Ssr Mining Inc. (SSRM) Q3 2022 Earnings Call Transcript

Thank you for your patience. This is the conference operator. Welcome to SSR Mining’s Third Quarter 2022 Results Conference Call. I will now hand the call over to Alex Hunchak from SSR Mining. Please proceed.

Thank you, operator and hello everyone. Thank you for joining SSR Mining’s third quarter 2022 conference call, during which we will provide an update on our business and a review of our financial performance. Our third 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; and Alison White, CFO; and Stew Beckman, COO. Now, I will turn the call over to Rod for his opening remarks.

Right. Thanks, Alex and hello to you all and thanks for joining us. In the third quarter, our business was clearly impacted by the suspension of the Çöpler mine. I am pleased to report that operations restarted at the end of September and ramped up smoothly. Despite the bump in the road to Çöpler, our business remains in an incredibly strong position with a robust balance sheet that has enabled us a capital return yield of more than 5% over two consecutive years. Looking forward, we are in excellent shape with all four of our assets poised for a strong quarter four, where we expect to return to significant free cash flow generation. Some key points from the quarter. Reflecting on the negligible contribution from Çöpler and the delayed ounces from Marigold, we produced 107,000 gold equivalent ounces. Year-to-date production is now 441,000 gold equivalent ounces. Our third quarter all-in sustaining costs were $1,901 per gold equivalent ounce after absorbing more than $30 million in cash costs incurred at Çöpler during the quarter. Year-to-date, our all-in sustaining cost is $1,331 per gold equivalent ounce. I am going to speak a little bit more about guidance later on in the presentation. Financially, our balance sheet and free cash flow outlook supported the repurchase of $100 million in shares under our NCIB year-to-date. Our aggressive execution on the NCIB, which was only announced in June, has the company on track for nearly $160 million in capital returns in 2022, a plus 5% capital return yield. On the growth front, we received the EAA for the first stage of the Çakmaktepe Extension project at Çöpler in the quarter. With the infrastructure construction underway, it keeps us on track for first production in 2023. As a reminder, the project will add more than 1.2 million ounces to the Çöpler life of mine plan for an incremental CapEx of around $70 million. The results from the C2 PFS are expected next year in an updated technical report for Çöpler and we are planning to publish a new technical report for Marigold that will incorporate exploration success and potential production growth. At the close of the year, we are planning to release exploration updates for Marigold, Seabee and Copper Hill. This is in addition to the positive drill results we just released for the Çakmaktepe Extension. Lastly, we continue to execute on our strategy of redeploying proceeds from non-core asset sales in our core jurisdictions with the announcement of the Kartaltepe transaction in October.

Thank you, Rod, and good afternoon or good day to everyone on the call. This quarter, we produced nearly 107,000 gold equivalent ounces bringing year-to-date production to 444,000 gold equivalent ounces. Gold equivalent sales of 97,000 ounces in the quarter drove revenue of $167 million. Attributable net loss for the quarter was $26 million or a $0.12 loss per diluted share and adjusted attributable net loss was negative $14 million or a $0.07 loss per diluted share. It is worth highlighting that attributable and adjusted attributable losses include more than $40 million in care and maintenance costs incurred at Çöpler during the suspension of operations that occurred for almost the entire quarter. On the right side of the slide, I will touch on the reported $0.07 loss per diluted share that is calculated based on the company’s definition of adjusted attributable net income or loss per share. Attributable net loss of $0.12 per share was adjusted for transaction costs associated with the sale of Pitarilla, tax adjustments and minor adjustments for foreign exchange fluctuations during the quarter.

Thank you, Alison. As always, I will start with EHS&S. We were pleased to restart operations at Çöpler at the end of the quarter following the completion of improvement initiatives required by the Turkish authorities. The suspension was disappointing but did allow us to revisit a number of our processes and systems to improve our performance. The smooth startup of operations is a testament to the work by the team. Positively and separately, we received a number of outstanding permits in Türkiye during the quarter. We will continue to work hard to maintain and build upon these relationships, ensuring positive contributions to our stakeholders and host communities. Safety and the care of our teams, communities and the environment are core values, and we believe are also foundational to the business performance. Moving on to Slide 13 and I’ll talk about Çöpler. At Çöpler, the operation ramped up smoothly in the third quarter, an impressive accomplishment by our team given the length of the suspension. As discussed on the Q2 call, we were able to accelerate maintenance on the Autoclave 1 during the suspension, including the completion of partial relining of the face bricks. As a result, there is no scheduled major planned maintenance in the sulfide plant for the remainder of the year, allowing us to operate without major interruptions throughout the fourth quarter. Operating time and production was very limited in the third quarter, so per ounce costs are not really meaningful. For the full year, we expect to produce 180,000 to 190,000 ounces at an all-in sustaining cost of $1,345 to $1,375 per ounce. The reduced production guidance reflects our careful and measured restart of the operations as well as later-than-expected access to oxide ounces. With respect to the growth initiatives, we’ve received the EIA for the first phase of the operation of Çakmaktepe Extension and construction on infrastructure is well underway, and we remain on track to deliver first production in 2023.

Right. Thanks, Stew, and thanks, Alison. I also just want to take the opportunity to recognize the significant contribution Stew has made to the business as he leaves all four operations in excellent shape and poised for a strong fourth quarter and beyond. We all wish him nothing but success for the future and note that Stew’s replacement will be announced very shortly. Our business is in a very strong position, and we are moving forward at full stride into the last quarter. With all assets back to steady state, we expect to return to strong free cash flow.

Thank you, Mr. Antal. Our first question is from Ovais Habib with Scotiabank. Please go ahead.

Thanks, operator. Hi, Rod and SSR team. Just a couple of questions from me. So at Marigold, Stew touched on the fines that are at Marigold. I believe these are towards the North pit. Question is, do you have enough metallurgical tests completed around and in the North pit to be comfortable going forward in dealing with the fines? And also, is the high grade mostly located around the North pit as well?

Yes. So the – so yes, to all of your questions. So yes, the higher grade comes out of the North pit. We have done the test work. And as I said in my talk, we’ve had a number of different people review those. And we don’t believe that we have any problem with the heap leach and based on their experience from other sites, we expect that we will eventually see this gold. And as you can see, we’ve stacked quite a lot of gold. We did stack it quite late as well. So we’re expecting this wave of gold to come out over this quarter and into the next quarter. We have practically finished mining the fine material as well.

And that’s – the mining of the fine material was ended in Q4. So was that in Q4 or that…

It’s ending imminently. We’re almost at the end.

Got it. And do you have other high-grade areas within these pits that you’re going to be targeting going into 2023?

No. Not in the North pit. We finished those pits. They were only small pits. It’s as per the mine schedule.

Okay. Thanks, Stew for that. And just at Çöpler. So in terms of Çöpler, are you now back at nameplate capacity at the sulfide plant, in terms of – or is there a ramp-up that we should expect in Q4?

No. The Sulfide plant came up very well and came up quite quickly. In fact, I was extremely pleased and given my experience of starting these types of things up after a long shutdown. And I think that reflected the work that we did. I think you just need to remember, we shut everything down. So unfortunately, we had to shut down the mining of the oxide mining works, exploration, and we even shut down the infrastructure work in the district. So as we restarted, the Sulfide plant came up well and really quickly. It’s very stable, and it’s running very well.

So, that’s given that we were delayed for that period, that’s pushed out as well. So, we are mining in the pits. We are mining from the Çakmaktepe area and hauling that down. The other thing that we did was when we brought the sulfide plant back online given that’s where we had the issue very carefully. So, stood on that and thanks for that update as well. But on Çakmaktepe, in terms of accessing the oxide material, do we see that start to see you guys start processing that material in Q1 of next year, or this is kind of moving towards as you wrap up going towards the second half of the year?

I think I will just – I think just to remember, as I let you talk about in detail. There are two parts of Çakmaktepe. There is the old residual mine that we had up there that we produced gold from a couple of years ago that has some residual ounces that we had expected to bring into this quarter. And then there is the new Çakmaktepe Extension. So, just not to confuse people because I think they are two different things. And one is a new project, which is earmarked for next year. One is the residual ounces that we have gone up there to mine the last piece of this quarter.

Thanks for the clarity on that, Rod. So, I am talking about the new Çakmaktepe. So, can you give us a little bit more color on how things are progressing there?

Yes. So, they are progressing well. We have been doing the infrastructure work. So, we have to move some public roads. So, we have constructed some overpasses so that we can separate our mine fleet from the – our haul fleet from the public roads. We have been building some separate roads. We are in the process of doing the preliminary work for relocating we have to remit telecommunications there. We have to move some power lines and some water lines. And so we are busy doing that work at the moment, and that’s progressing quite well. And our expectation has always been like in ‘23 for the start of it.

Perfect. That’s it for me guys. Thanks for taking my questions.

Thank you, Ovais.

The next question is from Cosmos Chiu with CIBC. Please go ahead. Mr. Chiu, your line is open.

Sorry, I was muted. Hi Rod. Thanks, Alison and all the best, Stew. Maybe my first question is on Marigold. I am going to ask about the sustainability of the higher grade being stacked, the 0.63 gram per ton versus your 0.48 gram per ton reserves. But it sounds like it’s positively correlated the grade with well-defined in the north pit. So, Stew as you mentioned, as you come to an end in terms of mining north pit should we see sort of the grade revert back to the mean fairly soon?

Yes. Cosmos, you are exactly right. We will revert to the mean. Yes, that’s why it’s the main. We will go back there. But we actually had a windfall in the oxide. So, sorry, in those north pits and they reconciled high. So, we ended up with more material coming out of those pits than was in the reserves. So, we are pretty happy with that. But yes, those areas have finished now, and we expected to have higher grade through this period while we were treating them.

Great. And then I might have missed it. But Stew, did you mention how much longer these fines are taking in terms of the leach cycle for the gold to come out? I know you are expecting it to come out in Q4 and into 2023. How much longer is it?

Well, I don’t think we have actually quantified it in months because it’s not – it doesn’t come out necessarily in a step. So, it sort of drags on with a long – with a relatively long tail. I did also mention one of the directives we got from – I think it came from John and the experience from some of the other sites when they have the fine material was when you initially start the leaching to start at a much lower rate and saturate the pile first. So, it doesn’t mobilize the final material within that and then call stratification and then sort of make it take even longer to leach out. And so we have got two impacts in this quarter. We have got the impact of stacking more fine material plus we have also started the leach cycle slower. So, we are putting less leach liquor on it for the first couple of weeks and then stepping it up. So, it’s a bit of a – it’s a bit hard to give an exact weeks timeframe. And as you know, it depends – and given that we are coming towards the end of the year, we try to stack in the narrowest paths of the heap leach that we can get it out by year-end. But it’s also a function of where we are on the pile of stack. It is a pretty difficult question. We have been doing work with Forte Dynamics as well and doing quite – which is the work that’s been going over the whole year to put together three-dimensional leach plans and a much higher fidelity of what was placed where exactly on the heap to get a better prediction of what is coming off.

And I think the other thing I would just say because the work that Stew has talked about just gives us a high level of confidence moving into this sort of next phase, but having the stacked is a great position of being. But having back-end-loaded plans, when things like this happen, it really doesn’t give you any time to recover. And so I think we are a little bit of a consequence of that as well. So, I just wanted to alleviate anyone’s fears out there that the gold is not going to come. We’ve backed ourselves to the end of the year. We have got the gold up on the pads, and the leach cycle has been slower than we had anticipated in our models, and we don’t have time to catch up. That’s really simply what’s happening.

Got it. Maybe moving on to Çöpler here, you might have answered this question as well. But as I work through the math, it’s great to hear that you did 18,000 ounces in the month of October. But it sounds like, from my math, you still need to increase that on average of about 16% in November and December. Is that a function of tonnage and grade from Stew and Rod your comments, it sounds like it is both, but I just want to confirm.

Can you repeat that? We didn’t quite understand the question.

So, you did 18,000 ounces. I think you need in October. You need 60,000 ounces to hit your guidance for Çöpler for the year, 60,000 ounces in Q4. So, if I work out the math, you need to improve by about 16% from the 18,000 ounces in October. I am just wondering if that improvement in November and December, on average, is based on tonnage grade or both. I think Stew, I think you did kind of mention that it might be both, but I just want to confirm.

Yes.

Yes. So Çöpler, so we are seeing the oxide coming down a bit later. And we are seeing the grades a bit lower as a result of the mining ramping up and some work we have had to do to try and rearrange the mine plan. It won’t be tonnage that drives it. It will be timing and a bit of growth.

Yes. And I think, Cos, you probably – I don’t know – I think you came in a little bit later, but in the discussion – that’s okay. Just again, just to clarify. On Stew’s discussion, we talked about getting the mining contractor back on site, getting the mining going has been a little bit slower than we anticipated. And getting that ramp-up to access the high grade, which is we expect to sort of now start to come for the sulfides I am talking about. We are moving down that direction. So, all things are going to lead us to meeting that restated guidance.

Got it. Thanks. Rod, I did come in a bit late. It took me 10 minutes to sign on. Maybe something on the financial front, hopefully, I am not shooting myself in the foot again. I read something in the MD&A, I don’t think it’s a big deal. But you did mention that as a result of what happened to Çöpler, not in compliance with the term loan covenants. You don’t have a lot due on that. But I just want to confirm, is that – should we be concerned?

So, no, I wouldn’t be concerned, Cosmos. But the fact of the matter is that’s where we were at the end of the quarter. And so we felt that from a disclosure perspective, it was important to inform everybody. We have continued to make payments on the loan as they come due even during the closure. And as I mentioned in my comments, Stew and I am sorry if you missed this as well. But we do anticipate actually being able to close out that loan by the end of next year.

Great. And then, Alison, since I have you here, the cash costs and the all-in sustaining costs in the quarter was impacted by a $31.1 million sort of cost related to the Çöpler suspension. I just want to make sure, are there any costs that we should be aware of that’s leading into Q4? Are these – I would imagine these are one-time costs. I just want to make sure that none of these one-time costs are leading into Q4. It doesn’t sound like it since it’s already restarted, but I just want to confirm.

So, your assumption is correct. There are – none of those costs are going to bleed into Q4, Cosmos. Those were all one-time costs, specifically related to the closure and standby type costs for labor and other things so that we could ramp up as quickly as possible once we got the okay to reopen.

Great. And then maybe one last question. This might be a difficult question, but I might ask you anyways. Rod, when you restarted when you got the permits back in September ‘22 restarted Çöpler, at that point in time, did you consider updating guidance? And if you did, what has changed between then and now?

No, it’s a good question, Cos. Look, I think when we did the quarter two results call, we said we are going to do everything we can to claw back the lost time and lost production. And we had a plan, as we always do, there are a few levers that we had in the business to help us to try to chase that goal. As it transpires with the clarity around the slower leaching at Marigold, the impacts of the gold-to-silver ratio at Puna and then some of the other initiatives that we had around chasing those residual ounces at Çakmaktepe, we just don’t have the time to be able to do it. Unfortunately, we did a lot of things to try to capture it. But chasing the high grade at Seabee that Stew mentioned, we just haven’t been able to catch it. So, it wasn’t considered. We wanted to see how the operations were traveling, so we could have a more accurate representation. If we are going to recon, obviously, we want to be able to hit it. So, it wasn’t the appropriate timing. But look, we did everything we could. It’s disappointing to us all that we couldn’t capture it if, for instance, Marigold hadn’t underperformed in this last quarter in terms of the gold production, then we probably would have been in a good position, but we are not. So, that’s where we are. But look, I think the business fundamentally is very strong coming out of this into the fourth quarter, which is going to be around 200,000 ounces consolidated view of the business, moving into a really good 2023 and all the good things that come with that free cash flow and other things, we are in good shape. But we have had a bump in the road, and now we are looking forward.

Great. Thanks Rod and perfectly we understand. And once again thanks for answering my questions and all the best, Stew.

Thanks.

Cos, thank you.

This concludes the question-and-answer session. I would like to turn the conference back over to Mr. Antal for any closing remarks.

Great. Thanks everyone and thanks for joining us today. And as we mentioned, we are looking forward to much more positive full year results in early next year and closing this year off in a very strong position to set us up for what will be a great 2023. So, with that good day to you all and thanks for joining us.

This concludes today’s conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.