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 ("MD&A") can be viewed on the Company's website at www.greatpanther.com, or SEDAR at www.sedar.com. All financial information is prepared in accordance with IFRS 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 CEO. "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% 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 to Third Quarter 2013 unless otherwise noted)
- Achieved record metal production of 890,641 silver equivalent ounces ("Ag eq oz"), a 13% increase, including 103,897 Ag eq oz from San Ignacio;
- Throughput totalled 90,882 tonnes, a quarterly record and 15% 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 ("cash cost") increased 10% to US $10.91;
- Cash cost per silver payable ounce was US $9.13 for the Guanajuato Mine Complex ("GMC"), an increase of 133%, and US $15.82 at Topia, a decrease of 12%. The increase at GMC is mainly attributed to lower gold production and lower gold prices which reduced by-product credits
- All-in sustaining cost ("AISC") and All-in cost ("AIC") per silver payable ounce both decreased 17%, to US $19.95 and US $20.29, respectively;
- Revenues totalled $12.8 million, a decrease of 11% which is reflective of the significantly lower average metal prices;
- Net loss was $1.0 million, compared to net loss of $1.5 million; -- Adjusted EBITDA was $1.3 million compared to $3.9 million;
- Cash and cash equivalents were $20.4 million compared to $21.8 million at December 31, 2013;
- Net working capital decreased to $35.3 million from $38.2 million at December 31, 2013.
DISCUSSION OF THIRD QUARTER 2014 FINANCIAL RESULTS
For the three months ended September 30, 2014, the Company earned revenues of $12.8 million, compared to $14.3 million for the same period in 2013, a decrease of 11%. This decrease is primarily the result of a decrease in average realized silver prices (US $18.85 compared to US $21.70) and average realized gold prices (US $1,257.37 compared to US $1,354.14). These factors offset a 15% increase in sales volume on a silver equivalent ounce basis, a 7% appreciation of the US dollar against the Canadian dollar which had the effect of increasing revenue reported in Canadian dollars, and a 13% 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 to $5.5 million in the third quarter of 2013, primarily as a result of the 11% decrease in revenues and the 13% increase in cost of sales noted above.
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 ("M&I") resource at Guanajuato based on the updated NI 43-101 Resource report issued in December 2013, the ongoing additions to mineral properties, plant and equipment, and the 15% 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 to 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 above.
General and administrative ("G&A") expenses were $1.5 million for the third quarter of 2014 compared to $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 ("E&E") were $0.9 million for the third quarter of 2014 compared to $0.5 million for the same period in 2013. The increase is primarily due to $0.3 million 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. Ongoing development expenditures for San Ignacio continued to be expensed as the project does not meet the criteria for capitalization under IFRS.
Finance and other income was $2.6 million for the third quarter of 2014, compared to expenses of $3.1 million for the same period in 2013. The change is primarily attributed to $0.5 million 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 US dollar compared to the Canadian dollar. This compared to 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 US 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 $0.3 million for the third quarter of 2014 compared to a recovery of $1.3 million in the third quarter of 2013, a decrease of 74%. The income tax recovery comprised $0.1 million in current income tax expense and a $0.2 million deferred tax recovery. The net recovery realized during the third quarter of 2014 relates to pre-tax 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 to 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 $0.3 million reduction in G&A expenses, and the $5.7 million increase in finance and other income. These were partially offset by the $0.4 million increase in E&E expenses and a $0.9 million decrease in income tax recovery.
Adjusted EBITDA was $1.3 million for the third quarter of 2014, compared to 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 ("cash cost") of US $10.91 for the third quarter of 2014 increased from US $9.89 in the third quarter of 2013. While Topia saw a 12% reduction in cash cost, this was more than offset by a 133% increase in cash cost at the GMC primarily due to lower by-product credits as a result of a decrease in gold production and gold prices.
All-in sustaining cost per silver payable ounce ("AISC") for the third quarter of 2014 decreased to US $19.95 from US $24.01 in the third quarter of 2013. This reduction is primarily due to the favourable impact of a 25% 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 ("AIC") for the third quarter of 2014 decreased to US $20.29 from US $24.48 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 SEPTEMBER 30, 2014
At September 30, 2014, the Company had cash and cash equivalents of $20.4 million compared to $21.8 million at December 31, 2013. Cash decreased by $1.4 million primarily due to $6.4 million of capital expenditures incurred in the nine months ended September 30, 2014 which exceeded $3.8 million of cash generated from operating activities, $0.7 million in proceeds from the exercise of options and $0.5 million related to favourable foreign currency translation on US dollar and Mexican peso cash deposits.
At September 30, 2014, the Company had working capital of $35.3 million compared to $38.2 million at December 31, 2013. Working capital decreased by $2.9 million as cash and cash equivalents decreased $1.4 million (as described above), current assets excluding cash decreased $2.4 million, and trade and other payables decreased $0.9 million.
The Company expects to meet its guidance of 3.0 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 September 30, 2014 was 2,276,784 Ag eq oz, representing an increase of 10% over the same period in the prior year.
Cash cost for the nine months ended September 30, 2014 was US$12.90 per silver payable ounce. The Company expects its cash cost for the 2014 fiscal year to be within the guidance range of US$12.00 - US$13.00. Cash cost for the third quarter of 2014 was US$10.91 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 shown in the table below. AISC was US$19.95 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.
Capital expenditures were $6.4 million for the nine months ended September 30, 2014 and the Company is maintaining its expectation to be at the lower end of its guidance of $10 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 the 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 November 6, 2014, at 7:00 AM Pacific Daylight Time, 10:00 AM Eastern Daylight Time. Hosting the call will be Mr. Robert Archer, President and CEO, and Mr. Jim Zadra, CFO and Corporate Secretary.
Shareholders, analysts, investors and media are invited to join the live webcast and conference call by logging in or dialing in just prior to the start time.
|Live webcast and registration
|U.S. & Canada Toll-Free
|| 1 800 735 5968
||+1 212 231 2905
|No passcode 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.