index=42&type=section&id=Capital_NonGAAP) Capital is a non-GAAP measure calculated as total equity plus total debt less cash and short-term investments, used to evaluate enterprise value - Capital is a non-GAAP measure calculated as total equity plus total debt less cash and cash equivalents and short-term investments, used to evaluate the Company's enterprise value[183](index=183&type=chunk) [Working Capital](index=42&type=section&id=Working_Capital_NonGAAP) Working capital is a non-GAAP measure defined as current assets less current liabilities, used to assess the Company's ability to meet current obligations - Working capital is a non-GAAP measure calculated as current assets less current liabilities, used to evaluate the Company's ability to meet current obligations[184](index=184&type=chunk) [Risks and Uncertainties](index=43&type=section&id=Risks%20and%20Uncertainties) This section outlines the Company's exposure to various financial, operational, and external risks, including metal price volatility, legal proceedings, and climate change impacts [Financial Risk Exposure](index=43&type=section&id=Financial_Risk_Exposure) The Company is exposed to metal price, credit, interest rate, foreign currency, and liquidity risks, managed through strategies detailed in its 2021 Annual Financial Statements - Pan American is exposed to metal price risk, credit risk, interest rate risk, foreign currency exchange rate risk, and liquidity risk[186](index=186&type=chunk) - The Company's exposures and management of these risks are described in Note 8 'Financial Instruments' of the 2021 Annual Financial Statements, with no significant changes during Q3 2022[186](index=186&type=chunk) [Price Risk](index=43&type=section&id=Price_Risk) Fluctuations in metal and consumable prices impact profitability, with the Company mitigating risk through hedging contracts, resulting in a **$1.56 million** net derivative loss in Q3 2022 - A decrease in market prices for silver, gold, and other metals, or an increase in consumable prices, could affect profitability and mine viability[187](index=187&type=chunk) - The Company uses forward sales or option contracts for base metals and diesel swap contracts to mitigate price risk, and as of September 30, 2022, it had outstanding collars and forward contracts for zinc and diesel[187](index=187&type=chunk)[188](index=188&type=chunk)[189](index=189&type=chunk) Derivative Gains and Losses on Commodities (USD thousands) | Commodity | Q3 2022 | Q3 2021 | YTD 2022 | YTD 2021 | | :-------- | :------ | :------ | :------- | :------- | | Zinc (losses) gains | $(23) | — | $1,760 | — | | Copper gains (losses) | — | $261 | — | $(896) | | Diesel gains (losses) | $(624) | $1,149 | $4,214 | $9,126 | | Other | $(913) | — | $(1,129) | — | | **Total** | **$(1,560)** | **$1,410** | **$4,845** | **$8,230** | [Trading Activities and Credit Risk](index=44&type=section&id=Trading_Activities_Credit_Risk) The Company faces credit risk from concentrate sales, doré refining, spot market sales, and supplier advances, which management actively monitors to avoid concentration - Credit risk arises from concentrate sales (receivable balances of **$26.5 million** as of Sep 30, 2022), doré refining (precious metal inventory at refineries of **$11.6 million**), spot market sales, and supplier advances (**$16.3 million**)[193](index=193&type=chunk)[194](index=194&type=chunk)[195](index=195&type=chunk)[196](index=196&type=chunk)[198](index=198&type=chunk) - Management monitors and assesses credit risk from refining arrangements, concentrate sales, commodity contracts, supplier advances, and customers, and aims to avoid concentration of credit risk[199](index=199&type=chunk) [Foreign currency exchange rate risk](index=45&type=section&id=Foreign_Currency_Exchange_Rate_Risk) Financial results are exposed to foreign currency fluctuations, mitigated by local currency accumulation and hedging contracts, resulting in a **$4.98 million** net derivative loss in Q3 2022 - Financial results are subject to changes in the USD value relative to local currencies (PEN, MXN, ARS, BOB, CAD), negatively impacted by strengthening local currencies[201](index=201&type=chunk) - The Company mitigates currency exposure by accumulating local currencies and entering into hedging contracts for MXN, PEN, and CAD, with outstanding positions for MXN (**$27.0 million**), PEN (**$39.0 million**), and CAD (**$114.0 million**) as of Sep 30, 2022[201](index=201&type=chunk)[202](index=202&type=chunk)[203](index=203&type=chunk)[204](index=204&type=chunk) Derivative Gains and Losses on Currencies (USD thousands) | Currency | Q3 2022 | Q3 2021 | YTD 2022 | YTD 2021 | | :------- | :------ | :------ | :------- | :------- | | Mexican peso (losses) gains | $394 | $(517) | $750 | $(574) | | Peruvian sol gains (losses) | $(743) | $(1,812) | $961 | $(3,999) | | Canadian dollar gains (losses) | $(4,628) | $(816) | $(5,038) | $98 | | **Total** | **$(4,977)** | **$(3,145)** | **$(3,327)** | **$(4,475)** | [Claims and Legal Proceedings](index=45&type=section&id=Claims_Legal_Proceedings) Pan American is involved in legal proceedings concerning the Escobal mine, La Colorada land ownership, and class action lawsuits against Tahoe Resources, with uncertain outcomes that could materially impact operations - Legal proceedings include claims against PAS Guatemala and the Ministry of Energy and Mines of Guatemala regarding alleged land damage and injunctive relief to prevent future mining activities at the Escobal mine, which is currently suspended[207](index=207&type=chunk)[208](index=208&type=chunk) - Claims in Mexico involve community rights and land ownership over a portion of La Colorada mine's surface lands and a petition to suspend exploration/exploitation work on mining concessions, with the Company confident in its title but acknowledging potential adverse impacts[209](index=209&type=chunk) - Ongoing class action lawsuits in the U.S. and Canada against Tahoe Resources Inc. (acquired by Pan American) and its former management allege misrepresentations and seek significant damages[210](index=210&type=chunk) [COVID-19 and Other Pandemics](index=47&type=section&id=COVID-19_and_Other_Pandemics) COVID-19 has significantly impacted operations, workforce, and supply chain, leading to increased costs and uncertain future disruptions, market volatility, and financing challenges - COVID-19 has caused temporary suspensions of operations in Mexico, Peru, Argentina, and Bolivia, and reduced throughput in Canada, impacting employees, contractors, and suppliers[212](index=212&type=chunk) - The extent of future impacts is highly uncertain, depending on the duration of outbreaks, severity of variants, and effectiveness of containment actions, with comprehensive COVID-19 protocols expected to continue increasing costs and restricting throughput[213](index=213&type=chunk) - Continued spread of COVID-19 could lead to material adverse effects on global/regional economies, the Company's business, supply chain, demand for products, stock markets, ability to raise capital, and financing costs[214](index=214&type=chunk) [Climate Change](index=49&type=section&id=Climate_Change) Climate change poses significant risks, including increased regulatory costs, negative market perception, and physical risks like extreme weather, which could disrupt operations - Climate change can impact the business through current and emerging policies and regulations on GHG emissions and energy efficiency, leading to additional transition costs and regulatory complexity[215](index=215&type=chunk) - Concerns about climate change may negatively affect the Company's share price and reputation, as institutional investors may divest from industries with perceived environmental impacts[216](index=216&type=chunk) - Physical risks of climate change, such as extreme weather, resource shortages, and changes in rainfall, could damage facilities, disrupt access/shipping, impact personnel safety, cause supply shortages, and lead to temporary or permanent cessation of operations[217](index=217&type=chunk)[218](index=218&type=chunk) [Summary of Significant Accounting Policies, Standards and Judgements](index=51&type=section&id=Summary%20of%20Significant%20Accounting%20Policies,%20Standards%20and%20Judgements) This section confirms consistency of accounting policies, evaluates new standards, and highlights the reliance on critical accounting estimates and assumptions - The accounting policies used for the unaudited condensed interim consolidated financial statements are consistent with those in the Company's 2021 Annual Financial Statements[219](index=219&type=chunk) - Management is evaluating new accounting standards and interpretations but does not expect them to have a material impact on the consolidated financial statements upon adoption[220](index=220&type=chunk) - The preparation of financial statements requires management to make critical accounting estimates and assumptions that are uncertain and could materially impact the financial statements, with these estimates continuously reviewed using the most current information[221](index=221&type=chunk) [Subsequent Events](index=51&type=section&id=Subsequent%20Events) Pan American announced a definitive offer to acquire Yamana Gold Inc. on November 4, 2022, a transaction expected to significantly boost production and financial position - On November 4, 2022, Pan American and Agnico Eagle Limited announced a definitive binding offer to acquire Yamana Gold Inc., with Yamana selling its Canadian assets to Agnico Eagle, and Yamana subsequently terminated its agreement with Gold Fields and entered into an arrangement agreement with Pan American and Agnico Eagle on November 8, 2022[223](index=223&type=chunk) - The Pan American – Agnico Proposed Transaction involves Pan American acquiring Yamana shares, **$1.0 billion** in cash from Agnico Eagle, and approximately **36.1 million** Agnico Eagle common shares, with Pan American providing Yamana with **$150 million** towards a **$300 million** termination fee to Gold Fields[223](index=223&type=chunk)[230](index=230&type=chunk) - If completed, the transaction is expected to contribute low-cost production growth, long-life mineral reserves, increase silver production by **~50%** and gold production by **~100%**, and enhance Pan American's financial position, with Pan American having secured a commitment to increase its credit facilities from **$500 million to $1,250 million** to support potential financial requirements[225](index=225&type=chunk)[226](index=226&type=chunk) [Disclosure Controls and Procedures and Technical Information](index=53&type=section&id=Disclosure%20Controls%20and%20Procedures%20and%20Technical%20Information) This section addresses the effectiveness of disclosure controls and internal control over financial reporting, acknowledges inherent limitations, and confirms the review of technical information by Qualified Persons [Disclosure controls and procedures (DC&P)](index=53&type=section&id=DC%26P) The CEO and CFO concluded that the Company's Disclosure Controls and Procedures were effective as of December 31, 2021, ensuring timely and accurate information disclosure - The CEO and CFO are responsible for establishing and maintaining adequate DC&P[229](index=229&type=chunk) - As of December 31, 2021, the CEO and CFO concluded that the Company's DC&P were effective in ensuring information required for reports is recorded, processed, summarized, and reported timely and communicated to management[230](index=230&type=chunk) [Internal control over financial reporting (ICFR)](index=54&type=section&id=ICFR) The CEO and CFO concluded that Internal Control over Financial Reporting was effective as of December 31, 2021, with no material changes during Q3 or YTD 2022 - The CEO and CFO are responsible for establishing and maintaining adequate ICFR[232](index=232&type=chunk) - Based on their evaluation, the CEO and CFO concluded that the Company's ICFR was effective as of December 31, 2021[232](index=232&type=chunk) - There has been no material change in the Company's ICFR during the three and nine months ended September 30, 2022[234](index=234&type=chunk) [Inherent limitations of controls and procedures](index=54&type=section&id=Inherent_Limitations) All internal control systems have inherent limitations, providing only reasonable assurance that control objectives are met and may not always prevent or detect misstatements - All internal control systems have inherent limitations, meaning even effective systems may not prevent or detect misstatements on a timely basis, providing only reasonable assurance[235](index=235&type=chunk) [Technical Information](index=54&type=section&id=Technical_Information) Scientific and technical information in this MD&A has been reviewed and approved by Qualified Persons, with further details available in the Company's Annual Information Form and Form 40-F - Scientific and technical information in this MD&A has been reviewed and approved by Martin Wafforn, P.Eng., and Christopher Emerson, FAusIMM, both Qualified Persons as defined in NI 43-101[236](index=236&type=chunk) - More detailed technical information on the Company's material mineral properties is available in its Annual Information Form and Form 40-F[237](index=237&type=chunk) [Cautionary Note](index=55&type=section&id=Cautionary%20Note) This section provides cautionary notes regarding forward-looking statements and the differences in mineral reserve and resource reporting for U.S. investors [Cautionary Note Regarding Forward-Looking Statements and Information](index=55&type=section&id=Forward_Looking_Statements) The MD&A contains forward-looking statements based on current assumptions, subject to significant operational, economic, and regulatory uncertainties, cautioning against undue reliance due to inherent risks - The MD&A contains 'forward-looking statements' and 'forward-looking information' related to future financial/operational performance, production forecasts, costs, capital expenditures, metal prices, foreign exchange rates, impacts of COVID-19, legal proceedings, project development, and ESG goals[240](index=240&type=chunk) - These statements are based on assumptions and estimates, including the impact of inflation, COVID-19 management, mineral grades, metal prices, currency exchange rates, and regulatory approvals, which are subject to significant uncertainties[241](index=241&type=chunk)[242](index=242&type=chunk) - Known and unknown risks, such as fluctuations in metal prices, currency markets, technological/operational risks, government changes, environmental hazards, and creditworthiness of counterparties, may cause actual results to differ materially[243](index=243&type=chunk) [Cautionary Note to U.S. Investors Concerning Estimates of Mineral Reserves and Mineral Resources](index=58&type=section&id=US_Investors_Mineral_Reserves) U.S. investors are cautioned that mineral reserve and resource estimates adhere to Canadian NI 43-101 standards, which differ significantly from U.S. SEC requirements and may not be comparable - Mineral reserve and resource estimates are disclosed in accordance with Canadian NI 43-101 standards, which differ significantly from U.S. SEC requirements[244](index=244&type=chunk) - Information concerning mineralization, deposits, mineral reserve, and mineral resource information may not be comparable to similar information disclosed by U.S. companies[244](index=244&type=chunk)

Yamana Gold Inc. (AUY) Gold Forum Americas / XPL-DEV 2022 Conference September 20, 2022 10:00 AM ET Company Participants Peter Marrone - Executive Chairman Conference Call Participants Peter Marrone Great, thank you very much. So let me begin by saying what you know, which is we're in the midst of a, in process on a business combination, but to provide context and underpin the value that has been ascribed to the deal, first I'll provide a summary of our assets and the assessment of value that our board went ...

Company Overview - Yamana Gold is a precious metals company primarily focused on gold, with exposure to silver and copper[6] - The company targets a production platform of over 1 million gold equivalent ounces at low all-in sustaining costs[6] - Yamana Gold had a 1H22 gold equivalent ounce (GEO) production of approximately 500,000 at an AISC of $1,084 per GEO[6] - The company anticipates a sequential increase in sustainable production to at least 1.5 million GEO, representing a minimum 50% production growth[6] Key Projects and Production - Canadian Malartic is projected to have an attributable production platform of 320,000-340,000 ounces per annum at all-in sustaining costs of $1,030/oz[9] - Wasamac's annual gold production is projected to average 169,000 ounces over an initial 10-year mine life with an AISC of $828/oz[16] - Jacobina has a production platform of 230,000 ounces per year at an AISC of ~$760/oz after the Phase 2 expansion to 8,500 tpd[20] - El Peñón has a production platform of 220,000 GEO with AISC at $885/GEO[28] - Cerro Moro has a base case production platform of 150,000 to 165,000 GEO per year[36] MARA Project - The MARA project pre-feasibility study highlights an NPV8% of >$3 billion at a copper price of $3.50/lb and gold price of $1,600/oz on a 100% basis[40] - MARA has a processing capacity of +115,000 tpd and production of 556 Mlbs CuEq for the first 10 years, with an AISC of $1.44/lb CuEq[40] Gold Fields Transaction - Gold Fields made an all-share offer for Yamana Gold at an exchange ratio of 0.6 Gold Fields shares for each Yamana share, implying a valuation of US$6.7 billion[46] - Yamana shareholders will own approximately 39% of the combined group[46]

Financial Data and Key Metrics Changes - In Q2 2022, the company produced 4.5 million ounces of silver, with production at La Colorada increasing by over 50% compared to Q2 last year, reaching approximately 1.7 million ounces [6]. Business Line Data and Key Metrics Changes - The strong performance at La Colorada was highlighted, attributed to improved ventilation conditions in the mine [6]. Market Data and Key Metrics Changes - No specific market data or key metrics changes were mentioned in the provided content. Company Strategy and Development Direction and Industry Competition - The company is focused on improving working conditions in the mine, as evidenced by the operation of a new refrigeration plant in July, which is expected to enhance productivity [6]. Management's Comments on Operating Environment and Future Outlook - Management emphasized the positive impact of improved ventilation and the new refrigeration plant on production capabilities, indicating a commitment to enhancing operational efficiency [6]. Other Important Information - The call included forward-looking statements and references to non-GAAP measures, with cautionary statements available in the MD&A, news release, and presentation slides [4]. Q&A Session Summary - No specific questions and answers from the Q&A session were provided in the content.

Management's Discussion and Analysis FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 Management Discussion and Analysis For the three and six months ended June 30, 2022 and 2021 (tabular amounts are in thousands of U.S. dollars except number of shares, options, warrants, per share amounts, and per ounce amounts, unless otherwise noted) TABLE OF CONTENTS | Introduction | | 2 | | --- | --- | --- | | Core Business | and Strategy | 3 | | Q2 2022 | Highlights | 4 | | Environmental, | Social, and Governance | 6 ...

| --- | --- | --- | --- | --- | --- | |-----------------------------------|-------|-------|-------|-------|-------| | | | | | | | | | | | | | | | | | | | | | | 2022 SECOND | | | | | | | | | | | | | | QUARTER RESULTS | | | | | | | JULY 29, 2022 | | | | | | | TSX: YRI \| NYSE: AUY \| LSE: AUY | | | | | | CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS: contains or incorporates by reference "forward-looking statements" and "forward-looking information" ...

Summary of Yamana Gold Inc. Conference Call Company Overview - **Company**: Yamana Gold Inc. (AUY) - **Event**: Bank of America 2022 Global Metals, Mining and Steel Conference Call - **Date**: May 18, 2022 - **Participants**: Daniel Racine (President, CEO & Director), Lawson Winder (Bank of America) Key Points Company Performance - Yamana Gold is performing exceptionally well, with all mines exceeding expectations and a strong Q1 performance. The forecast for Q2 is also positive, aiming for 1 million ounces of gold equivalent (GEO) production, with a growth target of 3% for the following years [3][4][5] - The company has maintained a pristine balance sheet and is actively buying back shares, indicating strong financial health and commitment to shareholder returns [4][29] Cost Management - Despite industry-wide cost inflation, Yamana has effectively controlled costs through operational excellence initiatives, involving teams at all levels to optimize performance and efficiency [5][6][7] - The company has increased its inventory to four months, which has mitigated the impact of rising fuel costs, with the overall cost increase projected to be a maximum of 3% for the year [7][8] Growth Outlook - Yamana aims to reach 1.5 million ounces of production within 10 years, with immediate targets of 1.25 million ounces achievable through the Wasamac project and ongoing improvements at Jacobina and Canadian Malartic [11][12][13] - The company is confident in its ability to convert resources into reserves, particularly at Canadian Malartic, which has shown significant resource growth [12][13] Exploration Success - The exploration strategy has been revitalized, leading to increased resource discovery without significantly increasing costs. The use of AI in exploration has enhanced efficiency [15][17] - Successful exploration at Jacobina and Canadian Malartic has contributed to the company's growth, with a focus on drilling and resource conversion [16][17] Asset Development - **Wasamac**: Acquired last year, showing promising exploration results and a feasibility study indicating potential production of 200,000 ounces per year. The focus is currently on permitting and environmental assessments [19][20][22] - **MARA**: A copper/gold asset in Argentina, with a prefeasibility study indicating potential production of 556 million pounds of copper per year. The mill is already built, and the company is finalizing environmental assessments [23][24][25] Capital Allocation - Yamana has a low gross and net debt, aiming for a net debt to EBITDA ratio below 1. The company has increased dividends by 500% since mid-2019 and is considering further increases [29][30] - The capital allocation strategy includes a mix of dividends, project investments, and share buybacks, with a focus on low capital risk projects [28][30] Additional Insights - The company is leveraging its strong financial position to enhance shareholder returns while maintaining a balanced approach to capital allocation [29][30] - The operational excellence initiatives and strategic exploration efforts are key drivers of Yamana's success in a challenging market environment [6][15]

Financial Data and Key Metrics Changes - In Q1 2022, revenue was $439.9 million, with net earnings of $76.8 million or $0.36 per share, including a one-time $44.6 million fair value adjustment for the interest in Maverix [9] - Adjusted earnings were $32 million or $0.15 per share, with cash flow from operations totaling $68.8 million [9] - The company reported net cash of $224.8 million and announced a dividend of $0.12 per common share for Q1 [9] Business Line Data and Key Metrics Changes - Silver production was 4.6 million ounces, with all-in sustaining costs at $13.41 per ounce and cash costs at $10.23 per ounce [5] - Gold production reached 131,000 ounces, with all-in sustaining costs at $1,502 per ounce and cash costs at $1,069 per ounce [8] - The silver segment benefited from higher byproduct metal prices, while the gold segment faced challenges due to lower mine grades and a significant NRV inventory adjustment [5][8] Market Data and Key Metrics Changes - The company experienced inflationary pressures, particularly for diesel and consumables, impacting overall costs [4] - The Omicron variant initially reduced workforce deployment but was largely managed, allowing for a return to normal operations [4][17] Company Strategy and Development Direction - The company is focused on achieving production guidance for 2022, with expectations weighted towards the second half of the year [4] - Growth projects include significant drilling at La Colorada Skarn, with over 100,000 meters completed since the last resource estimate [10] - The company is evaluating alternative opportunities for Morococha, including monetization and joint ventures [7] Management Comments on Operating Environment and Future Outlook - Management expressed optimism about returning to normal workforce levels and operational improvements despite ongoing inflationary pressures [4][17] - The company is closely monitoring global inflation and will adjust cost estimates as necessary [4] - The management highlighted the importance of engineering work to define mining methods for future resource updates [20] Other Important Information - The company released its 2021 Sustainability Report, outlining goals to reduce GHG emissions by at least 30% by 2030 [11] - The consultation process for the Escobal project is ongoing, with multiple meetings planned [11][16] Q&A Session Summary Question: Update on Escobal consultation process - Management indicated that there is no set number of meetings and expressed encouragement about the current schedule of meetings [16] Question: Lead time for recommencing operations - Management stated that a few months would be needed to return to production, with ongoing care and maintenance ensuring readiness [18] Question: Focus of resource update for La Colorada Skarn - Management confirmed that the resource update will focus on both upgrading inferred resources and adding to them with step-out drilling [20] Question: Factors contributing to costs at Dolores - Management identified lower grade ores and COVID-related inefficiencies as the main drivers of increased costs at Dolores [24][25] Question: Strategic intention for La Arena 2 - Management noted that La Arena 2 is gaining interest due to its potential as a copper-gold porphyry project, with ongoing exploration and resource updates planned [27][28]

[Introduction](index=3&type=section&id=Introduction) This MD&A explains Pan American Silver's performance and outlook, presented in USD under IFRS and utilizing non-GAAP measures - This MD&A provides an understanding of factors influencing Pan American Silver Corp's performance and future outlook, to be read with the 2021 Annual Financial Statements and Q1 2022 Financial Statements[3](index=3&type=chunk) - All amounts are in **USD**, and financial reporting adheres to **IFRS**[3](index=3&type=chunk) - The MD&A refers to non-GAAP measures like 'all-in sustaining costs per ounce sold', 'cash costs per ounce sold', 'adjusted earnings', and 'working capital', which are detailed in the 'Alternative Performance (Non-GAAP) Measures' section[4](index=4&type=chunk) [Core Business and Strategy](index=4&type=section&id=Core%20Business%20and%20Strategy) The company engages in silver and gold mining with a vision to be the premier silver mining company through sustainable growth - Pan American Silver Corp is engaged in silver and gold mining, including exploration, development, extraction, processing, refining, and reclamation, operating mines in **Peru, Mexico, Argentina, Bolivia, and Canada**[7](index=7&type=chunk) - The Company's vision is to be the **world's premier silver mining company**, focusing on sustainable profits, growing mineral reserves, fostering positive stakeholder relationships, and continuously improving asset quality[8](index=8&type=chunk)[9](index=9&type=chunk) [Q1 2022 Highlights](index=5&type=section&id=Highlights) Q1 2022 saw stable silver production, higher revenue and net earnings, but increased costs and slightly lower adjusted earnings [Operations](index=5&type=section&id=Operations) In Q1 2022, silver production was comparable to Q1 2021, while gold and base metal production saw slight decreases Q1 2022 Production Highlights (YoY) | Metal | Q1 2022 Production | Q1 2021 Production | Change (%) | | :---- | :------------------ | :------------------ | :--------- | | Silver | 4.62 million ounces | 4.58 million ounces | +0.9% | | Gold | 131.0 thousand ounces | 137.6 thousand ounces | -5% | | Zinc | 10.2 thousand tonnes | 13.1 thousand tonnes | -22.1% | | Lead | 4.7 thousand tonnes | 5.0 thousand tonnes | -6% | | Copper | 1.8 thousand tonnes | 2.1 thousand tonnes | -14.3% | - **Silver production was comparable YoY**, with increases at La Colorada and Manantial Espejo offsetting declines at San Vicente and Morococha[10](index=10&type=chunk)[12](index=12&type=chunk)[14](index=14&type=chunk) - **Gold production decreased 5%** due to lower output at La Arena and Dolores, partially offset by Shahuindo[10](index=10&type=chunk)[12](index=12&type=chunk)[14](index=14&type=chunk) - The Company **reaffirms its 2022 operating outlook** for silver, gold, zinc, lead, and copper production[11](index=11&type=chunk)[13](index=13&type=chunk)[15](index=15&type=chunk) [Financial](index=5&type=section&id=Financial) The company reported a significant increase in net earnings and cash flow, driven by higher sales and favorable adjustments Q1 2022 Financial Highlights (YoY) | Metric | Q1 2022 (USD millions) | Q1 2021 (USD millions) | Change (YoY) | | :----- | :--------------------- | :--------------------- | :----------- | | Revenue | $439.9 | $368.1 | +20% | | Net Earnings | $76.8 | ($7.6) | +$84.4 | | Basic EPS | $0.36 | ($0.04) | +$0.40 | | Cash Flow from Operations | $68.8 | $29.9 | +$38.9 | | Adjusted Earnings | $32.0 | $37.4 | -$5.4 | | Basic Adjusted EPS | $0.15 | $0.18 | -$0.03 | - **Revenue increased 20%** due to a 40% increase in silver ounces sold and a 9% increase in gold ounces sold, largely from inventory draw-downs[17](index=17&type=chunk)[86](index=86&type=chunk) - **Net earnings significantly improved** to $76.8 million from a loss of $7.6 million, primarily due to a **$44.6 million fair-value adjustment gain** on the Maverix investment and a **$26.5 million decrease in income tax expense**[18](index=18&type=chunk)[22](index=22&type=chunk) - **Cash flow from operations increased by $38.9 million**, reflecting an $8.8 million increase in cash mine operating earnings and a $32.3 million reduction in non-cash working capital build-up[16](index=16&type=chunk) - **Adjusted earnings decreased** to $32.0 million ($0.15 per share) from $37.4 million ($0.18 per share) in Q1 2021[19](index=19&type=chunk) Q1 2022 Cash Costs and AISC (YoY) | Segment | Metric | Q1 2022 | Q1 2021 | Change (YoY) | | :------ | :----- | :------ | :------ | :----------- | | Silver | Cash Costs/oz | $10.23 | $12.30 | -$2.07 | | Silver | AISC/oz | $13.41 | $16.99 | -$3.58 | | Gold | Cash Costs/oz | $1,069 | $846 | +$223 | | Gold | AISC/oz | $1,502 | $1,058 | +$444 | - **Silver Segment Cash Costs per ounce decreased by $2.07**, primarily due to higher base metal prices and lower costs at La Colorada, despite inflationary pressures[19](index=19&type=chunk)[20](index=20&type=chunk)[21](index=21&type=chunk)[23](index=23&type=chunk) [Environmental, Social, and Governance (ESG)](index=7&type=section&id=Environmental%2C%20Social%2C%20and%20Governance) The company is committed to sustainable practices and released its 2021 Sustainability Report in accordance with global standards - Pan American is committed to responsible and sustainable business practices, encompassing environmental care, community development, safe workplaces, and transparent operations[26](index=26&type=chunk) - The Company released its **2021 Sustainability Report** on May 5, 2022, prepared in accordance with **GRI Standards** and aligned with **SASB Standard**[27](index=27&type=chunk) [Operating Performance](index=7&type=section&id=Operating%20Performance) This section details Q1 2022 production volumes, costs, and individual mine performance across silver, gold, and base metals [Silver and Gold Production](index=7&type=section&id=Silver%20and%20Gold%20Production) Consolidated silver production in Q1 2022 was 4.62 million ounces, slightly up from Q1 2021, while gold production decreased by 5% Q1 2022 Silver and Gold Production by Operation (koz) | Operation | Silver Production (koz) | Gold Production (koz) | | :-------- | :---------------------- | :-------------------- | | La Colorada | 1,419 | 0.6 | | Huaron | 899 | 0.2 | | Morococha | 324 | 0.1 | | San Vicente | 476 | — | | Manantial Espejo | 903 | 6.1 | | Dolores | 518 | 34.6 | | Shahuindo | 66 | 34.3 | | La Arena | 11 | 23.3 | | Timmins | 4 | 31.8 | | **Total** | **4,619** | **131.0** | - Total silver production for Q1 2022 was **4,619 koz**, slightly higher than Q1 2021 (4,583 koz)[30](index=30&type=chunk) - Total gold production was **131.0 koz**, down from Q1 2021 (137.6 koz)[30](index=30&type=chunk) [Base Metal Production](index=8&type=section&id=Base%20Metal%20Production) Base metal production in Q1 2022 saw decreases across zinc, lead, and copper compared to Q1 2021 Q1 2022 Base Metal Production (kt) | Metal | Q1 2022 (kt) | Q1 2021 (kt) | | :---- | :----------- | :----------- | | Zinc | 10.2 | 13.1 | | Lead | 4.7 | 5.0 | | Copper | 1.8 | 2.1 | - Payable base metal production also decreased, with zinc at **8.5 kt** (Q1 2021: 10.9 kt), lead at **4.4 kt** (Q1 2021: 4.7 kt), and copper at **1.6 kt** (Q1 2021: 1.7 kt)[31](index=31&type=chunk) [Cash Costs and AISC](index=8&type=section&id=Cash%20Costs%20and%20AISC) Silver Segment costs decreased significantly due to by-product prices, while Gold Segment costs increased from lower grades and inflation Q1 2022 Consolidated Cash Costs and AISC (per ounce) | Segment | Metric | Q1 2022 | Q1 2021 | Change (YoY) | | :------ | :----- | :------ | :------ | :----------- | | Silver | Cash Costs | $10.23 | $12.30 | -$2.07 | | Silver | AISC | $13.41 | $16.99 | -$3.58 | | Gold | Cash Costs | $1,069 | $846 | +$223 | | Gold | AISC | $1,502 | $1,058 | +$444 | - **Silver Segment Cash Costs decreased by $2.07/oz**, primarily due to higher base metal prices and lower costs at La Colorada[20](index=20&type=chunk)[22](index=22&type=chunk) - **Gold Segment Cash Costs increased by $223/oz**, mainly due to lower mined grades, inflationary pressures, and supply chain shortages[21](index=21&type=chunk)[24](index=24&type=chunk) [Individual Mine Performance](index=9&type=section&id=Individual%20Mine%20Performance) Individual mine performance varied, with strong results at La Colorada and Manantial Espejo, while others faced cost and grade challenges [La Colorada Operation](index=9&type=section&id=La%20Colorada%20Operation) Silver production increased 33% due to higher grades, leading to a significant decrease in both Cash Costs and AISC La Colorada Q1 2022 Performance (YoY) | Metric | Q1 2022 | Q1 2021 | Change (YoY) | | :----- | :------ | :------ | :----------- | | Silver Production (koz) | 1,419 | 1,065 | +33% | | Cash Costs ($/oz) | $9.73 | $15.62 | -$5.89 | | AISC ($/oz) | $12.19 | $42.44 | -$30.25 | - **Silver production increased 33%** due to higher grades and throughput from improved ventilation[38](index=38&type=chunk)[40](index=40&type=chunk) - **AISC decreased by $30.25/oz**, driven by higher silver grades, by-product metal prices, and lower sustaining capital[38](index=38&type=chunk)[40](index=40&type=chunk) [Huaron Operation](index=10&type=section&id=Huaron%20Operation) Higher base metal prices drove down cash costs, offsetting inflationary pressures and lower zinc and copper production Huaron Q1 2022 Performance (YoY) | Metric | Q1 2022 | Q1 2021 | Change (YoY) | | :----- | :------ | :------ | :----------- | | Silver Production (koz) | 899 | 884 | +2% | | Zinc Production (kt) | 4.05 | 5.13 | -21% | | Copper Production (kt) | 1.22 | 1.56 | -22% | | Lead Production (kt) | 2.58 | 2.30 | +12% | | Cash Costs ($/oz) | ($1.16) | $2.35 | -$3.51 | | AISC ($/oz) | $3.49 | $4.82 | -$1.33 | - **Cash Costs decreased by $3.50/oz**, primarily from higher base metal prices, offsetting inflationary pressures[43](index=43&type=chunk)[44](index=44&type=chunk) [Dolores Operation](index=11&type=section&id=Dolores%20Operation) Lower grades from a reserve estimate shortfall led to decreased silver and gold production and significantly higher costs Dolores Q1 2022 Performance (YoY) | Metric | Q1 2022 | Q1 2021 | Change (YoY) | | :----- | :------ | :------ | :----------- | | Silver Production (koz) | 518 | 634 | -18% | | Gold Production (koz) | 34.6 | 37.0 | -7% | | Cash Costs ($/gold oz) | $976 | $718 | +$258 | | AISC ($/gold oz) | $1,682 | $723 | +$959 | - **Silver production decreased 18%** and **gold production decreased 7%**, largely due to lower grades[46](index=46&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk) - **AISC increased by $959/oz**, driven by lower grades, higher operating costs, and negative NRV inventory adjustments[46](index=46&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk) [Shahuindo Operation](index=12&type=section&id=Shahuindo%20Operation) Gold production increased 16% due to higher throughput, though costs rose from a higher waste-to-ore ratio and inflation Shahuindo Q1 2022 Performance (YoY) | Metric | Q1 2022 | Q1 2021 | Change (YoY) | | :----- | :------ | :------ | :----------- | | Gold Production (koz) | 34.26 | 29.54 | +16% | | Cash Costs ($/oz) | $915 | $751 | +$164 | | AISC ($/oz) | $1,152 | $844 | +$308 | - **Gold production increased 16%** due to higher tonnes stacked and improved recovery, despite lower grades[51](index=51&type=chunk)[52](index=52&type=chunk) - **AISC increased by $308/oz**, primarily due to a higher waste-to-ore ratio, lower gold grades, and inflationary pressures[51](index=51&type=chunk)[52](index=52&type=chunk) [La Arena Operation](index=13&type=section&id=La%20Arena%20Operation) Gold production decreased 30% due to lower grades, resulting in significantly higher cash costs and AISC La Arena Q1 2022 Performance (YoY) | Metric | Q1 2022 | Q1 2021 | Change (YoY) | | :----- | :------ | :------ | :----------- | | Gold Production (koz) | 23.35 | 33.15 | -30% | | Cash Costs ($/oz) | $963 | $598 | +$365 | | AISC ($/oz) | $1,424 | $1,072 | +$352 | - **Gold production decreased 30%** due to lower grades and a decrease in the ratio of ounces recovered to stacked[55](index=55&type=chunk)[56](index=56&type=chunk) - **Cash Costs increased by $365/oz**, mainly reflecting inflationary pressures and lower grades[55](index=55&type=chunk)[56](index=56&type=chunk) [Timmins Operation](index=14&type=section&id=Timmins%20Operation) Gold production saw a slight increase from higher mining rates, but costs rose due to lower grades and inflation Timmins Q1 2022 Performance (YoY) | Metric | Q1 2022 | Q1 2021 | Change (YoY) | | :----- | :------ | :------ | :----------- | | Gold Production (koz) | 31.79 | 30.98 | +3% | | Cash Costs ($/oz) | $1,414 | $1,292 | +$122 | | AISC ($/oz) | $1,695 | $1,568 | +$127 | - **Cash Costs increased by $122/oz**, primarily from lower grades and higher operating costs due to inflationary pressures[60](index=60&type=chunk)[61](index=61&type=chunk) [Other Operations (Morococha, San Vicente, Manantial Espejo)](index=15&type=section&id=Other%20Operations) Morococha was placed on care and maintenance, San Vicente saw lower grades, while Manantial Espejo's production increased Other Operations Q1 2022 Performance (YoY) | Operation | Metric | Q1 2022 | Q1 2021 | Change (YoY) | | :-------- | :----- | :------ | :------ | :----------- | | Morococha | Silver Production (koz) | 324 | 521 | -37.8% | | Morococha | Cash Costs ($/oz) | $5.68 | $13.89 | -$8.21 | | San Vicente | Silver Production (koz) | 476 | 701 | -32.1% | | San Vicente | Cash Costs ($/oz) | $19.39 | $13.35 | +$6.04 | | Manantial Espejo | Silver Production (koz) | 903 | 697 | +29.6% | | Manantial Espejo | Cash Costs ($/oz) | $15.42 | $19.78 | -$4.36 | - **Morococha production decreased** as the operation was placed on care and maintenance in February 2022[65](index=65&type=chunk)[66](index=66&type=chunk) - **Manantial Espejo saw increased production** from higher tonnages and grades at COSE and Joaquin[65](index=65&type=chunk)[66](index=66&type=chunk) [2022 Annual Operating Outlook](index=16&type=section&id=2022%20Annual%20Operating%20Outlook) The company reaffirms its 2022 annual outlook for metal production, costs, and capital expenditures based on Q1 performance [Production Relative to Forecast](index=16&type=section&id=Production%20Relative%20to%20Forecast) Management reaffirms the 2022 annual consolidated metal production outlook based on Q1 2022 results and expected future production 2022 Operating Outlook vs. Q1 2022 Production | Metal | 2022 Operating Outlook | Q1 2022 Production | | :---- | :--------------------- | :----------------- | | Silver | 19.00 - 20.50 Moz | 4.62 Moz | | Gold | 550.0 - 605.0 koz | 131.0 koz | | Zinc | 35.0 - 40.0 kt | 10.2 kt | | Lead | 15.0 - 17.0 kt | 4.7 kt | | Copper | 5.5 - 6.5 kt | 1.8 kt | - The Company **reaffirms its 2022 Operating Outlook** for annual consolidated metal production[69](index=69&type=chunk) [Cash Costs and AISC Compared to Forecast](index=16&type=section&id=Cash%20Costs%20and%20AISC%20Compared%20to%20Forecast) The overall 2022 Operating Outlook for consolidated Cash Costs and AISC is reaffirmed despite some Q1 2022 variances 2022 Operating Outlook vs. Q1 2022 Cash Costs and AISC (per ounce) | Segment | Metric | 2022 Operating Outlook | Q1 2022 | | :------ | :----- | :--------------------- | :------ | | Silver Segment | Cash Costs | $10.70 - $12.20 | $10.23 | | Silver Segment | AISC | $14.50 - $16.00 | $13.41 | | Gold Segment | Cash Costs | $970 - $1,070 | $1,069 | | Gold Segment | AISC | $1,240 - $1,365 | $1,502 | - Management **reaffirms the 2022 Operating Outlook for Cash Costs and AISC**, despite some Q1 2022 results being outside the forecast ranges[71](index=71&type=chunk)[73](index=73&type=chunk) - Forecast estimates are influenced by assumptions for productivity, input costs, commodity prices (e.g., **$22.50/oz silver, $1,750/oz gold**), and currency exchange rates[70](index=70&type=chunk)[72](index=72&type=chunk) [Capital Expenditures Relative to Forecast](index=17&type=section&id=Capital%20Expenditures%20Relative%20to%20Forecast) The Company reaffirms its 2022 Operating Outlook for sustaining and project capital expenditures, with Q1 spending on track 2022 Capital Expenditures Outlook vs. Q1 2022 ($ millions) | Category | 2022 Operating Outlook | Q1 2022 | | :------- | :--------------------- | :------ | | Sustaining Capital Sub-total | $200.0 - $210.0 | $56.0 | | Project Capital Sub-total | $80.0 - $95.0 | $9.2 | | **Total Capital** | **$280.0 - $305.0** | **$65.2** | - Management **reaffirms the 2022 Operating Outlook** for sustaining and project capital[74](index=74&type=chunk) [Project Development Update](index=17&type=section&id=Project%20Development%20Update) Project development capital in Q1 2022 totaled $9.1 million, primarily focused on the La Colorada Skarn project Q1 2022 Project Development Capital (thousands of USD) | Project | Q1 2022 | Q1 2021 | | :------ | :------ | :------ | | La Colorada projects | $8,560 | $4,082 | | Timmins projects | $401 | $644 | | Other projects | $163 | $225 | | **Total** | **$9,124** | **$4,951** | - Total project development capital in Q1 2022 was **$9.1 million**, primarily invested in the **La Colorada Skarn project** for exploration, development, and construction[75](index=75&type=chunk) [Overview of Q1 2022 Financial Results](index=18&type=section&id=Overview%20of%20Q1%202022%20Financial%20Results) This section provides a detailed analysis of Q1 2022 financial statements, including income, cash flow, and adjusted earnings [Selected Annual and Quarterly Information](index=18&type=section&id=Selected%20Annual%20and%20Quarterly%20Information) Q1 2022 financial performance showed significant improvement in net earnings and cash flow compared to Q1 2021 Selected Quarterly Financial Results (thousands of USD) | Metric | Q1 2022 | Q1 2021 | Q4 2021 | Q3 2021 | Q2 2021 | Q1 2020 | | :----- | :------ | :------ | :------ | :------ | :------ | :------ | | Revenue | $439,888 | $368,099 | $422,170 | $460,349 | $382,132 | $358,428 | | Mine operating earnings | $66,755 | $89,964 | $76,039 | $98,887 | $103,048 | $50,058 | | Earnings for the period attributable to equity holders | $76,517 | ($7,798) | $14,036 | $20,251 | $70,939 | ($76,807) | | Basic (loss) earnings per share | $0.36 | ($0.04) | $0.06 | $0.10 | $0.34 | ($0.37) | | Cash flow from operating activities | $68,758 | $29,850 | $118,098 | $157,017 | $87,143 | $114,051 | | Cash dividends paid per share | $0.12 | $0.07 | $0.10 | $0.10 | $0.07 | $0.05 | | Total assets | $3,540,297 | N/A | $3,518,584 | N/A | N/A | $3,433,875 | | Total long-term financial liabilities | $303,984 | N/A | $297,600 | N/A | N/A | $277,696 | | Total attributable shareholders' equity | $2,683,201 | N/A | $2,631,554 | N/A | N/A | $2,602,519 | - Q1 2022 revenue was **$439.9 million**, with net earnings of **$76.5 million** ($0.36 basic EPS)[78](index=78&type=chunk) - Cash flow from operating activities was **$68.8 million**, total assets stood at **$3.54 billion**, and shareholders' equity at **$2.68 billion**[78](index=78&type=chunk) [Income Statement: Q1 2022 vs. Q1 2021](index=20&type=section&id=Income%20Statement%3A%20Q1%202022%20vs.%20Q1%202021) Net earnings improved significantly, driven by higher sales volumes, a gain on the Maverix investment, and reduced income tax expense Key Drivers of Net Earnings Change Q1 2022 vs. Q1 2021 (thousands of USD) | Factor | Impact on Net Earnings | | :----- | :--------------------- | | Net loss, Q1 2021 | ($7,562) | | Increased revenue (metal prices & quantities) | +$71,789 | | Increased cost of sales (production & D&A) | ($94,998) | | Increased gains/income from associates | +$44,835 | | Decreased investment loss | +$41,859 | | Decreased income tax expense | +$26,537 | | Other net changes | ($5,315) | | **Net earnings, Q1 2022** | **$76,831** | - **Net earnings increased by $84.4 million**, from a $7.6 million loss in Q1 2021 to $76.8 million earnings in Q1 2022, resulting in basic EPS of $0.36[18](index=18&type=chunk)[85](index=85&type=chunk) - **Revenue increased by $71.8 million**, mainly due to higher quantities of silver (+40%) and gold (+9%) sold[86](index=86&type=chunk)[87](index=87&type=chunk)[89](index=89&type=chunk) - **Cost of sales increased by $95.0 million**, driven by higher sales volumes, NRV inventory adjustments, and Omicron/inflationary pressures[86](index=86&type=chunk)[90](index=90&type=chunk)[91](index=91&type=chunk) - A **$44.6 million fair-value adjustment gain** was recognized from changing the accounting treatment of the Maverix investment[22](index=22&type=chunk)[91](index=91&type=chunk) - **Income tax expense decreased by $26.5 million**, mainly due to the appreciation of the Peruvian sol (PEN) on Peruvian tax attributes[22](index=22&type=chunk)[92](index=92&type=chunk) [Statement of Cash Flows: Q1 2022 vs. Q1 2021](index=22&type=section&id=Statement%20of%20Cash%20Flows%3A%20Q1%202022%20vs.%20Q1%202021) Cash flow from operations increased significantly due to reduced working capital usage and higher cash mine operating earnings Cash Flow Summary Q1 2022 vs. Q1 2021 (thousands of USD) | Activity | Q1 2022 | Q1 2021 | Change (YoY) | | :------- | :------ | :------ | :----------- | | Operating Activities | $68,758 | $29,850 | +$38,908 | | Investing Activities | ($51,100) | ($44,500) | ($6,600) | | Financing Activities | ($29,200) | ($18,000) | ($11,200) | - **Cash flow from operations increased by $38.9 million**, driven by less cash used in working capital changes and increased cash mine operating earnings[93](index=93&type=chunk)[94](index=94&type=chunk) - **Investing activities used $51.1 million**, primarily for $61.5 million in mineral properties, plant, and equipment[95](index=95&type=chunk) - **Financing activities used $29.2 million**, mainly for $25.3 million in dividends and $3.4 million in lease repayments[96](index=96&type=chunk) [Adjusted Earnings: Q1 2022 vs Q1 2021](index=22&type=section&id=Adjusted%20Earnings%3A%20Q1%202022%20vs%20Q1%202021) Adjusted earnings decreased in Q1 2022 compared to Q1 2021, primarily due to the exclusion of significant investment-related gains Adjusted Earnings Q1 2022 vs. Q1 2021 (thousands of USD) | Metric | Q1 2022 | Q1 2021 | | :----- | :------ | :------ | | Net earnings (loss) for the period | $76,831 | ($7,562) | | Total adjustments | ($44,854) | $44,995 | | **Adjusted earnings for the period** | **$31,977** | **$37,433** | | Adjusted earnings per share | $0.15 | $0.18 | - **Adjusted earnings for Q1 2022 were $32.0 million** ($0.15 per share), down from $37.4 million ($0.18 per share) in Q1 2021[98](index=98&type=chunk) - Key adjustments include unrealized foreign exchange losses, heap inventory net realizable value charge, and gains and income from associates[141](index=141&type=chunk) [Liquidity Position and Capital Resources](index=23&type=section&id=Liquidity%20Position%20and%20Capital%20Resources) The company maintains a strong liquidity position with sufficient cash, an undrawn credit facility, and manageable debt levels [Liquidity and Capital Resources](index=23&type=section&id=Liquidity%20and%20Capital%20Resources) Pan American Silver maintains a strong liquidity position with $326.3 million in cash and an undrawn $500.0 million credit facility Liquidity and Capital Measures (thousands of USD) | Metric | March 31, 2022 | Dec. 31, 2021 | Q1 2022 Change | | :----- | :------------- | :------------ | :------------- | | Cash and Short-term investments | $326,286 | $335,273 | ($8,987) | | Working Capital | $620,663 | $613,494 | $7,169 | | Credit Facility committed amount | $500,000 | $500,000 | — | | Credit Facility amounts drawn | — | — | — | | Total debt | $47,046 | $45,861 | $1,185 | | Capital | $2,403,961 | $2,342,142 | $61,819 | - **Cash and short-term investments decreased by $9.0 million** in Q1 2022 to $326.3 million, primarily due to capital additions and higher dividend payments[101](index=101&type=chunk) - **Working capital increased by $7.2 million** to $620.7 million at March 31, 2022[103](index=103&type=chunk) - The **$500 million revolving Sustainability-Linked Credit Facility was undrawn** as of March 31, 2022[104](index=104&type=chunk) - Management believes liquid assets are sufficient to satisfy 2022 working capital requirements, fund planned capital expenditures, and discharge liabilities[106](index=106&type=chunk) [Outstanding Share Amounts](index=24&type=section&id=Outstanding%20Share%20Amounts) As of May 11, 2022, Pan American Silver had 210.5 million common shares outstanding, plus options and Contingent Value Rights Outstanding Share Amounts as at May 11, 2022 | Instrument | Amount | | :--------- | :----- | | Common shares | 210,511,219 | | Options | 220,984 | | Total | 210,732,203 | - Approximately **0.2 million stock options** were outstanding, with 0.2 million vested and exercisable[109](index=109&type=chunk)[112](index=112&type=chunk) - Additionally, **313.9 million CVRs** were outstanding, convertible into 15.6 million common shares upon the first commercial shipment from the Escobal mine[109](index=109&type=chunk)[112](index=112&type=chunk) [Closure and Decommissioning Cost Provision](index=26&type=section&id=Closure%20and%20Decommissioning%20Cost%20Provision) The provision for future closure and decommissioning costs increased to $252.8 million due to inflation and updated estimates - The total inflated and undiscounted amount was **$451.7 million** as of March 31, 2022 (up from $413.0 million at Dec 31, 2021)[113](index=113&type=chunk)[114](index=114&type=chunk) - The inflated and discounted provision on the statement of financial position was **$252.8 million** (up from $242.9 million at Dec 31, 2021)[114](index=114&type=chunk) - Accretion of the discount charged as finance expense in Q1 2022 was **$3.7 million** (Q1 2021: $1.9 million)[115](index=115&type=chunk) [Related Party Transactions](index=26&type=section&id=Related%20Party%20Transactions) No significant related party transactions occurred in Q1 2022, with Maverix being a related party until March 31, 2022 - Related parties include subsidiaries, associates, and key management, with Maverix remaining a related party until March 31, 2022[116](index=116&type=chunk) - No other related party transactions occurred in Q1 2022 or Q1 2021[116](index=116&type=chunk) [Alternative Performance Measures (Non-GAAP)](index=26&type=section&id=Alternative%20Performance%20Measures%20(Non-GAAP)) This section defines and provides reconciliations for non-GAAP measures like Cash Costs, AISC, and Adjusted Earnings [Per Ounce Measures (Cash Costs and AISC)](index=26&type=section&id=Per%20Ounce%20Measures) Cash Costs and AISC are non-GAAP measures used to evaluate operational performance, calculated net of by-product credits - Cash Costs and AISC are non-GAAP measures, not standardized under IFRS, used to evaluate operating performance and compare against industry benchmarks[117](index=117&type=chunk)[122](index=122&type=chunk)[123](index=123&type=chunk) - Silver segment costs are calculated net of credits from all metals other than silver, while gold segment costs are net of realized silver revenues[119](index=119&type=chunk)[121](index=121&type=chunk) Consolidated Cash Costs and AISC Reconciliation Q1 2022 vs. Q1 2021 (thousands of USD) | Metric | Silver Segment Q1 2022 | Silver Segment Q1 2021 | Gold Segment Q1 2022 | Gold Segment Q1 2021 | | :----- | :--------------------- | :--------------------- | :------------------- | :------------------- | | Production costs | $97,589 | $80,601 | $174,383 | $112,580 | | On-site direct operating costs | $96,236 | $79,159 | $161,293 | $121,837 | | Cash Costs | $42,920 | $34,563 | $149,439 | $108,100 | | All-in sustaining costs | $56,263 | $47,744 | $209,957 | $135,189 | | Silver ounces sold (koz) | 4,197 | 2,810 | — | — | | Gold ounces sold (koz) | — | — | 140 | 128 | | Cash costs per ounce sold | $10.23 | $12.30 | $1,069 | $846 | | AISC per ounce sold | $13.41 | $16.99 | $1,502 | $1,058 | Reconciliation of Payments for MPP&E and Sustaining Capital (thousands of USD) | Item | Q1 2022 | Q1 2021 | | :--- | :------ | :------ | | Payments for mineral properties, plant and equipment | $61,453 | $47,971 | | Lease Payments | $3,419 | $2,982 | | Repayment of loans | $850 | — | | Investment (non-sustaining) capital | ($9,765) | ($5,743) | | **Sustaining Capital** | **$55,957** | **$45,210** | [Adjusted Earnings](index=33&type=section&id=Adjusted%20Earnings) Adjusted earnings, a non-GAAP measure, decreased to $32.0 million in Q1 2022 from $37.4 million in Q1 2021 - Adjusted earnings and basic adjusted earnings per share are non-GAAP measures designed to reflect normalized earnings by eliminating non-operational items[139](index=139&type=chunk) Adjusted Earnings Reconciliation Q1 2022 vs. Q1 2021 (thousands of USD) | Item | Q1 2022 | Q1 2021 | | :--- | :------ | :------ | | Net earnings (loss) for the period | $76,831 | ($7,562) | | Total adjustments | ($44,854) | $44,995 | | **Adjusted earnings for the period** | **$31,977** | **$37,433** | | Adjusted earnings per share | $0.15 | $0.18 | [Total Debt](index=33&type=section&id=Total%20Debt) Total debt is a non-GAAP measure representing current and non-current debt, lease liabilities, and loans payable - Total debt is a non-GAAP measure calculated as the sum of amounts drawn on the Credit Facility, finance lease liabilities, and loans payable[142](index=142&type=chunk) - As of March 31, 2022, **total debt was $47.0 million**, an increase of $1.2 million from December 31, 2021[100](index=100&type=chunk) [Capital](index=33&type=section&id=Capital) Capital is a non-GAAP measure calculated as total equity plus total debt less cash and short-term investments - Capital is a non-GAAP measure calculated as total equity plus total debt less cash and cash equivalents and short-term investments[143](index=143&type=chunk) - As of March 31, 2022, **Capital was $2.40 billion**, an increase of $61.8 million from December 31, 2021[100](index=100&type=chunk) [Working Capital](index=33&type=section&id=Working%20Capital) Working capital, a non-GAAP measure of short-term liquidity, was $620.7 million as of March 31, 2022 - Working capital is a non-GAAP measure calculated as current assets less current liabilities, used to evaluate the Company's ability to meet current obligations[144](index=144&type=chunk)[145](index=145&type=chunk) - Working capital at March 31, 2022, was **$620.7 million**, an increase of $7.2 million from $613.5 million at December 31, 2021[100](index=100&type=chunk)[103](index=103&type=chunk) [Cash Mine Operating Earnings](index=34&type=section&id=Cash%20Mine%20Operating%20Earnings) Cash mine operating earnings, a non-GAAP measure, increased to $165.7 million in Q1 2022 from $156.9 million in Q1 2021 - Cash mine operating earnings is a non-GAAP measure calculated by excluding depreciation, amortization, and NRV inventory adjustments from mine operating earnings[146](index=146&type=chunk) Cash Mine Operating Earnings Reconciliation Q1 2022 vs. Q1 2021 (thousands of USD) | Item | Q1 2022 | Q1 2021 | | :--- | :------ | :------ | | Mine operating earnings | $66,755 | $89,964 | | Depreciation and amortization | $84,526 | $75,093 | | Net realizable value adjustment for inventories | $14,443 | ($8,143) | | **Cash mine operating earnings** | **$165,724** | **$156,914** | - Cash mine operating earnings in Q1 2022 totaled **$165.7 million**, an increase from $156.9 million in Q1 2021[101](index=101&type=chunk)[147](index=147&type=chunk) [Risks and Uncertainties](index=34&type=section&id=Risks%20and%20Uncertainties) The company faces various risks including financial market volatility, legal proceedings, COVID-19 impacts, and climate change [Financial Risk Exposure](index=34&type=section&id=Financial%20Risk%20Exposure) Pan American Silver is exposed to various financial risks, with management of these risks remaining consistent in Q1 2022 - The Company is exposed to **metal price risk, credit risk, interest rate risk, foreign currency exchange rate risk, and liquidity risk**[150](index=150&type=chunk) - There were no significant changes to these financial risks or the Company's management of exposure to them during Q1 2022[150](index=150&type=chunk) [Price Risk](index=35&type=section&id=Price%20Risk) The Company faces price risk from commodity fluctuations and input costs, using derivatives to mitigate some exposures - Profitability is affected by decreases in metal prices and increases in consumable prices, with the Company using forward sales or option contracts to mitigate base metal price risk[152](index=152&type=chunk) - As of March 31, 2022, the Company had outstanding **zinc collars** (2,700 tonnes) and a **zinc forward contract** (2,700 tonnes), recording **$1.1 million in losses** in Q1 2022[153](index=153&type=chunk) - The Company had outstanding **diesel swap contracts** (2.7 million gallons) and recorded **gains of $2.8 million** in Q1 2022[155](index=155&type=chunk) [Trading Activities and Credit Risk](index=35&type=section&id=Trading%20Activities%20and%20Credit%20Risk) The Company faces credit risk from concentrate buyers, refineries, and suppliers, which management actively monitors - Credit risk arises from long-term supply arrangements for concentrates, refining agreements for doré, spot market sales, and supplier advances[156](index=156&type=chunk)[158](index=158&type=chunk)[159](index=159&type=chunk)[161](index=161&type=chunk) - As of March 31, 2022, receivable balances from concentrate buyers were **$48.2 million**, and precious metal inventory at refineries was approximately **$35.7 million**[157](index=157&type=chunk)[158](index=158&type=chunk)[161](index=161&type=chunk) - Management monitors and assesses credit risk, avoiding unacceptable concentration to any single counterparty[162](index=162&type=chunk) [Foreign currency exchange rate risk](index=36&type=section&id=Foreign%20currency%20exchange%20rate%20risk) The Company is exposed to foreign currency risk as its financial statements are in USD but operations occur in various local currencies - Financial results are subject to changes in the USD value relative to local currencies (e.g., PEN, MXN, ARS, BOB, CAD)[164](index=164&type=chunk) - As of March 31, 2022, Pan American held **$61.8 million in CAD**, $1.1 million in MXN, $7.1 million in PEN, $12.8 million in ARS, $2.7 million in BOB, and $0.4 million in Guatemalan quetzales[165](index=165&type=chunk) - The Company had outstanding foreign currency hedging positions for MXN, PEN, and CAD, recording gains on these derivative contracts in Q1 2022[166](index=166&type=chunk) [Claims and Legal Proceedings](index=36&type=section&id=Claims%20and%20Legal%20Proceedings) Pan American is involved in various legal proceedings whose outcomes are uncertain and could materially impact the Company - The Company is subject to various claims and legal proceedings, which could result in monetary damages or loss of permits/rights[167](index=167&type=chunk) - Legal proceedings against the Company's subsidiary in Guatemala claim damages near the **Escobal mine** and seek to prevent future mining activities[168](index=168&type=chunk)[170](index=170&type=chunk) - The Company is appealing a dismissal related to a legal challenge concerning surface land ownership at the **La Colorada mine** in Mexico[171](index=171&type=chunk) - Ongoing **class action lawsuits** in the U.S. and Canada against Tahoe Resources Inc. (acquired by Pan American) allege misrepresentations[172](index=172&type=chunk) [COVID-19 and Other Pandemics](index=38&type=section&id=COVID-19%20and%20Other%20Pandemics) COVID-19 continues to pose significant risks to operations, with potential for increased costs and supply chain disruptions - COVID-19 has already caused temporary suspensions and reduced throughput at operations, impacting employees, contractors, and suppliers[174](index=174&type=chunk) - Future impacts are highly uncertain, and comprehensive COVID-19 protocols are expected to **increase costs and restrict throughput in 2022**[175](index=175&type=chunk) - The continued spread of COVID-19 could materially adversely affect global economies and the Company's business, stock price, and ability to raise capital[176](index=176&type=chunk) [Climate Change](index=40&type=section&id=Climate%20Change) Climate change presents significant risks, including increased regulatory costs, negative public perception, and physical operational risks - The Company is impacted by evolving policies and regulations related to greenhouse gas emissions, which may result in additional transition costs[177](index=177&type=chunk) - Public perception and investor sentiment regarding environmental impacts could negatively affect the Company's reputation and share price[178](index=178&type=chunk) - Physical risks of climate change, such as **extreme weather and water shortages**, could damage facilities and disrupt operations[179](index=179&type=chunk) [Summary of Significant Accounting Policies, Standards and Judgements](index=41&type=section&id=Summary%20of%20Significant%20Accounting%20Policies%2C%20Standards%20and%20Judgements) Accounting policies remain consistent with 2021, and financial statement preparation involves significant management estimates - Accounting policies applied in Q1 2022 are consistent with those in the 2021 audited consolidated financial statements[180](index=180&type=chunk)[181](index=181&type=chunk) - Preparation of financial statements requires **significant management estimates and assumptions**, which are continuously reviewed[182](index=182&type=chunk) [Disclosure Controls and Procedures and Technical Information](index=41&type=section&id=Disclosure%20Controls%20and%20Procedures%20and%20Technical%20Information) Management confirms the effectiveness of disclosure controls and internal controls, with technical information approved by Qualified Persons [Disclosure Controls and Procedures (DC&P)](index=41&type=section&id=Disclosure%20controls%20and%20procedures%20(%22DC%26P%22)) The CEO and CFO concluded that the Company's Disclosure Controls and Procedures were effective as of December 31, 2021 - The CEO and CFO are responsible for establishing and maintaining adequate DC&P and concluded they were **effective** as of December 31, 2021[185](index=185&type=chunk)[186](index=186&type=chunk) [Internal Control Over Financial Reporting (ICFR)](index=41&type=section&id=Internal%20control%20over%20financial%20reporting%20(%22ICFR%22)) The CEO and CFO assessed Internal Control Over Financial Reporting as effective as of December 31, 2021 - The CEO and CFO are responsible for establishing and maintaining adequate ICFR and concluded it was **effective** as of December 31, 2021, based on the COSO framework[187](index=187&type=chunk) - The effectiveness of the Company's ICFR as of December 31, 2021, was **audited by Deloitte LLP**[188](index=188&type=chunk) [Changes in ICFR](index=43&type=section&id=Changes%20in%20ICFR) There have been no material changes to the Company's Internal Control Over Financial Reporting during Q1 2022 - **No material changes** to the Company's ICFR occurred during the three and twelve months ended March 31, 2022[189](index=189&type=chunk) [Inherent limitations of controls and procedures](index=43&type=section&id=Inherent%20limitations%20of%20controls%20and%20procedures) All internal control systems have inherent limitations and can only provide reasonable, not absolute, assurance - Internal control systems have inherent limitations, providing only **reasonable assurance** and may not prevent or detect all misstatements timely[190](index=190&type=chunk) [Technical Information](index=43&type=section&id=Technical%20Information) Scientific and technical information in this MD&A has been reviewed and approved by Qualified Persons under NI 43-101 - Scientific and technical information has been reviewed and approved by **Martin Wafforn, P.Eng., and Christopher Emerson, FAusIMM**, both Qualified Persons[191](index=191&type=chunk) - More detailed technical information is available in the Company's **Annual Information Form and Form 40-F**[192](index=192&type=chunk) [Cautionary Note](index=43&type=section&id=Cautionary%20Note) This report contains forward-looking statements subject to risks and discloses mineral estimates under Canadian standards [Cautionary Note Regarding Forward-Looking Statements and Information](index=43&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements%20and%20Information) This MD&A contains forward-looking statements subject to significant risks and uncertainties that could cause actual results to differ - The MD&A contains **forward-looking statements** regarding future financial/operational performance, 2022 forecasts, metal prices, and project development[193](index=193&type=chunk) - These statements are based on assumptions and are subject to significant operational, business, economic, political, and social uncertainties[194](index=194&type=chunk)[197](index=197&type=chunk) - Known and unknown risks may cause actual results to differ materially, and investors are cautioned against undue reliance on these statements[198](index=198&type=chunk) [Cautionary Note to U.S. Investors Concerning Estimates of Mineral Reserves and Mineral Resources](index=45&type=section&id=Cautionary%20Note%20to%20U.S.%20Investors%20Concerning%20Estimates%20of%20Mineral%20Reserves%20and%20Mineral%20Resources) Mineral reserve and resource estimates are disclosed according to Canadian NI 43-101 standards, which differ from U.S. SEC requirements - Mineral reserve and resource estimates are disclosed in accordance with **Canadian NI 43-101 standards**, which differ significantly from U.S. SEC requirements[199](index=199&type=chunk) - Information concerning mineralization and resources may **not be comparable** to similar information disclosed by U.S. companies[199](index=199&type=chunk)

Pan American Silver Corp. (NYSE:PAAS) Q4 2021 Earnings Conference Call February 24, 2022 11:00 AM ET Company Participants Siren Fisekci - VP, IR Michael Steinmann - President and CEO Steve Busby - COO Conference Call Participants Cosmos Chiu - CIBC Don DeMarco - National Bank Financial Operator Thank you for standing by. This is the conference operator. Welcome to the Pan American Silver Full Year and Fourth Quarter 2021 Results Conference Call and Webcast. As a reminder, all participants are in listen-only ...