Mr. Geoff Burns reports

PAN AMERICAN SILVER GENERATES RECORD MINE OPERATING EARNINGS DURING THE THIRD QUARTER

Pan American Silver Corp. has released unaudited financial and operating results for the quarter ended Sept. 30, 2010. Increasing precious metal prices coupled with a solid operating performance allowed the company to deliver a new quarterly record for mine operating earnings (3) of $60.6-million, while both net income and free cash flow also surged to near-record levels. In addition, Pan American provided an update on its operations and development projects.

This earnings release should be read in conjunction with the company's management's discussion and analysis, financial statements and notes to financial statements for the corresponding period, which have been posted on SEDAR and are also available on the company's website.

Third quarter 2010 highlights (unaudited) (1):

• Consolidated silver production was 6.2 million ounces.

• Consolidated gold production was 21,277 ounces.

• Consolidated cash costs (2) were $6.08 per ounce of payable silver, net of byproduct credits.

• Record sales were $161.3-million, an increase of 36 per cent.

• Record mine operating earnings (3) were $60.6-million, an increase of 75 per cent.

• Net income increased 66 per cent to $28.8-million or 27 cents per share.

• Cash flow from operations (before changes in non-cash operating working capital) (4) increased 17 per cent to $50.7-million, or 47 cents per share.

• Cash and short-term investments rose $50.7-million from the previous quarter to $288.4-million.

• Net working capital increased to $360.5-million.

(1) Financial information based on Canadian generally accepted accounting principles; for percentages compare third quarter 2010 with third quarter 2009.

(2) Cash costs per payable ounce of silver is a non-GAAP measure. The company believes that, in addition to cost of sales, cash cost per ounce is a useful and complementary benchmark that investors use to evaluate the company's performance and ability to generate cash flow and is well understood and widely reported in the silver mining industry. However, cash costs per ounce does not have a standardized meaning prescribed by Canadian GAAP as an indicator of performance. A reconciliation is included in the company's management's discussion and analysis.

(3) Mine operating earnings is a non-GAAP measure used by the company to assess the performance of its silver mining operations. Mine operating earnings are equal to sales less cost of sales and depreciation and amortization and are considered to be substantially the same as gross margin.

(4) Cash flow from operations (before changes in non-cash operating working capital) is a non-GAAP measure used by the company to manage and evaluate operating performance. The company considers this measure to reflect better normalized cash flow generated by operations. Cash flow per share is a non-GAAP measure used as a measure of return on capital and is calculated using cash flow from operations, before changes in non-cash working capital, divided by basic weighted average shares outstanding. Investors are cautioned that this measure is not defined in current GAAP, and there is no comparable measure defined in GAAP.

Commenting on Pan American's strong third quarter results, Geoff Burns, president and chief executive officer, said: "Our consistent operating excellence has allowed us to harvest the benefits of rising silver and gold prices, and consequently we delivered superior financial results for the third quarter. It was indeed gratifying to see Pan American generate a new quarterly record for mine operating earnings, while banking nearly $51-million. This, coupled with the steady progress on the technical work to advance the Navidad and La Preciosa silver development projects, made for an excellent quarter."

Financial results

During the quarter ended Sept. 30, 2010, Pan American posted record sales of $161.3-million, an increase of 36 per cent compared with the same period of last year. Increased revenue resulted from higher quantities of silver, zinc and lead sold combined with higher realized prices for silver, gold, zinc and copper, partially offset by lower quantities of gold and copper sold. Quarterly mine operating earnings were also a record at $60.6-million, which represents a 75-per-cent increase compared with the third quarter of 2009.

Net income for the third quarter of 2010 was $28.8-million or 27 cents per share, an increase of 66 per cent year on year. Net income rose significantly due to higher realized prices for all metals produced by the company, with the exception of lead, and increases in the quantities of silver, zinc and lead sold. Included in the calculation of quarterly net income were $9.8-million in exploration and development expenses at the company's development projects and an income tax provision which increased to $17.6-million on account of higher taxable earnings at the company's operations and the 12.5-per-cent Bolivian mining tax implemented in October of 2009.

Cash flow from operating activities (before changes in non-cash operating working capital) of 2010 rose to $50.7-million or 47 cents per share for the third quarter, a 17-per-cent increase compared with the third quarter of last year.

At Sept. 30, 2010, the company had cash and short-term investments of $288.4-million, an increase of $50.7-million as compared with the end of the second quarter of this year. The company's working capital rose to $360.5-million.

Production and mining operations

During the third quarter of 2010, Pan American's seven mines performed largely as expected, producing a total of 6.2 million ounces of silver, down 2 per cent from the comparable period in 2009. The variance was largely due to production declines experienced by the company's Peruvian operations due to lower silver grades and recoveries, which were largely offset by another excellent quarter at the company's Mexican mines.

Silver production at the company's Mexican operations, La Colorada and Alamo Dorado, was up year on year thanks to increased throughput rates at both mines and higher silver grades at Alamo Dorado. The Alamo Dorado mine continued to benefit from high-grade ore mined during this year's unusually long dry season, producing 1.8 million ounces of silver at cash costs of $2.98 per ounce of silver in the third quarter. La Colorada mine had another consistent quarter contributing 900,000 ounces of silver at cash costs of $8.67 per ounce. Quarterly gold production at both Alamo Dorado and La Colorada was down slightly year on year due to lower gold grades and totalled 4,181 ounces and 993 ounces, respectively.

In Peru, the Morococha mine produced 700,000 ounces of silver at cash costs of $4.20 per ounce of silver, the Quiruvilca mine produced 300,000 ounces of silver at cash costs of $9.40 per ounce of silver and the Huaron mine produced 800,000 of silver at cash costs of $11.71 per ounce of silver. While Huaron is still not back to normal production levels, higher-grade ore from the mine's lower-180 level plus the resumption of mechanized mining in certain areas allowed throughput rates to rise steadily throughout the quarter and contributed to a 12-per-cent increase in silver production, as well as to a decrease of almost $2 per ounce in cash costs as compared with the second quarter of this year.

In Argentina, the Manantial Espejo mine produced one million ounces of silver at a cash cost of $3.65 per ounce of silver, which was similar to the quantity of silver produced during the third quarter of 2009; however, cash costs rose substantially due to higher on-site expenditures and lower gold byproduct credits as gold production declined 28 per cent due to the expected decrease in mined gold grades.

Lastly the San Vicente mine in Bolivia produced 700,000 ounces of silver during the third quarter of 2010 at cash costs of $8.99 per ounce of silver. Silver production declined due to processing lower-silver-grade material. The mine has been operating at commercial production levels for a full year, and mined ore grades are now more representative of the overall reserve averages.

During the three months ended Sept. 30, 2010, Pan American produced a total of 21,277 ounces of gold, 10,811 tonnes of zinc, 3,774 tonnes of lead and 1,226 tonnes of copper. Year on year, gold production declined 24 per cent, and copper production was down 34 per cent due to planned lower gold grades at Manantial Espejo and lower-than-expected copper grades at Morococha and Huaron.

Pan American's consolidated cash costs for the quarter ended Sept. 30, 2010, were $6.08 per ounce of silver, net of byproduct credits, which were 24 per cent higher than the same period in 2009. Cash costs increased due to upward pressures on property operating expenditures, including labour, energy and consumables, plus higher royalties and treatment charges. Cash costs were also negatively affected by the appreciation of local currencies against the U.S. dollar in Peru and Mexico, and lower quantities of gold and copper sold, partially offset by higher realized byproducts metal prices.

Project development

At the Navidad silver development project, Pan American steadily advanced all the technical work necessary to complete a preliminary economic assessment later this year. During the third quarter of 2010, the company spent $10.8-million and completed approximately 33,400 metres of diamond drilling, including infill, condemnation and geotechnical drilling. The company also advanced a number of project development activities, including metallurgical testing, field and geotechnical work for the design of the tailings dam and the open pit, plus other engineering studies necessary for the PEA. Year to date, Pan American has invested approximately $29-million on the development work for Navidad.

Meanwhile Pan American also intensified the communications and community relations campaign it initiated earlier this year. Throughout the third quarter, company officials met local authorities, community leaders and residents and conducted a number of site visits to promote transparency and present the long-term benefits of developing the project in an environmentally sensitive and responsible manner. At present, Navidad employs 178 workers and contractors, primarily from the local communities. The company expects to spend $36-million at Navidad during 2010 and to complete the PEA before year-end. The company also expects to complete an environmental impact assessment during the first quarter of 2011.

In spite of the lack of progress in the legislative front in the province of Chubut to allow open pit mining in the central Meseta and a degree of political uncertainty in Argentina that has accompanied the untimely death of former president Nestor Kirchner, the company remains determined to continue working closely with the local communities around Navidad and communicating openly with the provincial government to allow the company to develop Navidad.

At La Preciosa joint-venture silver project, Pan American has essentially completed the 2010 resource definition drilling and exploration program. During the third quarter of 2010, Pan American invested $3.1-million at the project and executed 20,482 metres of drilling, including exploration drilling at the Nancy and Orito targets. Only limited drilling between the main resource and the Martha NW area remains for this year. Technical work for the project's PEA is well advanced, and the company expects to complete and release this report before year-end.

In Peru, technical work for the relocation of Morococha's ancillary facilities and processing plant is well under way. The location of the new structures has been identified, and ground preparation work is already advancing. During the third quarter of 2010, Pan American incurred $2.7-million in project expenditures at Morococha and received $5.8-million from Minera Chinalco Peru.

Outlook

During the first nine months of 2010, Pan American produced 18.6 million ounces of silver at an average cash cost of $5.41 per ounce of silver, net of byproduct credits. Additionally the company produced 70,306 ounces of gold, 32,594 tonnes of zinc, 10,102 tonnes of lead and 3,960 tonnes of copper. Based on year-to-date production, Pan American expects to comfortably meet or exceed its full year 2010 consolidated silver production forecast of 23.4 million ounces at a cash cost below $5.90 per ounce of silver, net of byproduct credits.

Mr. Burns added: "Two thousand ten is shaping up to be another outstanding year for Pan American. In all likelihood, we will surpass the silver production guidance we released last February to post our 15th consecutive year of silver production growth. With precious metal prices at record levels, this should translate into outstanding financial results. Further quantitative easing in the United States and the debt situation in most of the European Union countries continues to reaffirm my strong belief in the fundamental and increasing value of both silver and gold. In a world where reserve currencies continue to struggle, silver and gold should perform very well. In this environment, with silver and gold prices on the rise, our value proposition is second to none thanks to our operational expertise and our world-class development projects."

Technical information contained in this news release has been reviewed by Michael Steinmann, PGeo, executive vice-president of geology and exploration, and Martin Wafforn, PEng, vice-president of technical services, who are the company's qualified persons for the purposes of NI 43-101.

Pan American will host a conference call to discuss its unaudited third quarter 2010 financial and operating results on Nov. 9, 2010, at 7 a.m. Pacific Time (10 a.m. Eastern Time). Participants can access the conference by dialling toll-free 1-800-319-4610 (Canada and United States) or by dialling 1-604-638-5340 from outside North America. The call can also be accessed by live audio webcast at the company website.

The call will be available for replay for one week after the conference by dialling 1-604-638-9010 and entering code 6218 followed by the number sign.

                  CONSOLIDATED FINANCIAL HIGHLIGHTS 
                      (in thousands of U.S. $)

                                  Three months ended       Nine months ended
                                       Sept. 30,                Sept. 30,
                                     2010       2009        2010        2009     
                                                                            
Net income for the period      $   28,815 $   17,375 $    66,184 $    34,193
Basic earnings per share       $     0.27 $     0.20 $      0.62 $      0.40
Mine operating earnings        $   60,581 $   34,708 $   148,599 $    68,672
Cash flow from operations                                                   
(before changes in non-cash                                                
operating working capital)     $   50,748 $   43,262 $   135,712 $    99,173