Pan American Silver Corp. (NYSE:PAAS) Q2 2024 Earnings Conference Call August 8, 2024 11:00 AM ET

Company Participants

Siren Fisekci - IR
Michael Steinmann - President and CEO
Steve Busby - COO

Conference Call Participants

Cosmos Chiu - CIBC
Don DeMarco - National Bank Financial

Operator

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.

Siren Fisekci

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.

Michael Steinmann

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.