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Executives

Michael Anglin - President and CEO

Tom Yip - CFO

George Paspalas - SVP, Operations

Joe Ovsenek - SVP, Corporate Development

Analysts

Anupum Kaiton - Scarsdale Equities

Andrew Kaip - BMO Capital Markets

Haytham Hodely - Salman Partners

Jorge Beristain - Deutsche Bank

Kwan Lunz-Intaglo - Scotia Capital

Chris Lichtenheldt - UBS

Silver Standard Resources Inc. (SSRI) Q1 2010 Earnings Call May 12, 2010 11:00 AM ET

Operator

Good day everyone and welcome to the first quarter 2010 financial results and project update conference call. This call is being recorded. At this time for opening remarks and introductions, I’d like to turn the call over to Silver Standards President and CEO, Mr. Michael Anglin. Mr. Anglin please go ahead.

Michael Anglin

Thank you. Good morning ladies and gentlemen. Welcome to Silver Standard first quarter 2010 conference call, reviewing our financial performance and updating our projects. On the call this morning we have George Paspalas, Senior Vice President Operations; Joe Ovsenek, Senior Vice President Corporate Development; Tom Yip, Chief Financial Officer; Kristen Riddell, Vice President, Corporate Secretary and General Counsel; Ken McNaughton, Vice President Exploration.

Our financial statements as well as our management discussion analysis together with project updates, have been filed on SEDAR and are available on our website. We have a webcast accompanying our comments today and it can be found at a web location referenced in the yesterday’s news release. We’ll be making forward looking statements on the call today and I advise you to refer to our forward-looking disclosure accompanying our news releases out on SEDAR.

Our focus in the first quarter was a continuing ramp-up to the Pirquitas mill complex where we achieved commercial production on November 1. We are now starting to process sulphide ore to the mill, for which it is designed. We are starting to see results in the numbers from the mine. George Paspalas our Senior Vice President Operations will describe Pirquitas in more detail in his presentation.

Among the highlights the first quarter with the sale of the non conservative property in British Columbia was $15 million. Silvertip sales, is part of the on going rationalization of our portfolio. These funds will augment our exploration and development activities and help to ensure that we are well funded to achieve the objectives of our strategic plan to grow the company.

Returning to the primary services call, our first quarter 2010 results I’d like to turn the call over to Tom Yip our CFO, who’ll speak through our first quarter financial results. Tom?

Tom Yip

Thanks Mike. For the quarter we recorded a net loss of $7.6 million or $0.10 per share, versus a net loss of $2.5 million or $0.04 per share in 2009. This was a first full quarter of operations and as Mike has mentioned we continue to wrap up the mill facilities processing for phosphate and sulphide ores encountered in the pit. Or our operating costs spent our Pirquitas are in line with our expectations. The lower production has resulted in a high cost per ounce of silver produced.

During the quarter we produced 609,000 ounces of silver, and with a drop down of our finished goods inventory from December we sold 907,000 ounces on an average price of $17.43 per ounce. Of the transportation deductions and refining costs, revenues were $11.5 million. Copper sales were $20.04 million and depreciation and amortization were 7.8, for a loss from mine operations of $16.7 million.

G&A costs were $5.3 million, the increase over the prior years relates to additional employees that were added throughout 2009. Severance, recruiting and bonuses are repaid in the quarter. Sulphide compensation was $2 million, similar to the prior year as we continue to amortize the Black-Scholes value of previously-granted options. Interest expense of $2.4 million relates to the convertible debenture, which was previously capitalized to the Pirquitas construction, that is now charged to the P&L. Often in these expenses during the quarter as Mike has mentioned, we sold the Silvertip property in Northern BC for a gain of $13.1 million as well as selling a portion of our share investments for a gain of 2.4. And lastly we had a $6.1 million recovery of future income taxes related to the loss from mine operations.

Turning to the cash flow, we began the year with $27 million and during the quarter we had a net increase of $76 million in our cash balance. For financing activities we sold $6.7 million common shares at a price of $17 per share for growth proceeds of a $114 million and after deducting fees and expenses we netted $108 million.

We used $16.2 million for operating activities, which was primarily the cash loss from mine operations of $9 million, G&A costs of $5.3 million and interest of $3.4. Investing activities include exploration and project spending of $4.8 million. At Pirquitas we paid down construction bills of $16.4 million. During the quarter we spent $3.9 million for refundable value added tax and in early April we filed our first applications with the tax authorities to begin the process of recovering our debt receivable. As I mentioned we sold the Silvertip property and share investments and received cash proceeds of $9.3 million.

We ended the quarter with $103 million in cash so as we continue optimizing our Pirquitas mine we are well positioned to advance our other key projects.

Back to you Mike.

Michael Anglin

Thank you John, George Paspalas our Senior Vice President Operations will walk you through the operational progress of Pirquitas and also describe the work under way at our development projects San Luis and Pitarrilla. George?

George Paspalas

Thanks Mike, and good morning everyone. Operations are progressing well at Pirquitas. We show the open pit here on slide 6. The upper photo shows the pit looking north and we are about to encroach on the valley floor and advance the pit through to join up with the south side. For those with large monitors, you can make out the anticline structure nicely in the north wall of the pit.

The lower shot shows the south side of the pit where we have just commenced mining, sulphide ore. Operationally, the pit is performing very well. Safety and environmental has been excellent and production continues to improve. We have commenced the Phase II push back in early April and the mining is reconciling well with our expectations.

A very pleasing aspect of the pit operations is the sustained improvement in unit mining costs. We are now running at U.S. $1.81 per ton mine for the quarter which is a great result for a small altitude, small high altitude pit and much better than what we had planned to achieve for the year. Our conservative effort to implement long term efficiency improvements and direct cost reduction programs has paid good dividend throughout the year. Work on the cost reduction front is on-going and our objective now is to take the successes of the open pit operation and translate those systems and outcomes to the processing facility.

Turning now to the process side. Quarter one was always planned to be a ramp up period, following the processing of high grade oxide ore in December 2009. We started processing low grade transition material and worked through some metallurgical challenges in obtaining acceptable silver zinc separation in the processing circuit. We have now achieved some success in this regard and the most notable outcome is that Pirquitas is now producing a scalable zinc concentrate from the current installed facility and there is every indication that minimal capital investment will be required to ensure reliable zinc concentrate production through the life of the mine now. As we headed into April, we were confident in our ability to be able to process the transition material and started to feed high-grade material into the plant during the second half of April.

April silver production of 535,000 ounces is more typical of the trend we will see as we start to ramp-up silver production now over the balance of the year quarter-on-quarter, and hence our guidance for 7 million ounces of silver for the full year.

Lower tin grades were realized from the ore in the upper most levels of the ore body and hence the tin circuit was shut down until the tin feed grade picks up. This is purely a timing thing and tin concentrate production is anticipated to commence in quarter three this year. Our tin production guidance for 2010 is now 800,000 pounds.

Cash production costs on a per ounces basis for quarter one are not representative of the year due to the lower silver production and our cash cost guidance net in by-product credits is approximately $10 per ounce for the year. This is slightly higher than previous guidance due to less tin credits in the transition ore. However, it does not account for full by-product credits that we will receive from zinc production later in the year.

So to wrap up, we are seeing ongoing improvement in the operational performance of Pirquitas, the metallurgical challenge of obtaining a zinc-silver separation in the floatation circuit ended up with the added benefit thus creating the ability now to product zinc concentrate with little additional capital expenditure.

Turning now to the San Luis project, the feasibility study for the San Luis project has been approved by Board of Directors and is been provided to Esperanza Silver pursuant to the joint venture agreement. San Luis is a greenfields precious metals discovery. And the feasibility study is focused on the extraction of one high grade vein. The Ayelen vein from within the known mineralized systems on the quite large property package owned by the joint venture. The San Luis system is a volcanic-hosted epithermal quartz precious metal deposit. The Ayelen vein is almost vertical with a strike length of over 720 meters and down dip extension of more than 325 meters.

The true thickness of the vein can go up to 10 meters an average 1.5 or 3 meters wide. Slide 11, shows the Ayelen vein in both long and cross section. The San Luis proven and probable reserve are just over 0.5 million announces, sorry 0.5 million tons with the gold rate of just under 18 grams per ton and silver grade of 446 grams per ton. For contained ounces of 7.2 million silver and 290,000 ounces of gold. This is a really nice project. The ore body is extremely amenable to proven mining methods used extensively throughout Peru.

The ore body is easily accessed from the side of the hill shown here in the long section it also outcrops at the top. San Luis has excellent metallurgy and the high grade gives great operating margins. Slide 13, is a summary of the project, key data on this page of the capital cost to build estimated at $90.4 million average annual production from the mine 68,000 ounces of gold and 1.6 million ounces of silver per annum. Cash operating cost a $14 per ounce of gold when the silver credits are taken into account. The project is financially very robust.

At $800 gold and $12.50 silver, the project delivers an after tax internal rate of return of 26.5% for a net present value of $39 million. Some sensitivities are shown in the graph and as you can see plugging into recent metal prices really cranks the return to the project. So as in San Luis the feasibility study is completed and we are now progressing the environmental approvals for the project.

Quickly updating the progress of the Pitarrilla feasibility study. We have completed the initial mine design now and have initial plant projects drawn up, work from the ground is continuing with some rehabilitation work on the access ramp and baseline data collection for environment requirements. Some additional geotechnical drilling has been completed to provide additional information to confirm some of the pre-feasibility study assumptions. We are progressing well and we are on target for completion of the feasibility study at the end of the year. So that's it for me, back to you Mike?

Michael Anglin

Thank you, George. I would now like to talk about our progress at our other project activities. As we have said last quarter, exploration compliments our production focus is a value creation proposition for our shareholders. Work has now started at the Brucejack project in Northern British Columbia. There we have planned a 24,000 meter drill program. One goal of the drilling is the expansion of the newly discovered Bridge Zone which interpretation suggest may have the potential to be a gold-copper-molybdenum porphyry similar to the Snowfield Project six kilometers to the north.

Other drill targets include the continued testing for expansion of the high grade Galena Hill and West Zones. You may recall one of the results of last years drilling at Brucejack was 4 million ounces of gold measured and indicated and 4.9 million ounce of gold inferred. We will also be testing new areas which have been defined by surface sampling and mapping. This season's exploration program at Snowfield will include an 18,000 meter diamond drill program. We are at the final stages of completing a preliminary assessment for Snowfield and engineering studies and other dimensions of the project are also under way.

We have significant exploration programs planned for Berenguela in Peru, San Agustin in Mexico and Challacollo in Chile, each which has company maker exploration potential. At Berenguela the 5,000 meter diamond drill program is expected to commence in early June to test for the source and depths of the silver-copper resource at surface. At San Agustin a 6,000 meter diamond drill program, we will test in Q3 for additional surface gold, silver, oxide mineralization and potential high-grade and breccia-hosted mineralization depth.

At Challacollo the 5,000 meter drill program will touch the Pitarrilla-style mineralization, as well as copper porphyry potential. This program is planned for second-half of 2010. To conclude, our corporate priorities are to achieve full production and efficiencies at Pirquitas; to advance our key development projects San Luis and Pitarrilla and to maintain an ambitious and well funded exploration program. These are the formal remarks we wish to make this morning.

I will now respond to questions you may have, thank you.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from Anupum Kaiton of Scarsdale Equities please go ahead.

Anupum Kaiton - Scarsdale Equities

Hi, guys, thanks for the call this morning. Had a question about the San Luis project. Is there a chance that you might have any upside to the mine life there or is that one vein and basically as stated right now? Thanks. And I have another follow-up.

Michael Anglin

Let me answer that question. The feasibility study was based on the one vein, obviously the district has great exploration potential and we hope to resume exploration there and see what comes along.

Anupum Kaiton - Scarsdale Equities

Okay. And then so what is the profitability of San Luis right now after tax and at current metal prices?

Tom Yip

Hi Anupum, the project that $800 gold and $12.5 silver is an internal rider returning at 26.5% or NPV of say you know $39 million but if you have a look in the presentation. If you plug in current metal prices you see that, that changes dramatically to the positive side. That information is available on the presentation.

Anupum Kaiton - Scarsdale Equities

Okay. And is that a is the NVP numbers you provide there, are those after-tax numbers?

Tom Yip

That’s correct. There are all after tax numbers.

Anupum Kaiton - Scarsdale Equities

Okay, so if I see here it's about, if it's at spot you're about $109 million at 5% discount rate?

Tom Yip

That’s correct.

Anupum Kaiton - Scarsdale Equities

Okay. And are you guys going to be providing an or is there a PEA or some other type of document that you'll have online pretty soon regarding San Luis?

Tom Yip

Yeah we will be filing a 43101 reporting due course.

Operator

Our next question comes from Andrew Kaip of BMO Capital Markets. Please go ahead.

Andrew Kaip - BMO Capital Markets

Hi, guys, thanks again for this update. Mike, I've got some questions regarding Pirquitas and in particular the work you've been doing on the same concentrate. Can you give us an indication of I guess, first of all, you indicated that you're producing saleable or potentially saleable concentrates. I'm wondering where the silver distribution is breaking out with the production of the zinc concentrate? And then I'm also wondering when or based on the work that you've been doing so far, how do you see the ramp up in zinc concentrate production occurring through the remainder of this year? And are there any additional capital costs that are required to get to full-scale zinc production?

Michael Anglin

Thanks for that question Andrew. George has been looking at this in depth and he can answer.

George Paspalas

Sure. Hi Andrew, first of all the silver distribution, the silver now 90% of the silver made out of Pirquitas’s is reporting the silver concentrate. Depending on the actual metallurgical response of the ore feed that can be a lot higher and then it can be up to 95%. And then on average about 10% goes into the zinc con. The ramp up of the zinc is now purely a function of head growth and silver-zinc ration in the ore feed. We starting making zinc cons in the middle of April, we feel it’s a little early yet perhaps give guidance on what sort of production numbers there are, but the indications we have are that we can certainly take the average ore bodies zinc grade, and make a saleable I think concentrate at the existing facility for non-capital investment. If we start doing kind of start doing kind of higher grade zinc values we may need a small amount of incremental floatation capacity, but essentially minimal capital investment required now for sustained, continuous zinc concentrate production of Pirquitas.

Michael Anglin

Thanks George, did that answer your question Andrew?

Andrew Kaip - BMO Capital Markets

Yes, it does. So, essentially what you are saying when, where are the zinc grades currently? Are they below reserve grade? And are you saying that once you get to sort of a reserve grade that we should expect you to again, zinc concentrate production on a go forward basis? And in the mine plan when do see those zinc grades getting to reserve grade?

George Paspalas

We’re currently running around about 0.4% zinc, but there are, the situation at Pirquitas. We do in encounter some high grade zinc zones, so we can get runs up to a percent of zinc. I think it’ll be fair to say that by third quarter we’re going to start to hit every inch life of mine ore bodies and grades in the mill feed.

Operator

Our next question comes from Haytham Hodely of Salman Partners, please go ahead.

Haytham Hodely - Salman Partners

Good morning everybody. George just a follow up on that. Excuse me, so you’re saying with regards to zinc by Q3 of this year you will be up to life of mine expectations grades, grade lines?

George Paspalas

We should be saying the Q3, the Q3 will be getting the life-of-mine head grade coming in there is obviously a ramp up on the recovery angle as we just aim to make this down we need to refine that so that might be a little longer before we get to a life-of-mine production rate but the head grade with it.

Haytham Hodely - Salman Partners

Sorry. And that life-of-mine zinc grade that's somewhere around 0.8 correct?

George Paspalas

Yeah $0.7 I think.

Haytham Hodely - Salman Partners

Okay. So you think we'll at least see something around 0.7% by about Q3 of this year?

George Paspalas

Yes.

Haytham Hodely - Salman Partners

Okay. And then based on that and based on what you're seeing right now, for the full quarter what would your expectation in terms of production of zinc be?

George Paspalas

It's still early to me to give you that hyphen because you know we are just starting the circuit and we really need to get a handle on recovery so now I wouldn’t like to give any guidance right now.

Haytham Hodely - Salman Partners

Okay. Would you say that that zinc circuit, would that be classified as a separate circuit? I'm trying to figure out will you actually not report it until you feel it's at commercial levels?

George Paspalas

Yeah that’s right and you know that will be a little lighter in the year but it will be a discrete concentrate, it will be. And it's liable that zinc concentrate. It will be sold as a zinc concentrate.

Haytham Hodely - Salman Partners

So if we see something between now and then it's basically just an added plus?

George Paspalas

That’s right.

Haytham Hodely - Salman Partners

And then maybe another question just with regards to your cost per ton, you did mentioned earlier; I think it was at $1.81 per ton?

George Paspalas

Yes.

Haytham Hodely - Salman Partners

And was that number for the quarter or was that the number that you're seeing it right now?

George Paspalas

That’s not, that’s the average for the quarter.

Haytham Hodely - Salman Partners

And that's it for Q1. And what are you actually seeing so far in the second quarter, April - May?

George Paspalas

In line with that and we are hoping we can maintain that cost profile now and we are doing a lot more and trying to even improve that. Gets a little more challenging to get a lot bit of that as you get deeper in the pit but dollar I think is a good number for an environment like this.

Haytham Hodely - Salman Partners

Right. No, that is a good number. What was your life-of-mine plan after that?

George Paspalas

They were $2.

Haytham Hodely - Salman Partners

That was $2 even actually higher maybe 2, 2.50 something like that?

George Paspalas

Yeah we were 210 I think on ore and 2 bucks on waste. The blended number was around 205.

Haytham Hodely - Salman Partners

Ok that’s fair enough and then how are your other costs tracking your processing and G&A that kind of thing?

George Paspalas

Well the cost control at the mine is really, its good and our total spend down there is bang on with our expectations and in line with that budget. On the unit cost basis, on a unit basis, it’s a little down because of those production issues we had in the first quarter but we’re through that now. So we have to see it incoming the line on the unit cost basis. But on a total spend basis, its right where we wanted it.

Haytham Hodely - Salman Partners

So that $1.81 we talked about, that's per ton moved, is that correct?

George Paspalas

That’s right.

Haytham Hodely - Salman Partners

And what’s your sort of ratio right now George?

George Paspalas

Currently, we’re into that push back. Its running about 7. So throughout the remainder of this year, we would expect it to average? I think 7 for the balance of this year, 7 to 7.5 is a good number.

Haytham Hodely - Salman Partners

And then next year what does it look like at that point?

George Paspalas

We’ll start to trim off a bit from that. Maybe take one off that.

Haytham Hodely - Salman Partners

Okay, so somewhere around six to 6.5? Okay, fair enough. And then the last question I guess maybe on the financial side, do you still hold the shares that you received from Silver Corp as part of the Silvertip sale?

Michael Anglin

Yes we did.

Haytham Hodely - Salman Partners

Ok and where did those show up in your balance sheet?

Michael Anglin

They are in the marketable securities online cable.

Haytham Hodely - Salman Partners

So under current assets then, is that correct?

Tom Yip

Yes.

Operator

Our next question comes from Jorge Beristain of Deutsche Bank. Please go ahead.

Jorge Beristain - Deutsche Bank

Good morning, gentlemen, had two questions. One is on the cash cost guidance that you gave in the management discussion papers. You mentioned $16, I believe, at Pirquitas on an all-in cash cost and I think it said inclusive of tax, and I just wanted to understand a little bit the nomenclature there if we should interpret that as being a pre by-product of cash cost as we can kind of infer on the zinc items you've given roughly $2 of by-product credit for 2010. So, I just wanted to understand if we should be shooting for a $14 net cash cost for 2010? That's my first question.

Tom Yip

That the total guidance there that you referred to includes five credits and there’s very little zinc in there and there’s a little bit of tin.

Jorge Beristain - Deutsche Bank

Sorry, I meant the tin by-product credits this year. So the $16 you're saying is inclusive of by-products at this point?

Tom Yip

That’s correct and what it has been in that number is the refining cost and relatives and export taxes.

Jorge Beristain - Deutsche Bank

Yes, that was going to be my next question on the 10% contacts from Argentina, so that's in that number already?

Tom Yip

It is.

Jorge Beristain - Deutsche Bank

And so just simple math, if we were to assume a $16 silver price for 2010 and a $16 all-in net cash cost that you're quoting your EBITDA would be $0 at the mine level and that's before SG&A and R&D?

Tom Yip

That would be correct.

Jorge Beristain - Deutsche Bank

Okay. My other question is just following up just to clarify, that guidance, that was given for 2010 or 2011? And then also if you could just update us on the status of the Argentine concentrate tax, if that's going to be something that on a go-forward basis you take the charge for and basically it remains to be sorted out at a future date or if it’s something that your differing taking the charge for and it remains to be sorted out at a future date?

Tom Yip

Yeah certainly the accounting over at that we have taken a conservative view and pretty much expensed and included in our cost. With respect to what we do going forward is to the tax itself Joe can pick up on that.

Joe Ovsenek

On the tax side some of the mines that work through the course on having the tax declared, void. They have had success and we are looking to how we can follow-up. So I would expect to hear something on our position in the next quarter.

Jorge Beristain - Deutsche Bank

Okay and then lastly just to talk about on a gross level your cash flow outlook you obviously have about a $100 million in the bank right now but your cash and burn rate on San Luis which you quoted at a $90 million CapEx plus some R&D and SG&A basically if Pirquitas will not be contributing significant cash flow in the next one or two quarters until the zinc circuit kicks in. I was just wondering if you would contemplate another equity offering I understand that you still have some ability to as you share based on your filings.

Joe Ovsenek

If we do have room on our shelves issue shares however we are expecting Pirquitas start delivering in the third quarter.

Jorge Beristain - Deutsche Bank

So would you at this point be able to rule out the need for further equity issuance or do you think that will be just subject to the ramp at Pirquitas and/or the CapEx at San Luis. I am trying to understand if you can do San Luis according to your internal projections without the need to further tap the capital markets?

Michael Anglin

I think the general answer yes, we are looking at all forms of being able to finance San Luis and the other projects. Obviously can't discount equity raising but I meant there are a lot of other options I think are more attractive to us.

Operator

Our next question comes from Kwan Lunz-Intaglo from Scotia Capital, please go ahead.

Kwan Lunz-Intaglo - Scotia Capital

Yes, sure, thank you. I'm on for Trevor Turnbull. A couple questions on the CapEx. What do you expect to spend for the rest of year on Pirquitas and Pitarrilla?

George Paspalas

The signing capital expenditure at Pirquitas for the rest of the year is probably a balance of about $5 million and we are just spending on the Pitarrilla feasibility study to circle about $9 million.

Kwan Lunz-Intaglo - Scotia Capital

Okay. And San Luis, let's say after you meet with Endeavor, what will be the permitting time line and when do you think you'll be spending cash on that CapEx?

George Paspalas

Yes, the next step on the permitting is the filing of the environment impact statement which we are just getting the trends that are now ready to go and indications from the regulators in country that's typically a nine month process for that to be approved.

Joe Ovsenek

We also have to get the land access agreements in place for the communities and so by the time that’s done the environment impact statement result decision process that we have in this year in the joint venture agreement we will be looking at work in probably the first-half of next year but obviously got to refine them a bit over time.

Kwan Lunz-Intaglo - Scotia Capital

Are you guys still doing some drilling around San Luis?

Joe Ovsenek

No. We’ve completed the drilling and we are now going to this phase of presenting the study and getting ready for the next phase.

Operator

Our next question comes from John Tumazos.

John Tumazos - Very Independent Research

Could you take a guess as to what the range, high or low, might be for next year’s capital spending and repeat this year’s capital budget?

Michael Anglin

The obvious answer is no. I think we have some commitments, we are always going to fund exploration, we have some project pipeline to fund. We have the cash flow from Pirquitas and our need to look for other financing incentives but not at this point in time. It’s far too early to do that.

John Tumazos - Very Independent Research

What’s this year’s budget?

Tom Yip

In terms of CapEx it’s fairly minor at Pirquitas as George has mentioned. The spend on the projects is in the order of 30 million to 40 million depending on success of our exploration programs.

Operator

Our next question is a follow-up from Andrew Kaip of BMO Capital Markets.

Andrew Kaip - BMO Capital Markets

Just one follow-up question, on our questions about Pirquitas and the Zinc concentrate can you give us an indication based on where today what that concentrate grade is looking like and then also what the recoveries are?

George Paspalas

Yes sure Andrew, again as I said we’ve been into this for a month now. We’ve shown that even within that month we can hit a high 40 to 50% con grade, 40 to 50% of zinc which is what the feasibility estimates were. And we approach a 50% recovery which is what the feasibility study estimates where so even after month we are hitting some of those numbers quite quickly so we are reasonably confident that we can bring in something 50% and 50% recovery.

Operator

Our question comes from Chris Lichtenheldt of UBS please go ahead.

Chris Lichtenheldt - UBS

First, just wanted ask, in MD&A you said that there was also some of the challenges you've retested, done some more metallurgical testing on the sulphide ores. Can you describe a little bit of what you found in those new tests in terms of recoveries?

Michael Anglin

The biggest I guess issue we found was the sulphide and oxide together in transition created the challenge for us to separate the silver and zinc apart and that’s where we are doing a lot of testing to end up with the silver concentrate that’s so high in zinc that we get penalized for the silver content and get no recognition for the zinc or make a zinc concentrate that’s so high in silver that we again get penalized for the silver.

So all of that test or the majority of that test was about how do we get a separation between the silver and the zinc and we have now made some great head way in achieving that.

Chris Lichtenheldt - UBS

Okay. And then does that help the actual recovery of silver?

Michael Anglin

It does.

Chris Lichtenheldt - UBS

Once you move to sulphide, do you have any sense of what that looks like?

Michael Anglin

Yes, as well as we get further and further through transitional materials, we are getting more and more like the sulphide ore and our recoveries starting to ramp up and we are pretty happy now we are starting to get more regularly into the 60s and 50s that we were in the past which means we are heading towards where we need to get to with the sulphides.

So, its quite happening. It’s seeing what we are seeing now with the more sulphidic transition and then going into sulphide a little later in the quarter.

Chris Lichtenheldt - UBS

Okay, just a couple more questions actually. The cash cost guidance we were talking about earlier, I might be mistaken, is it $14 all in or is it $16?

Tom Yip

We have to disclose $14 already including the SS&R and royalty exploration taxes.

Chris Lichtenheldt - UBS

Okay, so it's $14. And then in the guidance of $14 cash cost all in and the 7 million ounces, I don't know if you have this handy but can you tell us what assumptions were made on the production side in terms of throughput and grades and recoveries so we know where the bar is set relative to where you are now?

Michael Anglin

Well, the answer is 7 million ounces and then working we don’t have that with us Chris. That’s going big.

Chris Lichtenheldt - UBS

But obviously you're expecting an improvement in recovery implied in that 7 million, right? That's fair to say?

Michael Anglin

Yes, as we get there towards more sulphidic ore, we are seeing the recovery coming up. I mean the plant is operating at it’s ninth life capacity. Is there a turning to 4,000 ton a day. But no that numbers not in front of us.

Chris Lichtenheldt - UBS

And off the top of your head no idea of grade there, as grade's moving around a bit as you move to sulphide it might be a little better than first quarter?

Michael Anglin

Indefinitely.

Chris Lichtenheldt - UBS

Yes. Okay, great. Can you remind us what the spend is at Pirquitas then? You said it was sort of on budget this quarter, what is that number?

George Paspalas

We spend about $6 million US a month for the property.

Chris Lichtenheldt - UBS

Okay, and that's all being expensed at this point, right?

George Paspalas

Correct.

Chris Lichtenheldt - UBS

Okay. And then maybe just the last question for Tom, on the investing activities for the month, the cash used or PP&E Mineral Properties spent almost $20 million, can you just describe some of the big pieces of that, what the breakout was?

Tom Yip

Well this piece was of paying down of Pirquitas construction Bill. And then the other component was the $4.8 million which was spent on our properties. The biggest piece being San Luis and Pitarrilla.

Chris Lichtenheldt - UBS

Right, okay. And then actually, sorry, maybe one last question. You spoke a couple times about potential for asset rationalization, you said your priorities are obviously Pirquitas, San Luis and Pitarrilla. Does that mean anything after that you'd consider divesting or do you have a priority list in terms of what maybe you look at developing after those three or selling? Do you have any more comments on the other projects?

Michael Anglin

Not in this stage, we’re sort of reviewing all our options, and the world is changing rapidly and some things can quite attractive and may be something’s not quite so attractive.

Chris Lichtenheldt - UBS

Okay. So it's just an ongoing work in process, there won't be a point where you say these are the assets you want to keep versus sell, you're just always looking at opportunities. Is that the?

Michael Anglin

That’s a correct interpretation.

Operator

(Operator Instructions) We have a follow up from Haytham Hodely of Salman Partners.

Haytham Hodely - Salman Partners

Just a follow up. That seven million contained ounces, is that correct, George?

George Paspalas

That 7 million ounces produced.

Haytham Hodely - Salman Partners

So is that payable then?

George Paspalas

No, that's produced.

Haytham Hodely - Salman Partners

So that's contained in concentrate?

George Paspalas

Yes.

Haytham Hodely - Salman Partners

Okay. And then with regards to management, what's happening on the search for a replacement for Bob?

Michael Anglin

The search is going well but it's one of these things where you don’t put a time line out when we got the right guy and pull a taxi, I mean there will be an announcement.

Haytham Hodely - Salman Partners

Okay. I'm assuming that you're looking for somebody who's had more operating experience, is that fair to say?

Michael Anglin

We are looking at bunch of great candidates, in an international search and when we finally we made up our minds and answer will come out.

Operator

I am showing no further questions at this time.

Michael Anglin

Right well thank you very much and look forward to the next call.

Operator

Ladies and gentlemen that does conclude today’s conference, you may all disconnect and have a wonderful day.

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Source: Silver Standard Resources Inc. Q1 2010 Earnings Call Transcript
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