August 11, 2011 / 2:27 PM / in 6 years

Pan American Silver misses expectations, shares slip

* Q2 adj EPS $0.71 vs analyst forecast $0.75

* Shares down 5 percent at C$27.81 on TSX (In U.S. dollars unless noted)

TORONTO, Aug 11 (Reuters) - Shares of Pan American Silver PAA.TO fell 5 percent on Thursday after its second quarter earnings missed analyst expectations, despite achieving record sales on soaring metal prices.

Net income in the quarter ended June 30 was $113.5 million, or $1.04 a share. That compared with a year-ago loss of $5.6 million, or 6 cents a share.

Excluding one-time items, the miner said its earnings were $76.1 million, or 71 cents a share, below analyst forecasts of 75 cents a share, according to Thomson Reuters I/B/E/S.

The average realized silver price more than doubled in the quarter, but earnings were hit by lower production, deferred sales and higher cash costs per ounce.

Revenue rose 54 percent to a record $231.9 million.

Silver production fell 18 percent to 5.6 million ounces, with cash costs of $9.19 per ounce. The company also produced 21,900 ounces of gold.

Pan American’s Mexican operations, Alamo Dorado and La Colorada, performed well, while its Peruvian mines lagged due to lower grades and operational issues.

In the second quarter, Pan American increased its silver inventory by 300,000 ounces and its gold inventory by 2,000 ounces. The company expects to sell this inventory over the remainder of 2011.

The Vancouver-based miner maintained its full year production guidance of 23 million to 24 million ounces of silver, but said cash costs would be higher than anticipated at $8.25 to $8.75 per ounce.

The shares were down C$1.46 at C$27.81 on Thursday morning on the Toronto Stock Exchange.

$1=$0.99 Canadian Reporting by Julie Gordon; editing by Rob Wilson

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