Q3 2021 Great Panther Mining Ltd Earnings Call
Thank you for standing by and this is the conference operator, welcome to Great Panther Mining's third quarter 2021 financial results conference 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.
To join the question queue. You May Press Star then one on your telephone keypad should you need assistance during the conference call you May signal, an operator by pressing star Zero I would now like to turn the conference over to Fiona Grant <unk>, Vice President Investor Relations.
Please go ahead.
Thank you operator.
Everyone I'm Fiona Grant, let Jay 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 today.
The commentary also refers to various non-GAAP measures definitions and reconciliations that are included in the company's MD&A for the three and nine months ended September 32021, all dollar amounts expressed in this presentation and the associated financial statements and MD&A are in U S dollars unless otherwise noted.
For reference during the call basic refers to all in sustaining costs.
Detailed cautionary statements can be found at the end of the presentation.
For today's call. Please refer to the Q3 2021 financial results news release issued yesterday and the accompanying financial statements and MD&A, which were posted on our website and have been filed on SEDAR and Edgar.
This conference call is being recorded and will be available for replay later today.
Play information and the presentation slides accompanying this conference call and webcast will be available on our website.
On the call. This morning, we have Rob Henderson, President and CEO.
Saturday Caulk, Chief Financial Officer, and Fernando Cornicle, Chief operating officer.
Thank you Jennifer and thank you everyone for dialing in today.
On today's call, we will walk you through our third quarter production and financial results as well as spend some time discussing our plans to address the challenges we have in operations.
We'll provide some revised 2021 guidance and some preliminary forward looking guidance for 2022 to give you a clear picture of the company's outlook.
At Tucano Gold mine in Brazil.
Optionality that affords us the opportunity to shift gears from source production from multiple other open pits.
Plus the high grade underground reserves.
Yeah, Jim logical prostate activity of the region also underpins the long term value of the economy as we continue to invest in the regional exploration targets.
The land package and the potential for a second or even third mine.
Where the long term value exists with great Panther and shareholders.
Q3 was undoubtedly a challenging quarter.
At Tucano.
Our mine fleet availability related to maintenance and supply issues led to lower tonnage being mined.
And the delay in the completion of the Oracle in Central South.
Or ucs pit pushback activities.
In Mexico, the emblem Mentation of new labor laws led to temporary staff shortages, resulting in delays in tonnage mined.
In addition production at the GMC in mind.
It was primarily from the historically mined areas in actual tonnages available were lower than estimated and as a result, our consolidated metal production was 22444 gold equivalent ounces.
Which included 18423 ounces of gold and 280245 ounces of silver.
As we reported in the second quarter.
The ucs pushback to activities were expected to continue into the third quarter.
And for lower grade ore was mined from the Oracle Gulf pitch.
And it was supplemented by stockpile.
Resulting in lower average grades in the mill and this resulted in an increase in our unit costs.
No the metal sales volumes and lower prices for all metals resulted in a revenue of $38 4 million.
<unk> operating loss of $7 1 million.
And a net loss of $18 million.
We ended the quarter with $35 $9 million in cash and cash equivalents.
Turning our focus now to again subsequent to quarter end, we made the difficult decision to put the one to watch of mine and the cost of processing plant on care and maintenance at the end of November.
This course of action was necessary.
Given the uncertainty related to the permitting required.
To expand the tailings storage facilities at Arcata plant.
We intend to operate the high grade San Ignacio mine and we are exploring alternative arrangements for the mine, including third party processing them all.
In mid October following a review of ongoing monitoring of the Ucs pit.
We were advised by Chicanos Geo Technical committee that additional remediation work would be required to improve safety package.
And we've decided to postpone this works to mid 2022.
This remediation can be done more effectively following the rainy season.
And now we turn our attention to optimize the mine plan to manage cash flow and safeguard strong production for next year.
Limited mining of ore has been authorized in the southern portion of the Ucs pits. So we will continue mining there until the end of this year.
It's important to note that Ucs is just one of many pets at Tucano.
The contained ounces are relatively low.
It is not the driver of future growth for the mine.
A total of seven pits at Tucano, including tap AB.
Which accounts for the majority of our current reserves.
We're doing the work to a depth of the mine plan.
At how much we will be able to mine from ucs.
As soon as we can deploy the fleet to type a b and how to make the best use of our resources to optimize production next year.
Initial engineering designs indicates that our production will be weighted to the back half of 2022.
The first half will see production continue from Oracle North and.
In tap fee.
While we invest in the stripping of tap any b.
And we're looking at all of that stripping can be accelerators to bring on stream sooner.
In the first half of 2022, we plan to complete the work necessary to accelerate our plans to.
You bring on the oil come North underground project into production, where we have roughly 288000 ounces.
Reserves.
With approval expected in Q2 production could come come on stream as early as Q4 next year.
We also plan to continue investing to secure future production.
From Tucano.
By continued regional exploration at <unk>.
Kind of exploration budget for 2022 is planned to be roughly in the same order of magnitude as it was this year.
However, we will be undertaking the majority of this work in the second half of 2022.
And we expect strong operating cash flow.
I'll now pass it over to Fernando <unk>.
Our chief operating officer.
To discuss the results from our operations.
Thank you, Rob and good morning, everyone focusing first on Tucano.
Oil production for the quarter was 16325 ounces compared to the 31803 ounces in Q3 2020.
Average gold recovery was 88, 8% as a consequence of lower gold rates at 464 grams per tonne.
The decrease in production was mostly related to lower ounces mined in the Oracle central South pit.
Which was affected by low fleet availability.
Technical restrictions due to wall movement and higher than anticipated rate levels.
Hello fleet availability also affect that mining rates and the other pits such as stop baby.
Political more during the quarter lower grade ore from the stockpile soup lamented fresh ROM from the Oracle central South analytical morph pits.
Despite the high planned throughput lower feed grades and lower metal recoveries, resulting in an increased eight with an average of $2051 per ounce compared with the <unk> thousand $61 per ounce in Q3 2020.
As Rob mentioned earlier.
Carlo Geotechnical comedy.
Buys that an additional pushback will be required to improve safety factors and the north central portion of the pit.
At the same time the comedy after a site visit in the evaluation of the old real situation from the ground outdoor is the company to continue mining in the southern portion of the pit, which remains stable us per radar monitoring.
The company has decided to defer additional pushback activities until mid 2022.
Right after the rainy season.
To ensure safe conditions for our workers and also the ramp down mining activities in the southern portion of the paid by the end of December.
As a reference that the rainy season in that part of Brazil typically runs from January one.
What about six months.
Did you think nickel analyses and modeling is it still ongoing therefore, we do not know yet the size of.
There's pushback more information will be provided once we know more.
On the exploration front, we saw some very promising results in Q3, we completed a total of 15000 meters of drilling.
Both in the open pits and the underground.
The underground drilling program, which has started in late 2020 continue throughout Q3.
We are fast tracking of studies for this development to support the startup decision in late 2022.
Roger gets ambition as a 40000 to 50000 ounce per year underground mine.
Glad to extract ore from below the current political north open pit.
Moving on to tap C. The resource replacement and expansion drilling conducted in this pit.
As demonstrated continuous mineralization.
In regards to the regional exploration forward nearly 2000 square kilometer land package. This year, we have started with extensive sampling campaign.
A mapping program over high potential exploration corridor, which.
Which were the final last year.
As a result, I received drill targets are being defined with this within this corridor.
The regional exploration program focus is on the identification and fast tracking of gold targets within a 20 kilometer radius of the mine that could be exploited by up indeed methods.
Processed by the Tucano plant.
And most of them trained is the first of a high priority exploration targets being evaluated with multi element soil geochemistry.
Q3 exploration results have shown that <unk> has a continuous three eight kilometer long elevated gold trend drill.
Drill testing is planned to commence this month and continue into 2022.
Yeah.
They won the hearts of complex in Mexico.
A total of 278000 silver equivalent ounces were produced with silver recoveries, averaging 87, 1%.
Average silver grades of around 240 grams per tonne.
Well recoveries weight 86, 4% and average gold rates were 164 grams per tonne.
Production was decreased by around 70% due to lower throughput and lower silver grade the lower throughput was mainly related.
So the implementation of new labor laws in Mexico, which led to labor shortages at the mine.
What's also paired with lower than estimated production from historically mined areas.
As a result of this lower production the AC was $46 nine bullish droughts.
Silver compared to the $18 eight in Q3 2020.
As Rob noted earlier the company has made the difficult decision to put the one what the mine and the cat a processing plant in care and maintenance at the end of this month.
At <unk> total production was 242000 silver equivalent ounces, a decrease of 37% mostly related to lower throughput and lower grades and gold lead and zinc.
The lower throughput was related to the implementation of new Labour loss in Mexico, very similar to GNC.
The average grades in Q3 were around 373 grams per ton silver only 64 grams per tonne gold along with byproducts of lead and zinc metal recoveries were at 93, 7% silver.
Two 2% for gold.
I've got a gun shy in Peru.
5000 meter drill program commenced in July focusing on the Escondida, Wellington and Constancia Bay.
The drilling program was completed in late October with finalized phase to be received by the end of this year.
I will now turn the call to some of the Baker CFO to discuss our financial results.
Thank you Fernando.
In the third quarter revenue was $38 $4 million, a decrease of 50% of our Q3 2020 due to lower metal sales volumes and lower metals prices of $1780 per ounce for gold and $22 79 per ounce for silver.
Mine operating loss before noncash items was $7 $1 million versus mine operating earnings of $31 $9 million in Q3 2020.
Consolidated ASIC per gold ounce sold excluding corporate G&A was 2010 and $47 compared with $1023, primarily due to lower production attributed to lower grades and recoveries, which resulted in an increase in costs per gold ounce sold.
As of July one 2021, the company ceased the capitalization of mining cost for the year come open pits.
All mining costs, including the pushback would be expense for the remainder of the Pet's life. Please note that this will result in higher cash costs reported for those pits going forward.
The net loss in Q3, 2021 was $18 million compared with net income of $18 $6 million in Q3, 2020, adjusted EBITA was negative $8 $8 million compared with $34 $9 million in cash flow from operating activities before changes in noncash working capital was negative $8.7 million compared with two.
$96 $2 million in Q3 2020. This decrease is due primarily to lower gold ounces sold lower realized gold and silver prices and higher cash costs stemming from the factors described previously.
We ended the quarter with cash and cash equivalents of 34, $35 $9 million net working capital of $3 $8 million and $33.7 million of current borrowings we secured new 18 month credit facilities, with Asahi and Samsung and reestablished a $25 million at the market facility to underpin the company's working capital position.
Fishing and to execute on growth objectives.
Due to the Q3 production disruptions in Chicago, we have revised our 2020 one production guidance for Tucano to between 75080, 4000 gold ounces and consolidated production guidance to a range of 94000 209000 gold equivalent ounces.
Please note that there was an inconsistency in the text of our news release that stayed at that kind of guidance is ranging from 70000 to 80000 gold ounces. Although the table provided contain the correct information as does the company's MD&A.
Consolidated ASIC guidance for 2021 has been increased to a range of 1950 to $2050 per gold ounce sold.
Looking forward to next year, our preliminary mine plans for 2020 to include production of up to 100000 ounces from Tucano, approximately 75% of which would be delivered in the second half of the year when the top AP pet accelerates mining of ore.
As we head into 2022, we are cognizant of the need to digest.
Sorry, judiciously manage the capital and we are reviewing a number of potential avenues to set ourselves up for growth in the new year.
We have necessary development costs in the first half of the year that will underpin strong cash flow in the second half and we are managing capital. Accordingly, we are also executing on global cost cutting initiatives, managing controllable costs and prioritizing capital programs overall, we expect production to be healthy in 2022.
That's all we have for formal remarks, I will now turn it back to the operator for Q&A.
Thank you we will now begin the question and answer session to.
To join the question queue you May Press Star then one on your telephone keypad.
Sarah tone acknowledging your request.
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The first question comes from Jake Zukowski with Alliance Global partners.
Please go ahead.
Hey, Robyn thanks for taking my questions.
Hello, Jay just.
Starting with with Ucs, I mean, I know you talked about deferring some of the pushback activities to the middle of next year or are you able to provide any additional color on the number of ounces remaining there I guess I'm just wondering if there's been any thought.
Given to fully transitioning away from ucs altogether and moving onto the other pets.
Yeah.
Certainly.
Uh huh.
And a 43 101, we don't give a detailed breakdown, but we do give some analysis and what that's looked like and there's probably about six months of production left in Ucs. So you know in the order of 50000 ounces.
Ucs at its high grades.
We are mining at right now, but it's it's you know.
It's not the future of Tucano.
A b has.
Over 100000 ounces for instance.
We do need to move on from Ucs and start extracting the gold from the multiple other pits that are available to us.
Okay. That's helpful and then in that vein with tap a b I mean, obviously, it's gonna account for the majority of our production in the <unk>.
Second half of next year, it might be a bit early but do you guys have any indications on sort of the development and stripping costs that we might see there in the first half next year.
Yeah, we're still doing our budgets, but China, maybe you can give a bit more color on the nature of type a meeting.
The stripping requirements.
Absolutely at the top baby is conventionally known as a super mining because it's soft material you see you see mining almost free D and it's it's it's much much closer to the plant the crushing a portion of the plant. So a in terms of course, we are anticipating that a b will be much cheaper.
Or then obviously Oracle, which is located six kilometers away from the plant.
Okay. That's helpful. And then just lastly on the underground scenario.
You may have hit on this if I missed that I apologize should we still expect a formal study there over the next quarter or so I know you guys kind of mentioned you might make a.
Development decision later in the year on that front.
Yes.
We're doing work on that study as we speak.
We're continuing to drill the zone to extend it and.
And to confirm.
The continuity of the higher grade portion. So yeah, we would look at getting that resolved out in the middle of next year.
We would then go to the board for approval to spend the capital.
Just in the order of $10 million to $15 million and.
The the mineralization that you know it's.
Political banded on some information that continues just right on from the bottom up.
North pit so we'd be into.
The mineralization pretty quickly so.
If we get a Q2 decision we could see gold coming into the plant as early as the end of next year.
Yeah.
Got it okay. That's all on my end thanks again.
Thank you Jay.
Okay.
The next question comes from Heiko with H C. Wainwright. Please go ahead.
Hey, there thanks for taking my questions.
Good morning Heiko.
Good morning, with the tailings dam Portland at Guanajuato came in quite some color about the terms trucking distances and just more clarity with the associated costs with the alternative arrangements that you're currently looking into.
Yeah. So you know about.
You know as you know our tailings facility is reaching capacity so without a permits.
For our mill, we're looking at all of our.
Two neighboring mines to keep them.
Capacity and they have indicated they have.
So you know the San Ignacio mine is right next door to the ball on the Tulsa and trucking distances is very short.
On the other side of town.
The El Cubo mine.
The trucking distance is in the order of 15 kilometers.
It's something that we're doing right now is we're trucking our San Ignacio ore to the plant.
It's it's an established process.
We're pretty confident that San Ignacio is good grades and we can come to some agreement with with our neighboring minds for it.
The ore processing agreements.
Okay.
And then just thinking out loud here your outlook for the second half of next year or two call is actually pretty good again for the second half.
Go below what we have to my model previously for the full year given the issues that you faced in the first half of the year building.
Building on all of that extrapolating out to 75% of the 100000 ounces for the second half Youre looking at average of 37500 per quarter and we're back on track to at least for our model.
With all that said two questions should we model the second half of 2022 and just sort of keep that figure constant going forward thereafter.
And also I assume the answer is yes, but I just want to double check given the tap a b. It is this that a gradual ramp up or should we expect Q1, two to be more or less the same before jumps up as this is all done.
Yeah, I'll hold very good Christian C D. Yeah, so type a b.
It's a pretty big picture its been previously mined where were.
Currently doing a pushback on the on the next phase right now so we do get a steady release of gold and that release you know it does.
In Q1, and Q2, we do get some production term type might be.
But it accelerates in Q.
Q3, and carries on into Q4, and indeed on too.
2023, so we are we.
We do see that you know tucano is a 100000 ounce a year producer.
But we're looking at next year and that's why we're looking at it at 2023, but yes, we've got to get into tap a b and remove a bunch of that soft waste material before we get into the richer all benches, which which released.
The gold into the mill, so yeah. It type a b as a steady ramp up into Q3, and then it's sustained into.
2023.
Yeah.
Perfect. Thank you.
The next question comes from Joseph Reagor with Roth Capital Partners.
Please go ahead.
Yeah.
Hey, guys. Thanks for taking my questions.
Following a bit on one of heico's questions GMC.
What can we expect on a throughput basis from saying that if you do sign one of these offtake agreements are a toll milling agreement.
Yeah.
Obviously, it's going to be contingent on you know what the neighboring mills can receive.
I think right now the.
The San Ignacio.
Mine is the main contributor to our production at GMC. So we would expect that to continue.
Carter mine has not provided much ore to the mill and the <unk>.
Last year GMC production. This year has predominantly been from scenic nature.
So you know that label.
I hope to continue that next year, obviously dependent on the ability.
The oil processing agreements that's still TBD.
Okay Fair enough and then.
You know just kind of following on a bit of the other guys questions on Tucano.
We're just trying to model this out from a cash flow standpoint.
<unk>.
Do you think youre going to need some form of additional capital in order to fund everything given the low production rates in the first half of next year and you know would your preference be.
You know another forward gold sale.
Some kind of debt facility or equity if you had to do something.
I think our balance sheet right now, we've got $36 million in cash $44 million in pets. Sandra is obviously looking at some financing alternatives to us maybe she can give some more color on that.
Hum.
I'd say, yes.
We have cash on hand of.
We recently established a 25 million, okay, and 30 on which we can look to supplement our working capital needs. We are looking at all options. We haven't made a decision at this point on.
But let's hope we don't have a preference to answer your question.
But we do have a number of opportunities we're exploring.
Okay.
And then.
No.
Maybe bigger picture Rob.
The thought with Tucano is that Theres, a lot of potential not only in the existing pits.
And then the underground but also in the region is there any opportunity to bring in a neighboring project to kind of accelerate.
Your movement away from Ucs.
Yeah.
Our tenements.
Yeah.
Kind of as big it's it's 90 kilometers by 30 kilometers. So it's it's a massive massive area.
To the south of US we do have a an iron ore mine that is getting looking at being reactivated so.
The old iron ore mine look might come on production again.
A few years, but you know I think our attention right now is to drill the greenstone anomalies that we had been the regions we've identified.
Three or four very high prospective targets, we've done over 500 kilometer.
Of soil sampling.
Ambling, we've identified <unk> as the highest priority project and we're drilling that you know as we speak and we have two others.
To the north of the mine, which are all within trucking distance of the mill. So.
Is that you know this district does have additional potential and we do need to.
Get into the.
The region. The underground you know of course.
It's also a high priority so underground.
Do have we've got the identified underground at Nordson.
Pushing hard on that one but again this is a banded iron formation political and underground opportunities, but on all of our pits. So we've got an example nodes as well.
Okay fair enough I'll turn it over.
Yeah.
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.
Thanks, operator, thanks for taking my call just a question here going back to to kind of.
So I understand you're so you've got your you source from several pits how much now is coming from.
Various pits and tap a b seems to be kind of on deck to be a big provider next year, what's the oh, what's the cost of the of the pushback there.
And what kind of grades are you expecting to get out of TARP baby.
Yeah.
So yeah type a b is is kind of a second highest grade the highest grade we have right now is.
Central South type a b as the next highest.
And it runs at round about one seven Gram a tonne.
In terms of quantity material Fernando you got some color on that.
Yeah absolutely.
For next year, we're anticipating around eight to 9 million tons coming from a b one.
As we start being in tour. So this is why it is taking around.
Four to five months to get that stripping done.
For Okay, and what was the cost of the stripping there you had mentioned it was pretty soft material. So.
It's softer material so with the rates, we manage right now is probably below 10 reais per ton.
Okay, So, but I don't know how many times, they're going to move so like I'm, just kind of trying to understand what kind of money has to be.
<unk> invested here and capitalize here to get into it.
But that's that's that's why I said between eight to 9 million tons that we need to strip or weekend.
Okay Yep Yep.
Okay apologies.
No that's fine.
Oh, Okay, great and then.
So where.
And is that going to be that's not your sole source of all right. It sounds like you're still taking some from.
Ucs and from other other pits, but.
Yeah.
Scheduling or coming from political north of steel, we have stopped see going live.
In Q1 and Q2.
And.
We are.
Basically moving ourselves to start with this grouping of neuro Concentrix South by late June next.
Next year.
And in parallel we will do maybe one okay.
And and when I look at the guidance for next year are for Tucano, obviously like you say, it's it's heavily weighted to the second half.
So that suggests that where we're looking at similar to lower grades are being produced in the first half.
Then we've spent we saw this spike I think it was 0.6 for this quarter 0.64 grams per tonne to the mill I think so are we going to be seeing similar to lower grades in the first half and does that also suggest your stockpile is largely done.
It lowered grades so well will continue in Q1 as we move into Q2 are they are going to start improving because of that see some initial order coming from maybe one the new local north.
But in terms of the stockpiles, yes, where we're starting to run a little bit lower on those.
But there is a portion.
The central South that we're still mining, which is the southern portion of the pit is going to help us to preserve some stockpile for Q1 and Q2.
Okay.
Okay. Thanks, and then just if I can ask one more question. Thanks for your patience on the exploration front, so theres been a lot of drilling going on.
Well you know several pits here that we've been mining over the year or are we going to when do we expect a resource update I forget when you normally do that but when should we expect a resource update and what kind of granularity will we see in it when we get kind of updated pit by pit or or or sort of just sort of a global.
Type number.
I think.
The update probably going to happen you know early next year.
We.
The update will be very similar to the one we released.
A year ago. So it does give details for all the pits.
Oh, well the analysis is and it'll be an update of what we currently have right now, but yeah, it's probably going to come out in.
Early next year.
Right, but it should include some of the results from the extensive drilling you've done this year to correct absolutely yes, okay.
Okay. Okay. So.
That's great. Okay. That's it for me I'll leave it there thanks.
Thank you.
This concludes the question answer session.
I'd like to turn the conference back over to Rob Henderson for any closing remarks.
Thank you operator.
We know it's been a difficult year, and we're fortunate to be able to adapt to re sequencing of the Tucano mine designs in order to tap into.
Gold production from our numerous other pits and underground opportunities.
We are expecting a good year in 2022 from a total production perspective production that will be backend weighted and therefore, we have to be prudent about our capital spending to navigate through the first half of the year.
Yeah.
We are doing.
Just that to a number of initiatives aimed at preserving capital efficiently deploying resources and securing financing.
I Havent goldbloom and I believe in the strength of the gold price moving towards its why I joined Great Panther and why I believe we have a solid future, we're fully leveraged to the gold price, which given inflationary.
Ratios across the globe.
Should result in value creation all stakeholders.
We have a large land package with district scale potential deferral.
A differentiating factor.
It offers us significant upside.
We have the team to execute on our growth objectives.
With the acquisitions as an integral part of our strategy to grow into an intermediate gold producer.
Pops of everyone here at Great Panther, we thank you for your support and look forward to sharing our progress with you in the next quarter.
Thank you for your time today.
Yeah.
This concludes today's conference call.
Disconnect your lines. Thank you for participating and have a pleasant day.
Okay.
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Yes.
Okay.
Yeah.
Hum.
Yeah.
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