Great Panther Silver Corp. (NYSE Amex: GPL and TSX: GPR) announced second quarter 2011 financial results after the close yesterday and held a comprehensive conference call to discuss these results with investors this morning at 10:00am EDT (7:00am PDT).
After a brief introduction by Corporate Communications VP, Eric Bertsch, Bob Archer, CEO and President of the Company covered financial results and fielded investor questions in the roughly 45 minute conference call.
Here is a brief list of key financial metrics from yesterday’s release for Q2-2011: Revenue – $8.6 million, down 8% from Q2-2010, Earnings – $4 million, up 15% from Q2-2010, Net Income – $2.5 million, down 43% from Q2-2010 and year-to-date Net Income – $9.5 million, up 78% from same period 2010.
At the top of the call, Bob discussed the situation in which both top line revenue and net income for Q2 were incrementally lower than the same period of 2010 due to several factors and characterized this quarter as “unusual”. After listening to the call we would characterize the situations that have contributed to these lower operating numbers as “non-recurring events”, which management has addressed and which will be ameliorated over the next few quarters. In the case of reduction in concentrate sales and backlog of silver concentrate material (listed as roughly $5 million in concentrate inventory on a cost basis vs. normal inventory of approximately $1 million) management explained that this is due to a bottleneck of precious metal rich concentrate experienced by the smelter in South Africa that Great Panther sells concentrate to. Due to this situation, Great Panther has negotiated additional sources to sell their silver concentrate and they expect to be able to move both all future concentrate production as well as reduce this backlog of concentrate over the next few quarters – so in other words, the revenue they are not realizing in Q2 should show up by year-end in Q3 and Q4 income statements (and possibly at even higher silver prices). So overall, we do not see much of a material effect over the intermediate term. Also contributing to lower overall silver production (562,944 oz ag-eq for Q2-2011 vs. 574,740 oz ag-eq for Q2-2010) and increasing per ounce recovery costs was the fact that at both Topia and Guanajuato, the Company was processing lower grade material during Q2-2011. Great Panther expects this situation to change as well due to the fact that they are conducting additional underground drilling and sampling to bring run of mine processing grades up – and are confident in their ability to accomplish this measure.
On an overall basis, today’s call highlighted the fact that Great Panther is moving forward materially on a number of fronts that we see as key value drivers for continued long term growth. During the call management discussed initiatives to increase average daily throughput at both Topia and Guanajuato – which are continuing to be successful (targeting 750 tpd total by year end) and that they were still on track to meet 2012 production guidance for silver ounces produced (targeting roughly 3.8 million total ounces ag-eq). Also during the call management discussed the acquisition of the Santa Rosa project area, increasing land position at Guanajuato by 134%, (which can be processed via the existing mine infrastructure); cash and cash equivalents of $37.7 million (as of June 30, 2011); and continued exploration work ramping up at both Guanajuato and Topia as well as continued work on strategic acquisitions that would compliment the Great Panther portfolio of projects. Another key take away from the call which we consider to be of real importance moving forward is the average realized sale price per ounce, which has gone from roughly $20 in Q2-2010 to $36.21 per ounce in Q2-2011 – not a metric that management has much control over per se, but one that sure goes a long way towards helping grow the value of a business and it’s in-situ metal resource.
With any enterprise that is growing quickly, there are bound to be some growing pains. The one thing we have found to be true with Great Panther’s management team is that they are extremely adept at handling these situations while keeping their eye on the big picture – which is to incrementally grow the overall enterprise and raise shareholder value, which they have done a fantastic job so far, and we expect that trend to continue well into 2012 and beyond.
The full financial breakdown for Q2-2011 is available here
An archive of today’s full conference call is available by calling: 1-877-660-6853 using the following information: Account #: 286 Conference ID #: 377042