Pan American's silver production falls a bit short, gold exceeds expectations

Pan American's silver production falls a bit short, gold exceeds expectations

Tuesday, April 20, 2010

In spite of a 13% increase in silver production during the first quarter, Pan American Silver still fell 3% short of its forecast silver production goals.
Author: Dorothy Kosich

RENO, NV -

Vancouver-based Pan American Silver's consolidated silver production fell three percent short of the forecast for the first quarter, whereas gold production was almost 8,000 ounces above the plan.

Nevertheless, silver production was up 13% to 5.5 million ounces as compared to the first quarter of last year.

Gold production increased 34% to 27,896 ounces during the first-quarter 2010, compared to the same period a year ago.

Silver production from the Morococha and Quiruvilca mines in Peru and the La Colorada mine in Mexico was in line with forecasts. However, silver production at the Huaron mine in Peru was well below expectations due to adverse ground conditions in several key production areas.

Huaron also recently experienced a five-day strike from April 10th until it was settled on April 15th. The strike caused the shutdown of production as the union disputed the amount of the 2009 workers' profit-sharing payment. Huaron's profits last year were negatively affected by the economic downturn in the first half of 2009. In addition, there was a negative impact on profits due to the, as yet unrecovered amount owed to the company by the Doe Run Peru smelter which was forced to close in the first quarter of last year and has yet to reopen.

However, Pan American reported that the Alamo Dorado silver-gold mine in Sonora, Mexico and the San Vicente silver-zinc mine in Bolivia both experienced excellent first quarters this year, which were able to largely overcome Huaron's production shortfall for the quarter.

Nonetheless, the Manantial Espejo silver-gold mine in the Santa Cruz Province in the Patagonia region of Argentina also did not meet projected silver production forecasts during the first quarter. However, the mine's higher than expected gold production "more than compensated for this fact," the company said.

PanAm anticipates that Huaron production will continue to be adversely impacted by difficult ground conditions until the third quarter of this year, which will likely cause the mine to fall short of its full year production target. Nevertheless, better than anticipated silver grades at Alamo Dorado and San Vincente are likely to continue and "should entirely offset Huaron's shortfall for the year," the company advised.

Therefore, Pan American still expects to achieve its full-year silver production forecast of 23.4 million ounces in 2010. In addition, the company forecasts that the positive gold production trend at Manantial Espejo will continue throughout this year, prompting Pan American to increase its gold production forecast to 95,000 ounces in 2010.

"We've had a very solid start to 2010 and precious metals prices have remained robust," PanAM CEO Geoff Burns said in a news release late Monday night.

"Silver averaged $16.93 per ounce in the first three months of 2010 and should provide very healthy operating margins for Pan American, even though the price was not quite as high as the consensus analyst expectations of US$18.40 per ounce," he added.

Pan American's silver production falls a bit short, gold exceeds expectations Reviewed by NajlA On Tuesday, April 20, 2010, at 4:18 AM Rating: 5
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