Manantial Espejo

Pan American Silver reported production results for the three months ended September 30, 2010. The company's 6.2 million ounces of silver production in Q3 2010 was slightly lower than the 6.4 million ounces of silver produced in Q3 2009. Silver production decreased primarily due to lower silver grades and recoveries at the Peruvian operations. Production of gold decreased 24% over the comparable period of 2009 due mainly to reduced grades at Manantial Espejo. Higher zinc production at La Colorada and San Vicente’s new plant served to compensate for lower production at Huaron due to lower grades, and lower production at both Morococha and Quiruvilca due to lower tonnes milled. Higher lead production at Huaron and La Colorada was due to higher throughput and higher grades at Morococha but was partially offset by lower production at Quiruvilca due to lower milled tonnes. Copper production declined by 34% compared to Q3 2009 due primarily to lower grades.

Pan American‘s silver production increased by 4.4 million ounces to 23 million ounces in 2009 primarily driven by new production from Manantial Espejo and San Vicente, partially offset by decreases at our Mexican operations. Silver production in 2009 was slightly above our forecast of 22.9 million ounces, including production from Quiruvilca. Quiruvilca operated for the full year in 2009 and contributed 1.4 million ounces to our consolidated silver production. Higher than forecast silver production at San Vicente, Alamo Dorado, La Colorada and Morococha outweighed shortfalls relative to management’s expectations at Huaron and Manantial Espejo.Consolidated cash costs per ounce of silver were $5.53 in 2009, a 7% decline from 2008’s cash costs per ounce of $5.96.

Pan American produced a new company record 5.8 million ounces of silver in the second quarter of 2009, which was a 24% increase over the 4.7 million ounces produced in the second quarter of 2008. The main reasons for the increase were the addition of silver production from the Manantial Espejo mine, which produced 1.0 million ounces of silver in Q2 2009 and increased silver production from San Vicente, which produced an additional 0.4 million ounces in Q2 2009 relative to silver production in Q2 2008. These increases were partially offset by lower silver production at La Colorada and Alamo Dorado in Mexico as a result of anticipated lower throughput and silver grades. At the company’s Peruvian operations, as forecast, lower throughput rates were partially offset by higher silver grades which resulted in a slight decrease in silver production relative to the comparable period of 2008. Consolidated cash costs for Q2 2009 were $5.99 per ounce compared to $5.28 per ounce for the corresponding period of 2008. The most significant factor behind this increase in cash costs was the decrease in by-product credits per ounce, which resulted from lower base metal prices, partially offset by increases in by-product metal production.