Quiruvilca (99.8%)

Pan American Silver Corp. has operated the Quiruvilca polymetallic underground mine in Peru since late 1995. The property consists of 140 mining concessions covering 3,566 hectares. The mine is located at an elevation of 3,800 metres in the Andes Mountains of northern Peru, approximately 130 kilometres inland from the coastal city of Trujillo.

History

Quiruvilca is one of Peru's oldest mines, with mineralization first reported in the area in 1789.  The mine has been in continuous operation since 1940.  Initially, mining focused on the copper bearing veins on the property but, gradually, focus was shifted to veins in the zinc-lead zone.  In March 1967, the mill started to treat complex ores producing copper, lead and zinc concentrates.

In 1995, Pan American Silver Corp. acquired 80% of the outstanding voting shares in Mina Quiruvilca.  Between 1995 and 1996, the Company increased its interest in the mine to 99.9% of the outstanding voting shares and 99.8% of the total outstanding equity.

Geology

Quiruvilca is located at the west side of the Western Cordillera on the edge of the Calipuy Volcanic Formation.  This mid-Miocene formation consists of andesite flows and flow brecchias interlayered with thin basalt flows and tuffaceous lacustrine sediments.

In the mine area, mineralization is contained in a series of over 130 narrow veins filling fractures and faults.  At least 75% of these veins have been in production at some point in time. Although narrow, the veins at Quiruvilca tend to have extensive lateral and vertical continuity within various structure types.  In some places the veins show thick ore shoots connected to thinner sub-economic to non-economic zones.  The width varies from up to two metres in the central zone to stringers.

Mining

Access to the Quiruvilca Mine is from four adits driven into the side of the mountain.  The underground workings cover an area four kilometres long by three kilometres wide and extend to more than 400 metres in depth. 

There are, on average, 60 active stopes at any given time, almost all using the cut and fill mining method.  Approximately one-third of the stopes are typically in the drilling and blasting phase, one-third in the mucking phase and one-third in the filling phase. In stopes where hydraulic backfill is not available, or in places where the vein is very narrow and would not otherwise be economic, resueing is employed with the waste rock remaining in the stope as backfill. In all other stopes, tailings are poured into the stope hydraulically to serve as backfill.  Tailings from the mill are directed to the hydraulic fill plant located near the Santa Catalina Tailings Impoundment. 

Operating Highlights

		2007	2006	2005
	Tonnes Milled	362,141	370,115	362,192
	Silver ounces	1,569,000	2,105,475	2,234,565
	Zinc tonnes	7,234	8,712	9,697
	Lead tonnes	2,528	2,574	2,761
	Copper tonnes	1,805	1,345	1,307
	Gold ounces	1,566	1,106	1,289
	Cash cost per ounce	$2.43	$(0.04)	$4.07

Exploration

Exploration at Quiruvilca is conducted using a combination of diamond drilling and underground drifting.  Two to three diamond drills are in continuous operation at the property, drilling holes between 50 and 350 metres in length.  This is generally followed by underground drifting and cross-cutting at 70-metre spacing.  During 2007, 11,520 metres of drilling was completed, along with 4,858 metres of drifting for reserve delineation and access for mining.

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Mineral Reserves ^{1, 2, 3}

	Reserve Category	Tonnes	Grams of Silver per tonne	% Zinc	% Lead	% Copper
	Proven	730,431	175	3.22	0.96	0.93
	Probable	702,046	149	3.43	1.23	0.38
	Total	1,432,478	162	3.32	1.09	0.66

1 Calculated as at December 31, 2007 using a price of $11 per ounce of silver, $2,100 per tonne of zinc, $1,600 per tonne of lead and $6,000 per tonne of copper.

2 Estimates of mineral reserves are calculated on the basis of blocks exposed by underground workings on one or more sides and having an in-place diluted value equal to or above the cutoff grade ($36.00/tonne).  Proven and probable mineral reserves are extrapolated between 15 and 30 metres down dip depending on vein continuity. See also information in the Annual Information Form under the heading “Mineral Reserve and Mineral Resource Estimate Information”.

3 Mineral reserve estimates for Quiruvilca were prepared under the supervision of, or were reviewed by, Michael Steinmann, P.Geo., Senior Vice President Geology & Exploration, and Martin G. Wafforn, P.Eng., Vice-President of Mine Engineering, as Qualified Persons as that term is defined in NI 43-101.

Mineral Resources^{1, 2}

	Resource Category	Tonnes	Grams of Silver per tonne	% Zinc	% Lead	% Copper
	Measured	4,246,310	114	2.01	0.74	1.22
	Indicated	952,541	164	3.92	1.34	0.66
	Inferred	2,471,876	135	2.88	1.01	0.87

1 These resources are in addition to mineral reserves.  Calculated as at December 31, 2007 using a price of $11 per ounce of silver, $2,100 per tonne of zinc, $1,600 per tonne of lead and $6,000 per tonne of copper.  See also information in the Annual Information Form under the heading “Mineral Reserve and Mineral Resource Estimate Information”.

2 Mineral resource estimates for Quiruvilca were prepared under the supervision of, or were reviewed by, Michael Steinmann, P.Geo., Senior Vice President Geology & Exploration, and Martin G. Wafforn, P.Eng., Vice-President of Mine Engineering, as Qualified Persons as that term is defined in NI 43-101.

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Huarón (100%)

The Huarón silver-zinc underground polymetallic mine is located in the Andes Mountains of Peru, 320 kilometres northeast of the capital city of Lima.  The property consists of 252 concessions spanning 63,822 hectares.  It sits in the heart of the Cerro de Pasco district, one of Peru's most important mining regions, accounting for over half of Peru's silver production.

History

Huarón is a primary silver mine that has produced more than 220 million ounces of silver from 70 known veins since operations began in 1912.  In 1998, Huarón's production ceased after its underground workings were flooded due to an accident at a neighboring mine.  Pan American Silver Corp. acquired a majority interest in the Huarón mine in 2000 and fast-tracked the project through feasibility, financing and construction to begin full-scale operation in 2001.  The Company subsequently acquired the remaining interest and now holds 100% of the property.

Geology

The main lithology in the Huarón area is a sequence of continental “redbeds” consisting of interbedded sandstones, limestones, marls, conglomerates, breccias and cherts of the Abigarrada and Casapalca Formations of Upper Cretaceous to Lower Tertiary age. 

The Huarón mine is located within an anticline formed by east-west compressional forces.  The axis of the anticline is approximately north-south striking and gently plunging to the north.  There are two main fault systems: (i) north-south striking thrust faults, parallel to the axis of the anticline; and (ii) east-west striking tensional faults.

Huarón is a polymetallic deposit (hosting silver, lead, zinc and copper) consisting of mineralized structures probably related to Miocene monzonite dykes principally within, but not confined to the Huarón anticline.  Mineralization is encountered in veins parallel to the main fault systems, in replacement bodies associated with the calcareaous sections of the conglomerates and other favourable stratigraphic horizons, and as dissemination in the monzonitic intrusions at vein intersections.

Mining

In 2007, stopes from 31 different veins (averaging 2.1 metres wide) were mined.  The mining method is 100% cut-and-fill, using mill tailings as the backfill material. The mine mechanized some of the stopes during the year by introducing small scoop trams.  This had the effect of increasing productivity, reducing the number of stopes required to maintain production from 58 at the start of the year to 35 by the end of the year. 

During 2007 the mine started the development of a new conveyor-way ramp from the current bottom of the mine (250 level) to the 180 level in the north zone.  This work is ongoing and will deepen the north zone of the mine by 70 metres to provide access to known vein extensions that have not been previously mined.  At the end of 2007 the ramp reached level 190 and was only 10 metres away from target.

An evaluation was undertaken in 2006 to determine whether to use existing mine shafts (which are inoperative) to replace diesel trucks and reduce mine haulage costs from the lower levels of the mine.  It was determined that it would be cost efficient to refurbish and deepen D shaft to 180 level, with construction to start in 2008. 

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Operating Highlights

		2007	2006	2005
	Tonnes Milled	750,799	693,285	639,849
	Silver ounces	3,827,000	3,664,660	3,690,786
	Zinc tonnes	12,064	11,735	11,701
	Lead tonnes	6,985	6,858	6,774
	Copper tonnes	1,658	1,603	1,689
	Gold ounces	3,496	1,832	1,113
	Cash cost per ounce	$2.78	$2.41	$5.08

Exploration

Exploration at Huarón is conducted using a combination of underground drilling and drifting.  Generally, underground drill holes that intersect promising ore grade mineralization are followed up by drifting for mineral resource and mineral reserve definition.  During 2007, 15,046 metres were drilled using three drill rigs. In addition, 3,895 metres of underground drifting were completed for mineral resource and mineral reserve definition.

Mineral Reserves ^{1, 2}

	Reserve Category	Tonnes	Grams of Silver per tonne	% Zinc	% Lead	% Copper
	Proven	5,603,501	189	3.11	1.58	0.32
	Probable	4,007,250	192	3.20	1.69	0.29
	Total	9,610,751	190	3.14	1.62	0.31

1Calculated as at December 31, 2007 using a price of $11 per ounce of silver, $2,100 per tonne of zinc, $1,600 per tonne of lead and $6,000 per tonne of copper.  See also information in the Annual Information Form under the heading “Mineral Reserve and Mineral Resource Estimate Information”.

2 Mineral reserve estimates for Huarón were prepared under the supervision of, or were reviewed by, Michael Steinmann, P.Geo., Senior Vice President Geology & Exploration, and Martin G. Wafforn, P.Eng., Vice-President of Mine Engineering, as Qualified Persons as that term is defined in NI 43-101.

Mineral Resources^{1, 2}

	Resource Category	Tonnes	Grams of Silver per tonne	% Zinc	% Lead	% Copper
	Measured	1,299,923	161	3.96	2.41	0.41
	Indicated	846,119	163	4.03	2.12	0.61
	Inferred	3,938,682	177	2.99	1.73	0.26

1 These resources are in addition to Huarón mineral reserves.  Calculated as at December 31, 2007 using a price of $11 per ounce of silver, $2,100 per tonne of zinc, $1,600 per tonne of lead and $6,000 per tonne of copper. See also information in the Annual Information Form under the heading “Mineral Reserve and Mineral Resource Estimate Information”.

2 Mineral resource estimates for Huarón were prepared under the supervision of, or were reviewed by, Michael Steinmann, P.Geo., Senior Vice President Geology & Exploration, and Martin G. Wafforn, P.Eng., Vice President of Mine Engineering, as Qualified Persons as that term is defined in NI 43-101.

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Morococha (89.4%)

Morococha is an underground, polymetallic mine located in the Junin district of Peru, 137 kilometres east of the capital city of Lima and approximately 50 kilometres southwest of Pan American Silver Corp.'s Huaron mine.  

History

The Morococha district has been mined continuously for more than 100 years. It lies within one of the world's most prolific mineral belts for polymetallic vein systems. Morococha hosts a very large and prolific network of veins, mantos, chimneys, skarns and other replacement bodies within a mineral rights package covering 110 square kilometres of concessions that make up some of the most prospective ground in Pan American Silver Corp. portfolio. Pan American Silver Corp. completed the property acquisition in 2004.

Geology

Mineralization includes epi-mesothermal silver-lead-copper-zinc veins and bedded silver-base metal replacements or mantos (which together account for the majority of the past and present economic mineralization at the Morococha property), intrusive-sediment contact skarns, and the quartz porphyry-hosted Toromocho disseminated copper system. The size and geometry of individual ore shoots in the veins can range up to 400 metres in length and more than 800 metres down plunge. Undiluted district vein width averages are on the order of 1.2 metres.

Ore and gangue mineralogy is similar in veins and mantos but it varies considerably across the property. Sphalerite, galena, and chalcopyrite are the most important primary minerals for zinc, lead and copper and silver is generally present as freibergite (silver-tetrahedrite) or argentiferous galena. Gangue generally consists of quartz, calcite, barite and rhodochrosite, the latter having a strong correlation with higher silver grades. 

Mining

Underground mining operations at the Morococha property consist primarily of typical overhand cut and fill, shrinkage and mechanized room and pillar methods using classified tailings or waste rock for backfill where needed.

Holes are drilled in the mining face using jacklegs or jumbo drills (in Codiciada) which are loaded with explosives and blasted between shifts twice per day.  Slushers are used in the cut and fill and shrink stopes and scoop trams are used in the room and pillar stopes and some of the wider cut and fill stopes to transport the broken rock to chutes that report to levels with track haulage.  Locomotives transport the ore from the chutes to one of three shafts for hoisting.  Highway dump trucks then haul the ore from shaft coarse ore bins to mill stock piles.

In addition to the three main shafts, some ore is also transported from certain sectors of the mine to stockpiles using LHD’s (scoop trams).

Operating Highlights

		2007	2006	2005
	Tonnes Milled	609,540	577,201	467,521
	Silver ounces	2,870,000	2,923,267	2,736,393
	Zinc tonnes	17,133	18,115	15,689
	Lead tonnes	6,085	5,722	5,875
	Copper tonnes	2,088	1,546	925
	Gold ounces	1,306	1,019	1,741
	Cash cost per ounce	$(2.16)	$(3.71)	$2.61

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Exploration

Shortly after acquiring the Morococha operation in 2004, Pan American Silver Corp. started aggressive exploration programs based on underground and surface diamond drilling.  From late 2004 to September 2007, 743 underground diamond drill holes and 110 surface diamond drill holes were completed for a total of 146,402 metres of diamond drilling.

Mineral Reserves ^1,2,3

	Reserve Category	Tonnes	Grams of Silver per tonne	% Zinc	% Lead	% Copper
	Proven	4,620,935	148	3.53	1.39	0.38
	Probable	2,840,986	152	3.91	1.65	0.34
	Total	7,461,921	150	3.67	1.49	0.36

1 Calculated as at December 31, 2007 using prices of $11 per ounce of silver, $2,100 per tonne of zinc, $1,600 per tonne of lead and $6,000 per tonne of copper.  See also information in the Annual Information Form under the heading “Mineral Reserve and Mineral Resource Estimate Information”.

2 Mineral reserve estimates for Morococha were prepared under the supervision of, or were reviewed by, Michael Steinmann, P.Geo., Senior Vice President Geology & Exploration, and Martin G. Wafforn, P.Eng., Vice-President of Mine Engineering, as Qualified Persons, as that term is defined in NI 43-101.

3 Tonnes are shown for 100% of the Morococha property.  Pan American Silver Corp., through it subsidiary Pan American Silver Corp. Peru, has a 89.35% voting interest in the Morococha property.

Mineral Resources ^1,2,3

	Resource Category	Tonnes	Grams of Silver per tonne	% Zinc	% Lead	% Copper
	Measured	1,291,373	162	3.19	1.33	0.32
	Indicated	1,549,323	237	3.16	1.60	0.31
	Inferred	7,093,836	151	3.44	1.34	0.39

1 These resources are in addition to mineral reserves. Calculated as at December 31, 2007 using prices of $11 per ounce of silver, $2,100 per tonne of zinc, $1,600 per tonne of lead and $6,000 per tonne of copper.  See also information in the Annual Information Form under the heading “Mineral Reserve and Mineral Resource Estimate Information”.

2 Mineral resource estimates for the Morococha mine were prepared under the supervision of, or were reviewed by, Michael Steinmann, P.Geo., Senior Vice President, Geology  & Exploration, and Martin G. Wafforn, P.Eng., Vice-President of Mine Engineering, as Qualified Persons as that term is defined in NI 43-101.

3 Tonnes are shown for 100% of the Morococha property. Pan American Silver Corp., through its subsidiary Pan American Silver Corp. Peru, has a 89.35% voting interest in the Morococha property.

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Silver-Rich Stockpiles

The Company does not consider the stockpiles to be a material property for the purposes of NI 43-101.

The stockpiles are located in the Cerro de Pasco mining district of Peru. For many decades, Volcan's Cerro de Pasco mine accumulated large silver-rich pyrite stockpiles from which the silver could not be extracted by standard metallurgical processes. In November 2002, Pan American Silver Corp. acquired the rights to these stockpiles.

Pan American Silver Corp. owns the right to mine and sell 600,000 tonnes of the highest grade silver stockpiles to Doe Run Peru’s La Oroya smelter, where the ore is used as process flux and Pan American Silver Corp. is paid for the silver contained.

Pursuant to this agreement, as of December 2004, Pan American Silver Corp. has been required to pay Volcan 33.3% of the net cash flow from stockpiles sales, after taxes and costs. As a result of Volcan's interest, the higher the price of silver, the higher the cash cost per ounce at the operation.

In 2007, demand for the stockpiled ore from the only buyer of this material, Doe Run Peru, decreased by 9% from the previous year. The average grade of the pyrite material sold declined by 12% in 2007, resulting in a 20% decrease in silver production.

Operating Highlights

		2007	2006	2005
	Tonnes Sold	52,547	58,016	61,499
	Silver ounces	454,000	566,383	692,381
	Cash cost per ounce	$3.24	$3.17	$1.08