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Pan American Silver reports record silver and gold production, but net profits slump

Published: 04:47 13 Aug 2009 AEST

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[Dorothy Kosich, Mineweb.com] Pan American Silver Tuesday reported a 24% increase in silver production to a record of 5.8 million ounces during the second quarter of this year as well as a 270% increase in gold production to a record 25,068 ounces.

The main reasons for the increase were the addition of silver production from the Manantial Espejo mine, which yielded 1 million ounces of silver during the quarter and increased production from San Vicente which mined an additional 400,000 ounces.

However, these increases were partially offset by lower silver production at La Colorado and Alamo Dorado as a result of anticipated lower throughput and silver grades, as well as a five-day suspension of Mexican operations as the result of the swine flu outbreak in Mexico. Peruvian operations reported lower throughput rates which were partially offset by higher silver grades.

Production of gold also increased three-fold as a result of the commencement of production at the Manantial Espejo mine, and processing of a high-grade gold deposit at the La Colorado mine. Gold is now Pan American Silver's largest by-product, accounting for 18% of the total metal value of consolidated production in the quarter.

Pan American Silver said it stands by its forecasted production this year of 21.5 million ounces of silver at cash costs of $6/oz, 85,000 ounces of gold, 36,000 tonnes of zinc, 12,800 tonnes of lead, and 5,000 tonnes of copper.

Among the significant events reported by Pan American during the quarter was the closure of the La Oroya smelter complex by Doe Run Peru, which has since filed for reorganization protection. Pan American Silver said Doe Run Peru owes the Vancouver-based miner $8.8 million for concentrates which were sent for processing at La Oroya.

"While the company continues to pursue all legal and commercial avenues to collect outstanding payments in full, the timing of such a collection does not appear imminent and there is uncertainty regarding its collectability," Pan American said.

While the company has been able to sell copper concentrate to other buyers, Pan American has earned far less money than the Doe Run Peru contract.

For the second-quarter 2009, Pan American reported a net income of $10.2 million or 12-cents per share, down substantially from the net income of $21.4 million (26-cents/sh) reported during the second quarter of last year. "Net income in Q2 was negatively impacted by sharper lower realized silver and base metals prices relative to the comparable period of 2008," the company said. Net income was also reduced by a non-cash debt provision of $4.4 million. Included in net income was a non-cash forex loss of $1.2 million.

For the first half of this year, Pan American reported a net income of $16.8 million or 20-cents per share, down substantially from the $51.5 million (65-cents/sh) reported during the first six months of 2008.

 

 

Mineweb is a web-based international mining publication focusing on mining financial and corporate news and comment.

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