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Great Panther is taking its Tucano gold mine to the next level in Brazil

Snapshot

Great Panther operates the Tucano gold mine in Amapá State, Brazil, two primarily silver mines in Mexico and the Coricancha mine in Peru

Great Panther Mining Limited -

Quick facts: Great Panther Mining Limited

Price: 1.05 CAD

TSX:GPR
Market: TSX
Market Cap: $372.46 m
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  • Production up and running again after coronavirus delay
  • Tucano mine in Brazil offers operational and exploration upside
  • Diversified gold and silver portfolio

What Great Panther does:

Great Panther Mining Ltd (TSE:GPR) (NYSEAMERICAN:GPL) made a statement by jumping into intermediate precious metals production with its acquisition of Beadell Resources and its Tucano gold mine in Brazil last year. The company, originally known as Great Panther Silver, now generates gold from 83% of its production.

Tucano is 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.

How is it doing:

Great Panther posted record third-quarter results in early November after resuming mining activities in June. The company had shut down activity in March due to the coronavirus (COVID-19) pandemic.

The company's net income for the quarter hit a record US$18.6 million, or $0.05 per share, as revenue rose 8% year over year to US$77.0 million. The company also generated record adjusted EBITDA of US$34.9 million and record cash flow from operating activities of US$19.7 million, or $0.06 per share.

Great Panther produced 39,788 gold equivalent ounces during the quarter at all-in-sustaining costs (AISC), excluding corporate G&A, of US$1,023 per gold ounce sold. It ended the quarter with cash and equivalents of US$66.6 million as of September 30.

The company said it is on track to meet 2020 guidance of 146,000 to 158,000 gold equivalent ounces at AISC of US$1,150 to US$1,250 per ounce of gold sold. 

At the Tucano operation, gold output was 12% lower in the third quarter at 31,803 ounces (2019: 36,317 ounces) but over the nine-month period, was up 9% on the figure in 2019, at 93,401 ounces (2019: 89,686 ounces).

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

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.

Inflection points:

  • Exploration at the Tucano mine
  • Average grade vs cost of continued operations
  • Possible coronavirus developments in Brazil, Mexico and Peru

What the broker says:

On November 6, Roth Capital Markets reiterated its Buy rating and a US$1.25 price target on Great Panther, a day after the company released its financial results. 

The numbers came in ahead of Roth’s expectations.

“Revenue of $77 million was above our estimate of $69.3 million mainly due to higher price realizations. Higher revenue also drove slightly higher EPS of $0.05 compared to our $0.04 estimate,” Roth's analysts wrote in a note to clients. “Thus, we view Q3 results as a beat.”

Looking ahead, the Roth analysts said they will be watching for news about the company’s Tucano project in Brazil: “With Q3 results behind them, GPL's management is focused on providing an update on Tucano and particularly the UCS pit. We anticipate the release of the Tucano update by year-end, which should provide a positive catalyst for the company, in our view.”

“Despite the better than anticipated Q3 financial results, we are maintaining our US$1.25 price target,” Roth wrote. “The positive impact of higher Q3 cash flow was offset by an increase in our long-term cost estimates at Tucano. We believe total mining costs are likely to increase once stockpiles are exhausted. However, this is likely to be offset by an increase in average grade. Thus, we are maintaining our Buy rating,” they added.

What the boss says:

Great Panther took a hit from COVID-19, but CEO Rob Henderson says the company has surged back to a strong position.

"We delivered a solid quarter of steady-state operations at all of our mines in Q3 2020, despite the challenges of managing COVID-19,” Henderson said in the results statement. “Strong gold and silver prices and continued improvement of our AISC translated to record financial results and continued to strengthen the balance sheet.”

"We are well-positioned to meet our full-year production and cost guidance while maintaining the highest health and safety protocols for our teams in Brazil, Mexico and Peru,” he added

Contact Andrew Kessel at [email protected]

Follow him on Twitter @andrew_kessel

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