2021
ANNUAL REPORT
Timmins
Silver Segment
Mining Operations
Gold Segment
Mining Operations
Development and
Advanced Stage
Exploration Projects
Pan American Silver owns and operates
Dolores
silver and gold mines located in
Mexico, Peru, Canada, Argentina and
Bolivia. In addition to the Escobal
mine in Guatemala that is currently
not operating, our two development
stage projects, La Colorada Skarn
and Navidad, offer the potential for
significant growth in silver production.
La Colorada
Skarn Deposit
Escobal*
(Currently on care
and maintenance)
Shahuindo
La Arena
Huaron
Morococha
(Currently on care
and maintenance)
San Vicente
E
C
N
A
M
R
O
F
R
E
P
G
N
I
T
A
R
E
P
O
1
2
0
2
Ag
19.2 Moz
consolidated production
$15.62/oz
silver segment all-in
sustaining costs
529 Moz
proven + probable reserves
E
C
N
A
M
R
O
F
R
E
P
G
N
I
T
A
R
E
P
O
1
2
0
2
Au
579.3 koz
consolidated production
$1,214/oz
gold segment all-in
sustaining costs
4.2 Moz
proven + probable reserves
Navidad
Manantial Espejo
2021 REVENUE GENERATED BY METAL
2021 RESERVES BY METAL
Zinc
8%
Lead
2%
Copper
4%
Silver
26%
Gold
60%
Zinc
14%
Lead
6%
Copper
3%
Gold
29%
Silver
48%
Revenue by metal in 2021 is based on the average realized metal
prices for 2021 of: $25.00/oz for silver, $1,792/oz for gold, $2,997/
tonne for zinc, $2,206/tonne for lead and $9,297/tonne for copper.
The reserves by metal reflect the Company’s mineral reserve
estimates as of June 30, 2021, and metal price assumptions of
$18.00/oz for silver, $1,350/oz for gold, $2,450/tonne for zinc,
$2,000/tonne for lead, and $6,500/tonne for copper; see the mineral
reserves and mineral resources on page 68 for further information.
All financial data in this report is stated in US dollars ("USD") unless otherwise noted.
CONSOLIDATED RESULTS
Weighted average shares during period (millions)
Shares outstanding end of period (millions)
FINANCIAL (in thousands USD, except per share amounts)
Revenue
Mine operating earnings
Net earnings
Basic earnings per share(1)
Adjusted earnings(2)
Basic adjusted earnings per share(1)
Net cash generated from operating activities
Net cash generated from operating activities before changes in working capital(2)
Sustaining capital expenditures(2)
Project capital expenditures(2)
Cash dividend per share
PRODUCTION
Silver (thousand ounces)
Gold (thousand ounces)
Zinc (thousand tonnes)
Lead (thousand tonnes)
Copper (thousand tonnes)
CASH COSTS(2) ($/ounce)
Silver Segment(3)
Gold Segment(4)
AISC(2) ($/ounce)
Silver Segment(3)
Gold Segment(4)
AVERAGE REALIZED PRICES(5)
Silver ($/ounce)
Gold ($/ounce)
Zinc ($/tonne)
Lead ($/tonne)
Copper ($/tonne)
December 31,
2021
210.3
210.5
December 31,
2020
210.1
210.3
Year ended
December 31,
2021
2020
$
$
$
$
$
$
$
$
$
$
$
1,632,750 $
367,938 $
98,562 $
0.46 $
161,782 $
0.77 $
392,108 $
463,177 $
207,623 $
46,476 $
0.34 $
1,338,812
360,177
176,455
0.85
181,243
0.86
462,315
365,333
162,047
21,545
0.22
19,174
579.3
49.4
18.1
8.7
11.51
899
15.62
1,214
25.00
1,792
2,997
2,206
9,297
17,312
522.4
40.2
15.7
5.2
7.05
797
11.38
1,011
20.60
1,758
2,288
1,851
6,412
Per share amounts are based on basic weighted average common shares.
(1)
(2) Non- GAAP measure; please refer to the "Alternative Performance (non-GAAP) Measures" section on page 130 of this annual report for further
information on these measures.
(3) As of Q1 2021, Dolores was moved from the Silver Segment to the Gold Segment due to the expected mine sequencing into a higher gold zone of the
mine. 2021 Silver Segment is comprised of the following operations: La Colorada, Huaron, Morococha, San Vicente and Manantial Espejo. The 2020
Silver Segment metrics include Dolores.
2021 Gold Segment is comprised of the following operations: Dolores, Shahuindo, La Arena and Timmins. The 2020 Gold Segment metrics exclude
Dolores.
(4)
(5) Metal prices stated are inclusive of final settlement adjustments on concentrate sales.
For historical financial and operating data, please see the Interactive Analyst Centre at panamericansilver.com
Certain of the statements and information in this annual report constitute "forward-looking statements" within the meaning of the United States Private
Securities Litigation Reform Act of 1995 and "forward-looking information" within the meaning of applicable Canadian provincial securities laws. Please refer
to pages 130 to 132 at the end of this annual report for an important note to readers regarding forward-looking statements and information.
PAN AMERICAN SILVER CORP.
1
LETTER FROM THE BOARD CHAIR
This is my first letter to you as the Chair of Pan American’s
Board of Directors. I was honoured to succeed Ross Beaty
as Chair of the Company when he retired in May 2021.
Ross held the role of Chair since the inception of Pan
American in 1994 and was instrumental in building a
company that is a world leader in silver production, with a
for excellence and a culture of social
reputation
responsibility and environmental stewardship. The values
and vision of Ross and Pan American are ones that are
close to my heart and, as the Chair of Pan American, I look
forward to building on our strengths, as we continue to
mine sustainably and deliver value to our stakeholders.
The past year was challenging for Pan American as
COVID-19 continued to impact all our lives, both physically
and emotionally. The Latin American countries where we
operate were particularly hard hit by the pandemic and
our employees, contractors and communities faced
incredibly difficult times. The extensive measures that we
put in place early in 2020 to protect and support our
workers and their communities, as well as the business,
were maintained throughout 2021. We are fortunately in
a different place now than we were a year ago, as
vaccination rates are rising throughout Latin America and
better treatment options exist. We are hopeful that 2022
will be much less impacted by the pandemic.
We also had a challenging year from a safety perspective.
Pan American has 13,548 employees and contractors
across our nine operations, and nothing matters more to
management and the Board than the health and safety of
each person. Over the past years, the Company has been
steadily strengthening all aspects of its safety program.
Sadly, despite our improvements, in 2021 we tragically
suffered four fatalities, one each at Huaron, La Colorada,
Morococha and San Vicente. The impact of these losses
was profound. The Health, Safety and Environment
Committee as well as the full Board spent many hours
with management discussing these fatalities specifically,
as well as safety in general. The families impacted by
these tragedies have our thoughts, condolences, and
support.
In 2021, management successfully advanced several key
priorities. At La Colorada, ventilation constraints that had
impacted operations since late 2019 were remedied,
enabling safe and productive working at deeper levels in
the mine. In addition, $39.5 million was invested at the La
Colorada Skarn project for exploration drilling and project
studies. We believe development of the Skarn represents
a significant growth project for the Company going
forward.
Pan American is in a strong financial position to enhance
operations and fund growth. In 2021, we invested $243.5
million in the business and returned $71.5 million in
dividends to shareholders ($0.34 per common share). We
exited 2021 with liquidity of $835.3 million, including net
cash of $237.7 million1 and an un-utilized revolving credit
facility of $500.0 million. The credit facility was amended
in 2021 to include pricing adjustments based on third-
party sustainability performance ratings of Pan American
by S&P Global and MSCI, the first for a Canadian mining
company.
In the past year, we have continued to refine and enhance
our approach to ESG and, in this regard, replaced our
Health Safety Environment and Communities Committee
with our new Communities and Sustainable Development
Committee and our Health, Safety and Environment
Committee. The separation of responsibilities into these
two committees is fundamentally a recognition of the
importance of these aspects of our business.
two new policies:
We also approved
the Social
Sustainability Policy and the Environmental Policy, both
reflective of our current thinking and enhanced approach.
While we have had a separate Environmental Policy and
(formerly) a Corporate Social Responsibility Policy for
several years, the new and revised policies more
accurately reflect Pan American’s current commitments
and expectations with respect to the way we do business
responsibly and ethically, as well as our alignment with
widely recognized international standards. These policies
both guide us in how we conduct ourselves and provide
detailed objectives against which we can evaluate our
social and environmental performance.
PAN AMERICAN SILVER CORP.
2
We work closely with local communities to promote long
term positive relationships and sustainable economies. In
2021, our primary focus has been on health, education
and maintaining local procurement opportunities.
In parallel with sustainable economies, we need
sustainable environments, and in this regard climate
change is an important issue. We made progress on our
commitment to implement the Task Force on Climate-
related Financial Disclosure (“TCFD”) recommendations
with the publication of our first TCFD-focused disclosure
and strategy for further incorporating consideration of
climate risks and opportunities into our business model.
Our 2021 reporting includes more information on physical
and transition climate risks.
We appreciate the importance of the goal under the Paris
Agreement to
limit the global average temperature
increase this century to below 2.0 degrees Celsius
compared to pre-industrial levels, and we continue to
work actively on our climate strategy. Early in 2022, the
Board approved a corporate target to reduce CO2
emissions by 30% by 2030, based on our 2019 baseline
emissions.
Another important area of focus for the Board is inclusion
and diversity. Pan American has been rolling out its
Building Respect Together campaign, which aims to
ensure we have a welcoming and inclusive workplace.
Pan American has a wonderful, culturally diverse
workforce, but the level of participation of both females
low. Significant
and under-represented minorities
efforts have been made towards hiring, promoting and
retaining female workers and educating local women with
a view to providing opportunities for participating in
mining operations.
is
Looking ahead, the future is positive. We are well
positioned for growth with our world class skarn project at
La Colorada as well as Escobal in Guatemala and Navidad
to engaging our
in Argentina. We
stakeholders, and to demonstrating how mining can be
forward
look
done responsibly and benefit both the people in the local
communities and the region more broadly.
The past year saw a significant amount of regeneration at
the Board. Coinciding with Ross’ retirement in May 2021,
we elected Jennifer Maki to the board. We have now had
a full year with our two newer directors – Kathy Sendall
and Jennifer Maki - both of whom have been making
wonderful contributions. Towards the end of the year, we
were able to resume site visits. Several directors and I
visited the Timmins operation in Canada and the La
Colorada and Dolores mines in Mexico. Spending time
with management and the operational teams is important
for the Board to better understand the culture and
operating environment of the Company.
We have an extraordinary team at Pan American that
strives for excellence and cares deeply for people and the
environment. I am incredibly proud of the way that Pan
American's employees and contractors have managed
through the challenges of 2021, and supported each other
and their communities. On behalf of the Board, I would
like to thank every single employee and contractor for
their unwavering commitment, as well as our stakeholders
for their ongoing support.
Gillian Winckler, Chair of the Board of Directors
March 15, 2022
1. Net cash is a non-GAAP measure calculated as cash and cash
equivalents and short-term investments other than equity securities,
less the total of amounts drawn on our credit facility, finance lease
liabilities and loans payable.
PAN AMERICAN SILVER CORP.
3
LETTER FROM PRESIDENT & CEO
Pan American has always been guided by our view that a
well-managed mining company demonstrates sustainable
business practices, prioritizes the health and safety of its
people and communities, and invests in its assets to
generate long-term returns for shareholders. We focused
on these principles during another year marked by the
challenges of the COVID-19 pandemic.
Operating performance and the impact of the COVID-19
pandemic
Latin America continued to be hit hard by the COVID-19
pandemic during 2021, with vaccination programs rolling
out at a slower rate than in North America. Pan American
partnered with UNICEF Canada's GiveAVax campaign to
provide global equitable access to COVID-19 vaccines
through the distribution of vaccines to low and middle
income countries. We also
to
vaccinations for employees who chose to be vaccinated.
facilitated access
We remained vigilant by adhering to the comprehensive
protocols established by governments and Pan American
to prevent spread of the virus. These protocols reduced
workforce deployment
impacted our
production, costs and progress on capital projects.
levels, and
Silver production was also
impacted by ventilation
constraints at our La Colorada operation in Mexico.
Ventilation infrastructure was restored in the third quarter
of 2021, and mine development and production rates
have been improving. We expect a 35% increase in silver
production at La Colorada in 2022 based on the mid-point
of our guidance(1). Further
the
ventilation circuit should enable La Colorada to deliver
improvements
to
strong silver production at attractive margins well into the
future, given the mine’s long-life reserves and resources.
In 2021, both silver and gold production rose 11% over
2020 levels, with all-in sustaining costs in 2021 for the
Silver Segment of $15.62 per ounce and $1,214 per ounce
for the Gold Segment.
Improving ESG performance and reporting
Operating in an ethical, responsible, and sustainable
manner is reflected in our policies and guidelines that
formalize how we must conduct our business. Of utmost
importance is the safety of our people, and we are deeply
saddened by four fatalities that occurred at our operations
last year. We are determined to
improve safety
performance at our narrow vein underground mines
where these fatalities occurred. In Peru, we recently
completed a third party assessment of the progress made
under a behaviour based safety system. That process has
helped identify methods to enhance safety awareness and
emphasize a focus on performing work safely in our
operations.
in our
improvements
We made
environmental
performance in 2021, reducing GHG emissions by 11% and
achieving our target of reducing energy consumption by
7% compared to the 2021 base case. We also reduced
water consumption by 10% compared to the 2021 base
case, and we achieved a net positive impact on vegetation
and biodiversity across all our sites.
On the social front, we continue to actively engage with
our communities to better understand their priorities and
to invest in initiatives that will provide them with lasting
benefits. At the same time, we are supporting diversity
and inclusion within our workforce, completing the first
module of our Building Respect Together program in 2021.
In 2021, we published our first report under the UN Global
Compact, describing our progress and commitment to the
Ten Principles. Our PAS Guatemala subsidiary joined the
UN Global Compact at the country level. In addition, we
the United Nations Voluntary
have
Principles on Security and Human Rights standards at all
our sites over the past year.
implemented
improve our ESG performance and
Our efforts to
reporting are being recognized. In 2021, our ratings by the
major ESG rating agencies improved across the board
compared with prior years.
Outlook for our business
Pan American is set up well for success. We are in a strong
financial position to invest in growth and support returns
to shareholders, while generating economic value for the
people in the regions where we operate. In 2021, our
PAN AMERICAN SILVER CORP.
4
operations generated $392.1 million of operating cash
flow. Our cash and cash equivalent balances grew by
$116.4 million, exiting 2021 with a balance of $283.6
million. Total debt(2) at December 31, 2021 was $45.9
million.
We increased the quarterly dividend to $0.10 per common
share in 2021, marking the third dividend increase in 18
months. In February 2022, we introduced a new dividend
policy that supplements the base quarterly dividend of
$0.10 per common share with a variable dividend amount
linked to the net cash on the balance sheet for the
previous quarter. Based on that new policy, the cash
dividend of $0.12 per common share to be paid in March
2022 is a 20% increase from the prior quarter.
We expect operating performance to improve in 2022
with higher productivity levels across the operations, as
the impact of the COVID-19 pandemic on workforce
deployment
lessens. Cost pressures, supply chain
disruptions and shipment delays are global effects from
the pandemic and are likely to persist for some time.
These effects are sadly being exacerbated by the conflict
unfolding in Europe as I write this letter.
Our diversified portfolio includes the potential for growth.
At our La Colorada Skarn project, we completed 72,500
metres of infill and exploration drilling in 2021, with drill
results returning high grade intercepts and indicating the
potential for resource expansion. In 2022, we plan further
drilling of the Skarn, and to expand the engineering
studies to consider development of the deposit through
larger, bulk mining methods. Meanwhile, we are
advancing infrastructure projects for the Skarn that will
also provide early benefits to the existing mine.
The ILO 169 consultation process for the already built
Escobal mine in Guatemala began in 2021, with a series of
pre-consultation meetings held over the course of the
year and into 2022. The Ministry of Energy and Mines in
Guatemala is leading the consultation process with the
Xinka
Indigenous peoples and our PAS Guatemala
subsidiary is a participant in this process. Completion of
the consultation is required for reinstatement of the
mining license at Escobal. The timing for completion of the
consultation process has not yet been determined.
Our Navidad project remains a long-term option on a large
silver resource. Development of the project requires
legislation that would allow open pit mining in certain
zones in the province of Chubut, Argentina.
Pan American the “go-to” name for investing in silver
Our share price is highly correlated to precious metal
prices, and in particular, the price of silver. Industrial
demand for silver is expected to grow because it is a
necessary component in the manufacture of solar panels,
electric cars and other electronic uses(3). With a strong
outlook for silver in the transition to an electrified, low-
carbon economy, and some of the best projects in the
world to deliver meaningful growth in silver, Pan American
offers investors a unique opportunity to invest in silver.
As well, silver and gold continue to play an important role
as a hedge against
inflation and as a safe-haven
investment. The conflict in Europe that transpired in early
2022 has confirmed this role that precious metals play.
In closing, I would like to thank Pan American founder and
Chair, Ross Beaty, who retired from the Board of Directors
in 2021, for his contributions and counsel over the years.
We welcomed Gillian Winckler as the new Board Chair,
who has a strong background in mining, finance and ESG
matters. We also welcomed Jennifer Maki to the Board in
2021. Ms. Maki has extensive experience in finance and
the mining sector. Pan American is fortunate to have a
strong Board of Directors, and I look forward to working
with them to advance our strategic priorities.
for
the Pan American organization
I would also like to thank our employees and contractors
across
their
resilience during another year
commitment and
challenged by the COVID-19 pandemic. On behalf of the
team, I would like to acknowledge Mr. Robert Doyle for
his 18 years of service to the Company, and wish him well
Ignacio Couturier has been
in his retirement. Mr.
appointed as the new Chief Financial Officer of the
Company. Ignacio has worked in progressively senior roles
within Pan American for 20 years, and has a deep
understanding of our business.
Pan American has the team, the assets and the vision to
continue creating value for our stakeholders.
Michael Steinmann, President and CEO
March 15, 2022
1. See page 13 for Pan American's 2022 guidance, as at February 23,
2022.
2. Net cash is calculated as cash and cash equivalents plus short-term
investments, other than equity securities, less total debt. Total debt is
calculated as the total of amounts drawn on our credit facility, finance
lease liabilities and loans payable. Net cash and total debt are non-
GAAP measures.
3. Silver Institute and CRU, September 2021.
PAN AMERICAN SILVER CORP.
5
Management’s Discussion and Analysis
FOR THE YEAR ENDED DECEMBER 31, 2021
February 23, 2022
TABLE OF CONTENTS
Introduction ........................................................................................................................................................ 7
Core Business and Strategy ................................................................................................................................. 8
2021 Highlights ................................................................................................................................................... 9
Environmental, Social, and Governance ............................................................................................................. 11
2022 Operating Outlook ..................................................................................................................................... 13
Operating Performance ...................................................................................................................................... 20
Project Development Update ............................................................................................................................ 36
Overview of 2021 Financial Results .................................................................................................................... 36
Liquidity and Capital Position ............................................................................................................................. 45
Closure and Decommissioning Cost Provision .................................................................................................... 48
Related Party Transactions ................................................................................................................................. 48
Alternative Performance (Non-GAAP) Measures ............................................................................................... 49
Risks and Uncertainties ....................................................................................................................................... 58
Significant Judgments and Key Sources of Estimation Uncertainty in the Application of Accounting Policies . 65
Changes in Accounting Standards ....................................................................................................................... 66
Disclosure Controls and Procedures and Internal Control Over Financial Reporting ........................................ 66
Mineral Reserves and Resources and Technical Information ............................................................................ 68
Cautionary Note .................................................................................................................................................. 72
PAN AMERICAN SILVER CORP.
6
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
INTRODUCTION
This Management’s Discussion and Analysis (“MD&A”) is intended to help the reader understand the significant
factors that influence the performance of Pan American Silver Corp. and its subsidiaries (collectively “Pan
American”, “we”, “us”, “our” or the “Company”) and such factors that may affect its future performance. This
MD&A should be read in conjunction with the Company’s audited consolidated financial statements for the year
ended December 31, 2021 (the “2021 Financial Statements”) and the related notes contained therein. All
amounts in this MD&A and the 2021 Financial Statements are expressed in United States dollars (“USD”), unless
identified otherwise. The Company reports its financial position, financial performance and cash flows in
accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting
Standards Board (“IASB”). Pan American’s significant accounting policies are set out in Note 3 of the 2021 Financial
Statements.
This MD&A refers to various non-Generally Accepted Accounting Principles (“non-GAAP”) measures, such as “all-in
sustaining costs per ounce sold”, “cash costs per ounce sold”, “adjusted earnings” and “basic adjusted earnings per
share”, “cash mine operating earnings”, “total debt”, “capital”, and “working capital”, which are used by the
Company to manage and evaluate operating performance at each of the Company’s mines and are widely
reported in the mining industry as benchmarks for performance, do not have standardized meanings under IFRS,
and the methodology by which these measures are calculated may differ from similar measures reported by other
companies. To facilitate a better understanding of these non-GAAP measures as calculated by the Company,
additional information has been provided in this MD&A. Please refer to the section of this MD&A entitled
“Alternative Performance (Non-GAAP) Measures” for a detailed description of “all-in sustaining cost per ounce
sold”, “cash costs per ounce sold”, “adjusted earnings” and “basic adjusted earnings per share”, “cash mine
operating earnings”, “total debt”, “capital”, and “working capital” as well as details of the Company’s by-product
credits and a reconciliation, where appropriate, of these measures to the 2021 Financial Statements.
Any reference to “cash costs” in this MD&A should be understood to mean cash costs per ounce of silver or gold
sold, net of by-product credits. Any reference to “AISC” in this MD&A should be understood to mean all-in
sustaining costs per silver or gold ounce sold, net of by-product credits.
Except for historical information contained in this MD&A, the following disclosures are forward-looking statements
within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and forward-looking information
within the meaning of applicable Canadian provincial securities laws, or are future oriented financial information
and as such, are based on an assumed set of economic conditions and courses of action. Please refer to the
cautionary note regarding forward-looking statements and information at the back of this MD&A and the “Risks
Related to Pan American’s Business” contained in the Company’s most recent Annual Information Form on file
with the Canadian provincial securities regulatory authorities and Form 40-F on file with the U.S. Securities and
Exchange Commission (the “SEC”). Additional information about Pan American and its business activities, including
its Annual Information Form, is available on SEDAR at www.sedar.com.
PAN AMERICAN SILVER CORP.
7
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
CORE BUSINESS AND STRATEGY
Pan American engages in silver and gold mining and related activities, including exploration, mine development,
extraction, processing, refining and reclamation. The Company owns and operates silver and gold mines located in
Peru, Mexico, Argentina, Bolivia, and Canada. We also own the Escobal mine in Guatemala that is currently not
operating. In addition, the Company is exploring for new silver deposits and opportunities throughout the
Americas. The Company is listed on the Toronto Stock Exchange (Symbol: PAAS) and on the Nasdaq Global Select
Market in New York (Symbol: PAAS).
Pan American’s vision is to be the world’s premier silver mining company, with a reputation for excellence in
discovery, engineering, innovation and sustainable development. To achieve this vision, we base our business on
the following strategy:
• Generate sustainable profits and superior returns on investments through the safe, efficient and
•
•
•
•
environmentally sound development and operation of our assets.
Constantly replace and grow our mineral reserves and mineral resources through targeted near-mine
exploration and global business development.
Foster positive long-term relationships with our employees, shareholders, communities and local
governments through open and honest communication and ethical and sustainable business practices.
Continually search for opportunities to upgrade and improve the quality of our assets, both internally and
through acquisition.
Encourage our employees to be innovative, responsive and entrepreneurial throughout our entire
organization.
To execute this strategy, Pan American has assembled a sector-leading team of mining professionals with a depth
of knowledge and experience in all aspects of our business, which enables the Company to confidently advance
early stage projects through construction and into operation.
PAN AMERICAN SILVER CORP.
8
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
2021 HIGHLIGHTS
Operations
Silver production of 19.2 million ounces
Consolidated 2021 silver production of 19.2 million ounces was 1.9 million ounces more than we produced in
2020, due to the impact of the coronavirus disease ("COVID-19") related mine suspensions in 2020. 2021 silver
production was within the revised 2021 forecast provided in the Q3 2021 MD&A dated November 9, 2021 (the
"Revised 2021 Forecast") range of 19.0 to 20.0 million ounces.
Gold production of 579.3 thousand ounces
Consolidated 2021 gold production of 579.3 thousand ounces was 56.8 thousand ounces more than we produced
in 2020. This is largely the result of higher gold production at Dolores from mine sequencing in 2021, and the
impact in 2020 of the COVID-19 related mine suspensions. The increase at Dolores was partially offset by lower
production at Shahuindo and Timmins, as further described in the "Individual Mine Performance" section of this
MD&A. 2021 gold production was within the Revised 2021 Forecast range of 560.0 to 588.0 thousand ounces.
Base metal production
Base metal production in 2021 was higher than in 2020, largely due to the impact of the COVID-19 related mine
suspensions in 2020.
Zinc production in 2021 of 49.4 thousand tonnes was slightly below management's Revised 2021 Forecast
production range of 49.8 to 53.6 thousand tonnes.
Lead production in 2021 of 18.1 thousand tonnes was slightly below management's Revised 2021 Forecast
production range of 18.5 to 20.3 thousand tonnes.
Copper production in 2021 of 8.7 thousand tonnes was slightly below management's Revised 2021 Forecast
production range of 8.9 to 9.2 thousand tonnes.
See the "Individual Mine Performance" section of this MD&A for further detail on operating performance.
Financial
Cash Flow
Cash flow from operations: totaled $392.1 million in 2021. This was $70.2 million less than the $462.3 million
generated in 2020, as increased income taxes and changes in non-cash working capital changes more than offset
the $81.1 million increase in cash mine operating earnings.
Non-cash working capital changes in 2021 resulted in a $71.1 million use of cash, primarily driven by an $82.9
million build-up in inventories. These working capital movements were in contrast to the $97.0 million source of
cash in 2020, which was driven primarily by a $56.8 million build-up of accounts payables and accrued liabilities
and a $54.8 million decrease in trade and other receivable balances.
Liquidity and working capital position
As at December 31, 2021, the Company had cash and short-term investment balances of $335.3 million, working
capital of $613.5 million, and the full $500.0 million available under its sustainability-linked revolving credit facility
(the "Sustainability-Linked Credit Facility"). Total debt of $45.9 million was related to lease liabilities and
construction loans.
The Company's cash and short-term investment balances increased by $56.2 million in 2021, driven by a $116.4
million increase in cash and cash equivalents from accumulated operating cash flow, offset by a $60.2 million
decrease in short-term investments from non-cash mark-to-market investment losses from our equity position in
New Pacific Metals Corp. ("New Pacific"). Working capital increased by $118.3 million from December 31, 2020 as
a result of the increased cash and cash equivalents.
PAN AMERICAN SILVER CORP.
9
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
Revenue, net earnings, and adjusted earnings
Revenue in 2021 of $1.63 billion was 22% higher than in 2020, reflecting higher metal prices and increased
quantities produced and sold.
Net earnings of $98.6 million ($0.46 basic income per share) for 2021 compared to $176.5 million ($0.85 basic
income per share) in 2020. The $77.9 million year-over-year decrease mainly reflects: (i) a $70.9 million increase in
income tax expense; (ii) a $121.9 million decrease in investment income, largely from non-cash mark-to-market of
the Company's equity investment in New Pacific; partially offset by (i) a $70.3 million decrease in care and
maintenance costs, with no COVID-19 related mine suspensions in 2021, (ii) a $24.2 million increase in gains on
sale of mineral properties, and (iii) a $21.2 million decrease in other expenses.
Adjusted earnings: in 2021 were $161.8 million, representing basic adjusted earnings per share of $0.77, which
was $19.5 million, or $0.09 per share, lower than 2020 adjusted earnings of $181.2 million, and basic adjusted
earnings per share of $0.86, respectively.
Adjusted earnings is a non-GAAP measure. Please refer to the “Alternative Performance (Non-GAAP) Measures”
section of this MD&A for a detailed reconciliation of this measure to the 2021 Financial Statements.
Cash costs per ounce sold
Silver Segment 2021 cash costs were $11.51 per silver ounce sold, slightly lower than the Revised 2021 Forecast
range of $11.60 to $12.50 per silver ounce sold.
Gold Segment 2021 cash costs were $899 per gold ounce sold, which was within the range of $825 to $925 as
provided in the original forecast in our Annual 2020 MD&A dated February 17, 2021 (the "2021 Original Forecast").
Cash costs is a non-GAAP measure. Please refer to the “Alternative Performance (Non-GAAP) Measures” section of
this MD&A for a detailed reconciliation of this measure to the 2021 Financial Statements.
All-in Sustaining Costs per ounce sold (“AISC”)
Silver Segment 2021 AISC were $15.62 per silver ounce sold, slightly lower than the Revised 2021 Forecast range of
$15.75 to $16.75 per silver ounce sold.
Gold Segment 2021 AISC were $1,214 per gold ounce sold, which was within the Original 2021 Forecast range of
$1,135 to $1,250 per gold ounce sold.
Consolidated 2021 AISC per silver ounce sold, including corporate administration, exploration, accretion, and by-
product credits from the Gold Segment mines, were $1.44 per silver ounce sold, which was above the Revised
2021 Forecast range of $(4.50) to $0.00 per silver ounce sold.
AISC is a non-GAAP measure. Please refer to the “Alternative Performance (Non-GAAP) Measures” section of this
MD&A for a detailed reconciliation of this measure to the 2021 Financial Statements.
COVID-19 Impact
Pan American had anticipated that the impact of the COVID-19 pandemic on operations would diminish over the
course of 2021, as vaccination rates increased across our operating jurisdictions; however, this expectation did not
fully materialize, and the pandemic continued to be a significant factor throughout Latin America during 2021. Pan
American maintained and enhanced the comprehensive protocols that we had implemented to protect health and
safety at the onset of the pandemic. These protocols resulted in reduced workforce deployment levels, which
affected production rates and progress on capital projects in 2021 compared to those originally assumed in the
Company's guidance.
In 2020, Pan American's normal operations in Mexico, Peru, Argentina and Bolivia were suspended for an average
duration of approximately two months during the first half of the year in order to comply with mandatory national
quarantines imposed in response to the COVID-19 pandemic. The Huaron and Morococha operations in Peru were
suspended for an additional approximately three months in the third quarter of 2020 (collectively “COVID-19
PAN AMERICAN SILVER CORP.
10
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
related mine suspension”). The Timmins operation in Canada was not suspended in 2020, however the operating
capacities were reduced due to COVID-19 protocols.
Pan American has been supporting our local communities in many ways during the pandemic, including the
donation of food and hygiene supplies, contributing to a new vaccination clinic in Peru, facilitating access to health
care and education, and supporting employee mental health. We believe vaccination is critical to reducing the
spread of the COVID-19 virus. Accordingly, we committed our support to UNICEF Canada's GiveAVax campaign,
aimed at distributing two billion doses of COVID-19 vaccines to low and middle income countries by the end of
2021, as announced in our Q2 2021 MD&A.
Further disclosure on the impact from the COVID-19 pandemic can be found in the “Risks and Uncertainties”
section of this MD&A.
ENVIRONMENTAL, SOCIAL, AND GOVERNANCE
Safe production, the environmentally sound development and operation of assets, and fostering positive long-
term relationships with employees, shareholders, communities, and local governments are fundamental to our
strategy.
Our corporate environmental, social and governance (“ESG”) performance goals are set in collaboration with our
operations teams. On an annual basis, these teams conduct an extensive process of setting ESG performance goals
for their operation. We have also developed a set of Sustainability Performance Indicators (SPIs), to measure and
monitor performance on key social and environmental activities at our operations. Health and safety indicators are
also monitored. Our 2021 goals are described in the “Goals and Performance” section of the Company's 2020
Sustainability Report
the Company's website at
www.panamericansilver.com.
(the “2021 ESG Goals”), which
is available on
Through our membership in the Mining Association of Canada, we continue to implement the Towards Sustainable
Mining (“TSM”) performance system, a world class management standard designed to help mining companies
responsibly drive sustainability performance and manage risk. In 2021, we achieved Level A for all TSM protocols
at all operations, except for the Safety protocol at Huaron, San Vicente, La Colorada and Morococha where each
operation had a fatal accident, and the Tailings Management protocol at Morococha, Huaron and Timmins due to
management system improvements that are in progress to achieve Level A during 2022.
We will provide complete details of our performance against our 2021 ESG Goals in the Company's 2021
Sustainability Report, which will be available early in the second quarter of 2022.
Environment
In 2021, we had no significant environmental incidents at our operations. We’re currently quantifying and
assessing our 2021 annual ESG results versus our ESG 2021 goals, the results of which will be reported in the 2021
Sustainability Report. We currently expect to meet the majority of our annual environmental goals. The 2021 base
case is our projected 2021 water use, energy use, GHG emissions, and waste generation, as calculated using our
life of mine plans adjusted for annual production guidance. With regards to non-rock related waste compared to
the 2021 base case, we do not expect to meet our target due to unforeseen waste generated from projects and
pandemic-related activities.
Social
We did not meet our most important goal of zero fatalities, as Huaron, San Vicente, La Colorada and Morococha
mines each experienced one fatality in 2021. We also fell short on our lost time injury frequency (LTIF) and lost
time injury severity (LTIS) targets. The Company is committed to overcoming these safety performance shortfalls
and attaining its vision of ensuring the health and safety of all Pan American employees and contractors. The
Company will be advancing several additional safety initiatives to achieve this vision, which include: improving and
developing our leadership skills; expanding the knowledge and technical abilities of our workforce; and reviewing
the way that we identify, evaluate and manage risks in the workplace.
PAN AMERICAN SILVER CORP.
11
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
In 2021, we had no new social disputes at our operations, and we expect to meet the majority of our annual social
goals. Despite resolving all high-risk grievances by the end of 2021, one medium-risk grievance remained open in
Peru as of December 31, 2021. We continue to invest in social initiatives – education, health and economic
development projects – with the intention to provide lasting benefits to host communities. In 2021, we also
completed the first module of our "Building Respect Together" program, covering 100% of our workforce. This
program is aimed at fostering a more respectful, safe and inclusive work environment at Pan American.
Governance
In 2021, we increased the representation of women on our Board of Directors to 38%, which constitutes three
directors, one of whom is the Chair of the Board. Also, seven of our eight directors (88%), including the Chair of
the Board, are independent.
In 2021, 100% of our directors, officers, executives, and senior management were re-certified in accordance to Pan
American’s Anti-Corruption Policy and the Code of Ethical Conduct, confirming they are familiar with our policies,
acknowledging its contents, committing to fulfill them and to report any violation.
We also trained 480 critical employees from all jurisdictions in anti-corruption practices. The training course was
launched in late 2021 and the employees completed it during December 2021 and January 2022.
Our annual incentive plan provides incentive compensation directly related to achieving short-term objectives,
both corporate and operations specific, which are approved by the Board with 35% of the goals tied to ESG
metrics.
For more information on our Corporate Governance practices and performance, please review our Annual
Information Form and Management
the Company's website at
www.panamericansilver.com.
Information Circular available on
PAN AMERICAN SILVER CORP.
12
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
2022 OPERATING OUTLOOK
These estimates form part of our "forward-looking statements and information" and are subject to the cautionary
note associated with forward-looking statements and information at the end of this MD&A. We may revise
forecasts during the year to reflect actual results to date and those anticipated for the remainder of the year. The
2022 production, cash costs and AISC outlooks for each mine are further discussed in the "2022 Mine Operation
Forecasts" section of this MD&A.
The Company has initiated a strategic review of alternatives for the Morococha operation and, as such, has
excluded it from the 2022 operating outlook.
2022 Silver and Gold Production, Cash Costs and AISC Forecasts:
Silver Segment:
La Colorada
Huaron
San Vicente(2)
Manantial Espejo/COSE/Joaquin
Total
Gold Segment:
Dolores
Shahuindo
La Arena
Timmins
Total
Total Production
Silver Production
Gold Production
(million ounces)
(thousand ounces)
Cash Costs
($ per ounce)(1)
AISC
($ per ounce)(1)
6.85 - 7.10
3.70 - 3.95
2.35 - 2.50
3.00 - 3.50
15.90 - 17.05
2.85 - 3.15
0.21 - 0.26
0.03
0.01
3.10 - 3.45
19.00 - 20.50
2.8 - 3.0
0.5
0.2
20.0 - 25.0
23.5 - 28.7
157.5 - 179.0
136.0 - 150.8
98.0 - 103.5
135.0 - 143.0
526.5 - 576.3
550.0 - 605.0
8.00 - 9.00
1.80 - 4.50
15.30 - 16.55
21.00 - 24.00
10.70 - 12.20
715 - 840
910 - 995
990 - 1,070
1,340 - 1,415
970 - 1,070
n/a
12.40 - 13.40
7.80 - 9.90
18.70 - 19.70
22.00 - 24.80
14.50 - 16.00
925 - 1,070
1,170 - 1,275
1,380 - 1,475
1,615 - 1,695
1,240 - 1,365
n/a
(1) Cash costs and AISC are non-GAAP measures. Please refer to the “Alternative Performance (Non-GAAP) Measures” section of this
MD&A for further information on these measures. The cash costs and AISC forecasts assume average metal prices of $22.50/oz for
silver, $1,750/oz for gold, $3,000/tonne ($1.36/lb) for zinc, $2,200/tonne ($1.00/lb) for lead, and $9,200/tonne ($4.17/lb) for copper;
and average annual exchange rates relative to 1 USD of 20.00 for the Mexican peso ("MXN"), 4.10 for the Peruvian sol ("PEN"), 122.17
for the Argentine peso ("ARS"), 7.00 for the Bolivian boliviano ("BOB"), and $1.25 for the Canadian dollar ("CAD").
(2) San Vicente data represents Pan American’s 95.0% interest in the mine's production.
The Company continues to face challenges and uncertainties related to the COVID-19 pandemic that have
negatively impacted production and costs since the onset in early 2020. Pan American continues to monitor for
the prevalence of COVID-19 in and around our operations, assist in vaccination distributions and deploy
comprehensive protocols to protect the health and safety of our workforce and communities. Occasional
outbreaks of COVID-19 have been observed at all our operations and the protocols we have implemented increase
our operating costs, impact supply chain logistics and reduce workforce deployment, thereby decreasing
production rates to varying degrees. The Company's overall workforce vaccination rate was determined to be
more than 90% in early 2022, and we are expecting the impact of COVID-19 to gradually diminish in all operating
jurisdictions over the course of the year. However, as experienced in 2020 and 2021, there is a high degree of
uncertainty as to how the COVID-19 pandemic may impact operations. The impact of any restrictions could
improve or worsen relative to our assumptions, depending on how each jurisdiction manages potential outbreaks
of COVID-19, the supply and effectiveness of vaccines, and the impact from further mutations of the virus.
Silver production in 2022 is expected to be between 19.0 and 20.5 million ounces, which is between 1% lower and
7% higher than the 2021 consolidated production of 19.2 million ounces. Our 2022 Operating Outlook excludes
production from Morococha, and assumes a gradual easing of operating restrictions and absenteeism related to
PAN AMERICAN SILVER CORP.
13
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
COVID-19, the continued ramp-up in mining rates at La Colorada following the improvements to mine ventilation,
and higher expected silver grades from mine sequencing at Dolores.
Gold production in 2022 is expected to be between 550.0 thousand and 605.0 thousand ounces, which is
consistent with 2021 production levels. Production is anticipated to increase at Dolores and Shahuindo as a result
of improvements in irrigation efficiencies in the leach pads allowing for a higher ratio of ounces produced to
stacked. These improvements will be offset by lower production at La Arena and Manantial Espejo, largely from
lower grades due to mine sequencing.
Silver Segment cash costs for 2022 are forecast to be between $10.70 and $12.20 per ounce of silver sold, while
Silver Segment AISC are forecast to be between $14.50 and $16.00 per ounce of silver sold, which are consistent
with 2021 Silver Segment cash costs and AISC of $11.51 and $15.62, respectively. Cash costs and AISC are expected
to benefit from improved throughput and production rates at La Colorada and the anticipated easing of COVID-19
related restrictions during the year. However, these improvements are expected to be largely offset by:
inflationary pressures across the portfolio; the completion of mining activities at the high-grade COSE satellite
deposit at Manantial Espejo, resulting in lower gold by-product credits in 2022; higher development rates at San
Vicente; and the assumed placement of the Morococha operation into care and maintenance while strategic
alternatives are evaluated, recognizing that Morococha had positively impacted 2021 Silver Segment cash costs
and AISC by $0.30 and $0.34 per ounce, respectively.
Gold Segment cash costs for 2022 are forecast to be between $970 and $1,070 per payable ounce of gold, while
Gold Segment AISC are forecast to be between $1,240 and $1,365 per ounce, which is an increase compared to
2021 Gold Segment cash costs and AISC of $899 and $1,214, respectively. This anticipated increase in the Gold
Segment cash cost and AISC is primarily due to: (i) inflationary pressures across the portfolio; (ii) higher community
and environmental spending; (iii) higher waste mining rates at Shahuindo; and, (iv) increased depth and greater
requirements for ground support and backfill at Timmins.
2022 Consolidated Base Metal Production Forecasts:
Consolidated Production
35.0 - 40.0
15.0 - 17.0
Zinc
(kt)
Lead
(kt)
Copper
(kt)
5.5 - 6.5
Base metal production is expected to decrease for zinc, lead and copper in 2022 compared to 2021. The expected
decreases are largely driven by the assumed period of care and maintenance at Morococha, which more than
offsets the increased throughput and grades at La Colorada and Huaron.
PAN AMERICAN SILVER CORP.
14
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
2022 Capital Expenditure Forecasts
Pan American expects sustaining capital expenditure of between $200.0 million and $210.0 million in 2022, which
is consistent with 2021 expenditures of $207.6 million. In addition, Pan American expects to invest between $80.0
million and $95.0 million in project capital primarily to advance the Skarn project at La Colorada and for the
construction of a paste fill plant at the Bell Creek mine.
The following table details the forecast capital expenditures at the Company's operations and projects in 2022:
La Colorada
Huaron
San Vicente
Manantial Espejo
Dolores
Shahuindo
La Arena
Timmins
Sustaining Capital Total
La Colorada Projects
Timmins Projects
Project Capital Total
Total Capital
2022 Forecast Total
Capital
Investment
($ millions)
2022 Forecast Sustaining
Capital Expenditures
($ millions)
2022 Forecast Lease &
Other Payments(1)
($ millions)
28.0 - 29.0
16.0 - 19.0
7.0 - 8.0
2.0 - 3.0
33.0 - 34.0
37.0 - 38.0
39.0 - 40.0
38.0 - 39.0
28.0 - 29.0
14.0 - 17.0
7.0 - 8.0
0.0 - 1.0
30.5 - 31.5
23.5 - 24.5
35.5 - 36.5
37.5 - 38.5
200.0 - 210.0
176.0 - 186.0
68.0 - 81.0
12.0 - 14.0
80.0 - 95.0
280.0 - 305.0
0.0
2.0
0.0
2.0
2.5
13.5
3.5
0.5
24.0
(1)
Lease and other payments include debt repayments on construction loan facilities classified as "Debt" as per Note 17 of the Company's
2021 Financial Statements. These facilities are for constructions of pads and other infrastructure in which the Company only makes
cash payments upon completion of construction activities and on a scheduled basis.
The forecast 2022 sustaining capital is primarily related to the following activities:
•
La Colorada - an accelerated mine deepening project to advance development, supporting the transition
to more mechanized mining using long-hole stoping with greater primary level development spacings,
underground ventilation infrastructure improvements, mine equipment replacement and refurbishments,
tailing storage facility expansions and near-mine exploration.
• Huaron - the completion of a tailings storage facility expansion, mine deepening and infrastructure
•
investments, mine equipment replacements and lease payments, and near-mine exploration.
San Vicente - the completion of a tailings storage facility expansion, a mine deepening project, equipment
replacements, and near-mine exploration.
• Manantial Espejo - lease payments related to on-site electricity generation.
• Dolores - heap leach pad expansions, open pit mine waste pre-stripping, near mine exploration, and mine
•
•
•
infrastructure and plant upgrades.
Shahuindo - heap leach pad and waste rock storage facility expansions, including payments on
construction loans used to finance these investments, other lease payments, land purchases, and near-
mine exploration.
La Arena - open pit mine waste pre-stripping, waste rock storage facility preparation and leach pad
expansions, including payments on construction loans used to finance these investments, other lease
payments, and near-mine exploration.
Timmins - tailings storage facility expansions, mine equipment replacements and refurbishments, mill
upgrades, and near-mine exploration.
PAN AMERICAN SILVER CORP.
15
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
Forecast 2022 project capital consists of:
•
•
La Colorada - continued exploration and in-fill drilling on the Skarn project; advancing engineering work to
determine optimal project design given the growing size of the Skarn deposit; and site infrastructure
upgrades. The site infrastructure upgrades include commencing the development of a ramp in mid-2022
to eventually access the Skarn deposit, advancing construction of the concrete lined ventilation shaft, and
completing and commissioning the refrigeration plant. This infrastructure is expected to benefit both the
long-term development of the Skarn as well as the current vein-system operation.
Timmins - construction of a paste fill plant for Bell Creek to improve backfill quality and availability for
more effective ground support systems and to increase resource recovery, in addition to exploration
expenditures related to the Wetmore and Whitney projects.
2022 General and Administrative Expense Forecast
Annual corporate general and administrative expense is forecast to be between $42.0 million and $46.0 million in
2022, which includes share-based compensation but excludes greenfield exploration and associated corporate
overhead. The increase over the 2021 general and administrative expense of $34.9 million is related to increased
travel, higher ESG related spending, inflation, and headcount. Further, 2021 general and administrative expenses
were affected by reduced equity-based compensation due to 2021 share price performance which is not factored
into the 2022 guidance.
2022 Care and Maintenance Forecast
Forecast care and maintenance expense for 2022 is comprised of $21.0 million to $22.0 million for the Escobal
mine, $12.0 to $13.0 million for the Morococha mine (on an annual basis), and $3.0 million to $3.5 million for the
Navidad project.
2022 Exploration Expenditures Forecast
Exploration expenditures in 2022, including amounts that will be expensed and capitalized, are expected to
total between $42.0 million and $46.0 million, comprised of: (i) $12.0 million to $13.0 million for 95,000 metres of
near-mine brownfield exploration drilling targeting reserve replacement, which is included in the forecast for 2022
sustaining capital expenditures for each mine; (ii) $8.0 million to $9.0 million in regional, greenfield exploration
in Peru, Mexico and Canada and corporate overhead; and (iii) $22.0 million to $24.0 million for drilling the La
Colorada Skarn and adjacent vein systems, as well as exploring the Wetmore and Whitney projects adjacent to the
Bell Creek mine at Timmins, which is included in the forecast for 2022 project capital expenditures.
2022 Mine Operation Forecasts
Management's expectations for each mine’s 2022 operating performance, including production, cash costs, and
AISC, are provided below:
PAN AMERICAN SILVER CORP.
16
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
La Colorada operation
Silver production is forecast to be between 6.85 and 7.10 million ounces in 2022, which is 32% to 37% more than
the 5.17 million ounces produced in 2021. The expected increase is primarily the result of higher throughput rates
and silver grades. The increase in throughput rates is driven by: (i) continued ramp-up in mining rates following
improvements from the ventilation-driven disruptions in 2020 and much of 2021; (ii) continued progress on
ventilation enhancements during 2022; and, (iii) the expectation of diminishing COVID-19 related operating
restrictions throughout the year. As the mine deepens and advances east, we have encountered increased heat
and humidity loadings that affect the rock mass and ground support systems, impacting mine ventilation. Further
work to improve ventilation and underground conditions continues, including the commissioning of the
refrigeration plant expected in mid-2022 and the concrete-lined ventilation shaft project, which is anticipated to
be completed in mid-2023. Higher grades are expected to result from improved access to sulphide mineralization
in the better ventilated Candelaria East section of the mine. This will allow for mine sequencing into higher grade
areas. Zinc and lead production are also expected to benefit from access to Candelaria East, allowing increased
throughput and grades in the sulphide plant.
Cash costs per silver ounce in 2022 are forecast to be between $8.00 and $9.00. This is between $1.76 and $2.76
lower than the $10.76 recorded in 2021, and is the result of higher silver and base metal production from higher
throughput and grades. Increased production rates are expected to be partially offset by higher operating costs
from: (i) inflationary pressures; (ii) increased energy consumption from new ventilation and cooling infrastructure
in the mine, including increased booster fan capacity and the refrigeration plant that is expected to be periodically
operated as needed beginning in early 2022; and (iii) the continued conversion to long-hole stoping, which
requires accelerated development and ground support over the next two years but will result in improved
efficiencies, throughput rates, and costs in the medium to long term.
AISC in 2022 is forecast to be between $12.40 and $13.40 per silver ounce, which is between $4.11 and $5.11
lower than the $17.51 recorded in 2021. This is driven by the same factors affecting cash costs in addition to lower
sustaining capital per ounce in 2022, as higher sustaining capital is offset by higher forecasted silver production.
Huaron operation
Silver production is forecast to be between 3.70 and 3.95 million ounces in 2022, which is 5% to 12% higher than
the 3.51 million ounces produced in 2021. The forecast reflects higher anticipated throughput, as the operating
restrictions related to COVID-19 are expected to diminish during the year, as well as increased silver grades from
mine sequencing. The higher throughput is similarly expected to result in an increase in base metal production,
with increasing zinc and lead grades and decreasing copper grades expected due to mine sequencing.
Cash costs per silver ounce in 2022 are forecast to be between $1.80 and $4.50, which is consistent with 2021 cash
costs of $3.95 per ounce. This reflects higher throughput and grade driven production increases across all metals,
except copper, offset by higher operating costs and increased treatment and refining charges.
AISC for 2022 is forecast to be between $7.80 and $9.90 per silver ounce, which is $0.01 to $2.11 higher than the
$7.79 per ounce recorded in 2021. The anticipated increase in AISC largely reflects higher sustaining capital per
ounce, in part due to the deferral of approximately $3.0 million in sustaining capital from 2021 to 2022.
San Vicente operation
Silver production is forecast to be between 2.35 and 2.50 million ounces in 2022, which is 2% to 8% lower than
2021 production of 2.55 million ounces. The expected decrease reflects lower anticipated throughput due to
increased mine development rates, partially offset by a modest increase in mined grades from improved dilution
controls by deploying additional narrow vein mining techniques to the narrowing reserve base. Base metal
production is expected to be lower for zinc and copper and higher for lead. The lower copper and higher lead
production is driven by optimizing the current commercial contract conditions for the bulk concentrate, whereas
zinc is expected to be lower due to lower throughput rates.
PAN AMERICAN SILVER CORP.
17
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
Cash costs per silver ounce in 2022 are forecast to be between $15.30 and $16.55, which is between $0.32 and
$1.57 higher than the 2021 cash costs of $14.98 per ounce. The expected increase in 2022 costs largely reflects
higher mine development rates to address the narrowing reserve vein widths, and lower silver production levels;
which are only partially offset by improved concentrate treatment terms and lower royalty expense, largely from
lower metal price assumptions.
AISC for 2022 is forecast to be between $18.70 and $19.70 per silver ounce; a $1.45 to $2.45 increase from the
$17.25 per ounce recorded in 2021. The expected increase is due to the same factors affecting year-over-year cash
costs as well as higher sustaining capital, which is partly due to the deferral of certain projects from 2021 into
2022.
Manantial Espejo operation
Silver production is forecast to be between 3.00 and 3.50 million ounces in 2022, which is consistent with the 3.24
million ounces produced in 2021. Gold production in 2022 is forecast to be between 20.0 and 25.0 thousand
ounces, which is between 26% and 41% lower than the 33.8 thousand ounces produced in 2021. The expected
decrease in gold production reflects a lower contribution from COSE, as the remaining reserves are expected to be
lower grade and largely depleted by mid-2022. Further, the Company's low-grade stockpiles used to complement
the underground ores mined is expected to be depleted by the end of 2022.
Cash costs per silver ounce in 2022 are forecast to be between $21.00 and $24.00; a $2.63 to $5.63 increase from
the 2021 cash costs of $18.37. The expected increase is primarily the result of lower gold grades processed due to
the completion of mining activities in the high-grade COSE deposit by mid-year, and a particularly challenging local
inflationary environment.
AISC for 2022 is forecast to be between $22.00 and $24.80 per silver ounce; a $1.33 to $4.13 increase from the
$20.67 per ounce reported in 2021. This is the result of the same factors affecting cash costs, partially offset by
lower sustaining capital per ounce.
Dolores operation
Gold production in 2022 is forecast to be between 157.5 and 179.0 thousand ounces, which is between 2% lower
and 12% higher than the 160.1 thousand ounces produced in 2021. Despite an expected 7% reduction in gold
grades as a result of open pit mine sequencing, mid-point gold production guidance is expected to be above 2021
levels. This is because of a higher ratio of recovered ounces to stacked ounces from adjustments in leach
sequencing to compensate for the delay in the construction of the Phase 1 south leach pad, which was completed
in late 2021.
Silver production is forecast to be between 2.85 and 3.15 million ounces in 2022. This is 27% to 41% higher than
the 2.24 million ounces produced in 2021, which is the result of open pit mine sequencing into higher silver
grades.
Cash costs per gold ounce in 2022 are forecast to be between $715 and $840 per ounce, which is between $34
lower and $91 higher than the $749 per gold ounce reported in 2021. Cash costs per ounce are generally expected
to increase from inflationary pressures on direct operating costs and lower expected gold grades stacked, which
are expected to be partially offset by higher silver by-product credits.
AISC in 2022 is forecast to be between $925 and $1,070 per gold ounce, which is between $17 and $162 lower
than the $1,087 per gold ounce recorded in 2021. The expected decrease is due to 2021 AISC being impacted by: a
non-recurring inventory net realizable value ("NRV") write-down of $9.7 million; and lower sustaining capital per
ounce, largely from reduced leach pad investments needed in 2022.
Shahuindo operation
Gold production is forecast to be between 136.0 and 150.8 thousand ounces in 2022, which amounts to an
increase of between 1% and 13% from the 134.0 thousand ounces produced in 2021. The expected increase
PAN AMERICAN SILVER CORP.
18
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
reflects a higher ratio of recovered ounces to stacked ounces due to the expectation of obtaining adequate coarse
ore for blending in 2022, which will allow for normalized irrigation rates.
Cash costs per gold ounce in 2022 are forecast to be between $910 and $995, which is $130 to $215 higher than
the $780 per ounce recorded in 2021. The expected increase is due to: (i) a 23% increase in the open pit waste
stripping ratio; (ii) inflationary pressures; (iii) higher community and environmental expenditures; and, (iv) an
increase in leach reagents needed to bring extraction rates more in line with results demonstrated in laboratory
column leach tests.
AISC in 2022 is forecast to be between $1,170 and $1,275 per gold ounce, which is $170 to $275 higher than the
2021 AISC of $1,000 per ounce. The increased amount reflects the increase in cash costs, as well as higher
sustaining capital from increased loan re-payments relating to infrastructure investments. In 2021, the Company
began using construction loan facilities to finance long-term investments in leach pad and waste storage facilities,
recognizing the spending in these investments in the calculation of AISC as the payments on these loans are made.
La Arena operation
Gold production is forecast to be between 98.0 and 103.5 thousand ounces in 2022; a reduction of 8% to 13%
from the 112.4 thousand ounces produced in 2021. This is primarily driven by mine sequencing and longer mine
haul distances resulting in an expected reduction in mined ore tonnes and grades.
Cash costs per gold ounce in 2022 are forecast to be between $990 and $1,070, which is $229 to $309 higher than
2021 cash costs of $761 per ounce. The increase is a result of: (i) lower gold production; (ii) longer mine haul
distances; (iii) inflationary pressures; (iv) increased environmental and community spending; and, (v) a
normalization in expensed costs, as 2021 cash costs benefited from costs inventoried at a historically lower strip
ratio. The higher strip ratio in 2021 and 2022 is due to the increase in mine life from exploration success, albeit at
a higher strip ratio and lower grades than were experienced during 2019 and 2020.
AISC for 2022 is forecast to be between $1,380 and $1,475 per gold ounce, which is between $198 and $293
higher than the $1,182 per ounce reported in 2021. This is largely due to the increase in cash costs previously
mentioned.
Timmins operation
Gold production is forecast to be between 135.0 and 143.0 thousand ounces in 2022; a 1% to 7% increase from
the 133.8 thousand ounces produced in 2021. This primarily reflects an increase in anticipated throughput from
higher mining rates in Bell Creek due to an expected reduction in COVID-19 related absenteeism, combined with
improved stope cycles through accelerated and optimized cemented rock fill ("CRF") placement. The Company is
evaluating the construction of a paste fill plant at the Bell Creek mine in 2022 to increase future resource recovery
and eliminate the production rate bottleneck.
Cash costs per gold ounce in 2022 are forecast to be between $1,340 and $1,415, which is $21 to $96 higher than
the 2021 cash costs of $1,319. The expected increase reflects inflationary pressures, increased ground support and
CRF backfill, mine deepening, and the expectation of a stronger Canadian dollar currency exchange rate, partially
offset by higher gold production.
AISC for 2022 is forecast to be between $1,615 and $1,695 per gold ounce, which is $4 lower to $76 higher than
the 2021 AISC of $1,619 per ounce. This is the result of an expected increase in cash costs, offset by the higher
gold production driving lower sustaining capital on a per ounce basis.
PAN AMERICAN SILVER CORP.
19
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
2021 OPERATING PERFORMANCE
Consolidated 2021 Operating Results
Silver and Gold Production
The following table provides silver and gold production at each of Pan American’s operations for the three and
twelve month periods ended December 31, 2021 and 2020. Each operation’s production variances are further
discussed in the “Individual Mine Performance” section of this MD&A.
Silver Production
(ounces ‘000s)
Gold Production
(ounces ‘000s)
Three months ended
December 31,
Year ended
December 31,
Three months ended
December 31,
Year ended
December 31,
2021
2020
2021
2020
2021
2020
2021
2020
La Colorada
Huaron
Morococha(1)
San Vicente(2)
Manantial Espejo
Dolores
Shahuindo
La Arena
Timmins
Total (3)
Total Payable Production(4)
1,584
1,186
838
540
641
1,090
507
61
11
4
5,276
4,937
5,171
3,513
2,175
2,548
3,236
2,240
235
40
16
5,025
2,148
1,173
2,320
2,547
3,779
268
33
18
0.8
0.3
0.4
0.1
11.3
40.1
37.0
32.6
34.2
892
527
663
742
764
83
11
4
4,872
19,174
4,588
17,858
17,312
16,392
156.7
155.9
0.8
0.3
0.2
0.1
8.0
30.5
33.6
41.4
38.1
152.9
152.2
2.7
1.1
1.1
0.3
33.8
160.1
134.0
112.4
133.8
579.3
576.4
3.5
0.5
0.6
0.3
23.4
98.0
142.4
105.4
148.4
522.4
520.5
(1) Morococha data represents Pan American's 92.3% interest in the mine's production.
(2) San Vicente data represents Pan American's 95.0% interest in the mine's production.
(3) Totals may not add due to rounding.
(4) Payable production reflects sellable metal after deducting commercial contract metal payabilities.
Silver Production
Consolidated silver production in 2021 of 19.17 million ounces was 11% higher than the 17.31 million ounces
produced in 2020. Production at all Silver Segment operations increased year-over-year, as 2021 did not
experience the COVID-19 related mine suspensions that occurred in 2020, and production increased at La Colorada
from improved ventilation conditions in the second half of 2021. These increases were partially offset by
decreased silver production at Dolores in 2021 due to expected mine sequencing and delayed leach pad
construction.
Consolidated silver production in Q4 2021 of 5.28 million ounces was 8% higher than the 4.87 million ounces
produced in Q4 2020. This was primarily due to increased production at La Colorada and Manantial Espejo,
partially offset by decreased silver production at Dolores from mine sequencing and delayed leach pad
construction. The increase at La Colorada was both throughput and grade driven, with a ramp-up in production
following ventilation improvements. At Manantial Espejo, production increased relative to Q4 2020, when
operations were impacted by a temporary COVID-19 related mine suspension.
Gold Production
Consolidated gold production in 2021 of 579.3 thousand ounces was 11% above the 522.4 thousand ounces
produced in 2020. The increase was driven by higher throughput at all mines, except Timmins, and especially at
Dolores from higher gold grades due to mine sequencing, as expected. See the "2021 Highlights" and "Individual
Mine Performance" sections of this MD&A for further detail.
PAN AMERICAN SILVER CORP.
20
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
Consolidated gold production in Q4 2021 of 156.7 thousand ounces was 3% higher than the 152.9 thousand
ounces produced in Q4 2020. This was largely due to completing a delayed leach pad expansion at Dolores, higher
stacking rates at Shahuindo, and higher production at Manantial Espejo. These increases offset lower production
at La Arena due to mine sequencing, and at Timmins from lower throughput.
Each operation’s production variances are further discussed in the “Individual Mine Performance” section of this
MD&A.
Base Metal Production
The following table provides the Company’s base metal production for the three-month and twelve-month periods
ended December 31, 2021 and 2020:
Zinc - kt
Lead - kt
Copper - kt
Zinc - kt
Lead - kt
Copper - kt
Base Metal Production
Three months ended
December 31,
Year ended
December 31,
2021
2020
2021
2020
11.2
4.1
2.4
14.2
5.4
2.3
49.4
18.1
8.7
40.2
15.7
5.2
Base Metal Payable Production
Three months ended
December 31,
Year ended
December 31,
2021
2020
2021
2020
9.4
3.9
2.1
11.9
5.0
1.9
41.3
17.0
7.4
33.7
14.8
4.4
Zinc, lead and copper production were 23%, 15% and 68% higher in 2021 relative to 2020, respectively. The
increases were largely due to increased throughput, as 2021 did not experience the COVID-19 related mine
suspensions that occurred in 2020, which more than offset mine sequencing into lower zinc and lead grades at La
Colorada, Huaron, and Morococha.
Each operation’s by-product production variances are further discussed in the “Individual Mine Performance”
section of this MD&A.
Per Ounce Measures
The Company's operations have been divided into Silver and Gold Segments for the purposes of reporting cash
costs and AISC, as set out in the table below. The quantification of both the current cash costs and AISC measures
is described in detail, and where appropriate reconciled to the 2021 Financial Statements, in the "Alternative
Performance (Non-GAAP) Measures" section of this MD&A.
PAN AMERICAN SILVER CORP.
21
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
The following table reflects the cash costs and AISC net of by-product credits at each of Pan American’s operations
for the three and twelve months ended December 31, 2021, as compared to the same periods in 2020:
Cash Costs(1)
($ per ounce)
AISC(1)
($ per ounce)
Three months
ended
December 31,
Year ended
December 31,
Three months
ended
December 31,
Year ended
December 31,
2021
2020
2021
2020
2021
2020
2021
2020
11.64
7.07
10.76
6.99
15.93
11.78
17.51
10.80
(9.79) —
(2.48) —
(2.17) —
—
3.49
4.57
10.87
12.50
9.74
931
832
819
2.03
11.85
17.67
18.72
6.15
—
619
556
3.95
9.63
14.98
18.37
11.51
749
780
761
3.77
11.40
15.54
15.68
7.05
—
588
721
1,298
1,126
1,319
1,061
963
763
899
797
3.35
18.29
20.89
19.24
10.37
—
842
873
1,355
1,023
7.79
13.49
17.25
20.67
15.62
1,087
1,000
1,182
1,619
1,214
6.17
6.53
18.38
17.94
15.80
11.38
—
750
1,109
1,213
1,011
9.63
7.98
14.59
14.35
13.57
1,959
1,091
1,197
1,614
1,461
7.87
(7.28)
1.44
(3.29)
3.60
(5.85)
0.94
(2.35)
La Colorada
Dolores(2)
Huaron
Morococha
San Vicente
Manantial Espejo
Silver Segment Consolidated(2)
Dolores(2)
Shahuindo
La Arena
Timmins
Gold Segment Consolidated(2)
Consolidated AISC per silver ounce sold
Consolidated AISC before NRV inventory
adjustments
(1) Cash costs and AISC are non-GAAP measures. Please refer to the “Alternative Performance (Non-GAAP) Measures” section of this MD&A
for a detailed description of these measures and, where appropriate, a reconciliation of the measure to the 2021 Financial Statements.
(2) Due to the expected mine sequencing into a higher gold zone of the Dolores mine, the Company determined that the mine is better
identified as a Gold Segment operation from 2021 onwards. Thus, as of Q1 2021, cash costs and AISC at Dolores are reported on a per
ounce of gold basis and are included as part of the Gold Segment cash costs and AISC calculations. Dolores cash costs and AISC in the
2020 comparable period were reported on a per ounce of silver basis and included as part of the Silver Segment cash costs and AISC
calculations, as previously reported. For comparison purposes, had Dolores been reported in the Gold Segment in 2020, Gold Segment
cash costs and AISC for Q4 2020 would have been $759 and $1,018, respectively, and for the year ended December 31, 2020 would have
been $802 and $1,046, respectively. Silver Segment cash costs and AISC for Q4 2020 would have been $10.33 and $13.65, respectively
and for 2020 would have been $10.05 and $13.02, respectively.
Cash Costs
Silver Segment cash costs in 2021 were $11.51 per ounce, a $4.46 increase from the $7.05 per ounce reported in
2020. The increase was driven primarily from:
i.
a $3.00 per ounce increase from reclassifying Dolores to the Gold Segment;
ii. a $1.60 per ounce increase from higher costs at La Colorada; and,
iii. a $0.72 per ounce increase from cost escalations at Manantial Espejo.
These increases were partially offset by an $0.87 per ounce decrease from higher by-product credits at Huaron
and Morococha.
All operations experienced higher costs from COVID-19 operating protocols and inflation-driven wage, energy and
consumable cost increases ("COVID and Inflationary Costs"). Each operation's variances are further discussed in
the “Individual Mine Performance” section of this MD&A.
PAN AMERICAN SILVER CORP.
22
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
Gold Segment cash costs in 2021 were $899 per ounce, a $102 increase from the $797 per ounce reported in 2020.
The increase was largely the result of increased costs per ounce at Shahuindo and Timmins, which were driven by
lower gold grades mined and higher operating costs, as further described in the "Individual Mine Performance"
section of this MD&A. This increase was partially offset by reclassifying Dolores to the Gold Segment, which
benefited Gold Segment cash costs by $62 per ounce.
AISC
Silver Segment AISC in 2021 was $15.62 per ounce, a $4.24 increase from the $11.38 per ounce reported in 2020.
This was due to the same factors that increased Silver Segment cash costs. A decrease in sustaining capital per
ounce was offset by the impact of inventory NRV adjustments, which reduced costs by $16.2 million in 2020 but
only by $1.0 million in 2021.
Gold Segment AISC in 2021 was $1,214 per ounce, a $203 increase from the $1,011 per ounce reported in 2020.
The increase was primarily due to the same factors that increased Gold Segment cash costs, in addition to higher
sustaining capital per ounce, largely the result of the deferral of certain projects from 2020 into 2021 due to
COVID-19.
Consolidated silver basis AISC for 2021 was $1.44 per ounce, a $4.73 increase from the negative $3.29 per ounce
reported in 2020. The increase was primarily from higher operating costs and capital spending per ounce, partially
offset by higher by-product prices and quantities sold.
PAN AMERICAN SILVER CORP.
23
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
2021 Operating Results versus 2021 Forecast
The following table sets out the actual 2021 annual metal production, cash costs, AISC and capital expenditures
compared to those forecast by management throughout the year. The 2021 original forecast was provided in our
Annual 2020 MD&A dated February 17, 2021 (the "2021 Original Forecast"). Management subsequently revised
the forecasts in its Q1 2021 MD&A and Q3 2021 MD&A (the "2021 May Revised Forecast" and "2021 November
Revised Forecast", respectively). In the table below "NC" denotes no changes to the previously provided forecast.
Silver Production - Moz
Gold Production - koz
Zinc Production - kt
Lead Production - kt
Copper Production - kt
Silver Segment Cash Costs ($ per ounce)
Gold Segment Cash Costs ($ per ounce)
Silver Segment AISC ($ per ounce)
Gold Segment AISC ($ per ounce)
Consolidated Silver Basis AISC ($ per ounce)
Sustaining Capital ($ millions)
Project Capital ($ millions)
2021 Original
Forecast
22.50 - 24.00
605.0 - 655.1
60.7 - 64.5
23.4 - 25.7
7.1 - 8.0
8.50 - 10.00
825 - 925
12.50 - 14.00
1,135 - 1,250
(2.80) - 2.70
245.0 - 260.0
55.0 - 60.0
2021 May Revised
Forecast
2021 November
Revised Forecast
2021 Actual
20.50 - 22.00
NC
55.5 - 60.5
21.0 - 23.5
8.5 - 9.0
9.60 -11.60
NC
19.00 - 20.00
560.0 - 588.0
49.8 - 53.6
18.5 - 20.3
8.9 - 9.2
11.60 - 12.50
NC
14.25 - 15.75
15.75 - 16.75
NC
NC
230.0 - 245.0
NC
NC
(4.50) - 0.00
217.5 - 226.0
43.5 - 45.0
19.2
579.3
49.4
18.1
8.7
11.51
899
15.62
1,214
1.44
207.6
46.5
Silver and Gold Production versus the 2021 Original Forecast
Silver Segment:
La Colorada
Huaron
Morococha(2)
San Vicente(2)
Manantial Espejo
Silver Segment Total(3)
Gold Segment:
Dolores
Shahuindo
La Arena
Timmins
Gold Segment Total(3)
Total(3)
2021 Silver Production
(million ounces)
2021 Gold Production
(thousand ounces)
Forecast (1)
Actual
Forecast (1)
Actual
7.16 - 7.44
3.61 - 3.86
2.25 - 2.42
3.23 - 3.37
3.18 - 3.46
5.17
3.51
2.18
2.55
3.24
19.43 - 20.55
16.65
2.73 - 2.97
0.29 - 0.43
0.03
0.02
3.07 - 3.45
2.24
0.23
0.04
0.02
2.53
22.50 - 24.00
19.17
4.0 - 4.2
0.5
0.8 - 0.9
0.5
33.2 - 35.3
39.0 - 41.4
160.8 - 179.3
153.9 - 165.0
102.9 - 110.9
148.4 - 158.5
566.0 - 613.7
605.0 - 655.1
2.7
1.1
1.1
0.3
33.8
39.0
160.1
134.0
112.4
133.8
540.3
579.3
(1) Forecast as per the 2021 Original Forecast.
(2) Production figures are only for Pan American’s ownership share of Morococha (92.3%), and San Vicente (95.0%).
(3) Totals may not add due to rounding.
Silver Production
Consolidated 2021 silver production of 19.2 million ounces was affected by the ventilation constraints at La
Colorada during the first half of the year, increased mining dilution at San Vicente, delays in leach pad construction
at Dolores, and generally lower than anticipated workforce deployments at all mines due to COVID-19 operating
protocols.
PAN AMERICAN SILVER CORP.
24
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
Gold Production
Consolidated 2021 gold production of 579.3 thousand ounces was affected by the COVID-19 operating protocols
impacting workforce deployments, a delay in completing leach pad construction at Dolores, reduced leach
irrigation and lower than expected grades at Shahuindo, and geotechnical challenges at Bell Creek.
Base Metal Production versus the 2021 Original Forecast
Consolidated
2021 Zinc Production
(thousand tonnes)
2021 Lead Production
(thousand tonnes)
2021 Copper Production
(thousand tonnes)
Forecast (1)
60.7 - 64.5
Actual
49.4
Forecast (1)
23.4 - 25.7
Actual
18.1
Forecast (1)
7.1 - 8.0
Actual
8.7
(1) Forecast as per the 2021 Original Forecast.
2021 zinc and lead production were below the low end of the 2021 Original Forecast, whereas copper production
was above the high end of the 2021 Original Forecast, primarily due to mine sequence timing at Huaron and
Morococha. Zinc and lead production were also affected by ventilation constraints at La Colorada.
Cash Costs and AISC versus the 2021 Original Forecast
The following table summarizes 2021 cash costs and AISC compared to the 2021 Original Forecast on a per ounce
basis, net of by-product credits.
Silver Segment:
La Colorada
Huaron
Morococha
San Vicente
Manantial Espejo
Total
Gold Segment:
Dolores
Shahuindo
La Arena
Timmins
Total
Consolidated Silver Basis
2021 Cash Costs(1)
($ per ounce)
2021 AISC(1)
($ per ounce)
Forecast (2)
Actual
Forecast (2)
Actual
4.00 - 5.00
4.80 - 7.90
10.00 - 14.20
12.30 - 13.50
16.30 - 17.30
8.50 - 10.00
665 - 820
715 - 795
870 - 940
1,085 - 1,160
825 - 925
n/a
10.76
3.95
9.63
14.98
18.37
11.51
749
780
761
1,319
899
n/a
8.50 - 9.50
9.50 - 12.50
13.50 - 17.50
16.75 - 17.75
19.00 - 20.00
12.50 - 14.00
850 - 1,000
1,125 - 1,250
1,275 - 1,400
1,375 - 1,450
1,135 - 1,250
(2.80) - 2.70
17.51
7.79
13.49
17.25
20.67
15.62
1,087
1,000
1,182
1,619
1,214
1.44
(1) Cash costs and AISC are non-GAAP measures. Please refer to the “Alternative Performance (Non-GAAP) Measures” section of this
MD&A for a detailed description of these calculations and a reconciliation of these measures to the 2021 Financial Statements. The
cash costs and AISC forecasts assumed realized prices and exchange rates of $23.50/oz for silver, $1,825/oz for gold, $2,700/tonne
($1.22/lb) for zinc, $1,900/tonne ($0.86/lb) for lead, and $7,400/tonne ($3.36/lb) for copper; and average exchange rates relative to 1
USD of 20.00 for the MXN, 3.50 for the PEN, 96.67 for the ARS, 7.00 for the BOB, and 1.30 for the CAD.
(2) Forecast as per the 2021 Original Forecast.
Cash Costs
All operations were affected by higher than expected COVID and Inflationary Costs, while underground mines
were also particularly affected by reduced workforce deployments which impacted production and unit cost rates.
Silver Segment cash costs of $11.51 per ounce were also affected by production shortfalls at La Colorada, San
Vicente and Manantial Espejo.
Gold Segment cash costs of $899 per ounce were within the 2021 Original Forecast range, reflecting higher
production at La Arena and the decision to capitalize a portion of the waste mining as deferred stripping at
PAN AMERICAN SILVER CORP.
25
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
Dolores, which was not originally contemplated and reduced cash costs. These factors offset increases from the
geotechnical issues encountered at Timmins, and lower production at Shahuindo.
AISC
Silver Segment AISC of $15.62 per silver ounce was affected by the same factors driving cash costs.
Gold Segment AISC of $1,214 per gold ounce was within the 2021 Original Forecast range, as higher AISC at
Dolores and Timmins were offset by lower AISC at Shahuindo and La Arena, due to the same factors affecting cash
costs.
Consolidated AISC, calculated on a silver ounce basis, of $1.44 was within the 2021 Original Forecast range.
Capital Expenditures versus the 2021 Original Forecast
The following table summarizes the 2021 capital expenditures compared to the 2021 Original Forecast.
La Colorada
Huaron
Morococha
San Vicente
Manantial Espejo
Dolores
Shahuindo
La Arena
Timmins
Sustaining Capital Sub-total
La Colorada Skarn
Timmins
Other
Project Capital Sub-total
Total Capital
5.3
7.6
7.0
26.1
10.9
Actual
2021 Capital Expenditure ($ millions)
Forecast (1)
27.0 - 29.5
14.5 - 15.5
6.0 - 7.0
13.5 - 14.5
6.5 - 7.5
26.0 - 30.0
66.5 - 68.0
44.5 - 45.0
40.5 - 43.0
245.0 - 260.0
50.0 - 55.0
5.0
-
55.0 - 60.0
300.0 - 320.0
207.6
254.1
46.5
28.8
40.6
45.5
39.5
35.9
6.4
0.6
(1) Forecast as per the 2021 Original Forecast.
Sustaining capital expenditures were $37.4 million less than the low end of the 2021 Original Forecast range,
driven primarily by COVID-19 related delays in project execution and the timing of cash outflows, which were
partially offset by unplanned waste mining capitalization at Dolores. At Shahuindo, the Company entered into
construction loans to finance leach pads and other site infrastructure, which reduced cash outflows during the
year relative to the 2021 Original Forecast. Project capital in 2021 was also below the 2021 Original Forecast
range, primarily due to COVID-19 operating protocols.
PAN AMERICAN SILVER CORP.
26
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
Individual Mine Operation Performance
An analysis of performance at each operation in 2021 compared with 2020 follows. The project capital amounts
invested in 2021 are further discussed in the "Project Development Update" section of this MD&A.
La Colorada operation
Tonnes milled - kt
Average silver grade – grams per tonne
Average zinc grade - %
Average lead grade - %
Production:
Silver – koz
Gold – koz
Zinc – kt
Lead – kt
Payable Production:
Silver – koz
Gold – koz
Zinc – kt
Lead – kt
Cash costs - $ per ounce(1)
Sustaining capital - $ thousands(2)
Care and maintenances costs - $ thousands
AISC - $ per ounce(1)
Payable silver sold - koz
Three months ended
December 31
Year ended
December 31
2021
159.9
343
1.71
0.95
1,584
0.79
2.26
1.22
1,510
0.65
1.93
1.13
11.64
6,410
—
15.93
1,669
2020
139.6
295
2.62
1.29
1,186
0.77
3.13
1.50
1,116
0.64
2.66
1.41
7.07
5,496
—
11.78
1,291
2021
572.5
312
2.05
1.09
5,171
2.71
9.98
5.19
4,902
2.21
8.49
4.83
10.76
26,069
—
17.51
4,321
2020
559.1
308
2.80
1.39
5,025
3.47
13.58
6.63
4,700
2.98
11.55
6.20
6.99
18,417
7,973
10.80
5,254
(1) Cash costs and AISC are non-GAAP measures. Please refer to the “Alternative Performance (Non-GAAP) Measures” section of this
MD&A for a detailed reconciliation of these measures to cost of sales.
(2) Sustaining capital expenditures exclude $16.5 million and $39.5 million investing activity cash outflows for Q4 2021 and full year 2021,
respectively (Q4 2020 and full year 2020: $1.9 million and $11.0 million, respectively) related to investment capital incurred on the La
Colorada projects, as disclosed in the “Project Development Update” section of this MD&A.
2021 versus 2020
Production:
•
•
Silver: 3% increase driven by higher throughput and grades. The improvement in throughput rates was
largely driven by 2020 being impacted by the COVID-19-related mine suspension. Restoration of critical
ventilation infrastructure also allowed mining rates and grades to ramp-up in the second half of 2021.
By-products: 26% and 22% decrease in zinc and lead, respectively, as a result of restricted access to the
sulphide ore in the Candelaria East zone of the mine. This led to lower base metal grades and a higher
proportion of oxide ore in total throughput following efforts to mitigate the unexpected 2019 and 2020
ventilation infrastructure failures.
Cash Costs: were $3.77 higher than in 2020, reflecting an increase in operating costs per ounce due to: (i)
investments in advancing a transition to a more mechanized long-hole stoping mining method, including
accelerating underground advances, which will eventually enable primary level development spacing to increase;
(ii) higher energy consumption from the installation of more ventilation fan capacity to address the higher heat
and humidity conditions being encountered at depth and to the east; (iii) higher spending on ground support,
including an increase in shotcrete, to address poor quality rock; and (iv) increased COVID and Inflationary Costs.
PAN AMERICAN SILVER CORP.
27
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
Sustaining Capital: increased spending in 2021 primarily related to restoring and upgrading ventilation
infrastructure, mine equipment replacement and rehabilitation, underground infrastructure, tailings storage
facility expansion, lease payments for equipment and offices, and near-mine exploration activities.
AISC: was $6.71 higher than in 2020, as a result of the factors affecting year-over-year cash costs, in addition to
higher sustaining capital per ounce due to the higher investments in ventilation infrastructure.
Huaron operation
Tonnes milled - kt
Average silver grade – grams per tonne
Average zinc grade - %
Average lead grade - %
Average copper grade - %
Production:
Silver – koz
Gold – koz
Zinc – kt
Lead – kt
Copper – kt
Payable Production:
Silver – koz
Gold – koz
Zinc – kt
Lead – kt
Copper – kt
Cash costs - $ per ounce(1)
Sustaining capital - $ thousands
Care and maintenances costs - $ thousands
AISC - $ per ounce(1)
Payable silver sold – koz
Three months ended
December 31
Year ended
December 31
2021
233.1
137
1.79
1.02
0.86
838
0.27
3.06
1.63
1.55
688
0.03
2.51
1.53
1.35
3.49
3,991
—
9.63
672
2020
230.5
143
2.58
1.32
0.94
892
0.29
4.69
2.33
1.65
796
0.07
3.88
2.19
1.39
2.03
776
(11)
3.35
697
2021
940.3
141
2.14
1.11
0.82
3,513
1.09
15.37
7.48
5.85
2,930
0.13
12.63
7.02
4.94
3.95
10,897
—
7.79
2,976
2020
555.6
144
2.58
1.32
0.88
2,148
0.53
11.21
5.59
3.65
1,870
0.08
9.27
5.24
2.98
3.77
4,500
20,840
6.53
1,843
(1) Cash costs and AISC are non-GAAP measures. Please refer to the “Alternative Performance (Non-GAAP) Measures” section of this
MD&A for a detailed reconciliation of these measures to cost of sales.
2021 versus 2020
Production:
•
•
Silver: 64% higher from increased throughput relative to the prior year, given the COVID-19 related mine
suspensions in 2020.
By-products: zinc, lead and copper production increased 37%, 34% and 60%, respectively, primarily due to
the higher throughput, partially offset by lower base metal grades due to mine sequencing.
Cash Costs: $0.18 per ounce higher. Higher operating costs per ounce from COVID and Inflationary Costs and the
deferral of mine development and other expenditures from 2020 into 2021 due to the COVID-19 related mine
suspension in 2020, were largely offset by lower concentrate treatment charges from improved market conditions
and higher by-product credits per ounce from higher base metal prices.
PAN AMERICAN SILVER CORP.
28
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
Sustaining Capital: higher spending in 2021 was primarily related to advancing certain projects that had been
delayed or deferred in 2020 due to COVID-19, as well as spending on equipment leases, near mine exploration,
equipment replacements and refurbishments, and a tailings storage facility expansion.
AISC: an increase of $1.26 per ounce due to the same factors affecting year-over-year cash costs and higher
sustaining capital investments.
Morococha operation(1)
Three months ended
December 31
Year ended
December 31
Tonnes milled – kt
Average silver grade – grams per tonne
Average zinc grade - %
Average lead grade - %
Average copper grade - %
Production:
Silver – koz
Gold – koz
Zinc – kt
Lead – kt
Copper – kt
Payable Production:
Silver – koz
Gold – koz
Zinc – kt
Lead – kt
Copper – kt
Cash costs - $ per ounce(2)
Sustaining capital - $ thousands(3)
Care and maintenances costs - $ thousands
AISC - $ per ounce(2)
Payable silver sold (100%) - koz
2021
158.9
118
2.97
1.02
0.54
540
0.35
3.93
1.27
0.67
469
0.18
3.31
1.20
0.63
4.57
1,184
—
7.98
491
2020
141.4
129
3.30
1.31
0.47
527
0.19
4.08
1.51
0.43
457
0.08
3.42
1.43
0.41
11.85
3,219
(3)
18.29
517
2021
617.5
122
2.98
1.04
0.48
2,175
1.11
15.64
5.14
2.17
1,894
0.53
13.19
4.86
2.04
9.63
6,957
—
13.49
2,059
2020
328.6
126
3.43
1.29
0.43
1,173
0.59
9.86
3.46
0.88
1,011
0.32
8.27
3.28
0.83
11.40
7,259
20,023
18.38
1,108
(1) Production figures are for Pan American’s 92.3% share only, unless otherwise noted.
(2) Cash costs and AISC are non-GAAP measures. Please refer to the “Alternative Performance (Non-GAAP) Measures” section of this
MD&A for a detailed reconciliation of these measures to cost of sales.
(3) Sustaining capital expenditures exclude $nil million and $0.1 million investing activity cash outflows for Q4 2021 and full year 2021,
respectively (Q4 2020 and full year 2020, $0.2 million and $1.0 million, respectively) related to investment capital incurred on the
Morococha project, as disclosed in the “Project Development Update” section of this MD&A.
2021 versus 2020
Production:
•
•
Silver: 85% higher from increased throughput relative to the prior year, given the COVID-19 related mine
suspension in 2020.
By-products: zinc, lead and copper increased by 59%, 49%, 146%, respectively, primarily due to the higher
throughput. The lower zinc and lead grades and higher copper grades were the result of mine sequencing.
Cash Costs: $1.77 per ounce lower, due to lower concentrate treatment charges and higher by-product credits
from increased base metal prices. These more than offset higher operating costs per ounce from COVID and
Inflationary Costs and the disruptions from the mine suspensions affecting the timing of mine development and
other expenditures in 2020.
PAN AMERICAN SILVER CORP.
29
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
Sustaining Capital: was consistent with the prior year, and primarily related to near-mine exploration, equipment
replacements and refurbishments, equipment and office leases, and surface infrastructure.
AISC: decreased $4.89 per ounce, primarily driven by the same factors affecting year-over-year cash costs, in
addition to lower sustaining capital per ounce from increased silver production rates.
San Vicente operation (1)
Three months ended
December 31
Year ended
December 31
Tonnes milled – kt
Average silver grade – grams per tonne
Average zinc grade - %
Average lead grade - %
Average copper grade - %
Production:
Silver – koz
Gold – koz
Zinc – kt
Lead – kt
Copper – kt
Payable Production:
Silver – koz
Gold – koz
Zinc – kt
Lead – kt
Copper – kt
Cash costs - $ per ounce(2)
Sustaining capital - $ thousands
Care and maintenances costs - $ thousands
AISC - $ per ounce(2)
Payable silver sold (100%) - koz
2021
90.1
246
2.63
0.03
0.24
641
0.06
1.93
0.02
0.18
600
—
1.61
0.02
0.15
10.87
2,469
—
14.59
682
2020
93.0
237
2.88
0.05
0.24
663
0.08
2.34
0.04
0.18
617
0.02
1.94
0.03
0.15
17.67
1,391
—
20.89
453
2021
356.3
244
2.81
0.10
0.24
2,548
0.28
8.36
0.32
0.66
2,379
0.04
6.97
0.25
0.41
14.98
5,340
—
17.25
2,465
2020
285.1
276
2.34
0.02
0.27
2,320
0.31
5.57
0.05
0.62
2,180
0.12
4.65
0.05
0.55
15.54
4,877
2,890
17.94
2,153
(1) Production figures are for Pan American’s 95.0% share only, unless otherwise noted.
(2) Cash costs and AISC are non-GAAP measures. Please refer to the “Alternative Performance (Non-GAAP) Measures” section of this
MD&A for a detailed reconciliation of these measures to cost of sales.
2021 versus 2020
Production:
•
•
Silver: 10% higher from increased throughput relative to the prior year, given the COVID-19 related mine
suspension in 2020, which more than offset the lower grades from increased mining dilution due to the
narrowing vein structures at depth.
By-products: zinc, lead and copper production increased by 50%, 483% and 6%, respectively, primarily due
to the increase in throughput. In addition, zinc production benefited from higher grades from mine
sequencing, whereas the significant increase in lead production was the result of commercial terms that
resulted in higher lead payability.
Cash costs: decreased $0.56 per ounce due to higher by-product credits per ounce from higher base metal prices,
grades and payabilities. These more than offset higher operating costs per ounce from the impact of COVID and
Inflationary Costs, lower silver grades, and higher royalty costs per ounce from increased metal prices.
PAN AMERICAN SILVER CORP.
30
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
Sustaining Capital: higher in 2021, and primarily related to a tailings storage facility expansion, mine equipment
replacements and rehabilitation, near-mine exploration, and mine site and camp infrastructure.
AISC: a $0.69 per ounce decrease due to the same factors affecting year-over-year cash costs.
Manantial Espejo operation
Tonnes milled - kt
Average silver grade – grams per tonne
Average gold grade – grams per tonne
Production:
Silver – koz
Gold – koz
Payable Production:
Silver – koz
Gold – koz
Cash costs - $ per ounce(1)
Sustaining capital - $ thousands(2)
Care and maintenances costs - $ thousands
AISC - $ per ounce(1)
Payable silver sold - koz
Three months ended
December 31
Year ended
December 31
2021
170.8
230
2.25
1,090
11.35
1,088
11.32
12.50
2,573
—
14.35
1,007
2020
149.3
166
1.78
742
7.98
741
7.96
18.72
732
—
19.24
702
2021
657.1
177
1.75
3,236
33.76
3,229
33.69
18.37
7,575
—
20.67
3,062
2020
604.7
146
1.30
2,547
23.37
2,542
23.32
15.68
3,264
5,617
15.80
2,545
(1) Cash costs and AISC are non-GAAP measures. Please refer to the “Alternative Performance (Non-GAAP) Measures” section of this
MD&A for a detailed reconciliation of these measures to cost of sales.
(2) Sustaining capital expenditures for Q4 2020 and full year 2020 exclude $1.2 million and $7.5 million, respectively, related to the
development of the Joaquin and COSE projects, as disclosed in the “Project Development Update” section of this MD&A.
2021 versus 2020
Production:
•
Silver and Gold: 27% and 44% higher, respectively. The increased production is the result of higher
throughput and grades from a greater contribution of underground ore from Manantial Espejo, COSE and
Joaquin, given the COVID-19 related mine suspensions in 2020.
Cash costs: increased $2.69 per ounce from COVID and Inflationary Costs and higher mining and ore haulage costs
from increased mining activities at COSE and Joaquin. The factors increasing costs were partially offset by
increased silver and gold production.
Sustaining Capital: the increase over the prior year is largely driven by increased mine equipment refurbishment
and the tailings facility storage expansion, which was initiated and completed in 2021. Both years also included
near-mine exploration and lease payments for diesel generators.
AISC: increased $4.87 per ounce due to the same factors affecting year-over-year cash costs, in addition to higher
sustaining capital per ounce and a decrease in cost-reducing NRV inventory write-ups.
PAN AMERICAN SILVER CORP.
31
Dolores operation
Tonnes placed - kt(1)
Waste tonnes mined - kt
Average silver grade – grams per tonne
Average gold grade – grams per tonne
Production:
Silver – koz
Gold – koz
Payable Production:
Silver – koz
Gold – koz
Cash costs - $ per ounce(2)
Sustaining capital - $ thousands
Care and maintenances costs - $ thousands
AISC - $ per ounce(2)
Payable gold sold - koz
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
Three months ended
December 31
Year ended
December 31
2021
7,774.4
24,374.9
2020
6,429.9
25,227.4
2021
2,057.0
7,043.5
14
0.66
507
40.1
507
40.1
931
12,097
—
1,959
34.34
2020
1,891.1
6,074.8
21
0.76
764
30.5
762
30.4
744
16
0.95
2,240
160.1
2,236
159.8
749
12,778
40,566
—
996
29.00
—
1,087
158.07
29
0.64
3,779
98.0
3,773
97.9
824
44,861
10,175
1,189
96.18
In 2021, the Company built up a high-grade stockpile of 353 thousand tonnes, representing $7.9 million in inventoried costs.
(1)
(2) Cash costs and AISC are non-GAAP measures. Please refer to the “Alternative Performance (Non-GAAP) Measures” section of this
MD&A for a detailed reconciliation of these measures to cost of sales. As previously described, beginning in 2021, Dolores cash costs
and AISC are being reported on a per ounce of gold basis with silver considered as a by-product, rather than on a silver basis with gold
considered as a by-product. In Q4 2020 and FY 2020, silver basis cash costs were reported as negative $9.79 and negative $2.48 per
ounce, and silver basis AISC were reported as negative $2.17 and $6.17 per ounce, respectively.
2021 versus 2020
Production:
•
Silver: the 41% decrease is largely the result of lower grades from mine sequencing into higher gold grade
zones, as expected, partially offset by higher stacking rates relative to 2020, which was impacted by the
COVID-19 related mine suspension. In 2021, silver inventories in the heap leach pad grew by 308 thousand
ounces, representing $3.1 million in inventoried costs, largely due to the delay in completing the
construction of leach pad 1 South.
• Gold: the 63% increase is primarily due to the increase in throughput and grades previously mentioned. In
2021, gold inventories in the heap leach pad grew by 32.3 thousand ounces, representing $26.4 million in
inventoried costs, due to the delay in completing the construction of leach pad 1 South.
Cash Costs: decreased $75 per ounce; largely the result of increased gold grades and a lower waste mining strip
ratio driving unit costs lower, partially offset by lower by-product credits from lower silver grades and higher
operating costs. Higher operating costs were driven by: (i) the impact of COVID and Inflationary Costs, (ii) higher
community spending, and (iii) a higher rate of lime application on the leach pad.
Sustaining Capital: reduced spending year-over-year, primarily due to less mine waste pre-stripping and mine
equipment overhauls and replacements, partially offset by greater leach pad expansions.
AISC: decreased $102 per ounce due to the same factors decreasing cash costs, as well as higher gold production
and lower sustaining capital. These were partially offset by NRV inventory cost adjustments, which added $9.7
million to costs in the current period, but reduced costs by $12.7 million in the previous period.
PAN AMERICAN SILVER CORP.
32
Shahuindo operation
Tonnes milled - kt (1)
Waste tonnes mined - kt
Average silver grade – grams per tonne
Average gold grade – grams per tonne
Production:
Silver – koz
Gold – koz
Payable Production:
Silver – koz
Gold – koz
Cash costs - $ per ounce(2)
Sustaining capital - $ thousands
Care and maintenances costs - $ thousands
AISC - $ per ounce(2)
Payable gold sold - koz
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
Three months ended
December 31
Year ended
December 31
2021
3,617.1
3,641.8
6
0.43
60.54
36.95
60.08
36.92
832
9,146
—
1,091
39.53
2020
2,697.3
3,533.5
7
0.54
83.10
33.60
82.47
33.57
619
6,963
—
842
33.06
2021
13,149.3
16,717.4
6
0.47
234.69
134.04
232.93
133.93
780
28,846
—
1,000
139.46
2020
10,603.4
9,833.4
9
0.56
268.30
142.38
266.29
142.26
588
22,749
3,855
750
150.77
In 2021, the Company built up a low-grade stockpile 2.0 million tonnes, representing $7.7 million in inventoried costs.
(1)
(2) Cash costs and AISC are non-GAAP measures. Please refer to the “Alternative Performance (Non-GAAP) Measures” section of this
MD&A for a detailed reconciliation of these measures to cost of sales.
2021 versus 2020
Production: Gold decreased 6% due to lower grades from mine sequencing and reduced leaching irrigation rates to
prevent ponding of unexpectedly higher clay rich ores, which led to an increase of in-pad inventory. Those factors
more than offset the higher throughput in 2021 relative to 2020 when the mine was impacted by the COVID-19
related mine suspension. Gold inventory in leach pad increased by 16.3 thousand ounces in 2021, representing
$18.5 million in inventoried costs.
Cash Costs: increased $192 per ounce, primarily as a result of lower gold grades mined, an increase in the strip
ratio, and the impact of COVID and Inflationary Costs.
Sustaining Capital: was comprised of leach pad expansions, site infrastructure improvements, near-mine
exploration, payments for leased mining equipment, and repayments on construction loans related to leach pad
and other infrastructure. The increase over the prior year is due to advancing certain projects that were delayed or
deferred from 2020 due to COVID-19.
AISC: increased $250 per ounce, due to the same factors affecting year-over-year cash costs, in addition to higher
sustaining capital expenditures per ounce.
PAN AMERICAN SILVER CORP.
33
La Arena operation
Tonnes milled - kt
Waste tonnes mined - kt
Average silver grade – grams per tonne
Average gold grade – grams per tonne
Production:
Silver – koz
Gold – koz
Payable Production:
Silver – koz
Gold – koz
Cash costs - $ per ounce(1)
Sustaining capital - $ thousands
Care and maintenances costs - $ thousands
AISC - $ per ounce(1)
Payable gold sold - koz
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
Three months ended
December 31
Year ended
December 31
2021
4,037.6
5,372.8
—
0.35
11.11
32.59
11.08
32.57
819
9,996
—
1,197
26.87
2020
4,132.2
5,796.7
1
0.42
11.27
41.40
11.24
41.37
556
13,030
—
873
42.10
2021
10,855.2
27,007.5
1
0.36
39.75
112.35
39.63
112.27
761
45,479
—
1,182
109.43
2020
10,079.3
20,520.9
1
0.37
33.46
105.37
33.36
105.29
721
37,324
3,712
1,109
99.32
(1) Cash costs and AISC are non-GAAP measures. Please refer to the “Alternative Performance (Non-GAAP) Measures” section of this
MD&A for a detailed reconciliation of these measures to cost of sales.
2021 versus 2020
Production: Gold increased 7% from higher mining rates and throughput relative to the prior year when the mine
was impacted by the COVID-19 related mine suspension.
Cash Costs: increased $40 per ounce, primarily from a higher strip ratio and COVID and Inflationary Costs. The
higher strip ratio is the result of mine life extensions, which have increased the mine waste strip ratio.
Sustaining Capital: primarily related to capitalized deferred stripping, waste storage facility expansions, leach pad
expansions, and near-mine exploration. The increase over the prior year reflects higher spending on heap leach
pad expansion and deferred stripping.
AISC: increased by $73 per ounce, due to the same factors affecting year-over-year cash costs, as well as an
increase in sustaining capital per ounce.
PAN AMERICAN SILVER CORP.
34
Timmins' operation
Tonnes milled - kt
Average gold grade – grams per tonne
Production:
Silver – koz
Gold – koz
Payable Production:
Silver – koz
Gold – koz
Cash costs - $ per ounce(1)
Sustaining capital - $ thousands(2)
Care and maintenances costs - $ thousands
AISC - $ per ounce(1)
Payable gold sold - koz
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
Three months ended
December 31
Year ended
December 31
2021
391.4
2.83
4.03
34.25
3.99
34.22
1,298
8,415
—
1,614
30.00
2020
426.2
2.73
4.38
38.09
4.34
38.06
1,126
7,621
—
1,355
37.20
2021
1,593.1
2.70
16.16
133.85
16.00
133.75
1,319
35,894
—
1,619
132.00
2020
1,643.1
2.85
17.63
148.40
17.46
148.29
1,061
18,795
—
1,213
148.13
(1) Cash costs and AISC are non-GAAP measures. Please refer to the “Alternative Performance (Non-GAAP) Measures” section of this
MD&A for a detailed reconciliation of these measures to cost of sales.
(2) Sustaining capital expenditures exclude $0.2 million and $6.4 million investing activity cash outflows for Q4 2021 and full year 2021,
respectively (Q4 2020 and full year 2020, $0.5 million and $2.0 million, respectively) related to investment capital incurred on the
Timmins projects, as disclosed in the “Project Development Update” section of this MD&A.
2021 versus 2020
Production: Gold decreased 10% due to lower throughput from Bell Creek where mining rates have suffered from
geotechnical challenges that require mining method adjustments and modifications to ground support systems in
the deeper areas of the mine.
Cash Costs: increased $258 per ounce, primarily as a result of the lower grades and higher operating costs from
COVID and Inflationary Costs and the appreciation of the Canadian dollar.
Sustaining Capital: was primarily comprised of mine equipment refurbishment and replacement, mine
infrastructure upgrades, a tailings storage facility expansion, near-mine exploration, and lease payments for
mining equipment. The increase over the prior year was largely driven by increased spending on expansion of the
tailings storage facility and on equipment refurbishment and replacement.
AISC: increased by $406 per ounce due to the same factors impacting cash costs, as well as higher sustaining
capital expenditures.
PAN AMERICAN SILVER CORP.
35
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
PROJECT DEVELOPMENT UPDATE
The following table reflects the amounts spent at each of Pan American’s major projects in 2021 as compared to
2020.
Project Development Investment(1)
(thousands of USD)
La Colorada projects
Joaquin and COSE projects
Timmins projects
Other
Total
Three months ended
December 31
Year ended
December 31
2021
16,521
—
244
134
2020
1,909
1,198
450
196
2021
39,462
—
6,403
611
16,899
3,753
46,476
2020
10,971
7,525
1,956
1,093
21,545
During 2021, the Company spent $46.5 million in 2021, largely to advance exploration and development studies
for the La Colorada Skarn project, including the start of construction of the new concrete-lined ventilation shaft
and refrigeration plant, and the Wetmore exploration project at Timmins.
OVERVIEW OF 2021 FINANCIAL RESULTS
Selected Annual and Quarterly Information
The following tables set out selected quarterly results for the past twelve quarters as well as selected annual
results for the past three years. The dominant factors affecting results in the quarters and years presented below
are the volatility of realized metal prices, and the volume and timing of sales, which varies with the timing of
shipments, and which was also impacted by the COVID-19 related mine suspension. The fourth quarter of 2019
included impairment charges to the Manantial Espejo mine and the COSE and Joaquin projects.
2021
Quarter Ended
(In thousands of USD, other than per share amounts)
March 31
June 30
Sept 30
Dec 31
Year
Ended
Dec 31
Revenue
$
368,099 $
382,132 $
460,349 $
422,170 $ 1,632,750
Mine operating earnings
(Loss) earnings for the period attributable to equity holders $
$
Basic (loss) earnings per share
$
Diluted (loss) earnings per share
Cash flow from operating activities
Cash dividends paid per share
Other financial information
Total assets
Total long-term financial liabilities(1)
Total attributable shareholders’ equity
$
$
$
89,964 $
103,048 $
98,887 $
76,039 $
367,938
(7,798) $
70,939 $
20,251 $
14,036 $
97,428
(0.04) $
(0.04) $
0.34 $
0.34 $
0.10 $
0.10 $
0.06 $
0.06 $
0.46
0.46
29,850 $
87,143 $
157,017 $
118,098 $
392,108
0.070
$
0.070
$
0.100
$
0.100
$
0.340
$ 3,518,584
$
297,600
$ 2,631,554
(1) Total long-term financial liabilities are comprised of non-current liabilities excluding deferred tax liabilities and deferred revenue.
PAN AMERICAN SILVER CORP.
36
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
2020
Quarter Ended
(In thousands of USD, other than per share amounts)
March 31
June 30
Sept 30
Dec 31
Year
Ended
Dec 31
Revenue
$
358,428 $
249,509 $
Mine operating earnings
(Loss) earnings for the period attributable to equity holders $
$
Basic (loss) earnings per share
$
Diluted (loss) earnings per share
Cash flow from operating activities
Cash dividends paid per share
Other financial information
Total assets
Total long-term financial liabilities(1)
Total attributable shareholders’ equity
$
$
$
50,058 $
48,386 $
(76,807) $
20,063 $
(0.37) $
(0.37) $
0.10 $
0.10 $
114,051 $
62,750 $
0.05 $
0.05 $
300,414 $
124,561 $
65,741 $
0.31 $
0.31 $
114,943 $
0.05 $
430,461 $ 1,338,812
137,172 $
168,885 $
0.80 $
177,882
360,177
0.85
0.80 $
170,571 $
0.070 $
0.85
462,315
0.220
$ 3,433,875
$
277,696
$ 2,602,519
(1) Total long-term financial liabilities are comprised of non-current liabilities excluding deferred tax liabilities and deferred revenue.
2019
(In thousands of USD, other than per share amounts)
Revenue(2)
Mine operating earnings(2)
Earnings for the period attributable to equity holders
Basic earnings per share
Diluted earnings per share
Cash flow from operating activities
Cash dividends paid per share
Other financial information
Total assets
Total long-term financial liabilities(3)
Total attributable shareholders’ equity
March 31(1)
$
253,699 $
Quarter Ended
June 30(1)
Sept 30(1)
Dec 31
Year
Ended
Dec 31
340,494 $
352,187 $
404,379 $ 1,350,759
$
$
$
$
$
$
15,770 $
51,058 $
63,850 $
98,610 $
229,288
2,783 $
18,371 $
37,657 $
51,927 $
110,738
0.02 $
0.02 $
0.09 $
0.09 $
0.18 $
0.18 $
0.26 $
0.26 $
0.55
0.55
(12,911) $
83,518 $
81,948 $
129,473 $
282,028
0.035 $
0.035 $
0.035 $
0.035 $
0.14
$ 3,461,682
$
517,776
$ 2,463,099
(1) Amounts differ from those originally reported in the respective quarter due to: (i) the finalization of the purchase price allocation,
which was retrospectively applied, the most significant change being the removal of the previously recorded $30.5 million bargain
purchase gain; and, (ii) amounts presented retrospectively as if Timmins had not been classified as held for sale.
(2) Concurrent with the acquisition of Tahoe, the Company classified the Timmins mines as a discontinued operation held for sale and, in
Q3 2019, reclassified to be a continuing operation. As a result, the previously recorded first and second quarters have been recast to
present the Timmins mines as continuing operations.
(3) Total long-term financial liabilities are comprised of non-current liabilities excluding deferred tax liabilities, deferred revenue, and share
purchase warrant liabilities.
PAN AMERICAN SILVER CORP.
37
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
Income Statement: 2021 versus 2020
Net earnings of $98.6 million were recorded in 2021 compared to $176.5 million in 2020, which corresponds to
basic earnings per share of $0.46 and $0.85, respectively.
The following table highlights the difference between net earnings in 2021 compared with 2020:
Net earnings, year ended December 31, 2020
Increased revenue:
$
176,455
Note
Higher quantities of metal sold
Increased realized metal prices
Increased direct selling costs
Decreased negative settlement adjustments
Total increase in revenue
Increased cost of sales:
Increased production costs and increased royalty charges
Increased depreciation and amortization
Total increase in cost of sales
Increased investment loss
Increased income tax expense
Decreased income from equity investees
Increased foreign exchange loss
Increased exploration and project development expense
Decreased mine care and maintenance costs
Increased gains on sales of mineral properties, plant and equipment
Decreased other expense
Decreased interest and finance expense
Increased gains on derivatives
Decreased general and administrative expense
Net earnings, year ended December 31, 2021
$
$
139,496
157,073
(9,625)
6,994
$
293,938
(1)
(237,688)
(48,489)
$
$
(2)
(6)
(3)
(4)
(5)
(7)
(8)
(286,177)
(121,861)
(70,872)
(6,182)
(5,793)
(3,975)
70,325
24,245
21,180
3,906
1,850
1,523
98,562
1. Revenue for 2021 was $1.63 billion, a $293.9 million increase from the $1.34 billion of revenue recognized in
2020. The revenue increase resulted from increased metal prices and volumes of metal quantities sold. The
higher volumes sold largely reflects continuous operations in 2021 whereas 2020 operations were impacted by
the COVID-19 related mine suspensions.
The following table reflects the metal prices realized by the Company and the quantities of metal sold during
each year:
Silver(1) – koz
Gold(1) – koz
Zinc(1) – kt
Lead(1) – kt
Copper(1) – kt
Realized Metal Prices
Quantities of Metal Sold
Year ended
December 31
Year ended
December 31
2021
2020
2021
2020
$
$
$
$
$
25.00 $
1,792 $
2,997 $
2,206 $
9,297 $
20.60
1,758
2,288
1,851
6,412
17,470
574.9
42.7
17.0
7.8
17,317
519.7
35.7
16.5
4.2
(1) Metal price stated as dollars per ounce for silver and gold, and dollars per tonne for zinc, lead and copper, inclusive of final
settlement adjustments on concentrate sales.
Realized prices for silver, gold, zinc, lead and copper, increased by 21%, 2% ,31%, 19% and 45%, respectively,
in 2021 compared to 2020. Higher quantities of all metals were sold in 2021 compared to 2020, with year-
over-year quantities of silver, gold, zinc, lead and copper increasing by 1%, 11%, 20%, 3%, and 83%,
respectively.
PAN AMERICAN SILVER CORP.
38
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
Silver Segment and Gold Segment revenues in 2021 were $601.3 million and $1,031.4 million, respectively,
compared to Silver Segment and Gold Segment revenues in 2020 of $380.4 million and $958.4 million,
respectively, which included Dolores in the Gold Segment for both periods.
2. Production and royalty costs in 2021 were $961.9 million, $237.7 million higher than in 2020, largely due to a
$228.8 million increase in production costs. The increase in production costs was largely driven by increased
quantities of metal sold from all mines except La Colorada, the cost impact from COVID and Inflationary Costs
on all operations, and NRV inventory adjustments. Silver Segment production costs, excluding NRV inventory
adjustment impacts and Dolores costs in both years, increased by $147.7 million, which in addition to the
factors noted above, reflected: (i) increased mining costs at Manantial Espejo from a full-year of operations at
COSE and Joaquin; and (ii) higher operating costs at La Colorada, as described in the "Individual Mine
Performance Section" of this MD&A. Gold Segment costs, excluding the NRV inventory adjustment impacts
and including Dolores costs in both years, increased $81.2 million, which in addition to the factors noted
above, mainly reflect increased waste mining strip ratios at both La Arena and Shahuindo. Additionally, there
was a $24.9 million year-over-year cost increase from NRV adjustments, which increased costs by $8.7 million
in 2021 compared to a $16.2 million decrease to costs in 2020. NRV adjustments in both years were related
mainly to Dolores.
3.
4.
Investment loss of $59.7 million in 2021 was a $121.9 million change from 2020 when the Company's
investments generated a $62.1 million gain. Investment income and losses in each period largely reflect fair
value "mark-to-market" adjustments on certain of the Company's equity investments, the largest component
of which being the Company's shares in New Pacific. The 2020 income also includes a gain on the sale of 10.4
million shares in the Company's equity investment in Maverix Metals Inc. ("Maverix").
Income Tax Expense was $146.4 million in 2021, a $70.9 million increase from 2020, in part due to increased
earnings from operations. Despite the increase in earnings from operations, the earnings before income tax
were comparable year-over-year due to unrealized mark-to-market adjustments on short term investments.
These adjustments, which generated losses in 2021 and gains in 2020 did not result in corresponding tax
benefits or expenses, respectively. Further, the 2020 expense was reduced by the recognition of previously
unrecognized tax attributes related to the Timmins West, Bell Creek, and La Arena mines.
5. Care and maintenance costs were $31.8 million in 2021, a $70.3 million decrease from 2020, reflecting the
COVID-19 related mine suspensions in 2020. Care and maintenance costs in 2021 related primarily to the
Company's Escobal mine, where operations are currently suspended and the Navidad project.
6. Depreciation and amortization were $303.0 million in 2021, a $48.5 million increase from 2020, largely
reflecting increased quantities of metal sold, as well as increased rates in particular at Dolores due to a decline
in proven and probable mineral reserves and at La Arena due to increased depreciable capital base.
7. Gains on sale of mineral properties, plant and equipment were $32.2 million, a $24.2 million increase from
2020, largely from the sale of the Waterloo exploration property in 2021.
8. Other expense was $nil in 2021, which was a $21.2 million improvement over 2020. The 2020 expense mainly
reflects a $6.1 million provision relating to certain value-added tax receivables in Guatemala; a $5.2 million
increase to estimated closure and decommissioning liabilities for the Company's Alamo Dorado mine in
Mexico, which went into reclamation at the end of 2017; commissions and transactions costs associated with
the Company's sales of certain Maverix and New Pacific shares in 2020; and the settlement of certain claims by
former contractors of the Company.
PAN AMERICAN SILVER CORP.
39
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
Statement of Cash Flows: 2021 versus 2020
Cash flow from operations in 2021 totaled $392.1 million, $70.2 million less than the $462.3 million generated in
2020. The decrease was largely driven by: (i) the impact of changes in non-cash working capital, which were a
$71.1 million use of cash in 2021 compared to a $97.0 million source of cash in 2020; and (ii) a $47.6 million
increase in income tax payments, largely from increased taxable earnings in 2021 in addition to March 2021 true-
up payments driven by higher 2020 taxable income. These decreases were partially offset by an increase in cash
mine operating earnings of $81.1 million. The increase in cash mine operating earnings was driven by stronger
metal prices and higher volumes sold, which more than offset higher production costs.
The $71.1 million use of cash in non-cash working capital, largely reflecting an $82.9 million increase in inventory
balances, mostly from the La Colorada concentrates shipping delays and in-heap inventory build-ups at Shahuindo
and Dolores. These compared to the $97.0 million source of cash in 2020, which was driven primarily by a $56.8
million build-up of accounts payables and accrued liabilities and a $54.8 million decrease in trade and other
receivable balances.
Investing activities utilized $186.7 million, primarily from $243.5 million spent on mineral properties, plant and
equipment at the Company’s mines and projects, which was partially offset by $45.8 million in proceeds from the
sale of certain non-core exploration-stage mineral properties, primarily Waterloo and various royalties.
In 2020, $83.9 million of cash was used in investing activities and reflected $178.6 million spent on mineral
properties, plant and equipment at the Company’s mines and projects, and $15.6 million invested in the exercise
of Maverix warrants, which was partially offset by $90.4 million received from the net sale of short-term
investments, primarily in New Pacific, the partial disposition of the Company's interest in Maverix, and $22.5
million in proceeds from the sale of certain non-core exploration-stage mineral properties
Financing activities in 2021 used $85.9 million, primarily related to $71.5 million in dividend payments to
shareholders and $12.4 million of lease repayments.
On August 10, 2021, the Company entered into an amendment agreement to amend and extend its $500.0 million
credit facility, with a maturity date of February 1, 2023, (the "Credit Facility"), into the $500.0 million
Sustainability-Linked Credit Facility, with a maturity date of August 8, 2025.
Financing activities in 2020 used $329.6 million, primarily related to the net repayment of $275.0 million on the
Company's Credit Facility, which was fully repaid as at December 31, 2020, $46.2 million in shareholder dividend
payments, and $13.1 million of lease repayments.
Adjusted Earnings: 2021 versus 2020
Adjusted earnings and basic adjusted earnings per share are non-GAAP measures that the Company considers to
better reflect normalized earnings, as it eliminates items that in Management's judgment are subject to volatility
as a result of factors that are unrelated to operations in the period, and/or relate to items that will settle in future
periods. Neither adjusted earnings nor basic adjusted earnings per share have any standardized meaning
prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other
companies.
Please refer to the section of this MD&A entitled “Alternative Performance (Non-GAAP) Measures” for a detailed
description, and a reconciliation of these measures to the 2021 Financial Statements.
Adjusted Earnings in 2021 were $161.8 million, representing a basic adjusted earnings per share of $0.77, which
was $19.5 million, or $0.09 per share, lower than 2020 adjusted earnings of $181.2 million, and basic adjusted
earnings per share of $0.86, respectively.
PAN AMERICAN SILVER CORP.
40
The following chart illustrates the key factors leading to the change in adjusted earnings from 2020 to 2021:
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
(1) Commencing in Q1 2021, gains and losses recognized in relation to certain equity investments owned by the Company, and included in
Investment income (loss) in the Company's financial statements, are being excluded from adjusted earnings. This change was based on
the increase in both the magnitude and volatility of these investments having a larger impact on the Company’s net income in recent
years, and Management’s belief that these fair-market-values are neither under the control of Management nor representative of
normal course operating results. The comparative period's adjusted earnings have been revised to conform to this change and thus
differ from that previously reported.
PAN AMERICAN SILVER CORP.
41
Adjusted Earnings Reconciliation - 2020 to 2021 ($ millions)$181.2$164.1$139.5$14.0$(226.5)$(52.9)$(48.5)$(9.1)$161.82020adjustedearningsIncreasedmetalprices,net ofsettlementadjustmentsIncreasedquantitiesof metalsoldDecreasedotherexpenseIncreasedproductioncosts androyaltiesIncreasedincometaxprovisionIncreaseddepreciationandamortizationOther2021adjustedearnings$—$200.0$400.0$600.0 Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
Income Statement: Q4 2021 versus Q4 2020
Net earnings of $14.7 million was recorded in Q4 2021 compared to $169.0 million in Q4 2020, which corresponds
to basic earnings per share of $0.07 and $0.80, respectively.
The following table highlights the key items driving the difference between the net earnings in Q4 2021 compared
to the net earnings recorded in Q4 2020, some of which are further explained below:
Net earnings, three months ended December 31, 2020
Decreased revenue:
169,018
Note
$
$
$
Decreased realized metal prices
Lower quantities of metal sold
Decreased negative settlement adjustments
Decreased direct selling costs
Total decrease in revenue
Increased cost of sales:
Increased production costs and decreased royalty charges
Decreased depreciation and amortization
Total increase in cost of sales
Increased income tax expense
Increased investment loss
Decreased income from equity investees
Decreased gains on sales of mineral properties, plant and equipment
Decreased gains on derivatives
Increased foreign exchange loss
Increased exploration and project development expense
Increased mine care and maintenance costs
Decreased other expense
Decreased general and administrative expense
Decreased interest and finance expense
(2,428)
(13,294)
3,975
3,456
$
(8,291)
(1)
(54,165)
1,323
$
(2)
(3)
(4)
(6)
(7)
(8)
(5)
(52,842)
(37,986)
(36,686)
(12,051)
(10,383)
(5,651)
(4,440)
(2,985)
(2,511)
16,047
2,426
999
14,664
Net earnings, three months ended December 31, 2021
$
1. Revenue for Q4 2021 was $422.2 million, an $8.3 million decrease from the $430.5 million recognized in Q4
2020. The revenue decrease reflects $13.3 million from lower quantities of metal sold, driven largely by lower
zinc and lead production due to mine sequencing and the timing of gold sales that led to an inventory build-up
in Q4 2021, as well as $2.4 million in lower metal prices. These decreases offset the improvement in treatment
and refining charges and the positive impact of concentrate final price settlement adjustments.
The following table reflects the metal prices realized by the Company and the quantities of metal sold during
each quarter:
Silver(1) – koz
Gold(1) – koz
Zinc(1) – kt
Lead(1) – kt
Copper(1) – kt
Realized Metal Prices
Quantities of Metal Sold
Three months ended
December 31
Three months ended
December 31
2021
2020
2021
2020
$
$
$
$
$
23.33 $
1,792 $
3,352 $
2,333 $
9,545 $
24.72
1,874
2,566
1,922
7,234
5,067
142.6
9.9
4.1
2.1
4,732
148.1
14.5
5.4
1.7
(1) Metal price stated as dollars per ounce for silver and gold, and dollars per tonne for zinc, lead and copper, inclusive of final
settlement adjustments on concentrate sales.
PAN AMERICAN SILVER CORP.
42
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
Decreased quarter-over-quarter realized silver and gold prices of 6% and 4%, were partially offset by increased
zinc, lead and copper prices of 31%, 21%, and 32%.
Sales volumes decreased for gold, zinc and lead, by 4%, 32%, and 24%, respectively, whereas silver and copper
quantities increased by 7% and 24%, respectively.
Silver Segment and Gold Segment revenues in Q4 2021 were $174.4 million and $247.7 million, respectively,
compared to Q4 2020 Silver Segment and Gold Segment revenues of $138.1 million and $292.4 million,
respectively, when including Dolores in the Gold Segment for both periods.
2. Production and royalty costs of $270.0 million in Q4 2021 were $54.2 million higher than those in Q4 2020,
driven by a $56.7 million increase in production costs in Q4 2021 compared to Q4 2020. The higher production
costs reflect COVID and Inflationary Costs and $28.4 million from the impact of NRV inventory adjustments,
which increased costs by $21.7 million in Q4 2021, but decreased costs by $6.7 million in Q4 2020. The
majority of the NRV adjustments in each period were related to inventories at the Dolores mine.
3.
Income tax expense in Q4 2021 was $28.5 million compared to $9.5 million of income tax recovery in Q4
2020. The $38.0 million variance was largely attributable to the impact on 2020 income tax expense from: (i)
the recognition of various unrecognized tax attributes, and (ii) changes in foreign exchange rates on foreign
currency denominated deductible tax attributes, particularly in Mexico. These drove an income tax recovery
in Q4 2020, and more than offset the lower income tax expense from the $116.4 million decrease in net
income before tax from Q4 2020 to Q4 2021 .
4.
Investment loss of $6.1 million in Q4 2021 compares with $30.6 million of investment income in Q4 2020.
Investment gains and losses in both periods reflect fair value "mark-to-market" adjustments on the
Company's equity investments, especially New Pacific.
5. Other income of $2.5 million in Q4 2021 resulted in a $16.0 million change relative to the $13.5 million other
expense booked in Q4 2020. Q4 2021 other income reflects changes in supplies inventory provisions for our
non-operating subsidiaries, while the Q4 2020 expense reflects a $6.1 million provision relating to certain
value-added tax receivables
increase to estimated closure and
decommissioning liabilities for the Company's Alamo Dorado mine in Mexico, which went into reclamation at
the end of 2017.
in Guatemala and a $5.2 million
6.
Income from equity investees was a $12.1 million decrease in Q4 2021 compared to Q4 2020. Income from
equity investees in both periods primarily reflect the Company's share of income from Maverix.
7. Gains on sale of mineral properties, plant and equipment were a $10.4 million decrease in Q4 2021
compared with Q4 2020, and relate to the disposition of non-core exploration properties.
8. Gains on derivatives of $1.6 million in Q4 2021 compares with $7.3 million of gains on derivatives in Q4 2020.
The decrease of $5.7 million is primarily related to a decrease in gains from the Company's diesel and MXN
contracts in the current quarter.
Statement of Cash Flows: Q4 2021 versus Q4 2020
Cash flow from operations in Q4 2021 totaled $118.1 million, $52.5 million less than the $170.6 million generated
in Q4 2020. This decrease was mainly attributable to a $28.2 million decrease in cash from changes in non-cash
operating working capital and a $34.1 million decrease in cash mine operating earnings.
Working capital changes in Q4 2021 resulted in a $9.7 million use of cash, mainly reflecting an inventory build-up
offset by a build-up in accounts payables and accrued liabilities. Changes in non-cash working capital in Q4 2020
resulted in an $18.6 million source of cash, comprised mainly of a build-up in accounts payables and accrued
liabilities that offset an increase in inventories and trade and other receivables balances.
Investing activities utilized $66.3 million of cash in Q4 2021, comprised mostly of $70.1 million spent on mineral
property, plant and equipment additions at the Company’s mines and projects, which was partially offset by cash
PAN AMERICAN SILVER CORP.
43
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
inflows from derivative contracts and non-core asset sales. In Q4 2020, investing activities utilized $40.1 million,
largely reflecting spending of $53.6 million on mineral property, plant and equipment at the Company’s mines and
projects, partially offset by $12.0 million from the sale of non-core exploration assets.
Financing activities in Q4 2021 used $25.1 million, largely related to $21.0 million of dividends paid to
shareholders, $0.9 million of loan repayments, and $3.4 million of lease repayments. In Q4 2020, $113.5 million
was used in financing activities, which consisted of $90.0 million of repayments on the Credit Facility, $14.7 million
paid as dividends to shareholders, and $8.8 million of loan and lease repayments.
Adjusted Earnings: Q4 2021 versus Q4 2020
Please refer to the section of this MD&A entitled “Alternative Performance (Non-GAAP) Measures” for a detailed
description of “adjusted earnings”, and a reconciliation of these measures to the 2021 Financial Statements.
Adjusted Earnings in Q4 2021 was $39.9 million, representing a basic adjusted earnings per share of $0.19, which
was $49.9 million, or $0.24 per share, lower than Q4 2020 adjusted earnings of $89.9 million, and $0.43 of basic
adjusted earnings per share.
The following chart illustrates the key factors leading to the change in adjusted earnings from Q4 2020 to Q4 2021:
(1) Commencing in Q1 2021, gains and losses recognized in relation to certain equity investments owned by the Company, and included in
Investment income (loss) in the Company's financial statements, are being excluded from adjusted earnings. This change was based on
the increase in both the magnitude and volatility of these investments having a larger impact on the Company’s net income in recent
years, and Management’s belief that these fair-market-values are neither under the control of Management nor representative of
normal course operating results. The comparative period's adjusted earnings have been revised to conform to this change and thus
differ from that previously reported.
PAN AMERICAN SILVER CORP.
44
Adjusted Earnings Reconciliation - Q4 2020 to Q4 2021($ millions)$89.9$10.9$3.5$0.3$(28.8)$(19.6)$(13.3)$(3.0)$39.9Q4 2020adjustedearningsDecreasedotherexpenseDecreaseddirectsellingcostsOtherIncreaseddirectoperatingcost ofsales andDDAIncreasedincometaxprovisionDecreasedquantitiesof metalsoldIncreasedexplorationand projectdevelopmentexpenseQ4 2021adjustedearnings$—$25.0$50.0$75.0$100.0$125.0 Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
LIQUIDITY AND CAPITAL POSITION
Liquidity and Capital Measures
Cash and cash equivalents ("Cash")
Short-term Investments
Cash and Short-term investments
Working Capital
Credit Facility committed amount
Credit Facility amounts drawn
Shareholders' equity
Total debt (1)
Capital (2)
December 31,
2021
September 30,
2021
December 31,
2020
Q4 2021
Change
2021
Change
283,550
51,723
335,273
613,494
500,000
—
257,509
57,938
315,447
618,761
500,000
—
167,113
111,946
279,059
495,168
500,000
—
2,636,008
2,639,114
2,605,839
45,861
44,977
33,565
26,041
(6,215)
19,826
(5,267)
—
—
(3,106)
884
116,437
(60,223)
56,214
118,326
—
—
30,169
12,296
2,346,596
2,368,644
2,360,345
(22,048)
(13,749)
(1) Total debt is a Non-GAAP measure calculated as the total of amounts drawn on the Credit Facility and Sustainability-Linked Credit
Facility, finance lease liabilities and loans payable.
(2) The capital of the Company consists of items included in shareholders’ equity and debt, net of cash and cash equivalents and short
term investments.
Liquidity and Capital Resources
The Company's cash and short-term investments increased by $26.0 million and $116.4 million during Q4 2021
and the full year 2021, respectively. Operating cash flows of $118.1 million in Q4 2021, included $22.8 million in
tax payments and a $9.7 million use of cash from working capital changes, and financed all of the Company's
investing and financing activities in the quarter. The financing and investing activity cash outflows in the quarter
included $70.1 million in payments for mineral property plant and equipment, $21.0 million in dividend payments,
and $3.4 million of payments on equipment leases. The Company's equity investments classified as a short-term
investment, including the Company's investment in New Pacific, decreased by $6.2 million in the quarter.
Annual operating cash flows in 2021 of $392.1 million included $71.1 million use of cash from working capital
changes and $129.2 million in tax payments. Annual operating cash flows together with $45.8 million of proceeds
from the sale of non-core mineral properties, including Waterloo, were sufficient to cover $243.5 million of
investments in mineral property plant and equipment, dividend payments of $71.5 million, and lease payments of
$12.4 million during the year. The Company's equity investments classified as a short-term investment, including
the Company's investment in New Pacific, decreased by $60.2 million in 2021.
Pan American’s investment objectives for its cash balances are to preserve capital, to provide liquidity and to
maximize returns. The Company’s strategy to achieve these objectives is to invest excess cash balances in a
portfolio of primarily fixed income instruments with specified credit rating targets established by the board of
directors of the Company (the "Board of Directors"). The Company does not own any asset-backed commercial
paper or other similar, known, at-risk investments in its investment portfolio.
Working capital at December 31, 2021 of $613.5 million decreased by $5.3 million from September 30, 2021. The
decrease was attributable to a $14.6 million increase in current liabilities, other than those relating to taxes, and a
$14.3 million net increase in current tax liabilities, partially offset by the $19.8 million combined increase in cash
and short-term investments described above, and a $3.8 million increase in other current assets other than those
relating to taxes. Since December 31, 2020, working capital has increased by $118.3 million, primarily from: $56.2
million of cash and short-term investments, and an $89.8 million increase in other current assets other than those
relating to taxes, which primarily reflected an increase in inventories, partially offset by a $21.3 million increase in
current liabilities other than those relating to taxes, and a $6.3 million net increase in current tax liabilities.
As of December 31, 2021, the Company was in compliance with all financial covenants under the Sustainability-
Linked Credit Facility, which as of the date of this MD&A and as at December 31, 2021 remained undrawn. The
borrowing costs under the Sustainability-Linked Credit Facility are based on the Company's leverage ratio subject
to pricing adjustments based on sustainability performance ratings and scores at either (i) LIBOR plus 1.825% to
PAN AMERICAN SILVER CORP.
45
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
2.80%; or (ii) The Bank of Nova Scotia's Base Rate on U.S. dollar denominated commercial loans plus 0.825% to
1.80%. Undrawn amounts under the Sustainability-Linked Credit Facility are subject to a stand-by fee of 0.41% to
0.63% per annum, dependent on the Company's leverage ratio and subject pricing adjustments based on
sustainability performance ratings and scores. The Company's Sustainability-Linked Credit Facility matures on
August 8, 2025.
The net cash generated from the sales of metal production provides our primary source of cash flows. We have
not experienced payment delinquencies from our metal sales counterparties during the COVID-19 pandemic, nor
do we currently expect to experience such delinquencies as the pandemic continues, though the impact of
COVID-19 on the credit risk associated with our counterparties cannot be determined with any degree of certainty.
The Company may periodically experience restrictions on the ability of its subsidiaries to transfer funds to Pan
American Silver Corp., primarily as a result of fiscal restrictions or regulatory changes in the jurisdictions where we
operate. For example, Argentina has, at times, instituted unfavorable economic policies and strict currency
controls, particularly on USD transactions. These restrictions on our ability to receive funds from our subsidiaries
have not, and are not currently expected to, materially impact the Company’s ability to meet its obligations.
The Company manages its capital structure and makes adjustments in light of changes in its economic
environment and the risk characteristics of the Company’s assets. To effectively manage the Company’s capital
requirements, Pan American utilizes a planning, budgeting and forecasting process to help determine the funds
required to ensure the Company has the appropriate liquidity to meet its operating and growth objectives. The
Company ensures that there are sufficient committed loan facilities to meet its short-term business requirements,
taking into account its anticipated cash flows from operations and its holdings of cash and cash equivalents and
short term investments.
The Company’s financial position at December 31, 2021, and the operating cash flows that are expected over the
next twelve months, lead management to believe that the Company’s liquid assets are sufficient to satisfy our
2022 working capital requirements, commitments, fund currently planned capital expenditures, and to discharge
liabilities as they come due. The Company remains well positioned to take advantage of strategic opportunities as
they become available. Liquidity risks are discussed further in the “Risks and Uncertainties” section of this MD&A.
The impact of inflation on the Company’s financial position, operational performance, or cash flows over the next
twelve months cannot be determined with any degree of certainty due to a number of uncertainties, including
those related to the COVID-19 business disruptions.
PAN AMERICAN SILVER CORP.
46
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
Commitments
In the normal course of business, the Company enters into contracts that give rise to commitments which are
described in Note 8(e)(ii) of the 2021 Financial Statements, and in the Liquidity and Capital Position section of this
MD&A, for future minimum payments. The following table summarizes the remaining contractual maturities of the
Company's financial liabilities and operating and capital commitments on an undiscounted basis:
Payments due by period 2021
Accounts payable and accrued liabilities other than:
Severance accrual
Employee compensation
Total accounts payable and accrued liabilities
Income taxes payable
Loss on derivatives
Debt
Repayment of principal
Interest and standby fees
Provisions (1)(2)
Future employee compensation
Total contractual obligations (2)
$
$
Within 1
year
275,629 $
26,695
3,763
306,087
59,133
351
2 - 3 years
4- 5 years
After 5
years
— $
404
—
404
—
—
— $
33
—
33
—
—
— $
4,450
—
4,450
—
—
Total
275,629
31,582
3,763
310,974
59,133
351
3,400
2,613
2,738
3,352
377,674 $
6,800
4,867
2,553
9,058
23,682 $
5,100
1,432
—
—
6,565 $
—
—
—
—
4,450 $
15,300
8,912
5,291
12,410
412,371
(1) Total litigation provision (Note 15).
(2) Amounts above do not include payments related to closure and decommissioning (current $5.3 million, long-term $237.6 million)
discussed in Note 15, the $20.8 million deferred credit arising from the Navidad acquisition discussed in Note 18, and deferred tax
liabilities of $184.8 million in Note 27.
Outstanding Share Amounts
As at December 31, 2021, the Company had approximately 0.28 million stock options outstanding (each
exercisable for one common share of the Company), with exercise prices in the range of CAD $9.76 to CAD $41.62
and a weighted average life of 3.8 years. Approximately 0.22 million of the stock options were vested and
exercisable at December 31, 2021, with an average weighted exercise price of CAD $18.84 per share.
The following table sets out the common shares and options outstanding as at the date of this MD&A:
Common shares
Options
Total
Outstanding as at
February 17, 2022
210,457,524
279,003
210,736,527
As part of the consideration payable to Tahoe shareholders in connection with the acquisition of Tahoe, Tahoe
shareholders received contingent consideration in the form of one contingent value right ("CVR") for each Tahoe
share. Each CVR has a 10 year term and will be exchanged for 0.0497 of a Pan American share upon first
commercial shipment of concentrate following restart of operations at the Escobal mine. The Company issued an
aggregate of 313,887,490 CVRs.
PAN AMERICAN SILVER CORP.
47
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
CLOSURE AND DECOMMISSIONING COST PROVISION
The estimated future closure and decommissioning costs are based principally on the requirements of relevant
authorities and the Company’s environmental policies. The provision is measured using management’s
assumptions and estimates for future cash outflows. The Company accrues these costs, which are determined by
discounting costs using rates specific to the underlying obligation. Upon recognition of a liability for the closure
and decommissioning costs, the Company capitalizes these costs to the related mine and amortizes such amounts
over the life of each mine on a unit-of-production basis, except in the case of exploration projects for which the
offset to the liability is expensed. The accretion of the discount due to the passage of time is recognized as an
increase in the liability and a finance expense.
The total inflated and undiscounted amount of estimated cash flows required to settle the Company’s estimated
future closure and decommissioning costs as of December 31, 2021 was $413.0 million (December 31, 2020 -
$330.6 million) using inflation rates of between 1% and 5% (December 31, 2020 - between 0% and 4%). The
inflated and discounted provision on the statement of financial position as at December 31, 2021, using discount
rates between 1% and 9% (December 31, 2020 - between 0% and 8%), was $242.9 million (December 31, 2020 -
$235.1 million). Spending with respect to decommissioning obligations at the Alamo Dorado and Manantial Espejo
mines began in 2016, while the remainder of the obligations are expected to be paid through 2047 or later if mine
life is extended. Revisions made to the reclamation obligations in 2021 were primarily a result of increased site
disturbance at the mines as well as revisions to the estimate based on periodic reviews of closure plans, actual
expenditures incurred and concurrent closure activities completed. These obligations will be funded from
operating cash flows, reclamation deposits and cash on hand.
The accretion of the discount charged in Q4 2021 and 2021 earnings as finance expense were $1.9 million and $7.5
million, respectively (Q4 2020 and 2020 - $2.1 million and $8.3 million, respectively). Reclamation expenditures
incurred during Q4 2021 and 2021 were $1.7 million and $6.0 million, respectively (Q4 2020 and 2020 - $0.8
million and $2.5 million, respectively).
RELATED PARTY TRANSACTIONS
The Company’s related parties include its subsidiaries, associates over which it exercises significant influence and
key management personnel. During its normal course of operation, the Company enters into transactions with its
related parties for goods and services. Related party transactions with Maverix have been disclosed in Note 12 of
the 2021 Financial Statements.
These transactions are in the normal course of operations and are measured at the exchange amount, which is the
amount of consideration established and agreed to by the parties.
PAN AMERICAN SILVER CORP.
48
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
ALTERNATIVE PERFORMANCE (NON-GAAP) MEASURES
Per Ounce Measures
Cash costs and AISC are non-GAAP financial measures that do not have any standardized meaning prescribed by
IFRS and are therefore unlikely to be comparable to similar measures presented by other companies.
Pan American produces by-product metals incidentally to our silver and gold mining activities. We have adopted
the practice of calculating a performance measure with the net cost of producing an ounce of silver and gold, our
primary payable metals, after deducting revenues gained from incidental by-product production. This performance
measurement has been commonly used in the mining industry for many years and was developed as a relatively
simple way of comparing the net production costs of the primary metal for a specific period against the prevailing
market price of that metal.
Silver segment cash costs and AISC are calculated net of credits for realized revenues from all metals other than
silver ("silver segment by-product credits"), and are calculated per ounce of silver sold. Gold segment cash costs
and AISC are calculated net of credits for realized silver revenues ("gold segment by-product credits"), and are
calculated per ounce of gold sold. Consolidated cash costs and AISC are based on total silver ounces sold and are
net of by-product credits from all metals other than silver ("silver basis consolidated by-product credits").
Cash costs per ounce metrics, net of by-product credits, is used extensively in our internal decision making
processes. We believe the metric is also useful to investors because it facilitates comparison, on a mine-by-mine
basis, notwithstanding the unique mix of incidental by-product production at each mine, of our operations’
relative performance on a period-by-period basis, and against the operations of our peers in the silver industry.
Cash costs per ounce is conceptually understood and widely reported in the mining industry.
We believe that AISC, also calculated net of by-products, is a comprehensive measure of the full cost of operating
our consolidated business, given that it includes the cost of replacing silver and gold ounces through exploration,
the cost of ongoing capital investments (sustaining capital), general and administrative expenses, as well as other
items that affect the Company’s consolidated cash flow.
Due to the expected mine sequencing into a higher gold zone of the mine plan at Dolores, the Company has
determined that the mine is better identified as a Gold Segment operation from 2021 onwards. Thus as of Q1
2021, Dolores Cash Costs and AISC are reported on a per ounce of gold basis and are included as part of the Gold
Segment Cash Costs and AISC calculations. 2020 Dolores Cash Costs and AISC are reported on a per ounce of silver
basis and are included as part of the Silver Segment Cash Costs and AISC calculations, as previously reported.
To facilitate a better understanding of these measures as calculated by the Company, the following table provides
the detailed reconciliation of these measures to the applicable cost items, as reported in the consolidated financial
statements for the respective periods.
PAN AMERICAN SILVER CORP.
49
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
Consolidated Cash Costs and AISC:
(In thousands of USD, except as noted)
Production Costs
Purchase price allocation inventory fair value
adjustment
NRV inventory adjustments
On-site direct operating costs(3)
Royalties
Smelting, refining and direct selling charges(2)
Cash cost of sales before by-product credits(3)
Silver segment by-product credits(2)
Gold segment by-product credits(2)
Consolidated silver basis by-product credits(1,2)
Cash costs
NRV inventory adjustments
Sustaining capital
Exploration and project development
Reclamation cost accretion
General and administrative expense
All-in sustaining costs
Silver segment silver ounces sold (koz)
Gold segment gold ounces sold (koz)
Total silver ounces sold (koz)
Cash costs per ounce sold
AISC per ounce sold
AISC per ounce sold (excluding NRV inventory
adjustments)
Three months ended
December 31, 2021
Three months ended
December 31, 2020
Silver
Segment
106,908
Gold Segment
156,533
Corporate
Consolidated
(silver basis)(1)
263,442
Silver Segment Gold Segment
87,296
119,407
Corporate
Consolidated
(silver basis)(1)
206,702
—
814
107,722
2,204
18,604
128,530
(84,497)
—
—
44,033
(814)
16,627
1,040
494
—
61,381
4,522
—
—
9.74
13.57
13.75
(55)
(22,466)
134,012
4,345
43
138,400
—
(12,561)
—
125,839
22,466
39,654
1,926
1,129
—
191,014
—
131
—
963
1,461
1,289
(55)
(21,653)
241,734
6,548
18,647
266,930
—
—
(319,162)
(52,232)
21,653
56,280
4,076
1,864
8,255
39,895
—
—
5,067
7.87
3.60
6,742
126,148
7,222
22,074
155,444
(127,021)
—
—
28,424
(6,742)
24,392
596
1,225
—
47,895
4,620
—
—
6.15
10.37
11.83
(712)
—
86,583
1,902
29
88,514
—
(2,745)
—
85,769
—
27,615
851
749
—
114,984
—
112
—
763
1,023
1,023
1,110
240
8,255
9,605
(712)
6,742
212,732
9,123
22,103
243,958
—
—
(337,483)
(93,524)
(6,742)
52,007
1,091
2,061
10,679
(34,428)
—
—
4,732
(7.28)
(5.85)
(356)
87
10,679
10,410
PAN AMERICAN SILVER CORP.
50
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
(In thousands of USD, except as noted)
Production Costs
Purchase price allocation inventory fair value
adjustment
NRV inventory adjustments
On-site direct operating costs
Royalties
Smelting, refining and direct selling charges(2)
Cash cost of sales before by-product credits
Silver segment by-product credits(2)
Gold segment by-product credits(2)
Consolidated silver basis by-product credits(1,2)
Cash costs
NRV inventory adjustments
Sustaining capital
Exploration and project development
Reclamation cost accretion
General and administrative expense
All-in sustaining costs
Silver segment silver ounces sold (koz)
Gold segment gold ounces sold (koz)
Total silver ounces sold (koz)
Cash costs per ounce sold
AISC per ounce sold
AISC per ounce sold (excluding NRV inventory
adjustments)
Year ended
December 31, 2021
Year ended
December 31, 2020
Silver
Segment
384,460
Gold Segment
541,019
Corporate
Consolidated
(silver basis)(1)
925,479
Silver
Segment
Gold
Segment(4)
375,475
321,198
Corporate
Consolidated
(silver basis)(1)
696,672
992
385,452
17,483
70,921
473,857
(302,620)
—
—
171,237
(992)
56,837
3,329
2,008
(604)
(9,712)
530,704
18,892
181
549,776
—
(65,135)
—
484,642
9,712
150,785
4,681
4,516
232,418
654,336
14,883
—
—
11.51
15.62
15.68
—
539
—
899
1,214
1,196
(604)
(8,719)
916,156
36,375
71,102
1,023,633
—
—
(1,268,161)
(244,528)
8,719
207,623
11,071
7,470
34,852
25,207
—
—
17,470
1.44
0.94
16,175
391,650
20,663
61,340
473,653
(354,042)
—
—
119,611
(16,175)
83,178
1,474
4,898
(3,463)
—
317,735
6,832
137
324,704
—
(7,213)
—
317,490
—
78,868
3,413
2,996
192,986
402,768
16,966
—
—
7.05
11.38
12.33
—
398
—
797
1,011
1,011
3,060
946
34,852
38,858
(3,463)
16,175
709,385
27,494
61,477
798,357
—
—
(1,052,852)
(254,495)
(16,175)
162,047
7,096
8,260
36,375
(56,893)
—
—
17,317
(3.29)
(2.35)
2,209
365
36,375
38,948
(1) Consolidated silver basis calculated by treating all revenues from metals other than silver, including gold, as a by-product credit in cash costs. Consolidated silver basis by-product credits
include all silver segment by-product credits, as well as gold revenues from the Gold Segment mines as by-products. Total silver ounces sold likewise includes silver ounces sold from
Gold Segment operations.
Included in the revenue line of the consolidated income statements. By-product credits are reflective of realized metal prices for the applicable periods.
(2)
PAN AMERICAN SILVER CORP.
51
Sustaining capital is included in AISC, while capital related to growth projects or acquisitions (referred to by the Company as project or investment capital)
is not. Inclusion of only sustaining capital in the AISC measure reflects the capital costs associated with current ounces sold as opposed to project capital,
which is expected to increase future production. The project capital excluded in the reconciliation below is further described in the "Project Development
Update" section of this MD&A.
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
Reconciliation of payments for mineral properties,
plant and equipment and sustaining capital
(in thousands of USD)
Payments for mineral properties, plant and equipment(1)
Add/(Subtract)
Lease Payments(1)
Repayment of loans(2)
Investment (non-sustaining) capital
Sustaining Capital
Three months ended
December 31,
Year ended
December 31,
2021
70,146
2020
53,637
2021
2020
243,478
178,556
3,417
850
(18,132)
56,280
3,180
—
(4,807)
52,007
12,396
1,700
(49,951)
207,623
13,101
—
(29,610)
162,047
(1) As presented on the consolidated statements of cash flows.
(2) As presented on the consolidated statements of cash flows. Related to repayments of construction loans for leach pad expansions in Peru.
PAN AMERICAN SILVER CORP.
52
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
Silver Segment Cash Costs and AISC by mine:
SILVER SEGMENT
Three Months Ended December 31, 2021
(In thousands of USD, except as noted)
Production Costs
NRV inventory adjustments
On-site direct operating costs
Royalties
Smelting, refining & direct selling costs
Cash costs before by-product credits
Silver segment by-product credits
Cash costs
NRV inventory adjustments
Sustaining capital
Exploration and project development
Reclamation cost accretion
All-in sustaining costs
Silver segment silver ounces sold (koz)
Cash cost per ounce sold
AISC per ounce sold
AISC per ounce sold (excluding NRV
inventory adjustments)
La Colorada
Huaron
Morococha
San
Vicente
Manantial
Espejo
Consolidated
Silver
Segment
27,142
—
27,142
68
3,461
30,671
(11,242)
19,430
—
6,410
626
113
26,578
1,669
11.64
15.93
15.93
21,913
—
21,913
—
4,792
26,705
(24,360)
2,345
—
3,991
—
139
6,476
672
3.49
9.63
9.63
18,720
—
18,720
—
4,611
23,331
(21,084)
2,247
—
1,184
414
75
3,919
491
4.57
7.98
7.98
11,567
—
11,567
1,119
2,807
15,493
(8,075)
7,418
—
2,469
—
65
9,952
682
10.87
14.59
14.59
27,566
814
28,380
1,017
2,933
32,329
(19,736)
12,593
(814)
2,573
—
102
14,455
1,007
12.50
14.35
15.16
106,908
814
107,722
2,204
18,604
128,530
(84,497)
44,033
(814)
16,627
1,040
494
61,381
4,522
9.74
13.57
13.75
SILVER SEGMENT
Three Months Ended December 31, 2020
(In thousands of USD, except as noted) La Colorada
22,069
Production Costs
—
NRV inventory adjustments
22,069
On-site direct operating costs
185
Royalties
4,444
Smelting, refining & direct selling costs
26,698
Cash costs before by-product credits
(17,577)
Silver segment by-product credits
9,121
Cash costs
NRV inventory adjustments
Sustaining capital
Exploration and project development
Reclamation cost accretion
All-in sustaining costs
Silver segment silver ounces sold (koz)
Cash cost per ounce sold
AISC per ounce sold
AISC per ounce sold (excluding NRV
inventory adjustments)
—
5,496
442
143
15,201
1,291
7.07
11.78
Dolores
Huaron
Morococha
17,207
—
17,207
—
5,775
22,982
(16,852)
6,130
16,402
—
16,402
57
7,790
24,249
(22,832)
1,416
—
776
—
144
2,336
697
2.03
3.35
—
3,219
30
84
9,463
517
11.85
18.29
San
Vicente
Manantial
Espejo
Consolidated
Silver
Segment
6,455
—
6,455
3,647
2,132
12,234
(4,222)
8,013
—
1,391
—
71
9,475
453
17.67
20.89
21,038
492
21,530
730
1,919
24,180
(11,044)
13,136
(492)
732
—
123
13,499
702
18.72
19.24
119,407
6,742
126,148
7,222
22,074
155,444
(127,021)
28,424
(6,742)
24,392
596
1,225
47,895
4,620
6.15
10.37
36,235
6,250
42,485
2,603
13
45,101
(54,493)
(9,392)
(6,250)
12,778
124
660
(2,079)
959
(9.79)
(2.17)
11.78
4.35
3.35
18.29
20.89
19.94
11.83
PAN AMERICAN SILVER CORP.
53
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
SILVER SEGMENT
Year ended December 31, 2021
(In thousands of USD, except as noted)
Production Costs
NRV inventory adjustments
On-site direct operating costs
Royalties
Smelting, refining & direct selling costs
Cash costs before by-product credits
Silver segment by-product credits
Cash costs
NRV inventory adjustments
Sustaining capital
Exploration and project development
Reclamation cost accretion
All-in sustaining costs
Silver segment silver ounces sold (koz)
Cash cost per ounce sold
AISC per ounce sold
AISC per ounce sold (excluding NRV
inventory adjustments)
SILVER SEGMENT(1)
La Colorada
Huaron
Morococha
San
Vicente
Manantial
Espejo
Consolidated
Silver
Segment
74,874
—
74,874
319
10,883
86,075
(39,586)
46,490
—
26,069
2,643
452
75,654
4,321
10.76
17.51
17.51
90,126
—
90,126
—
21,925
112,051
(100,306)
11,745
—
10,897
—
557
23,199
2,976
3.95
7.79
7.79
75,182
—
75,182
—
20,140
95,322
(75,491)
19,831
—
6,957
686
298
27,772
2,059
9.63
13.49
13.49
40,404
—
40,404
14,165
9,612
64,181
(27,265)
36,917
—
5,340
—
261
42,518
2,465
14.98
17.25
17.25
103,874
992
104,866
3,000
8,361
116,227
(59,973)
56,254
(992)
7,575
—
439
63,275
3,062
18.37
20.67
20.99
384,460
992
385,452
17,483
70,921
473,857
(302,620)
171,237
(992)
56,837
3,329
2,008
232,418
14,883
11.51
15.62
15.68
Year ended December 31, 2020
Dolores
Huaron
(In thousands of USD, except as noted) La Colorada
69,073
Production Costs
—
NRV inventory adjustments
69,073
On-site direct operating costs
593
Royalties
18,110
Smelting, refining & direct selling costs
87,776
Cash costs before by-product credits
(51,039)
Silver segment by-product credits
36,737
Cash costs
NRV inventory adjustments
Sustaining capital
Exploration and project development
Reclamation cost accretion
All-in sustaining costs
Silver segment silver ounces sold (koz)
Cash cost per ounce sold
AISC per ounce sold
AISC per ounce sold (excluding NRV
inventory adjustments)
—
18,417
998
570
56,723
5,254
6.99
10.80
138,670
12,713
151,384
8,286
66
159,736
(169,802)
(10,066)
(12,713)
44,861
338
2,640
25,060
4,063
(2.48)
6.17
Morococha
35,768
—
35,768
—
11,712
47,480
(34,856)
12,624
39,572
—
39,572
42
18,167
57,781
(50,826)
6,955
—
4,500
—
576
12,031
1,843
3.77
6.53
—
7,259
138
336
20,357
1,108
11.40
18.38
San
Vicente
Manantial
Espejo
Consolidated
Silver
Segment
25,940
—
25,940
9,812
7,092
42,844
(9,383)
33,461
—
4,877
—
285
38,623
2,153
15.54
17.94
66,451
3,462
69,913
1,930
6,192
78,036
(38,137)
39,899
(3,462)
3,264
—
491
40,192
2,545
15.68
15.80
375,475
16,175
391,650
20,663
61,340
473,653
(354,042)
119,611
(16,175)
83,178
1,474
4,898
192,986
16,966
7.05
11.38
10.80
9.30
6.53
18.38
17.94
17.16
12.33
PAN AMERICAN SILVER CORP.
54
Gold Segment Cash Costs and AISC by mine:
GOLD SEGMENT
(In thousands of USD, except as noted)
Production Costs
Purchase Price Allocation Inventory Fair Value Adjustment
NRV inventory adjustments
On-site direct operating costs
Royalties
Smelting, refining & direct selling costs
Cash costs before by-product credits
Gold segment by-product credits
Cash costs
NRV inventory adjustments
Sustaining capital
Exploration and project development
Reclamation cost accretion
All-in sustaining costs
Gold segment gold ounces sold
Cash cost per ounce sold
AISC per ounce sold
AISC per ounce sold (excluding NRV inventory adjustments)
GOLD SEGMENT
(In thousands of USD, except as noted)
Production Costs
Purchase Price Allocation Inventory Fair Value Adjustment
NRV inventory adjustments
On-site direct operating costs
Royalties
Smelting, refining & direct selling costs
Cash costs before by-product credits
Gold segment by-product credits
Cash costs
NRV inventory adjustments
Sustaining capital
Exploration and project development
Reclamation cost accretion
All-in sustaining costs
Gold segment gold ounces sold
Cash cost per ounce sold
AISC per ounce sold
AISC per ounce sold (excluding NRV inventory adjustments)
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
Dolores
Three Months Ended December 31, 2021
La Arena
Shahuindo
Timmins
62,850
—
(22,466)
40,384
2,599
7
42,990
(11,001)
31,989
22,466
12,097
36
701
67,289
34,343
931
1,959
1,305
34,233
(55)
—
34,179
—
—
34,179
(1,276)
32,902
—
9,146
828
263
43,139
39,531
832
1,091
1,091
22,204
—
—
22,204
—
—
22,204
37,245
—
—
37,245
1,746
36
39,027
(190)
(94)
22,014
—
9,996
—
150
32,160
26,867
819
1,197
1,197
38,933
—
8,415
1,062
15
48,425
30,000
1,298
1,614
1,614
Total
156,533
(55)
(22,466)
134,012
4,345
43
138,400
(12,561)
125,839
22,466
39,654
1,926
1,129
191,014
130,740
963
1,461
1,289
Three Months Ended December 31, 2020
Shahuindo
La Arena
Timmins
Total
23,460
(688)
—
22,772
—
—
22,772
(2,291)
20,481
—
6,963
—
404
27,848
33,063
619
842
842
23,797
(24)
—
23,772
—
—
23,772
(365)
23,407
—
13,030
—
295
36,732
42,096
556
873
873
40,039
—
—
40,039
1,902
29
41,970
(89)
41,881
—
7,621
851
51
50,404
37,200
1,126
1,355
1,355
87,296
(712)
—
86,583
1,902
29
88,514
(2,745)
85,769
—
27,615
851
749
114,984
112,359
763
1,023
1,023
PAN AMERICAN SILVER CORP.
55
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
GOLD SEGMENT
(In thousands of USD, except as noted)
Production Costs
Purchase Price Allocation Inventory Fair Value Adjustment
NRV inventory adjustments
On-site direct operating costs
Royalties
Smelting, refining & direct selling costs
Cash costs before by-product credits
Gold segment by-product credits
Cash costs
NRV inventory adjustments
Sustaining capital
Exploration and project development
Reclamation cost accretion
All-in sustaining costs
Gold segment gold ounces sold
Year ended December 31, 2021
Dolores
Shahuindo
La Arena
Timmins
174,219
(9,712)
164,507
12,067
40
176,613
(58,154)
118,460
9,712
40,566
225
2,804
171,766
115,009
(598)
—
114,411
—
—
114,411
(5,643)
108,768
—
28,846
828
1,052
139,494
84,243
(6)
—
84,237
—
—
84,237
(927)
83,310
—
45,479
—
599
129,389
167,549
—
—
167,549
6,825
141
174,515
(411)
174,104
—
35,894
3,628
61
213,688
Total
541,019
(604)
(9,712)
530,704
18,892
181
549,776
(65,135)
484,642
9,712
150,785
4,681
4,516
654,336
158,071
139,456
109,432
132,000
538,960
Cash cost per ounce sold
AISC per ounce sold
AISC per ounce sold (excluding NRV inventory adjustments)
749
1,087
1,025
780
1,000
1,000
761
1,182
1,182
1,319
1,619
1,619
899
1,214
1,196
GOLD SEGMENT
Year ended December 31, 2020
(In thousands of USD, except as noted)
Production Costs
Purchase Price Allocation Inventory Fair Value Adjustment
NRV inventory adjustments
On-site direct operating costs
Royalties
Smelting, refining & direct selling costs
Cash costs before by-product credits
Gold segment by-product credits
Cash costs
NRV inventory adjustments
Sustaining capital
Exploration and project development
Reclamation cost accretion
All-in sustaining costs
Gold segment gold ounces sold
Cash cost per ounce sold
AISC per ounce sold
AISC per ounce sold (excluding NRV inventory adjustments)
Shahuindo
La Arena
Timmins
Total
97,941
(3,125)
—
94,816
—
—
94,816
(6,120)
88,695
—
22,749
(5)
1,615
113,055
150,775
588
750
750
72,676
(336)
—
72,339
—
—
72,339
(743)
71,596
—
37,324
—
1,179
110,098
99,320
721
1,109
1,109
150,581
(1)
—
150,580
6,832
137
157,549
(350)
157,199
—
18,795
3,418
203
179,615
148,130
1,061
1,213
1,213
321,198
(3,463)
—
317,735
6,832
137
324,704
(7,213)
317,490
—
78,868
3,413
2,996
402,768
398,225
797
1,011
1,011
PAN AMERICAN SILVER CORP.
56
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
Adjusted Earnings and Basic Adjusted Earnings Per Share
Adjusted earnings and basic adjusted earnings per share are non-GAAP measures that the Company considers to
better reflect normalized earnings as it eliminates items that in management's judgment are subject to volatility as
a result of factors which are unrelated to operations in the period, and/or relate to items that will settle in future
periods. Certain items that become applicable in a period may be adjusted for, with the Company retroactively
presenting comparable periods with an adjustment for such items and conversely, items no longer applicable may
be removed from the calculation. The Company adjusts certain items in the periods that they occurred, but does
not reverse or otherwise unwind the effect of such items in future periods. Neither adjusted earnings nor basic
adjusted earnings per share have any standardized meaning prescribed by GAAP and are therefore unlikely to be
comparable to similar measures presented by other companies.
The following table shows a reconciliation of adjusted earnings for the three and twelve months ended
December 31, 2021 and 2020, to the net earnings for each period.
(In thousands of USD, except as noted)
Net earnings for the period
Adjust for:
Write-down of other assets
Unrealized foreign exchange losses
Heap inventory net realizable value charge (recovery)
Unrealized losses (gains) on derivatives
(Income) from equity investees
Loss (gain) on sale of assets
COVID 19 mine care and maintenance
Unrealized Investment loss (income) (1)
Closure and decommissioning liability
Effect of taxes on adjusting items
Effect of foreign exchange on taxes
Total adjustments
Adjusted earnings for the period
Weighted average shares for the period
Adjusted earnings per share for the period
Three Months Ended
December 31
2021
14,664 $
2020(1)
169,018 $
$
Year ended
December 31
2021
98,562 $
—
1,643
20,421
662
(289)
551
—
6,083
—
(7,353)
3,561
25,279 $
39,943 $
—
1,002
(3,621)
(6,712)
(12,340)
(9,832)
—
(30,603)
5,174
(30)
(22,171)
(79,133) $
89,885 $
210,348
210,193
0.19 $
0.43 $
—
6,703
11,831
3,764
(4,347)
(32,167)
—
59,722
—
3,377
14,337
63,220 $
161,782 $
210,298
0.77 $
$
$
$
2020(1)
176,455
2,013
8,857
662
(6,175)
(10,529)
(7,922)
75,097
(62,139)
5,174
(18,848)
18,598
4,788
181,243
210,085
0.86
(1) Commencing in Q1 2021 gains and losses recognized in relation to certain equity investments owned by the Company, and included in
Investment (loss) income in the Company's financial statements, are being excluded from adjusted earnings. This change was based on
the increase in both the magnitude and volatility of these investments having a larger impact to the Company’s net income in recent
years, and Management’s belief that these fair-market-values are neither under the control of Management nor representative of
normal course operating results. The comparative period's adjusted earnings have been revised to conform to this change and thus
differ from that previously reported.
Total Debt
Total debt is a non-GAAP measure calculated as the total current and non-current portions of long-term debt
(including amounts drawn on the Sustainability-Linked Credit Facility), lease liabilities, and loans payable. Total
debt does not have any standardized meaning prescribed by GAAP and is therefore unlikely to be comparable to
similar measures presented by other companies. The Company and certain investors use this information to
evaluate the financial debt leverage of the Company.
Capital
Capital is a non-GAAP measure and is calculated as total equity plus total debt less cash and cash equivalents and
short term investments. Capital does not have any standardized meaning prescribed by GAAP and is therefore
unlikely to be comparable to similar measures presented by other companies. The Company and certain investors
use this information to evaluate the enterprise value of the Company.
PAN AMERICAN SILVER CORP.
57
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
Working Capital
Working capital is a non-GAAP measure calculated as current assets less current liabilities. Working capital does
not have any standardized meaning prescribed by GAAP and is therefore unlikely to be comparable to similar
measures presented by other companies. The Company and certain investors use this information to evaluate
whether the Company is able to meet its current obligations using its current assets.
Cash Mine Operating Earnings
Cash mine operating earnings is a non-GAAP measure calculated as mine operating earnings excluding
depreciation and amortization expense and NRV inventory adjustments included in production costs. Cash mine
operating earnings does not have any standardized meaning prescribed by GAAP and is therefore unlikely to be
comparable to similar measures presented by other companies. The Company excludes these significant non-cash
items to arrive at cash mine operating earnings for the purpose of analyzing and explaining periodic cash flow from
operations and changes thereto.
Reconciliation of cash mine operating earnings
(in thousands of USD)
Mine operating earnings(1)
Add/(Subtract)
Depreciation and amortization(1)
Net realizable value adjustment for inventories(2)
Cash mine operating earnings
Three Months Ended
December 31
2021
76,039 $
2020
137,172 $
Year ended
December 31
2021
367,938 $
76,141
21,652
173,832 $
77,464
(6,741)
207,895 $
302,958
8,719
679,615 $
2020
360,177
254,469
(16,175)
598,471
$
$
(1) As presented on the consolidated statements of earnings and comprehensive earnings.
(2) As presented in Note 24 to the Company's 2021 Financial Statements.
RISKS AND UNCERTAINTIES
The Company is exposed to many risks in conducting its business, including but not limited to: metal price risk as
the Company derives its revenue from the sale of silver, gold, zinc, lead, and copper; trading and credit risk in the
normal course of dealing with other companies; foreign exchange risk as the Company reports its financial
statements in USD whereas the Company operates in jurisdictions that utilize other currencies; risks relating to
cyber security; the inherent risk of uncertainties in estimating mineral reserves and mineral resources; political,
economic and social risks related to conducting business in jurisdictions such as Canada, Peru, Mexico, Argentina,
Bolivia and Guatemala; environmental risks; risks related to its relations with employees and local communities
where we operate, and risks relating to the spread of COVID-19, which has to date resulted in profound health and
economic impacts globally and which presents future risks and uncertainties that are largely unknown at this time.
Certain of these risks are described below, and are more fully described in Pan American’s Annual Information
Form (available on SEDAR at www.sedar.com) and Form 40-F filed with the SEC, and in the Financial Instruments
and related risks section of the 2021 Financial Statements. Readers are encouraged to refer to these documents
for a more detailed description of some of the risks and uncertainties inherent to Pan American’s business.
Financial Instruments Risk Exposure
The Company is exposed to financial risks, including metal price risk, credit risk, interest rate risk, foreign currency
exchange rate risk, and liquidity risk. The Company's exposures and management of each of those risks is
described in the 2021 Financial Statements under Note 8 "Financial Instruments", along with the financial
statement classification, the significant assumptions made in determining the fair value, and amounts of income,
expenses, gains and losses associated with financial instruments. Fair value estimates are made at a specific point
in time, based on relevant market information and information about the financial instrument. These estimates
are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be
determined with precision. Changes in assumptions could significantly affect the estimates.
PAN AMERICAN SILVER CORP.
58
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
The following provides a description of the risks related to financial instruments and how management manages
these risks:
Metal Price Fluctuations
The majority of our revenue is derived from the sale of silver, gold, zinc, copper and lead, and therefore
fluctuations in the price of these metals significantly affect our operations and profitability. Our sales are directly
dependent on metal prices, and metal prices have historically shown significant volatility and are beyond our
control. The Board of Directors continually assesses Pan American’s strategy towards our metal exposure,
depending on market conditions. The table below illustrates the effect of changes in silver and gold prices on
anticipated revenues for 2022, expressed in percentage terms. This analysis assumes that quantities of silver and
gold produced and sold remain constant under all price scenarios presented.
2022 Revenue Metal Price Sensitivity
Gold Price
$1,450
$1,550
$1,650
$1,750
$1,850
$1,950
$2,050
Silver
Price
$19.50
$20.50
$21.50
$22.50
$23.50
$24.50
$25.50
85%
87%
88%
89%
90%
91%
92%
89%
90%
91%
93%
94%
95%
96%
93%
94%
95%
96%
97%
99%
100%
96%
98%
99%
100%
101%
102%
104%
100%
101%
103%
104%
105%
106%
107%
104%
105%
106%
107%
109%
110%
111%
108%
109%
110%
111%
112%
113%
115%
Since base metal and gold revenue are treated as a by-product credit for purposes of calculating Silver Segment
cash costs and AISC per ounce of silver sold, and silver revenue is treated as a by-product credit for purposes of
calculating Gold Segment cash costs and AISC per ounce of gold sold, these non-GAAP measures are highly
sensitive to metal prices. The tables below illustrate this point by plotting the expected Silver Segment AISC per
silver ounce according to our 2022 guidance against various price assumptions for the Silver Segment’s two main
by-product credits, zinc and gold, and plotting the expected Gold Segment AISC per gold ounce according to our
2022 guidance against various price assumptions for the Gold Segment's main by-product credit, Silver, expressed
in percentage terms:
2022 Silver Segment AISC Metal Price Sensitivity
$1,450
$1,550
$1,650
$1,750
$1,850
Gold Price
Zinc
Price
$2,700
$2,800
$2,900
$3,000
$3,100
$3,200
$3,300
106%
105%
104%
103%
102%
101%
100%
105%
104%
103%
102%
101%
100%
99%
104%
103%
102%
101%
100%
99%
98%
103%
102%
101%
100%
99%
98%
97%
103%
101%
100%
99%
98%
97%
96%
$1,950
102%
100%
99%
98%
97%
96%
95%
$2,050
101%
99%
98%
97%
96%
95%
94%
PAN AMERICAN SILVER CORP.
59
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
2022 Gold Segment AISC Metal Price Sensitivity
$19.50
Gold
Price
$1,750
101%
$20.50
101%
$21.50
100%
Silver Price
$22.50
100%
$23.50
100%
$24.50
$25.50
99%
99%
The price of silver and other metals are affected by numerous factors beyond our control, including:
•
•
global and regional levels of supply and demand;
sales by government holders and other third parties;
• metal stock levels maintained by producers and others;
•
•
•
•
•
•
•
•
increased production due to new mine developments and improved mining and production methods;
speculative activities;
inventory carrying costs;
availability, demand and costs of metal substitutes;
international economic and political conditions;
interest rates, inflation and currency values;
increased demand for silver or other metals for new technologies; and
reduced demand resulting from obsolescence of technologies and processes utilizing silver and other
metals.
In addition to general global economic conditions that can have a significant impact on our business in many ways,
declining market prices for metals could materially adversely affect our operations and profitability. A decrease in
the market price of silver, gold and other metals could affect the commercial viability of our mines and production
at some of our mining properties. Lower prices could also adversely affect future exploration and our ability to
develop mineral properties and mines, including the development of capital intensive projects such as Navidad, all
of which would have a material adverse impact on our financial condition, results of operations and future
prospects. There can be no assurance that the market prices will remain at sustainable levels.
If market prices of gold and silver remain below levels used in Pan American’s impairment testing and reserve
prices for an extended period of time, Pan American may need to reassess its long-term price assumptions, and a
significant decrease in the long-term price assumptions would be an indicator of potential impairment, requiring
Pan American to perform an impairment assessment on related assets. Due to the sensitivity of the recoverable
amounts to long term metal prices, as well as to other factors including changes to mine plans and cost
escalations, any significant change in these key assumptions and inputs could result in impairment charges in
future periods.
The Board of Directors continually assesses Pan American’s strategy towards our base metal exposure, depending
on market conditions. From time to time, we mitigate the market price risk associated with our base metal
production by committing some of our forecast base metal production to forward sales and options contracts.
However, decisions relating to hedging may have material adverse effects on our financial performance, financial
position, and results of operations.
During the year ended December 31, 2021, the Company entered into collars made up of put and call contracts for
its exposure to copper but had no contracts outstanding as at December 31, 2021. The Company recorded losses
of $0.2 million and $1.1 million in Q4 2021 and 2021, respectively, on copper contracts during the year ended
December 31, 2021. The Company did not enter into copper contracts during the comparable periods in 2020. As
PAN AMERICAN SILVER CORP.
60
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
at December 31, 2021, the Company had outstanding collars made up of put and call contracts for its exposure to
zinc (3,600 tonnes) with settlement dates on those positions between January 2022 and December 2022. The
outstanding contracts have respective weighted average floor and cap prices per tonne of $3,150 and $4,000. The
Company recorded gains of $0.1 million and $0.1 million during the three and twelve months ended December 31,
2021, respectively. The Company did not have any zinc contracts outstanding during the comparable periods in
2020.
During 2020, the Company entered into diesel swap contracts designed to fix or limit the Company’s exposure to
higher fuel prices. As at December 31, 2021, the Company had outstanding positions on its diesel exposure with a
notional amount of 3.6 million gallons, with a weighted average fixed price of $1.42 per gallon, expiring between
January 2022 and December 2022. The Company recorded gains of $0.3 million and $9.4 million for the three and
twelve months ended December 31, 2021, respectively (Q4 2020 and 2020: gains of $4.0 million and $4.7 million,
respectively).
We take the view that our precious metals production should not be hedged, thereby allowing the maximum
exposure to precious metal prices. However, in extreme circumstances, the Board of Directors may make
exceptions to this approach. Such decisions could have material adverse effects upon our financial performance,
financial position, and results of operations.
Trading Activities and Credit Risk
The zinc, lead, and copper concentrates produced by us are sold through long-term supply arrangements to metal
traders or integrated mining and smelting companies. The terms of the concentrate contracts may require us to
deliver concentrate that has a value greater than the payment received at the time of delivery, thereby
introducing us to credit risk of the buyers of our concentrates. Should any of these counterparties not honour our
contractual arrangements, or should any of them become insolvent, we may incur losses for products already
shipped and be forced to sell our concentrates in the spot market or we may not have a market for our
concentrates and therefore our future operating results may be materially adversely impacted.
As at December 31, 2021, we had receivable balances associated with buyers of our concentrates of $40.0 million
(2020 - $35.1 million). The vast majority of our concentrate is sold to a limited number of concentrate buyers.
Doré production is refined under long term agreements with fixed refining terms at three separate refineries
worldwide. We generally retain the risk and title to the precious metals throughout the process of refining and
therefore are exposed to the risk that the refineries will not be able to perform in accordance with the refining
contract and that we may not be able to fully recover our precious metals in such circumstances. As at
December 31, 2021, we had approximately $52.3 million (2020 - $61.8 million) contained in precious metal
inventory at refineries. We maintain insurance coverage against the loss of precious metals at our mine sites and
in-transit to refineries. Risk is transferred to the refineries upon delivery.
Refined silver and gold is sold in the spot market to various bullion traders and banks. Credit risk may arise from
these activities if we are not paid for metal at the time it is delivered, as required by spot sale contracts.
We maintain trading facilities with several banks and bullion dealers for the purposes of transacting our trading
activities. None of these facilities are subject to margin arrangements. Our trading activities can expose us to our
counterparties’ credit risk to the extent that our trading positions have a positive mark-to-market value.
Supplier advances for products and services yet to be provided are a common practice in some jurisdictions in
which we operate. These advances represent a credit risk to us to the extent that suppliers do not deliver products
or perform services as expected. As at December 31, 2021, we had made $11.2 million of supplier advances (2020
- $8.2 million), which are reflected in “Trade and other receivables” on the consolidated statements of financial
position.
Management constantly monitors and assesses the credit risk resulting from our concentrate sales, refining
arrangements and commodity contracts. Furthermore, management carefully considers credit risk when allocating
PAN AMERICAN SILVER CORP.
61
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
prospective sales and refining business to counterparties. In making allocation decisions, management attempts to
avoid unacceptable concentration of credit risk to any single counterparty.
From time to time, we may invest in equity securities of other companies. Just as investing in Pan American is
inherent with risks such as those set out in this MD&A, by investing in other companies we will be exposed to the
risks associated with owning equity securities and those risks inherent in the investee companies.
Exchange Rate Risk
We report our financial statements in USD; however we operate in jurisdictions that utilize other currencies. As a
consequence, the financial results of our operations, as reported in USD, are subject to changes in the value of the
USD relative to local currencies. Since our sales are denominated in USD and a portion of our operating costs and
capital spending are in local currencies, we are negatively impacted by strengthening local currencies relative to
the USD and positively impacted by the inverse. From time to time, we mitigate part of this currency exposure by
accumulating local currencies, entering into contracts designed to fix or limit our exposure to changes in the value
of local currencies relative to the USD, or assuming liability positions to offset financial assets subject to currency
risk.
Pan American held cash and short-term investments of $60.5 million in CAD, $1.2 million in MXN, $8.6 million in
PEN, $12.5 million in ARS, $8.4 million in BOB, and $0.2 million in Guatemalan quetzales as at December 31, 2021.
As at December 31, 2021, Pan American had outstanding positions on $36.0 million in foreign currency exposure
of MXN purchases, $16.8 million of PEN purchases, and $48.0 million of CAD purchases. The MXN positions had
weighted average USD put and call exchange rates of $20.50 and $26.08, respectively, expiring between January
2022 and December 2022. The PEN positions had a weighted average USD fixed exchange rate of $4.13, expiring
between January 2022 and December 2022. The CAD positions had weighted average USD put and call exchange
rates of $1.26 and $1.32, respectively, expiring between January 2022 and December 2022.
For the year ended December 31, 2021, the Company recorded losses of $0.2 million (2020 - gains of $1.6 million),
losses of $3.7 million (2020 - losses of $2.2 million), and gains of $0.9 million (2020 - losses of $0.6 million) on
MXN, PEN, and CAD derivative contracts, respectively.
The following table illustrates the effect of changes in the exchange rate of PEN and CAD against the USD on
anticipated cost of sales for 2022, expressed in percentage terms:
2022 Cost of Sales Exchange Rate Sensitivity
PEN/
USD
$3.50
$3.70
$3.90
$4.10
$4.30
$4.50
$4.70
$1.04
106%
105%
104%
104%
103%
102%
102%
$1.11
105%
104%
103%
102%
102%
101%
100%
$1.18
103%
103%
102%
101%
100%
100%
99%
CAD/USD
$1.25
102%
101%
101%
100%
99%
99%
98%
$1.32
101%
101%
100%
99%
98%
98%
97%
$1.39
101%
100%
99%
98%
98%
97%
96%
$1.46
100%
99%
98%
97%
97%
96%
96%
Our balance sheet contains various monetary assets and liabilities, some of which are denominated in foreign
currencies. Accounting convention dictates that these balances are translated at the end of each period, with
resulting adjustments being reflected as foreign exchange gains or losses on our income statement.
In addition to the foregoing, governmental restrictions and controls relating to exchange rates also impact our
operations. In Argentina, for example, the government has at times established official exchange rates that were
significantly different from the unofficial exchange rates more readily utilized locally to determine prices and
PAN AMERICAN SILVER CORP.
62
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
value. Our investments in Argentina are primarily funded from outside of the country, and therefore conversion of
foreign currencies, like USD, at the official exchange rate has had the effect of reducing purchasing power and
substantially increasing relative costs in an already high inflationary market. Maintaining monetary assets in ARS
also exposes us to the risks of ARS devaluation and high domestic inflation.
Liquidity Risk
Liquidity risk is the risk that we will not be able to meet our financial obligations as they come due. The volatility of
the metals markets can impact our ability to forecast cash flow from operations.
We must maintain sufficient liquidity to meet our short-term business requirements, taking into account our
anticipated cash flows from operations, our holdings of cash and cash equivalents, and committed loan facilities.
We manage our liquidity risk by continuously monitoring forecasted and actual cash flows. We have in place a
rigorous reporting, planning and budgeting process to help determine the funds required to support our normal
operating requirements on an ongoing basis and our expansion plans. We continually evaluate and review capital
and operating expenditures in order to identify, decrease, and limit all non-essential expenditures.
We are required to use a portion of our cash flow to service principal and interest on debt, which will limit the
cash flow available for other business opportunities. We also maintain and enter into intercompany credit
arrangements with our subsidiaries in the normal course. Our ability to make scheduled principal payments, pay
interest on or refinance our indebtedness depends on our future performance, which is subject to economic,
financial, competitive and other factors beyond our control. Unexpected delays in production, the suspension of
our mining licenses, or other operational problems could impact our ability to service the debt and make
necessary capital expenditures when the debt becomes due. If we are unable to generate such cash flow to timely
repay any debt outstanding, we may be required to adopt one or more alternatives, such as selling assets,
restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our
ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time.
We may not be able to engage in any of these activities or engage in these activities on desirable terms, which
could result in a default on our debt obligations.
Claims and Legal Proceedings
Pan American is subject to various claims and legal proceedings covering a wide range of matters that arise in the
ordinary course of business activities. The nature, assessment and management of such claims are described in
this section, and in Note 28 to the Company's 2021 Financial Statements. There were no significant changes to
those risks or to the Company's management of exposure to those risks during the three months ended December
31, 2021.
In early May 2021, the Company’s subsidiary in Guatemala and the Ministry of Energy and Mines of Guatemala
were served with legal proceedings that were originated in the Constitutional Court of Guatemala by a small group
of residents and landowners, or alleged residents and landowners, from the La Cuchilla community near the
Escobal mine claiming that prior mining activities damaged their lands. Currently, operations at Escobal are
suspended pending the completion of the government-led ILO 169 consultation process. Nevertheless, the action
seeks injunctive relief to prevent future mining activities at Escobal. While the Company believes the claims are
procedurally and substantively flawed and without merit, the outcome of these proceedings cannot be
determined at this time.
As reported in our Annual Information Form dated February 23, 2022, certain individuals have asserted
community rights and land ownership over a portion of the La Colorada mine’s surface lands in the Agrarian Courts
of Mexico. They have also initiated a process before the Secretariat of Agrarian, Territorial and Urban
Development (“SEDATU”) in Zacatecas to declare such lands as national property. In 2019, we filed a legal
challenge (amparo) against this process and obtained an injunction to protect our ownership of these surface
rights pending the outcome of the challenge and a further review by SEDATU. Our challenge was dismissed on
October 25, 2021, primarily on the basis that no final declaration of national lands had yet been made by SEDATU
PAN AMERICAN SILVER CORP.
63
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
that would affect our property rights. We have appealed this dismissal and we will continue to oppose the SEDATU
process. While we believe that we hold proper title to the surface lands in question, if we are unable to maintain,
or maintain access to, those surface rights, there could be material adverse impacts on the La Colorada mine’s
future mining operations.
COVID-19 and Other Pandemics
Since the outbreak of COVID-19 in late 2019, it has spread into areas where we have operations and where our
offices are located. During 2020, Government efforts to curtail the spread of COVID-19 resulted in temporary
suspensions of our operations in Mexico, Peru, Argentina and Bolivia, and we reduced throughput at our Timmins
operation in Canada in order to enhance physical distancing and protect our personnel and the community. The
spread of COVID-19 has impacted our employees and contractors, not only as it relates to potential health
concerns, but also in terms of limitations on movement, availability of food and other goods, and personal well-
being, among others. Our suppliers and service providers have also been impacted.
While COVID-19 has already had significant, direct impacts on our operations, our business, our workforce, and
our production, the extent to which COVID-19 will continue to impact our operations will depend on future
developments which are highly uncertain and cannot be predicted with confidence. These future developments
include, but are not limited to, the duration of any outbreak, new information that may emerge concerning the
severity of COVID-19 or its variants, and the actions taken to contain COVID-19 or treat it. The impact of
governmental restrictions and health and safety protocols could improve or worsen relative to our assumptions,
depending on how each jurisdiction manages potential outbreaks of COVID-19 and the efficacy of vaccines and
other measures. We assume operations will continue to be impacted by comprehensive COVID-19 protocols in
2022, which would increase costs and restrict throughput levels, especially at our underground mines. Our ability
to continue with our operations, or to successfully maintain our operations on care and maintenance if so
required, or to restart or ramp-up any such operations efficiently or economically, or at all, is unknown. It is also
uncertain, whether we will be able to maintain an adequate financial condition and have sufficient capital, or have
access to capital through our Sustainability-Linked Credit Facility or otherwise, to sustain our business and
operations.
Moreover, the continued presence of, or spread, of COVID-19 and its variants, and any future emergence and
spread of similar pathogens, globally would likely have material adverse effect on both global and regional
economies, including those in which we operate, as we have seen already. Such effects would not only affect our
business and results of operations, but also the operations of our suppliers, contractors and service providers,
including smelter and refining service providers, and the demand for our production. COVID-19 and the spread of
similar pathogens could also negatively impact stock markets, including the trading price of our shares, adversely
impact our ability to raise capital, cause continued interest rate volatility and movements that could make
obtaining financing or refinancing our debt obligations more challenging or more expensive (if such financing is
available at all), and result in any operations affected by coronavirus becoming subject to quarantine or shut
down. Any of these developments, and others, could have a material adverse effect on our business and results of
operations.
PAN AMERICAN SILVER CORP.
64
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
Climate Change
There is significant evidence of the effects of climate change on our planet and an intensifying focus on addressing
these issues. The Company recognizes that climate change is a global challenge that may have both favorable and
adverse effects on our business in a range of possible ways. Mining and processing operations are energy intensive
and result in a carbon footprint either directly or through the purchase of fossil-fuel based electricity. As such, the
Company is impacted by current and emerging policy and regulation relating to greenhouse gas emission levels,
energy efficiency, and reporting of climate-change related risks. While some of the costs associated with reducing
emissions may be offset by increased energy efficiency, technological innovation, or the increased demand for our
metals as part of technological innovations, the current regulatory trend may result in additional transition costs
at some of our operations. Governments are introducing climate change legislation and treaties at the
international, national, and local levels, and regulations relating to emission levels and energy efficiency are
evolving and becoming more rigorous. Current laws and regulatory requirements are not consistent across the
jurisdictions in which we operate, and regulatory uncertainty is likely to result in additional complexity and cost in
our compliance efforts. Public perception of mining is, in some respects, negative and there is increasing pressure
to curtail mining in many jurisdictions as a result, in part, of perceived adverse effects of mining on the
environment.
Concerns around climate change may also affect the market price of our shares as institutional investors and
others may divest interests in industries that are thought to have more environmental impacts. While we are
committed to operating responsibly and reducing the negative effects of our operations on the environment, our
ability to reduce emissions, energy and water usage by increasing efficiency and by adopting new innovation is
constrained by technological advancement, operational factors and economics. Adoption of new technologies,
the use of renewable energy, and infrastructure and operational changes necessary to reduce water usage may
also increase our costs significantly. Concerns over climate change, and our ability to respond to regulatory
requirements and societal expectations, may have significant impacts on our operations and on our reputation,
and may even result in reduced demand for our products.
The physical risks of climate change could also adversely impact our operations. These risks include, among other
things, extreme weather events, resource shortages, changes in rainfall and in storm patterns and intensities,
water shortages, changing sea levels and extreme temperatures. Climate-related events such as mudslides, floods,
droughts and fires can have significant impacts, directly and indirectly, on our operations and could result in
damage to our facilities, disruptions in accessing our sites with labour and essential materials or in shipping
products from our mines, risks to the safety and security of our personnel and to communities, shortages of
required supplies such as fuel and chemicals, inability to source enough water to supply our operations, and the
temporary or permanent cessation of one or more of our operations. There is no assurance that we will be able to
successfully anticipate, respond to, or manage the risks associated with physical climate change events and
impacts, and this may result in material adverse consequences to our business and to our financial results.
SIGNIFICANT JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY IN THE
APPLICATION OF ACCOUNTING POLICIES
In preparing financial statements in accordance with IFRS, management is required to make estimates and
assumptions that affect the amounts reported in the consolidated financial statements. These critical accounting
estimates represent management estimates and judgments that are uncertain, and any changes in these could
materially impact the Company’s financial statements. Management continuously reviews its estimates,
judgments and assumptions using the most current information available. The significant judgments and key
sources of estimation uncertainty in the application of accounting policies are described in Note 5 and Note 6 of
the 2021 Financial Statements, respectively.
Readers should also refer to Note 3 of the 2021 Financial Statements, for the Company’s summary of significant
accounting policies.
PAN AMERICAN SILVER CORP.
65
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
CHANGES IN ACCOUNTING STANDARDS
Certain new accounting standards and interpretations have been published that are not mandatory for the current
period and have not been early adopted.
Presentation of Financial Statements (Amendment to IAS 1)
The amendments to IAS 1, clarify the presentation of liabilities. The classification of liabilities as current or non-
current is based on contractual rights that are in existence at the end of the reporting period and is affected by
expectations about whether an entity will exercise its right to defer settlement. A liability not due over the next
twelve months is classified as non-current even if management intends or expects to settle the liability within
twelve months. The amendment also introduces a definition of ‘settlement’ to make clear that settlement refers
to the transfer of cash, equity instruments, other assets, or services to the counterparty. The amendments are
effective for annual reporting periods beginning on or after January 1, 2023. The implementation of this
amendment is not expected to have a material impact on the Company.
Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12)
The amendment clarifies that the initial recognition exemption does not apply to transactions in which equal
amounts of deductible and taxable temporary differences arise on initial recognition. The amendment is effective
for annual reporting periods beginning on or after January 1, 2023. Early application is permitted. This
amendment is not expected to have a material impact on the Company.
Property, Plant and Equipment - Proceeds before Intended Use (Amendments to IAS 16)
The amendment will prohibit the Company from deducting net proceeds from selling any items produced while
bringing an item of property, plant and equipment to the location and condition necessary for it to be capable of
operating in a manner intended by management. The amendment requires retrospective application and effective
for annual reporting periods beginning on or after January 1, 2022, with earlier application permitted. This
amendment is not expected to have a material impact on the Company upon adoption; however, the amendment
may have impacts in future periods.
Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)
The amendments require that an entity discloses its material accounting policies, instead of its significant
accounting policies. Further amendments explain how an entity can identify a material accounting policy.
Examples of when an accounting policy is likely to be material are added. To support the amendment, the IASB has
also developed guidance and examples to explain and demonstrate the application of the ‘four-step materiality
process’ described in IFRS Practice Statement 2. The amendments are effective for annual reporting periods
beginning on or after January 1, 2023. The Company is currently evaluating the impact of the amendment on its
financial statements.
DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROL OVER FINANCIAL REPORTING
Pan American’s management considers the meaning of internal control to be the processes established by
management to provide reasonable assurance about the achievement of the Company’s objectives regarding
operations, reporting and compliance. Internal control is designed to address identified risks that threaten any of
these objectives.
Disclosure controls and procedures (“DC&P”)
Our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) are responsible for establishing and
maintaining adequate DC&P. Under the supervision and with the participation of our CEO and CFO, we evaluated
the effectiveness of the design and operation of our DC&P in accordance with requirements of National
Instrument 52-109 of the Canadian Securities Commission (“NI 52-109”) and the Sarbanes Oxley Act of 2002 (as
adopted by the US Securities and Exchange Commission).
PAN AMERICAN SILVER CORP.
66
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
As of December 31, 2021, based on the evaluation, our CEO and CFO concluded that our DC&P were effective to
ensure that information required to be disclosed by us in reports we file or submit is recorded, processed,
summarized and reported within the time periods specified in securities legislation and is accumulated and
communicated to our management, including our CEO and CFO.
Internal control over financial reporting (“ICFR”)
Our CEO and CFO are responsible for establishing and maintaining adequate ICFR. Under the supervision and with
the participation of our CEO and CFO, we evaluated the effectiveness of our ICFR as of December 31, 2021 based
upon the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of
the Treadway Commission. Based on the evaluation, our CEO and CFO concluded that our ICFR was effective as of
December 31, 2021. Management reviewed the results of management’s evaluation with the Audit Committee of
the Board.
The effectiveness of the Company’s ICFR as of December 31, 2021 has been audited by Deloitte LLP, Independent
Registered Public Accounting Firm as stated in their report immediately preceding the Company’s audited
consolidated financial statements for the year ended December 31, 2021.
Changes in ICFR
There has been no change in the Company’s ICFR during the three and twelve month periods ended December 31,
2021 that has materially affected, or is reasonably likely to materially affect, its ICFR.
Inherent limitations of controls and procedures
All internal control systems, no matter how well designed, have inherent limitations. As a result, even systems
determined to be effective may not prevent or detect misstatements on a timely basis, as systems can provide
only reasonable assurance that the objectives of the control system are met. In addition, projections of any
evaluation of the effectiveness of ICFR to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures
may change.
PAN AMERICAN SILVER CORP.
67
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
MINERAL RESERVES AND RESOURCES
Pan American Silver Corporation Mineral Reserves as of June 30, 2021 (1,2)
Property
Classification
Location
Tonnes
(Mt)
Ag (g/t) Contained
Ag (Moz)
Au (g/t) Contained
Cu (%)
Pb (%)
Zn (%)
Au (koz)
Silver Segment
Huaron
Peru
Morococha (92.3%)(3) Peru
La Colorada
Mexico
Manantial Espejo
Argentina
San Vicente (95%)(3)
Bolivia
Joaquin
Argentina
COSE
Argentina
Proven
Probable
Proven
Probable
Proven
Probable
Proven
Probable
Proven
Probable
Proven
Probable
Proven
Probable
Escobal
Guatemala Proven
Total Silver Segment(4)
Gold Segment
La Arena
Peru
Dolores
Mexico
Shahuindo
Peru
Timmins
Canada
Probable
Proven
Probable
Proven
Probable
Proven
Probable
Proven
Probable
Total Gold Segment(4)
Total Gold and Silver Segments(4)
Proven +
Probable
6.9
3.6
3.0
3.5
3.9
6.2
0.3
0.2
1.0
0.5
0.1
0.3
—
—
2.5
22.1
54.2
24.8
21.9
20.8
6.2
54.6
49.8
4.0
6.9
189.0
243.2
164
171
151
155
350
289
280
337
364
375
497
533
860
185
486
316
278
22.0
28.0
8
6
11
89
36.6
19.8
14.7
17.4
43.5
57.3
2.5
1.8
11.8
6.6
1.6
6.0
0.7
0.1
39.5
225.0
0.25
0.19
2.56
3.28
0.19
0.36
20.56
11.32
0.42
0.34
30.6
38.2
23.10
17.20
0.60
4.00
17.4
3.7
34.20
243.80
0.70
0.31
0.38
0.31
0.38
0.41
1.46
1.73
1.30
1.36
1.17
1.18
0.26
0.30
2.95
3.10
3.78
3.72
2.09
2.06
3.84
3.89
1.02
0.77
1.07
1.75
1.25
2.15
484.9
0.36
412.9
0.47
0.39
0.27
0.74
0.78
0.54
0.41
3.03
2.91
0.63
314.1
193.3
495.3
155.1
949.8
663.1
385.3
642.6
3,798.5
14.9
5.6
14.5
9.4
44.4
529.3
0.58
4,211.5
0.47
1.07
2.15
(1) See table below entitled “Metal price assumptions used to estimate mineral reserves and resources as at June 30, 2021”.
(2) Mineral reserve estimates were prepared under the supervision of, or were reviewed by, Christopher Emerson, FAusIMM, Vice
President Business Development and Geology and Martin G. Wafforn, P.Eng., Senior Vice President Technical Services and Process
Optimization, each of whom are Qualified Persons as that term is defined in National Instrument 43-101 Standards of Disclosures of
Mineral Projects (“NI 43-101").
(3) This information represents the portion of mineral reserves attributable to Pan American based on its ownership interest in the
operating entity as indicated.
(4) Totals may not add up due to rounding. Total average grades of each element are with respect to those mines that produce the
element.
PAN AMERICAN SILVER CORP.
68
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
Pan American Silver Corporation Measured and Indicated Mineral Resources as of June 30, 2021(1,2)
Property
Classification
Location
Au (g/t) Contained
Tonnes
(Mt)
Ag (g/t) Contained
Ag (Moz)
Peru
Mexico
Measured
Indicated
Measured
Indicated
Measured
Indicated
Argentina Measured
Indicated
Argentina Measured
Indicated
Indicated
Measured
Indicated
Argentina Measured
Indicated
Guatemala Measured
Indicated
Argentina
Bolivia
Silver Segment
Huaron
Morococha (92.3%)(3) Peru
La Colorada
Manantial Espejo
COSE
Joaquin
San Vicente (95%)(3)
Navidad
Escobal
Total Silver Segment(4)
Gold Segment
Dolores
La Bolsa
Pico Machay
La Arena
Shahuindo
Mexico
Mexico
Peru
Peru
Peru
Timmins
Canada
La Arena II
Peru
Whitney (79%)(3)
Canada
Gold River
Marlhill
Vogel
Canada
Canada
Canada
Total Gold Segment(4)
Measured
Indicated
Measured
Indicated
Measured
Indicated
Measured
Indicated
Measured
Indicated
Measured
Indicated
Measured
Indicated
Measured
Indicated
Indicated
Indicated
Indicated
1.9
2.5
0.6
0.8
1.3
1.9
0.2
0.3
—
—
0.3
0.9
0.3
15.4
139.8
2.3
14.2
182.7
2.8
0.8
10.8
10.6
4.7
5.9
1.6
2.6
19.3
24.2
2.7
5.1
154.2
556.6
0.8
1.8
0.7
0.4
2.2
807.8
162
154
134
121
185
175
185
219
146
218
357
165
233
137
126
251
201
137
16.00
22.00
10
8
9.9
12.1
2.4
3.0
7.6
10.6
1.4
2.1
0.2
0.1
3.8
4.8
2.3
67.8
564.5
18.6
91.6
803.0
1.50
0.60
3.5
2.7
5.00
4.00
3.20
3.50
7
14.9
0.15
0.15
1.85
2.72
1.68
5.55
0.25
0.23
0.20
0.26
0.3
0.62
0.70
0.54
0.91
0.67
0.32
0.22
0.29
0.28
3.46
2.90
0.25
0.23
7.02
6.77
5.29
4.52
1.75
0.31
Cu (%)
Pb (%)
Zn (%)
Au (koz)
6.00
9.00
14.40
26.30
2.40
1.40
2.70
16.70
93.00
0.21
0.67
0.61
0.91
0.22
0.28
0.10
0.04
1.63
1.55
0.82
0.55
0.82
1.22
0.18
0.21
1.44
0.79
0.31
0.38
171.9
0.06
0.83
3.11
2.78
2.64
2.04
1.42
2.12
2.60
2.58
0.59
0.66
1.34
27.2
16.3
242.8
184.3
137.5
127.1
16.2
18.1
182.5
218.6
296.0
478.7
1256.6
4,061.0
172.3
387.5
117.4
57.4
125.0
0.38
0.37
8,122.4
0.37
Total Gold and Silver Segments(4)
Measured +
Indicated
990.5
101
817.9
0.31
8,294.3
0.31
0.83
1.34
(1) See table below entitled “Metal price assumptions used to estimate mineral reserves and resources as at June 30, 2021”.
(2) Mineral reserve estimates were prepared under the supervision of, or were reviewed by, Christopher Emerson, FAusIMM, Vice
President Business Development and Geology and Martin G. Wafforn, P.Eng., Senior Vice President Technical Services and Process
Optimization, each of whom are Qualified Persons as that term is defined in NI 43-101.
(3) This information represents the portion of mineral reserves attributable to Pan American based on its ownership interest in the
operating entity as indicated.
(4) Totals may not add up due to rounding. Total average grades of each element are with respect to those mines that produce the
element.
PAN AMERICAN SILVER CORP.
69
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
Pan American Silver Corporation Inferred Mineral Resources as of June 30, 2021(1,2)
Contained
Classification
Property
Ag (Moz)
Tonnes
(Mt)
Ag
(g/t)
Location
Au
(g/t)
Contained
Au (koz)
Cu (%)
Pb (%)
Zn (%)
Silver Segment
Peru
Huaron
Morococha (92.3%)(3) Peru
La Colorada
La Colorada Skarn
Manantial Espejo
San Vicente (95%)(3)
Navidad
Joaquin
COSE
Escobal
Inferred
Inferred
Mexico
Inferred
Mexico
Inferred
Argentina
Inferred
Bolivia
Inferred
Argentina
Inferred
Argentina
Inferred
Inferred
Argentina
Guatemala Inferred
Total Silver Segment(4)
Gold Segment
Dolores
La Bolsa
Pico Machay
La Arena
Shahuindo
Shahuindo Sulphide
Timmins
La Arena II
Whitney
Gold River
Vogel
Total Gold Segment(4)
Mexico
Mexico
Peru
Peru
Peru
Peru
Canada
Peru
Canada
Canada
Canada
Inferred
Inferred
Inferred
Inferred
Inferred
Inferred
Inferred
Inferred
Inferred
Inferred
Inferred
Total Gold and Silver Segments(4)
Inferred
153
143
190
44
263
292
81
317
77
180
74
46
8
8
14
5.8
4.8
8.4
100.4
0.5
2.6
45.9
0.2
—
1.9
170.5
2.7
13.7
23.9
8.9
17.7
97.4
3.9
71.0
0.8
5.3
1.5
246.8
417.3
13
47
1.51
1.09
1.29
1.77
0.29
0.57
0.22
1.36
2.73
3.29
2.48
4.29
2.49
0.42
3.96
28.6
21.9
51.1
141.0
4.3
24.6
119.4
1.9
—
10.7
403.5
4.0
3.3
4.5
45.1
56.9
0.43
0.39
0.20
0.26
0.02
0.2
2.7
0.3
2.2
0.9
40.9
44.6
1.6
0.8
53.7
0.40
141.6
0.16
1.25
0.51
0.58
0.24
0.47
0.74
3.12
0.21
5.34
6.06
3.60
0.71
108.5
224.6
445.7
70.1
268.2
2323.3
395.9
486.7
134.9
1,027.4
168.8
0.2
5,654
0.23
460.4
0.70
5,795.6
0.17
1.36
3.96
(1) See table below entitled “Metal price assumptions used to estimate mineral reserves and resources as at June 30, 2021”.
(2) Mineral reserve estimates were prepared under the supervision of, or were reviewed by, Christopher Emerson, FAusIMM, Vice
President Business Development and Geology and Martin G. Wafforn, P.Eng., Senior Vice President Technical Services and Process
Optimization, each of whom are Qualified Persons as that term is defined in NI 43-101.
(3) This information represents the portion of mineral reserves attributable to Pan American based on its ownership interest in the
operating entity as indicated.
(4) Totals may not add up due to rounding. Total average grades of each element are with respect to those mines that produce the
element.
PAN AMERICAN SILVER CORP.
70
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
Metal Price Assumptions Used to Estimate Mineral Reserves and Resources as of June 30, 2021
Property
Ag US$/oz Au US$/oz Cu US$/t
Category
Pb US$/t
Zn US$/t
18.00
18.00
18.00
18.50
18.00
20.00
14.00
18.00
20.00
18.00
12.52
18.00
20.00
18.00
20.00
20.00
18.00
20.00
15.00
18.00
20.00
Huaron
Morococha
La Colorada
La Colorada Skarn
Dolores
La Bolsa
Manantial Espejo
San Vicente
Navidad
Pico Machay
Joaquin
COSE
Escobal
Shahuindo
Shahuindo Sulphide
La Arena
La Arena II
Timmins
Whitney
Gold River
Marlhill
Vogel
All categories
All categories
All categories
All categories
Reserves
Resources
All categories
Reserves
Resources
All categories
All categories
All categories
Reserves
Resources
Reserves
Resources
All categories
Reserves
Resources
Inferred Resource
Reserves
Resources
All categories
All categories
All categories
All categories
All categories
Inside pit
Below pit
1,300
1,300
1,300
1,350
1,600
825
1,400
1,600
1,300
700
1,450
1,600
1,450
1,600
1,300
1,350
1,600
1,400
1,450
1,600
1,500
1,450
1,450
1,200
1,125
1,150
1,150
6,500
6,500
6,500
6,500
2,000
2,000
2,000
2,200
2,450
2,450
2,450
2,600
6,500
2,062
1,100
2,450
2,204
2,424
8,816
General Notes Applicable to the Foregoing Tables:
Mineral reserves and resources are as defined by the Canadian Institute of Mining, Metallurgy and Petroleum.
Pan American reports mineral resources and mineral reserves separately. Reported mineral resources do not include amounts identified as
mineral reserves. Mineral resources that are not mineral reserves have no demonstrated economic viability.
Pan American does not expect these mineral reserve and resource estimates to be materially affected by metallurgical, environmental,
permitting, legal, taxation, socio-economic, political, and marketing or other relevant issues.
See the Company's Annual Information Form dated February 23, 2022, available at www.sedar.com for further information on the
Company's material mineral properties, including information concerning associated QA/QC and data verification matters, the key
assumptions, parameters and methods used by the Company to estimate mineral reserves and mineral resources, and for a detailed
description of known legal, political, environmental, and other risks that could materially affect the Company's business and the potential
development of the Company's mineral reserves and resources.
Quantities of contained metal are shown before metallurgical recoveries.
Scientific and technical information contained in this MD&A has been reviewed and approved by Martin Wafforn, P.Eng., Senior Vice
President Technical Services and Processing Optimization, and Christopher Emerson, FAusIMM, Vice President Business Development and
Geology, each of whom are Qualified Persons, as the term is defined in NI 43-101.
For more detailed information regarding the Company’s material mineral properties and technical information related thereto, including a
complete list of current technical reports applicable to such properties, please refer to the Company’s Annual Information Form dated
February 23, 2022, filed at www.sedar.com or the Company’s most recent Form 40-F filed with the SEC.
PAN AMERICAN SILVER CORP.
71
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
Cautionary Note Regarding Forward-Looking Statements and Information
Certain of the statements and information in this MD&A constitute “forward-looking statements” within the meaning of the United States
Private Securities Litigation Reform Act of 1995 and “forward-looking information” within the meaning of applicable Canadian provincial
securities laws relating to the Company and its operations. All statements, other than statements of historical fact, are forward-looking
statements. When used in this MD&A, the words, “will”, “believes”, “expects”, “intents”, “plans”, “forecast”, “objective”, “guidance”,
“outlook”, “potential”, “anticipated”, “budget”, and other similar words and expressions, identify forward-looking statements or
information. These forward-looking statements or information relate to, among other things: future financial or operational performance
and forecasts for 2022, including our estimated production of silver, gold and other metals forecasted and anticipated timing for the same,
and our estimated cash costs, AISC, capital and exploration, mine operation, general and administrative, care and maintenance
expenditures; future anticipated prices for gold, silver and other metals and assumed foreign exchange rates; expectations with respect to
the future anticipated impact of COVID-19 on our operations, the lessening or increase in pandemic-related restrictions and protocols, and
the anticipated timing for the same; the ability of Pan American to continue with its operations, or to successfully maintain our operations
on care and maintenance, should the situation related to COVID-19 not be as anticipated; the impacts of inflation on Pan American and its
operations; whether Pan American is able to maintain a strong financial condition and have sufficient capital, or have access to capital
through the Sustainability-Linked Credit Facility or otherwise, to sustain our business and operations; the timing and outcome with respect
to Pan American's environmental, social and governance activities, and Pan American's corporate social responsibility activities and our
reporting in respect thereof; the duration and effect of the suspensions of operations of the Escobal mine, as well as the nature of and
continuation of the constitutional court-mandated ILO 169 consultation process in Guatemala, and the timing and, if applicable, completion
thereof; certain legal proceedings that were originated in the Constitutional Court of Guatemala relating to the Escobal mine; the SEDATU
process with respect to a portion of the La Colorada mine’s surface lands; the timing and success of site infrastructure upgrades at the La
Colorada mine; the ability of Pan American to successfully complete any capital projects, including with respect to Bell Creek, and the
Wetmore and Whitney projects, the expected economic or operational results derived from those projects, and the impacts of any such
projects on Pan American; the future results of our exploration activities, including with respect to the skarn exploration program at La
Colorada; anticipated mineral reserves and mineral resources; and the Company’s plans and expectations for its properties and operations.
These forward-looking statements and information reflect the Company’s current views with respect to future events and are necessarily
based upon a number of assumptions and estimates that, while considered reasonable by the Company, are inherently subject to significant
operational, business, economic, competitive, political, regulatory, and social uncertainties and contingencies. These assumptions, some of
which are described in the “Risks and Uncertainties” section of this MD&A, include: the world-wide economic and social impact of COVID-19
is managed and the duration and extent of the coronavirus pandemic is minimized or not long-term; the management of COVID-19 in each
jurisdiction; the assumptions related to the global supply and availability of COVID-19 vaccines and the effectiveness and results of any
vaccines; the presence and impact of COVID-19 on our workforce, suppliers and other essential resources and the effect those impacts have
on our business; if necessary, continuation of operations following shutdowns or reductions in production, our ability to manage reduced
operations efficiently and economically, including to maintain necessary staffing; our ability to implement environmental, social and
governance activities; tonnage of ore to be mined and processed; ore grades and recoveries; prices for silver, gold and base metals
remaining as estimated; currency exchange rates remaining as estimated; capital, decommissioning and reclamation estimates; our mineral
reserve and mineral resource estimates and the assumptions upon which they are based; prices for energy inputs, labour, materials,
supplies and services (including transportation); no labour-related disruptions at any of our operations; no unplanned delays or
interruptions in scheduled production;protection of our interests against claims and legal proceedings; all necessary permits, licenses and
regulatory approvals for our operations are received in a timely manner and can be maintained; and our ability to comply with
environmental, health and safety laws, particularly given the potential for modifications and expansion of such laws. The foregoing list of
assumptions is not exhaustive.
The Company cautions the reader that forward-looking statements and information involve known and unknown risks, uncertainties and
other factors that may cause actual results and developments to differ materially from those expressed or implied by such forward-looking
statements or information contained in this MD&A and the Company has made assumptions and estimates based on or related to many of
these factors. Such factors include, without limitation: the duration and effects of the coronavirus and COVID-19 variants, and any other
epidemics or pandemics on our operations and workforce, and their effects on global economies and society; fluctuations in silver, gold, and
base metal prices; fluctuations in prices for energy inputs; fluctuations in currency markets (such as the PEN, MXN, ARS, BOL, GTQ and CAD
versus the USD); risks related to the technological and operational nature of the Company’s business; changes in national and local
government, legislation, taxation, controls or regulations and political, legal or economic developments in Canada, the United States,
Mexico, Peru, Argentina, Bolivia, Guatemala or other countries where the Company may carry on business, some of which might prevent or
cause the suspension or discontinuation of mining activities, including the risk of expropriation related to certain of our operations,
particularly in Argentina and Bolivia and risks related to the constitutional court-mandated ILO 169 consultation process in Guatemala; risks
and hazards associated with the business of mineral exploration, development and mining (including environmental hazards, industrial
accidents, unusual or unexpected geological or structural formations, pressures, cave-ins and flooding); risks relating to the credit
worthiness or financial condition of suppliers, refiners and other parties with whom the Company does business; inadequate insurance, or
inability to obtain insurance, to cover these risks and hazards; employee relations; relationships with and claims by the local communities
and indigenous populations; availability and increasing costs associated with mining inputs and labour; the Company’s ability to secure our
mine sites or maintain access to our mine sites due to criminal activity, violence, or civil and labour unrest; the speculative nature of mineral
exploration and development, including the risk of obtaining or retaining necessary licenses and permits; challenges to, or difficulty in
maintaining, the Company’s title to properties and continued ownership thereof; diminishing quantities or grades of mineral reserves as
properties are mined; global financial conditions; the Company’s ability to complete and successfully integrate acquisitions and to mitigate
other business combination risks; the actual results of current exploration activities, conclusions of economic evaluations, and changes in
project parameters to deal with unanticipated economic or other factors; increased competition in the mining industry for properties,
equipment, qualified personnel, and their costs; having sufficient cash to pay obligations as they come due; and those factors identified
under the caption “Risks Related to Pan American’s Business” in the Company’s most recent Form 40-F and Annual Information Form filed
PAN AMERICAN SILVER CORP.
72
Management Discussion and Analysis
For the years ended December 31, 2021 and 2020
(tabular amounts in thousands of U.S. dollars other than shares, options,
warrants, per share amounts, or unless otherwise noted)
with the United States Securities and Exchange Commission and Canadian provincial securities regulatory authorities, respectively. Although
the Company has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that
cause results not to be as anticipated, estimated, described, or intended. Investors are cautioned against attributing undue certainty or
reliance on forward-looking statements or information. Forward-looking statements and information are designed to help readers
understand Management's current views of our near and longer term prospects and may not be appropriate for other purposes. The
Company does not intend, and does not assume any obligation, to update or revise forward-looking statements or information to reflect
changes in assumptions or in circumstances or any other events affecting such statements or information, other than as required by
applicable law.
Cautionary Note to U.S. Investors Concerning Estimates of Mineral Reserves and Mineral Resources
This MD&A has been prepared in accordance with the requirements of Canadian securities laws, which differ from the requirements of U.S.
securities laws. Unless otherwise indicated, all references to mineral reserve and mineral resource estimates included in the MD&A have
been disclosed in accordance with NI 43-101 and the Canadian Institute of Mining, Metallurgy, and Petroleum Definition Standards. NI
43-101 is a rule developed by the Canadian Securities Administrators that establishes standards for all public disclosure an issuer makes of
scientific and technical information concerning mineral projects. Canadian standards, including NI 43-101, differ significantly from the
requirements of the SEC, and information concerning mineralization, deposits, mineral reserve and resource information contained or
referred to herein may not be comparable to similar information disclosed by U.S. companies. In particular, and without limiting the
generality of the foregoing, this MD&A uses the terms “measured resource”, “indicated resources” and “inferred resources”. U.S. investors
are advised that, while such terms are recognized and required by Canadian Securities laws, the SEC does not recognize them. The
requirements of NI 43-101 for identification of “reserves” are not the same as those of the SEC, and reserves reported by Pan American, in
compliance with NI 43-101, may not qualify as “reserves” under SEC standards. Under U.S. standards, mineralization may not be classified as
a “reserve” unless the determination has been made that the mineralization could be economically and legally produced for extracted at the
time the reserve determination is made. U.S. investors are cautioned not to assume that any part of a “measured resource” or “indicated
resource” will ever be converted in to a “reserve”. U.S. investors should also understand that “inferred resources” have a great amount
of uncertainty as to their existence and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any
part of the “inferred resources” exist, are economically or legally mineable or will ever be upgraded to a higher category. Under
Canadian Securities laws, estimated “inferred resources” may not form the basis of feasibility or pre-feasibility studies, except in rare cases.
Disclosure of “contained ounces” in a mineral resource is permitted disclosure under Canadian Securities laws. However, the SEC normally
only permits issuers to report mineralization that does not constitute “reserves” by SEC standards as in place tonnage and grade, without
reference to unit measures. Accordingly, information concerning mineral deposits set forth may not be comparable with information made
public companies that report in accordance with U.S. standards.
PAN AMERICAN SILVER CORP.
73
Consolidated Financial Statements and Notes
FOR THE YEARS ENDED DECEMBER 31, 2021 AND DECEMBER 31, 2020
PAN AMERICAN SILVER CORP.
74
Management’s Responsibility For Financial Reporting
The accompanying consolidated financial statements of Pan American Silver Corp. ("Pan American" or the
"Company") have been prepared by and are the responsibility of management and have been approved by the
Board of Directors (the "Board").
These Consolidated Financial Statements were prepared in accordance with International Financial Reporting
Standards ("IFRS") as issued by the International Accounting Standards Board (“IASB”) and include managements
best estimates and judgements. Pan American has developed and maintains a system of internal controls designed
to ensure the reliability of its financial information.
Deloitte LLP, an Independent Registered Public Accounting Firm, has audited these Consolidated Financial
Statements. Their report outlines the scope of their examination and opinion on the consolidated financial
statements.
"signed"
Michael Steinmann
Chief Executive Officer
February 23, 2022
"signed"
A. Robert Doyle
Chief Financial Officer
Management’s Report on Internal Control over Financial Reporting
Management of Pan American is responsible for establishing and maintaining adequate internal control over
financial reporting and for its assessment of the effectiveness of internal control over financial reporting.
Pan American's management assessed the effectiveness of the Company's Internal control over financial reporting
as of December 31, 2021, in accordance with the criteria established in Internal Control – Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this
assessment, management concluded that, as of December 31, 2021, Pan American’s internal control over financial
reporting was effective.
Deloitte LLP, an Independent Registered Public Accounting Firm, has audited the Company’s Consolidated financial
statements for the year ended December 31, 2021, and as stated in the Report of Independent Registered Public
Accounting Firm, they have expressed an unqualified opinion on the effectiveness of the Company’s internal
control over financial reporting as of December 31, 2021.
PAN AMERICAN SILVER CORP.
75
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Pan American Silver Corp.
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of financial position of Pan American Silver Corp. and
subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of earnings
and comprehensive earnings, cash flows, and changes in equity, for each of the two years in the period ended
December 31, 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion,
the financial statements present fairly, in all material respects, the financial position of the Company as of
December 31, 2021 and 2020, and its financial performance and its cash flows for each of the two years in the
period ended December 31, 2021, in accordance with International Financial Reporting Standards as issued by the
International Accounting Standards Board.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based
on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated February 23, 2022, expressed an unqualified
opinion on the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express
an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered
with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial
statements that was communicated or required to be communicated to the audit committee and that (1) relates
to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective, or complex judgments. The communication of critical audit matters does not alter in any way our
opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter
below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it
relates.
Impairments - Assessment of Whether Indicators of Impairment or Impairment Reversal Exist within the
Mineral Properties, Plant and Equipment - Refer to Note 5e to the financial statements
Critical Audit Matter Description
The Company’s determination of whether or not an indicator of impairment or impairment reversal exists at the
cash generating unit level requires significant management judgment. Changes in metal price forecasts or discount
rates, increases or decreases in estimated future costs of production, increases or decreases in estimated future
capital costs, reductions or increases in the amount of recoverable mineral reserves and mineral resources and/or
adverse or favorable political or regulatory developments can result in a write-down or write-up of the carrying
amounts of the Company’s mineral properties, plant and equipment.
PAN AMERICAN SILVER CORP.
76
While there are several factors that are required to determine whether or not an indicator of impairment or
impairment reversal exists, the judgments with the highest degree of subjectivity are future metal prices (for both
silver and gold), discount rates and the Company’s ability or expected timing to restart the Escobal mine. Auditing
these estimates and factors required a high degree of subjectivity in applying audit procedures and in evaluating
the results of those procedures. This resulted in an increased extent of audit effort, including the involvement of
fair value specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the future metal prices (for both silver and gold), discount rates and the
Company's ability or expected timing to restart the Escobal mine considered in the assessment of indicators of
impairment or impairment reversal included the following, among others:
•
•
Evaluated the effectiveness of the Company’s controls over management’s assessment of indicators of
impairment or impairment reversal.
Performed independent research to assess if there have been any substantive local, political, or regulatory
changes negatively impacting the ability or expected timing to restart the Escobal mine.
• With the assistance of fair value specialists:
◦
◦
Evaluated the future metal prices (silver and gold) by comparing management forecasts to third
party forecasts, and
Evaluated the reasonableness of the change in discount rate by testing the source information
underlying the determination of the discount rate.
/s/ Deloitte LLP
Chartered Professional Accountants
Vancouver, Canada
February 23, 2022
We have served as the Company's auditor since 1993.
PAN AMERICAN SILVER CORP.
77
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Pan American Silver Corp.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Pan American Silver Corp. and subsidiaries (the
“Company") as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion,
the Company maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by
COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2021, of
the Company and our report dated February 23, 2022, expressed an unqualified opinion on those financial
statements.
Basis for Opinion
The Company's management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on
the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting
was maintained in all material respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk, and performing such other procedures as
we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
/s/ Deloitte LLP
Chartered Professional Accountants
Vancouver, Canada
February 23, 2022
PAN AMERICAN SILVER CORP.
78
Assets
Current assets
Cash and cash equivalents (Note 24)
Short-term investments (Note 9)
Trade and other receivables
Income tax receivables
Inventories (Note 10)
Derivative assets (Note 8)
Prepaid expenses and other current assets
Non-current assets
Mineral properties, plant and equipment (Note 11)
Long-term inventories (Note 10)
Long-term refundable taxes
Deferred tax assets (Note 27)
Investment in associates (Note 12)
Goodwill and other assets (Note 13)
Total assets
Liabilities
Current liabilities
Accounts payable and accrued liabilities (Note 14)
Derivative liabilities (Note 8)
Provisions (Note 15)
Lease obligations (Note 16)
Debt (Note 17)
Income tax payables
Non-current liabilities
Long-term provisions (Note 15)
Deferred tax liabilities (Note 27)
Long-term lease obligations (Note 16)
Long-term debt (Note 17)
Deferred revenue (Note 12)
Other long-term liabilities (Note 18)
Total liabilities
Equity (Note 19)
Issued capital
Reserves
Deficit
Total equity attributable to Company shareholders
Non-controlling interests
Total equity
Total liabilities and equity
Consolidated Statements of Financial Position
(in thousands of U.S. dollars)
December 31,
2021
December 31,
2020
$
$
$
$
283,550 $
51,723
128,150
20,282
500,462
3,995
13,007
1,001,169
2,344,551
25,644
8,711
55,953
78,657
3,899
3,518,584 $
306,087 $
351
8,041
10,663
3,400
59,133
387,675
240,111
184,785
19,898
11,900
12,516
25,691
882,576
167,113
111,946
127,756
22,051
406,191
7,812
14,055
856,924
2,415,006
24,355
4,009
57,850
71,560
4,171
3,433,875
281,938
367
12,066
12,829
—
54,556
361,756
229,887
175,311
20,736
—
13,273
27,073
828,036
3,136,214
93,375
(598,035)
2,631,554
4,454
2,636,008
3,518,584 $
3,132,140
93,409
(623,030)
2,602,519
3,320
2,605,839
3,433,875
Commitments and contingencies (Notes 8, 28); subsequent events (Note 30)
See accompanying notes to the consolidated financial statements
APPROVED BY THE BOARD ON FEBRUARY 23, 2022
"signed" Gillian Winckler, Director
"signed" Michael Steinmann, Director
PAN AMERICAN SILVER CORP.
79
Consolidated Statements of Earnings and Comprehensive Earnings
(in thousands of U.S. dollars except per share amounts)
Revenue (Note 25)
Cost of sales
Production costs (Note 20)
Depreciation and amortization (Note 11)
Royalties
Mine operating earnings (Note 25)
General and administrative
Exploration and project development
Mine care and maintenance (Note 21)
Foreign exchange losses
Gains on derivatives (Note 8c)
Gains on sale of mineral properties, plant and equipment (Note 11)
Income from equity investees (Note 12)
Other income (expense) (Note 26)
Earnings from operations
Investment (loss) income (Note 8b)
Interest and finance expense (Note 22)
Earnings before income taxes
Income tax expense (Note 27)
Net earnings and comprehensive earnings
Net earnings and comprehensive earnings attributable to:
Equity holders of the Company
Non-controlling interests
Earnings per share attributable to common shareholders (Note 23)
Basic earnings per share
Diluted earnings per share
Weighted average shares outstanding (in 000’s) Basic
Weighted average shares outstanding (in 000’s) Diluted
See accompanying notes to the consolidated financial statements.
2021
1,632,750 $
2020
1,338,812
$
(925,479)
(302,958)
(36,375)
(1,264,812)
367,938
(34,852)
(11,071)
(31,780)
(11,267)
5,393
32,167
4,347
36
320,911
(59,722)
(16,198)
244,991
(146,429)
$
98,562 $
(696,672)
(254,469)
(27,494)
(978,635)
360,177
(36,375)
(7,096)
(102,105)
(5,474)
3,543
7,922
10,529
(21,144)
209,977
62,139
(20,104)
252,012
(75,557)
176,455
$
$
$
97,428
1,134
98,562 $
177,882
(1,427)
176,455
0.46 $
0.46 $
210,298
210,435
0.85
0.85
210,085
210,295
PAN AMERICAN SILVER CORP.
80
Operating activities
Net earnings for the year
Income tax expense (Note 27)
Depreciation and amortization (Note 11,21)
Unrealized investment loss (income)
Accretion on closure and decommissioning provision (Note 15)
Unrealized foreign exchange losses
Interest expense (Note 22)
Interest paid
Interest received
Income taxes paid
Other operating activities (Note 24)
Net change in non-cash working capital items (Note 24)
Investing activities
Payments for mineral properties, plant and equipment
Proceeds from sale of mineral properties, plant and equipment (Note 11)
Proceeds from short-term investments and other securities
Exercise of warrants (Note 12)
Net proceeds (payments) from derivatives
Financing activities
Proceeds from common shares issued
Distributions to non-controlling interests
Dividends paid
Proceeds from credit facility (Note 17)
Repayment of credit facility (Note 17)
Repayment of Loans (Note 17)
Payment of equipment leases
Effects of exchange rate changes on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Supplemental cash flow information (Note 24).
See accompanying notes to the consolidated financial statements.
Consolidated Statements of Cash Flows
(in thousands of U.S. dollars)
2021
2020
$
98,562 $
146,429
302,958
59,722
7,470
6,703
3,660
(5,234)
172
(129,205)
(28,060)
(71,069)
392,108 $
(243,478) $
45,798
1,861
—
9,157
(186,662) $
619 $
(933)
(71,500)
—
—
(1,700)
(12,396)
(85,910) $
(3,099)
116,437
167,113
283,550 $
$
$
$
$
$
$
176,455
75,557
272,444
(58,673)
8,260
8,857
9,216
(10,217)
253
(81,636)
(35,183)
96,982
462,315
(178,556)
22,474
90,384
(15,626)
(2,594)
(83,918)
4,737
—
(46,223)
80,000
(355,000)
—
(13,101)
(329,587)
(2,261)
46,549
120,564
167,113
PAN AMERICAN SILVER CORP.
81
Consolidated Statements of Changes in Equity
(in thousands of U.S. dollars except for number of shares)
Attributable to equity holders of the Company
Issued
shares
Issued
capital
Reserves
209,835,558 $ 3,123,514 $
94,274 $
Deficit
(754,689) $ 2,463,099 $
Total
Non-
controlling
interests
Total
equity
4,747 $ 2,467,846
—
—
—
177,882
177,882
(1,427)
176,455
329,379
5,800
(1,063)
93,730
2,826
—
—
—
—
—
210,258,667 $ 3,132,140 $
198
—
93,409 $
—
—
—
(46,223)
4,737
2,826
198
(46,223)
(623,030) $ 2,602,519 $
—
—
4,737
2,826
—
—
198
(46,223)
3,320 $ 2,605,839
Balance, December 31, 2019
Total comprehensive earnings
Net earnings for the year
Shares issued on the exercise of
stock options
Shares issued as compensation
(Note 19)
Share-based compensation on
option grants
Dividends paid
Balance, December 31, 2020
Total comprehensive earnings
Net earnings for the year
Shares issued on the exercise of
stock options
Shares issued as compensation
(Note 19)
Share-based compensation on
option grants
Distributions by subsidiaries to
non-controlling interests
Dividends paid
—
65,780
—
762
133,077
3,312
—
—
—
—
—
—
Balance, December 31, 2021
210,457,524 $ 3,136,214 $
See accompanying notes to the consolidated financial statements.
—
97,428
97,428
1,134
98,562
(143)
—
109
—
—
—
619
3,312
109
—
—
—
619
3,312
109
—
—
93,375 $
(933)
(71,500)
(933)
(71,500)
(598,035) $ 2,631,554 $
—
—
(933)
(71,500)
4,454 $ 2,636,008
PAN AMERICAN SILVER CORP.
82
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
1. NATURE OF OPERATIONS
Pan American Silver Corp. is the ultimate parent company of its subsidiary group (collectively, the “Company”, or
“Pan American”). Pan American is a British Columbia corporation domiciled in Canada, and its office is at Suite
1440 – 625 Howe Street, Vancouver, British Columbia, V6C 2T6.
The Company is engaged in the production and sale of silver, gold, zinc, lead and copper as well as other related
activities, including exploration, extraction, processing, refining and reclamation. The Company’s major products
are produced from mines in Canada, Peru, Mexico, Argentina and Bolivia. Additionally, the Company has project
development activities in Canada, Peru, Mexico and Argentina, and exploration activities throughout South
America, Canada and Mexico. As at December 31, 2021, the Company's Escobal mine in Guatemala continues to
be on care and maintenance pending satisfactory completion of a consultation process led by the Ministry of
Energy and Mines ("MEM") in Guatemala.
2. BASIS OF PREPARATION
These consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards as issued by the International Accounting Standards Board (“IFRS”), effective as of December 31, 2021.
These consolidated financial statements were approved for issuance by the Board of Directors on February 23,
2022.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies used in the preparation of these consolidated financial statements are as
follows:
a) Presentation currency
The functional and presentation currency of the Company and each of its subsidiaries is the United States
dollar ("USD").
b) Basis of measurement
These consolidated financial statements have been prepared on an historical cost basis, except for those
assets and liabilities that are measured at revalued amounts or fair values at the end of each reporting period.
PAN AMERICAN SILVER CORP.
83
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
c) Basis of consolidation
The accounts of the Company and its subsidiaries, which are controlled by the Company, have been included
in these consolidated financial statements. Control is achieved when the Company is exposed, or has rights, to
variable returns from the investee and when the Company has the ability to affect those returns through its
power over the investee. Subsidiaries are included in the consolidated financial results of the Company from
the effective date of acquisition up to the effective date of disposition or loss of control. The principal
subsidiaries of the Company and their geographic locations at December 31, 2021 were as follows:
Location
Canada
Mexico
Peru
Subsidiary
Lake Shore Gold Corp.
Plata Panamericana S.A. de C.V.
Compañía Minera Dolores S.A. de C.V.
Pan American Silver Huaron S.A.
Compañía Minera Argentum S.A.
Shahuindo S.A.C.
La Arena S.A.
Pan American Silver (Bolivia) S.A.
Pan American Silver Guatemala S.A.
Bolivia
Guatemala
Argentina Minera Tritón Argentina S.A.
Minera Joaquin S.R.L.
Minera Argenta S.A.
d)
Investments in associates
Ownership
Interest
100%
100%
100%
100%
92%
100%
100%
95%
100%
100%
100%
100%
Operations and Development
Projects Owned
Accounting
Consolidated Bell Creek and Timmins West mines
Consolidated La Colorada mine
Consolidated Dolores mine
Consolidated Huaron mine
Consolidated Morococha mine
Consolidated Shahuindo mine
Consolidated La Arena mine
Consolidated San Vicente mine
Consolidated Escobal mine
Consolidated Manantial Espejo & Cap-Oeste Sur Este mines
Consolidated Joaquin mine
Consolidated Navidad project
An associate is an entity over which the investor has significant influence but not control and that is neither a
subsidiary nor an interest in a joint venture. Significant influence is presumed to exist where the Company has
between 20% and 50% of the voting rights, but can also arise where the Company has less than 20%, if the
Company has the power to participate in the financial and operating policy decisions affecting the entity. The
Company’s share of the net assets and net earnings or loss is accounted for in the consolidated financial
statements using the equity method of accounting.
e) Business combinations
Upon the acquisition of a business, the acquisition method of accounting is used, whereby the purchase
consideration is allocated to the identifiable assets, liabilities and contingent liabilities (identifiable net assets)
acquired on the basis of fair value at the date of acquisition. When the cost of the acquisition exceeds the fair
value attributable to the Company’s share of the identifiable net assets, the difference is treated as goodwill,
which is not amortized and is reviewed for impairment annually or more frequently when there is an
indication of impairment. If the fair value attributable to the Company’s share of the identifiable net assets
exceeds the cost of acquisition, the difference is immediately recognized in the consolidated income
statement. Acquisition related costs, other than costs to issue debt or equity securities of the acquirer,
including investment banking fees, legal fees, accounting fees, valuation fees, and other professional or
consulting fees are expensed as incurred. The costs to issue equity securities of the Company as consideration
for the acquisition are reduced from share capital as share issuance costs. The costs to issue debt securities
are capitalized and amortized using the effective interest method.
Non-controlling interests are measured either at fair value or at the non-controlling interests’ proportionate
share of the recognized amounts of the acquirers’ identifiable net assets as at the date of acquisition. The
choice of measurement basis is made on a transaction by transaction basis.
Control of a business may be achieved in stages. Upon the acquisition of control, any previously held interest is
re-measured to fair value at the date control is obtained resulting in a gain or loss upon the acquisition of
control.
PAN AMERICAN SILVER CORP.
84
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
If the initial accounting for a business combination is incomplete by the end of the reporting period in which
the combination occurs, the Company reports provisional amounts for the items for which the accounting is
incomplete. These provisional amounts are adjusted during the measurement period, or additional assets or
liabilities are recognized, to reflect new information obtained about facts and circumstances that existed at
the acquisition date that, if known, would have affected the amounts recognized at that date.
f) Revenue recognition
Revenue associated with the sale of commodities is recognized when control of the asset sold is transferred to
the customer. Indicators of control transferring include an unconditional obligation to pay, legal title, physical
possession, transfer of risk and rewards and customer acceptance. This generally occurs when the goods are
delivered to a loading port, warehouse, vessel or metal account as contractually agreed with the buyer; at
which point the buyer controls the goods. In cases where the Company is responsible for the cost of shipping
and certain other services after the date on which control of the goods transfers to the customer, these other
services are considered separate performance obligations and thus a portion of revenue earned under the
contract is allocated and recognized as these performance obligations are satisfied.
The Company’s concentrate sales contracts with third-party buyers, in general, provide for a provisional
payment based upon provisional assays and quoted metal prices. Final settlement is based on applicable
commodity prices set on specified quotational periods, typically ranging from one month prior to shipment,
and can extend to three months after the shipment arrives at the smelter and is based on average market
metal prices. For this purpose, the transaction price can be measured reliably for those products, such as
silver, gold, zinc, lead and copper, for which there exists an active and freely traded commodity market such as
the London Metals Exchange and the value of product sold by the Company is directly linked to the form in
which it is traded on that market.
Sales revenue is commonly subject to adjustments based on an inspection of the product by the customer. In
such cases, sales revenue is initially recognized on a provisional basis using the Company’s best estimate of
contained metal, and adjusted subsequently. Revenues are recorded under these contracts at the time control
passes to the buyer based on the expected settlement period. Revenue on provisionally priced sales is
recognized based on estimates of the fair value of the consideration receivable based on forward market
prices and estimated quantities. At each reporting date provisionally priced metal is marked to market based
on the forward selling price for the quotational period stipulated in the contract. Variations between the price
recorded at the date when control is transferred to the buyer and the actual final price set under the smelting
contracts are caused by changes in metal prices resulting in the receivable being recorded at fair value through
profit or loss ("FVTPL").
IFRS 15 - Revenue from Contracts with Customers ("IFRS 15") requires that variable consideration should only
be recognized to the extent that it is highly probable that a significant reversal in the amount of cumulative
revenue recognized will not occur. The Company concluded that the adjustments relating to the final assay
results for the quantity and quality of concentrate sold are not significant and do not constrain the recognition
of revenue.
Refining and treatment charges under the sales contracts are netted against revenue for sales of metal
concentrate.
The Company recognizes deferred revenue in the event it receives payments from customers in consideration
for future commitments to deliver metals and before such sale meets the criteria for revenue recognition. The
Company recognizes amounts in revenue as the metals are delivered to the customer. Specifically, for the
metal agreements entered into with Maverix Metals Inc. ("Maverix"), the Company determines the
amortization of deferred revenue to the Consolidated Income Statement on a per unit basis using the
estimated total quantity of metal expected to be delivered to Maverix over the terms of the contract. The
Company estimates the current portion of deferred revenue based on quantities anticipated to be delivered
over the next twelve months.
PAN AMERICAN SILVER CORP.
85
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
g) Financial instruments
Measurement – initial recognition
Financial assets and financial liabilities are recognized in the Company’s statement of financial position when
the Company becomes a party to the contractual provisions of the instrument. On initial recognition, all
financial assets and financial liabilities are recorded at fair value, net of attributable transaction costs, except
for financial assets and liabilities classified as at FVTPL. Transaction costs of financial assets and liabilities
classified as at FVTPL are expensed in the period in which they are incurred.
Subsequent measurement of financial assets and liabilities depends on the classifications of such assets and
liabilities.
Classification of financial assets
Amortized cost:
Financial assets that meet the following conditions are measured subsequently at amortized cost:
(i) The financial asset is held within a business model whose objective is to hold financial assets in order to
collect contractual cash flows, and
(ii) The contractual terms of the financial asset give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount outstanding.
The amortized cost of a financial asset is the amount at which the financial asset is measured at initial
recognition minus the principal repayments, plus the cumulative amortization using effective interest method
of any difference between that initial amount and the maturity amount, adjusted for any loss allowance.
Interest income is recognized using the effective interest method. Interest income is recognized in Investment
(loss) income in the Consolidated Income Statements.
The Company's financial assets at amortized cost primarily include cash and cash equivalents, receivables not
arising from sale of metal concentrates included in Trade and other receivables in the Consolidated Statement
of Financial Position (Note 8(a)).
FVTPL:
By default, all other financial assets are measured subsequently at FVTPL.
The Company, at initial recognition, may also irrevocably designate a financial asset as measured at FVTPL if
doing so eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise
arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases.
Financial assets measured at FVTPL are measured at fair value at the end of each reporting period, with any
fair value gains or losses recognized in profit or loss to the extent they are not part of a designated hedging
relationship. Fair value is determined in the manner described in Note 8(d)(ii). The Company's financial assets
at FVTPL include its trade receivables from provisional concentrate sales, short-term investments in equity
securities, and derivative assets not designated as hedging instruments.
Financial liabilities and equity
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the
substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
An equity instrument is any contract that evidences a residual interest in the assets of the Company after
deducting all its liabilities. Equity instruments issued by the Company are recognized at the proceeds received,
net of direct issue costs. Repurchase of the Company’s own equity instruments is recognized and deducted
directly in equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of
the Company’s own equity instruments.
PAN AMERICAN SILVER CORP.
86
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
Classification of financial liabilities
Financial liabilities that are not contingent consideration of an acquirer in a business combination, held for
trading or designated as at FVTPL, are measured at amortized cost using effective interest method.
Derivatives
When the Company enters into derivative contracts, these transactions are designed to reduce exposures
related to assets and liabilities, firm commitments or anticipated transactions. The Company does not have
derivative instruments that qualify as cash flow hedges and consequently all derivatives are recorded at fair
value with changes in fair value recognized in net earnings.
h) Derivative Financial Instruments
The Company utilizes metals and currency contracts, including forward contracts to manage exposure to
fluctuations in metal prices and foreign currency exchange rates. For metals production, these contracts are
intended to reduce the risk of falling prices on the Company’s future sales. Foreign currency derivative
financial instruments, such as forward contracts, are used to manage the effects of exchange rate changes on
foreign currency cost exposures. Such derivative financial instruments are initially recognized at fair value on
the date on which a derivative contract is entered into and are subsequently re-measured at fair value.
Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative
and any gains or losses arising from changes in fair value on derivatives are taken directly to earnings for the
year. The fair value of forward currency and commodity contracts is calculated by reference to current
forward exchange rates and prices for contracts with similar maturity profiles.
Derivatives, including certain conversion options and warrants with exercise prices in a currency other than
the functional currency, are recognized at fair value with changes in fair value recognized in profit or loss.
i)
Inventories
Inventories include work in progress, concentrate, doré, processed silver and gold, heap leach inventory, and
operating materials and supplies. Work in progress inventory includes ore stockpiles and other partly
processed material. Stockpiles represent ore that has been extracted and is available for further processing.
The classification of inventory is determined by the stage at which the ore is in the production process.
Inventories of ore are sampled for metal content and are valued based on the lower of cost or estimated net
realizable value ("NRV") based upon the period ending prices of contained metal. Cost is determined on a
weighted average basis or using a first-in-first-out basis and includes all costs incurred in the normal course of
business including direct material and direct labour costs and an allocation of production overheads,
depreciation and amortization, and other costs, based on normal production capacity, incurred in bringing
each product to its present location and condition. Material that does not contain a minimum quantity of
metal to cover estimated processing expenses to recover the contained metal is not classified as inventory and
is assigned no value. The work in progress inventory is considered part of the operating cycle which the
Company classifies as current inventory and hence heap leach and stockpiles are included in current inventory.
Quantities are assessed primarily through surveys and assays.
The costs incurred in the construction of the heap leach pad are capitalized. Heap leach inventory represents
silver and gold contained in ore that has been placed on the leach pad for cyanide irrigation. The heap leach
process is a process of extracting silver and gold by placing ore on an impermeable pad and applying a diluted
cyanide solution that dissolves a portion of the contained silver and gold, which is then recovered during the
metallurgical process. When the ore is placed on the pad, an estimate of the recoverable ounces is made
based on tonnage, ore grade and estimated recoveries of the ore type placed on the pad. The estimated
recoverable ounces on the pad are used to compile the inventory cost.
The Company uses several integrated steps to scientifically measure the metal content of the ore placed on
the leach pads. The tonnage, grade, and ore type to be mined in a period was first estimated using the Mineral
Reserve model. As the ore body is drilled in preparation for the blasting process, samples are taken of the drill
PAN AMERICAN SILVER CORP.
87
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
residue, which is assayed to determine their metal content and quantities of contained metal. The estimated
recoverable ounces carried in the leach pad inventory are adjusted based on actual recoveries being
experienced. Actual and estimated recoveries achieved are measured to the extent possible using various
indicators including, but not limited to, individual cell recoveries, the use of leach curve recovery and trends in
the levels of carried ounces depending on the circumstances or cumulative pad recoveries.
The Company then processes the ore through the crushing facility where the output is again weighed and
sampled for assaying. A metallurgical reconciliation with the data collected from the mining operation is
completed with appropriate adjustments made to previous estimates. The crushed ore is then transported to
the leach pad for application of the leaching solution. The samples from the automated sampler are assayed
each shift and used for process control. The quantity of leach solution is measured by flow meters throughout
the leaching and precipitation process. The pregnant solution from the heap leach is collected and passed
through the processing circuit to produce precipitate, which is retorted and then smelted to produce doré
bars.
The Company allocates direct and indirect production costs to by-products on a systematic and rational basis.
With respect to concentrate and doré inventory, production costs are allocated based on the silver equivalent
ounces contained within the respective concentrate and doré.
The inventory is stated at lower of cost or NRV, with cost being determined using a weighted average cost
method. The ending inventory value of ounces associated with the leach pad is equal to opening recoverable
ounces plus recoverable ounces placed less ounces produced plus or minus ounce adjustments.
The estimate of both the ultimate recovery expected over time and the quantity of metal that may be
extracted relative to the time the leach process occurs requires the use of estimates, which rely upon
laboratory test work and estimated models of the leaching kinetics in the heap leach pads. Test work consists
of leach columns of up to 400 days duration with 150 days being the average, from which the Company
projects metal recoveries up to three years in the future. The quantities of metal contained in the ore are
based upon actual weights and assay analysis. The rate at which the leach process extracts gold and silver from
the crushed ore is based upon laboratory column tests and actual experience. The assumptions used by the
Company to measure metal content during each stage of the inventory conversion process include estimated
recovery rates based on laboratory testing and assaying. The Company periodically reviews its estimates
compared to actual experience and revises its estimates when appropriate. The ultimate recovery will not be
known until the leaching operations cease.
Supplies inventories are valued at the lower of average cost and NRV using replacement cost plus cost to
dispose, net of obsolescence. Concentrate and doré inventory includes product at the mine site, the port
warehouse and product held by refineries. At times, the Company has a limited amount of finished silver at a
minting operation where coins depicting Pan American’s emblem are stamped.
j) Mineral properties, plant and equipment (MPPE)
On initial acquisition, MPPE are valued at cost, being the purchase price and the directly attributable costs of
acquisition or construction required to bring the asset to the location and condition necessary for the asset to
be capable of operating in the manner intended by management. When provisions for closure and
decommissioning are recognized, the corresponding cost is capitalized as part of the cost of the related assets,
representing part of the cost of acquiring the future economic benefits of the operation. The capitalized cost
of closure and decommissioning activities is recognized in MPPE and depreciated accordingly.
In subsequent periods, buildings, plant and equipment are stated at cost less accumulated depreciation and
any impairment in value, whilst land is stated at cost less any impairment in value and is not depreciated.
Each asset's or part’s estimated useful life has due regard to both its own physical life limitations and the
present assessment of economically recoverable reserves of the mine property at which the item is located,
and to possible future variations in those assessments. Estimates of remaining useful lives and residual values
are reviewed annually. Changes in estimates are accounted for prospectively.
PAN AMERICAN SILVER CORP.
88
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
The expected useful lives are included below in the accounting policy for depreciation of MPPE. The net
carrying amounts of MPPE are reviewed for impairment either individually or at the cash-generating unit level
when events and changes in circumstances indicate that the carrying amounts may not be recoverable. To the
extent that these values exceed their recoverable amounts, that excess is recorded as an impairment provision
in the financial year in which this is determined.
In countries where the Company paid Value Added Tax (“VAT”) and where there is uncertainty of its
recoverability, the VAT payments have either been deferred with mineral property costs relating to the
property or expensed if it relates to mineral exploration. If the Company ultimately recovers previously
deferred amounts, the amount received will be applied to reduce mineral property costs or taken as a credit
against current expenses depending on the prior treatment.
Expenditure on major maintenance or repairs includes the cost of the replacement of parts of assets and
overhaul costs. Where an asset or part of an asset is replaced and it is probable that future economic benefits
associated with the item will be available to the Company, the expenditure is capitalized and the carrying
amount of the item replaced derecognized. Similarly, overhaul costs associated with major maintenance are
capitalized and depreciated over their useful lives where it is probable that future economic benefits will be
available and any remaining carrying amounts of the cost of previous overhauls are derecognized. All other
costs are expensed as incurred.
Where an item of MPPE is disposed of, it is derecognized and the difference between its carrying value and net
sales proceeds is disclosed as earnings or loss on disposal in the income statement. Any items of mineral
property, plant or equipment that cease to have future economic benefits are derecognized with any gain or
loss included in the financial year in which the item is derecognized.
k) Operational mining properties and mine development
When it has been determined that a mineral property can be economically developed as a result of
establishing proven and probable reserves (which occurs upon completion of a positive economic analysis of
the mineral deposit), the costs incurred to develop such property including costs to further delineate the ore
body and remove overburden to initially expose the ore body prior to the start of mining operations, are also
capitalized. Such costs are amortized using the units-of-production method over the estimated life of the ore
body based on proven and probable reserves.
Costs associated with commissioning activities on constructed plants are deferred from the date of mechanical
completion of the facilities until the date the Company is ready to commence commercial production. Any
revenues earned during this period are recorded as a reduction in deferred commissioning costs. These costs
are amortized using the units-of-production method (described below) over the life of the mine, commencing
on the date of commercial production.
Acquisition costs related to the acquisition of land and mineral rights are capitalized as incurred. Prior to
acquiring such land or mineral rights, the Company makes a preliminary evaluation to determine that the
property has significant potential to economically develop the deposit. The time between initial acquisition
and full evaluation of a property’s potential is dependent on many factors including: location relative to
existing infrastructure, the property’s stage of development, geological controls and metal prices. If a
mineable deposit is discovered, such costs are amortized when production begins. If no mineable deposit is
discovered, such costs are expensed in the period in which it is determined the property has no future
economic value. In countries where the Company has paid VAT and where there is uncertainty of its
recoverability, the VAT payments have either been deferred with mineral property costs relating to the
property or expensed if it relates to mineral exploration. If the Company ultimately makes recoveries of the
VAT, the amount received will be applied to reduce mineral property costs or taken as a credit against current
expenses depending on the prior treatment.
Major development expenditures on producing properties incurred to increase production or extend the life of
the mine are capitalized while ongoing mining expenditures on producing properties are charged against
PAN AMERICAN SILVER CORP.
89
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
earnings as incurred. Gains or losses from sales or retirements of assets are included in gain or loss on sale of
assets.
l) Depreciation of MPPE
The carrying amounts of MPPE (including initial and any subsequent capital expenditure) are depreciated to
their estimated residual value over the estimated useful lives of the specific assets concerned, or the
estimated life of the associated mine or mineral lease, if shorter. Estimates of residual values and useful lives
are reviewed annually and any change in estimate is taken into account in the determination of remaining
depreciation charges, and adjusted if appropriate, at each statement of financial position date. Changes to the
estimated residual values or useful lives are accounted for prospectively. Depreciation commences on the date
when the asset is available for use as intended by management.
i) Units of production basis
For mining properties and leases and certain mining equipment, the economic benefits from the asset are
consumed in a pattern which is linked to the production level. Except as noted below, such assets are
depreciated on a units of production basis.
In applying the units of production method, depreciation is normally calculated using the quantity of
material extracted from the mine in the period as a percentage of the total quantity of material to be
extracted in current and future periods based on proven and probable reserves.
ii) Straight line basis
Assets within operations for which production is not expected to fluctuate significantly from one year to
another or which have a physical life shorter than the related mine are depreciated on a straight line
basis.
MPPE are depreciated over their useful life, or over the remaining life of the mine if shorter. The major
categories of property, plant and equipment are depreciated on a unit of production and/or straight-line
basis as follows:
Land – not depreciated
•
• Mobile equipment – 3 to 7 years
•
• Mining properties and leases including capitalized evaluation and development expenditures –
Buildings and plant facilities – 25 to 50 years
based on applicable reserves on a unit of production basis.
Exploration and evaluation – not depreciated until mine goes into production
•
• Assets under construction – not depreciated until assets are ready for their intended use
m) Exploration and evaluation
Exploration expenditures are incurred in the search for economic mineral deposits or the process of obtaining
more information about existing mineral deposits and typically include costs associated with drilling, sampling,
mapping and other activity related to the search for ore.
Evaluation expenditures are incurred to establish the technical and commercial viability of mineral deposits
and typically include costs associated with determining optimal methods of extraction and metallurgical and
treatment processes, permitting, and preparing economic evaluations.
Exploration expenditures are expensed as
Evaluation expenditures are capitalized when
management determines there is a high degree of confidence that future economic benefits will flow to the
Company. Acquired exploration and evaluation projects and acquired exploration rights are recognized as
assets at their cost of acquisition or at fair value if purchased as part of a business combination.
incurred.
Capitalized exploration and evaluation expenditures are reclassified to mineral properties, plant and
equipment, in accordance with Note 3(j), once the technical feasibility and commercial viability are
demonstrated.
PAN AMERICAN SILVER CORP.
90
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
n) Deferred stripping costs
In open pit mining operations, it is necessary to remove overburden and other waste in order to access the ore
body. During the preproduction phase, these costs are capitalized as part of the cost of the mine property and
subsequently amortized over the life of the mine (or pit) on a units of production basis.
The costs of removal of the waste material during a mine’s production phase are deferred where they give rise
to future benefits. These capitalized costs are subsequently amortized on a unit of production basis over the
reserves that directly benefit from the specific stripping activity.
o)
Impairment (and reversals of impairment) of non-current assets
The Company reviews and tests the carrying amount of MPPE and intangible assets with finite lives when
there is an indication of impairment or impairment reversal. Additionally, disposal groups held for sale are
tested for impairment upon classification as a disposal group held for sale.
Impairment assessments on MPPE and intangible assets are conducted at the level of the CGU. The
recoverable amount of a CGU is the higher of value in use ("VIU") and fair value less cost to sell. VIU is the net
present value of expected future cash flows. Impairments are recognized for any excess of carrying value over
the recoverable amount.
Where the recoverable amount is assessed using discounted cash flow techniques, the resulting estimates are
based on detailed mine and/or production plans. The cash flow forecasts are based on best estimates of
expected future revenues and costs, including the future cash costs of production, capital expenditure,
closure, restoration and environmental clean-up. These may include net cash flows expected to be realized
from extraction, processing and sale of mineral resources that do not currently qualify for inclusion in proven
or probable ore reserves. Such non-reserve material is included where there is a high degree of confidence in
its economic extraction. This expectation is usually based on preliminary drilling and sampling of areas of
mineralization that are contiguous with existing reserves. Typically, the additional evaluation to achieve
reserve status for such material has not yet been done because this would involve incurring costs earlier than
is required for the efficient planning and operation of the mine.
Where the recoverable amount of a CGU is dependent on the life of its associated ore, expected future cash
flows reflect long term mine plans, which are based on detailed research, analysis and iterative modeling to
optimize the level of return from investment, output and sequence of extraction. The mine plan takes account
of all relevant characteristics of the ore, including waste to ore ratios, ore grades, haul distances, chemical and
metallurgical properties of the ore affecting process recoveries and capacities of processing equipment that
can be used. The mine plan is therefore the basis for forecasting production output in each future year and for
forecasting production costs.
The Company’s cash flow forecasts are based on estimates of future commodity prices, which assume market
prices will revert to the Company’s assessment of the long-term average price, generally over a period of three
to five years. These assessments often differ from current price levels and are updated periodically.
The discount rates applied to the future cash flow forecasts represent an estimate of the rate the market
would apply having regard to the time value of money and the risks specific to the asset for which the future
cash flow estimates have not been adjusted, including appropriate adjustments for the risk profile of the
countries in which the individual CGU operate. The great majority of the Company’s sales are based on prices
denominated in USD. To the extent that the currencies of countries in which the Company produces
commodities strengthen against the USD without commodity price offset, cash flows and, therefore, net
present values are reduced.
Non-financial assets other than goodwill that have suffered impairment are tested for possible reversal of the
impairment whenever events or changes in circumstances indicate that the impairment may have reversed.
PAN AMERICAN SILVER CORP.
91
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
p) Closure and decommissioning costs
The mining, extraction and processing activities of the Company normally give rise to obligations for site
closure or rehabilitation. Closure and decommissioning works can include facility decommissioning and
dismantling; removal or treatment of waste materials; site and land rehabilitation. The extent of work
required and the associated costs are dependent on the requirements of relevant authorities and the
Company’s environmental policies. Provisions for the cost of each closure and rehabilitation program are
recognized at the time that environmental disturbance occurs. When the extent of disturbance increases over
the life of an operation, the provision is increased accordingly. Costs included in the provision encompass all
closure and decommissioning activity expected to occur progressively over the life of the operation and at the
time of closure in connection with disturbances at the reporting date. Routine operating costs that may impact
the ultimate closure and decommissioning activities, such as waste material handling conducted as an integral
part of a mining or production process, are not included in the provision. Costs arising from unforeseen
circumstances, such as the contamination caused by unplanned discharges, are recognized as an expense and
liability when the event gives rise to an obligation which is probable and capable of reliable estimation. The
timing of the actual closure and decommissioning expenditure is dependent upon a number of factors such as
the life and nature of the asset, the operating license conditions, and the environment in which the mine
operates. Expenditures may occur before and after closure and can continue for an extended period of time
dependent on closure and decommissioning requirements. Closure and decommissioning provisions are
measured at the expected value of future cash flows, discounted to their present value and determined
according to the probability of alternative estimates of cash flows occurring for each operation. Discount rates
used are specific to the underlying obligation. Significant judgments and estimates are involved in forming
expectations of future activities and the amount and timing of the associated cash flows. Those expectations
are formed based on existing environmental and regulatory requirements which give rise to a constructive or
legal obligation.
When provisions for closure and decommissioning are initially recognized, the corresponding cost is
capitalized as a component of the cost of the related asset, representing part of the cost of acquiring the
future economic benefits of the operation. The capitalized cost of closure and decommissioning activities is
recognized in property, plant and equipment and depreciated accordingly. The value of the provision is
progressively increased over time as the effect of discounting unwinds, creating an expense recognized in
finance expenses. Closure and decommissioning provisions are also adjusted for changes in estimates. Those
adjustments are accounted for as a change in the corresponding capitalized cost, except where a reduction in
the provision is greater than the un-depreciated capitalized cost of the related assets, in which case the
capitalized cost is reduced to nil and the remaining adjustment is recognized in the income statement. In the
case of closed sites, changes to estimated costs are recognized immediately in the income statement. Changes
to the capitalized cost result in an adjustment to future depreciation and finance charges. Adjustments to the
estimated amount and timing of future closure and decommissioning cash flows are a normal occurrence in
light of the significant judgments and estimates involved.
The provision is reviewed at the end of each reporting period for changes to obligations, legislation or discount
rates that impact estimated costs or lives of operations and adjusted to reflect current best estimate. The cost
of the related asset is adjusted for changes in the provision resulting from changes in the estimated cash flows
or discount rate and the adjusted cost of the asset is depreciated prospectively.
q) Foreign currency translation
The Company’s functional currency and that of its subsidiaries is the USD, as this is the principal currency of
the economic environments in which they operate. Transaction amounts denominated in foreign currencies
(currencies other than USD) are translated into USD at exchange rates prevailing at the transaction dates.
Carrying values of foreign currency monetary assets and liabilities are re-translated at each statement of
financial position date to reflect the U.S. exchange rate prevailing at that date.
PAN AMERICAN SILVER CORP.
92
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
Gains and losses arising from translation of foreign currency monetary assets and liabilities at each period end
are included in earnings except for differences arising on decommissioning provisions which are capitalized for
operating mines.
r)
Share-based payments
The Company makes share-based awards, including restricted share units ("RSUs"), performance share units
("PSUs"), shares and options, to certain employees.
For equity-settled awards, the fair value is charged to the income statement and credited to equity, on a
straight-line basis over the vesting period, after adjusting for the estimated number of awards that are
expected to vest. The fair value of the equity-settled awards is determined at the date of grant. Non-vesting
conditions and market conditions, such as target share price upon which vesting is conditioned, are factored
into the determination of fair value at the date of grant. All other vesting conditions are excluded from the
determination of fair value and included in management’s estimate of the number of awards ultimately
expected to vest.
The fair value is determined by using option pricing models. At each statement of financial position date prior
to vesting, the cumulative expense representing the extent to which the vesting period has expired and
management’s best estimate of the awards that are ultimately expected to vest is computed (after adjusting
for non-market performance conditions). The movement in cumulative expense is recognized in the income
statement with a corresponding entry within equity. No expense is recognized for awards that do not
ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as
vested irrespective of whether or not the market condition is satisfied, provided that all other performance
conditions are satisfied.
Where the terms of an equity-settled award are modified, as a minimum an expense is recognized as if the
terms had not been modified over the original vesting period. In addition, an expense is recognized for any
modification, which increases the total fair value of the share-based payment arrangement, or is otherwise
beneficial to the employee as measured at the date of modification, over the remainder of the new vesting
period.
Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any
expense not yet recognized for the award is recognized immediately. Any compensation paid up to the fair
value of the awards at the cancellation or settlement date is deducted from equity, with any excess over fair
value being treated as an expense in the income statement. However, if a new award is substituted for the
cancelled award, and designated as a replacement award on the date that it is granted, the new awards are
treated as if they are a modification of the original award, as described in the previous paragraph.
s)
Leases
Lease Definition
At inception of a contract, the Company assesses whether the contract is, or contains, a lease. A contract is, or
contains, a lease if it conveys the right to control the use of an identified asset for a period of time in exchange
for consideration. An identified asset may be implicitly or explicitly specified in a contract, but must be
physically distinct, and must not have the ability for substitution by a lessor. The Company has the right to
control an identified asset if it obtains substantially all of its economic benefits and either pre-determines, or
directs how and for what purpose the asset is used.
Measurement of ROU Assets and Lease Obligations
At lease commencement, the Company recognizes a ROU Asset and a lease obligation. The ROU Asset is
initially measured at cost, which comprises the initial amount of the lease obligation adjusted for any lease
payments made at, or before, the commencement date, plus any initial direct costs incurred, less any lease
incentives received.
PAN AMERICAN SILVER CORP.
93
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
The ROU Asset is subsequently amortized on a straight-line basis over the shorter of the term of the lease, or
the useful life of the asset determined on the same basis as the Company’s property, plant and equipment.
The ROU Asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements
of the lease obligation.
The lease obligation is initially measured at the present value of lease payments remaining at the lease
commencement date, discounted using the Company’s incremental borrowing rate. Lease payments included
in the measurement of the lease obligation, when applicable, may comprise fixed payments, variable
payments that depend on an index or rate, amounts expected to be payable under a residual value guarantee
and the exercise price under a purchase, extension or termination option that the Company is reasonably
certain to exercise.
The lease obligation is subsequently measured at amortized cost using the effective interest method. It is
remeasured when there is a change in future lease payments arising from a change in an index or rate, if there
is a change in the Company’s estimate of the amount expected to be payable under a residual value
guarantee, or if the Company changes its assessment of whether it will exercise a purchase, extension or
termination option. When the lease obligation is remeasured, a corresponding adjustment is made to the
carrying amount of the ROU Asset.
Recognition Exemptions
The Company has elected not to recognize ROU Assets and lease obligations for short-term leases that have a
lease term of twelve months or less or for leases of low-value assets. Payments associated with these leases
are recognized as an operating expense on a straight-line basis over the lease term within costs and expenses
on the consolidated income statement.
t)
Income taxes
Taxation on the earnings or loss for the year comprises current and deferred tax. Taxation is recognized in the
income statement except to the extent that it relates to items recognized in other comprehensive income or
directly in equity, in which case the tax is recognized in other comprehensive income or equity.
Current tax is the expected tax payable on the taxable income for the year using rates enacted or substantively
enacted at the year end, and includes any adjustment to tax payable in respect of previous years.
Deferred tax is provided using the statement of financial position liability method, providing for the tax effect
of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes
and the amounts used for tax assessment or deduction purposes. Where an asset has no deductible or
depreciable amount for income tax purposes, but has a deductible amount on sale or abandonment for capital
gains tax purposes, that amount is included in the determination of temporary differences.
The tax effect of certain temporary differences is not recognized, principally with respect to goodwill;
temporary differences arising on the initial recognition of assets or liabilities (other than those arising in a
business combination or in a manner that initially impacted accounting or taxable earnings); and temporary
differences relating to investments in subsidiaries, jointly controlled entities and associates to the extent that
the Company is able to control the reversal of the temporary difference and the temporary difference is not
expected to reverse in the foreseeable future. The amount of deferred tax recognized is based on the
expected manner and timing of realization or settlement of the carrying amount of assets and liabilities, with
the exception of items that have a tax base solely derived under capital gains tax legislation, using tax rates
enacted or substantively enacted at period end. To the extent that an item’s tax base is solely derived from the
amount deductible under capital gains tax legislation, deferred tax is determined as if such amounts are
deductible in determining future assessable income.
The carrying amount of deferred income tax assets is reviewed at each statement of financial position date
and reduced to the extent that it is no longer probable that sufficient taxable earnings will be available to
PAN AMERICAN SILVER CORP.
94
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
allow all or part of the deferred income tax asset to be utilized. To the extent that an asset not previously
recognized fulfils the criteria for recognition, a deferred income tax asset is recorded.
Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in
which the asset is realized or the liability is settled, based on tax rates and tax laws enacted or substantively
enacted at the statement of financial position date.
Current and deferred taxes relating to items recognized in other comprehensive income or directly in equity
are recognized in other comprehensive income or equity and not in the income statement. Mining taxes and
royalties are treated and disclosed as current and deferred taxes if they have the characteristics of an income
tax. Judgments are required about the application of income tax legislation. These judgments and assumptions
are subject to risk and uncertainty, hence there is a possibility that changes in circumstances will alter
expectations, which may impact the amount of deferred tax assets and deferred tax liabilities recognized on
the statement of financial position and the amount of other tax losses and temporary differences not yet
recognized. In such circumstances, some or the entire carrying amount of recognized deferred tax assets and
liabilities may require adjustment, resulting in a corresponding credit or charge to the income statement.
Deferred tax assets, including those arising from tax losses, capital losses and temporary differences, are
recognized only where it is probable that taxable earnings will be available against which the losses or
deductible temporary differences can be utilized. Assumptions about the generation of future taxable earnings
and repatriation of retained earnings depend on management’s estimates of future cash flows. These depend
on estimates of future production and sales volumes, commodity prices, reserves, operating costs, closure and
decommissioning costs, capital expenditures, dividends and other capital management transactions.
u) Earnings (loss) per share
Basic earnings (loss) per share is calculated by dividing earnings attributable to ordinary equity holders of the
parent entity by the weighted average number of ordinary shares outstanding during the period.
The diluted earnings per share calculation is based on the earnings attributable to ordinary equity holders and
the weighted average number of shares outstanding after adjusting for the effects of all potential ordinary
shares. This method requires that the number of shares used in the calculation be the weighted average
number of shares that would be issued on the conversion of all the dilutive potential ordinary shares into
ordinary shares. This method assumes that the potential ordinary shares converted into ordinary shares at the
beginning of the period (or at the time of issuance, if not in existence at beginning of the period). The number
of dilutive potential ordinary shares is determined independently for each period presented.
For convertible securities that may be settled in cash or shares at the holder’s option, returns to preference
shareholders and income charges are added back to net earnings used for basic EPS and the maximum number
of ordinary shares that could be issued on conversion is used in computing diluted earnings per share.
v) Borrowing costs and upfront costs
Borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets
are capitalized. Qualifying assets are assets that require a substantial amount of time to prepare for their
intended use, including mineral properties in the evaluation stage where there is a high likelihood of
commercial exploitation. Qualifying assets also include significant expansion projects at the operating mines.
Borrowing costs are considered an element of the historical cost of the qualifying asset. Capitalization ceases
when the asset is substantially complete or if construction is interrupted for an extended period. Where the
funds used to finance a qualifying asset form part of general borrowings, the amount capitalized is calculated
using a weighted average of rates applicable to the relevant borrowings during the period. Where funds
borrowed are directly attributable to a qualifying asset, the amount capitalized represents the borrowing costs
specific to those borrowings. Where surplus funds available out of money borrowed specifically to finance a
project are temporarily invested, the total borrowing cost is reduced by income generated from short-term
investments of such funds.
PAN AMERICAN SILVER CORP.
95
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
Upfront costs incurred in connection with entering new credit facilities are recorded as Other assets and are
amortized over the life of the respective credit facilities.
4. CHANGES IN ACCOUNTING STANDARDS
Certain new accounting standards and interpretations have been published that are not mandatory for the current
period and have not been early adopted.
Presentation of Financial Statements (Amendment to IAS 1)
The amendments to IAS 1, clarify the presentation of liabilities. The classification of liabilities as current or non-
current is based on contractual rights that are in existence at the end of the reporting period and is affected by
expectations about whether an entity will exercise its right to defer settlement. A liability not due over the next
twelve months is classified as non-current even if management intends or expects to settle the liability within
twelve months. The amendment also introduces a definition of ‘settlement’ to make clear that settlement refers
to the transfer of cash, equity instruments, other assets, or services to the counterparty. The amendments are
effective for annual reporting periods beginning on or after January 1, 2023. The implementation of this
amendment is not expected to have a material impact on the Company.
Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12)
The amendment clarifies that the initial recognition exemption does not apply to transactions in which equal
amounts of deductible and taxable temporary differences arise on initial recognition. The amendment is effective
for annual reporting periods beginning on or after January 1, 2023. Early application is permitted. This
amendment is not expected to have a material impact on the Company.
Property, Plant and Equipment - Proceeds before Intended Use (Amendments to IAS 16)
The amendment will prohibit the Company from deducting net proceeds from selling any items produced while
bringing an item of property, plant and equipment to the location and condition necessary for it to be capable of
operating in a manner intended by management. The amendment requires retrospective application and effective
for annual reporting periods beginning on or after January 1, 2022, with earlier application permitted. This
amendment is not expected to have a material impact on the Company upon adoption; however, the amendment
may have impacts in future periods.
Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)
The amendments require that an entity discloses its material accounting policies, instead of its significant
accounting policies. Further amendments explain how an entity can identify a material accounting policy.
Examples of when an accounting policy is likely to be material are added. To support the amendment, the IASB has
also developed guidance and examples to explain and demonstrate the application of the ‘four-step materiality
process’ described in IFRS Practice Statement 2. The amendments are effective for annual reporting periods
beginning on or after January 1, 2023. The Company is currently evaluating the impact of the amendment on its
financial statements.
PAN AMERICAN SILVER CORP.
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Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
5. SIGNIFICANT JUDGMENTS IN APPLYING ACCOUNTING POLICIES
Judgments that have the most significant effect on the amounts recognized in the Company’s consolidated
financial statements are as follows:
a) Capitalization of evaluation costs
The Company has determined that evaluation costs capitalized during the year relating to the operating mines
and certain other exploration interests have potential future economic benefits and are potentially
economically recoverable. In making this judgment, the Company has assessed various sources of information
including but not limited to the geologic and metallurgic information, history of conversion of mineral deposits
to proven and probable mineral reserves, scoping and feasibility studies, proximity to existing ore bodies,
operating management expertise and required environmental, operating and other permits.
b) Functional currency
The functional currency for the Company and its subsidiaries is the currency of the primary economic
environment in which each operates. The Company has determined that its functional currency and that of its
subsidiaries is the USD. The determination of functional currency may require certain judgments to determine
the primary economic environment. The Company reconsiders the functional currency used when there is a
change in events and conditions which determined the primary economic environment.
c) Determination of significant influence of associates
Determination of whether the Company has significant influence with respect to its associates requires an
assessment of whether the Company has power to participate in the financial and operating policy decisions of
the investee but does not have control or joint control of those policies. The Company determined that it had
significant influence over its investment in Maverix (Note 12), despite holding an ownership interest of less
than 20%, after consideration for the relevant facts and circumstances including the Company's ability to
nominate a member of the Maverix board of directors.
d) Deferral of stripping costs
In determining whether stripping costs incurred during the production phase of a mining property relate to
mineral reserves that will be mined in a future period and therefore should be capitalized, the Company treats
the costs of removal of the waste material during a mine’s production phase as deferred, where it gives rise to
future benefits. These capitalized costs are subsequently amortized on a unit of production basis over the
reserves that directly benefit from the specific stripping activity. As at December 31, 2021, the carrying
amount of Dolores and La Arena capitalized stripping costs was $23.5 million and $41.0 million, respectively
(2020 - $40.7 million and $32.9 million, respectively).
e)
Impairment, or impairment reversal, of mining interests
There is significant judgment involved in assessing whether any indications of impairment, or impairment
reversal, exist for mining interests, with consideration given to both external and internal sources of
information. Information the Company considers include changes in the market, economic and legal
environment in which the Company operates that are not within its control that affect the recoverable
amount of mining interests. Internal sources of information include the manner in which mineral property,
plant and equipment are being used or are expected to be used and indications of the economic performance
of the assets. Estimates include but are not limited to estimates of the discounted future after-tax cash flows
expected to be derived from the Company’s mining properties, costs to sell the mining properties and the
appropriate discount rate. Changes in metal price forecasts, increases or decreases in estimated future costs
of production, increases or decreases in estimated future capital costs, reductions or increases in the amount
of recoverable mineral reserves and mineral resources and/or adverse or favorable current economics can
result in a write-down or write-up of the carrying amounts of the Company’s mining interests.
PAN AMERICAN SILVER CORP.
97
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
f) Coronavirus disease ("COVID-19") pandemic impact
In March 2020, the World Health Organization declared a global pandemic following the emergence and rapid
spread of a novel strain of the coronavirus. Since the outbreak of COVID-19, it has spread to areas where we
have operations and offices. The outbreak and subsequent Government measures intended to limit the
pandemic had significant effects on commodity prices and capital markets. The spread of COVID-19 has
impacted our employees and contractors, not only as it relates to potential health concerns, but also in terms
of limitations on movement, availability of food and other goods, and personal well-being, among others. Our
suppliers and service providers have also been impacted.
During 2020, Government efforts to curtail the spread of COVID-19 resulted in temporary suspensions of our
operations in Mexico, Peru, Argentina and Bolivia (see Note 21), and we reduced throughput at our Timmins
operation in Canada in order to enhance physical distancing and protect our personnel and the community.
During 2021, there were no Government mandated suspensions but operations have continued to be
impacted by COVID-19 protocols, which have increased costs and restricted throughput levels, especially at
our underground mines.
The extent to which COVID-19 will continue to impact our operations will depend on future developments
which are highly uncertain and cannot be predicted with confidence. These future developments include, but
are not limited to, the continued presence of, or spread, of COVID-19, and any future emergence and spread
of similar pathogens, the duration of the outbreak, new information that may emerge concerning the severity
of COVID-19, and the actions taken to contain COVID-19 or treat it. The impact of governmental restrictions
and health and safety protocols could improve or worsen relative to our assumptions, depending on how each
jurisdiction manages potential outbreaks of COVID-19, the efficacy and availability of adequate supplies of
vaccines, and the roll-out of vaccination programs in each jurisdiction.
As of December 31, 2021 and 2020, no operations were suspended as a result of COVID-19. Based on
management analysis, the Company has concluded that the impacts to date including increased costs and
deferral of production due to reduced throughput do not represent indicators of impairment for any of the
Company's assets as at December 31, 2021 and 2020.
PAN AMERICAN SILVER CORP.
98
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
6. KEY SOURCES OF ESTIMATION UNCERTAINTY IN THE APPLICATION OF ACCOUNTING
POLICIES
Key sources of estimation uncertainty that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities are:
•
Revenue recognition: Revenue from the sale of concentrate to independent smelters is recognized when
control of the asset sold is transferred to the customer. The Company's concentrate sales contracts with third-
party buyers, in general, provide for a provisional payment based upon provisional assays and quoted metal
prices. Final settlement is based on applicable commodity prices set on specified quotational periods, typically
ranging from one month prior to shipment, and can extend to three months after the shipment arrives at the
smelter and is based on average market metal prices. Sales revenue is commonly subject to adjustments based
on an inspection of the product by the customer. In such cases, sales revenue is initially recognized on a
provisional basis using the Company’s best estimate of contained metal, and adjusted subsequently. Revenues
are recorded under these contracts at the time control passes to the buyer based on the expected settlement
period. Revenue on provisionally priced sales is recognized based on estimates of the fair value of the
consideration receivable based on forward market prices and estimated quantities. At each reporting date
provisionally priced metal is marked to market based on the forward selling price for the quotational period
stipulated in the contract. Variations between the price recorded at the date when control is transferred to
the buyer and the actual final price set under the smelting contracts are caused by changes in metal prices
resulting in the receivable being recorded at FVTPL. In a period of high price volatility, as experienced under
current economic conditions, the effect of mark-to-market price adjustments related to the quantity of metal
which remains to be settled with independent smelters could be significant. For changes in metal quantities
upon receipt of new information and assay, the provisional sales quantities are adjusted.
•
Estimated recoverable ounces: The carrying amounts of the Company’s mining properties are depleted based
on recoverable ounces. Changes to estimates of recoverable ounces and depletable costs including changes
resulting from revisions to the Company’s mine plans and changes in metal price forecasts can result in a
change to future depletion rates.
• Mineral reserve estimates: The figures for mineral reserves and mineral resources are disclosed in accordance
with National Instrument 43 - 101, “Standards of Disclosure for Mineral Projects”, issued by the Canadian
Securities Administrators and in accordance with “Estimation of Mineral Resources and Mineral Reserves Best
Practice Guidelines – adopted November 23, 2003”, prepared by the Canadian Institute of Mining, Metallurgy
and Petroleum Standing Committee on Reserve Definitions. There are numerous uncertainties inherent in
estimating mineral reserves and mineral resources, including many factors beyond the Company’s control.
Such estimation is a subjective process, and the accuracy of any mineral reserve or mineral resource estimate
is a function of the quantity and quality of available data and of the assumptions made and judgments used in
engineering and geological
including
economic assumptions such as metal prices and market conditions could have a material effect in the future
on the Company’s financial position and results of operation.
interpretation. Differences between management’s assumptions
•
Valuation of Inventory: In determining mine production costs recognized in the consolidated income
statement, the Company makes estimates of quantities of ore stacked in stockpiles, placed on the heap leach
pad and in process and the recoverable silver in this material to determine the average costs of finished goods
sold during the period. Changes in these estimates can result in a change in mine operating costs of future
periods and carrying amounts of inventories. Refer to Note 10 for details.
• Depreciation and amortization rates for mineral properties, plant and equipment and mineral interests:
Depreciation and amortization expenses are allocated based on assumed asset lives and depreciation and
amortization rates. Should the asset life or depreciation rate differ from the initial estimate, an adjustment
PAN AMERICAN SILVER CORP.
99
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
•
•
would be made in the consolidated income statement prospectively. A change in the mineral reserve estimate
for assets depreciated using the units of production method would impact depreciation expense prospectively.
Estimation of decommissioning and reclamation costs and the timing of expenditures: The cost estimates are
updated annually during the life of a mine to reflect known developments, (e.g. revisions to cost estimates and
to the estimated lives of operations), and are subject to review at regular intervals. Decommissioning,
restoration and similar liabilities are estimated based on the Company’s interpretation of current regulatory
requirements, constructive obligations and are measured at the best estimate of expenditures required to
settle the present obligation of decommissioning, restoration or similar liabilities that may occur upon
decommissioning of the mine at the end of its productive life. The carrying amount is determined based on the
net present value of estimated future cash expenditures for the settlement of decommissioning, restoration or
similar liabilities that may occur upon decommissioning of the mine. Such estimates are subject to change
based on changes in laws and regulations and negotiations with regulatory authorities. Refer to Note 15 for
details on decommissioning and restoration costs.
Income taxes and recoverability of deferred tax assets: In assessing the probability of realizing income tax
assets recognized, the Company makes estimates related to expectations of future taxable income, applicable
tax planning opportunities, expected timing of reversals of existing temporary differences and the likelihood
that tax positions taken will be sustained upon examination by applicable tax authorities. In making its
assessments, the Company gives additional weight to positive and negative evidence that can be objectively
verified. Estimates of future taxable income are based on forecasted cash flows from operations and the
application of existing tax laws in each jurisdiction. The Company considers relevant tax planning opportunities
that are within the Company’s control, are feasible and within management’s ability to implement.
Examination by applicable tax authorities is supported based on individual facts and circumstances of the
relevant tax position examined in light of all available evidence. Where applicable tax laws and regulations are
either unclear or subject to ongoing varying interpretations, it is reasonably possible that changes in these
estimates can occur that materially affect the amounts of income tax assets recognized. Also, future changes
in tax laws could limit the Company from realizing the tax benefits from the deferred tax assets. The Company
reassesses unrecognized income tax assets at each reporting period.
•
Provisions and contingencies: Due to the size, complexity and nature of the Company’s operations, various
legal and tax matters are outstanding from time to time. In the event the Company’s estimates of the future
resolution of these matters change, the Company will recognize the effects of the changes in its consolidated
financial statements on the date such changes occur. Refer to Note 28 for further discussion on contingencies.
7. MANAGEMENT OF CAPITAL
The Company’s objective when managing its capital is to maintain its ability to continue as a going concern while
at the same time maximizing the growth of its business and providing returns to its shareholders. The Company’s
capital structure consists of shareholders’ equity (comprising issued capital plus share option reserve plus deficit,
plus investment revaluation reserve) with a balance of $2.6 billion as at December 31, 2021 (2020 - $2.6 billion).
The Company manages its capital structure and makes adjustments based on changes to its economic
environment and the risk characteristics of the Company’s assets. The Company’s capital requirements are
effectively managed based on the Company having a thorough reporting, planning and forecasting process to help
identify the funds required to ensure the Company is able to meet its operating and growth objectives.
The Company is not subject to externally imposed capital requirements and the Company’s overall objective with
respect to capital risk management remains unchanged from the year ended December 31, 2020.
PAN AMERICAN SILVER CORP.
100
8. FINANCIAL INSTRUMENTS
a) Financial assets and liabilities by categories:
December 31, 2021
Financial Assets:
Cash and cash equivalents
Trade receivables from provisional concentrates sales (1)
Receivable not arising from sale of metal concentrates (1)
Short-term investments
Derivative assets
Financial Liabilities:
Derivative liabilities
Debt
(1)
Included in Trade and other receivables.
December 31, 2020
Financial Assets:
Cash and cash equivalents
Trade receivables from provisional concentrates sales (1)
Receivable not arising from sale of metal concentrates (1)
Short-term investments
Derivative assets
Financial Liabilities:
Derivative liabilities
(1)
Included in Trade and other receivables.
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
Amortized cost
FVTPL
Total
$
283,550 $
—
76,902
—
—
360,452 $
— $
15,300 $
$
$
$
— $
40,020
—
51,723
3,995
95,738 $
283,550
40,020
76,902
51,723
3,995
456,190
351 $
— $
351
15,300
Amortized cost
FVTPL
Total
$
167,113 $
—
84,486
—
—
251,599 $
$
$
— $
35,084
—
111,946
7,812
154,842 $
167,113
35,084
84,486
111,946
7,812
406,441
— $
367 $
367
b) Short-term investments in equity securities recorded at FVTPL
The Company’s short-term investments in equity securities are recorded at FVTPL. The (losses) gains from
short-term investments in equity securities for the year ended December 31, 2021 and 2020 were as follows:
Unrealized (losses) gains on short-term investments, equity securities
Realized gains on short-term investments, equity securities
2021
2020
$
$
(60,355) $
633
(59,722) $
10,577
51,562
62,139
c) Derivative instruments
The Company's derivatives are comprised of foreign currency and commodity contracts. The gains on
derivatives for the year ended December 31, 2021 and 2020 were comprised of the following:
Gains on derivatives
Realized gains (losses) on derivatives
Unrealized (losses) gains on derivatives
2021
2020
$
$
9,156 $
(3,763)
5,393 $
(2,594)
6,137
3,543
PAN AMERICAN SILVER CORP.
101
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
d) Fair value information
i)
Fair Value Measurement
The categories of the fair value hierarchy that reflect the inputs to valuation techniques used to measure
fair value are as follows:
Level 1: Quoted prices in active markets for identical assets or liabilities;
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or
liability, either directly or indirectly; and
Level 3: Inputs for the asset or liability based on unobservable market data
The levels in the fair value hierarchy into which the Company’s financial assets and liabilities that are
measured and recognized on the consolidated statements of financial position at fair value on a recurring
basis were categorized as follows:
Assets and Liabilities:
Short-term investments
Trade receivables from provisional concentrate sales
Derivative assets
Derivative liabilities
At December 31, 2021
Level 2
Level 1
At December 31, 2020
Level 2
Level 1
$
$
51,723 $
—
—
—
51,723 $
— $
111,946 $
40,020
3,995
(351)
43,664 $
—
—
—
111,946 $
—
35,084
7,812
(367)
42,529
The methodology and assessment of inputs for determining the fair value of financial assets and liabilities
as well as the levels of hierarchy for the Company’s financial assets and liabilities measured at fair value
remains unchanged from that at December 31, 2020.
ii) Valuation Techniques
Short-term investments
The Company’s short-term investments and other investments are valued using quoted market prices in
active markets and as such are classified within Level 1 of the fair value hierarchy and are primarily equity
securities. The fair value of the investment securities is calculated as the quoted market price of the
investment and in the case of equity securities, the quoted market price multiplied by the quantity of
shares held by the Company.
Derivative assets and liabilities
The Company’s derivative assets and liabilities were comprised of foreign currency and commodity
contracts which are valued using observable market prices.
Trade Receivables from Provisional Concentrate Sales
A portion of the Company’s trade receivables arose from provisional concentrate sales and are valued
using quoted market prices based on the forward London Metal Exchange for copper, zinc and lead and
the London Bullion Market Association P.M. fix for gold and silver.
PAN AMERICAN SILVER CORP.
102
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
e) Financial Instruments and related risks
The Company has exposure to risks of varying degrees of significance which could affect its ability to achieve
its strategic objectives for growth and shareholder returns. The principle financial risks to which the Company
is exposed are:
i) Credit risk
ii) Liquidity risk
iii) Market risk
1. Currency risk
2. Interest rate risk
3. Price risk
The Company’s Board of Directors has overall responsibility for the establishment and oversight of the
Company’s risk management framework and reviews the Company’s policies on an ongoing basis.
i)
Credit Risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial
instrument fails to meet its contractual obligations and arises principally from the Company’s trade
receivables. The carrying value of trade receivables represents the maximum credit exposure.
The Company has concentrate contracts to sell the zinc, lead, copper and silver concentrates produced by
the Huaron, Morococha, San Vicente and La Colorada mines. Concentrate contracts are a common
business practice in the mining industry. The terms of the concentrate contracts may require the Company
to deliver concentrate that has a value greater than the payment received at the time of delivery, thereby
introducing the Company to credit risk of the buyers of concentrates. Should any of these counterparties
not honour purchase arrangements, or should any of them become insolvent, the Company may incur
losses for products already shipped and be forced to sell its concentrates on the spot market or it may not
have a market for its concentrates and therefore its future operating results may be materially adversely
impacted. At December 31, 2021, the Company had receivable balances associated with buyers of its
concentrates of $40.0 million (2020 - $35.1 million). The vast majority of the Company’s concentrate is
sold to five well-known concentrate buyers.
Doré production from La Colorada, Dolores, Manantial Espejo, Shahuindo, La Arena, Bell Creek and
Timmins is refined under long-term agreements with fixed refining terms at five separate refineries
worldwide. The Company generally retains the risk and title to the precious metals throughout the process
of refining and therefore is exposed to the risk that the refineries will not be able to perform in accordance
with the refining contract and that the Company may not be able to fully recover precious metals in such
circumstances. At December 31, 2021, the Company had approximately $52.3 million (2020 - $61.8
million) of value contained in precious metal inventory at refineries. The Company maintains insurance
coverage against the loss of precious metals at the Company’s mine sites, in-transit to refineries and while
at the refineries. Risk is transferred to the refineries upon delivery.
The Company maintains trading facilities with several banks and bullion dealers for the purposes of
transacting the Company’s metal sales. None of these facilities are subject to margin arrangements. The
Company’s trading activities can expose the Company to the credit risk of its counterparties to the extent
that the trading positions have a positive mark-to-market value. However, the Company maintains an
active credit management and monitoring program to minimize the risk of excessive credit risk
concentration with any single counterparty.
Refined silver and gold are sold in the spot market to various bullion traders and banks. Credit risk may
arise from these activities if the Company is not paid for metal at the time it is delivered, as required by
spot sale contracts.
Supplier advances for products and services yet to be provided are a common practice in some
jurisdictions in which we operate. These advances represent a credit risk to us to the extent that suppliers
PAN AMERICAN SILVER CORP.
103
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
do not deliver products or perform services as expected. As at December 31, 2021, we had made $11.2
million of supplier advances (2020 - $8.2 million), which are reflected in “Trade and other receivables” on
the consolidated statements of financial position.
Management constantly monitors and assesses the credit risk resulting from its refining arrangements,
concentrate sales and commodity contracts with its refiners, trading counterparties and customers.
Furthermore, management carefully considers credit risk when allocating prospective sales and refining
business to counterparties. In making allocation decisions, management attempts to avoid unacceptable
concentration of credit risk to any single counterparty.
Cash and cash equivalents, trade accounts receivable and other receivables that represent the maximum
credit risk to the Company consist of the following:
Cash and cash equivalents
Trade accounts receivable (1)
Supplier advances (1)
Employee loans (1)
(1)
Included in Trade and other receivables.
$
December 31,
2021
283,550 $
40,020
11,228
667
December 31,
2020
167,113
35,084
8,186
552
The Company invests its cash and cash equivalents, which also has credit risk, with the objective of
maintaining safety of principal and providing adequate liquidity to meet all current payment obligations.
ii) Liquidity Risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come
due. The Company manages its liquidity risk by continuously monitoring forecasted and actual cash flows.
The Company has in place a rigorous planning and budgeting process to help determine the funds required
to support the Company’s normal operating requirements on an ongoing basis and its expansion plans.
The Company strives to maintain sufficient liquidity to meet its short-term business requirements, taking
into account its anticipated cash flows from operations, its holdings of cash and short-term investments,
and its committed loan facilities.
In the normal course of business, the Company enters into contracts that give rise to commitments for
future minimum payments. The following tables summarize the remaining contractual maturities of the
Company's financial liabilities and operating and capital commitments on an undiscounted basis:
Payments due by period 2021
Accounts payable and accrued liabilities other than:
Severance accrual
Employee compensation
Total accounts payable and accrued liabilities
Income taxes payable
Loss on derivatives
Debt
Repayment of principal
Interest and standby fees
Provisions (1)(2)
Future employee compensation
Total contractual obligations (2)
$
$
Within 1
year
275,629 $
26,695
3,763
306,087
59,133
351
2 - 3 years
4- 5 years
After 5
years
— $
404
—
404
—
—
— $
33
—
33
—
—
— $
4,450
—
4,450
—
—
Total
275,629
31,582
3,763
310,974
59,133
351
3,400
2,613
2,738
3,352
377,674 $
6,800
4,867
2,553
9,058
23,682 $
5,100
1,432
—
—
6,565 $
—
—
—
—
4,450 $
15,300
8,912
5,291
12,410
412,371
(1) Total litigation provision (Note 15).
(2) Amounts above do not include payments related to closure and decommissioning (current $5.3 million, long-term $237.6
million) discussed in Note 15, the $20.8 million deferred credit arising from the Navidad acquisition discussed in Note 18, and
deferred tax liabilities of $184.8 million in Note 27.
PAN AMERICAN SILVER CORP.
104
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
Payments due by period 2020
Accounts payable and accrued liabilities other than:
Severance accrual
Employee compensation
Total accounts payable and accrued liabilities
Income taxes payable
Loss on derivatives
Debt
Interest and standby fees
Provisions (1)(2)
Future employee compensation
Total contractual obligations (2)
$
$
2 - 3 years
4- 5 years
After 5
years
Within 1
year
272,266 $
2,935
6,737
281,938
54,556
367
— $
— $
3,711
—
3,711
—
—
1,120
—
1,120
—
—
2,110
3,648
4,396
347,015 $
2,294
3,109
11,468
20,582 $
—
85
—
1,205 $
Total
272,266
7,842
6,737
286,845
54,556
367
4,404
6,843
15,864
368,879
— $
76
—
76
—
—
—
1
—
77 $
(1) Total litigation provision (Note 15).
(2) Amounts above do not include payments related to closure and decommissioning (current $8.4 million, long-term $226.7
million) discussed in Note 15, the $20.8 million deferred credit arising from the Navidad acquisition discussed in Note 18, and
deferred tax liabilities of $175.3 million in Note 27.
There was no significant change to the Company’s exposure to liquidity risk during the year ended
December 31, 2021.
iii) Market Risk
1. Currency Risk
The Company reports its financial statements in USD; however, the Company operates in jurisdictions
that utilize other currencies. As a consequence, the financial results of the Company’s operations as
reported in USD are subject to changes in the value of the USD relative to local currencies. Since the
Company’s sales are denominated in USD and a portion of the Company’s operating costs and capital
spending are in local currencies, the Company is negatively impacted by strengthening local currencies
relative to the USD and positively impacted by the inverse.
At December 31, 2021, the Company had outstanding positions on its foreign currency exposure of
Mexican peso ("MXN"), Peruvian sol ("PEN") and Canadian dollar ("CAD") purchases. The Company
recorded losses of $0.2 million, $3.7 million, and gains of $0.9 million, respectively, on MXN, PEN and
CAD derivative contracts for the year ended December 31, 2021 (2020 - gains of $1.6 million, losses of
$2.2 million, and losses of $0.6 million, respectively).
The Company’s net earnings are affected by the revaluation of its monetary assets and monetary
liabilities at each balance sheet date. The Company has reviewed its monetary assets and monetary
liabilities and is exposed to foreign exchange risk through financial assets and liabilities and deferred
income tax liabilities denominated in currencies other than USD, as shown in the table below. The
Company estimates that a 10% change in the exchange rate of the foreign currencies in which its
December 31, 2021 non-USD net monetary liabilities were denominated would result in an income
before taxes change of about $23.0 million (2020 - $13.8 million).
PAN AMERICAN SILVER CORP.
105
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
The Company is exposed to currency risk through the following financial assets and liabilities, and
deferred income tax assets and liabilities denominated in foreign currencies:
$
$
$
At December 31, 2021
Canadian Dollar
Mexican Peso
Argentine Peso
Bolivian Boliviano
European Euro
Peruvian Sol
Guatemala quetzal
At December 31, 2020
Canadian Dollar
Mexican Peso
Argentine Peso
Bolivian Boliviano
European Euro
Peruvian Sol
Guatemala quetzal
Cash and
short-term
investments
Other current
and
non-current
assets
Income taxes
receivable
(payable),
current and non-
current
Accounts
payable
and accrued
liabilities and
non-
current liabilities
Deferred tax
assets and
liabilities
60,507 $
1,159
12,488
8,397
49
8,585
169
91,354 $
3,389 $
7,681
20,358
499
—
17,295
539
49,761 $
— $
(14,930)
1,502
(7,943)
—
(22,207)
(91)
(43,669) $
(27,448) $
(25,985)
(19,525)
(23,914)
—
(54,953)
(9,919)
(161,744) $
—
(64,584)
(13)
(6,954)
—
(94,367)
—
(165,918)
Cash and
short-term
investments
Other current
and
non-current
assets
Income taxes
receivable
(payable),
current and non-
current(1)
Accounts
payable
and accrued
liabilities and
non-
current liabilities
Deferred tax
assets and
liabilities(1)
117,956 $
1,020
7,175
571
3
13,917
453
$
141,095 $
4,952 $
29,895
16,878
218
—
26,257
677
78,877 $
— $
3,550
1,513
(3,159)
—
(39,296)
—
(37,392) $
(24,310) $
(45,050)
(14,543)
(19,402)
—
(54,672)
(4,559)
(162,536) $
—
(73,017)
—
(7,700)
—
(77,810)
—
(158,527)
(1) Recast comparative to be consistent with current presentation.
2.
Interest Rate Risk
Interest rate risk is the risk that the fair values and future cash flows of the Company will fluctuate
because of changes in market interest rates. The average interest rate earned by the Company during
the year ended December 31, 2021 on its cash and short-term investments was 0.7% (2020 - 0.9%). A
10% increase or decrease in the interest earned from financial institutions on cash and short-term
investments would not result in a change in the Company’s earnings before income taxes (2020 – $0.1
million).
On August 10, 2021 the Company entered into an amendment agreement to amend and extend its
$500 million credit facility, with a maturity date of February 1, 2023 (the "Credit Facility"), into a
$500 million sustainability-linked credit facility, with a maturity date of August 8, 2025 (the
"Sustainability-Linked Credit Facility") (Note 17). There were no amounts drawn during the year
ended December 31, 2021 on either the Sustainability-Linked Credit Facility or the Credit Facility. The
amounts drawn on the Credit Facility incurred an average interest rate of 2.6% during the year ended
December 31, 2020.
At December 31, 2021, the Company has $30.6 million in lease obligations (2020 - $33.6 million), that
are subject to an annualized interest rate of 10.6% (2020 - 9.3%).
3. Price Risk
Metal price risk is the risk that changes in metal prices will affect the Company’s income or the value
of its related financial instruments. The Company derives its revenue from the sale of silver, gold, lead,
copper, and zinc. The Company’s sales are directly dependent on metal prices that have shown
PAN AMERICAN SILVER CORP.
106
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
significant volatility and are beyond the Company’s control. Consistent with the Company’s mission to
provide equity investors with exposure to changes in precious metal prices, the Company’s current
policy is to not hedge the price of precious metal.
During the year ended December 31, 2021, the Company entered into collars made up of put and call
contracts for its exposure to copper but had no contracts outstanding as at December 31, 2021. The
Company recorded losses of $1.1 million on copper contracts during the year ended December 31,
2021. The Company did not enter into copper contracts during the year ended December 31, 2020.
As at December 31, 2021, the Company entered into collars made up of put and call contracts for its
exposure to zinc but had no contracts outstanding as at December 31, 2021. The Company recorded
gains of $0.1 million during the year ended December 31, 2021.
At December 31, 2021, the Company had outstanding positions of diesel swap contracts designated to
fix or limit the Company’s exposure to higher fuel prices (the “Diesel fuel swaps”). The Company
recorded gains of $9.4 million on Diesel fuel swaps during the year ended December 31, 2021 (2020 -
gains of $4.7 million).
A 10% increase in all metal prices as at December 31, 2021, would result in an increase of
approximately $165.1 million (2020 – $138 million) in the Company’s revenues. A 10% decrease in all
metal prices as at the same period would result in a decrease of approximately $166.4 million (2020 -
$138.2 million) in the Company’s revenues. The Company also enters into provisional concentrate
contracts to sell the zinc, lead and copper concentrates. We have provisionally priced sales for which
price finalization, referenced to the relevant zinc, lead, copper and silver index, is outstanding at the
balance sheet date. A 10% increase in metals prices on open positions of zinc, lead, copper and silver
for provisional concentrate contracts for the year ended December 31, 2021 would result in an
increase of approximately $7.2 million (2020 - $4.6 million) in the Company’s before tax earnings,
which would be reflected in 2021 results. A 10% decrease in metal prices for the same period would
result in a decrease of approximately $7.2 million (2020 - $4.6 million) in the Company’s before tax
earnings.
The Company mitigates the price risk associated with its base metal production by committing some
of its forecasted base metal production from time to time under forward sales and option contracts.
The Board of Directors continually assesses the Company’s strategy towards its base metal exposure,
depending on market conditions.
9. SHORT-TERM INVESTMENTS
December 31, 2021
December 31, 2020
Fair
Value
Cost
Accumulated
unrealized
holding gains
Fair Value
Cost
Accumulated
unrealized
holding gains
Short-term investments
$
51,723 $
20,419 $
31,304 $
111,946 $
20,419 $
91,527
PAN AMERICAN SILVER CORP.
107
10. INVENTORIES
Inventories consist of:
Concentrate
Stockpile
Heap leach and in process
Doré and finished
Materials and supplies
Total inventories
Less: current inventories
Non-current inventories(1)
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
December 31,
2021
30,647 $
43,216
286,266
81,448
84,529
526,106 $
(500,462) $
25,644 $
December 31,
2020
19,104
30,063
219,334
77,489
84,556
430,546
(406,191)
24,355
$
$
$
$
(1)
Inventories at Escobal mine, which include $18.3 million (2020 - $17.1 million) in supplies with the remainder attributable to metals,
have been classified as non-current pending the restart of operations.
Total inventories held at net realizable value amounted to $203.7 million at December 31, 2021 (December 31,
2020 – $215.5 million). The Company recorded write-downs of $8.7 million for the year ended December 31, 2021
(2020 – recoveries of $16.2 million) which were included in cost of sales (Note 20).
A portion of the stockpile ore amounting to $4.5 million (2020 - $2.7 million) and a portion of the heap leach
inventory amounting to $185.1 million (2020 - $147.0 million) are expected to be recovered or settled after more
than twelve months.
11. MINERAL PROPERTIES, PLANT AND EQUIPMENT
Acquisition costs of investment and non-producing properties together with costs directly related to mine
development expenditures are capitalized. Exploration expenditures on investment and non-producing properties
are charged to expense in the period they are incurred.
Capitalization of evaluation expenditures commences when there is a high degree of confidence in the project’s
viability and hence it is probable that future economic benefits will flow to the Company. Evaluation expenditures,
other than that acquired from the purchase of another mining company, are carried forward as an asset provided
that such costs are expected to be recovered in full through successful development and exploration of the area of
interest, or alternatively by its sale. Evaluation expenditures include delineation drilling, metallurgical evaluations,
and geotechnical evaluations amongst others.
PAN AMERICAN SILVER CORP.
108
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
Mineral properties, plant and equipment consist of:
Mining Properties
Depletable
Non-depletable
Carrying value
As at January 1, 2021
Net of accumulated depreciation
Additions
Disposals
Depreciation and amortization (1)
Depreciation charge captured in inventory
Transfers
Closure and decommissioning – changes in
estimate (Note 15)
As at December 31, 2021
Cost as at December 31, 2021
Accumulated depreciation and impairments
Carrying value – December 31, 2021
Reserves
and Resources
Reserves
and Resources
Exploration
and Evaluation
Plant and
Equipment
Total
$
$
$
$
996,745 $
210,484
(2,770)
(166,116)
(21,249)
90,571
6,905
1,114,570 $
3,140,594 $
(2,026,024)
1,114,570 $
307,080 $
31,971
—
(770)
—
(9,522)
431,650 $
7,253
(12,315)
—
—
(93)
679,531 $
16,766
(4,542)
(136,072)
—
(80,956)
328,759 $
426,495 $
474,727 $
2,415,006
266,474
(19,627)
(302,958)
(21,249)
—
6,905
2,344,551
343,705 $
(14,946)
328,759 $
839,427 $
(412,932)
426,495 $
1,288,392 $
(813,665)
474,727 $
5,612,118
(3,267,567)
2,344,551
(1) Includes $nil of depreciation and amortization included in mine care and maintenance for the year ended December 31, 2021.
Carrying value
As at January 1, 2020
Net of accumulated depreciation
Additions
Disposals
Depreciation and amortization (1)
Depreciation charge captured in inventory
Transfers
Closure and decommissioning – changes in
estimate (Note 15)
As at December 31, 2020
Cost as at December 31, 2020
Accumulated depreciation and impairments
Carrying value – December 31, 2020
Mining Properties
Depletable
Non-depletable
Reserves
and Resources
Reserves
and Resources
Exploration
and Evaluation
Plant and
Equipment
Total
$
$
$
$
950,752 $
142,463
(235)
(125,277)
(29,618)
22,747
35,913
996,745 $
331,549 $
17,159
(38)
(1,059)
—
(40,531)
450,926 $
631
(14,315)
—
—
(5,592)
—
—
771,674 $
30,971
(382)
(146,108)
—
23,376
—
307,080 $
431,650 $
679,531 $
2,504,901
191,224
(14,970)
(272,444)
(29,618)
—
35,913
2,415,006
2,753,136 $
(1,756,391)
996,745 $
321,639 $
(14,559)
307,080 $
844,487 $
(412,837)
431,650 $
1,461,678 $
(782,147)
679,531 $
5,380,940
(2,965,934)
2,415,006
(1) Includes $18.0 million of depreciation and amortization included in mine care and maintenance for the year ended December 31, 2020.
PAN AMERICAN SILVER CORP.
109
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
December 31, 2021
December 31, 2020
Accumulated
Depreciation
and
Impairment
Cost
Carrying
Value
Cost
Accumulated
Depreciation
and
Impairment
Carrying
Value
$
$
$
$
$
224,700 $
277,105
590,096
208,306
355,471
1,738,040
518,931
151,045
335,488
29,804
4,428,986 $
(141,902) $
(188,821)
(132,727)
(105,006)
(185,684)
(1,350,908)
(500,244)
(110,829)
(103,903)
(19,664)
(2,839,688) $
82,798 $
88,284
457,369
103,300
169,787
387,132
18,687
40,216
231,585
10,140
1,589,298 $
218,270 $
267,705
546,643
170,401
308,378
1,709,105
513,626
144,790
307,243
28,653
4,214,814 $
(135,932) $
(175,844)
(86,855)
(66,313)
(164,443)
(1,228,492)
(485,036)
(101,408)
(75,902)
(18,313)
(2,538,538) $
6,373 $
(871) $
5,502 $
6,758 $
(1,254) $
566,577
257,390
63,018
3,549
117,005
78,443
55,370
2,981
32,426
1,183,132 $
5,612,118 $
(376,101)
(1,842)
—
—
—
(36,975)
—
—
(12,090)
(427,879) $
(3,267,567) $
190,476
255,548
63,018
3,549
117,005
41,468
55,370
2,981
20,336
755,253 $
2,344,551 $
566,577
259,198
71,099
6,079
117,000
80,239
21,589
5,054
32,533
1,166,126 $
5,380,940 $
(376,101)
(1,072)
—
—
—
(36,975)
—
—
(11,994)
(427,396) $
(2,965,934) $
82,338
91,861
459,788
104,088
143,935
480,613
28,590
43,382
231,341
10,340
1,676,276
5,504
190,476
258,126
71,099
6,079
117,000
43,264
21,589
5,054
20,539
738,730
2,415,006
Producing properties:
Huaron, Peru
Morococha, Peru
Shahuindo, Peru
La Arena, Peru
La Colorada, Mexico
Dolores, Mexico (1)
Manantial Espejo, Argentina (2)
San Vicente, Bolivia
Timmins, Canada
Other
Non-Producing Properties:
Land
Navidad, Argentina (3)
Escobal, Guatemala
Timmins, Canada
Shahuindo, Peru
La Arena, Peru
Minefinders, Mexico
La Colorada, Mexico
Morococha, Peru
Other
Total
(1) Includes previously recorded impairment charges of $748.9 million at December 31, 2021 (2020 - $748.9 million).
(2) Includes previously recorded impairment charges of $173.3 million at December 31, 2021 (2020 - $173.3 million).
(3) Includes previously recorded impairment charges of $376.1 million at December 31, 2021 (2020 - $376.1 million).
Disposal
On June 28, 2021, the Company completed the sale of a portfolio of six precious metals royalties to Maverix and
another counterparty for total consideration of $9.5 million in cash and 491,071 common shares in Maverix valued
at $2.6 million (Note 12). As a result, the Company recorded a gain of $0.8 million during the year ended
December 31, 2021 in gains on sale of mineral properties, plant and equipment.
On July 12, 2021, the Company completed the sale of 100% of its interest in the Waterloo silver-barite project for
consideration of $33.5 million in cash and the retention of a 2% net smelter royalty on any future production of
minerals from this project. The Company realized a gain on disposal of $32.5 million for the year ended
December 31, 2021.
PAN AMERICAN SILVER CORP.
110
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
12. INVESTMENTS IN ASSOCIATES
The following table shows a continuity of the Company's investments in associates:
Maverix investment, December 31, 2020
Acquisition (disposition) of shares in associate
Adjustment for change in ownership interest
Dividends
Dilution (losses) gains
Income from associate
Maverix investment, December 31, 2021
Other investment, December 31, 2021
Total investment in associates, December 31, 2021
Investment in Maverix:
2021
71,560 $
2,616
(22)
(1,220)
(34)
4,510
77,410 $
1,247
78,657 $
2020
84,319
(23,467)
1,489
(1,310)
9,160
1,369
71,560
—
71,560
$
$
$
On June 5, 2020, the Company completed a Secondary Offering pursuant to an underwriting agreement dated
May 29, 2020 between Maverix, the Company, and a syndicate of underwriters (the "Secondary Offering"). As
part of the Secondary Offering, the Company sold 10,350,000 common shares of Maverix at a price of $4.40 per
common share for aggregate gross proceeds of $45.5 million and paid underwriting fees equal to 4% of the gross
proceeds equal to $1.9 million.
Concurrent with the Secondary Offering, the Company acquired ownership or control of an additional 8,250,000
common shares of Maverix through the exercise of its remaining 8,250,000 common share purchase warrants in
Maverix (the "Warrants"). 5,000,000 Warrants had an exercise price of $1.56 and 3,250,000 Warrants had an
exercise price of $2.408. Maverix received gross proceeds of approximately $15.6 million. As a result, the
Company de-recognized the remaining warrant liability representing in substance ownership of Maverix.
The Company's share of Maverix income or loss was recorded, based on its 17% interest during the year ended
December 31, 2021 (26% from January 1, 2020 to June 5, 2020, 18% from June 6, 2020 to October 29, 2020, and
17% from October 30, 2020 to December 31, 2020), representing the Company’s equity interest.
Deferred Revenue:
Deferred revenue relates to precious metal streams whereby the Company will sell 100% of the future gold
production from La Colorada and 5% of the future gold production from La Bolsa, which is in the exploration stage,
to Maverix for $650 and $450 per ounce, respectively (the "Streams").
The deferred revenue related to the Streams will be recognized as revenue by the Company as the gold ounces are
delivered to Maverix. As at December 31, 2021, the deferred revenue liability was $12.5 million (December 31,
2020 - $13.3 million).
13. GOODWILL AND OTHER ASSETS
Other assets consist of:
Goodwill
Other assets
December 31,
2021
December 31,
2020
$
$
2,775 $
1,124
3,899 $
2,775
1,396
4,171
PAN AMERICAN SILVER CORP.
111
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
14. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consist of:
Trade accounts payable(1)
Royalty payables
Other accounts payable and accrued liabilities
Payroll and severance liabilities
Value added tax liabilities
Other tax payables
December 31,
2021
77,461 $
24,113
107,207
64,968
12,006
20,332
306,087 $
December 31,
2020
80,280
18,166
94,600
56,715
11,208
20,969
281,938
$
$
(1) No interest is charged on the trade accounts payable ranging from 30 to 60 days from the invoice date. The Company has policies in
place to ensure that all payables are paid within the credit terms.
15. PROVISIONS
December 31, 2019
Revisions in estimates and obligations incurred
Charged (credited) to earnings:
-new provisions
-change in estimate
-exchange gains on provisions
-utilized in the year
Reclamation expenditures
Accretion expense (Note 22)
December 31, 2020
Revisions in estimates and obligations incurred
Charged (credited) to earnings:
-new provisions
-change in estimate
-exchange gains on provisions
-utilized in the period
Reclamation expenditures
Accretion expense (Note 22)
December 31, 2021
Maturity analysis of total provisions:
Current
Non-Current
Closure and
Decommissioning
$
188,455 $
40,857
—
—
—
—
(2,462)
8,260
235,110 $
6,278
—
—
—
—
(5,997)
7,470
242,861 $
$
$
Litigation
Total
6,929 $
—
2,402
(1,754)
(569)
(165)
—
—
6,843 $
—
6,376
(1,801)
(389)
(5,738)
—
—
5,291 $
195,384
40,857
2,402
(1,754)
(569)
(165)
(2,462)
8,260
241,953
6,278
6,376
(1,801)
(389)
(5,738)
(5,997)
7,470
248,152
December 31,
2021
8,041 $
240,111
248,152 $
December 31,
2020
12,066
229,887
241,953
$
$
PAN AMERICAN SILVER CORP.
112
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
Closure and Decommissioning Cost Provision
The total inflated and undiscounted amount of estimated cash flows required to settle the Company’s estimated
future closure and decommissioning costs is $413.0 million (2020 - $330.6 million), which has been inflated using
inflation rates of between 1% and 5% (2020 – between 0% and 4%). The total provision for closure and
decommissioning cost is calculated using discount rates of between 1% and 9% (2020 - between 0% and 8%).
Revisions made to the reclamation obligations in 2021 were primarily a result of increased site disturbance at the
mines as well as revisions to the estimate based on periodic reviews of closure plans, actual expenditures incurred
and concurrent closure activities completed. These obligations will be funded from operating cash flows,
reclamation deposits and cash on hand.
The accretion expense charged to 2021 earnings as finance expense was $7.5 million (2020 - $8.3 million).
Reclamation expenditures paid during the current year were $6.0 million (2020 - $2.5 million).
Litigation Provision
The litigation provision, as at December 31, 2021 and 2020, consists primarily of amounts accrued for labour
claims at several of the Company’s mine operations. The balance of $5.3 million at December 31, 2021 (2020 - $6.8
million) represents the Company’s best estimate for all known and anticipated future obligations related to the
above claims. The amount and timing of any expected payments are uncertain as their determination is outside
the control of the Company.
16. LEASES
a. Right-of-use assets ("ROU")
The following table summarizes changes in ROU assets for the year ended December 31, 2021, which have been
recorded in mineral properties, plant and equipment on the consolidated statements of financial position:
Opening net book value
Additions
Depreciation
Other
Closing net book value
b. Lease obligations
December 31,
2021
33,543 $
9,924
(12,444)
(1,527)
29,496 $
December 31,
2020
43,361
5,534
(14,244)
(1,108)
33,543
$
$
The following table presents a reconciliation of the Company's undiscounted cash flows at December 31, 2021 and
December 31, 2020 to their present value for the Company's lease obligations:
Within one year
Between one and five years
Beyond five years
Total undiscounted lease obligations
Less future interest charges
Total discounted lease obligations
Less: current portion of lease obligations
Non-current portion of lease obligations
December 31,
2021
11,690 $
16,676
16,934
45,300
(14,739)
30,561 $
(10,663)
19,898 $
December 31,
2020
13,505
17,902
19,255
50,662
(17,097)
33,565
(12,829)
20,736
$
$
$
PAN AMERICAN SILVER CORP.
113
17. DEBT
Loan
Less: current Loan
Non-current Loan
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
December 31,
2021
15,300 $
(3,400) $
11,900 $
December 31,
2020
—
—
—
$
$
$
In June 2021, a wholly-owned Peruvian subsidiary of the Company entered into a Loan for the purpose of certain
construction financing. The Loan is denominated in USD, has a five-year term with quarterly repayments and
bears interest of 3.6% per annum.
On August 10, 2021, Pan American Silver Corp. entered into an amendment agreement to amend and extend the
Credit Facility into the Sustainability-Linked Credit Facility. The Sustainability-Linked Credit Facility features a
pricing mechanism allowing for pricing adjustments on drawn and undrawn balances based on sustainability
performance ratings and scores published by MSCI and S&P Global. The Sustainability-Linked Credit Facility
matures on August 8, 2025 and does not include a minimum tangible net worth financial covenant, which was a
condition of the previous Credit Facility. In addition, the financial covenants continue to include the requirement
for the Company to maintain: (i) a leverage ratio less than or equal to 3.5:1; and (ii) an interest coverage ratio
more than or equal to 3.0:1. The Sustainability-Linked Credit Facility and Credit Facility were undrawn at
December 31, 2021 and December 31, 2020, respectively. As of December 31, 2021, the Company was in
compliance with all covenants required by the Sustainability-Linked Credit Facility.
The Sustainability-Linked Credit Facility can be drawn down at any time to finance the Company’s working capital
requirements, acquisitions, investments and for general corporate purposes. Subject to pricing adjustment based
on sustainability performance ratings and scores, any amounts drawn under the Sustainability-Linked Credit
Facility will incur interest at LIBOR plus 1.825% to 2.80%. Undrawn amounts are subject to a stand-by fee of 0.41%
to 0.63% per annum, dependent on the Company's leverage ratio and sustainability performance ratings and
scores.
The Company did not draw from these credit facilities during the year ended December 31, 2021 and incurred
$2.1 million in standby charges on undrawn amounts. During the year ended December 31, 2020, the Company
incurred $2.2 million in standby charges on undrawn amounts and $5.0 million in interest at an average interest
rate of 2.6% on drawn amounts under these facilities.
18. OTHER LONG-TERM LIABILITIES
Other long term liabilities consist of:
Deferred credit(1)
Other tax payables
Severance liabilities
December 31,
2021
20,788 $
16
4,887
25,691 $
December 31,
2020
20,788
54
6,231
27,073
$
$
(1) Represents the obligation to deliver future silver production of Navidad pursuant to a silver stream contract.
PAN AMERICAN SILVER CORP.
114
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
19. SHARE CAPITAL AND EMPLOYEE COMPENSATION PLANS
a. Stock options and common shares issued as compensation ("Compensation Shares")
For the year ended December 31, 2021, the total share-based compensation expense relating to stock options
and Compensation Shares was $5.1 million (2020 - $3.0 million) and is presented as a component of general
and administrative expense.
•
Stock options
During the year ended December 31, 2021, the Company granted 53,115 (2020 – 7,605 stock options)
stock options.
During the year ended December 31, 2021, the Company issued 65,780 common shares in connection
with the exercise of stock options (2020 – 329,379 common shares in connection with the exercise of
329,711 stock options).
•
Compensation shares
During the year ended December 31, 2021, the Company issued 9,646 common shares to Directors in lieu
of Directors' fees of $0.3 million (2020 - 9,883 common shares in lieu of fees of $0.2 million).
The following table summarizes changes in stock options for the years ended December 31:
As at December 31, 2019
Granted
Exercised
Expired
Forfeited
As at December 31, 2020
Granted
Exercised
Expired
Forfeited
As at December 31, 2021
Stock Options
Weighted
Average
Exercise
Price CAD$
33.84
39.48
19.23
53.41
43.08
18.78
30.70
11.77
41.62
32.27
21.38
Shares
1,143,348 $
7,605 $
(329,711) $
(482,438) $
(21,387) $
317,417 $
53,115
(65,780) $
(2,162)
(23,587) $
279,003 $
The following table summarizes information about the Company's stock options outstanding at December 31,
2021:
Range of Exercise
Prices
CAD$
$9.76 - $17.11
$17.12 - $24.46
$24.47 - $31.81
$31.82 - $41.62
Options Outstanding
Options Exercisable
Number
Outstanding as
at December
31, 2021
48,458
143,896
74,720
11,929
279,003
Weighted
Average
Remaining
Contractual Life
(years)
0.9 $
3.4 $
6.4 $
3.9 $
3.8 $
Weighted
Average
Exercise Price
CAD$
11.59
18.90
29.50
40.26
21.38
Number
Outstanding as
at December
31, 2021
48,458 $
143,896 $
21,605 $
8,128 $
222,087 $
Weighted
Average
Exercise
Price CAD$
11.59
18.90
26.54
40.62
18.84
PAN AMERICAN SILVER CORP.
115
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
The following assumptions were used in the Black-Scholes option pricing model in determining the fair value
of options granted during the years ended December 31:
Expected life
Expected volatility
Expected dividend yield
Risk-free interest rate
Weighted average exercise price (CAD$)
Weighted average fair value (CAD$)
b. PSUs
2021
2020
4.0
44.0 %
2.4 %
1.9 %
$
$
30.70
9.39
$
$
4.0
37.9 %
1.1 %
0.8 %
39.45
15.80
PSUs are notional share units that mirror the market value of the Company’s common shares. Each vested PSU
entitles the participant to a cash payment equal to the value of an underlying share, less applicable taxes, at
the end of the term, plus the cash equivalent of any dividends distributed by the Company during the three-
year performance period. PSU grants will vest on the date that is three years from the date of grant subject to
certain exceptions. Performance results at the end of the performance period relative to predetermined
performance criteria and the application of the corresponding performance multiplier determine how many
PSUs vest for each participant. The Board of Directors approved the issuance of 79,417 PSUs for 2021 with a
share price of CAD $32.72 (2020 - 62,920 PSUs approved at a share price of CAD $39.51). Compensation
expense for PSUs was $1.9 million for the year ended December 31, 2021 (2020 - $4.2 million) and is
presented as a component of general and administrative expense.
At December 31, 2021, the following PSUs were outstanding:
PSU
As at December 31, 2019
Granted
Paid out
Change in value
As at December 31, 2020
Granted
Paid out
Forfeited
Change in value
As at December 31, 2021
c. RSUs
Number
Outstanding
247,601 $
62,920
(54,962)
—
255,559 $
79,417
(117,328)
—
—
217,648 $
Fair Value
5,896
1,942
(2,626)
3,658
8,870
2,049
(4,539)
—
(901)
5,479
Under the Company’s RSU plan, selected employees are granted RSUs where each RSU has a value equivalent
to one Pan American common share. At the time of settlement, the Board of Directors has the discretion to
settle the RSUs with cash or common shares. The RSUs vest in three installments, the first 33.3% vest on the
first anniversary date of the grant, the second 33.3% vest on the second anniversary date of the grant, and a
further 33.3% vest on the third anniversary date of the grant. Additionally, RSU value is adjusted to reflect
dividends paid on common shares over the vesting period.
Compensation expense for RSUs was $1.8 million for the year ended December 31, 2021 (2020 – $5.0 million)
and is presented as a component of general and administrative expense.
PAN AMERICAN SILVER CORP.
116
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
At December 31, 2021, the following RSUs were outstanding:
RSU
As at December 31, 2019
Granted
Paid out
Forfeited
Change in value
As at December 31, 2020
Granted
Paid out
Forfeited
Change in value
As at December 31, 2021
d.
Issued share capital
Number
Outstanding
299,216 $
261,224
(148,049)
(15,819)
—
396,572 $
240,366
(197,320)
(13,218)
—
426,400 $
Fair Value
7,107
6,302
(4,762)
(545)
5,628
13,730
5,818
(4,829)
(329)
(3,699)
10,691
The Company is authorized to issue 400,000,000 common shares without par value.
e. Dividends
The Company declared the following dividends for the years ended December 31, 2021 and 2020:
Declaration date
February 23, 2022 (1)
November 9, 2021
August 10, 2021
May 12, 2021
February 17, 2021
November 4, 2020
August 5, 2020
May 6, 2020
February 19, 2020
Record date
March 7, 2022
November 22, 2021
August 23, 2021
May 25, 2021
March 1, 2021
November 16, 2020
August 17, 2020
May 19, 2020
March 2, 2020
Dividend per
common share
0.12
0.10
0.10
0.07
0.07
0.07
0.05
0.05
0.05
$
$
$
$
$
$
$
$
$
(1) These dividends were declared subsequent to the year end and have not been recognized as distributions to owners during the
period presented.
f. CVRs
As part of the acquisition of Tahoe Resources Inc ("Tahoe"), on February 22, 2019, the Company issued
313,887,490 Contingent Value Rights ("CVRs"), with a term of 10 years, which were convertible into
15,600,208 common shares upon the first commercial shipment of concentrate following the restart of
operations at the Escobal mine. As of December 31, 2021 and 2020, there were 313,883,990 CVRs
outstanding which were convertible into 15,600,034 common shares.
PAN AMERICAN SILVER CORP.
117
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
20. PRODUCTION COSTS
Production costs are comprised of the following:
Materials and consumables
Salaries and employee benefits (1)
Contractors
Utilities
Other (recovery) expense
Changes in inventories (2)
(1) Employee compensation and benefits expense is comprised of:
Wages, salaries and bonuses
Share-based compensation
Total employee compensation and benefit expenses
Less: Expensed within Care and Maintenance expenses
Less: Expensed within General and Administrative expenses
Less: Expensed within Exploration expenses
Employee compensation and benefits expenses included in production costs
2021
381,446 $
317,081
226,095
48,675
34,165
(81,983)
925,479 $
2021
352,736 $
5,128
357,864
(4,310)
(31,230)
(5,243)
317,081 $
2020
284,215
262,753
125,242
39,242
18,198
(32,978)
696,672
2020
317,668
3,024
320,692
(37,695)
(17,180)
(3,064)
262,753
$
$
$
$
(2)
Includes NRV adjustments to inventory to increase production costs by $8.7 million for the year ended December 31, 2021 (2020 -
reduce by $16.2 million).
21. MINE CARE AND MAINTENANCE
COVID-19 mine care and maintenance expenses (1)
COVID-19 mine care and maintenance depreciation
Total COVID 19 mine care and maintenance
Mine care and maintenance expenses
(1) As a result of the temporary suspension of mines due to COVID-19 (Note 5f).
22. INTEREST AND FINANCE EXPENSE
Interest expense
Finance fees
Accretion expense (Note 15)
2021
— $
—
—
31,780
31,780 $
2020
58,323
17,975
76,298
25,807
102,105
2021
3,660 $
5,068
7,470
16,198 $
2020
9,216
2,628
8,260
20,104
$
$
$
$
PAN AMERICAN SILVER CORP.
118
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
23. EARNINGS PER SHARE
For the year ended December 31
2021
2020
Earnings (1)
(Numerator)
Shares (000’s)
(Denominator)
Per-Share
Amount
Earnings
(Numerator)
Shares (000’s)
(Denominator)
Per-Share
Amount
Net earnings
Basic earnings per share
Effect of dilutive securities:
Stock options
Diluted earnings per share
$
$
$
97,428
97,428
—
97,428
210,298 $
137
210,435 $
(1) Net earnings attributable to equity holders of the Company.
$
0.46 $
177,882
177,882
210,085 $
0.85
—
0.46 $
177,882
210
210,295 $
0.85
Potentially dilutive securities excluded in the diluted earnings per share calculation for the year ended
December 31, 2021 were 65,044 out-of-the-money options and CVRs potentially convertible into 15,600,034
common shares (2020 – 24,902 out-of-the-money options and CVRs potentially convertible into 15,600,034
common shares)
24. SUPPLEMENTAL CASH FLOW INFORMATION
The following tables summarize other adjustments for non-cash income statement items, changes in operating
working capital items and significant non-cash items:
Other operating activities
Adjustments for non-cash income statement items:
Net realizable value adjustment for inventories
Gains on derivatives (Note 8c)
Share-based compensation expense
Income from equity investees (Note 12)
Gains on sale of mineral properties, plant and equipment (Note 11)
Gains on warrants
8,719 $
(5,393)
5,128
(4,347)
(32,167)
2021
2020
$
—
(28,060) $
$
The following tables summarize other adjustments for non-cash income statement items, changes in operating
working capital items and significant non-cash items:
Changes in non-cash operating working capital items:
Trade and other receivables
Inventories
Prepaid expenses
Accounts payable and accrued liabilities
Provisions
2021
(2,874) $
$
(82,885)
1,049
18,086
(4,445)
(71,069) $
$
(16,175)
(3,543)
3,024
(10,529)
(7,922)
(38)
(35,183)
2020
54,838
(14,623)
2,353
56,816
(2,402)
96,982
Cash and Cash Equivalents
Cash in banks
25. SEGMENTED INFORMATION
December 31,
2021
283,550 $
December 31,
2020
167,113
$
The Company reviews its segment reporting to ensure it reflects the operational structure of the Company and
enables the Company's Chief Operating Decision Maker to review operating segment performance. We have
determined that each producing mine and significant development property represents an operating segment.
The Company has organized its reportable and operating segments by significant revenue streams and geographic
regions.
PAN AMERICAN SILVER CORP.
119
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
Significant information relating to the Company’s reportable operating segments is summarized in the table
below:
For the year ended December 31, 2021
Mine
Revenue
Production
costs and
royalties
Depreciation
Mine
operating
earnings
Capital
expenditures(1)
Segment/
Country
Silver Segment:
Mexico
Peru
Bolivia
Argentina
Guatemala
Total Silver Segment
Gold Segment:
Mexico
Peru
La Colorada
Huaron
Morococha
San Vicente
Manantial Espejo
Escobal
Dolores(2)
Shahuindo
La Arena
Timmins
Canada
Total Gold Segment
Other segment:
Canada
Argentina
Other
Total
Pas Corp
Navidad
Other
Segment/
Country
Silver Segment:
Mexico
Peru
Bolivia
Argentina
Guatemala
Total Silver Segment
Gold Segment:
Mexico
Peru
La Colorada
Huaron
Morococha
San Vicente
Manantial Espejo
Escobal
Dolores(2)
Shahuindo
La Arena
Timmins
Canada
Total Gold Segment
Other segment:
Canada
Argentina
Other
Total
Pas Corp
Navidad
Other
$
130,112 $
154,634
108,699
80,446
127,445
—
601,336
75,192 $
90,126
75,182
54,569
106,874
—
401,943
342,556
255,771
194,582
238,505
1,031,414
—
—
—
186,285
115,009
84,243
174,374
559,911
—
—
—
$
1,632,750 $
961,854 $
20,505 $
11,564
13,738
9,276
16,031
—
71,114
106,397
42,600
41,362
39,768
230,127
34,415 $
52,944
19,779
16,601
4,540
—
128,279
49,874
98,162
68,977
24,363
241,376
407
—
1,310
302,958 $
(407)
—
(1,310)
367,938 $
65,532
10,897
8,329
5,340
7,575
778
98,451
40,566
27,678
45,479
42,298
156,021
332
90
980
255,874
$
128,824 $
72,073
47,046
48,396
84,051
69,663 $
39,612
35,768
35,753
68,381
—
19,608 $
7,069
7,203
6,725
9,787
380,390
249,177
50,392
87,694
40,562
27,683
46,605
202,544
250,219
270,043
176,028
262,132
958,422
—
146,961
97,940
72,676
157,412
474,989
—
—
—
$
1,338,812 $
724,166 $
491
—
1,042
254,469 $
(491)
—
(1,042)
360,177 $
39,553 $
25,392
4,075
5,918
5,883
—
80,821
15,564
131,541
75,669
58,115
280,889
29,388
4,500
10,168
4,877
10,789
4,807
64,529
44,861
23,335
37,324
20,751
126,271
297
—
560
191,657
Includes payments for mineral properties, plant and equipment and payment of equipment leases.
(1)
(2) The mine was reclassified to the Gold Segment in 2021 as a result of expected mine sequencing into a higher gold zone.
For the year ended December 31, 2020
Mine
Revenue
Production
costs and
royalties
Depreciation
Mine
operating
earnings
Capital
expenditures(1)
Includes payments for mineral properties, plant and equipment and payment of equipment leases.
(1)
(2) The mine has been represented in the Gold Segment to align with current year presentation.
PAN AMERICAN SILVER CORP.
120
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
A reconciliation of segment mine operating earnings to the Company’s earnings before income taxes per the
Consolidated Income Statements is as follows:
Mine operating earnings
General and administrative
Exploration and project development
Mine care and maintenance
Foreign exchange losses
Gains on commodity and foreign currency contracts
Gains on sale of mineral properties, plant and equipment
Share of income from associate and dilution gain
Other income (expense)
Earnings from operations
Investment (loss) income
Interest and finance expense
Earnings before income taxes
At December 31, 2021
Segment/Country
Silver Segment:
Mexico
Peru
Bolivia
Argentina
Guatemala
Total Silver Segment
Gold Segment:
Mexico
Peru
Canada
Total Gold Segment
Other segment:
Canada
Argentina
Total
Mine
La Colorada
Huaron
Morococha
San Vicente
Manantial Espejo
Escobal
Dolores(1)
Shahuindo
La Arena
Timmins
Pas Corp
Navidad
Other
2021
367,938 $
(34,852)
(11,071)
(31,780)
(11,267)
5,393
32,167
4,347
36
320,911
(59,722)
(16,198)
244,991 $
2020
360,177
(36,375)
(7,096)
(102,105)
(5,474)
3,543
7,922
10,529
(21,144)
209,977
62,139
(20,104)
252,012
$
$
Assets
Liabilities
Net assets
$
299,038 $
117,514
124,607
88,924
71,012
287,811
988,906
750,220
591,164
317,371
419,106
2,077,861
52,934 $
59,975
40,494
53,264
29,017
19,833
255,517
193,638
199,450
106,799
62,196
562,083
176,006
193,077
82,734
3,518,584 $
$
16,492
—
48,484
882,576 $
246,104
57,539
84,113
35,660
41,995
267,978
733,389
556,582
391,714
210,572
356,910
1,515,778
159,514
193,077
34,250
2,636,008
(1) The mine was reclassified to the Gold Segment in 2021 as a result of expected mine sequencing into a higher gold zone.
PAN AMERICAN SILVER CORP.
121
At December 31, 2020
Segment/Country
Silver Segment:
Mexico
Peru
Bolivia
Argentina
Guatemala
Total Silver Segment
Gold Segment:
Mexico
Peru
Canada
Total Gold Segment
Other segment:
Canada
Argentina
Mine
La Colorada
Huaron
Morococha
San Vicente
Manantial Espejo
Escobal
Dolores(1)
Shahuindo
La Arena
Timmins
Pas Corp
Navidad
Other
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
Assets
Liabilities
Net assets
$
231,217 $
113,177
121,004
83,668
75,113
288,588
912,767
752,873
566,734
299,372
414,396
2,033,375
230,872
192,999
63,862
3,433,875 $
$
48,971 $
40,663
34,906
40,536
26,950
24,427
216,453
169,444
201,427
112,475
60,482
543,828
18,795
—
48,960
828,036 $
182,246
72,514
86,098
43,132
48,163
264,161
696,314
583,429
365,307
186,897
353,914
1,489,547
212,077
192,999
14,902
2,605,839
2020
1,047,601
65,033
132,823
50,081
43,274
1,338,812
(1) The mine has been represented in the Gold Segment to align with current year presentation.
Product Revenue
Refined silver and gold
Zinc concentrate
Lead concentrate
Copper concentrate
Silver concentrate
Total
2021
1,177,388 $
119,059
145,524
133,025
57,754
1,632,750 $
$
$
The Company has 25 customers that account for 100% of the concentrate and silver and gold sales revenue. The
Company has 7 customers that accounted for 21%, 13%, 12%, 11%, 9%, 7%, and 7% of total sales in 2021, and 7
customers that accounted for 19%, 17%, 12%, 11%, 7%, 7%, and 5% of total sales in 2020. The loss of certain of
these customers or curtailment of purchases by such customers could have a material adverse effect on the
Company’s financial performance, financial position, and cash flows.
26. OTHER EXPENSES
Change in closure and decommissioning estimates (1)
Change in provisions
Commissions on investment dispositions
Other expense
Total
(1) Relates to changes in estimates after the completion of mining activities.
2021
246 $
1,323
—
(1,605)
(36) $
2020
5,230
7,493
3,465
4,956
21,144
$
$
PAN AMERICAN SILVER CORP.
122
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
27. INCOME TAXES
Components of Income Tax Expense
Current tax expense (recovery)
Recognized in profit or loss in current year
Adjustments recognized in the current year with respect to prior years
Deferred tax expense (recovery)
Deferred tax recovery recognized in the current year
Adjustments recognized in the current year with respect to prior years
Benefit from previously unrecognized losses, and other temporary differences
Decrease in deferred tax liabilities due to tax impact of NRV charge to inventory
Income tax expense
2021
2020
$
$
134,947 $
147
135,094
14,194
56
508
(3,423)
11,335
146,429 $
99,013
(658)
98,355
14,667
433
(42,379)
4,481
(22,798)
75,557
Income tax expense differs from the amounts that would result from applying the Canadian federal and provincial
income tax rates to earnings before income tax. These differences result from the items shown on the following
table, which result in an effective tax rate that varies considerably from the comparable period. The factors which
have affected the effective tax rate for the year ended December 31, 2021 and the comparable period of 2020
were foreign exchange fluctuations, mining taxes paid, and withholding taxes on payments from foreign
subsidiaries.
The most significant factor impacting the effective tax rate was due to the changes in the recognition of deferred
tax assets. The increase in the effective tax rate for 2021 was due to the mark-to-market losses on short-term
investments, for which no tax benefit could be recognized; whereas in 2020, it was reduced due to the recognition
of deferred tax benefits associated with deductible tax attributes in La Arena, Timmins West, and Bell Creek. The
Company continues to expect that these and other factors will continue to cause volatility in effective tax rates in
the future.
Reconciliation of Effective Income Tax Rate
Earnings before taxes and non-controlling interest
Statutory Canadian income tax rate
Income tax expense based on above rates
Increase (decrease) due to:
Non-deductible expenditures
Foreign tax rate differences
Change in net deferred tax assets not recognized
Non-taxable portion of net earnings of affiliates
Effect of other taxes paid (mining and withholding)
Effect of foreign exchange on tax expense
Non-taxable impact of foreign exchange
Change in non-deductible portion of reclamation liabilities
Other
Income tax expense
2021
2020
$
$
244,991
$
252,012
27.00 %
66,148
$
27.00 %
68,043
6,192
15,969
20,574
(1,304)
25,846
14,337
(1,203)
2,380
(2,510)
146,429
$
9,915
16,179
(64,765)
—
22,545
18,598
(3,000)
8,605
(563)
75,557
$
PAN AMERICAN SILVER CORP.
123
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
Deferred tax assets and liabilities
The following is the analysis of the deferred tax assets (liabilities) presented in the consolidated financial
statements:
Net deferred tax liabilities, beginning of year
Recognized in net earnings in the year
Other
Net deferred liabilities, end of year
Deferred tax assets
Deferred tax liabilities
Net deferred tax liabilities
2021
(117,461) $
(11,335)
(36)
(128,832)
55,953
(184,785)
(128,832) $
2020
(140,361)
22,798
102
(117,461)
57,850
(175,311)
(117,461)
$
$
Components of deferred tax assets and liabilities
The deferred tax assets (liabilities) are comprised of the various temporary differences, as detailed below:
Deferred tax assets (liabilities) arising from:
Closure and decommissioning costs
Tax losses, resource pools and mining tax credits
Deductible Mexican mining taxes
Accounts payable and accrued liabilities
Trade and other receivables
Provision for doubtful debts and inventory adjustments
Short-term investments
Mineral properties, plant, and equipment
Estimated sales provisions
Other temporary differences and provisions
Net deferred tax liabilities
2021
2020
$
$
27,742 $
92,928
4,682
22,119
29,163
(28,153)
(7,941)
(245,126)
(30,466)
6,220
(128,832) $
26,482
140,608
3,286
17,737
13,290
(21,354)
(15,649)
(274,483)
(14,028)
6,650
(117,461)
At December 31, 2021, the net deferred tax liability above included the deferred tax asset of $92.9 million, which
includes the benefits from tax losses ($26.4 million) and resource pools ($66.5 million). The decrease of $47.7
million in this deferred tax asset is mainly due to the unrealized losses on short-term investments. These
unrealized mark-to-market losses in 2021 reduced the offsetting operating losses recognized, whereas in 2020,
additional operating losses were recognized to offset the unrealized mark-to-market gains. The losses will begin to
expire after the 2024 year end, if unused.
At December 31, 2020, the net deferred tax liability above included the deferred tax asset of $140.6 million, which
includes the benefits from tax losses ($43.8 million) and resource pools ($96.8 million). The increase in this
deferred tax asset is mainly due to the Timmins and Bell Creek mines - the assets added were related to previously
unbenefitted deductible resource pools, partially offset by losses utilized against taxable income earned. The
losses will begin to expire after the 2024 year end, if unused.
PAN AMERICAN SILVER CORP.
124
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
Unrecognized deductible temporary differences, unused tax losses and unused tax credits
Deductible temporary differences, unused tax losses and unused tax credits for which no deferred tax assets have
been recognized are attributable to the following:
Operating tax loss
Net capital tax loss
Resource pools and other tax credits (1)
Financing fees
Mineral properties, plant, and equipment (2)
Closure and decommissioning costs
Exploration and other expenses not currently deductible (2)
Intercompany debt
Doubtful debt and inventory
Payroll and vacation accruals
Other temporary differences
2021
366,351 $
35,801
49,230
1,050
127,945
143,080
33,837
17,956
24,624
6,168
6,154
812,196 $
$
$
Includes tax credits which will begin to expire after 2027 year end, if unused.
(1)
(2) Recast comparative temporary differences to be consistent with current presentation.
Included in the above amounts are operating tax losses, which if not utilized will expire as follows:
At December 31, 2021
2022
2023
2024 – and after
Total tax losses
At December 31, 2020
2021
2022
2023 – and after
Total tax losses
$
$
$
$
Canada
US
Peru
Mexico
Barbados
Argentina
— $
—
330,799
330,799 $
529 $
360
11,399
12,288 $
156 $
—
593
749 $
— $
207
2,092
2,299 $
15 $
60
168
243 $
3 $
5
19,965
19,973
Canada
US
Peru
Mexico
Barbados
Argentina
— $
—
269,001
269,001 $
317 $
529
11,746
12,592 $
26 $
—
314
340 $
— $
—
2,406
2,406 $
8 $
12
183
203 $
1 $
3
80
84 $
2020
284,626
32,378
48,773
2,003
107,124
136,728
68,266
12,160
41,378
1,491
3,562
738,489
Total
703
632
365,016
366,351
Total
352
544
283,730
284,626
Taxable temporary differences associated with investment in subsidiaries
At December 31, 2021, taxable temporary differences of $282.0 million (2020 – $275.7 million) associated with the
investments in subsidiaries have not been recognized as the Company is able to control the timing of the reversal
of these differences which are not expected to reverse in the foreseeable future.
PAN AMERICAN SILVER CORP.
125
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
28. CONTINGENCIES
The following is a summary of the contingent matters and obligations relating to the Company as at December 31,
2021.
General
The Company is subject to various investigations, claims and legal and tax proceedings covering matters that arise
in the ordinary course of business activities. Each of these matters is subject to various uncertainties and it is
possible that some of these matters may be resolved unfavorably to the Company. Certain conditions may exist as
of the date the financial statements are issued, which may result in a loss to the Company. In the opinion of
management none of these matters are expected to have a material effect on the results of operations or financial
conditions of the Company.
Environment
The Company’s mining and exploration activities are subject to various laws and regulations governing the
protection of the environment. These laws and regulations are continually changing and are generally becoming
more restrictive. The Company conducts its operations so as to protect the public health and environment and
believes its operations are in compliance with applicable laws and regulations in all material respects. The
Company has made, and expects to make in the future, expenditures to comply with such laws and regulations,
but cannot predict the full amount of such future expenditures.
Estimated future reclamation costs are based on the extent of work required and the associated costs are
dependent on the requirements of relevant authorities and the Company’s environmental policies. As of
December 31, 2021, $242.9 million (2020 - $235.1 million) was accrued for reclamation costs relating to mineral
properties (Note 15).
Tax
The Company operates in numerous countries around the world and accordingly it is subject to, and pays annual
income taxes under the various income tax regimes in the countries in which it operates. Some of these tax
regimes are defined by contractual agreements with the local government, and others are defined by the general
corporate income tax laws of the country. The Company has historically filed, and continues to file, all required
income tax returns and to pay the taxes reasonably determined to be due. The tax rules and regulations in many
countries are highly complex and subject to interpretation. From time to time, the Company is subject to a review
of its historic income tax filings and in connection with such reviews, disputes can arise with the taxing authorities
over the interpretation or application of certain rules to the Company’s business conducted within the country
involved.
Title
The validity of our mining or exploration titles or claims or rights, which constitute most of our property holdings,
can be uncertain and may be contested. Although the Company has taken steps to verify title to properties in
which it has an interest, these procedures do not guarantee the Company’s title. Property title may be subject to,
among other things, unregistered prior agreements or transfers, indigenous land claims, or undetected title
defects. In some cases, we do not own or hold rights to the mineral concessions we mine, and our rights may be
contractual in nature. We have not conducted surveys of all the claims in which we hold direct or indirect interests
and therefore, the precise area and location of such claims may be in doubt. The land title system is also not well
developed in some countries and may rely on informal, hereditary or possessory rights. Such informal systems can
create significant uncertainty in obtaining and maintaining ownership or rights of access, in defining precise
locations or clear boundaries to properties, and substantiating rights if challenged. No assurance can be given that
applicable governments will not revoke or significantly alter the conditions of the applicable exploration and
mining titles or claims, or that such exploration and mining titles or claims will not be challenged or impugned by
PAN AMERICAN SILVER CORP.
126
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
third parties. Any defects in title to our properties, or the revocation of or challenges to our rights to mine, could
have a material adverse effect on our operations and financial condition.
Legal Proceedings
We are subject to various claims and legal proceedings covering a wide range of matters that arise in the ordinary
course of business activities. Many of these claims are from current or ex-employees, or employees of former or
current owners of our operations, such as the Quiruvilca-related claims in Peru, which could, in the aggregate, be
of significant value, and include alleged improper dismissals, workplace illnesses, such as silicosis, and claims for
additional profit-sharing and bonuses in prior years.
We may become subject to class action lawsuits. For example, in mid-2017, Tahoe, which was acquired by us in
late February 2019, and certain of its former directors and officers became the subject of three purported class
action lawsuits filed in the United States that center primarily around alleged misrepresentations. These U.S. class
action lawsuits were later consolidated into one class action suit that is ongoing. In October 2018, Tahoe learned
that a similar proposed class action lawsuit had been filed in the Superior Court of Ontario. These lawsuits seek
significant damages. Tahoe has disputed the allegations made in these suits, however the outcomes are not
determinable at this time.
We may also be subject to proceedings in our commercial relationships. While we believe that we have defenses
to such allegations, if we are unsuccessful in our defense of these claims, we may be subject to significant losses.
Furthermore, we are in some cases the subject of claims by local communities, indigenous groups or private land
owners relating to land and mineral rights, or environmental or social damage, and such claimants may seek
sizeable monetary damages against us and/or the return of surface or mineral rights or revocation of permits and
licenses that are valuable to us and which may impact our operations and profitability if lost.
Each of these matters is subject to various uncertainties and it is possible that some of these matters may be
resolved unfavourably to us. We establish provisions for matters that are probable and can be reasonably
estimated. We also carry liability insurance coverage, however such insurance does not cover all risks to which we
might be exposed and in other cases, may only partially cover losses incurred by us. In addition, we may be
involved in disputes with other parties in the future that may result in litigation, which may result in a material
adverse effect on our financial position, cash flow and results of operations.
Country
Argentina
Unanticipated or drastic changes in laws and regulations have affected our operations in the past. For
example, previous governments implemented severe price, foreign exchange, and import controls which
included informal restrictions on dividend, interest, and service payments abroad and limitations on the
ability to convert ARS into USD which exposed the Company to additional risks of ARS devaluation and
high domestic inflation. The current government in Argentina maintains unfavorable economic policies,
such as strict currency controls and the imposition of export duties.
The Company has suspended project development activities at Navidad as a result of uncertainty over the
zoning, regulatory and tax laws. The Company remains committed to the development of Navidad and to
contributing to the positive economic and social development of the province of Chubut upon the
adoption of a favorable legislative framework.
PAN AMERICAN SILVER CORP.
127
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
Bolivia
On May 28, 2014, the Bolivian government enacted the New Mining Law. Among other things, the New
Mining Law provided that all pre-existing contracts were to migrate to one of several new forms of
agreement within a prescribed period of time. The Company currently has a joint venture agreement with
COMIBOL (the "COMIBOL Joint Venture"), a Bolivian state mining company, relating to the San Vicente
mine. As a result, we anticipate that the COMIBOL Joint Venture will be subject to such migration and
possible renegotiation of key terms. The migration process has been delayed by COMIBOL and has not
been completed.
The primary effects on the San Vicente operation and our interest therein will not be known until such
time as we have, if required to do so, renegotiated the COMIBOL Joint Venture, and the full impact may
only be realized over time. We will take appropriate steps to protect and, if necessary, enforce our rights
under the COMIBOL Joint Venture. There is, however, no guarantee that governmental actions, including
possible expropriation or additional changes in the law, and the migration of the COMIBOL Joint Venture
will not impact our involvement in the San Vicente operation in an adverse way and such actions could
have a material adverse effect on us and our business.
The Company's San Vicente mine, pursuant to the COMIBOL Joint Venture, is obligated to pay COMIBOL a
participation fee of 37.5% of the operation’s cash flow. For the year ended December 31, 2021, the
Company incurred approximately $7.7 million in COMIBOL royalties (2020 - incurred $5.8 million).
Guatemala
Some communities and non-governmental organizations ("NGOs") have been vocal and active in their
opposition to mining and exploration activities in Guatemala. In July 2017, the Escobal mining license was
suspended as a result of a court proceeding initiated by an NGO in Guatemala, based upon the allegation
that the Guatemala MEM violated the Xinka indigenous people’s right of consultation. After several
decisions and appeals on the matter, a decision of the Constitutional Court of Guatemala was rendered on
September 3, 2018, determining that the Escobal mining license would remain suspended until the
Guatemala MEM completes an ILO 169 consultation.
This consultation process for the Escobal mine in Guatemala has advanced in 2021 with pre-consultation
meetings held in May, June and October. The process is being led by the Guatemala MEM with
representatives of the Xinka indigenous people and PAS Guatemala, Pan American's subsidiary in
Guatemala, as participants in the process.
Operations at the Escobal mine have been suspended, on care and maintenance, since July 2017, and the
Constitutional Court of Guatemala has ordered the continued suspension of the mining license while the
MEM conducts the ILO 169 consultation with the Xinka communities residing in the area of influence.
Legal challenges to the consultation process have been filed with the Guatemalan Supreme Court by
parties opposed to the Escobal mine and the ultimate outcome of the various challenges remains
uncertain. The process, timing, and outcome of the ILO 169 consultation also remains uncertain.
29. RELATED PARTY TRANSACTIONS
The Company’s related parties include its subsidiaries, associates over which it exercises significant influence, and
key management personnel. During its normal course of operation, the Company enters into transactions with its
related parties for goods and services. All related party transactions for the year ended December 31, 2021 and
2020 have been disclosed in these consolidated financial statements. Transactions with Maverix, an associate of
the Company, have been disclosed in Note 12 of these consolidated financial statements.
These transactions are in the normal course of operations and are measured at the exchange amount, which is the
amount of consideration established and agreed to by the parties.
PAN AMERICAN SILVER CORP.
128
Remuneration of key management personnel
Notes to the Consolidated Financial Statements
As at December 31, 2021 and December 31, 2020, and
for the years ended December 31, 2021 and 2020
(tabular amounts are in thousands of U.S. dollars except number of shares,
options, warrants, and per share amounts, unless otherwise noted)
The remuneration of directors and other members of key management personnel during the year was as follows:
2020 (4)
14,809
930
2,143
17,882
Salaries and short-term benefits (1)
Post-employment benefits (2)
Share-based payments (3)
2021
18,592 $
1,130
640
20,362 $
$
$
Includes annual salary and short-term incentives or bonuses earned in the year.
Includes annual contributions to retirement savings plans made by the Company.
Includes annual RSUs, PSUs, stock option and common share grants.
(1)
(2)
(3)
(4) Recast to provide consistency with current presentation.
30. SUBSEQUENT EVENTS
Subsequent to December 31, 2021, the Company made the decision to decommission and dismantle the mine's
processing plant and place the Morococha mine on care and maintenance later in fiscal 2022 while strategic
alternatives for Morococha are evaluated.
PAN AMERICAN SILVER CORP.
129
Non-GAAP Measures
This Annual Report of Pan American Silver Corp. and its
subsidiaries (collectively, “Pan American”, “Pan American
Silver”, the “Company”, “we” or “our”) refers to various
non-GAAP measures, such as “all-in sustaining costs per
ounce sold", “cash costs per ounce sold”, “adjusted
earnings” and “basic adjusted earnings per share”, "net
cash generated from operating activities before changes in
working capital", "net cash", "total debt", "capital",
“working capital", and "free cash flow". These measures
do not have a standardized meaning prescribed by IFRS as
an indicator of performance, and may differ from methods
used by other companies. Any reference to “Cash Costs”
in this annual report should be understood to mean cash
costs per ounce of silver or gold sold, net of by-product
credits. Any reference to “AISC” in this annual report
should be understood to mean all-in sustaining costs per
silver or gold ounce sold, net of by-product credits.
Readers should refer to the “Alternative Performance
(Non-GAAP) Measures” section of
the Company’s
Management’s Discussion and Analysis (“MD&A”) for the
period ended December 31, 2021, contained within this
Annual Report and available at www.sedar.com.
Reporting Currency and Financial Information
Unless we have specified otherwise, all references to
dollar amounts or $ are to United States dollars.
Cautionary Note Regarding Forward-Looking Statements
and Information
fact, are
Certain of the statements and information in this news
release constitute "forward-looking statements" within
the meaning of the United States Private Securities
Litigation Reform Act of 1995 and "forward-looking
information" within the meaning of applicable Canadian
provincial securities laws. All statements, other than
statements of historical
forward-looking
statements or information. Forward-looking statements or
information in this annual report relate to, among other
things: future financial or operational performance; the
impact of COVID-19 and related government protocols on
our operations, including but not limited to reduction in
workforce deployment levels, which may impact our
production, costs and progress on capital projects;
whether Pan American is able to maintain a strong
financial condition and have sufficient capital, or have
access to capital through our corporate credit facility or
otherwise, to sustain our business and operations; our
plans for exploration and other developments for the La
Colorada Skarn project and related infrastructure projects,
and the timing of such developments; the continued
advancement of the government-led ILO 169 consultation
process
in connection with the Escobal mine; the
successful implementation of our climate strategy; the
results of exploration and development,
expected
including our ability to discover or define new mineral
reserves and mineral resources; whether the laws in the
province of Chubut, Argentina will permit Pan American to
develop the Navidad project and our ability to successfully
develop the project; the ability of Pan American to
successfully complete any capital and development
projects and the expected economic or operational results
derived from those projects, such as the exploration,
engineering, and infrastructure projects at the La Colorada
mine; and the successful generation of growth in our
businesses and returns to shareholders.
These forward-looking statements and information reflect
Pan American’s current views with respect to future
events and are necessarily based upon a number of
assumptions that, while considered reasonable by Pan
American, are inherently subject to significant operational,
business, economic and regulatory uncertainties and
contingencies. These assumptions include: the world-wide
economic and social impact of COVID-19 and the duration
and extent of the COVID-19 pandemic and related
restrictions, and the impact of COVID-19 and COVID-19
related restrictions on our workforce, suppliers and other
essential resources and what effect those impacts, if they
change, would have on our business; the effect that the
COVID-19 pandemic may have on our financial and
operational results; the ability of Pan American to
continue with its operations, including our ability to
successfully maintain our operations on care and
maintenance where required and to manage reduced
operations efficiently and economically; future anticipated
prices for gold, silver and other metals and assumed
foreign exchange rates; the timing and impact of the
capital and development projects at La Colorada; the
ongoing impact and timing of the government-led ILO 169
consultation process in connection with Escobal; ore
grades and recoveries; prices for silver, gold and base
metals remaining as estimated; currency exchange rates
remaining as estimated; capital, decommissioning and
reclamation estimates; our mineral reserve and resource
estimates and the assumptions upon which they are
based; prices for energy inputs, labour, materials, supplies
and services (including transportation); no labour-related
disruptions at any of our operations; no unplanned delays
or interruptions in scheduled production; all necessary
permits,
for our
licenses and regulatory approvals
operations are received in a timely manner; our ability to
secure and maintain title and ownership to properties and
the surface rights necessary for our operations; and our
ability to comply with environmental, health and safety
laws. The foregoing list of assumptions is not exhaustive.
Pan American cautions the reader that forward-looking
statements and information involve known and unknown
risks, uncertainties and other factors that may cause
actual results and developments to differ materially from
implied by such forward-looking
those expressed or
PAN AMERICAN SILVER CORP.
130
and
services
operate,
(including
local communities and
jurisdictions where we
statements or information contained in this Annual Report
and Pan American has made assumptions and estimates
based on or related to many of these factors. Such factors
include, without limitation: the duration and effects of
COVID-19, and any other pandemics on our operations
and workforce, and the effects on global economies and
society; fluctuations in silver, gold and base metal prices;
fluctuations in prices for energy inputs, labour, materials,
supplies
transportation);
fluctuations in currency markets (such as the PEN, MXN,
ARS, BOB, GTQ and CAD versus the USD); operational risks
and hazards
inherent with the business of mining
(including environmental accidents and hazards, industrial
accidents, equipment breakdown, unusual or unexpected
geological or structural formations, cave-ins, flooding and
severe weather); risks relating to the credit worthiness or
financial condition of suppliers, refiners and other parties
with whom Pan American does business; inadequate
insurance, or inability to obtain insurance, to cover these
risks and hazards; employee relations; relationships with,
and claims by,
indigenous
populations; our ability to obtain all necessary permits,
licenses and regulatory approvals in a timely manner;
changes in laws, regulations and government practices in
the
including
environmental, export and import laws and regulations;
changes in national and local government, legislation,
taxation, controls or regulations and political, legal or
economic developments in Canada, the United States,
Mexico, Peru, Argentina, Bolivia, Guatemala or other
countries where Pan American may carry on business,
including legal restrictions relating to mining, including in
Chubut, Argentina, risks relating to expropriation, and
risks relating to the constitutional government-led ILO 169
consultation process in Guatemala; diminishing quantities
or grades of mineral reserves as properties are mined;
increased competition
for
equipment and qualified personnel; and those factors
identified under the caption "Risks Related to Pan
American's Business" in Pan American's most recent form
40-F and Annual Information Form filed with the United
States Securities and Exchange Commission and Canadian
provincial securities regulatory authorities, respectively.
Although Pan American has attempted to
identify
important factors that could cause actual results to differ
materially, there may be other factors that cause results
not to be as anticipated, estimated, described or
intended. Investors are cautioned against undue reliance
on forward-looking statements or information. Forward-
looking statements and information are designed to help
readers understand management's current views of our
near and
longer term prospects and may not be
appropriate for other purposes. Pan American does not
intend, nor does it assume any obligation to update or
information,
revise
whether as a result of new information, changes in
statements or
forward-looking
the mining
industry
in
assumptions, future events or otherwise, except to the
extent required by applicable law.
Technical Information
Technical information contained in this annual report with
respect to Pan American Silver Corp. has been reviewed
and approved by Martin Wafforn, P.Eng., SVP Technical
Services and Process Optimization, and Chris Emerson,
FAusIMM, VP Business Development and Geology, who
are Pan American’s qualified persons for the purposes of
National
(“NI 43-101”). Mineral
reserves in this annual report were prepared under the
supervision of, or were reviewed by, Martin Wafforn and
Chris Emerson.
Instrument 43-101
See Pan American’s Annual Information Form dated
February 23, 2022, available at www.sedar.com for
further information on Pan American’s material mineral
properties as at December 31, 2021, including information
concerning associated QA/QC and data verification
matters, the key assumptions, parameters and methods
used by the Pan American to estimate mineral reserves
and mineral resources, and for a detailed description of
known legal, political, environmental, and other risks that
could materially affect Pan American’s business and the
potential development of Pan American’s mineral reserves
and resources. Please also refer to Pan American’s news
release dated August 4, 2020 with respect to Pan
American’s inferred mineral resource estimate for the La
Colorada Skarn deposit, and our news releases with
respect to the La Colorada Skarn exploration results,
together with additional drilling information of the La
Colorada
at
panamericansilver.com.
available
Skarn,
which
are
The mineral reserves and resources of Pan American in
this annual report reflect our mineral reserves and
resources estimates as at June 30, 2021, as announced in
our news release dated August 11, 2021.
Cautionary Note to U.S. Investors Concerning Estimates
of Mineral Reserves and Mineral Resources
This Annual Report has been prepared and disclosed in
accordance with the requirements of Canadian securities
laws that differ from the requirements of United States
securities laws. Unless otherwise indicated, all mineral
reserve and mineral resource estimates included in this
Annual Report have been disclosed in accordance with NI
43-101 and the Canadian Institute of Mining, Metallurgy
and Petroleum (“CIM”) - Definition Standards adopted by
the CIM Council. NI 43-101 is an instrument developed by
the Canadian Securities Administrators that establishes
standards for all public disclosure an issuer makes of
scientific and technical information concerning mineral
projects.
PAN AMERICAN SILVER CORP.
131
the
terms
Canadian public disclosure standards, including NI 43-101,
differ significantly from the requirements of the U.S.
Securities and Exchange Commission (the “SEC”), and
information with respect to mineralization and mineral
reserves and mineral resources contained or incorporated
by reference herein may not be comparable to similar
information disclosed by U.S. companies. In particular, and
without limiting the generality of the foregoing, these
documents use
‘‘Measured Resources’’,
‘‘Indicated Resources’’ and ‘‘Inferred Resources’’. U.S.
investors are advised that, while such terms are
recognized and required by Canadian securities laws, the
SEC does not recognize them. The requirements of NI
43-101 for identification of ‘‘reserves’’ are not the same as
those of the SEC, and reserves reported by Pan American
in compliance with NI 43-101 may not qualify as
‘‘reserves’’ under SEC standards. Under U.S. standards,
mineralization may not be classified as a ‘‘reserve’’ unless
the determination has been made that the mineralization
could be economically and legally produced or extracted
at the time the reserve determination is made. U.S.
investors are cautioned not to assume that any part of a
‘‘Measured Resource’’ or ‘‘Indicated Resource’’ will ever
be converted into a ‘‘reserve’’. U.S. investors should also
understand that
‘‘Inferred Resources’’ have a great
amount of uncertainty as to their existence and as to their
economic and legal feasibility. It cannot be assumed that
all or any part of
‘‘Inferred Resources’’ exist, are
economically or legally mineable or will ever be upgraded
to a higher category. Under Canadian securities laws,
‘‘Inferred Resources’’ may not form the basis of feasibility
or pre-feasibility studies except in certain cases. Disclosure
is a
of
in a mineral resource
permitted disclosure under Canadian securities
laws,
however, the SEC normally only permits issuers to report
mineralization that does not constitute ‘‘reserves’’ by SEC
in place tonnage and grade, without
standards as
reference to unit measures. Accordingly,
information
concerning mineral deposits set forth in this Annual
Report may not be comparable with information made
public by companies that report in accordance with U.S.
standards.
‘‘contained ounces’’
property
the mineral
The SEC has adopted amendments to its disclosure rules
to modernize
disclosure
requirements for issuers whose securities are registered
with the SEC under the U.S. Securities Exchange Act of
(the “Exchange Act”). These
1934, as amended
amendments became effective February 25, 2019 (the
“SEC Modernization Rules”) with compliance required for
the first fiscal year beginning on or after January 1, 2021.
Under the SEC Modernization Rules, the historical
property disclosure requirements for mining registrants
included in Industry Guide 7 under the U.S. Securities Act
of 1933, as amended, will be rescinded and replaced with
disclosure requirements in subpart 1300 of SEC Regulation
S-K. Following the transition period, as a foreign private
issuer that is eligible to file reports with the SEC pursuant
to the multi-jurisdictional disclosure system (the “MJDS”),
Pan American Silver is not required to provide disclosure
on its mineral properties under the SEC Modernization
Rules and will continue to provide disclosure under NI
43-101. If Pan American Silver ceases to be a foreign
private issuer or loses its eligibility to file its annual report
on Form 40-F pursuant to the MJDS, then Pan American
Silver will be subject to the SEC Modernization Rules,
which differ from the requirements of NI 43-101.
As a result of the adoption of the SEC Modernization
Rules, the SEC now recognizes estimates of “measured
mineral resources”, “indicated mineral resources” and
“inferred mineral resources.” In addition, the SEC has
amended its definitions of “proven mineral reserves” and
“probable mineral reserves” to be “substantially similar”
to the corresponding standards under NI 43-101. While
the SEC will now recognize “measured mineral resources”,
“indicated mineral resources” and “inferred mineral
resources”, U.S. investors should not assume that any part
or all of the mineralization in these categories will ever be
converted into a higher category of mineral resources or
into mineral reserves. Mineralization described using
these terms has a greater amount of uncertainty as to its
existence and feasibility than mineralization that has been
characterized as reserves. Accordingly, U.S. investors are
cautioned not to assume that any measured mineral
resources,
inferred
indicated mineral resources, or
mineral resources that Pan American Silver reports are or
will be economically or legally mineable. Further, “inferred
mineral resources” have a greater amount of uncertainty
as to their existence and as to whether they can be mined
legally or economically. Therefore, U.S. investors are also
cautioned not to assume that all or any part of the
“inferred mineral resources” exist. Under Canadian
securities laws, estimates of “inferred mineral resources”
may not form the basis of feasibility or pre-feasibility
studies, except in rare cases. While the above terms are
“substantially similar” to the standards under NI 43-101,
there are differences in the definitions under the SEC
Modernization Rules. Accordingly, there is no assurance
any mineral reserves or mineral resources that Pan
American Silver may report as “proven mineral reserves”,
“probable mineral
“measured mineral
reserves”,
resources”, “indicated mineral resources” and “inferred
mineral resources” under NI 43-101 would be the same
had Pan American Silver prepared the reserve or resource
estimates under the standards adopted under the SEC
Modernization Rules.
All trade names, trademarks, and logos displayed in this
Annual Report that are not owned by Pan American Silver
are the property of their respective owners.
PAN AMERICAN SILVER CORP.
132
CORPORATE INFORMATION
CORPORATE OFFICE
1440 - 625 Howe Street
Vancouver, British Columbia
Canada V6C 2T6
604-684-1175
info@panamericansilver.com
BOARD OF DIRECTORS
AND EXECUTIVE OFFICERS
(As at December 31, 2021)
Gillian Winckler(2) – Chair
Michael Carroll(1,4) – Director
Neil de Gelder(1,2,4) – Director
Charles Jeannes(3,4,5) – Director
Jennifer Maki(1,5) – Director
Walter Segsworth(2,3,4) – Director
Kathleen Sendall(3,5) – Director
Michael Steinmann – Director, President
& Chief Executive Officer
Steve Busby – Chief Operating Officer
Robert Doyle – Chief Financial Officer
Christopher Lemon – General Counsel
Brent Bergeron – Senior Vice President,
Corporate Affairs & Sustainability
Andres Dasso – Senior Vice President,
Mining Operations
George Greer – Senior Vice President,
Project Development
Sean McAleer – Senior Vice President &
Managing Director, Guatemala
Martin Wafforn – Senior Vice President,
Technical Services & Process Optimization
AUDITORS
Deloitte LLP, Chartered
Professional Accountants
2800 – 1055 Dunsmuir Street
Vancouver, British Columbia
Canada V7X 1P4
(1) Audit Committee member
(2) Nominating & Governance
Committee member
(3) Health, Safety, & Environment
Committee member
(4) Human Resources & Compensation
Committee member
(5) Communities & Sustainable
Development Committee member
REGISTRAR AND
TRANSFER AGENT
Computershare Investor Services Inc.
100 University Avenue, 9th Floor
Toronto, Ontario
Canada M5J 2Y1
1-800-564-6253
service@computershare.com
EXTERNAL LEGAL COUNSEL
Borden Ladner Gervais LLP
1200 – 200 Burrard Street
Vancouver, British Columbia
Canada V7X 1T2
SHARE INFORMATION
NASDAQ: PAAS
TSX: PAAS
Common shares outstanding
at December 31, 2021: 210.5 million
INVESTOR CONTACT
Siren Fisekci
Vice President, Investor Relations &
Corporate Communications
T: 604-684-1175
E: ir@panamericansilver.com
PANAMERICANSILVER.COM
ANNUAL GENERAL AND SPECIAL MEETING
Wednesday, May 11, 2022 – 3:00pm (PST)
1200 Waterfront Centre
200 Burrard Street
Vancouver, British Columbia, Canada
The Meeting may be accessed remotely via
Conference Call and Webcast:
Dial-in numbers:
1-800-319-4610
(toll-free in Canada and the U.S.)
+1-604-638-5340
(international participants)
panamericansilver.com
Webcast:
PROVIDING ENHANCED EXPOSURE TO SILVER
Pan American Silver provides investors with
enhanced exposure to silver through a large
base of silver reserves and resources, as well
as major catalysts to grow silver production.
We believe silver is a critical metal, as the
world moves towards decarbonization and
electrification. Our diversified portfolio
includes gold assets that contribute to
strong cash flow and shareholder returns.
We have been operating in the Americas for
28 years with a demonstrated commitment to
sustainable mining – creating safe, healthy and
prosperous environments for our workforce
and communities.
NASDAQ: PAAS
TSX: PAAS
RESPONSIBLE
MINING
Reporting Environmental,
Sustainability, and
Governance performance
since 2010.
PRUDENT FINANCIAL
MANAGEMENT
Maintaining a strong balance
sheet with total available liquidity
of $835.3 M at December 31, 2021.
OPERATIONAL EXCELLENCE
A proven operator, responsibly building
and operating mines throughout the
Americas for the past 28 years.
SHAREHOLDER RETURNS
Investing in growth and paying a base
dividend plus a supplemental dividend
linked to financial performance.
WWW.PANAMERICANSILVER.COM