Great Panther Mining Limited
Q3 2016 Earnings Call Transcript

Published: 3 Nov 2016

[Operator:]

Good morning ladies and gentlemen. Thank you for standing by. Welcome to the Great Panther Silver Limited 2016 Third Quarter Financial Results Conference Call and Webcast. As a reminder all participants are in a 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 call over to Spiros Cacos, Director of Investor Relations. Please go ahead.

[Spiros Cacos:]

Thank you, Jesophine (ph). Good morning everyone and thank you for taking the time to join 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 on today’s call may contain forward-looking statements. You should be cautioned that actual results and future events could differ from those noted in today’s presentation. I would like to remind you that this conference call is being recorded and will be available for replay after 10

[Robert Archer:]

Thank you, Spiros. Good morning, everyone. I'll start this morning’s conference call with highlights of our third quarter and then provide an overview of our operational and financial results and conclude with a Q&A session. To begin, I'd like to note that we commence reporting all financial results in U.S. dollars in the third of this year. Accordingly, all dollar amounts expressed in this presentation and the associated interim financial statements and MD&A are in U.S. dollars unless otherwise noted. Consolidated production was down in the third quarter due to lower throughput our Topia mine, where we experienced two temporary shutdowns and to lower grades at the San Ignacio mine compared to the higher grades encountered in 2015. Nonetheless, we remain on track to meet our production guidance for the year. Cash costs and all-in sustaining costs for AISE was substantially reduced by 49% and 8% respectively when compared to the third quarter of 2015. Favorable foreign exchange rates and higher metal prices were the primary factors which contributed to a reduction in our costs. For similar reasons our revenue, gross profit, adjusted EBITDA, operating cash flow and net income have all shown significant increases over the prior year. Our third quarter mine operating earnings before non-cash items increased 64% to $7.2 million compared to the third quarter of 2015. The improvement and cash flow from operations combined with proceeds from a $29.9 million bought deal offering in July contributed to further strengthening Great Panther’s balance sheet. We closed the quarter with $52.9 million in cash and cash equivalents, $68.2 million in net working capital and no long-term debt. Guanajuato Mine Complex or the GMC accounted for approximately 79% of our total production in the third quarter of 2016. Metal production from the GMC was approximately 755,000 silver equivalent ounces representing a decrease of 5% over the same quarter last year. The decrease was largely attributed to slightly lower grades at San Ignacio compared to the higher than normal grades experienced last year. Cash cost for the GMC was $0.15 for payable silver ounce in the third quarter mainly due to higher byproduct credits from gold sales and higher realized gold prices than a year ago. The significant decrease in cash cost at the GMC contributed to 43% reduction in AISC to $5.58 for payable silver ounce when compared to the same period last year. The decrease in AISC is also reflection of the reduction in capital expenditures due to timing of CapEx and development programs. At our Topia Mine in Durango, overall metal production was 30% lower than in the third quarter of 2015, the decrease was due to lower throughput resulting primarily from two temporary interruptions in the quarter. Consequently, cash cost per payable silver ounce increased by 5% to $0.13 and $0.25 compared to the same quarter in the previous year. We commenced the expansion of the new dry-stack tailings facility at Topia in the third quarter and once completed this is expected to add 5 years to 7 years capacity to the operations. This is the reason that Topia’s AISC increased 59% to $19.52 in the third quarter. We will see AISC for Topia at a similar level until the beginning of the second quarter of next year when the expansion is anticipated to be complete. Turning now to our third quarter consolidated financial results. Revenues for the third quarter increased 22% to $15.6 million due to improved silver and gold prices. Improved metal prices were the major contributor to $2.8 million increase in revenue and higher margins. However, these positive features were slightly offset by 7% decrease in metal sales. Adjusted EBITDA increased by 197% to $4.7 million when compared to the third quarter of 2015. We recorded net income of $2.1 million or $0.01 per share in the third quarter largely as a result of change in the functional currency in Mexico to U.S. dollars. And this is something that if anyone has any questions on -- perhaps they could address those after the presentation is finished and I’m sure Jim would be happy to answer any questions on that. Nonetheless, this was still partly offset by a foreign exchange loss of $900,000 when compared to the same quarter in the previous year. In July, Great Panther completed a bought deal offering for gross proceeds of $29.9 million. Subsequently we suspended the sale of common shares under the $10 million after market or ATM offering initiated last April. Depending on market conditions and our anticipated capital needs, we may complete a portion or the remaining $4.5 million of the ATM. These financings along with the strong cash flow generated from our operations have significantly enhanced our cash and net working capital positions. This puts us in a very strong position to be able to pursue acquisition opportunities as part of our strategy of growing production. In summary, Great Panther delivered strong financial results in the third quarter with significant increases in mine operating earnings, cash flow and net income, with just more than $3 million silver, gold ounces produced in the first nine months, we continue to be on track to achieve our production guidance of $4 million to $4.2 million silver and gold ounces for 2016. And we expect to achieve or beat our revised cash cost guidance of $46 per ounce and AISC of $12 to $14 per payable silver ounce. However, we do caution that the construction of the dry-stack tailing facility at Topia could result in a temporary disruption of throughput at the plant. Should this happen it’s anticipated that mined ore will be stockpiled for later processing. With the current cash position of approximately $52.9 million, Great Panther is in a much stronger financial position to capitalize on strategic growth opportunities. I will now open up the call for questions. Operator, are there any questions?

[Robert Archer:]

Okay. Thank you, operator. In closing then, I would like to thank our employees and contractors, our shareholders, analysts and the financial community for their continued support and confidence that they have shown on us throughout the recent downturn. We believe that our continued improving discipline and operational efficiencies along with our strong balance sheet has now firmly positioned us to capitalize on organic and external growth opportunities that may lie ahead. We’ll continue to focus on the execution of our growth strategy and trust that 2017 will bring forth an increasingly positive commodity market that will reward our shareholders. Thanks for your participation today. And I look forward to sharing our progress with you again next quarter.

[Operator:]

Thank you, Mr. Archer. That concludes Great Panther’s third quarter 2016 financial results conference call and webcast. We thank you for your participation and ask that you please disconnect your lines.