Pan American Silver Corporation
First Quarter 2005 Earnings
April 29, 2005
Operator: Good morning ladies and gentlemen and welcome to the Pan American Silver Corporation First Quarter 2005 Earnings Conference Call. At this time all lines have been placed on a listen-only mode and the floor will be open for questions following today’s presentation.
It is now my pleasure to turn the floor over to your host, Ross Beaty. Sir, the floor is yours.
Ross Beaty: Thank you very much, Operator. Good morning ladies and gentlemen. Welcome to Pan American’s Q1 Results Conference Call. As usual, we’ll follow my introduction with a Q&A period. To help answer any questions I have with me here in Vancouver Geoff Burns, Pan American’s President and CEO; Rob Doyle, our CFO; Andy Pooler, Senior VP Operations; and Brenda Radies, our VP Corporate Relations.
Well, yesterday afternoon was our annual general meeting where all our directors were re-elected for another year. While this is a routine corporate event, we also use it as an excuse to bring all our senior management to Vancouver for some in depth management discussions and to give our board a chance to discuss company matters directly with all our senior team. It also serves as a reminder to me the caliber of our management team. It’s a cliché to say that we have a great team but it is true and I want to remind our shareholders of the huge strengthening of our team over the last couple of years. This process is now complete and I think our existing team is capable of really driving our growth over the next five plus years as we seek to double again, and then double again our silver production.
The biggest item of discussion at this year’s board and management meetings associated with our annual general meeting was where are the earnings? Our financial results announced this morning were disappointing in view of the 4% stronger silver and 20% stronger base metal prices we are now seeing relative to a year ago. While our operations are generating adequate cash flow – about $4.7 million in Q1 – and positive net operating earnings – about $1.5 million in Q1, our internal earnings target was not met. So I’m going to go into some detail on what happened this quarter.
To summarize, our revenue went up 79%; that’s pretty good growth. And that was due to strong growth in our silver production, up 27%, and to more concentrate shipments in the quarter than we had a year ago. But our costs went up even more and eroded the benefits of our higher revenue. And here’s the current picture: we are experiencing higher fuel, power, shipping and timber costs at our operations. Timber is used of course in underground operations at all three mines, in Peru particularly, so it is a significant cost of our operation there, and those costs have all gone up. Now, some of these costs will come down during the balance of 2005 and others will persist. It’s very hard to predict what’s going to happen to particularly fuel prices in terms of the oil price and also, in a somewhat less related way, power rates, because a lot of our power rates depend on water flows and so forth, particularly in Peru where we have mostly hydro power. We also expect shipping rates will come down as more ships are deployed to bulk carrying but we don’t know when that will happen.
We’re also seeing – we also saw I should say – in the first quarter about an 8% increase in our labour and other costs associated and denominated in Peruvian and Mexican currencies as there has been about an 8% devaluation of the US dollar against those currencies. This devaluation didn’t happen much in 2004 but in Q1 there was a market appreciation of these currencies against the US dollar. Now again, this devaluation or appreciation, relatively speaking, may or may not continue and we’re not ready, if there are any questions on this – and just to answer that question if it exists – we are not yet ready to hedge our local currency exposure against the dollar. We are paying higher charges to the smelters as well to treat our concentrates, due to price participation clauses normal to such contracts.
And then we have just paid for the first time half a million dollars in Q1 for a new royalty in Peru. This is a very regressive type of tax; it’s a gross net smelter return royalty and we hope the Peruvian government will reverse this in due course, once it appreciates the very negative impact of such a royalty on the investment climate of Peru.
We are also paying much higher income tax, or in fact we are also paying income tax really for the first time in Peru. We started paying this in the latter half of last year and we expensed $1.2 million this quarter compared to nil in 2004. Now having said that, I never complain too much about paying true income tax since it does mean our operations are profitable, but I very much object to paying gross royalties which are payable even if a mine is losing money, and that’s where the new tax in Peru is regressive.
Other costs impacting us this quarter were increased general and administrative costs due to, number one, our expanded management team, and number two, because much of this team is paid in Canadian dollars, which in fact appreciated 20% against the dollar in the last year – the US dollar in the last year. Actually, very little of our cost base is payable in Canadian dollars but the head office here in Vancouver is and that’s obviously caused our G&A to go up to some degree.
We are also incurring unusual costs to make us compliant under the new Sarbanes-Oxley Act, and again that cost will not recur in 2006.
Even with all these extra costs though, we would still have reported positive earnings but for two other items. Firstly, we put some base metal hedges in place over the last two years to avoid the risk of us having to sell our base metals at the really low prices of three to four years ago. Now, we locked in prices lower than we would have realized with no hedges due to the benefit of hindsight. And this cost us about $2 million in foregone revenue in Q1, but obviously we are trying to protect our downside here and we thought it was a prudent thing to do at the time. I should say that we are not doing any current base metal hedging but I wouldn’t preclude that from happening again in the future to the extent we see unsustainable spikes in the price.
We also expensed $1.5 million in exploration in Q1 – about a million dollars more than last year – and all of this went to our bottom line as a cost. All of the increase was spent at our Manantial Espejo Project where we are nearly finished a feasibility study, and costs after we complete the feasibility will be capitalized. So this expense will not recur; however, we do plan on carrying out an expanded exploration program in 2005 and 2006 beyond what we’ve done say in the last couple of years. We think our growth – and so we will have continued exploration expenses because we’re going to drive a lot of our growth now with, we hope, successful discoveries as opposed to major acquisitions. So we’re really going to kick up our exploration effort for silver.
Now that might be more detailed than you wanted on our cost structure but I felt it was important to indicate that our cost structure has increased, not permanently in many cases, but certainly there will be a higher cost structure as we see in the future as long as things stay as they are today, and we are taking this very seriously. We are working very hard to eventually reduce unit costs through, for example, better productivity.
Our silver and copper production was also modestly below our budgeted levels and this cost us about $2 million, particularly at our Huaron mine in Peru. We do expect though that our annual silver production will be at our budgeted target of 13.5 million ounces in 2005 as we expect Huaron, and to a lesser extent our Quiruvilca – a slight shortfall we had at Quiruvilca relative to our expectations, will catch up production in the balance of 2005. There’s a host of issues at those two operations that have, that caused slightly lower production in our plants and those issues are absolutely correctable – most of them corrected already – and we’re, as I say, we expect to catch up production. None of them are serious and none of them are major.
So those are some of the negatives of our Q1 results. I’d like to also briefly talk about some positives that happened in Q1. Firstly, our new Morococha mine operated very, very well, producing at budget grade and below budget costs. But we – for me the most exciting part is we’ve received some very, very good exploration results that will bode well for the future with respect to lowering our unit costs for operating, through the discovery of some very wide, a very wide zone there that is new and we’re going to get into that and try to develop it as soon as we can. And so that will lower our costs and it will also allow us to expand our production in due course, so very exciting exploration results there and good operating results.
Our La Colorada mine in Mexico also had its best quarter ever; it reached design capacity and had its best safety record as well. We’re still working on resolving the water problems there that prevent our sulphide mine from restarting but we hope this will occur by late 2005 and again this will really drive costs there down much lower than we’re now seeing.
Also in Mexico, as most of you know, we made the decision to build our newest mine at Álamo Dorado. This operation will begin in late 2006 and again should drive our operating costs lower while enabling us to produce about 22 million ounces on an annual basis starting in about 15 or 16 months. Our senior team has been completely assembled there, we’ve advanced all of the lead time (the large lead time purchases), we’ve got all of our equipment now ordered and in place, we don’t have any timeline issues as far as we know right now, permits are in place and we’re really rocking and rolling right now at getting that mine up and ready. We expect to start moving dirt – when Andy – in about October? Starting mining operations in October and we should have first production coming out in the fall of ’06.
Finally, we also embarked on a program to market pure silver coins and bars for investors interested in buying physical silver. These beautiful silver products – and I mean they really are beautiful – will offer investors an inexpensive way to buy Pan American Silver from our Mexican mine, from La Colorado. And it will also stimulate silver demand on a long-term basis, so I’m really looking forward to the success of that program. So far we’ve already sold over 50,000 ounces of our silver products and if any of you have questions on how to order these, absolutely telephone Brenda Radies at our office and she’ll give you links into the website or The Mint that’s doing the minting for us or the telephone number to place orders.
So our strong growth will continue. We’re working hard on our Manantial Espejo Project in Argentina and on our San Vicente Project in Bolivia. Both of these projects will allow us to expand our silver production again and/or improve our leverage yet again to silver prices. We are going to really focus on our costs for the balance of 2005 and I certainly hope to report improved results for the balance of the year, especially in the second half. Our objective of becoming the largest primary silver producer in the world will be met shortly, and we remain steadfast in our mission of delivering the best leverage to the silver price of any company in the world.
I expect silver prices will remain strong for the foreseeable future. With our expanded production in our new mines – Morococha, San Vicente and Álamo Dorado – producing at lower cash costs than our older operations, I’m certain our costs will decrease. We will become more productive and we will deliver good earnings growth to our shareholders, in addition to strong capital gains growth as we grow our silver materials and resources. Our share liquidity remains the best in the silver industry; we have an excellent balance sheet with over $100 million in working capital and no debt and we continue to have the best growth profile in the industry. Well, I could go on and on, particularly about how and why I think silver prices will remain firm. Bottom line: I think we are in the early stages of a commodity super cycle and Pan American is very well positioned to benefit from this on a long-term basis.
And I’m going to close on that note and open the call to questions and hope we can refine some of my comments today with further detail from Geoff or Rob to the extent that you have questions. Thank you again for joining us today and I’d like to open the call now to questions, Operator.
Operator: Thank you. The floor is now open for questions. If you would like to ask a question, you may press star, followed by the number one, on your touchtone phone. If at any point your question has been answered, you may remove yourself from the queue by pressing the pound key. We do ask that while you pose your question, that you please pick up your handset to provide optimum sound quality. Once again ladies and gentlemen, if you do have a question you may press star, followed by the number one, on your touchtone phone at this time. Once again callers, if you would like to ask a question you may press star, then one, on your touchtone phone at this time.
Our first question is coming from Steve Butler with Canaccord Capital.
Steve Butler: We just thought we’d give you a bit of a scare there, guys. Just kidding. It’s a busy day and you have a conflict with a Kinross call at the moment, but that’s OK. I wanted to ask a question about grades. I just noticed maybe, at least with respect to my model – maybe not with respect to your quarterly plans – how the zinc grades were substantially lower, it seemed all synchronously lower at Huaron and Quiruvilca. And maybe you can comment then just on the sequencing because I found that that was a particularly disappointing grade profile, at least in the quarter, but I didn’t really have specific Q1 guidance, guys.
Ross Beaty: OK, do you want to tackle that one, Andy?
Andy Pooler: Sure, thank you. This is Andy Pooler, Senior VP of Operations. Zinc has trailed off a little bit with other production numbers in the first quarter at Huaron. We’ve taken measures to offset that going into the second quarter. We do have one high grade zinc vein that we’re working off as to metallurgical issues that we’re on, so we set that aside for the first quarter. Quiruvilca we have a zinc area of the mine in the upper areas and a silver ridge in the lower. And that also experienced some mechanical issues in the first quarter, so those grades will rebound in the second quarter I think and get right back on track.
Ross Beaty: What’s the forecast grades for the year, Andy, that we can be giving the guidance on?
Andy Pooler: It’ll be right back to the budget level forecast. I can look it up for you.
Ross Beaty: Yeah, why don’t we look it up?
Andy Pooler: OK.
Ross Beaty: We’ll give you the budget level on that, Steve, in just a sec but, as we say, we should get back to those levels. And we had above budget zinc grades. You don’t see that in the results here. For Morococha we had above budget zinc grades in the quarter, so we’re, you know, on balance we’re actually not doing too bad.
Steve Butler: Yeah.
Andy Pooler: Well, and I mean when you round out Morococha we’ve not only had above budget but we’ve increased recovery of our zinc by 10% at Morococha and we’ll also add on several hundred tonnes of zinc per month of production from Morococha and (inaudible) as well.
Ross Beaty: Yeah. If you wanted to put it in a model we should, we expect right now to produce about 1,300 tonnes more zinc at Morococha than we budgeted, primarily because of the better recoveries but also because our grades are a little bit better.
Steve Butler: Right, OK.
Ross Beaty: And that’ll offset anything we lose out of Quiruvilca and Huaron.
Steve Butler: Did you guys experience – I mean has it been a pretty dramatic increase in TC/RC’s or could you broadly speak to those?
Ross Beaty: Sure. Well actually, Rob, do you want to speak to that? I mean it’s not really the TC/RC increase I was speaking to; it’s the price participation clauses, which just means you don’t get all the benefit of the higher price on the base metal side.
Steve Butler: OK.
Rob Doyle: Typical of our zinc and the contracts is the buyers of our concentrates participate and escalate it. So that could be as much as $0.38 from every dollar. So in other words, for every dollar that zinc goes higher, $0.38 to $0.40 might go to the smelter or the buyer of the concentrate.
Steve Butler: Is that, Rob, is that above $0.45 zinc generally?
Rob Doyle: Typically they, well our threshold is right around $1,000; the base is $1,000/tonne.
Steve Butler: Right.
Steve Butler: Just above $0.40; around $0.45.
Ross Beaty: Pretty close, Steve.
Steve Butler: OK, and how about on lead? What is the basis there?
Rob Doyle: The basis is – it actually varies from contract to contract, Steve, and I can certainly get back to you with more detail. Unfortunately, the base on quite a lot of our lead is very low; it’s around about $500, although we do have some contracts where the basis is closer to $700.
Steve Butler: OK. And it makes for a good pulling the hair out too, analyzing your TC/RC’s.
Ross Beaty: Oh yeah, for sure, for sure.
Steve Butler: And last question. Just do you expect to expense I guess an additional $1.8 million for the Manantial Espejo Feasibility? So that’ll be a Q2/Q3 sort of split?
Ross Beaty: There will be another $1.5 million to Pan American’s interest.
Steve Butler: Right, OK.
Ross Beaty: Sorry.
Steve Butler: And that – but you’re expecting this – so I should, I could reasonably split that in Q2 and Q3?
Ross Beaty: I think so, yes, yes.
Steve Butler: For spending purposes, OK.
Rob Doyle: Yes, yes, that’s right.
Steve Butler: Thanks.
Ross Beaty: And then it’ll drop right off and there should be nothing in Q4.
Steve Butler: OK, thanks very much.
Ross Beaty: Wait. Andy, you’ve got the zinc numbers?
Andy Pooler: I do have the numbers relative to the zinc grade. Actually, on a grade relative to budget we’re fairly close but we will see about an 8% increase over the next two quarters from both mines up to the 3.25% level of zinc and then our production will be right on track, if not a little ahead of track.
Steve Butler: OK, thanks.
Ross Beaty: Thanks, Steve.
Operator: Thank you. Our next question is coming from Tom Jakubowski with BMO Nesbitt Burns.
Tom Jakubowski: Hello, guys.
Ross Beaty: Good morning, Tom.
Tom Jakubowski: Morning. I just had a couple of questions. The first one being your cash costs calculation? You guys are using a base with the payable; the payable cash costs right now. Is that…
Ross Beaty: That’s correct.
Tom Jakubowski: Is that going to be going forward as well?
Ross Beaty: Yes, it is Tom.
Tom Jakubowski: OK.
Ross Beaty: And that is a change from previously and it’s more in line with industry standards.
Tom Jakubowski: OK, and so that will be happening going forward as well?
Ross Beaty: That’s correct.
Tom Jakubowski: And are you still maintaining your $4.25 US dollars per ounce forecast for the year? I mean and you came in I think at $4.50 for Q1, if I’m not mistaken. Do you think you’re still going to be able to meet the $4.25 for the year?
Geoff Burns: Yeah Tom, this is Geoff to answer your question. I believe that we will get to the $4.25. In Ross’ comments he noted that we were a little bit below our expectations on our silver production in the first quarter. The other area that we were behind where we thought we were going to be is actually on copper production, which contributes a fair bit to our by-product credit. We believe over the balance of the year that we’re going to get – meet that 13.5 million ounces and by bringing back in the higher levels of the by-products, I think we’re going to make that $4.25. The only caveat I would have for that, Tom, is we right now are still working hard to get San Vicente moving forward. If we do not get that moving forward in the next month or so that could have a little bit of a negative impact on that $4.25. I’m confident that we will, but that would be the only caveat I would put on it.
Tom Jakubowski: OK. OK, that’s it. Thanks, guys.
Ross Beaty: Thanks, Tom. That’s good. Thanks, Geoff.
Operator: Thank you. Our next question is coming from Michael Vint with CIBC World Markets.
Michael Vint: Hi. Just a question on your – you mentioned labour as being a contributor to your earnings going down. I was wondering if you could break that down a little more for me as to…
Ross Beaty: Sure.
Michael Vint: What percentage it’s gone up and why you think it’s gone up?
Ross Beaty: Sure. Do you want to tackle that one, Rob, or do you want to – Geoff?
Geoff Burns: Let me take that one on, Michael. I think the biggest part in terms of labour is really the currency impact on the labour. We obviously are paying our local workforces in Peruvian Sole in Peru and Pesos in Mexico. That probably is approximately 35% of our cash cost basis on our on site, so the 8% change in the devaluation of those currencies relative to the US dollar is the biggest contributor.
In terms of on location we have had some increases, or have put in place some increases, particularly at Morococha. We did, as you know, we took over that operation last year and I can tell you that we’re trying to bring that operation and the workforce in line with what we’re paying at our other two mines, which will, in my view, keep our workforce in tune and keep the productivities higher than they have been in the past. And so that has contributed to a little bit of the labour increase.
Ross Beaty: Great, thanks Geoff. You know, we had some questions last year on when the US dollar devalued so sharply against so many currencies globally like the Euro, the Canadian dollar, Australian dollar, South African Rand, and so forth, and what was going on in Mexico and Peru. And at that time, most of last year actually, the Peruvian Sole and the Mexican Peso were relatively stable and in fact devalued along with the dollar relative to all those other currencies. So we were, you know, we were fairly happy; we were producing basically dollars or producing in US dollar denominated commodities, and we were paying our expenses primarily in US dollar denominated local currencies. Now, the Mexican Peso has has appreciated modestly – about 4 or 5% in the last six months, or really the last three or four months, against the dollar. We don’t see that as likely to continue, particularly because the Mexican economy is so closely tied with the US economy. It may a little bit but it’s not likely to. It’s been very much a function of the strong oil prices and the fact that Mexico’s a big oil exporter.
In terms of Peru, the Peruvian Sole has in fact depreciated 8 to 10% against the US dollar in the last five or six months and this has been a bit of a surprise to all of us. Obviously if we’d known it was going to go up we would have hedged but we are somewhat surprised and we, you know, it’s a function of quite a strong Peruvian economy right now. Lots of demand for Peruvian money and a very healthy mining industry particularly in Peru, lots of big, new projects and to the extent that continues I suppose it’s not going to get a lot better, we just don’t think it’s going to get a lot worse either. So at the moment we’re not really inclined to do any hedging and suffer those attendant risks by trying to be, you know, predicting.
Michael Vint: OK. The next question was the royalty in Peru. I didn’t get a chance to read in detail the report there. What is that number? And then the other one was a quick question on those silver coins.
Ross Beaty: Oh, the royalties. Let me talk about the royalty question. I’m sure – this is a pet peeve of mine. I just think it was a very, as I say, regressive is the most polite word I can use. It’s a 1 to 3% gross royalty on mineral products exports or production from any Peruvian mine – full stop. It’s a gross revenue. We pay 1%. It’s – the 1 to 3 depends on your revenue from the mine and we’re just under the 1% if we segregate each mine to pay it separately. If we had to put them all together we’d have to pay more than 1%. But it’s a significant cost and, as I say, it’s…
Michael Vint: It’s 1 to 3%?
Ross Beaty: Yeah, it’s 1% for us; 3% for a very big producer like Yanacocha, or Southern Peru Copper, or some of the big, big mines there.
Michael Vint: All right.
Ross Beaty: Big, big expense; it comes right off the top and, or right off the bottom line really, and I just think it’s foolish cause it does definitely reduce the – it makes the investment climate worse in Peru. It makes mining in Peru less competitive compared to anywhere else. What the Chileans are trying to do right now is make it more of a profit-based tax. You can dispute the need for a country to tax anybody or anywhere but if they decide to tax, fair enough, they have that right to do that. It’s how they tax that I object to, and this particular tax is going to scare away investments and it doesn’t need to. Peruvians – Peru is a great country, it’s a terrific mining country and it’s, you know, I think it’s just not good economic policy, as a bottom line. And from our standpoint it’s costing us about $2 million bucks a year. Basically on the high quote…
Geoff Burns: $0.12 an ounce.
Ross Beaty: About $0.12 an ounce.
Geoff Burns: Yeah.
Michael Vint: OK, great.
Ross Beaty: Oh, the other silver coin question. We are not making a nickel on those coins, Mike. We are simply offering the service.
Michael Vint: It’s strictly marketing.
Ross Beaty: Exactly. This is marketing, this is, it stimulates the demand for our products. We are offering it to The Mint more or less at cost and they are taking a very, very low margin on this of between $0.50 and $0.70 per ounce for actually doing the refining and the production of the bars and the coins and in so doing are able to offer these to – why we like this climate is we’re able to offer these products to investors pretty well at the lowest cost physical silver that they can buy anywhere. I mean you compare that to say silver eagles or Canadian maple leaves, which you can go down to a coin dealer and buy for double their face value and these are coming in. These are true monetary products. They will also be resalable.
Michael Vint: OK.
Ross Beaty: The Mint will buy them at a slight discount off the spot price. And so this is – these are true bullion products – this is money.
Michael Vint: Oh, it is, heh? OK, all right. Well, thanks.
Ross Beaty: OK.
Operator: Thank you. Our next question is coming from John Pistilli with UBS.
John Pistilli: Hi guys.
Ross Beaty: Good morning, John.
John Pistilli: Ross, can you maybe comment on what you’re seeing in terms of supply/demand for the silver market and maybe also comment on the Chinese government sales of silver?
Ross Beaty: Sure. That’s – I’ll try to make that brief. The demand side is broad based. Strong demand is going to grow this year relative to a slight decline last year because industrial demand’s up, photography demand is down. That is, however, offset by less photography scrap coming back into the market. So the photography side is only a very slight negative on the total supply/demand balance. But it is a slight negative; it’s not a positive.
The strength this year is going to be in India where they’ve, they’re buying silver again. They just simply stopped buying silver last year when silver went up above $6.00. The silver market in India of course is the only real price sensitive market and they have traditionally stopped buying on spikes up and bought heavily when the price is low. They’re price sensitive. I think when the price took off last year many people who had been in a traditional buy on – sell on spikes, buy on dips, kind of a trading pattern, didn’t realize that the fundamentals of commodity markets right now have changed profoundly. I think we – and I said already – I think we’re in a super cycle. I think many, many people agree with that. It’s not for no reason I say that; there’s a lot of reasons behind that. But to the extent we are in a super cycle the price will not retreat back below $6 and I think silver, really we can look forward to many, many years of good prices relative to say the last five or 10 years.
Now, that has also been accepted in India and in places where the Indians buy through, such as Dubai, where they’re now buying silver to satisfy the historical, the cultural, the religious reasons that they have been the world’s number one silver market for millennia. So they’re now back in the market and that’s going to – jewelry and silverware dropped 8% last year and that was almost entirely the Indians stopping their purchase of silver. So now to the extent they’re back in the market we should see return growth to that sector, certainly up over last year, and that’s going to bring the total silver demand much higher than it was a year ago. So that side’s pretty strong right now and I think you’re also seeing those numbers coming through in the gold and platinum group levels purchases and as well for jewelry and silverware, other than certain markets for platinum. That’s another story. So on the demand side things are pretty good.
On the supply side things are also pretty good. We’re seeing more or less static demand growth – supply growth this year from the number one source of supply, which is mines. We’re not seeing significant by-product supply enter in the market and there’s no new silver mines coming on stream right now, i.e., this year, that are going to impact that much. I’ve done a supply study of mines that are opening but at the same token there’s mines shutting down just because they’re exhausted. And there’s been a number of those in the last couple of years and that will continue in the next few years. So even though there’s some big, new production production coming on stream in say two or three years – Pascua-Lama in Chile and Apex’s San Cristobal mine in Bolivia are two examples – the net new production is still relatively modest looking out five years, and this year it’s probably going to be maybe 1% in that order. Scrap supply is down, mine supply is static, investment demand is there and the investment supply is seriously depleted.
Now, that supply that’s coming from above ground stockpiles to satisfy what has been a deficit market for the last 15 years, has largely come from China in the last five years. These are government stockpiles sold out of China. We don’t have good numbers but we think those sales are dramatically reduced, if not – those stockpiles are dramatically reduced, if not depleted completely. They might have 50 to 80 million ounces left; it’s a guess. It’s Goldfield’s guess. Goldfield’s does the annual silver survey but it’s just a guess. Now, India is the only other government that has significant known stockpiles. They own – they have about 80 million ounces – eight, zero. And they announced earlier this year that they were going to dispose of those at a rate of about 20 million ounces a year for the next four years, so none of those numbers are big enough to provide any supply shock to the market. On balance there are many, many reasons to be bullish about silver prices really long-term and that’s why we continue to be bullish. We don’t see, you know, any, I think barring a shock, barring a real crisis when silver of course could go through the roof, you know, we see modestly improving prices, not dramatically improving prices, and that’s kind of what we hope will happen as well because of course it improves markets long-term if there’s modest things that happen. Of course markets don’t really usually perform that way but you like to think they will. I hope that answers your questions.
John Pistilli: Yes, thank you.
Operator: Thank you. At this time there appear to be no further questions. I would now like to turn the floor back to Ross Beaty for any further comments.
Ross Beaty: All right. Well, thank you. I’m not going to say any more. I think that covers things off but you I’m sure detected a note of disappointment in my voice over the results. We are very, very serious about wanting to build our bottom line instead of have it shrink. We are very serious about wanting to build the company with good, solid earnings because we think we’ve delivered everything else that creates wealth to our shareholders and that’s why we’re so conscious about trying to improve our bottom line results, build our production base even further, and increase our margins to the extent we can. A lot of this is a function of luck in a certain sense in that mines are what they are. You have a – Mother Nature gives you a cost base that if they’re mines like we have, which are narrow, very labour intensive mines, you know, you have a built in cost structure that you can’t do too much about but within that you, there are ways to make it better and that really comes to management. I feel we do have the strongest management team in the silver sector and so to the extent we can wring every single last nickel out of these operations, we’re quite steadfastly focused on doing that.
Apart from that, I think everything else is pretty good. We’re a pretty happy company right now and we know where we’re going and it’s a particular honour to be – to see all our operating managers here in Vancouver this week to just share the experience I guess. On that I’ll close. Thank you again and give us a call if you have any further questions. Bye-bye.
Operator: Thank you. This does conclude today’s teleconference. You may disconnect your lines at this time and have a wonderful day.
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