Pan Am breaks ground in Mexico (March 14, 2005)

Pan American Silver (PAA-T) expects to be producing more than 21 million oz. silver annually by 2006 following a decision to start up the Alamo Dorado mine, 320 km south of Hermosillo, Mexico.

Construction of the US$76.6-million open-pit mine will begin in the second quarter, with the first silver pour slated for late 2006. The mine is expected to produce around 5 million oz. silver at a cash cost less than US$3.25 per oz. in each of its eight years of operation. Recovery rates for both silver and gold are expected to exceed 90%.

At the end of 2004, Alamo Dorado had a proven and probable reserve of 11.6 million tonnes grading 118 grams silver and 0.34 gram gold per tonne, or 44 million oz. silver (almost 40 million of those ounces were in the probable category); 3.9 million tonnes grading 72 grams silver and 0.27 gram gold were in the measured and indicated category; and 518,000 tonnes at 79 grams silver and 0.34 gram gold were inferred.

The 15-to-18-month construction period will see the erection of a primary crushing circuit, semi-autogenous grinding mill, ball mill, and conventional cyanide leaching circuit. Also, a tailings treatment plant will be built to recover sodium cyanide used in processing.

In 2004, Pan American Silver produced a record 11.2 million oz. silver, up 30% from 2003. Fourth-quarter production grew by 48% to 3.1 million oz., compared with the corresponding quarter of 2003. During the year, cash costs rose by 4% to US$4.25 per oz.; cash cost for the fourth quarter jumped 17% to US$4.70 per oz.

The company ended the year with a profit of US$19.9 million. Revenue more than doubled to a record US$92.9 million on improved production and metal prices.

At the end of 2004, Pan Am had US$98 million in cash and short-term investments. The company remains debt-free.

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