Great Panther Mining Limited
Q1 2022 Earnings Call Transcript

Published: 13 May 2022

[Operator:]

Thank you for standing by. This is the conference operator. Welcome to Great Panther Mining’s First Quarter 2022 Results Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. I would now like to turn the conference over to Fiona Grant Leydier, Vice President, Investor Relations. Please go ahead.

[Fiona Grant Leydier:]

Thank you, Operator. Good morning, everyone. I'm Fiona Grant Leydier. Thank you for participating today. Before we begin, please note that we will be making forward-looking statements during the presentation. You should be cautioned that actual results and future events may differ from those noted today. The commentary also refers to various non-GAAP measures, definitions and reconciliations that are included in the Company's MD&A for the three months ended March 31st, 2022. All dollar amounts expressed in this presentation and the associated financial statements and MD&A are in U.S. dollars, unless otherwise noted. For reference, during the call, AISC refers to all-in sustaining costs. For today's call, please refer to the first quarter 2022 financial results news release issued yesterday and the accompanying financial statements and MD&A, which are posted on our website and have been filed on SEDAR and EDGAR. This conference call is being recorded and will be available for replay later today. Replay information and the presentation slides accompanying this conference call and webcast will be available on our website at greatpanther.com. On the call this morning, we have Alan Hair, Chair and Interim CEO; Sandra Daycock, Chief Financial Officer; and Fernando Cornejo, Chief Operating Officer.

[Alan Hair:]

Thank you, Fiona and thank you everyone for dialing in today. We navigated through another challenging quarter and have made good progress in a number of fronts to build back steady state production Tucano. To that end we're starting to see improvements in operating performance at Tucano, thanks to the mobilization of the new contractor MINAX, who is working in tandem with our current contractor U&M and we have advanced stripping of the TAP AB, TAP C and Urucum North pits in preparation for production in the third quarter. We reported an updated mineral reserve and mineral resource estimate to Tucano Gold Mine, which outlines an increase in both reserves and resources successfully replacing 2021 mining depletion and the increasingly the open pit mine light by 1.5 years. This updated MRMR was focused on the open pit as drilling of the Urucum North underground project has just been completed. The underground resource will be updated once engineering studies currently underway are finalized. We also reported some encouraging exploration results from the Coricancha advanced development project in Peru. The results confirm the potential of Escondida vein which has never been mined. We are evaluating options to further advance the project. We were fortunate that the Omicron COVID search in Q1 did not adversely affect our operations. Safety protocols remain in place and vaccination programs continue to progress. Our financial results for the quarter are representative of where we are in the new optimized mine plan for Tucano following the setbacks in 2021. Revenue for the quarter was $33.4 point four million on a consolidated production of 17,913 gold equivalent ounces. Consolidated cash costs were $1,725 per ounce per gold and sold and consolidated ASIC excluding corporate G&A was $2,740 per gold ounce sold. We expect to have high costs in the first half of this year, because of the amount of stripping we're are doing against the backdrop of low gold ounces coming from the mine. We expect cost to normalize and cash flow to improve this production increases in throughout the second half of the year. We ended the quarter with $33.4 million in cash and cash equivalents and borrowing of $52.7 million. Sandra will go into further details in these financials later in the call. I will now pass it over to Fernando Cornejo, COO to discuss results from our operations.

[Fernando Cornejo:]

Thank you, Alan and good morning, everyone. Focusing first on to Tucano. Gold production for the quarter was 14,037 ounces, compared with the 22,986 ounces in Q1 2021 decrease of 39%. Despite plant throughput being 10%, compared to Q1 2021, the ongoing stripping in the TAP AB, TAP C and Urucum North pits resulted in low or production. Triggering a higher consumption of low grade stockpiles price in marginal ore. The plant feed grade for this first quarter was 1.57 grams per ton, compared to the 1.9 gram per ton in Q1 2021. Production in the first quarter of 2022 was positively affected by mine reconciliation and higher plant throughput due to the higher availability of the MINAX fleet to rehandle stockpile. For the quarter, cash cost per ounce sold was $1,817, compared to the $983 in Q1 2021. And the AISC per ounce sold was $2,606, compared to the $1,549 in Q1 2021. In Q1, the Tucano geotechnical completed studies for the Urucum Central South pit pushback with the assistance of SRK Consulting. This studies further refined the design of the pushback providing more confidence that this pushback could be done safely and effectively. This work is expected to commence in the second half of 2022 and production of ore is expected to resume in 2023. With regards to the new contractor, we are on track to have MINAX fully mobilized in Q2 this year. MINAX with its new, locally sourced mining fleet has contributed to a more efficient productivity. And over time, this will have positive effect on performance and costs. Finally, to outline that we are currently in discussions with our existing contractor U&M to resolve concerns our equipment availability. Moving on with Topia, total production for the quarter was 290,694 silver equivalent ounces, compared with 366,318 ounces in Q1 2021. Metal production decreased by 20%, primarily due to lower material milled in the absence of the stockpiles, while the targeted producing mines for 2022 are in development. Silver recoveries were 92% same as in Q1 2021, and gold recoveries were 64.1%, compared to the 55.4% in 2021. Average rates were somewhat lower at 362 grams per ton silver and 1.84 grams per ton of gold, compared to 398 grams per ton silver and 1.87 grams per ton gold in 2021. For the quarter, cash cost per payable silver ounce were $16.82, compared to the $15.88 in Q1 2021. And the AISC per payable silver ounce was $26.74, compared to the $18.71 in Q1 2021. The Guanajuato mine remains on care and maintenance, while the company assess its options to maximize the potential of this asset. I will now turn the call over to Sandra Daycock, our CFO to discuss the financial results.

[Sandra Daycock:]

Thank you, Fernando. Consolidated revenue for the quarter was $33.4 million, compared with $52.6 million in Q1 2021. On consolidated sales of 17,798 gold equivalent ounces, compared with 29,635 gold equivalent ounces in Q1 2021. Mine operating earnings were $2.3 million, compared with $19.9 million in the same period of 2021. Our average realized price for gold was $1,885 per ounce in Q1 2022 versus $1,755 per ounce in Q1 2021. And our average realized silver price decreased slightly to $24.10 per ounce in the first quarter, compared with $25.35 per ounce in Q1 2021. Cash cost per gold ounce sold were $1,725 per gold ounce sold, an 81% increase, compared with $954 per gold ounce sold in Q1 2021. Due to the reduction in sales volume stemming from the processing of lower grade stockpiles and marginal ore to supplement lower mine ore production that Fernando mentioned. Consolidated AISC for gold ounce sold excluding corporate G&A, with $2,740 in Q1 2022, compared with $1,557 in Q1 2021. As we are seeing across the industry, inflationary pressures are starting to have an impact on costs. The strengthening up the BRL against the US dollar represented approximately $100 per ounce of the higher AISC in Q1 2022 versus Q1 2021, and inflation in Brazil costs also contributed approximately a $120 per ounce to AISC. To that end, we are reviewing the potential impact of this cost pressure relative to our 2022 cost guidance and assessing further initiatives to improve operational efficiency and reduce fixed costs. Our net loss was $8.9 million, compared with a net loss of $0.3 million in Q1 2021. And EBITDA was negative $1.2 million, compared with $10.3 million of EBITDA in the same quarter last year. Cash flow from operating activities before changes in non-cash working capital was negative $4.5 million, compared with $70.3 million in Q1 2021. We ended the quarter with cash and cash equivalents of $33.4 million, compared with $45.5 million for the same period in 2021 and $47.7 million on December 31, 2021. During Q1 2022 borrowing -- at the end of Q1 2022, borrowing totaled $52.7 million, compared with $27.6 million in Q1 2021. And in addition during Q1 2022, the company issued shares for proceeds of $2.7 million through the ATM facility. Our net working capital declined to negative $18.1 million in the quarter and current assets declined only slightly as the negative change in cash of $14.3 million was partially offset by higher receivable and inventory balances, including the re-clasification of $7.4 million tax refund receivable into current assets, because as we are very happy to report. This sizable refund was received in April. However, current liabilities increased by $17 million, due to $6.1 million in off take loan repayments being reclassed to current liabilities, $6.8 million and higher provisions for leases continued and reclamation and the $2.7 million increase in trade payables. A big portion of that increase stemmed from inflation and the exchange rate that I mentioned earlier. The company expect to generate positive cash flows from its mining operations in 2022 prior to capital investment debt repayment obligations and exploration development costs. Further, we have established -- an established track record of refinancing our debt obligations as we come due. In the meantime, we expect to require further financing and we are evaluating various alternatives to bridge the gap to steady state production in the latter half of the year. Thank you. That's all have for formal remarks. I'll now turn the call back to the operator for the question-and-answer period.

[Operator:]

Thank you. We will now begin the question-and-answer session. Our first question comes from Heiko Ihle of H.C. Wainwright. Please go ahead.

[Heiko Ihle:]

Hi there, thanks for taking my questions. Can you hear me okay?

[Alan Hair:]

Yes, we can.

[Heiko Ihle:]

So my next

[Alan Hair:]

Sorry, you're breaking up now.

[Operator:]

Pardon me, it seems Heiko’s line has disconnected.

[Fiona Grant Leydier:]

Operator is line working. Heiko is obviously disconnected.

[Operator:]

Heiko has disconnected. I'll hand it over to Fiona.

[Fiona Grant Leydier:]

Actually have a question on behalf of Jake Sekelsky of AGP. He is traveling at the moment, but did send through a question via email. So I'll pose that right now and we can answer here. We've seen inflationary pressures across the board. Are you taking any proactive steps to mitigate the impact here, specifically related to energy and consumables?

[Alan Hair:]

Yes, absolutely. I mean, we're doing a very thorough review of our costs and the current contracts, maybe Fernando could get a little bit more detailed color?

[Fernando Cornejo:]

Yes, absolutely, we are breaking down our contracts between major contracts and midsize contracts and we're going into renegotiations with all those companies. Some of those will imply potentially switching supplies at this point in time. But the team in Brazil and Mexico are moving ahead with those negotiations.

[Operator:]

This concludes the question-and-answer session. I would like turn the conference back over to Alan Hair for any closing remarks.

[Alan Hair:]

Thank you, operator. As Sandra mentioned we expect to generate positive cash flow from our operations in the second half of this year. We are prudently managing our costs and are focused on delivering optimal operational performance as to ramps back up. We'll have results from the Urucum North underground drill campaigns and shortly, which will be followed by completion of the engineering studies required for development by the end of the year. As we stated earlier, the first half of this year is all that building back to steady-state at Tucano with the expectation of a stronger second half of 2022 continuing into 2023. We look forward to share our progress with you in the next quarter. Thank you for your time today.

[Operator:]

This concludes today's conference call. You may disconnect your line. Thank you for participating and have a pleasant day.