Pan American Silver Corp. (NASDAQ:PAAS) Q4 2024 Earnings Call Transcript

Pan American Silver Corp. (NASDAQ:PAAS) Q4 2024 Earnings Call Transcript February 20, 2025

Operator: Thank you for standing by. This is the conference operator. Welcome to the Pan American Silver Corp. Fourth Quarter and Year End 2024 Results Conference Call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. I would now like to turn the conference over to Siren Fisekci, VP, Investor Relations. Please go ahead, Ms. Fisekci.

Siren Fisekci: Thank you for joining us today for Pan American Silver Corp.’s conference call and webcast to discuss our Q4 financial results, our audited financial results for the 2024 year, and our outlook for 2025. This call includes forward-looking statements and information and makes reference to non-GAAP measures. Please see the cautionary statements in our MD&A, news release, and presentation slides for our 2024 audit results, all of which are available on our website. I’ll now turn the call over to Michael Steinmann, Pan American’s President and CEO.

Michael Steinmann: Thank you, Siren, and hello, everyone. I’m glad you could join us to discuss Pan American Silver Corp.’s 2024 results and our outlook for 2025. We are very pleased with the company’s performance over the past year. Revenue was a record of $815.1 million in Q4 and $2.8 billion in 2024, reflecting the contribution of a full year of production from the acquired Yamana mines and strong metal prices. We achieved our production guidance for 2024. Silver production totaled 21.1 million ounces, and gold production was a company record of 892,000 ounces. All-in sustaining costs for the silver segment, excluding NRV inventory adjustments, were $18.98 per ounce in 2024, slightly above the guidance. Gold segment all-in sustaining costs, excluding NRV inventory adjustments in 2024, were $1,501 per ounce and were within the guidance.

In 2024, we completed several major projects, notably the new ventilation infrastructure at La Colorada. We are now seeing the benefits in terms of higher throughput at La Colorada, achieving our target of 2,000 tons at the end of last year and lower per ounce operating costs. We finished construction of the new filtration plant and filter stack tailings storage facility at Huaron and the paste backfill plant at Timmins. These investments have set those assets up well for the future. While today, our operations are generating record cash flows. Cash flow generated from operations was a record $274.1 million in Q4, and also a record of $724.1 million for the full year, reflecting strong margins. We also achieved record free cash flow of $196.2 million in Q4 or $445.1 million for the full year.

We recorded net earnings of $107.8 million or $0.30 per share in Q4. Full year net earnings were $112.7 million or $0.31 per share in 2024. Net earnings in Q4 reflect a gain from the sale of La Arena being almost entirely offset by adjustments at Dolores to the closure and decommissioning liability and to the net realizable value of the inventory. The adjustments at Dolores reflect the completion of mining and the transition to the residual leaching phase and active reclamation. Based on our most recent estimates for residual heap leaching in the post-mining phase, we expect economic production to continue at decreasing rates through mid to late 2026. Gain from the La Arena sale and the adjustments at Dolores were adjusted from earnings. This resulted in adjusted earnings of $126.9 million or $0.35 per share in Q4.

Full year adjusted earnings were $286.7 million or $0.79 per share. Pan American Silver Corp. is entering 2025 in a strong financial position. We are now in a net cash position with $887 million cash and short-term investments against roughly $800 million of debt, largely related to the two long-term bonds we acquired through the Yamana transaction. Our credit facility remains undrawn, giving us $1.6 billion of total available liquidity. This is a great position to be able to pursue our growth objectives while returning capital to shareholders. Yesterday, we announced the $0.10 per share dividend with respect to Q4. In the first quarter of 2025, we also repurchased approximately $20 million or roughly 900,000 shares under the share buyback plan.

That brings total share repurchases since introducing the share buyback plan last March to roughly 2.6 million shares. Total dividends paid over 2024 were $145.4 million. I’m very proud that we have been able to return over $1 billion in dividends and share buybacks to investors since 2010 by investing in growth, maintaining a strong balance sheet, and not issuing any equity to public offerings. Moving on to our guidance for this year. In 2025, we are expecting largely steady-state operations with the notable changes relative to 2024 being the sale of La Arena, the lower center in the residual leach phase, and improved operations at La Colorada following the ventilation upgrade. We are expecting to produce between 20 to 21 million ounces of silver and 735,000 to 800,000 ounces of gold in 2025.

We expect both silver and gold production to be weighted to the second half of the year, with the corresponding effects of lower per unit costs over that period. Please see our Q4 news release and MD&A for quarterly production and cost estimates. Average all-in sustaining costs for the silver segment in 2025 are expected to be between $16.25 and $18.25 per ounce. For the gold segment, we expect all-in sustaining costs of between $1,525 to $1,625 per ounce in 2025. Sustaining capital is forecasted to be between $270 million to $285 million and project capital between $90 to $100 million. Project capital includes investment at La Colorada and current vein mine operation aimed at opening production access to 13 new veins. These discoveries will expand high-grade zones in the eastern part of the mine and were highlighted in our December 9, 2024, annual exploration update news release.

The La Colorada’s current project, we plan to invest $39 million to $42 million in exploration and infill drilling and to advance the technical studies to determine the optimum development scenario for the company. They’re also investing project capital at Timmins for the construction of the Stage 6 tailing storage facility and exploration of satellite deposits. At Jacobina, we are directing project capital to advance a comprehensive mine and plant optimization study, expecting to describe some initial value enhancement projects by midyear. At Huaron, we have some residual project capital related to the new tailings filtration plant and filter stack tailings storage, which have been successfully commissioned and ramping up to full operation.

We plan to invest about $80 million on exploration in 2025, mostly for reserve replacement. We are forecasting cash taxes of $240 million to $260 million, with approximately one-third to be paid in the first quarter of 2025. Care maintenance costs are estimated to total between $20.5 million to $24 million, mostly related to Escobal. Working meetings amongst the participants in the consultation process for Escobal resumed in late January after the Christmas break. We will continue to work with the government of Guatemala and Xinca representatives to advance the consultation process. The government has not yet published the timeline for completion of the consultation, and there is no date for restart of the operation. Heading into 2025, Pan American Silver Corp.

is well-positioned to benefit from this strong metal price environment we are in. The mines we acquired through the Yamana transaction and the strong operating teams managing them are now well integrated into our organization. We made significant strides in rationalizing the portfolio, and we will continue with a focus on safe, efficient, and sustainable mining operations. We will continue to build an even better and stronger company that offers investors unique upside to silver with expanding margins in a rising metal price environment. We’re well on track with that goal, and I look forward to keeping you informed of our progress. I will be happy now to take your questions.

Q&A Session

Operator: Thank you. We will now begin the question and answer session. If you’re using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star. Thank you. The first question comes from Cosmos Chiu with CIBC. Please go ahead.

Cosmos Chiu: Thanks, Michael and team. Maybe my first question is on La Colorada. I see that your 2025 guidance is 5.5 to 5.8 million ounces. I could have thought that could have been slightly higher given that you produced 1.6 million ounces in Q4. But again, not everything’s in a straight line. So could you maybe comment on 2025 guidance for La Colorada?

Michael Steinmann: Sure, Cosmos. Good morning, and I’ll let Steve answer that question.

Steve Busby: Yeah. Good morning, Cosmos. Thank you for that question. If you recall in December, we put out a press release that highlighted some of the really significant exploration intercepts we’re seeing off to the east side of that area on Candelaria. What we decided to do is there’s a bit of a balancing going on. We’re trying to reduce a little bit the burden. We’ve got a capacity burden in the system on waste movement. And we want to develop out into this new area to bring long-term value to that operation. So we’re balancing, you know, what kind of impacts do we want to see next year compared to trying to get that aggressively opening up that new area and understanding better the potential reserves out in that area. So it was kind of a happy medium we chose for 2025, a little bit of short-term pain for long-term gain there.

And I’ll let Chris talk a little bit about what we’re seeing out there and why we’re doing it. But before that, I just also want to mention that along the way going out to that east, we do cross a section of concession that belongs to one of our neighbors. So we will be mining through a concession there, and there seems to be some ore there, and we’ll share some of the profits with that concession owner as we pass through there. So that has a bit of an impact on the cost and the production as well. But it’s really the waste constraint. We want to develop that area. We only have so much capacity to move more in waste. So something’s got to give as we open up that area, and we think long-term, it’s going to bring substantial additional value to the company, and I’ll let Chris kind of highlight on that.

Chris Emerson: Yeah. Hi. Chris, this is Chris here. Hi. Yes. As Mike mentioned, you have 30 new structures which were highlighted in the December exploration press release. We’ve been alluding to this over last year. We’ve put a lot of effort into moving a lot of the exploration over to that east portion. We have some of the major structures, the NC2, etcetera. But if you remember, you know, the La Colorada mine has been deepening. And, you know, as we know that through these systems, it becomes more palmetto rich. So finding new structures and finding new areas higher up in the system is obviously beneficial. And that’s why we’re really concentrating on that eastern portion and southeast of the Scan area, which is depth as well. But we’ve had some great results, as you can see in that press release. And that’s certainly something to look forward to. The future of the company.

Cosmos Chiu: Great. And maybe, you know, same type of question for Jacobina as well. You’re guiding to 185,000 to 195,000 ounces in 2025. I thought that could have gone higher potentially as well just given that you did a record 52.4 in Q4 2024. Could you maybe comment on that and also maybe comment on I believe there’s some optimization studies ongoing at Jacobina? How that’s going so far?

Steve Busby: Yeah. Cosmos, Steve here again. Yeah. We had a remarkable year at Jacobina. We’re very, very happy with the way that operation is debottlenecking, continues to debottleneck. With that said, there are some projects that are underway during 2025 outside of the optimization study that try to firm up the plant and give us stability. You know, we got some screens that are undersized. We’re pushing them too hard. So we’re replacing some screens in the crushing plant as well as the grinding circuit. We’re doing some upgrades on our CIP carbon and pulp tanks to give us that sustainable run rate, but those projects won’t be done till late in the year, so we didn’t want to forecast the kind of production throughputs we had during Q4 for the whole first nine months given those projects.

Once those projects are done, we’re quite confident, and as part of the optimization work that I’ll talk about next, we’re quite confident mid-year, we’ll be able to come out with some, you know, looking forward beyond 2025 as to how we can push that plant up a little bit. Relative to the optimization study, that work is going really well. There’s a few projects that are going to come out. We’re going to be announcing them later in 2025 midyear that deals with handling of this concept of this paste plant we’ve been talking about for the underground mine that allows us to get a better recovery of the reserve and resources that exist there. But also, in the longer-term picture, we got to change the way we’re handling some of the tailings, so we’re looking at a filter plant there too.

So the optimization study is kind of starting to break up into different phases. The first phase will focus on getting those projects out along with getting this mill sustained at the kind of throughputs we saw in Q4. And then we see, you know, future potential is really starting to get exciting there as well too as what we can do during 2026 and 2027.

Cosmos Chiu: Mhmm. And maybe one last question, sort of bigger picture. Michael, sure you’ve noticed that Newmont has now sold their assets. Does this now change how you view your Timmins assets? And then, also, can you remind us of the book value you have for these assets?

Michael Steinmann: Look, these assets are doing really, really well as you can imagine. But I think we talked about that in the past that I’m a strong believer, and we are strong believers that that district, the entire Timmins district, can generate way more value in a, you know, maybe a bit of different form looking at a, you know, not yet how that will look like, but working together on many fronts, there are lots of trucks and transportation going all different directions between Newmont or soon Discovery Silver and ourselves. So I think there’s a lot to optimize. It’s probably a bit early to, you know, to talk about that, but I think there’s a lot we can do that, you know, helps our shareholders and probably helps Discovery shareholders as well.

And then, you know, that was obviously the reason why they did the deal with Newmont. I think that’s a great district in Canada. Great producer of gold. And don’t forget, it’s not only our two operations there, but I think we shared in the past some results from some of the more satellite exploration programs that Chris is doing at Whitney and Gold River rehab as well. So there’s some very, very interesting additional satellites. I think everything will play in those decisions. So I think it’s a very exciting time for Timmins.

Cosmos Chiu: Great. Thanks again, Michael, Steve, Chris, Darren, and team. Those are the questions I have. Thank you.

Michael Steinmann: Thanks, Cosmos.

Operator: The next question comes from Don DeMarco with National Bank Financial. Please go ahead.

Don DeMarco: Thank you, operator, and good morning, Michael and team. Yeah. Constructive guidance really shows some stability in the ops. Thank you. So a few questions. Can you hear me okay?

Michael Steinmann: We do. Yeah. Go ahead.

Don DeMarco: Okay. Great. So you know, I jumped in a little bit late. You may have talked a bit about Jacobina, but what is the timing of the optimization study? And what details can you share now about the throughput increases or mine life extensions, things like that that had been talked about at one point.

Steve Busby: Yeah. Hi, Don. Steve here. Yeah. We had a great Q4 at Jacobina. We were able to accomplish kind of a target we set ourselves of trying to get the throughput through the mine and the plant at 175,000 tons, you know, just over 9,000 tons a day. We accomplished that. We were very pleased with that. But we do have some projects that we have to complete in the plant. We’re changing some screens in the crusher, we’re changing some screens in the grinding circuit. We’re upgrading some of the tanks and some of the tailings pumping. That’ll give us stability and sustainability of that kind of throughput is what we’re seeing. So a big part of the optimization study is those projects are done. It’ll capture those values and give us sustainability late into 2025 and certainly into 2026.

And we’ll kind of disclose what those numbers are looking like midyear. Now midyear, the optimization study is starting to split off into different phases. And we’re seeing phase one, where we’re looking at this paste plant that we talked about over the last year or so bringing that in to allow us to recover more of the reserves. And also, we got a longer-term tailings disposal alternatives, which the paste plant helps us with. But also we were looking at a filter plant for tailings disposal too. So that will kind of be the phase one optimization. We’ll announce kind of some projects around that and what the returns are, investments are. We’re targeting midyear this year to do that. And then beyond that, we’ll move into phase two, which once we understand how those feed in, we got some really interesting optimizations that we’re gonna be continuing on that’ll bring value into 2026, 2027, 2028 that will be a phase two program later.

Don DeMarco: Okay. Thank you for that. And Steve, while I have your ear here, on El Peñón, you know, we’re seeing stable production year over year, costs are stable, and an attractive AISC midpoint at $12.35. Actually even slightly lower year over year. Does this mean that those sort of initial integration hiccups are really in the rearview mirror and you’re feeling comfortable with this asset now?

Steve Busby: Absolutely. Yeah. Great question, Don. And, yeah, we’re very pleased with the stability of that. We’re focusing a lot of effort on exploration. We want to extend that mine life. It’s a great cash-flowing asset for us. Costs are stable. The operation’s stable. You know, I’ll remind you, it’s at a 130,000 kind of ounce a year gold production levels. You know, it’s a little less than what we aggressively pursued in 2023. But that, kind of dialing that in, we feel very comfortable with that operation, and it’s performing incredibly well.

Michael Steinmann: It was a dumb, I mean, if you recall, it was really the spacing of some of those drilling in some of the stopes. That, you know, that we saw that impact at the beginning. I mean, I wouldn’t call it really an integration hiccup. I think the team at Peñón is doing an unbelievable job and integrated very easily into our company and our system. So did the other Yamana assets. So not really an issue on the integration, but really that space drilling and Chris and his team did a lot of work drilling that out, and I think we’re seeing the result of that now.

Don DeMarco: Okay. Good to see. And Michael, last question on Escobal. You mentioned that the government hasn’t published a timeline for completion of the consultation process. What is your sense here? It’s been a stalemate for about a year now. But you know, there’s probably other means going on. Are there reasons to be optimistic for 2025 or what are your thoughts on Escobal?

Michael Steinmann: Yeah. I wouldn’t call it a stalemate. I mean, there’s a lot of meetings going on. You know, as you recall with the new government coming in just about a year ago, there was kind of a slow start-up last year. To get there, but there’s a lot of work going on in the background. Between the actors. So I wouldn’t call it a stalemate. We, you know, we had kind of some timings for meetings published years ago by the government. And I think that’s, you know, really didn’t really bring that much as it just put pressure on actors as non-necessary. So we’d rather just continue with many meetings, as many discussions we can on the way to, you know, to hopefully a positive solution here. So yeah, I wouldn’t call it a stalemate. I think there’s probably, oh, maybe let me have Shana give a quick update here too. There’s quite a lot going on.

Shana Halvorson: Yeah. Well, thank you, Michael. There was a change in government last year, and so they did change out the vice minister’s sustain of the element who leads the process. So that was a key in some of the delays last year, but the meetings are ongoing into Q4. We had several meetings with the government as well as Xinca Parliament’s meetings with the government. So those were good. And then things always slow down over the holidays and into early January, and then we just started picking up again with some meetings with the government. So yeah, I feel like there’s gonna be a lot more activity in the coming weeks and months, and, you know, hopefully, we’re able to provide a more meaningful update as some of the developments after the Q1 results in May. So I’m looking forward to that.

Don DeMarco: Okay. Okay. Excellent. Thank you for that. That’s all for me. Good luck with Q1 and the rest of the year.

Michael Steinmann: Thank you.

Operator: This concludes the question and answer session. I would like to turn the conference back over to Michael Steinmann for any closing remarks. Please go ahead.

Michael Steinmann: Sorry, operator. I just see that a question came in. Could we answer that, please?

Operator: Yes. Of course. Next question comes from Ovais Habib with Scotiabank. Please go ahead.

Ovais Habib: Hi, Michael and the Pan American team. Just a couple of questions for me. Sorry if you’ve already touched upon some of these as I’ve been bouncing between a couple. Michael, just first question in regards to the guidance. I believe production and costs are second-half weighted. Any kind of color that you can provide in terms of what assets would drive the split between the first and second half?

Michael Steinmann: Yeah. Well, let Steve do that. But just in general, for the listener, this is obviously a recurring theme with Pan American, and it’s largely driven partially by the weather, so by the seasons, rainy seasons, dry seasons, cold winters, in the far south. But remember, we are in whole different kinds of climates. You saw the same last year, obviously, in the year before, and you saw, you know, it’s a pretty strong production we had in Q4. Nothing obviously we can do with the climate there. That’s just what it is for the assets that are distributed so widely over different climate zones, but I’ll have Steve give you a bit more details.

Steve Busby: Yeah. Thanks, Ovais. And one of the bigger drivers is Cerro Moro, and that’s just mine sequencing as we’re opening up the Naty open pit. We’re getting the higher grade later in the year. That’s really driving a big part of it. Shahuindo, as Michael mentioned, is very, very weather dependent. So we generally see better production going in late in the year there as well. I think those are probably the two bigger drivers. There’s a bit of that at El Peñón, but it’s again, it’s just mine sequence.

Ovais Habib: Perfect. Thanks for that, Steve and Michael as well. And my next question is more of the fact that, you know, again, you had a great Q4, generated a lot of free cash flow in Q4, that based on, you know, operations kind of it looks like there are stabilizing going into 2025 as well. So that’s really good to see. Now that, you know, kind of you’ve integrated all those Yamana assets, you’ve done a great job on the non-core as well. Is it time now to start focusing more on the exploration side or, you know, how should we look at 2025 in terms of exploration?

Michael Steinmann: We never really slowed down on exploration. You see there’s a substantial budget for it. We tend to even increase our budget during the year. It really depends on the result. As you know, I’m a geologist by trade, and strong exploration results always will be rewarded with more investments. It’s really the bread and butter of our business, and obviously, you have the plant already built and the mine is already developed largely. So in each place, replacing that reserve is incredibly important and generates a lot of value. So exploration always is a very big focus, but our exploration, as you know, is really focused on brownfields so close to our sites. Reserve edition, maybe some truckable distance where we’re looking at some trackable satellites in some places.

I think Cerro Moro comes to mind where we are actually mining at one zone right now. We just discovered another one that Chris and his team are drilling out. So exploration is always very core to us. If you look back, we have been incredibly successful replacing hundreds of millions of ounces of silver over the last, I would say, fifteen years with brownfield exploration, on-site exploration. And don’t forget our exploration program discovered Escobal. So this will always be a big focus on that.

Ovais Habib: That’s perfect. Thanks, Michael, for that, and thanks for taking my questions. And looking forward to seeing you during PDAC.

Michael Steinmann: Thank you. See you then.

Operator: The next question comes from Adrian Day with Management. Please go ahead.

Adrian Day: Yeah. Good morning. Just a follow-up, if I may, on Escobal, but take a different direction. Once you get the approval to reopen, and, of course, you’ll obviously get an indication it’s coming probably before it actually happens. But how soon before you’re producing again and how soon before it’s fully ramped back up?

Michael Steinmann: Yeah. Hi, Adrian. Look. I’ll take it for take probably a good quarter to two to start up the first stope, and then as you know or probably remember from the time with the tower when the asset was in production, those stopes are very sizable and produce a lot of silver. So that would start, I guess, one stope at Escobal should be equivalent to about five to six million ounces of silver per year. So that’s already a strong start-up. I think thereafter probably about a part of the year to bring it back to the full production which was somewhere in the range of 20 to 22 million ounces a year.

Adrian Day: Okay. Okay. That’s helpful. And just once the approval is granted, are you as a company ready to start, or would you say, well, we’ve got other things going on, we’ll leave it a few months now?

Michael Steinmann: It’s obviously an incredible mine and project. So all our focus is on this. There’s always a lot going on. You know, we have a very accomplished team that can handle many assets at the same time. I think we have shown that year over year over year. So of course, that will be a number one focus. You probably noticed over the past years that we normally spend probably as much as $24 million in the past, maybe now more between $18 million and $20 million in care maintenance of that sort. To make sure that everything is in top shape and the restart can happen or could happen as quickly as possible.

Adrian Day: Okay. I appreciate that. Thank you.

Michael Steinmann: Thank you.

Operator: This concludes the question and answer session. I would like to turn the conference back over to Michael Steinmann for any closing remarks, please.

Michael Steinmann: Thank you, operator, and thanks for everyone calling in today. Yes, these are exciting times for Pan American Silver Corp., very high metal prices, very strong cash flow generation, and great returns to our shareholders. So, you know, we will really focus on maintaining a rigorous control on our costs to maintain those great margins that we are enjoying right now. And I’m really looking forward to updating you in our Q1 call in May. Until then, have a good day. Thank you, everyone.

Operator: This brings to close today’s conference. You may disconnect your lines. Thank you for participating, and have a pleasant day.