Thank you for standing by. This is the conference operator. Welcome to the Pan American Silver Fourth Quarter and Year-End 2022 Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Siren Fisekci, VP, Investor Relations. Please go ahead, Ms. Fisekci.

Thank you for joining us today to discuss Pan American Silver's Q4 2022 results. This call includes forward-looking statements and information and makes reference to non-GAAP measures. Please see the cautionary statements in our MD&A for the period ended December 31, 2022 and news release and the presentation slides for our call today, all of which are available on our website. I'll now turn the call over to Michael Steinmann, Pan American's President and CEO.

Thank you for joining our call today. I'm looking forward to discussing with you the major event of 2022 which is our transaction to acquire the Latin American assets of Yamana Gold. Shareholders of both Pan American and Yamana overwhelmingly approved the transaction in January and we expect it to close some time this quarter. But first, let's recap Pan American's 2022 results. Pan American produced 18.5 million ounces of silver and 552,500 ounces of gold in 2022. Silver production came in at the top end of the revised range we issued in November, while gold production was in line with our original operating outlook. Gold production in the fourth quarter was the second highest on record, driven by back-end loaded production from Shahuindo and La Arena as we had expected and communicated. Both silver and gold production were impacted by reserve grade shortfalls in Phase 9b of the open pit at the Dolores mine while silver production was further impacted by mine sequencing into lower silver grade stopes at La Colorada in the second half of 2022. Ventilation conditions in the La Colorada underground mine improved in the second half of 2022 following the installation of 2 booster fans and the commissioning of a refrigeration plant. We expect to complete sinking of the new concrete line shaft late this year and equip the shaft with ventilation fans during 2024 which will further improve access to the higher-grade zones of the La Colorada vein deposit. Operating costs came in above our original guidance range, as we indicated they would, largely reflecting the global inflationary environment. Total capital expenditures were in line with our original operating outlook. We made significant progress on our major capital projects to advance the La Colorada Skarn. In 2022, we completed 32,000 meters of exploration drilling,…

The first question is from Craig Hutchison from TD Securities.

With respect to the upcoming guidance, will it be retroactive to January 1? That's my first question. And then, the second question is with respect to the segments. Can we expect, say, if Cerro Moro to fall into the silver segment and the remaining assets to report to the gold segment? Or will all the assets report to the gold segment?

Yes. Thanks for the question, Craig. Yes, our guidance for Pan American's original assets, the guidance will be for the full year. And then the assets that come to us through the Yamana transaction will, of course, be adjusted to the closing date. So that's what we are planning and we are not completely sure with the closing date yet. That's kind of a moving target yet. So that's what we have in mind. And I think the separation between gold and silver segment operations, it's probably very close or what you had mentioned.

Okay. And then do you expect any cyclicality with respect to your existing assets similar to this past year, so in doing La Arena, where you expect grades to be -- recoveries to be back-end weighted or maybe front-end weighted. Any kind of clarity on that would be appreciated.

Yes, Craig, this is Steve. It will be back-end weighted. It's typical at La Arena with our stripping schedule but we did carry over some of the waiting in 2022 into '23. So we're actually -- it will probably be more even than the previous years we've seen but it will trend towards the back end to some degree.

And just to add that, Craig, something on the guidance. Of course, there will be quite some different numbers when you look at the costs because Yamana is showing it in gold equivalents, while as you mentioned, we separate it out in gold and the silver segment’s net of byproduct credit. So there’s not going to be a complete apples-to-apples to compare from 1 company to the other.

The next question is from John Tumazos from John Tumazos Very Independent Research.

We're here on February 23, where the first quarter is over half done. Can you give us a little guidance on the March quarter? Will the silver output be above or below 4 million ounces?

John, it's Michael. We don't have, obviously, all this data yet. I think we're off to a decent start of the year. I think that's fair to say. And Well, as I said, once we have the transaction closed, we have that closing date that we can include in our -- in the adjustment to the guidance to the Yamana assets, we'll be able to put the full guidance out. And then of course we'll report the first quarter results around in May, like every year. I would expect that soon -- or pretty soon after we close, we should release a press release with our full year guidance for the combined company. As a news flow, I would also expect -- or you should expect to see some additional information on the drilling and exploration results from La Colorada Skarn. This is ongoing and you probably noticed that we have like probably 3, 4 times a year, we put out results. I'm sure that will be additional information that's probably going to come out before our Q1 results in May.

Michael, as you know, when you pay a premium to acquire a company and then another premium for the break fee, you have to improve the performance of the other company to justify the higher valuation, or else later down the road, there can be impairment charges if you don't earn the return. In Agnico's case, they have a big savings because they won't have to build a mill for Wasamac. In the operation of the Latin American mines, other than G&A and purchasing, are there any obvious improvements or ways you're going to run the mines better than Yamana would have?

Yes, John, first of all, this is a very accretive transaction. So when you discount the part that Agnico is paying for their assets in Canada, you're left off with the South American assets. And when you look at what we paid for, it's probably about 0.7x NAV, somewhere in that range, that we pay for those assets. If you add in all the closing costs and some of the break fees, you probably got to like 0.8 to 0.85 somewhere in that range. So it's a very accretive transaction. So probably a bit different than when you just look at the acquisition of a full company because this goes out in 2 pieces and was split between North America and South America, there was an opportunity for us to pick up those assets in an accretive transaction basically at a discount. Yamana did a good job in running those assets but what's changing, first of all, on the G&A which are quite big numbers -- what's changing and not only G&A in North America but also in South America because we have some overlap in some of our offices. We are obviously very happy that the operational teams will join us from Yamana; they did a great job. But you also have to see that we're going to be a much larger entity in Latin America, having much more purchasing power and negotiation power for our big purchases of, let's say, cyanide, steel balls, explosives, et cetera which will also result in additional synergies which we did not include yet in our kind of proposed synergy number that we put out there as about $40 million to $60 million a year. That $40 million to $60 million is mostly G&A includes, I think, a little bit on the exploration side but it's mostly G&A. So there will be additional synergies from the operational side, no doubt. We need to, of course, close the deal and start working with the assets before. We could put a finger on that number but the $40 million to $60 million to start with this is a pretty good number, $400 million to $600 million in the first 10 years.

So Mike, could you explain the accretion a little more? It would seem like in this share swap, the biggest driver of the accretion is that Pan Am's mines have very little gross margin and the Yamana mines have a bigger gross margin. And I apologize, I don't read Street NAV estimates. Sometimes, people use very low discount rates or assumptions that are foreign to me. But could you explain that accretion in a little more detail?

When you look at the accretion dilution analysis for an acquisition, you obviously look at many different factors. In this case, it's of course, as I explained, already accretive to NAV. It's accretive to cash flow. It's accretive to production. It's accretive to cash cost, very important. As we said from the beginning, this will result in a combination of higher and lower cost production with, in some cases, significantly longer-life mines. And then, when you look at the reserves, of course, we already have the largest silver reserves or one of the largest silver reserves in the world. I think we had there about 110 million ounces, give or take, to the reserve. But the biggest addition of that -- on the reserve side, on the accretion side is, of course, on the gold side that, that adds substantial amount of gold to our reserves as well. So these are kind of the major main points on the accretion dilution analysis. Of course, you can dive into other smaller details but the biggest one is that yes, bigger, stronger and longer time production at lower cost.

If I could ask one more. What do you think is a good guess for when La Colorada Skarn enters production?

That's a very good question and we spend a lot of effort on this. As you know, this, no doubt, has been our biggest discovery ever. And it's a great deposit. It keeps growing. And as I said and alluded to, we will put down more exploration results during the year as we go. I'm sure you noticed when we put out the last resource update, that this is kind of a moving target as the exploration has been so successful, not only with infill drilling but with step-out drilling, plus added that really high-grade zone that we reported in September last year. But the engineering has to adapt constantly to decide on the mining method that we go forward with it. I think we are still on track with the PA probably late this year. As I said, we will have more information as we go during the year out there. It's going to be a very sizable deposit, as you can imagine. It's we have already, what, with all the categories, probably around 0.25 billion tons of resources which I have no doubt will grow with the current exploration program. So it will take a number of years to put that in production. And it really depends what mining method at the end, we put a pin in and how we deal with the high-grade zone, if you deal with that separately or it's part of our overall production profile. So that's all very dictative if we are a few years faster or if we just built a really big operation and it takes a few years more to do so. But I don't have that number yet, John.

So it might be 2027, or it might be a range of 2027 to 2029, if it's a bigger, more complicated construction.

And for sure -- as I said, I don’t have the final year. But for sure, it will be a ramp-up. You can imagine and I think we discussed that before. We are looking at sizable production, anything between 15,000 to 20,000 tons a day or bigger, you can imagine that you’re not starting up the mine from scratch in a few months like that. That will be a long ramp up to get to that tonnage, like any very large underground operation in the world.

[Operator Instructions] The next question is from Sarah Constantine from Summer Moon [ph].

I had a quick question on Escobal. I know you guys mentioned there is no time line but I guess in your annual report said that in 2023, there's no expectation of reduction in Escobal. So should we assume you guys believe that your earliest production would be back online would be in 2024? Or is that a piece of, I guess, misinformation? What are your thoughts on it?

This is Sean McAleer. We've got the consultation process ongoing right now. And the process has obviously taken some time due to COVID, changing government after the acquisition. And it's hard to put a date on when the consultation will be concluded. And obviously, that is a prerequisite before we can set any kind of parameters around when we would enter production. The Escobal startup, when and if it does occur later on in the year or in 2024, it's going to take months to get back up again. So we can't give a date really for a start-up Escobal right now.

This concludes the question-and-answer session. I would like to turn the conference back over to Michael Steinmann for any closing remarks.

Yes. Thank you for calling in, everyone. I’m sure there will be many more questions once everybody is off restrictions and we close the transaction and cannot detail, discuss new Pan American. It will be a very exciting transformational transaction for us. It will be an exciting journey during 2023. And I’m really looking forward to discuss that in detail with you in some press releases and for sure at our May -- what is that? Q1 update in May ’023. Have a good spring, everyone. Thank you.

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.