FOURTH QUARTER HIGHLIGHTS (unaudited)
* Net income of $29.6 million ($0.39 per share), up $59.2 million
from a net loss of $29.5 million ($0.44 loss per share) in Q4 2005.
* Mine operating earnings up over 300% to $35.1 million compared to
$8.7 million in Q4 2005.
* Sales of $82.6 million, a 118% increase over $37.9 million in Q4
2005.
* Silver production of 3.1 million ounces at a cash cost per ounce of
$2.42. (a)
* Construction of Alamo Dorado mine completed.
* Manantial Espejo project progressing well, anticipated start-up May
1, 2008.
FULL YEAR 2006 HIGHLIGHTS (unaudited)
* Record net income of $58.2 million ($0.79 per share), up from a net
loss of $28.6 million ($0.43 loss per share) in 2005.
* Record mine operating earnings of $113.3 million, up five-fold from
$21.7 million in 2005.
* Record silver production of 13.0 million ounces, up 4% over 2005.
* Average cash costs per ounce of silver declined 57% to $1.89
compared to 2005. (a)
* Manantial Espejo project interest increased to 100%, financed and
construction started.
* Replaced all reserves mined and added 35.4 million ounces of silver
to the Company's proven and probable reserves.
FORECAST 2007
* Silver production planned to increase 35%, to 17.6 million ounces.
* Cash costs projected at $3.04 per ounce of silver. (a)
(a) Cash costs are a non-GAAP measure. Please refer to Note c under the
heading "Mine Operating Highlights" in this release for a
reconciliation to cost of sales.
(b) Financials Based On Canadian GAAP
FINANCIAL RESULTS (unaudited)
VANCOUVER, British Columbia, Feb. 21, 2007 (PRIME NEWSWIRE) -- Pan American Silver Corp. (Nasdaq:PAAS) (TSX:PAA) today reported unaudited financial and operating results for the full year and fourth quarter 2006, and provided production guidance for 2007.
Fourth quarter 2006 net income was $29.6 million ($0.39 per share) on sales of $82.6 million, compared to a net loss of $29.5 million ($0.44 loss per share) on sales of $37.9 million in the year earlier period. Fourth quarter earnings included recognition of an $8.0 million gain relating to the sale of the Company's interest in the Dukat mine in Russia in 2004.
Net income for the year was a record $58.2 million ($0.79 per share) compared to a net loss of $28.6 ($0.43 loss per share) recorded for 2005. Included in net income in 2006 was an $18.3 million loss on commodity and foreign exchange contracts, partially offset by an $8.0 million gain on the sale of the Company's interest in the Dukat mine. Cash flow from operations increased 510% to $65.9 million from $10.8 million in 2005.
Cost of sales for 2006 was $124.6 million, or $37.0 million more than in 2005 due primarily to increased mining and milling rates at all of the Company's operations, costs associated with the shipment of approximately 8,400 tonnes more concentrate from Peru than in 2005, and industry-wide cost increases for consumables, energy and personnel. Also, as a result of higher earnings, workers' participation in Peru for 2006 increased to $9.2 million, as compared to $1.2 million incurred in 2005.
During 2006 the Company maintained its strong financial position. Working capital at December 31, 2006 was $204.6 million, an increase of $129.9 million over the prior year. The Company anticipates that its current cash position and expected cash flows in 2007 will be sufficient to fund its project development and expansion plans.
"By all measures, 2006 was a record year for Pan American. Our continued success is directly attributable to increasing our silver and byproduct metal production, coupled with much higher realized silver and base metal prices in 2006," commented Geoff Burns, President and CEO. "We are delivering on our growth plans, and the improving quality of our portfolio of operations underpins the strength of our earnings and cash flow. With the addition of our newest mine, Alamo Dorado, we expect higher production and sales volumes in 2007, while maintaining consistently low cash costs."
PRODUCTION AND OPERATIONS
In the fourth quarter 2006, Pan American produced 3.1 million ounces of silver, as compared to 3.2 million ounces produced in Q4 2005, at consolidated cash costs of $2.42, 46% lower than cash costs of $4.48 per ounce in Q4 2005. Full year 2006 consolidated production rose 4% over 2005 production to 13.0 million ounces. Consolidated cash costs for the full year 2006 were $1.89 per ounce of silver, 57% lower than cash costs of $4.38 per ounce in 2005.
Full year 2006 consolidated production of zinc and copper increased, respectively, by 5% and 16% to 39,366 tonnes and 4,546 tonnes, respectively. Lead production declined by 1% to 15,307 tonnes. The increase in overall base metal production, combined with high metal prices in 2006, were clear drivers of record low cash cost of production in 2006.
While establishing a new record, consolidated silver production for 2006 did fall short of the Company's projections of 14.0 million ounces. This was primarily due to a longer than anticipated process plant start-up at the new Alamo Dorado mine. However, in January 2007, the Alamo Dorado mine began pouring silver, and production previously anticipated for inclusion in 2006 production is expected to be made up in 2007.
"The completion of construction of the Alamo Dorado mine shows that we are executing on our strategy of growth, which projects an annual silver production of 25 million ounces by 2009," commented Geoff Burns, President and CEO. "Our project pipeline continued to grow in 2006 as construction of the Manantial Espejo mine in Argentina advanced and development plans to expand production at Morococha and San Vicente were initiated. Our growth plan will deliver enhanced shareholder value through increased production, greater geographic and political diversity in our asset base, and reduced overall production costs from introducing modern mines to our asset portfolio."
Peru
The Morococha mine was again the most profitable of the Company's mines in 2006, recording full year net income of $24.1 million and producing silver at a negative cash cost per ounce of $3.71 for the full year. Pan American's share of 2006 silver production from the mine totaled 2.9 million ounces, or 7% more than 2005 production. Fourth quarter production was 0.7 million ounces and the mill continued to achieve record throughput of over 55,000 tonnes per month, which is expected to be maintained throughout 2007. Development plans for 2007 and 2008 include improving access to higher grade material in the Buenaventura area and the Manto Italia deposit. Until these development plans are completed, lower silver head grades are expected, resulting in a slightly lower production forecast of 2.7 million ounces for 2007. However, higher zinc and lead grades are expected in 2007 resulting in higher base metal production.
The Huaron mine produced 3.7 million ounces in 2006, including 0.9 million ounces in the fourth quarter. Cash costs of production for the year were much lower than anticipated, at $2.41 per ounce, or 53% lower than in 2005, primarily a result of higher base metal prices. Net income from the mine for the year was $15.8 million. In 2007, silver production is expected to increase to 3.8 million ounces as a result of higher mill throughput rates. Zinc and lead production are also expected to increase by 9% and 15%, respectively. Plans that were started in 2006 to develop and deepen the mine below the current workings will continue in 2007.
The Quiruvilca mine continued to be a steady low-cost producer in 2006, contributing $15.5 million to the Company's net earnings and producing silver at a cash cost of negative $0.04 per ounce, as compared to $4.07 per ounce in 2005. Full year 2006 silver production was 2.1 million ounces, and fourth quarter silver production was 0.4 million ounces. Forecast silver production for 2007 is anticipated to decline by 10% over 2006 to approximately 1.9 million ounces, due to an anticipated decline in ore grades. However, zinc production is expected to increase by 8%, while lead and copper production are expected to be similar to 2006.
The Silver Stockpile operation produced 0.57 million ounces of silver for the full year 2006 at cash costs of $3.17, and 0.13 million ounces in the fourth quarter at cash costs of $3.02 per ounce. Production rates are a function of demand from the smelter purchasing the ore. Production for 2007 is anticipated to increase modestly to 0.58 million ounces.
Mexico
2006 was a year of significant progress at the La Colorada mine. Full year silver production for 2006 increased 13% over 2005 to 3.5 million ounces, at a cash cost of $6.49 per ounce. Production was lower than forecast as a result of delays in restarting the sulphide operation at the mine, which resulted in fewer processed tonnes of ore and a shortfall of approximately 0.4 million ounces of silver compared to production estimates. By fourth quarter 2006, however, the Company had restarted the sulphide plant and successfully implemented a dewatering program to increase production from the sulphide zone to meet milling capacity. As a result, the combined sulphide and oxide plant throughput in 2007 is expected to increase by 25% over 2006, with full year 2007 silver production estimated at 3.8 million ounces. Capital investment in the mine during 2007 is expected to focus on reducing future operating costs and extending the economic life of the mine through extensive exploration activity.
Bolivia
Mining and milling throughout the fourth quarter at the high grade silver-zinc San Vicente mine continued uninterrupted and annual production and cash costs were in line with expectation. For the full year 2006, the mine produced 0.3 million ounces of silver, compared to 0.08 million ounces in 2005, at a cash cost of $3.49 per ounce. Processing at the Chilcobija plant continued under the 150,000 tonne toll milling agreement entered into in August 2006. At year-end over 34,500 tonnes of ore had been processed under this agreement, with an additional 45,000 tonnes either stockpiled ahead of, or being processed in, the plant. Anticipated silver production for 2007 is 0.5 million ounces. Feasibility analysis and engineering plans to expand mine production and build a new mill on the property have been completed; however a construction decision is pending political developments in Bolivia.
DEVELOPMENT PROJECTS
At Alamo Dorado in Mexico, construction of the open pit mine and processing facility was completed in the fourth quarter as efforts turned to commissioning of the filtration, refining and AVR cyanide recovery circuits. Total construction costs for the project have amounted to approximately $81.5 million. In addition, costs to build the initial ore stockpile and in-circuit silver inventories, which totaled $2.3 million, have been recorded as current working capital. Slow start-up of the filtration circuit pushed initial silver production to Q1 2007. The mine completed its first silver pour in January 2007 and is now ramping up to sustained production levels of 4,000 tonnes per day. 2007 production is anticipated to be 4.3 million ounces of silver and 14,000 ounces of gold.
The Manantial Espejo project in Argentina began construction in 2006. Both the Maria and Melissa vein underground portal excavations were completed and advances on both ramps will continue in 2007. Topsoil stripping activity commenced for the Karina Union surface mine and mobile surface mine equipment will continue to arrive on site throughout the first quarter 2007. Total purchase commitments to the end of 2006 for mining equipment and EPCM-related contract work were $41.7 million, including $22.4 million in project expenditures. Construction of the mine is expected to be completed in April 2008 with commissioning starting thereafter. Production from Manantial Espejo is anticipated to average 4.3 million ounces of silver and 62,000 ounces of gold annually.
RESERVES AND RESOURCES
In 2006, Pan American increased its silver reserves and resources at every one of its operating and development properties. As at December 31, 2006, proven and probable reserves totaled 213.4 million ounces, a 20% increase over the previous year. For the complete reserves and resources breakdown by property and category, please refer to the news release issued by the Company on February 16, 2007, which is available online at www.panamericansilver.com.
2007 OPERATING AND CAPITAL EXPENDITURE GUIDANCE
Based on expected ramp-up of production at Alamo Dorado in 2007, as well as increased production from the La Colorada and San Vicente mines, offset slightly by lower production at Morococha and Quiruvilca, silver production in 2007 is expected to reach 17.6 million ounces. Consolidated cash costs of production for 2007 are expected to be $3.04 per ounce. The 2007 forecast breakdown of silver production, cash costs and total costs per ounce for each of the Company's operations is as follows:
---------------------------------------------------------------------
Interest Silver Production Cash Costs Total Costs
(millions) per ounce per ounce
---------------------------------------------------------------------
Quiruvilca 100% 1.9 $2.21 $3.86
---------------------------------------------------------------------
Huaron 100% 3.8 $3.26 $4.48
---------------------------------------------------------------------
Morococha 88.5% 2.7 ($3.16) ($1.87)
---------------------------------------------------------------------
Silver
Stockpiles 100% 0.6 $2.51 $2.51
---------------------------------------------------------------------
San Vicente 55% 0.5 $3.77 $4.30
---------------------------------------------------------------------
La Colorada 100% 3.8 $6.82 $8.61
---------------------------------------------------------------------
Alamo Dorado 100% 4.3 $3.27 $7.43
---------------------------------------------------------------------
---------------------------------------------------------------------
Total 17.6 million $3.04 $5.20
---------------------------------------------------------------------
* Price Assumptions - Silver: $10.00 per ounce; Zinc: $3,000
per tonne; Lead: $1,000 per tonne; Copper: $5,000 per tonne; and
Gold: $550 per ounce.
In addition, on a consolidated basis, the Company's anticipated by-product production for 2007 is as follows: 43,900 tonnes of zinc, 19,900 tonnes of lead, 4,100 tonnes of copper and 19,400 ounces of gold.
Capital expenditures for 2007 are expected to be close to $145.5 million, split between development capital of approximately $106.1 million, primarily for construction of Manantial Espejo and potential expansion at San Vicente, and sustaining capital of approximately $39.4 million, primarily for exploration and expansion plans at Morococha, Huaron, La Colorada, Quiruvilca and Alamo Dorado.
RESTATEMENT OF U.S. GAAP RECONCILIATION NOTE DISCLOSURE FOR NON-CASH CHARGES
Recent announcements have been made regarding interpretation by the United States regulatory authorities (the "Interpretation") of U.S. accounting rules contained in the Statement of Financial Accounting Standards ("SFAS") 133, Accounting for Derivative Instruments and Hedging Activities, which determine the current U.S. accounting treatment of the Company's share purchase warrants.
The Company reports in accordance with Canadian generally accepted accounting principles ("Canadian GAAP") and provides note disclosure in its financial statements with respect to a reconciliation of Canadian GAAP to generally accepted accounting principles in the United States ("US GAAP"). The Interpretation impacts the Company's US GAAP reconciliation note disclosure, but has no effect on Canadian GAAP disclosure. Under Canadian GAAP, share purchase warrants are accounted for as equity and recorded at their historical cost. The interpretation under U.S. GAAP requires that when a Company's share purchase warrants have an exercise price denominated in a currency other than a company's functional currency, those share purchase warrants must be classified as liabilities at their fair value with any resulting gains or losses being included in the calculation of US GAAP earnings. In these circumstances, a loss (gain) would be recorded by the Company when the value of the share purchase warrants increases (decreases). These are non-cash charges, however, and do not impact the Company's operations.
As a result of the Interpretation, the Company will restate the U.S. GAAP reconciliation note included in its financial statements for the years ended December 31, 2003, 2004, and 2005. This restatement pertains only to the Company's U.S. GAAP reconciliation note disclosure, due to mark-to-market losses/gains arising from the fair valuation of these share purchase warrants as follows: an earnings decrease of $18.5 million for the year ended December 31, 2003, an earnings decrease of $2.8 million for the year ended December 31, 2004 and an earnings decrease of $6.9 million for the year ended December 31, 2005. At the time that the Company's share purchase warrants are exercised, the value of the warrants will be reclassified to shareholders' equity within the Company's US GAAP reconciliation note. The Company will apply this accounting treatment for share purchase warrants to the US GAAP reconciliation note for the financial year ended December 31, 2006.
The Company understands that the Financial Accounting Standards Board has initiated a project to determine the accounting treatment for convertible debt with elements of foreign currency risk. This project is expected to provide further US GAAP guidance in respect of accounting for share purchase warrants.
SILVER MARKETS
Silver made exceptionally strong gains in 2006 as the price broke quarter-century records by peaking over $15.00 per ounce in May and recording an average annual price of $11.57 per ounce, 60% higher than the average price in 2005 of $7.22 per ounce. In the fourth quarter of 2006, the price of silver averaged $12.61 per ounce, $4.94 per ounce higher than in the year earlier period.
Investment demand in silver accelerated once again in December as holdings in the silver exchange traded fund ("ETF") increased by approximately 20 million ounces to bring total ounces of physical silver held in trust to just over 121 million ounces by year-end.
Thus far in 2007, the price of silver has remained steady at well over $13.00 per ounce. We believe the fundamental factors behind the silver bull market are stronger than ever and that 2007 will prove to be another exceptional year for silver.
CONFERENCE CALL DETAILS
Pan American will host a conference call to discuss its financial and operating results on Thursday, February 22, 2007 at 12:00 pm PST (3:00 pm EST). North American participants please dial toll-free 1-888-694-4728 and international participants please dial 1-973-582-2745. The call will also be broadcast live on the internet at www.vcall.com/IC/CEPage.asp?ID=113265. The call will be available for replay for one week after the call by dialing 1-877-519-4471 (for North American callers) and 1-973-341-3080 (for international callers) and using the replay pin number 8352496.
For more information, please contact: Alexis Stewart, Director Corporate & Investor Relations (604) 684.1175 astewart@panamericansilver.com
The Pan American Silver Corp. logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=3233
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
THIS NEWS RELEASE CONTAINS "FORWARD-LOOKING INFORMATION" WITHIN THE MEANING OF APPLICABLE CANADIAN AND U.S. SECURITIES LEGISLATION. STATEMENTS CONTAINING FORWARD-LOOKING INFORMATION EXPRESS, AS AT THE DATE OF THIS NEWS RELEASE, THE COMPANY'S PLANS, ESTIMATES, FORECASTS, PROJECTIONS, EXPECTATIONS, OR BELIEFS AS TO FUTURE EVENTS OR RESULTS AND THE COMPANY DOES NOT INTEND, AND DOES NOT ASSUME ANY OBLIGATION TO, UPDATE SUCH STATEMENTS CONTAINING THE FORWARD-LOOKING INFORMATION. GENERALLY, FORWARD-LOOKING INFORMATION CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS "PLANS", "PROJECTS" OR "PROJECTED", "EXPECTS" OR "DOES NOT EXPECT", "IS EXPECTED", "ESTIMATES", "FORECASTS", "SCHEDULED", "INTENDS", "ANTICIPATES" OR "DOES NOT ANTICIPATE", OR "BELIEVES", OR VARIATIONS OF SUCH WORDS AND PHRASES, OR STATEMENTS THAT CERTAIN ACTIONS, EVENTS OR RESULTS "MAY", "CAN", "COULD", "WOULD", "MIGHT" OR "WILL BE TAKEN", "OCCUR" OR "BE ACHIEVED". STATEMENTS CONTAINING FORWARD-LOOKING INFORMATION INCLUDE, BUT ARE NOT LIMITED TO, STATEMENTS WITH RESPECT TO TIMING AND BUDGET OF CONSTRUCTION ACTIVITIES AT ALAMO DORADO AND MANANTIAL ESPEJO, THE EXPECTED RESULTS FROM EXPLORATION ACTIVITIES, THE ECONOMIC VIABILITY OF THE DEVELOPMENT OF NEWLY DISCOVERED ORE BODIES, THE ESTIMATION OF FUTURE PRODUCTION LEVELS, EXPECTATIONS REGARDING MINE PRODUCTION COSTS, THE REQUIREMENTS FOR ADDITIONAL CAPITAL, THE RESULTS OF DRILLING, AND PAN AMERICAN SILVER'S COMMITMENT TO, AND PLANS FOR DEVELOPING, NEWLY DISCOVERED AND EXISTING MINERALIZED STRUCTURES.
STATEMENTS CONTAINING FORWARD-LOOKING INFORMATION INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE THE ACTUAL RESULTS, LEVEL OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS OF PAN AMERICAN SILVER AND ITS OPERATIONS TO BE MATERIALLY DIFFERENT FROM THOSE EXPRESSED OR IMPLIED BY SUCH STATEMENTS. SUCH FACTORS INCLUDE, AMONG OTHERS, RISKS RELATED TO TECHNOLOGICAL AND OPERATIONAL NATURE OF THE COMPANY'S BUSINESS, CHANGES IN THE POLITICAL OR ECONOMIC ENVIRONMENT, THE ACTUAL RESULTS OF CURRENT EXPLORATION ACTIVITIES, CONCLUSIONS OF ECONOMIC EVALUATIONS, CHANGES IN PROJECT PARAMETERS TO DEAL WITH UNANTICIPATED ECONOMIC FACTORS, FUTURE PRICES OF SILVER, GOLD AND OTHER BASE METALS, AS WELL AS THOSE FACTORS DESCRIBED IN THE SECTIONS RELATING TO RISK FACTORS OF PAN AMERICAN SILVER'S BUSINESS FILED IN THE COMPANY'S FORM 40-F, ANNUAL INFORMATION FORM AND OTHER REQUIRED SECURITIES FILINGS ON SEDAR AND EDGAR. ALTHOUGH THE COMPANY HAS ATTEMPTED TO IDENTIFY IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN FORWARD-LOOKING STATEMENTS, THERE MAY BE OTHER FACTORS THAT CAUSE RESULTS TO BE MATERIALLY DIFFERENT FROM THOSE ANTICIPATED, DESCRIBED, ESTIMATED, ASSESSED OR INTENDED. THERE CAN BE NO ASSURANCE THAT ANY STATEMENTS CONTAINING FORWARD-LOOKING INFORMATION WILL PROVE TO BE ACCURATE AS ACTUAL RESULTS AND FUTURE EVENTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN SUCH STATEMENTS. ACCORDINGLY, READERS SHOULD NOT PLACE UNDUE RELIANCE ON STATEMENTS CONTAINING FORWARD-LOOKING INFORMATION.
Financial & Operating Highlights
Three months ended Twelve months ended
December 31 December 31
2006 2005 2006 2005
---------------------------------------------------------------------
Consolidated Financial Highlights (in thousands of U.S. dollars)
(Unaudited)
Net income (loss)
for the period $ 29,648 $ (29,514) $ 58,206 $ (28,594)
Basic income per
share $ 0.39 $ (0.44) $ 0.79 $ (0.43)
Diluted income per
share $ 0.38 $ (0.44) $ 0.76 $ (0.43)
Cash flow from
operations $ 13,390 $ 2,300 $ 65,899 $ 10,763
Mine Operating
Earning (d) $ 35,063 $ 8,683 $ 113,319 $ 21,658
Cash and
short-term
investments $ 171,948 $ 55,322 $ 171,948 $ 55,322
Working capital $ 204,616 $ 74,763 $ 204,616 $ 74,763
Consolidated
Production and Ore
Milled
Tonnes milled 495,314 439,687 1,903,963 1,691,525
Silver metal -
ounces 3,146,683 3,242,771 13,018,354 12,529,417
Zinc metal - tonnes 9,251 9,327 39,366 37,421
Lead metal - tonnes 3,380 3,918 15,307 15,410
Copper metal -
tonnes 1,214 912 4,546 3,931
Payable ounces of
silver (used in
cost per ounce
calculations) 2,879,000 2,955,842 11,922,186 11,435,604
Consolidated Cost
per Ounce of
Silver (net of
by-product credits)
Total cash cost
per ounce (c) $ 2.42 $ 4.48 $ 1.89 $ 4.38
Total production
cost per
ounce (c) $ 3.96 $ 5.82 $ 3.38 $ 5.72
In thousands of
U.S. dollars
Direct operating
costs, royalties,
treatment and
refining
charges $ 53,843 $ 34,250 $ 180,480 $ 123,691
By-product
credits (46,872) (21,004) (157,893) (73,609)
---------------------------------------------------------------------
Cash operating
costs 6,971 13,246 22,587 50,082
Depreciation,
amortization and
reclamation 4,426 3,966 17,745 15,376
---------------------------------------------------------------------
Production costs $ 11,397 $ 17,213 $ 40,332 $ 65,458
=====================================================================
Average Metal
Prices
Silver - London
Fixing per ounce $ 12.58 $ 8.05 $ 11.55 $ 7.31
Zinc - LME Cash
Settlement per
tonne $ 4,194 $ 1,637 $ 3,273 $ 1,382
Lead - LME Cash
Settlement per
tonne $ 1,622 $ 1,047 $ 1,288 $ 976
Copper - LME Cash
Settlement per
tonne $ 7,087 $ 4,297 $ 6,731 $ 3,684
Mine Operations Highlights
Three months ended Twelve months ended
December 31 December 31
2006 2005 2006 2005
---------------------------------------------------------------------
Huaron Mine
Tonnes milled 180,050 167,035 693,285 639,849
Average silver
grade - grams per
tonne 192 212 200 214
Average zinc grade 2.62% 2.59% 2.59% 2.79%
Silver - ounces 891,068 943,596 3,664,660 3,690,786
Zinc - tonnes 2,917 2,634 11,735 11,701
Lead - tonnes 1,488 1,613 6,858 6,774
Copper - tonnes 332 363 1,603 1,689
Total cash cost per
ounce (c) $ 2.15 5.40 2.41 5.08
Total production
cost per ounce (c) $ 3.54 6.62 3.71 6.30
In thousands of
U.S. dollars
Direct operating
costs, royalties,
treatment and
refining charges $ 16,715 $ 11,314 $ 59,205 $ 42,601
By-product credits (14,978) (6,682) (51,180) (25,554)
---------------------------------------------------------------------
Cash operating costs 1,736 4,632 8,024 17,047
Depreciation,
amortization and
reclamation 1,121 1,048 4,338 4,074
---------------------------------------------------------------------
Production costs $ 2,857 $ 5,680 $ 12,362 $ 21,121
=====================================================================
Payable ounces of
silver (used in
cost per ounce
calculation) 807,121 857,619 3,329,106 3,354,504
Quiruvilca Mine
Tonnes milled 88,015 86,400 370,115 362,192
Average silver grade
- grams per tonne 182 214 209 221
Average zinc grade 2.57% 3.09% 2.79% 3.18%
Silver - ounces 424,296 510,592 2,105,475 2,234,565
Zinc - tonnes 1,863 2,225 8,712 9,697
Lead - tonnes 606 658 2,574 2,761
Copper - tonnes 341 299 1,345 1,307
Total cash cost per
ounce (c) $ 0.58 $ 4.18 $ (0.04) $ 4.07
Total production
cost per ounce (c) $ 2.13 $ 4.79 $ 1.25 $ 4.63
In thousands of
U.S. dollars
Direct operating
costs, royalties,
treatment and
refining charges $ 10,181 $ 7,009 $ 35,636 $ 27,210
By-product credits (9,953) (5,030) 35,714 (18,753)
---------------------------------------------------------------------
Cash operating costs 228 1,979 78 8,457
Depreciation,
amortization and
reclamation 609 288 2,511 1,167
---------------------------------------------------------------------
Production costs $ 838 $ 2,267 $ 2,433 $ 9,624
=====================================================================
Payable ounces of
silver (used in
cost per ounce
calculation) 392,770 473,652 1,954,228 2,077,245
Three months ended Twelve months ended
December 31 December 31
2006 2005 2006 2005
---------------------------------------------------------------------
Morococha Mine(a)
Tonnes milled 153,750 120,498 577,201 467,521
Average silver grade
- grams per tonne 195 235 186 215
Average zinc grade 3.63% 4.79% 3.73% 4.27%
Silver - ounces 721,139 685,265 2,923,267 2,736,393
Zinc - tonnes 4,121 4,134 18,115 15,689
Lead - tonnes 1,208 1,648 5,722 5,875
Copper - tonnes 515 241 1,546 925
Total cash cost per
ounce (c) $ (4.09) $ 2.10 $ (3.71) $ 2.61
Total production
cost per ounce (c) $ (2.22) $ 3.89 $ (1.96) $ 4.36
In thousands of U.S.
dollars
Direct operating
costs, royalties,
treatment and
refining charges $ 17,214 $ 9,653 $ 56,523 $ 33,796
By-product credits (19,861) (8,363) (66,220) (27,364)
---------------------------------------------------------------------
Cash operating costs (2,647) 1,290 (9,697) 6,432
Depreciation,
amortization and
reclamation 1,210 1,099 4,570 4,296
---------------------------------------------------------------------
Production costs $ (1,437) $ 2,389 $ (5,127) $ 10,728
=====================================================================
Payable ounces of
silver (used in
cost per ounce
calculations) 646,688 613,821 2,617,162 2,461,749
La Colorada Mine
Tonnes milled 59,486 55,645 233,743 211,854
Average silver grade
- grams per tonne 520 509 540 530
Silver - ounces 858,799 844,553 3,493,995 3,094,301
Zinc - tonnes -- -- -- --
Lead - tonnes 78 -- 153 --
Total cash cost per
ounce (c) $ 8.51 $ 6.03 $ 6.49 $ 5.63
Total production
cost per ounce (c) $ 10.22 $ 7.85 $ 8.29 $ 7.52
In thousands of U.S.
dollars
Direct operating
costs, royalties,
treatment and
refining charges $ 7,887 $ 5,468 $ 24,721 $ 18,768
By-product credits (650) (412) (2,203) (1,421)
---------------------------------------------------------------------
Cash operating costs 7,237 5,056 22,518 17,347
Depreciation,
amortization and
reclamation 1,454 1,531 6,259 5,839
---------------------------------------------------------------------
Production costs $ 8,691 $ 6,587 $ 28,777 $ 23,186
=====================================================================
Payable ounces of
silver (used in
cost per ounce
calculations) 850,047 839,026 3,471,949 3,081,213
Three months ended Twelve months ended
December 31, December 31,
2006 2005 2006 2005
---------------------------------------------------------------------
Silver Stock Piles
Tonnes sold 15,253 15,011 58,016 61,499
Average silver grade
- grams per tonne 246 368 304 350
Silver - ounces 120,728 177,773 566,383 692,381
Total cash cost
per ounce (c) $ 3.02 $ 2.00 $ 3.17 $ 1.82
Total production
cost per ounce (c) $ 3.02 $ 2.00 $ 3.17 $ 1.82
In thousands of US dollars
Direct operating costs,
royalties, treatment
and refining charges $ 192 $ 202 $ 988 $ 711
By-product credits -- -- -- --
---------------------------------------------------------------------
Cash operating costs 192 202 988 711
Depreciation,
amortization and
reclamation -- -- -- --
---------------------------------------------------------------------
Production costs $ 192 $ 202 $ 988 $ 711
=====================================================================
Payable ounces of
silver (used in cost
per ounce calculations) 63,601 100,917 311,583 390,086
San Vicente Mine(b)
Tonnes milled 14,013 10,109 29,618 10,109
Average silver grade
- grams per tonne 333 296 326 296
Average zinc grade
- percent 3.15% 4.07% 3.44% 4.07%
Silver - ounces 130,653 80,991 264,573 80,991
Zinc - tonnes 352 334 805 334
Copper - tonnes 26 10 52 10
Total cash cost per
ounce (c) $ 1.86 $ 1.24 $ 3.49 $ 1.24
Total production cost
per ounce (c) $ 2.16 $ 1.24 $ 3.78 $ 1.24
In thousands of US dollars
Direct operating costs,
royalties, treatment and
refining charges $ 1,654 $ 604 $ 3,407 $ 604
By-product credits (1,429) (516) (2,575) (516)
---------------------------------------------------------------------
Cash operating costs 225 88 832 88
Depreciation, amortization
and reclamation 32 -- 67 --
---------------------------------------------------------------------
Production costs $ 257 $ 88 $ 899 $ 88
=====================================================================
Payable ounces of silver
(used in cost per ounce
calculations) 118,774 70,808 238,157 70,808
(a) Production and cost figures are for Pan American's share only.
Pan American's ownership was approximately 88.5% during the
quarter.
(b) The production statistics represent Pan American's 55%
interest in the mine in 2006.
(c) The Company reports the non-GAAP cash cost per ounce of
payable silver in order to manage and evaluate operating
performance at each of the Company's mines. The measure is widely
used in the silver mining industry as a benchmark for
performance, but does not have standardized meaning. To
facilitate a better understanding of this measure as calculated
by the Company, we have provided a detailed reconciliation of
this measure to our cost of sales, as shown in our unaudited
Consolidated Statement of Operations for the period.
Three months ended Twelve months ended
December 31, December 31,
2006 2005 2006 2005
-------- -------- -------- --------
Cost of sales $ 41,885 $ 25,514 $124,608 $ 87,648
Add/(Subtract)
Smelting, refining, and
transportation charges 20,920 10,532 69,394 37,736
By-product credits (50,623) (22,594) (168,639) (78,025)
Mining royalties 2,458 446 5,269 1,615
Workers participation (3,590) (454) (9,250) (1,243)
Change in inventories (4,653) (489) (2,016) 1,975
Other 374 529 2,634 1,395
Minority interest
adjustment 200 (239) 586 (1,018)
-------- -------- -------- --------
Cash Operating Costs A $ 6,971 $ 13,246 $ 22,587 $ 50,082
Add/(Subtract)
Depreciation and
amortization 5,640 3,674 17,520 13,095
Asset retirement and
reclamation 614 665 2,457 2,329
Change in inventories (1,607) (73) (1,455) 943
Other (38) (133) (125) (360)
Minority interest
adjustment (184) (157) (652) (632)
-------- -------- -------- --------
Production Costs B $ 11,397 $ 17,213 $ 40,332 $ 65,458
Payable Ounces of Silver
(in `000 ounces) C 2,879 2,956 11,922 11,436
-------- -------- -------- --------
Total Cash Cost
per Ounce A/C $ 2.42 $ 4.48 $ 1.89 $ 4.38
-------- -------- -------- --------
Total Production Costs
per Ounce B/C $ 3.96 $ 5.82 $ 3.38 $ 5.72
-------- -------- -------- --------
(d) The Company reports the non-GAAP measure Mine Operating
Earning to evaluate and manage the operating performance at the
Company's mines. This measure is calculated by subtracting Cost
of Sales and Depreciation and Amortization from Sales. To
facilitate a better understanding of this measure it is
reconciled as shown in our unaudited Consolidated Statement of
Operations for the period.
PAN AMERICAN SILVER CORP.
Consolidated Balance Sheets
As at December 31
(In thousands of US dollars)
(Unaudited)
2006 2005
---------------------------------------------------------------------
Assets
Current
Cash and cash equivalents $ 80,347 $ 29,291
Short-term investments 91,601 26,031
Accounts receivable 65,971 27,342
Inventories and stockpiled ore 22,216 16,667
Unrealized gain on commodity and
foreign currency contracts 186 863
Future income taxes 6,670 --
Prepaid expenses and other 3,106 1,935
---------------------------------------------------------------------
Total Current Assets 270,097 102,129
Mineral property, plant and equipment, net 112,993 99,815
Construction in progress 104,037 34,306
Investment in non-producing properties 188,107 123,259
Direct smelting ore 1,831 2,236
Future income taxes 500 --
Other assets 2,430 535
---------------------------------------------------------------------
Total Assets $ 679,995 $ 362,280
=====================================================================
Liabilities
Current
Accounts payable and accrued liabilities $ 40,095 $ 21,886
Income taxes payable 23,187 447
Unrealized loss on commodity contracts -- 4,810
Current portion of non-current liabilities 2,199 223
---------------------------------------------------------------------
Total Current Liabilities 65,481 27,366
Liability component of convertible debentures -- 126
Asset retirement obligations and reclamation 44,309 39,378
Future income taxes 48,499 32,396
Other liabilities and provisions -- 1,894
Non-controlling interest 9,680 3,798
---------------------------------------------------------------------
Total Liabilities 167,969 104,958
---------------------------------------------------------------------
Shareholders' Equity
Share capital
Authorized:
200,000,000 common shares of no par value
Issued:
December 31, 2005 - 67,564,903 common shares
December 31, 2006 - 76,195,426 common shares 584,769 388,830
Equity component of convertible debentures -- 762
Additional paid in capital 14,485 13,117
Deficit (87,228) (145,387)
---------------------------------------------------------------------
Total Shareholders' Equity 512,026 257,322
---------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 679,995 $ 362,280
=====================================================================
Pan American Silver Corp.
Consolidated Statements of Operations
(Unaudited - in thousands of US Dollars,
except for per share amounts)
Three months ended Twelve months ended
December 31, December 31,
2006 2005 2006 2005
---------------------------------------------------------------------
Sales $ 82,588 $ 37,871 $255,447 $122,401
Cost of sales 41,885 25,514 124,608 87,648
Depreciation and
amortization 5,640 3,674 17,520 13,095
---------------------------------------------------------------------
Mine operating earnings 35,063 8,683 113,319 21,658
General and administrative 2,084 1,558 9,172 6,936
Exploration and project
development 3,902 994 8,040 3,697
Asset retirement and
reclamation 614 655 2,457 2,329
Write-down of mining assets -- 29,666 -- 29,666
---------------------------------------------------------------------
Operating income (loss) 28,463 (24,190) 93,650 (20,970)
---------------------------------------------------------------------
Interest and financing
expenses (137) (182) (573) (494)
Investment and other income 1,179 664 5,235 2,649
Loss on commodity and
currency contract
(net of gains) (1,042) (6,152) (18,328) (8,196)
Gain on sale of assets 8,243 2,103 7,483 2,556
---------------------------------------------------------------------
Income (loss) before taxes
and non-controlling
interest 36,706 (27,757) 87,467 (24,455)
Income tax provision (5,496) (1,676) (25,484) (3,285)
Non-controlling interest (1,562) (81) (3,777) (854)
---------------------------------------------------------------------
Net income (loss) for the
period $ 29,648 $(29,514) $ 58,206 $(28,594)
=====================================================================
Attributable to common
shareholders:
Net income (loss) for
the period $ 29,648 $(29,514) $ 58,206 $(28,594)
Accretion of convertible
debentures (15) (126) (47) (129)
---------------------------------------------------------------------
Adjusted net income for the
period attributable to
common shareholders $ 29,633 $(29,640) $ 58,159 $(28,723)
---------------------------------------------------------------------
Basic income (loss)
per share $ 0.39 $ (0.44) $ 0.79 $ (0.43)
Diluted income (loss)
per share $ 0.38 $ (0.44) $ 0.76 $ (0.43)
Weighted average number of
shares outstanding (000's)
Basic 76,073 66,943 73,628 67,042
Diluted 78,713 66,943 76,152 67,042
Pan American Silver Corp.
Consolidated Statement of Cash Flows
(Unaudited - in thousands of US dollars)
Three months ended Twelve months ended
December 31, December 31,
2006 2005 2006 2005
---------------------------------------------------------------------
Operating activities
Net income (loss) for
the period $ 29,648 $(29,514) $ 58,206 $(28,594)
Reclamation expenditures (504) (704) (1,172) (1,528)
Items not involving cash:
Depreciation and
amortization 5,640 3,674 17,520 13,095
Asset retirement and
reclamation 614 655 2,457 2,329
Gain on sale of assets (8,243) (2,103) (7,483) (2,556)
Future income taxes (3,803) 802 (3,343) (816)
Non-controlling interest 1,562 81 3,777 854
Write-down of mining
assets -- 29,666 -- 29,666
Unrealized (loss) gain
on commodity and
foreign currency
contracts (4,131) 1,812 (4,125) (268)
Stock-based compensation 1,343 603 2,943 1,950
Changes in non-cash
operating working capital (8,736) (2,672) (2,881) (3,369)
---------------------------------------------------------------------
Cash generated by
operating activities 13,390 2,300 65,899 10,763
---------------------------------------------------------------------
Investing activities
Mineral property, plant
and equipment
expenditures (25,129) (18,907) (96,401) (59,638)
Maturity (purchase) of
short-term investments 17,101 20,672 (65,570) 44,100
Proceeds from sale of
assets 2,000 -- 2,000 50
Other (14) (899) (766) --
---------------------------------------------------------------------
Cash (used in) provided
by investing activities (6,042) 866 (160,737) (15,488)
---------------------------------------------------------------------
Financing activities
Proceeds from issuance
of common shares 573 3,621 153,611 6,361
Share issue costs -- -- (7,669) --
Other (7) 3 (48) (690)
---------------------------------------------------------------------
Cash generated by
financing activities 566 3,624 145,894 5,671
---------------------------------------------------------------------
Increase in cash and
cash equivalents during
the period 7,914 6,790 51,056 946
Cash and cash equivalents,
beginning of period 72,433 22,501 29,291 28,345
---------------------------------------------------------------------
Cash and cash equivalents,
end of period $ 80,347 $ 29,291 $ 80,347 $ 29,291
=====================================================================
Shares issued on conversion
of convertible debentures $ 788 -- $ 881 --
Shares issued for
compensation -- $ 80 $ 559 $ 490
Shares issued for
acquisition of mining
assets -- -- $ 47,381 --
Shares purchase warrants
issued on cancellation
of obligation -- -- -- $ 2,100
Supplemental Disclosures
Interest paid $ 13 $ 2 $ 48 $ 38
=========================================
Taxes paid $ 2,692 $ 1,137 $ 7,946 $ 5,249
=========================================