TORONTO (miningweekly.com) - Argentina's Chubut province will likely introduce a key change to its mining law by the end of this year, Pan American Silver CEO Geoff Burns said on Thursday.

Vancouver-based Pan American bought the Navidad project in Chubut last year, when it acquired Aquiline Resources, but the provincial law as it stands bans all openpit mining, as well as the use of cyanide in operations.

The company said earlier this year it hoped to see progress on legislative changes by mid-2010 that would allow the openpit mine to move ahead.

But Burns said on a conference call on Thursday, that he had met with the governor of Chubut in late June, and was pleased with the discussions that took place.

The details of the talks were confidential, "but I will say that I know the government is completely aware of our progress and schedules for the development of Navidad," Burns said.

"And I remain absolutely confident that the needed amendment to the current mining law that will allow us to proceed will be introduced before the end of this year."

Pan American expects to complete its first scoping study on Navidad in the fourth quarter of this year, and will also have the environmental study for the project ready by year-end.

Besides Navidad, Pan American has eight operating mines, in Mexico, Peru, Argentina and Bolivia, and is also studying an openpit mine at the La Preciosa project in Mexico's Durango state.

The company produced 6,9-million ounces of silver in the second quarter, an increase of 18% compared with a year earlier, mainly because of a particularly strong performance from the Alamo Dorado operation, in Mexico, which offset much lower production from the Huaron mine in Peru.

Gold output declined 16%, to 21 133 oz, because of lower grades being mined at the Manantial Espejo operation, while zinc production of 10 893 t, 3 228 t of lead and 1 433 t of copper were more or less unchanged year-on-year.

Burns said that the company believes it had addressed the operational difficulties encountered in the first half of the year at Huaron, and expects to see marked improvements at the operation over the remainder of the year.

Group cash costs for the second quarter were $5,64 per ounce of silver, net of by-product credits.

Although the company has maintained its forecast for the year of $5,90/oz, Burns said that he expects the final figures will "comfortably beat" the target.

Pan American has seen some cost inflation at operations though, which partially offset the benefits of higher by-product metal prices.

Production costs have increased by some 20% on a per ton basis compared with a year ago, which also includes the effect of stronger domestic currencies compared with the US dollar, he said.

Pan American Silver earned $18,3-million in the second quarter, compared with $10,2-million in the same period a year earlier.

Revenue increased 32%, to $147,3-million.

Shares in the company edged up 0,04% on Thursday, to C$24,29 apiece by 16:10 in Toronto.