Pan American Silver CEO Discusses Q3 2010 Results - Earnings Call Transcript

Pan American Silver Corp (

PAAS

)

Q3 2010 Earnings Call

November 9, 2010 10:00 a.m. ET

Executives

Kettina Cordero – Coordinator, IR

Geoff Burns – President and CEO

Steve Busby – COO

Michael Steinmann – EVP, Geology and Exploration

Rob Doyle – CFO

Analysts

Steven Butler – Canaccord Genuity

Presentation

Operator

Compare to:
Previous Statements by PAAS
» Pan American Silver Corp. Q2 2010 Earnings Call Transcript
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» Pan American Silver Corp. Q3 2009 Earnings Call Transcript

Hello. This is the Chorus Call conference operator. Welcome to Pan American Silver Corporation’s third quarter 2010 conference call and webcast. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. (Operator Instructions).

At this time, I would like to turn the call over to Mrs. Kettina Cordero, Coordinator Investor Relations, please go ahead Mrs. Cordero.

Kettina Cordero

Thank you, operator, and good morning ladies and gentlemen. Today are our President and CEO, Geoff Burns, is joining us from Toronto, and I am joined here in Vancouver by our Chief Operating Officer, Steve Busby, our Executive Vice President of Geology and Exploration, Michael Steinmann, and our Chief Financial Officer, Rob Doyle.

I would like to start this conference by reminding you that this call cannot be reproduced or retransmitted without our consent, and by pointing out that certain of the statements and information in this call will constitute forward-looking statements and forward-looking information within the meaning of applicable securities laws. All statements other than statements of historical fact are forward-looking statements.

These statements reflect the company's current views with respect to future events and they are necessarily based upon a number of assumptions and estimates that while considered reasonable by the company are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies.

Many known and unknown factors could cause actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements. And the company has made assumptions and estimates based on or related to many of these factors, encouraging investors to refer to the cautionary language included in our most recent news release dated November 8, 2010 as well as those factors that emphasize under the caption risk related to Pan American's business in company's most Form 40-F and IR information form.

Investors are cautioned against attributing undue certainty or reliance on forward-looking statements and the company does not intend or assume any obligation to update these forward-looking statements or information other than as required by law.

With that, I will turn the call to Geoff Burns, President and CEO.

Geoff Burns

Thank you, Kettina. Good morning, ladies and gentleman, and welcome to Pan American Silver’s 2010 third quarter earnings release and conference call. As has become our normal call format, I will start our call with some very brief general comments about our third quarter results, and Steve, then Mike will provide a more detailed discussion of our activities in our mines, our development projects and their exploration programs. Rob will then discuss our financial results and how we have continued to enhance our cash balances as we prepare for the development of Navidad.

Before jumping directly into our results, it is a great pleasure that I would like to mention that our Board of Directors approved a doubling of our annual dividend. Starting with the recently completed third quarter, we will move to a quarterly cash dividend distribution of 2.5 cents per share from what was previously semi-annual distributions.

Our third dividend of 2010 and first quarterly dividend will be paid on or about December 1 of this year, to holders of record of common shares as of the close of business on November 19. It is indeed gratifying to be in a position to comfortably distribute an increasing portion of our growing prosperity back to you, directly in cash.

Now to our results. Pan American delivered a solid third quarter, we produced 6.2 million ounces of silver in the third quarter and a cash cost of $6.08 per ounce. Our third quarter gold production was a very respectable 21,300 ounces in line with our expectations.

Our Zinc, Lead, and Copper production was slightly below planned, largely due to lower-than-forecasted throughput at our Huaron mine.

This indirectly hurt our cash cost, which were a little higher than we thought they would be due to the lower-than-expected byproduct credits.

Year to date, to the end of September, we produced 18.6 million ounces of silver at a cash cost of $5.41 per ounce, which puts us right on track to comfortably meet, and in all likelihood surpass our annual silver forecast of 23.4 million ounces at a cash cost of $5.90 per ounce.

Our consistent operating results translated nicely into outstanding financial performance during the third quarter. Trying not to steal to much of Rob’s thunder, as I know he’s all set to review with you in detail our third quarter financial results in a few minutes, I would like to mention a couple of key financial metrics.

First, silver prices averaged over $18.60 per ounce during the third quarter, which allowed our cash margins to expand to almost $12.70; the highest levels we’ve experienced since the first quarter of 2008. With silver prices now bouncing up $28 per ounce, our margins have literally exploded in the last several weeks.

Second, our cash flow from operations before chances in non-cash working capital items was $50.7 million or $0.47 per share. And lastly, we had net free cash flow and banked $51 million to bring our working capital position at the end of September to over 360 million.

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