SilverCrest Metals Inc. (AMEX:SILV) Q1 2023 Earnings Call Transcript May 12, 2023
Operator: Good morning, ladies and gentlemen. And welcome to the SilverCrest Reports First Quarter 2023 Results Conference Call. At this time, all lines are listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] This call is being recorded on Friday, May 12, 2023. I would now like to turn the conference over to Eric Fier, CEO and Director. Please go ahead.
Eric Fier: Thank you, Operator. Good morning. And thanks, everyone, for joining the first quarterly earnings call as a precious metal producer. Today, we’ll be providing commentary on our first full quarter of production after which we’ll be happy to take questions. The slide deck will be referring to is available on our website at silvercrestmetals.com under the Investor tab. Before we get started, I’d like to direct you to the forward-looking statements on slide two. All figures discussed this morning are in U.S. dollars unless otherwise stated. On the call with me today are Chris Ritchie, President; and Pierre Beaudoin, Chief Operating Officer. Let’s start with slide three. Q1 marked our first full quarter of commercial production.
We have focused on ramping up, gaining further confidence with operations, generating free cash flow while reducing operational and financial risk. Our early ramp-up success, coupled with our robust cash position has allowed us to accelerate debt prepayments, which significantly derisked our balance sheet. The Las Chispas operation continues to perform well with the processing plant, meeting or exceeding design parameters. Also one of our biggest success stories to-date is how our stockpiles have continued to create value and reduce risk. The underground mine ramp-up is progressing as per updated rates. Completion of the updated Technical Report, so I’d like to refer this to the updated feasibility study remains on schedule for late Q2. This report forms the basis for future production and cost guidance.
We will continue to advance our ESG initiatives, including a strong focus on health and safety, as well as risks and opportunities within the community in which we operate. The second year of our Water Stewardship Plan in the local communities, which is based on the findings of our TCFD work is progressing nicely and we remain on track to deliver our inaugural ESG report in Q2. We are also very proud to announce that we recently received a notable ESG award in Mexico and we look forward to continuing with this momentum. I will now pass the call to Chris to discuss financial results for the quarter.
Chris Ritchie: Thanks, Eric. Moving to slide four. In the quarter, we generated revenue of $58 million. Cost of sales were $22.4 million, reflecting a mine operating margin of an impressive 61%. Net income in the quarter was $27.2 million or $0.18 per share. It is important to note that our results in the quarter benefited from access to our surface stockpiles, which carry a lower cost per ounce than those currently being mined, as well as from tax loss carryforwards. We expect these benefits to continue through 2023. Net free cash flow was $19.3 million or $0.13 per share. In November 2022, we restructured our debt facility, which lowered our interest costs and improved the terms. At that time, we repaid $40 million from cash that was available to us based on an on-time and on-budget build.
The prepayment of an additional $25 million was made in Q1 was supported by strong free cash flow. This is the best way to prove that the mine is operating successfully. Subsequent to quarter end, we have prepaid a further $20 million of debt based on continuing strong cash flow generation. This reduces our total debt outstanding to $5 million. We have now repaid 95% of our debt within six months of declaring commercial production, a significant accomplishment in a short period of time. We forecast that this early prepayment of debt has reduced our interest cost by approximately $6 million. We ended the quarter with $45.8 million of cash and cash equivalents, and an undrawn $70 million revolving credit facility. With that, I will now pass it to Pierre to discuss operations at Las Chispas.
Pierre Beaudoin: Thanks, Chris, and good morning, everybody. I’m now on slide six. Ramp up of underground mining rates remain similar as Q4 2022 at an average slightly above 700 tonnes per day. As planned, the underground mining rate is expected to continue to ramp up over the next few years. Underground capital development is tracking slightly behind plan, but we expect that it will accelerate through the remainder of 2023. Quantum and timing will be defined in the updated Technical Report. We’ve undertaken discussion with multiple underground contractors, including our current contractors. These discussions are focused on ensuring we can meet our ramp up objectives, while defining costs that are reflective of the global inflationary environment.
Still on slide six. The Las Chispa processing plant averaged daily throughput of 1,160 tonnes per day for a total of 104,000 tonnes processed during the quarter. The plant recovered 2.44 million ounces of silver equivalent in Q1 and we expect similar level in Q2 2023. An estimated 40% of production feed was sourced from stockpile during the quarter. The stock pile continued to reduce risk and provide flexibility as we progress our ramp up of the underground mine. I want and need to highlight that as the percentage of processing throughput sourced from stockpiles decline, the benefit to the current cost structure will be impacted. Our corporate level AISC, which aligns with the World Gold Council definition was $11.45 per ounce silver equivalent.
These costs incorporate some of the inflationary impact and mine site change experienced over the last 2.5 years. The updated Technical Report will address any outstanding cost impacts. Moving now to slide seven. You will see that the updated Technical Report remains on track for release in late Q2 of 2023. This study will include refresh costs, updated resource and reserve, and the new life of mine plan, which will consider optimal mining, stockpile and processing rates. I will now pass it back to Eric to conclude the presentation.
Eric Fier: Thanks, Pierre. As mentioned earlier, our balance sheet derisking has remained a key focus. We now have minor debt remaining, while retaining access to our $70 million revolving facility. Exploration efforts are focused on Las Chispa, El Picacho and other early-stage regional opportunities around Las Chispa. This is part of a $5 million H1 exploration budget. In parallel with updating the technical [Technical Difficulty] term focus at Las Chispa will be on reserve replacement through targeting conversion of inferred and indicated resources. In late April, the Mexican Senate passed a revised mining reform, since you initially hearing about the proposed changes, we have been working with our legal counsel and other members of the industry to review and continue discussion.
The situation remains fluid and additional review of changes for more clarity and their potential impact on our concessions is ongoing. That wraps up our formal commentary for today. We will now take questions. As a reminder, with the upcoming release of the updated Technical Report/Feasibility Study, there will be some information that we’ll be unable to comment on until this report is released. Operator, please open the line for questions.
Q&A Session
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Operator: Thank you. [Operator Instructions] Your first question comes from the line of Stephen Soock from Stifel. Your line is now open.
Operator: Your next question comes from the line of John Sclodnick from Desjardins. Your line is now open.
Operator: [Operator Instructions] Your next question comes from the line of Phil Ker from PI Financial. You line is now open.
Operator: Your next question comes from the line of John Tumazos from John Tumazos Very Independent Research. Your line is now open.
Operator: There are no further questions at this time. Eric Fier. Please continue.
Eric Fier: I’d like to thanks every [Technical Difficulty] attending the SilverCrest Q1 2023 results call and have a great day.
Operator: Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.
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