Acquisition of Beadell Resources and its Tucano mine created new intermediate metals miner
Production at Tucano gold mine ramping up alongside positive exploration results
Large resource base with 1.4M gold equivalent ounces in measured and indicated category
What Great Panther does:
Great Panther Mining Ltd (TSE:GPR) (NYSEAmerican:GPL) became a new intermediate precious metals producer with its acquisition in March this year of Beadell Resources and its Tucano gold mine in Brazil.
The mine is currently the second-largest gold producer in Brazil, generating around 150,000 ounces per year from several open pits, and is sitting on a multi-million ounce deposit. The deal turned Great Panther into a 200,000 gold-equivalent ounce per year producer.
Elsewhere, the firm has assets in Mexico, where it runs the Guanajuato mine complex - consisting of two mines Guanajuato and San Ignacio - which had production of 2.6 million ounces of silver equivalent (Ag Eq) in 2018, and the Topia mine, which produced 1.5 million ounces of Ag Eq last year, and where the firm is bidding to lift processing capacity by 25% in a program of work started this January.
Significantly last month, in Peru, the firm announced it had decided to restart production at the gold-silver-copper-lead-zinc Coricancha mine, which had been on care and maintenance.
A preliminary economic assessment (PEA) issued last year showed robust numbers and low capital costs at the mine. Using base case gold at US$1,300 per ounce and silver at US$16.50 an ounce, Great Panther said Coricancha was estimated to generate an after-tax net present value of US$16.6 million and an after-tax internal rate of return of 81%.
The mine re-start could add another 3 million silver equivalent ounces of production per year to the group's total.
Formerly, the company was known as Great Panther Silver Ltd, but now it generates mainly gold, at 83% of production - having been less than 50% previously - hence the name change.
How it is doing:
The Tucano mine is key to the firm's bid to become a large Latin American-focused metals producer and its addition to the portfolio has already been felt, not least as the company has been quick at improving the plant's processing capacity.
On August 5, Great Panther reported the third straight month of increased gold production for July at the asset, thanks to the commissioning of what's called the supplemental oxygen system in March.
For July, output at Tucano was 12,497 ounces of the yellow metal, from 266,357 tonnes milled with 93.5% recovery, compared to 11,980 ounces produced in June and 10,899 in May.
Last week, the miner launched a US$15 million bought deal financing to advance production at the Tucano mine. Net proceeds will be used for, firstly, a near mine and regional exploration program, secondly, capital expenditures in connection with Tucano, including optimization initiatives, and thirdly, the improvement of working capital balances.
Great Panther said it would also repay existing company debt amounting to 10% of the net proceeds.
In July, Great Panther reported a 165% increase in revenue for the three months to end June boosted by production from the Tucano mine and posted a 187% increase in mine operating earnings before non-cash items compared to the first quarter of this year. Tucano achieved production guidance for the three months to 30 June at 29,899 ounces.
In addition, Great Panther recently posted encouraging drill finds from Tucano - the first exploration at the property the firm has done since acquiring the asset in March.
High gold grades were recovered over notable widths below the existing AB3 open pit. Assays from ten of the first 12 holes returned intersections such as 15.35 grams per ton (g/t) gold over 13.55 metres, including 30.94 g/t gold over 5.35 metres in one hole.
What the boss says:
Following the positive drill assays from first exploration at Tucano released at the end of July, Great Panther chief executive Jim Bannantine told Proactive: "Right now we're focusing on extending the mine life of the existing project and the results we put out this morning add resources to one of our large pits - the AB3 pit and we think add higher grade than we have in our existing mine plan."
What the broker says:
Roth Capital Partners recently repeated a Buy rating on Great Panther shares, but lowered its price target to C$2 per share from C$2.25 previously.
"Despite the weaker than expected quarter, we believe Great Panther remains on track for a stronger 2H19 as the rainy season comes to an end and optimization efforts take hold at Tucano," its analysts said in a note to clients.
Meanwhile, Noble Capital Markets reduced earnings estimates for Great Panther but repeated an Outperform rating and C$1.50 target price on the stock.
"While the Tucano mine has taken center stage, increased contributions from Guanajuato, contingent on successful exploration efforts, increased plant capacity at Topia in 2020 and bringing Coricancha into production all support the long-term growth outlook," Noble's analysts said.
Great Panther shares in Toronto were trading at C$1.05 each, giving the firm a market cap of around C$292 million.