SSR Mining Inc (SSRM) 2007 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen. Welcome to the Silver Standard fourth quarter and year-end financial results and project update conference call. 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 is March 12, 2008. It is now my pleasure to introduce your host, Mr. Robert Quartermain, President. Please go ahead, sir.

Great. Thank you. Good afternoon, ladies and gentlemen, and welcome to the Silver Standard fourth quarter and 2007 year-end conference call. On the call with me today in Vancouver is Joe Ovsenek, our Senior Vice President of Corporate, George Paspalas, our Senior Vice President of Operations , Tom Yip, our Vice President of Finance and Chief Financial Officer, Ken McNaughton, our Vice President of Exploration, and Paul LaFontaine, our Director of Investor Relations.

Today's call will focus on three aspects of the Company. Tom will take you through our financial performance for 2007. George will update you on activities at our Pirquitas development project in Argentina, and I will discuss other shareholder value creation activities. Now, I'd like to turn the call over to Tom to discuss our financial statements.

Thanks, Bob. For 2007, we had a net loss of $34.1 million, or $0.55 per share compared to net earnings of $16.4 million or $0.28 per share in 2006. The $50 million swing year-over-year is due to a $35 million gain from our sales of property in 2006. As well in 2007, we took a write-down of $12 million on our asset-backed commercial paper. This write-down was based on our best estimates of fair value as of December 31 as we await for the --- committee to restructure the trusts which have been frozen since August of last year. During 2007, the $34 million loss is due to a number of items.

We had noncash stock-based compensations expense of $59 based on the factual value of our stock options, issued as part of compensation and incentive plan. Compared to 2006, the addition of a $2 million expense reflects options issued to additional senior staff. We recorded the $12 million write-down our our investments and asset-backed commercial paper as mentioned before. We had a foreign exchange loss of $3.5 million on U.S. dollars held as the Canadian dollar has strengthened throughout the year. And I would like to note that we have interest income of $6.8 million which offsets most of our general and administrative salary and professional fee costs of $8.5 million. During the year, we spent $89 million our our projects of which the majority was on Pirquitas, accounting for $59 million of the $89 million.

We ended the year with working capital of $172 million of which $80 million was in cash. The $80 million cash balance is net of the $57 million face value of asset-backed commercial paper which has been reclassed to long-term assets. Since December, we had two significant transaction that added to our liquidity. First, we sold $138 million senior 4.5% convertible notes for a net proceeds of $134 million, and we sold our $1.9 million ounces of silver bullion for proceeds of $39.6 million. With this additional U.S. $173 million of additional liquidity, we are well possessioned to complete the construction of Pirquitas and to advance our other principle projects. Back to you, Bob.

Great. Thank you very much, Tom. I'd now like to turn the call over to George who going to update on the Pirquitas project.

Thanks, Bob. The detailed engineering of the Pirquitas project is on target for completion by mid-year. We are well into the construction stage of the product now. All of the major equipment items have been ordered, and delivery times have been locked in to commence planned commissioning in fourth quarter 2008. Contract demanding is ramping up rapidly with a total of 165 construction workers now on site. Our peak manning construction of about 450 people will be reached in the next two months. The construction facilities are ready to accept the projected increases in manning levels. We have made significant progress with the construction of the civil works for the process plant in all infrastructure. Our overall project earthworks is 70% complete. Precast concrete footings are 60% complete, and we are well-advanced of the structural steel pre-fabrication at 30% complete.

Our strategy to conduct a significant portion of the precast concrete and structural steel offsite lower attitudes is paying dividends from a productivity perspective. Also key in our construction success to-date, has been the utilization of the mining fleet which is complete and located at site to assist in the construction bulk of earthworks. This has provided great training for our local equipment operators while it's advancing the construction schedule. We are working up a resource and reserve update for the project to be completed second quarter 2008. As a reminder, the potential of the Pirquitas project, the last reserve update which is November 2007, reported that Pirquitas contains 136 million ounces of silver in the proven and probable reserve category. As a proposed annual average production rate of almost 11 million ounces of silver per annum, this will give us just over ten years of initial mine life.

We're excited about the future potential to expand reserves. We have an additional 47.2 million ounces of silver in measure and indicator resources, and have encountered additional mineralization, both within and adjacent to the current open pit perimeter. This has led to the opportunistic decision to include some efficient expansion upgrades in the revised capital estimate made in November 2007. Pirquitas is a robust project with an MPV of U.S. dollars $920 million at a 5% discount rate, an internal rate of return of 52% at current metal prices and current reserves. We have an excellent construction management team in place, and they are working well with the experienced Argentinian-based EPCM contractor. The operation's team is led by an ex-pyritic general manager with substantial project start-up experience.

We have all of the department managers in place, and have sourced some well-experienced supervisory and mid-level management positions into the mine site. We have hired an experienced commissioning manager. We are now building the commissioning and plant operations teams ready for start up later this year. So to summarize, we have commenced construction and are making good progress. We have the construction and operations teams in place to deliver commissioning in fourth quarter 2008, with concentrated production to commence in earnest in quarter one 2009. Pirquitas is a great deposit, and at recent historical prices will deliver substantial cash flow to Silver Standard. Back to you, Bob.

Great. Thank you, George. Turning to our other activities, 2007 was a year of success for Silver Standard. During the year, we increased several resources in all categories by 17.5%. Our resource base is the largest of any publicly traded primary silver company, and is currently 136 million ounces of proven and probable reserves, 777 million ounces of measured and indicated resources, and 615 million of inferred resources spread over 17 projects with most in north, central, and South America. Pirquitas continues to the be the main focus of the Company's management and cash resources at this time, and accordingly it's also the proxy by which the market is currently valuing the Company. George and his team will continue to achieve the development milestones we have set for the project through this year.

Our prairie projects after Pirquitas are San Luis and Pitarrilla. At the San Luis joint venture in Peru with Esperanza Silver, we continue to focus on the high-grade veins in and around the Ayelen vein, as well as the --- BP Zone. Our plan is to permit and commence underground exploration, leading to feasibility study later this year in the high-grade veins. In November, we announced resources of approximately 7 million ounces of silver, and 230,000 ounces of gold, and we believe through exploration, we can continue to add to this resource. At Pitarrilla, we increase silver resources by 35% in 2007 in keeping with resource increases year-over-year. We also added considerable base metals of zinc and lead.

We continue to explore the project with surface drills, and we've also initiated a three-kilometer exploration decline to access and explore the higher-grade silver base mineralization at Breccia Ridge. This would be the initial area of production due to the high-net MSR value of the rock rock in this area. We will continue to explore and undertake engineering studies on the surface mineralization. We anticipate a further resource update in the second quarter and will move the project through to pre-feasibility during 2008. As we reported yesterday, drilling at Snowfields in 2007 was successful in moving almost 1 million ounces of inferred gold resources into the indicated category. We added an additional 500,000 ounces of inferred gold at the project.

The main focus of our 2008 program will be important, as it will follow up in the new mineralized area discovered last year withhold, Amsted One which intersected almost 280 meters grading close to 0.8 grams of gold plus copper. This zone is a long-strike of Seabridge's Mitchell Zone where they have announced a resource of 29 million ounces of gold. This area is shaping up to a major gold camp and we are well-positioned in it. At Diablillos in Argentina, we continue to drill and will have a resource update on this project during the second quarter. Our excellent project pipeline means Silver Standard can grow organically by using projected generated cash flow, starting with Pirquitas.

Historically, Silver Standard has create shareholder value by drilling and resource addition and we will continue this in 2008. This year, we'll be drilling for and enhancing resources at Pirquitas, the San Luis joint venture, Pitarrilla, Snowfields, Diablillos, Challacollo, Candalleria, Maverick Springs, as well as programs in our option projects of which the most significant is Santa Giustina in Mexico. In 2007, we saw silver prices at a 27-year high, and the Company attained it highest share price. We --- did experience a few challenges. We've exposure to asset-backed commercial paper and we continue to await resolution of this matter, and have taken an appropriate write-down.

At Pirquitas, like many projects which are currently under construction, we experienced a capital cost increase. Yet we now have the necessary funds in hand to be able to complete the project with commissioning in the fourth quarter of this year. I would also like to comment on a few items subsequent to year-end as Tom mentioned. To insure that we have the necessary capital to not only complete Pirquitas, but also to maintain the tempo of exploration and development of our other projects, we raised $138 million through a convertible deventure. In 2004, we purchased 1.95 million of silver at approximately $5.85 per share. With silver currently trading at 20-year highs, the board felt it was prudent to monetize this investment as we can deploy this capital to ensure that we can maintain the tempo of exploration development under many other projects.

The Company currently has approximately $230 million is cash. In 2008, we will continue to have organic growth at our many silver projects. We'll commission Pirquitas in the fourth quarter. Through non-core asset sales, we will continue to reinforce our balance sheet so we can maintain and accelerate a level of activities at our projects at this time of this time of high precious metal prices. Those are our formal remarks, and we would now like to answer any questions which you many have.

(OPERATOR INSTRUCTIONS) Good. It looks like the first question will come from a Private Investor, Victor DeGrande. Please go ahead.

Good afternoon. I would like to snow if the Snowfield project is considered to be a core asset, and if the Company will one day become a gold producer? Or is this one will eventually be sold off or monetized, and you're you'll remain focused on providing to silver?

Thank you. Well with the large silver in-ground resource that we have, our main focus is on silver. The Snowfield's project provides a great opportunity to discovery additional gold resources on it, and it's our focus for drilling it this year. However, once we've been able to fully determine the extent of the mineralization on it, we would determine what's the best way to be able to monetize that project to get the maximum value for shareholders. It may be possibly we look at joint-venturing it. but there's currently not an intention to take our focus off of being a primarily-focused silver company at this time.

Okay. Thank you.

Thank you. The next question will come from Adrian Day of Adrian Day Asset Management.

Yes. Good afternoon. Two questions if I may. First on the write-down of the -- write-off of the commercial paper, obviously at year-end that was considered appropriate. First question, I'm just wondering if anything has changed. We're now in March. Do you think that's going to be sufficient? Do you even think you might get some of that back? Or how do you so that now?

And then the second, if I may. I'll just follow up. You've already talked a about Snowfields, but you've also got the San Luis, where you've got --- I don't what it is, the right to --- 80-% I think. So I didn't know if you had plans to make take 100% there? Along with that, are there a lot of small properties that you might be thinking of just divesting off for cash since they are less and less meaningful for the Company?

Thank you, Adrian. With respect to the first question on the asset-backed commercial paper, we think the write-down that we took at that time was appropriate in light of where the market currently stands. We continue to wait and find out what is going to be resolved with the Purdy Commission on that. I would expect in our next conference call at the end of our first quarter, we could perhaps advise further on the write-downs, but we think what we've done there is appropriate.

With regards to your next question on Snowfields, yes, we're going to continue to drill it off. With respect to the San Luis joint venture, we can earn up to an 80%-interest by putting into production. We're currently earning a 70%-interest by completing a feasibility study on the project. We will continue to advance that under the terms of the agreement. Any --- further increase above and beyond that, we would have to look at some future time. Then to your final question, yes, we do have some smaller projects which are no longer core to the Company, and we will continue to look at monetizing those, and then redeploy that capital pack on the balance sheet.

Okay. Great. Thank you.

(OPERATOR INSTRUCTIONS) The next question will come from Mr. Ian Howat of the National Bank Financial. Please go ahead.

Afternoon, Bob. Just on Pirquitas, none of the technical parameters, the production outlook, recoveries, or any to that have changed over the last year or two, have then?

No, they have not. I'll let George answer that.

Essentially, what has been released publicly with the 43-101 is the production schedule we're working to with a new reserve update. We'll get into a new mine plane, but I think it will be pretty well in line with publicly-released historical figures.

Okay. Historically, there was sort of slag or other material there that may have contained some tin. Is there any plan to process that more now?

Yes. That's always been in the plan. In fact, it's quite fortuitous for us that some of the highest grade material is already crushed and down at the plant site ready to go through. That's going to really aid our start up strategy.

Okay. Thanks a lot.

There are no further questions in the queue at this time. Please continue, sir.

Well, if there are no further questions, we thank you go for attending the call today. We look forward to continued good results coming from all of our projects. We look forward to updating you on our first quarter conference call in a few months from now. Thanks very much, and have a nice afternoon.

Thank you, ladies and gentlemen. This will conclude the conference call for today. You can now disconnect your lines, and have a great afternoon.