Pan American Silver Announces Unaudited Net Earnings of $0.23 per Share for Q2 2017

VANCOUVER, Aug. 9, 2017

All amounts are expressed in US$ unless otherwise indicated. Financial information is based on International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board.

This news release refers to measures that are not generally accepted accounting principle ("Non-GAAP") financial measures, including cash costs per payable ounce of silver, all-in sustaining costs per silver ounce sold, adjusted earnings and total debt. Please refer to the "Alternative Performance (non-GAAP) Measures" section of this news release for further information on these measures.

VANCOUVER, Aug. 9, 2017 /PRNewswire/ - Pan American Silver Corp. (NASDAQ: PAAS; TSX: PAAS) ("Pan American", or the "Company") today reported unaudited net earnings of $36.0 million ($0.23 basic earnings per share) for the second quarter ended June 30, 2017 ("Q2 2017") compared with $34.2 million ($0.22 basic earnings per share) in the second quarter of 2016 ("Q2 2016").  Adjusted earnings were $22.3 million ($0.15 basic adjusted earnings per share) compared with $18.0 million ($0.12 basic adjusted earnings per share) in Q2 2016.

"Pan American operations generated strong earnings in the quarter on revenues that topped $200 million. Silver production is on pace to achieve our annual targeted range, while costs are tracking well below. We have now reduced our estimate for cash costs and AISCSOS in 2017 by 14% and 10%, respectively, from the mid-point of our original guidance," said Michael Steinmann, President and Chief Executive Officer of the Company. "The longer term outlook for operations is also encouraging with excellent progress on our mine expansions in Mexico and our two new projects in Argentina. Throughput at La Colorada achieved design rates of 1,800 tonnes per day in June, six months ahead of plan. At Dolores, commissioning of the new pulp agglomeration plant has begun and the underground mine has been delivering low-grade development muck to the heap. As we saw during Q2 with La Colorada, these expansions improve our operating margins through growth in low-cost production."

Highlights for Q2 2017:

• Silver production of 6.30 million ounces was similar to the 6.33 million ounces produced in Q2 2016. Quarter-over-quarter, production increased at La Colorada and Manantial Espejo, declined at Alamo Dorado and San Vicente, and was essentially consistent at Dolores, Morococha and Huaron. 
• Gold production was 37.7 thousand ounces compared with 48.4 thousand ounces in Q2 2016. The decrease was primarily the result of lower ore grades at Manantial Espejo and Dolores together with the shutdown of Alamo Dorado operations.
• Revenue was up 5% to $201.3 million from $192.3 million reported in Q2 2016, reflecting higher realized metal prices and lower direct selling costs, partially offset by an increase to negative settlement adjustments on concentrate shipments and lower quantities of gold and copper sold. The biggest impact on revenues came from a 2% increase in realized silver prices and a 33% increase in realized zinc prices quarter-over-quarter.
• Consolidated cash costs per payable ounce of silver, net of by-product credits ("Cash Costs") were $5.71 in Q2 2017 compared with $5.57 recorded in Q2 2016, reflecting a decrease in by-product credits partially offset by lower consolidated direct operating costs. Cash Costs for the six months ended June 30, 2017 ("H1 2017") were 8% below the low end of management's 2017 annual guidance range; accordingly, management has revised its guidance for 2017 annual Cash Costs to $5.50 to $6.50 per ounce from original guidance of $6.45 to $7.45 per ounce.
• Consolidated All-In Sustaining Costs per Silver Ounce Sold ("AISCSOS") were $10.73 in Q2 2017 compared with $11.31 in Q2 2016. AISCSOS for H1 2017 of $11.66 were closer to the low end of management's 2017 annual guidance range of $11.50 to $12.90; accordingly, management has lowered the annual 2017 AISCSOS guidance to $10.50 to $11.50.
• Net cash generated from operating activities was $42.9 million compared with $66.0 million in Q2 2016. The decrease reflects a $20.7 million change in working capital and a $10.2 million increase in taxes paid. 
• Net earnings were $36.0 million ($0.23 basic earnings per share) compared with $34.2 million ($0.22 basic earnings per share) in Q2 2016. 
• Adjusted earnings were $22.3 million ($0.15 basic adjusted earnings per share) compared with $18.0 million ($0.12 basic adjusted earnings per share) in Q2 2016.
• Strong liquidity and working capital position. The Company exited Q2 2017 with cash and short-term investment balances of $198.2 million, after directing $7.5 million towards the acquisition of the Cap-Oeste Sur Este ("COSE") project. At June 30, 2017, the Company had working capital of $429.6 million, $263.8 million available under its revolving credit facility, and total debt outstanding of $46.7 million.
• Capital expenditures totaled $41.8 million in Q2 2017, including approximately $16.7 million of project capital; this is a decrease from Q2 2016 capital expenditures of $52.8 million, which included $28.0 million of project capital. Pan American is increasing its estimate for 2017 project capital to total $73.5 million to $78.5 million, with the increase largely directed to advancing the Joaquin and COSE projects.
• On the Dolores expansion, the Company completed construction of the pulp agglomeration plant and commenced commissioning. Development of the underground mine also progressed, and remains on track for the initial stope ore mining to begin before the end of 2017.
• On the La Colorada expansion, development of the underground mine advanced ahead of plan, achieving the targeted 1,800 tonnes per day mining and processing rates during the last month of Q2 2017. As well, the new power line was energized.
• The Company has closed its acquisition of 100% of the COSE project, originally announced on April 25, 2017. The remaining $7.5 million payment necessary to complete the purchase will be payable either 12 months after the closing date, or upon the commencement of commercial production of COSE, whichever is the earlier.  During H1 2017, Pan American acquired the COSE and Joaquin projects, both high-grade silver deposits offering synergies with the Company's Manantial Espejo mine in the Santa Cruz province of Argentina.
• At the Joaquin project, the Company has initiated a 6,200 metre drill program and engineering analysis to determine the quantity of potentially economic material that could be trucked to the Manantial Espejo processing plant for treatment. We expect to complete a Preliminary Economic Assessment on the project by year-end.
• For the COSE project, the Company plans to invest $23.9 million to construct an underground mine (excludes the final $7.5 million project acquisition payment referenced above). The project envisions an underground decline ramp, with the first stoping area being encountered towards the end of 2018 after 1.0 kilometre of development. The material mined will be trucked to our Manantial Espejo plant for processing at a rate of approximately 200 tonnes per day for 18 months. On average, the project is expected to produce approximately 112,000 ounces of silver and 2,300 ounces of gold per month. The estimated internal rate of return on the total investment, including $15 million of acquisition costs, is 18% assuming a flat silver price of $18.50 per ounce and a flat gold price of $1,300 per ounce. The results of this preliminary economic assessment are preliminary in nature in that they include inferred mineral resources that are considered to be too geologically speculative to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the assessment will be realized. Mineral resources that are not mineral reserves have no demonstrated economic viability.
• A quarterly cash dividend of $0.025 per common share, approximately $3.8 million in aggregate cash dividends, has been approved by the Board of Directors. The dividend will be payable on or about Friday, September 1, 2017, to holders of record of Pan American's common shares as of the close on Monday, August 21, 2017. Pan American's dividends are designated as eligible dividends for the purposes of the Income Tax Act (Canada). As is standard practice, the amounts and specific distribution dates of any future dividends will be evaluated and determined by the Board of Directors on an ongoing basis.

Consolidated Financial Results