SSR Mining Inc (SSRM) 2009 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Silver Standard's first quarter 2009 financial results and project update. At this time, all participants are in a listen-only mode but following the presentation we will conduct a question-and-answer session. (Operator Instructions). As a reminder, today's conference is being recorded. Today is May 19, 2009. At this time, it is now my pleasure to introduce your host, Mr. Robert Quartermain, President and CEO. Please go ahead, sir.

Thank you. Good morning, ladies and gentlemen, and welcome to Silver Standard's first quarter conference call reviewing our financial performance and updating our projects. On the call with me in Vancouver this morning I have George Paspalas, Senior Vice President Operations; Joseph Ovsenek, Senior Vice President of Corporate; Tom Yip, Vice President Finance and Chief Financial Officer; and Paula Fontaine, Director of Investor Relations is on phone. Our financial statements as well as our management discussion with project updates have been filed on CEDAR and are available on our website. We have a visual presentation that will accompany our comments today and it can be found in the web location referenced in our press release. We will be making forward-looking statements today and advise to you refer to our forward-looking disclosure on this webcast and on our website.

The singular most important event eminating from our first quarter activities is that we are now producing concentrated Pirquitas and we will shortly turn what is has been in ground resources and reserves into income. It is a milestone for this Company. It will provide the financial foundation on which we can now proceed with our organic growth plans. It is an accomplishment that has been a team effort and acknowledge all at Silver Standard who have helped us achieved it. George Paspalas, our Senior Vice President Operations, and his on-site team are to be commended. In a moment, George will provide an update on Pirquitas and our engineering efforts at the San Luis joint venture project in Peru and our wholly-owned Pitarilla project in Mexico. First, I would ask Tom Yip our Vice President Finance and Chief Financial Officer to speak to our first quarter results.

Thanks, Bob. As we transition to producer status we have changed our functional reporting currency to US dollars effective at the beginning of this year. During the first quarter as Bob mentioned we focused on completing construction and began commissioning the Pirquitas mine as well as advancing our other key projects.

For th P&L, we have a net loss of $2.6 million or $0.04 per share compared to a net income of $2.3 million of $0.04 per share in first quarter 2008. This year's quarter's results include general and administrative expenses of 2.1 million similar to prior quarters. Stock-based compensation was 1.9 million as we continue to amortize the Black-Scholes value of preciously granted options. We had a foreign exchange loss of a $1 million resulting from the effect of the weakening Canadian dollar on our Canadian cash holdings. During the quarter we received 1.6 million of interest related to our ABCP holdings at the end of January. We did receive new notes replacing the notes of our frozen July 2007. We have a book value of 21 million and continue to wait for a market to develop for these new notes, and finally during the quarter we finalized our tax filings and recorded a recovery related to income tax provision that we took last year in conjunction with the gain on the sale of the Shasta property.

In terms of cash flow, during the first quarter we had a net increase of 35 million in our cash balance. We used 4 million in operating activities, and for financing activities during the quarter we sold 5.8 million common shares at $17 per share for net proceeds of approximately 93 million after commissions and expenses. We continue to execute our plan spending $49.5 million on our projects, of which the majority was at Pirquitas. To date we have incurred 213 of the estimated 230 million construction cost to build the mine. In addition to these construction costs we incurred approximately 14 million of pre operating expenses during the quarter. Related to the construction we spent $4 .5 million for refundable value-added taxes. We ended the quarter with 107.7 million in cash.

So in summary with current liquidity and expected revenues from the production and sale of concentrates at our Pirquitas property, we are well positioned to advance on other principal projects. Back to you Bob.

Thank you, Tom. I will now ask George Paspalas our Senior Vice President of Operations, to walk you through the progress at Pirquitas and production plans for this year. George will also describe to you our engineering progress at San Luis and Pitarrilla.

Thanks, Bob. The production startup is going well at Pirquitas. I'm sure everyone knows where the project is locate but just in case, here on slide seven, Pirquitas is located in the northwest corner of Argentina in the [Jujuy] province. Very well serviced by road and gas pipeline access. Slide eight shows the open pit taken last week. The pit operational performance is continually improving. The graph on slide nine shows steady improvement in mine tonnage during the first four months of the year.

Rapid pit operations have moved over seven million tons of material since the Pirquitas open pit operation in July 2008. We have now exposed all and have commenced stock pile high-grade material in front of the primary crusher shown here in slide ten. The total of 82,000 tons of ore stock piled so far. We have started the Ball up -- the Ball mill up with historical Jig Tailings material which will continue to provide process plant feed through the next three months. It's always been our start up strategy. This will allow mine operations to develop a large stockpile of pit ore prior to commencing processing this material, and may provide us the opportunity to maximize the plant feed grade for the balance 2009. A two mine waste storage area are fully developed now which will provide capacity for the life of the open pit.

Slide 11 shows both Pircas gorge and the Cortadera gorge by storage facility. It is going really well and we have a great team of local people running that part of the operation.

Under the process facility now, as mentioned earlier, we are operating the plant on the historical Jig Tailings and we will continue to do so for the next three months. Slide 12 shows the temporary feeding arrangement where we are bringing the Jig Tailings into the. A large conveyor going off to the buildings on the right-hand side of the shot. This material is running average pit grades as expected. Start-up has gone very well, all of the service areas are fully operational, and slide 13 shows the final gas pressure reduction system in the upper shot. Assay Laboratory in power station in lower. In addition to the assay laboratory which is conducting all of the requirements, we also after comprehensive metallurgical testing laboratory located in the same building. The laboratory itself is managed for us by STS International. Associated systems have come up nicely. We have encountered some routine commissioning issues with some of the slurry hoppers and pump boxes requiring some reconfiguration, some minor piping issues which have now been resolved.

Slide 14 shows images from the commissioning. Most importantly there has not been any significant that issue has impacted the initial addition operation or threatens the future operations of the plant.

We're now making silver concentrate shown here in slide 15, which shows some of the initial bags being filled. The cost to complete the project remains at 230 million. We're currently incurring pre production operating cost as we ramp up our operation activities. We have proven the bore mill and associated systems. Our objective for the rest of May is to fine-tune the silver cleanup flotation circuit and ramp-up silver concentrate production, culminating in our first shipment of concentrate off-site near month end.

As we are approaching full personnel compliment, it is note worthy to mention our employment demographics, shown here on slide 16. Operating Pirquitas with a minium number of expense and have strived to maximize the local employment levels. Local communities closest to us, the rate of employment in the villages is on the order of 90% or greater in some. Slide 17 shows some of our people. Our long-term strategic approach to hire local, hire early, and train, has worked very well for us on the property, and has also enabled us to build a platform of very good community and social relations for the future of the mine.

Moving on to some of our development projects, first I will talk about Pitarrilla, shown here in the Mexico silver belt on slide 18.

As we zoom into the area, slide 19 I want to emphasize the nature of Pitarrilla. Pitarrilla is a camp, certainly not just a single deposit that we will exploit. The slide shows the principal zones of mineralization that we have discovered to date. The factors for development at the moment is the Breccia Ridge area. Slide 20 show the break out of resources with as total of almost 410 million ounces of silver in M& I overall and almost 200 million ounces of M&I silver, about half of the resource occurring single in the Breccia region underground resource. Slide 21 shows a section through the Breccia Ridge mineralization zone. We are advancing studies for both the underground development and open pit development on the deposits.

Now finalizing pre feasibility study on the underground development, this pre feasibility study was nearing completion late last year, but when the lower metal prices occurring at that time realized, it was thought that we should go back and optimize the study to design a more robust project that can sustain a low metal price operating environment. We have now finish need optimizing phase of the project, and we will have a final pre feasibility study for our internal review shortly. Optimizing the underground we have embarked on a number of scoping and pre feasibility level investigations on the surface and hence open pit potential for the Breccia Ridge material. We are now working aggressively, trying to bring the open pit option up to the same level of technical diligence that the underground has, as co-development of both these components of the Breccia Ridge resource has the potential for great significance to the Company. We're also taking the opportunity now to advance scoping studies on the other resource zones within the Pitarrilla camp to gain a better understanding of how it would look for the Company. (Inaudible) Pitarrilla, we have the feasibility study on the Breccia Ridge underground essential completed. We are rapidly advancing studies now on the Breccia Ridge open pit, will then review the development strategy of these two significant resource areas. Meanwhile, we are conducting evaluations into the other resource areas to develop a total property staged development strategy. Certainly exciting times for the Pitarrilla project. We're pleased to announce the appointment of Monty Reid as the General Manager Pitarrilla to oversee the development of the area. Monty has a wealth of project development and operational experience, most notably with [placidime] and iron gold. He has spent numerous years developing and operating projects in South America and he's an experienced addition to our team.

Moving to San Luis, slide 22, the property is a typical Peruvian high grade narrow vain system. Focusing in the development of the Ayelen Vein, slide 23. As this slide shows the Ayelen Vein carries very high gold and silver grades, and we're just completing a feasibility study now optimizing the extraction of the vein. It is our intention to have the feasibility study completed by the end of this quarter. (Inaudible) It's a good feeling to get production up at Pirquitas, and we will now optimize that asset while bringing San Luis and Pitarrilla through development decisions.

Thank you George for the update. I would now like to run you through our progress on our other project activities. I will start with slide 24 on the webcast. Exploration continues to be a focus for the Company as the value creation proposition for our shareholders. What he have a robust exploration budget this year focused on key projects.

At our Snowfield project in Northern British Columbia, we now supply a five-fold increase in total gold resources in January, with the resource increased announced by Seabridge on their adjacent Mitchell Zone project, the Mitchell Snowfield zone holds a world-class mineralized gold copper system. We have substantially increased our budget for the Snowfield project in 2009 over 2008 and will drill in excess of 20,000 meters. We have our crews ready and will mobilize to the site in early June. Our program is intended to upgrade a significant portion of inferred gold resources to measured an indicated resources and also test other known gold mineralized areas in the property.

We're also encouraged by the reelection of the liberal party in British Columbia. Part of their reelection platform spoke to construction of the Highway 37 power line which we [deposited] for the project. The (Inaudible) steam project was returned to the Company in February of 2009 and we completed an updated 43101 on it, our data review demonstrates the project has significant additional resource potential at surface. We're also interested in the opportunity at depth for classic replacement sulfide mineralization. We have budgeted significant funds that will test both the surface and depth potential later this year.

We anticipate a resource update for Diablillos later this quarter, and we also will be investing funds on Berenguela, Veta Colorado, and Maverick Springs projects and resource and engineering studies to better understand how these projects will fit in our long-term development strategy. Then, of course, we have the other Blue Sky opportunities which we will selectively advance going forward. (Inaudible) Snowfield and St. Augustine projects we have significantly increased our exposure to gold. One of our objectives this year will be to determine on how best to capture the value of this gold exposure for the Company and for the shareholders. So this year you can see we will have a number of project activities from drilling through further resource announcements to prefeasibility and feasibility study releases. Optimization of the silver and tin circuits at the Pirquitas Mill complex will be our priority through the next quarter as this is the foundation for the development of our other assets. We are excited now about our organic growth opportunities. Friday. Silver Standard held its 63rd Annual General Meeting and I thank all of our staff and stakeholders for their contribution to the achievements we have made so far. These are the formal remarks we wish to make, and we'd now be pleased to answer any questions you may have. Hello, operator.

Thank you. (Operator Instructions). Our first question today is from Jorge Beristain from Deutsche Bank.

Hi, it's Jorge from Deutsche. Two quick questions. On the Pirquitas startup could you give us the exact volume sales guidance that you're looking to achieve in the second quarter and if production will match sales on a going forward basis? And secondly, are there any hedges or presales that we should be aware of that could impact your average realized price?

I'll take the second question first, which is our policy here is that we're not planning on doing any hedging with respect to our production as it relates to sill vehicles and so we won't be doing that, and George can speak to the plans as we're just with wrap-up stage with respect to your first question.

Hi, Jorge. For the second quarter, we're ramping up, and as quick as we can push the plant we will, so it it's difficult to give you exact guidance for the second quarter, but what I can tell you is for 2009, we are still targeting producing 6 million ounces of silver. That's the best guidance we can give you in terms of volume of production. With respect to the lag or the matching production versus sales, the contracts we have in place at the moment, looking at probably a 30-day delay in that, so I think the most accurate we can give sue 30-day lag between production and at least provisional payment, which is the majority of that production.

Okay, thank you very much.

Moving on, we'll take our next question from Chris Lichtenheldt of UBS.

Morning, first, on the MD&A that the cost at Pirquitas per ton should be around $26 over life of mine. Do you have any clarity of what costs may look like this year for that six million ounce?

Thanks, Chris. Obvious higher because the average $26 per ton is based on the life of mine strip ratio. Is running about 4.6 to 1. We've finished the pre stripping. Our actual strip ratio is 11 to 1. For this year and next year our costs are significantly higher, $26 a ton by virtue of the stripping. That reduces to a point where we go below the 26. The short answer is, higher than 26 for the first few years, then a lot lower in the latter.

Okay. North of 30, or a little bit difficult to pin something down?

It's a bit difficult, but it is north of 30. It's difficult, because as we're optimizing the pit to strip ratio that strip ratio is changing.

Okay. I'll look at. That thanks. And my second question, more broad, but I know we don't have -- or you don't after decision yet on San Luis, but should you go ahead with that? It sounds like the intention would be to internally fund any potential financing required would. That be a fair assumption?

Chris, it's Bob. I think we'll look at that at the time as to what the financing opportunities would be. We see the San Luis as a fairly robust project. It is a joint venture, so we have to deliver our report to the joint venture, then determine after that how we proceed, and I would suspect that at the next call we could give you further clarification on that.

Okay, great, thanks. Then just last question quickly, again in the MD&A it talks about the outstanding contemplation of an export tax within the courts in Argentina. Do you have any idea when there maybe decision on that? Are you expecting one over the near term?

No, that's been before the courts in Argentina for some time, and we don't have any clarity on that or any guidance. It's working its way through.

Okay, thanks a lot.

Thank you, Chris.

Moving on, our next question will be from Trevor Turnbull from Scotia Capital.

Good morning, guys. I had a question on the production coming out of Pirquitas. You had spoken about op tie migs and ramping up the silver circuit down there. I know the ten circuit would then be next on your list of things to do, but does this mean that there won't be any tin concentrate produced at all in the beginning while you optimize silver, or is it actually rung at the same time?

Hi, Trevor, thanks. No, the tin circuit isn't running. Our focus is at silver stream. You essentially pull the silver off first, silver only, then you pull the tin off. So we will not be running the tin until we get the silver bedded down. Our focus is that current prices, the tin, for 75 to 80% of the process.

What did you say?

Sorry, silver accounts for 75 to 80% of the revenue.

Is that something that we should look for sometime in the fall or before year end, or is it something we actually need to wait for 2010?

Certainly before year end. If everything goes swimmingly well, it will be the end of the second quarter, but I think realistically early third quarter is what we're going to hit.

Okay. And then with respect to the costs, I caught the question regarding costs relative to $26 per ton in the stripping ratio. In addition to that, when we look at, say, TCRCs that were envisioned, I guess it was [Hatch] who did it, should we be looking at TCRCs as materially higher, lower, or kind of in line with those study estimates?

I think you're best to go with in line. Some of the higher he refining charges now are offset by lower transport costs, et cetera. So the feasibility numbers are pretty good first step for now.

Okay. So all things being equal, it's kind of balanced out over time.

Yes, if you take the whole off-site cost component, yes.

And then just -- the actual -- can you remind me what the actual tonnage estimate is, cost per ton to move basic rock, whether it be ore or strip?

Mining costs are split between ore and waste. Ore is higher than waste. It's running about $2.25 a top, whereas the waste is around $2a ton.

One more quick -- I guess maybe two quick ones. One on Pitarrilla. You're nearly finished with the on the underground before. We see anything released are you going to put those two together into one comprehensive study, it sounds like?

Trevor, it's Bob. I think what we'll do, we'll look at the data, we'll probably want to get that data out and then we'll proceed with the material. As George pointed out, you're looking almost at three areas of operations over time. The underground component of Breccia Ridge, then the four areas that surround it. So these things are being looked at as three separate areas. As we get one to a level where we've got quality data we can get out, but that's the point you have to recognize. Then other studies coming along to compliment it with respect to other opportunities that we see at the project.

So for the first one, is got this summer that we're looking for?

Possibly. We have -- the data has been reviewed, as George point out, we God in the fall but had to go back and redo the mine plan because of the change in metal prices, and that is currently undergoing an internal review process so we're working through that process now, and at some point we'll be through that then we'll advise, and we'll be able to give you first guidance on that over the next month or two.

Okay. Then last question, and I apologize, because Chris may have asked something along these lines. San Luis permitting, were you still waiting on some permitting before you could proceed? obviously you're waiting for the feasible study, but from a permitting perspective are you ready to go at San Luis?

Yes, San Luis project, we're actually -- through the end of the year, then have to go through other aspects of the permitting with that study in hand. So we're moving it forward on a few fronts.

Great, thank you.

Thanks.

Just a reminder, it is star 1 if you have a question today. We'll go on to Haytham Hodaly from Salman Partners.

Couple questions to follow up on one of the questions about the strip ratio. If I recall, life of mine was 4.8 to 1, strip ratio, roughly 11 to 1. Is that a good number to use or you think it's coming down?

It comes down on a monthly basis, and as I -- we're optimizing the pit at the moment. It's probably going to get down to a number of 7 by the end of the year.

So somewhere between 7 and 11, a 9 or 10 is probably not unreasonable?

Yes. If it's 7 to 1, I guess I'm trying to determine when we actually get down to about 4.8 or the high four -- we get to the open strip ratio around about year four, then we start to slide below it.

If I assume a gradual transition --

Almost straight line, really. A few --

You talked about the cost of ton to move ore. Is that just a function of haul distance?

And blasting and grade control. So a couple of increments.

That $2 to $2.25, that's higher than the original study.

That's right. We've seen pretty significant cost -- in some areas in Argentina. Luckily we're reasonably protected on fuel price. They haven't gone up as much as may have seen elsewhere.

So somewhere around $2 to $2.25 is a reasonable long-term number to use.

I wouldn't like to you do that. (inaudible) I'm hoping the cost experience curve will come in and costs will come down with time.

Okay, that makes sense.

We're getting better at doing what we're doing on basis. That's going to reflect in those costs in the end.

How is the escalation or inflationary factors affecting your processing costs? I think it was around 11 before.

Yes, they're pretty good. Where we really saw the costs were on -- in the construction side. A lot of the industrial chemicals, media for grinding -- pretty flat line now.

And just one question, I guess, with regards to the Pitarrilla optimization study. What kinds of things are you looking at? Is it more a function of cut-off grade?

Cut-off grade, pre dominant factor, operating costs trade-off, just sizing the operation, underground filling techniques, mine design.

Okay. Then maybe just one question for the CFO. On corporate G&A, what do you forecast this year for corporate G&A now that you are going to be up and running shortly.

I think the 2.1 that we experienced in the first quarter is a good number, we've had a a slight increase as we continue to fill out the internal staff at the head office here to take dare of operating type --

That 2.1, that excludes stock-based compensation, correct?

That's correct, that outside.

You have been averaging roughly, just over 2 million quarter is that reasonable number to use going forward?

Going forward they will come off a little because of the fact that the newer stock based comp awards have been at a lower cost.

Okay, so yes, you were at 2.2 last quarter, sorry the 2.2 in Q4, 1.9 in Q1, so probably somewhere below the 1.9, you're saying?

Yes.

Perfect. Thank you.

Thanks. We'll go next to Adam Graf from Dahlman Rose.

Good morning, guys. Just a quick question, hitting on this again. The stripping ratio for this year at 11 to 1, grading down to 7 to 1, is that -- is some of that going to be capitalized, or is that all -- all of that stripping expense flowing through the P&L?

We're through -- essentially through the capitalization now, but I'll hand over to Tom to talk to that.

Generally what happens, as we're in the pre production period, unless we're into normalized production, we will just expense as we go.

So with the 11 to 1 grading down to 7 to 1, is that quote unquote normalized production?

Well, yes, I think that's what George was trying to say.

So that is effectively going to be flowing through P&L.

Company exploration costs here. Doing okay?

Thank you.

Our next question is from Craig West from GMP securities.

Good morning. First of all congratulations on the start-up there at Pirquitas. Good to see the progress you have made. Impressive. Couple quick questions on the concentrate that you are producing right now. Obviously running some Jig Tails through. Could you just comment again on the grades that you're getting out of those Jig Tails any guess that's the same material coming out of the under ground workings in the core of the project. metallurgical are they comparable to what you are going to get out of the pit?

We're pretty lucky in the sense that even though they're tailings, they're approximating the average grade of the pit. The metallurgical performance is about the same as the pit as well so what we're seeing out of the -- something typical what we're expecting from the pit.

Can you talk at all what kind of grades you are seeing in your concentrate at all?

We're optimizing that at the moment. We're starting to ramp up to be something that's quite salable.

Okay and then maybe just a little bit on the commercial production levels. Did you guys say sort of a taming when you're going to stop capitalizing and declare commercial production, if you will? Is that a Q3 thing now?

Yes, we're targeting Q3.

That's all I've got. Thanks, guys.

Thanks, for your good word.

One final reminder, it is star 1 to ask a question today. And we'll take a question from Ian Horowitz from National Bank Financing.

Good morning, everyone. Just on the pit operations itself, couple questions on. That have you had any surprises on how it's performed to date, either the rock mechanics or just how everything has performed? And whether -- has the ore been where you expected to hit in the.

Thanks, Ian. The pit has performed well. We've actually incurred a lot more oxide material in the upper levels that we weren't expecting, so that's been stockpiled, and that's a make work project fore a metallurgical in the next few years. Unfortunately there's a lot of structure, so the walls are going to look a bit ratty, and we've had to ensure that we do a lot of clean one, but generally performance is good, the ore is where it is. We're paying a lot of attention to grade control. We've got a specific, unique low-angle drill rig to come in here and do the grade control to make sure we don't miss the vertical type vein systems. The pit is going really well.

Okay. And maybe I missed it. And so what -- for next year, you are going to produce probably just silver and tin. Do you have any idea what volumes you're expecting next year?

Well, we're starting to get into the more -- a more mature, stable operation, and we'll be hitting those average life of mine sort averaging 10 million ounces of silver per annum.

That's it for me. Thank you.

Thanks, Ian.

And we'll take the follow-up question from Trevor Turnbull from Scotia Capital.

Yes, I just was curious, do you have to pay the royalty on the Jig Tails, or is it just primary ore that you're worried about?

Which royalty are you referring to, Trevor?

I thought they called it like a mine mouth royalty at Pirquitas. Am I getting something mixed up? I just wondered if the Jig Tails would actually -- would you to have apply the royalty to or not.

Excuse me, it's Joe here. As the royalty is currently structured, yes, we'd apply that. So it would be the royalty, the Waite's actually structured is fairly -- underground operation, would be -- we'd be entitled to cut costs from moving the Jig Tails from where they're currently located to the mill.

But at the same time, they still need to apply the royalty at the end of it all?

That's correct.

No worries. Thanks.

Our next question will come from Haytham Hodaly from Salman Partners.

Quick follow-up. What's your carrying value at Pirquitas so far? Trying to figure out what your DD&A will look like once it's up and running.

Tom will appears that question.

Just going to grab that out of the financials. The development cost of 94 million, of course the construction cost on top of that is of approximately -- by the time we're done, 230ish.

Okay, and you're amortizing that -- or accruing that, pardon me, over the recoverable reserve, is that correct?

Yes, it will be life of mine.

Perfect, thank you.

And one final reminder, it is star 1 if you have a question today. And it appears there are no further questions today. Mr. Quartermain, I will turn the conference back to you for any additional or closing remarks.

Thank you very much ladies and gentlemen I will say it has been a milestone for Silver Standard and we look forward to giving you positive news on our next call, which will be in August. Enjoy your day.

That does conclude our conference call today. Thank you all for your participation.