SSR Mining Inc (SSRM) 2016 Q2 法說會逐字稿

Thank you for standing by. Good morning, everyone, welcome to Silver Standard's second-quarter 2016 conference call. This call is being recorded. At this time for opening remarks and introductions I would like to turn the call over to Stacey Pavlova, Manager of Investor Relations. Please, go ahead.

Thank you, operator. Good morning, ladies and gentlemen. Welcome to Silver Standard's second-quarter 2016 conference call during which we will provide an update on our business and a review of our financial performance.

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 call there is an online webcast and you will find the information to access the webcast in our news release relating to this call.

Please note that all figures discussed during the call are in US dollars unless otherwise indicated. All references to cash costs and all in sustaining costs are per payable ounce of metal sold. We will be making forward-looking statements today, so please read the disclosures in the relevant documents.

Joining us on the call this morning are Paul Benson, our President and CEO; Greg Martin, our CFO; Alan Pangbourne, COO; and Carl Edmonds, Chief Geologist. Now I would like to turn the call over to Paul for opening remarks.

Thanks, Stacey. Good morning, ladies and gentlemen. I'm very pleased to welcome you to our call to cover not only our strong Q2 performance but also to discuss our progress to date on delivering a strong year for the Company.

During the second quarter on May 31 we completed the acquisition of Claude Resources, adding the Seabee Gold operation to our portfolio and positioning Silver Standard as an intermediate precious metals producer with scale and margin. On a pro forma basis the Company is expected to produce nearly 400,000 gold equivalent ounces in 2016.

Additionally, our operating and geopolitical profile is well diversified with prospective ground at each of our mines that provides good exploration opportunities going forward.

All operations continue to perform well and are on track to meet or exceed annual guidance. Marigold produced just over 47,000 ounces of gold with a cash cost of $663 an ounce, and the mine is well positioned to deliver higher production in second half from previously stacked ore and yesterday we lowered our cash cost guidance for the year.

The three -- additional 300 tonne haul trucks we announced early in Q1 were commissioned ahead of schedule in early Q2. We have already started to see their impact and will see further benefits and the second half of the year as they ramp up.

At Seabee we are working on a safe, smooth and efficient integration of the operation into our Company. We also remain focused on introducing our operational excellence programs and working with the local team to identify opportunities for improvement while also advancing exploration activities. Seabee is on track to meet the higher end of annual guidance previously announced by Claude Resources.

Pirquitas had another strong quarter with 2.5 million ounces of silver produced at record low cash costs of $8.87 an ounce, which allows us to further reduce our annual cash cost guidance for the site. Our operational excellence efforts delivered further improvements with the mill achieving a record daily average daily milling rate.

In parallel we continue to progress our valuation of the Chinchillas project as a satellite mine to feed the Pirquitas plant and extend the life of the operation. We remain on track for a decision as to whether we exercise our option and move forward with the project in the fourth quarter of this year. This is one of several ways we seek to maximize the value of our assets in our portfolio.

During the quarter we generated $30 million of cash from operating activities which led to an increased cash position of $233 million at the end of the quarter. And this is after investing some $24 million in our operations and exploration activities.

In addition to the increase in the cash position our marketable securities, which predominantly reflects only a 10% interest in Pretium Resources, stood at $193 million at June 30. Due to the continued improvements in the equity markets this has risen to $208 million as of August 10.

Later in the call Carl will discuss our exploration success during the quarter. We are particularly pleased with the progress at Marigold and have increased the exploration budget for the year which includes funding for testing for deep high-grade targets.

Also with the conclusion of the re-assay program we are updating our mine plans and expect to be able to release a new longer term production and cost profile for Marigold in September.

Subsequent to the second quarter we announced on Monday, August 8 the favorable resolution of our tax dispute with Canada Revenue Agency relating to our tax treatment of the 2010 sale of our shares of our subsidiary earning to Snowfield and Brucejack projects.

As a result the CRA will issue new notices of reassessment and, importantly, refund our deposit of $19.2 million plus interest. This refund is expected to be received later in the third quarter.

With that I will turn the call over to Alan who will discuss our operational performance in more detail.

Thank you, Paul. Today I will discuss the quarterly results for our now three operations. This quarter is significant for us as we added our third operation, Seabee. Including the entire quarter's production for all three mines we have increased Q2 production to nearly 100,000 ounces of gold equivalent.

At Marigold we remain on track to meet our increase guidance for 2016 as we produced 47,195 ounces, taking our first half production to 97,500 ounces. As we stack more ounces in Q2 we expect to see the additional ounces to be recovered in the second half of the year with a strong Q4 production as the new pad starts to produce ounces. Our cash costs continue to reduce with Q2 dropping to $663 per ounce.

During the quarter we moved 18.7 million tonnes, slightly higher than Q1, as we started to see the impact of the additional trucks on haulage capacity.

However, we also experienced a swing bearing failure on one of the hydraulic shuttles that reduced our loading capacity and hence we did not see the full impact of the additional haulage trucks. By the end of the quarter the shovel was repaired and operational. This failure also impacted our mining cost which rose slightly to $1.55 per tonne.

During the quarter we continued to see positive reconciliation resulting in increased ore tonnage when compared to the 43-101 technical report. And we stacked 6.7 million tonnes of ore at a grade of 0.44 grams per tonne containing approximately 67,000 recoverable ounces.

The additional led to a continued reduction in the [ship to] strip ratio which this quarter dropped to 1.8 to 1. Even though we are stacking more ounces in Q1 and Q2, due to their location [hide on the heat] and when they were placed under (inaudible) the gold will be produce later in the year as expected.

Construction of the next leach pad commenced in late Q1 and is expected to be completed on schedule late in Q3 benefiting Q4's production. So at Marigold we continue on track to deliver planned gold production at a lower cash cost and we expect this to continue in Q3 as we realize the impact of the additional trucks and further in Q4 as the new leach pad starts to produce.

Moving on to Seabee, although we have only officially owned the asset since May 31, we are already seeing some encouraging potential of site and are very excited about how we can again apply our operational excellence for (inaudible) to start increasing production and reducing costs.

Our initial focus has been on the safe, smooth and successful integration into Silver Standard and this process is ongoing. During the second quarter Seabee produced 17,524 ounces of gold. Production continues to focus on moving from [sill] development at Santoy Gap to long-haul stopes.

We have successfully started the cemented rock fill and will form the crown pillar for the first series of long-haul stopes at Santoy Gap. And we expect to start full scale long-haul stope production this quarter. This will shift the focus even more towards the Santoy mine complex over the year.

Santoy is significantly different to Seabee ore bodies in that they are wider, higher grade and this leads to more ounces per vertical meter and lower mining costs. As we see increasing ore from Santoy we also expect to be able to increase the milling rate.

As with Marigold and Pirquitas, we follow a plan that focuses on people, processes and data to determine the most efficient way to improve the operations at Seabee.

As mentioned in our production release, we had a 10-day electrical failure at our main substation that stopped all production. Fortunately we had the required spares on site and commenced repairs immediately once the fault was identified.

Both mines, the mill and all the infrastructure has all been operating again since July 4 and we remain on track to achieve the higher end of the previously announced Claude Resources annual guidance.

So at Seabee, as we continue our integration process we already see areas for improvement. We are looking forward to reporting on these as we advance both at Santoy with the conversion to full-scale long-haul production stopes and in the plant examining where the true bottlenecks are.

Moving on to Pirquitas where we continue to see strong production and cost performance we produced 2.5 million ounces of silver, slightly lower than Q1 but still tracking to meet the higher end of our guidance. On the cost side we saw further improvements leading to a record low cash cost of $8.87 per ounce.

We also tightened our cost guidance as a result of extending operating life and the various cost reductions over the first two quarters of this year. Q2 saw stable mine operations with the total tonnage mined similar to Q1 at 2.54 million tonnes. We continue to mine more ore at a strip ratio of 2.5 to 1.

Mine grades are in line with previous quarters. Excess ore was stockpiled to be processed at the end of the mining operation. In the process plant we further improved milling performance with silver feed grades in line with previous quarters.

Milling rates continue to rise in Q2 and we milled at an average rate of 4,668 tonnes per day, a new record processing rate for Pirquitas. The zinc circuit did not operate this quarter as planned to optimize silver recovery and production.

In April we completed the annual wage negotiation with the union; the negotiations were concluded without any impact or interruption to the operations. And on July 1 we submitted the site remediation plan to the provincial authorities for a review and approval. So Pirquitas continued the year with strong stable costs and production producing 2.5 million ounces.

At Chinchillas work continued with the focus moving to engineering studies, permit applications and community engagement. We expect the EIA to be submitted in late Q3.

So in summary, All of our operating teams overcame certain operational challenges to deliver solid quarterly production that supports our improved cost and production guidance. I will now hand over to Carl who will take you through our exploration activities.

Thank you, Alan. Exploration activities in the second quarter maintained a focus on the three mining districts with drills active at Marigold and Seabee for exploration and at Chinchillas for condemnation purposes. Generative activity was stepped up with surface sampling and mapping at [Perdita] in California.

At Marigold we concluded a successful drive for resource to reserve conversion and are now drilling at the contiguous Valmy property. During the second quarter we drilled 15,575 meters in 73 RC drill holes on targets at 8 South extension, HideOut, Terry Zone North and Valmy.

During the quarter we received resource additive drill results from HideOut, Terry Zone North and 8 South extension which were announced earlier this week. Collectively these results improve the definition of the higher grade feeder structures and contribute to the contained gold within the resource improving the probability that resources in these areas will convert to reserve at year end.

In the second quarter we concluded the assay program introduced last year with a final tally for 2016 of 52,600 samples retrieved and submitted for analysis. The results of this work are consistent with our 2015 experience and form the basis for our longer-term production and cost outlook for Marigold.

At Valmy we received our drilling permits as expected and in May began drilling on the property adjacent to the pits formerly mined by Newmont. Results are in for the first 12 confirmatory holes and are largely as expected compared to historic data.

Overall the program at Marigold has exceeded our expectations for the year and based on this we are increasing the drilling budget by $2.1 million. These funds will be used primarily for two purposes.

Firstly to complete another 27,000 meters of RC drilling in the second half pursuing further resource conversion in addition at Valmy and HideOut.

And secondly, to reengage our program of deep, high grade sulfide exploration targeting structures in rocks correlative to the [Comus] formation which is the important host rock at the [Turquoise Ridge] mine located along strike to the north of Marigold.

At Seabee Gold operation we had exploration drills active from surface and underground working on resource to reserve conversion at Santoy Gap and exploration for additional resource areas between Santoy Gap and Santoy 8.

In June we completed 3,348 meters of drilling in 11 holes. Promising results have been received in the area between the Santoy 8A and Santoy Gap which we expect to result in additional resources.

At the Seabee mine underground exploration on the 15 vein structure returned encouraging results and surface drilling encountered positive results at [Herb West] and at [Carruthers] in targets north of Seabee and on strike from Santoy Gap respectively.

In the second half of the year we will see drilling step up in pace on the conversion of resources at Santoy Gap and the continued scout drilling for extensions to and repeats of the Santoy gap deposit.

In Argentina we have an option agreement with Golden Arrow Resources to advance their Chinchillas project located 30 kilometers from Pirquitas. Here we funded $1.5 million in the second quarter on condemnation drilling, geotechnical, hydrological, metallurgical and environmental studies along with continuing community engagement programs.

During the period Golden Arrow announced new resources based on the exploration and infill programs funded by Silver Standard. These resources support our continued engineering work in funding a study for a new mine by year's end.

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

Thanks, Carl. Before I get to our strong financial performance for the quarter let me first address the Claude Resources acquisition whereby we acquired the Seabee Gold operation, adding to our portfolio a high-quality, free cash flowing gold operation in Canada.

We closed the acquisition at the end of May, so for the second quarter we consolidated only one month of Seabee operational results. However the impacts of the transaction on our financial statements were more significant.

As required we have completed our preliminary acquisition price allocation for Seabee. For those of you that followed us through the transaction, you will be a where our share price performed strongly through that transaction period as investors recognized the merits of the deal, including the opportunities within the Seabee Gold operation.

Clearly we are pleased with that result, but for balance sheet recognition purposes it does have implications on our purchase accounting. As prescribed we valued the transaction at close, which was significantly higher than at announcement, despite the deal economics not changing as the exchange ratio was fixed.

As a result of this higher transaction value and the required recognition of a large deferred tax liability that decreases the net assets acquired, we recorded goodwill on the acquisition. For our purposes the goodwill is supported by operational and tax synergies.

There are a few other items related to the transaction to note. In the quarter we expensed about $3.9 million in acquisition and integration costs, which negatively impacted reported net income.

We are well through the integration process, so while we will see some charges flow into Q3 they should be fairly modest and largely related to integrating IT infrastructure. Transaction costs on the Claude side were paid by Claude before close so they reduced cash acquired.

As previously announced we immediately repaid the higher cost more restrictive Claude credit facility reducing consolidated debt levels. So these items brought Claude in at a neutral impact to cash and debt. We did, however, acquire about 7,000 ounces of gold bullion in inventory that we sold post-close.

As highlighted during the transaction, with the Claude acquisition we sit with a stronger balance sheet and stronger credit metrics. We now have a lower debt to equity ratio, stronger EBITDA, better interest coverage ratios and lower net debt. So the balance sheet is well set to support our continued investment and growth objectives.

Finally it is important to point out that we had to bring Claude's gold inventory onto our books at fair value, which is effectively the prevailing gold price. So mine operating earnings in June for Seabee is a meaningless number.

Going forward we will see operating earnings revert to representative values, but due to the purchase accounting Seabee will see high ongoing amortization charges. So while cash flows will be strong at Seabee's low cost structure, mine operating earnings will be impacted by these non-cash charges.

Turning to the quarter overall, we have reported another strong financial period highlighted by another quarter of free cash flow and higher adjusted earnings of $0.25 per share. Continued strong cost performance particularly at Pirquitas drove production to 86,956 gold equivalent ounces at cash costs of $669 per ounce sold and all in sustaining costs of $1,062 per ounce, including Seabees results since acquisition.

These results combined with higher metal prices enabled us to post solid numbers. Reported revenues of $119 million and income from mine operations of $44 million. Mine operating earnings were up 160% from the comparable quarter in 2015 and 85% higher than Q1.

G&A expense increased in the quarter, but this was entirely due to non-cash stock-based compensation revaluation charges on our share price gains. In fact, underlying cash G&A was down 4% quarter on quarter. So despite these items we reported headline earnings of $12.5 million for the quarter, or $0.13 per share, with adjusted earnings of $23.6 million or $0.25 per share.

Silver Standard continues to differentiate itself with our ability to generate free cash flow from a variety of sources, but most importantly our operations. Cash from operations was $30 million in the second quarter, over double the first quarter despite a further build in non-cash working capital of $5.3 million.

As guided, investments in PP&E were elevated in Q2 at $14.5 million largely due to the leach pad built and haul trucks purchased at Marigold. Deferred stripping costs at Marigold also increased as we moved into stripping a new phase at the Mackay pit. As discussed earlier, we received cash through the Claude transaction but paid an equivalent amount to reduce debt.

So through the quarter we added $15 million of cash to our strong liquidity position and closed the quarter at $233 million. We gained significant working capital through the Claude acquisition, the increase in the value of our Pretium holding and the success of our appeal regarding the proposed CRA reassessment.

Seabee carried substantial working capital due to its remote location which necessitates pre-purchasing consumables and supplies for the entire operating year. So at the end of Q2 our working capital position totaled $530 million, a significant asset equating to almost one-third of our market cap.

Due to our solid first half of the year and expectations of continued strong performance we have been able to improve our guidance at both mines and introduce guidance for Seabee.

At Marigold where we increased production guidance earlier this year we are now able to reduce cash cost guidance by about $40 per ounce to between $650 and $700 per ounce with a similar decline in all in sustaining costs, reflecting the overcall of ounces from the mine and the continued lower diesel prices.

At Pirquitas we are upping the low end of production guidance, reflecting the above expectations performance of the lower levels of the San Miguel pit which is giving us more fresh ore through H2. And also for the second time this year we are reducing cash cost guidance by about $1 per ounce to between $9 and $10 per ounce reflecting the continuing cost containment and strong mill performance.

We are increasing capital investments at Pirquitas as we have decided to proceed with an additional lift on the tailings dam to enable operations to extend to late 2017 and more mobile equipment capital as we use the fleet longer with the extension to the open pit life.

At Seabee we are introducing our expectations for the second half of the year with production between 32,000 and 35,000 ounces of gold at low cash costs of between $610 and $640 per ounce.

Underground development is an important item in the second half as we push the Santoy decline down, so capital development is expected at $6 million while capital expenditures are minimal at about $2 million as we complete some infrastructure at the Santoy deposit. So we expect Seabee to have attractive all in sustaining cost.

So to summarize, the first half of the year has gone well particularly at Pirquitas and these guidance improvements reflect our confidence in that carrying into the second half. We continue to be encouraged by the metal price backdrop and the fundamental factors that are driving metal prices higher.

As we fully benefit from the contribution of Seabee in H2 and from these metal -- from these higher metal prices we are well positioned to continue to report positive financial results.

So with those comments I will turn it back to Paul to wrap things up.

Thanks, Greg. The most important event of the quarter was the closing of the Claude Resources acquisition. Assets of this quality are not often available. And while Seabee is already generating free cash flow, we adjusted the start of our optimization phase, as Alan and Carl highlighted earlier.

Consistent with our strategy this acquisition positions us as a high-quality intermediate precious metals producer with a market capitalization over $1.7 billion. During the quarter we increased our cash position, strengthened our balance sheet and enhanced our ability to pursue internal and external growth opportunities.

We continue to deliver results through low risk brownfields exploration programs with the objective of extending mine life and expanding mineral resources at our operations. This, along with productivity improvements is another way we continue to maximize the value of our portfolio.

All in all our operations have performed well so far in 2016 setting us up for a strong second half with increased production, lower cost and added cash generation for our shareholders.

With this our formal presentation concludes and I will pass the line to the operator to take any questions you might have.

(Operator Instructions). Craig Johnston, Scotiabank.

A handful of questions here, but I will start with costs at Seabee. It looks like mining costs I think in the MD&A were noted at $141 a tonne. It just seems significantly higher than say what my previous understanding of what underground costs were under Claude's ownership. Just wondering what you guys think mining costs will look like going forward and if I am missing anything there.

No, Craig, fairly simple explanation. I will pass over to Alan who will run through it for you.

Good morning, Craig. It is quite simple; in the MD&A we are already reporting the costs for June. And so that was the month that also coincided with the power failure. So you have to remember we lost seven days of entire production across the board. So that impacts the total tonnes.

On top of that we were at a learning stage with the CRF, the concrete filling in the stopes. And so the tonnes mined that month were lower as we got used how we do that process and we actually consumed about 5,000 tonnes out of stockpile.

So if you convert it to dollars per tonne milled rather than mined because of the stockpile fluctuation and look back at the previous quarters we actually are averaging around about $80 a tonne.

Okay, perfect, that helps a lot. Moving on, maybe a question for Greg just relating to G&A costs in the quarter. You mentioned in your previous remarks that the cash amount was actually down quarter over quarter.

I'm just a bit confused there when you try and reconcile that to your cash flow statement and your share-based compensation adjustment is only -- I think it is like $700,000. Just trying to understand the difference between say the $12 million in G&A versus the $700,000 in share-based payments.

Sure, Craig. As you recognized and I think most companies reported fairly large P&L impacts during the quarter due to the revaluation and we were similar to that. There is obviously a timing difference between when you recognize expense and when you pay cash related to stock-based comp. So the timing differences between the P&L and the cash flow can change.

Obviously we settle those instruments generally once a year, then that coincides with that time period, whereas the expense varies quarter to quarter. So from a P&L perspective, as I said, the actual underlying G expense went down. We will see the cash flow impacts sort of normalize over time as we see the share price movements play out through the rest of the year combined with the timing of any actual settlements of the underlying instruments.

Got it, okay, thanks. And just on a go-forward basis, any sense you can give us in terms of run rate on fake cash G&A?

Yes, I mean we've generally said it is about $[60] million. It obviously is impacted somewhat by the Canadian dollar; we are largely a Canadian dollar-based G&A expense. So it will vary a bit by exchange rate. But it is running right now sort of somewhat under $4 million a quarter.

Great, okay, thanks, Greg. Next question is on Chinchillas, just wondering I guess if you guys are to make the production decision or the option decision to go forward there, what type of studies are you expecting to make public or guidance make public if that was to take place?

We are working towards obviously producing a substantial study to support the Board decision should we go ahead with that and that would be compliant with a 43-101 prefeasibility type study. And obviously if we made a positive decision we would be releasing that to the market.

Okay, perfect. And just one more, just a bit of a housekeeping item on marketable securities. My understanding based on my knowledge is that you have Pretium shares, Golden Arrow shares and Argonaut shares. Is there anything else that I am missing that is a material number? Just trying to reconcile our mark-to-market figure versus the one quoted of $208 million on the call.

Just to be clear that $208 million was as of yesterday. I just noted the difference between the June 30 number and $208 million. But I will let Greg talked to the numbers.

Yes, Craig, the only material marketable security position we have at this point is the Pretium (inaudible).

Okay.

There are some other small positions but they really don't move the needle for us at this point.

Okay, Greg. Thanks, Greg. Thanks, guys. Thanks for taking my call and congrats on the good quarter.

Chris Terry, Deutsche Bank.

I have got a couple questions, maybe just starting with Marigold and the re-assay program now that you are through that. What should we expect going forward for how you may give guidance on production? Will you give say a five-year outlook at some point or will it just be say 2017 guidance and you do it on a yearly basis?

Yes, as we noted, we are sort of doing the updates of the mine plans now. Our expectation is hopefully we will get that done towards the end of September and we would look to give a longer term so it may be five years at order of magnitude, we haven't gone firm on that yet. But it will definitely be more than 2017.

Okay. And we should expect that late this year or you will do it (multiple speakers).

No, in September, it will be the month of September.

Oh, you will do it in September, okay, okay. And then just at Chinchillas following on from Craig's question there. Is it really -- the decision that you're making at the moment are you moving around a lot of assumptions, input assumptions, commodities, etc.?

Or is it more just a function of taking the time and considering all the drilling results and that will be the key determining factor in whether you go ahead with it?

So I guess given we have moved up a lot in commodities prices recently are you reconsidering how you look at the project just based on that or is it a function of the geology?

No, it is actually more of a function of getting through the workload to define all of the final costing. So the drilling is pretty much complete and we have moved on to the condemnation drilling to make sure we are not going to put waste dumps on top of things.

And metallurgical test work is completed and most of the underlying data collection work is completed. And, as I said earlier we have really focusing now on geotechnical engineering, hydrological engineering so as we understand that.

We are also focused on preparing the EIA so as we can submit it in this quarter and then also the community engagements and the roads and the infrastructure stuff pulling all those costs together so as we have got a final model. We have flexed the metal prices and it is not that sensitive at the sorts of ranges we are seeing at the moment.

Okay, thanks. That is all for me.

Mark Mihaljevic, RBC Capital Markets.

Nice quarter. So a couple questions for me. So first off, I guess with the haul trucks now active at Marigold and obviously you can increase the total tonnes moved. But do have a sense of how much you think you can stack annually on an average rate just broader sense?

I know you were doing 20 million before but now you have been running well north of 6 million in a quarter. So just wondering on a normalized annualized basis where you would expect that to flush out at.

To be honest I haven't really looked at what that is, I have been more worried about whether I run into a permit limit and I don't run into a permit limit because we had the permit modified. So we -- because of the way the mine plan works we literally stack whatever is ore in front of the shovels.

On a longer-term basis it tends to be pretty -- I won't say stable because it goes up and down by quarter -- but it sits around that 20 million, 30 million tonne range somewhere. So there is a nice big range there for you between 20 million and 30 million. But I think you will get a better feeling for that when we put that longer dated forecast out in September.

Okay, thanks for that. I guess probably a question for Greg here. On the depreciation there was a pretty meaningful cut back at Pirquitas quarter over quarter. And it also doesn't look like you recognized any depreciation at Seabee. So just wondering what we should be looking for in the next couple quarters from that?

Sure let me just address Seabee first, Mark. And as I said, because it was only June there is some funny things that happened with the numbers. Effectively we sold inventory from an accounting purposes in June and therefore that got brought on at fair value. So there is kind of no inherent depreciation charge embedded in that inventory once you restate it to fair value.

So as I said on my comments, we will see that normalize over the coming periods. We are still working through the final PPA piece and the allocation on the PPA piece, so I can't provide you the specific guidance at this point. But you will see as we report through Q3 and Q4 you will get a feel for what those amortization charges look like.

With regards to Pirquitas, the depreciation impact is largely related to the fact that there isn't a lot of asset value left down at Pirquitas. So the underlying amortization charges at Pirquitas are going to be quite limited going forward.

Okay. And I guess there is a bit of a reflection of the fact that you are able to extend the mine life now through 2017 compared to what you were expecting earlier. So more quarters over which to amortize that small base?

That is exactly correct. I mean as we said, we are seeing really good performance out of the open pit, which we are pleased at. We are seeing very good cost containment and we are pleased generally with the trend in Argentina on a macro basis. So all of those things have given us the confidence to do the tailings lift and extend the operation out through the back end of 2017.

Perfect. And then just one more for me. There was some wording on the export duty in Argentina and potentially needing to put up some security against it and some let's say progress on the court case. So I'm just wondering if you could give a bit more color on that.

Sure. Mark, let me talk to that. So as you know, we previously disclosed that in February the export duties were removed so we no longer accrue for export duties which has also been a positive impact on the performance down at Pirquitas.

We have been in pretty much continual litigation on that point from 2010 through to the current period. And we have had the benefit of the injunction through that period that avoided us paying the duties but we were accruing them through that period.

And during that time the tax authorities have repeatedly [peeled] and at every step MPI has been successful in upholding the injunction. In the recent court decision they upheld our injunction. They put in place some conditions of security from NPI and Silver Standard.

And so right now we are having discussions with the tax authorities around a security package that would be acceptable to us at the same time trying to talk more broadly if there is a way to kind of put the entire issue behind us. So that is where it sits right now.

We are having those discussions and we will continue to see how they trend forward. If we can't reach an agreement then there would be some possibility for them to start to seek to remove the injunction and potentially come to see claims, but we are actively engaged to make sure that is avoided.

Thanks. That is it for me.

(Operator Instructions). Jean-Paul Tsotsos, BMO Capital Markets.

Congratulations on the quarter. I just have a few questions. One is the CRA resettlement. What do you guys expect for the timing of repayment and any other further details around that?

Thanks, Jean-Paul we expect we will receive the refund of the deposit in Q3.

Okay. The other question was around Pirquitas. According to our numbers it looks like you guys got above average prices for your silver there. So I am guessing it has something to do with provisional pricing. I was wondering if you can provide further details on that.

Sure. We did see a mark-to-market impact in Q2 positively because, particularly as you would have observed, silver prices strengthened fairly strongly towards the end of the quarter. So I believe at the end of the quarter prices were about $18.60 an ounce. So that would have been the price of which we revalued any outstanding ounces.

We usually have about 60 days of production outstanding on provisional payments. So we got that benefit through Q2. Obviously silver prices have continued to rise since that period. So we will see that cash collection flow into Q3. And obviously we continue to benefit from those higher silver prices as we continue to realize those outstanding contracts.

Okay. Now also on Pirquitas, just about the stockpiles that are there that you are going to be working next year. Do you have any idea of what average grades that we should be kind of forecasting for that?

I am not sure what we have disclosed in the past and it would be Related to --.

It is stated on the resources.

We would have to get back to you with an actual number if we disclosed it, but it would be the medium and the low-grade stockpiles obviously starting with a higher grade of the medium grade material and working our way down over the year.

Most of that is more recent, fresh, medium grade material that has been stockpiled. So the delta that has been stockpiled over the last sort of six to nine months would be what goes in first.

Yes, you obviously can look at what has been published in terms of what has been mined and milled and go do a back calculation probably just as quickly as we can.

Okay. Okay, thank you so much, guys.

Craig Johnston, Scotiabank.

One last quick one for me, guys. Just wondering if there is any change to your strategy with the Pretium shares since the run up we have seen.

No. We have just thoroughly enjoyed the ride. What we have said is that it is not a strategic asset for it but we are very happy with the exposure to the project and the doubled exposure then through to our gold price. We think they have done an outstanding job moving that project forward both technically and financially getting the funding in place.

And normally in a situation like this as a project moves closer to first production, which I think is second half of next year or something, I would be expecting to see further share price appreciation. So we are comfortable where we are at the moment. Obviously it is not a core asset, so at some stage a shipment will be sold when we have a need for cash.

Okay, no, make sense. Thanks, Paul.

There are no more questions at this time. I will now turn the call back to Mr. Benson.

Excellent. Thank you very much, everyone, for joining the call and hope you have a good day and we will see you next time. Cheers.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect your lines. Thank you for participating and have a pleasant day.