Pan American Silver — Refining estimates post Q2 results

Pan American Silver (NYSE: PAAS)

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Research: Metals & Mining

Pan American Silver — Refining estimates post Q2 results

Pan American Silver (PAAS) reported its first quarterly results that include the assets acquired as part of the Yamana transaction, with Q2 revenues and adjusted EBITDA of US$640m and US$218m, an improved margin of 34%. Despite somewhat weaker than expected numbers, PAAS maintained its operational and cost guidance for FY23, which points to a visible improvement in performance in H2. Escobal continues to advance through the ILO 169 consultation process, with completion of Phase 2 expected by the authorities in October. We have updated our financial estimates and revised our valuation, which now stands at US$22.2 per share.

Written by

Andrey Litvin

Energy and Resources Analyst

Macro Pyrite mineral_pan american

Metals & Mining

Pan American Silver

Refining estimates post Q2 results

Results update

Metals and mining

15 August 2023

Price

US$15.8

Market cap

US$5,758m

Net debt (US$m) at Q223, including short-term investments of US$42m

726

Shares in issue

364.4m

Free float

100%

Code

PAAS

Primary exchange

TSX

Secondary exchange

NYSE

Share price performance

%

1m

3m

12m

Abs

(0.7)

(4.1)

(13.2)

Rel (local)

(0.3)

(11.9)

(17.2)

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

Minerals reserves and resources

August/September 2023

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 Silver (PAAS) reported its first quarterly results that include the assets acquired as part of the Yamana transaction, with Q2 revenues and adjusted EBITDA of US$640m and US$218m, an improved margin of 34%. Despite somewhat weaker than expected numbers, PAAS maintained its operational and cost guidance for FY23, which points to a visible improvement in performance in H2. Escobal continues to advance through the ILO 169 consultation process, with completion of Phase 2 expected by the authorities in October. We have updated our financial estimates and revised our valuation, which now stands at US$22.2 per share.

Year

end

Revenue
(US$m)

EBITDA
(US$m)

EPS*
(US$)

DPS
(US$)

EV/EBITDA
(x)

Yield
(%)

12/21

1,632.8

593.2

0.60

0.34

10.7

2.2

12/22

1,494.7

272.0

(0.51)

0.45

23.3

2.8

12/23e

2,439.1

740.7

0.36

0.41

7.9

2.6

12/24e

2,873.2

1,085.0

0.74

0.40

5.4

2.5

Note: *EPS is normalised, excluding exceptional items.

Q223 results are a mixed bag

Q2 silver and gold production was 6,024koz and 248koz, a respective c 50% and 100% increase on Q123, with revenues and adjusted EBITDA of US$640m (US$390m) and US$218m (US$117m). EPS adjusted for one-offs was US$0.04 versus consensus expectations of US$0.08. A quarterly dividend was declared at US$0.10 per share, in line with Q1. We have refined our estimates post the results, with an FY23 EBITDA estimate of US$741m (previously US$734m).

Escobal consultation continues to move forward

Three meetings for Escobal were held in Q223 as part of Phase 2 of the ILO 169 consultation process. The Guatemalan Ministry of Energy and Mines expects the completion of the second stage of the consultation in October 2023. After this, the process will move into the final phase of the Supreme Court verification, which should pave the way for the project to be restarted.

Non-core asset sale to strengthen the balance sheet

As reported earlier, PAAS agreed to sell a number of non-core assets, including MARA and Morococha, for US$593m in cash and net smelter return (NSR) royalties. The sale significantly strengthens the balance sheet and reduces care and maintenance expenses. PAAS reported Q223 net debt of US$726m (including short-term investments) and we expect it to improve to US$183m at end FY23.

Valuation: Absolute and relative upside intact

We have updated our valuation post the Q2 results, reverting to using the NPV of consolidated cash flows over the mine life of projects versus the sum-of-the-parts approach used before. At a nominal WACC of 7.8% (from 7.5%) and taking into account the sale of non-core assets, our valuation is now US$22.2 per share (vs US$22.5). On our revised estimates, the stock trades on an FY23e EV/EBITDA of 7.9x falling to 5.4x in FY24e. Applying average gold and silver peer group multiples for FY23/24e implies a value of US$24.8 per share.

Q223 results: Not out of the woods yet

PAAS’s Q223 results saw a significant step up in performance on the back of full consolidation of the recently acquired Yamana assets and a sequential increase in gold and silver prices. Total silver production was 6,024koz compared to just 3,891koz in Q123, while gold output was 248koz compared to 123koz in the preceding quarter. As a result, the company reported revenues of US$640m, up from US$390m in Q123, and adjusted EBITDA of US$218m, up from US$117m, at an improved margin of 34%. The results were affected by a number of one-off items, which included a US$32m inventory revaluation at the acquired mines, a US$42m pre-tax impairment charge related to the Morococha divestment and US$6m in transaction costs. Adjusted for these items EPS for the quarter came in at US$0.04. PAAS declared a dividend of US$0.10 per share, in line with Q123. During the conference call management commented that the company is working on an updated dividend policy, which it aims to introduce towards the end of the year.

While the headline results are not directly comparable with the preceding quarters, we note that both silver and gold segments reported a visible reduction in cash costs, with a 24% drop for the former and a 7% fall for the latter. Importantly, the Q2 cash costs were below the company’s quarterly guidance (see page 3). Improved cost performance came amid rather disappointing results from the company’s flagship La Colorada mine, which saw its mine EBITDA falling from US$10m in Q123 to a negative US$1.4m due to a reduction in processed tonnes and a consequent steep drop in silver output (related to persisting ventilation constraints in the high grade, dip zone of the mine). Among other factors that could have potentially affected the results is the company’s commitment (as part of the Yamana transaction) to deliver 20% of the silver produced by Cerro Moro (up to 1.2Moz pa until 7.0Moz achieved) for 30% of the silver spot price. Cerro Moro produced 1.4Moz of silver in Q2 and is guided to produce 3.6–3.9Moz in 9M FY23.

Exhibit 1: PAAS Q2 results summary

US$m unless stated

Q223

Q123

Silver production (koz)

6,024.0

3,891.0

Gold production (koz)

248.2

122.7

 

 

 

Silver segment cash cost (US$/oz)

9.3

12.2

Silver segment AISC* (US$/oz)

15.7

14.1

 

 

 

Gold segment cash cost (US$/oz)

1,045.0

1,120.0

Gold segment AISC (US$/oz)

1,342.0

1,196.0

 

 

 

Revenue

639.9

390.3

Cash production costs

(405.3)

(230.8)

D&A

(150.0)

(73.1)

Royalties

(14.0)

(9.2)

Mine operating earnings

70.6

77.2

Care and maintenance

(26.9)

(22.0)

Exploration

(6.1)

(1.0)

G&A

(17.5)

(10.4)

EBITDA**

218.2

116.9

- margin

34.1

30.0

Reported PBT

(61.7)

25.2

Reported EPS, US$

(0.13)

0.08

Adjusted EPS (company), US$

0.04

0.10

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

Net debt was reported at US$768m (US$726m including short-term investments) compared to US$776m in Q123 (US$674m). While net operating cash flow was up from US$51m to US$117m, free cash flow fell from US$13m to US$4m due to an increase in capex. H223 should see a significant improvement in the company’s liquidity position, following the recently announced divestment of the MARA, Morococha and Jeronimo projects as well as the sale of a number of non-controlling equity interests. The overall cash proceeds from these transactions are expected to reach US$593m, strengthening the balance sheet and reducing care and maintenance costs. We discussed these divestments in our recent note. With the announced sale of non-controlling assets and thanks to the anticipated improvement in operational performance in H2, we expect the company’s net debt to reduce to US$183m (including short-term investments) at end FY23.

Continued progress at Escobal

As part of the results announcement PAAS provided an update on the ILO 169 consultation process at the Escobal mine. In Q223, three consultation meetings were held, during which the company and government institutions completed the information transfer to the Xinka indigenous people. Based on the public disclosure, it was expected that following the review of the provided information in August Xinka representatives would start the discussion of the potential issues with the Guatemalan Ministry of Energy and Mines. The Guatemalan Ministry of Energy and Mines expects the consultation process to be completed in October 2023. After this, the consultation will 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 in FY25, which we believe is a reasonable assumption allowing for the completion of the consultation process and the required preparations for the recommissioning of the project.

FY23 guidance maintained; earnings refined slightly

PAAS maintained its FY23 production and cost guidance, which it released with its Q1 results. The guidance takes into account the company’s pre-acquisition operations and a nine-month contribution from the Yamana assets. Total silver production is expected to reach 21–23Moz (6.7–7.7Moz from Yamana assets), while total gold production is guided at 870–970koz (405–465koz). As is typically the case for PAAS, production is expected to be second half weighted, with Q4 seen as the strongest quarter for both metals. Given the H1 results, the second half should bring a significant improvement in operational and financial performance.

Exhibit 2: PAAS quarterly production and cost guidance

 

Q123a

Q223e

Q323e

Q423e

FY23e

Silver production, Moz

3.9

5.4–6.0

5.7–6.4

6.0–6.7

21–23

Gold production, koz

123

225–255

248–283

274–309

870–970

Silver segment cash cost, US$/oz

12.2

11.0–13.1

8.5–10.6

9.2–11.3

10.0–12.0

Silver segment AISC, US$/oz

14.1

16.1–18.2

11.7–13.8

12.1–14.2

14.0–16.0

Gold segment cash cost, US$/oz

1,120

1,070–1,200

975–1,110

860–975

975–1,100

Gold segment AISC, US$/oz

1,196

1,430–1,580

1,290–1,440

1,070–1,200

1,275–1,425

Source: PAAS

We have updated our production, cost and financial estimates to reflect the Q2 results and more detailed information provided on the acquired Yamana assets. We have also slightly revised our FY23 gold and silver price assumptions to bring them closer to the year to date performance and current spot prices. Overall, our earnings estimates are little changed as we expect the company to generate US$741m in FY23 EBITDA (US$734m before), while our adjusted EPS estimate is virtually unchanged at US$0.36. The significant reduction in the reported EPS estimate is due to the higher D&A charge and one offs reported in H123. We note that our FY23 cost estimates for the silver segment are at the top end of the company’s guidance range as we take a more conservative view following the Q2 results and more specifically, the weaker than expected La Colorada performance. Also of note is an anticipated significant reduction in care and maintenance costs in FY24 following the disposal of MARA and Morococha.

Our EBITDA estimates compare to consensus of US$755m for FY23 and US$1,123m for FY24.

Exhibit 3: PAAS forecast changes

US$m unless stated

FY23e

FY24e

FY23

 

New

Old

New

Old

guidance

Total silver production, Moz

22.8

22.2

25.7

25.1

21–23

Total gold production, koz

922

941

1,108

1,122

870–970

 

Silver segment cash cost, US$/oz

11.7

10.8

9.2

8.9

10–12

Silver segment AISC, US$/oz

16.0

14.9

13.3

12.7

14–16

Silver price, US$/oz

23.3

23.7

24.3

24.3

 

Gold segment cash cost, US$/oz

1,068

1,030

972

925

975–1,100

Gold segment AISC, US$/oz

1,395

1,381

1,194

1,186

1,275–1,425

Gold price, US$/oz

1,932

1,960

1,928

1,928

 

Revenue

2,439.1

2,437.7

2,873.2

2,895.8

Cash production costs

(1,483.7)

(1,482.3)

(1,577.9)

(1,581.3)

D&A

(516.5)

(465.0)

(557.1)

(534.6)

Royalties

(62.2)

(41.6)

(64.4)

(40.6)

Exploration, care and maintenance

(101.7)

(105.0)

(64.0)

(95.0)

G&A

(68.0)

(75.0)

(70.0)

(80.0)

EBITDA

740.7

733.7

1,085.0

1,099.0

Reported EPS, US$

0.07

0.28

0.74

0.75

Adjusted EPS (Edison), US$

0.36

0.37

0.74

0.78

Source: Edison Investment Research

Valuation: Significant upside prevails

Our valuation approach for PAAS remains unchanged in that we continue to employ a discounted cash flow (DCF) methodology to value the company. However, following the release of the Q2 results we have reverted to using the conventional DCF methodology over the mine life for all the projects, including Yamana’s assets. These project level cash flows are combined into a single consolidated cash flow, which is discounted at a CAPM-derived WACC. Prior to that, our valuation was based on a sum-of-the-parts approach to capture the value of the Yamana assets post-acquisition. As shown in Exhibit 4, our updated valuation of the company after the Q2 results stands at US$22.2/share (from US$22.5).

In addition to the above-mentioned changes, we have updated our nominal WACC from 7.5% to 7.8% on the back of the higher risk-free rate (3.5% vs 3.1%) but lower equity risk premium (5.0% vs 5.9%; source: Damodaran). Our long-term real discount rate (post FY28) moves from 4.0% to 4.8% as we lowered our long-term inflation assumption from 3.5% to 3.0%. We have also reflected the recently announced sale of the non-core assets. Due to the lack of visibility on timing, we currently do not capture the value of the copper NSR royalties for MARA, which could represent a visible upside to our valuation given the potential scale of the project. As before, we model the restart of the Escobal project in FY25.

Exhibit 4: PAAS DCF valuation summary (FY2954e not shown)

US$m unless stated

FY23e

FY24e

FY25e

FY26e

FY27e

FY28e

EBITDA

740.7

1,085.0

1,396.6

1,386.5

1,276.6

1,237.4

EBIT

224.2

527.9

917.3

941.6

853.7

857.8

Tax on EBIT

(78.5)

(184.8)

(321.0)

(329.6)

(298.8)

(300.2)

D&A

516.5

557.1

479.3

444.9

422.9

379.6

Working capital

(71.6)

(42.0)

(16.0)

32.3

27.2

7.0

Capex

(392.6)

(312.7)

(294.1)

(262.9)

(244.4)

(220.6)

Free cash flow

198.1

545.6

765.5

826.3

760.7

723.5

Discount rate

7.76

7.76

7.76

7.76

7.76

4.76

Discount factor

1.0

0.9

0.9

0.8

0.7

0.7

Discounted free cash flow

198.1

506.3

659.2

660.3

564.1

512.2

Sum of DFCF

7,938

 

 

 

 

 

Add value of exploration/development assets

675.1

 

 

 

 

 

Less net debt, FY23e, including ST investments

182.5

 

 

 

 

 

Implied equity value

8,430.3

 

 

 

 

 

Number of shares* (m)

380.0

 

 

 

 

 

Value per share (US$)

22.2

 

 

 

 

 

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

The peer group valuation of PAAS is complicated by the company’s increased scale and the lack of comparable medium-sized primary silver producers with a significant gold revenue stream. We have therefore subjectively put together separate peer groups for silver and gold companies. In addition to size, the analysis is distorted by different regional exposures of the broadly comparable companies.

On our revised estimates, PAAS trades on an EV/EBITDA multiple of 7.9x for FY23 and 5.4x for FY24 (based on Q223 net debt adjusted for the sale of non-core assets) versus the average multiple for the combined silver and gold universe of 13.5x for FY23e and 6.7x for FY24e. Applying an average peer group EV/EBITDA multiple for FY23/24e of 10.1x to our PAAS average FY23/24 EBITDA estimates implies a per share equity value of US$24.8.

Exhibit 5: Financial summary

$'m

2020

2021

2022

2023e

2024e

31-December

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

1,338.8

1,632.8

1,494.7

2,439.1

2,873.2

Cash production costs

(696.7)

(925.5)

(1,094.4)

(1,498.7)

(1,589.9)

DD&A

(254.5)

(303.0)

(316.0)

(516.5)

(557.1)

Royalties

(27.5)

(36.4)

(35.9)

(62.2)

(64.4)

Gross Profit

360.2

367.9

48.4

361.7

661.9

G&A

(36.4)

(34.9)

(29.0)

(68.0)

(70.0)

Other operating costs

(109.2)

(42.9)

(63.5)

(101.7)

(64.0)

Operating profit (before amort. and excepts.)

 

 

214.6

290.2

(44.1)

224.2

527.9

EBITDA

 

 

469.1

593.2

272.0

740.7

1,085.0

Other operating expenses

(5.5)

30.7

(6.4)

4.9

0.0

Exceptionals

0.0

0.0

(211.8)

(66.8)

0.0

Reported operating profit

209.1

320.9

(262.3)

130.1

527.9

Net Interest and finance expense

(20.1)

(16.2)

(22.5)

(90.8)

(88.2)

Profit Before Tax (norm)

 

 

194.5

274.0

(66.6)

133.4

439.7

Investment income (loss)

63.0

(59.7)

(16.2)

0.0

0.0

Profit Before Tax (reported)

 

 

252.0

245.0

(301.0)

39.3

439.7

Reported tax

(75.6)

(146.4)

(39.1)

(14.9)

(167.1)

Profit After Tax (norm)

118.9

127.6

(105.7)

118.4

272.6

Profit After Tax (reported)

176.5

98.6

(340.1)

24.3

272.6

Minority interests

(1.4)

1.1

1.7

1.2

2.0

Net income (normalised)

120.4

126.5

(107.4)

117.2

270.6

Net income (reported)

177.9

97.4

(341.8)

23.1

270.6

Average Number of Shares Outstanding (m)

210

210

211

326

364

EPS - basic normalised ($)

 

 

0.57

0.60

(0.51)

0.36

0.74

EPS - normalised fully diluted ($)

 

 

0.57

0.60

(0.51)

0.36

0.74

EPS - basic reported ($)

 

 

0.85

0.46

(1.62)

0.07

0.74

Dividend ($)

0.22

0.34

0.45

0.41

0.40

BALANCE SHEET

Fixed Assets

 

 

2,577.0

2,517.4

2,444.1

6,436.4

6,263.3

Tangible assets

2,415.0

2,344.6

2,226.4

6,257.0

6,083.9

Investments

71.6

78.7

121.2

0.0

0.0

Other

90.4

94.2

96.6

179.4

179.4

Current Assets

 

 

856.9

1,001.2

804.4

1,654.9

1,813.2

Inventories

406.2

500.5

471.6

691.1

734.9

Receivables

127.8

128.2

136.6

160.4

188.9

Cash

167.1

283.6

107.0

662.8

748.8

ST investments

111.9

51.7

35.3

41.7

41.7

Other

43.9

37.3

53.8

98.9

98.9

Current Liabilities

 

 

(361.8)

(387.7)

(380.8)

(617.9)

(633.3)

Creditors

(281.9)

(306.1)

(308.1)

(479.7)

(510.1)

Short term borrowings and leases

(12.8)

(14.1)

(27.3)

(51.6)

(36.6)

Other

(67.0)

(67.5)

(45.5)

(86.6)

(86.6)

Long Term Liabilities

 

 

(466.3)

(494.9)

(666.0)

(2,555.5)

(2,396.8)

LT debt and leases

(20.7)

(31.8)

(199.5)

(835.4)

(826.7)

Other long term liabilities

(445.5)

(463.1)

(466.5)

(1,720.1)

(1,570.1)

Net Assets

 

 

2,605.8

2,636.0

2,201.6

4,917.8

5,046.4

Minority interests

(3.3)

(4.5)

(6.1)

(5.0)

(7.0)

Shareholders' equity

 

 

2,602.5

2,631.6

2,195.5

4,912.8

5,039.4

CASH FLOW

Operating Cash Flow

176.5

98.6

(340.1)

24.3

272.6

D&A, exceptionals, other

280.5

498.9

555.2

633.5

812.3

Working capital movement

97.0

(71.1)

(42.0)

(71.6)

(42.0)

Tax

(81.6)

(129.2)

(137.8)

(164.9)

(317.1)

Net Interest

(10.0)

(5.1)

(3.4)

(61.3)

(56.9)

Net operating cash flow

 

 

462.3

392.1

31.9

360.0

669.0

Capex

(178.6)

(243.5)

(274.7)

(392.6)

(312.7)

Acquisitions/disposals

22.5

45.8

8.7

957.9

0.0

Equity financing

4.7

0.6

0.9

0.0

0.0

Dividends

(46.2)

(71.5)

(94.7)

(130.4)

(145.8)

Other

59.1

(2.3)

20.0

(20.0)

(15.0)

Net Cash Flow

323.8

121.2

(307.9)

774.9

195.6

Opening net debt/(cash), including ST investments

 

 

77.9

(245.5)

(289.4)

84.5

182.6

FX and other

(0.5)

(77.3)

(66.0)

(872.9)

(85.9)

Closing net debt/(cash), including ST investments

 

 

(245.5)

(289.4)

84.5

182.5

72.8

Closing net debt/(cash), excluding ST investments

(133.5)

(237.7)

119.9

224.3

114.5

Source: Pan American Silver, Edison Investment Research


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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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