TORONTO (miningweekly.com) – Precious metals miner Pan American Silver on Thursday swung to a second-quarter net loss of $187.1-million, or $1.23 a share, compared with earnings of $37.03-million a year earlier, as lower metals prices and a noncash impairment charge weighed on its financial performance.

The Vancouver-based company’s president and CEO, Geoff Burns, on Thursday said weaker-than-expected output in the quarter ended June 30, coupled with the “precipitous fall” in silver and gold prices, severely squeezed the company’s operating margins.

This had also forced the company to recognise negative pricing adjustments and inventory write-downs, and to book a $185.2-million noncash impairment charge on the long-term net realisable value of the Dolores mine, in Mexico, which Pan American bought for $1.5-billion from Minefinders in the first half of last year.

Excluding special items, the miner’s net loss totalled $9.92-million, or $0.07 a share, below analyst expectations of $0.05 a share, on revenues of $200.73-million.

Pan American said it had started to hedge part of its production to offset the risk of further price declines, and had entered into forward contracts of up to a year, which cover up to a quarter of its expected precious metal output.

The second-largest US silver producer by output, Hecla Mining, last week also said it had started hedging all metals once they were shipped, to reduce its exposure to the variability in the realised prices.

The company was also implementing various cost-cutting measures.

Revenues dropped 12% year-on-year to $175.6-million.

Pan American's average realised silver price fell 23% in the period to $22.68/oz, and the realised gold price fell 12% to $1 423/oz.

On Thursday afternoon, spot silver prices climbed to $23.09/oz in New York, after hitting a low of $18.19/oz in June.

At $12.09/oz of silver, net of by-product credits, Pan American's consolidated cash costs for the quarter rose 9% year-on-year, but were within management's expectations.

The company confirmed its full-year production guidance of between 25-million and 26-million ounces of silver, at cash costs of between $11.50/oz and $12.80/oz of silver, net of by-product credits. It also expected to produce between 125 000 oz and 135 000 oz of gold, 38 500 t and 41 500 t of zinc, 12 500 t and 13 500 t of lead and 4 500 t and 5 000 t of copper by the end of the year.

Pan American operates seven mines in Mexico, Peru, Argentina and Bolivia and has several development projects in the US, Mexico, Peru and Argentina.