Canadian silver mining company Pan American Silver Corp. (PAAS, PAA.TO) reported Tuesday that profit for the third quarter soared from last year, boosted by strong production growth and higher gold prices. The company also said that it will comfortably meet its forecasted annual production target fro fiscal 2009, and cash costs for the year are anticipated below the prior guidance.
Pan American's mission is to be the largest and lowest cost primary silver mining company, and to achieve this by constantly increasing silver production and silver reserves. The company's growth strategy is based on the continued increase of low cost silver production through the efficient operation and expansion of its existing mines, an aggressive exploration program and the acquisition and development of new silver-rich deposits. Pan American owns and operates eight silver mines in Peru, Mexico, Bolivia and Argentina.
In a statement, president and chief executive officer, Geoff Burns said, "This was a very strong quarter for Pan American. We set new quarterly records for silver and gold production. Our cash costs declined to $4.91 per ounce of silver on the strength of increased byproduct credits."
The company added that the third quarter performance was driven by a well executed startup of the San Vicente mine expansion, which has been producing silver beyond expectations, and a solid quarter at Manantial Espejo. Both these projects, now operating mines, are clear upgrades to the company's portfolio of assets and are now delivering the kind of returns hoped for when the decisions was taken to invest in their development.
The Vancouver, Canada-based miner reported consolidated net income of US$17.38 million or US$0.20 per basic share for the third quarter, sharply higher than US$6.40 million or US$0.08 per basic share in the prior-year quarter.
On average, 10 analysts polled by Thomson Reuters expected the company to earn US$0.21 per share for the third quarter. Analysts' estimate typically excludes special items.
Sales for the quarter reached a quarterly record of US$118.6 million, up 49% from the same quarter last year, helped by significant quantities of silver and gold sold. Wall Street analysts had a consensus revenue estimate of $115.76 million for the quarter.
Silver sales accounted for 63% of the company's total revenues and gold sales contributed 17% of the revenues, which has increased Pan American's exposure to precious metals to 80% of total revenues.
Cost of sales for the third quarter increased 17% to US$61.8 million from last year, reflecting greater quantities of silver and gold sold, partially offset by the ongoing cost control measures implemented last year.
Mine operating earnings for the quarter climbed 124% to US$34.71 million from US$15.47 million in the year-ago quarter, due to higher sales volumes and higher realized gold prices, partially offset by increased cost of sales and higher depreciation and amortization charges.
The company ended the third quarter with cash and short-term investments of $149.45 million, compared to $90.88 million at end of the prior-year quarter.
During the third quarter, silver production increased 31% to reach a quarterly record of 6.35 million ounces from 4.86 ounces in the prior-year quarter, helped by a quarterly record of 869,000 ounces of silver produced at San Vicente mine. Gold production soared 331% to reach a quarterly record of 28,017 ounces over a year ago's 6.50 ounces.
Total production cost per ounce decreased to US$8.95 from last year's US$9.53, while total cash cost per payable silver ounce was US$4.91, down 26% from US$6.61 in the prior-year quarter.
For the nine-month period, the company reported net income of US$34.19 million or US$0.40 per share, declined from US$57.92 million or US$0.72 per basic share in the prior-year period.
"Now looking to the future, I can't think of a more exciting time to be part of Pan American Silver. With our operating mines performing solidly, with silver and gold prices near all time highs and with La Preciosa and hopefully Navidad in our growth pipeline, we are poised to move to the next level, creating new value and generating real returns for our shareholders," Burns added.
Looking ahead, Pan American is confident that it will comfortably meet its forecasted annual production target of 21.5 million ounces of silver and 85,000 ounces of gold for 2009, excluding production from Quiruvilca.
Further, the Company currently expects its consolidated cash costs for the full year 2009 to be below the previously announced guidance of about $6.00 per ounce of silver.
PAAS closed Tuesday's regular trading session at US$23.60, up $0.54 or 2.34% on a volume of 2.51 million shares, while PAA.TO ended on the Toronto Stock Exchange at C$24.77, up $0.38 or 1.56% on a volume of 0.40 million shares.
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