TravelingThomCalandra (GUANAJUATO, Mexico) – Two underdog teams shared space on the Mexico return flight to the USA today: Pan-American Games baseball champion Team Canada and silver producer Great Panther Silver.
Team Canada, managed by former Toronto Blue Jays catcher Ernie Witt, told me USA, Cuba and Mexico are always the lead contenders. His Canada team snatched victory from Team USA in a 2-1 nail-biter Tuesday evening in Mexico.
Great Panther Silver (AMEX: GPL and TSX: T.GPR, Stock Forum) is poised to snatch victory in Guanajuato, a historic Mexico silver district. But that victory, beneficial to shareholders in my view, might be tinged with melancholy.
Bob Archer’s Great Panther Silver was the first small Canadian prospector to the city and surrounding region of Guanajuato. Bradford Cooke’s Endeavour Silver (NYSE: EXK and TSX: T.EDR, Stock Forum) followed closely in 2007. (Photo: Great Panther’s Robert Archer at the entrance to Guanajuato Mine Complex this week – Thom Calandra photo)
Both have been among the Mexico silver producers’ fastest up-and-comers on their way to mid-tier status of five million or more ounces yearly. First Majestic (TSX: T.FR, Stock Forum) gets top honors in that category.
In Great Panther’s case, the bucks, or growth, slowed in this year’s second and third quarters. “In 2009, when you were first here,” Mr. Archer tells me in this week’s mine tour, “we had a lot of assumptions built into our targets. Factor in a 33 percent drop in grades (vs. Q3 2010 at Guanajuato) and that is quite a production drop.” In fact, slower than forecast mine development and a few exploration holes that were clunkers led to a 24 percent drop year to year in metal production at the picturesque hillside town’s labyrinth of rich silver and gold veins.
Adding to the melancholy: a back-up in concentrate shipments to a South Africa smelter this past summer smacked Mr. Archer’s company straight in the kisser.
The 600 tonne per day through-put at Great Panther’s Cata Plant is half what the mill at Guanajuato can handle.
For those, like me just returning from tours of both Endeavour Silver and Great Panther’s operations, and pressed for time as I head to the New Orleans Investment Conference, this is a first take at what could happen with Great Panther, a company whose shareholders and employees are ferociously loyal in their defense of Mr. Archer and his team.
The takeaway for me, a shareholder and almost three-year researcher of Great Panther and Endeavour Silver, is that Great Panther is ready for a merger:
- GPR’s SGS-operated laboratory is probably three times as efficient as the one Endeavour has at Guanajuato. “Great Panther is doing a four-day turnaround on samples and Endeavour four weeks,” says Bob Moriarty of 321gold.com. “Duplicate labs are just one of the Guanajuato redundancies.” Mr. Moriarty, a longstanding gold and silver writer (and I disclose, a friend), was on the tour with me and about 25 other bankers, writers, investors and analysts. Ore samples from Great Panther’s lab run about a third of the expense as Endeavour’s one.
- Endeavour Silver sure could use extra plant capacity. A sharp upgrade of its existing plant at Bolanitos, about five kilometers outside town, ultimately will take total tonnes per day to about 1,600 per day. President and COO Godfrey Walton says a new Lucero ramp that connects several veins, plus accelerated mine development at the Asuncion vein system and improved ore targeting and blasting efficiencies, could soak up the extra capacity of Endeavour’s slick mill improvements by late 2012.
- Exploration staffs – both proficient and led by tried-and-true geologists – are another redundancy. So is other high-level staff, including operations chiefs. GPR has about 785 employees at Guanajuato and Endeavour has 410 at Guanajuato.
Mr. Archer, seen recently having lunch with Brad Cooke at Joe Martin’s Silver Summit in Spokane, Washington, declines to state for the record if any transaction with a second silver producer makes sense for the company. I spoke with him Monday on site and underground … and on Tuesday after his appearance at a lunch with former Mexico President Vicente Fox. Great Panther and Endeavour Silver, in cooperation with Gordon Holmes’ wheelchair initiative, were donating about 200 chairs to Mexico families. (See photo: Vicente Fox, Robert Archer and Gordon Holmes, left to right)
“This is the company we built from what was a failed local cooperative. We are tied to the centuries of silver mining tradition here at Valenciana and throughout the district,” he says. ‘We have always felt responsible for contributing to the community.” The company has earned several marks of distinction in the area of community outreach in and around the town of Guanajuato, Leon and at its Topia camp in Durango State.
Another Great Panther team member, VP of Corporate Development Erick Bertsch, asks me, “You are a shareholder … would you take a 20 percent premium? 25 percent? (Thom: Well, no, but 35 percent? Maybe.) Yes, the silver sector is ready for consolidation. Many silver companies would improve their performance with synergies. In our case, GPR has little to no synergy with our Durango holdings (at Topia) and (those of) Endeavour (at Guanacevi). In Guanajuato, yes, there are well known synergies.”
Mr. Cooke down the road at Endeavour’s Bolanitos states, “We’ve approached everyone in the district. Most likely we will find another deal before any action in Guanajuato. Not much interest from Bob.” Endeavour Silver recently expanded its exploration strategy with silver properties in Chile.
Adds Endeavour’s Mr. Walton, who has been with Endeavour Silver since Day One at Guanajuato four years ago: “We’re hoping someone in the area just, well, throws in the towel. It takes two sides to talk.” (Photo: Mr. Walton and a mill manager at Endeavour’s upgraded plant at Bolanitos – Thom Calandra photo)
An ambitious and veteran operations chief at Endeavour, David Howe, has in place a rigorous efficiencies flowchart for his new waste rock contractor. Mr. Howe, a geologist engineer from England, says his team’s mine development, in cooperation with exploration targeting by VP of Exploration Barry Devlin, already has identified intensely high-grade veins, some already known and some newly unearthed.
One batch of core at Endeavour’s massive shed, just above the silver district’s historic Veta Madre vein, was laden with ceracite-speckled samples, indicating a high gold content. The facility has about $12 million worth of core samples, Brad Cooke estimates.
In one tray: five meters of recently assayed half-ounce gold and monstrously rich silver core from the Karina vein. Endeavour’s concentrate, shipped presently to its leach mill at Guanacevi, runs about 12 kilos of silver and 150 grams of gold per tonne, or $20,000 for each satellite-monitored truckload to Durango State.
The rub for Endeavour, in its eagerness to expand its milling options, is that the Guanacevi mill’s leach circuit “loses” a percentage of the silver. The company is planning a second tank to treat the silver-gold concentrates from Guanajuato.
The higher the silver price, says Endeavour spokesman and corporate relations manager Hugh Clarke, the larger the “lost” dollars per tonne of concentrate. A two-month planning regimen at Endeavour, based like GPR in Vancouver, Canada, will address how the expanding producer copes with its need for mill through-put in 2012.
If Endeavour keeps to form, its production of silver-equivalent ounces (companywide), which grew from 0 (zero) ounces in 2007 to 2.7 million ounces in 2010, will reach at least 4.5 million ounces for 2011. It could double that in 18 months.
Great Panther expects 2.20 silver-equivalent ounces in 2011 vs.2.25 million ounces in 2010 – basically flat and below Mr. Archer’s hopes of two years ago.
There is much that might be taking place behind the scenes, based on what I see here at both operations. If I am correct, Great Panther and Endeavour Silver some day, sooner than later, will join their operations in both Guanajuato and Durango states. The silver industry, at least in Mexico, will be the biggest winner. Followed, I pray, by this audience and my portfolio. In the meantime, I will be adding to my stake in Endeavour Silver and coddling my Great Panther shares with great care.
SUNWARD RESOURCES: No substantive comments from the developer of a Titiribi, Colombia, gold and copper property (TSX: V.SWD, Stock Forum), after it “parted ways” with its VP of Exploration, Dr. Amit Tripathi. A founder of Sunward, Vancouver’s Phil O’Neill, only would say, “You can understand that we cannot comment.” Contacts in Medellin tell me Dr. Tripathi and a director disagreed on exploration strategy. Dr. Tripathi and new CEO Colin Andrew said little to clarify the departure.
Bellhaven Copper & Gold: The Colombia miner (TSX: V.BHV, Stock Forum), my largest position and one of the first Planetary Prospects of the original Ticker Trax By Stockhouse & Thom Calandra, reported a 10 percent strategic investment from Iamgold (TSX: T.IMG, Stock Forum). The shares rose 45 percent. More in Stockhouse Movers.
EUROPE ON LE BUS: In 13 days, I will be accompanying a group of miners, prospectors, professors and promoters across several European cities. The Zimtu road show on a bus will make its way to the Munich Gold Show and visit Zurich, Geneva, Hamburg and Vienna. If you’d like to know more, get a free lunch, cocktails and an overview of the metals marketplace, please visit: http://roadtrip.zimtu.com/. The sponsor is Zimtu Capital (TSX: V.ZC, Stock Forum) and seven of its portfolio companies. To register: click here – it is free.
NEW ORLEANS: I will be speaking at Brien Lundin’s New Orleans Investment Conference. Click on this link for details. The topic: “10x Return Candidates in Ghana, Colombia, Sierra Leone, Quebec and Ethiopia.” I go on at 7:35 p.m. Thursday Oct. 27, that’s tomorrow – followed by a revealing workshop. On the Friday afternoon break of the show I will be touring the New Orleans exhibit hall looking at these companies and shepherding anyone who wants to tag along: Golden Valley Mines (TSX: V.GZZ, Stock Forum), Lexaria Corp. & Enertopia Corp., Revett Minerals Inc. (TSX: T.RVM, Stock Forum), Edgewater Exploration (TSX: V.EDW, Stock Forum), Evolving Gold Corp. (TSX: T.EVG, Stock Forum), Coeur d’Alene Mines, Tintina Resources and Bayou City Exploration. … I am a partner of investor outreach firm Torrey Hills Capital in Del Mar, near San Diego, California. Great Panther Silver, Revett Minerals and Golden Valley Mines are Torrey Hills clients.
Stockhouse members – the service is free – can see my entire portfolio online. It is under the portfolio function and my user name, which is TCALANDRA. Aside from Central Fund of Canada (TSX: T.CEF.A, Stock Forum), there is little to nothing in my portfolio suitable for risk-averse investors. I am not a financial adviser or planner. In this article, I am a shareholder of Endeavour Silver, Great Panther Silver, Revett Minerals and Golden Valley Mines.