Pan Am silver production soars

Vancouver — Pan American Silver’s (PAA-T) three operations in Peru and Mexico produced 6.9 million oz. silver during 2001, up 90% over last year. By product zinc production was 17,191 tonnes and copper production was pegged at 2,161 tonnes, a 26% and 97% increase, respectively.

These increases are the direct result of the company opening two new mines last year. In April, the Huaron mine in Peru began full-scale production and in January the La Colorada mine in Mexico started small-scale production. The Huaron silver-zinc mine in Peru, was acquired in 2000 and is now operating at the commercial rate of 4.3 million oz. silver and 18,000 tonnes zinc per year. Proven and probable reserves total 6.2 million tonnes grading 252 grams silver per tonne, plus 3.59% zinc, 2.44% lead and 0.43% copper. Total resources are 13 million tonnes grading 239 grams silver, 4% zinc, 2.2% lead and 0.5% copper. The resource is based on a silver price of US$5 per oz. and a zinc price of US50 per lb. The La Colorada mine was acquired in 1998 and with a new development plan in the works, it is expected to produce 3.8 million oz. silver per year. Situated in Zacatecas state, the project hosts 6.72 million tonnes grading 419 grams silver per tonne.

“I am pleased at the success of our new silver mines at Huaron and La Colorada and particularly, the new development plan for La Colorada,” said Pan American’s Chairman and CEO, Ross Beaty. “This new plan of adding a leach circuit to our existing concentrate production will yield 90% of the original plan’s silver output for less than 65% of the original projected capital cost, and will give us a good return even at today’s depressed silver price.”

Pan American recently updated its bankable feasibility study on production from the La Colorada mine. The study is based on the original mineral reserves minus the 47,317 tonnes mined last year at a grade of 598 grams per tonne silver. The original study called for capital costs of US$27.6 million for a 1,000 tonne-per-day operation producing 4.2 million oz. of silver per year. The new study pegs capital costs at US$18.2 million for a 800 tonne-per-day operation producing 3.8 million oz. of silver per year for a minimum mine life of 10 years. The company used a US$4.50 silver price and 100% equity financing. The revised study estimates a 22% rate of return.

Construction of the expanded operation will take about 10 months once financing is in place. Pan American reports that any new construction will not interfere with the current operation which is operating at a rate of 1.2 million oz. of silver annually. The company has an option to purchase the entire 5% net smelter return royalty for the La Colorada project for US$3 million. This is payable in cash or shares by March 23, 2003.

Pan American forecasts that it will produce 9.2 million oz. of silver this year.