Parsing Today’s Pan American Silver (PAAS) NR on Dolores

By Otto Rock

Today’s offering from Pan American Silver (PAAS) is on this link. Here we go, your humble scribe does the black ink:

VANCOUVER, June 4, 2018 /PRNewswire/ – Pan American Silver Corp. (NASDAQ: PAAS) (TSX: PAAS) (the “Company”) today announces that the security situation on the access roads to the Dolores mine has improved following increased patrol and enforcement by the Mexican authorities.

We know this. Police have been running heavily armed convoys through the zone.

As a result, road transport of diesel fuel, cement and other supplies to the mine has now resumed. 

Strange that they didn’t previously tell us they’d stopped. But so far at least the La Linea narco gangs have not engaged the convoys and trucks have got through.

The Company will increase the use of its private, secured airstrip to transport people to and from the mine site until the situation normalizes.

A nice bit of legalese here. In fact the company has been running 20 light aircraft flights per day to get workers out of Dolores. I suppose that the pilot flying back in counts as “to the mine” as well, but the traffic in reality has been one-way. Hundreds of workers flown out, with the next batch due to leave in the second half of this month. that’s when they plan to ship out heavy machinery, too.

Due to the suspension of personnel transport on the access roads and reduced staffing levels, in late May the Company curtailed certain activities, including underground and open pit mining and leach pad expansion. 

To be exact, Dolores is operating at 70% capacity.

Production of silver and gold continues at normal rates due to the large reserve of high and low grade ore stockpiles, which are feeding the pulp agglomeration plant and partial operation of the crushing plant. The heap leaching and Merrill Crowe circuits continue to operate normally. At this time, the Company does not expect a material impact to its annual production guidance for 2018.

Again note the legalese here, “At this time”. Heap leach operations are forgiving in nature over a short period, what PAAS needs to worry about is a prolonged supply chain starvation that begins to affect the medium-term production outlook. See above for more on that.

“We would like to express our gratitude to the Federal and Chihuahua State authorities in Mexico for their support and rapid deployment of resources to secure the access roads to our Dolores mine, and we will continue to work closely with them as we move forward,” said Michael Steinmann, President and Chief Executive Officer of the Company.

Because if the police only hang around for a couple of weeks, they’re screwed. Not only that, but we know from experience that the narco gangs such as La Linea tend to make temporary retreats but will always return to claim their transport/shakedown corridors. Anyone who thinks that this issue, which has been months and years in the making, has suddenly and permanently disappeared needs to get out more.

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Gary

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