November 10, 2011 / 4:59 PM / in 6 years

UPDATE 2-Silver Standard shares plunge on reserve cut

* Cuts reserves at Pirquitas mine by 52 percent

* Shares slump 22.32 percent to C$15.21 on the TSX (In U.S. dollars unless noted)

TORONTO, Nov 10 (Reuters) - Shares of Silver Standard Resources SSO.TO plunged to their lowest point in nearly three years on Thursday, a day after the company cut the reserves at its Pirquitas mine in Argentina by more than half.

The Canadian miner also said it sees operating costs rising to $35.52 per tonne of silver ore from $22.00.

Silver Standard shares slumped 22.32 percent to C$15.21 on Thursday morning on the Toronto Stock Exchange.

Late on Wednesday, Silver Standard reduced the proven and probably reserve estimate at the Pirquitas mine by 52 percent to 93.1 million ounces of contained silver. That compared with proven and probable reserves of 195.1 million ounces reported in a 2008 technical report.

Silver Standard blamed the reduction on a geological reinterpretation that lowered the amount of recoverable silver, along with higher operating costs.

The company has also mined 18.6 million ounces since production started in 2009, accounting for a portion of the reserve decline.

“While we have taken a prudent approach to Pirquitas’ reserves, we have a great exploration team who are focused on finding more ounces,” Chief Executive John Smith said in a release.

Silver production at the mine fell to 1.6 million ounces in the quarter from 1.9 million a year earlier, as production hiccups hit output.

The mill at Pirquitas was shut down in July and then again in September due to a gearbox failure, which prompted the firm to cut its 2011 silver production outlook last month to 7.3 million-7.6 million ounces. [ID:nL3E7KR1IW]

On Wednesday, Vancouver-based Silver Standard reported a net profit of $21.8 million, or 27 cents a share for the third quarter, ended Sept. 30. That compared with a loss of $10.4 million, or 13 cents a share, in the year-earlier period.

Total production costs were $24.55 an ounce, compared with $19.89 last year, while revenue from the mine fell 37 percent to $26.2 million.

Silver Standard has a pipeline of 15 projects in Argentina, Peru, Canada, Chile and the United States.

$1=$1.02 Canadian Reporting by Bhaswati Mukhopadhyay in Bangalore and Julie Gordon in Toronto; editing by Rob Wilson

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