viewGreat Panther Mining Limited

Great Panther well positioned to deliver goals as first-quarter gold equivalent output doubles


Great Panther operates three mines including the Tucano gold mine in Amapá State, Brazil, and two mainly silver mines in Mexico

Great Panther Mining Limited -

Quick facts: Great Panther Mining Limited

Price: 1.115 CAD

Market: TSX
Market Cap: $393.69 m
  • New experienced CEO and new look board 

  • Tucano mine offers operational and exploration upside

  • Diversified portfolio with robust growth profile

What Great Panther does:

Great Panther Mining Ltd (TSE:GPR) (NYSEAMERICAN:GPL) became a new intermediate precious metals producer with its acquisition in March last year of Beadell Resources and its Tucano gold mine in Brazil.

Formerly, the company was known as Great Panther Silver Ltd but now that it generates mainly gold (83% of production, having been under 50% previously) the name was changed. The group's market cap is over US$144 million.

Tucano 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 the company into a 200,000 gold-equivalent ounce per year producer.

Great Panther operates three mines including the Tucano gold mine in Amapá State, Brazil, and two mainly silver mines in Mexico.

These Mexican assets are the Guanajuato mine complex - consisting of two mines Guanajuato and San Ignacio, and the Topia mine.

The company also owns the Coricancha mine in Peru where last year it executed a successful bulk sample mining program in accordance with a 2018 preliminary economic assessment (PEA). Great Panther is establishing the conditions, under which a restart at the mine could be implemented.

To sum up, Great Panther owns an operating gold mine in Brazil and two operating primary silver mines in Mexico. It also owns two mines on care and maintenance - one in Mexico and one in Peru.

How is it doing:

On April 21 this year, the group named experienced mining executive  Rob Henderson as its new CEO alongside a raft of board changes. David Garofalo became the new chairman, while mining professionals Joseph Gallucci and Alan Hair also joined the board

Jeffrey Mason, the previous chairman and interim CEO, stepped down but will still provide consulting services. Robert Archer, who co-founded the group, will not stand for re-election to the board at this year's AGM but will continue to serve in an advisory capacity, Great Panther said.

Henderson was, most recently, president and CEO of copper miner Amerigo Resources LTD (CVE:ARG), which has assets in Chile. He oversaw a successful $95 million debt financing to complete a major expansion project, safely increased production, lowered cash costs and extended the life of the operation to 2036.

Meanwhile, on April 3, Great Panther said it was temporarily suspending mining and processing at its Mexican operations to mitigate the spread of coronavirus.

It said activity at the Guanajuato Mine Complex (GMC) and the Topia mine would cease until April 30, in line with the directive of the Mexican government announced on March 31.

The group pointed out that monthly output for the firm from Mexico accounts for only around 2% of annual group output on a gold equivalent ounce basis.

Reporting its 2019 financial results earlier this year, Great Panther said the aim for 2020 was to ramp up exploration, expand its resources and improve its finances.

In the 12 months to December 31, Great Panther's revenue came in at C$198.7 million, up from C$139.2 million in 2018, reflecting the acquisition of Tucano. The net loss was C$91.0 million, as mine operating earnings were offset by an impairment of Tucano goodwill of C$38.7 million.

And this month the miner reported its first-quarter production results, which showed a more than doubling of group gold equivalent production in the first quarter compared to the same period last year. Output for the three months was 35,000 gold-equivalent ounces, which was 134% higher than the first quarter of 2019, driven by operational improvements at its Tucano gold mine and a first full quarter of output from the Brazilian mine.

At GMC, 393,000 silver equivalent ounces were generated, an 11% increase on the first quarter of 2019, benefitting from higher throughput, silver grades, and recoveries.

Meanwhile, Topia produced 376,303 silver equivalent ounces in the quarter, a decrease of 11% compared to the same period in 2019. This was attributed to lower tonnage processed, lower gold grades and silver recoveries and the change in metal equivalency ratios, but was partly offset by higher silver grades and gold recoveries.

For the Tucano mine, 2020 planned production is between 120,000 and 130,000 gold ounces - up around between 13% and 23% compared to the 106,000 gold ounces of production in 2019.

What the broker says:

Following the board changes, Noble Capital Markets repeated an 'outperform' recommendation on the shares, saying it believed the new team brought  a "compelling combination of operational, technical and capital markets experience".

"....we think Mr. Henderson is suited to build on the company's strengths leading to a more stable and growing company and thus attracting greater investor interest. Based on the company's depressed valuation, the market appears to have low expectations. If the new appointments advance and accelerate progress in improving operational and financial performance, we believe there is ample opportunity for an improved valuation," said analyst Mark Reichman.

Following the first-quarter production numbers, Noble also said in a note the results had been "modestly better" than it had expected.

"Compared with the prior-year period, gold and silver production increased 249.0% and 10.8%, respectively," said the broker.

"While our 2020 and 2021 EPS estimates remain $0.03 and $0.10, respectively, our quarterly estimates reflect, in part, modestly higher-than-expected gold production in the first quarter and the impact of second-quarter work restrictions in Mexico."

Noble's forecasts for earnings before interest, tax, depreciation, and amortization (EBITDA) for 2020 and 2021 are $61.4 million and $86.8 million respectively.

"Along with the potential for the Guanajuato mine to return to production in 2020, the company is taking the necessary steps to improve the long-term growth profile of the Tucano mine through near mine and regional exploration programs," added the broker.

What the boss says:

"We had a solid start to the year, achieving production growth supporting our 2020 annual guidance, completing a strong advance in stripping at Tucano which will benefit production later in 2020 and in 2021, and commencing our exploration programs," Jeffrey Mason had said in the company's first quarter production statement.

"We remain well-positioned to deliver on our 2020 objectives while keeping our workforce and communities safe by proactively and collaboratively working with local, state and federal authorities in managing the ongoing challenges of (coronavirus) COVID-19," he added.

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