SSR Mining Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 4, 2023

There are 6 speakers on the call.

Operator

Hello, everyone, and welcome to SSR Mining's First Quarter 2023 Conference Call. This call is being recorded. At this time, for opening remarks and introductions, I'd like to turn the call over to Alex Hunchak from SSR Mining. Please go ahead.

Speaker 1

Thank you, operator, and hello, everyone. Thank you for joining SSR Mining's Q1 2023 conference call, during which we will provide an update on our business and a review of our financial Our Q1 2023 consolidated financial statements have been presented in accordance with U. S. GAAP. These financial statements have been filed on EDGAR, SEDAR, ASX and are also available on our website.

Speaker 1

To accompany our call, there is an online webcast and you will find the information to access the webcast Today's discussion will include forward looking statements. So please read the disclosures in the relevant documents. Joining us on the call today are Rod Antal, President and CEO and Alison White, CFO. Now, I will turn the call over to Rod for his opening remarks.

Speaker 2

Great. Thanks, Alex, and hello to you all and thanks for joining us. We ended 2023 Focused on execution and operational delivery and the first quarter results are well aligned to our expectations. We're on track for all our guidance targets and expect improving production and costs in the coming quarters to drive strong free cash flow for the remainder of the year. The Q1 began with the release of our updated 3 year guidance, We reiterated our expectations to deliver annual production of 700,000 ounces through 2025, We are progressing a number of key work programs to support that longer term production target, including preproduction activities at Cakmaktepe Extension, With first production remains on track for 2023 as well as investment in 4 new haul trucks to support the waste stripping activities at Red Dot.

Speaker 2

In addition, we continue to showcase our exploration portfolio with the release of some very impressive Near mine results from Puna, which have the potential to drive mineral reserve growth at the mine, In turn, providing further support to our longer term 700,000 ounce production platform. We have a number of key catalysts planned this year. This includes first production from Cakmaktepe Extension, the technical report updates at Marigold and Copler to showcase their upside And additional exploration results from the other targets we have. We continued our robust capital returns program in the quarter And given our positive outlook for the remainder of the year, as well as our robust balance sheet with almost $900,000,000 in total liquidity, We expect to remain active on the share buyback program. We have a proud history as explorers, Mine builders and operators and our solid first quarter results have us on track to deliver our guidance targets as we have done Over the 9 consecutive years before 2022, with forthcoming positive catalysts across the business, we remain excited for the year ahead.

Speaker 2

I'm just going to move on to Slide 4 with ESG. On 14th April, we published our 5th Annual ESG and Sustainability report, marking another step in SSR Mining's continued effort to operate responsibly And sustainably, while maximizing the benefits to all our stakeholders. These years and has long been a core value and focus for the company As it firmly underpins our success, we continue to prioritize the health and safety of our employees and business partners We have recently implemented a focus and formal leadership in the field initiative to drive engagement and improve safety performance across the company. Another key focus last year was the development of the global water strategy to help ensure we manage water as a vital resource for our operations We're now implementing water management plans for each one of the assets and are also continuing our efforts On integrated mine closure plans to ensure we leave a positive and lasting legacy for the communities in which we operate. Additional key initiatives this year will include continued development of an action plan on our journey towards net zero, Including evaluating options to incorporate renewable energy and decarbonization technologies in our operating platform.

Speaker 2

As we have done previously, we work hard to advance our ESG initiatives and look forward to sharing continued updates on that journey throughout the remainder of the year. Let's move on to Slide 5. As I mentioned, we released the 3 year guidance, which reiterated our expectations For a stable production platform of at least 700,000 ounces. With a robust exploration platform And number of growth initiatives already underway, we continue to expect that we can deliver the baseline production level through the remainder of the decade. Later this year, we will release updated technical reports with the maiden mineral reserves from the surplus C2 expansion project As well as an updated life of mine plan that incorporates new ounces for Marigold's new Millennium target.

Speaker 2

At Seabee and Puna, recent exploration releases have highlighted the successes of near mine drilling activities that provides the opportunity to build reserves In short, while the production platform outlined on the slide is largely centered on the mineral reserves only, we see a The purpose of the updated technical reports is to capture positive upside with respect to both production and value from within the portfolio. Let's move on to number 6, Slide number 6. On top of our reputation as operators, We have a proven history of project delivery and value accretive M and A. Our approach to M and A remains unchanged. We continue to actively consider and evaluate opportunities to add value to our business through transactions that fit our strategy As low capital intensity growth in core jurisdictions and that complement our focus on free cash flow.

Speaker 2

We successfully delivered on 2 of these deals in 2022, building our ownership in in mine assets at Copler And CB, 2 jurisdictions where we feel we truly have an advantage. I'm going to turn over to Slide 7 and hand the presentation to Alison.

Speaker 3

Thanks, Rod. I'd like to first focus on our capital returns program and track record, which are well aligned to the 3 pillars of our capital allocation strategy. We remain committed to our disciplined approach to the 3 pillars this year continuing to reinvest in our business, Ensuring balance sheet strength and executing on our final pillar to return capital to shareholders. Through the end of April, we have returned approximately $47,000,000 to shareholders in the form of our base dividend and through our active share buyback program. Our strong start to returns in 2023 follows 2 consecutive years with shareholder returns Averaging 5% annually.

Speaker 3

Since the beginning of 2021, nearly $400,000,000 of total capital has been returned to shareholders Approximately 14% of our current market cap. As Rod had mentioned, we see a number of positive and value additive catalysts on the horizon. As such, we view our share buybacks as an accretive way to deliver further value to our shareholders. Slide 8 will provide a review of the Q1, so let's take a look at our results. There are a few key points that I'd like to highlight today.

Speaker 3

The Q1 production of 147,000 ounces was in line with budget. All in sustaining cost Of $16.93 an ounce, we're also in line with expectations and reflect Our guidance of a first half weighted sustaining capital profile, which included higher planned spend associated with haul truck purchases at Marigold And purchases during the Seabee winter road season. Overall, our full year production profile remains 55% to 60% weighted to the second half of the year and our free cash flow outlook remains even more heavily weighted to the second half of the year. As planned, sustaining capital remains in Q2 and we remain On track for our consolidated 2023 guidance targets. Also within the quarter, we were pleased to announce Positive exploration results from Kuna and proud to release our 5th Annual ESG and Sustainability Report.

Speaker 3

And now I'll discuss our quarterly financial performance in more detail on Slide 9. In the first quarter, sold 155,000 gold equivalent ounces, generating $315,000,000 in revenue. Attributable net or $0.10 per diluted share. 1st quarter operating cash flow of $3,000,000 and free cash flow Of negative $56,000,000 were impacted by the expected CapEx spend mentioned on the previous slide and the changes in working capital. Operating cash flow and free cash flow before changes in working capital were $91,000,000 $32,000,000 As noted, we continue to anticipate a second half weighted free cash flow profile supported by increased production and improving costs.

Speaker 3

With respect to inflation, we've seen some relief from diesel and power prices across the portfolio. But note that consumable pricing and labor cost pressures remain a headwind for us. Overall, we remain on track for our full year consolidated Let's talk about our reported $0.10 in diluted earnings per share that is calculated based on the company's definition of attributable net income per share and is shown on the right side of the presentation. We start with our attributable net income of $0.14 per share And then make adjustments to exclude the after tax impacts of specific items that are not reflective of the company's ongoing operations. This quarter primarily featured adjustments for tax impacts, including a one time tax in Turkey to assist with earthquake recovery efforts as well as a minor adjustment to the market value of our investment portfolio.

Speaker 3

And turning to slide 10, we'll talk about SSR's Our balance sheet remains one of our key strengths and pillars of our capital allocation strategy With nearly $600,000,000 in total cash and more than $310,000,000 in net cash, total liquidity stood at nearly $100,000,000 at the end of the Q1. We are committed to maintaining a robust balance sheet to weather volatility in the commodity price And to ensure all of our capital commitments, debt servicing requirements and base dividend payments are fully funded even in the event of a potential downturn in the gold price. The quarterly base dividend of $0.07 a share is payable to our $13.50 per ounce gold reserve price. At the same time, we will continue to reinvest in internal growth, Including our exceptionally high return Cakmaktepe Extension and C2 projects, as well as our plethora of exciting exploration programs across the portfolio that we have dedicated more than $80,000,000 to this year. Finally, Our peer leading capital returns represent the 3rd pillar of our overall strategy.

Speaker 3

So far in 2023, our previously discussed share buybacks An annualized base dividend have us on track for a minimum full year capital returns yield in excess of 3%. We will remain dynamic in our approach to share buybacks and have capacity to repurchase up to approximately 2,400,000 shares On the current buyback program before its expiration later in June. Our significant capital returns over the year to date Are a meaningful tailwind for the company. And I'll leave the discussion on the positive note as I turn it back to Rod to walk through the assets.

Speaker 2

Great. Perfect. Thank you very much, Allison. Earlier this year, we welcomed Bill McNiven as our EVP, Operations and Sustainability After a successful career at Barrick, amongst other places. Since his arrival, Bill has been laser focused on ensuring operational delivery From each of the assets, already he has identified a number of opportunities to help streamline and drive down costs And we're excited to see our portfolio continue to mature in both performance and ESG under his leadership.

Speaker 2

Right now and as you would expect, he is in the field, but you will hear from him later in the year. So I'm going to talk to Slide number 12, Starting off with Sherpa. The mine delivered quarter 1 production of 55,000 ounces at an all in sustaining cost of $14.20 Per ounce, reflecting our expectations for a production profile weighted 55% to the second half of twenty twenty three. Impressively, the sulfide plant delivered its 2nd consecutive quarter with throughputs above 8,000 tons per day, showcasing the successful ramp up have the operations since last September. In addition, we are finalizing the plans for a full plant shutdown, which will either be late this quarter or early in quarter 3.

Speaker 2

Other work programs at Chipola continue to schedule, Including first production from the more than 1,200,000 ounces from the Cakmaktepe Extension project. We're also continuing to work on the C2 expansion opportunity through the pre feasibility study, which we will be published in the Q4. Technical work to date has been built on the original technical report released in 2022 and we see potential to further improve The existing study through the incorporation of successful drilling results and flow sheet optimizations and refinements. Exploration work continues across the Copler District, including the regional Cacatepe target, where we expanded our ownership to 80% in quarter 4 last year. We have a full suite of near and longer term growth opportunities across the district and Marigold produced 52,000 ounces in the Q1, in line with the plant production profile That is 60% to 70% weighted to the second half of the year.

Speaker 2

Oil sustaining costs of $16.63 in the first quarter Reflected the planned spend on the new haul truck purchases that has facilitated the start of waste stripping at the red dot target. Methane capital will remain elevated in the Q2 as we complete the delivery of the remaining haul trucks And we forecast all in sustaining costs to reduce in the second half of the year. We expect to continue to recover the majority of the remaining ounces We will stack more typical durable ore at Marigold and have already seen leach cycles return to normal. Marigold remains on track for a strong 2023 with full year production of 260,000 to 290,000 ounces. We're continuing to progress the work ahead of an updated technical report for Marigold, where we are working to capture upside.

Speaker 2

This includes incorporating more than 2 years of drilling and in particular on the new Millennium target. Work is underway to identify longer term Moving on to Slide 14 and Seabee. Seabee's 1st quarter production reflected a now resolved issue With underground equipment availability that negatively impacted the mine sequencing schedule. As a result, While we had expected the Q1 to represent the lowest period of production for the operation, grades processed were below expectations. Seabee's winter road season means costs are heavily weighted to the first half of the year.

Speaker 2

Work continues to advance Our near mine exploration at Seabee as we prioritize mineral resource conversion activities to ensure mineral reserve growth And mine life extensions in the future. We also continue to evaluate early stage exploration targets at depth Below the existing Santoy mineralization as well as regional targets like Porky and Porky West that could contribute meaningfully to CB's longer On to Slide 15 of Puna. Puna once again delivered a strong quarter With 2,000,000 ounces of production and an all in sustaining cost of $16.40 an ounce, Puna remains well on track for its full year guidance With production 50% to 55% weighted to second half and costs also improving in half 2. In the quarter, we announced positive exploration results from Puna, predominantly focused on near mine resource and reserve expansion efforts As we aim to extend the life of mine plans, we also demonstrated successful step out drill results At the Cortaderas target on the Paquitas property, which could also represent a longer term growth opportunity for the mine. Moving on to 16, our exploration.

Speaker 2

Building on the exploration success for Puna and the other assets, Work continued globally across the portfolio of growth opportunities. Neam Mine Exploration continues to advance at all 4 producing assets We're excited to showcase these results in the forthcoming updated technical reports starting with Copler and Marigold in the Q4 of this year. Work continues at our greenfield targets in core jurisdictions and we expect to have an update from our Copper Hill target in the coming months. We plan to invest significantly in exploration across the platform, recognizing the significant value we can deliver to shareholders through the organic growth we have. Just some concluding remarks before I open it up to Q and A.

Speaker 2

As you heard, we started the year well and look forward to regaining some of the lost momentum As we deliver against our operational targets throughout the year, we remain firmly committed to capital returns As evidenced by the continued activity on our share buyback program and expect to deliver strong free cash flow into the second half of this year. From the Cakmaktepe Extension Project as well as highlighting the upside potential associated with our Copler and Marigold in the new technical reports planned for later this year. SSR Mining is in a great position and we look forward to continuing to demonstrate Back to the market throughout the remainder of the year. So with that, operator, let's open it up to questions, please.

Operator

Thank you, Mr. Antal. Our first question is from Michael Cyprysko with RBC Capital Markets. Please go ahead.

Speaker 4

Thanks very much, Rod and team for taking my questions. Maybe a couple of questions on Marigold And Poona, if I could. First on Marigold, I know that you have the update coming, but can you talk a bit more about How you're thinking about the longer term there? What considerations you're taking into account for sequencing in New Millennium, Trenton Buffalo Valley. And at this point, I suppose could you say whether or not it's possible that the lower guidance in 2025 Could be backfilled with some of the new pits?

Speaker 2

Yes. Look, hi, Michael. Marigold, The key focus for us is and similar to actually all of the assets right now is getting Some of the conversion of the exploration we've been doing over the last few years. The real particular emphasis, of course, though, was As it has been, and particularly at Marigold is the near term opportunities that will add life To the current production profiles. And as you rightly point out, with an emphasis on Looking for opportunities to fill some of the valleys that we have in the production profiles and improve them.

Speaker 2

So Now with that in mind, it's really been an effort immediately around the oxide opportunities, And in particular around the new Millennium target. So that will be a key feature of the technical report. While we're doing that, we're also got eye to the future and part of the work that we are doing is Looking at and developing those sort of pathways, if you like, to the longer dated opportunities down to the southern end of the property At both Trenton Canyon and Buffalo Valley. So they're much more in early stage in terms of their life cycle. But in terms of our thought processes and how we're thinking about them, we are doing some initial concepts of how they might Play into the longer dated future at Marigold.

Speaker 2

But initially, it's really just a focus on improving

Speaker 5

Is it fair to

Speaker 4

characterize The exercise as figuring out how they'd be sequenced, How you'd move ore around or is it more at this point figuring out what the mineral endowment is At each of the targets or both?

Speaker 2

It's a little bit of all that. And remember, we're talking about 2 different things there. And if you're talking particularly at both Trinity Canyon and Buffalo Valley, there's both the oxide opportunities and potentially the sulfide So, and some of those considerations are, is it large enough to support its own infrastructure? Should we put a heap leach pad down In that location rather than hauling it all the way up into the Marigold Mining and Processing Etcetera, etcetera. So there's some of the early considerations that we're doing in trade offs, but drilling is also Catching up to help us define the size of the prize.

Speaker 4

Okay. That's great. That's helpful. And maybe just flipping to Puna, Could you update us maybe on how you think about Puna in the portfolio? You've obviously had the solid exploration results.

Speaker 4

You've been reinvesting. Obviously, silver has moved higher too. Do you think you get full value for that silver? Should we still think of it as a core operation in Argentina and do you expect this level of reinvestment and exploration to continue for the foreseeable future?

Speaker 2

Yes. I think if you take a step back and look at Puna, it probably from an It's actually been under invested for a number of years and last year was really first effort of putting some more effort and dollars into the exploration programs. And I guess not a surprise to us, The drill results that we're releasing in quarter 1 were outstanding and do show clearly a potential there For mine life extension for the asset. So that's a good place to start. So Yes.

Speaker 2

While we're generating those results and understanding how they play into the longer term picture for Puna For extending the mine life, they will get more dollars to invest into it. But at this stage, Puna remains an asset, A core asset to us. And as it continues to evolve, that will be important to us To really understand its full potential as an asset in the SSR portfolio. So it's pretty exciting some of the results we're getting down there.

Operator

Your next question is from Cosmos Chiu with CIBC. Please go ahead.

Speaker 5

Hi, thanks Rod and Sorry if you might have answered some of my questions here, but I missed the first 10 minutes because it took me 10 minutes to get in. But maybe first off on CV, Rod, not the best quarter in Q1 as you mentioned. Could you maybe elaborate on what the equipment downtime issues were and how they were resolved?

Speaker 2

Hi, guys. Yes, look, sorry, you missed the first few minutes, but I'm happy Happy to answer your questions. Look, the safety issue was just equipment availability. We had some unscheduled maintenance, which meant that the development rates and Access to the mine schedule that we actually planned for, meant we weren't able to do that. So instead of accessing some of the better grades, we're in areas where we hadn't planned to be.

Speaker 2

So it was as simple as that. We've now overcome those and the fleet is up back and running. But as you know, with a quarter behind us, we're going to do everything we can to catch it back up, but it might be a bit of Stretch to sort of get back to that bottom end of guidance. But again, if I look at it from an overall perspective and materiality Compared to the other assets, obviously, it's a smaller contributor. So, it's not a concern for us on a consolidated basis at this stage.

Speaker 5

Of course. And I think in the MD and A you mentioned that you're trending back up to reserve grade. Think reserve grade 6.35 grams per tonne. How does it work? Is it like linear?

Speaker 5

Are you going to get back to it right away? And How should we look at grades?

Speaker 2

Look, as soon as we get back into the more normal sequence, you would expect To be on that average cost. So to answer your question, yes, we would expect it to get back to that average for the year.

Speaker 5

Yes. And then Ron, last year was a very good year. There was positive great reconciliation to the point where I think at one point in time you were trying to look to see and Do some exploration around the fringes to see if you could find some of that higher grade. I didn't see it mentioned in the MD and A, but could that be an X factor in terms of CV, is there any kind of potential here in terms of the higher grades that you saw last year, this year?

Speaker 2

We're certainly still in terms of the exploration efforts, we do have a program looking at the continuation of the mineralization of depth, that is true. And that's Part of the actual work this year. In terms of planning for the leprechaun pots, because that's a dangerous practice to do, but Looking back, that happens to play out lucky us, but we don't plan that way.

Speaker 5

Well, where's the phone if you don't got Bell and Elecrochaun? Just kidding.

Speaker 2

Well, if we do, I might cause you with the first and last.

Speaker 5

All right. Thank you. Awesome. Maybe switching gears to Cherpiler, great to hear a number of catalysts coming up, Checkmate extension and then also C2. Have you ever disclosed Rod, I forget, how much of are you accounting for in terms of Cekmatepe extension coming in in terms of production analysis To get to your guidance for the year for Turco, did you ever talk about that or if you didn't, can you?

Speaker 2

Because I don't think we actually put it into by location, but Overall, the oxide production in the Copler this year is 30,000 to 35,000 ounces. And part of that, probably a third of that is the CACMAK extension.

Speaker 5

Great. And then on C2, the C2 project sounds like there's a lot of potential here. Could you remind us The C2 project, is that within your what you talked about a few months ago, the 700,000 ounce sort of platform? Is that included or can we see more upside from what you've included?

Speaker 2

Yes. Remember when we put out the technical report, there was Also a discussion around the and remember the get Pacquiao step back, C2 itself in The first round was more like a PEA case. So it was a very initial sort of cut of what we saw at C2. That and those ounces were included. But as we've said a number of times, the work that we're doing Since then to now take us into the next round of update, which is later this year is to put it into a PFS, so a high level of Detail and study.

Speaker 2

And there's 2 really focus areas there for us. 1 is the continuation of including some of the exploration that we've been doing. But to the really the flow sheet optimization efforts to lock down other that having that type of flow sheet available to us might open up beyond C2. So It's not probably too much to go on to in this call because it's still a work in progress. But our expectation is what you saw in the Starting in 2022 was just the start of the sort of the evolution of what C2 will become.

Speaker 2

And more and more, I guess to say it another way, we expect more upside through the work we're doing at the moment.

Operator

This concludes the question and answer session. I will turn the conference back over to Mr. Antal.

Speaker 2

Good. Thanks very much. And look again, thanks very much for joining us on the call. Look forward to a very strong 2023 and talk to you all soon.

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