Pan American Silver Corp.
TSX : PAA
NASDAQ : PAAS

Pan American Silver Corp.

February 21, 2008 06:00 ET

Pan American Silver Reports Record Earnings, Cash Flow and Production for 2007

(All amounts in US dollars unless otherwise stated)

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Feb. 21, 2008) - Pan American Silver Corp. (TSX:PAA)(NASDAQ:PAAS) today reported unaudited financial and operating results for the fourth quarter and fiscal year ended December 31, 2007. The Company also provided an update on production, operations and outlook for 2008.

"By all measures, 2007 was by far Pan American's best year ever," said Geoff Burns, President and CEO. "We achieved new records for silver production, metal sales, operating cash flows, and net earnings, while at the same time solidly progressing our development projects. Our growing production, forecast at 19.5 million ounces in 2008, combined with robust silver prices makes our prospects for future years even brighter."



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Fourth Quarter 2007 Highlights (unaudited) (i)
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- Record silver production of 5.1 million ounces, up 63% over Q4 2006
- Record cash flow from operating activities (before changes in non-cash
working capital) of $27.3 million up 23% over Q4 2006
- Net income of $26.1 million ($0.34/share)
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Full Year 2007 Highlights (unaudited) (i)
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- Record silver production of 17.1 million ounces, up 31% over 2006, at a
cash cost of $3.42 per ounce
- Record sales of $301.1 million, up 18% over 2006
- Record cash flow from operating activities (before changes in non-cash
working capital) of $105.9 million, up 54% from 2006
- Record net income of $88.9 million ($1.16/share), up 53% from
$58.2 million ($0.79/share) in 2006
- Commenced production at Alamo Dorado; continued construction of
Manantial Espejo; began expansion at San Vicente
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Forecast 2008
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- Silver production estimated to increase 14% to 19.5 million ounces
- Cash costs projected at $4.31 per ounce of silver
- Manantial Espejo expected to begin operations in mid-2008
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(i) Financial information based on Canadian GAAP.


The Company's projections noted in this press release as to future production of silver and other minerals, cash costs and the expansion costs, IRR and payback period at San Vicente are forward-looking information and are based upon the following key assumptions:

- the Company's forecast production for each individual mine is achieved,

- the Company's schedule for the development, completion and ramp-up of production from Manatial Espejo and the expansion of San Vicente is achieved,

- the Company is able to obtain or maintain the necessary permits and approvals from government authorities to achieve the forecast production, cash costs and expansion of San Vicente,

- there is no disruption in production, increase in costs or disruption in the expansion of San Vicente due to: natural phenomena and hazards; technological, mechanical or operational disruptions; changes in local governments, legislation, taxation or the political or economic environment; fluctuations in the price of silver, gold or base metals; fluctuations in the local currencies of those countries in which the Company carries on business; unexpected work stoppages or labour disputes; increased competition in the mining industry for equipment and qualified personnel; fluctuations in the price for natural gas, fuel oil and other key supplies; or transportation disruptions.

No assurance can be given that the indicated quantities of silver and other minerals will be produced, projected cash costs or forecast expansion costs will be achieved or IRR and payback at San Vicente will be met. Expected future production, cash costs and expansion costs, IRR and payback periods are inherently uncertain and could materially change over time. If actual results differ from the assumptions set out above, the Company's mineral production, cash costs and expansion costs, IRR and payback at San Vicente may differ materially from the forecasts in this press release.

Financial Results

The Company finished the year with record net income of $88.9 million ($1.16/share), up 53% from $58.2 million ($0.79/share) in 2006. Net income for the fourth quarter of 2007 was $26.1 million, or $0.34 per share. Even though fourth quarter production increased significantly, a strike in a Peruvian port limited our concentrate shipments and concentrate sales.

Cash flow from operations before changes in non-cash working capital reached new highs, increasing 23% as compared to the fourth quarter of 2006, to $27.3 million. For the full year in 2007, cash flow from operations before changes in non-cash working capital rose to $105.9 million, a 54% increase over 2006.

The improved financial results for the year were primarily due to commencement of operations at the Company's new Alamo Dorado mine in Mexico, plus higher silver and lead prices. In addition, net income for 2007 included a gain on the sale of the Company's interest in the Dukat mine in Russia of $12.4 million and a gain on commodity and foreign currency contracts of $5.3 million. Included in the net income for 2006 were a loss on commodity and foreign currency contracts of $18.3 million, and a gain on the sale of the Company's interest in Dukat of $7.5 million.

In 2007 sales grew by 18% to a new high of $301.1 million on the strength of increased silver and gold production and higher realized silver prices. Sales in the fourth quarter of 2007 increased to $85.9 million.

Cost of sales increased during the fourth quarter to $48.8 million, and in the 12-month period were $167.8 million. Increased costs of sales were a direct result of the inclusion of production from Alamo Dorado, combined with higher industry-wide costs for labour, energy and supplies. Strengthening currencies in Latin America, particularly Peru, also contributed to higher costs.

Working capital at December 31, 2007 was $186.3 million, a decrease of $18.3 million from $204.6 million at year end 2006. Capital investments of $123.4 million, primarily for the construction of the Manantial Espejo and the San Vicente development projects were funded mostly by cash flow from operations.

Production And Operations

Pan American Silver produced a record 5.1 million ounces of silver in the fourth quarter of 2007, 63% more than in the same quarter of 2006 and the seventh consecutive quarter of increased production. For the 12-month period, silver production also established a new benchmark of 17.1 million ounces, up 31% from 2006.

"Our La Colorada, Alamo Dorado and Huaron mines led Pan American's production increase during 2007 and we delivered, as promised, our 13th consecutive year of silver growth," said Mr. Burns. "The startup of Manantial Espejo in Argentina is on track for mid-2008, and we fully expect to deliver record silver production in 2008, while significantly increasing our gold production."

Consolidated cash costs of silver production for 2007 were $3.42 per ounce, versus $1.89 in 2006. The increase was partly due to commencement of production at Alamo Dorado, which is a slightly higher cost producer as it has limited by-product credits.

Peru

The Huaron mine produced 3.8 million ounces of silver in 2007, 4% higher than the previous year. Cash costs were $2.78 per ounce, 15% more than in 2006 because of higher operating costs, royalties and treatment charges. During 2007, a mine deepening project was initiated at Huaron that aims to gain access to a significant portion of high grade ore below the 250 foot level. A very successful exploration program increased Huaron's proven and probable resources by 15% to 58.8 million ounces of silver.

Silver production at Morococha during 2007 totaled 2.9 million ounces, slightly less than the year-earlier period but 7% above 2007's forecast. Morococha continued to be the Company's lowest cost producer with cash costs of negative $2.16 per ounce of silver for the year. Revenues from by-product credits continued to be substantially higher than operating costs. During 2007, development continued on the Manto Italia ramp, a two-year initiative designed to provide long-term access to several untapped mining zones.

At the Quiruvilca mine, silver production was 1.6 million ounces in 2007, off from 2.1 million ounces the previous year, due to lower ore grades and a 2% decrease in tonnage milled. Cash costs were $2.43 per ounce. A project to access higher grade ore in the deeper southern area of the mine has been completed. This access ramp to the 400 level is being commissioned in the first quarter of 2008.

The Silver Stockpile operation produced 454,202 ounces of silver in 2007. Cash costs totaled $3.24 per ounce, virtually the same as the $3.17 per ounce recorded in 2006.

Mexico

Commercial production at Alamo Dorado, the Company's newest silver mine, began in the second quarter. Operations steadily improved during the second half of 2007 and the mine is currently exceeding original feasibility estimates. The operation produced 3.8 million ounces of silver and 13,335 ounces of gold during its nine months of commercial operation in 2007. Silver production of 5.2 million ounces and 16,000 ounces of gold is projected for 2008. Cash costs were $4.41 per ounce of silver in 2007, which was higher than forecast due to higher than expected start-up costs combined with rising energy, labor and consumable expenses. With the operation hitting its stride, the Company expects cash costs to decline modestly to $4.19 per ounce during 2008.

The La Colorada mine was the Company's top silver producer during 2007, increasing output by 13% to 4.0 million ounces as compared to the previous year. Much of the gain was the result of increased tonnages milled following the restart of a sulphide ore processing circuit. Cash costs at La Colorada were $6.88 per ounce, similar to levels achieved in 2006. La Colorada was and will continue to be the site of substantial exploration activity, with three diamond drill rigs working at the property for most of 2007 and continuing in 2008. Refer to our press release of February 20, 2008 for a discussion of the silver reserves and resources replaced as a direct result of the drilling effort. Further additions are anticipated in 2008 once new discovered areas are included in the mine plan.

Bolivia

At the high-grade, silver-zinc San Vicente mine, the Company increased ownership to 95% from 55% in June 2007; at the same time it announced a major expansion to fully develop the property's ore body. As a result, the Company's share of San Vicente production increased to 619,000 ounces of silver in 2007, compared to 265,000 ounces in 2006. Cash costs were $5.41 per ounce which was up significantly from 2006 due to lower silver and zinc grades, combined with rising operating costs. The mine project is proceeding well and completion is expected to be on schedule at year end 2008. The Company now expects the expansion project to cost $65 million less cash flow generated from 2008 mining operations. The expansion project includes the development of trackless mining methods, replacing the main mine hoist, constructing a 750 metric ton per day flotation processing facility, upgrading the site infrastructure, upgrading the power and water supply systems, and completing several community development initiatives. In spite of the capital escalation, economics remain sound and at the company's reserve prices, the IRR for San Vicente is estimated at 16% with a payback period of 4 years. When completed, San Vicente is projected to produce on average approximately 2.8 million ounces of silver per year for the first five years of full production. The Company plans to continue to mine and process ore through a third party mill while it completes the expansion.

Argentina

Construction of Manantial Espejo in Argentina, Pan American's eighth mine, proceeded on schedule during 2007. Over 600 Pan American employees and contractors are on site. This forecasted $185 million project, which includes $30 million in refundable VAT tax, consists of developing two underground and two surface mines, constructing a 2000 metric ton per day processing facility, installing the necessary site infrastructure, expanding housing in the local community, and participating in the construction of a power line that will service the mine and the local community. The two primary underground ramps advanced during the year, intersecting both ore veins as expected. Open pit mining is well ahead of schedule and to date there are already 132,000 tonnes of ore stockpiled awaiting the completion of the processing facility. At year end, project expenditures totaled $97.9 million and it is estimated that overall construction was 58% complete. Mechanical completion is scheduled for mid 2008, reaching full capacity of 2,000 tonnes per day early in the fourth quarter. Manantial Espejo is projected to produce an average of 4.1 million ounces of silver and 60,000 ounces of gold annually.

Outlook

In 2008, the Company expects to deliver its 14th consecutive year of production growth by increasing silver production 14% to 19.5 million ounces. This growth will be driven by the first full year of operation of the new Alamo Dorado mine and the commencement of production at Manantial Espejo. Production of by-product zinc and lead are also expected to increase in 2008, while gold output will be significantly higher due to new production from Manantial Espejo. Consolidated cash costs are forecast to be $4.31 per ounce, while capital expenditures are forecast at $152.1 million for 2008, most of which are targeted to complete construction at Manantial Espejo and the expansion of San Vicente. On a mine by mine basis, 2008's production is forecast as follows:



2008 Production Forecast(1)
---------------------------



Projected Ounces Projected Cash
of Silver (000,s) Costs ($/oz)

Huaron 3.7 $5.12
Morococha 2.7 $0.33
Quiruvilca 1.5 $5.40
Silver Stockpiles 0.4 $3.28
Alamo Dorado 5.2 $4.19
La Colorada 3.9 $7.50
San Vicente 0.7 $7.50
Manantial Espejo 1.4 $1.15
---------------------------------------------------------
Totals 19.5 $4.31

(1) 2008 cash cost estimates are higher than 2007 realized cash costs due
to the forecast assumption that by-product metal prices in 2008 will be
lower than in 2007. Assumed metal prices used in the above forecast are
as follows: Zinc - $2,100/tonne; Lead - $2,100/tonne; Copper - $6,000/tonne;
Gold - $700/oz


Silver Market

Silver prices continued to increase through 2007, averaging $13.38 per ounce for the year, an increase of almost 16%, year over year. Supply and demand fundamentals remain robust, with silver investment continuing to increase. These elements combined with weakness in the US dollar support a continuing favourable outlook for silver prices in 2008.

Selected Financial and Operating Highlights for the fourth quarter of 2007 are attached to this news release.

Pan American will host a conference call to discuss financial and operating results on Thursday, February 21, 2008 at 8:00 am PT (11:00 am ET). North American participants dial toll-free 1-800-762-9439 and international participants dial 1-480-629-9041. The call will also be broadcast live on the Internet at www.vcall.com/IC/CEPage.asp?ID=126040.

A playback can be accessed for one week after the call by dialing 1-800-406-7325 (from North America) and 1-303-590-3030 (from the rest of the world) and entering passcode 3844191.

Technical information contained in this news 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.

About Pan American Silver Corp.

Pan American's mission is to be the world's largest and lowest cost primary silver mining company by increasing its silver production, silver reserves and the cost efficiency of its operations. The Company has seven operating silver mines in Mexico, Peru and Bolivia. An eighth mine in Argentina is scheduled to commence operations in 2008.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

THIS NEWS RELEASE CONTAINS "FORWARD-LOOKING INFORMATION" WITHIN THE MEANING OF THE UNITED STATES "PRIVATE SECURITIES LITIGATION REFORM ACT" OF 1995 AND APPLICABLE CANADIAN SECURITIES LEGISLATION. STATEMENTS CONTAINING FORWARD-LOOKING INFORMATION EXPRESS, AS AT THE DATE OF THIS NEWS RELEASE, THE COMPANY'S PLANS, ESTIMATES, FORECASTS, PROJECTIONS, EXPECTATIONS, OR BELIEFS AS TO FUTURE EVENTS OR RESULTS AND THE COMPANY DOES NOT INTEND, AND DOES NOT ASSUME ANY OBLIGATION TO, UPDATE SUCH STATEMENTS CONTAINING THE FORWARD-LOOKING INFORMATION. GENERALLY, FORWARD-LOOKING INFORMATION CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS "PLANS", "PROJECTS" OR "PROJECTED", "EXPECTS" OR "DOES NOT EXPECT", "IS EXPECTED", "ESTIMATES", "FORECASTS", "SCHEDULED", "INTENDS", "ANTICIPATES" OR "DOES NOT ANTICIPATE", OR "BELIEVES", OR VARIATIONS OF SUCH WORDS AND PHRASES, OR STATEMENTS THAT CERTAIN ACTIONS, EVENTS OR RESULTS "MAY", "CAN", "COULD", "WOULD", "MIGHT" OR "WILL BE TAKEN", "OCCUR" OR "BE ACHIEVED". STATEMENTS CONTAINING FORWARD-LOOKING INFORMATION INCLUDE, BUT ARE NOT LIMITED TO, STATEMENTS WITH RESPECT TO TIMING AND BUDGET OF CONSTRUCTION ACTIVITIES AT MANANTIAL ESPEJO AND SAN VICENTE, THE EXPECTED RESULTS FROM EXPLORATION ACTIVITIES, THE ECONOMIC VIABILITY OF THE DEVELOPMENT OF NEWLY DISCOVERED ORE BODIES, THE ESTIMATION OF MINERAL RESERVES AND RESOURCES, FUTURE PRODUCTION LEVELS, EXPECTATIONS REGARDING MINE PRODUCTION COSTS, THE REQUIREMENTS FOR ADDITIONAL CAPITAL, THE RESULTS OF DRILLING, AND PAN AMERICAN'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 AND ITS OPERATIONS TO BE MATERIALLY DIFFERENT FROM THOSE EXPRESSED OR IMPLIED BY SUCH STATEMENTS. SUCH FACTORS INCLUDE, AMONG OTHERS, RISKS RELATED TO TECHNOLOGICAL AND OPERATIONAL NATURE OF THE COMPANY'S BUSINESS, CHANGES IN LOCAL GOVERNMENT LEGISLATION, TAXATION OR THE POLITICAL OR ECONOMIC ENVIRONMENT, EXPOSURE TO FLUCTUATIONS IN THE COMPANY'S INVESTMENTS AND THE LOCAL CURRENCIES OF THOSE COUNTRIES IN WHICH PAN AMERICAN CARRIES ON BUSINESS, THE ACTUAL RESULTS OF CURRENT EXPLORATION ACTIVITIES, CONCLUSIONS OF ECONOMIC EVALUATIONS, CHANGES IN PROJECT PARAMETERS TO DEAL WITH UNANTICIPATED ECONOMIC FACTORS, FUTURE PRICES OF SILVER, GOLD AND BASE METALS, INCREASED COMPETITION IN THE MINING INDUSTRY FOR PROPERTIES, EQUIPMENT, QUALIFIED PERSONNEL, AND THEIR RISING COSTS, UNPREDICTABLE RISKS AND HAZARDS RELATING TO THE OPERATION AND DEVELOPMENT OF OUR MINES OR PROPERTIES, UNEXPECTED WORK STOPPAGES OR LABOUR DISPUTES, TRANSPORTATION DISRUPTIONS, 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 Twelve months ended
December 31 December 31
2007 2006 2007 2006
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Consolidated Financial
Highlights (in thousands
of US dollars)
(Unaudited)

Net income for the
period $ 26,062 $ 29,648 $ 88,860 $ 58,206
Basic income per share $ 0.34 $ 0.39 $ 1.16 $ 0.79
Mine operating
earnings(1) $ 28,859 $ 35,063 $ 104,275 $ 113,319
Cash flow from
operations (excluding
changes in non-cash
operating working
capital) $ 27,317 $ 22,126 $ 105,939 $ 68,780
Mineral property,
plant and equipment
expenditures $ 34,545 $ 25,129 $ 123,415 $ 96,401
Cash and short-term
investments $ 107,315 $ 171,948 $ 107,315 $ 171,948
Net working capital $ 186,337 $ 204,616 $ 186,337 $ 204,616

Consolidated Production

Silver - ounces 5,128,959 3,146,683 17,113,027 13,018,353
Zinc - tonnes 9,373 9,253 39,075 39,367
Lead - tonnes 4,376 3,380 16,284 15,307
Copper - tonnes 1,538 1,214 5,650 4,546
Gold - ounces 7,824 2,131 23,580 7,458

Consolidated Cost per
Ounce of Silver (net
of by-product credits)

Total cash cost per
ounce (2) $ 4.54 $ 2.42 $ 3.42 $ 1.89
Total production cost
per ounce (2) $ 7.11 $ 3.96 $ 5.69 $ 3.38

Payable ounces of silver 4,819,255 2,879,001 15,911,734 11,922,185

Average Metal Prices
Silver - London Fixing
per ounce $ 14.21 $ 12.58 $ 13.38 $ 11.55
Zinc - LME Cash
Settlement per tonne $ 2,646 $ 4,194 $ 3,250 $ 3,273
Lead - LME Cash
Settlement per tonne $ 3,262 $ 1,622 $ 2,595 $ 1,288
Copper - LME Cash
Settlement per tonne $ 7,126 $ 7,087 $ 7,239 $ 6,731
Gold - London Fixing
per ounce $ 786 $ 614 $ 695 $ 604



Mine Operations Highlights
Three months ended Twelve months ended
December 31 December 31
2007 2006 2007 2006
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Huaron Mine

Tonnes milled 191,867 180,050 750,799 693,285
Average silver grade -
grams per tonne 198 192 196 200
Average zinc grade 2.31% 2.62% 2.54% 2.59%
Silver - ounces 999,738 891,068 3,827,105 3,664,660
Zinc - tonnes 2,785 2,917 12,064 11,735
Lead - tonnes 1,838 1,488 6,985 6,858
Copper - tonnes 479 332 1,658 1,603
Gold - ounces 819 695 3,496 1,832

Total cash cost
per ounce (2) $ 4.20 $ 2.15 $ 2.78 $ 2.41
Total production
cost per ounce (2) $ 5.35 $ 3.54 $ 3.97 $ 3.71

Payable ounces of silver 908,221 807,121 3,453,409 3,329,106

Morococha Mine(i)

Tonnes milled 165,285 153,750 609,540 577,201
Average silver grade -
grams per tonne 175 172 172 186
Average zinc grade 3.01% 3.22% 3.36% 3.73%
Silver - ounces 806,493 721,139 2,870,379 2,923,267
Zinc - tonnes 4,142 4,121 17,133 18,115
Lead - tonnes 1,720 1,208 6,085 5,722
Copper - tonnes 500 515 2,088 1,546
Gold - ounces 649 282 1,306 1,019

Total cash cost
per ounce (2) $ 2.74 $ (4.09) $ (2.16) $ (3.71)
Total production
cost per ounce (2) $ 4.38 $ (2.22) $ (0.44) $ (1.96)

Payable ounces of silver 725,013 646,688 2,580,837 2,617,162

(i) Production and cost figures are for Pan American's share only. Pan
American's ownership changed from 88.5% to 89.35% in October 2007.

Quiruvilca Mine

Tonnes milled 93,063 88,015 362,141 370,115
Average silver grade -
grams per tonne 141 182 162 209
Average zinc grade 2.34% 2.57% 2.46% 2.79%
Silver - ounces 349,544 424,296 1,569,351 2,105,475
Zinc - tonnes 1,750 1,863 7,234 8,712
Lead - tonnes 609 606 2,528 2,574
Copper - tonnes 543 341 1,805 1,345
Gold - ounces 374 270 1,566 1,106

Total cash cost
per ounce (2) $ 5.15 $ 0.58 $ 2.43 $ (0.04)
Total production cost
per ounce (2) $ 6.91 $ 2.13 $ 3.97 $ 1.25

Payable ounces of silver 320,697 392,770 1,445,185 1,954,228


Three months ended Twelve months ended
December 31 December 31
2007 2006 2007 2006
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Pyrite Stock Piles

Tonnes sold 12,006 15,253 52,547 58,016
Average silver grade -
grams per tonne 258 246 269 304
Silver - ounces 99,745 120,728 454,202 566,383

Total cash cost
per ounce (2) $ 3.52 $ 3.02 $ 3.24 $ 3.17
Total production cost
per ounce (2) $ 3.52 $ 3.02 $ 3.24 $ 3.17

Payable ounces of silver 53,128 63,601 243,998 311,583

Alamo Dorado Mine(i)

Tonnes milled 420,336 - 1,139,899 -
Average silver grade -
grams per tonne 122 - 127 -
Silver - ounces 1,689,648 - 3,809,003 -
Gold - ounces 5,032 - 13,335 -

Total cash cost
per ounce (2) 3.62 - 4.41 -
Total production cost
per ounce (2) 7.98 - 8.96 -

Payable ounces of silver 1,685,424 - 3,799,480 -

(i) Commercial production commenced on April 1, 2007.

La Colorada Mine

Tonnes milled 95,778 59,486 331,067 233,743
Average silver grade -
grams per tonne 407 520 437 540
Silver - ounces 1,077,901 858,799 3,964,074 3,493,995
Zinc - tonnes 371 - 943 -
Lead - tonnes 209 78 686 153
Gold - ounces 950 884 3,877 3,501

Total cash cost
per ounce (2) $ 6.97 $ 8.51 $ 6.88 $ 6.49
Total production cost
per ounce (2) $ 8.89 $ 10.22 $ 8.68 $ 8.29

Payable ounces of silver 1,032,071 850,047 3,834,685 3,471,949

San Vicente Mine(i)

Tonnes milled 17,359 14,013 82,855 29,618
Average silver grade -
grams per tonne 279 333 296 326
Average zinc grade 2.77% 3.15% 2.82% 3.44%
Silver - ounces 105,890 130,653 618,913 264,573
Zinc - tonnes 325 352 1,701 805
Copper - tonnes 16 26 99 52

Total cash cost
per ounce (2) $ 10.12 $ 1.86 $ 5.41 $ 3.49
Total production cost
per ounce (2) $ 12.56 $ 2.16 $ 7.47 $ 3.78

Payable ounces of silver 94,701 118,774 554,140 238,157

(i) The production statistics represent Pan American's interest in the mine.
Pan American's ownership was approximately 55% through May 22, 2007 and
increased to 95% subsequently.


(1) The Company reports the non-GAAP measure Mine Operating Earning to evaluate and manage the operating performance at the Company's mines. This measure is calculated by subtracting Cost of Sales and Depreciation and Amortization from Sales. To facilitate a better understanding of this measure it is reconciled as shown in our unaudited Consolidated Statement of Operations for the period.

(2) The Company reports the non-GAAP cash cost per ounce of payable silver in order to manage and evaluate operating performance at each of the Company's mines. The measure is widely used in the silver mining industry as a benchmark for performance, but does not have standardized meaning. To facilitate a better understanding of this measure as calculated by the Company, we have provided a detailed reconciliation of this measure to our cost of sales, as shown in our unaudited Consolidated Statement of Operations for the period.



Three months ended Twelve months ended
December 31 December 31
2007 2006 2007 2006
-------------------- ----------------------
Cost of sales $ 48,803 $ 41,885 $ 167,797 $ 124,608

Add/(Subtract)

Smelting, refining, and
transportation charges 21,088 20,920 87,019 69,394
By-product credits (52,607) (50,623) (210,701) (168,639)
Mining royalties 1,537 2,458 5,761 5,269
Workers participation
and voluntary payments (1,256) (3,590) (6,304) (9,250)
Change in inventories 4,635 (4,653) 8,595 (2,016)
Other (54) 374 (579) 2,634
Minority interest
adjustment (265) 200 172 586
Alamo Dorado
Commissioning Costs - 2,719 -
---------------------- ------------------------ ------------------------
Cash Operating Costs A $ 21,882 $ 6,971 $ 54,478 $ 22,587

Add/(Subtract)
Depreciation and
amortization 8,227 5,640 28,992 17,520
Asset retirement and
reclamation 674 614 2,860 2,457
Change in inventories 3,719 (1,607) 4,081 (1,455)
Other (48) (38) (175) (125)
Minority interest
adjustment (192) (184) (933) (652)
Alamo Dorado
Commissioning
Costs - - 1,304 -
---------------------- ------------------------ ------------------------
Production Costs B $ 34,262 $ 11,397 $ 90,607 $ 40,332

Payable Ounces
of Silver C 4,819,255 2,879,001 15,911,734 11,922,185
Total Cash Cost ---------------------------------------------------
---------------------------------------------------
per Ounce A/C $ 4.54 $ 2.42 $ 3.42 $ 1.89
---------------------------------------------------
---------------------------------------------------
Total Production
Costs per Ounce B/C $ 7.11 $ 3.96 $ 5.69 $ 3.38
---------------------------------------------------
---------------------------------------------------




PAN AMERICAN SILVER CORP.
Consolidated Balance Sheets
(Unaudited In thousands of US dollars)

December 31, December 31,
2007 2006

----------------------------------------------------------------------------
Assets
Current
Cash and cash equivalents $ 51,915 $ 80,347
Short-term investments 55,400 91,601
Accounts receivable 68,600 65,971
Inventories and stockpiled ore 51,737 22,216
Unrealized gain on commodity and foreign
currency contracts 5,502 186
Future income taxes 8,388 6,670
Prepaid expenses and other 3,376 3,106
----------------------------------------------------------------------------
Total Current Assets 244,918 270,097

Mineral property, plant and equipment, net 305,918 112,993
Construction in progress 95,981 104,037
Investment in non-producing properties 98,385 188,107
Direct smelting ore 1,379 1,831
Future income taxes - 500
Other assets 16,322 2,430
----------------------------------------------------------------------------
Total Assets $ 762,903 $ 679,995
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Liabilities
Current
Accounts payable and accrued liabilities $ 53,736 $ 40,095
Taxes payable 1,771 23,187
Unrealized loss on commodity contracts 27 -
Other current liabilities 3,047 2,199
----------------------------------------------------------------------------
Total Current Liabilities 58,581 65,481

Asset retirement obligations and reclamation 50,370 44,309
Future income taxes 48,698 48,499
Other liabilities and provisions 151 -
----------------------------------------------------------------------------
Total Liabilities 157,800 158,289
----------------------------------------------------------------------------

Non-controlling interest 5,486 9,680

Share capital
Common Shares 592,402 584,769
Additional paid in capital 14,233 14,485
Accumulated other comprehensive income (8,650) -
Retained earnings (deficit) 1,632 (87,228)
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Total Shareholders' Equity 599,617 512,026
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Total Liabilities, Non-controlling interest and
Shareholders' Equity $ 762,903 $ 679,995
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Pan American Silver Corp.
Consolidated Statements of Operations
(Unaudited - in thousands of US dollars, except for per share amounts)

Three months ended Twelve months ended
December 31, December 31,
2007 2006 2007 2006
----------------------------------------------------------------------------

Sales $ 85,889 $ 82,588 $ 301,064 $ 255,447
Cost of sales 48,803 41,885 167,797 124,608
Depreciation and amortization 8,227 5,640 28,992 17,520
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Mine operating earnings 28,859 35,063 104,275 113,319

General and administrative 3,120 2,084 9,522 9,172
Exploration and project
development 1,992 3,902 3,362 8,040
Asset retirement and
reclamation 674 614 2,860 2,457
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Operating income 23,073 28,463 88,531 93,650
Interest and financing
expenses (246) (137) (660) (573)
Investment and other income 131 1,122 5,371 6,562
Foreign exchange gain (loss) 631 (644) 928 (799)
Other income and expense (370) 701 (370) (528)
Net gain (loss) on commodity
and foreign currency contracts 4,005 (1,042) 5,345 (18,328)
(Loss) gain on sale of assets (75) 8,243 12,425 7,483
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Income before taxes and
non-controlling interest 27,149 36,706 111,570 87,467
Income tax provision (599) (5,496) (19,605) (25,484)
Non-controlling interest (488) (1,562) (3,105) (3,777)
----------------------------------------------------------------------------
Net income for the period $ 26,062 $ 29,648 $ 88,860 $ 58,206
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Attributable to common
shareholders:

Net income for the period $ 26,062 $ 29,648 $ 88,860 $ 58,206
Accretion of convertible
debentures - (15) - (47)
----------------------------------------------------------------------------
Adjusted net income for the
period attributable to common
shareholders $ 26,062 $ 29,633 $ 88,860 $ 58,159
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----------------------------------------------------------------------------

Basic income per share $ 0.34 $ 0.39 $ 1.16 $ 0.79
Diluted income per share $ 0.33 $ 0.38 $ 1.12 $ 0.76

Weighted average number of
shares outstanding
(in thousands)
Basic 76,521 76,073 76,453 73,628
Diluted 79,434 78,713 79,174 76,152



Pan American Silver Corp.
Consolidated Statement of Cash Flows
(Unaudited - in thousands of US dollars)

Three months ended Twelve months ended
December 31, December 31,
2007 2006 2007 2006
----------------------------------------------------------------------------

Operating activities
Net income for the period $ 26,062 $ 29,648 $ 88,860 $ 58,206
Reclamation expenditures (54) (504) (767) (1,172)
Items not involving cash: -
Depreciation and amortization 8,227 5,640 28,992 17,520
Asset retirement and
reclamation 674 614 2,860 2,457
Loss (gain) on sale of assets 75 (8,243) (12,425) (7,483)
Future income taxes (3,994) (3,803) (1,448) (3,343)
Non-controlling interest 488 1,562 3,105 3,777
Unrealized (gain) loss on
commodity and foreign
currency contracts (4,863) (4,131) (5,290) (4,125)
Stock-based compensation 702 1,343 2,052 2,943
Changes in non-cash operating
working capital (609) (8,736) (38,578) (2,881)
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Cash generated by operating
activities 26,708 13,390 67,361 65,899
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Investing activities
Mineral property, plant and
equipment expenditures (net
of accruals) (34,545) (25,129) (117,170) (96,999)
Acquisition of net assets of
subsidiary, net of cash - - (6,245) (168)
Maturity (purchase) of
short-term investments (2,031) 17,101 24,931 (65,570)
Proceeds from sale of assets 17 2,000 10,267 2,000
Purchase of other assets (3,590) (14) (11,272) (766)
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Cash used in investing
activities (40,149) (6,042) (99,489) (160,737)
----------------------------------------------------------------------------

Financing activities
Proceeds from issuance of
common shares 1,810 578 5,164 153,611
Dividends paid by subsidiaries
to non controlling interests - - (2,347) -
Share issue costs - (5) - (7,669)
Contributions from NCI 729 - 729 -
Convertible Debentures
interest payments (7) - (48)
(Repayment) proceeds from
advance on metal shipments (3,023) - 150 -
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Cash (used in) generated by
financing activities (484) 566 3,696 145,894
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(Decrease) increase in cash
and cash equivalents during
the period (13,925) 7,914 (28,432) 51,056
Cash and cash equivalents,
beginning of period 65,840 72,433 80,347 29,291
----------------------------------------------------------------------------
Cash and cash equivalents, end
of period $ 51,915 $ 80,347 $ 51,915 $ 80,347
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Supplemental Disclosures
Interest paid $ - $ 13 $ - $ 48
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Taxes paid $ 8,329 $ 2,692 $ 44,376 $ 7,946
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Contact Information