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Executives

Rhonda Bennetto – VP, Corporate Communications

Robert Archer – President and CEO

Jim Zadra – CFO

Analysts

Christos Doulis

Great Panther Silver Ltd. (GPL) Q2 2013 Earnings Call August 8, 2013 10:00 AM ET

Operator

Ladies and gentlemen thank you for standing-by. Welcome to the Great Panther Silver Limited Second Quarter 2013 Financial Results conference call and webinar. During the presentation all participants would be in a listen-only mode. Afterwards we’ll conduct a question and answer session. (Operator Instructions). As a reminder this conference is being recorded Thursday August 9, 2013.

I would now like to turn the conference over to Rhonda Bennetto, Vice President Corporate Communications. Please go ahead.

Rhonda Bennetto

Thank you Benjamin. Good Morning and thank you for taking the time to join our call today. With me this morning are Bob Archer our President and CEO and Jim Zadra our Chief Financial Officer.

We are using a presentation today to add a visual component to our conference call. You can access the slides by going to www.greatpanther.com and clicking on the main banner page on our home page.

Before we begin, I’d like to mention that some of the commentary on today’s call will contain forward looking statements. Although we will make every effort, you should be cautioned that actual results made and future events might differ from those noted in today’s presentation.

At the end of Mr. Archer’s presentation, there will be a question-and-answer session and a replay of this call will be available a little later today. The details to access the replay were noted in the press release announcing this call and are available on our website.

I’ll turn the call over to Bob.

Robert Archer

Thank you Rhonda. Good morning everyone and thanks for joining us. As Rhonda just noted, you can follow along with me and the slides I’m referring to by logging into our Website at www.greatpanther.com where you will find them front and center on our home page.

I will assume that everyone has read the release and I would like to start today by reviewing some operation results as they better address the financial results I’ll be referring to in just a moment. After that I will open the call up.

On a consolidated basis Great Panther produced a record 680,212 silver equivalent ounces in Q2 from its Guanajuato and Topia operations in Mexico. A 22% increase over Q2 of 2012 and a 12% increase over Q1 of 2013. Year-over-year silver production was up 6% and gold production increased 17%. The increased throughput at both mines and higher gold grades at Guanajuato led to the overall increase in production. Silver grades were down year-on-year at both operations but up over Q1 of 2013. Guanajuato and Topia melt 29% and 22% more tons respectively than the same quarter in 2012 reflecting improvements to both processing plants. Initiatives to improve grade control had an immediate impact at both mines as May and June showed a significant improvement in grades.

At Guanajuato this resulted primarily from the termination of mining and lower grade areas of the mine as well as better sampling procedures and less dilution within active areas. At Topia grade control is primarily focused on the reduction of dilution that is inherently associated with the mining of narrow veins. With first half production totaling almost 1.3 million silver equivalent ounces the company is on track to meet its guidance of 2.4 to 2.5 million silver equivalent ounces for fiscal 2013.

Guanajuato showed the strongest year-on-year performance with a 30% increase in silver equivalent production mainly due to a 74% increase in gold output. The Santa Margarita Vein at Guanajuato has been delivering consistently strong gold grades in the 4 gram per ton range but silver grades in this vein are lower typically above 50 grams per ton which brings down the overall average for the mine.

The increased silver equivalent production at Topia was the result of higher silver grades over the previous quarter and higher throughput compared to Q2 of 2012. Two of the smaller higher cost mines at Topia were shut down in Q1. And the remaining 12 mines are being reviewed on a continuing basis to ensure their viability due to the independent nature of these mines the Topia option has a lot of flexibility in this regard.

Turning to our financial results for the quarter the sudden drop in metal prices in Q2 had an immediate and severe impact on revenues and cash flow. Average realized silver prices decreased 23% from Q2 of 2012 and 27% from Q1 of 2013. Despite the company’s quick reaction to lower site costs, to cut expenditures and increased grades the effects of many of these actions will not be reflected until Q3.

As such the company sustained a net loss for the quarter of $5.1 million. Our margins for the quarter were also impacted by approximately $1.3 million in mark-to-market adjustments and shipments from the prior quarter as a result of the significant decrease in metal prices.

The high unit costs in Q2 were largely a function of sales in the quarter that reflected production from the first four months of the year at lower grades and higher site costs. It is expected that the third quarter results will reflect the benefit from the sale of the lower cost to higher grade production from the second quarter as much of this production still remained in inventory at the end of Q2 due to being in-transit to an overseas smelter.

Consolidated cash costs for silver ounce was US$18.14 for the three months ended June 30th 2013 a 59% increase compared to $11.42 for the same period in 2012 and a 2% decrease compared to US$18.60 in the first quarter of 2013.

As I just mentioned the continued high unit costs reflect Q1 productions more than Q2 and we should see an improving trend in cost per ounce going into Q3. For that reason we have adjusted our guidance on cost per ounce for 2013 to the $15 or $16 range. Great Panther continues to have a strong balance sheet $21.3 million in cash and cash equivalents, $35.1 million in working capital and no long-term debt.

In order to lower unit cash costs the company has implemented wide ranging cost reduction initiatives that include eliminating or deferring non-essential CapEx prioritizing mine development with a focus on production and reducing exploration corporate communications, business development and administrative budgets with concurrent lay-offs.

The number of contractors at Guanajuato has been reduced and some contractors at both operations have been re-negotiated. Some of these actions will not have an impact until Q3 however and severance costs in Q2 may give it an immediate impact of staff reductions.

In addition to increasing grades we are also looking at areas of both mines for production can be increased in order to increase revenue and lower our unit fixed costs. We are moving our San Ignacio Project forward and anticipate the approval of our EIA near the end of Q3. Upon receipt of that permit we will be able to commence the ramp development.

A program of infill drilling will also begin before the end of Q3 in order to better define the existing resource prior to underground development. Much of the surface infrastructure is already in place and the remaining CapEx budget to bring the mine into production is approximately $2 million.

As most of the ore is within 75 meters of surface we anticipate initial production in Q1 of 2014 and growing through the year. Ore will be trucked about 20 kilometers to the Cata Processing Plant at the main Guanajuato Mine Complex where we have a sufficient capacity to process it.

Due to the drop in metal prices a revised mine plan is underway and we’ll focus on only the higher grade intermediate vein in the short-term. Further details of the mine plants such as the anticipated mining rate, grade, costs etcetera will be released in due course.

The initial drilling program on our El Horcon Project was completed in Q2 with 2156 meters and 24 holes. The Diamantillo vein was tested over a strike length of 650 meters and remains open in both directions as well as to depth.

We have since completed an internal resource estimate of the drilled portion of the vein and they are in the process of completing a preliminary economic assessment. With this information we will be able to determine whether to continue with exploring and developing the project or to put in hold until metal prices improve. With that Benjamin I would like to open up the call for questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) One moment please for our first question. Our first question comes from the line of (inaudible).

Unidentified Analyst

Yes.

Operator

(Inaudible) Please go ahead with your question.

Unidentified Analyst

Can you just sort of walk me through the $15 to $16 cash flows estimate between the remainder of the year for Guanajuato and Topia to sort of break it down?

Robert Archer

A break down do you mean between the mines [Hiko]?

Unidentified Analyst

Correct yes.

Robert Archer

Maybe I’d get Jim to address that specific one.

Jim Zadra

Sure. Sure. Mostly I guess for Topia we would see Topia being in the $16 to $18 range and then Guanajuato in the $12 to $15 range.

Unidentified Analyst

Is that sort of the same thing for the Q2 results?

Jim Zadra

No for Q2 they were actually almost equal at around $18 the exact numbers I don’t have in front of me but for Q2 they were roughly equal.

Unidentified Analyst

Got you. And can you just remind what were… the time belt between when you deliver the concentrate for this, the smelter deliveries versus when you get was it 90 days?

Jim Zadra

The delivery cycle is about 60 days and then the payment cycle is another 60 days.

Unidentified Analyst

Okay so four months essentially were kind of very good. And then you guys…

Jim Zadra

Carrying to operate that quarter…

Unidentified Analyst

Got you and then you guys had some talk about San Ignacio and I know it’s obviously you’re way, way, way too early to really get a real grip on it. But just walk me through some of the financial figures that you guys are I mean you got $21 million in cash. Walk me through some of the financial metrics you guys are using to evaluate this.

Jim Zadra

To evaluate San Ignacio.

Unidentified Analyst

Correct.

Jim Zadra

What I just had with, we’ve taken a look at the existing resource. And to me they were, the resources built on three principle veins. And with the current smelter prices only one of those veins is economic at current prices. And so that’s the intermediate vein that’s the one that we’re focused on. So the ramp development will go down with the idea of mining that vein principally although it will go down between that one and another one. So the metal prices come back that’ll be just as the cost fell out in the other direction and combining the Melladito vein at a later date. But the principle focus initially will be on intermediate which is still economic at these prices. And we’ve also modeled out using $18 or lower. And we’re still good at that level.

Unidentified Analyst

Got you. Well thank you very much for taking my questions.

Robert Archer

Thanks [Hiko].

Operator

(Operator Instructions) We have no questions from the phone lines at this time. (Operator Instructions) Our next question comes from the line of Christos Doulis. Please proceed with your question.

Christos Doulis

Thanks guys. Just, I don’t see if you have any sort of guidance here on CapEx for the bulk of the year and ‘14 or any sort of preliminary budget for ‘14. Any comment there?

Robert Archer

But we don’t (inaudible) our budget for 2014 just yet but that’s, but for the balance of the year we have reduced our overall CapEx for the year from about 18 million ton to about 12 and so about mostly the lower half of that has been spent already. And so there is about maybe 5 million left…

Christos Doulis

Okay does that include the 2 million in San Ingacio?

Robert Archer

Yes it does.

Christos Doulis

Thank you very much.

Robert Archer

Okay.

Operator

We have no questions from the phone lines at this time I will turn it back over to Bob.

Robert Archer

Thanks Benjamin. And in closing I’d just like to ensure our shareholders and potential investors that we are reacting and adjusting to the current environment of lower metal prices. Internally we have already begun to see the effects of these initiatives and we’re confident that they’ll be reflected in our financial results starting in the third quarter. In the interim our strong balance sheet gives the ability to weather the storm. And I thank our shareholders for the patience and loyalty.

Operator

Ladies and gentlemen this concludes the conference call for today. We thank you for your participation and ask you to please disconnect your lines.

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