‘It’s a great time to be in the industry’: Great Panther Mining focuses on stability, growth

Great Panther Silver changed its name to Great Panther Mining (TSX: GPR; NYSE-AM: GPL) last year after adding the Tucano gold mine in northern Brazil to its portfolio of two primary silver mines in Mexico and a silver-lead-zinc-copper project in Peru. Now gold makes up 80% of the company’s revenue and silver the remaining 20%.

“It was a very transformational transaction,” Great Panther’s new president and chief executive Rob Henderson says of the Tucano acquisition. “I wasn’t there at the time but the company made a conscious decision to diversify into gold.”

Last year, the company produced 147,000 oz. gold-equivalent, and its 2020 guidance is for 146,000-158,000 oz. gold-equivalent at all-in sustaining costs (AISCs) in the range of US$1,150 to US$1,250 per oz. gold sold.

Henderson joined Great Panther Mining in April, after heading up copper producer Amerigo Resources (TSX: ARG; US-OTC: ARREF) for seven years. Prior to Amerigo, Henderson spent eight years at Kinross Gold (TSX: K; NYSE: KGC), where he was senior vice president of technical services. He got his start at Rand Mines in Johannesburg where he worked as both a metallurgist and assistant plant superintendent.

“I saw this as an opportunity to join a company with very good assets in Brazil, Mexico and Peru,” he says in an interview. “It’s a growing company and well-diversified and has a good balance of silver and gold, but, for me, it’s going back to my roots as a gold miner.”

For now, his priorities are to continue to build on cost and operating efficiencies at the Tucano mine and grow production and increase exploration at all three mines.

Great Panther owns two primary silver operations in Mexico – the Guanajuato mine complex and Topia – which have been churning out silver for the company since it was created in 2005. The Guanajuato mine complex is Great Panther’s largest operation in Mexico and includes production from the Guanajuato and San Ignacio underground mines, which are situated on the outskirts of the capital city of Guanajuato. The Topia mine, in northwestern Mexico, is 235 km west of the city of Durango.

“Mexico is working well for us,” Henderson says. “The mines have been producing continuously since 2005, they’re in very good historic mining districts and at today’s silver price they’re producing free cash flow for us.”

Henderson notes that when Bob Archer, the company’s founder, purchased the Guanajuato mine fifteen years ago from a cooperative of Mexican workers who had been operating it for 50 years, it had three years of resources on its books and that it still has 3 million oz. today. “We’ve been producing 1.5 million oz. of silver there every year for the last 15 years, which goes to show the exploration potential is enormous for us,” he says. “One of the features of these Mexican silver mines is that you’re always going to have a very small drilled inventory ahead of you, but the systems are huge, and I think we’ve demonstrated that at both Guanajuato and Topia.”

Robert Archer , founder of Great Panther Silver, listens in during a tour of the company’s SGS-managed laboratory at its GMC silver-gold mine in Guanajuato, Mexico, in 2016. Photo by Lesley Stokes.

The challenge with the two silver mines is that they are difficult to drill because they are high-grade narrow veins and you can only drill from underground. “You start off with a couple of years of resources on the books and you drill every year to prove up enough material to mine for the next couple of years. That’s how these Mexican silver mines go, so you have to have faith in the system and both of the mines have fabulous vein systems there which are extensive but you’re never going to have much confirmed mine life ahead of you. They need to be drilled continuously.”

By contrast, Great Panther’s Tucano open-pit gold mine, the third-largest gold producer in Brazil, poses different challenges, he says. Last year, the company had to deal with a pit wall stability issue. The pit’s high walls got wet in the rain and there was a threat of material falling into the pit, so the company had to change the mine plan from a safety point of view, he explained.

“We spent a lot of money on geo-tech drilling so now we understand the rock mechanics a lot better, but it was basically operating where we didn’t have enough knowledge. So we need to know what we can and can’t do and when we have that knowledge through drilling and studies, then we can get more stability in our production estimates.”

Henderson says his focus will be to bring “stability and predictability in our production and costs.”

“In the past, Great Panther has seen too much variability in our production – it goes up and down – and costs go up and down, so for me as an operator I’d like to bring some stability to that and make sure we deliver what we say we’re going to deliver and at the same time keep a continuing focus on cost.”

Meanwhile, at the Coricancha project in Peru, which Great Panther acquired from Nyrstar in 2017, previous operators used a mining method that gave them a lot of tonnage but dropped the grade. Henderson, however, has engaged the company’s Mexican engineers to see if they can employ more selective mining methods that will keep the grade up. The challenge, he says, will be to get enough tonnage to fill the mill. As a result, the company is now undertaking desk-top studies and hopes to make a production decision on Coricancha in the next 12 months.

“It’s a past producer. It’s very prospective on the exploration side. It’s got all the infrastructure on-site, so the capital required for a restart there is low,” he says. “But mining is tricky. We need to figure out what the appropriate mining method is.”

Nyrstar used long-hole stoping and were running at a rate of about 500 tonnes a day, he says. “We’re looking at cut and fill and the rate will be much lower than 500 tonnes per day but we don’t know how much lower. But the grade will be higher so this would keep grades high but the challenge is to find enough headings to keep the mill full.”

Miners underground at Great Panther Silver’s Guanajuato mine complex in Mexico. Credit: Great Panther Silver

As a long time operator and CEO, Henderson knows how hard it is to get everything right.

“In mining, there are always things that can go wrong— there are multiple reasons for things that can go sideways. You have to be on top of everything and can’t keep your eye on one issue … you’ve got to have your eye on all the balls that are moving all the time.”

Looking ahead, Henderson notes that while the company plans to continue exploration at all of its assets in the Americas, it is also focused on M&A in Mexico and Brazil, and points out that David Garofalo, the former CEO of Goldcorp, joined the board at the same time he became chief executive, “and has given us the mandate for growth.”

“My vision is to grow the company,” Henderson says. “It is growing through cash flow right now, and through drilling to increase our resources, and we are also looking to get bigger and become more relevant to institutional investors. A 150,000 oz. producer is on the small side to be of interest to institutional investors, so we want to grow the company to become a bigger producer. The timing is good — it’s a great time to be in the industry.”