Pan American Silver Corp. (PAAS) Earnings Call Transcript & Summary

We're very happy to have Pan American Silver, a very large silver and gold and base metals producer. We are impressed that the balance sheet swung to net cash from debt, that the La Colorada discovery advances and that there's pre-conversations beginning in Guatemala. We're glad to see the company make progress, and we're looking forward to the stock making some, too. Siren, please. Thank you.

Thanks, John, and thanks for giving us the opportunity to participate in the conference today. I'm happy to tell you some more about the Pan American Silver and our recent activities. So let me just jump forward. We do have a couple of slides, some cautionary note slides, which point to the forward-looking information in the presentation. But I will leave those for our listeners to read on their on time. So let's jump into who is Pan American Silver. We were formed to provide investors with exposure to silver, and that remains our strategy today. We are the world's second-largest primary silver producer, and we have the largest silver reserves globally. Our estimated proven and probable silver reserves total 550 million ounces, and we have another 5.2 million ounces of gold reserves. Pan American has several advantages that we believe make us a unique investment in precious metals and particularly in offering long-term exposure to silver. We have a diversified portfolio at 9 mining operations across 5 countries, and that excludes the Escobal mine in Guatemala that is currently not operating. The locations of our mines are provided on this map here on the slide, I'll walk through them quickly just so that you get a good overview. Starting in the Northern Canada, we own and operate the Timmins operation, which includes the Timmins West and Bell Creek mines. These are 2 gold mines -- underground gold mines that we acquired as part of the Tahoe transaction in 2019. And moving south to Mexico, Dolores is a gold silver mine. It's currently entering its best years for gold production. And in Mexico, we also own the La Colorada mine, which is currently our best silver-producing mine. That's also the site of our skarn discovery, which I'll discuss shortly. In Guatemala, we own the Escobal mine, which, as I said, is currently in care and maintenance. In Peru, we own four mines, Shahuindo and La Arena are the 2 large gold mines that we acquired as part of the Tahoe transaction. We own the Morococha, our silver rich mines with base metal credits for gold, lead, zinc and copper production. In Bolivia, our San Vicente mine is similarly a silver rich mine with base metal credits. And then moving south into Argentina, we have 2 mines, COSE and Joaquin. They're not shown on the map, but they're part of our Manantial Espejo operation. There are 2 satellite underground mines, which feed into our mill at Manantial Espejo and are co-mingled from the stockpile or we have at Manantial Espejo. In Argentina, you can also see the location of our Navidad project, which is in the neighboring province of Chubut. In addition to the solid cash-generating base of those assets, we have 3 large catalysts shown on this slide, any of which would have a material impact on shareholder value. We acquired the Escobal mine as part of our acquisition of Tahoe. It's an already-built, very high-quality mine that was producing about 20 million ounces of silver at an average cost -- all-in sustaining cost of just below $10 per ounce when it was operating during the 3 years it was operating. It's been suspended since 2017. So that would nearly double our silver production. As I said, operations are currently suspended, pending completion of an ILO 169 consultation with an indigenous community. That process is being led by the Guatemalan government, the Ministry of Energy and Mines. And that process actually started formally last month, and the next meeting is scheduled to occur this Sunday on June 20. So the process is now underway and progressing. But at this point, we don't have a time line of when it may be concluded. So we cannot provide a timeline or speculate when we may be able to restart that mine. In Mexico, we announced a major exploration discovery adjacent to our La Colorada mine in late 2018. That's the skarn discovery. And last year, we provided an update to the resource estimate for the discovery. The inferred mineral resource is estimated at 100.4 million tonnes, containing 141 million ounces of silver. So the size of that deposit indicates a large new mine that will deliver long-term growth for Pan American. I will cover more of that in detail later in the presentation. Turning to Navidad. We view that as the best and largest undeveloped silver project in the world. There is a ban on open-pit mining in the province of Chubut, Argentina where the deposit is located. But an amendment to the mining law has been proposed that would allow mining in certain zones of the province, and that Navidad project would be in a permitted zone. So we need to wait for the legislature to be able to approve an amendment to the mining law to allow us to proceed with that project. Moving on to the next slide here. Pan American has a solid track record of operating in Latin America now for 27 years. That long history of successful operations reflects our view that you have to create value for all of your stakeholders, your shareholders, your local communities and your employees, and these are the stakeholders that will help you in your future success. We are recognized as a strong operator, managing costs to deliver healthy margins and investing in projects that deliver strong returns. Since 2010, we've generated $1.5 billion in free cash flow. We also have a very strong financial position currently with $206 million in cash and short-term investments and no long-term debt. Responsible mining is at the core of our business and has been since the company was formed. This slide provides some of the highlights of our ESG performance. I will point out that Latin America was hit particularly hard by the COVID-19 pandemic. So we have committed $2 million to support communities with donations of food and sanitary supplies. And we have also committed a further $1.5 million over 3 years to partner with UNICEF Canada to support children and their families affected by COVID-19. Supporting and providing benefits to our host communities is very important to us. About 99% of our employees are from the countries where we operate and over 80% of the economic value that our mines generate stays in the countries where we operate. The work we do in the areas of ESG is described more fully in our sustainability report, which we have been publishing since 2010. Beginning with our 2020 report, we are now aligning our disclosure with TCFD and SASB. And we are a member of the Mining Association of Canada and implementing there towards sustainable mining protocols across all of our operations. Moving on to our outlook for 2021. We expect to produce about 21 million ounces of silver and 630,000 ounces of gold based on the midpoint of the ranges provided on this slide. The expected gold production would represent record gold production for Pan American while silver production is materially lower than we would normally produce. In a normal year, our silver production would be in the 25 million to 28 million-ounce range. And the main reason why that silver production is so much lower is the effect COVID-19 has on our underground silver-producing mines and because of some ventilation work that we are doing at La Colorada, which is our largest silver producer. I'll go into more detail on those factors shortly here. All-in sustaining costs for silver are impacted by lower production with our guidance for 2021 being $15 per ounce of silver. Gold all-in sustaining costs are estimated at $1,192 per ounce, again, both based on the midpoint of the ranges shown on this slide. It is important to point out that our all-in sustaining costs are fully loaded. So they contain all of our sustaining capital, our G&A and our exploration expenses. The only thing it does not include is project capital, and we are estimating $55 million to $60 million of project capital in 2021. However, you can see that given the current estimates for our all-in sustaining cost and the prevailing metal prices, we expect to be generating attractive profit margins this year as well. As you can see from the reserves pie graph, our gold operations generate -- while our gold operations generate most of our revenue with silver accounting for about 27% and our base metals accounting for 16%, it's flipped a bit on the reserve side with 46% of our reserves being silver reserves, 32% in gold. And so our future is clearly tied to silver. And those reserve figures do not include anything for the La Colorada skarn or our Navidad project. Both of those are in resources. However, it does include the reserves for Escobal.

So Siren, we could paraphrase this chart and just say that the 2 gold deposits in Peru are shorter life.

Not Shahuindo, but La Arena. Yes. So Shahuindo, we do not see it as a shorter life project. We definitely see that having a longer future. The...

Does that mean the Shahuindo sulfides are likely to advance when the oxides are depleted? Or does that mean there's more oxide to come?

We've been pretty successful with the exploration there. So we think there's a lot more potential for exploration at Shahuindo.

Both oxide and sulfide or just the sulfide?

On both the oxides and the sulfides.

Excuse me for interrupting, I was just trying to interject.

Yes, I know. Please do.

And in Ontario, do you think the gold mines are longer live where the veins will continue to depth but they're just not defined? Or how would you characterize the Timmins West and Bell Creek mines?

Yes. So when we acquired those from Tahoe, we did think they had a shorter life. You may remember that our initial plan was to divest those mines. We thought they didn't fit with our geographic profile, if you will, and because they were gold mines and our strategy is really to be the premier silver producer. But after having owned these assets now for over 2 years, we have actually been quite successful on the exploration side, and we have 2 very interesting exploration projects underway called Whitney and Wetmore. So we think we're going to be able to extend the lives at our Timmins operation as well.

Excuse me for interrupting.

Yes. No, please do. And you're right that the La Arena has a bit of a shorter life. It's probably in the 4- to 5-year range right now, given the exploration success we've had there, too, since acquiring that asset. And then maybe a couple of years of leaching after we've completed the open-pit mining at La Arena. So just to summarize, we do see our future being in silver given the weighting of our reserves in that metal. And we consider that to be a positive, that's where we want to be. We think the demand for silver will be greater in the future given its uses in electrical componentry and in photovoltaics for solar panels. Smart operations generate strong cash flow as this slide demonstrates. Our free cash flow has nearly doubled annually over the past 3 years. In 2020, we generated record operating cash flow of $462.3 million, and that's despite the significant impact COVID has had in our operations. Importantly, we delivered that performance on a per share basis with our investors fully participating in the growth of that free cash flow. We have not issued equity as part of a public offering since 2009, and that reflects our aim to not dilute our shareholders. We would like to allow them to participate fully in rising precious metal prices. So moving up. Sorry, well, these things go quickly sometimes. Looking at our operating performance, the COVID-19 pandemic did have a significant impact on our operations in 2020 and continues to impact them today because we do have operating protocols that restrict the throughput rates. In 2020, all of our operations in Latin America were suspended for an average of 2 months. And our Huaron and Morococha operations in Korea were extended for -- were suspended for about 3 months. The only operation that wasn't suspended was Timmins in Canada, which continued to run throughout the COVID pandemic, albeit reduced throughput rates to accommodate those protocols. As you can see from the graph, silver production is impacted more than gold. And that's because the physical distancing requirements are more stringent in our underground mines, and that's where we produce most of our silver. It's also more challenging to deploy the necessary workforce levels that we need. They don't necessarily pass the screening process, and we can't hire contractors as easily to replace the employees that don't pass that screening process. There's also a much more extensive safety training that they need to go through. So our workforce levels are -- have been much more impacted by the COVID-19 pandemic. The other thing that's affected our silver production has been the ventilation work we've been doing at La Colorada. That work is expected to be completed in Q3 2021. And after that point, we'll be able to regain access to the higher-grade areas of the mine, and we will be able to increase our throughput rates. That work is going well. So we're on track to achieve that. As I said, we're expecting record gold production this year with our Dolores mine entering its best years for gold production. We have indicated that both production and cash flow will be back-end weighted towards this year as throughput rates improve based on the assumption that the impact of COVID-19 will diminish throughput rates and grades will improve at La Colorada as we complete the ventilation work and as we get through to some mine sequencing in our other mines, and the inventory builds that we've pointed to in Q3. So a back-end weighted year in terms of production and cash flow. So looking at free cash flow allocation. Since 2010, Pan American has generated $1.5 billion in free cash flow. Our priorities for that free cash flow in order of importance are to: First, maintain low to 0 debt. Mining is a cyclical business, and we prefer to have low debt to no debt to manage and take advantage of opportunities at low points in the price cycle. That gives us the flexibility to do that. We did repay all of the amounts drawn on our credit facility in 2020. So current -- so at the end of Q1, we had no long-term bank debt. The second priority for our free cash flow is to invest in high-return projects. Most recently, we did that with the highly accretive Tahoe acquisition, which closed in February 2019, and the expansion of our La Colorada and Dolores mines in Mexico about 5 years ago. And today, we are now investing and advancing the development of our La Colorada skarn deposit. So investments such as this help us to deliver the growth and the capital appreciation that our investors are seeking. Since 2010, we have invested nearly $600 million in expansions. So it's a significant amount of investment in expansions and return to our shareholders. Our third priority is to return cash to shareholders in the form of dividends. Since 2010, we have returned $514 million to our shareholders in the form of both dividends and share buybacks. Our preference at this time is to return that cash in the form of dividends rather than share buybacks. So we've been doing that since 2016 when Michael Steinmann became the CEO. In 2020, we doubled the quarterly dividend to $0.07 per share. Again, we haven't issued any public equity since 2009. Moving on to Slide 12 and our La Colorada skarn discovery. As I said last year, we provided an updated inferred mineral resource estimate for the skarn discovery. Based on a $60 per tonne cutoff, we estimate the deposit to contain about 100 million tonnes of resource containing an estimated 141 million ounces of silver. The grades are lower than the veins we are currently mining at La Colorada, but the zones are much larger. So mining of this skarn deposit will be a bigger bulk mining project where the cost on a per ton basis would be lower. So we consider this to be a significant discovery for Pan American supporting long-term growth with the development of a large tonnage, new underground line for the company. Development of this mine, combined with the vein deposit that we are currently mining, indicates growing silver production at low cost, given that the deposit is also rich in base metals.

And our 15,000 tonnes a day, we estimate it produce 1% of world lead and 1% of world zinc demand.

Okay. Yes. Well, we will be -- it was my next point. We're targeting PEA by the end of this year. So that will give you a better sense of the size of this project, the capital investment needed and the timing. So we're continuing with the drilling. We announced some drilling results on May 12, which are available on our website but continue to deliver wide zones. We're very pleased with -- to continue drilling on this deposit. And we're doing some metallurgical and engineering work just to be able to provide that PEA by the end of the year. In fact, I'd encourage you to take a look at our website. We have a page that's dedicated to the La Colorada skarn discovery that includes a video as well. We do also have a number of other assets in our portfolio that have value. Maverix is a company that we started nearly 6 years ago with 16 royalty assets that we have in our portfolio. We spun those out into a new royalty and streaming entity, which allowed us to surface value for those assets. And Maverix has continued to grow over time with a current market value of $190 million, that's to our 18% interest in it. So our 18% interest represents $190 million of Canadian value. We also hold an approximately 10% interest in New Pacific. New Pacific owns the Silver Sands project in Bolivia, which is an early-stage silver exploration project that looks very interesting and that we're watching closely. We have been operating our San Vicente mine in Bolivia for 20 years, so we do have experience in that country. And we hold a 25% interest in the Shalipayco project. It's a zinc development project in Peru owned by Nexa Resources. We also have a JV agreement with Radius Gold to explore smaller gold play in Mexico called Amalia. So just to remind our investors of some of the things that value in our portfolio, apart from our operating assets and our catalysts. So that actually wraps up my formal comments. In summary, I'd say Pan American is the preferred investment for exposure to silver. We operate a diversified portfolio of producing assets, generating strong cash flow. We have a prudent approach to financial management and capital allocation and a very experienced management team. And in particular, we offer long-term exposure to silver to our Silver weighted reserves and 3 large catalysts, Escobal, Navidad and the La Colorada skarn, each of which offers optionality and material upside for investors. So I'd be happy to take any questions that you may have now.

Siren, the companies we study that have -- of course, everyone has COVID impacts. Most of them managed to run their mills, but they might have 4 categories of problems operating or delivering or some defer waste stripping if they don't have enough trucks or truck drivers. Some defer underground development, where usually the underground development is 2 years ahead of the current mining, so that's something they can stall or postpone. Some have trouble executing CapEx projects, which appears may be a contributor with the ventilation at La Colorada. And some of them defer exploration drilling where they can't move the geologists around. Generally, they're short people and move resources to current production as much as they can. In your case, is La Colorada ventilation the biggest impact? Are there other underground mines where the development might not be 2 years ahead and might have fallen months behind besides of La Colorada?

So the biggest impact that we saw related to COVID-19, I think that's what your question is about.

Of course.

Yes, would be La Colorada and Manantial Espejo. And it really is a reflection of the fact that both are underground mines and that the incidence of COVID were higher in the regions where those mines were located. So when we try to deploy people to those mines, they don't necessarily pass the screening process. They've been identified as a close contact with someone who's been affected by COVID, and we cannot bring them onto site. So we do several rounds of testing for COVID. And then again, for those mines, it's very challenging to be able to replace those workers who don't pass the screening process with contracted workforce. The contracted workers, it just it requires a higher skill set. And it's complicated further at Manantial Espejo because in Argentina, where it's located, the southern part of Argentina, most of the miners are coming from the skilled, underground miners are coming from Northern Argentina. And there are travel restrictions, there's quarantining procedures that really extend how the duration of bringing people back and forth to our operation. We actually made the decision. We were able to get some of the workforce to relocate to the town of, I won't pronounce correctly, it's [indiscernible], sorry, in Southern Argentina, near our Manantial Espejo operation. So we're -- we have that workforce relocated there, but it did mean that we had to reduce the amount of throughput that we can get through that line. And that was factored into our forecast for 2020 -- 2021, rather. And you may have noticed that in our Q1 disclosure, we reduced our silver production guidance, and that reflects the fact that, again, we were having lower workforce deployments at Manantial Espejo than we had anticipated. We do think that things will improve. -- vaccination programs are rolling out in Latin America. They are slowly rolling out, but we expect that, that will occur over time. But it's not until Q1 2022 that we expect to be free of any impact from COVID-19, where our operations are running closer to full throughput rates. And again, it's really on the underground silver-producing mines that we're seeing that impact, our gold produced -- open-pit gold producing mines have not been affected to that degree. They are actually running very close to their design throughput capacities.

I may not be an expert in Peru and maybe you aren't either, but I talked to Southern Copper, which runs some major projects in Peru. And they sent me some documentation that implied that the 130-person unit camera legislature is comprised of 10 parties, and 5 of them are to the right at 166 seats, and 3 parties are centrist at 122 seats. And the 2 left parties want only 42, the largest of which Castillo's party holds 34 seats. So it appears unclear that he has a legislative mandate to enact any of this rhetoric. 10 parties are very unpredictable. They might call less differently issue by issue. But it seems like he imitated some of the proposals in Chile, and there might be a greater consensus in Chile where the constitution was written in 1980 by Pinochet's government. But in Peru, it seems to be a different situation. Do you think this is a good time to pick up projects in Peru when people might be scared?

I think there's a lot of uncertainty that would make people very hesitant about proceeding with any type of investment in Peru.

And how about Pan Am, you've been there a long time?

Yes. I think the same would go. I think we have to get a little bit more clarity on what this looks like. You're right that the parliament, the Congress appears very fragmented. So it leads it to be known how much a new president will be able to accomplish with such a fragmented Congress to deal with. But what you can infer is that there's going to be a real period of uncertainty and upheaval and...

So...

Kind of show that the rural areas really were behind steel in the urban areas where for Fujimori. And with where our operations are located, that means that those -- the local communities are really the backers of Castillo. So our inference from that is while he may not be able to push through a lot of legislative type changes, it probably would embolden the local communities and workforce to make higher demands, increase their demands. So there's just a lot to navigate through until we get some more clarity on, one, we don't even know who the president is. I mean, it certainly, at this point, looks like it's Castillo with very small margin of 50.14% of the vote. But that would be the first thing is determine who is actually going to be the President, and how long they're going to be able to be in that position.

So Southern Copper says that they would halt their Tia Maria project, which is halted anyway. They just haven't acknowledged it. That Castillo opposes it, but they would continue spending on the Michiquillay and Los Chancas projects that add up to 700,000 tons of copper that are 2027, 2028 target dates. So they would hope to complete those after he's out of power after 5 years. They're more confident. Those are multibillion-dollar projects. It's possible to interpret from the legislature that maybe the Peruvians had a tough choice like we, Americans, did in 2016 between Hillary and Donald or 2020 between Joe and Donald. Maybe they rejected Fujimori more than they embrace Castillo, given that Fujimori's parties did better in the legislature than she did in the general election. It also is hard to interpret when there were 18 candidates in the first round plus 1 that withdrew and 4 that were kicked out.

Yes.

So it's complicated.

Like no candidates in the first round got more than 18% of the vote. So that just tells you that there's no significant broad support for either of those 2 possible candidates for President contenders at this point.

4 or 5 years ago, Tahoe published a PEA from La Arena sulfides. Good night, [ Alicia ]. And sometimes, Siren, I don't believe the deposit exists and I calculate different, so first. And sometimes, I don't like to use coefficient variation or standard deviation. Some of the investors went to Harvard or Yale where they did liberal arts and didn't do mathematics. So we have a lot of smart clients in our numbers jocks. So one thing I calculate is total resources per assay. Sometimes I calculate total resources per ounce of gold resource -- gold ounces per assay, excuse me. So lowering the sulfides is 5,400 tonnes per assay. And Rosemont and [indiscernible] Blanca, when their Boards authorized them, were 14,000 or 15,000 tonnes per assay. Pebble is 185,000. So Tahoe, God bless them, drilled the hell out of La Arena sulfides even though they didn't have the money to build it. Maybe they spent too much money at the PEA stage. And it's a very well-defined project. And the copper sulfides have the benefit of pre-stripping from the oxide gold and you have a truck shop and a workforce and a mine manager and you know the cost per ton. So I like the copper sulfides best among copper projects. They're not up in the air like Pebble environmentally and CapEx, and Seabridge is a $5 billion CapEx. I know $1 million is a lot, but $5 million is more. Now that the company is rolling in cash, I'm exaggerating a little bit, but it's not $400 million in debt, and the copper price is over $4 and the gold price is much higher, do you think Michael might have a weak moment where he retains 1/3 or 1/2 of the La Arena project? If you retain 1/3 of it, it might only be $400 million of capital and some of it would be debt.

It think...

I know I'm getting you in trouble, Siren.

No, no. Well, this is a conversation. So you can get his direct answer to you at one point, I'm sure. But he's gotten this question, and he's been pretty clear that it's just not a fit with our strategy, that we would look to divest at that asset, that La Arena II. And there are ways we could do that, which may allow us to make it more attractive, like retain that...

[indiscernible] a gold stream...

To structure the transaction that way. But it's a large copper deposit. So it's really -- that's not where we would invest our capital. It's not a...

So is it really about being Pan Am silver? Or is it really about having NPV?

Well, we're always -- NPV is the bottom line, but we wanted to come from silver assets and silver projects. We believe that, that...

I'm a little more easy going in that regard. I just care about dividends, NPV. Concerning...

[indiscernible] So we have to think about that, too. I don't know. While we do look to invest in that asset, there's probably...

It's probably good time to divest that you have 2 years to kill while you still have oxide leaching going on and maybe more if you find a little more at the bottom of the pit. But you don't have to make a decision right now and then see uncertainties.

No.

You could sell it 5 years from now when the guy's out of power, if he's in power. Hopefully, he doesn't rule the country in 5 years or great to make crazy taxes. Siren, I might have had an impression of the Escobal issues from the previous Tahoe management that may not have understood it well in hindsight. And we try to read the Prensa Libre daily newspaper in Guatemala. My Spanish isn't perfect, but Alicia that works for me is from Mexico. She and the translating software carry us a little bit.

Okay.

My impression is that the Xinca ethnic group nationally is very small. That it's as little as 0.10% of the population, but they have a congress and a legislature. Do you know what percent of the Guatemalan population they are? Or is it impossible to know because summer 1/8 and summer 1/4, and they all went to marry like we do in the U.S. and Canada?

Yes. I don't know what the number is, and I'm not sure it matters because the point is they can identify as being a Xinca, an indigenous member of that community. And this is exactly what got Escobal in trouble to begin with, was to say that there are no Xinca within the territory, within the location of the mine that would need to be consulted with.

And that was the Ministry of Mines. It wasn't Tahoe's process.

Yes. It is the Ministry of Mines that is responsible for conducting the ILO 169 consultation because Guatemala is a signatory to ILO 169. But both the government and the company were making the argument that there were insufficient numbers of Xinca within the area of interest, which turned out to be not the case.

Now there was a protest where one of the Tahoe's security guards shot and killed someone, and there other things. So we're -- other incidents that -- where there wasn't a death, but they were injuries.

Yes. There wasn't a death in that case either. It was an injury. So if you're speaking about the...

There's an article about the L.A. Times immortalizing some teenage girl.

That was different, yes. That was not the incident involving Escobal...

Was that someone that was like a drive-by shooting that was in an automobile driven by the father? It was blamed on the mine when it wasn't or necessary.

I do understand that there was a young girl that was identified as being part of the Escobal resistance, who was shot, but it's not -- that incident is not tied to our operations.

So it was a random act of violence that somehow got written up associated with the company.

I don't think any conclusions have been made as to what it was. But yes, the -- just to be clear, it's not -- it did not happen on our grounds. So it's not part of the incident, where -- there was an incident I'll describe that shortly. But no, this was inferred, I guess, by some media that there was a relationship to the mine, but there is no reason to believe that there is a relationship with mine other than they -- she was part of the resistance. So back in 2013, there were some protesters at the gate of the Escobal mine, and one of the security guards fired rubber bullets at these protesters. They did file a court claim in the BC courts. We settled that in the summer of 2019. So we...

So it's rubber bullets.

But there were injuries that resulted from that, and we did apologize for that incident. It was not the way it should have been managed. It's not the way we would do things. In fact, after acquiring Escobal, we completely revamped and took a good look at how -- what our security procedures would be there. We don't have our guards patrolling their perimeter of the mine. We just have a different approach to it.

There was a blockade. I believe it was in a town called [ Castillas ] 16, 18 miles towards the capital. Around the time, the mine was closed, separate from the constitutional court decision. Is that a function of just frictions from the highway traffic, delivering fuel and other supplies to the mines and taking concentrate out? Do you think there's a social friction in the transportation corridor?

I think that's been one of the issues that's been raised is the traffic on the transport. And those are the things that we are looking to discuss with the communities and work at mitigation measures as part of that consultation so that we can work with them on those type of concerns. That roadblock still exists. It's not aggressively managed, if you will. There's vehicles that can travel on that. So that's not an issue. We can get access to the site. I'm sure, obviously, if we're transporting a truck full concentrate, and that would might be stopped, but that roadblock still exists. It will be one thing that we will need to sort out with the community. But I think as this consultation process progresses and we work through some of the issues and some of the concerns and perceptions that the local communities have that we can overcome some of the objections and be able to resolve those concerns.

During the blockade, Tahoe helicopter fuel in, even when the mine was idled, they had to dewater to prevent damage. And they had a helicopter shot, there was a fuel helicopter. It made an emergency landing without exploding. That must have a terrifying incident for the guys that are piloting the helicopter. Was anyone ever prosecute and convicted for shooting down the helicopter?

I do not have any information on that incident, no.

It was penetrated at the tail rotor. The bullets did ignite the fuel tank. It was good luck it just hit the tail rotor, and that the pilot was able to win the helicopter without exploding. So there appeared to be a lack of goodwill on several sites.

Yes, that is one of the reasons why we were able to pick up this asset. I think the relationships with the local communities have really deteriorated. Trust in the company have really deteriorated. And that's why we were able to acquire this world-class mine. There are obviously still issues that we need to work through, but we think there is a path forward. We've made many changes since acquiring the asset. We've completely changed the team that's on the ground in Guatemala. We have a different approach. So we are working to reestablish that trust and that dialogue by being transparent and by listening to what those concerns are. We do have agreements mechanism that has been set up for the Escobal operation as well. I can say that the majority of the requests that are made to that grievance mechanism are for employment opportunities, what people looking for jobs. So I think the tone has really changed with the local communities and how they're interacting with the new owners, the Pan American, not the mine.

We, in America, see these news reports of people crossing our border, and a lot of them were supposed to be from Central American communities. I think Jim [indiscernible] has told me to Denver Gold Forum in 2018 that, by that point, at least 200 of the workers had left and gone to America. I'm just thinking where I vacation in Greece, there's a lot of empty houses from people that immigrated and went to America 100 years ago or moved to Athens. And they just respect the property, and it's in the title whoever died 100 years ago. What are the tunnels like in Guatemala, where so many people have immigrated and gone to America? Are they half empty, semi ghost towns because of the migration depopulating, they come to America?

Yes. I don't know, John...

Did you spend much time in Guatemala since the acquisition?

Yes. I have been there. I have visited the operation. I have met the new local team that's installed there. And actually, our country lead manager in Guatemala is a 20-year veteran from Pan American. So he is leading the work there. The migration issue is definitely an issue for a lot of countries in South and Central America. And the U.S. has been trying to take steps to stop that migration, but it's a matter of economic circumstances. And I think the solution to that is to be able to generate economic opportunities so that the people within those countries can stay in their towns and stay in their countries and be able to be where they probably prefer to be instead of being on the move, looking for employment.

Siren, 30 years ago, I worked at a large investment firm that have an economist who is neither [indiscernible]. They have a demographic model. And an demographic economist argues that GDP is a function of population growth plus productivity growth. It's a different model than MV times PY that was the fundamental monitors equation. So if you follow that model and the population decays 5% a year, that's minus 5% GDP growth. And just think of all the houses that aren't built and all the toothpaste that isn't bought. So it would seem to be, even without the virus, a grave economic condition when GDP falls because of out-migration. So in that context, the Escobal episode is even more damaging to the citizens of Guatemala. It would seem rational to have dialogue and pre-consultation and mitigation matters and get people to work and reduce the deep population of regions. Do you know if a depopulation of Guatemala is more from the capital, more from the East, more Eastern coastal plans, more from the Western Highlands? Or is it just universal?

Yes. I don't know, I won't be able to tell you from what regions that migration is coming by it.

Yes, it would seem to be a very challenging problem. If we were to think of ourselves, Siren, or think of Pan Am 3 years from now, it's possible that La Colorada is built or almost built. And it's possible that Escobal has been restarted, and it's possible they never get their act together in Chubut. It's still on the table, who knows. But what would Michael and the team do with La Colorada done and Escobal running, and Escobal running at the recent prices would generate something like $300 million more cash flow. Do you think that some of these investment projects, New Pacific or others might rise up or other projects will rise up from the development cube? Do you think the technical teams would have more time to study La Arena to depth, Shahuindo to depth and all these undeveloped resources in Ontario, not all right in Timmins? But there were all these like short gold pieces and these little juniors that Tony Makuch acquired when he was running Lake Shore before Tahoe bought them out. I'm just thinking 3 years from now, I don't think Michael and your geos are going to play golf. What do you think they're going to work on?

Yes. Well, first of all, being a great -- that would be a great position to be in. La Colorada, the development of La Colorada, be given the size of that deposit. I don't know...

That's going to generate the kind of cash too, not just Escobal.

Yes, it could be well advanced. Escobal could be producing. That's the -- we have to wait and see where the consultation process ends up. It needs to go back to the Supreme Court of Guatemala, but it's definitely a priority for us. I think we focus on the exploration that's a fit with our company. So it really is more directed at brownfield exploration to replace reserves and extend the mine life of current operations. We do continue to look at new M&A opportunities for sizable deposits, preference being for silver and things that would move the needle for Pan American, obviously accretive. And then you'd have to think about what other considerations you'd have for optimizing your portfolio of assets. At that point, if we have 2 very large silver-producing mines, we may look at some of our other assets and determine if they are still a fit with Pan American if they're delivering the returns for the effort that's required all in the context of what other opportunities we might have identified as well.

So I was just thinking, if there's 210 million shares, Escobal would pay $1 or $1.50 dividend. La Colorada skarn would be the same. So maybe the corporate dividend could be $3, $4 a share. But I think that probably Michael and the team are going to look at some of these projects in Ontario, where Lake Shore had accumulated all these resources and Tahoe didn't advance any of them. Of course, the gold price is much higher today. And then there's the depth extensions of Shahuindo and the depth extensions of the La Arena II. I know I'm speaking out of line, but that's okay. I'm a shareholder, not an employee. So there's a lot of opportunities. I certainly hope that your management doesn't pull a Barrick or a Newmont and acts self-important that they're too busy to manage a small project because those big mining companies sold all these things cheap. Now the second-largest market company in Australia is Northern Star that bought 4 mines from Barrick and Newmont in 2014, '15. And at the bottom of the gold market, the cash flow paid off the acquisition in 1 year. And sometimes, the buyers have their own corporate ego. And if a gold deposit isn't 1 million ounces, they don't want to pay much for it. So I just hope you're not swimming in cash, and you sell off the smaller mines for jump change, make a mistake.

I can say this management team is returns-driven. So if it's going to demonstrate the tech of returns that are attractive for our shareholders, and those are the assets that we would invest in and continue to keep in the portfolio. But if they're skinny and they take up an [ enormous ] amount of management time for relatively little return, then those could potentially be ones that would not...

It could turn out that between Navidad, Escobal and Colorada, if all 3 were producing, each of them could equal or exceed the current cash flow of Pan Am this year.

Yes.

They're big mines. I didn't think that it would be an alternative to get rid of the old faithful. So of course, mines decline and become less profitable.

Yes. Well, and that's not what I'm saying. I mean, there -- I'm just saying that you would look at your assets and see what return they're providing to the company to your shareholders to determine which are fit with your portfolio? And I don't know what's added...

And I don't mean to put words and get you in trouble, Siren. I'm not a fan of the small mine sell-offs. SSR Mining is almost built on the Marigold acquisition from Goldcorp. Some of the sales that were done in 2013, '15 of the smaller mines, what happened, some of these companies sold certainty to invest in [indiscernible]. So Goldcorp sold Marigold, for example, to build Cochenour that didn't exist. Now your company is much more solid, and I don't think you're going to build anything that doesn't exist. But some of the large-cap companies that aren't as large cap anymore sold known quantities to invest in non and existing economics. So that's why...

I hear you. We do have smaller mines in our portfolio that do have -- I'm thinking of a smaller polymetallic mines like in Peru, but those can go on for decades still, those veins extend debt. They've been already mined for 80 to 100 years, but we just continue to replace reserves there. So those -- we do recognize the value of having those type of assets in our portfolio.

So I'm just giving an example. It's probably not something you can respond to. 20, 30 years ago, there was a junior steel analyst, the Goldman named [ Alberto Aries ]. And he was very promising, so they took them out of steel and put them in private capital. And he has his own fund that he's run for 20 years or so. And he's Peruvian, and I think he's still the controlling shareholder with half or slightly over half of Sierra Metals in one of his funds. And 3 or 4 years ago, he wanted to wind up that fund. And they have a number of small underground mines that are pulling metallic, and the big copper companies all want these porphyries. And they all want 100,000 tonne a day grinding mills and 400-tonne trucks. And they love things just like La Arena II. So there hasn't been a satisfactory bid for Sierra Metals. It might be the perfect thing for Pan Am to buy when everybody is scared of Peru. And before, Alberto has been trying to sell it for 3 or 4 or 5 years.

Yes.

And now with this uncertainty, he must be grit in his teeth, but I'm sure he's very patient. So small mines can be fine. It's just -- but you don't get big Christmas cards from the suppliers because you're not doing the 100,000 tonne a day grinding mills and the 400-ton trucks.

Yes.

So I'm just kidding around.

I know.

So I'm rooting for you to solve Alberto's problem and make a profit doing it. There's always something out there. That's why I just...

And I can say that...

It proves me how rich these people got that bought the small mines at Newmont and Barrick and Goldcorp didn't want. That's all. Siren, I appreciate you putting up with me. You're very good. I do my best to get you above your pay grade and into trouble.

Yes. Well, hopefully, yes, I didn't say anything that crossed that line. But no, it's great to talk to you, John, and thank you for the opportunity.

Thank you. Give Michael and Rob my regards. I hope Rob's on his bicycle and avoiding all crashes.

I will pass that on to him. He's been safe so far. Safety is our priority too, so yes.

Have a good night. Thank you for your time. Thank you.

Thanks, John. Okay. Bye-bye.

Bye-bye.