Earnings Labs

SSR Mining Inc. (SSRM)

Q4 2021 Earnings Call· Thu, Feb 24, 2022

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Transcript

Operator

Operator

Hello, everyone and welcome to SSR Mining's Fourth Quarter 2021 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

Management

Thank you, operator and hello everyone. Thank you for joining SSR Mining's fourth quarter 2021 conference call. During which we will provide an update on our business and a review of our financial performance. Beginning with the fourth quarter and annual 2021 financial results, our consolidated financial statements have been presented in accordance with U.S. GAAP. These statements, along with the comparative restated financial statements for the two years prior, 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. Joining us on the call today are Rod Antal, President and CEO; Alison White, CFO; and Stu Beckman, COO. Now, I would like to turn the call over to Rod for opening remarks.

Rodney Antal

Management

Thanks Alex and hello to everyone and thanks for joining us today. We're going to take our time, as there is a lot of positive information that we are excited to share with you today. The highlights include; firstly, our record full-year production, lower costs and significant free cash flow generation. Second, our substantial organic growth opportunities within our portfolio have now delivered a 14% increase to our reserves which is a phenomenal success. Three, the publishing of our new technical reports which lay out an incredibly positive 700,000 ounce a year baseline for our business. And finally, our upcoming execution plans for the near-term growth opportunities which represent some of the highest returning projects in our sector. So, first starting off with our performance. 2021 which was our first year post-merger, allowed us to showcase the quality and resilience of our globally diversified asset base. We delivered nearly 800,000 ounces of production at the top-end in our guidance range, while our all-in sustaining costs of $955 an ounce, beat our previously lowered all-in sustaining cost guidance, bucking the inflationary trends. These results were a testament to our exceptional operational performance and proactive supply chain management and that our performance resulted in peer-leading 2021 free cash flow generation of $444 million or a 12% yield. As we have committed to our shareholders, this free cash flow has translated directly into capital returns and we distributed nearly $200 million to shareholders last year or about a 5% yield. Given the robust outlook for free cash flow generation for years to come, we will continue to deliver against our capital allocation strategy and the recently announced 40% base dividend increase is evidence of that commitment. Second, in addition to our full year results, we released our updated resource and reserve statements. They…

Alison White

CFO

Thanks, Rod and hello, everyone. It's incredibly exciting to comment on another positive financial quarter for the business, as shown on slide 9. I'd like to preface this slide with the fact, that this is the first time SSR reported results under U.S. GAAP which is the basis of the accounting for the numbers shown here. I also want to take a minute to thank our team members for what was a major undertaking over the last month. This was an incredible effort across the business and involves almost every function in the company to get us where we are today, filed for the first time as an SEC large accelerated filer. As we take our first look at the U.S. GAAP results, Q4 was another solid quarter operationally for the company. We produced over 211,000 gold equivalent ounces and had gold equivalent sales of over 218,000 ounces, for a total of $408 million in revenue for Q4, bringing total 2021 revenues to over $1.4 billion. Attributable net income for the quarter was $127 million or $0.60 per basic share and adjusted attributable net income was $98 million or $0.46 per basic share. For the full year, attributable net income was $368 million or $1.70 per share and adjusted attributable net income was $402 million or $1.86 per share. As Rod highlighted, we continue to deliver in all aspects of our business and are proud of the cash flow and returns that are generated as a result, including $609 million in operating cash flow and $444 million in free cash flow during 2021, equivalent to a peer-leading 12% free cash flow yield. On the right side of the slide, I'd like to provide you some commentary on our reported $0.46 in adjusted earnings per share, that are calculated based on…

Stewart Beckman

Management

Thank you very much, Alison. Before I dive into the detail, let me just comment on our composite production profile from the technical reports on Slide 13. It is just the next step and a great foundation for us to leverage from. Remember that this slide includes C2 but does not include any production upside from our extensive near-mine and in-mine exploration portfolio. This year, we've made a considerable commitment to increase our organic growth spend, to make sure that we can define and show what we believe to be a much longer, stronger future production profile. I'll share my positivity with you, as we work through the slides for each of the properties. Let's start the discussion with Copler on Slide 14. We started building the Copler District masterplan a number of years ago, to help direct and focus this strategic mine development. We published CDNP 20 in November 2020, outlining Ardich as the PEA case, with an intent to convert it to a feasibility level reserve in the following year's technical report. As promised, in this year's CDMP21 report, Ardich added 1.6 million ounces of reserves and 1.2 million ounces to our production profile which was even better than the case that we laid out in the PEA. The production and development group and the Copler team, have been busy with permitting and preparations and we plan to start work on the ground later this year. The cost of the project is very low, limited to infrastructure work and expansion of the Copler heap leach. The order of Ardich will be trucked to Copler for treatment. We are still exploring at Ardich and it is still open. Based on the ongoing drilling, we expect that the resource and reserve will continue to grow. We also have some ideas…

Rodney Antal

Management

Well, thanks, Stu and Allison. Definitely a lot to get through today. To summarize, 2021 was a year of outperformance for SSR with respect to our operating results, our free cash flow generation, our capital returns and, of course, the outstanding results from growth. In today's technical reports, we have now delivered a robust baseline production profile, with a clear opportunity to sustain our 700,000 ounces of production profile into the next decade. We'll continue to build on that base in the near and medium term. 2022 will be another year of strength for our business, including continued robust capital returns and free cash flow generation. With a robust portfolio of organic growth opportunities, we expect our expanded exploration budget to help further identify and delineate an even brighter future that we've outlined today. So with that, I'm going to pass the call back to Eileen to take any questions you may have.

Operator

Operator

Thank you, Mr. Antal. We will now begin the question-and-answer session. [Operator Instructions] Our first question is from Tyler Langton with J.P. Morgan. Please go ahead.

Tyler Langton

Analyst · J.P. Morgan. Please go ahead

Yes, good evening, Rod. Thanks for taking my question. I guess Stu, just to start, I guess, with Copler -- for Ardich, I think you're kind of talking about production starting in 2023. Could you just provide a little more info on sort of -- if you need certain permits or other items to kind of -- to hit that production date? And then with C2, I think you said the next step was maybe a PFS and I'm just kind of wondering, sort of the timing that you're expecting for that?

Stewart Beckman

Management

Okay, this is Stewart. I'll answer that. So we've been permitting Ardich for some time. And you may remember, if you've been on some of these calls, about half of Ardich was covered by the Cakmaktepe EIA which is why in a lot of the documentation and you'll see it called the Cakmaktepe extension. So the application for the extension for Cakmaktepe, the first stage of Cakmak for the start of pits is in process and we're expecting to see that come out in the next couple of months. And then we'll have a number of local earnings that come on the back of that. At this stage, we see our way to having those permitted to allow us to start work in the fourth quarter of this year and then progressing in line with what you see in the technical report. And as always, with the permitting, there's a series of subsequent permits that come about. We're riding the scope of work for the feasibility study for C2 now. We do have work, obviously, ongoing that came out of the order of magnitude of scoping study work that we were doing through last year, that's ongoing. And we're at the stage now -- we did use Senko [ph] to do the capital cost estimates and then we factor those based on the numbers that we had from the recent construction of both the Float plant and the CEC treat plant. So we think that we've got pretty solid numbers there. And we're at the stage now for a much more detailed scheduling and engineering work which we expect to have approved at the beginning of April and start work in earnest, directly after that.

Tyler Langton

Analyst · J.P. Morgan. Please go ahead

Great, that's helpful. Thanks. And then I guess just on sort of capital returns, Rod. I mean I know the dividend recently the increase in the dividend. Just any thoughts on buybacks? And then, obviously, last year, you had a fair number of noncore asset sales. Is there anything else that you're potentially looking at, or have you kind of divested mostly what you wanted to?

Rodney Antal

Management

I'll answer the second part, Tyler, I'll let Alison answer the first question. So from the portfolio review process, it's still ongoing and we are looking within, just to make sure that there's obviously -- the obvious targets that you could ask about, like San Luis and others. But we're also taking that same discipline across the exploration portfolio. So we're land rich. We have a lot of land around our asset bases and we sort of continue to churn through that, where the hypothesis might not [indiscernible] in terms of our exploration efforts and we'll turn those over and replace those as well. So that churn will continue, it's a normal course of business for us as 2022 rolls on. But we did do a heavy lift in '21, so I think the sort of larger scale opportunities have pretty much been done now.

Alison White

CFO

And Tyler, I'll answer the first part of that on the share buyback plan. So you may recall earlier in 2021, we announced a plan to be able to repurchase 10 million shares and we still have about 1.2 million shares outstanding on that plan. And our intention is to execute against it, as long as it would be accretive for us to do so. So we will take a look at what that valuation constitutes and act accordingly.

Tyler Langton

Analyst · J.P. Morgan. Please go ahead

Great. Thanks so much.

Alison White

CFO

Thank you.

Operator

Operator

The next question is from Cosmos Chiu with CIBC. Please go ahead.

Cosmos Chiu

Analyst · CIBC. Please go ahead

Thanks, Rod and team. Maybe my first question is on Copler and the growth potential here. As you talked about, the copper rich ore will allow you to open up the pit. How much of that potentially additional sulfide and oxide material have you included in your technical report today?

Stewart Beckman

Management

So Cosmos, all of the material that's mined that's above the cut-off grade for feeding to the plants, when we've made the larger pit, is included in the feed to the plant. So the value of C2, although the copper drove us to be able to make the bigger pit, most of the value comes from gold. And in fact, the concentrates that we make from the from the concentrator runs about 2 ounces. So it's predominantly a gold concentrate as far as our read [ph] goes.

Cosmos Chiu

Analyst · CIBC. Please go ahead

Great. And then...

Rodney Antal

Management

I think -- you can go ahead, Cosmos.

Cosmos Chiu

Analyst · CIBC. Please go ahead

Okay. Yes. And I just want to follow up on the CapEx here, $218 million at C2. You have a very good track record in terms of delivering on budget and on time. But I'm just wondering how much inflation have you factored into your CapEx estimates. Stu, you kind of touched on it but I just want to get a bit more granularity on it, in terms of how have you factored that in? There has also been volatility in the Turkish lira, how have we accounted for that potential risk, as you come up with these CapEx numbers?

Stewart Beckman

Management

Yes. So remember, this is an initial assessment case. So the -- so the estimate is sort of a plus or minus 50% estimate. However, I would say we've got a pretty good handle on what the costs are. We just finished building the flotation plant. So concrete steel costs, particularly those which we can source locally in Turkey, it's a very cost efficient place to build things. We did have, as I said, Senko [ph] supported us with the engineering work and then we factored that with good factoring numbers. So as far as an estimate goes, it's a good estimate, a really solid estimate for a project at this stage. But we do have a lot of work to do. I think there's actually quite a lot of opportunity for what we end up with ultimately in the plant and how we might be able to leverage value out of the plant going forward. We've been looking at whether or not we would be -- get a significant advantage by bringing Ardich and some of the high-grade Ardich ores, the oxide ores and treating those through the sulfide plant, either just grinding or augmenting them with sulfide to increase the recoveries and leveraging quite a lot of value out of that. But that's quite a large exercise and scheduling which will happen subsequent to this piece of work. So I think there's a lot more to come from it yet, Cosmos.

Cosmos Chiu

Analyst · CIBC. Please go ahead

No, it's great that you brought it up, because that kind of connects well to my next question in terms of leveraging the infrastructure, the copper concentrate. And as you mentioned, you've increased your ownership at Copper Hill. Things like that, is that -- was that taken into consideration as well? Could you leverage that later on down the road in terms of some of these other sort of copper, richer areas?

Stewart Beckman

Management

No. There will be tough synergies from the business, of course. But the distance between the operations is going to preclude us sort of moving any of the material around. And with Copper Hill, what we see at Copper Hill is a very clean chalcopyrite ore, that's really just chalcopyrite. And it's close to the coast and it's actually very close to the smelter. So we'll move a little bit there. Copler is also blessed with sort of amazing infrastructure as well. So you might remember when you were there, we have a railway directly underneath the mine which sits right next to the hydroelectric power stations on the other side of the highway. So as far as the infrastructure for building a copper concentrate could be in a better place. A little bit more flatground would have been handy.

Cosmos Chiu

Analyst · CIBC. Please go ahead

For sure. Maybe moving on to Marigold. As you mentioned, today's technical report was really just a base case, just based on reserves. Could you remind us, as you showed on the map, there's quite a few targets here, New Millennium, Buffalo Valley, Trenton Canyon and Valmy, just to name a few. What has been included in this base case? And what can we expect in terms of what's being included in the, I believe, another technical report may be coming out later on this year?

Stewart Beckman

Management

So pretty much the reserves as they were, all that's remained at Marigold, so just the existing deposits. The areas that we're looking to leverage going forward, are the areas around the existing pits. And remember, we also have an application in -- for an extension to Valmy and that the extension to Valmy was done at a much larger pit shell, with regards to the application. So it takes in pretty much all of the New Millennium and that will pretty much make it into that new pit. So we're busy focusing on drilling out that area, so that in the next year or so, we'll be able to include that into the reserve and then show that value and fill that gap, that I referred to, in the production profile before we get to Seabee -- not Seabee, to Red Dot.

Cosmos Chiu

Analyst · CIBC. Please go ahead

Maybe one last question, just a follow-up here. I read in the MD&A that there's a potential for separate infrastructure for Buffalo Valley and Trenton Canyon. Maybe could you elaborate on that? Is that just getting it to a bigger size, or are you alluding to potentially for the sulfides? Could you elaborate a little bit?

Stewart Beckman

Management

One of the opportunities that has come up to really drive some efficiency and maybe some significant rescheduling at Marigold would be, to build a heap leach at the southern end of the property, where the current pits are and reduce the haul and then be able to use that also for Buffalo Valley and also for the southern pits from the existing Marigold deposits. And that we would take the carbon from there and then take it up to the existing desorption circuit. So we're just running through that at the moment but we think that we might able us squeeze some real value out of Marigold by doing that. But we haven't done enough work yet, to really wrap our arms around what it might be worth.

Cosmos Chiu

Analyst · CIBC. Please go ahead

Great. Thanks Stu and Rod and team and once again and looking forward to all these different growth opportunities.

Stewart Beckman

Management

Thanks, Cosmos.

Operator

Operator

The next question is from Ovais Habib with Scotiabank. Please go ahead.

Ovais Habib

Analyst · Scotiabank. Please go ahead

Thanks, operator. Hi, Rod and SSR team and congrats on a strong quarter and really thanks for updating all the mine plans, with all the tech reports that you released today. Most of my questions have been answered but maybe a bit of a follow-up question from last question asked by Cosmos. In regards to tech reports released today, you pointed out that these are all base case scenarios and do not include drilling that took place in 2021. Now based on the endpoint and your exploration team's expectations which operating asset do you see the most potential upside in the near term?

Stewart Beckman

Management

That's a difficult question. There was some inclusion. So for us, for example, the cut-off date was sort of at the end of May, beginning of June for the drilling. And we had about, I think, a subsequent 104 holes there. So I think Ardich will continue to grow. We're sure that we're going to see growth around the existing pits at Marigold. So we'll leverage that over time. We're really excited about what's in Seabee. And I think when you look at the numbers at Seabee, sort of Seabee's high production rate than a step off, we're quite sure that we'll be able to fill that, as we've been able to do with the extensions on Santoy 8 and 9, extending those laterally from where the mine currently is. And given that we do have so much headboard free capacity in the mill, then we can put the slightly lower grade, 5 or 6 grams lower grade at Seabee. We will use that to top up, where we've got spare capacity in the mine. Ultimately, in the future and there's a long way to go to get there, we'd like to see maybe another decline at Seabee, an all-weather road and a material increase, that's perfectly conceivable at Seabee. But we've got a lot of work to do and a bit of exploration like to go with it as well. But indications are good.

Rodney Antal

Management

Yes. I think you can take [indiscernible] when you look at it, it's across the across the portfolio, they're different but they're all just as exciting as each other, as we work through. I think what Stu's outlined here and what the team have done, during 2021 has just been terrific in terms of prioritizing and being very methodical and thoughtful in the way we've approached it. That's going to continue into this year and if we have time and obviously success, you can see what we can do -- if we have the focus on the right areas and we do expect that to come from the rest of the portfolio as Copler did, so.

Stewart Beckman

Management

I think you should start to get excited about Copper Hill at some point, too. If you look at the drilling assets we have there and that it's open around, it's a nice high-grade copper deposit, relatively easy, looks like it will be easy to treat at daylights; so relatively easy access. So we're hoping we can develop that site pretty quickly as well. But that will rely on getting access to drill.

Ovais Habib

Analyst · Scotiabank. Please go ahead

Perfect. Thanks for that. And just a follow-up on that. I mean, obviously, we've talked about all this offsite, apparent in your current portfolio. Any thoughts on M&A? Any thoughts on projects that you're looking at, extensions to your existing assets or anything that's out in the market?

Rodney Antal

Management

Look Ovais, it's the same issue, as I think we've always given as -- we'll be thoughtful. We will look at opportunities. We won't stop looking at opportunities that aren't in our portfolio, that would stay on strategy for us to ensure they sort of complement the great asset base we have but also the great fundamentals of the business that we've built and we'll progress them. And the less we talk about them and obviously not interesting to us and we're not talking about a lot. So there's really nothing else to talk about at this stage. But we will look into it.

Ovais Habib

Analyst · Scotiabank. Please go ahead

Okay, perfect. Thanks Rod, thanks Stu for this and that's all for me.

Rodney Antal

Management

All right. Thank you.

Operator

Operator

The next question is from Mike Parkin with National Bank Financial. Please go ahead.

Mike Parkin

Analyst · National Bank Financial. Please go ahead

Hey, guys. Really, everything has kind of been asked but just in terms of the exploration work that you're doing at Trenton Canyon and Buffalo Valley, can you give us and kind of walk us through -- you've given us some pretty good information in terms of what you're thinking. But how can we kind of think in terms of updates beyond exploration updates -- like where do you kind of target seeing resources starting to kind of come together there, if drill programs kind of continue to show success?

Stewart Beckman

Management

I think that will probably become more clear through this year -- probably into next year. Buffalo Valley is -- we did do a sort of a lot of geochemical work, making sure that we were -- that we haven't missed anything. We were looking in the right places and using some different techniques. We have been drilling to extend the known resource that's there. We're also seeing some interesting things at Trenton Canyon and we're seeing a bit more sort of narrow vein high-grade material there compared to sort of the larger placements of low grade that we see in other parts. And that would be sort of consistent with the way it was mined in the past as well which was relatively narrower compared to the way we mine that now. So we do have a bit more work to do, before we come out with sort of a clear development pathway there...

Mike Parkin

Analyst · National Bank Financial. Please go ahead

Okay. And do you have access to the historical drill core, that the legacy pits were based on?

Stewart Beckman

Management

Yes. So all of that data was handed over. As is the case when these things happen, a lot of those are quite old. So I wouldn't say that's perfect. But we do have all the delta.

Mike Parkin

Analyst · National Bank Financial. Please go ahead

From my understanding, it was kind of done on a smaller scale, smaller benches, so cut-off grade is probably elevated. So do you see potential that some of that data could be kind of low-hanging fruit for you, that you probably, I guess -- maybe just given the age of it, look to confirm with some holes but is that some of your thoughts that maybe low grade but actually very good in terms of what you mine at Marigold today and make lots of cash doing on a bigger scale?

Stewart Beckman

Management

Yes. Well, I think if you're thinking about that, we'd probably think more about outflow value. We do get some anomalies in that part of the world with the drilling, because when it was done, certainly, we see this as at Trenton Canyon when it was done some time ago, where the grade was below the cut-off, the grades weren't reported in some of the data sets, it was just reported as no report. So we've got the going back and redoing analysis of some of those samples. And that's -- that, in part, drives the drill plans that we're putting together for those projects.

Mike Parkin

Analyst · National Bank Financial. Please go ahead

Okay. And just last question. We're seeing some tightness in drill crew availability in -- mostly Canada. Are you seeing any of that kind of constraint in Turkey or in Nevada?

Stewart Beckman

Management

We're doing okay. We've got all of what we want in Turkey. Certainly, the laboratories are struggling. Jim, the manager in Nevada has managed to secure the drills he needs for this year but it wasn't easy on health. So we have seen that there is some tightness there.

Mike Parkin

Analyst · National Bank Financial. Please go ahead

That's it for me, guys. Thanks very much and looking forward to our next years.

Rodney Antal

Management

Yes, sir.

Operator

Operator

Our final question is from Michael Siperco with RBC Capital Markets. Please go ahead.

Michael Siperco

Analyst · RBC Capital Markets. Please go ahead

Thanks very much and thanks for staying late for me here. Maybe just looking at the 3-year guidance. Obviously, you had a great year in 2021 and almost at that $800,000 mark but the outlook is lower over the next couple of years. Understandably, on sequencing things you've discussed. How concerned are you about that lower headline production number? And are there any levers you can pull maybe in '23 or '24? Is an 800,000-ounce a year possible from the base you've established, or are you fussed about it at all?

Stewart Beckman

Management

Look, Michael, I think it's really just a consequence of the mine sequencing that we have. And particularly, at Copler, if you look at the aggregation of all the operations. We had telegraphed in the last tech reports, the Life of Mine production profiles for it and it does take a step down, while we bring Cakmaktepe online. So it's as expected and no, we're not worried about it. Our job has really been focused on creating a longer-dated future and trying to set that next decade out, where we can sustain at least 700,000 ounces and give ourselves a very stable plate form. If it goes to 750,000 and then 800,000 and down to 750,000, we're okay with that as well and our priority has really been around targeting a 10-year plus 700,000 ounce production profile. Today, with the tech reports that have been published. You heard us say probably now 4 times during the call that, we feel very confident that we're going to achieve that. So that's really been a priority for us.

Michael Siperco

Analyst · RBC Capital Markets. Please go ahead

Okay, great. And then very quickly on capital allocation, apologies if I missed it earlier in the call but you're hitting your 52-week high or close to it now. Can you update any guidance on how you're thinking about buying back stock, where you'll be active and maybe is there a point at which you'd rather do a special dividend than a buyback?

Alison White

CFO

Yes. So thanks for the question. We do have intention to continue on with the share buyback program that we had started in 2021. We still have a few months left on that program to repurchase shares and we also still have some shares left on that program to repurchase. There's about 1.2 million shares left. And then in addition to that, we will take into consideration the current market prices, as well as the valuation for the company and reassess, does it make sense to have another share buyback program? Or would we look at other options like a special dividend or even something else. So we'll definitely be taking a look at that and just need some time to kind of work through all that, based on everything that's come out today and all the information that we have.

Michael Siperco

Analyst · RBC Capital Markets. Please go ahead

Okay, great. Thanks very much. Have a good evening.

Rodney Antal

Management

All right. Thanks, Michael.

Operator

Operator

This concludes the question-and-answer session. I'd like to turn the call back over to Mr. Antal.

Rodney Antal

Management

Well, thanks everyone. Obviously a lot to get to today. So appreciate your patience, as we trolled through a bit. Obviously, a huge amount -- really interesting exciting news, building on a fantastic '21. So look forward to keeping you up to date during the year and talk more, as '22 unfolds. Thanks, everyone.

Operator

Operator

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