Great Panther Mining Limited
Q1 2020 Earnings Call Transcript

Published: 8 May 2020

[Operator:]

Thank you for standing by. This is the conference operator. Welcome to Great Panther Mining’s Q1 Earnings Call and Webcast. As a reminder, all participants are in a listen-only mode and the conference is being recorded. After the presentation, there'll be an opportunity to ask questions. [Operator Instructions]I would now like to turn the conference over to Meghan Brown, Vice President, Investor Relations. Please go ahead.

[Meghan Brown:]

Thank you, operator, and good morning, everyone. I'm Meg Brown. Thank you for taking the time to participate in our call today. Before we begin, I would like to mention that some of the commentary on today's call contains forward-looking statements. You should be cautioned that actual results and future events may differ from those noted in today's presentation.The commentary also refers to various non-GAAP measures, definitions and reconciliations that are included in the company's MD&A for the period ended March 31, 2020. All dollar amounts in this presentation and in the associated financials and MD&A are in U.S. dollars, unless noted. For reference during the call, AISC refers to all-in sustaining costs.I would like to remind everyone that this conference call is being recorded and will be available for replay later today. Replay information and the presentation slides accompanying this call and webcast will be available on our website at www.greatpanther.com.Joining the call this morning, we have Rob Henderson, our newly appointed President and CEO; Neil Hepworth, our Chief Operating Officer; Jim Zadra, our Chief Financial Officer.And I will now turn the call over to Rob Henderson. Rob?

[Rob Henderson:]

Thanks Meg and thank you everyone for dialing in today. I'm excited to take this on for a number of reasons. First of all, Great Panther is highly leveraged the gold price and I see a significant value play in a rising gold price environment. Secondly, that's most importantly, Great Panther has a great team with producing assets in good jurisdictions. Our employees have done very well in this very disruptive time of COVID-19. I would like to thank them and all our frontline workers for their efforts.My priority is to stabilize operations, generate strong cash flow. My background is in operations, so I'm looking forward to this task. We also need to advance our brownfields exploration efforts and we need to maintain liquidity. The market doesn't like surprises and this is one of the main reasons in my mind that the company trades at a significant discount to its peer group.We've had setbacks and at the end of the day, we have not had consistent operating performance and the resulting lack of predictability and results. Now, we have a refresh board with tremendous mining experience and strong relationships within the industry brings us new access to capital markets and projects and this brings me to the third reason I see good upside in our company, is that Great Panther has had a low profile on Baystreet, which is an important financial center for mining. We've had tremendous following in the U.S. and Europe and trade almost eight times the volume on NYSE Americans than we do on the TSX. Many of you on the call today have been longtime supporters of Great Panther. And I look forward to building a similar established following on in Canada as this should give us a strong rewrite opportunity as we stabilize and improve the operations.One of our high level objectives is to build a stronger capital markets presence as this will create a strong platform for further growth. The new board will also strengthen and support our ability to do this. Once we get our currency back to where it should be relative to our peers, we will look to grow the company through the M&A and achieving critical mass is important. We want to grow the business. Because I haven't yet had the chance to visit the mines and meet our teams in person, I'm going to give a high level overview of the quarter and then we'll turn over to Neil for the detailed discussions on the operations, and of course Jim will do the financial review.But before we get started with a review of the quarter, I'd like to comment on the health and safety of our people pertaining to COVID-19. We have put in place a number of proactive measures including travel restrictions and many of our employees are working remotely including everyone at head office. At mine sites, we have supervision monitoring and response plans in place as well as health screening and continuous assessment and we are limiting external visitors. In spite of this, we unfortunately reported two effected employees at our Tucano mine this week.Both cases are local employees living in the nearby communities of Pedra, Bronca and Serra do Navio. They have both been placed in quarantine and are being monitored by the local health authority. We continue to screen all employees on arrival at the mine site and workers are encouraged to stay at home if they do not feel well. The health and wellbeing of our people and communities is a core value and will continue to be our top priority through this pandemic.On the topic of COVID-19, all of our mines were in full production during the first quarter. However, subsequent to the end of the quarter in early April, the next government put in place a directive to temporarily suspend all nonessential business activities, which included mining. The directive was initially set to expire on April the 30, but it has been extended until May – the end of May.As a result, Topia and Guanajuato Mine Complex are not currently operating. Our Tucano Mine in Brazil so far continued to operate with full and proper protocols in place. We had a strong cash position at the end of Q1 and lost production in April and May from Mexico, not expected to exceed more than 5% of our annual plan production for the company as a whole.So 2020 was off to a good start in Q1 and we delivered significant growth and revenue, mine operating earnings and operating cash flow. Our production totaled 34,725 gold equivalent ounces, a 134% increase over Q1 last year following Tucano acquisition. Our revenue of $48.1 million delivered cash flow from operations of $11.8 million in the quarter and we ended the quarter with $39 million cash on the balance sheet.Driving that growth and production was at Tucano Gold Mine which is now our flagship assets and as a big focus this year as we carry out a $6.6 million, 55,000 meter exploration program focused on near mine resources. Tucano produced 26,176 ounces of gold in the quarter, a 12% increase over the first quarter of 2019. This last quarter we also announced our inaugural mineral reserve and mineral resource estimate which was significantly lower than the previous estimates. This is the result of updating the geological model which resulted in higher grades and lower tonnage.But most importantly, this model now provides us with greater confidence in our mine planning. We're currently focused on drilling in our existing pits to convert mineral resources to reserves and the property surrounding the mine has great potential and it's very under explored. So we will be testing some regional targets this year too. We are maintaining our full year production guidance at Tucano of 120,000 ounces to 130,000 ounces of gold and all-in sustaining costs between $1,150 and $1,250 per ounce.In our Mexican silver operations in the quarter, we produced 769,429 silver equivalent ounces in the first quarter and also launched a 25,000 meter exploration program at GMC, which is progressing well. GMC is expected to produce 1.2 to 1.4 million silver equivalent ounces this year at an all-in sustaining costs between $13 per ounce and $14 per ounce of silver.As we will discuss later on our call, Topia's guidance will be released at a future date, but no later than the end of Q2.I previously noted the suspension of mining operations in Mexico by the federal authorities as a protective measure due to COVID-19. To-date, we haven't had any cases of COVID-19 at our Mexican operations at which we still have staff undertaking necessary care and maintenance and security has allowed for.I'm very excited to lead Great Panther in the next phase of growth. We are a precious metal producer with assets in Mexico, Brazil, and Peru. We have a strong, diverse operating platform from which to grow with exploration upside and financial strength along with an experienced team to execute on these important initiatives.I'll now turn the call over to Neil Hepworth to cover the operation.

[Neil Hepworth:]

Okay, thanks Rob. Okay. Starting with Tucano. After closing acquisition last year, we immediately focused on finishing construction and commissioning of the sulfide processing circuit, which allows us to process a higher grade sulfide ore that' we did last year.First quarter production totaled 26,176 ounces of gold. As expected, this was lower than Q4 as they focused on pre-stripping activities in all of the producing pits, Urucum Central North, AB3 and starting with the pushback in Urucum North. This resulted in fewer tons of ore mined in the quarter, but as planned, the pre-strip sets us up nicely to make up over the course of the year. Costs in the quarter were higher than full year guidance for the same reason. Waste tonnage was 36% higher than the previous quarter as we advanced some of the waste movements schedule for upcoming quarters.The upside, however, is that all of this should lead to improve production and lower ASIC in the remaining – remainder of 2020 and into 2021. During the quarter as Rob mentioned, we launched a $6.6 million, 55,000 meter drilling program at Tucano that is divided into near-mine and regional categories. This is a threefold increase in the amount of drilling done last year as we work to capitalize into Tucano’s exploration potential. 5 million is dedicated to within five kilometers of the plant that could lead to the development of new mineralized zones while 1.6 million is focused on regional targets within a 20-kilometer distance to the mill well within economic trucking distance.In addition with the current gold price are well above the prices used in the historic pit shell designs, we are analyzing opportunities to expand the existing pits.During Q1, we completed the first 2,408 meters of this drilling with two rigs on site. Two additional rigs have been added since quarter end for a total of four rings. Okay. We are evaluating the merits of conducting a feasibility study for underground. The study was started around the end of the year. We will consider an exploration declined to provide access to the ore plus goodwill coverage for lower down in ore body. The ramp would also eventually serve as a production ramp. The feasibility study will evaluate the economics of dual production declines, different mining methods and contractor versus owner operated models.On the next slide, we'll talk a little bit about the exploration. The main focus for the reserve replacement drilling is TAP AB. Target resources are below the current $1,350 per ounce reserve pit shell, which is the blue line and above a new $1,500 per ounce pit shelf, which is the orange line. This new shell is far larger than the RPA $1,500 resource pit shell that considered average mining cost for Tucano and 3.8 real per U.S. dollar exchange rate.The new shell includes an exchange rate of 4.5 real per U.S. dollar and uses mining cost specific to tap a beat to take into account the extended oxidized zone within free diggable material and the proximity of process plants and waste dumps.Our second new resource shell in red demonstrates gains that may be made if the equivalent of a 10% reduction in operating costs are achieved. Okay. You can see there that the reserve replacement drill also is shown in purple traces. Infill drilling is focused on resources with less existing coverage so that these inferred resources can be upgraded to – firstly to indicated resources and then converted to reserves within this pit shell. The conversion of inferred and indicated resources in the orange and red pit shells will increase reserves by between 180,000 and 230,000 ounces. The first phase of drilling is expected to be completed by the end of June.The next slide looks the regional exploration potential. I think that Great Panthers’ regional tenements cover the most prospective and underexplored greenstone terrain in Brazil. The images that you see on this slide are basically conductivity superimposed on magnetics. The large oval shaped blue zones reflect granitic intrusions are the main drivers of mineralization. The red squiggles, highly conductive zones such as banded iron formations, chemical sediments or deep weathering that’s squeezed between the intrusions. The granite intrusions provide heat that drives and generates the gold rich hydrothermal systems that precipitate gold in structural and chemical reactive host rocks.There's seven kilometer trend Tucano mine trend is a north south trend indicated by the arrow note the numerous environment similar to the Tucano trend that need to be prioritized and evaluated. We have a new VP Expiration and he has extensive experience in greenstones and extensive knowledge of Tucano tenements in particular for these previous functions. Nick will identify and give priority to high potential corridors and targets based on logistics and prospectively with a view to fast track and exploration program that's expected to start in Q. So we may end up jumping into some regional exploration with avengers rather than taking it slowly.Next slide. Moving to our Mexican operations, it's important to note that our primary metal produce is now gold. However, we continue to use and report cost metrics per payable silver ounce to manage and evaluate operating performance at our Mexican silver mines.In Q1 we produced 376,000 silver-equivalent ounces or – sorry about 4,200 gold equivalent ounces at Topia, reflecting lower throughput and also lower average gold medals increase. These factors were partially offset by higher average silver grade and in gold recoveries. We completed 1,561 meters of exploration drilling in the quarter at Topia to better define existing mineral resources and extend the mineral resources into areas. There are currently four rigs on site at Topia.As noted in our March 9 press release, we temporarily ceased depositing tailings – on Phase II tailings storage facility at Topia based on a recommendation by a concept by our consultants. Our team is reviewing various alternatives including mitigation measures to continue using Phase II TSF and advancing permitting for Phase III of the TSF. Currently we estimated a potential mill stoppage for three to six months with ongoing mining and stock piling of ore. However, to quarter end operations were temporary suspended due to COVID-19, which is now expected to be in place until end of May.At the Guanajuato Mine Complex, nearly all of the process ore was being sourced from the San Ignacio mine, while we continue at Guanajuato Mine. The two mines together with a shared processing plant comprised our Guanajuato Mine Complex, or GMC. Production from the GMC in the first quarter was approximately 393,000 silver equivalent ounces or about 4,300 gold equivalent ounces. That's a cash cost of $7.84 per payable silver ounce and all-in sustaining cost of $14.21 per equivalent silver ounce.The exploration program continues to advance at GMC with four underground drill rigs in operation and the objectives of outlining institute blocks of higher grade mineralization. Underground and surface exploration has also been increased at San Ignacio. In March of this year, we announced.In March of this year, we announced an updated 40 feet, NI 43-101 resource for both Guanajuato and San Ignacio. Exploration efforts will continue this year with a goal of boosting production from GMC in the second half of 2020.Okay. I'll now turn the call over to Great Panther’s CFO, Jim Zadra to discuss our quarter financial results.

[Jim Zadra:]

Thanks, Neil, and welcome everyone. We recorded a 188% increase in our revenue for the first quarter of 2020 relative to Q1 of 2019, which is a primary driver behind our higher operating earnings and operating cash flow. The higher revenue primarily reflects the full quarter of Tucano operations, which required last year and also reflects a significant improvement in the average worldwide gold price to $1,577 versus $1,294 for Q1 of 2019.Today, gold is well above $1,700 per ounce and has been trading in this range for a good part of the quarter, which bodes well for our Q2 results. We reported mine operating earnings before non-cash items $14.2 million and cash flow from operation of $11.8 million. Despite these strong increases in mine operating earnings and operating cash flow, we reported a net loss of $0.13 per share after accounting for non-cash items. Adjusting for these items, we reported adjusted EBITDA of $6.4 million.The non-cash charges relate primarily to the significant historic weakening of the Brazilian real against the U.S. dollar towards the end of the quarter, as a COVID-19 pandemic accelerated. Approximately $26 million of these non-cash items relate to changes in the value of outstanding Brazilian real forward contracts that we put in place in the fourth quarter and the first quarter to hedge a portion of our production costs in Brazil to better – to have better certainty on our cash flows.These forward contracts run out to February, 2021 and as we are not fully hedged, we will continue to realize a net benefit on our real-denominated costs if there's a substantial sustained weakness in the real. If the real strengthens, we will recover some of the mark-to-market losses we recorded on the remaining contracts. I know there were $11 million of primarily non-cash charges relates to the translation of U.S. dollar denominated borrowings liabilities on the books of our foreign and primarily the Brazilian subsidiary.G&A expenses were higher than in Q1 2019 due to full quarter impact of the addition of G&A costs from the acquisition of Tucano and additional insurance charges. We expect to see a reduction in G&A in the following quarters as we realized the cost synergies from closing the former parent company head office of Tucano. In the second quarter of 2020 most of the contractual ongoing employment and other administrative costs of the former head office will be wind down.For the first quarter of 2020, consolidated cash costs was $1,054 per gold ounce sold and all-in sustaining costs, excluding corporate G&A was $1,737 per gold ounce sold. AISC and cash costs were impacted by a number of factors including the seasonally lower production at Tucano, lower sales as compared to production and higher waste stripping as Neil mentioned, which is expected to benefit production through the remainder of the year.As production increases and we see lower levels of waste movement, we expect our AISC to trend towards our guidance of $1,150 to $1,250 per ounce for Tucano. And we continue to maintain our cash cost and AISC guidance for the GMC. And later this quarter, we expect to provide guidance for Topia after we have better visibility on a restart following the COVID-19 restrictions in Mexico and the status of moderating our Phase 2 tailings down with progress on permitting of Phase 3.We continue to strengthen our balance sheet in the first quarter, closing on $11.25 million Gold Dore Prepayment facility with Samsung and we also increased our credit facilities in Brazil by a net $2.5 million. We are continuing to pursue additional capital to fund our exploration and growth programs and to improve our balance sheet. In terms of our capital allocation priorities, our primary focus remains optimization and exploration at Tucano and secondly exploration at our mines in Mexico.I'll now turn the call back to Rob.

[Rob Henderson:]

Thank you, Jim. Before we open up for questions, I just wanted to – turning to our last slide in this presentation and that's the valuation gap. I believe this is one of the most compelling opportunities I see here and one of the reasons I was excited to take this on.I talked earlier about the re-rate opportunity based on the fact that Great Panther trades at a significant discount to its peer group. Again, our priority is to stabilize operations, get to a place where cash flow is steady and strong, meanwhile, improving our visibility in the Canadian capital markets while we continue to foster and grow our profile in the U.S. markets. I see great upside in the company's valuation.Thank you. That's all we have full formal remarks and I'll turn it back to you for the Q&A.

[Operator:]

Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question is from Matthew OKeefe of Cantor Fitzgerald. Please go ahead.

[Matthew OKeefe:]

Thanks, operator. Good morning. So yes, just a couple of questions. Obviously, we've chatted recently when you – the new team has come on Board. So of course, welcome and we would share your optimism for the future for Great Panther. One of the areas that I'm particularly drawn to with Great Panther is the exploration. And you've touched on that a fair bit in the comments. But I was wondering it looks like you've already spent about $6 million from the financials this quarter on exploration. I'm assuming that the budget is going to increase. And I guess you pointed out that about $5 million is really near-mine stuff and a little bit more regional.One, what might we see some results from that and would we expect to see a budget increase in continued exploration for the remainder year?

[Rob Henderson:]

Yes, hi Matt. And yes, thanks for the comments. We've got the drills turning in Brazil. We are well into the program. Certainly not up to $6 million yet, but it is the focus to get our input drilling done by mid-year. So we are looking for Q3 update to the model in time for the budgets process at the end of the year. The regional exploration, we'll be focusing on that once the season dries up, which again is, we're looking at Q3, Q4. So perhaps Jim can give a bit more color on the on the dollar spend.

[Jim Zadra:]

Sure. Matt, it's Jim. Just want to remind you the exploration and development line item on our P&L reflects primarily the core cash costs in exploration activities in Mexico that we don't capitalize. Whereas our exploration at Tucano is capitalized, it will show up in CapEx. So the $6 million you are seeing is the exploration programs that are not related to Tucano. And we remain on track in Tucano in terms of the $6.6 million exploration program. We haven't – we still have a couple quarters to go in terms of completing that.

[Matthew OKeefe:]

Okay. Thanks for clearing that up. Okay. And then, well, I've got just another quick question here on COVID-19. I guess we haven't heard anything official from the Mexican government as to when you might – whether you will be starting up early or the 30 of May. How long will it take you to ramp up, and how are things in around Guanajuato with respect to the virus?

[Jim Zadra:]

Right. Guanajuato is next to a town and therefore we are in a latter startup category date according to the Mexican government. So end of May is when we can start up there and it's going to take two to three weeks to get the team in place to get all the protocols agreed to get all the safety conditions in place. So it's going to be a startup in June in reality. At Topia 18 of May is right now the green light from the government because we have not had any COVID cases there. So the team is going to be mobilizing there a bit earlier. But the focus there is really to get the permitting and monitoring activities in place so we can start production, a bit later on. So the focus right now is to get teams mobilized by the end of May in Mexico.

[Matthew OKeefe:]

Okay. Great, thanks you for that. I'll let others ask questions at this point. Thank you.

[Jim Zadra:]

Thanks Matt.

[Operator:]

The next question is from Heiko Ihle of H.C. Wainwright. Please go ahead.

[Heiko Ihle:]

Hey guys, thanks for taking my questions.

[Rob Henderson:]

Hi, Heiko.

[Heiko Ihle:]

Hi. So I mean Brazil seems to be getting a bit worse every day when it comes to the COVID-19 issues. I mean, and from everything you've said and everything one reads clearly, your people want to work and they seem pretty good at it too. But I mean if the government shuts down the site, that's pretty much the end of that. I know you haven't been there in person. I mean, you mentioned that even earlier on this call, but can you just tell us a little bit about what you are seeing from your in-country staff, what you are hearing firsthand accounts, things that probably don't make the newspapers here in North America and things that we really aren't picking up on a little bit place.

[Rob Henderson:]

Yes, Brazil is a mining community. We're not building a mine in Brazil. And as you mentioned that, Brazil has been particularly hard hit by COVID. And we are seeing it now in our communities, which is nasty. And our employees – it's a tough time to operate it. There's a lot of tension, there's a lot of uncertainty about the COVID. So, I really – my heart goes out to all our employees who are working on these very difficult conditions. But the protocols do seem to be working and the government is right now is encouraging mine to carry on working under strict protocols. So it is tough, but the mines are operating.Neil, you've probably got a bit more direct experience in, this. Do you have any commentary on Brazil?

[Neil Hepworth:]

Yes, I think one of the things is that they're a little bit more economically driven than the people in Europe. And if they are not working, there's no food on the table. So I think a lot more motivated to get out there. And the authorities recognize that so that they're not in too much of a hurry to shut places down. As long as we can show that we've got the right protocols in place, they are pretty sort of accommodating to us. And in particular, the local community is very, very much behind us because we are supplying this, the main sort of source of employment in the area. So yeah, there's a of – sort of – there's a lot of support for keeping the mine open.

[Heiko Ihle:]

Yes. Speaking of being a one employer in the area with Topia, I mean the mine is about as remote as it gets, I've been there. I assume they won't have an issue with the May 18 startup. So that's currently being around. I mean, worst-case scenario, I guess, they will close the airstrip and the little road in and out of town? Or is there more extensive plans that are being handled to well with this whole thing?

[Rob Henderson:]

Neil, you’ve got that one? Well,

[Neil Hepworth:]

Yes, as I understand it, I mean the, well Topia in particular, that's definitely sort of a one employer town. And we've got everybody behind us, they’re trying to get us open up as soon as possible, but they're fighting against the government. So it's a slightly different story there. So even though we've got the mayor going out and attending meetings and lobbying to try and get a start as early as possible, it's basically the government that's laying down the major rules. But having said that, there's a – we basically fairly said that we'll be starting up on the 18, which is which is, is partly due to the fact that there is some low incidents of COVID, but partly of the fact that the local community is so much behind us and is pushing and making a noise and lobbying for us.

[Heiko Ihle:]

Okay. And then just to confirm, you guys aren't having any issues getting gold out of Brazil, right?

[Rob Henderson:]

I don’t know, that part of the supply chain is working very smoothly.

[Heiko Ihle:]

Okay. That is it. I'll get back in queue. I let other people ask questions. Thank you guys and keep it up.

[Rob Henderson:]

Thank you.

[Operator:]

The next question is from Mark Reichman of Noble Capital Markets. Please go ahead.

[Mark Reichman:]

Good morning. I just said two questions. First, with respect to Tucano’s all in saving costs, could you provide maybe a little more detailed bridge from the first quarter to the guidance range? And I noticed there are still some stripping and development cost to be spent. And so I just wanted to kind of get your key variables that you are focused on there.

[Jim Zadra:]

Okay Mark just in general terms, we should see the stripping decrease, which will have a pretty significant impact in terms of reducing the ASIC through the following quarters. We'll also see the production levels come up. And one of the important things to note is that we report our ASIC and cash costs on a sales basis. And if you look at our sales versus production numbers for Q1, we produced 34,000 ounces but sold about 26,000 ounces, 27,000 ounces.So that has quite a bit of an impact on the AISC number because we're using a smaller denominator against the exploration, the CapEx, all the other items that go into and the stripping that goes into the AISC calculation. So as our production levels go up from Q1, that will also bring down the AISC number.

[Mark Reichman:]

Okay. And then just secondly, could you just walk us through the timeline on the litigation measures for the Phase II TSF and the remediation that's required on that adjacent TSF to the Phase III and how that might impact permitting?

[Neil Hepworth:]

Shall I take this guys?

[Rob Henderson:]

Yes please.

[Neil Hepworth:]

Okay, essentially during November last year we have a fairly high – we had a lot of rainfall during last year and the particularly high rainfall during November. And we had a movement on this paleo surface that lies beneath the tailings impoundment. Now that triggered our trigger action response plan, which told us basically that we needed to stop using the TSF for first stacking tailings. Subsequent to that we've been – we've continued monitoring this and we've had sort of two three months of stable readings. We’re now back into the green. So in theory, we can actually go back and start stacking on Phase II.But having said that, the consultant is keeping us in the orange status or the yellow status, where we have to continue reinstalling some instruments on the Phase I and continuing with weekly monitoring instead of monthly monitoring. But because of the COVID we were not stack – we basically are not stacking on Phase II, we haven't gone back to stacking yet.So once we got the new instruments in and that's going to be starting soon. I mentioned earlier about the support of the local authorities. They've given us permission to bring in the in this month to do all of the instrumentation in the Phase I to do the CPT testing. So we should have some results sometime in roundabout towards the end of June, we shouldn't be in a position where we can probably – where we've replaced all the instruments, we can probably go back to the green status in Phase II.In the meantime we are continuing to try and get the license on Phase III. We think it's fairly close. We'll know within two weeks of the government reopening whether we have got it or not. And then if we haven't, we will continue pushing to get that. So I mean does that cover?I think one of the main things…

[Mark Reichman:]

Yes, go ahead.

[Neil Hepworth:]

Well one of the main things is that in the 2017 they did a dam break analysis. But they did it on specific reserves sort of a water retaining structure or alternatively retaining dam that had a large pond behind it. Subsequent events we've basically been dry stacking on top of Phase I, so the water table has dropped 10 meters, so the material isn't saturated. So it's a completely different situation to where it was when we looked at it previous, which is why we are re-doing the CPT tests to see the extent of material that could flow if the dam did fail.

[Mark Reichman:]

Okay. And that's the remediation that's basically, that's highlighted in the MD&A that's the remediation.

[Neil Hepworth:]

Well if the CPT tests indicate that we've got liquefiable tailings then what we would do is we would put in a series of wells and start to drain it. Okay, that would be – the remediation would be the wells to dry it.

[Mark Reichman:]

Okay, okay, great. Listen, thank you very much. That's very helpful.

[Rob Henderson:]

Thank you, Mark.

[Operator:]

[Operator Instructions] The next question is from Bhakti Pavani of Alliance Global Partners. Please go ahead.

[Bhakti Pavani:]

Good morning guys. Thank you for taking my questions.

[Rob Henderson:]

Good morning, Bhakti.

[Bhakti Pavani:]

I wanted to start with Tucano as a part of the safety measures since the mine is still operating, has there been any kind of cost impacts that you have to incur in order to implement those safety measures?

[Rob Henderson:]

Nothing significant Bhakti, I mean, we're really – it's a way of working rather than actually spending. So maybe we might feel a little bit of inefficiency, but there's no huge dollar value. We are helping out the community with test kits and – but it's not – the dollar amount is not significant.

[Jim Zadra:]

Can I add a little bit?

[Bhakti Pavani:]

Sure.

[Jim Zadra:]

Well I’ll just say, yeah, I mean, in terms of donations, I think, it was $200,000 worth of sort of medical and safety equipment that we provided the local council. And as Rob said, I mean, the main thing is because we are screening everybody that comes in and anybody that has the slightest sort of sign that they might be sort of having some, anything that looks hopefully like a symptom, we send them home again. So there will be slight inefficiencies because of that in terms of equipment maintenance and operators, but nothing significant at this stage.

[Bhakti Pavani:]

Got it. Thank you very much. And the second question is in case the government mandate a partial or complete shutdown, what kind of contingency measures you have in place or do you expect to implement in order for the smooth operation at Tucano?

[Rob Henderson:]

Neil, do you want to address that?

[Neil Hepworth:]

Yes what we've got is we've got close to a million tons of stockpile running at about 0.62 grams, 0.63 grams. If the government asks us to shut down, what we would do is we would ask them if we could go into partial shutdown and continue operating with the plants and the stockpiles. What we are doing in the meantime to sort of sell this to the government is we are segregating the plant workers from the other workers so that if it does come to that, then we can actually point out that we've taken these measures and that the plant staff is separate and we should be safe to go on.

[Bhakti Pavani:]

Perfect. That's very helpful. Thank you so much. Moving to Guanajuato the operations are expected to be shut down until May 30. At this point – and given that the ramp up is going to take about two to three weeks, do you have any kind of stockpile that maybe you can process once you get the green light from the government?

[Neil Hepworth:]

No, not really, nothing significant, a few days, it's not really as stockpiling situation there.

[Bhakti Pavani:]

Got it.

[Neil Hepworth:]

It would just be a case of slowly ramping up production.

[Bhakti Pavani:]

Got it. And just last one from the housekeeping standpoint I'm sorry if I missed the comment earlier, but Jim did talk about the expected wound down of G&A expense in the lateral half. Jim, maybe could you please quantify as to what level of reduction do you expect to see on the G&A search front?

[Jim Zadra:]

Sure Bhakti. I would expect to see the cash G&A so exclusive of items like share-based comp trend down to about $2 million, $2.5 million for the remaining quarters.

[Bhakti Pavani:]

Got it. Thank you very much. That’s it from my side guys.

[Rob Henderson:]

Thank you, Bhakti.

[Operator:]

The next question is from Jake Sekelsky of ROTH Capital Partners . Please go ahead.

[Jake Sekelsky:]

Hey guys, thanks for taking my questions.

[Rob Henderson:]

Good morning Jake.

[Jake Sekelsky:]

Just a quick one at Tucano, it looks like you accelerated some stripping activities during the quarter, which just good to see. I suspect these are going to come down over the next few quarters a year. Are you able to give any color on this? I'm just trying to get a handle on what all-in sustaining costs might look like over the rest of the year.

[Rob Henderson:]

Sure. Jake of the capitalized stripping costs, and if you go to our guidance table, we did give guidance on the capitalized stripping we incurred about close to half of the annual capitalized stripping costs in Q1. So you can use that as a basis to basically model out the capitalized tripping for the balance of the year.

[Jake Sekelsky:]

Is it fair to say it'll be evenly distributed over the next three quarters or front end loaded?

[Rob Henderson:]

I think my view is probably more in Q2 and Q3 and less than Q4 but maybe Neil can comment on that.

[Neil Hepworth:]

Yes, I think – there's a number of things that are sort of – on the one hand, we still got a lot of material to move on the central north pit, to get into the guts of the ore body and in the north pit. But we will be sort of in the second and third quarter, we will be into the main ore body. So there'll be less of that stripping. But in the last quarter we start to bring in some stripping for next year. And also in the third quarter we start to bring in some from the Central South as well from AB1. So it's sort of like – it basically – I think it’ll sort of balance out, but mainly over the third and fourth quarter.

[Jake Sekelsky:]

Okay, that's helpful. That was all on my end. Thanks.

[Rob Henderson:]

Thank you, Jake.

[Operator:]

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

[Rob Henderson:]

Thank you, operator. Certainly last year was an important year for Great Panther as we transitioned from being a silver producer in a single jurisdiction into what we are now, which is a multi jurisdiction gold and silver producer. Based on the first quarter results this year, we’re off to a good start. Obviously the disruptions due to COVID-19 will be a challenge, but Tucano is by far our largest contributor and will be the focus of our attention as we work to stabilize operations, increase cash flow, and add more gold to our mineral resource base.I'm confident we now have a solid platform and a competent team to drive growth and steadily improve operations. Thank you for your participation today. And behalf of everyone here at Great Panther, I look forward to sharing our progress with you in the next quarter.

[Operator:]

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