Pan American Silver Corp. (PAAS, PAA.TO) Tuesday said its first quarter profit declined from last year, hurt by lower base metal and silver prices, offset in part by a reduction in cost of sales.
Pan American's consolidated net income for the first quarter was US$6.6 million or US$0.08 per share, down from US$30.2 million or US$0.38 per share in the prior year quarter. On average, 10 analysts polled by Thomson Reuters expected the company to earn US$0.08 per share for the first quarter. Analysts' estimate typically excludes special items.
First quarter sales declined to US$70.4 million from US$108.8 million in the same quarter of 2008, due to lower silver and base metal prices.
During the quarter, silver production increased 8% to 4.9 million ounces, as Manantial Espejo reached commercial production in January 2009.
Gold production jumped 206% to 20,858 ounces over a year ago, driven by production at Manantial Espejo. Gold has now become Pan American's largest by-product, accounting for 19% of the value of metals produced during the period just ended.
Cost of sales decreased 11% to US$45.1 million for the quarter, reflecting a concerted company-wide effort to reduce expenses.
During the quarter, Pan American continued to invest in growth, spending US$18.7 million on mineral properties, plant and equipment. About US$9.9 million was directed towards construction and commissioning activities at the San Vicente mine, while US$3.5 million related to final payments for the construction and commissioning of Manantial Espejo.
In February, Pan American completed a public offering of 6.4 million common shares at a price of US$16.25 per share, for gross proceeds of US$103.5 million. Net proceeds after considering underwriting fees and issue expenses were US$98.0 million. The proceeds are intended to fund acquisitions, development initiatives on acquired properties, working capital requirements and general corporate purposes.
Looking ahead, the company said it will continue with the cost reduction programs implemented in late 2008, which significantly reduced Pan American's capital and operating expenditures.
Pan American also expects to deliver continued production growth and generate positive cash flow and earnings in 2009 and beyond.
PAAS closed Tuesday's regular trading session at US$19.86, up 31 cents or 1.59%. In after-hours, the share lost 6 cents. PAA.TO ended Tuesday's regular trading session at C$22.92, up 48 cents or 2.14%.
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