SSR Mining Inc

NASDAQ:SSRM

Earnings Call Analysis

Financial Stability Amid Operational Challenges at Copler

In Q2 2024, production totaled 76,000 gold equivalent ounces at an all-in sustaining cost (AISC) of $2,116 per ounce. Challenges at the Copler mine led to significant remediation expenses, with $55 million spent in Q2 and an estimated total of $250-$300 million. Despite this, the company’s financial standing remains strong with $358 million in cash and an undrawn credit facility. Marigold, Seabee, and Puna mines are all on track for their annual targets. The company anticipates improved production and free cash flow in the second half of the year, noting substantial progress in brownfield exploration at all sites.

Solid Production Amidst Challenges

In the second quarter of 2024, the company reported gold equivalent production of 76,000 ounces, with an all-in sustaining cost (AISC) of $2,116 per ounce, inclusive of significant remediation costs from the Copler incident. This production brings the total for the first half of the year to 156,000 ounces, aligning with the management's expectations for an increase in production in the latter half of the year. Notably, production at Marigold is expected to improve significantly in the fourth quarter, which may lead to positive cash flows.

Financial Position Remains Robust

The company ended the quarter with a strong cash position of $358 million, despite incurring $55 million in remediation costs. The addition of an undrawn revolving credit facility enhances their financial flexibility, providing a cushion as operations potentially recover and stabilize. The negative cash generated from operations was $78 million, and the free cash flow was reported at negative $116 million for the quarter, mostly attributable to the costs related to Copler.

Remediation Efforts at Copler Progressing

The remediation efforts at the Copler operation remain a critical focus, with $55 million spent in the quarter from an overall projected cost of $250 million to $300 million. The company is making significant progress, with 70% of the displaced material already relocated. The hope is to restart sulfide plant operations soon, contingent on receiving necessary permits from Turkish authorities. This includes addressing ongoing discussions regarding waste management and seeking approvals for construction of the East storage facility.

Operational Highlights - Marigold, Seabee, and Puna

Marigold produced 26,000 ounces at the highest costs of the year due to initial waste stripping, but expects considerable improvement in the second half of 2024. Seabee produced 17,000 ounces at an AISC of $1,626, with grades projected to maintain average levels of 5-6 grams per ton through the year. Puna rebounded strongly with 2.7 million ounces of silver produced alongside a solid AISC of $15.19, positioning them well for the rest of the year.

Guidance and Future Outlook

Looking ahead, the management affirmed that all three operations - Marigold, Seabee, and Puna - remain on track to meet their full-year production and cost guidance. Strong free cash flow generation is anticipated in the latter half of the year, particularly as remediation efforts conclude and production increases. Management also highlighted ongoing exploration at Puna and Seabee, aiming to extend mine life and replace reserves through active drilling and targeted studies.

Exploratory Efforts to Extend Mine Life

The exploration initiatives at both Puna and Seabee are critical for extending mine life and potentially increasing reserves. While comprehensive updates on reserves will not be available until the end of the year, management remains optimistic that drilling results could favorably impact the reserves and overall operational strategies moving forward.

Earnings Call Transcript 2024-Q2

[Operator]

Hello, everyone, and welcome to SSR Mining's Second Quarter 2024 Financial Results Conference Call. Please be advised that this call is being recorded. [Operator Instructions]

At this time, for opening remarks and introductions, I would like to turn the call over to Alex Hunchak from SSR Mining. Please go ahead.

[Alex Hunchak, executive]

Thank you, operator, and hello, everyone. Thank you for joining today's conference call, during which we'll provide an update on the Copler incident, as well as a review of our second quarter financial results.

Our consulted 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 be joined on today's call by Michael Sparks, Chief Financial Officer; and Bill MacNevin, EVP, Operations and Sustainability.

I'll now turn the line over to Rod.

[Rodney Antal, executive]

Great, and thanks, Alex. I will start with an update on Copler, summarizing where the site currently stands, and then we'll provide an update on the second quarter results from Marigold, Seabee and Puna, with all 3 operations performing well against plan to this point in the year.

At Copler, there have been 4 priorities in our ongoing efforts since the incident. In summary, these are: one, the recovery of our missing colleagues; two, the containment of the incident; three, the remediation of the site; and lastly, four, the incident review and preparing for next steps.

With respect to the recovery of our missing colleagues, the 9 individuals who were lost as a result of the tragic incident have been recovered and we want to thank all those who have worked tirelessly to locate and return our colleagues to their families. We are continuing to support the families, our employees and the community members impacted by the incident, and to date we have retained a full complement of salaried staff at Copler.

Secondly, all of the planned containment infrastructure, including a grout curtain, coffer dam and buttress, as well as pumping systems and the Sabirli Creek diversion, have been successfully installed. Public statements from Turkish government officials continue to reiterate that there has been no recordable contamination to local soil, water or air in sampling locations.

Third, with respect to remediation, we continue to prioritize the cleanup of the Sabirli Valley and remain on track to have all the displaced heap leach material removed by the end of the third quarter. Of the total displaced material, we have moved more than 70% into temporary storage locations. More importantly, this includes more than 90% of the material from the Sabirli Valley. The total remediation spend in the second quarter was $55 million against our estimated total remediation spend at $250 million to $300 million.

We are continuing discussions with the Turkish government officials around the remediation plan, including the approval and construction of the East storage facility. As we look ahead, it's important to note that the investigations into the cause of the Copler incident continue and we are cooperating fully with the relevant authorities in Turkiye. We have commissioned independent third parties to review the design, construction and operation of the heap leach pad. To date, these reviews have not identified any material nonconformance with the construction or operation of the heap leach pad relative to third-party design parameters.

Simultaneously, we continue to work closely with all the relevant authorities to advance the permits required to restart the Copler mine. These include the restatement of the Copler EIA and operating permits. If and when the permits are granted, we would anticipate commencing sulfide plant operations through the processing of existing ore stockpiles on site. These stockpiles contain more than 700,000 ounces of gold. Certainly, there is a lot of work ahead for us at Copler as we continue to advance the remediation efforts. However, we have made meaningful progress to date and remain fully committed to a restart of the operation once we receive all the necessary permits.

And now, with that, we'll move on to Slide 4, where Michael will discuss the second quarter results.

[Michael Sparks, executive]

Thank you, Rod, and good afternoon, everyone. Second quarter 2024 production was 76,000 gold equivalent ounces at all-in sustaining cost of $2,116 per ounce, which includes cash, care and maintenance costs incurred at Copler, representing approximately $245 per ounce. For the first half, Marigold, Seabee and Puna combined to produce 156,000 gold equivalent ounces, in line with our continued expectations for a second half weighted production profile and each asset remains well on track for their full year of production and cost guidance.

We finished the quarter with a cash position of $358 million, inclusive of the aforementioned $55 million in remediation costs and another $17 million in cash, care and maintenance costs at Copler. With an undrawn revolving credit facility and an outlook for improved production and free cash flow generation in the second half, we remain in a strong position financially. During the quarter, we continue 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 as we move towards a construction decision for the project.

On to Slide 5 for a brief look at the financial results. We recorded attributable net income of $0.05 per share in the second quarter, while adjusted net income per share was $0.04, reflecting the exclusion of the mark-to-market gain on our portfolio of marketable securities. As a reminder, in the first quarter of 2024, we booked a $250 million remediation expense for costs we expect to incur at Copler, and the impact of this expense was fully reflected in first quarter income statement. Included in the remediation spend at Copler, second quarter cash generated by operating activities was negative $78 million, while free cash flow was negative $116 million. As noted, our total cash position remained strong at $358 million.

With an additional undrawn revolving credit facility and strong second half free cash flow expected from the other operations, we remain well-positioned to manage remediation costs at Copler, as well as our reinvestment needs across the business.

Now, on to Slide 7, where Bill will discuss the operations starting with Marigold.

[William MacNevin, executive]

Thanks, Michael. Marigold's second quarter production of 26,000 ounces was in line with our expectation. The 2024 mine plan called for the second quarter to feature the lowest production and highest cost of the year, reflecting the focus on waste stripping at Red Dot in the first half of 2024, and a catch-up in sustaining capital spend to bring us back on track for the year-to-date spend. With the first half now complete, we expect production and cost to improve meaningfully in the second half of the year, particularly in the fourth quarter. Marigold remains on track for its full year production and cost guidance.

Brownfield growth activity at Buffalo Valley and other near mine targets advanced during the quarter, as we look to continue to replace mine depletion and potentially further extend Marigold's operating life.

Now on to Seabee. At Seabee, second quarter production was 17,000 ounces at an AISC of $1,626 per ounce. Production and costs were in line with expectations, as grade mined and processed are expected to average between 5 and 6 grams per ton for the remainder of 2024. Seabee remains on track for full year guidance. Exploration activity at Seabee continues to focus on near mine extensions to existing underground mineralization, as well as the continued advancement of Porky and Porky West targets. The Porky targets represent a potential mine life extension opportunity, and the Seabee team are aggressively advancing technical studies to better delineate the opportunity.

Now on to Puna. Puna produced 2.7 million ounces of silver in the second quarter, a strong bounce back from softer production in the first quarter due to heavy rains. AISC of $15.19 per ounce in the second quarter demonstrated Puna's significant free cash flow of margins in the current silver price environment. The first half production of 4.6 million ounces of silver at an AISC of $15.36 per ounce, Puna remains well on track for full year guidance. In addition, exploration and technical work continues 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, we'll turn back to Rod for closing remarks.

[Rodney Antal, executive]

Thanks, Bill and Michael. As you can see, our second quarter results were well aligned to our expectations, with Marigold, Seabee and Puna all on track to meet full year guidance. We will continue to diligently advance remediation efforts at Copler and remain fully committed to returning to operations in Turkiye.

So with that, I will turn the call over to the operator for any questions you may have.

[Operator]

[Operator Instructions] The first question comes from Lawson Winder with Bank of America.

[Lawson Winder, analyst]

Thanks for the update and my condolences to your colleagues and their families. I just wanted to ask about a statement in the release where you said that you're not able to estimate when and under what conditions the mine will resume at Copler and implied in that is that the mine will restart. Have you received indications from Turkish authorities suggesting that the mine will start at some unknown time and under some unknown conditions?

[Rodney Antal, executive]

As you can appreciate, I mean, the focus for us has been on the priorities as I outlined and moving diligently through each one of those sequences is really important to put us in the right environment for us to gain those approvals for restart. So, those discussions are underway. Obviously, I'm not going to provide too much more color or comment on those, but we are actively discussing the work forward plan for Copler as we move through each one of those stages.

[Lawson Winder, analyst]

Okay. All right. That's helpful, Rod. And then could I also ask about some of the exploration you guys have touched on in your presentation and in the results. When you look to year-end, so 2 questions on the reserve update. With the existing operations do you anticipate replacing reserves based on drilling to date? And do you anticipate any change to the gold price assumption on which those reserves are based?

[Rodney Antal, executive]

As you remember, Lawson, we actually did a pretty big comprehensive update to all of our technical reports and I think it was sort of lost earlier this year with the -- obviously, the Copler incident. And that was a comprehensive refresh across each one of the operations. The exploration this year is, obviously, targeted on those targets to -- particularly at both Puna and Seabee to extend mine life, but that work program is still active. So it's a bit early to tell exactly what the results will be or indeed the actual timing of those results to do any more updates to what we already did pretty comprehensively during 2023. So that's the work plan at the moment. We'll obviously release exploration results as and when they're available or meaningful exploration results as and when they're available. But the real key priority right now is Seabee and Puna.

[Lawson Winder, analyst]

And then on the gold price assumption, is there any intention to change that for the year-end reserve statements or just keep that in line with the technical reports?

[Rodney Antal, executive]

Look, we haven't even got to that yet. We won't even assess the gold price until the end of the year, but I think from memory when we did the tech reports for this year -- early this year, we were well in line with what our peer group was doing.

[Operator]

This concludes the question-and-answer session.

[Rodney Antal, executive]

Great. Appreciate it. Thank you, operator, and thank you all for joining us today, and we'll talk again here soon. Thank you.

[Operator]

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