Pan American Silver Reports Net Earnings of $43.4 million in Q3

Pan American Silver Corp. (NASDAQ: PAAS,TSX: PAA) reported unaudited results for Q3. Highlights include net earnings of $43.4 million ($0.28 basic earnings per share).
As quoted in the press release:

Highlights for the three and nine-month periods ended September 30, 2016:

• Silver production in Q3 2016 was 6.36 million ounces compared with 6.61 million ounces in Q3 2015. The decrease reflects anticipated production declines at Alamo Dorado, with the mine reaching the end of its life, and at Dolores due to lower grades from mine sequencing. The decreases at these mines were partially offset by higher silver production at La Colorada, Morococha and Huaron. For the nine-month period, silver production totaled 19.11 million ounces in 2016 compared with 19.34 million ounces in the same period of 2015. Silver production in 2016 is pacing ahead of plan, and we are now raising our outlook for silver production in 2016 to 25.0 to 25.7 million ounces.
• Gold production was 50.4 thousand ounces in the third quarter of 2016 and 140.0 thousand ounces in the nine-month period of 2016, in line with guidance.
• Consolidated cash costs dropped 44% to $4.89 per payable ounce of silver in Q3 2016 compared with Q3 2015. For the nine-month period, cash costs were $6.17 per ounce, down 38% from the same period of 2015. The reduction in costs reflects increased by-product credits, export incentives at Manantial Espejo, and lower direct operating costs. Given cash costs are below the low end of our guidance, we are reducing the estimate for 2016 consolidated cash costs to between $6.25 and $7.00 per ounce. This is the second reduction in the outlook for 2016 cash costs, representing a decline of 33% from original guidance.
  Consolidated All-In Sustaining Costs per Silver Ounce Sold (“AISCSOS”) were $6.34 in Q3 2016, down 61% from Q3 2015. For the nine-month period, AISCSOS was $10.10, down 33% from the same period of 2015. The decline in quarter-over-quarter AISCSOS resulted mainly from: positive net realizable value (“NRV”) inventory adjustments at Manantial Espejo and Dolores, increased by-product credits, export incentives at Manantial Espejo, and cost reductions at Dolores and Morococha. We are reducing our estimate for AISCSOS for the second time this year to between $10.75 and $11.50 per ounce, representing a total reduction of 22% from original guidance.
• Revenue was $233.6 million, up 47% from Q3 2015, reflecting higher metals prices and quantities sold, except copper, and positive variances in settlement adjustments on concentrate shipments. Most significant was a 34% quarter-over-quarter increase in silver prices to an average of $19.69 per ounce in Q3 2016.
• Net cash generated from operating activities was $102.3 million, up 211% from Q3 2015, largely due to increased revenues and decreases in production costs and income taxes paid.
• Net earnings increased to $43.4 million ($0.28 per share) compared with a net loss of $67.5 million ($0.44 loss per share) in Q3 2015. The increase reflects higher revenue, lower costs and no impairment charges in Q3 2016 versus a $28.8 million impairment charge in Q3 2015, partially offset by higher income taxes.
  Adjusted earnings were $37.0 million ($0.24 basic adjusted earnings per share) compared with an adjusted net loss of $9.3 million ($0.06 basic loss per share) in Q3 2015.
• Liquidity position continued to strengthen over Q3 2016, with a $41.1 million increase in cash and short-term investments. At September 30, 2016, cash and cash equivalents and short-term investment balances were $245.3 million, the working capital position was $434.2 million and total debt outstanding was $47.0 million.
• Capital expenditures totaled $48.5 million in Q3 2016, including project capital for the Dolores and La Colorada mine expansions.
• A quarterly cash dividend of $0.0125 per common share, approximately $1.9 million in aggregate cash dividends, has been approved by the Board of Directors. The dividend will be payable on or about Tuesday, December 6, 2016, to holders of record of Pan American’s common shares as of the close on Friday, November 25, 2016. 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.
• Unlocked value with the Maverix Metals Inc. transaction close. During Q3 2016 the Company closed a plan of arrangement (the “Arrangement”) with Maverix Metals Inc. (“Maverix”), which commenced trading on the TSX Venture Exchange on July 12, 2016, under the stock symbol “MMX”. Pursuant to the Arrangement, Maverix acquired from the Company a portfolio of royalties, precious metals streams and payment agreements, that prior to the transaction were essentially unvalued within the Company’s asset portfolio, in exchange for a 54% equity interest in Maverix (63% fully diluted). The Company recognized a $6.6 million gain ($0.6 million after tax) during Q3 2016 in relation to this transaction.

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