- Growing silver and gold producer in the Americas
- Tucano mine in Brazil offers operational and exploration upside
- Diversified portfolio and strong management
What Great Panther does:
Great Panther Mining Ltd (Great Panther Mining Limited (TSX:GPR, NYSE:GPL)) (NYSEAMERICAN:GPL) became an intermediate precious metals producer with its acquisition of Beadell Resources and its Tucano gold mine in Brazil in 2019 The company, originally known as Great Panther Silver, now generates gold from 83% of its production.
Tucano is the second-largest gold producer in Brazil, generating around 150,000 ounces per year from several open pits, and is sitting on a multi-million-ounce deposit. The deal turned the company into a 200,000 gold-equivalent ounce per year producer.
Great Panther operates three mines including the Tucano gold mine in Amapá State, Brazil, and two mainly silver mines in Mexico. These Mexican assets are the Guanajuato mine complex - consisting of two mines, Guanajuato and San Ignacio - and the Topia mine.
The company also owns the Coricancha mine in Peru where in 2020 it executed a successful bulk sample mining program in accordance with a 2018 preliminary economic assessment (PEA). Great Panther is establishing the conditions, under which a restart at the mine could be implemented.
In April 2020, the group named experienced mining executive Rob Henderson as its new CEO alongside a raft of board changes. David Garofalo became the new chairman, while mining professionals Joseph Gallucci and Alan Hair also joined the board
Henderson was president and CEO of copper miner Amerigo Resources LTD, which has assets in Chile. He oversaw a successful $95 million debt financing to complete a major expansion project, safely increased production, lowered cash costs and extended the life of the operation to 2036.
How is it doing:
Great Panther has been on a roll despite the recent challenges posed by the global coronavirus (COVID-19) pandemic and on May 6, 2021, posted revenue of US$52.5 million for the three months to March 31, 2021, up 9% from US$48 million in the first quarter of 2020. The net loss came in at US$331,000 compared to a net loss of US$40.4 million in the same quarter a year earlier. Firmer metals prices and a weaker Brazilian real help it to record its solid set of first-quarter results.
In April, the company reported its 1Q 2021 operating results, producing 22,996 gold ounces from its Tucano mine in Brazil, as well as 363,318 silver equivalent ounces from its Topia mine and 279,306 silver equivalent ounces from the Guanajuato Mine Complex (GMC) in Mexico. In total, its consolidated metal production for the quarter was 30,556 gold equivalent ounces.
For 2021, consolidated production from the group's Tucano, Topia and GMC mines is expected to be between 135,000 and 150,000 gold-equivalent ounces, with the second half of the year expected to account for a least 55% of annual production guidance.
Also in April, Great Panther revealed new open pit drill results including intercepts of 17.7 grams per ton (g/t) gold over 1.75 metres from 130 metres in one drill hole and 6.3 g/t gold over 3.9 metres in another. According to the company, the first phase drill program centred on the TAP C pit, which is located between two pits that are currently in production at Tucano. TAP C includes three pits over a 1,500-metre trend, with the C1 pit the largest of the three and stretching over a strike length of nearly 700 metres and depths of 50 metres.
Drilling is continuing at the zone, Great Panther said. A second reverse circulation drill is due on site in mid-May for shallow, infill resource drilling. The company will also complete a new model of the northern pits at TAP C and other areas to define additional drill targets.
In Mexico, at the group's San Ignacio mine, 5,000m of fill-in surface drilling is planned along the Purisima veins, and at the Guanajuato mien complex, sampling and geological mapping in accessible parts of the historical mining areas is nearly complete, which will be followed by a planned 10,000m of underground drilling.
Inflection points:
- Continued drilling in Brazil and Mexico
- Gold and silver price moves
- M&A activity in sector
What the broker says:
Roth Capital markets reiterated its Buy rating and $1.40 price target for Great Panther two days after the company published its first quarter results on May 5.
Revenue of $52.6 million and adjusted EPS of breakeven were a hair below the firm’s estimates of $53.7 million and $0.01, respectively, which Roth attributed to metal price realizations. Even so, Roth said the company’s potential for growth in the back half of 2021 is being “clearly underappreciated.”
“We believe GPL is trading at a significant discount to its peers on a future cash flow basis,” Roth analyst Joe Reagor wrote. “We estimate operating cash flow of $50.3 million in H2 2021, or $0.13 per share fully diluted. Thus, the company’s shares are trading at approximately 3.2x our H2 cash flow estimates annualized. We also note that our price target represents only 5.4x this cash flow estimate. Ultimately, we
expect the company to see significant share price appreciation if it can deliver on H2 2021 expectations.”
Roth reached a valuation of $520.6 million, or $1.35 per share. That figure comes from a $388.8 million discounted cash flow value, plus $30 million in net cash at the end of 2020, $30.5 million for the potential of developing its Tucano underground gold resource, a $31.3 million valuation for its Coricancha project in Peru and $40 million for exploration upside potential in the next 24 months. The company rounded up the per share figure to get its price target of $1.40.
What the boss says:
In a statement accompanying Great Panther's 1Q 2021 operating results, CEO Rob Henderson told investors: "I am pleased to report that operations continue safely despite COVID-19 and we remain on track with our proposed guidance for the year."
"As previously stated, the first quarter was planned to be a low production quarter due to heavy stripping. Production is expected to ramp up quarter-over-quarter for the remainder of the year as mining progresses into sectors with lower strip ratios. ... Despite these items, we believe the company is still poised for a strong 2021."
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
Follow him on Twitter @andrew_kessel