Revett Mining Company Inc. (NYSEMKT:RVM)
Q4 2013 Earnings Conference Call
March 28, 2014 11:30 AM ET
Ken Eickerman - CFO
John Shanahan - President and CEO
Doug Miller - VP of Operations
Spencer Lehman - Private Investor
Good morning, my name is Sharon, and I will be your conference operator today. At this time, I would like to welcome everyone to the Revett Mining Company Inc. Year-End Review Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question-and-answer session. (Operator Instructions) Thank you. Mr. Ken Eickerman, CFO, you may begin your conference.
Thank you, Sharon and good day everyone. And thanks for joining our 2013 year-end financial and operations conference call. I am Ken Eickerman, the CFO and joining me today is our President and CEO, John Shanahan; and Vice President of Operations, Mr. Doug Miller. Before we begin, I would like to note that this call contains forward-looking statements that are made pursuant to Safe Harbor provisions of the Federal Securities laws. These statements involve risks, uncertainties and assumptions that may cause actual results to differ materially from those anticipated.
Listeners to the call are advised to review the risk factors contained in our most recent annual report on Form 10-K for descriptions of risks, uncertainties and assumptions related to forward-looking statements. Please note this call is intended for investors and may not be reproduced by the media in any part or in whole without prior consent. At this time, I'll turn the call over to our President and CEO, John Shanahan, who will recap the results for the 2013. Following his remarks, Doug Miller will provide an update of operations, and then I'll walk you through the financials, and then John will wrap it up with our outlook before we finish with your questions. John?
Thanks, Ken. Welcome. My comments this morning I think will be reasonably brief. I think we won’t go into a great detail in a recap of 2013 but what I would like to first and foremost say is welcome to our very first call as Revett Mining Company. We are a U.S. company which became effective in mid-February this year and that process really did streamline us as a company with all our assets and employees that are in the U.S. I will be happy to take any questions. We will discuss this a little bit further during question time but it was the quick thing for us to do and I am glad that it’s behind us. And the change in jurisdiction and of course came with a name change to Revett Mining was early quite subtle. It was something that we did preemptively just hoping there was going to be no confusion between the Canadian entity Revett Minerals and the U.S. entity Revett Mining.
As it turned out it was seamless and straightforward but I suppose it does better reflect what we do. We are a mining company and speaking of which, I suppose that’s a good segway to talk about where we are as a company today. I won’t jump too far ahead, Doug Miller, our VP of Operations will provide a more detail report of exactly where we are in our employee redevelopment today. But what I would like to do is really provide a snapshot of where we are today as a company. And I am going to break it down into a couple of areas here. And three critical things to remember here, we own L assets the Troy Mine and operation went back up and running will provide us cash flow and that all important operational base in Northwest Montana.
We own Troy outright, 100%. We also own the Rock Creek project, 100%. It’s an exceptional deposit and closer to much higher grade and but this is really more mineable deposit than Troy. But we do need to complete permitting but taken those together is a very good combination. They close in proximity, they have, they share the same geology and geochemistry and those same mining experience is needed to operate both efficiently. So, our investment today in Troy, our reinvestment today in Troy is also an investment in Rock Creek. We must say that we own those assets outright, today we have no debt on our books apart from some capital leases and at the end of March I think they are under a $1 million in total, those capital leases of what we do and we will continue to do operational.
And we have other assets, we have cash following recent private placement this week probably at the end of March, we will be sitting there with just over $9 million in cash. We have other assets. We have mobile equipment and we have non-mining lands to the tune of around $15 million and so when I say non-mining lands, I mean these are lands that we purchased and have identified primarily for mitigation needs at Rock Creek. Once we are through the permitting process, they are critical lands to us and we need them. We just don’t need them tomorrow but if you look in total of where we are as a company, we do have some very important assets. Lastly of course, we have an experienced workforce with those critical skill sets that will get us back to mining profitably and safely at Troy. And it’s that skill set that’s going to enable us to hit the ground running on day one at Rock Creek. We also had very limited downside exposure apart from the capital need that we have at the moment to complete and gets Troy running backup in fully running there is not a lot of downside.
When I talk about cash that we have on hand of $9 million that is not including $6.5 million of cash that we put away at restricted account for eventual Troy reclamation now if we decided, hey we don’t want to minus we going to close Troy down tomorrow we would use that $6.5 million we would not have to dip into general process but of course that’s not what we’re going to do. But just one people to know that there is very little downside on that path and across the Rock Creek we really had spent the largest portion of our requirements for proliferating (Ph) after permitting. But we still have ongoing spending and it varies but it’s probably averaging after the balance of this year at about $100,000 a month. But those major items, the big ticket items like the 3D water model and the essential geochemical reports have all been completed.
So clearly our focus now is to get Troy back up and running and to complete Rock Creek permitting. I believe and Doug will talk more about it but we remain on target our focus here is to restart operations in the fourth quarter or restart production in the fourth quarter. It will initially be limited to about 1,000 tons per day as we ramp up. But we still from there we still have ongoing development needs to complement redevelopment efforts and getting access to the high bids, so wont’ really be into that mid-2015 that we would hit that full production capabilities. At today’s middle process Troy is remains cash flow positive. But I think like most people on this call we really do believe that we will see high metal prices as we head to the balance of this year, and we want to be part of that. So it goes really too far.
We led our work to complete the next leg of our financing needs but I want to be very clear here with everybody we are not going to do something that’s silly that is going to be a noose around our neck not something that we’re going to sit down we’ll have Troy back up and running and really do Rock Creek and all of the [indiscernible] why did we do this we should have done something simpler and we’re committed to doing that. Clearly to finish off this next financing need we would like to do something fairly simple or straight forward date or even something convertible but we’re not going to do some type of financial structure that we have timely a way after the next five years and it for all the hard work that we do and not getting for the damage of it.
And of course I want to focus here is to complete permitting at Rock Creek. It’s a long process and we are near in the end. But the process of now working through the drops and the preliminary drops of the FEIS with the Forest Service reviewing its cooperating agencies and then having a supplemental EIA to out for public comment does take time. But we do clearly see it all coming together. And I think for our shareholders and stakeholders and I think it will needs to remember I think you should look at mining projects around the country in the U.S. There are significant hurdles that need to be overcome and they mainly relate to the Clean Water Act where the EPA enquiry or engineering has reviewing over site or the Endangered Species Act which requires a biological opinion to show that an operation is not going to repeat the recovery goals of actual species.
In our case of course the biological opinion is the critical document that is needed. Now our biological opinion was first issued in 2001 it was challenges and reissued on two occasions and it wasn’t until 2011, 10 years later, that that biological opinion was upheld by the Ninth Circuit Court of Appeals, a ultimate court in the U.S., that ruling, a very clear ruling was not challenged again. And so that biological opinion is rock solid and won’t be challenged again. And we feel that that is the significant portion of permitting that is out of the way. We do know that our processing is one of the cleanest operations that you are going to find in the country. We’re extremely proud of our small footprint and our word of quality at Troy and Rock Creek will do the same that’s why we know as detailed as it is as long as the process is as long as it is that we have a project that is going to be a project that is permutable and will stand the test of time.
With that I’d like to pass this call over to Doug Miller. Doug is based at the Troy mine but he is Vice President of Operations with both development of the site at Rock Creek and also operations at Troy. Thank you, and Doug?
Thank you, John. First, I’d like to start with our [indiscernible] performance. From past 18 months, we’ve gone with all the reportable acts than all the lost time access and that’s in excess of 550 days or 350,000 man-hours. As far the dual decline into the I Bed first of all accessing the North C Bed to get our initial production or that limited production, as John pointed out, in the North C Bed fourth quarter. Those two dual drifts are progressing on budget on target, all in advance and also in cost. We are in excess of about 3600 feet in that drifting process now. One of the first structures that we’ve encountered just last week was projected from middle courtside above us, so we move Arizona intersect that when the process of going through, it now should be pretty, looks like it’ll be a very limited problem for us, nothing that we didn’t anticipate. And the next major structure would be the deep haul (Ph) which is probably about 275 to 300 feet out in front of us.
The target to interest the C Bed, North C Bed ore body is in the third quarter, production would be in the fourth quarter of this year. As John pointed out, the decline would continue to spiral down and intersect the I Bed in the second half of 2015 early in the second half of 2015. We’re in the process now where we have contractors here extubating borehole for to be used for ventilation and secondary escape way for these I Bed and North C Bed. It’s completed the pilot hole and are today in the process of back rimming the borehole, the 10-foot diameter borehole.
Thank you for your time and turn this back over to Ken Eickerman now.
Thanks, Doug. Everybody on this phone call knows that we suspended mining operations Troy in late December 2012 because of ground conditions and consequentially we did not mine any order during 2013. So a comparison between our 2013 results and 2012 results is not meaningful therefore I’d like to discuss other items financial issue. At December 31, we had cash on hand right at $8 million and working capital of 10.6. In that 10.6, it does not include our available for sale, security. During the first quarter of 2014, we’ve liquidated these securities and increased our available cash by over $800,000. In addition, we settled an insurance claim on some damaged mine equipment and we’ll be receiving a check later on today for approximately $2.3 million.
In addition, in late March of 2014 and as John mentioned earlier, we completed by the placement of our common shares and stock purchase warrant for approximately $3.4 million. With this, our current cash position is higher than our 2013 yearend balance. And in during 2013, we continued our efforts to move the Rock Creek permitting forward I would add the expense over 1.2 million for the SESI contractors. For 2014, we signed to continue this financial commitment. I’ll turn it back over to John for some final comments. John?
Well, thanks, Ken. I really don’t have any final comments other than, I think as everyone knows, we made a decision to reinvest in Troy and we going to continue doing that and we’re very pleased with the progress to-date.
With that, I think we’ll turn this back to operator and take some questions, if there are any. Thank you.
(Operator Instructions) Your first question comes from Spencer Lehman, Private Investor. Your line is open.
Spencer Lehman - Private Investor
Good report. Just here you’ve mentioned the price of metals, this copper had been little bit of surprise this year in the downside, how do you feel about that? And what do you look forward to hear in copper prices?
My personal view Spencer is I think copper has been a little bit weak on the back of Chinese financing in Chinese news and the revelation which I think the market already knew that there was copper stocks in China. But I think sort of that as I think if you could take it all out on a global view, we still remain very convinced that there are the copper units been produced that’s needed to sustain growth. And it’s very hard for those production rates that are forecast, if everyone meets those it’s a great day. But as we know in mining not everyone meets those forecast, and I think some of the great clouds handing over the natural resources sector at the moment and particularly that may attribute to begin a shortfall in production on copper units particularly, what we’re seeing in Indonesia at the moment with export taxes and requirements smelting within the country, I think parts of Latin America or would probably what will be somewhere some labor disputes and a whole host of other reasons. I still think we’re going to see higher copper prices in the next year or two.
And silver, a little bit different story of course it’s so tight to gold. And then so we forced to look at the gold market and when you see pretty much the price of the gold very close to or approaching that cash cost of operating and you feel that is little very downside there. I think with low inflation rates around the world and still the ability and the desire for the bank particularly central banks in Europe to see a cash infusion and pending the monthly policy. There is a little bit of life left in the gold and silver markets. So not as easy as for us to see because it is such a macroeconomic point of view, but looking just at the copper industry and we still feel that we’re going to get to see process back toward $4.
Spencer Lehman - Private Investor
Looking forward to the opening of choice, where would you – would have a breakeven for copper a ballpark?
When we back up running fully we’re looking at around 275 for copper and we’re looking at probably just over $17.5 for silver. It varies of course Spencer at 1000 tons per day cost higher because it’s a volume process for us, but one would back fully up and running with sitting at around that 270 copper and about 17.5 a little bit higher, 17 and 17 on so far.
(Operator Instructions) We have no further question at this time. I will turn the call over to the presenters.
Well, thank you in closing, once again just appreciate everybody’s interest. And we know what we need to do. We are always available, if there are questions. A good day for us is going only in this fourth quarter when we reach out that Troy now. But let everybody know that no one is taking their foot off the gas pedal. We’re committed to do what we need to do.
Thank everybody for their time and appreciate it.
This concludes today’s conference call. You may now disconnect.
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