IMPACT Silver's (ISVLF) CEO Fred Davidson on Q2 2014 Results - Earnings Call Transcript

| About: IMPACT Silver (ISVLF)

IMPACT Silver Corporation (OTCPK:ISVLF) Q2 2014 Earnings Conference Call August 27, 2014 10:00 AM ET


Jerry Huang - Manager, IR

Fred Davidson - President, CEO and Director


Just a reminder today’s conference has being recorded.

Jerry Huang

Good day ladies and gentlemen. Welcome to the IMPACT Silver Corp. Second Quarter 2014 Period Ending June 30, 2014 Financial and Production Results Conference Call. Before we begin, we would like to go over our discloser statement followed by Mr. Fred Davidson’s comments on the quarter’s results and finally followed by a question-and-answer period.

Certain statements of the following conference call regarding IMPACT’s business operations may constitute forward-looking statements. Such statements are not historical facts but our predictions about the future which inherently involves risk and uncertainties. It may cause our actual results to differ materially from those contained in the forward-looking statements.

I would like to now turn over to President and CEO of IMPACT Silver, Mr. Fred Davidson.

Fred Davidson

Thank you, Jerry. Well, needless to say the financial statements seem to reflect the general market for us over and overall. Few people really recognize that over the last 18 months the Silver price has fallen from $30.87 down to June 30th price of $20.87. And needless to say that’s made a fairly dramatic impact upon the revenue for the quarter. The quarterly revenues were $2.6 million down from the comparable $3.8 million of last year. And as I say, as a principal reason being the price but secondarily there was a slight decline in grade for the quarter.

We had incurred a loss of about $1 million for the quarter, which was an improvement over Q1 but obviously it wasn’t anywhere where we’d want to be for the comparables in going forward. Mine operating losses before amortization and depreciation of 0.4 million compared to 0.6 million in earnings for the comparative period. What really changed things for us, for the quarter was the one we have sold 2.6 million share of the stock Defiance we had previously optioned the Zacualpan mill from us.

And the net proceeds of $321,000 recorded a gain on our income statement of 213,000. We substantially reduced mineral property expenditures down to 0.7 million but it still had an impact of taking cash down to 1.7 million in total. We’re still free of debt, we’re running very tightened in terms of operations and as a result we have kept our working capital to $4.4 million again down to 6.9 million from December. It’s been a pretty very rough quarter. In fact it’s been a pretty rough 6 months.

Silver production I would say it was down slightly because of grade and impart because of slower, slight lower tonnage of the period. And the average mill feed as I said went from 163 down to 142 from those two comparative periods from last year and this year. Well, that is up slightly from the first quarter of this year. So we are starting to come back in grade as we did into some of the better producing mines in the district.

Total tonnage for the first half of the quarter was -- first half of the year was 78,790 tons which is higher than last year’s 75,175 but as I said the quarter’s production was slightly lower. Overall, what we’re seeing if you will is the addition of certain tonnage coming out of the San Ramon which has always been historically one of our highest producers and we’re starting to see some more production coming from Mirasol which is our newest producer. Both of them are particularly high grade.

And what we’ve done over the last three months in fact six months has made a very conscious effort to aim for the higher grade material in the mine and mines until we’re reducing cost and in fact one of the things you see for the quarters, I was mentioning is that the operating cost have risen proportionally part of that reflects settlements or layoffs that we’ve conducted in the second quarter and part of that unfortunately reflects the fact that we’re seeing union settlements for an increase of about 6% and that was a retroactive adjustment.

The overall performance for the quarter then was unfortunately we call it satisfactory but not where we’d like to be and we’re going to continue to make an effort to raise grades, especially in this current pricing scenario. And we’re going to continue to pressure on our costs and our capital expenditures for the period.

Jerry, maybe we should go to some of the questions that were raised.

Question-and-Answer Session

Jerry Huang

Okay. Thank you for the review of the quarter, Fred. We’ll now go to our answer-and-question period where some of the investors of IMPACT Silver have sent out questions and I just want to address each concerns and issues over the quarter. So question one, Fred. With silver prices depressed still below $20 an ounce what’s the realistic timeframe for a while to get to start seeing higher ore feeds?

Fred Davidson

That’s a, it’s a good question and it’s obviously one we’re very concerned about. We are working on it as we say there was a slight increase in grade from the second, from the first quarter into the second quarter as we bring on the Mirasol as we hope to open up more and more of the San Ramon which has been a traditionally higher grade mine, we’re going to see those grades rise. Unfortunately development in a case like this takes time.

In the meantime, we’re seeing, well is that things like Oscar Cuchara which does have higher grades also has a fair degree of development bucked with it. So we’re really trying to establish what the ratio between development bucked which tends to be lower grade versus the stope material which tends to be higher grade. What that ratio is going to be, obviously we want to keep it as high as possible in terms of stope development. We just haven’t had enough experience in Oscar Cuchara to tell. But I would say going forward for the balance of the year we should see incrementally increasing grades and we’re certainly going to try and push it higher faster than we would normally, even prudent money.

Jerry Huang

Thank you, Fred. With cost increasing past revenues on per ton basis low quarter, what specific cost control measure that you got earlier, have we have in place for impact?

Fred Davidson

Yes. Well, I guess the very first one we’ve done is we did some layoffs almost about 10% of the total staff, it’s sort of a standard everybody assumes, you could just layoff people and it solves the problem. No, we produced each drill or each worker if you will and effectively produces ex number of tons a day, you can fill the gap when you lay off some people, well when you layoff too many you can’t increase that productivity dramatically. So and labor is our biggest single cost. We have gone back to a number of our suppliers, we’re pressing them on pricing and we are getting a fairly positive response. We have cut back on our exploration dramatically. We were fortunate in that last year in a good pricing environment, we conducted a good portion of our expiration that we needed over this year and last, it’s identified a number of targets, Mirasol being the case in point. The discovery of San Ramon depth was another one both of those has result, direct result of their exploration we’ve done over the last year. So it has given us a bit of breathing room. We expect to see our exploration cost remain and quite low for the balance of the year. We, as to say we have reduced labor cost, pointing that we’ve also had a 6% increase in wages. So we’re doing what we can, I think at this point in time we’ll have to review where we go from here over the next 6 months, but I would say we’ll continue pressure in pricing.

Jerry Huang

Thank you, Fred. One more question, while impact remains debt free. The cash balance has been dropping significantly quarter-over-quarter. Do we have anything else in the capital markets, so we’re looking forward to in terms of joint ventures or any sort of partnerships that can alleviate the position?

Fred Davidson

Well, we have been doing, just looking at some of our incremental projects and in case -- is that could take us for instance. We’re Defiance we had to drop the property we’ve certainly but looking at situation where people would prepare to auction it. It’s a tight market for everybody and we have discussing that with at least two groups right now. We have a situation where we’re trying to get other people to participate in other projects or alternatively some of the peripheral property we have overall. And of course, we’ve had in this market those who understand what we have they’ve been offering us the opportunity to even finance with them at the current price and time.

Jerry Huang

Excellent, Fred, could we get a small updates on the Capire mine and the potential return configuration for gold and copper feed?

Fred Davidson

Yes. At the current moment because we want to keep, as it cope and grade up we’re taking that the, from a higher level the Carlos Pacheco and feeding it to support them. We would rather put through less and higher grade than more and more grade and if we take the Carlos Pacheco material over the Zacualpan mill, we’re going to across, a probably a decline in the grade at Zacualpan so at this point in time well maybe the same.

Jerry Huang

Thank you. In terms of the EGA mine it’s been adding to ore feeds this quarter and the production has been up from zero to almost 15% with the quarter. And what does that mean for the overall production mix at the Guadalupe mill?

Fred Davidson

Yes. EGA, it’s been interesting, EGA we’ve had for about 6 to 7 years, it provides us unique ore that allows us to improve the quality of our concentrate in that it has a higher lead, zinc con attached to it and to make the requirements for the lead, zinc to be acceptable but the smelters we need more leg, we actually have a situation at times where we have too much silver and not enough lead, so we EGA ore to bring the lead up to global limits.

Jerry Huang

Excellent, it sounds like IMPACT has a good flexibility in terms of ore feeds to accommodate that, with the needs of our smelters. In closing any other further comments for the quarter looking forward, Fred?

Fred Davidson

Well, at this point I think we had a tough year, as no question about it. I think we’re doing what we need to do to survive it. And I think the theme of the, that the whole group is survived and thrive. And we are starting to see that those results are coming through with lower, it will be lower cost in the future, hopefully slightly higher grade and hopefully in the current pricing environment, we’ll see some relief on it over the next six months.

Jerry Huang

Thank you all of joining us, in reviewing our second quarter 2014 financial and production results for IMPACT Silver. We look forward to our next quarter’s call with you. If you have any questions pleased submit your questions or give a call at the office, our Web site at Thank you for your continued support of IMPACT Silver. Have a great day.

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