SSR Mining Inc (SSRM) 2013 Q3 法說會逐字稿

Good day, everyone, and welcome to Silver Standard's third-quarter 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 John Smith, President and CEO.

Thank you, Kate. Good morning, ladies and gentlemen. Welcome to Silver Standard's third-quarter 2013 conference call during which we will provide a view of our financial performance and give an update on our business.

Joining me on the call this morning is Greg Martin, our CFO; Alan Pangbourne, Senior Vice President, Projects; Carl Edmunds, our Chief Geologist; and Andrew Sharp, Vice President of our Technical Services, who has spent six months spearheading the change program at Pirquitas. Also present is John DeCooman, Vice President, Business Development and Strategy.

Our financial statements and management's discussion and analysis have been filed on SEDAR and Edgar and are also available on our website. To accompany our comments today there is also an online webcast and you will find the information on this and our news release relating to this call.

Now, we will be making forward-looking statements today and I refer you to the disclosure accompanying our slides, news release, and also on SEDAR and Edgar.

As a precious metals miner it is critical to drive cost reduction at this point in the cycle, but alone that is not enough. We still have to position for the future. At Silver Standard, our strong asset base and cash position uniquely allow us to do this.

Once again we have used our property portfolio to deliver value with the sale of our Mexican property, San Agustin, for approximately $75 million in cash and shares and we also have a 2% NSR on future sulphide production.

Since I joined Silver Standard in 2010 we have not diluted our shareholders by issuing equity. This is important. We have used our property portfolio appropriately to deliver value through the sale of Snowfield, Brucejack, Bowdens, and now San Agustin.

Sales of this kind underline the real value in Silver Standard beyond our producing and planned mines, which I believe is not fully reflected in our share price.

Andrew, working with our team at Pirquitas, has done an excellent job in putting in a new operating model which is clearly delivering cost savings now three quarters in a row and against the headwinds of inflation in Argentina, which is even more commendable. We will keep this going.

The challenge given to the Pirquitas team is to be cash flowing, taking into account both mine OpEx and CapEx, at an $18 silver price. The process is in place and there are actions through into next year driving to this target.

We again produced 2 million ounces of silver this quarter. However, we have made a decision not to produce low margin ounces, even if that impacts near-term production results. It is the only way of maintaining the focus on proper decision making at the mine.

Now this is a year of significant investment at Pirquitas with the transitioning of the San Miguel pits and the raising of the tailings dam, both necessary in scope and in timing.

Cash management is critical for Pirquitas. The in-country cash must be managed to allow the team to succeed in restructuring the business. We are also in discussions with the Argentine government regarding the VAT repayments, which would clearly improve liquidity.

The impact of this on our full-year guidance is as follows. Silver production through the fourth quarter is re-forecast to be similar to the third quarter at 2 million ounces. Ore mined through the quarter will continue to be of a transitionary nature and high in zinc, which impacts silver recovery.

Zinc production during the fourth quarter, however, is anticipated to be higher than expected and similar to our third-quarter levels at approximately 8 million pounds leading to the overall value of metals produced to be largely unchanged from expectations.

Based on the strong cost performance through the first nine months in 2013 and continued cost improvements at Pirquitas, we expect annual cash costs to be at the lower end of our already reduced guidance. Capital expenditures at the Pirquitas mine in the fourth quarter are expected to total approximately $7 million as the Phase 4 tailings lift and our ore mining fleet replacement projects are largely completed.

Deferred stripping expenditures in the fourth quarter are anticipated to be $3 million as the strip ratio continues to reduce while the Phase 2 progresses. Annual exploration and development expenditure guidance remains unchanged.

Now moving to our development activities, in Mexico our Pitarrilla project team continues to deliver against the four objectives set for this year -- land, permitting, engineering, and financing. The changes to the Mexican tax and royalty regime announced by the federal government significantly impact the commerciality of all mining in Mexico, which has evoked a sector-wide response. We are evaluating the impact on Pitarrilla and our options to mitigate it.

This will delay our construction decision into 2014. This is necessary and prudent given the significance of the (inaudible) and we will provide further guidance when we complete our evaluation of the situation.

Now let me hand over to my colleagues to provide more detail. Firstly, on Pirquitas, Andrew?

Thank you, John. Our management team at Pirquitas continues to focus on operational excellence, a task made more challenging this year with the variability of material coming from the mining transition. As part of restructuring Pirquitas for the future, management is systematically working through all processes from mining to concentrate and streamlining the management operating systems.

Irrespective of these activities, we still produced 2 million ounces of silver, in line with our plan for this quarter, and also 5% higher than Q2 production. Mine operations moved 4.5 million tonnes of material; the same amount compared to the second quarter. New ore mining fleet arrived during the quarter to replace the mining contractor as part of our operating cost reduction plan.

As Phase 2 progresses strip ratios are decreasing, reduced by half in Q3 from Q2. Improved process control and mechanical availability in Q3 have resulted in the increase in milling rates by 8% compared to Q2. The pressure jigs continued to perform at record levels and helped maintain the ore grade in the mill at 215 grams per tonne silver compared to 216 grams per tonne silver in the second quarter.

Silver recovery of 74.6% in the third quarter was the same as the recovery in the second quarter, despite the plant handling a large additional amount of zinc.

Zinc head grades were 25% higher than Q2 and exceeded our expectations for the quarter. Zinc produced in zinc concentrate was 40% higher than Q2 results. Both zinc concentrate grade and recovery are at record levels for the Pirquitas plant.

The cost production plan at Pirquitas commenced in early 2013 aiming for the mine to be cash flowing after operating and capital expenditures at an $18 per ounce silver price. The activities have focused on reducing contractor involvement, reskilling our workforce, redesigning (inaudible) and processing for optimal effectiveness, and necessarily reducing people at the site.

These activities have been done in consultation with communities, government, and the union. This process will continue into the early part of 2014. All-in-all Q3 has been a solid production quarter. We have had positive operational performance, particularly considering the mine transition, the cost repositioning, and the current challenges of operating in Argentina.

Alan will now provide an update on our Pitarrilla and San Luis projects.

Thank you, Andrew. As John mentioned, with the substantial Mexican tax and royalty increases recently passed into law, we have to evaluate what this means for our Pitarrilla project. We will examine opportunities to reengineer the project, but necessarily it will take time to come to the right answer.

Notwithstanding this uncontrollable event, we have made significant progress advancing the Pitarrilla project. In the third quarter we focused on the key elements that required more definition prior to a construction decision.

We have received access to the remaining critical parcel of land. Although still subject to legal process, this removes a significant barrier and now allows us to control the site construction once we receive an approved EIA.

The environmental permitting process is underway and in the third quarter we received, as expected, a request for clarification and additional information from the authorities, which was answered within the stipulated time frame in late October. The EIA and these responses continue to be reviewed by the Mexican authorities and we expect to obtain an approved EIA by the end of the year.

The change of land usage documentation has also been completed and can be submitted when required.

Additionally, the pilot plant testing was completed in the third quarter. At site, work continued on the upgrade of the access road.

The definition of water and power supplies. Water exploration activities continue to focus on confirming and expanding our understanding of the underground aquifer. Power supply, voltage, and the connection point to the national grid have also now been defined.

With respect to financing, Phase 1 of the joint venture partner process concluded on the 29th of October and we will now work with counterparties through the impact of the tax changes and the project review process.

As can be seen, over the last three quarters we advanced Pitarrilla as planned and have secured key surface rights, advanced the necessary permits, and await the final ruling on the EIA by year end; completed the 10-tonne pilot plant; and defined the required voltage and power supply route. In the fourth quarter we will reassess both timing and activities in light of the significant costs and economic impact of the new royalty and increased taxes.

We have rescheduled project hiring and suspended the EPC and bidding process until we have a clear path forward. We expect to report back on this work next year.

Now moving to our San Luis project in Peru. During the third quarter negotiations continued with the Ecash community and we have presented our proposal of several community meetings with the support of the Peruvian Ministry of Energy and Mines. The process continues to move forward in Ecash with the establishment of a roundtable and we continue to engage with the community, keeping them informed on the project.

We are also actively working in the Cochabamba community and progressing permit applications to allow exploration activity on their land focusing on the Bonita Zone.

I will now hand over to Carl who will take you through our exploration activities in the third quarter.

Thank you, Alan. Continuing with the update on our San Luis property, during the third quarter we completed plans for a 2014 drilling campaign at the Bonita Zone where previous surface sampling had defined an epithermal gold, silver exploration target present in auriferous vein structures over a 700 by 440 meter area. Previous work along a north/northwest trending ridge defined three similarly trending veins containing base and precious metal grades in hand collected channel samples assaying up to 87 grams per tonne gold, 264 grams per tonne silver, with base metals credits.

The Bonita Zone is located approximately 6 kilometers south/southwest from the Ayelen deposit, wholly on Cochabamba community land where we have exploration and development agreements. We have initiated the environmental work in preparation of the drill permit application. We anticipate submitting the Bonita Zone application to the regulatory authorities in the fourth quarter and then commencing the same process for a separate target called San Simone.

Previous work at San Simone has defined north/northwest trending epithermal veins containing precious and base metal grades in hand samples that assayed up to 4.5 grams per tonne gold, 193 grams per tonne silver, also with base metal credits. San Simone narrow vein structures are present over a 400 by 600 meter area located 2.5 kilometers south on trend from the Ayelen Vein, again wholly located on Cochabamba community land.

At the San Luis del Cordero property in central Durango State, Mexico, we have an option agreement to acquire a 51% interest in the property. In October we secured the work permit for the project. The exploration program calls for diamond drilling a minimum of 4,000 meters on silver, copper, zinc vein and [scarring] type targets before the year-end. And as of last week we started drilling with two drill rigs.

Now over to Greg for a discussion of the Company's financial results.

Thanks, Carl. The precious metals sector was dominated by the macroeconomic backdrop of the US through the third quarter. Expectations of a reduction to quantitative easing drove metal prices lower early in the quarter, only to see silver prices stage a rebound when it became clear those expectations were unfounded.

Prices then eased through September and into October as the shutdown of the US government and concerns around technical debt default drove general risk aversion in the market. Against this pricing context the achievements of the Pirquitas mine and operating cost reductions were highly important as the mine produced and sold 2 million ounces of silver at cash costs of $13.32 per payable ounce sold.

However, this reduction in silver prices and, hence, cast generation of the mine has coincided with the highest year of sustaining capital investment at the mine as we replaced the ore mining contractor with an owned fleet, completed the bulk of the work on the Stage 4 tailings lift, and transitioned through high stripping on the San Miguel pit. These investments position Pirquitas to generate free cash flow going forward, but have certainly impacted our results through this year.

Revenues for the third quarter totaled $43.9 million. This represents an increase of 35% over the second quarter of 2013 as lower sales volumes and silver prices were more than offset by 123% higher zinc sales of 5 million pounds and a positive revaluation impact of approximately $5 million as silver prices recovered from their low point that had coincided with the second-quarter close.

Revenues declined by 40% against the comparative period of 2012 due to lower sales volumes and silver prices. Realized silver prices averaged $21.38 per ounce this quarter versus $22.47 per ounce in the second quarter of 2013 and $29.37 per ounce during the comparative period.

With sales matching production, finished concentrate inventory at the end of the quarter totaled 1.9 million ounces of silver and 10.3 million pounds of zinc, with a book value of $24.6 million. Probably the clearest metric of the cost reduction success is shown by the cost per ounce of our finished goods inventory, which declined by over $1.50 per contained ounce between December 2012 and the end of this quarter. That lower-cost inventory will flow through the income statement in the coming periods.

Income from mine operations totaled $5.7 million as the mine returned to profitability after the loss experienced in the second quarter. Income from mine operations declined from $19.4 million in the comparative quarter, principally due to a decline in silver prices and lower sales volumes, partially offset by lower costs of inventory sold.

Exploration and evaluation costs continued significantly below the comparative periods. I will point out that this quarter's G&A expense included approximately $2.5 million in one-off restructuring charges related to the 25% reduction in head office staff. Our go-forward rate for G&A expense has declined commensurately with these reductions.

Net loss for the third quarter totaled $14.3 million or $0.18 per share. Approximately half of the loss related to foreign exchange of $7.9 million, a portion of which are non-cash. They continued at an elevated rate due to the higher VAT receivable levels and the accelerated rate of Argentine peso depreciation.

Cash costs for the quarter totaled $13.32 per payable ounce sold as the benefits of the cost reduction program continued to show positive impacts on the mine operating cost structure. Cash costs were similar to the second quarter, but 24% lower than the comparative period. As John referenced earlier, based on continued strong cost performance we expect to achieve the lower end of the range of our annual cash cost guidance.

Before changes in non-cash working capital we generated operating cash flow of $4.1 million. Non-cash working capital increased by $8.8 million, primarily due to timing of receipts from customers as sales receivables increased by $12 million from the second quarter. Through October we have seen significant collections on those outstanding sales.

Investments at Pirquitas totaled $16.6 million in the quarter for stripping and capital activities. Extraneous factors also impacted cash flow as VAT recovery was delayed through the quarter. The team in Argentina is engaged in discussion with the tax authorities to get these funds moving.

These effects, combined with our investments to advance our property portfolio, resulted in a decline in cash of $34.4 million. As I mentioned earlier, we recognized that this would be a challenging year for free cash flow due to the high investment levels and the drop in silver prices has certainly added to that impact. But by the end of the year we will be coming out of the other end of the Pirquitas investment cycle with a balance sheet that remains exceptionally strong.

Our cash position at the end of the quarter remained over $400 million, giving us great capacity as we drive forward, and the San Agustin transaction bolsters this position. As working capital is released it will positively impact our overall cash position.

So the pieces are coming into place at Pirquitas. The plant has been operating effectively, the cost restructuring is yielding results, and the capital intensity is declining. We have rationalized our head office and will continue to drive down costs so our capital is used to develop our portfolio and build the operating base of the Company.

With those comments I will turn it back to John for closing remarks.

Thanks, Greg. Ladies and gentlemen, here at Silver Standard we continue to manage and build our company for the future. We manage the duality of cutting costs and growing our business through clear delineation of objectives, and both of these can be seen in our results and our business outlook.

We have the team that can deliver with a wealth of right experience and capability. Our focus for 2013 remains on driving cost reduction programs, maintaining our strong balance sheet to enable growth, continuing to deliver predictable performance at Pirquitas, enabling the Pitarrilla project, and creating value from our exploration and asset portfolio.

With 30 years in this business I've seen all parts of the cycle. A lot of that time was spent in low-price environments. We know what we have to do.

Cash management first is critical. Our cash is for growth investment, not operating uses, and that is why we are taking the position on Pirquitas that we have laid out.

Equally, you have to invest at the right points in the cycle. Our investment in Pirquitas this year is because of mining sequence with a clear view to future value. That being said, the mine has to live within its means and in the current environment production will be secondary to margin.

I believe we have proven to be good stewards of our assets and we will continue to be so. We know it is cost management and the deployment of cash appropriately for growth that matters. This is our focus and we are uniquely positioned in our industry, which we will exploit for our shareholders.

So with that let me pass on to take any questions that you may have.

(Operator Instructions) Adam Graf, Cowen and Company.

Great. Thanks, guys. Congratulations on the quarter.

Just a quick question maybe for Johnny regarding the buildup in zinc inventory that you guys seem to be -- seems to have happened since fourth quarter of 2012. What is sort of the cause and the plan going forward there?

Thanks, Adam. It is good to get the question, appreciate it. The work that Andrew and the team have been doing down there has been, I think, more successful than we anticipated which has led to slightly greater levels of output on the zinc con side. We have gone ahead and made some choices around looking to place that into the market and don't foresee an inability to start bleeding that down on a quicker rate than we have seen it build up.

Johnny, maybe you can give us some idea of the timing of that as you see it?

Yes, I would like to start seeing it hit in the fourth quarter for sure.

And maybe when do you think you will catch up -- first quarter 2014? What is your guess there?

Yes, I think it is possible in the new year, but let us get through some of our current budgeting. But we will bring it down as our aim is to bring it more in line with production for sure.

And you are seeing the market is strong, Johnny?

Yes, and the market is strong, Adam, so I don't think it is an issue of whether or not we can get it off or not. We just have to do it in a reasonably timely manner and we will get there for sure.

But you should start seeing some impacts within the fourth quarter. It should be positive.

Great, thank you.

(Operator Instructions) Chris Lichtenheldt, Dundee Capital Markets.

Morning, everyone. Just wanted to -- can you provide a little bit of commentary around the sales process at San Agustin? Is this sort of opportunistic [part] thinking [to you], or was this a bit of a competitive process? Or how does that work if you can comment a bit?

Chris, it has always been a competitive process for us. We did an evaluation, like we have done in all our properties, and we understand which ones are for us to keep and which ones are better by others.

Just have to look at the location of El Castillo and you can see that there is a natural owner of this one. We have had a competitive process for awhile. We have been in discussions with Argonaut through that, and it is just timing and conclusion that brought it to deal finish this time. So it would be a good result for them, but it is a great result for us.

Okay. Can you remind us just what the carrying value of that asset was?

Look, it is small. $3 million? $3 million, right.

And so are there other assets that are tagged for sale, or do you just continue to evaluate all of them? How do you think about that?

The way that we think about it, and if you look at the sequence of asset sales we had is, like any other miner, everything is for sale at the right price. There is ones that we want to keep and build and there is ones that are more suitable to go outside.

We don't put our for-sale sign up and have a continuing process. We look at opportunistically when is it the right time, who is the natural buyer, and can we conclude that for the value of our shareholders. So we don't have, if you like, a formal process as such, but we are always active and engaged around opportunity that is right.

Okay. Then just lastly, obviously with the cash balance strong and continuing to accumulate with this sale, coupled with I guess a temporary postponement of spend at Pitarrilla, anything else you have in mind for the cash? Or are you are happy just to sit and wait and see how the Mexico royalty and Pitarrilla shapes up?

The one thing that we have got is huge opportunities. We have projects in five different countries, so we have got opportunities within our portfolio ourselves. But also at this time in the market there is a lot of distress and a lot of things changing, so we have been maintaining an opportunistic position to acquisition as well as growth.

So we are kind of fairly dynamic on that, Chris, and we will stay that way to make sure that we are positioned for the right way of investing that -- deploying that capital for our future growth.

Okay, that is helpful. Thanks a lot.

[Jeff Wright], H.C. Wainwright.

Good morning. Thanks for taking my questions. A couple questions first on Pirquitas.

We have talked previously about the impact of the zinc on the silver recoveries. Didn't really see that show up in Q3. Do you think that balancing act will continue into Q4 with 74% or 75% recoveries on the silver side or --?

Thanks, David. I will pass on to Andrew. He is best place to answer that one for you.

So we still see that zinc grades are going to be high for the next three quarters and that is putting challenge on us to produce silver recoveries in that same range. So it is a daily fight for us out there to maintain that particular level.

So at the moment we are predicting recoveries in similar ranges. We will continue forward with that. As zinc grade comes down in late 2014 we will see some other change.

Okay. So we should look at the zinc grade in that 1.8%, 1.9% range, at least through Q2 2014 is what you are telling me?

Yes, similar ranges that you have seen in Q3 will be Q4, Q1, Q2.

Okay, thanks. That is very helpful. Then I guess a question for Johnny DeCooman. On the increased production on the zinc, it is good insight that you are getting -- providing color on the zinc market. Have you contemplated any zinc hedges, given the robust zinc production that really wasn't there last year?

Thanks, Jeff. Good to talk with you. I haven't but maybe, Greg, you can just confirm that.

Yes, Jeff, that is not part of our strategy at this point.

Okay. So you think the market on zinc should hold up with the extra zinc and shouldn't necessitate a hedge I guess; another way to look at it?

Yes, we don't think that it does and we think that we will be get it away in due course with good value.

Okay, that is good to know. Then I guess a couple other just housekeeping questions.

Looking at the -- it looks like there is a $2.5 million charge you mentioned on the G&A side that wasn't really anticipated. If I am looking at Q4 and kind of going forward, I don't see any other large one-time charges. Is there any additional things that should come up that I should anticipate or --?

Let me pass to Greg on this one.

Just two comments, Jeff. I guess we did actually guide in the second quarter on that restructuring charge, so if you look back at our outlook that number was in there. So it should not have been unexpected; it should have been expected.

Secondly, we are through the restructuring in the head office so we don't see any continued impacts as we move forward.

Great. I think that was it for all my questions. Thanks.

Jorge Beristain, Deutsche Bank.

Good morning, John and everybody, and congratulations on that asset sale. It was nice to see.

In terms of the updated timeline because of the Mexican tax changes, I'm not sure if I heard it correctly, but I thought you said it would impact. But could you just reiterate how many months or quarters you see a decision being pushed back now before you submit it to the Board for construction approval because of this Mexican tax change? That is my first question.

Morning, Jorge. For us we have got to go through an evaluation process. So we have understood the headline tax and royalty changes.

We are going to actually walk it through the model in this; there are nuances of how the regulation gets applied. And it is not just a mining related. It is general tax stuff that the guys have to work through.

Then we have got to look at really on the basis of that coming what does it do? Can we reshape our capital investment profile? Can we do things differently? That, in my view, is going to take us months, not weeks to do, so I think we are well into next year to get that.

It is hard to actually give you an actual date that we will complete that because I think that what we see is depending on what the results are it will then define what work has to be done. So I think that is kind of how we see it unfolding.

Okay. So it is an issue of months, but not quarters?

Yes, yes. (multiple speakers)

My second question was just if you could give us like a rough ballpark -- I mean we have already heard from other companies that have projects in Mexico. But, order of magnitude, what do you think this tax change shaves off of the net present value of the project?

So in other words, how much would you have to lower the CapEx and/or OpEx by to offset the tax changes? Is this sort of like a $50 million NPV hit to the economics of the project or could you give us an order of magnitude?

I will get Greg to give you a comment on that one.

Jorge, we are not in a position to give you any specific guidance around the impacts on the tax. Clearly, it has been pretty well publicized what the components of that tax change are, and they do impact a number of aspects through some depreciation rates into some income tax rates and also through our royalty piece.

So I think you have seen others guide and we have put out some public commentary that shows it takes an all-in tax rate up into the 50% range. We have to go through a process to look at how we can mitigate any of that, but that is the kind of range on effective tax rates that these things impose in a generic sense. But we haven't completed the specific analysis on this project.

Okay. Where would you say your all-in effective tax rate was before the tax code change?

On an unlevered basis it was in that 30% range.

So not insubstantial, Jorge, across the business.

So just so I understand this correctly; you are saying that the cumulative of all of the -- not only the EBITDA tax but then the special precious metals royalty surcharge and all the other changes, the lack of deductions and things like this, is roughly a 20 percentage point increase in the tax rate?

I think that is what you have seen most in the commentary in the industry if you refer to what the Chamber of Mines has put out. There is a number of public documents that have been put out by the Chamber of Mines and they sum the effective tax rate into that high 40%s, low 50% range. It obviously is impacted a bit by what your EBITDA percentage is, but that is the kind of rates the industry has been announcing they believe the impacts to be.

Okay. Sorry, I don't want to monopolize this, but just quickly in terms of the partners, did I care correctly that you are now going to be consulting with potential partners about the tax change? Does that imply that you already have kind of a short list of potential JV partners to bring in, or did I mishear that comment?

No, we have a two-stage process for partner selection. We are through Phase 1 so we have got counterparties and we are talking to them about this.

Clearly, before we had the Mexican tax and royalty issue we were on a plan and a program. We had full disclosure on that with potential partners. This changes it because we need to look at what is the best way forward, and we will be in consultation with them as to best way and timing.

Okay. Thank you, thank you very much.

(Operator Instructions) Garrett Goggin, Gold Stock Analyst.

Quick question regarding -- so now that Pitarrilla has been delayed slightly and you are sitting on $475 million of cash, would you ever look at purchasing a smaller CapEx advanced-stage project or even a producing asset?

Absolutely. I mean the issue is opportunity, right price, and right place. And so part of our program is clearly about developing our organic growth pipeline, but we also stay very active in terms of acquisition opportunities, both ones that are near and ones that are earlier stage. So that is clearly part of our ways that we look to deploy our cash best for our shareholders.

Okay, that is good. Thank you.

Edward Okine, Basso Capital.

I was just wondering, I mean, if you can take us through the economics and underlying valuation for this asset sale, especially the commodity prices embedded in it.

Okay, I will pass you over to Johnny on that one.

Edward, in general, it has got about a 2.1 million ounce oxide and sulphide resource, and if you look at it on an M&I basis it comes in between the mid to upper 40s in terms of a measured and indicated basis. That is what we tend to use and I think the industry tends to use.

I can't speak for the guys at Argonaut in terms of how they might have priced that valuation up, but we tend to price earlier stage assets of that nature on a dollars per ounce basis.

So I mean, are you saying that you price offset a portion at what rate? And then maybe the [I&I] is at what rate? I'm just trying to see if I can --.

If you take the measured and indicated resource that is available, both through our website and their news release, and you take the cash and share consideration into account that totals approximately $47 per ounce of measured and indicated gold resource.

Okay, all right. I got you, thank you.

Brian Yu, Citi.

This is Dan sitting in for Brian. I just had a quick one on Pirquitas. In terms of production for next year is it fair to assume that production kind of stays around that 2 million ounces a quarter rate given the higher zinc rates that are through the first two quarters then kind of stepping up in the third and fourth quarter as you move past some of that transitory ore?

Dan, John here. No, we haven't started -- we have started our 2014 budget process and part of that is going through our life of mine, our next sequence for 2014. We are not there in terms of what we look to to 2014. But the good news is clearly as we progress through the year we are down now into the sulphide ore, the better ore and we are getting through that stripping program.

So it does position us better going forward all years, but as for 2014 we aren't there yet in terms of a fully developed plan to lock in. We finished that in December of this year.

All right, thanks.

There are no further questions at this time. I would like to turn the call back to Mr. Smith.

Thanks very much, Kate. Look, ladies and gentlemen, thank you for participating and we look forward to keeping you updated. Have a good day.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a good day.