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News

Pan American Silver Announces $79.3 million in Net Cash Generated From Operating Activities in Q4 2017

Published: Tuesday, February 20th, 2018

Increases Dividend by 40%

All financial figures are in U.S. dollars unless otherwise indicated.

VANCOUVER, Feb. 20, 2018 /CNW/ - Pan American Silver Corp. (NASDAQ: PAAS; TSX: PAAS) ("Pan American", or the "Company") today reported unaudited results for the fourth quarter ("Q4 2017") and year-ended December 31, 2017. These results are preliminary and could change based on final audited results.

"We generated $224.6 million in cash flow from operations in 2017. La Colorada, Morococha, Huaron and Dolores had record annual operating free cash flow," said Michael Steinmann, President and Chief Executive Officer of the Company. "Our cash and short-term investments increased by about $41 million in the quarter, resulting in a balance of $227.5 million at year-end. Operations at Morococha have been performing particularly well, which has led to a reversal of the impairment we booked at that mine in 2015 and made a significant impact on earnings in Q4 2017."

Added Mr. Steinmann: "With a strong financial position, expansions completed at our largest mines, and operations generating strong cash flow, the Board of Directors today declared a 40% increase in the dividend."

Highlights for the three and twelve-month periods ended December 31, 2017:

  • Silver production in Q4 2017 was 6.58 million ounces, which is 4% higher than production in the fourth quarter of 2016 ("Q4 2016"), primarily reflecting increases at Dolores, La Colorada and Morococha. Annual silver production of 25.0 million ounces was similar to the 25.4 million produced in 2016, as increases at La Colorada and Dolores offset the expected decline from the conclusion of Alamo Dorado operations.
  • Gold production was 43.7 thousand ounces in Q4 2017 compared with 43.9 thousand ounces in Q4 2016. Annual 2017 gold production was 160.0 thousand ounces compared with 183.9 thousand ounces in 2016. The decrease was due to lower ore grades at Manantial Espejo and the conclusion of Alamo Dorado operations.
  • Zinc production of 14.7 thousand tonnes in Q4 2017 was up 11% compared with Q4 2016. Annual 2017 zinc production of 55.3 thousand tonnes was 7% more than in 2016. The increases primarily reflect the expansion of the La Colorada operations.
  • Lead production of 5.4 thousand tonnes in Q4 2017 was 2% lower than in Q4 2016. Annual 2017 production of 21.5 thousand tonnes was up 6% from 2016, driven by La Colorada.
  • Copper production of 3.0 thousand tonnes in Q4 2017 and annual 2017 production of 13.4 thousand tonnes were 3% and 7% lower, respectively, than the corresponding 2016 periods, largely due to mine sequencing at Morococha.
  • Revenue of $226.0 million in Q4 2017 was up 19% from Q4 2016. The increase was largely attributable to higher sales volumes for all metals, except copper, and higher prices for all metals, except silver. Positive settlement adjustments on concentrate shipments also contributed to the increase. Annual 2017 revenue was $816.8 million, up 5% from 2016, due to higher base metal prices and lower treatment and refining charges.
  • Consolidated All-In Sustaining Costs per Silver Ounce Sold ("AISCSOS") were $10.86 in Q4 2017 compared with $10.38 in Q4 2016. Annual 2017 AISCSOS of $10.79 was $0.71 under the low end of management's original forecast of $11.50 to $12.90 and within the revised forecast of $10.50 to $11.50.
  • Consolidated cash costs per payable ounce of silver, net of by-product credits ("Cash Costs") were $3.18 in Q4 2017 compared with $6.66 in Q4 2016, reflecting higher productivity, increased by-product credits and improved concentrate treatment terms. Annual 2017 Cash Costs of $4.55 were 28% lower than 2016, largely due to increased throughput at La Colorada, higher by-product credits, and lower treatment and refining charges.
  • Net cash generated from operating activities was up 74% to $79.3 million in Q4 2017 compared with $45.7 million in Q4 2016, reflecting higher revenues, positive working capital changes and lower cash taxes. Annual 2017 operating cash flows of $224.6 million were 5% higher than the $214.8 million generated in 2016, driven primarily by increased revenues and positive working capital changes, partially offset by higher cash taxes.
  • Net earnings were $49.7 million ($0.32 basic earnings per share) in Q4 2017 compared with $22.3 million ($0.14 basic earnings per share) in Q4 2016. Q4 2017 net earnings include a $60.2 million reversal of the 2015 Morococha mine impairment. Annual 2017 net earnings were $123.5 million ($0.79 basic earnings per share) compared with $101.8 million ($0.66 basic earnings per share) in 2016.
  • Adjusted earnings were $19.2 million ($0.13 basic adjusted earnings per share) compared with $19.0 million ($0.12 basic adjusted earnings per share) in Q4 2016. Higher revenues in Q4 2017 were offset by increases in production costs, including increased negative non-cash net realizable value inventory adjustments, as well as higher depreciation and income tax expense. Annual 2017 adjusted earnings were $77.7 million ($0.51 basic adjusted earnings per share) compared with $86.6 million ($0.57 basic adjusted earnings per share) in 2016.
  • Liquidity and working capital position. During 2017, debt reduced by $32.7 million (including capital leases), resulting in year end debt of $10.6 million, mostly related to finance lease liabilities. At December 31, 2017, the Company had cash and short-term investment balances of $227.5 million, working capital of $410.8 million and $300.0 million available under its revolving credit facility.
  • Capital expenditures totaled $42.3 million in Q4 2017 compared with $56.5 million in Q4 2016. Annual 2017 capital expenditures were $145.8 million, including approximately $61.4 million of project capital, compared with $198.5 million in 2016. The decrease was largely due to the completion of the La Colorada expansion, partially offset by a $4.9 million year-over-year increase in sustaining capital.
  • Dolores expansion. In 2017, we completed construction of the pulp agglomeration plant with commissioning activities fully underway at year-end. We also advanced the underground mine development and reached the planned daily stacking rate of 20,000 tonnes.
  • The La Colorada expansion achieved full design processing rates of 1,800 tonnes per day by mid 2017.
  • COSE and Joaquin projects. We obtained authorizations to initiate construction on the two mining projects located within ore trucking distance from our Manantial Espejo mine. At COSE, we have prepared the necessary project infrastructure and advanced 148 metres on the underground decline.
  • Pan American acquired a 12.1% interest in New Pacific Metals Corp. (approximately 16.44% fully diluted) for approximately $22.7 million in November 2017. The acquisition provides Pan American with exposure to the Silver Sand Project, a highly prospective exploration project located in the Potosí Department of Bolivia.
  • A 40% increase in the quarterly cash dividend to $0.035 per common share, approximately $5.4 million in aggregate cash dividends, has been approved by the Board of Directors. The dividend will be payable on or about March 16, 2018, to holders of record of Pan American's common shares as of the close on March 5, 2018. Pan American's dividends are designated as eligible dividends for the purposes of the Income Tax Act (Canada). As is standard practice, the amounts and specific distribution dates of any future dividends will be evaluated and determined by the Board of Directors on an ongoing basis.

The foregoing contains measures that are not generally accepted accounting principle ("non-GAAP") financial measures. Please refer to the "Alternative Performance (non-GAAP) Measures" section of this news release for further information on these measures.

CONSOLIDATED FINANCIAL RESULTS

Unaudited in thousands of U.S. Dollars, except per ounce and per share amounts

Three months ended
December 31,

Year ended
December 31,

2017

2016

2017

2016

Revenue                                                                   

226,031

190,596

816,828

774,775

Mine operating earnings

43,285

48,956

168,760

198,879

Net earnings for the period

49,664

22,284

123,451

101,825

Adjusted earnings for the period(1)

19,219

18,965

77,705

86,600

Net cash generated from operating activities

79,291

45,668

224,559

214,804

All-in sustaining cost per silver ounce sold(1)

10.86

10.38

10.79

10.17

Net earnings per share attributable to

common shareholders (basic)

0.32

0.14

0.79

0.66

Adjusted earnings per share attributable to

common shareholders (basic)(1)

0.13

0.12

0.51

0.57

(1)

Adjusted earnings and all-in sustaining costs per silver ounce sold are non-GAAP measures. Please refer to the "Alternative Performance (non-GAAP) Measures" section of this news release for further information on these measures.

 

CONSOLIDATED OPERATIONAL RESULTS


Three months ended December 31, 2017

Three months ended December 31, 2016


Production

Cash 
Costs(1)
$

Production

Cash
Costs(1)
$


Ag
(Moz)

Au
(koz)

Ag
(Moz)

Au
(koz)

La Colorada

1.87

1.26

0.43

1.67

0.86

4.38

Dolores

1.26

31.22

(3.93)

0.90

28.83

(5.93)

Alamo Dorado

0.03

0.11

2.09

0.40

1.41

22.80

Huaron

0.95

0.19

2.08

0.94

0.20

4.54

Morococha (2)

0.72

0.82

(7.42)

0.58

0.43

5.52

San Vicente (3)

1.10

0.14

9.04

1.05

n/a

11.22

Manantial Espejo

0.65

9.98

26.52

0.78

12.21

14.61

TOTAL

6.58

43.71

3.18

6.31

43.94

6.66

 


Year ended December 31, 2017

Year ended December 31, 2016


Production

Cash 
Costs(1)
$
 

Production

Cash
Costs(1)
$


Ag
(Moz)

Au
(koz)

Ag
(Moz)

Au
(koz)

La Colorada

7.06

4.29

2.08

5.80

2.93

6.15

Dolores

4.23

103.02

(1.65)

3.84

102.76

(1.08)

Alamo Dorado

0.64

2.12

16.49

1.86

8.38

16.02

Huaron

3.68

1.15

1.35

3.81

0.81

5.79

Morococha (2)

2.63

3.53

(5.34)

2.54

2.14

4.21

San Vicente (3)

3.61

0.51

11.85

4.43

n/a

11.95

Manantial Espejo

3.12

45.34

18.25

3.14

66.89

4.28

TOTAL

24.98

159.96

4.55

25.42

183.92

6.29

Totals may not add up due to rounding.

(1)

Cash costs are a non-GAAP measure. Please refer to the "Alternative Performance (non-GAAP) Measures" section of this news release for further information on these measures.

(2)

Morococha data represents Pan American's 92.3% interest in the mine's production.

(3)

San Vicente data represents Pan American's 95.0% interest in the mine's production.

 

By-Product Production


Three months ended December 31,

Year ended December 31,


2017

2016

2017

2016

Gold - ounces '000s ("koz")

43.7

43.9

160.0

183.9

Zinc - tonnes '000s ("kt")

14.7

13.2

55.3

51.9

Lead - kt

5.4

5.5

21.5

20.2

Copper - kt

3.0

3.1

13.4

14.4

 

Average Realized Metal Prices


Three months ended December 31,

Year ended December 31,


2017

2016

2017

2016

Silver $/ounce

16.65

17.65

16.99

17.35

Gold $/ounce

1,276

1,212

1,257

1,251

Zinc $/tonne

3,282

2,587

2,929

2,133

Lead $/tonne

2,472

2,178

2,351

1,892

Copper $/tonne

6,811

5,282

6,174

4,816

 

Capital Expenditures


Annual Forecast(1)

Year ended December 31,

(in millions of USD)

2017

2017

2016

La Colorada

10.5 – 11.5

13.3

9.9

Dolores

39.0 – 40.0

38.4

40.4

Alamo Dorado

Huaron

8.0 – 9.0

8.8

11.1

Morococha

9.0 – 10.0

12.5

10.3

San Vicente

12.0 – 13.0

8.1

4.9

Manantial Espejo

3.5 – 4.5

3.3

2.9

Sustaining Capital Total(2)

82.0 - 88.0

84.4

79.5

La Colorada project capital

6.5 – 7.5

6.9

52.9

Dolores project capital

51.5 – 54.5

49.9

66.1

Joaquin and COSE projects(3)

11.0 – 12.5

4.7

Project Capital Total(2)

69.0 - 74.5

61.4

119.0

Consolidated Total

151.0 – 162.5

145.8

198.5

(1)

Forecast amount per 2016 annual MD&A dated March 22, 2017, except for Joaquin and COSE projects, which were initially forecast in the MD&A for the second quarter of 2017.

(2)

The sustaining capital total amounts capitalized in 2017 were $0.2 million more than the $84.2 million of 2017 sustaining capital cash outflows and project capital amounts capitalized in 2017 were $1.6 million less than the $63.0 million of 2017 project capital cash outflows; the capital cash outflows are included in the 2017 AISCSOS calculation, shown in the "Alternative Performance (non-GAAP) Measures" section of this news release, and are different from the capital amounts in the tables included in the "Individual Mine Operation Highlights" section of this news release.  These differences are due to the timing difference between the cash payment of capital investments compared with the period in which investments are capitalized.

(3)

Total expenditures of $9.7 million were incurred in 2017 for the Joaquin and COSE projects, of which $5.0 million was expensed as part of 2017 exploration and project development expenses, and the remaining $4.7 million was capitalized.  

 

2018 GUIDANCE AND THREE-YEAR OUTLOOK

There have been no revisions to the outlook Pan American provided in its press release dated January 11, 2018 for the years 2018 to 2020 (the "Three-Year Outlook"), and as provided in the table below:






2018 Guidance

2019 Outlook

2020 Outlook

Production





Silver (million ounces)

25.0 - 26.5

27.7 - 29.7

30.5 - 33.0


Gold (thousand ounces)

175 - 185

183 - 193

165 - 179


Zinc (thousand tonnes)

60.0 - 62.0

55.5 - 59.5

60.5 - 64.5


Lead (thousand tonnes)

21.0 - 22.0

21.0 - 23.0

23.0 - 26.0


Copper (thousand tonnes)

12.0 - 12.5

10.5 - 12.5

11.5 - 13.5

Cash Costs(1)($/ounce)

3.60 - 4.60

4.50 - 6.00

4.75 - 6.75

Sustaining capital ($ millions)

100 - 105

100 - 110

75 - 90

AISCSOS(1) ($/ounce)

9.30 - 10.80

9.50 - 11.50

8.50 - 11.00

(1)

Cash Costs and AISCSOS are non-GAAP measures.  Please refer to the section titled "Alternative Performance (non-GAAP) Measures" at the end of this news release for further information on these measures.

 

The following table provides the price and foreign exchange rate assumptions used to forecast total Cash Costs and AISCSOS in the Three-year Outlook:




Years 2018 to 2020

Metal prices



Silver ($/ounce)

16.50


Gold ($/ounce)

1,250


Zinc ($/tonne)

3,100


Lead ($/tonne)                                  

2,350


Copper ($/tonne)

6,500

Average annual exchange rates relative to 1 USD



Mexican peso

18.50


Peruvian sol

3.23


Argentine peso

19.59


Bolivian boliviano

7.00

 

Technical information contained in this news release with respect to Pan American has been reviewed and approved by Martin Wafforn, P.Eng., Senior Vice President, Technical Services & Process Optimization, who is the Company's Qualified Person for the purposes of National Instrument 43-101. For additional information about the Company's material mineral properties, other than the Joaquin property, please refer to the Company's Annual Information Form dated March 22, 2017, filed at www.sedar.com. For further technical information relating to the development of the Joaquin project, please refer to the National Instrument 43-101 technical report entitled "Technical Report for the Joaquin Property, Santa Cruz, Argentina - Pre-feasibility Study", with an effective date of November 30, 2017, which is filed on SEDAR at www.sedar.com and available on the Company's website. For further technical information relating to the La Colorada and Dolores expansion projects, please refer to the National Instrument 43-101 technical reports entitled "Technical Report - Preliminary Economic Analysis for the Expansion of the La Colorada Mine, Zacatecas, Mexico," with an effective date of December 31, 2013, and "Technical Report for the Dolores Property, Chihuahua, Mexico", with an effective date of December 31, 2016, both of which are filed on SEDAR at www.sedar.com and available on the Company's website. The results of the preliminary economic assessments at La Colorada, Dolores and COSE are preliminary in nature, in that they include inferred mineral resources that are considered too geologically speculative to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the assessment will be realized. Mineral resources that are not mineral reserves have no demonstrated economic viability.

2017 Annual Unaudited Results Conference Call and Webcast

Date:


February 21, 2018

Time:


11:00 am ET (8:00 am PT)

Dial-in numbers:


1-800-319-4610 (toll-free in Canada and the U.S.)



+1-604-638-5340 (international participants)

A live and archived webcast and presentation slides will be available on the Company's website at www.panamericansilver.com.


About Pan American Silver

Pan American Silver Corp. is one of the world's largest primary silver producers, providing investors with enhanced exposure to silver through low-cost operations. Founded in 1994, Pan American is recognized for its operating expertise, prudent financial management and commitment to responsible development.  The Company is headquartered in Vancouver, B.C. and owns and operates six mines in Mexico, Peru, Argentina and Bolivia. Our shares trade on NASDAQ and the Toronto Stock Exchange under the symbol "PAAS".

For more information, visit: www.panamericansilver.com.

Alternative Performance (Non-GAAP) Measures

In this press release we refer to measures that are not generally accepted accounting principle ("non-GAAP") financial measures. These measures are widely used in the mining industry as a benchmark for performance, but do not have a standardized meaning as prescribed by IFRS as an indicator of performance, and may differ from methods used by other companies with similar descriptions. These non-GAAP financial measures include:

  • Cash costs per payable ounce of silver, net of by-product credits ("cash costs"). The Company's method of calculating cash costs may differ from the methods used by other entities and, accordingly, the Company's cash costs may not be comparable to similarly titled measures used by other entities. Investors are cautioned that cash costs should not be construed as an alternative to production costs, depreciation and amortization, and royalties determined in accordance with IFRS as an indicator of performance.
  • Adjusted earnings and adjusted earnings per share. The Company believes that these measures better reflect normalized earnings as they eliminate items that in management's judgment are subject to volatility as a result of factors which are unrelated to operations in the period, and/or relate to items that will settle in future periods.
  • All-in sustaining costs per silver ounce sold ("AISCSOS"). The Company has adopted AISCSOS as a measure of its consolidated operating performance and its ability to generate cash from all operations collectively, and the Company believes it is a more comprehensive measure of the cost of operating our consolidated business than traditional cash costs per payable ounce, as it includes the cost of replacing ounces through exploration, the cost of ongoing capital investments (sustaining capital), general and administrative expenses, as well as other items that affect the Company's consolidated earnings and cash flow.
  • Total debt is calculated as the total current and non-current portions of: long-term debt; finance lease liabilities; and loans payable. Total debt does not have any standardized meaning prescribed by GAAP and is therefore unlikely to be comparable to similar measures presented by other companies. The Company and certain investors use this information to evaluate the financial debt leverage of the Company.
  • Operating free cash flow is calculated as net cash generated from operating activities less cash invested in sustaining capital. The Company believes the inclusion of sustaining capital investments better reflects total operating cash flows. Operating free cash flow does not have any standardized meaning prescribed by GAAP and is therefore unlikely to be comparable to similar measures presented by other companies.

Readers should refer to the "Alternative Performance (non-GAAP) Measures" section following the Consolidated Statements of Cash Flows included in this news release for a more detailed discussion of these and other non-GAAP measures and their calculation.

Cautionary Note Regarding Forward-Looking Statements and Information

Certain of the statements and information in this news release constitute "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and "forward-looking information" within the meaning of applicable Canadian provincial securities laws. All statements, other than statements of historical fact, are forward-looking statements or information. Forward-looking statements or information in this news release relate to, among other things: future financial or operational performance, including our estimated production of silver, gold and other metals in 2018 and beyond, our estimated Cash Costs and AISCSOS in 2018 and beyond, and our expectations with respect to future metal prices and exchange rates; the ability of the Company to successfully complete any capital investment programs and projects, including whether on time, or on or below budget, and the success, expected economic or operational results derived from those programs and projects, and the impacts of any such programs and projects on the Company, including with respect to production, associated operational efficiencies and economic returns; the election by the Company and its ability to successfully complete the acquisition of the COSE project; the realization of benefits from any transactions, including the Joaquin and COSE transactions, and the financial and operational impacts of any such transactions on the Company; and the approval or the amount of any future cash dividends.

These forward-looking statements and information reflect the Company's current views with respect to future events and are necessarily based upon a number of assumptions that, while considered reasonable by the Company, are inherently subject to significant operational, business, economic and regulatory uncertainties and contingencies. These assumptions include: tonnage of ore to be mined and processed; ore grades and recoveries; prices for silver, gold and base metals remaining as estimated; currency exchange rates remaining as estimated; capital, decommissioning and reclamation estimates; our mineral reserve and resource estimates and the assumptions upon which they are based; prices for energy inputs, labour, materials, supplies and services (including transportation); no labour-related disruptions at any of our operations; no unplanned delays or interruptions in scheduled production; all necessary permits, licenses and regulatory approvals for our operations are received in a timely manner; and our ability to comply with environmental, health and safety laws. The foregoing list of assumptions is not exhaustive.

The Company cautions the reader that forward-looking statements and information involve known and unknown risks, uncertainties and other factors that may cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements or information contained in this news release and the Company has made assumptions and estimates based on or related to many of these factors. Such factors include, without limitation: fluctuations in silver, gold and base metal prices; fluctuations in prices for energy inputs, labour, materials, supplies and services (including transportation); fluctuations in currency markets (such as the Canadian dollar, Peruvian sol, Mexican peso, Argentine peso and Bolivian boliviano versus the U.S. dollar); operational risks and hazards inherent with the business of mining (including environmental accidents and hazards, industrial accidents, equipment breakdown, unusual or unexpected geological or structural formations, cave-ins, flooding and severe weather); risks relating to the credit worthiness or financial condition of suppliers, refiners and other parties with whom the Company does business; inadequate insurance, or inability to obtain insurance, to cover these risks and hazards; employee relations; relationships with, and claims by, local communities and indigenous populations; our ability to obtain all necessary permits, licenses and regulatory approvals in a timely manner; changes in laws, regulations and government practices in the jurisdictions where we operate, including environmental, export and import laws and regulations; legal restrictions relating to mining, including in Chubut, Argentina; risks relating to expropriation; diminishing quantities or grades of mineral reserves as properties are mined; increased competition in the mining industry for equipment and qualified personnel; and those factors identified under the caption "Risks Related to Pan American's Business" in the Company's most recent form 40-F and Annual Information Form filed with the United States Securities and Exchange Commission and Canadian provincial securities regulatory authorities, respectively. Although the Company has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated, described or intended. Investors are cautioned against undue reliance on forward-looking statements or information. Forward-looking statements and information are designed to help readers understand management's current views of our near and longer term prospects and may not be appropriate for other purposes. The Company does not intend, nor does it assume any obligation to update or revise forward-looking statements or information, whether as a result of new information, changes in assumptions, future events or otherwise, except to the extent required by applicable law.

Cautionary Note to US Investors Concerning Estimates of Mineral Reserves and Resources

This news release has been prepared in accordance with the requirements of Canadian securities laws, which differ from the requirements of U.S. securities laws. Unless otherwise indicated, all mineral reserve and resource estimates included in this news release have been disclosed in accordance with Canadian National Instrument 43-101 - Standards of Disclosure for Mineral Projects (''NI 43-101'') and the Canadian Institute of Mining, Metallurgy and Petroleum definition standards. NI 43-101 is a rule developed by the Canadian Securities Administrators that establishes standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects.

Canadian standards, including NI 43-101, differ significantly from the requirements of the SEC, and information concerning mineralization, deposits, mineral reserve and resource information contained or referred to herein may not be comparable to similar information disclosed by U.S. companies. In particular, and without limiting the generality of the foregoing, this news release uses the terms ''measured resources'', ''indicated resources'' and ''inferred resources''. U.S. investors are advised that, while such terms are recognized and required by Canadian securities laws, the SEC does not recognize them. The requirements of NI 43-101 for identification of ''reserves'' are not the same as those of the SEC, and reserves reported by Pan American in compliance with NI 43-101 may not qualify as ''reserves'' under SEC standards. Under U.S. standards, mineralization may not be classified as a ''reserve'' unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made. U.S. investors are cautioned not to assume that any part of a "measured resource" or "indicated resource" will ever be converted into a "reserve". U.S. investors should also understand that "inferred resources" have a great amount of uncertainty as to their existence and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of "inferred resources" exist, are economically or legally mineable or will ever be upgraded to a higher category. Under Canadian securities laws, estimated "inferred resources" may not form the basis of feasibility or pre-feasibility studies except in rare cases. Disclosure of "contained ounces" in a mineral resource is permitted disclosure under Canadian securities laws. However, the SEC normally only permits issuers to report mineralization that does not constitute "reserves" by SEC standards as in place tonnage and grade, without reference to unit measures. Accordingly, information concerning mineral deposits set forth herein may not be comparable with information made public by companies that report in accordance with U.S. standards.

Consolidated Statements of Financial Position

(Unaudited in thousands of U.S. dollars)







December 31,
 2017

December 31,
 2016

Assets




Current assets




Cash and cash equivalents


$

175,953

$

180,881

Short-term investments


51,590

36,729

Trade and other receivables


109,746

130,117

Income taxes receivable


16,991

17,460

Inventories


218,715

237,329

Derivative financial instruments


1,092

Assets held for sale


7,949

Prepaid expenses and other current assets


13,434

10,337



595,470

612,853

Non-current assets




Mineral properties, plant and equipment


1,336,683

1,222,727

Long-term refundable tax


80

7,664

Deferred tax assets


2,679

1,727

Investment in associates


55,017

49,734

Other assets


346

379

Goodwill


3,057

3,057

Total Assets


$

1,993,332

$

1,898,141





Liabilities




Current liabilities




Accounts payable and accrued liabilities


$

139,698

$

143,502

Loans payable


3,000

Derivative financial instruments


1,906

2,815

Current portion of provisions


8,245

8,499

Current portion of finance lease


5,734

3,559

Income tax payable


26,131

25,911



184,714

184,286

Non-current liabilities




Long-term portion of provisions


61,248

51,444

Deferred tax liabilities


171,228

170,863

Long-term portion of finance lease


1,825

3,542

Long-term debt


36,200

Deferred revenue


12,017

11,561

Other long-term liabilities


26,954

27,408

Share purchase warrants


14,295

13,833

Total Liabilities


472,281

499,137





Equity




Capital and reserves




Issued capital


2,318,252

2,303,978

Share option reserve


22,463

22,946

Investment revaluation reserve


1,605

434

Deficit


(825,470)

(931,060)

Total Equity attributable to equity holders of the Company


1,516,850

1,396,298

Non-controlling interests


4,201

2,706

Total Equity


1,521,051

1,399,004

Total Liabilities and Equity


$

1,993,332

$

1,898,141

 

Consolidated Income Statements

(Unaudited in thousands of U.S. dollars except per share amounts)





Three months ended
December 31,

Year ended
December 31,


2017

2016

2017

2016

Revenue

$

226,031

$

190,596

$

816,828

$

774,775

Cost of sales






Production costs

(139,697)

(110,466)

(500,670)

(428,333)


Depreciation and amortization

(34,240)

(23,032)

(122,888)

(115,955)


Royalties                                                              

(8,809)

(8,142)

(24,510)

(31,608)


(182,746)

(141,640)

(648,068)

(575,896)

Mine operating earnings

43,285

48,956

168,760

198,879






General and administrative

(4,732)

(5,592)

(21,397)

(23,663)

Exploration and project development

(4,269)

(3,068)

(19,755)

(11,334)

Foreign exchange gains (losses)

1,052

(4,441)

1,823

(9,054)

Impairment reversals

61,554

61,554

(Losses) gains on commodity, diesel fuel swaps, and foreign





currency contracts

(1,841)

(1,710)

606

(4,944)

(Loss) gain on sale of mineral properties, plant and equipment

(794)

6,795

191

25,100

Share of loss from associate and dilution gain

259

1,308

2,052

7,946

Other (expense) income

(4,011)

3,254

(5,505)

1,542

Earnings from operations

90,503

45,502

188,329

184,472






Gain on derivatives

64

64

Investment income

658

371

1,277

1,350

Interest and finance expense

(2,353)

(2,730)

(7,185)

(9,551)

Earnings before income taxes

88,872

43,143

182,485

176,271

Income tax expense

(39,208)

(20,859)

(59,034)

(74,446)

Net earnings for the period

$

49,664

$

22,284

$

123,451

$

101,825






Attributable to:






Equity holders of the Company

$

48,892

$

21,777

$

120,991

$

100,085


Non-controlling interests


772


507


2,460


1,740


$

49,664

$

22,284

$

123,451

$

101,825






Earnings per share attributable to common shareholders





Basic earnings per share

$

0.32

$

0.14

$

0.79

$

0.66

Diluted earnings per share

$

0.32

$

0.14

$

0.79

$

0.66

Weighted average shares outstanding (in 000's) Basic

153,207

152,263

153,070

152,118

Weighted average shares outstanding (in 000's) Diluted

153,434

152,669

153,353

152,504

 

Consolidated Statements of Comprehensive Income

(Unaudited in thousands of U.S. dollars)







Three months ended
December 31,

Year ended
December 31,



2017

2016

2017

2016

Net earnings for the period


$

49,664

$

22,284

$

123,451

$

101,825

Items that may be reclassified subsequently to net earnings:







Unrealized net gains (losses) on available for sale securities
(net of $nil tax in 2017 and 2016)


1,376

(2,151)

810

912


Reclassification adjustment for realized losses (gains) on
equity securities to earnings (net of $nil tax in 2017 and 2016)


250

(27)

361

(20)

Total comprehensive earnings for the period


$

51,290

$

20,106

$

124,622

$

102,717







Total comprehensive earnings attributable to:






Equity holders of the Company


$

50,518

$

19,599

$

122,162

$

100,977

Non-controlling interests


772

507

2,460

1,740



$

51,290

$

20,106

$

124,622

$

102,717

 

Consolidated Statements of Cash Flows

(Unaudited in thousands of U.S. dollars)





Three months ended
December 31,

Year ended
December 31,


2017

2016

2017

2016

Cash flow from operating activities






Net earnings for the period

$

49,664

$

22,284

$

123,451

$

101,825






Current income tax expense

26,706

9,841

62,877

44,031

Deferred income tax expense (recovery)

12,502

11,018

(3,843)

30,415

Interest expense (recovery)

284

891

(1,179)

2,115

Depreciation and amortization

34,240

23,032

122,888

115,955

Impairment reversals

(61,554)

(61,554)

Accretion on closure and decommissioning provision

1,493

1,090

5,973

4,363

Unrealized losses (gains) on foreign exchange

362

4,139

(383)

5,759

Losses (gains) on commodity, diesel fuel swaps, and foreign
currency contracts

1,841

1,710

(606)

4,944

Loss (gain) on sale of mineral properties, plant and equipment

794

(157)

(191)

(25,100)

Project development write-down

1,898

Other operating activities

5,856

(18,613)

13,269

(46,935)

Changes in non-cash operating working capital

15,193

2,283

11,709

(5,545)

Operating cash flows before interest and income taxes

$

87,381

$

57,518

$

274,309

$

231,827






Interest paid

(413)

(1,800)

(2,367)

(2,553)

Interest received

414

406

1,462

1,382

Income taxes paid

(8,091)

(10,456)

(48,845)

(15,852)

Net cash generated from operating activities

$

79,291

$

45,668

$

224,559

$

214,804






Cash flow from investing activities





Payments for mineral properties, plant and equipment

$

(36,473)

$

(56,477)

$

(142,232)

$

(202,661)

Acquisition of mineral interests

(20,219)

Net (purchase of) proceeds from sales of short-term investments

(703)

(3,199)

(14,267)

56,870

Proceeds from sale of mineral properties, plant and equipment

36

738

1,674

16,319

Purchase of shares in associate

(2,473)

Net proceeds (payments) from commodity, diesel fuel swaps,
and foreign currency contracts

348

(2,145)

(304)

(4,965)

Exercise of warrants and other payments

(5,460)

(5,460)

Net cash used in investing activities

$

(36,792)

$

(66,543)

$

(177,821)

$

(139,897)






Cash flow from financing activities





Proceeds from issue of equity shares

$

28

$

96

$

2,606

$

2,399

Distributions to non-controlling interests

(314)

(107)

(1,052)

(428)

Dividends paid

(3,830)

(1,903)

(15,314)

(7,606)

Repayment of credit facility

(36,200)

Proceeds from (payment of) short-term loans

3,000

(5,172)

3,000

(19,536)

Payment of equipment leases

(1,344)

(725)

(4,542)

(3,047)

Net cash used in financing activities

$

(2,460)

$

(7,811)

$

(51,502)

$

(28,218)

Effects of exchange rate changes on cash and cash equivalents

(80)

2

(164)

229

Net increase in cash and cash equivalents

39,959

(28,684)

(4,928)

46,918

Cash and cash equivalents at the beginning of the period

135,994

209,565

180,881

133,963

Cash and cash equivalents at the end of the period

$

175,953

$

180,881

$

175,953

$

180,881










 

ALTERNATIVE PERFORMANCE (NON-GAAP) MEASURES

AISCSOS
AISCSOS is a non-GAAP financial measure. AISCSOS does not have any standardized meaning prescribed by IFRS and is therefore unlikely to be comparable to similar measures presented by other companies. We believe that AISCSOS reflects a comprehensive measure of the full cost of operating our consolidated business given it includes the cost of replacing silver ounces through exploration, the cost of ongoing capital investments (sustaining capital), general and administrative expenses, as well as other items that affect the Company's consolidated cash flow. To facilitate a better understanding of this measure as calculated by the Company, the following table provides the detailed reconciliation of this measure to the applicable cost items, as reported in the consolidated income statements for the respective periods:







Three months ended
December 31,

Year ended
December 31,

(In thousands of USD, except as noted)


2017

2016

2017

2016

Direct operating costs


$

134,202

$

120,496

$

488,363

$

472,806

Inventory net realizable value ("NRV") adjustments

A

5,495

(10,715)

12,307

(42,815)

Production costs(1)


$

139,697

$

109,781

$

500,670

$

429,991

Royalties


8,809

8,142

24,510

31,608

Direct selling costs (2)


19,408

20,656

69,344

80,319

Less by-product credits (2)


(131,679)

(109,571)

(462,663)

(424,442)

Cash cost of sales net of by-products (3)


$

36,235

$

29,009

$

131,862

$

117,476

Sustaining capital (4)


$

25,573

$

24,976

$

84,215

$

89,394

Exploration and project development(5)


4,269

3,068

17,858

11,334

Reclamation cost accretion


1,493

1,090

5,973

4,363

General and administrative expense


4,732

5,592

21,397

23,663

All-in sustaining costs (3)

B

$

72,303

$

63,735

$

261,304

$

246,230

Payable ounces sold (in thousands)

C

6,659.4

6,138.2

24,211.7

24,199.5

All-in sustaining cost per silver ounce sold, net of by-products

B/C

$

10.86

$

10.38

$

10.79

$

10.17

All-in sustaining cost per silver ounce sold, net of by-products
(excludes NRV inventory adjustments)

(B-A)/C

$

10.03

$

12.13

$

10.28

$

11.94

(1)

For the purposes of AISCSOS, Alamo Dorado production costs for the three and twelve month periods ended December 31, 2016 have been decreased by $0.6 million and increased by $1.7 million, respectively, to exclude non-cash adjustments to the closure and decommissioning liabilities that are included in production costs as presented in the unaudited consolidated statements of income (loss).

(2)

Included in the revenue line of the interim consolidated income statements, and for by-product credits are reflective of realized metal prices for the applicable periods.

(3)

Totals may not add due to rounding.

(4)

Please refer to the table below.  Further, 2017 annual sustaining capital cash outflows included in this table were $0.2 million less than the $84.4 million capitalized in 2017,  as shown in the Capital  Expenditures table included in this news release. The difference is due to the timing difference between the cash payment of capital investments compared with the period in which investments are capitalized.

(5)

The amounts for year-to-date 2017 exclude $1.9 million from non-cash project development write-downs.

 

As part of the AISCSOS measure, sustaining capital is included while expansionary or acquisition capital (referred to by the Company as non-sustaining capital) is not. Inclusion of sustaining capital only is a measure of capital costs associated with current ounces sold as opposed to investment capital, which is expected to increase future production. For the periods under review, the items noted below are associated with the La Colorada expansion project, the Dolores leach pad and other expansionary expenditures considered to be investment capital projects.






Reconciliation of payments for mineral properties,
plant and equipment and sustaining capital

Three months ended
December 31,

Year ended
December 31,

(in thousands of USD)

2017

2016

2017

2016

Payments for mineral properties, plant and equipment(1)

$

36,473

$

56,477

142,232

202,661

Add/(Subtract)





Advances received for leases

1,385

2,213

5,000

6,151

Non-Sustaining capital (Dolores, La Colorada projects, and other)

(12,284)

(33,714)

(63,017)

(119,418)

Sustaining Capital(2)

$

25,573

$

24,976

84,215

89,394

(1)

As presented on the unaudited interim consolidated statements of cash flows.

(2)

Totals may not add due to rounding

 


Three months ended December 31, 2017

(In thousands of USD, except as noted)

La
Colorada

Dolores

Alamo
Dorado

Huaron

Morococha

San
Vicente

Manantial
Espejo

PASCORP

Consolidated

Direct operating costs

16,580

35,739

3,957

19,551

16,931

10,484

30,960


134,202

NRV inventory adjustments

4,098

(1,916)

3,313


5,495

Production costs

16,580

39,838

2,041

19,551

16,931

10,484

34,273


139,697

Royalties

106

1,966

6,105

633


8,809

Direct selling costs

4,066

31

248

6,659

5,014

3,383

8


19,408

Less by-product credits

(18,316)

(39,317)

(61)

(24,653)

(26,767)

(6,969)

(15,595)


(131,679)

Cash cost of sales net of by-products(1)

2,435

2,518

2,227

1,557

(4,823)

13,002

19,319


36,235

Sustaining capital

2,576

13,303

3,548

3,162

1,939

1,045


25,573

Exploration and project development

73

564

428

543

936

1,726

4,269

Reclamation cost accretion

112

296

89

162

105

56

619

54

1,493

General & administrative expense

4,731

4,732

All-in sustaining costs(1)

5,196

16,682

2,317

5,695

(1,013)

14,998

21,918

6,511

72,303

Payable ounces sold (thousand)

1,847

1,225

133

813

658

1,218

766


6,659

All-in sustaining cost per silver ounce
sold, net of by-products

$

2.81

$

13.62

$

17.45

$

7.00

$

(1.54)

$

12.31

$

28.63


$

10.86

All-in sustaining cost per silver ounce
sold, net of by-products (excludes NRV
inventory adjustments)

2.81

10.27

31.89

7.00

(1.54)

12.31

24.30


10.03

(1)

Totals may not add due to rounding.

 











Year ended December 31, 2017

(In thousands of USD, except as noted)

La
Colorada

Dolores

Alamo
Dorado

Huaron

Morococha

San
Vicente

Manantial
Espejo

PASCORP

Consolidated

Direct operating costs

67,170

116,104

20,477

75,551

63,967

34,731

110,362


488,363

NRV inventory adjustments


6,847

(2,598)




8,058


12,307

Production costs

67,170

122,951

17,879

75,551

63,967

34,731

118,420


500,670

Royalties

475

6,501

79

14,321

3,134


24,510

Direct selling costs

12,235

93

479

26,238

18,770

10,740

789


69,344

Less by-product credits

(64,133)

(128,351)

(3,467)

(97,715)

(94,233)

(16,278)

(58,485)


(462,663)

Cash cost of sales net of by-products(1)

15,748

1,194

14,970

4,074

(11,496)

43,513

63,858


131,862

Sustaining capital

13,970

36,071

10,267

12,428

8,146

3,333


84,215

Exploration and project development

251

2,444

1,713

1,629

4,588

7,232

17,858

Reclamation cost accretion

448

1,186

357

646

420

225

2,474

216

5,973

General & administrative expense

21,397

21,397

All-in sustaining costs(1)

30,417

40,894

15,327

16,701

2,981

51,884

74,254

28,845

261,304

Payable ounces sold (thousand)

6,853

4,089

867

3,181

2,448

3,603

3,171


24,212

All-in sustaining cost per silver ounce
sold, net of by-products

$

4.44

$

10.00

$

17.69

$

5.25

$

1.22

$

14.40

$

23.42


$

10.79

All-in sustaining cost per silver ounce
sold, net of by-products (excludes NRV
inventory adjustments)

$

4.44

$

8.33

$

20.68

$

5.25

$

1.22

$

14.40

$

20.88


$

10.28

(1)

Totals may not add due to rounding.

 


Three months ended December 31, 2016

(In thousands of USD, except as noted)

La
Colorada

Dolores

Alamo
Dorado

Huaron

Morococha

San
Vicente

Manantial
Espejo

PASCORP

Consolidated

Direct operating costs

14,674

28,664

7,266

17,991

15,547

10,016

26,336


120,496

NRV inventory adjustments

(6,350)

2,224

(6,589)


(10,715)

Production costs

14,674

22,314

9,490

17,991

15,547

10,016

19,747


109,781

Royalties

135

1,604

33

5,598

772


8,142

Direct selling costs

3,712

23

125

7,735

5,643

4,634

(1,215)


20,656

Less by-product credits

(12,238)

(32,868)

(1,609)

(21,206)

(18,379)

(5,372)

(17,898)


(109,571)

Cash cost of sales net of by-products(1)

6,283

(8,927)

8,039

4,520

2,812

14,876

1,406


29,009

Sustaining capital

2,229

10,772

4,355

4,892

1,631

1,097


24,976

Exploration and project development

31

628

576

109

1,723

3,068

Reclamation cost accretion

72

179

104

126

86

54

433

37

1,090

General & administrative expense

5,592

5,592

All-in sustaining costs(1)

8,615

2,652

8,144

9,576

7,899

16,561

2,935

7,352

63,735

Payable ounces sold (thousand)

1,561

895

286

759

526

1,332

779


6,138

All-in sustaining cost per silver ounce
sold, net of by-products

$

5.52

$

2.96

$

28.44

$

12.62

$

15.02

$

12.43

$

3.77


$

10.38

All-in sustaining cost per silver ounce
sold, net of by-products (excludes NRV
inventroy adjustments)

$

5.52

$

10.06

$

20.68

$

12.62

$

15.02

$

12.43

$

12.22


$

12.13

(1)

Totals may not add due to rounding.

 


Year ended December 31, 2016

(In thousands of USD, except as noted)

La
Colorada

Dolores

Alamo
Dorado

Huaron

Morococha

San
Vicente

Manantial
Espejo

PASCORP

Consolidated

Direct operating costs

50,879

121,162

40,172

67,911

58,868

34,959

98,856


472,806

NRV inventory adjustments


(22,434)

1,173




(21,554)


(42,815)

Production costs

50,879

98,728

41,345

67,911

58,868

34,959

77,302


429,991

Royalties

401

6,224

235

20,929

3,818


31,608

Direct selling costs

13,554

107

376

32,443

25,702

15,697

(7,562)


80,319

Less by-product credits

(34,737)

(123,811)

(13,156)

(77,754)

(74,754)

(15,774)

(84,456)


(424,442)

Cash cost of sales net of by-products(1)

30,098

(18,751)

28,800

22,600

9,817

55,811

(10,898)


117,476

Sustaining capital

10,545

48,079

11,994

10,945

4,963

2,868


89,394

Exploration and project development

186

1,792

837

1,053

7,465

11,334

Reclamation cost accretion

287

714

416

505

345

218

1,731

148

4,363

General & administrative expense

23,663

23,663

All-in sustaining costs(1)

41,116

31,834

29,216

35,935

22,159

60,991

(6,299)

31,276

246,230

Payable ounces sold (thousand)

5,486

3,839

1,967

3,233

2,377

4,264

3,033


24,200

All-in sustaining cost per silver ounce sold, net of by-products

$

7.49

$

8.29

$

14.85

$

11.11

$

9.32

$

14.30

$

(2.08)


$

10.17

All-in sustaining cost per silver ounce sold, net of by-products (excludes NRV inventory adjustments)

$

7.49

$

14.14

$

14.26

$

11.11

$

9.32

$

14.30

$

5.03


$

11.94

(1)

Totals may not add due to rounding.

 

  • Cash Costs per Ounce of Silver, net of by-product credits

Pan American produces by-product metals incidentally to our silver mining activities. We have adopted the practice of calculating the net cost of producing an ounce of silver, our primary payable metal, after deducting revenues gained from incidental by-product production, as a performance measure. This performance measurement has been commonly used in the mining industry for many years and was developed as a relatively simple way of comparing the net production costs of the primary metal for a specific period against the prevailing market price of that metal.

Cash costs per ounce metrics, net of by-product credits, is used extensively in our internal decision making processes. We believe the metric is also useful to investors because it facilitates comparison, on a mine-by-mine basis, notwithstanding the unique mix of incidental by-product production at each mine, of our operations' relative performance on a period-by-period basis, and against the operations of our peers in the silver industry on a consistent basis. Cash costs per ounce is conceptually understood and widely reported in the silver mining industry. However, cash cost per ounce of silver is a non-GAAP measure and does not have a standardized meaning prescribed by GAAP and the Company's method of calculating cash costs may differ from the methods used by other entities.

To facilitate a better understanding of these measures as calculated by the Company, the following table provides the detailed reconciliation of these measures to the production costs, as reported in the consolidated income statements for the respective periods:







Total Cash Costs per ounce of Payable Silver, net of
by-product credits


Three months ended
December 31,

Year ended
December 31,


(in thousands of U.S. dollars except as noted)



2017


2016


2017


2016

Production costs


$

139,697

$

110,466

$

500,670

$

428,333

Add/(Subtract)






Royalties


8,809

8,142

24,510

31,608

Smelting, refining, and transportation charges


18,469

22,204

73,222

91,371

Worker's participation and voluntary payments


(1,374)

(876)

(5,067)

(3,397)

Change in inventories


(12,776)

(3,473)

(16,011)

(11,937)

Other


555

358

1,559

(5,660)

Non-controlling interests (1)


(64)

(811)

(1,126)

(3,358)

Inventory net realizable value ("NRV") adjustments


(5,495)

10,715

(12,307)

42,815

Cash Operating Costs before by-product credits(2)


147,820

146,725

565,450

569,775


Less gold credit


(54,648)

(52,888)

(196,649)

(227,196)


Less zinc credit


(40,826)

(28,486)

(137,826)

(93,428)


Less lead credit


(12,687)

(11,226)

(46,948)

(35,890)


Less copper credit    


(20,026)

(14,667)

(77,348)

(63,404)

Cash Operating Costs net of by-product credits (2)

A

19,633

39,457

106,678

149,857

Payable Silver Production (koz)

B

6,172

5,925

23,444

23,818

Cash Costs per ounce net of by-product credits

A/B

$

3.18

$

6.66

$

4.55

$

6.29

(1)

Figures presented in the reconciliation table above are on a 100% basis as presented in the consolidated financial statements with an adjustment line item to account for the portion of the Morococha and San Vicente mines owned by non-controlling interests, an expense item not included in operating cash costs. The associated tables below are for the Company's share of ownership only.

(2)

Figures in this table and in the associated tables below may not add due to rounding.

 


Three months ended December 31, 2017 (1)

(in thousands of USD except as noted)



La
Colorada

Dolores

Alamo
Dorado

Huaron

Morococha

San
Vicente

Manantial
Espejo

Consolidated
Total

Cash Costs before by-
product credits

A

$

18,708

$

34,778

$

136

$

26,440

$

20,276

$

15,300

$

29,800

$

145,437


Less gold credit

b1

(1,377)

(39,708)

(90)

(9)

(625)

(79)

(12,704)

(54,592)


Less zinc credit

b2

(11,337)

(12,296)

(12,205)

(3,767)

(39,605)


Less lead credit

b3

(5,232)

(4,758)

(2,361)

(131)

(12,483)


Less copper credit

b4

(7,671)

(9,585)

(1,868)

(19,124)

Sub-total by-product credits

B=( b1+
b2+ b3+
b4)

$

(17,947)

$

(39,708)

$

(90)

$

(24,733)

$

(24,776)

$

(5,845)

$

(12,704)

$

(125,804)

Cash Costs net of by-
product credits

C=(A+B)

$

761

$

(4,930)

$

46

$

1,706

$

(4,500)

$

9,455

$

17,095

$

19,633











Payable ounces of silver
(thousand)

D

1,777

1,254

22

821

607

1,046

645

6,172



















Cash cost per ounce net
of by-products

C/D

$

0.43

$

(3.93)

$

2.09

$

2.08

$

(7.42)

$

9.04

$

26.52

$

3.18

(1)

Totals may not add due to rounding.

 


Year ended December 31, 2017(1)

(in thousands of USD except as noted)



La
Colorada

Dolores

Alamo
Dorado

Huaron

Morococha

San
Vicente

Manantial
Espejo

Consolidated
Total

Cash Costs before by-
product credits

A

$

75,407

122,532

$

12,666

$

101,588

$

76,085

$

55,286

$

113,726

$

557,291


Less gold credit

b1

(4,477)

(129,503)

(2,498)

(148)

(2,639)

(305)

(56,842)

(196,411)


Less zinc credit

b2

(37,967)

(46,080)

(39,402)

(10,522)

(133,972)


Less lead credit

b3

(18,994)

(19,039)

(7,573)

(672)

(46,278)


Less copper credit

b4

(46)

(32,059)

(38,315)

(3,533)

(73,952)

Sub-total by-product
credits

B=( b1+
b2+ b3+
b4)

$

(61,438)

$

(129,503)

$

(2,544)

$

(97,327)

$

(87,929)

$

(15,032)

$

(56,842)

$

(450,614)

Cash Costs net of by-
product credits

C=(A+B)

$

13,970

$

(6,971)

$

10,123

$

4,261

$

(11,844)

$

40,254

$

56,884

$

106,677











Payable ounces of silver
(thousand)

D

6,709

4,225

614

3,164

2,219

3,396

3,117

23,444



















Cash cost per ounce net
of by-products

C/D

$

2.08

$

(1.65)

$

16.49

$

1.35

$

(5.34)

$

11.85

$

18.25

$

4.55

(1)

Totals may not add due to rounding.

 


Three months ended December 31, 2016(1)

(in thousands of USD except as noted)



La
Colorada

Dolores

Alamo
Dorado

Huaron

Morococha

San
Vicente

Manantial
Espejo

Consolidated
Total

Cash Costs before by-
product credits

A

$

19,118

29,875

$

10,704

$

25,766

$

19,496

$

14,034

$

26,259

$

145,251


Less gold credit

b1

(841)

(35,183)

(1,690)

(165)

(86)

(14,905)

(52,870)


Less zinc credit

b2

(7,801)

(11,056)

(7,361)

(1,568)

(27,787)


Less lead credit

b3

(3,513)

(6,005)

(1,444)

(136)

(11,098)


Less copper credit

b4

31

(5,122)

(7,849)

(1,095)

(14,035)

Sub-total by-product credits

B=( b1+
b2+ b3+
b4)

$

(12,155)

$

(35,183)

$

(1,659)

$

(22,183)

$

(16,819)

$

(2,885)

$

(14,905)

$

(105,790)

Cash Costs net of by-
product credits

C=(A+B)

$

6,962

$

(5,308)

$

9,046

$

3,583

$

2,676

$

11,149

$

11,354

$

39,462











Payable ounces of silver
(thousand)

D

1,588

895

397

789

485

994

777

5,925



















Cash cost per ounce net
of by-products

C/D

$

4.38

$

(5.93)

$

22.80

$

4.54

$

5.52

$

11.22

$

14.61

$

6.66

(1)

Totals may not add due to rounding.

 


Year ended December 31, 2016(1)

(in thousands of USD except as noted)



La
Colorada

Dolores

Alamo
Dorado

Huaron

Morococha

San
Vicente

Manantial
Espejo

Consolidated
Total

Cash Costs before by-
product credits

A

$

68,057

124,570

$

39,891

$

96,284

$

75,586

$

61,779

$

97,388

$

563,555


Less gold credit

b1

(2,929)

(128,696)

(10,251)

(2)

(897)

(335)

(83,992)

(227,103)


Less zinc credit

b2

(20,636)

(34,638)

(26,841)

(8,611)

(90,726)


Less lead credit

b3

(10,487)

(18,967)

(5,166)

(795)

(35,415)


Less copper credit

b4

(100)

(24,113)

(33,701)

(2,534)

(60,448)

Sub-total by-product
credits

B=(b1+
b2+ b3+
b4)

$

(34,052)

$

(128,696)

$

(10,351)

$

(77,720)

$

(66,605)

$

(12,275)

$

(83,992)

$

(413,692)

Cash Costs net of by-
product credits

C=(A+B)

$

34,004

$

(4,126)

$

29,539

$

18,565

$

8,981

$

49,504

$

13,396

$

149,862











Payable ounces of silver
(thousand)

D

5,531

3,831

1,844

3,208

2,132

4,143

3,130

23,818



















Cash cost per ounce net
of by-products

C/D

$

6.15

$

(1.08)

$

16.02

$

5.79

$

4.21

$

11.95

$

4.28

$

6.29

(1)

Totals may not add due to rounding.

 

  • Adjusted Earnings and Basic Adjusted Earnings Per Share

Adjusted earnings and basic adjusted earnings per share are non-GAAP measures that the Company considers to better reflect normalized earnings as it eliminates items that in management's judgment are subject to volatility as a result of factors which are unrelated to operations in the period, and/or relate to items that will settle in future periods. Certain items that become applicable in a period may be adjusted for, with the Company retroactively presenting comparable periods with an adjustment for such items and conversely, items no longer applicable may be removed from the calculation. The Company adjusts certain items in the periods that they occurred but does not reverse or otherwise unwind the effect of such items in future periods. Neither adjusted earnings nor basic adjusted earnings per share have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other companies.

The following table shows a reconciliation of adjusted loss and earnings for the year and three months ended December 31, 2017 and 2016, to the net earnings for each period.









Three Months Ended
December 31,

Year ended
December 31,

(In thousands of USD, except as noted)


2017

2016

2017

2016

Net earnings for the period


$

49,664

$

22,284

$

123,451

$

101,825

Adjust for:







Derivative gains


(64)

(64)


Impairment reversals


(61,554)

(61,554)


Write-down of project development costs


1,898


Unrealized foreign exchange losses (gains)


362

4,139

(383)

5,759


Net realizable value adjustments to heap inventory


4,936

(6,619)

10,060

(14,110)


Unrealized losses (gains) on commodity contracts


2,190

(435)

(909)

(21)


Share of loss from associate and dilution gain


(259)

(8,484)

(2,052)

(7,946)


Mine operation severance costs


3,509


Reversal of previously accrued tax liabilities


(2,793)


Gain (loss) on sale of assets


794

(157)

(191)

(25,100)

Closure and decommissioning liability adjustment


4,515

8,388

Adjust for effect of taxes relating to the above


$

6,046

$

2,180

$

2,273

$

11,870

Adjust for effect of foreign exchange on taxes


12,589

6,057

(3,928)

14,323

Adjusted earnings for the period


$

19,219

$

18,965

$

77,705

$

86,600

Weighted average shares for the period


153,207

152,118

153,070

152,118

Adjusted earnings per share for the period


$

0.13

$

0.12

$

0.51

$

0.57

 


INDIVIDUAL MINE OPERATION HIGHLIGHTS

La Colorada mine







Three months ended
December 31,

Year ended
December 31,



2017

2016

2017

2016

Tonnes milled - kt


170.7

154.6

655.3

528.8

Average silver grade – grams per tonne


374

370

368

377

Average zinc grade - %


2.88

2.79

2.81

2.63

Average lead grade - %


1.54

1.31

1.54

1.31

Average silver recovery - %


91.1

90.5

91.1

90.3

Average zinc recovery - %


84.1

84.5

83.7

82.2

Average lead recovery - %


86.2

86.7

86.9

86.5

Production:







Silver – koz


1,870

1,665

7,056

5,795


Gold – koz


1.26

0.86

4.29

2.93


Zinc – kt


4.14

3.64

15.44

11.40


Lead – kt                                           


2.26

1.76

8.80

6.00











Cash cost per ounce net of by-products


$

0.43

$

4.38

$

2.08

$

6.15











AISCSOS


$

2.81

$

5.52

$

4.44

$

7.49







Payable silver sold - koz


1,847

1,561

6,853

5,486











Sustaining capital -  ('000s)


$

2,576

$

2,229

$

13,970

$

10,545

 

Dolores mine







Three months ended
December 31,

Year ended
December 31,


2017

2016

2017

2016

Tonnes placed - kt

1,785.1

1,650.5

9,288.7

6,306.5

Average silver grade – grams per tonne

39

43

38

37

Average gold grade – grams per tonne

0.76

0.79

0.66

0.75

Average silver produced to placed ratio - %

55.5

39.2

51.7

50.8

Average gold produced to placed ratio - %

71.8

69.1

70.7

67.7

Production:






Silver – koz

1,256

897

4,232

3,838


Gold – koz                                    

31.2

28.8

103.0

102.8






Cash cost per ounce net of by-products

(3.93)

(5.93)

(1.65)

(1.08)






AISCSOS

13.62

2.96

10.00

8.29






Payable silver sold - koz

1,225

895

4,089

3,839






Sustaining capital -  ('000s)

$

13,303

$

10,772

$

36,071

$

48,079

 

Alamo Dorado mine







Three months ended
December 31,

Year ended
December 31,



2017

2016

2017

2016

Tonnes milled - kt


448.6

451.8

1,833.1

Average silver grade – grams per tonne


 NA

40

43

45

Average gold grade – grams per tonne


 NA

0.14

0.17

0.18

Average silver recovery - %


 NA

65.2

67.6

68.8

Production:






Silver – koz


32.7

401.0

640.7

1,864.0


Gold – koz


0.1

1.4

2.1

8.4


Copper – tonnes                               


0

0

13

30







Cash cost per ounce net of by-products


2.09

22.80

16.49

16.02







AISCSOS


17.45

28.44

17.69

14.85







Payable silver sold - koz


133

286

867

1,967







Sustaining capital -  ('000s)


$

$

$

$

 

Huaron mine







Three months ended
December 31,

Year ended
December 31,



2017

2016

2017

2016

Tonnes milled - kt


231.5

229.9

928.1

904.4

Average silver grade – grams per tonne


152

149

146

157

Average zinc grade - %


2.58

3.12

2.70

3.01

Average lead grade - %


1.15

1.59

1.23

1.51

Average copper grade - %


0.70

0.78

0.84

0.90

Average silver recovery - %


84.1

85.3

85.2

84.1

Average zinc recovery - %


77.8

74.6

77.6

74.3

Average lead recovery - %


76.6

81.4

77.7

79.4

Average copper recovery - %


74.5

72.1

78.5

75.5

Production:







Silver – koz


951

935

3,684

3,812


Gold – koz


0.19

0.20

1.15

0.81


Zinc – kt


4.64

5.31

19.37

19.94


Lead – kt


2.03

2.97

8.77

10.72


Copper – kt                                    


1.21

1.27

6.09

6.07







Cash cost per ounce net of by-products


$

2.08

$

4.54

$

1.35

$

5.79







AISCSOS


$

7.00

$

12.62

$

5.25

$

11.11







Payable silver sold – koz


813

759

3,181

3,233







Sustaining capital - ('000s)


$

3,548

$

4,355

$

10,267

$

11,994

 

Morococha mine(1)







Three months ended
December 31,

Year ended
December 31,



2017

2016

2017

2016

Tonnes milled – kt


170.6

164.2

676.9

672.8

Average silver grade – grams per tonne


145

126

137

135

Average zinc grade  - %


3.25

2.81

3.01

3.15

Average lead grade  - %


0.84

0.71

0.78

0.75

Average copper grade  - %


1.07

1.23

1.20

1.44

Average silver recovery - %


91.0

88.6

89.2

88.4

Average zinc recovery - %


81.2

76.2

79.6

73.2

Average lead recovery - %


71.0

62.9

66.6

60.0

Average copper recovery - %


83.4

82.6

83.9

82.6

Production:







Silver – koz


721

578

2,634

2,541


Gold – koz


0.82

0.43

3.53

2.14


Zinc – kt


4.49

3.48

16.13

15.46


Lead – kt


1.00

0.72

3.46

2.94


Copper – kt                                  


1.49

1.60

6.64

7.74







Cash cost per ounce net of by-products


$

(7.42)

$

5.52

$

(5.34)

$

4.21







AISCSOS


$

(1.54)

$

15.02

$

1.22

$

9.32







Payable silver sold (100%) - koz


658

526

2,448

2,377







Sustaining capital (100%) -  ('000s)


$

3,162

$

4,892

$

12,428

$

10,945

(1)

Production figures are for Pan American's 92.3% share only, unless otherwise noted.

 

San Vicente mine (1)







Three months ended
December 31,

Year ended
December 31,



2017

2016

2017

2016

Tonnes milled – kt


89.5

81.5

328.1

338.9

Average silver grade – grams per tonne


406

431

374

443

Average zinc grade - %


2.01

1.41

1.94

2.05

Average lead grade - %


0.25

0.29

0.29

0.32

Average silver recovery - %


93.9

93.9

92.6

93.2

Average zinc recovery - %


77.7

64.3

68.7

73.0

Average lead recovery - %


79.1

87.8

80.1

84.2

Production:







Silver – koz


1,102

1,050

3,610

4,433


Gold – koz


0.14


0.51



Zinc – kt


1.40

0.75

4.36

5.08


Lead – kt


0.11

0.09

0.47

0.59


Copper – kt                                      


0.33

0.23

0.63

0.55







Cash cost per ounce net of by-products


$

9.04

$

11.22

$

11.85

$

11.95







AISCSOS


$

12.31

$

12.43

$

14.40

$

14.30







Payable silver sold (100%) - koz


1,218

1,332

3,603

4,264







Sustaining capital (100%) -  ('000s)


$

1,939

$

1,631

$

8,146

$

4,963

(1)

Production figures are for Pan American's 95.0% share only, unless otherwise noted.

 

Manantial Espejo mine







Three months ended
December 31,

Year ended
December 31,



2017

2016

2017

2016

Tonnes milled - kt


205.1

205.0

793.5

753.6

Average silver grade – grams per tonne


107

130

134

143

Average gold grade – grams per tonne


1.62

2.00

1.88

2.94

Average silver recovery - %


89.7

91.1

90.6

90.2

Average gold recovery - %


93.5

92.8

93.8

93.8

Production:






Silver – koz


646

779

3,123

3,136

Gold – koz


9.98

12.21

45.34

66.89







Cash cost per ounce net of by-products


$

26.52

$

14.61

$

18.25

$

4.28







AISCSOS


$

28.63

$

3.77

$

23.42

$

(2.08)







Payable silver sold - koz


766

779

3,171

3,033







Sustaining capital -  ('000s)


$

1,045

$

1,097

$

3,333

$

2,868

 

 

SOURCE Pan American Silver Corp.

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