Pan American Silver: Poised to Benefit from Higher Prices

Pan American Silver (PAAS) – 3rd Quarter earnings review

Stats:

Silver production of 4.45 million oz., up 38% YoY

Sales of $87.9 million, up 37% YoY

Net Income of $23.9 million, up 46% YoY

Working Capital of $207.4 million at September 30, 2007

Total cash costs of $3.32 per ounce.

Peru

Morococha – Silver production totaled 750,603 oz. for the quarter, up 8% YoY. Cash costs of $2.92 oz. due to by-product credits.

Huaron - Silver production totaled 950,797 oz. for the quarter with cash costs of $2.92 oz.

Quiruvilca – Silver production of 408,888 oz. for the quarter with a cash cost of $1.33 oz.

Silver Stockpile – Silver production of 117,252 oz. at a cash cost of $2.49 oz.

Mexico

Alamo Dorado (new mine) – 460,000 oz. produced in September at a cost of $3.88 oz. 3rd quarter production was 994,325 oz. at a cost of $5.02 oz. The cost was higher than anticipated due to boiler failures which have since been replaced.

La Colorada – 995,463 oz. of production at a cash cost of $6.73 oz.

Argentina

Manantial Espejo – Underground ramps have advanced a total of 1.1 km with the mine on budget and on schedule for completion in May 2008. Cumulative project construction is approximately 45% complete.

Bolivia

San Vincente – 236,412 oz. produced in the third quarter at a cash cost of $5.21 oz. Expansion is underway and should be completed by the end of 2008. The mine should average 2.8 million ounces of silver a year for the first 5 years of production.

Comment: Strong quarter for PAAS as production set new records and development continued at the companies various projects. Alamo Dorado production is being ramped up and Manantial development is coming along nicely.

The low cost Peruvian operations are nicely offsetting higher cost mines in Mexico and Bolivia.

PAAS is primed to benefit from higher silver prices and should expect strong profit growth as the price of silver moves higher in 2008. With working capital of slightly more than $200 million, PAAS is well capitalized and able to fund continued exploration and mine development in house.

Disclosure: Long PAAS