Pan American Silver Reports First Quarter Results May 20, 1999 22:38
Canadian Corporate News
VANCOUVER, BRITISH COLUMBIA--Highlights
- Produced 703,648 ounces of silver from Quiruvilca mine, Peru
(1998 - 673,466 ounces) at cash cost of $4.93 per ounce (1998 - 2.84).
- Commenced underground development at La Colorada silver mine, Mexico.
- Signed mandate letter with the International Finance Corporation,
a member of the World Bank Group, regarding a $60 million debt
financing of Dukat project, Russia. Assembled miningteam at Dukat,
awarded basic engineering design and received permits to mine and
construct.
- Completed $21 million equity financing.
FINANCIAL (all amounts are expressed in U.S. dollars)
The net loss for the first quarter of 1999 was $1,974,000 or $0.07per
share. This compares to net income of $91,000 for the first quarter
of 1998. The principal reasons for this result are significantly
lower realized metal prices and higher costs. Revenue of $5,770,000
was $308,000 less than for the first quarterof 1998, due to a 17 per
cent lower silver price, a 6 per cent lower zinc price and a 20 per
cent lower copper price. Mine operating costs were $1,181,000 higher
in 1999 than for the first three months of 1998. This cost increase
is due to: a 2.5 percenthigher mill throughput; $120,000 in
termination payments; higher costs associated with obtaining 56
percent of Quiruvilca's power requirements from rented or standby
generating facilities; additional tramming costs due to a delay
(because of the reductionin available electricity) in the start up of
the new conveyor system on the 280 mine level; and disruptions due to
unusually heavy rains. Exploration and general and administration
costs areon budget, but are slightly higher than those incurred in
1998. Similarly, non-cash depreciation and reclamation expenses are
on budget, but are higher than last year's expenses. Cash increased
by $20.9 million as a result of an equity financing completed in
March.
QUIRUVILCA MINE, PERU
Silver production in the first quarter of 1999 was 703,648 ounces
(1998 - 673,466 ounces). Ore production was 123,175 tonnes (1998 -
120,130 tonnes). By-product metal production was 5,347 tonnes of zinc
(1998 - 4,749 tonnes), 1,515 tonnes of lead (1998 - 1,321 tonnes) and
254 tonnes of copper (1998 - 276 tonnes). These amounts are less than
budgeted due to temporary interruptions of power due to a lightening
strike at the electric utilities' main transformer during the quarter
and to disruptions due to heavy rains. The power company expects that
repairs will be completed by mid-1999 and insurance proceeds are
expected to offset some of the higher operating costs. As a result of
these factors, cash and production costs per ounce of silver produced
were higher thanbudgeted at $4.93 and $5.87, respectively (1998 -
$2.84 and $3.71,respectively). A new labour contract for 1999 was
signed with theunions representing the mine and mill workers.
LA COLORADA MINE, MEXICO
Capital spending on the La Colorada mine development program totalled
$1,431,165 during the first quarter. Progress included rehabilitation
of the production shaft, completion of 1,057 metresof the 7,849 metre
tunnelling program, engineering of mill and tailings dam design
(awarded to H.A. Simons Ltd. and Agra Engineering respectively) and
submission of an environmental impact study to Mexican authorities.
The underground reserve and stope development program is on-going.
Mill construction is planned to commence in September. Permitting
work is on schedule to allow renewed silver production starting in
the second quarter of 2000. The 1999 exploration drilling program has
recently begunto test extensions of the significant deep discovery
made in 1998 as well as the breccia pipes on the property. Initial
drill results have been highly encouraging.
DUKAT MINE, RUSSIA
Pan American, through its 70 percent owned Russian subsidiary ZAO
Serebro Dukat, continued its program to complete negotiations with a
syndicate of banks led by the International Finance Corporation
("IFC"), a member of the World Bank Group, in respect of a $60
million debt financing of the $95 million Dukat mine development
project. Following Pan American's receipt of a positive bankable
feasibility study in January, a mandate letter was signed with IFC in
February and due diligence activities began by IFC and a syndicate of
potential lenders to the project. These are advancing as planned and
include an independent engineering audit of the feasibility study. In
conjunction with the debt financing,IFC has agreed to purchase $9
million worth of Pan American commonshares through a private
placement and, potentially, purchase a 10percent direct stake in
Serebro Dukat.
Banking arrangements are expected to be concluded by July to allow
the project to meet its schedule for completion of weather-dependent
work by September. Mine construction is expected to continue through
1999 and early 2000 resulting in commencement of silver production
during the second quarter of 2000. In conjunction with the work
required to complete the financing package, work continues in Russia
on permitting and licensing, concentrate export arrangements and
Central Bank license requirements. Senior staff are now in place to
advance Dukat to construction, with five foreign and 95 Russian staff
employed by Serebro Dukat. Permits to mine and construct have been
received and environmental permits are expected in June.
Subject to completion of financing arrangements, Dukat remains on
schedule to commence production in mid-2000 as one of the world's
largest and lowest cost primary silver mines. Production in its first
year will be approximately 9.6 million ounces increasing to more than
16 million ounces annually by late 2001.
EXPLORATION PROJECTS
In Peru, Battle Mountain Gold continues its 24,000 metre, $2.5
million drilling program to evaluate the Tres Cruces property as
required under the terms of its option agreement, which also requires
payment of $16 million to Pan American by the end of 2001.
In Mexico, Teck Corporation continues to explore Pan American's
Lucita property, located 5 km north of Zacatecas City, Mexico and
near the major San Nicholas copper-zinc-silver deposit. Teck may earn
a 60 percent interest by making a series of cash payments to Pan
American and funding all project costs until delivery of a
feasibility study.
In Bolivia, Pan American has reached agreement with the state mining
company, COMIBOL, to acquire rights to develop the San Vicente mine,
a large silver-zinc mine which operated from 1972 until 1993, when it
closed due to low silver and zinc prices. Considerable mining
infrastructure exists at site. Pan American will carry out a two year
exploration program on the property designed to define a mineral
resource potential which would allow a new mine to be constructed at
San Vicente producing 4-5 million ounces of silver annually.
Y2K DISCLOSURE
Pan American does not have any business critical information systems
that will be affected by the Year 2000 computer problem, nor does
management believe that the Company would be adversely affected by
any such problem that might affect its major suppliersor customers.
The total expected cost to update the Company's information systems
to be year 2000 compliant is $150,000.
Ross J. Beaty, Chairman
John H. Wright, President
May 15, 1999
First Quarter Highlights
March 31,
1999 1998
Net income (loss) ($1,974) $91
Earnings (loss) per share (0.07) 0.00
Cash flow from (used by) operations (2,097) (616)
Capital spending 4,590 9,972
Exploration expense 550 443
Cash and investments 24,387 27,279
Working capital $30,482 $32,592
Ore Milled and Metals Produced
Tonnes milled 123,175 120,130
Silver - ounces 703,648 673,466
Zinc - tonnes 5,347 4,749
Lead - tonnes 1,515 1,321
Copper - tonnes 254 276
Realized Metal Prices
Silver - per ounce $4.90 $5.91
Zinc - per pound $0.45 $0.48
Lead - per pound $0.23 $0.24
Copper - per pound $0.52 $0.65
Cost Per Ounce (net of by-product credits)
Cash cost per ounce of silver $4.93 $2.84
Production cost per ounce of silver 5.87 3.71
PAN AMERICAN SILVER CORP.
Consolidated Balance Sheets
(in thousands of U.S. dollars - unaudited)
March 31 Dec. 31
1999 1998
ASSETS
Current
Cash and cash equivalents $ 24,360 $ 10,076
Short-term investments 27 63
Accounts receivable 5,546 4,563
Concentrate inventory 1,525 1,848
Supplies inventory 2,882 3,071
Prepaids and deposits 1,806 1,742
--------------------
36,146 21,363
Long-term receivable 1,126 1,126
Property, plant and equipment, net 24,630 23,863
Resource properties 27,337 24,271
Other 68 96
--------------------
$ 89,307 $ 70,719
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LIABILITIES
Current
Accounts payables $ 5,559 5,612
Advance payments for concentrates - 350
Current portion of severance indemnity 105 105
--------------------
5,664 6,067
Deferred income 1,126 1,126
Other liabilities 219 329
Provision for reclamation 730 598
Severance indemnity 1,008 943
--------------------
8,747 9,063
--------------------
SHAREHOLDERS' EQUITY
Share capital
Issued:
December 31, 1998 - 24,728,315 shares
March 31, 1999 - 28,706,815 shares 95,511 74,595
Cumulative foreign exchange adjustment 197 235
Deficit (15,148) (13,174)
--------------------
80,560 61,656
--------------------
$ 89,307 $ 70,719
--------------------
PAN AMERICAN SILVER CORP.
Consolidated Statements of Operations and Deficit
For the three months ended March 31, 1999 and 1998
(in thousands of U.S. dollars, except for per share
amount - unaudited)
1999 1998
Revenue $ 5,770 $ 6,079
Expenses
Operating 6,197 5,016
Depreciation and amortization 570 494
Reclamation 131 88
Exploration 550 443
General and administration 576 458
Exchange loss (gain) 2 (74)
--------------------
8,026 6,425
--------------------
Net loss before undernoted item (2,256) (346)
Investment income, net 282 437
--------------------
Net income (loss) for the period (1,974) 91
Deficit, beginning of period (13,174) (7,187)
--------------------
Deficit, end of period $ (15,148) $ (7,096)
--------------------
Loss per share ($0.07) ($0.00)
Weighted averages shares
outstanding 28,178,323 24,343,579
PAN AMERICAN SILVER CORP.
Consolidated Statements of Cash Flows
For the three months ended March 31, 1999 and 1998
(in thousands of U.S. dollars - unaudited)
1999 1998
Operating activities
Sales proceeds $ 4,098 $ 5,563
Hedging proceeds 116 760
Investment, other income and expenses 293 804
Products and services purchased (5,352) (6,741)
Exploration (550) (443)
General and administration (702) (559)
--------------------
(2,097) (616)
--------------------
Investing activities
Additions to property, plant
and equipment (1,337) (1,840)
Resource properties, net (3,253) (5,026)
Proceeds from sale of investments 25 52
Other 30 (59)
--------------------
(4,535) (6,873)
--------------------
Financing activities
Shares issued for cash 22,045 2,907
Share issue costs (1,129) -
--------------------
20,916 2,907
--------------------
Increase (decrease) in cash and cash
equivalents for the period 14,284 (4,582)
Cash and cash equivalents,
beginning of period 10,076 31,861
--------------------
Cash and cash equivalents,
end of period $ 24,360 $ 27,279
--------------------
Supplemental disclosure on non-cash transactions
Issued shares for property $ - $ 3,099
Resource properties - (3,099)
--------------------
$ - $ -
FOR FURTHER INFORMATION PLEASE CONTACT:
Pan American Silver Corp.
Rosie Moore
VP Corporate Relations
(604) 684-1175
Website: www.panamericansilver.com |
