UPDATE: Great Panther Silver posts Q1 results showing modest sales, production growth despite challenges

Thu 10:20 am by Deborah Bacal

The company is predicting its second quarter results will likely reflect the “impact of the resumption of normal operations” at Guanajuato, after the illegal occupation in March and continued grade challenges at the mine last month, some of which was associated with the preparation necessary to return the higher grade Guanajuato zones to normal.

Great Panther Silver (TSE:GPR) (NYSE MKT:GPL) is sticking to its full year production guidance despite a challenging first quarter that saw the illegal occupation of its Guanajuato plant and administration facilities in Mexico as well as lower grades at Guanajuato and a decline in precious metal prices.

The company is predicting its second quarter results will likely reflect the “impact of the resumption of normal operations” at Guanajuato, after the illegal occupation in March and continued grade challenges at the mine last month, some of which was associated with the preparation necessary to return the higher grade Guanajuato zones to normal.

Great Panther said that the resumption of normal operations should help to reflect the results from the fourth quarter of last year, and, together with the start of production at its San Ignacio project, is expected to put the company on track to meet its forecast for 3.1 to 3.2 million silver equivalent ounces in 2014. Achieving its guidance would represent 10% growth from 2013, and a 13% compound annual growth rate for the past several years.

Even with the challenges, the company managed to post first quarter results that included a 10% rise in year-over-year production, a 2% increase in revenues, and a significant drop in costs.

"While I am extremely grateful for the support and resilience of our employees and contractors during this difficult period, we recognize there is still more work to do to bring the operations at Guanajuato back to an optimal state," said president and CEO Robert Archer in a statement with the quarterly figures released late Wednesday.

"We continued to have challenges with grades at Guanajuato in April, which will impact the financial results of the second quarter, but we expect operational results to markedly improve for the remainder of the year as we return to proper mine sequencing and better grades at Guanajuato.

"San Ignacio is on track to commence production in this quarter as planned, and we are maintaining our guidance for overall growth in 2014."

For the three months to March 31, the company posted a net loss of $0.6 million, or flat on a per share basis, compared to net income of $1.3 million, or 1 cent per share, in the first quarter of 2013. The loss was on account of development expenses for San Ignacio, and additional losses and expenses tied to the illegal standoff at Guanajuato, the company said.

Revenue, however, rose 2% to $12.9 million from $12.6 million, resulting from an 11% increase in metal sales on a silver equivalent ounce basis as well as the appreciation of the US dollar against the Canadian dollar. This offset a 32% decline in the average realized silver price and a similar decline in the gold price.

During the quarter, as first announced last month, the company produced 667,349 silver equivalent ounces from its Guanajuato and Topia mines, up from 607,501 ounces in the year-ago period.

Compared to the first quarter last year, pure silver output was steady, while gold production rose 17%. The company said that even with the problems at Guanajuato, metal production at its Topia mine increased 24% to a record 258,407 silver equivalent ounces on improved grades.

All-in sustaining costs during the latest period fell to US$24.06 from US$36.84 per silver payable ounce a year earlier, due to a decrease in cash costs, sustaining capital expenditures and lower general and administrative expenses. The company embarked on a comprehensive cost reduction program in the second quarter of last year, when precious metal prices experienced a substantial drop.

Great Panther said that overall metal production for 2014 is expected to increase gradually through the year as the San Ignacio project comes on stream. The mine is expected to begin production in the second quarter, at a rate of about 100 tonnes per day, ramping up to roughly 250 tonnes by year-end.

The precious metals miner is anticipating to invest about $10 to $13 million in capital expenditures this year, including for continued mine development and diamond drilling at both Guanajuato and Topia and the acquisition of new equipment to reduce production costs further. Exploration drilling of about 16,500 metres is also planned, with the bulk to take place at Guanajuato.

On a conference call this morning, CEO Archer said that the primary focus of the company this quarter would be to return to proper mine sequencing in higher grade zones at Guanajuato, and to strive to improve grade control at both of its mines.