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Edited Transcript of SSO.TO earnings conference call or presentation 9-Aug-19 3:00pm GMT

Q2 2019 SSR Mining Inc Earnings Call

Vancouver Aug 19, 2019 (Thomson StreetEvents) -- Edited Transcript of SSR Mining Inc earnings conference call or presentation Friday, August 9, 2019 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* F. Carl Edmunds

SSR Mining Inc. - VP of Exploration

* Gregory John Martin

SSR Mining Inc. - Senior VP & CFO

* Kevin O'Kane

SSR Mining Inc. - Senior VP & COO

* Paul Benson

SSR Mining Inc. - President, CEO & Director

* Svetoslava Pavlova

SSR Mining Inc. - IR Manager

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Conference Call Participants

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* Adam Philip Graf

B. Riley FBR, Inc., Research Division - Senior Mining Analyst & MD

* Chris Thompson

PI Financial Corp., Research Division - Head of Mining Research

* Michael Parkin

National Bank Financial, Inc., Research Division - Mining Analyst

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Presentation

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Operator [1]

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Good morning, everyone, and welcome to SSR Mining Second Quarter 2019 Conference Call. This call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Stacey Pavlova, Manager, Investor Relations. Please go ahead.

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Svetoslava Pavlova, SSR Mining Inc. - IR Manager [2]

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Thank you, operator. Good morning, ladies and gentlemen. Welcome to SSR Mining's second quarter 2019 conference call during which we will provide an update on our business and a review of our financial performance.

Our financial statements and management's discussion and analysis have been filed on SEDAR and EDGAR 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. All references to cash costs and all-in sustaining costs are per payable ounce of metal sold. We will be making forward-looking statements today, so please read the disclosures in the relevant documents.

Joining us on the call this morning are Paul Benson, President and CEO; Greg Martin, our CFO; Kevin O'Kane, COO; and Carl Edmunds, Vice President, Exploration.

Now I would like to turn the call over to Paul for opening remarks.

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Paul Benson, SSR Mining Inc. - President, CEO & Director [3]

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Thank you, Stacey. Good morning, ladies and gentlemen. I'm very pleased to welcome you to our call to discuss our second quarter 2019 operating and financial results.

We delivered a strong quarter as we produced nearly 100,000 gold equivalent ounces and progressed a number of strategic initiatives while we maintained our financial strengths. All 3 mines achieve solid results.

At Marigold, we produced 55,000 ounces of gold while stacking nearly 30% more ore on the leach pad at a higher grade compared to Q1, setting us up well for the remainder of the year. At Seabee, higher gold grade and recovery led to a strong quarterly production of over 26,000 ounces.

The new underground equipment was commissioned early in the second quarter, and we are already seeing an improved underground development rate as well. Puna Operations produced 1.5 million ounces of silver with silver grades tracking well to the mine plan. So overall, the solid performance delivered by each operation positions us well for the year.

With the first half of the year behind us, we are taking this opportunity to revise our guidance at each operation, as Greg will discuss later. On a consolidated basis, we are improving our production guidance and increasing our midpoint production to 400,000 gold equivalent ounces. Largely due to strong metal prices, which drives royalties upwards, we are marginally increasing our cash cost guidance with midpoint now expected to be $735 per gold equivalent ounce.

During the second quarter, we announced the acquisition of the Trenton Canyon and Buffalo Valley properties located immediately south of our Marigold mine. This acquisition almost doubles our land package and provides us with the opportunity to grow the reserves and resources and potentially extend Marigold's mine life. We expect to begin drilling there in the third quarter of this year, and Carl will discuss this later in the call.

As we recently reported, our exploration programs at Marigold and Seabee have been successful, and we expect to add to reserves and resources at year-end 2019 from a number of our exploration targets. Most pleasingly, we anticipate the conversion of resources to reserves at the Red Dot area, which is expected to extend the Marigold mine life into the early 2030s without the mining expansion capital previously considered as part of the equipment replacement study.

This is particularly important for the operation in this environment, where investors are rightly focused on capital discipline rather than expansion for expansion sake. We're also pleased with our financial performance during the quarter as we reported $18 million of adjusted attributable net income and generated $33 million of cash from operating activities.

We ended the quarter with a strong balance sheet of $452 million even after a $22 million cash outflow for the purchase of Trenton Canyon and Buffalo Valley properties. Subsequent to quarter end, we announced we have entered into an agreement to acquire the remaining 25% of Puna Operations. This acquisition provides many benefits both to SSR Mining and Golden Arrow shareholders as it allows us to consolidate our ownership while providing Golden Arrow with funding to pursue their exploration projects. We also elected to exercise our participation right to purchase additional shares in SilverCrest, which allows us to maintain a 9.9% interest in the high-grade Las Chispas deposit.

With that, I'll turn the call over to Kevin, who will discuss our operational performance in more detail.

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Kevin O'Kane, SSR Mining Inc. - Senior VP & COO [4]

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Thank you, Paul. As you have heard, our operational performance in Q2 sets us up for an equally strong second half of the year. At Marigold, we had the second consecutive quarter with no recordable injury. At Puna, we reached 3 million hours without a lost time incident, dating back more than 2 years. And at Seabee, we safely mobilized and ramped up construction of the tailings expansion project.

From this stable base, in the quarter, we produced more than 98,000 gold equivalent ounces at a consolidated cash cost of $775 per gold equivalent ounce. At Marigold, we produced 54,992 ounces of gold, 3% more than the first quarter. Cash costs were $835 per ounce, 3% higher compared to the first quarter.

The cost results were driven mainly by increased reagent consumption from more ore tonnes stacked, [drive] maintenance on the Hitachi haul fleet and lower-capitalized stripping, which sees overburdened costs allocated to cash costs. Although dealer prices were higher, this was partially offset by lower [tire] costs from improved life.

We moved 19.3 million tonnes of material, an 11% increase compared to the first quarter. Approximately 7.1 million tonnes of ore were delivered to the heap leach pad at a grade of 0.8 -- 0.38 grams per tonne gold. This compares to 5.5 million tonnes of ore at a grade of 0.34 grams per tonne gold in Q1, and we expect the stack rate to increase through the year.

As Paul already discussed, at the Red Dot area, we completed a drill program in 2018 and geotechnical drilling and engineering work in H1 2019, aiming to convert resources to reserves. This effort was successful in that we have already converted 350,000 ounces to reserves as reported at year-end 2018 and now expect to add reserves at Red Dot. This work completed by Marigold is based on current assumptions, which included gold price of $1,250 per ounce and is anticipated to extend the Marigold mine life into the early 2030s. We are very pleased with this result and extend thanks to the team for their hard work.

Seabee's operational performance for the quarter was solid. The operation produced 26,539 ounces of gold in the second quarter of 2019, a 15% decrease mainly due to timing of gold pours at year-end 2018 that led to an overall higher gold production in the first quarter of 2019. Cash costs were $526 per ounce compared to $467 per ounce in Q1 2019 as the timing of gold pours benefited unit cash costs in the first quarter.

The new underground mining equipment delivered over the ice road was commissioned at the beginning of the second quarter and is operating at the Santoy mining complex. Underground development rates, the key driver for higher ore extraction in the future, increased by 26% during the second quarter compared to the previous quarter. We are on track to reach a processing rate of 1,050 tonnes per day by year-end 2019.

The mill achieved an average throughput of 971 tonnes per day over the second quarter, a 4% decline compared to the previous quarter largely due to planned work on the electrical distribution system as part of the tailings expansion project.

Gold mill feed grade was 9.83 grams per tonne, 15% higher compared to the first quarter and in line with plan. Gold recovery for the quarter was 98%, a 1 percentage point increase over the first quarter.

And we're on track with the development of the tailings expansion project. Puna Operations produced 1.5 million ounces of silver during the second quarter, 38% lower than the first quarter of 2019, mainly due to lower silver grades, which are consistent with the mine plan and the reserve grade and processing less ore. Silver sales totaled 2.7 million ounces. On an attributable basis, silver production and sales for the second quarter totaled 1.1 million ounces and 2 million ounces, respectively.

The increase in silver sales in Q2 aligns quarterly sales with production year-to-date. Zinc recovery from the Chinchillas ore has been lower than projected, reflecting our focus on raising silver recovery above that projected in the PFS and lower-than-expected performance of the zinc circuit to date.

Cash costs were $9.80 per ounce of silver for the second quarter compared to $9.94 per ounce of silver for the first quarter, reflecting the increase in by-product credits. During the second quarter, ore was milled at an average of 3,436 tonnes per day, an 11% decrease compared to the previous quarter, mainly due to maintenance of control systems and continued debottlenecking of the new tailings pumping system that is expected to continue through the third quarter of 2019.

Processed ore in the second quarter of 2019 contained an average silver grade of 160 grams per tonne, a 32% decrease compared to the first quarter consistent with plan. Mining of the Chinchillas pit reached the planned rates during the quarter as we stabilize the operation. The strip ratio was 16:1 as mining of the next phase of the Chinchillas pit continues as planned. The strip ratio will decrease through the second half of the year and trend to the long-term strip ratio outlined in the PFS.

In summary, the operation delivered solid results during the quarter, setting us up well for the second half of the year. We continue our focus on safe production and achieving steady-state operation at Puna while exploring for additional mineralization at Marigold, including at the recently purchased land position and in and near the Seabee Gold Operation.

I will now hand over to Carl, who will take you through our exploration activities.

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F. Carl Edmunds, SSR Mining Inc. - VP of Exploration [5]

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Thank you, Kevin. For 2019, our objectives at Marigold are resource conversion at Red Dot and exploration for new resources north and south of Red Dot and at the Mackay and Valmy areas. Our objectives at Seabee focus on resource conversion at Santoy 8A, Gap and Gap hanging wall and resource growth drilling at Gap hanging wall. Greenfields activities continue at the Fisher project and select areas south of the Santoy mine.

Turning to Marigold. The main focus of our 2019 activities has been to define the Red Dot Mineral Reserve through completion of geotechnical and QA/QC core drilling to provide sufficient data for detailed mine planning. Ancillary to this has been continued exploration for drilling for additional resources north and south of Red Dot in the Mackay pit and at the Valmy and East Basalt areas. During the second quarter, we completed a total of 66 reverse circulation drill holes for 25,167 meters on these targets.

At Red Dot, our exploration and drilling indicates that the majority of the originally targeted Mineral Resources is expected to convert to mineral reserves at year-end 2019 as disclosed in our exploration update news release in late July. We view this as a successful result, which will extend the mine life at Marigold.

We released exploration results from drilling completed since September 2018 at Red Dot, North and South Red Dot and the Mackay pit. Examples such as 114 meters and 0.79 grams per tonne gold at North Red Dot, 47 meters of 1.7 grams per tonne gold at South Red Dot and 53 meters of 0.7 grams per tonne gold at Valmy were received this quarter as set out in our July news release.

We expect these results to positively impact our Mineral Reserves and Mineral Resources estimate at year-end 2019. During the third quarter of 2019, we will begin exploration work at the recently acquired Trenton Canyon property. Our objectives there are to develop a Mineral Resources estimate and to evaluate the greater consolidated land package for other prospective targets.

At the Seabee Gold Operation, our 2019 exploration plans include 45,000 meters of underground drilling and 15,000 meters of surface drilling with the objective to increase and convert Mineral Resources into Mineral Reserves near the Santoy mine complex.

During the second quarter of 2019, close to the Santoy mine area, we completed 20,379 meters of surface and underground drilling in 49 holes. Our drill programs focus mostly on Santoy Gap hanging wall with a number of holes completed at Santoy Gap and the Santoy 8A zone. Results received during the second quarter at Santoy Gap hanging wall include examples such as 5.8 meters of 9.16 grams per tonne gold, 4 meters of 23.3 grams per tonne gold and 5.8 meters of 11 grams per tonne gold as highlights from drill intersections outside the mineral resource as reported in our July news release.

We are confident that Gap hanging wall will again make a positive contribution to Mineral Resources when reported at year-end 2019. Greenfields exploration activities began in June and are focused on Inferred Mineral Resource discovery on the Seabee Gold Operation claims and the adjacent Fisher project.

This work comprises field programs of soil geochemistry, prospect entrenching and geologic mapping conducted from fly camps located at strategic points along the Santoy Shear. Prospecting work has already located anomalous gold mineralization in bedrock 500 meters north of the Mack target, where we reported a drill intercept to 7.3 grams per tonne over 1.6 meters and 3.76 grams per tonne over 4.2 meters, as previously reported in Q1 2019.

Turning to Pitarrilla. Last week, we announced that we are assessing further exploration activities following the review of a smaller scale underground mining alternative. This underground project is based on the potential to increase contained silver zinc and lead in the resource through improved definition of high-grade vein mineralization. The contemplated underground drill program would orthogonally target higher-grade vein mineralization associated with steeply dipping rhyolite dikes that cross-cut the host lithology at angles parallel to most of our current resource drilling.

This mineralization is likely to be underrepresented in terms of grade and continuity in our historic drilling and current resource. Presently, we are in the process of evaluating contractors to extend the existing decline. And if approved, our intention is to initiate drilling in the second half of 2020.

Now over to Greg for a discussion of our financial results.

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Gregory John Martin, SSR Mining Inc. - Senior VP & CFO [6]

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Thanks, Carl. The second quarter continued to support our expectations for the year with continued stronger production on the back of the December 2018 startup of Chinchillas driving sequential improvement in financial performance.

Gold price strength late in the quarter had a limited impact on the second quarter and silver prices were a drag on results, so our financial improvement reflects operating performance.

For the quarter, we generated revenues of $155 million, a 50% increase from the comparative quarter and a 23% increase from the first quarter. Revenue was positively impacted by above production sales at Puna as we sold down a good portion of inventory built in the first quarter.

Going forward, our objective remains achieving a general balance of production and sales. Though it's typical in concentrate operations, some volatility will persist. Income from mine operations was $30 million this quarter, about 41% above the comparative quarter and in line with Q1 as we saw a marginally lower contribution from gold assets offset by a higher contribution from our silver asset.

Reported net income was $12.4 million or $0.09 per share, an improvement from both the comparative and first quarter. Adjusted net income was $18 million or $0.15 per share. So a positive and straightforward quarter from an income statement perspective. Cash generated by operating activities was $33 million, roughly double the comparative quarter and clearly significantly better than the first quarter.

You may have noted that operating cash was negatively impacted by an $11.4 million build of noncash working capital. We have seen a large overall build in the first half of the year totaling $39 million. Noncash working capital in the second quarter was largely driven by an increase in accounts receivable from the high concentrate sales that have delayed payment terms. So we will definitely see recovery of this working capital as concentrate sales stabilize and Seabee works progressively through its site consumable inventories over the balance of the year.

Investment in our operating assets remained on track per guidance, totaling $21.4 million for capital and capitalized mining and exploration costs. The biggest use of cash was the $22 million paid for the acquisition of the Trenton Canyon and Buffalo Valley properties contiguous to Marigold.

We also used $4.8 million for the residual infrastructure works at our Chinchillas project. We closed the quarter at $452 million of cash, a marginal reduction in our cash balance due to working capital and the land acquisition. And with our $75 million credit facility completely undrawn, we remain in an enviable liquidity position. We have completed our midyear forecast process which, combined with a favorable first half of the year, has driven revisions to certain of our guidance metrics.

At the Marigold mine, full year production has increased to between 205,000 and 220,000 ounces as we have been able to stack more ounces earlier in the year than anticipated due to pit optimization. Cash cost guidance has increased marginally due to a lower proportion of waste mining cost being capitalize and higher royalty costs on the back of higher gold prices.

Each $100 increase in the gold price adds approximately $10 to Marigold reported cash costs. With the reduction in capitalized stripping guidance to $15 million, all-in sustaining costs remained largely unchanged.

At the Seabee Gold Operation, similarly, production guidance has increased to between 100,000 and 110,000 ounces due to higher grades mined. We have also had a meaningful downward revision to cash cost guidance to between $475 and $505 per payable ounce sold due to higher grades, favorable foreign exchange rates through the first half of the year and strong cost discipline. The operating margins at Seabee are quite impressive at these gold prices.

At Puna Operations with the mine and mill now operating for 6 months, we have actual performance data we have incorporated into our guidance update. We have seen better silver recovery than modeled and lower zinc recovery. The silver/lead concentrate holds the majority of value with better payment terms, so our focus is on optimizing silver and lead. Silver guidance has been increased to between 6.5 and 7.5 million ounces at higher cash costs of between $9.75 and $11.25 per payable silver ounce. Capital stripping and capital expenditures have increased marginally as we focus on stripping the Phase 2 pit.

Work remains ongoing to optimize performance recognizing we are in the early days of Chinchillas operations.

So overall, we are set up well for the second half of 2019. Looking forward to the third quarter, we have announced the intent to acquire the remaining 25% of Puna operations. This acquisition is unlikely to impact on our third quarter results with an expected close date late in the third quarter or early in Q4. The consideration is almost all noncash. And as we already consolidate 100% of Puna results, once the deal completes, the financial reporting results are mainly balance sheet related.

Post acquisition, we will benefit from the full operating exposure of the asset through the elimination of the noncontrolling interest. We will also record the purchase of the SilverCrest top-up shares in the third quarter.

Our participation in its financing has a relatively modest impact to cash of up to $3.5 million. The original purchase of shares has proven quite positive. At the end of July, we saw about a $21 million increase in value so we are pleased to continue to support their success.

The final point I will highlight is the move in metal prices through July for both gold and silver. Each metal has moved through some significant resistance levels, so that is an encouraging longer-term development. With those comments, I turn the call back to Paul.

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Paul Benson, SSR Mining Inc. - President, CEO & Director [7]

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Thanks, Greg. So in summary, another strong production quarter enabling us to improve guidance, which positions us to meet or exceed guidance for the eighth consecutive year.

Our investment in exploration continues to pay dividends as we expect Red Dot to increase the mine life without the need for expansion capital at Marigold and as we continue to drill the Santoy Gap hanging wall at Seabee. Pending final approval, we will look to extend the existing decline at Pitarrilla to complete a drilling campaign with the aim of increasing the high-grade zones and hit our objective of double-digit returns at spot silver price.

We have also continued to pursue external opportunities while maintaining strong financial discipline, which includes completing the acquisition of the Trenton Canyon and Buffalo Valley properties neighboring Marigold, announcing the acquisition of the remaining 25% in Puna operations and maintaining our 9.9% interest in SilverCrest and our exposure to the high-grade Las Chispas project. Finally, with the refinancing of our convertible notes earlier this year, our balance sheet is in a very strong position, allowing us to pursue internal and external growth opportunities.

This concludes the formal remarks of our earnings call. I'll now pass the line to our operator to take any questions you may have.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question comes from Mike Parkin with National Bank.

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Michael Parkin, National Bank Financial, Inc., Research Division - Mining Analyst [2]

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I just -- following up on Greg's comments about the working capital build in the first half, where do you expect like accounts receivable to kind of normalize by the end of the year?

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Paul Benson, SSR Mining Inc. - President, CEO & Director [3]

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Greg?

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Gregory John Martin, SSR Mining Inc. - Senior VP & CFO [4]

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Yes. Thanks, Mike. You'll note obviously sales at Puna and those accounts receivable are largely related to our concentrate sales. We recover any gold sales in an immediate fashion. So as we see production come in line, we'll see those accounts receivable probably come back just above 50% of the level that we see now. If you look at what our production guidance is and you match up sales, that's the kind of range that we would expect to see those come in line to.

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Operator [5]

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The next question comes from Chris Thompson with PI Financial.

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Chris Thompson, PI Financial Corp., Research Division - Head of Mining Research [6]

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Just 2 quick questions. Marigold, first of all. How should we be looking at strip for the remainder of the year? And more specifically, the -- I guess, the portion that you plan to capitalize.

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Paul Benson, SSR Mining Inc. - President, CEO & Director [7]

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We don't give quarterly guidance on the strip ratios. But Kevin, do you have some terms on where we're mining at the moment?

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Kevin O'Kane, SSR Mining Inc. - Senior VP & COO [8]

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Yes. Our stripping ratios should remain similar to what they have been the first part of -- the first half of the year. There's nothing -- no change that's made in the mine plan.

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Paul Benson, SSR Mining Inc. - President, CEO & Director [9]

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Greg, any comment on the portion that's capitalized?

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Gregory John Martin, SSR Mining Inc. - Senior VP & CFO [10]

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Yes. So Chris, I'd just -- I'd point you towards our guidance. So you can see we dropped [our inferred] strip guidance relative to where we started the year, and that's really reflecting on what's happened in the first half of the year with more ore tonnes being mined, and you can see that in the stack.

So clearly, our guidance indicates that we will see a return to what I'd call average strip ratios over the balance of the year and kind of back to the typical level of, give or take, $3 million to $4 million capitalized in each quarter to get us towards our guidance number for the year.

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Chris Thompson, PI Financial Corp., Research Division - Head of Mining Research [11]

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Perfect. And then just over to Puna. Obviously, a bit of a switch around moving to higher silver and obviously lower zinc production there. Would it be true to say that the Q2 would be more representative by way of grade and -- sorry, recoveries and head grades to what we should expect for the remainder of the year here?

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Kevin O'Kane, SSR Mining Inc. - Senior VP & COO [12]

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Yes. No, Chris, that's right. You'll see the second half being very similar to Q2 both in grades and recoveries for both metals -- for all the metals.

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Operator [13]

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(Operator Instructions) The next question comes from Adam Graf with B. Riley FBR.

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Adam Philip Graf, B. Riley FBR, Inc., Research Division - Senior Mining Analyst & MD [14]

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Congratulations on quite a strong quarter. I just have a couple of detail questions. Can you give us any guidance, Greg, on the tax -- effective tax rates that we can expect for the second half of the year?

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Gregory John Martin, SSR Mining Inc. - Senior VP & CFO [15]

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Yes. Sure, Adam. I'll do my best, and I've talked to taxes over a number of previous quarters. They are an issue that always has some variability and is a bit difficult to predict.

What I'd say is, in this quarter, there's really nothing unusual that happened in our tax. We're taxable at Seabee and Marigold, and we see, basically, recoveries at corporate and recoveries at Puna, where we have inflation adjustments that flow through the tax expense down in Puna that resulted in some deferred tax recovery. And that's going to be an ongoing issue that I've highlighted in the last couple of calls.

So quarter-to-quarter, we're going to see some variability. I'd still guide generally to about a 25% effective tax rate over a longer term period, but we certainly could see that vary meaningfully from that percentage in a period just depending on where foreign exchange and inflation rates go down in Argentina, principally.

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Adam Philip Graf, B. Riley FBR, Inc., Research Division - Senior Mining Analyst & MD [16]

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And then speaking about Puna, can you guys give us the rough or maybe the exact realized zinc and lead prices that you guys realized?

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Paul Benson, SSR Mining Inc. - President, CEO & Director [17]

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Greg?

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Gregory John Martin, SSR Mining Inc. - Senior VP & CFO [18]

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I -- sorry, I don't have what we'd call the exact numbers. But effectively, we would realize what the prevailing price was in the quarter for the shipments that settled. We have a number of outstanding shipments that will continue to settle that would be subject to price adjustments over the kind of 6 weeks post quarter end depending on where those base metal prices go.

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Adam Philip Graf, B. Riley FBR, Inc., Research Division - Senior Mining Analyst & MD [19]

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And related to the realized price, what was the impact of TCRCs in the quarter?

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Gregory John Martin, SSR Mining Inc. - Senior VP & CFO [20]

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Yes. So if you look at our cash cost note in our MD&A, Adam, you will see the TCRCs that we incurred disclose separately as an item in that table. Look at that and if you wanted to follow up, I'm certainly happy to have a discussion on any specifics on it.

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Adam Philip Graf, B. Riley FBR, Inc., Research Division - Senior Mining Analyst & MD [21]

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All right. And then getting away from kind of accounting type issues. Can you guys give us an idea of when you're going to sort of have a new idea of a mine plan or potential mine plan for Pitarrilla?

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Paul Benson, SSR Mining Inc. - President, CEO & Director [22]

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As we've said around Pitarrilla, we're reviewing it at the moment, looking at the extension of the decline and then the diamond drilling. Gut feel at the moment, order of magnitude for that would be 18 to 24 months, extending the decline, doing the drilling and then interpretation. And so obviously, following on from that, then we'd worry about what the new mine plan looks like.

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Adam Philip Graf, B. Riley FBR, Inc., Research Division - Senior Mining Analyst & MD [23]

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And sort of what -- I assume you're going to be sort of thinking about spot pricing at that time?

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Paul Benson, SSR Mining Inc. - President, CEO & Director [24]

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Yes. Yes, what we've said with Pitarrilla is that we'll only move forward if it gives us a double-digit IRR at spot price. Obviously, the challenge with silver, the consensus price has, in recent years, sat fairly or significantly above the spot price. So you can't justify the project just hoping for the consensus price. So we'll take into account at that time what the spot price is and make an evaluation at that time.

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Adam Philip Graf, B. Riley FBR, Inc., Research Division - Senior Mining Analyst & MD [25]

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And based on the old plan and the current exchange rates, isn't Pitarrilla -- doesn't Pitarrilla look pretty good at $17 silver?

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Paul Benson, SSR Mining Inc. - President, CEO & Director [26]

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With the history of Pitarrilla, the original plan done in 2012, that was a large open pit with big capital that needed well over $20 to get a double-digit return.

Last year, we said we'll do a study to look at a smaller project focused on higher-grade underground focused on the sulfites. It came back at a single-digit IRR, and we said we're going to maintain our discipline. So it was NPV positive, which is great, but we want to maintain that discipline. When we went back to have a look, we realized that we think there's a good chance that we're -- the higher-grade is underrepresented in that old resource model. So we're going to go ahead with it. So yes, irrespective of what the silver price does short term, we're going to do this evaluation because we believe this is the chance of being able to increase volume and impact of that high growth.

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Operator [27]

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This concludes the question-and-answer session. I will turn the call back to Mr. Benson.

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Paul Benson, SSR Mining Inc. - President, CEO & Director [28]

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Thanks very much, operator. Thanks very much, everyone, for participating in the call today. Have a great day.

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Operator [29]

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