Pan American at a loss despite higher production

Despite a 138% year-over-year increase in silver production, Pan American Silver (PAA-T) has posted a loss in the third quarter.

Excluding unusual items, the third-quarter loss was US$2.8 million, compared with a loss of US$400,000 a year earlier. Including the sale of land in Peru, which generated total proceeds of $3.7 million, the company’s net income during the recent quarter was US$700,000. Revenue between the two periods almost doubled to US$13.8 million.

For the first three quarters of 20001, the company incurred a net loss (excluding unusual items) of US$7.2 million, compared with a year-ago loss of US$1.9 million. Revenue climbed to US$26.4 million from US$21.3 million. The losses are attributed to weak metals prices.

Total silver production for the quarter weighed in at 1.7 million oz. an increase of 93% over a year ago. Zinc production increased by 18% to 7,197 tonnes, lead production jumped 114% to 4,567 tonnes, and copper production swelled 62% to 482 tonnes.

Total silver production for the third quarter rang in at 2.1 million oz., an increase of 138% over a year ago. Zinc production increased 135% to 8,661 tonnes. Lead and copper production were also higher. The increases in metal production is thanks to the early 2001 start up of production at the Huaron and La Colorada mines, in Peru and Mexico, respectively.

Total quarterly cash cost per ounce of silver, net of byproduct credits, was US$4.41 (compared with US$2.82 a year earlier), while the total production cost amounted to US$5.05 per oz. (up from US$3.66). The increases are attributed to significantly lower zinc, lead and copper prices.

The average realized silver price for the quarter, net of refining costs, was US$3.96 per oz., (US$4.53 the previous year). Zinc production sold for US38 per lb. (US54); lead sold for US21 per lb. (20 per lb.); and copper for 60 per lb. (75 per lb.).

The company recently eliminated 65 staff positions at its operations, in addition to those previously announced, in an attempt to reduce operating costs. Severance costs of about US$600,000 will be recognized in the fourth quarter. In October, the Huaron construction loan was repaid with the proceeds from a new four-year US$6.5 million loan. The new loan will be repaid in monthly instalments of US$135,000.

At the end of September, PAA had working capital of US$2 million, US$700,000 less than at the end of the second quarter. Cash and equivalents stood at US44.9 million.