Yeah, perfect. Thanks, Cos. Welcome, everybody. Pleasure to be here and give you a quick intro here. I think most of you obviously know the company. Lots of impressive changes to the company over the last few years. Obviously, first on the M&A side, which I would call very timely M&A activity over the last few years, which obviously allow us now to take advantage of these high metal prices. You see there our assets that we have and projects, that is the Q2 numbers there, $1.3 billion of revenue from those assets.
They will go for a long time, many of those. We have a lot of big builds ahead of us, very exciting projects. I am sure Cosmos will talk about that. We just updated our reserve, 511 million oz of silver reserve. The biggest reserve in the world, and it will continue to grow.
It does not include yet the incredible discoveries that we made at La Colorada. I will sure have time to talk a bit later about that skarn development on La Colorada, which actually now will become our biggest silver mine, even being ahead of Juanicipio, the 44% project we purchased from MAG Silver last year. La Colorada, once it is dusted and done, will produce over 19 million oz of silver in a long, long period. The first phase of that expansion or new project of the skarn will run for 37 years, and that is only about half of the current resources that we discovered at that deposit. So really an amazing discovery. I thought I would just show a few slides here. I am sure everybody is interested in cost. I show you here the cost, how they evolved over the years.
So you see quarter- by- quarter there, the gray bars are our silver mines. Remember, we always show silver and gold separate. We do not use equivalencies. I cannot sell an equivalent ounce of silver. There is no market for that. So these are pure silver ounces and pure gold ounces. The price we achieved, the average price for a given quarter. In blue, you see the all-in sustaining costs and their net of by-product credit. So you will obviously see that on the silver side, there is a lot of up and downs, and that is really driven by those by-products.
Silver does not occur on its own. It always comes with by-products. Any kind of gold and base metals you can imagine that we have there. Of course, like Q1, very low cost because of the very high metal prices that we all enjoyed in Q1.
That will normalize again. I think our cost will be somewhere in the $17-$18 range, I guess, for the year. When you look at the gold side, it is a clear picture because gold has normally less by-products. You see there a slight increase in cost over the last two years and really driven by the worldwide inflation we see right now. Of course, big driver is the oil price right now. You always should keep in mind that although Pan American is an underground operator, we only have really one large open pit, and a lot is electrified and diesel fuel is only 5% of our production cost, higher oil price is obviously rolling through everything. Higher oil price will impact every and any cost we see. So the total increase is way more than just an increase on that 5%.
We all see that when we go out and do our shopping or do our businesses, and that is what you see. But overall, still very well-controlled cost increases here. This is not looking like 2010. If you now remember that big cost inflation we had in the mining space. This is well measured, obviously, because there is a lot of goods and services available now in the mining space, and that is the reason why we all enjoy these huge margins. What do we do with these margins? Well, we sit on incredible strong balance sheet, about $1.8 billion in cash. We have about $3.5 billion of liquidity available to us, and we still generate obviously a lot of free cash flow. We decided this year to return 35%-40% of that free cash flow.
When we announced that was equivalent to about $1 billion to shareholders, that will still leave us well sufficient money to build the big expansion at La Colorada and expansions at other projects. So we see there historically, we paid dividends since 2010, but share buybacks have been few and far apart there. Now there is actually enough cash available to really make a difference to our share count. We decided to fix our dividend at $305 million as a fixed number per year. When we buy back shares, your dividend will increase every quarter a little bit because there is less shares outstanding. Then put about the other around $700 million into share buybacks, and we are well on track with that program to go through this for the year. So great return to shareholders from all those big cash flows.
Then there is a lot of upside, and I am sure Cos can talk about a few of them. Obviously, La Colorada being the biggest one. Shahuindo being our biggest cash flow right now with very exciting long-term projects. Timmins also very exciting what we see there, what is coming, and of course, Juanicipio that we purchased at 44% last year, which is doing exceedingly well. I think with that overview, I come over, Cos, and we can go through some Q&A.
Great. Thanks, Michael. You touched on a number of very good points here, but let us take a step back and talk about the first half. As you mentioned, the first half, strong production performance. If I look at your portfolio, which operations were you pleased with in terms of first half performance? Which assets can we expect improvement into Q3 and Q4?
Yeah. Look, I'm pretty much on track, so I'm pleased with the whole progress for the first six months. Our production is not evenly distributed through the year. Our production is always back-end loaded. The biggest reason is really difference between dry seasons and rainy seasons with some of our, the Shahuindo mine in Peru. Q4 is always our biggest production quarter. That will be no difference this year. When you look at that obviously has impacts to cost. The cost will be lower in Q4 because we produce more ounces, et cetera. When you look quarter to quarter, there's quite a bit of difference. We try to help you as an analyst and help the shareholders and show ideas how these quarters look like so that people don't just divide them because they're so different during the year.
But look, I'm really happy how the first six months evolved here. Cost side looked really good. Silver side, right on track. A bit harder sometimes on the gold side. We got a bit harder hit on some of the mines with the weather, starting in Chile. You all saw that the impact to some of the copper producers, obviously same to us. That El Niño event will now move up further north and will get closer to Shahuindo or Huaron in Peru. Normally hits Peru right in November or December, so we'll see what the impact will be for that. But so far, so good, yeah.
Great. That's great to hear. Michael, ahead of the Mining Forum Americas early in September, you actually released your updated reserves and mineral resources as of June 30th, 2026, pointing to substantial silver and gold reserves. In terms of inventory, 511 million oz of silver, 6.3 million oz of gold. Can you remind us some of the key highlights, such as the discovery of the four new veins at La Colorada?
Yeah. Sure. Look, more than replacement again of all the silver production. This is now going on for nearly 20 years. It's not every year exactly a full replacement, but most. I think when you look at the 20- year, we replace probably around 85% of what we produce. Our replacement cost is $1.11. If you divide what it costs us to find those ounces. Of course, there's no way that I can purchase an ounce of silver for $1.11, never has been probably in the past neither. Brownfield exploration success is the best value driver you can have. Obviously, the biggest one and most exciting one is La Colorada. I joined Pan American in 2004. La Colorada was a very small mine and a very small reserve.
When you go fast-forward, still a big reserve on the structures, on the veins that we're mining right now. La Colorada is producing right now 6 million oz, but the big discovery of the skarn, which sits right below the veins. At the moment, we have about 450 million tons. By the way, that's not in the reserve, it's in the resource at the moment. We just showed an updated PEA increasing the production at La Colorada from currently about 2,200 tons to 15,000 tons a day. La Colorada will be producing somewhere between 19 and 20 million oz of silver for a very long time. I mentioned that before. The first phase of that expansion will run for 37 years. There's a lot of more upside. We keep finding more veins, we keep finding more skarn ore bodies.
Of course, this is going to go way beyond my lifetime, and I'm really excited about that discovery. Again, we didn't have to buy this discovery. We have far enough cash to build this with cash on hand. So definitely when you replace your reserve or make discoveries like that, the value generation is unmatched.
That segues well into my next question on La Colorada skarn, and you forgot to mention that it is going to have a mine life of at least 30 years. So it's not going to be beyond your lifetime, Michael. You'll be fine. Based on the PEA, could you maybe touch on some of the priorities for the remainder of the year? Maybe in terms of developing the 588 level access to the skarn or anything else that you want to touch on.
Right. Obviously, for sure beyond my lifetime as CEO. If you look at with the development pipeline and everything, we're looking about 41 years here for phase one. I'm sure somebody will, over time, build this even bigger, make another expand. I have no doubt there is so much optionality on that. That's what we locked in in the PEA. It's about a $2 billion capital spend over the next four and a half to five years. Easy to do with our cash generation. We probably, if everything stays the same, may not even need to tap into our cash holding on the balance sheet to do this.
Actually, the board approved the first part of that, which is about a 12 km underground development starting at the bottom of our current mine. It's a big ramp, six by six and a half meter ramp for that big production.
It will go all the way down to the bottom of the, or close to the bottom of the skarn and then go over to the east where it will connect with two big shafts that we are going to approve later this year and then start building next year. They are about eight meter diameter Conventional sunk, fully concrete-lined shaft. One is for ventilation and one will be for production. Those are the longest lead items for this development, that is why we wanted to start right away.
The new tailings impoundment and the bigger plant can be built later on, obviously, be ready for production somewhere in 2030 - 2031. Crazy incredible project, depending what metal price, of course, you use, but IRR somewhere between 17% and 25%. As we all know, this long lead and very long dated projects are kind of tough to get a big IRR.
Having that kind of number and return on a project like that is pretty amazing. NPV somewhere between $3 billion and $5.5 billion or $6 billion on this project here. As I said, capital around $2 billion, so well in our means to build, but definitely the biggest project that we ever built. Really exciting project and, as I said, really excited to see. We will release more exploration results later this year, but, we have about 18 drill rigs still going at La Colorada and new discoveries just keep coming in.
Great. Maybe switching gears a little bit, Michael. I think one operation that does not get the attention that it deserves is the Timmins operations. You did bring it up in your slides, but I guess, can we maybe talk a bit more about the Timmins operations? In June, you had highlighted key exploration results that supported an expansion plan. Could you remind investors what is the value proposition here?
Right. Obviously there is two things, but a higher metal price, of course, helped here on Timmins, as it is a big underground operation, quite deep. We decided to extend the shaft in Bell Creek. We approved that project a few weeks ago, and that will obviously continue the production at Timmins here for quite a bit longer. When we actually purchased as part of Tahoe, Timmins came to us. We kind of assumed that it will be mined out and done pretty much about 2025 or 2026. It should be done by now. We did not show yet the final PEA. It will come out in the first six month of next year.
But we showed actually an idea how this is actually moving forward with all the additional satellites that we discovered and how we integrate them in the Timmins operation, bringing this now to a mine that will run way into the mid-2040s or more. So that's another 20 years life at least. And there is a plan, obviously, over that time to increase gold production as well. So I have to be a bit more patient to get all the details on the capital side and how the cost structure will look at and the production profile for the gold.
I'm very excited to have a Canadian platform really. All the rest of our operations are in Latin America, which I'm very familiar and very happy to have, too. But I'm also excited to have a Canadian platform here that is to extend life and is to grow.
So it's good to have.
Another 20 years. That's, again, beyond your lifetime as CEO or maybe not.
Luckily.
All these all my lives.
If we retire at the same time, then luckily.
Maybe talk about Juanicipio. In hindsight, you made that acquisition at a very good time. Since then, year- to- date at least, you have realized silver grades that are higher than reserve, even beyond Fresnillo's guidance in terms of grade profile. Maybe talk about Juanicipio a little bit. Maybe also touch on the exploration program that.
Sure.
The joint venture partnership has put in place in terms of upside potential at Juanicipio.
Yeah, look, this last year was new to us and we had some discussions about that. Look, very happy obviously to be in a joint venture with Fresnillo. I think there was a lot of questions a year of when we did the deal or two years ago about that. I think by now probably everybody is very comfortable. I am very comfortable. I am pretty sure Fresnillo is very comfortable with it. A great operation, the newest operation Fresnillo has. Very well run. We own 44%. That came to the purchase of MAG Silver that we did.
As you said, very timely. I think silver just hit about $30 or so when we did that transaction and started running right just when we closed the transaction. The grade has been quite a bit higher. You know what happened? This is the same district in La Colorada, right? That is the crow flies.
That's about 60 km away. Geology is very similar. Just no skarn yet discovered below, but the veins are very similar. Obviously, for the geologists in the room, there is clear there's a clear zonation with precious metals higher up going into lead, zinc, and copper deeper down. So when you mine deeper down, that's the same at La Colorada, is the same at Juanicipio. You get into higher base metal and lower silver grades. The same will happen obviously when we keep going deeper at Juanicipio. So while we have a positive kind of reconciliation when we look right now, I would expect that to continue. But the grade itself will come down, and we will get into more base metal. So don't account, and obviously you can look at the PEA where this is going or, sorry, at the feasibility of Juanicipio.
Those grades are coming up and the zinc and lead grades are increasing. How do you keep the silver production up? Well, the same than at La Colorada. You do a lot of exploration, you find additional structures, which we already know are there, and you start mining them a bit higher at the surface again, and you are starting higher silver grades again. And with that mix, you keep that silver grade and the silver production very stable. And we do that at La Colorada now for over 25 years.
So for that, you need to do a lot of exploration obviously. And this year we more than doubled the exploration program between Fresnillo and ourselves. Of course, there's no financial limitations to do that, and I will be happy to increase it significantly again next year and replace the reserves as well there.
Some of the drilling was a bit deeper, so it was replaced with a bit more base metal-rich ore as well, but some really exciting veins that are parallel to the main structure. The geology is very clear. I think it's just a matter of drilling more holes and then developing those higher-grade silver structures on the top. So I don't see a big challenge here on the geology. It's very similar to what we're working in already for many decades.
Great. Thanks, Michael. I think that's all the time we have, but certainly a very exciting story here at Pan American Silver. We can certainly see how Pan American Silver stands out in the group of silver producers. So thanks a lot.
Thank you very much.
Again, Michael.