VANCOUVER, BRITISH COLUMBIA -- (Marketwire) -- 08/11/09 -- (All amounts in US dollars unless otherwise stated and all production figures are approximate)
Pan American Silver Corp. (TSX: PAA)(NASDAQ: PAAS) today reported unaudited financial and operating results for the quarter ended June 30, 2009. The Company also 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.
Second Quarter 2009 Highlights(1)
- Silver production increased 24% to quarterly record of 5.8 million ounces
- Gold production increased 270% to quarterly record of 25,068 ounces
- Cash costs(2) of $5.99 per payable silver ounce
- Record quarterly sales of $111.4 million
- Cash flow generated by operations of $32.0 million, or $0.37 per share outstanding
- Mine operating earnings(2) of $23.5 million, more than double from first quarter of 2009
- Net income of $10.2 million or $0.12 per share
- Adjusted net income of $13.5 million or $0.16 per share, excluding the after tax $3.3 million write down of a smelter receivable
- Declared commercial production at San Vicente's mine expansion and new processing plant on April 1st
- Signed joint-venture agreement with Orko Silver and initiated drilling and development program at La Preciosa silver project in Mexico
(1) Financial information based on Canadian GAAP; results are unaudited; percentages compare Q2 2009 with Q2 2008
(2) Cash costs per ounce, and mine operating earnings are non-GAAP measures; for detailed descriptions see pages 4 and 11 of the MD&A, respectively
"I am very pleased with the way we have been able to turn around our business and deliver great results in just two quarters", said Geoff Burns, President and CEO. "During the second quarter we continued building on the positive trend we set in the first three months of 2009 and produced 5.8 million ounces of silver and over 25,000 ounces of gold. Both new quarterly records for Pan American Silver. Thanks to the outstanding ramp up at Manantial Espejo, and continued fiscal discipline, we kept cash costs below our annual guidance and recorded strong quarterly net earnings and operating cash flows. With San Vicente's new processing plant rapidly approaching design capacity, I am confident that we will continue generating healthy earnings and cash flow, and delivering value to our shareholders through the balance of 2009 and beyond."
Financial Results
Pan American had sales of $111.4 million during the second quarter of 2009, a new quarterly record and a 7% increase from last year's second quarter. The increase was the result of higher quantities of silver, zinc and gold sold, which more than offset lower silver and base metals prices. Silver sales remained the Company's mainstay, accounting for 58% of total revenues, and gold contributed 18%, increasing the Company's exposure to precious metals to 76% of total revenues.
Cost of sales for the quarter was $66.0 million, which was 27% higher than a year ago. The increase, mainly attributable to higher sales volumes of silver, was held in check by cost controls implemented by management last year which continued during the current year, plus general reductions in the cost of energy, consumables and favourable foreign exchange rates.
Mine operating earnings totaled $23.5 million, a 40% decrease from the second quarter of 2008, but more than double the $10.5 million posted for the first three months of 2009. The year over year decline resulted from higher sales volumes being outweighed by increased depreciation and amortization expenses at Manantial Espejo and San Vicente and increased cost of sales.
During the quarter the Company generated $32.0 million in cash flow from operating activities or $0.37 per share outstanding, which was 21% less than in the second quarter of 2008. However, the current quarter's operating cash flow was up sharply as compared to the first quarter of 2009, increasing by more that by $37 million.
Pan American generated net income of $10.2 million or $0.12 per share in the second quarter of 2009, versus net income of $21.4 million or $0.26 per share generated in the second quarter of last year. Excluding the $3.3 million non-cash, after tax charge for the write down of a smelter receivable, adjusted net income was $13.5 million or $0.16 per share.
At June 30, 2009 Pan American had $112.4 million in cash and short-term investments, representing an increase of $82.2 million from December 31, 2008. The increase was mainly due to a public offering of common shares in February 2009, which generated net proceeds of $98.6 million. The Company's working capital increased to $216.1 million at June 30, 2009 from $95.1 million at the end of 2008. Pan American remains debt-free and fully funded to complete its short term growth projects. In addition, the Company has access to a $70.0 million credit facility, which is undrawn and intended for general corporate purposes and strategic business development opportunities.
Production And Operations
Pan American produced 5.8 million ounces of silver during the second quarter of 2009, which was 24% more than the same period in 2008 and represents a new quarterly production record for the Company. The increase was mainly due to the new Manantial Espejo mine in Argentina, which reached commercial production in January 2009. As expected, silver production from the Company's Peruvian operations was slightly lower than last year due to lower throughput rates, partially offset by higher ore grades. Silver production from the Company's Mexican operations declined as a result of planned lower throughput at the La Colorada mine and planned lower grades at the Alamo Dorado mine, which were not quite off-set by higher throughput rates.
During the second quarter, the Company produced 25,068 ounces of gold, which was also a new quarterly record and represented an increase of 270% over the second quarter of 2008. Gold has now become Pan American's single most valuable by-product, accounting for 18% of the total value of metals produced during the second quarter.
Consolidated cash costs for the quarter were $5.99 per ounce of silver, compared to $5.28 in the same period of last year and in line with the Company's guidance for 2009.
