Silver & Gold Production Increases, San Vicente Commissioning Under Way
VANCOUVER, BRITISH COLUMBIA -- (Marketwire) -- 05/12/09 -- (All amounts in US dollars unless otherwise stated and all production figures are approximate)
Pan American Silver Corp. (TSX: PAA)(NASDAQ: PAAS) ("Pan American" or the "Company") today reported unaudited financial and operating results for the quarter ended March 31, 2009 and provided an update on operations.
This earnings release should be read in conjunction with the Company's MD&A, Financial Statements and Notes to Financial Statements for the corresponding period, which are available on the Company's website at www.panamericansilver.com, and have been posted on SEDAR at www.sedar.com.
First Quarter 2009 Highlights(1)
- Silver production increased 8% to 4.9 million ounces, compared to Q1 2008
- Record gold production of 20,858 ounces, an increase of 206%, compared to Q1 2008
- Cash costs(2) declined 28% to $5.94 per ounce of payable silver, as compared to Q4 2008
- Mine operating earnings(2) of $10.5 million
- Net income of $6.6 million or $0.08 per share
- Cash flow from operations (before changes in working capital) of $19.0 million, or $0.23 per share(2)
- Inaugurated and achieved commercial production at Manantial Espejo silver and gold mine
- Started commissioning of San Vicente mine
- Completed public offering of common shares for gross proceeds of $103.5 million
- Signed agreement to earn a 55% interest in La Preciosa silver development property in Mexico
(1) Financial information based on Canadian GAAP
(2) Mine operating earnings, cash flow per share and cash costs are non-GAAP measures; for detailed descriptions see pages 3 and 8 of the MD&A
"The first quarter was a pivotal period for Pan American Silver, highlighted by much improved financial results and key operational and mine development achievements" said Geoff Burns, President and CEO. "In the fourth quarter of last year we took immediate and decisive action with respect to our people and our assets to combat a precipitous fall in metal prices. It is extremely rewarding to see the positive results of those difficult decisions. We rebounded from a disappointing fourth quarter performance, by again posting positive net income, respectable cash flow from operations and solid mine operating earnings."
Mr. Burns continued, "Furthermore, we recorded our second highest quarterly silver production, reduced our cash costs by 28% as compared to the previous quarter, achieved commercial production at Manantial Espejo, our newest silver and gold mine, and began commissioning of our San Vicente mine expansion project. We successfully changed our course during last year's financial crisis, by focusing on our core strengths in mine development and operations and are again well positioned to continue on a path of profitable growth, ready to seek out strategic opportunities."
Financial Results
Pan American recorded sales of $70.4 million during the first quarter of 2009, compared to $108.8 million in the first quarter of 2008. The decrease was the result of lower silver and base metal prices, which were partially offset by an 11% increase in the quantity of silver sold and a 206% increase in the amount of gold sold. Quantities of base metals sold were comparable to the year-earlier period. Cost of sales for the quarter was $45.1 million, which was 11% lower than a year ago and reflected a concerted company-wide effort to reduce expenses.
Mine operating earnings totaled $10.5 million, a 78% decrease from the first quarter of 2008, but a $20.4 million improvement over the mine operating loss that was posted in the 4th quarter of 2008. The year-over-year decline was a direct result of lower base metal prices, as higher depreciation and amortization expenses were mostly offset by reduced cost of sales.
Consolidated net income for the first quarter was $6.6 million or $0.08 per share, compared to $30.2 million or $0.38 per share last year. The decline was almost exclusively due to lower base metal and silver prices, offset in part by a reduction in cost of sales. However, net income improved by an impressive $39.9 million as compared to the 4th quarter of last year.
During the quarter the Company generated $19.0 million in cash flow from operating activities before changes in working capital. Again, reduced operating cash flow was primarily due to lower prices for metals sold. Cash flow from operating activities (before changes in working capital) increased by more than $30.6 million as compared to the fourth quarter of last year, benefiting from increased silver and gold production, costs savings and higher silver and gold prices during the first quarter of 2009.
During the quarter, Pan American continued to invest in growth, spending $18.7 million on mineral properties, plant and equipment. Of that total, $9.9 million was directed to construction and commissioning activities at the San Vicente mine, while $3.5 million related to final payments for the construction and commissioning of Manantial Espejo.
In February, Pan American completed a public offering of 6.4 million common shares at a price of $16.25 per share, for aggregate gross proceeds of $103.5 million and net proceeds, after considering underwriting fees and issue expenses, of $98.0 million. The proceeds are intended to fund acquisitions, development initiatives on acquired properties, working capital requirements and general corporate purposes.
At March 31, 2009 Pan American had $107.3 million in cash and short-term investments, an increase of $77.2 million from December 31, 2008. The increase was mainly the result of proceeds of the equity offering in February, offset by capital expenditures and investments in working capital accounts. The Company finished the current quarter with working capital of $199.3 million.
