PAN
AMERICAN SILVER DELIVERS Record Earnings
and
operating cash flows �
for First
QUARTER 2008
(All
amounts in US dollars unless otherwise stated and all production figures are
approximate)
Vancouver, B.C. � May 13, 2008 � Pan
American Silver Corp. (NASDAQ: PAAS; TSX: PAA) today reported unaudited
financial and operating results for the first quarter ended March 31, 2008.�
The Company also provided an update on production, operations and an outlook
for the balance of 2008 for all eight of its operating and development properties.�
Geoff Burns, President and CEO commented: �We�ve
had an outstanding start to 2008, building on the momentum we generated in the
second half of last year.� Record earnings, record cash flow from operating
activities, record mine operating earnings and record sales; by all measures
the first quarter of 2008 was the best quarter in the Company�s history.�
Lead by our Alamo Dorado mine in Mexico, our key operations
delivered outstanding results.� We also made great strides in completing the
construction of our Manantial Espejo project in Argentina which we intend to start
up in the third quarter this year.� Pan American is well positioned to realize
our 14th consecutive year of production growth and, with good
reason, I believe the best is still ahead.�
First Quarter Highlights
�
Silver production increased 36%
to 4.5 million ounces
�
Cash cost of silver production
was $3.70 per ounce, down 19% from Q4 2007 �
�
Sales increased 126% to a record
$108.8 million
�
Net income climbed 47% to a record
$30.2 million or $0.38/share
�
Mine operating earnings rose more
than three fold, to a record $48.4 million
�
Record cash flow from
operations of $45.4 million (before changes in non-cash working capital).� An
increase of �231% from year-earlier period
�
Construction of Manantial
Espejo mine 78% complete with start-up scheduled for the third quarter of
2008
|
� Cash costs are a non-GAAP
measure.
* Financial information in this news release is based on
Canadian GAAP.
Financial Results
Sales
in the first quarter increased 126% from 2007 to a quarterly record of $108.8
million.� Sales benefited from significant increases in silver produced and
sold as well as much higher realized silver prices.�
Cost
of sales for the quarter was $50.5 million, up from $29.0 million in the first
quarter of 2007.� Most of this increase was directly attributable to the greater
quantities of production sold relative to a year ago and, to a lesser degree,
to the effects of industry-wide cost increases in labour, energy and consumables.
�
Mine
operating earnings rose 225% to a new high of $48.4 million.
Consolidated
net income for the three months ended March 31, 2008 was a record $30.2 million
or $0.38 per share, a 47% increase over the $20.4 million or $0.27 per share in
the same period in 2007.
Cash
flow from operations before changes in working capital increased 231% to a new quarterly
high of $45.4 million.
Capital
expenditures for the quarter totaled $45.1 million, of which $33.0 million was dedicated
to the construction of Manantial Espejo in Argentina.� Pan American�s newest
silver mine was approximately 78% complete at the end of the quarter and is
scheduled for a third quarter start up.�
In
February the Company received over $43.9 million from the exercise of almost
four million warrants that were issued when Pan American acquired Minera Corner
Bay in 2003 (then owner
of the Alamo Dorado project).
At
March 31, 2008 Pan American�s working capital totaled $233.5 million, up
from $186.3 million at December 31, 2007.� The significant increase in working
capital reflects the strong first quarter operating and financial performance
coupled with the receipt of funds from the warrant exercise.
Production And Operations
Pan
American produced 4.5 million ounces of silver, 36% more than in the first
quarter of 2007.� Alamo Dorado, Pan American�s largest silver mine, is
now producing above feasibility levels and contributed over 1.42 million ounces
of silver during the first quarter of 2008. �La Colorada and Huaron also had a
very solid first quarter and produced 1.0 million and 0.95 million ounces of
silver respectively.
Consolidated
cash cost of silver production was $3.70 per ounce.� This was higher than the
$2.98 per ounce realized in the same period last year; however, it was also significantly
less than the $4.50 per ounce recorded in the fourth quarter of 2007 and well below
the Company�s full year 2008 forecast of $4.27 per ounce.� �Our
cash costs, are still being pushed by industry-wide inflationary pressures, but
I am pleased to see we were well below our full year cash cost forecast as we
benefited from increased by-product production, particularly gold, and higher
than forecasted silver production.� said Mr. Burns.
Morococha
was the Company�s lowest cost mine during the first quarter, with cash
costs of $0.60 per ounce, while cash costs at Huaron and
Quiruvilca were well below forecast at $3.50 and $3.62 per ounce respectively.
Peru
The Morococha mine (89.4% owned) produced 0.67
million ounces of silver to the company�s account during the first quarter
at a cash cost of $0.60 per ounce. �Quarterly production was above the
comparable period in 2007 as increased tonnes processed more than offset modestly
lower silver grades. �Progress of the Manto Italia development ramp continued
into 2008 and is more than half complete.� This two year project will provide
long term access to numerous untapped mining zones.
First
quarter production at Huaron was 0.95
million ounces of silver, 2% ahead of the first quarter of last year.� Huaron
is now mining and processing consistently at over 62,500 tonnes per month, an
increase of 8% as compared to 2007.� Cash costs per ounce were $3.50.� Long
term development work continued to focus on a major mine deepening program that
aims to access recently discovered high grade ore below the 250 level.
Silver
production at the Quiruvilca mine
was 0.35 million ounces, down 14% from the comparable 2007 period.� The
decrease in silver production at Quiruvilca was expected and was the result of
mining deeper in the mineralized system where silver grades are somewhat lower.
�Cash costs for the quarter were $3.62 per ounce, up from $2.33 per ounce a
year ago and reflect the lower silver production.
The Silver Stockpile operation produced 0.07
million ounces of silver in the first quarter at a cash cost of $5.59 per
ounce. �
Mexico
Alamo Dorado was the Company�s standout operation in the
first quarter of 2008, producing 1.42 million ounces of silver. �Alamo Dorado
also produced approximately 4,800 ounces of gold in the first quarter.� The
mine is now producing above feasibility estimates and cash costs were 30% lower
than this year�s forecast at $3.22 per ounce due to higher silver
production and higher gold by-product credits.� Improvements in the refinery
and the electrowinning process are under way and are expected to contribute to further
production gains in the second quarter.�
The La Colorada mine had another excellent
quarter.� Silver production was 1.0 million ounces, up 17% from the first
quarter of 2007 as a 30% increase in tonnes of ore processed more than offset an
18% decrease in silver grades.� Cash costs declined by 4%, primarily reflecting
increased production and efficiency improvements. �La Colorada continues to be
the site of substantial exploration activity, with three diamond drill rigs
working at the property.
Bolivia
Mining
at the high grade silver-zinc San Vicente
mine continued through the first quarter, with 49,000 ounces of silver produced.�
The major expansion of San Vicente proceeded on schedule, with capital
expenditures totaling $6.3 million during the quarter.� The project is expected
to be completed as planned by the end of 2008.
Argentina
Construction
activities at Manantial Espejo continued
to progress towards a third
quarter start up.� At the end of March the project was 78% complete.� The Maria
and Melissa underground ramps have both intersected the main ore zones and
level development in preparation for stope mining has commenced in both zones. �Open-pit
pre-stripping at both the Maria and Karina union pits continued as planned.� To
date over 172,000 tonnes of ore have been stockpiled in anticipation of
completing the process facility. �Committed expenditures on Manantial Espejo
were $154 million at the end of the quarter and we still expect to be within 5%
of the $185 million capital budget when commissioning starts in a few months
time.� Manantial is forecast to produce 1.4 million ounces of silver and 27,000
ounces of gold in 2008 at negative cash costs.
Silver
Markets
According
to the recently released World Silver Survey 2008 prepared by GFMS the silver
price averaged $13.37/oz in 2007, a 16% increase over 2006 and a stronger
performance than that of gold, platinum and palladium last year.� The upward
trend continued during the first quarter of 2008, when silver averaged $17.59/oz.�
A key development in silver�s recent surge appears to be the increased
interest from investors as demonstrated by the launch of the silver Exchange Traded
Funds in 2006, which now hold over 180 million ounces of silver.�
Simultaneously, industrial demand for silver saw a sixth consecutive year of
growth according to GFMS.� Demand from industrial applications increased 7%
while total global fabrication demand rose 1%.� At the same time, global supply
declined by 2%, in spite of the significant price increase. �
Overall
the fundamentals continue to point towards strong silver prices for the
foreseeable future.
Outlook
Pan
American�s seven producing mines are operating as planned and development
and expansion activities at Manantial Espejo and San Vicente are expected to be
completed this year.� The Company�s financial position is excellent, with
ample working capital to complete our current construction plans and finance
our aggressive exploration and business development activities.� In 2008 Pan
American expects to produce 19.5 million ounces of silver at a cash cost of
$4.31 per ounce, which will make it the second largest primary silver producer
in the world.
***
About Pan
American Silver
Pan American
Silver�s mission is to be the world�s largest and lowest cost
primary silver mining company by increasing its low cost silver production and
silver reserves.� The Company has seven operating mines in Mexico, Peru
and Bolivia.�
An eighth mine in Argentina
is scheduled to commence operations in the second half of 2008.
Selected Financial and
Operating Highlights for the first quarter 2008 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 &
Exploration, who is the Company�s Qualified Person
for the purposes of NI 43-101.
Pan
American will host a conference call to discuss financial and operating results
on Wednesday, May 14, 2008 at 8:00 am PT (11:00 am ET).� North American
participants dial toll-free 1-800-300-0053 and international participants dial
1-647-427-3420.� The call will also be broadcast live on the Internet at http://www.investorcalendar.com/IC/CEPage.asp?ID=128475.�
��Listeners may also gain access by logging on at www.panamericansilver.com. �The
call will be available for replay for one week after the call by dialing
1-800-677-8849 (for North American callers) and 1-402-220-1454 (for
international callers) and entering passcode 44437346.
Information Contact
Kettina Cordero
Coordinator,
Investor Relations
(604) 684-1175
kcordero@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, budget AND EXPENDITURES FOR 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 AND PROJECTED
CASH COSTS PER OUNCE, THE ADEQUACY OF CAPITAL OR THE REQUIREMENTS FOR
ADDITIONAL CAPITAL, EXPECTATIONS REGARDING FUTURE SILVER PRICES, 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, 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, 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
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
|
March 31,
|
|
|
|
|
2008
|
2007
|
|
|
|
|
Consolidated Financial Highlights
(in thousands of US dollars)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Net income for the period
|
|
$
|
30,157
|
$
|
20,435
|
Basic earnings per share
|
|
$
|
0.38
|
$
|
0.27
|
Mine operating earnings
|
|
$
|
48,375
|
$
|
14,874
|
Cash flow from operations (excluding
�� changes in operating assets and liabilities)
|
|
$
|
45,412
|
$
|
13,727
|
Capital spending
|
|
$
|
43,513
|
$
|
19,272
|
Cash and short-term investments
|
|
$
|
136,245
|
$
|
162,342
|
Working capital
|
|
$
|
233,466
|
$
|
207,355
|
|
|
|
|
|
|
Consolidated Ore Milled & Metals Recovered to
Concentrate
|
|
|
|
|
|
|
|
|
|
Tonnes milled
|
|
|
932,715
|
|
637,589
|
Silver metal - ounces
|
|
|
4,509,261
|
|
3,344,084
|
Zinc metal - tonnes
|
|
|
9,404
|
|
9,554
|
Lead metal - tonnes
|
|
|
4,236
|
|
3,734
|
Copper metal - tonnes
|
|
|
1,408
|
|
1,303
|
Gold metal - ounces
|
|
|
6,809
|
|
2,908
|
|
|
|
|
|
|
Consolidated Cost per Ounce of
Silver (net of by-product credits)
|
|
|
|
|
|
|
|
|
|
|
Total cash cost per ounce (1)
|
|
$
|
3.70
|
$
|
2.98
|
Total production cost per ounce (1)
|
|
$
|
6.47
|
$
|
4.75
|
|
|
|
|
|
|
|
|
|
|
|
|
Payable ounces of silver (used in cost per ounce
calculations)
|
|
4,227,256
|
|
3,069,553
|
|
|
|
|
|
|
Average Metal Prices
|
|
|
|
|
|
Silver - London
Fixing
|
|
$
|
17.59
|
$
|
13.29
|
Zinc - LME Cash Settlement per tonne
|
|
$
|
2,426
|
$
|
3,460
|
Lead - LME Cash Settlement per
tonne
|
|
$
|
2,891
|
$
|
1,787
|
Copper - LME Cash Settlement
per tonne
|
|
$
|
7,763
|
$
|
5,941
|
Gold � London
Fixing
|
|
$
|
925
|
$
|
650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mine Operations Highlights
|
|
|
|
|
Three
Months ended
|
|
|
|
|
|
March 31
|
|
|
|
|
2008
|
2007
|
|
|
|
|
|
|
Huaron Mine
|
|
|
|
|
|
|
|
|
|
|
|
Tonnes milled
|
|
|
|
|
187,532
|
|
180,825
|
Average silver grade - grams per tonne
|
|
|
|
|
194
|
|
197
|
Average zinc grade
|
|
|
|
|
2.33%
|
|
2.81%
|
Silver metal � ounces
|
|
|
|
|
946,082
|
|
927,093
|
Zinc metal � tonnes
|
|
|
|
|
2,924
|
|
3,294
|
Lead metal � tonnes
|
|
|
|
|
1,711
|
|
1,767
|
Copper metal � tonnes
|
|
|
|
|
391
|
|
344
|
Gold metal - ounces
|
|
|
|
|
403
|
|
927
|
|
|
|
|
|
|
|
|
Total cash cost per ounce (1)
|
|
|
|
$
|
3.50
|
$
|
1.99
|
Total production cost per ounce (1)
|
|
|
|
$
|
4.80
|
$
|
3.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payable ounces of silver (used in cost per ounce
calculation)
|
|
854,182
|
|
833,160
|
|
|
|
|
|
|
|
|
Morococha Mine (89.4% ownership)
|
|
|
|
|
|
|
|
|
|
|
|
Tonnes milled
|
|
|
157,721
|
|
146,133
|
Average silver grade � grams per tonne
|
|
|
157
|
|
163
|
Average zinc grade
|
|
|
3.12%
|
|
3.34%
|
Silver metal � ounces
|
|
|
667,697
|
|
638,904
|
Zinc metal � tonnes
|
|
|
4,106
|
|
4,066
|
Lead metal � tonnes
|
|
|
1,741
|
|
1,234
|
Copper metal � tonnes
|
|
|
447
|
|
549
|
Gold metal - ounces
|
|
|
305
|
|
116
|
|
|
|
|
|
|
Total cash cost per ounce (1)
|
|
$
|
0.60
|
|
(4.20)
|
Total production cost per ounce (1)
|
|
$
|
2.68
|
|
(2.35)
|
|
|
|
|
|
|
|
|
|
|
|
|
Payable ounces of silver (used in cost per ounce
calculations)
|
|
597,937
|
|
575,958
|
|
|
|
|
|
Quiruvilca Mine
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tonnes milled
|
|
|
|
|
91,962
|
|
89,201
|
Average silver grade - grams per tonne
|
|
|
|
|
144
|
|
169
|
Average zinc grade
|
|
|
|
|
2.43%
|
|
2.43%
|
Silver metal � ounces
|
|
|
|
|
353,785
|
|
403,919
|
Zinc metal � tonnes
|
|
|
|
|
1,792
|
|
1,780
|
Lead metal � tonnes
|
|
|
|
|
558
|
|
595
|
Copper metal � tonnes
|
|
|
|
|
558
|
|
381
|
Gold metal - ounces
|
|
|
|
|
417
|
|
313
|
|
|
|
|
|
|
|
|
Total cash cost per ounce (1)
|
|
|
|
$
|
3.62
|
$
|
2.33
|
Total production cost per ounce (1)
|
|
|
|
$
|
6.08
|
$
|
3.81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payable ounces of silver (used in cost per ounce
calculation)
|
|
325,985
|
|
373,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months ended
|
|
|
|
March 31
|
|
|
|
2008
|
|
2007
|
|
|
|
|
|
|
La Colorada Mine
|
|
|
|
|
|
|
|
|
|
|
|
Tonnes milled
|
|
|
95,409
|
|
68,469
|
Average silver grade - grams per tonne
|
|
|
375
|
|
458
|
Silver metal � ounces
|
|
|
998,930
|
|
854,745
|
Zinc metal � tonnes
|
|
|
365
|
|
48
|
Lead metal � tonnes
|
|
|
226
|
|
138
|
Copper metal � tonnes
|
|
|
922
|
|
857
|
|
|
|
|
|
|
Total cash cost per ounce (1)
|
|
$
|
6.48
|
$
|
6.78
|
Total production cost per ounce (1)
|
|
$
|
8.49
|
$
|
8.50
|
|
|
|
|
|
|
|
|
|
|
|
|
Payable ounces of silver (used in cost per ounce calculations)
|
|
951,861
|
|
837,735
|
|
|
|
|
|
|
|
|
|
|
|
|
Alamo Dorado(2)
|
|
|
|
|
|
|
|
|
|
|
|
Tonnes milled
|
|
|
391,957
|
|
137,041
|
Average silver grade � grams per tonne
|
|
|
133
|
|
124
|
Silver metal � ounces
|
|
|
1,418,911
|
|
267,024
|
Gold metal � ounces
|
|
|
4,762
|
|
696
|
|
|
|
|
|
|
Total cash cost per ounce (1)
|
|
$
|
3.22
|
$
|
10.22
|
Total production cost per ounce (1)
|
|
$
|
7.86
|
$
|
15.13
|
|
|
|
|
|
|
|
|
|
|
|
|
Payable ounces of silver (used in cost per ounce
calculations)
|
|
1,415,364
|
��������
|
266,104
|
|
|
|
|
|
|
|
|
|
|
|
|
San Vicente Mine (95%
ownership)(3)
|
|
|
|
|
|
|
|
|
|
|
|
Tonnes milled
|
|
|
8,135
|
|
15,920
|
Average silver grade � grams per tonne
|
|
|
238
|
|
312
|
Average zinc grade - percent
|
|
|
3.53%
|
|
2.99%
|
Silver metal � ounces
|
|
|
49,043
|
|
136,473
|
Zinc metal - tonnes
|
|
|
217
|
|
367
|
Copper metal - tonnes
|
|
|
11
|
|
28
|
|
|
|
|
|
|
Total cash cost per ounce (1)
|
|
$
|
3.77
|
$
|
3.16
|
Total production cost per ounce (1)
|
|
$
|
5.80
|
$
|
3.82
|
|
|
|
|
|
|
|
|
|
|
|
|
Payable ounces of silver (used in cost per ounce
calculations)
|
|
43,566
|
��������
|
122,176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pyrite Stockpile
|
|
|
|
|
|
|
|
|
|
|
|
Tonnes sold
|
|
|
10,531
|
|
14,730
|
Average silver grade - grams per tonne
|
|
|
221
|
|
245
|
Silver metal � ounces
|
|
|
74,813
|
|
115,925
|
|
|
|
|
|
|
Total cash cost per ounce (1)
|
|
$
|
5.59
|
$
|
3.84
|
Total production cost per ounce (1)
|
|
$
|
5.59
|
$
|
3.84
|
|
|
|
|
|
|
|
|
|
|
|
-
|
Payable ounces of silver (used in cost per ounce
calculations)
|
|
38,360
|
��������
|
60,990
|
|
|
|
|
|
|
|
(1)��� Cash cost per ounce is a non-GAAP
measurement and investors are cautioned not to place undue reliance on it and
are urged to read all GAAP accounting disclosures presented in the unaudited
consolidated financial statements and accompanying footnotes.� In addition, see
the reconciliation of operating costs to �Cash Cost per Ounce of Payable
Silver� set forth in the Management Discussion and Analysis.
(2)�� Alamo
Dorado had not achieved commercial production levels in the 1st quarter of
2007.� Commercial production was achieved on April 1, 2007
(3)�� Pan
American owned 55% of San Vicente in the first quarter of 2007.