• Cash Flow Before Changes in Working Capital: $203.3 million in Q2.
• Free Cash Flow: $102.1 million in Q2.
• Cash Balance: $337.2 million as of June 30, an increase of $36.1 million from the previous quarter.
• Net Loss: $21.4 million or $0.06 per share in Q2.
• Adjusted Earnings: $40 million or $0.11 per share.
• Silver Production: 4.57 million ounces in Q2, below the expected range of 5.36 million to 5.78 million ounces.
• Gold Production: 22,400 ounces in Q2, slightly below the expected range of 221,000 to 252,000 ounces.
• Silver Segment All-In Sustaining Costs: $18.12 per ounce, excluding NRV adjustments.
• Gold Segment All-In Sustaining Costs: $1,465 per ounce, excluding NRV adjustments.
• Net Debt: Declined to $472.3 million.
• Dividend: Base cash dividend maintained at $0.10 per common share.

• Warning! GuruFocus has detected 4 Warning Signs with PAAS.

Release Date: August 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Pan American Silver Corp (NYSE:PAAS) generated record cash flow before changes in working capital of $203.3 million in Q2, resulting in $102.1 million free cash flow.
• The company's balance sheet improved with cash balances rising to $337.2 million at June 30, an increase of $36.1 million from the previous quarter.
• The new ventilation infrastructure at La Colorada was completed on schedule, improving ventilation conditions and expected to increase throughput and grades in the second half of 2024.
• Costs in Q2 were better than expected, with all-in sustaining costs for both the silver and gold segments below guidance ranges.
• The company is on track with major projects, including the new dry-stack tailings storage facility at Huaron and the paste plant project at Timmins, both scheduled for completion in 2024.

Negative Points

• Pan American Silver Corp (NYSE:PAAS) reported a net loss in Q2 of $21.4 million, significantly impacted by a $93.1 million income tax expense and $26.7 million net realizable value inventory expense.
• Silver production of 4.57 million ounces in Q2 was below the expected range due to ventilation constraints at La Colorada and weather-related disruptions at other sites.
• Weather-related disruptions at Dolores and Cerro Moro impacted ore mining and access, leading to lower grades and throughput.
• Unusual heavy rains at Minera Florida resulted in a 10-day suspension of ore processing, affecting production.
• Currency fluctuations, particularly the devaluation of the Brazilian real and Mexican peso, impacted income tax expenses and could continue to affect financial results.

Q & A Highlights

Q: Can you elaborate on the current status and impact of the new ventilation shaft at La Colorada? A: Michael Steinmann, President and CEO, explained that the ventilation shaft was completed on time and has significantly improved airflow, increasing mine temperatures and production rates. Steven Busby, COO, added that the airflow increased by 200,000-300,000 cubic feet per minute, leading to a 25% increase in tonnage and a 10% boost in development rates. The company expects a steady ramp-up in production through the rest of the year.

Q: Despite lower silver production in Q2, costs were better than expected. How was this achieved, and can it be sustained? A: Michael Steinmann noted that increased production later in the year, particularly at La Colorada, will lower costs due to fixed costs being spread over more output. Steven Busby added that the timing of by-product credit sales and currency fluctuations positively impacted costs. The company expects these factors to continue benefiting costs in the second half of the year.

Q: What is the current status of the Escobal consultation process in Guatemala? A: Michael Steinmann stated that there have been numerous meetings with government officials, and while the appointment of the vice minister of sustainable development is pending, the company anticipates a continuation of the consultation process. The new government is gradually setting up, and discussions are expected to normalize soon.

Q: Can you provide an update on the optimization work at Jacobina? A: Michael Steinmann expressed excitement about Jacobina's performance, highlighting strong cash flow and production. Steven Busby mentioned that optimization work is ongoing, focusing on mining methods to increase resource recovery and potentially throughput. The study results are expected in the first half of next year.

Q: What are the expectations for Cerro Moro's grades and throughput in the coming quarters? A: Michael Steinmann noted that access to the high-grade Naty zone was restricted due to weather, but access has been re-established. Steven Busby added that the company is upgrading infrastructure to prevent future disruptions and plans to accelerate production in Naty, with stronger output expected in Q4.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.