Mr. Robert Archer reports
GREAT PANTHER SILVER REPORTS THIRD QUARTER 2014 FINANCIAL RESULTS
Great Panther Silver Ltd. has released financial results for the company's three and nine months ended Sept. 30, 2014. The full version of the company's unaudited condensed interim consolidated financial statements and management's discussion and analysis can be viewed on the company's website or SEDAR. All financial information is prepared in accordance with international financial reporting standards, and all dollar amounts are expressed in Canadian dollars unless otherwise indicated.
"Great Panther achieved record production in the third quarter of 2014. It was the first full quarter of production at San Ignacio, and there were significant improvements in grades and cash cost compared to the first half of 2014," stated Robert Archer, president and chief executive officer. "Financial results for the third quarter, however, were significantly impacted by a sharp drop in silver and gold prices. Average realized silver prices were down 13 per cent compared to the third quarter of 2013, and this had a substantial negative impact on margins. We are continuing to focus on cost-efficiencies and grade control and have implemented a full review of our operations to seek further cost reductions. Given that both Topia and Guanajuato each comprise multiple operating areas, some with very high grades, Great Panther has significant flexibility in this regard. In addition, with no debt and a strong working capital position, the company is well positioned to weather further metal price volatility."
Highlights (third quarter 2014 compared with third quarter 2013 unless otherwise noted):
- Achieved record metal production of 890,641 silver equivalent ounces, a 13-per-cent increase, including 103,897 silver equivalent ounces from San
Ignacio;
- Throughput total of 90,882 tonnes, a quarterly record and 15-per-cent increase;
the production ramp-up at San Ignacio after initiating commercial
production in June was the primary contributor of growth during the
third quarter;
- Consolidated cash cost per silver payable ounce up 10 per cent to $10.91 (U.S.);
- Cash cost per silver payable ounce of $9.13 (U.S.) for the Guanajuato mine
complex, an increase of 133 per cent, and $15.82 (U.S.) at Topia, a decrease
of 12 per cent; the increase at GMC is mainly attributed to lower gold
production and lower gold prices, which reduced byproduct credits;
- All-in sustaining cost and all-in cost per silver
payable ounce both down 17 per cent to $19.95 (U.S.) and $20.29 (U.S.),
respectively;
- Revenues total of $12.8-million, a decrease of 11 per cent, which is reflective
of the significantly lower average metal prices;
- Net loss of $1.0-million, compared with net loss of $1.5-million;
-
Adjusted earnings before interest, taxes, depreciation and amortization of $1.3-million compared with $3.9-million;
- Cash and cash equivalents of $20.4-million compared with $21.8-million
at Dec. 31, 2013;
- Net working capital down to $35.3-million from $38.2-million at
Dec. 31, 2013.
OPERATING AND FINANCIAL RESULTS SUMMARY
(in Cdn $000s except ounces, amounts per share and per ounce)
Nine months Nine months
ended ended
Sept. Sept.
Q3 2014 Q3 2013 30, 2014 30, 2013
Operating
Tonnes milled
(excluding custom
milling) 89,030 76,898 242,625 214,007
Silver equivalent
ounces produced 890,641 789,250 2,276,784 2,076,963
Silver ounce
production 565,965 459,924 1,356,634 1,226,278
Gold ounce
production 4,200 4,695 11,639 11,833
Silver payable
ounces 461,249 369,672 1,194,839 1,116,333
Cash cost per
silver payable
ounce (U.S.$) $ 10.91 $ 9.89 $ 12.90 $ 15.55
AISC per silver
payable
ounce (U.S.$) $ 19.95 $ 24.01 $ 22.73 $ 31.05
AIC per silver
payable ounce
(U.S.$) $ 20.29 $ 24.48 $ 24.04 $ 32.01
Financial
Revenue $12,801 $14,313 $ 40,146 $38,117
Gross profit (loss)
before non-cash
items $ 2,918 $ 5,533 $ 8,616 $ 8,412
Gross profit (loss) $(1,521) $ 2,645 $ (3,468) $ (885)
Net income (loss) $ (970) $(1,523) $ (6,066) $(5,369)
Adjusted EBITDA $ 1,267 $ 3,865 $ 935 $ 1,063
Average realized
silver price (U.S.$) $ 18.85 $ 21.70 $ 19.56 $ 24.33
Per-share amounts
Earnings (loss) per
share -- basic $ (0.01) $ (0.01) $ (0.04) $ (0.04)
Earnings (loss) per
share -- diluted $ (0.01) $ (0.01) $ (0.04) $ (0.04)
Discussion of third quarter 2014 financial results
For the three months ended Sept. 30, 2014, the company earned revenues of $12.8-million, compared with $14.3-million for the same period in 2013, a decrease of 11 per cent. This decrease is primarily the result of a decrease in average realized silver prices ($18.85 (U.S.) compared with $21.70 (U.S.)) and average realized gold prices ($1,257.37 (U.S.) compared with $1,354.14 (U.S.)). These factors offset a 15-per-cent increase in sales volume on a silver equivalent ounce basis, a 7-per-cent appreciation of the U.S. dollar against the Canadian dollar, which had the effect of increasing revenue reported in Canadian dollars, and a 13-per-cent reduction in smelting and refining charges, which are netted against revenues.
Gross profit before non-cash items decreased to $2.9-million in the third quarter of 2014 compared with $5.5-million in the third quarter of 2013, primarily as a result of the 11-per-cent decrease in revenues and the 13-per-cent increase in cost of sales noted herein.
Amortization and depletion of mineral properties, plant and equipment relating to cost of sales increased from $2.8-million in the third quarter 2013 to $4.3-million in the third quarter 2014. This was due to a reduction of the measured and indicated resource at Guanajuato based on the updated NI 43-101 resource report issued in December, 2013, the continuing additions to mineral properties, plant and equipment, and the 15-per-cent increase in sales on a silver equivalent ounce basis. The reduction of the resource estimate has the effect of reducing the amortization base and therefore increasing the amortization expense per unit produced and sold.
Gross loss was $1.5-million in the third quarter of 2014 compared with a gross profit of $2.6-million in the third quarter of 2013. The change is due to the decrease in revenues of $1.5-million and increase in cost of sales by $2.6-million as a result of the factors discussed herein.
General and administrative expenses were $1.5-million for the third quarter of 2014 compared with $1.8-million for the same period in 2013. The decrease reflects the timing of certain G&A expenditures incurred in Mexico.
Exploration and evaluation were $900,000 for the third quarter of 2014 compared with $500,000 for the same period in 2013. The increase is primarily due to $300,000 of San Ignacio development expenditures incurred in the third quarter of 2014, while there were no such expenditures in the third quarter of 2013. The company made the decision to begin development of San Ignacio based on internal economic assessments, and began development late in 2013, with commercial production commencing in June, 2014. Continuing development expenditures for San Ignacio continued to be expensed as the project does not meet the criteria for capitalization under international financial reporting standards.
Finance and other income was $2.6-million for the third quarter of 2014, compared with expenses of $3.1-million for the same period in 2013. The change is primarily attributed to $500,000 in insurance proceeds and a foreign currency gain of $2.1-million recognized in the third quarter of 2014 due mainly to the strengthening of the U.S. dollar compared with the Canadian dollar. This compared with a foreign currency loss of $3.5-million in the third quarter of 2013. Foreign exchange gains and losses arise from the translation of foreign-denominated transactions and balances relative to the functional currency of the company's subsidiaries and the company's reporting currency. The company has significant Canadian- and U.S.-dollar loans receivable from one of its Mexican subsidiaries, and fluctuations in the Mexican peso create significant unrealized foreign exchange gains and losses on the loans owing to the Canadian parent. These unrealized gains and losses are recognized in the consolidated net income of the company.
The company recorded an income tax recovery of $300,000 for the third quarter of 2014 compared with a recovery of $1.3-million in the third quarter of 2013, a decrease of 74 per cent. The income tax recovery comprised $100,000 in current income tax expense and a $200,000 deferred tax recovery. The net recovery realized during the third quarter of 2014 relates to pretax losses by the company's operations in Mexico recognized in the period. The Mexican subsidiary is able to deduct mine development costs immediately; however, the deduction of these items for tax purposes creates a deferred tax liability as the costs are capitalized for accounting purposes. The company has net operating tax losses in Canada and has not recognized the benefit of any of these losses in the financial statements of the company.
The net loss for the third quarter of 2014 was $1.0-million compared with a net loss of $1.5-million in the comparative quarter of 2013. The increase in net loss is attributable to the $4.2-million decrease in gross profit, the $300,000 reduction in general and administrative expenses, and the $5.7-million increase in finance and other income. These were partially offset by the $400,000 increase in E&E expenses and a $900,000 decrease in income tax recovery.
Adjusted EBITDA was $1.3-million for the third quarter of 2014, compared with adjusted EBITDA of $3.9-million for the same period in 2013. The decrease in adjusted EBITDA primarily reflects the $2.6-million decline in gross profit before non-cash items, with higher E&E expenses offset by lower G&A expenses.
Cash cost and all-in costs
Cash cost per silver payable ounce of $10.91 (U.S.) for the third quarter of 2014 increased from $9.89 (U.S.) in the third quarter of 2013. While Topia saw a 12-per-cent reduction in cash cost, this was more than offset by a 133-per-cent increase in cash cost at the GMC primarily due to lower byproduct credits as a result of a decrease in gold production and gold prices.
All-in sustaining cost per silver payable ounce for the third quarter of 2014 decreased to $19.95 (U.S.) from $24.01 (U.S.) in the third quarter of 2013. This reduction is primarily due to the favourable impact of a 25-per-cent increase in silver payable ounces compared with the third quarter of 2013, which reduced sustaining capital expenditures and general and administrative expenditures on a per payable silver ounce basis.
All-in cost per silver payable ounce for the third quarter of 2014 decreased to $20.29 (U.S.) from $24.48 (U.S.) in the third quarter of 2013, as a result of the same factors which reduced AISC.
Please refer to the company's management's discussion and analysis for further discussion of cash cost, AISC and AIC and for a reconciliation to the company's financial results as reported under IFRS.
Cash and working capital at Sept. 30, 2014
At Sept. 30, 2014, the company had cash and cash equivalents of $20.4-million compared with $21.8-million at Dec. 31, 2013. Cash decreased by $1.4-million primarily due to $6.4-million of capital expenditures incurred in the nine months ended Sept. 30, 2014, which exceeded $3.8-million of cash generated from operating activities, $700,000 in proceeds from the exercise of options, and $500,000 related to favourable foreign currency translation on U.S.-dollar and Mexican-peso cash deposits.
At Sept. 30, 2014, the company had working capital of $35.3-million compared with $38.2-million at Dec. 31, 2013. Working capital decreased by $2.9-million as cash and cash equivalents decreased $1.4-million (as described herein), current assets excluding cash decreased $2.4-million, and trade and other payables decreased $900,000.
Outlook
The company expects to meet its guidance of 3.0 million to 3.1 million silver equivalent ounces for the 2014 fiscal year, based on the production outlook for the final quarter of 2014. The company's production for the nine months ended Sept. 30, 2014, was 2,276,784 silver equivalent ounces, representing an increase of 10 per cent over the same period in the prior year.
Cash cost for the nine months ended Sept. 30, 2014, was $12.90 (U.S.) per silver payable ounce. The company expects its cash cost for the 2014 fiscal year to be within the guidance range of $12 (U.S.) $13 (U.S.). Cash cost for the third quarter of 2014 was $10.91 (U.S.), which was a substantial decrease from the first half of 2014. This was primarily the result of grade improvement at Guanajuato, which is expected to be maintained in the fourth quarter.
The company is also maintaining its guidance for AISC and AIC as shown in the attached production and cash cost table. AISC was $19.95 (U.S.) per silver payable ounce in the third quarter of 2014, which represents a significant reduction in AISC from the first half of the year. The company expects AISC in the fourth quarter to again be meaningfully lower than in the first half of 2014.
PRODUCTION AND CASH COST GUIDANCE 2014
YTD
Sept.
30, 2014 Actual 2013 Guidance range 2014
Total silver equivalent ounces 2,276,784 2,840,844 3,000,000-3,100,000
Cash cost per silver payable
ounce (U.S.$) $ 12.90 $ 13.45 $ 12.00-$ 13.00
AIC (U.S.$) $ 24.04 $ 27.44 $ 22.00-$ 24.00
AISC (U.S.$) $ 22.73 $ 26.26 $ 21.00-$ 23.00
Capital expenditures were $6.4-million for the nine months ended Sept. 30, 2014, and the company is maintaining its expectation to be at the lower end of its guidance of $10-million to $13-million in capital expenditures for the year. Capital expenditures during the final quarter of 2014 will focus on continued mine development and diamond drilling at both Guanajuato and Topia, rehabilitation of the Cata shaft at Guanajuato, and the acquisition of new mining and plant equipment.
Webcast and conference call to discuss third quarter 2014 financial results
The company will hold a live webcast and conference call to discuss the financial results on Nov. 6, 2014, at 7 a.m. Pacific Daylight Time or 10 a.m. Eastern Daylight Time. Hosting the call will be Mr. Archer, president and chief executive officer, and Jim Zadra, chief financial officer and corporate secretary.
Shareholders, analysts, investors and media are invited to join the live webcast and conference call by logging in or dialling in just prior to the start time.
CONFERENCE CALL AND WEBCAST DETAILS
Live webcast and registration Great Panther website
U.S. and Canada toll-free 1-800-735-5968
International toll 1-212-231-2905
Note:
No passcode is necessary.
A replay of the webcast will be available on the investors section of the company's website approximately one hour after the conference call.
We seek Safe Harbor.
© 2024 Canjex Publishing Ltd. All rights reserved.