Great Panther Mining Limited
Q2 2017 Earnings Call Transcript

Published: 3 Aug 2017

[Operator:]

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Great Panther Silver Limited Second Quarter 2017 Financial Results Conference Call and Webcast. 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. [Operator Instructions] I would now like to turn the conference over to Spiros Cacos, Director of Investor Relations.

[Spiros Cacos:]

Thank you, April. Good morning everyone, and thank you for taking the time to participate in our call today. With me here this morning are Robert Archer, President and CEO; and Jim Zadra, Chief Financial Officer. Before we begin, I would like to mention that some of the commentary in today's call may contain forward statements. You should be cautioned that actual results and future events could differ from those noted in today's presentation. The commentary also reference to various non-IFRS measures, definitions, and reconciliations that are included in the company's MD&A for the year-end ended on June 30th, 2017. I would like to remind everyone that this conference call is being recorded and will be available for replay after 10

[Bob Archer:]

Thank you, Spiros. Good morning everyone. As always, I'll start this morning's conference call with our second quarter highlights, and then provide an overview of our operational and financial results, discuss our outlook for 2017, and conclude with a Q&A session. Before we start, I'd like to remind everyone that all dollar amounts expressed in this presentation and the associated financial statements in MD&A are in U.S. dollars unless otherwise noted. The Great Panther team presented strong operational results in the second quarter of 2017 delivering a new record in total metal production as well as individual metal production records at Topia. We also delivered $800,000 of net income despite a decline in metal prices. Consolidated cash costs and all-in sustaining cost to our AISC for Q2 2017 were both higher in the second quarter of - were both higher than in the second quarter of 2016. And I'll get into the details of that in a moment. Revenue showed a decrease over the same period in the prior year due to decrease of metal sales volumes and lower realized metal prices. As of June 30th we held $57.1 million in cash and short term deposits and $63 million in networking capital in our long term debt. The Topia Mine is now operating at plant capacity after the plant was closed from December to March for upgrades and the installation of a new dry stack tailings handling facility. Last week we resubmitted the permit application for the Phase II tailings storage facility after clearing a seminar condition and interim dry tailings are being stacked on the Phase I TSF. On the operational front, metal production from the Guanajuato Mine Complex or GMC was approximately 715,400 silver equivalent ounces, this represented an 8% decrease over the second quarter of the previous year and the period to lower throughput and lower grades reflecting variability in the mineral resource. While lower production from San Ignacio was offset by higher production from the Guanajuato Mines encouraging drill results of San Ignacio have resulted in the stepped up effort on mine development in those areas. Cash costs for the GMC increased to $5.44 per payable silver ounce in the second quarter due to a strengthening in the Mexican peso and lower grades. AISC increased to $10.89 for payable silver ounce reflecting the higher cash costs and our elevated investments in exploration and development expenditures. As I previously noted, milling operations at Topia Mine and Guanajuato return to capacity during Q2 following the commissioning of the upgraded processing plant. The plant is now processing a combination run of mine ore and material of the stockpile during the four months shutdown to implement the plant upgrades including the new tailings and facility. Improved great control through the same period has resulted in higher grades while the plant upgrades have led to an increase in recovery. Consequently Topia achieved individual production records for silver, gold, lead and zinc resulting in a new record in silver production of approximately 387,000 ounces an increase of 47% compared to the same quarter last year. The higher grades and recoveries also translated into a 41% decrease in cash cost per silver payable ounce to $6.15 when compared to the second quarter of 2016. AISC at Topia also declined to $10.78 from $11.49 in the same period last year. As noted last week, we announced that our team in Topia had fulfilled the outstanding condition required by the Mexican Environmental Authority (SEMARNAT) and that resubmit the permit application for the Phase II TSF. We expect to receive a response within the 60 business days which is standard procedure, the environmental permitting process. Though I would believe that will be able to obtain a permit for use of the new TSF without interruption of operations been accumulation and dry tailings on Phase I TSF can continue definitely and we can't guarantee this destruction production will be totally avoided with the permit be further delay. At the end of June, we finalized our agreement with Near Star and acquire 100% interest in the Coricancha Mine Complex which sits approximately 90 kilometers east of Lima, Peru. Coricancha comprises a polymetallic mine and operational 600 ton per day processing plant, and supporting mining infrastructure. It's fully permitted, but has been on care and maintenance since 2013. Coricancha is a high grade, narrow being underground mine that fits very well with our existing operations in Mexico and we believe that we have the expertise in the discipline to successfully bring it back into production. We're still refining our plants that will include mine development and preparation for underground drilling, environmental and engineering studies optimization studies to lower production costs and the initiation of our pre-feasibility study or PFS. We anticipate that the PFS will take control of Q1 of 2018 and depending on the outcome as own investment and support of restarting operations could commence shortly thereafter. In addition, we're currently working on an updated mineral resource estimate, which is expected to be completed towards the end of September. Based upon historical records we believe the mine has a potential for approximately three million silver equivalent announces of production annually which should boost our consolidated metal production by about 75%. Turning now to our second quarter consolidated financial results. Revenue decreased over the second quarter of 2016 primarily as a result of a decrease in unit mental sales and lower realized metal prices. Lower unit metal sales for realized despite record production due to timing of shipments and the higher proportion production coming from Topia which receives less favorable sales firms and the GMC. Mine operating earnings before non-cash items also declined as a result of the decline in revenue and higher cash cost. Despite to decline in mine operating earnings and increases in our G&A and EE&D expenditures, we delivered net income of $0.8 million in the second quarter and improvement over the second quarter of last year. A decrease in tax expense and improvement in finance and other income expense were the primary drivers in our net earnings. Consolidated cash cost for Q2 2017 increased to $5.67 for payable silver ounce from $1.72 in the second quarter of 2016 as a result of lower grades and byproduct credits at the GMC and the strengthening of the Mexican peso against the U.S. dollar and a higher proportion of metal sales from Topia. All-in sustaining cost or AISC was higher than a year ago up lower than Q1 of this year as the capital expenditures for the Topia tailings project were primarily incurred in Q1. Cash in short term deposits increased by $0.4 million in the quarter to $57.1 million. Our balance sheet remains strong with networking capital at $63 million and we have no long term debt. This keeps us in an enviable position to pursue additional acquisitions opportunities as part of our growth strategy. In summary, Great Panther delivered another solid quarter with record production and generated net income split lower metal prices. But Topia now operating at capacity and assuming we can continue their uninterrupted we expect to achieve our guide of $4.7 million and $4.17 million silver equivalent ounces for the year. However, there are always uncertainties associated with mine and we cannot guarantee avoidance of the disruption. In the event the risk changed our guidance we will disclose any revisions accordingly. In addition, we're anticipating maintaining our cash cost guidance within a range of $5 to $6 for cash costs and our AISC from $14 to $16 per ounce. With the acquisition of the Coricancha Mine Complex not completed we look forward to updating the mineral resource estimate completing further evaluations of the mine and commencing the PFS. Advancing the Coricancha Mine project has become our first step towards establishing a foundational improve and rolling out the new face of the growth strategy. Lastly, as many of you already know, I announced last quarter that I would be stepping down as President and CEO this year. As Great Panther's largest non-institutional shareholder, I have a strong invested interest in the continued success of this company consequently is my intent to stay on the board and help the company transition to new leadership that will continue to focus on executing our growth strategy that are building the company through acquisition. This past Tuesday, we announce that my successor will be Jim Valentine, who will Great Panther as President and CEO effective August 16. Jim is the seasoned executive has lived Latin America and is fluent in Spanish and Portuguese. He is an engineer with an MBA and was most recently the President and CEO of our minerals with operations in Brazil and Mexico. We believe that Jim is highly qualified to take ownership of Great Panther's near term growth strategy lead the next phase of Company's growth though look forward to supporting Jim in this regard. I'll now open the call for questions. [Operator Instructions] Appears that we do not have any questions at this time.

[Bob Archer:]

Okay, thank you, April. In closing and this being my last earnings call of Great Panther. I'd like to thank our employees and contractors for not only delivering another good quarter for making Great Panther a success story. I would also like to thank our shareholders and the financial community for their continued support over the years and for the confidence placed on us particularly through challenging markets on metal price cycles. And to board member you have my commitment that we will continue to focus on executing our strategies and achieving our goals that will ultimately reward our shareholders. Thank you for your participation today and behalf of everyone here in Great Panther we look forward to showing our progress with you in the next quarter.

[Operator:]

Thank you, Mr. Archer. That concludes Great Panther's second quarter 2017 financial results conference call and webcast. Good bye.