Pan American Silver(PAAS) - 2023 Q3 - Quarterly Report

Unaudited Condensed Interim Consolidated Financial Statements Condensed Interim Consolidated Statements of Financial Position As of September 30, 2023, the company's total assets significantly increased to $7.53 billion from $3.25 billion at the end of 2022, primarily driven by a substantial rise in 'Mineral properties, plant and equipment' from $2.23 billion to $5.89 billion due to the Yamana acquisition Consolidated Statement of Financial Position Highlights (in millions of U.S. dollars) | Account | September 30, 2023 | December 31, 2022 | Change | | :--- | :--- | :--- | :--- | | Total Current Assets | $1,476.5 | $804.4 | +$672.1 | | Mineral properties, plant and equipment | $5,885.1 | $2,226.4 | +$3,658.7 | | Total Assets | $7,534.0 | $3,248.5 | +$4,285.5 | | Total Current Liabilities | $644.4 | $380.8 | +$263.6 | | Total Liabilities | $2,626.9 | $1,046.9 | +$1,580.0 | | Total Equity | $4,907.1 | $2,201.6 | +$2,705.5 | Condensed Interim Consolidated Statements of Earnings and Comprehensive Earnings For Q3 2023, revenue surged to $616.3 million from $338.9 million year-over-year, resulting in a net loss of $22.7 million, a significant improvement from the $71.2 million loss in Q3 2022 Key Earnings Data (in millions of U.S. dollars, except per share amounts) | Metric | Q3 2023 | Q3 2022 | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $616.3 | $338.9 | $1,646.5 | $1,119.3 | | Mine operating earnings (loss) | $61.9 | $(21.8) | $209.7 | $13.3 | | Net Loss | $(22.7) | $(71.2) | $(53.6) | $(168.0) | | Basic Loss Per Share | $(0.06) | $(0.34) | $(0.17) | $(0.80) | Condensed Interim Consolidated Statements of Cash Flows For the nine months ended September 30, 2023, net cash from operating activities significantly increased to $282.9 million, while investing activities generated a net cash inflow of $468.5 million, primarily due to the Yamana acquisition and asset sales Cash Flow Summary (in millions of U.S. dollars) | Activity | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash from Operating Activities | $282.9 | $144.0 | | Net cash from Investing Activities | $468.5 | $(187.2) | | Net cash from Financing Activities | $(506.3) | $(84.3) | | Increase (Decrease) in Cash | $240.6 | $(130.5) | | Cash and cash equivalents at end of period | $347.5 | $153.1 | Condensed Interim Consolidated Statements of Changes in Equity Total equity increased from $2.20 billion at the end of 2022 to $4.91 billion as of September 30, 2023, primarily driven by the issuance of 153.8 million shares valued at $2.82 billion for the Yamana acquisition - The Yamana acquisition was the main driver of the equity change, with the company issuing 153.8 million shares valued at $2.82 billion[7] Equity Reconciliation (in millions of U.S. dollars) | Description | Amount | | :--- | :--- | | Balance, December 31, 2022 | $2,201.6 | | Net loss for the period | $(53.6) | | Other comprehensive loss | $(24.3) | | The Acquisition (Note 4) | $3,312.2 | | Dispositions (Note 5) | $(446.8) | | Dividends paid | $(94.0) | | Other | $11.5 | | Balance, September 30, 2023 | $4,907.1 | Notes to the Condensed Interim Consolidated Financial Statements Note 1: Nature of Operations Pan American Silver Corp. is a Canadian company engaged in silver and gold mining, exploration, development, and related activities across the Americas, with a key event being the acquisition of Yamana Gold Inc. on March 31, 2023 - The company is primarily engaged in silver and gold mining and related activities across the Americas[10] - On March 31, 2023, the Company acquired Yamana Gold Inc., adding mines in Brazil, Chile, and Argentina[11] - The Escobal mine in Guatemala remains on care and maintenance pending completion of a government-led consultation process[10] Note 4: Yamana Acquisition On March 31, 2023, the company acquired 100% of Yamana Gold Inc. for 153.8 million shares valued at $2.8 billion, adding $3.31 billion in net assets and contributing $598.4 million of revenue for the nine months ended September 30, 2023 - Completed the acquisition of Yamana Gold Inc. on March 31, 2023, for 153.8 million shares valued at $2.8 billion[28] Preliminary Purchase Price Allocation (in millions of U.S. dollars) | Item | Value | | :--- | :--- | | Mineral properties, plant and equipment | $5,273.2 | | Cash and cash equivalents | $259.5 | | Debt assumed | $(943.1) | | Deferred taxes liability | $(1,083.2) | | Net assets acquired | $3,312.2 | - For the nine months ended September 30, 2023, the Yamana acquisition contributed $598.4 million of revenue and $9.6 million of net loss[37] - Acquisition-related costs for the nine months ended September 30, 2023, were $25.0 million[35][36] Note 5: Dispositions In Q3 2023, the company completed two significant dispositions, selling its 56.25% interest in the MARA project for $475 million cash and its 92.3% interest in the Morococha mine for $25 million cash, recognizing a $6.7 million gain on the latter - Sold its 56.25% interest in the MARA project for $475 million cash plus a 0.75% NSR royalty[38] - Sold its 92.3% interest in the Morococha mine for $25 million cash, recognizing a $6.7 million gain on the sale[40] - An impairment charge of $42.4 million was recorded on Morococha upon its classification as an asset held for sale in June 2023[40] Note 6: Financial Instruments The company is exposed to credit, liquidity, and market risks, including currency, interest rate, and metal price fluctuations, and recorded a $4.2 million loss on derivatives in Q3 2023, primarily from foreign currency contracts - The company's policy is to not hedge the price of precious metals to provide equity investors with exposure to price changes[73] - Credit risk arises from concentrate sales, with receivables of $23.6 million, and from precious metal inventory at refineries, valued at $45.4 million as of September 30, 2023[57][58] Derivative (Losses) Gains (in millions of U.S. dollars) | Period | Q3 2023 | Q3 2022 | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Total | $(4.2) | $(6.5) | $1.2 | $1.5 | Note 10: Mineral Properties, Plant and Equipment The carrying value of mineral properties, plant, and equipment increased to $5.89 billion at September 30, 2023, primarily due to properties acquired from the Yamana acquisition, including Jacobina, El Peñon, Minera Florida, and Cerro Moro Carrying Value of Mineral Properties, Plant and Equipment (in millions of U.S. dollars) | Date | Carrying Value | | :--- | :--- | | September 30, 2023 | $5,885.1 | | December 31, 2022 | $2,226.4 | - The increase in asset value is mainly due to properties acquired from Yamana (Note 4)[81] - The company's interest in the ADLF / Jeronimo project was classified as an asset held for sale, with mineral properties valued at $141.6 million[83][85] Note 11: Impairment For the nine months ended September 30, 2023, the company recorded a pre-tax impairment charge of $42.4 million related to the sale of its interest in the Morococha mine, aligning its carrying value with the $25.0 million sale price Impairment Expense (in millions of U.S. dollars) | Period | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Impairment Expense | $42.4 | $99.1 | - The 2023 impairment of $42.4 million was recorded on the Morococha mine net assets to adjust its carrying value to the sale price[87] - The 2022 impairment of $99.1 million was related to the Dolores Mine CGU[89] Note 17: Debt As of September 30, 2023, total non-current debt significantly increased to $704.9 million due to the assumption of two Senior Notes with a combined carrying value of $680.8 million from the Yamana acquisition Debt Summary (in millions of U.S. dollars) | Debt Instrument | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Senior Notes | $680.8 | $— | | SL-Credit Facility | $— | $160.0 | | Other loans | $38.9 | $33.7 | | Total Non-current Debt | $704.9 | $180.0 | - Two Senior Notes were acquired with Yamana: one maturing in 2027 and another in 2031[107] - The SL-Credit Facility was upsized to $750.0 million and was fully undrawn as of September 30, 2023[108] Note 19: Share Capital and Employee Compensation Plans The company declared quarterly dividends of $0.10 per common share for the first three quarters of 2023, with 370.0 thousand stock options outstanding and 313.9 million Contingent Value Rights (CVRs) convertible into 15.6 million common shares upon the Escobal mine's restart - The company declared dividends of $0.10 per common share for each of the first three quarters of 2023[126] - 313.9 million Contingent Value Rights (CVRs) are outstanding, convertible into 15.6 million common shares upon the first commercial shipment from the Escobal mine[127] Outstanding Stock Options (in thousands) | Date | Options Outstanding | Weighted Avg. Exercise Price (CAD$) | | :--- | :--- | :--- | | Dec 31, 2022 | 377.0 | $23.01 | | Sep 30, 2023 | 370.0 | $22.90 | Note 25: Segmented Information Following the Yamana acquisition, the Gold segment became the largest contributor to revenue, generating $446.8 million in Q3 2023, while the Silver segment generated $169.5 million in revenue - The Yamana acquisition added the Jacobina, El Peñon, and Minera Florida mines to the Gold Segment, and the Cerro Moro mine to the Silver Segment[139] Segment Performance - Q3 2023 (in millions of U.S. dollars) | Segment | Revenue | Mine Operating Earnings | | :--- | :--- | :--- | | Silver Segment | $169.5 | $22.2 | | Gold Segment | $446.8 | $42.4 | | Total | $616.3 | $61.9 | Segment Assets - September 30, 2023 (in millions of U.S. dollars) | Segment | Total Assets | Net Assets | | :--- | :--- | :--- | | Silver Segment | $1,133.6 | $861.5 | | Gold Segment | $5,419.6 | $3,935.6 | | Other Segment | $980.8 | $110.0 | | Total | $7,534.0 | $4,907.1 | Note 27: Commitments The company has ongoing commitments from the Yamana acquisition, including a silver stream agreement requiring delivery of 20% of silver from Cerro Moro until a 7 million ounce threshold is met, with 5.7 million ounces delivered to date - A commitment exists to deliver 20% of silver from Cerro Moro to Sandstorm Gold Ltd. until a 7 million ounce threshold is met; 5.7 million ounces have been delivered to date[165] - The company has approximately $22.9 million in commitments for construction activities at its sites and projects[166]