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Pan American Silver Reports Higher 4Q Profit, Hikes Dividend

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(Kitco News) - Pan American Silver Corp. (Nasdaq, TSX: PAAS), one of the world’s largest primary silver producers, late Tuesday announced a higher dividend and larger net profit in the fourth quarter as the company unwound an impairment charge.

Net earnings were $49.7 million, or 32 cents per share, more than double the $22.3 million, or 14 cents, in the fourth quarter of 2016. The October-December results include a $60.2 million reversal of the 2015 Morococha mine impairment.

Excluding special items, adjusted earnings were $19.2 million, or 13 cents, compared with $19 million, or 12 cents, in the year-ago period.

Fourth-quarter revenue of $226 million rose 19% from a year ago, which the company said was the result of higher sales volumes for most metals and also higher prices for all but silver. While mainly a silver producer, the company also mines gold, zinc, lead and copper.

The company reported a 40% increase in the quarterly cash dividend to 35 cents per share. This will be payable around March 16 to shareholders of record as of the close on March 5.

"We generated $224.6 million in cash flow from operations in 2017. La Colorada, Morococha, Huaron and Dolores had record annual operating free cash flow," said Michael Steinmann, president and chief executive officer, also reporting that cash and short-term investments increased.

“Operations at Morococha have been performing particularly well, which has led to a reversal of the impairment we booked at that mine in 2015 and made a significant impact on earnings in Q4 2017."

Full-year net earnings rose to $123.5 million, or 79 cents per share, from $101.8 million, or 66 cents, in 2016. Adjusted 2017 earnings were $77.7 million, or 51 cents, compared with $86.6 million, or 57 cents, in 2016.

Pan American said silver production in the fourth quarter was 6.58 million ounces, which was 4% higher year-on-year, primarily due to increases at Dolores, La Colorada and Morococha. Annual production of 25 million ounces was similar to the 25.4 million produced in 2016.

Gold output of 43,700 ounces in the October-December period was comparable to 43,900 in the year-ago quarter. Annual gold production was 160,000 ounces, compared with 183,900 in 2016.

Consolidated all-in sustaining costs per silver ounce sold were $10.86 in the fourth quarter, compared with $10.38 a year ago. Full-year AISCSOS of $10.79 was within the revised forecast of $10.50 to $11.50.

Production guidance for 2018 was unchanged from the company’s early-January announcement. Pan American expects to mine between 25 million and 26.5 million silver ounces this year and 175,000 to 185,000 ounces of gold.

Meanwhile, Pan American said end-of-2017 mineral reserves include 288 million ounces of silver and 1.9 million ounces of gold, compared with 286 million silver ounces and 2 million gold ounces as of the end of 2016. The company reported newly discovered mineral reserves at the Morococha and Huaron mines.

"We added about 33 million ounces of new silver mineral reserves in 2017, more than replacing ounces depleted through mining,” said Christopher Emerson, Pan American's vice president business development and geology. “The silver grade of the mineral reserves increased by 13% to 94 grams per tonne, in part reflecting the additions of the new high-grade properties in Argentina."

Pan American said it spent approximately $18 million on exploration drilling in 2017 and will up this to $19 million in 2018.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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