Pan American Silver Corp. · TSX:PAAS
Pan American Silver — Non-Deal Roadshow (May 2011)
38 slides from Pan American Silver's roadshow presentation, May 25, 2011
Slide 1: BOA-ML Roadshow May 25-26, 2011 – Toronto & Montreal
BOA-ML Roadshow May 25 - 26, 2011 – Toronto & Montreal
Slide 2: Cautionary Note Regarding Forward-Looking Statements
Cautionary Note Regarding Forward-Looking Statements CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS CERTAIN OF THE STATEMENTS AND INFORMATION IN THIS PRESENTATION CONSTITUTE “FORWARD-LOOKING STATEMENTS” WITHIN THE MEANING OF THE UNITED STATES PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AN
Slide 3: Our Operations
NORTH AMERICA 4 ” CANADA Head Office (Vancouver) “pa MEXICO Alamo Dorado La Preciosa (JV) La Colorada @ Mining Operations SOUTH AMERICA Ri. PERU Quiruvilca Huaron f) Morococha = x Pico Machay BOLIVIA San Vicente ARGENTINA Calcatreu Navidad Manantial Espejo Development Projects
Slide 4: 15 Years Of Silver Production Growth
15 Years Of Silver Production Growth • Diversified political & economical exposure in Latin America • Industry-leader in mine development and operation • Reliable performance (PAAS meets its operational forecasts) • Generating and distributing strong financial returns • Superior balance sheet • Core
Slide 5: Q1 2011 - Silver Production
Q1 2011 - Silver Production Silver Produced Cash Costs * Mine Million Ounces US$ / oz Huaron 0.6 11.60 Morococha 0.5 6.86 Quiruvilca 0.3 4.65 Alamo Dorado 1.3 4.93 La Colorada 1.1 6.73 Manantial Espejo 0.9 8.56 San Vicente 0.6 13.49 TOTAL 5.3 $7.83 * Cash costs net of by-product credits. Realized pr
Slide 6: Q1 2011 – Operating Highlights
Q1 2011 – Operating Highlights • Ag production down 3% from Q1 2010 due to lower-than-expected grades and throughput at the Company’s South American operations • Mexican operations continue to perform above expectations • Alamo Dorado produced 1.3 Moz Ag, at $4.93 per ounce • La Colorada produced 0.
Slide 7: Q1 2011 – Financial Highlights
Q1 2011 – Financial Highlights First period of reporting under IFRS Q1 2011 Record mine operating earnings (1) $96.0 million Record net earnings* $92.2 million Record net earnings* per share $0.86 Adjusted net earnings* (2) $64.6 million Adjusted net earnings* per share $0.60 Record operating cash f
Slide 8: Q1 2011 - Financial Position
Q1 2011 - Financial Position* Million US$ Cash and Short Term Investments $397.2 Working Capital $492.8 Debt $0 Undrawn Credit Facility $150 Generated $39 million in free cash flow during the quarter * At March 31, 2011 8
Slide 9: Q1 2011 – Brown Field Exploration Highlights
Q1 2011 – Brown Field Exploration Highlights • 25,000 meters of diamond drilling completed • Slightly behind plan due to minor mechanical issues, which affected drill availability and have already been successfully addressed • La Colorada • Very impressive results from continued drilling of NC2 vein
Slide 10: 2011 - Silver Production Forecast
2011 - Silver Production Forecast Estimated Production Estimated Cash Costs Mine (Moz Ag) ($/oz)* Huaron 3.1 to 3.2 11.10 to 13.00 Morococha 2.6 to 2.7 4.80 to 6.60 Quiruvilca 1.0 to 1.1 8.80 to 9.90 San Vicente 3.2 to 3.3 7.60 to 8.60 La Colorada 4.1 to 4.2 7.60 to 8.50 Alamo Dorado 4.8 to 5.1 5.30
Slide 11: 2011 - Production Forecast
2011 - Production Forecast Other Metals Estimated Production Gold (ounces) 76,000 to 78,000 Zinc (tonnes) 44,000 to 46,000 Lead (tonnes) 14,000 Copper (tonnes) 5,200 to 5,500 11
Slide 12: 2011 – Exposure to Silver
2011 – Exposure to Silver 2011 Forecast 4% 5% 11% 13% 66% Silver Gold Zinc Lead Copper Revenue distribution calculated assuming the following average metal prices: Ag $20.65/oz, Au $1,320/oz, Zn $2,050/tonne, Pb $2,050/tonne, Cu $7,000/tonne 12
Slide 13: La Preciosa – Q1 2011
La Preciosa – Q1 2011 • Invested $0.7 million • No drilling activity • Evaluating alternative mine plans to take full advantage of the improved, long-term metal price projections: • Combined open pit and underground operations • Large open pit only • Underground only • In 2011 plan to invest $1 mill
Slide 14: Navidad – Q1 2011
Navidad – Q1 2011 • Invested $6.1 million • Focused on diamond drilling, basic engineering design and technical work to complete Environmental Impact Assessment and ultimately a Feasibility Report by Q4 2011 • Initiated comprehensive community and government relations campaign to foster open dialogu
Slide 15: Navidad – Preliminary Assessment
Navidad – Preliminary Assessment Tonnes Ag Eq Category Ag g/t Pb (%) Ag (Moz) Pb (Mlb) (million) (g/t) Measured 15.4 177 137 0.27 g/t 67 489 Indicated 139.8 147 126 0.79 565 2,425 Inferred 45.9 97 81 0.57 119 580 • Mineable ore: – 52.9 million tonnes of silver/copper ore @ average 163.5 g/t Ag, 0.06
Slide 16: Navidad – Preliminary Assessment Highlights
Navidad – Preliminary Assessment Highlights • Highly economic project will recover mineral through conventional open pit mining • Average annual silver production of 19.8 million ounces (years 1-5) • Cash costs* of $6.03 per ounce of silver, net of by-product credits • 17-year mine life • After-tax
Slide 17: Navidad Capital Costs Estimates
Navidad Capital Costs Estimates Preliminary Assessment US$ millions Mine 41.35 Pre-production costs 21.21 Plant & Infrastructure 548.87 Tailings Dam 46.30 Owner’s Costs 69.38 Working Capital 10.00 Power Lines 22.55 Total Preproduction and Construction $759.66 Includes : • 25% contingency on contract
Slide 18: Navidad – Economic Highlights
Navidad – Economic Highlights* Base Case Upside Case Silver price ($/oz) $ 18.00 $ 25.00 Lead price ($/tonne) $ 1,950 $ 2,150 After-tax NPV 0% ($ million) $ 1,089 $ 2,019 After-tax NPV 5% ($million) $ 524 $ 1,157 After-tax IRR 14.2% 23.6% Payback (years) 5.5 3.7 Years 1-5 average Ag production (moz)
Slide 19: Navidad Latest Developments
Navidad Latest Developments Chubut Provincial Elections • Martin Buzzi, candidate supported by current governor Das Neves, elected governor by a very narrow victory on March 20th • Results of the provincial election were challenged by opposition candidate Eliceche (President Kirchner’s candidate). K
Slide 20: 15 Years of Silver Production Growth
15 Years of Silver Production Growth 40 CAGR 2003 - 2010: 13.7% 30 20 10 0 2003 2004 2005 2006 2007 2008 2009 2010 2011E 2012E 2013E 2014E * Navidad Manantial Espejo San Vicente Alamo Dorado La Colorada Stockpiles Huaron Morococha Quiruvilca * Assumes the law prohibiting open pit mining in the Provi
Slide 21: The Silver Market 2010
The Silver Market 2010 (Dec 30 $30.70/oz) (Jan 4 $17.17/oz) • The average silver price in 2010 was $20.19 per ounce • The price of silver increased 78% between January and December 2010 • In comparison, the price of gold increased 25% in 2010 21
Slide 22: The Silver Market 2010
The Silver Market 2010 World Silver Supply World Silver Demand 6% 4% 17% 20% 10% 46% 4% 70% 16% 7% Industrial Applications Photography Mine Production Scrap Jewelry Silverware Hedging Government Sales Coins & Medals Net Investment Total supply 1,057 Moz Total demand 1,057 Moz • Mine production up 2%
Slide 23: The Silver Market 2010
The Silver Market 2010 Supply • Total silver supply increased 14.6% in 2010, but mine supply rose only 2% • Net producer hedging soared to 61 Moz on strong prices • Largest mine production increases seen in Mexico, China and Australia; conversely, largest decline seen in Peru • Mexico and Peru large
Slide 24: ETF Silver Holdings
ETF Silver Holdings • Combined silver ETF holdings finished 2010 at 583 million ounces • Silver ETFs holdings grew approximately 25% or 115 million ounces during 2010 • Total ETF holdings were valued at approximately $17.8 billion at year-end 24
Slide 25: 2011 Silver Market (GFMS’ Outlook)
2011 Silver Market (GFMS’ Outlook) • Mine production expected to increase (mainly in Mexico) to ~790 Moz • Net producer hedging and scrap supply likely to remain strong on higher prices • Overall supply expected to rise ~3% • Industrial demand expected to slow after 2010’s strong growth • Total fabr
Slide 26: Our Executive Team
Our Executive Team Left to Right: Wayne Vincent ‐ VP Accounting & Financial Reporting; Sean MacAleer ‐ VP Human Resources & Security; Delaney Fisher ‐ Corporate Secretary & Legal Counsel; Steve Busby ‐ COO; George Greer – VP Project Development; Geoff Burns – President & CEO; Rob Doyle – CFO; Martin
Slide 27: Our Board of Directors
Our Board of Directors Left to Right: Bill Fleckenstein (Independent); David Press (Independent); Robert Pirooz (Corporate Counsel); Ross Beaty (Chairman); Geoff Burns (President & CEO); Walter Segsworth (Independent); Michael Carroll (Independent); Paul Sweeney (Independent). Not pictured: Michael
Slide 28: Delivering Strong and Growing Earnings
Delivering Strong and Growing Earnings Million US$ $50.00 Net Income 43.4 $40.00 30.2 28.8 $30.00 27.8 21.4 17.4 19.1 18.3 $20.00 10.2 $10.00 6.4 6.6 $‐ Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 $(10.00) $(20.00) $(30.00) (33.3) $(40.00) 28
Slide 29: Delivering Strong and Growing Operating Cash Flows
Delivering Strong and Growing Operating Cash Flows Million US$ 90.0 Cash Flow From Operations (before changes in working capital) 83.6 80.0 70.0 64.6 60.0 52.7 52.1 49.0 50.0 45.1 40.0 37.1 32.0 30.0 24.3 21.0 20.0 10.0 0.0 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2
Slide 30: PAAS Leverage to the Silver Price
PAAS Leverage to the Silver Price 30
Slide 31: Delivering on Silver Production Forecast
Delivering on Silver Production Forecast* Millions of Ounces Forecast Ag Production Actual Ag Production 25 23.0 23.4 24.3 21.5 23.5 18.8 18.7 20 15 10 5 0 2008 2009 2010 2011 31
Slide 32: Delivering on Cash Costs Forecasts
Delivering on Cash Costs Forecasts* Forecast Cash Costs Actual Cash Costs $8.00 (1) $7.25 $7.00 $6.28 $5.96 $5.90 $5.69 $5.53 $6.00 $5.00 $4.27 $4.00 $3.00 $2.00 $1.00 $‐ 2008 2009 2010 2011 (1) Collapse of base metal prices in 2nd half of 2008: • Zn from $1.00/lb to $0.50/lb • Pb from $1.10/lb to $
Slide 33: Relative Price Performance
Relative Price Performance PAAS 33
Slide 34: PAAS – Value Proposition
PAAS – Value Proposition • Levered exposure to silver price (approximately 66% revenue from Ag in 2011) • Double-digit growth (Navidad) • Reliable, consistent operating performance • Excellent financial returns • Proven exploration capability • Undervalued relative to peers 34
Slide 35: Cautionary Statements
Cautionary Statements CAUTIONARY NOTE REGARDING MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES • Mineral resources that are not mineral reserves have no demonstrated economic viability. PAA is required to describe mineral resources associated with their properties utilizing Canadian Institute of Min
Slide 36: Endnotes and Cautionary Statements
Endnotes and Cautionary Statements • Michael Steinmann, P.Geo. Executive Vice President, Geology and Exploration of PAA and Martin Wafforn, P. Eng., Vice President, Technical Services of PAA are the “Qualified Persons” within the meaning of National Instrument 43-101 – Standards of Disclosure for Mi
Slide 37: Appendix I Pan American Silver Reserves
Appendix I Pan American Silver Reserves* MINERAL RESERVES - PROVEN AND PROBABLE Tonnes Ag Ag Cont. Au Au Cont. Cu Pb Zn Location Type Classification (000's) (g/mt) (000,s ozs) (g/mt) (oz) (%) (%) (%) Huaron Peru Vein Proven 6,284 174 35,108 N/A N/A 0.29 1.46 2.98 Vein Probable 4,336 173 24,179 N/A N
Slide 38: Appendix II Pan American Silver Resources
Appendix II Pan American Silver Resources* MINERAL RESOURCES - MEASURED AND INDICATED Tonnes Ag Ag Cont. Au Au Cont. Cu Pb Zn Location Type Classification (000's) (g/mt) (000,s ozs) (g/mt) (oz) (%) (%) (%) Huaron Peru Vein Measured 696 153 3,432 N/A N/A 0.56 2.38 3.76 Vein Indicated 507 152 2,471 N/