eight operating mines - Peru, Mexico & Bolivia
Expertise in Mine Construction and Developmen
Message: Announces Fourth Quarter and 2008 Year End Results
| February 19, 2009 | |
| Pan American Silver Announces Fourth Quarter and 2008 Year End Results | |
|
VANCOUVER, BRITISH COLUMBIA--(Marketwire - Feb. 19, 2009) - Pan American Silver Corp. (TSX:PAA)(NASDAQ:PAAS) - (All amounts in US dollars unless otherwise stated and all production figures are approximate) Pan American Silver Corp. today reported unaudited financial and operating results for the fourth quarter and fiscal year ended December 31, 2008. The Company also provided an update on its mining operations and an outlook for 2009. This earnings release should be read in conjunction with the Company's unaudited 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. Fourth Quarter 2008 Highlights (unaudited)(1) - 4.6 million ounces of silver produced - Cash costs of $8.24(2) per payable ounce of silver - Net loss of $33.3 million or $0.41 per share, including $35.4 million in atypical charges for the write down of the Quiruvilca mine, pricing adjustments, severance costs and currency losses - Cash flow used by operations was $(4.9) million - Adjusted cash flow from operations(3) was positive $4.2 million - Manantial Espejo commenced silver-gold dore production December 29, 2008 - San Vicente expansion 92% complete at year end 2008 Year-End Highlights (unaudited)(1) - Record annual silver production of 18.7 million ounces, 13th consecutive year of growth - Cash costs of $5.96(2) per payable ounce of silver - Net earnings of $24.6 million or $0.31 per share - Record cash flows generated by operating activities of $93.0 million - Adjusted cash flow from operations(3) of $95.6 million - Record sales of $338.6 million - Proven and probable reserves of 223.7 million ounces of silver and 701,000 ounces of gold at year end 2009 Outlook - Silver production to increase by 15% to 21.5 million ounces - Gold output to more than double to 85,000 ounces - Manantial Espejo to reach commercial production during the first quarter - San Vicente expansion to be commissioned and ramp up to full capacity by end of the 2nd quarter - $103.5 million raised in February through 6.4 million equity share financing (1) Financial information in this news release is based on Canadian GAAP (2) Cash costs per payable ounce of silver is a non GAAP measure. The Company believes that, in addition to cost of sales, cash costs per ounce is a useful and complementary benchmark for performance and is well understood and widely reported in the silver mining industry. However, cash costs per ounce does not have a standardized meaning prescribed by Canadian GAAP. Investors are cautioned that cash costs per ounce should not be construed as an alternative to cost of sales determined in accordance with Canadian GAAP as an indicator of performance. The Company's method of calculating cash costs per ounce may differ from the methods used by other entities and, accordingly, the Company's cash costs per ounce may not be comparable to similarly titled measures used by other entities. See "Financial and Operating Highlights" below for a reconciliation of this measure to the Company's cost of sales. (3) Adjusted cash flow from operations is a non-GAAP measure. The Company believes that, in addition to cash flow, adjusted cash flow is a useful and complementary performance measure. However, adjusted cash flow does not have a standardized meaning prescribed by Canadian GAAP. Investors are cautioned that adjusted cash flow should not be construed as an alternative to cash flow determined in accordance with Canadian GAAP as an indicator of performance. The Company's method of calculating adjusted cash flow may differ from the methods used by other entities and, accordingly, the Company's adjusted cash flow may not be comparable to similarly titled measures used by other entities. See "Financial and Operating Highlights" below for a reconciliation of this measure to the Company's cash flow (used in) generated by operating activities. Commenting on today's announcement, Geoff Burns, President and CEO said: "As announced in early January, the fourth quarter of 2008 was a very challenging period for the mining industry and for Pan American. We found ourselves on the wrong side of a strengthening US dollar, base metal prices fell precipitously and consequently operating costs reached all-time highs. However, we responded accordingly and made some difficult decisions with respect to our assets and our people and we are already starting to see the benefits of these actions. I'm happy to be able to report that in January of this year we produced 1.7 million ounces of silver at a cash cost of $5.97 per ounce. That's a 28% improvement over our fourth quarter's cash costs and in line with what we are expecting in 2009." Financial Results During the fourth quarter of 2008, Pan American reported a consolidated net loss of ($33.3) million or ($0.41) per share. As previously announced, a number of atypical charges registered during the quarter negatively affected the Company's financial results. These include (i) a one-time non-cash charge of $15.1 million for the write down of the Quiruvilca mine, (ii) an $8.8 million charge for final price adjustments of concentrate shipments made during the third quarter, but where final pricing was settled during the fourth quarter, (iii) a $5.8 million loss on currency positions, partially offset by gains in zinc and lead contracts, (iv) a $4.7 million charge for severance and other expenses of a non-recurring nature and (v) a $1.0 million foreign exchange loss. Consolidated mine operating earnings for the year 2008 were $93.2 million, down 11% from 2007, while consolidated net income for the year was $24.6 million, or $0.31 per share compared to $88.9 million or $1.16 per share for 2007. Sales during the quarter were $46.3 million, a 46% decline compared to the fourth quarter of 2007. Sales were negatively affected by lower quantities sold and shipped, the deterioration of silver and base metals prices and an $8.8 million negative pricing adjustment described above. At the end of October silver reached its lowest price since late 2005, while average zinc and lead prices were also significantly down at 55% and 62%, respectively, compared to a year ago. Despite lower sales during the fourth quarter, the Company posted annual record sales of $338.6 million, a 12% increase year over year. Cash flow used by operating activities for the quarter ended December 31, 2008 were $(4.9) million. However, adjusted cash flow from operations(3) remained positive at $4.2 million. During the fourth quarter the Company invested $60.2 million in capital expenditures, of which $28.5 million were invested in the final stages of construction and commissioning of Manantial Espejo and $22.1 million in San Vicente's expansion. During the full year 2008, the Company generated $93.0 million in cash flow from operating activities, a 37% increase year over year. At December 31, 2008 Pan American had $30.1 million in cash and short term investments and $95.1 million in working capital. The Company remains debt-free and has not drawn on the $70 million revolving facility announced in October 2008. With Manantial Espejo now in production and San Vicente's expansion nearing commissioning, the Company remains fully funded to complete its current short term growth strategy. Production and Operations 2008 was the Company's thirteenth consecutive year of production growth with annual production of 18.7 million ounces of silver, a 9% increase over 2007. The Company also produced 25,146 ounces of gold, which represents an 8% increase from the previous year. Pan American's operations produced 4.6 million ounces of silver during the fourth quarter of 2008. Alamo Dorado and La Colorada had good quarters, contributing 1.4 million and 0.9 million ounces of silver, respectively. In Peru, Huaron milling was slowed by mechanical problems, now rectified, which reduced quarterly production to 0.8 million ounces of silver, while Morococha and Quiruvilca produced 0.6 million and 0.3 million ounces of silver, respectively. Consolidated cash costs for the fourth quarter of 2008 rose to $8.24 per ounce of silver net of by-product credits, from $4.54 in the fourth quarter of 2007. Cash costs for the year increased to $5.96 per ounce of silver produced net of by-product credits, from $3.42 during 2007. The increase was a direct result of lower base metal by-product credits coupled with increased costs for materials, energy and labour, which escalated significantly throughout 2008. The Company expects its cash costs to decline going into 2009, as a consequence of the proactive measures implemented in November of 2008, the addition of lower cost production from Manantial Espejo, the weakening of local currencies and clear indications that last year's cost escalations are beginning to reverse. In fact, during January 2009, the Company produced 1.7 million ounces of silver at a cash cost of $5.97 per ounce, a 28% reduction as compared to the fourth quarter of 2008. Outlook In 2009, Pan American expects to increase silver production by another 15% to 21.5 million ounces, excluding production from the Quiruvilca mine, which the Company is preparing for a period of care and maintenance. ------------------------------------------------------
Silver Production Cash Costs
Million ounces Per Ounce US$
------------------------------------------------------
Huaron 4.2 8.14
------------------------------------------------------
Morococha 2.7 7.82
------------------------------------------------------
Silver Stockpiles 0.2 2.93
------------------------------------------------------
San Vicente 1.9 6.98
------------------------------------------------------
La Colorada 3.4 8.01
------------------------------------------------------
Alamo Dorado 4.8 6.32
------------------------------------------------------
Manantial Espejo 4.3 2.25
------------------------------------------------------
TOTAL 21.5 6.28
------------------------------------------------------
The Company also expects to more than double its gold production and is forecasting 85,000 ounces of gold in 2009. With the anticipated increase in both silver and gold production, the Company expects to significantly reduce its exposure to base metals and estimates that in 2009 58% of its revenue will come from the sale of silver and 16% from the sale of gold. Consolidated cash costs for 2009 are expected to increase modestly to $6.28 per payable ounce of silver net of by-product credits, compared to the $5.96 per ounce posted in 2008. Higher costs are expected during the first half of the year reflecting the ramp up of both Manantial Espejo and San Vicente and should decrease as 2009 progresses. To calculate the by-product credits included in the 2009 projected cash costs, the Company has assumed average zinc and gold prices of US$1,150 per tonne and US$725 per ounce, respectively. Pan American expects to invest $29.5 million in capital expenditures during 2009. $5.5 million will be spent in development and construction capital to finalize San Vicente's expansion and $24.0 million in sustaining capital at its other operations. Recent Developments On February 12, 2009, Pan American closed a public offering of 6,371,000 common shares to raise gross proceeds of approximately $103.5 million. As indicated in the final prospectus supplement, the Company expects to use the net proceeds of the offering for potential acquisitions, development of acquired mineral properties, working capital and other general corporate purposes. Including the public offering, the Company now has approximately $125 million in cash and short term investments and in excess of $195 million in working capital. Commenting on the quarterly results and 2009's outlook, Geoff Burns added: "As difficult as the fourth quarter was, I could not be more optimistic about our future. We took some tough steps and the results are already starting to show. Our newest and lowest cost mine is ramping up better than expected. Our increased exposure to silver and now gold could not be more timely, as the price of both precious metals has increased significantly in response to an economic crisis of global proportions. Silver is again above US$ 14.00 per ounce and gold is closing in on US$ 1,000 per ounce. I think there is ample reason to believe they will push higher in 2009 and Pan American is again, well positioned to reap the benefits." |
Loading...
Loading...
New Message
Please
login
to post a reply