SSR Mining Inc (SSRM) 2007 Q2 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to the Silver Standard second-quarter 2007 financial results and project update. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. (OPERATOR INSTRUCTIONS) as a reminder, this conference is being recorded today, August 10, 2007. It is now my pleasure to introduce your host, Mr. Robert Quartermain, President and CEO.

Thank you. Welcome to Silver Standard's second-quarter conference call. With me on the call this morning at our Vancouver office I have Joe Ovsenek, our Senior Vice President, Corporate; George Paspalas, our Senior Vice President, Operations; Tom Yip, our Vice President, Finance, and Chief Financial Officer; and Ross Mitchell, our retiring VP, Finance.

Since our last conference call in April, both George and Tom have joined our senior management team at Silver Standard. George comes to us after an 18-year senior management career with Placer Dome, where he was responsible for the construction and operation of a number of mines and we look forward to his application of those skills sets as we transition Silver Standard from an exploration to a mining company. Similarly, Tom comes with extensive financial background in the mining sector, having been with Echo Bay through its years of development and growing from initial mine to multi-mine gold company. Tom brings with him the financial expertise of operational controls as well as an understanding of funding mechanisms required to grow our company and manage our balance sheet. I welcome them both to our management team.

I also want to acknowledge contribution that Ross Mitchell has made to Silver Standard over the last eleven years, during which he held the position of Vice President, Finance. Ross will be retiring next week after a career of over thirty years in the mining business. Thank you, Ross.

In my remarks this morning, I will comment on our financial results released earlier today and update you on a variety of projects, and then we will answer any questions which you may have on my commentary. I would also advise that I will be making some forward-looking statements and direct you to the cautionary note disclosure on our website and in our financial statements.

For the quarter just ended, the Company had a loss of C$5 million, or C$0.08 per share. This compares to earnings in the same period last year of C$16 million, which resulted from the gain on the sale of our 50% joint venture interest in the Manantial Espejo project.

Total expenses for the quarter were C$6.89, compared to C$2.6 million in the comparable quarter in 2006. The increased expenditures are largely result of the C$3.5 million of stock-based compensation expense recorded during the quarter. During the last quarter, Silver Standard has been successful in attracting senior level management to our team and part of their compensation packages have included stock options and the corresponding expense is reflected in our statements.

General and administration expenses were up from the same period in 2006 and this was a large part due to increasing our staff as we move to producer status. Of the C$1.6 million in G&A costs, some of the charges were consulting and recruitment costs, which are non-recurring items. Actual G&A costs for the quarter ended June 30, 2007, excluding stock base compensation, non-recurring G&A costs, and a 3% foreign exchange loss, would have been approximately C$2 million.

Income from the quarter was C$2.1 million, an increase from C$1.2 million for the same period in the previous year. This was largely result of increased interest income. Project expenditures for the quarter, second, were C$29 million, with the main project expenditure items made up of construction and mine equipment purchases for Pirquitas totaling C$20.9 million, C$3.3 million for expiration at the Pitarrilla property in Mexico, and C$1.9 million for expiration on the San Luis joint venture property in Peru.

We ended the quarter with a very strong balance sheet, with working capital of C$232 million. If we were to add in our silver bullion at market value, working capital would be C$242 million as of June 30. Almost all of our cash is in Canadian dollars and as a result, we have benefited from the increasing value of the Canadian dollar against the currencies of other countries where we operate, particularly the Argentine peso.

Due to the fact that we purchase U.S. dollars and pesos in advance of expenditure requirements, compounded with the recent volatility in the Canadian/U.S. exchange rate, we have reported a small currency loss resulting from the change in value from the time when monies were cash called and converted and the time that the expenditures were recorded on our books. As we now start to accelerate our expenditure levels in Argentina, we will be looking at ways to lock in the higher Canadian dollar value.

I would now like to discuss our project activities for the last quarter and update you on our progress. Activities at Pirquitas continue at a rapid pace, with the fourth quarter 2008 as the target for mill commissioning. All long-lead items for mining and processing equipment have been ordered. The majority the new fleet, including pitch shovel, excavators, dozers, 100-ton trucks with tires, are on-site and are being commissioned prior to commencement of open pit prestripping, which will start in the fourth quarter of this year.

Some initial mind construction has commenced and detailed engineering for the mine facility is nearing completion, with our engineering team moving from Buenos Aires to Jujuy shortly. We currently have approximately 175 people employed on-site and this will increase to approximate 500 to 600 individuals during construction in 2008.

Hiring of key on-site engineering staff is progressing, as is training of local workers for the skills we need at the operation. Specifically, we have been working with Caterpillar and using their simulator to train the individuals we will need for operation of the mine fleet. Through George and his team and working in concert with EPCM contractor Techint, we continue to find efficiencies from the previous visibility work as we now proceed to construction.

Higher commodity and fuel prices in the global arena will lead to upward pressure on the capital costs from the 2006 cash visibility update of U.S. $146 million. We plan on updating these capital costs at are third-quarter conference call in November as we continue to work and detailed engineering.

The Pirquitas ore reserve from the Feasability Study Update of last year was calculated using a C$5.35 per ounce silver price, C$2.75 per pound tin price, and a C$0.42 per pound zinc price. We're currently updating the reserve for the project using metal prices more in line with current higher metal prices as used by industry peers. This figure is expected to be reported in the fourth quarter as well. We also continue to pursue debt financing for the project, provided the same did not require silver hedging.

One aspect of the Pirquitas project that I would like to comment on as a geologist is the geology. The Pirquitas project is a bulk tonnage operation with a silver core and a peripheral zinc halo. Previous work in the property, because of low zinc prices, focused largely on the core silver-tin area. We have mobilized a drill to the property and are currently drilling into the pitwalls of the contemplated open pit, as well as undertaking some underground sampling of both historical and new workings.

We have encountered zones running one to 3% zinc with silver and tin credits over widths of many tens of meters, which are classified as waste in the current pit model. Some of these zones will be incorporated into the revised reserve calculation expected to be completed before the fourth quarter.

On the San Luis joint venture in Peru with our partner Esperanza Silver, we have two drills currently operating. One drill is in-filling the Ayelen vein while the second drill is testing some of the other five veins identified on the property at depth. We also continue with property-wide exploration on the 250-square-kilometer concession. The results from this high-grade silver-gold property will be reported as they are received. Because of the high-grade nature of the property, is our intent to advance this project to feasibility as quickly as possible.

We continue to aggressively explore our 100%-owned Pitarrilla project in Durango states, Mexico with six drills currently operating on the property. We expect to spend some C$20 million on the property through 2007 and drill in excess of 60,000 meters of diamond drilling.

During the quarter, we announced a 28% increase in silver resources and a significant base metal resource on the property. We hope to provide our next resource update prior to our third-quarter conference call in November.

The board has approved a C$12.5 million underground program, which will start shortly. This will enable us to access and drill off in detail high-grade material that was encountered in Hole 152, which averaged 2.5 kilograms of silver and 25% combined base metals, lead, zinc, copper, over ten meters. Drilling confirms that this higher-grade mineralization occurs in a stratigraphic basal conglomerate unit, which we continue to intersect elsewhere in the property.

We've been very encouraged by the Pitarrilla project, as we have taken it from a surface sample in 2002 to where we now have in excess of 400 drill holes on the property, 350 million ounces of silver in measured and indicated resources, and 190 million ounces of silver in inferred resources. Mineralization identified at Pitarrilla is expected to lend itself to both open pit as well as underground development.

We have commenced a 15,000-meter drill program on the Diablillos project in Argentina. Due to weather, we had a three-week delay in starting this project and we expect to report an updated resource estimate sometime late in the fourth quarter of 2007 or the first quarter of 2008. We also commenced drilling on the wholly-owned Snowfield property in Northern British Columbia and we will report our results as they are received. A resource update will also follow later this year or in the first quarter of 2008.

As a company, we continue to deliver value to our shareholders by discovering silver resource ounces at less than C$0.10 per ounce in our projects. We believe that the drill is the best value-adding mechanism for our shareholders at this time.

We have the team in place under George Paspalas to complete the Pirquitas project as our first mine development and then follow on with other priorities of San Luis and Pitarrilla. We are well-funded to deliver on our planned property activities through the remainder of this year and through 2008.

With those remarks, I finish my formal comments and I will now answer any questions which you may have.

(OPERATOR INSTRUCTIONS) Rodney Stevens, Salman Partners.

I just have a few questions. First of all, with regard to Pirquitas and the project debt financing, can you just give us a little better idea what seems to be the hold up there? Also can you just give us your view on interest rates and whether or not you're looking at floating rates?

Right, I will answer the question in two aspects. We started looking at debt financing on the project over a year ago. We did engage with a financial group. We reviewed the project with them in detail. Because of lower metal prices even a year ago, or lower trailing averages, they were demanding a reasonable amount of silver hedging in place and it is something we did not want to do. Consequently, we decided not to pursue that. Since then, we have been looking at other options in Argentina, in the country itself. There are avenues to fund internally and those discussions and activities have been going on for a number of months. So the next quarter call, we would like to be able to update you on that. So that aspect is -- that is why it is just taking a little longer. We followed one route, we stopped, and now we're pursuing another avenue on that. We still are well-funded. The second regards to interest rates. Any discussions we have would be looking at LIBOR plus the fixed cost over a certain length of time on that

And your view on the direction of interest rates?

My view in the direction of interest rates? I'd like to turn that over to someone else here. You know, we are well funded. Higher interest rates are good because it gives us more interest for the cash we have in the bank. If we're going to go out, we certainly want to get interest rates, but I think with what is going on in the market and it has for the last week, you're probably better at advising me on that than me on you.

Okay, tough call. Then moving on to Pitarrilla, can you just give us in estimate of what percentage of the drilling has been in-fill versus step-out or expansion?

I would think probably a 60/30 -- 60/40 with probably 60 to 65% probably doing in-field drilling and perhaps 40 we continue to drill to the north and northeast and we're closing the gap between the Breccia Ridge zone and the Javelina Creek zone. So it is the one reason we have not been putting drill holes out is that we are doing in-filling. We're doing concentration in and around Hole 152 ahead of going underground in that zone because of its high-grade nature, but we do continue to expand, are expanding the mineralization to the north and to the northeast and the reason why we still have six drills churning away there.

San Luis exploration results, you said you will report them as received, but I suppose we will see some probably Q3 or Q4?

Yes, we are in Q3 now. I would expect over the next few weeks, you will see something coming out. We have to deal with our joint venture partner on it, but down there, as any place, getting out the results once the drilling is done. We want to batch them up and so you will be seeing results both through Q3 and Q4 with the drills churning.

Okay, great. With regard to some of your non-core assets, just as a general preference for these sort of non-core assets -- I think I have my own view -- but it would be correct to say that your preference would be towards selling these assets rather than JV'ing them or developing them yourselves?

That would be the case. I think with many of the project, because they have been drilled off or have enough information on them, we can do reasonable net asset values and I think best to monetize them and redeploy that capital onto our balance sheet, which would then allow us to put it into our key projects, such as Pirquitas, San Luis, and Pitarrilla.

All right, great. Thank you very much.

Richard Gray, Blackmont Capital.

Just a couple questions here. When do you expect or when are you planning to -- when do you expect to get the permits for the underground drift at Pitarrilla? Would you be starting construction of that immediately after?

I understand, Richard, that they are done now and so we're just in the process of mobilizing contractors and what-not to site and would hope to be starting in the fourth quarter.

So the permits are done?

Yes.

Okay, great. As Pirquitas, what are the -- you went through a good outline there of what is going on, but what are the big items right now that you have not received or what do you think is going to be the critical items in terms of getting everything ready for Q4 of '08?

I will take a stab and let George come in if he feels I have not hit it appropriately. We have -- some of the trucks are on-site. We are still waiting for a few more trucks, so they will be on-site for us delivering as they are supposed to be delivered. Because of the power generation on-site, we are using gas-fired generators and the lead time on those is a little bit longer. They are currently scheduled to meet and meet our timeline. It is a bit tight, but I think that would be the only significant large-lead item of any consequence.

That is great, Bob.

Yes, so that would be it. Otherwise, we started buying equipment and planning it last year, so we are in good shape.

Okay, and just any kind of update on the hookup to the pipeline?

Right, we are waiting for one final permit on that. There is a route which runs close to the mine site which was just designated a more national route, as opposed to provincial route, and as a result of that, there are some certain requirements around it. Otherwise, we have all the permits and everything we need for it. We just have one more permit around this route, which is, again, an application and a time value issue, as opposed to one which would be -- materially affect the pipeline itself. So we're just waiting on getting that final permit and then be ready for it.

Excellent, thanks a lot.

(OPERATOR INSTRUCTIONS) gentlemen, there are no further questions. Please continue.

Good, thank you all for joining us on this Friday with everything else going on in the market. We appreciate your attention and look forward to updating you in our third-quarter conference call in November. I think we'll have a lot more to talk about at that time. Enjoy your day.

Ladies and gentlemen, this concludes conference call for today. Thank you for your participation and have a great day.