Q2 2022 Great Panther Mining Ltd Earnings Call
Thank you for standing by this is the conference operator, welcome to the Great Panther Mining's second quarter 2022 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 one on your telephone keypad.
Shouldn't you needed the assistance during the conference call you May signal, an operator by pressing Star then zero.
I would now like to turn the conference over to Fiona Grant Liz Shea Vice President Investor Relations. Please go ahead.
Thank you operator, and good morning, everyone. Thank you for participating 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 months ended June 30th 'twenty 'twenty 2022.
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 refresh to all in sustaining cost.
For today's call. Please refer to the second quarter 2022 financial results news release issued yesterday and the accompanying financial statements and MD&A, which are posted on our website and have been filed on SEDAR and Edgar.
Please note that following the announcement of the sale of our Mexican assets and according with I F. R. F. Five all results associated with the Companys Mexican subsidiary MMR and its operation have been classified as assets held for sale. Therefore during the call. We will be discussing results from continuing operations only which relates to the.
Chicago Goldmine.
This conference call is being recorded and will be available for replay later today.
Information and the presentation slides accompanying the conference call and webcast will be available on our website at great Panther Dotcom.
On the call. This morning, we have Alan her chair and interim CEO .
Saturday Cox, Chief Financial Officer, and spending on local nickel Chief operating officer.
Oh, and I think you're muted.
Sorry, I'm all set.
Put yourself on mute.
Thanks. Thank you for your honor and thank you everyone for dialing in today. This quarter was transformative for great Panther mining with the agreement reached to salvage the peace of mind and then the final watch when mining complex in Mexico.
Both silver mines, there where the assets. The company was originally signed he's on I provided numerous years of solid results.
With the sale of these assets so Heather.
Can I focus useful.
<unk> resources, primarily on Tucano.
Is where we see the most long term value creation potential for the company and its stakeholders.
So that's and we're seeing progress at Tucano as shown in this quarter's results.
During the quarter, we saw improving levels of production from channel and moved a significant demand for materials to position the mine for the SEC.
Half of the year.
We're starting to ramp up in the top eight unexpected should be back to a <unk>.
The rates of production by the fourth quarter.
Regarding the underground studies to the Ericsson North underground project continues to advance as just packaging.
And we expect to complete an updated resource estimate for the underground by the fourth quarter and we hope to have most report next quarter.
As with many in the industry, we are seeing inflationary headwinds impact our cost of operations significantly more than anticipated for the year.
And that reason, we've had to adjust our 2022 cost guidance, which Sandra will detail later, Nicole we can see.
It needs to look for ways to best manage our liquidity, taking cost improvement actions and deferring capital expenditures where possible.
Revenue for the quarter was $30 million on production of 16629 gold ounces.
Inflation unnecessary spending on capital programs led to cash costs of 1500 and $75 per gold ounce sold.
Asia, excluding corporate G&A of 3000, and Atg dollar strengths.
Gold and silver.
Sure.
As previously stated we expect to have high cost.
In the first half of 2022, two due to the heavy stripping required to position Chicago for return to steady state production in the second half.
We expect cost to normalize in cash flow to improve as production increases throughout the second half of the year and then into 'twenty two 'twenty three.
We ended the quarter was $21 $1 million in cash and cash equivalents and borrowings of $43 $4 million.
Sandra will go into further detail in Eastern Asia results later Nicole.
I will now pass the call over to Fernando who see your oldest to discuss results from our operations.
Thank you Adam and good morning, everyone reduction from Tucano grew in the second quarter was in line with expectations.
The stripping continue in preparation for accessing main ore lenses, and therefore better grades in the second half of 2022.
When looking at the production was sold this quarter compared to the last quarter. We are starting to see modest improvements in line with our plan to return to a normalized rate of production.
Gold production for this quarter was 16649 ounces compare with.
14037 ounces in the first quarter of this year.
The increase of 18%.
And 20679 ounces.
In Q2, 2021 degrees of 39%.
Total mining tonnage increased by 76% compared to Q1 2022.
And 36% compared to the same quarter last year.
This is a result of having two mining contractors U N M and me next operating in parallel throughout the different pits.
Regardless in the process of moving into better operational conditions with lower stripping ratio for the year.
Mining higher volumes of ore for the next several months.
Mine ore tonnage and gold grades during the second quarter were also higher.
Through the first quarter of 2022.
Adult love 291160 tons of mined ore were processed this quarter.
232213 tonnes in Q1 'twenty to 'twenty two.
It's a 25%.
And 211913 palms in Q2 2021 also at 37% increase.
The plant feed grade for the quarter was <unk> 69 grams per tonne compared to the only 57 grams per tonne in Q1 2022.
An increase of 21%.
Endpoint 81 grams per tonne in Q2, 2021, a decrease of 15%.
If all of the mentioned inflation has had a significant impact on all key consumables and services used in our business, including diesel cyanide and others.
In addition, due to higher than normal rainfall levels in northern Brazil.
Literally in the first quarter of this year.
It was necessary to fast drive the expansion of the Tucano tailings facility.
As well as the installation of a buck.
Raiders to manage water levels in our tailings facilities they.
These two items led to an increase in capital spending and led to a higher than anticipated cost for the quarter.
Cash cost per ounce.
We're $1575.
Baird with $1617 in Q2, 2021.
And anything for gold ounces sold excluding corporate G&A was $3080.
Mostly due to higher stripping levels and the additional capital expenditures explained a few moments ago.
During the quarter there were sourced conversion program for the vertical North underground project was completed.
Nominated with force estimate is currently being developed by our team in Brazil.
In parallel the company has it started trade off studies for ramp development and mining mill in parallel with engineering and metallurgical project work.
While planning activities that are underway.
The permitting process has also started with the state environmental agency semi.
Project development.
Including the athlete of mineral resources and reserves is on track to be completed by the fourth quarter of this year.
Regional target definition.
They should embraer at decision is currently underway in consultation with gold spot discoveries.
This project began in June and results are expected in early August .
Portable drills are being contracted in a 2500 to 3500 meter drill program is expected to begin in August upon completion of the gold spot study.
Of course, he ghansham, we are continuing to evaluate options to optimize the project and we'll report new developments as they arise.
I will now pass the call over to Sandra they'd call to discuss our financial results in more detail. Thank you.
Thank you Fernando.
Revenue for the quarter was $30 million compared with $39 million in the same quarter last year on Goldfields and 16076 ounces compared with 21459 ounces in the same period last year.
The average realized gold price was $1865 per ounce versus $1850 per ounce in Q2, 2021 and our mine operating income was $1 million compared with a loss of $2.6 million.
Our net loss was $12 $1 million compared with a net loss of $8 $7 million in Q2, 'twenty, one and EBITA was negative $5 million compared with negative <unk> $9 million the same quarter last year.
Net cash flows from operating activities before change in noncash working capital was negative $8 $3 million compared with negative is there a point $9 million in Q2, 2021.
We ended the quarter with cash and cash equivalents of $21.1 million compared with $35 $2 million for the same period in 2021 and $33 $4 million at the end of Q1 2022 maybe.
Made significant investments in the business in the second quarter, including $15 million and stripping $7.1 million in capital investment and $1.8 million in exploration further we repaid $5 $5 million in debt on a net basis with borrowings totaling $43 $4 million on June 30 is 2022.
In addition during Q2 the company issued shares for proceeds of $3 million through the ATM facility.
Finally, we received $13 million in cash proceeds from near Star in relation to the settlement of near surface rights and obligations, including yesterday's indemnity agreement in connection with the car attach of mine.
As Alan and Fernando both mentioned previously we have determined that the counter cost guidance for the year must be adjusted cash costs have been revised and 1200 to $1300 an ounce sold to a range of 14 to $1500 per ounce of.
Called out Salt ASIC, excluding corporate G&A has been revised fan.
A range of 1600 to $1700 per gold ounce sold to a range of 2200 $2300 pick all of that so.
The significant difference between Asia and cash cost reflects investments in stripping, which will the gold production in 'twenty or 'twenty three as long as necessary capital expenditures Fernando mentioned earlier on the kind of tailings facilities.
To kind of forecast production remains within the previously guided range of 85000 to 100000 ounces.
The company expects to generate positive cash flows from its mining operations from 'twenty to 'twenty two prior to capital investments debt repayment obligations and exploration and development costs.
However, further financing will be required to improve working capital to fund planned capital investments and exploration programs.
Great minds and made scheduled debt repayment obligations, we are evaluating options to yeah.
She has secured new sources of capital to allow us to achieve our longer term objectives.
That's all we have for formal remarks, I will now turn the call back to the operator for the question and answer period.
Thank you.
Well now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad, you'll hear a tone acknowledging your request.
Youre using a speakerphone, please pick up the handset before pressing any keys.
To withdraw your question. Please press Star then two.
Our first question is from Heiko Ely with H C. Wainwright. Please go ahead.
Hey, there thanks for taking my questions hope everyone's doing well.
Going through your release, there was a sentence in there or that you expect to see and I quote we're towards normalized rate of production in the second half unquote.
Can you maybe just provide a bit of a month to month overview I mean, we're known in August I assumed you Elias obviously done and you put this out after July it was over can you just give us a little bit of color of how July ones given that there was no reg FD issues given that this is a public southern here.
Hi, Heiko.
Thank you.
Fair to say the fact that we've kept our guidance unchanged.
I think you can work out.
We also mentioned that two thirds of our production will come in the <unk>.
The second half of the year so.
We're seeing a progressive ramp up.
Through Q3, and then outs.
Q4 has been.
So steady state.
Hopefully that helps.
That's fair Okay.
Just moving a little bit when you start to talk on this call with talking a little bit above inflation.
Topic, that's on everyone's mind, just open up a newspaper.
But just moving on from all of that are you, having trouble getting any specific components side I mean, it seems like random little spare parts or like you know random odds and ends are hard to show up.
It seems like the important things tend to show up even though the higher cost, but is there anything that you're not getting to a site that you need is there any bottlenecks that are starting to develop or is it just as long as you pay off everything Toms and just maybe building on all of that are you seeing anything get.
Worse and in that regard.
There were certain issues.
I ran some.
Costs associated with the mining contractor.
Mobilizing I think that was also part of the.
Process things that bucket teeth in and things like that.
Thank god and tougher dose.
No.
The Harbin.
Some are.
Delays in midnight truly mobilize it causes some equipment supply delays, but.
Delivery dates are set.
It's not really that much of a slippage maybe.
Maybe about a month I don't know Fernando can add any additional color.
Yeah, I mean, maybe the did.
The delays we have seen with the contract in terms of parts in the stock components are just part of the mobilization process, but in terms of consumables into God No. We haven't experienced any delays at Tucano is a is a consolidated mine operation has many years.
That has been operating at the supply chain is it's quite a willis structure. So.
Yeah, No no no issues from from a production perspective, specifically on delivery of those supplies.
That's encouraging to hear I appreciate everyone's time I'll get back in queue. Thank you.
The next question is from Jake Sokolowski with Alliance Global Partners. Please go ahead.
Hey, guys. Thanks for taking my questions.
So sandra touched on this a bit but I'm just trying to get a handle on where costs might settle and once steady state is reached later this year I mean, do you think longer term ASIC of $1200, an ounce or so sort of like what we saw in 2020 is achievable.
I'm just trying to get.
A sense of what the thinking is there.
Well you can see the the range that we've guided to so that should give you a feel for what our expectations. After the bounds of the year a big component of the cost increase is being fueled increased very significantly in Brazil.
And I mean, I don't know if you saw today, the Victor as oil price.
Broke below $90. So obviously, it's come off quite significantly from.
From its recent high so.
We're hoping that we might in some areas see some see some mitigation of some of these.
Cost increases that we've had to build this year.
Yes.
It's obviously very hard to tell I mean, the world is a very uncertain place right now so.
It's really hard to look that far into the future and.
Just predict project for the balance of this year and our revised guidance.
Fair enough okay.
And then just on AR or come North underground I know originally you know you guys had plans to potentially start development work. There. Later this year is that still the plan or has that been deferred to the first half of 2023.
That's the first thing that we have to really get an understanding on is what the determinate tightened timeline she should be.
We think the packaging should be relatively simple given its within existing operations, but we haven't had that confirmed.
As you know the exact timing may may have been.
Moved out of our hands in any case.
That being said.
<unk>.
Obviously, we're still we're still doing the engineering and the optimization work. So that's that's underway.
And.
Yeah.
Honestly you also had to apply.
Some capital this year to address them.
The tailings.
Hum.
What's the balance sheet.
Likelihood.
Reported by a number of companies we've done.
Unusually high rainfall the early parts of this year and have had to alter our capital.
Plans accordingly.
Especially as we think that's the way the world's going and as these high at this higher rainfall man it should be the new normal so I.
I think we will just have to see how does the parents are progressing and where we stand from our ability to to.
On the project before we.
The the dollars so certainly wouldn't anticipate.
Commencing construction this year, but hopefully it.
It would be something that we'd be able to move forward next year.
Makes sense, that's all for me thanks again.
Thank you.
The next question is from Joseph Reagor with Roth Capital Partners. Please go ahead.
Hey, guys. Thanks for taking the questions most of the stuff I wanted to touch on is already been asked but.
Any update on the fine related to the Fishkill that did you guys announced I guess it was it late 'twenty.
'twenty one early 'twenty two.
No there's been no no update in that.
Okay.
And then.
I saw the settlement around a core concept.
Is this an indication that you guys might be looking to sell that asset as well.
We're certainly assessing.
I've said in assessing all of our options including them.
The potential to restart operations, there, but certainly at Edison is on the table right now in terms of what we do is Cory <unk>.
As we've said previously our capital allocation priorities are onto kind of.
Okay Fair enough and then if you don't sell Corey answer than you just complete the current asset sale based on your guys' revised cost estimates do you feel comfortable you can cover your debt.
With the return to positive cash flow from Tucano.
Yes, I mean I have to say, we should be back to steady state.
Through steady state operation by Q4.
And sort of mine plan shows.
Brown, a healthy 2023, so we should be in good shape on that basis.
We just had to overcome the real pivot in the mine plan with the slope stability issues.
It was from Central says pets, we we're now coming out the other side of that and I think we're very close to them I should say returning to a steady state production.
Okay Alright.
Alright, Thanks, I'll turn it over.
The next question is from at least as much as two key with a combined capital. Please go ahead.
Hum.
Hello can you hear me.
Yes.
Hi, Thanks for taking my question last week in the United States that court trial for those precious metal traders, who are accused of manipulating gold and silver prices to close what message do you think that mining companies might want to tell potential and current investors.
I'm, sorry could you could you repeat that.
Yeah. So last week, there was that correct trials, where there's precious metal traders that were accused of.
Gold and silver prices, what message do you think that mining companies might want to tell potential and current investors.
I have to confess I'm not familiar with what you're referencing.
Really.
Okay, Yeah, that's sort of moving on to my next question. It's the macro question about the junior mining industry. It's an interesting time for investors thinking of entering a returning to mining stocks for some investors see buying opportunity at reasonable stock prices. When you are speaking.
With investors how are you adjusting the risks of inflation recession and these other economic challenges.
Hmm.
I think.
We as a company I know just from some other mining companies in another industries, Inc.
So sadly I wish, but trying to navigate our way through uncertain times.
Yeah.
And by doing that where we say you know being careful with our capital allocation. We are looking to see where we can.
Just costs and improve efficiencies all the typical things that Susan.
Any company tries to do.
Through <unk> through a downturn, especially mining companies that are subject to the Ah <unk>.
Metal price cycles.
Two pack so I don't think we're doing anything.
We wouldn't be doing and in another similar situations.
The company has faced in its history.
This concludes the time allocated for Q&A session today I'd like to turn the conference back over to Alan hair for any closing remarks.
Thank you all for Asia.
This close it was another challenging one but we are starting to see improvements in continues to progress and the plans to turn things around at Tucano.
We expect to see improving results next quarter and beyond and we look forward to sharing our progress with you.
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.
[music].
Yes.
[music].
Uh huh.
Yeah.
[music].