Q3 2020 Great Panther Mining Ltd Earnings Call
Good morning, and thank you for standing by welcome to Great Panthers. My name is <unk> third quarter earnings 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.
To join the question queue simply press Star and one on your Touchtone phone should anyone need assistance during the conference call today May signal, an operator by pressing star and zero on their telephone I would now like to turn the call over to Megan Mcgrath Vice President of Investor Relations.
Thank you operator, and good morning, everyone I'm Meg brown. Thank.
Thank you for taking the time to participate in our call today before we begin I'd like to mention there is some legal language at the end of this presentation, which advisors at some of the commentary on todays call contains forward looking statements you should be cautions that actual results and future events may differ from those noted in today's presentation.
And Terry also refer to various non-GAAP measures definitions and reconciliations that are included in our M&A for the period ended September thirtyth.
All dollar amounts expressjet its presentations and the associated financial statements Mdna already U.S. dollars unless noted for reference during the call and I see well first of all in sustaining cost I.
I would like to remind everyone that this conference 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 great Panther Dot com.
On the call. This morning, we have Rob Henderson, President and CEO Neil.
Neal Hot worse, Chief operating officer, and James I'll draw Chief Financial Officer, I'll now turn the presentation over to Rob.
Thanks, Mike and thanks, everyone for dialing in today.
I'm very excited to be sharing our record results with you today.
The steady production from our minds together with the increase in the gold and silver prices helped us deliver a number of financial results for the third quarter.
Turning to slide three I want to say I'm extremely impressed with how our team is managing through 'cause it 19.
I can work as we know it has changed in the span of just a few months and our.
People have adopted a new way of working we have developed and implemented robust prevention monitoring and response plans all of operations, including.
Including mandatory medical screening and testing.
Oh that still remains our biggest risk business and 2020, particularly as we appear to be entering the second wave of fiction.
All of US have been affected however, the majority of a coded cases had been in Brazil, but I'm pleased to say that 97% of those sixtyl ever Cabot and all that it worked well just 3% remaining in quarantine all restricted to looking at that.
We will continue to be diligent monitoring in response to keep our people safe and healthy [laughter].
Turning to slide.
Or.
Since transitioning from Great Panther, silver grade and the mining a little over a year ago.
We now have 300% operations in two stable mining jurisdictions, Brazil and Mexico.
Largest assets is that Tucano gold mine in Brazil, which is by far our largest mine contributing 83% above gold equivalent ounces on a year to date basis.
Yeah, and GMC in Mexico, or essentially silver mines, and I've been steady contributors to great dentist cash flow for the last 15 years.
When I joined Great Panther six months ago, My immediate priority was to support the team and getting all operations stabilized and generating strong cash flow.
Well the onset of Covance and an immediate tribal bad I have not been able to do spend time at the mines at the moment. However.
However, I wasn't able to spend a week at U. Conn recently and have now mid teen and seasonal operation twist in it and I'm very pleased to report.
Things are going in the right direction in terms of day to day operations and the exploration programs advancing as planned.
We remain well positioned to meet our full year production and cost guidance on a consolidated basis.
Just 146250 8000 gold equivalent ounces at an all in sustaining cost 11, 50 212 <unk>.
<unk> dollars per ounce.
[noise], let me to slide five we delivered very good results in Q3, including close to 40000 ounces of gold equivalent production in the quarter slightly higher than that of Q2 and on track with our plans.
Boyd by the strong metal prices gold at 19, a $7 per ounce and silver at $26 per ounce.
Able to report a number of financial records, including revenue of 77 million net income 913 million and adjusted EBITDA of 35.
These achievements resulted in a strengthening of the balance sheet.
During the quarter was $67 million in cash and equivalents and this strong free cash flow puts us in a good position to internally fund, our exploration and capital programs and further build working capital.
Which is kind of be at $25 million.
Slide six I want to highlight that we published Dr. sustainability report in the quarter using the GRC reporting framework documents all the good work being done by outside.
In the areas of health safety, environmental social and governance and I'm told you to have a look the report on a website now welcome your feedback.
Well no no turnover meal at Blitz.
Chief operating officer to discuss the operations in more detail.
Okay, great, Okay, well convert to corn on slide seven.
Production in Q3 was round about 52000 ounces of gold, which brought on production for the nine months ending September 30 to about 93000 ounces of gold would fall into a couple of years remaining stable at about 92.1%.
All in sustaining cost for the Q quarter three came in at $1061, an ounce, which is a 20% improvement over Q3.
2019, this was due mainly to the benefit of the refund.
Yes.
Oh, it couldn't 20 exploration program with a budget of 6.6 million and 55000 meters of drilling is continuing to advance with 22800 meters drilled to the end of the third quarter.
Moving to slide eight.
First phase of the exploration drill program is now completed just over 14000 leases and this was focused on drilling immediately below the 13.
The $50 per ounce designed pit shells untapped baby watertight babies.
This this this sterling was targeted to convert resources to reserves to extend the open pit mine life. These old since they've been through the your reserve and resource statement, which we expect to release before the end of the year.
The objective of this study was to at least to place. This year is mined ounces.
The journey, there's always a number of high grade sections with together with other intersections indicated continues the continuity of the resources below the pits.
As a further two diamond drills operating on work release deposit with improved resource drilling is happening. So some step out drilling is being carried out to test for additional ore shoots in other countries.
Okay moving to slide nine.
On slide nine the second phase of its a drill program is to evaluate the potential for an underground operation below the autocam no. Good.
The previous owner established Oh published a feasibility Prefeasibility study, which you visited ambitions are 1000 times. They underground operation contributing 40 to 50000 ounces of gold per year.
Well the grading up to programs the terms on the ground rule would be high grade sweetness and stuff, but something like the open pit all.
Okay. The initial target for Great America drilling this year was to extend.
Lets show stoping areas it would be available for money fast when developing the underground access from that's just that drilling is finishing off now and we're going to be moving into deeper drilling in this in this in this quarter. This is together more information on the extent of the deeper high grade ore shoots.
Both in terms of the continuity of these shoots.
Extensions, both up and down plunge.
We aim to have a decision on whether to proceed with the feasibility study for an underground mine. Following the completion of the underground drill program updates of the geological model.
Slide Slide 10 as noted on slide 10, great cinnamon covered some of the most prospective underexplored greenstone, please come to raise in Brazil.
During the third quarter of 20 to 25.
The interpretation of the revision to exploration data sets was carried out primarily by comparing the structure structured based on airborne geophysics with existing soil chemistry, daughter.
An exploration well was due both to help generate numerous targets with specific focus on most within three kilometers struck me that so that's cool persist books.
We are currently drilling to the regional targets, so remember looks from which represent a third phase about took on the drill program.
In addition to the Sterling an extensive program sovereign stream sediment something is being undertaken to both maintain compliance on tenements, but also to evaluate the other priority exploration cargo so the regional land package.
All right turning to our Mexican.
Operations.
On slide 11, Topia reported the imports of stable operations, producing nearly 400000 silver equivalent ounces with recoveries of 92.5%.
All in sustaining cost was $15 80 thought the payable silver ounce, which is a 29% improvement over quarter to 2020.
We don't track to me Twentytwenty production guidance of 1.2 million to 1.2 million silver equivalent ounces.
All in sustaining cost will probably come in lower than the garden, some trends $1.20 $2 per payable silver ounce and all in sustaining cost for the first nine months of the year below $18 per payable silver ounce.
Okay. Toby is basically a high grade narrow vein system.
By its nature has a very small amount of reserves, but every year, we continue to grow and develop to replace mined ounces even already.
Ready Topia 15 years with good cash flow generation.
On slide 12 as GMC. It's DMC. The process is primarily sourced from San Ignacio mine, which we had some pretty good exploration success last year and it's a rather to increase their contribution from one what's the margin 2020.
The two lines together with a shared processing going compares are going to want to mine complex Oh didn't see.
Production from Jim Suva third quarter was just over 160000 ounces of silver equivalent. So you have some silver and maybe two 2000 ounces of gold 635000 silver equivalent ounces.
All in sustaining cost in Q3 came in at $18 83 payable silver ounce, which is 31% improvement over Q2 Tracy Tracy.
The exploration program continues to advance a gym see with four underground drill rigs in operation and the objectives about learning.
Instead, two blocks of high grade mineralization.
On May 25000 meters of drilling so twitchy trenching and the end of Q3 EBITDA completed nearly 11000 meters.
That's one of them on board and working on the drilling was focused mainly on the loss closes I do with previous results have allowed us to increase production from this area and trend you printed at San Ignacio the building its focus on the charisma annual button.
Okay, I'll now turn the call over to great friends, and CFO, Jim's I'd like to discuss our financial results.
Thank you Neal and welcome everyone.
For Q3 2020, Great Panthers financial results reflected an average realized gold price of.
1900 $7.
400, plus $400 plus improvement over Q3 of 2019, and almost 200 dollar improvement over the previous quarter.
Strong gold price together with production tracking well to our annual guidance made for a very strong quarter in terms of financial results.
Silver saw even greater percentage increases, which benefited our Mexican operations. However, we remain primarily leverage to the gold price with gold representing just over 80, 85% of the value of our production in Q3.
We also saw very good cost performance on a consolidated basis with our Ace SEC before corporate DNA coming in at $1023 for Q3, a 22% decrease over Q3, 2019, driven primarily by the weaker Brazilian real.
Net earnings for Q3 were 18.6 million or five cents per share and more than double the 8.6 million reported.
In the previous quarter mine operating earnings before non cash items came in at 42 million more than double the level of Q3 2019, and adjusted EBITDA was 35 million.
And almost threefold improvement over Q3 of last year.
Cash flow from operating activities or operating cash flow was 20 million. This reflects it about 6 million 6 million dollar reduction in our trade payables to normalize this balance.
Which was at a high level at the end of Q2. In addition, it reflected 6 million of settlements aren't BRL hedges.
After adjusting for these items.
Our operations generated 32 million in operating cash flow before capex and capital lease payments of $10 million.
Which shows a strong free cash flow margin of our business.
I also note that our operating cash flow includes exploration expenditures for our Mexican operations, which are expensed, rather than capitalized or catch a project in care and maintenance expenditures.
And of course, DNA and interest charges.
For the full year, our consolidated EBITDA I see your guidance is for 11 50 to 12 50 per ounce and were trending well to this with our nine month actually I see.
At $1221 and the noted 10 23 reported for Q3.
With gold and silver continuing at multiyear highs, we expect to see continued strong financial performance and cash flow generation in the fourth quarter.
At 1900 dollar goal to counter it was generating in the order of $800 per gold ounce a free cash flow.
Other than the noted to counter drill programs there are no.
Significant plan on sustaining capex programs, which are outside of Rory I see guidance.
In terms of our balance sheet, our cash position improved to $67 million at the end of September while we reduced our debt by.
About 4 million and also further reduced our trade payables as noted by $6 million during the quarter.
Therefore, working capital improved to 25 million.
And our total debt at the end of Q3 sat at $46 million well below our total cash balance.
Thank you that's all for the formal remarks for today and I will turn the call back to the operator for today.
Thank you.
We'll now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad.
Sarah telling acknowledging your request if you are using a speakerphone. Please pick up your handset, but for pressing any keys.
To withdraw your question. Please press Star then two.
Well pause for a moment as callers join the queue.
The first question comes from Heiko I leave with H.C. Wainwright. Please go ahead.
Hey, guys. Thanks for taking my questions I appreciate it's nice to see the stock up 7% for that.
One thing I was going through your hey.
Hey, I was going through your Mdna on page four you earlier today and you hinted at some of the coal with profit coal protocols that you have that you hit your contingency plans just a couple of follow up questions on that can you elaborate on your contingency plans on an asset by asset basis, I don't know how much of that you're you're willing and able to have out in the public domain.
Sure.
I think our biggest contingency is obviously an economy thats a biggest cash flow generator.
We we do have a large number of stockpiles on on site. So we are able to continue processing if for whatever reason, though mining contractor is down.
We do have on site diesel generators, we bought.
A good store inventories is but I think we are going to we were able to last.
Quite a time at Tucano, if a portion of the team is unable to operate for them for a while.
Yeah that that's our biggest contingency plan that obviously in Mexico again.
Keeping our supply chains types, we're making sure that our vulnerable employees all are at home and not exposed to risk at sites and we have a very extensive testing protocol for people coming on on on and off the mine. So I think certainly in Brazil.
We managed the first wave.
Well, when we kept running but.
As you know I think we are interested in the second phase.
I think the Brazilians I'm going to do just fine I think they've gone through the first wave.
The Mexicans didn't really hit hit the first wave so they experienced experiencing it for the first time.
Learning a lot of the protocols from the Brazilians, obviously, but Mexico is probably you probably have more of a concern than Brazil.
Fair enough now makes makes perfect sense can you maybe also provide just a bit a color on your on how these plans have changed since June in Mexico. When you. When you were started there I assume the whole you all sanitation not too many people in one spot is still the same but is there anything in regards to what areas of the mine.
I mean, you're you're going into.
No. The mine plans essentially stayed the same you know obviously with good respect social distancing as our operating practices have changed radically.
But the areas in which were mining at words, we're still pretty much sticking to the plan.
Mix makes perfect sounds great and then and then cost wise and has there any been any meaningful changes since this whole a lunacy started in other words are your mitigation pret a measure it's getting more expenses and on that same Colton I assume you would guess, we're obviously buying you know and.
95, math well before most people, leaving you with that was so I assume you don't have any issue still getting your p. correct.
Given that it's just much more competitive to get that stuff now.
No we seem to be all fine in that area and no issues there.
I think where we do have new protocols. We we we've stood down black supervisors, who are vulnerable on all at home. So we are seeing some inefficiencies translates into the workforce that we can't work as quickly as we would have liked to before for safety issues. Because we don't have the full complement of teams that but.
Generally the workforce has responded really well and the terms of the cost will be.
We also need benefit benefiting from weaknesses and the currencies in the countries, we operate and maybe Jim you could have a bit more to say on the effect of the currencies and all costs.
Very helpful I'll get back in queue. Thank you guys very much and thanks for taking my question.
Thank you.
The next question comes from Joseph Reagor with Roth Capital Partners. Please go ahead.
Hey, guys. Thanks for taking the questions and congrats on good quarter.
Hmm I guess.
Hey, So I guess first thing is on the debt front you know.
How far along are you guys on doing any form of debt refinancing.
What are you seeing if you if you can comment on an terms out there.
[noise] and timing.
Jim you want to handle that one.
Sure Hi, Joe how are you doing.
In terms of refinancing we'd like to get the Reais reserve and resource update for two kinda out first I think that that's.
I think that's an important piece of information that we'd like to get out and and sure. The lenders have the benefit of knowing that so we are you know in discussions with a number of lenders we've provided information.
Asian under confidentiality agreement and you know we are waiting for the completion of the M.R.M.R. to take sort of discussions further.
So timing if we were to do something probably more likely a and Q1 of 2021.
And in terms of the market I think theres seems to be good interest there and.
And.
Yeah. Good good interest from the on the part of lenders.
Okay sounds good switching gears quite a bit to condo [noise].
Sometime next year, you could run out of these above ground stockpiles that you have and then.
You know I assume go back to you know mining at a rate of close to 800000 tons.
Per quarter.
Should we expect grades to go up a cost to go up on a per ton basis, as well and is that 800000 tons per quarter number right is it a little higher a little lower can you give us any color there.
Yeah. So the you know we all going through on all my hands right now.
Part of the normal budgeting process, but yeah, we've got a mining contract there is pretty much fixed and what volume they can handle in the trucks do you that the mining rates that were obviously going to be running at the Max mining rates in terms of stockpiles you know they are lower grade stockpiled. So we we.
Well probably posts in you know only when we meet too. So we don't intend to run them down in a hurry you would leave them in the past.
Friends for high rate oil coming from the pits. So I think the mine plan would include some stockpile, but sitting on all the bits, but the.
The the mine planning process is still ongoing so we were not in a position to give any guidance fall for that for the next couple of years yet but.
I'll get that to you as soon as we can.
[noise], Okay fair enough and then.
At Topia it.
It's like you know your gold sales versus your gold production.
Hi, this is down quite a bit it normally or you know, it's like 80% or something maybe.
Maybe 85, a in this quarter was 63 is that like an inventory building gold at Topia and if so should we expect a tear reverse next quarter.
So.
Jim you want to handle that one.
Joe our gold production at Topia is generally pretty nominal it's the the bulk of the production there is a silver.
And then there is a a lead and zinc component.
It's you know it will fluctuate from quarter, but what we do produce in terms of gold at that Topia.
Will fluctuate quarter to quarter, depending on where were mining and variability of the gold grade versus silver grade.
Okay, but specifically was or was there an inventory build there 'cause <unk> year production was 308.
<unk> sales was 194, so there's no 100 ounce gap there is that.
Or is that maybe a lag on the delivery of concentrates.
It's it's likely it's most likely that the timing on the delivery of the concentrates.
Okay fair enough I'll turn it over thanks guys.
Thank you.
Once again, if you have a question. Please press Star then one.
The next question comes from Matthew O'keefe with Cantor Fitzgerald. Please go ahead.
Hi, good morning, Congrats on a good quarter.
Most of my questions have been asked already by the other analysts, but I was wondering a bit on the exploration side are generating some good cash share. Your your your programs are your exploration programs are ongoing it seems you've got some good regional targets.
And you've already completed some of your near well not completed but done your plan for the near term targets. How are we going to are we going to see an increase in like a significant increase in your exploration effort in the short term and maybe you could just discuss a little you know, what's what's next near near mine as well as regional.
Sure.
Well I.
Yeah, I think with Mexico, which is going to be more of the same. So this year, we budgeted $4 million or basically in mind drilling at Topia and Jim seat. So we think we'll continue to see that.
Just to put confidence on the ounces into the mine plan at Mexico.
In Brazil is where we are more focusing on the regions. So we had a $7 million budget this year.
That was the splits near mine and regional so I think next year, we're going to continue on the near mine stuff, we're going to be continuing to get more definition on the open pit resources, we're going to get a bit more detail on the underground, which Neil outlined so if you need to get that into the mine plans and then.
I think most importantly, as the region's regional stuff so Mick wind up.
No the area stream new wells.
Identified a number of high priority targets, which we need to put diamond drill holes the mix, yes. So the the budget next year.
It's probably going to be the same if not a little bit higher and in order to advance some of those regional opportunities.
Okay. Thanks.
Thanks, and you touched on the you know the some of the detailed work that you're doing this year will have an impact on on your mine plan are you going to release some guidance for a new mine plan sort of mid next year is there I know you can do a resource before the end of this year, but what about sort of mine planning guidance.
Yeah, I mean, you know typically we issue the the annual guidance early on in the year.
We will be getting all reserve report out on Kano in December so that will have the likes of mine details and then you know 2021 guidance is when we have the budget is finalized so that'll be an index do we get that guidance [laughter]. Okay.
No. That's a that's great. Okay. Good. Thanks, that's it for me thank.
Thank you.
The next question comes from Aaron Franklin a private Investor. Please go ahead.
Yes, Thanks for taking my call I'm, just wondering about a the pru mine the core channel mine.
You guys had purchasing to 17 and last you guys are saying that you guys are going to make a decision on this mine. If you guys were going to star.
Starting with a do you have any timeframe like you guys are looking to do with the screw mine.
So things there and.
We do so we aren't currently on care and maintenance right now so we're doing some cleanup activities there.
Kids.
Last year run some material through the mill and this year, we're looking at.
The how how best to mine this deposit suits. It was lost mine by the US dollar in 2013.
Use the long hole mining method, which you the grades never really got up to where they should be so the mine is challenged by the terrain its narrow vein and so we're looking to.
Get a more selective mining processing and the challenge there is to fill the mill. So it is in study phase certainly with the highest silver prices you know things are looking much more interesting there and if we can crack the secret of this might be more selectively but getting enough.
Greetings and placed its Ola Mill, then you know I believe we'll have an office. So I think it's still a work in progress and we are looking at what's the best way is to restart those facilities.
Is there a cost to restart what would be that I always thought what what would be the cost to restart. The mine. If you guys did make a decision on us.
It would be essentially just.
Getting access into the mind into the into the stopes.
Stopes so.
There would be a nominal amount so.
Work that we need to do to rehabilitate the the money access but the plan is in place. The infrastructure is in place. So we would have to spend some money on development on the mine butts.
Do it's not a significant additional capital.
What do you think 15 20 miles or less.
Hi, so any kind of swap.
Yeah, I would say that's too high.
Oh, Okay. Thank you.
Yes.
Yes. The challenge there is to get payable war and [laughter]. The the previous operators sales in that channel and so its.
It's a it's a tricky deposit.
Sounds like so that's what.
Well I got to find a way to minus profitably or well what if you guys are you guys sell it at you guys decide not to.
Oh, Yeah, obviously, that's a that's a decision were going EPS get to next year.
If we.
Constitute ourselves then we'd have to look at doing it with someone else or even seven [noise].
Oh, yes.
Well not.
The next question comes from Troy, George <unk>, a private Investor. Please go ahead.
Okay and first then a second quarter got beat up pretty bad with some currency swaps and the Brazilian real and I was wondering if you sold some of those swaps when the real.
Strength from Oh reality against the dollar.
And also do you have a currency trading here working for you.
[noise] hi, its trends after a we did settle some of those out into maybe when they in.
The Brazilian real took a bit of a death.
We're currently we have about 40 million notional.
Oh, the contracts that we're continuing to hold.
We don't have an internal currency trader, we have Oh, we do have a treasury person.
That matters is that function along with the other treasury functions and.
We work with various external parties on a.
On currency transactions.
Well that was my only question. Thank you very much.
This concludes the question and answer session I would like to turn the conference back over to the presenters for any closing remarks.
Oh.
Thank you very much everyone for attending our Q3 call. We look forward to continuing to make money from operations and we will talk to in the next quarter. Thank.
Thank you very much.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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