SSR Mining Inc (SSRM) 2009 Q4 法說會逐字稿

Welcome to fourth quarter 2009, this call is being recorded. At this time, for opening remarks and introductions I would like to turn call over o to Silver Standard's President and CEO, Mr. Michael Anglin. Mr. Anglin, please go ahead, sir.

Thank you. Good morning, ladies and gentlemen. Welcome to Silver Standard's fourth quarter and year-end 2009 conference call. Reviewing our financial performance and updating our projects.

On the call this morning we have George Paspalas, Senior Vice President of Operations, Joe Ovsenek, Senior Vice President of Corporate Development, Tom Yip, Vice President of Finance and Chief Financial Officer, Kristin Riddell, Vice President, Corporate Secretary and General Counsel, Ken McNaughton, Vice President of Explorations and Paul LaFontain, Director of Investor Relations. Our financial statements as well as our management discussion analysis together with the project updates, have been filed on SEDAR.

And are available on our web site. We have a webcast accompanying our comments today, and it can be found at the web location referenced yesterday's news release. We will be making forward-looking statements on the call today. I'd advise you to refer to the forward-looking disclosure accompanying our news release and on SEDAR.

Our focus in the fourth quarter was a ramp up with our Pirquitas no complex and we have achieved commercial production on December 1st. We know that the shareholders are focused on our ability to deliver at Pirquitas. We have achieved far operational targets, and are now focused on optimizing silver production levels. We will begin processing sulfide ore throughout -- through the mill next week on the road to full production.

George Paspalas, our Senior Vice President of Operations will describe Pirquitas in more detail in his presentation. Since my appointment as interim President and CEO in January, I have spent time with the management group focusing on the implementation of our strategic plan.. Which includes optimizing Pirquita, developing our principal projects in a safe and expeditious manner and advancing explorations in our Snowfield and Ridgejack gold projects in British Columbia as well as other exploration projects in our portfolio.

Last month, we concluded a successful financing as well as the sale of our Non-Core Silvertip project. These funds insure that we can maintain our exploration development activities and achieve the objectives of our strategic plan to grow the Company. I also had the opportunity for a visit to the Pirquitas mine and I have just returned from institutional investor conference where we shared perspectives with institutional investors.

Returning to the primary purpose of this call, our 2009 financial results. We recorded our first revenues from mining operations at Pirquitas which produced 1.1 million ounces of silver during the year. I would now like to turn the call over to Tom Yip, our Vice President of Finance and Chief Financial Officer, who will speak to our fourth quarter financial results. Tom?

Thanks, Mike. For the fourth quarter we had a net loss of $9.1 million or $0.13 per share. The P&L comprised of sales in December from silver that was produced prior to the achievement of production status on December 1st. During the month, we sold 460,000 ounces of silver, at $17.49 per ounce, and after deducting transportation refining charges, revenue was $5.4 million.

Cost of sales was $5.9 million, reflecting our cost to produce those ounces during the preproduction period which was then reduced to net realizable value at the beginning of December. At the depreciation and amortization of $2 million, loss from mine operations was $2.5 million. General and administrative costs were $2.9 million similar to other quarters. Stock based compensation was $1.5 million as we continue to amortize the Black Shoals value on previously granted options.

During the quarter, we sold a majority of our ABCP investments for $20 million and recorded a loss on the sale plus ruled down the remaining book value, this totaled $4.6 million. Interest expense of $1.1 million during the quarter relates to the convertible debenture that was previously capitalized to the Pirquita project. With production status reached December interest is now charged to the P&L.

And lastly we had a $3.3 million recovery of income taxes. This is mainly attributable to the reversal of prior year's provisions and tax recoveries, for the mine operating loss. For the year, we have a loss of $13.2 million or $0.19 per share. The results include the $2.5 million loss for mine operations in December, general and administrative costs were $10.3 million slightly higher than the previous year due to adding staff as we transitioned to prove reserve status.

Stock-based compensation was $6.3 million. This was lower than the prior year's as we had left option standing. We had a foreign exchange gain of $5 million, resulting from the impact of the strengthening of the Canadian dollar on our net Canadian monetary assets.

And lastly, we had a $4.3 million recovery of income taxes for the year, $3.3 of it occurring in the fourth quarter, and another $1 million related to the adjustment of last year's tax provision and the sale of Shaster, when we finalized our filings in the second quarter of 2009. In terms of capital, we began the quarter with $43 million and had a net decrease of $16 million in our cash balance.

During the quarter, we sold the majority of our ABCP Holdings for proceeds of $21 million and received $3.5 million upon the exercise of stock options granted to employees. We used $20.8 million in operating activities primarily related to G&A costs, and off $2.9 million and another $16 million for inventories, which represents the transfer of preoffering costs when we establish values for our inventory of silver in process and finished goods on December 1st. For investing activities, we spent $13.9 million on our projects advancing our exploration and development project and completing the construction of Pirquitas. Related to the construction, we spent $5.1 million for refundable value-added taxes.

We ended the quarter with $27 million in cash. Summarizing the year's cash flow, we began with $72 million and had a net decrease of $45 million. During the year, we sold 6.8 million common shares, for net proceeds after expenses of $146 million. We also sold a portion of our ABC peak and share investment portfolio for proceeds of $24 million.

We used $40 million in operating activities including G&A costs of $10 million, $9 million for taxes related to the sale of the Sapshaster project in the prior year, and $21 million to establish our initial inventories of supplies in process and finished goods of silver constant chips. For investing activities we spent $152 million dollars on our projects including $25 million to advance our exploration and development projects.

The remainer was spent on the construction of Pirquitas and preoperating costs. To date, we have incurred $255 million to build a plant and facility as well as another $79 million for preoperating costs. Relate to the construction we spent $22.8 million for refundable value added taxes. We ended the year with $27 million in cash. As Mike has mentioned, subsequent to the year end in February we sold 6.7 million shares for estimated net proceeds after expenses of $108 million. So in summary, we are now optimizing the Pirquitas mine and are well funded to continue advancing our other key projects. Back to you, Mike.

Thank you, Tom. George Paspalas, our Senior Vice President of Operations, will walk you through the operational progress of Pirquitas, and also describe the work underway in our development projects, San Luis and Pitarilla. George?

Thanks, Mike. The operation is progressing well at Pirquita. Slide 10 shows a recent start of the pit and is a good representation of the state of the nation presently. In the foreground, you can see where the mining has been occurring over the past 20 odd months.

This is the partis event side or the north side of the pit. Here you can see stage one, where we stepped in towards the valley. They're getting more immediate access to the ore. Well commence pushing this step back mid this year. Over the valley, in the background is the opposing or south side of the the pit where stripping has commenced and we had just started to encounter the sulfites.

We will now bring both sides of the pit down together as we pass through the valley's wall and into the heart of the ore body. The buildings to right are all that remain, of all of the historical mining equipment and infrastructure in the valley. It has all been removed in preparation to the open pit advance.

These buildings will serve as facilities for the underground shoule we elect to progress words here in the future. The portal can be seen at the valley floor on the right hand side of the shaw. The pit operations continue to deliver operational improvements.

We averaged US $2.15 per ton all in unit mining costs for 2009. And we hope to continue to improve on this performance indicator during 2010. A number of cost reduction initiatives have been instituted for further efficiency gains. Although the benefits we are starting to see in the pit operations are now a reflection of a maturing operation, and the benefits of our long term training strategies, going to have affect. A total of 14.3 million tons of material was mined in 2009, bringing the project to date total around 18 million tons.

Turning now to processing. The completed facility is shown here on slide 12. Oxidized ore from the open pit commences millfeed in mid November 2009. While excellent final concentrate silver grades are expected during this material, it was anticipated that the silver recovery would be around 30%. The oxidized ore has overperformed our expectations from metallurgical standpoint realizing silver recoveries approaching 60% rather than the 30% expected. The process plant has continued to achieve excellent mechanical and electrical realizability which has been a feature of the installation from the startup.

In addition, the mill operated well above feasibility throughput rates, and it is anticipated that this will continue through 2010. Commercial production was declared in December 2009, and 1.1 million ounces of silver were produced for 2009. Moving into 2010, the oxidized material will continue to be processed until it is exhausted. This is anticipated to occur over the next four or five days.

The plant will then be fed more transitional star material, as we head into the sulfites. We have commissioned the team circuit and produced some minor team concentrates off the gravity component. However the oxidized ore contains very little tin in the head grade. So the tin circuit will wait until the tin head grade increases with the sulfides before recommenced introduction.

Moving on to our advanced development projects, The San Luis feasibility study essentially completed. And are waiting a final rewrite, expected over the next few weeks. Additional geretek drilling has been completed at site and those results along with a management review of the draft feasibility study will be incorporated into the final draft. At Pitarrilla, the pressure reached underground feasibility study is in full swing. We have awarded all of the engineering functions and have conducted a detailed planning process for completion of the feasibility study shown here on the wall in the picture on slide 14. It is anticipated that the feasibility study will be completed at year-end. Well, that's it for me, back to you, Mike.

Thank you, George. I would now like to run you through progress and other product activities. As we stated last quarter, exploration compliments our production focus as a value creation proposition for our shareholders.

In December, we reported resource updates for our Snowfield and Ridgejack properties in northern British Columbia. Snowfield along with the adjacent Mitchell over sea bridges into a world class gold mineral system. We have now outlined 19.7 million ounces of measure indicated gold at Snowfield and an additional 10 million ounces of impured gold. In addition to the gold at Snowfield, there's also significant copper, and mineralization. Under the Ridgejack project, six kilometers to the south of Snowfield, we have over 4 million ounces of gold measured indicated and almost 5 million ounces of gold inferred.

The Snowfield and Ridgejack projects remain open for further testing particularly the 6 kilometers separating the two sides. This summer we are planning a substantial exploration program similar in structure to our 2009 program. Key objectives include further drilling in Snowfield, upgraded 10 million ounces in deferred gold, additional testing of two principle areas of Ridgejack, and testing of the targets developed in our 2009 campaign.

With the Snowfield project and other gold projects, we have significant exposure to gold and one of our projectors continues to be how best to capture the value of this gold exposure for the Company and our shareholders. We have significant exploration programs planned for Santa Gustine in Mexico, Benegaya in Peru and Chile. To conclude, achieving full production of Pirquitas is our current corporate priority. Together with the completion of feasibility studies for San Luis joint venture in Peru in Q2 and our Pitarrilla project in Mexico in Q4 this year. Our exploration activities this year will focus on the Snowfield and Ridgejack gold projects. We'll also be looking forward to testing the potential of depth for projects such as Santa Christine. These are the formal remarks that we wish to make this morning. We will now respond to questions you may have. Thank you.

Certainly. Ladies and gentlemen, if you have a question at this time, (Operator Instructions). Our first question comes from Aden Day of Arden Day Asset Management. Your question please.

It is Adrian. I actually have two quick questions if I may. One on San Luis, you know you indicated a feasibility was essentially down. Two questions if I may. Do you know when it will actually be released to the market, what is the estimate for that and the second question I don't know if you can say, have your partners had an opportunity to review it? I know there was a little bit of an issue, shall we say, a couple of years ago. And then the second thing, if I may, just ask it on Snowfield, is your thinking developing in anyway on what to do with that since it is a gold assets?

I guess the first question around which is around San Luis, when we will issue it officially,and we have spoken to our partners. The partners have looked at the feasibility study. We have not formally presented it to them as of yet. You know we still have to go through the final internal processes here at Silver Standard. And when that's completed the partners have had a chance to look at it, it will be released to the public. Second question on Snowfield, yes, you know, Snowfield's a massive resource, it is a massive challenge. We are currently sort of evaluating all the options of all what we might choose to do with it. We haven't excluded anything from developing it to demonitizing it somehow. So all options are on the table moment.

But you are not leaning one way or the other at the moment. Nothing has changed?

Not really. I mean, we've got some scoping study activities coming along. And when we get that information, you know, we will have to have a serious think about it.

Okay. Great. Thank you.

Thank you. Our next question comes from Haytham Hodaly from Salman Partners. Your question, please.

Hi. Haytham Hodaly here. Just a quick question, first one will be just with regards to Silver tech the latest divestitures, you guys did, it looks like a divestiture on your part but questions are, you've had it for a number of years, zinc prices, lead prices are up, silver prices are up. Have you -- first of all, did you actually do any work on that project since you had it, and secondly, has there ever been any economics assessed at current pricing?

Let me put that question to Joe Ovsenek, who is the Senior Vice President of Corporate development.

Hi. We done some work taking a look at the scope of it reaching for divestiture. We come down to size. We didn't see it having the scale for the size of company we are at this time and what we are looking to develop.

Okay. So it just wasn't big enough. And then had a significant potential for expansion at that point?

It would have taken a lot -- it will take a lot of work to see on the expansion, there may be potential there but it will take a significant amount of work at the project.

Okay. Next question I guess, just maybe some housekeeping issues. Just with regards to your forecast for expense of exploration and G&A for 2010.

Let me hand that over to Tom Yip, to answer that one.

On the exploration fund, I think what we will forecast in the upcoming year is pretty much what we have done in terms of quantum for this year, and similarly for the G&A costs, we're pretty well at full scale head count. I would think the fourth quarter is pretty representative of how we move going forward.

Just to add to that, you know one focus this year, I said during the opening remarks is looking at accelerate or push as hard as we can on San Luis and Pitarrilla. So that will be the fair amount of money to keep those things moving along.

I guess the question was asked earlier, in terms of timing of Pitarrilla, what was the answer again?

In Pitarrilla, we're looking to get our internal feasibility study ready in Q4.

Okay. Maybe one last question for Tom. Tom, would the Pirquitas wrapping up and now it is actually at commercial production, what do you forecast your effective tax rate on a corporate level will be be?

Well, the I will say in the local level taxization is a nominal 30%, possibly 33%, but it does just for nominal purposes it will take us a while to get up to the full effective cash tax basis. We have certainly accelerated appreciation options down, and down in Argentina.

You touched on my next question, I guess, what are you putting in your model for DD&A this year?

DD&A is approximately the $411 million that we have at the end of the year over its current estimated mine life of approximately 13 to 14 years.

Okay. Perfect. Thank you.

Thank you. (Operator Instructions). Our next question comes from Chris Lichtenheldt from UBS. Your question, please.

Hi. Thanks. Just a few questions on Pirquitas, first of all, there was more CapEx in the quarter on Pirquitas. It looks like another $20.4 million for construction, mining equipment. I thought after last quarter that was pretty much done. Was this unexpected CapEx and where are we now with these types of costs for construction and equipment?

Hi, Chris. The CapEx is pretty well wrapped up. What that additional funds wrap in we've included the sustaining capital for the year into that falling number. And we have also included some table pay charges from the gas contract, from previous years into there as well. You know, we are getting close to final number now. Obviously works done. Everyone's offsite, and it is just settling the final close out with contractors. So we don't expect the numbers going to move around too much from what you see now.

Okay. But, so still some more for 2010? A guided number for that.

Very small increment. Certainly not material.

Okay.

Chris, are you there?

Did we lose him?

It appears we have.

Okay. Our next question comes from Rich Stuchberry from Macquaire. Your question, please.

Hi. Rick Stuchberry. Just on the valuation question, gentlemen, we have got a number of projects, has the Company identified which of the core projects, which ones are we going to off and get value out of to get the stock price back up to where we were a few years back? Has this process been identified and sort of who is handling it or is this going to wait until we get the new CEO in place?

Mike here, I think I will answer that one. Basically we had a strategic plan which we put out in December which was agreed to with management of the board. We are sticking to that plan. So the first thing we have the to get Pirquitas up and running properly, and then move into looking at other options, Brownfield and so so on which you normally do when you get a project up and running. The next one, San Luis, get the studies done. We talked about Q2 for the feasibility and Pitarrilla Q4, so I think it is a pretty, good looking project pipeline. You know, the question then begs itself, what about other assets in the portfolio. And I think, you know, we are always looking at how to value them, and I think the recent sales, you know indicates that is we are active. And project, you know doesn't look like it is going to fit our plan, then you know, clearly, we have sold them in the past and we will look at ways to monetize in the future.

Great. I think the frustration for your shareholders is they look at this thing as a tremendous value play, and yet the market is not recognizing the value and I think in your attempt to off some of these noncore assets is positive one and approximate the more you can do the more it shows the market that you are, you know actively trying to get this thing to go the way it shall be going. Not. That was just a comment for r you.

This is Joe. I will respond. We actively looked at starting to rationalize our portfolio, early in 2008. We completed the sale of the Shafter in July 2008. Unfortunately, the financial crisis to a little bit of the wind out of the sails of our rationalization program. We've reinitiate things looking at our projects now that there's capital available for people to acquire projects.

Okay. Thank you.

It appear that is Chris from UBS is back. Your line is open again, sir.

Thank you. Sorry I don't know what happened there. So, I think we did the CapEx, can you give a little better idea of we are now in terms of the since we have almost three months two and a bit this year in terms of what grades look like at Pirquitas in recoveries maybe as well? Is that possible?

Sure, Chris. Have you got enough coins on you for the answer? Remembering that we are processing oxide, transitioning which becomes a mixture of oxide and transitioning, sulfide and then sulfide. So what we are seeing is on pure oxide, we're seeing fantastic concentrate. Plus 20,000 grams per ton. There's no impurities in it. Recoveries of the ore of 60%. We anticipate that as we transition and head more to the sulfides we will come back to the feasibility study numbers on the concentrate so that at 20,000 grams per ton and the recovery starts to slide up into the over the 60's into the 70's as you get into 100% sulfide.

Do you still ultimately expect 80ish on the recoveries for the sulfides or --

Let's start with 70. We will be happy the get into the early 70's and mid-70's as the plant stabilizes, and then obviously, as we get smarter and understand the ore body better, anything up to 100 we will take.

Okay. Just another couple of more questions actually but on the sales in the fourth quarter of last year, I think you sold half of what you produced. What drove that and where do you expect sales -- do you expect to be able to sell most of what you are producing now over the next couple of quarters?

Yeah, Chris, the timing differential between sales and production is purely logistics. Nothing to do with any sale restriction.

Okay.

It is a matter of packaging up, sampling getting the customs documentation and getting the stuff to the port for guests. So that's a typical sort of delay and in fact it is very good in the industry normally people look at the three month delay.

Okay. That's good. And then finally on the cash cost guidance, I noticed there was a little bit of change in the guidance this time around, last in February 10th the last guidance you gave, it referred to an operating cost guidance at $9 an ounce and today it is referred to as a production cost of $9 an ounce and it seems that was the production cost you realized in the fourth quarter with the full operating cost of $16.57. Does that mean for 2009, we could expect full operating costs of over $16 or can you give a little clarity on all that?

The problem with December, it is a month in isolation that reflects data but not indicative. At the moment, from what we've seen, we're sticking with the previous disclosed guidance December of 2010 of $9 an ounce.

Okay. But just to be clear that $9 doesn't include treatment refining royalties expert taxes those things. Is that true?

That's correct.

So should those be somewhat stable from December although December's start up treatment refining expert talks seems like that would those be relatively stable throughout the year?

No, I will -- 2010 will be lower than what you have seen in December. December is still has a start up sales and refining contract in there, we're renegotiating that now. That will come down were considerably.

Okay.

The off side charge also reduce significantly from what you saw in December.

Can you give us any guidance on what the full operating cost number might look like for 2010?

We are in the middle of negotiations on this. We don't want to give it away. So no.

Okay. All right. I will leave it there. Thanks a lot.

Thanks, Chris.

Thank you. There are no further questions in the cue at this time. I would like to turn the program back to Mr. Anglin for any further remarks.

Thanks very much. I appreciate those who asked questions and I look forward to speaking to you in the near future. Take care.

Thank you. Ladies and gentlemen, for your participation in today's conference. This does conclude the program, you may now disconnect. Good day.