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  • Operator

  • Thank you for standing by.

  • This is the conference operator.

  • Welcome to the Pan American Silver First Quarter 2017 Results Conference Call.

  • (Operator Instructions) And the conference is being recorded.

  • (Operator Instructions) I would now like to turn the conference over to Siren Fisekci, Vice President Investor Relations.

  • Please go ahead.

  • Siren Fisekci

  • Thank you, operator, and welcome, everyone, to Pan American Silver's First Quarter 2017 Conference Call.

  • We released our results after yesterday's market close, and a copy of the press release and presentation slides for today's call are available on our website.

  • In a few moments, I will turn the call over to Pan American's President and CEO, Michael Steinmann, who will provide an overview of the quarter.

  • We will then open up the call to questions and answers.

  • Joining us for the Q&A portion are Pan American's Chief Operating Officer, Steve Busby; Chief Financial Officer, Rob Doyle; Martin Wafforn, Senior Vice President, Technical Services and Process Optimization; and Vice President of Business Development and Geology, Chris Emerson.

  • Before we get started, I'd like to remind everyone that our press release and certain statements and information in this call constitute forward-looking statements and information.

  • Please review the cautionary statements included in our press release and presentation as well as the risk factors described in our most recent Form 40-F and Annual Information Form.

  • I will now turn the call over to Michael.

  • Michael Steinmann - CEO, President and Director

  • Thank you, Siren, and welcome, everyone, joining us today to discuss the first quarter results.

  • Operating performance in the first quarter was right on track to achieve our guidance for 2017.

  • We also made good progress on our expansions at La Colorada and Dolores.

  • Further supporting future silver production, we announced recently 2 acquisitions in Argentina.

  • Before discussing operations in more detail, let me give you the highlights for Q1 financial performance.

  • Revenue was up 26% to just under $200 million compared with Q1 last year.

  • Largely reflecting the 17% increase in silver prices over that period.

  • As you know, roughly half of the revenues it generated from silver sales with the other half generated from sales of gold, copper, lead and zinc.

  • Prices for those metals are also up quarter-over-quarter.

  • Quantities of all metal sold were similar to Q1 2016.

  • A decrease in direct selling costs also contributed to the increase in revenues.

  • Direct selling costs mainly reflect lower treatment and the refining charges, primarily due to improved concentrate treatment charges in Peru.

  • The growth in revenue drove the significant increase in net earnings coming in at $20 million or $0.13 a share for the quarter and cash flow from operations, which totaled about $39 million.

  • All-in sustaining costs or AISCSOS also came down quarter-over-quarter.

  • Q1 2017 AISCSOS of $12.63 reflect the higher prices for our byproduct metals plus higher silver sales and lower direct selling and sustaining costs.

  • An increase in production cost, the majority of which is due to NRV adjustments, partially offset these factors.

  • The negative NRV adjustments in the quarter totaled $11.2 million or $1.87 per ounce.

  • Without this NRV adjustments our AISCSOS would have been $10.76.

  • Given the higher income levels recorded in 2016, cash flow in the quarter was impacted by $25 million in net income tax payments.

  • Q1 does reflect the true-up amount for taxes.

  • So cash taxes in the remaining quarter should be significantly less.

  • Adjusted earnings for Q1 2017 were $9 million or $0.06 per share.

  • Cash flow generated in the quarter was more than sufficient to fund our mines, project capital, higher taxes and our dividend.

  • However, we did drawdown our cash and short-term investment balance by about $13 million to fund the acquisition of the Joaquin project in Argentina.

  • Our financial position remains very strong with a cash and short-term investment balance at the end of Q1 of about $205 million and still very low debt of about $44 million.

  • Turning to the operations.

  • Q1 silver production of 6.2 million ounces was similar to last year's Q1 of 6.4 million ounces.

  • Production of other metals was also steady quarter-over-quarter with the exception of gold, which was down about 9%.

  • We expected gold production to decline in Q1 2017 because of lower grades at Alamo Dorado from processing of lower grade stockpiles and at Manantial Espejo due to mine sequencing.

  • Gold production from Manantial Espejo in 2017 is expected to be significantly less than last year, due to the completion of open-pit mining around the middle of this year.

  • However, growth from Dolores is expected to mitigate the production loss from Manantial Espejo and Alamo Dorado.

  • Following completion of the expansion and mine sequencing, gold production from Dolores is expected to grow over the 2017 to 2019 period.

  • Consolidated cash cost continues to impress, coming in at $6.18 per ounce in Q1, down 23% from Q1 last year.

  • Quarter-over-quarter, the decrease reflect higher prices for our byproduct metals.

  • Taking a closer look at operating performance at each of our mines.

  • The most notable improvements was at La Colorada due to the expansion project.

  • Following completion of the new mine shaft and sulfide processing plant in 2016, we have seen a significant increase in throughput with rates averaging around 1,700 tonnes per day over Q1, resulting in a 19% increase in silver production from La Colorada in the quarter.

  • Cash costs are half of what they were a year ago at $3 per ounce in Q1 2017.

  • The decline was largely driven by higher byproduct credits.

  • We are expecting throughput rates to continue to climb, achieving around 1,800 tonnes per day by the end of this year.

  • Development of the underground mine to support these rates is progressing well.

  • We also constructed new power line to power the expanded facility at La Colorada, which will be energized in Q2.

  • Silver production at Dolores declined about 10% quarter-over-quarter, while gold production was up 14%.

  • This is due to very long-term extraction kinetics associated with the silver heap leach operation.

  • We expect silver and gold production to rise over 2017, following development of the underground mine and completion of the pulp agglomeration plant.

  • Construction of the plant was 80% complete at the end of the quarter, on track to begin commissioning mid of this year.

  • We continue to expect the underground mine to achieve ore mining rates of 1,500 tonnes per day by the end of the year.

  • Processing of the stockpile at Alamo Dorado was completed in Q1.

  • We do have some additional values remaining in process inventories.

  • So we will continue to report a very small amount of production from Alamo Dorado in Q2.

  • Highly profitable ounces, I might add, since they don't require much work.

  • We continue our reclamation activities at this mine.

  • Turning now to Peru.

  • Our Huaron and Morococha mines reported significant reductions in cash costs due to higher byproduct credits.

  • Cash costs at Huaron were down to $0.77 per ounce, while at Morococha they came in at negative $3.18 per ounce in Q1.

  • Silver grades declined at both Huaron and Morococha due to mine sequencing, which also led to the increase in zinc production at Huaron and less production at Morococha.

  • While Peru suffered heavy rains during February and March this year, we were able to manage our operations with minimal impact.

  • At our San Vicente mine in Bolivia, production was down relative to last year due to plant shutdowns.

  • One of the shutdowns was to repair a mill bearing, work that had been scheduled for April, but which is now completed.

  • The other shutdowns were to address safety awareness.

  • In Argentina, changing grades due to mine sequencing and open pit mines expansion at Manantial Espejo's Concepcion open pit resulted in higher silver production, up 16% and lower gold production, down 32%.

  • The decrease in gold production reflects prestriping in the Concepcion pit, while a decrease in gold production and the prestriping cost contributed to higher cost in the quarter, we should see a corresponding benefit in Q2.

  • In addition, cost at Manantial were impacted by the elimination of the Patagonia port credit incentive late in 2016 and higher inflation rates in Argentina.

  • The increase in quarter-over-quarter AISCSOS at Manantial Espejo was further affected by negative NRV adjustments.

  • We expect to complete the open-pit mining at Manantial around the middle of this year, while underground mining should continue well into 2019.

  • Over the past few months, we also announced 2 acquisitions of high-grade silver deposits that provide excellent synergies with our Manantial Espejo mine.

  • We closed our 100% acquisition of the Joaquin project from coal mining in February.

  • And announced our 100% acquisition of the COSE project from Patagonia Gold early in April -- sorry, late in April.

  • Both projects have some attractive high-grade materials that are within trucking distance to Manantial on existing transportation corridors.

  • The plant at Manantial will have capacity to process the feed and no additional tailings fund will be required.

  • We are aiming to have preliminary economic studies complete for both projects later this year.

  • The 3-year production profile we provided on January 12 of this year does not include any contribution from these projects, nor does our capital expenditure profile reflect any corresponding investments.

  • However, we expect the capital investment to benefit from existing infrastructure and our invested capital at Manantial Espejo.

  • We believe this will enable us to add attractive silver ounces to our production profile.

  • Operating results for the first quarter keep us on track to achieve our guidance for 2017, as such we have made no changes to our 2017 guidance.

  • We expect to produce in the range of 24.5 million to 26 million ounces of silver at cash cost between $6.45 and $7.45 per ounce.

  • All-in sustaining costs are expected to be between $11.50 and $12.90.

  • Further information on our guidance is provided in our MD&A for the period ended March 31, 2017.

  • We have also made no changes to our capital spending estimates for the year.

  • We expect to complete spending on the expansions at La Colorada and Dolores at the end of this year and sustaining capital requirements are expected to remain fairly stable.

  • We did not defer spending on our plants and equipments during the period of low precious metal prices.

  • In fact, we invested in our business to improve project returns.

  • We intend to follow the same strategy going forward, and our strong financial position enables us to do so.

  • We have seen silver prices weaken recently, but our most -- but our cost structures enables us to manage a period of lower prices.

  • We plan to continue to seek opportunities in growth, both through acquisitions and with internal improvements.

  • And with that, I would like to open the call for our Q&A session.

  • Thank you, operator.

  • Operator

  • (Operator Instructions) The first question comes from Lucas Pipes with FBR Company.

  • Lucas Nathaniel Pipes - Analyst

  • I wanted to follow up a little bit on your Argentina additions.

  • It seems like you see a lot of potential there around these 3 reserve blocks.

  • Could you speak a little bit more about the synergies at the Manantial Espejo operation in terms of what you've added around there?

  • I would appreciate maybe little bit more details in terms of magnitude that's further down the road?

  • Michael Steinmann - CEO, President and Director

  • Sure.

  • Good morning, Lucas.

  • While you know that the plan at Manantial Espejo is to finalize, not only the open-pit mining, but also the underground mining somewhere in 2019, at least that's the current plan.

  • These additions are really attractive to us for several reasons.

  • Mostly we invested obviously a substantial amount of capital to build the plant at Manantial Espejo, not only to mine, but the processing plant, tailings plant facilities, et cetera, et cetera.

  • So to be able to continue using that is very attractive to us.

  • And this addition, although not huge, and you've seen some of the resources probably in core statements, we will give you technical reports during this year that give you more detail on how much we believe we can mine from both of these assets from the higher-grade portion that makes obviously -- has to go -- have to be higher grade and so it make sense to ship it or truck it to Manantial.

  • But that's very attractive to us, because it not only allows us to keep going at Manantial Espejo, but it keeps the door open for further exploration potential on our own land, because we continue to explore there.

  • You might recall that we have been still able to replace our reserves last year with brownfield exploration.

  • But also opens us exploration potential on the other 2 blocks that we purchased beside the already existing resource there.

  • Lucas Nathaniel Pipes - Analyst

  • Got it.

  • That's very helpful.

  • And as Argentina is -- appears to be a focus.

  • Michael, would it be possible for you to give us an update in terms of the political situation down there?

  • I know in the past, it was difficult from time-to-time.

  • How would you described it?

  • I would appreciate your update on the situation.

  • How you see things evolving in terms of also getting knowhow in there and technology that you need to continue to grow in the region?

  • Michael Steinmann - CEO, President and Director

  • But -- so I mean all the changes we've seen and you heard me describing it in many occasion that this recent changes that the federal -- new federal administration did have been very positive for us.

  • You've seen it last year in the results, reflected in the results on Manantial Espejo.

  • The fact that there's free flow of capital again, and we can actually easily import goods and parts and equipment, which really helped us out big time at Manantial Espejo and for future development projects.

  • On the other hand, we still see quite high inflation rates in Argentina, which is a bit of concern, they came down, and hopefully, they will continue to decline, that's the plan that the federal government announced.

  • And I hope that, that will be a reality here going down the road.

  • But I've seen very positive changes in Argentina so far and it's for sure a much different situation to do business there now than it was, say, a couple, 3 years ago.

  • Operator

  • The next question comes from Chris Terry with Deutsche Bank.

  • Christopher Michael Terry - Research Analyst

  • Hi Michael and team.

  • Yes, couple of questions from me.

  • Just in terms of the overall acquisition strategy.

  • Are you saying at the moment that the best opportunities are in these sort of smaller options or synergistic-type arrangements like you've done in Argentina or are you still looking at something potentially bigger?

  • Or is it -- do you think at the moment that that's the best way to do it, just sort of, I guess, put lot of options into the portfolio?

  • Michael Steinmann - CEO, President and Director

  • Good morning, Chris.

  • Well, this is really an opportunistic approach here to what we see around, what is available and what really helps us out.

  • As I explained in Argentina big time to take advantage of our former investments, so that does not mean that we are not looking at different countries to invest and expand or larger or other small opportunities in the space.

  • I mean, you are very aware like we as well of any silver opportunity, large or small in this space and we continue to monitor that market.

  • So I don't want to say that we are just looking at small ones, but that's just the opportunity -- that opportunities that came up and, obviously, very timely, I would like to say for Manantial Espejo.

  • Christopher Michael Terry - Research Analyst

  • Okay, okay.

  • And just following on from Lucas' questions.

  • If you release the technical studies in the second half of this year on those additional projects, are you saying we could see production by 2019 time frame?

  • Michael Steinmann - CEO, President and Director

  • I'll pass that down to Steve and Martin.

  • Steven Luis Busby - COO

  • Yes.

  • Good morning, Chris.

  • This is Steve.

  • Yes, I mean, I don't want to put a date out there without the technical studies done.

  • We are, in both cases, COSE and in Joaquin, we're looking at building an underground ramp access mine.

  • So the ramps themselves may take us 1.5 years to 2 years to build at each property, we'll try to look at both of these things simultaneously.

  • COSE is probably in a better position from a permit standpoint.

  • We do have to permit both projects, but we think we can probably -- given what work Patagonia Gold has already done at COSE, take advantage of that and streamline that permit.

  • So again, I don't want to say when the start date will be, but once we get on the ground, once we get started, I would say within 1.5 years to 3 years we should be producing there.

  • Michael Steinmann - CEO, President and Director

  • As I mentioned, we are working on the technical reports that will give you much clarity on -- not only on timing, but obviously also on production tonnage and grades.

  • Christopher Michael Terry - Research Analyst

  • And then just at La Colorada, the -- just an update on the sulfide processing plant there that you put -- that you finished late last year, obviously.

  • Is everything running to plan there?

  • Yes, you said you're sort of hitting the run rate pretty consistently, getting recoveries that you're after, et cetera?

  • Steven Luis Busby - COO

  • Yes, yes.

  • From the plant standpoint, the plant has been running marvelously.

  • The mine's definitely bracing to feed that plant.

  • It's a hungry plant.

  • So we're quite pleased with the plant performance.

  • We did have a minor crusher issue.

  • One of the new crushers kind of -- we lost a bearing on it during Q1.

  • So we did incur some costs to kind of fix that and get it back up, but again, the plant capacity wasn't an issue.

  • So we were able to make up that tonnage pretty quickly within the quarter and not see the effects.

  • But overall, the plant is running marvelously.

  • Plenty of capacity.

  • The shaft is running marvelously, plenty of capacity.

  • It's really advancing on these developments.

  • And I got to say in Q1, as Michael alluded to, close to 1,700 tonnes a day was better than we were expecting.

  • So we're definitely tracking better than expected in terms of the ramp-up at La Colorada.

  • Christopher Michael Terry - Research Analyst

  • Okay, okay.

  • And then the last one from me just in terms of the gold production in the first quarter.

  • And I think you're saying that, that was largely as expected and that's supposed to ramp up during the year.

  • Do we think about that as just -- as you complete your expansion projects that, that will slowly be the highest in 4Q?

  • Or, I guess, what's the progression on gold between 2Q, 3Q and 4Q?

  • Steven Luis Busby - COO

  • Yes, definitely, just as you described, Chris, as that -- as we start commissioning at Dolores, the pulp agglomeration circuit, which we hope to start commissioning during July, August period.

  • We'll see that production rate ramp up and that's really what's going to drive that gold production up.

  • So Q4 will definitely be our strongest quarter assuming that commissioning goes smoothly.

  • Operator

  • The next question is from Cosmos Chiu with CIBC.

  • Cheuk Yin Chiu - Director of Precious Metals Equity Research

  • Maybe to follow up quickly on Dolores.

  • I guess, should we be expecting higher recoveries in the second half of 2017, as you commission the pulp agglomeration plant, Steve?

  • Steven Luis Busby - COO

  • Yes, good question, Cosmos.

  • Certainly the concept of the pulp agglomeration is to bring us higher recoveries.

  • It is a heap leach, so recoveries do take time even in an agglomerated state.

  • We do expect the kinetics, the rate of recovery to be improved with the agglomeration plant.

  • So net-net, yes, I think we're anxious to start seeing that plant come online.

  • We're anxious to start seeing the kinetics of the recoveries improve and the overall recovery rate improve.

  • How fast that's going to ramp up, it's easy to get overly excited about it.

  • It is a heap leach.

  • And I have learned many years ago in my career, that heap leaches teach you how to be very patient and not to be too greedy.

  • So my words of advice is kind of it will take some time to ramp that up, but we're pretty excited about the opportunities.

  • Cheuk Yin Chiu - Director of Precious Metals Equity Research

  • Okay.

  • And I guess, in that case with Dolores sort of full year guidance in terms of production, that's not dependent on any kind of substantial increase in recovery.

  • Steven Luis Busby - COO

  • Correct.

  • Yes, it's not dependent on that.

  • Yes.

  • Cheuk Yin Chiu - Director of Precious Metals Equity Research

  • Okay.

  • And then switching gears a little bit on La Colorada here.

  • You're trying to get up to 18,000 tonnes per day underground mining throughput by year-end.

  • Sorry, I might have missed it, but where are you at right now and then to increase from where it is today to 180,000 tonnes per day -- 1,800 tonnes per day, is it just a matter of getting more working faces going, where are you right now in terms of working faces?

  • Where do you need to get to for 1,800 tonnes per day?

  • Steven Luis Busby - COO

  • Yes, 1,800 tonnes per day is our target by year-end.

  • It is dependent on opening up more stope faces.

  • So right now, we're generating development muck underneath and above on the stopes that we plan to mine underneath it.

  • And then as we access those stopes and actually start stope mining, that's when we'll start to see that kind of final bit of the rate increase come in.

  • Again, we're projecting towards the end of the year.

  • We are tracking better than expected.

  • We may start to see that 1,800 tonnes a day sooner than the end of the year.

  • And as I mentioned, we hit 17 -- nearly 1,700 tonnes a day during Q1, which was ahead of where we thought we would be.

  • So we don't anticipate that falling back.

  • It will only go up from where we are at, and we feel quite confident we'll certainly achieve the 1,800 tonnes a day probably in Q4.

  • Cheuk Yin Chiu - Director of Precious Metals Equity Research

  • That's great.

  • And again, maybe switching gears a little bit, maybe a question for Rob.

  • $25 million of cash taxes in Q1, was certainly, as Michael mentioned, a true-up for the profitability from last year, but Michael also mentioned that likely going to be less cash taxes for the future quarters.

  • So I guess; number one, to confirm the Q1 true-up that kind of settles what the higher profitability for 2016, I guess.

  • And number two, what kind of tax ratio we'd be using for the rest of 2017?

  • And how does it work, again, because, I guess, if the profitability in 2017 is going to -- the taxes isn't going to come due until 2018, I believe, because there is a 1-year lag.

  • A. Robert Doyle - CFO

  • Yes, that's exactly right, Cosmos.

  • So as expected, Q1 was by far our heaviest tax payment quarter.

  • The $25 million we expect to come down.

  • Q2 will be a little bit heavier again, but it will be probably more in the sort of $8 million range is what we expect and then probably dropping down to round about $5 million for Q3 and Q4.

  • So it's another $18 million for the balance of the year.

  • So really what -- as you described, what that reflects is firstly, the catch up, which has largely happened in Q1, and then our installments that we pay in Q and in throughout 2017 are based on our 2016 performance.

  • So our installments have gone up and that's why you'll see higher cash taxes this year than last year.

  • Michael Steinmann - CEO, President and Director

  • To answer your question, I guess, is if everything stays similar in 2017 than 2016, there won't be a huge true-up payment at the beginning of 2018.

  • A. Robert Doyle - CFO

  • (inaudible) behind the higher installments.

  • Michael Steinmann - CEO, President and Director

  • But all depending on, obviously, where the metal prices will go.

  • Cheuk Yin Chiu - Director of Precious Metals Equity Research

  • Great.

  • And then maybe 1 last question, Michael.

  • I don't want to beat a dead horse, but certainly you've made some great acquisitions in terms of Argentina.

  • And then leveraging off current infrastructure, is that sort of like an opportunity only sort of encapsulated in Argentina or are you seeing some of those add-ons sort of take on opportunities in other countries as well like in Mexico and Peru, whereby you can actually leverage off your existing infrastructure?

  • Michael Steinmann - CEO, President and Director

  • It's definitely very interesting concept, Cosmos.

  • There are always -- as you know, it's easier to make smaller discoveries than huge discoveries for exploration companies.

  • So they tend to find them and they obviously tend to find them somewhere in kind of proximity of existing mines.

  • So it's always an interesting concept for us.

  • I think the idea of when we started the option contract for La Negra was very similar.

  • I know we're not planning to truck that to an existing plant, but we knew obviously that we're going to have a plant available to us from the wind down of Alamo Dorado.

  • So it's an interesting concept.

  • Obviously, doesn't work very easy everywhere and you have to match in if you would want to add something like that to La Colorada.

  • You would have to find really, really high-grade to pay for trucking and displacing our already very high-grade ore.

  • But we are not at that the same stage in the place like La Colorada and we still have many, many, many years of reserve ahead of us.

  • So that will be known in a long time from now when we would look at similar opportunities around La Colorada.

  • And I think we have huge exploration potential as well around our other mines.

  • So we will obviously work first with that, but if there are opportunities close by and very high grade and it makes economic sense, sure, why not?

  • Operator

  • (Operator Instructions) The next question comes from Chris Thompson with Raymond James.

  • Chris Thompson - Mining Equity Research Analyst

  • Just 2 quick questions.

  • Firstly, on Dolores.

  • I just want to focus in on the open pit there.

  • Obviously, I'm aware that the mining cycle there sort of dictated sort of lower grades earlier in the year moving into higher grades later in the year.

  • Historically, is that what we can expect moving forward?

  • Steven Luis Busby - COO

  • Yes, definitely.

  • There is some sequencing at Dolores with the phasing of the pits.

  • We have actually 10 phases of the pits and some of the phases are actually sub-phase, so there's even more of those.

  • And as we mine each phase, we mine kind of top to bottom and as we get deeper on the bottom of each phase, the overall pit gets deeper and deeper.

  • And as we get deeper, we do see the higher gold grades.

  • Silver is a little more erratic throughout the deposit.

  • We see high grades and low grades kind of mix throughout the deposit.

  • So we're kind of in and out of that throughout that.

  • The current cycle we're in, we were into some decent grades in Q1.

  • I suspect that's going to come off a little bit in the Q2 and Q3, before we start seeing it come back in, kind of Q3, Q4 period.

  • So the time between the kind of grade droughts, if you will, for gold, it's becoming shorter with each phase of the pit as we mine it.

  • But that's kind of a general description.

  • Again, I think I would reference you to the 43-101 for an annual kind of view of how that cycles and that same annual cycle you kind of see divvied up within the quarters as well.

  • Chris Thompson - Mining Equity Research Analyst

  • All right.

  • Because, I mean, obviously with that variance positive towards the end of the year from the open pit and then you've got the underground coming on.

  • I guess, it's -- you're going to get some pretty good gold grades coming out there.

  • Steven Luis Busby - COO

  • We're definitely looking forward to some decent gold grades at Dolores in the future, absolutely.

  • Chris Thompson - Mining Equity Research Analyst

  • And Steve, when can we expect open pit production -- say, underground production to start up?

  • Steven Luis Busby - COO

  • Well, our plan is to have it started up -- have stope mining started by the end of this year.

  • Maybe our first stopes will be mining into the first part of next year.

  • With that said, similar to our discussion at La Colorada, there is development muck that we do produce on ore zones along the way that's not as good a grade as the stope muck.

  • And I can say, we've already started producing some of that development muck and we are sending some of that to the heap as we speak.

  • Chris Thompson - Mining Equity Research Analyst

  • Okay, great.

  • Just moving on very quickly to La Colorada.

  • I'm interested in looking at the split, I guess, between underground oxide and underground sulfide.

  • What was that split during the quarter?

  • Steven Luis Busby - COO

  • Yes, I don't have that data right in front of me, Chris.

  • Chris Thompson - Mining Equity Research Analyst

  • Okay, no worries.

  • We can catch up on that later.

  • But, I mean, do you anticipate similar sort of split moving forward?

  • Steven Luis Busby - COO

  • Yes, we do.

  • As the ramp-up of the production comes, I think Q1 is probably pretty reflective of the sulfide oxide split that we're seeing.

  • I mean, there is not much left in that ramp-up as you can appreciate, we're down to the last 100 tonnes a day.

  • So I think it will be -- we are seeing some oxides in this ramp-up too.

  • So I want to say Q1 is probably the kind of split we're going to see going forward.

  • Chris Thompson - Mining Equity Research Analyst

  • Great.

  • All right.

  • And then final quick question.

  • Revisiting, I guess, an increased dividend here, I mean, is that something that you guys are talking about at the moment?

  • And if so, what would you be looking for, for -- to execute on that?

  • Michael Steinmann - CEO, President and Director

  • As you know, the dividend is discussed really quarter-by-quarter by the board.

  • Take into account a lot of parameters for that.

  • One for sure is our capital spending on new projects, which, as you know, is coming pretty much to an end, somewhere at the end of Q2 or Q3 of this year, and then we look at that just the stable sustaining capital.

  • Again, any further project development that we will see on Joaquin, and COSE is obviously not included yet in that plan, we have to wait for the technical reports.

  • But the board is looking at that, it obviously depends on our cash flow and our -- on the metal prices we see, but we look at it every quarter.

  • As you know, we are and have been always very keen to return value to our shareholders.

  • And the dividend is, obviously, a very important part of that.

  • Operator

  • This concludes the question-and-answer session.

  • I would like to turn the conference back over to the management for any closing remarks.

  • Michael Steinmann - CEO, President and Director

  • Thank you, operator, and thank you for joining us today on this call.

  • Our results for the first quarter are solid and we are on track to achieve our guidance for 2017.

  • Our 3-year outlook confirms our view that we are the low-cost silver producer with growing production plus the optionality of a number of advanced projects in our pipeline.

  • We look forward to keeping you informed of our progress over the coming quarters.

  • Talk to you in Q2, I think it's early of August.

  • Thank you very much.

  • That's all, operator.

  • Operator

  • Thank you, sir.

  • This concludes today's conference call.

  • You may disconnect your lines.

  • Thank you for participating, and have a pleasant day.