Great Panther Mining Limited

as does permitting, and we expect to complete an updated resource estimate for the underground by the fourth quarter. We hope to have more to report next quarter. As with many in the industry, we are seeing inflationary headwinds impact our cost of operations significantly more than anticipated for the year. For that reason, we have had to adjust our 2022 cost guidance, which Sandra will detail later in the call. We continue to look for ways to best manage our liquidity taking cost-improving actions and deferring capital expenditures where possible. Revenue for the quarter was $30 million on production of 16,629 gold ounces. Inflation and necessary spending on capital programs led to cash costs of $1,575 per gold ounce sold, and ASIC excluding corporate G&A of $3,080 per ounce per gold ounce sold. As previously stated, we expect to have high costs in the first half of 2022 due to the heavy stripping required to position Tucano for return to steady state production in the second half. We expect costs to normalize and cash flow to improve as production increases throughout the second half of the year and into 2023. We ended the quarter with $21.1 million in cash and cash equivalents and borrowings of $43.4 million. Sandro will go into further detail on these financial results later in the call. I will now pass the call over to Fernando Cojonejo, COO, to discuss results from our operations.

Thank you, Alan, and good morning, everyone. Reduction from Tucano during the second quarter was in line with expectations as stripping continued in preparation for accessing main or lenses and therefore third grades in the second half of 2022. When looking at the production results this quarter compared to the last quarter, we are starting to see modest improvements in line with our plan to return to a normalized rate of production. Goal production for this quarter was 16,629 ounces compared with 14,037 ounces in the first quarter of this year, which is an increase of 18% and 20,609 ounces In Q2 2021, decrease of 39%. Total mine tonnage increased by 76% compared to Q1 2022 and 36% compared to the same quarter last year. This is a result of having two mining contractors, UNM and MINAGS, operating in parallel throughout the different pits. Tucano is in the process of moving into better operational conditions with lower stripping ratios for the year and mining higher volumes of ore for the next several months. Mine ore tonnage and gold grades during the second quarter were also higher compared to the first quarter of 2022. A total of 291,160 tons of mine ore were processed this quarter versus 232,000 21,213 tons in Q1 2022, an increase of 25%. And 211,913 tons in Q2 2021, also a 37% increase. The planned feed rate for the quarter was 0.69 grams per ton, compared to the 0.57 gram per ton in Q1 2022, an increase of 21%, and 0.81 gram per ton in Q2 2021, a decrease of 15%. As Alan mentioned, inflation has had a significant impact on all key consumables and services used in our business, including diesel, cyanide, and others. In addition, due to higher than normal rainfall levels in northern Brazil, particularly in the first quarter of this year, it was necessary to fast track the expansion of the Tucano tailings facility, as well as the installation of evaporators to manage water levels in our tailings facilities. These two items led to an increase in capital spending and led to a higher than anticipated cost for the quarter. Cash cost rounds sold were $1,575 compared with $1,617 in Q2 2021. And ASIC per gold ounce sold, excluding corporate G&A, was $3,080, mostly due to highest tripping levels and the additional capital expenditures explained a few moments ago. During the quarter, the resource conversion program for the Urucum North underground project was completed, and an updated resource estimate is currently being developed by our team in Brazil. In parallel, the company has started trade-off studies for ramp development and mining methods in parallel with engineering and metallurgical project work, while planning activities are underway. The permitting process has also started with the state environmental agency, SEMA, Project development, including the update of mineral resources and reserves, is on track to be completed by the fourth quarter of this year. Regional target definition, validation, and prioritization is currently underway in consultation with Gold Spot Discoveries. This project began in June and results are expected in early August. Portable drills are being contracted and a 2,500 to 3,500-meter drill program is expected to begin in August upon completion of the Gold Spot Study. At Coricancha, we are continuing to evaluate options to optimize the project and will report new developments as they arise. I will now pass the call over to Sandra Baycock to discuss our financial results in more detail. Thank you.

Thank you, Fernando. Revenue for the quarter was $30 million compared with $39 million in the same quarter last year on gold sales of 16,076 ounces compared with 21,459 ounces in the same period last year. The average realized gold price was $1,865 per ounce versus $1,850 per ounce in Q2 2021. And our mine operating income was $0.1 million compared with a loss of $2.6 million. Our net loss was $12.1 million compared with a net loss of $8.7 million in Q2 2021. And EBITDA was negative $5 million compared with negative $0.9 million in the same quarter last year. Net cash flows from operating activities before change in non-cash working capital was negative $8.3 million compared with negative $0.9 million in Q2 2021. We ended the quarter with cash and cash equivalents of $21.1 million compared with $35.2 million for the same period in 2021 and $33.4 million at the end of Q1 2022. We made significant investments in the business in the second quarter, including $15 million in stripping, $7.1 million in capital investments, and $1.8 million in exploration. Further, we repaid $5.5 million in debt on a net basis, with borrowings totaling $43.4 million on June 30, 2022. In addition, during Q2, the company issued shares for proceeds of $3 million through the ATM facility. Finally, we received $13 million in cash proceeds from NearStar in relation to a settlement of NearStar's rights and obligations, including NearStar's indemnity agreement in connection with the Coricancha mine. As Alan and Fernando both mentioned previously, we have determined that Takano cost guidance for the year must be adjusted. Cash costs have been revised from $1,200 to $1,300 an ounce sold to a range of $1,400 to $1,500 per ounce sold, gold ounce sold. ASIC, excluding corporate GNA, has been revised from a range of $1,600 to $1,700 per gold ounce sold to a range of $2,200 to $2,300 per gold ounce sold. The significant difference between ASIC and cash costs reflects investments in stripping, which will yield gold production in 2023, as well as necessary capital expenditures Fernando mentioned earlier on the Tucano tailings facilities. Forecast production remains within the previously guided range of 85,000 to 100,000 ounces. The company expects to generate positive cash flows from its mining operations in 2022 prior to capital investments, debt repayment obligations, and exploration and development costs. However, further financing will be required to improve working capital, fund plan capital investments, and exploration programs for its operating mines and meet scheduled debt repayment obligations. We are evaluating options to that to secure new sources of capital to allow us to achieve our longer-term objectives. Thank you. That's all we have for formal remarks. I will now turn the call back to the operator for the question and answer period.

Thank you. We'll now begin the question and answer session. To join the question queue, you may press star then 1 on your telephone keypad. You'll hear a tone acknowledging your request. If you're using a speakerphone, please pick up the handset before pressing any keys. To withdraw your question, please press star then two. Our first question is from Heiko Ehle with HC Wainwright. Please go ahead.

Hey there. Thanks for taking my questions. Hope everyone's doing well. Going through your release, there was a sentence in there that you expect a, and I quote, return to normalized rate of production in the second half, unquote. Can you maybe just provide a bit of a month-to-month overview? I mean, we're now in August. I assume July is obviously done, and you put this out after July was over. Can you just give a little bit of color of how July went, given that there was no Reg FD issues, given there's a public setting here?

Hi, Heiko. I think, you know, it's fair to say by the fact that we've kept our guidance unchanged, I think you can work out that we also mentioned that two-thirds of our production will come in the second half of the year. So we're seeing a progressive ramp-up through Q3, and then I would say characterize Q4 as being at this kind of steady state. Hopefully that helps.

That's fair. Okay. Just moving on a little bit, Alan, you start this call with talking a little bit about inflation. I mean, it's a topic that's on everyone's mind, just open up a newspaper. But just moving on from all of that, are you having trouble getting any specific components inside? I mean, It seems like random little spare parts or like, you know, random odds and ends are hard to show up. It seems like the important things tend to show up even at a higher cost. But is there anything that you're not getting to site that you need? Is there any bottlenecks that are starting to develop? Or is it just as long as you pay up, everything comes? And just maybe building on all of that, are you seeing anything get worse in that regard?

There were certain issues around some parts associated with the mining contractor mobilizing, but I think that was just also part of the mobilization process, things like bucket teeth and things like that. But I think we're on top of those now. There have been... some uh delays in mean actually mobilizing because of some equipment supply delays but uh you know delivery dates are are set it's not really that much of a slippage maybe maybe about a month um i don't know if fernando can add any additional color yeah i mean the uh the um

The delays we have seen with the contractor in terms of parts and the stock components are just part of the mobilization process. But in terms of key consumables in Tucano, we haven't experienced any delays. Tucano is a consolidated mine operation, has many years that has been operating and the supply chain is quite well structured. Yeah, no issues from a production perspective specifically on delivery of those supplies.

That's encouraging to hear. I appreciate everyone's time. I'll get back to you. Thank you.

The next question is from Jake Sikelski with Alliance Global Partners. Please go ahead.

Hey, guys. Thanks for taking my questions. So Sandra touched on this a bit, but I'm just trying to get a handle on where costs might settle in once steady-state is reached later this year. I mean, do you think longer-term ASIC of $1,200 an ounce or so, sort of like what we saw in 2020, is achievable? I'm just trying to get a sense of what the thinking is there.

Well, you can see the ranges that we've guided to, so that should give you a feel for what our expectations are for the balance of the year. A big component of the cost increase has been fuel. It's increased very significantly in Brazil. And I mean, I don't know if you saw today that the crude oil price broke below $90. So obviously it's come off quite significantly from its recent high. So We're hoping that we might, in some areas, see some mitigation of some of these significant cost increases that we've had to bear this year. But it's obviously very hard to tell. I mean, the world's a very uncertain place right now. So it's really hard to look that far into the future. And we've just projected for the balance of this year in our revised guidance

Fair enough. Okay. And then just on Erkom North Underground, I know originally you guys had plans to potentially start development work there later this year. Is that still the plan or has that been deferred to the first half of 2023?

The first thing that we have to really get an understanding on is what the permit type and timeline should be. We think the permitting should be relatively simple given it's within existing operations, but we haven't had that confirmed. So, you know, the exact timing may have been moved out of our hands in any case. That being said, obviously we're still doing the engineering and the optimization work, so that's underway. And we, you know, Obviously also had to apply some capital this year to address the tailings and water balance likely had reported by a number of companies. We've done unusually high rainfall at the early part of this year and have had to alter our capital plans accordingly. especially as we think that the way the world's going, this higher rainfall may actually be the new normal. So I think we'll just have to see how the permitting progresses and where we stand from our ability to fund the project before we commit the dollars. So certainly wouldn't anticipate commencing construction this year, but hopefully, as she suggested, it would be something that we'd be able to move forward next year

Makes sense. That's all for me. Thanks again. Thank you.

The next question is from Joseph Rieger with Roth Capital Partners. Please go ahead.

Hey, guys. Thanks for taking the questions. Most of the stuff I wanted to touch on has already been asked. But any update on the fine related to the fish kill that you guys announced, I guess, was it late 2020? 21 or early 2022?

No, there's been no update in that.

Okay. And then, I saw the settlement around, is this an indication that you guys might be looking to sell that asset as well?

We're certainly assessing, as we've said, assessing all our options. including um the potential to to restart operations there but certainly everything's on the table right now in terms of what we do with corey conchette as we've said previously our capital allocation priorities are uh onto canon okay fair enough and then if you don't sell corey concha and you just complete the current asset sale um based on your guys

revised cost estimates, do you feel comfortable you can cover your debt with the return to positive cash flow from Takano?

Yes, I mean, as I say, we should be back to steady state, true steady state operation by Q4, and our current mine plan shows relatively healthy 2023, so we should be in good shape on that basis. You know, we just had to overcome the real pivot in the mine plan with the slope stability issues at Iroquois Central South, but we're now coming out the other side of that and I think we're very close to, as I say, returning to steady state production.

OK. Alright, thanks. I'll turn it over.

The next question is from Elise Mochizuki with Akamai Capital. Please go ahead.

Hello, can you hear me?

Yes.

Hi, thanks for taking my question. Last week in the United States, that court trial for those precious metal traders who were accused of manipulating gold and silver prices drew to a close. What message do you think that mining companies might want to tell potential and current investors?

Sorry, could you repeat that?

Yeah, so last week there was that court trial for those precious metal traders that were accused of manipulating gold and silver prices. What message do you think that mining companies might want to tell potential and current investors?

I have to confess I'm not familiar with what you're referencing and really... Okay, yeah, that's okay.

Moving on to my next question. It's a macro question about the junior mining industry. It's an interesting time for investors thinking of entering or returning to mining stocks where some investors see buying opportunity at reasonable stock prices. When you are speaking with investors, how are you addressing the risks of inflation, recession and these other economic challenges?

Well, I think we as a company are no different from other mining companies and other industries. I think As I said earlier, we're trying to navigate our way through uncertain times. And by doing that, we're being careful with our capital allocation. We are looking to where we can reduce costs and improve efficiencies, all the typical things that any company tries to do. through a downturn, especially mining companies that are subject to the metal price cycle impact. So I don't think we're doing anything that we wouldn't be doing in other similar situations that the companies faced in its history.

This concludes the time allocated for Q&A session today. I'd like to turn the conference back over to Alan Hare for any closing remarks.

Thank you, operator. This quarter was another challenging one, but we are starting to see improvements and continue to progress in the plan to turn things around at Tucano. We expect to see improving results next quarter and beyond, and we look forward to sharing our progress with you. Thank you for your time today.

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.