- New intermediate gold and silver producer
- Diversified portfolio with robust growth profile
- Tucano mine offers operations and exploration upside
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$175 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:
A majority of companies are affected in some way or other by the global coronavirus pandemic and on April 3 this year, Great Panther said it was temporarily suspending mining and processing at its Mexican operations to mitigate its spread.
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 on March 31, Great Panther said the aim for 2020 was to ramp up exploration, expand its resources and improve its finances.
Its purchase of Tucano led to increased production (on a gold equivalent basis) and revenue by 182% and 234%, respectively, when compared to 2018.
For the 12 months to December 31, 2019, 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.
Cash and short term deposits at the end of the year were C$36.9 million compared to C$50.5 million the year before - down 27%. The firm's net working capital was C$12.8 million.
For Tucano this year, 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 2019 financials, Noble Capital repeated an 'outperform' rating on Great Panther, saying that along with the potential for the Guanajuato mine to return to production in 2020, the company was taking the 'necessary steps' to improve the long-term growth profile of Tucano through near mine and regional exploration programs.
"We project 2020 EPS and EBITDA of $0.03 and $62.2 million, respectively. While EPS is unchanged, EBITDA is down modestly from our prior estimate of $63.8 million," the broker's analysts said.
"While Great Panther has had its share of operating challenges, we believe 2020 could be a transition year to improved financial performance," they added.
Noble expects all-in sustaining costs (AISC) at Tucano to be in the range of US$1,150 to US$1,250 per gold ounce for 2020, compared to US$1,406 in 2019.
Capital expenditures of $7 million are associated with a new primary crusher to be installed at the plant mid-year and the expansion of Tucano's tailings storage capacity, it said.
Exploration expenditures are expected to be US$7 million and focused on near-mine drilling activities, said analysts.
What the boss says:
At the time of the full-year results, Jeffrey Mason, Great Panther's interim president and CEO and chairman, told investors: "The company's focus for 2020 is to continue the current program of implementing operational improvements, ramp up exploration programs to replace and expand mineral resources, and improve our financial position, all with the objective of creating shareholder value and regaining the confidence of our various stakeholders."
"Importantly, we are investing a minimum of $11 million to realize the significant exploration potential at our assets, focusing on mine life extension at Tucano and a possible re-start of the Guanajuato mine later this year," he added.