Today I’m speaking with Robert Archer, President and CEO of Great Panther Silver Ltd. (TSX: T.GPR, Stock Forum).
Mr. Archer has more than 30 years 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.
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.
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Great Panther is a sponsor of Richard’s site aheadoftheherd.com. Richard does not own shares of Great Panther Silver