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Pan American Silver (PAAS)

Q4 2011 Earnings Call

February 23, 2012 11:00 am ET

Executives

Kettina Cordero -

Geoffrey A. Burns - Chief Executive Officer, President, Director and Member of Health, Safety & Environmental Committee

Steven L. Busby - Chief Operating Officer

Michael Steinmann - Executive Vice President of Geology & Exploration

Robert G. Doyle - Chief Financial Officer

Analysts

Ralph M. Profiti - Crédit Suisse AG, Research Division

Gary Lundgren

John Kratochwil - Canaccord Genuity, Research Division

Chris Lichtenheldt - UBS Investment Bank, Research Division

Presentation

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Operator

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Hello. This is the Chorus Call conference operator. Welcome to the Pan American Silver Q4 and Year-End 2011 Results Conference Call and Webcast. [Operator Instructions] And the conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Mrs. Kettina Cordero, Coordinator, Investor Relations. Please go ahead.

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 today's call by reminding our listeners that this call cannot be reproduced or retransmitted without our consent and by indicating 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 facts, are forward-looking statements. These statements reflect the company's current views with respect to future events and 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 included in the most recent news release dated February 22, 2012, and as well as those factors identified under the caption Risks Related to Pan American's Business in the company's 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.

I will now turn the call over to Geoff Burns, President and CEO.

Geoffrey A. Burns

Thank you, Kettina. Good morning, ladies and gentlemen, and welcome to Pan American Silver's 2011 Fourth Quarter and Full Year Earnings Conference Call. This morning, we will be discussing our fourth quarter and full-year operating and financial results that were released earlier, provide you with our forecast for 2012, update you on our year-end silver reserves and resources and future exploration programs, as well as on the progress of our development projects. In addition, I will talk briefly about our proposed acquisition of Minefinders and their flagship property, the Dolores mine in Mexico. As is our custom, I will begin with some general remarks before passing the call to Steve, Michael and Rob, who will provide you more detailed commentary.

I like to start by letting you know that yesterday, our Board of Directors approved a 50% increase in our quarterly dividend from $0.025 per share to $0.0375 per share per quarter. The payment of our first cash dividend of 2012 will be made on or about Monday, March 19, to holders of record of our common shares as of the close of business on March 5. It is very rewarding and a true reflection of the financial success we have been enjoying at Pan American to be able to increase our dividend for the second time since we first started paying it a little over 2 years ago.

In addition to returning cash to our shareholders directly through our dividends, we have also been returning cash by way of a normal course issuer bid, which we announced on August 26 of last year, wherein we could buy up to 5% of our issued and outstanding shares. As Rob will describe in a few moments, we have been actively reproaching some of our common shares and continue to do so up until early December of last year when we signed a letter of intent to pursue the purchase of Minefinders.

While we have significant capital requirements ahead of us, with the pending develop of Navidad, our major growth project, we remain very comfortable that we can meet this need, as well as continue to directly share in our good fortune with our shareholders through the payment of dividends.

Now let's recap what we accomplished during the fourth quarter and for the full year of 2011. We produced 5.3 million ounces of silver at a cash cost of $11.18 per ounce, net of by-product credits, which was slightly lower than we had planned. Our Mexican mines, La Colorada and Alamo Dorado, continue to perform extremely well during the fourth quarter, a trend that they enjoyed all year, as did our San Vicente mine in Bolivia. However, as Steve will discuss in more detail, we had 1 short-term issue and 1 longer-term issue at Manantial Espejo in Argentina that provided some fourth quarter challenges, and we made another short-term decision to focus on exploration at Alamo Dorado, which caused us some anticipated production. Net-net, we are about 8% behind in what we thought we would deliver in terms of silver production in the fourth quarter, and as a consequences, our costs were higher than anticipated.

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