Pan American Silver Corp.
TSX : PAA
NASDAQ : PAAS

Pan American Silver Corp.

February 15, 2011 23:41 ET

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 figures are approximate)

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Feb. 15, 2011) - 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 $6.612 per ounce of silver, net of by-product credits.
  • Record mine operating earnings4 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 $5.692 per ounce of silver, net of by-product credits.
  • Mine operating earnings4 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 Perú.

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
Quiruvilca 1.0 – 1.1 8.80 – 9.90
San Vicente 3.2 – 3.3 7.60 – 8.60
La Colorada 4.1 – 4.2 7.60 – 8.50
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
 
 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  
 
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*                  
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  
 
* 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  
    Three months ended   Twelve months ended  
    December 31,   December 31,  
    2010   2009   2010   2009  
   
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*                  
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  
   
* 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 Costs A $ 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 Costs B $ 57,010 $ 53,113 $ 220,816 $ 209,523  
Payable Ounces of Silver C     5,410,003   5,696,804             23,224,366   21,888,131  
Total Cash Operating Costs per Ounce A/C   $ 6.61 $ 5.36   $ 5.69 $ 5.53  
Total Production Costs per Ounce B/C   $ 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  

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