Pan American posts loss

Vancouver A US$12.1 million charge against the operations of the Quiruvilca mine had Pan American Silver (PAA-T) seeing red in the fourth quarter of 2002.

The hit follows a US$15.1 million write down of the mine’s carrying value and long term reclamation costs taken in the third quarter and drove the company to report a net loss of US$33.7 million, or US0.80 per share for the year.

The Peruvian mine in Peru 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 is reviewing its options for the money-losing operation, one option being closure.

"Pan American has another tough financial year in 2002 due to continued very low metal prices," says the company’s Chief Executive officer, Ross Beaty.

Excluding the latest charge, Pan American posted a loss of US$1.6 million or US$0.04 per share, compared to a loss of US$4.4 million or US$0.12 per share in 2001.

Thanks to its mainstay Huaron mine in Peru, the company produced a record 7.8 million oz. silver from its four mines in 2002, a 12% rise from the 2001 total.

The company managed to lower 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, 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 forecast 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.

Moving to 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 2003.

"Pan American now has four silver operations and several outstanding growth projects," adds Beaty. "In 2003, the company’s silver production is expected to grow to 10.3 million ozs."