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Pan American Silver reports 2018 operating results and 2019 guidance

Published by , Assistant Editor
Global Mining Review,

On Monday this week, Pan American Silver Corp. (Pan American) announced preliminary operating results for 4Q18 and FY18, and provided guidance for 2019.

"2018 was a pivotal year for Pan American with low cash costs, strong cash flow, continued improvements at Morococha and Huaron, and positive impact to the bottom line from our La Colorada and Dolores expansions," said Michael Steinmann, President and CEO of Pan American.

"In addition, we made an important skarn discovery at La Colorada and announced the transformational acquisition of Tahoe. The acquisition is expected to close at the end of February, and we are looking forward to updating our forecast for 2019 in the second quarter to include the Tahoe assets."

2018 Consolidated operating highlights

  • Silver production of 24.8 million oz was modestly below the original guidance range provided in January 2018 (the original guidance) of 25 - 26.5 million oz, primarily due to shortfalls at Dolores and San Vicente, partially offset by higher-than-forecast production at La Colorada and Morococha, both of which set annual records. At Dolores, above average rainfalls during 3Q18 hampered the company’s ability to make up open pit tonnages following the security-related road closures in June, resulting in a shortfall of tonnes placed on the heap. In addition, slower cement deliveries due to logistical challenges required lower solution application and reduced leach rates. At San Vicente, narrow vein mechanisation efforts required additional operator training, resulting in lower throughput and increased dilution.
  • Gold production of 178.9 thousand oz was within the Original Guidance range. An annual record was set for gold production at Dolores.
  • Record zinc and lead production exceeded the Original Guidance range, with annual zinc production records set at La Colorada, Morococha and San Vicente. La Colorada also set an annual record for lead production. Copper production was within the revised range provided on 8 August, 2018 (the revised guidance).
  • Cash costs of US$3.35/oz of silver were within Revised Guidance. A record low annual cash cost of CAN$2.02/oz was set at La Colorada.

2019 guidance

The guidance provided is Pan American's initial guidance for 2019, and excludes the assets to be acquired under the Arrangement with Tahoe. We intend to update the guidance to include the Tahoe assets and allocation of new general and administrative costs following close of the transaction, which is currently expected to be on or about 26 February 2019. The timing for providing updated guidance is currently anticipated to be in the second quarter of 2019. We may also revise guidance during the year to reflect actual and anticipated results.

The 2019 guidance reflects certain adjustments from the outlook provided for 2019 in our news release dated 11 January 2018. The anticipated increase in AISCSOS is mainly due to: lower by-product base metal prices, higher treatment and refining costs for flotation concentrates, new export tax payments in Argentina, increased electricity costs in Mexico, and wage inflation; partially offset by lower sustaining capital.

The anticipated decrease in silver and gold production is due to a later startup of COSE production related to a change in the mining method. The modification takes into account the current ground conditions and directly transfers the existing miner expertise from the Manantial Espejo operation. The change requires additional upfront development, which is expected to result in an approximate 6 month delay in commencing production at COSE, rescheduling some of the ounces originally planned for 2019 into 2020.

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