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Thu Mar 14, 2002
Pan American Silver Corp. Reports Year-End And Fourth Quarter Results
Pan American will host a conference call on Friday March 15th at 8:00 a.m. Pacific time (11 a.m. Eastern time) to discuss 2001's financial and operational results, give project updates, and answer questions. To listen to the call live, dial 1-416-695-5806. To listen to a playback of the call after it has ended, dial 1-416-695-5800 and enter the pass code 1104294. This option will be available for 2 weeks after the call. The conference call will also be broadcast live and archived for later playback on the Internet at http://www.q1234.com.
PAN AMERICAN SILVER CORP. REPORTS YEAR-END AND FOURTH QUARTER RESULTS
Vancouver, British Columbia - Pan American Silver Corp. (NASDAQ: PAAS; TSE: PAA) reports its audited financial results for the fourth quarter and the year 2001. All amounts are expressed in U.S. dollars. Revenue for the fourth quarter was $10.9 million, an increase of 26 per cent from 2000. Revenue for the year was $39.3 million, 25 per cent greater than for 2000 due to the April start up of the Company's Huaron mine in Peru, and limited production since early 2001 from the La Colorada mine in Mexico. Full-year silver production was 6.9 million ounces, an increase of 92 per cent from last year. Zinc production for the year increased 26 per cent to 30,894 tonnes (2000 - 24,462 tonnes).
Pan American incurred a fourth quarter loss of $4.4 million or $0.12 per share and a loss for the year of $8.1 million or $0.22 per share (Q4 2000 - loss of $6.4 million or $0.19 per share; 2000 loss $45.9 million or $1.35 per share). Excluding the unusual property write downs in 2000, the financial results of 2001 were poorer due primarily to lower metal prices and also to severance expenses of $0.5 million, a $0.5 million increase in interest expense, negative metal price adjustments on concentrate shipped earlier in the year and higher depreciation and reclamation expenses. During the year, Pan American reduced personnel, lowered production from Quiruvilca and implemented a number of other cost-cutting measures. The costs associated with most of these measures were reflected in the fourth quarter - during 2002, the resulting benefits will be realized.
Although fourth quarter metal prices remained very low, prices have improved considerably this year from their lows set in 2001. The silver price averaged $4.32 per ounce for the fourth quarter compared to $4.74 in the fourth quarter 2000, a decline of 9 per cent. The annual average silver price for 2001 was $4.40 per ounce compared to $4.94 in 2000, a decline of 11 per cent. The zinc price fared even worse, dropping to a record low level in real terms at $0.35 per pound in the fourth quarter of 2001 compared to $0.49 per pound for the fourth quarter of 2000, a decline of 29 per cent. For 2001, the annual average zinc price of $0.40 per pound was $0.11 per pound or 22 per cent lower than in 2000. The low zinc price significantly lowered Pan American's by-product revenue and consequently increased total cash and total production costs per ounce at all operations, most significantly at the Quiruvilca mine.
Operating activities consumed $2.1 million in cash over the course of the year including $1.0 million during the fourth quarter. In 2000, operating activities generated $0.6 million including $0.3 million in the fourth quarter. A total of $6.5 million was spent during 2001 for mine development and on equipment (Q4 2001 - $0.8 million). During 2000, capital spending totaled $19.0 million (Q4 2000 - $4.1 million). For 2001 and 2000 most of the capital spending was incurred on construction of the Huaron mine. During 2001, Pan American made net debt repayments of $5.0 million. At December 31, long-term debt was $5.0 million.
Cash and cash equivalents at December 31, 2001 stood at $3.3 million (December 31, 2000 - $7.5 million), and have since increased significantly due to the recent completion of a public offering of 3.45 million common shares for net proceeds of $15.6 million.
Pan American's CEO, Ross Beaty, said, "2001 was another year of great progress in operations but record low metal prices made it a tough year from a financial standpoint. We successfully opened our new Huaron silver mine in Peru on time and on budget while increasing our ownership in Huaron to 100 per cent. We opened our La Colorada silver mine in Mexico to small-scale production. We repaid our Huaron construction loan in full and raised $6.5 million in long-term debt in Peru. Our recent equity financing has strengthened our balance sheet and provided the equity funds necessary for the planned expansion of our La Colorada mine. I believe silver and zinc prices will continue to improve this year, and I expect our hard work and operational successes in 2001 will reward us with improved financial results this year."
At the Huaron mine, mill production began in April. In August, Pan American increased its interest in Huaron to 100 per cent by selling a small parcel of land to a neighboring mine. Pan American recorded a $3.5 million gain on this transaction. In addition, a portion of the Huaron land package outside the mine area was optioned to Anglo American during 2001, and Anglo performed ground and airborne exploration for polymetallic mineralization. Projected production from Huaron in 2002 is 4.7 million ounces of silver, 17,000 tonnes of zinc and 12,000 tonnes of lead. Ore grade to date in 2002 has been in excess of planned levels due to the recent discovery of a wide zone of above-average grade zinc mineralization that is expected to contribute to production throughout the year.
At the Quiruvilca mine, operating costs decreased due to a number of cost-cutting measures, but metal prices, particularly zinc, decreased even more resulting in continued operating losses. Production from Quiruvilca in 2002 is estimated at 3.2 million ounces of silver and 20,550 tonnes of zinc. Metal prices are currently close to those necessary for Quiruvilca to generate positive operating results. The Tres Cruces gold project near the Quiruvilca mine was dormant during the year, however Barrick Gold maintained an active exploration program at Pan American's Los Angeles gold property, also adjacent to the Quiruvilca mine.
In Mexico, Pan American opened and operated successfully the high-grade La Colorada silver mine under a limited scale production plan. In January 2002 the mine was expanded to 200 tonnes per day and planned silver production for 2002 at this limited scale is 1.2 million ounces. An updated feasibility study was completed on an expansion of the mine to 800 tonnes per day at a capital cost of $18.2 million. Planning is in progress to initiate construction provided silver prices maintain current levels. Pan American continues to actively search for other silver projects in Mexico.
At other projects, Pan American leased the San Vicente project in Bolivia to a well-known Bolivian mining company for a two-year limited scale toll mining operation to assist social conditions around the mine and offset mine maintenance costs. In Russia, the Dukat project was not advanced during the year, but the 80 per cent owner Polymetal has indicated its intention to proceed with mine construction in 2002.
Pan American ended 2001 with silver reserves and resources totaling 612 million ounces, including proven and probable reserves of 168 million ounces. In 2002, Pan American's long-life silver production is expected to increase to 9 million ounces and, subject to the expansion at La Colorada, 2003 silver production is expected to exceed 11 million ounces.
Ross J. Beaty, Chairman or
Rosie Moore, VP Corporate Relations
(604) 684-1175
www.panamericansilver.com
CAUTIONARY NOTE
Some of the statements in this news release are forward-looking statements, such as estimates of future production levels, expectations regarding mine production costs, expected trends in mineral prices and statements that describe Pan American's future plans, objectives or goals. Actual results and developments may differ materially from those contemplated by these statements depending on such factors as changes in general economic conditions and financial markets, changes in prices for silver and other metals , technological and operational hazards in Pan American's mining and mine development activities, uncertainties inherent in the calculation of mineral reserves, mineral resources and metal recoveries, the timing and availability of financing, governmental and other approvals, political unrest or instability in countries where Pan American is active, labor relations and other risk factors listed from time to time in Pan American's Form 40-F.
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