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Mon Mar 10, 2003
Pan American Silver Corp. Reports Year End And Fourth Quarter Results
Pan American will host a conference call on Tuesday March 11th at 9:00 a.m. Pacific time (12 p.m. Eastern time) to discuss 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 1379677. 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.
Vancouver, British Columbia -- Pan American Silver Corp. (NASDAQ: PAAS; TSX: PAA) today reported its financial results for the fourth quarter and the year 2002. All amounts are expressed in U.S. dollars. Revenue for the fourth quarter was $12.1 million, an 11 percent increase over that of 2001. Revenue for the year was $45.1 million, 21 per cent greater than for 2001 due to a full year's operations from the company's Huaron mine in Peru. Full-year silver production was 7.8 million ounces, 12 percent higher than in 2001.
During the fourth quarter, Pan American recorded an unusual charge of $12.1 million against the operations of the Quiruvilca mine, resulting in a net loss for the quarter of $13.7 million or $0.32 per share. The unusual charge follows the company's $15.1 million write-down in the third quarter of the Quiruvilca mine's carrying value and an assessment of the long-term mine reclamation cost. The net loss for the year was $33.7 million ($0.80 per share) including the total $27.2 million Quiruvilca mine write-down and reclamation charge. The fourth quarter charge consisted of a $10 million non-cash provision for future reclamation costs, a $1.8 million non-cash provision against the carrying value of the mine's supplies inventory and $0.29 million of mine development costs incurred in the fourth quarter. All future expenditures at Quiruvilca will be expensed as incurred. Operations at Quiruvilca have been severely affected by record low metal prices since late 2000, particularly zinc. The mine continues to operate, and in fact has operated better than expected to date in 2003.
Excluding the unusual charge, the net loss for the fourth quarter was $1.6 million or $0.04 per share (2001 -- net loss of $4.4 million or $0.12 per share). The improvement stems mainly from good results at the Huaron mine, where metal production was higher and costs lower than in the fourth quarter of 2001. Consolidated production for the quarter was 2.0 million ounces of silver, 9,555 tonnes of zinc, 5,214 tonnes of lead and 742 tonnes of copper.
Mining operations contributed $1.9 million during the year, a $5.2 million improvement from 2001 when mining operations lost $3.3 million. The mining contribution in the fourth quarter was $0.4 million (2001 -- lost $1.2 million). Capital spending totaled $10.9 million, primarily on the La Colorada mine expansion. Financing activities, net of $3.3 million in debt repayments during the year, generated $18.5 million. Cash at year-end was $10.2 million. At December 31, the company had spent and committed $10.1 million of the $20 million La Colorada capital budget and the balance of the expansion costs will be funded from a $10 million loan from the IFC, a member of the World Bank group, the first tranche of which was drawn down on March 7, 2003. This project is proceeding on schedule and within budget and should be completed by July. At year-end, long-term debt was $3.9 million (2001 - $5 million).
Pan American's CEO Ross Beaty, said, "Pan American had another tough financial year in 2002 due to continued very low metal prices, but I am optimistic that we will have much better results in 2003 as we grow into a larger and stronger company. We have taken the difficult decision to reflect in our 2002 results our worst-case financial exposure regarding the Quiruvilca mine even though we expect metal prices and therefore Quiruvilca's results to improve in the future. We began construction of La Colorada and this should be our most profitable mine when it opens to full-scale production in July. Huaron had an excellent performance in 2002 and we added a new source of cash flow from the Peru silver stockpiles operation late in the year. We added major growth projects at Manantial Espejo in Argentina, and early in 2003, at Alamo Dorado in Mexico following our acquisition of Corner Bay Silver. So I am very excited about our growth ahead, and with it our ability to improve our financial results this year."
In Peru, the company increased its silver operations to three, with the November addition of a small but very profitable silver stockpile operation that is expected to produce about 0.5 million ounces annually at a cash cost of less than $2 per ounce for the next ten years. At the Huaron mine, silver production increased to 4.5 million ounces in 2002 from 2.9 million ounces in 2001. In December a 10 percent mine expansion began at Huaron due to excellent exploration results in the year, and planned production in 2003 is 4.9 million ounces of silver. At the Quiruvilca mine, production in 2003 is planned at 2.7 million ounces of silver. Half of Quiruvilca's planned zinc production for 2003 has been hedged at higher-than-current prices and operations so far this year are much improved from the previous quarter.
In Mexico, Pan American began construction in July of the $20 million project that will expand production at the La Colorada mine to 3.8 million ounces annually by mid-2003. Silver production for 2002 was 0.6 million ounces and planned production for 2003 is 2.3 million ounces. In June, the company agreed to acquire Corner Bay Silver in a merger that closed on February 20, 2003. Corner Bay's main asset was the 77 million ounce Alamo Dorado silver project and Pan American plans to complete a revised feasibility study on the deposit by mid-2003, and then proceed with production financing and construction as soon as possible on this promising project.
Elsewhere, Pan American has interests in four other growth projects that were all advanced during 2002. In Bolivia, the San Vicente mine produced 1.1 million ounces of silver under a toll-milling agreement with a Bolivian company, and Pan American anticipates advancing the property in 2003 towards a feasibility study. In Argentina, the 50 percent owned Manantial Espejo property generated very good exploration drilling results during the year, and plans for 2003 are to undertake an underground tunneling and drilling program on the property leading to a feasibility study in 2004. In Peru, the Tres Cruces gold project near Quiruvilca was reactivated during the year as a result of the large nearby Alto Chicama gold discovery by Barrick Gold, and higher gold prices. In 2003, Barrick will be exploring Tres Cruces and the company's Los Angeles gold property, also adjacent to Quiruvilca. Finally, in Russia, the 20 percent owned Dukat mine was reported to have opened in December, though no silver sales were made and it is uncertain as to when they will commence.
Mr. Beaty concluded, "Pan American now has four silver operations and several outstanding growth projects. In 2003 the company's silver production is expected to grow to 10.3 million ounces. While the silver price only rose modestly in 2002 relative to gold, it outperformed most base metal prices -- an affirmation of silver's dual role as a precious and industrial metal. The outlook is good for higher metal prices in 2003 and, with our rising production base, this will immediately translate to improved financial results for our shareholders. We are solidly on track to become the world's purest large silver producer in the near future and the pre-eminent silver mining investment equity."
- End -
Ross J. Beaty, Chairman or
Rosie Moore, VP Corporate Relations
(604) 684-1175
CAUTIONARY NOTE
Some of the statements in this news release are forward-looking statements and as such are based on an assumed set of economic conditions and courses of action. These include 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. There is a significant risk that actual results will vary, perhaps materially, from results projected 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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