Mr.
Robert Archer reports
GREAT PANTHER SILVER REPORTS FIRST QUARTER 2016 FINANCIAL RESULTS
Great Panther Silver Ltd. is releasing its financial results for the company's three months ended March 31, 2016. The full version of the company's unaudited condensed interim consolidated financial statements, and management's discussion and analysis (MD&A) can be viewed on the company's website or on SEDAR. All financial information is prepared in accordance with IFRS (international financial reporting standards) and all dollar amounts are expressed in Canadian dollars unless otherwise indicated.
"Great Panther continued to deliver strong performance from its operations in the first quarter, including continued reductions in cash costs and all-in sustaining costs, while staying on track with our full-year operating guidance," stated Robert Archer, president and chief executive officer. "Our mine operating earnings before non-cash items increased 16 per cent over the first quarter of the prior year due to significantly lower cash costs and favourable foreign exchange rates. Consolidated cash cost for the company continued the declining trend of last year to reach $4.20 (U.S.) per payable silver ounce, an impressive reduction of 52 per cent from the first quarter in 2015."
For the first quarter of 2016, the company reduced all-in sustaining costs (AISC) per payable silver ounce by 36 per cent to $9.25 (U.S.), which contributed to strong operating earnings and free cash flow margins from the company's operating mines. While lower cash cost per payable silver ounce was the primary factor in the reduction in AISC, lower-than-normal development and sustaining capital expenditures relating to the company's operating mines also contributed to the decline in AISC. These factors were mainly due to the timing of expenditures and AISC is expected to trend toward the company's guidance range during the remainder of the year. Despite the significant reductions in cash cost and AISC, and strong mine operating earnings, the company reported a net loss of $4.5-million for the first quarter of 2016, mainly due to unrealized (non-cash) foreign exchange losses of $6.4-million on intercompany loans and advances to the company's subsidiaries which are marked-to-market exchange rates in the accounts of the subsidiaries at the end of each period. In addition, a $1.5-million increase in exploration, evaluation and development (EE&D) expenditures over the first quarter of 2015 contributed to the net loss. The increase in EE&D expenditures is primarily associated with the Coricancha and GDLR projects for which the company entered into or signed option agreements in the second quarter of 2015. The company terminated its work and the option on the GDLR project in the first quarter of 2016.
Highlights of the first quarter of 2016, compared with the first quarter of 2015, unless otherwise noted:
-
Metal production increased 2 per cent to 1,009,828 AgEq (silver equivalent) ounces;
-
Silver production of 539,472 ounces, a decrease of 10 per cent;
- Gold production increased 19 per cent to 5,599 gold ounces;
- Cash cost decreased 52 per cent to $4.20 (U.S.) per ounce;
- AISC decreased 36 per cent to $9.25 (U.S.) per payable silver ounce;
-
Revenues decreased 9 per cent to $18.5-million;
- Mine operating earnings before non-cash items increased to $7.7-million, compared with $6.7-million;
-
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) increased to $3.7-million, compared with $3.6-million;
- Net loss totalled 4.5 million, compared with a net income of $3.6-million;
- Cash flow from operating activities, before changes in non-cash net working capital, amounted to $4.0-million, compared with $4.8-million;
- Cash and cash equivalents were $17.0-million at March 31, 2015, compared with $17.9-million at Dec. 31, 2015;
- Net working capital increased to $35.5-million at March 31, 2015, from $33.2-million at Dec. 31, 2015.
OPERATING AND FINANCIAL RESULTS SUMMARY
(in thousands of Canadian dollars, except per-share amounts and as noted)
First First Fourth
quarter quarter quarter
of 2016 of 2015 of 2015
Operating
Tonnes milled (excluding custom milling) $ 88,683 $ 99,252 $ 94,874
Silver equivalent ounces produced (1) 1,009,828 987,887 1,002,584
Silver ounce production 539,472 597,111 553,189
Gold ounce production 5,599 4,703 5,637
Payable silver ounces 478,098 622,339 502,170
Cost per tonne milled (in U.S. dollars) (2) $ 95 $ 102 $ 97
Cash cost (in U.S. dollars) (2) $ 4.20 $ 8.71 $ 8.14
AISC (in U.S. dollars) (2) $ 9.25 $ 14.47 $ 15.10
Financial
Revenue 18,454 20,250 17,152
Mine operating earnings before non-cash items (2) 7,746 6,652 4,907
Mine operating earnings 6,147 524 3,226
Net (loss) income (4,461) 3,588 (4,860)
Adjusted EBITDA (2) 3,733 3,688 (557)
Operating cash flows before changes in non-cash net working capital 4,001 4,827 (775)
Cash at end of period 16,981 18,694 17,860
Net working capital at end of period 35,532 36,904 33,252
Average realized silver price (in U.S. dollars) (3) $ 16.19 $ 16.99 $ 13.57
Per-share amounts (in Canadian dollars)
Earnings (loss) per share, basic and diluted $ (0.03) $ 0.03 $ (0.03)
(1) Silver equivalent ounces are referred to throughout this document. For 2016, AgEq ounces are
calculated using a 70:1 Ag:Au (silver:gold) ratio, and ratios of 1:0.0504 and 1:0.0504 for the price
per ounce of silver to lead and zinc price per pound, respectively, and applied to the relevant metal
content of the concentrates produced, expected to be produced or sold from operations. Comparatively,
in 2015, AgEq ounces were calculated using a 65:1 Ag:Au ratio, and ratios of 1:0.050 and 1:0.056 for
the price per ounce of silver to lead and zinc price per pound, respectively, and applied to the
relevant metal content of the concentrates produced, expected to be produced or sold from operations.
(2) The company has included the non-IFRS performance measures cost per tonne milled, cash cost, AISC,
mine operating earnings before non-cash items, cost of sales before non-cash items and adjusted EBITDA
throughout this document. Refer to the non-IFRS measures section of the company's MD&A for an
explanation of these measures and reconciliation to the company's reported financial results in
accordance with IFRS. As these are not standardized measures, they may not be directly comparable with
similarly titled measures used by others.
(3) The average realized silver price is prior to smelting and refining charges.
Review of financial results
The $1.8-million or 9-per-cent decrease in revenue during the first quarter of 2016, relative to the first quarter of 2015, was primarily attributable to the 16-per-cent reduction in metal sales volumes, which was due to the timing of concentrate shipments. The effect of the lower metal sales volumes was an estimated $4.3-million reduction in revenue and was partly offset by an estimated positive $2.0-million impact from the stronger U.S.-dollar/Canadian-dollar exchange rate in the first quarter of 2016, as well as the impact of a 13-per-cent increase in average realized gold prices (as expressed in U.S. dollars), which accounted for an approximately $200,000 positive impact on revenue. Due to the lower metal sales volumes, smelting and refining charges were also $200,000 lower than during the first quarter of 2015, which had a positive impact on revenue.
Mine operating earnings before non-cash items for the first quarter of 2016 were $7.7-million, an increase of $1.1-million compared with the first quarter of 2015. This was predominantly the result of the impact of favourable exchange rates. The stronger U.S. dollar relative to the Canadian dollar during the first quarter of 2016 had the effect of increasing revenue in Canadian-dollar terms. Conversely, the Canadian dollar strengthened 9 per cent against the Mexican peso, which had the impact of reducing Mexican-peso production costs in Canadian-dollar terms. In addition, the company's mine operating earnings benefited from the increase in average realized gold prices relative to the first quarter of 2015, as well as from the decrease in smelting and refining charges. These factors were offset by the impact of the lower metal sales volumes, which was due to the timing of shipments.
Exploration, evaluation and development expenses were $2.5-million for the first quarter of 2016, an increase of $1.5-million compared with the same period in 2015. This was primarily a result of exploration and evaluation programs related to the Coricancha and the GDLR projects, which commenced after the company entered into option agreements for these projects in the second quarter of 2015, and continued into the first quarter of 2016.
Finance and other expense increased significantly due to a $6.1-million net foreign exchange loss recognized in the first quarter of 2016, compared with a $6.0-million foreign exchange gain recorded during the same period in 2015. The net foreign exchange loss for the first quarter of 2016 includes $6.9-million in foreign exchange losses, $6.4-million of which relates to intercompany balances, partly offset by a fair value gain of $700,000 recorded on the outstanding foreign currency forward contracts as at March 31, 2016.
The net loss of $4.5-million for the first quarter of 2016 is primarily attributable to a $6.1-million net foreign exchange loss incurred in the period. This compares with a $6.0-million foreign exchange gain incurred in the first quarter of 2015. In addition, the $1.5-million increase in EE&D expenses and a $300,000 increase in income tax expense contributed to the net loss in the first quarter of 2016. These factors were partly offset by a $5.6-million increase in mine operating earnings, as well as the $300,000 decrease in general and administrative (G&A) expenses.
Adjusted EBITDA of $3.7-million for the first quarter of 2016 was comparable with that of the same quarter of the prior year.
Cash cost and all-in sustaining cost
Cash cost was $4.20 (U.S.) for the first quarter of 2016, a 52-per-cent decrease compared with the first quarter of 2015. The decrease in cash cost was predominantly the result of higher byproduct credits per payable silver ounce from an increase in gold production due to the increase in production from San Ignacio, which has higher gold grades. 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 first quarter of 2016 decreased 36 per cent to $9.25 (U.S.), compared with the first quarter of 2015, primarily due to the reduction in cash cost described above. The reduction in G&A expenses, sustaining EE&D expenditures and sustaining capital expenditures also contributed to decrease in AISC. The company expects an increase in sustaining capital expenditures and EE&D expenses in subsequent quarters, which is expected to increase AISC from the levels reported in the first quarter of 2016. However, the company is maintaining its guidance for 2016 cash cost and AISC as detailed in the outlook section below.
Please refer to the company's MD&A for further discussion of cash cost and AISC, and for a reconciliation to the company's financial results as reported under IFRS.
Outlook
The company's previously announced production and cost guidance for the year ending Dec. 31, 2016, remains unchanged.
PRODUCTION AND CASH COST GUIDANCE
First quarter of 2016, Fiscal year 2016, Fiscal year 2015,
actual guidance actual
Total silver equivalent ounces (1) 1,009,828 4,000,000 to 4,200,000 4,159,121
Cash cost (in U.S. dollars) (2) $4.20 $5.00 to $7.00 $7.50
AISC (in U.S. dollars) (2) $9.25 $13.00 to $15.00 $13.76
Exploration drilling -- operating mines (metres) 2,135 11,000 17,680
(1) For 2016 guidance, AgEq ounces have been using a 70:1 Ag:Au ratio, and a ratio of 1:0.0504 for the
U.S.-dollar price of silver ounces to the U.S.-dollar price for both lead and zinc pounds. For 2015,
AgEq ounces were calculated using a 65:1 Ag:Au ratio, and ratios of 1:0.050 and 1:0.056 for the price
per ounce of silver to lead and zinc price per pound, respectively.
(2) Cash cost and AISC are non-IFRS measures. Refer to the non-IFRS measures section of this MD&A for
an explanation of these measures and reconciliation to the company's reported financial results in
accordance with IFRS. As these are not standardized measures, they may not be directly comparable with
similarly titled measures used by others.
The company's previously announced guidance for capital expenditures and EE&D expenses for the year ending Dec. 31, 2016, remains unchanged.
CAPEX AND EE&D EXPENSE GUIDANCE
(in millions of Canadian dollars)
First quarter of 2016, Fiscal year 2016, Fiscal year 2015,
actual guidance actual
Capital expenditures -- buildings,
plant and equipment $0.4 $3.5 to $5.0 $3.2
Capitalized development costs -- operating mines $0.1 $0.5 $3.2
EE&D -- operating mines $0.6 $7.0 to $8.0 $4.6
Exploration and evaluation expense - Coricancha $1.2 $1.0 to $3.0 $2.7
Webcast and conference call to discuss first quarter 2016 financial results
Great Panther will hold a live webcast and conference call to discuss the financial results on May 5, 2016, at 8 a.m. Pacific Standard Time (11 a.m. Eastern Standard Time). Hosting the call will be Robert 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.
Live webcast and registration: on the company's website
United States and Canada toll-free: 1-866-832-4290
International toll: 1-919-825 3215
Conference ID: 99233135
A replay of the webcast will be available on the investors section of the company's website approximately one hour after the conference call.
Non-IFRS measures
The discussion of financial results in this news release includes reference to mine operating earnings before non-cash items, adjusted EBITDA, cash cost and AISC, which are non-IFRS measures. The company provides these measures as additional information regarding the company's financial results and performance. Please refer to the company's MD&A for the three months ended March 31, 2016, for definitions and reconciliations of these measures to the company's financial statements.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands of Canadian dollars, except per-share data)
For the three months ended March 31,
2016 2015
Revenue $ 18,454 $ 20,250
Cost of sales
Production costs 10,708 13,598
Amortization and depletion 1,550 6,000
Share-based compensation 49 128
12,307 19,726
Mine operating earnings 6,147 524
General and administrative expenses
Administrative expenses 1,658 2,074
Amortization and depletion 69 63
Share-based compensation 207 98
1,934 2,235
Exploration, evaluation and development expenses
Exploration and evaluation expenses 1,836 772
Mine development costs 587 144
Share-based compensation 27 57
2,450 973
Finance and other income (expense)
Interest income 30 139
Finance costs (26) (21)
Foreign exchange gain (loss) (6,143) 5,966
Other income 23 26
(6,116) 6,110
(Loss) income before income taxes (4,353) 3,426
Income tax expense (recovery) 108 (162)
Net (loss) income for the period (4,461) 3,588
Other comprehensive income (loss), net of tax
Items that are or may be reclassified subsequently to net income (loss)
Foreign currency translation 3,580 (2,054)
Change in fair value of available-for-sale financial assets (net of tax) 4 -
3,584 (2,054)
Total comprehensive (loss) income for the period (877) 1,534
Earnings (loss) per share
Basic and diluted $ (0.03) $ 0.03
We seek Safe Harbor.
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