SSR Mining Inc (SSRM) 2021 Q1 法說會逐字稿

Good day, everyone, and welcome to SSR Mining's First Quarter 2021 Conference Call. This call is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to Wes Sconce with SSR Mining.

Thank you, operator. Good day, ladies and gentlemen. Welcome to SSR Mining's First Quarter 2021 conference call. During which, we will provide an update on our business and a review of our financial performance. Our financial statements and management's discussion and analysis have been filed on SEDAR, EDGAR, the ASX and are also available on our website. To accompany our call, there is an online webcast and you will find the information to access the webcast in our news release relating to this call.

Please note that all figures discussed during this call are in U.S. dollars unless otherwise indicated. All references to cash costs and all in sustaining costs are per payable ounce of metal sold. We will be making forward-looking statements today, so please read the disclosures in the relevant documents. Joining us on the call today are Rod Antal, President and CEO, Alison White, CFO and Stewart Beckman COO. Now I'd like to turn the call over to Rod for opening remarks. Rod?

Thanks, Wes and good afternoon and good morning to you all. Before we begin, I would like to welcome Alison White, our new CFO to her first earnings call with SSR Mining. We are delighted to have a person with Alison's caliber joined SSR as we continue to set the foundation for the future in time and as travel allows a number of you will meet Alison in person. But for today, you will have the opportunity to hear from Alison as she walks you through the results of a very strong first quarter.

So now moving on to the quarterly review. The quality and operational consistency of our 4 operating sites were clearly on display in the quarter, as we delivered production of 196,000 gold equivalent ounces at an all-in sustaining costs of $1,004 per ounce. We generated $77 million as unlevered free cash flow and this great start to the year firmly puts us on track to achieve our full year guidance targets.

Our peer leading free cash flow generation and strong balance sheet have allowed us to take the last step to our overall approach to capital management and allocation. We already implemented a base dividend of $44 million per year to be paid quarterly. Now and in addition to the base dividend, we announced a meaningful share buyback program of up to $150 million.

The combination of the base dividend and our share buyback program aligns our peer leading free cash flow yield with our capital return yield. Our total capital return to shareholders will be up to $194 million this year, which is a peer leading position. It is important to highlight that we have entered into an automatic share purchase agreement with a Canadian broker and have full intention to execute on our share buyback programs, especially at the current share prices. In a short period of time since closing of the merger, we have implemented a holistic capital allocation program, that allows us to continue to invest in growth and maintain returns to our shareholders through the gold price cycles, which is great progress and provides clarity on our capital management going forward.

From a growth perspective, we continue to invest in value-adding capital projects, while advancing our large organic exploration portfolio. The purpose of our exploration program is to die light our ability to sustain 700,000 to 800,000 ounces of gold production for at least the next 10 years. So moving on to the next Slide, which is on ESG. We've done a tremendous amount of work on setting and resetting priorities of both legacy companies as well as finalizing a new suite the sustainability policies to align to leading industry practices.

This work formed a foundation for our 2020 sustainability report that was released during the quarter. The Sustainability Report reconfirmed our commitment to communities and the environment. And it also highlighted several achievements during 2020 and most importantly set out our priorities for 2021. This included a commitment to establishing an action plan to achieve net zero greenhouse gas emissions by 2050. We have also begun to improve disclosures on climate and water management by responding to the Carbon Disclosure Project and aligning our reporting with the requirements of the task force on climate related financial disclosures.

From a safety perspective, although COVID remains pervasive, we are doing a good job of managing it at all our sites. Our COVID protocols focus first on protecting our people contractors in the community in which we work and our efforts have been successful in mitigating the impacts to our operations. We have a well-resourced and experienced H.S. in operations team within SSR and are proud of our achievements and vision for the future as we continue to be progressive in our approach.

Moving on to the next Slide, our unit A production and cost performance is tracking well to meet our 2021 guidance that you can see here on this Slide. Our focus for the year is to ensure safe production and we have several initiatives underway as we pushed to improve our overall approach to safety and results. The quarter one safety results were a step in the right direction. We are investing in several high growth returns across growth opportunities across the business. Some examples of the growth in initiatives include, Alacer, the flotation circuit construction and ramp up, which is on track for commissioning in the second half. We have an ongoing and continuous improvement initiatives at Marigold and at Seabee we're focused on increasing the underground development grades to allow us to utilize the lightened mill capacity in the future. And finally at Puna, the transition to an owner operators haulage fleet is underway. All the initiatives that I just mentioned are now progressing to plan.

On the exploration side, we're investing $65 million across our portfolio and expect these efforts will take center stage as we advanced the exploration targets and provide some clarity on this scale and time lines during the year.

A good example is a step out and infill drilling at outage, which continues to support resource expansion and conversion to reserves for this sizable, low capital intensity asset, that is planned to come into production by '23. Stu will touch on a number of these later in the call.

Just moving to the next Slide and before I hand the call over to Alison and Stu, I want to touch base on a few of the quarterly highlights. As I said, operationally all 4 sites had a good first quarter nicely setting us up for the remainder of the year. Our gold production and costs provide a solid start. At Marigold, we set a record material movement and at surplus Seabee and Puna all contributed to the strong results.

From a financial perspective, we reported an EPS at $0.47 per share and generated $77 million in free cash flow adding to our strong balance sheet. Finally, we published the updated mineral resources and reserves during the quarter. Gold Mineral Reserves increased 5% to 8 million ounces, while M&I mineral resources increased 14% to 15 million ounces.

So with that, I'll turn the call over to Alison, who will discuss our financial performance in more detail starting on Slide 7.

Thanks, Rod and good afternoon everyone. I'm thrilled to be here at SSR Mining and very excited to talk about the quarterly results as shown on Slide 7. We've completed a strong quarter with the assets all delivering on quality and consistency, producing a 196,094 gold equivalent ounces during the quarter and selling 201,494 gold equivalent ounces for a total of $366.5 million in revenue for the quarter.

Attributable net income was $53 million or $0.24 per share and adjusted attributable net income was $102.4 million for the quarter, with adjusted attributable earnings per share of $0.47. Operating cash flow were strong at $145.2 million for the quarter and our free cash flow was $77 million before paying out $49.1 million in shareholder and noncontrolling interest dividends as well as $17.5 million to reduce debt. On the right side of the slide, there are more details on the $0.47 and adjusted earnings per share. Walking from the $0.24 and attributable net income per share to add $0.11 for the amortization of the fair value as a result of the adjustment to bump up to the fair value of inventory and mineral properties at Copler at the time of acquisition, followed by $0.03 per share for COVID and integration cost, rest $0.03 for taxes and adding back $0.11 per share as a result of the foreign currency revaluation on the deferred tax assets held in Turkey.

Turning to Slide 8, we can talk about SSR's balance sheet strength. SSR continues to provide balance sheet strength amongst its peers and maintained strong liquidity, closing the quarter with over $900 million in consolidated cash and $476 million in net cash. Given heavier loads on working capital in Q1, especially at Seabee, where they re-stopped while the ice road was formed.

Dividend payments to our shareholders of $11 million and a $38 million payment to our non-controlling interest partner at Copler, we are in an outstanding cash position. Net cash-to-EBITDA ratio is 0.6x, again demonstrating our strength and placing us in the top quartile of our peer group.

SSR continues to act on its multifaceted capital allocation strategy, declaring a $0.05 dividend per share again during Q1, coupled with a recently announced non-course issuer bid, share buyback program, set up to repurchase 10 million shares through an automated purchased framework within 12 months.

On Slide 9, we can talk more about SSR's peer leading free cash flow and capital returns. We are confident that our capital allocation program provides attractive yields for our shareholders. SSR Mining's peer leading free cash flow yield of 11% is more than double the midcap peer group at 2%.

And SSR's capital return yield is more than double that of the mid-cap peer group at 5.4% for this year alone. Our capital allocation priorities include investing in growth, returning cash to shareholders and maintaining balance sheet strength. SSR is accomplishing this through a $0.05 based dividend per quarter, yielding 1% per year which is supplemented by the share buyback program recently announced and discussed on the previous slide. The combination of a peer group leading returns and significant free cash flow generation differentiates SSR Mining and demonstrates our commitment to shareholder returns. We will continue to execute on our priorities, both financially and operationally, as we move through 2021. Stu will walk you through the operational highlights starting on Page 10.

Thank you, Alison. Thank you, Rod. First off for ESG. We had an impressive health and safety quarter with a 65% reduction in recordable injury rate compared to 2020, with all of the sites seeing improvement. We also completed the sustainability report, which I hope you've had time to read. It includes new commitments on greenhouse gas emissions in order. To match this result to deliver these extended ESG commitments, we started some restructuring of the and his team. The rollout of our new integrated ESG management system progressed to plan and we'll provide our business leaders with better tools for delivery, risk management and improved oversight and data analytics. While COVID remains a challenge for the world, it is now part of our oncology and we had diligently managing it along with the other risks and business factors. Moving on to operations and growth. The business is off to a really solid start with all operations achieving above budgeted production and overall below budgeted costs.

So we're in a great position to live the guidance for 2021. Some cost savings to simply of timing of exploration and capital spend, which are both expected to catch up. However, taking timing into consideration, overall costs were still slightly better than budgeted for the quarter. Across the business, we've been reviewing and improving our life of mine planning processes. The outcome of this long cycle will form the basis of the long-term guidance which we will include for the first time with the annual guidance starting in 2022.

Moving on the Copler, the Copler sulfide plant continue to process well above designed throughput grades, grades with good relative to budget and offset lower than planned recoveries. The Copler oxide plant stacked well above budget recoverable ounces under the heap leach with the gap in production simply a function of timing of the late cycle. The flotation plant construction as well advanced and remains on schedule with commissioning and ramp up for the beginning of Q3. The flotation plant is really going to transform the pressure oxidation plant.

Drilling and study work continued in the districts, which includes Copler outage -- and the Copler Saddle and we drilled about 13,000 meters of diamond hauls for the quarter. We currently had 7 drills at outage. The deeper drilling in C2 is showing gaps and continuity of economic mineralization and late in the quarter, we slowed the drilling. That said, there is already considerable copper driven mineral value within and immediately adjacent to the reserve Brazil shells. And the current mine plan does not exploit these. The study team analyzing options to leverage additional value from this. Outage will be the significant feature of the updated CDMP 21 technical report, which we aim to complete by Q1 next year.

In the last technical report CDMP 20, outage was included only as the resource and as a PEI case in Section 24. We showed a potential to add about $500 million in NPV and about 1 million ounces of gold production. In CDMP 2021 outage will be improved with the subsequent work, and will be converted into reserve. That is it will move to the base Central case and evaluation models. Additionally, and I stress of course, depending on the outcome of the work we are aiming to include copper mineralization as a resource and as a PEA case into the CDMP 2021 technical report.

Now let's move to Marigold. Marigold achieved a quarterly record for mine tones and its second-best quarter of gold production. This is doubly impressive given the site concluded the scheduled 35-day shutdown for the big electrical P&H 4100 shovels. The 2 new hydraulic PC7000 shovels stepped up and fill the gap during the shutdown. In the mine, we started drilling and equipping dewatering boards and commenced with the construction of the rapid infiltration basin. This is where the water will be put back into the water table. We also intentionally left some ore in the pit during the quarter, while we completed construction of shell 24. The shell is now complete and we are on stacking on it.

Exploration at Marigold focus mostly around the existing pits and we drilled about 25,000 meters with what is looking like good result. Please move to Seabee. Seabee's production was slightly above budget. The annual ice road restocking is done and we have set for the year. There were some new and additional underground mining equipment arrived onsite, which will go into service in the coming months, mine development is also in line with budget. We've been very busy with exploration at Seabee drilling out the Gap hanging wall at the Santoy hanging wall looking to pull those into reserve and resource in the near term. We are also drilling at exploration sites at Mac North, Joker and Fisher and we are sitting out to more work at Amisk. We remain pretty bullish on the growth potential at both the Greater Seabee and Amisk.

Please move to Puna. Puna's mass reduction targets out of the park. They were well over budget on production and unit costs were significantly below budget. Plant throughput was sustaining the greater than 4500 ton a day, a new record. The long way to change over to iron ore haulage for the mine to the plant started in April and should further lower operating costs. We are reviewing the life of mine planning at a higher processing rate for Puna. Now move to the exploration Slide. I pretty much talked about all of these items key items already. And so in summary, for the business side is excellent production was above budget, coupled by budget and our organic growth projects advanced. A good quarter for the business and our operations in growth teams. Thank you very much. Back to you, Rod.

Thanks, Stu, and thank you, Alison. So just to summarize, as of all mentioned, a very strong quarter to start the year, both financially and operationally. We've now completed capital allocation framework and continuing strong free cash flow. Our capital returns to shareholders is peer leading while allowing us to grow. With the operations delivering, low capital intensity growth, the balance sheet in terrific shape and now our capital returns in place, we believe we will regain share price momentum and offer an excellent long-term investment choice for shareholders.

So with that, operator, I will pass the call over to any questions you might have.

(Operator Instructions) First question comes from Tyler Langton with JPMorgan.

I guess to start, are you seeing any sort of inflationary pressures for like materials, energy, labor and then I guess just somewhat related with exchange rates. I guess any details on maybe impact on costs just sort of in Canada, Turkey or Argentina?

I'm going to pass that one over to Alison.

So I'll take the first portion of your question off the bat about inflation pressures. So at this point, we really have not seen any material inflation pressures across the business. We are continuing to monitor that and stay close to the markets to try to this way anything that could be coming our ways. But we have not yet seen that come through.

And then on the second part of your question, Tyler, our exchange rates in the devaluation in some of the currencies in the countries where we operate. Again it's usually a shortly win for us. We normally get offset by the country inflation rates increasing with the devaluation, so while it's a short wind leave and it looks good on paper, it usually catches us up to being sort of net neutral.

And then just with that Copler, I guess, I mean obviously it was a good start to the year and I mean sort of the annualized Q1 production would just get to the low end of the guidance, but I guess costs sorry production should be sort of ramping throughout the year and costs. Just sort of came in and sort of come around the midpoint of annual guidance. Like can you just talk about the cadence of production for the remainder of the year and just kind of how to think about cost as well especially as the flotation start up?

Hi Tyler, it's Stewart. So you remember when we gave guidance of the beginning of the year, we said that we expected share going to be back-end loaded when we issued the technical report. What are the main drivers in the technical report was construction of the flotation plant, which drives volumes up at Cipla through the sulfide plant and significantly pushes the cost down. So our expectation has always been that the year would be back, back-end loaded in the cost would drop in the second half.

The next question comes from Cosmos Chiu with CIBC.

Certainly a great way to kick off your journey with SSR Mining with a huge earnings beat. Maybe first off, my question is on the Marigold. I think in the MD&A, you mentioned that the heaps are getting fairly high now. And so part of the Q1 production was actually a result of stocking in Q4. In that, can I ask you about the leach cycle these days at and Marigold how, what's the height of some of these lifts here and I guess the point of my question is you stacked 5.7 million tons in Q1 fairly good grade 0.4 gram per ton.

When is that going to come through?

It's always an interesting question Cosmos. So the -- for the rest of this year we'll be stocking and sell 24, which I mentioned, and which is stacking on and we'll start irrigating on soon. So for the remainder of the year, we're going to see stacking pretty close to the plastic. And so we'll see a pretty quick return or a short leach cycle and we'll actually see drawdown in inventory from the rest of heaps.

And then, maybe moving to Seabee here. As you mentioned, 8.45 gram per ton head grade in Q1, lower than last year, but as expected as you were working through some of the lower productivity areas Stu, could you remind us when are you getting back to some of the higher productivity areas potentially higher grades?

Yes. So we are seeing some high grades coming through the mine at the moment but you remember the guidance I said there is a little bit lower this year than the previous years on the basis of that's what the mine schedule is doing and with the expectation that will come back up in the following years. We will, as I said in my call being the issuing long-term guidance that will help you to map that out at least over the 3 years when we issued the long-term guidance at the end of the year.

I guess bringing this altogether, as you mentioned earlier Copler is going to be back-end loaded. It sounds like Marigold in the second half production is going to be fairly good as well and Seabee you're seeing some of the higher grades. I guess what I'm trying to get to is, if I look at Q1 production 196,000 geos. If I were to annualize that and you might say I can't. You would hit the top end of full year guidance. Is that, how should we look at? Is it -- I know, it's still early days, but is that is that possible?

Hi Cosmos, this is Alison, thanks for the question. And thank you for the welcome earlier. I appreciate that. So I think that our guidance for the year remains consistent with what we've previously talked about and we are going to continue to monitor, if there is any intra-quarter changes but right now we are affirming what we've previously said and will bring back any additional information that we have, when we are aware of it.

And maybe one last question. Just looking at Turkey here, I think 2 days ago or several days ago there was the government announced a shut-down, given COVID-19. Maybe a question for Rod. Could you make some comments in terms of COVID-19 and Turkey and that shutdown, does it have any impact on mining operations?

No, it doesn't caused, it's similar to what we've seen all through COVID actually in Turkey, it has been at times where, there has been restrictions placed that hasn't been totally both the countries on a shut down. So the mining industry is sort of considering that the essential service group. And so we can continue to operate as long as it's done safely. So the restrictions are really around just the public and restricting hours in out of their homes and that sort of stuff. They went through more recently quite a big spike in COVID cases and it's really just in response to that. In short term and particularly the fact that they're just about start celebrating their religious holidays as well where it's a lot more people usually mobile moving around. So they are trying to avoid another big spike.

(Operator Instructions) The next question comes from Mike Parkin with National Bank.

Congrats on the solid quarter. Most of my questions have been answered. Just one on the exploration side of things, where, when could we expect the next exploration update coming out of Marigold and just in terms of drilling the Trenton Canyon oxides, how are you kind of on that program is that program well established and ramping up or are you still kind of mobilizing drills and stuff. And should we expect kind of a greater number of holes coming in the second half versus the first half in terms of updates?

So we are ramping up and in that area. We will bring up over the next couple of quarters and update on Trenton Canyon and we will bring out updates of each of the more advanced exploration side from Seabee and from Copler to provide updates of where we are across all of the businesses. In Trenton Canyon, we took a step back and doing more drilling before we advance into study work at Trenton Canyon to make sure we fully understand that may resource before we proceed to the next step. But we are, we are -- have to drilling.

And then with pit area, when do you think you'll be in a position to start drilling from the underground?

So after the merger, we took the opportunity and we put the advancement of the underground decline on hold. While we do a more fulsome assessment of the current resource of the current resource knowledge and the status of that study. So we don't have an immediate clients not drilling in the Peter underground.

This concludes the question-and-answer session. I would like to turn the conference back over to Rod Antal for any closing remarks.

Great. Thanks, Anastasia and again thank you all for joining us today. Really solid quarter and it's obviously nice to introduce Alison that way to the company, and hopefully have many more of them to come. Thanks again and have a great day.

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