Pan American Silver announces its unaudited fourth quarter and full year 2015 financial results

(All amounts in US$ unless otherwise indicated. Financial information is based on International Financial Reporting Standards ("IFRS"). Results are unaudited and could change based on final audited financial results.)

This news release contains forward-looking information about expected future events and financial and operating performance of the Company. Readers should refer to the risks and assumptions set out in the "Cautionary Note Regarding Forward-Looking Statements" contained in this news release.

VANCOUVER, Feb. 18, 2016 /CNW/ - Pan American Silver Corp. (NASDAQ: PAAS; TSX: PAA) ("Pan American", or the "Company") today reported unaudited results for the three and twelve months ended December 31, 2015.

Strategic Achievements

Fourth Quarter ("Q4") 2015

  • Produced 6.78 million ounces of silver and 48,200 ounces of gold
  • Reduced consolidated cash costs(1) 24% from Q4 2014 to $9.09 per payable ounce of silver, net of by-product credits
  • Reduced consolidated All-In Sustaining Costs per Silver Ounce Sold(2) ("AISCSOS") 21% from Q4 2014 to $14.76, net of by-product credits
  • Increased net cash flow generated from operating activities to $23.4 million, or $0.15 per share

Full-Year 2015 ("2015")

  • Achieved record silver production of 26.12 million ounces
  • Achieved record gold production of 183,700 ounces
  • Reduced consolidated cash costs(1) by 15% from 2014 to $9.70 per payable ounce of silver, net of by-product credits
  • Reduced consolidated AISCSOS(2) by 17% from 2014 to $14.92
  • Generated strong net cash flow from operating activities of $88.7 million, sufficient to fully fund sustaining capital of $73.7 million
  • Advanced the La Colorada expansion:
    • New shaft 50% complete
    • New sulphide processing plant 70% complete
  • Commenced the Dolores expansion:
    • Advanced underground ramp 866 metres
    • New power line approximately 74% complete

(1)

Cash cost per ounce of silver, net of by-product credits ("cash costs") is a not a generally accepted accounting principle (a "non-GAAP") measure. Cash costs does not have a standardized meaning prescribed by IFRS as an indicator of performance.  The Company's method of calculating cash costs may differ from the methods used by other entities and, accordingly, the Company's cash costs may not be comparable to similarly titled measures used by other entities. Investors are cautioned cash costs per payable ounce of silver should not be construed as an alternative to production costs, depreciation and amortization, and royalties determined in accordance with IFRS as an indicator of performance. Readers should refer to the "Alternative Performance (non-GAAP) Measures" section at the end of this news release for a more detailed discussion of this measure and its calculation.

(2)

All-In Sustaining Costs per Silver Ounce Sold ("AISCSOS") is a non-GAAP measure. The Company has adopted AISCSOS as a measure of its consolidated operating performance and its ability to generate cash from all operations collectively, and the Company believes it is a more comprehensive measure of the cost of operating our consolidated business than traditional cash costs per payable ounce as it includes the cost of replacing ounces through exploration, the cost of ongoing capital investments (sustaining capital), general and administrative expenses, as well as other items that affect the Company's consolidated earnings and cash flow. AISCSOS does not have a standardized meaning prescribed by GAAP, and readers should refer to the "Alternative Performance (non-GAAP) Measures" section at the end of this news release for a more detailed discussion of this measure and its calculation.



Michael Steinmann, President and Chief Executive Officer of the Company commented on the fourth quarter 2015 and full-year 2015 performance results, "2015 was one of the strongest production years in Pan American's history with record silver and gold production, a 15% decrease of our cash costs and a 17% decrease in AISCSOS from 2014. In spite of deteriorating metal prices, our record setting production helped us to continue to generate strong operating cash flows of $88.7 million, or $0.58 per share, which was more than sufficient to cover our annual sustaining capital of $73.7 million. Our efforts did not fully counteract the effects of lower metal prices on our earnings, as net realizable value adjustments, low prices, foreign exchange losses, and impairments pushed us into a net loss position for the year."

Mr. Steinmann continued, "However, our balance sheet remains healthy and we have more than adequate cash to fully fund both of our expansion projects at La Colorada and Dolores, which are advancing as planned. I look forward to 2016 and beyond, when we should see substantial reductions to our cash costs and AISCSOS once the two expansions are complete."

Consolidated Financial Results



Three months ended

December 31,

Twelve months ended

December 31,

(Unaudited in thousands of U.S. Dollars, except as noted)


2015


2014


2015


2014

Revenue

$

162,960

$

163,096

$

674,688

$

751,942

Mine operating (loss) earnings

$

(7,771)

$

(21,369)

$

(32,089)

$

8,073

Net loss for the period

$

(136,958)

$

(525,727)

$

(231,556)

$

(544,823)

Adjusted loss for the period(1)

$

(17,517)

$

(21,207)

$

(57,968)

$

(20,825)

Net cash generated from operating

activities

$

23,401

$

823

$

88,692

$

124,188


Costs Per Payable Silver Ounce

All-in sustaining cost per silver ounce sold(2) (AISCSOS)

$

14.76

$

18.62

$

14.92

$

17.88


Per Share Results

Net loss per share attributable to common shareholders (basic)

$

(0.88)

$

(3.48)

$

(1.49)

$

(3.60)

Adjusted loss per share attributable
to common shareholders (basic)(1)

$

(0.12)

$

(0.14)

$

(0.38)

$

(0.14)

Net cash generated from operating activities per share

$

0.15

$

0.01

$

0.58

$

0.82

(1)

Adjusted (loss) earnings, and adjusted (loss) earnings per share attributable to common shareholders, are a non-GAAP measure that the Company considers to better reflect normalized earnings as it eliminates items that may be volatile from period to period relating to positions which will settle in future periods, and items that are non-recurring. Readers should refer to the "Alternative Performance (non-GAAP) Measures" section at the end of this news release for a more detailed discussion of this measure and its calculation.

(2)

AISCSOS is a non-GAAP measure. AISCSOS does not have a standardized meaning prescribed by GAAP, and readers should refer to the "Alternative Performance (non-GAAP) Measures" section at the end of this news release for a more detailed discussion of this measure and its calculation.



Fourth Quarter Consolidated Financial Results – Q4 2015 vs. Q4 2014

Pan American's revenue during Q4 2015 declined slightly from Q4 2014, a result of metal price declines and negative price and quantity settlements, almost completely offset by increased quantities of metals sold, most notably gold and copper.

During Q4 2015, the Company's average realized prices for silver and gold declined 7% and 8%, respectively from Q4 2014 to $14.66 per ounce of silver and $1,109 per ounce of gold. The Company received $1,672 per tonne of zinc, $1,684 per tonne of lead, and $4,871 per tonne of copper, a decline from the fourth quarter of 2014 of 25%, 14%, and 26%, respectively.

The Company's net loss during Q4 2015 declined by $388.8 million from Q4 2014 primarily due to a decline of $412.8 million in net of tax impairment charges and a $13.6 million reduction in mine operating losses. During Q4 2015, the Company recorded $121.5 million in pre-tax impairment charges on the value of mineral properties, and plant and equipment at Morococha, Dolores and Alamo Dorado. The impairment charges were incurred mainly due to the prolonged decline in the Company's long-term reserve metal prices in the quarter. After adjusting for impairment charges and other items, the Company's adjusted loss for Q4 2015 declined 17% relative to Q4 2014, primarily the result of a decline in production costs.

Net cash generated from operating activities during Q4 2015 rose sharply compared to Q4 2014 due largely to the decline in mine operating losses, lower income tax, and interest payments.

AISCSOS during Q4 2015 declined 21%, or $3.86 from Q4 2014 to $14.76, primarily as a result of lower direct operating costs, higher by-product credits, particularly from more gold by-product production at Dolores and Alamo Dorado; and higher silver sales, partially offset by higher general and administrative expenses; and higher treatment and refining charges.

During Q4 2015, the Company paid $7.6 million in cash dividends to its shareholders and drew $36.2 million from its secured revolving line of credit exclusively in connection with the payment of the Minefinders convertible debentures, which all matured in December 2015. 

Annual Consolidated Financial Results – 2015 vs. 2014

Pan American's revenue in 2015 declined by $77.3 million from 2014 revenues, due to significantly lower metals prices, partially offset by larger quantities of gold and copper sold. During 2015, the Company sold 20% more ounces of gold and 73% more tonnes of copper than in 2014 due to record annual gold and copper production.

In 2015, the Company's average realized prices for silver and gold declined 16% and 8% from 2014, respectively. Pan American received an average of $15.53 per ounce of silver and $1,162 per ounce of gold in 2015. The Company received $1,889 per tonne of zinc, 13% less than in 2014, $1,745 per tonne of lead, 16% less than in 2014, and $5,314 per tonne of copper, 22% less than in 2014.

Pan American's mine operating losses were $32.1 million during 2015, $40.2 million lower than the $8.1 million mine operating earnings generated in 2014. The decline in mine operating earnings was due almost entirely to the lower revenue, which was partially offset by a $40.2 million decrease in net production costs and royalties.

Pan American's net loss for 2015 declined by $313.3 million when compared to net losses for 2014, mostly on account of $392.7 million lower net of tax impairment charges, primarily offset by the previously mentioned decline in revenues. In 2015, the Company recognized pre-tax impairment charges totaling $150.3 million relating to write-downs of the Manantial Espejo, Morococha, Dolores, and Alamo Dorado mines.

The adjusted loss of $58.0 million for 2015 was $37.1 million higher than the adjusted loss in 2014. The year-over-year increased adjusted loss was largely attributable to the previously discussed decline in revenues, offset by reduced production costs and royalties and lower income taxes.

Net cash generated from operating activities during 2015 declined 29% compared to 2014, mainly as a result of lower revenues, offset by decreased production costs and royalties, as well as lower income tax payments. Operating cash flow generated during the year was sufficient to fund all of the Company's sustaining capital needs, taxes payable, interest payments and half of the $41.7 million distributed to shareholders during 2015 in the form of cash dividends.  

Consolidated AISCSOS for 2015 declined 17% to $14.92 compared to 2014 due to lower sustaining capital expenditures, lower net realizable value adjustments to inventories, primarily related to Dolores heap leach inventories; lower direct operating costs, and higher by-product credits, mainly from record gold production.

At December 31, 2015, Pan American had $226.6 million in cash and short-term investments and maintained a very strong working capital position of $392.2 million.

Consolidated Operational Results – Q4 2015 vs. Q4 2014


Q4 2015
Production

Q4 2014
Production


Ag
(Moz)

Au
(koz)

Cash

Costs(1) $

Ag
(Moz)

Au
(koz)

Cash
Costs (1) $

La Colorada

1.42

0.65

7.28

1.29

0.72

7.57

Dolores

0.95

18.21

11.64

0.95

17.99

12.99

Alamo Dorado

0.82

7.89

5.49

0.86

5.67

14.07

Huaron

0.99

0.24

11.35

0.95

0.30

12.22

Morococha

0.52

0.78

12.99

0.60

0.91

12.53

San Vicente

1.08

n/a

11.12

1.17

n/a

11.88

Manantial Espejo

1.01

20.46

6.48

0.91

18.27

13.93

TOTAL (2)

6.78

48.22

9.09

6.73

43.86

11.92

(1)

Cash costs per payable ounce of silver, net of by-product credits. Average by-product metal prices for Q4 2015 were: Au $1,106/oz, Zn $1,613/tonne, Pb $1,681/tonne, and Cu $4,892/tonne. Cash costs is a non-GAAP measure and cash costs does not have a standardized meaning prescribed by IFRS as an indicator of performance.  Readers should refer to the "Alternative Performance (non-GAAP) Measures" section at the end of this news release for a more detailed discussion of this measure and its calculation.

(2)

Totals may not add up due to rounding.

Silver production in Q4 2015 was similar to Q4 2014, with production increases at La Colorada, Huaron, and Manantial Espejo partially offset by production declines at the Company's other operations.

Despite substantially lower prices for all by-products, consolidated cash costs during Q4 2015 declined 24% due to higher production of all by-product metals and lower direct unit operating costs at all mines, particularly at Huaron, Morococha, Manantial Espejo and Alamo Dorado.

Gold production during Q4 2015 rose 10% from the comparable quarter of 2014, driven by increased production at Dolores, Alamo Dorado and Manantial Espejo.

During Q4 2015, Pan American also produced 11,500 tonnes of zinc, 4,100 tonnes of lead and 4,000 tonnes of copper, 12%, 5% and 34% more than in Q4 2014. Copper production rose significantly due to mine sequencing at the Company's Peruvian mines, where production continues to focus on copper-rich areas.

Consolidated Operational Results – 2015 vs. 2014


FY 2015
Production

FY 2014
Production


Ag
(Moz)

Au
(koz)

Cash

Costs(1) $

Ag
(Moz)

Au
(koz)

Cash
Costs (1) $

La Colorada

5.33

2.63

7.41

4.98

2.57

8.14

Dolores

4.25

79.14

9.28

3.98

66.82

12.94

Alamo Dorado

2.97

20.34

11.41

3.47

17.56

12.89

Huaron

3.71

1.05

10.91

3.63

1.16

11.56

Morococha

2.17

3.22

13.03

2.37

2.92

13.22

San Vicente

4.12

n/a

11.57

3.95

n/a

13.16

Manantial Espejo

3.58

77.32

7.33

3.72

70.47

10.12

TOTAL (2)

26.12

183.70

9.70

26.11

161.50

11.46

(1)

Cash costs per payable ounce of silver, net of by-product credits. Average by-product metal prices for 2015 were: Au $1,160/oz, Zn $1,928/tonne, Pb $1,784/tonne, and Cu $5,495/tonne. Cash costs is a non-GAAP measure and cash costs does not have a standardized meaning prescribed by IFRS as an indicator of performance.  Readers should refer to the "Alternative Performance (non-GAAP) Measures" section at the end of this news release for a more detailed discussion of this measure and its calculation.

(2)

Totals may not add up due to rounding.



Consolidated record silver production for 2015 was similar to that of 2014, with production increases at La Colorada, Dolores, Huaron, and San Vicente offsetting declines at Alamo Dorado, Morococha and Manantial Espejo. Consolidated gold production rose 14% compared to 2014 to a new annual Company record with notable increases to production record levels at Dolores, Alamo Dorado and Manantial Espejo.

Despite substantially lower by-product metal prices, the Company reduced cash costs by 15% from 2014 on account of higher gold production and record-breaking consolidated copper production, as well as substantially lower unit operating costs per tonne at all of the Company's mines due to improved productivities, favorable currency exchange rates and lower costs for certain consumables, especially diesel fuel.

Pan American's consolidated base metals production during 2015 was 40,700 tonnes of zinc, 14,600 tonnes of lead and 15,000 tonnes of copper. Zinc production declined 7% and lead production declined 3% from 2014, mainly due to lower production at Morococha from a change in mine sequencing targeting higher value ores from the copper-rich Esperanza area that drove consolidated copper production up 67% from 2014.

Capital Expenditures – Fiscal Year 2015 vs. Fiscal Year 2014

During 2015, Pan American spent $73.7 million in sustaining capital at its operating mines, 25% less than in 2014, due to reduced pre-stripping at Manantial Espejo, fewer mining equipment replacements, and less capitalized underground infrastructure development at Huaron and Morococha given the advances accomplished in previous years.

In addition, the Company invested $76.5 million in long term project capital to advance the La Colorada and Dolores mine expansions.

Current and Future Dividends

Today, the Board of Directors approved a quarterly cash dividend in the amount of $0.0125 per common share. The cash dividend will be payable on or about Friday, March 11, 2016, to holders of record of common shares as of the close of Monday, February 29, 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.

2016 Operational Forecast

In 2016, Pan American expects to produce between 24.0 million and 25.0 million ounces of silver and between 175,000 and 185,000 ounces of gold.

Pan American's 2016 base metals production is expected to be between 46,000 and 48,000 tonnes of zinc, 15,000 to 15,500 tonnes of lead and 13,000 to 13,500 tonnes of copper.

Consolidated cash costs for the full year 2016 are expected to be between $9.45 and $10.45 per ounce of silver, net of by-product credits, and consolidated AISCSOS are expected to be between $13.60 and $14.90, net of by-product credits. The Company has assumed by-product prices of Au $1,100/oz, Zn $1,700/tonne, Pb $1,600/tonne and Cu $4,600/tonne in the calculation of the forecast 2016 cash costs and AISCSOS.

Also in 2016, Pan American expects to spend between $65.0 million and $75.0 million in sustaining capital at its operating mines. In addition, the Company expects to invest between $135.0 million and $140.0 million in project development at La Colorada and Dolores.

Please refer to the Company's news release issued on January 19, 2016 for details of the Company's production and cash costs forecast by mine.

Technical information contained in this news release with respect to Pan American has been reviewed and approved by Martin Wafforn, P.Eng., VP Technical Services, who is the Company's Qualified Person for the purposes of National Instrument 43-101. For additional information about the Company's material mineral properties, please refer to the Company's Annual Information Form dated March 30, 2015, filed at www.sedar.com.

Pan American will host a conference call to discuss these results on Thursday, February 18, 2016 at 1:00 pm EST (10:00 am PST). To participate in the conference, please dial toll number 1-604-638-5340.

 

A live audio webcast and PowerPoint presentation will be available at https://meet.panamericansilver.com/ir/8D435YLF. The audio and PowerPoint webcast will also be available for replay by visiting the Events page of the Company's website at www.panamericansilver.com/Investors/Events.

About Pan American Silver

Pan American Silver's mission is to be the world's pre-eminent silver producer with a reputation for excellence in discovery, engineering, innovation and sustainable development. The Company has seven operating mines in Mexico, Peru, Argentina and Bolivia. Pan American also owns several development projects in Mexico, USA, Peru and Argentina.

NON-GAAP MEASURES

THIS NEWS RELEASE REFERS TO VARIOUS NON-GAAP MEASURES, SUCH AS CASH COSTS PER PAYABLE OUNCE OF SILVER, ALL-IN SUSTAINING COST PER SILVER OUNCE SOLD AND ADJUSTED (LOSS) EARNINGSREADERS SHOULD REFER TO THE "ALTERNATIVE PERFORMANCE (NON-GAAP) MEASURES" SECTION AT THE END OF THIS NEWS RELEASE FOR A MORE DETAILED DISCUSSION OF THESE MEASURES AND THEIR CALCULATION.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

CERTAIN OF THE STATEMENTS AND INFORMATION IN THIS NEWS RELEASE CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE UNITED STATES PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND "FORWARD-LOOKING INFORMATION" WITHIN THE MEANING OF APPLICABLE CANADIAN PROVINCIAL SECURITIES LAWS. ALL STATEMENTS, OTHER THAN STATEMENTS OF HISTORICAL FACT, ARE FORWARD-LOOKING STATEMENTS OR INFORMATION. FORWARD-LOOKING STATEMENTS OR INFORMATION IN THIS NEWS RELEASE RELATE TO, AMONG OTHER THINGS: OUR ESTIMATED PRODUCTION OF SILVER, GOLD AND OTHER METALS IN 2016; OUR ESTIMATED CASH COSTS PER PAYABLE OUNCE OF SILVER IN 2016; OUR ESTIMATED CAPITAL INVESTMENTS, AISCSOS, AND SUSTAINING CAPITAL FOR 2016; THE ABILITY OF THE COMPANY TO SUCCESSFULLY COMPLETE ANY CAPITAL INVESTMENT PROGRAMS AND PROJECTS AND THE IMPACTS OF ANY SUCH PROGRAMS AND PROJECTS ON THE COMPANY; AND ANY ANTICIPATED LEVEL OF FINANCIAL AND OPERATIONAL SUCCESS IN 2016.

THESE STATEMENTS REFLECT THE COMPANY'S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND ARE NECESSARILY BASED UPON A NUMBER OF ASSUMPTIONS THAT, WHILE CONSIDERED REASONABLE BY THE COMPANY, ARE INHERENTLY SUBJECT TO SIGNIFICANT OPERATIONAL, BUSINESS, ECONOMIC AND REGULATORY UNCERTAINTIES AND CONTINGENCIES.  THESE ASSUMPTIONS INCLUDE: TONNAGE OF ORE TO BE MINED AND PROCESSED; ORE GRADES AND RECOVERIES; PRICES FOR SILVER, GOLD AND BASE METALS REMAINING AS ESTIMATED; CURRENCY EXCHANGE RATES REMAINING AS ESTIMATED; CAPITAL, DECOMMISSIONING AND RECLAMATION ESTIMATES; OUR MINERAL RESERVE AND RESOURCE ESTIMATES AND THE ASSUMPTIONS UPON WHICH THEY ARE BASED; PRICES FOR ENERGY INPUTS, LABOUR, MATERIALS, SUPPLIES AND SERVICES (INCLUDING TRANSPORTATION); NO LABOUR-RELATED DISRUPTIONS AT ANY OF OUR OPERATIONS: NO UNPLANNED DELAYS IN OR INTERRUPTIONS IN SCHEDULED PRODUCTION; ALL NECESSARY PERMITS, LICENCES AND REGULATORY APPROVALS FOR OUR OPERATIONS ARE RECEIVED IN A TIMELY MANNER; AND OUR ABILITY TO COMPLY WITH ENVIRONMENTAL, HEALTH AND SAFETY LAWS. THE FOREGOING LIST OF ASSUMPTIONS IS NOT EXHAUSTIVE.

THE COMPANY CAUTIONS THE READER THAT FORWARD-LOOKING STATEMENTS AND INFORMATION INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE ACTUAL RESULTS AND DEVELOPMENTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS OR INFORMATION CONTAINED IN THIS NEWS RELEASE AND THE COMPANY HAS MADE ASSUMPTIONS AND ESTIMATES BASED ON OR RELATED TO MANY OF THESE FACTORS. SUCH FACTORS INCLUDE, WITHOUT LIMITATION: FLUCTUATIONS IN SILVER, GOLD AND  BASE METALS PRICES; FLUCTUATIONS IN PRICES FOR ENERGY INPUTS, LABOUR, MATERIALS, SUPPLIES AND SERVICES (INCLUDING TRANSPORTATION); FLUCTUATIONS IN CURRENCY MARKETS (SUCH AS THE CANADIAN DOLLAR, PERUVIAN SOL, MEXICAN PESO AND BOLIVIAN BOLIVIANO VERSUS THE U.S. DOLLAR); OPERATIONAL RISKS AND HAZARDS INHERENT WITH THE BUSINESS OF MINING (INCLUDING ENVIRONMENTAL ACCIDENTS AND HAZARDS, INDUSTRIAL ACCIDENTS, EQUIPMENT BREAKDOWN, UNUSUAL OR UNEXPECTED GEOLOGICAL OR STRUCTURAL FORMATIONS, CAVE-INS, FLOODING AND SEVERE WEATHER); RISKS RELATING TO THE CREDIT WORTHINESS OR FINANCIAL CONDITION OF SUPPLIERS, REFINERS AND OTHER PARTIES WITH WHOM THE COMPANY DOES BUSINESS; INADEQUATE INSURANCE, OR INABILITY TO OBTAIN INSURANCE, TO COVER THESE RISKS AND HAZARDS; EMPLOYEE RELATIONS; RELATIONSHIPS WITH, AND CLAIMS BY, LOCAL COMMUNITIES AND INDIGENOUS POPULATIONS; OUR ABILITY TO OBTAIN ALL NECESSARY PERMITS, LICENSES AND REGULATORY APPROVALS IN A TIMELY MANNER; CHANGES IN LAWS, REGULATIONS AND GOVERNMENT PRACTICES IN THE JURISDICTIONS WHERE WE OPERATE, INCLUDING ENVIRONMENTAL, EXPORT AND IMPORT LAWS AND REGULATIONS; DIMINISHING QUANTITIES OR GRADES OF MINERAL RESERVES AS PROPERTIES ARE MINED; INCREASED COMPETITION IN THE MINING INDUSTRY FOR EQUIPMENT AND QUALIFIED PERSONNEL; AND THOSE FACTORS IDENTIFIED UNDER THE CAPTION "RISKS RELATED TO PAN AMERICAN'S BUSINESS" IN THE COMPANY'S MOST RECENT FORM 40-F AND ANNUAL INFORMATION FORM FILED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION AND CANADIAN SECURITIES REGULATORY AUTHORITIES. ALTHOUGH THE COMPANY HAS ATTEMPTED TO IDENTIFY IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY, THERE MAY BE OTHER FACTORS THAT CAUSE RESULTS NOT TO BE AS ANTICIPATED, ESTIMATED, DESCRIBED OR INTENDED. INVESTORS ARE CAUTIONED AGAINST UNDUE RELIANCE ON FORWARD-LOOKING STATEMENTS AND INFORMATION. FORWARD-LOOKING STATEMENTS AND INFORMATION ARE DESIGNED TO HELP READERS UNDERSTAND MANAGEMENT'S CURRENT VIEWS OF OUR NEAR AND LONGER TERM PROSPECTS AND MAY NOT BE APPROPRIATE FOR OTHER PURPOSES. THE COMPANY DOES NOT INTEND, NOR DOES IT ASSUME ANY OBLIGATION TO UPDATE OR REVISE FORWARD-LOOKING STATEMENTS AND INFORMATION, WHETHER AS A RESULT OF NEW INFORMATION, CHANGES IN ASSUMPTIONS, FUTURE EVENTS OR OTHERWISE, EXCEPT TO THE EXTENT REQUIRED BY APPLICABLE LAW.

Pan American Silver Corp.


Consolidated Statements of Financial Position

As at December 31, 2015 and 2014

(Unaudited in thousands of U.S. dollars)



December 31,

2015

December 31,
2014


Assets






Current assets






Cash and cash equivalents


$

133,963

$

146,193

Short-term investments



92,678


184,220

Trade and other receivables



87,041


105,644

Income taxes receivable



27,373


37,626

Inventories



204,361


252,549

Prepaid expenses and other current assets



6,748


4,464




552,164


730,696

Non-current assets






Mineral properties, plant and equipment



1,145,221


1,266,391

Long-term refundable tax



8,994


7,698

Deferred tax assets



3,730


2,584

Other assets



1,871


7,447

Goodwill



3,057


3,057

Total Assets



$

1,715,037


$

2,017,873







Liabilities






Current liabilities






Accounts payable and accrued liabilities


$

112,829

$

126,209

Loan payable



19,578


17,600

Current portion of long-term debt



-


34,797

Provisions



8,979


3,121

Derivative financial instruments



2,835


-

Current portion of finance lease



2,238


3,993

Current income tax liabilities



13,481


22,321




159,940


208,041

Non-current liabilities






Provisions



45,892


45,063

Deferred tax liabilities



142,127


160,072

Long-term debt



36,200


-

Long-term portion of finance lease



1,759


4,044

Other long-term liabilities



30,503


30,716

Total Liabilities



416,421


447,936







Equity






Capital and reserves






Issued capital


2,298,390


2,296,672

Share option reserve



22,829


22,091

Investment revaluation reserve



(458)


(485)

Deficit



(1,023,539)


(755,186)

Total Equity attributable to equity holders of the Company


1,297,222


1,563,092

Non-controlling interests


1,394


6,845

Total Equity


1,298,616


1,569,937

Total Liabilities and Equity

$

1,715,037

$

2,017,873
















Pan American Silver Corp.







Consolidated Income Statements







(Unaudited in thousands of U.S. dollars, except for share and per share amounts)
















Three months ended


Twelve months ended



December 31,


December 31,



2015


2014


2015


2014










Revenue

$

162,960

$

163,096

$

674,688

$

751,942

Cost of sales










Production costs


(127,873)


(140,695)


(532,031)


(568,204)


Depreciation and amortization


(36,917)


(38,493)


(150,845)


(147,710)


Royalties


(5,941)


(5,277)


(23,901)


(27,955)



(170,731)


(184,465)


(706,777)


(743,869)

Mine operating (loss) earnings

$

(7,771)

$

(21,369)

$

(32,089)

$

8,073










General and administrative


(5,890)


(3,051)


(18,027)


(17,908)

Exploration and project development


(2,320)


(4,278)


(11,940)


(13,225)

Impairment charge


(121,512)


(596,262)


(150,268)


(596,262)

Foreign exchange losses


(3,971)


(4,486)


(13,004)


(13,275)

Losses on commodity and foreign currency contracts


(1,999)


-


(324)


-

Gain on sale of assets


38


945


372


1,145

Other expenses


(442)


(1,583)


(4,762)


(1,314)

Loss from continuing operations


(143,867)


(630,084)


(230,042)


(632,766)










Gain (loss) on derivatives


4


(252)


278


1,348

Investment income


1,394


568


2,461


2,840

Interest and finance expense


(2,529)


(1,277)


(8,452)


(8,739)

Loss before income taxes


(144,998)


(631,045)


(235,755)


(637,317)

Income tax recovery


8,040


105,318


4,199


92,494

Net loss for the period

$

(136,958)

$

(525,727)

$

(231,556)

$

(544,823)










Attributable to:










Equity holders of the Company

$

(132,909)

$

(526,706)

$

(226,650)

$

(545,588)


Non-controlling interests


(4,049)


979


(4,906)


765


$

(136,958)

$

(525,727)

$

(231,556)

$

(544,823)


Loss per share attributable to common shareholders









Basic and diluted loss per share

$

(0.88)

$

(3.48)

$

(1.49)

$

(3.60)

Weighted average shares outstanding (in 000's) Basic and diluted


151,715


151,534


151,664


151,511



Consolidated Statements of Comprehensive Income

(unaudited in thousands of U.S. dollars)



Three months ended


Twelve months ended


December 31,


December 31,


2015


2014


2015


2014

Net loss for the period

$

(136,958)

$

(525,727)

$

(231,556)

$

(544,823)









Unrealized net loss on available for sale securities

(net of zero dollars tax)

(256)


(485)


(1,459)


(1,429)

Reclassification adjustment for net loss included in earnings

359


319


1,486


1,081

Total comprehensive loss for the period

$

(136,855)

$

(525,893)

$

(231,529)

$

(545,171)









Total comprehensive loss attributable to:








Equity holders of the Company

$

(132,806)

$

(526,872)

$

(226,623)

$

(545,936)

Non-controlling interests

(4,049)


979


(4,906)


765


$

(136,855)

$

(525,893)

$

(231,529)

$

(545,171)
















Pan American Silver Corp.




Consolidated Statements of Cash Flows




(Unaudited in thousands of U.S. dollars)






Three months ended

Twelve months ended



December 31,

December 31,



2015

2014

2015

2014

Cash flow from operating activities









Net loss for the period

$

(136,958)

$

(525,727)

$

(231,556)

$

(544,823)










Current income taxes expense


7,114


10,136


15,854


35,807

Deferred income tax recovery


(15,154)


(115,454)


(20,053)


(128,301)

Interest expense


1,166


360


3,640


5,072

Depreciation and amortization


36,917


38,493


150,845


147,710

Impairment charge


121,512


596,262


150,268


596,262

Accretion on closure and decommissioning provision


810


809


3,239


3,238

Unrealized (gains) losses on foreign exchange


(1,319)


(618)


860


4,034

Share-based compensation expense


226


504


2,569


2,529

Losses on commodity and foreign currency contracts


1,999


-


324


-

(Gain) loss on derivatives


(4)


252


(278)


(1,348)

Gain on sale of assets


(38)


(945)


(372)


(1,145)

Net realizable value adjustment for inventory


5,028


2,212


10,861


29,953

Changes in non-cash operating working capital


6,064


3,849


19,840


11,597

Operating cash flows before interest and income taxes


27,363


10,133


106,041


160,585










Interest paid


(823)


(1,868)


(4,472)


(5,051)

Interest received


102


249


1,012


1,792

Income taxes paid


(3,241)


(7,691)


(13,889)


(33,138)

Net cash generated from operating activities


23,401


823


88,692


124,188










Cash flow from investing activities









Payments for mineral properties, plant and equipment


(53,705)


(30,131)


(146,735)


(131,761)

Proceeds from (purchase of) short term investments


18,248


33,672


91,296


(13,524)

Proceeds from settlement of commodity contracts


990


-


2,511


-

Proceeds from sale of mineral properties, plant and equipment


103


1,378


647


1,852

Refundable tax and other asset expenditures


(666)


1,449


(111)


187

Net cash (used in) generated from investing activities


(35,030)


6,368


(52,392)


(143,246)










Cash flow from financing activities









Proceeds from issue of equity shares


-


3


-


3

Dividends paid


(7,579)


(18,933)


(41,703)


(75,751)

Payment of convertible debenture


(36,235)


-


(36,235)


-

Proceeds from credit facility


36,200


-


36,200


-

(Payment of) proceeds from short term loan


(367)


(444)


1,978


(2,438)

Payments of equipment leases


(571)


(1,544)


(7,531)


(5,347)

Net distributions to non-controlling interests


(16)


-


(545)


(375)

Net cash used in financing activities


(8,568)


(20,918)


(47,836)


(83,908)

Effects of exchange rate changes on cash


(1,139)


(62)


(694)


(778)

Net decrease in cash and cash equivalents


(21,336)


(13,789)


(12,230)


(103,744)

Cash and cash equivalents at the beginning of the period


155,299


159,982


146,193


249,937

Cash and cash equivalents at the end of the period

$

133,963

$

146,193

$

133,963

$

146,193










Supplemental Cash Flow Information









Significant Non-Cash Items









Equipment acquired by leases

$

2,571

$

636

$

3,491

$

3,230

Stock compensation issued to employees and directors

$

1,545

$

1,389

$

1,718

$

1,461




Mine Operating Highlights



La Colorada

Three months ended

December  31,

Twelve months ended

December 31,



2015


2014


2015


2014

Tonnes milled - kt


122.7


119.7


485.4


471.3

Average silver grade – grams per tonne


401


373


379


366

Average silver recovery - %


90.0


89.7


90.1


89.8

Production:










Silver – koz


1,423


1,286


5,327


4,979


Gold – koz


0.65


0.72


2.63


2.57


Zinc – kt


2.51


2.19


8.91


7.70


Lead – kt


1.25


1.02


4.26


3.74










Cash cost per ounce net of by-products

$

7.28

$

7.57

$

7.41

$

8.14










AISCSOS

$

9.75

$

9.20


9.57

$

10.90










Payable silver sold - koz


1,263


1,099


5,109


4,726










Sustaining capital -  ('000s)

$

2,965

$

1,488

$

9,869

$

13,476











Dolores

Three months ended

December 31,

Twelve  months ended

December 31,



2015


2014


2015


2014

Tonnes placed - kt


1,501.3


1,611.9


6,108.9


6,053.9

Average silver grade – grams per tonne


36


42


44


40

Average gold grade – grams per tonne


0.52


0.48


0.57


0.44

Average silver produced to placed ratio - %


54.2


44.2


49.7


51.8

Average gold produced to placed ratio - %


72.7


72.6


70.9


78.3

Production:










Silver – koz


947


954


4,250


3,982


Gold – koz


18.21


17.99


79.14


66.82










Cash cost per ounce net of by-products

$

11.64


12.99


9.28


12.94










AISCSOS

$

21.55


31.20


12.67


27.02










Payable silver sold - koz


1,048


883


4,448


3,912










Sustaining capital -  ('000s)

$

10,064


7,962


25,162


27,632










Alamo Dorado

Three months ended

December 31,

Twelve months ended

December 31,



2015


2014


2015


2014

Tonnes milled - kt


455.3


481.4


1,798.6


1,763.0

Average silver grade – grams per tonne


64


63


62


75

Average gold grade – grams per tonne


0.56


0.40


0.39


0.37

Average silver recovery - %


86.0


83.8


82.9


81.4

Production:










Silver – koz


818


865


2,970


3,473


Gold – koz


7.89


5.67


20.34


17.56


Copper – tonnes


40


10


100


30










Cash cost per ounce net of by-products

$

5.49

$

14.07

$

11.41

$

12.89










AISCSOS

$

7.93

$

17.39

$

12.72

$

13.05










Payable silver sold - koz


726


816


2,944


3,606










Sustaining capital -  ('000s)

$

-

$

67

$

-

$

293











Huaron

Three months ended

December 31,

Twelve months ended

December 31,



2015


2014


2015


2014

Tonnes milled - kt


233.0


236.8


894.5


892.8

Average silver grade – grams per tonne


161


157


157


154

Average zinc grade – %


2.63


2.34


2.41


2.41

Average silver recovery - %


82.6


82.5


83.2


83.2

Production:










Silver – koz


987


952


3,705


3,635


Gold – koz


0.24


0.30


1.05


1.16


Zinc – kt


3.98


3.37


13.55


14.20


Lead – kt


1.96


1.63


6.92


6.03


Copper – kt


1.67


1.71


6.70


5.88










Cash cost per ounce net of by-products

$

11.35

$

12.22

$

10.91

$

11.56










AISCSOS

$

18.74

$

22.35

$

16.89

$

19.07










Payable silver sold - koz


774


788


3,009


3,025










Sustaining capital -  ('000s)

$

4,599

$

4,970

$

13,610

$

17,327










Morococha

Three months ended

December 31,

Twelve months ended

December 31,



2015


2014


2015


2014

Tonnes milled - kt


165.6


148.9


637.2


566.3

Average silver grade – grams per tonne


117


145


124


152

Average zinc grade  - %


2.83


3.09


2.83


3.60

Average silver recovery - %


84.7


86.7


85.2


86.4

Production:










Silver – koz


524


603


2,165


2,370


Gold – koz


0.78


0.91


3.22


2.92


Zinc – kt


2.76


3.29


11.37


15.80


Lead – kt


0.66


1.10


2.56


4.74


Copper – kt


2.29


1.26


8.16


3.08










Cash cost per ounce net of by-products 

$

12.99

$

12.53

$

13.03

$

13.22










AISCSOS

$

21.02

$

20.20

$

19.21

$

19.39










Payable silver sold - koz


483


537


1,995


2,125










Sustaining capital -  ('000s)

$

2,516

$

3,149

$

7,713

$

10,199











San Vicente

Three months ended

December 31,

Twelve months ended

December 31,



2015


2014


2015


2014

Tonnes milled - kt


86.0


85.1


330.8


316.0

Average silver grade – grams per tonne


428


454


422


417

Average zinc grade - %


3.30


2.10


2.65


2.37

Average silver recovery - %


91.2


94.5


92.6


93.2

Production:










Silver – koz


1,081


1,172


4,118


3,949


Zinc – kt


2.22


1.38


6.82


5.84


Lead – kt


0.22


0.16


0.84


0.50










Cash cost per ounce net of by-products 

$

11.12

$

11.88

$

11.57

$

13.16










AISCSOS

$

11.00

$

11.90

$

11.91

$

13.78










Payable silver sold - koz


1,448


1,117


4,019


4,177










Sustaining capital -  ('000s)

$

996

$

992

$

3,286

$

3,415











Manantial Espejo

Three months ended

December 31,

Twelve months ended

December 31,



2015


2014


2015


2014

Tonnes milled - kt


207.7


210.4


774.9


796.9

Average silver grade – grams per tonne


164


144


158


157

Average gold grade – grams per tonne


3.19


2.86


3.28


2.82

Average silver recovery - %


91.7


92.0


91.6


92.1

Average gold recovery - %


94.6


94.8


95.1


95.2

Production:










Silver – koz


1,005


913


3,583


3,725


Gold – koz


20.46


18.27


77.32


70.47










Cash cost per ounce net of by-products 

$

6.48

$

13.93

$

7.33

$

10.12










AISCSOS

$

10.96

$

17.21

$

18.81

$

17.93










Payable silver sold - koz


978


1,113


3,655


3,860










Sustaining capital -  ('000s)

$

2,337

$

5,543

$

14,061

$

26,741










ALTERNATIVE PERFORMANCE (NON-GAAP) MEASURES

  • AISCSOS

We believe that AISCSOS reflects a comprehensive measure of the full cost of operating our consolidated business given it includes the cost of replacing ounces through exploration, the cost of ongoing capital investments (sustaining capital), general and administrative expenses, as well as other items that affect the Company's consolidated earnings and cash flow. To facilitate a better understanding of this measure as calculated by the Company, the following table provides the detailed reconciliation of this measure to the applicable cost items, as reported in the consolidated income statements for the respective periods:

All-In Sustaining Cost per Silver Ounce Sold
(Unaudited in thousands of U.S. dollars








Three months ended

December 31,

Twelve months ended
December 31,

(In thousands of USD, except as noted)



2015


2014


2015


2014

Direct operating costs


$

122,845

$

138,484

$

521,169

$

538,251

Net realizable value ("NRV") inventory adjustments



5,028


2,212


10,861


29,953

Production costs


$

127,873

$

140,695

$

532,031

$

568,204

Royalties



5,941


5,277


23,901


27,955

Smelting, refining and transportation charges(1)



24,995


24,159


90,858


86,470

Less by-product credits(1)



(92,138)


(84,141)


(377,954)


(361,309)

Cash cost of sales net of by-products(2)


$

66,671

$

85,990

$

268,835

$

321,319











Sustaining capital(3)


$

23,476

$

24,173

$

73,701

$

99,083

Exploration and project development



2,320


4,278


11,940


13,225

Reclamation cost accretion



810


809


3,239


3,238

General & administrative expense 



5,890


3,051


18,027


17,908

All-in sustaining costs(2)

A

$

99,167

$

118,299

$

375,744

$

454,744

Payable ounces sold (in thousands)

B


6,719.5


6,352.6


25,179.8


25,430.5

All-in sustaining cost per silver ounce sold,

net of by-products

A/B

$

14.76

$

18.62

$

14.92

$

17.88

All-in sustaining cost per silver ounce sold,

net of by-products (excludes NRV) adjustments)


$

14.01

$

18.27

$

14.49

$

16.71

(1)

Included in the revenue line of the unaudited condensed consolidated income statements and are reflective of realized metal prices for the applicable periods.

(2)

Totals may not add due to rounding.

(3)

Please refer to the Sustaining Capital table.



As part of the AISCSOS measure, sustaining capital is included while expansionary or acquisition capital (referred to by the Company as investment capital) is not. Inclusion of sustaining capital only is a better measure of capital costs associated with current ounces sold as opposed to investment capital, which is expected to increase future production. For the periods under review, the below noted items associated with the La Colorada expansion project, and Dolores' leach pad and other expansionary expenditures are considered investment capital projects.

Sustaining Capital
(Unaudited in thousands of U.S. dollars)




Reconciliation of payments for mineral property,

plant and equipment and sustaining capital

Three months ended

December 31,

Twelve months ended

December 31,

(in thousands of USD)


2015


2014


2015


2014

Payments for mineral properties, plant and equipment(1)

$

53,705

$

30,131

$

146,735

$

131,761

Add/(Subtract)









Advances received for leases


2,571


636


3,491


3,230

Non-Sustaining capital (Dolores, La Colorada projects, and other)


(32,800)


(6,595)


(76,524)


(35,908)

Sustaining Capital(2)

$

23,476

$

24,172

$

73,701

$

99,083

(1)     As presented on the unaudited condensed consolidated statements of cash flows.

(2)     Totals may not add due to rounding.

All-In Sustaining Cost per Silver Ounce Sold per mine
(Unaudited in thousands of U.S. dollars)


Three months ended December 31, 2015

(In thousands of USD, except as noted)

La

Colorada

Dolores

Alamo

Dorado

Huaron

Morococha

San

Vicente

Manantial

Espejo

PASCORP

Consolidated

Direct operating costs

11,454

29,065

14,034

16,999

14,707

11,747

24,837


122,845

NRV inventory adjustments

-

3,132

684

-

-

-

1,212


5,028

Production costs

11,454

32,198

14,718

16,999

14,707

11,747

26,049


127,873

Royalties

73

1,225

97

-

-

3,542

1,004


5,941

Smelting, refining and transportation charges(1)

3,009

31

252

7,451

7,711

4,615

1,926


24,995

Less by-product credits(1)

(5,415)

(21,110)

(9,369)

(14,752)

(15,587)

(5,031)

(20,874)


(92,138)

Cash cost of sales net of by-products(2)

9,121

12,344

5,698

9,698

6,831

14,873

8,105


66,671











Sustaining capital(3)

2,965

10,064

-

4,599

2,516

996

2,337


23,476

Exploration and project development

172

86

-

53

722

-

-

1,287

2,320

Reclamation cost accretion

59

90

58

150

96

56

274

26

810

General & administrative expense 

-

-

-

-

-

-

-

5,890

5,890

All-in sustaining costs(2)

12,317

22,585

5,756

14,500

10,165

15,925

10,716

7,202

99,167

Payable ounces sold

1,262,660

1,048,000

726,214

773,799

483,481

1,447,582

977,754


6,719,489











All-in sustaining cost per silver ounce sold,

net of by-products

$

9.75

$

21.55

$

7.93

$

18.74

$

21.02

$

11.00

$

10.96


$

14.76

All-in sustaining cost per silver ounce sold,

net of by-products (excludes NRV adjustments)

$

9.75

$

18.56

$

6.98

$

18.74

$

21.02

$

11.00

$

9.72


$

14.01

(1)

Included in the revenue line of the unaudited condensed consolidated income statements and are reflective of realized metal prices for the applicable periods.

(2)

Totals may not add due to rounding.

(3)

Please refer to the Sustaining Capital table.













Twelve months ended December 31, 2015

(In thousands of USD, except as noted)

La Colorada

Dolores

Alamo Dorado

Huaron

Morococha

San Vicente

Manantial Espejo

PASCORP

Consolidated

Direct operating costs

48,842

132,343

60,159

66,878

66,096

32,211

114,640


521,169

NRV inventory adjustments


(11,417)

(522)




22,800


10,861

Production costs

48,842

120,926

59,637

66,878

66,096

32,211

137,440


532,031

Royalties

385

5,289

344

-

-

14,051

3,832


23,901

Smelting, refining and transportation charges(1)

11,877

132

682

26,986

31,424

11,147

8,609


90,858

Less by-product credits(1)

(22,585)

(96,066)

(23,446)

(58,027)

(68,480)

(13,047)

(96,302)


(377,954)

Cash cost of sales net of by-products (2)

38,519

30,281

37,217

35,837

29,041

44,362

53,579


268,836











Sustaining capital(3) 

9,869

25,162

-

13,610

7,713

3,286

14,061


73,701

Exploration and project development

254

544

-

765

1,202

-

-

9,175

11,940

Reclamation cost accretion

237

362

232

600

384

226

1,096

103

3,239

General & administrative expense 

-

-

-

-

-

-

-

18,027

18,027

All-in sustaining costs(3)

48,879

56,348

37,450

50,813

38,339

47,873

68,736

27,305

375,744

Payable ounces sold

5,108,985

4,448,000

2,944,491

3,009,185

1,995,307

4,019,265

3,654,556


25,179,788











All-in sustaining cost per silver ounce sold,

net of by-products

$

9.57

$

12.67

$

12.72

$

16.89

$

19.21

$

11.91

$

18.81


$

14.92

All-in sustaining cost per silver ounce sold,

net of by-products (excludes NRV adjustments)

$

9.57

$

15.24

$

12.90

$

16.89

$

19.21

$

11.91

$

12.57


$

14.49

(1)

Included in the revenue line of the unaudited condensed consolidated income statements and are reflective of realized metal prices for the applicable periods.

(2)

Totals may not add due to rounding.

(3)

Please refer to the Sustaining Capital table.


Three months ended December 31, 2014

(In thousands of USD, except as noted)

La

Colorada

Dolores

Alamo

Dorado

Huaron

Morococha

San

Vicente

Manantial

Espejo

PASCORP

Consolidated

Direct operating costs

11,676

29,668

18,309

20,589

16,583

8,353

33,307


138,484

NRV inventory adjustments

-

6,341

1,248

-

-

-

(5,377)


2,212

Production costs

11,676

36,009

19,557

20,589

16,583

8,353

27,929


140,696

Royalties

95

1,023

96

-

-

3,112

951


5,277

Smelting, refining and transportation charges(1)

2,775

49

149

10,363

5,163

3,471

2,188


24,159

Less by-product credits(1)

(5,980)

(17,859)

(5,870)

(18,525)

(15,198)

(2,681)

(18,027)


(84,141)

Cash cost of sales net of by-products (2)

8,565

19,222

13,931

12,428

6,549

12,254

13,041


85,990











Sustaining capital(3) 

1,488

7,962

67

4,970

3,149

992

5,543


24,172

Exploration and project development

1

264

135

59

1,056

-

294

2,469

4,278

Reclamation cost accretion

59

90

58

150

96

56

274

25

809

General & administrative expense 

-

-

-

-

-

-

-

3,051

3,051

All-in sustaining costs(3)

10,113

27,538

14,191

17,607

10,849

13,302

19,152

5,545

118,299











Payable ounces sold

1,098,949

882,500

816,061

787,616

537,071

1,117,385

1,112,980


6,352,562

All-in sustaining cost per silver ounce sold,

net of by-products

$

9.20

$

31.20

$

17.39

$

22.35

$

20.20

$

11.90

$

17.21


$

18.62

All-in sustaining cost per silver ounce sold,

net of by-products (excludes NRV adjustments)

$

9.20

$

24.02

$

15.86

$

22.35

$

20.20

$

11.90

$

22.04


$

18.27

(1)   Included in the revenue line of the unaudited condensed interim consolidated income statements and are reflective of realized metal prices for the applicable periods.

(2)   Totals may not add due to rounding.

(3)   Please refer to the Sustaining Capital table.









Twelve months ended December 31, 2014








(In thousands of USD, except as noted)

La Colorada


Dolores


Alamo

Dorado


Huaron


Morococha


San

Vicente


Manantial

Espejo

PASCORP

Consolidated

Direct operating costs

49,992


129,154


65,519


77,013


68,873


34,126


113,573


538,250

NRV inventory adjustments

-


23,253


1,947


-


-


-


4,753


29,953

Production costs

49,992


152,407


67,466


77,013


68,873


34,126


118,326


568,203

Royalties

436


4,888


457


-


-


17,900


4,273


27,955

Smelting, refining and transportation charges(1)

11,142


178


633


32,146


19,799


13,638


8,934


86,470

Less by-product credits(1)

(23,761)


(81,377)


(22,370)


(70,723)


(59,487)


(11,753)


(91,838)


(361,309)

Cash cost of sales net of by-products(2)

37,808


76,097


46,187


38,437


29,185


53,911


39,695


321,319

















Sustaining capital(3) 

13,476


27,632


293


17,327


10,199


3,415


26,741


99,083

Exploration and project development

9


1,602


336


1,312


1,453


-


1,657

6,855

13,225

Reclamation cost accretion

237


362


232


600


384


226


1,096

102

3,238

General & administrative expense 

-


-


-


-


-


-


-

17,908

17,908

All-in sustaining costs(2)

51,530


105,693


47,048


57,676


41,221


57,552


69,189

24,865

454,773

Payable ounces sold

4,726,138


3,911,600


3,605,832


3,024,572


2,125,430


4,177,048


3,859,900


25,430,519

















All-in sustaining cost per silver ounce sold,

net of by-products

$      10.90


$ 27.02


$     13.05


$      19.07


$       19.39


$      13.78


$      17.93


$      17.88

All-in sustaining cost per silver ounce sold,

net of by-products (excludes NRV adjustments)

$      10.90


$ 21.08


$      12.51


$      19.07


$       19.39


$      13.78


$      16.69


$      16.71

(1)

Included in the revenue line of the unaudited condensed consolidated income statements and are reflective of realized metal prices for the applicable periods.

(2)

Totals may not add due to rounding.

(3)

Please refer to the Sustaining Capital table.



 

  • Cash Costs per Ounce of Silver, net of by-product credits

Pan American produces by-product metals incidentally to our silver mining activities. We have adopted the practice of calculating the net cost of producing an ounce of silver, our primary payable metal, after deducting revenues gained from incidental by-product production, as a performance measure. This performance measurement has been commonly used in the mining industry for many years and was developed as a relatively simple way of comparing the net production costs of the primary metal for a specific period against the prevailing market price of that metal.

Cash costs per ounce metrics, net of by-product credits, were utilized extensively in our internal decision making processes. We believe they are useful to investors as these metrics facilitate comparison, on a mine by mine basis, notwithstanding the unique mix of incidental by-product production at each mine, of our operations' relative performance on a period by period basis, and against the operations of our peers in the silver industry on a consistent basis. Cash costs per ounce is conceptually understood and widely reported in the silver mining industry. However, cash cost per ounce does not have a standardized meaning prescribed by GAAP and the Company's method of calculating cash costs may differ from the methods used by other entities.

To facilitate a better understanding of these measures as calculated by the Company, the following table provides the detailed reconciliation of these measures to the production costs, as reported in the consolidated income statements for the respective periods:




Total Cash Costs per ounce of Payable Silver, net of by-product credits(1)

Three months ended

December 31,

Twelve months ended

December 31,

   (in thousands of U.S. dollars except as noted)


2015


2014


2015


2014

Production costs


$

127,873

$

140,695

$

532,031

$

568,204

Add/(Subtract)










Royalties



5,941


5,277


23,901


27,955

Smelting, refining, and transportation charges



24,319


21,195


94,804


76,968

Worker's participation and voluntary payments



62


113


(147)


(484)

Change in inventories



(3,115)


8,966


(19,114)


15,835

Other



882


(1,461)


(6,537)


(5,653)

Non-controlling interests(2)



(1,072)


(1,204)


(4,331)


(4,746)

Metal inventories recovery (write-down)



(5,028)


(2,212)


(10,861)


(29,953)

Cash Operating Costs before by-product credits



149,860


171,369


609,746


648,126


Less gold credit



(52,562)


(51,794)


(208,800)


(201,317)


Less zinc credit



(15,855)


(19,676)


(66,831)


(81,357)


Less lead credit



(6,477)


(7,412)


(24,488)


(29,903)


Less copper credit



(17,030)


(16,935)


(71,635)


(52,856)

Cash Operating Costs net of by-product credits

A


57,936


75,554


237,992


282,693











Payable Silver Production (koz)

B


6,370.8


6,340.4


24,530.8


24,663.4

Cash Costs per ounce net of by-product credits

(A*$1000)

/B

$

9.09

$

11.92

$

9.70

$

11.46

(1)

Figures in this table and in the associated tables below may not add due to rounding.

(2)

Figures presented in the reconciliation table above are on a 100% basis as presented in the statements with an adjustment line item to account for the portion of the Morococha and San Vicente mines owned by non-controlling interests, an expense item not included in operating cash costs. The associated tables below are for the Company's share of ownership only.



Three months ended December 31, 2015(1)
(in thousands of USD except as noted)




La
Colorada


Dolores


Alamo
Dorado


Huaron


Morococha



San Vicente


Manantial
Espejo

Consolidated
Total

Cash Costs before by-product credits

A

$

15,861

$

31,089

$

13,353

$

23,380

$

21,143


$

14,376

$

29,203

$

148,405


Less gold credit

b1


(595)


(20,095)


(8,726)


(24)


(330)



(63)


(22,699)


(52,531)


Less zinc credit

b2


(3,420)


-


-


(5,299)


(3,664)



(3,006)


-


(15,390)


Less lead credit

b3


(1,956)


-


-


(3,107)


(1,040)



(274)


-


(6,376)


Less copper credit

b4


-


-


(181)


(5,750)


(10,241)



-


-


(16,172)

Sub-total by-product credits

B=( b1+ b2+ b3+ b4)

$

(5,971)

$

(20,095)

$

(8,907)

$

(14,179)

$

(15,275)


$

(3,343)

$

(22,699)

$

(90,469)

Cash Costs net of by-product credits

C=(A+B)

$

9,890

$

10,995

$

4,446

$

9,200

$

5,868


$

11,033

$

6,505

$

57,936




















Payable ounces of silver (thousand)

D


1,359


945


810


810


452



992


1,003


6,371




















Cash cost per ounce net of by-products

C/D

$

7.28

$

11.64

$

5.49

$

11.35

$

12.99


$

11.12

$

6.48

$

9.09


Twelve months ended December 31, 2015(1)
(in thousands of USD except as noted)




La
Colorada


Dolores


Alamo
Dorado


Huaron


Morococha



San Vicente


Manantial
Espejo

Consolidated
Total


Cash Costs before by-product credits

A

$

61,748

$

130,918

$

57,178

$

93,503

$

88,542


$

56,262

$

115,548

$

603,698



Less gold credit

b1


(2,586)


(91,551)


(23,187)


(174)


(1,594)



(241)


(89,320)

$

(208,654)



Less zinc credit

b2


(14,429)


-


-


(21,416)


(17,973)



(10,932)


-


(64,750)



Less lead credit

b3


(7,049)


-


-


(11,586)


(4,261)



(1,173)


-


(24,069)



Less copper credit

b4


-


-


(439)


(27,189)


(40,606)



-


-


(68,233)


Sub-total by-product credits

B=( b1+ b2+ b3+ b4)

$

(24,064)

$

(91,551)

$

(23,625)

$

(60,365)

$

(64,434)


$

(12,346)

$

(89,320)

$

(365,706)


Cash Costs net of by-product credits

C=(A+B)

$

37,683

$

39,367

$

33,553

$

33,137

$

24,107


$

43,916

$

26,228

$

237,992






















Payable ounces of silver (thousand)

D


5,089


4,242


2,941


3,037


1,851



3,796


3,576


24,531






















Cash cost per ounce net of by-products

C/D

$

7.41

$

9.28

$

11.41

$

10.91

$

13.03


$

11.57

$

7.33

$

9.70




Three months ended December 31, 2014




La
Colorada


Dolores


Alamo
Dorado


Huaron


Morococha


San
Vicente


Manantial
Espejo

Consolidated
Total

Cash Costs before by-product credits

A

$

15,824

$

33,909

$

18,896

$

29,001

$

22,046

$

15,736

$

34,500

$

169,913


Less gold credit

b1

$

(681)

$

(21,555)

$

(6,775)

$

(36)

$

(798)

$

(67)

$

(21,812)

$

(51,724)


Less zinc credit

b2

$

(4,154)

$

-

$

-

$

(6,177)

$

(6,110)

$

(2,586)

$

-

$

(19,028)


Less lead credit

b3

$

(1,897)

$

-

$

-

$

(3,049)

$

(2,069)

$

(211)

$

-

$

(7,227)


Less copper credit

b4

$

-

$

-

$

(32)

$

(9,746)

$

(6,604)

$

-

$

-

$

(16,382)

Sub-total by-product credits

B=( b1+ b2+ b3+ b4)

$

(6,731)

$

(21,555)

$

(6,807)

$

(19,009)

$

(15,581)

$

(2,864)

$

(21,812)

$

(94,360)

Cash Costs net of by-product credits

C=(A+B)

$

9,093

$

12,354

$

12,089

$

9,993

$

6,465

$

12,872

$

12,688

$

75,553



















Payable ounces of silver (thousand)

D


1,202


951


859


818


516


1,084


911


6,340



















Cash cost per Ounce of Silver net of by-product credits

=C/D

$

7.57

$

12.99

$

14.07

$

12.22

$

12.53

$

11.88

$

13.93

$

11.92




Twelve months ended December 31, 2014




La
Colorada


Dolores


Alamo
Dorado


Huaron


Morococha


San
Vicente


Manantial
Espejo

Consolidated
Total

Cash Costs before by-product credits

A

$

62,635

$

135,665

$

66,727

$

107,990

$

83,915

$

59,287

$

126,500

$

642,720


Less gold credit

b1

$

(2,534)

$

(84,317)

$

(22,048)

$

(295)

$

(2,730)

$

(254)

$

(88,898)

$

(201,075)


Less zinc credit

b2

$

(14,128)

$

-

$

-

$

(25,414)

$

(28,381)

$

(10,504)

$

-

$

(78,426)


Less lead credit

b3

$

(7,265)

$

-

$

-

$

(11,817)

$

(9,340)

$

(663)

$

-

$

(29,086)


Less copper credit

b4

$

-

$

-

$

(164)

$

(34,394)

$

(16,884)

$

-

$

-

$

(51,442)



















Sub-total by-product credits

B=( b1+ b2+ b3+ b4)

$

(23,927)

$

(84,317)

$

(22,212)

$

(71,920)

$

(57,335)

$

(11,420)

$

(88,898)

$

(360,028)

Cash Costs net of by-product credits

C=(A+B)

$

38,708

$

51,347

$

44,516

$

36,070

$

26,581

$

47,867

$

37,602

$

282,692



















Payable ounces of silver (thousand)

D


4,756


3,969


3,454


3,120


2,010


3,636


3,717


24,663



















Cash cost per Ounce of Silver net of by-product credits

=C/D

$

8.14

$

12.94

$

12.89

$

11.56

$

13.22

$

13.16

$

10.12

$

11.46

Adjusted Losses and Basic Adjusted Losses Per Share

Adjusted earnings is a non-GAAP measure that the Company considers to better reflect normalized earnings as it eliminates items that may be volatile from period to period, relating to positions which will settle in future periods, and items that are non-recurring. Certain items that become applicable in a period may be adjusted for, with the Company retroactively presenting comparable periods with an adjustment for such items and conversely, items no longer applicable may be removed from the calculation. The Company adjusts certain items in the periods that they occurred but does not reverse or otherwise unwind the effect of such items in future periods.

The following table shows a reconciliation of adjusted loss and earnings for the three and twelve months ended December 31, 2015 and 2014, to the net (loss) earnings for each period:

Adjusted Loss Reconciliation
(Unaudited in thousands of U.S. dollars)







Three months ended
D
ecember 31,

Twelve months ended
December 31,

(In thousands of USD, except as noted)



2015


2014


2015


2014

 Net loss for the period


$

(136,958)

$

(525,727)

$

(231,556)

$

(544,823)

 Adjust derivative (gain) loss



(4)


252


(278)


(1,348)

 Adjust impairment of mineral properties



121,512


596,262


150,268


596,262

 Adjust write-down of other assets



2,678


-


22,812


-

 Adjust unrealized foreign exchange (gain) losses



(1,319)


(618)


860


4,034

 Adjust net realizable value of heap inventory



6,366


10,982


6,401


36,578

 Adjust unrealized loss on commodity contracts



2,989


-


2,835


-

 Adjust gain on sale of assets



(38)


(945)


(372)


(1,145)

 Adjust for effect of taxes



(12,743)


(101,413)


(8,938)


(110,383)

 Adjusted loss for the period


$

(17,517)

$

(21,207)

$

(57,968)

$

(20,825)

 Weighted average shares for the period



151,715


151,534


151,664


151,511

 Adjusted loss per share for the period


$

(0.12)

$

(0.14)

$

(0.38)

$

(0.14)

SOURCE Pan American Silver Corp.

For further information: Kettina Cordero - Manager, Investor Relations, (604) 684-1175, ir@panamericansilver.com, www.panamericansilver.com

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