o | REGISTRATION STATEMENT PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934 |
þ | ANNUAL REPORT PURSUANT TO SECTION 13(a) OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
British Columbia (Province or other Jurisdiction of Incorporation or Organization) | 1044 (Primary Standard Industrial Classification Code Number) | Not Applicable (I.R.S. Employer Identification No..) |
Vancouver, British Columbia
V6C 2T6
(604) 684-1175
(Address and telephone number of Registrants’ principal executive offices)
111 Eighth Avenue, 13th Floor
New York, NY 10011
(212) 894-8940
(Name, address (including zip code) and telephone number
(including area code) of agent for service in the United States)
Title of each class Common Shares, No Par Value | Name of each exchange on which registered The NASDAQ Stock Market Toronto Stock Exchange |
outstanding as at December 31, 2006
Document No. 1: | Annual Information Form for the year ended December 31, 2006, dated March 21, 2007. | |
Document No. 2: | Management’s Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 31, 2006. | |
Document No. 3: | Audited Consolidated Financial Statements for the financial year ended December 31, 2006, prepared in accordance with Canadian generally accepted accounting principles, and reconciled to United States generally accepted accounting principles in accordance with Item 18 of Form 20-F. |
Information
Form
Ended December 31, 2006
Vancouver, British Columbia
V6C 2T6
• | the sufficiency of Pan American’s current working capital and anticipated operating cash flow; | ||
• | the accuracy of mineral reserve and resource estimates and estimates of future production and future cash and total costs of production at Quiruvilca, Huaron, Morococha, La Colorada, San Vicente, Alamo Dorado, Manantial Espejo, the stockpiles or other properties; | ||
• | estimated production rates for silver and other payable metals produced by Pan American, timing of production and the cash and total costs of production at each of the Company’s properties; | ||
• | the estimated cost of and availability of funding for ongoing capital replacement or improvement programs; | ||
• | the estimated cost of construction, development and ramp-up of Alamo Dorado, Manantial Espejo or other projects; | ||
• | the estimates of expected or anticipated economic returns from a mining project, as reflected in feasibility studies prepared in relation to development of projects; | ||
• | estimated exploration expenditures to be incurred on the Company’s various silver exploration properties; | ||
• | compliance with environmental regulations; | ||
• | the effects of laws, regulations and government policies affecting the Company’s operations; | ||
• | forecast capital and non-operating spending; and | ||
• | future sales of the metals produced by Pan American. |
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Imperial Measure | = | Metric Unit | Metric Unit | = | Imperial Measure | ||||||
2.47 acres | 1 hectare | 0.4047 hectares | 1 acre | ||||||||
3.28 feet | 1 metre | 0.3048 metres | 1 foot | ||||||||
0.62 miles | 1 kilometre | 1.609 kilometres | 1 mile | ||||||||
0.032 ounces (troy) | 1 gram | 31.1 grams | 1 ounce (troy) | ||||||||
1.102 tons (short) | 1 tonne | 0.907 tonnes | 1 ton | ||||||||
0.029 ounces (troy)/ton | 1 gram/tonne | 34.28 grams/tonne | 1 ounce (troy)/ton |
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Name | Jurisdiction | Ownership (%) | ||
Pan American Silver (Barbados) Corp. (“Pan American Barbados”) | Barbados | 100 | ||
Pan American Silver Peru S.A.C. (“Pan American Peru”) | Peru | 100 | ||
Pan American Silver S.A. Mina Quiruvilca (“Mina Quiruvilca”) 1 | Peru | 99.93 | ||
Compania Minera Argentum (“Argentum”)2 | Peru | 92.012 | ||
Corner Bay Silver Inc. (“Corner Bay”) | Canada | 100 | ||
Minera Corner Bay S.A. de C.V. (“MCB”) | Mexico | 100 | ||
Plata Panamericana S.A. de C.V. (“Pan American Mexico”) | Mexico | 100 | ||
Pan American Minerals, Inc. (“Pan American U.S.”) | Nevada | 100 | ||
Pan American Silver (Bolivia) S.A. (“Pan American Bolivia”) | Bolivia | 553 | ||
Compania Minera Alto Valle S.A. (“Alto Valle”) | Argentina | 1004 | ||
Minera Triton Argentina S.A. (“MTA”) | Argentina | 1004 |
1 | As of January 2006, Mina Quiruvilca merged with Cia. Minera Huaron S.A., a Peruvian company in which Pan American previously held a 99.85% interest. | |
2 | In April 2005, Argentum amalgamated with Compania Minera Natividad (“Natividad”), a company in which Pan American previously held a 100% interest. The Company is the indirect owner of 92.01% of the voting shares of Argentum and 63.46% of the non-voting investment shares for a total ownership interest of 88.5%. | |
3 | Pursuant to a shareholders’ agreement entered into in January 2006, the remaining 45% interest in the capital of Pan American Bolivia is held by Empressa Minera Unificoda S.A. (“EMUSA”), a Bolivian mining company, and Trafigura Beheer B.V., a Dutch company involved in the purchase and sale of mineral concentrates, with 40% and 5%, respectively. | |
4 | In March 2006, Pan American negotiated and entered into a purchase agreement with Silver Standard Resources (“SSR”) to acquire SSR’s 50% interest in MTA and Alto Valle, respectively, thus becoming a 100% indirect owner of the Manantial Espejo project. |
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• | Increase silver production— During its twelve year history, Pan American has increased its annual silver production each year, including a 16% increase from 11.2 million ounces in 2004 to 13.0 million ounces in 2006. This has been accomplished through a combination of acquisition and development and expansion efforts. During the most recent year, Pan American (i) completed mine construction of its Alamo Dorado mine in Mexico; (ii) purchased the remaining 50% of the silver-gold Manantial Espejo project in Argentina and began construction of the mine; and (iii) increased its exploration efforts focussed on areas around its existing mines and early stage exploration activities in Peru, Mexico, Argentina and Ecuador. | ||
Silver production increased during the year ended December 31, 2006, to 13.0 million ounces, which was a 4% increase over 2005. Silver production as at December 31, 2005 was approximately 12.5 million ounces, which was a 12% increase over 2004. | |||
• | Increase Reserves and Resources— At December 31, 2006 proven and probable silver mineral reserves for Pan American were 213.4 million ounces which represents a 20% increase over the year earlier. At the Company’s operating and development properties, measured and indicated resources increased 12.1 million ounces, while inferred resources grew by 9.9 million ounces. | ||
• | Continue to be a “Low Cost Producer”— Together with increased production, Pan American has been successful at reducing its cash costs of production. Full year 2006 cash costs to produce an ounce of silver were $1.89. Although low cash costs experienced in 2006 were attributable to higher realized by-product base metal prices, Pan American’s growth strategy includes focusing on reducing overall unit production costs. To keep production costs down, the Company is adding newer more mechanized mines (such as Alamo Dorado and Manantial Espejo) to its portfolio of assets, and will continue to review mining plans at its operating mines in order to find greater productivities and efficiencies as well as develop financial strategies to reduce exposure to foreign currency exchange fluctuations and base metal price fluctuations. |
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• | Acquire additional silver exploration properties— Pan American is seeking to acquire a portfolio of promising silver exploration properties. Pan American’s exploration and acquisition focus is on silver properties with bulk mineable targets that have the possibility of possessing over 50 million ounces of silver mineralization to supplement Pan American’s existing base of silver exploration properties. | ||
• | Generate sustainable profits from mining operations— Financial performance is monitored annually against targets for operating earnings and cash flow from operations, as well as against operating measures such as production. Pan American continuously develops and implements tax planning strategies, and seeks to organize its corporate structure and activities to optimize its overall tax position. |
• | 2004— (i) completed an expansion of and commenced commercial production at the La Colorada mine in Mexico; (ii) assumed the operator role in respect of the Manantial Espejo development project in Argentina; (iii) reached two agreements, one to purchase an 81% interest in Argentum for approximately $33.8 million and the other to purchase all of the issued and outstanding shares of Natividad for $1.5 million in cash, together resulting in Pan American obtaining concessions and mining operations referred to as the “Morococha mine” (subsequently, Pan American acquired an additional 5% interest in Argentum for $1.5 million); (iv) made an offering of 3,333,333 common shares at a price of $16.50 per share for proceeds of $55 million; (v) sold 6,839 hectares of mining concessions and surface rights in the vicinity of the Quiruvilca mine to Barrick Gold Corporation (“Barrick”) for $3,582,575 and for the assumption of $67,425 of payments owing in respect of these mining concessions; (vi) made a formal offer (the “Conversion Offer”) to encourage conversion by holders of the Company’s $86.25 million outstanding principal amount of Debentures (as at December 31, 2004 holders of approximately $717,000 principal amount of Debentures remained unconverted, and the Company issued 9,145,700 million common shares, and made cash payments of approximately $11.5 million, in respect of such conversions); and (vii) sold its 20% interest in the Dukat silver mine in Magadan State, Russia to OAO MNPO Polimetall, the mine’s owner and operator, for $20.5 million in cash and the right to receive up to $22.5 million in contingent future payments. | ||
• | 2005— (i) completed the feasibility study for, and commenced construction of, an open pit silver mine at the Alamo Dorado silver project in Mexico; (ii) entered into a consignment agreement with Northwest Territorial Mint to produce a new line of silver bullion products; (iii) completed 14,000 metres of exploration and infill drilling at Morococha, resulting in an increase in proven and probable reserves and an extension of the life of the mine; (iv) completed, and submitted to the Argentine authorities, an environmental impact statement for the development of the Manantial Espejo joint venture silver project; (v) resumed commercial production at the San Vicente mine under a toll milling agreement with a nearby mill and renegotiated an agreement with EMUSA, a Bolivian mining company, to increase Pan American’s interest in the San Vicente mine from 50% to 55%; (vi) conducted extensive exploration activity which replaced all ounces mined and increased total proven and probable reserves by 30.5 million ounces; and (vii) the Company issued 255,781 warrants to the International Finance Corporation in exchange for the termination of past and future obligations relating to production from the La Colorada mine. | ||
• | 2006— (i) completed construction of the Alamo Dorado mine; (ii) acquired the remaining 50% interest in the Manantial Espejo project from Silver Standard Resources Inc. for 1.95 million common shares of the Company; (iii) obtained approval of the environmental impact statement necessary to begin |
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development of the Manantial Espejo silver-gold mine and commenced construction of the mine; (iv) completed an equity financing, the gross proceeds of which totalled $150 million earmarked primarily for the development of the Manantial Espejo mine; (v) conducted over 90,000 metres of exploration drilling on the Company’s existing mine site properties, largely contributing to a 20% increase in the Company’s proven and probable reserves and an increase in reserves and resources at each of the company’s operating and development properties; (vi) redeemed or converted the outstanding principal amount of the Company’s 5.25% convertible debentures remaining after the Conversion Offer made in 2004; (vi) completed the first phase of the sulphide plant refurbishment at La Colorada; and (vii) increased overall Company consolidated silver production to 13.0 million ounces. |
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Quiruvilca | Huaron | La Colorada1 | Morococha2 | San Vicente3 | Consolidated | |||||||||||||||||||
Tonnes milled | 370,115 | 693,285 | 233,743 | 577,201 | 29,618 | 1,903,963 | ||||||||||||||||||
Grade | ||||||||||||||||||||||||
Silver — grams/tonne | 209 | 200 | 540 | 186 | 326 | N/A | ||||||||||||||||||
Gold — grams/tonne | 0.91 | 0.32 | 0.60 | — | — | N/A | ||||||||||||||||||
% Zinc | 2.79 | 2.59 | 2.10 | 3.73 | 3.44 | N/A | ||||||||||||||||||
% Lead | 0.86 | 1.31 | 1.07 | 1.33 | — | N/A | ||||||||||||||||||
% Copper | 0.51 | 0.37 | — | 0.41 | 0.22 | N/A | ||||||||||||||||||
Production | ||||||||||||||||||||||||
Ounces silver | 2,105,475 | 3,664,660 | 3,493,995 | 2,923,267 | 264,573 | 13,018,354 | 4 | |||||||||||||||||
Ounces gold | 1,106 | 1,832 | 3,501 | — | 6,438 | |||||||||||||||||||
Tonnes zinc | 8,712 | 11,735 | — | 18,115 | 805 | 39,366 | ||||||||||||||||||
Tonnes lead | 2,574 | 6,858 | 153 | 5,722 | — | 15,307 | ||||||||||||||||||
Tonnes copper | 1,345 | 1,603 | — | 1,546 | 52 | 4,546 |
1 | La Colorada zinc and lead grades are for sulphide ore only. | |
2 | Morococha data represents Pan American’s 88.5% interest in the mine’s production. | |
3 | San Vicente data represents Pan American’s 55% interest in the mine’s production. | |
4 | Includes 566,383 ounces of silver produced from the Stockpiles in Peru. |
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Silver US$/Ounce | $ | 9.00 | ||
Zinc US$/Tonne | $ | 2,100 | ||
Lead US$/Tonne | $ | 1,000 | ||
Copper US$/Tonne | $ | 5,000 | ||
Gold US$/Ounce | $ | 525 |
Ore Reserves | Ore Resource | |||||||
Cut Off ($/Tonne) | Cut Off ($/Tonne) | |||||||
Huaron | 32.00 | 25.00 | ||||||
Quiruvilca | 27.00 | 20.00 | ||||||
Morococha | 34.00 | 27.00 | ||||||
San Vicente | 34.00 | 17.00 | ||||||
La Colorada | 56.18 | 56.18 |
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Gold recovery = 0.95 — 0.001 / gold grade (g/t) – 0.0005 * Copper grade (ppm)
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Reserve | Grams of Silver | |||||||||||||||||||
Category | Tonnes | per Tonne | % Zinc | % Lead | % Copper | |||||||||||||||
Proven | 1,049,205 | 170 | 3.36 | 1.15 | 0.66 | |||||||||||||||
Probable | 604,340 | 175 | 4.23 | 1.43 | 0.63 | |||||||||||||||
TOTAL | 1,653,545 | 172 | 3.68 | 1.25 | 0.65 |
1 | Calculated using a price of $9.00 per ounce of silver, $2,100 per tonne of zinc, $1,000 per tonne of lead and $5,000 per tonne of copper. | |
2 | Estimates of mineral reserves are calculated on the basis of blocks exposed by underground workings on one or more sides and having an in-place diluted value equal to or above the cutoff grade ($27/tonne). Proven and probable mineral reserves are extrapolated between 15 and 30 metres down dip depending on vein continuity. See also information in this Annual Information Form under the heading “Mineral Reserve and Mineral Resource estimate information”. | |
3 | Mineral reserve estimates for Quiruvilca were prepared under the supervision of, or were reviewed by, Michael Steinmann, P.Geo., Senior Vice President Geology & Exploration, and Martin G. Wafforn, P.Eng., Vice-President of Mine Engineering, as Qualified Persons as that term is defined inNational Instrument 43-101-Standards of Disclosure for Mineral Projects(“NI 43-101”). |
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Tonnes | ||||
Opening balance, December 31, 2005 | 1,504,925 | 1 | ||
Additions | 518,735 | |||
Less Tonnes mined | <370,115> | |||
Closing balance, December 31, 2006 | 1,653,545 |
1 | December 31, 2005 reserves were calculated using a price of $6.25 per ounce of silver and $1,150 per tonne of zinc. Changes in reserves or resources, as applicable, are attributed to information provided by drilling and subsequent reclassification of reserves or resources, an increase in the silver price, changes in pit designs, reconciliation between the mill and the resource model, and changes to operating costs. |
Resource | Grams of Silver | |||||||||||||||||||
Category | Tonnes | per Tonne | % Zinc | % Lead | % Copper | |||||||||||||||
Measured | 4,249,215 | 122 | 2.20 | 0.82 | 1.22 | |||||||||||||||
Indicated | 637,920 | 187 | 4.40 | 1.58 | 0.85 | |||||||||||||||
Inferred | 3,862,415 | 167 | 3.88 | 1.44 | 0.58 |
1 | These resources are in addition to mineral reserves. Calculated using a price of $9.00 per ounce of silver, $2,100 per tonne of zinc, $1,000 per tonne of lead and $5,000 per tonne of copper. See also information under the heading “Mineral Reserve and Mineral Resource estimate information”. | |
2 | Mineral resource estimates for Quiruvilca were prepared under the supervision of, or were reviewed by, Michael Steinmann, P.Geo., Senior Vice President Geology & Exploration, and Martin G. Wafforn, P.Eng., Vice-President of Mine Engineering, as Qualified Persons as that term is defined in NI 43-101. |
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Average Sales Price | ||||||||||||
Revenue1 | Tonnes | per Tonne | ||||||||||
Zinc Concentrate | $18.8 million | 15,949 | $ | 1,179 | ||||||||
Lead Concentrate | $8.2 million | 6,372 | $ | 1,287 | ||||||||
Copper Concentrate | $23.2 million | 6,705 | $ | 3,460 |
1 | Consists of sales to arm’s length customers. |
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Average Sales Price | ||||||||||||
Revenue1 | Tonnes | per Tonne | ||||||||||
Zinc Concentrate | $6.9 million | 18,011 | $ | 381 | ||||||||
Lead Concentrate | $3.0 million | 3,237 | $ | 919 | ||||||||
Copper Concentrate | $12.3 million | 6,681 | $ | 1,838 |
1 | Consists of sales to arm’s length customers. |
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Reserve | Grams of Silver | |||||||||||||||||||
Category | Tonnes | per tonne | % Zinc | % Lead | % Copper | |||||||||||||||
Proven | 4,638,300 | 184 | 3.16 | 1.57 | 0.31 | |||||||||||||||
Probable | 4,048,556 | 183 | 3.21 | 1.79 | 0.21 | |||||||||||||||
Total | 8,686,856 | 184 | 3.18 | 1.67 | 0.26 |
1 | Calculated using a price of $9.00 per ounce of silver, $2,100 per tonne of zinc, $1,000 per tonne of lead and $5,000 per tonne of copper. See also information in this Annual Information Form under the heading “Mineral Reserve and Mineral Resource estimate information”. | |
2 | Mineral reserve estimates for Huaron were prepared under the supervision of, or were reviewed by, Michael Steinmann, P.Geo., Senior Vice President Geology & Exploration, and Martin G. Wafforn, P.Eng., Vice-President of Mine Engineering, as Qualified Persons as that term is defined in NI 43-101. |
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Tonnes | ||||
Opening balance, December 31, 2005 | 7,354,026 | 1 | ||
Additions | 2,026,115 | |||
Less tonnes mined from reserves | <693,285> | |||
Closing balance, December 31, 2006 | 8,686,856 | |||
1 | December 31, 2005 reserves were calculated using a price of $6.25 per ounce of silver and $1,150 per tonne of zinc. December 31, 2006 reserves were calculated using a price of $9.00 per ounce of silver and $2,100 per tonne of zinc. Changes in reserves or resources, as applicable, are attributed to information provided by drilling and subsequent reclassification of reserves or resources, an increase in the silver price, changes in pit designs, reconciliation between the mill and the resource model, and changes to operating costs. |
Resource | Grams of Silver | |||||||||||||||||||
Category | Tonnes | per tonne | % Zinc | % Lead | % Copper | |||||||||||||||
Measured | 1,581,966 | 166 | 3.68 | 2.02 | 0.45 | |||||||||||||||
Indicated | 1,168,964 | 174 | 3.83 | 1.86 | 0.55 | |||||||||||||||
Inferred | 3,457,751 | 182 | 3.03 | 1.69 | 0.30 |
1 | These resources are in addition to Huaron mineral reserves. Calculated using a price of $9.00 per ounce of silver, $2,100 per tonne of zinc, $1,000 per tonne of lead and $5,000 per tonne of copper. See also information in this Annual Information Form under the heading “Mineral Reserve and Mineral Resource estimate information”. | |
2 | Mineral resource estimates for Huaron were prepared under the supervision of, or were reviewed by, Michael Steinmann, P.Geo., Senior Vice President Geology & Exploration, and Martin G. Wafforn, P.Eng., Vice President of Mine Engineering, as Qualified Persons as that term is defined in NI 43-101. |
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Average Sales Price | ||||||||||||
2006 | Revenue1 | Tonnes | per Tonne | |||||||||
Zinc Concentrate | $23.2 million | 24,975 | $ | 929 | ||||||||
Lead Concentrate | $17.1 million | 17,002 | $ | 1,006 | ||||||||
Copper Concentrate | $31.3 million | 6,716 | $ | 4,661 |
Average Sales Price | ||||||||||||
2005 | Revenue1 | Tonnes | per Tonne | |||||||||
Zinc Concentrate | $ | 7,208,913 | 23,182 | $ | 311 | |||||||
Lead Concentrate | $ | 9,887,443 | 15,992 | $ | 618 | |||||||
Copper Concentrate | $ | 17,770,711 | 7,470 | $ | 2,379 |
1 | Consists of sales to arm’s length customers. |
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• | NCP— Average orientation 075/60S. This zone is characterized by a broad mineralized shear within limestone containing one or more quartz veins parallel to the orientation of the shear. The majority of the silver mineralization is found in the quartz veins. Mining is in progress on various sublevels down to the 423 level. The NCP vein is east of the Candelaria Breccia. The vein splits to the west into at least 5 mineralized and recoverable veins termed Footwall, Hangingwall, Hangingwall2, Split and Inversa. Inferred Resources have been estimated to the 520 level. The NCP veins are economically the most important and contain 46% of the remaining resource and reserve ounces of silver. | ||
• | NC2— Average orientation 045/70S. NC2 is a narrow (one-to-two metre) mainly sulphide and partly oxide vein. It has a strike length of over 700 metres and is open to the east with potential extension to the west. Mining is currently occurring on levels down to the 380 level and has been drilled to below the 495 level where inferred resources have been estimated. The NC2 vein is the most important source of sulphide mineralization and contains 23% of the remaining resource and reserve ounces of silver. | ||
• | Amolillo— Average orientation is 045/70S. Amolillo is mainly an oxide vein located 500 metres north of the NC2 and NCP vein complex. The vein has recently been converted to reserve status with 2006 drilling success and the drilling has shown the vein to be open to the east, west and down dip. Pan American decided to rehabilitate and further develop the Amolillo vein in 2006, and has since purchased equipment and commenced mining on the 30 and 70 levels. | ||
• | Recompensa— Average orientation is 090/80N. Recompensa is a combination of vein and manto mineralization located more than one kilometre northwest of the NC2 and NCP vein complex. The vein mineralization is narrow (less than one metre). Recompensa contains both oxide and sulphide material. Only resources have been estimated in this structure. | ||
• | 4235 — Average orientation 090/75N. 4235 is a narrow (approximately one metre) vein which occurs in the hanging wall of the NCP and NC2 vein systems. It has a strike length of approximately 140 metres, and has been exposed by development on the 295 level and by drilling above and below that level. The western half of 4235 is sulphide and the eastern half is oxide. Only resources have been estimated in this structure. |
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Reserve | Grams of Silver | Grams of Gold | ||||||||||||||||||
Category | Tonnes | per tonne | per tonne | % Lead | % Zinc | |||||||||||||||
Proven | 608,072 | 493 | 0.37 | 0.89 | 1.58 | |||||||||||||||
Probable | 579,699 | 543 | 0.43 | 0.95 | 1.60 | |||||||||||||||
Total | 1,187,771 | 517 | 0.40 | 0.92 | 1.59 |
1 | Calculated using a price of $9.00 per ounce of silver, $525 per ounce of gold, $1000 per tonne of lead and $2100 per tonne of zinc. | |
2 | Mineral reserves for La Colorada have been prepared under the supervision or were reviewed by Michael Steinmann, P. Geo., Senior Vice President Geology & Exploration, and Martin Wafforn, P. Eng., Vice-President of Mine Engineering, as Qualified Persons as that term is defined in NI 43-101. | |
3 | The La Colorada mine applies incremental cut off grades as the combined process plants currently have more capacity than the mines. See also information in this Annual Information Form under the heading “Mineral Reserve and Mineral Resource estimate information”. |
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Resource | Grams of Silver | Grams of Gold | ||||||||||||||||||
Category | Tonnes | per tonne | per tonne | % Lead | % Zinc | |||||||||||||||
Measured | 184,161 | 381 | 0.40 | 0.98 | 1.34 | |||||||||||||||
Indicated | 550,693 | 274 | 0.23 | 1.57 | 1.43 | |||||||||||||||
Inferred | 1,718,422 | 398 | 0.30 | 2.24 | 2.32 |
1 | These resources are in addition to La Colorada mineral reserves. Calculated using a price of $9.00 per ounce of silver, $525 per ounce of gold, $1000 per tonne of lead and $2100 per tonne of zinc. See also information in this Annual Information Form under the heading “Mineral Reserve and Mineral Resource estimate information”. | |
2 | Mineral resource estimates for La Colorada have been prepared under the supervision, or were reviewed by Michael Steinmann, P. Geo., Senior Vice President Geology & Exploration, and Martin Wafforn, P. Eng., Vice-President of Mine Engineering, as Qualified Persons, as that term is defined in NI 43-101. |
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Revenue1 | Quantity | |||
Silver and Gold in Doré | $37.7 million | 3,185,000 ounces silver and 3,600 ounces gold | ||
Lead Concentrate | $3.2 million | 441 tonnes |
1 | Consists of sales to arm’s length customers. |
Revenue1 | Quantity | |||
Silver and Gold in Doré | $21.6 million | 2,508,000 ounces of silver and 2,500 ounces of gold |
1 | Consists of sales to arm’s length customers. |
Average Sales Price | ||||||||||
Revenue1 | Quantity | per Tonne | ||||||||
Silver and Gold in Doré | $11.1 million | 1,810,380 ounces of silver and 2,235 ounces of gold | — | |||||||
Zinc Concentrate | $0.1 million | 223 tonnes | $ | 494 | ||||||
Lead Concentrate | $1.4 million | 484 tonnes | $ | 2,908 |
1 | Consists of arm’s length customers. |
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Grams of Silver | Grams of Gold | |||||||||||
Class Reserve Category | Tonnes | per tonne | per tonne | |||||||||
Proven | 1,642,000 | 108 | 0.38 | |||||||||
Probable | 10,794,000 | 113 | 0.30 | |||||||||
TOTAL | 12,436,000 | 112 | 0.31 |
1 | Calculated using a price of $9.00 per ounce of silver and $525 per ounce of gold. | |
2 | Mineral reserve estimates for Alamo Dorado were prepared under the supervision of, or were reviewed by, Michael Steinmann, P.Geo., Senior Vice President Geology & Exploration, and Martin G. Wafforn, P.Eng., Vice-President of Mine Engineering as Qualified Persons as that term is defined in NI 43-101. See also information in this Annual Information Form under the heading “Mineral Reserve and Mineral Resource estimate information”. |
Grams of Silver | Grams of Gold | |||||||||||
Class Reserve Category | Tonnes | per tonne | per tonne | |||||||||
Measured | 263,000 | 84 | 0.31 | |||||||||
Indicated | 3,610,000 | 71 | 0.23 | |||||||||
Inferred | 518,000 | 79 | 0.30 |
1 | Calculated using a price of $ 9.00 per ounce of silver and $525 per ounce of gold. | |
2 | Mineral resource estimates for Alamo Dorado were prepared under the supervision of, or were reviewed by, Michael Steinmann, P.Geo., Senior Vice President Geology & Exploration, and Martin G. Wafforn, P.Eng., Vice-President of Mine Engineering as Qualified Persons as that term is defined in NI 43-101. See also information in this Annual Information Form under the heading “Mineral Reserve and Mineral Resource estimate information”. |
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Morococha Mineral Reserves1,2 | ||||||||||||||||||||
Grams of Silver | ||||||||||||||||||||
Reserve Category | Tonnes | per Tonne | % Copper | % Lead | % Zinc | |||||||||||||||
Proven | 4,073,423 | 155 | 0.36 | 1.49 | 3.84 | |||||||||||||||
Probable | 2,304,141 | 157 | 0.41 | 1.83 | 4.16 | |||||||||||||||
TOTAL | 6,377564 | 156 | 0.38 | 1.61 | 3.96 |
1 | Calculated using prices of $9.00 per ounce of silver, $2,100 per tonne of zinc, $1,000 per tonne of lead and $5,000 per tonne of copper. See also information in this Annual Information Form under the heading “Mineral Reserve and Mineral Resource estimate information”. | |
2 | Mineral reserve estimates for Morococha were prepared under the supervision of, or were reviewed by, Michael Steinmann, P.Geo., Senior Vice President Geology & Exploration, and Martin G. Wafforn, P.Eng., Vice-President of Mine Engineering, as Qualified Persons, as that term is defined in NI 43-101. |
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Morococha | ||||||||||||||||||||
Mineral Resource Estimate1, 2 | ||||||||||||||||||||
Grams of Silver | ||||||||||||||||||||
Resource Category | Tonnes | per Tonne | % Lead | % Copper | % Zinc | |||||||||||||||
Measured | 2,052,231 | 192 | 1.47 | 0.30 | 3.52 | |||||||||||||||
Indicated | 810,905 | 178 | 1.26 | 0.41 | 2.90 | |||||||||||||||
Inferred | 9,783,592 | 227 | 1.90 | 0.47 | 4.37 |
1 | These resources are in addition to mineral reserves. Calculated using prices of $9.00 per ounce of silver, $2,100 per tonne of zinc, $1,000 per tonne of lead and $5,000 per tonne of copper. See also information in this Annual Information Form under the heading “Mineral Reserve and Mineral Resource estimate information”. | |
2 | Mineral resource estimates for the Morococha mine were prepared under the supervision of, or were reviewed by, Michael Steinmann, P.Geo., Senior Vice President, Geology & Exploration, and Martin G. Wafforn, P.Eng., Vice-President of Mine Engineering, as Qualified Persons as that term is defined in NI 43-101. |
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Average Sales Price | ||||||||||||
Revenue1 | Tonnes | per Tonne | ||||||||||
Zinc Concentrate | $38.1 million | 41,968 | $ | 908 | ||||||||
Lead Concentrate | $14.9 million | 12,955 | $ | 1,150 | ||||||||
Copper Concentrate | $32.3 million | 7,209 | $ | 4,481 |
1 | Consists of arm’s length sales to third parties. |
Average Sales Price per | ||||||||||||
Revenue1 | Tonnes | Tonne | ||||||||||
Zinc Concentrate | $13.2 million | 39,354 | $ | 337 | ||||||||
Lead Concentrate | $ 9.9 million | 13,043 | $ | 758 | ||||||||
Copper Concentrate | $16.6 million | 4,581 | $ | 3,614 |
1 | Consists of arm’s length sales to third parties. |
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San Vicente Mineral Reserves1,2 | ||||||||||||
Reserve | Grams of Silver | |||||||||||
Category | Tonnes | per tonne | Zn (%) | |||||||||
Proven | 1,988,538 | 304 | 3.85 | |||||||||
Probable | 1,069,647 | 430 | 2.66 | |||||||||
TOTAL | 3,058,185 | 348 | 3.43 |
1 | Calculated using a price of $9.00 per ounce of silver and $2,100 per tonne of zinc. See also information in this Annual Information Form under the heading “Mineral Reserve and Mineral Resource estimate information”. | |
2 | Mineral reserve estimates for San Vicente were prepared under the supervision of, or were reviewed by, Michael Steinmann, P.Geo., Senior Vice President Geology & Exploration, who is a Qualified Persons as that term is defined in NI 43-101. |
San Vicente Mineral Resources1,2,3 | ||||||||||||
Class Reserve | Grams of Silver | |||||||||||
Category | Tonnes | per tonne | Zn (%) | |||||||||
Measured | 224,953 | 74 | 1.15 | |||||||||
Indicated | 445,244 | 294 | 3.67 | |||||||||
Inferred | 531,223 | 243 | 2.34 |
1 | These resources are in addition to San Vicente mineral reserves. | |
2 | Calculated using a price of $9.00 per ounce of silver and $2,100 per tonne of zinc. See also information in this Annual Information Form under the heading “Mineral Reserve and Mineral Resource estimate information”. | |
3 | Mineral resource estimates for San Vicente were prepared under the supervision of, or were reviewed by, Michael Steinmann, P.Geo., Senior Vice President Geology & Exploration, who is a Qualified Person as that term is defined in NI 43-101. |
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Average Sales Price | ||||||||||||
Revenue1 | Tonnes | per Tonne | ||||||||||
Zinc Concentrate | $4.7 million | 2,764 | $ | 1,700 | ||||||||
Copper Concentrate | $4.2 million | 625 | $ | 6,720 |
1 | Consists of sales to arm’s length third parties. |
Average Sales Price | ||||||||||||
Revenue1 | Tonnes | per Tonne | ||||||||||
Zinc Concentrate | $0.8 million | 732 | $ | 1,067 | ||||||||
Copper Concentrate | $0.4 million | 80 | $ | 5,029 |
1 | Consists of sales to arm’s length third parties. |
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Stockpile Mineral Reserves and Resources1 | ||||||||
Reserve or Resource Category | Tonnes | Grams of Silver per Tonne | ||||||
Probable Reserve | 294,359 | 292 | ||||||
Inferred Resource1,2 | 21,337,000 | 162 |
1 | Mineral resource estimates were prepared and calculated in 2002 by a third party contractor, Consultora Minera Anglo Peruana S.A., and are contained in a report prepared by that company entitled “Cubicacion de Recursos ‘Stockpiles’ de Piritas”. In preparing the report, Consultora Minera Anglo Peruana considered the results from 63 holes and 696 related samples, which were analyzed at the Huaron laboratory. The mineral reserve and resource estimates were prepared under the supervision of, or were reviewed by Michael Steinmann, P. Geo., Senior Vice-President Geology and Exploration, as Qualified Person as that term is defined in 43-101. | |
2 | Pan American’s interest is derived pursuant to an option agreement with Volcan. Volcan recently denied Pan American’s right to exercise its option over the Stockpiles and is disputing the validity and enforceability of the option. It is Pan American’s intention to seek arbitration to resolve this matter. The dispute does not affect the Company’s interest in the probable reserves at the Silver Stockpiles, which is governed by a separate agreement. |
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Reserve Category | Tonnes | Grams of Silver per Tonne | Grams of Gold per Tonne | |||||||||
Proven | 3,489,410 | 151 | 2.05 | |||||||||
Probable | 3,701,109 | 181 | 2.66 | |||||||||
TOTAL | 7,190,519 | 166 | 2.36 |
1 | Calculated as at December 31, 2006 using prices of $9.00 per ounce of silver, $525 per ounce of gold | |
2 | Mineral reserve estimates for Manantial Espejo were prepared under the supervision of, or were reviewed by Martin G. Wafforn, P.Eng., Vice President of Mine Engineering, who is a Qualified Person as that term is defined in NI 43-101. | |
3 | For all ores at Manantial Espejo the metallurgical recovery of the plant was assumed to be 93.57% for silver and 94.25% for gold. Payable amounts in the doré product of the mine are assumed to be 99.75% for silver and 98.87% for gold. The cut off grade applied for all open pit ores was 73 g/t. The nominal cutoff used to define underground Maria longhole stoping ore was 160gpt AgEq. The nominal cutoff used to define underground Maria and Melissa shrinkage stoping ore was 194gpt AgEq. The nominal cutoff used to define underground Concepcion cut and fill stoping ore was 210gpt AgEq. In all underground reserves, stoping blocks were visually defined using the cited cutoffs with a long section display of silver equivalent grade. However, once the stopes were defined, all recovered material inside of the stopes was defined as ore, regardless of grade. In all cases, the value ratio used to determine silver equivalency was 59.787. This ratio and the cutoffs were determined by the same method as in the feasibility study, using feasibility costs, payables, taxes, royalties, and metallurgical recoveries. However, all of the input values were revised to match the final results of the feasibility, with the exception of Gold and Silver sales prices, which were $525 and $9.00 respectively. |
Resource Category | Tonnes | Grams of Silver per Tonne | Grams of Gold per Tonne | |||||||||
Measured | 1,806,990 | 87 | 0.86 | |||||||||
Indicated | 2,287,968 | 94 | 0.84 | |||||||||
Inferred | 2,522,819 | 107 | 1.04 |
1 | Calculated as at December 31, 2006 using a price of $9.00 per ounce of silver and $525 per ounce of gold. | |
2 | Mineral resource estimates for Manantial Espejo were prepared under the supervision of, or were reviewed by, Michael Steinmann, P.Geo., Senior Vice President Geology & Exploration, who is a Qualified Person as that term is defined in NI 43-101. |
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• | Bottle Roll Whole Ore Cyanidation Leach | ||
• | Apparent Bulk Density | ||
• | Grinding | ||
• | Flotation | ||
• | Settling | ||
• | Filtration | ||
• | Gravity Concentration | ||
• | Electrowinning | ||
• | Thickening | ||
• | Hardness | ||
• | Abrasion | ||
• | Gravity Concentrate Leach | ||
• | Gravity Tail Leach |
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• | Grind size P80 = 105 µm | ||
• | Weight to concentrate= 21% | ||
• | Concentrate regrind size P80 = 53 µm | ||
• | Concentrate leach NaCN concentration => 2-2.5 g/L | ||
• | Concentrate leach pH = 10.5-11 | ||
• | Concentrate leach retention time => 144 hours | ||
• | Tails leach NaCN concentration => 1.5-2.0 g/L | ||
• | Tails leach pH = 10.5-11 | ||
• | Tails leach retention time => 76 hours |
NaCN (Sodium Cyanide) |
• | Karina-Unión 0.4-0.5 kg/t ore | ||
• | Maria 0.6-0.8 kg/t ore | ||
• | Melissa 0.7 kg/t ore | ||
• | Concepción 0.6 kg/ t ore |
CaO (Pebble Lime) |
• | Karina-Unión 0.7-0.8 kg/t ore | ||
• | Maria 0.6-0.8 kg/t ore | ||
• | Melissa 0.5 kg/t ore | ||
• | Concepción 0.5 kg/ t ore |
• | Silver recovery 93.6% | ||
• | Gold recovery 94.2% |
Au | Ag | |||||||
Mine Head Grades (gpt) | 2.82 | 189 | ||||||
Gravity Recovery (%) | 58.3 | 60.2 | ||||||
Concentrate Leach Extraction (%) | 99.2 | 99.4 | ||||||
Gravity Tail Leach Extraction (%) | 88.6 | 85.3 | ||||||
Overall Extraction (%) | 94.8 | 93.8 | ||||||
Soluble Loss (%) | 0.6 | 0.2 | ||||||
Overall Recovery (%) | 94.2 | 93.6 |
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Initial Capital | (k-$) | |||
Pre-Stripping/Develop | $ | 6,897 | ||
Open Pit Mine | $ | 8,984 | ||
Underground Mine | $ | 6,630 | ||
Plant | $ | 47,743 | ||
Infrastructure | $ | 17,274 | ||
Tailings | $ | 3,469 | ||
Owners Cost | $ | 10,017 | ||
Commissioning | $ | 2,671 | ||
EPCM – Administration | $ | 2,250 | ||
Spare Parts & Initial Fill | $ | 3,332 | ||
Working Capital | $ | 3,094 | ||
Sub-total | $ | 112,361 | ||
VAT Tax | $ | 18,070 | ||
TOTAL | $ | 130,431 | ||
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Property | Location | Historical Estimates | Tonnes | g/mt Ag | ||||||||||||
Hog Heaven1 | Montana | Unclassifed2 | 2,705,000 | 167 | ||||||||||||
Hog Heaven1 | Montana | Unclassified3 | 7,639,000 | 133 | ||||||||||||
Waterloo4 | California | Unclassified4 | 33,758,000 | 93 |
1 | The historical estimate for Hog Heaven was calculated by Gregory Hahn, Chief Geological Engineer for CoCa Mines Inc., a previous owner of the property, in a report titled “Hog Heaven Project Optimization Study” dated May 1989, prior to implementation of National Instrument 43-101, Standards of Disclosure for Mineral Projects (“NI 43-101”). The historical estimate was based on extensive diamond drilling, and was calculated using a silver price of $6.50 per ounce and a gold price of $400 per ounce (these were relevant prices at the time of the calculation). Michael Steinmann, P.Geo., Qualified Person for the Company, has reviewed the available data, including drill sections, surface maps, and additional supporting information sources, and believes that the historic calculation was conducted in a professional and competent manner and is relevant for the purposes of the Company’s decision to maintain its interest in this property. In the study, the historic estimate was sub-categorized as follows: |
Category | Tons | Oz/Ton Ag | Oz/Ton Au | |||||||||
Proven reserves | 2,981,690 | 4.88 | 0.018 | |||||||||
Probable & possible reserves | 904,200 | 10.40 | 0.020 | |||||||||
Heap leach ore | 316,100 | 1.56 | 0.014 | |||||||||
Possible resources | 4,500,000 | 2.41 | 0.020 | |||||||||
Inferred resources | 2,700,000 | 4.44 | 0.022 |
However, the Company has not completed the work necessary to verify the historical estimate. Accordingly, the Company is not treating the historical estimate as NI 43-101 compliant categories of mineral resources based on information prepared by or under the supervision of a Qualified Person. These historical estimates should not be relied upon. | ||
2 | The Company believes that the historical estimate category of “proven reserves” for Hog Heaven most closely corresponds to 2,705,000 tonnes in the NI 43-101 category of “indicated resources”. | |
3 | The Company believes that the historical estimate categories of “proven & possible reserves”, “heap leach ore stockpile”, “possible resources” and “inferred resources” most closely correspond to 7,639,000 tonnes in the NI 43-101 category of “inferred resources”. | |
4 | The historical estimate for Waterloo was initially calculated by Asarco Inc. in 1968. In September 1994 Robert J. Rodger, P.Eng., reviewed the Asarco reports and prepared a Technical Evaluation Report on the Waterloo property, prior to the implementation of NI 43-101. The Technical Evaluation Report confirmed that the historical estimate was based on reverse circulation drilling and underground sampling, and concluded the estimate was based on sound methodology. The historical estimate at Waterloo was calculated using a silver price of $5.00 per ounce (the relevant price at the time of the calculation). Michael Steinmann, P.Geo., Qualified Person for the Company, has reviewed the Technical Evaluation Report and believes the historic calculation was conducted in a professional and competent manner and is relevant for purposes of the Company’s decision to maintain its interest in the property. The Company believes that the historical estimate category of 37,235,000 tons (at 2.71 ounces per ton silver) of “measured and indicated reserves” most closely correspond to 33,758,000 tonnes in the NI 43-101 category of “indicated resource.” However, the Company has not completed the work necessary to verify the historical estimate. Accordingly, the Company is not treating the historical estimate as NI 43-101 compliant categories of resources based on information prepared by or under the supervision of a Qualified Person. These historical estimates should not be relied upon. | |
Tonne = 1 metric tonne (1,000 kg), Ton = 1 short ton (2,000 lbs). |
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Years Ended December 31 | ||||||||||||||
(in thousands of U.S. dollars) | ||||||||||||||
2006 | 2005 | 2004 | ||||||||||||
Acquisition | Morococha | — | 36,871 | |||||||||||
Manantial Espejo | 47,549 | |||||||||||||
47,549 | — | 36,871 | ||||||||||||
Development | Huaron | 5,266 | 4,969 | 5,543 | ||||||||||
Quiruvilca | 1,848 | 2,262 | 984 | |||||||||||
Morococha | 10,512 | 8,446 | — | |||||||||||
La Colorada | 7,994 | 5,453 | 8,474 | |||||||||||
Alamo Dorado | 51,331 | 35,548 | 1,676 | |||||||||||
Manantial Espejo | 22,758 | — | — | |||||||||||
San Vicente | 5,013 | 1,899 | — | |||||||||||
Other | 583 | — | — | |||||||||||
105,305 | 59,638 | 17,043 | ||||||||||||
Exploration | Huaron | 456 | — | — | ||||||||||
Quiruvilca | 434 | — | — | |||||||||||
Morococha | 1,477 | 691 | — | |||||||||||
La Colorada | 2,266 | — | — | |||||||||||
Alamo Dorado | 474 | 226 | — | |||||||||||
Manantial Espejo | 201 | 2,022 | 2,663 | |||||||||||
San Vicente | 1,610 | 116 | 482 | |||||||||||
Other | 1,122 | 642 | 612 | |||||||||||
8,040 | 3,697 | 3,757 | ||||||||||||
Investment | Waterloo | — | — | 57 | ||||||||||
Hog Heaven | — | — | 24 | |||||||||||
81 | ||||||||||||||
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• | levels of supply and demand; | ||
• | global or regional consumptive patterns; | ||
• | sales by government holders; | ||
• | metal stock levels maintained by producers and others; | ||
• | increased production due to new mine developments and improved mining and production methods; | ||
• | speculative activities; | ||
• | inventory carrying costs; | ||
• | availability and costs of metal substitutes; | ||
• | international economic and political conditions; | ||
• | interest rates; | ||
• | currency values; and | ||
• | inflation. |
• | terrorism and hostage taking; | ||
• | military repression; | ||
• | expropriation or nationalization without adequate compensation; | ||
• | difficulties enforcing judgments obtained in Canadian or United States courts against assets located outside of those jurisdictions; | ||
• | labour unrest; | ||
• | high rates of inflation; | ||
• | changes to royalty and tax regimes; | ||
• | extreme fluctuations in currency exchange rates; | ||
• | volatile local political and economic developments; and | ||
• | difficulty with understanding and complying with the regulatory and legal framework respecting the ownership and maintenance of mineral properties, mines and mining operations. |
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• | environmental protection; | ||
• | management and use of toxic substances and explosives; | ||
• | management of natural resources; | ||
• | exploration, development of mines, production, and post-closure reclamation; | ||
• | exports; | ||
• | price controls; | ||
• | taxation; | ||
• | mining royalties; | ||
• | labour standards and occupational health and safety, including mine safety; and | ||
• | historic and cultural preservation. |
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• | environmental hazards; | ||
• | industrial accidents and explosions; | ||
• | the encountering of unusual or unexpected geological formations; | ||
• | ground fall and cave-ins; | ||
• | flooding; | ||
• | earthquakes; and | ||
• | periodic interruptions due to inclement or hazardous weather conditions. |
• | environmental damage and liabilities; | ||
• | work stoppages and delayed production; | ||
• | increased production costs; | ||
• | damage to, or destruction of, mineral properties or production facilities; | ||
• | personal injury or death; | ||
• | asset write downs; | ||
• | monetary losses; and | ||
• | other liabilities. |
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2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
Revenue | $ | 255,447 | $ | 122,401 | $ | 94,825 | $ | 45,122 | $ | 45,093 | ||||||||||
Operating earnings/(loss) | 93,650 | (20,970 | ) | 940 | (6,452 | ) | (34,241 | ) | ||||||||||||
Net income/(loss) | 58,206 | (28,594 | ) | 15,214 | (6,794 | ) | (33,977 | ) | ||||||||||||
Net earnings/(loss) per share — basic | $ | 0.79 | $ | (0.43 | ) | $ | 0.06 | $ | (0.20 | ) | $ | (0.81 | ) | |||||||
— diluted | $ | 0.76 | $ | (0.43 | ) | $ | 0.06 | $ | (0.20 | ) | $ | (0.81 | ) | |||||||
Cash and short-term investments | 171,948 | 55,322 | 98,136 | 89,129 | 10,198 | |||||||||||||||
Total assets | 679,995 | 362,280 | 370,086 | 279,883 | 102,945 | |||||||||||||||
Total long-term financial liabilities | 102,488 | 77,592 | 68,279 | 73,137 | 27,222 | |||||||||||||||
Total shareholder’s equity | 512,026 | 257,322 | 275,516 | 184,098 | 55,492 |
2006 | 2005 | |||||||||||||||||||||||||||||||
Three | Three | Three | Three | Three | Three | Three | Three | |||||||||||||||||||||||||
months | months | months | months | months | months | months | months | |||||||||||||||||||||||||
ended | ended | ended | ended | ended | ended | ended | ended | |||||||||||||||||||||||||
March 31 | June 30 | Sept. 30 | Dec. 31 | March 31 | June 30 | Sept. 30 | Dec. 31 | |||||||||||||||||||||||||
(in thousands of U.S. Dollars, except per share amounts) | ||||||||||||||||||||||||||||||||
Revenue | $ | 45,743 | $ | 62,848 | $ | 64,268 | $ | 82,588 | $ | 29,086 | $ | 25,358 | $ | 30,086 | $ | 37,871 | ||||||||||||||||
Expenses: | ||||||||||||||||||||||||||||||||
Cost of sales | 24,297 | 27,613 | 30,813 | 41,885 | 22,380 | 18,417 | 21,337 | 25,514 | ||||||||||||||||||||||||
Depreciation and depletion | 3,471 | 4,175 | 4,234 | 5,640 | 3,218 | 2,415 | 3,788 | 3,674 | ||||||||||||||||||||||||
General & Admin. | 1,933 | 2,416 | 2,739 | 2,084 | 1,563 | 1,750 | 2,065 | 1,558 | ||||||||||||||||||||||||
Asset Retirement & Reclamation | 614 | 614 | 615 | 614 | 527 | 412 | 735 | 655 | ||||||||||||||||||||||||
Exploration | 1,234 | 637 | 2,267 | 3,902 | 1,424 | 885 | 394 | 994 | ||||||||||||||||||||||||
Investment income, net | (111 | ) | (880 | ) | (1,869 | ) | (1,802 | ) | (163 | ) | (899 | ) | (1,064 | ) | (29 | ) | ||||||||||||||||
(Gain)/loss on commodity contracts | 11,830 | 4,780 | 676 | 1,042 | 3,337 | (3,491 | ) | 2,198 | 6,152 | |||||||||||||||||||||||
Non-controlling interest | 1,223 | 952 | 40 | 1,562 | 81 | 152 | (79 | ) | 700 | |||||||||||||||||||||||
Write down on mining assets | — | — | — | — | — | — | — | 29,666 | ||||||||||||||||||||||||
Gain on sale of assets | — | — | — | 7,483 | — | — | — | (2,556 | ) | |||||||||||||||||||||||
Income (loss) before tax | 1,252 | 22,541 | 24,753 | 35,144 | (3,281 | ) | 5,717 | 712 | (28,457 | ) | ||||||||||||||||||||||
Income Tax Provision | (4,013 | ) | (7,577 | ) | (8,398 | ) | (5,496 | ) | (942 | ) | (746 | ) | (540 | ) | (1,057 | ) | ||||||||||||||||
Net income (loss) for the period | $ | (2,761 | ) | $ | 14,964 | $ | 16,355 | $ | 29,648 | $ | (4,223 | ) | $ | 4,971 | $ | 172 | $ | (29,514 | ) | |||||||||||||
Earnings (loss) per share — basic | $ | (0.04 | ) | $ | 0.21 | $ | 0.22 | $ | 0.39 | $ | (0.06 | ) | $ | 0.07 | $ | 0.00 | $ | (0.44 | ) | |||||||||||||
Earnings (loss) per share — diluted | $ | (0.04 | ) | $ | 0.20 | $ | 0.20 | $ | 0.40 | $ | (0.06 | ) | $ | 0.07 | $ | 0.00 | $ | (0.44 | ) |
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Name and Municipality | Principal Occupation During the | |||
of Residence | Position with the Company | Past Five Years | ||
Ross J. Beaty 4 Vancouver, B.C. Canada | Director and Chairman (director of the Company since September 30, 1988) | Chairman of the Company since April 1994; former CEO of the Company. | ||
Geoff A. Burns 4 North Vancouver, B.C. Canada | Director, President and Chief Executive Officer (director of the Company since July 1, 2003) | President of the Company since July 1, 2003, Chief Executive Officer of the Company since May 11, 2004; and Chief Operating Officer from July 1, 2003 to May 11, 2004; prior thereto Sr. Vice President and Chief Financial Officer of Coeur D’Alene Mines Corporation | ||
William A. Fleckenstein3, 4 Seattle, Washington, U.S.A. | Director of the Company sinceMay 9, 1997 | President of Fleckenstein Capital, Inc. (an investment counselling firm) from 1996 to present | ||
Michael Larson 4 Seattle, Washington, U.S.A. | Director of the Company since November 29, 1999 | Business Manager of Cascade Investment LLC (a private investment company) | ||
Michael J.J. Maloney1, 2, 3, 4 Seattle, Washington, U.S.A. | Director of the Company from Sept. 25, 1995 to Nov. 29, 1999 and then re-elected on March 2, 2000 | Private Investor | ||
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Name and Municipality | Principal Occupation During the | |||
of Residence | Position with the Company | Past Five Years | ||
Paul B. Sweeney1, 4 Surrey, B.C. Canada | Director of the Company since August 5, 1999 | Executive Vice-President – Corporate Development of Plutonic Power Corporation (hydroelectric company); former Vice President and Chief Financial Officer of Canico Resource Corp. (a mining company) from February 2002 to November 2005; prior thereto Chief Financial Officer of Manhattan Minerals Inc. (a mining company) from December 1999 to May 2001. | ||
John H. Wright4 Vancouver, B.C. Canada | Director of the Company since September 30, 1988 | Retired since July 2003; President and Chief Operating Officer of the Company from 1995 to 2003. | ||
John Willson1, 2, 4 Vancouver, B.C. Canada | Director since May 10, 2002 | Retired since April 2000; formerly President and Chief Executive Officer of Placer Dome Inc. | ||
A. Robert Doyle Vancouver, B.C. Canada | Chief Financial Officer | Chief Financial Officer of the Company since January 2004; and prior thereto Senior Vice President-Mining Finance and Metals Marketing with Standard Bank. | ||
Robert P. Pirooz Vancouver, B.C. Canada | General Counsel and Secretary | General Counsel and Secretary of the Company since January 2003; Prior thereto Group Vice President with the BCR Group of Companies. | ||
Steven Busby Vancouver, B.C. Canada | Senior Vice President, Project Development & Technical Services | Senior Vice President, Project Development & Technical Services of the Company since August 2003; Principal of S.L. Busby Consulting from September 2001 to August 2003 and Vice President Engineering and Director of Technical Services for Coeur D’Alene Mines Corporation from August 1998 to September 2001. | ||
Andrew Pooler Vancouver, B.C. Canada | Senior Vice President, Mining Operations | Senior Vice President, Mining Operations of the Company since September 8, 2003; Chief Operating Officer for Colville Tribal Enterprise Corp. from 2000 to 2003; Vice President Operations for Greenstone Resources Ltd. from 1998 to 2000; and prior thereto Vice President Operations for Amex Gold 1992 to 1998. | ||
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Name and Municipality | Principal Occupation During the | |||
of Residence | Position with the Company | Past Five Years | ||
Michael Steinmann North Vancouver, B.C. Canada | Senior Vice President, Geology & Exploration | Vice President Geology of the Company since March 2004; Manager of Geology for Glencore, South American operations and projects, 2000 to 2004. | ||
Wayne Vincent Blaine, WA, USA | Controller | Controller of the Company since April 2005, Prior thereto Controller for Coeur D’Alene Mines Corporation from 1998 to 2004. | ||
Martin Wafforn Coquitlam, B.C. Canada | Vice- President Mine Engineering | Vice- President Mine Engineering ,and prior thereto Director of Mine Engineering of the Company since February 2004; Prior thereto Manager of Mine Engineering with Barrick Gold Corporation and Homestake Mining Company |
1 | Member of the Audit Committee | |
2 | Member of the Compensation Committee | |
3 | Member of the Nominating and Governance Committee | |
4 | Member of the Health, Safety and Environment Committee |
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Month | High | Low | Volume | |||||||||
January | $ | 28.57 | $ | 21.33 | 4,155,400 | |||||||
February | $ | 29.14 | $ | 24.61 | 5,050,400 | |||||||
March | $ | 32.13 | $ | 25.13 | 5,485,700 | |||||||
April | $ | 30.50 | $ | 25.00 | 5,539,000 | |||||||
May | $ | 28.25 | $ | 20.00 | 7,900,500 | |||||||
June | $ | 21.93 | $ | 17.00 | 4,755,800 | |||||||
July | $ | 21.63 | $ | 18.17 | 2,025,300 | |||||||
August | $ | 25.40 | $ | 21.15 | 3,484,000 | |||||||
September | $ | 26.25 | $ | 20.10 | 2,671,600 | |||||||
October | $ | 25.18 | $ | 19.70 | 2,741,800 | |||||||
November | $ | 29.73 | $ | 24.76 | 4,984,000 | |||||||
December | $ | 29.99 | $ | 27.50 | 2,142,400 |
Month | High | Low | Volume | |||||||||
January | $ | 24.54 | $ | 18.42 | 35,092,400 | |||||||
February | $ | 25.48 | $ | 21.30 | 31,537,600 | |||||||
March | $ | 27.68 | $ | 21.58 | 42,388,200 | |||||||
April | $ | 26.45 | $ | 22.17 | 47,433200 | |||||||
May | $ | 25.38 | $ | 17.78 | 53,303,000 | |||||||
June | $ | 19.92 | $ | 15.49 | 36,041,600 | |||||||
July | $ | 19.04 | $ | 15.87 | 21,392,600 | |||||||
August | $ | 22.80 | $ | 18.59 | 27,230,400 | |||||||
September | $ | 23.70 | $ | 18.07 | 27,530,400 | |||||||
October | $ | 22.29 | $ | 17.50 | 24,261,200 | |||||||
November | $ | 26.06 | $ | 21.72 | 26,252,200 | |||||||
December | $ | 26.07 | $ | 23.90 | 19,486,300 |
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(the “Company”)
1. | The Committee shall be composed of at least three independent directors.1 | ||
2. | All members of the Committee shall, to the satisfaction of the Board, be Financially Literate and at least one member will be a Committee Financial Expert (“Financially Literate” and “Committee Financial Expert” are defined in the Definitions section of this Charter). | ||
3. | The members of the Committee shall be appointed by the Board, based on the recommendation of the Nominating and Governance Committee, to serve one year terms and are permitted to serve an unlimited number of consecutive terms. | ||
4. | The Committee shall appoint a chair (the “Chair”) from among its members who shall be an unrelated director. | ||
5. | The Committee will make every effort to meet at least four times per year and each member is entitled to request that an additional meeting be called, which will be held within one week of the request for such meeting. A quorum at meetings of the Committee shall be two members. | ||
6. | The external auditor may request the Chair to call a meeting of the Committee to consider any matter that the auditor believes should be brought to the attention of the directors or the shareholders of the Company. | ||
7. | The Committee will make every effort to ensure that minutes of the Committee meetings be distributed to all members of the Committee with copies to the chief financial officer and the external auditor. |
1 | In order to be considered “independent”, the following applies: | |
(a) | Pursuant to the Canadian Securities Administrators’ Multilateral Instrument 52-110 “Audit Committees”, a member of the Committee must not have a direct or indirect material relationship with the Company. A “material relationship” is a relationship which could, in the view of the Company’s Board, be reasonably expected to interfere with the exercise of a member’s independent judgment. | |
(b) | Pursuant to United States securities laws, a member of the Committee may not accept directly or indirectly any consulting, advisory, or other compensatory fee from the Company or any of its subsidiaries; nor be an affiliated person, as such term is defined in Rule 10A-3 of the Securities and Exchange Act of 1934, of the Company or any of its subsidiaries. |
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1. | the audited annual financial statements, and recommend to the Board they be approved for inclusion in the Company’s annual report; | ||
2. | interim financial statements, and the notes related thereto, and recommend to the Board they be approved for inclusion in the Company’s quarterly financial release; | ||
3. | other financial information included in the Company’s annual report; | ||
4. | quarterly and annual Management Discussion and Analysis; | ||
5. | the annual and interim earnings press releases before the Company publicly discloses the information contained therein; | ||
6. | any press release to be publicly disseminated which contains material information of a financial nature; and | ||
7. | the Annual Information Form. |
1. | The Committee will recommend to the Board the external auditor to be nominated for appointment by shareholders at each annual general meeting of the Company. | ||
2. | The Committee will review the performance of the external auditor and, where appropriate, recommend to the Board the removal of the external auditor. | ||
3. | The Committee will confirm the independence and effectiveness of the external auditor, which will require receipt from the external auditor of a formal written statement delineating all relationships between the auditor and the Company and any other factors that might affect the independence of the auditor. | ||
4. | The external Auditor will report directly to the Audit Committee. | ||
5. | The Committee will oversee the work of the external auditor generally, and review and report to the Board on the planning and results of external audit work, including: |
a. | the external auditor’s engagement letter or other reports of the auditor; |
A-2
b. | the reasonableness of the estimated fees and other compensation to be paid to the external auditor; | ||
c. | the form and content of the quarterly and annual audit report, which should include,inter alia: |
i. | a summary of the Company’s internal controls and procedures; | ||
ii. | any material issues raised in the most recent meeting of the Committee; |
d. | any other related audit, review or attestation services performed for the Company by the external auditors; and | ||
e. | an assessment of the external auditor’s performance. |
6. | The Committee will actively engage in dialogue with the external auditor with respect to any disclosed relationships or services that may affect the independence and objectivity of the external auditor and take, or recommend the Board take, appropriate actions to oversee the independence of the external auditor. | ||
7. | The Committee will review and pre-approve all non-audit services provided to the Company or its subsidiaries by the external auditor prior to the commencement of such services. Pre-approval of non-audit services will be satisfied only if the requirements as set out inNational Instrument 52-110 “Audit Committees”are satisfied. | ||
8. | The Committee will monitor the relationship between management and the external auditor and resolve any disagreements between them regarding financial reporting. |
1. | Obtain reasonable assurance from discussions with (and/or reports from) management, and reports from external and internal auditors that the Company’s financial and accounting systems are reliable and that the prescribed internal controls are operating effectively. | ||
2. | In consultation with the external auditor and the Disclosure Committee of the Board, review the integrity of the Company’s financial reporting process and the internal control structure. | ||
3. | Review the acceptability of the Company’s accounting principles and direct the auditors’ examinations to particular areas of question or concern, as required. | ||
4. | Request the auditors to undertake special examinations (e.g., review compliance with conflict of interest policies). | ||
5. | Together with management, review control weaknesses identified by the external and internal auditors. | ||
6. | Review the appointments of the chief financial officer and key financial executives. |
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1. | Review activities, organization structure and qualifications of the internal audit function. | ||
2. | Review the resources, budget, reporting relationships and planned activities of the internal audit function. | ||
3. | Review internal audit findings and determine that they are being properly followed up. | ||
4. | Annually review and recommend changes, if any, to the internal audit procedures. | ||
5. | Review with the Company’s legal counsel any legal matter that could have a significant impact on the Company’s financial statements. |
1. | The Committee will review and monitor the Company’s compliance with applicable legal and regulatory requirements, particularly those related to financial reporting and disclosure. | ||
2. | The Committee will review all related-party transactions. |
1. | the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters; and | ||
2. | the confidential, anonymous submission by employees of the Company and its subsidiaries of similar concerns. |
1. | The Committee shall have the authority to: |
a. | engage independent counsel and other advisors as it determines necessary to carry out its duties; | ||
b. | set and pay the compensation for any advisors employed by the Committee; and | ||
c. | communicate directly with the internal and external auditors. |
2. | The Committee shall have the power, authority and discretion delegated to it by the Board which shall not include the power to change the membership of or fill vacancies in the Committee. | ||
3. | A resolution approved in writing by the members of the Committee shall be valid and effective as if it had been passed at a duly called meeting. Such resolution shall be filed with the minutes of |
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the proceedings of the Committee and shall be effective on the date stated thereon or on the latest date stated in any counterpart. | |||
4. | The Board shall have the power at any time to revoke or override the authority given to or acts done by the Committee except as to acts done before such revocation or act of overriding and to terminate the appointment or change the membership of the Committee or fill vacancies in it as it shall see fit. | ||
5. | The Committee shall have unrestricted and unfettered access to all Company personnel and documents and shall be provided with the resources necessary to carry out its responsibilities. |
(a) | an understanding of generally accepted accounting principles and financial statements; | ||
(b) | the ability to assess the general application of such principles in connection with the accounting for estimates, accruals and reserves; | ||
(c) | experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and level of complexity of issues that can reasonably be expected to be raised in the Company’s financial statements, or experience actively supervising one or more persons engaged in such activities; | ||
(d) | an understanding of internal controls and procedures for financial reporting; and | ||
(e) | an understanding of audit committee functions; |
i) | education and experience as a principal financial officer, principal accounting officer, controller, public accountant or auditor or experience in one or more positions that involve the performance of similar functions; | ||
ii) | experience actively supervising a principal financial officer, principal accounting officer, controller, public accountant, auditor or person performing similar functions; or | ||
iii) | experience overseeing or assessing the performance of companies or public accountants with respect to the preparation, auditing or evaluation of financial statements; or other relevant experience. |
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1. | The“Overview of 2006”section provides a discussion of thesignificant events and transactionsthat occurred during the year and an analysis of Pan American’sfinancial results andoperating performance. A detailed analysis of each mine’s operating performance in 2006 and our forecasts for 2007 are also provided in this section, together with a reconciliation of ourconsolidated cash and total costs per ounce of silverto the cost of sales reported in our consolidated statement of operations. | |
2. | The“Liquidity and Capital Resources”section describes our current financial condition and discusses our expected capital and liquidity requirements for 2007 and beyond. | |
3. | The “Critical Accounting Policies and Estimates”section identifies those accounting estimates that have the largest impact on the financial presentation. | |
4. | The“Risks and Uncertainty”section discusses the risks associated with Pan American’s business and our risk management programs to mitigate such risks. | |
5. | The“Controls and Procedures”section describes the Company’s approach to internal controls and management’s assessment of the effectiveness of internal controls over financial reporting. | |
6. | Finally, in the“Outlook”section we discuss the status of Pan American’sdevelopment projects,and themetal marketsinto which we sell our production. |
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Quarters Ended(unaudited) | Years Ended | |||||||||||||||||||
2006 | March 31 | June 30 | Sept. 30 | Dec. 31 | Dec. 31 | |||||||||||||||
Sales | $ | 45,744 | $ | 62,848 | $ | 64,268 | $ | 82,588 | $ | 255,447 | ||||||||||
Mine operating earnings* | $ | 17,976 | $ | 31,060 | $ | 29,221 | $ | 35,063 | $ | 113,319 | ||||||||||
General & Administrative | $ | (1,933 | ) | $ | (2,416 | ) | $ | (2,739 | ) | $ | (2,084 | ) | $ | (9,172 | ) | |||||
Exploration | $ | (1,234 | ) | $ | (637 | ) | $ | (2,267 | ) | $ | (3,902 | ) | $ | (8,040 | ) | |||||
Loss on commodity and currency contracts | $ | (11,830 | ) | $ | (4,780 | ) | $ | (676 | ) | $ | (1,042 | ) | $ | (18,328 | ) | |||||
Net income (loss) for the period | $ | (2,761 | ) | $ | 14,964 | $ | 16,355 | $ | 29,648 | $ | 58,206 | |||||||||
Net income/(loss) per share — Basic | $ | (0.04 | ) | $ | 0.21 | $ | 0.22 | $ | 0.39 | $ | 0.79 | |||||||||
— Diluted | $ | (0.04 | ) | $ | 0.20 | $ | 0.20 | $ | 0.38 | $ | 0.76 | |||||||||
Other financial information: | ||||||||||||||||||||
Total Assets | $ | 679,995 | ||||||||||||||||||
Total long-term financial liabilities | $ | 102,488 | ||||||||||||||||||
Total Shareholders Equity | $ | 512,026 |
2005 | March 31 | June 30 | Sept. 30 | Dec. 31 | Dec. 31 | |||||||||||||||
Sales | $ | 29,086 | $ | 25,358 | $ | 30,086 | $ | 37,871 | $ | 122,401 | ||||||||||
Mine operating earnings* | $ | 3,488 | $ | 4,526 | $ | 4,961 | $ | 8,683 | $ | 21,658 | ||||||||||
General & Administrative | $ | (1,563 | ) | $ | (1,751 | ) | $ | (2,065 | ) | $ | (1,558 | ) | $ | (6,936 | ) | |||||
Exploration | $ | (1,424 | ) | $ | (885 | ) | $ | (394 | ) | $ | (994 | ) | $ | (3,697 | ) | |||||
Loss on commodity and currency contracts | $ | (3,337 | ) | $ | 3,491 | $ | (2,198 | ) | $ | (6,152 | ) | $ | (8,196 | ) | ||||||
Write-down of mining assets | $ | 0 | $ | 0 | $ | 0 | $ | (29,666 | ) | $ | (29,666 | ) | ||||||||
Net income/(loss) for the period | $ | (4,223 | ) | $ | 4,971 | $ | 172 | $ | (29,514 | ) | $ | (28,594 | ) | |||||||
Net income/(loss) per share — Basic | $ | (0.06 | ) | �� | $ | 0.07 | $ | 0.00 | $ | (0.44 | ) | $ | (0.43 | ) | ||||||
— Diluted | $ | (0.06 | ) | $ | 0.07 | $ | 0.00 | $ | (0.44 | ) | $ | (0.43 | ) | |||||||
Other financial information: | ||||||||||||||||||||
Total Assets | $ | 362,280 | ||||||||||||||||||
Total long-term financial liabilities | $ | 77,592 | ||||||||||||||||||
Total Shareholders Equity | $ | 257,322 |
2004 | March 31 | June 30 | Sept. 30 | Dec. 31 | Dec. 31 | |||||||||||||||
Sales | $ | 15,708 | $ | 21,179 | $ | 27,916 | $ | 30,022 | $ | 94,825 | ||||||||||
Mine operating earnings* | $ | 2,395 | $ | 2,640 | $ | 6,357 | $ | 3,402 | $ | 14,794 | ||||||||||
General & Administrative | $ | (1,243 | ) | $ | (1,886 | ) | $ | (1,452 | ) | $ | (1,660 | ) | $ | (6,241 | ) | |||||
Exploration | $ | (528 | ) | $ | (1,137 | ) | $ | (1,213 | ) | $ | (960 | ) | $ | (3,838 | ) | |||||
Loss on commodity and currency contracts | $ | (2,214 | ) | $ | 1,836 | $ | (3,438 | ) | $ | (2,801 | ) | $ | (6,617 | ) | ||||||
Net income (loss) for the period | $ | (2,023 | ) | $ | 3,352 | $ | 358 | $ | 13,527 | $ | 15,214 | |||||||||
Net income/(loss) per share — Basic | $ | (0.08 | ) | $ | (0.09 | ) | $ | 0.01 | $ | 0.21 | $ | 0.06 | ||||||||
— Diluted | $ | (0.08 | ) | $ | (0.09 | ) | $ | 0.01 | $ | 0.21 | $ | 0.06 | ||||||||
Other financial information: | ||||||||||||||||||||
Total Assets | $ | 370,086 | ||||||||||||||||||
Total long-term financial liabilities | $ | 68,279 | ||||||||||||||||||
Total Shareholders Equity | $ | 275,516 |
* | Mine operating earnings/(loss) is equal to sales less cost of sales less depreciation and amortization, which is considered to be substantially the same as gross margin. |
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2007 Forecast | 2006 | 2005 | 2004 | |||||||||||||
Production | ||||||||||||||||
Silver ounces | 17,610,000 | 13,018,354 | 12,529,417 | 11,182,030 | ||||||||||||
Zinc tonnes | 43,900 | 39,366 | 37,421 | 34,086 | ||||||||||||
Lead tonnes | 19,900 | 15,307 | 15,410 | 16,694 | ||||||||||||
Copper tonnes | 4,100 | 4,546 | 3,931 | 3,426 | ||||||||||||
Gold ounces | 19,400 | 6,438 | 5,777 | 4,072 | ||||||||||||
Costs | ||||||||||||||||
Cash cost per ounce | $ | 3.04 | $ | 1.89 | $ | 4.38 | $ | 4.17 | ||||||||
Non-cash cost per ounce | $ | 2.15 | $ | 1.49 | $ | 1.34 | $ | 1.14 | ||||||||
Total Cost per ounce | $ | 5.20 | $ | 3.38 | $ | 5.72 | $ | 5.30 |
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Morococha | 2007 Forecast | 2006 | 2005 | 2004 | ||||||||||||
Tonnes Milled | 581,243 | 577,201 | 467,521 | 212,172 | ||||||||||||
Silver ounces | 2,670,000 | 2,923,267 | 2,736,393 | 1,259,451 | ||||||||||||
Zinc tonnes | 19,400 | 18,115 | 15,689 | 5,902 | ||||||||||||
Lead tonnes | 8,900 | 5,722 | 5,875 | 2,186 | ||||||||||||
Copper tonnes | 1,400 | 1,546 | 925 | 538 | ||||||||||||
Tonnes Shipped | ||||||||||||||||
Zinc concentrate | 39,200 | 37,142 | 34,404 | 13,613 | ||||||||||||
Lead concentrate | 16,900 | 11,466 | 11,369 | 4,416 | ||||||||||||
Copper concentrate | 5,900 | 6,381 | 3,994 | 2,399 | ||||||||||||
Cash cost per ounce | $ | (3.16 | ) | $ | (3.71 | ) | $ | 2.61 | $ | 4.47 | ||||||
Non-cash cost per ounce | $ | 1.29 | $ | 1.75 | $ | 1.74 | $ | 1.69 | ||||||||
Total Cost per ounce | $ | (1.87 | ) | $ | (1.96 | ) | $ | 4.36 | $ | 6.16 |
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Huaron | 2007 Forecast | 2006 | 2005 | 2004 | ||||||||||||
Tonnes Milled | 719,000 | 693,285 | 639,849 | 635,845 | ||||||||||||
Silver ounces | 3,860,000 | 3,664,660 | 3,690,786 | 4,080,737 | ||||||||||||
Zinc tonnes | 12,700 | 11,735 | 11,701 | 15,041 | ||||||||||||
Lead tonnes | 7,900 | 6,858 | 6,774 | 10,569 | ||||||||||||
Copper tonnes | 1,300 | 1,603 | 1,689 | 1,754 | ||||||||||||
Gold ounces | 1,100 | 1,832 | 1,113 | 339 | ||||||||||||
Tonnes Shipped | ||||||||||||||||
Zinc concentrate | 25,546 | 24,975 | 23,110 | 34,314 | ||||||||||||
Lead concentrate | 15,642 | 17,002 | 16,162 | 20,253 | ||||||||||||
Copper concentrate | 6,052 | 6,716 | 7,470 | 7,030 | ||||||||||||
Cash cost per ounce | $ | 3.26 | $ | 2.41 | $ | 5.08 | $ | 3.79 | ||||||||
Non-cash cost per ounce | $ | 1.22 | $ | 1.30 | $ | 1.21 | $ | 1.26 | ||||||||
Total Cost per ounce | $ | 4.48 | $ | 3.71 | $ | 6.30 | $ | 5.05 |
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Quiruvilca | 2007 Forecast | 2006 | 2005 | 2004 | ||||||||||||
Tonnes Milled | 376,400 | 370,115 | 362,192 | 381,237 | ||||||||||||
Silver ounces | 1,900,000 | 2,105,475 | 2,234,565 | 2,530,869 | ||||||||||||
Zinc tonnes | 9,400 | 8,712 | 9,697 | 11,709 | ||||||||||||
Lead tonnes | 2,600 | 2,574 | 2,761 | 3,803 | ||||||||||||
Copper tonnes | 1,300 | 1,345 | 1,307 | 1,081 | ||||||||||||
Gold ounces | 1,200 | 1,106 | 1,289 | 1,305 | ||||||||||||
Tonnes Shipped | ||||||||||||||||
Zinc concentrate | 16,758 | 15,949 | 17,921 | 19,657 | ||||||||||||
Lead concentrate | 4,726 | 6,373 | 3,226 | 11,048 | ||||||||||||
Copper concentrate | 6,346 | 6,706 | 6,681 | 6,268 | ||||||||||||
Cash cost per ounce | $ | 2.21 | $ | (0.04 | ) | $ | 4.07 | $ | 3.75 | |||||||
Non-cash cost per ounce | $ | 1.65 | $ | 1.28 | $ | 0.56 | $ | 0.28 | ||||||||
Total Cost per ounce | $ | 3.86 | $ | 1.25 | $ | 4.63 | $ | 4.03 |
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La Colorada | 2007 Forecast | 2006 | 2005 | 2004 | ||||||||||||
Tonnes Milled | 291,622 | 233,743 | 211,854 | 171,155 | ||||||||||||
Silver ounces | 3,820,000 | 3,493,995 | 3,094,301 | 2,036,075 | ||||||||||||
Zinc tonnes | 600 | 0 | 0 | 122 | ||||||||||||
Lead tonnes | 500 | 153 | 0 | 136 | ||||||||||||
Gold ounces | 2,400 | 3,501 | 3,375 | 2,428 | ||||||||||||
Cash cost per ounce | $ | 6.82 | $ | 6.49 | $ | 5.63 | 6.26 | |||||||||
Non-cash cost per ounce | $ | 1.79 | $ | 1.80 | $ | 1.90 | 1.91 | |||||||||
Total Cost per ounce | $ | 8.61 | $ | 8.29 | $ | 7.52 | 8.17 |
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Alamo | 2007 Forecast | |||
Tonnes Milled | 1,384,000 | |||
Silver ounces | 4,250,000 | |||
Gold ounces | 14,700 | |||
Cash cost per ounce | $ | 3.27 | ||
Non-cash cost per ounce | $ | 4.16 | ||
Total Cost per ounce | $ | 7.43 |
Pyrite Stockpiles | 2007 Forecast | 2006 | 2005 | 2004 | ||||||||||||
Tonnes Sold | 60,000 | 58,016 | 61,499 | 79,451 | ||||||||||||
Silver ounces | 580,000 | 566,383 | 692,381 | 961,869 | ||||||||||||
Cash cost per ounce | $ | 2.51 | $ | 3.17 | $ | 1.82 | $ | 0.19 | ||||||||
Non-cash cost per ounce | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | ||||||||
Total Cost per ounce | $ | 2.51 | $ | 3.17 | $ | 1.82 | $ | 0.19 |
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San Vicente | 2007 Forecast | 2006 | 2005 | |||||||||
Tonnes Milled | 58,218 | 29,618 | 10,109 | |||||||||
Silver ounces | 530,000 | 264,573 | 80,991 | |||||||||
Zinc tonnes | 1,800 | 805 | 334 | |||||||||
Copper tonnes | 100 | 52 | 10 | |||||||||
Cash cost per ounce | $ | 3.77 | $ | 3.49 | $ | 1.24 | ||||||
Non-cash cost per ounce | $ | 0.54 | $ | 0.28 | $ | 0.00 | ||||||
Total Cost per ounce | $ | 4.30 | $ | 3.78 | $ | 1.24 |
15
Cash and Total Cost per Ounce Reconciliation | ||||||||||||||
(in thousands of US dollars) | 2006 | 2005 | 2004 | |||||||||||
Cost of Sales | $ | 124,608 | $ | 87,648 | $ | 69,162 | ||||||||
Add / (Subtract) | ||||||||||||||
Smelting, refining, & transportation charges | 69,394 | 37,736 | 26,948 | |||||||||||
By-product credits | (168,639 | ) | (78,025 | ) | (54,911 | ) | ||||||||
Mining royalties | 5,269 | 1,615 | 484 | |||||||||||
Worker’s participation | (9,250 | ) | (1,243 | ) | (998 | ) | ||||||||
Change in inventories | (2,016 | ) | 1,975 | (553 | ) | |||||||||
Other | 2,634 | 1,395 | 1,696 | |||||||||||
Minority interest adjustment | 586 | (1,018 | ) | (1,091 | ) | |||||||||
Cash Operating Costs | A | 22,587 | 50,082 | 40,737 | ||||||||||
Add / (Subtract) Depreciation & amortization | 17,520 | 13,095 | 10,869 | |||||||||||
Asset retirement & reclamation | 2,457 | 2,329 | 1,315 | |||||||||||
Change in inventories | (1,455 | ) | 943 | (56 | ) | |||||||||
Other | (125 | ) | (360 | ) | (612 | ) | ||||||||
Minority interest adjustment | (652 | ) | (632 | ) | (386 | ) | ||||||||
Total Costs | B | $ | 40,332 | $ | 65,458 | $ | 51,867 | |||||||
Payable Silver Production (‘000 of oz.) | C | 11,922 | 11,436 | 9,781 | ||||||||||
Cash Costs per ounce | A/C | $ | 1.89 | $ | 4.38 | $ | 4.17 | |||||||
Total Costs per ounce | B/C | $ | 3.38 | $ | 5.72 | $ | 5.30 |
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Payments due by period (in thousands of dollars) | ||||||||||||||||||||
Less than | 1 - 3 | 4 - 5 | After | |||||||||||||||||
Total | 1 year | years | years | 5 years | ||||||||||||||||
Capital Lease Obligations | $ | 748 | $ | 452 | $ | 296 | ||||||||||||||
Purchase Obligations(1) | 18,600 | 10,032 | 8,568 | |||||||||||||||||
Total contractual obligations | $ | 19,348 | $ | 10,484 | $ | 8,867 | ||||||||||||||
(1) | Contract commitments for construction materials for the Manantial Espejo project existing at December 31, 2006, which will be incurred during 2007 and 2008. |
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Sales by Metal: | Sales by Operation: |
Net Revenue | ||||||||||||||||||||||||||||||||||
Zinc Price | ||||||||||||||||||||||||||||||||||
$1,500 | $ 2,000 | $ 2,500 | $ 3,000 | $ 3,500 | $ 4,000 | $ 4,500 | ||||||||||||||||||||||||||||
$ | 7.00 | $ | 184,153 | $ | 195,515 | $ | 206,877 | $ | 218,239 | $ | 229,602 | $ | 240,964 | $ | 252,326 | |||||||||||||||||||
$ | 8.00 | $ | 201,123 | $ | 212,485 | $ | 223,847 | $ | 235,209 | $ | 246,572 | $ | 257,934 | $ | 269,296 | |||||||||||||||||||
$ | 9.00 | $ | 218,093 | $ | 229,455 | $ | 240,817 | $ | 252,179 | $ | 263,542 | $ | 274,904 | $ | 286,266 | |||||||||||||||||||
Silver Price | $ | 10.00 | $ | 235,063 | $ | 246,425 | $ | 257,787 | $ | 269,149 | $ | 280,512 | $ | 291,874 | $ | 303,236 | ||||||||||||||||||
$ | 11.00 | $ | 252,033 | $ | 263,395 | $ | 274,757 | $ | 286,120 | $ | 297,482 | $ | 308,844 | $ | 320,206 | |||||||||||||||||||
$ | 12.00 | $ | 269,003 | $ | 280,365 | $ | 291,727 | $ | 303,090 | $ | 314,452 | $ | 325,814 | $ | 337,176 | |||||||||||||||||||
$ | 13.00 | $ | 285,973 | $ | 297,335 | $ | 308,697 | $ | 320,060 | $ | 331,422 | $ | 342,784 | $ | 354,146 | |||||||||||||||||||
$ | 14.00 | $ | 302,943 | $ | 314,305 | $ | 325,667 | $ | 337,030 | $ | 348,392 | $ | 359,754 | $ | 371,116 | |||||||||||||||||||
21
Zinc Prices | ||||||||||||||||||||||||||||||||
$1,500 | $2,000 | $2,500 | $3,000 | $3,500 | $4,000 | $4,500 | ||||||||||||||||||||||||||
$ | 2,000 | $ | 5.57 | $ | 4.94 | $ | 4.31 | $ | 3.68 | $ | 3.06 | $ | 2.43 | $ | 1.80 | |||||||||||||||||
$ | 3,000 | $ | 5.35 | $ | 4.72 | $ | 4.10 | $ | 3.47 | $ | 2.84 | $ | 2.21 | $ | 1.59 | |||||||||||||||||
$ | 4,000 | $ | 5.14 | $ | 4.51 | $ | 3.88 | $ | 3.26 | $ | 2.63 | $ | 2.00 | $ | 1.37 | |||||||||||||||||
Copper Prices | $ | 5,000 | $ | 4.93 | $ | 4.30 | $ | 3.67 | $ | 3.04 | $ | 2.42 | $ | 1.79 | $ | 1.16 | ||||||||||||||||
$ | 6,000 | $ | 4.71 | $ | 4.09 | $ | 3.46 | $ | 2.83 | $ | 2.20 | $ | 1.58 | $ | 0.95 | |||||||||||||||||
$ | 7,000 | $ | 4.50 | $ | 3.88 | $ | 3.25 | $ | 2.62 | $ | 1.99 | $ | 1.36 | $ | 0.74 | |||||||||||||||||
$ | 8,000 | $ | 4.29 | $ | 3.66 | $ | 3.04 | $ | 2.41 | $ | 1.78 | $ | 1.15 | $ | 0.53 | |||||||||||||||||
22
23
(1) | pertain to the maintenance of records that accurately and fairly reflect, in reasonable detail, the transactions related to the acquisition and dispositions of Pan American’s assets |
(2) | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and receipts and expenditures are made only in accordance with authorizations of management and Pan American’s directors |
(3) | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of Pan American’s assets that could have a material effect on the financial statements. |
24
25
26
27
for the Year Ended December 31, 2006
Geoff Burns | A. Robert Doyle | |||||
President and Chief Executive Officer | Chief Financial Officer |
29
(i) | pertain to the maintenance of records that accurately and fairly reflect, in reasonable detail, the transactions related to and dispositions of Pan American’s assets |
(ii) | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and Pan American receipts and expenditures are made only in accordance with authorizations of management and Pan American’s directors |
(iii) | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of Pan American assets that could have a material effect on Pan American’s financial statements. |
Geoff Burns | A. Robert Doyle | |||
President and Chief Executive Officer | Chief Financial Officer |
30
Vancouver, Canada
March 21, 2007
Deloitte&Touche LLP | ||
2800-1055 Dunsmuir Street | ||
4 Bentall Centre | ||
P.O Box 49279 | ||
Vancouver BC V7X 1P4 | ||
Canada | ||
Tel:604-669-4466 | ||
Fax:604-685-0395 | ||
www.deloitte.ca |
Vancouver, Canada
March 21, 2007
Member of | ||
Deloitte Touche Tohmatsu |
Consolidated Balance Sheets
As at December 31
(In thousands of U.S. dollars)
2006 | 2005 | |||||||
Assets | ||||||||
Current | ||||||||
Cash | $ | 80,347 | $ | 29,291 | ||||
Short-term investments | 91,601 | 26,031 | ||||||
Accounts receivable, net of $Nil provision for doubtful accounts (2005 - $Nil) | 65,971 | 27,342 | ||||||
Inventories (Note 4) | 22,216 | 16,667 | ||||||
Unrealized gain on commodity and foreign currency contracts | 186 | 863 | ||||||
Future income taxes (Note 17) | 6,670 | — | ||||||
Prepaid expenses | 3,106 | 1,935 | ||||||
Total Current Assets | 270,097 | 102,129 | ||||||
Mineral property, plant and equipment, net (Note 5) | 112,993 | 99,815 | ||||||
Construction in progress (Note 6) | 104,037 | 34,306 | ||||||
Investment in non-producing properties (Note 6) | 188,107 | 123,259 | ||||||
Direct smelting ore (Note 4) | 1,831 | 2,236 | ||||||
Future tax asset | 500 | — | ||||||
Other assets (Note 7) | 2,430 | 535 | ||||||
Total Assets | $ | 679,995 | $ | 362,280 | ||||
Liabilities | ||||||||
Current | ||||||||
Accounts payable and accrued liabilities (Note 8) | $ | 40,095 | $ | 21,886 | ||||
Taxes payable | 23,187 | 447 | ||||||
Unrealized loss on commodity contracts | — | 4,810 | ||||||
Other current liabilities | 2,199 | 223 | ||||||
Total Current Liabilities | 65,481 | 27,366 | ||||||
Liability component of convertible debentures (Note 9) | — | 126 | ||||||
Provision for asset retirement obligation and reclamation (Note 10) | 44,309 | 39,378 | ||||||
Future income taxes (Note 17) | 48,499 | 32,396 | ||||||
Other liabilities and provisions | — | 1,894 | ||||||
Non-controlling interest | 9,680 | 3,798 | ||||||
Total Liabilities | 167,969 | 104,958 | ||||||
Shareholders’ Equity | ||||||||
Share capital (Note 11) | ||||||||
Authorized: 100,000,000 common shares of no par value Issued and outstanding: | ||||||||
December 31, 2006 – 76,195,426 common shares December 31, 2005 – 67,564,903 common shares | 584,769 | 388,830 | ||||||
Equity component of convertible debentures (Note 9) | — | 762 | ||||||
Additional paid in capital | 14,485 | 13,117 | ||||||
Deficit | (87,228 | ) | (145,387 | ) | ||||
Total Shareholders’ Equity | 512,026 | 257,322 | ||||||
Total Liabilities and Shareholders’ Equity | $ | 679,995 | $ | 362,280 | ||||
Ross J. Beaty, Director | Geoff A. Burns, Director |
34
Consolidated Statements of Operations
For the years ended December 31, 2006, 2005 and 2004
(in thousands of US Dollars, except for per share amounts)
2006 | 2005 | 2004 | ||||||||||
Sales | $ | 255,447 | $ | 122,401 | $ | 94,825 | ||||||
Cost of sales | 124,608 | 87,648 | 69,162 | |||||||||
Depreciation and amortization | 17,520 | 13,095 | 10,869 | |||||||||
Mine operating earnings | 113,319 | 21,658 | 14,794 | |||||||||
General and administrative | 9,172 | 6,936 | 6,241 | |||||||||
Exploration | 8,040 | 3,697 | 3,838 | |||||||||
Asset retirement and reclamation | 2,457 | 2,329 | 1,315 | |||||||||
Write-down of mining assets | — | 29,666 | 2,460 | |||||||||
Operating earnings (loss) | 93,650 | (20,970 | ) | 940 | ||||||||
Investment and other income | 6,034 | 2,885 | 2,472 | |||||||||
Foreign exchange loss | (799 | ) | (236 | ) | (134 | ) | ||||||
Interest and financing expenses | (573 | ) | (494 | ) | (898 | ) | ||||||
Premium on early retirement of debentures | — | — | (1,364 | ) | ||||||||
Loss on commodity and currency contracts (net of gains) | (18,328 | ) | (8,196 | ) | (6,617 | ) | ||||||
Gain on sale of assets | 7,483 | 2,556 | 23,747 | |||||||||
Net earnings (loss) before non-controlling interest and taxes | 87,467 | (24,455 | ) | 18,146 | ||||||||
Non-controlling interest | (3,777 | ) | (854 | ) | (179 | ) | ||||||
Income tax provision (Note 17) | (25,484 | ) | (3,285 | ) | (2,753 | ) | ||||||
Net income (loss) for the year | $ | 58,206 | $ | (28,594 | ) | $ | 15,214 | |||||
Attributable to common shareholders: | ||||||||||||
Net income (loss) for the year | $ | 58,206 | $ | (28,594 | ) | $ | 15,214 | |||||
Accretion of convertible debentures | (47 | ) | (129 | ) | (2,871 | ) | ||||||
Early conversion premium on convertible debentures | — | — | (8,464 | ) | ||||||||
Net income (loss) for the year attributable to common shareholders | $ | 58,159 | $ | (28,723 | ) | $ | 3,879 | |||||
Earnings (loss) per share (Note 12) | ||||||||||||
Basic income (loss) per share | $ | 0.79 | $ | (0.43 | ) | $ | 0.06 | |||||
Diluted income (loss) per share | $ | 0.76 | $ | (0.43 | ) | $ | 0.06 | |||||
Weighted average shares outstanding: | ||||||||||||
Basic | 73,628 | 67,042 | 63,169 | |||||||||
Diluted | 76,152 | 67,042 | 65,268 |
35
Consolidated Statements of Shareholders’ Equity
For the year ended December 31, 2006, 2005, 2004
(in thousands of US dollars, except for amounts of shares)
Additional | ||||||||||||||||||||||||
Common Shares | Convertible | Paid in | ||||||||||||||||||||||
Shares | Amount | Debentures | Capital | Deficit | Total | |||||||||||||||||||
Balance, December 31, 2003 | 53,009,851 | $ | 225,154 | $ | 66,735 | $ | 12,752 | $ | (120,543 | ) | $ | 184,098 | ||||||||||||
Issued on the exercise of stock options | 785,095 | 9,437 | — | (3,965 | ) | — | 5,472 | |||||||||||||||||
Issued on the exercise of share purchase warrants | 544,775 | 1,965 | — | — | — | 1,965 | ||||||||||||||||||
Stock-based compensation on stock options | — | — | — | 2,189 | — | 2,189 | ||||||||||||||||||
Issued for cash, net of issue costs | 3,333,333 | 54,820 | — | — | — | 54,820 | ||||||||||||||||||
Accretion of convertible debentures | — | — | 2,871 | — | (2,871 | ) | — | |||||||||||||||||
Issued on the conversion of convertible debentures | 9,145,700 | 88,950 | (68,973 | ) | — | (8,464 | ) | 11,513 | ||||||||||||||||
Issued as compensation | 16,624 | 245 | — | — | — | 245 | ||||||||||||||||||
Net income for the year | — | — | — | — | 15,214 | 15,214 | ||||||||||||||||||
Balance, December 31, 2004 | 66,835,378 | 380,571 | 633 | 10,976 | (116,664 | ) | 275,516 | |||||||||||||||||
Issued on the exercise of stock options | 693,933 | 7,751 | — | (1,403 | ) | — | 6,348 | |||||||||||||||||
Issued on the exercise of share purchase warrants | 1,320 | 18 | — | (5 | ) | — | 13 | |||||||||||||||||
Stock-based compensation on stock options | — | — | — | 1,460 | — | 1,460 | ||||||||||||||||||
Warrants issued to settle obligation | — | — | — | 2,100 | — | 2,100 | ||||||||||||||||||
Accretion of convertible debentures | — | — | 129 | — | (129 | ) | — | |||||||||||||||||
Other | — | — | — | (11 | ) | — | (11 | ) | ||||||||||||||||
Issued as compensation | 34,272 | 490 | — | — | — | 490 | ||||||||||||||||||
Net loss for the year | — | — | — | — | (28,594 | ) | (28,594 | ) | ||||||||||||||||
Balance, December 31, 2005 | 67,564,903 | 388,830 | 762 | 13,117 | (145,387 | ) | 257,322 | |||||||||||||||||
Issued on the exercise of stock options | 275,358 | 4,477 | — | (1,120 | ) | — | 3,357 | |||||||||||||||||
Issued on the exercise of share purchase warrants | 23,970 | 310 | — | (56 | ) | — | 254 | |||||||||||||||||
Issued on the conversion of convertible debentures | 73,557 | 881 | (793 | ) | — | — | 88 | |||||||||||||||||
Issued as compensation | 26,231 | 559 | — | 70 | — | 629 | ||||||||||||||||||
Issued to acquire mineral interests | 1,950,000 | 47,381 | — | — | — | 47,381 | ||||||||||||||||||
Issued for cash, net of issue costs | 6,281,407 | 142,331 | — | — | — | 142,331 | ||||||||||||||||||
Accretion of convertible debentures | — | — | 47 | — | (47 | ) | — | |||||||||||||||||
Stock-based compensation on options granted | — | — | — | 2,474 | — | 2,474 | ||||||||||||||||||
Repurchase convertible debentures | — | — | (16 | ) | — | — | (16 | ) | ||||||||||||||||
Net income for the year | — | — | — | — | 58,206 | 58,206 | ||||||||||||||||||
Balance, December 31, 2006 | 76,195,426 | $ | 584,769 | $ | — | $ | 14,485 | $ | (87,228 | ) | $ | 512,026 | ||||||||||||
36
Consolidated Statement of Cash Flows
(in thousands of U.S. dollars)
2006 | 2005 | 2004 | ||||||||||
Operating activities | ||||||||||||
Net income(loss) for the year | $ | 58,206 | $ | (28,594 | ) | $ | 15,214 | |||||
Reclamation expenditures | (1,172 | ) | (1,528 | ) | (1,347 | ) | ||||||
Items not affecting cash; | ||||||||||||
Depreciation and amortization | 17,520 | 13,095 | 10,869 | |||||||||
Future income taxes | (3,343 | ) | (816 | ) | 31 | |||||||
Asset retirement and reclamation accretion | 2,457 | 2,329 | 1,315 | |||||||||
Non-controlling interest | 3,777 | 854 | 179 | |||||||||
Debt settlement expenses | — | — | 1,208 | |||||||||
Write-down of mining assets | — | 29,666 | 2,460 | |||||||||
Interest accretion on the convertible debentures | 8 | 2 | 366 | |||||||||
Stock-based compensation | 2,943 | 1,950 | 2,189 | |||||||||
Unrealized (gain) loss on commodity and currency contracts | (4,125 | ) | (268 | ) | 4,215 | |||||||
Gain on sale of assets | (7,483 | ) | (2,556 | ) | (23,747 | ) | ||||||
Changes in non-cash operating working capital (Note 13) | (2,889 | ) | (3,371 | ) | (9,819 | ) | ||||||
Cash generated by operations | 65,899 | 10,763 | 3,133 | |||||||||
Investing activities | ||||||||||||
Mining property, plant and equipment expenditures | (96,999 | ) | (59,638 | ) | (17,043 | ) | ||||||
Acquisition of net assets of subsidiary, net of cash (Note 3) | (168 | ) | — | (36,214 | ) | |||||||
Proceeds from sale of assets (Note 6) | 2,000 | 50 | 23,747 | |||||||||
Proceeds from/(purchase of) short-term investments | (65,570 | ) | 44,100 | 5,147 | ||||||||
Cash used in investing activities | (160,737 | ) | (15,488 | ) | (24,363 | ) | ||||||
Financing activities | ||||||||||||
Proceeds from issuance of common shares | 153,611 | 6,361 | 62,437 | |||||||||
Share issue costs | (7,669 | ) | — | (180 | ) | |||||||
Convertible debentures payments | (48 | ) | (38 | ) | (13,565 | ) | ||||||
Repayment of short-term loans | — | (652 | ) | (13,308 | ) | |||||||
Cash generated by financing activities | 145,894 | 5,671 | 35,384 | |||||||||
Increase in cash during the year | 51,056 | 946 | 14,154 | |||||||||
Cash, beginning of year | 29,291 | 28,345 | 14,191 | |||||||||
Cash, end of year | $ | 80,347 | $ | 29,291 | $ | 28,345 | ||||||
Supplemental Cash Flow Information (Note 14) | ||||||||||||
Interest paid | $ | 48 | $ | 38 | $ | 2,663 | ||||||
Taxes paid | $ | 7,946 | $ | 5,249 | $ | 1,249 | ||||||
37
Notes to Consolidated Financial Statements
December 31, 2006, 2005, 2004
(Tabular amounts are in thousands except per share amounts)
Operations and | ||||||||||
Ownership | Development Projects | |||||||||
Subsidiary | Location | interest | Status | Owned | ||||||
Pan American Silver S.A. Mina Quiruvilca(2) | Peru | 99.9 | % | Consolidated | Quiruvilca Mine/Huaron Mine | |||||
Compañía Minera Argentum S.A. | Peru | 88.5 | % | Consolidated | Morococha Mine | |||||
Plata Panamericana S.A. de C.V. | Mexico | 100 | % | Consolidated | La Colorada Mine | |||||
Minera Corner Bay S.A. | Mexico | 100 | % | Consolidated | Alamo Dorado Project | |||||
Compañía Minera PAS Bolivia S.A. | Bolivia | 55 | % | Consolidated | San Vicente Project | |||||
Compañía Minera Triton S.A. | Argentina | 100 | %(1) | Consolidated | Manantial Espejo Project |
(1) | The Company acquired the remaining 50% interest from the joint venture partner on April 10, 2006. | |
(2) | In January 2006, Pan American Silver S.A.C. merged with Compañia Minera Huaron S.A. to form Pan American Silver S.A. Mina Quiruvilca. |
38
Notes to Consolidated Financial Statements
December 31, 2006, 2005, 2004
(Tabular amounts are in thousands except per share amounts)
39
Notes to Consolidated Financial Statements
December 31, 2006, 2005, 2004
(Tabular amounts are in thousands except per share amounts)
40
Notes to Consolidated Financial Statements
December 31, 2006, 2005, 2004
(Tabular amounts are in thousands except per share amounts)
41
Notes to Consolidated Financial Statements
December 31, 2006, 2005, 2004
(Tabular amounts are in thousands except per share amounts)
• | As of January 1, 2007, the Company is required to adopt the Canadian Institute of Chartered Accountants (“CICA”) Section 1530“Comprehensive Income”,Section 3251“Equity”, Section 3855“Financial Instruments – Recognition and Measurement”, and Section 3865“Hedges”, which were issued in January 2005. Under the new standards, comprehensive income has been introduced which will provide for certain gains and losses, including foreign currency translation adjustments and other amounts arising from changes in fair value, to be temporarily recorded outside of net earnings. In addition, all financial instruments, including derivatives, are to be included in the Company’s Consolidated Balance Sheet and measured, in most cases, at fair values, and requirements for hedge accounting have been further clarified. | ||
The Company does not expect the Financial Instruments and Hedges standards to have a material impact on its Consolidated Financial Statements as the Company currently uses mark-to market accounting for derivative instruments that do not qualify or are not designated as hedges. As a result of these new standards, the Company’s financial statement presentation will change to be similar to the presentation under the Unites States General Accepted Accounting Principles and Reporting included in Note 20. | |||
• | As of January 1, 2007, the Company is required to adopt revised CICA Section 1506“Accounting Changes”, which provides expanded disclosures for changes in accounting policies, accounting estimates and corrections of errors. Under the new standard, |
42
Notes to Consolidated Financial Statements
December 31, 2006, 2005, 2004
(Tabular amounts are in thousands except per share amounts)
accounting changes should be applied retrospectively unless otherwise permitted or where impracticable to determine. As well, voluntary changes in accounting policy are made only when required by a primary source of GAAP or the change results in more relevant and reliable information. The Company does not expect application of this revised standard to have a material impact on its Consolidated Financial Statements. | |||
• | As of January 2008, the Company will be required to adopt two new CICA standards, Section 3862“Financial Instruments – Disclosures”and Section 3863“Financial Instruments – Presentation”, which will replace Section 3861“Financial Instruments – Disclosure and Presentation”. The new disclosure standard increases the emphasis on the risks associated with both recognized and unrecognized financial instruments and how those risks are managed. The new presentation standard carries forward the former presentation requirements. The new financial instruments presentation and disclosure requirements were issued in December 2006 and the Company is assessing the impact on its Consolidated Financial Statements. | ||
• | As of January 1, 2008, the Company will be required to adopt CICA Section 1535“Capital Disclosures”, which will require companies to disclose their objectives, policies and processes for managing capital. In addition, disclosures are to include whether companies have complied with externally imposed capital requirements. The new capital disclosure requirements were issued in December 2006 and the Company is assessing the impact on its Consolidated Financial Statements. | ||
• | In January 2006, CICA Accounting Standards Board (“AcSB”) adopted a strategic plan for the direction of accounting standards in Canada. As part of that plan, accounting standards in Canada for public companies are expected to converge with International Financial Reporting Standards (“IFRS”) by the end of 2011. The Company continues to monitor and assess the impact of convergence of Canadian GAAP and IFRS. |
43
Notes to Consolidated Financial Statements
December 31, 2006, 2005, 2004
(Tabular amounts are in thousands except per share amounts)
Current assets, including cash of $45 | $ | 71 | ||
Plant and equipment | 1,711 | |||
Mineral properties | 57,201 | |||
Other | 1,176 | |||
60,159 | ||||
Less: | ||||
Accounts payable and accrued liabilities | (99 | ) | ||
Future income tax liability | (12,511 | ) | ||
Total purchase price | $ | 47,549 | ||
Consideration paid is as follows: | ||||
Issue of Shares | $ | 47,381 | ||
Acquisition costs | 168 | |||
$ | 47,549 | |||
December 31, | ||||||||||
2006 | 2005 | |||||||||
Concentrate inventory | $ | 3,558 | $ | 6,421 | ||||||
Direct smelting ore | 2,278 | 2,687 | ||||||||
Stockpile ore | 3,760 | 497 | ||||||||
Dore and finished inventory | 3,352 | 3,101 | ||||||||
Materials and supplies | 11,099 | 6,197 | ||||||||
24,047 | 18,903 | |||||||||
Less: non-current direct smelting ore | (1,831 | ) | (2,236 | ) | ||||||
$ | 22,216 | $ | 16,667 | |||||||
44
Notes to Consolidated Financial Statements
December 31, 2006, 2005, 2004
(Tabular amounts are in thousands except per share amounts)
December 31, 2006 | December 31, 2005 | |||||||||||||||||||||||
Accumulated | Net Book | Accumulated | Net Book | |||||||||||||||||||||
Cost | Amortization | Value | Cost | Amortization | Value | |||||||||||||||||||
Morococha mine, Peru | $ | 46,631 | $ | (9,778 | ) | $ | 36,853 | $ | 34,137 | $ | (6,414 | ) | $ | 27,723 | ||||||||||
La Colorada mine, Mexico | 34,618 | (10,982 | ) | 23,636 | 23,529 | — | 23,529 | |||||||||||||||||
Huaron mine, Peru | 59,679 | (18,951 | ) | 40,728 | 59,302 | (19,537 | ) | 39,765 | ||||||||||||||||
Quiruvilca mine, Peru | 20,448 | (15,524 | ) | 4,924 | 20,558 | (14,460 | ) | 6,098 | ||||||||||||||||
Alamo Dorado | 1,356 | (133 | ) | 1,223 | — | — | — | |||||||||||||||||
San Vicente mine, Bolivia | 3,717 | (328 | ) | 3,389 | 363 | (56 | ) | 307 | ||||||||||||||||
Manantial Espejo | 2,953 | (1,284 | ) | 1,669 | — | — | — | |||||||||||||||||
Other | 1,179 | (608 | ) | 571 | 3,213 | (820 | ) | 2,393 | ||||||||||||||||
TOTAL | $ | 170,581 | $ | (57,588 | ) | $ | 112,993 | $ | 141,102 | $ | (41,287 | ) | $ | 99,815 | ||||||||||
45
Notes to Consolidated Financial Statements
December 31, 2006, 2005, 2004
(Tabular amounts are in thousands except per share amounts)
2006 | 2005 | |||||||
Plant and equipment | $ | 85,177 | $ | 64,935 | ||||
Mineral properties and mine development | 83,549 | 76,167 | ||||||
Capital lease (equipment) | 1,855 | — | ||||||
170,581 | 141,102 | |||||||
Less: Accumulated depletion and depreciation | (57,471 | ) | (41,287 | ) | ||||
Depreciation capitalized leases | (117 | ) | — | |||||
$ | 112,993 | $ | 99,815 | |||||
December 31, 2006 | December 31, 2005 | |||||||||
Net Book Value | Net Book Value | |||||||||
Alamo Dorado, Mexico | $ | 80,546 | $ | 34,306 | ||||||
Manantial Espejo, Argentina | 23,491 | — | ||||||||
TOTAL | $ | 104,037 | $ | 34,306 | ||||||
46
Notes to Consolidated Financial Statements
December 31, 2006, 2005, 2004
(Tabular amounts are in thousands except per share amounts)
December 31, 2006 | December 31, 2005 | |||||||||
Net Book Value | Net Book Value | |||||||||
Morococha, Peru | $ | 28,107 | $ | 31,052 | ||||||
Manantial Espejo, Argentina | 61,110 | 1,979 | ||||||||
Alamo Dorado, Mexico | 91,404 | 84,543 | ||||||||
San Vicente, Bolivia | 6,077 | 4,454 | ||||||||
Other | 1,409 | 1,231 | ||||||||
TOTAL | $ | 188,107 | $ | 123,259 | ||||||
47
Notes to Consolidated Financial Statements
December 31, 2006, 2005, 2004
(Tabular amounts are in thousands except per share amounts)
Average | Amount | |||
Price of Silver | of annual payment | |||
$5.50 - $6.00 | $ | 500,000 | ||
$6.00 - $7.00 | $ | 1,000,000 | ||
$7.00 - $8.00 | $ | 2,000,000 | ||
$8.00 - $9.00 | $ | 5,000,000 | ||
$9.00 - $10.00 | $ | 6,000,000 | ||
$10.00 - and above | $ | 8,000,000 |
2006 | 2005 | |||||||
Long-term receivable | $ | 1,905 | $ | — | ||||
Reclamation bonds | 121 | 131 | ||||||
Other | 404 | 404 | ||||||
$ | 2,430 | $ | 535 | |||||
48
Notes to Consolidated Financial Statements
December 31, 2006, 2005, 2004
(Tabular amounts are in thousands except per share amounts)
2006 | 2005 | |||||||
Trade accounts payable | $ | 18,887 | $ | 15,962 | ||||
Payroll and related benefits | 12,818 | 3,258 | ||||||
Royalties | 442 | 123 | ||||||
Capital leases | 703 | — | ||||||
Provisions and other liabilities | 7,245 | 2,543 | ||||||
$ | 40,095 | $ | 21,886 | |||||
49
Notes to Consolidated Financial Statements
December 31, 2006, 2005, 2004
(Tabular amounts are in thousands except per share amounts)
Balance at December 31, 2003 | $ | 21,192 | ||
Reclamation expenditures | (1,347 | ) | ||
Accretion expense | 1,315 | |||
Revisions in estimated cash flows | 2,234 | |||
Amount arising from business acquisition | 8,618 | |||
Balance at December 31, 2004 | 32,012 | |||
Reclamation expenditures | (1,528 | ) | ||
Accretion expense | 2,329 | |||
Alamo Dorado Liability at December 31, 2005 | 730 | |||
Revisions in estimated cash flows | 5,835 | |||
Balance at December 31, 2005 | 39,378 | |||
Reclamation expenditures | (1,172 | ) | ||
Accretion expense | 2,457 | |||
Revisions in estimated cash flows | 3,646 | |||
Balance at December 31, 2006 | $ | 44,309 | ||
50
Notes to Consolidated Financial Statements
December 31, 2006, 2005, 2004
(Tabular amounts are in thousands except per share amounts)
Incentive | Share Purchase | |||||||||||||||||||
Stock Option Plan | Warrants | Total | ||||||||||||||||||
Shares | Price | Shares | Price | Shares | ||||||||||||||||
Year ended December 31, 2003 | 1,979,705 | $ | 6.69 | 4,354,496 | $ | 8.56 | 6,334,201 | |||||||||||||
Granted | 570,000 | $ | 12.00-18.73 | — | — | 570,000 | ||||||||||||||
Exercised | (785,095 | ) | $ | 4.16-13.73 | (544,774 | ) | $ | 3.89-9.98 | (1,329,869 | ) | ||||||||||
Expired | (1,036 | ) | $ | 7.70-9.98 | — | — | (1,036 | ) | ||||||||||||
Cancelled | (80,000 | ) | $ | 8.14 | — | — | (80,000 | ) | ||||||||||||
Year ended December 31, 2004 | 1,683,574 | $ | 9.90 | 3,809,722 | $ | 9.98 | 5,493,296 | |||||||||||||
Granted | 87,000 | 16.12 | 255,781 | 16.91 | 342,781 | |||||||||||||||
Exercised | (693,933 | ) | 9.15 | (1,320 | ) | 9.98 | (695,253 | ) | ||||||||||||
Cancelled | (26,000 | ) | 18.16 | — | — | (26,000 | ) | |||||||||||||
Year ended December 31, 2005 | 1,050,641 | $ | 10.88 | 4,064,183 | $ | 10.71 | 5,114,824 | |||||||||||||
Granted | 191,332 | $ | 19.23 | — | $ | — | 191,332 | |||||||||||||
Exercised | (275,358 | ) | $ | 12.19 | (23,970 | ) | $ | 10.63 | (299,328 | ) | ||||||||||
Cancelled | (47,200 | ) | $ | 20.64 | — | — | (47,200 | ) | ||||||||||||
Year ended December 31, 2006 | 919,415 | $ | 12.11 | 4,040,213 | $ | 10.84 | 4,959,628 | |||||||||||||
51
Notes to Consolidated Financial Statements
December 31, 2006, 2005, 2004
(Tabular amounts are in thousands except per share amounts)
Options Outstanding | Options Exercisable | |||||||||||||||||||
Number | Weighted Average | Weighted | Number | Weighted | ||||||||||||||||
Outstanding as | Remaining | Average | Exercisable as | Average | ||||||||||||||||
Range of | at December | Contractual Life | Exercise | at December 31, | Exercise | |||||||||||||||
Exercise Prices | 31, 2006 | (months) | Price | 2006 | Price | |||||||||||||||
$4.29 | 175,000 | 46.49 | $ | 4.29 | 175,000 | $ | 4.29 | |||||||||||||
$7.64 - $10.30 | 291,083 | 12.63 | 8.49 | 301,083 | 8.49 | |||||||||||||||
$12.38 - $18.05 | 262,200 | 30.42 | 16.03 | 146,203 | 16.25 | |||||||||||||||
$18.91 - $22.97 | 191,132 | 48.83 | 19.39 | 11,438 | 22.73 | |||||||||||||||
919,415 | 31.67 | $ | 12.11 | 633,724 | $ | 9.38 | ||||||||||||||
2006 | 2005 | 2004 | ||||||||||||||||||||||||||||||||||
Income | Shares | Per-Share | Income | Shares | Per-Share | Income | Shares | Per-Share | ||||||||||||||||||||||||||||
For the year ended December 31 | (Numerator) | (Denominator) | Amount | (Numerator) | (Denominator) | Amount | (Numerator) | (Denominator) | Amount | |||||||||||||||||||||||||||
Net Income (loss) attributable to Common Shareholders | $ | 58,159 | $ | (28,723 | ) | $ | 3,879 | |||||||||||||||||||||||||||||
Basic EPS | 58,159 | 73,627,847 | $ | 0.79 | (28,723 | ) | 67,041,967 | $ | (0.43 | ) | 3,879 | 63,168,995 | $ | 0.06 | ||||||||||||||||||||||
Effect of Dilutive Securities: | ||||||||||||||||||||||||||||||||||||
Convertible Debentures | 8 | 22,714 | 2 | — | — | — | ||||||||||||||||||||||||||||||
Stock Options | — | 524,989 | — | — | — | 666,746 | ||||||||||||||||||||||||||||||
Warrants | — | 1,976,175 | — | — | — | 1,432,396 | ||||||||||||||||||||||||||||||
Diluted EPS | 58,167 | 76,151,725 | $ | 0.76 | $ | (28,721 | ) | 67,041,967 | $ | (0.43 | ) | $ | 3,879 | 65,268,137 | $ | 0.06 | ||||||||||||||||||||
52
Notes to Consolidated Financial Statements
December 31, 2006, 2005, 2004
(Tabular amounts are in thousands except per share amounts)
Year Ended December 31, | ||||||||||||
Changes in non-cash working capital items | 2006 | 2005 | 2004 | |||||||||
Accounts receivable | $ | (38,629 | ) | $ | (1,585 | ) | $ | (13,970 | ) | |||
Inventories | (3,864 | ) | (4,838 | ) | 2,652 | |||||||
Prepaid expenses | (1,171 | ) | (724 | ) | 124 | |||||||
Accounts payable and accrued liabilities | 16,059 | 4,371 | 5,259 | |||||||||
Taxes payable | 22,740 | 447 | — | |||||||||
Advances for metal shipments | — | (652 | ) | (3,884 | ) | |||||||
Other current liabilities | 1,976 | (390 | ) | — | ||||||||
$ | (2,889 | ) | $ | (3,371 | ) | $ | (9,819 | ) | ||||
Year Ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
Common shares issued on the conversion of convertible debentures | $ | 881 | $ | — | $ | 88,950 | ||||||
Exchange of mineral property for marketable securities | — | — | 404 | |||||||||
Common shares issued as compensation expense | 559 | 490 | — | |||||||||
Common shares issued to acquire mineral interests | 47,381 | — | — | |||||||||
Share purchase warrants issued on cancellation of obligation | — | 2,100 | — |
53
Notes to Consolidated Financial Statements
December 31, 2006, 2005, 2004
(Tabular amounts are in thousands except per share amounts)
For the year ended December 31, 2006 | ||||||||||||||||||||
Mining & Development | Investment and | |||||||||||||||||||
Mexico | Peru | exploration | Corporate | Total | ||||||||||||||||
Revenue from external customers | $ | 40,927 | $ | 207,523 | $ | 6,997 | $ | — | $ | 255,447 | ||||||||||
Gain (loss) on sale of assets | $ | — | (453 | ) | $ | 7,977 | $ | (41 | ) | $ | 7,483 | |||||||||
Investment and other income and foreign exchange loss | $ | (133 | ) | $ | 97 | $ | 245 | $ | 5,026 | $ | 5,235 | |||||||||
Loss on commodity and foreign currency contracts | — | — | — | (18,328 | ) | (18,328 | ) | |||||||||||||
Interest and financing expenses | $ | — | $ | (398 | ) | $ | — | $ | (175 | ) | $ | (573 | ) | |||||||
Exploration | $ | (2,266 | ) | $ | (2,368 | ) | $ | (2,285 | ) | $ | (1,121 | ) | $ | (8,040 | ) | |||||
Depreciation and amortization | $ | (6,466 | ) | $ | (10,643 | ) | $ | (286 | ) | $ | (125 | ) | $ | (17,520 | ) | |||||
Net income (loss) for the year | $ | 10,547 | $ | 58,191 | $ | (4,504 | ) | $ | (6,028 | ) | $ | 58,206 | ||||||||
Mineral property, plant and equipment Capital expenditures | $ | 7,860 | $ | 17,627 | $ | 71,099 | $ | 581 | $ | 96,999 | ||||||||||
Segment assets | $ | 44,234 | $ | 228,454 | $ | 256,230 | $ | 151,077 | $ | 679,995 |
For the year ended December 31, 2005 | ||||||||||||||||||||
Mining & Development | Investment and | |||||||||||||||||||
Mexico | Peru | exploration | Corporate | Total | ||||||||||||||||
Revenue from external customers | $ | 21,645 | $ | 99,809 | $ | 947 | $ | — | $ | 122,401 | ||||||||||
Gain (loss) on sale of assets | $ | — | $ | 556 | $ | — | $ | 2,000 | $ | 2,556 | ||||||||||
Investment and other income and foreign exchange loss | $ | 6 | $ | 276 | $ | 2,000 | $ | 367 | $ | 2,649 | ||||||||||
Loss on commodity and foreign currency contracts | $ | — | $ | — | $ | — | $ | (8,196 | ) | $ | (8,196 | ) | ||||||||
Interest and financing expenses | $ | — | $ | (307 | ) | $ | — | $ | (187 | ) | $ | (494 | ) | |||||||
Exploration | $ | (2 | ) | $ | (691 | ) | $ | (2,364 | ) | $ | (640 | ) | $ | (3,697 | ) | |||||
Depreciation and amortization | $ | (5,145 | ) | $ | (7,705 | ) | $ | (72 | ) | $ | (173 | ) | $ | (13,095 | ) | |||||
Net income (loss) for the year | $ | (32,257 | ) | $ | 13,392 | $ | (3,004 | ) | $ | (6,725 | ) | $ | (28,594 | ) | ||||||
Mineral property, plant and equipment Capital expenditures | $ | 5,453 | $ | 15,727 | $ | 39,318 | $ | (860 | ) | $ | 59,638 | |||||||||
Segment assets | $ | 31,012 | $ | 147,383 | $ | 134,398 | $ | 49,487 | $ | 362,280 |
For the year ended December 31, 2004 | ||||||||||||||||||||
Mining & Development | Investment and | |||||||||||||||||||
Mexico | Peru | exploration | Corporate | Total | ||||||||||||||||
Revenue from external customers | $ | 11,938 | $ | 84,401 | $ | — | $ | (1,514 | ) | $ | 94,825 | |||||||||
Gain on sale of assets | $ | — | $ | 3,583 | $ | 20,164 | $ | — | $ | 23,747 | ||||||||||
Investment and other income and foreign exchange loss | $ | 10 | $ | 213 | $ | 822 | $ | 1,293 | $ | 2,472 | ||||||||||
Loss on commodity and foreign currency contracts | $ | — | $ | — | $ | — | $ | (6,617 | ) | $ | (6,617 | ) | ||||||||
Interest and financing expenses | $ | (229 | ) | $ | (304 | ) | $ | — | $ | (365 | ) | $ | (898 | ) | ||||||
Exploration | $ | (84 | ) | $ | (172 | ) | $ | (3,582 | ) | $ | — | $ | (3,838 | ) | ||||||
Depreciation and amortization | $ | (3,788 | ) | $ | (7,055 | ) | $ | — | $ | (26 | ) | $ | (10,869 | ) | ||||||
Net income (loss) for the year | $ | (5,245 | ) | $ | 18,271 | $ | 17,358 | $ | (15,170 | ) | $ | 15,214 | ||||||||
Mineral property, plant and equipment Capital expenditures | $ | 6,193 | $ | 9,170 | $ | 1,484 | $ | 196 | $ | 17,043 | ||||||||||
Segment assets | $ | 55,702 | $ | 136,432 | $ | 87,611 | $ | 90,341 | $ | 370,086 |
54
Notes to Consolidated Financial Statements
December 31, 2006, 2005, 2004
(Tabular amounts are in thousands except per share amounts)
Revenue | Net capital assets1 | |||||||||||||||||||
2006 | 2005 | 2004 | 2006 | 2005 | ||||||||||||||||
Peru | $ | 207,523 | $ | 99,809 | $ | 84,401 | $ | 110,993 | $ | 105,281 | ||||||||||
Canada | — | — | (1,514 | ) | 222 | 190 | ||||||||||||||
Mexico | 40,927 | 21,645 | 11,938 | 196,994 | 142,258 | |||||||||||||||
United States | — | — | — | 1,191 | 1,198 | |||||||||||||||
Argentina | — | — | — | 86,271 | 3,691 | |||||||||||||||
Bolivia | 6,996 | 947 | — | 9,466 | 4,762 | |||||||||||||||
Total | $ | 255,447 | $ | 122,401 | $ | 94,825 | $ | 405,137 | $ | 257,380 | ||||||||||
1 | Net capital assets are comprised of mineral property, plant and equipment, net of depreciation and amortization, construction in progress and investment in non-producing properties. |
Product Revenue | 2006 | 2005 | 2004 | |||||||||
Silver | $ | 37,747 | $ | 21,645 | $ | 11,113 | ||||||
Zinc concentrate | 84,374 | 28,884 | 17,451 | |||||||||
Lead concentrate | 43,393 | 23,594 | 29,123 | |||||||||
Copper concentrate | 91,507 | 47,148 | 34,785 | |||||||||
Other (net of royalties) | (1,574 | ) | 1,130 | 2,353 | ||||||||
Total | $ | 255,447 | $ | 122,401 | $ | 94,825 | ||||||
55
Notes to Consolidated Financial Statements
December 31, 2006, 2005, 2004
(Tabular amounts are in thousands except per share amounts)
Year ending December 31 | Capital Leases | |||
2007 | $ | 452 | ||
2008 | 296 | |||
Total future minimum payments | 748 | |||
Less amount representing interest | (45 | ) | ||
Present value lease | $ | 703 | ||
56
Notes to Consolidated Financial Statements
December 31, 2006, 2005, 2004
(Tabular amounts are in thousands except per share amounts)
2006 | 2005 | 2004 | ||||||||||
Current income taxes | $ | 28,827 | $ | 4,101 | $ | 2,723 | ||||||
Future income taxes | (3,343 | ) | (816 | ) | 30 | |||||||
Provision for income taxes | $ | 25,484 | $ | 3,285 | $ | 2,753 | ||||||
57
Notes to Consolidated Financial Statements
December 31, 2006, 2005, 2004
(Tabular amounts are in thousands except per share amounts)
2006 | 2005 | 2004 | ||||||||||
Statutory tax rate | 34.12 | % | 34.87 | % | 35.60 | % | ||||||
Income tax expense (recovery) based on above rates | $ | 32,721 | $ | (8,690 | ) | $ | 7,204 | |||||
Increase (decrease) due to: | ||||||||||||
Non-deductible expenses | 1,004 | 680 | 779 | |||||||||
Realization of future tax asset not previously recognized | (8,778 | ) | (3,613 | ) | (5,511 | ) | ||||||
Tax Benefit not recognized when arose | 4,029 | 5,529 | 7,269 | |||||||||
Lower statutory tax rates on earning of foreign subsidiaries | (519 | ) | 1,780 | (6,244 | ) | |||||||
Write-down not recognized in the period | — | 8,307 | — | |||||||||
Increase in income tax rates in foreign jurisdictions | 2,728 | — | — | |||||||||
Workers participation in Peru | (8,404 | ) | (1,243 | ) | (998 | ) | ||||||
Other | 2,703 | 535 | 254 | |||||||||
$ | 25,484 | $ | 3,285 | $ | 2,753 | |||||||
2006 | 2005 | |||||||
Excess of tax value of capital assets over book value | $ | 4,864 | $ | 10,841 | ||||
Deductible temporary differences and other | 15,227 | 13,622 | ||||||
Canadian resources pools | 2,170 | 2,689 | ||||||
Non-capital loss carry forward | 31,252 | 23,301 | ||||||
Capital losses and other | 3,438 | 5,130 | ||||||
Total future income tax asset | 56,951 | 55,583 | ||||||
Less: valuation allowance | (31,876 | ) | (40,479 | ) | ||||
Net future income tax asset | 25,075 | 15,104 | ||||||
Excess of book value of capital assets over tax value | (66,404 | ) | (47,500 | ) | ||||
Net future income tax liability | $ | (41,329 | ) | $ | (32,396 | ) | ||
2006 | 2005 | |||||||
Current future income tax assets | $ | 6,670 | $ | — | ||||
Long-term future income tax assets | 500 | — | ||||||
Long-term future income tax liabilities | $ | (48,499 | ) | $ | (32,396 | ) | ||
(41,329 | ) | (32,396 | ) | |||||
58
Notes to Consolidated Financial Statements
December 31, 2006, 2005, 2004
(Tabular amounts are in thousands except per share amounts)
Amount | Expiry | |||||||
Canada | $ | 63,404 | 2007-2026 | |||||
Argentina | 1,370 | 2007-2010 | ||||||
Bolivia | 125 | Indefinite | ||||||
Cyprus | 7,042 | Indefinite | ||||||
Mexico | 33,636 | 2007-2015 | ||||||
Peru | 4,337 | 2007 | ||||||
December 31, 2006 | ||||||||||||
Shareholder’s | ||||||||||||
Consolidated Balance Sheets | Total assets | Total liabilities | Equity | |||||||||
Reported under Canadian GAAP | $ | 679,995 | $ | 167,969 | $ | 512,026 | ||||||
Amortization of non-producing property (a) | (1,700 | ) | (595 | ) | (1,105 | ) | ||||||
Increase in depletion expense (c) | (11,441 | ) | (3,957 | ) | (7,484 | ) | ||||||
Reported under US GAAP | $ | 666,854 | $ | 163,417 | $ | 503,437 | ||||||
59
Notes to Consolidated Financial Statements
December 31, 2006, 2005, 2004
(Tabular amounts are in thousands except per share amounts)
December 31, 2005 | ||||||||||||
Shareholder’s | ||||||||||||
Consolidated Balance Sheets | Total assets | Total liabilities | Equity | |||||||||
Reported under Canadian GAAP | $ | 362,280 | $ | 104,958 | $ | 257,322 | ||||||
Amortization of non-producing property (a) | (1,700 | ) | (595 | ) | (1,105 | ) | ||||||
Increase in depletion expense (c) | (5,846 | ) | (2,081 | ) | (3,765 | ) | ||||||
Reclassify convertible debentures (b) | — | 633 | (633 | ) | ||||||||
Net effect on convertible debentures adjustments (b) | 10 | — | 10 | |||||||||
Reported under US GAAP | $ | 354,744 | $ | 102,915 | $ | 251,829 | ||||||
December 31, 2006 | ||||||||||||||||||||||||
Additional | Other | |||||||||||||||||||||||
Consolidated Statement of | Common | Paid | Comprehensive | |||||||||||||||||||||
Shareholder’s Equity | Shares | in Capital | Deficit | Income (loss) | Total | |||||||||||||||||||
Reported under Canadian GAAP | $ | 584,769 | $ | 14,485 | $ | (87,228 | ) | $ | — | $ | 512,026 | |||||||||||||
Amortization of mineral property (a) | — | — | (1,105 | ) | — | (1,105 | ) | |||||||||||||||||
Debt issue costs (b) | — | 3,273 | (3,273 | ) | — | - | ||||||||||||||||||
Increase depletion expense | — | — | (7,484 | ) | — | (7,484 | ) | |||||||||||||||||
Available for sale securities (f) | — | (58 | ) | 58 | - | |||||||||||||||||||
Reported under US GAAP | $ | 584,769 | $ | 17,758 | $ | (99,148 | ) | $ | 58 | $ | 503,437 | |||||||||||||
December 31, 2005 | ||||||||||||||||||||
Consolidated Statement of | Common | Convertible | Additional Paid | |||||||||||||||||
Shareholder’s Equity | Shares | Debentures | in Capital | Deficit | Total | |||||||||||||||
Reported under Canadian GAAP | $ | 388,830 | $ | 762 | $ | 13,117 | $ | (145,387 | ) | $ | 257,322 | |||||||||
Amortization of mineral property (a) | — | — | — | (1,105 | ) | (1,105 | ) | |||||||||||||
Reclassify convertible debentures(b) | — | (762 | ) | — | 129 | (633 | ) | |||||||||||||
Debt issue costs (b) | — | — | 3,273 | (3,259 | ) | 14 | ||||||||||||||
Amortization of debt issue costs (b) | — | — | — | (4 | ) | (4 | ) | |||||||||||||
Increase in depletion expense (c) | (3,765 | ) | (3,765 | ) | ||||||||||||||||
Reported Under US GAAP | $ | 388,830 | $ | — | $ | 16,390 | $ | (153,391 | ) | $ | 251,829 | |||||||||
December 31, 2004 | ||||||||||||||||||||
Consolidated Statement of | Common | Convertible | Additional Paid | |||||||||||||||||
Shareholder’s Equity | Shares | Debentures | in Capital | Deficit | Total | |||||||||||||||
Reported under Canadian GAAP | $ | 380,571 | $ | 633 | $ | 10,976 | $ | (116,664 | ) | $ | 275,516 | |||||||||
Amortization of mineral property (a) | — | — | — | (1,105 | ) | (1,105 | ) | |||||||||||||
Increase in depletion expense (c) | (1,786 | ) | (1,786 | ) | ||||||||||||||||
Deferred exploration (a) | — | — | — | (1,825 | ) | (1,825 | ) | |||||||||||||
Net effect on convertible debenture adjustments (b) | — | — | — | 13 | 13 | |||||||||||||||
Reclassify convertible debentures (b) | — | (633 | ) | — | — | (633 | ) | |||||||||||||
Reported under US GAAP | $ | 380,571 | $ | — | $ | 10,976 | $ | (121,367 | ) | $ | 270,180 | |||||||||
60
Notes to Consolidated Financial Statements
December 31, 2006, 2005, 2004
(Tabular amounts are in thousands except per share amounts)
December 31 | ||||||||||||
Consolidated statement of operations | 2006 | 2005 | 2004 | |||||||||
Net income (Loss) reported under Canadian GAAP | $ | 58,206 | $ | (28,594 | ) | $ | 15,214 | |||||
Amortization of mineral property (a) | — | — | — | |||||||||
Increase in depletion expense (c) | (1,933 | ) | (3,765 | ) | (1,786 | ) | ||||||
Deferred exploration (a) | 1,825 | (168 | ) | |||||||||
Unrealized (loss) gain on marketable securities (f) | (58 | ) | 228 | (741 | ) | |||||||
Loss on commodity contracts (e) | — | — | 1,515 | |||||||||
Net effect on convertible debentures adjustments (b) | — | — | (13,243 | ) | ||||||||
Amortization of debt issue costs (b) | — | (4 | ) | (2,804 | ) | |||||||
Net income (loss) reported under US GAAP | $ | 56,215 | $ | (30,310 | ) | $ | (2,013 | ) | ||||
Consolidated Statements of Operations | ||||||||||||
(Under US GAAP) | 2006 | 2005 | 2004 | |||||||||
Revenue | $ | 255,447 | $ | 122,401 | $ | 94,825 | ||||||
Expenses | ||||||||||||
Operating | 124,608 | 87,648 | 69,162 | |||||||||
General and Administrative | 9,172 | 6,936 | 6,241 | |||||||||
Depreciation, depletion, and amortization (a)(c) | 20,564 | 18,941 | 13,588 | |||||||||
Asset retirement and reclamation | 2,457 | 2,329 | 1,315 | |||||||||
Exploration and project development | 8,040 | 3,697 | 3,838 | |||||||||
Premium on early retirement of debt (b) | — | — | 13,534 | |||||||||
Write-down of assets | — | 27,841 | 2,460 | |||||||||
164,841 | 147,392 | 110,138 | ||||||||||
Income (loss) before the under noted | 90,606 | (24,991 | ) | (15,313 | ) | |||||||
Interest and other income (f) | 5,177 | 2,877 | 1,597 | |||||||||
Interest and financing expense | (573 | ) | (494 | ) | (1,971 | ) | ||||||
Loss on commodity and foreign currency contracts (d) | (18,328 | ) | (8,196 | ) | (5,102 | ) | ||||||
Amortization of debt issue costs (b) | — | (4 | ) | (2,804 | ) | |||||||
Gain on sale of assets | 7,483 | 2,556 | 23,747 | |||||||||
Income (loss) before income taxes & non-controlling interest | 84,365 | (28,252 | ) | (154 | ) | |||||||
Income tax provision (c) | (24,373 | ) | (1,204 | ) | (1,988 | ) | ||||||
Non- controlling interest | (3,777 | ) | (854 | ) | (179 | ) | ||||||
Net income (loss) for the year | $ | 56,215 | $ | (30,310 | ) | $ | (2,013 | ) | ||||
Earnings (loss) per share | ||||||||||||
Basic | $ | 0.76 | $ | (0.45 | ) | $ | (0.03 | ) | ||||
Diluted | $ | 0.74 | $ | (0.45 | ) | $ | (0.03 | ) | ||||
Weighted average number of common shares outstanding | ||||||||||||
Basic | 73,628 | 67,042 | 63,169 | |||||||||
Diluted | 76,152 | 67,042 | 63,169 |
61
Notes to Consolidated Financial Statements
December 31, 2006, 2005, 2004
(Tabular amounts are in thousands except per share amounts)
62
Notes to Consolidated Financial Statements
December 31, 2006, 2005, 2004
(Tabular amounts are in thousands except per share amounts)
63
Notes to Consolidated Financial Statements
December 31, 2006, 2005, 2004
(Tabular amounts are in thousands except per share amounts)
2006 | 2005 | 2004 | ||||||||||
Net income (loss) under US GAAP | $ | 34,647 | $ | (26,545 | ) | $ | (2,013 | ) | ||||
Unrealized gain (loss) on available securities | 58 | (228 | ) | 741 | ||||||||
Comprehensive net income (loss) under US GAAP | $ | 34,705 | $ | (26,773 | ) | $ | (1,272 | ) | ||||
64
Notes to Consolidated Financial Statements
December 31, 2006, 2005, 2004
(Tabular amounts are in thousands except per share amounts)
65
Vancouver, B.C.
Canada V6C 2T6
Fax : 604.684.0147
www.panamericansilver.com
PAN AMERICAN SILVER CORP. | ||||||
Dated: March 30, 2007 | By: | /s/ Robert Pirooz | ||||
By: | Robert Pirooz | |||||
Title: | General Counsel and Secretary |
Number | Document | |
23.1 | Consent of Deloitte & Touche LLP | |
23.2 | Consent of Donald F. Earnest | |
23.3 | Consent of Martin Wafforn | |
23.4 | Consent of Michael Steinmann | |
23.5 | Consent of Consultora Minera Anglo Peruana S.A. | |
23.6 | Consent of Ground Water International S.A.C. | |
23.7 | Consents of M3 Engineering & Technology Corporation | |
23.8 | Consent of MWH Global Inc. | |
23.9 | Consent of Resource Modeling Incorporated. | |
23.10 | Consent of Snowden Mining Industry Consultants | |
23.11 | Consent of SRK Consulting | |
23.12 | Consent of Resource Evaluation Inc. | |
23.13 | Consent of AMEC Americas Limited | |
31. | Certifications of CEO and CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32. | Certification of CEO and CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |