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Steve Busby, COO of Pan American Silver

Pan American Silver Corp. posted sharply higher quarterly earnings on Wednesday but missed analyst profit expectations and forecast lower gold and silver production levels next year.

The Vancouver-based company said it plans to produce between 23 million and 24 million ounces of silver in 2011, down from 24.3 million ounces in 2010.

It also expects to produce 76,000 to 78,000 ounces of gold in 2011, down from the 89,555 ounces last year.

The company, which operates in Mexico, Peru, Bolivia and Argentina, posted profit of $46.4-million (U.S.) or 43 cents a share in the fourth quarter ended Dec. 31.That was up 67 per cent from earnings of $27.8-million or 31 cents a year earlier. However, the results fell short of analysts' average estimate for a profit of 47 cents a share, according to Thomson Reuters I/B/E/S.

Revenue was up 24 per cent at $191.1-million.

Pan American benefited from stronger spot silver prices, which nearly doubled through 2010, rising to $30.86 from $16.86, as investors turned to precious metals as a safe haven in economic uncertainty.

The company added 27 million ounces of silver to its reserves in 2010, and has budgeted about $39-million for exploration in 2011.

"Current reserves are sufficient to sustain current production levels for about 10 years," UBS mining analyst Chris Lichtenheldt said in a note to clients.

He added that the Navidad project in Argentina will expand the company's production profile, but that development is dependent on the state of Chubut changing its law to allow open pit mining.

Pan American also said that it would pay a dividend of 2.5 cents a share for the quarter.