Avino Silver & Gold Mines Ltd
TSX:ASM
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
0.59
2.1
|
| Price Target |
|
We'll email you a reminder when the closing price reaches CAD.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Avino Silver & Gold Mines Ltd
You don't have any saved screeners yet
Thank you for standing by. This is the conference operator. Welcome to the Avino Silver & Gold Mines First Quarter 2020 Results Conference Call and Webcast. [Operator Instructions] The conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Jennifer North, Manager of Investor Relations. Please go ahead.
Thank you, operator. Good morning, and welcome to the Avino Silver & Gold Mines Ltd. First Quarter 2020 Financial Results Conference Call and Webcast. On the call today, we have the company's President and CEO, David Wolfin; our Chief Financial Officer, Nathan Harte; our Chief Operating Officer, Carlos Rodriguez; and our VP of Technical Services, Peter Latta. Before we get started, please note that certain statements made today on this call by the management team may include forward-looking information within the meaning of applicable securities laws. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results to be materially different than those expressed by or implied by such forward-looking statements. The company does not intend to and does not assume any obligation to update such forward-looking statements or information other than as required by applicable law. For more information, we refer you to our detailed cautionary note in the presentation accompanying this call or on our press release of yesterday's date. I would like to remind everyone that this conference call is being recorded and will be available for replay later today. Replay information and the presentation slides accompanying this conference call and webcast will be available on the website. Thank you. I will now turn the call over to Avino's President and CEO, David Wolfin. David?
Thanks, Jen. Good morning, everyone, and welcome to Avino's Q1 2020 Financial Results Conference Call and Webcast. Thanks for joining us. Before we begin, please note that the full financial statements and MD&A are now available on our website. Today, we will cover the highlights of our first quarter 2020 financial and operating performance, and then we'll open it up for questions. Please note that all figures are stated in U.S. dollars unless otherwise noted. As the first quarter of 2020 was winding down and production results were looking positive, COVID-19 was rapidly changing the way that everyone around the world would be operating their business and personal lives. On April 2, 2020, Avino announced that it would temporarily suspend operations at the Avino Mine in Durango, Mexico to comply with the Mexican government's order for all nonessential businesses, including the mining industry, to help fight against the spread of COVID-19.At the mine site, we quickly adapted to our temporary closure plan to maintain critical activities to protect the mine workers. The company also implemented remote work policies for employees in both Vancouver and Durango offices to ensure their health and safety. During the first quarter of this year, overall production results were higher compared to Q1 2019 due to the Avino Mine performing well from a grade, throughput and mill availability perspective. The Hanging-wall Breccia material also contributed positively to the overall feed grade. The decrease in silver production and consolidated silver grade in Q1 2020 compared to Q1 2019 is primarily attributed to the planned shutdown of the San Gonzalo mine in Q4 2019. As reported in Q4 2019, Avino transitioned to full production from the Avino Mine in Q1 2020, following our scheduled mine plan. The advancement of the underground connection between the 2 portals at the Avino Mine experienced some delays due to training shortages for certain equipment. This connection was to be completed during the first quarter 2020. However, due to COVID-19 situation, the time line for completion has been deferred until Mexican government's decree for the temporary suspension of nonessential businesses are lifted. Prior to the ordered shutdowns, our team in Mexico worked diligently to transport concentrate to the Port of Manzanillo, therefore, ensuring product would be queued up for delivery. We achieved revenues from mining operations of $7.1 million, up 6% from Q1 2019. Mine operating income was up $0.8 million, which was also up 1,405% from Q1 2019; operating cash flow of $0.3 million; and EBITDA of $0.4 million. During the quarter, both silver and gold prices fluctuated, with gold prices reaching $1,700 an ounce and silver reaching $18 in the latter part of January, only to fall just under -- just over $12 in mid-March, all due to the market uncertainty experienced due to COVID 19. In the month of April, the metal prices seem to be somewhat stabilized. We remain optimistic that metal prices will continue to move up. On a consolidated basis, silver-equivalent production for the first quarter increased by 11% to 684,000 ounces compared to 615,000 ounces in Q1 2019. Silver production was down 1% to 267,000 ounces from 268,000 ounces. Gold production was down 21% to 1,531 ounces from 1,813 ounces. And copper production was up 70% to 1.8 million pounds from 1.1 million pounds in Q1 2019. The Avino Mine produced a record 262,238 silver ounces, the highest quarterly total achieved to date. On a mine-by-mine basis, overall silver-equivalent production at the Avino increased by 78% compared to Q1 2019. This is primarily a result of significantly higher silver and copper grades during the quarter as well as increases in mill throughput and recoveries from all 3 metals. The overall increase was slightly offset by a decline in gold feed grades during the quarter. On a metal-by-metal basis, production at Avino increased significantly in both silver and copper, with increases of 133% and 88%, respectively, when compared to Q1 2019. Further, gold production increased by 38% when it came to Q1 2019. During Q1 2020, mill feed at Avino increased by 58% over Q1 2019, with silver and copper grades up 39% and 18%, respectively, and gold down 16%. Recovery rates for Q1 2020 showed improvements compared to Q1 2019, with increases of 6% in silver, 4% in gold and 1% in copper. As mentioned in our 2020 production outlook, we processed a small amount of AHAG material in the first half of Q1 2020 before the transition to 100% production from the Avino Mine. During Q1 2020, silver and gold and copper grades decreased by 24% and 26%, respectively, compared to Q1 2019. Accordingly, for Q1, our consolidated cash cost per silver payable equivalent ounce and all-in sustaining cash cost per payable silver equivalent ounce decreased to $9.83 and $14.88, respectively, compared to $11.44 and $16.22, respectively, in Q1 2019. I will now ask Nathan Harte, Avino's Chief Financial Officer, to present the financial results for Q1 2020.
Thank you, David. It's my pleasure to be on the call, and I would like to welcome everyone who has joined us and is viewing our presentation today. During Q1, we generated revenues from mining operations of $7.1 million, up 6% compared to Q1 of 2019. Avino also reported significantly higher mine operating income of $0.8 million when compared to $56,000 for the same quarter in 2019. As well as higher EBITDA and adjusted EBITDA of $0.4 million compared to $63,000 and $15,000, respectively, in Q1 of 2019. Avino reported net losses after taxes from continuing operations of $0.2 million compared to $0.5 million in Q1 of 2019. This translated to a loss per share of nil or $0 from continuing operations for the first quarter of 2020 compared to loss per share of $0.01 in Q1 2019.Working capital at the end of Q1 2020 was $10.8 million compared to $13.2 million at the end of 2019 and $10.5 million at the end of the first quarter of 2019, and this includes cash of $6.7 million on hand. As David mentioned earlier, our first quarter consolidated cash costs and all-in sustaining cash costs per payable silver equivalent ounce decreased to $9.83 and $14.88, respectively, compared to $11.44 and $16.22, respectively, for the first quarter of 2019.Our revenues from mining operations of $7.1 million in the first quarter were derived 32% from silver, 25% from gold and 43% from copper. Capital expenditures for Q1 2020 totaled $0.5 million compared to $2.5 million in the first quarter of 2019, with the decrease due mostly to the timing of planned expenditures and a cautious approach regarding the current COVID-19 pandemic. We do expect this amount to increase later into 2020 as certain capital expenditures have been pushed into the latter half of the year. Avino remains flexible, both financially and operationally to adjust to the changing situation as appropriate, and we will continue to monitor the situation and provide updates accordingly. I will now hand it back over to David for a discussion on our plans for 2020.
Thank you, Nathan. We're going through a rare and unsettling time, and we want to provide assurances that we are complying with health authorities in both Canada and Mexico to ensure the health and safety of our employees and stakeholders as well as addressing what all this means for Avino and its shareholders. We followed orders put forth by the Mexican government on April 1 to temporarily suspend operations. And by April 2, we transitioned to a temporary closure plan. We are extremely fortunate that we do not have any cases of COVID-19, which is attributed to our rigorous health and safety procedures that were implemented weeks ago. Above all, the health and wellness of our employees globally is our top priority. Amidst this time of pandemic-related upheaval, we achieved quarterly results in Q1 that surpassed all quarters in 2019, which included record copper production, and I want to acknowledge our hard-working team in Mexico who are instrumental in helping to achieve this. Before COVID-19 and early in the first quarter, we had announced a renewed focus on exploration in Mexico and the search for another exciting high-grade deposit similar to San Gonzalo within the Avino property. I want to ensure our shareholders that this focus hasn't changed, only delayed for a time until it's safe for operations to start up and exploration plans to go ahead. We thank you for your patience and understanding. We remain optimistic for a treatment and vaccine and a corresponding return to business as usual. We will get through this together, stay safe. Finally, I would like to say thank you to the teams in both Canada and Mexico for their dedication, hard work and contributions and for being able to quickly and efficiently transition to working remotely. We would now like to move the call to the question-and-answer portion. Operator?
Due to technical difficulties, please be aware the slides from today's presentation will be available on the website. [Operator Instructions] Our first question comes from Heiko Ihle of H.C. Wainwright.
So there seems to be just a bit of confusion in the market with the reopening of Mexico. I mean I've heard a variety of dates, end of May, May 17, May 18, obviously, there is at least a little bit up in flux. But can you just walk us through -- I mean, your area, I assume, in theory, at least, would make you eligible to reopen on the 18th, correct?
David here. It's hard to say. We're hearing the 18th. But I think they're saying if areas are not affected, the 18th is the date, but we're unsure. There are a few cases in Durango, not near our mine. But -- so Carlos is waiting to hear from the local government.
I mean at this point, the 18th is 11 days off, how many days would you actually need from getting the green light to pulling all the ore?
It's probably going to take a few weeks to ramp up. Peter, do you want to take that one?
Yes. Sure, Heiko. The question is bringing everyone back. The nice part is that all of our workers are living in the adjacent towns there. So bringing them back to work isn't the issue. As far as ramping up to full production, that will take a few days. But as soon as we get the green light, we can have everyone back at site and doing the work again, I think, in pretty short order.
Okay. Very good. And then can you just venture a guess on G&A savings during the second quarter and the rest of the year? I mean we've essentially stopped travel, we've stopped conference attendance. I've seen a couple of shows go virtual, but even that is at a lower price for the attendees. How meaningful is all of that? And how sustainable do you think those cost savings are?
I think that one's for Nate.
Yes. Thanks, David. Thanks, Heiko. It's a good question. I mean a lot of the G&A savings that people will see, I don't think it'll be quite as significant as some people might think only for -- from an Investor Relations perspective, as a lot of these conferences, like you said, went virtual and there are still some costs associated with that and making sure that it's still bringing in the same investor base or even a new investor base as we're seeing new people come into the market. And I mean, in our office, everyone is still working, albeit remotely. We're working in a collaborative fashion through Microsoft Teams or whatever the appropriate platform is. But everyone is still working, and there's still a lot of work to do. So we think there'll be some savings, but I don't -- in being overly significant at this time.
It might be related to Q1 because I think there was 3 conferences in Q1. But in Q2, there shouldn't be any, I don't think.
Our next question comes from Joseph Reagor of Roth Capital Partners.
A couple of things. Heiko already hit on the main question on the start-up. So maybe digging into the numbers a little bit instead. In Q1, your ounces sold versus ounces produced was like 84%. Is that indicative that there was maybe a shipment that went out at the end of the quarter, but got registered as Q2 from a revenue standpoint?
Peter, do you want to talk about the shipments?
Yes. Nate, I actually think this is probably a question for you as far as the accounting of that.
Yes, sure. Thanks, Peter and David. Thanks, Joe. It's a good question. In general, there's usually a difference between our ounces produced and payable ounces sold due to -- I mean obviously, the payability factor that comes into effect when we're selling concentrate. And that ratio -- I mean, it's similar to previous quarters, especially if you compare it to the first quarter of 2019, right? There's being -- this correlated increases in production and ounces sold is about the same, I believe, 10% and 11% each. So obviously, with COVID coming into effect, we did a few -- I guess, I'd say, smarter operational things, where we made sure that we do have concentrate at port for the next few months. But I don't think it's really a cutoff or timing thing where we are expecting an extra 100,000 ounces to come through in the first couple of weeks in April. It's more just the payability factor that you're seeing there.
Okay. I mean I think historically, the payability is more in the mid-90s, and that looks like something in the 84% range, just quick math. But you're saying a part of that was also a step-up in production and that kind of we should see a normal payability going forward.
Yes, that's correct.
Okay. And then second item on the revenue front. Treatment charges were about almost 20% of revenue in Q1. Was there any specific thing driving that? I mean historically, they are more mid-teens to low teens, and that seems like a bit of a jump there.
Yes. So that's a fair question. We did have a couple of penalties that were higher than usual, just from some of the grade variation at Avino. We're expecting that to normalize, but we did see that in the second -- the latter half of the quarter. But we are hopefully expecting that to come back down to the levels you kind of saw, the teens you talked about that we saw throughout most of 2019.
Okay. But it sounds like it's possible that might have a slight impact on Q2 as well.
Possible, but I don't think you'll see it quite as significant as what we saw in the first quarter.
Okay. And then just expanding on what Heiko was asking about the May 18 date. How much communication are you guys having with the government about when can you restart? Is this a daily conversation, a weekly conversation? Just to give us an idea of how much movement there might be on that date.
Carlos is in contact with the governor's office every few days, checking in with them. But there's no new announcement as of yet.
Not yet. Actually, David, yes, we are waiting for official announcement on that. So only some rumors from other people, mining people, but nothing official. So we need to move officially.
Our next question comes from Matthew O'Keefe of Cantor Fitzgerald.
Just a question for me on -- I know things are still in flux, but you had some exploration plans and some capital plans. Do you see that these are going to be modified because of the shutdown? And can you speak to kind of what kind of impact that might have on your budgeting and your plans?
Well, exploration is going to be pushed out, obviously, because we're not allowed to do anything there right now. But Nate, do you want to talk about the budget?
Sure. Thanks, David. Yes, Matt, good question. Obviously, as mentioned on the call, we're taking a cautious approach with some of the larger capital expenditures. But it does look like there's the potential for reopening sooner than later. So we would put those things back into play fairly quickly. The timing of our CapEx as far as on the mine equipment side was later into 2020 anyway. So the lower amount in Q1 was -- I mean, it was a bit lower than we originally expected, but not overly too much lower than what we were kind of hoping to see.
But you're not losing kind of spot in line or any -- nothing is really impaired as it were. Okay.
No, we're not -- yes.
Okay. I guess we'll just all anxiously await the big announcement where everyone can get back to work.
[Operator Instructions] Our next question comes from Bhakti Pavani of Alliance Global Partners.
I just wanted to dig a little deeper on the production side, given there is still an uncertainty with regards to opening up, and there is an expected ramp-up time frame. So just wondering, do you have any AHAG material on site that can be quickly processed when you open up? If yes, how does -- what does kind of the inventory look like at this point?
Carlos, do you want to take this one?
Sure. Sure. Absolutely, David. Bhakti, this is Carlos here. Yes. We have -- of course, we have broken ore underground in the different levels. But also we have some tonnage on -- see it on surface. So the overall tonnage is about 31,000, 32,000 tonnes of broken ore ready to be processed. And as soon the decree is lifted, yes, we will start with a full production in the different phases underground, yes.
And Bhakti, just to clarify there, that's broken ore of ET material, not the AHAG material. We still do have some AHAG material, just to answer your question there, but we're focused on the ET, and we do have some broken ore inventory, as Carlos just mentioned.
Okay. Perfect. And during this lockdown or due to placing the mine under maintenance and care, what's kind of the estimated burn rate on a monthly basis?
So I guess, Bhakti, I think that one is more for me. Sorry. So the expected burn rate at the moment or you're going forward?
At the moment.
At the moment, sure, no problem. So at the moment, obviously, we've switched to care and maintenance. Our staff has been reduced by, I would say, close to 80% or 90% at the Avino Mine. So the overhead is quite low. And including Vancouver, where it's about $0.5 million right now per month, and that covers overhead for Vancouver, Durango and all of any other marketing and other efforts that were ongoing right now.
Okay, perfect. And just last, with respect to CapEx, you did mention that the plan is to spend in the latter half of the year. The question is, do you still expect to meet your guidance? Or do you think it would be revised, given COVID?
I think it depends on when we're able to return to normal operations. Obviously, we're going to -- we might -- if it lasts a few more months, there's talks of May 18 and May 30, but nothing is really beneficial yet. If that is extended, we'll have to push a few things back in -- likely into 2021, and we would have to come up with the revised expected number for 2020 at that time. For now, I would expect it to come down slightly, but not overall materially as the shutdown has only lasted about 1 month to 1.5 months at this point.
This concludes the question-and-answer session. I would like to turn the conference back over to Mr. David Wolfin for closing remarks.
Thanks, operator. I'd like to thank you all for your continued support. COVID-19 has created a lot of uncertainty for the world. But when we get back mining, it looks like we are heading into a perfect storm with low fuel costs and higher metal prices. Despite the challenges that COVID-19 created, Avino has been preparing for the future by focusing on strengthening our balance sheet, limiting our downside risk by farming out noncore assets and establishing a platform for growth by way of brownfields exploration on the Avino property. We are building a new exploration division with a larger emphasis on the Avino property to extend the mineral resources organically. We will not only look at building resources, but we are also looking for a high-grade discovery to replace the San Gonzalo mine. I'd like to wish you all a healthy, happy and prosperous 2020. Operator?
Thank you. This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.