Pan American Silver Corp (PAAS) 2018 Q4 法說會逐字稿

Thank you for standing by.

This is the conference operator.

Welcome to the Pan American Silver Fourth Quarter and Full Year 2018 Earnings Review 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 of Investor Relations.

Please, go ahead.

Thank you, operator, and welcome everyone to Pan American Silver's Fourth Quarter and Full Year 2018 Conference Call.

We released our results after yesterday's market close, and a copy of the news 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 a brief review of our results.

We will then open 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; Senior VP, Project Development, George Greer; Senior VP, Technical Services and Process Optimization, Martin Wafforn; and VP of Business Development and Geology, Chris Emerson.

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

Please review the cautionary statements included in our news 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.

Thank you, Siren.

Welcome everyone joining us today to discuss our results for the fourth quarter and full year 2018.

Quickly recapping our Q4 results.

We generated $11.9 million of cash from operations, impacted by lower prices for all metals and lower silver, gold and copper sales.

The lower quantity sold reflects an inventory built at San Vicente and La Colorada, which represents approximately $8.4 million of revenue that should be realized in the next quarter.

The net loss for the quarter was $63.6 million or a basic loss per share of $0.42.

The adjusted loss was $2 million or a $0.01 loss per share.

The most significant impact from Q4 earnings was the nearly $28 million impairment charge on our Manantial Espejo, COSE, Joaquin assets, which resulted from the new Argentine export tax introduced in late 2018, combined with the decrease in short-term consensus metal prices.

The other significant reductions to earnings included net realizable inventory adjustments, costs related to the Tahoe transaction, tax expense from foreign exchange changes and an inventory write-off to the credit loss related to a third-party refinery, all of which totaled to $36.3 million.

All-in sustaining costs in Q4 were $15.86, including $13.3 million of NRV adjustments.

AISCSOS net of NRV adjustments were $13.36 for the quarter and was impacted by the lower silver ounces sold partially due to the inventory build as well as lower byproduct credits from lower prices for all metals in Q4.

Sustaining capital expenditures are $31.3 million for the quarter reflect the tailing storage expansion and mine deepening project at Huaron as well as an increase in spending at the La Colorada for equipment rehabilitations and raise boring activities.

For full year 2018, our operations generated a healthy $155 million in cash flow.

Operating cash flow before working capital changes, interests, transaction costs and taxes of $237 million in 2018 was more than sufficient to fund sustaining capital, taxes and dividends.

Non-sustaining capital cash outflow of $45 million and $11 million repayment of short-term debt resulted in a cash and short-term investment balance at the end of the year of $213 million.

Annual 2018 net earnings were $12 million or $0.07 per share.

Adjusted earnings were $59.4 million or $0.39 per share.

We previously reported preliminary operating results, which showed that we met our production guidance for all metals except silver, where we were 200,000 ounces or 0.8% short of the low end of our guidance range.

In 2018, we produced 24.8 million ounces of silver at all-in sustaining costs of $10.73.

All-in sustaining costs are in line with original guidance of $9.30 to $10.80.

All-in sustaining costs net of NRV adjustments were $9.68, well in line with our revised range of $8.50 to $10 provided in Q2 and $0.59 lower than in the year 2017.

2018 sustaining capital was $105.2 million compared with our forecast of $100 million to $105 million, reflecting higher pre-stripping and leach pad expansionary activities at Dolores, largely offset with lower capital spending at Huaron on infrastructure upgrades, equipment procurements, exploration and tailings facility expansion, mostly as a result of timing.

Project capital was $41.3 million compared with the revised forecast provided with our Q3 2018 results of $40 million, and was directed to the COSE and Joaquin mine developments in Argentina as well as investments at Dolores and La Colorada.

Cash costs of $3.35 per ounce in 2018 were the lowest on the record since 2006.

We beat the original guidance issued in January 2018 of cash costs between $3.60 and $4.60, and were within the revised range provided with our Q2 results.

Silver production in 2018 reflects shortfalls at Dolores and San Vicente.

At Dolores, above average rainfalls during the third quarter hampered our ability to make up open-pit tonnages following the security-related road closures in June, resulting in a shortfall of tonnes placed on the heap and excess leach solution dilutions.

In addition, slower cement deliveries due to logistical challenges, not related to past security issues, required lower solution applications and reduced leach rates.

During Q4, we installed 2 expansion kits into pulp agglomeration plant at Dolores, which has resulted in achieving nameplate throughputs on most days.

We plan to install the third and final filter expression kit during the first half of this year in order to maximize throughput and sustain overall rates at the heap leach pad of 20,000 tonnes per day.

At San Vicente, narrow vein mechanization efforts required additional operator training, resulting in lower throughput and increased dilution.

Operations at La Colorada and Morococha performed better than expected, partially offsetting the impacts form Dolores and San Vicente.

La Colorada set an annual production record for silver and zinc and record low cash cost of $2.02 per ounce.

We provided 2019 production and cost guidance on January 21, with annual silver production expected to be between 26.5 million to 27.5 million ounces at an all-in sustaining costs of $10.80 to $12.30.

We expect to produce between 162,500 to 172,500 ounces of gold.

A latest startup of the COSE mine due to the change in mining method pushed out some of the silver and gold ounces we were expecting in 2019 into 2020.

Project capital is estimated at $30 million in 2019, which will be directed at completing construction of the underground declines at COSE and Joaquin mines to bring production on stream in the third and fourth quarter of this year as well as development of the underground mine at Dolores to achieve the targeted 1,500 tonnes per day.

Please keep in mind that this guidance does not include any production from the Tahoe assets.

We will issue revised guidance in Q2 after we started the integration of these new assets.

Yesterday, we also released our year-end 2018 mineral reserve and resource report.

Proven and probable silver mineral reserves at year-end were 280 million ounces and gold mineral reserves were 1.7 million ounces.

Successful near-site exploration programs replaced large parts of the silver mine in 2018, especially at our high-return assets La Colorada, Huaron, and Morococha, where we replaced 132%, 115% and 220% of the silver mine.

Again, the reserves and resources yesterday reported do not include the Tahoe assets.

On October 23, 2018, we announced the major new discovery at La Colorada with wide zones of polymetallic mineralization below our current production levels.

This is a very exciting development and, without a doubt, the largest discovery Pan American has ever made.

2018, we drilled 12,600 meters on the Skarn target.

Even in the very early stage of this remarkable discovery, none of the intersects encountered are included in the year-end 2018 reserves or resources.

I would encourage you to take a look at the news release we issued yesterday for more information on this impressive results.

The sections have also been posted in our website under La Colorada.

Intersects of up to 308 meters containing 6.5%; lead, zinc combined with 46 grams silver and 0.2% copper or intervals in the 12 to 90 meter range carrying over 8% to 13% lead, zinc combined are more than outstanding.

Silver is more variable in this new ore body, but returning over 100 grams in many samples.

In 2019, we are planning 42,000 meters of drilling in the Skarn discovery with the aim of releasing an initial mineral resource estimation later this year

For the company as a whole, the total exploration budget for 2019 is approximately $20 million, and we plan to complete about 122,000 meters of diamond drilling.

This does not include any exploration spending on the Tahoe assets.

In closing, I would like to congratulate Matt Andrews and Monica Moretto for receiving the Robert R Headley Award for Excellence in Social and Environmental Responsibility from the Association of Mineral Exploration.

This is a strong endorsement of the leadership within Pan American for social and environmental responsibility.

Pan American is at a pivotal point in its history, and I'm very excited by the many prospects and opportunities that lie ahead of us.

Our transaction with Tahoe is expected to close tomorrow.

Our focus will be on integrating the new assets and capturing valuable synergies.

We are entering 2019 in a strong financial position, enabling us to take a careful, thoughtful approach through executing on our growth opportunities.

These growth opportunities are among the best in the sector with a potential to unlock substantial value for our shareholders.

With that, I would like to open the call for questions.

(Operator Instructions) Our first question comes from Chris Thompson of PI Financial.

Just, my question is related very much to Dolores.

The first question, I'm wondering if you can just give us a sense of how the underground ramp-up is going there?

I'll pass it on to Steve.

Chris, yes, we -- as we have kind of alluded to, we took a major disruption on that ramp-up during 2018 to address a couple of items.

One was to address the access road security shutdown that we faced for a month.

We demobilized all the underground personnel and contractors.

And we decided over that month, when there was shutdown, it was an opportunity for us to kind of change direction.

We had been using a primary underground mine development contractor in Mexico, and we decided it was time -- ahead of time what we had planned to do to bring our own people on board.

So we decided not to bring back the contractor, bring our own people on and start training, and that disrupted that whole ramp-up quite significantly.

So we're sitting here today, we're feeling pretty good about getting our people trained.

We got the crews working.

We still need some additional personnel.

We're trying to get on board, as we speak.

But we're mining at rates of around 500 tonnes a day.

We're starting to push above that now.

We're going to be opening up the South zone.

So we'll have the central zone and a South zone that will be mining towards middle part of the year, and we're feeling pretty good that we'll be able to ramp-up towards the latter part of the year to the 1,500 tonnes a day.

And so Steve, we should be basically just, I guess, modeling 500 and then a slow ramp-up to 1,500 in Q4?

Yes, so I think that would be accurate.

Okay.

Obviously, you mentioned installation of the final filter kit in H1.

Again, what should we be modeling by way of throughput rates to the leach pad in H1 this year?

Well, throughput to the leach pad, we're still maintaining the 20,000 tonne a day total rate.

We're currently seeing right around -- we're right around design tonnage right now or even with just the 2 expansion kits on the filters, maybe a slightly below it.

So I would say we're probably going to be in the 5,200 to 5,600 tonne a day range for the first half of the year and probably 5,600 tonnes a day thereafter, which is a design rate.

Great.

Steve, then the final question.

More exploration more than anything else.

Just looking, can you maybe just talk to the exploration upside and potential for reserve growth at Dolores?

Sure, sure, Chris.

Yes, I mean, we drilled around 8,000 meters last year.

That was really sensed on the underground and expanding.

You saw a little increase in the inferred resources at Dolores.

The pit into the north is pretty well defined.

We, per se, are looking at some on-surface and some more regional stuff going into 2019.

So at the moment, there's not a huge possibility to increase that reserve base outside of what is in resource at the moment.

I think it's fair to say, Chris, that the -- all the upside on the exploration at Dolores is on the underground, as Chris mentioned, and it will be difficult to push back the pit further.

There is a geographical or topographical constraint to the pit, so that won't be possible.

So all the upside will go probably further south as I can see in the underground.

So I guess, really you're only going to get a better handle on that when you start ramping up production on the underground, and maybe positioning drills underground to drill off opportunity?

That's correct.

That's -- Chris...

Yes, I mean, to be fair, we did have some success in 2018.

There are 2 structures there, and we did -- we were able to put into a resource and reserve some of Alma Maria.

So sure, I mean, as where we would have ramped down on first down, we'll get some better accesses and be able to maybe expand that.

Our next question comes from John Tumazos of John Tumazos Independent Research.

We admire your strong balance sheet and net cash position.

And if I could ask about 3 financial alternatives with the strong balance sheet.

First, at low silver prices, would you hold back and not sell some of your production, the queue in mining held back some gold production this past year, for example.

Second, after the transaction closes, some of the Tahoe shareholders might move on.

Would you repurchase Pan Am stock?

Or could you update us as to whether you have a buyback authorization?

And thirdly, will you have a buyback authorization for the continuing contingent valuation rate, where some people might just sell that like it's a dividend or something?

Thank you, John.

Interesting questions.

I'll go and start with the first one, holding back silver production.

Obviously, we're continuously selling silver and gold production completely unhedged.

As you know, we have some hedges in our base metals.

The idea is we need to provide to our shareholders full exposure to the silver price and that's how we achieve.

We have, as you saw in the press release, sitting on a very, very large reserve of 280 million ounces.

We will add in another probably 280 million ounces around there, I think, from the Tahoe side.

We mentioned that we will do a reserve update midyear and include all these assets in our reserve base.

So if you look at our reserve base, far over 0.5 billion ounces of silver and then over 1 billion ounces in the resources as well, that's a lot of silver available to us to mine at different metal prices and at higher metal prices as well.

So there's really not a need for us to hold back and, kind of, hedge the silver as we want to be unhedged and provide exposure to silver price at any time in the market.

Regarding return to our shareholders, we started paying a dividend in 2010, strong return to our shareholders of over $400 million since then.

There was some kind of share buyback in there in the past.

At the moment, we are opting really on returning value to our shareholders through dividend and not share buybacks.

And then, your last question was, I believe, on the CVR.

And, look, we will close the transaction tomorrow, and then we'll see how the CVR trades and what happens over the next years, if people actually willing to selling that CVR or not, and what kind of activity we'll see around there.

So we'll just see and wait on that.

Our next question comes from Mark Mihaljevic of RBC Capital Markets.

First question for me.

Obviously, we've seen some pretty bad weather down in South America, Peru, in particular.

Have you seen any impact to that on the operations?

Mark, this is Steve.

We are seeing some disruptions in the transport routes along the central highway, but our operations themselves have been reasonably stable.

We haven't seen heavy rainfalls in any of our operations at this time.

So we're not worried about the operation, but we are worried about the transport routes.

If you remember, I believe, it was 2 years ago we had to look at alternative routes into Morococha and Huaron that added about 18 hours to the trip.

We may be facing that again this year if this heavy rain persists.

But we're not seeing it up at the mine sites themselves at this point.

Okay.

So probably something we'd expect to see more on maybe a bit of a higher cost and maybe some lags with sales, but not likely anything on the production side, is probably a fair assessment?

Yes.

Correct.

And then -- Okay, and any -- were there any issues with the trucking strike there?

I think there's been some noise out of Peru on that front.

So did that actually have an impact with logistics as well ?

At this point, no.

We have not seen any impacts from the strike -- the trucker strike.

Okay.

Then moving over to La Colorada, again continues to be a -- the workforce of this company and nice growth to the reserve.

Just the one caveat there being, I guess, the grade did come down a bit kind of more in line to where you guys have been mining over the past few years.

So just kind of a reset given some reinterpretations there, and kind of what you're actually able to deliver?

Or is it just that you added some -- or some of the tonnages that came in with this lower grade?

Yes.

Mark, we did, kind of, rationalize some of the reserves at these higher production rates.

We did add a little bit of a dilution to our reserve base.

But in addition to that, the biggest effect is the new areas that came in are a little bit lower grade as well.

But we're -- as you can tell, we're very happy with La Colorada, with the additional production rates.

It is the workforce of the company and it's doing a great job.

Just to add -- Mark, to add a few statements to this.

You saw over 100 million ounces of Proven and Probable reserves in La Colorada producing over 8 million ounces of reserves of production this year.

That's the plan.

Just with the Proven and Probable reserves that's to continue for the next 12 years, we have a strong resource base as well at La Colorada.

Of course, we're going deeper down in the asset, so the resource, the deeper we go down, will have a bit lower silver grades in the veins as well and higher base metal grades.

And then, obviously, don't forget the really massive discovery there.

I think, obviously, La Colorada will show us some results.

Chris is drilling a lot of meters this year.

I believe it's like 40,000 meters?

Yes, it's 42,000 and 10,000 from a carryover, so...

So 50,000 meters just on this current target, which I'm sure you've seen the very impressive results.

Of course, there's lower silver grade, but keep in mind that's kind of on the side.

So that does not affect our mining of our reserve and resources in the vein.

That's just an additional discovery for La Colorada.

Yes.

Perfect.

Definitely an exceptional asset and that's -- it's current target looks very interesting, so looking forward to that evolving over the next couple of years.

I guess, just kind of one follow-up to La Colorada.

Kind of as you look forward, what kind of throughputs do you think you can actually push out of that now that you've stabilized that the, call it, 1 -- or 0.19 million tonnes per quarter?

Is that, kind of, a steady state or should we expect you to continue to block and tackle that higher?

Great question, Mark.

We're extremely pleased with the de-bottlenecking efforts that have taken place there.

And obviously these 2,100 tonne a day rates that we're seeing are very pleasing, and it's far beyond what we thought we'd achieve, even though that infrastructure we put in place we knew was pretty robust.

I -- we got a resourceful group down there, and I'm not going to hold them back.

They're doing somethings.

They're looking at ways to tweak some more out.

But obviously, as they de-bottleneck, they're taking the low hanging fruit as days go on, so it gets harder and harder.

I would not, at this point, project we're going to see increases there.

But I am cautiously optimistic that over the long run, we're going to squeeze a little more out of that thing.

Perfect.

And then, just kind of shifting gears a little.

Wondering if there've been any updates with Shalipayco.

I guess, you guys have the free carry interest there and, I guess, you previously outlined that as potentially noncore?

So is that project still advancing?

And, kind of, if there is any updates on the process there?

Yes.

It's definitely a noncore asset for us.

It's the same project, a very large same project in Peru, which is run by Nexa, and we own a 25% free carry into production on the asset.

I would refer you to look at the Nexa public statements they made, I think, just last week or this week.

And also there are presentations that I've seen where Shalipayco's is in the development pipeline, somewhere in the early 2021, 2022, somewhere around there.

But have a look on their presentations, please.

It's all there they're talking about.

But as I said, this is definitely one of the noncore assets on the Pan American side.

Our next question comes from Lucas Pipes of B. Riley Financial.

I wanted to first ask kind of a question on Escobal as we look forward to the combination of these 2 companies.

What are some of the milestones that the market should be, kind of, having on the radar as you look to integrate this asset?

I would appreciate your thoughts on that.

Sure.

I'll take that, Lucas.

I think we have to shift a little bit here on the thinking.

I know that always -- obviously announced milestones on the consultation process, which will continue.

But, as you said, the transaction will close tomorrow and we are looking forward to advance our plans and engage -- especially engage with the communities in the region.

So our goal is really to establish the trust through a fair, transparent and honest, respectful dialogues.

So that's really important to get going right now with the regional communities.

We do not believe that this is a unilateral solution.

And we have always pursued dialogue, consensus on mutual beneficial relationships with the stakeholders.

So we'll continue to do that at the Escobal.

And this takes time.

I think from the beginning on, I was very clear that this will take time.

We will take the time necessary to get this right and build long-lasting trust with the communities.

So while that's going on, obviously, with the communities, inside the communities, the consultation process is advancing through the ministry of mines.

But at the moment, that's really how it works, so we will take our time.

Stay tuned.

I will give updates.

That's first close tomorrow, and then start integration.

We'll give updates, obviously, every quarter.

So do you have a guesstimate at this point, kind of how quickly Escobal could come back to full capacity?

No, Lucas, I don't have.

And obviously, it's a deal structure that we have here with -- which CVR reflects exactly that.

The CVR will be paid out once we have the first shipment of concentrate from the site.

So that's reflects the fact that there is no fixed timing on it, as I said.

It is very important here to get this right and take the time necessary to do that right.

And while you do that, is there a sense of, kind of, what the capital spend -- expenditures and the OpEx at Escobal are while you take your time?

Yes, Lucas, this is Steve.

We're going to be spending the next month very closely with our team down in Guatemala, as we integrate and prepare budgets and get into details on the strategy.

We are -- as Michael alluded to, we are focusing the strategy in the communities.

It's going to change, kind of, the way things have been doing recently.

So we need to get on the ground.

We need to understand that strategy better, put the budgets together.

I don't have a number that I'm willing to share at this time.

Our goal is to come out in May with a new kind of care and maintenance budget for that as we launch on that strategy to work with the communities.

So at this point, I don't want to give the number yet.

That's appreciated.

Maybe one last question on Escobal, and then I'll switch topics quickly.

But when I looked at some of the historical data, it appeared to me that Escobal never reached the design levels of, kind of, below $100 per tonne for ore.

So do you have a sense where operating costs per tonne should be shaking out down the road?

Any updated views on that?

Yes.

Lucas, I do not.

We have not had a chance to really get into that level of budgeting.

As Michael says, I mean, we are anticipating a lengthy process here with the communities, and that's kind of where our focus is right now.

We do have a crew in the mine doing care and maintenance, quite capable, quite confident group.

And we'll get our hands around that, understand better as we bring that up to operations what the cost will be, but we haven't even started that process yet.

Got you.

That's helpful.

And then, turning it over to Navidad.

Any progress on that front?

I know that it's in a pretty difficult, just, kind of, regulatory backdrop in Argentina, but would appreciate any updated thoughts on the progress there.

Yes, sure.

So just to give an update what happened in the province of Chubut.

The elections in Chubut, like in, at least, 9 or 10 other provinces in Argentina, have been advanced.

So they will happen earlier.

Primaries will be in the first week of April and then the final election in the first week of June.

That's a bit different than on the federal side, where the election will happen in October this year as well.

So we'll go -- there's an election process going on right now in the province, obviously, and just decide that.

I think, nothing changed from what I said and stated before.

I think everybody is working diligently towards a solution here at Navidad, and we are supporting those efforts, obviously, in the province and hope that there will be a solution, which will be a law -- amended law that does disunification and allows some zones of mining and some zones of nonmining in the province to go forward.

And, I think, it's an incredibly good project that would provide a lot of support, a lot of jobs and it will support the province for many years to go.

(Operator Instructions) Our next question is a follow-up from Chris Thompson of PI Financial.

Just a quick follow-up question, Argentina, again.

Any comments on cost pressures, inflationary pressures in Argentina right now?

I can take the inflationary part, and then I'll refer to Steve for the cost.

Yes, it was, for Argentina, not an easy year last year.

I think we ended up somewhere in the high 40s on the inflation.

You saw there was a big devaluation phase that happened.

I would say, it was a short but very abrupt time in, I believe, August -- July or August, and that was not an easy year.

So I think the projection right now are lower inflation rates for the years to come here.

I encourage you, obviously, to read the information from the Argentine federal government.

But definitely, the year-end was around, I think, high -- in the higher 40s, somewhere in the 45% to 47%, which for sure with devaluation helped us on the costs, but then there's obviously pressure there to reclaim part of that.

And I will pass it on to Steve to give you some more details on that.

Yes, Chris.

This is Steve.

And as Michael says, we've come out of 2018 in really good condition.

Our costs have actually been reduced with that significant devaluation that took place, but we are facing the clawbacks as we've suggested.

And what we have planned for this year is kind of a 10%, if you will, clawback of cost, starting right out of the blocks in January.

We think we're seeing that.

And then, what we are planning from there on is kind of a balance.

I mean, it's a crystal ball.

It's a balance between inflation and devaluation to where we're kind of projecting a modest 5% increase in U.S. dollar terms overall being the offset of the devaluation to the inflation.

That's what we're planning this year, and that's the best we can do right now.

Our next question comes from John Bridges, JP Morgan.

I was just wondering, following on from the previous question, the write-downs in Argentina.

The extra taxes, the windfall taxes there, were only supposed to be going for a year or 2. Have you taken a more conservative stance?

Is that what led to the asset value cap?

John, it's Rob Doyle here.

You are right that the law, as currently written, is through to the end of 2020.

So it is a relatively short-term law export tax.

The reason why it really hits the projects that we have in Argentina is because of the relatively short-term hedge of those projects, COSE and Joaquin are significant producers, but really right over that period 2019, 2020, 2021.

So it really does impact the carrying value of those assets.

Okay.

And then, just as a follow-up.

I guess, you've got enough core now for the metallurgist to play with.

So I just wonder at La Colorada, if you have a better sense as to what the metallurgy is of that that skarn material?

Yes.

We're certainly -- as we go through nearly 13,000 meters at the end of 2018, we're going into 2019, we will start -- we do have a lot of core coming in now and we will obviously start to review that with the technical services guys, with Martin and Steve.

And, yes, certainly, I would expect just through this year as we build towards that initial resource to have metallurgical testing completed.

Without going into very detailed geological descriptions here, but it looks to me, at least, looking at the cores, a very coarse polymetallic mineralizations.

We'll see...

I mean, yes, John, if I can add in on that as a metallurgist.

But at La Colorada, in the veins we actually have wonderful sulfide metallurgy.

I mean, the floatation is very efficient.

The selective flotation of lead and zinc is very efficient there.

We're seeing coarse grain minerals of sphalerite and galena in the veins.

And from what I've seen of the core of the skarn, it looks every bit is coarse-grained if even not cleaner and better.

So I'm really excited to start doing some testing.

We haven't started that process yet.

But just visually looking at the core, I'm kind of with Michael, it looks really exciting, yes.

So it feels as if you might be able to avoid the bulk concentrate?

I think almost without a doubt, it's that clean, yes.

And there's a bit of copper too, which will be exciting to play with.

And we really are seeing choco pie as well.

So again, who knows what could happen

Our next question is a follow-up from Lucas Pipes of B. Riley Financial.

Thank you for taking the follow-up question.

I wanted to ask what the throughput was at the Dolores mill and how much came from underground versus open pit?

Then if you have a sense for the average grades and the coverage at the Dolores mill again from underground versus open pit?

Yes, thanks, Lucas.

Right now, the pulp agglomeration plant, as I alluded to earlier, we're running today right around 5,200, 5,300 tonnes a day up to the designed 5,600 tonnes a day pretty regularly.

Of that, 500 tonnes a day is coming from the underground and the rest is coming from the open pit.

And then, we're going to be ramping that underground up, as we mentioned, through the end of the year, up to the 1,500 tonnes a day.

And that will push some of that open pit lower grade of the high grade, back to the low-grade circuit so that we maintain 20,000 tonnes a day to the heap.

Got it.

Okay.

That's helpful.

And then, one last question here.

Earlier this month, there was a local news report about the court ruling regarding the Chinalco operations at Morococha.

Could you give us an update there?

And what the impact to Pan American might be of that court ruling?

Yes, Lucas.

We don't see that being an effect to us.

That dealt with some residents that remain in the old town of Morococha that has to relocate to allow that open pit to advance.

It doesn't affect us.

Our operations are outside of that.

We're working directly with Chinalco, trying to determine the best timing for us to relocate our mill.

Someday, we'll have to relocate that mill.

At this point, we do not have a date that we have fixed in stone as to when that's going to happen.

And when you have to relocate the mill, is -- any financial impact to Pan American of that?

Or how would that be worked out?

Yes, Chinalco will put up some of the money for that relocation.

We had to relocate some of our offices and shop infrastructures back about 6, 7, 8 years ago, and they put up some money on that.

They will have to put up some money on that mill.

We'll have to put up some as well.

It'll be -- we'll probably put up the majority -- a slight majority of that overall depending on what it's going to cost to do that.

We haven't really started the engineering studies on that yet.

This concludes the question-and-answer session.

I'd like to turn the conference back over to Mr. Michael Steinmann for any closing remarks.

Thank you, operator.

As you all heard, Tahoe transaction will close tomorrow, and I would like to take the opportunity here to welcome all our new stakeholders to Pan American Silver.

I intend to address our new members of the workforce, our new community members and the indigenous groups around the operations and our new shareholders in the same open and honest manner.

And we always worked and always will work at Pan American Silver.

I'm looking forward to address everybody for our -- this Q1 call in May.

Until then, have a good time, everyone.

Thank you.

This concludes today's conference call.

You may disconnect your lines.

Thank you for participating, and have a pleasant day.