SSR Mining Inc

NASDAQ:SSRM

Earnings Call Analysis

SSR Mining Reports Q3 Results and Remediation Progress on Çöpler Incident

In Q3 2024, SSR Mining produced 97,000 gold equivalent ounces at $2,065 per ounce, while recording net income of $0.05 per share. The Çöpler mine remediation is ongoing, costing $48 million this quarter, with overall costs projected between $250-$300 million over 24-36 months. Marigold's production is still on track for 155,000-175,000 ounces, but costs are expected to rise by 60% due to royalties. Seabee production dropped to 10,000 ounces due to forest fires but is expected to resume promptly. Puna increased its silver production guidance to 10-10.5 million ounces for 2024, up by over 1 million ounces.

Navigating Challenges at Çöpler

The call kicked off with an update on the Çöpler mine incident, where all nine missing colleagues have been safely accounted for. The company is focusing on the containment and remediation at the site, which has progressed well with the installation of key infrastructure. Notably, approximately 16 million tonnes of displaced heap leach material have been moved, symbolizing a significant step in their efforts. Importantly, the remediation process is estimated to cost between $250 million to $300 million and will take 24 to 36 months to complete. This proactive approach is crucial for investors as it indicates the management’s commitment to safety and compliance, which can influence public perception and share price stability.

Financial Performance Overview

Turning to financial results, the third quarter of 2024 saw attributable net income of $0.05 per share and adjusted net income of $0.03 per share, largely reflecting operational adjustments including significant remediation costs. The company generated negative cash flow from operations of $1 million and reported a free cash flow of negative $34 million, reflecting challenges primarily due to costs related to the Çöpler site. However, total cash at the quarter's end was $334 million, with a net cash position of $104 million, showcasing a solid liquidity position that can support both operational needs and continued investments.

Production Highlights: Marigold, Seabee, and Puna

During the third quarter, production totaled 97,000 gold equivalent ounces with all-in sustaining costs averaging $2,065 per ounce. Key operational highlights showed that the Marigold mine produced 48,000 ounces, aligning with expectations while the fourth quarter is expected to see the lowest production and highest costs of the year. Nonetheless, Marigold remains on track to meet its annual production guidance of 155,000 to 175,000 ounces. However, increased operational costs largely due to higher royalty expenses—approximately 60% of the cost increase stemming from strong gold prices—are anticipated to halt the companies' projections through 2025. In Seabee, production dropped to 10,000 ounces due to temporary mine suspension caused by forest fires, with the mine’s full-year guidance now adjusted to 65,000 to 70,000 ounces.

Puna's Surge in Silver Production

Puna produced an impressive 2.9 million ounces of silver during the quarter, marking a period of record throughput at the Pirquitas processing facility. Following this success, Puna is on track to produce between 10 million and 10.5 million ounces of silver in 2024, a notable increase of over 1 million ounces compared to previous forecasts. This uptick positions Puna as a critical contributor to SSR Mining's revenue streams.

Outlook and Future Guidance

Looking ahead, the firm is optimistic about fourth-quarter performance, anticipating better production metrics and improved free cash flow. Key highlights include ongoing exploration activities at Marigold aimed at extending mine life and new drilling opportunities at Seabee. The management expects to provide an update on the 2025 capital plans early next year. Overall, the groundwork laid in Q3 positions the company well for recovery and growth. The ongoing dialogue regarding operational permits at Çöpler is essential, as expectations indicate a potential restart could occur shortly after approvals—a timeline that is pivotal for investor confidence.

Earnings Call Transcript 2024-Q3

[Operator]

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.

[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 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 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 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.

[Rodney Antal, executive]

Great. Thanks, Alex, and thanks for everyone for joining us today. I'm going to start today's call with an update on Çöpler, summarizing the work completed to date in the key areas of focus going forward. We will then provide an update on the third quarter financial results and operational highlights for Marigold, Seabee and Puna. At Çöpler, we've made good progress on the 4 key priorities since the incident. These have been: first, the recovery of our missing colleagues; two, 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 9 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 are proving to be effective. Public statements from the 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 tonnes of the displaced heap leach material moved into temporary storage locations, including substantially all the displaced material from the Sabirli 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 the Turkish government officials around the final remediation plan, including the approval and construction of the East storage facility, which will permanently close -- 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 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 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 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 operations of the heap leach facility. To date, this review has not identified any material nonconformance 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.

[Michael Sparks, executive]

Thanks, Rod, and good afternoon, everyone. Third quarter 2024 production was 97,000 gold equivalent ounces at all-in 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 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.

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 position financially 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.

[William MacNevin, executive]

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 to 175,000 ounces. However, we now expect increased full year costs due predominantly to increased royalty costs and higher-than-expected maintenance component costs. Of the increase to 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 in Santoy 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 to 70,000 ounces at AISC of $1,725 to $1,755 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 have 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 2 quarters, Puna is now expected to produce 10 million 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 $1,537 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 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 I'll turn back to Rod for closing remarks.

[Rodney Antal, executive]

Great. Thanks, Michael, and thanks, Bill. As I mentioned, we set out 4 commitments following the Çöpler incident. These commitments are important milestones in the path towards a potential restart of the operation. And I mentioned we continue to make good progress on all the fronts. We are looking forward to a strong close to the year at each of Marigold, Seabee and Puna, and we'll 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.

[Operator]

[Operator Instructions] Our first question today comes from Ovais Habib from Scotiabank.

[Ovais Habib, analyst]

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 there permits required? Anything else that you need kind of to go forward with that? Any sort of color on that would be appreciated.

[Rodney Antal, executive]

Yes. Thanks,. Look, I think the pleasing status of where we are right now from a remediation perspective is the key point is substantially all the materials out of the Sabirli 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 date, 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 foreclosure.

So all of that work has 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 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.

[Ovais Habib, analyst]

And just in terms of the EIA, in terms of -- now you're kind of reverting back, I believe, to the 2012 EIA. And it's kind of talking about 6,000 tonnes per day versus the 9,000 tonnes per day that was in the 2021 EIA. Assuming you get all the necessary approvals to restart, would you be looking at a restart at that 6,000 tonnes per day then versus the 9,000? Just some clarity there.

[Rodney Antal, executive]

Yes, that's correct, Ovais. I think, look, the cancellation, as we've disclosed, was an administrative appeal in the court. There is efforts going on in country to appeal those case in conjunction with the appropriate government departments. So that is continuing in the background. But the default position is back to the 2014 EIA, which limits the throughput rates to 6,000 tonnes per day. So that will be the assuming all things being equal, as we know it today, that would be the fallback position, and we'll plan on those accordingly. And then in the future, we would -- we have to anyway do an EIA refresh in the future, and that will just accelerate those efforts moving into next year.

[Ovais Habib, analyst]

And just 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?

[Rodney Antal, executive]

It's not dependent on all of the remediation or other efforts around it. It's -- the discussions that we've had and as I sort of mentioned, I think all of the efforts that we've had underway and are currently underway and some are completed, some are still ongoing at Çöpler are really a precursor to those conversations. And as you can imagine, actively and continually, there's many levels of government that those conversations are continuing to evolve. So it's not necessarily all on the condition that we finish all this work, but it helps while we're having those conversations because we're acting out our commitments to make good post the Çöpler incident, and we'll continue to have the dialogue with the various government departments to ultimately achieve a restart at Çöpler.

[Operator]

[Operator Instructions] And ladies and gentlemen, I'm showing no additional questions at this time, we'll close today's question-and-answer session as well as today's conference call. We do thank you for joining the presentation.

You may now disconnect your lines.