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Pan American warns of cost creep, stock drops

Kitco News

Pan American Silver (NASDAQ: PAAS) (TSX: PAAS) said yesterday it had a net loss of $173.6 million, 83 cents basic loss per share, in Q2.

The company said revenue was impacted by a pre-tax impairment charge of $99.1 million recorded for Dolores and $62.8 million in net realizable value (NRV) inventory adjustments, primarily at Dolores.

Pan American dropped 14% today to $18.14 a share as of 1 p.m. ET.

Dolores is the company's Chihuahua, Mexico operation. Pan American completed an expansion of the Dolores mine in 2017 that featured a pulp agglomeration plant to process high-grade ore from a new underground mine, together with the high-grade portion of the ore from the open-pit mine.

"Pan American's Q2 results were markedly impacted by the underperformance at Dolores and our determination that recording an impairment of this asset was required," said Michael Steinmann, President and Chief Executive Officer. "The remaining operations performed largely in line with our expectations."

The company said it is still within guidance but production is at the low end of range.

The estimate for gold segment cash costs is expected to be at the high end of the original guidance range and the estimate for AISC, excluding NRV adjustments, has been revised from between $1,240 and $1,365 per ounce to between $1,450 and $1,550 per ounce.

"The revision reflects the production shortfall at Dolores, global inflationary pressures and an increase in estimated consolidated sustaining capital spending," said the company.

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