Pan American Silver (TSX:PAAS) held its first-quarter earnings conference call on Wednesday. Below is the complete transcript from the call.

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Summary

Pan American Silver reported strong operating earnings with silver production of 6.4 million ounces and gold production of 169,000 ounces, aligning with their outlook.

Silver segment all-in sustaining costs were $6.63 per ounce, below guidance, while gold segment costs were consistent with expectations.

The company generated $488 million in free cash flow in Q1, ending with a record cash and short-term investment balance of over $1.8 billion.

Pan American Silver introduced an Enhanced Shareholder Return Framework, targeting the return of 35-40% of annual attributable free cash flow through dividends and share repurchases.

The La Colorada expansion project is progressing, with the board approving $265 million in project capital over the next five years.

The company maintained its full-year outlook for production and costs, while monitoring potential cost pressures related to fuel prices.

Management expressed strong confidence in the financial strength and strategic direction, emphasizing ongoing growth and shareholder returns.

Full Transcript

Siram Gasecki

Mr. Gasecki, thank you for joining us today for Pan American Silver's conference call and webcast to discuss our first quarter 2026 results. This call includes forward looking statements and information and references non GAAP measures. Please see the cautionary statements in our MD&A Q1 news release, shareholder Return Framework news release and presentation slides for the period ended March 31, 2026, all of which are available on our website. I'll now turn the call over to Michael Steinman, Pan American's President and CEO.

Michael Steinman (President and CEO)

Good morning everyone and thank you for joining us today. I'm pleased to report another solid quarter of operating performance delivering strong operating earnings. Attributable silver production of 6.4 million ounces and attributable gold production of 169,000 ounces were in line with our outlook. Silver segment all in sustaining costs of $6.63 per ounce came in well below guidance while gold segment all in sustaining costs of $1,851 per ounce were consistent with expectations. The performance on silver segment costs was driven by the contribution of low cost ounces from Juanicipio and the impact of higher gold prices. Revenue of $1.2 billion was impacted by the buildup of approximately 644,000 ounces of silver in inventory primarily at La Colorada. Due to the timing of concentrate shipments. Net earnings were $456 million or $1.08 per share and adjusted earnings were $1.09 per share. We continue to generate strong levels of free cash flow reflecting both our operating performance and favorable metal prices. In the first quarter we generated $488 million of attributable free cash flow. This has further strengthened our balance sheet and we ended Q1 with a record cash and short term investment balance of over $1.8 billion including cash attributable to our interest in Juanicipio. The strength of our free cash flow generation and balance sheet has enabled us to introduce An Enhanced Shareholder Return Framework the new framework targets the return of 35 to 40% of annual attributable free cash flow to shareholders through a combination of dividends and common share repurchases. Under our normal course issuer bid of up to $1 billion, we expect to pay aggregate dividends of approximately $305 million during 2026 equivalent to a quarterly dividend of $0.18 per common share based on the current share count and use approximately $700 million for share repurchases. By accelerating share repurchases, we aim to enhance long term per share value by increasing each shareholder's exposure to our high quality portfolio and supporting sustainable growth in dividends over time. This enhanced shareholder return framework reinforces our disciplined approach to capital allocation while maintaining sufficient cash for growth and M and A activities while providing resilient shareholder returns across commodity cycles. Focusing on Growth the release of the revised PA of the La Colorada expansion in March provides greater clarity on the capital requirements and long term potential of this important organic growth project. The expansion is expected to produce an average of 19.1 million ounces of silver annually during the peak five years following construction and ramp up. The revised PA represents a huge improvement over the original study with higher grades, lower capital intensity, stronger overall returns and reduced technical risk due to the use of a conventional long haul openstips top mining method. The project improved as a result of continued exploration success which identified new high grade veins east of the current mining area. Exploration drilling continues to intersect mineralization beyond current resources, highlighting the potential to further expand the resource base and extend peak production. The board approved $265 million in project capital over the next five years to support development of a ramp to access the SCARN minimization. We now expect to spend between 92 to 95 million dollars on the La Camarada Scarn project in 2026, increasing consolidated 2026 project capital guidance to between 240 and 255 million dollars. We're also making progress at our Jacobine optimization project. During Q1 we completed construction of two new carbon in pulp tanks and implemented improvements to the tailings pump system. One of the most significant opportunities we see at Jacobina is simplifying and optimizing the process plant flow sheet. Conceptual engineering is nearing completion and we will transition to basic engineering in the coming months. We also expect detailed engineering for a filtration plan, filter, tailings stack and a temporary mine based backfill plant within the coming months. At Escobar, the Government of Guatemala is continuing the ILO 169 consultation process. An engagement has been ongoing, including recent site visits to review care maintenance activities and confirm compliance with the court ordered suspension. At this time, there is no timeline for the conclusion of the Escobal ILO 169 consultation or for the restart of operations at the mine. Given our strong operating performance in the first quarter, we are maintaining our full year outlook for production, all in sustaining costs and sustaining capital. We expect some gold production to shift into the fourth quarter of 2026. We are monitoring potential cost pressures, particularly related to fuel prices. Due to most of our mines being underground, our direct exposure to fuel is relatively limited, approximately 5% of total operating costs. High fuel prices can have broader inflationary effects, including on labor and consumables. We remain focused on managing these pressures proactively. To recap, 2026 is off to an excellent start. We delivered another strong quarter. We are generating robust free cash flow. Production and costs are in line with our guidance and we have introduced an enhanced shareholder return framework that reflects this strong cash generation. And with that, I'll turn the call over for questions.

OPERATOR

Thank you. We will now begin the question and answer session. To join the question queue, you May press star then 1. On your telephone keypad you'll hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, Press Star then 2. Our first question is from Fahad Tariq with Jeffries. Please go ahead.

Fahad Tariq (Equity Analyst at Jeffries)

Hi, thanks for taking my question. You mentioned just now the impact of higher diesel potentially on consumables and labor. Can you maybe just mention, have you started to see any consumable prices started to go up or anything that you're hearing from your suppliers? Thanks.

Scott

Yes, Scott, can you take that, please? Yes, good morning. Not significantly, no. We've seen some increases in the costs of geosynthetics and minor, very minor ones and cost of staff transportation where the increase in fuel costs have been passed on to us, but nothing significant in any of our operations.

Fahad Tariq (Equity Analyst at Jeffries)

Okay, great. And then maybe just one more for me. On the silver segment, AISC, which is. Was very low this quarter in part because of the byproduct credits at Cerro Moro. Can you maybe just talk about. It would have to trend quite a bit higher to get to the full year guidance. Maybe just talk about the, like how that's going to happen and whether it's possible for ASIC to come in lower than the guidance range. Thanks.

Michael Steinman (President and CEO)

Yeah, thanks. Yeah, great quarter on the, on the Silver Cost as you say, mostly driven. I think you know it's pretty clear which with one CPO strong production there, as you recall, that was one of the attraction of that of that mine that we have a strong silver production at Juanicipio paired with very low cost. And then as you mentioned the byproduct credits, Cerro Moro that have been very strong this quarter. Look, this is one quarter in of the year. We'll obviously reassess mid year if we can re guide our cost. But after 1/4 we just decided to leave it where it is. But great start for the year on the cost side for sure.

Fahad Tariq (Equity Analyst at Jeffries)

Okay, great. Thank you.

OPERATOR

Thank you. The next question is from Ovez Habib with Scotiabank. Please go ahead.

Ovez Habib (Equity Analyst at Scotiabank)

Thank you. Operator. Hi Michael And Pan American team, really congrats on a good quarter again, especially on the silver segment costs. Also the shareholders return program was a nice positive surprise as well. So that was great to see. A couple of questions from me maybe starting off with Juanicipio consistently has been showing some positive grade reconciliation over the last couple of quarters. How you guys see this kind of grade kind of shaping up throughout the year and then how should we look at things moving on more in the future?

Michael Steinman (President and CEO)

Yeah, I will start and we'll have the technical team giving a little bit more detail on that. Absolutely. Look, we have seen this Great outperformance at Juanicipio for many quarters even before we purchased the asset. It's a great mine as you know. And you know, I think one of the main reason is that we find some more tons higher up with higher grades. But just to remind me, these are very similar systems than what we see at La Colorada. So very high grade silver, some gold, high grade gold higher up to surface. The deeper down you go into mine, the deeper and higher grade you get into base metals. And that's why like at La Colorada the same will be valid for Juanicipio will be when you do exploration, you discover additional veins that you plant in and you start mining higher up again you bring in higher silver grade. So that's kind of the system, that's the geology of all these systems in that silver belt of Mexico. So as I said, the main structure, the grade will go into more base metals, more zinc and leatherage when you go deeper down. But as you see very strong outperformance on the silver side up to now. And you know I think we'll see that that decrease coming at one point obviously our decrease just on silver and as I said, very strong increase on base metals. But at the moment we are enjoying these high grades and I think that slight decrease will be quite a bit slower than we probably anticipated.

Ovez Habib (Equity Analyst at Scotiabank)

Thanks for that Michael and just maybe quickly moving on to La Colorada in regards to the PEA that you announced, obviously a lot of drilling was left out on that PEA and there was some very high grade results and good structures that you guys had delineated. Are you expecting to release some sort of an updated study incorporating these results or any sort of optimization work that you've been doing in the background in the next couple of quarters?

Michael Steinman (President and CEO)

Definitely. We'll put that exploration update and then we'll include obviously this data in our mid year reserve and resource update that we normally publish somewhere in August. So there you will get a new idea how it looks like just you said left out. We didn't really leave them out. It's just, you know, it's a lot of work to obviously come up with an updated PEA and the whole mine plan and everything while our geologists are very excited on that project and keep drilling a lot and create a lot of data. So there's always quite a long, wouldn't call it lag, but backup of data that comes in a bit later on. So that will continue as we have many drill rigs working at La Colorada and there will be constantly new data coming in. So again we will come out with updated exploration results and then include that in our updated reserve resource estimation. Sounds good. Thank you always.

Steve Busby

Steve has some more additional comments to that. Yeah, sorry, Steve Busby here. I just wanted to add, so we won't, we will delay the next report in terms of like a PFS update because we have such a long schedule for this initial development of the ramp and eventually the shaft. Those are kind of taking precedence of the development schedule. So we want to get those early work projects going and get those moving along and then we'll go back and start doing additional engineering and such for the plant and surface infrastructure. So as Michael says, we'll update resources along the way, but we won't come out with a new mine plan right now for a couple more years at least.

Michael Steinman (President and CEO)

But just to add to that, so of ace, you probably saw in the press release, the port approved the first tranche of capital for the La Colorada's garden. That's a great milestone for this really, really important and large project for us. La Colorada is going to be one of the biggest and lowest cost silver mine in the world. And we approved the first $265 million to advance a ramp down from the existing mine to this car. That's a long. It's about a five year project to build that ramp. So you can imagine that, you know, in ground and conditions that we are very familiar with, we drive many ramps. But this ramp will be very special for us as it will access the shaft is the first important part of capital spend on the La Colorada Scarn project. And it was important to get that started because that's really kind of one of the slowest piece of the puzzle, if you want to say so to put it all together. As Steve said, building the new plant and surface infrastructure, there is plenty of time later on.

Ovez Habib (Equity Analyst at Scotiabank)

Excellent. Thanks. Thanks for the color. Both Michael and Steve on that. That's it from me. And looking forward to attending the side trip in early June. Thanks.

OPERATOR

Thank you. Avais. The next question is from Cosmos Chu with cibc. Please go ahead.

Cosmos Chu (Equity Analyst at CIBC)

Thanks Michael and team and congrats on a strong start to 2026, maybe on Scarn again, good to see that you've committed $265 million for the initial decline development. Could you remind us in terms of the dimensions of the decline development? Is it going to be sufficient for production? Will it eventually be used for production or most of the hoisting is going to be coming from the east hoisting shaft. Could you maybe help us picture it in terms of how this is going to eventually work?

Martin Muffler

Sure. Hi, it's Martin Muffler here. Yes, the decline we're driving at 5.5 meters by 6 meters. So a big decline with the intention of putting big sized trucks in there, you know, in the order of 50 ton capacity trucks and we use those to haul up to the 588 level and then we'll use other trucks to take the waste that we're generating from this. It's actually 12.4 kilometers of development that we're going to do over the next five years. That'll all go up to Surface via the other deep line, our long term production. We'll all go up the east production shaft. That's the plan. But we will have this ramp that's available as well. But the long term plan, as I said, is to use the shaft for hoisting the order circuits.

Cosmos Chu (Equity Analyst at CIBC)

Great. And then the other part of capital returned. Michael, as you mentioned, great to see the new enhanced shareholder return framework now in place. I guess my question is, is it as simple? You know, when we try to figure out how many shares you might buy in each quarter. Should I, for example, in Q1, you generated $488 million in free cash flow as an estimate. Can I multiply that by like 35 or 40%, subtract out what you would normally kind of divvy out in each quarter to figure out, you know, how many shares you could buy? Of course it's going to be dependent on the levels of Pan American Silver shares. But is that kind of like the sort of how we would execute on that framework?

Michael Steinman (President and CEO)

Yeah, look, I mean what we announced is up to a billion dollar of return. Fun part is dividend. The dividend is kind of fixed at a total amount of $305 million for the year. So while we're buying back shares, the return on the dividend per share will slightly and slowly increase with more buybacks in place. So that's another additional interesting addition here to our capital return framework. We looked at the past returns we had. Of course we increased the dividend three times over the last quarter. But our cash flow generation is so strong right now and the big projects that we are building, there is enough capital sold or our growth. And you probably saw we are already at about $1.8 billion between cash and short term investments. So, you know, the board believes that we can return up to a billion dollar. I believe that obviously too we are right on track for that. And that's kind of the plan. So how many shares we can buy? Well, that's as you said, will depend on the share price for that. But you know, we'll really try to aim for that billion dollar return this year.

Cosmos Chu (Equity Analyst at CIBC)

It's great to hear, Michael. And then I guess on that I noticed that in Q1 you utilized not a lot of it. You bought back about 460,000 common shares in Q1, which is not a lot given that if you want to, you know, hit those, some of those numbers that you just mentioned, you might need to kind of buy back 10 million shares for the rest of 2026. So I guess my question is in Q1, why were there not more shares being bought back? Was it due to a level in terms of where you were trading at? As you mentioned in the press release, the share buybacks were 54.04 a share in Q1 or was it just due to the fact that in Q1 you did not have this enhanced shareholder return framework put in place just yet?

Michael Steinman (President and CEO)

Yeah, really a combination of the framework wasn't in place. And very important to remember we put out the updated PA and there was quite a while we were in a blackout and couldn't really repurchase shares for a while. So until we had all that information out, as soon as that happened, we started repurchasing shares. So that was the reason for that kind of delay. But as you can imagine, we will step up that repurchase pretty strongly to get to that total billion dollar return for the year.

Cosmos Chu (Equity Analyst at CIBC)

Of course, maybe one last question. In the same press release you talked about other projects, including the Timmins project. The extension of the Bell Creek shaft didn't really get a lot of airtime, but I think it could be important. So maybe, you know, if you can touch on that a little bit as well as some of the exploration opportunities that you have mentioned for that area.

Michael Steinman (President and CEO)

Yeah, definitely important. And you know, there's only so much room in the press release. We will of course give a lot of details on that during our investor day. But very exciting to lower the shaft and, and add many, many years of future production to Timmins. And maybe Martin, you want to give us some more color on the shaft extension?

Martin Muffler

Yeah, absolutely. Yeah. It's a great project. Delighted that it's announced. Actually the idea is that we're going to extend the shaft by another 625 meters from the current 1080 level down to 1705. It's actually going to be developed using alimak raises. So we'll come and alimak up from two levels as we go. It's $131 million total investment and it allows extension of Bell Creek well into 2040. Actually we think right now around about depending on how the reserves go, but well beyond 2040. 2046 is what we used in the economics of the upper shaft extension. So, so exciting project. It definitely help as well with the vortage costs because we're mining right now quite a bit below the ramp. So that's going to help us with the cost there as well.

Cosmos Chu (Equity Analyst at CIBC)

That's great to hear and I agree. Michael, not enough room in the press release. That's why you have people like me asking questions. Congrats again Michael Martin and team and for answering all my questions and I'll pass it on.

Michael Steinman (President and CEO)

Thank you.

OPERATOR

The next question is from Jeffrey Hume with Ingalls and Snyder. Please go ahead.

Jeffrey Hume (Equity Analyst at Ingalls and Snyder)

Oh, I apologize. I don't have a question at this time.

OPERATOR

Once again, if you have a question, Please press star then 1. The next question is from Don DeMarco with National Bank Financial. Please go ahead.

Don DeMarco (Equity Analyst at National Bank Financial)

Thank you operator. And good morning Michael and team. Thanks for taking my question. Maybe just continuing on the discussion on the Scarn. Of course we saw the board approve the 12 kilometer decline over five years. Does this represent a formal go forward on the project or would that be something that we might expect after the PFS update that was mentioned? Maybe in a couple years from now?

Michael Steinman (President and CEO)

Yeah, this is a very, you know, it's a project that needs quite a few years, but this is definitely the start of our Scarn development. This is not just an exploration ramp down to see how that Scarn looks like. We obviously have a lot of information. We drilled on the scarn since 2018 when we did the discovery. And you just heard Martin saying that we're driving down a ramp of 5.5 by 6.5 meters which will fit 50 tonne trucks. So this is definitely the first span of a great project and a great big mine that we're going to build here for Pan America.

Don DeMarco (Equity Analyst at National Bank Financial)

Okay. And of course, like the revised PEA came out a couple months ago and showed capex of 1.9 billion. Just can you remind us, I think at this point you were talking about funding this within Pan American exclusively, is that right?

Michael Steinman (President and CEO)

That's correct. As I said, our cash and short term investment balance right now is 1.8 billion. Of course it's, you know, there will be a lot of cash flow coming in over the coming quarters and years while we build this asset. There is plenty of funds available for us to fund this project and continue with our return to our shareholders at the same time.

Don DeMarco (Equity Analyst at National Bank Financial)

Yeah, and I guess that's a good segue into my next question. I mean, you know, the shareholder return program is very timely. I mean, it's a real step up in the share buybacks and coincides with the discounted valuation. But I see it is weighted to buybacks. That's pretty common in the sector. Can you share your thoughts on how you decided on the allocation between shares and dividend amounts?

Michael Steinman (President and CEO)

Yeah, when we look at that historic returns we have between share buybacks and dividends, we returned somewhere around mid 30% of our free cash flow to shareholder, historically probably higher weighted to dividends. Now we achieved such a high level of cash flow and as I said, increased our dividend already three times every last past three quarters. So we all believe that at this point the strong share the share reap purchase is a better and stronger use of our cash and return to our shareholders than just continuously increasing the dividend. So it's a great mix. I think, I think it's a great day. When we approved, when we approved the billion return to our shareholder yesterday.

Don DeMarco (Equity Analyst at National Bank Financial)

Okay, that's all for me. Thanks again, Michael, and good luck. With the rest of the quarter.

Michael Steinman (President and CEO)

Thank you.

OPERATOR

The next question is from John Tomasos with John Tomasos very independent research. Please go ahead.

John Tomasos (Independent Research Analyst)

Thank you very much and congratulations on all the cash and good things. In the updated Scarring pea, the Capex fell by about a billion dollars. The upfront capital. Could you describe the sub zones of Scarn where I'm presuming that the updated PEA accesses a higher grade, perhaps less deep part of the Scarn that needs less capital, has more revenue. Maybe it's lower temperature, maybe it needs a little less ventilation. But my sense is that some parts of the Scarn are richer and easier than other parts of the Scarn.

Michael Steinman (President and CEO)

Yes, thanks for the question, John. Absolutely, you're right there. That the big decrease in capital between the two PAs was really that initially it was a way, way bigger sub level caving project. Remember at the beginning we envisioned up to 50,000 ton a day. During the years following years, we discovered more and more high grade material, not only in the Skarn, but also closer to surface in some additional veins. And I would like to refer everybody to a number of press releases that we put out over the last two years on those high grade wide intersects that you encountered within the scar node bodies and these really high grade structures that we discovered close to surface. So when you put all that high grade together that we discovered over the last few years, we had the chance to build a smaller, higher grade starter, if you want to call. I'm not sure starter mine is the right word because the project we put out is at least 37 years long. But we will definitely mine first those higher silver grades. And that's why the tonnage decreased from that kind of initially around 50,000 tons to about 15,000 tons a day and just uses conventional long haul open stoping. So with that change, obviously it's a smaller mine to build, smaller plant to build, and less development for the underground, much simpler straightforward mining method that we apply in most of our underground operations. That combination brought the capital requirement down by a billion dollars.

OPERATOR

Thank. You. This concludes the question and answer session. I'd like to turn the conference back over to Michael Steinman for any closing remarks.

Michael Steinman (President and CEO)

Thank you operator, and thanks everyone for calling in another great quarter. Strong production, low cost, especially now our silver mines. A great combination obviously combined with very high metal prices as well, and as a result, very high cash flows. So in light of those strong free cash flows, as you saw in the press release, we adopted a new shareholder return framework targeting to return up to a billion dollars between dividends and share repurchases for 2026. We also approved some really important capital spending, as we just discussed here with the people on the call for Jacobina, Timmins and of course most importantly for La Colorada, which really marks the first large approved capital spending to develop our great Scarn deposit at La Colorada with the first $265 million approved to sink or lower that access large access ramp to the deposit. We will be hosting our Investor Day in Toronto on June 1. There will be ample time there with lots of maps and cross sections to explain and dive really deep into all these projects. La Colorada, Jacobina and Timmins together with many other exciting projects that Pan American has on the development and exploration side. And really looking forward if you could join us for that for that event again, it's on June 1st in Toronto that will be available obviously in person if you're in Toronto or via webcast. Looking forward to talking to everyone at that event. Have a great time until June 1st. Thank you very much.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.