Ahead of the Herd With Great Panther Silver

Rick: What’s your take regarding the silver market and PM market in general Bob?

Bob: There’s a bit of a disconnect between the physical market for precious metals and the paper market. It’s the futures market where prices are determined, the traders are so skittish these days, in terms of trying to determine trends and whatnot, they just hang on every little bit of news coming out, good or bad, and then try to jump on it thinking that this is a signal or a catalyst for prices to move higher or lower.

So, because of that you’re seeing this tremendous volatility in prices that I don’t ever remember seeing in the prices of gold and silver. It’s just incredible. But meanwhile the physical market is really tight. Just ask anybody who’s tried to buy Silver Eagles or gold coins.

You’re paying huge premiums and you often have to wait weeks or even months for delivery. So, the physical market is pretty tight and yet pricing doesn’t really reflect that. Pricing is all over the place, and it’s really tough for a lot of guys to get a handle on and determine whether we’re in an uptrend or a downtrend.

There are never any straight lines in this business, either in the markets or in commodity prices, and so nobody should expect to see that, but I think the long-term trend is still upwards for precious metals because all the fundamentals that brought us to this level in the first place are all still there, huge debt loads, sovereign debt issues, currency crises etc. So, those are big issues and they’re not going away any time soon.

Rick: So you believe we’re in a long-term trend that might be dubbed a precious metal and commodity super cycle?

Bob: Absolutely. I think it’s going to take years to sort this out, all these debt issues that we’re seeing right now. Ultimately, the global economies will get back on track and the countries like China and India and so on, will continue to power forward, and they’ll be the real drivers going through the next few decades. So, they’re going to need commodities to do that. So, yeah, I do think this is going to be around for a while yet.

Rick: Bull markets climb a wall of worry.

Bob: Absolutely.

Rick: The recent sell off is going to be a very short-lived downturn within what is a secular bull market. The opportunity being presented today seems to be quite special for those willing to take advantage of it.

Bob: I was just doing some marketing in Toronto and talking to a lot of guys, a lot of Fund Managers and even when it was just a massive exit from the markets and everything seemed like it was just falling apart these guys weren’t concerned. A lot of them had pulled money out of the markets months ago and were sitting on larger than normal cash positions. They saw this as a tremendous buying opportunity, they were just taking the time to do their research and pick the good solid stocks to put on their radar screens, the ones that were going to be there after the rout, and then they could jump in and buy them at a fraction of what they were trading at just a few months before. So they weren’t concerned at all.

Rick: The companies with production have built-up a tremendous amount of cash. They’ve got good cash flow, and their fundamentals are likely better than they were three years ago, it looks like we’re priced about where we were at the bottom in 2008.

Bob: That’s right, and as you say, for companies that have solid cash flow, metal prices are still higher than they were in 2008, and so if companies costs haven’t changed appreciably, then profit margins have been growing, and that’s certainly the case for us.

Rick: Now, your company, the one we’re talking about today, is Great Panther Silver. Could you give us a bit of the history on it?

Bob: Essentially myself and my original business partner, Francisco Ramos, who’s a Mexican mining engineer, started the company at a private level in 2003 and then used Great Panther, which was a trading shell at the time to go public through a vend-in, and that essentially took place in February of 2004.

The Topia Mine was the project we used to go public and we were exploring on that and building up the first resource to demonstrate the potential in order to put it back in production. And while we were doing that we had an opportunity to buy the Guanajuato Mine, which is now our flagship and essentially completed that purchase in 2005. Then we had both mines in production by 2006, and we’ve just been drilling and increasing production and resources ever since. So we’ve seen a steady climb in both our resources and our production, and the mine life is actually going up, not down, because the more drilling we do, the more resources we build up, the longer the mine life becomes.

Rick: Tell us about Guanajuato, the city and the area, and exactly what we have there. It seems pretty special with the discoveries and increasing the resource.

Bob: Guanajuato is a pretty special case. Silver was first discovered there in 1548 by the Spaniards, and the first mining license was granted in the year 1600, so it’s been in production for more than 400 years, and there are not a lot of mines that can say that, so it’s very special from that point of view.

And a lot of the mining infrastructure, the shafts and tunnels and so on that we’re using, were actually developed by the Spaniards. So, the city itself effectively grew on top of the mines as they were developed, given that these are underground mines, and as the city grew, it became the capital city of the State, and it’s now a city of about 200,000 people.

It has a University, lots of government jobs, obviously, it’s a tourist center, given that it’s also a UNESCO World Heritage site because of the colonial architecture dating back to the 1700s. So, it’s an absolutely gorgeous city to visit, and when we have mine tours and such, our mine office and the main plant and everything is literally a 4 minute drive from the hotel. So it’s tremendous infrastructure, some of the best infrastructure that I’ve ever seen, and it’s a gorgeous place to live and work.

Rick: The people, the citizens in the area actually appreciate the mine being right there?

Bob: Oh, absolutely. It’s very much a mining town. When you first arrive into the city, one of the first things that you see is a statue of a miner, and there are several of these throughout the city, and there’s a large statue, sort of monument type thing, overlooking the whole city that is a kind of a folk hero, that was actually a miner who helped to drive the Spanish out back in the early 1800s. A lot of the hotels and restaurants and so on, have mining related names and that sort of thing. So, it is very much still a mining town. There is a very strong mining culture there, and we have a lot of support from the local people, and we do a lot of work in the community, and it’s a great place.

Rick: Mining underground is different from open pit mining in obvious ways but one that might not be understood is the issue of drilling off resources.

Bob: For an open pit mine you can usually drill off the life of mine resources before you even start, but for an underground mine you typically develop your resources as you go, and that’s true pretty much anywhere in the world.

I’ve worked in underground mines here in Canada, and going back to the early part of my career, a lot of times these mines would only have one or two years resources in front of them, but they have been in operation for decades. The Dome Mine in Timmins, Campbell, Red Lake in northwestern Ontario are a couple that come to mind.

It’s a function of underground mining. Both of our mines are underground mines and that’s just the way it is. But we already have about a 15 year plus mine life at our Topia Mine, and Guanajuato is currently sitting with about a 5 year mine life, and we’ve just actually added to that if you include the San Ignacio Project, which is a satellite project just to the west of town and within trucking distance.

So as far as the plant goes, we can just truck everything around to there, which extends the life of the operation. But we’re still drilling underground at 300 to 500 meters depth in Guanajuato and we fully expect that the resources are going to continue to increase with every drill program.

Rick: You’ve got a resource on San Ignacio and a new project that’s never been drilled?

Bob: We just put a new resource out on our San Ignacio Project, a 4-1/2 million ounce silver equivalent inferred resource, that’s just the initial resource on this property. It represents only about a third of the known strike lengths of mineralization, and probably less than 10% of the total strike length of the veins on the property.

San Ignacio has a huge amount of potential and we’ll be continuing to grow that resource as time goes on. We’re going through the process for permitting to drive a ramp to explore it underground, and then ultimately start to process that material over at the Guanajuato Plant. It’s only 20 km by road. We have excess capacity at Guanajuato. So, that’s going to play a major role over the next few years in terms of us being able to continue to grow our production at Guanajuato.

We’ve just picked up a project on the east side of Guanajuato. It’s kind of a mirror image of San Ignacio in the sense that it’s also within trucking distance, earlier stage exploration, but nonetheless, gold and silver bearing veins on the property. Never been drilled, we’ll be having our first drill program on that coming up this quarter, and if we’re successful there, as we have been at San Ignacio, then that could likewise add to our throughput and our production at Guanajuato as well.

Of course either one of those could end up being developed into a stand-alone operation, depending on how big the deposits turn out to be. So, I see a lot of growth ahead at Guanajuato.

Rick: Can you tell us a little bit about Topia?

Bob: It’s an epithermal silver, lead, zinc vein district with narrow veins, but very high grade, typically running around 450 grams per tonne silver along with about 6-7% lead/zinc and a little bit of gold. We’re currently mining on about 13 different veins in the district and trucking the ore back to the plant in town. It’s a great operation. It does tend to be a little bit higher cost because of the nature of the narrow vein mining, but the grades are high, so that the value of the ore is quite a bit higher. So the profit margin, which is the important part, is about the same at Topia as it is at Guanajuato where the grades are lower, but the costs are also lower.

At Topia we’ve just expanded the plant capacity, and so have lots of room to grow. We’re continuing to drill and develop new mines, new working faces at Topia and try to get the production up. I’d like to see Topia getting up to more than a million ounces a year in terms of silver equivalent production.

Topia has a good long mine life already established.

Rick: Are you on the acquisition hunt?

Bob: We’re looking to add another new mine, either in Mexico or elsewhere in Latin America. We’re fairly active on the acquisition side of things. We have an acquisition team in place, and we also have an exploration manager in Lima, Peru, looking for opportunities in South America as well. So, I hope that in the short term, we’ll be able to add either another mine with immediate production or something with near-term production potential to continue to grow the company.

Rick: As this commodity super cycle has moved forward companies are increasingly having to go off the beaten path into riskier situations, is where you’re operating in Mexico safe?

Bob: You could say that in Mexico, in general, yes the country risk has changed over the last few years, unfortunately not for the better. But it does still depend to a large degree on where you are in the country. We’re very fortunate in that we haven’t experienced any concerns , particularly at Guanajuato, where it’s well away from any of those issues. Guanajuato is a great place to work. We don’t have any security issues there at all.

Topia is in the Sierra Madre Mountains, but it’s also a small operation at the end of the road, and there haven’t really been any security concerns at site for us, and you know, of course we’re always aware of any local issues that might impact us, and we try to be proactive if anything comes up, but fortunately it hasn’t been an issue for us.

Rick: Great Panther Silver is definitely going to grow production, either internally or through acquisition.

Bob: Or both.

Rick: Or both. How’s silver sales going? I know when I go to your website greatpanther.com and I click on Silver Bullion, I see your selling Great Panther silver.

Bob: Yes, and it’s been going well. We’ve had a lot of demand for the products and it’s, well we’re just adding actually a couple of new products. We’ll have one ounce wafers, and 1/2 ounce wafers as well, and a one ounce wafer that’s actually divided into four 1/4 ounce segments on the back, so something a little unique. There’s been pretty strong demand for the product.

Rick: Thanks Bob, it’s been a pleasure.