VANCOUVER, Nov. 8, 2016 /PRNewswire/ - Silver Standard
Resources Inc. (NASDAQ: SSRI) (TSX: SSO) ("Silver Standard")
reports consolidated financial results for the third quarter ended
September 30, 2016.
Paul Benson, President and CEO
said, "In the third quarter of 2016 we demonstrated increased scale
and healthy margin with our record quarterly production, among
other operating records. We produced nearly 113,000 gold equivalent
ounces at all-in sustaining costs of $940 per ounce, and have improved guidance at our
Marigold and Pirquitas mines. Importantly, we continued to drive
our Operational Excellence programs, which delivered tangible
results at all operations, including our updated five-year outlook
at Marigold, a successful plant trial at Seabee and record
production and quarterly throughput at Pirquitas."
"We further strengthened our balance sheet, which boasts
$278 million of cash and cash
equivalents and $178 million of
marketable securities. Our three cash-flowing mines generated
$53 million of operating cash flow,
while we continued investing in our future. We also demonstrated
once again the value held within our project portfolio with our
announced project sales in the latter part of the quarter. The team
delivered solid results in the third quarter and we remain focused
on generating shareholder value through all parts of our business
going forward."
Third Quarter 2016 Highlights:
(All figures are in
U.S. dollars unless otherwise noted)
- Strong financial performance: Achieved record quarterly
revenue of $143.4 million, net income
of $38.0 million or $0.32 per share and adjusted net income of
$37.2 million or $0.31 per share.
- Increased cash balance: Quarter-end balance increased by
$44.9 million to $277.5 million. Cash generated by operating
activities totaled $53.1 million.
- Demonstrated scale and margin from three operations:
Record quarterly production of 112,559 gold equivalent ounces at
cash costs of $618 per equivalent
gold ounce sold.
- Lowered cash costs guidance at Marigold: Reported cash
costs of $636 per payable ounce of
gold sold, 4% lower compared to the previous quarter, and reduced
cash costs guidance to between $640 and
$680 per payable ounce of gold sold. Produced 47,456 ounces
of gold, on track to meet annual guidance.
- Strong production at Seabee: Produced 20,142 ounces of
gold at cash costs of $661 per
payable ounce of gold sold.
- Improved production and cash costs guidance at
Pirquitas: Produced a record 3.0 million ounces of silver, 21%
higher than the second quarter of 2016, at record low cash costs of
$8.48 per payable ounce of silver
sold. Increased production guidance to between 9.5 and 10.5 million
ounces of silver and decreased cash costs guidance to between
$9.00 and $9.50 per payable ounce of
silver sold.
- Favorable resolution of tax dispute with Canada Revenue
Agency: Settled in our favor the tax dispute with the CRA which
resulted in the repayment of our deposit of $18.2 million plus accrued interest.
- Realized value through project portfolio: Subsequent to
quarter end, completed the sale of our Parral properties in
Mexico and our Diablillos and M-18
projects in Argentina, for future
cash installments and shares valued at approximately $20 million.
Marigold mine, U.S.
|
Three months
ended
|
Operating
data
|
September 30
2016
|
|
June 30
2016
|
|
March 31
2016
|
|
December 31
2015
|
|
September
30
2015
|
|
Total material mined
(kt)
|
19,558
|
|
18,685
|
|
17,291
|
|
18,560
|
|
18,425
|
|
Waste removed
(kt)
|
14,741
|
|
12,005
|
|
11,611
|
|
13,788
|
|
11,242
|
|
Total ore stacked
(kt)
|
4,817
|
|
6,680
|
|
5,680
|
|
4,772
|
|
7,183
|
|
Strip
ratio
|
3.1
|
|
1.8
|
|
2.0
|
|
2.9
|
|
1.6
|
|
Mining cost ($/t
mined)
|
1.48
|
|
1.55
|
|
1.45
|
|
1.54
|
|
1.65
|
|
Gold stacked grade
(g/t)
|
0.42
|
|
0.44
|
|
0.47
|
|
0.48
|
|
0.43
|
|
Processing cost ($/t
processed)
|
0.95
|
|
0.70
|
|
0.71
|
|
0.86
|
|
0.66
|
|
Gold recovery
(%)
|
71.0
|
|
70.7
|
|
70.0
|
|
69.9
|
|
69.7
|
|
General and admin
costs ($/t processed)
|
0.56
|
|
0.38
|
|
0.47
|
|
0.47
|
|
0.41
|
|
|
|
|
|
|
|
Gold produced
(oz)
|
47,456
|
|
47,195
|
|
50,520
|
|
61,461
|
|
41,262
|
|
Gold sold
(oz)
|
47,278
|
|
47,124
|
|
48,605
|
|
62,827
|
|
39,525
|
|
|
|
|
|
|
|
Realized gold price
($/oz) (1)
|
1,330
|
|
1,259
|
|
1,189
|
|
1,084
|
|
1,110
|
|
|
|
|
|
|
|
Cash costs ($/oz)
(1)
|
636
|
|
663
|
|
719
|
|
727
|
|
719
|
|
AISC ($/oz)
(1)
|
1,139
|
|
1,067
|
|
841
|
|
799
|
|
998
|
|
|
|
|
|
|
|
Financial data
($000s)
|
|
|
|
|
|
|
Revenue
|
62,831
|
|
59,197
|
|
57,742
|
|
67,936
|
|
43,836
|
|
Income from mine
operations
|
23,156
|
|
17,641
|
|
11,227
|
|
7,902
|
|
7,288
|
|
Capital
investments
|
8,310
|
|
10,154
|
|
8,796
|
|
3,641
|
|
8,931
|
|
Capitalized deferred
stripping
|
13,787
|
|
7,231
|
|
1,435
|
|
—
|
|
—
|
|
Exploration
expenditures (2)
|
1,145
|
|
1,597
|
|
1,102
|
|
731
|
|
1,944
|
|
|
|
(1)
|
We report the
non-GAAP financial measures of realized gold prices, cash costs and
all-in sustaining costs ("AISC") per payable ounce of gold sold to
manage and evaluate operating performance at the Marigold mine. For
a better understanding and a reconciliation of these measures to
cost of sales, as shown in our consolidated statements of
comprehensive income (loss), please refer to "Non-GAAP and
Additional GAAP Financial Measures" in section 12 of our
management's discussion and analysis of the financial position and
results of operation for the three and nine months ended September
30, 2016 ("MD&A").
|
(2)
|
Includes capitalized
and expensed exploration expenses.
|
Mine production
We produced 47,456 ounces of gold in the third quarter of 2016,
in line with our second quarter gold production and on target to
meet previously increased annual guidance. The construction of a
new leach pad was completed on schedule and under budget in the
latter half of the third quarter. The additional leach pad
capacity and higher amount of ore tonnes stacked earlier in the
year are expected to result in strong fourth quarter gold
production.
A total of 19.6 million tonnes of material was mined in the
third quarter, 5% higher than the second quarter of 2016 and a
record for the mine, due to increased hauling capacity added to the
fleet earlier in the year and shorter haul distances relating to
the higher strip ratio. Approximately 4.8 million tonnes of ore
were delivered to the leach pads at a gold grade of 0.42 g/t,
containing approximately 47,000 recoverable ounces of gold stacked
during the quarter. The strip ratio increased to 3.1:1 in the third
quarter as we began stripping of the next phase of the Mackay pit.
Gold recovery was 71% in the third quarter.
Mine operating costs
Cash costs and AISC per payable ounce of gold sold are
non-GAAP financial measures. Please see "Cautionary Note Regarding
Non-GAAP Measures".
Cash costs, which include all costs of inventory, refining costs
and royalties, of $636 per payable
ounce of gold sold in the third quarter of 2016 were lower than
cash costs of $663 per payable ounce
of gold sold in the second quarter of 2016 as costs of inventory
decreased due to improved mining costs and increased capitalized
stripping. Costs per tonne mined decreased to $1.48 per tonne in the third quarter of 2016, 5%
lower than in the second quarter of 2016 due to maintaining
expenditure levels despite the increase in total tonnes mined.
Processing unit costs were 36% higher in the third quarter of 2016
than in the second quarter of 2016 due to fewer tonnes stacked
resulting from the higher strip ratio. General and administrative
unit costs were also higher in the third quarter of 2016 than in
the second quarter of 2016 due to fewer tonnes stacked but were
comparable on an absolute basis.
AISC of $1,139 per payable ounce
of gold sold in the third quarter of 2016 increased from
$1,067 in the second quarter of 2016
due to higher capitalized stripping and capital expenditures
related to the construction of the new leach pad during the second
and third quarters of 2016.
Mine sales
A total of 47,278 ounces of gold were sold at an average price
of $1,330 per ounce during the third
quarter of 2016, compared to 47,124 ounces of gold sold at a 6%
lower average price of $1,259 per
ounce during the second quarter of 2016.
Exploration
Exploration activities in the third quarter of 2016 focused on
drilling at the HideOut target and the Valmy property. The
objective of these drilling activities is to convert Mineral
Resources to Mineral Reserves and to expand Mineral Resources, in
certain instances. As reported on November
7, 2016, two track-mounted rigs completed 13,408 meters of
reverse circulation drilling in 50 drillholes on targets where
previous results show potential for Mineral Resource additions or
Mineral Reserve conversion. The 500-meter long corridor between
HideOut and the 8 South pit extension area has been a focus of
drilling activity. At the Valmy property, drilling during the
quarter continued to extend the zone of mineralization to the south
and east of the known mineralization at the Valmy pit. Results to
date are expected to expand Mineral Resources. We expect to
continue drilling outside of the current pit areas, including the
eastern extension of the Basalt pit mineralization.
We expanded our gravity survey coverage at Marigold to include
the additional lands to the east, south and west of the original
mineral claims. These data, together with our understanding of the
sub-surface geology, have been used to select drill sites for the
deep sulphide exploration program targeting a high grade style of
mineralization similar to that found at the Turquoise Ridge mine
located 56 kilometers north of the Marigold mine. We expect to
complete one deep core hole by the end of the fourth quarter of
2016, representing the sixth deep core hole targeting higher-grade
sulphide mineralization. We plan to complete a total of three deep
core holes by the end of the first quarter of 2017.
The results from our ongoing exploration program and the
completed Assay Program will be included in our annual 2016 Mineral
Reserves and Mineral Resources estimate to be published in the
first quarter of 2017.
Seabee Gold Operation, Canada
Operating
data
|
Three months
ended
September 30,
2016
|
|
Period from
Acquisition
to June 30, 2016 (1)
|
|
Three months
ended
June 30, 2016
(2)
|
|
Total ore milled
(t)
|
82,756
|
|
18,856
|
|
71,218
|
|
Ore milled per day
(t/day)
|
900
|
|
629
|
|
783
|
|
Gold mill feed grade
(g/t)
|
7.40
|
|
7.79
|
|
7.97
|
|
Mining costs ($/t
mined)
|
58
|
|
110
|
|
N/A
|
|
Processing costs ($/t
processed)
|
19
|
|
29
|
|
N/A
|
|
Gold recovery
(%)
|
96.5
|
|
96.6
|
|
96.8
|
|
General and admin
costs ($/t processed)
|
37
|
|
61
|
|
N/A
|
|
|
|
|
|
|
Gold produced
(oz)
|
20,142
|
|
6,721
|
|
17,524
|
|
Gold sold
(oz)
|
21,911
|
|
11,306
|
|
16,305
|
|
|
|
|
|
|
Realized gold price
($/oz) (3)
|
1,334
|
|
1,278
|
|
1,271
|
|
|
|
|
|
|
Cash costs ($/oz)
(3,5)
|
661
|
|
663
|
|
N/A
|
|
AISC ($/oz)
(3,5)
|
840
|
|
776
|
|
N/A
|
|
|
|
|
|
|
Financial data
($000s)
|
|
|
|
|
Revenue
|
29,214
|
|
14,437
|
|
N/A
|
|
Income from mine
operations
|
4,126
|
|
1,216
|
|
N/A
|
|
Capital
development
|
2,104
|
|
803
|
|
N/A
|
|
Capital
investments
|
579
|
|
337
|
|
N/A
|
|
Exploration
expenditures (4)
|
1,206
|
|
117
|
|
N/A
|
|
(1)
|
The data presented
in this column is for the period from May 31, 2016, to June 30,
2016, the period for which we were entitled to all economic
benefits of the Seabee Gold Operation following our acquisition of
Claude Resources Inc. ("Claude Resources").
|
(2)
|
The data presented
in this column includes operating results for the Seabee Gold
Operation for the entire second quarter of 2016, including the
period from April 1 to May 30, 2016 prior to our acquisition of
Claude Resources.
|
(3)
|
We report the
non-GAAP financial measures of realized gold prices, cash costs and
AISC per payable ounce of gold sold to manage and evaluate
operating performance at the Seabee Gold Operation. For a better
understanding and a reconciliation of these measures to cost of
sales, as shown in our consolidated statements of comprehensive
income (loss), please refer to "Non-GAAP and Additional GAAP
Financial Measures" in section 12 of our MD&A.
|
(4)
|
Includes
capitalized and expensed exploration expenses.
|
(5)
|
The non-GAAP
measure of cash costs from the Seabee Gold Operation was adjusted
to eliminate the adjustment of inventory to fair value as at the
date of our acquisition of Claude Resources.
|
Mine production
The Seabee Gold Operation consists of the Seabee and Santoy
underground mines, both of which feed a single processing facility.
The mine produced 20,142 ounces of gold in the third quarter of
2016 despite a three-day continuation of the ten-day unplanned
power outage which commenced in June
2016.
A total of 82,756 tonnes of ore were milled at a gold grade of
7.4 g/t in the third quarter of 2016. The gold recovery was 96.5%.
As part of our initial Operational Excellence plan for the Seabee
Gold Operation, we successfully trialed higher mill throughput
during the month of August. The mill processed ore at or above
1,000 tonnes per day, with an average of 998 tonnes per day in the
month. We achieved this with minor modifications to the processing
facility, while maintaining gold recovery. As a result, we were
able to increase mill throughput in the third quarter by 15% to 900
tonnes per day, compared to the second quarter of 2016. We are
reviewing the long-term mine plan to determine the feasibility of
higher, sustainable throughput rates.
During the third quarter of 2016, the Santoy mine provided
approximately 82% of total ore milled, while the Seabee mine
provided 18%.
Mine operating costs
Cash costs and AISC per payable ounce of gold sold are
non-GAAP financial measures. Please see "Cautionary Note Regarding
Non-GAAP Measures".
Cash costs per payable ounce of gold sold, which include all
costs of inventory, refining costs and royalties and exclude the
effect of the fair value adjustment at our acquisition of Claude
Resources, were $661 in the third
quarter of 2016. Costs per tonne mined were $58 per tonne in the third quarter, processing
unit costs were $19 per tonne
processed and general and administration unit costs were
$37 per tonne. The decrease in the
costs per tonne mined and milled in the third quarter of 2016 from
June 2016 is due to higher tonnes
mined and milled in total and also per day. Additionally, only a
three-day unplanned power outage affected the third quarter of
2016, whereas in June 2016 the power
outage lasted seven days.
AISC per payable ounce of gold sold, which also exclude the
effect of the fair value adjustment at acquisition, were
$840 in the third quarter of 2016, as
capital spending remained modest with exploration spending
increasing consistent with our objective of adding Mineral Reserves
and Mineral Resources at the mine.
Mine sales
A total of 21,911 ounces of gold were sold at an average price
of $1,334 per ounce during the third
quarter of 2016.
Exploration
For 2016, the Seabee Gold Operation planned 65,000 meters of
underground drilling and 18,000 meters of surface drilling with the
objective to increase and convert Mineral Resources into Mineral
Reserves. As reported on November 7,
2016, during the third quarter, we completed 13,540 meters
of underground diamond drilling to upgrade Inferred Mineral
Resources and explore further the extensions to the Santoy 8A and
Santoy Gap deposits. From surface, we completed 6,172 meters of
drilling exploring the down plunge extension of Santoy Gap 9A, 9B,
and 9C deposits. Drilling intersected the projections of the
mineralized structures at expected depths with anomalous results.
Seven surface and underground drillholes were completed at the
Santoy 8A target, of which five results were notable. Highlighted
drill results from the third quarter include 5.8 meters at a grade
of 27.86 g/t gold (SUG-16-920) from the 8A zone, 4.1 meters at a
grade of 33.8 g/t gold (SUG-16-063) from the 9C zone and 5.0 meters
at a grade of 31.94 g/t gold (SUG-16-919) from the 8A zone.
For the fourth quarter of 2016 at the Seabee Gold Operation, our
focus underground and from surface will be on infill drilling at
Santoy Gap with the objective to convert Inferred Mineral Resources
to Measured and Indicated Mineral Resources.
On October 6, 2016, we announced
an option agreement to acquire an 80% interest in the adjacent
Fisher property which lies south on strike from the ore deposits at
Santoy Gap and 8A. This agreement doubles our prospective land
position at the Seabee Gold Operation and planning for exploration
work is underway.
Pirquitas mine, Argentina
|
Three months
ended
|
Operating
data
|
September 30
2016
|
|
June 30
2016
|
|
March 31
2016
|
|
December 31
2015
|
|
September 30
2015
|
|
Total material mined
(kt)
|
2,385
|
|
2,543
|
|
2,520
|
|
2,712
|
|
2,746
|
|
Waste removed
(kt)
|
1,584
|
|
1,814
|
|
1,726
|
|
1,966
|
|
2,219
|
|
Ore mined
(kt)
|
801
|
|
729
|
|
794
|
|
746
|
|
527
|
|
Strip
ratio
|
2.0
|
|
2.5
|
|
2.2
|
|
2.6
|
|
4.2
|
|
Silver mined grade
(g/t)
|
190
|
|
189
|
|
181
|
|
187
|
|
188
|
|
Mining costs ($/t
mined)
|
3.80
|
|
3.54
|
|
2.97
|
|
3.78
|
|
3.94
|
|
Ore milled
(kt)
|
455
|
|
425
|
|
418
|
|
421
|
|
410
|
|
Silver mill feed
grade (g/t)
|
264
|
|
238
|
|
247
|
|
237
|
|
238
|
|
Processing cost ($/t
milled)
|
14.78
|
|
15.10
|
|
13.58
|
|
20.60
|
|
21.53
|
|
Silver recovery
(%)
|
79.0
|
|
77.6
|
|
79.7
|
|
80.8
|
|
82.0
|
|
General and admin
costs ($/t milled)
|
5.84
|
|
6.22
|
|
5.68
|
|
8.09
|
|
8.13
|
|
|
|
|
|
|
|
Silver produced ('000
oz)
|
3,047
|
|
2,526
|
|
2,639
|
|
2,588
|
|
2,576
|
|
Silver sold ('000
oz)
|
2,947
|
|
2,594
|
|
3,223
|
|
1,943
|
|
2,819
|
|
|
|
|
|
|
|
Realized silver price
($/oz) (1)
|
19.64
|
|
16.52
|
|
14.94
|
|
15.00
|
|
14.97
|
|
|
|
|
|
|
|
Cash costs ($/oz)
(1)
|
8.48
|
|
8.87
|
|
8.93
|
|
10.96
|
|
11.02
|
|
AISC ($/oz)
(1)
|
9.87
|
|
10.03
|
|
9.67
|
|
12.78
|
|
12.68
|
|
|
|
|
|
|
|
Financial Data
($000s)
|
|
|
|
|
|
|
Revenue
|
51,336
|
|
45,141
|
|
47,711
|
|
22,656
|
|
33,355
|
|
Income (loss) from
mine operations (2)
|
31,908
|
|
25,205
|
|
12,071
|
|
(28,387)
|
|
(14,684)
|
|
Capital
investments
|
3,158
|
|
2,057
|
|
1,578
|
|
2,305
|
|
2,500
|
|
Capitalized
stripping
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Exploration
expenditures
|
7
|
|
25
|
|
22
|
|
234
|
|
1,124
|
|
(1)
|
We report the
non-GAAP financial measures of realized silver prices, cash costs
and AISC per payable ounce of silver sold to manage and evaluate
operating performance at the Pirquitas mine. For a better
understanding and a reconciliation of these measures to cost of
sales, as shown in our consolidated statements of comprehensive
income (loss), please refer to "Non-GAAP and Additional GAAP
Financial Measures" in section 12 of our MD&A.
|
(2)
|
Income (loss) from
mine operations for the quarters ended December 31, 2015, and
September 30, 2015, include $24.6 million and $7.7 million,
respectively, of non-cash adjustments to stockpile, warehouse
inventory and severance provision at the Pirquitas
mine.
|
Mine production
The Pirquitas mine produced 3.0 million ounces of silver during
the third quarter of 2016, a quarterly record for the mine, which
enabled our 2016 production guidance to be increased. Higher silver
production is a result of record ore tonnes milled, higher silver
mill feed grade and higher silver recovery.
Ore was milled at an average rate of 4,946 tonnes per day in the
third quarter. During August 2016, the mill operated at an
average rate of over 5,200 tonnes per day, a record for the mill
since it began operating, a result of one of our ongoing
Operational Excellence programs. Ore milled contained an average
silver grade of 264 g/t, 11% higher than the 238 g/t reported in
the second quarter as additional tonnes of higher grade ore,
relative to the production model, encountered in the lower benches
of the San Miguel open pit enabled
selective milling of higher grades and stockpiling of lower grades.
Detailed planning and consultation for the cessation of open pit
mining in the first quarter of 2017 is well underway. Thereafter,
medium and lower grade stockpile material will be processed through
the plant in 2017. The average recovery rate for silver in the
third quarter of 79.0% was 2% higher than the 77.6% in the previous
quarter.
Mine operating costs
Cash costs and AISC per payable ounce of silver sold are
non-GAAP financial measures. Please see "Cautionary Note Regarding
Non-GAAP Measures".
Cash costs, which include cost of inventory, treatment and
refining costs and by-product credits, decreased by 4% to
$8.48 per payable ounce of silver
sold in the third quarter of 2016 from $8.87 per payable ounce of silver sold in the
second quarter of 2016. Mining costs per tonne increased due
primarily to longer hauls, higher diesel prices and inflation which
increased at a rate greater than the Argentine peso devalued. This
increase was more than offset by the lower processing costs and
general and administration costs per tonne due to higher plant
throughput. The second quarter of 2016 benefited marginally from
residual by-product revenue from zinc of about $0.20 per payable ounce of silver sold whereas,
as planned, there were no zinc sales in the current quarter.
AISC of $9.87 per payable ounce of
silver sold were lower in the third quarter of 2016 than the
$10.03 per payable ounce of silver
sold in the second quarter of 2016 despite higher capital spend as
we commenced the construction on the phase 5 tailings lift required
to process stockpiles to the end of 2017.
Mine sales
We recognized sales of 2.9 million ounces of silver, higher than
the 2.6 million in the second quarter, as a result of higher
production and timing of concentrate shipments.
Chinchillas project, Argentina
During the second quarter of 2016, Golden Arrow Resources
Corporation ("Golden Arrow") released a revised Mineral Resources
estimate and technical report for the Chinchillas project following
an infill drilling program of 115 core drillholes comprising 15,142
meters of drilling. As part of the continuing engineering studies,
a program of condemnation drilling commenced beneath areas selected
for major infrastructure, such as the waste rock facility. During
the third quarter, 16 core drillholes for 3,252 meters were
completed to investigate the presence of near surface
mineralization underlying and proximal to the proposed waste rock
facility. The results of this work were reported by Golden Arrow in news releases on September 7, 2016, and October 3, 2016. In addition to this work,
geotechnical, hydrological, metallurgical and environmental
baseline studies, along with community engagement programs,
continued. In the third quarter of 2016, we funded approximately
$2.9 million for work on the
Chinchillas project, bringing total expenditures to date to
$10.5 million.
We are undertaking the relevant engineering studies to determine
the economic viability of the Chinchillas project as a satellite
mine feeding the Pirquitas plant and extending the life of the
operation. Our option agreement with Golden
Arrow requires the notice of exercise in regards to forming
a joint venture by March 31, 2017.
All technical work is scheduled for completion in advance of that
date to enable a decision with regards to such notice.
Export duties
We entered into a fiscal stability agreement (the "Fiscal
Agreement") with the Federal Government of Argentina in 1998 for production from the
Pirquitas mine. In December 2007, the
National Customs Authority of Argentina (Dirección Nacional de Aduanas)
("Customs") levied an export duty of approximately 10% from
concentrate for projects with fiscal stability agreements
pre-dating 2002 and Customs has asserted that the Pirquitas mine is
subject to this duty. We have challenged the legality of the export
duty applied to silver concentrate and the matter is currently
under review by the Federal Court (Jujuy) in Argentina.
The Federal Court (Jujuy) granted an injunction in our favor
effective September 29, 2010, that
prohibited the Customs from withholding the 10% export duty on
silver concentrate (the "Injunction"), pending the decision of the
courts with respect to our challenge of the legality of the
application of the export duty. On June 21,
2016 the Federal Court (Jujuy) ruled that the Injunction
would remain in place subject to certain conditions, including the
provision by August 5, 2016, of a
guarantee by Silver Standard against liabilities arising from
export duties and applicable interest as well as security from Mina
Pirquitas, LLC on certain assets at the Pirquitas mine. We have
appealed the condition to provide the parent guarantee. The
requirement for the guarantee and security is suspended pending the
outcome of that appeal. We are also continuing discussions with the
Federal Tax Authority and other government officials for potential
resolution of the claim. We cannot predict the outcome of the court
proceedings and those discussions. If we do not reach a successful
resolution of the matter, the Federal Tax Authority may make
further application to the court to have the Injunction lifted and,
upon that, initiate proceedings to collect the accrued export
duties and its claimed interest. The lifting of the Injunction does
not impact our underlying challenge of the legality of the
application of export duties or remedies available under the Fiscal
Agreement. Changes in our assessment of this matter could result in
material adjustments to our consolidated statements of income
(loss).
Outlook
This section of the news release provides management's
production and cost estimates. See "Cautionary Note Regarding
Forward-Looking Statements."
We completed the acquisition of Claude Resources Inc. ("Claude
Resources"), which owned the Seabee Gold Operation in northern
Saskatchewan, Canada, on
May 31, 2016. The operation has been
in continuous production since 1991 and consists of two operating
mines (the Seabee mine and Santoy mine complex), a central milling
facility, camp facilities and important regional exploration
targets. We also acquired the 40,400 hectare Amisk gold project in
northeastern Saskatchewan.
With strong operating performance through the third quarter of
2016 combined with our outlook for the fourth quarter, we are able
to improve certain guidance metrics.
At the Marigold mine, for the third time this year, annual cash
costs guidance is being reduced to between $640 and $680 per payable ounce of gold sold from
previous guidance of between $650 and
$700 per payable ounce of gold sold reflecting continued
lower diesel prices and the overcall of mined ounces from the
Mackay open pit. Production, capital and capitalized stripping
guidance at Marigold remain unchanged.
Annual silver production guidance for the Pirquitas mine has
been revised upward for the second time this year to between 9.5
and 10.5 million ounces from previous guidance of between 9.0 and
10.0 million ounces, due to additional ore tonnes being mined from
the lower benches of the San
Miguel open pit. Additionally, for the third time this year,
cash costs guidance is being reduced to between $9.00 and $9.50 per payable ounce of silver sold,
reflecting lower diesel prices, continued stronger operating
performance and effective cost control. Capital expenditure
guidance at Pirquitas remains unchanged.
Operating
Guidance
|
|
Marigold
mine
|
|
Seabee Gold
Operation(2)
|
|
Pirquitas
mine
|
|
Gold
Production
|
oz
|
200,000 -
210,000
|
|
32,000 -
35,000
|
|
—
|
|
Silver
Production
|
Moz
|
—
|
|
—
|
|
9.5 - 10.5
|
|
Cash costs per
payable ounce sold (1)
|
$/oz
|
640 - 680
|
|
610 - 640
|
|
9.00 -
9.50
|
|
Capital
Expenditures
|
$M
|
32
|
|
2
|
|
12
|
|
Capitalized Stripping
Costs
|
$M
|
30
|
|
6
|
|
—
|
|
(1)
|
We report the
non-GAAP financial measure of cash costs per payable ounce of gold
and silver sold to manage and evaluate operating performance at the
Marigold mine, the Seabee Gold Operation and the Pirquitas mine.
See "Non-GAAP and Additional GAAP Financial Measures" in section 12
of our MD&A.
|
(2)
|
Guidance for the
Seabee Gold Operation is for the period from July 1, 2016 to
December 31, 2016, and is estimated based on an exchange rate of
1.30 CAD/USD.
|
Consolidated Financial Summary
Selected Financial
Data (1)
|
|
|
Three months ended
September 30
|
|
Nine months ended
September 30
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
$
|
|
$
|
|
$
|
|
$
|
|
Revenue
|
143,381
|
|
77,191
|
|
363,669
|
|
284,730
|
|
Income (loss) from
mine operations (2)
|
59,190
|
|
(7,396)
|
|
126,550
|
|
39,325
|
|
Operating income
(loss) (2)
|
50,248
|
|
(50,733)
|
|
89,099
|
|
(24,244)
|
|
Net income (loss) for
the period (2)
|
38,042
|
|
(59,416)
|
|
52,825
|
|
(57,580)
|
|
Basic income (loss)
per share
|
0.32
|
|
(0.74)
|
|
0.54
|
|
(0.71)
|
|
Adjusted income
(loss) before tax (3)
|
45,168
|
|
(11,844)
|
|
83,996
|
|
7,037
|
|
Adjusted net income
(loss) (3)
|
37,214
|
|
(10,127)
|
|
69,405
|
|
(5,891)
|
|
Adjusted basic income
(loss) per share (3)
|
0.31
|
|
(0.13)
|
|
0.71
|
|
(0.07)
|
|
Cash generated by
operating activities
|
53,066
|
|
998
|
|
96,554
|
|
53,560
|
|
Cash (used in)
investing activities
|
(10,581)
|
|
(17,288)
|
|
(19,222)
|
|
(33,766)
|
|
Cash generated by
(used in) financing activities
|
2,599
|
|
—
|
|
(11,400)
|
|
(1,649)
|
|
|
|
|
|
Financial
Position
|
September 30,
2016
|
|
December 31,
2015
|
|
|
|
Cash and cash
equivalents
|
277,544
|
|
211,862
|
|
|
|
Current assets -
total
|
690,206
|
|
476,734
|
|
|
|
Current liabilities -
total
|
133,943
|
|
135,851
|
|
|
|
Working
capital
|
556,263
|
|
340,883
|
|
|
|
Total
assets
|
1,454,618
|
|
871,677
|
|
|
|
(1)
|
All values are
presented in thousands of U.S. dollars, except per share
values.
|
(2)
|
Loss from mine
operations for the three and nine months ended September 30, 2015
includes a $7.7 million non-cash write-down of stockpile inventory
to its net realizable value at the Pirquitas mine. Operating Loss
and Net Loss for the three and nine months ended September 30, 2015
include non-cash, pre-tax impairment charge and write-downs of
$42.2 million related to the Pirquitas mine.
|
(3)
|
We report non-GAAP
measures including adjusted income before- and after-tax, to manage
and evaluate our operating performance. Please see "Cautionary Note
Regarding Non-GAAP Measures".
|
Quarterly financial summary
The 86% increase in quarterly revenue compared to the third
quarter of 2015 was due to higher realized prices of gold by 20%
and silver by 31%, combined with a 48% increase in gold equivalent
ounces sold, largely due to sales from the newly-acquired Seabee
Gold Operation and stronger sales and production from the Pirquitas
mine.
Income from mine operations in the third quarter of 2016
generated a positive gross margin of 41%, significantly higher than
the negative 10% margin in the third quarter of 2015 due to higher
precious metals prices, lower cost of sales, particularly at the
Pirquitas mine, and the addition of the Seabee Gold Operation. The
loss from mining operations in the third quarter of 2015 was also
negatively impacted by the write-down of low grade stockpiles at
the Pirquitas mine in the amount of $7.7
million. Operating income in the third quarter of 2015 was
negatively impacted by a $34.5
million impairment of the Pirquitas mine.
Cash generated by operating activities increased significantly
to $53.1 million compared to
$1.0 million in the third quarter of
2015. The higher prices of gold and silver and the higher volumes
sold at lower unit cost generated significantly higher cash from
operating activities. We used $10.6
million in investing activities in the third quarter of 2016
compared to $17.3 million in the
third quarter of 2015. Investments relating to the addition of the
Seabee Gold Operation, seasonally higher investments at Marigold
and capitalized stripping totaling $30.8
million were partially offset by receipt of our deposit of
$18.2 million plus accrued interest
from the Canada Revenue Agency ("CRA"). In the comparative quarter
of 2015, we invested $13.0 million in
plant and equipment at the Marigold mine, and acquired the Valmy
property for $11.5 million and this
was offset by the release of $7.5
million of restricted cash.
Year-to-date financial summary
The increase in revenue for the nine months ended September 30, 2016, of 28%, compared to the nine
months ended September 30, 2015,
resulted from higher sales of gold equivalent payable ounces by 17%
due to sales from the newly-acquired Seabee Gold Operation and
strong performance at the Pirquitas mine and also higher prices of
gold by 7.5% and silver by 6%.
Income from mine operations in the nine months ended
September 30, 2016, generated a gross
margin of 35%, higher than the 14% in the nine months ended
September 30, 2015, mainly due to
higher precious metals prices and lower cost of sales, particularly
at the Pirquitas mine. The income from mine operations in the nine
months ended September 30, 2015, was
also negatively impacted by the write-down of low grade stockpiles
at the Pirquitas mine in the amount of $7.7
million. Operating income in the nine months ended
September 30, 2016, was significantly
higher than in the comparative period which was also negatively
impacted by a $34.5 million
impairment of the Pirquitas mine.
Cash generated from operating activities was $96.6 million in the nine months ended
September 30, 2016, compared to
$53.6 million in the comparative
period of 2015 as a result of improved margins at Marigold and
Pirquitas and the addition of the strong cash producing Seabee Gold
Operation in May 2016. In the nine
months ended September 30, 2016, we
invested $31.2 million in plant and
equipment and $22.5 million in
capitalized stripping primarily at the Marigold mine, higher by
$3.5 million and $9.9 million, respectively, than in the
comparative period. Cash used in investing activities was
significantly lower in the nine months ended September 30, 2016, than in the nine months ended
September 30, 2015, as we received
$16.9 million of cash in the Claude
Resources acquisition, collected the CRA deposit of $18.2 million plus accrued interest and
received $4.4 million from the sale
of marketable securities. In the comparative period, we paid the
deposit to CRA but received $20.0
million as a final payment from the sale of the San Agustin project. Cash used in financing
activities in the nine-month period includes repayment of Claude
Resources' $13.7 million credit
facility, full repayment of the short-term debt in Argentina and receipt of $6.4 million from the exercise of stock
options.
Corporate Summary
The tax dispute with the CRA has now been settled in our favor.
On August 24, 2016, the CRA issued a
new notice of reassessment for each of the 2010 and 2011 taxation
years reversing the Notice of Reassessment ("NOR") issued to us in
January 2015 and, on September 2, 2016, refunded the deposit we paid
to the CRA to appeal, plus accrued interest from the date of
payment of the deposit. Following the receipt of the deposit, with
accrued interest, the Department of Justice ("DOJ") filed a notice
of discontinuance of our appeal with the Tax Court of Canada.
In September 2016, we announced
the sale of 100% of our Parral properties in Chihuahua, Mexico, including the Veta
Colorada, La Palmilla, and
San Patricio properties
(collectively, the "Parral properties") to Endeavour Silver Corp.
("Endeavour Silver") for $6.0 million
of Endeavour Silver shares (based on the average of the closing
prices of Endeavour Silver shares sold on the NYSE during the ten
trading days prior to September 13,
2016). We also announced a transaction on our Diablillos and
M-18 projects, located in Argentina, with Huayra Minerals Corporation
("Huayra") for cash payments of approximately $1.5 million over the first two years and
$12.5 million over the following
three to five years, a 19.9% equity interest in Huayra, with free
carried interest until the completion of a public offering of
$5.0 million or more, and a 1.0% net
smelter returns royalty on production from each of the projects.
Each of these transactions were completed subsequent to quarter
end.
On August 19, 2016, we sold 100%
of our Juncal and La Flora projects in Region II, Chile to Austral Gold Limited (ASX: AGD) for
aggregate consideration of $250,000
in cash and a 1.0% net smelter return royalty on production from
the projects.
Qualified Persons
The scientific and technical information contained in this news
release relating to the Marigold mine has been reviewed and
approved by Thomas Rice and
James N. Carver, each of whom is a
SME Registered Member and a Qualified Person under National
Instrument 43-101 – Standards of Disclosure for Mineral
Projects ("NI 43-101"). Mr. Rice is our Technical Services
Manager and Mr. Carver is our Chief Geologist at the Marigold mine.
The scientific and technical data contained in this news release
relating to the Seabee Gold Operation has been reviewed and
approved by Gordon Reed, P.Eng., and
F. Carl Edmunds, P. Geo., each of
whom is a Qualified Person under NI 43-101. Mr. Reed is our General
Manager at the Seabee Gold Operation and Mr. Edmunds is our Chief
Geologist, Exploration. The scientific and technical information
contained in this news release relating to the Pirquitas mine has
been reviewed and approved by Bruce
Butcher, P.Eng., and F. Carl
Edmunds, P. Geo., each of whom is a Qualified Person under
NI 43-101. Mr. Butcher is our Director, Mine Planning.
Management Discussion & Analysis and Conference
Call
This news release should be read in conjunction with our
unaudited condensed consolidated interim financial statements and
our MD&A as filed with the Canadian Securities Administrators
and available at www.sedar.com or our website at
www.silverstandard.com.
- Conference call and webcast: Wednesday,
November 9, 2016, at 11:00 a.m.
EST.
Toll-free in U.S. and Canada: +1
(800) 319-4610
All other callers: +1 (416) 915-3239
Webcast: ir.silverstandard.com
- The conference call will be archived and available at
ir.silverstandard.com.
Audio replay will be available for two weeks by calling:
Toll-free in U.S. and Canada: +1
(855) 669-9658, replay code 0879
All other callers: +1 (412) 317-0088, replay code 0879
About Silver Standard
Silver Standard is a Canadian-based precious metals producer
with three wholly-owned and operated mines, including the Marigold
gold mine in Nevada, U.S., the
Seabee Gold Operation in Saskatchewan,
Canada and the Pirquitas silver mine in Jujuy Province,
Argentina. We also have two
feasibility stage projects and an extensive portfolio of
exploration properties throughout North and South America. We are committed to delivering
safe production through relentless emphasis on Operational
Excellence. We are also focused on growing production and Mineral
Reserves through the exploration and acquisition of assets for
accretive growth, while maintaining financial strength.
For further information contact:
W. John DeCooman, Jr.
Vice President, Business Development and Strategy
Silver Standard Resources Inc.
Vancouver, BC
N.A. toll-free: +1 (888) 338-0046
All others: +1 (604) 689-3846
E-Mail: invest@silverstandard.com
To receive Silver Standard's news releases by e-mail, please
register using the Silver Standard website at
www.silverstandard.com.
Cautionary Note Regarding Forward-Looking
Statements
This news release contains forward-looking information within
the meaning of Canadian securities laws and forward-looking
statements within the meaning of the U.S. Private Securities
Litigation Reform Act of 1995 (collectively, "forward-looking
statements"). All statements, other than statements of historical
fact, are forward-looking statements.
Generally, forward-looking statements can be identified by
the use of words or phrases such as "expects," "anticipates,"
"plans," "projects," "estimates," "assumes," "intends," "strategy,"
"goals," "objectives," "potential," "believes," or variations
thereof, or stating that certain actions, events or results "may,"
"could," "would," "might" or "will" be taken, occur or be achieved,
or the negative of any of these terms or similar expressions. The
forward-looking statements in this news release relate to, among
other things: future production of gold, silver and other metals;
future costs of inventory, and cash costs, total costs and AISC per
payable ounce of gold, silver and other metals sold; expected
exploration and development expenditures; the prices of gold,
silver and other metals; the timing of cessation of San Miguel open pit mining activities and
stockpile processing at the Pirquitas mine; the effects of laws,
regulations and government policies affecting our operations or
potential future operations; future successful development of our
projects; the anticipated benefits from our acquisition of Claude
Resources; expected timing to complete engineering studies at the
Chinchillas project and make a decision about whether to move
forward with the project; the sufficiency of our current working
capital, anticipated operating cash flow or our ability to raise
necessary funds; estimated production rates for gold, silver and
other metals produced by us; timing of production and the cash
costs and total costs of production at the Marigold mine, the
Seabee Gold Operation and the Pirquitas mine; the estimated cost of
sustaining capital; ongoing or future development plans and capital
replacement, improvement or remediation programs; the expected
benefits of the new leach pad at the Marigold mine; the estimates
of expected or anticipated economic returns from our mining
projects, including future sales of metals, concentrate or other
products produced by us; our ability to expand Mineral Resources
and convert Mineral Resources into Mineral Reserves; and our plans
and expectations for our properties and operations.
These forward-looking statements are subject to a variety of
known and unknown risks, uncertainties and other factors that could
cause actual events or results to differ from those expressed or
implied, including, without limitation, the following: uncertainty
of production, development plans and cost estimates for the
Marigold mine, the Seabee Gold Operation, the Pirquitas mine and
our projects; our ability to replace Mineral Reserves; our ability
to successfully integrate our acquisition of Claude Resources;
subject to exercising our election to proceed, our ability to
complete and successfully integrate Golden
Arrow's Chinchillas project, on a joint venture basis, into
our current operations; commodity price fluctuations; political or
economic instability and unexpected regulatory changes; currency
fluctuations; the possibility of future losses; general economic
conditions; fully realizing the value of our shareholdings in
Pretium Resources Inc. and our other marketable securities, due to
changes in price, liquidity or disposal cost of such marketable
securities; potential export duty and related interest on past
production and sales of silver concentrate from the Pirquitas mine;
counterparty and market risks related to the sale of our
concentrate and metals; uncertainty in the accuracy of Mineral
Reserves and Mineral Resources estimates and in our ability to
extract mineralization profitably; differences in U.S. and Canadian
practices for reporting Mineral Reserves and Mineral Resources;
lack of suitable infrastructure or damage to existing
infrastructure; future development risks, including start-up delays
and cost overruns; our ability to obtain adequate financing for
further exploration and development programs and opportunities;
uncertainty in acquiring additional commercially mineable mineral
rights; delays in obtaining or failure to obtain governmental
permits, or non-compliance with our permits; our ability to attract
and retain qualified personnel and management; potential labour
unrest, including labour actions by our unionized employees at the
Pirquitas mine; the impact of governmental regulations, including
health, safety and environmental regulations, including increased
costs and restrictions on operations due to compliance with such
regulations; reclamation and closure requirements for our mineral
properties; failure to effectively manage our tailings facilities;
social and economic changes following closure of a mine, including
the expected closure of the Pirquitas mine in 2017, may lead to
adverse impacts and unrest; unpredictable risks and hazards related
to the development and operation of a mine or mineral property that
are beyond our control; indigenous peoples' title claims and rights
to consultation and accommodation may affect our existing
operations as well as development projects and future acquisitions;
assessments by taxation authorities in multiple jurisdictions;
recoverability of value added tax and changes to the collection
process in Argentina; claims and
legal proceedings, including adverse rulings in litigation against
us and/or our directors or officers; compliance with
anti-corruption laws and internal controls, and increased
regulatory compliance costs; complying with emerging climate change
regulations and the impact of climate change, including extreme
weather conditions; uncertainties related to title to our mineral
properties and the ability to obtain surface rights; the
sufficiency of our insurance coverage; civil disobedience in the
countries where our mineral properties are located; operational
safety and security risks; actions required to be taken by us under
human rights law; competition in the mining industry for mineral
properties; shortage or poor quality of equipment or supplies; an
event of default under our convertible notes may significantly
reduce our liquidity and adversely affect our business; failure to
meet covenants under our senior secured revolving credit facility;
conflicts of interest that could arise from certain of our
directors' involvement with other natural resource companies;
information systems security threats; and those other various risks
and uncertainties identified under the heading "Risk Factors" in
our most recent Annual Information Form filed with the Canadian
securities regulatory authorities and included in our most recent
Annual Report on Form 40-F filed with the U.S. Securities and
Exchange Commission ("SEC").
This list is not exhaustive of the factors that may affect
any of our forward-looking statements. Our forward-looking
statements are based on what our management considers to be
reasonable assumptions, beliefs, expectations and opinions based on
the information currently available to it. Assumptions have been
made regarding, among other things, our ability to carry on our
exploration and development activities, our ability to meet our
obligations under our property agreements, the timing and results
of drilling programs, the discovery of Mineral Resources and
Mineral Reserves on our mineral properties, the timely receipt of
required approvals and permits, including those approvals and
permits required for successful project permitting, construction
and operation of our projects, the price of the minerals we
produce, the costs of operating and exploration expenditures, our
ability to operate in a safe, efficient and effective manner, our
ability to obtain financing as and when required and on reasonable
terms and our ability to continue operating the Marigold mine, the
Seabee Gold Operation and the Pirquitas mine. You are cautioned
that the foregoing list is not exhaustive of all factors and
assumptions which may have been used. We cannot assure you that
actual events, performance or results will be consistent with these
forward-looking statements, and management's assumptions may prove
to be incorrect. Our forward-looking statements reflect current
expectations regarding future events and operating performance and
speak only as of the date hereof and we do not assume any
obligation to update forward-looking statements if circumstances or
management's beliefs, expectations or opinions should change other
than as required by applicable law. For the reasons set forth
above, you should not place undue reliance on forward-looking
statements.
Cautionary Note to U.S. Investors
This news release includes Mineral Reserves and Mineral
Resources classification terms that comply with reporting standards
in Canada and the Mineral Reserves
and the Mineral Resources estimates are made in accordance with NI
43-101. NI 43-101 is a rule developed by the Canadian Securities
Administrators that establishes standards for all public disclosure
an issuer makes of scientific and technical information concerning
mineral projects. These standards differ significantly from the
requirements of the SEC set out in SEC Industry Guide 7.
Consequently, Mineral Reserves and Mineral Resources information
included in this news release is not comparable to similar
information that would generally be disclosed by domestic U.S.
reporting companies subject to the reporting and disclosure
requirements of the SEC. Under SEC standards, mineralization may
not be classified as a "reserve" unless the determination has been
made that the mineralization could be economically produced or
extracted at the time the reserve determination is made. In
addition, the SEC's disclosure standards normally do not permit the
inclusion of information concerning "Measured Mineral Resources,"
"Indicated Mineral Resources" or "Inferred Mineral Resources" or
other descriptions of the amount of mineralization in mineral
deposits that do not constitute "reserves" by U.S. standards in
documents filed with the SEC. U.S. investors should understand that
"Inferred Mineral Resources" have a great amount of uncertainty as
to their existence and great uncertainty as to their economic and
legal feasibility. Moreover, the requirements of NI 43-101 for
identification of "reserves" are also not the same as those of the
SEC, and reserves reported by us in compliance with NI 43-101 may
not qualify as "reserves" under SEC standards. Accordingly,
information concerning mineral deposits set forth herein may not be
comparable with information made public by companies that report in
accordance with U.S. standards.
Cautionary Note Regarding Non-GAAP Measures
This news release includes certain terms or performance
measures commonly used in the mining industry that are not defined
under International Financial Reporting Standards ("IFRS"),
including cash costs, total costs and AISC per payable ounce of
precious metals sold, realized metal prices, adjusted income (loss)
before tax, adjusted income tax (expense), adjusted net income
(loss) and adjusted basic earnings (loss) per share. Non-GAAP
financial measures do not have any standardized meaning prescribed
under IFRS and, therefore, they may not be comparable to similar
measures reported by other companies. We believe that, in addition
to conventional measures prepared in accordance with IFRS, certain
investors use this information to evaluate our performance. The
data presented is intended to provide additional information and
should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with IFRS. These
non-GAAP measures should be read in conjunction with our
consolidated financial statements. Readers should refer to
"Non-GAAP and Additional GAAP Financial Measures" in section 12 of
our MD&A, available under our corporate profile at
www.sedar.com or on our website at www.silverstandard.com, for a
more detailed discussion of how we calculate such measures and for
a reconciliation of such measures to IFRS terms.
SOURCE Silver Standard Resources Inc.