Pan American Silver security improved at Mexico mine

Pan American's Dolores gold-silver mine in Chihuahua, Mexico. Source: Pan American Silver Corp.

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Pan American’s Dolores gold-silver mine in Chihuahua, Mexico. Source: Pan American Silver Corp.

Pan American Silver Corp. [PAAS-TSX, NASDAQ] on Monday June 4 said the security situation at its Dolores Mine in Chihuahua, Mexico is improved following increased patrols and enforcement by Mexican Authorities.

Road transport of diesel fuel, cement and other supplies to the mine has now resumed. The company said it will increase the use of its private secured airstrip to transport people until the situation normalizes. In late May, Pan American reduced activities on site, including underground and open pit mining and leach pad expansion. The company said these steps followed recent security incidents along the access roads being used to transport personnel and materials to and from the Dolores mine. It did not elaborate.

“Our priority is the safety and security of our personnel,” said Pan American President and CEO Michael Steinmann in a press release issued on May 28, 2018. It is why the company elected to suspend personnel movements to and from the mine until roads are safe for employees, Steinmann said.

On Monday, the company said production continues at normal rate due to a large reserve of high and low grade ore stockpiles. At this time, Pan American said it does not expect a material impact on its annual production guidance of 4.5 million to 4.9 million ounces of silver and 138,900 ounces to 147,700 ounces of gold.

Pan American shares eased 0.61% or $0.14 to $22.82 in early afternoon trading on Monday. The 52-week range is $24.49 and $18.

Pan American recently said road blockades at its Huaron Mine in Peru ended after operations there were suspended last month.

As announced April 27, 2018, operations at the mine had been suspended since April 24, 2018, as a result of road blockades instituted by members of the nearby Huayllay community.

“With oversight from the Social Affairs General Office of the Peruvian Ministry of Energy and Mines, an agreement was reached with representatives of the Huayllay community to end the roadblocks,” Pan American said in a press release.

“This was resolved quickly enough that guidance is maintained at 25.0 to 26.5 million ounces of silver with all-in-sustaining costs of US$9.30 to $10.80 an ounce,” Scotiabank said in a report.

Pan American said the community members were demanding compensation from the company for alleged impacts to the community land, as well as additional service contracts for construction work, haulage and material supply at the mine.

The underground mine, mill and supporting villages at Huaron were originally built in 1912 by a subsidiary of the French Penarroya Company. The nearby town of Huayllay provides workers, lodging and supplies.

Pan American owns and operates six mines in Mexico, Peru, Argentina and Bolivia. The Peruvian operations include the Huaron and Morococha mines and an exploration stage gold property know as Pico Machay.  Huaron is a 2,300 tonne-per-day underground polymetallic silver mine located in the province of Pasco in the Central Highlands of Peru.

Cerro de Pasco, the nearest city, is a major mining centre and capital of the region with a population of 70,000. The operation is producing silver-rich zinc, lead and copper in concentrates. It is expected to produce 3.6-3.8 million ounces of silver, or 14% of the company’s targeted production this year.

The company’s largest operations, in terms of production are the La Colorado and Dolores mines in Mexico. They are expected to produce between 7.4-7.7 million and 4.5-4.9 million ounces of silver this year, respectively.

The Huaron Mine was acquired by Pan American in 2001. The company is now the 100% owner of Huaron and the mining concessions, through its wholly-owned subsidiary Pan American Silver Huaron S.A. The mineral rights are held by 187 mining concessions with a combined area of 29,343.7 hectares. The concessions are permanently granted provided that the holder complies with an annual payment to the Institute of Geology, Mining and Metallurgy (INGEMMET), which is a branch of the Peruvian Ministry of Energy and Mines.

Huaron operates an 870,000 tonne-per-year mill using froth induced flotation technology to produce silver in copper, lead and zinc concentrates.

Silver, zinc, lead and copper mineralization is present in epithermal veins, mantos and limestone replacements. Mining is undertaken using a combination of mechanized sub-level long hole stoping, and mechanical and conventional cut and fill.

A June 2014 technical report said Pan American’s community relations team implements an extensive program of community engagement activities including information sessions, health services, infrastructure works and education and training programs for local people, which have resulted in the establishment of several small businesses.

The report said experienced mining personnel from the region commute to the property via company sponsored buses, company vehicles or privately owned vehicles.

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