Pan American Silver Reports Best Fourth Quarter in the Company's History

VANCOUVER, BRITISH COLUMBIA, Feb 15, 2010 (MARKETWIRE via COMTEX) -- (All amounts in US dollars unless otherwise stated and all production figures are approximate)

Pan American Silver Corp. /quotes/comstock/11t!paa (CA:PAA 23.59, 0.00, 0.00%) /quotes/comstock/15*!paas/quotes/nls/paas (PAAS 23.19, +0.99, +4.46%) (the "Company") today reported record-setting operating and financial results for the fourth quarter and fiscal year ended December 31, 2009. The Company also provided an update on its operations and its production forecast for 2010.

Fourth Quarter 2009 Highlights (unaudited)(1)

- Silver production increased 30% to 6.0 million ounces.

- Gold production increased 425% to 26,600 ounces.

- Consolidated cash costs declined 35% to $5.36(2) per payable ounce of silver.

- Mine operating earnings were a Company record $57.3 million.

- Net income was $27.8 million or $0.31 per share, as compared to a net loss in the prior year period

- Cash flow from operations (excluding changes in non-cash working capital)(3) was $52.5 million or $0.59 per share.

- Sales increased 234% to a record $154.4 million.

- Acquired Aquiline Resources Inc. and with it, the Navidad project; one of the largest undeveloped primary silver deposits in the world.

2009 Year-End Highlights (unaudited)(1)

- Silver production increased 23% to a record 23.0 million ounces.

- Gold production increased 297% to a record 100,704 ounces.

- Consolidated cash costs declined 7% to $5.53(2) per payable ounce of silver.

- Mine operating earnings rose 35% to a record $126 million.

- Net income increased 152% to $62 million or $0.71 per share.

- Cash flow from operations (excluding changes in non-cash working capital)(3) increased 52% to a record $151.7 million or $1.73 per share.

- Sales increased 34% to a record $454.8 million.

- Completed commissioning and commenced commercial production at the Manantial Espejo mine in Argentina.

- Completed construction of a major expansion and commenced commercial production at the San Vicente mine in Bolivia.

- Signed agreement with Orko Silver Corp. to jointly advance the La Preciosa silver deposit in Mexico.

2010 Outlook

- Silver production expected to increase modestly to 23.4 million ounces at an expected cash cost of $6.40 per ounce, net of by-product credits

- Complete definition drilling and metallurgical tests and produce feasibility report for La Preciosa

- Commence definition drilling, metallurgical testing and advance feasibility study for Navidad

(1) Financial information in this news release is based on Canadian GAAP; results are unaudited; percentages compare year-on-year

(2) Cash costs per payable ounce of silver is a non GAAP measure. The Company believes that, in addition to cost of sales, cash costs per ounce is a useful and complementary benchmark that investors use to evaluate the Company's performance and ability to generate cash flow and is well understood and widely reported in the silver mining industry. However, cash costs per ounce does not have a standardized meaning prescribed by Canadian GAAP. Investors are cautioned that cash costs per ounce should not be construed as an alternative to cost of sales determined in accordance with Canadian GAAP as an indicator of performance. The Company's method of calculating cash costs per ounce may differ from the methods used by other entities and, accordingly, the Company's cash costs per ounce may not be comparable to similarly titled measures used by other entities. See "Financial and Operating Highlights" below for a reconciliation of this measure to the Company's cost of sales.

(3) Cash flow from operations (excluding changes in non-cash working capital) is a non-GAAP measure. This non-GAAP measure is used by the Company to manage and evaluate operating performance and the Company considers this measure to better reflect normalized cash flow generated by operations. Cash flow per share is a non-GAAP measure. Cash flow per share is used as a measure of return on capital and is calculated using cash flow from operations, before working capital changes, divided by basic weighted average shares outstanding. Investors are cautioned that this measure is not defined in current GAAP and there is no comparable measure defined in GAAP.

"2009 was an exceptional year for Pan American," said Geoff Burns, President & CEO. "We recorded our 14th consecutive year of silver production growth with the smooth commissioning of two new mines. Record gold and silver production coupled with the resurgence of precious metal prices allowed us to post new records for both net earnings and operating cash flow. This performance and the maturing of our portfolio of assets has positioned us to be able to declare the first dividend to shareholders in Pan American's history. In addition, with the acquisition of Navidad and the joint venture on La Preciosa we have positioned the Company for a period of transformational growth in 2012 and 2013."

Financial Results

In the fourth quarter, Pan American generated consolidated net income of $27.8 million or $0.31 per share. Net income for the period was reduced by (i) a non-cash fair value charge of $2.2 million for a delay in recovery of refundable value added tax in Argentina, and (ii) an increase to $4.3 million in exploration spending as the Company moved aggressively forward with the La Preciosa development project. Net income for the year was a Company record $62 million or $0.71 per share, an increase of 152% as compared to 2008. The increase in net income was primarily attributable to record gold and silver production, and higher realized silver and gold prices.

Sales during the quarter rose to $154.4 million, an increase of 234% as compared to the same period of 2008. The increase resulted from higher quantities of precious metals sold, combined with significant increases in metal prices. Pan American's revenues jumped to a record $454.8 million for the full year, which was 34% more than in 2008, again due to increased precious metal production and higher realized prices.

The company generated a record $57.3 million in mine operating earnings during the fourth quarter. Annual consolidated mine operating earnings were 35% higher than a year ago at a record $126 million.

During the fourth quarter Pan American generated $52.5 million in cash from operating activities, before working capital adjustments, a vast improvement from the last quarter of 2008 when the company's cash flow from operating activities was negative. During 2009, the Company's cash flow from operations before working capital adjustments jumped 52% to $151.7 million or $1.73 per share as compared to 2008.

At year-end Pan American had cash and short-term investments of $193.1 million, no debt and an undrawn $70 million credit facility.

Production and Operations

Pan American produced 6.0 million ounces of silver and 26,600 ounces of gold during the fourth quarter. San Vicente and Alamo Dorado were the Company's largest silver producing mines in the fourth quarter, each producing 1.1 million ounces. Manantial Espejo produced over 1 million ounces of silver and added 19,500 ounces of gold during the quarter, while the La Colorada mine produced 0.95 million ounces of silver. The Company's three Peruvian operations combined to post a solid quarter adding 1.9 million ounces of silver to Pan American's consolidated production.

In 2009, the Company's silver production grew for the 14th consecutive year to a record 23.0 million ounces, a 23% increase from 2008. Gold production increased to 100,700 ounces, a 300% increase as compared to 2008. Both records were the direct result of commencing commercial operations at Manantial Espejo and San Vicente. In addition, the Company also achieved record zinc and copper production of 44,246 tonnes and 6,446 tonnes, respectively.

Consolidated cash costs for the fourth quarter declined to $5.36 per ounce of silver, net of by-product credits, a 35% decrease from the $8.24 per ounce posted in the last quarter of 2008. Consolidated cash costs for the year were $5.53 per ounce of silver, net of by-product credits, a 7% improvement from the $5.97 posted in 2008 and well below the Company's annual guidance of $6.00 per ounce for 2009. Lower cash costs were a result of ongoing costs-savings programs implemented in late 2008, higher by-product metal prices and the inclusion of low-cost production from Manantial Espejo in the Company's consolidated base.

Outlook

In 2010 the Company expects a 2% increase in silver production to 23.4 million ounces. The anticipated production increase will come from a full year of production from both Manantial Espejo and San Vicente, offset by an expected production decline at Alamo Dorado.