SSR Mining Inc (SSRM) 2006 Q2 法說會逐字稿

Welcome to the Silver Standard's Q2 financial and operating results conference call. [OPERATOR INSTRUCTIONS] As a reminder this conference call is being recorded today, August 16, 2006. It is now my pleasure to introduce your host, Mr. Robert Quartermain. Please go ahead, sir.

Thank you. Good morning, ladies and gentlemen. Welcome to Silver Standard's second quarter conference call. In the call this morning I will remark on our second quarter financial results, I'll discuss our activities at Pirquitas, comment on a few of our other projects and finish with a Pitarrilla project update. After that I will answer any questions which you may have.

Here with me in the office today I have our Senior Vice President Joe Ovsenek; and Paul LaFontaine, our Director of Investor Relations. In opening I'd like to make the comment that management at Silver Standard has consistently delivered on creating silver value for our shareholders and this is evidenced not only in our quarterly financial statements, but also in the exploration successes that we have enjoyed to date specifically at Pitarrilla.

For the quarter we had headlined earnings of $0.28 per share reflecting quarter earnings of approximately $16.5 million. Our property investments totaled 5.5 million for the quarter with much of this attributable to the increased exploration and drilling which we're undertaking at Pitarrilla. Our administration expenses were $2.4 million which consisted of a one-time salary expense for the quarter with normalized quarterly admin. costs of approximately $1.9 million.

The Company's increased activities have also seen an increase in our salaries, our G&A, and as well as our Sarbanes-Oxley costs. I believe the Company has done a good job in managing our increasing administrative costs. Our income for the quarter was largely as a consequence of the sale of our joint venture interest in [Minancial as Bejo], towards a joint venture partner earlier this year. This was a stark transaction and resulted -- and as a result of the correlation in the market subsequent to the sale, the Company had to write down it's marketable securities by approximately $15 million, some of which we we would expect to recapture in the third quarter. The one-time sale resulted in earnings for the period of a little more than $16 million.

In May the Company concluded a financing in which it issued 7.2 million shares at $23 per share in an underwriting syndicate co-managed by Bear Stearns and Deutsche Bank with Black Mark Capital as the Canadian co-lead, and Citigroup National Bank, and Solomon Partners rounding out the financing syndicate. The financing was placed with institutional shareholders both in Canada and the United States, and raised a total of of $171 million after expenses for the Company and I would point out that at our current share price today, the shares are currently back in the money.

As of June 30, the Company had cash and cash equivalents of of $199 million, with our silver bullion and marketable securities valued at cost totaling an additional $60 million. Based on market prices, at June 30, there was an additional $30 million in unrealized gains giving the Company a total of approximately $290 million and no debt. With the increase, in the recent value of our marketable securities, that number is actually a little higher as of today's date.

Mineral property cost for the quarter were approximately $9.5 million and this includes not only our expiration activities but also one-time specific items including the purchase of Silver Resources at Berenguela in Peru, purchase at the Veta Colorado silver project in Mexico and the acquisition of surface rights on various projects. With these one-time items removed our mineral exploration cost in the second quarter of '06 were similar to our exploration costs in the second quarter of '05. I would now like to turn my attentions to updating our project activities.

At the Pirquitas Project in northern Argentina we currently have approximately 100 individuals employed on site doing preparatory work ahead of a production decision. We expect by the end of the third quarter or start of the fourth quarter toward the EPCM contract for the project we are in discussions with a construction manager to manage the Pirquitas project for our account and we have a multinational bank undertaking due diligence on the project ahead of securing debt financing for the project which we expect to occur in the fourth quarter. We have purchased a bond note for the property, are in the process of selecting a truck fleet for the property which will be delivered on time to meet our anticipated production requirements in late 2008.

We are currently undertaking updating scoping studies on the Diablillos project, we are approximately $17 million had previous been spent on a pre-feasibility study, we're completing additional metallurgical work for the Bowdens Project in Australia ahead of finalizing a scoping study evaluating it's current economics. We currently have one drill and we've been mobilizing a second drill to the Snow Fields gold Melinden property in northern British Columbia. We are drilling this to outline a resource which we then would hope to monetize in context of the gold market. We have mobilized a drill to the San Luis joint venture project and we along with our joint venture partner Esperanza Silver expect to be receiving results from this project late in the third, early in the fourth quarter.

Finally, at our Pitarrilla project in Mexico we had impressive results which were announced yesterday. Our last resource calculation for Pitarrilla was based on 34,000 meters of drilling through March of this year which did not include any drilling from Breccia Ridge. Since that time with three drills operating we've been able to expand the Breccia Ridge as well as other zones in order to increase the resources Pitarrilla.

We currently have completed 155 drill holes totaling 40,000 meters and 186 reverse circulation holes totaling an additional 20,000 meters for a total of 60,000 meters of drilling in over 340 holes. Silver resources at Pitarrilla are now comprised of 100 million -- 105 million ounces of measured resources and 128 million ounces of vindicated resources which is a 249% increase from March. Of measured and indicated resources. Inferred resources now total 192 million ounces which is a 50% increase from March.

We're very pleased with the continued growth in the Pitarrilla project and personally I want to commend the team which is working under the management of Ken McNaughton, our Vice President of Exploration in this office, with contributions By Ron Burke our Chief Geo Scientist and by Guillermo Lothano and his crew in Mexico. When we started drilling the Pitarrilla project a few years ago we were focusing on near surface mineralization.

As we have continued to drill the project we have encountered base metal mineralization at depth and our best index section to date occurred in one full -- 152 which was announced yesterday. In that, we intersected 535 feet grading almost seven ounces of silver per ton, but within this was a zone of base metal mineralization averaging 70 ounces of silver and 25% base metals over 33 seed and included within this zone were two smaller zones, one 10 feet containing 14% copper and the other a 12 foot zone containing almost 30% base metals. Both with over 70 ounces of silver per ton.

We currently have two drills operating in the Breccia Ridge zone and they will continue to test the mineralization in hole 152 along strike and to the east. I would also like to make the comment that the resources at Pitarrilla only include drilling assays from surface to a depth of 450 meters below surface. We have some drill holes which have encountered mineralization greater than 450 meters below surface, however the drill spacing in these holes is not sufficient to conduct the appropriate statistical work to bring this mineralization into the resource calculation at this time. We will continue to drill and we'll bring these resource results into our estimate at such time as the drill density is sufficient.

We are mobilizing a fourth drill to the property which has much deeper drill capabilities than the three drills which currently on site. We will continue to test the mineralization at Pitarrilla at depth. As an exploration geologist I'd like to say I have been very pleased with the successes that we have made at Pitarrilla and on our other projects. We are increasing our head office staff in Vancouver and we look forward to making an effective transition from an exploration Company to a mining Company over the next few years.

We believe this transition will be rewarding for our shareholders as we expect a rerating of our share value. We also believe this transition will establish Silver Standard as a premier silver mining company with an extremely attractive portfolio of projects which can be developed over time to benefit of our shareholders. Those are the formal remarks which I wanted to make today and I would now like to open the lines for questions which you may have.

Thank you. [OPERATOR INSTRUCTIONS] Thank you. Our first question comes from Rodney Stevens. Please go ahead.

Good afternoon, gentlemen. First of all, congratulations on the resource estimate at Pitarrilla, certainly was more than I think a lot of people were expecting, but in any case, it looks like there is still some significant resource growth potential there with the massive sulfide mineralization to depth. So just curious, I guess my first question is with the one deeper drill rig, at what point do you think we might see an initial resource estimate from the potential blow?

Rodney, thanks for that question. We'll get the rig in there some time probably towards the end of September and these deeper holes which are maybe upwards of 600 to 700 meters can certainly take a few weeks to drill and with the back up in assay labs although we do try and move assays along as quick as we can, we're operating upwards of four weeks on assay turnaround. So from starting a hole to getting the data might take upwards of six weeks so it's certainly going to be through the fall we'll be drilling and we're going to then need sufficient drill holes at depth in order to come up with the appropriate geostatistical parameters in which we can then undertake a resource calculation. So I'm saying our plan is to continue to drill aggressively through the fall and we'll see where we are at the end of this year and into the start of the next year in being able to put some resource parameters around that deeper mineralization we've been intersecting.

Okay, so you had stated previously that you also anticipated an updated resource at Pitarrilla by the end of the year so that would be more related to the near surface oxide portion?

That would be related to the mineralization which we are expecting near surface, and we may revisit that. I mean, with the resource that we've been able to announce at this point in time that we'll just see where we are with the drilling and we may determine to perhaps extend another resource update until we've got additional drilling at depth, but I say the plan is we'll have four drills working away there and we'll continue to drill and update as the results allow us to.

Okay. Secondly, with regards to the debt financing, at this point, you obviously have gone through some negotiations. What sort of debt to equity ratio are you kind of looking at at this point and is there talk of hedging requirements?

The answer to that would be in the prospectus when we did our financing, we indicated that we would apply approximately $85 million of the financing towards Pirquitas, so we're looking at about 50/50 debt equity financing on the project. As our shareholders know we have tried to state that we do not want any hedging in the project or stay as unhedged as we can. That's the one reason why we have a couple million ounces of physical silver we could use that and because of hedging requirements.

What I would say to date is that there has been discussions around the hedging. We've made it clear our point on it and we'll continue with the discussions and see where we get once we have been able to get a little further along on discussions with the bank, but currently, our plan is to have minimal, if no hedging at all on the project.

Okay, certainly you have enough cash to be in a strong negotiating position.

Both our cash and our share position and other assets that's quite true, so it's a matter of a gain once the banks have concluded their due diligence, then sitting down and negotiating a final term sheet.

Okay. And then I guess I've noticed in your quarterly report, you mentioned you have or are working on updates at Diablillos, and Bowdens, and previously, you also mentioned that you were working on Shafter and Challacollo. What's the situation with Shafter and Challacollo now? Do we expect an update in the scoping study or is that kind of something that's been delayed?

No. We've been working on all four. I think the priorities we've indicated in the past have been Diablillos and Bowdens are the two that we're working on. As you know getting engineering groups out there is a little more difficult. We have been doing a resource revisitation on the Shafter project and are currently involved with an engineering group and updating.

It's just going to take a little longer to do that and the same with the Challacollo, because Shafter and Challacollo have some similarities we've been looking at the same groups involved in those two projects. So those are being looked at, but not as aggressively as Diablillos and Bowdens. Just because that both Diablillos and Bowdens are open pit, or potentially open pitable projects. They are more on the scale of the Pirquitas project and they make more sense with synergies. So with limited resources which one is able to find right now from a consulting point of view, we're applying our efforts where it makes best for our strategy going forward. So we are looking at those other two, perhaps not with the same amount of query that we are with Diablillos and Bowdens right now.

Okay, and some of these projects which are fairly well advanced, I mean, it may make sense that rather than continuing to develop them you may -- obviously you could be looking for a future -- a potential buyer of some of these projects? I mean, is it possible that we'll see some more or that you've moved -- had some significant progress on some potential asset sales? This quarter?

I wouldn't say--.

Or are you more aggressively I should say?

Yes. That we're looking at any specific asset sales at this point in time. As you point out what we want to do is make sure we get the best value for our shareholders and if we're now focusing our activities on Pitarrilla and Pirquitas, some of these are the projects which are not core are ones that we'll have to determine what we want to do with them. Having said that it's necessary for us to undertake the engineering work so we can do the appropriate net asset value and sensitivity calculations around them before we look at divesting them. So currently I'd say there's no discussions going on with any of those. That's not to say they wouldn't occur in the future once we have a better handle on the economic parameters of those properties.

Okay just a few more quick questions. The Snow Field hasn't been really talked about or mentioned in the past. It's a gold property. Can you just speak to what the historic resource estimate was there and how, exactly -- I suppose you're intending to sell it?

The Snow Fields property is located in northern British Columbia and it's a project which we've had in the Company. There are some minor silver indications around it but it largely has a gold footprint to it. There is no resource calculation that's been done on it which is 43-101 there are a few drill holes in it which have intersected some interesting gold mineralization.

We've sent our team up to look at it, they felt that it's probably possible to expand it. Our plan was to go in and drill it because we can drill it relatively cheaply and in this robust gold market felt that it is an asset that's not core to us and we can look at potentially monetizing it and then redeploying that cash in other areas. So we merely made the point that we didn't want the market, later this year and we just announced results do not be aware of it but it's a gain, it's not a priority project for us, but it's one that we think we can enhance value on and then redeploy that value on some of our other projects.

Okay and I guess just finally, any anticipation of when we can see some initial drill holes from San Luis?

No. As I indicated, once the drilling starts down there, it's a matter of drilling, getting assay results and that's probably going to be late in the third quarter maybe start of the fourth quarter of this year.

All right that's great. Thanks very much.

Thanks Rodney.

Our next question comes from Adrian Day. Please go ahead.

Yes, good morning. My question was already answered in the last one, I'm sorry. I tried to withdraw but didn't know how to.

Thanks Adrian.

Thank you. Our next question comes from Ian House, please go ahead.

Good morning sorry I may have missed the beginning of the call. What's happened with Pirquitas, Bob?

Yes, at Pirquitas, Ian, we indicated that we continue to advance it forward. We have had EPCM contractors down on site so we hope to be selecting an EPCM contract end of third into start of fourth quarter. We are currently are in discussions with an international banking group which are currently down doing due diligence on it. We have been in discussions with the construction manager to come on for our account, we have acquired a ball movement for the project and we're currently in discussions to source the fleet on it as well we have about 100 people working on the site to advance ahead of making production decisions later. That's more or less what I said earlier.

And if you made a production decision, what, refresh my memory, what's the time frame for the construction period?

The time frame for the construction period is about 21 months.

All right thanks very much, Bob.

Thank you, Ian.

Thank you. [OPERATOR INSTRUCTIONS] Thank you, sir. There are no further questions at this time.

All right well ladies and gentlemen, I thank you very much for attending the call this morning and as I said, we at Silver Standard are going to deliver silver value for our shareholders. We have been very pleased with the results of Pitarrilla and our management of the Company to date and we look forward to updating you on our next call which will be in November. Have a nice day.

Thank you very much. This does conclude today's conference call. Please disconnect your lines and have a wonderful day.