Great Panther Silver (TSE:GPR)(NYSE MKT:GPL), a precious metals miner that is dealing with an illegal occupation at its Guanajuato mine in Mexico, has announced its year-end and fourth quarter results, which showed operational improvements such as record metal production despite the hit from weak gold and silver prices. 

“We are pleased to show continued reduction in our costs and improvements in our operating cash-flow, adjusted EBITDA and free cash-flow from the levels we saw in the first half of the year,” said president and CEO Robert Archer, in a statement released late Monday. 

The chief executive said on a conference call today that the company, with two operating mines in Mexico, processed 23% more ore in 2013 than the previous year for record annual production, topping its guidance by 14% and resulting in the “best year ever”. 

Archer spoke of improvements in efficiencies at both of its Topia and Guanajuato processing plants, including grade control initiatives, as well as a wide-ranging cost reduction plan undertaken immediately after the collapse in metal prices in the second quarter of last year. The Mexico-focused precious metals company took immediate steps to navigate its way through a more challenging environment for silver and gold producers. 

Cash costs improved markedly throughout 2013, dropping from US$18.60 per silver ounce in the first quarter to US$8.85 in the fourth quarter. The latter figure compares with US$14.58 in the fourth quarter of 2012. For the full year, however, cash costs rose 10% from 2012 to US$13.45 an ounce, but because of the improvements in the second half of 2013, the figure beat the company’s guidance of US$15 to US$16 an ounce.

“I am especially pleased that our operations team was able to achieve these results while attaining a 19% increase in metal production in 2013, and successfully advancing the development of San Ignacio to keep on track for the commencement of production in the second quarter of this year,” said Archer in the statement. 

Great Panther is expected to increase total metals production by about 10% this year, with guidance of 3.1 to 3.2 million silver equivalent ounces. Output is expected to increase gradually throughout the year as its San Ignacio development project comes on stream. San Ignacio is planned to start production at about 100 tonnes per day, ramping up to about 250 tonnes per day by the end of 2014.

“Despite our improved results in the second half of the year, the overall results for 2013 were significantly impacted by a 38% decline in the silver price and cost and grade challenges in the first half,” Archer said. 

Revenue declined 12% in 2013 to $53.95 million, while the company swung to a net loss of $12.7 million from a profit of $5.5 million in 2012. On a per share basis, the miner recorded a net loss of 9 cents, compared to net earnings of 4 cents in the previous year.

The most recent figures reflect impairment charges of $12 million in the fourth quarter, including a $6.3 million charge tied to its Guanajuato mine and the current outlook for precious metals prices, and a $5.7 million charge related to its San Ignacio project.

The weak silver and gold prices offset a 19% increase in silver equivalent production last year, to 2.84 million ounces — a new record. 

“Silver and gold prices still remain at relatively low levels, and we will continue to look for ways to reduce costs and mitigate grade variability, with a key goal of improving free cash-flow,” affirmed Archer.

“The significant decline in metal prices was also a principal factor in $12 million of non-cash impairment charges taken in the fourth quarter.” 

So far, the company’s efforts to cut back on costs include a reduction in the number of mining contractors at Guanajuato, the renegotiation of mining contracts and improvements in mine planning as well as grade control. It also made cuts to exploration, general and administrative expenses, and pulled back on certain development programs. 

At its Guanajuato mine, which accounted for 67% of total production in 2013, the company earlier Monday reported that 60 people gained unauthorized entry to its main administration building and plant facility at the site, after an illegal worker was killed in a violent clash with guards at the facility last Wednesday. The company has in the meantime shut operations until a peaceful resolution is put in place. 

Despite notifying local authorities, Great Panther said no action has yet been taken, and Archer urged Mexican authorities on the conference call today to “express the legality” of the company’s acquisition of the mine to “dispel all misrepresentation” and to peacefully resolve the issue.

The chief executive, who said Great Panther holds full legal title to all of its Guanajuato assets, emphasized that the safety of the company’s employees is its first priority, with all of its workers currently safe off-site. The company also said that it is currently reviewing all options to regain custody of its facilities. 

The Guanajuato mine saw a 27% increase in tonnes milled in 2013.

Aside from taking its San Ignacio project to production, and proceeding with permitting for phase II exploration at its El Horcon asset, Great Panther said it will remain open to potential acquisition targets within Mexico and Peru.