Thank you for standing by. This is the conference operator. Welcome to the Pan American Silver fourth quarter and year-end 2022 results conference call. As a reminder, all participants are in listen-only mode, the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Siren Fisekci, VP Investor Relations. Please go ahead, Ms. Fisekci.
Thank you for joining us today to discuss Pan American Silver's Q4 2022 results. This call includes forward-looking statements and information and makes reference to non-GAAP measures. Please see the cautionary statements in our MD&A for the period ended December 31, 2022, and news release and the presentation slides for our call today, all of which are available on our website. I'll now turn the call over to Michael Steinmann, Pan American's President and CEO.
Thank you for joining our call today. I'm looking forward to discussing with you the major event of 2022, which is our transaction to acquire the Latin American assets of Yamana Gold. Shareholders of both Pan American and Yamana overwhelmingly approved the transaction in January. We expect it to close sometime this quarter. First, let's recap Pan American's 2022 results. Pan American produced 18.5 million ounces of silver and 552,500 ounces of gold in 2022. Silver production came in at the top end of the revised range we issued in November, while gold production was in line with our original operating outlook. Gold production in the fourth quarter was the second-highest on record, driven by back-end loaded production from Shahuindo and La Arena, as we had expected and communicated.
Both silver and gold production were impacted by reserve grade shortfalls in Phase 9B of the open pit at the Dolores mine, while silver production was further impacted by mine sequencing into lower silver grade stopes at La Colorada in the second half of 2022. Ventilation conditions in the La Colorada underground mine improved in the second half of 2022 following the installation of two booster fans and the commissioning of a refrigeration plant. We expect to complete sinking of the new concrete line shaft late this year and equip the shaft with ventilation fans during 2024, which will further improve access to the higher-grade zones of the La Colorada vein deposit. Operating costs came in above our original guidance range as we indicated they would, largely reflecting the global inflationary environment. Total capital expenditures were in line with our original operating outlook.
We made significant progress on our major capital project to advance the La Colorada Skarn. In 2022, we completed 32,000 m of exploration drilling, discovering a high-grade zone of mineralization that we announced mid-year, and about 46,000 m of infill drilling, enabling us to update the mineral resource estimate for the Skarn in September. We also advanced construction of the new concrete line ventilation shaft, reaching a depth of 88 m by the end of the year. We have included a couple of photos in the slides that accompany this call. We completed and put into service the refrigeration plant. This new infrastructure will benefit the existing La Colorada mine as well as future development of the Skarn. At our Escobal mine in Guatemala, progress was made on the ILO 169 consultation.
In 2022, the pre-consultation phase was completed, and the Ministry of Energy and Mines and Xinca representatives delivered the progress reports to the Guatemalan Supreme Court of Justice. As you know, we cannot provide a timeline for completion of the consultation or potential restart of the mine. Revenue in 2022 totaled $1.5 billion. During Q4, we had a buildup in silver and gold finished good inventories valued at about $45 million-$50 million, which reduced the amount that could be booked to revenue due to timing of shipment at the end of December. Cash flow and earnings in Q4 and for the full year were distorted by expenses related to the amount of transaction.
In Q4, we expensed $157.3 million for transaction costs, primarily for the $150 million we advanced to Yamana for the termination fee paid to Gold Fields Limited. We are expecting to record additional expense related to the transaction in Q1 2023. The other significant factor affecting earnings in 2023 was the impairment and NRV inventory charges related to the reserve grade shortfall of the Dolores Phase 9B open pit, which we reported in Q2. On an adjusted basis, earnings were $17.9 million or $0.09 per share in 2022.
We exited 2022 with cash and short-term investment balances of $142 million and total available liquidity of $482 million. We drew down our revolving credit facility by $160 million to fund costs related to the Yamana transaction. We maintain a dividend of $0.10 per share for Q4. Pan American liquidated its remaining equity interest in Maverix Metals Inc. in January 2023 in connection with the acquisition of Maverix Metals by Triple Flag Precious Metals Corp, realizing net proceeds of $105.3 million. Previously, in May 2020, we had sold a portion of our equity holdings in Maverix for $45.4 million.
Therefore, in total, we have crystallized $150.7 million value for the 19 royalties, precious metal streams and payment agreements that had been sold from our portfolio to Maverix Metals. We are in a solid financial position entering 2023 and expect our financial performance to further improve over the coming year as we integrate the Latin American assets we will acquire through our transaction with Yamana. The Yamana transaction will strengthen our competitive advantage in Latin America, where we have nearly 30 years of operating experience. With an expanded and more diversified portfolio, plus a suite of highly promising development projects and exploration properties, we see opportunities for growth and operational and administrative synergies. We are planning to provide our operating outlook for 2023 following the completion of the transaction, which is expected to occur later in the first quarter of 2023.
The outlook will include the Latin American assets acquired through the transaction, as well as consolidated forecasts for annual general and administrative, exploration, and project development costs. It will also reflect the Manantial Espejo operation in Argentina being placed on care and maintenance after reaching the end of its mine life at the end of 2022. The transaction with Yamana is truly transformative and builds on Pan American's core operating strength. The New Pan American is a stronger, larger, and more diversified company better able to internally fund and advance our growth projects. I'm proud of what our team has accomplished in 2022, positioning the company and our stakeholders for a very promising future. I would now be happy to take your questions.
We will now begin the question-and-answer session. To join the question queue, you may press star, then one on your telephone keypad. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. We will pause for a moment as callers join the queue. The first question is from Craig Hutchison from TD Securities. Please go ahead.
Good morning, guys.
Morning.
With respect to the upcoming guidance, will it be retroactive to January 1st? That's my first question. Second question is, with respect to the segments, can we expect, say, Cerro Moro to fall into the silver segment and the remaining assets to report to the gold segment? Will all the assets report to the gold segment?
To answer the question, Craig. yeah our the guidance for Pan American's original assets, the guidance will be for the full year. The assets that come to us through the Yamana transaction will of course be adjusted to the closing date. That's what we are planning, as we're not completely sure with the closing date yet. That's kind of a moving target yet. That's what we have in mind. I think the separation between gold and silver segment operations, it's probably very close to what you mentioned.
Okay. Then do you expect any cyclicality with respect to your existing assets similar to this past year, Shahuindo and La Arena? Or you expect grades to be, you know, recoveries to be back-end weighted or maybe front-end weighted? Any kind of clarity on that, be appreciated.
Yeah, Craig, this is Steve. It will be back-end weighted. It's typical at La Arena with our stripping schedule. We did carry over some of the weighting in 2022 into 2023. We're actually It'll probably be more even than the previous years we've seen, but it will trend towards the back end to some degree.
Okay. Thanks, guys.
Just to add that, Craig, something on the guidance, of course, there will be quite some different numbers when you look at the costs because Yamana is showing it in gold equivalents. While as you mentioned, we separate it out in gold and silver segments, net of by-product credits. So there's not gonna be complete apples to apples to compare from one company to the other.
Okay. I appreciate that. Thanks.
Mm-hmm. Thank you.
The next question is from John Tumazos from John Tumazos Very Independent Research. Please go ahead.
Thank you. We're here on February 23rd, where the first quarter is over half done. Can you give us a little guidance on t he March quarter, will the silver output be above or below 4 million ounces?
Hi, John, it's Michael. We don't have obviously all this data yet. I think we're off to a decent start of the year. I think that's fair to say. We'll, as I said, once we have the transaction closed, we have that closing date that we can include in our in the adjustment to the guidance to the Yamana assets, we'll be able to, you know, to put the full guidance out. Of course, we report the first quarter results, around in May like every year. I would expect that soon or pretty soon after we close, we should release a press release with our full year guidance, for the combined company.
As a news flow, I would also expect, or you should expect to see some additional information on the drilling and exploration results from La Colorada's Skarn. This is ongoing and you probably noticed that we have like, you know, probably 3x, 4x a year we put out results. I'm sure that will be additional information that's probably gonna come out before our Q1 results in May.
Michael, as you know, when you pay a premium to acquire a company and then another premium for the break fee, you have to improve the performance of the other company, to justify the higher valuation. Else later down the road, there can be, you know, impairment charges if you don't earn the return. In Agnico's case, they have a big savings because they won't have to build a mill for Wasamac. In the operation of the Latin American mines, other than G&A and purchasing, are there any obvious improvements, or ways you're gonna run the mines better than Yamana would have?
Yeah. John, first of all, it's a very accretive transaction. When you discount the part that Agnico is paying for their assets in Canada, you're left up with the South American assets. When you look at what we paid for, it's probably about 0.7x NAV, somewhere in that range, that we paid for those assets. If you add in all the closing costs and some of the break fees, you probably get to, like, 0.8x-0.85x, somewhere in that range. It's a very accretive transaction.
Probably a bit different than when you just look at the, you know, acquisition of a full company because this goes out in two pieces and was split between North America and South America. There was an opportunity for us to pick up those assets in an accretive transaction, basically at a discount. Look, Yamana did a good job in running those assets, what's changing, first of all, on the G&A, which are, you know, quite big numbers. What's changing and not only G&A in North America, also in South America, because we have some overlap in some of our offices. We are obviously very happy that, you know, the operational teams will join us from Yamana. They did a great job.
You also have to see that we're gonna be a much larger entity in Latin America, having much more purchasing power and negotiation power, for our big purchases of, let's say, cyanide, steel balls, explosives, et cetera, which will also result in additional synergies which we did not include yet in our kind of proposed synergy number that we put out there. It's about $40 million-$60 million a year. That $40 million-$60 million is mostly G&A, includes I think a little bit on the exploration side, but it's mostly G&A. There will be additional synergies from the operational sides, no doubt. We need to, of course, close the deal and start working with the assets before we could put a finger on that number.
The $40 million-$60 million to start with is, you know, is a pretty good number, $400 million-$600 million in the first 10 years.
Mike, could you explain the accretion a little more? It would seem like in this share swap, the biggest driver of the accretion is that Pan Am's mines have very little gross margin, and the amount of mines have a bigger gross margin. I apologize, I don't read, Street and NAV estimates. Sometimes people use very low discount rates or assumptions that are foreign to me. Could you explain that accretion in a little more detail?
Right. You know, when you look at accretion/dilution analysis for an acquisition, you obviously look at many different factors. In this case, it's, it's of course, as I explained already, accretive to NAV, it's accretive to cash flow. Accretive to production. It's accretive to cash cost. Very important, as we said from the beginning, this will result in a combination of higher and lower cost production, but, in some cases, significantly longer life mines. When you look at the reserves, of course, we already have the largest silver reserves or one of the largest silver reserve in the world. I think we add there, about 110 million ounces, give or take to the reserve.
The biggest addition of that, on the reserve side, on the accretion side, is of course on the gold side, at that substantial amount of gold to our reserves as well. These are kind of the, you know, the major main points on the accretion/dilution analysis. Of course, you can dive into other smaller details, but the biggest one is that, yeah, bigger, stronger and longer time production at lower cost.
If I could ask one more. What do you think is a good guess for when La Colorada Skarn enters production?
That's a very good question. We spend a lot of effort on this. As you know, this, you know, no doubt, has been our biggest discovery ever, and, it's a great deposit. It keeps growing, and as I said and alluded to, we will put out more exploration results during the year as we go. I'm sure you noticed when we put out the last resource update that this is kind of a moving target as the exploration has been so successful, not only with infill drilling but with the step-out drilling. Plus, added that really high-grade zone that we reported in September last year. The engineering has to adapt constantly, to decide on the mining method that we go forward with it.
I think we're still on track with the PA, probably late this year. As I said, we will have more information as we go during the year out there. It's gonna be a very sizable deposit, as you can imagine. It's, you know, we have already, with all the categories, probably around 250 million tons of resources, which I have no doubt will grow with the current exploration program. It will take a number of years to put that in production, and it really depends what mining method at the end we put a pin in and how we deal with the high-grade zone. If we deal with that separately or it's part of our overall production profile.
That will really dictate if we are a few years faster or if we just built a really big operation and it takes a few years more to do so. I don't have that number yet, John.
It might be 2027 or it might be a range of 2027-2029 if it's a bigger, more complicated, construction.
For sure, as I said, I don't have the final year, but for sure it will be a ramp up. You can imagine, and I think we discussed that before. We are looking at, you know, sizable production, anything between 15,000 tons-20,000 tons a day or bigger. You can imagine that it's not starting up a mine from scratch in a few months like that, there will be a long ramp up to get to that tonnage like any very large underground operation in the world.
Thank you and good luck.
Thank you. Have a good day.
Once again, if you have a question, please press star then one. The next question is from Sara Konstantine from Summer Moon. Please go ahead.
Good morning. I had a quick question on Escobal. I know you guys mentioned there is no timeline, but I guess in your annual report said that in 2023 there's no expectation of reduction in Escobal. Should we assume you guys believe that your earliest production would be back online would be in 2024? Is that a piece of, I guess, misinformation or what are your thoughts on that? Thank you.
Yeah. Hi, this is Sean McAleer. We've got the consultation process ongoing right now and the process has obviously taken some time due to COVID, change of government after the acquisition. It's hard to put a date on when the consultation will be concluded. Obviously that's is a prerequisite before we can set any kind of parameters around when we would enter production. The Escobal startup when and if it does occur, you know, later on in the year or in 2024, it's gonna take months to get back up again. We can't give a date really for startup about Escobal right now.
Okay. All right, thank you.
Thank you.
This concludes the question-and-answer session. I would like to turn the conference back over to Michael Steinmann for any closing remarks.
Yes, thank you for calling in everyone. I'm sure there will be many more questions once everybody is off restrictions and we close the transaction and can at detail discuss New Pan American. It will be a very exciting transformational transaction for us. It will be an exciting journey during 2023, and I'm really looking forward to discuss that in detail with you in some press releases and for sure at our May, what is that? Q1, update in May 2023. Have a good spring, everyone. Thank you.
This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.