Cash Costs Decrease 25% While Silver and Gold Production Rise 7% and 48%
(Unaudited results - All amounts in US dollars unless otherwise stated
and all production figures are approximate)
VANCOUVER, Nov. 14, 2013 /CNW/ - Pan American Silver Corp. (NASDAQ: PAAS; TSX: PAA) (the "Company", or "Pan American") reported
net earnings of $14.2 million or $0.09 per share for the third quarter
of 2013. Adjusted earnings for the same period were $12.2 million or
$0.08 per share. Cash flow generated from operating activities was
$40.7 million or $0.27 per share. Year-to-date silver and gold
production are on track to meet the Company's full year 2013 production
forecast, at significantly lower than forecast cash costs.
Third Quarter 2013 Highlights (unaudited)(1)
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Silver production of 6.7 million ounces, up 7% over Q3 2012 and 8% over
Q2 2013
-
Record gold production of 41,600 ounces, up 48% over Q3 2012 and 39%
over Q2 2013
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Production costs were $130.0 million, down 8% from Q3 2012 and 4% down
from Q2 2013.
-
Consolidated cash costs(2) of $10.40 per ounce of silver, net of by-product credits, down 25% from
Q2 2012 and 14% from Q2 2013.
-
All-in sustaining costs per silver ounce sold ("AISCSOS")(3) of $16.26 per ounce of silver sold, down 33% from Q3 2012.
-
Mine operating earnings(4) of $33.9 million.
-
Net earnings of $14.2 million or $0.09 per share.
-
Adjusted net earnings(5) of $12.2 million or $0.08 per share.
-
Net cash generated from operating activities of $40.7 million or $0.27
per share(6)
-
Revenue of $213.6 million.
-
Cash dividends of $18.9 million paid to holders of common shares.
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Financial Position (at September 30, 2013)
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Cash and short term investments of $421.0 million.
-
Working capital of $699.3 million.
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(1) Financial information in this news release is based on International
Financial Reporting Standards ("IFRS"); results are unaudited;
percentages compare period-on-period.
(2) Cash costs per payable ounce of silver, net of by-product credits, is a
non-GAAP measure. The Company believes that in addition to production
costs, depreciation and amortization, and royalties, cash costs per
ounce is a useful and complementary benchmark that investors use to
evaluate the Company's performance and ability to generate cash flow
and is well understood and widely reported in the silver mining
industry. However, cash costs per ounce does not have a standardized
meaning prescribed by IFRS as an indicator of performance. Investors
are cautioned that cash costs per ounce 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. The Company's method of calculating cash costs per ounce
may differ from the methods used by other entities and, accordingly,
the Company's cash costs per ounce may not be comparable to similarly
titled measures used by other entities. See "Financial and Operating
Highlights" below for a reconciliation of this measure to the Company's
production costs, depreciation and amortization, and royalties (1)
(3) All-In sustaining costs per silver ounce sold ("AISCSOS") is a non-GAAP
measure. The Company has adopted the reporting of AISCSOS as a measure
of a silver mining company's consolidated operating performance and the
ability to generate cash flow from all operations collectively. We
believe it is a more comprehensive measure of the cost of operating our
consolidated business than traditional cash and total costs per 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. This measure including
its subcomponent Sustaining Capital are non - GAAP measures and readers
should refer to the section of Q3 2013 MD&A "Alternative Performance
(Non-GAAP) Measures" for a reconciliation of this measure to the Q3
2013 unaudited condensed interim consolidated financial statements.
(4) Mine operating earnings is a non-GAAP measure used by the Company to
assess the performance of its silver mining operations. Mine operating
earnings is calculated as revenue less production costs, depreciation
and amortization and royalties. The Company and certain investors use
this information to evaluate the Company's performance.
(5) Adjusted earnings and adjusted earnings per share attributable to
common shareholders are non-GAAP measures. Adjusted earnings is
calculated as net earnings (loss) for the period adjusting for the
gains or losses recorded on fair market value adjustments on the
Company's outstanding derivative instruments, impairment of mineral
property, unrealized foreign exchange gains or losses, unrealized gain
or loss on commodity contracts, realized and unrealized losses on
silver and gold forward contracts, severance expense, the transaction
costs arising from the Minefinders transaction, gain or loss on sale of
assets, and the effect for taxes on the above items. The Company
considers this measure to better reflect normalized earnings as it does
not include items which may be volatile from period to period.
(6) Cash flow from operating activities per share is a non-GAAP measure.
This non-GAAP measure is used by the Company to manage and evaluate
operating performance before capital investment and financing
activities and is calculated using cash flow from operating activities
divided by basic weighted average shares outstanding.
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Geoff Burns, President & CEO, commented on the third quarter 2013
results, "Our quarterly results are a clear indication of the success
of our focused efforts over the past 5 months to enhance our production
and reduce our costs. Silver production rose and we achieved a new
quarterly record for gold production. At the same time, we trimmed our
mine site production costs by 9% or $12 million compared to the same
period last year, which netted us a healthy 25% reduction in our cash
costs per ounce." Burns continued, "This effort allowed Pan American
to post respectable financial results, generate significant operating
cash flows and return to bottom line profitability. We have
successfully re-positioned the Company to prosper and grow in the
current price environment."
Financial Results
Pan American generated revenue of $213.6 million during the third
quarter of 2013, 15% lower year-on-year, due to lower precious metals
prices, partially offset by greater quantities of all metals produced
by the Company. On average, during the quarter Pan American realized a
price of $20.52 per ounce of silver and $1,319, per ounce of gold, 30%
and 19% lower than a year ago, respectively. Zinc and copper prices
remained stable at $1,862 per tonne and $7,146 per tonne,
respectively. In contrast, the lead price rose 9% from a year ago to
$2,100 per tonne. Silver accounted for 61% of quarterly revenue while
gold accounted for 23%. Zinc, lead and copper contributed only 9%, 3%
and 4%, respectively, to consolidated quarterly revenue.
During the third quarter of 2013, Pan American generated net earnings of
$14.2 million, or $0.09 per share, compared to net earnings of $22.6
million, or $0.15 per share, in the same quarter of 2012. Net earnings
declined due to lower revenue, higher depreciation and amortization,
and higher losses on commodity and foreign currency contracts, mainly
associated with the previously announced cancellation of gold and
silver forward contracts, partially offset by gains in foreign
exchange.
Adjusted earnings for the quarter ended September 30, 2013 were $12.2
million or $0.08 per share. Adjusted earnings were calculated by
adjusting for several non-recurring items, most notably an unrealized
gain of $7.8 million in foreign exchange and $6.3 million in unrealized
and realized losses for the cancellation of precious metals forward
contracts. For a detailed reconciliation of adjusted earnings, please
refer to the financial and operating highlights table at the end of
this news release.
Mine operating earnings generated during the third quarter of 2013 were
$33.9 million, compared to $65.4 million in the third quarter of 2012.
The decline was directly attributable to significantly lower metal
prices compared to a year ago and higher depreciation and amortization,
partially offset by lower production costs and royalties; however, the
present quarter's mine operating earnings improved vastly from the $3.8
million generated in the second quarter of 2013.
Operating cash flow generated during the third quarter of 2013 was $40.7
million, or $0.27 per share, compared to $79.5 million a year ago, and
$0.5 million generated in the second quarter of 2013.
As a result of cost reduction measures implemented earlier this year,
general and administration expenses for the third quarter of 2013 fell
to $3.9 million from $4.6 million in both the third quarter of 2012 and
in the preceding quarter of 2013. Additionally, exploration and
project development expenses went down to $2.6 million, from $8.2
million during the third quarter of 2012 and $5.6 million during the
preceding quarter.
Pan American remains in solid financial condition with $421.0 million in
cash and short term investments, $63.7 million in debt, and working
capital of $699.3 million at September 30, 2013.
In the third quarter of 2013, Pan American paid $18.9 million in cash
dividends to holders of its common shares.
Income taxes for the third quarter of 2013 were $11.7 million, down from
$16.1 million in the comparable quarter of 2012, and the Company's
effective tax rate was 45%. Effective rates vary considerably between
periods and from the amounts that would result from applying the
Canadian statutory income tax rates to earnings before income taxes.
Please refer to the Company's MD&A dated September 30, 2013 for a
detailed reconciliation of Pan American's consolidated tax rate.
Production and Operations
Pan American produced 6.7 million ounces of silver during the third
quarter of 2013, 7% more year-on-year, thanks to significant production
gains at Dolores, Huaron, Morococha and San Vicente, slightly offset by
small production declines at La Colorada and Manantial Espejo.
During the reporting quarter, the Company's Mexican operations produced
a total of 3.3 million ounces of silver. La Colorada and Alamo Dorado
maintained steady production levels compared to a year ago at 1.3
million ounces of silver and 1.1 million ounces of silver,
respectively. Dolores recovered from a sluggish second quarter as a
result of increasing grades and mining and processing rates to produce
1.0 million ounces of silver, a 25% increase year-on-year.
In Perú, both Huaron and Morococha achieved significant production
improvements from last year, due to higher grades, throughput and
recoveries. Huaron produced 0.9 million ounces of silver, 18% more
year-on-year, while Morococha produced 0.7 million ounces of silver,
24% more year-on-year.
In Bolivia, San Vicente produced 1.1 million ounces of silver, 9% more
than in the third quarter of 2012. The increase was attributable to
higher grades, throughput and recoveries.
In Argentina, Manantial Espejo produced 0.8 million ounces of silver,
which was 9% less than in the third quarter of 2012, but 17% higher
than in the previous quarter. The decline was due to lower silver
grades, primarily caused by mine sequencing and encountering more
complex mineralized structures requiring additional ore control.
During the quarter Pan American produced 41,600 ounces of gold in total,
48% more than a year ago. The rise was due to production increases of
60% at Dolores and 56% at Manantial Espejo because of better grades and
recoveries.
Pan American increased its quarterly base metals production
substantially. Consolidated quarterly production was 10,600 tonnes of
zinc, 24% more year-on-year, 3,400 tonnes of lead, 27% more
year-on-year and 1,500 tonnes of copper, 52% more year-on-year.
Pan American's quarterly consolidated cash costs were $10.40 per ounce
of silver, net of by-product credits, a decrease of 25% compared to the
third quarter of 2012 and 14% lower than in the second quarter of
2013. The decrease resulted from the Company's cost control strategy
implemented earlier this year and to higher quantities of by-product
metals sold during the quarter, partially offset by lower by-product
credits on lower metals prices, with the exception of lead.
Pan American has adopted the reporting of AISCSOS as a measure of the
Company's consolidated operating performance and its ability to
generate cash flow from all operations collectively. For the quarter
ended September 30, 2013, AISCOS was $16.26, compared to $24.27 in the
third quarter of 2012, or 33% lower. The following table provides a
detailed reconciliation of AISCSOS:
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Three months ended Sept. 30,
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Nine months ended Sept. 30,
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|
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2013
|
|
2012
|
|
2013
|
|
2012
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Production costs
|
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$
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129,959
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$
|
141,977
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$
|
394,390
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$
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358,509
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Royalties
|
|
$
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7,668
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$
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14,161
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$
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20,889
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$
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29,384
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Smelting, refining and
transportation charges(1)
|
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$
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27,334
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$
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25,571
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$
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69,850
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$
|
72,537
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Less by-product credits(1)
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$
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(89,313)
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$
|
(76,742)
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$
|
(246,113)
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$
|
(214,036)
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Cash cost of sales net of by-
products
|
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$
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75,648
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$
|
104,968
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$
|
239,016
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$
|
246,395
|
|
|
|
|
|
|
|
|
|
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Sustaining capital(2)
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$
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29,543
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$
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33,808
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$
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88,944
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$
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68,810
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Exploration
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|
$
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2,622
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$
|
8,193
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$
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14,485
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$
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26,341
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Reclamation cost accretion
|
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$
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759
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$
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710
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$
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2,273
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$
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2,344
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General & administrative expense
|
|
$
|
3,939
|
$
|
4,591
|
$
|
14,377
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$
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16,152
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All-in sustaining costs
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A
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$
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112,511
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$
|
152,270
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$
|
359,095
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$
|
360,042
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Payable ounces sold
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B
|
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6,920,757
|
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6,273,353
|
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19,042,012
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17,358,691
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All-in sustaining cost per silver
ounce sold, net of by-products
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(A*$1000)/B
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$
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16.26
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$
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24.27
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$
|
18.86
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$
|
20.74
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(1)
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Included in the revenue line of the unaudited condensed interim
consolidated income statements and are reflective of realized metal
prices for the applicable periods.
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(2)
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Non - GAAP measure: please refer to section Alternative Performance
(Non-GAAP) Measures for a reconciliation of this measure to the
unaudited condensed interim consolidated financial statements.
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During the quarter, Pan American spent a total of $29.5 million in
sustaining capital at its seven operations, 16% less than in the
previous quarter. In addition, the Company spent $10.6 million at
Dolores on the expansion of leach pad 2 and construction of leach pad
3, as well as $1.8 million at other expansion projects at Dolores. The
expansion of leach pad 2 was completed at the end of last quarter,
providing essential expanded stacking capacity until leach Pad 3 is
completed. Construction of leach pad 3 progressed as planned despite
heavy rains and the installation of the pad liner was completed in late
September. The well risers, solution collection system and over liner
material are currently being installed, and leach pad 3 is on track for
the commencement of leaching operations. At the start of November, the
operation began stacking lower grade coarse crushed ore and should see
high grade ore stacked and under leach in the coming weeks.
Project Development - Organic Growth Opportunities
Significant progress has been made on an expansion study at the La
Colorada mine to take advantage of the exploration success of recent
years, which has led to an increase in proven and probable mineral
reserves to 65 million ounces of silver at the beginning of 2013, from
18 million ounces of silver in 2009. The expansion study is nearing
completion to the preliminary economic assessment level and is expected
to include the development of a hoisting shaft to increase mine
capacity and a subsequent expansion of the sulphide floatation plant.
Pan American plans to spend $3 million on an expansion study at the
Dolores mine, where the installation of a new crushing, grinding and
pulp agglomeration plant is being considered to improve silver and gold
recoveries of high grade ores, and to increase overall processing
capacity. In addition to confirmatory metallurgical test work
currently in progress, the Company is constructing a small pilot plant
at the mine in order to finalize the flow sheet of the proposed new
plant.
Commenting on the Company's operating results, Steve Busby, Chief
Operating Officer, said; "I am particularly pleased with our efforts to
reduce costs in light of reduced silver and gold prices, while
delivering solid outcomes essentially across all of our mines. I
believe Dolores' quarterly performance begins to highlight the
capabilities of this mine. We expect the operation will stabilize
nicely after the capital-intensive pad 3 is commissioned into
production this month. Our multi-year efforts and investments to
mechanize our operations in Peru are beginning to deliver excellent
results and I expect a steady trend of improvement over the next few
years as we advance on some interesting underground developments at
both of these mines. Our La Colorada, Alamo Dorado and San Vicente
mines continue to deliver solid operating performances and I believe we
are starting to see a positive turn-around at Manantial Espejo as we
expose higher grade ore in the open pit." Busby continued, "Capital
expenditures for 2013 are expected to be near $157 million. Looking
forward into 2014, further efforts will be made to re-optimize our
three Mexican mines under the scenario of the new royalty tax and
expected diesel fuel cost increases; however, I do expect to see
reduced sustaining capital in 2014 relative to the extensive
investments of 2013. Our excellent quarterly operating performance
would not have been possible without the dedicated effort of our
experienced operating team and I would like to personally thank them
for all their efforts."
Subsequent Events
In October 2013, the Mexican Senate approved a bill to introduce a
deductible royalty of 7.5% on mine operating income, before certain
deductions including amortization and depreciation, as well as a 0.5%
royalty on revenues derived from silver, gold and platinum. In
addition, the bill proposes a 10% withholding tax on dividends paid to
non-resident shareholders (subject to tax treaty reductions). This
could result in a significant non-cash adjustment to deferred taxes,
which could run through our earnings in the fourth quarter of 2013.
Although the bill still requires presidential approval prior to being
enacted with an expected January 1, 2014 effective date, Pan American
considers the bill substantially enacted and is in the process of
evaluating its effect on future cash flows, earnings and growth
opportunities in Mexico beyond 2013.
2013 Outlook
Year-to-date, Pan American produced 19.2 million ounces of silver and
103,600 ounces of gold at cash costs of $11.25 per ounce of silver, net
of by-product credits and all-in sustaining costs of $18.86 per ounce
of silver, net of by-product credits. The Company is confident that it
will achieve its full-year 2013 guidance of 25 to 26 million ounces of
silver and 125,000 to 135,000 ounces of gold at cash costs below the
original forecast of $11.50 to $12.80, net of by-product credits.*
Pan American also expects to produce 38,500 to 41,500 tonnes of zinc,
12,500 to 13,500 tonnes of lead and 4,500 to 5,000 tonnes of copper.
* Cash costs estimations are based on assumed metals prices for H2 2013
of $1,200 per ounce of gold, $1,925 per tonne of zinc, $1,975 per tonne
of lead and $7,800 per tonne of copper.
About Pan American
Pan American's mission is to be the world's pre-eminent silver producer,
with a reputation for excellence in discovery, engineering, innovation
and sustainable development. The Company has seven operating mines in
Mexico, Peru, Argentina and Bolivia and several development projects in
USA, Mexico, Peru and Argentina.
Technical information contained in this news release with respect to Pan
American has been reviewed by Michael Steinmann, P.Geo., Executive VP
Corporate Development & Geology, and Martin Wafforn, P.Eng., VP
Technical Services, who are the Company's Qualified Persons for the purposes of NI 43-101.
Pan American will host a conference call to discuss these results on
Thursday, November 14, 2013 at 1:00 pm ET (10:00 am PT). To access the
conference, North American and International participants dial toll
number 1-604-638-5340. A live audio webcast and Power Point
presentation can be accessed at http://services.choruscall.ca/links/pan131114.html. The call will be available for replay for one week after the call by
dialing 1-604-638-9010 and entering code # 6218 followed by the # sign.
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CAUTIONARY NOTE REGARDING Non-IFRS Measure - Cash costs per ounce
This News Release presents information about our cash costS of
production of an ounce of silver for our operating mines. Cash costS
per ounce produced is calculated as follows:
-
except as otherwise noted, cash costs per ounce produced is calculated
by dividing total cash costs by total silver ounces produced at the
relevant mine or mines
-
total cash costs include mine operating costs such as mining,
processing, administration, royalties and operating taxes, but exclude
amortization, reclamation costs, financing costs and capital
development and exploration. Certain amounts of stock-based
compensation are excluded as well
Cash cost per ounce of silver produced is included in this news release
because certain investors use this information to assess our
performance and also to determine our ability to generate cash flow for
use in investing and other activities. The inclusion of cash costs per
ounce produced may enable investors to better understand year-over-year
changes in our production costs, which in turn affect profitability and
cash flow.
Cash costs per ounce produced does not have a standardized meaning or a
consistent basis of calculation prescribed by Canadian accounting
standards. Investors are cautioned that cash costs per ounce produced
should not be considered in isolation or construed as a substitute to
costs determined in accordance with Canadian accounting standards as
prescribed under IFRS as an indicator of performance. Our method of
calculating cash costs per ounce produced may differ from the methods
used by other entities and, accordingly, our cash costs per ounce
produced may not be comparable to similarly titled measures used by
other entities. See our MD&A for the year ended December 31, 2012
filed on SEDAR at www.sedar.com for a reconciliation of cash costs per
ounce produced to the most directly comparable accounting measure under
IFRS.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
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. WHEN USED IN THIS
NEWS RELEASE THE WORDS, "BELIEVES", "EXPECTS", "INTENDS", "PLANS",
"FORECAST", "OBJECTIVE", "OUTLOOK", "POSITIONING", "POTENTIAL",
"ANTICIPATED", "BUDGET", AND OTHER SIMILAR WORDS AND EXPRESSIONS,
IDENTIFY FORWARD-LOOKING STATEMENTS OR INFORMATION. THESE
FORWARD-LOOKING STATEMENTS OR INFORMATION RELATE TO, AMONG OTHER
THINGS: FUTURE PRODUCTION OF SILVER, GOLD AND OTHER METALS AND THE
TIMING OF SUCH PRODUCTION; FUTURE CASH COSTS PER OUNCE OF SILVER; THE
PRICE OF SILVER AND OTHER METALS; THE EFFECTS OF LAWS, REGULATIONS AND
GOVERNMENT POLICIES AFFECTING PAN AMERICAN'S OPERATIONS OR POTENTIAL
FUTURE OPERATIONS INCLUDING, BUT NOT LIMITED TO recent proposed changes
to the LAWS IN MEXICO relating to a new mining royalty; THE CONTINUING
NATURE OF HIGH INFLATION, RISING CAPITAL AND OPERATING COSTS, CAPITAL
RESTRICTIONS AND RISKS OF EXPROPRIATION IN ARGENTINA, AND THEIR EFFECTS
ON THE COMPANY AND ITS ASSETS; THE TIMING OF PRODUCTION AND THE CASH
AND TOTAL COSTS OF PRODUCTION AT EACH OF THE COMPANY'S PROPERTIES; THE
SUFFICIENCY OF THE COMPANY'S CURRENT WORKING CAPITAL, ANTICIPATED
OPERATING CASH FLOW OR ITS ABILITY TO RAISE NECESSARY FUNDS; THE
ABILITY OF THE COMPANY TO ACHIEVE ANY PLANNED EXPANSIONS AND
DEVELOPMENT, INCLUDING BUT NOT LIMITED TO, POTENTIAL OPPORTUNITIES AT
THE DOLORES MINE in connection with the pulp agglomeration project and
expansion of the la colorada mine, THE TIMING FOR THE SAME and the
expected results of any such opportunities or expansions; the ability
of the company to reduce capital costs and the effects of such
reduction measures on the company; THE ESTIMATES OF EXPECTED OR
ANTICIPATED ECONOMIC RETURNS FROM THE COMPANY'S MINING PROJECTS;
FORECAST CAPITAL AND NON-OPERATING SPENDING; FUTURE SALES OF THE
METALS, CONCENTRATES OR OTHER PRODUCTS PRODUCED BY THE COMPANY; AND THE
COMPANY'S PLANS AND EXPECTATIONS FOR ITS PROPERTIES AND OPERATIONS.
THESE STATEMENTS REFLECT THE COMPANY'S CURRENT VIEWS WITH RESPECT TO
FUTURE EVENTS AND ARE NECESSARILY BASED UPON A NUMBER OF ASSUMPTIONS
AND ESTIMATES THAT, WHILE CONSIDERED REASONABLE BY THE COMPANY, ARE
INHERENTLY SUBJECT TO SIGNIFICANT BUSINESS, ECONOMIC, COMPETITIVE,
POLITICAL AND SOCIAL UNCERTAINTIES AND CONTINGENCIES. MANY FACTORS,
BOTH KNOWN AND UNKNOWN, COULD CAUSE ACTUAL RESULTS, PERFORMANCE OR
ACHIEVEMENTS TO BE MATERIALLY DIFFERENT FROM THE RESULTS, PERFORMANCE
OR ACHIEVEMENTS THAT ARE OR MAY BE EXPRESSED OR IMPLIED BY SUCH
FORWARD-LOOKING STATEMENTS 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 SPOT AND FORWARD MARKETS FOR SILVER, GOLD, BASE METALS
AND CERTAIN OTHER COMMODITIES (SUCH AS NATURAL GAS, FUEL OIL AND
ELECTRICITY); FLUCTUATIONS IN CURRENCY MARKETS (SUCH AS THE CANADIAN
DOLLAR, PERUVIAN SOL, MEXICAN PESO, ARGENTINE PESO AND BOLIVIAN
BOLIVIANO VERSUS THE U.S. DOLLAR); RISKS RELATED TO THE TECHNOLOGICAL
AND OPERATIONAL NATURE OF THE COMPANY'S BUSINESS; CHANGES IN NATIONAL
AND LOCAL GOVERNMENT, LEGISLATION, TAXATION, CONTROLS OR REGULATIONS
INCLUDING AMONG OTHERS, CHANGES TO IMPORT AND EXPORT REGULATIONS AND
LAWS RELATING TO THE REPATRIATION OF CAPITAL AND FOREIGN CURRENCY
CONTROLS; POLITICAL OR ECONOMIC DEVELOPMENTS IN CANADA, THE UNITED
STATES, MEXICO, PERU, ARGENTINA, BOLIVIA OR OTHER COUNTRIES WHERE THE
COMPANY MAY CARRY ON BUSINESS IN THE FUTURE; RISKS AND HAZARDS
ASSOCIATED WITH THE BUSINESS OF MINERAL EXPLORATION, DEVELOPMENT AND
MINING (INCLUDING ENVIRONMENTAL HAZARDS, INDUSTRIAL ACCIDENTS, UNUSUAL
OR UNEXPECTED GEOLOGICAL OR STRUCTURAL FORMATIONS, PRESSURES, CAVE-INS
AND FLOODING); 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 AND THE
EFFECTS OF LABOUR LAWS IN THOSE COUNTRIES IN WHICH THE COMPANY
OPERATES; RELATIONSHIPS WITH AND CLAIMS BY LOCAL COMMUNITIES AND
INDIGENOUS POPULATIONS; AVAILABILITY AND INCREASING COSTS ASSOCIATED
WITH MINING INPUTS AND LABOUR; THE SPECULATIVE NATURE OF MINERAL
EXPLORATION AND DEVELOPMENT, INCLUDING THE RISKS OF OBTAINING NECESSARY
LICENSES AND PERMITS AND THE PRESENCE OF LAWS AND REGULATIONS THAT MAY
IMPOSE RESTRICTIONS ON MINING, INCLUDING THOSE CURRENTLY IN THE
PROVINCE OF CHUBUT, ARGENTINA; DIMINISHING QUANTITIES OR GRADES OF
MINERAL RESERVES AS PROPERTIES ARE MINED; GLOBAL FINANCIAL CONDITIONS;
THE COMPANY'S ABILITY TO COMPLETE AND SUCCESSFULLY INTEGRATE
ACQUISITIONS AND TO MITIGATE OTHER BUSINESS COMBINATION RISKS;
CHALLENGES TO, OR DIFFICULTY IN MAINTAINING, THE COMPANY'S TITLE TO
PROPERTIES AND CONTINUED OWNERSHIP THEREOF; THE ACTUAL RESULTS OF
CURRENT EXPLORATION ACTIVITIES, CONCLUSIONS OF ECONOMIC EVALUATIONS,
AND CHANGES IN PROJECT PARAMETERS TO DEAL WITH UNANTICIPATED ECONOMIC
OR OTHER FACTORS; INCREASED COMPETITION IN THE MINING INDUSTRY FOR
PROPERTIES, EQUIPMENT, QUALIFIED PERSONNEL, AND THEIR COSTS; 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. INVESTORS
ARE CAUTIONED AGAINST ATTRIBUTING UNDUE CERTAINTY OR RELIANCE ON
FORWARD-LOOKING STATEMENTS. 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. THE COMPANY DOES NOT
INTEND, AND DOES NOT ASSUME ANY OBLIGATION, TO UPDATE THESE
FORWARD-LOOKING STATEMENTS OR INFORMATION TO REFLECT CHANGES IN
ASSUMPTIONS OR CHANGES IN CIRCUMSTANCES OR ANY OTHER EVENTS AFFECTING
SUCH STATEMENTS OR INFORMATION, OTHER THAN AS REQUIRED BY APPLICABLE
LAW.
Pan American Silver Corp.
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Financial & Operating Highlights
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Three months ended
September 30,
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Nine months ended
September 30,
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2013
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2012(1)
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2013
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2012(1)
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Consolidated Financial Highlights
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(Unaudited in thousands of U.S. Dollars, except per share amounts)
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Net earnings (loss) for the period
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$
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14,236
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$
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22,608
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$
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(152,783)
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$
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109,890
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Earnings (loss) per share attributable to common shareholders (basic)
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$
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0.09
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$
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0.15
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$
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(1.00)
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$
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0.80
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Adjusted earnings for the period(2)
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$
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12,240
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$
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37,259
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$
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34,803
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$
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114,627
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Adjusted earnings per share attributable to common shareholders (basic)
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$
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0.08
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$
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0.25
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$
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0.23
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$
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0.84
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Mine operating earnings
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$
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33,934
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$
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65,440
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$
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112,564
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$
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218,854
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Net cash generated from operating activities
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$
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40,730
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$
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79,507
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$
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73,450
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$
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111,702
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Operating cash flows before interest and income taxes
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$
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49,102
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$
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102,531
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$
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150,386
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$
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244,634
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Capital spending
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$
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41,708
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$
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41,821
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$
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125,732
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$
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94,646
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Dividends paid
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$
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18,926
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$
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7,612
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$
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56,874
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$
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17,301
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Shares repurchased
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$
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-
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$
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7,548
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$
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6,740
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$
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31,030
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Cash and short-term investments
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$
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421,014
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$
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547,958
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$
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421,014
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$
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547,958
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Working capital(3)
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$
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699,344
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$
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774,262
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$
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699,344
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$
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774,262
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Consolidated Ore Milled & Metals Recovered to Concentrate
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Tonnes milled
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2,625,476
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2,529,520
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7,571,824
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6,197,260
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Silver metal - ounces
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6,695,229
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6,278,728
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19,159,426
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18,181,133
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Gold metal - ounces
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41,555
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28,162
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103,588
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79,902
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Zinc metal - tonnes
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10,569
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8,502
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30,871
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27,963
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Lead metal - tonnes
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3,381
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2,671
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10,034
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9,461
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Copper metal - tonnes
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1,537
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1,009
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3,856
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3,026
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Consolidated Cost per Ounce of Silver (net of by-product credits) (4)
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Total cash cost per ounce
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$
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10.40
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$
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13.87
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$
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11.25
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$
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12.14
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Total production cost per ounce
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$
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16.85
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$
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19.73
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$
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17.27
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$
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17.17
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All-in Sustaining Cost per Silver Ounce Sold (net of by-products)(5)
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$
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16.26
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$
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24.27
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$
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18.86
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$
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20.74
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Payable ounces of silver (used in cost per ounce calculations)
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6,345,533
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5,942,625
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18,165,371
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17,187,839
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(1)
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Certain 2012 balances have been recast to reflect the effects of
finalizing the purchase price allocation of the Minefinders transaction
during the 2013 first quarter.
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(2)
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Adjusted earnings and adjusted earnings per share attributable to common
shareholders are non-GAAP measures. Adjusted earnings is calculated as
net earnings (loss) for the period adjusting for the gains or losses
recorded on fair market value adjustments on the Company's outstanding
derivative instruments, impairment of mineral property, unrealized
foreign exchange gains or losses, unrealized gain or loss on commodity
contracts, realized and unrealized losses on silver and gold forward
contracts, severance expense, the transaction costs arising from the
Minefinders transaction, gain or loss on sale of assets, and the effect
for taxes on the above items. The Company considers this m_easure to
better reflect normalized earnings as it does not include items which
may be volatile from period to period.
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Three months ended September 30,
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Nine months ended September 30,
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Adjusted (Loss) Earnings Reconciliation
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2013
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2012
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2013
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2012
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Net earnings (loss) for the period
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$
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14,236
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$
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22,608
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$
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(152,783)
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$
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109,890
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Adjust derivative (gain) loss
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(1,333)
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13,950
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(15,466)
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(9,956)
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Adjust impairment of mineral property
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-
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-
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203,443
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-
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Adjust unrealized foreign exchange (gains) losses
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(7,830)
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(2,943)
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(266)
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6,708
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Adjust unrealized loss (gain) on commodity contracts
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388
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522
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(235)
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9
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Adjust loss on silver and gold forward contracts
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6,254
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-
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6,254
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-
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Adjust severance expense
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617
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-
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617
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-
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Adjust gain (loss) on sale of assets
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(135)
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3,122
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(8,099)
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(8,186)
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Adjust acquisition costs
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-
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-
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-
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16,162
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Adjust for effect of taxes
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43
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-
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1,338
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-
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Adjusted earnings for the period
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$
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12,240
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$
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37,259
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$
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34,803
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$
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114,627
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(3)
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Working capital is a non-GAAP measure calculated as current assets less
current liabilities. The Company and certain investors use this
information to evaluate whether the Company is able to meet its current
obligations using its current assets.
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(4)
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Consolidated cost per ounce of silver is a non-GAAP measure. The
Company believes that in addition to production costs, depreciation and
amortization, and royalties, cash cost per ounce is a useful and
complementary benchmark that investors use to evaluate the Company's
performance and ability to generate cash flows and is well understood
and widely reported in the silver mining industry. However, cash cost
per ounce does not have a standardized meaning prescribed by IFRS as an
indicator of performance. Investors are cautioned that cash costs per
ounce 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. The Company's method of
calculating cash costs per ounce may differ from the methods used by
other entities.
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(5)
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All-In Sustaining Costs per Silver Ounce sold ("AISCOS") is a non-GAAP
measure. The Company has adopted the reporting AISCSOS as a measure of
a silver mining company's consolidated operating performance and the
ability to generate cash flow from all operations collectively. We
believe it is a more comprehensive measure of the cost of operating our
consolidated business than traditional cash and total costs per 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. This measure including
its subcomponent Sustaining Capital are non - GAAP measures and readers
should refer to the section of Q3 2013 MD&A "Alternative Performance
(Non-GAAP) Measures" for a reconciliation of this measure to the Q3
2013 unaudited condensed interim consolidated financial statements.
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SOURCE Pan American Silver Corp.