Stockhouse member represents retail shareholders on silver mine tour.
On Monday, Stockhouse started publication of a multi-part series about littleguy123’s tour of Great Panther Resource’s (TSX: T.GPR, Stock Forum) silver-gold mine in Guanajuato, Mexico. (Read part I.)
In this part, littleguy123 leads readers down the due diligence pathway as the investor reveals more about what he learned in Guanajuato on his excellent adventure.
And stay tuned for part III in the series as Stockhouse touches base with Great Panther’s CEO Robert Archer, who has generously agreed to share thoughts about investor relations, Stockhouse and the “little guy.”
[Editor’s note: I regret that I first identified Great Panther Resources as a “junior gold company” in the title to the first part of the series, rather than a “junior silver company.” The error has since been corrected.]
Now, on to the interview…
Stockhouse: Let’s get to the tour itself. What exactly did you see, and what were your reactions?
littleguy123: This was my first mining tour, so I lack previous experience to make any comparisons. However, being able to personally view the mine and the mill WHILE the company's operations (and progress) were being presented to me undoubtedly improved my own comprehension and retention of information.
For example, there has been over a BILLION ounces of silver extracted from this mine (all relatively close to the surface). My previous “take” on the mine was that future operations would be almost completely dependent on exploring/extracting silver from greater depths. So I was pleasantly surprised to see NEW mining activity along a ramp only a few hundred yards from the entrance (a VERY short distance in relation to the many MILES of ramps in this HUGE complex). Later I was shown a map, indicating large areas still close to the surface which had not even been drilled – let alone mined.
SH: What’s one thing that took you completely by surprise that you didn’t know?
LG: Along with what I mentioned above, the fact that the company's recent jump in production and revenues was on significantly LOWER throughput was certainly a surprise. Combined with greater recoveries, it emphasized that the company was now focusing on improving efficiency, rather than simply running as much tonnage as possible through the mill.
SH: Did you get an impression of what the locals thought of Great Panther’s operation?
LG: You've probably hit on the STRONGEST impression I got from my trip. Guanajuato is a BEAUTIFUL city (a U.N. World Heritage Site), which for over 400 years has literally been built around this mine. The mine is as much a part of the city's culture as it is its economy. It's a VERY nice feeling to know you're investing in a company which is genuinely improving and restoring the heart of a city. GPR hires virtually ALL its operational personnel from the local population, and in fact the University of Guanajuato supplies most of the mining professionals for ALL of Mexico.
SH: I know that you’re bullish on Great Panther. Did the tour change your opinion of the company in any material way? More bullish? Less?
LG: My previous bullishness was mostly focused on the ENORMOUS resource potential of the company, with operations being a secondary factor. As my understanding of the company improved, I now have a much more enthusiastic (and more informed) perspective on the actual mining operations themselves.
SH: Anything you can reveal about future plans for the company?
LG: A lot has happened recently, so your question touches on many factors. Short-term, there is new equipment on order to help re-activate additional “zones” in the mine, as the company begins to ramp up throughput toward the present capacity of 1200 tpd from current throughput of a little over 600 tpd.
Longer-term the company is on track to access the vast amounts of high-grade silver (and gold) ore from lower levels (almost certainly in the hundred's of millions of ozs). Also, the company recently discovered base metal mineralization for the first time in the 400+ years that the mine has been in operation. In addition, capacity can be raised to 1600 tpd simply by adding a fourth ball mill – an inexpensive means of increasing production.
Finally, the Guanajuato mine is just one of the company's two profitable, operational mines, and one of its three main projects. From a production standpoint, the company's third project (Mapimi) provides the company with its biggest upside as a future open-pit operation, while the resource potential could eventually be comparable to the huge Guanajuato mine.
SH: What was one thing you DIDN’T like about what you saw with respect to company operations?
LG: When I got back and “reported” to the BB, I mentioned that current throughput was a “good news/bad news” issue. Obviously, no shareholder likes to learn that a mine has REDUCED throughput from previous levels. The fact that the company could actually significantly increase production on lower throughput certainly cushions that blow.
The only other somewhat negative factor is that the company isn't going to be able prove-up the vast amounts of silver at Guanajuato's lower levels in huge chunks – it would be prohibitively expensive. Instead, the company will be accessing all that ore in more cost-effective “bite-size” pieces – as it starts extracting that ore. As Mr. Archer said to me privately, and at the ceremony, he expects Guanajuato to be cranking out silver long after he is dead.
SH: Is there anything you think the company could be doing differently / better with respect to its operations? What about with respect to communication with retail shareholders?
LG: I simply lack the expertise to be able to suggest to the company how to do things better going forward. In hindsight, you could argue that they tried to ramp up production too fast – leading to high cash-costs and low efficiency. However, that must be balanced with financial realities. If the company had not attempted to maximize throughput at earlier stages, it could have meant greater capital requirements to fund operations – and more dilution for shareholders.
As for communication, in addition to my personal invitation to the trip, I was strongly encouraged to contact the company regularly for up-to-date information, and I was also urged to pass along the same message to others on the BB. So it's hard to find any reason to be critical on that front.
SH: Did you get an idea of how management feels about the macro conditions for the precious metals sector? Ex: capital costs rising w/ inflation, difficulty finding skilled labor, credit crisis leading to hard times raising money, etc.
LG: As for the “macro” picture for the sector, I probably spent more time sharing my views with them, than the other way around (lol). It's their responsibility to plan conservatively – so that the company is capable of reacting/adjusting to any proverbial “worst-case scenario.”
Regarding the other factors you mentioned, with both mines profitable, GPR is not as vulnerable to credit/financial factors as are the exploration plays. From a costs standpoint, I never actually asked any direct questions. I already knew Mexico was a low-cost jurisdiction for global mining. I found out the company gets ALL its power from hydroelectricity – through the town’s main power-grid, so it's in better shape than MANY other producers in the industry. As I mentioned before, the University of Guanajuato is literally in the company's own “back-yard,” and Mexico's resource sector was based on mining long before it ever started producing large amounts of oil – so there are less problems with skilled labor than many/most mining industries in other countries. In fact, the majority of my portfolio is invested in companies with Mexican operations/properties.
SH: Give us some examples of questions (and answers) that you asked / received from the GPR team that you can share with Stockhouse readers.
LG: Lol! I asked more questions on the mine tour than everyone else on the tour put together!
I didn't actually take notes - although I saw Jay Taylor doing a lot of writing as my questions were answered. Maybe you should ask him (lol)? I also had a chance for a long conversation (in an informal setting) with the V.P. of Operations (Francisco Ramos Sanchez) – who was Robert Archer's original partner in starting up the company.
SH: How did you prepare yourself for the tour?
LG: “Prepare” myself? Lol! I had no idea what to expect – and was prepared accordingly.
SH: Do you feel like you have an open line of communication now with GPR management? With Archer himself? Is this important for retail shareholder relations, and if so, why?
LG: As I alluded to before, one of the many positive surprises from this whole experience has been how open, friendly, and eager to talk about the company EVERY member of GPR's team has been throughout. With GPR as my largest holding, this certainly provides me with a greater comfort level with my holding for the future.
I have an open line of communication with Robert Archer; I've already utilized this line of communication, and will do so in the future. With all the volatility, propaganda, and manipulation which are realities in today's market, in my opinion it's a big plus when shareholders know they can go DIRECTLY to management for clarification and/or more information regarding current and future issues.
SH: I take it the company covered all your expenses…
LG: The company paid for my air-fare, some of my meals and “refreshments,” all the entertainment and tourist activities I could squeeze in, and booked me into a VERY nice hotel (at their corporate rate). I personally covered the remaining expenses.
SH: Were you offered any equity in the company, for example, were you given the opportunity to participate in a private placement?
LG: Lol! I've made no secret on Stockhouse (or to the management of GPR) that I truly am a “little guy” in the world of investing. I also made that clear to the MANY people I met on the trip. I wanted to avoid creating the impression that I was some big “investment tycoon” - so those sorts of conversations never took place. GPR has never offered me any “sweetheart” deals of any kind.
SH: Did you or do you own shares in the company?
LG: Yes. GPR is my largest holding.
SH: Was there any kind of agreement that you would do a formal (or even informal) write-up of the company? A report from a lay investor?
LG: Nothing of this nature was discussed at all prior to me actually leaving for Mexico. It wasn't until after I returned that I mentioned any BB posting based on this trip, as well as the possibility of Stockhouse itself reporting on my experience. No one from GPR ever made any inquiries or suggestions about what I would (or wouldn't) say after I returned, though I'm sure they expected I would have SOMETHING to say on the BB.
SH: Is this an experience (visiting mine sites) that you would actively seek to have again in the future?
LG: The people whom I met on the trip (who attend these functions regularly) told me that this is as good as it gets. You rarely (ever?) get to do a mine tour with a mine which is LITERALLY next door to a U.N. World Heritage site. It's a beautiful city with a fantastic climate (and NO bugs!). People who would never consider buying mining stock should still look at Guanajuato as a great place for a vacation!
I also have to mention the many extremely nice (and interesting) people I met throughout my trip outside of GPR's management team. I expected a certain amount of “VIP” treatment from Great Panther – but wasn't expecting those not on the company's payroll to extend that same reception.
If any kind of similar opportunity arose in the future (with GPR or another company), I would be strongly inclined to attend.
SH: Anything you would like to add?
LG: Personally, this has been a very rewarding experience for me from every perspective. I'll even offer you a title for this article: “Littleguy's Excellent Adventure” - though perhaps that would be a better title for a Reader's Digest feature, rather than for an investor website (lol).
This marks the end of the formal interview with littleguy123. If you have follow-up questions, feel free to post them in the comment section below, or look for the writer on his Stockhouse blog Outside the Market.
This conversation took place with a member of the Stockhouse community.
Stay tuned for Part III, an interview with Great Panther Resource’s President and CEO, Robert Archer, coming next week.
