Pan American Cuts Exploration to "Virtually Nil"

Vancouver-based Pan American Silver (Nasdaq: PAAS) is cutting back its 2002 exploration budget to "virtually nil" and has put the activity on the backburner, chairman and CEO Ross Beaty told a conference call. "As an exploration geologist, that's a hard thing to do," he said. But that and other cost-cutting measures, including the laying off of 215 people in Peru, which are painful in the short term, will make the company healthier long term, he predicted. Low metal prices have forced the cutbacks. But the company has ruled out closing loss-making Quiruvilca silver mine in northern Peru as the costs would be greater than the US$100,000pm-or-less operating loss the company is budgeting on at current low prices. "We have an extremely good group of people there - we would never be able to operate it under the labor conditions we have here," he said at the Vancouver-held call. "But it [Quiruvilca] was never intended to be a mine at US$280/oz gold, US$4/oz silver," he added. Elsewhere Pan American's other silver operations Huaron (Peru) and La Colorada (Mexico) started up "extremely smoothly" during the year, while last month it agreed a Bolivian company can run a small-scale operation at its San Vicente project in Potosi department, south Bolivia. The deal allows Pan American to keep the property, generate some revenue, provides local employment and goes towards alleviating "some tough social conditions," Beaty said. He was speaking at a conference call held after the company announced its 3Q01 results - net income of US$700,000 (helped by a land-sale at Huaron), against a net loss of US$38mn in same-period 2000 (due to a US$37.6mn write-off on its Dukat project in Russia). Excluding those unusual items, the third-quarter loss was US$2.8mn (against US$400,000); the nine month loss was US$7.2mn versus US$1.9mn.