Stillwater Critical Minerals Corp. press release

Pan American Silver reports cash flow from operations of $62.8 million in Q2 2020 and updates 2020 guidance

2020-08-05

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Canada NewsWire

VANCOUVER, BC, Aug. 5, 2020

VANCOUVER, BC, Aug. 5, 2020/CNW/ - Pan American Silver Corp.(NASDAQ: PAAS) (TSX: PAAS) ("Pan American" or the "Company") today reported unaudited results for the second quarter ended June 30, 2020 ("Q2 2020"). Pan American's unaudited condensed interim consolidated financial statements and notes ("financial statements"), as well as Pan American's management's discussion and analysis ("MD&A") for the three and six months ended June 30, 2020, are available on Pan American's website at panamericansilver.com and on SEDAR atwww.sedar.com.

"The global COVID-19 pandemic had a significant impact on Q2 results, with all our Latin American operations placed in care and maintenance mode for periods of time during the quarter. Except for our two polymetallic underground mines in Peru, all operations are now back in production under comprehensive health and safety protocols," said Michael Steinmann, President and Chief Executive Officer. "Our ability to successfully navigate the extraordinary challenges over the first half of this year demonstrates the resilience of our business and the capability and efforts of our team. With the updated guidance for 2020 that we provided today and rising precious metal prices, we are looking forward to strong cash flow generation over the remainder of 2020."

Added Mr. Steinmann: "Despite the challenges, we further improved our financial position during Q2. We had the opportunity to crystallize value through the divestiture of some non-core assets, including portions of certain equity investment interests held within our diversified portfolio. As of June 30, 2020, our cash and short term investment balances increased to approximately $262 million, while the amount drawn on our Credit Facility was reduced to $200 million. In August, we repaid an additional $40 millionon our Credit Facility."

Q2 2020 Highlights:

Revenue was $249.5 million. Strong precious metal prices, with gold and silver averaging $1,708per ounce and $16.58per ounce, respectively, helped offset the impact of the COVID-19 related suspensions at our Latin American operations. Consolidated silver production of 2.8 million ounces and gold production of 96.6 thousand ounces primarily reflect the COVID-19 related suspensions. Net cash generated from operations was $62.8 million, which included $46.5 millionof COVID-19 related mine care and maintenance costs. Working capital changes resulted in a $31.3 millionsource of cash, mainly driven by the draw-down in inventories from continued leaching at the Company's three heap leach operations during the COVID-19 related suspensions. Net income of $19.4 million($0.10basic income per share) reflects mine operating earnings of $48.4 million, with the impact of COVID-19 related suspensions reducing both revenue and cost of sales. Net income includes $47.5 millionof investment income, primarily relating to gains on the sale and fair value measurements of certain equity investments owned by Pan American, offset by $52.2 millionof mine care and maintenance costs, the vast majority incurred from the COVID-19 related suspensions. Adjusted earnings of $58.4 million($0.28basic adjusted earnings per share) excludes $46.5 millionof COVID-19 related mine care and maintenance costs. Silver Segment Cash Costs and All-in Sustaining Costs ("AISC") were $6.23and $12.54per silver ounce sold, respectively. Due to the continuation of leaching activities, Dolores made up a significant portion of production in the quarter and materially benefited Silver segment Cash Costs. Silver Segment AISC reflects investment in critical projects and cost-increasing net realizable value ("NRV") inventory adjustments at Dolores, offset by cost-reducing NRV adjustments at Manantial Espejo. Gold Segment Cash Costs and AISC were $905and $1,015per gold ounce sold, respectively. Gold Segment Cash Costs were negatively impacted by mine sequencing at the La Arenaoperation, resulting in less ore tonnes at lower grades, and mining lower grade extensions to reserves at Timmins. Consolidated AISC, including gold by-product credits from the Gold Segment mines, were $(3.14)per silver ounce sold. Based on drilling completed over the six month period ended June 30, 2020, Pan American updated its inferred mineral resource estimate for the La Coloradaskarn deposit in Mexicoto 100.4 million tonnes, containing an estimated 141.0 million ounces of silver with 4.3 million tonnes of zinc, 1.8 million tonnes of lead and 0.2 million tonnes of copper; see our news release dated August 4, 2020for further details. Through 200,000 metres of drilling from July 2019to June 2020, we were able to add 22.1 million ounces of silver and 719 thousand ounces of gold to our proven and probable mineral reserves, replacing 76% of silver and 107% of the gold mined for the 12-month period ended June 30, 2020; see our news release dated August 5, 2020for further details. Pan American realized cash proceeds totaling $81.1 millionfrom the divestment of investment interests and non-core assets, primarily related to: the sale of 10.35 million common shares of Maverix Metals Inc. and a subsequent exercise of 8.25 million common share purchase warrants, resulting in a current undiluted interest of approximately 19.9%; the sale of 10.0 million shares in New Pacific Metals Corp., resulting in a current undiluted interest of approximately 9.96%; and, the sale of the Juby and Knight exploration properties in Ontario, Canada. Pan American repaid $140.0 millionon its four-year, $500.0 millionCredit Facility, reducing the amount drawn as at June 30, 2020, to $200.0 million. The $140.0 millionrepayment is comprised of $80.0 millionthat was drawn in April 2020as a precautionary measure in response to COVID-19 and subsequently repaid, and a further repayment of $60.0 million. At June 30, 2020, the Company had cash and short-term investment balances of $261.6 millionand working capital of $471.6 million. Total debt was $236.9 million(including $36.9 millionof lease liabilities). In August, the Company made an additional repayment on the Credit Facility of $40.0 million. The Board of Directors has approved a cash dividend of $0.05per common share, or approximately $10.5 millionin aggregate cash dividends, payable on or about August 27, 2020, to holders of record of Pan American's common shares as of the close on August 17, 2020. 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. Pan American released its 2019 Sustainability Report in May 2020and became a signatory of the United Nations Global Compact in July 2020.

Cash Costs, AISC, adjusted earnings, basic adjusted earnings per share, sustaining capital, project capital, working capital, total debt and total available liquidity 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.

COVID-19 Impact on Operations

During Q2 2020, Pan American placed its operations in Mexico, Peru, Argentinaand Boliviain care and maintenance for various durations, depending on the government restrictions imposed in those regions in response to COVID-19. Company-wide, Pan American restricted international travel and enabled work-from-home arrangements where practical. The Company's Timminsoperation in Canadacontinued to produce gold at modestly reduced capacity to comply with physical distancing restrictions. Limited production also continued at the Dolores, La Arenaand Shahuindo open pit operations during their suspensions from circulation of process solutions on the heap leach pads. The Company incurred $46.5 millionin care and maintenance costs in Q2 2020 for the COVID-19 related suspensions.

By the end of Q2 2020, all of Pan American's suspended operations had resumed production; however, its Huaron and Morococha operations in Peruwere returned to care and maintenance on July 20, 2020after several workers at the mines tested positive for the COVID-19 virus. A reduced workforce will conduct care and maintenance activities at those mines until it is determined that normal operations can safely resume.

Pan American coordinated closely with government authorities, local communities and its workforce on the safe restart of operations and the implementation of comprehensive COVID-19 protocols to protect health and safety. These protocols include strict sanitary measures, return-to-work health screenings, and where applicable, testing for the COVID-19 virus, contact tracing and quarantining. For more information on these protocols, see panamericansilver.com. Pan American has been remobilizing the workforce gradually in order to provide greater physical distancing and to allow time to adopt as well as progressively assess and refine the pandemic related operating protocols. Overall, operations are producing modesty below design capacity to accommodate physical distancing restrictions.

Pan American sustained site care, maintenance and monitoring activities and continued the ventilation upgrade projects at La Coloradaduring the operating suspensions in Q2 2020. Development work on the underground mine at COSE was suspended on March 23, 2020and resumed on May 4, 2020, and the Company expects to commence processing ore mined from COSE in the third quarter of 2020. The Company achieved 90% completion of the Timminsexpansion project in Q2 2020; however, production capacity is expected to continue to be reduced by COVID-19 related restrictions.

We remain concerned about the humanitarian crisis that the COVID-19 pandemic has caused throughout much of Latin America. We are adapting our community outreach programs to best support the communities near our mines during this very difficult time. Our support is currently focused on donating food and sanitation supplies, conducting hygiene and sanitation campaigns, and working with local authorities to assist in delivering education and donations of healthcare equipment and supplies.

We also recognize the additional stress and challenges the COVID-19 pandemic present to our employees. We are introducing programs to support employee mental health and stress management at our operations. In addition, we are communicating with our employees, including those who have been demobilized or working from remote locations, to check on their physical and emotional health.

Second Quarter 2020 Unaudited Results Conference Call and Webcast

Callers should dial in 5 to 10 minutes prior to the scheduled start time. The live webcast and presentation slides will be available on the Company's website atpanamericansilver.com. An archive of the webcast will also be available for three months.

CONSOLIDATED RESULTS

| | Three months ended | Twelve months ended | | | | | June 30, 2020 | December 31, 2019 | | | | Weighted average shares during period (millions) | 210.0 | 201.4 | | | | Shares outstanding end of period (millions) | 210.1 | 209.8 | | | | | | | | | | | Three months ended June 30, | | | | | | 2020 | 2019 | | | | FINANCIAL | | | | | | Revenue | $ | 249,509 | $ | 340,494 | | Mine operating earnings | $ | 48,386 | $ | 51,058 | | Net earnings | $ | 19,412 | $ | 18,499 | | Basic earnings per share(1) | $ | 0.10 | $ | 0.09 | | Adjusted earnings(2) | $ | 58,424 | $ | 13,378 | | Basic adjusted earnings per share(1) | $ | 0.28 | $ | 0.06 | | Net cash generated from operating activities | $ | 62,750 | $ | 83,518 | | Net cash generated from operating activities before changes in working capital(2) | $ | 31,479 | $ | 63,378 | | Sustaining capital expenditures(2) | $ | 23,479 | $ | 55,911 | | Project capital expenditures(2) | $ | 9,836 | $ | 13,688 | | Cash dividend per share | $ | 0.050 | $ | 0.035 | | PRODUCTION | | | | | | Silver (thousand ounces) | 2,791 | 6,474 | | | | Gold (thousand ounces) | 96.6 | 154.6 | | | | Zinc (thousand tonnes) | 4.3 | 17.4 | | | | Lead (thousand tonnes) | 1.7 | 6.8 | | | | Copper (thousand tonnes) | 0.3 | 2.1 | | | | CASH COSTS(2)($/ounce) | | | | | | Silver Segment | 6.23 | 6.67 | | | | Gold Segment | 905 | 696 | | | | AISC(2)($/ounce) | | | | | | Silver Segment | 12.54 | 10.67 | | | | Gold Segment | 1,015 | 977 | | | | Consolidated Silver Basis | (3.14) | 6.06 | | | | AVERAGE REALIZED PRICES(3) | | | | | | Silver ($/ounce) | 16.58 | 14.90 | | | | Gold ($/ounce) | 1,708 | 1,312 | | | | Zinc ($/tonne) | 1,791 | 2,783 | | | | Lead ($/tonne) | 1,643 | 1,875 | | | | Copper ($/tonne) | 5,217 | 6,100 | | |

| (1) | Per share amounts are based on basic weighted average common shares. | | (2) | Non- GAAP measures: adjusted earnings, basic adjusted earnings per share, and net cash generated from operating activities before changes in working capital are non-GAAP financial measures. Please refer to the "Alternative Performance (non-GAAP) Measures" section of this news release for further information on these measures. | | (3) | Metal prices stated are inclusive of final settlement adjustments on concentrate sales. |

INDIVIDUAL MINE OPERATING PERFORMANCE

June 30, | | | | | 2020 | 2019 | 2020 | 2019 | | Silver Segment: | | | | | | La Colorada | 801 | 2,045 | 0.6 | 1.1 | | Dolores | 915 | 1,226 | 17.7 | 28.5 | | Huaron | 211 | 948 | 0.1 | 0.2 | | Morococha(1) | 47 | 615 | — | 0.3 | | San Vicente(2) | 265 | 940 | — | 0.1 | | Manantial Espejo | 503 | 652 | 3.5 | 5.4 | | Gold Segment: | | | | | | Shahuindo | 40 | 35 | 26.8 | 46.8 | | La Arena | 5 | 6 | 13.7 | 28.4 | | Timmins | 4 | 5 | 34.2 | 43.8 | | Total(3) | 2,791 | 6,474 | 96.6 | 154.6 |

| (1) | Morococha data represents Pan American 92.3% interest in the mine's production. | | (2) | San Vicente data represents Pan American 95.0% interest in the mine's production. | | (3) | Totals may not add due to rounding. |

($ per ounce) | AISC(1)

($ per ounce) | | | | Three months ended

June 30, | Three months ended

June 30, | | | | | 2020 | 2019 | 2020 | 2019 | | | La Colorada | 7.13 | 2.82 | 12.56 | 5.07 | | Dolores | 2.23 | 6.87 | 12.95 | 22.30 | | Huaron | 3.93 | 1.64 | 6.61 | 4.45 | | Morococha | 12.90 | 3.69 | 17.42 | 10.47 | | San Vicente | 2.61 | 10.18 | 4.52 | 10.60 | | Manantial Espejo | 16.24 | 18.35 | 16.54 | 14.01 | | Silver Segment Consolidated(2) | 6.23 | 6.67 | 12.54 | 10.67 | | Shahuindo | 632 | 546 | 747 | 719 | | La Arena | 1,082 | 652 | 1,259 | 1,441 | | Timmins(3) | 1,092 | 875 | 1,171 | 937 | | Gold Segment Consolidated(2)(3) | 905 | 696 | 1,015 | 977 | | Consolidated metrics per silver ounce sold(3)(4): | | | | | | All Operations | | | (3.14) | 6.06 | | Consolidated AISC before NRV inventory adjustments | | | (3.62) | 6.40 |

| (1) | Cash Costs and AISC are non-GAAP measures. Please refer to the section "Alternative Performance (Non-GAAP) Measures" of the MD&A for the three months ended June 30, 2020 for a detailed description of these measures and where appropriate a reconciliation of the measure to the Q2 2020 financial statements. | | (2) | Silver segment Cash Costs and AISC are calculated net of credits for realized revenues from all metals other than silver and are calculated per ounce of silver sold. Gold segment Cash Costs and AISC are calculated net of credits for realized silver revenues and are calculated per ounce of gold sold. Consolidated AISC is based on total silver ounces sold and are net of by-product credits from all metals other than silver. | | (3) | 2019 Timmins, Gold Segment, and Consolidated AISC were adjusted to reflect amounts recast, and presented, for the three months ended June 30, 2019 as if Timmins had not been classified as held for sale. | | (4) | Consolidated silver basis total is calculated per silver ounce sold with total gold revenues included within by-product credits. G&A costs are included in the consolidated AISC, but not allocated in calculating AISC for each operation. |

2020 GUIDANCE

On May 6, 2020, the Company withdrew its 2020 annual production, Cash Costs, AISC and capital expenditure forecasts, as provided in the 2019 annual MD&A dated March 12, 2020(the "Original 2020 Guidance"). The decision to withdraw the Original 2020 Guidance was based on the uncertainties regarding the impact of the COVID-19 pandemic on our operations.

The Company has revised its annual production, Cash Costs, AISC and capital expenditure forecasts for 2020 (the "Revised 2020 Guidance"), which is provided below. The estimates comprising the Revised 2020 Guidance are forward-looking statements and information that are subject to the cautionary note associated with forward-looking statements and information at the end of this news release.

Annual production, Cash Costs and AISC Guidance

| | Silver Production (million ounces) | Gold Production

(thousand ounces) | Cash Costs ($ per ounce) | AISC

($ per ounce)(1) | | Silver Segment: | | | | | | La Colorada | 6.40 - 7.20 | 4.0 | 6.20 - 7.00 | 9.50 - 10.50 | | Dolores | 4.00 - 4.80 | 99.0 - 104.0 | (5.60) - (3.90) | 3.90 - 7.40 | | Huaron | 2.00 - 2.20 | 1.0 | 8.20 - 9.10 | 11.80 - 12.80 | | Morococha (92.3%)(2) | 1.20 - 1.40 | 1.0 | 11.00 - 12.30 | 16.80 - 18.40 | | San Vicente (95.0%)(3) | 2.20 - 2.60 | — | 14.30 - 16.20 | 16.10 - 18.20 | | Manantial Espejo, COSE, and Joaquin | 3.00 - 3.50 | 24.0 - 27.0 | 13.80 - 15.90 | 15.30 - 17.70 | | Total (4,5) | 18.80 - 21.70 | 130.0 - 138.0 | 6.20 - 7.70 | 10.50 - 12.50 | | Gold Segment: | | | | | | Shahuindo | 0.20 - 0.30 | 147.0 - 164.0 | 590 - 660 | 860 - 960 | | La Arena | — | 103.0 - 114.0 | 760 - 860 | 1,140 - 1,260 | | Timmins | — | 145.0 - 159.0 | 1,030 - 1,060 | 1,175 - 1,240 | | Total (4,5) | 0.20 - 0.30 | 395.0 - 437.0 | 800 - 860 | 1,050 - 1,125 | | Total Production (5) | 19.00 - 22.00 | 525.0 - 575.0 | | | | Consolidated Silver Basis (4) | | | n/a(6) | (3.00) - 0.75 |

| (1) | Cash Costs and AISC are non-GAAP measures. Please refer to the "Alternative Performance (Non-GAAP) Measures" section of the MD&A for the three months ended June 30, 2020 for further information on these measures. The Cash Costs and AISC forecasts assume realized prices and exchange rates for the six month period ended June 30, 2020 and the following price and exchange rate assumptions for the period July 1, 2020 to December 31, 2020: metal prices of $18.25/oz for silver, $1,850/oz for gold, $2,050/tonne ($0.93/lb) for zinc, $1,775/tonne ($0.81/lb) for lead, and $6,150/tonne ($2.79/lb) for copper; and for the period July 1, 2020 to December 31, 2020, average exchange rates relative to 1 USD of 22.50 for the Mexican peso ("MXN"), 3.50 for the Peruvian sol ("PEN"), 77.53 for the Argentine peso ("ARS"), 6.91 for the Bolivian boliviano ("BOB"), and $1.35 for the Canadian dollar ("CAD"). | | (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. | | (4) | As shown in the detailed quantification of consolidated AISC, included in the "Alternative Performance (Non-GAAP) Measures" section of the MD&A for the three months ended June 30, 2020, corporate general and administrative costs, and exploration and project development expenses are included in Consolidated Silver Basis AISC, but are not allocated in calculating AISC for the Silver and Gold Segments. | | (5) | Totals may not add due to rounding. | | (6) | Pan American does not provide guidance for Cash Costs on a Consolidated Silver Basis, as AISC guidance better reflects costs on a Consolidated Silver Basis. |