Erdene Resource Development Corporation press release

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

2018-02-21

TSX - Toronto Stock Exchange · Gold · Silver · Lead · Zinc · Molybdenum · Antimony · Copper · Canada

Canada NewsWire

VANCOUVER, Feb. 20, 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 millionin cash flow from operations in 2017. La Colorada, Morococha, Huaron and Doloreshad 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 millionin the quarter, resulting in a balance of $227.5 millionat 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 productionin 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 Coloradaand Morococha. Annual silver production of 25.0 million ounces was similar to the 25.4 million produced in 2016, as increases at La Coloradaand Doloresoffset the expected decline from the conclusion of Alamo Dorado operations. Gold productionwas 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 Coloradaoperations. Lead productionof 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 productionof 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. Revenueof $226.0 millionin 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 $10.86in Q4 2017 compared with $10.38in Q4 2016. Annual 2017 AISCSOS of $10.79was $0.71under the low end of management's original forecast of $11.50to $12.90and within the revised forecast of $10.50to $11.50. Consolidated cash costsper payable ounce of silver, net of by-product credits ("Cash Costs") were $3.18in Q4 2017 compared with $6.66in Q4 2016, reflecting higher productivity, increased by-product credits and improved concentrate treatment terms. Annual 2017 Cash Costs of $4.55were 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 activitieswas up 74% to $79.3 millionin Q4 2017 compared with $45.7 millionin Q4 2016, reflecting higher revenues, positive working capital changes and lower cash taxes. Annual 2017 operating cash flows of $224.6 millionwere 5% higher than the $214.8 milliongenerated in 2016, driven primarily by increased revenues and positive working capital changes, partially offset by higher cash taxes. Net earnings were $49.7 million($0.32basic earnings per share) in Q4 2017 compared with $22.3 million($0.14basic earnings per share) in Q4 2016. Q4 2017 net earnings include a $60.2 millionreversal of the 2015 Morococha mine impairment. Annual 2017 net earnings were $123.5 million($0.79basic earnings per share) compared with $101.8 million($0.66basic earnings per share) in 2016. Adjusted earningswere $19.2 million($0.13basic adjusted earnings per share) compared with $19.0 million($0.12basic 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($0.51basic adjusted earnings per share) compared with $86.6 million($0.57basic 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 millionand $300.0 millionavailable under its revolving credit facility. Capital expenditurestotaled $42.3 millionin Q4 2017 compared with $56.5 millionin Q4 2016. Annual 2017 capital expenditures were $145.8 million, including approximately $61.4 millionof project capital, compared with $198.5 millionin 2016. The decrease was largely due to the completion of the La Coloradaexpansion, partially offset by a $4.9 millionyear-over-year increase in sustaining capital. Doloresexpansion. 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 Coloradaexpansion 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 millionin 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 dividendto $0.035per common share, approximately $5.4 millionin 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, 2018for 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.comand available on the Company's website. For further technical information relating to the La Coloradaand Doloresexpansion 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.comand available on the Company's website. The results of the preliminary economic assessments at La Colorada, Doloresand 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

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, Argentinaand 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.