Great Panther Mining Limited
Q4 2014 Earnings Call Transcript

Published: 5 Mar 2015

[Operator:]

Ladies and gentlemen, thank you for standing by. Welcome to the Great Panther Silver Limited 2014 Year End Financial Results Call and Webcast. During the presentation all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded Thursday, March 05, 2015. I would now like to turn the conference over to Spiros Cacos, Director of Investor Relations. Please go ahead.

[Spiros Cacos:]

Thank you, Evelot. 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'd like to mention that some of the commentary of today's call will 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 9

[Robert Archer:]

Thank you Spiros, good morning everyone and thanks for joining us today. We'll start this morning with a brief overview followed by year end highlights from our operations. We'll then discuss in more detail our financial results and conclude today's call with Q&A session where we would be happy to answer any questions you may have. Great Panther delivered another year of record production in 2014; our operations produced almost 3.2 million silver equivalent ounces reaching the higher end of our guidance for the year. As most of you already know, the main factor for this increase was the successful commissioning of our San Ignacio satellite mine in June. After a challenging first half of the year Great Panther’s operations significantly improved in the second half. Efforts to improve efficiencies in great control contributed to an improvement in grades in the second half of the year and a modest improvement in our cash costs year-over-year. However, we recognize that we still have work to do in this regard and these issues will continue to be a focus in 2015. Consolidated cash costs for 2014 decreased 5% compared to 2013, however, our financial results for year-end were impacted by a significant decline in silver and gold prices. From the comparative period in 2014 silver and gold prices declined 20% and 10% respectively. The decline in metal prices was also the main factor contributing to the $11.7 million of non-cash impairment charges taken in the fourth quarter. Great Panther is certainly not alone in the industry in taking such charge. Turning to the exploration side, we had good news at the end of the year; the news on high grade silver-gold mineralization was discovered in the San Ignacio property and led to an increase in the overall resource base at the Guanajuato Mine Complex. Despite the significant decline in metal prices Great Panther continues to maintain a healthy balance sheet with $18 million in cash, $32.9 million in working capital and no long term debt. We will continue to focus on operational efficiencies and great control with the objective of reducing our cash costs and to be able to sustain continued weakness in metal price. I'll now turn to the operational highlights for 2014, Great Panthers consolidated operation processed 335,199 tons of ore, an 18% increase compared to 2013. As I just mentioned overall metal production was a record $3.2 million silver equivalent ounce and grew by 12% year-over-year. Since 2008 metal production has increased to the compound annual growth rate of 10%. Our silver production increased 11% to 1.9 million ounces and our gold production increased 5% to more than 16,000 ounces. We continue to be a primary silver producer with 58% of our revenues deriving from the sales of silver, 33% from the sales of gold, and 9% from base metals. I would like to provide you now with some more detail on our individual operations. We'll start with the operating results of the Guanajuato Mine Complex or the GMC which includes San Ignacio production. The GMC accounted for approximately 70% of our total production in 2014, processing a little more than 267,000 tons, a 21% increase over the prior year. Metal production of more than 2,193,000 silver equivalent ounces was another record for the GMC operation and represented an 11% increase over the prior year. The new satellite San Ignacio mine contributed approximately 382,000 silver equivalent ounces in 2014. Average ore grades for 2014 were 161 grams per ton for silver and 2.03 grams per ton for gold compared to 169 grams per ton and 2.31 grams per ton respectively for 2013. Grades improved significantly in the third and fourth quarter when compared to the first half of 2014. We continue to realize very strong recovery at Guanajuato plant with silver at 89.5% and gold at 90.8%. During 2014 modifications were made to the flotation circuit of the Cata plant which improved gold recoveries in concentrate grades from San Ignacio ore. Approximately 7,800 meters of underground development were completed during 2014. Mine development in the fourth quarter of approximately 1,900 meters was focused on the Santa Margarita and Cata zones and in San Ignacio on infrastructure work south of the intermediate bank on higher grade zones and wider and more consistent plains [ph]. Cash cost for the GMC in 2014 saw an increase of 7% to US$11.12, primarily due to 5% lower silver grades and a decrease in byproduct credits as the direct result of lower realized gold prices. All-in sustaining cost or AISC for the year decreased to 17% to US$22.08 from US$26.53 in 2013 primarily due to the reduction in cash costs and reductions in exploration and evaluation in mine development expenditures. We'll now continue with San Ignacio mine. San Ignacio contributed 381,880 silver equivalent ounces of production in 2014. In Q4 alone San Ignacio represented both 20% of the overall production from the Guanajuato Mine Complex. As we mentioned, we had some excellent results from the San Ignacio surface drill program which was conducted in the fourth quarter of 2014. The first six drill holes were highlighted by 7.45 meter or 5.26 meter true width intersection of 1,133 grams per ton silver and 6.86 grams per ton gold. This zone contained 0.5 meter section of mineralization that assayed 11,951 grams per ton silver and 48.2 grams per ton gold, the highest assays ever received from the San Ignacio property. This hole was approximately 130 meters south of the resource block and the new zone of mineralization extends for at least 300 meters underscoring the strike potential of this area. These results of the 2014 drill program are being used for follow-up underground drilling and development in 2015. The San Ignacio mine will continue to play an important role in 2015 as production will focus on the newly identified higher grade southern extension of the intermediate and detail range [ph]. An updated 43-101 in our resource was announced in the first quarter of 2015 as part of Guanajuato Mine Complex and is available on our website and SEDAR. I'll now continue with our Topia mine in Durango. Topia’s no-throughput for the year increased by 9% to more than 76,000 tons. Metal production increased 16% to approximately 1 million silver equivalent ounces compared to 2013, the 8% increase in throughput largely accounted for the year-over-year increase in metal production. Mining at the end of the year was focused at 9 of the 11 mines comprising Topia and production was increased at Argentina, Durangueño and Hormiguera mines, this is an example of operational flexibility to react to lower metal prices at our existing mines which include multiple operating areas with very increasing cost profiles. The cash cost for 2014 at Topia was US$15.81 which represents the 15% decrease from the US$18.65 in the previous year. The decrease is primarily a result of lower smelting and refining charges and lower cost per ton. All-in sustaining cost for 2014 at Topia also decreased by a similar margin. I'll now turn to our year end consolidated financial results. Despite our efforts to improve deficiencies reduced our cash cost and other expenditures in 2014, our financial results were significantly impacted by the decline in silver and gold prices, and $11.7 million non-cash pre-tax impairment charge. Revenues for 2014 was $54.4 million, and increased only modestly compared to $54.0 million in 2013 as the increases in metal production and favorable foreign exchange rate movements were offset by decreases in average silver and gold prices. Great Panther recorded a net loss of $33 million in 2014 compared to a net loss of $12.7 million in 2013. The net loss reflected the $11.7 million pre-tax non-cash impairment charge and $2.1 million of primarily non-cash income tax expense as we took allowances against the benefits of tax losses that were previously recognized on the balance sheet. Net loss also increased over the prior year due to lower gross profit or income from mining operations that resulted primarily from lower metal prices and approximately $2 million of San Ignacio development which was expensed rather than capitalized. Adjusted EBITDA was negative $0.3 million for 2014 compared to positive $5.2 million in 2013. The decrease resulted primarily from the lower gross profit and approximately $2 million in San Ignacio development costs that were expensed. Consolidated cash cost per silver payable ounce of $12.78 for the year 2014 saw a 5% decrease compared to the previous year. The decrease is mainly explained by reductions in site cost per ton and reduction in smelting and refining charges, these decreases were partially offset by lower byproduct credits due to lower metal prices and a decline in silver grades which reduced the payable silver ounces per ton ore. All-in sustaining cost per silver payable ounce for 2014 decreased 16% to $22.07 from $26.26 in 2013. This reduction attributed to reductions in cash cost, mine development and exploration and evaluation expenditures, in addition, an increase in payable ounces contributed to the reduction in these costs on a payable ounce basis. As mentioned at the beginning of the call, we continue to have a strong balance sheet. At year end we're at a cash position of $18 million and $32.9 million in working capital and no long-term debt. As a summary, Great Panther’s production for the year 2014 was 3,187,832 silver equivalent ounces representing an increase of 12% over last year. Silver and gold production increased 11% and 5% respectively. Cash cost per ounce was US$12.78 in 2014, a 5% decrease compared to 2013, and AISC per silver payable ounce decreased 16% to US$22.07. In 2015 we expect production at San Ignacio to continue to increase as the focus shifts to the new higher grade and thicker range zones to the south of the current workings, this in addition to our continuing effort to improve grades at the main Guanajuato mines and the Topia are expected to deliver $3.5 million to $3.6 million silver equivalent ounces in 2015, this represents an approximate 10% increase over 2014. Cash costs are anticipated to be in the range US$11.50 to US$12.50 per ounce of payable silver, while AISC projected to be US$18.50 to US$19.85 per ounce of payable silver. Our cost per ounce is extremely sensitive to great variability and this is a permanent importance to us in the current metal priced environment. On a more recent development I would also like to bring it to one’s attention to the fact that on February 26, 2015 Great Panther announced that has entered into a binding letter agreement to acquire Cangold Limited. The completion of this transaction will result in Great Panther continuing the option to acquire the advanced stage Guadalupe de los Reyes gold-silver Project in Sinaloa in Mexico. This acquisition does not change our M&A strategy as we're still actively looking for a near term producing project for mine in Mexico or in Latin America. The terms of the agreement are available on our website and on SEDAR. At that point I'd like to turn - or if you open discussion for Q&A session.

[Robert Archer:]

Thank you, operator. In closing, we acknowledge that these are difficult times for the mining industry, but I want to emphasize that Great Panther has a lot of flexibility in streamlining our operations to react to metal price volatility. Just as importantly, our strong balance sheet provides a buffer for us to weather this downturn, we are getting excellent results at our San Ignacio mine and I'm confident that we will be able to expand this operation in the near future. In addition, the company will also continue to pursue additional mining opportunities. I would like to thank our employees, our contractors, and our stakeholders for their efforts and continued support as we work together to provide a better future for Great Panther Silver.

[Operator:]

Thank you for attending the Great Panther Silver Limited 2014 year financial call and webcast. You may now disconnect.