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Pan American Silver Corp. Q2 2010 Earnings Call Transcript

Pan American Silver Corp. Q2 2010 Earnings Call Transcript

Pan American Silver Corp. (PAAS)

Q2 2010 Earnings Call Transcript

August 12, 2010 2:00 pm ET


Kettina Cordero – Coordinator, IR

Geoff Burns – President and CEO

Steve Busby – COO

Michael Steinmann – EVP, Geology and Exploration

Rob Doyle – CFO


Haytham Hodaly – Salman Partners

Chris Lichtenheldt – UBS

John Bridges – JPMorgan

Andrew Kaip – BMO Capital Markets

John Tumazos – John Tumazos Very Independent Research

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Hello. This is the Chorus Call conference operator. Welcome to Pan American Silver second quarter 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.



Thank you operator and good morning ladies and gentlemen. Joining me here today are our President and CEO, Geoff Burns, 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 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. We encourage investors to refer to the cautionary language referred to the cautionary language included in our most recent news release dated August 11, 2010 as well as those factors identified under the caption risk related to Pan American's business in company's most form 40-F and annual 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 or depending on where you are, good afternoon, ladies and gentlemen and welcome to Pan American Silver's 2010 second quarter earnings conference call. As has become our norm of call format, I will start the call with some very brief general comments about our second quarter results then Steve and Mike will provide a more detailed discussion of our activities in our mines, our development projects and with our 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 into our results I would like to mention that I am happy to tell you that our Board of Directors approved our second semi-annual cash dividend in the amount of $0.025 per share. This dividend will be paid on Tuesday September 7th to holders of record of common shares as of the close of business on Monday, August 23



While I know it's a modest dividend, it is a pleasure to know your company has matured to the point where we can comfortably distribute a portion of our profits back to you directly in cash.

Now to our results. By all measures, Pan American delivered another solid quarter. We produced 6.9 million-ounces of silver in the second quarter, 18% higher than the second quarter of 2009, and a new quarterly company record.

Much of this record was complements of our Alamo Dorado mine which had a terrific quarter, alone producing 2.4 million ounces of silver, our San Vicente, Le Colorado, Manantial Espejo, and Morococha mines also had good quarters producing pretty much as expected. The one dull spot in our portfolio was our Huaron mine which continued to struggle with lower than forecast production and higher cash costs.

I'm sure Steve will provide more commentary on the situation at Huaron, but I know we have just about turned the corner at this long-live operation and I'm fully expecting a significant improvement in its performance over the balance of this year.

Our second quarter gold production was a very respectable 21,000-ounces. A decline from the record levels we achieved during the first quarter of the year but very much as planned. This was in line with our expectations. However, our consolidated gold production is still on track to make 90,000 – excuse me, 95,000-ounces over the – for the full year.

Our zinc, lead and copper production was also basically right on plan as lower than expected zinc production from Huaron was fully offset by increased zinc production from San Vicente.

Year-to-date, we produced 12.4 million ounces of silver and 49,000 ounce of gold, which puts us right on target to achieve our annual forecast of 23.4 million-ounces of silver for 2010.

Our cash costs declined by 6% from a year ago to $5.64 per ounce net of by-product credits, while down from a year ago, this is slightly higher than I was expecting given the current price environment for our by-product credits and largely reflects some of the inflation we have been seeing on our per ton operating costs as well as the impact of the difficult quarter at Huaron.

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