Pan American Silver(PAAS) - 2024 Q4 - Annual Report

Executive Summary & Highlights Pan American Silver achieved record Q4 and FY 2024 revenue, cash flow, and free cash flow, reflecting strong metal prices and operational performance Q4 2024 and FY 2024 Performance Highlights Pan American Silver reported record revenue, cash flow from operations, and free cash flow for Q4 and FY 2024, reflecting strong metal prices, expanding margins, and solid operating performance - Pan American generated record free cash flow of $196.2 million in Q4 2024 and $445.1 million in FY 2024, reflecting strong metal prices, expanding margins, and solid operating performance[3] Q4 2024 and FY 2024 Key Financial and Production Highlights | Metric | Q4 2024 | FY 2024 | | :------------------------------------ | :------ | :------ | | Revenue | $815.1 million | $2.8 billion | | Net earnings | $107.8 million | $112.7 million | | Basic earnings per share | $0.30 | $0.31 | | Adjusted earnings | $126.9 million | $286.7 million | | Basic adjusted earnings per share | $0.35 | $0.79 | | Cash flow from operating activities | $274.1 million | $724.1 million | | Free cash flow | $196.2 million | $445.1 million | | Silver production | 6.0 million ounces | 21.1 million ounces | | Gold production | 224.2 thousand ounces | 892.5 thousand ounces | | Silver Segment Cash Costs | $14.06 per ounce | $14.30 per ounce | | Silver Segment AISC (excl. NRV) | $19.88 per ounce | $18.98 per ounce | | Gold Segment Cash Costs | $1,223 per ounce | $1,203 per ounce | | Gold Segment AISC (excl. NRV) | $1,521 per ounce | $1,501 per ounce | | Capital expenditures | N/A | $372.4 million | | Working capital (Dec 31, 2024) | N/A | $1,033.4 million | | Cash and short-term investments (Dec 31, 2024) | N/A | $887.3 million | | Total available liquidity (Dec 31, 2024) | N/A | $1.6 billion | | Total debt (Dec 31, 2024) | N/A | $803.3 million | | Cash dividend declared | $0.10 per common share | N/A | - The company repurchased 1,720,366 common shares for $24.3 million in FY 2024 and an additional 909,012 shares for $20.0 million in January 2025 under its Normal Course Issuer Bid (NCIB)[6] Q4 2024 Project Updates The company advanced several key projects in Q4 2024, including significant capital investments and infrastructure upgrades across multiple mines Mine-Specific Project Developments The company advanced several key projects in Q4 2024, including significant capital investments in La Colorada for the Skarn project, substantial completion of Huaron's new tailings filtration plant, and full operation of Timmins' Bell Creek paste backfill plant - La Colorada: $8.0 million of project capital was spent on the Skarn project for engineering work and exploration drilling[10] - Huaron: $6.5 million of project capital was spent on the construction of the new tailings filtration plant and filter-stack tailings storage facility, which was substantially completed in Q4 2024 and is expected to be fully operational within the first half of 2025[10] - Timmins: $1.5 million of project capital was spent to complete construction of the Bell Creek paste backfill plant, now fully operational for enhanced ground stability and increased mineral resource recovery[10] - Jacobina: $4.5 million of project capital was spent in upgrading the plant facility infrastructure and on a study aimed at optimizing the mine's long-term economics and sustainability[10] - Escobal: The mine remains on care and maintenance with no date for a restart of operations, as the ILO 169 consultation process continues with Xinka representatives and the government[10] 2025 Operating Outlook The company provides its 2025 operating outlook, including production forecasts for silver, gold, and base metals, along with detailed cost and expenditure projections Production Forecasts Pan American forecasts 2025 silver production between 20.00-21.00 million ounces and gold production between 735-800 thousand ounces, with production for both metals expected to be weighted towards the second half of the year - Silver production in 2025 is forecast to be between 20.00 to 21.00 million ounces, driven by higher development rates at La Colorada and increased throughput/grades at Huaron, offset by decreases at Dolores and San Vicente[11] - Gold production in 2025 is forecast to be between 735 to 800 thousand ounces, reflecting the disposition of La Arena in 2024 and the cessation of active mining at Dolores[11] - Both silver and gold production are weighted to the second half of 2025, with a corresponding decrease in AISC per ounce over that period[11] Silver and Gold Production by Segment Detailed 2025 production forecasts for silver and gold are provided across various segments and individual mines 2025 Silver and Gold Production Forecasts by Segment | Segment/Mine | Silver Production (million ounces) | Gold Production (thousand ounces) | | :------------- | :------------------------------- | :-------------------------------- | | Silver Segment Total | 14.70 - 15.50 | 79 - 89 | | La Colorada (Mexico) | 5.50 - 5.80 | 2 | | Cerro Moro (Argentina) | 2.80 - 2.90 | 77 - 87 | | Huaron (Peru) | 3.70 - 3.90 | — | | San Vicente (Bolivia) | 2.70 - 2.90 | — | | Gold Segment Total | 5.30 - 5.50 | 656 - 711 | | Jacobina (Brazil) | — | 185 - 195 | | El Peñon (Chile) | 3.70 - 3.80 | 120 - 130 | | Timmins (Canada) | — | 120 - 130 | | Shahuindo (Peru) | 0.25 | 125 - 135 | | Minera Florida (Chile) | 0.45 | 78 - 90 | | Dolores (Mexico) | 0.90 - 1.00 | 28 - 31 | | Total Production | 20.00 - 21.00 | 735 - 800 | Quarterly Production Forecasts Quarterly production forecasts for silver and gold in 2025 indicate a weighting towards the second half of the year 2025 Quarterly Operating Outlook | Quarter | Silver Production (million ounces) | Gold Production (thousand ounces) | | :------ | :------------------------------- | :-------------------------------- | | Q1 | 4.75 - 5.00 | 175 - 189 | | Q2 | 4.95 - 5.20 | 179 - 194 | | Q3 | 5.10 - 5.35 | 189 - 205 | | Q4 | 5.20 - 5.45 | 192 - 212 | | FY 2025 | 20.00 - 21.00 | 735 - 800 | Consolidated Base Metal Production The 2025 forecast includes consolidated production volumes for key base metals: zinc, lead, and copper 2025 Consolidated Base Metal Production Forecasts (thousand tonnes) | Metal | Forecast | | :---- | :------- | | Zinc | 42 - 45 | | Lead | 21 - 22 | | Copper| 4 | Cost Forecasts (AISC) The 2025 AISC forecasts for both silver and gold segments are provided, with expectations of decreasing costs in the second half of the year, based on specific metal price and exchange rate assumptions - AISC per ounce is expected to decrease in the second half of 2025, corresponding with the weighting of silver and gold production to that period[11] - AISC forecasts assume average metal prices of $30.00/oz for silver, $2,650/oz for gold, $3,000/tonne for zinc, $2,000/tonne for lead, and $9,500/tonne for copper[13] - Average annual exchange rates relative to 1 USD are assumed for the Mexican peso (20.00), Peruvian sol (3.75), Argentine peso (1,177), Bolivian boliviano (7.00), Canadian dollar ($1.38), Chilean peso (950.00), and Brazilian real (5.75)[13] Silver Segment AISC The 2025 All-in Sustaining Cost (AISC) forecast for the silver segment details quarterly expectations and influencing factors - Forecasted Silver Segment AISC for 2025 is between $16.25 and $18.25 per ounce[14] 2025 Quarterly Silver Segment AISC Forecast | Quarter | AISC ($ per ounce) | | :------ | :----------------- | | Q1 | 21.00 - 22.25 | | Q2 | 19.50 - 21.25 | | Q3 | 14.25 - 16.25 | | Q4 | 10.25 - 13.00 | | FY 2025 | 16.25 - 18.25 | - The forecast reflects reduced AISC at La Colorada due to new ventilation and higher gold by-product credits from Cerro Moro, partly offset by additional contractual payments and higher operating costs at Huaron for the new tailings plant[14] Gold Segment AISC The 2025 All-in Sustaining Cost (AISC) forecast for the gold segment outlines quarterly expectations and key cost drivers - Forecasted Gold Segment AISC for 2025 is between $1,525 and $1,625 per ounce[14] 2025 Quarterly Gold Segment AISC Forecast | Quarter | AISC ($ per ounce) | | :------ | :----------------- | | Q1 | 1,575 - 1,675 | | Q2 | 1,550 - 1,650 | | Q3 | 1,500 - 1,600 | | Q4 | 1,500 - 1,600 | | FY 2025 | 1,525 - 1,625 | - Operating costs per ounce are expected to increase at Shahuindo due to lower grade ore and postponed capital, and at Timmins from new paste plant operations and inflationary pressures, partly offset by a weakening Canadian dollar[14] Expenditure Forecasts Pan American forecasts total capital expenditures for 2025 to be between $360.0-$385.0 million, with specific allocations for sustaining and project capital, as well as other operational and administrative expenses 2025 Expenditures Forecast ($ millions) | Category | Forecast | | :-------------------------- | :------------- | | Sustaining Capital | 270.0 - 285.0 | | Project Capital | 90.0 - 100.0 | | Total Capital Expenditures | 360.0 - 385.0 | | Reclamation Expenditures | 28.0 - 34.5 | | Care & Maintenance | 20.5 - 24.0 | | General and Administrative | 80.0 - 85.0 | | Exploration and Project Development | 15.0 - 20.0 | | Income Tax Payments | 240.0 - 260.0 | | Depreciation and Amortization | 450.0 - 500.0 | Planned Project Capital Expenditures Detailed project capital expenditures for 2025 are outlined for various mines, focusing on exploration, infrastructure, and optimization initiatives - Planned project capital expenditures for 2025 include $10.0-$12.0 million for La Colorada (Veins) for exploration and infrastructure, and $39.0-$42.0 million for La Colorada (Skarn) for exploration and engineering[21] - Huaron has an estimated residual project capital of $12.0-$13.5 million for the new tailings filtration plant. Timmins plans $18.0-$20.0 million, including a new 'stage 6' tailings storage facility and satellite deposit exploration[21] - Jacobina has an estimated investment of $11.0-$12.5 million to advance a mine and plant optimization study[21] Conference Call and Webcast Details Pan American Silver will host a conference call and webcast on February 20, 2025, at 11:00 am ET to discuss the 2024 financial results and 2025 operating outlook - A conference call and webcast to discuss the 2024 financial results and 2025 Operating Outlook will be held on February 20, 2025, at 11:00 am ET (8:00 am PT)[19] - Participants can register for the conference call and access the webcast via provided links, with an archive available for three months on panamericansilver.com[19][20] Consolidated Financial Results This section presents a consolidated overview of key financial and operational data for Q4 and FY 2024, including income statements and cash flows Key Consolidated Financial and Operational Data This section provides a consolidated overview of key financial metrics and operational data for Q4 and FY 2024 compared to 2023, highlighting significant improvements in revenue and net earnings Consolidated Results Summary | Metric | Q4 2024 | Q4 2023 | FY 2024 | FY 2023 | | :------------------------------------ | :------ | :------ | :------ | :------ | | FINANCIAL | | | | | | Revenue ($ millions) | 815.1 | 669.6 | 2,818.9 | 2,316.1 | | Mine operating earnings ($ millions) | 184.9 | 64.9 | 548.5 | 296.8 | | Net earnings (loss) ($ millions) | 107.8 | (67.8) | 112.7 | (104.9) | | Basic earnings (loss) per share ($) | 0.30 | (0.19) | 0.31 | (0.32) | | Adjusted earnings (loss) ($ millions) | 126.9 | (16.3) | 286.7 | 39.3 | | Basic adjusted earnings (loss) per share ($) | 0.35 | (0.04) | 0.79 | 0.12 | | Net cash generated from operating activities ($ millions) | 274.1 | 167.4 | 724.1 | 450.2 | | Sustaining capital expenditures ($ millions) | 77.9 | 92.6 | 279.0 | 288.5 | | Non-sustaining capital expenditures ($ millions) | 21.5 | 41.8 | 101.4 | 141.3 | | Cash dividend per share ($) | 0.10 | 0.10 | 0.40 | 0.40 | | PRODUCTION | | | | | | Silver (thousand ounces) | 6,018 | 4,835 | 21,061 | 20,437 | | Gold (thousand ounces) | 224 | 268 | 892 | 883 | | Zinc (thousand tonnes) | 14.1 | 9.4 | 45.1 | 38.8 | | Lead (thousand tonnes) | 6.1 | 4.2 | 20.8 | 18.7 | | Copper (thousand tonnes) | 1.0 | 1.4 | 5.2 | 5.0 | | CASH COSTS ($/ounce) | | | | | | Silver Segment | 14.06 | 19.31 | 14.30 | 13.07 | | Gold Segment | 1,223 | 1,096 | 1,203 | 1,113 | | AISC ($/ounce) | | | | | | Silver Segment (excl. NRV) | 19.88 | 26.28 | 18.98 | 17.91 | | Gold Segment (excl. NRV) | 1,521 | 1,415 | 1,501 | 1,416 | | AVERAGE REALIZED PRICES ($/ounce or $/tonne) | | | | | | Silver ($/ounce) | 30.87 | 22.33 | 28.06 | 22.94 | | Gold ($/ounce) | 2,666 | 1,980 | 2,388 | 1,951 | | Zinc ($/tonne) | 3,060 | 2,493 | 2,828 | 2,656 | | Lead ($/tonne) | 1,967 | 2,121 | 2,058 | 2,146 | | Copper ($/tonne) | 9,019 | 8,146 | 9,260 | 8,475 | Fourth Quarter Consolidated Income Statements The consolidated income statement for Q4 2024 shows a significant increase in revenue and a return to net earnings compared to a net loss in Q4 2023, driven by higher mine operating earnings and substantial gains from the sale of subsidiaries Fourth Quarter Consolidated Income Statements ($ millions) | Metric | Q4 2024 | Q4 2023 | | :------------------------------------------ | :------ | :------ | | Revenue | 815.1 | 669.6 | | Cost of sales | (630.2) | (604.7) | | Mine operating earnings | 184.9 | 64.9 | | Earnings (loss) from operations | 254.6 | (26.8) | | Earnings (loss) before income taxes | 226.0 | (48.0) | | Income tax expense | (118.2) | (19.8) | | Net earnings (loss) | 107.8 | (67.8) | | Basic earnings (loss) per share | 0.30 | (0.19) | | Gains from sale of subsidiaries | 137.4 | — | | Change in mine reclamation obligations | (53.9) | (13.8) | Fourth Quarter Consolidated Statements of Cash Flows The consolidated cash flow statement for Q4 2024 indicates a substantial increase in net cash generated from operating activities and a positive net cash flow from investing activities, primarily due to significant cash proceeds from the sale of subsidiaries Fourth Quarter Consolidated Statements of Cash Flows ($ millions) | Metric | Q4 2024 | Q4 2023 | | :------------------------------------------ | :------ | :------ | | Net cash generated from operating activities | 274.1 | 167.4 | | Net cash generated from investing activities | 201.8 | (70.6) | | Net cash generated from financing activities | (49.7) | (45.5) | | Cash and cash equivalents at end of period | 862.8 | 399.6 | | Cash proceeds from sale of subsidiaries | 306.6 | 45.5 | | Payments for mineral properties, plant and equipment | (85.4) | (118.7) | Company Information This section provides an overview of Pan American Silver's operations, geographic presence, and its use of alternative performance measures About Pan American Silver Pan American Silver is a leading producer of precious metals in the Americas, operating silver and gold mines across seven countries, with a focus on sustainability, operational excellence, and prudent financial management over three decades - Pan American is a leading producer of precious metals in the Americas, operating silver and gold mines in Canada, Mexico, Peru, Bolivia, Argentina, Chile, and Brazil[31] - The company also owns the Escobal mine in Guatemala, which is currently not operating, and holds interests in exploration and development projects[31] - Headquartered in Vancouver, B.C., Pan American Silver has been operating for over three decades, earning an industry-leading reputation for sustainability performance, operational excellence, and prudent financial management[31] Alternative Performance (Non-GAAP) Measures This section defines and explains several non-GAAP financial measures used by Pan American Silver, emphasizing their utility for investors while cautioning against direct comparison with other companies' metrics - Non-GAAP measures like Cash Costs, Adjusted earnings, and All-in Sustaining Costs (AISC) are used as benchmarks for performance in the mining industry, providing a more comprehensive view of operating costs and normalized earnings[34] - Total debt, working capital, and total available liquidity are non-GAAP measures used by Pan American and investors to evaluate financial leverage, ability to meet current obligations, and liquid assets available[34] - Free cash flow, calculated as net cash from operating activities less sustaining capital expenditures, is a non-GAAP measure used to evaluate profitability and capital available for investment or return to shareholders[34] Cautionary Note Regarding Forward-Looking Statements and Information This section provides a cautionary note regarding forward-looking statements and information, outlining inherent risks, uncertainties, and assumptions that could cause actual results to differ materially from projections - Forward-looking statements relate to future financial or operational performance, including estimated production, AISC, capital expenditures for 2025, and expectations regarding strategic initiatives and capital projects[37] - These statements are based on assumptions such as metal prices, foreign exchange rates, timing and impact of capital expenditure projects, ore grades, and regulatory approvals, which are subject to significant operational, business, economic, and regulatory uncertainties[38] - Known and unknown risks include inflation, fluctuations in metal prices and currency markets, operational hazards, changes in laws and regulations, political developments, and diminishing mineral reserves, which could cause actual results to differ materially[39]