Pan American Silver (NYSE:PAAS) management outlined a revised Preliminary Economic Assessment (PEA) for the company’s La Colorada Skarn project during a webcast and conference call, describing a new development plan that combines expansion of the skarn deposit with recently identified high-grade silver vein discoveries on the broader La Colorada property.
Vice President of Investor Relations Siren Fisekci noted the discussion included forward-looking statements and referenced a March 24, 2026 news release announcing the revised PEA results. The company said an updated technical report for the La Colorada property, including the revised PEA, is expected to be filed within 45 days and will be available on SEDAR+ and the company’s website.
Shift in development plan: skarn and new veins, built around existing operations
With those exploration results, Steinmann said Pan American “took a fresh look” at development and produced a revised PEA that contemplates running the existing La Colorada mine while simultaneously developing the higher-grade portion of the skarn deposit and newly identified high-grade veins.
Key elements of the revised development approach discussed on the call included:
- Construction of a decline from the 588 level of the existing mine to access the skarn deposit, with preliminary work expected to begin in 2026. Management said this decline does not require additional permitting.
- Engineering work in 2026 for two conventionally sunk shafts from surface (a production shaft and a ventilation shaft), expected to be completed by 2030 to support both the skarn and newly discovered vein zones.
- Construction of a new 15,000-ton-per-day processing plant timed for initial skarn production in 2032, intended to process all La Colorada production (including reserves and resources from the vein system and the high-grade skarn portion).
Steinmann said total capital investment for the project is estimated at $1.9 billion over about six years, with the heaviest spending in the final three years as the new plant is built. He added that the company currently expects to fund the capital through cash flow from Pan American’s operating mines. Additional permits would be required for the shafts, the new processing plant, and tailings facility expansion, management said.
Production outlook and mining method changes
Management described the overall concept as an “expanded La Colorada mine,” which Steinmann said could position La Colorada as one of the largest and lowest-cost silver mines in the world. During the peak five years following construction and ramp-up, silver production is expected to average 19.1 million ounces annually, followed by an average of 11 million ounces per year for another 10 years before declining through the remainder of a 37-year mine life.
Steinmann emphasized exploration upside, including four new high-grade veins discovered to the southeast of the current mine, and said additional mineralization could extend peak silver output. The revised PEA assumes conventional long-hole open stoping with paste backfill, a method the company said it already uses across its underground operations. Steinmann contrasted that with the original PEA, which contemplated developing only the skarn using sub-level caving, noting that cave mining would only be considered as part of a potential future expansion.
Standalone project economics and cost profile in the revised PEA
Management said the revised PEA’s economics are specific to development of the skarn and vein mineral resources, and do not include the current operation’s mineral reserves in the mine plan or economics for the skarn project, citing NI 43-101 reporting requirements.
On a standalone basis, Steinmann said the revised PEA estimates an incremental after-tax net present value (NPV) discounted at 5% of approximately $2.6 billion and an after-tax internal rate of return (IRR) of 17% using the company’s long-term base case metal prices of $45/oz silver, $2,800/ton zinc, and $2,000/ton lead. Under a higher price scenario of $75/oz silver, $3,400/ton zinc, and $2,000/ton lead, Pan American estimates the incremental after-tax NPV (5% discount) rises to about $5.2 billion and after-tax IRR to 25%.
At the base case prices, the company estimated a four-year payback on the initial $1.9 billion investment, improving to about three years in the higher price scenario. The project is expected to generate average annual free cash flow of $653 million in the initial five years after construction and plant ramp-up at base case prices, or $988 million annually in the higher price scenario. Steinmann said those figures are incremental to free cash flow from the existing La Colorada mine reserves during the same periods.
Steinmann also highlighted projected operating margins, stating silver all-in sustaining costs are expected to average negative $22.67 per ounce over the initial five-year period due to by-product credits from zinc and lead. At base case prices, management said revenue is expected to be about 42% silver, 39% zinc, and 19% lead; in the upside scenario, silver’s revenue contribution increases to 51%.
Q&A: partner interest, CapEx drivers, ventilation, and permitting timeline
During the Q&A, Steinmann said the change in approach was not driven by a lack of partner interest. Instead, he cited a preference for a “higher grade, lower capital, way lower risk” path that he said also delivers higher silver output than anticipated in the original PEA. When asked about partnering, Steinmann said Pan American could “easily do this project” on its own, though discussions continue around elements such as zinc offtake.
On cost details, an executive (Steve) said the revised PEA reports a combined direct mining cost of $54.50 per ton for the skarn and additional vein resources, compared with approximately $160 to $180 per ton “today” for the current vein mine, attributing the lower blended cost to larger skarn stopes. He said mining methods for the veins are assumed to remain similar to current practice, although the company intends to evaluate opportunities during pre-feasibility trade-off studies.
On ventilation and heat, Martin said the project plan includes significant ventilation and refrigeration allowances, including 905 cubic meters per second of ventilation and an additional 21 MW of refrigeration power, with an aim to keep the working environment below roughly 28.5–30 degrees Celsius wet bulb temperature. He added the company is also evaluating remote operations to reduce personnel exposure underground.
Regarding next steps, management said it is defining the scope and schedule to advance toward a pre-feasibility study, but did not provide a target release date, indicating it would “likely” come in or after 2027 depending on requirements. On permitting, management said discussions with regulators are ongoing and it has not been determined whether an environmental impact assessment update is required.
Steinmann said the company expects preliminary work on the 588 level decline to begin soon, along with continued exploration and definition drilling in the skarn and eastern portions of the vein system. He also pointed investors to a June 1 Investor Day, where he said the company plans to share more detail on the project.
About Pan American Silver (NYSE:PAAS)
Pan American Silver Corp. (NYSE: PAAS) is a Vancouver-based mining company and one of the world’s largest primary silver producers. The company’s core activities encompass the exploration, development, extraction and processing of silver, with significant by-product production of gold, zinc and lead. Pan American Silver maintains a vertically integrated operating model, covering the full mining value chain from resource discovery through to refined metal production.
With a geographic footprint concentrated across the Americas, Pan American Silver operates multiple mines in Mexico, Peru, Argentina and Bolivia, and is advancing several development and exploration projects in Chile and Ecuador.
