Great Panther is on the prowl for acquisitions
TGR: Great Panther recently signed an agreement to acquire the Coricancha mine in Peru. Can you tell us why Peru and why this mine?
BA: I first went to Peru in 2009, and I saw a lot of opportunity there for a company like ours. Peru is the second largest silver-producing country certainly in Latin America; some people would say the world depending on whether you count China as No. 2 or No. 3. Mexico is No. 1. What I recognized in 2009 was that there were very few midsize public companies working in Peru. Statistically, geologically, you have to have a lot of midsize deposits. The big ones are being mined by the larger companies, the smaller ones mainly by small private operators. But there weren't a lot of midsize companies.
So we've been looking in Peru fairly actively since about 2010 and have been negotiating on a number of different deals through that period. I'd been familiar with Coricancha since that time and followed it. When it came available, in 2014, we expressed interest and took an option on the project first to do some work on it, get comfortable with it and decide if it was something that we really wanted to step up and buy.
Essentially we decided that we did. We conducted about $2 million ($2M) worth of work on the property. Then last year we notified the owners, Nyrstar (NYR:BSE), that we wanted to move ahead with an acquisition. We negotiated the terms in Q3/16 and signed the purchase agreement in December. We're just waiting for that to close. Then we'll take possession and start to advance the project.
TGR: Do you have any idea of how soon you would start drilling?
BA: The underground drilling should start probably within a couple of months of us taking possession. Surface drilling will take longer because it requires a permit. We may be able to get a permit by Q4/17 or it may go into Q1/18. The mine is on care and maintenance at the moment. It does have a fully operational 600-ton-per-day plant. Everything is fully permitted. So it's really a question of conducting a prefeasibility-level study, including engineering and environmental evaluations, and doing the drilling.
We'll be upgrading the resource by Q2/17. All of that will give us a better understanding by, hopefully, the end of 2017 as to what really needs to be done to bring it back to full production and the time frame it would take to do that.
But at this point, with the information that we have, we're estimating that it will take about 18 months to bring it back into production at an approximate cost of around $25M. We are fully funded to do that, so we don't anticipate having to come back to the market.
TGR: Where do you see Great Panther going from here?
BA: Focusing on getting Coricancha back up and running is going to be a key aspect of what we do over the near term. At full production, based on historical records, we estimate that Coricancha has the potential to produce about 3 Moz Ag eq on an annual basis, which would be about a 75% increase for us. So it's a very meaningful addition to our portfolio.
But in the interim, we are also looking to make another acquisition. If we could find something that's actually in production now, that would be ideal.
TGR: Great Panther's shares have been quite high recently and have been staying quite high. Can you tell us what's going on with the company financially?
BA: One of our strengths right now is our balance sheet. We did raise some money last year. We completed a bought-deal financing in the summer for $30M, plus we raised another $5.5 through an at-the-market financing over a few months. So net proceeds from all of that were a little over $33M, which, combined with our positive cash flow, has given us about $56M in cash and cash equivalents, and working capital of about $67M, with no debt. So we have a very, very strong balance sheet.
That, plus the prospects for Coricancha and the fact that we don't anticipate going back to market to finance it, are all reasons why the company is attractive right now. I'm pleased to say that there was a positive response in the market when we announced the Coricancha deal back in December, so that was very nice to see.
TGR: Is there anything else that you'd like to tell our readers?
BA: We're very optimistic about the future for Great Panther and are moving forward on our growth strategy with expansion through Peru. We would like to use Coricancha as a foundation for future growth in Peru. Great Panther was built by acquiring past-producing mines and bringing them back into production, refurbishing them and bringing them up to their proper operating efficiencies. So we hope to do the same thing with Coricancha and be able to build on that. By focusing on Mexico and Peru and trying to maintain our focus on silver as much as possible, we think the company has a great future.
Bob Archer is a cofounder of Great Panther Silver Limited, and as CEO and a director, he is responsible for the development of the strategic direction Great Panther Silver. Archer has more than 35 years of experience working for mining companies throughout North America, including Newmont Exploration of Canada Ltd., Rio Algom Exploration Inc., Placer Dome Canada Ltd. and Noranda Exploration Inc. He spent eight years in senior management roles with companies in the junior sector prior to founding Great Panther.