Ssr Mining Inc. (SSRM) Q1 2024 Earnings Call Transcript

Hello, everyone, and welcome to SSR Mining's First Quarter 2024 Financial Results Conference Call. At this time, I would like to turn the call over to Alex Hunchak from SSR Mining. Please go ahead.

Thank you, operator, and hello, everyone. Thank you for joining today's conference call. During which I will provide an update on the Copler incident as well as a brief review of our first quarter financial results. Our 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. Additionally, we will refer to non-GAAP financial measures during our discussion and in the accompanying slides. Please see our press release for information about the comparable GAAP measures. Rod Antal, Executive Chairman, will lead today's call and members of our executive team, including Michael Sparks, Chief Financial Officer; Eddie Farid, Chief Strategy Officer; and Bill MacNevin, EVP of Operations and Sustainability, are also present on the call. I will now turn the line over to Rod.

Great. Thanks, Alex. I'm going to speak first about Copler and provide all our stakeholders with an update on both our immediate priorities and on our path forward in Turkey. I will then provide an update on our ongoing operations in the Americas. The current priorities for Copler can be distilled into four clear categories: one, the recovery efforts for our five remaining colleagues; two, the containment efforts; three, the remediation plan; and four, planning for next steps. So first, with respect to the recovery efforts. I would like to start by offering our sincere condolences to the families of our missing colleagues as well as the community members who are impacted by the Copler incident. The primary focus at Copler has and continues to be the return of the remaining missing colleagues to their families. Our teams in consultation with the relevant Turkish authorities have been diligently working on finding the missing individuals and will continue to do so. All recovery activities are currently focused in the Sabirli Valley. To date, over 6.7 million tons of heap leach material has been relocated as part of the ongoing recovery, containment, and remediation activity, including the removal of 4.2 million tons from the Sabirli Valley. Second, the containment efforts. Since the incidents, our containment efforts have advanced alongside the removal of the displaced material. This work includes activities such as the installation of a grout curtain, cofferdam, and buttress, which are substantially complete. There is also the ongoing installation of pumping systems and diversion channels. We currently expect the removal of all the displaced heap leach material from Sabirli Valley into temporary storage locations to be completed in the third quarter of 2024. Third, the permanent remediation planning. While our teams on the ground have advanced the recovery and containment work, we have also worked with the Turkish government, independent experts, and external consultants to develop a remediation plan. This plan includes, among other things, permanent closure of the heap leach pad and construction of a long-term storage facility for the displaced heap leach material. This facility will be designed to permanently store approximately 18 million to 20 million tons of displaced material. The future remediation work is expected to cost between $250 million to $300 million on a 100% basis. This is in addition to the approximately $25 million already spent since the incident in February. We expect work to be completed over a two to three-year period. With the company's total cash position of $467 million at the end of the first quarter, cash flow from our three ongoing operations and no balance outstanding on our revolving credit facility, we are well positioned to fund this remediation work in the future. This transitions into the initial plans for the next steps. In order to restart the operations, the company will require the reinstatement of the previously suspended environmental impact assessment and operating permits. At this time, it remains too early to provide guidance on if and when the mine will restart. However, for future planning purposes, we anticipate the sulfide plant will initially process more than 700,000 ounces of gold from the sulfide stockpiles while remediation work is completed. Now let's move on to Slide 5 and discuss the 2024 operating results. First quarter 2024 production was 102,000 gold equivalent ounces at an all-in sustaining cost of $1,569 per ounce, including 80,000 gold equivalent ounces from Marigold, Seabee, and Puna. The results from these three operations were in line with our expectations for a back half weighted production profile and each asset remains well on track for the full year production and cost guidance. As a reminder, Marigold's 2024 production profile remains 70% weighted to the second half of the year, while Puna's production is 55% weighted to half 2. Accordingly, we expect the second quarter to be our highest cost and lowest production period of the year. However, over 2024, we expect our operations will deliver solid asset free cash flow. On the development side, while the planned activities for 2024 at Hod Maden have been reduced, we have continued to advance engineering, project execution planning, and technical studies. We will provide additional updates at a later date. Now moving on to Slide 6, a brief look at the financial results. We recorded an attributable net loss of $1.42 per share in the first quarter, reflecting the financial impacts of the Copler incident, which we will discuss shortly. Adjusted net income per share was $0.11, and we generated $25 million in operating cash flow in the quarter. Free cash flow was negative $9 million. As noted, our total cash position is $467 million with an additional undrawn revolving credit facility available. We continue to have a solid liquidity position to manage remediation costs at Copler and reinvestment needs across the business going forward. Moving to Slide 7 for some more details on the noncash and cash impacts of the Copler incident. As I mentioned, our first quarter financial results were significantly impacted by the Copler incident. We recorded charges totaling $288 million, including costs incurred to date, plus future remediation costs and legal contingencies. This reclamation and remediation work will include the construction of the East Storage Facility and displaced heap leach material movement. We also recorded an impairment of $76 million for all heap leach inventory, which contained an estimated 44,000 ounces of recoverable gold, and an impairment of $38 million for the now obsolete heap leach equipment and infrastructure given the heap leach pad facility will be permanently closed. So on to Slide 9 and a discussion on the operating results, beginning with Marigold. Marigold's first quarter production of 35,000 ounces was in line with our expectations. The 2024 mine plan called for the first quarter to feature the lowest quarterly stacked ore grades, reflecting the focus on waste stripping at Red Dot in the first half of this year. Despite this, the all-in sustaining cost of $1,430 per ounce was better than expected, largely due to the timing of capital spending. Quarter two all-in sustaining costs are expected to be above full year guidance as a result of the deferral of capital spending from quarter one. Marigold remains well on track for its full year production and cost guidance. Moving on to Seabee on Slide 10. At Seabee, the first quarter production was 24,000 ounces and an all-in sustaining cost of $1,416 per ounce. Production and costs were slightly better than planned, reflecting the processing of higher-grade material stockpiled in the fourth quarter of 2023. For the remainder of the year, Seabee expects mine and processed grades to average between five and six grams per ton. Seabee remains on track for its full year production and cost guidance as well. The exploration activities at Seabee continue to focus on near-mine extensions to existing underground mineralization as well as continued advancements of the Porky and Porky West targets. The Porky targets represent a potential mine life extension opportunity, and the Seabee team is aggressively advancing the technical studies to better delineate this opportunity. Finally, let's move on to Puna on Slide 11. Puna produced 1.9 million ounces of silver in the first quarter, slightly lower than expected due to significant rainfall that impacted the mining rates. Despite this, Puna remains well on track for full year production guidance of 8.75 million to 9.5 million ounces of silver at an all-in sustaining cost of $14.75 to $16.25 per ounce. Exploration and technical work continues to evaluate opportunities to extend operations at Puna through potential extensions at Chinchillas and the continued advancement of the Cortaderas target through near-mine drilling. Our team at Copler remains focused and steadfast as we continue with the overall recovery efforts. This has been supported by the strong operating results at Marigold, Seabee, and Puna, and I want to recognize our team's focus and commitment during a difficult time. Before I open up for questions, I would like to remind everyone that there are certain topics around legal matters and ongoing investigations that I cannot comment on at this time. So operator, if we can open up the call now to any questions people might have.

The first question comes from Ovais Habib with Scotiabank.

Rod and SSR team, just a couple of questions from me. Regarding the remediation costs at Copler of $250 million to $300 million, does this amount include any sort of care and maintenance cost throughout the two to three years it will take to complete the remediation?

No, it doesn't, Ovais. It takes into account the construction of the storage facility, the remediation efforts on the heap leach pad, etc. If you look at the financials, the care and maintenance costs in the first quarter were around, I believe, $17 million from memory. If you allow for those per quarter going forward, it would depend on how long that period lasts while we're shut down.

Okay. And just regarding the environmental permits. Will you apply for the environmental permits while the remediation is ongoing? Or once the remediation is complete? Is there a possibility that the sulfide plant could start before the remediations are complete?

Yes, Ovais. As I mentioned, our efforts and focus have really been on finding our missing colleagues and defining the remediation efforts getting those in consultation with the government authorities approved. We have just started to turn our mind to the startup and all the other factors that will require us to get that EIA permit reinstated and other things as well. It’s a little too early to say exactly what pathway we need and how long it will take, along with the other questions you may have. But that will come over time.

The next question comes from Mike Parkin with National Bank.

First on Seabee. Historically, you've always had a significant working capital outflow in the first quarter with the inventory build at Seabee on the ice road. I couldn't find any mention of that in the 10-Q. Did that happen? Did you receive everything to the site that you were hoping for?

Firstly, Mike, welcome back. I hope you're doing well. We had a very successful winter program this year on the ice road, probably our best one for many years. So we didn't have the normal buildup that we've faced before with delays on the ice roads to manage the logistics. This year was a slightly different outcome, and we achieved a much more efficient result in terms of that buildup and working capital.

That's good. And then on Copler, can you give us an update? I know you can't speak on everything, but in terms of who you're in discussions with, where you are in the process, is there still an investigation being carried out by, I don't even know what ministry, if it's like the Ministry of Labor, Ministry of Environment? Are those concluded, and are you awaiting their ruling, or where are you in that process?

Yes. Look, again, Mike, I appreciate that I can't comment specifically on the ongoing investigations and the legal proceedings. But yes, on the ground at Copler, we have many government stakeholders from various ministries that we would normally interact with regarding mining activities, as well as other ministries that have provided great assistance for us on the ground. Those conversations have been ongoing since day one; discussing everything, as I mentioned, around the remediation efforts, the long-term storage solutions for the displaced heap leach material, and how we remedy the heap leach pad for closure.

Okay. And then just a follow-up on the remediation work that you're estimating will cost $250 million to $300 million. Are those plans concrete and approved by the government, or is that still a work in progress?

It's based on the discussions and engineering design we have done to date. Those estimates are based on a lot of detailed work at this stage, so yes, it's well advanced in terms of the engineering.

Okay. And then just back over the ocean to Marigold. Barrick is regularly commenting on an extremely tight labor market in Nevada. Others we have talked to note that it doesn't seem to be as bad. What's your experience with Marigold? Are you finding turnover rates elevated, more in line with historical norms, or are you benefiting from possibly gaining workers from other sites?

Mike, I'm going to pass that one over to Bill to answer.

Mike, we do a lot of work with our workforce, focusing on where we're going as a business, but also on the development of the people and their roles within it. In terms of turnover, we’re really just at our historic levels. If anything, we’re working hard to improve it beyond that. So there's no real impact to the business, and we're looking to reduce turnover even further.

The next question comes from Carey MacRury with Canaccord Genuity.

Just wondering if you are able to restart the plant with stockpiles only. Do you have an idea of what the cash costs of that would be?

Look, Carey, that data will come down the track. Once we have clarity about the pathways, date, etc., we will reset those planning efforts around that, but it's just too early to discuss those details just yet.

Okay, fair enough. And just on the convertible debt, investors have the right to redeem potentially in 2026 or have the company repurchase. Is there anything related to the incident in Turkey that could trigger that in 2026, or is that related to something else?

I'm going to pass that one to Eddie.

Not at this stage.

Any detail around that or not really?

If you go through the contracts for the convertible notes, at this stage, there's nothing around the incident that gives us concern regarding the convertible notes.

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

Great. Thanks, operator. Again, I appreciate everyone joining us today and look forward to continuing updates as we move along, particularly at Copler. Good evening to you all.

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