Great Panther Silver is showing marked improvements at its operations from the previous quarter, with its third quarter financials announced today providing no better proof of its efforts through lower cash costs, higher production, and better operating margins and cash flow.
The Mexico-focused precious metals company, which has been engaged in a program of wide-ranging cost cutting and grade control initiatives throughout the year, reported better results overall from the second quarter for the three months that ended September 30, despite declines from a year ago in light of a more challenging environment for silver and gold producers.
“The improved financial results were achieved alongside a second successive quarterly record in total metal production,” said president and CEO Robert Archer in a statement Thursday.
“While I recognize and appreciate the efforts and dedication of all our employees and contractors, we realize that there is still more to do and we will continue to pursue cost reductions across all of our operations to further improve margins. On a conference call following the release, he added that the company has turned the corner back to profitability.
As price declines in gold and silver ensnare precious metals miners industry-wide, the bulk of them have been embarking on cost cutting programs to lift profits and margins.
Indeed, for the third quarter, Great Panther, which operates the Guanajuato and Topia mines in Mexico, reported a net loss of $1.5 million, or 1 cent per share, compared to a net loss of $5.1 million, or 4 cents per share in the second quarter. In the same period a year ago, the company recorded net income of $1.7 million, or 1 cent per share.
Revenue fell 6% from the year ago period to $14.3 million, but this represented an increase of 28% from the prior quarter as average realized silver prices marginally grew quarter-over-quarter by 1% to $21.85 per ounce. Silver prices took a dramatic slide in the second quarter of this year.
Overall cash costs improved both year-over-year and quarter-over-quarter to $9.89 per silver ounce, 25% lower than a year ago and down 45% from the second quarter of this year as silver grades at its Guanajuato mine rose quarter-over-quarter.
Gross profit, or income from mining operations, almost tripled from the previous quarter to $2.6 million, while cash flow from operating activities rose to $5.7 million from negative $0.7 million in the second quarter.
Production also improved, to the point where the company said it expects to exceed its full year guidance of 2.4 to 2.5 million silver equivalent ounces, anticipating somewhere in the order of 2.7 million ounces. For the third quarter, the company achieved records, with output of 789,250 silver equivalent ounces, up 33% from a year ago and 16% from the second quarter. Metal sales even rose 32% from the third quarter last year, but this was offset by a 32% decline in average realized silver prices year-over-year.
In the face of this, the company said it has worked to reduce costs through a reduction in the number of mining contractors at its Guanajuato mine, as well as by renegotiating contracts to create greater accountability for material and labour costs. It also worked to improve grade control and mine planning, though it cautioned that its mines have complex geology and that measures taken to mitigate grade variability so far do not eliminate this factor entirely.
It has even reduced the number of operating mines at Topia to 11 from 14, which will be lowered again to 9 by the end of the year.
Great Panther has also cut exploration and general and admin expenses, and reduced capital expenditures to focus on the investments with the greatest returns. The company is in the midst of developing its San Ignacio project, which is slated to start initial production in the first half of next year at about 100 tonnes per day, ramping up to 250 tonnes by the end of 2014. Ore is to be processed at the company’s Cata plant at the main Guanajuato mine complex, just 22 kilometres away, which is expected to reduce cash costs further.
The fourth quarter is looking very good so far, with continued strong operating performance, commented Archer on the conference call in response to an analyst question regarding the companys outlook going into next year. He said that on a cost basis, the current quarter should be pretty similar to the third quarter, with the latest costs thought to be fairly representative on a go-forward basis as San Ignacio output begins in 2014.
