Great Panther is a Canadian mining company that has just commenced mining at its 100% owned Topia silver mine in Durango, Mexico, which it acquired in February 2005. Commercial production is slated to begin in a few weeks once the plant maintenance is complete.
In July 2005 the Company signed a Letter Of Intent to acquire a total of 1,100 hectares, with two main properties in the Guanajuato District, Mexico. These properties contain four silver-gold mines, including the Valenciana Mine, once regarded as the 'richest silver mine in the world'.
The Guanajuato District is one of the most prolific and best known silver districts in the world. Estimates of historic production in the District exceed one billion ounces of silver and 4 million ounces of gold with the mines having been in continuous production for approximately 400 years.
Mexico is the world's largest producer of silver, producing 99.2 million ounces of silver in 2004. It accounted for 15.6% of total global production.
Great Panther is listed as a mining company on the TSX Venture Exchange. The Company's head office is in Vancouver.
The Company owns several silver-gold properties in Mexico. Apart from the Topia and Guanajuato properties mentioned above, it also owns the Virimoa gold property and the San Antonio gold-copper project (more details in the Properties section below).
The Company has been raising cash to pay for its acquisitions. On July 19, 2005 it closed on $1.025 million; on September 14, it closed on $3.63 million and on October 4, 2005 it closed another round of financing of $1.93 million.
It intends to raise another $15 million in funding through an issue of silver-backed redeemable preference shares. These shares would be issued, in Canadian dollars, at the average US$ price per ounce of silver for the previous month. Paying a 7% dividend in Canadian dollars, the issue would be secured against the Company’s silver production. In addition, the preference shares would have a redemption feature, whereby the Company could redeem them at its option at the end of the third and fourth anniversaries of the issue, and be required to redeem all remaining preferred shares outstanding at the fifth anniversary of the issue, at the Canadian dollar equivalent of the then average US dollar price per ounce of silver. Thus, investors would get a fixed yield plus/minus the full value for any upward/downward movement in the price of silver.
According to information provided by the Silver Institute, an international industry association, the supply-demand fundamentals for silver are very attractive from an investor's perspective.
In 2004, the average price of an ounce of silver rose by 37% from a year earlier. The broad categories of silver demand in 2004 were (in millions of ounces): industrial applications (367), jewelry (248) and photography (181). Total demand was 879 million oz., down just 4 million oz. despite a massive increase in the price of silver during the year.
Supply came from three primary sources (in millions of ounces): mining (634), government sales (62) and silver scrap (181).
The key factor to note is that newly mined silver only covered 72% of the total demand for silver in 2004. So a key determinant of silver’s price in the future is how much silver exists above ground and is available for sale. This number is controversial, as it is very difficult to collate these numbers and estimates vary widely.
According to the Silver Institute there are now only 202 million ounces of silver above ground. The US government, once a large hoarder of silver, has depleted its entire stock and now has to buy silver on the open market to mint silver coins. The Chinese government, a major supplier of silver, is either running out of silver or is hoarding it. It sold an estimated 62 million ounces in silver in 2003 but dramatically reduced this to only 34 million ounces in 2004.
GFMS, a leading industry researcher, states in a study published in September 2005, that it believes that China will become a net importer of silver in the next few years.
Bill Gates of Microsoft and Warren Buffett of Berkshire Hathaway (the two richest men in the US) are known to be very large investors in silver.
Mexico is the world’s largest producer of silver (at 99.2 million ounces), followed by Peru (Canada ranks seventh at 40.6 million). Mexico is home to many high-grade gold and silver mines.
The map below shows the region within which the Company’s properties lie, and are marked by red stars. Major mines and deposits operated by other companies are shown by red dots.
TOPIA: The Topia Mining District is one of the oldest in Mexico, producing an estimated 30 million ounces of silver since 1538. Mexico’s largest silver mining company, Minera Mexicana Peñoles, built the Topia silver mine in 1952 and produced substantial amounts of metal before selling the mine to a former manager in 1989. From 1952-1999, the mine produced 15 million ounces of silver, 18,500 ounces of gold, 48,000 tonnes of lead and 44,500 tonnes of zinc.
The Company owns 100% of the rights to mine 1,500 hectares and explore another 4,844 hectares. It acquired the property for US$ 2.57 million (of which US$ 1.8 million is vendor financed and payable from future cash-flows).
The property has a 200 ton per day mill onsite. The average mill head grades during that period were 437 g/t silver, 0.87 g/t gold, 3.9% lead and 4.2% zinc. Production ceased in 1999 due to low silver prices and resumed this year at 25% of mill capacity prior to the sale of the property.
The Company plans to begin reprocessing silver from the tailings pile, and increasing its exploration program to define and mine high grade veins for future production. It expects to reach full capacity in 2006.
Early underground samplings have confirmed Peñoles' historical grade data from 67 channel samples, except that gold grades were consistently and significantly higher (up to 5 times) in the Company’s sampling. Further work is planned to investigate if the defined mineralisation was undervalued previously.
GUANAJUATO: This property is located just outside the capital city of Guanajuato State, 380 km northwest of Mexico City. Guanajuato was for centuries one of the richest cities in Mexico, as enormous wealth poured out of its silver mines.
he Guanajuato Mining District is one of the most prolific and best known silver districts in the world, with silver being discovered in 1548 and estimates of historic production ranging from 700 million to 1.5 billion ounces of silver and 4 to 7 million ounces of gold. During the 18th century, the district was reportedly "producing one-third of the world's silver".
The Company has signed a Letter of Intent to acquire a 100% interest in a group of producing silver-gold mines in Guanajuato, Mexico. The total purchase price for the proposed acquisition is US$7,250,000 which includes 1,100 hectares in 2 main properties, the 1,200 tonne per day plant, workshops and administration facilities, complete mining infrastructure, mining equipment, and certain surface rights (real estate). The transaction is expected to be formalised by November.
The property is being acquired from a mining cooperative that has struggled through low silver prices, running up large debts and operating at 20% of capacity. There has been no drilling done since 2000.
Drill holes from the 1980's and 1990's, however, indicate that the mineralization continues to depth under the existing workings. In addition, there is significant potential to block out new resources on the existing levels with a comprehensive drilling and sampling program. Great Panther's management believes that, with such a program in place, a new and substantial resource base could be established such that the mines could be brought back into full production.
VIRIMOA: The Virimoa Property is situated in the heart of the Sierra Madre Mineral Belt and close to a number of significant gold and gold-silver deposits. It is 17 kilometres southwest of Great Panther's Topia Silver Mine. The claims cover 148 hectares. The Company has conducted a small diamond drilling program following the successful delineation of a 250 metre wide zone of gold-silver-zinc mineralization. The drilling indicated that the zone also contains a significant amount of copper and further work is planned to determine the extent of the mineralization.
SAN ANTONIO: The San Antonio Gold-Copper Project lies within the well-known Guadalupe y Calvo Mining District in southwest Chihuahua. It comprises 5 exploitation concessions that total 643.7 hectares and 2 exploration concessions encompassing 11,666 hectares.
Great Panther commenced a 20-hole, 2,000-metre diamond drilling program in February 2005, which helped to outline the presence of a gold-copper system more than 14km in size. The drill program was the first ever conducted on the property. Results are provided in the press release of July 26.
Robert Archer, PGeo (President & CEO): More than 25 years in the mining industry, including 15 years of mineral exploration with Placer Dome, Newmont, Rio Algom and Noranda and 9 years at the senior management level of junior exploration companies. Mr. Archer has participated in or supervised four positive feasibility studies, including one at Placer Dome’s 15 million ounce (gold) Dome Mine. Mr. Archer has an Honours B.Sc. degree in geology from Laurentian University in Ontario.
Kaare G. Foy (Chairman & CFO): Director of several Canadian public companies (Cangold Limited, Central Asia Gold Limited & Covik Development Corp.). Mr. Foy has a Bachelor’s degree in Economics from Monash University in Australia and became an Associate of the Australian Society of Accountants.
Malcolm A. Burne (Director): Executive Chairman of Golden Prospect PLC, a publicly listed UK gold fund. A former stockbroker and financier, Mr. Burne has worked throughout the world and is a highly successful and respected businessman with extensive contacts in London, where he lives.
John T. Kopcheff, BSc (Honours) (Director): Managing Director of Victoria Petroleum NL, a company listed on the main board of the Australian Stock Exchange. A petroleum geologist by training, Mr. Kopcheff has many years experience in managing and financing public companies.
Ing. Francisco Ramos Sanchez (Vice-President of Operations): With 27 years in the mining industry, Ing. Ramos is a Mexican mining engineer and metallurgist based in Mexico. He designed and built the plant for Luismin’s (owned by Goldcorp) San Martin Mine in Queretaro State and is highly respected in the Mexican mining industry.
Robert Brown, PEng (Vice-President of Exploration): More than 25 years in the mining industry including extensive experience throughout the Americas. Mr. Brown spent 15 years with Lac Minerals, culminating in the position of Exploration Manager for Western Canada. He has a degree in engineering geology from Queen's University.
Ing. Jesus Rico, MBA (General Mine Manager): Ing. Rico is a Mexican mining engineer with almost 30 years experience in the mining industry, and used to manage the Topia Mine for Peñoles in the mid-1980's. He has also been mine manager at a number of Peñoles’ other operations in Mexico.
Ing. Luis Bravo (Mine Superintendent): Ing. Bravo has 17 years experience in mines throughout Mexico and was recently Mine Foreman at Luismin's Tayoltita Silver-Gold Mine in Durango.
Great Panther has the opportunity to become a highly profitable mining company, if it is able to operate its newly acquired mines at their previous capacities and grades, or better. With silver prices now at US$ 7.69 per oz., these mines have historically produced at between US$ 3 & 4 per oz. Successful execution will allow the Company, at full production on the above properties, to become one of the leading primary silver producers in the world.
It needs to raise capital to complete its acquisition, and to modernise its operations. It expects to ramp up production to a capacity of approximately 4 million ounces of silver equivalent, while implementing a mining plan to improve grades. It will undertake exploration to discover new resources.
For more information, please visit the Company website at: www.greatpanther.com
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