Pan American Silver suspends operations at Peru mine

The milling facility at Pan American's Huaron Mine in Peru. Source: Pan American Silver Corp.

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The milling facility at Pan American’s Huaron Mine in Peru. Source: Pan American Silver Corp.

Pan American Silver Corp. [PAAS-TSX, NASDAQ] said operations at its Huaron Mine in Peru have been suspended since April 24, 2018, as a result of road blockades instituted by members of the nearby Huayllay community.

The announcement came after the close of trading Friday, April 27, 2018.

Pan American said the community members have demanded 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 company said it is actively involved in discussions with the community members and is engaged in the mediation process being led by the Social Affairs General Office of the Peruvian Ministry of Energy and Mines. It also said it will provide notice once operations at the Huaron Mine have resumed.

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.

Shares of Pan American Silver, the world’s second largest primary silver producer, eased 4% or $0.86 to $20.68 in late morning trading on Monday.

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 ounces, 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 there were no social or community pressures that materially impact the ability of the company to extract the mineral reserves and resources. It said Pan America’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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