UPDATE 3-Pan American shares fall on results, soft outlook

Wed Feb 16, 2011 10:54am EST

* EPS $0.43 vs $0.31 a year-ago, forecast $0.47

* Revenue up 24 percent at $191.1 million

* Sees 2011 silver production 23-24 mln ounces

* Shares down 5.67 percent at C$34.27 (Recasts, adds analyst comment; in U.S. dollars unless noted)

By Julie Gordon

TORONTO, Feb 16 (Reuters) - Shares of Pan American Silver (PAA.TO) fell more than 7 percent on Wednesday, after the miner posted sharply higher quarterly earnings but missed analyst profit expectations and forecast lower gold and silver production levels next year.

The Vancouver-based company said it plans to produce between 23 million and 24 million ounces of silver in 2011, down from 24.3 million ounces in 2010.

It also expects to produce 76,000 to 78,000 ounces of gold in 2011, down from the 89,555 ounces last year.

Pan American shares were down C$2.06 to C$34.27 Wednesday morning on the Toronto Stock Exchange, after tumbling as much as 7.3 percent to C$33.69.

The company, which operates in Mexico, Peru, Bolivia and Argentina, posted a net income of $46.4 million, or 43 cents a share, in the fourth quarter, ended Dec. 31.

That was up 67 percent from earnings of $27.8 million, or 31 cents a share, a year earlier.

However, the results fell short of analysts' average estimate for a profit of 47 cents a share, according to Thomson Reuters I/B/E/S.

Revenue was up 24 percent at $191.1 million.

Pan American benefited from stronger spot silver prices, which nearly doubled through 2010, rising from $16.86 to $30.86, as investors turned to precious metals as a safe haven from economic uncertainty.

The company added 27 million ounces of silver to its reserves in 2010, and has budgeted about $39 million for exploration in 2011.

"Current reserves are sufficient to sustain current production levels for about 10 years," UBS mining analyst Chris Lichtenheldt said in a note to clients.

He added that the Navidad project in Argentina will expand the company's production profile, but that development is dependent on the state of Chubut changing its law to allow open pit mining.

Pan American also said that it would pay a dividend of 2.5 cents a share for the quarter.

($1=$0.99 Canadian) (Additional reporting by Isheeta Sanghi; editing by Rob Wilson)

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