Mr. Robert Archer reports
GREAT PANTHER SILVER REPORTS FISCAL YEAR 2014 FINANCIAL RESULTS
Great Panther Silver Ltd. has released financial results for the company's year ended Dec. 31, 2014. The full version of the company's financial statements, management's discussion and analysis, and annual information form 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.
"Our operations had a very strong finish in 2014, with record silver, gold and silver equivalent production, despite a difficult start to the year," stated Robert Archer, president and chief executive officer. "We brought the San Ignacio mine into production, discovered new high-grade silver-gold mineralization there and increased the overall resource base at the Guanajuato mine complex. I would also like to congratulate our entire team on their ongoing efforts to improve efficiencies and grade control. These efforts translated into a modest reduction in our cash cost year over year, although we still have work to do in this regard."
Margins and cash flows for 2014 were significantly impacted by a 20-per-cent decline in the average silver price compared with 2013, and a 10-per-cent decline in the average gold price. The decline in the average gold price also reduced byproduct credits and therefore lessened the year-over-year reduction in cash cost. Great Panther has operational flexibility to react to lower metal prices as its mines each comprise multiple operating areas, with varying grade and cost profiles. In addition, the company has no debt and a strong working capital, which better position it against a backdrop of metal price volatility. Financial results for 2014 were also significantly impacted by $11.7-million of non-cash impairment charges taken in the fourth quarter. The significant decline in metal prices and a reduction in forecast expectations for metal prices were the principal factors accounting for the charge.
Fiscal year 2014 compared with fiscal year 2013 (unless otherwise noted):
- Throughput totalled 344,257 tonnes (including 9,058 tonnes of milling for a third party), an 18-per-cent increase. The start-up of the San Ignacio mine in June, 2014, was the primary contributor of growth.
- Record metal production totalled 3,187,832 silver equivalent ounces, a 12-per-cent increase, including 376,642 silver equivalent ounces from San Ignacio.
- Silver production increased 11 per cent to a record 1,906,645 silver ounces.
- Gold production increased 5 per cent to a record 16,461 gold ounces.
- Cash cost per silver payable ounce decreased 5 per cent to $12.78 (U.S.).
- All-in sustaining cost per silver payable ounce decreased 16 per cent to $22.07 (U.S.).
- Revenues totalled $54.4-million, an increase of 1 per cent.
- Net loss was $33.0-million, compared with net loss of $12.7-million.
- Adjusted earnings before interest, taxes, depreciation and amortization were negative $300,000 compared with $5.2-million.
- Cash flow from operating activities, before changes in non-cash working capital (NCWC), was $1.2-million compared with $5.5-million.
- Cash and cash equivalents were $18.0-million at Dec. 31, 2014, compared with $21.8-million at Dec. 31, 2013.
- Net working capital decreased to $32.9-million at Dec. 31, 2014, from $38.2-million at Dec. 31, 2013.
Fourth quarter 2014 compared with fourth quarter 2013 (unless otherwise noted):
- Throughput increased 32 per cent to 94,886 tonnes (including 2,312 tonnes of milling for a third party).
- The company achieved record quarterly metal production of 911,048 silver equivalent ounces, a 19-per-cent increase, including 132,594 silver equivalent ounces from San Ignacio.
- Silver production increased 13 per cent to 550,010 silver ounces.
- Gold production increased 24 per cent to a record 4,822 gold ounces.
- Cash cost increased 38 per cent to $12.23 (U.S.).
- Revenues totalled $14.2-million, a decrease of 10 per cent, which is reflective of the significantly lower average metal prices.
- Net loss was $26.9-million, compared with net loss of $7.4-million.
- Adjusted EBITDA was negative $1.2-million compared with $4.1-million.
- Cash flow from operating activities, before changes in NCWC, was negative $1.3-million compared with $4.9-million.
OPERATING AND FINANCIAL RESULTS SUMMARY
(in $000s (Canadian) except ounces, amounts per share and per ounce)
Q4 2014 Q4 2013 FY 2014 FY 2013
Operating
Tonnes milled (excluding custom milling) 92,574 69,601 335,199 283,608
Silver equivalent ounces produced 911,048 763,881 3,187,832 2,840,844
Silver ounce production 550,010 484,937 1,906,645 1,711,215
Gold ounce production 4,822 3,881 16,461 15,714
Silver payable ounces 534,664 508,801 1,729,503 1,625,134
Cost per tonne milled (U.S.$) $ 111.08 $ 119.53 $ 119.52 $ 131.04
Cash cost per silver payable ounce (U.S.$) $ 12.23 $ 8.85 $ 12.78 $ 13.45
AISC per silver payable ounce (U.S.$) $ 21.46 $ 15.77 $ 22.07 $ 26.26
AIC per silver payable ounce (U.S.$) $ 21.48 $ 17.40 $ 22.98 $ 27.44
Financial
Revenue $ 14,244 $ 15,837 $ 54,390 $ 53,954
Gross profit before non-cash items $ 2,159 $ 5,719 $ 10,775 $ 14,131
Gross profit (loss) $ (2,693) $ 1,523 $ (6,161) $ 640
Net (loss) $ (26,948) $ (7,359) $ (33,013) $ (12,729)
Adjusted EBITDA $ (1,211) $ 4,101 $ (277) $ 5,163
Operating cash flows before changes in NCWC $ (1,253) $ 4,934 $ 1,171 $ 5,495
Average realized silver price (U.S.$) $ 15.78 $ 20.15 $ 18.28 $ 22.89
Per-share amounts
(Loss) per share, basic $ (0.19) $ (0.05) $ (0.24) $ (0.09)
(Loss) per share, diluted $ (0.19) $ (0.05) $ (0.24) $ (0.09)
Discussion of full-year 2014 financial results
For the year ended Dec. 31, 2014, the company earned revenues of $54.4-million, compared with $54.0-million for 2013. A 4-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 reduction in smelting and refining charges were all factors that contributed to the increase in revenues. Revenue growth, however, was limited by the impact of decreases in the average realized silver price ($18.28 (U.S.) compared with $22.89 (U.S.)) and the average realized gold price ($1,244.92 (U.S.) compared with $1,359.53 (U.S.)).
Cost of sales before non-cash items increased 10 per cent to $43.6-million for the year ended Dec. 31, 2014, compared with $39.8-million in 2013. The increase in cost of sales is primarily attributable to a 17-per-cent increase in ore tonnes milled in 2014 compared with 2013. The increase in throughput was partly offset by a 9-per-cent decrease in cost per tonne milled.
Gross profit before non-cash items decreased 20 per cent primarily as a result of the 10-per-cent increase in cost of sales before non-cash items, which exceeded the increase in revenue. This is attributed to the impact of lower metal prices and lower grades that would have otherwise contributed to a larger increase in revenue.
Amortization and depletion increased 27 per cent due to a reduction of the measured and indicated resource at Guanajuato based on the updated NI 43-101 resource estimate issued in December, 2013, the continuing additions to mineral properties, plant and equipment, and the increase in sales on a silver equivalent ounce basis. The reduction of the resource in 2013 had the effect of reducing the amortization base for 2014 and therefore increasing the amortization expense per unit produced and sold.
For the year ended Dec. 31, 2014, gross loss was $6.2-million compared with a $600,000 gross profit in 2013. The increase in gross loss was due to the $3.8-million increase in cost of sales before non-cash items and the $3.5-million increase in amortization and depletion expense.
General and administrative expenses decreased $700,000, which reflects the impact of cost reductions initiated in 2013. In addition, G&A expenses for the comparative period of 2013 reflected non-recurring severance costs incurred in the second quarter of 2013.
Exploration and evaluation expenses increased $2.2-million primarily related to San Ignacio development expenditures of $2.4-million incurred after the start of construction and development in the fourth quarter of 2013 and the addition of a $500,000 reclamation and remediation provision for San Ignacio. This was partly offset by a reduction in consulting fees and drilling costs particularly due to the cessation of a surface drill program at El Horcon in 2013. The company made the decision to begin development of San Ignacio based on internal economic assessments, began development late in 2013 and entered into commercial production 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.
A pretax non-cash impairment charge of $11.7-million was recorded in 2014, compared with a pretax non-cash impairment charge of $12.0-million in 2013. The 2014 charge consists of a $3.9-million charge against the carrying value of the GMC mineral property, a $4.8-million charge against the GMC assets and a $3.0-million charge against the carrying value of the Topia mine. The charges are attributed to a decline in silver and gold prices and lower forecast expectations for future metal prices. In addition, a reduction in measured, indicated and inferred resources at Guanajuato during 2014 contributed to the charges specific to Guanajuato.
Finance expense and other expense were $1.4-million for the year ended Dec. 31, 2014, compared with finance and other income of $5.4-million in 2013. Fluctuations in foreign exchange gains and losses explain $6.0-million of the variation year to year, and most of the balance is attributed to $700,000 of expenses and losses associated with the illegal occupation of the Guanajuato mine during the first quarter of 2014. 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 finances its Mexican subsidiaries through Canadian- and U.S.-dollar loans, and fluctuations in the Mexican peso can create significant unrealized foreign exchange gains and losses on the loans. These unrealized gains and losses are recognized in the consolidated net income of the company. During 2014, the Mexican peso weakened 3 per cent compared with the Canadian dollar, resulting in net foreign exchange losses, whereas during 2013, the Mexican peso strengthened 5 per cent compared with the Canadian dollar, resulting in net foreign exchange gains.
Net income tax expense was $2.1-million during the 2014 year compared with a $3.5-million income tax recovery in the comparative period. The net income tax expense realized during 2014 relates to valuation allowances taken against tax losses and other deductible temporary differences as management has reassessed the ability and time frame to realize the benefit of such tax losses and other temporary differences in light of lower forecast expectations for future metal prices.
Net loss for the year ended Dec. 31, 2014, was $33.0-million, compared with a net loss of $12.7-million for the same period in 2013. The increase in net loss is accounted for by the $6.8-million increase in gross loss, $5.6-million increase in income tax expense, the $6.8-million increase in finance expense and other expense (due mainly to foreign exchange fluctuation described herein), and the $2.2-million increase in exploration and evaluation expenses. These factors were partially offset by a $700,000 decrease in general and administrative expenses.
Adjusted earnings before interest, taxes, depreciation and amortization were negative $300,000 for 2014, compared with adjusted EBITDA of $5.2-million for 2013. The decrease in adjusted EBITDA is primarily attributed to a $3.4-million decrease in gross profit excluding non-cash items, a $2.2-million increase in E&E expenses and a $700,000 increase in other expenses associated with the illegal occupation of the Guanajuato mine during the first quarter of 2014. These factors were partly offset by a $700,000 reduction in G&A expenses.
Discussion of fourth quarter 2014 financial results
For the three months ended Dec. 31, 2014, the company earned revenues of $14.2-million, compared with $15.8-million for the same period in 2013, a decrease of 9 per cent. This was partly due to a 5-per-cent decrease in sales volume on a silver equivalent ounce basis as a result of declines and higher inventory levels at the GMC. Further contributing to the decrease was a lower average realized silver price ($15.78 (U.S.) compared with $20.15 (U.S.)) and a lower average realized gold price ($1,188.29 (U.S.) compared with $1,254.80 (U.S.)). The decline in metal prices was partly mitigated by an 8-per-cent appreciation of the U.S. dollar against the Canadian dollar, which had the effect of increasing revenue reported in Canadian dollars.
Cost of sales before non-cash items increased by 19 per cent compared with the fourth quarter of 2013, and was primarily attributable to a 32-per-cent increase in tonnes milled. The increase in throughput was partly offset by a 7-per-cent decrease in cost per tonne milled.
Gross profit before non-cash items decreased to $2.2-million in the fourth quarter of 2014 compared with $5.7-million in the fourth quarter of 2013, as a result of the 9-per-cent decrease in revenues and the 19-per-cent increase in cost of sales before non-cash items.
General and administrative expenses were $2.1-million for the fourth quarter of 2014 compared with $1.5-million for the same period in 2013. The increase primarily reflects expenditures in connection with the structuring of Great Panther's Canadian parent company's investment in its Mexican subsidiaries, and related tax and legal advisory fees.
Exploration and evaluation expenses were $1.6-million for the fourth quarter of 2014 compared with $300,000 for the same period in 2013. The increase is primarily due to $700,000 of San Ignacio development expenditures incurred in the fourth quarter of 2014, while there were no such expenditures in the fourth quarter of 2013, and $500,000 relating to a San Ignacio reclamation and remediation provision.
A pretax non-cash impairment charge of $11.7-million was recorded in the fourth quarter of 2014, compared with a pretax non-cash impairment charge of $12.0-million in the fourth quarter of 2013.
Finance expense and other expense were $4.3-million for the fourth quarter of 2014, compared with income of $4.1-million for the same period in 2013. The change is primarily attributed to a $4.4-million foreign currency loss recognized in the fourth quarter of 2014. This compared with a foreign currency gain of $4.0-million in the fourth quarter of 2013.
The company recorded income tax expense of $4.6-million for the fourth quarter of 2014 compared with a recovery of $900,000 in the fourth quarter of 2013. The net expense realized during the fourth quarter of 2014 relates to valuation allowances taken against tax losses and other deductible temporary differences as management has reassessed the ability and time frame to realize the benefit of such tax losses and other temporary differences in light of lower forecast expectations for future metal prices.
Net loss for the fourth quarter of 2014 was $27.0-million compared with a net loss of $7.0-million in the comparative quarter of 2013. The largest factors contributing to the increase in net loss are the $6.8-million increase in finance expense and other expense and the $5.4-million increase in income tax expense. Other factors are the $4.2-million increase in gross loss, the $2.2-million increase in E&E expenses and the $700,000 increase in G&A expenses.
Adjusted EBITDA was negative $1.2-million for the fourth quarter of 2014, compared with adjusted EBITDA of $4.1-million for the same period in 2013. The decrease in adjusted EBITDA primarily reflects the $3.6-million decline in gross profit before non-cash items, $1.3-million higher E&E expenses and $600,000 higher G&A expenses.
Cash cost and all-in costs
Cash cost was $12.78 (U.S.) for the year ended Dec. 31, 2014, a 5-per-cent decrease compared with $13.45 (U.S.) for the year ended Dec. 31, 2013. The decrease is mainly explained by reductions in costs per tonne milled and in smelting and refining charges. These factors were partially offset by lower byproduct credits due to lower metal prices and lower gold grades. In addition, a decline in silver grades reduced payable silver ounces per tonne of ore. Cash cost and the associated byproduct credits are computed based on sales during the period (rather than production), and, as such, the amount of the byproduct credit may not directly correlate to the production reported for the period.
All-in sustaining cost for the year ended Dec. 31, 2014, decreased to $22.07 (U.S.) from $26.26 (U.S.) in the year ended Dec. 31, 2013. This reduction is primarily due to a 41-per-cent and a 23-per-cent reduction in E&E and mine development expenditures, respectively. The reduction in cash cost and the favourable impact of a 6-per-cent increase in silver payable ounces compared with 2013 considerably further reduced these expenses on a per payable ounce basis.
Cash cost was $12.23 (U.S.) for the fourth quarter of 2014, an increase from $8.85 (U.S.) in the fourth quarter of 2013. While Topia saw a 5-per-cent reduction in cash cost, this was more than offset by an 89-per-cent increase in cash cost at the GMC. The increase in cash cost at the GMC in the fourth quarter of 2014 is mainly due to a decline in silver grades and lower gold byproduct credits due to lower gold prices despite an increase in gold ounces sold. These factors were partly offset by a decrease in cost per tonne milled and a reduction in smelting and refining charges.
AISC increased from $15.77 (U.S.) in the fourth quarter of 2013 to $21.46 (U.S.) in the fourth quarter of 2014, primarily due to the increase in cash costs described herein. This was partially offset by the favourable impact of a 5-per-cent increase in silver payable ounces, which reduced G&A, E&E and sustaining capital expenditures on a per silver payable ounce basis.
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 international financial reporting standards.
Cash and working capital at Dec. 31, 2014
At Dec. 31, 2014, the company had cash and cash equivalents of $18.0-million compared with $21.8-million at Dec. 31, 2013. Cash decreased by $3.8-million from the end of 2013 primarily due to $8.4-million of investing activities (primarily capital expenditures) incurred in 2014, which exceeded cash generated from operating activities of $3.5-million. During 2014, the company also realized $800,000 in proceeds from the exercise of options, and a $400,000 increase in cash related to favourable foreign currency translation primarily on U.S.-dollar cash deposits. At Dec. 31, 2014, the company had working capital of $32.9-million compared with $38.2-million at Dec. 31, 2013. Working capital decreased by $5.3-million as cash and cash equivalents decreased $3.8-million (as described herein), current assets (excluding cash) decreased $2.4-million, and trade and other payables decreased $900,000.
Outlook
Production at San Ignacio is expected to continue to increase in 2015 as the focus shifts to the new high-grade and thicker vein zones to the south of the 2014 workings. This, in addition to a continuing effort to improve grades at the main Guanajuato mines and at Topia, is expected to deliver 3.5 million to 3.6 million silver equivalent ounces in 2015. This represents an approximate 10-per-cent increase over 2014, including a small impact from the change in ratios to determine silver equivalent ounces to account for the movement in metal prices over the past year. Cash costs are anticipated to be in the range of $11.50 (U.S.) to $12.50 (U.S.) per ounce of payable silver, while AISC is projected to be $18.50 (U.S.) to $19.85 (U.S.) per ounce of payable silver. Naturally, the company will strive to achieve costs which are lower than guidance.
PRODUCTION AND CASH COST GUIDANCE
Production and cash cost guidance FY 2015 guidance range FY 2014 actual
Total silver equivalent ounces 3,500,000-3,600,000 3,187,832
Cash cost per silver payable ounce (U.S.$) $11.50-$12.50 $12.78
AISC (U.S.$) $18.50-$19.85 $21.81
Great Panther expects to spend between $10-million to $12-million in 2015 on mine development and diamond drilling at the GMC and Topia mine, and on the acquisition of new mining and plant equipment, to support further operational efficiencies. The company plans approximately 19,000 metres of exploration drilling in 2015 to further define resources, look for vein extensions and test new targets. Planned drilling consists of 14,000 metres at Guanajuato and 5,000 metres at San Ignacio.
Webcast and conference call to discuss fiscal year 2014 financial results
Great Panther will hold a live webcast and conference call to discuss the financial results on March 5, 2015, at 7 a.m. Pacific Standard Time, 10 a.m. Eastern Standard 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.
WEBCAST AND CONFERENCE CALL
Live webcast and registration At the company's website
United States and Canada toll-free 866-832-4290
International toll 919-825-3215
Conference ID 75965326
A replay of the webcast will be available on the investors section of the company's website approximately one hour after the conference call.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(expressed in thousands of Canadian dollars, except per-share data)
For the years ended Dec. 31,
2014 2013
Revenue $ 54,390 $ 53,954
Cost of sales
Production costs 43,615 39,822
Amortization and depletion 16,570 13,047
Share-based payments 366 445
Total 60,551 53,314
Gross profit (loss) (6,161) 640
General and administrative expenses
Administrative expenses 6,450 7,156
Amortization and depletion 311 300
Share-based payments 329 380
Total 7,090 7,836
Exploration and evaluation expenses
Exploration and evaluation, and development expenses 4,429 2,306
Share-based payments 161 86
Total 4,590 2,392
Impairment of mineral properties, plant and equipment 11,743 12,042
Total (29,584) (12,630)
Finance and other income (expense)
Interest income 226 335
Finance costs (58) (53)
Foreign exchange gain (loss) (1,349) 4,648
Other income (expense) (173) 493
Total (1,354) 5,423
(Loss) before income taxes (30,938) (16,207)
Income tax expense (recovery)
Current 191 183
Deferred 1,884 (3,661)
Total 2,075 (3,478)
Net (loss) for the year (33,013) (12,729)
Other comprehensive income (loss), net of tax
Items that are or may be reclassified subsequently to net income (loss)
Foreign currency translation 1,314 296
Change in fair value of available-for-sale financial assets (6) (71)
Total 1,308 225
Total comprehensive (loss) for the year (31,705) (12,504)
(Loss) per share $ (0.24) $ (0.09)
Basic $ (0.24) $ (0.09)
Diluted
We seek Safe Harbor.
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