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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good day, everyone and welcome to SSR Mining’s Fourth Quarter and Year End 2020 Conference Call. This call is being recorded.
At this time for opening remarks and introductions, I would like to turn the call over to Brian Martin, Investor Relations for SSR Mining. Please go ahead.
Thank you, operator. Good day, ladies and gentlemen. Welcome to SSR Mining’s fourth quarter and year end 2020 conference call, during which we will provide an update on our business and review of our financial performance.
Our Financial Statements and Management Discussion and Analysis have been filed on SEDAR, EDGAR, 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 this call are in US dollars, unless otherwise indicated. All references to cash costs and all in sustaining costs are per payable ounce of metals sold.
We will be making forward-looking statements today. So, please read the disclosures in the relevant documents. Joining us on the call today are; Rod Antal, President and CEO; Greg Martin, CFO; and Stewart Beckman, COO.
Now I’d like to turn the call over to Rod for the opening remarks.
Thanks, Brian and good afternoon and good morning to you all. 2020 was truly a transformational year for SSR Mining, as we completed the merger and integrated Alacer Gold. We delivered a number of value-enhancing catalysts across our portfolio and successfully navigated the challenges presented by the COVID-19 pandemic.
During this period of unprecedented change, we met our 2020 objectives with all four of our operating sites, exiting 2020 with momentum and clearly defined growth initiatives which we’ll touch on later in the presentation.
I’m proud to announce, we declared our inaugural quarterly dividend this morning, in line with our recently announced capital returns policy which is designed to maintain balance sheet strength, fund future growth opportunities and return capital to our shareholders. A balance sheet with $457 million in net cash and continuing peer leading free cash flow will allow us to assess additional capital returns in the form of supplemental dividends and/or share buyback programs moving forward.
From a growth perspective, we delivered a number of exciting catalysts highlighted by the release of the Copler Technical Report, which demonstrated the scale, quality and long-term value of these assets. The report mainly featured Ardich and was the first step in defining the significant organic growth potential of this world-class asset.
We also announced the discovery of C2 copper-gold porphyry intersecting wide mineralization below the Copler pit. This is just another emerging example of the significant and material growth potential within the business. At Marigold and Seabee and across the broader portfolio, we have a number of organic growth and exploration opportunities we expect to highlight as the year progresses.
We remain focused on sustaining and growing our business with a goal to demonstrate our organic ability to sustain production of 700,000 to 800,000 gold equivalent ounces for the next five plus years. On this note, we are planning to provide a longer data production guidance to the market later in 2021. Building from our fundamentally strong business, we have an exciting platform to firmly establish SSR as a premier mid-tier gold producer in the sector. And our fourth quarter results clearly demonstrate the strength of the business.
So turning on to the next slide. ESG has always been ingrained in the culture of SSR Mining. Going forward, we’ll continue to do the right things and be recognized as a true partner with our employees and the communities where we operate. We’re compiling our 2020 sustainability report and look forward to providing an update on our progress, as well as the discussion on our 2021 priorities. From a safety perspective, we hold ourselves in a high standard and have many examples of best practices across our business.
I’ll take a minute to recognize two achievements in the quarter. Firstly, I congratulate the Copler team on being awarded the 2020 SME Health and Safety Operational Excellence Award, which is truly a great achievement for the site. And at Seabee, the team were successful in meeting the new diesel particular matter regulations of the province with the recently installed ventilation upgrades. This means, there is no longer mandatory to wear respirators in the underground, which is an excellent outcome for all. We are proud of our achievements and we’ll continue to be progressive in our approach to ESG moving forward.
As looking ahead at our 2020 outlook, how guidance represents an overall improvement relative to our 2020 performance. Our focus for the year is to ensure safe production, and we have several initiatives being implemented to continue to improve our overall safety results. We expect to generate peer leading free cash flow, while prudently investing in high return growth opportunities across the substantial asset base that we have.
Some examples of our growth initiatives, include the flotation circuit construction and ramp up at Copler, ongoing cost and continuous improvement initiatives at Marigold. A focus on increasing underground development rights, allowing us to utilize lightened mill capacity at Seabee in the future and the transition to owner-operated haulage fleet of Puna.
On the exploration side, we’re investing $65 million across the portfolio and expect these efforts will take center stage as we advance the exploration targets and provide some clarity on this scale and timelines during this year. In this regard, there are a few areas you should pay attention to in 2021. C2 and Ardich to Copler, New Millennium and Trenton Canyon targets of Marigold and the SantoyGap Hanging Wall at Seabee. Stew will touch on these later in the call.
I just want to highlight a few quarterly highlights before I turn the call over to Greg and Stew to dive into the detail. Operationally, we had a very strong fourth quarter with all four of our operating assets exiting the year with momentum and confidence moving into ‘21. Our consolidated gold equivalent production totaled 220,000 ounces and an all-in sustaining costs of $976 per ounce. Marigold set a number of operational records, while Copler, Seabee and Puna all contributed to the strong results.
From a financial perspective, we reported an adjusted EPS $0.50 a share, and generated $157 million in free cash flow in the fourth quarter, ending the year in an excellent position we consolidated cash of nearly $900 million and net cash of $457 million. These results would have been even stronger if our sales had not lagged production due to the timing of gold pours, and concentrated shipments at year end.
So with that, I’ll turn the call over to Greg, who will discuss our financial performance in more detail.
Thank you. As outlined by Rod, a fantastic final quarter for SSR Mining, with our assets integrated and all operations delivering. We posted impressive financial results which demonstrate the new strength and scale of our business model. While COVID continues to impact on costs and efficiencies, it did not stop our minds from achieving revised guidance. With annual numbers being a blend of pre and post merger results, I’ll focus my comments on the fourth quarter.
Revenue for the quarter increased 65% to $371 million as compared to $225 million in the previous quarter. As we benefited from Copler’s contribution for the full quarter combined with sequential improvements at all four assets. Income from mine operations increased 76% quarter-on-quarter to $146.5 million and net income effectively quadrupled from $90 million to $98 million from $25 million in the third quarter.
Adjusted net income increased 61% to $109 million or $0.50 per share in this quarter from $68 million in the third quarter. So strong financial momentum across all metrics as SSR resets into a new higher scale peer space. Perhaps the only blemish on the quarter was our results would have been even stronger if ounces sold would have equal ounces produced. Timing of gold pours at year end drove higher carryover of finished goods inventory at our gold assets. And for those of you familiar with the concentrate market, which is how our silver gets sold, you understand the normal lags from restarting concentrate shipments post-COVID closures.
Our concentrates in Argentina are generally smelted in Europe or Asia. So shipment cycles are long. Shipments were back to steady state in November. And as a bit of a bonus, we’re selling our concentrates into stronger silver prices to this point in Q1. As I noted on our third quarter call, amortization of fair value adjustments related to acquisition accounting for Alacer will be an ongoing impact to reported income. These items totaled $28 million in the quarter and $49 million for the full year and are identified in our adjusted income table. Also through the fourth quarter, while all less than the third quarter, COVID costs, care and maintenance costs and transaction and integration costs all impacted reported income.
Cash generation in the quarter was outstanding. Cash from operations in the fourth quarter increased fivefold relative to the third quarter to $217 million. We generated $157 million in free cash flow even while sustaining capital investments increased as the site’s return to steady state operations. Our net increase in cash was $127 million, considering debt repayments. These strong results support our inaugural quarterly dividend of $0.05 per share announced today. The maturing of SSR to a business that can sustain and grow a quarterly dividend has been a goal of mine since I joined the company. So it is satisfying to see this achievement.
As we discussed last quarter, our dividend framework of considering incremental shareholder returns above our base dividend from excess free cash flow provides opportunity to further consider these issues as we wrap our arms around the combined business. Our balance sheet is in exceptional shape with $897 million of consolidated cash and $457 million of net cash. We will continue to manage our capital structure in a responsible manner to ensure the ability to efficiently fund and grow our asset base.
Our outlook for 2021 as published earlier in the quarter puts us in a good position to continue our strong financial performance and free cash flow generation. Capital intensity remains well managed as we grow to over 700,000 equivalent ounces. In our outlook, we noted cash flow weighted to the second half of 2021, recognizing the production profile, particularly as the flotation circuit at Copler starts, but also our sustaining and growth capital profile, which is heavier in the first half of the year.
Looking specifically at the first quarter, these cash flow effects are amplified as our working capital build is loaded towards Q1 due to the Seabee ice road restocking and an expected building receivables as we return to steady state concentrates sales. The first quarter also sees a concentration of cash tax payments. With Copler’s strong 2020 performance we paid intercompany dividends in January, which results in a joint venture partner distribution in the quarter. And as announced, we will recognize our first dividend payment in Q1, so overall expecting a great 2021 within those first half-second half variations.
With those comments, I’ll turn the call over to Stew.
Thanks, Greg. Before we move into the mine site summaries, as always, I’ll start with EHS&S, environment health, safety and sustainability. Although COVID remains pervasive, we are managing it at our sites, caring for our people and getting on with business. Marigold and Copler didn’t suffer shutdowns due to the pandemic and both Seabee and Puna had bounced back to full production. Our COVID protocols focus first on protecting our people, contractors and the communities in which we work.
As part of the merger integration, we reviewed our ESG policies which were updated and approved by the new Board. The alignment and updating EHS&S standards followed and will be completed by the end of the quarter. This forms a foundation about EHS&S management system, ensuring both efficiency in execution and that we have a high standard across the business.
I was delighted and very proud that our Turkish business unit, Anagold was awarded the 2020 SME Health and Safety Operational Excellence Award by SME. The award recognized the achievement of over 22 million hours LTI free during the transformation of that business, with a construction and commissioning of the $750 million sulfide plant. Copler is currently more than 500 days and approaching 7 million hours LTI free. Not to be yet done, Marigold was also awarded the 2020 Nevada Mining Association’s safety award for large operations, which was a well deserved recognition of the Marigold team.
The new SSR sustainability report is in drafting and we plan to release this with our annual filings at the end of this quarter. Leveraging best practice across the business is a core of our integration process. In the sustainability report, we will reconfirm our commitment to our communities and the environment along with continuous improvement in reporting. With disclosure starting to the CDP and TCFD planned later this year. We have a well resourced and experienced HSE and operations teams within SSR.
Now please move to Slide 8 for some commentary on each of the sites. 2020 was another really big year for the Copler operations. Despite the challenges of COVID, the team managed to deliver within guidance, 327,000 ounces at $752 an ounce. There were some indirect COVID impacts, including production and the pushing back of some work in costs into this year. Despite the challenges of 2020, the sulphide plant continues to perform at the higher end of expectation and is now consistently operating well above design throughput. The autoclaves achieved an impressive 92.5% operating time in 2020. Copler demonstrated again, it is truly a world-class operation and district with solid performance and outstanding development pathways.
In Q4, we released the 2020 Copler District Master Plan technical report or the CDMP 2020 as we call it, this was the next step in the development of the district included a supplemental flotation circuit in the base case, which significantly increases throughput rates and an alternate PEA case to the development of the near mine Ardich deposit. The Board have approved the construction of the flotation plant which is on track to commissioning mid this year.
Key takeaways from the CDMP 2020 were, the base or the mineral reserve case which incorporates a supplemental flotation circuit, increased processing rates, lowered costs, significantly increased reserves and resources, extended the mine life and delivered an NPV of $1.7 billion at a 5% discount rate. The life of mine gold production for the reserve case is 3.6 million ounces.
The second scenario included an alternative PEA case, which had the development of the Ardich deposit, Ardich is located 6 kilometers northeast of the Copler processing facilities where it’s all will be treated. The NPV for the PEA case was $2.2 billion at 5% discount rate. And the life of mine gold production was 4.6 million ounces with plenty of upside. There are 175 holes drilled in the Ardich that contributed to CDMP 2020. Since those first holes we’ve drilled another 130 holes and exploration and infill drilling is going on as we speak.
Excitingly, in the last half of 2020, we discovered a copper-gold porphyry directly under the main pit in Copler Mine, on the 25th of November, we made an exploration release for the first four holes. Creatively we designated the targets C2. I’ll talk more about C2 later on.
Please jump to Slide 9 and we’ll talk about Marigold. Marigold operated through 2020 without a COVID stoppage due to excellent work and effort by the management team. They didn’t just keep the mine operating, they broke records for annual production in 2020, along with quarterly and monthly production records in Q4, producing 77,000 ounces in the quarter.
The Q4 production benefited from all being stacked onto lower lists of the leach pads. Record material movements were also achieved in 2020 and we expect these records will be beaten again in 2021. In Q4, issues with the new hydraulic shovels were largely resolved. And we’re off to a good start in 2021. The expanded fleet, improving performance and shorter hauls are supporting the higher tonnage rates in the mine.
The head grade crept up in the fourth quarter, higher than previous’ quarters as always extracted for Mackey 4 and Mackay 8. All-in sustaining costs for 2020 were $1,222 an ounce, and they were impacted by an increase in royalties as a result of gold price as it did at all of our sites.
Exploration drilling continued across the property with some interesting results, Marigold has very large land package from acquisitions over the last few years. This provides lots of opportunities to discover and develop low cost near mine resources by leveraging off our knowhow and our infrastructure. I’ll talk a little bit more about Marigold exploration later.
Please move to Slide 10. We see real potential in Seabee, above what’s been a pretty consistent performance over recent years apart from the COVID impact, of course. On EHS&S front, Rod has already mentioned, Seabee’s achievement in lowering the diesel particulate matter and improving the working conditions from our folks. Seabee continues to manage COVID with some cases presenting on site, while this has created difficulties for operations, they are carefully and safely managing it.
Seabee ramped back up in August and in September had a record month milling on average 12,071 tonnes a day. In Q4, the mill caught up with the mine and the average mill throughput rate was 1,081 tonne per day, which is consistent with our PEA case which was released in 2017, predicting 1,050 tonnes per day for the life of mine. The processing plant clearly has capacity and the mine is the bottleneck.
Continuous improvement opportunities in the mind are being pursued, including some replacement and extra equipment which is scheduled to come across the ice road in the next few weeks. Additionally, we’re putting a lot of effort into resource and reserve definition in the mine along with increased exploration, targeting extensions to mineralization on strike in our very large tenement package, and the contiguous Fisher JV areas.
Within the mine in Q4, we did more than 8 kilometers of drilling in a Santoy Hanging Wall target, which is adjacent to the existing mine infrastructure. This will be a focus for the resource development team in 2021. And we’re expecting that it will be the next development opportunity behind the Gap Hanging Wall. We’re developing a second fill into the Gap Hanging Wall, aiming to convert a significant portion of the Gap Hanging Wall resources into reserve by the end of 2021.
Please move to Side 11. Puna has ramped back after the hiatus for COVID and hasn’t had a great run at the end of the year. Throughput rates averaged just over 4,500 tonne per day, delivering 2.2 million ounces of silver in Q4. Overall 2020 produced 5.6 million ounces of silver and exceeded our updated guidance, AISC was $15.22 an ounce for silver. And as Greg mentioned, the AISC was impacted by delays of Copler concentrate sales.
The team at Puna are very focused on continuous improvement in cost control. At the end of this quarter, we transition to iron haulage from the mine for the 40 kilometer trip to the processing plant. Coming out of commissioning and the COVID shock, Puna has stabilized really well and is consistently delivering.
Now please move to Slide 12. I’ve already covered off a lot of this already. But I want to take a couple of minutes to help and frame it the way we see the portfolio from an exploration perspective. First of all, it’s fantastic portfolio, rich with Brownfield near mine targets which present opportunities for low cost capital, near mine and in-mine development. In Seabee, we have non-mineralization that, if developed could leverage off the fact at the processing plant has a much higher capacity than the current mined configuration can deliver.
Marigold has potential to achieve one of a number of valuable accretive outcomes. First, an increase in the head grade and resources from near mine, which will then be processed in the current heap leach pad areas. We’re focused on increasing the grade and believe that there is good probability of a successful outcome, especially in the areas of budding the historical pits. Recent tenure acquisitions really boosted this prospect.
Secondly, expanding and developing the resources of the recently purchased Trenton Canyon and Buffalo Valleys. And finally, the discovery of an economic sulfide ore body similar to other mines in our district is a tantalizing target, which we have a reason to believe is a real possibility. Finally, but not last is Copler. Copler has a plethora of opportunities that can take advantage of the processing complex which has the capacity to trade both oxide and sulfide ores. The development of Cakmaktepe mine in recent years is a great example of our ability to execute this strategy.
Ardich is the most advanced project with a target to deliver ore to the Copler processing facility in 2023. As I mentioned earlier, developing Ardich is expected to add at least 1 million ounces of gold to the production of Copler. Our newest discovery is C2, which also has the potential of significant value.
Please move to Slide 13 and I’ll give you a brief update of where we are with C2. C2 was discovered in the last half of 2020 we released the exploration data for the first four holes. The best intercept was bit over 240 meters at two points – at 0.74% to same copper equivalent starting from just 37 meters and included grades – included zones where the grades were well over 1%. Those holes were compensated for lithology and sent to Canada from metallurgical testing where we are encouraged by the preliminary results. The first round of met testing will be completed in the next weeks and the data analysis before the end of the quarter.
In the center of the slide, you can see a photo of the chalcopyrite froth from the lab testing of the C2 ore. There’s really good reason to be excited by C2. It seems to have grade and there is good potential for volume. There are higher grades near the surface. The mineralization starts practically in the final bottom of the existing pit, which you can see from the cross sections at the bottom of the slide. Copler is blessed with great infrastructure.
And importantly, we’ve recently demonstrated that we can deliver a major project in an area. There is a lot of work to do to turn C2 into a project. And we’re running hard at it. We have 9 drills in C2 at the moment and are advancing our thinking and preparation for a development study. You should hear more about C2 in the future.
Thank you very much. And back to Rod.
Well, thanks, Stew, and thanks, Greg. So despite the challenges thrown at us by COVID, our team have done a tremendous job managing our operations, completing the merger, and integration, all while finishing the year with exceptionally strong fourth quarter performance. We declared our inaugural dividend this morning, which highlights the financial strength of our new business at a responsible approach to capital allocation.
We will assess the potential for further capital returns to our shareholders in line with our capital allocation policy with our Quarter 1 2020 financial results. In ‘21, we remain focus on creating value for our shareholders, safety and execution, while progressing the many organic high value growth options that we have been highlighted during this presentation.
So with that, I’ll pass the line to the operator to take any questions you may have.
Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Ovais Habib of Scotiabank. Please go ahead.
Hi, Rod and team and thanks for taking my questions. Rod, just the first question, again, you’ve touched on asset allocation quite a bit. And you know, talked about share buybacks. And is there you know, obviously, your balance sheet is extremely strong, you’re – you’ve got to be generating a lot of good free cash flow in 2021. You know, and your free cash flow profile is second half weighted? Is this kind of what you’re looking to get over in terms of announcing any sort of a share buyback program? Or is there any other plans in place?
Thanks, Ovais and look, I’ll answer the question in a slightly long version, because I think it’s important. The capital allocation – policy that we established towards the end of last year was really in three prongs and the, you know, the first part was to maintain the, you know, maintain and strengthen the balance sheet to you know, ensure we continue with our debt management and other needs of the business.
Keeping an eye to the future and some of the exciting growth prospects that we have, you know, emerging in the portfolio, in particular, more recently, we want to be able to maintain that strength in that balance sheet to allow us to grow from within our means, so that’s really important to us, and then obviously the last piece is, you know, returning excess cash to shareholders.
So the base dividend that kicks it off this morning is the first step in that direction and that’s something that we feel very confident that can sustain through any cycle and so we are really pleased to get that behind us. And then obviously with the you know now we’re already in ‘21 once we complete our Quarter 1 financial results or in conjunction with those Quarter 1 financial results, we’ll start doing the assessment of either supplementing those base dividends with another dividend and/or the other share buyback so it’s not too not too far down the road here, Ovais.
Okay. Thanks, Rod just getting antsy here I guess. Just moving on to exploration. You know, definitely focus seems to be in near mine organic opportunities and you’re looking at Copler, Marigold as well as Seabee. What are your plans on Pitarrilla and San Luis, I mean, what – are those assets becoming a little bit non-core or just will remain part of the portfolio? And then, you know, once you do kind of go through your three main assets, then you’ll start looking at those assets as the next in the organic pipeline?
Yeah, look, no, Ovais, we haven’t made any determinations about no core and non-core, I mean in the portfolio at this stage, where we will go through a process and we’ll continue to do it as normal course business for us to ensure that, you know, we always have a view to managing the portfolio, because you can easily get, you know, in the bad habit of not doing that, and being ruthless and rigorous in those approach. It’s still status quo in terms of San Luis and Pitarrilla in particular and your question and, you know, we’ll continue to work to look at those during 2021.
And then, you know, Puna, Puna towards, Ovais, is another question that comes up quite a lot. You know, it’s a great little cash flow generator, and you know particularly with silver prices where they are today, we see that continuing. And this year, we are going to put some money into investing and looking at some of the exploration potential around Puna as well to see what else might exist there. So, you know, at this stage, it’s a bit of a holding pattern, Ovais and really important that we understand the full value of the portfolio. And as time goes on, obviously, those questions will become more front of mine for us.
That’s it, Rod. Thanks so much and, again, yeah, thanks for taking my questions.
Our next question comes from Cosmos Chiu of CIBC. Please go ahead.
Hi, thanks, Rod and team for the conference call and great to see that you’ve put in the inaugural dividends here. Maybe my first question is on reserves and resources, Rod, you know, great to see that you’ve put into technical report late last year on Copler updating the reserve and resources there. But how about the other deposits, you know, in terms of Marigold and Seabee Santoy? You know, when would we – should we be expecting in terms of a reserve resource update? And on a go-forward basis, should we expect it on an annual basis in terms of, you know, reserve resource updates at the various deposits?
Yeah, Cosmos, it’s Stewart here.
Hi, Stew.
So we’d use to do this differentially you know, Alacer used to do it annually. And with the aim, and that’s what we’re going to do going forward. So you’ll see those come out, they’re prepared ready to go. We’re just finalizing them and taking in time at the moment. So you’ll get to see those with the filings at the end of the year, or the year end filings, I should say.
Okay, so it should be coming out fairly soon like within the month.
And we’ll do that regularly in March.
Okay. Okay. Sounds good. And then, I guess my next question is, you know, in terms of C2, you know, great to see that you’ve made a discovery here. But maybe it’s too early right now, but I’m just trying to, you know, figure out this kind of fits in, you know, you put out the technical report, the Copler master plan late last year. Clearly C2 is not in it yet. But how does it sort of, and kind of fit in, and clearly, you know, it’s a bit different, you know, you’re getting down to the porphyry now, compared to, you know, more the epithermal deposit up at the top. And so it sounds like to me, you’re going to have to put in some infrastructure. However, you know, Stew, as you said, there’s already some infrastructure in place. Could you kind of help me in terms of, you know, try to piece it together how this kind of fits in and potentially could fit in based on what you know, today?
Because I think the – I’ll just make a point and I let Stew also contribute on this question. In particular, the tech report that we put out for Copler last year, we’re very clear that it was really just the start for that asset in terms of highlighting the full value and the full potential of it. Maybe we did still have constraints around the other drilling around Ardich and so there’ll be more to come. But we have a number of other targets that we’ll pursue around the Copler settle and also within the Copler pit. So it really was just the beginning of the new story for Copler. And then, obviously, on the backside of that we discovered the C2 as well. So, you know, my view is I’m agnostic to discoveries in terms of, you know, whether it’s a gold-copper porphyry or whether it’s a gold discovery only, because of time grind, and that’s the best bang for the buck and the best value for our shareholders. But, you know, it’s definitely exciting.
Stew?
Yep. So maybe I could just help you how to think about it. So the porphyry deposit, we should, you know, we’re thinking about that as potentially a standalone porphyry, which would carry its own infrastructure. So, you know, a typical concentrator, and that’s the test work that we’re currently undertaking.
That said, if, as we do the cutbacks, we would expect to pick up more of the epithermal on the contact at each of the contacts, the gold. We also have the areas that you know that look like they might be very high gold and lower and copper, which may be suitable for the sulfide plant going forward. And one of the things that we have been looking at in the laboratory is, whether or not after we make the, you know, the typical copper concentrate, whether there is any opportunity for us to recover more of the gold into a para concentrate.
So, you know, in typical cheerful of fashion, we’ve got lots of opportunities. But if you look at the grade of the, you know, the first holes that we pulled out, you know, the length of those and where they sit and the strike length, you know, if we can get enough volume in the bottom that into the porphyry. You know, it’ll stand well against other porphyry discoveries in the world.
Great. And then, as you mentioned, Stew, on the grade, you know, the drill intercepts that you’ve put out, they are on a copper equivalent basis. Could you remind me, you know, what’s the split here between copper and gold? And is it really, you know, the economics behind here? Is it really copper-driven?
It’s gold-driven about two-thirds gold in value, at this stage for the first four holes that we sold.
Okay. Okay, I was just wondering, because I guess so why do you, you know, put it out as a copper equivalent grade?
Because that’s typically how people look at porphyries.
Okay.
So we were trying to do something to help people to understand it to be able to write it against our porphyries.
Got you. And then the –
As the other thing, you know, with a copper – with a porphyry that tend to be larger volume, lower grades. So, you know, the development of a porphyry would generally mean a larger, you know, a larger throughput concentrator rather the sort of the higher grade, lower tonnes that you see fitting the current Copler facility.
Got you. Thanks, Stew. Maybe a last – my last question is that is on the 2021 catalysts. You know, as you mentioned at Marigold, you’re looking at ongoing cost reduction, continuous improvement initiatives. Could you maybe, you know, expand on that? You know, I guess, in the past, SSR Mining had talked about, you know, equipment, replacement and Marigold? Is that something that’s being considered, you know, great controlled drilling? enhancements? Is that something that’s been considered, I’m just trying to get a better sense in terms of how you’re going to, you know, get about getting to that, you know, continuous improvement at Marigold?
Yeah, so we’ve obviously got a you know quite a program of fleet replacement at Marigold going on at the moment. So the PC 7000s have really started to hit their straps. This year, when we did the original pass of the plan, the plan was showing, you know, the biggest movements that we would have ever seen in the pit. And as part of their caution was, we kept the throughput rate based on the fact that we thought we might see congestion.
And we think there’s a real opportunity to start to apply some higher level control over the top of the dispatch, and we’re doing some work, we’ve done some work, we’ve actually got operating within Copler, within the plant, some AI and there’s some advances in similar technology for PID control. So the guys are starting to look at those types of – that type of work, as well as the other type of continuous improvement that we’re always working on.
So as part of the merger, we’re going through a process of just redigging that hole improvement space. And we’ve really broken it into two parts. One is continuous improvement, which is that doing good business, you know, doing better at what we do every day, you know, Lean Six Sigma and these programs.
The second part we’re doing is, how can we get step change improvement into the business, leveraging off some of this new technology at sort of low cost and to get it into place quickly. So, you know, we’re not looking immediately to automate fleet, but how can we use AI to help us to manage and plan better and allocate resources better.
When you remember, because America you know increments are really meaningful. So we have some of the work programs will obviously talk about as I get through further advancement this year.
Yeah, you know, we’ve been busy reaching out, you know, to all of that network to see how we can advance this. And I have to say, you know, the Marigold team are pretty impressive team. And, you know, always looking for and hungry for these opportunities.
Yeah, I concur. I was there three years ago, and I was quite impressed by the team out there at Marigold. Maybe my last question here, again, on the 2021 catalysts at Seabee, you mentioned, you know, you’re looking to increase the mining rates to exploit a latent mill capacity here. Again, could you, you know, help me understand elaborate on what you’re trying to do at Seabee Santoy?
Yeah, so in the first instance, there’s been a continuous improvement program and increasing lateral development is required at Seabee. Some of that was required just to get the continued go-forward plan, they were also looking at. So we’ve got a couple of jumbos coming in. The same type of things that I was talking about doing at Marigold, we’re looking to implement at Seabee and going forward, this year will be stabilization, getting the lateral development rates up.
And, you know, I have to say, implementing sort of continuous improvement work that people well at the end of last year, and sort of started to move consistently at rates that they haven’t moved out before, at the beginning of this year, you know, this far ahead of what the plan has in place for us for lateral movement – lateral rates. So that’s sort of, again, that’s the foundational continuous improvement piece.
The other piece that we’re doing is a little bit longer-lived. You know, everybody believes that Seabee is a project that sort of always has four or five years life in front of it. And we’ll have four or five years life in front of it for the next 20 or 30 or 40 years. However, how along we manage to continue to develop the next tranche and bring it on. The question has to be, we put a bit more focus and effort and money into exploration, and we can lift our time horizon a little bit, will we be able to bring some of that other – some of the other mineralization forward and invest in building up the mine capacity to be able to at least meet what the mill can do, and then maybe fully exploit the resource.
So you sort of got the immediate, you know, do better at what we’re doing and go faster and a half way that you know is improvement, some sort of innovation. And then the longer-term piece lift the horizon and, you know, can we change the paradigm for Seabee. There’s a lot of work to do to work out whether that’s going to be achievable, but we believe that there’s a pretty good chance that that’s real opportunity.
Thanks. Thanks for the very thorough answer here. And those are the questions I have. Thanks a lot.
Our next question comes from Tyler Langton with JP Morgan. Please go ahead.
Yeah, good afternoon, and thanks for taking my question. I guess, you know, in general, and I guess oil prices up, diesel prices up or, you know, outside of those, are you seeing sort of just any inflation, whether it’s through labor, materials, equipment that could kind of pressure something for cost targets for the year. And then I guess, one more specifically with Copler maybe you know the flotation circuit, it’s not a huge CapEx spend, but we think just, you know, the PEA case and then the CapEx there over the next, you know, year or so, you know, any uncertain inflationary risks with that?
Hi, Tyler it’s Rod. I’ll let Greg tackle the most of the questions actually, if not all.
Yeah, sure. Thanks. Thanks, Tyler. You know, I think we’re still seeing cost pressures to be fairly moderated generally from the labor side, you know where we’re operating, obviously we’re still seeing, you know, generally economic conditions not fully rebounded. So we’re not seeing significant pressures, as you noted, obviously, commodity prices are trending up. So that is an area that we’re monitoring.
We’re fairly well protected on the diesel side for 2021. You know, we’re well hedged at both Marigold and Seabee on that pace. So we do have, you know, we do have some protection in on those assets, let’s so at Puna and at Copler. But it does provide a bit of protection against those pieces. So it’s certainly an area we’ll be monitoring. But I would say currently, you know, we’re not seeing significant pressures translate through.
Fair enough, that’s helpful. Thanks. And then in terms of just a follow-up on the capital allocation. I mean is there, as you mentioned, you kind of ended the year with, you know, close to $900 million of cash. I mean is there sort of, as you go-forward a minimum level of cash that you want to keep on the balance sheet, just to kind of, you know, provide support for the various sort of projects in expiration you’re looking at?
Yeah, look, I think it’s a – we sort of take a more holistic view of what all that means to us to all of it. Yes, that’s definitely part of the objective to ensure we have the balance sheet recognizing, you know, we’re in a cyclical business. As quickly as signals go up, we’ve seen more recently, you know, prices come off and ensuring that we have the ability then to, you know, self fund the growth that we have in the pipeline. So that’s definitely part of the, you know, the overall strategy for us.
And, you know, obviously, with the current share price weakness, we’ll definitely look more closely at using tools available tools, like an NCIB program for share buyback moving into these quarters, I’m not promising it, but it definitely becomes a key piece of our considerations as we move forward. So it’s really just trying to do it all, you know, recognize the strength of the business, recognize the growth potential and recognize the cash flow generation through the cycles. So and that – this will be well obviously evolving. It’s new, it’s still a new company, and who can teach you to mature our thoughts as we move along.
Great, thanks so much.
Our next question comes from Daniel Morgan with UBS. Please go ahead.
Hi, Rod and team. Two questions, if I may. Firstly, just on Marigold. Can you simplistically talk to when it will hit its sweet spot? I, this year, you’ve got record material movements coming? And I think, Greg, correct me if I’m wrong, this year we’ll still be below reserved grades. So just wondering, you know, when are we going to get that sweet spot where stripping comes off and you get, you know, grade at or above reserve grade?
Yeah, it’s not in this year, it’s in the next few years. This year, we’ve got a highest strip ratio. We do get some higher grade at the end of the year when we move to five in to the north. But it’s another stripping year.
Okay. And at Copler, just wondering if you could elaborate on when other shutdowns budgeted for this year. I’m just trying to get my, you know, quarterly numbers, you know, trajectory, right. And, you know, perhaps if you could also call out if there’s any major, you know, seasonal or quarterly changes to production this year that are worthy of note?
Yeah, so for this year, we’ve only got one major shutdown on the autoclaves and that’ll be autoclave 1, which will happen right at the end of this quarter at the beginning of next quarter.
It will be about three weeks. And then other than that, the big drivers to Copler this year, the grade varies a bit just based on the mine plan. And then the big – the really big overprint is the commissioning of the flotation plant which happens in starting and starting at the beginning of third quarter.
Dan, let me put our ‘21 guidance, I’ll let Brian or Greg just to give you the exact numbers. We actually did note that the production will be back end rated for the year for some of the reasons Stew did outline, but for other reasons and other operations as well. And I think Greg gave a really good overview of how it also translates into cash generation in 2021. So if you look back at those documents, and if you need anything else, we can always do it offline.
No, that’s perfect. Thanks for your answers.
Our next question comes from Ryan Thompson of BMO. Please go ahead.
Hey, guys. Thanks for the update. I think most of my questions have been asked, but maybe just a couple of housekeeping things for the model. I think Greg mentioned that the dividend to the JV partner was paid in January, just for the benefit of the biggest legacy SSR analysts, what is like how should we model that dividend going forward in terms of timing? And then just secondly, just on the sales like in production. Is it safe to assume that the bulk of both gold and silver that wasn’t sold in Q4 is going to hit the Q1 income statement?
Yeah, sure I’ll address those, Ryan. I think just first talking about the sales. I mean, you know, we’ll see normal variations, moderate quarter-on-quarter, you know, it was extreme in the fourth quarter, just as really all four assets returned to much higher levels of production relative to Q3. So typically, on a portfolio effect, we won’t see that kind of variation nor, you know, at Puna, assuming we stay at steady state, which is obviously something where we’re expecting, you know, we’d see that moderate. So, again, you’ll see normal variations, but I think as we move towards the end of Q2, you know, we’ll be right on track.
With regards to the, you know, dividend piece, it’s really, you know, that that’s a question that’s really challenging to answer specifically, a lot of that’s going to depend on some of the issues that Stew talked about in terms of, you know, the needs of that operation from an investment standpoint, that would dictate, you know, how we look at distributions out of that operation going forward. And there’s also, you know, debt repayments and other things that come out of that operation as part of the debt structure in there. So, you know, we’ll provide guidance as it’s appropriate, but it’s something that we can’t really give you a formula to determine in any in any manner.
Okay, appreciate the update, guys. Thanks a lot.
This concludes the question-and-answer session. I would like to turn the conference back over to Rod Antal for any closing remarks.
Well, thanks, operator and thanks, everyone for participating today. I look forward to keeping you informed of our progress in 2021. And obviously, recapturing some lost momentum here is, we you know get this year and start to highlight some of the excellent growth potential we have in the portfolio. So with that, good afternoon, good evening and good morning.
This concludes today’s conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.