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Great Panther Silver

Richard (Rick) Mills
Ahead of the Herd

As a general rule, the most successful man in life is the man who has the best information

The silver/gold vein systems of the Veta Madre at Guanajuato were discovered as early as 1548. At their peak of production in the 18th century these systems were responsible for one third of the world’s silver output. Today the Guanajuato area and its prolific, high grade silver/gold vein systems are still one of the most prolific silver producing regions of the world.

According to a survey conducted by The Fraser Institute, Mexico is among the top 20 most attractive regions in the world for exploration and mining. A strong mining culture, excellent geology, political stability and favorable tax and permitting structures all combine to create major appeal for mining companies.

Non-Mexican companies can maintain 100% ownership of their properties and reap the full benefits of successful exploration and project development for their shareholders.

Great Panther Silver (TSX – GPR) has two operating mines in Mexico and is on the prowl for further acquisitions. GPR is one of the fastest growing primary silver producers in Mexico with strong leverage to future rises in the price of silver. The centerpiece of the Company's operations is the world class Guanajuato Silver-Gold Mine in the state of Guanajuato.

Great Panther also owns and operates the Topia Silver-Lead-Zinc Mine in Durango State. The Company has increased production to a new all time high and is growing the resource base through continued surface drilling and underground development.

Cash: $9.0 million
Debt: $4.1 million
Shares Outstanding: 114.8 million
Fully Diluted:  130.8 million
Insiders own: 5%
Institutional ownership: 30%
Retail ownership:  65%

Business Model: Acquisition and development of assets in Mexico, get into production quickly and use the proceeds to supplement exploration, development and further acquisitions.

Success at Implementation -  In an industry where most mining projects take ten or more years to advance from discovery to commercial production, the Team at Great Panther Silver has done an exceptional job of acquiring two past producing mining operations, rehabilitating them, and getting them into production in a very short period of time. 

  • Feb. 2004 - Commenced trading as “GPR” and initiated exploration at the Topia Mine
  • 2005 - Purchase and rehabilitation of Topia and Guanajuato Mines
  • 2006 - Commenced production at Topia and Guanajuato
  • 2006 to date - Steadily increased production
  • 2009 to date - Achieved and maintained profitability
  • Continuing growth towards mid-tier silver producer

Today Great Panther is profitable -  many junior miners get into small scale production but are not profitable and do need to return to the market for equity financings to continue operations.  Great Panther’s mines are 100% owned and fully paid for.  Additionally, Great Panther’s $36 million organic growth strategy is currently being funded out of cash flow. The Company plans to spend about $20 million in 2010 on exploration and development to define and prepare new resources for future production.  

This author believes the benefits of today’s capital expenditures will become apparent in the 2011 and 2012 production numbers.

GPR Annual Production
Great Panther has a solid track record of increasing production and decreasing costs through better efficiencies in mining operation.  The Company has projected that it will continue this trend out to 2012. 

 

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Mexico is the number two silver producer in the world, has relatively stable politics, a robust economy and is very mining friendly

Guanajuato

Guanajuato Silver/Gold Mine Highlights

  • Underground mine with 3 operating shafts & 3 ramps
  • Produced 1,541,220 oz silver equivalent (including 1,019,751 oz Ag and 6,748 oz Au) in 2009, 37% higher than 2008
  • Q2 2010 production of 369,390 oz silver equivalent (including 288,825 oz Ag and 1,289 oz Au)
  • Currently operating at ~525 tonnes per day with plant capacity of 1,200 tonnes per day =  expansion potential
  • First NI 43-101 resource of 5.3 million Ag eq oz – deep Cata only
  • Deep drilling underway at Rayas to increase resources (Q4 2010)
  • Los Pozos Zone is high grade silver-gold - Up to 2.3g/t Au and 783g/t Ag over width of 9.6 metres
  • Santa Margarita Zone is gold-rich. Drilling has expanded this to >175m along strike and locally to depth of 600 metres. Drilling will add to resource base (update due in Q4)
  • Veta Madre silver-gold zone is opening up to southeast and to depth - still have 250m to property boundary
  • A new silver-gold zone - 576g/t Ag & 1.33g/t Au over 2.15m at vertical depth of 590 metres open to depth and to southeast
  • The recent drilling results are significant in that several new epithermal systems appear to be developing in the deepest parts of the multi-phase epithermal system known to exist at Guanajuato

"These recent results from the deep drilling program at Rayas are confirming our long-standing belief that the mineralizing system at Guanajuato has a lot of life left in it. The expansion of the gold-rich Santa Margarita vein will not only increase our resource base but should provide for consistent and higher gold production for the foreseeable future. The discovery of a new silver-gold zone near the 600 metre level is very exciting as it, in itself, opens up a whole new area of the mine. We have only tested 250 metres of strike length in the deep Rayas area to date, of a planned 600 metres. The Guanajuato Mine property covers 4,200 metres of strike length, and next year, we will be testing the depth extent of the historically rich Valenciana Mine." Robert Archer, President & CEO

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New production areas at Guanajuato will include the deep Rayas Clavo, the famous Valenciana Mine, and the stand-alone San Ignacio Mine.

Topia

The Topia Mining District is one of the oldest in Mexico, the discovery of silver dating back to 1538. Peñoles built a 200 tonne per day mill on site and operated the mine continuously until 1989. A private company continued production on a small scale until 1999.
 
Total historical production for the district has been estimated at 30 million ounces of silver. The on-site mill complex treated the ore and produced lead and zinc concentrates that were shipped to the Peñoles smelter in Torreon.

Records for Peñoles' 38 years of production indicate average mill head grades of 437 g/t silver, 0.87 g/t gold, 3.9% lead and 4.2% zinc. Overall average metal recoveries were silver-86%, gold-55%, lead-94% and zinc-85%.

Topia Silver/gold/Lead/Zinc Mine highlights

  • Property covers 6,500 hectares – most of the district
  • Mining from 12 veins & trucking ore to central plant in town
  • Plant operates at 170 tpd with ~ 20% custom milling
  • Town of 3,000 for labor force & supplies

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  • On state power grid
  • Road and air access
  • Recent acquisition of La Prieta concession, approx. 20km by road from plant will add mill feed by late 2010
  • Produced 661,236 oz silver equivalent (including 437,079 oz Ag) in 2009
  • Q2 2010 production of 205,350 Ag eq oz (including 121,758 oz Ag), 19% higher than Q1 2009
  • NI 43-101 compliant resource of 11 million Ag eq oz to be updated in Q4
  • High grade gold (~15g/t) in Recompensa Vein

Great Panther’s Three Year Organic Growth Strategy

  • Increase production at both mines to a combined 3.8 million silver equivalent ounces by 2012
  • Lower operating costs to approx. US$4.00/Ag oz (net of by-products) through increased throughput and operating efficiencies
  • Delineate and maintain a 10-year mine life for both operations at the new production rate, i.e. NI 43-101 compliant resources of approximately 40 million silver equivalent ounces
  • Realize opportunities for further production increases beyond 2012 through new development and greater efficiencies

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Conclusion

The following Corporate strategy for profitable growth should benefit shareholders for years to come.

  • The pace of mine development at both operations will be increased with new ramps, raises, drifts and crosscuts to provide/improve access to various areas within the mines – a total of ~10km at Guanajuato and >5.5km at Topia
  • A total of 65,000 metres of surface & underground exploration drilling will focus on defining resources, looking for vein extensions and testing new targets
  • Discovery cost should be <US$0.50 per Ag eq oz with steady positive results to feed the market.
  • Pursuing acquisition opportunities to add third mine in Latin America
  • Holding cash position at ~$10 million, while reducing short term debt
  • Significant organic growth strategy to increase annual production to approximately 3.8 million Ag eq oz and resources to 40 million Ag eq oz by 2012 with further increases possible beyond that point – all funded out of cash flow

Silver and profitable junior silver producers should be on every investor’s radar screen. Is silver and Great Panther Silver TSX – GPR on your radar screen?

If not, maybe they should be.

Richard (Rick) Mills

rick@aheadoftheherd.com
www.aheadoftheherd.com

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Richard is host of aheadoftheherd.com and invests in the junior resource sector. His articles have been published on over 200 websites, including: Wall Street Journal, SafeHaven, Market Oracle, USAToday, National Post, Stockhouse, Lewrockwell.com, Casey Research, 24hgold, Vancouver Sun, SilverBearCafe, Infomine, Huffington Post, Mineweb, 321Gold, Kitco, Gold-Eagle, The Gold/Energy Reports, Resource Investor, Calgary Herald and Financial Sense.

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Legal Notice / Disclaimer

This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified; Richard Mills makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Richard Mills only and are subject to change without notice. Richard Mills assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, I, Richard Mills, assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information provided within this Report.

Richard Mills does not own shares in any company mentioned in this article

Great Panther Silver TSX – GPR is an advertiser on aheadoftheherd.com

 

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