Pan American Silver Corp. · TSX:PAAS
Pan American Silver — Investor Presentation (December 2005)
32 slides from Pan American Silver's investor presentation, December 2005
Slide 1: Investing in Growth
Investing in Growth December 2005
Slide 2: Q3 2005 – Sustainable Profitability
Q3 2005 – Sustainable Profitability Record production of 3.2 million ounces. Record quarterly revenue of $30 million. Cash flow from operations of $7 million. Mine operating earnings of $4.9 million. Net earnings of $2.3 million.
Slide 3: Q3 2005 – Sustainable Growth
Q3 2005 – Sustainable Growth Alamo Dorado mine construction on time and on budget. Production resumed at San Vicente. Expansion on target for mid-2006. Phase 1 - Morococha production to increase 13% in 2006. Phase 2 expansion engineering underway. Manantial Espejo decision expected year-end. All gro
Slide 4: Pan American – The Silver Story
Pan American – The Silver Story QUIRUVILCA LA COLORADA MOROCOCHA ALAMO DORADO HUARON STOCKPILES SAN VICENTE MANANTIAL ESPEJO 30 25 Millions of ounces 20 15 10 5 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005e 2006e 2007e 2008e
Slide 5: Reserves and Resources
Reserves and Resources* IN MILLIONS OF OUNCES PROV/PROB. MEAS./IND. INFERRED RESERVES RESOURCES RESOURCE OPERATIONS S Morococha 21.9 11.1 71.9 Huaron 48.0 8.4 13.8 Quiruvilca 6.7 17.0 12.2 Stockpiles 4.3 - - La Colorada 29.8 37.3 32.9 SUB-TOTAL 110.7 73.8 130.8 DEVELOPMENT PROJECTS Alamo Dorado 44.0
Slide 6: Solid Base of Operations and Outstanding Growth
Solid Base of Operations and Outstanding Growth OPERATION ALAMO DORADO DEVELOPMENT MEXICO PROJECT LA COLORADA MEXICO QUIRUVILCA HUARON PERU PERU STOCKPILES PERU MOROCOCHA PERU MANANTIAL ESPEJO SAN VICENTE ARGENTINA BOLIVIA
Slide 7: Solid Base of Operations and Outstanding Growth
Solid Base Of Operations and Outstanding Growth PERU Yanacocha Alto Chicama (gold) TRUJILLO QUIRUVILCA N PERU Cerro de Pasco Pacific Ocean STOCKPILES HUARON MOROCOCHA LIMA Casapalca 0 200 PRODUCING MINE KM
Slide 8: Morococha – Investing in Growth
Solid Base Of Operations and Outstanding Growth MOROCOCHA – INVESTING IN GROWTH Mine acquisition completed in August 2004. Currently producing at an annualized rate of 3.1 million ounces at a cash cost of ~$2.75/oz. Cash costs in Q3 of $1.99/oz. 11,600 hectare land package with tremendous exploratio
Slide 9: Morococha – Investing in Growth (Short Term)
Solid Base Of Operations and Outstanding Growth MOROCOCHA – INVESTING IN GROWTH SHORT TERM: Much of the new reserves and resources contained in bulk-mineable mantos, which will be much lower cost. In 2006 expect to increase annual production 13% to 3.5 million ounces at cash cost of <$2.75/oz.
Slide 10: Morococha – Major Expansion
Solid Base Of Operations and Outstanding Growth MOROCOCHA – INVESTING IN GROWTH LONGER TERM: MAJOR EXPANSION 2 plants on site now, only 1 currently active. Engineering underway to determine optimal mining and processing plans. Goal is to double production by 2009. Infrastructure in place to allow fo
Slide 11: Solid Base of Operations and Outstanding Growth
Solid Base Of Operations and Outstanding Growth MEXICO Hermosillo Guaymas ALAMO DORADO MEXICO Se ao fC ort ez Pacific Ocean Durango Fresnillo 0 250 LA COLORADA KM Zacatecas
Slide 12: La Colorada
Solid Base Of Operations and Outstanding Growth LA COLORADA 2005 production forecast of 2.9 million ounces at cash cost of $5.53/oz. Good potential to lower costs further with restart of sulphide mining. Sulphide ore being stockpiled. Processing to resume in April ’06. Sulphides will add 0.9 million
Slide 13: Alamo Dorado – The Next Generation
Pipeline Of Growth Projects ALAMO DORADO – THE NEXT GENERATION Construction commenced in Q2. Production to begin late 2006. Average 5 million oz/year silver at cash cost of $3.25/oz. Capital cost $76.6 million. On schedule, on budget. • 80% of major capital components ordered and prices fixed.
Slide 14: Alamo Dorado – Under Construction
Alamo Dorado – Under Construction
Slide 15: San Vicente – The Next Generation
Pipeline Of Growth Projects SAN VICENTE – THE NEXT GENERATION Most production in 2005 deferred while feasibility study completed on refurbishment of existing mill. In October, increased interest from 50 to 55%. Resumed processing to produce +100,000 ounces in 2005. Processing to begin Q2 2006 at 2.1
Slide 16: Manantial Espejo – The Next Generation
Pipeline Of Growth Projects MANANTIAL ESPEJO – THE NEXT GENERATION 50/50 joint venture with Silver Standard Resources. Proposed 2,000 tonnes per day combined open pit/underground mine. 30-40 million oz silver deposit with 0.5 million oz gold. PAAS share of annual production ~2 million ounces of silv
Slide 17: Manantial Espejo – The Next Generation
Pipeline Of Growth Projects MANANTIAL ESPEJO – THE NEXT GENERATION Environmental Impact Statement submitted to govt. Signed letter of intent with Provincial government to construct powerline to site and to Gobernador Gregores. Feasibility study to be completed by end of December, but release pending
Slide 18: Active Drilling Programs
Exploration Potential ACTIVE DRILLING PROGRAMS 2005 (meters)2006 (meters) Morococha 24,000 59,400 Quiruvilca 10,500 9,145 Huaron 7,200 13,696 Huaypachina - 2,000 La Colorada 5,000 8,000 Manantial Espejo 12,350 - TOTAL 59,050 92,241
Slide 19: Active Drilling Programs
Exploration Potential ACTIVE DRILLING PROGRAMS Exploration drilling targeting additional +30 million ounces around existing operations for $0.12/oz. Regional exploration to focus on Mexico, Peru, Argentina and Bolivia. Example is Huaypachina in Peru, midway between Huaron and Morococha. Potential to
Slide 20: Superior Growth Profile
Superior Growth Profile COMPARABLE PRIMARY SILVER PRODUCERS 15 14.8 14.2 14.1 14. SILVER PRODUCTION (MILLION 0 12.5 11.2 9.8 10 8.7 OUNCES) 8.6 7.2 7.0 6.0 5 0 02 03 04 05e 02 03 04 05e 02 03 04 05e PAN AMERICAN SILVER COEUR D’ALENE HECLA
Slide 21: Superior Trading Performance
Superior Trading Performance COMPARABLE PRIMARY SILVER PRODUCERS $300 $250 $200 Average Monthly $150 Trading Value $M $100 (January-November 2005) $50 $0 PAAS CDE HL 140% 130% 120% PAAS 110% Relative Share CDE 100% Price 90% Performance 80% (January-December 2005) 70% 60% HL 50%
Slide 22: Excellent Liquidity
Excellent Liquidity Strong balance sheet. $68 million in cash and short-term investments (Sept ‘05). No debt. H2 2005 cash flow from operations of $2.0 million/month. 67.2 million shares outstanding ~ 71 million fully diluted. •Corner Bay Warrants (Feb. ’08) – 3.8 million shares Excellent liquidity.
Slide 23: Pan American – The Silver Story
Pan American – The Silver Story Solid base of operations. New low-cost silver mine under construction in Mexico. Development fully funded from cash on hand. Robust pipeline of projects for future development. Highly prospective exploration opportunities. Superior leverage to silver – totally unhedge
Slide 24: The Silver Market
THE SILVER MARKET
Slide 25: Silver Price
Silver Price In 2003, silver price rose 28%. In 2004 silver price rose 13.5%, outperforming gold (up 4%). In 2005 (to Dec. 9) silver price up 33% (gold up 21%) and high volatility continuing.
Slide 26: World Silver Demand
World Silver Demand 1000 900 1.7% 5% 800 Millions of ounces 700 600 8% 500 400 4% 300 200 100 4% 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Source: Silver Institute, GFMS Industrial Photographic Jewelry & Silverware Coins & Metals De-Hedging Investment
Slide 27: Photographic Silver Demand
Photographic Silver Demand Worldwide Use of Silver in Photo Imaging Product Fabric 250 X-Ray 200 Motion Pictures million troy oz. 150 Graphic Arts Photograph 100 y 50 0 2003 2004 2005 2006 2007 2008 2009 2010 Courtesy: Photofinishing News, Inc.
Slide 28: World Silver Supply
World Silver Supply 1000 900 21 800 % Millions of ounces 700 3% 600 500 400 1% 300 200 100 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Source: Silver Institute, GFMS Mine Production Old silver Scrap Producer Hedging Inventory Sales
Slide 29: Identifiable Silver Stocks
Identifiable Silver Stocks 1400 1200 Millions of ounces 1000 800 600 400 200 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Source: Silver Institute, GFMS European Dealers Governments Comex Other
Slide 30: 2005 Forecast
2005 Forecast DEMAND: - Industrial production key driver – strong growth forecast - Chinese industrial demand growing very rapidly - Investment demand up sharply SUPPLY: - Mine production flat - Scrap supply declines offset photo demand declines - US government stockpile gone (was 2 billion oz) - Ch
Slide 31: Longer-term Demand
Longer-term Demand Expect silver mine supply to remain static in 2006 even with higher prices. Decline in photographic demand offset by lower scrap supply Very strong Chinese demand growth in all sectors Several major new uses on horizon: • Plasma TVs (flat screen), 48-volt car batteries • Water tre
Slide 32: Forward-looking Statements
Forward-looking Statements Some of the statements in this presentation are forward-looking statements and as such are based on an assumed set of economic conditions and courses of action. These include estimates of future production levels, expectations regarding mine production costs, expected tren
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