SSR Mining Inc (SSRM) 2006 Q3 法說會逐字稿

Good day, Ladies and Gentlemen. Welcome to the Silver Standard Resources, Inc., Third Quarter 2006 Conference Call. [OPERATOR INSTRUCTIONS] It is now my pleasure to introduce your host, Mr. Robert Quartermain, President of Silver Standard. Please go ahead, sir.

Thank you. Good morning, Ladies and Gentlemen and welcome to Silver Standard's Third Quarter Conference Call. I will chair the call this morning. I have in the room with me Joe Ovsenek, Senior Vice President, Ross Mitchell, Vice President and Chief Financial Officer, Paul LaFontaine, Manager of Investor Relations and Mike Robb, Vice President of Project Development for the Pirquitas project in Argentina.

I will deal with our third quarter results first and then discuss our project activities. After that, I will open the phone lines for any questions which you may have.

In our financial results, which were reported yesterday, we had earnings of $0.04 per share for the quarter, giving us total earnings of $18 million or $0.31 for the nine months ended September 30th. Most of these earnings can be attributed to interest income and write-up of our marketable securities, largely our investment in Pan American Silver. Cash expenditures for the quarter, excluding purchases of surface rights in our projects, amounted to $9.2 million and this reflects the increase drilling at Pitarrilla, the drill program at the Snowfield property and the increased pace of work at the Pirquitas project in Argentina.

Administration expenses for the quarter were $2.5 million, in which $1 million was stock-based compensation. The increase in costs over 2005 is due to our increased activities, related staff levels, as well as increased regulatory costs.

Working capital at the end amounted to $255 million with no debt. This included our silver bullion and marketable securities at costs. When you add in the additional market value of these two items at September 30th, it's more or less current with the current market. Our total working capital is approximately $290 million. And again, I comment, no debt.

Turning to our projects. At the Snowfield property, which is located in northern British Columbia, we are outlining a significant bulk tonnage gold resource. Of the drill holed assayed, received to date, all 20 holes have encountered consistent gold mineralization grading between 1 and 2 grams of gold per ton, over intervals of between 100 and 200 meters. We are still waiting on the remaining 7 drill holes and with those in hand we will undertake a resource estimate. We hope to have the resource estimate completed during this fourth quarter. Although Snowfield has not been a core project for Silver Standard, in light of these impressive results which we are getting, we will review the status once we have an initial resource estimate.

Last week, we, along with our joint venture partner Esperanza Silver announced the first diamond drill holes results for the San Luis joint venture in Peru. Although one might say that the drill holes were as expected, based on the surface trench results, we believe the results were nonetheless spectacular and that they encountered consistent high grade bonanza gold silver mineralization to depth. Due to the fact that there are other mineralized veins in the property and the main Ayelen Vein is mineralized for at least 350 meters along [striked] surface, the joint venture has decided to increase the tempo of the activities on this property. We will bring a second drill onto the property, which we expect to arrive in mid-December. We will also continue with the drilling of the main vein, both along strike and further down depth. To date, we have drilled 15 holes in the property and results will be released as they are received. Fortunately, we're getting much quicker turnaround time for assays in Peru than we are in our other projects in North America and in Mexico.

Since our last call, we continued to aggressively drill the Pitarrilla project in Mexico. On September the 27th we announced a significant drill hole on the property which encountered 1,970 feed grading, 2.5 ounces of silver per ton and almost 2.5% combined lead zinc. We currently have one drill capable of drilling holes in excess of 1,000 meters working on the property and will continue to expand the deeper mineralization with this drill. The other three drills continue to expand in infield drills, knowing mineralization with a fifth drill to be mobilized to the project. It is our plan to continue an aggressive drill program on this property, with the intention of moving into pre-feasibility study in 2007 and depending upon the continuity of higher grade base metal mineralization that we are counting at depth, we may consider an underground exploration program, also commencing in 2007.

During the quarter, we have been busy on our Pirquitas project and acquiring equipment, including negotiations for rolling stock in an associated mark contract, soliciting bids and choosing an EPCM contractor and hiring staff both here in Vancouver and at the mine site. Due to the fact that we are coming into the summer season on site, and want to complete some preliminary work during this time period, the Board of Directors decided to make the formal production decision in October. I along with Joe Ovsenek attended those announcements in the capital of [inaudible], with the Provincial Governor and the National Secretary of Mining. We expect over the next month to conclude negotiations on the rolling stock and also make announcements regarding the engineering firm selected for the EPCM contract. [Horchneta Ramires], our Mine Manager on site is experienced in developing and operations of mines on this size at altitude. [Dave Maceraqou] has over 30 years of construction management of projects in the mining business at altitude and Latin America, has joined us and will oversee the construction of the project.

We had indicated that we would seek that financing with respect to the project and we are in discussions with banks in that regard. We have indicated to the banks that we do not want to hedge any of our silver production for the project and continue discussions with the banks in order to optimize facility lending for the project that will allow our shareholders maximum exposure to silver metal prices. Our strong balance sheet means that we can finance the project without debt. We believe, however, that it is prudent at some point ascribe a certain level of debt to the Pirquitas project.

I'm also pleased to announce that Peter Tomsett, the CEO and President of Placer Dome until it's merger with Barrick Gold earlier this year, has agreed to join the Board of Silver Standard. Mr. Tomsett has extensive experience in international operations, both as an engineer, but more importantly in the running of a significant gold mining company. We are pleased to have his talents at the Board level at Silver Standard as we make the transition from an exploration to a mining company.

To summarize, we have a strong balance sheet and we are advancing the Pirquitas project as a first producing mine slated for production in the fourth quarter of 2008. With our continued exploration success at a world-class Pitarrilla project and recent spectacular drill results at San Luis, we plan to advance these projects as our next development projects, after the Pirquitas project to turn Silver Standard into a significant primary silver producer by 2010/2011.

With those remarks, I will now open this call to any questions which you may have.

Thank you. [OPERATOR INSTRUCTIONS] The first question comes from Rodney Stevens of Salman Partners. Please go ahead.

Thank you. Good morning, Gentleman. Just a few questions. First of all, with regards to Pitarrilla, you mentioned that you continue to [interspect] significant silver and massive [sulphide] in the base metal portion below the oxide portion of the system. Given the success you're indicating, is there any possibility to see an initial resource testament of the massive sulphides in the next resource update? Or will that be solely on the offset portion?

No, we will do a complete project update resource for that, Rodney. As we've indicated, because of the length of time of drilling these holes and the assay backup, which is taking us upwards of 30 to 40 days, our plan is to do a new resource calculation in the first quarter of next year. With that calculation, we will have a tended massive sulphide calculation, as well. So, the overall calculation will involve silver and all other commodities on the project.

And you had a significant increase in resource [inaudible] in the last update. Do you see something similar this next one or not nearly to this scale as the last one?

I can't comment on that. I think we'll have to wait till the resource number comes out. I think the fact that we had the significant increase last time was due to the fact that we had been drilling extensively on the project. It depends a bit on the geo statistical characterization between the drill holes. So, if we continue to have, I would say, good continuity between holes and the geo stats hold up, then we would expect to certainly increase the resource above where it was last time. I think we pointed out that some of the mineralization below 400 meters below surface was not taken into account in the last resource calculation because the holes were too far spaced for the geo stats. We, of course, are now infilling that and as a consequence, we'll be able to take mineralization, which is below 400 to 600 meters, of which we are getting some interesting hits or did there last time, as we reported.

So, I can't comment, but we'll certainly increase it over where it was in the last release.

Okay. It's fair to say that the bulk of the potential resource growth at this point is within the massive sulphide?

I would say the resource increase is going to be throughout the entire project. So, we can't strictly characterize that. The Gordon Colorado Zone, which is the first one we drilled, we've only tested that to 60 meters below surface. So, in some of these other silver zones, we will have to see what may extend at depth. So, I think it's one of just what the depth on the project versus charactering it as specific mineralization type.

Okay. The pre feasibility study which you'll be working on subsequent to the resource update, would that consider any of the massive sulphides at this stage?

It will be a pre feasibility study in the overall project, correct.

Right. And so it's like that it will change significantly with further drilling?

Yes.

Okay. Alright. And secondly, I want to just clarify, the joint venture agreement that you have with Esperanza Silver, I mean right now you've earned 55% of the project and it's my understanding you could increase that to 70% by producing a bankable feasibility study. And then increase that further to 80% by funding the project through to development?

That's consistent with the disclosure and that's determined of the deal, correct.

Okay. I mean, does it really make sense to add only an additional 10% by funding the full development [inaudible] below the project? I mean, do you think that would be worth it?

Well, Rodney, at the time we would take and I think do a net asset value calculation on the value of the project and we'd have to determine what the value would be. But that's the way the deal is structured and we'll deal with that going forward. But this is a bonanza high grade mineralized system. There are very few of these that are encountered. So, we're very pleased with that and we're going to continue to advance it forward for our shareholders.

Okay. And when do you expect to be drilling on some of the peripheral veins?

Well, we're bringing the second drill in that project in December and we'll keep one drill in the main vein and then we'll determine. But we'll probably at that point start [intesting] some of the other veins, which are mineralized in the system.

Okay. And then just lastly, it looks like you have three main projects developing here, Pirquitas, potentially Pitarrilla could be your next most significant asset. And then with further drilling success maybe even San Luis. It looks like you have three potential projects here. And just curious, if these ones will be focused on, do you see yourselves taking on any additional projects? Or do you see yourself as having the capacity to take on any additional projects?

These projects will certainly be able to keep us focused going forward. If you're talking about other development projects, only if their accretive to shareholders. We're not currently active looking at them, of course. We'll continue to advance our other properties and if there are opportunities which can be accretive to our overall silver resource, we would certainly look at those. But I'd say our plate is relatively full with the drilling success that we've had in creating value currently. And we will look at projects on a one off basis as they may be presented to us.

Okay. So, is it like then that we could see the sale of these other properties or perhaps a joint venture agreement whereby someone else would be the operator?

You're talking the other projects which we have within the Company?

yes.

The other 13 or 14 projects?

Yes.

Yes. We'll be looking at those as we move forward. We have been approached on some of the projects and that's correct. If they're no longer felt to be core within our development strategy over the next few years, then we could either monetize them to avoid dilution for funding the next project opportunities or we could bring in partners and then share in their development. So, again we're looking at those as a one opt we're approached on those projects.

Alright then. Thank you very much.

Thank you.

[OPERATOR INSTRUCTIONS] Your next question comes from [Adrian Day] from [Adrian Day] Asset Management. Please go ahead.

Hi. Good morning and good job. Unless I missed it, Bob, I didn't hear you say anything about Berenguela and I don't think I've heard much about that recently. What's happening there?

Well, Berenguela, Adrian, has a good resource on it. We are looking at perhaps doing a revised scoping study on that next year because of the copper component with the silver which is near surface. Because of its altitude and economics, it's perhaps not as attractive as San Luis and Pitarrilla are right now. So, I guess because of our personnel who are focused on those, that we continue to be interested in Berenguela project. And they say we're going to do some additional engineering work on it and then determine where we move it along with regards to the other three activities which we have going on.

And that would be the same with something like Diablillos. So, our engineers are currently down at Diablillos right now and we're planning on doing a 10,000 meter infield drill program on it. And so, we'll be continuing to move forward, both at Diablillos and the Berenguela project. Perhaps they won't have much visibility as they had previously.

Okay. Great. But on Berenguela, you only have an option on the silver stream, right?

No. If you recall last year, we actually bought the entire project.

Okay.

So, we not only own the silver stream, we own the copper stream, of which there's about 400 million pounds, I believe. So, we own the entire project outright. So, we can determine its development pace.

Okay. Great. Thank you.

Your next question comes from Craig West from UBS. Please go ahead.

Good morning, gentlemen. Good results this quarter. The first question I have is on that joint venture, the San Luis. I'm just trying to get a better feel for the timing of the remaining results. I understand you put a rush on the first results that came from the first four drill holes. And I was just sort of wondering the timing for remaining holes and are you still experiencing delays there in getting results back from assay labs?

Craig, like I say, in Peru we're getting a little better turnaround on those results. Because the first four were sent in as a fairly small batch, the next holes have gone in at a little more normal pace. And depending on the batching out of the field, will determine when they're released. So, we may have another five to six holes, which we would hope to be able to release I'd say probably over the next few weeks. And they'll go along a little quicker than we're certainly getting results out of Pitarrilla.

But we would expect, I would hope by the end of the quarter, that we'll get the current holes. We've got 15 holes drilled now that we should be seeing those results coming through the end of this month and into next month.

Great. Thank you. I guess the final thing was additions to the team. You made a comment about a few people that have been added to help you with the development of Pirquitas. Any other hiring that needs to occur sometime in the next three, four months?

Yes. We're currently in the process of sourcing a Vice President of Mining to help us make this transition. Into that we are improving on our engineering staff here in the office and that continues to go forward. And then certainly at the mine sites we've hired a [metaler] just down there with 30 years working in Peru who will be managing the mill facility at the Pirquitas mine. So, over the next few months you will be seeing further additions here. Whether or not I'll be making announcements around them, we may just do a general summary perhaps in the first quarter of next year, showing the increased staff that we've taken on in order to help us make this transition.

Great. Thank you very much.

Thank you.

Gentlemen, there are no further questions at this time. Please continue.

Well, gentlemen, if there are no further questions on the phone line, I would like to thank you all for attending the conference call this morning. We've what we consider to be just a great quarter. We're going to continue to add value per shareholders through using a drill machine and we look forward to updating you on our next call next year. Thanks very much and have a great day.

Ladies and Gentlemen, this concludes the conference call for today. Thank you for your participation. Disconnect your line and have a great day.