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Pan American Silver production halved due to COVID-19

Kitco News

Second quarter silver production at Pan American Silver (TSX:PAAS) was 2.8 million ounces, down from 6.4 million during the same quarter a year ago.

The company reported its numbers today.

"The global COVID-19 pandemic had a significant impact on Q2 results, with all our Latin American operations placed in care and maintenance mode for periods of time during the quarter. Except for our two polymetallic underground mines in Peru, all operations are now back in production under comprehensive health and safety protocols," said Michael Steinmann, President and Chief Executive Officer.

Going forward revenue should bounce stronger. The company said revenue was $249.5 million with gold and silver averaging $1,708 per ounce and $16.58 per ounce, respectively. Both metals are now trading higher.

The company's net cash generated from operations was $62.8 million, which included $46.5 million of COVID-19 related mine care and maintenance costs. Working capital changes resulted in a $31.3 million source of cash, mainly driven by the draw-down in inventories from continued leaching at the company's three heap leach operations during the COVID-19 related suspensions.

COVID-19 costs were significant. The company incurred $46.5 million in care and maintenance costs in Q2 2020 due to COVID-19 related suspensions.

The company said most operations are back online, but wanred of the "humanitarian crisis" due to the pandemic.

"By the end of Q2 2020, all of Pan American's suspended operations had resumed production; however, its Huaron and Morococha operations in Peru were returned to care and maintenance on July 20, 2020 after several workers at the mines tested positive for the COVID-19 virus. A reduced workforce will conduct care and maintenance activities at those mines until it is determined that normal operations can safely resume," wrote the company.

"We remain concerned about the humanitarian crisis that the COVID-19 pandemic has caused throughout much of Latin America. We are adapting our community outreach programs to best support the communities near our mines during this very difficult time."

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