Q2 2021 Great Panther Mining Ltd Earnings Call
Thank you for standing by this is the conference operator.
Welcome to Great Panther Mining's second quarter 2021 results conference call. As a reminder, all participants are in listen only mode and the conference is being recorded after the presentation there'll be an opportunity to ask questions to join the question queue. You May Press Star then 1 on your telephone keypad.
Should you need assistance during the conference call you May signal, an operator by pressing star and zero I would now like to turn the conference over to Fiona Grant, let Jay Vice President Investor Relations. Please go ahead.
Thank you operator.
Morning, everyone and be on the ground My day, Thank you for participating in our 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.
Commentary also refers to various non-GAAP measures definitions and reconciliations that are included and the company's MD&A for the 3 months ended June 30, 2020.1 all.
All dollar amounts expressed in this presentation and the associated financial statements and MD&A are and U S dollars unless otherwise noted.
For reference during the call each day refers to all in sustaining cost.
Detailed cautionary statement can be found at the end of the presentation.
I'd like to remind everyone that this conference call 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, a great Panther dot com on.
On the call. This morning, we have Rob Henderson, President and CEO.
Sandra day clock, Chief Financial Officer, and Monaco, and nickel Chief operating officer.
Thank you Pim and thank you everyone for dialing in today I'm very pleased to have Sandra and Fernando and the room with me today to significant promotions within our leadership team.
It's under day Cook, who was promoted from Vice President corporate Finance and Treasury to Chief Financial Officer and co.
And to connect home previously you'd vice President of operations, and Brazil was appointed Chief operating officer.
I've been with the company for a full again and I'm very pleased with the team's performance to date COVID-19 has certainly made things complicated, but our team and xiaomi, how they can adapt quickly and effectively despite the hardships.
During the quarter, we remained fully committed to our COVID-19 protocols and in particular and maintaining awareness about prevention practices across the organization as well as and our surrounding communities.
As I emphasized before this and say yeah for exploration for Great Panther.
Team has had some very nice results from Tucano and the quarter and the high grade intersections, we reported from the Oracle and north deposits are very encouraging.
Q2 was a challenging quarter from a production viewpoint, but I'm pleased to say that in July ahead of schedule and we safely recommenced mining of ore at Tucano is Oracle and central stopped open pit.
And May we had temporarily suspended mining of ore at Gcs force.
Safety reasons due to movement detected and the west wall of the pit.
This suspension led to reduced production in Q2, as well as higher costs related to the additional stripping and your remediation to ensure stability.
Production is now ramping back up and the higher grade ore that we Didnt mine and Q2 will not be mined and the upcoming quarters.
And the second quarter consolidated metal production was 27722 gold equivalent ounces.
Inclusive of 22000, and 804 ounces of gold and 334423 ounces of silver.
The suspension of mining of ore from Ucs resulted in lower revenue for the quarter than originally forecast over those ounces about 10, thousands and total will be mined in upcoming quarters and will contribute to our overall revenue for 2020, 1 and into next year of 2022.
Although the mining of ore Ucs was temporarily halted we continue to operate with a full mining fleets on stripping activities and continued exploration and capital programs.
And these are significant investments required to position great Panther for future growth.
As a result, our costs went up and our unit costs increased.
All in sustaining costs, excluding corporate G&A.
With $2021 per gold ounce sold compared with $1027 in Q2, 2020.
These higher costs are attributed to the additional stripping at Juicy S as well as processing of lower grade stockpile material, which resulted in fewer ounces produced and sold.
Our quarterly revenue was $52.1 million and mine operating earnings was $7.2 million.
We ended the quarter with $35.2 million and cash and cash equivalents and we reduced our borrowings to $26.3 million.
Given the lack of progress and securing.
And that's to expand our tailings facility at GMC and Mexico.
We have adjusted down our consolidated annual 2021 guidance to a range of 120 to 130000 ounces of gold equivalents.
Yeah.
We've also reviewed and revised our consolidated guidance for ASIC taking accounts.
The lower anticipated production and the high costs experienced in Q2.
'twenty 'twenty 1.
And we expect our annual Asics to range from 700 to 8.
$100 per gold ounce sold.
So what this means is that the second half of the year, we expect to produce about 60 to 70000 ounces of gold equivalent.
And in all in sustaining cost of 15, and 50, 216 and $75 per gold equivalent ounce sold.
And Julien we published our 2020 sustainability report mining for good.
Highlights our progress and the areas of health and safety and environmental responsibility and community engagement and development.
And I'm pleased to say and 2020, we adopted and official diversity public policy and.
And we achieved 24% of leadership positions now held by women.
We had zero environmental incidents and improved our lost time injury frequency rate.
7%.
Safety is a key area of focus for us and we continue working across the organization on new initiatives. This year to further strengthen our safety practices.
I'm very proud of how the team has delivered on our sustainability mandate and encourage everyone to read the report which is available on our website at great Panther Dot com.
I will now pass it over to Fernando connects them to discuss results from operations.
Thank you, Rob and good morning, everyone.
Focusing first on forgotten.
Gold production for the quarter was 20000, and 696 ounces compared with 35421 ounces and Q2.2020.
42% decrease related to lower oil production due to temporary suspension of mining and Oracle and central South which resulted in the processing of lower grade material from stockpiles and ore from the article North pit.
With lower recovery rates.
And.
The second half of 2020, 1 is expected to account for 60% of production guidance, which Portugal is expected to be between 100, and 105000 ounces of gold and the year.
All in sustaining costs for the quarter was $2214 per gold ounce sold compared with 982, and Q2, 2020 due to lower gold production higher operating cost and traditional reclaiming of stockpiles and higher stripping costs, you'll see yes.
Total 1.4 million tons of waste material was removed and Q2 and a further 1.2 million tons and is expected to be moved and Q3.
Moving forward groundwater monitoring and water management will be key to continue operations and order from central and South.
Installation of Consolidators and groundwater monitoring stations will be completed over the next 2 months, we are evaluating and installation of practical trains to maintain a higher degree of control over phreatic levels and the west wall, especially when mining that pit.
As Rob mentioned earlier exploration efforts I took out and will have been producing some very promising results to date over 17281 meters of drilling have been completed for the near mine and regional programs.
The exploration team will continue with the drilling program over the next 2 quarters to achieve the 60004 hundred and here and you'll target.
Atop sea drilling continues to intersect mineralization down to 70 meters below the current pit.
The drilling along without reevaluation of historical data.
And that's led to an improved understanding of the controls of mineralization and unusual logical model that will be integrated into the next meeting of resource statement for Chicago.
And the year.
Our political north a series of deep holes were drilled to test the deeper portions and down plunge extension of the Oracle North high grade zone.
From this drilling program.
Demonstrate the potential for additional near gold production and we are expediting and studies to support a production decision next year.
In addition, drilling intersected high grade mineralization near surface.
Which we believe could further extend the Oracle north open pit.
To date the regional soil sampling has been completed alone 438 line kilometers of the budget and 500 kilometers and the geochemistry and results are currently under evaluation drilling is scheduled for the second half of the year to test regional targets. Once this evaluation is complete.
The main areas of focus will be targets within 20 kilometer radius of the mine, which include <unk> and Lenovo Motorola.
Okay.
Won the Hearts of mine complex and Mexico.
A total of 284883 silver equivalent ounces were produced with silver recoveries of 87, 4% and and average silver grades of 119 grams per ton.
Gold recoveries were 87, 6% and the average gold grade was 158 gram per tonne.
Production increased 111% when compared with Q2.2020.
This variance is associated with the suspension of activities and the second quarter of 2020 due to COVID-19.
All in sustaining cost and Q2.2021was 39.3.
Others per payable ounce of silver compared to the 27 and $3 and Q2.2020, mostly due to higher mine development costs with lower than expected production.
In terms of permitting we continue to await approval from going out for.
And for the expansion of the tailings dam storage at GNC. However, Osprey <unk> news release on July 14th we have identified technical alternatives to extend the tailings capacity and the existing permits until December 2021with.
We continue to proactively engage with 1 hour to help expedite the permitting process and will provide an update to the market. Once a day solution has been and found.
And to be a total production was 212259 silver equivalent analysis.
And increase of 114%, mainly due to higher throughput and higher grades higher recoveries for all metals.
Well Jimmy Dean to this variance was also the government mandated shutdown and Mexico during Q2, 2020 due to COVID-19.
Average great were 432 grams per tonne silver.
And 1.0, saving ground's per ton gold, along with byproducts of lead and zinc metal recoveries were $93.5 per cent says sales over and <unk>.
Comprehensive local.
All in sustaining costs per payable ounce was 21.7.
Others versus the 22.3, and Q2, 2020, mainly due to a higher number of payable silver ounces, which decrease the all in sustaining cost on a per payable silver ounce basis.
That's great Ghansham, a community agreement and what's received in May and I and 5000 meter drill program started in July.
I will now turn the call over to Sandra to discuss our financial results. Thank you.
Thank you Fernando and good morning.
Q2, 2021 and was a difficult quarter revenues in Q2, 2021 and with $52.1 million.
A decrease of 22% over Q2, 2020.
The lower metal sales volume offset partially by higher realized price at $1818 per call and $27.45 per se.
Great.
Mine operating earnings before non cash items decreased from $35.8 million and $7.2 million.
Consolidated electric pulled out.
Excluding corporate G&A was 2000 and tenant and $1 compared to 1000.
$27 and Q2, 2020, primarily due to higher cost of to kind of related to the ucs pushed back activity.
As Rob already said, we continue to run at full mining fleet and investments shipping and remediation activities during the quarter paired with the reduced ounces of production and that's resulted in higher costs.
This investment however is expected to contribute to the company's future growth and we expect mining to be back to normal and the coming quarters.
Net loss was $10.1 million compared with net income of $8.6 million and Q2, 2020.
Adjusted EBITDA was negative <unk> 5 million compared to $38.2 million and cash flow from operating activities before changes in noncash working capital was negative <unk> 9 million compared with $24.1 million and Q2.2020.
This decrease is due mainly to higher cash costs attributable to the pushback activities that ucs and political events and felt partly offset by higher realized gold and silver price.
We ended the quarter with cash and cash equivalents of $35.2 million net and working cap net working capital of $9.8 million and $25.
$5 million of current borrowing it and.
Made significant progress.
Cortes and negotiating potential new credit facility, we expect to finalize these arrangements and the third quarter.
I'll share our working capital position.
And thank you. That's all we have for formal remarks, I'll turn it back now to the operator for question and assets.
Thank you we will begin the question and answer session.
Join the question queue. You May Press Star then 1 on your telephone keypad and you will hear atone acknowledging your request.
You are using a speakerphone please pick up your handset before pressing any keys to withdraw your question. Please press Star then 2 we will pause for a moment as colors joined the queue.
Our first question comes from Joseph Reagor of Roth Capital Partners. Please go ahead.
Hey, Rob and team thanks for taking my questions.
Good morning, gentlemen.
So I guess first thing is G M C.
Can you give us any additional color on what's causing those delays is it just COVID-19 related issues or is there more to it than that for the permitting.
And then also you know could you give us any concept of a handicap of what your expectations are at this point like odds of getting to the finish line by the end of the year.
Thanks, John.
I think and where we're not the only ones experiencing this.
Issue with permits.
We're engaged with Conagra, but we have not had a formal response from them yet.
So.
It is a frustrating process and Mexico right now regarding mining permits.
We.
As I noted, we do have capacity to the end of the year, but.
And we do have to make capital decisions, we need to invest into development and GMC and unless we get.
You know more certainty around our ability to secure those permits.
And where.
Questioning whether we can actually run to the end of the year.
So the engagement with Conagra is still going on but the response has been disappointing to date. So that's why we.
Decided to adjust our guidance downwards based on and off lower expectation of getting those permits and time to make the necessary capital decisions.
Okay Fair enough and then.
On a capital spend basis I realize there's a little uncertainty at G. M. C. But you know first half of the year has been you know 27, and 28 million something like that that you guys have spent on capex.
And what is the second half of the year look like and maybe what are the largest components of it.
Sure.
And first half of the year it was stripping intensive half and.
And we knew that going into the year, we had to spend more than budgeted and Q2, but Sydney and Capex and the second half of the year is gonna be a lot lower and <unk>.
And do you give any color on that.
Yeah, so and the.
And the Capex and.
And the 3 components and the Capex is stepping in and.
Capital and also exploration and we have.
And.
Invested heavily in the first half and exploration that we didn't expect to increase that somewhat and the second half and.
Now that we have better access to and tailoring.
And the the capital and.
Expenditure for the second half.
It's more weighted to the second half on certain projects.
Cost saving projects initiatives, and and primarily into kind of the stripping will reduce significantly as we've already guided and the.
And second half as we reach day.
The higher grade ore body and you see it.
Okay and.
Is there any you.
You know even a wide range you guys could put around it on a dollar number basis.
You know I think where we're reviewing all our capex I think it would be premature to put a dollar range at this point.
Okay understandable I'll turn it over.
Thank you Sir.
Our next question comes from Jake Sikorski of Alliance Global Partners. Please go ahead.
Hey, guys. Thanks for taking my questions Jay.
Just looking at the economy from a great perspective for the second half and do you think some of that higher grade material is going to make it into the mine plan and on the latter part of the third quarter or do you think that's more of a fourth quarter type of that.
Yeah, Hi, Jake Fernando Cornejo here, just absolutely a bit higher and higher grade material from political and central South is starting to be mine assets now and the grades are expected to increase over the next 2 quarters are starting now in August.
Got it okay. That's helpful.
And then on the underground scenario that the economy.
<unk> seen some drill results there.
When do you think that that more comprehensive update will come out would be around the time of the resource update towards the year end.
And what we intend to do there Jacob.
And the lending.
And through the year end and these studies will probably be complete in the first half of next year to enable us a decision to put down.
And axis portal and the second half of the year.
Somebody was going to carry on drilling to the end of the year. The study is going to be complete and the first half of next year and.
And the expectation is that we would start going underground and the second half of next year.
Okay, Perfect and then lastly back from Mexico, just sort of building on and on 1 of Joe's questions.
And any color on the remaining capacity there and how quickly do you think you can move forward with some of the other areas that you've identified and if that's the route that you chose.
Yes.
We're doing a bunch of studies on what we can do is alternative.
<unk> storage options and treating and a dry stack the problem with that as.
We will need permits to do dry stack as well and we're back into a log jam of 1 to 2 years to get the permits for and alternate tailings solution. So we continue to push for all our lifts on the existing facility, which would give us another 5 years and.
And in parallel we are looking at alternative options for them.
A dry stack, but that will require a new permit and so and we may have to hit a pause button at GMC and order to get those new tailings permits for and alternative facility.
Yeah.
Got it got it okay.
That's all from me Thanks again.
Thank you.
Our next question comes from Heiko Ely of H C. Wainwright. Please go ahead.
And Eric Thanks for taking my questions.
Good morning, Ike and.
And theyre good at and <unk>.
Europe, it's 6 P. M here, but are related to the improvement and the U S. Yes wall stability and you state that you have already removed and there was a quote approximately 1.4 million tons of waste material from the upper west wallet. The ucs pit with a further $1.2 million tons and plan to be removed in Q3.
I was mentally try and see how much $2.6 million tons really is and and then frankly failed, but I do understand numbers. So so building on that can you provide some color of approximately what you pay to move each ton and also and looking ahead are there efficiencies where costs go down by doing it more and more.
Or vice versa, this and get more expensive to haul stuff is you've got a hold it up more.
Alright, Sandra and.
And we don't generally guide on our cost structure for competitive reasons, but you know it.
It's typical of industry.
Yes.
It's it's it's not so much a cost issue that's.
We're facing its access to the pit and delay and getting those ounces.
It's not a lot of tonnage and now we can move that tonnage and.
And in a month really so it's it's not the volume that's the issue it's getting access to the ore at the bottom of pit, which has hindered us.
Now that we are back in there we've still got some final smoothing to do on that wall and so thats the balance of work that we expect to happen and this quarter, but the the main focus of that we're back in the pits and mining efficiently again, so we do have access to those higher grades.
Zones are or which we were prevented accessing and in Q2 for safety reasons.
Fair.
A second question and I'm asking this because the topic came up on another call earlier today, what are you seeing with treatment charges and Mexico are you seeing any meaningful improvements and I have a feeling when we get the we can't talk about this from competitive reasons, but can you quantify.
And what youre seeing as well.
You're talking about our.
Smelter returns or are you talking about the the mill efficiencies.
And I know that the smelters.
Yeah, I mean, that's pretty sensitive and.
Information and so and.
And we did contract hire.
And.
Our charges on an annual basis and putting.
And that's a temporary care so great.
I leave it to fair comment on that.
[laughter].
Thank you.
Thank you.
Our next question comes from Matthew O'keefe of Cantor Fitzgerald. Please go ahead.
Thanks, operator, and good morning.
And just some follow up here on to channel.
First off to count on and a quick question on G. M C. So onto Ken Oh Oh.
This is the the ucs pit, yeah, you'll be getting into there and now they get to high grade.
Is that it for ucs this year or how many how much more time do we have and how much more.
<unk> will be contributing to the overall mine plan and where where else are you getting core from to feed the.
Even though.
Yes, good morning.
Yes as per the current mine plan will extend into 2022, perhaps for 1 additional quarter.
And that that will be part of the sequence for the next year as well.
Okay. So we won't we won't be seeing a recurring issue with with all the volatility.
Yeah.
That's correct I mean, the overall the overall the strategy behind installing disarming errors and water monitoring holes and having.
Having drains and is to prevent a water accumulation and are increasing on the phreatic levels. During the rainy season, so that will give us some assurance that once we go into the rainy season, which starts normally by December.
And we'll have some control over that phreatic labeling and continue mining at depth.
Uh huh.
Okay. Thanks.
And then going back to Mexico here with G. M. C. I know you're so it sounds like things are going.
Going as well as planned there.
You'll be if you do shut down.
Well, what would you call your care and maintenance cost be roughly.
And are you looking at where there was there some discretion about toll milling options are there any options on that as well.
Yeah.
Obviously, we haven't come to a decision yet.
We're just probability weighting things and we've got to make those decisions. This quarter, but you had a toll milling isn't as an option that there are 2 other operators and the region.
With mill capacity, so that may be an option and so what you do.
Decision on care and maintenance it has not been made yet.
There are some alternatives that we are actively looking at.
No I understand that you have.
I've made that decision, but you must be kind of I mean, it sounds like we're going in that direction. So.
And cost wouldn't be that severe to put down and care and maintenance and and I mean, if it's just a matter of timing on this permit it might be what another year or something.
Yeah exactly so.
And option is for us to carry on mining and and do them.
Toll milling and <unk>.
And thereby mill so that you know that is actively under consideration.
Do you have a preferred option.
Not yet.
And progress [laughter], Okay, alright, and we don't have certainty on the permits so that that's making things a little bit complicated.
Yeah, you don't even have a as you said he didn't have a response so that's that's a bit troubling too so and.
And if it wasn't there.
If we had a response today, who would make things a lot clearer, but where we're dealing with levels of grain this guy and and uncertainty.
Right got it okay.
Okay I'll leave it there. Thank you. Thank you.
Our next question comes from Troy, George a private Investor. Please go ahead.
Thank you for taking my call I had a couple of questions first.
First you foresee.
Do you foresee profitability and our 2021 at the end of year.
Yes, Thanks, Brian.
We do expect to produce 60 to 70000 ounces of gold and and the second half of the year at an all in sustaining cost of 15 and 50 to 60 and 75. So short answer is yes.
Okay, Great that's great to hear and then the new discovery at and <unk>.
Cano and is that going to extend the mine life do you believe.
Absolutely.
It will extend mine life.
But the most important thing and it is the grades were.
Well, we're looking at and seen a much higher grades and the underground and <unk>.
And even in fact, and the Oracle north near surface.
The work and the second half of the year is looking at you know, how we would capture those higher grades and to the mine plan, which would increase production.
Okay Fantastic and then also I might add a comment I have to follow up you know mines and they had problems for over a year and getting approval from the Mexican government because of Covid.
And you might want and give them a call and see how they finally got through.
Okay. Thanks.
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.
The.
And the investments we've made not only and tucano.
To ensure the stability of the pit wall Ucs, but also having 2 significant mine development and exploration at all of our operations.
And I believe will contribute significantly to the future growth of the company.
As exploration is the key to unlocking the value of our land package and Brazil, we expect to have a steady stream of news informing you of our exploration results and the coming months.
Along with the strength of our new leadership team, Great Panther is well positioned for growth both organically and through accretive acquisition opportunities that will further grow our production profile.
And on behalf of everyone here at Great Panther I look.
Look forward to sharing our progress with you and the next quarter and thank you for your time today.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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