Robert A. Archer
CEO and President
Great Panther Silver
View from the Top

Many Treasures Still to Unearth at Guanajuato Mine Complex

Wed, 10/21/2015 - 08:38

Q: What are the benefits of listing on both the Toronto Stock Exchange and the New York Stock Exchange?

A: The main benefit we have seen is a significant increase in the trading of our stocks. We tend to trade about 10 times the volume in New York as we do in Toronto. There are a lot more people in the US willing to invest in silver mining stocks. The US is a country that has a long silver mining history while Canada does not have the same historical attachment to silver. Another benefit of being listed in New York is that it gives us access to potential US investors as its regulatory environment prohibits brokers from trading Canadian stocks. So if Canadian companies want to attract American investors, they must be listed on a US-based stock exchange. Before we listed our company on the NYSE, a lot of investors liked our company but could not invest in it for this reason. Once we performed our listing in the US, we opened the doors for all of these new potential investors.

Q: What actions have you implemented to reduce costs while improving grade control and operating efficiencies?

A: We took a number of actions across the board. One of our main strategies was to reduce our costs for contractors and materials. All of the mining at our Guanajuato Mine Complex is carried out by contractors. Contractors thus represent a large percentage of our costs so we are naturally trying to make them more efficient, which involves changing some of them. We are pushing to gain some discounts on the services they provide and materials they use. We also laid off some employees in Guanajuato and Vancouver. Besides this, we are focusing on working on areas with higher grades and on improving our grade controls to avoid dilution. We always have to contend with the fact that our operations in Guanajuato have very high grade variability. The grade will vary considerably on a daily, monthly, and quarterly basis so we are always trying to average those out. Sometimes, in order to access the high grade ores, we have to excavate areas that are not very rich in minerals. There is nothing we can do about that but we have to account for it in our everyday operations.

Q: Great Panther has a strong balance sheet with no debt and a solid working capital of US$35.3 million. What investment strategy has allowed you to keep this strong position?

A: It comes down to achieving a balance between your operating costs and the silver grades. We have been highly flexible on how we utilize our CAPEX while remaining disciplined. In a lot of cases, companies like ours have to spend to keep growing, even if these expenditures do not bring an immediate return on investment. Mining companies that cut back too severely on their CAPEX run the risk of jeopardizing the long-term sustainability of their projects. No matter the operating environment, there are always aspects that can be improved, such as safety or environmental works. These areas must be looked at on a regular basis to identify costs that can be deferred and those that cannot.

Q: Exploration costs are no longer fully tax deductible in Mexico. What impact has this had on your approach to exploration?

A: It has not had an immediate impact mainly because, due to low metal prices, the company really cut back on its exploration budget anyway. However, we have seen that this fiscal change has greatly affected developing companies or companies that have major projects at the development stage. The reform has stopped them from recovering their exploration cost, which would have been a great help during the development stage. This has really changed the return on investments for such companies and has therefore affected mining shareholders. In order to counterbalance the effects of this new tax law, high metal prices will be needed before such companies can truly reach profitability. These new changes to the regulations are threatening the long-term viability of the mining industry in this country and are hurting the Mexican economy.

Q: How has mine production changed at Great Panther’s mines in recent years?

A: One of our main achievements of 2014 was the opening of our San Ignacio mine. Thanks to its commercial production, we saw an increase in the throughput of our plant, taking up some of its excess capacity. By the end of 2014, San Ignacio was contributing about 20% of the tonnage going through our plant. Historically, our Guanajuato mines had a grade ratio of about a 100:1, or about 100 grams of silver for each gram of gold. In 2013, these ratios changed a little bit, mainly because we had been mining the Santa Margarita zone, which has very high grade gold but very low grade silver. In 2014, they changed again because we stopped mining as much ore from the Santa Margarita deposit. In 2014, we processed a record of 267,812 tonnes of ore, which was 21% higher than the previous year. Metal production reached a 2,193,403oz of silver equivalent, also 11% higher year-on-year and another record. Gratifyingly, the ramp up of San Ignacio was the main engine of this growth.

Our silver-lead-zinc Topia mine in Durango saw the ore processed rise by 9% to 67,387 over 2013. Topia’s metal production increased by 16% year-on-year to reach 994,429oz of silver equivalent, with a grade of 343 g/t for silver.

Q: How important will the San Ignacio satellite deposit prove to be for Great Panther’s future operations?

A: This mine will become very important for us and for the Guanajuato Mine Complex as a whole. As previously mentioned, 20% of the tonnage being processed at our plant comes from San Ignacio and we believe this amount will grow substantially in 2015. We are going to be developing an ore pocket that we recently discovered through our diamond drilling campaigns. This zone is wider and contains better grades than that we have been mining so far. This will allow us as a company to considerably increase our production.

Q: What is the exploration upside potential of the Guanajuato mine?

A: The Guanajuato Mine Complex has a world-class deposit where we are positive that important discoveries will continue to be made in the near future. This mine has been producing for over 400 years, it is estimated that over a billion ounces have been exploited from the district so far. The challenge lies in the fact that these discoveries will have to be made from underground. This is very expensive, difficult and time-consuming since geophysical studies are not effective at those depths. We will have to proceed with diamond drilling and geological studies to discover the potential our mine still holds. In order to explore in this way, we first have to excavate the tunnels so that we can withdraw samples from new areas. When the mine has a depth of 500m, a lot of development work will first have to be carried out before we know if we should continue exploring. There are many areas that have not been tested, but when we consider the discoveries made in the San Ignacio deposit, it is almost certain that we will continue to make important discoveries. I believe that this mine will continue producing for many years to come.

Q: Great Panther’s first resource estimate for El Horcon in Jalisco was completed in 2014. What is the plan to move this project toward production?

A: El Horcon is showing great potential to become another satellite mine, much like San Ignacio, as it lies 100km by road northwest of the Guanajuato Mine Complex. The synergies that could be accomplished would be very similar to the ones we currently enjoy with the San Ignacio deposit. The project is currently at the permitting stage, so we have not yet made a production decision. Should we begin operating El Horcon, it will not be necessary to construct a new processing plant or tailings pond. We will just need to truck the ore to our processing plant in Guanajuato. Currently, we do not see the need to fast track El Horcon since it depends on higher metal prices and the government’s response in issuing the permits. We will invest in this project and fast track it once the market conditions seem optimal to commence production.