Pan American Silver slashes cost guidance
Pan American Silver lowered its cost guidance following significant improvements at mines in Peru, Argentina and Mexico.
Latin America's third biggest silver producer cut its 2016 cash cost forecasts 30% to US$6.50-7.50/oz, with all-in sustaining costs (AISCs) expected at US$11.60-12.60/oz, down 16%.
COSTS SLUMP
The lower cost guidance follows significant improvements in Q2, with cash costs of US$5.57/oz, down from US$9.44/oz in the same quarter of 2015 and AISCs at US$11.31/oz, down from US$14.46/oz.
The bulk of the Q2 cost improvements were at the Dolores mine in Mexico, Manantial Espejo in Argentina and Morococha in Peru, each of which saw cash costs fall by US$8-9/oz.
Cash costs at Dolores fell to negative US$0.64/oz from US$8.34/oz as a result of higher gold production and lower operating costs driven by a weaker peso and lower diesel costs, CEO Michael Steinmann told the Q2 earnings call.
Manantial Espejo also saw cash costs fall to negative territory at -US$2.40/oz from US$6.18/oz, partly due to the devaluation of the Argentine peso.
Productivity improvements, in part linked to increased mechanization, pushed cash costs down to US$1.35/oz from US$9.78/oz at Morococha, and led to a significant fall at Huarón, also in Peru, to US$5.70/oz from US$8.96/oz.
Further improvements to operating margins are expected from expansions at the Dolores and La Colorada mines in Mexico, which are expected to conclude next year.
Pan American is on track to meet 2016 production forecasts of 24-25Moz silver, 175-185,000oz gold, 46-48,000t zinc, 15-15,500t lead and 13-13,500t copper.
The company increased its exploration budget 38% to US$14.5mn, with capex guidance unchanged at US$200-215mn.
RESULTS
Net earnings were US$34.2mn in Q2, compared with a net loss of US$7.3mn in the same quarter last year, driven by lower production costs and the sale of certain non-core assets in Peru.
Revenue increased to US$192mn from US$174mn, with silver production of 6.33Moz, down from 6.65Moz, and gold output up 9% at 48,400oz.
Capex totaled US$52.8mn, up from US$29.6mn, largely because of increased project capital at Dolores and La Colorada.
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