Last updated on April 25, 2014 at 1:22 EDT

Pan American Silver increases silver production by 14% and reports record quarterly gold production

August 14, 2012

(All amounts in US dollars unless otherwise stated and all production
figures are approximate)

VANCOUVER, Aug. 14, 2012 /PRNewswire/ – Pan American Silver Corp. (NASDAQ: PAAS; TSX: PAA) (the “Company”, or “Pan American”), today
reported operational and financial results for the second quarter of
2012.  In addition, Pan American provided an update on its operations
and its development projects including the integration of the
recently-acquired Dolores mine.

This earnings release should be read in conjunction with the Company’s
MD&A, Financial Statements and Notes to Financial Statements for the
corresponding period, which have been posted on SEDAR at
www.sedar.com and are also available on the Company’s website at www.panamericansilver.com.

    |Second Quarter 2012 Financial and Operating Highlights (unaudited)   |
    |(1)                                                                  |
    |    --  Second-highest quarterly silver production in Company        |
    |        history, of 6.4 million ounces                               |
    |    --  Quarterly record gold production of 32,244 ounces            |
    |    --  Consolidated cash costs(2) of $11.85per ounce of silver, net |
    |        of by-product credits                                        |
    |    --  Mine operating earningsof $56.3 million                      |
    |    --  Net earnings of $44.0 million or $0.29 per share             |
    |    --  Adjusted earnings(3) of $17.1 million or $0.11 per share     |
    |    --  Operating cash flow (before working capital changes) of $35.0|
    |        million or $0.23 per share                                   |
    |    --  Revenue of $200.6 million                                    |
    |    --  Invested $23.5 million to repurchase 1.3 million of the      |
    |        Company's shares. Completed the repurchase                   |
    |        program subsequent to quarter end, totaling 5.4 million      |
    |Liquidity (at June 30, 2012)                                         |
    |    --  Cash and short-term investments of $519.8 million            |
    |Strategic Business Development                                       |
    |    --  Completed the integration of the Dolores silver/gold mine in |
    |        Mexico                                                       |
    |    --  Sold the high-cost, Quiruvilca mine on June 1, 2012          |

    (1) Financial information in this news release is based on
    International Financial Reporting Standards ("IFRS"); results are
    (2)Cash costs per payable ounce of silver is a non-GAAP measure. The
    Company believes that in addition to production costs, depreciation and
    amortization, and royalties, cash cost 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 IFRS as an
    indicator of performance.  Investors are cautioned that cash costs per
    ounce should not be construed as an alternative to production costs,
    depreciation and amortization, and royalties determined in accordance
    with IFRS 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 production costs, depreciation and
    amortization, and royalties.
    (3) Adjusted earnings is a non-GAAP measure calculated as net earnings
    for the period adjusting for; the gain or loss recorded on fair market
    value adjustments on the Company's outstanding derivative instruments,
    foreign exchange gains or losses. The Company considers this measure to
    better reflect normalized earnings as it does not include unrealized
    gains or losses from outstanding derivatives, which may be volatile
    from period to period, and acquisition costs and other non-recurring

Commenting on the 2(nd) quarter results, Geoff Burns, President and CEO said; “We had a very
solid production quarter and as expected, after our acquisition and
integration of the Dolores mine, we set a new quarterly record for gold
production and achieved the-second highest silver production in our
history. At mid-year, we are right on track to achieve the production
and cash cost goals we set for 2012.”  Burns continued; “Our operating
earnings remain healthy in spite of a 23% decline in the realized
silver price year-on-year, as we significantly strengthened our mining
portfolio with the addition of the low-cost Dolores mine and the sale
of Quiruvilca.  As always, we intend to continue to concentrate on
optimizing our assets, led by our work at Dolores.  With our Navidad
project temporarily sidelined, we will be evaluating opportunities to
organically grow our production more aggressively, for example a
Dolores mill potential, further resource expansions at La Colorada and
our re-activated Waterloo silver project.  Finally, we will use our
financial strength and sector-knowledge to look for new development

Financial Results

During the second quarter of 2012, Pan American generated revenue of
$200.6 million, a decline of 13% as compared to revenues generated in
the second quarter of 2011.  Revenue and adjusted earnings were
directly impacted by a marked decline in the realized prices of silver
and base metals, a $9.6 million negative price adjustment on sales
recorded in the previous quarter but which were settled or marked to
market in the current quarter, and the fact that the Company sold 0.7
million less ounces of silver and 5,800 less ounces of gold than were
produced in the quarter.  These items were partially offset by higher
realized prices for gold and more precious metals sold year-on-year. 
During the quarter, the average realized price of silver was $29.53,
which was 23% lower than a year ago. Base metal prices also declined
year-on-year and the Company realized prices per tonne of $1,924 for
zinc, $2,010 for lead and $8,166 for copper, which were 16%, 21% and
10% lower than in the comparable quarter of 2011, respectively.

Net earnings generated during the quarter ended June 30, 2012 were $44.0
million, or $0.29 per share, which was 61% lower than in the second
quarter of 2011.  After adjusting for the $21.2 million non-cash gains
on derivatives, an $11.2 million gain on the sale of the Quiruvilca
mine, $2.4 million in transaction costs related to the Minefinders
Corporation acquisition and a $3.1 million foreign exchange loss, the
Company’s adjusted earnings were $17.1 million, or $0.11 per share.
This compares to adjusted earnings of $75.44 million or $0.70 per share
in the comparable quarter in 2011. Adjusted earnings per share and all
other per-share performance metrics in the second quarter were impacted
by the issuance of approximately 49 million shares of Pan American’s
common stock in connection with the acquisition of Minefinders that was
completed on March 30, 2012.

Mine operating earnings for the second quarter of 2012 were $56.3
million, or 53% less than in the same period of 2011.  The decrease was
primarily due to the items mentioned above, in addition to higher
depreciation charges on revenues from the newly-acquired Dolores mine
and higher royalties – in particular at the San Vicente mine, where
royalties paid to COMIBOL have increased from 9.4% to 37.5% of
operating cash flow, now that the Company has completed the capital
pay-back period.

During the three months ended June 30, 2012, operating cash flow before
non-cash working capital changes was $35.0 million, or $0.23 per
share.  The decline year-on-year was mainly due to lower mine operating
earnings, and $27.8 million in taxes paid during the second quarter of
2012 as compared to only $10.8 million in the same period of 2011.

At $24.3 million, accrued income taxes for the second quarter of 2012
were 22% lower than in the same quarter of 2011 due to lower operating
earnings.  However, the effective tax rate for the quarter was 35.6%,
which was higher than the 21.5% recorded during the second quarter of
2011.  The main factors causing variations in the Company’s effective
tax rate are the unrealized non-cash gains/losses on the Company’s
warrants, foreign income tax rate differentials, foreign exchange
gains/losses and non-recognition of certain deferred tax assets.  Pan
American expects that these and other factors will continue to cause
volatility in effective tax rates in the future.  The Company expects
that the effective tax rate for 2012, excluding the non-cash market
adjustments for the volatility in warrants and convertible debt, to be
between 30% and 35%.

The Company’s working capital was $768.8 million at June 30, 2012, of
which $519.8 million was held in cash and short term investments. In
the first six months of 2012, Pan American has paid $109.5 million in
income taxes (predominantly related to previous years’ income),
invested $52.8 million in capital at its operations and development
projects, invested a further $29.8 million in precious metals and
Dolores mine’s leach pad inventory, spent $23.5 million repurchasing
shares, paid $9.7 million in dividends and still increased our cash and
short term investments by $28.5 million, inclusive of $86.5 million
acquired through the Minefinders transaction.

Production and Operations

During the three months ended June 30, 2012, Pan American’s consolidated
silver production was 6.4 million ounces, 14% more than in the second
quarter of 2011 and 16% greater than production in the first quarter of
2012.  The increase was due to the addition of 0.9 million ounces
produced by the newly-acquired Dolores mine in the state of Chihuahua,
Mexico.  Also in Mexico, the La Colorada mine and the Alamo Dorado mine
produced 1.1 million ounces and 1.3 million ounces of silver,
respectively.  La Colorada’s silver production was in line with that of
last year’s second quarter, but Alamo Dorado’s output was slightly
lower year-on-year due to expected lower throughput rates as a result
of mining and processing harder ores.

In Peru, higher silver grades and throughput rates improved silver
production at the Morococha mine to 0.5 million ounces, a 28% increase
from the second quarter of last year.  At the Huaron mine, lower grades
were almost completely offset by higher throughput rates and
recoveries, resulting in a marginal decline in silver production to 0.7
million ounces, approximately 25,000 ounces less than in the same
period of last year.

Following the strategic review announced by Pan American at the
beginning of this year, the Company successfully completed the sale of
the high-cost Quiruvilca mine effective June 1, 2012 to a subsidiary of
Southern Peaks Mining L.P.  Under the terms of the sale agreement, Pan
American sold 100% of its ownership interest in the mine for $2 million
in cash, subject to certain adjustments, which were described in detail
in the Company’s news release dated June 26, 2012.  The Quiruvilca mine
only contributed a total of 0.1 million ounces of silver for the months
of April and May, as compared to 0.2 million ounces during the second
quarter of 2011.

In Argentina, the Manantial Espejo mine produced 0.9 million ounces of
silver, 8% less than in the second quarter of last year.  The country’s
import restrictions continue to have a negative effect on equipment
availabilities in the open pit and underground operations, as well as
in the processing plant.  The low equipment availability has delayed
access to higher grade ores, leading to lower silver and gold
production than was anticipated.  Efforts continue to find solutions to
overcome the spare parts supply issues including enhancing the quality
of local supplies.

At just over 0.9 million ounces, silver production at the San Vicente
mine improved slightly on higher throughput and recovery rates, which
were partially offset by modestly lower grades.

The Company’s 2012 second quarter consolidated gold production rose 47%
from the second quarter of 2011 to 32,244 ounces, thanks to the
contribution of approximately 15,000 ounces from Dolores and a slight
increase in gold production from Alamo Dorado on higher gold grades,
partially offset by a decline in gold production from Manantial
Espejo.  For the three months ended June 30, 2012, zinc and copper
production was relatively flat year-on-year due to production
improvements at Huaron and Morococha, partially offset by the sale of

Consolidated cash costs during this year’s second quarter were $11.85
per ounce, net of by-product credits, an increase of 29% over the
second quarter of last year.  As forecast, cash costs rose at most of
the Company’s operations due to lower by-product credits from lower
metal prices, the effects of cost inflation, particularly in Argentina,
increased COMIBOL participation at San Vicente and the planned increase
in underground development at our Peruvian operations.  Offsetting
these expected increases was the consolidation of production from the
low-cost Dolores mine.

Dolores’ cash costs in the second quarter of 2012 were $2.06 per ounce,
net of gold by-product credits, which was well below the Company’s
guidance and had a positive impact on our cost profile.

Project Development

At the Navidad development project in Chubut, Argentina, Pan American
invested $6.6 million during the second quarter of 2012 to advance the
Project’s Environmental Impact Assessment (EIA) and work towards
completion of an updated Feasibility Study.  Progress included updated
economics based on current capital and operating costs, both of which
have increased from the PEA issued in late 2010, offset by the
inclusion of additional mineral resources defined by last year’s
exploration drilling program.  While 90% complete, work on the updated
feasibility study has been suspended pending clarity and final
definition of the draft mining legislation that was submitted to the
provincial legislature during the quarter.

On July 2(nd), Pan American reported that the Governor of the province of Chubut,
submitted to the provincial legislature a draft bill that would
regulate all oil and gas and mining activities in the province.  The
draft legislation incorporated the long-awaited and expected zoning of
the province, which would allow for the development of Navidad as an
open pit mine.

However, the same draft legislation proposed to introduce a series of
new regulations, which would significantly increase provincial
royalties and impose the province’s direct participation in all mining
projects, including Navidad.  While the proposed bill remains subject
to review and debate within sub-committees of the legislature, without
meaningful modifications, the Company will be forced to temporarily
suspend further project expenditures in Navidad.  Without a clear
potential for positive economic returns, it is impossible to justify
further investment in this world-class silver development project.  Pan
American is hopeful that the provincial government will consider the
magnitude of the negative effect this proposed law, as drafted, would
have on future mining activities in Chubut, and believes that there is
a reasonable possibility that the draft legislation will be amended
during the parliamentary discussion prior to its passage.

At present, Pan American Silver is curtailing activities related to
project engineering, procurement and development until the final
passing of the law is complete and the ultimate economic impact of the
fiscal measures can be assessed.  Local community support activities in
Chubut will continue in order to sustain the social acceptance that the
Company has worked so hard to obtain. Although project engineering and
development is on hold, none of the work completed to date has been
jeopardized and it can be ramped-up in a short period of time when and
if conditions warrant.

Pan American has also focused its attention to the Waterloo silver
development project in San Bernardino County, California, where the
Company owns 100% of a property that contains a large historical of
plus-100 million ounces of silver mineral resource((1)).  Initial drilling results have been excellent, confirming some of the
historical results published by the project’s previous owner. For the
remainder of the year, the Company will increase its exploration
efforts at Waterloo, including metallurgical test work, continued RC
and diamond drilling, geological mapping and geophysical surveys.

Commenting on the quarterly results and plans for the balance of 2012,
Steve Busby, Chief Operating Officer, said, “I am very pleased at how
quickly and positively the integration of the long-life Dolores mine
was achieved and I look forward to taking advantage of the many
opportunities to optimize the mine that we see possible in the coming
years.  I remain concerned by the persistent inflation that we continue
to battle with in Argentina at Manantial Espejo, but we’re finally
starting to see production improvements at our Peruvian operations
following the intensive efforts over the last couple of years.  In
addition, our San Vicente, Alamo Dorado and La Colorada mines all
continue to provide consistent profitable production. With over half
the year behind us, I am confident that we will achieve the production
and cost guidance we provided earlier this year of 24.25 to 25.5
million ounces of silver at a consolidated cash cost of between $11.50
to $12.50 per ounce of silver, net of by-product credits.”

((1)) The historical estimate for Waterloo was prepared prior to
implementation of National Instrument 43-101, Standards of Disclosure
for Mineral Projects (“NI 43-101″), and the Company has not yet
completed the work necessary to verify the historical estimate or to
classify the historical estimate as current Mineral Resources. 
Accordingly, the Company is not treating the historical estimate as a
current Mineral Resource or NI 43-101-compliant based on information
prepared or under the supervision of a Qualified Person (“QP”).  The
historical estimate should not be relied upon; however, Michael
Steinmann, P.Geo., the QP for Pan American, has reviewed all the
available data and believes that the historical estimate was conducted
in an appropriate manner and is relevant for the purposes of the
Company’s decision to maintain its interest in the property.


About Pan American Silver

Pan American Silver’s mission is to be the world’s largest and lowest
cost primary silver mining company by increasing its low cost silver
production and silver Mineral Reserves.  The Company has seven
operating mines in Mexico, Peru, Argentina and Bolivia, including the
recently acquired Dolores gold/silver mine in Chihuahua, Mexico. Pan
American also owns the Navidad silver development project in Chubut,
Argentina, the Calcatreu gold project in Rio Negro, also in Argentina
and the La Virginia development project in Sonora, Mexico.

Technical information contained in this news release with respect to Pan
American has been reviewed by Michael Steinmann, P.Geo., Executive VP
Geology & Exploration, and Martin Wafforn, P.Eng., VP Technical
Services, who are the Company’s Qualified Persons
for the purposes of NI 43-101.

Pan American will host a conference call to discuss the unaudited
quarterly results on Wednesday, August 15, 2012 at 11:00 am ET (08:00
am PT).  To access the conference, North American participants dial
1-647-427-7450, followed by conference ID 12917908.  A live audio
webcast can be accessed at http://www.newswire.ca/en/webcast/detail/1009459/1090681.  Listeners may also gain access by logging on at http://www.panamericansilver.com/q2-2012-results-conference-call/.  The call will be available for replay for one week after the call by
dialing 1-416-849-0833 and entering replay password # 12917908.


Certain of the statements and information in this news release
constitute “forward-looking statements” within the meaning of the
United States Private Securities Litigation Reform Act of 1995 and
“forward-looking information” within the meaning of applicable Canadian
provincial securities laws.  All statements, other than statements of
historical fact, are forward-looking statements.  When used in this
news release the words, “believes”, “expects”, “intends”, “plans”,
“forecast”, “objective”, “OUTLOOK”, “POSITIONING”, “POTENTIAL”,
“ANTICIPATED”, “budget”, and other similar words and expressions,
identify forward-looking statements or information.  These
forward-looking statements or information relate to, among other
things: future production of silver, gold and other metals and the
timing of such production; future cash costs per ounce of silver; the
price of silver and other metals; THE EFFECTS OF LAWS, REGULATIONS AND
FUTURE OPERATIONS including, but not limited to LAWS IN THE PROVINCE OF
CHUBUT, ARGENTINA, WHICH, currently have significant restrictions on
mining and any potentialchanges to the laws of bolivia with respect to
mining; ;the potential for future expansion and optimization of the
dolores mineand the development of the navidad projectand other 
development projects of the companies; the timing of production and the
cash and total costs of production at each of the company’s properties;
the sufficiency of the Company’s current working capital, anticipated
operating cash flow or its ability to raise necessary funds; timing of
release of technical or other reports, including the finalization of
the environmental impact assessments and feasibility study relating to
the navidad project; the estimates of expected or anticipated economic
returns from the Company’s mining projects; forecast capital and
non-operating spending; future sales of the metals, concentrates or
other products produced by the Company; and the Company’s plans and
expectations for its properties and operations.

These statements reflect the Company’s current views with respect to
future events and are necessarily based upon a number of assumptions
and estimates that, while considered reasonable by the Company, are
inherently subject to significant business, economic, competitive,
political and social uncertainties and contingencies.  Many factors,
both known and unknown, could cause actual results, performance or
achievements to be materially different from the results, performance
or achievements that are or may be expressed or implied by such
forward-looking statements contained in this News Release and the
Company has made assumptions and estimates based on or related to many
of these factors.  Such factors include, without limitation:
fluctuations in spot and forward markets for silver, gold, base metals
and certain other commodities (such as natural gas, fuel oil and
electricity); fluctuations in currency markets (such as the Canadian
dollar, Peruvian sol, Mexican peso, Argentine peso and Bolivian
boliviano versus the U.S. dollar); risks related to the technological
and operational nature of the Company’s business; changes in national
and local government, legislation, taxation, controls or regulations
including among others, changes to import and export regulations and
laws relating to the repatriation of capital and foreign currency
controls; political or economic developments in Canada, the United
States, Mexico, Peru, Argentina, Bolivia or other countries where the
Company may carry on business in the future; risks and hazards
associated with the business of mineral exploration, development and
mining (including environmental hazards, industrial accidents, unusual
or unexpected geological or structural formations, pressures, cave-ins
COMPANY DOES BUSINESS; inadequate insurance, or inability to obtain
insurance, to cover these risks and hazards; employee relations;
POPULATIONS; availability and increasing costs associated with mining
inputs and labour; the speculative nature of mineral exploration and
development, including the risks of obtaining necessary licenses and
CHUBUT, ARGENTINA; diminishing quantities or grades of mineral reserves
as properties are mined; global financial conditions; the Company’s
ability to complete and successfully integrate acquisitions AND TO
IN MAINTAINING, the Company’s title to properties AND CONTINUED
OWNERSHIP THEREOF; the actual results of current exploration
activities, conclusions of economic evaluations, and changes in project
parameters to deal with unanticipated economic or other factors;
increased competition in the mining industry for properties, equipment,
qualified personnel, and their costs; and those factors identified
under the caption “Risks Related to Pan American’s Business” in the
Company’s most recent Form 40-F and Annual Information Form filed with
the United States Securities and Exchange Commission and Canadian
provincial securities regulatory authorities.  Investors are cautioned
against attributing undue certainty or reliance on forward-looking
statements.  Although the Company has attempted to identify important
factors that could cause actual results to differ materially, there may
be other factors that cause results not to be as anticipated,
estimated, described or intended.  The Company does not intend, and
does not assume any obligation, to update these forward-looking
statements or information to reflect changes in assumptions or changes
in circumstances or any other events affecting such statements or
information, other than as required by applicable law.

    Pan American
    Silver Corp.
    Financial &

                        Three months ended June 30,         Six months ended June 30,

                               2012            2011             2012             2011


    (Unaudited in
    thousands of

    Net earnings
    for the
    period              $    44,041     $   113,478     $     94,286     $    206,157

    Earnings per
    to common
    shareholders        $      0.29     $      1.04     $       0.73     $       1.91

    earnings for
    the period(1)       $    17,050     $    75,440     $     77,687     $    140,071

    earnings per
    share               $      0.11     $      0.70     $       0.60     $       1.31

    earnings            $    56,296     $   118,629     $    158,192     $    214,647

    Cash flow
    (used by)
    operations          $   (5,200)     $   104,127     $     32,195     $    163,592

    cash flow
    changes             $    35,021     $   119,523     $     63,012     $    202,070

    spending            $  (32,809)     $  (39,651)     $   (52,825)     $   (56,843)

    Cash and
    investments         $   519,759     $   460,996     $    519,759     $    460,996

    capital(2)          $   768,789     $   578,153     $    768,789     $    578,153

    Consolidated Ore
    Milled & Metals
    Recovered to

    Tonnes milled         2,511,691       1,171,361        3,667,740        2,332,881

    Silver metal
    - ounces              6,399,446       5,620,038       11,902,405       10,964,777

    Gold metal -
    ounces                   32,244          21,900           51,740           40,540

    Zinc metal -
    tonnes                    8,429           8,582           19,461           17,426

    Lead metal -
    tonnes                    2,775           3,081            6,790            6,380

    Copper metal
    - tonnes                  1,037           1,054            2,016            2,300

    Cost per
    Ounce of
    Silver (net
    of by-product

    Total cash
    cost per
    ounce               $     11.85     $      9.19     $      11.23     $        8.53

    cost per
    ounce               $     17.27     $     12.75     $      15.87     $      12.03

    ounces of
    silver (used
    in cost per
    calculations)         6,072,220       5,369,975       11,245,214       10,463,449

    (1)      Adjusted earnings is a non-GAAP measure calculated as net
             earnings for the period adjusting for the gain or loss
             recorded on fair market
             value adjustments on the Company's outstanding derivative
             instruments, foreign exchange gains or losses, the transaction
             costs arising from
             the Minefinders transaction and gains on the disposition of
             mineral interests. The Company considers this measure to
             better reflect normalized
             earnings as it does not include unrealized gains or losses
             from outstanding derivatives, which may be volatile from
             period to period, and acquisition
             costs and other non-recurring items.

    (2)      Working capital is a non-GAAP measure calculated as current
             assets less current liabilities. The Company and certain
             investors use this
             information to evaluate whether the Company is able to meet
             its current obligations using its current assets.


SOURCE Pan American Silver Corp.

Source: PR Newswire