EX-99.1 2 ex991.htm Q2 FINANCIAL STATEMENTS

Exhibit 99.1

 

 

 

 

 

 

 

 

 

 

 

 

GREAT PANTHER MINING LIMITED

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 

FOR THE THREE AND SIX MONTHS ENDED

JUNE 30, 2021, and 2020

 

Expressed in US Dollars

(Unaudited)

Great Panther MINING Limited

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Expressed in thousands of US dollars - Unaudited)

       
   June 30,
2021		  December 31,
2020
ASSETS          
Current assets:          
Cash and cash equivalents  $35,229   $63,396 
Restricted cash   1,031    1,024 
Trade and other receivables (note 4)   17,899    15,644 
Inventories (note 5)   30,090    33,743 
Other current assets (note 6)   11,352    5,675 
    95,601    119,482 
Other receivables (note 4)   7,877    11,836 
Mineral properties, plant and equipment (note 7)   128,111    110,559 
Exploration and evaluation assets   26,580    26,334 
Other assets (note 8)   9,170    12,209 
   $267,339   $280,420 
           
LIABILITIES AND SHAREHOLDERS’ EQUITY          
Current liabilities:          
Trade payables and accrued liabilities (note 9(a))  $53,818   $53,221 
Current portion of borrowings (note 10)   25,484    30,933 
Derivative liabilities (note 11)   —      2,974 
Reclamation and remediation provisions - current   6,526    958 
    85,828    88,086 
Other liabilities (note 9(b))   5,487    6,117 
Borrowings (note 10)   833    2,465 
Reclamation and remediation provisions   63,183    67,367 
Deferred tax liabilities   4,854    4,682 
    160,185    168,717 
Shareholders’ equity:          
Share capital (note 12)   269,919    268,872 
Reserves   16,396    11,604 
Deficit   (179,161)   (168,773)
    107,154    111,703 
   $267,339   $280,420 

The accompanying notes are an integral part of these consolidated financial statements.

 

Commitments and contingencies (note 18)

Subsequent event (note 22)

 

 

Approved by the Board of Directors

“David Garofalo”   “Elise Rees”
David Garofalo, Director   Elise Rees, Director

 

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Great Panther MINING Limited

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(Expressed in thousands of US dollars, except per share amounts - Unaudited)

 

For the three and six months ended June 30, 2021 and 2020

 

   Three months ended  Six months ended
   June 30,  June 30,
   2021  2020  2021  2020
Revenue (note 13)  $52,097   $67,028   $104,667   $115,078 
                     
Cost of sales                    
Production costs (note 14)   44,982    31,373    77,726    65,222 
Amortization and depletion   7,753    11,794    16,550    20,025 
    52,735    43,167    94,276    85,247 
                     
Mine operating earnings (loss)   (638)   23,861    10,391    29,831 
                     
General and administrative expenses (note 15)   3,574    3,589    7,962    7,183 
                     
Exploration, evaluation, and development expenses                    
Exploration and evaluation expenses (note 16)   2,843    2,217    5,455    5,125 
Mine development costs   1,145    313    2,033    877 
Change in reclamation and remediation provisions   4    11    —      34 
    3,992    2,541    7,488    6,036 
                     
Care and maintenance costs   —      322    —      551 
                     
Operating earnings (loss)   (8,204)   17,409    (5,059)   16,061 
                     
Finance and other income (expense)                    
Finance income   69    74    137    179 
Finance expense   (529)   (689)   (1,397)   (1,477)
Other expense (note 17)   (1,522)   (7,885)   (3,848)   (46,350)
    (1,982)   (8,500)   (5,108)   (47,648)
                     
Income (loss) before income taxes   (10,186)   8,909    (10,167)   (31,587)
                     
Income tax expense (recovery)   (129)   357    221    325 
                     
Net income (loss) for the period  $(10,057)  $8,552   $(10,388)  $(31,912)
                     
Earnings (loss) per share - basic (note 12(d))  $(0.03)  $0.03   $(0.03)  $(0.10)
Earnings (loss) per share - diluted (note 12(d))  $(0.03)  $0.03   $(0.03)  $(0.10)
                     
                     

The accompanying notes are an integral part of these consolidated financial statements.

 

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Great Panther MINING Limited

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Expressed in thousands of US dollars - Unaudited)

 

For the three and six months ended June 30, 2021 and 2020

 

   Three months ended  Six months ended
   June 30,  June 30,
   2021  2020  2021  2020
             
Net income (loss) for the period  $(10,057)  $8,552   $(10,388)  $(31,912)
                     
Other comprehensive income (loss) (“OCI”), net of tax                    
Foreign currency translation   11,858    (5,841)   4,283    (10,873)
Change in fair value of financial assets designated as fair value through OCI, net of tax   1    —      1    1 
    11,859    (5,841)   4,284    (10,872)
                     
Total comprehensive income (loss) for the period  $1,802   $2,711   $(6,104)  $(42,784)
                     

The accompanying notes are an integral part of these consolidated financial statements.

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Great Panther MINING Limited

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(Expressed in thousands of US dollars, except number of common shares - Unaudited)

 

For the six months ended June 30, 2021 and 2020

 

   Share capital  Reserves      
   Number of common shares (000s)  Amount  Share options and warrants  Foreign currency translation  Fair value  Total reserves  Deficit  Total shareholders’ equity
Balance, January 1, 2020   311,941   $252,186   $20,575   $(2,972)  $(183)  $17,420   $(169,107)  $100,499 
Shares issued for bought deal financing (note 12(e))   40,250    14,705    —      —      —      —      —      14,705 
Restricted and deferred share units settled   696    530    (530)   —      —      (530)   —      —   
Shares issued upon settlement of obligation   88    39    —      —      —      —      —      39 
Share options exercised   15    10    (3)   —      —      (3)   —      7 
Share-based compensation   —      —      1,407    —      —      1,407    —      1,407 
Comprehensive income (loss)   —      —      —      (10,873)   1    (10,872)   (31,912)   (42,784)
Balance, June 30, 2020   352,990   $267,470   $21,449   $(13,845)  $(182)  $7,422   $(201,019)  $73,873 
                                         
Balance, January 1, 2021   355,033   $268,872   $21,815   $(10,029)  $(182)  $11,604   $(168,773)  $111,703 
Restricted and deferred share units settled   838    591    (591)   —      —      (591)   —      —   
Share options exercised   651    456    (132)   —      —      (132)   —      324 
Share-based compensation   —      —      1,231    —      —      1,231    —      1,231 
Comprehensive income (loss)   —      —      —      4,283    1    4,284    (10,388)   (6,104)
Balance, June 30, 2021   356,522   $269,919   $22,323   $(5,746)  $(181)  $16,396   $(179,161)  $107,154 
                                         

The accompanying notes are an integral part of these consolidated financial statements.

 

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Great Panther MINING Limited

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in thousands of US dollars - Unaudited)

 

For the three and six months ended June 30, 2021 and 2020

 

   Three months ended  Six months ended
   June 30,  June 30,
   2021  2020  2021  2020
Cash flows from operating activities:                    
Net income (loss) for the period  $(10,057)  $8,552   $(10,388)  $(31,912)
Items not involving cash:                    
Amortization and depletion   7,885    11,909    16,792    20,252 
Change in reclamation and remediation provision   4    11    —      34 
Loss on derivative instruments   —      3,741    572    29,786 
Unrealized foreign exchange loss (gain)   (257)   4,859    (442)   13,988 
Income tax expense (recovery)   (129)   357    221    325 
Share-based compensation   642    1,231    1,231    1,407 
Other non-cash items (note 20(a))   1,263    1,255    2,687    2,776 
Interest received   70    68    137    173 
Interest paid   (319)   (1,028)   (771)   (1,809)
Settlement of derivative instruments   —      (6,953)   (3,546)   (9,387)
Income taxes paid   (34)   106    (135)   (631)
    (932)   24,108    6,358    25,002 
Changes in non-cash working capital:                    
Trade and other receivables   719    (2,188)   2,406    (152)
Inventories   7,040    381    4,349    327 
Other current assets   303    (2,125)   (2,160)   (5,084)
Trade payables and accrued liabilities   (625)   (677)   (2,119)   11,163 
Net cash provided by operating activities   6,505    19,499    8,834    31,256 
                     
Cash flows from investing activities:                    
Cash restricted for Coricancha environmental bond   (398)   19    (400)   26 
Additions to mineral properties, plant and equipment   (14,488)   (7,925)   (27,478)   (24,356)
Net cash provided by (used in) investing activities   (14,886)   (7,906)   (27,878)   (24,330)
                     
Cash flows from financing activities:                    
Proceeds from bought deal financing, net (note 12(e))   —      14,705    —      14,705 
Payment of lease liabilities   (1,513)   (1,402)   (2,969)   (3,043)
Proceeds from borrowings   6,900    3,219    9,550    20,569 
Repayment of borrowings   (8,275)   (6,939)   (16,717)   (14,581)
Proceeds from exercise of share options   319    2    324    7 
Net cash provided by (used in) financing activities   (2,569)   9,585    (9,812)   17,657 
                     
Effect of foreign currency translation on cash and cash equivalents   715    232    689    (1,348)
                     
Increase (decrease) in cash and cash equivalents   (10,235)   21,410    (28,167)   23,235 
Cash and cash equivalents, beginning of period   45,464    38,795    63,396    36,970 
Cash and cash equivalents, end of period  $35,229   $60,205   $35,229   $60,205 
                     

The accompanying notes are an integral part of these consolidated financial statements.

 

Supplemental cash flow information (note 20)

 

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Great Panther mining Limited

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts expressed in thousands of US dollars, except where otherwise noted)

 

As at and for the three and six months ended June 30, 2021 and 2020 (Unaudited)

 

 

1.NATURE OF OPERATIONS

Great Panther Mining Limited (“Great Panther” or the “Company”) is a public company listed on the Toronto Stock Exchange (“TSX”) trading under the symbol GPR, and on the NYSE American trading under the symbol GPL and is incorporated and domiciled in Canada. The Company’s registered and records office is located at 1330 - 200 Granville Street, Vancouver, BC.

The Company has three wholly owned mining operations including the Tucano gold mine (“Tucano”), which produces gold doré and is located in Amapá State in northern Brazil. In Mexico, Great Panther operates the Topia mine (“Topia”) in the state of Durango, which produces concentrates containing silver, gold, lead and zinc, and the Guanajuato Mine Complex (the “GMC”) in the state of Guanajuato. The GMC comprises the Guanajuato mine (“Guanajuato”), the San Ignacio mine (“San Ignacio”) and the Cata processing plant, which produces silver and gold concentrates.

The Company also wholly owns the Coricancha Mine Complex (“Coricancha”), a gold-silver-copper-lead-zinc mine and 600 tonnes per day processing facility in the central Andes of Peru, approximately 90 kilometres east of Lima. Coricancha was acquired by the Company in June 2017, having been placed on care and maintenance by its previous owner in August 2013. The Company continues to evaluate a restart of Coricancha.

The Company has a portfolio of exploration projects. The El Horcón property is located 100 kilometres by road northwest of Guanajuato, Santa Rosa is located 15 kilometres northeast of Guanajuato, and the Plomo property is located in Sonora, Mexico. The Argosy property is located in the Red Lake Mining District in northwestern Ontario, Canada.

These condensed interim consolidated financial statements (“consolidated financial statements”) have been prepared on a going concern basis, which contemplates the continuity of normal business activity and the realization of assets and the settlement of liabilities in the normal course of business.

In March 2020, the World Health Organization declared a global pandemic following the emergence and rapid spread of a novel strain of the coronavirus respiratory disease (“COVID-19”). The Company continues to closely monitor the developments of COVID-19, and its variants, with a focus on the jurisdictions in which the Company operates and its head office location in Canada. The worldwide spread of COVID-19 is prompting governments to implement different measures to curb the spread of COVID-19 regularly. During this period of uncertainty, the Company’s priority is to continue to safeguard the health and safety of personnel and host communities, support and enforce government actions to slow the spread of COVID-19 and assess and mitigate the risks to the business continuity. As the extent and duration of the impacts from COVID-19 remain unclear, the Company’s estimates and assumptions may evolve as conditions change. Actual results could differ significantly from those estimates.

2.BASIS OF PREPARATION

These condensed interim consolidated financial statements have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting (“IAS 34”) using accounting policies consistent with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). These should be read in conjunction with the Company’s most recent annual consolidated financial statements as at and for the year ended December 31, 2020. The accounting policies and critical estimates applied by the Company in these condensed interim consolidated financial statements are the same as those applied in the most recent annual consolidated financial statements. These condensed interim consolidated financial statements do not include all the information required for full annual financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of changes in the Company’s financial position and performance since the most recent annual consolidated financial statements.

These condensed interim consolidated financial statements were approved by the Company’s Board of Directors on August 4, 2021.

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Great Panther mining Limited

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts expressed in thousands of US dollars, except where otherwise noted)

 

As at and for the three and six months ended June 30, 2021 and 2020 (Unaudited)

 

3.Accounting standards issued and adopted on January 1, 2021
(a)New and amended IFRS standards not yet effective

New accounting standards and interpretations that have been published are not mandatory for the current period and have not been early adopted. These standards are not expected to have a material impact on the Company.

4.TRADE AND OTHER RECEIVABLES
       
   June 30,
2021		  December 31,
2020
Current          
Trade receivables  $2,770   $2,011 
Value-added tax receivable   4,289    3,839 
PIS / COFINS - Brazil (a)   9,874    8,732 
Judicial deposits - Brazil   314    302 
Other   652    760 
    17,899    15,644 
Non-Current          
PIS / COFINS - Brazil (a)   4,728    9,058 
Income taxes recoverable - Brazil   3,016    2,764 
Other   133    14 
   $7,877   $11,836 
(a)PIS/COFINS

The PIS (Program of Social Integration) and COFINS (Contribution for the Financing of Social Security) are Brazilian federal taxes that apply to all companies in the private sector. PIS is a mandatory employer contribution to an employee savings initiative, and COFINS is a contribution to finance the social security system. Companies are required to calculate and remit PIS and COFINS based on monthly gross revenues. The Company’s Brazilian gold sales are zero-rated for PIS/COFINS purposes; however, the current legislation allows for input tax credits to offset the amounts due by applying rates of 1.65% for PIS and 7.65% for COFINS, respectively, to some of the purchases in Brazil. As such, the Company has PIS/COFINS credits recorded as receivables.

The Company continues to pursue the refund of its PIS/COFINS receivables. To the extent the Company is unable to receive refunds for all its PIS/COFINS assets, the PIS/COFINS assets are expected to be recoverable through the Company generating future Brazilian federal tax liabilities. At the Company’s election, these federal tax liabilities can be offset against the Company’s PIS/COFINS assets.

  7 

Great Panther mining Limited

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts expressed in thousands of US dollars, except where otherwise noted)

 

As at and for the three and six months ended June 30, 2021 and 2020 (Unaudited)

 

5.INVENTORIES
       
   June 30,
2021		  December 31,
2020
Concentrate  $791   $578 
Ore stockpiles   3,115    11,562 
Materials and supplies   23,127    18,538 
Gold in circuit   1,095    1,266 
Gold bullion   1,958    1,794 
Silver bullion   4    5 
   $30,090   $33,743 
           

During the three and six months ended June 30, 2021, the inventory recognized as cost of sales was $55.6 million and $95.4 million, respectively (three and six months ended June 30, 2020 - $29.3 million and $61.3 million, respectively), which includes production costs and amortization and depletion directly attributable to the inventory production process.

6.OTHER CURRENT ASSETS
       
   June 30,
2021		  December 31,
2020
Prepaid expenses and deposits  $6,321   $3,569 
Reimbursement rights (note 8(a))   4,943    1,918 
Other current assets   88    188 
   $11,352   $5,675 

 

  8 

Great Panther mining Limited

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts expressed in thousands of US dollars, except where otherwise noted)

 

As at and for the three and six months ended June 30, 2021 and 2020 (Unaudited)

7.MINERAL PROPERTIES, PLANT AND EQUIPMENT
   Mineral properties - depletable  Mineral properties - non depletable  Plant and equipment  Land and buildings  Furniture, fixtures and equipment  Right-of-use assets  Total
Cost                                   
Balance, January 1, 2021  $88,162   $33,869   $76,081   $23,797   $5,507   $18,905   $246,321 
Additions   24,787    —      1,561    1,043    88    2,747    30,226 
Change in remediation provision   (389)   —      (115)   —      —      —      (504)
Foreign exchange translation difference   3,524    1,317    1,491    901    14    715    7,962 
Balance, June 30, 2021  $116,084   $35,186   $79,018   $25,741   $5,609   $22,367   $284,005 
                                    
Accumulated depreciation                                   
Balance, January 1, 2021  $53,625   $—     $56,918   $9,343   $4,933   $10,943   $135,762 
Amortization and depletion   9,865    —      2,307    1,553    119    2,579    16,423 
Foreign exchange translation difference   1,642    —      1,069    440    (1)   559    3,709 
Balance, June 30, 2021  $65,132   $—     $60,294   $11,336   $5,051   $14,081   $155,894 
                                    
Carrying value, June 30, 2021  $50,952   $35,186   $18,724   $14,405   $558   $8,286   $128,111 
                                    

 

   Mineral properties - depletable  Mineral properties - non depletable  Plant and equipment  Land and buildings  Furniture, fixtures and equipment  Right-of-use assets  Total
Cost                                   
Balance, January 1, 2020  $58,237   $43,186   $83,335   $22,548   $5,636   $22,685   $235,627 
Additions   32,754    —      3,499    5,692    3    890    42,838 
Change in remediation provision   3,546    —      (342)   —      —      —      3,204 
Foreign exchange translation difference   (6,375)   (9,317)   (10,411)   (4,443)   (132)   (4,670)   (35,348)
Balance, December 31, 2020  $88,162   $33,869   $76,081   $23,797   $5,507   $18,905   $246,321 
                                    
Accumulated depreciation                                   
Balance, January 1, 2020  $38,964   $—     $44,769   $5,726   $4,549   $7,809   $101,817 
Amortization and depletion   15,790    —      15,435    4,508    430    4,881    41,044 
Foreign exchange translation difference   (1,129)   —      (3,286)   (891)   (46)   (1,747)   (7,099)
Balance, December 31, 2020  $53,625   $—     $56,918   $9,343   $4,933   $10,943   $135,762 
                                    
Carrying value, December 31, 2020  $34,537   $33,869   $19,163   $14,454   $574   $7,962   $110,559 
                                    

 

  9 

Great Panther mining Limited

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts expressed in thousands of US dollars, except where otherwise noted)

 

As at and for the three and six months ended June 30, 2021 and 2020 (Unaudited)

 

(a)Leases
i)Right-of-use assets
          
   Mining equipment  Power generators  Vehicles  Office & Communication  Land easements  Total
Balance, January 1, 2021  $3,925   $2,508   $476   $478   $575   $7,962 
Additions   1,961    6    119    —      661    2,747 
Amortization and depletion   (1,470)   (680)   (238)   (103)   (88)   (2,579)
Foreign exchange translation difference   91    58    7    —      —      156 
Balance, June 30, 2021  $4,507   $1,892   $364   $375   $1,148   $8,286 
                               
                               
     Mining equipment    Power generators    Vehicles    Office & Communication    Land easements    Total 
Balance, January 1, 2020  $7,376   $5,035   $1,095   $658   $712   $14,876 
Additions   801    —      —      89    —      890 
Amortization and depletion   (2,663)   (1,437)   (378)   (266)   (137)   (4,881)
Foreign exchange translation difference   (1,589)   (1,090)   (241)   (3)   —      (2,923)
Balance, December 31, 2020  $3,925   $2,508   $476   $478   $575   $7,962 
                               
                               
                               
ii)Lease liabilities
    
   June 30, 2021  December 31, 2020
Maturity analysis - contractual undiscounted cash flows          
Less than one year  $6,487   $5,855 
One to five years   5,590    5,475 
More than five years   86    98 
Total undiscounted lease liabilities   12,163    11,428 
Lease liabilities in the Consolidated Statement of Financial Position   11,594    11,221 
Current (note 9 (a))   6,299    5,296 
Non-current (note 9 (b))  $5,295   $5,925 
           

 

  10 

Great Panther mining Limited

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts expressed in thousands of US dollars, except where otherwise noted)

 

As at and for the three and six months ended June 30, 2021 and 2020 (Unaudited)

iii)Amount recognized in the Consolidated Statements of Comprehensive Income
          
   Three months ended June 30,  Six months ended June 30,
   2021  2020  2021  2020
Interest on lease liabilities  $250   $278   $465   $630 
Variable lease payments not included in the measurement of lease liabilities   11,518    12,202    24,603    26,601 
Expenses relating to short-term leases   5,187    1,956    11,708    6,544 
Expenses relating to leases of low-value assets, excluding short-term leases of low-value assets   3    1    5    5 
                     

The Company has elected not to separate the lease component from the non-lease component for short-term leases that have a lease term of less than one year.

8.OTHER ASSETS
       
   June 30,
2021		  December 31,
2020
Reimbursement rights (a)  $9,138   $12,178 
Restricted cash   32    31 
   $9,170   $12,209 
(a)Reimbursement rights

Pursuant to the acquisition of Coricancha, the vendors, Nyrstar International B.V. and Nyrstar Netherlands (Holdings) B.V. (together “Nyrstar”) and their parent company (at the time of the acquisition, Nyrstar N.V. and subsequently replaced by NN2 Newco Limited), agreed to reimburse the Company for:

•the cost of movement and reclamation of certain legacy tailings facilities should the regulatory authorities require these to be moved, up to a maximum of $20.0 million; and
•all fines or sanctions that arise before or after closing resulting from activities or ownership of Coricancha prior to June 30, 2017, up to a maximum of $4.0 million.
9.TRADE PAYABLES AND ACCRUED LIABILITIES AND OTHER LIABILITIES
(a)Trade payables and accrued liabilities
       
   June 30,
2021		  December 31,
2020
Trade payables  $23,081   $27,478 
Accrued liabilities   18,871    14,758 
Taxes payable   3,250    3,306 
Lease liabilities   6,299    5,296 
Other payables   2,317    2,383 
   $53,818   $53,221 
           

 

  11 

Great Panther mining Limited

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts expressed in thousands of US dollars, except where otherwise noted)

 

As at and for the three and six months ended June 30, 2021 and 2020 (Unaudited)

 

 

(b)Other liabilities
       
   June 30,
2021		  December 31,
2020
Lease liabilities  $5,295   $5,925 
Accrued liabilities   192    192 
   $5,487   $6,117 

 

10.BORROWINGS
                
   MACA  Unsecured bank facilities  Bradesco  Samsung  Total
Balance, January 1, 2021  $3,010   $17,516   $2,404   $10,468   $33,398 
Borrowings   —      9,550    —      —      9,550 
Interest accrued   18    465    111    208    802 
Principal repayments   (2,937)   (8,400)   (556)   (4,824)   (16,717)
Interest payments   (59)   (254)   (159)   (212)   (684)
Foreign exchange   (32)   —      —      —      (32)
Balance, June 30, 2021  $—     $18,877   $1,800   $5,640   $26,317 
Current  $—     $18,877   $967   $5,640   $25,484 
Non-current  $—     $—     $833   $—     $833 
                          
(a)Unsecured bank facilities

The Company has unsecured, revolving, interest-bearing bank facilities totalling $18.9 million. The unsecured bank facilities are denominated in US dollars (“USD”) and are interest bearing at a weighted average fixed interest rate of 5.4% per annum and are repayable through January 2022.

(b)Bradesco

On March 11, 2020, the Company received a USD denominated loan from Bradesco in the amount of $10.0 million, with net loan proceeds of $2.5 million as $7.5 million is required to be retained as cash collateral. The loan matures on February 24, 2023 and is required to be repaid in nine quarterly repayments of $1.1 million commencing March 5, 2021. The return of the cash collateral will be proportionate to the quarterly loan repayments, resulting in net quarterly repayments of $0.3 million commencing March 5, 2021. The loan principal of $10.0 million bears interest at 3.7% per annum, and the cash collateral of $7.5 million bears interest from 1.55% to 2.40% per annum. The cash collateral of $7.5 million has been netted against the $10.0 million borrowings at June 30, 2021.

(c)Samsung

On January 6, 2020, the Company entered an $11.3 million gold doré prepayment agreement with Samsung (the “Agreement”). In consideration of delivery and sale of approximately 3,000 ounces of gold contained in doré per month over a two-year period commencing January 2020 from Tucano, Samsung has agreed to advance $11.3 million (the “Advance”) to Great Panther. Gold deliveries are sold at a 0.65% discount to the benchmark price of gold at the time of delivery. The Advance is repayable in equal monthly instalments of $0.8 million which commenced December 2020 and continue to January 2022 such that all amounts outstanding to Samsung will be repaid in full. The Advance bears interest at an annual rate of 3-month USD LIBOR plus 5% and is secured by a pledge of all equity interests in Great Panther’s Brazilian subsidiary that owns Tucano. Great Panther has a full option for early repayment of the Advance, subject to a 3% penalty applied to the outstanding balance. The Agreement also provides Samsung with a right of offer for concentrates produced from Coricancha in certain circumstances.

  12 

Great Panther mining Limited

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts expressed in thousands of US dollars, except where otherwise noted)

 

As at and for the three and six months ended June 30, 2021 and 2020 (Unaudited)

11.FINANCIAL INSTRUMENTS

At June 30, 2021, the fair value of the Company’s long-term borrowings approximates their carrying values measured based on the level 2 of the fair value hierarchy.

The fair value of other financial instruments approximates their carrying values due to their short-term nature.

The Company had no outstanding non-deliverable forward foreign exchange contracts for Brazilian real (“BRL”) against USD at June 30, 2021. At December 31, 2020, the Company had BRL 88.2 million of non-deliverable forward foreign exchange contracts for which the fair value of these contracts resulted in a liability of $3.0 million.

12.SHARE CAPITAL
(a)Share options
   Six months ended
June 30, 2021		  Six months ended
June 30, 2020
   Options
(000’s)		  Weighted
average
exercise
price		  Options
(000’s)		  Weighted
average
exercise price
 Outstanding, January 1    9,709   C$ 1.00    8,316   C$ 1.20 
 Granted    2,341    1.04    6,155    0.55 
 Forfeited/Expired    (2,466)   1.42    (2,210)   0.82 
 Exercised    (651)   0.61    (16)   0.65 
 Outstanding, June 30    8,933   C$ 0.92    12,245   C$ 0.94 
 Exercisable, June 30    3,974   C$ 1.07    4,304   C$ 1.43 

 

 

Range of exercise prices  Options
outstanding
(000’s)		  Weighted
average
remaining
contractual life
(years)		  Options
exercisable
(000’s)		  Weighted
average
exercise price
 C$0.54 to $0.62    3,379    3.78    1,275   C$ 0.54 
 C$0.63 to $1.10    3,936    4.04    1,123    0.92 
 C$1.11 to $1.62    1,011    2.08    969    1.48 
 C$1.63 to $2.19    607    0.77    607    1.83 
      8,933    3.50    3,974   C$ 1.07 

During the three and six months ended June 30, 2021, the Company recorded share-based compensation expense relating to share options of $0.1 million and $0.3 million, respectively (three and six months ended June 30, 2020 - $0.2 million and $0.3 million, respectively).

The weighted average fair value of options granted during the six months ended June 30, 2021, was C$0.49 (six months ended June 30, 2020 - C$0.23). The grant date fair value of share options granted was determined using a Black Scholes option pricing model using the following weighted average assumptions:

 

  13 

Great Panther mining Limited

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts expressed in thousands of US dollars, except where otherwise noted)

 

As at and for the three and six months ended June 30, 2021 and 2020 (Unaudited)

 

 

  2021 2020
Risk-free interest rate 0.54% Nil
Expected life (years) 3.14 Nil
Annualized volatility 71% Nil
Forfeiture rate 20% Nil

The annualized volatility assumption is based on the historical volatility of the Company’s common share price on the Toronto Stock Exchange. The risk-free interest rate assumption is based on government bonds with a remaining term equal to the expected life of the options.

(b)Restricted share units ("RSUs"), Performance based restricted share unit (“PSUs”) and Deferred share units ("DSUs")

The following table summarizes information about the RSUs outstanding at June 30, 2021 and 2020:

   Six months ended
June 30, 2021		  Six months ended
June 30, 2020
   Number of units  Weighted
average grant
date fair value
($/unit)		  Number of
units		  Weighted
average grant
date fair value
($/unit)
 Balance at January 1    1,911,434   C$ 0.70    1,243,530   C$ 1.19 
 Granted    776,270    1.04    1,636,000    0.56 
 Settled    (550,242)   0.76    (695,736)   1.06 
 Cancelled    (403,186)   0.72    (98,399)   1.15 
 Outstanding at June 30    1,734,276   C$ 0.83    2,085,395   C$ 0.74 
                       

The following table summarizes information about the PSUs outstanding at June 30, 2021, and 2020:

   Six months ended
June 30, 2021		  Six months ended
June 30, 2020
   Number of
units		  Weighted
average grant
date fair value
($/unit)		  Number of
units		  Weighted
average grant
date fair value
($/unit)
 Balance at January 1    1,904,500   C$ 0.70    531,000   C$ 1.14 
 Granted    780,968    1.04    1,510,700    0.56 
 Cancelled    (472,619)   0.68    (71,100)   1.03 
 Outstanding at June 30    2,212,849   C$ 0.82    1,970,600   C$ 0.70 

 

  14 

Great Panther mining Limited

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts expressed in thousands of US dollars, except where otherwise noted)

 

As at and for the three and six months ended June 30, 2021 and 2020 (Unaudited)

 

The following table summarizes information about the DSUs outstanding at June 30, 2021, and 2020:

   Six months ended
June 30, 2021		  Six months ended
June 30, 2020
   Number of units 

Weighted

average grant

date fair value

($/unit)

  Number of units 

Weighted

average grant

date fair value

($/unit)

 Balance at January 1    2,420,189   C$ 0.78    946,150   C$ 1.19 
 Granted    781,354    0.91    2,020,200    0.57 
 Settled    (288,500)   1.11    —      —   
 Outstanding at June 30    2,913,043   C$ 0.78    2,966,350   C$ 0.76 
                       

During the three and six months ended June 30, 2021, the Company recorded share-based compensation expense relating to RSUs, PSUs, and DSUs of $0.5 million and $0.9 million, respectively (three and six months ended June 30, 2020 - $1.0 million and $1.1 million, respectively).

(c)Share purchase warrants

The Company has issued 9,749,727 share purchase warrants at an exercise price of $1.317 per share. 6,321,695 share purchase warrants have an expiry date of May 17, 2022, and 3,428,032 share purchase warrants have an expiry date of June 27, 2022.

(d)Earnings (loss) per share
   Three months ended
June 30,		  Six months ended
June 30,
   2021  2020  2021  2020
Income (loss) attributable to equity owners  $(10,057)  $8,552   $(10,388)  $(31,912)
Weighted average number of shares (000's)   355,659    330,497    355,659    321,222 
Earnings (loss) per share ‒ basic  $(0.03)  $0.03   $(0.03)  $(0.10)
                     

 

   Three months ended
June 30,		  Six months ended
June 30,
   2021  2020  2021  2020
Income (loss) attributable to equity owners  $(10,057)  $8,552   $(10,388)  $(31,912)
                     
Weighted average number of shares (000's)   355,659    330,497    355,659    321,222 
Incremental shares from RSUs, PSUs and DSUs   —      6,367    —      —   
Weighted average diluted number of shares (000’s)   355,659    336,864    355,659    321,222 
                     
Earnings (loss) per share ‒ diluted  $(0.03)  $0.03   $(0.03)  $(0.10)

Anti-dilutive share purchase options, warrants, deferred share units, restricted share units and performance share units have not been included in the diluted earnings per share calculation.

 

  15 

Great Panther mining Limited

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts expressed in thousands of US dollars, except where otherwise noted)

 

As at and for the three and six months ended June 30, 2021 and 2020 (Unaudited)

(e)Financings

On May 20, 2020, the Company closed a bought deal financing for aggregate gross proceeds of $16.1 million, pursuant to which the Company issued 40,250,000 common shares of the Company at the price of $0.40 per share. The Company paid a cash commission to the underwriters equal to 6% of the gross proceeds of the financing and recognized net proceeds of $14.7 million after deducting share issuance costs.

13.Revenue

The Company generates revenue primarily from the sale of precious metals, consisting of metal concentrates and refined gold.

In the following table, revenue is disaggregated by the geographic location of the Company’s mines and major products.

   Three months ended June 30,
   2021  2020
   Brazil  Mexico  Total  Brazil  Mexico  Total
Gold  $38,951   $3,386   $42,337   $62,274   $1,713   $63,987 
Silver   103    8,563    8,666    120    2,524    2,644 
Lead   —      763    763    —      295    295 
Zinc   —      1,004    1,004    —      370    370 
Ore processing revenue   —      —      —      —      —      —   
Smelting and refining charges   (11)   (953)   (964)   (26)   (519)   (545)
Revenue from contracts with customers  $39,043   $12,763   $51,806   $62,368   $4,383   $66,751 
Changes in fair value from provisional pricing   —      291    291    —      277    277 
Total revenue  $39,043   $13,054   $52,097   $62,368   $4,660   $67,028 

 

  16 

Great Panther mining Limited

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts expressed in thousands of US dollars, except where otherwise noted)

 

As at and for the three and six months ended June 30, 2021 and 2020 (Unaudited)

 

 

   Six months ended June 30,
   2021  2020
   Brazil  Mexico  Total  Brazil  Mexico  Total
Gold  $79,407   $6,656   $86,063   $100,270   $5,900   $106,170 
Silver   183    16,653    16,836    177    8,346    8,523 
Lead   —      1,618    1,618    —      984    984 
Zinc   —      2,249    2,249    —      1,429    1,429 
Ore processing revenue   —      —      —      —      34    34 
Smelting and refining charges   (24)   (2,177)   (2,201)   (44)   (1,784)   (1,828)
Revenue from contracts with customers  $79,566   $24,999   $104,565   $100,403   $14,909   $115,312 
Changes in fair value from provisional pricing   —      102    102    —      (234)   (234)
Total revenue  $79,566   $25,101   $104,667   $100,403   $14,675   $115,078 

The amount of revenue recognized in the three and six months ended June 30, 2021, from performance obligations satisfied (or partially satisfied) in the previous period, due to the current period settlement of metal concentrate revenue recognized in the prior periods were reductions of revenue of $nil million and $0.2 million, respectively. At June 30, 2021, the Company had $4.4 million in revenue subject to provisional pricing in relation to the sale of concentrates.

14.PRODUCTION COSTS
   Three months ended
June 30,		  Six months
ended June 30,
   2021  2020  2021  2020
Raw materials and consumables  $14,873   $10,747   $27,263   $24,471 
Salaries and employee benefits   4,854    3,445    9,395    7,640 
Contractors   14,863    10,059    28,831    24,556 
Repairs and maintenance   389    272    676    595 
Site administration   1,158    807    2,157    1,848 
Royalties   1,065    1,607    2,184    2,685 
Mining duties   55    20    109    68 
Share-based compensation   134    100    233    147 
    37,391    27,057    70,848    62,010 
Change in inventories   7,591    3,049    6,878    1,945 
    44,982    30,106    77,726    63,955 
Unabsorbed fixed costs (a)   —      1,267    —      1,267 
Total production costs  $44,982   $31,373   $77,726   $65,222 
                     
(a)Unabsorbed fixed costs

The Company’s operations in Mexico were shut down during April and May 2020 as a result of government orders due to the COVID-19 pandemic. During the shutdown, the Company incurred fixed costs for these operations, which otherwise would have been recorded to inventory but were expensed as incurred.

 

  17 

Great Panther mining Limited

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts expressed in thousands of US dollars, except where otherwise noted)

 

As at and for the three and six months ended June 30, 2021 and 2020 (Unaudited)

 

15.GENERAL AND ADMINISTRATIVE EXPENSES
   Three months ended
June 30,		  Six months ended
June 30,
   2021  2020  2021  2020
Salaries and employee benefits  $1,176   $775   $3,086   $2,347 
Professional fees   313    477    601    974 
Office and other expenses   1,491    1,114    3,119    2,424 
Amortization   132    115    242    227 
Share-based compensation   462    1,108    914    1,211 
Total general and administrative expenses  $3,574   $3,589   $7,962   $7,183 
                     
16.EXPLORATION AND EVALUATION EXPENSES
   Three months ended June 30,  Six months ended June 30,
   2021  2020  2021  2020
Salaries and employee benefits  $573   $494   $1,120   $1,156 
Raw materials and consumables   596    315    932    330 
Professional fees   1,262    619    2,402    2,266 
Office and other expenses   366    766    917    1,324 
Share-based compensation   46    23    84    49 
Total exploration and evaluation expenses  $2,843   $2,217   $5,455   $5,125 
                     
17.OTHER EXPENSE
  

Three months ended

June 30,

 

Six months ended

June 30,

   2021  2020  2021  2020
Accretion expense  $803   $640   $1,427   $1,478 
Loss on derivative instruments   —      3,741    572    29,786 
Foreign exchange loss   (58)   3,135    806    13,903 
Other expense   777    369    1,043    1,183 
   $1,522   $7,885   $3,848   $46,350 
                     

 

  18 

Great Panther mining Limited

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts expressed in thousands of US dollars, except where otherwise noted)

 

As at and for the three and six months ended June 30, 2021 and 2020 (Unaudited)

 

18.COMMITMENTS AND CONTINGENCIES
(a)Commitments

As at June 30, 2021, the Company had the following commitments:

   Total  1 year  2-3 years  4-5 years  Thereafter
Operating lease payments  $3   $3   $—     $—     $—   
Drilling services   1,685    1,685    —      —      —   
Equipment purchases   368    368    —      —      —   
Total commitments  $2,056   $2,056   $—     $—     $—   
                          

On June 29, 2020, the Company announced it had reached an agreement with Nyrstar and NN2 Newco Limited, the parent of the Nyrstar entities, to amend certain agreements (the “Amending Agreements”) in respect of the Company’s remediation obligations in connection with Great Panther’s 2017 acquisition of Coricancha from Nyrstar. The Amending Agreements include amendments to the Share Purchase Agreement under which the Company purchased Coricancha from Nyrstar and the related agreement for Coricancha under which Nyrstar agreed to fund a portion of the bond to secure remediation costs for Coricancha in the future in respect of a permanent closure of the mine.

Under the Amending Agreements, Nyrstar has agreed to extend its requirement to post remediation bond obligations as security for closure costs at Coricancha beyond the original June 30, 2020 expiry date. The Amending Agreements provide that Nyrstar will maintain a $7.0 million bond (previously $9.7 million) until June 30, 2021 and $6.5 million for the following year, effectively deferring Great Panther’s funding requirements for these amounts until June 30, 2022, unless Great Panther decides to permanently close Coricancha. The Company has provided a deposit to cover its additional $2.7 million bond requirement as of June 30, 2020, and in June 2017 also funded the $1.2 million increase in bond closure amount required by the Ministerio de Energía y Minas de Perú (the“MEM”) at that time. As at June 30, 2021, the total bond amount required by the MEM was $10.9 million, of which Nyrstar is responsible for $6.5 million and the Company is responsible for $4.4 million as described above.

If a decision to permanently close the mine is made, Nyrstar will fund closure costs up to the revised amount of its bond funding obligation, and Coricancha will be required to post the full amount of the required remediation bond with Peruvian government authorities. If no decision is made to permanently close Coricancha by June 30, 2022, then Coricancha will likewise be required to post the full amount of the required reclamation bond. Nrystar’s obligation to indemnify the Company for up to $20.0 million for closure of Cancha 1 and 2 tailings storage facilities is not changed by the Company’s decision regarding Coricancha’s future operating plans.

(b)Contingencies
i)GMC

Tailings storage

In February 2016, the Mexican national water authority, Comisión Nacional del Agua (“CONAGUA”), required that the Company make formal applications for permits associated with the occupation and construction of the tailings storage facility (“TSF”) at the GMC. The Company filed its applications, and the authorities conducted an inspection of the TSF and requested further technical information, which the Company submitted in December 2017. In July 2017, the Company submitted to the Mexican environmental permitting authority, Secretaría de Medio Ambiente y Recursos Naturales (“SEMARNAT”), an amendment to the Environmental Impact Statement (“EIS”) requesting an expansion of the existing TSF (Lifts 18 and 19). This was accepted by SEMARNAT subject to approval by CONAGUA and in February 2019 CONAGUA requested additional technical information.

  19 

Great Panther mining Limited

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts expressed in thousands of US dollars, except where otherwise noted)

 

As at and for the three and six months ended June 30, 2021 and 2020 (Unaudited)

 

The Company has been working with permitting authorities to expand the capacity of the GMC’s existing TSF. In parallel, the Company has completed its review to identify technical alternatives to extend its tailings storage capacity utilizing existing permits and has begun modifying the tailings discharge using cyclones to extend the permitted tailings capacity until December 2021. This will allow more time for receipt of the pending expansion approval. However, if the expansion approval of the TSF has not been received in December 2021, or is conditioned, then the Company may need to cease milling operations at the GMC until receipt of the CONAGUA expansion approval or the satisfaction of such conditions. Alternatively, the GMC may enter into toll milling agreements with nearby operations with excess processing and tailings storage capacity or consider alternatives for tailings storage.

Additional water use permits

Since the February 2016 correspondence with CONAGUA, the Company has also determined through its own undertakings that additional CONAGUA permits may be needed in connection with water discharge and water use at the GMC’s TSF. The Company is assessing technical options and is confirming if additional water use permits are required. The Company believes that it will be able to address or mitigate the need for any necessary water discharge and use permits without any impact to its operations but cannot provide complete assurance that there is no risk in this regard. In the fourth quarter of 2019, the Company received the authorization to discharge wastewater from San Ignacio.

ii)Topia

Topia was accepted into a voluntary environmental audit program supported by the Mexican environmental compliance authority, the Procuraduría Federal de Protección al Ambiente (“PROFEPA”). Devised as a cooperative management strategy, the audit commenced in 2017. The Company completed remediating the important environmental legacy issues but has not reached full compliance with the audit within the timeframe proposed. The Company anticipates that it will be able to achieve full compliance; however, the Company cannot provide complete assurance that upon completion of the compliance program, further reviews will not lead to future suspensions of operations.

On March 9, 2020, the Company disclosed it ceased depositing tailings on the Topia Phase II TSF following a recommendation from the Company's independent tailings management and geotechnical consultants. This was due to an increase in the rate of movement in the material below the TSF that was assumed to be related to an increase in groundwater pressures. During the suspension of non-essential activities due to COVID-19, Great Panther continued monitoring the conditions on Phase I and Phase II and installed additional geotechnical instrumentation. Additionally, tests were carried out to determine the state of the tailings in Phase I and extensive work was carried out to identify the source and reduce the flow of water into the base of the TSF. Consequently, Phase II was restarted based on positive results of monitoring and a stacking plan for Phase II received from a third-party consultant with strict control on sequence and compaction level. The Company has also received the required permit for Phase III, which is expected to be available for use after constructing retaining walls and erosion controls around the base of the facility. Construction work began in March 2021, but was stopped to revise the retaining walls and under drains after the geotechnical reconnaissance drilling indicated over saturated material in zones of the old legacy TSF. A new engineered design supported by the Company’s third-party engineer will be received and remediation implemented after the rainy season. For tailings storage in the longer term, The Company continues to identify additional sites for Phase IV. The previous site did not meet geotechnical standards for construction of a dry stack TSF.

There is no assurance that any remediation plan for Phase I or that the stacking plan for Phase II will be successful in preventing further movement of the tailings. Any movement of the material underlying the TSF could result in significant environmental damage, potential loss of life and property and consequential liability to the Company.

iii)Coricancha

Coricancha has been on care and maintenance since August 2013 and is subject to oversight by the Organismo de Evaluación y Fiscalización Ambiental (“OEFA”), the Peruvian public agency responsible for environmental assessment and inspection, and by the Organismo Supervisor de la Inversión en Energía y Minería (“OSINERGMIN”), which is the Peruvian regulatory body with oversight responsibility over energy and mining companies.

  20 

Great Panther mining Limited

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts expressed in thousands of US dollars, except where otherwise noted)

 

As at and for the three and six months ended June 30, 2021 and 2020 (Unaudited)

 

Fines and sanctions

Nyrstar has agreed to reimburse the Company for all fines or sanctions that resulted from activities or ownership of Coricancha prior to June 30, 2017, up to a maximum of $4.0 million. Accordingly, a reimbursement right in the amount of $1.5 million has been recorded in respect of fines or sanctions that have been levied by regulatory bodies in Peru.

The Company has accrued for and recorded a further reimbursement right of $0.4 million for certain civil lawsuits filed by individuals and former suppliers.

Legacy tailings facilities

The Company has undertaken the reclamation of certain legacy tailings facilities at Coricancha under a remediation plan approved by the MEM, the relevant regulatory body. In addition, as part of the purchase of Coricancha, the Company has an agreement with Nyrstar for the reimbursement of the cost of these reclamation activities. The Company is seeking approval of a modification to a remediation plan from the MEM in accordance with the recommendations of an independent consultant to preserve the stability of nearby areas by reclaiming the legacy tailings in situ. The Company has changed the scheduling of the reclamation work, pending a decision from the MEM regarding the proposal to modify the approved remediation plan. To protect itself from any pending or future fines, penalties, regulatory action, or charges from government authorities and to request the MEM issue a decision of the proposed modification to the remediation plan for legacy tailings, the Company initiated a Constitutional Case and was successfully awarded an injunction to prevent fines and penalties until MEM issues its decision. Subsequent to the year ended December 31, 2020, the Company was notified of a second instance decision in the Constitutional Case, which unfavourably dismissed the Company’s Constitutional Case. The decision requests that the MEM issue a technical report evaluating the proposed modifications to the remediation plan within two months of the decision. Effective June 10, 2021, the related injunction was cancelled. While the Company has appealed the Constitutional Case proceeding decision, it has been advised that it is not possible to appeal the cancellation of the injunction. The cancellation of the injunction exposes the Company to potential fines, penalties, regulatory action or charges from government authorities. Separately, the Company is reviewing potential alternatives to allow for the full reclamation while preserving the stability of the surrounding areas.

iv)Tucano

Various claims related to Brazil indirect taxes and labour matters

The Company has various litigation claims from a number of governmental assessments pertaining to indirect taxes and labour disputes associated with former employees and contract labour in Brazil.

The indirect tax matter principally relates to claims for the state sales tax, Imposto Sobre Operações Relativas à Circulação de Mercadorias e Serviços de Transporte Interestadual de Intermunicipal e de Comunicações (“ICMS”), which are mostly related to rate differences. For these claims, the possibility of loss was not considered probable by the Company’s Brazilian attorneys and no provision has been recognized.

The labour matters principally relate to claims made by former employees and contract labour for the equivalent payment of all social security and other related labour benefits, as well as consequential tax claims, as if they were regular employees. As of June 30, 2021, the items for which a loss was probable related to the labour disputes, inclusive of any related interest, amounted to approximately $2.0 million, for which a provision was recognized (as of June 30, 2020 - $2.3 million).

In connection with the above proceedings, a total of $0.3 million (December 31, 2020 - $0.3 million) of escrow cash deposits were made as of June 30, 2021 (note 4). Generally, any escrowed amounts would be refundable to the extent the matters are resolved in the Company’s favour.

  21 

Great Panther mining Limited

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts expressed in thousands of US dollars, except where otherwise noted)

 

As at and for the three and six months ended June 30, 2021 and 2020 (Unaudited)

 

Environmental damages - William Creek

In May 2009, the State of Amapá Public Prosecutor (“MPAP”) filed a public civil action seeking payment for environmental damages caused to William Creek, as well as to other creeks located in the region of influence of Zamin Amapá Mineração (“Zamin”) and Tucano mines. The alleged damage is related to the modification of the creek’s riverbed, soiling and sedimentation. In January 2018, the Amapá State Court ordered Tucano to pay a fine of approximately $1.2 million (BRL 6.0 million plus interest and inflation counted as from the date of the damage) to the State Environmental Fund. As at June 30, 2021, the updated value with interest and inflation is approximately $6.1 million (BRL 30.3 million). The Company is in the process of appealing. Based on legal advice received, the best estimate of the loss is less than the full amount claimed, and the Company has accrued the best estimate of the cost to settle the claim.

Archaeological sites damage

In May 2016 and June 2016, the Brazilian Federal Public Prosecutor (“MPF”) filed public civil actions seeking compensation to be paid by Zamin, the State of Amapá and Tucano for damages to 34 archaeological sites as a result of activities in 2006-2009 at the Amapá-MMX Iron Ore Project currently owned by Zamin and as a result of activities in 2004-2010 at the Amapari Project and for the State of Amapá failing to take proper action during the environmental licensing procedures (the “Archaeological Civil Actions”). During Q4 of 2020, the sixth Lower Court in the Judiciary Section of the State of Amapá ratified a settlement agreement between Tucano and the MPF in respect of the Archeological Civil Actions (the “Settlement Agreement”). Under the terms of the Settlement Agreement, as full and final settlement of the Archaeological Civil Actions, Tucano agreed to earmark BRL 8.0 million, no later than December 31, 2021, for implementation of socio-environmental measures for the benefit of the State of Amapá community, including a combination of community food donations in the first three months following ratification and those socio-environmental measures defined by mutual agreement of Tucano and MPF for the benefit of the communities in the Municipalities of Pedra Branca do Amapari and Serra do Navio funded in the second half of 2021. The Instituto do Patrimônio Histórico e Artístico Nacional - Historic and Artistic National Heritage Institute (“IPHAN”) have sought clarification of the settlement agreement requesting certain of the settlement funds be designated specifically to IPHAN.

In related proceedings, not covered by the Settlement Agreement, Tucano is in the process of appealing fines and damages arising in the Federal Court of Appeal. The likelihood of total loss is not considered probable based on legal advice received. However, the best estimate of the loss is less than the full amount claimed and the Company has accrued the best estimate of costs to settle the claim.

Cyanide usage

In October 2018, the public prosecutor’s office of labour affairs for the State of Amapá filed a public civil action seeking payment for potential damages and medical costs in relation to the Company’s employees’ exposure to cyanide used in the processing of its gold. In August 2019, a regional labour court ordered Tucano to pay compensation of approximately BRL 4.0 million plus interest and inflation for these damages, in addition to surveillance and funding medical costs of any diseases to Tucano’s internal and outsourced employees and former employees, and to stop using cyanide in its production process within one year from the final non-appealable decision on the proceedings. Tucano is in the process of appealing to a Federal Superior Labour Court all aspects of the regional labour court decision. In March 2020, it was accepted that the appeal, exclusively with respect to whether or not the use of cyanide may continue, be admitted for consideration by the Federal Superior Labour Court and the balance of the decision has not yet been accepted for consideration and is under appeal. Tucano is not aware of any circumstances of former or current employees who have suffered health consequences from exposure to cyanide at the Company’s operations. In addition, the Company notes that the use of cyanide in the processing of gold is common in the industry within Brazil and is not prohibited by any federal law in Brazil and that the Company complies with proper safety standards in the use and handling of cyanide in its operations. The Company believes the claims are without merit. As the matter progresses, the Company will review its assessment.

 

  22 

Great Panther mining Limited

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts expressed in thousands of US dollars, except where otherwise noted)

 

As at and for the three and six months ended June 30, 2021 and 2020 (Unaudited)

 

19.RELATED PARTY TRANSACTIONS

Other than transactions in the normal course of business with key management personnel, the Company had no transaction between related parties in the three and six months ended June 30, 2021, and 2020. During the three and six months ended June 30, 2021, severance paid was $nil and $0.6 million, respectively, (no severance paid during the three and six months ended June 30, 2020).

20.SUPPLEMENTAL CASH FLOW INFORMATION
(a)Other non-cash items
   Three months ended
June 30,		  Six months ended
June 30,
   2021  2020  2021  2020
Accretion  $803   $640   $1,427   $1,478 
Finance expense   529    689    1,397    1,477 
Finance income   (69)   (74)   (137)   (179)
   $1,263   $1,255   $2,687   $2,776 
(b)Non-cash investing and financing activities
   Three months ended
March 31,		  Six months ended
June 30,
   2021  2020  2021  2020
Change in reclamation and remediation provision included within mineral properties, plant and equipment and exploration and evaluation assets  $(587)  $859   $(265)  $1,361 
                     
Change in lease liability related to right-of-use assets   459    460    2,747    503 

 

 

  23 

Great Panther mining Limited

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts expressed in thousands of US dollars, except where otherwise noted)

 

As at and for the three and six months ended June 30, 2021 and 2020 (Unaudited)

 

21.OPERATING SEGMENTS

The Company’s operations are all within the mining sector, consisting of three operating segments, two of which are located in Mexico, one of which is located in Brazil, plus one segment associated with Coricancha in Peru, one Exploration segment and one Corporate segment. Due to diversities in geography and production processes, the Company operates Tucano, the GMC and Topia mines separately, with separate budgeting and evaluation of results of operations and exploration activities. The Coricancha segment contains the net assets associated with Coricancha, and the cost of its exploration, evaluation and development activities are separately budgeted and reported. The Corporate segment provides financial, human resources and technical support to the three mining operations and Coricancha. The GMC operation produces silver and gold in concentrate, and the Topia operation produces silver, gold, lead and zinc in concentrate for refining off-site. The Tucano operation produces gold doré. The Exploration segment includes the Company’s mineral exploration and evaluation assets at Santa Rosa, El Horcón, Plomo and Argosy.

   Operations            
   Tucano  GMC  Topia  Coricancha  Exploration  Corporate  Total
Three months ended
June 30, 2021		                     
External revenue  $—     $6,105   $6,949   $—     $—     $39,043   $52,097 
Intersegment revenue   37,145    —      —      —      —      (37,145)   —   
Amortization and depletion   6,776    117    865    63    —      64    7,885 
Exploration and evaluation expenses   34    738    353    1,533    63    122    2,843 
Non-cash change in reclamation and remediation provision   —      4    —      —      —      —      4 
Finance income   33    —      —      —      —      36    69 
Finance expense   342    —      —      94    —      93    529 
Income (loss) before income taxes   (5,422)   (1,770)   1,299    (1,815)   (133)   (2,345)   (10,186)
Income tax expense (recovery)   (129)   —      —      —      —      —      (129)
Net income (loss)   (5,293)   (1,770)   1,299    (1,815)   (133)   (2,345)   (10,057)
Additions to non-current assets   12,963    (67)   1,131    976    —      —      15,003 

 

Six months ended
June 30, 2021

                                   
External revenue  $—     $11,955   $13,146   $—     $—     $79,566   $104,667 
Intersegment revenue   77,252    —      —      —      —      (77,252)   —   
Amortization and depletion   14,621    245    1,692    106    —      129    16,792 
Exploration and evaluation expenses   134    1,530    477    2,892    178    244    5,455 
Non-cash change in reclamation and remediation provision   —      —      —      —      —      —      —   
Finance income   72    —      —      3    —      62    137 
Finance expense   983    —      —      186    —      228    1,397 
Income (loss) before income taxes   1,715    (3,115)   1,834    (3,619)   (229)   (6,753)   (10,167)
Income tax expense   6    147    68    —      —      —      221 
Net income (loss)   1,709    (3,262)   1,766    (3,619)   (229)   (6,753)   (10,388)
Additions to non-current assets   25,713    1,113    2,113    1,021    —      —      29,960 
                                    
As at June 30, 2021                                   
Total assets  $169,193   $5,950   $15,437   $45,411   $2,146   $29,202   $267,339 
Total liabilities  $83,240   $17,212   $2,529   $44,115   $542   $12,547   $160,185 

 

  24 

Great Panther mining Limited

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts expressed in thousands of US dollars, except where otherwise noted)

 

As at and for the three and six months ended June 30, 2021 and 2020 (Unaudited)

 

 

   Operations            
   Tucano  GMC  Topia  Coricancha  Exploration  Corporate  Total
Three months ended June 30, 2020                  
External revenue  $—     $2,552   $2,108   $—     $—     $62,368   $67,028 
Intersegment revenue   55,829    —      —      —      —      (55,829)   —   
Amortization and depletion   10,684    383    725    53    —      64    11,909 
Exploration and evaluation expenses   3    383    48    1,728    6    49    2,217 
Non-cash change in reclamation and remediation provision   —      11    —      —      —      —      11 
Care and maintenance costs   —      322    —      —      —      —      322 
Finance income   48    —      —      —      —      26    74 
Finance expense   344    —      —      —      —      345    689 
Income (loss) before income taxes   16,340    (1,001)   (897)   (1,946)   (117)   (3,470)   8,909 
Income tax expense   (357)   —      —      —      —      —      (357)
Net income (loss)   15,983    (1,001)   (897)   (1,946)   (117)   (3,470)   8,552 
Additions to non-current assets   8,077    141    429    596    —      —      9,243 

 

Six months ended June 30, 2020

                                   
External revenue  $—     $8,617   $6,058   $—     $—     $100,403   $115,078 
Intersegment revenue   93,220    —      —      —      —      (93,220)   —   
Amortization and depletion   17,896    732    1,393    102    —      129    20,252 
Exploration and evaluation expenses   365    843    146    3,529    103    139    5,125 
Non-cash change in reclamation and remediation provision   —      34    —      —      —      —      34 
Care and maintenance costs   —      551    —      —      —      —      551 
Finance income   49    —      —      —      —      130    179 
Finance expense   828    —      —      1    —      648    1,477 
Net income (loss) before income taxes   4,887    (1,281)   (1,886)   (3,751)   124    (29,680)   (31,587)
Income tax expense (recovery)   357    (26)   (14)   —      —      8    325 
Net income (loss)   4,530    (1,255)   (1,872)   (3,751)   124    (29,688)   (31,912)
Additions to non-current assets   24,107    762    1,365    (56)   —      42    26,220 
                                    

 

As at June 30, 2020

                                   
Total assets  $136,265   $6,236   $14,481   $31,078   $2,124   $63,251   $253,435 
Total liabilities  $89,571   $14,225   $2,425   $30,040   $2   $43,299   $179,562 

 

22.SUBSEQUENT EVENT

On August 4, 2021, the Company entered into a share purchase agreement with Newrange Gold Corp. (“Newrange”) under which the Company will sell the shares of its wholly-owned subsidiary Cangold Limited (“Cangold”) to Newrange for a purchase price of CAD$1.0 million paid as a combination of cash and common shares of Newrange. Cangold holds the Company’s interest in the Argosy property in Northern Ontario in the Red Lake Mining District. Prior to closing, the Company will complete a reorganization to retain its 100% interest in the Company’s Plomo property located in Mexico. Completion of the transaction is subject to customary closing conditions.

 

 

 

 

 

 

 

  25