Pan American Silver Delivers New Records for Production, Income, and Cash Flow for 2010 Produced 24.3 Million Ounces of Silver, Completing our 15th Consecutive Year of Growth(All amounts in US dollars unless otherwise stated and all production figure
Produced 24.3 Million Ounces of Silver, Completing our 15th Consecutive Year of Growth
(All amounts in US dollars unless otherwise stated and all production figures are approximate)
VANCOUVER, BRITISH COLUMBIA -- (Marketwire) -- 02/15/11 -- Pan American Silver Corp. (TSX: PAA)(NASDAQ: PAAS) (the 'Company'), today reported on its 15th consecutive year of silver production growth and posted record financial results for the fourth quarter and fiscal year ended December 31, 2010. The Company also provided an update on its operations and development projects, as well as a forecast for production and costs for 2011.
Fourth Quarter 2010 Highlights (unaudited) (1)
-- Silver production of 5.7 million ounces.
-- Gold production of 19,249 ounces.
-- Consolidated cash costs of $6.61(2)per ounce of silver, net of by-
product credits.
-- Record mine operating earnings(4)of $91.2 million, an increase of 59%.
-- Record net income of $46.4 million or $0.43 per share, an increase of
67%.
-- Record cash flow from operations (excluding changes in non-cash working
capital)(3)of $82.6 million or $0.77 per share, an increase 57%.
-- Record sales of $191.1 million, an increase of 24%.
2010 Year-End Highlights (unaudited) (1)
-- Silver production increased 5% to a record 24.3 million ounces.
-- Gold production declined slightly to 89,555 ounces.
-- Cash costs rose 3% to $5.69(2)per ounce of silver, net of by-product
credits.
-- Mine operating earnings(4)rose 90% to a record $239.8 million.
-- Net income increased 82% to a record $112.6 million or $1.05 per share.
-- Cash flow from operations (excluding changes in non-cash working
capital) (3)increased 44% to a record $218.3 million or $2.04 per share
-- Sales increased 39% to a record $632 million.
-- Cash and short term investments increased $167.4 million to of $360.5
million at December 31, 2010.
-- Instituted quarterly cash dividend of $0.025 per share and distributed
a total of $0.075 per share.
-- Completed and released a preliminary assessment for the world-class
Navidad silver project in Argentina.
2011 Forecast and Plans
-- Silver production to decrease modestly to 23 to 24 million ounces, at
a cash cost of $7.00 to $7.50 per ounce, net of by-product credits.
-- Produce final feasibility study for the Navidad silver project.
-- Complete preliminary assessment for the La Preciosa silver project,
in Mexico.
1. Financial information in this news release is based on Canadian GAAP;
results are unaudited; percentages compare period-on-period.
2. Cash costs per payable ounce of silver is a non-GAAP measure. The
Company believes that, in addition to cost of sales, cash costs per
ounce is a useful and complementary benchmark that investors use to
evaluate the Company's performance and ability to generate cash flow
and is well understood and widely reported in the silver mining
industry. However, the term cash costs per ounce does not have a
standardized meaning prescribed by Canadian GAAP. Investors are
cautioned that cash costs per ounce should not be construed as an
alternative to cost of sales determined in accordance with Canadian
GAAP as an indicator of performance. The Company's method of
calculating cash costs per ounce may differ from the methods used by
other entities and, accordingly, the Company's cash costs per ounce
may not be comparable to similarly titled measures used by other
entities. See 'Financial and Operating Highlights' below for a
reconciliation of this measure to the Company's cost of sales.
3. Cash flow from operations (excluding changes in non-cash working
capital) is a non-GAAP measure. This non-GAAP measure is used by the
Company to manage and evaluate operating performance and the Company
considers this measure to better reflect normalized cash flow generated
by operations. Cash flow per share is a non-GAAP measure. Cash flow per
share is used as a measure of return on capital and is calculated using
cash flow from operations, before working capital changes, divided by
basic weighted average shares outstanding. Investors are cautioned that
this measure is not defined in current GAAP and there is no comparable
measure defined in GAAP.
4. Mine operating earnings is a non-GAAP measure used by the Company to
assess the performance of its silver mining operations. Mine operating
earnings are equal to sales less cost of sales and depreciation and
amortization, and is considered to be substantially the same as gross
margin.
'By almost every measure, 2010 was the best year in Pan American's history,' said Geoff Burns, President & CEO. 'We recorded our 15th consecutive year of silver production growth. We completed the acquisition of the world class Navidad silver development project in January, and by the end of November had completed sufficient technical work to release our preliminary assessment. Riding the wave of increasing silver prices and production growth we delivered new records for net income and net cash flow, ending 2010 with over $360 million in the bank. We paid our first ever dividend in February and then doubled the frequency of distributions nine months later. In 2010, more than ever before, Pan American was able to realize on the hard work and investments in growth we had made over the previous 5 years. We are well positioned to continue to deliver superior financial results while we prepare to move forward with Navidad, the biggest growth project we've ever had.'
Financial Results
During the fourth quarter of 2010, Pan American generated a new quarterly record for consolidated net income of $46.4 million or $0.43 per share, which was 67% higher than in the same period of 2009. The increase was directly attributable to higher realized prices for all metals produced by the Company, partially offset by the write-off of the carrying value of the Pyrite Stockpile inventory of $1.5 million. Consolidated net income for the year was $112.6 million or $1.05 per share, also a new company record and an increase of 82% compared to 2009. Net income for the full year was boosted by record silver production and significantly higher realized metals prices, partially offset by higher direct operating costs, increased exploration and project development expenses incurred for the advancement of the Navidad and La Preciosa projects and the write down of inventory and receivable balances of $4.8 million related to the closure of Doe Run's La Oroya smelter in Peru.
Sales during the fourth quarter rose to $191.1 million, an increase of 24% from sales recorded in the fourth quarter of 2009. The positive variance resulted from significantly higher metal prices, partially offset by reduced metal production. Pan American's consolidated revenues for the full year were a record $632 million or 39% more than in 2009, thanks to record silver production and higher realized prices for all metals produced by the Company.
During the fourth quarter of 2010, the Company generated record mine operating earnings of $91.2 million, or 59% more than in the last quarter of 2009. Annual consolidated mine operating earnings were also a record $239.8 million, 90% higher than a year ago.
Cash flow from operations, before changes in non-cash operating working capital, during the fourth quarter jumped 57% from a year ago to a record $82.6 million. Consolidated cash flow from operations, before changes in non-cash operating working capital, for 2010 was also a record $218.3 million or 44% higher than in 2009.
At December 31, 2010, Pan American had cash and short term investments of $360.5 million and the Company's working capital position had increased to $433.8 million. The Company is debt free, except for some minor capital leases for equipment, and has not drawn on its existing credit facility.
Production and Operations
During the fourth quarter of 2010, the Company produced 5.7 million ounces of silver and 19,249 ounces of gold, which represented a decrease of 5% and 28% respectively from the last quarter of 2009. Alamo Dorado was once again the Company's largest silver producer at 1.4 million ounces; however, silver production was negatively affected by a decrease in silver produced at the Company's Peruvian operations and at the San Vicente mine in Bolivia. Lower ore grades, and as a consequence lower recoveries, were the main reasons that silver production declined at these operations during the fourth quarter.
2010 was Pan American's 15th consecutive year of silver production growth, with consolidated production of 24.3 million ounces of silver, a 5% increase over 2009 and well ahead of our previously released annual forecast of 23.5 million ounces. As expected, gold production decreased to 89,555 or 11% less than in 2009. Annual silver production was driven by 6.7 million ounces produced at Alamo Dorado, where we mined more quantities of higher grade ore than anticipated. Annual gold production declined due to the expected decrease in gold grades at Manantial Espejo, where annual production declined 11% from 2009 levels to 62,843 ounces. Annual zinc, lead and copper production at 43,103 tonnes, 13,629 tonnes and 5,221 tonnes, respectively was basically in line with the Company's forecast.
Consolidated cash costs for the fourth quarter of 2010 rose to $6.61 per ounce of silver, net of by-product credits. The increase was directly attributable to less by-product credits from less gold and zinc production, the cost impact of processing more tonnes at Huaron at lower grades, and an increase in the Provincial Royalty at Manantial Espejo. 2010 consolidated cash costs were $5.69 per ounce of silver, net of by-product credits, a 3% increase from the $5.53 posted in 2009, but well below the Company's announced 2010 guidance of $5.90 per ounce for 2010.
Outlook
In 2011 the Company expects to produce 23 to 24 million ounces of silver, a decrease of approximately 3% from 2010 production levels. Management believes that forecasted silver production declines at Alamo Dorado (approximately 28%) and Quiruvilca (approximately 10%), will be partially offset by expected production gains at Huaron, San Vicente, La Colorada and Manantial Espejo. Forecasted silver production and cash costs for each operation are presented below:
Estimated Estimated
Silver Production Cash Costs
Million ounces Per Ounce US$
---------------------------------------------------------------------------
Huaron 3.1 - 3.2 11.10 - 13.00
---------------------------------------------------------------------------
Morococha 2.6 - 2.7 4.80 - 6.60
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Quiruvilca 1.0 - 1.1 8.80 - 9.90
---------------------------------------------------------------------------
San Vicente 3.2 - 3.3 7.60 - 8.60
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La Colorada 4.1 - 4.2 7.60 - 8.50
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Alamo Dorado 4.8 - 5.1 5.30 - 5.70
---------------------------------------------------------------------------
Manantial Espejo 4.2 - 4.5 4.80 - 5.60
---------------------------------------------------------------------------
TOTAL 23.0 - 24.0 7.00 - 7.50 (1)
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(1)For purposes of estimating 2011's cash cost, the Company assumed the
following price leves for its by-product production: Zn $2,150/tonne; Pb
$2,150/tonne; Cu $9,000/tonne; Au $1,320/oz.
As expected, the gold grade at Manantial Espejo will decline in the coming year and as a consequence the Company is forecasting approximately 13% lower consolidated gold production in 2011, at 76,000 to 78,000 ounces. Zinc and lead production should increase modestly from last year to between 44,000 to 46,000 tonnes and 14,000 tonnes respectively, while copper production is expected to remain flat at between 5,200 to 5,500 tonnes.
The Company expects upward-inflationary operating cost pressures to persist throughout 2011, particularly in respect of our labour costs and reduced gold production. Royalty increases, stronger local currencies (relative to the US$) and increased concentrate treatment charges are all likely to push our cash costs higher to $7.00 to $7.50 per ounce of silver, net of by-product credits. For purposes of forecasting 2011's cash costs, the Company has assumed lower by-product metal prices.
Growth Projects
During 2010, Pan American invested $37.5 million in the world-class Navidad silver development project. Activities were focused on diamond drilling to further define and raise confidence in the resources of the eight deposits that comprise the project, conduct basic engineering design works, and complete an Environmental Impact Assessment ('EIA') and ultimately a full feasibility report. The Company also launched a comprehensive community and government relations program, to improve the public's understanding of the mining activity and to initiate an open dialogue for the amendment of the current mining law, which bans open pit mining in the province of Chubut where Navidad is located.
On November 30, 2010, the Company released the results of Navidad's preliminary assessment, which defined a highly economic project which would recover the mineral resources through conventional surface mining methods. It is estimated that Navidad could produce an average of 19.8 million ounces of silver over the first 5 years of operation, have a mine life in excess of 17 years and generate an after-tax return of $1.2 billion at a 5% discount rate (assuming a $25 per ounce silver price). The construction of a 15,000 tonnes-per-day operation would require approximately $760 million in pre-production costs, excluding $133 million in recoverable VAT. The project would provide direct employment to approximately 1,500 individuals during the construction phase and to 500 individuals during the operations phase.
The preliminary assessment was subsequently filed with the applicable regulatory authorities on January 14, 2011 and is available on SEDAR at www.sedar.com. The Company expects to complete an EIA during the second quarter of 2011 and a full feasibility study early in the fourth quarter. In 2011, the Company plans to invest $44.7 million in Navidad's continued development, including $16 million for continued diamond drilling. The remainder will be directed towards preparation of the EIA, tailings site and geotechnical evaluation, metallurgical studies, basic engineering designs, the feasibility study and community and government relations activities. Pan American remains confident that an open and informed dialogue regarding open cut mining in the Central Meseta of Chubut will ultimately be resolved favourably and lead to the responsible development of Navidad. The Company intends to continue working with the local communities and provincial government to transform Navidad into a world-class silver mine.
During 2010 Pan American was also very active at the La Preciosa joint-venture, where the Company invested a total of $10 million in exploration and delineation drilling, metallurgical testing and engineering activities. The Company is currently completing additional work to evaluate alternative extraction and development scenarios to maximize the project's economics, in view of the improved metals price environment. During the first half of 2011, Pan American expects to invest $1 million at La Preciosa to complete a preliminary assessment by mid-year 2011.
Furthermore, in 2011 Pan American expects to invest $54 million in sustaining capital at its seven operating mines, including $11 million for brownfield exploration. In addition, the Company expects to spend approximately $12 million in greenfield exploration.
In closing, Geoff Burns said, 'Throughout 15 years of uninterrupted production growth we have built our reputation as a solid operating company that delivers on our production, cost and growth targets. Over the same period, we've managed our balance sheet very conservatively. Together, these attributes, coupled with continued strong prices, should serve us well, as we prepare to embark on the largest development project in our Company's history.'
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, Argentina and Bolivia. Pan American also owns the Navidad silver development project in Chubut, Argentina and is the operator of the La Preciosa joint-venture project in Durango, Mexico.
Technical information contained in this news release has been reviewed by Michael Steinmann, P.Geo., Executive VP Geology & Exploration, and Martin Wafforn, P.Eng., VP Technical Services, who are the Company's Qualified Persons for the purposes of NI 43-101.
Pan American will host a conference call to discuss the results on Wednesday, February 16, 2011 at 11:00 am ET (08:00 am PT). To access the conference, North American participants dial toll free 1-800-319-4610. International participants dial 1-604-638-5340. A live audio webcast can be accessed at https://services.choruscall.com/links/pan110216.html 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 1-604- 638-9010 and entering code 6218 followed by # sign.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
CERTAIN OF THE STATEMENTS AND INFORMATION IN THIS NEWS RELEASE CONSTITUTE 'FORWARD-LOOKING STATEMENTS' WITHIN THE MEANING OF THE UNITED STATES PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND 'FORWARD-LOOKING INFORMATION' WITHIN THE MEANING OF APPLICABLE CANADIAN PROVINCIAL SECURITIES LAWS RELATING TO THE COMPANY AND ITS OPERATIONS. ALL STATEMENTS, OTHER THAN STATEMENTS OF HISTORICAL FACT, ARE FORWARD-LOOKING STATEMENTS. WHEN USED IN THIS NEWS RELEASE THE WORDS, 'BELIEVES', 'EXPECTS', 'INTENDS', 'PLANS', 'FORECAST', 'OBJECTIVE', 'OUTLOOK', 'POSITIONING', 'POTENTIAL', 'ANTICIPATED', 'BUDGET', AND OTHER SIMILAR WORDS AND EXPRESSIONS, IDENTIFY FORWARD-LOOKING STATEMENTS OR INFORMATION. THESE FORWARD-LOOKING STATEMENTS OR INFORMATION RELATE TO, AMONG OTHER THINGS: FUTURE PRODUCTION OF SILVER, GOLD AND OTHER METALS AND THE TIMING OF SUCH PRODUCTION; FUTURE CASH COSTS PER OUNCE OF SILVER; THE PRICE OF SILVER AND OTHER METALS; THE EFFECTS OF LAWS, REGULATIONS AND GOVERNMENT POLICIES AFFECTING PAN AMERICAN'S OPERATIONS OR POTENTIAL FUTURE OPERATIONS, INLCUDING BY NOT LIMITED TO, LAWS IN THE PROVINCE OF CHUBUT, ARGENTINA, WHICH, CURRENTLY HAVE SIGNIFICANT RESTRICTIONS ON MINING; FUTURE SUCCESSFUL DEVELOPMENT OF THE NAVIDAD PROJECT, THE LA PRECIOSA PROJECT, AND OTHER DEVELOPMENT PROJECTS OF THE COMPANY; THE SUFFICIENCY OF THE COMPANY'S CURRENT WORKING CAPITAL, ANTICIPATED OPERATING CASH FLOW OR ITS ABILITY TO RAISE NECESSARY FUNDS; TIMING OFRELEASE OF TECHNICAL OR OTHER REPORTS; ; THE ESTIMATES OF EXPECTED OR ANTICIPATED ECONOMIC RETURNS FROM THE COMPANY'S MINING PROJECTS; ESTIMATED EXPLORATION EXPENDITURES TO BE INCURRED ON THE COMPANY'S VARIOUS PROPERTIES; FORECAST CAPITAL AND NON-OPERATING SPENDING; FUTURE SALES OF THE METALS, CONCENTRATES OR OTHER PRODUCTS PRODUCED BY THE COMPANY; AND THE COMPANY'S PLANS AND EXPECTATIONS FOR ITS PROPERTIES AND OPERATIONS.
THESE STATEMENTS REFLECT THE COMPANY'S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND ARE NECESSARILY BASED UPON A NUMBER OF ASSUMPTIONS AND ESTIMATES THAT, WHILE CONSIDERED REASONABLE BY THE COMPANY, ARE INHERENTLY SUBJECT TO SIGNIFICANT BUSINESS, ECONOMIC, COMPETITIVE, POLITICAL AND SOCIAL UNCERTAINTIES AND CONTINGENCIES. MANY FACTORS, BOTH KNOWN AND UNKNOWN, COULD CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS TO BE MATERIALLY DIFFERENT FROM THE RESULTS, PERFORMANCE OR ACHIEVEMENTS THAT ARE OR MAY BE EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS CONTAINED IN THIS NEWS RELEASE AND THE COMPANY HAS MADE ASSUMPTIONS AND ESTIMATES BASED ON OR RELATED TO MANY OF THESE FACTORS. SUCH FACTORS INCLUDE, WITHOUT LIMITATION: FLUCTUATIONS IN SPOT AND FORWARD MARKETS FOR SILVER, GOLD, BASE METALS AND CERTAIN OTHER COMMODITIES (SUCH AS NATURAL GAS, FUEL OIL AND ELECTRICITY); FLUCTUATIONS IN CURRENCY MARKETS (SUCH AS THE CANADIAN DOLLAR, PERUVIAN SOL, MEXICAN PESO, ARGENTINE PESO AND BOLIVIAN BOLIVIANO VERSUS THE U.S. DOLLAR).
RISKS RELATED TO THE TECHNOLOGICAL AND OPERATIONAL NATURE OF THE COMPANY'S BUSINESS; CHANGES IN NATIONAL AND LOCAL GOVERNMENT, LEGISLATION, TAXATION, CONTROLS OR REGULATIONS AND POLITICAL OR ECONOMIC DEVELOPMENTS IN CANADA, THE UNITED STATES, MEXICO, PERU, ARGENTINA, BOLIVIA OR OTHER COUNTRIES WHERE THE COMPANY MAY CARRY ON BUSINESS IN THE FUTURE; RISKS AND HAZARDS ASSOCIATED WITH THE BUSINESS OF MINERAL EXPLORATION, DEVELOPMENT AND MINING (INCLUDING ENVIRONMENTAL HAZARDS, INDUSTRIAL ACCIDENTS, UNUSUAL OR UNEXPECTED GEOLOGICAL OR STRUCTURAL FORMATIONS, PRESSURES, CAVE-INS AND FLOODING); RISKS RELATING TO THE CREDIT WORTHINESS OR FINANCIAL CONDITION OF SUPPLIERS, REFINERS AND OTHER PARTIES WITH WHOM THE COMPANY DOES BUSINESS; INADEQUATE INSURANCE, OR INABILITY TO OBTAIN INSURANCE, TO COVER THESE RISKS AND HAZARDS; EMPLOYEE RELATIONS; RELATIONSHIPS WITH AND CLAIMS BY LOCAL COMMUNITIES AND INDIGENOUS POPULATIONS; AVAILABILITY AND INCREASING COSTS ASSOCIATED WITH MINING INPUTS AND LABOUR; THE SPECULATIVE NATURE OF MINERAL EXPLORATION AND DEVELOPMENT, INCLUDING THE RISKS OF OBTAINING NECESSARY LICENSES AND PERMITS AND THE PRESENCE OF LAWS AND REGULATIONS THAT MAY IMPOSE RESTRICTIONS ON MINING, INCLUDING THOSE CURRENTLY IN THE PROVINCE OF CHUBUT, ARGENTINA; DIMINISHING QUANTITIES OR GRADES OF MINERAL RESERVES AS PROPERTIES ARE MINED; GLOBAL FINANCIAL CONDITIONS; THE COMPANY'S ABILITY TO COMPLETE AND SUCCESSFULLY INTEGRATE ACQUISITIONS AND TO MITIGATE OTHER BUSINESS COMBINATION RISKS; CHALLENGES TO, OR DIFFICULTY IN MAINTAINING, THE COMPANY'S TITLE TO PROPERTIES AND CONTINUED OWNERSHIP THEREOF; THE ACTUAL RESULTS OF CURRENT EXPLORATION ACTIVITIES, CONCLUSIONS OF ECONOMIC EVALUATIONS, AND CHANGES IN PROJECT PARAMETERS TO DEAL WITH UNANTICIPATED ECONOMIC OR OTHER FACTORS; INCREASED COMPETITION IN THE MINING INDUSTRY FOR PROPERTIES, EQUIPMENT, QUALIFIED PERSONNEL, AND THEIR COSTS; AND THOSE FACTORS IDENTIFIED UNDER THE CAPTION 'RISKS RELATED TO PAN AMERICAN'S BUSINESS' IN THE COMPANY'S MOST RECENT FORM 40-F AND ANNUAL INFORMATION FORM FILED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION AND CANADIAN PROVINCIAL SECURITIES REGULATORY AUTHORITIES.
INVESTORS ARE CAUTIONED AGAINST ATTRIBUTING UNDUE CERTAINTY OR RELIANCE ON FORWARD-LOOKING STATEMENTS. ALTHOUGH THE COMPANY HAS ATTEMPTED TO IDENTIFY IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY, THERE MAY BE OTHER FACTORS THAT CAUSE RESULTS NOT TO BE AS ANTICIPATED, ESTIMATED, DESCRIBED OR INTENDED. THE COMPANY DOES NOT INTEND, AND DOES NOT ASSUME ANY OBLIGATION, TO UPDATE THESE FORWARD- LOOKING STATEMENTS OR INFORMATION TO REFLECT CHANGES IN ASSUMPTIONS OR CHANGES IN CIRCUMSTANCES OR ANY OTHER EVENTS AFFECTING SUCH STATEMENTS OR INFORMATION, OTHER THAN AS REQUIRED BY APPLICABLE LAW.
Pan American Silver Corp. Financial & Operating Highlights
Three months ended Twelve months ended
December 31, December 31,
2010 2009 2010 2009
---------------------------------------------------------------------------
Consolidated Financial Highlights (in thousands of US dollars)
(Unaudited)
Net income for the period $ 46,389 $ 27,805 $ 112,573 $ 61,998
Basic earnings per share $ 0.43 $ 0.31 $ 1.05 $ 0.71
Mine operating earnings $ 91,208 $ 57,334 $ 239,807 $ 126,006
Cash generated by
operations (before
changes in
non-cash operating working
capital) $ 82,597 $ 52,485 $ 218,309 $ 151,658
Capital spending $ 29,639 $ 8,617 $ 83,370 $ 52,751
Cash and short-term
investments $ 360,504 $ 193,097 $ 360,504 $ 193,097
Working capital $ 433,789 $ 272,275 $ 433,789 $ 272,275
Consolidated Ore Milled &
Metals
Recovered to Concentrate
Tonnes milled 1,188,648 1,194,104 4,657,935 4,464,382
Silver metal - ounces 5,667,665 5,992,726 24,285,794 23,043,539
Gold metal - ounces 19,249 26,625 89,556 100,704
Zinc metal - tonnes 10,509 11,891 43,103 44,246
Lead metal - tonnes 3,527 3,473 13,628 14,328
Copper metal - tonnes 1,261 1,582 5,221 6,446
Consolidated Cost per
Ounce of Silver
(net of by-product
credits)
Total cash cost per
ounce(1) $ 6.61 $ 5.36 $ 5.69 $ 5.53
Total production cost per
ounce(1) $ 10.54 $ 9.32 $ 9.51 $ 9.57
Payable ounces of silver 5,410,003 5,696,804 23,224,366 21,888,131
(used in cost per ounce
calculations)
Mine Operations Highlights
Three months ended Twelve months ended
December 31, December 31,
2010 2009 2010 2009
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Huaron Mine
Tonnes milled 195,648 177,447 704,094 699,420
Average silver grade - grams
per tonne 162 182 171 200
Average zinc grade - percent 2.49% 2.56% 2.43% 2.48%
Average silver recovery -
percent 75.0% 77.9% 77.3% 79.2%
Silver - ounces 763,529 810,358 2,987,280 3,562,893
Gold - ounces 576 275 1,525 1,235
Zinc - tonnes 2,820 2,844 10,216 11,198
Lead - tonnes 1,222 1,062 4,346 4,372
Copper - tonnes 396 531 1,654 2,166
Total cash cost per ounce (1) $ 11.86 $ 10.73 $ 12.35 $ 9.95
Total production cost per ounce
(1) $ 13.62 $ 12.27 $ 13.98 $ 11.33
Payable ounces of silver 700,078 731,223 2,753,906 3,225,928
Morococha Mine(i)
Tonnes milled 151,780 169,003 619,819 638,805
Average silver grade - grams
per tonne 146 155 152 156
Average zinc grade - percent 2.42% 3.16% 2.88% 3.24%
Average silver recovery -
percent 87.0% 87.2% 87.0% 86.1%
Silver - ounces 621,289 733,283 2,632,790 2,762,064
Gold - ounces 622 320 2,329 1,291
Zinc - tonnes 3,080 4,499 15,228 16,942
Lead - tonnes 1,022 1,339 4,927 5,520
Copper - tonnes 398 470 1,532 2,030
Total cash cost per ounce (1) $ 5.18 $ 2.36 $ 4.43 $ 5.86
Total production cost per ounce
(1) $ 7.96 $ 4.98 $ 7.13 $ 8.49
Payable ounces of silver 555,351 654,293 2,338,121 2,469,949
(i) Production and cost figures are for Pan American's share only. Pan
American's ownership was 92.2%.
Quiruvilca Mine
Tonnes milled 82,571 82,354 323,427 330,030
Average silver grade - grams
per tonne 136 159 141 155
Average zinc grade - percent 3.74% 3.84% 3.58% 3.80%
Average silver recovery -
percent 83.8% 86.5% 84.7% 86.3%
Silver - ounces 301,782 364,176 1,245,030 1,421,897
Gold - ounces 478 424 1,801 1,522
Zinc - tonnes 2,671 2,774 10,058 10,993
Lead - tonnes 825 784 2,989 3,230
Copper - tonnes 311 407 1,434 1,643
Total cash cost per ounce (1) $ 3.89 $ 6.26 $ 5.87 $ 8.64
Total production cost per ounce
(1) $ 4.61 $ 6.85 $ 6.56 $ 9.25
Payable ounces of silver 270,666 332,568 1,128,557 1,288,720
Pyrite Stockpiles
Tonnes sold - - - 13,984
Average silver grade -
grams per tonne - - - 218
Silver - ounces - - - 98,235
Total cash cost per ounce
(1) $ - $ - $ - $ 3.78
Total production cost per
ounce (1) $ - $ - $ - $ 3.78
Payable ounces of silver - - - 50,218
Alamo Dorado Mine
Tonnes milled 414,543 432,944 1,675,952 1,671,257
Average silver grade -
grams per tonne 130 97 147 111
Average gold grade - grams
per tonne 0.37 0.36 0.38 0.39
Average silver recovery -
percent 85.4% 85.4% 88.4% 87.7%
Silver - ounces 1,351,451 1,062,582 6,721,258 5,320,637
Gold - ounces 4,013 4,332 16,746 18,211
Copper - tonnes 24 4 89 206
Total cash cost per ounce
(1) $ 3.40 $ 5.07 $ 3.16 $ 4.51
Total production cost per
ounce (1) $ 7.81 $ 9.81 $ 7.41 $ 9.12
Payable ounces of silver 1,344,999 1,058,770 6,683,134 5,284,037
La Colorada Mine
Tonnes milled 87,496 83,460 345,697 324,916
Average silver grade -
grams per tonne 379 408 378 384
Average silver recovery -
percent 88.6% 86.2% 88.0% 86.2%
Silver - ounces 945,753 945,933 3,701,568 3,467,856
Gold - ounces 1,148 1,741 4,312 6,554
Zinc - tonnes 915 638 2,940 2,311
Lead - tonnes 458 288 1,366 1,205
Total cash cost per ounce
(1) $ 7.88 $ 7.66 $ 8.59 $ 7.55
Total production cost per
ounce (1) $ 9.14 $ 11.31 $ 9.73 $ 11.21
Payable ounces of silver 900,513 909,623 3,537,905 3,333,170
San Vicente Mine(i)
Tonnes milled 67,681 60,747 271,483 167,006
Average silver grade -
grams per tonne 347 595 389 537
Average zinc grade -
percent 2.03% 2.42% 2.29% 2.26%
Average silver recovery -
percent 89.3% 92.0% 89.1% 91.0%
Silver - ounces 674,908 1,069,572 3,033,046 2,626,774
Zinc - tonnes 1,023 1,135 4,661 2,803
Copper - tonnes 132 170 512 401
Total cash cost per ounce
(1) $ 9.08 $ 6.56 $ 8.21 $ 7.07
Total production cost per
ounce (1) $ 13.38 $ 8.72 $ 12.07 $ 9.51
Payable ounces of silver 630,957 1,005,014 2,823,869 2,458,600
(i) Production and cost figures are for Pan American's share
only. Pan American's ownership was 95%.
Manantial Espejo Mine
Tonnes milled 188,929 188,149 717,463 632,949
Average silver grade -
grams per tonne 187 186 191 209
Average gold grade - grams
per tonne 2.23 3.63 2.81 3.79
Average silver recovery -
percent 91.7% 87.9% 90.5% 87.6%
Average gold recovery -
percent 95.1% 94.5% 94.7% 94.6%
Silver - ounces 1,008,953 1,006,823 3,964,822 3,783,183
Gold - ounces 12,411 19,533 62,843 71,892
Total cash cost per ounce
(1) $ 6.08 0.11 $ 1.61 (0.84)
Total production cost per
ounce (1) $ 14.53 9.12 $ 10.16 8.19
Payable ounces of silver 1,007,439 1,005,313 3,958,874 3,777,508
(1)Cash costs per payable ounce of silver is a non-GAAP measure. The
CompanY believes that, in addition to cost of sales, cash cost per
ounce is a useful and complementary benchmark that investors use to
evaluate the Company's performance and ability to generate cash flow
and is well understood and widely reported in the silver mining
industry. However, cash costs per ounce does not have a standardized
meaning prescribed by Canadian GAAP as an indicator of performance.
A reconciliation is shown below.
Cash Costs and Total Production Costs per Ounce of Payable Silver (net of
by-product credits)
Three months ended Twelve months ended
December 31, December 31,
2010 2009 2010 2009
--------------------------- ----------------------------
Cost of sales $ 78,760 $ 72,697 $ 305,696 $ 245,637
Add/(Subtract)
Smelting, refining,
and transportation
charges 16,849 19,015 66,441 64,118
By-product
credits (65,483) (69,357) (253,925) (215,657)
Mining
royalties 6,507 5,598 21,300 11,867
Workers
participation and
voluntary payments (2,552) (463) (6,230) (1,151)
Change in
inventories 4,269 1,633 5,977 15,068
Other (2,040) 1,888 (5,092) 3,368
Minority
interest
adjustment (560) (501) (2,112) (2,144)
---------------- ------------------------- ---------------------------
Cash Operating A
Costs $ 35,750 30,510 $ 132,055 121,106
Add/(Subtract)
Depreciation
and
amortization 21,131 24,375 86,483 83,169
Asset
retirement and
reclamation 732 753 2,929 2,998
Change in
inventories 8 (2,195) 1,212 3,388
Other (337) (70) (755) (271)
Minority
interest
adjustment (274) (260) (1,108) (867)
----------------- --------------------------- ----------------------------
Production B
Costs $ 57,010 $ 53,113 $ 220,816 $ 209,523
Payable Ounces C
of Silver 5,410,003 5,696,804 23,224,366 21,888,131
-------------------------- ----------------------------
Total Cash A/C
Operating
Costs per
Ounce $ 6.61 $ 5.36 $ 5.69 $ 5.53
------------------------ ----------------------------
Total B/C
Production
Costs per
Ounce $ 10.54 $ 9.32 $ 9.51 $ 9.57
------------------------ ----------------------------
Pan American Silver Corp.
Consolidated Balance Sheets
As at December 31, 2010
(Unaudited in thousands of U.S. dollars)
2010 2009
---------------------------------------------------------------------------
Assets
Current
Cash $ 179,921 $ 100,474
Short-term investments 180,583 92,623
Accounts receivable 66,893 66,059
Income taxes receivable 87 12,132
Inventories 106,854 93,446
Unrealized gain on commodity contracts - 160
Future income taxes 8,172 4,993
Prepaid and other deferred expenses 6,520 2,568
---------------------------------------------------------------------------
Total Current Assets 549,030 372,455
Mineral property, plant and equipment, net 1,492,538 1,457,724
Long-term refundable tax receivable 28,171 11,909
Future income taxes 1,251 -
Other assets 1,618 6,521
---------------------------------------------------------------------------
Total Assets $ 2,072,608 $ 1,848,609
---------------------------------------------------------------------------
Liabilities
Current
Accounts payable and accrued liabilities $ 81,230 $ 96,159
Future income taxes 4,312 -
Income taxes payable 29,699 4,021
---------------------------------------------------------------------------
Total Current Liabilities 115,241 100,180
Provision for asset retirement obligation and
reclamation 69,463 62,775
Future income taxes 331,228 305,820
Other liabilities 28,614 20,788
---------------------------------------------------------------------------
Total Liabilities 544,546 489,563
---------------------------------------------------------------------------
Non-controlling Interests 7,774 15,256
Shareholders' Equity
Share capital (authorized: 200,000,000 common
shares of no par value) 1,272,860 1,206,647
Contributed surplus 45,303 47,293
Accumulated other comprehensive income 9,346 1,618
Retained earnings 192,779 88,232
---------------------------------------------------------------------------
Retained earnings and accumulated other
comprehensive income 202,125 89,850
---------------------------------------------------------------------------
Total Shareholders' Equity 1,520,288 1,343,790
---------------------------------------------------------------------------
Total Liabilities, Non-controlling Interests
and Shareholders' Equity $ 2,072,608 $ 1,848,609
---------------------------------------------------------------------------
Pan American Silver Corp.
Consolidated Statements of Operations
(Unaudited In thousands of U.S. dollars, except for share and per share
amounts)
Three months ended Twelve months ended
December 31, December 31,
2010 2009 2010 2009
--------------------------------------------------------------------------
Sales $ 191,099 $ 154,406 $ 631,986 $ 454,812
Cost of sales 78,760 72,697 305,696 245,637
Depreciation and amortization 21,131 24,375 86,483 83,169
--------------------------------------------------------------------------
Mine operating earnings 91,208 57,334 239,807 126,006
General and administrative 5,900 3,571 17,109 12,769
Exploration and project
development 433 4,609 24,527 9,934
Accretion of asset retirement
obligation 732 753 2,929 2,998
Doubtful accounts and inventory
provisions 1,461 - 4,754 4,375
--------------------------------------------------------------------------
Operating earnings 82,682 48,401 190,488 95,930
Interest and financing expenses (766) (2,472) (2,061) (4,292)
Investment and other income
(expenses), net 3,090 (3,407) 5,488 (1,467)
Foreign exchange gains (losses) 4,762 1,781 11,058 (1,018)
Net (losses) gains on commodity
and foreign currency
contracts (201) (414) (237) 1,918
Net gains (losses) on sale of
assets 76 8 651 (220)
--------------------------------------------------------------------------
Income before taxes and non-
controlling interest 89,643 43,897 205,387 90,851
Non-controlling interests (28) (863) (1,827) (1,097)
Income tax provision (43,226) (15,229) (90,987) (27,756)
--------------------------------------------------------------------------
Net income for the period $ 46,389 $ 27,805 $ 112,573 $ 61,998
--------------------------------------------------------------------------
Earnings per share:
Basic income per share $ 0.43 $ 0.31 $ 1.05 $ 0.71
Diluted income per share $ 0.43 $ 0.31 $ 1.05 $ 0.71
Weighted average number of
shares outstanding
(in thousands)
Basic 107,227 88,337 106,969 87,578
Diluted 108,043 88,950 107,575 87,751
Pan American Silver Corp.
Consolidated Statements of Cash Flows
(Unaudited In thousands of U.S. dollars)
Three months ended Twelve months ended
December 31 December 31
2010 2009 2010 2009
Operating activities
Net income for the period $ 46,389 $ 27,805 $ 112,573 $ 61,998
Reclamation expenditures (372) (500) (1,045) (992)
Items not affecting cash:
Depreciation and amortization 21,131 24,375 86,483 83,169
Asset retirement and reclamation
accretion 732 753 2,929 2,998
Net (losses) gains on sale of
assets (76) (8) (651) 220
Future income taxes 15,646 2,418 17,227 2,113
Unrealized (losses) gains on
foreign exchange (3,781) (3,099) (9,976) 1,478
Non-controlling interests 28 863 1,827 1,097
Other operating adjustments and
charges 1,461 2,770 4,754 7,145
Gain on disposal of securities
for acquisition of subsidiary - (3,640) - (6,353)
Net change in unrealized (gains)
losses on commodity and foreign
currency contracts (79) 54 160 (3,597)
Stock-based compensation 1,518 694 4,028 2,382
Changes in non-cash operating
working capital 1,032 (367) 23,947 (35,782)
--------------------------------------------------------------------------
Cash generated by operating
activities 83,629 52,118 242,256 115,876
--------------------------------------------------------------------------
Investing activities
Mining property, plant and
equipment expenditures (net (29,639) (8,617) (83,370) (52,751)
of related accruals)
Acquisition of net assets of
subsidiary, (net of $4.3 million
cash acquired) - 942 - 942
Net (purchase of) proceeds from
sale of short-term investments (41,630) (6,285) (80,162) (80,136)
Proceeds from sale of assets 95 71 1,337 208
Proceeds from (purchase of)
other assets 2,222 (4,051) (3,922) (14,605)
--------------------------------------------------------------------------
Cash used in investing activities (68,952) (17,940) (166,117) (146,342)
--------------------------------------------------------------------------
Financing activities
Proceeds from issuance of
common shares 8,726 - 11,887 103,909
Share issue costs - - - (5,592)
Dividends paid (2,680) - (8,026) -
Net payments to
non-controlling interests (312) - (992) -
Net proceeds (repayments) from
advances on metal 4,474 955 (270) 5,742
shipments and loans
--------------------------------------------------------------------------
Cash generated by financing
activities 10,208 955 2,599 104,059
--------------------------------------------------------------------------
Cash, beginning of period 154,442 65,249 100,474 26,789
--------------------------------------------------------------------------
Increase in cash during
the period 24,885 35,133 78,738 73,593
Effect of exchange rate
changes on cash 594 92 709 92
--------------------------------------------------------------------------
Cash, end of period $ 179,921 $ 100,474 $ 179,921 $ 100,474
--------------------------------------------------------------------------
Supplemental Cash
Flow Information
Interest paid $ - $ - $ - $ -
-------------------------------------------
Taxes paid $ 10,085 $ 5,018 $ 36,651 $ 21,655
-------------------------------------------
Significant Non-Cash Items
Debenture and equity issued
to acquire mineral interest $ - $ 514,870 $ 47,517 $ 514,870
------------------------------------------
Stock compensation issued to
employees and directors $ 2,024 $ 335 $ 4,768 $ 1,963
------------------------------------------
Contacts:
Pan American Silver Corp.
Kettina Cordero
Coordinator, Investor Relations
(604) 684-1175
info@panamericansilver.com
www.panamericansilver.com