-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CY3Jcp+FqVamnLLOvduvWZyvjuvtpRu/SM5p34pcSR7E6h7Ri+Va9j+k7oWudH8U OUd/NNRTuXqvN+CJqAiyYw== 0001130319-02-001366.txt : 20021122 0001130319-02-001366.hdr.sgml : 20021122 20021122131227 ACCESSION NUMBER: 0001130319-02-001366 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20021118 FILED AS OF DATE: 20021122 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PAN AMERICAN SILVER CORP CENTRAL INDEX KEY: 0000771992 STANDARD INDUSTRIAL CLASSIFICATION: SILVER ORES [1044] IRS NUMBER: 999999999 FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 6-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-13727 FILM NUMBER: 02837463 BUSINESS ADDRESS: STREET 1: 1500-625 HOWE STREET CITY: VANCOUVER BC CANADA STATE: A1 ZIP: V6C 2T6 MAIL ADDRESS: STREET 1: 1500 625 HOWE ST CITY: VANCOUVER BC V6C 2T6 STATE: A1 ZIP: 999999999 FORMER COMPANY: FORMER CONFORMED NAME: PAN AMERICAN MINERALS CORP DATE OF NAME CHANGE: 19950608 6-K 1 o08329e6vk.txt FORM 6-K FORM 6-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13A - 16 OR 15D - 16 OF THE SECURITIES EXCHANGE ACT OF 1934 For November 18, 2002 PAN AMERICAN SILVER CORP. 1500 - 625 HOWE STREET VANCOUVER, B.C. V6C 2T6 Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F. Form 20-F Form 40-F X ----- ------- Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. Yes No X ----- ------ If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-__________ SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PAN AMERICAN SILVER CORP. Date: November 18, 2002 By: /s/ Gordon Jang ----------------------------------- Gordon Jang, Controller, and Corporate Secretary -2- DOCUMENTS INCLUDED AS PART OF THIS REPORT
NO. DOCUMENT - --- -------- 10.1. Material Change Report under Section 85(1) of the Securities Act (British Columbia) dated November 21, 2002. 99.1. Press Release dated November 18, 2002.
-1- EX-10.1 3 o08329exv10w1.txt MATERIAL CHANGE REPORT DATED NOVEMBER 21, 2002 Exhibit 10.1 This is the form of a material change report required under section 85(1) of the Securities Act and section 151 of the Securities Rules. BC FORM 53-901F (PREVIOUSLY FORM 27) SECURITIES ACT MATERIAL CHANGE REPORT UNDER SECTION 85(1) OF THE SECURITIES ACT (BRITISH COLUMBIA) AND SIMILAR PROVISIONS OF OTHER APPLICABLE LEGISLATION ITEM 1. REPORTING ISSUER Pan American Silver Corp. (the "COMPANY") 1500 - 625 Howe Street Vancouver, BC V6E 2T6 ITEM 2. DATE OF MATERIAL CHANGE November 18, 2002 ITEM 3. PRESS RELEASE A press release was issued by the Company on November 18, 2002 at Vancouver, British Columbia and distributed through the facilities of Canada NewsWire. ITEM 4. SUMMARY OF MATERIAL CHANGE The Company announced its third quarter financial and operations results for the quarter ended September 30, 2002. All amounts are expressed in U.S. dollars. The Company reported a third quarter net loss (before a write down) of $2.26 million ($0.05 loss per share) compared to a net loss (before an unusual gain) of $2.80 million ($0.07 loss per share) for the third quarter of 2001. During the third quarter, the Company wrote down its investment in the Quiruvilca mine by $15.13 million. Management determined that the recovery of its investment in Quiruvilca was unlikely unless realized metal prices were significantly higher than those of the recent past. The net loss, including the Quiruvilca write down, was $17.39 million ($0.40 per share) for the third quarter compared to net income of $0.70 million ($0.02 per share) after a $3.50 million unusual gain on the sale of land for the third quarter of 2001. ITEM 5. FULL DESCRIPTION OF MATERIAL CHANGE HIGHLIGHTS - Gained overwhelming shareholder approval for acquisition of Corner Bay Silver. - Began construction of full-scale operation at La Colorada silver mine in Mexico, which will quadruple the mine's silver production in mid-2003. - Wrote down carrying value of Quiruvilca mine due to lack of profitability at current metal prices. - Began expansion of Huaron mine in Peru due to exploration success, which will result in a 10 percent production increase starting in 2003. FINANCIAL (all amounts are expressed in US dollars) The Company reported a third quarter net loss (before a write down) of $2.26 million ($0.05 loss per share) compared to a net loss (before an unusual gain) of $2.80 million ($0.07 loss per share) for the third quarter of 2001. During the third quarter, the Company wrote down its investment in the Quiruvilca mine by $15.13 million. Management determined that the recovery of its investment in Quiruvilca was unlikely unless realized metal prices were significantly higher than those of the recent past. The net loss, including the Quiruvilca write down, was $17.39 million ($0.40 per share) for the third quarter compared to net income of $0.70 million ($0.02 per share) after a $3.50 million unusual gain on the sale of land for the third quarter of 2001. Revenue for the quarter was $11.20 million or 19 percent less than revenue for the third quarter of 2001. This decrease is principally due to the timing of zinc, lead and copper concentrate shipments from the Quiruvilca and Huaron mines. Consolidated silver production was 1,750,467 ounces for the third quarter (2001 - 2,140,802 ounces). Production of zinc and copper were all higher for the third quarter when compared to 2001. Silver production was lower at La Colorada because milling operations were temporarily suspended in order to focus on preparation for the mine expansion and at Quiruvilca because of lower production levels and lower silver grade. Base metal production was higher because of higher base metal grades. The La Colorada mine is now back in operation. For the nine months ended September 2002 consolidated silver production was 5,755,367 ounces or 19 per cent higher than for the first three quarters of 2001 due to three quarters of full production from Huaron more than offsetting the decrease in production at Quiruvilca and La Colorada. During the third quarter operating activities generated cash flow of $1.17 million. Investing activities, virtually all of which consisted of plant and equipment expenditures at La Colorada, consumed $3.22 million and financing activities consumed $1.00 million including loan repayments of $0.60 million. Working capital, including cash of $17.96 million, amounted to $13.70 million at September 30, 2002. CORNER BAY SILVER ACQUISITION In early September shareholders of both the Company and Corner Bay voted in favour of the Company acquiring Corner Bay. Closing of the merger has been delayed while efforts have been made to secure a source of water for a potential mining operation. A water rights agreement with a local agricultural cooperative has been entered into and is in the process of being ratified and approved by a regional water users association and necessary Mexican authorities. The Company and Corner Bay have extended the date for -2- procurement of water from November 15 to December 17 and it is hoped the merger can then be completed. This will result in the Company acquiring 100 percent of the Alamo Dorado silver deposit. It is expected that Alamo Dorado will produce in excess of 6 million ounces per year for at least 8 years at a total cash cost of $3.25. Construction could commence soon after completion of the La Colorada expansion project now underway. HUARON MINE, PERU The Huaron mine continued to operate well during the quarter, producing 1,101,005 ounces of silver and 5,285 tonnes of zinc at a total cash cost of $4.17 per ounce of silver net of by-product credits. As a result of exploration success to date in 2002, the mine has begun an expansion project that will increase production nearly 10 percent by late-2003. This cost is being funded from operating cash flow and expensed as part of the cash cost of production reported from the mine. Huaron has outperformed the Company's expectations for 2002 and has contributed $2.85 million in cash flow in the year to date, despite very low metal prices. QUIRUVILCA MINE, PERU The Quiruvilca mine continues to struggle under existing low metal prices. During the quarter, the mine produced 594,463 ounces of silver and 4,622 tonnes of zinc at a total cash cost of $5.20 per ounce of silver net of by-product credits. Since the third quarter of 2001 operating costs per tonne have decreased from $43.36 to $38.46, however revenue during the same period has decreased from $38.09 to $32.42 due to lower metal prices and a drop in silver grades as the more silver-rich veins in the upper parts of the mine are exhausted and production comes from the deeper, zinc-rich veins. Despite extraordinary efforts by the Company's employees to reduce all possible costs, Quiruvilca simply cannot make money at current metal prices. All options continue to be examined to remedy this situation. Quiruvilca has operated continuously since 1925, and so closure (either temporary or permanent) would be very costly in financial and social terms. Higher metal prices will allow the mine to contribute to the Company's cash flow, as it did most recently in 2000, but it is impossible to predict when this will occur. Using current metal prices, the mine will not return its carrying value, and as a prudent accounting policy, $15.13 million of the mine's book value was written down during the quarter. LA COLORADA MINE, MEXICO The third quarter was a transition period at the La Colorada mine as construction began on the mine expansion that will quadruple silver production to 3.8 million ounces annually beginning in mid-2003. This work required the small-scale existing operation to close for six weeks during the quarter. Production resumed in mid-September. During the quarter, 54,999 ounces of silver were produced. So far, construction is on schedule and budget. The construction team is complete, the oxide mill equipment is on site and being assembled and most of the new underground equipment has been delivered. -3- SAN VICENTE MINE, BOLIVIA Small-scale operation by EMUSA, the Bolivian company that operates this mine under a short term toll-mining agreement with the Company, continued during the quarter with production of 350,000 ounces of silver and a cash flow contribution to the Company of about $0.10 million. In light of the successful operation to date that has been possible using EMUSA's nearby milling facility, the Company is discussing with EMUSA other options that would increase silver production from San Vicente to the benefit of both companies and the Bolivian state mining company COMIBOL. EXPLORATION The Company was active during the quarter in four exploration programs, three of which continue. Near La Colorada, a small drilling program was carried out without significant results. At Huaron, drilling was successful in increasing reserves in the wide zones discovered in late 2001 that have contributed to the mine's successful operation this year. At Manantial Espejo in Argentina, drilling began in the 6,000 meter program designed to move the project forward to the pre-feasibility stage in 2003, and initial results have been very promising. Finally, in Mexico, surface exploration concluded at the Ocotlan project and drilling has now begun on the most attractive targets. SILVER MARKETS Silver prices deteriorated in the third quarter, along with most other metal prices. Zinc dropped to a new record low in real dollar terms. These price declines are due to a drop in industrial demand that began in mid-2000 and no accompanying change in supply. Silver is widely used in the electronics and high-tech sectors where demand remains very weak. Little speculative buying was apparent during the quarter, in contrast to earlier in 2002. However, strong physical buying is reported at current silver prices, mine supply of silver is likely to decrease in 2002 for the first time in six years, and it is believed that Chinese sales of silver inventories have been curtailed for the time being. While some reports argue that silver prices are being manipulated downward by bullion traders, we believe silver prices can be well explained by demand and supply fundamentals, which provide a solid base to current prices and good support for a higher price trend in the near future. ITEM 6. RELIANCE ON SECTION 85(2) OF THE ACT This report is not being filed on a confidential basis. ITEM 7. OMITTED INFORMATION There are no significant facts required to be disclosed herein which have been omitted. -4- ITEM 8. SENIOR OFFICERS For Further information, please contact: Name: Gordon Jang Office: Controller and Corporate Secretary Telephone: (604) 684-1175 ITEM 9. STATEMENT OF SENIOR OFFICER The foregoing accurately discloses the material change referred to herein. DATED at Vancouver, British Columbia, this 21st day of November, 2002. /s/ Gordon Jang ----------------------------------------------- Signature of a senior officer of the reporting issuer Gordon Jang, Controller and Corporate Secretary ----------------------------------------------- -5- EX-99.1 4 o08329exv99w1.txt PRESS RELEASE DATED NOVEMBER 18, 2002 EXHIBIT 99.1 [PAN AMERICAN SILVER CORP. LOGO] [LOGO] November 18, 2002 PAN AMERICAN SILVER REPORTS THIRD QUARTER RESULTS Pan American will host a conference call on Monday, November 18th at 10:00 a.m. Pacific time (1:00 p.m. Eastern time) to discuss the third quarter financial and operational results, give project updates, and answer questions. To participate in the call, dial 1-416-695-5806 five minutes before the start time. To listen to a playback of the call after it has ended, dial 1-416-695-5800 and enter the pass code 1303238. This option will be available for 2 weeks after the call. The conference call will also be broadcast live and archived for later playback on the Internet at HTTP://WWW.Q1234.COM. HIGHLIGHTS o Gained overwhelming shareholder approval for acquisition of Corner Bay Silver. o Began construction of full-scale operation at La Colorada silver mine in Mexico, which will quadruple the mine's silver production in mid-2003. o Wrote down carrying value of Quiruvilca mine due to lack of profitability at current metal prices. o Began expansion of Huaron mine in Peru due to exploration success, which will result in a 10 percent production increase starting in 2003. FINANCIAL Pan American Silver Corp. reported a third quarter net loss (before a write down) of $2.26 million ($0.05 loss per share) compared to a net loss (before an unusual gain) of $2.80 million ($0.07 loss per share) for the third quarter of 2001. During the third quarter, the Company wrote down its investment in the Quiruvilca mine by $15.13 million. Management determined that the recovery of its investment in Quiruvilca was unlikely unless realized metal prices were significantly higher than those of the recent past. The net loss, including the Quiruvilca write down, was $17.39 million ($0.40 per share) for the third quarter compared to net income of $0.70 million ($0.02 per share) after a $3.50 million unusual gain on the sale of land for the third quarter of 2001. Revenue for the quarter was $11.20 million or 19 percent less than revenue for the third quarter of 2001. This decrease is principally due to the timing of zinc, lead and copper concentrate shipments from the Quiruvilca and Huaron mines. Consolidated silver production was 1,750,467 ounces for the third quarter (2001 - - 2,140,802 ounces). Production of zinc and copper were all higher for the third quarter when compared to 2001. Silver production was lower at La Colorada because milling operations were temporarily suspended in order to focus on preparation for the mine expansion and at Quiruvilca because of lower production levels and lower silver grade. Base metal production was higher because of higher base metal grades. The La Colorada mine is now back in operation. 1500-625 HOWE STREET, VANCOUVER, BC CANADA V6C 2T6. TEL 604.684.1175 FAX 604.684.0147 WWW.PANAMERICANSILVER.COM For the nine months ended September 2002 consolidated silver production was 5,755,367 ounces or 19 per cent higher than for the first three quarters of 2001 due to three quarters of full production from Huaron more than offsetting the decrease in production at Quiruvilca and La Colorada. During the third quarter operating activities generated cash flow of $1.17 million. Investing activities, virtually all of which consisted of plant and equipment expenditures at La Colorada, consumed $3.22 million and financing activities consumed $1.00 million including loan repayments of $0.60 million. Working capital, including cash of $17.96 million, amounted to $13.70 million at September 30, 2002. CORNER BAY SILVER ACQUISITION In early September shareholders of both Pan American and Corner Bay voted in favour of Pan American acquiring Corner Bay. Closing of the merger has been delayed while efforts have been made to secure a source of water for a potential mining operation. A water rights agreement with a local agricultural cooperative has been entered into and is in the process of being ratified and approved by a regional water users association and necessary Mexican authorities. Pan American and Corner Bay have extended the date for procurement of water from November 15 to December 17 and it is hoped the merger can then be completed. This will result in Pan American acquiring 100 percent of the Alamo Dorado silver deposit. It is expected that Alamo Dorado will produce in excess of 6 million ounces per year for at least 8 years at a total cash cost of $3.25. Construction could commence soon after completion of the La Colorada expansion project now underway. HUARON MINE, PERU The Huaron mine continued to operate well during the quarter, producing 1,101,005 ounces of silver and 5,285 tonnes of zinc at a total cash cost of $4.17 per ounce of silver net of by-product credits. As a result of exploration success to date in 2002, the mine has begun an expansion project that will increase production nearly 10 percent by late-2003. This cost is being funded from operating cash flow and expensed as part of the cash cost of production reported from the mine. Huaron has outperformed the Company's expectations for 2002 and has contributed $2.85 million in cash flow in the year to date, despite very low metal prices. QUIRUVILCA MINE, PERU The Quiruvilca mine continues to struggle under existing low metal prices. During the quarter, the mine produced 594,463 ounces of silver and 4,622 tonnes of zinc at a total cash cost of $5.20 per ounce of silver net of by-product credits. Since the third quarter of 2001 operating costs per tonne have decreased from $43.36 to $38.46, however revenue during the same period has decreased from $38.09 to $32.42 due to lower metal prices and a drop in silver grades as the more silver-rich veins in the upper parts of the mine are exhausted and production comes from the deeper, zinc-rich veins. Despite extraordinary efforts by the Company's employees to reduce all possible costs, Quiruvilca simply cannot make money at current metal prices. All options continue to be examined to remedy this situation. Quiruvilca has operated continuously since 1925, and so closure (either temporary or permanent) would be very costly in financial and social terms. Higher metal prices will allow the mine to contribute to the Company's cash flow, as it did most recently in 2000, but it is impossible to predict when this will occur. Using current metal prices, the mine will not return its carrying value, and as a prudent accounting policy, $15.13 million of the mine's book value was written down during the quarter. 2 LA COLORADA MINE, MEXICO The third quarter was a transition period at the La Colorada mine as construction began on the mine expansion that will quadruple silver production to 3.8 million ounces annually beginning in mid-2003. This work required the small-scale existing operation to close for six weeks during the quarter. Production resumed in mid-September. During the quarter, 54,999 ounces of silver were produced. So far, construction is on schedule and budget. The construction team is complete, the oxide mill equipment is on site and being assembled and most of the new underground equipment has been delivered. SAN VICENTE MINE, BOLIVIA Small-scale operation by EMUSA, the Bolivian company that operates this mine under a short term toll-mining agreement with Pan American, continued during the quarter with production of 350,000 ounces of silver and a cash flow contribution to Pan American of about $0.10 million. In light of the successful operation to date that has been possible using EMUSA's nearby milling facility, Pan American is discussing with EMUSA other options that would increase silver production from San Vicente to the benefit of both companies and the Bolivian state mining company COMIBOL. EXPLORATION Pan American was active during the quarter in four exploration programs, three of which continue. Near La Colorada, a small drilling program was carried out without significant results. At Huaron, drilling was successful in increasing reserves in the wide zones discovered in late 2001 that have contributed to the mine's successful operation this year. At Manantial Espejo in Argentina, drilling began in the 6,000 meter program designed to move the project forward to the pre-feasibility stage in 2003, and initial results have been very promising. Finally, in Mexico, surface exploration concluded at the Ocotlan project and drilling has now begun on the most attractive targets. SILVER MARKETS Silver prices deteriorated in the third quarter, along with most other metal prices. Zinc dropped to a new record low in real dollar terms. These price declines are due to a drop in industrial demand that began in mid-2000 and no accompanying change in supply. Silver is widely used in the electronics and high-tech sectors where demand remains very weak. Little speculative buying was apparent during the quarter, in contrast to earlier in 2002. However, strong physical buying is reported at current silver prices, mine supply of silver is likely to decrease in 2002 for the first time in six years, and it is believed that Chinese sales of silver inventories have been curtailed for the time being. While some reports argue that silver prices are being manipulated downward by bullion traders, we believe silver prices can be well explained by demand and supply fundamentals, which provide a solid base to current prices and good support for a higher price trend in the near future. - End - Ross J. Beaty, Chairman or Rosie Moore, VP Corporate Relations 604-684-1175 To view Pan American's full third quarter filing, please visit www.panamericansilver.com/s/InvestorRelations.asp CAUTIONARY NOTE Some of the statements in this news release are forward-looking statements, such as estimates of future production levels, expectations regarding mine production costs, expected trends in mineral prices and statements that describe Pan American's future plans, objectives or goals. Actual results and developments may differ materially from those contemplated by these statements depending on such factors as changes in general economic conditions and financial markets, changes in prices for silver and other metals , technological and operational hazards in Pan American's mining and mine development activities, uncertainties inherent in the calculation of mineral reserves, mineral resources and metal recoveries, the timing and availability of financing, governmental and other approvals, political unrest or instability in countries where Pan American is active, labor relations and other risk factors listed from time to time in Pan American's Form 40-F. 3 FINANCIAL AND OPERATIONAL HIGHLIGHTS
NINE MONTHS ENDED THREE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 --------------------------- --------------------------- 2002 2001 2002 2001 ----------- ----------- ----------- ----------- CONSOLIDATED FINANCIAL HIGHLIGHTS (IN THOUSANDS OF US DOLLARS) Net income (loss) $ (19,937) $ (3,689) $ (17,387) $ 701 Earnings (loss) per share (0.48) (0.10) (0.40) 0.02 Net income (loss) before unusual items (4,808) (7,189) (2,258) (2,799) Earnings (loss) per share before unusual items (0.12) (20.00) (0.05) (0.07) Contribution from mining operations 1,553 (2,066) (252) (681) Capital spending 6,048 5,761 3,418 566 Exploration expense 577 438 234 115 Cash 17,964 4,866 17,964 4,866 Working capital $ 13,700 $ 1,965 $ 13,700 $ 1,965 CONSOLIDATED ORE MILLED & METALS RECOVERED TO CONCENTRATE Tonnes milled 876,383 695,491 287,831 293,065 Silver metal - ounces 5,755,367 4,852,636 1,750,467 2,140,802 Zinc metal - tonnes 29,526 21,517 9,947 8,661 Lead metal - tonnes 15,576 12,425 4,993 5,582 Copper metal - tonnes 2,105 1,390 723 602 Net smelter return per tonne milled $ 40.27 $ 42.38 $ 37.35 $ 40.20 Cost per tonne 39.64 44.34 38.21 42.31 ----------- ----------- ----------- ----------- Margin (loss) per tonne $ 0.63 $ (1.97) $ (0.86) $ (2.11) =========== =========== =========== =========== CONSOLIDATED COST PER OUNCE OF SILVER (NET OF BY-PRODUCT CREDITS) Total cash cost per ounce $ 3.87 $ 4.28 $ 4.53 $ 4.06 Total production cost per ounce $ 4.67 $ 4.98 $ 5.45 $ 4.64 IN THOUSANDS OF US DOLLARS Direct operating costs & value of metals lost $ 37,433 $ 31,456 $ 12,259 $ 13,515 in smelting and refining By-product credits (13,298) (11,379) (4,583) (4,064) ----------- ----------- ----------- ----------- Cash operating costs $ 24,135 $ 20,077 $ 7,675 $ 9,451 =========== =========== =========== =========== Depreciation, amortization & reclamation 4,821 3,291 1,565 1,361 ----------- ----------- ----------- ----------- Production costs $ 28,956 $ 23,368 $ 9,240 $ 10,812 =========== =========== =========== =========== Ounces for cost per ounce calculations 5,700,369 4,691,507 1,695,468 2,329,652 AVERAGE METAL PRICES Silver - LME Cash Settlement per ounce $ 4.63 $ 4.40 $ 4.67 $ 4.27 Zinc - LME Cash Settlement per pound $ 0.35 $ 0.42 $ 0.35 $ 0.37 Lead - LME Cash Settlement per pound $ 0.21 $ 0.22 $ 0.20 $ 0.21 Copper - LME Cash Settlement per pound $ 0.71 $ 0.74 $ 0.69 $ 0.67 AVERAGE METAL PRICES REALIZED Silver - per ounce (note) $ 4.29 $ 4.02 $ 4.34 $ 3.96 Zinc - per pound $ 0.35 $ 0.41 $ 0.35 $ 0.38 Lead - per pound (note 3) $ 0.21 $ 0.21 $ 0.20 $ 0.21 Copper - per pound (note) $ 0.62 $ 0.64 $ 0.62 $ 0.60
Note - Pan American pays a refining charge for silver and copper 4 MINE OPERATIONS HIGHLIGHTS HUARON MINE
NINE MONTHS ENDED THREE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 --------------------------- --------------------------- 2002 2001 2002 2001 ----------- ----------- ----------- ----------- Tonnes milled 449,995 230,135 150,330 142,254 Average silver grade - grams per tonne 263.5 276.6 256.6 274.4 Average zinc grade - percent 4.08% 3.13% 4.15% 3.24% Silver - ounces 3,393,069 1,809,763 1,101,005 1,122,715 Zinc - tonnes 15,440 5,355 5,285 3,473 Lead - tonnes 10,275 5,727 3,338 3,441 Copper - tonnes 1,334 512 471 302 Net smelter return per tonne milled $ 44.41 $ 40.65 $ 43.21 $ 39.77 Cost per tonne 38.14 40.44 39.59 39.24 ----------- ----------- ----------- ----------- Margin (loss) per tonne $ 6.27 $ 0.20 $ 3.62 $ 0.53 =========== =========== =========== =========== Total cash cost per ounce $ 3.65 $ 3.93 $ 4.17 $ 3.94 Total production cost per ounce $ 4.10 $ 4.28 $ 4.63 $ 4.29 IN THOUSANDS OF US DOLLARS Direct operating costs & value of metals lost $ 19,065 $ 9,639 $ 6,730 $ 6,233 in smelting and refining By-product credits (6,675) (2,526) (2,143) (1,578) ----------- ----------- ----------- ----------- Cash operating costs $ 12,390 $ 7,113 $ 4,586 $ 4,655 =========== =========== =========== =========== Depreciation, amortization & reclamation 1,530 641 511 413 ----------- ----------- ----------- ----------- Production costs $ 13,920 $ 7,754 $ 5,097 $ 5,068 =========== =========== =========== =========== Ounces for cost per ounce calculations 3,393,069 1,809,763 1,101,005 1,182,445
QUIRUVILCA MINE
NINE MONTHS ENDED THREE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 --------------------------- --------------------------- 2002 2001 2002 2001 ----------- ----------- ----------- ----------- Tonnes milled 389,254 431,858 131,200 137,766 Average silver grade - grams per tonne 177.6 201.9 163.8 203.3 Average zinc grade - percent 3.99% 4.13% 3.97% 4.11% Silver - ounces 1,933,526 2,487,501 594,463 792,619 Zinc - tonnes 13,854 15,991 4,622 5,059 Lead - tonnes 5,070 6,443 1,620 2,027 Copper - tonnes 771 878 252 300 Net smelter return per tonne milled $ 34.90 $ 41.50 $ 32.42 $ 38.09 Cost per tonne 39.53 44.52 38.46 43.36 ----------- ----------- ----------- ----------- Margin (loss) per tonne $ (4.63) $ (3.03) $ (6.04) $ (5.26) =========== =========== =========== =========== Total cash cost per ounce $ 5.04 $ 4.64 $ 5.20 $ 6.10 Total production cost per ounce $ 6.62 $ 5.60 $ 6.97 $ 7.10 IN THOUSANDS OF US DOLLARS Direct operating costs & value of metals lost $ 16,368 $ 20,306 $ 5,529 $ 7,264 in smelting and refining By-product credits (6,615) (8,764) (2,440) (2,431) ----------- ----------- ----------- ----------- Cash operating costs $ 9,752 $ 11,542 $ 3,089 $ 4,833 =========== =========== =========== =========== Depreciation, amortization & reclamation 3,049 2,394 1,054 793 ----------- ----------- ----------- ----------- Production costs $ 12,801 $ 13,936 $ 4,143 $ 5,627 =========== =========== =========== =========== Ounces for cost per ounce calculations 1,933,526 2,487,501 594,463 792,619
5 LA COLORADA MINE
NINE MONTHS ENDED THREE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 ---------------------- --------------------- 2002 2001 2002 2001 --------- --------- --------- --------- Tonnes milled 37,134 33,498 6,301 13,045 Average silver grade - grams per tonne 414.0 661.0 335.7 631.2 Silver - ounces 428,772 555,372 54,999 225,468 Zinc - tonnes 232 171 40 129 Lead - tonnes 231 255 35 114 Net smelter return per tonne milled $ 46.36 $ 65.58 $ -- $ 67.12 Cost per tonne 58.96 68.82 -- 64.78 --------- --------- --------- --------- Margin (loss) per tonne $ (12.60) $ (3.24) $ -- $ (2.34) ========= ========= ========= ========= Total cash cost per ounce $ 5.33 $ 3.41 $ -- $ 3.74 Total production cost per ounce $ 5.98 $ 4.06 $ -- $ 4.87 IN THOUSANDS OF US DOLLARS Direct operating costs & value of metals lost $ 2,001 $ 1,433 $ -- $ 899 in smelting and refining By-product credits (8) (89) -- (55) --------- --------- --------- --------- Cash operating costs $ 1,993 $ 1,344 $ -- $ 843 ========= ========= ========= ========= Depreciation, amortization & reclamation 243 256 -- 256 --------- --------- --------- --------- Production costs $ 2,236 $ 1,600 $ -- $ 1,099 ========= ========= ========= ========= Ounces for cost per ounce calculations 373,773 394,243 -- 225,468
6 PAN AMERICAN SILVER CORP. Consolidated Balance Sheets (Unaudited - in thousands of U.S. dollars)
SEPTEMBER 30 DECEMBER 31 ASSETS 2002 2001 ------------ ----------- Current Cash and cash equivalents $ 17,964 $ 3,331 Short-term investments 13 513 Accounts receivable 5,408 6,037 Inventories - concentrate 3,285 2,115 Inventories - supplies 2,769 2,540 Prepaid expenses 4,680 6,534 --------- --------- Total Current Assets 34,119 21,070 Property, plant and equipment, net 55,234 66,659 Mineral properties 3,797 1,785 Deferred income tax 240 -- Other 2,416 2,003 --------- --------- Total Assets $ 95,806 $ 91,517 ========= ========= LIABILITIES Current Operating line of credit $ 720 $ 1,390 Accounts payable and accrued liabilities 11,591 12,283 Advances for metal concentrates 4,514 4,071 Current portion of bank loans 2,209 2,209 Current portion of capital leases 116 -- Current portion of severance indemnity and commitments 663 547 Current portion of deferred revenue 606 643 --------- --------- Total Current Liabilities 20,419 21,143 Deferred revenue 1,764 1,850 Capital leases 117 -- Bank loans 3,409 5,010 Provision for reclamation 2,756 2,112 Severance indemnity and commitments 2,219 2,525 --------- --------- Total Liabilities 30,684 32,640 ========= ========= SHAREHOLDERS' EQUITY Share capital Authorized: 100,000,000 common shares of no par value Issued: December 31, 2001 - 37,628,234 common shares September 30, 2002 - 43,209,262 common shares 156,917 130,723 Additional paid in capital 1,108 1,120 Deficit (92,903) (72,966) --------- --------- Total Shareholders' Equity 65,122 58,877 --------- --------- Total Liabilities and Shareholders' Equity $ 95,806 $ 91,517 ========= =========
See accompanying notes to consolidated financial statements 7 PAN AMERICAN SILVER CORP. Consolidated Statements of Operations and Deficit (Unaudited - in thousands of U.S. dollars, except for shares and per share amounts)
NINE MONTHS ENDED THREE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 ---------------------------- ---------------------------- 2002 2001 2002 2001 ------------ ------------ ------------ ------------ REVENUE $ 33,009 $ 26,383 $ 11,195 $ 13,791 EXPENSES Operating 31,456 28,448 11,447 14,471 General and administration 1,236 1,467 379 486 Depreciation and amortization 4,180 3,020 1,316 1,278 Reclamation 645 330 226 107 Exploration 577 438 234 115 Interest expense 765 479 250 287 Other expenses (income) (802) (4,110) (399) (3,654) Write-down of mineral property 15,129 -- 15,129 -- ------------ ------------ ------------ ------------ 53,186 30,072 28,582 13,090 ------------ ------------ ------------ ------------ Net income (loss) before taxes (20,177) (3,689) (17,387) 701 Income tax recovery 240 -- -- -- ------------ ------------ ------------ ------------ Net income (loss) for the period (19,937) (3,689) (17,387) 701 Deficit, beginning of period (72,966) (64,889) (75,516) (69,279) ------------ ------------ ------------ ------------ Deficit, end of period $ (92,903) $ (68,578) $ (92,903) $ (68,578) ============ ============ ============ ============ Income (loss) per share - Basic $ (0.48) $ (0.10) $ (0.40) $ 0.02 Income (loss) per share - Fully Diluted $ (0.48) $ (0.10) $ (0.40) $ 0.02 Weighted average shares outstanding - Basic 41,751,774 35,679,701 43,193,324 37,429,443 Weighted average shares outstanding - Fully Diluted 41,751,774 35,679,701 43,193,324 37,589,724
See accompanying notes to consolidated financial statements 8 PAN AMERICAN SILVER CORP. Consolidated Statements of Cash Flows - Direct Method (Unaudited - in thousands of U.S. dollars)
NINE MONTHS ENDED THREE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 -------------------- -------------------- OPERATING ACTIVITIES 2002 2001 2002 2001 -------- -------- -------- -------- Sales proceeds $ 33,386 $ 28,221 $ 9,983 $ 11,688 Hedging activities 723 22 253 -- Interest paid (765) (479) (250) (287) Other income and expenses 769 268 126 (166) Products and services purchased (31,385) (27,165) (8,437) (12,138) Exploration (557) (423) (192) (105) General and administration (1,086) (1,498) (317) (614) -------- -------- -------- -------- 1,085 (1,054) 1,166 (1,622) -------- -------- -------- -------- FINANCING ACTIVITIES Shares issued for cash 22,708 9,552 90 404 Share issue costs (956) (311) -- 13 Capital leases 233 -- -- -- Proceeds from (repayment of) line of credit (670) -- (490) -- Proceeds from (repayment of) bank loans (1,601) (5,180) (603) (2,113) -------- -------- -------- -------- 19,714 4,061 (1,003) (1,696) -------- -------- -------- -------- INVESTING ACTIVITIES Property, plant and equipment expenditures (5,286) (5,798) (3,185) (561) Mineral property expenditures (762) (22) -- (13) Short-term investments (purchases) sales -- 256 -- 200 Other (118) (121) (39) (43) -------- -------- -------- -------- (6,166) (5,685) (3,224) (417) -------- -------- -------- -------- Increase (decrease) in cash and cash equivalents during the period 14,633 (2,678) (3,061) (3,735) Cash and cash equivalents, beginning of period 3,331 7,544 21,025 8,601 -------- -------- -------- -------- Cash and cash equivalents, end of period $ 17,964 $ 4,866 $ 17,964 $ 4,866 ======== ======== ======== ======== SUPPLEMENTAL DISCLOSURE ON NON-CASH TRANSACTIONS Sale of land concessions $ -- $ 3,300 $ -- $ 3,300 Shares issued for royalty purchase (390,117 shares issued) 3,000 -- -- -- Shares issued for compensation expense (69,000 shares issued) 254 -- -- -- -------- -------- -------- -------- $ 3,254 $ 3,300 $ -- $ 3,300 ======== ======== ======== ========
See accompanying notes to consolidated financial statements 9 PAN AMERICAN SILVER CORP. Consolidated Statements of Cash Flows - Indirect Method (Unaudited - in thousands of U.S. dollars)
NINE MONTHS ENDED THREE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 -------------------- -------------------- OPERATING ACTIVITIES 2002 2001 2002 2001 -------- -------- -------- -------- Net income (loss) for the period $(19,937) $ (3,689) $(17,387) $ 701 Items not involving cash Depreciation and amortization 4,180 3,020 1,316 1,278 Gain on sale of assets -- (3,523) -- (3,500) Reclamation provision 645 330 226 107 Deferred income tax (240) -- -- -- Operating cost provisions 131 (291) 314 (184) Write-down of mineral property 15,129 -- 15,129 -- -------- -------- -------- -------- (92) (4,153) (402) (1,598) Changes in non-cash operating working capital items 1,177 3,099 1,568 (24) -------- -------- -------- -------- Cash provided by (used in) operations 1,085 (1,054) 1,166 (1,622) -------- -------- -------- -------- FINANCING ACTIVITIES Shares issued for cash 22,646 9,552 90 404 Share issue costs (956) (311) -- 13 Changes in non-cash working capital items 62 -- -- -- Capital leases 233 -- -- -- Proceeds from (repayment of) line of credit (670) -- (490) -- Proceeds from (repayment of) bank loans (1,601) (5,180) (603) (2,113) -------- -------- -------- -------- 19,714 4,061 (1,003) (1,696) -------- -------- -------- -------- INVESTING ACTIVITIES Property, plant and equipment expenditures (4,884) (5,745) (2,827) (553) Mineral property expenditures (762) (16) -- (13) Changes in non-cash working capital items (402) (59) (358) (8) Short-term investments (purchases) sales -- 256 -- 200 Other (118) (121) (39) (43) -------- -------- -------- -------- (6,166) (5,685) (3,224) (417) -------- -------- -------- -------- Increase (decrease) in cash and cash equivalents during 14,633 (2,678) (3,061) (3,735) the period Cash and cash equivalents, beginning of period 3,331 7,544 21,025 8,601 -------- -------- -------- -------- Cash and cash equivalents, end of period $ 17,964 $ 4,866 $ 17,964 $ 4,866 ======== ======== ======== ======== SUPPLEMENTAL DISCLOSURE ON NON-CASH TRANSACTIONS Sale of land concessions $ -- $ 3,300 $ -- $ 3,300 Shares issued for royalty purchase (390,117 shares issued) 3,000 -- -- -- Shares issued for compensation expense (69,000 shares issued) 254 -- -- -- -------- -------- -------- -------- $ 3,254 $ 3,300 $ -- $ 3,300 ======== ======== ======== ========
See accompanying notes to consolidated financial statements 10 -----END PRIVACY-ENHANCED MESSAGE-----