SSR Mining Q2 2023 Earnings Call Transcript

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August 2, 2023

There are 6 speakers on the call.

Operator

Everyone and welcome to SSR Mining's 2nd 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 Honchuck with SSR Mining.

Speaker 1

Thank you, operator, and hello, everyone. Thank you for joining SSR Mining's Q2 2023 conference call, during which we will provide an update on our business and a review of our financial performance. Our Q2 2023 consolidated financial statements have been presented in accordance with U. S. GAAP.

Speaker 1

These financial statements have been filed on EDGAR, SEDAR, the ASX and are also available on our website. To accompany our call, there is an online webcast, 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 U. S. Dollars unless otherwise indicated.

Speaker 1

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, Executive Chairman Alison White, Chief Financial Officer and Bill McNevin, Executive Vice President, Operations and Sustainability. 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. Before I get started, I wanted to introduce Bill McNiven, who is joining us for his 1st quarterly earnings call. It's a pleasure to have him finally join us. He's been in the field for the last 6 months and welcome to the call, Bill.

Speaker 2

As we close out the first half of twenty twenty three, it is pleasing to report that our consolidated operational results to date Have been generally well aligned to our expectations. Production from Copler, Marigold and Puna have been solid, partially offsetting the slower start to the year at Seabee. Looking forward and as we guided at the beginning of the year, we expect During the 3rd and 4th quarters at reduced costs, generating positive free cash flow. Given our outlook for a strong second half of the year And our recent share price, we repurchased over $45,000,000 of shares in the first half of the year. Combined with our base dividend, we are on track to exceed $100,000,000 in capital returns in 2023 All at 3.4 percent yield.

Speaker 2

This is a strong message that should confirm our free cash flow outlook for the second half of the year. It was a busy quarter advancing our organic production growth and announcing a strategic acquisition. At Copler's Cakmaktepe extension, we began pre stripping that will allow access to the 1st oxide ore this year and is aligned to our original timetable. For our team, this progress is obviously very exciting. Also during the quarter, we announced a highly accretive acquisition of the world class hot matin project in Turkey, which provides us operatorship and an up to 40% interest in the project.

Speaker 2

We've We've been busy completing the handover from our partner, Lydia Mines, who has been doing a tremendous job advancing the project and establishing sustainable relationships with all the key stakeholders including the local communities. We've been focused on recruiting the project team to complement the team already on the ground and progressing the initial site works which are underway. Finally, we anticipate the release An updated technical report and subsequent construction decision for the project during 2024. We also have a number of key value driving catalysts on the horizon. This includes the first production from the Cakmatape Extension And the technical report updates that showcase the future of Marigone, Sherpa and again, Hod Madden.

Speaker 2

These technical reports are the next Our continued de risking of the long term 700,000 ounce production platform that forms the foundation of SSR. We have a proud history as explorers, mine builders and operators, as well as a long track record of prudent value Additive M and A. Our business is in a strong position supported by our solid balance sheet, including the more than $700,000,000 in total liquidity. I'm going to move on to Slide number 4 and I'll talk about ESG. ESG is And has long been a core value and focus for the company as it firmly underpins our success.

Speaker 2

We continue to prioritize the health and safety of our employees And Business Partners and on the 14th April this year, we published our 5th annual ESG and Sustainability Report marking another step in SSR Mining's continued efforts to operate responsibly and sustainably while maximizing the benefits to our stakeholders. In 2023 and as an improvement opportunity, we reinvigorated A focused informal leadership in the field initiative to drive engagement and improve safety performance across the operations, which has been met with enthusiasm from our teams. Additional key initiatives this year include continued development of an action plan We are progressing water management plans for each of our assets and finally progressing our efforts on integrated mine closure plans to ensure that we leave a positive and lasting legacy for our local communities. As we've done previously, we will work hard to advance Our ESG initiatives and look forward to sharing continued updates on that journey throughout the year. So moving on to Slide number 5.

Speaker 2

As I mentioned, we have established a pathway to maintaining a stable production platform of at least 700,000 ounces over the remainder of the decade. That platform was further supported by the acquisition of the Hot Madden project, adding 1 of the highest We continue to advance drilling and technical work ahead of the updated with the goal of building reserves and extending mine lives at each one of those assets. We intend to convert these efforts Into updated life of mine plans providing a full refresh of each asset's long term production profile as well as highlighting opportunities for future growth. We're in a good position to build on the existing production profile demonstrated on this slide. By delivering low capital intensity, high return organic growth, we aim to continue demonstrating our position As a strong and consistent operator with a commitment to free cash flow generation.

Speaker 2

Moving on to Slide 6, And just to talk a little bit about Cod Madam. As I mentioned in the Q2, we announced And closed a transaction that provided SSR Mining operatorship and up to a 40% interest in the world class Hod Madden project in Northeast Antiqueyo. Od Matin perfectly complements our portfolio with best in class gold equivalent grades of over 11 grams At an average life of mine, co product all in sustaining costs of less than $600 an ounce. We have a proven track record of success in the country and are advancing site preparation activities at the project as we speak. Our technical teams are hard at work optimizing the design, project execution and production plans developed by our partner while also evaluating additional upside opportunities.

Speaker 2

This year, we're spending a total of $21,000,000 and are working to arrange financing for the construction decision. Next year, we expect to issue an updated technical report for the project, which will inform the construction decision for our Board. This first quarter of costs, Hotmadin is expected to generate in excess of $160,000,000 in free cash flow annually For more than $65,000,000 in attributable free cash flow using the $1600 per ounce base case gold price. This structured transaction limited our upfront capital outlay and we expect it will help preserve At better than a 15% all in acquisition internal rate of return for our shareholders by the time the project is in production. Overall, the transaction was a material positive for our business, our existing partnership with Lydia Mines and our new partners Horizon, And we look forward to updating you on the progress as we continue along that journey.

Speaker 2

So just moving on to Slide 7, We are confident in our ability to deliver shareholder value with the Hotman transaction because as you can see, it is something we've done before. The same project development team and strategies that successfully delivered the Copler Sulfide Plant project on time and under budget Is currently being deployed or redeployed to the Hod Madden project, further derisking the project build. In addition to that experience as mine builders, we have a clear track record of adding value through M and A And continue to see further upside across the portfolio that delivers additional values to our shareholders. Our approach to M and A remains unchanged. We will continue to actively consider and evaluate opportunities to add value to our business through transactions that fit our strategy of disciplined growth in core jurisdictions and that complement Our focus on free cash flow.

Speaker 2

So with that, I'm going to turn over to Slide number 8 and hand the presentation over to Alison.

Speaker 3

Thanks, Rod, and good afternoon, everyone. I'd like to first focus on our capital returns program, which remained active in the Q2 and is one of the 3 pillars of our capital allocation strategy, complemented by reinvesting in our business and ensuring balance sheet strength. Through the end of June, we have to shareholders for the 3rd consecutive year. In total, we have returned more than $400,000,000 over the last 3 years, which is something we are very proud of. The company is positioned for a minimum full year capital returns yield of at least 3.4% based on the activity that we've already had this year.

Speaker 3

As Rod mentioned, we see a number of positive and value additive catalysts on the horizon, as well as positive operational tailwinds and as such we view the buyback as an accretive way to return capital to shareholders. During the last month of the quarter, we also renewed our share buyback program, enabling us to repurchase up to an additional 10,200,000 shares over the next 12 months. Slide 9 will provide a review of the Q2, so let's turn to that and take a look at our results. 2nd quarter production of 157,000 gold equivalent ounces and first half production of 304,000 gold equivalent ounces We're in line with our expectations for a second half weighted production profile. Sales in the second quarter We're 148,000 gold equivalent ounces.

Speaker 3

The approximately 9,000 ounces produced, but not sold in the quarter was driven by a closure of the banks and metal markets during the last week of June for a Turkish holiday and a late arrival of a vessel at our port where we ship concentrates for Puna. These are timing differences and the ounces were sold in the Q3. All in sustaining cost of $16.33 an ounce is slightly high, but in line with expectations and reflects our guidance of the first half weighted sustaining capital profile, where we placed 4 new haul trucks into service at Marigold. Our first half of sustaining capital at CB is also always high due to purchases made for transport on the ice road that supports operations at that location for the entire year. The all in sustaining cost denominator was also impacted by the 9,000 In Unfold inventory at Sherpler and Puna, which decreased the ounces sold for the calculation and would have improved our overall fall in sustaining costs.

Speaker 3

Earnings per share was $0.35 per diluted share. Attributable net income and adjusted attributable net income were both approximately $75,000,000 Deferred tax benefits were net at about $46,000,000 during the quarter after considering the non controlling interest. With the acquisition of Cartel Tepe late last year and Hod Madden this year, our deferred tax liabilities increased by more than $200,000,000 This increase in the total base value of liabilities is then subject to the currency devaluation that has occurred thus far in 2023, Driving the net benefit after consideration of non controlling interest reductions. In the quarter, we delivered positive free cash flow of $22,000,000 for $46,000,000 before working capital adjustments. Over the remainder of 2023, our production remains relatively evenly split between the 3rd and the 4th quarters with a decline in the pace of the spend on sustaining capital driving improved free cash flow throughout the rest of the year.

Speaker 3

With respect to inflation, we have seen an improvement in diesel and power prices across the portfolio, But note that consumable pricing and labor cost pressures do remain a headwind. Overall, however, We remain on track for our full year consolidated capital and cost guidance. On July 15, Certai announced a 5% increase in the corporate tax rate from 20% to 25% that is retroactive to January 1, And we will now begin the Q3 when we record the 5% increase. For cash taxes, we do not anticipate a material change in the short term due to existing incentive tax credits in the country that are currently in use. Any additional benefits such as the one we had in the 2nd quarter Resulting from devaluation will continue to offset additional expense expected as a result of the rate change to 25%.

Speaker 3

Now turning to Slide 10, we can talk about SSR Mining's financial position. Our balance sheet remains another of our key strengths and a pillar of our capital allocation strategy. Our cash position currently stands at more than $410,000,000 reflecting our continued delivery of peer leading capital returns and $120,000,000 in upfront consideration paid as a part of the Hod Madden transaction, which was also paid during the quarter. Total liquidity is currently more than $700,000,000 and we expect positive free cash flow into the end of 2023 that will further reinforce our financial position. We are committed to maintaining a robust balance sheet to weather volatility in the commodity price environment, ensuring 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.

Speaker 3

As such, the quarterly base dividend of $0.07 a share is payable to our $13.50 an ounce gold reserve price. Our 3rd key pillar of the capital allocation strategy is that we will continue to reinvest in growth, including our internal High return, Cakmaktepe Extension, Tripler Expansion and Hod Madden Projects, as well as the exciting exploration programs across the portfolio that we have dedicated more than $80,000,000 in spend to this year. We will remain dynamic in our approach to our share buybacks and have capacity to repurchase up to 10,200,000 additional shares on the recently announced buyback program before its expiration in June of 2024. Our company remains in a strong financial position and we expect Further improvement into year end. And now I'll turn the call over to Bill, our Executive Vice President of Operations and Sustainability to review the operations.

Speaker 4

Thanks, Allison.

Speaker 5

It's a

Speaker 4

pleasure to be here with you today on my first conference call with SSR Mining. Since joining the company at the beginning of the year, I've been focused on operational improvement and efficiency, and I've spent the majority of my time at each of our 4 core operations. Already I've come to respect the impressive talent and diversity of skill we have throughout the company. I'm very appreciative of all the hard work that has brought SSR Mines where it stands today. At the same time, I see areas for improvement and we will continue to define and prioritize these as we update our operating practices going forward.

Speaker 4

Before I dive into the individual assets, I want to start with a brief discussion about safety. Most important thing we do each and every day is getting our people home safe. As a core SSR value, this has always been a focus. Now we are driving increased leadership engagement And implementing simple tools to enable our people. Whilst this is improving safety, it is also improving the quality of work and results in the field.

Speaker 4

Our safe production delivery is an integral approach to our long term success. So now on to Chobba. The mine delivered Q2 production of 52,000 ounces at an ASIC of 13.84 per ounce. The sulfide plant delivered another strong quarter of production, the throughputs averaging nearly 7,500 tonne per day, showcasing the continued optimization of this asset. The planned Autoclave maintenance currently underway is on track to As usual, we continue to operate the 2nd Autoclave at higher capacity during the maintenance period, Limiting the impact of production in the Q3.

Speaker 4

Other key work programs, Chipla, continue as scheduled, including first production from Cakmangtepe, Extension, where pre stripping was initiated in the 2nd quarter and first gold production 10000 to 15000 ounces is expected this year. We're also advancing work on the updated technical report. Work to date has built on the TRS published in 2022. With significant advance with work We are now awaiting assay results to support this technical report update, which means we will be in the position to publish Exploration work continues across Chupa District, including the regional targets where we expanded our ownership to 80% in Q4 of 'twenty two. We have a full suite of near and long term growth opportunities across the district that we will continue to advance.

Speaker 4

Now on to Slide 14. Marigold produced 60,000 ounces in the 2nd quarter in line with the planned production profile. At an ASIC of $16.56 per ounce in the second quarter, Reflected the planned spend on new haul truck purchases to support waste stripping activities. Sustaining capital will trend downward significantly in the 3rd and 4th quarters, in line with full year guidance. Marigold remains on track for 2023 with leach cycles now returned to normal As the mine continues stacking more durable ore that was typical for the operation.

Speaker 4

We're advancing technical work ahead of an updated life of mine plan for Marigold, where we aim to capture upside. This includes incorporating more than 2 years of drilling, in particular at New Millennium into updated resource models for Marigal. Work is also underway to evaluate potential longer term production pathways at the Trenton Canyon and Buffalo Valley targets at the southern end of the Marigold property. Now moving on to Slide 15, Seabee. Seabee's 2nd quarter production was below plan as the mine work to overcome the 1st quarter mining shortfall resulting from the unplanned maintenance outage.

Speaker 4

Accordingly, grades remain below our original expectations at the mine, focused on getting the stope sequence on plan to open up access to high grade stoves for the second half. Positively in the month of July, CB Ted grade Increased and the mine produced just under 8,000 ounces, positioning the operation for a much stronger second half. In addition to improved mine performance, we expect costs to improve in the second half given the completion of spend on the winter road in the second quarter. We continue to advance our near mine exploration at Seabee as we prioritize mineral resource conversion activities to ensure growth and mine life extensions in the future. Moving on to Slide 16, Perna.

Speaker 4

Burnham delivered another strong quarter and up with 2,300,000 ounces of production at ASIC of $17.40 per ounce. Burnham Reim is well on track for its full year guidance and we anticipate improving cost performance in the second half. Near mine exploration continued in the 2nd quarter, predominantly focused on resource and reserve expansion efforts as we aim to extend the life of mine plan. We've also returned additional exploration success at Cortadera's target near the Paquitas Mill, presenting a potential longer term growth target for the operation. Moving on to Slide 17.

Speaker 4

Before I hand back to Rod, I want to reiterate my optimism for our portfolio and longer term trajectory. We have an accomplished team and a very solid portfolio of operations And I'm thrilled to have a role in helping further improve and grow SSR Mining.

Speaker 2

Great. Thanks, Bill, and thanks, Allison. As you've heard, we're in a good position as we move into the second half of twenty twenty three. Generally, the Q2 was aligned to expectations and positively also included the highly accretive acquisition The up to 40% interest in the Hotmadden project. While we are tracking to the lower end of our consolidated production guidance due To the first half results at CB, we expect significant improvement in our operating and financial results in the second half of the year.

Speaker 2

We're also keen to share the updated technical reports to showcase the organic growth potential across the portfolio. So in short, with a key number of value enhancing catalysts on the horizon and the anticipation of improving production and free cash flow In the coming quarters, we remain extremely optimistic about the business. So with that, I'm going to hand the call back over to the operators for

Operator

Our first question is from Cosmos Chiu with CIBC. Please go ahead.

Speaker 5

Thank you, Rod, Alison, Bill and Alex, maybe my first question is on your guidance. Rod, you've maintained your Your guidance at 700,000 to 780,000 ounces, GEOs, but you've also said you're now trending towards the lower end. I just want to confirm, I think you've already kind of answered my question here, but the one sort of factor that you had not anticipated Would have been the slower start to CD. Is that why it's now trending to a lower end? Everything else is on target, all the other assets just really CD?

Speaker 2

Yes, I think that's right, Cosmos. If you remember in the Q1, we talked about The underperformance at CB and the reasons why, and clearly that put us on the back foot. And if you remember, I I can't remember if you actually asked the question, but I did say it would probably be difficult for us to call back to the original guidance for Seabee and that's held true during the Q2 as well. So as we look across the assets and how they're performing, We're actually quite fortunate, I think that we're in the position we're in. Given that Performance at Sea Blue, we're right on track for the first half and expect to if we can maintain that sort of momentum moving into Half 2, we'll be able to meet our production guidance over the lower end.

Speaker 5

Great. And maybe more specifically On Kepler, you've done 107,000 ounces now in the first half. You're targeting 2 According to 2,700,000 ounces for the year. If I work it out correctly, the math, It looks like you have to improve in Q3 and also Q4 as well. You've said Q4 is going to be 55% of the second half of production.

Speaker 5

But If I work it out, Q3 has to improve as well. I guess my question is, Rod, it sounds like there's some maintenance that still needs to be completed in Q3. Can you help me understand how Q3 is going to be better than Q2? Is it a combination of Cac Mu Tepe Coming in or is it higher throughput? Could you just give me a bit more color?

Speaker 2

I'm going to since we've got Bill in the room now and I can deflect some of these questions to the team, I'm going to deflect this one to Bill.

Speaker 5

Thank you.

Speaker 2

Yes. I

Speaker 4

appreciate the question. So there's a we have several drivers Heading into Q3 and then into Q4. We've done some work with the Autoclaves on the throughput rates. So there's we've been improving there. The other thing that impacted the first half of the year was the, our oxide performance, that we didn't actually end up Stacking as much material as we planned for.

Speaker 4

Moving forward, we've got plans to have that material be stacked and that will help increase as well. And also we've got some very good work going on in terms of improving the operating time in the order class. So that's the maintenance I talk about is going to be finished this month, but it's going to come in on a Less time than we've traditionally done and there's also been some changes in what we do with maintenance with that oxidization circuit. So several things there. So it is an increase, but we're very focused on working to deliver against it.

Speaker 5

Great. And I don't know if this is related from other companies we've heard there was heavy rainfall in Turkey A In parts of Turkey in Q2, is that part of why your stacking of the off sites was impacted or was AAA a bit different?

Speaker 4

We didn't we weren't heavily impacted by the weather in Q2. Our oxide stack was purely about blending and having the right material at the right time. So weather wasn't an impact for us.

Speaker 5

Got it. Maybe switching gears a little bit, same question on Marigold, solid quarter, solid Q2 as expected. You've done 112,000 ounces now in the first half, slightly over, you're targeting 260,000 to 290, Once again, it sounds like the leach cycle is now more normalized without some of the fines that you saw last year. But what's driving that increase again into Q3 and Q4? Is it stacking rates?

Speaker 5

Is it the recovery that's coming up from what you've already stacked In Q1 and Q2, could you maybe again give us a bit more color in terms of the increase that we're anticipating?

Speaker 4

Stacking rates, the big driver. So obviously, Q3 is very important to us. So it's mining through and the material we're getting coming towards us. As you say that we've normalized, we're through. We had a positive return relative to we were Challenge with that area that needed work with the fines material.

Speaker 4

We're virtually through that. So now it's just really about the timing of the oil release and the Thank you, Ryan.

Speaker 5

Great. And maybe one last question, again, on something else here. Hi, Madan. I've always said, I think that's a very complementary acquisition that you've made, Rod. I know you're looking working But in the meantime, should we anticipate, Rod, any kind of news flow between now and then?

Speaker 5

And that maybe, again, specifically, you talked about financing options. Could you give us some insight in terms of what some of those options might be?

Speaker 2

Yes, because it's really the work that we're doing to put us into a position to make a Go decision on the project is just improving the fidelity that we have around the project itself. So We are doing some infill drilling. We're doing the work around the flow sheets validation work. We're also looking at Validating our own thoughts on ways to improve the flow sheets etcetera. So There won't really be a lot of news flow to talk about here in the next little while moving into next year because it will all be pieces of work that will be running in parallel together to come to a conclusion for us.

Speaker 2

But it really is just Simply thinking about its confirmatory work from our DD that we overlay our experience of building the surplus sulfide plant And the approach that we took to building that plant with the same team that we've now deployed in some positions I hope it's a hot mat and etcetera, etcetera, etcetera. So when we get going and start to bring it out of the ground, we have a high level of confidence to be Very successful for it. So that's really what the emphasis will be. There'll be some small works going on. As we sort of mentioned, there is Some early stage infrastructure works.

Speaker 2

We've got some tunneling going on to access the site, some tunneling work that will be going on at site So to put the access over to the TSF area, But beyond that, there won't be a whole lot more activity. So it's ramping up, it's getting the teams in place, Some drilling, etcetera. So really look forward to next year. From a financial perspective, Allison is really busy at the moment as you can imagine. I think she's made a couple of trips to London already to pick up on the work that was already sort of underway by our joint venture partners and we expect To pick that work up to try to progress through to a project financing.

Speaker 2

And if there's obviously any news flow coming from that Between now and the actual decision time, we'll obviously let you know that that work will just quietly Progress here to try to get the best terms as possible for the partners that we now have on the hot matting project. So I don't expect anything to come out of that here in the next couple of months. It will probably be at best late in the year or probably early next year.

Speaker 5

Of course. Thanks, Rod and team. Understood. And thanks again for answering all my questions.

Operator

For any closing remarks.

Speaker 2

Great. Thank you and thanks everyone again for joining us today and participating in our call. Have a great day and look forward to talking to you again in another quarter. Thank you. Bye bye.

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