Pan Am Silver posts Q4 loss

Vancouver — A US$12.1-million charge against the operations of the Quiruvilca mine in Peru caused Pan American Silver (PAA-T) to spill red ink in the fourth quarter of 2002.

The hit followed a US$15.1-million writedown of the mine’s carrying value and long-term reclamation costs taken in the third quarter, and contributed to a loss of US$33.7 million (or US80 per share) for 2002.

The Peruvian mine has struggled against a backdrop of low zinc prices. Silver production was scaled back to 2.5 million oz. at a total cash cost of US$5.15 per oz., net of byproduct credits.

Pan American says it is reviewing its options for the money-losing operation, one of which is closure.

“Pan American had another tough financial year in 2002, due to low metal prices,” says CEO Ross Beaty.

Excluding the latest charge, Pan American’s loss for the year amounted to US$1.6 million (US4 per share), compared with a loss of US$4.4 million (US12 per share) in 2001.

The company produced a record 7.8 million oz. silver from its four mines in 2002, a 12% rise from the 2001 total.

Pan American lowered total cash costs for consolidated production to US$4.16 per oz., compared with US$4.36 in 2001. The production of byproduct metals also hit a record in 2002, including 39,081 tonnes of zinc and 20,790 tonnes of lead.

The star performer was the Huaron mine, in Peru, which yielded 4.5 million oz. silver at a total cash cost of US$3.66 per oz. net of byproduct credits. At year-end, mill throughput was increased by 10%, and silver production for 2003 is expected to increase to 4.9 million oz.

In November, Pan American acquired a small silver operation in central Peru, where production is estimated to be 540,000 oz. per year at an average total cash cost of US$1.65 per oz. over 10 years. In 2002, this operation produced 101,459 oz. silver at a cash cost of US$1.50 per oz.

In Mexico, the La Colorada mine continued to operate at a small scale, with production coming in at 626,035 oz. silver. Production is expected to reach 3.8 million oz. per year at an estimated total cash cost of US$2.65 per oz. once the ongoing mine expansion is completed, in July.

In 2003, the company’s silver production is expected to grow to 10.3 million oz.