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

Thank you for standing by. This is the conference operator. Welcome to the Pan American Silver Annual General and Special Meeting. [Operator Instructions] And the conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Siren Fisekci, VP, Investor Relations and Corporate Communications. Please go ahead. Siren, your mic is open.

Yes. Yes. Thank you. Yes. This is -- my name is Gillian Winckler. I'm the Chair of the company. 2022 Annual General and Special Meeting will now come to order. Due to the current state of the global COVID-19 pandemic, we have recommended that all shareholders vote by proxy in advance of the meeting and not attend the meeting in person. We thank all shareholders who are listening to the proceedings of this meeting via live conference call or audio webcast, and we look forward to future meetings when we shall host you in person. We will now proceed with the formal part of the meeting. Shareholders wishing to ask questions relating to the business of the meeting should submit them via the live webcast. Pursuant to articles of the company, I will be acting as Chair of the meeting. Delaney Fisher, Senior Vice President, Associate General Counsel and Corporate Secretary of the company, will act as secretary for this meeting. Anita Basi of Computershare Investor Services will act as scrutineer of the meeting. Will the secretary please assure us that the Annual General and Special Meeting has been properly called?

Thank you. I have before me an affidavit of a representative of Computershare Investor Services, Inc. attesting that the notice calling this Annual General and Special Meeting together with the information circular, formal proxy and audited financial statements were delivered in accordance with the Business Corporations Act and applicable securities laws. Therefore, Madam Chair, this Annual General and Special Meeting has been properly called.

I'll now request that the secretary read the scrutineer's report.

The scrutineer's report reads as follows: 3 shareholders voted in person representing 11,089 shares; 303 shareholders voted by proxy, representing 131,350,672 shares. There were 306 total shareholders holding 131,361,761 shares. The total issued and outstanding shares as of the record date was 210,474,655. As such, the percentage of outstanding shares represented at the meeting was 62.41%.

Thank you. I got the scrutineer's report and declare accordingly that a quorum is present. I now declare that the Annual General and Special Meeting is regularly called and properly constituted for the transaction of business. First item of business is the reading of the minutes of last year's annual meeting. I will request the motion to take the minutes as read and confirmed.

So moved.

All those in favor, please signify by raising their right hand. [Voting]

Against, if any. [Voting]

I declare the motion carried. The next item of business is the presentation of the audited financial statements of the company and the report of the auditors thereon for the year ended December 31, 2021. The audited financial statements and auditor's report were mailed to each shareholder who had requested a copy. I shall consider the audited financial statements and auditor's report received by the shareholders and submitted to this Annual General Meeting -- Annual General and Special Meeting. It is now in order to proceed with the election of directors for the upcoming year. There are 8 positions to be filled, each to hold office until the next Annual Meeting of Shareholders. I now declare the meeting open for nominations for directors.

I nominee Michael Carroll, Neil de Gelder, Charles Jeannes, Jennifer Maki, Walter Segsworth, Kathleen Sendall, Michael Steinmann and Gillian Winckler, all to be directors of the company and to hold office in accordance with the articles of the company.

Each of the nominees has previously consented in writing to act as a director. I ask for a motion that nominations be closed.

So moved.

All those in favor of the motion, please signify by raising their right hand. [Voting]

Against, if any. [Voting]

Carried. We will now proceed with the election of directors. Each director will be elected separately by a show of hands. It is proposed that separate ordinary resolutions be passed electing Michael Carroll, Neil de Gelder, Charles Jeannes, Jennifer Maki, Walter Segsworth, Kathleen Sendall, Michael Steinmann and Gillian Winckler as directors of the company for the ensuing year to hold office until the next Annual Meeting of Shareholders.

So moved.

I would ask that each shareholder signify their vote on the following appointments by raising their right hand. All those in favor of the appointment of Michael Carroll. [Voting]

Against, if any. [Voting]

Carried. All those in favor of the appointment of Neil de Gelder. [Voting]

Against, if any. [Voting]

Carried. All those in favor of the appointment of Charles Jeannes. [Voting]

Against, if any. [Voting]

Carried. All those in favor of the appointment of Jennifer Maki. [Voting]

Against, if any. [Voting]

Carried. All those in favor of the appointment of Walter Segsworth. [Voting]

Against, if any. [Voting]

Carried. All those in favor of the appointment of Kathleen Sendall. [Voting]

Against, if any. [Voting]

Carried. All those in favor of the appointment of Michael Steinmann. [Voting]

Against, if any. [Voting]

Carried. All those in favor of the appointment of the Gillian Winckler. [Voting]

Against, if any. [Voting]

Carried. I declare that Messrs. Carroll, de Gelder, Segsworth, Steinmann, Jeannes and Mss. Maki, Sendall and Winckler have been elected as directors of the company for the ensuing year to hold office until the next Annual Meeting of Shareholders of the company or until their successors are elected or appointed. The next item of business is the appointment of auditors. It is proposed that the company reappoints Deloitte LLP as auditors of the company. Accordingly, I ask for a motion that Deloitte be appointed as auditors of the company for the ensuing year.

So moved.

All those in favor, please signify by raising their hand -- their right hand. [Voting]

Against, if any. [Voting]

Carried. The next item of business is the fixing of the auditor's remuneration. It is proposed that the Board of Directors be authorized to determine the remuneration to be paid to Deloitte for the ensuing year.

So moved.

All those in favor, please signify by raising their right hand. [Voting]

Against, if any. [Voting]

Carried. The next item of business is to consider and approve an ordinary advisory resolution approving the company's approach to executive compensation. The full text of the advisory resolution is contained on Page 14 of the information circular for this meeting. I ask for a motion that the advisory resolution approving the company's approach to executive compensation be approved.

So moved.

All those in favor, please signify by raising their right hand. [Voting]

Against, if any. [Voting]

Carried. I'll now call for a motion to conclude the formal portion of the Annual General Meeting -- Annual General and Special Meeting of the company.

I move that this meeting be concluded.

All those in favor, please signify by raising their right hand. [Voting]

Against, if any. [Voting]

I declare this Annual General and Special Meeting of the company concluded. Thank you for your attendance and continuing support. I'll now hand over because there were a few questions that came through, and I'll hand over to Siren Fisekci and Michael Steinmann.

Thank you, Gill. Just give me a second here while I look through the questions. The first one is in Chubut, Argentina, where community opposition has called for the Navidad project, a video was leaked where a provincial deputy secure support for the mining industry. There is an open investigation in Chubut provincial court into bribing of legislatures. Does Pan American have anything to say about that?

Thanks for the question. Navidad, I assume it to be first to the Navidad project that we have in Chubut. It's actually a project that is on care and maintenance since the termination of the exploration phase, which if I recall right, was about 2013. So all the exploration is done. The project has no construction or production from that, and it's on care and maintenance since then as there is currently no -- there's no law that would allow open pit mining. I don't know what the rest of the question refers to. We obviously, as a Canadian company, report under [ ESMA ] all our payments that go out to governments worldwide. And please feel free in our public filing to read about that.

Thank you. We have a question from Angus Wong representing SumOfUs, a corporate responsibility organization who delivered a petition just prior to this meeting. We understand the petition called on Pan American Silver to respect community self-determination around Escobal and Navidad mines in Guatemala and Argentina. The question raised was, do you have any response to the people that signed this petition? Michael, can you respond to that?

Sure. First and foremost, we respect indigenous people's right to consultation. But in alignment with the Mining Association of Canada, MAC, they have the TSM Indigenous and Community Relationships Protocol. And as outlined also in our social sustainability policy, we are committed to aim to achieve free, prior and informed consent for impact on rights of directly affected indigenous people. But when we look at Guatemala, and I give you a bit more background there, right now the Escobal mine is not operating. It's not operating since -- well, before we purchased Tahoe mining. And the mine is on care and maintenance while the government of Guatemala is conducting an ILO 169 consultation process. This is a requirement mandated by the Constitutional Court of Guatemala. So no time line has been set for a potential restart of the mine. If you're interested on the ILO 169 process, it is the United Nations International Labor Organization convention regarding indigenous and tribal peoples in independent countries. And the aim of the ILO 169 process is to provide meaningful participation for constructive dialogue. Guatemala's Ministry of Energy and Mines is leading that ILO 169 process. And they have structured a very transparent and inclusive consultation process with broad participation. And if you are interested, please, we provided actually a website on the government side where we can read all the details about the consultation. Pan American is participating in good faith. I mean full respect to the terms of the Constitutional Court ruling, the ILO 169 consultation process and our global human rights policy. To date, we have participated in 6 preconsultation meetings. We have also participated in 2 working meetings with the Ministry of Energy and Mines and the Xinka Parliament to discuss our care and maintenance activities and supply needs. These activities have been validated by numerous visits from the Ministry of Energy and Mines, from the Ministry of Environment and Natural Resources as well as a Verification Commission visit that was made up by representatives from the Xinka Parliament, the Ministry of Energy and Mines and the Ministry of Environment and Natural Resources. Human rights is a really important issue to us, and we have human rights audits to ensure our best practices and compliance regarding principles on business and human rights.

Great. Thank you. We have one on La Colorada skarn. When can the skarn be in production? And how much could it produce?

Yes, it's a question I get quite often. It's a bit early to say that. It's a very large discovery. We will just put a press release on May 9 regarding the latest drill results. Actually, we drilled about 100,000 meters since the last resource update. And right now, we're really focused on infill and exploration drilling and then come up with a new resource somewhere mid of this year, and then later on, make a decision on a mining method and production numbers, cost, capital, et cetera. So it's a bit early to say right now when production will start, but we started working on several infrastructure projects that will help for the skarn. One is thinking of a ventilation shaft, concrete-lined shaft. We started late last year. We will also start driving a ramp to that skarn down and installed actually a cooling unit that is cooling the mine, which is right now starting up. So these are projects that help our current production and will help in the future our strong production as well. But yes, I have to refer you really to a bit later, maybe later in the year or early next year when we have more technical information available to give an idea at what time the skarn production will start.

Thank you, Michael. We've got another question that's lengthier. But pulling out the question, it is that at La Colorada mine in Mexico. Over 40 families were displaced to make way for an expansion. I think that's the question. What would be the response to that?

Actually, as part of the expansion of La Colorada, which started in 2015, we built new camp facilities and reaccommodated workers as well as a few families on our property to which we, of course, have registered legal title. 13 families opposed the move our new accommodation and thus filed a land rights claim at the Mexican [indiscernible] court. This group have engaged United Nations Office of the High Commissioner of Human Rights or OHCHR in Mexico. An additional process was initiated before the Secretary of Agrarian Territorial and Urban Development in Zacatecas to dispute lands legally owned by the company and declared as national property. We have been proactively working with the OHCHR and the families to resolve these issues. In 2018, the OHCHR has identified areas of concern and opportunities for improvement from a human rights perspective, including improving water, electricity and facility access as well as changes to some physical security infrastructure. We took immediate steps to address those issues and also met with representatives of the families and officials of the OHCHR and National Human Rights Commission already in 3 occasions prior to 2021. Going forward to 2021, we introduced the process to discuss the relocation with the affected families, held our dialogues first and continuous dialogues with them. These really have helped us to better understand their concerns. We were also able to respond to some requests, including conducting changes to security measures, maintenance, some accommodations and access roads and working with the families to hire school teacher, providing them with access to health care services. So we are actively working with those families and the OHCHR and committed to find the resolution during 2022.

Thank you. We also have a question on how the new dividend policy works. If you could explain that, please, Michael.

Sure. And we introduced the policy just in February. So this was basically the second quarter that we used that policy to define actually the level of our dividend. So when you look at it, we pay a base dividend of USD 0.10 per common share and quarter. And then on top of that, there's an additional dividend, a supplemental dividend, which is calculated based on our net cash position on our balance sheet. So it's a very easy measure for you to calculate how it works. If the net cash is between $100 million and $200 million, we would pay an additional $0.01 dividend. If the net cash is $200 million to $300 million, it's an additional $0.02. That goes up if it's between $300 million and $400 million, it will go up to an additional $0.06. And if it's over $400 million, we would pay an additional $0.08. Like last quarter and this quarter, our net cash is about $200 million. So there's another $0.02 of dividend, which will be paid to our shareholders. So a total dividend paid that has been declared today by the Board will be $0.12 per share for this quarter.

Great. Thank you. I'm just checking to see if there's any other questions. Give me 1 minute. Would Pan American consider a buyback program in addition to the new dividend policy?

First and foremost, I'm very happy that we actually have a discussion how we return cash to our shareholders. It's a very important tool for a successful mining company to return and be able to return cash to the shareholders at any time of the metal price cycle. I think our preference is to return the money in the form of dividend at this point in the metal price cycle and leave the decision with the shareholders to decide if they would like to purchase more exposure to Pan American. My preference is really not to issue the shares in the first place, which has much better impact for our shareholders. And the last time we actually issued shares for our business, which was not for purchase but for our business, it goes all the way back to -- I believe it was January 2009. So our share count at the moment, I think, Siren, is somewhere around 210...

210.5.

210.5 million shares. So we're very happy with the new dividend policy to return money through dividends. And as I said, trying to keep our already low share count at lower levels.

Great. Thank you. That appears to be all of the questions we have that are pertinent to the business of this meeting. So at this point, I will turn it back over to our Chair, Gillian, to close the meeting.

Thank you. Thank you, Michael, and thank you, Siren. And thank you, everyone, for the questions you submitted. And we look forward to the meeting next year and [ to remain engaged ] with management is always welcomed. Thank you very much, and I declare the meeting closed.

Thanks.

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.