Great Panther Mining Ltd

TSX:GPR

Earnings Call Transcript

[Operator]

Thank you for standing by. This is the conference operator. Welcome to the Great Panther Mining Second Quarter 2020 Earnings Conference Call. [Operator Instructions]I would now like to turn the conference over to Meghan Brown, Director, Investor Relations. Please go ahead.

[Meghan Brown, Vice President of Investor Relations]

Thank you, operator, and good morning, everyone. I'm Meg Brown. Thanks for taking the time to participate in our call today. Before we begin, I would like to mention that some of the commentary on the call will contain forward-looking statements. You should be cautioned that actual results and future events may differ from those noted in today's presentation. The commentary also refers to various non-GAAP measures, definitions, and reconciliations that are included in our MD&A for the period ended June 30 of 2020All dollar amounts expressed in this presentation and in the associated financial statements and MD&A are in U.S. dollars unless otherwise noted.And for reference during the call. AISC refers to all-in sustaining costs. I would like to remind everyone that this call is being recorded and will be available for replay later today. Replay information and the presentation slides accompanying this conference call and webcast will be available on our website at greatpanther.com.On the call this morning we have Rob Henderson, President and CEO; Neil Hepworth, Chief Operating Officer; and Jim Zadra, Chief Financial Officer.I'll now turn the call over to President and CEO, Rob Henderson.

[Robert Duncan Henderson, President, CEO & Director]

Thanks, Meg, and thank you, everyone, for dialing in. I'm very excited to be sharing our second quarter results today. The robust production from our mines, together with the increase in the gold and silver price has helped us deliver on record earnings for the quarter.But before we discuss the operations. I want to say I'm extremely impressed with how our team has managed through this period of uncertainty around COVID-19. Never before have we seen such disruption in every aspect of our lives and work. We face many risks in managing our mining company but have never anything -- seen anything quite like this virus.Our people have responded with courage and tenacity and determination. It's evidence that we have a committed workforce adapting to new ways of working and we are strengthening relationships with all our key stakeholders. At Tucano, I'm pleased to report that all of our employees who have tested positive for COVID have now fully recovered. In Mexico, there have been full cases reported at GMC, one of whom is fully recovered and at Topia which is more remote, there have been just two cases. We're monitoring our Mexican workforce very carefully as Mexico has seen a rise in cases in recent weeks.We continue to screen all employees on arrival at our mine sites and workers are encouraged to stay home, if they don't feel well. The health and well-being of our people and communities is a core value and will continue to be our top priority throughout this pandemic. Our team has done very well in this disruptive time of COVID-19 and I would like to thank them all for their efforts.And now moving on to Slide 5. When I joined Great Panther just a little over three months ago, I told you that my priority was to support the team and getting our operation stabilized and generating strong cash flow and I'm pleased to report that things are going in the right direction. At the operations, GMC and Topia made a smooth transition back into full operations following the COVID shutdowns, and restarting the mine typically has bumps, but our team has worked diligently to bring things back as quickly and as smoothly as possible. Both are well positioned now to have a strong and steady second half and are in line to benefit from a silver price that has risen more than 40% in just over a month.The Topia, we were able to issue cost and production guidance for the full year for the first time. We also adjusted GMC guidance to reflect the short-term shutdown. We now have realistic and achievable production and cost objectives for Mexican operations and both are in good shape to meet their targets. Tucano is also trending in line with the full-year targets we set out in January, to kind of achieved a new monthly production record of 15,389 ounces in June, a record since the time we acquired it in early 2019 and this was achieved in spite of seasonally poor weather.Next slide. In spite of COVID, 2020 is off to a good start as we delivered a number of all-time company records in the second quarter. Importantly, we are generating robust cash flows that will help us internally fund our capital and exploration programs and further improve our balance sheet. The combination of a strong rise in the gold price, record production at Tucano and substantially lower all-in sustaining costs drove these records, which included mine operating earnings before non-cash items of $35.8 million, net income of $8.6 million, adjusted EBITDA of $30.2 million and cash flow from operations of $19.5 million.We produced 38,541 gold equivalent ounces in Q2 2020 which is an 11% improvement over Q1 2020 and brings our year-to-date production to 73,267 gold equivalent ounces. This puts us on track to meet our full-year guidance of 146,000 to 158,000 of gold equivalent ounces. On the corporate side, we completed a bought deal financing in Q2 with gross proceeds of $16.1 million. This cash injection combined with our strong internal cash flow generation due to the rise in the gold price put us in a good position to internally fund our capital programs and further build working capital. Our cash position as of June 30 was $60 million. During the quarter, we also reached an agreement with Nyrstarto defer our Coricancha bond requirements. This reduces our short-term funding requirements and highlights our commitment to realizing Coricancha's significant potential. Neil, our Chief Operating Officer will go through the operations in more detail, but some highlights include production 35,421 ounces of gold at Tucano, a 35% increase of Q1 2020, and an all-in sustaining cost of $982 per ounce of gold and sold.Reduction of 280,831 silver equivalent ounces from our Mexican mines and this was despite a nearly two-month shutdown due to COVID, but as mentioned operations have resumed smoothly as at the end of May. Because of COVID, I haven't had a chance to visit the mines yet and meet our teams in person.So I will hand over to Neil for the detailed discussion of the mines and of course, Jim will do the financial review. Neil, over to you.

[Neil Hepworth, Chief Operating Officer]

Okay. Thanks, Rob. First of all, let's start with Tucano. The completion last year of the sulfide processing circuits that's allowing us to process much higher-grade ore with install retaining pretty good, high recoveries. The second quarter production was 35,421 ounces of gold as Rob pointed out. This was an 18% increase over Q2 2019, despite particularly adverse seasonal weather.We had, we had 40% higher rainfall than an average in Q2 this year. The increase in gold production was primarily due to higher gold grades and increased ore processing rates and as Rob said we achieved a new monthly production record of 15,389 ounces of gold in June. Okay. With the 71,000 ounces of gold production in the first half of 2020, we are on track to achieve our guidance for Tucano of 120,000 to 130,000 ounces from the mine, contributing to our confidence and this is the expectation of the higher-grades as we mined in the lower portions of the pits, which all tend to have a higher grade. In Q4, the all-in sustaining cost was $992 per ounce of gold sold, a 13% improvement over Q2 2019. And we are on track to meet our all-in sustaining cost guidance for Tucano of $11.50 per ounce to $12.50 per ounce. Our 2020 exploration program with a budget of $6.6 million and 555,000 meters of drilling is progressing well.Okay. The next slide. For our reserve replacement of Tucano, our target resources are below the $1,350 per ounce reserve pit shell, which is the blue line and above the $1,500 per ounce pit shell, let's see the orange line. This new shell is larger than the RPA $1,500 resource pit shell which considered some average mining cost for TAP AB and a 3.8 real to the U.S. dollar exchange rate. The new shell includes a more favorable exchange rate at 4.5 real to the U.S. dollar and uses mining cost specific to TAP AB to take into account the free-diggable material and proximity to process plant into the waste dumps. The slide also shows the drill holes, the part of this reserve replacement drilling that they sort of the purple color. The reserve replacement drilling is focused on resources currently drilled to inferred spacing and are located between the two pit shells. The target for this reserve replacement drilling in TAP AB is conversion of sufficient resources to reserves to replace 2020 reserve depletion in all of the pits.Next slide. This is to do with exploration. In June, we released the first set of drill results from the infill drilling in the open pits. Drilling completed to date totaled 7,236 meters of diamond and RC drilling at the TAP AB1 and TAP AB3 pits, plus 600 and, 6,333 meters of RAB drilling in the regional targets. Drilling rates are expected to increase in the second half of the year because this is when we go into the dry season. We've also increased the number of rigs operating and we've got a fourth-time drill on-site. These new -- the additional and plus extra RC rig, these additional rigs are going to be focused on the Urucum underground and Urucum East. Results from drilling up to the end of June will be incorporated into an updated resource and reserve estimates expected in Q4 2020. We'd also gathering additional data to support a feasibility study for an underground operation below Urucum North pit. The study would commence around the end of the year and we'll probably include an exploration decline that could eventually be converted to production grow up.Next slide. Regionally, our tenements cover the most prospective and under-explored greenstone terrain in Brazil. The image in the slide is conductivity of magnetics. The large oval-shaped blue zones reflect granitic intrusions are the primary drivers of the mineralization. The red squiggles highly conductive zones such as banded iron formations or chemical settlements of deep weathering squeezed between -- between the granites. The seven-kilometer long Tucano trend is a north-south Tucano trend is a North-South red trend indicated by yellow. Note there's the numerous environments are very similar to the Tucano trends and all of these potential targets. Our new VP Exploration Nick Winer has got extensive experience in greenstones and extensive experience in this area in particular. Nick is using his skills in structural geology combined with this multi-element geochemistry experience to identify high potential corridors and targets. This is with a view to fast track an exploration program that could involve RC and diamond drilling as early as Q4 this year depending on accessing and permitting constraints.Next slide. Okay. This is Topia in Mexico. While Mexico -- while our primary metal produced from a company-wide basis is gold, our Mexican operations remain primary silver in terms of production. Therefore, we continue to report silver equivalent ounce production and unit cost metrics for Mexican silver mines. Q2 production was adversely impacted by suspension of mining operations in Mexico in April and May. This was in compliance with the directive of the Mexican federal government due to COVID-19. At Topia, we produced 146,128 silver equivalent ounces and we are on track to meet the guidance of 1.2 million to 1.3 million silver equivalent ounces. The all-in sustaining cost was $22.32 per ounce of payable silver for the second quarter, reflecting the full cost of care and maintenance during the temporary shutdown. Plant's throughput will increase in Q3. As I said, now comes back online and grade should increase as a proportion of development or decreases as we complete opening of new areas.We continue to focus on increasing plant throughput in driving down costs at Topia. On the exploration front of Topia, we completed 2,612 meters of exploration drilling in Q2 with the four rigs are on-site. I think very importantly, we also received the required government approvals and a permit to start stacking on Phase 3 of the TSF. Phase 3 will be available after we finished construction of retaining walls, erosion controls around the base of the facility. At GMC,--the next slide. At GMC nearly all of the process ore was sourced from San Ignacio mine, while we continue to exploration activities at the Guanajuato mine. The 2 mines together share a process plant and the comprised Guanajuato Mine Complex referred to as GMC. So production from GMC in the second quarter was 134,703 ounces of silver equivalent and an all-in sustaining cost of $27.36 per silver equivalent ounce. As with -- as with Topia GMC's all-in sustaining costs for the second quarter, which reflects the full cost of mine during the shutdown of April and May and the all-in sustaining cost is expected to trend towards to the full-year guidance of $13 to $14 for the full year. At Guanajuato the exploration program continues to advance at GMC with the objective of outlining institute blocks of higher-grade mineralization. We completed 2,612 meters of infill drilling program in Q2 2020 with four rigs operating. Guanajuato underground drilling is focused on the Los Pozos area and improving mineral resource estimation [ contribution ] in the areas. We are planning for an increase in production from Guanajuato in the second, in the second half based on the continued development of the Los Pozos. Underground and surface exploration is also increased at San Ignacio. The initial program surface drilling at San Ignacio is located a hanging walls on along with Purisima plane system were initial drill results show very high potential and an additional 2,500 meters of drilling has been allocated in this area for the second phase of infill drilling that will start in mid-August.I'll now turn the call over to Great Panther CFO, Jim Zadra to discuss our financial results.

[Jim A. Zadra, CFO & Corporate Secretary]

Thank you, Neil. And welcome everyone. We recorded revenue of $67 million in the second quarter or 48% increase relative to Q2 2019, reflecting strong production results for Tucano and a strong increase in the gold price. These factors, along with an improvement in our unit cost at Tucano drilled a very significant increase in our operating earnings. EBITDA margin, net earnings, and cash flow. We reported mine operating earnings before non-cash items of $35.8 million in cash flow from operations of $24..1 million before non-cash net working capital movements. These were both new records for Great Panther and are a reflection of the significant free cash flow leverage in our operations. We delivered a substantial increase in adjusted EBITDA to $30.2 million which also reflected the quarterly record. Our net earnings were $8.6 million or $0.03 per share and also included approximately $6.8 million of foreign exchange losses which were primarily non-cash charges related foreign subsidiary translation adjustments and mark-to-market adjustments. It's important to note that the strong revenue earnings and cash flow results for the second quarter were achieved at an average realized gold price of $1,728 per ounce and also despite the suspension of our Mexican operations for most of the second quarter due to the government mandate Mexico to mitigate the spread of COVID-19. As noted, our Mexican mines have resumed full operation and gold is now well above $2,000 per ounce and silver traded above $28 per ounce today. With the current silver and gold price environment, we expect to see an even stronger financial performance for the third quarter. As noted, we saw a significant improvement in our cost in the second quarter and reported ASIC of $1,027 per ounce of gold sold on a consolidated basis, and before corporate G&A costs. The lower ASIC is reflective of a weaker Brazilian real, higher production for Tucano, and lower stripping cost due to the stripping that was advanced in the first quarter.For the full year, our ASIC guidances for $1,150 to $1,250 per ounce on a consolidated basis, and we're trending well to this. As our ASIC reflected higher stripping costs in Q1 2020, we also expect ASIC for Q3 and Q4 to be below our guidance range. This implies significant free cash flow margin for operations at current prices of gold and silver. For Tucano alone, the current gold price implies a free cash flow margin of over $1,100 per ounce, based on our expected ASIC for the second half.Significant margin levels can even be achieved with the gold price reverts back to the Q2 average. In terms of our balance sheet, our cash position improved to $60.2 million at the end of June, while we reduced our debt by about $4 million and continue to improve our net working capital position. We completed a bought deal financing in the second quarter for net proceeds $14.1 million. The financing was completed in light of the uncertainties posed by COVID-19 and to ensure we have sufficient working capital to complete the critical exploration programs discussed.As Rob noted, our operating teams have done an excellent job of managing the unprecedented challenge of COVID-19. While this challenge still remains for us and other mines operating throughout the world, we are in an even stronger position to manage it from the standpoint of our financial position and in terms of our experience and knowledge. In terms of capital allocation for 2020, our priorities are the noted exploration programs at Tucano and in Mexico, which we commenced earlier in the year. Given the recent rise in gold and silver prices, we're pleased we started these programs early on and we look forward to opportunities to further advance them.

[Robert Duncan Henderson, President, CEO & Director]

Thank you. That's all we have for formal remarks and I'll turn back to the operator for our Q&A.

[Operator]

We will now begin the question-and-answer session. [Operator Instruction] Our first question is from Heiko Ihle with H.C. Wainwright.

[Heiko Felix Ihle]

Good quarter. And I guess a bit of a common looking at mine operating earnings for the quarter of $0.11 with the stock price below $1 shows the valuation gap that we frankly expect to diminish over time quite well.Looking at Tucano, have you seen any new-formed challenges in regards to costs for labor, materials or suppliers that are unrelated to COVID and more based on the recent strength that are essentially based on strength in metal prices and not COVID. I mean. Jim mentioned earlier realized prices for $1,728 in the quarter. We're obviously well over $2,000 right now and I expect at least at some point in time other guys are going to want a piece of that pie, are you seeing anything like that?

[Robert Duncan Henderson, President, CEO & Director]

Yes. Thanks for the question. Yes, I think right now we are benefiting from a very weak real in Brazil and I think we are seeing a bit of an inflation happening in Brazil. So we are seeing some local costs going up, but Tucano is a pretty remote operation and there is not a lot of gold mining in Brazil. So we're not being crowded out by the people, but we are just seeing a local inflation cost pressure there but the real is the very low-real is certainly helping our cash cost saving.

[Jim A. Zadra, CFO & Corporate Secretary]

Can I just add? [indiscernible] Add something. The, I mean the one thing that impacts us is that there's rise and fall attached to the mining contracts is related to the exchange rate, but it's not, it's not a significant quarter -- it's not a significant part of it, but it definitely impacts on our costs in a negative way.

[Heiko Felix Ihle]

Fair enough. Speaking of Brazil and the COVID case. I mean obviously Brazil is not the best at handling this whole thing right now and efficiency issues with having a fairly large caseload. So just thinking out loud, given the nature of the deposit, it's an open-pit mine, not really all at crowded underground together and you have some ease of continuing distancing of the miners. Do you think that's a fair assessment? Are you maybe like able to give us a little bit more, a breakdown of the impact that you're seeing what exactly has changed? Can you just maybe provide a little more color along those lines?

[Robert Duncan Henderson, President, CEO & Director]

Sure, Heiko. Neil, you want to address them?

[Neil Hepworth, Chief Operating Officer]

Yes, additionally, we had some, not so much the social distancing side of things, because we did some fairly sort of innovative stops in terms of the canteen and multiple hours and all the rest of it and would have been an open-pit as well we can sort of maintain fairly good some social distancing. The process plant is a little bit more tricky, but we haven't really experienced too many problems. The one thing that did happen. I mean, which was quite gratifying was because initially we have quite a lot of people off just from just absorptions and because of exhibiting minor symptoms and all of the rest of it, we changed to twelve-hour shifts from eight-hour shifts. Now you -- normally the union fight you very hard on that because they obviously prefer to have the eight hours where they sort of employ more people, but the union was pretty some behind us and has allowed us to go on to twelve-hour shifts on the, on the mining and on the process plant and we just only, I mean, now we're going back to 8-hour shifts.

[Operator]

Our next question is from Matthew O'Keefe with Cantor Fitzgerald.

[Matthew Dennis O'Keefe, Research Analyst]

And congrats on a great quarter. I just had a couple of things, one, just you mentioned in the presentation there at Tucano part of your forward exploration plans, you're contemplating doing an underground exploration drift. Could you, could you expand on that a little bit and sort of a timing for that, and the cost and what, what impact that would have short term and long term?

[Robert Duncan Henderson, President, CEO & Director]

Yes. Thanks, Matt. We do have an existing study on underground option at Tucano and the study was done a couple of years ago. So the potential to go on underground has always been there. Typically, with the ban at iron-type formation you do eventually do go underground because they are very deep structures. So I guess the original team at Tucano had identified the underground a couple of years ago and did some initial work on it and we want to refine the network. We want to increase our confidence levels, certainly in the earlier paths of the access. So we want to get and revisit that study, the end of this year, do some more drilling just to confirm ore body continuity and access details. So we're essentially going to be de-risking a study that would had been done a couple of years ago.

[Matthew Dennis O'Keefe, Research Analyst]

Okay. And could you remind us again the rough number of ounces that you'd be targeting under there?

[Unknown Executive]

Neil, do you have that number in hand?

[Neil Hepworth, Chief Operating Officer]

Sorry, sorry what?

[Robert Duncan Henderson, President, CEO & Director]

The underground potential, how many ounces that we're looking at?

[Neil Hepworth, Chief Operating Officer]

It was fairly I'm trying to think now, now I've to look it up, but it is quite substantial. It's just off the top of my head, I would have thought, probably about 30,000 or 40,000 ounces a year when we start mining.

[Matthew Dennis O'Keefe, Research Analyst]

Right, right. Okay. Okay. Okay.

[Robert Duncan Henderson, President, CEO & Director]

And that would be....

[Neil Hepworth, Chief Operating Officer]

That's the order of magnitude.

[Matthew Dennis O'Keefe, Research Analyst]

Right. And so -- and that could have since you're doing an underground we'd be doing underground drifts, you'd be able to access that pretty readily once you -- you'd have access to it fairly quickly after you done the exploration presumably with that access?

[Robert Duncan Henderson, President, CEO & Director]

That's correct. It will be done through an existing pit. So I mean the future would consist of underground mining and open-pit mining simultaneously to keep the mill. So...

[Matthew Dennis O'Keefe, Research Analyst]

Got you. And then. Okay. That was great. And then just one other thing on Tucano. The recoveries were I think just over 90%. Are we -- was that unusual recovery like is that what we should be looking at going forward because that's how we were more towards 92% what we will be expecting. Is there -- is that is just within the normal variance or?

[Robert Duncan Henderson, President, CEO & Director]

Yes. Neil, can give more color, but that it's a function of where we were mining in the pits and we were mining, a very high prototype zone, which typically gives pretty low recoveries. So we were -- the recoveries were actually better than what we expected. But as we migrate back towards the Tapereba pits, I think we're going to see a recovery increase again. Neil, you're going to more color on that?

[Neil Hepworth, Chief Operating Officer]

Yes. No, that's what I mean, initially, when we first it is sort of prototype hotspots. We had some honorable recovery so like 80 odd percent. I mean it was, it was quite nasty, and we had the high grades, but eventually, we identified exactly what the problem was and we did a whole series of tests. And we towards the end of June, we started to sort of blend a lot more to try and get the amount of prototypes percentage down and those recoveries got back up to 92%, 93%, even up to 94% at one stage. So the 90% sort of reflects, so initially very low recoveries but then getting back on top of it.

[Matthew Dennis O'Keefe, Research Analyst]

Okay. Now, that's great, that's good clarification on that. And it sounds like you've got that kind of figured out going forward. And then just one final question on Coricancha that -- how should we be thinking about that. I mean, we've got some pretty good commodity prices here there is a lot of -- lot of metal there that's pretty could be readily available.Maybe you could just talk a little bit about your plans for Coricancha?

[Robert Duncan Henderson, President, CEO & Director]

Sure. Yes, it is a project that's very levered to metal price and we have an old study done a couple of years ago which needs refreshing. So we've allocated a team to have a much deeper dive into what our production rates could be and look at different ways of accessing the ore body. So we expect to refresh the study in towards the end of this year with a view of even potentially more drilling if it looks feasible but at current metal prices, it is a very interesting project.

[Matthew Dennis O'Keefe, Research Analyst]

Yes. Is it a -- I can't recall sorry guys but is it a long like once you did sort of figure out what you want to do with that. Is it a long lead time to get because you've done some production from it previously. I mean is it a long ramp-up time or is there a lot of work to be done to -- for development and do you need any new major equipment?

[Robert Duncan Henderson, President, CEO & Director]

Yes. It is an existing mine. We have a mill that's running there. So it's a function of mine access that we have to have a look at and we'll have to do some rehab and work, but we're not talking about a long lead time at all because most of the infrastructure is there.

[Matthew Dennis O'Keefe, Research Analyst]

Now there a lot. I realize is a lot going on and I'm just curious about that one given these metal prices, but that's it for me.

[Robert Duncan Henderson, President, CEO & Director]

Thank you, Matt.

[Operator]

Our next question is from Bhakti Pavani with Alliance Global Partners.

[Bhakti Pavani, Senior Research Analyst]

And congratulations on the quarter.

[Robert Duncan Henderson, President, CEO & Director]

Thank you, Bhakti.

[Bhakti Pavani, Senior Research Analyst]

I apologize if my questions sound repetitive, but just kind of curious, you had a record monthly production at Tucano in June, and second half is normally the strongest production at Tucano. Could you maybe provide some color on how the production has fed in the month of July in comparison to June?

[Robert Duncan Henderson, President, CEO & Director]

Yes. I think June was an exceptional month because we did hit very high grades which we expected and the recoveries were better than what we expected because the guys in the plant, figure out how to deal with the prototype. So it was a pleasant surprise in June that we hit that record.And I think we are going back towards the Tapereba pits in the second half of the year. So we are not going to have these spectacular high grades situation. So we're maintaining our guidance on Tucano pretty steady. So there is no big surprises.

[Bhakti Pavani, Senior Research Analyst]

Got it. Just wanted to follow up on Coricancha. I know you, you just mentioned that we plan to do additional study which should be out by the end of the year. But just kind of curious following the completion of study in addition to this, what else do you need to accomplish in order to take a production decision there?

[Robert Duncan Henderson, President, CEO & Director]

Well, yes, it's, first of all, you got to figure out is it worth doing. You've got to look at the financial metrics, you got to look at capital prioritization. So there are a number of hurdles for us to jump through. And right now with the existing study, we think that needs a lot more refining and derisking.So it's a matter of inputs net study and getting the project to a state where we can make a decision whether to proceed or not to proceed. So we've got a lot of things to look at. And I think the main one is, improve the financials and its ability to generate decent cash flow. So that's going to be the priority is to make sure this project is going to be economic for us.

[Bhakti Pavani, Senior Research Analyst]

Got it. And lastly, on the cash, you had a very good quarter when it comes to cash flow generation and you have about $60 million in cash. What's your near-term plan on deploying that cash? Is it going to be more focused towards debt reduction or you plan to go ahead with the underground drift development at Tucano? If you can provide some color, please.

[Robert Duncan Henderson, President, CEO & Director]

Yes. Jim, you want to handle it?

[Jim A. Zadra, CFO & Corporate Secretary]

Sure. Hi Bhakti. Really the capital allocation priorities are the exploration drilling as I outlined where we're going to continue to pay down our debts which are very manageable, given our current cash position and with the current metal prices, we'll continue to look for other opportunities to deploy capital in a way that will, that will increase value and increase our [ NAV ].

[Operator]

[Operator Instruction] Our next question is from Roger Davis, a private investor.

[Unknown Attendee]

Congratulations on the numbers. I think you kind of answered my question. I was going to ask about the production at Tucano because if you take the 15,000 ounces from June and multiply that times section, we get 90,000 ounces during the second half of the year, and if you add that to the 60,000 ounces from the first half that would be 150,000 ounces and your guidance is 120,000 ounces to 130,000 ounces. That same indicate a rather significant drop-off in production, so I guess you're saying that your grades are not going to be as high, or do you think you might have a chance of beating that 130,000 number?

[Robert Duncan Henderson, President, CEO & Director]

Yes. Thanks for the question, [ Roger ]. Yes. The Tucano we've got a series of different pits with we got slightly different characteristics and in June, we were mining right at the bottom of Urucum which is very high grade with the high prototype. We are going to the Tapereba pits in the second half of the year, so which does have a different characteristics. I think where we're maintaining our guidance. I don't think we're going to hit those spectacular results we had in June. If we do it will be a nice surprise, but we certainly think we're on line for the guidance and the plan is staying consistent.

[Unknown Attendee]

So according to your guidance and you expect somewhere around the 30,000 ounces to 35,000 ounces range for the third quarter and the fourth quarter?

[Robert Duncan Henderson, President, CEO & Director]

Yes, I think fourth quarter will be slightly better than the third. Because typically you get the weather working for you there, so third quarter is probably going to be one of our weaker quarters in terms of build production.

[Unknown Attendee]

Yes. Okay. Well, congratulations again on the great numbers.

[Robert Duncan Henderson, President, CEO & Director]

Thank you, [ Roger ].

[Operator]

There are no further questions registered at this time, I would like to turn the conference back over to Rob Henderson for any closing remarks.

[Robert Duncan Henderson, President, CEO & Director]

Thank you very much, operator. Q2 was a milestone quarter for us and we achieved a new production record at Tucano. We delivered strong free cash flow from all of our mines and this was achieved in spite of the significant challenges of COVID-19 and I certainly believe it's a testament to the strength of our team and good oversight from our new Board. And I'm confident that we've got a very solid platform to drive growth and benefit from the increased gold and silver prices that we're currently seeing. So thank you very much for your participation today. On behalf of everyone here at Great Panther, I look forward to sharing our progress with you in the next quarter.

[Operator]

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