Geoffrey Burns, President and Chief Executive Officer

Howard Flinker, Flinker and Company Haytham Hodaly, Salman Partners Mark Murrow, Adar Investment Management Ronald Sheffelman, Private Investor Curt Beeler, Private Investor

Thanks operator, it’s actually Geoff Burns, President and CEO, but perhaps I’ll go to comedy in the future. Anyway, good morning and welcome to Pan American Corp’s first quarter earnings release and conference call. Joining me this morning here in Vancouver, Andrew Pooler, our Senior VP of Operations; Steve Busby, Senior VP Project Development; Robert Doyle, our CFO; and Michael Steinmann, our Senior Vice President of Geology and Exploration. They are here to help answer any questions you might have after I finish my opening remarks. As always and usual, all amounts I talk about will be in U.S. dollars. And with that, let’s get started. We are off to a great start in 2006 as we continue to deliver on the production, growth and financial commitments we made to you over the course of last year. Each and every one of our operating mines increased silver production in the first quarter of 2006 as compared to the year earlier period. On a consolidated basis, we had a new company record for silver production of 3.3 million ounces. Buoyed by this increase in production and higher silver and base metal prices, we recorded new records for mine operating earnings, for cash flow from operating activities, and for cash cost per ounce. Mine operating earnings, a key metric in judging the profitability and operating performance of each of our mines, quadrupled to $18 million in the first quarter. Cash flow from our operating activities, excluding working capital adjustments was almost $9 million, and our costs to produce an ounce of silver declined to their lowest level in the company’s history at $2.47 an ounce. Let’s take a quick tour at each of our operations. Starting in Peru, our Morococha mine continues to improve with each and every quarter. Silver production climbed…

It’s Flinker and I’d like to ask a question, or a couple. If you did not have the silver credits at Manantial Espejo, what would your cash costs approximate? I mean, not silver credits, zinc credits, you know what I meant but I said it incorrectly.

Sorry; Manantial Espejo would be gold credits.

Gold credits; okay, I forgot that.

That’s correct, yes. That would be actually, I haven’t looked at that in this sense because it then becomes a tricky question of how to allocate the full costs between your gold, which should carry some burden of the costs as well as the silver…

Right.

…offhand, if we were to split our costs on a 50-50 basis…

Right.

…I would suggest that our cash costs there would be in the $2.00 per ounce range. And gold would also be a significantly low cost production as well.

Okay. Second, one thing that worries many of us, not only in Bolivia or Peru but Venezuela and Argentina is, well Kirschner, who is also a buddy of Hugo Chavez. What are the rumblings you hear there about either higher taxes or higher royalties or just – give us more, we want more!

No problem, actually we’re very, very comfortable in Argentina for a couple of very specific reasons. The first one is our location in terms of where we are in Argentina. We are in the province of Santa Cruz, which is probably one of the few provinces that actually has a mining industry (multiple speakers)…that’s right. So that’s sort of number one. But going directly to your question with respect to Kirschner, Kirschner is from the province of Santa Cruz.

Okay.

And as are many of his very closest advisors and cabinet ministers, and we have had unbelievable support at the federal level, including we just signed an agreement wherein the federal government as well as the province are going to contribute 1/3, 1/3 and us 1/3 to the building of a power line to the local community, which is right beside our mine, a little town called Gobernador Gregores. So, we’ve just seen support at the municipal level, this is very interesting, the Intendente in Gubernador, a small community of less than 3,000 people has access to Kirschner. He can go in, he can see Kirschner and talk about specifics in his community as well as our project, access that would be somewhat surprising. And it’s that tie between Kirschner’s sort of origins in that province and the support we’ve seen that make us very comfortable in Argentina right now.

What’s the tax regime for mining in Argentina? What’s the royalty regime, right now?

That’s a fairly complicated question. I can certainly get back to you if you want to give me a call – I’ll go ahead or if you want to give me a call after this conference call, I can give you a write-down of all the various.

Give me a number.

It’s roughly 35%, all in on a net basis. So it’s not dissimilar from actually Peru or Mexico for that matter.

35%?

…slightly higher, but not dissimilar.

That’s the taxes, or the taxes and royalties?

That would be the net of all the taxes, less tax credits, import/export credits etc., 35%, plus or minus.

Okay. And is there an additional royalty, or not?

That’s inclusive of the royalties…

Oh, that’s all in. Okay. So, just like, we could expect this in Africa or anywhere else; there’s a possibility that could rise, because that seems to be the movement around the world. Would you agree?

I would tend to agree. You certainly, you hope that logic prevails, but there’s no question that taxes around the world have been escalating.

Yeah, and one point, you say you’re confused by the accounting on hedges. At the same time, you cite, “negative costs” in Manantial Espejo – I can’t say it well. They’re one and the same. So, if you understand one, you understand the other.

I certainly do understand them. I just find the accounting treatment that we’re using right now is not clear with respect to what we’re doing as a company and presenting that to our investors.

No, it’s not clear in both cases, actually.

Yeah and –

I mean, no business can have a negative cost, there’s no such thing. But in the mining business we somehow figure out a way to call it negative costs.

Fair enough.

That’s all I have. Thank you.

Our next question is from Haytham Hodaly of Salman Partners.

Salman Partners, Haytham. Geoff, how are you?

Good Haytham, yourself?

Yes, just I have a few quick questions. Could you give us just a breakdown of your production forecast for this year? Where your production will be coming from, specifically?

The total that we’re anticipating is 14 million ounces or just slightly above. 4 million ounces is La Colorada, at Huaron you can pretty much take the first quarter and multiply it times four; similarly with Quiruvilca, Haytham, and as well as Morococha. At the pyrite stockpiles we’re looking at somewhere about 650,000 ounces. We will see a little production, are anticipating a little production from Alamo Dorado late this year in the neighborhood of 550,000 to 555,000 ounces and to a small degree some production from San Vicente. We saw some of that in the first quarter, about 80,000 ounces. We’re hoping to get that limited production going again, and might see as much as 400,000 to 500,000 ounces out of San Vicente. And I’m hoping if you total all that up, I’m pretty sure you’re going to get over 14 million.

Okay, and could you maybe just go through, by 2008 now, how you would expect those to grow?

Haytham, I mean, that’s a pretty detailed question to – I’m more than happy to have Rob or someone respond to you.

How about this, just how much do you expect from your major operations by 2008, what’s going to be your largest two or three contributors?

Well certainly Alamo Dorado at over 5 million ounces is number one; Manantial Espejo at 4.2 million to 4.5 million ounces; Huaron at almost 4 million ounces; Morococha closing in between 5.5 million to 6 million ounces; La Colorada continuing at about 4 million ounces; and then the pyrites pretty much at the same rates we’re seeing right now; and then San Vicente, depending on our development options there with respect to government, at somewhere between 1.8 million to 2 million ounces to our account.

Okay that’s perfect, and you’ve recently come to the market, obviously done a financing, can you just outline what you’re seeing out there in terms of opportunities these days?

On the acquisition side Haytham?

Yes, that’s right.

Yeah, in general, as you know, silver assets are very, primary silver assets are very rare in nature, and that hasn’t changed. What we have seen is a large, large escalation in valuations, which are making it I’m going to say very difficult for us to aggressively pursue opportunities. As always unless there’s some sort of ability to add value above and beyond some of the base assets that we’ve been looking at, it’s really hard to be paying two to three times their underlying value. So, I guess there are still opportunities there, valuations are hard and we’re trying to exercise some discipline in our approach to looking at those.

Okay. One final question I guess, Morococha and Manantial Espejo used to be a category which required higher silver prices. You’ve still got a couple of those deposits, if I recall, I’m assuming you do stories like Hog Heaven and Waterloo, whatever happened to those?

We actually have, there’s probably three assets that we’re showing on our resource reserve book that certainly now have potential at these prices. The first, and what may be foremost opportunity with respect to the pyrite stockpiles, which we have a 50% interest in Peru, there’s over 100 million ounces of silver locked up in those pyrites. And we actually have been doing a fair bit of work on the metallurgical side looking for perhaps a hydro metallurgical process to unlock the silver from the pyrite. It’s always been a function of the cost of doing that, but certainly at these prices the technology exists to make that a reality. So that’s the one we’re probably looking at hardest of the three we have on our book. The other two are Hog Heaven, which is in Montana, and Waterloo, which is in California. Both of them fairly large resources, and frankly Haytham, both of them we have not done much work on over the past several years, certainly since I’ve been with the company. But we will be, at these price levels we are going to start to have a look at those once again, because indeed at sort of 8, our initial estimates are sort of $8, $9 prices, all of a sudden the economics started to turn positive. So we haven’t done much yet, but it’s something we’re going to get to.

All right, thank you Geoff.

You’re welcome.

Our next question is from Mark Murrow of Adar (phonetic) Investment Management.

Hi, thanks for taking my question. If I exclude all the development mines just like Peru and La Colorada, how can I look at the annual maintenance CapEx for those mines?

I have a pretty decent handle on those, I guess I will just go through them sort of individually. At Huaron, maybe the simplest way is to think about $1 an ounce between sustaining capital for equipment and between ongoing development, and that would exclude some projects that are more longer term in nature where we might be developing new accesses to lower parts of the ore body. But $1 an ounce is not a bad way to look at it, and indeed that’s probably similar for Morococha. Quiruvilca is less, it’s a more fully developed mine and less capital requirements, probably in the neighborhood of $0.50 an ounce, maybe $0.60 an ounce on the silver side, so $1 million to $1.5 million in capital on a sustaining basis. La Colorada has been relatively high over the first few years of its operation that should decline. I would again use something between sort of $0.75 to $0.80 an ounce in sustaining capital there.

Okay and that’s ounce of production.

That’s correct, per ounce of production.

Okay great, thanks.

You’re welcome.

Yes, I have tuned in late and so you very likely have already covered this, but in a broad sweep, I’ve been following the stock very closely and you’ve been buying like crazy sites that will accumulate silver in particular. And yet the stock in the last two or three days has dropped sharply and there’s no news to support that, no insider selling, etc. What’s happened here?

To a certain degree that’s a good question, Ronald. We’ve seen certainly very volatile silver prices over the last couple of weeks as well as, but still trending in the upward direction even though swinging sometimes $0.50 to $0.70 per day.

Right.

In general we’ve seen, within our peer group, a decline across the entire, I’m going to say the entire silver sector, pretty much equivalent with what’s happened with our stock. On a couple of days, we saw silver up sharply, yet none of our peer group nor ourselves actually following along with the price. So, there has been, I’m going to say, what appears to be a short-term sort of divergence between the stocks and the underlying commodity. I think part of that is directly related to some of the developments in South America. There are couple of our peers who are very, very exposed in Bolivia. As I mentioned, we have a very small and limited exposure, and have been managing it on that basis for a while at San Vicente. And there has been some, I think, maybe some concerns in terms of couple of the other South American countries and I hope my comments earlier have, to a certain degree calmed some of those concerns, at least as they relate to Pan American. But I tend to think that that factor maybe more than anything has decoupled the price with the sector. My expectation would be if we continue to see strong prices, continue from Pan American’s point of view of delivering excellent performance, I would like to think we’d see that share price moving again, up in tandem with the silver price.

When do you see that happening?

Ron I wish I had that crystal ball, I’d certainly see it over the long-term, whether it’s next week or the week after, I mean I can’t say. The market is a dynamic beast. Like you, I certainly follow the trends, particularly related to our own stock. I’d like to see that reestablished. I think that relationship will be reestablished, I can’t tell you when.

All right thank you.

You’re welcome.

Yes, will you be doing any hedging against the dollar?

Relative to the two, I guess the three primary currencies that we deal in; one is the Sol obviously in Peru, the peso in Mexico and the peso in Argentina. We did put in a Mexican peso hedge in conjunction with the development of Alamo Dorado to protect against strengthening of the peso relative to the U.S. dollar. That has performed relatively well for us, although in reality over the sort of, I’m going to say 16 month period since we put that in place, there hasn’t been a huge swing in the relative valuations of those two currencies, particularly I’m guessing given the close trade ties between the United States and Mexico. We likely will look at doing another program; our business is not, in essence not in taking currency risks, our business is in taking mining risks. So, I think we’ll probably reinitiate a portion of that program going forward. We are going to look at a similar program for the Argentine peso relative to our development of Manantial Espejo. The scenario there is somewhat different, inflation is quite high in Argentina right now and the peso has not really responded to that fact, which is a bit concerning, and it has been trading almost flat relative to the U.S. dollar. So, we’re looking at that, but at this stage we haven’t decided whether or not to jump in, Curt. The last area is the Sol in Peru. So much of the Peruvian economy is tied directly to commodity prices, which are all quoted in U.S. dollars. The Sol has really traded in a very, very narrow range relative to the U.S. dollar over the last couple of years. And I think our view is it’s going to continue to do so, so we aren’t likely to do anything on that front.

Thank you very much.

You’re welcome.

At this time, there appear to be no further questions.

Thank you operator, and thank you everyone for joining us this morning. I’m very much looking forward to updating you again sometime in late July or early August when we have our second quarter results. We have a lot going on, prices are certainly buoyant, and I look forward to talking about even better results in about three months time.

Thank you. This does conclude today’s conference call, you may now disconnect.