Tuesday, primary silver mining company Pan American Silver Corp. (PAA.TO,PAAS) reported a decline in earnings for the second quarter, despite a 7% increase in revenues, hurt in large part by higher expenses and lower mining operating earnings. The company also provided an update on operations.
Net income for the quarter slid to US$10.2 million or US$0.12 per share from US$21.4 million or US$0.26 per share in the corresponding period last year.
The results for the quarter include a US$3.3 million non-cash, after tax charge related to the write down of a smelter receivable. Excluding the item, adjusted net income was US$13.5 million or US$0.16 per share.
Quarterly sales were US$111.4 million, up 7% from the same period last year. The company attributed the increase to sale of higher quantities of silver, zinc and gold sold, which more than offset lower silver and base metals prices.
Silver production rose 24% when compared to the same period last year to 5.8 million ounces, and formed 58% of total revenues. Gold production surged 270% to 25,068 ounces and formed 18% of revenues. Production cost per ounce increased to US$10.10 from US$8.06 in the prior year period.
Cost of sales for the quarter was US$66.0 million, which was 27% higher than a year ago. Mine operating earnings totaled US$23.5 million, down 40% from the second quarter of 2008.
Pan American said it has over US$112 million in cash and short term investments, working capital in excess of US$216 million, no debt and an undrawn credit facility of US$70 million. The company said it is in an optimal position to finance current operations and is now focusing on exploration of the La Preciosa project.
Looking ahead, the company said it will meet its annual production target of 21.5 million ounces of silver and 85 thousands ounces of gold at cash costs of about US$6.00 per ounce of silver.
PAAS declined US$0.78 or 3.90% and closed Tuesday's regular trading session at US$19.23. After hours, PAAS declined further US$0.18 or 0.94% and traded at US$19.05.
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