Thanks to what President and CEO Geoff Burns called the best quarter in the company's history, Vancouver's Pan American Silver reported record profiles, record cash flow, record mine operating earnings and record sales for the first quarter of this year.
During a conference call to discuss quarterly results Wednesday, Pan American COO Steven Busby told analysts that the company's operations will probably not be impacted by a threatened Peruvian national miners' strike or the political turmoil in Bolivia.
Sales in the first quarter increased 126% to a record $108.8 million due to a 36% increase in silver production, mine operating earnings that rose more than three-fold to a record $48.4 million, and cash flow from operations that increase 231% to a record $454.4 million (before changes in non-working capital). Burns told analysts that Pan American Silver, one of the world's largest primary silver producers, should be breaking records over the balance of the year.
Consolidated cash cost of silver production increased from $2.98/oz during first-quarter 2007 to $3.70 per ounce for the first quarter of this year, but still remains below the full year 2008 forecast of $4.27/oz. Our cash costs are still being pushed by our full year cash cost forecast as we benefited from increased by-product production, particularly gold, and higher than forecasted silver production.
Pan American reported a record net income of $30.16 million (38-cents per share) for the first-quarter 2008, up from $20.4 million (27-cents/share) for the same period a year ago. The company produced 4,227,256 payable ounces of silver during the first quarter of this year, up from 3,344,084 ounces produced during the first-quarter 2007.
The company owns and operations seven silver mines in Peru, Mexico and Bolivia, and is constructing a new silver mine in Argentina, expanding its Bolivia mine, and exploring for new silver deposits throughout South America and Mexico.
Site construction and development work at the Manantial Espejo silver mine in Argentina is more than 78% complete with the construction expected to be finished in August, six months ahead of schedule. The project is expected to be within 5% of the original $185 million capex. Manatial is forecast to produce 1.4 million ounces of silver and 27,000 ounces of gold this year at negative cash costs.
This year Pan American plans to produce 19.5 million ounces of silver, which will make it the second largest primary silver producer in the world.
Pan American has been mining on a limited scale at the San Vicente project in Bolivia with a project expansion expected to be completed at the end of the year. The mine produced 49,000 ounces of silver during the first quarter of this year and is utilizing a toll milling program.
Despite the current political turmoil as departments begin the voting process to declare their autonomy from the Bolivian central government, Busby told analysts, I believe we are blessed being so far removed from the Capital of La Paz.
While Burns admitted to analysts that Bolivia is filled with challenges, he insisted that San Vicente enjoys very, very solid support from the local community.