Growth at its Tucano mine in Brazil a key focus for Great Panther Mining this year

• Acquisition of Beadell Resources and its Tucano mine created new intermediate metals miner
• Strong balance sheet to fund growth projects and exploration
• Near-term production growth from Coricancha
• Large resource base with 1.4 million gold equivalent ounces in measured and indicated category

  What Great Panther does:

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

The mine is currently the second-largest gold producer in Brazil, producing 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, the 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.

In July this year, the firm decided it would put its Coricancha polymetallic mine in Brazil into production after much evaluation, thereby pressing go on a former producing mine expected to reach full scale production in less than a year. The mine is expected to produce around 40,000 gold equivalent ounces annually.

Using base case metal prices, including gold at US$1,300 per ounce and silver at US$16.50 an ounce, a preliminary economic assessment (PEA)  estimated the project to generate an after-tax net present value of US$16.6 million and an after-tax internal rate of return of 81%..

Formerly, the company was known as Great Panther Silver Ltd, but now generates mainly gold (83%) rather than 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 producer and its addition to the group’s assets was keenly felt in recently announced second quarter results – covering a full three months of its contribution.

The miner reported a 165% increase in revenue in the second quarter due to production from Tucano. The mine achieved the group’s production guidance for the three months to 30 June at 29,899 ounces from over 5 million tonnes of mined material.

Great Panther also said Tucano had started to show a further improvement in grade and recovery after the commissioning of the supplemental oxygen system at the end of April, which is expected to lead to an improvement in earnings for the rest of the year. For the July month, Tucano is on track to meet the firm’s third quarter guidance.

Looking ahead, the company said it aimed to continue optimizing Tucano operations, which includes implementing cost saving and efficiency measures to improve profitability and reduce cash cost and AISC (all-in sustaning cost).

Tucano is expected to generate 35,600 to 38,600 gold ounces in the third quarter, and between 55,000 and 59,600 in the fourth quarter of this year.

Group revenue for the three months to 30 June was US$45.3 million, up 165% compared to the US$17 million reported in the second quarter of 2018, while its net loss increased to US$5.6 million in the period, from a loss of US$2.7 million a year earlier.

The increased deficit represented exploration, evaluation and development expenditure of US$4.5 million, and general and administrative (G&A) expenditures of US$3.2 million, the miner noted.

At the Mexico assets, the firm said it was pursuing a multi-mine optimization strategy under which production is being sourced entirely currently from the San Ignacio mine, while the exploration program at Guanajuato will continue in the third quarter. The aim is to bring the Guanajuato mine back into production in 2020.

The firm repeated its production guidance for full year 2019 across the group at 171,500 to 185,000 gold equivalent ounces.

What the boss says:

In May, Great Panther CEO, Jim Bannantine told Proactive: “Great Panther Mining now is an intermediate producer so we’ve scaled up by a factor of roughly four to produce 200,000 ounces this year.”

What the broker says:

Earlier this month, analysts at Noble Capital Markets were upbeat on Grreat Panther following 2Q production numbers, rating the stock an Outperform, with a C$1.50 price target. Shares are currently trading at around C$1.12.

In total, second quarter production rose by 195% to 39,922 gold equivalent ounces versus the prior year period and was up 197% compared to the first quarter of 2019, helped significantly with the Tucano acquisition.

Based on the higher production and commodity price expectations, Noble increased its full year 2019 earnings per share (EPS) and underlying earnings (EBITDA) estimates for the metals miner to $0.01 and $39.3 millio, up from $0.00 and $37.6 million, respectively.

Its full year 2020 EPS and EBITDA estimates were also increased to $0.14 and $90.8 million, up from $0.06 and $66.1 million, respectively.

Story by ProactiveInvestors