Ssr Mining Inc. (SSRM) Q3 2024 Earnings Call Transcript

Hello, everyone. And welcome to SSR Mining’s Third Quarter 2024 Financial Results Conference Call. This call is being recorded. At this time, for opening remarks and introductions, I would like to turn the conference call over to Alex Hunchak from SSR Mining.

Thank you, Operator, and hello, everyone. Thank you for joining today’s conference call, during which we’ll provide an update on the Çöpler Incident, as well as a review of our third 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 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 be joined by Michael Sparks, Chief Financial Officer; and Bill MacNevin, EVP, Operations and Sustainability, on today’s call. I will now turn the line over to Rod.

Great. Thanks, Alex, and thanks everyone for joining us today. I am going to start today’s call with an update on Çöpler, summarizing the work completed to date and the key areas of focus going forward. We will then provide an update on the third quarter financial results and operational highlights from Marigold, Seabee, and Puna. At Çöpler, we have made good progress on the four key priorities since the incident. These have been, first, the recovery of our missing colleagues; second, the containment and remediation of the site; third, the investigation into the root cause of the heap leach failure; and fourth, preparing for the restart of the Çöpler mine. With respect to our missing colleagues, all nine individuals have been recovered and returned to their families. We are continuing to support the families and the community members impacted by the Çöpler Incident. Second, all of the planned containment infrastructure has been successfully installed and is proving to be effective. Public statements from Turkish Government officials continue to reiterate that there has been no recordable contamination to local soil, water, or air in the sampling locations. In partnership with the Turkish authorities, we have continued to progress the remediation at site. Good progress has been made to date with over 16 million tons of the displaced heap leach material moved into temporary storage locations, including substantially all the displaced material from the Sabırlı Valley. As part of the remediation work, and as previously disclosed, the heap leach pad will be permanently closed, and no future heap leach processing will take place at Çöpler. We are continuing discussions with Turkish Government officials around the final remediation plan, including the approval and construction of the east storage facility, which will permanently store all of this displaced material. The Çöpler remediation and containment work is estimated to cost between $250 million to $300 million and take a total of 24 months to 36 months to complete. In the third quarter of 2024, $48 million was spent on remediation activities at Çöpler, bringing total remediation spend since April 1 to $103.3 million. Third, on the incident investigation, the initial design of the heap leach facility, prepared prior to commencing production in 2010, and each subsequent expansion thereafter, was engineered, reviewed, and approved by independent third-party engineering firms. Throughout the various stages of construction across the life of the heap leach facility, third-party reviews were also conducted to ensure conformance with the underlying engineering design parameters. The investigations into the cause of the Çöpler Incident began shortly after the event. We commissioned independent experts to review the design, construction, and operation of the heap leach facility. To date, this review has not identified any material non-conformance with the construction or operation of the heap leach facility relative to the third-party engineered design parameters. The last point with respect to a potential restart. We continue to work closely with the relevant authorities to advance the required permits for the restart of the Çöpler mine. Once all regulatory approvals, including the operating permits, are reinstated, it is anticipated that the initial operations at Çöpler could restart within 20 days from that point. So now let’s move on to Slide 4, where Michael will discuss the third quarter results.

Thanks, Rod, and good afternoon, everyone. Third quarter 2024 production was 97,000 gold equivalent ounces at all sustaining costs of $2,065 per ounce, which includes cash care and maintenance costs incurred at both Çöpler and Seabee, representing approximately $252 an ounce. Seabee was placed into temporary care and maintenance due to forest fires on August 21, and operations were subsequently restarted on October 11. Year-to-date, Marigold, Seabee, and Puna have combined to produce 249,000 gold equivalent ounces. During the quarter, we continued to advance brownfield exploration programs at Marigold, Seabee, and Puna, which Bill will discuss later. Additionally, site establishment and engineering activities at Hod Maden continue to progress. On to Slide 5 for a brief look at the financial results. We recorded attributable net income of $0.05 per share in the third quarter, while adjusted net income per share was $0.03, largely reflecting the exclusion of minor tax and foreign exchange gains recorded in the quarter. As a reminder, we do not adjust for care and maintenance costs, and the full impact of these expenses at both Çöpler and Seabee are included in our adjusted net income. Including the remediation spend at Çöpler, third quarter cash generated by operating activities was negative $1 million, while free cash flow was negative $34 million. We finished the quarter with $334 million in total cash and a net cash position of $104 million and total liquidity of $834 million. With our existing liquidity and an outlook for improved production and free cash flow generation in the fourth quarter, we remain in a strong financial position and are well positioned to manage the remediation costs at Çöpler, as well as continue our reinvestment needs across the business. On to Slide 7 to discuss the operations, where Bill will start with Marigold.

Thanks, Michael. Marigold’s third quarter production of 48,000 ounces was in line with expectations. As the 2024 mine plan calls for, the fourth quarter has the lowest production and highest cost of the year. Marigold remains on track to meet its full year production guidance of 155,000 ounces to 175,000 ounces. However, we now expect increased full year costs due prudently to increased royalty costs and higher than expected maintenance component costs. Of the increased Marigold’s AISC guidance, approximately 60% is associated with higher royalty costs, resulting from the strong gold price in 2024. We expect both of these cost pressures to persist into 2025. Brownfield exploration and desktop studies at Buffalo Valley advanced during the quarter as we look to continue to replace mine depletion and potentially further expand Marigold’s operating life. Now on to Seabee. At Seabee, third quarter production of 10,000 ounces reflected the temporary suspension of operations on August 21 due to forest fires in the vicinity of the mine. Thankfully, none of our employees were injured by these fires, and the process plant and sandstone mine were not materially impacted. While some remote equipment, including power poles, piping, and exploration equipment was damaged, operations were fully restarted on October 11. Due to the suspension, Seabee’s full year 2024 guidance is now 65,000 ounces to 70,000 ounces at AISC of $17.25 per ounce to $17.55 per ounce. Seabee continues to focus on evaluating and drilling near-mine extensions to existing underground mineralization, as well as the continued advancement of the Porky and Porky West targets. The Porky targets represent a potential mine life extension opportunity, and the Seabee team is aggressively advancing technical studies to better delineate the opportunity. While the surface drilling program was impacted by forest fires in the third quarter, the vegetation cover cleared by the fires has provided our exploration team with new opportunities to evaluate surface targets in the coming field seasons. Now on to Puna. Puna produced 2.9 million ounces of silver in the third quarter, reflecting a second consecutive quarter of record throughputs for the Pirquitas processing facility. Owing to strong operating results over the last two quarters, Puna is now expected to produce 10 million ounces to 10.5 million ounces of silver in 2024, an increase of more than 1 million ounces of silver on a midpoint basis. While Puna’s full year cost expectations are unchanged, the AISC of $15.37 per ounce in the third quarter demonstrated Puna’s significant free cash flow margins in the current silver price environment. In addition, exploration and technical work continue to evaluate opportunities to extend operations at Puna through potential extensions at Chinchillas and continued advancement of the Cortaderas target through near-mine drilling. Now I’ll turn back to Rod for closing remarks.

Great. Thanks, Michael, and thanks, Bill. As I mentioned, we set out four commitments following the Çöpler Incident. These commitments are important milestones on the path towards a potential restart of the operation, and I mentioned we continue to make good progress on all fronts. We are looking forward to a strong close to the year at each of Marigold, Seabee, and Puna, and will continue to advance opportunities to improve our business through operational excellence initiatives and brownfields growth projects as we move into 2025. As Michael mentioned, we have continued to advance Hod Maden, and we expect to provide an update on our anticipated 2025 capital spend at the project with our normal guidance update early next year. To date, our work continues to demonstrate an exceptionally high-quality asset that will be a key contributor to our portfolio going forward. So, with that, I’m going to turn over the call to the Operator for any questions you may have. Thank you.

Our first question today comes from Ovais Habib from Scotiabank. Please go ahead with your question.

Hi, Rod and SSR team. Just a couple of questions from me. Starting off just on the Çöpler remediation, you’ve talked about, obviously, this temporary storage facility right now. And then obviously, you’re going to go to a more permanent storage facility at one point. What kind of, I mean, in terms of, you’re waiting for, I guess, approvals, what kind of approvals do you need? Are the permits required? Anything else that you need kind of to go forward with that? Any sort of follow on that would be appreciated.

Yeah. Thanks, Ovais. Look, I think the pleasing status of where we are right now from a remediation perspective is, the key point is, substantially all the material is out of the Sabırlı Valley. So that’s really the good news. And of course, when the incident happened, we didn’t have a final sort of design for what the ultimate storage facility would be and nor did we expect that we’d have to recreate one. So since that day, we’ve been in consultation with the government going through the various options that we had to not only locate the permanent storage facility but also define it from an engineering perspective, as well as meeting the commitments from the Turkish regulations of what the requirements are for a closure. So all of that work’s been ongoing, Ovais. And the location was chosen, which is good, which is we’ve termed the storage facility. The engineering has progressed. The discussions are going on with the regulators to ensure that we have met all of the requirements as well. And remember, this will be the first closure of this type in the country. So we’re making sure that we’re taking all the right steps, and once that’s all done, the approvals will be forthcoming. So we do expect that early next year, and then from that point, we’ll start the efforts around the construction and then moving the materials in the temporary locations to the permanent one.

Thank you for that, Rod. Regarding the EIA, it seems you are returning to the 2012 EIA, which indicates a capacity of 6,000 tons per day, compared to the 9,000 tons per day mentioned in the 2021 EIA. If you receive all necessary approvals to restart, will you be considering a restart at the 6,000 tons per day capacity instead of the 9,000 tons? I would appreciate some clarification on that.

Yes, that's right, Ovais. The cancellation we mentioned was due to an administrative appeal in the courts. Ongoing efforts are being made in the country to appeal these cases with the relevant government departments. This process is continuing behind the scenes. The default position, however, is based on the 2014 EIA, which restricts the triple rates to 6,000 tons per day. Assuming nothing changes from what we know now, that will be our fallback position, and we will plan accordingly. In the future, we will need to refresh the EIA anyway, which will expedite those efforts as we move into next year.

Thanks for that, Rod. And just a last question for me. In terms of any sort of restart over here, with your discussions that you’re having with the regulators, does the restart have to wait until all remediation is complete or can you restart while the remediation is taking place?

It’s not reliant on the completion of all the remediation or associated efforts. The discussions I mentioned earlier show that all the initiatives currently in progress, some finished and others ongoing at Çöpler, really serve as a foundation for those conversations. As you can imagine, there are multiple levels of government involved, and those discussions are continuously evolving. Therefore, it's not strictly conditional on finishing all this work, but it certainly aids our discussions as we fulfill our commitments following the Çöpler Incident. We will keep engaging with the various government departments to ultimately facilitate a restart at Çöpler.

Perfect. Thanks for that, Rod. That’s all my questions.

Appreciate it. Thanks, Ovais.

And ladies and gentlemen, we will now conclude today's question-and-answer session and the conference call. Thank you for joining the presentation. You may now disconnect your lines.