SSR Mining Inc (SSRM) 2010 Q1 法說會逐字稿

Good day, everyone, and welcome to the first quarter 2010 financial results and project update conference call. This call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Silver Standard's President and CEO, Mr. Michael Anglin. Mr. Anglin, please go ahead.

Thank you. Good morning, ladies and gentlemen. Welcome to Silver Standard's first quarter 2010 conference call reviewing our financial performance and updating our projects. On the call this morning we have George Paspalas, Senior Vice President, Operations; Joe Ovsenek, Senior Vice President, Corporate Development; Tom Yip, Chief Financial Officer; Kristin Riddell, Vice President, Corporate Secretary and General Counsel; Ken McNaughton, Vice President, Exploration. Our financial statements, as well as our management discussion and analysis, together with project updates, have been filed on SEDAR and are available on our website. We have a webcast accompanying our comments today and it can be found at the web location referenced in yesterday's news release. We will be making forward-looking statements on the call today and I'd advise you to refer to our forward-looking disclosure accompanying our news release and on SEDAR.

Our focus in the first quarter was the continuing ramp-up with our Pirquitas mill complex, where we achieved commercial production on November 1st. We are now starting to process sulphide ore to the mill, for which is was designed, and we are starting to see results in the numbers from the mine. George Paspalas, our Senior Vice President of Operations, will describe Pirquitas in more detail in his presentation. Among the highlights of the first quarter was the sale of a non-core Silvertip property in British Columbia for CAD15 million. The Silvertip sale is part of the ongoing rationalization of our portfolio. These funds will augment our exploration and development activities and help to ensure that we are well funded to achieve the objectives of our strategic plan to grow the Company.

Returning to the primary purpose of this call, our first quarter 2010 results, I'd like to turn the call over to Tom Yip, our CFO, who will speak to our first quarter financial results. Tom?

Thanks, Mike. For the quarter we recorded a net loss of CAD7.6 million, or CAD0.10 per share, versus a net loss of CAD2.5 million, or CAD0.04 per share in 2009. This was our first full quarter of operations and as Mike has mentioned, we continue to ramp-up the mill facilities processing both oxide and sulfite ores encountered in the pit. While our operating cost spent at Pirquitas are in line with our expectations, the lower production has resulted in a high cost-per-ounce of silver produced. During the quarter we produced 609,000 ounces of silver and with the drawdown of our finished goods inventory from December we sold 907,000 ounces at an average price of CAD17.43 per ounce. After transportation deductions and refining costs revenues were CAD11.5 million. Cost of sales were CAD20.4 million and depreciation and amortization was CAD7.8 million, for a loss from mine operations of CAD16.7 million. G&A costs were CAD5.3 million. The increase over the prior year relates to additional employees that were added throughout 2009, severance, recruiting and bonuses that were paid in the quarter.

Stock-based compensation was CAD2 million. similar to the prior year. as we continue to amortize the Black-Scholes value of previously-granted options. Interest expense of CAD3.4 million relates to the convertible debenture, which was previously capitalized to the Pirquitas construction that is now charged to the P&L. Offsetting these expenses, during the quarter, as Mike has mentioned, we sold the Silvertip property in Northern BC for a gain of CAD13.1 million, as well as selling a portion of our share investments for a gain of CAD2.4 million. And, lastly, we had a CAD6.1 million recovery of future income taxes related to the loss from mine operations.

Turning to the cash flow, we began the year with CAD27 million and during the quarter we had a net increase of CAD76 million in our cash balance. For financing activities we sold 6.7 common shares at a price of CAD17 per share for gross proceeds of CAD114 million, and after deducting fees and expenses we netted CAD108 million. We used CAD16.2 million for offering activities, which was primarily the cash loss from mine operations of CAD9 million, G&A costs of CAD5.3 million and interest of CAD3.4 million. Investing activities include exploration and project spending of CAD4.8 million. And at Pirquitas we paid down construction bills of CAD16.4 million. During the quarter we spent CAD3.9 million for refundable, value-added tax and in April we filed our first application with the tax authorities to begin the process of recovering our (inaudible) receivable. And as mentioned, we sold the Silvertip property and share of business, and received cash proceeds of CAD9.3 million. We ended the quarter with CAD103 million in cash, so as we continue optimizing our Pirquitas mine we're well positioned to advance 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 at Pirquitas and also describe the work under way at our development projects, San Luis and Pitarrilla. George?

Thanks, Mike. Good morning, everyone. Operations are progressing well at Pirquitas. We see the open pit here on slide six. The upper photo shows the pit looking north and we are about to encroach on the valley floor and advance the pit through to join up with the south side. For those with large monitors you can make out the anticline structure nicely in the north wall of the pit. The lower shot shows the south side of the pit where we have just commenced mining sulfide oil. Operationally the pit is performing very well. Safety and environmental has been excellent and production continues to improve. We have commenced the Phase two push-back in early April and the mining is reconciling well with our expectations. A very pleasing aspect of the pit operation is the sustained improvement in unit mining costs. We are now running at $1.81 per ton mine for the first quarter, which is a great result for a small altitude -- small high-altitude pit and much better than what we had plan to achieve for the year. Our concerted effort to implement long-term efficiency improvements and direct cost reduction programs has paid good dividends for us here. Work on the cost reduction front is ongoing and our objective now is to take the successes of the open pit operation and translate those systems and outcomes to the processing facility.

Turning now to the process side, quarter one was always planned to be a ramp-up period following the processing of high-grade oxide ore in December 2009. We started processing low-grade transition material and worked through some metallurgical challenges in obtaining acceptable silver zinc separation in (inaudible) circuit. We have now achieved some success in this regard and the most notable outcome is that Pirquitas is now producing a saleable zinc concentrate from the current installed facility and there is every indication that minimal capital investment will be required to ensure reliable zinc concentrate production through the life of the mine now. As we entered into April we were confident in our ability to be able to process the transition material and started to feed high-grade material into the plant during the second half of April. April's silver production of 535,000 ounces is more typical of the trend we will see as we start to ramp-up silver production now over the balance of the year, quarter on quarter, and, hence, our guidance for seven million ounces of silver for the full year.

Lower tin grades were realized from the ore in the upper most levels of the ore body and hence the tin circuit was shut down until the tin feed grade picks up. This is purely a timing thing and tin concentrate production is anticipated to commence in quarter three this year. Our tin production guidance for 2010 is now 800,000 pounds. Cash production costs on a per ounce basis for quarter one are not representative of the year due to the low silver production, and our cash cost guidance, net of by-product credits, is approximately CAD10 per ounce for the year. This is slightly higher than previous guidance due to less tin credits from the transition ore. However, it does not account for full by-product credits that we will receive from zinc production later in the year. So to wrap up, we are seeing ongoing improvement in the operational performance of Pirquitas, the metallurgical challenge of obtaining a zinc-silver separation in the floatation circuit ended up with the added benefit of having the ability now to provide zinc concentrates with little additional capital expenditure.

Turning now to the San Luis project, the feasibility study for the San Luis project has been approved by the Board of Directors and has been provided to Esperanza Silver pursuant to the joint venture agreement. San Luis is greenfields, precious metal discovery and the feasibility study is focused on the extraction of one high-grade vein, the Ayelen vein, from within the known mineralized systems from the quite large property package owned by the joint venture. The San Luis system is a volcanic-hosted epithermal quartz precious metal deposit. The Ayelen vein is almost vertical, with a strike length about 720 meters and down dip extensions of more than 325 meters. The true thickness of the vein can go up to 10 meters and averages 1.5 to 3 meters wide. Slide 11 shows the Ayelen vein in both long and cross section. The San Luis proven and probable reserves are just over 0.5 million ounces -- sorry, 0.5 million tons with a gold grade of just under 18 grams per ton and silver grade of 446 grams per ton for contained ounces of 7.2 million silver and 290,000 ounces of gold. This is a really nice project. The ore body is extremely amenable to proven mining methods used extensively throughout Peru. The ore body is easily accessed from the side of the hill, shown in this section. It also outcrops at the top. San Luis has excellent metallurgy and the high grade gives great operating margins.

Slide 13 is a summary of the project. Key data on this page with the capital cost to build estimated at $90.4 million; average annual production from the mine 68,000 ounces of gold and 1.6 million ounces of silver per annum; cash operating costs are $14 per ounce of gold when the silver credits are taken into account. The project is financially very very robust. At $800 gold and $12.50 silver, the project delivers an after-tax internal rate of return of 26.5% for a net present value of $39 million. Some sensitivities are shown in the graph and as you can see, plugging in recent metal prices really cranks the return to the project. So as in San Luis, the feasibility study is completed and we are now progressing environmental approvals for the project.

Quickly updating the progress of the Pitarrilla feasibility study, we have completed the initial mine design now and have initial plant flow sheets drawn up. Work on the ground is continuing with some rehabilitation work on the access ramp and baseline data collection for environmental requirements. Some additional geotechnical drilling has been completed to provide additional information to confirm some of the prefeasibility study assumptions. We are progressing well and we are on target for completion of the feasibility study at the end of year.

So that's it for me. Back to you, Mike.

Thank you, George. I would now like to talk about our progress at our other project activities. As we said last quarter exploration complements our production focus and is a value creation proposition for our shareholders. Work is now started at the Brucejack project in Northern British Columbia. There we have planned a 24,000-meter drill program. One goal of the drilling is the expansion of the newly-discovered Bridge Zone, which interpretations just may have the potential to be gold-copper-molybdenum porphyry similar to the Snowfield Project six mi -- six kilometers to the north. Other drill targets include the continued testing for expansion of high-grade Galena Hill and West Zones. You may recall one of the results of last-year's drilling at Brucejack was four million ounces of gold, measured and indicated, and 4.9 million ounces of gold inferred. We'll also be testing new areas, which have been defined by surface sampling and mapping. This season's exploration program at Snowfield will include 18,000-meter diamond drill program during the final stage of completing a preliminary assessment for Snowfield and engineering studies and other dimensions of the project are also under way.

We have significant exploration programs planned for Berenguela in Peru, San Agustin in Mexico and Challacollo in Chile, each of which has Company-maker exploration potential. At Berenguela a 5,000-meter diamond drill program is expected to commence in early June to test for the source at depths of the silver-copper resource at surface. At San Agustin a 6,000-meter diamond drill program will test in Q3 for additional surface gold, silver, oxide mineralization potential high-grade and breccia-hosted mineralization at depth. At Challacollo a 5,000-meter drill program will test for Pitarrilla-style mineralization, as well as copper porphyry potential. This program is planned for second half of 2010.

To conclude, our corporate priorities are to achieve full production and efficiencies at Pirquitas; to advance our two development projects, San Luis and Pitarrilla; and maintain an ambitions and well-funded exploration program. These are the formal remarks we wish to make this morning and we'll now respond to questions you may have. Thank you.

(Operator Instructions). Our first question comes from [Anupum Kaiton] of Scarsdale Equities. Please go ahead.

Hi, guys, thanks for the call this morning. Had a question about the San Luis project. Is there a chance that you might have any upside to the mine life there or is that one vein and basically as stated right now? Thanks. And I have another follow up.

Let me answer that question. The feasibility study was based on the one vein. Obviously the district has great exploration potential and we hope to resume exploration and see what comes along.

Okay. And then so what is the profitability of San Luis right now after tax and at current metal prices?

Well, hi, Anupum. The project to $800 gold and $12.50 silver is an internal rate of return of 26.5%, or an NVP of $39 million. But if you have a look in the presentation if you plug in current metal prices you see that that changes dramatically to the positive side. That information's available on the presentation.

Okay. And is that a -- the NVP numbers you provide there, are those after-tax numbers?

That's correct, they're all after-tax numbers.

Okay, so if I -- I see here it's about -- if it's at spot you're about $109 million at 5% discount rate?

That's correct.

Okay. And are you guys going to be providing a -- is there a PEA or some other type of document that you'll have online pretty soon regarding San Luis?

Yes, we'll be filing a 43-101 report in due course.

Okay. Okay, great. Thanks, guys.

Okay.

Thank you.

Our next question comes from Andrew Kaip of BMO Capital Markets. Please go ahead.

Hi, guys, thanks again for this update. Mike, I've got some questions regarding Pirquitas and in particular the work you've been doing on the same concentrate. Can you give us an indication of -- I guess, first of all, you indicated that you're producing saleable or potentially saleable concentrates. I'm wondering where the silver distribution is breaking out with the production of the zinc concentrate? And then I'm also wondering when -- or based on the work that you've been done -- been doing so far, how do you see the ramp up in zinc concentrate production occurring through the remainder of this year? And are there any additional capital costs that are required to get to full-scale zinc production?

Thanks for that question, Andrew. George has been looking at this in depth and he can answer.

Sure. Hi, Andrew. First of all, the silver distribution -- the silver now, 90% of the silver made out of Pirquitas is reporting in as a silver concentrate. Depending on the actual metallurgical response of the ore feed it can be a lot higher than that, it can be up to 95%, and then on average about 10% goes into the zinc con. The ramp up of the zinc is now purely a function of head grade and silver zinc ratio in the ore feed. We started making zinc cons in the middle of April. We feel it's a little early yet to perhaps give guidance on what sort of production numbers there are, but the indications we have are that we can certainly take the average ore body zinc grade and make a saleable zinc concentrate at the existing facility for no capital investment. If we start to encounter higher-grade zinc values we may need a small amount of incremental flotation capacity, but essentially minimal capital investment required now for sustained continuous zinc concentrate production at Pirquitas.

Thanks, George. Does that answer your question, Andrew?

Yes, it does. So essentially what you're saying when -- where are the zinc grades currently? Are they below reserve grade and are you saying that once you get to a reserve grade that we should expect you to begin zinc concentrate production on a go-forward basis? And in the mine plan when do you see those zinc grades getting to reserve grade?

We're currently running around about 0.4% zinc, but there are -- the situation with Pirquitas we do encounter some high-grade zinc zones so we can get runs of up to a percent of zinc. I think it would be fair to say that by third quarter we're going to start to hit average life-of-mine ore bodies zinc grades in the mill feed.

Okay. No, that's great,thank you very much.

All right, thanks for your questions, Andrew. So next question, please.

Our next question comes from Haytham Hodaly of Salman Partners. Please go ahead.

Good morning, everybody.

Hi, Haytham.

George, just to follow up on that -- excuse me -- so you're saying with regards to zinc by Q3 of this year you will be up to life-of-mine expectations grades -- grade wise?

We should be seeing the Q3 -- by Q3 will be getting the life-of-mine head grade coming in. There's obviously a ramp up on the recovery angle as we're just starting to make this now and we need to refine that, so it may be a little long before we get to a life-of-mine production, right, but the head --

Sorry. And that life-of-mine zinc grade that's somewhere around 0.8 correct?

Yes, 0.7, I think.

Okay. So you think we'll at least see something around 0.7% by about Q3 of this year?

Yes.

Okay. And then based on that and based on what you're seeing right now, what would your -- for a full quarter what would your expectation in terms of production of zinc be?

It's too early for me to give you that, Haytham, because we're just starting the circuit and we really need to get a handle on recoveries and I wouldn't like to give any guidance right now.

Okay. Would you say that that zinc circuit, would that be classified as a separate circuit? I'm trying to figure out will it actually be -- will you actually not report it until you feel it's at commercial levels?

No, that's right. And that will be a little later in the year, but it'll be a discreet concentrate. It'll be -- it's labeled a zinc concentrate, it'll be sold as a zinc concentrate.

Okay. So if we see something between now and then it's basically just an added plus?

That's right.

Okay. And then maybe another question just with regards to your cost per ton. You did mention earlier, I think it was $1.86 per ton -- I'm sorry, $1.81 per ton?

Yes, that's right.

And was that number for the quarter or as that the number that you're seeing for right now?

That's the average for the quarter.

Okay, and that's it for Q1. And what are you actually seeing so far in April -- I'm sorry, in the second quarter, April, May?

In line with that and we're hoping we can maintain that cost profile now and we're doing a lot to try and even improve that. Get's a little more challenging to get a lot better than that as you get deeper in the pit, but $1.81 is a good number for an environment like this.

Right. No, that is a good number. What was your life-of-mine plan estimate at?

$2.00.

Yes, I though your (inaudible) was actually even higher, maybe $2.00, $2.50, something like that?

Yes, we were $2.10, I think, on ore and $2.00 on life and the blended number was around $2.05.

Okay, fair enough. And then how are your other cost tracking, your processing, G&A, that kind of thing?

Well, it -- the act -- the cost control at the mine is really -- is good and our total spend down there is bang on with our expectations and in line with our budget. On a unit cost basis -- on the unit base it's a little down because of those production issues we had in the first quarter, but we're through that now so we'd to see in coming the line on a unit cost basis, but on a total spend basis it's right where we wanted it.

Okay. So that $1.81 we talked about, that's per ton moved, is that correct?

That's right.

And what's your (inaudible) right now, George?

Currently we're into that push back, it's running about seven.

So this -- throughout the remainder of this year what would you expect it to average?

I think seven -- for the balance of this year seven to 7.5 is a good number.

Okay. And then next year what does it look like at that point?

It'll start to trim off a bit from that, maybe take one off that.

Okay, so somewhere around six to 6.5? Okay, fair enough. And then the last question I guess maybe on the financial side, do you still hold the shares that you received from Silver Corp as part of the Silvertip sale?

Yes, we do.

Okay. And where do those show up in your balance sheet?

Tom?

They're in the marketable securities line.

So under current assets then, is that correct?

Yes.

Okay, fair enough. Perfect. Thank you.

Thank you .

Our next question comes from [Jorge Beristain] of Deutsche Bank. Please go ahead.

Good morning, gentlemen, had two questions. One is on the cash cost guidance that you gave in the management discussion papers. You mentioned $16, I believe, at Pirquitas on an all-in cash cost and I think it said inclusive of tax, and I just wanted to understand a little bit the nomenclature there if we should interpret that as being a pre by-product of cash cost as we can kind of infer on the zinc items you've given roughly $2 of by-product credit for 2010 so I just wanted to understand if we should be shooting for a $14 net cash cost for 2010? That's my first question.

Tom, could you answer that, please?

The total guidance there that you referred to includes by-product credits and there is very little zinc and there is a little bit of tin.

Sorry, I meant the tin by-product credits this year. So the $16 you're saying is inclusive of bi-products at this point?

That's correct, and what it has in that number is the refining cost and relatives and export tax.

Yes, that was going to be my next question on the 10% contacts from Argentina, so that's in that number already?

It is.

And so just simple math, if we were to assume a $16 silver price for 2010 and a $16 all-in net cash cost that you're quoting your EBITDA would be $0 at the mine level and that's before SG&A and R&D?

That would be correct.

Okay. My other question is just following up just to clarify, that guidance, that was given for 2010 or 2011? And then also if you could just update us on the status of the Argentine concentrate tax, if that's going to be something that on a go-forward basis you take the charge for and basically it remains to be sorted out at a future date or if it's something that you're deferring taking the charge for and it remains to be sorted out at a future date?

Tom can answer the first part and George can answer the second part.

Yes, the accounting of it we've taken a conservative view and pretty much expensed and included in our cost. With respect to what we do going forward as to the tax itself, Joe can pick up on that?

On the tax side, some of the mines have worked through the courts on having a tax declared void. They have had success and we are looking to how we can follow on, so I would expect to hear something on our position in the next quarter.

Okay. And then, lastly, just to talk about on a gross level your cash flow outlook, you obviously have about $100 million in the bank right now but your cash burn rate on San Luis, which you quoted at about a $90 million CapEx plus some R&D and SG&A, basically if Pirquitas will not be contributing significant cash flow in the next one-or-two quarters until the zinc circuit kicks in I was just wondering if you would contemplate another equity offering? I understand that you still have some ability to issue shares based on your filings.

On the -- we do have room on our shelf to issue shares, however, we are expecting Pirquitas to start delivering in the third quarter.

So would you at this point be able to rule out the need for further equity issuance or do you think that will be just subject to the ramp at Pirquitas and/or the CapEx at San Luis? I'm trying to understand if you can do San Luis according to your internal projections without the need to further tap the capital markets?

I think the general answer here, we look at all forms of being able to finance San Luis and the other projects. Obviously we can't discount equity raising but there are a lot of other options that I think are more attractive to us.

Okay, thank you.

Our next question comes from [Kwan Lunz-Intaglo] from Scotia Capital -- pardon me if I mispronounced. Please go ahead.

Yes, sure, thank you. Just -- I'm on for Trevor Turnbull. A couple questions on the CapEx. What do you expect to spend for the rest of year on Pirquitas and Pitarrilla?

Hi, Kwan. The sustaining capital expenditure at Pirquitas for the rest of the year is probably a balance of about $5 million and we're just spending on the Pitarrilla feasibility study the circuit of about $9 million.

Okay. And San Luis, let's say after you meet with your -- with Endeavor, what will be the permitting time line and when do you think you'll be spending cash on that CapEx?

George, can you answer that?

Yes, the next step on the permitting is the filing of the environmental impact statement, which we're just getting that translated now and ready to go and indications from the regulators in country are that that's typically a nine-month process for that to be approved.

We also have to get some land access agreements in place for the communities and so by the time that's done and the environmental impact statements are filed and some decision processes that we have in the -- pursuant to the joint venture agreement, we will be looking at work in probably the first half of next year, but obviously we've got to refine that a bit more with time.

Are you guys still doing some drilling around San Luis?

No, we've completed the drilling and we're now going through this phase of presenting the study and getting ready for the next phase.

Okay. Thanks, guys.

Thanks, Kwan. .

Our next question comes from John Tumazos. Please go ahead.

Good morning. Could you take a guess as to what the range, high or low, might be for next year's capital spending and repeat this year's capital budget?

The obvious answer is no. I think we have some commitments. We're always going to fund exploration, we have the project pipeline to fund, we have the cash flow from Pirquitas and then our need to look for other financing alternatives. but at this time it's far too early to do that.

What is this year's budget?

In terms of CapEx it's fairly minor at Pirquitas, as George has mentioned. The spend on the projects is in the order of $30 million to $40 million depending on success of our exploration programs.

Thank you.

Thanks, John.

Our next question is a follow up from Andrew Kaip of BMO Capital Markets. Please go ahead.

Hi, guys. Just one follow-up question on our questions about Pirquitas and the zinc concentrate. Can you give us an indication of based on work to date what the concentrate grade is looking like and then also what the recoveries are?

George?

Yes, sure, Andrew. Again, as I've said, we've been into this for a month now. We've shown that even within that month we can hit a high 40% to 50% con grade -- 40% to 50% of zinc, which is what the feasibility estimates were.

Okay.

And we approach a 50% recovery, which is what the feasibility estimates were. So even after a month we're hitting some of those numbers quite quickly, so we're reasonably confident that we can bring in something around 50% zinc at 50% recovery.

Okay, thanks very much.

No problem.

Our next question comes from Chris Lichtenheldt of UBS. Please go ahead.

Good morning, everyone.

Good morning, Chris.

First, just wanted ask, in MD&A you said that there was also some of the challenges you've retested, done some more metallurgical testing on the sulfide ores. Can you describe a little bit of what you found in the new tests in terms of recoveries?

The biggest, I guess, issue we found was the sulfide and oxide together in transition created a challenge for us to separate the silver and the zinc apart and that's where we're doing a lot of the testing to not end up with a silver concentrate that's so high in zinc that we get penalized for the silver content and get no recognition for the zinc, or make a zinc concentrate that's so high in silver that we, again, get penalized for the silver. So all of that test work -- or the majority of that test work was about how do we get a separation between the silver and the zinc and we there made some great headway in achieving that.

Okay. And then does that help the actual recovery of silver?

It does.

Once you move to sulfide, do you have any sense of what that looks like?

Yes. Well, as we get further and further through transitional material we're getting more and more like the sulfide ore and you can tell recovery's starting to ramp up and we're pretty happy now. We're starting to get more regularly into the 60s and the 50s that we were in the past, which means we're heading towards where we need to get to with the sulfide. So it's quite happy seeing what we're seeing now with the more sulfidic transition and then going into sulfide a little later in the quarter.

Okay, just a couple more questions actually. The cash cost guidance we were talking about earlier, I might be mistaken, is it $14 all in or is it $16?

Tom?

We actually disclosed $14 all including the SS&R and royalty exploration taxes.

Okay, so it's $14. And then in the guidance of $14 cash cost all in and the seven million ounces, I don't know if you have this handy but can you tell us what assumptions were made on the production side in terms of throughput and grades and recoveries so we know where the bar is set relative to where you are now?

Well, the answer's seven million ounces and then working -- we don't have that with us, Chris.

Okay.

We'll have to go and dig that out.

But you're -- obviously you're expecting an improvement in recovery implied in that seven million, right? That's fair to say?

Yes. As we get back towards more sulfidic ore we are seeing more coming up. The plant is operating at its [name plate] capacity, right, the tonnage of 4,000 tons a day. But no, that number's not in front of us.

And off the top of your head no idea of grade there, as grade's moving around a bit as you move to sulfide it might be a little better than first quarter?

Definitely.

Yes. Okay, great. Can you remind us what the spend is at Pirquitas then? You said it was sort of on budget this quarter, what is that number?

That's right. We spend about $6 million a month all in for the property.

Okay, and that's all being expensed at this point, right?

Correct.

Okay. And then maybe just the last question for Tom, on the investing activities for the month, the cash used or -- PP&E Mineral Properties spent almost $20 million, can you just describe some of the big pieces of that, what the breakout was?

Well, the biggest piece was the paying down of Pirquitas construction bill.

Okay.

And then the other component was the $4.8 million, which was spent on our properties, the biggest piece being San Luis and Pitarrilla .

Right, okay. And then actually, sorry, maybe one last question. You spoke a couple times about potential for asset rationalization, you said your priorities are obviously Pirquitas, San Luis and Pitarrilla. Does that mean anything after that you'd consider divesting or do you have a priority list in terms of what maybe you look at developing after those three or selling? Do you have any more comments on the other projects?

I don't think at this stage. We're reviewing all of our options and the world's changing rapidly and some things are looking quite attractive and maybe some things not quite so attractive.

Okay. So it's just an ongoing work in process, there won't be a point where you say these are the assets you want to keep versus sell, you're just always looking at opportunities. Is that the --?

I think that's about the correct interpretation.

Okay. Okay, that's it for me. Thanks a lot.

Thanks, Chris.

(Operator Instructions). We have a follow up from Haytham Hodaly of Salman Partners. Please go ahead.

Good morning again, guys, just a follow up. That's seven million contained ounces, is that correct, George?

It's 7 million ounces produced.

So is that payable then? No, that's produced. So that's contained in concentrate?

Yes.

Okay.

Sorry, it's contained in concentrate.

Okay. And then with regards to management, what's happening on the search for a replacement for Bob?

I think maybe probably the search is going well, but it's one of these things where you don't put a timeline out. When we've got the right guy and the board's happy there'll be an announcement.

Okay. I'm assuming that you're looking for somebody who's had more operating experience, is that fair to say?

We've looked at a bunch of great candidates, we've done an international search, and when we've finally made up our minds an announcement will come out.

Okay, fair enough. Thank you.

All right.

I'm showing no further questions at this time.

All right. Well, thank you very much and look forward to the next call.

Ladies and gentlemen, that does conclude today's conference. You may all disconnect and have a wonderful day.