Hello. This is the conference operator. Welcome to the Pan American Silver Corporation's Second Quarter 2011 Conference Call and Webcast. [Operator Instructions] At this time, I'd like to turn the conference over to Ms. Kettina Cordero, Coordinator, Investor Relations. Please go ahead.

Thank you, operator, and good morning, ladies and gentlemen. Joining me here today are our President and CEO, Geoff Burns; our Chief Operating Officer, Steve Busby; our Executive Vice President of Geology and Exploration, Michael Steinmann; our Chief Financial Officer, Rob Doyle; and our Vice President of Project Development, George Greer. I would like to start today's call by a reminder of this note that this call cannot be reproduced or retransmitted without our consent and by indicating that certain of the statements and information in this call will constitute forward-looking statements and forward-looking information within the meaning of applicable securities laws. All statements other than statements of historical fact are forward-looking statements. These statements reflect the company’s current views with respect to future events, and they 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 known and unknown factors could cause actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements, and the company has made assumptions and estimates based on or related to many of these factors. We encourage investors to refer to the cautionary language included in our most recent news release dated August 11, 2011, and as well as 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. Investors are cautioned against attributing undue certainty or reliance on forward-looking statements. And the company does not intend or assume any obligation to update these forward-looking statements or information other than as required by law. I'll now turn the call to Geoff Burns, President and CEO.

Thank you, Kettina. Good morning, ladies and gentlemen, and welcome to Pan American Silver's 2011 Second Quarter Earnings Conference Call. In addition to discussing the results of our most recently completed quarter, we are also going to use this opportunity to talk about the positive results of the Preliminary Economic Assessment for the La Preciosa project that we jointly released earlier this morning with Orko Silver. Overall, we have some pretty interesting news to talk about today, so let's get started. As has become our standard format, I will first provide some general remarks about our second quarter results before passing the call to Steve and Michael, who will provide more insight into our quarterly and year-to-date operating performance, our development projects and our greenfield and brownfield exploration programs. We'll continue with Rob who will provide some additional color to our record-breaking financial results and, finally, George Greer, our Vice President of Project Development, has joined us for the call today to provide some additional detail on the PEA for the La Preciosa silver development project. Before diving into you to the quarter, I am pleased to be able to confirm that yesterday, our Board of Directors approved the distribution of our third cash dividend of this year in the amount of USD $0.025 per share. The payment will be made effective on or about Tuesday, September 6, 2011, to holders of record of common shares as of the close of business on Monday, August 22. Pan American continues to generate record cash flows on the back of robust silver and gold prices, and it's a real pleasure to be able to return some of this cash directly to our shareholders by way of a dividend. As important is the fact that at current price levels, the company is comfortably…

Thank you, Geoff, and good morning, ladies and gentlemen. Pan American Silver Corp. is certainly benefiting from these record high precious metal prices, given our solidly performing operations and incredibly exciting development projects. During Q2, our projects advanced very well, and our operating teams once again managed some pluses and minuses to essentially achieve our consolidated production target of 5.6 million ounces of silver. Our operating costs in Bolivia and Argentina include significant government royalty and tariff payments that are directly proportional to the silver price. To a lesser extent, we have faced cost increases for third-party copper concentrate treatments, employment costs as the mining-related job market becomes increasingly competitive and certain raw materials, particularly diesel fuel in Argentina. These factors all contributed to escalating our quarterly cash cost to $9.19 per ounce or about 23% above our target. Our Manantial Espejo mine in Argentina produced 960,000 ounces of silver at a cash cost of $6.80 per ounce compared to 976,000 ounces of silver at a cash cost of $3.07 an ounce the year before. The silver grade in the second quarter was about 15% below, and the gold grade was about 15% above, our resource model projections, which are the types of variances that we have become accustomed to at Manantial since the start-up in 2009. Based on our experiences so far, we are confident these types of quarterly variations eventually even out, as our overall resource model continues to be a good global indicator of the ore tons and grades at Manantial Espejo. Our record high silver price realization in Q2 of $38.10 per ounce adversely impacted our cash cost since the export tariff and royalties we pay move proportionately with the silver price. However, as Geoff indicated, we clearly benefit much more from the greater margins at…

Thank you, Steve. Good morning, everyone. Following my standard practice, I'd like to start with the drill statistics for the last 3 months. This gives you good idea about the advances and resources we are dedicating to our exploration programs. Compared to Q1, we increased in Q2 the company mine drilling by over 20% to a total of 37,330 meters. Advances in exploration diamond drilling amounted to a total of 27,730 meters, representing about 41% of our 129,000-meter annual program for reserve replacement. This makes the program nearly back on track after the drilling shortfall during the first 3 months of the year. Morococha nearly doubled the meters from 2,910 in Q1 to 5,790 meters in Q2. La Colorada increased drilling by over 63% to a total of 4,430 meters for the quarter and Huaron increased the program by 18% compared to Q1. The largest growth program was executed at Navidad with 9,600 meters, followed by Manantial Espejo with 7,190 meters. Both mines returned some spectacular results from the new drill holes. Navidad focused its infill extension and delineation drill program on La Esperanza, Calcite Northwest, Loma de la Plata and Galena Hill deposits, fine-mining 72 holes. We also received sample results from Barite Hill, which had been drilled at the end of Q1. The longest intersection was in hole 15-80 [ph], which returned 144.5 meters containing 290 gram per ton silver. Other news [ph] for us is Barite Hill intersects were 32.6 meters at 349 gram per ton silver hole in 15-82[ph] and 16.85 meters at 381 grams per ton silver in hole 15-83[ph]. Exploration for Esperanza already provided some spectacular results last quarter. As well in Q2, it did not disappoint. For example, hole 50-93 [ph] intersected 25 meters at 944 gram per ton silver, and in hole…

Good morning, ladies and gentlemen. Much like Q1 of this year, we had another record-breaking quarter from a financial perspective. As Geoff mentioned, we generated company records for earnings and cash flow in addition to declaring another quarterly dividend. Attributable earnings for the second quarter were $112.6 million, which equates to $1.04 per share, and adjusted earnings, after taking out a $56.5 million mark-to-market non-cash gain on our warrants, were $76.1 million or $0.71 per share. On mine operating earnings, we're a record $118.6 million, which implies a 51% gross margin. Operating cash flow before working capital movements more than doubled from the comparable quarter of 2010 to a record $119.4 million. These mine financial results were fueled by record realized prices for gold and silver, which combined to comprise 87% of our revenues for the quarter. Our average realized silver price for the quarter was $38.21 on sales of 5 million ounces. And in gold, we sold almost 19,700 ounces at an average price of $1,500 per ounce. We actually sold significantly less quantities of all metals than we produced other than lead as a result of timing of shipments, which is the main reason for the $11.9 million increase in inventories during the quarter that you may see on our balance sheet. During the quarter, the company increased its metal inventory balances by approximately 2,000 ounces of gold and about 300,000 ounces of silver. Had these ounces, which were produced in Q2 2011, been sold at the average realized prices during the quarter, additional architect [ph] earnings of approximately $7 million or $0.07 per share would've been recorded. We're shifting the benefits from the sale of these additional ounces in the third quarter as we reduce our dore inventories. Our Q2 earnings included a gain on derivatives of…

Thank you, Rob, and good morning, ladies and gentlemen. Today, I'm pleased to be here to discuss the results of the La Preciosa project Preliminary Economic Assessment, which we have been working on for the past 8 months. This assessment had been both challenging and rewarding, and I am very excited to be finally able to talk to you in detail about how we envision this project being developed. As you are aware, the La Preciosa project is a joint venture between Orko Silver and Pan American Silver. We have been working together to develop the project to the point of completing a PEA. The assessment is based as a standalone project, developed and operated on a joint venture basis as per the current agreement between Orko Silver and Pan American. Over the past 2 years, we have spent approximately $15 million on further diamond drilling, metallurgical testing and project engineering activities. And we have contracted some of the best consultants in the industry to assist us with the assessment, including, amongst others, Snowden Mining Industry Consultants, M3 Engineering and Technology and Quantitative Geosciences. In the past 2 years, we have drilled an additional 90,000 meters of exploration and infill holes to help us better understand the nature of the mineral deposit. As such, let us start first with an update of the resources. Please note that all of these resources are expressed in terms of diluted resources. We have applied 2 cut-off grades, one for the open-pit at 35 grams per ton silver, and the other for the underground mining at 85 grams per ton silver. Total indicated resource currently stands at 24.8 million tons, grading 142 grams per ton silver and 0.28 grams per ton gold. Inferred resources include an additional 15.2 million tons at 96 grams per…

Thank you, George. You have now heard where we have been. The obvious question is what lies ahead for Pan American. Our strategy going forward has not changed. We are going to utilize our core strength and expertise as an operating company to continue to focus on optimizing our mining operations to maximize our cash flow generating capacity and profitability. We are going to continue to aggressively explore all our current assets to extend their mine lives. Lastly, we're going to use our financial strength and experience as mine builders and developers to bring Navidad and La Preciosa towards production decisions, and deliver the kind of growth that you have been accustomed to seeing in Pan American. Before opening up the line for questions, I'd like to cover 3 more topics. The first is La Preciosa. After a number of delays, it is certainly rewarding to finally have been able to release the PEA for La Preciosa. As I said in our news release earlier this morning, it's a very interesting project for Pan American at almost 7 million ounces per year on average, it has a solid production, silver production profile, it has a relatively long mine life and is located in a good mining jurisdiction, less than an hour's drive from our existing Mexican administration offices in Durango. At the PEA's long-term silver price assumption of $25 per ounce, the economics are very compelling. At current silver prices, the project economics become extremely robust. We will be moving forward aggressively to complete the Feasibility Study and position ourselves for a construction decision in the first half of 2012. The second thing I'm sure you're interested to hear about is the status of the mining law in Chubut, where our Navidad project is located. That's the mining law that…

[Operator Instructions] Our first question today comes from Chris Lichtenheldt of UBS Securities.

Just a first quick question on the cash cost guidance that was increased slightly. You cited a number of reasons why there are higher costs. I'm wondering if you might be able to break down that increase in cash cost guidance between the higher silver prices that are causing higher royalties and the higher treatment charges. And then secondly, any improvement in by-product prices or production assumption? And thirdly, then, just most importantly, the true cost inflation on the ground in terms of per ton. I'm just trying to understand exactly what drives that. If you can help at all on that, that would be great.

Chris, this is Steve. We may have to get back to you on those details. I don't have them quite right at my fingertips. But I can say, in order of importance by far and away, are higher silver price. And we're using in our forecasting for the rest of the year, the average price of our Q2 results, which was $38.10 an ounce. That is the biggest driver to the cash cost increase. Second to that would be the higher smelting and treatment and refining charges in Bolivia. And then, following that would be the increased cost for employment between Bolivia, Peru and Argentina, and then lastly, the diesel fuel price increase in Argentina. Those are the 4 main factors in order of importance.

Okay. That's really helpful. Then just a follow-up on that quickly, you're using $38 and small change now. What were you using in the previous guidance, just out of curiosity?

The budget price of $20.65.

Yes, a budget price of $20.65 an ounce.

The next question comes from Norm Robbins [ph], a private investor.

Geoff, this is Norm Robins. I'm a private investor and a shareholder in Orko. Do you have any interest in or plans to buy my shares from me?

Norm, you know that, that is absolutely not a question I can answer. We just released the results today, and happy to talk about what La Preciosa looks like. We have -- our arrangement is, as you're aware, we can earn a 55% interest in the project by bringing it to production and Orko will retain the other 45%. Beyond that, I'm just not going to be able to comment.

The next question comes from Haytham Hodaly of RBC Capital Markets.

A question on -- just a couple of simple questions. The inventory buildup that we saw, the 2,000 ounces of gold, 300,000 ounces of silver, is that specifically related to certain operations or is that just generally across-the-board?

Haytham, Rob here. Yes, actually, gold was almost entirely in Manantial Espejo. As you would imagine, that's where most of our gold production comes from. And the silver is almost entirely at Alamo Dorado. And that's really just the timing of shipment issue. So hopefully, we will have the quarter, the third quarter or the fourth quarter, where we'll actually sell more than we produce. And we've had inventory production the last couple of quarters.

Okay. So is that a reasonable level that you've been holding for quite some time?

It's the highest level we've had in, actually, at any point in time. So yes, we do the clean-up recoveries this year and hope that the third quarter is going to be better from a timing point of view.

Okay, perfect. And then since as I've got you, Rob, just a question. You talked a little bit about the effective tax rate as a good explanation in the financials in the MD&A. What would your forecast effective tax rate be for the second half of this year?

In an ideal world, without the noise of the warrants and FX movements and withholding tax that we pay from time to time, we would expect to have them in the mid-30s as an effective tax rate.

Okay. And in a nonideal world that we live in?

Well, if there's a gain on a warrant, then it's going to be lower. If there's a loss in the warrant, it's going to be higher. That's as precise as I can be, I'm sorry.

Yes. So maybe using something like a 30% and just making adjustments thereafter. What about with regards to the deferred component? I saw the deferred component of taxes has decreased quite a bit of a last [indiscernible].

Yes, in this particular quarter, the deferred component was about $1.6 million, I believe, on top of current of $31 million. I can get back to you after the call with some detail on that if you like it.

Yes, that will be helpful. Maybe just a question on La Preciosa for George. Please remind me, just in terms of the contract, you an earn 55% by bringing the project into production. But are you responsible for 100% of the CapEx or do they pay their provided share?

Yes, we are responsible for the CapEx on a 100% basis until we start first production. From that point forward, operating cost and future capital cost sustaining our share between the 2 groups on the 55%, 45% arrangement.

Will you be able to recover your 45% of additional capital that you're paying on their half? Is that -- just the cost of actually acquiring the assets?

Well, that would be coming out of the operating earnings in those years.

So in theory, you would get the majority of the operating earnings for the first few years until the capital is repaid on a 100% basis?

No. Not of -- we would do -- we'd get our investment back through, of course, the years of operation through our share of the operating revenues.

George, I guess what I'm asking is, is the 45% of the capital cost, is that recoverable as well? Or is that, Orko paying that?

We pay 100% of the capital cost. The 45% carry is essentially us buying our way into the deposit.

Okay. That's what I was trying to get. Perfect. Maybe just one other question on Navidad. Obviously, there was a preliminary assessment released by M3 late last year. We've obviously seen cost escalation. Have you looked to see what type of impact that some of the cost escalations could have on the capital cost at Navidad?

We're going through that right now, Haytham, as we do the Feasibility Study. We don't have an update to that cost estimate. I can tell you that, that decision to buy that equipment has helped that tremendously. So we're hopeful that we can offset some of the cost escalation in those areas.

In addition, Haytham, if I could add in. There's a number of obviously moving parts relative to, going from the PEA at Navidad into a full feasibility. Certainly, we'll be reevaluating our capital cost estimate. We'll be looking again at details at our operating cost estimates. At the same time, I hope you heard loud and clear some of Michael's numbers with respect to the drilling we've done, particularly on Valle Esperanza. I mean, we're talking multi, multi, multimeters at over 1 kilogram of silver. And that is going to have an incredible impact on the project economics, well beyond the change in potentially some of the inflation that we're seeing with the some of the [ph]operating costs.

Good answer. One last question. Sorry, I'll hop around back to La Preciosa. Was the $11.84 per ounce cash cost, does that include any kind of a royalty? Is there any royalties on this cost [ph]?

Yes, it does.

It includes just, that's all. Haytham, that is the all-in standard calculation of cash cost, net of gold, by-product credits, includes refining royalties, all operating costs including site G&A, the full monty.

Perfect. And who is the royalty on that project payable to?

Actually, I'm not sure offhand. I don't want to give out a wrong answer. And we have it included in the -- at the moment, it just escapes me who's entitled.

[Operator Instructions] Our next question today comes from Ralph Profiti of Crédit Suisse. Ralph Profiti - Crédit Suisse AG: With respect to Huaron, I'm just wondering what grades you were encountering that, in this silver price environment would lead you to shut down that zone of production? And also, how much was Alianza as part of the general mine plan at Huaron? And sort of lastly, sort of on a go forward basis, do we look at Huaron being more of a lower-tons, higher-grade deposit? Or do you imagine coming it back ever, in which case, it would be vice versa?

That's a good question. The Alianza zone at Huaron is primarily a zinc zone. It was always considered to be a low-grade silver. We were kind of hoping to see around 3%, 3.5% type zinc. And we were coming in something shy of 3%. But that, it really wasn't a contributor of silver. It did give us about, I would say, 10,000 to 15,000 tons a month of material off of that zone because it was a long-hold, open-style minding. But it just wasn't giving us what we wanted. It wasn't really paying where we want it to go. And primarily, we wanted to focus the efforts that we were using in that area into developing some more higher-grade, silver-rich zones, if you will, or even potentially some copper zones that looked pretty nice for us. So it's really redirecting some of those efforts to things we feel are more profitable. Generally speaking, as we go forward, I think we are going to see a little bit -- well, certainly for the rest of this year, lesser tons at the kind of grades we're seeing now, the higher 185-type silver grades. Going into the next year, we're hoping to open up more areas and start to claw back on that 10,000 to 15,000 tons a month that we lost on Alianza. Ralph Profiti - Crédit Suisse AG: I see. Great, perfect. And, Geoff, I have to ask, we're sitting on a volatile silver market, and at these prices, they are still very robust. Has hedging the silver price come anywhere close to being higher on your priority list of a strategy?

No problem, Ralph. I guess, currently, we still have no intentions to hedge either our exposure to silver or our exposure to gold. It continues to -- as of today, it still looks like a pretty wise decision as we see gold climbing over $1,700 an ounce. And certainly, we've seen silver over 40, but sitting 37, 38, 39. Having said that, as we move forward and look at making significant capital investments in La Preciosa and also in Navidad, we would certainly once again, have a very, very thorough discussion with our board, if it makes any sense at that moment in time to protect some of that capital investment. But as of today, no. We are still 100% and will continue to be 100% exposed to gold and silver prices.

There are no further questions at this time. I'll hand the conference back to Mr. Burns for any closing comments.

Thank you, operator, and thank you, everyone, for joining us again this morning for our conference call and discussion of La Preciosa. And all I can say is I look forward to seeing you about another 3 months time with more news and more financial results, and hopefully, some updates on how things are moving forward particularly in Argentina. Thank you.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect your lines. Thank you for participating. Have a pleasant day.