Q4 2020 Great Panther Mining Ltd Earnings Call
Thank you for standing by this is the conference operator, welcome to Great Panther Mining's 'twenty 'twenty year end financial results Conference call.
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I would now like to turn the conference over to Fiona Grant Lushy, Vice President Investor Relations. Please go ahead.
Thank you operator.
Good morning, everyone I'm gonna granting a day. Thank you for taking the time to make just a patent on call today before we begin. Please note that we will be making forward looking statements. During the presentation you should be cautioned that actual results and future events may differ from those noted in todays 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 December 31, 'twenty 'twenty on.
All dollar amounts expressed in this presentation and the associated financial statements and MD&A are in U S dollars unless otherwise noted.
During the call a sick refers to all in sustaining costs.
Detailed cautionary statements can be found on at the end of the presentation.
I would like to remind everyone that this conference call is being recorded and will be available for replay later today replay information on the presentation slides accompanying this conference call.
Webcast will be available on our website a great Panther dotcom.
On the call. This morning, we have Rob Henderson, President and CEO, Neil Hepworth, Chief operating officer on Jim's address Chief Financial Officer.
Thank you P on them.
Thank you everyone for dialing in today.
On a 20 was a year of substantial growth for great Tencent as our transition.
Diversified intermediate gold producer continues.
Amid a challenging environment brought on by the COVID-19 pandemic.
Our team was able to adapt quickly and efficiently ultimately delivering significant operational improvements and record financial results.
It produced more gold equivalent ounces in 2020 than we did in 2019.
And I'm pleased to report that total revenue in 2020 increased by 31% of a 2019.
$61 million on production of just over 150000 gold equivalent ounces.
Our mine operating earnings before non cash items was $124 5 million or 37 cents per share.
Adjusted EBITDA came in at $98 million in cash flow from operating activity.
$67 million or 20 cents a share.
Well costs came down and consolidated ASIC, excluding G&A improved by 11%.
Picky.
2019.
On a cost of $1228 per.
Ouch.
We also delivered on increases in our mineral reserves and mineral resources at Tucano, We successfully replaced mine depletion and added another year of open pit mine life.
While strengthening our level of confidence in the deposit for future mine and operational planning.
At GMC in Mexico, the updated mineral resource estimates reported in November delivered an increase of 17% in measured and indicated category and we doubled the inferred resources, there as well as higher grades.
Since the acquisition of Tucano in 2019, we've been steadily building our cash position, we ended the year with $63 million in cash and cash equivalents.
And our working capital was $31 million, we also saw a meaningful decrease from debt.
From the company in a strong financial position.
Incredibly pleased closeout the year on such a robust balance sheet, a testament to the hard work and executed by our team to deliver value for our shareholders.
And so building on the success of 2020 this year, we'll see an aggressive ramp up of our exploration efforts.
On a total of $13 million and 90000 meters planned to further define on known resources on.
On tapping into the huge potential is yet to come.
Our key objectives will be to continue to extend that.
<unk> open pit mine life further prove up the underground with a huge extending the high grade zones.
And probably most importantly make meaningful inroads into key targets into condos.
Hence the regional land package.
Building on our 2020 exploration success on Mexico will also be a key focus this year for us.
In 2021 consolidated gold equivalent production from the Tucano Tropaean GMC mines is expected to be 135000, 250000 gold equivalent ounces with the second half from 'twenty to 'twenty, one expected to account for at least 55%.
Our annual production guidance.
It is expected to come in between 13, and 15, 14, 15 14 $50 per gold ounce sold.
And note that the costs from the first half of the year will be higher than this guidance due to lower production levels and the highest stripping in the first half.
I will now turn it over you know Edwards, our chief operating officer to discuss operations in more detail.
Okay. Thank you Rob.
I will now provide an overview of 2020 results about various producing assets.
Two corner, our wholly on gold producing assets in Brazil, We've managed gold production for the year, increasing by 19% to just over 125000 ounces per.
Please note that the comparative data presented for 2019 is for the period from March 5th 2019 to December 31st 2019. This is a period for which to corner on it.
Sorry from which great Panther on Tucana following the acquisition.
2020 saw an improvement in mining productivity as our 2019 with mine material up 32% and total plant throughput up by 33%.
<unk> for the year came in at $1200 per ounce, a 15% improvement over 2019, mainly due to the weakening of the Brazilian real.
That's all from central cell pitch.
The work on Knight piece hold indicate you've got movement in the pit walls with rebates to the high phreatic surface in the west wall.
On the phreatic level recorded in January was muddled by like pre sold and indicated that mining to the ultimate pit geometry could be done I'm just stable conditions provided preoptic levels in the west are controlled.
Note that this is this is still work in progress on needs to be confirmed.
At the corner, we continue with an aggressive near mine on regional exploration program. The near mine program is aimed at replacing open pit reserves on expanding the high grade underground reserves.
The open pit drilling is primarily aimed at expanding the resources below the oxide ore oxidized ore that was mined from tap C. Jewelry beautiful times. There will also be additional drilling in the order from east Oslo in tourist areas are also part of the seven kilometer tucana trade.
For Orca North underground, there's a very focused drilling program to validate extend some dimensions of the high grade zone below the order from north pit.
The first 5000 breaches of holes will be in the upper zone with the second 3000 meters looking up looking at the up from the extension. So that we can evaluate the merits of bringing in the decline from the south following the plunge of the high grade zone.
Turning to our Mexican silver mines, Firstly tropea production in 2020 was approximately one 1 million silver equivalent ounces with silver recoveries of 92% and silver grades of free under the 52 grams a tonne.
Over equivalent grade of 670 grams, a ton, reflecting the byproducts of gold lead and silver.
Basic was $19 75 per payable ounce of silver a 29% increase over 2019 and reflects the impact of the federally mandated COVID-19 related shutdowns in Mexico. These were from most of April and May.
And plus the voluntary suspension, we implemented five weeks in quarter four as a measure to protect our workforce and the community.
Following these COVID-19 disruptions in Q2 and again in Q4 operations that took Peter now back to normal.
The Covid disruptions also prevent us getting permits for exploration drilling a total payout.
But the 2020 drilling budgets has been added to the 'twenty 'twenty, one drilling budgets in order to make up for this delay.
G M C. A full year production was also approximately one 1 million silver equivalent ounces.
This was comprised of 520000 ounces of silver and nearly 7000 ounces of gold.
Every silver grades were 125 grams, a ton silver gold grades with 166 grams per ton gold, which translates to a silver equivalent grade of 275 grams a tonne.
At Guanajuato ASIC came in at $21 88 per payable silver ounce, reflecting the impact of federally mandated COVID-19 related shutdowns in Mexico in November we announced an updated mineral resource estimate for GMC measured and indicated resources increased by 17% while interest income.
Third resources more than doubled.
The 2021 surface drill program of 5000 meters San Ignacio commenced in mid January.
And should finalize in mid June Mr. Langhans for further exploration of the purest methane expanding with Santolina vein on instilling all of the existing known areas of the theatres about vein system.
At Guanajuato, the 'twenty 'twenty, one build program 10000 maintenance commencing on February the eighth with three girls and index. We would expect me to ending in July from June 'twenty one initial.
Initial targets include loss Covid, Los Pozos above this 290 level between Valenciano and charter on the 290 level and puts us above the 275 level.
In Peru, it's Corey can share.
On the exploration program of 5200 maintenance has proposed the targets of high grade and easily accessible mining areas of Escondida Constancia in Burlington veins. We started this program is subject to final discussions with the local visa community on.
I'll now turn the call over to Great Panther CFO, James <unk> to discuss our financial results.
Thank you Nicole and welcome everyone.
Pleased to report that strong gold and silver prices together with strong execution by our operating teams led to significant improvements in our financial results across the board.
Revenue increased by $62 2 million, thanks to higher gold production and sales in Chicago, and a higher realized gold and silver prices, which were 17 85, and 'twenty 'twenty, one 'twenty eight respectively.
Cent increase.
Except for gold and 29% for silver.
Overall production costs decreased by $25 million, primarily due to the weakening of the Brazilian real and Mexican peso relative to the U S dollar.
Leading to the noted an 11% reduction in consolidated a S C. Excluding G&A.
<unk> 28 per payable gold ounce for the for 2020.
I also note that a S. C reflects the full impact of the Covid COVID-19 related operating suspensions in Mexico.
Adding the care and maintenance costs during those expansions and higher operating costs as a result of health and safety protocols and productivity impacts at our at our operations.
As mentioned earlier 2020 was a year that saw solid operational improvements acyclic Q4 saw an EBIT greater improvement when compared to the same period in 2019, reflecting a decrease of 23%.
Our strong metal price environment favorable foreign exchange rates.
Expansion in our.
For non cash items, which increased to $124 million on $124 5 million or <unk> 37 per share compared to 41 9 million in prior year.
After accounting for non cash depletion and amortization charges mine operating earnings were $83 9 million and adjusted EBITDA came in at $98 million each up substantially over 2019.
Operating earnings were $57 million after accounting for non capitalized exploration and development expenditures.
And we were breakeven on the net income line after accounting for interest charges non cash foreign exchange translation losses, and settlement costs and foreign exchange hedges.
Which were wound up last months, leaving us unhedged currencies at the current time.
Cash flow from operating activities or operating cash flow before changes in noncash working capital was $69 million or <unk> 20 per share and.
And represented a substantial improved debt.
Modest outflows in 2019.
Free cash flow was $26 9 million for the year and $9 1 million in the fourth quarter.
We ended the year on a solid financial footing with cash with a cash position of $63 million and net working capital of 31 million.
Paid down $14 million of debt in Q4 weighted to skip deleveraging at a strong net cash position going into 2021.
2021, we will maintain our focus on building our working capital on strengthening the balance sheet in order to bolster our ability to leverage potential growth opportunities, including acquisitions as we continue to evolve as a diversified precious metals producer focused on the Americas.
Thank you again it's.
That's all we have for formal remarks, and I'll now turn it back to the operator for the Q&A session.
Thank you.
We will now begin the question and answer session.
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The first question comes from Heiko with H C. Wainwright. Please go ahead.
Hey, there thanks for taking my questions.
Good morning, if youre.
Your outlook your.
Your outlook that you're doing 55 per cent of your guidance in the second half of the year man it looks like Thats, mostly due to the higher stripping in Brazil, but just to confirm because it's not I I didn't see it completely stated anywhere Mexico should not have a similar production breakdown, but rather we can just see much more of a trend line quarter over quarter.
<unk> in Mexico from the year right.
That's correct Heiko on Mexican producers.
Are going to be steady.
They're all underground operations and not subject to swings that we see in the open pits. So yeah. The the weak first half of the year is entirely due to our stripping requirements at Tucano and we get into the higher grade ore in the second half of the year.
Got it.
That's what I can maybe sorry.
That's what I figured I just wanted to clarify and then completely completely different question with your continued transition to becoming more of a gold company are you seeing any changes in your investor base in people that are ringing you up asking questions.
What are you thinking in regards to you know multiple adjustments for higher trading multiples are you seeing anything that maybe we're not privy to.
Or anything that you want on like let us know.
No I don't think so I think we've got a healthy mix of retail investors, who have always been big supporters of our net.
Our strong silver position in Mexico.
A few more institutional investors, thanks pizza economy, but the mix as per the stayed pretty consistent and we're not getting any different messages to what we were getting last year, So I'm pretty happy with our investor base.
Excellent. Thank you for the answers Stacey.
Thank you.
Yeah.
The next question comes from Jake Zukowski with Alliance Global Partners. Please go ahead.
Hey, guys. Thanks for taking my questions.
Good morning Jake.
At the Carnival.
You mentioned, you're expecting to see some higher stripping costs in the first half of this year and just wondering if you're able to quantify this quarter over quarter at all I'm.
I'm just trying to get a handle on how <unk> might look on a quarterly basis throughout the year.
I don't think we've typically given that guidance.
Jimmy You go you got me flavors, there, but I think generally it's just the first and second quarters will be EBIT low and there will be improvements in the third and fourth debt Glenn think theres going to be any significant difference between Q1 and Q2, but Jim do you have any color on that.
Sure Jacob I would say that the stripping costs in the first half per probably 55% to 60% for the full year.
Okay. That's helpful.
And then just more of a housekeeping item in Mexico, I noticed you arent providing.
Basic guidance there I'm just wondering what the reason is for that is that related more to the level of investment you are expecting to make this year at a higher sustaining cost.
Great.
Sure I think.
It's more of a day with Mexico, representing 20% of our production and really it's two catalysts that are driving force in terms of.
The <unk> at the end of the day.
And if you can see from you.
You can.
You see from the guidance that the Tucano as sick as really the equivalent of a consolidated ASIC. So we're really expecting Mexico.
To be at the same level on a gold equivalent basis.
Okay that makes sense.
That's all from me Thanks again guys.
Thank you Jake.
The next question comes from Matthew O'keefe with Cantor Fitzgerald. Please go ahead.
Thanks, operator, and good morning.
Next year for you.
Just a couple of quick questions and I may have missed it I apologize if you address.
This already but.
The work towards defining an underground underground potential at Tucano, how is that progressing and when would we expect an update there.
Thanks, Matt.
Good question. So we've just got back to looking at the underground we've kind of put it on the shelf for a number of years, but the the plan is to.
Look at the ore body extension beneath the Oracle north pit so its banded iron formation.
It extends well below the pits and we should have mined out the oracle pits in the second half of next year. So that would be the time that we could start looking at putting a decline down into the ore body, which is going to just a couple of hundred meters below the pits. So right now what we're doing is.
Drilling the underground ore body looking for extensions of that high grade zone and.
Putting together a study as to when best to locate the portal and how best to mine need the deposit so where we're starting drilling again and we're starting to look at studies to support a capital decision in the second half of next year.
Okay. So we would see economic numbers on that in 2022.
Revise that guidance correct that's correct.
Okay great.
And on the exploration front I know you you provided an update.
Just in January.
Exploration update on increased the budget there.
On the news flow will look like for exploration because that's always been a big part of the okay, great well, that's well in the last since you got to count on it with interest me and is a big part of the story at Tucano exploration.
Sure.
Last year was mainly infill drilling.
And we then typically released infill drill results because they just confirming that we know what they are ready.
Last year was a little bit slow on the on the on the drilling was up because of the infill nature of them.
This year, we are drilling the region. So we're looking for brand new deposits.
It's hard to.
Predict exactly when the geologists are going to have enough information to be sure of a regional targets, but I suspect we are drilling them now so the regional news release, it could be any day the underground.
We are again, it's it's it's of the infill nature, but we are looking to extend the body. So I think we will be looking at getting some underground news releases out probably in midyear that will confirm the mixed into the ore body.
And the infill drilling that were doing on the on the on the pitch about $3 million of our budget.
The $8 million budget next year.
Looking at the.
Pits.
So again, they're pretty much of an infill nature.
He is not going to be a huge used from the surround debt. So in summary, if and when we hit the regional deposits that will be big news and the underground is probably going to be mid year and onwards.
Okay great.
Thats It from me thanks very much.
Thank you.
The next question comes from Joseph Reagor with Roth Capital Partners.
Go ahead.
Hey, Rob and team thanks for taking the questions and congrats on a good strong finish to the year.
Thank you Joe good morning.
Good morning, So first thing.
Kind of following on a little bit of the last caller's question.
With the exploration, especially the non infill as you go forward the share.
Is there like a certain threshold that you guys would need to achieve to release individual or small set drill holes. Instead of you know kind of doing quarterly updates yourself.
Okay.
Yes, that's a good question I mean, typically if we just hit one drill hole was an interesting results that debt that wouldn't be considered material, but if we'd Sydney glut.
A handful three or four then we would be releasing a press release.
It is.
There is no hard science about what threshold, but I think once we've got a set of numbers that we feel on material, we would release it to the market.
Okay, and if you had any.
Regional success with Youre drilling, what's the timeline to being able to add something to the mine life, but whats the permitting climate like would it just be an amendment to the current mine plan or are there areas, where you'd have to start like you know from square one to get at it how do you.
You guys think about that.
Yeah sure good question.
We are looking at.
Charities that are in our tenements in our trucking ore to the mill, but maybe Neil you can give joe a bit more flavor on the on the on the permitting environment in Brazil.
Yes.
Think as soon as we start hitting some interesting results, even even before we've actually got a sort of a proper.
Appropriate resource defined we'll start the <unk>.
The permitting process to give us a little bit of a head start on this.
This this would be sort of in the areas of from sort of.
No not on my railroad.
Yeah on the couple of other places as well so yes. So it will still take a couple of years, but we'll try and fast track of as much as possible by my anticipate.
Where things are starting to go right.
Okay fair enough.
And.
Switching gears.
M C Q4.
On sustaining costs were quite elevated was there some.
Unique cap on Oh, you're on.
Capital allocation number or some specific driving force behind why it jumped so much even quarter over quarter.
Mhm.
Yes.
Although on the mines on GMC was most affected by Covid.
It's an underground mine.
We had to reduce one of the ships just because we couldnt get the level of supervision that was required to save production. So gmc's production was was quite badly hit in Q4 and as a result, the unit cost winds up so I think we're over those issues now.
We're back at three shifts at G. M season, It was just.
Mainly as a function of just.
Yeah.
Insufficient manpower to do efficient mining.
Yeah.
Alright.
And then maybe one final thing any comment on what the M&A markets like you know either potentially acquiring in Brazil, or South America or potentially selling off some older. The older Mexican assets like has a climate changed at all since the middle of last summer.
Yeah.
There's an interest in Christian on the M&A climate I think it's still you know COVID-19 is definitely slowing things down a bit but from all sides. We are keen to get.
Into the 200000 ounce plus producing range and exploration is one way of doing it. The other way is mergers and acquisitions. So we are actively in discussions with other.
Small producers in Mexico.
U S and Brazil that would help us get above the the magic 200000 ounce level M&A is certainly still a very much a focus for us.
Okay. Thanks, I'll turn it over.
Thanks, Tim.
The next question comes from MS Panther, Lemon with a private investor.
Please go ahead.
Yes, hi, guys.
One of the other.
Carlos mentioned this question about gold versus silver mix and on.
I'm just wondering if you could elaborate a little bit more on that.
With silver price holding up so much better than golden and maybe even the future with <unk>.
Being a commercial.
Or.
You have some flexibility as far as your exploration and as far as your focus on your mind Mexican minds on all that where you can ramp up that debt part where you can become more of a silver company.
Good day price.
Bottom line can kick in can silver wag the dog.
I believe it can.
Certainly you know on Mexican assets are exactly the same as the ones we had three.
Three years ago.
When when.
Bob I was running the company so on Mexican assets do well when silver prices high in Tokyo last year.
Had some pretty spectacular results there are.
Our exploration.
As you know they own their underground net.
Vein high grade operations, you can only drilling from underground, but certainly a G. M. C. We had a lot of success last year. So we added over 10 million ounces, which is which is really good for three or four years of production that debt.
G M C.
The mining rate is limited because again its underground so the on.
The way, we could increase silver production was by increased tonnage. So we're working on that but from an exploration point of view I think we saw a significant success with GNC last year, we now turning our attention to Tokyo, which which didn't get as much loved as we would've liked last year due to the COVID-19.
<unk> permit delays, but we do like Tokyo, a lot it's much higher great and GMC zone, we are focusing on drilling in Tokyo.
And working.
Or we can increase our tenants Jo Mills day, but bottom line.
Sylvia is contributing to our margins.
<unk> silver and <unk>.
Where we're spending the necessary money on exploration in Mexico.
Okay. Thank you.
Once again, if you have a question. Please press Star then one.
The next question comes from Erin Franklin with Investors Group. Please go ahead.
Okay.
Hi, Rob how are you doing today.
Great. Thank you Erinn.
Awesome.
I've got a couple of questions.
Are we going to get a decision on the Peru mine on how you guys are going to go forward with the.
The mine in Peru, either on the joint venture or reopening or somehow.
Some type of plan.
Yeah.
As Neil outlined we do have a drill program for quality content. So we're on.
Hoping to get in there.
Hello.
Yeah, Yeah. So we are planning to drill correct ghansham.
If we get good results at midyear.
Okay decision.
We're also dealing with the regulators in Peru and Peru.
It's been a pretty tough year in terms of the the political climate zone. We are seeing changes in the ministries. There so getting a decision on the legacy tailings. There is also going to help us make decisions.
We probably going to be better placed in the second half of the year to make a call on on a restart there.
Okay.
Okay.
Second would be what.
And on a cash that you guys are holding.
What does that make sense to look at.
Some type of repurchase program for shares.
Just because it seems a little bit.
Under the value that comparison.
Even without the gold market.
Yeah that is a good question and we do look at some capital allocation quite carefully.
But I think theres still hesitation that COVID-19 is not over there is talk of a third waves.
We like the cash buffer we've got.
Yes, I don't think were quite in a position with confidence in certain COVID-19 related in order to.
Deploy our cash in any other way right mouse that we're just focusing on exploration is the best way to add value.
Okay and last our last question is the.
On the tailing dam in Mexico, I think it's on OPO or GMC.
But youre, having some permitting issues.
I didn't know if I were you guys able to.
Mexican authority is able to get back to you guys.
Uh huh.
Not yet so yeah.
Cool.
They are COVID-19 related delays to that as well.
Maybe you can give aaron a bit more color on the.
On the status on Mexico.
Yeah, we still waiting for conagra to get back to as we keep on thinking that it's fairly imminent, but yeah.
Yeah.
It hasn't happened yet.
For the the concert T S efforts.
At G M C. The Topeka TSA, if we had we had problems last year and in terms of book.
So betsy issues, which we seem to basically resolved now so tobi here, we did a pretty good with pretty good standing with without without tailings capacity okay.
Would you guys be able to hear his question.
OPM DMC or would you be able to divert Ah.
Your or to the other facility if there was an issue.
Yeah.
<unk> is basically okay.
This will double check okay great.
Volker.
Great.
But no other alternatives in the area for toll milling. So it's it's it's it's if we didn't have tightened capacity issues.
Oh God Oh, that's not all that's good news.
Awesome. Thank you very much.
Thank you.
Yeah.
This concludes the question and answer session I would like to turn the conference back over to Rob Henderson for any closing remarks.
Thank you operator.
So 2020 was a banner year for Great Panther.
Having joined the company as CEO in April 2020.
But I've been in the seat for eight months and I'm incredibly pleased to see how the team has stayed.
Focused on achieving safe and profitable growth during a challenging year given the COVID-19 pandemic. This will be a year that none of us none of us want to get.
And as we turn our attention to this year I am excited for what's ahead.
This is a year from exploration during which we plan to unlock the great potential, which you see on on assets, particularly at Tucano moving.
Have a land package there.
World Class Fleet Greenstone district, approximately 90 kilometers by 30 kilometers.
It really has yet to see a drill bit outside all seven kilometer mine sentiment and I'll share our intelligence excitement.
Thank you for your participation today and on behalf of everyone here at Great Panther I look forward to sharing our progress with you in the next quarter.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
Great.
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Okay.
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Yes.
Okay.
Okay.
Great.
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