THIRD QUARTER 2007 HIGHLIGHTS - Record quarterly silver production of 4.5 million ounces, up 38% over Q3 2006. - Net income of $23.9 million ($0.31/share), up 46% from $16.4 million ($0.22/share) in Q3 2006. - Record quarterly cash flow from operating activities of $33.3 million, before changes in non-cash operating working capital. - Record quarterly sales of $87.9 million, up 37% over Q3 2006. - Alamo Dorado silver production increased to almost 1.0 million ounces. September production was 460,000 ounces, 8% higher than feasibility projections. - Construction at Manantial Espejo mine in Argentina 45% complete and progressing well. - On target to produce nearly 17 million ounces of silver in 2007 and 25 million ounces in 2009. * Financial information in this news release is based on Canadian GAAP.
VANCOUVER, British Columbia, Nov. 9, 2007 (PRIME NEWSWIRE) --
FINANCIAL RESULTS
Pan American Silver Corp. (Nasdaq:PAAS) (TSX:PAA) today reported that consolidated net income for the third quarter of 2007 increased 46% to $23.9 million, or $0.31 per share, as compared to $16.4 million, or $0.22 per share, in the year earlier period. The Company also generated record quarterly cash flow from operations of $33.3 million, before changes in non-cash operating working capital items. The improved financial results for the quarter were primarily due to the positive contribution to earnings and cash flow from the Company's new Alamo Dorado mine, increased silver and base metal production and increased silver and lead prices. Net income in the third quarter of 2007 also benefited from the recognition of a further $2.25 million from the gain on the sale of the Company's interest in the Dukat mine in Russia.
Third quarter sales increased by 37% as compared to the year earlier period, to $87.9 million, primarily due to increased silver and base metal production and higher prices. During the third quarter the Company was able to ship all of the concentrate it produced. However for the year, concentrate shipments and therefore revenue recognition still lags production. At September 30, 2007 the Company had approximately 12,300 tonnes of concentrate inventory on hand as compared to approximately 3,700 tonnes at December 31, 2006. The Company expects to ship and record sales on all the concentrates produced in 2007 by the end of the year.
Cost of sales during the third quarter were $49.2 million, a significant increase from the $30.8 million recorded in the same period in 2006. Higher cost of sales directly reflected the inclusion of Alamo Dorado production costs, as well as the effects of industry-wide escalation in labour costs, consumable and reagent costs and stronger local currencies.
Commenting on the third quarter, Geoff Burns, President and CEO, said: "As expected, we delivered production growth, earnings growth and cash flow growth. Our construction initiatives at our two newest projects Manantial Espejo and San Vicente are progressing extremely well. By all measures Pan American had an excellent quarter, however with silver prices continuing to rally and our silver production continuing to grow strongly, I firmly believe that the best still lies ahead."
Working capital at September 30, 2007 was $207.4 million, an increase of $6.3 million from June 30, 2007. Capital expenditures in the quarter were $29.7 million, of which $16.4 million was spent on construction of the Manantial Espejo mine in Argentina and $1.8 million on the expansion project at the San Vicente mine in Bolivia.
PRODUCTION AND OPERATIONS
The Company produced 4.5 million ounces of silver in the third quarter, 6% more than in the second quarter of this year and 38% more than in the comparable period of 2006. This is the sixth consecutive quarter that Pan American has delivered silver production growth. In addition, consolidated zinc, lead and copper production increased across the board in the third quarter. All of the Company's mines demonstrated solid operating performance in the third quarter; most notable were Alamo Dorado and San Vicente where production increased 16% and 36%, respectively, as compared to the second quarter 2007.
Cash costs in the third quarter increased to $3.32 per ounce of silver, from $1.57 per ounce recorded in the comparable period in 2006. Cash costs increased as a result of increased production from Alamo Dorado, where by-product credits are limited, and general cost escalation at all of the Company's operations. Year over year, cash costs on a per tonne mined and milled basis have increased by approximately 16%, on average.
PERU
Silver production at Morococha in the third quarter of 2007 totaled 750,603 ounces, or 8% more than in the year earlier period. Despite increased mining costs associated with higher milling rates and the purchase of a small quantity of high grade ore, cash costs were negative $2.92, as byproduct credits continued to be greater than operating costs. Development of the Manto Italia ramp, which is designed to provide long term access to several untapped mining zones at Morococha continued to move forward during the quarter. This two year ramp and infrastructure project is a key component of our long term plans for Morococha.
The Huaron mine had a solid third quarter, producing 950,797 ounces of silver. Cash costs were $2.93 per ounce for the quarter, higher than the $2.32 per ounce recorded in the year earlier period primarily as a result of general cost escalation that has been previously described. Earlier this year, a mine deepening project was initiated at Huaron, an investment in the long term future of the operation. A significant portion of the highest grade reserves and resources at Huaron are located below the 250 level and this project, which includes driving a ramp below the 250 level and the deepening of a pre-existing shaft will open up a new mining area and provide access to higher grade ore for years to come.
Third quarter silver production at the Quiruvilca mine was 408,888 ounces and cash costs remained steady at $1.33 per ounce. However, production for the quarter was modestly below expectations as the operation mined lower grade ore in order to supply the mill with sufficient tonnage, while work to access deeper and higher grade ore veins in the southern area of the mine continued. The ramp is now scheduled to be completed by the end of the year.
The Silver Stockpile operation produced 117,252 ounces of silver in the third quarter at a cash cost of $2.49 per ounce.
MEXICO
Silver production at the Company's new Alamo Dorado mine steadily improved during the third quarter and the operation is now exceeding original feasibility estimates. In September the mine produced 460,000 ounces of silver, at a cash cost of $3.88, surpassing our original plans by 8%.
During the third quarter, Alamo Dorado produced 994,325 ounces of silver at a cash cost of $5.02 per ounce. Cash costs were somewhat higher than expected, primarily due to failure of one of two boilers used to preheat refinery solutions, which negatively impacted gold recoveries and associated byproduct credits. The boiler has been repaired, gold recoveries have risen and as demonstrated in September, the Company expects that costs should decline over the balance of the year.
The La Colorada mine had another excellent quarter producing 995,453 ounces of silver, 8% more than in the third quarter of 2006. It was the Company's top silver producer for the second consecutive quarter. Cash costs at La Colorada were $6.73 per ounce. Cash costs have declined compared to earlier this year, as increased production has helped offset the effects of escalation. With the operation running smoothly, attention at La Colorada has shifted to exploration, with three diamond drill rigs working at the property for most of 2007. The Company looks forward to providing a formal update on the positive results that have been achieved from this program when it publishes a new reserve and resource statement in early 2008.
ARGENTINA
Mining and construction activities continued to ramp up at the Manantial Espejo project in Argentina. On the mining side, the Melissa and Maria underground ramps have advanced a total of 1,129 meters and we have intersected both veins as modeled. Pre-stripping of the Karina Union and Maria pits is ahead of schedule with more than 1.6 million tonnes moved to the end of September.
Construction activities have been accelerating rapidly with over 500 Pan American and contractor employees now on site. The tailings dam has been completed, concrete placement is 56% complete, the administration and laboratory buildings have been completed and should be occupied by the end of November and steel erection for the main leaching and thickening tanks is in progress. At the end of the third quarter, project expenditures totaled $72.8 million with total project commitments at $93.9 million. To date, construction is on budget with mechanical completion scheduled for May of 2008; however, possible delays in equipment deliveries and contractor timing is putting this schedule under pressure. Manantial Espejo is expected to produce an average of 4.1 million ounces of silver and 60,000 ounces of gold annually.
BOLIVIA
Mining and mine expansion activities continued throughout the third quarter at the high grade silver-zinc San Vicente mine. The mine produced 236,412 ounces of silver at a cash cost of $5.21 per ounce.
Mine development is moving ahead as planned with the advance of the Litoral ramp approaching 400 meters. Plant construction and related infrastructure expansion has been initiated. Civil work, consisting of site clearing for the plant and associated facilities and the building of roads was approximately 75% complete at the end of the quarter. The construction camp is being finished and should be ready for occupancy shortly, detailed engineering is nearing completion and all the major long lead time equipment has been ordered. The San Vicente expansion project is still in its early stages, but is off to a reasonable start.
The expansion project should be completed at the end of 2008 at a total cost of approximately $40.5 million and when completed San Vicente should produce an average of 2.8 million ounces of silver per year for at least the first five years of full production.
Pan American Silver's mission is to be the largest and lowest cost primary silver mining company globally, and to achieve this by constantly increasing its low cost silver production and its silver reserves. Pan American has delivered 12 consecutive years of production growth and expects to continue this trend in 2007 as silver production is on track to increase by 31% to 17 million ounces in 2007, then increase to over 25 million ounces by 2009.
The Pan American Silver Corp. logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=3233
Selected Financial and Operating Highlights for the third quarter 2007 are attached to this news release. These should be read in conjunction with the Company's MD&A, Financial Statements and Notes to Financial Statements for the corresponding period, which are available on the Company's website at www.panamericansilver.com, and have been posted on Sedar at www.sedar.com.
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, which can be found on page 6 of the MD&A.
Technical information contained in this press release has been reviewed by Michael Steinmann, P.Geo., Senior Vice President Geology and Exploration, who is the Company's Qualified Person for the purposes of NI 43-101.
Pan American will host a conference call to discuss its financial and operating results on Monday, November 12, 2007 at 8:00 am PST (11:00 am 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 http://www.vcall.com/IC/CEPage.asp?ID=122299. 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 9368810.
For more information, please contact: Rob Doyle, Chief Financial Officer at (604) 684-1175 or e-mail Pan American at info@panamericansilver.com.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
THIS NEWS RELEASE CONTAINS "FORWARD-LOOKING INFORMATION" WITHIN THE MEANING OF THE UNITED STATES "PRIVATE SECURITIES LITIGATION REFORM ACT" OF 1995 AND APPLICABLE CANADIAN 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 MANANTIAL ESPEJO AND SAN VICENTE, THE EXPECTED RESULTS FROM EXPLORATION ACTIVITIES, THE ECONOMIC VIABILITY OF THE DEVELOPMENT OF NEWLY DISCOVERED ORE BODIES, THE ESTIMATION OF MINERAL RESERVES AND RESOURCES, 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 LOCAL GOVERNMENT LEGISLATION, TAXATION OR THE POLITICAL OR ECONOMIC ENVIRONMENT, EXPOSURE TO FLUCTUATIONS IN THE COMPANY'S INVESTMENTS AND THE LOCAL CURRENCIES OF THOSE COUNTRIES IN WHICH PAN AMERICAN CARRIES ON BUSINESS, 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 BASE METALS, INCREASED COMPETITION IN THE MINING INDUSTRY FOR PROPERTIES, EQUIPMENT, QUALIFIED PERSONNEL, AND THEIR RISING COSTS, UNPREDICTABLE RISKS AND HAZARDS RELATING TO THE OPERATION AND DEVELOPMENT OF OUR MINES OR PROPERTIES, UNEXPECTED WORK STOPPAGES OR LABOUR DISPUTES, THE SPECULATIVE NATURE OF EXPLORATION AND DEVELOPMENT, FLUCTUATIONS IN THE PRICE FOR NATURAL GAS, FUEL OIL AND OTHER KEY SUPPLIES, AS WELL AS THOSE FACTORS DESCRIBED IN THE SECTION "RISK RELATED TO PAN AMERICAN'S BUSINESS" CONTAINED IN THE COMPANY'S MOST RECENT FORM 40F/ANNUAL INFORMATION FORM FILED WITH THE SEC AND CANADIAN PROVINCIAL SECURITIES REGULATORY AUTHORITIES. 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
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2007 2006 2007 2006
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Consolidated Financial
Highlights (in thousands
of US dollars)
(Unaudited)
Net income for the period $ 23,891 $ 16,355 $ 62,798 $ 28,558
Basic income per share $ 0.31 $ 0.22 $ 0.82 $ 0.39
Mine operating earnings $ 29,125 $ 29,221 $ 75,416 $ 78,256
Cash flow from operations
(excluding changes in
non-cash operating
working capital) $ 33,340 $ 21,090 $ 78,622 $ 46,654
Mineral property, plant
and equipment
expenditures $ 29,732 $ 18,026 $ 82,625 $ 71,272
Cash and short-term
investments $ 153,047 $ 181,136 $ 153,047 $ 181,136
Net working capital $ 207,350 $ 196,006 $ 207,350 $ 196,006
Consolidated Production
Silver - ounces 4,453,729 3,226,775 12,017,564 9,871,671
Zinc - tonnes 10,221 9,922 29,706 30,115
Lead - tonnes 4,159 4,060 11,909 11,927
Copper - tonnes 1,544 1,126 4,127 3,333
Gold - ounces 5,497 1,964 15,756 5,326
Consolidated Cost per
Ounce of Silver
(net of by-product
credits)
Total cash cost per
ounce (1) $ 3.32 $ 1.57 $ 2.95 $ 1.75
Total production cost per
ounce (1) $ 5.65 $ 3.28 $ 5.09 $ 3.34
Payable ounces of silver 4,136,221 2,963,597 11,122,324 9,043,186
Average Metal Prices
Silver - London Fixing
per ounce $ 12.70 $ 11.70 $ 13.11 $ 11.21
Zinc - LME Cash
Settlement per tonne $ 3,238 $ 3,363 $ 3,452 $ 2,966
Lead - LME Cash
Settlement per tonne $ 3,141 $ 1,189 $ 2,373 $ 1,176
Copper - LME Cash
Settlement per tonne $ 7,713 $ 7,670 $ 7,087 $ 6,612
Gold - London Fixing
per ounce $ 680 $ 622 $ 666 $ 601
Mine Operations Highlights
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2007 2006 2007 2006
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Huaron Mine
Tonnes milled 192,571 185,290 558,932 513,235
Average silver grade -
grams per tonne 192 193 195 203
Average zinc grade 2.37% 2.48% 2.62% 2.58%
Silver - ounces 950,797 941,569 2,827,367 2,773,593
Zinc - tonnes 2,837 3,095 9,279 8,818
Lead - tonnes 1,564 1,750 5,147 5,371
Copper - tonnes 512 426 1,179 1,272
Gold - ounces 798 480 2,677 1,137
Total cash cost per
ounce (1) $ 2.93 $ 2.32 $ 2.28 $ 2.53
Total production cost
per ounce (1) $ 4.15 $ 3.67 $ 3.48 $ 3.81
Payable ounces of silver 860,230 856,108 2,545,188 2,521,986
Quiruvilca Mine
Tonnes milled 91,834 92,468 269,078 282,100
Average silver grade -
grams per tonne 167 199 169 217
Average zinc grade 2.79% 2.70% 2.50% 2.86%
Silver - ounces 408,888 489,972 1,219,807 1,681,179
Zinc - tonnes 2,069 2,090 5,484 6,849
Lead - tonnes 728 650 1,920 1,968
Copper - tonnes 459 308 1,262 1,004
Gold - ounces 568 276 1,192 836
Total cash cost per
ounce (1) $ 1.33 $ (0.39) $ 1.65 $ (0.15)
Total production cost
per ounce (1) $ 2.83 $ 0.99 $ 3.13 $ 1.07
Payable ounces of silver 374,214 454,284 1,124,488 1,561,459
Morococha Mine*
Tonnes milled 154,157 150,191 444,256 423,451
Average silver grade -
grams per tonne 175 176 170 191
Average zinc grade 3.44% 3.61% 3.49% 3.91%
Silver - ounces 750,603 694,984 2,063,886 2,202,128
Zinc - tonnes 4,472 4,567 12,991 13,994
Lead - tonnes 1,690 1,591 4,364 4,514
Copper - tonnes 533 381 1,588 1,031
Gold - ounces 451 231 656 737
Total cash cost per
ounce (1) $ (2.92) $ (5.14) $ (4.07) $ (3.58)
Total production cost
per ounce (1) $ (1.27) $ (3.23) $ (2.33) $ (1.87)
Payable ounces of silver 675,527 622,402 1,855,824 1,970,474
* Production and cost figures are for Pan American's share only. Pan
American ownership was 88.5% during the quarter.
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La Colorada Mine
Tonnes milled 87,563 60,463 235,289 174,257
Average silver grade - grams
per tonne 416 547 450 546
Silver - ounces 995,453 923,553 2,886,173 2,635,197
Zinc - tonnes 268 -- 572 --
Lead - tonnes 177 68 477 74
Gold - ounces 978 2,927
Total cash cost per ounce(1) $ 6.73 $ 5.92 $ 6.85 $ 5.83
Total production cost per
ounce(1) $ 8.63 $ 7.55 $ 8.61 $ 7.66
Payable ounces of silver 959,516 915,811 2,802,615 2,621,902
Alamo Dorado Mine*
Tonnes milled 326,661 -- 719,563 --
Average silver grade - grams
per tonne 132 -- 129 --
Silver - ounces 994,325 -- 2,119,355 --
Gold - ounces 2,702 -- 8,303 --
Total cash cost per ounce(1) 5.02 -- 5.14 --
Total production cost per
ounce(1) 9.74 -- 9.85 --
Payable ounces of silver 991,839 -- 2,113,804 --
* Commercial production commenced on April 1, 2007.
San Vicente Mine*
Tonnes milled 30,610 6,725 70,057 15,712
Average silver grade - grams
per tonne 288 317 296 319
Average zinc grade 2.48% 3.32% 2.66% 3.70%
Silver - ounces 236,412 55,370 546,519 133,920
Zinc - tonnes 575 169 1,381 453
Copper - tonnes 41 11 98 26
Total cash cost per ounce(1) $ 5.21 $ 8.09 $ 4.23 $ 5.48
Total production cost per
ounce(1) $ 7.15 $ 8.40 $ 6.10 $ 5.78
Payable ounces of silver 211,148 49,298 489,535 119,384
* The production statistics represent Pan American's interest in the
mine. Pan American's ownership was approximately 55% through May 22,
2007 and increased to 95% subsequently.
Pyrite Stock Piles
Tonnes sold 12,787 13,506 40,541 42,763
Average silver grade - grams
per tonne 285 279 272 324
Silver - ounces 117,252 121,327 354,457 445,655
Total cash cost per ounce(1) $ 2.49 $ 3.30 $ 3.16 $ 3.21
Total production cost per
ounce(1) $ 2.49 $ 3.30 $ 3.16 $ 3.21
Payable ounces of silver 63,746 65,694 190,870 247,982
(1) 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, which can be found on page 6 of the
MD&A.