Good morning, ladies and gentlemen and welcome to the Pan American Silver Second Quarter 2024 Unaudited Results Conference Call and Webcast. [Operator Instructions] This call is being recorded on Thursday, August 8, 2024. I would now like to turn the conference over to Siren Fisekci, VP, Investor Relations. Please go ahead.

Thank you for joining us today for Pan American Silver's Q2 2024 conference call. This call includes forward-looking statements and information and makes reference to non-GAAP measures. Please see the cautionary statements in our MD&A, news release and presentation slides for our Q2 2024 unaudited results all of which are available on our website. I'll now turn the call over to Michael Steinmann, Pan American's President and CEO.

Thanks, Siren. And thank you, everyone, for joining the call. Our operations generated record cash flow before changes in working capital of $203.3 million in Q2. This resulted in $102.1 million free cash flow in Q2. Balance sheet strength further improved with cash balances rising to $337.2 million at June 30, an increase of $36.1 million from the previous quarter. This strong financial performance was impacted by an unusual income tax expense, driven primarily by foreign currency exchange rate fluctuations in the quarter, namely evaluations of the Brazilian Real and the Mexican Peso, which reduced foreign dominated deductible tax attributes, as well as inflation adjustments on monetary liabilities in Argentina. Reported net loss in Q2 of $21.4 million or $0.06 per share was significantly impacted by the $93.1 million in income tax expense and $26.7 million net realizable value inventory expense. Adjusted earnings were $40 million or $0.11 per share. The impact of the inflation-driven Argentine income tax, which was not adjusted, reduced adjusted earnings by $0.03 per share. Turning to operations. Silver production of 4.57 million ounces in Q2 was below our expected range of $5.36 million to 5.78 million ounces for the quarter has continued ventilation constraints at La Colorada affected silver grades and throughputs. I'm very pleased to report that the new ventilation infrastructure was completed at the end of June and commissioning and start-up of the new plan started on July 11, 2024. As scheduled and ventilation conditions in the deeper Eastern areas of the mine have improved significantly. We are currently accelerating mine rehabilitation and development rates, which should steadily increase access to the higher grade Eastern Candelaria production areas. As a result, we are expecting to achieve higher throughput and grades in the second half of 2024 as planned. The slides that accompany this…

[Operator Instructions] Your first question comes from Cosmos Chiu with CIBC. Your line is now open.

Thanks Michael and team. Maybe my first question is on La Colorada. Michael, you kind of touched on it. La Colorada, the ventilation shaft is now in place. It sounds like it's going pretty well. Could you maybe elaborate? Is it functioning as expected? How has that sort of helped airflow? And ultimately, I guess what I'm trying to get to is, in terms of getting to 2,000 tonnes per day, you said you're going to get to it by year-end along with higher grades. Is it going to be more a straight line sort of increase from now until then? Or is there going to be some kind of step change and is that going to be part of the fact that, as you mentioned, overall, Q4 is going to be stronger than [Q3]?

Yes. Thanks, Cosmos. Yes, the shaft completion and the installation and startup of the fan was right on time, as we indicated since the beginning of the year, it will happen midyear, it happened midyear. It looks very exciting what we see on the results side on the impact to the mine of that chart, which, as you know, was a multiyear project really to kind of bring us back on track here with the production at La Colorada but Steve, maybe give some more detail.

Sure. Good morning, Cosmos. Thanks for the question. I have to say we're incredibly happy with the results of this new shaft. Immediately, when we turn the fans on July 11, we increased overall flow rates into the mine by about 200,000, 300,000 cubic feet per second of air flow - feet per minute, sorry, and immediately, we saw temperatures drop in the Candelaria East Zone by 3-degree wet fall Celsius. So a substantial improvement which led immediately, we saw a pump in tonnage of 25% over what we've been seeing up until that point through the year. We were about 1,400 tonnes a day going in for the year before we started that fan. We're now up at around a little over 1,700 tonnes a day. So between now and the end of the year, the other thing I wanted to mention is that we also bumped our development of 10% where we were prior to when that fan started up. So within the 2.5, 3-weeks of running the fan, we've seen incredible boost of production and development rates. That will continue to ramp up. I think for purposes of quarterly reporting, it will be a bit of a straight line ramp-up. Obviously, day to day, there's fluctuations that take place but we're feeling good that we're starting from a good pace, and we'll ramp up through the rest of the year.

Yes, that's great to hear. And then maybe on the quarterly guidance as well. Michael, as you mentioned, Q2 due to weather-related issues. Silver production was lower than your quarterly guidance. However, I do see that your cost, all-in sustaining costs was also lower or better than your quarterly guidance. So how you would achieve that lower cost despite lower production? And then ultimately, what's the - your ability to sustain those lower costs on a go-forward basis. Can we see that once again in terms of that better cost once again in Q3 and Q4?

Well, don't forget that, especially at La Colorada and other places with increased production later in the year and La Colorada is the best example of that, we obviously have a fixed cost there and having a larger denominator will bring the cost per ounce right down. That's really the reason why we forecast those lower costs at La Colorada go into the year, really based on that ramp-up of the production. So that's, of course, still there for us.

Yes. Just to add, Cosmos, I think in the first half of the year, some of the lower costs we've seen has been related to the timing of our inventory of byproduct credit sales relative to what we're producing. We sold a bit more byproduct than what we produced during that period. So that will offset as we look to the second half of the year. As Michael said, we do anticipate reduced unit cost per ton substantially at La Colorada. We are seeing some improvements that we've made at Cerro Moro and Jacobina, they're coming in at pretty good cost per ton. So we've kind of projected that out with the actual byproduct credits. And that's where we're saying that we feel will come in line with what we guided for our cash and East Coast costs for the year.

One last point, Cosmos. As I also mentioned, on the cost side, currency fluctuations have a big impact on our costs. We saw a devaluation in the quarter, especially in the Mexican Peso and the Brazilian Real. And that had a positive impact on our costs and will continue to do so if that continues down the road. Just on the flip side of that, obviously, when you have a devaluation of the currency, we see kind of an increase of our noncash tax expense due to those currency fluctuations. So you see that in our earnings numbers, but as I said that's a non-cash tax expense there, and I really like to see that the positive impact to our cost that we have now. And it's a very, very exciting combination of lower cost and higher metal prices, which obviously must reflect - the reflection of that, obviously, was the record cash flow.

I agree. And maybe one last question on Escobal. It seems like from your MD&A meetings are still continuing into Q3, despite the fact that the appointment of the Vice Minister of Sustainable Development is still pending. Am I reading that correctly? And was there any more updates in terms of Guatemala and Escobal?

Yes, we have actually got a large number of meetings with government officials during the quarter. And I think after a bit of slow startup, I think of the new government, they have most of the people in place, there are still a few people missing to be put there. But I think the other meeting scheduled between us and the government officials has definitely improved and looking forward to continue and go back into the full consultation meetings that we need to have to advance this.

Great. That's great to hear. And thanks again, Michael, Steve and [John] and team, and those are questions I have.

Thanks Cosmos.

Your next question comes from Don DeMarco with National Bank Financial. Your line is now open.

Thank you, operator, and Michael and team. Maybe first question, just continuing on with Escobal. So I've been looking at the price of the contingent value rights and they've eased a little bit over the recent months, do you think this is a fair indicator of the likelihood of a restart or just the tenor of activities at Escobal related to the consultation process?

I will be careful when you look at the price of the contingent value right, as you know, there is a $330 million CVRs out there, so a large number. And when you look at the trading numbers, this is a very limited trading on those CVR. So they obviously follow Pan American share price, of course. And then I think the fact that the new government needed a bit longer to set everything up here could have had an impact to that. But I will not read too much into it, as I said, as it is a very, very limit the trading of those CVRs.

Okay. And then just - I mean, it's encouraging to hear that there's a number of meetings that have been held. But is there any visibility for next meetings or the filling of that vacancy. This is just kind of maybe repeating some of the questions that were asked by the last caller. But just wondering what we might anticipate in the coming months on this process.

Look, I mean, we anticipate that, that role will obviously be filled by the government at time and will pick up, I think, with that the kind of the style of meetings we had before. As I said at the moment all I can say is that there has been quite a impressive number of meetings with government of officials between the company and us, and it was really like quite a slow start of the year with the new government, which kind of has to be expected, obviously, new government, as you can imagine. A lot of new officials in place that need to brought up to speed that have other issues to deal with in the country than just as Escobal as you can imagine. And now they are in place, most of them probably five, six months now. So I think, we see kind of a normalized - normalizing meeting schedule here in the future.

Okay. We'll look forward to that. So next question, the quarter we see a true portfolio effect here. You've got lower costs offsetting higher costs with different operations. The cornerstone mines look strong, Jacobine in particular. Now you've got this optimization work that's underway. The mine's running seemingly great at 8,400 tonnes per day. Are you still - is the optimization still looking at maybe trying to increase that throughput, or what are some of the areas of focus that we can look forward to whenever that report will be released?

Yes, we're very excited about Jacobine. As you see, very, very strong cash flow for us, very strong production, very, very long mine life. So yes, we're still working on the optimization. I think there's much more to do at Jacobine, but maybe Steve, you want to because I know you're not ready yet with the study to release anything, but maybe a few little points.

Sure. Thanks for the question, Don. Yes, the optimization work is proceeding at full bore. We are seeing benefits to changing some of the mining methods, particularly at depth, as we've talked in the past, that would allow us to capture more of the resource recovery, reserve recovery with the same development. That could lead to higher throughput. You kind of said it well. We're really happy running 8,400 tonnes a day. We've got a throttle there. Everything's coming in line. We're making a few upgrades to circuits in the process plan, a few upgrades in some of the systems in the mine. We're very happy with where it's running there, and we want to make sure that the optimization study is done in a way that will achieve the same kind of stable, steady-state run at a higher throughput, with understanding all aspects of that. So, there's still a lot of work to do. We're still talking sometime in the first half of next year to come out with the results. We do, I would say, tend to think it's going to show us higher throughput, but I don't really want to give any numbers on it right now.

Okay. Thanks for that, Steve. In the meantime, it's looking great. So last question. Looking to the Mexican administration, Claudia has been in the seat now for a few months. Have you had a chance to meet with the new administration? Are there any concerns or issues that might potentially develop or concerns in the quarters ahead with this change?

Yes. The new administration has been elected you're right, but they are not - they did not take office yet. September 1, while the change happens. It's a bit early to answer your question. I think we will continue to happily work with the government of Mexico. Mexico has always been a good place for us to work. We have very strong operations in Mexico. Sorry. October 1, sorry. That will be the change of the government. So, as I said, a bit early, but I don't foresee any big changes how we work with the government in Mexico. Governments, as you know, change in every country we are working overtime. We are dealing with very long reserve lives in some of our assets, especially when you look at the La Colorado squad. There will be many, many administrations passing while we produce for decades and decades on that asset in the future. So, we're very happy to work in Mexico. I don't see any issue at this point.

Okay, Michael. Thanks so much for that, and good luck with Q3.

Thank you. Operator? Hello? Hello, operator? Nicholas, if you can hear us, you're in the queue to ask a question.

Thanks, Michael, for taking my question here. I just had a question on Cerro Moro, if I could. I understand that grades have been a little bit variable here for the previous two quarters, and that's been due to some regulated impacts, but I was hoping you guys could provide some color on what the next quarter or two might look like there with respect to grade and throughput. Thank you.

Yes, and it's really hinging on the Naty zone that we are mining that is probably 25 kilometers away from Cerro Moro, high-grade satellite, and we couldn't really access that site all the time during Q2 because of the really, really strong rains and snowfalls during winter. We are obviously getting now into springtime soon, and access has been re-established. So that's why we're maintaining obviously our outlook for the production there. Steve, want to give some details?

Yes, sure. Nicholas. And we were pushing pretty hard to get Naty online towards the end of last year we talked about it. It was kind of the next grade zone, if you will. We were going to open up after mining out the higher-grade portions of the zone deposit. It was very important to us. So we pushed out there, we got that up and running quite well early in Q1, and it was starting to deliver pretty well. I have to admit, yes, we had some pretty good rains there, higher than normal, but we also - our road wasn't really built to the kind of standards we would have liked to have seen. So the combination of the two definitely limited, restricted our ability to access the pit. We didn't really have dewatering systems in place to the degree that we should have to dewater the pit in these kind of rainstorms. So we've been - as we've regained access, and now we are mining back in Naty at the rates we'd like to mine, we're upgrading those roads, we're upgrading those dewatering systems so that we can face these storms in the future. And we're also looking at plans now to accelerate production in Naty to kind of claw back what we missed in Q2 there. We feel pretty good that we've got a good plan in place to be able to do that, but that's going to load up Q4 more so. You won't see as much coming out in Q3. So when you look at the distribution at Cerro Moro, it's going to be stronger in Q4 than Q3.

Got it. Okay. That's helpful. Thanks, Steve. Just if I could sneak in one more. We're almost halfway through the quarter here, and I understand that the La Arena two transaction is still expected to close sometime this quarter. I was just wondering if you guys could provide any updates or color on when you see that happening, and if there's anything with respect to approvals that you're still waiting for. Thank you.

Nicholas, that's right. And at the moment, we're still waiting for some regulatory approvals. And at the moment, it's still planned for Q3.

Great. Thanks, Michael.

Thank you.

There are no further questions at this time. I will now turn the call over to Michael for closing remarks.

Thank you, operator. And thanks, everyone, for joining the call today. Very exciting times coming here for Pan American. We got a glimpse here when you look at the record revenues, record cash flow, free cash flow, costs below guidance. Obviously, a very nice combination here when you go into a high metal price environment. At the same time, we finalized the ventilation system at La Colorado after quite a few years of very, very hard work to get there. So, as Steve explained, we already see an increase in not only production number but also development meters. We're nearly back on development meter on track where we want to be at about 2,000 meters a month, I believe. So, that will lead to a ramp up at La Colorado, as I explained, that will lead to lower costs at La Colorado. And a very exciting combination. While we still obviously work on our exciting Skarn deposit, no doubt this is one of the largest worldwide, largest discovery of submarine-based metals over the last decade. We'll continue working that and, of course, still have the optionality on Escobal. So, lots of exciting projects ahead of us and right out there to harvest the fruits of high metal prices with a combination of lower costs. So, looking forward to report on Q3 later this year. Until then, have a good time. Thanks, everyone.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.