Pan American Silver Corp (PAAS) 2007 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the Pan American Silver fourth-quarter and year-end 2007 earnings conference call. At this time, all participants are in a listen-only mode. Following today's presentation, instructions will be given for the question-and-answer session. (OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded Thursday, February 21, 2008.

I would now like to turn the conference over to Geoff Burns, President and Chief Executive Officer. Please go ahead, sir.

Thank you, operator. Good afternoon, ladies and gentlemen, and welcome to Pan American Silver fourth-quarter and 2007 year-end earnings release conference call. Joining me today here in Vancouver are Steve Busby, Senior Vice President, Project Development; Andrew Pooler, Senior Vice President, Operations; Michael Steinmann, Senior Vice President, Exploration and Mine Geology; and Rob Doyle, our Chief Financial Officer.

This morning I am going to start by making some comments on our overall performance and then touch briefly on each and every one of our mining operations. I have asked Steve Busby to update you on our Manantial Espejo and San Vicente development projects; and then Michael Steinmann will provide his views on our exploration programs and our recently-released reserve and resource update.

Let's get started. We delivered another solid quarter to close off last year, and by all measures 2007 was the best year in the Company's history.

During the fourth quarter, we posted a new Company record for silver production at 5.1 million ounces, which was up over 63% as compared to the fourth quarter of 2006.

We generated quarterly cash flow from our operating activities of $27.3 million, before non-cash working capital items. That is $0.36 per share and up 23% relative to the same period a year ago. Our quarterly revenues reached $85.9 million, up 4% from 2006.

The one shadow on our results in the fourth quarter was that our cost did climb to $4.54 per ounce. Hmm, costs; there has certainly been a lot of discussion on that topic both industrywide and internally here at Pan American.

I'm going to make some specific comments on our costs a little later when I talk about our 2008 forecast. But for the moment, I would like to say one thing. While our costs have gone up, our margins have remained very, very healthy.

In the fourth quarter, we realized an average silver price of $14.21 per ounce, so our cash operating margin was $9.70. While our costs in the year earlier period were much lower at $2.42 per ounce, our realized price of silver was only $12.58, so our cash margin was just over $10.

So our margins have shrunk a little less than 4% while at the same time our production has grown 63%. Pretty favorable math, I would contend. And at close to $18 today, we are seeing that our margins are absolutely expanding.

Putting everything together, we recorded net income of $26.1 million or $0.34 per share in the fourth quarter. If were not for a damn strike in the Peruvian port of Callao in December, which limited our ability to ship and record in sales almost 4,000 tonnes of zinc concentrates, I believe we would have recorded a record net income.

For the full year in 2007, we produced a new Company record of 17.1 million ounces of silver, just above our forecast. Cash flow from our operating activities was a new record at $106 million or $1.39 per share. That was an increase of 54% relative to 2006.

Annual sales topped $301 million, another record. Cash costs for the year, although higher, were a very respectable $3.42 per ounce. Finally, net income for 2007 was $88.9 million or $1.16 per share, an increase of 53% as compared to 2006's net income.

Record silver production, record cash flow, record revenue, and record earnings, another solid increase in our proven and probable reserves. I think it is fair to say that Pan American has had its best year in the Company's history. If silver prices stay where they are for 2008, which I for one believe they will, I'm predicting 2008 will be even better.

Let's talk operations, starting with our newest mine, Alamo Dorado in Mexico. After a slow start in early 2007, Alamo Dorado has come on like gangbusters. Throughput steadily improved, and by the end of the year we were consistently milling and processing above 4,500 tonnes per day, a little over 10% above feasibility estimates.

In December alone, Alamo Dorado produced over 600,000 ounces of silver. While I'm not expecting us to be able to meet this total every month, it does show what that mine is capable of doing.

For the full year, Alamo Dorado produced 3.8 million ounces of silver and over 13,000 ounces of gold at a cash cost of $4.41 per ounce. Not a bad showing for a startup year, I would say. For 2008, we're forecasting 5.2 million ounces of silver and 16,000 ounces of gold at a cost of $4.19 per ounce.

I like to think that Alamo Dorado is a model of what Pan American is all about. After the deposit was discovered by Corner Bay Silver, we negotiated its purchase. We designed the mine, and we did the feasibility study. We financed the construction costs, we built it, we started it up, and now it is delivering what we predicted it would.

This is the third operation we have taken from soup to nuts, and we have got two more on the boil. It is what defines Pan American in the silver sector. We are the silver mining company.

La Colorada, our other Mexican operation -- and one of those soup to nut jobs I just referred to -- had another outstanding quarter and its best year on record. La Colorada was our largest silver producer in 2008 with 4 million ounces of production, up 13% from 2006. Cash costs were relatively steady year-over-year at $6.90 per ounce.

Both the oxide and sulfide recovery circuits at the mine continue to run well at a combined rate of close to 1,100 tonnes per day, and underground operations have kept pace with this expanded processing capacity.

With the operation running smoothly, we shifted our attention to exploration and increasing La Colorada's mine life. We had some real success, but I am going to let Michael touch on that shortly. In 2008, we're forecasting 3.9 million ounces of silver from La Colorada at $7.50 per ounce.

Now, moving to Peru, at Morococha silver production for the year was 2.9 million ounces. Cash costs continued to be the lowest in the Company at negative $2.16 per ounce. Morococha's costs continue to benefit from high byproduct zinc production and good zinc prices. Morococha delivered a fine year in 2007, and we're forecasting it to produce 2.7 million ounces in 2008 at $0.33 an ounce.

The Huaron mine, one of the Company's cornerstone assets, maintained its solid performance throughout the fourth quarter and for the full year in 2007, and has clearly become one of our most consistent producing mines. Silver production at Huaron increased 4% in 2008 to 3.8 million ounces. Cash costs were very good at $2.78 per ounce for the year.

We initiated a mine deepening program at Huaron in early 2007 which is an investment in the long-term future of the operation. A significant portion of the highest grade reserves and resources are located below what is currently the lowest level of mine in the mine, the 250 level. We are currently ramping below the 250 level and are now working to deepen a pre-existing shaft to open up a completely new mining area. This project will take at least another full year to complete but will provide access to higher-grade ore for years to come.

This year, 2008, we believe Huaron will produce 3.7 million ounces of silver at a cost of $5.12 per ounce.

Our Quiruvilca mine in Peru had a tough year in 2007. It fell short of our production forecast, producing 1.6 million ounces of silver at a cost of $2.43 an ounce.

Don't misinterpret this comment. Quiruvilca still generated almost $16 million in mine operating earnings in 2007. It just didn't do as well as we thought it would.

We have now completed the 400 level ramp development project, and this access ramp is currently being commissioned and is expected to provide access to additional mining blocks with some higher silver and zinc grade material in 2008.

Having said that, we're going to be conservative with our forecast for 2008, and are predicting 1.5 million ounces at $5.40 an ounce.

We had some excellent exploration results in Peru this year. As much as I am tempted to dive into them right now, I don't want to steal any of Michael's thunder. Overall, our proving operations did very well in 2007, and remain the backbone of the Company, and should do equally well again this year.

To round out our operations, I will make a couple of comments on San Vicente's production performance. Silver production for the year from San Vicente was 619,000 ounces, as we mined throughout the year at an extremely modest basis, toll processing at a third-party mill at approximately 200 to 250 tonnes per day. Cash costs for the year were $5.41 per ounce of silver produced.

The future of San Vicente and our ability to extract real value out of this high-grade, long-life ore body, lies in the expansion project we started in 2007, which Steve will comment on momentarily. We will continue mining and processing in 2008 while we expand; and we're forecasting 700,000 ounces of silver from San Vicente this year.

I have talked enough for the moment. I'm going to ask Steve to fill you in on our growth plans, specifically the construction and development of Manantial Espejo and San Vicente. Steve?

Thank you, Jeff. Geoff. Starting with our San Vicente project, I am pleased to report this project is proceeding at a reasonable pace as we continue mobilizing the construction contractors to begin construction work following the typical wet summer season. This wet season has already started to taper off, and should end in the next three to four weeks.

We're particularly pleased with the safety performance of our approximate 350 employees and contractors working on the project, who have now accumulated in excess of 0.5 million safe manhours without a lost-time accident.

The new access ramp for the trackless mining development is advancing ahead of schedule and is now nearly 1 kilometer complete on the 2.3 kilometers planned ramp development.

Plant site excavations are completed and being prepared to begin the concrete placements. We estimate the project is now 30% complete and on track for mechanical completion by this year end.

The project equipment is staged at various ports around the world, and we now have favorable tax incentive authorizations and dry road conditions to begin shipping the equipment and materials to the site.

Total project expenditures to the end of December 2007 were $16 million; and total commitments were $24 million.

Under an agreement with the Bolivian state mining company, Comibol, we will begin mining and toll treating 100,000 metric tons more during 2008 while we complete the construction of the new 750 metric ton per day flotation mill; initiate the trackless mining of the high-grade [letoral] vein accessed by the new ramp; install a new hoist on the existing shaft; and upgrade much of the site infrastructure.

The site infrastructure upgrades include installing adequate power and water supply systems; upgrading the housing and camps; and enhancing the local school and medical clinic. We now expect the project capital cost to be $65 million, reflecting the need to upgrade the existing site infrastructure that was found to be inadequate to support our mine expansion and plant construction design.

This is an increase of about $23 million over our feasibility study, which we're not happy with; but, it is reflective of what is happening in the industry and what we are experiencing as well.

With that said, however, we're confident we can complete this project under this new estimate, particularly given that we have completed the engineering of this project; we have secured all the equipment and have it staged for delivery; and we have a well-defined construction program that is well underway.

We need to enhance the existing site infrastructure more than was initially anticipated, in order to attract the qualified staff to this remote site and to ensure this operation is sustainable over the life of the reserves and beyond.

In spite of this capital escalation, economics remain sound. At the current Pan American Silver Corp. reserve metal prices, the return of this project is estimated at 16% with a payback period of four years. At today's metal prices, this return exceeds 25% and has a payback of less than three years.

When completed, San Vicente is projected to produce on average approximately 2.8 million ounces of silver per year for the first five years of full production.

We're working towards securing our power supply and development agreements. When completed, we will remove a couple more remaining uncertainties we currently have with the project. We're not expecting significant problems with securing these agreements, but we will feel much more comfortable once they are in hand, given that they do require some level of political effort.

I'm particularly pleased with the quality of staff we have put in place for this construction and mine development. I'm confident we will be able to complete this project timely and reasonably within budget. The local community continues to be supportive of the project, and we expect San Vicente will be a long-lived asset in this important silver-producing region.

Moving south to our Manantial project in Argentina, I am very pleased to report that site development activities are proceeding safely, efficiently, and effectively. We have accumulated 1.3 million safe work hours without a lost-time accident and currently have 650 employee and construction contractors working on the project.

We estimate the overall project was 58% completed at year-end 2007, and we are on track for a midyear 2008 mechanical completion, after which we will anticipate a four-month startup to achieve full design production rates by year end and going into 2009.

Our significant project accomplishments to date include completing over 2.5 kilometers of underground development advances on two vein structures. We have also mined over 2.6 million metric tons from two surface pits.

We have stockpiled 132,000 tonnes of ore with grades of 165 gram per tonne of silver and 1.5 gram per tonne of gold, which contains approximately 20% more metal content than what we had estimated from this mine volume.

We have crosscut the two targeted veins in our underground developments as anticipated, and are seeing some very encouraging ore grades, where we extracted nearly 5,000 metric tons of development ore at grades in excess of 500 grams of silver and 6.4 grams of gold.

Although very early in the game, we are indeed encouraged by what we are seeing with the ore grades and the reserve model reconciliations.

We have completed most of the site ancillary and community housing projects, and it's allowing us to focus on completing the plant construction activities.

Unfortunately, the government-sponsored power line project has slid behind schedule; and as such, we have committed to construction of a 10 megawatt diesel generation facility on site that we anticipate could be needed for up to one year, until this power line is completed.

This power plant will also offer us additional protection in the future from downtimes caused from power supply disruptions that may be experienced. The generators and switchgear have been purchased, and we expect this facility to be operational in May.

We're very excited with completing the construction of this project in 2008 safely and start producing silver and gold in these very favorable markets as we have recently done at Alamo Dorado. We anticipate producing over 1.4 million ounces of silver and approximately 25,000 ounces of gold during 2008 as we get things started at a very favorable less than a negative $1.00 per ounce unit cash operating cost, given the handsome gold byproduct credit that we will enjoy on this project.

This operation will contribute 4 million ounces of silver and approximately 60,000 ounces of gold annually over its current estimated eight-year mine life. Once we stabilize this operation, we intend to reinitiate exploration efforts on the numerous untested vein structures that exist on the project.

We expect this operation will have a long and profitable life, becoming another cornerstone in Pan American Silver Corp's quality silver mine assets. You can imagine our anticipation of getting this project started, given the current metal market conditions.

This concludes my brief overview on the projects, and I will now turn it back over to Geoff.

Thanks, Steve. In addition to the earnings release we put out this morning, we released our annual update to proven and probable reserves a couple of days ago. I am hoping you may have had a chance to browse through that release as well.

Before turning the call over to Michael, I just wanted to say that in my opinion we had another outstanding year in 2007 on the exploration front. We start 2008 with 228 million ounces of silver in proven and probable reserves, having again more than replaced everything we mined in 2007 and added nicely to our reserve portfolio.

Over the last two years, we have discovered, upgraded, or purchased from JV partners over 86 million ounces of silver before considering annual mine depletion. This represents significant organic value creation.

In addition, Michael has launched a series of greenfield exploration initiatives; and we can only hope that there may be a major discovery hidden in one of them. Michael?

Morning. I'm sure most of you have seen our press release from February 20 with the Company-wide reserve and resource statements. In addition to replacing 100% of the 20.8 million ounces of contained silver that were mined during 2007, we added new proven and probable reserves of 14.5 million ounces and increased measured and indicated silver resources by another 4.9 million ounces.

In order to achieve similar exceptional results in 2008, our aggressive green- and brownfield program will continue during the entire year, drilling over 110,000 meters of diamond drilling. I would like to give you a short overview of the exploration plans for 2008 and deepen a bit the results from 2007.

First, our brownfield exploration programs. At Morococha we are drilling currently with eight to 10 rigs on a program of 25,000 meters for this year for exploration, and over 7,000 meters for infill drilling. The total cost for this program is approximately $2 million.

Besides the exploration for reserve replacement, the program will explore new targets on our large land holdings and expand our new high-grade vein discoveries on the northwest of the Morococha mine.

Since 2005, we added 30 million ounces of silver to the Morococha proven and probable reserves, a threefold increase since we purchased the mine. Morococha is a very large mine located in one of Peru's largest and prolific mineralized systems. I am very confident we will have good exploration results to report for years to come.

At Huaron, the program contains 25,000 meters of diamond drilling for 2008, using three to four rigs for a total of $800,000. We will continue with the exploration of the wide and hybrid ore bodies and veins discovered in 2007 in the 250 level, which were responsible for an important part of the 12.4 million ounce reserve replacement and addition at Huaron. The last three years we added 24.5 million ounces to the proven and probable reserves at Huaron.

The exploration program is advancing extremely well for us. With the current deepening of the mine that Geoff mentioned, we will access the [great] results we had with underground development. It is not only intersect of high-grades veins but also up 8-meter-wide ore bodies.

At Quiruvilca, we will drill about 12,000 meters using three rigs for a total cost of $700,000.

At La Colorada we're currently drilling with three rigs and will add a fourth one in March to work on a program of 14,000 meters with a total cost of $1.5 million. The main targets are the deep sulphides and the newly-discovered ore body in the Recompensa mine.

This is a very high-grade gold-silver ore body located close to our current development. Due to the exploration last year, mostly Recompensa added about 4 million ounces to our measured and indicated resources. We will upgrade a large part of these resources into the reserves during 2008. I will be very pleased to share these exciting results once the resource model and the metallurgical testwork is finished on this project.

In total, our brownfield exploration program for 2007 contains over 78,000 meters of diamond drilling, with a total drill cost of $5.5 million.

Now to our greenfield exploration. Our greenfield programs are mainly focused on Mexico, Peru, and Argentina, where we have several projects in each country. We plan to spend a total of about $7.8 million on these properties for exploration work and are constantly reviewing additional opportunities.

We are also very active in staking new ground. For example in Peru and Mexico, where we staked in 2007 over 24,600 hectares and 1,100 hectares, respectively, which will be part of our exploration program throughout the year.

Drill program for greenfield projects contains our 31,500 meters of diamond drilling. An important part of it will be executed on our optioned [Ariane] project in central Peru, where the first 10 drill holes intersected high-grade silver base metal mineralization in wide veins and branches.

As you see, we are very active exploring around our mines as well as on greenfield properties, running constantly 23 to 25 drill rigs. We will be releasing the results once the first stage of the program has been finished or resource models are available.

It is challenging to replace and add reserves year after year, on eight different properties. But I am confident that in 2008 we will once again add to our reserve base, and I can tell you that I am very pleased with the progress we have made on our greenfield programs up to this date. Geoff?

Thanks, Michael. Looking ahead into 2008, we are forecasting 19.5 million ounces of silver production or another 14% growth. We are also forecasting higher cash costs at $4.31 per ounce in 2008.

I said earlier that I would make a couple of comments on our costs. Our actual cash expenditures to produce a ton of ore have gone up. There are no two ways about it. Labor costs are higher; energy costs are higher; there are new government royalties in Peru and Bolivia; and there are the effects of strengthening currencies relative -- the effects of strengthening currencies relative to the US dollar are absolute.

We are focused on finding ways to improve our mining productivities to fight these effects; but the costs escalation has been rapid and is here to stay. Having said this, I believe the biggest effects of this cost inflation are now behind us.

There was clearly a catch-up phase on the labor front and energy costs, while higher, are starting to stabilize. So while higher costs are what we are living with, I don't see the same increases ahead of us as that we have just seen in 2006 and 2007.

While repeating myself, I think it is worthwhile to make the point again. Given the current price of silver, I expect our margins to expand nicely in 2008.

What of the price of silver? I would be remiss if I did not at least make a short comment on that. Silver prices increased throughout 2007, averaging $13.38 per ounce for the year, an increase of approximately 16% year over year.

The supply and demand fundamentals remain solid. Perhaps most importantly silver investment, like gold, has continued to increase. Silver investors through the Silver ETF have purchased almost 160 million ounces of the world's most versatile metal last time I checked.

These elements, combined with the weakness in the US dollar, clearly seem supportive of a positive outlook for future silver prices. Silver is trading at almost $18 an ounce today, and I believe $20 silver will be seen in the coming months.

Record silver production, record earnings, record cash flow, reserve replacement and growth, 2007 was a good year for Pan American. I want to thank the over 5,400 employees for helping to make that happen. Everyone from our Board of Directors to our operators in Mexico, Bolivia, Argentina, and Peru, my thanks.

To end, 2008 should be even better. Thank you, and I would ask the operator to open the lines for questions.

(OPERATOR INSTRUCTIONS) John Bridges with JPMorgan.

Good morning, Geoff, Rob. This is Ankush on behalf of John. I have two questions. Firstly, congratulations on the strong results despite the limited concentrate shipments.

Could you give us some color on what percentage of the production was not shipped because of the [dealers] at Peru?

Yes, sure, Ankush, Rob Doyle here. I will have to give you the details after the call; but from memory, there was about 15% of 2007's production was built up in inventory.

We built up about 10,000 tonnes during the course of the year, starting the year at roughly around 3,000 tonnes of concentrate inventory, and closing the year around 13,500 tonnes.

So just over 10,000 tonnes have built up. With monthly production rates of roundabout 10,000 tonnes, that is about a 15% buildup.

Okay, and should we expect this to remain like a constant level? Or do you expect inventory levels to go down next year?

It's a very unpredictable part of our business, because to a large extent the shipping schedules are out of our control. Unfortunately it will continue to be somewhat lumpy and volatile.

But certainly we think that our current inventory levels are well above average. So hopefully 2008 we will be able to report more shipments than production. So it obviously will come out over time. But it will continue to be volatile.

Okay. The second question is on Huaron, since you mentioned you have been working to deepen the mine to get access to the higher grade ore. Is this what is leading to slightly higher increase in the cash costs for 2008?

No, at Huaron the biggest thing on the cash costs, Ankush, is the assumptions we made within our forecast for metal prices. Because Huaron does benefit from zinc, copper, and lead byproducts. Our forecast prices are quite a bit below what the current pricing levels are, particularly for lead and copper.

The forecast is at $2,100 lead, and lead today is trading almost at $3,200, $3,300; and similar for copper. So that is the largest reason for actually forecasting higher cash costs at Huaron.

I actually predict there that we will have on an absolute basis in terms of dollars spent probably 7% kind of increase in our cash spent. The large per-ounce is a function of our calculated byproducts.

Okay, that is very helpful. Thank you.

John Doody with Gold Stock Analyst.

Guys, congratulations on a great year. Sort of a philosophical question, I guess. You're now operating mines in four countries in South America. They all have different issues. You are dealing with them, and dealing with them quite successfully.

I am wondering if you just had a -- what country would you prefer to be in, if everything else being equal? Is there one that you can say that really is more easier to operate in than any of the others?

And then I have a tax question for Rob.

Okay, well, I'm glad you're saving the tax question for Rob, John. Yes, I think, John, there clearly is some preferential countries in where we operate.

In some respects, fortuitously, the two best districts for silver have historically been Peru and Mexico; and they are clearly our preferential countries to operate in.

Mexico and Peru are very favorable to mining. They have long histories of developing mines, of operating mines, of providing certainty of land tender, providing certainty of adjudication of dispute. So while each has -- at different points in time has had minor tweaks and political uncertainty, in general, we are very comfortable in operating in both those localities.

You're certainly doing a good job.

Thanks again, John.

For Rob, could you give us a rundown on the tax rates that you're using at San Vicente? What is the corporate tax rate? What is -- they are calling it the complementary royalty that you have got factored into the feasibility study?

Yes, sure, John. The corporate tax rate recently has been increased to 37.5% in Bolivia. That is what we are using on in our models for the corporate tax rate.

Then the ICM rate is 6% currently. There still is a little bit of uncertainty with respect to the way that works. But currently we have modeled that as deductible against income tax.

Okay, so you're expecting the royalties to get approved as a deduction against the corporate tax?

Which of course is worse than if it was accreditable.

Right, okay. All right, great. Thank you very much.

(OPERATOR INSTRUCTIONS) Ian Howat with National Bank Financial.

Yes, good morning, guys. Can you give a rough breakdown of where the zinc is going to come from this year? Which mines are going to be the biggest producers, and on a production basis?

Sure, I don't have the -- number one is going to be Morococha; number two will be Huaron; and number three will be Quiruvilca.

I believe our overall production forecast is for just over 43,000 tonnes of zinc production. I can actually be a little more specific; Rob threw the budget right in front of me here.

So, close to 17,000 tonnes from Morococha; 14,500 tonnes from Huaron; and about 8,500 tonnes from Quiruvilca; with a couple of tonnes coming from San Vicente and La Colorada.

Okay. The projected production of 19.5 million, that is on a production basis, not the payable basis, correct?

That is correct.

Okay, that is it for me. Thank you.

(OPERATOR INSTRUCTIONS) [David Dennison], private investor.

Congratulations, guys. Thank you. Any talk of in the future, of a share dividend to shareholders?

Thanks, David, for your question. At this point I would like to see us complete our two projects that we have in front of us, which are Manantial and San Vicente. See the final capital investments. I am hoping we see exactly what Steve described today.

Those should be up and running next year. At that point in time, I think our situation will be stable, and we certainly are generating cash flow. At that point, we're going to be in a position to make a decision on exactly your question, David.

My sense is if we do not have a reasonable opportunity to reinvest that cash flow in either an expansion of an existing facility or in an acquisition or perhaps in the building of a brand new mine that Michael discovers, that we will return some of that cash to the shareholders, likely in the form of a dividend.

So, those decisions will be made, but nothing would likely happen until 2009?

I would say at earliest we're looking near the end of 2009, David.

Okay. Thank you.

Alexander Emery, Bloomberg.

Yes, good morning. Again, congratulations on your earnings. I was just interested to see about getting back to your issue of costs, which you have had a bit of a rise there. I just wondered if you could maybe break down a little more in detail what have been the main issues.

Where have you seen the biggest costs, whether it is energy or labor or maybe you could break it down? Thank you.

I don't have a breakdown in terms of the percentages within our $4.00-odd per ounce. I can tell you that labor has been by far the largest increment. It represents about 35% of our overall cost base, maybe even closer to 40% in our Peruvian mines, which are quite labor-intensive.

The second largest would be energy and energy-related through transportation. Not only the direct purchase of energy, but our transportation costs for our concentrates, etc., have gone up. That offhand is about 10% to 12% of our cost base.

Certainly the royalties, the voluntary contribution in Peru, and the new mining royalties in Bolivia, which are absolute off the top takes, have added to that total.

The strengthening of the Peruvian sole has probably added approximately 10% to our operating costs in Peru.

Alexander, if you need more specifics than that, I would encourage you to give Rob a call on our number here after this call to get additional information.

Thank you.

That does conclude our question-and-answer session. I would like to turn the call back over to management for any concluding remarks they may have.

Thank you, Eric. Well, thanks, everyone, for joining us here this morning for our year-end 2007 conference call. Look forward to catching up with everyone again in May when we have our first-quarter results.

As I said in my very closing comments, I am looking forward to an even better 2008. Thank you very much.

Ladies and gentlemen, this does conclude the Pan American Silver fourth-quarter and year-end 2007 earnings conference call. You may now disconnect and have a pleasant day.