Mr. Robert Archer reports
GREAT PANTHER SILVER REPORTS THIRD QUARTER 2015 FINANCIAL RESULTS
Great Panther Silver Ltd. has released financial results for the company's three and nine months ended Sept. 30, 2015. 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's third quarter 2015 financial results benefited from continued reductions in cash cost, all-in sustaining cost and from production growth, which helped mitigate further weakness in silver and gold prices," stated Robert Archer, president and chief executive officer. "All-in sustaining cost for the third quarter was once again below current silver prices. Most significantly, although operating cash flow for the third quarter was dampened by weak metal prices, operating cash flow for the first nine months of the year exceeded both sustaining capital expenditures and exploration expenditures, even as we ramped up exploration and assessment activities on the Guadalupe de los Reyes project and the Coricancha mine. Finally, our outlook for the year remains strong, with 20 per cent plus growth in production and significant year-over-year reductions in cash cost and AISC, and we continue to maintain a strong balance sheet with $35-million of net working capital and no debt."
Despite reductions in cash cost, which enabled the company to maintain good operating cash flow in the third quarter, the company incurred a net loss of $3.3-million as further weakness in metal prices dampened cash margins, and accelerated amortization increased non-cash charges. In addition, Great Panther commenced exploration and assessment activities at its Guadalupe de los Reyes project and the Coricancha mine, which materially increased exploration and evaluation expenditures. The company's adjusted earnings before interest, taxes, depreciation and amortization for the quarter, which adjust for non-cash charges, totalled $2.2-million and exceeded capex (cash flows from investing activities) of $2.0-million.
Highlights of the third quarter 2015 compared with third quarter 2014, unless otherwise noted:
- Metal production increased by 21 per cent to 1,080,296 silver equivalent ounces.
- Silver production increased 4 per cent to 586,918 silver ounces.
- Record gold production was 6,079 gold ounces, an increase of 45 per cent.
- Cash cost per payable silver ounce decreased 41 per cent to $6.50 (U.S.).
- All-in sustaining cost (AISC) decreased 32 per cent to $13.08 (U.S.) per payable silver ounce.
- Revenues increased 31 per cent to $16.8-million.
- Adjusted earnings before interest, taxes, depreciation and amortization increased to $2.2-million compared with $1.3-million.
- Net loss totalled $3.3-million, compared with a net loss of $1.0-million.
- Cash flow from operating activities, before changes in non-cash net working capital, amounted to $1.6-million, compared with $2.1-million.
- Cash and cash equivalents were $18.7-million at Sept. 30, 2015, compared with $18.0-million at Dec. 31, 2014.
- Net working capital increased to $34.7-million at Sept. 30, 2015, from $32.9-million at Dec. 31, 2014.
Discussion of third quarter 2015 financial results
For the third quarter of 2015, the company earned revenue of $16.8-million, compared with $12.8-million for the third quarter of 2014. The $4.0-million increase in revenue is primarily attributable to production growth, which translated into a 31-per-cent increase in metal sales volume. In addition, the 17-per-cent appreciation of the U.S. dollar against the Canadian dollar had the effect of increasing revenue reported in Canadian dollars. These factors more than offset the impact of 16-per-cent and 9-per-cent decreases in average realized silver and gold prices in U.S. dollars, respectively.
Gross profit before non-cash items increased by $2.8-million in the third quarter of 2015 compared with the third quarter of 2014, as a result of the $4.0-million increase in revenues, which exceeded a $1.1-million increase in cost of sales before non-cash items as the company was able to achieve production increases at a significantly lower unit cash cost.
Amortization and depletion of mineral properties, plant and equipment relating to cost of sales increased to $5.4-million in the third quarter of 2015 from $4.3-million in the third quarter of 2014. This was due to a reduction in the measured and indicated resource at the Guanajuato mine based on the updated mineral resource estimate issued in February, 2015. 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. In addition, there was the offsetting impact of an increase in the estimate of the mine life of the Topia mine during the third quarter of 2015, from 6.5 years to 11 years, which reduced amortization and depletion recorded during the quarter by approximately $100,000 compared with the amount that would otherwise have been recorded.
General and administrative (G&A) expenses were $1.7-million for the third quarter of 2015 compared with $1.5-million for the same period in 2014. The prior-year G&A expenses were lower, reflecting the timing of certain G&A expenditures in Mexico.
Exploration and evaluation (E&E) expenses were $2.1-million for the third quarter of 2015 compared with $900,000 for the same period in 2014. The increase is primarily the result of a $700,000 increase in mine development costs for the San Ignacio mine and the Guanajuato mine that do not meet the criteria for capitalization under international financial reporting standards. The company also commenced exploration programs associated with the GDLR project and Coricancha mine and spent $400,000 and $200,000, respectively, on these projects during the third quarter of 2015.
Finance and other income amounted to $500,000 for the third quarter of 2015, compared with finance and other income of $2.6-million for the same period in 2014. The change is primarily associated with a $1.5-million decrease in foreign currency gains recognized in the third quarter of 2015, compared with the same period in 2014. In addition, finance and other income for the third quarter of 2014 reflected proceeds from an insurance claim in the amount of $500,000. 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 to the company's reporting currency. The company's Mexican subsidiaries use the Mexican peso as their functional currency. The company has a significant U.S.-dollar intercompany loan owing by one of its Mexican subsidiaries, and fluctuations in the Mexican peso create significant unrealized foreign exchange gains and losses in the accounts of the Mexican subsidiary. These unrealized gains and losses are recognized in the consolidated net income of the company.
The company recorded a net income tax expense of $300,000 during the third quarter of 2015, predominantly as a result of an increase in the company's estimate of future special mining duties, which are expected to become payable by its Mexican operations. The net income tax recovery in the third quarter of 2014 amounted to $300,000 and is related to pretax losses by the company's operations in Mexico recognized in the comparative period.
Net loss for the third quarter of 2015 was $3.3-million, compared with a net loss of $1.0-million for the same period in 2014. The increase in net loss is primarily attributable to a $1.5-million decrease in foreign exchange gains recognized, as well as a $1.3-million increase in exploration expenditures attributed to the start of exploration activities at the company's new projects and the expensing of development expenditures associated with some of the company's operations. The increase in net loss is also reflective of a $600,000 increase in income tax expense and a $500,000 reduction in other income, as well as a $200,000 increase in G&A expenses. These factors were partly offset by the $1.8-million increase in gross profit.
Adjusted earnings before interest, taxes, depreciation and amortization were $2.2-million for the third quarter of 2015, compared with adjusted EBITDA of $1.3-million for the same period in 2014. The increase in adjusted EBITDA reflects the $2.8-million increase in gross profit before non-cash items. This was partly offset by the $1.3-million higher E&E expenses reported in the third quarter of 2015 and a $200,000 decrease in G&A expenses, as well as a $500,000 reduction in other income.
Cash cost and all-in sustaining cost
Cash cost was $6.50 (U.S.) per payable silver ounce for the third quarter of 2015, a 41-per-cent decrease compared with $11.02 (U.S.) for the third quarter of 2014. The decrease in cash cost was due to the increase in ore grades at all operations, which contributed to an 18-per-cent increase in payable silver ounces and higher byproduct credits. In addition, the strengthening of the U.S. dollar compared with the Mexican peso reduced cash operating costs in U.S.-dollar terms.
AISC for the third quarter of 2015 decreased to $13.08 (U.S.) per payable silver ounce from $19.25 (U.S.) in the third quarter of 2014. This 32-per-cent decrease is primarily due to the reduction in cash cost. In addition, there was a reduction in G&A, sustaining E&E and sustaining capital expenditures (all in U.S.-dollar terms) on a per payable ounce basis as a result of the increase in payable silver ounces noted above and the strengthening of the U.S. dollar against the Canadian dollar and the Mexican peso.
Please refer to the company's management's discussion and analysis for further discussion of cash cost and AISC, and for a reconciliation to the company's financial results as reported under IFRS.
Cash and working capital at Sept. 30, 2015
At Sept. 30, 2015, the company had cash and cash equivalents of $18.7-million compared with $18.0-million at Dec. 31, 2014. Cash increased by $700,000 in the first nine months of 2015 primarily due to cash flows from operating activities before changes in non-cash working capital of $10.0-million, and a $1.5-million increase in cash and cash equivalents as the result of favourable foreign exchange fluctuations. These factors exceeded the $8.7-million invested in mineral properties, plant and equipment, exploration and evaluation assets (the GDLR project and Coricancha mine), and the increase in non-cash working capital (primarily accounts receivable) of $2.1-million.
At Sept. 30, 2015, the company had net working capital of $34.7-million compared with $32.9-million at Dec. 31, 2014. Net working capital increased by $1.8-million due to the $700,000 increase in cash and a $2.7-million increase in trade and other receivables, net of the $1.4-million decrease in inventories during the first nine months of 2015.
Outlook
On Oct. 14, 2015, the company released its third quarter 2015 production results and announced that it expects to exceed its 2015 production guidance of 3.8 million to 3.9 million silver equivalent ounces, increased in the second quarter of 2015 from a range of 3.5 million to 3.6 million silver equivalent ounces. The company expects to exceed its guidance range of 3.8 million to 3.9 million silver equivalent ounces as production for the first nine months of the year totalled almost 3.2 million silver equivalent ounces. This will translate into at least 20-per-cent year-over-year growth in metal production.
Most importantly, the company expects to achieve lower than guidance cash cost and AISC for 2015, and AISC for the year is expected to be below the current silver price. However, fourth quarter 2015 AISC will be somewhat higher than levels in the third quarter due to greater capital expenditures and development planned for the fourth quarter.
GUIDANCE FOR 2015
Production and cash cost guidance FY 2014 actual Nine months ended Sept. 30, 2015 2015 guidance range
Total silver equivalent ounces 3,187,832 3,156,537 3,800,000-3,900,000
Cash cost per payable silver ounce (U.S.$) $12.78 $7.32 $9.00-$10.00
AISC (U.S.$) $22.07 $13.38 $15.00-$17.00
Production from San Ignacio will continue to account for the predominant portion of the production from the GMC in the fourth quarter and for the foreseeable future. At the end of the third quarter, production from San Ignacio had reached more than 500 tonnes per day, greater than the 450 tonnes per day originally targeted for year-end. Continued development of the Southern Extension zones should see further production growth from San Ignacio through the fourth quarter with a new year-end target of approximately 650 tonnes per day.
Mine site exploration is continuing with a 2,200-metre surface drill program at San Ignacio. The objectives of the program are to extend the southerly strike extension of the ore zones with step-out holes and to upgrade the existing resource with infill drilling. Further underground drilling will also be conducted on several targets in the Guanajuato mine.
Total planned drilling metres for 2015 remain unchanged at 29,700 metres. The 29,700 metres comprise drilling metres for the GMC, the GDLR project and the Coricancha mine. The company is maintaining its guidance for $10-million to $12-million in sustaining expenditures for 2015 comprising mine development and diamond drilling, and for the acquisition of new mining and plant equipment. Drilling related to the new projects is not included in this figure as they are considered non-sustaining expenditures.
Going into 2016, the company expects production growth rates to generally level off as the production ramp-up at San Ignacio over the last year will have been completed. In addition, the company will focus more on maintaining and improving on the cost reductions and efficiency gains over the past year, and on more exploration and development at all mines. With this focus, the San Ignacio mine will account for a greater proportion of production in 2016.
Webcast and conference call to discuss third quarter 2015 financial results
A conference call and webcast will be held Nov. 5, 2015, at 11 a.m. Eastern Time (8 a.m. Pacific Time) to discuss the results. The call will be hosted by Mr. Archer, president and chief executive officer. Jim Zadra, chief financial officer and corporate secretary, will not be available to attend this call due to a prior commitment.
Shareholders, analysts, investors and media are invited to join the live webcast and conference call by logging in or calling in five minutes prior to the start time.
CONFERENCE CALL AND WEBCAST
Live webcast and registration At the Great Panther website
United States and Canada toll-free 1-855-477-2487
International toll 1-919-825-3215
Conference ID 50865304
A replay of the webcast will be available on the Investors section of the company's website approximately one hour after the conference call.
All shareholders have the option to receive a hard copy of the company's financial statements free of charge upon request. Should you wish to receive Great Panther Silver's financial statements in hard copy, please contact the company toll-free at 1-888-355-1766 or 1-604-608-1766, or e-mail info@greatpanther.com.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(expressed in thousands of Canadian dollars, except per-share data)
For the three months For the nine months
ended Sept. 30, ended Sept. 30,
2015 2014 2015 2014
Revenue $ 16,788 $ 12,801 $ 56,222 $ 40,146
Cost of sales
Production costs 11,025 9,883 37,093 31,530
Amortization and depletion 5,397 4,296 16,408 11,841
Share-based compensation 85 143 248 243
Total 16,507 14,322 53,749 43,614
Gross profit (loss) 281 (1,521) 2,473 (3,468)
General and administrative expenses
Administrative expenses 1,524 1,289 5,185 4,582
Amortization and depletion 69 76 194 236
Share-based compensation 120 111 334 209
Total 1,713 1,476 5,713 5,027
Exploration and evaluation and
development expenses
Exploration and evaluation expenses 1,006 445 2,210 1,227
Mine development costs 1,037 348 1,701 1,686
Share-based compensation 79 71 224 103
Total 2,122 864 4,135 3,016
Finance and other income
Interest income 29 41 255 186
Finance costs (71) (28) (138) (105)
Foreign exchange gain 591 2,123 2,720 3,061
Other (expense) income (41) 431 17 (186)
Total 508 2,567 2,854 2,956
(Loss) before income taxes (3,046) (1,294) (4,521) (8,555)
Income tax expense (recovery)
Current (recovery) expense (5) (97) 220 84
Deferred expense (recovery) 307 (227) (260) (2,573)
Total 302 (324) (40) (2,489)
Net (loss) for the period (3,348) (970) (4,481) (6,066)
Other comprehensive income (loss), net of tax
Items that are or may be reclassified
subsequently to net income (loss)
Foreign currency translation 593 (322) 386 (288)
Change in fair value of available-for-sale
financial assets, net of tax (2) (16) (2) (10)
Total 591 (388) 384 (298)
Total comprehensive (loss) for the period (2,757) (1,308) (4,097) (6,364)
(Loss) per share,
basic and diluted (0.02) (0.01) (0.03) (0.04)
We seek Safe Harbor.
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