Pan American Silver — Q323: La Colorada continues to underperform

Pan American Silver (NYSE: PAAS)

Last close As at 13/04/2024

USD19.60

0.57 (3.00%)

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USD7,148m

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Research: Metals & Mining

Pan American Silver — Q323: La Colorada continues to underperform

Pan American’s Q3 results did not bring any major surprises at the group level, with lower EBITDA of US$159m, down 22% q-o-q, mainly a result of the continuing underperformance of La Colorada and lower-than-expected gold grades at El Penon. Yet the company reported flat (quarter-on-quarter) net operating cash flow of US$115m and broadly reiterated its FY23 operating guidance. We have revised downwards our near-term earnings estimates on the back of the results. However, our valuation has increased from US$22.0/share to US$22.7 due to updated longer-term gold price expectations. Although the shares have reacted negatively to the results, we expect a stronger Q4, while the commodity prices remain supportive against the backdrop of higher geopolitical risks.

Written by

Andrey Litvin

Energy and Resources Analyst

Macro Pyrite mineral_pan american

Metals & Mining

Pan American Silver

Q323: La Colorada continues to underperform

Results update

Metals and mining

14 November 2023

Price

US$13.2

Market cap

US$4,810m

Net debt (US$m) at Q323, including short-term investments of US$42m

423

Shares in issue

364.4m

Free float

100%

Code

PAAS

Primary exchange

TSX

Secondary exchange

NYSE

Share price performance

%

1m

3m

12m

Abs

(11.7)

(17.2)

(15.0)

Rel (local)

(13.4)

(16.2)

(23.0)

52-week high/low

US$19.49

US$13.64

Business description

Pan American Silver is one of the largest global primary silver producers and a sizeable gold miner, with operations in North, Central and South America since 1994. Following the acquisition of selected assets as part of the Yamana transaction, the company owns 11 producing operations, the currently suspended top tier Escobal silver mine and several large-scale advanced exploration and development projects.

Next events

La Colorada Skarn PEA

Q423

Analysts

Andrey Litvin

+44 (0)20 3077 5700

Andrew Keen

+44 (0)20 3077 5700

Pan American Silver is a research client of Edison Investment Research Limited

Pan American’s Q3 results did not bring any major surprises at the group level, with lower EBITDA of US$159m, down 22% q-o-q, mainly a result of the continuing underperformance of La Colorada and lower-than-expected gold grades at El Penon. Yet the company reported flat (quarter-on-quarter) net operating cash flow of US$115m and broadly reiterated its FY23 operating guidance. We have revised downwards our near-term earnings estimates on the back of the results. However, our valuation has increased from US$22.0/share to US$22.7 due to updated longer-term gold price expectations. Although the shares have reacted negatively to the results, we expect a stronger Q4, while the commodity prices remain supportive against the backdrop of higher geopolitical risks.

Year

end

Revenue
(US$m)

EBITDA
(US$m)

EPS*
(US$)

DPS
(US$)

EV/EBITDA
(x)

Yield
(%)

12/21

1,632.8

593.2

0.75

0.34

10.7

2.6

12/22

1,494.7

272.0

(0.54)

0.45

23.3

3.4

12/23e

2,303.3

674.6

0.21

0.41

7.9

3.1

12/24e

2,645.3

908.7

0.38

0.40

4.9

3.0

Note: *EPS excludes exceptional items.

Q323: Lower results due to La Colorada and El Penon

PAAS’s total silver production was down 6% q-o-q to 5.7Moz, while the silver segment cash cost was up 41% q-o-q to US$13.1/oz. The gold segment performed better as it only saw a 2% reduction in production to 244koz and a 14% increase in cash costs to US$1,187/oz. As a result, revenues declined 4% q-o-q and EBITDA fell 22%. Persisting ventilation issues at La Colorada and lower gold grades at El Penon were mainly responsible for the weaker performance. Yet PAAS reported operating cash flow of US$115m, versus US$117m in Q2. Net debt fell from US$726m at H123 to US$423m. A quarterly dividend of US$0.10/share was in line with Q2.

Revised estimates, broadly maintained guidance

The company expects silver and gold production at the lower end of the earlier operating outlook. Silver segment costs are expected to come in marginally above the top end of the guidance ranges, while gold segment costs are guided within the ranges. We have updated our near-term estimates following the results, with FY23e and FY24e EBITDA down to US$675m (vs US$741m) and US$909m (vs US$1,085m). We expect a seasonally stronger Q4 with EBITDA of c US$197m as we see some cost and production normalisation and supportive commodity prices.

Valuation: Upgraded on higher commodity prices

While lower near-term earnings expectations weighed on the valuation, we have increased our NPV derived value of PAAS from US$22.0/share to US$22.7/share. The main reason behind the upgrade is our updated longer-term gold price expectations (see page 4). On our revised estimates, the stock trades on an FY23e EV/EBITDA multiple of 7.9x falling to just 4.9x in FY24e. While the share price reacted negatively to the Q3 results, we see a stronger Q4 and supportive commodity prices against the backdrop of increased geopolitical risks as positives.

Q323 results: La Colorada remains a drag

PAAS’s Q323 financial results did not bring any major surprises at the consolidated level, with revenues coming in at US$617m, down 4% q-o-q, and EBITDA falling 22% to US$159m (NB: Q2 EBITDA is adjusted upwards for US$32m in one-off PPA inventory revaluation on the Yamana assets acquisition). One of the main drivers behind the results was the continuing underperformance of the flagship La Colorada mine, which saw lower production coupled with higher costs. The overall silver production was down 6% q-o-q to 5.7Moz, while the silver segment cash cost was up 41% q-o-q to US$13.1/oz. The gold segment fared better as it only saw a 2% reduction in production to 244koz and a 14% increase in unit cash cost to US$1,187/oz, predominantly due to the lower-than-expected gold grades at El Penon and higher costs at Jacobina.

The overall Q3 silver production was at the lower end of the company’s earlier quarterly guidance, while all other production metrics came in below guidance and cost metrics above guidance. Also, despite the lower output, Q3 silver sales were strong, up 2% q-o-q in ounces terms. Further on the positive side, all main operating cost lines were down, with G&A falling 10% q-o-q and care and maintenance expenses dropping by as much as 22%. We expect the latter to further normalise in Q4 as the company has recently completed the divestment of MARA and Morococha. PAAS declared a dividend of US$0.10 per share, in line with Q223.

Net debt was reported at US$423m (including short-term investments and leases) versus US$726m at end Q223. The reduction was a result of the asset sale completion and a net repayment of debt to the tune of US$280m. At US$115m, net operating cash flow was broadly in line with Q2 thanks to the lower cash tax payment, while free cash flow increased from US$4m to US$6m.

Exhibit 1: PAAS Q323 results summary

 US$m unless stated

Q323

Q223

q-o-q, %

Q123

Silver production, koz

5,687

6,024

(5.6)

3,891.0

Gold production, koz

244.2

248.2

(1.6)

122.7

 

 

 

 

Silver segment cash cost, US$/oz

13.1

9.3

41.3

12.2

Silver segment AISC, US$/oz

18.2

15.7

15.9

14.1

 

 

 

 

Gold segment cash cost, US$/oz

1,187

1,045

13.6

1,120.0

Gold segment AISC, US$/oz

1,451

1,342

8.1

1,196.0

 

 

 

 

Revenue

616.6

639.9

(3.6)

390.3

Cash production costs

(402.2)

(405.3)

(0.8)

(230.8)

D&A

(139.8)

(150.0)

(6.8)

(73.1)

Royalties

(12.4)

(14.0)

(11.4)

(9.2)

Mine operating earnings

61.9

70.6

(12.3)

77.2

Care and maintenance

(24.2)

(26.9)

(10.0)

(22.0)

Exploration

(3.7)

(6.1)

(39.3)

(1.0)

G&A

(15.0)

(17.5)

(14.3)

(10.4)

EBITDA*

158.8

202.3

(21.5)

116.9

Reported PBT

3.5

(61.7)

N/A

25.2

Reported EPS, US$

(0.06)

(0.13)

(53.4)

0.08

Adjusted EPS, company reported, US$

0.01

0.04

(25.0)

0.10

Source: PAAS. Note: *Q2 EBITDA is adjusted for the US$32m in PPA inventory revaluation.

At the project level, the company’s flagship La Colorada mine operation continued to underperform as its mine EBITDA remained in negative territory in Q3. Production remains negatively affected by the ventilation constraints in the high-grade dip zone of the mine. Lower throughput resulted in a quarterly cash cost of US$24.5/oz versus US$11.6/oz in FY22. In the first nine months of the year (9M23), the project generated mine EBITDA of just US$8.3m, versus US$42m in 9M22. PAAS expects to complete the installation of two exhaust fans on the surface of the ventilation shaft that is currently being advanced in mid-2024.

At the Cerro Moro project, silver production was affected by lower silver grades. However, this was partly offset by strong sales, of gold in particular, which resulted in increased by-product credits and helped to keep cash costs under control. Nevertheless, the project saw a reduction in estimated mine EBITDA from US$21.7m in Q2 to US$15.4m. Based on the reported data, we believe that the company may have already delivered the committed annual 1.2Moz of silver at 30% of the spot silver price (as per the Yamana transaction commitment to deliver 20% of the silver produced by the project at 30% of the spot price). We therefore expect a stronger quarter in Q423.

In the gold segment, we would highlight a reasonably strong performance from Dolores and Shahuindo, which delivered broadly flat mine EBITDA in Q3. However, this was offset by a visible increase in costs at the larger Jacobina mine and at El Penon.

Update on the Escobal project

In Q3, PAAS hosted three visits to the mine for Xinka indigenous representatives and their advisors and participated in several other meetings. At this stage, there is no clarity on the completion date of the consultation process, which currently remains in Phase 2. We note that the Guatemalan Ministry of Energy and Mines earlier expected the consultation process to be finalised in October 2023. After this, the consultation would move into the final phase, which is Supreme Court verification, which should pave the way for the project to be restarted. We continue to model the restart of Escobal in FY25, which we believe is a reasonable assumption allowing for the completion of consultation and the required preparations for the recommissioning of the project.

Earnings revisions: Expect a stronger Q4

We have updated our earnings estimates on the back of the Q3 results as well as to reflect up-to-date commodity prices and our revised longer-term gold price forecasts (see below). The company has broadly maintained its earlier FY23 production and cost outlook, noting that both silver and gold output are likely to come in at the lower end of the operating guidance (21–23Moz silver and 870–970koz gold). Further, it expects silver cash costs and all-in sustaining costs (AISC) to be slightly above the top end of the respective guidance ranges (US$10–12/oz and US$14–16/oz). Cash costs and AISC guidance for the gold segment was maintained. The main reasons for the slightly tweaked operating outlook are the weaker performance of the La Colorada mine and lower-than-expected gold grades at El Penon.

All in all, we now expect the company to generate US$675m in EBITDA in FY23 and US$909m in FY24. We have slightly adjusted upwards our cost estimates for both segments. In the silver segment, our cost assumptions were already at the upper end of the guided range and are now slightly above the indicated ranges, in line with guidance. Yet, while we prefer to take a more conservative view on costs and production following the Q2 and Q3 results and, more specifically, due to La Colorada’s continuing underperformance, we expect a better Q423, with EBITDA of US$197m versus US$159m in Q3. We note that Q4 is seasonally stronger for PAAS, in particular in gold, while favourable commodity prices should provide additional support.

Exhibit 2: PAAS forecast changes

FY23e

FY24e

FY23

 US$m unless stated

New

Old

New

Old

guidance

Total silver production, Moz

21.4

22.8

24.5

25.7

21–23

Total gold production, koz

883

922

1,145

1,108

870–970

 

Silver segment cash cost, US$/oz

12.2

11.7

9.9

9.2

10–12

Silver segment AISC, US$/oz

17.4

16.0

14.5

13.3

14–16

Silver price, US$/oz

23.1

23.3

23.5

24.3

 

Gold segment cash cost, US$/oz

1,101

1,068

1,012

972

975–1,100

Gold segment AISC, US$/oz

1,405

1,395

1,222

1,194

1,275–1,425

Gold price, US$/oz

1,930

1,932

1,896

1,928

 

Revenue

2,303.3

2,439.1

2,645.3

2,873.2

Cash production costs

(1,440.7)

(1,483.7)

(1,545.1)

(1,577.9)

D&A

(508.0)

(516.5)

(578.1)

(557.1)

Royalties

(48.7)

(62.2)

(55.4)

(64.4)

Exploration, care and maintenance

(99.6)

(101.7)

(63.0)

(64.0)

G&A

(59.0)

(68.0)

(68.0)

(70.0)

EBITDA

674.6

740.7

908.7

1,085.0

Reported EPS, US$

(0.12)

0.07

0.38

0.74

Adjusted EPS (Edison), US$

0.21

0.36

0.38

0.74

Source: PAAS, Edison Investment Research

Valuation: Upgraded on higher commodity prices

We continue to value PAAS using a discounted cash flow (DCF) approach over the mine life of projects based on the reported mineral resources. These project level cash flows are combined into a single consolidated cash flow, which we discount at a CAPM-derived WACC. As shown in Exhibit 4, our updated valuation of the company now stands at US$22.7/share (from US$22.0). While lower estimates weighed on the valuation, the main reason for the upgrade is our revised gold price expectations. For more details on our new gold price forecasts, see Edison’s recent report Gold: Shades of the 1970s, September 1979 revisited.

Exhibit 3: Revised commodity price assumptions, US$/oz

 

FY23e

FY24e

FY25e

FY26e

FY27e

FY28e*

New gold price

1,930

1,896

2,004

2,105

2,239

1,912

Old gold price

1,932

1,928

1,836

1,765

1,674

1,674

New silver price

23.1

23.5

23.0

23.0

23.0

23.0

Old silver price

23.3

24.3

24.0

23.5

23.0

23.0

Source: Edison Investment Research. Note: *FY28 is a long-term real price assumption. All other prices are nominal.

In addition to the above-mentioned changes, we have slightly updated our nominal WACC from 7.8% to 7.9% largely due to the higher risk-free rate of 3.7% versus 3.5%. Our long-term real discount rate (post FY28e) moves to 4.9% using the unchanged long-term inflation assumption of 3.0%.

On our revised estimates, PAAS trades on an EV/EBITDA multiple of 7.9x for FY23 and 4.9x for FY24. On Refinitiv consensus estimates these multiples are 7.3x and 4.9x respectively.

While the PAAS share price has been weak following the results, we believe that expectations of the stronger end to the year, plus strong commodity prices on the back of the increased geopolitical risks, should be supportive of the stock. We also note that the upcoming release of the skarn project preliminary economic assessment (PEA) could crystalise some value for the project, which we currently value on a resources multiple.

Exhibit 4: PAAS DCF valuation summary (FY29–54e not shown)

US$m

FY23e

FY24e

FY25e

FY26e

FY27e

FY28e

EBITDA

674.6

908.7

1,459.3

1,498.9

1,581.0

1,271.0

EBIT

166.5

330.6

972.5

1,025.7

1,150.6

853.2

Tax on EBIT

(66.6)

(132.2)

(340.4)

(359.0)

(402.7)

(298.6)

D&A

508.0

578.1

486.8

473.2

430.4

417.8

Working capital

7.6

(3.6)

(54.2)

44.2

2.9

29.9

Capex

(357.7)

(305.9)

(287.4)

(242.6)

(229.6)

(210.1)

Free cash flow

257.9

467.0

777.4

941.5

951.6

792.2

Discount rate (%)

7.9

7.9

7.9

7.9

7.9

4.9

Discount factor (x)

1.0

0.9

0.9

0.8

0.7

0.7

Discounted free cash flow

257.9

432.6

667.3

748.7

701.1

556.2

Sum of DFCF

8,377

 

 

 

 

 

Exploration/development assets

702.5

 

 

 

 

 

Net debt, FY23e

441.4

 

 

 

 

 

Implied equity value

8,638.0

 

 

 

 

 

Number of shares* (m)

380.0

 

 

 

 

 

Value per share, US$

22.7

 

 

 

 

 

Source: Edison Investment Research. Note: *Includes shares to be issued on restart of Escobal.

Exhibit 5: Financial summary

$'m

2020

2021

2022

2023e

2024e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

1,338.8

1,632.8

1,494.7

2,303.3

2,645.3

Cash production costs

(696.7)

(925.5)

(1,094.4)

(1,453.7)

(1,550.1)

DD&A

(254.5)

(303.0)

(316.0)

(508.0)

(578.1)

Royalties

(27.5)

(36.4)

(35.9)

(48.7)

(55.4)

Gross Profit

360.2

367.9

48.4

292.9

461.6

G&A

(36.4)

(34.9)

(29.0)

(59.0)

(68.0)

Other operating costs

(109.2)

(42.9)

(63.5)

(99.6)

(63.0)

Operating profit (before amort. and excepts.)

 

 

214.6

290.2

(44.1)

166.5

330.6

EBITDA

 

 

469.1

593.2

272.0

674.6

908.7

Other operating expenses

(5.5)

30.7

(6.4)

27.2

0.0

Exceptionals

0.0

0.0

(211.8)

(67.4)

0.0

Reported operating profit

209.1

320.9

(262.3)

94.1

330.6

Net Interest and finance expense

(20.1)

(16.2)

(22.5)

(94.3)

(98.2)

Profit Before Tax (norm)

 

 

189.0

304.7

(73.0)

99.4

232.4

Investment income (loss)

63.0

(59.7)

(16.2)

(8.8)

0.0

Profit Before Tax (reported)

 

 

252.0

245.0

(301.0)

(9.0)

232.4

Reported tax

(75.6)

(146.4)

(39.1)

(31.4)

(93.0)

Profit After Tax (norm)

113.4

158.3

(112.1)

68.0

139.4

Profit After Tax (reported)

176.5

98.6

(340.1)

(40.4)

139.4

Minority interests

(1.4)

1.1

1.7

(1.4)

1.0

Net income (normalised)

114.9

157.2

(113.8)

69.4

138.4

Net income (reported)

177.9

97.4

(341.8)

(39.0)

138.4

Average Number of Shares Outstanding (m)

210

210

211

326

364

EPS - basic normalised ($)

 

 

0.55

0.75

(0.54)

0.21

0.38

EPS - normalised fully diluted ($)

 

 

0.55

0.75

(0.54)

0.21

0.38

EPS - basic reported ($)

 

 

0.85

0.46

(1.62)

(0.12)

0.38

Dividend ($)

0.22

0.34

0.45

0.41

0.40

BALANCE SHEET

Fixed Assets

 

 

2,577.0

2,517.4

2,444.1

6,009.8

5,737.6

Tangible assets

2,415.0

2,344.6

2,226.4

5,837.4

5,565.2

Investments

71.6

78.7

121.2

0.0

0.0

Other

90.4

94.2

96.6

172.4

172.4

Current Assets

 

 

856.9

1,001.2

804.4

1,464.0

1,667.3

Inventories

406.2

500.5

471.6

702.6

719.7

Receivables

127.8

128.2

136.6

154.6

163.1

Cash

167.1

283.6

107.0

329.3

507.0

ST investments

111.9

51.7

35.3

38.5

38.5

Other

43.9

37.3

53.8

239.1

239.1

Current Liabilities

 

 

(361.8)

(387.7)

(380.8)

(643.5)

(665.4)

Creditors

(281.9)

(306.1)

(308.1)

(477.6)

(499.5)

Short term borrowings and leases

(12.8)

(14.1)

(27.3)

(54.4)

(54.4)

Other

(67.0)

(67.5)

(45.5)

(111.5)

(111.5)

Long Term Liabilities

 

 

(466.3)

(494.9)

(666.0)

(1,948.9)

(1,863.5)

LT debt and leases

(20.7)

(31.8)

(199.5)

(754.7)

(769.3)

Other long term liabilities

(445.5)

(463.1)

(466.5)

(1,194.2)

(1,094.2)

Net Assets

 

 

2,605.8

2,636.0

2,201.6

4,881.5

4,876.0

Minority interests

(3.3)

(4.5)

(6.1)

(58.8)

(59.8)

Shareholders' equity

 

 

2,602.5

2,631.6

2,195.5

4,822.7

4,816.2

CASH FLOW

Operating Cash Flow

176.5

98.6

(340.1)

(40.4)

139.4

D&A, exceptionals, other

280.5

498.9

555.2

644.9

769.3

Working capital movement

97.0

(71.1)

(42.0)

7.6

(3.6)

Tax

(81.6)

(129.2)

(137.8)

(161.4)

(193.0)

Net Interest

(10.0)

(5.1)

(3.4)

(39.0)

(57.7)

Net operating cash flow

 

 

462.3

392.1

31.9

411.7

654.4

Capex

(178.6)

(243.5)

(274.7)

(357.7)

(305.9)

Acquisitions/disposals

22.5

45.8

8.7

716.8

0.0

Equity financing

4.7

0.6

0.9

0.0

0.0

Dividends

(46.2)

(71.5)

(94.7)

(133.6)

(145.8)

Other

59.1

(2.3)

20.0

(11.5)

(25.0)

Net Cash Flow

323.8

121.2

(307.9)

625.7

177.8

Opening net debt/(cash), including ST investments

 

 

77.9

(245.5)

(289.4)

84.5

441.4

FX and other

(0.5)

(77.3)

(66.0)

(982.5)

(14.6)

Closing net debt/(cash), including ST investments

 

 

(245.5)

(289.4)

84.5

441.4

278.2

Closing net debt/(cash), excluding ST investments

(133.5)

(237.7)

119.9

479.9

316.7

Source: Pan American Silver accounts, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by Pan American Silver and prepared and issued by Edison, in consideration of a fee payable by Pan American Silver. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by Pan American Silver and prepared and issued by Edison, in consideration of a fee payable by Pan American Silver. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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