SSR Mining Inc. (NASDAQ:SSRM) Q1 2024 Earnings Call Transcript

SSR Mining Inc. (NASDAQ:SSRM) Q1 2024 Earnings Call Transcript May 8, 2024

SSR Mining Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Hello everyone and welcome to SSR Mining’s First Quarter 2024 Financial Results Conference Call. Please be advised, that this call is being recorded. [Operator Instructions] At this time, I would like to — for opening remarks, I would like to turn the conference call over to Alex Hunchak from SSR Mining. Please go ahead.

Alex Hunchak: Thank you, operator and hello, everyone. Thank you for joining today’s conference call. During which 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, Operations, Sustainability, are also present on the call. I will now turn the line over to Rod.

Rodney Antal: 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 4 clear categories: one, the recovery efforts for our 5 remaining colleagues; two, the containment efforts; three, the remediation plan and for 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 in 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 a Sabirli Valley and 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 the 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 2-year to 3-year period. With the company’s total cash position of $467 million at the end of the first quarter, cash flow from our 3 ongoing operations and no balance outstanding on our revolving credit facility, we are well positioned to fund this remediation work in the future. And this transitions as to 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 of if and when the mine will restart. But for future planning purposes, we anticipate the sulfide plant will initially process to 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 3 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 the [indiscernible] through 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 and project execution planning and the technical studies. We will provide additional updates at a later date. Now moving on to Slide 6 and 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 a 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 on to Slide 7 and shed some more color 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, displaced heap leach material movement — heap leach pad remediation and ore container infrastructure. In addition, we 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 beating 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 were better than expected, largely due to the timing of the capital spend. Quarter 2 all-in sustaining costs are expected to be above full year guidance as a result of the deferral — the capital spend from quarter one. Marigold remains well on track for its full year production and cost guidance. Moving on to Seabee on Slide number 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. The remainder of the year, Seabee expects mine and processed grades to average between 5 and 6 grams per ton. Seabee remains on track for its full year production and cost guidance as well. The exploration activities at Seabee continues to focus on near-mine extensions to existing underground mineralization as well as continued advancements of Porky and the 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 a 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 folks, 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.

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Q&A Session

Operator: [Operator Instructions] The first question comes from Ovais Habib with Scotiabank.

Ovais Habib: Rod and SSR team. Just a couple of questions from me. Just 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 2 to 3 years that’s going to take you to complete the remediation?

Rodney Antal: No, it doesn’t Ovais. It takes into account the construction of the storage facility. The remediation efforts on the heap leach pad, et cetera. If you look at the financials, the care and maintenance costs in the first quarter are around, I think, $17 million from memory. And so I think if you allow for those per quarter going forward. And I think it would also depend on, obviously, how long that goes for while we’re shut down.

Ovais Habib: Okay. And just in regards to the environmental permits. So will you look to apply for the environmental permits while the remediation is ongoing? Or once the remediation is complete, essentially, I mean, is there a possibility that the sulfide plant could start before the remediations are complete?

Rodney Antal: Yes. Look, I think Ovais, as I sort of mentioned and we’ll keep saying our efforts and focus has really been on finding our missing colleagues and the work to define what the remediation efforts will be in getting that — those in consultation with the government authorities approved. We’ve only really just started to turn our mind to the start-up and all the other factors that go with which will require us to get that EIA permit reinstated and some other things as well. So it’s a little bit early to say exactly what pathway we need and how long it’s going to take and all those other questions I know you all have but that will come over time.

Operator: The next question comes from Mike Parkin with National Bank.

Mike Parkin: First on Seabee. Historically, you’ve always had a big 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. Is that something that has happened? Did you get everything to the site that you’re hoping for?

Rodney Antal: Firstly, Mike, welcome back. Hope you’re doing well. We actually 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 sort of buildup that we’ve had before where we’ve had some delays on the ice roads to get the logistics up and down the road itself. So it was a slightly different outcome this year. We’re a much more efficient, better outcome in terms of that buildup and efficiency in our working capital.

Mike Parkin: Okay. That’s good. And then on Copler, are you like — can you give us — I know you can’t speak on everything. But in terms of who you’re dialoguing with where you are in the process, is there still like an investigation being carried out by — I don’t even know what ministry if it’s like Ministry of Labor, Ministry of Environment. Are those concluded and you’re awaiting their ruling on that? Or like where are you in the process on that front?

Rodney Antal: Yes. Look, again, Mike, I think you’d appreciate, I can’t comment specifically on the ongoing investigations and the legal proceedings. But, yes on the ground, we have — I think we mentioned it last quarter when the incident happened. We have many government stakeholders actually at Copler from the various different ministries that we would normally interacting on mining — normal mining activities as well as other ministries that have been a great assistance on the ground for us. And so those conversations have been going on since day 1 and discussing everything, as I mentioned, as ISS questions around the remediation efforts around how we’re going to look at the long-term storage solutions for the displaced heap leach material, how we remedy the heap leach pad and close that as well, et cetera, et cetera. So all that dialogue has been ongoing at the various ministry levels with at all levels within those ministries and that will continue.

Mike Parkin: Okay. And then just one follow-up on the remediation work that you’re estimating will cost $250 million to $300 million, is that — are those plans like concrete and approved by the government? Or is that a work in progress?

Rodney Antal: It’s based on the discussions in engineering design that we have done to date. So those estimates are based on a lot of work and a lot of detailed work at this stage. So yes, it’s well advanced in terms of the engineering.

Mike Parkin: Okay. And then just over back over the ocean to Marigold. Barrick’s regularly commenting of an extremely tight labor market in Nevada. But then others that we talked to note that it’s not — doesn’t seem to be as bad. What’s your experience with Marigold? Are you finding turnover rates are elevated or more in line with historical norms? Or are you benefiting from possibly gaining workers from other sites?

Rodney Antal: Mike, I’m going to pass that one over to Bill to answer.

Bill MacNevin: Mike. We do a lot of work with our workforce, both obviously focusing on where we’re going as a business but also in the development of the people and their part in that. In terms of the turnover in general, we’re really just at our historic levels. And if anything, we’re doing a lot of work to improve off that. So no real impact to the business and we’re looking to leverage on reducing it even further.

Operator: The next question comes from Carey MacRury with Canaccord Genuity.

Carey MacRury: Just wondering if you are able to restart the plant with stockpiles only, do you have a sense of what the cash costs of that would be?

Rodney Antal: Look, Carey, that data will come down the track. Once we have clarity about the pathways, date, et cetera, et cetera, we’ll reset those planning efforts around that but it’s just too early to talk about those things just yet.

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