TORONTO (miningweekly.com) – Vancouver-based Pan American Silver is considering a range of mine plan scenarios at its La Preciosa joint venture (JV), in Mexico, to take advantage of the improved outlook for previous metals demand and pricing.
The company expects to have the results of a preliminary economic assessment on the project by midyear, COO Steven Busby said on Wednesday. One of the scenarios being considered is “a significantly expanded openpit alternative,” he said.
Pan American has a JV at La Preciosa with junior Orko Silver, in which the larger company agreed to fund the construction of the mine and contribute its expertise, in exchange for a 55% interest in the project.
Silver prices almost doubled in 2010, outpacing even gold's gains, and reached a 30-year high above $31/oz on January 3 this year.
Burns also said on Wednesday that he was still confident the company will be ready to make a construction decision on its Navidad project in Argentina by the end of this year.
The project is in the province of Chubut, which has a ban on openpit mining. Provincial officials have said the legislation will be amended, but Pan American is not expecting progress until after the provincial elections that will take place in March this year.
The most likely result is that the province will define zones where openpit operations are permitted, including the area where Navidad is located, Burns said.
The company expects to have a full feasibility study ready for Navidad in the fourth quarter of this year.
The mine could produce 19,8-million ounces a year of silver in the first five years of operation, according to a December 2010 preliminary economic assessment. Capital costs were estimated at some $760-million, excluding recoverable value-added tax.
PROFIT RISES, BUT COST PRESSURES LOOM
Pan American, which operates eight mines in Mexico, Peru, Argentina and Bolivia, produced 24,3-million ounces of silver in 2010, 5% higher than in 2009.
Shares in the miner fell on Wednesday, despite strong fourth quarter earnings and production numbers, after the company said it expected production would decline and costs would rise in 2011.
Pan American reported a fourth-quarter net income of $46,4-million, an increase of 67% compared with a year earlier and a new record for the company, thanks to increased metals prices and output levels.
Sales for the three months rose 24% year-on-year, to $191,1-million.
Consolidated cash costs in the fourth quarter were $6,61/oz of silver, after by-product credits.
This year, the company expects silver output will decline to between 23-million and 24-million ounces, breaking a 15-year streak of consecutive production increases.
Declines at Alamo Dorado and Quiruvilca will be partly offset by increased production at the Huaron, San Vicente, La Colorada and Manantial Espejo mines, Pan American said.
Cash costs will be higher at between $7/oz and $7,50/oz after by-product credits.
Burns said that the company is expecting inflationary cost pressures will continue into 2011, while increased royalty payments, stronger local currencies and lower forecast production of by-products like gold, will also result in higher overall costs.
While costs in Bolivia, Peru and Mexico are generally stable, inflation in Argentina is resulting in direct wage pressures, and also pushing up the costs of contractors and other service providers, Burns said.
Pan American ended the year with cash and short-term investments of $360,5-million and no debt.
Shares in the company fell 5% on Wednesday, to C$34,50 apiece by 14:51 in Toronto.