Pan American Silver sees COVID-19 impacts lasting all year

The COVID-19 pandemic will continue to impact Pan American Silver’s mines for the whole of 2021 – with a production rebound hinging on the successful rollout of vaccines.

Pan American, one of Latin America’s top silver producers, saw assets in Mexico, Peru, Argentina and Bolivia suspended for varying periods last year due to the pandemic.

Operations have also been hit by travel restrictions in Argentina and new health protocols, which continue to impact production, particularly at the company’s underground assets.

Silver and gold production fell below revised guidance levels to 17.3Moz and 522,400oz, respectively, compared with 25.9Moz and 559,200oz in 2019.

While Pan American forecasts an improvement in 2021 to 22.5-24.0Moz silver and 605,000-655,000oz gold, this will be limited by ongoing pandemic-related impacts.

“The pandemic is still with us and our outlook for 2021 incorporates our view that while production will bounce back from 2020 levels, operations will continue to be impacted by COVID-19 protocols, which increase costs and restrict throughput levels, especially in our underground mines where we produce most of our silver,” CEO Michael Steinmann told a call to discuss production and guidance.

The company expects a gradual reduction in COVID-19 impacts during 2021, but normal operations will not resume until 1Q22, according to its forecasts, which depend on the successful rollout of vaccines across its operating jurisdictions.

The scale of the COVID-19 impacts has come of something of a surprise to analysts.

“In our opinion, this [2021 guidance] is not only a worse scenario than we had anticipated, but investors we have spoken with had not expected this either,” Scotia Capital's Trevor Turnbull said in a note.