Q4 2021 Great Panther Mining Ltd Earnings Call
We did see while we invest in the work necessary to set kind of on the right path.
Kind of on the right path.
Revenue for the year was $185 $7 million on a consolidated production of 105000 gold equivalent ounces.
81% of the company's revenue came from gold and 50% from silver.
The remaining 4% of revenues came from <unk> zinc at superior.
Sorry, I just slight.
A slight glitch there.
Consolidated cash cost.
$1440 and consolidated ASIC, excluding corporate G&A was $2029 per ounce gold sold.
A result of the investment needed to remediate the ucs pit wall as well as production from the UC Ucs pit being suspended which impeded us from accessing higher grade ore.
We ended the year with $47 $7 million in cash and cash equivalents.
And borrowings of $48 9 million.
Sandra will go into further detail on these financials later in the call.
Over the course of the year, we had a number of positive developments, we strengthened the management team with the appointment of a new CFO and COO.
Joining me on this call today and refresh the board of directors to ensure alignment with evolving corporate governance best practices.
Our safety performance improved compared to previous years, various safety programs beyond zero. The annual Safety Olympics, and then Ken Major award for safety Excellence have positively contributed to our safety culture. These initiatives are designed to empower employees and reward good safe behaviors.
During the year, we maintained robust COVID-19 response plans and protocols, which were minus successfully minimizing impact on operations.
The exploration team carried out most significant exploration campaign of our regional tenement package in Brazil, and over 30 years successfully identifying a 16 kilometer gold trend within a 20 kilometer radius of the mine.
And it wasn't really excited about some of the results from last year's near mine exploration program.
The drill program at the year to come North underground project successfully confirmed the continuity of mineralization at depth.
We currently have five diamond drill rigs completing an additional 11000 meters of drilling.
This additional information will be used for further engineering studies and a production decision by the fourth quarter.
With that I will now pass it over to Fernando Cornejo CLO to discuss results of our operations.
Good morning, everyone and thank you all and focusing first on Tucano gold production for the year was 79348 ounces compared with 125417 ounces in 2020.
The year over year decrease was mainly due to the geotechnical issues affecting pit wall instability in the world <unk> central South pit, which contain more than 60% of the ounces are scheduled for production in 2021.
The sharp drop in plant feed grades in Brazil reflects the processing of lower grade stockpiles to supplement the high grade ore that was initially planned to come from Oracle in central South.
This production issues were amplified by operational challenges related to contractual performance.
Which caused delays in pit development affecting production further.
In Q4, the geotechnical comedy <unk>.
<unk> mine that additional remediation work will be required to ensure stability of the wall and they order from central South pit.
And distributional pushback has been delayed until mid 2022.
The pushback the Sime is currently being fine June by our geotechnical comedy.
And it will be complemented by additional field drilling investigation, which was suggested by our consultants.
K, Canada.
I'm also pleased to report that we have signed a contract with a new Brazilian mining contractor <unk>.
Next.
Who is currently mobilizing to site.
This additional contract work.
Providing us with a brand new locally manufactured mining fleet, which we expect will improve availability utilization and productivity in the mine.
There will be a transition period, while we are fully onboard the next.
And phased out our current contractor.
In this transition period should be completed within this year.
2021 was a significant year for exploration at Tucano over.
Our 700 kilometers of soil sampling was carried out as.
As well as magnetic surveys covering the three regional targets.
But I mean, the Lauder modelo and with whom.
Presenting the first major exploration campaign in the region since the nineties.
Along the mine sequence over 32000 meters of drilling were completed during the year.
At <unk> North.
<unk> 8000 meter drill program was completed.
Revealing high grade intercepts and demonstrating continuing in the underground zone.
I think in 11000 meter drill campaign will be completed by the end of March.
And there is drilling data will be used in technical studies, which will lead to a production decision for the underground project in Q4.
And will be followed by portal construction.
I've been wondering what the mining complex in Mexico.
A total of 1 million 51336.
Silver equivalent ounces.
Were produced in 2021.
Compared with the $1 million 131028 ounces in 2020.
Recoveries were 86, 9% and 86, 6% for silver and gold respectively and.
And average grades fit through the plant were 117 grams per tonne silver and one six grams per tonne gold.
GMC production was affected by the implementation of new Labour loss in Mexico.
<unk> led to labor shortage, and some stoppages of mining activities throughout the year.
Production was also impacted due to mining being a scheduled near historically mined areas, which resulted in lower tonnage and lower grades.
This issuance combined resulted in a 7% decrease in year over year production.
In Q4, the company decided to place the GNC mine under care and maintenance due to lack of tailings storage capacity.
We are in continuous dialogue with semi match in canola to obtain the necessary permits to extend our tailings capacity.
The placement in care and maintenance and the lower production led to an increase of $37 $9 per payable ounce of silver.
Bear with the $21 $9 in 2020.
I'll stop here.
Total production for the year was $1 million 129600, <unk> you live in silver equivalent ounces.
Compared with the 1 million 85985 ounces in 2020.
Recoveries were 92, 8% and 61, 4% for silver and gold respectively.
And the average grades fed to the plant were 378 grams per ton silver and <unk> 83 grams per tonne gold.
<unk> per payable silver ounce for 2021 and Tokyo.
Was $25 $2 per ounce or.
28% increase compared to the $19 $7 in 2020.
Largely attributed to the implementation of the new labor laws in Mexico, as well as higher mining cost.
At Coty Concho in Peru, a new drilling program covering 5219 meters was completed in 2021.
As <unk> indicated the extension of known mineralization in this debate at high rates.
The results of this drilling will be incorporated into an updated mine development plan.
As we evaluate options for this asset.
During the fourth quarter, the company's operational leadership also changed.
We have overhauled the teams in all regions appointing new leaders in Brazil.
Mexico and Peru.
Which brings a fresh operational perspective on performance.
The new operations leadership, we'll be focusing on delivering on guidance and.
And also on cost optimization.
This will be accomplished through a systematic rent negotiation the bulky contract in our operations.
And where possible.
Looking further value by creating synergies between our existing operations in Peru and Mexico.
As well as an overall review of the current head count and fixed costs in all regions.
In 2022 consolidated production for the Tucano into Pia mines is expected to be in the range of 100 to 119000 gold equivalent ounces.
With the second half.
<unk> to account for at least 65% of this guidance.
Our 2022 cash cost will be between 200 to <unk> hundred dollars per ounce and.
NBA <unk> will be between 6100 to <unk> hundred dollars per ounce, which includes investments in exploration underground development.
Capitalized stripping.
Two kind of a production plan for this year does not consider any gold ounces coming from the <unk> central South pit.
And mining activities will be executed by two contractors <unk> and uhm.
And the mine plan for Tucano reflects modest stripping in the first half of the year, which will result in higher <unk> costs.
But those will be offset by increased production rates in the second half of the year.
I will now turn the call over to Sandra They Cook, our CFO to discuss the financial results. Thank you.
Thank you Fernando.
Consolidated revenue for the year 2021 was $195 7 million.
Tagged with $268 million in 2020.
On consolidated sales of 103166 gold equivalent ounces versus 148579 gold equivalent ounces in 2020, a decrease of 31%.
Mine operating earnings before noncash items totaled $29 8 million.
$124 $5 million for the year 2020.
And the average realized price for gold was essentially flat year over year at $1784 per ounce in 2021 versus $1785 per ounce in 2020.
The average realized price of silver increased slightly to $24 55 per ounce in 2021 from $21 28 per ounce in 2020.
Consolidated ASIC per gold ounce sold excluding corporate G&A came in at $2029 in 2020 , one, perhaps compared with $1228 in 2020.
Primarily due to the company's significant investment in the ECS pushback, which did not material gold production in 2021 from that pet.
This is resulting in lower availability of mind or the mill feed was supplemented with lower grade stockpile ore that reduced average grades and recoveries, resulting in an increase in cost to go down somewhat.
Our net loss was $42 2 million compared with net income of $3 million in 2020.
EBITDA was negative at $5 8 million.
Compared with $51 $1 million in 2020.
Cash flow from operating activities before changes in noncash working capital.
Negative $7 $7 million compared with $69 million in 2020.
So in 2021, we refinanced our outstanding debt and increased overall debt financing by $15 5 million.
September we entered a $20 million or prepayment facility with Asahi and a $5 million led lead concentrate prepayment agreement with Samsung each with an 18 months alone 10, offsetting this we repaid $10 4 million.
Prepayment agreement with Samsung and reduced other term loans by $4 million.
Also successfully renewed all of our unsecured credit facilities in Brazil, and raised an additional net $5 $2 million on that facility.
In addition to debt financing.
We established a $25 million at the market or ATM facility in October 2021.
We raised net proceeds of $21 4 million.
Bought deal signing financing in November .
We ended the year with cash and cash equivalents of $47 $7 million.
Net working capital of $2 million and $48 $9 million of current borrowings.
For 2022, my key areas of focus will be cost reduction control and efficiency at the corporate level and at each of our site.
Our 2022 corporate budget was focused on reducing head count through attrition and doing more with less limited expenditures to mission critical activities and as Fernando mentioned that our sites, we made major strides.
Reducing head count limiting capital expenditures and focusing exploration on our highest potential balance.
We believe we can run a leaner operation by staying focused and improving collaboration across our global site.
Continuing to offer and plays an engaging and rewarding work environment entrenching, our focus on safety and achieving our growth strategy and production target.
We expect the sizeable stripping program at Tucano in the first half of 2022 resulted in additional funding needs and we're exploring all options to purchase Scott <unk>.
Investment in stripping in our tap AB and tap fee pit along with the resumption of the ECS pushed back will be critical in setting us on the path to steady state production in the second half of the year and a return to positive cash flow.
Thank you that's all we have for formal remarks, and I will now turn the call back to the operator for the question and answer period.
Thank you we will now begin the question and answer session.
Join the question queue, you May Press Star then one on your telephone keypad.
You will hear a tone acknowledging your request.
If youre using a speakerphone please pick up your handset before pressing any keys.
Draw. Your question. Please press Star then two.
We will pause for a moment as callers join the queue.
The first question comes from Jake Zukowski with Alliance Global partners.
Please go ahead.
Hey, Alan it's Andrew and team Thanks for taking my questions.
So just looking at the Chicago underground scenario.
Can you touch on some of the studies and key permits over the next few quarters.
What the timeline looks like for those I mean, it sounds like you are targeting development for late this year.
I'm just trying to get a handle on the specific milestones between now and then.
Okay.
I'll start.
Sure.
Add some more color.
The key thing that will influence the timeline currently is.
Permitting.
We're <unk>.
Still need to finalize.
That with the government, we think with patents and you should be minimal.
Given that sits within the existing operations, but they may want some more extensive.
Works on so that remains on SaaS.
And then the other work is mainly around.
The engineering studies Geotechnical studies hydrological studies that we need to complete the staff came out with a fully fledged.
Mine plan.
Associated economics.
Fernando.
The color you can provide.
So the comments, we're well placed.
Certainly a permitting is something that we are.
Already discussing with the same.
Environmental agency and the state of omnibus.
And that that's where the.
Therefore, it is going to be to get those licenses on time. Thank you.
Okay that makes sense and I know, it's kind of hard to peg timelines with permitting but are you guys hopeful that we'll see or gain some more visibility on that in the second quarter of this year.
We hope so.
It's not unique to this jurisdiction and coming out of Covid. It's the same challenge in Mexico.
That's quite a backlog and just just getting through the bureaucracy, which was.
Already extensive is.
Potentially even longer than that or so.
Hopefully, we'll be able to continue to provide clarity, but we are in the hands of those agencies.
Got it okay.
And then just switching over to <unk> costs.
In the first half of the year I mean, you mentioned the higher stripping with production more heavily weighted in the second half of the year I guess.
Should we expect first half cost becomes somewhat in line with what we saw in 2021 are you able to provide any insight on that.
Maybe throw that one over to Sandra.
Yes, I mean, we haven't specifically guided on it but I guess, what I can tell you is.
Our mining costs at pretty consistent through the year.
And so.
The difference is really just that.
The mining costs per ton are being spent more in the first half of the year on moving waste stripping and then the mining cost in the second half are being devoted to more in line more so if you get to the same kind of steady state cost model.
You'll you'll arrive at a higher cost per ton in the first half versus the second.
Okay. That's helpful.
And then just lastly.
No that makes sense and that's helpful.
And then lastly, just in Mexico.
I know you guys are still working towards the tailings permits there, but I'm. Just curious are you seeing any interest from third parties.
On the M&A front or on the processing front.
For one of OXXO ore.
We've obviously.
Looking at how to maximize the value of all our assets, so where we're continually having conversations whether it's.
Toll milling arrangements or things like that we're also still trying to pursue guessing the.
The tailings.
Facility permits, which again like Brazil was heavily backlog.
Following COVID-19 .
So we're keeping keeping all options open efficacious once again.
Fair enough. Okay. That's all from me thanks again.
The next question comes from Heiko with H C Wainwright.
Please go ahead.
Hey, Thanks for taking my questions Alan Congratulations on the new appointment and.
It's nice to be on hold for the assault so swing one of dialed and thus what was playing so that was fun.
Purely all the curiosity and I'm not looking for an exact answer but can you just sort of guide as to how many people are currently doing remediation work on the pit wall of Ucs and maybe just also hit that a little bit how much all of the costs and again I'm not looking for a scientific answer just sort of our guidance range.
Well.
We're actually.
The pushback is delayed until after the rainy season so.
You have to work within <unk> currently has more than just just finalizing the.
Geotechnical understanding.
Again, I mean, the Donaldson Im just any more color you can provide.
Yes, that's correct, so we're local and central South.
We'll reassess dart with the pushback activities.
In H two.
Right now the flexibility we have is that we not only have we you in them. We also have this new contractor which has.
New equipment and there's also more cost effective so we have good options.
Gary on that that is stripping.
June end of June this year.
Okay.
I'm sorry.
Again on this so is it fair to say that the actual cash outflows for labor for anything related to Ucs is de minimis.
The outflows for UC as well in H two H.
Each one is mostly related with the stripping on <unk>, which is the main pit for 2022 and 2023 and also the pre stripping of type C, which is a smaller smaller pit that were also scheduling in Q1 to Q3 this year.
Got it.
Okay, and then completely different question inflation I mean, its award thats through old all the newspapers today, you see it everywhere.
Obviously geopolitical events recent ones haven't really helped.
What are you seeing with Inflations and do you guys have any cost escalation clauses with your various business partners that you might see in that you might get hit by.
My opinion is that longer term, obviously goals are going to rise quite substantially and this will more than net out but I. Just I just wanted to see what you guys had in place for that please.
Yes.
Remarks on during the Cold hydro are.
Addressing that we have sulfur increases.
Most of our contracts because of inflation.
In Brazil was around 10% to 11% increase.
And some of the key contracts because of the current situation worldwide and this is why we are seeing.
A bit of value on the start a full renegotiation of the majority of those contracts.
That renegotiation hopefully will take place over the next two quarters.
The same effects, we are seeing also in Mexico.
It's a common problem everywhere in the world, but we were having.
Already a plan to address that.
Right, but there is but there is no maximum.
Like a ceiling price essentially built into these contracts or is there.
No. It's a one time adjustment for Brandon.
You already have those.
But is there is there a maximum to this onetime adjustment like a ceiling.
And some of them there is in some others. It is open to negotiation.
And you wouldn't be able to hit that which ones have a ceiling and what that ceiling might be would you.
I'm afraid not because that obviously will take away some of the leverage and competition that we can exert from those contracts. So my apologies for that.
Okay <unk> I appreciate it. Thank you guys so much.
The next question comes from Joseph Reagor with Roth Capital Partners.
Please go ahead.
Hey, guys. Thanks for taking the questions.
A lot of my questions have already been answered, but a couple a couple of minor things I guess first one of Topeka.
With all in sustaining cost as high as they were in the second half of last year.
There any thoughts at all that.
It might be in your best interest to shut the mine down or are you guys working on some cost saving measures to get those all in sustaining costs back down to a number that's more in line with.
Current silver prices.
Yes, you go ahead Fernando here.
More detail.
Hi, good.
I'm sorry, we have we have reviewed the strategy in <unk>.
There was.
So mistakes made last year on the way and the allocation of the.
Of the equipment and the people we have multiple mines into peer so the plan for this year is targeting newer deposits we have Ross audio.
The 15 to 22 mine and luxury.
Which are higher grade or semi make a nice and this is where we're putting the best month for the next 12 months.
<unk>.
We look at the rates that we had.
We saw in 2021 compared to the grades that we're seeing nowadays, it's quite a bit of a different so it's a different strategy more focused on the quality rather than quantity.
I think that that's creating.
Reasonable results up to this point, which is the first couple of months of the year.
Does that address the question in some regards.
Yes, yes, no that helps.
And then.
Arnaud.
Given that you can really start to push back until after the rainy season, how much leeway do you guys feel you have.
To complete the push back so that you can meet the guide for the second half of the year.
And what would like a couple of week extension of the rainy season duty or due to the plan. There is there enough built in leeway or.
Is it tight schedule.
Just to be clear.
The ECS pushback.
We'll take costs through the balance of the year and we don't expect to see Ucs Saturdays until the following year. So there's no direct impact to what we guided.
On the pushback this year.
Okay.
Maybe a follow on then.
Given that that's the case.
Why is the what can you give us some more color on why the guide is so back back half loaded.
So as a result of some of the issues that Fernando alluded to of around.
Contrasted performance.
Going to adjust our mine plan.
Quickly.
So we can with the failure of the Ucs.
So we.
We didn't have the other area is opened up in trying to get to get the <unk> out. So that's why we're doing a lot of stripping.
In the first half of the year to access those agencies that were realized in the second half of the year.
Okay. Okay. Thanks for clarifying that.
And then one final thing.
As you guys internally model out your cash flow over the course of the year.
How comfortable are you with your available liquidity options.
Yes, hi.
Alright, sorry go ahead of Suntrust.
Yeah. So.
The year with $47 7 million in cash.
Helped by the bought deal financing you did last year.
As I mentioned in the call.
To complete this pushed back and the NCS later in the second half.
Pay for some of the heavier stripping costs, we're seeing in the first half to get to production.
Production.
We have determined that we will likely need to take care of more financing and we're evaluating options.
To do that we have.
Multiple ways of securing the financing that we had a track record of gains have high last year.
Okay fair enough I'll turn it over.
This concludes the question answer session.
I would now like to turn the conference back over to Alan hair for any closing remarks.
Thank you operator.
We are well into 2022, and we're already seeing improvements in our operations. Thanks to the various initiatives we have discussed on our call today.
I believe that we have turned the corner at Tucano and are now focused on executing on the optimized mine plan, which includes investment in advancing the underground project and building on our extensive exploration program of a reasonable land package, we look forward to sharing our progress with you in forthcoming quarters. Thank you for your time today.
Okay concludes todays conference call.
Connect your line.
Thank you for participating and have a pleasant Paul.
[noise] [noise].
[music].