Thank you for standing by. This is the conference operator. Welcome to the Pan American Silver first quarter 2026 results conference call. As a reminder, all participants are in listen only mode, and 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. You'll hear a tone acknowledging your request. Should you need assistance during the conference call, you may signal an operator by pressing star then zero. I would now like to turn the conference over to Siren Fisekci, Vice President, Investor Relations. Please go ahead, Ms. Fisekci.
Thank you for joining us today for Pan American Silver's conference call and webcast to discuss our first quarter 2026 results. This call includes forward-looking statements and information and references non-GAAP measures. Please see the cautionary statements in our MD&A Q1 news release, shareholder return framework news release, and presentation slides for the period ended March 31, 2026, all of which are available on our website. I'll now turn the call over to Michael Steinmann, Pan American's President and CEO.
Good morning, everyone, and thank you for joining us today. I'm pleased to report another solid quarter of operating performance, delivering strong operating earnings. Attributable silver production of 6.4 million ounces and attributable gold production of 169,000 ounces were in line with our outlook. Silver segment all-in sustaining costs of $6.63 per ounce came in well below guidance, while gold segment all-in sustaining costs of $1,851 per ounce were consistent with expectations. The performance on silver segment costs was driven by the contribution of low-cost ounces from Juanicipio and the impact of higher gold prices. Revenue of $1.2 billion was impacted by the buildup of approximately 644,000 ounces of silver in inventory, primarily at La Colorada due to the timing of concentrate shipments.
Net earnings were $456 million, or $1.08 per share, and adjusted earnings were $1.09 per share. We continue to generate strong levels of free cash flow, reflecting both our operating performance and favorable metal prices. In the first quarter, we generated $488 million of attributable free cash flow. This has further strengthened our balance sheet, and we ended Q1 with a record cash and short-term investment balance of over $1.8 billion, including cash attributable to our interest in Juanicipio. The strength of our free cash flow generation and balance sheet has enabled us to introduce an enhanced shareholder return framework.
The new framework targets the return of 35%-40% of annual attributable free cash flow to shareholders through a combination of dividends and common share repurchases under our normal course issuer bid of up to $1 billion. We expect to pay aggregate dividends of approximately $305 million during 2026, equivalent to a quarterly dividend of $0.18 per common share based on the current share count, and use approximately $700 million for share repurchases. By accelerating share repurchases, we aim to enhance long-term per share value by increasing each shareholder's exposure to our high-quality portfolio and supporting sustainable growth in dividends over time. This enhanced shareholder return framework reinforces our disciplined approach to capital allocation while maintaining sufficient cash for growth and M&A activities while providing resilient shareholder returns across commodity cycles.
Focusing on growth, the release of the revised PEA of the La Colorada expansion in March provides greater clarity on the capital requirements and long-term potential of this important organic growth project. The expansion is expected to produce an average of 19.1 million ounces of silver annually during the peak five years following construction and ramp up. The revised PEA represents a huge improvement over the original study with higher grades, lower capital intensity, stronger overall returns, and reduced technical risk due to the use of a conventional long-hole open stope mining method. The project improved as a result of continued exploration success, which identified new high-grade veins east of the current mining area. Exploration drilling continues to intersect mineralization beyond current resources, highlighting the potential to further expand the resource base and extend peak production.
The board approved $265 million in project capital over the next five years to support development of a ramp to access the skarn mineralization. We now expect to spend between $92 million-$95 million on the La Colorada skarn project in 2026, increasing consolidated 2026 project capital guidance to between $240 million and $255 million. We're also making progress with our Jacobina optimization project. During Q1, we completed construction of two new carbon-in-pulp tanks and implemented improvements to the tailings pump system. One of the most significant opportunities we see at Jacobina is simplifying and optimizing the process plant flow sheet. Conceptual engineering is nearing completion, and we will transition to basic engineering in the coming month.
We also expect detailed engineering for a filtration plant, filter tailings stack, and the temporary mine paste backfill plant within the coming month. At Escobal, the government of Guatemala is continuing the ILO 169 consultation process. An engagement has been ongoing, including recent site visits to review care maintenance activities and confirm compliance with the court-ordered suspension. At this time, there is no timeline for the conclusion of the Escobal ILO 169 consultation or for the restart of operations at the mine. Given our strong operating performance in the first quarter, we are maintaining our full-year outlook for production, all-in sustaining costs and sustaining capital. We expect some gold production to shift into the fourth quarter of 2026. We are monitoring potential cost pressures, particularly related to fuel prices.
Due to most of our mines being underground, our direct exposure to fuel is relatively limited, approximately 5% of total operating costs. High fuel prices can have broader inflationary effects, including on labor and consumables. We remain focused on managing these pressures proactively. To recap, 2026 is off to an excellent start. We delivered another strong quarter. We are generating robust free cash flow, production, and costs are in line with our guidance, and we have introduced an enhanced shareholder return framework that reflects this strong cash generation. With that, I'll turn the call over for questions.
Thank you. 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'll 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, press star then two. Our first question is from Fahad Tariq with Jefferies. Please go ahead.
Hi. Thanks for taking my question. You mentioned just now the impact of higher diesel potentially on consumables and labor. Can you maybe just mention, have you started to see any consumable prices started to go up or anything that you're hearing from your suppliers? Thanks.
Yes. Scott, can you take that, please?
Yeah. Good morning. Not significantly, no. We've seen some increases in the cost of geosynthetics and very minor ones and cost of staff transportation, where the increase in fuel costs have been passed on to us, but nothing significant at any of our operations.
Okay, great. Then maybe just one more from me. On the silver segment AISC, which was very low this quarter, in part because of the byproduct credits at Cerro Moro. Can you maybe just talk about, like it would have to trend quite a bit higher to get to the full year guidance. Maybe just talk about the Like how that's going to happen and whether it's possible for AISC to come in lower than the guidance range. Thanks.
Yeah. Thanks. Yeah, great quarter on the silver cost, as you say. Mostly driven, I think, you know, it's pretty clear with Juanicipio, strong production there. As you recall, that was one of the attraction of that mine, that we have a strong silver production at Juanicipio paired with very low cost. As you mentioned, the byproduct credits at Cerro Moro that have been very strong this quarter. Look, this is one quarter. End of the year, we'll obviously reassess mid-year if we gonna re-guide our cost. After one quarter, we just decided to leave it where it is. Great start for the year on the cost side for sure.
Okay, great. Thank you.
Thank you.
The next question is from Ovais Habib with Scotiabank. Please go ahead.
Thank you, operator. Hi, Michael and Pan American Silver team. Really congrats on a good quarter. Again, especially on the silver segment cost. Also the shareholders' return program was a nice positive surprise as well. That was great to see. A couple of questions from me, maybe starting off with Juanicipio. You know, Juanicipio consistently has been, you know, showing some, you know, positive grade reconciliation over the last, you know, couple of quarters. You know, how do you guys see this kind of grade kind of shaping up throughout the year? How should we look at things kind of moving on more in the future?
Yeah. I will start, we'll have the technical team giving a little bit more detail on that. Absolutely. Look, we have seen this great outperformance at Juanicipio for many quarters, even before we purchased the asset. It's a great mine, as you know. You know, I think one of the main reasons is that we find some more tons higher up with higher grades. Just to remind me, these are very similar systems than what we see at La Colorada. Very high grade, silver, some gold, high-grade gold, higher up to surface.
The deeper down you go in the mine, the deeper and higher grade you get into base metals. That's why, like at La Colorada, and the same will be valid for Guanaceví will be when you do exploration, you discover additional veins that you blend in and you start mining higher up again, you bring in higher silver grades. That's kind of the system, that's the geology of all these systems in that silver belt of Mexico, same for Guanaceví. As I said, the main structure, the grade will go into more base metals, more zinc and lead grades when you go deeper down. As you see, very strong outperformance on the silver side up to now.
You know, I think we'll see that decrease coming at one point, obviously, or decrease just on silver and as I said, very strong increase on base metals. you know, at the moment we are enjoying these high grades, and I think that slight decrease will be quite a bit slower than we probably anticipated.
Thanks for that, Michael. Just maybe quickly moving on to La Colorada. You know, in regards to the PEA that you announced, obviously a lot of drilling was left out on that PEA. There were some very high-grade re-results and good structures that you guys have delineated. Are you expecting to release some sort of an updated study incorporating these results, or any sort of optimization work that you've been doing in the background, in the next couple of quarters?
Definitely we'll put that exploration update and then we'll include obviously this data in our mid-year reserve and resource update that we normally publish somewhere in August. There you will get a new idea how it looks like. Just you said left out. We didn't really leave them out. It's just, you know, it's a lot of work to obviously come up with an updated PEA and the whole mine plan and everything, while our geologists are very excited on that project and keep drilling a lot and create a lot of data. There's always quite a long, wouldn't call it lag, but backup of data that comes in a bit later on.
That will continue as we have many drill rigs working at La Colorada, and there will be constantly new data coming in. Again, we will come out with updated exploration results and then include that in our updated reserve resource estimation.
Okay. Sounds good. Thanks for that, Michael.
Yeah—
Ovais, Steve has some more additional comments to that.
Yeah. Sorry, Ovais. Steve Busby here. I just wanted to add, we won't delay the next report in terms of like a PFS update because we have such a long schedule for this initial development of the ramp and eventually the shaft. Those are kind of taking precedence of the development schedule. We wanna get those early work projects going and get those moving along, and then we'll go back and start doing additional engineering and such for the plant and surface infrastructure. As Michael says, we'll update resources along the way, but we won't come out with a new mine plan right now for a couple more years at least.
Just to add to that, so Ovais, you probably saw in the press release, the board approved the first tranche of capital for the La Colorada skarn. That's a great milestone for this really important and large project for us. You know, La Colorada is going to be one of the biggest and lowest cost silver mine in the world, and we approved the first $265 million to advance a ramp down from the existing mine to the skarn. That's a long, it's about a five-year project to build that ramp. You can imagine that, you know, in ground and conditions that we're very familiar with, we drive many ramps, but this ramp will be very special for us as it will access the shaft.
It's the first important part of capital spend on the La Colorada skarn project. It was important to get that started because that's really kind of one of the slowest piece of the puzzle, if you wanna say so, to put it all together. As Steve said, building the new plant and surface infrastructure there is plenty of time later on.
Excellent. Thanks for the color, both Michael and Steve on that. That's it from me. Looking forward to attending the site trip in early June. Thanks.
Thank you, Ovais.
The next question is from Cosmos Chiu with CIBC. Please go ahead.
Thanks, Michael and team, and congrats on a strong start to 2026. Maybe, on skarn again, good to see that you've committed $265 million for the initial internal ramp. Could you remind us in terms of the dimensions of the internal ramp, is it gonna be sufficient for production? Will it, you know, eventually be used for production or most of the hoisting is gonna be coming from the east production shaft? Could you maybe, you know, help us picture it in terms of how this is gonna eventually work?
Sure. Hi, Ovais. It's Martin Wafforn here. Yes, the decline we're driving at 5.5 m by 6 m, so a big decline with the intention of putting big sized trucks in there, in the order of 50 ton capacity trucks. We use those to haul up to the 588 level, and then we'll use other trucks to take the waste that we're generating from this. It's actually 12.4 km of development that we're gonna do over the next five years. That'll all go up to surface via the other decline. Our long-term production will all go up the east production shaft. That's the plan. We will have this ramp that's available as well.
The long-term plan, as I said, is to use the shaft for hoisting, the ore to surface.
Great. The other part of capital returns, Michael , as you mentioned, great to see the new enhanced shareholder return framework now in place. I guess my question is it as simple, you know, when we try to figure out how many shares you might buy in each quarter, for example, in Q1, you generated $488 million in free cash flow. As an estimate, can I multiply that by, like, 35% or 40%, subtract out what you would normally kinda divvy out in each quarter to figure out, you know, how many shares you could buy? Of course, it's gonna be dependent on the levels of Pan American Silver shares, is that kinda, like, the sorta how we would execute under that framework?
Yeah, look, I mean, what we announced is up to $1 billion of return, and some part is dividend. The dividend is kind of fixed at a total amount of $305 million for the year. While we're buying back shares, the return on the dividend per share will slightly and slowly increase with more buybacks in place. That's another additional interesting addition here to our capital return framework. You know, we looked at the past returns we had. Of course, we increased the dividend three times over the last quarter. Our cash flow generation is so strong right now and the big projects that we are building, there is enough capital for our growth as well.
You probably saw we are already at about $1.8 billion between cash and short-term investments. You know, the board believes that we can return up to $1 billion. I believe that obviously too. We are right on track for that. That's kind of the plan. How many shares we can buy? Well, that's, as you said, will depend on the share price for that. You know, we'll really try to aim for that billion-dollar return this year.
It's great to hear, Michael. I guess on that, I noticed that in Q1, you utilized not a lot of it. You bought back about 460,000 common shares in Q1, which is not a lot, given that if you want to, you know, hit those, some of those numbers that you just mentioned, you might need to kind of buy back 10 million shares for the rest of 2026. I guess my question is, in Q1, why were there not more shares being bought back? Was it due to a level in terms of where you were trading at, as you mentioned in the press release, the share buybacks were at $54.04 a share in Q1?
Was it just due to the fact that in Q1 you did not have this enhanced shareholder return framework put in place just yet?
Yeah, really a combination of the framework wasn't in place. Very important too. Remember, we put out the updated PEA. There was quite a while we were in a blackout, couldn't really repurchase shares for a while. Until we had all that information out, as soon as that happened, we started repurchasing shares. That was the reason for that kind of delay. As you can imagine, we will step up that repurchase pretty strongly to get to that total billion-dollar return for the year.
Of course. Maybe one last question. In the same press release, you talked about other projects, including the Timmins project, the extension of the Bell Creek shaft. Not getting really get a lot of airtime, but I think it could be important. Maybe, you know, if you can touch on that a little bit, as well as some of the exploration opportunities that you have mentioned for that area.
Yeah, definitely important and, you know, there's only so much room in the press release. We will of course give a lot of details on that during our investor day, but very exciting to lower the shaft and many years of future production to Timmins. Maybe Martin, you wanna give us some more color on the shaft extension?
Absolutely. It's a great project. Delighted that it's announced actually. It's the idea is that we're gonna extend the shaft by another 625 m from the current 1080 level down to 1705. It's actually gonna be developed using Alimak raises. We'll come and Alimak up from two levels as we go. It's a $131 million total investment. It allows extension of Bell Creek well into 2040. Actually, we think right now around about, depending on how the reserves go, well beyond 2040. 2046 is the what we used in the economics of the shaft extension. Exciting project.
It definitely help as well with the haulage costs because we're mining right now quite a bit below the ramp, so that's gonna help us with the costs there as well.
That's great to hear. I agree, Michael, not enough room in this press release. That's why you have people like me asking questions. Congrats again, Michael, Martin and team and you know, for answering all my questions and I'll pass it on.
Thank you, Cosmos.
The next question is from Geoffrey Hulme with Ingalls & Snyder. Please go ahead.
Oh, I apologize. I don't have a question at this time.
Once again, if you have a question, please press star then one. The next question is from Don DeMarco with National Bank Financial. Please go ahead.
Thank you, operator. Good morning, Michael and team. Thanks for taking my question. Maybe just continuing on the discussion on the skarn. Of course, we saw the board approve the 12-km decline over five years. Does this represent a formal go-forward on the project? Or would that be something that we might expect, you know, after the PFS update that was mentioned, you know, maybe in a couple of years from now?
This is a very, it's a project that needs quite a few years, but this is definitely the start of our skarn development. This is not just an exploration ramp down to see how that skarn looks like. We obviously have a lot of information. We drilled on those skarns since 2018 when we did the discovery. You just heard Martin saying that we're driving down a ramp of 5.5 m by 6.5 m, which will fit 50-ton trucks. This is definitely the first span of a great project and a great big mine that we're gonna build here for Pan American.
Okay. Of course, like the revised PEA came out a couple months ago and showed CapEx of $1.9 billion. Just can you remind us, I think at this point you're talking about funding this within Pan American exclusively. Is that right?
That's correct. Yeah, as I said, our cash and short-term investment balance right now is $1.8 billion. Of course, it's, you know, there will a lot be a lot of cash flow coming in over the coming quarters and years while we build this asset. There's plenty of funds available for us to fund this project and continue with our return to our shareholders at the same time.
I guess that's a good segue into my next question. I mean, you know, the shareholder return program is very timely. I mean, it's a real step up in the share buybacks and coincides with a discount evaluation. I see it is weighted to buyback. That's pretty common in the sector. Can you share your thoughts on how you decided on the allocation between shares and dividend amounts?
Yeah. When we look at that historic returns we have between share buybacks and dividends, we returned somewhere around mid 30% of our free cash flow to shareholder. Historically, probably higher weighted to dividends. We achieved such a high level of cash flow, and as I said, increased our dividend already 3 x every last past three quarters. We all believe that, yeah, at this point, the strong share repurchase is a better and stronger use of our cash and return to our shareholders than just continuously increasing the dividend. It's a great mix, I think. I think it's, you know, it was a great day when we approved the $1 billion return to our shareholder yesterday.
Okay. That's all for me. Thanks again, Michael, and good luck with the rest of the quarter.
Thank you.
The next question is from John Tumazos with John Tumazos Very Independent Research. Please go ahead.
Thank you very much, congratulations on all the cash and good things. In the updated skarn PEA, the CapEx fell by about $1 billion, the upfront capital. Could you describe the subzones of skarn, where I'm presuming that the updated PEA accesses a higher grade, perhaps less deep part of the skarn that needs less capital, has more revenue. Maybe it's lower temperature, maybe it needs a little less ventilation. My sense is that some parts of the skarn are richer and easier than other parts of the skarn.
Yes. Thanks for the question, John. Absolutely, you're right there. The big decrease in capital between the two PEAs was really that initially it was a way bigger sub-level caving project. Remember at the beginning, we envisioned up to 50,000 ton a day. During the years, following years, we discovered more and more high grade material, not only in the skarn, but also closer to surface in some additional veins. I would like to refer everybody to a number of press releases that we put out over the last two years on those high grade wide intersects that we encountered within the skarn ore bodies and these really high grade structures that we discovered close to surface.
When you put all that high grade together that we discovered over the last few years, we had the chance to build a smaller, higher grade starter, if you want to call. I'm not sure starter mine is the right word because the project we put out is at least 37 years long. We'll definitely mine first those higher silver grades, and that's why the tonnage decreased from that kind of initially around 50,000 tons to about 15,000 tons a day. It just uses conventional long-hole open stoping. With that change, obviously it's a smaller mine to build, smaller plant to build, and less development for the underground. Much simpler, straightforward mining method that we apply in most of our underground operations. That combination brought the capital requirement down by $1 billion.
Thank you.
This concludes the question and answer session. I'd like to turn the conference back over to Michael Steinmann for any closing remarks.
Thank you, operator, and thanks everyone for calling in. Another great quarter, strong production, low cost, especially in our silver mines, a great combination. Obviously, combined with very high metal prices as well, and as a result, very high cash flows. In light of those strong free cash flows, as you saw in the press release, we adopted a new shareholder return framework targeting to return up to $1 billion between dividends and share repurchases for 2026.
We also approved some really important capital spending, as we just discussed here with the people on the call for Jacobina, Timmins, and of course, most importantly for La Colorada, which really marks the first large approved capital spending to develop our great skarn deposit at La Colorada with the first $265 million approved to sink or lower that access, large access ramp to the deposit. We will be hosting our Investor Day in Toronto on June 1. There will be ample time there with lots of maps and cross-sections to explain and dive really deep into all these projects, La Colorada, Jacobina, and Timmins, together with many other exciting projects that Pan American has on the development and exploration side.
I'm really looking forward, if you could join us for that, for that event on. Again, it's on June first in Toronto. That will be available obviously in person if you're in Toronto or via webcast. Looking forward to talking to everyone at that event. Have a great time until June first. Thank you very much.
This brings to a close today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.