Thank you for standing by. This is the conference operator. Welcome to the Pan American Silver 2020 Annual General and Special Meeting of Shareholders Conference Call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. Only shareholders are permitted to ask questions and are welcome to submit questions on the webcast for a response after the presentation from Pan American's President and CEO. This time is now 3:04 P.M. Pacific Time. Mr. Beaty, you may commence the meeting when ready. Please go ahead.
Thank you very much, Operator. I will now declare the 2020 Annual General Meeting and Special Meeting to come to order. My name is Ross Beaty. I'm the Chairman of the company, and I have to first say how peculiar this is today. This is a once-in-a-lifetime event, I hope, where we are not able to have the meeting in front of our shareholders and interested parties. Instead, we have to do this the way we're doing it by telephone and ask our shareholders to vote by proxy in advance of the meeting and to not attend the meeting in person, so if there are shareholders who are listening to this proceedings of this meeting, I welcome them and I thank them for joining us through our live conference call or audio webcast, and we look forward to future shareholder meetings where we may host you in person.
Today's meeting will occur in three parts. First, we'll address the formal items of business, and then Michael Steinmann, our President and Chief Executive Officer, will present on the company's activities in the last year and prospects for the upcoming year, and following that, we'll do a brief Q&A, so any shareholder wishing to ask questions should submit them via the live webcast. We'll now proceed to the formal part of the meeting. Pursuant to the articles of the company, I will be acting as Chairman of the meeting. Delaney Fisher, VP, Associate General Counsel, and Corporate Secretary of the company will act as Secretary for this meeting, and Anita Basi of Computershare Investor Services will act as scrutineer. With the Secretary, please assure us that the Annual General and Special Meeting has been properly called.
I have before me an affidavit of a representative of Computershare Investor Services Inc, attesting that the notice calling this Annual General and Special Meeting, together with the information circular, the form of proxy, and the audited financial statements, were delivered in accordance with the Business Corporations Act and applicable securities laws. Therefore, Mr. Chairman, this Annual General and Special Meeting has been properly called.
Thank you, Delaney. Will you please now read the Scrutineer's Report?
The Scrutineer's Report reads as follows: One shareholder attended in person representing 1,840 shares. 814 shareholders attended by proxy representing 142,084,871 shares. 815 total shareholders holding 142,086,711 shares. The total issued outstanding at the record date was 210,002,117 shares, so the percentage of outstanding shares representing the meeting is 67.66%.
I adopt the Scrutineer's Report and declare accordingly that a quorum is present. I now declare that the Annual General and Special Meeting is regularly called and properly constituted for the transaction of business. The first item of business is the reading of the minutes of last year's Annual Meeting. I will request the motion to take the minutes as read and confirmed.
So moved.
All in favor, please signify. Against, I declare the motion carried. The next item of business is the presentation of the audited financial statements of the company and the report of the auditors thereon for the year ended December 31st, 2019. The audited financial statements and auditor's report were mailed to each shareholder who had requested a copy. I shall consider the audited financial statements and auditor's report received by the shareholders and submitted to this Annual General and Special Meeting. It is now in order to proceed with the election of directors for the upcoming year. There are seven positions to be filled, each to hold office until the next Annual Meeting of shareholders. I now declare the meeting open for nomination for directors.
I nominate Ross J. Beaty, Michael L. Carroll, Neil de Gelder, Walter Segsworth, Michael Steinmann, Gillian Winckler, and Charles Jeannes to be the directors of the company and hold office in accordance with the articles of the company.
Each of the nominees has previously consented in writing to act as a director. I ask for a motion that nominations be closed.
So moved.
All those in favor of the motion, please signify. Against? Carried. We will now proceed with the election of directors. Each director will be elected separately by a show of hands. It is proposed that separate ordinary resolutions be passed electing Ross Beaty, Michael Carroll, Neil de Gelder, Walter Segsworth, Michael Steinmann, Gillian Winckler, and Charles Jeannes as directors of the company for the ensuing year to hold office until the next Annual General Meeting of shareholders.
So moved.
I would ask that each shareholder signify their vote on the following appointments by raising their right hand. All those in favor of the appointment of Ross Beaty. Against, carried. All those in favor of the appointment of Michael Carroll. Against, carried. All those in favor of the appointment of Neil de Gelder. Against, carried. All those in favor of the appointment of Walter Segsworth. Against, carried. All those in favor of the appointment of Michael Steinmann. Against, carried. All those in favor of the appointment of Gillian Winckler. Against, carried. All those in favor of the appointment of Charles Jeannes. Against, carried. I declare that Mr. Beaty, Carroll, de Gelder, Segsworth, Steinmann, Jeannes, and Ms. Winckler have been elected as directors of the company for the ensuing year to hold office until the next Annual Meeting of shareholders of the company or until their successors are elected or appointed.
The next item of business is the appointment of auditors. It is proposed that the company reappoint Deloitte LLP as auditors of the company. Accordingly, I ask for a motion that Deloitte LLP be appointed as auditors of the company for the ensuing year.
So moved.
All those in favor, please signify. Against? Carried. The next item of business is the fixing of the auditor's remuneration. It is proposed that the Board of Directors be authorized to determine the remuneration to be paid to Deloitte LLP for the ensuing year.
So moved.
All those in favor. Against. Carried. The next item of business is to consider and approve an ordinary resolution, advisory resolution approving the company's approach to executive compensation. The full text of the advisory resolution is contained on page 14 of the information circular for this meeting. I ask for a motion that the advisory resolution approving the company's approach to executive compensation be approved.
So moved.
Thank you. The vote on this resolution will be conducted by way of a poll. As shareholders present at the meeting cast their ballots at the beginning of the meeting, the results of the poll are available. I declare that the advisory resolution approving the company's approach to executive compensation was passed with 104,824,297 shares voted in favor and 7,107,879 votes cast against the resolution. This is a plurality of 93.65% in favor and 6.35% against. I declare the motion carried. I now call for a motion to conclude the formal portion of the Annual General and Special Meeting of the company.
I move that this meeting be concluded.
All those in favor, please signify by raising your hand. Against, I declare this Annual General and Special Meeting of the company concluded. Thank you for your attendance and continuing support, and I would now like to invite Dr. Michael Steinmann, the company's President and Chief Executive Officer, to say a few words about the activities of the company over the past year and its prospects for the upcoming year.
Thank you, Ross. And good afternoon, everyone. Q1 will obviously be remembered as the time when a global pandemic affected lives and businesses everywhere. The mining sector, particularly those with operations in Latin America, were severely impacted, and Pan American immediately engaged its crisis response team to help manage this highly dynamic and disrupting cascade of events. The health and safety of our employees and communities is always the primary concern. In order to prevent an outbreak of the virus at our sites, we adopted health and safety protocols consistent with those recommended by the local health authorities, best management practices, and the World Health Organization across all our operating sites and corporate offices. National quarantines imposed in the jurisdictions where we operate have posed hardship for our communities. We are supporting these communities through the donation of food and hygiene supplies and providing access to healthcare.
The impact of COVID-19 on our business during Q1 was limited to the last weeks of March. We suspended operations in Peru on March 16 and on March 23 in both Bolivia and Argentina. Our operations in Mexico were not suspended until April 1. However, we had already taken measures to increase physical distancing, which reduced throughput rates at our Dolores and La Colorada mines. We also reduced throughput at our mines in Canada to increase physical distancing. The Timmins and Bell Creek mines were never suspended and continued to operate. Over the coming weeks, we will carefully reopen our operations in Argentina, Peru, Bolivia, and Mexico, depending on governmental approval. We expect a gradual resumption of activities with modifications to accommodate greater physical distancing and with appropriate protocols in place to protect the health and safety of our workforce and communities.
We currently have had no confirmed case of COVID-19 at any of our Pan American Silver operations or offices. You will find further details on the restart plans for each operation in our Q2 news release. We are in a strong financial position to overcome this pandemic. As of March 31st, 2020, we have nearly $239 million in cash and short-term investments and $240 million available in our line of credit for a total liquidity of approximately $479 million. And we have a very experienced management team and a geographically diversified portfolio of quality assets. There are several headwinds in these times, like business suspensions, refinery and smelting, and transport disruptions, but there are also tailwinds like rising gold prices, weakened local currencies, and lower energy costs.
After the COVID-19 update, let's now talk about the assets of the company with a quick look back to 2019 and some plans for 2020. Pan American Silver became the world's premier silver mining company in 2019. We have a diversified portfolio of high-quality assets in the Americas with the largest silver reserves in the world. Last year, we celebrated our 25-year silver jubilee, a 25-year track record in Latin America. We are known for our capital discipline and strong balance sheet, generating strong margins at our operations, which benefits not only our host countries, communities, and shareholders, but everywhere else and anyone else involved with the company. And we have three large catalysts for future growth, including a large exploration discovery at La Colorada, and I will give you more details on that later on. On the map, you see the location of our assets across the Americas.
Now, the two assets in Canada that came to us through the Tahoe acquisition, as well as Shahuindo and La Arena, Peru, and Escobal in Guatemala, which is currently on care and maintenance, awaiting a court-mandated ILO 169 indigenous consultation. We are a very responsible mining company, publishing a detailed sustainability report since 2010 using the GRI framework and the UN Sustainable Development Goals. We put a lot of efforts in our tailings and water management, which is crucial for any mining company in the world, and we are reporting on greenhouse gas emissions since 2010. The 2019 sustainability report is made public over the next few days, which includes, for the first time, Scope 3 GHG greenhouse gas emissions. On this slide, you see a preview of the new report, and I'm really proud of it.
It is a very comprehensive document, and I would like to share a few highlights. Last year, our operations benefited 95 communities and indigenous groups from our socioeconomic programs. We planted over 360,000 trees and helped build infrastructure for nearly 2,400 families. Over 8,700 people received medical attention throughout our healthcare programs. We also provided educational support to nearly 8,300 students and provided university scholarships to 196 students. One last and very important point I would like to make: 99% of our employees are from the countries where we operate. In the report, you will also find details on direct economic value distribution. Last year, 82% of the economic value generated at our mines stayed in the countries where we operate. That's a total of over $1.1 billion that was paid or invested either locally, regionally, or nationally.
This includes salaries, as I mentioned, 99% of our employees come from the countries we work in, projects with our host communities, tax payments, and reinvestments or expansions in our operations and exploration. An important part of mining is mine closure and remediation. Our Alamo Dorado operation was a great mine over many years, but nothing is eternal. So, two years ago, we moved the mine into reclamation. I would like to share three pictures with you. The first on the top left shows the dry stack tailings during operation. You may see the processing plant in the far background. Dry stack is the best available technology, allowing a nearly 100% water recovery for reuse in the mine. We deposit dry, ground-up country rock after removal of gold and silver.
The top right photos show the same dry stack after reclamation, and on the bottom right, you see the former processing plant location after reclamation. This is a great example of responsible mine closure. But the most important event of 2019 was no doubt the transformative Tahoe acquisition. This was a very accretive transaction with an increase of silver equivalent reserves per share of 50% and an increase of silver equivalent production of about 27% per share. We have been able to capture $25 million-$30 million of annual Tahoe synergies, savings which will occur year after year. We increased our gold production substantially and added a large catalyst to our portfolio. As you know, the Escobal mine in Guatemala is currently on care and maintenance, awaiting the court-mandated ILO 169 consultation.
With all that, 2019 was a very positive year for us with strong cash flow and earnings, successful integration of the Tahoe operations, and we increased our dividend by 43%. And on top of it, made a world-class discovery at La Colorada. Quarterly revenues have been growing mostly because of our gold production. This is partially due to the increased production from the former Tahoe assets, but also an effect of outperforming gold prices. If you look at the reserves by metal in the pie chart on the right, you will notice that silver makes up nearly 50%, which is the future metal mix for our production. So more gold production right now while we are working on our future large silver assets. We are proudly paying dividends since 2010.
In the last decade, we generated $1.2 billion of free cash flow, of which $573 million was invested in expansions at our assets, and $463 million was returned to our shareholders in form of dividends and share buybacks. Our capital allocation priorities are simple: maintaining a strong balance sheet with low or no debt, invest in high-return projects, and return the rest to shareholders through dividends. The blue bars on this slide represent annual dividend payments in US dollars per share, and the light blue field shows the cumulative dividend paid over the last decade, which totals $321 million. Our business is cyclical, so dividends increase and decrease depending on metal prices and capital needs, but we will always try to provide shareholders with some dividends. It should be part of any mature and successful mining company. So let's talk about the La Colorada discovery.
We drilled the discovery hole in fall of 2018, and after only one year of drilling, we have been able to report an inferred mineral resource of 72.5 million tons, and there is still lots of room to grow. This is truly a world-class discovery made in one of our best operations. We plan to continue our drilling in 2020 with another 40,000 meters, but the program is currently on hold due to COVID-19, and we will issue an updated resource estimate with our general mid-year reserve and resource update. On my last slide, I would like to talk a little bit about the silver market. You see the 2019 demand and supply numbers published two weeks ago by the Silver Institute. You can access the detailed report on the Silver Institute website.
Silver has quickly become the metal of the future as it is mostly used in electronics and other industrial applications. As a matter of fact, the largest single use of silver is for the production of solar panels, but it is also widely used in medical applications and water purification due to its antibacterial properties, and it is playing a crucial role to achieve electrified and low-carbon economies. This marks the end of my presentation, and I will pass on to Siren for the Q&A.
We have another question on the La Colorada skarn discovery. Could you provide more details on the timing for development and production startup?
Sure, Siren. The La Colorada polymetallic mineralization, or called skarn for geologists, is indeed very exciting. We drilled, as I said, the discovery hole in just late fall in 2018, and after only one year of drilling, we were able to get to an inferred resource of 72.5 million tons, and we keep drilling, as I mentioned in my slide. This is a very exciting discovery for several reasons. First, it is no doubt a world-class discovery with lots of room to grow. Second, the discovery was made in one of our mines, which will secure production for many decades to come, so I don't have really timing on the production startup at this time or capital numbers available yet, but we plan to give a resource update mid-year, and we'll work on some early stage engineering and further metallurgical work for the second half of 2020.
Okay. Second question: how does the M&A space look? Are there any good opportunities at the moment, and would they be in the production or exploration sector? Would you prefer gold or silver?
Where the market is right now, I have no doubt that the current situation will create opportunity at one point, but that's probably more over long term. Right now, in short term, we are really focused on our operations. We already have substantial projects for growth in our portfolio. We are always looking around for opportunities, so nothing really has changed there. They really have to be accretive in several measures, like reserves, costs, or production cash flow, etc. For the metal mix, preferably silver with byproducts. Geologically, silver does not occur alone. It's normally found together with gold or base metals, or in some cases with all of them, and that's one of the reasons why we have the current metal production mix in the company with base metals, or in some cases with gold as a byproduct.
Then a question here on: Can you give an update on the Escobal mine in Guatemala? Has there been any progress in being able to restart that mine? What have you done so far to advance the process?
Sure. We have received ownership of Escobal in February 2019. Since then, we have worked very hard to repair relationships which have been lost under the former management. We have restructured the organization in Guatemala towards establishing positive relations with the workforce, the community, and the indigenous people by instilling an objective of peace, a willingness to listen, and a focus on respecting and protecting human rights, and a desire to find a mutually beneficial solution that could broadly distribute benefits from our potential business to the local communities and indigenous people. We announced mid-last year that we have reached the final resolution with Guatemalan community members who commenced the Supreme Court of British Columbia action in 2014 against Tahoe Resources prior to our early 2019 Tahoe acquisitions.
We have further followed up by revising our security practices to adhere to the Voluntary Principles on Security and Human Rights, as well as Child Rights and Security Checklist. We appointed a human rights officer and adopted a corporate-wide human rights policy. We also enhanced communication channels and improved grievance mechanisms that could contribute and comply with the court-mandated and government-led ILO 169 indigenous consultation process, in addition to building open and transparent relations with our communities and indigenous peoples. I cannot provide a timeline for completing the government-led ILO 169 consultation process. We recognize that the process has been put on hold following the government's executive-ordered quarantine to address the COVID-19 pandemic. However, our immediate priority today is trying to find ways to support our neighboring communities everywhere we work as they face significant disruptions to their food, sanitary, and medical supplies.
I hope that answers the question.
Okay. We've also got several questions here regarding the ILO 169 consultation and respecting indigenous rights in Guatemala. Do you want to provide some information there on that process?
Sure. As I mentioned several times, our immediate priority right now is to support neighboring communities everywhere we are working. But with that said, we understand that the court-mandated ILO 169 indigenous consultation involves a four-stage process that includes a review, pre-consultation, consultation, and court verification. We, as Pan American, are named as a party in the consultation process, and we will participate at the government's invitation. As the project owner, we will have to provide the bulk of information regarding the project. I guess the government participants will have to respond in their relevant areas. We will fully cooperate and support the process and will endeavor to create a transparent and inclusive environment for dialogue in a manner that respects broad indigenous people participation in the consultation.
The process is structured and led by the Minister of Energy and Mines of Guatemala and includes methods for determining who, how, and when certain individuals and groups will participate. We are optimistic the consultation process will lead to establishing long-term trust and partnership with all stakeholders in the region as it is intended by the ILO 169 indigenous convention.
We've got one question here on the silver market. If you could maybe talk a bit more about that and why you think that the silver price is being lagging the price of gold.
Sure. Gold has been for sure the best-performing asset class, I guess, this year. It was performing very well in 2019, but you're right. The silver underperformed, and as a result of this, the gold-silver ratio climbed to about 115, I think it was yesterday. As I've shown on the slide, about 55% of the silver is used in industrial application and another 20%-25% for jewelry. The industrial demand provides silver with a floor, the silver price, sorry, with a floor. So besides industrial use, silver has a very important other use: it's store of value, a real precious metal. So it is really the investment demand that drives the peaks of the silver price. Last year, and you saw it on the slide I showed, we saw lower investment demand, and we had the accelerating economies in the world, which put pressure on the silver price.
We all know that. The COVID-19 crisis accelerated the economic slowdown. So while investment demand started to increase over the last few months for the same reasons demand for gold is increasing, we need the industrial demand to pick up as well for silver to outperform gold again, and I would fully expect to see that happen during the recovery from this pandemic.
Thank you, Michael. That is all the questions we have on the webcast at this time.
Okay. Thank you, Siren, and thank you, everyone, for calling in today. I'm looking forward to talking to you at the next AGM in 2021, hopefully with the pandemic behind us. Thank you, everyone. Have a good evening.
This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.