“Coricancha will provide a 75% increase in the production level for Great Panther Silver”

James Bannantine

CEO, GREAT PANTHER SILVER

June 18, 2018

What attracted you to Great Panther Silver to join as CEO?

I joined Great Panther in August of 2017, after spending six years as the CEO of Aura Minerals, so my focus is mining in Latin America. I liked the combination of the steady and profitable production Great Panther has in Mexico with the growth opportunities elsewhere in the region, the first of which is Coricancha in Peru. We are currently producing a bit more than 4 million silver equivalent ounces,  between our Guanajuato and Topia mines. Coricancha will add 3 million extra ounces so it will provide a 75% increase in the production level for Great Panther.

What is the status of the Coricancha mine?

We published the latest preliminary economic assessment (PEA) for Coricancha in May 2018, and it contained no surprises. Coricancha used to produce 3 million ounces of silver equivalent annually, and the PEA shows an expected production of 3.1 million ounces, with an average head grade of 768 grams/tonne (g/mt) silver equivalent, split between gold, silver, lead, zinc and copper. It offers a very good internal rate of return (IRR) of 81%, and a net present value (NPV) of $16.6 million, as well as a relatively low initial capex to get the mine restarted, of just $8.8 million.

We have a four-year mine-life to begin with, in a mine plan that uses 28% of our resource statement. The immediate next step for us is a 6,000 mt bulk sample program to test our mining method, recoveries, and dilution rates. Assuming that is successful, we will restart the mine next year to have it fully up and running by the end of 2019.

Nyrstar shut down Coricancha in 2013. What is your approach to have a profitable operation?

Nyrstar’s strategy was a high volume approach to feed their smelters, while we are going after high grade and high margin. We are a narrow-vein mining company: if you look at Guanajuato, the mine has a 90-centimeter (cm) vein, and Topia has a system with a 25-cm vein. Coricancha sits somewhere in the middle, with a vein of around 55 cm and a plant that will process 600 mt/d. We expect to develop most of Coricancha with modified mechanization. Our study anticipates using a combination of resue mining and captive cut and fill, which is a mechanized method with very small equipment. Nyrstar suffered from dilution, so our main focus is going to be dilution-control, which means lower volume and higher selectivity for narrow mining width, as well as having more mining faces.

Coricancha has a history of more than 100 years of operations, on and off. How long could you extend mine-life there?

We are a producer, so we need to have resources in front of us to keep our production, and we have to drill every year. All of our capex and drilling goes to our all-in sustaining cost, so we do not want to overspend in drilling. Our Mexico’s mine has had a four-year mine-life for over 10 years. At Coricancha, once we get into the mine, we will have an opportunity to transfer more of the remaining resources to the mine plan for phase II, while we will also be able to drill underground to increase the resource base.

After Coricancha, how would you like to continue expanding Great Panther’s asset portfolio?

Our strategy is to grow in the Americas, with a focus on Latin America. We are looking for another project that will add around 5 more million ounces of silver equivalent. We like Mexico and Peru, with good mining laws, mining workforce and populations that understand mining. I would also add Brazil to the list. We want to find a silver or precious metals project. We are looking for late-stage projects either operating, on care and maintenance, or maybe a greenfield project ready for construction, but not an exploration project.

What is your view of silver fundamentals?

Our business plan is not based on the silver price going up – we are making money at today’s prices. Having said that, we believe the current price is a bit lower than what the medium-term silver price should be. We think that silver has a strong industrial demand, as well as a strong physical demand for jewelry and silverware. Last year we suffered on the investment demand side of silver, but we think that silver has upside on the price, and the consensus forecast around the world is $18/ounce for the medium term. The gold-silver ratio of 80 to 1 is too high, it has historically been 65 to 1. We are not counting on it, but if the silver price goes up by $1, our margins will increase by approximately 30%. In any case, just restarting Coricancha will have a significant effect on our cash flow and our market capitalization.

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