SSR Mining Inc (SSRM) 2013 Q4 法說會逐字稿

Good morning, everyone, and welcome to Silver Standard's fourth 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. Please go ahead, sir.

Thank you, Danielle. Good morning, ladies and gentlemen, and welcome to Silver Standard's fourth quarter 2013 conference call, during which we will provide a review of our financial performance and give an update on our business, both relating to the quarter and the full year. Joining me on the call this morning are Greg Martin, our CFO; Alan Pangbourne, Senior Vice President, Projects; John DeCooman, Vice President, Business Development and Strategy; Andrew Sharp, Vice President of Technical Services; and Carl Edmunds, our Chief Geologist. Also present is Kelly Stark-Anderson, our Vice President of Legal and Corporate Secretary.

Our financial statements and management's discussion and analysis are have been filed on SEDAR and EDGAR and are also available on our website. To accompany our call, there is an online webcast and you will find the information to access the webcast in our news release relating to this conference call. Now, we will be making forward-looking statements today so please read our disclosure in the relevant documents.

2013 was challenging for investors in our sector and specifically shareholders in Silver Standard. I want to thank those that have stood by us and assure them as a management team we remain focused on growing value. It's about doing what is right. Notwithstanding the business environment, I am proud of what we have achieved from the restructuring work at Pirquitas, also maintaining a strong balance sheet in difficult times, and our positioning for growth.

This work provided a strong platform for Silver Standard coming into 2014, supporting our recently announced $275 million acquisition of the Marigold Mine in Nevada from Goldcorp and Barrick. As a management team, we have demonstrated capability commercially with the excellent term secured on our $265 million convertible debt raising, our work with our customers on sales contracts, and the monetization of the non-core properties San Agustin and Challacollo.

Technically, the work on operational excellence at Pirquitas to reposition the cost structure and the project activity at Pitarrilla were also major achievements. In 2013, we also added to our capability, which provides us with a deep skill set across all areas of our business. This prepared a solid foundation for us to drive forward into the market with the purchase of Marigold, a truly transformational acquisition. With Marigold, we also now joining us have an experienced team in Nevada which will only improve our performance and positioning for the future.

At Pirquitas the operational excellence activity aimed at positioning the mine sustainably throughout the resource cycle has continued with real and visible results. This was done in a year where we were also deepening the pit, which added to cost and complexity. Nevertheless, 8.2 million ounces of silver were delivered at cash costs of $12.87 per ounce compared to $16.88 per ounce a year ago.

For zinc production, 2013 was a record year, beating our guidance. The challenge now at Pirquitas is to continue with restructuring and building out our business for the future. We've been in Argentina for two decades, and whilst there are challenges, we have delivered with a very experienced in-country team. In recent weeks, we've seen significant devaluation in the peso. While this will translate positively into our US dollar-reported cash costs, we also expect to see inflationary set up appear throughout 2014 in part response. Net-net it should be positive for our cost structure, but inflation needs to be positively dealt with by the government moving forward.

Our cost guidance for 2014 for Pirquitas reflects continuing focus on costs. Production of silver and zinc is strong and during the second half of the year the mine will have more ore exposed, allowing us to blend to a more optimal feed mix for processing.

Now, moving to our development activities in Mexico, our Pitarrilla project, like all mining in Mexico, was negatively impacted by the tax and royalty changes. We had set four objectives for 2013: land access, permitting, engineering, and financing. And although these objectives were being progressed, as a disciplined investor we decided to look at alternatives for a lower capital startup for the project. This work is continuing, which will enable us to form a view of the best way forward with Pitarrilla this year.

At San Luis during the fourth quarter, we proceeded to permit the 2014 drill program for the Bonita Zone, and we'll start drilling as soon as the rainy season is over. Now let me hand over to my colleagues to provide more detail on our performance. And at the end of the call we'll also address the purchase of Marigold. But firstly I will pass to Andrew, who will cover Pirquitas.

Thank you, John. The operational excellence program at Pirquitas, conceived in late 2012 and implemented throughout 2013, has shown improving results through the year, and Q4 solidly delivered more. The Pirquitas management team is focused and keen to maintain their advantage and go further in 2014. During the past year, mine operations completed the replacement of the mining contractor equipment. This is an example of careful use of capital funds delivering operational benefits, and in this case, with an expected payback of approximately 8 months.

We are also realizing other benefits as Phase 2 progresses. Strip ratios are expected to decrease in time, and in Q4 was no exception, with a 10% reduction compared to Q3. In Q4, the mine operations team moved 4.3 million tonnes of material, 4% less than the third quarter. This variation was largely driven from a chassis overhaul for one of the mine loaders. The replacement of the contractor fleet will deliver further cost savings in 2014. As Phase II progresses and the strip ratio continues to decrease, some of the mine fleet will become available for capital works. In particular, tailings dam construction will no longer require a mining contractor for earthmoving, and further capital cost savings will result.

In the plant, process control and mechanical availability continue to improve, and in Q4 have resulted in the increase in milling rates by 7% compared to Q3. Ore was milled at an average rate of 4567 tonnes per day during the quarter, 14.2% above the mill's nominal design. The fourth quarter mill processing rate demonstrates the return to average annual mill rates comparable to 2012, the best the plant has ever achieved, whilst also delivering record quantities of concentrate. One of the great achievements for the plant in 2013 was the revitalization of the pressure jigs circuit, and in Q4 the pressure jigs again continued to perform at record levels.

This excellent performance, combined with additional ore sourced from the pit, allowed delivery of a 228 gram per tonne silver head grade to the mills in Q4 compared to 215 grams per tonne in Q3. Silver recovery was slightly lower at 73.9% in Q4 from 74.6% in Q3 as the plant processed a record amount of zinc. Zinc head grades were 11% higher than Q3, and exceeded our expectations for the quarter. The high head grade, combined with excellent recovery, delivered zinc production 32% higher than Q3 results and kept up a tremendous zinc story, for Pirquitas for the year.

The cost-reduction plan at Pirquitas commenced in early 2013 with the immediate goal to reposition the mine from the upper end of the primary silver mine cost curve to a stronger competitive position. Our team achieved that goal with a 24% reduction in year-on-year cash costs, culminating with Q4 cash costs below $12 per payable ounce. 2013 actions focused on reducing contractor involvement, reskilling our workforce, redesigning mining and processing for optimal effectiveness, and necessarily reducing people at site. These activities have been done in consultation with communities, government, and the union. By the close of 2013, the plan for a 25% manning reduction is on schedule and 92% complete, which is a testament to the Pirquitas management team and the broader community they work with.

Q4 was a quarter of strong performance at Pirquitas. We delivered metal and the results of a well-considered and executed cost-reduction plan while steering through the current challenges of operating in Argentina. We look forward to advancing the operational excellence at Pirquitas in 2014. Alan will now provide an update on our Pitarrilla project.

Thank you, Andrew. As John mentioned, the impact of the new tax regime in Mexico and the lower silver prices have caused us to reassess how we may develop the Pitarrilla project. At the beginning of the year, we've had four key goals and we advanced all of them, some to completion. As reported previously, we will seek access to the remaining critical parts that are left. Pilot plant work was completed. Power supply root voltage was defined. However, as a result of the new taxes and lower silver prices in the second half of 2013, we decided to delay further engineering and site works.

The joint venture process was also suspended whilst we review internal development options. During 2013, we developed and presented environmental permit application. Additionally, we answered requests for further information. We had expected to receive conditional approval in late 2013. However, in February this year, we received notification that our permit had not been approved; a disappointing outcome. The principal reason is not having sufficient order rights to support project size of the larger field.

During the fourth quarter, we commenced a revision of various options for the project that could lead to a lower capital starter project with a meaningful production level without compromising the future option of the larger pit project. The initial focus of this work is on a 3000 to 4000 tonne a day underground operation targeting the higher grade, deeper sulfides at or below the bottom of the open pit project. We expect to have the results of this work by the end of Q2 this year. If there is an option that meets our requirements, we will then define the scope and schedule of work required prior to a construction decision related to the smaller project.

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

Thank you, Alan. Amidst the tight market conditions of 2013, exploration activities were reduced, focusing on cost reductions and project rationalization. Core and non-core projects have been identified and we have acted to move the latter out of the portfolio. Our sale of the San Agustin and Challacollo projects in the fourth quarter are examples of this. In 2014, exploration will continue its focus on optimizing value through careful choice of advancing our own properties and replacing those that no longer fit through acquisitions. As always in our industry, we will be opportunistic regarding the potential sales of non-core projects and our drilling efforts will be directed towards bolstering resources near our centers of operation.

At our San Luis property, we received the approved work permit application for a 2014 drilling campaign at the Bonita Zone from the Ministry of Energy and Mines in Peru. A permit to take water is now in progress with municipal authorities, and we anticipate being able to begin work once the rainy season ends. The Bonita Zone is a low-sulfidation precious metal epithermal exploration target defined by mineralized vein structures over a 700 meter by 440 meter area that is located on Cochabamba community land where we have exploration and development agreements.

The objectives of the 2014 work program will be to define sufficient resources to provide a startup alternative to the development of the Ayelen vein system. The first phase of drilling calls for approximately 5000 meters to be drilled in 40 holes. The San Simon zone, located on trend to the south of the Ayelen vein, received further detailed sampling and mapping work in the fourth quarter. The result of this work has reduced the ranking of the target, but we may return to conduct further work once production at the San Luis property is established.

In Mexico, at the San Luis del Cordero property in central Durango State, we have an option agreement to acquire a 51% interest in the property. During the fourth quarter of 2013 and into early 2014, we completed a 5500 meter drill program in 15 holes, and we are currently considering our options for the property. The exploration program tests silver, copper, zinc, vein and skarn type targets that have been defined by previous drilling and geophysics.

Finally, please note that attached to our press release is a mineral resources and reserves statement for December 31, 2013. In terms of changes, the San Agustin and Challacollo resources were removed, reflecting their recent sale. The Pirquitas mineral resources are now 157.9 million ounces of silver, an increase of 9.8 million ounces of silver due to the new resource model, net of 2013 ore processing depletion. Most of the resource increase is outside of the pit design, which feeds into our ongoing development of future possibilities for Pirquitas. The Pirquitas mineral reserves are 68.4 million ounces of silver. This is an 11.7 million ounce decrease, mostly a result of the 2013 ore processing depletion.

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

Thanks, Carl. 2013 was successful in continuing our efforts to improve the already strong financial foundation of our Company. At year-end, these are highlighted by our cash position, which increased by $49 million during the year to $416 million and our significantly higher working capital position of $584 million. Our convertible note offering in January of 2013 was an important financing transaction, as we refinanced our maturing convertible notes, added incremental financial capacity, and took advantage of strong markets at the start of that year to lock in 7-year funds with a sub-3% coupon and a $20 per share conversion price.

These actions set the balance sheet strongly to enable us to provide certainty on our Marigold acquisition with no requirements to seek financing or issue equity. In 2013, the fall in precious metal prices impacted the industry broadly, as both operators and developers were challenged to adapt to this new price paradigm. Silver opened 2013 at $30.31 per ounce and closed the year at $19.47 per ounce, a 36% decline. 2013 average silver prices of $23.83 per ounce were 24% lower than 2012 average prices of $31.33 per ounce.

Our financial results were impacted by the fall in silver prices in the first half of the year. For the year, we recorded revenues of $175 million, a 27% decline consistent with the drop in silver prices from 2012, despite also selling lower silver ounces, as this impact was offset by higher zinc sales. Income from mine operations before the inventory write-down was $17.4 million, a decline from $58 million in 2012 due to the drop in metal prices, somewhat offset by lower cost of inventory due to improved operating cost performance.

The drop in prices not only impacted revenues and margins, but also drove the impairment charges we recorded in the second quarter. Our net loss for the year, including impairment charges and gains, was $225 million or a loss per share of $2.79. Importantly, cash from operating activities remained positive at $19.5 million as we continue to look to drive cash generation.

Investments in our assets were in line with guidance. Investments in Pirquitas totaled $27 million as we completed stage IV of the tailings dam and replaced the contract ore mining fleet. Deferred stripping totaled approximately $29 million due to the high strip ratio as we transitioned from Phase 1 to Phase 2 of the San Miguel open pit. These investments were fully financed from liquidity within Argentina. With these investments behind us and the improvements to cash costs which declined 24% year on year, the mines' free cash flow generating ability improves going forward.

Investments in our exploration and development properties declined significantly, from $41 million in 2012 to $24 million in 2013, as we took a disciplined approach to spending. So we managed the business through 2013 to protect and improve the capacity of our balance sheet, adjust the business to the realities of a lower silver price environment, and continue the investments to improve the value of our assets.

Now, turning specifically to the fourth quarter, it was our highest quarter of revenue for the year, as we generated $49.3 million from sales of 2.5 million ounces of silver, our best quarter of silver sales in the year and record sales of 14.2 million pounds of zinc. We took the decision to draw down finished goods inventory as the production performance at Pirquitas continues to be predictable, and with the pit transition and its potential to impact production now behind us. We now have approximately one month of silver concentrate on site, a level we will target as we go forward.

Silver prices during the fourth quarter averaged $20.76 per ounce, similar to the third quarter, but significantly below fourth quarter 2012 average of $32.69 per ounce. As a result of the stable silver prices quarter on quarter, mark to market impacts to revenue in the fourth quarter were limited. Income from mine operations in the fourth quarter was $4 million. Lower margin zinc concentrate sales constituted a higher proportion of revenues, reducing the overall margins realized.

During the fourth quarter, we announced two exploration property divestments. The San Agustin sale closed before year-end and we are pleased the Challacollo sale has also now closed. The sales further bolster our financial strength. In the fourth quarter, we received $15 million in cash and 5.1 million shares of Argonaut Gold. We will receive a further $10 million of cash in 2014 and $20 million cash in 2015. I will note that at year-end, we accrued full taxes on the transaction, and in the first quarter we will be paying those, including VAT receipt from the buyer, of approximately $22 million. On Challacollo, we have now received $6.6 million after deductions from withholding taxes and 12 million shares of Mandalay. In the fourth quarter, we recorded a $64 million pretax gain on the San Agustin sale and will record a gain on Challacollo in the first quarter.

My final comment on the fourth quarter relates to the strong performance at Pirquitas as production of 2.3 million ounces resulted in the Company meeting production guidance. With cash costs per payable ounce for the quarter totaling $11.75 per ounce, we achieved strong cash cost performance and maintain the trend of lowering costs at the mine. The cost restructuring at the mine has rebased costs well below our initial expectations for the year. We resumed recovering VAT in the fourth quarter and the Argentine tax authorities continue to process and approve our VAT recovery applications. So, all in all, the fourth quarter positions us well as we move into 2014.

As we look forward to 2014, we set our guidance prior to announcing the Marigold Mine acquisition. And clearly Marigold will have a material impact on our operating results as we roughly double production, and our financial performance as we fund the acquisition, incur transaction and integration expenditures, and begin to benefit from Marigold's performance. Specifically at Pirquitas, we expect to produce and sell between 8.2 million and 8.6 million ounces of silver, an increase from 2013. Zinc production will match our record 2013 year at between 25 million and 30 million pounds of zinc, and sales will match that elevated level.

We expect cash costs per payable ounce of silver sold of between $12.50 and $13.50 per ounce. Investments at Pirquitas dropped substantially, with capital totaling $15 million and deferred stripping only $5 million. The drop in both of these areas positions Pirquitas to generate significantly higher free cash flow in 2014, assuming similar silver prices to 2013. Exploration and development expenditures, exclusive of Marigold, are forecast to total $22 million to position our projects for development and advance high priority exploration targets.

Just to add to John's comments earlier on the Argentine peso devaluation, we are still assessing the impact of this devaluation on the mine and our Argentine business unit. We will see a significant foreign exchange loss, mainly a non-cash loss on our Argentine peso denominated assets, which are principally VAT in the first quarter. Our cash position in Argentina is quite modest currently, so the impact of the devaluation on our cash position was limited, and we had strategies in place to protect its US dollar equivalent value.

So, 2013 started with a successful financing and now we begin 2014 deploying those funds into an exciting acquisition. I look forward to updating you on our financial performance as we move to being a multi-mine precious metals producer. I'll now turn the call back to John.

Thanks, Greg. Before my concluding remarks, given the magnitude of our announcement on February 3 to purchase the Marigold Mine, I will have John DeCooman comment on the transaction and strategy, and then Alan Pangbourne, who will be responsible for the mine performance and integration, will talk about our forward plan. John?

Thank you, John. Our announced acquisition of the Marigold Mine in Nevada for $275 million in cash is the culmination of a disciplined M&A process. The transaction was driven by our strategy to upgrade and balance our portfolio by adding a mine in an excellent jurisdiction that could contribute immediate operating cash flow. We also add technical and operating capability to our already strong Silver Standard team, while preserving the capacity to advance the San Luis and Pitarrilla projects.

As a result, this transaction is an ideal combination of investment rationale that deploys cash now, not equity, to grow cash flow per share. Our teams, headed by Alan, are already integrating their second mine into Silver Standard with the transaction expected to close in April. Following closing and completion of the technical reports, which are focused on higher-margin ounces, we will provide production and cost guidance for the Marigold Mine. This acquisition transforms Silver Standard into a multi-mine producer with the financial capacity to continue growing.

We are excited about what Marigold will do for the Company and look forward to creating more value for shareholders and the next leg of our strategy. Now over to you, Alan.

Thank you, Johnny. As you can see from the slide, we had an integration plan developed prior to our announcement. Since then, we have had the team on the ground reviewing all aspects of the operation. We have been principally gathering data to close in April, and the data collection has been focused primarily on people, IT, and finance matters. We are also working closely with Goldcorp, the operator, to ensure that we have a smooth handover.

At the same time, we been reviewing and compiling technical data to allow us to form our own view of the future mine resource, reserves, and life of mine plan. In the near term, we will be focusing on optimizing the newly commissioned equipment at site. This will lead to improved mining efficiency and reduced unit costs. As we have previously stated, we are focused on quality ounces and margin, and this will be reflected in the new resource and reserve statements that are planned for later this year.

We expect to announce an NI 43-101 technical report regarding Marigold's mineral resources and reserves in the third and fourth quarter of 2014, respectively. Once the deal is closed in April, we plan to initiate a drilling program aimed at potential expansion of the resource between and around existing resources. This drilling program will focus on low strip ratio of oxide mineralization. So back to you, John.

Thanks, Alan. So, ladies and gentlemen, here at Silver Standard we are focused on strong stewardship through this part of the cycle. And equally, we are not losing sight of this important time to prepare for the future. 2013 was a positive year for us, notwithstanding the weaker silver price environment. We delivered at Pirquitas both in production and, importantly in these markets, on costs through our systematic restructuring program. This cost discipline applied across our business in the sale of non-core assets and the raising of our convertible debt bolstered our strong balance sheet.

Investment discipline was shown at Pitarrilla, which is now being evaluated far a lower-capital startup. Silver Standard provides leverage and capacity through our portfolio and balance sheet, more than many of our competitor companies. The Marigold transaction supports and adds to this with immediate production of cash flow and leverage when it's closed in April 2014. And we have the team that will deliver with a wealth of right experience and capability.

In 2014, our goals are to smoothly integrate Marigold, continue the operational excellence at Pirquitas, define development pathways for both San Luis and Pitarrilla projects, and maintain cost discipline throughout the organization, supporting our strong balance sheet. And we will do this in a safe and appropriate manner. We are in a cyclical resource business. Yes, today we are at the lower part of the cycle and we know that now is the time to stay focused on cost management, but we have to be ready for the future, and our recent activities support this dual positioning. Silver Standard has delivered with our leverage to growth, and we are in a unique position in our industry, which we will exploit for our shareholders.

So, thank you for dialing in, and we'll now take any questions that you may have.

(Operator Instructions). Adam Graf, Cowen and Company

A couple of quick questions for you guys. At Marigold, is it fair to assume that the 2014 and 2015 mine plans as laid out by Goldcorp are going to be continued? Or will you be able to change things as rapidly as 2015?

Morning, Adam. I'll let Alan answer that one.

Adam, it's probably a bit early to be definitive at the moment, but we expect the 2014 plan will be very similar to the current Goldcorp plan. As I said in the call, we should have a new mine plan and reserve and resource by the end of the year and that will probably impact the 2015 plan.

Okay. And then on a separate subject at Pitarrilla, what strategies are you guys exploring in order to minimize the impact of the new Mexican royalty and tax regime?

Adam, in regards to Pitarrilla, it's really the focus on the higher grade, better margin material that's deeper in the ore body, and that's the reason that we are looking at underground exploitation possibilities. And that work is currently underway, and we expect to have results from that in the second quarter.

So, no integration of plans there in taking into account the new tax regime?

The financial analysis that we've been using is taking into account all of the new laws that have been put in place regarding taxes.

Adam, just a follow-up on that one. I think the important thing is that project, the open pit project, we're just having a look at it in a different way. We still want to have the open pit there, but we are looking at a -- can we start with a lower capital, better returning project initially and still preserve the open pit. And that's the work Alan will do and get completed in the second quarter with a view on.

And then just a quick follow-up on that. Is this going to look more like the plans several years ago, which was do the underground high grade with the option of the open pit, depending on metal price?

That's kind of what we're looking at. How can we do -- can we do an underground -- can we do it at the right value and then does that preserve the open pit above it?

Very good. Thank you, guys, for taking my questions.

Chris Lichtenheldt, Dundee.

First, congratulations on all the progress you've been able to achieve at Pirquitas over the past few years. It is beginning to look quite decent. So, my first question actually is on Pitarrilla. It is, or at least in my opinion, it's a challenging project in the number of ways, technically and politically now, with the permitting issues, as well as the royalties. And if we look back over the past five or six years, I think we add it up, the Company spent almost $100 million getting to this point. Is there a point where you just park it, put it on the shelf, given you have Marigold and some of the other things on the plate?

Chris, I think that's the work that we're doing just now. So we are looking at this underground project to see if we can get it to work. And we're doing that, as Alan says, with today's economic circumstances taken into account. And once we do that, we'll make a decision as to whether that's the right way to go, and then we'll reevaluate the right way forward for Pitarrilla.

Okay. I guess what I'm asking specifically is -- I think in the guidance you said you were going to spend $8.5 million in Mexico this year on development exploration. Is that mainly Pitarrilla?

Greg will answer that one.

Certainly, a large portion of that, approximately half relates to Pitarrilla. That really covers us through to the PEA stage of this underground, and also other holding costs and ancillary costs around the project. The balance of that, Chris, relates to our exploration activities in the country.

Okay, so that will go forward until you at least figure out the underground option?

That's right.

Okay. Secondly, with Pitarrilla looking more back-burnered in some respect, is there anything else in the pipeline that bumps up in terms of moving it into development status?

So, we do look at that, Chris, regularly. We have a portfolio of projects, and as we move forward, we look at the different ones we've got. San Luis is a priority for us just now, as well as Pitarrilla. So these are the two pathways we're looking to really move this year. So a lot of work going on in San Luis, a lot of attention on Pitarrilla, and then behind that we have other projects which we keep maturing forward.

Okay. Just an operating question at Pirquitas. I think in the past when we asked about strip ratios, usually we are directed to the technical report. And if I look at the original plans for stripping in 2014, it was more than 11 million tonnes or 12 million tonnes nearly, and if we consider your cost of mining per tonne there, it's probably in the $2.00 range, I assume still, in US dollar terms. It would still be a significant capital spend, but I think you guided to $5 million of capitalized stripping this year. Can you just comment on -- has some of the stripping been pushed out now to later years? Is it there a change to the plan, or is it just efficient costs?

We did most of the stripping, Chris, in 2013. That was our big strip year, and we've got $5 million worth more on deferred stripping this in 2014. And then we're really down into the heart of our Phase 2 pit shell. And really going forward from there we've got more access to the ore. So nothing is pushed out beyond. It really is by the time we do 2013 and 2014, we are down into the right material.

Okay. And then just my last question here. I noticed the reserves are done at $25. Is it safe to say that if we did assume a $22 or something lower, Pirquitas would still hold up? The rest of the deposit is pretty homogenous and it's all -- should be economic now?

Yes, that's a fair statement.

Okay. That's it, thanks.

John Tumazos, Very Independent Research.

Thank you for the call this morning and I apologize if my questions are too simple. First, the $225 million charge in the second quarter excluded Pitarrilla in Mexico, which is still in your reserves and resources, but you are evaluating it for the subsequent event of Mexican taxes. So we should expect I presume some update such as the underground plan your considering. First question, just want to make sure I understand the context of it. The $750 million CapEx is off the table and gone.

And the second question, net of the Marigold acquisition and the various, smaller asset sales, how much cash do you have? How much of the cash is restricted in Argentina? And how much in marketable securities do you have?

Morning, John. Your questions are never simple, so they are always worth answering. In respect to your first one about the $750 million CapEx for Pitarrilla, at this point in time that is off the table. We are looking, John, at a lower capital starter project with the underground. That's really what Alan is focused on for this year, and that piece of work will get to our view as to whether we go forward with that by the end of the second quarter.

On your question of cash, I'm going to pass it to Greg, and he is probably best to address that with you.

Good morning John. As disclosed in the MD&A, our cash position at the end of the year down in Argentina was about $20 million US equivalent. Of that, about half was invested in some products to protect its value. And since then, it's just been an operating change through January, period. We do have, disclosed in note 3, the financial statements -- it discloses what's held in short-term investments. They all mature under a fairly short time period. So, what's invested in investments of our cash position doesn't impact in any way upon our liquidity position.

If you're referring to our third-party marketable securities, again, those are disclosed. The principal investment we have is in Pretium, and we still hold the 18.8% share at present.

So, how much is the cash outside of Argentina net of the Marigold acquisition, with the benefit of the asset sales? And I actually was very aware of the Pretium shares, but I'm not as familiar with Mandalay and Argonaut and the other less significant bits and pieces.

Yes, so, principally we have full access to our cash position, apart from the portion that I referenced in Argentina. We do continue to repatriate cash from Argentina on a regular basis. So, again, as we I think talked about at the Marigold transaction, we're under no financial constraints with regards to that transaction, and we are going to come out of it with a strong balance sheet with the capacity to continue to advance our projects, continue to execute on our strategy.

I apologize. First Quantum reported, Agrium reported, Newmont reported, Thompson Creek reported, and I haven't read your MD&A. How much is your cash outside of Argentina net of Marigold? Is it $100 million, $125 million, $150 million?

If you're asking where we project post the transaction closing, we had $416 million, as we talked about earlier, John. We would expect our cash position to be in the neighborhood of $100 million, post closing. We have the transaction costs we talked about, and as I mentioned, we also have a reasonable tax payment down in Mexico related to the close of the San Agustin transaction. But we're still going to have a very healthy liquidity position coming out the back end of this acquisition.

Thank you, and I'm sorry for the simplicity of the question.

Brian Yu, Citi.

My question is on Pitarrilla. It seems like the limiting factor here is just the ability to get sufficient water access, even if the economics of the project do prove out. So, a couple of questions along these lines. First, in the press release it talks about the temporary moratorium on the external water source. Would you, by chance, know when that expires? And then, secondly, the prior side had said there was sufficient water supply there. I know things have changed quite a bit over time. Would that still be true today?

Okay, I'll let Alan talk to you on that one, Brian.

Regarding the water situation, the moratorium is an event-driven thing, so once the authorities have done the work evaluating the various aquifers across Mexico, we expect them to systematically start releasing aquifers for further exploration and exploitation permits to water. So it's very difficult to actually put a timeline on it. Regarding the underground project, the previous work from the studies -- I think it was in 2009 -- show that the project is actually net positive water due to the underground dewatering requirements, and that water is not subject to the current moratorium and can be used in the process plant. Which enables us to do the smaller project, because the water consumption obviously for that size project is significantly lower than the larger, big project. So we believe we've got the water to do the underground project.

Got it. Okay, thanks. And then my second question is just on Pirquitas. I know you mentioned with the peso devaluation, potential inflation, can you help us understand just specifically as it relates to the peso, how much of your costs there would be considered local versus other costs that are tied to globally traded commodities? And then have you seen signs of cost inflation thus far? I know the rapid devaluation has occurred pretty recently.

Greg?

Yes, thanks, Brian. Our local dollar cost position is about 60% of the mine's cost structure. Principally that comes from labor, but there's a number of other elements which we source locally in Argentina, so that's a pretty good benchmark to use to looking at the impact. For those that follow Argentina, they came out with a new inflation index which we believe accurately represents inflation in the country. That reported an inflation rate in January of 3.7%. I think expectations are for that to trend down marginally through the year.

So it is an evolving situation post the January devaluation. We're going to continue to monitor it. There are a number of labor renegotiations going on in the country right now, and we're obviously looking at that as a sign as to how inflation or the current situation in Argentina would impact on the cost structure of the operation. As John mentioned, we do see this as being a -- net-net it should be a positive, but we are evaluating the situation.

Great, thank you.

Adam Graf, Cowen and Company.

Just a couple more odds and ends here. Maybe this is a question for Johnny. I was able to back calculate your payable rates at Pirquitas at about 93% on the silver and about 69% on the zinc. How do you see that trending going forward?

Good morning, Adam. Thanks. I think that from the silver side I think that we still see the near-term market outlook as being equal or similar to where we've seen it in the last year or so. So I think that projection is fine. I still think that on the zinc side, your estimates may be a little more strong. The market still seems to be in favor of the smelters versus the miners, so that may be something that you might want to look at.

And then just again related to Pirquitas, you guys pointed out you hit almost record throughput in fourth quarter there of over 4500 tonnes a day. Are you going to be able to maintain that level in 2014 and going forward?

Andrew?

Sure. We are quite confident at the moment that that high level of production is going to move forward during this coming year.

And going forward beyond that, is there any point -- is there anything in the plan about encountering harder ore that might reduce the throughput?

No, there is not.

Great. Thank you very much, guys.

(Operator Instructions). Garrett Goggin, Gold Stock Analyst.

Couple of questions regarding Argentina and the devaluation there. If you look at your cash costs denominated in peso, it actually looks like they went up a little bit in peso terms over the year.

Greg?

Garrett, I'm not sure exactly how you're deriving that calculation. Obviously we don't disclose costs in peso terms. It's logical that they would go up because there is an underlying inflation element in the country. But what's important for us, because we sell silver in US dollar terms, is the US dollar value of the costs, and we saw very a significant decline through the year, as we talked about a 24% decline in our cash costs. So one of our key goals was to reduce the cost profile in 2013. We believe we achieved that, and the team is continuing to drive that excellence forward in 2014.

Okay. I'm just trying to get a grasp of the operating efficiency at the mine. Could you talk a little bit about your repatriation process as far as getting paid in dollars, getting it out of the country? You need to convert it back in pesos, pay a duty on it, and what's the time frame on that?

Yes, sure. So, we have addressed this on some previous calls, but we have a loan structure in place which provides for a regular flow of US dollars back up through the structure. We convert the pesos to US dollars at the official exchange rate. There is a withholding tax that gets applied to that amount, but it's been an efficient structure for us over the last couple of years.

Okay. Excellent. And my last question is regarding Marigold. It looks like Goldcorp and Barrick have spent a lot of money in CapEx over the past couple of years as far as operating improvement. Do you expect that CapEx amount to drop off significantly in 2014 and 2015?

Yes, Garrett that's the case. There was a large investment; they bought a [work] shovel that's just went into the pit in December, so the majority -- all of that has really been spent and is now about putting that gear to work and get value from it. So that's where we are focused. But, you're right, going forward, there's not that capital intensity.

Okay. And when are you going to come out with forecasts regarding that?

Well, we have to complete the transaction. We are aiming at April there, and we are looking at what we can do about it in 2014. But we've got to also do the resource and reserves update for Silver Standard, so we understand the priority of getting that done and getting to market, some guidance. We are very focused on that.

Okay. All right, John. Great. Thank you very much for your time. Have a great day.

Thank you. There are no further questions at this time. I will now turn the call back to Mr. Smith.

Thanks, Danielle. So, there is an important international hockey game about to start. So, this team in Canada have done its job in getting you done before 9 o'clock. So, ladies and gentlemen, enjoy the game, enjoy the day.

Ladies and gentlemen, thank you for participating in today's conference. We look forward to keeping you updated. Everyone have a great day.