Ssr Mining Inc. (SSRM) Q1 2022 Earnings Call Transcript

Hello, everyone, and welcome to SSR Mining's First Quarter 2022 Conference Call. This call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Alex Hunchak from SSR Mining.

Thank you, operator, and hello, everyone. Thank you for joining SSR Mining's first quarter 2022 conference call, during which we will provide an update on our business and a review of our financial performance. Our first quarter 2022 consolidated financial statements have been presented in accordance with U.S. GAAP. 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, 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 U.S. dollars, unless otherwise indicated. 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; Alison White, CFO; and Stew Beckman, COO. Now, I will turn the call over to Rod for his opening remarks.

Thanks, Alex, and hello to everyone, and thanks for joining us today. The first quarter of 2022 featured a number of positive and significant milestones, and I want to take this opportunity to recognize and thank everyone at SSR for all their extra efforts enabling a smooth transition to becoming an SEC filer. Already this year, we released our inaugural 3-year production guidance. And then as a function of our transition to an SEC filer, we released technical reports for all 4 of our producing assets, which led to a material increase in mineral reserves by 14%. Those reports not only supported our 3-year guidance, but also outlined a clear pathway to maintaining a stable production platform in excess of 700,000 ounces annually for at least the remainder of the decade. This solid long-term production outlook will support our goals for maintaining excellent free cash flow generation, reinvestment in high-yielding projects within our business and capital returns going forward. At the start of the year, we increased our base dividend by 40%, further reinforcing our capital returns commitment. In addition, during the quarter, we released our 2021 ESG and Sustainability report. We announced the accretive sale of our Pitarrilla project. And subsequent to the quarter, we have closed the Taiga Gold acquisition. And finally, we received Board approval to progress the 60% IRR C2 development project through to the PFS stage. Definitely, an impressive list of achievements in a short period of time. Now, diving into our operating results. I'm once again proud to note our continued track record of outperformance through delivering on our commitments. Gold equivalent production of over 173,000 ounces at an all-in sustaining cost of $1,093 per ounce was in line with our expectations. These results included a record quarter from Seabee, which produced 53,000 ounces of gold at an all-in sustaining cost of $596 per ounce. Seabee's outperformance helped offset some of the inflationary impacts we encountered during the quarter, particularly with respect to fuel and consumables. Coupled with our previous commentary that our full-year production is second half weighted, we remain well positioned to deliver against our full-year guidance of 700,000 to 780,000 ounces of gold at an all-in sustaining cost of $1,120 to $1,180 an ounce. Overall, we're off to a really strong start. Moving on to Slide 4. And on this slide, I want to highlight our ESG performance and priorities. The ESG is and has long been a core value and focus for SSR Mining as it firmly underpins the success of our business. We released our fourth annual ESG and Sustainability report in April, which highlighted a number of achievements during 2021 and some of the new initiatives for our company. During 2021, amongst other things, we progressed our efforts to establish a science-based action plan to support our commitment of net zero greenhouse gas emissions by 2050. In 2022, we will complete the rollout of our EHS&S integrated management systems with full implementation expected this year. Furthermore, we will complete third-party closure reviews across all operating assets to ensure a positive post-mining future for our stakeholders and are also developing a water stewardship strategy as we seek to continually reduce our environmental footprint going forward. So, moving on to Slide #5. I'll take a moment to highlight our outperformance across key metrics and the impressive returns our shareholders have enjoyed as a result. In '21, we realized a free cash flow yield of 12%, well exceeding our peer group and that strong performance translated to peer-leading capital returns. Subsequently, and as I mentioned, we have increased our base dividend by 40% to $0.28 annually and continued to evaluate further share buyback programs and/or further dividend increases. On top of our operating performance, we have delivered material value creation across the portfolio through operational improvement initiatives, project development strategies and exploration success. This includes the recently announced reserve growth at Ardich and Seabee's Gap Hangingwall. The consolidated outcome of all the new technical reports provides an impressive increase of 2.5 million ounces of production against the prior technical reports. And we feel like we're a long way from being both done or satisfied. We have a number of new growth projects moving along through the various stages of development and exploration continues across each operation on a number of exciting targets. The operational outperformance and value creation has translated directly into our share price performance as we have outperformed both our peers and the GDX by more than 30% over the last 12 months. With the catalyst-rich year we had, we fully expect this to continue. I'll speak to some of the catalysts on the next slide as well as some of our key achievements in the year-to-date. As noted, we have had a busy start to 2022, delivering a multitude of positive milestones. Looking ahead, we continue to focus on our operational excellence, including supply chain management initiatives aimed at limiting the impacts of inflation, supply chain weaknesses, and global disruptions on our operations. It is fortunate that we don't have any large capital projects on the books at the moment as they seem to be most prone to material cost increases. As you are aware, our capital projects are relatively modest in terms of capital costs that feature some of the best returns in the industry. We continued to progress Ardich towards first production in 2023. The CDMP21 released earlier this year, Ardich featured a 1.2 million ounces of gold production, adjusted to $69 million in development CapEx, and that production number could grow with continued exploration success. We have also approved the C2 project to move into a PFS study where the CDMP highlighted another 1 million ounces of gold production for approximately $220 million in CapEx to at this stage, beginning 2025. Now, just moving on to the next slide and our first quarter results in more detail. A few of the highlights that are relevant to consider for the quarter. Operationally, another strong quarter with 174,000 ounces of gold production at an all-in sustaining cost of $1,093 per ounce. Financially, we delivered adjusted EPS of $0.30 in the quarter. As previously guided, our first quarter cash flows were impacted by timing and increased tax and royalty payments. Despite that, we delivered operating cash flow of $62 million and free cash flow of $28 million. We announced the inaugural 3-year production guidance, showcasing a stable production above 700,000 ounces and increased our quarterly dividend payments by 40%. We also highlighted our long-term production platform with the updated technical reports, demonstrating our ability to maintain a 700,000 ounce a year baseline for the remainder of the decade. We continued with our positive portfolio rationalization with the sale of Pitarrilla, now realizing over $240 million in total consideration to non-core assets over the last 4 months. And then finally, and subsequent to the quarter, we closed the acquisition of Taiga Gold, which expands our exploration platform in Saskatchewan to 131,000 hectares. So, moving on to Slide 8. As we continue through 2022, it is worth highlighting our impressive track record of growth and execution. As noted, following a solid first quarter, we remain well on track against our full-year guidance and expect our production will remain second half weighted as Marigold's performance improves, especially in quarter 4 this year. Overall, we start the year with momentum on the back of a host of positive news and are in a great position to again meet or exceed our commitments. So, with that, I'm going to turn the call over to Alison, who's going to discuss our financial performance in detail, starting on Slide #9.

Thanks, Rod, and hello, everyone. I'm happy to see 2022 is off to a good start for both our operating and financial results. In the first quarter, we produced nearly 174,000 gold equivalent ounces, in line with our expectations for a back half weighted production profile as we had communicated with our guidance. Gold equivalent sales of nearly 180,000 ounces were supported by higher silver sales at Puna, as sales diverted from the end of 2021 were executed this quarter. Revenue was $355 million, supported by strong first quarter commodity prices. Attributable net income for the quarter was $69 million or $0.31 per diluted share and adjusted attributable net income was $66 million or $0.30 per diluted share. First quarter operating cash flow of $62 million and free cash flow of $28 million were both impacted by timing and increased tax and royalty payments during the quarter, as previously noted and expected. We continue to anticipate a second half weighted free cash flow profile and are keeping our eyes on inflationary pressures that have trust in across the business. While we have thus far maintained low costs, we acknowledge the headwinds. We've previously talked about pervasive inflationary pressures and how our continuous improvement programs have helped to offset some of the headwinds across the globe. Those improvement efforts continue in earnest to help offset what we are experiencing in price escalation. We've also previously communicated that inflation and devaluation tended to offset each other and we are now seeing that inflation is outpacing devaluation by about 10% to 12%, thus causing additional cost pressures for us as a business. Given diesel, reagents, and consumable parts are the categories where we're experiencing the most cost pressure thus far, we anticipate that this trend of rising costs will be something that will continue in the future. Again, we acknowledge that this is a headwind for us that we will aggressively and proactively work to mitigate, and we'll continue to update on any changes in this space as the year progresses. On the right side of Slide 9, I'd like to provide some commentary on our reported $0.30 in diluted earnings per share, that is calculated based on the company's definition of adjusted attributable net income per share. We start with our attributable net income of $0.31 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 to arrive at the $0.30 in adjusted attributable diluted earnings per share. Each of those items is outlined in the waterfall chart on the right of the slide. Admittedly, the impacts were relatively muted this quarter. We had minor adjustments for transaction and integration expenses that were associated with our SEC transaction that was completed earlier this year and stemming from the loss of SSR Mining's foreign private issuer status. Additional minor impacts included for foreign exchange as the Argentinian peso and the Turkish lira devalued against the U.S. dollar in the quarter. And finally, a minor adjustment for the mark-to-market of our marketable security portfolio. The most notable discussion here involves an item that is no longer included in our adjusted attributable net income for the fair value adjustment at Copler. As we noted in February, this is an item that we are no longer adjusting for and is now incorporated into the operating cost profile at Copler. Turning to Slide 10, we can talk about SSR's financial position. At the end of the quarter, the company maintained a cash and cash equivalent balance of over $1 billion, while net cash is nearly $700 million. With that strong cash position in mind, I would like to reiterate our priorities with respect to capital allocation within the business. First and foremost, we will continue to reinvest in growth, including our exceptionally high return Ardich and C2 projects, which will account for approximately $300 million in total growth capital through 2025. Next, we are committed to maintaining a robust balance sheet to weather volatility in the commodity price environment and 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. Third, we remain committed to capital returns as evidenced by the nearly $200 million we returned through our NCIB and base dividend in 2021. Already this year, we have increased our base dividend by 40% to $0.28 annually and we will continue to evaluate supplemental returns to our shareholders in 2022, including another share buyback program and/or a further dividend increase. Most importantly, we will continue to be disciplined in our approach to these initiatives while ensuring our returns appropriately reflect our company's strong free cash flow generation. And with this, I'll pass it over to Stew for an operational update, starting on Slide 12.

Thank you, Alison. As always, I'll begin with EHS&S. In our last call, Rod mentioned the tragic fatality that took place at Puna in the first quarter. The loss of Molina has had a profound impact on our business, and the subsequent actions are affecting all areas of our operations. Following a record low total recordable injury frequency rate of 2.47 in 2021, we saw an increase in the first quarter of 2022, which we're currently addressing. Our continuous improvement programs across all ESG elements are ongoing, and Rod has already highlighted the release of our updated sustainability report. Safety and caring for our teams, communities, and the environment are at the heart of our values and essential to our business performance. Before I get into the specifics of our quarterly results for each asset, I'd like to discuss our consolidated production profile from last quarter's technical reports, which is illustrated on Slide 12. The main takeaway is that the mine plans provide a solid production foundation, and we clearly see the potential to achieve over 700,000 ounces of gold equivalent production annually through 2030. This strong base, combined with various growth targets across our portfolio, indicates that we expect to build upon this foundation. As previously noted, we had a very active start to the year with strong production from Seabee and record sulfide throughput at Copler. While we experienced softer results at Marigold and Puna, we anticipate better performance in the second quarters and latter half of the year for both mines. We are on track for our full-year guidance of 700,000 to 780,000 gold equivalent ounces at an all-in sustaining cost of $1,120 to $1,180 per gold equivalent ounce, with production expected to be heavier in the second half, particularly due to our projections for a robust fourth quarter at Marigold. We are focused on the areas within our control, and each site is dedicated to operational excellence, emphasizing productivity improvements and cost management. Many of these enhancements were incorporated into our 2022 plans and budgets to counterbalance some inflationary impacts. Our supply chain transformation initiative, which began in 2021, is gaining traction and has better positioned us to navigate the supply chain challenges currently affecting the industry and the global market. Please refer to Slide 13 for an update on Copler. The Copler sulfide plant achieved another record quarterly throughput of 645,000 tonnes, and we are beginning to ramp up production from the flotation circuit. Localized reconciliation has had a negative effect on production, but we expect improvements in this area. We commenced our first major scheduled autoclave shutdown to rebrick phased courses on April 1st after the quarter ended, and the shutdown was completed on schedule without any complications. Congratulations are due to the Copler team for this accomplishment. As you may recall, the flotation plant ramp-up began after we received final operating permits late in December. This new plant will allow us to capitalize on excess capacity in the sulfide plant and increase overall production levels, while also reducing reagent consumption, which will help alleviate some inflationary pressures on consumables. We are continuing our development work at Ardich and are moving towards first gold production in 2023. As highlighted in the latest technical report, Ardich is anticipated to yield more than 1.2 million ounces of gold for an initial capital expenditure of about $69 million. Since 2017, we've invested $18.5 million in exploration drilling at Ardich, resulting in an impressive discovery cost of just $6 per ounce. Permitting remains a key focus for Ardich's development, and we are progressing well with the environmental impact assessment received for the start pit area. Also noteworthy for the Copler Mine is our C2 project; we have made advancements on C2 through the quarter, and the Board has approved its progression to the Pre-Feasibility Study phase. This is another promising low-capital intensity brownfield project for us, expected to yield approximately 1 million ounces of production for $220 million of capital and an impressive internal rate of return of 60%. We aim to commence production at C2 by 2025. Now moving to Slide 14 to discuss Marigold. As anticipated, Marigold started the year slowly due to mine scheduling, achieving quarterly production of 34,000 ounces with around 46,000 ounces placed on the heap leach. The timing of heap leach placements, in conjunction with final ore from the north pit and slow leach kinetics caused an increase in gold inventory during the quarter. We expect the inventory to draw down, along with access to higher-grade ore later this year, resulting in a strong finish for 2022 within our guidance. We previously indicated that Marigold would see production weight towards the latter half of the year. Efforts to drill and equip dewatering wells are ongoing, and the water table drawdown rates are aligning with our plans, which will allow us access to high-grade ores from the Mackay pits in the near future. We are also adopting a more structured approach to Marigold's future, framed through the Marigold District Master Plan, with work on its various components accelerated this quarter. We aim to convert ounces into reserves by the end of this year and will issue an updated technical report in 2023 outlining our plans for the continued development of Marigold. Our aggressive exploration and resource definition programs at Marigold are ongoing, with drilling at New Millennium targeting additional ore near existing pits along with concurrent drilling at Buffalo Valley and Trenton Canyon to outline the best resource development pathways. The exploration team drilled over 20,000 meters this quarter and is increasing the number of exploration drills from 5 to 6. We are seeing promising results and will share them as we consolidate the programs. Now, turning to Slide 15 for an update on Seabee. Seabee enjoyed a record production quarter, driven by exceptionally high grades of nearly 18 grams per tonne. I'm pleased to report that our continuous improvement programs are yielding results, reflecting enhanced operational performance and resulting in record mine production rates of 1,150 tonnes per day. This supports our base assumptions made in Seabee's SK1300 and underscores its potential as a producer of over 120,000 ounces in the future. We believe there is further upside to be captured in Seabee's operational performance, and we are pursuing this with great determination. At times, the grades were so high that we had to moderate mill speeds to optimize gold recoveries. We closed the first quarter with a modest stockpile of ore in front of the mill, set to be processed this quarter. Exploration at Seabee is also on the rise, with 2 drills currently targeting the Shane prospect from surface and 4 exploration drills operating underground at Santoy. The Shane targets are located just off the haulage road between the Seabee plant site and the Santoy Mine. We expect Seabee to align more closely with its full-year budgeted grades for the remainder of 2022. We've developed an exploration chamber and are actively drilling to extend the ore from high-grade zones. Seabee is now forecasted to hit the upper range of its 2022 production guidance. Before I conclude, I'd like to make a final note on Seabee. We successfully completed the ice road restocking of the mine for 2022, which went exceptionally well, so we are well-prepared for the rest of the year. Moving to Slide 16, I'd like to discuss Puna. Puna produced 1.3 million ounces of silver in the first quarter, facing challenges due to heavy rains that limited access to higher-grade ore at the bottom of the pit. As a result, we processed lower-grade ores that were originally scheduled for later in the year. Fortunately, the weather has improved in the second quarter, and we are on track to meet our full-year guidance. Puna has established a strong culture of continuous improvement, and their operational metrics are consistently enhancing, building on a new baseline production level of 4,500 tonnes per day. Across all our assets, we are encountering inflation challenges, further complicated by issues related to the Argentinian peso. We are proactively enhancing inventories of consumables and spares to minimize operational risks and mitigate the potential impact of slowdowns or disruptions in our supply chains. Our supply chain transformation program has been instrumental in supporting these efforts. Please refer to Slide 17. Lastly, before I open the floor for questions, I want to highlight some of the exploration initiatives that progressed during the quarter. In Turkey, we continued drilling at Ardich to further resource growth and conversion, as well as conducting new mine drilling around the main Copler pits. We plan to begin drilling at the [indiscernible] target south of Copler during the summer months, and preparations for our summer drilling campaign at our greenfield Copper Hill project in the Black Sea region are underway. In the Americas, new mine drilling is ongoing at Marigold, as previously noted. We are also advancing exploration in the Great Basin, including staking about 1,700 hectares of new claims in Nevada over the quarter. Additionally, we completed soil geochemistry programs at our Toy and NT Green leases in Nevada, yielding interesting results for follow-up. At Seabee, resource development is underway at the Gap Hangingwall of the Santoy Hangingwall, and we have progressed drilling programs at Santoy, Shane, Porky West, and Joker since the beginning of the year. We aim to finalize work defining the maiden mineral resource for Santoy Hangingwall, which will be included in an update of the Seabee technical report early in 2023. The exploration team also successfully concluded a winter drilling program at our Amisk exploration project in Saskatchewan. We will share the results once the analysis and quality control processes are completed. At Puna, we are getting ready to resume drill testing on targets after a prolonged hiatus. The exploration team is eager, and we have added a second drill to accelerate the testing of highly prospective targets identified at Chinchillas over recent months. I’m incredibly proud of our operations and development teams. They have a diverse skill set and depth of experience. We are among the few companies with a proven contemporary track record of successfully exploring, defining, constructing, and operating mines. This team is well-equipped to tackle the operational challenges of 2022 while also pursuing our ambitious growth objectives. Thank you, and let’s turn it back to Rodney for final remarks.

Great. Thanks, Stew, and thanks, Alison. As you've heard, there's certainly a lot going on, and we've had a great start to the year, particularly in light of the external challenges that are facing the industry. We remain on track to deliver our full-year production and cost guidance and have a number of potentially positive catalysts ahead, including the advancement of key growth initiatives and updates from our expanded exploration programs across the portfolio. So with that, I'm going to hand the call over to the operator for questions and answers. Thank you very much.

The first question is from Cosmos Chiu with CIBC.

Thanks, Rod, Alison, and Stew, for a very good presentation. And congrats on a very good start to 2022. Maybe first off on Seabee. As you mentioned, Q1 head grade was very high, very good. I appreciate, Stew, as you mentioned, you expect it to go back down to closer to 9 gram per tonne for the remainder of 2022. But I still have to ask the question. You've hit this high-grade zone starting in Q2 2021 last year, you were drilling it. I think I asked a question at that point in time as well in terms of continuation of the high grades. And you weren't sure at that point in time. Clearly, it's exceeded your expectations. Now that you've done more drilling, do you now have a better understanding of the geological structures? What drove some of these higher grades? And ultimately, can this continue?

Okay. So, I'll start at a high level, and then I'll drill down. So, we did talk when we did the SK 1300, you see the ounces tail off in the latter years as we deplete material from Santoy 8 and 9. Santoy 8 and 9, we believe, continue to extend that depth. And that's one of the main focus areas that we're drilling at the moment. We do see a slight increase as we go with depth at both of those, and so we are chasing both of them deeper. But we don't have drilling at depth at this stage. We've drilled - we've processed what we've drilled out in front of ourselves and we hope that it extends further. We do find these from time to time these jewelry boxes, and they are very high grades. The current drilling, we've got the drill chamber that we've built in front of ourselves. So, we've got drill holes in there at the moment. We can see structure but we don't know what the grade is. So - and they don't - the holes that we've got don't extend too far in front of ourselves. We will extend that drilling over time. So, it is a focus, and we do want to get more of this in front of us, and we are hopeful. If the grades are high, there is a chance that we will be able to get another stope in there by the end of this year. But it depends whether it continues or not, so I cannot promise you.

Maybe a bigger picture at Seabee here. You've closed a transaction on the Taiga Gold land package only recently. But anything you can share with us in terms of your plans for that big land package on a go-forward basis? Have you formulated any preliminary plans at this point in time?

Yes. So, it was part of our considerations ahead of buying that. We developed our strategy for exploration of the package over the next 10 years, which we shared with the Board as part of the approval process of acquiring the land. The obvious, of course, is Fisher, where we're already exploring. And then there are some other areas that we've got highlighted to start exploring, and we're very interested in. But as you say, Cosmos, it's still pretty early days.

Maybe just two questions on Copler. As you said, the flotation ramp-up is going as planned. As you mentioned, the sulfide plant had a record 645,000 tonnes in Q1. Could you remind us if that was your target? Or is it possible to exceed that with the ramp-up of the flotation circuit?

Yes. So, that - our expectation is that we will go higher, and we're budgeting to go higher. I think if you're looking for a guideline for numbers used, what's in the technical report that we've just completed because it remains pretty accurate. It's pretty early days in the commissioning of the flotation plant. We haven't put a lot of the different ore types through, and it's really only been a couple of months. So far, we're seeing better recovery of gold into a bit more volume, and we're seeing good performance. We also, the guys to their credit also managed to increase the performance of the autoclave, the underlying performance of the autoclaves as well. So, we're pretty - we're pretty positive and optimistic about the performance of the autoclaves with the lifetime.

And then that leads well to my next question, Stew, as you mentioned, recovery. I know that that recovery was 87% in the quarter, slightly lower than last year, like I think it was plus 90% last year. As you mentioned, was that higher than what you had expected? I know you're still feeding different ore types into the flotation. I'm just wondering if the lower 87% is due to the flotation circuit coming in? And is that a good number?

Yes. It is in part due to the flotation plant coming on. Our strategy for bringing the plant up was first to bring the plant up and get it stable at tonnage, so bring the tonnage up and then to chase the recovery. We also had just leading into the shutdown that started on the 1st of April. We did have a couple of issues in the back end of the plant that caused us some problems with recovery as well that contributed to that. I know it will take us a quarter or two really to settle down as the flotation plant starts to tune up.

And then my last question, maybe bigger picture for Rod. As you mentioned, Rod, very good free cash flow in Q1. We'll get even better in the second half with higher production. You've returned capital back to investors with the increase in dividend, normal course issuer bid, and everything else, but your cash keeps going up and you've sold off some of your noncore assets. Could you maybe make a general comment in terms of where you're going to spend all that cash? And what are your plans in terms of capital allocation?

Yes. I think what you paint out there, Cos, is a really good problem. But I think it actually is one of the differentiators for us as you should think about. I mean the business just goes from strength to strength. And it's really been built on great performance and all of our assets are contributing to it. So look, I think the initial step last year that we took around our capital returns and the strategy around our capital returns played out, and we delivered, like you said, nearly $200 million back to shareholders in some shape or form. We continue to assess those opportunities, and Alison and the team are busy coming up with a plan for the remainder of this year that we'll take to our Board to talk about here in the next month or two to address the increase in cash position, which, again, is a good problem to have. Part of the efforts around keeping that cash for us is obviously looking into the portfolio. And if you think about us post-merger, the progress that we've been able to make, not only rationalizing non-core assets from the portfolio, but adding more assets to the portfolio, Taiga acquisition, et cetera, et cetera, as well as the first really good start that we've had with the tech reports coming out for all of the assets, which remains very much a work in progress as we think about it. Having the ability to keep on investing into the business is really, really important to us, particularly if you get conversion rates at $6 an ounce for exploration success, as Stew highlighted in his discussion. So it's a bit of everything. Cos, we're looking at opportunities internally to reinvest. It's looking at opportunities to distribute excess cash to our shareholders, and having a balance sheet with some strength in it during a volatile time is actually a good position to be in. So, I think that's sort of where we are at the moment. And as a position - to launch from a position of strength is really what the other company will be known for, and I quite kind of like the position that we're in.

The next question comes from Ovais Habib with Scotiabank.

Again, I agree with Cosmos, congrats on a good quarter and a strong start to the year. A couple of my questions have been answered already, but just I think at the beginning of the presentation, you did talk a little bit about inflation, cost inflation. You really started on a good note on cost, but - and I know you had added in a buffer in terms of inflation in your guidance as well. In terms of supply, in terms of reagents and explosives, where do costs sit according to your budgets currently? And where is the point where we feel or where you feel that you have to relook at guidance or basically your cost estimates?

Sure. Ovais, I'll let Alison actually take this one up and discuss it for you.

So, we are seeing - we are definitely seeing inflation across a lot of our key consumables as well as diesel, explosives, and other areas. The range of the cost increases that we're seeing is really particular to the region and the location of each of the sites. And beyond that, some of the cost fluctuations that we're seeing range anywhere really from 15% to 35%, depending on what the actual consumable or item is as well as where we are located in the world. But typically, from a diesel standpoint, we have seen a little bit of an increase across our AISC. We have anywhere from say generally a 10%-ish increase in diesel price, especially at a location such as Marigold, where we have longer hauls, we typically see about a $5 impact per ounce to AISC. So, we certainly are seeing it, and we are managing through thus far, as you've noted, our costs are down so far for the year. However, we are keeping a tight watch on it and we are going to do our typical reforecasting for the year. If we see that the additional increases in price are going to go above and beyond what we expected or anticipated including our original budget and in our guidance, we will certainly come back out with that information.

I think Ovais, just to build on to it, general sense is that a huge amount of effort is going on across the business to tackle what seems to be quite interesting at the moment and hard to see a pathway to the end. I think what we're suggesting at the moment is, as Alison has outlined, we're actually in pretty good shape. However, there's a little bit of a cautionary statement that persists, and if it gets worse, obviously, it won't be just us in that boat, it will be the industry, and I think you're seeing those pressures play through. Some are more rapid than others. But I think we've done a pretty good job so far to manage it. But I don't think we see any end in sight.

The next question comes from Mike Parkin with National Bank.

Congrats on a pretty stellar quarter, especially at Seabee. First question, can you give us a little more color on - you mentioned finer ore at Marigold in the north pit. Is that just a function of lasting you're getting, is it actually like fines that are being generated above or like is it expected? Or is it a bit of a surprise? Just some additional color in terms of what you're facing up there.

Yes, Mike, it's Stew here. The new pits, 1 and 2, have slightly higher grades but are at the surface, consisting of fine-grained material. In fact, we were able to free dig the first couple of benches. This material is less durable than what we typically have. When we stack it on the heap leach, we blend it with more durable material from the Mackay pit to ensure proper percolation. However, it retains more water due to its finer texture. As we irrigate it, it can hold significant volume and slows the leach solution's passage through the heap. We incorporate these factors into our leach models, which we've been updating. The results from the heaps are consistent with our models, indicating a slower output as it processes.

So, it's not an issue of blockage in terms of fines generation. It's more just a slowing of the percolation?

Yes. Yes, that's more to it.

Just with respect to Turkey being a little closer to what's going on in Ukraine, are you seeing any of global inflationary pressures on consumables, whether it be diesel or other key consumables for Copler, just tied to the geological location a bit relative to Russia with it being a fairly significant supply over a number of commodities? Is that evident? Or are you finding the pressure there on consumables similar to that say of Marigold?

I don't think there's anything specific that you could overlay to what's happening up in Russia to Turkey. I think generally, as Alison sort of has outlined that we're seeing the cost pressures across the world at each one of their operations. It does vary by region, depending on what it is, but I wouldn't suggest it's anything specific to do with Russia.

And then just the last question for me. You mentioned the autoclave maintenance for Copler's planned for Q2 and Q4. Can you just give us a sense of how many days those outages are?

Yes. So, we just completed the autoclave #2 shutdowns. We did two, then we're going to do autoclave #1 in October. Autoclave 2 shutdown was 20 days, which was a pretty good performance. We had budgeted for a little bit for a couple of days longer than that. And then we also took a total plant shutdown during that 20 days that it was down of 5 days to do some work through the whole of the circuit. When we take one autoclave down, we do increase the throughput through the other one. So, it's not exactly a 50% impact when we take it down. The shutdown in Q4 will be approximately the same.

So you're doing number one in Q4?

Yes. Yes. And we're just finishing - we're just coming out of this shutdown. We're just doing some analysis, and then we'll go back and reschedule that one at the end of the year with the learnings that we had from this one. This was the first - the reason that I called this out as a pretty impressive outcome is, we've been extremely fortunate at Copler that the wear on the bricks in the autoclaves, apart from doing autoclaves or some of the - in the old days, some of the problems of some of the businesses happen with them. At Copler, we've had very little wear on the bricks and this is the first time that we've actually done a re-bricking to the autoclave. We did a re-brick of the phased courses in the parts of the autoclave, and it went very well.

Was that about three years since those bricks were originally put in?

The next question comes from Steven Green with TD Securities.

Just another quick one on Copler. I think you've kind of answered this question already. But regarding the shutdowns, do you think that will result in a quarterly basis on Q2 and Q4 being the lowest production quarters?

Yes.

And you do have in your mine plans, some scheduled material to be stacked on the heap leach. Can you tell us when you expect on a quarterly basis when that will come in?

We're redoing the schedule at the moment for the mine, but there's very little stacked to the heap leach this year. So, if you looked at our forecast production, it's quite low.

So, this may mean residual leach then?

Yes.

And just getting back to Seabee quickly. Again, I think you answered the question on grade profile expectations for the rest of the year. But you did mention that you are still kind of mining in one of those high-grade zones and you did have a stockpile. You do have some stockpile material part of the mill. Do you expect some of these high grades to bleed into Q2 as well?

So we finished in Q1 mining in the high-grade zone. We do have some of that material on the stockpile. Like all good miners, we put the best grade in first, so the material that we have in the stockpile is not at 18 grams a tonne, I would like it to be so. There will be some bleed into this month, but not a lot of the sort of 18 grams a tonne or sorry, into this quarter.

So, reasonable to expect then that material would mostly be in the kind of 10-gram range?

Yes, it will tail back to where it's supposed to be. If we're successful with this exploration, there's a chance that we will be back into it at the end of this year or the beginning of next year. We'll be able to get better guidance on that at the next meeting. But at the moment, nobody can give you that guidance because we don't know. We haven't got the assays back. I can speculate, if you like.

The next question is from Levi Spry with UBS.

Maybe just on the - maybe a question for Stew. The scope of the Marigold Master Plan, can you just tease out a bit of the detail there that we can expect that's feeding into, I guess, sort of the scope for it over the next 12 months? And maybe an update on where the deeper drilling the sulfides has got to?

Okay. So, as we did at Copler, we're building a master development plan at all of our sites, which is really some strategic development plan for the operations so that we can focus our development efforts on the key targets. What we actually had to put into the technical report that we shared with the broader community is always sort of a redacted version of that because we can only put the things in that we've got the work far enough along. The work that we - so we've had a series of workshops with the external experts and the rest of it there helping us. We've recently just engaged an engineering EPC company to give us some support. We're going back and having a look at the Buffalo Valley and Trenton Canyon what the development pathway would look there - look like there. We are getting new drilling in both in Buffalo Valley, which we're pretty excited about and also on Trenton Canyon that look a little bit different than perhaps what we thought before. We will have to make a decision at some point when we start to generate the schedules and do the resource estimates on those because we're getting a better understanding of what might be there. In the more near term, the drilling that you saw in the exploration around the existing pits and in the new millennium, we expect that, that will convert at least some of it in this coming technical report will convert into - will convert into resource and reserve. We are focusing some drilling around there at the moment because we do have a bit of a gap in '26, '27 in the current mine schedule, which you would have seen in the SK 1300, which we talked about last time. We're progressing the EIA and that will be completed with all of the permitting sort of in 2024. We would fill that gap. We're aiming to get at least part of that as much as we can define with the drilling that we've got done either the technical report, the next one you'll see, and we should be able to give a much better definition of what we think is going to happen at Buffalo Valley and Trenton Canyon based on this new work that we're doing.

Just the timing on that resource update then?

Beginning of next year.

And the deeper drilling, what is the update there?

So, we're still pursuing that, but it's not at the top of our agenda with regards to exploration. So, we got it kicking along on the background, but we don't really have anything to update this quarter.

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

Great. Thanks, everyone. I appreciate you participating today. Have a great rest of your day, and look forward to continuing on our grade efforts at quarter 1 later in the year. So, with that, we'll conclude the call. Thank you.

This concludes today's conference call, and you may disconnect your lines.