Coeur Mining, Inc. (CDE) Q4 2018 Earnings Report, Transcript and Summary

Good morning and welcome to the Coeur Mining Fourth Quarter 2018 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Paul DePartout, Director of Investor Relations. Please go ahead.

Thank you and good morning. Welcome to Coeur Mining's fourth quarter and full year 2018 earnings conference call. Our results were released after yesterday's market close and a copy of the press release and slides for today's call are available on our website. I would like to remind everyone that our press release and some of the comments today include forward-looking statements from which actual results may differ. Please review the cautionary statements included in our press release and presentation as well as the risk factors described in our 2018 10-K. Now, I'll turn it over to Mitch.

Thanks, Paul, and good morning. Thank you everyone for joining. Before we get started, I'd like to introduce two colleagues here with me. First is Tom Whelan, our new CFO who joined us last month. Tom will walk through the financial highlights and provide some detail on working capital and on capital allocation. He will also highlight some modifications to our guidance framework and how we plan to report our results going forward. Also with me here is Terry Smith, who recently took over as Senior Vice President of Operations after having served as our Vice President of North American Operations for the past five years. Terry will provide some operating detail in a few minutes. In summary, the fourth quarter reflected strong performance at Palmarejo, Rochester and Kensington, while Wharf had a weaker-than-expected quarter but has since bounced back strongly so far here in 2019. Meanwhile the ramp up of the Silvertip mine in British Columbia continues, progress has been slower than anticipated but mill availability continues to improve each month and we remain enthusiastic about our newest operation there. Overall, I was pleased with the progress we made last year in delivering on our strategy of discovering, developing and operating a balanced portfolio of high quality, North American precious metals assets. We continued upgrading our asset quality last year by successfully exiting Bolivia and starting up a new higher margin operating in Canada. We added more high quality, Nevada gold and silver assets with our acquisition of North Empire in Southern Nevada and with the package of assets located next to Rochester that we bought from Alio Gold. Those projects more than doubled Rochester's land position and provide additional future growth potential where we can leverage Rochester's existing infrastructure. Approximately two-thirds of our reserves are now located in the US and 100% of our production and cash flow now comes from our platform of five North American operation. It's also worth noting that 59% of our revenue last year came from our US mines and gold sales represented 69% of our total revenue with silver contributing 31%. Our investment in exploration which ranks among our most attractive capital allocation priorities, successfully replaced production last year and led to a fourth consecutive year of reserve growth. Reserves measured and indicated resources and inferred resources all increased last year. In the case of inferred resources gold and silver ounces increased 145% and 39% respectively reflecting our growing pipeline of high quality future growth opportunities. Similarly, our organic growth investments are beginning to pay off. The initial HPGR unit is being installed at Rochester which should start impacting silver recoveries in the second half of the year. This investment represents the first step toward a larger expansion in 2020, 2021 to establish Rochester as a source of higher margin, long-term production and cash flow and is expected to generate an attractive return. At Kensington, we're now generating a return on our investment to access the high grade Jualin deposit with the first 10,500 ounces of gold produced during the fourth quarter. Jualin is expected to be a catalyst for what should be a very strong cash flow year at Kensington in 2019. Our investments in Palmarejo beginning four years ago including the restructuring of the Franco-Nevada gold stream. The acquisition of Paramount Gold, development of two new higher grade underground mines, sustained levels of near mine exploration and numerous incremental optimization projects have resulted in substantial reserve growth, average grades nearly doubled 2014 levels. Unit cost that are now over 40% lower and over $130 million in free cash flow generated in just the past two years. And finally, although Wharf had a weak fourth quarter the acquisition continues to be a real winner for us. We paid $99 million for it in 2015 and had generated $136 million of free cash flow to-date. Wharf's reserves at the time of the acquisition were 560,000 ounces. After mining 450,000 ounces since that time reserves now stand at 88,000 ounces. Lastly, I want to call your attention to several slides starting on Slide 20 that highlight our best in class corporate governance and our proactive ESG programs and priorities. We maintain 1 rating by ISS for our governance practices including our board's independence, refreshment efforts, diversity, executive and director ownerships targets and incentive compensation design. Also we've included materials summarizing our environmental stewardship related to water and to our support of local communities. In fact, in 2018 we partnered with over 220 community organizations to help make a positive impact on people's lives in the communities where we have a presence. As I've said before, these priorities are a key component of our strategy essential to who we are a company. And with that, Terry will now provide some details on our operations.

Thanks Mitch and good morning, everyone. Before diving into operations, I just want to reiterate Mitch's comment regarding cash flow. Our operations team is focused on generating sustainable high quality cash flow and prioritizing quality over quantity. We invested our mines and development assets to support those concepts through success based exploration, high return, capital projects, as well as an emerging business improvement culture across the company. Looking at the fourth quarter Palmarejo, Rochester and Kensington all had strong finishes to the year. At Palmarejo fourth quarter mill throughput increased as the team did an excellent job of making up for the 17 operations day that we lost in the third quarter by milling roughly 25% more ore. With increased throughput, Palmarejo has delivered approximately $7.5 million in quarterly free cash flow despite roughly 4,600 ounces of gold and 277,000 ounces of silver being impacted by the RMC bankruptcy. In 2019, we'll continue advancing underground development towards La Nación, where we expect production will commence during the second half of the year. La Nación's grades are similar to our reserve grades. But accessing this zone will facilitate our throughput. Our mine plan anticipates La Nación adding around 410 [ph] tons [ph] per day of additional mill feed once ramped up. We also anticipated a new [indiscernible] to come online in the third quarter which is expected to increase recovery rates by about 2% for both gold and silver. This project with an estimated investment of $4.5 million and about one-year payback is a good example of the type of investments we prioritize according to our capital allocation framework. At Rochester, we continue to see strong performance from both the Stage IV and Stage III leach pads. As a reminder, we commissioned the expansion of the Stage IV leach pad back in mid-2017. This strong performance has helped us deliver approximately $15 million of free cash flow in the quarter and $23 million for the full year. This year the primary focus will be on upgrades to crushing facilities including an initial HPGR unit. These upgrades are expected to increase our crushing capacity, reduce operating cost as well as improve timing and overall silver recoveries. The project is advancing on schedule with commissioning expected in the second quarter. Currently earthworks have been completed with steel erection underway and we anticipate improved second half production because of all of these upgrades. We're excited to demonstrate what these improvements will mean for Rochester's long-term business performance. Touching on Kensington briefly, we saw a great fourth quarter largely due to high grade ore from Jualin, where we declared commercial production on December 1. We mined approximately 23,000 tons of development and 3,000 tons of stope ore from Jualin during the fourth quarter. This yielded nearly 10,500 ounces of gold at a grade of 0.40 ounce per ton which is more than double the grade we mine from the Kensington Main deposit. I'd like to thank our team at Kensington for bringing Jualin online and we look forward to delivering stronger results in the quarters ahead. Switching over to Silvertip, as Mitch mentioned the ramp up has been slower than we originally anticipated primarily due to mechanical issues leading to lower availability. I'd like to offer some additional color on what we've been dealing with up there. First off, it's important to point out that the Silvertip mill was originally constructed as part of the [indiscernible] mine operated by [indiscernible] in the early 1990s and move to Silvertip in 2015. Due to the age of the facility, the mill lags modern instrumentation and supplier support and parts have been proven challenging to find. In addition, several areas of facility were under designed or poorly installed requiring significant rework. We continue to enhance our workforce silvertip with combination of high turnover, lack of training and a challenging mill facility have also been factored. Although our due diligence identified these issues, we were overly optimistic about the amount of time that we take to address. However our strategy to improve mill performance is leading to upticks and availability and throughput, while making the plant simpler to operate. Most importantly, the underground mine is well developed and in good shape and we think the potential to expand the reserves and resources is quite significant. Over the past year, our geologist have developed a good understanding of deposit and are excited to do some step out drilling this year. We are looking forward to demonstrating Silvertip's value and developing it into one of our cornerstone assets. Now, I'll hand it over to Tom who will hit on the few financial points.

Thanks a lot, Terry and good morning, everybody. Really excited to be here on my first conference call with Coeur. Super excited to join the team and also important for all of to know I'm a shareholder of Coeur. I bought some shares right after the announcement, so I'm excited to be having enough skin in the game. Anyway, I'd like to start out with few comments about our capital allocation strategy. We're continuously investing in our business to drive value. In addition to the two acquisitions Mitch outlined. We invested over $140 million of capital expenditures in 2018 including over $55 million in development capital across our five mines and various projects at North America. [Indiscernible] of these investments include maintaining and extending our mine lives as demonstrated by fourth year of growth in our overall reserves as we highlighted in yesterday's new release. De-risking our overall production profile at Silvertip on which we look forward to reporting progress throughout 2019. Positioning Kensington for positive free cash flow through our investments in underground development, drilling and improved mining equipment. These efforts are expected to lead to higher grades, improved operating efficiencies and help identify several new high grade exploration targets. Finally prioritizing capital to Palmarejo, which continues to prove itself with strong operating cash flow. With excess mill capacity finding supplemental ore sources that can further improve profitability remains a priority. We ended 2018 with approximately $230 million of liquidity including $115 million of cash and coincidentally $115 million of revolver capacity. Overall our cash position declined roughly $77 million from 2017 primarily due to lower cash flow from operating activities in 2018 and the investments that I mentioned earlier. Let me add some color on these numbers. Our ability to generate cash is driven by our metal sales and the associated cost to production. On balance, we sold approximately the same amount of gold and silver ounces as we produced in 2018, with the exception of the material affected by the RMC bankruptcy. Operating cash flow from our five mines with $70 million during 2018 versus $260 million during 2017. Key drivers of the difference include lower top line revenue, primarily due to 15% fewer ounces of gold sold. Secondly, the timing of Mexican income and mining tax payments which totaled $40 million in 2018 including $17 million associated with 2017 earning. And finally our overall profit margin per unit sold decreased during 2018 largely due to higher cost at Silvertip, Wharf and to a lesser extent Kensington. I also want to highlight a few items that impacted working capital particularly in the fourth quarter. We saw unfavorable movements in our inventory largely driven by inventory write-downs of Silvertip as well as the inventory build still left at Wharf. The RMC bankruptcy resulted in approximately 6,500 ounces of gold and 400,000 ounces of silver not being sold. The cost associated with these ounces also impacted working capital. Before Mitch wraps up, I want to briefly cover our new reporting framework and high level guidance figures for 2019. We're modifying how we'll report production and cost to better reflect how we manage the business. While our exposure to silver remains important, our portfolio remains a much more balanced set of operating assets. More importantly, our focus remains on cash flow. Starting in the first quarter, our site level cost will be reported on a co-product basis with the exception of Wharf which will be done on a by-product basis given the small amount of silver production at that operation. Cost will be allocated based on the relative revenue contributing from each metal. We believe, this revised disclosure will improve transparency. Our full 2019 production and cost guidance ranges are highlighted on Slide 19 of our corporate presentation in Page 12 of our earnings release. Given the HPGR project at Rochester and the ramp up of Silvertip, we expect production to be skewed towards heavier second half of the year. 45% in the first half, 55% in the second half for those of you eager to tweak your models. Our CapEx guidance for 2019 ranges from $100 million to $120 million, 15% to 30% lower 2018 expenditures. We believe that this is the appropriate level of investment to continue executing on our overall strategy. We also want to stress our focus on maintaining our balance sheet liquidity and flexibility. We've done a great job improving our leverage profile over the past few years, but would like to continue to delever the balance sheet as we deliver overall financial performance. With that, I'll hand it back to Mitch.

Thanks Tom. So just to quickly wrap up. I think the key takeaways from the fourth quarter and 2018 are, that Rochester had an all-around solid year last year and exceptionally strong fourth quarter and this year, we're focused on installing that initial HPGR unit and expect to begin seeing the impact of that beginning mid-year. Palmarejo finished the year strongly and is expected to continue generating strong free cash flow this year despite lower expected gold grades. Silvertip is slowly by steadily ramping up. We're executing a solid plan there, designed to address the challenges and we still remain confident in the long-term value of this new and high grade asset. Weaker than expected results at Wharf in the fourth quarter look to behind us with 2019 expected to be more like prior years. And finally Kensington had that great fourth quarter led by Jualin, which we expect to lead the strong free cash flow here this year. We're all intently focused on returning to positive free cash flow in 2019 and remain committed to allocating capital according to our framework that summarized on Slide 12. We'll continue to pursue higher standard and remain focused on executing our strategy from our balance North American platform of precious metals assets. So with that, let's go ahead and open it up for questions.

[Operator Instructions] the first question comes from Joseph Reagor of ROTH Capital Partners. Please go ahead.

So couple items, I guess first one right off the bat. The guidance for this year felt a little more, I'll use the word conservative than last year. Is this an indication that with last year where couple of mines didn't meet initial expectations that you guys are taking your revised approach to how you guide as far as the production numbers go or is there anything else we should read into that?

I think you got it there, Joe. We're taking what we think is a realistic and prudent approach to setting our guidance achievable. But fairly realistic and might say conservative but hopefully be able.

Okay and on the 45-55 split, is there any more color you can give us there as far as which mines will be the biggest drivers of that? I'm assuming Silvertip is one of them as it ramps up, but other than that.

Yes Silvertip for the obvious reasons of the ramp up and then Rochester with the - everything going on there with the crusher upgrades going on in the first quarter. We'll see that then hopefully kick in and lead to a stronger second half at Rochester. We also have that La Nación ramp up at Palmarejo that will add a little bit more to the second half at Palmarejo than the first half.

Okay and then one final question, if I could. Tom mentioned balance sheet, trying to delever a little bit. Do you have any assets producing or the development stage that you consider non-core that could be uses away to raise capital and repay some of the debt?

It's a good question. We're always evaluating our portfolio, everything is for sale at the right price. I think that's the prudent way to be thinking about it, as a management team of a public company. Our five operating assets are all solid contributors in terms of free cash flow and we've got good organic growth at all of those. We're excited about sort of crystalizing overtime, but if somebody wanted to come in and pay us for all of that upfront, we'll always be open to anything. But there's - other than we have some small equity positions that are probably more easily monetized than an operating asset. We've gone through a pretty thorough monetization of non-core assets for the last two, three, four years. I think we sold on an individual basis, something like eight or 10 different interests in assets.

Okay. Well thanks for the color.

The next question is from Michael Dudas of Vertical Research Partners. Please go ahead.

First I want to commend you guys on the presentation your ESG discussion and the added details on the operations of mines. I think it's going to be very helpful going forward and also the change in higher reporting report out on the business.

Appreciate that feedback, thanks.

I think free cash flows on the minds of most investors thinking about the company this year. can you maybe will you discuss about the timing of business is going to run this year but certain things at the mines relative to offset some of the cost inflation or labor availability that Coeur is working on, maybe a couple of examples of what you're doing at some of the operations, to squeeze some of the cost out of that business.

Yes, I'll give you a couple of examples that come to my mind [technical difficulty] last time feel free to chime in. probably one of the biggest sweet factors in 2018 versus 2019 is Kensington. Capital expenditures down about in half, last year and that's really a reflection of the heavy investment that we've been putting in there to gain access to some of this higher grade material. So even though you see in the cost guidance at Kensington a number that might not sort of sink up with what expectations might be. From a cash flow standpoint, Kensington is pretty well set up now to go from what was negative cash flow year last year to a healthy free cash flow this year, so that's largely a grade story. The other example that comes up is just Wharf. There's - probably for the first time certainly in our time of owning Wharf, - had a clear hiccup there in the fourth quarter and that dragged down Wharf's results for the full year that is something we don't anticipate having happen again here in 2019 and so that's going to be a real big swing in terms of not only ounces of gold production but free cash flow as well. Obviously Silvertip as that scales up will be probably the largest swing between last year and being a consumer of cash and as we continue to ramp up there, having that flip over, so that's good growth that lies ahead there. Terry, did I leave any? I hit about all the mine.

Yes, I mentioned Palmarejo earlier, we're always trying to [indiscernible] for free cash flow at the operations, so we're ramping up throughput in the second half of the year, at Palmarejo to solve for that and maximize free cash flow. And at Rochester, really the HPGR crusher and upgrades to the ex-pit that were during - well drop our operating cost, increased timing of recoveries so it's like a magical free cash flow project that we're pretty excited about. So that will give us some really good free cash flow results at Rochester in the second half of the year.

Good point. Does that give you some good color, Mike?

Yes, it does Mitch. Thank you. What are you looking for this year out of your work at Sterling and Crown as you guys get better handle on the deposit, the opportunities there and what should we anticipate to look forward in positive data from that?

Yes, I'll hit on that and Hans is actually calling in from Reno, he'd just been down there at Sterling and Crown earlier this year. So Hans is still free to chime in. But Mike the two big things there worth mentioning, we'll spend combined about $5 million this year in exploration that will be split roughly in half between the two. Sterling kind of getting the first attention, Crown then in the second half of the year. With us focusing initially there at Crown and then on the SNA deposit initially. Both programs, both at Sterling and at Crown at really geared towards resource expansion. The other key point I think to think about there is, these need to fit in to an overall sequence in the portfolio that work for us, for our cash flow timing, for our organization. And so while Sterling probably could be put into production quickly for probably a modest amount of capital. What we envision there is something that could be larger based on additional time to drill and expand that resource, for us right now the initial focus is Rochester. We get Rochester and this next expansion in 2020, 2021 behind us. We see the free cash flow from that, then these two new deposits down in Southern Nevada. First probably Sterling and then later Crown, then those could become sort of in the development pipeline next and that would fit well with our company and overall kind of cash flow timing. So that's a little bit what we expect to be doing there in the near term and how we think about slotting in to the overall portfolio and sequencing. Hans is there anything you would like to add to that?

Mike, the focus obviously is resource growth shallow [technical difficulty] lower to stope ratio. It's a good high grade oxide system there, so we're focused on heap leachable oxide gold for foreseeable future. We started out with one rig, we basically inherited Northern Empires staff and operations and people [ph]. And moving forward you'll see us ramp up slowly as we get the geologic model figured out and the targeting figured out. So by technically, we'll have two rigs and eventually we'll get to 24-hour shifts and things like that. So the data will be rolling in much faster later in the year, than it is now. [Indiscernible] our geologist a chance to get ahead of the rigs [technical difficulty]. The Crown area I look at is, has the biggest growth story there, where Sterling will be the initial cash flow generator. Because the Crown area has potentially to really grow as evidenced by our neighbour [indiscernible] drilling.

I appreciate those comments. Thank you. My final question would be for Mitch. As you have a lot going on in 2019 that kind of get to get Silvertip off and get company to more normalized level, is the capital intensity of the business as you look going forward and not want to get guidance on 2021. Do you feel there's chance to have more reduced on the development capital side as prices improve you can really drive that cash flow as you exit 2019 and beyond?

Yes that's exactly how we're thinking about it, Mike. Is we've got the capital that we'll need to go into Rochester to realize the significant impact of this next expansion where we'll - new leach pads, expanded pressure, that is the next kind of hump [ph] in terms of CapEx that's mostly 2021 capital. But by then, you look at what everything else inside the company and you've got Silvertip in steady state, you've got Kensington continuing to have this nice balance between the Kensington Main and then these higher grade ore sources. You've got Palmarejo continuing to do what it's doing, you've got Wharf continuing to be a cash flow machine for us. Then once you get on the back side of that Rochester expansion and you see the cash flow from that thing, there's really a nice attractive looking cash flow profile sitting out there beyond that year.

Great thoughts. Thank you.

[Operator Instructions] the next question is from Mark Reichman of Noble Capital Partners. Please go ahead.

Given the expected growth in zinc and lead production at Silvertip. The projected cost applicable to sales at least for lead and zinc at the high end. Don't seem very competitive given where current prices are today. And so I was just wondering, when you think about the cost at Silvertip, are there some ways to get those costs down or what's it's going to take to get us the low end of your cost guidance. I think you're shooting for the 1,100 tons per day, but then there were also those four key areas, that I think you were focusing on try to get those costs down.

Yes good question, something we give a lot of time and thought there. I'm going to let Terry start and then Tom chime in on, anything that you would like to add. Terry?

Yes, thanks Mitch. So at Silvertip, really what we're trying to do initially is stabilize the operation and then we can look at optimizing the operation in the later part of the year. And that's when we'll attack operating cost. Right now it's pretty inefficient operating. We have a mill that requires a lot of labor to operate it. We have an underground mine that still has a lot of manual activities going on. So I can see us producing the amount of labor, we need to operate that place and that will result in some operating cost rolling off. We have a lot of contractors, we're using to support the operation at the moment and some of those costs will roll off. So it's still quite early as far as the genesis of Silvertip is concerned and I think, once we get into that optimization phase, we'll be well prepared to make Silvertip very competitive in the base metal phase.

Mark, it's Tom Whelan here. The couple other comments I would talk about, in a base metal business. You're only halfway home once Terry produces the wet concentrate that have lead and zinc for us to sell and I'm actually pretty excited about once we get to stable state of finding some ways to reduce our costs even further around finding happy homes for this concentrates. So there's opportunities on the supply chain, on shipping, all those areas sort of post the mine where I think there's some opportunities to find further cost savings. So again, I know the guidance is conservative here for 2018, but again we think that's prudent at this stage but absolutely stabilizing and optimizing on all our whiteboards in our office here in Chicago.

Okay and then the second question. At the high end, Rochester's 2019 production guidance is pretty much roughly flat with 2018 and you've got HPGR unit that will go into effect, it should benefit the second half of the year. So I was just wondering when you talked about 45%, 55% split companywide how would you address that just for Rochester?

The one thing, I'll say about Rochester and then Terry I'll turn it over to you is, our thought process around Rochester's guidance is, we're going to have a lot of new information in terms of how does this HPGR unit impact OpEx for example, just how quickly can we expect to see or will we see impacts on the silver recoveries and so we hopefully that will provide us with some ways of beating our guidance both on the production and on the cost side. As far as the split between first half, second half. Terry do you have?

Yes, so production will be stronger in the second half as we've sort of guiding over the morning here. And obviously as we get this unit in, leading to higher recoveries that timing is in the second quarter, that will facilitate an improved production profile in Q3 and Q4. Where you looking for specifics around capital like our split in capital?

What I was trying to address is at the high end of your guidance it's pretty much flat with 2018 production? So I guess what I'm looking at is, as you got the benefit of the high-pressure grinding roll in the second half. I understand that the second half supposed to be up little bit. But I mean should we imply kind of weak first half just given the fact that you're getting all that, squared away. Weaker than say, what maybe we saw in some of the quarters in 2018 and then a really robust second half or I was just trying to kind of get the magnitude and the difference between the first half, second half.

Yes, so just going back a little bit. We've shut down one of our two crushing plants last year. So our - the tons we place out in our leach pads there is - has gone down and really won't return back to strong levels until after this upgrade is been completed. So we will go through a lull here in the first half of the year in terms of overall production. So we're seeing a pretty strong half to the year.

Okay and then, I think I understand the increases and decreases in capital spending at each mine versus 2018, with maybe the exception of Palmarejo. And so I was just wondering is the increase there due mainly to the underground development at the La Nación deposit?

Yes, you've got it there Mark. I think last year our total capital was $30 million. This year guidance is $40 million to $45 million and I think La Nación is about $10 million associated with that. so much of what we have in CapEx at Palmarejo was underground development and I think that's $25 million or so just Independencia and Guadalupe and then you add in the additional capital required to get La Nación up and going and that gets you right into the guidance range for 2019.

Great. Thank you very much.

The next question comes from Brian MacArthur of Raymond James. Please go ahead.

I've few questions and they're mostly focused on Silvertip. So just one of the other comments was made earlier about efficiently placing concentrate going forward to get up and running. Because it's been slower than expected was that con [ph] stuff committed so that you've had penalties in the fourth quarter and the first quarter by not delivering stuff into contractors or is it sort of still open contracts where there is like no penalties involved and you just ship it as you get it now.

Brian it's Tom Whelan. So when we bought Silvertip we inherited long-term off take agreements. And we have not been able to deliver into those off take agreements because they anticipated much higher concentrate grade, so we've been working with the off take or two find happy homes for this. And I wouldn't say we're incurring penalties per se, we're just having to pay maybe a teeny bit more than benchmark terms just because of the lower quality of concentrate grades that we've had, so no penalties. I would for purposes of 2019 Terry and the team at Silvertip again music to my ears as seeing those concentrate grades go up and so we should be maybe able to deliver into this contract. We'll wait and see, but certainly we'll be achieving benchmark terms at worst in 2019.

Great. Okay, that's very helpful. I got to be honest the accounting for Silvertip in the fourth quarter was a bit hard to follow. [Indiscernible] exactly what was going on there. So second thing then just as far as other cash flow this year. So technically when you get to a 1,000 tons you still have to make the $25 million payment, right?

Yes.

Back to the JD [ph]?

Yes, tied to the receipt of that permit and that's $25 million, 25% in shares, 75% in cash. And I think that's due 15 days after receipt of that permit.

So it's not like it has to be sustained. It's just purely a permit saying it's not even you can sustain it at 1,000 tons, right? You pay it at the time you get the permit, there's no like ramp up or execution time period that you have to hit it or anything, it's purely a permit related thing.

Exactly, yes.

Okay. Second thing, you also - do you still get the - and I apologize if I mispronounce it, the Manquiri note receivable I think was coming in the third quarter of this year, is that still right?

That's right.

For the Bolivian transaction.

That's right, yes. There are two things still sort of that lie ahead there. One is the, repayment of the remaining balance of the note which I believe is $10 million. I think it's $6 million. and then there's an NSR that's attached to the mill there and that will start kicking in, I think it's in September so we'll be entitled to stream of cash flow out of that 2.5% NSR. But the last - biggest chunk is that remaining note balance.

Right and I guess the third component of what I would call it. I mean, if I read the financials right, I think both the receivable and the payout are in the current assets and liabilities which makes sense for me so the net cash them out. The final payment though on the Silvertip deal based on reserves which I think is done at the end of December 31, 2019, right?

Yes.

Is that - the question I have here is really, is that on the balance sheet anywhere? It didn't look like it was in current assets and current liabilities, but it may be in these other long-term liabilities which there's no sub-note too.

Correct, yes you got it Brian. It's in other long-term liabilities and when we made the acquisition, we set up the liability for the full $25 million because that's our expectation that we'll owe it and we're just slowly, pointing out to account here, we had it discounted at the time we acquired and we're slowly accreting it up to that $25 million at December 31. So actually I'll again, astute observation. It'll move to current as part of our Q1 results.

But then you may not actually pay the $25 million, depending on what happened, right? So then it may go back - that's the maximum. So you fully accrued for the well - best case, worst case, I guess whichever way you look at it.

No, our best estimate again. I mean we could go on about our confidence about the ore body. Our best estimate is well, the full $25 million.

Great. Thank you that was just helping with the other. I was trying to get other inflows and outflows this year. Thanks very much, that's very helpful.

Yes, sure no problem, Brian. Thanks.

There are no other questions at this time. This concludes our question-and-answer session. I would like to turn the conference back over to Mitchell Krebs for closing remarks.

Okay, well thanks. We appreciate everyone's time this morning. It's a busy day. We look forward to speaking with you again in the spring time to discuss our first quarter results. So thanks again and have a good day.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.