Pan American Silver(US:PAAS)2023-05-10 21:20Production Performance - Consolidated silver production for Q1 2023 was 3.89 million ounces, down 16% from 4.62 million ounces in Q1 2022 due to care and maintenance of Morococha and Manantial Espejo mines[13]. - Consolidated gold production for Q1 2023 was 122.7 thousand ounces, a decrease of 6% from 131.0 thousand ounces in Q1 2022, attributed to lower stacked tonnes and leach sequencing timing[14]. - Total silver production for Q1 2023 was 3,891,000 ounces, a decrease from 4,619,000 ounces in Q1 2022, while total gold production was 122,700 ounces, down from 131,000 ounces[42]. - Silver production increased by 1% to 922 koz in Q1 2023, driven by higher throughput, despite lower silver grades[54]. - Gold production at the Dolores Operation decreased by 23% to 26.5 koz, attributed to lower recovery ratios and gold grades[60]. - The Timmins Operation reported a 8% increase in gold production to 34.5 koz, supported by higher grades and throughput[78]. - Silver production for 2023 is estimated to be between 21.0 and 23.0 million ounces, with Original Assets contributing 14.3 to 15.3 million ounces and Acquired Operations contributing 6.7 to 7.7 million ounces[94]. - Gold production for 2023 is projected to total 870 to 970 thousand ounces, with Original Assets contributing 465 to 505 thousand ounces and Acquired Operations contributing 405 to 465 thousand ounces[95]. Financial Performance - Revenue for Q1 2023 was $390.3 million, an 11% decrease compared to Q1 2022, driven by a $35.1 million reduction in metal sold quantities and lower precious metals prices[16]. - Net earnings for Q1 2023 were $16.5 million, or $0.08 basic earnings per share, down from $76.8 million, or $0.36 per share in Q1 2022, largely due to a prior period one-time gain and current transaction costs related to the Yamana acquisition[18]. - Adjusted earnings for Q1 2023 were $21.2 million, or $0.10 adjusted earnings per share, compared to $31.9 million, or $0.15 per share in Q1 2022[19]. - Cash flow from operations in Q1 2023 was $51.3 million, down from $68.8 million in Q1 2022, primarily due to inflationary pressures and lower production costs[19]. - The total revenue for Q1 2023 was $390.3 million, with mine operating earnings of $77.2 million and net earnings attributable to equity holders of $16.4 million[107]. - In Q1 2023, cash flow from operating activities was $51.3 million, and cash dividends paid per share were $0.10[107]. - Net earnings for Q1 2023 were $16.5 million, a decrease from $76.8 million in Q1 2022, primarily due to lower realized metal prices and decreased quantities of metal sold[115]. - The company generated $327.9 million from investing activities in Q1 2023, primarily from cash acquired in the Yamana acquisition[124]. Costs and Expenditures - Silver Segment cash costs per ounce in Q1 2023 were $12.19, an increase of $1.96 from $10.23 in Q1 2022, driven by decreased revenue and transaction costs related to the acquisition[21]. - Gold Segment cash costs per ounce in Q1 2023 were $1,120, reflecting a $51 increase from Q1 2022, primarily due to lower gold grades and inflationary pressures[24]. - All-in sustaining costs (AISC) for the Silver Segment in Q1 2023 were $14.13 per ounce, up $0.72 from Q1 2022, mainly due to increased cash costs[25]. - Gold Segment AISC for Q1 2023 was $1,196 per ounce, a decrease of $307 compared to Q1 2022, primarily due to lower sustaining capital and positive NRV adjustments[26]. - Cash Costs for the Silver Segment consolidated were $12.19 per ounce in Q1 2023, compared to $10.23 per ounce in Q1 2022, reflecting an increase driven by lower silver grades and inflation[46]. - AISC for the Silver Segment consolidated was $14.13 per ounce in Q1 2023, compared to $13.41 per ounce in Q1 2022[46]. - Cash costs per ounce for silver were $12.19 for Q1 2023, up from $10.23 in Q1 2022, while for gold, cash costs per ounce were $1,120, compared to $1,069 in the same period[158]. - All-in sustaining costs (AISC) per ounce for silver were $14.13 in Q1 2023, compared to $13.41 in Q1 2022, and for gold, AISC was $1,196, down from $1,502[158]. Acquisition and Integration - The acquisition of Yamana was completed on March 31, 2023, for a total consideration of $2.8 billion, consisting of 153.8 million Pan American common shares[28]. - Following the acquisition, Pan American received $259.5 million in cash and cash equivalents from Yamana, with Pan American shareholders owning approximately 58% of the combined company[29]. - The allocation of the acquisition purchase price is still under review, with net assets attributable to Pan American estimated at $2.8 billion[31]. - The company incurred transaction and integration costs of $18.9 million in Q1 2023 related to the acquisition of Yamana, with no such costs in Q1 2022[120]. Capital and Investments - Working capital as of March 31, 2023, was $826.6 million, including cash and short-term investments of $513.1 million, with total debt of $1,187.0 million[19]. - Total capital expenditures for 2023 are forecasted to be between $400.0 and $425.0 million, including $95 to $105 million allocated for project capital[98]. - The company plans to invest $26 to $29 million in project capital at Jacobina to stabilize operations and upgrade infrastructure for gold recovery[98]. - The company invested $10.5 million in project development capital during Q1 2023, compared to $8.7 million in Q1 2022, reflecting increased spending on the La Colorada Skarn project[105]. - Project capital investments at Huaron are estimated to be between $22 million and $25 million for a tailings filtration plant, expected to be operational in 2024[103]. Financial Position and Liquidity - The company’s liquidity position improved, with cash and cash equivalents increasing to $411.3 million as of March 31, 2023, up from $107.0 million at the end of 2022[130]. - Working capital rose to $826.6 million at March 31, 2023, an increase of $403.0 million from $423.6 million at December 31, 2022[134]. - The company’s total debt increased to $1,187.0 million as of March 31, 2023, up from $226.8 million at the end of 2022[130]. Market and Regulatory Environment - The Argentine government established a 4.5% tax rate on silver and gold concentrate through Decree 1060/2020, impacting the profitability of operations in the region[198]. - The corporate tax rate in Argentina increased from 25% to 35% as of January 1, 2021, with a dividend withholding tax rate maintained at 7%[198]. - A proposed tax reform bill in Chile was rejected in March 2023, delaying potential changes to mining taxation for at least a year[199]. - Chilean Congress is currently considering a new mining royalty of 3% on the ad valorem value of copper, which could affect future revenue streams[199]. - Brazil introduced new transfer pricing rules in December 2022, aligning with OECD standards for cross-border transactions, which may impact operational costs[200]. - Argentina's restrictive policies on foreign investment and mining operations could lead to potential losses of valuable properties or rights[197]. - The mining sector in Argentina faces challenges due to various government regulations, including restrictions on production and ownership of land[197]. - The political climate in Latin America, particularly in Argentina and Chile, poses risks to mining operations and profitability due to changing regulations[197][199]. - The potential for increased taxation in the mining sector across Latin America could impact future investment decisions and operational strategies[198][199].