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Executives

John Smith - President & CEO

Greg Martin - CFO

Alan Pangbourne - SVP, Projects

John DeCooman - VP, Business Development & Strategy

Andrew Sharp - VP, Technical Services

Carl Edmunds - Chief Geologist

Kelly Stark-Anderson - VP, Legal & Corporate Secretary

Analysts

Adam Graf - Cowen and Company

Chris Lichtenheldt - Dundee Capital Markets

John Tumazos - Very Independent Research

Brian Yu - Citi

Garrett Goggin - Gold Stock Analyst

Silver Standard Resources, Inc. (SSRI) Q4 2013 Earnings Conference Call February 21, 2014 11:00 AM ET

Operator

Good morning everyone and welcome to Silver Standard’s Fourth Quarter Financial Results and Project Update Conference Call. (Operator Instructions).

At this time, for opening remarks and introductions, I would like to turn the call over to John Smith, President and CEO. Please go ahead, sir.

John Smith

Thank you, Daniele. Good morning, ladies and gentlemen, and welcome to Silver Standard's fourth quarter 2013 conference call, during which we'll provide a review of our financial performance and give an update on our business both relating to the quarter and the full year.

Joining me on the call this morning are Greg Martin, our CFO; Alan Pangbourne, Senior Vice President, Projects; John DeCooman, Vice President, Business Development & Strategy, Andrew Sharp, Vice President of our Technical Services and Carl Edmunds, our Chief Geologist. Also present is Kelly Stark-Anderson, our Vice President of Legal and Corporate Secretary.

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's an online webcast, and you'll find the information to access the webcast in our news release relating to this conference call.

And we will be making forward-looking statements today so please read our disclosures in the relevant documents.

2013 was challenging for investors in our sector and specifically shareholders of Silver Standard. I want to thank those that have stood by us and assure them as a management team we remain focused on growing value. It's about doing what is right. Notwithstanding the business environment I’m proud that what we have achieved from the restructuring work of Pirquitas also maintaining a strong balance sheet in difficult times and our positioning for growth. This work provided a strong platform for Silver Standard coming into 2014 supporting our recently announced 275 million acquisition of the Marigold mine in the Nevada from Gold Corp and Barrick.

As a management team we have demonstrated capability commercially with the excellent term secured on our 265 million convertible debt raising, our work with our customers on sales contracts and the monetization of the non-core properties San Agustin and Challacollo. Technically the work and operational excellence of Pirquitas to reposition the cost structure and the project activity of Pitarrilla were also major achievements. In 2013 we also added to our capability which provides us with a deep skill set across all areas of our business, this prepared us solid foundation for us to drive forward into the market with the purchase of Marigold a truly transformation acquisition. With Marigold we also made joining us have an experienced team in Nevada which will only improve our performance and positioning for the future.

At Pirquitas the operational excellence activity in that positioning of the mine sustainably throughout the resource cycle has continued with real and visible results. This was done in a year where we were also deepening the pits which added to cost and complexity. Nevertheless 8.2 million ounces of silver were delivered at cash cost of $12.87 per ounce compared to $16.88 per ounce a year ago. Our zinc production 2013 was a record year beating our guidance. The challenge now at Pirquitas is to continue with restructuring and building out a business for the future. We have been in Argentina for two decades of course with our challenges we have delivered with a very experienced in-country team.

In recent weeks we have seen significant devaluation of the peso, so this will translate positively into our U.S. dollar reported cash costs; we also expect to see inflationary setup up appear throughout 2014 in part response.

Net-net attributed positive for our cost structure but inflation needs to be positively dealt with by the government moving forward. Our cost guidance for 2014 for Pirquitas reflects continuing focus on costs. Production of silver and zinc and strong and during the second half of the year the mine will have more ore exposed allowing us to blend to more optimal feed mix for processing.

Now moving to our development activities in Mexico, our Pitarrilla project like all mining in Mexico was negatively impacted by the tax and royalty changes. We had set core objectives for 2013. Land access, permitting, engineering and financing. Now all these objectives were been progressed as a discipline investor we decided to look at alternatives for our lower capital startup for the project.

This work is continuing which will enable us to form a view of a best way forward for Pitarrilla this year. At San Luis during the fourth quarter we proceeded to permit the 2014 drill program for the Bonita Zone and we will start drilling as soon as the rainy season is over. And now let me handover to my colleagues to provide more detail on our performance and at the end of the call we will also address the purchase of Marigold but firstly I will pass to Andrew who will cover Pirquitas.

Andrew Sharp

Thank you John. The operational excellence program of Pirquitas conceived in late 2012 and implementing through that 2013 has shown improving results through the year and Q4 solidly delivered more. The Pirquitas management team is focused and seem to maintain that advantage and go further in 2014. During the past year mine operations completed the replacement of the mining contractor equipment. This is an example of careful use of capital funds delivering operational benefits and in this case with an expected payback of approximately 8 months. We’re also realizing other benefits as Phase II progresses. Strip ratios are expected to decrease in time and in Q4 there is no exception with a 10% reduction compared to Q3.

In Q4, the mine operations team moved 4.3 million tons of material 4% less than the third quarter. This variation was largely driven from a chassis overhaul for one of the mine loaders. The replacement of the contractor fleet will deliver further cost savings in 2014. As Phase II progresses and the strip ratio continues to decrease some of the mine fleet will become available for capital works. In particular tailings dam construction will no longer require a mining contractor for earth moving and a further capital cost savings would result.

Independent process control and mechanical availability continued to improve and in Q4 have resulted in the increase in milling rates by 7% compared to Q3. We always knew that an average rate of 4567 tons per day during the quarter or 10.2% above the mill’s nominal design. The fourth quarter mill processing rate demonstrates the return to average annual mill rates comparable to 2012 the best plant has ever achieved whilst also delivering record quantities of concentrate. And then the growth achievements for the plant in 2013 was the revitalization of the pressure jigs circuit and in Q4 the pressure jigs again continued to perform at record levels. There is some performance combined with additional ore sourced from the pit allowed [ph] degree of 228 gram per ton silver head grades in the mills in Q4 compared to 215 grams ton in Q3. Silver recovery was slightly lower at 73.9% in Q4 from 74.6% in Q3 as the plant processed a record amount of zinc.

Zinc head grades were 11% higher than Q3 and exceeded our expectations for the quarter. The high head grade combined with excellent recovery, delivered zinc production 32% higher than Q3 results and kept of a tremendous zinc story for Pirquitas for the year.

The customer reduction plan for Pirquitas commenced in early 2013 with the immediate goal for reposition the mine from the upper end of the primary silver mine cost curve to a stronger competitive position. Now our team achievement goal was a 24% reduction in year-over-year cash costs culminating with Q4 cash cost below $12 per payable ounce. 2013 action is focused on reducing contractor involvement, rescaling our work force, redesigning mining and processing’s optimal effectiveness and necessarily reducing people at site. These activities have been done in consultation with communities, government and the union. The close of 2013 the plant were a 25% mining reduction is on schedule and 92% complete which is a testament to the Pirquitas management team and the broader community they work with.

Q was a quarter of strong performance at Pirquitas, we delivered metal and the results are well considered and executed cost reduction plan while steering through the current challenges of operating in Argentina. We look forward to advancing the operational excellence at Pirquitas in 2014.

Alan will now provide an update on our Pitarrilla project.

Alan Pangbourne

Thank you Andrew. As John mentioned the impact from the new tax regime in Mexico on the lot of silver process of course to be assessed how we might develop the project. At the beginning of the year we have had core key goals and we have advanced all of them, some to completion.

As reported previously we received access to the remaining critical parts that are left. Pilot plant work was completed. Power supply root voltage was defined. However as a result of the new taxes around silver process in second half 2013 we decided to delay further engineering site works.

The joint venture process was also sustained whilst we review internally development options. During 2013 we developed and presented Bonita [ph] permit application. Additionally we had requested further information. We had expected to receive conditional approval in late 2013. However in February this year we received notification that our permits has not been approved disappointing outcome. The principal reason we are not having sufficient authorize [ph] to support project size of the larger pit. During the fourth quarter we commenced revision of various options for the project that could lead to a further capital, start the project in the meaningful production level without comprising future option of the larger pit project.

The initial focus of this will work is on a 3000 to 4000 ton a day underground operation targeting the higher grade, deeper sulfides at or below the bottom of the open pit project. We expect to have the results of this work by the end of Q2 this year. If there is an option that meets our requirements we will then define the scope and schedule for required process construction position related to smaller projects. I will now hand over to Carl who will take you through our exploration activities for the fourth quarter.

Carl Edmunds

Thank you Alan. Amidst the tight market conditions of 2013 exploration activities were reduced focusing on cost reductions and project rationalization, core and non-core projects have been identified and we have acted to move the latter out of the portfolio. Our sale of the San Agustin and Challacollo in the fourth quarter are examples of this. In 2014 exploration will continue it's focus on optimizing value through careful choice of advancing our own properties and replacing those that no longer fit through acquisitions. As always in our industry where we will be opportunistic regarding the potential sales of non-core projects and our drilling efforts will be directed towards bolstering resources near our centers of operations.

At our San Luis property we received the approved work permit application for 2014 drilling campaign at the Bonita Zone from the Ministry of Energy and Mines in Peru. A permit to take water is now in progress with municipal authorities and we anticipate being able to begin work once the rainy season ends. The Bonita Zone is a low sulfidation precious metal Epithermal exploration target defined by mineralizing structures over 700 meter by 440 meter area that is located on Cochabamba community land here we have exploration in development agreements. The objectives of the 2014 work program will be to define sufficient resources to provide a startup alternative to the development of the Ayelén vein system.

The first phase of drilling cost were approximately 5000 meters to be drilling in 40 holes. The San Simon zone located on trend to the south of the Ayelén vein received further detail sampling and mapping work in the fourth quarter.

The result of this work has reduced the ranking of the target that we may return to conduct further work once production at the San Luis property is established. In Mexico at the San Luis del Cordero property in Central Durango State we had an option agreement to acquire a 51% interest in the property. During the fourth quarter of 2013 and into early 2014 we completed a 5500 meter drill program in 15 holes and we are currently considering our options for the property.

The exploration program tests silver, copper, zinc, vein and skarn type targets that have been defined by previous drilling and geophysics. Finally please note that attached to our press release is a mineral resources and reserve statement for December 31, 2013. In terms of the changes the San Agustin and Challacollo were removed reflecting our recent sale. The Pirquitas mineral resources are now 157.9 million ounces of silver, an increase of 9.8 million ounces of silver due to the new resource model net of 2013 for processing depletion.

Most of the resource increase is outside of pit design which feeds into our ongoing development of future possibilities for Pirquitas. The Pirquitas mineral reserves are 68.4 million ounces of silver, this an 11.7 million ounce decrease mostly a result of the 2013 oil processing depletion. Now over to Greg for discussion of the Company’s financial results.

Greg Martin

Thanks Carl. 2013 was successful in continuing our efforts to improve the already strong financial foundation of our Company. At year-end these are highlighted by our cash position which increased by $49 million during the year to $460 million and are significantly higher working capital position of $584 million. Our convertible note offering in January of 2013 was an important financing transaction as we refinanced our maturing convertible notes added incremental financial capacity and took advantage of strong markets at the start of that year to lock in seven year funds with a sub 3% coupon and a 20% per share conversion price. This action set the balance sheet strongly to enable us to provide certainty on our Marigold acquisition with no requirements to seek financing or issue equity. In 2013 the fall in precious metal prices impacted the industry broadly as both operators and developers were challenged to adapt to this new price paradigm. Silver opened 2013 at $30.31 per ounce and closed the year at $19.47 per ounce, a 36% decline.

2013 average silver prices of $23.83 per ounce were 24% lower than 2012 averaged prices of $31.33 and per ounce. Our financial results were impacted by the fall in silver prices in the first half of the year. For the year we recorded revenues of a $175 million, a 27% decline.

Consistent with the drop in silver prices from 2012 despite also selling lower silver ounces as this impact was offset by higher zinc sale. Income from mine operations before the inventory write down was $17.4 million a decline from $58 million in 2012 due to the drop in metal prices somewhat offset by lower cost of inventory due to improved operating cost performance.

The drop in price is not only impacted revenues and margins but also drove the impairment charges we recorded in the second quarter. Our net loss for the year included impairment charges and gains was $225 million or a loss per share of $2.79.

Importantly cash from operating activities remain positive at 19.5 million as we continue to look to drive cash generation. Investments in our assets were in-line with guidance, investments in Pirquitas totaled $27 million as we completed stay four of the tailings dam and replace the contract or mining fleet.

Differed stripping totaled approximately $29 million due to the high strip ratio as we transition from Phase I to Phase II of the San Miguel open pit. These investments were fully financed from liquidity within Argentina. With these investments behind us and the improvements to cash cost which declined 24% year-on-year the mines free cash flow generating ability improves going forward.

Investments in our exploration and development properties declined significantly from $41 million in 2012 to $24 million in 2013 as we took a disciplined approach to spending. So we managed the business through 2013 to protect and improve the capacity of our balance sheet, adjust the business to the realities of a lower silver price environment and continue the investments to improve the value of our assets.

Now turning specifically to the fourth quarter, it was our highest quarter of revenue for the year as we generated $49.3 million from sales of 2.5 million ounces of silver. Our best quarter of silver sales in the year and record sales of 14.2 million pounds of zinc. We took the decision to draw down finished goods inventories as the production performance of Pirquitas continues to be predictable and with the pit transition and it's potential to impact production now behind us.

We now have approximately 1 month of silver concentrate of site a level we will target as we go forward. Silver prices during the fourth quarter averaged $20.76 per ounce similar to the third quarter but significantly below fourth quarter 2012 average of $32.69 per ounce. As a result of the stable silver prices quarter-on-quarter mark to market impacts to revenue in the fourth quarter were limited. Income from mine operations in the fourth quarter was $4 million, lower margin zinc concentrate sales constituted a higher proportion of revenues reducing the overall margins realized.

During the fourth quarter we announced two exploration property divestment, the San Agustin sales closed before year-end and we’re pleased that Challacollo sale has also now closed. The sales further bolster our financial strength. In the fourth quarter we received $15 million in cash and 5.1 million shares of Argonaut Gold. We will receive a further $10 million of cash in 2014 and 20 million in cash in 2015.

I will note that at year-end we accrued full taxes on the transaction and in the first quarter we will be paying those including the VAT receipt from the buyer of approximately $22 million. On Challacollo we have now received $6.6 million after deductions for withholding taxes and 12 million shares of Mandalay.

In the fourth quarter we recorded a $64 million pretax gain on the San Agustin sale and we will record a gain on Challacollo in the first quarter.

My final comment on the fourth quarter relates to the strong performance of Pirquitas as production of 2.3 million ounces resulted in the company meeting production guidance. With cash cost per payable ounce for the quarter totaling $11.75 per ounce we achieved strong cash cost performance and maintain the trend of lowering cost at the mine. The cost per structure hit the mine as rebased cost well below our initial expectations for the year. We resumed recovering VAT in the fourth quarter and the Argentine tax authorities continue to process and approve our VAT recovery applications.

So all in all the fourth quarter positions us well as we move into 2014. As we look forward to 2014 we set our guidance prior to announcing the Marigold mine acquisition and clearly Marigold will have a material impact on our operating results as we roughly double production and our financial performance as we fund the acquisition in current transaction and integration expenditures and begin to benefit for Marigold’s performance.

Specifically at Pirquitas we expect to produce and sell between 8.2 million and 8.6 million ounces of silver an increase from 2013.

Zinc production will match our record 2013 year at between 25 million and 30 million pounds of zinc and sales will match that elevated level. We expect cash cost for payable ounces silver sold of between $12.50 and $13.50 per ounce. Investments to Pirquitas dropped substantially with capital totaling $15 million and deferred stripping only $5 million. The drop in both of these areas positions Pirquitas to generate significantly higher free cash flow in 2014 assuming silver prices to 2013. Exploration and development expenditures exclusive of Marigold, our forecast to total $22 million to position our projects for development and advanced high priority exploration targets.

Just to add to John’s comments earlier on the Argentine peso devaluation. We’re still assessing the impact of this devaluation on the mine and our Argentine business unit. We will see a significant foreign exchange loss mainly a non-cash loss on our Argentine peso denominated assets which are principally VAT in the first quarter. Our cash position in Argentina is quite modest currently so the impact of the devaluation on our cash position was limited and we had strategies in place to protect it's U.S. dollar equivalent value.

So 2013 started with a successful financing and now we begin 2014 deploying those funds into an exciting acquisition. I look forward to updating you on our financial performance as we move to being a multi-mine precious metals producer.

I will now turn the call back to John.

John Smith

Thanks Greg. Before my concluding remarks given the magnitude of our announcement on the 3rd of February to purchase the Marigold mine I will have John DeCooman comment on the transaction and strategy and then Alan Pangbourne who will responsible for the mine performance and integration. We will talk about our forward plan, John?

John DeCooman

Thank you John. Our announced acquisition of the Marigold mine in Nevada for $275 million in cash is the culmination of a disciplined M&A process. The transaction was driven by our strategy to upgrade and balance our portfolio by adding the mine in an excellent jurisdiction that could contribute to immediate operating cash flow. We also add technical and operating capability to our already strong Silver Standard team while preserving the capability to advance the San Luis and Pitarrilla projects. As a result this transaction is an ideal combination of investment rational which employs cash now not equity to grow cash flow per share.

Our teams headed by Alan are already integrating our second mine into Silver Standard with the transaction expected to close in April. Following closing and completion of the technical reports which are focused on higher margin ounces, we will provide production and cost guidance for the Marigold mine. This acquisition transforms Silver Standard into a multi-mine producer with a financial capacity to continue growing. We’re excited about Marigold will do for the company and look forward to creating more value for shareholders in the next leg of our strategy.

Now over to you Alan.

Alan Pangbourne

Thank you John. As you can see from the slide we had an integration plan developed prior to our announcement. Since then we have had a team on the ground reviewing all aspects of the operation. We have been principally gathering data’s close in April and the data collection is being focused primarily on people, IT and finance matters. We’re also working closely with Goldcorp the operator to ensure that we have a smooth handover.

At the same time we have been reviewing and compiling technical data to allow us to form our own view of the future mine reserves and the life of mine planned. In the near term we will be focusing on optimizing the new commission to quickly decide [ph]. This will lead to improved mining efficiency and reduced unit costs.

As we have previously stated we’re focused on quality ounces and margin and this will be reflected in the new resource and reserve statements that are planned for later this year. We expect to announce the NI 43-101 technical reports regarding Marigold mineral resources and the reserves in the third and fourth quarter of 2014 expected [ph].

Once the deal is closed in April we plan to initiate a drilling program aimed at potential expansion of the resource between and around existing resources. This drilling program will focus on most strip ratio of oxide mineralization. So back to you John.

John Smith

So Ladies and gentlemen here at Silver Standard we’re focused on strong stewardship through this part of the cycle and equally we’re not losing sight of this important time to prepare for the future.

2013 was a positive year for us notwithstanding the weaker silver price environments. We delivered Pirquitas, both on production importantly in these markets on costs through our systematic restructuring program. This cost disciplined applied across our business in the sale of non-core assets and the raising of our convertible debt bolstered our strong balance sheet.

Investment discipline was shown at Pitarrilla which is now being evaluated for our lower capital startup. Silver Standard provides leverage and capacity to our portfolio and balance sheet and more than many of our competitor companies. The Marigold transaction supports and adds to this with immediate production, cash flow and leverage when it's closed in April 3rd, 2014.

And we have the team that will deliver with the breadth of right experience and capability. In 2014 our goals are to smoothly integrate Marigold, continue the operational excellence at Pirquitas, define development pathways for both San Luis and Pitarrilla projects and maintain cost discipline throughout the organization supporting our strong balance sheet and we will do this in a safe and appropriate manner. We’re in a cyclical resource business, yes, today we’re at the lower part of the cycle and we know that now is the time to stay focused on cost management but we have to be ready for the future and our recent activity support this dual positioning.

Silver Standard has delivered with our leverage to growth and we are in a unique position at our industry which we will exploit for our shareholders. So thank you for dialing in and we will now take any questions that you may have.

Question-and-Answer Session

Operator

Thank you Mr. Smith. (Operator Instructions). And Mr. Smith your first question comes from Adam Graf from Cowen and Company. Please go ahead.

Adam Graf - Cowen and Company

A couple of quick questions for you guys, at Marigold is it fair to assume that the 2014 and 2015 mine plans as sort of laid out by Goldcorp are going to be continued or will you be able to change things as rapidly as 2015?

Alan Pangbourne

Adam it's probably a bit early to be definitive at the moment but we expect 2014 plan will be very similar to the current Goldcorp plan but as I said in the call we should have a new mine plan in reserve and resource by the end of the year and that will probably impact the 2015 plan.

Adam Graf - Cowen and Company

Okay and then on a separate subject at Pitarrilla what strategies are you guys exploring in order to minimize the impact of the New Mexican royalty and tax regime?

John Smith

Adam in regards to Pitarrilla it's really the focus on the higher ground, better margin material that’s deeper in the ore body and that’s the reason that we’re looking an unground exploitation possibilities and that work is currently underway and we expect to have results from that in the second quarter.

Adam Graf - Cowen and Company

So no integration of plans there in taking into account the new tax regime?

John Smith

The financial analysis that we have been using is taking into account all of the new laws that have been put in place regarding taxes.

Greg Martin

So Adam just to follow-up on that one, I think the important thing is that that project the open pit project we’re just having a look at it in a different way. We still want to have the open pit there but we’re looking at kind of start, lower capital, better returning project initially and still preserve the open pit next what Alan will do I mean completed in the second quarter with a view on.

Adam Graf - Cowen and Company

And just a quick follow-up on that, is this going to look more like the plans several years ago which was through the underground high grade with the option of open pit depending on metal price?

John Smith

That’s kind of what we’re looking at. Can we do an underground? Can we do it at the right value? And then does that preserve the open pit above it?

Operator

Thank you. And your next question comes from Chris Lichtenheldt from Dundee. Your line is now open.

Chris Lichtenheldt - Dundee Capital Markets

First congratulations on all the progress you’ve being able to achieve for some of the past few years. It is beginning to look quite decent. So my first question actually is on Pitarrilla, it is early I guess in my opinion it's a challenging project in the number of ways technically and politically now with the permitting issues as well as the royalties and if we look back over the past 5 or 6 years I think we added up, the company spent almost $100 million getting to this point. Is there a point where you just park it, put it on the shelf you know given you’ve Marigold and some of the other things on the plate?

John Smith

Chris I think that’s the work that we’re doing just now, so we’re looking at this underground project to see if we can get it to work. We’re doing that as Alan says with today’s economic circumstances taken into account and once we do that we will make a decision as to whether that is the right way to go and then we will reevaluate the right way forward for Pitarrilla.

Chris Lichtenheldt - Dundee Capital Markets

Okay I guess I’m asking specifically is there I think in the guidance you’ve said you’re going to spend $8.5 million in Mexico this year on development exploration, is that mainly Pitarrilla?

Greg Martin

Certainly a large portion of that approximately at relates to Pitarrilla that really covers us through to the TE-8 [ph] stage of this underground and also other holding cost and ancillary cost around the project, the balance of that Chris relates to our exploration activities in the country.

Chris Lichtenheldt - Dundee Capital Markets

Okay so that will go forward until you at least figure out the underground option?

John Smith

That’s right.

Chris Lichtenheldt - Dundee Capital Markets

Okay. Secondly with Pitarrilla looking more backburner in some respect, is there anything else in the pipeline that sort of bumps up in terms of moving it into the development status?

John Smith

So we do look at that Chris regularly, we have a portfolio of projects and as we move forward, if you look at the different ones we have got San Luis, it's our priority project now as well as Pitarrilla. So these are the two pathways we’re looking to really move this year. So a lot of work going on in San Luis, a lot of attention on Pitarrilla and then behind that we have other projects which we keep maturity forward.

Chris Lichtenheldt - Dundee Capital Markets

Just an operating question for Pirquitas, I think in the past when we asked you those strip ratios usually were directed to the technical report and if I look at the original plans for stripping in 2014 it was more than 11 million tons or 12 million tons nearly and if we consider your cost of mining per ton there is probably in the $2 range I assume on U.S. dollar terms. It would still be a significant capital spend, I think you got it to 5 million of capitalized stripping this year. Can you just comment on has some of the stripping being pushed out to later years? Is there change to the plan or is this sufficient cost?

John Smith

We did most of the stripping in 2013, that was our big strip year and we got 5 million worth more under prior stripping this year in ’14 and then we’re really diving into the heart of our Phase II picture and really going forward from that with a more access to the ore. So nothing has pushed out beyond, it really is by the time we do ’13 and ’14 we’re down into the right material.

Chris Lichtenheldt - Dundee Capital Markets

Okay and then just my last question here. I noticed the reserves are done at 25. Is it safe to say if we did assume $22 something lower Pirquitas would still hold up the rest of the deposit is pretty homogeneous and it all should be economic now?

John Smith

Yeah that’s a fair statement.

Operator

Thank you. And you next question comes from John Tumazos from Very Independent Research. Please go ahead.

John Tumazos - Very Independent Research

First the 225 million charge in the second quarter excluded Pitarrilla in Mexico which is still in your reserves and resources but you’re evaluating it for the subsequent event of Mexican taxes so we should expect some update such as your underground plan, you’re considering. First question is I make sure I understand the context of it, the 750 million CapEx is off the table and gone. And the second question, that of the Marigold acquisition in the various smaller asset sales how much cash do you have? How much of the cash is restricted in Argentina? And how much in marketable securities do you have?

John Smith

In respect to your first one about the 750 million CapEx for Pitarrilla. At this point in time that is off the table. We’re looking, John, at that lower capital starter project with the underground, that’s really what Alan is focused on for this year and that piece of luck will get through our view as to whether we go forward with that by the end of the second quarter. On your question of cash I’m going to pass it to Greg and he is probably best to address that for you.

Greg Martin

As disclosed in the MD&A, our cash position at the end of the year down in Argentina was about $20 million U.S. equivalent, of that about half was invested in some products to protect it's value and since then it's just been an operating change through January period. We do have disclosed a note through the financial statements that discloses what’s held in short term investments, they all mature under a fairly short time period. So what’s invested in investments of our cash position, it doesn’t impact in any way upon our liquidity position.

If you’re referring to our third party marketable securities again those are disclosed, the principle investment we have is in Pretium and we still hold the 18.8% share of Pretium.

John Tumazos - Very Independent Research

So how much is the cash outside of Argentina net of the Marigold acquisition with the benefit of the asset sales? I actually was very aware of the Pretium shares but I’m not as familiar with Mandalay and Argonaut and the other less significant bits and pieces.

John Smith

Yeah principally we have full access to our cash position apart from the portion that I referenced in Argentina. We do continue to repatriate cash from Argentina on a regular basis so again as we I think I’ve talked about at the Marigold transaction, we’re under no financial constraints with regards to that transaction and we’re going to come out of it with a strong balance sheet with the capacity to continue to advance our projects, continue to execute on our strategy.

John Tumazos - Very Independent Research

I apologize. The First Quantum reported, and Agrium reported, Newmont reported, Thompson Creek reported and I haven't read your MD&A, how much is your cash of Argentina net of Marigold? Is it a 100 million? A 125 million? A 150 million?

Greg Martin

If you’re asking I guess where we project post the transaction closing we had 416 as we talked about earlier John we won't expect our cash position to be in the neighborhood of a 100 million post-closing. We have the transaction cost, we talked about and as I mentioned we also have a reasonable tax payment down in Mexico related to the close of the San Agustin transaction but we’re still going to have a very healthy liquidity position coming out the backend of this acquisition.

Operator

Thank you. And your next question comes from Brian Yu from Citi. Please go ahead.

Brian Yu – Citi

My question is on Pitarrilla, it seems like that limiting factor here is just ability to get sufficient water access, even if the economics of the project to do prove out. So I have couple of questions along these lines, first, in press release you tossed up temporary moratorium on the external water source. Would you a chance, when that expires and then secondly the prior slide said there was sufficient water supply there. I don’t think it has changed quite a bit overtime, would that still be true today?

Alan Pangbourne

Regarding the water situation the moratorium is an event driven thing so once the authorities have done the work of evaluating the various aquifers across Mexico. We expect them to systematically stop releasing further exploration and exploitation for water. So it's very difficult to actually put a time line on it. Regarding the underground project, the previous work from the studies I think it is in 2009 show that the project is actually net positive water due to the underground watering requirements and that water is not subject to the current moratorium and can be used in the process plant which enables us to do the smaller project because the water consumption obviously for that sized project is significantly lower than the larger pit project. So we believe we have got the water to do the underground project.

Brian Yu – Citi

And then my second question is just on for Pirquitas I know you’ve mentioned with the peso devaluation, potential inflation. Can you help us understand just specifically as it relates to peso, how much of your cost there will be considered local versus other cost that are tied to globally traded commodities? And then have you seen signs of cost inflation thus far? I know that rapid devaluations occurred pretty recently.

Greg Martin

Our local dollar cost position is about 60% of the mines cost structure principally that comes from labor but there is a number of other elements which we source locally in Argentina so that’s a pretty good benchmark to use to looking at the impacts. For those that follow Argentina they came out with the new inflation index which we believe accurately represents inflation in the country that reported in inflation rate in January of 3.7%. I think expectations are for that to trend down marginally through the year, so it's an evolving situation post of January devaluation. We’re going to continue to monitor it, there are a number of labor renegotiations going on in the country right now and we’re obviously looking at that as a sign as to how inflation or the current situation in Argentina would impact on the cost structure of the operation.

As John mentioned we do see this as being a net-net, it should be a positive but we’re evaluating the situation.

Operator

Thank you. And your next question comes from Adam Graf from Cowen and Company. Please go ahead.

Adam Graf - Cowen and Company

Just a couple more odds and ends here. Maybe this is a question for John, I was able to calculate your payable rates for Pirquitas around 93% on the silver and about 69% on the zinc. How do you see that trending going forward?

John Smith

I think that from the silver side I think that we still see the near term market outlook as being equal or similar to where it was in last year or so, so I think that projection is fine. I still think that on the zinc side your estimates maybe a little more strong. The market is still seems to be in favor of the smelters versus the miners. So that maybe something that you might want to look at.

Adam Graf - Cowen and Company

And then just again related to Pirquitas you guys pointed out, you had sort of almost record throughput in fourth quarter. They are over 4500 tons a day, are you going to be able to maintain that level in 2014 and going forward?

Andrew Sharp

Sure. We’re quite confident the moment that that high level of production is going to move forward during this coming year.

Adam Graf - Cowen and Company

And going forward beyond that is there anything on the plan about encountering harder ore that might reduce the throughput?

Andrew Sharp

No there is none.

Operator

Thank you. (Operator Instructions). And your next question comes from Garrett Goggin from Gold Stock Analyst. Please go ahead.

Garrett Goggin - Gold Stock Analyst

Couple of questions regarding Argentina and the devaluation there. If you look at your cash costs denominated in peso, it actually looks like they went up a little bit in peso terms over the year.

Greg Martin

Garret I’m not sure exactly how you’re driving that calculation. Obviously we don’t disclose cost in peso terms. It's logically that they would go up because there is an underlying inflation element in the country but what’s important for us because we sell silver in U.S. dollar terms, it's the U.S. dollar value of the cost and we saw very significant decline through the year as we talked about 24% decline in our cash cost. So one of our key goals was to reduce the cost profile in 2013, we believe we achieved that and the team is continuing to drive that excellence forward in ’14.

Garrett Goggin - Gold Stock Analyst

Okay. I'm just trying to get a grasp of the operating efficiency at the mine. Could you talk a little bit about your repatriation process as far as getting paid in dollars, getting it out of the country? You need to convert it back in pesos, pay a duty on it and what's the time frame on that?

Greg Martin

Yeah sure. So we have addressed this on some previous calls but we’ve a loan structure in place which provides for a regular flow of U.S. dollars back up through the structure. We convert the pesos to U.S. dollars at the official exchange rate. There is a withholding tax that gets applied to that amount but it's been an efficient structure for us over the last couple of years.

Garrett Goggin - Gold Stock Analyst

And my last question is regarding Marigold. It looks like Goldcorp and Barrick have spent a lot of money in CapEx over the past couple of years as far as operating improvement. Do you expect that CapEx amount to drop off significantly in 2014 and 2015?

John Smith

Yes that’s the case and there was a large investment they bought a work shovel that's just went into the pit in December so the majority, all of that’s really being spent and it's now by putting up that gear to work and get value from it. So that’s where we’re focused, but you’re right going forward there is not that capital intensity.

Garrett Goggin - Gold Stock Analyst

Okay. And when are you going to come out with forecasts regarding that?

John Smith

We will have to complete this transaction, we’re aiming at April. And we’re looking at what we’re going to do about it in 2014 but we got to also do the resource and reserves update for Silver Standard. So we understand that priority getting that done and getting to market, some guidance we’re very focused on that.

Operator

Thank you. There are no further questions at this time. I will now turn the call back to Mr. Smith.

John Smith

Thanks Daniele. So, there is an important international hockey game about to start. So, this team in Canada have done its job in getting you done before 9 o’clock. So ladies and gentlemen enjoy the game and enjoy the day.

Operator

Ladies and gentlemen thank you for participating in today’s conference. We look forward to keeping you updated. Everyone have a great day.

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