Claude Resources Inc. (NYSEMKT:CGR)
Q4 2015 Earnings Conference Call
March 31, 2016 11:00 ET
Marc Lepage - Manager, Investor Relations
Brian Skanderbeg - President and Chief Executive Officer
Rick Johnson - Chief Financial Officer
Don Blyth - Paradigm Capital
Ken Arnold - Private Investor
Joseph Hopper - Private Investor
Adam Melnyk - National Bank
Good morning, ladies and gentlemen. My name is Sally and I will be your conference operator today. At this time, I would like to welcome everyone to the Claude Resources Fourth Quarter and Annual 2015 Earnings Conference Call. [Operator Instructions] Thank you. I will now turn the call over to Marc Lepage, Manager of Investor Relations. Please go ahead.
Thank you, Sally. We would like to thank you all for joining us on our fourth quarter and full year 2015 earnings call. On the conference call today, we have Brian Skanderbeg, President and CEO and Rick Johnson, our CFO.
Please note that today’s presentation is located on the homepage of our website. Also, you can download and view our full year 2015 management discussion and analysis and financial statements located on the Investors page under Financials and Filings. During today’s call, we may use forward-looking statements which are based upon current expectations and involve risks and uncertainties. For further information regarding forward-looking statements, please refer to our cautionary note located on Page 2 in today’s presentation.
I will now turn the call over to Brian Skanderbeg, President and CEO.
Thank you, Marc. Hello, everyone and thank you for joining us as we review our 2015 operating and financial results and discuss our outlook for 2016. First, I want to acknowledge the outstanding performance of our team in achieving safe production. In 2015, we set a new gold production record and more importantly, we did it more safely than ever before. Our safety and environmental performances are outstanding and I am very proud of our employees and their accomplishments. Congratulations to you all and keep up the great work.
I will now start on Page 3 of the presentation with key highlights from 2015. 2015 was a year of records. Our focus in 2015 remained on production growth, cost containment and free cash flow margin with our operations team exceeding production and cost guidance for the second consecutive year. Most importantly, we achieved record gold production and earnings while delivering the best safety and environmental performance in our history.
Gold production in 2015 of 75,748 ounces was a new record for Claude driven by higher grades averaging 8.82 grams per ton of gold from both the Seabee Gold Mine and the Santoy Mine Complex. Higher revenues and lower unit costs have led to very strong net earnings of $32.3 million, or $0.17 a share and our fair leading cost performance continues to improve. In 2015, our total cash cost per ounce was CAD6.72 or $525 and our all-in sustaining cost per ounce were CAD11.22 and $8.78 per ounce. The strong operating and cost performance has led to an increase in cash and volume by $28.6 million to $39.8 million, which exceeds our long-term debt of $19 million. Again, 2015 was the year to remember and we are product of our accomplishments and confident that this performance is sustainable.
Now, on to Slide 4, our ability to set new production records over the last two years has been driven by new mining – mining new and better ore bodies and by changing the way we mine them. This increase in Santoy Gap ore and the positive results we are seeing from the Alimak mining continued to exceed our expectations. We ended 2015 with a very strong fourth quarter. During the quarter, gold production of 18,340 ounces was driven by mining higher grades of 8.99 grams of gold per ton, representing a 37% increase from the fourth quarter of 2014. Mill throughput of 65,950 tons and recoveries of 96% were also very strong during the quarter.
For the year, we exceeded revised guidance and produced 75,700 ounces of gold, a 20% increase over 2014 and a 73% increase from 2013. The improvement year-over-year was driven by a 20% increase in grade, positive reconciliation in grade and ounces from the mine plan at both the L62 and Santoy Gap deposits and the replacements of the lower grade Santoy 8 ore with higher grade Santoy Gap ore. 2015 gold sales also improved by 16% to 73,000 ounces. As I touched on earlier, we have done an excellent job in meeting or exceeding our production and cost targets while ensuring safety and environmental performance remain our number one priority.
Moving on to Slide 5, one of the key drivers in our success has been the addition of the Santoy Gap deposit to our production profile. Santoy Gap is a high-quality asset due to its high-grade nature and wide vein widths. To better illustrate, the Santoy Gap continues – contains approximately 2,000 ounce per vertical meter, whereas Seabee Mine historically contained about 1,000 ounce per vertical meter. As such, we are able to mine more ounces with less capital development and at a lower cost to drive better margin than free cash flow.
Since we started mining the Santoy Gap in May of 2014, it has produced approximately 196,000 tons at 8.27 grams per ton for a total of 52,158 ounces. Throughout this time, development and production rates have been well ahead of pre-feasibility and we have seen positive reconciliation on grade and ounces. The Santoy Gap deposit averaged 540 tons per day or 70% of total mill throughput during 2015, which is well ahead of schedule. In 2015, the gap deposit increased overall head grades at the Santoy Mine Complex by 48% and combined with the 36% increase in mill throughput, improved gold ounces produced by 102%. Currently, we have approximately 3 years of development completed and have nearly completed the internal crowned pillar on 38 level. This will drive increased stope availability and increased long-haul production rates while reducing production risk.
We also expect that the increased throughput from Santoy Gap will lower unit operating costs from $172 per ton in 2014 through $155 per ton in 2015 to a budget of $150 per ton in 2016 and declining further as Santoy Gap reaches full production in 2017. Note these operating costs are inclusive of approximately $10 per ton of royalty costs. Mining widths at Santoy Gap averaged 6 meters per individual veins and in some places can be up to 35 meters in composite with the three veins. This drives lower cost, high margin production. Santoy Gap production is expected to account for approximately 80% of the overall production in 2016 and will continue to play an even larger role in the future. We expect to be mining here for many years to come. The infrastructure upgrades and development needed to increase production to 700 and 750 plus tons per day in 2016 and 2017 are ongoing and the capital expenditures required are minimum.
I will now pass it over to Rick Johnson to discuss the financial results.
Thanks, Brian. Before I begin on Slide 6 with the financial highlights, please note that all figures presented in the table are in Canadian dollars unless otherwise stated. Gold revenue generated during the fourth quarter of $27.2 million was 20% higher than the $22.7 million reported in the comparable period of 2014. At year end, gold revenue of $107.7 million increased 23% from 2014, a reflection of a 16% increase in gold sales volume and a 6% increase in Canadian dollar gold prices realized.
Net earnings for the quarter were $11.3 million or $0.06 per share. This is up for a non-cash deferred income tax recovery of $4.4 million. Year-to-date, net earnings of $32.3 million or $0.17 per share after the same non-cash deferred income tax recovery of $4.4 million was a $27.7 million improvement over the $4.6 million, or $0.02 per share reported last year at the same time. The significant improvement in financial performance has been driven by an increase in ounces produced and sold for mining higher ore grades and continued improvement in operating efficiencies. For the quarter, cash flow from operations before net changes in non-cash operating working capital of $12.7 million or $0.07 per share was up significantly from the $4.5 million or $0.02 per share reported in the fourth quarter last year. For the year cash flow from operations of $49 million or $0.25 per share increased 85% from the $26.5 million or $0.14 per share reported in 2014.
Moving on to Slide 7, we continued to generate free cash flow in 2015 as we held the line on our all-in costs and our realized Canadian dollar gold price per ounce increased by about $90 to $1,481 per ounce. Our margins in Canadian dollars terms were very strong at $381 per ounce for the quarter and $359 per ounce for the year. Canadian gold miners continue to benefit from the currency tailwinds. It is our strong operating performance, improved grades and the successful ramp-up at Santoy Gap that has increased both year-to-date total cash costs and all-in sustaining costs per ounce. Total cash cost per ounce decreased by 27% to CAD679 per ounce or $509 for the quarter and by 20% to CAD672 or $525 per ounce for full year 2015. All-in sustaining costs per ounce of gold were also down to CAD1,103 per ounce or $826 per ounce during the quarter and for the year decreased by 14% to CAD1,122 per ounce or $878.
Now on to Slide 8, over the last 3 years we have focused on improving the strength of our balance sheet by reducing debt and increasing cash on hand. In 2015, we made significant progress with our ability to generate free cash flow and we are able to achieve a $28.6 million increase in cash and volume to end the year at $39.8 million. The strong financial performance is also about the company to reduce its long-term debt by $3.3 million in 2015 to end the year at $19.1 million. At year end, our working capital position was $46.9 million, nearly doubling the $23.9 million in working capital we reported at the end of last year.
In 2016, we expect our financial strength and flexibility to improve with our ability to generate substantial free cash flow at current gold prices. I will now pass the presentation back to Brian to discuss the updated mineral reserve and mineral resource estimates.
Thanks Rick. Now on to Slide 9, the updated mineral resource and mineral reserve estimate at the Seabee Gold Operation reflects the sustainability of the high grade ore that we have been delivering over the past 2 years. Note, we have been in production for over 25 years and our mineral resource statement is stronger than it was when we started. In 2015, proven and probable mineral reserves increased grade by 8% to 7.62 grams of gold per ton or reserve ounces decreased by 59,700 ounces to 239,000 ounces. The increase in reserve grade was mainly driven by the Santoy Gap deposit increasing to 8.12 grams of gold per ton from 7.64 grams, while the reduction in reserve ounces was largely attributed to mining depletion at the Seabee mine. Also the 2015 underground drill program was primarily focused on resource expansion outside the current mineral resources which translated to a 20% increase in inferred mineral resources. In 2016, the underground drill program will focus on drilling within the mineral resource to expand mineral reserves.
Measured and indicated mineral resources were relatively unchanged while inferred resources increased in both the grade and ounces by 10% and 20%, respectively. The increase of inferred ounces year-over-year came from significantly expanding the Santoy ore body at depth. This expansion is significant in both size and grade and provides a solid base to expand mine life at the Seabee and the Santoy Mine Complex. In 2016, we will complete approximately 65,000 meters of underground drilling to in-fill and focus on expanding the current reserves and resource base at both the Seabee mine and the Santoy mining complex.
Moving on to Slide 10, there is significant exploration potential that we find more gold in our under explored 23,300 hectares Seabee land package. We feel the best opportunity to find more gold is within or in-close proximity to mining infrastructure. For 2016, we have planned a $2.5 million or 18,000 meters surface exploration program for the Seabee Gold Operation. The exploration program is designed to focus on resource growth at the Santoy Mine Complex and the Seabee Gold mine and to test for new discoveries that the Carr and Herb West targets. Exploration proximal to the Seabee Gold mine will be focused 2 kilometers north of Herb West target. The surface drill program will consist of approximately 1,000 meters testing at parallel structure to the Seabee Gold mine. In addition to the surface exploration programs, the company will conduct approximately 65,000 meters of infill and step-out drilling from underground to focus on mineral reserves and resource growth. Approximately 45,000 meters will be focused on the Santoy Mine Complex and 20,000 meters at the Seabee Gold mine. The program will utilize four company owned drill rigs and test targets from up to seven underground drill platforms.
At the Santoy Mine Complex, we have an excellent opportunity to grow our resources as most of our mineral reserves and mineral resources are above the 500 meter level. Our drill results continue to demonstrate the high grade nature of the Santoy Mine Complex and the opportunity to expand the resource base. Our campus under-explored and with the strength of our balance sheet, we are in position to invest in exploration to extend the already robust mine life. In 2015 and the early part of 2016, drill results from the Santoy Gap Up-Dip program have been very encouraging and demonstrate the potential for resource and reserve expansion. Results are highlighted by hole JOY-16-700, which graded 29 grams per ton cut over 6.26 meters true width and hole JOY-16-701, which graded 52.8 grams per ton cut over 2.09 meters true width. These holes were drilled approximately 140 meters and 80 meters above the current infrastructure. These results are important as they are proximal to the current mine infrastructure, displayed consistent high grades over significant width and can be integrated into the mine plan in the short-term.
As I mentioned earlier, there is great opportunity at depth at Santoy Gap and holes SUG-15-062 of 42 grams per ton cut over 1.12 meters true width and SUG-15-048 30.5 grams per ton cut over 1.15 meters true width. The deepest hole ever drilled at Santoy Gap demonstrates the existence of the high grade and mineable width present at depth. We also had very good success in the down plunged target at the Santoy 8 deposit. The results to-date have indicated higher grades and greater width than have typically been mined within the sallower section of the Santoy deposit. This target area will be the core focus for 2016 drill program and is important for the long-term mine planning. We are confident that the system continue to adapt and are optimistic that drilling results translate the expansion of the current reserves and resources leading to an even longer mine life.
Now on to Slide 12, our strategy and focus will remain on grade and cost controls productivity improvements and increasing our exploration efforts. At the Seabee Gold Operation in 2016, production is expected to be between 65,000 and 72,000 ounces of gold. The majority of the tons and ounces in the 2016 business plan are expected to be sourced from the Santoy Gap deposit as it ramps up to average approximately 700 tons per day. The company remains confident that it will continue to generate strong earnings as 2016 unit cash costs and all-in sustaining costs are expected to be consistent with 2015. We are confident that we can meet or exceed our 2016 guidance and continue to generate very significant free cash flow. By achieving midpoint in production guidance and remaining on budget with our costs, we expect to yield an annual free cash flow margin of approximately 20% of revenues at current Canadian spot gold prices.
Now, I would like to take the time to discuss the announcement we made along with Silver Standard. On March 7, 2016, we announced Silver Standard will acquire all of the issued and outstanding shares. The proposed transaction was based on an agreed exchange ratio of 0.185 Silver Standard common shares and $0.001 per share of cash per a Claude share. The consideration represented an implied premium of 25% based on the 20-day VWAP of Silver Standard and Claude Resources and a 30% to Claude Resources’ closing price of $1.27 per common share on March 4, 2016. Upon completion of the transaction, existing Silver Standard and Claude shareholders will own approximately 68% and 32% of the combined company respectively.
Now, on to Slide 14, I will go over some of the benefits of the business combination. First, the acquisition establishes the high-quality mid-tier precious metals producer with margin and scale located in two of the best mining jurisdictions in the world, Saskatchewan and Nevada. The combined company is expected to produce approximately 390,000 ounces of gold equivalent at low cash cost of approximately $735 per ounce in 2016. Along with increased production, the pro forma company will have a very strong balance sheet with cash and marketable securities of approximately $330 million. This financial strength positions the company with the ability to pursue growth opportunities at our combined operations, and large exploration land packages as well as look for external opportunities. This transaction is very good for Claude Resources, its employees and our shareholders.
We are very excited as we think this repositions our assets within a company that I believe can more fully realize value through the benefits of multiple operations and capital to continue building on our success. Due to the meaningful ownership in the pro forma company, we gain exposure to the Marigold mine as well as the Pirquitas mine as well as maintain significant exposure to the operating strength and prospectivity of our own operations. We will gain new access to investors through better capital market exposure and improve liquidity. The combination also presents financial and tax synergies that can improve earnings.
Now, on to Slide 16, the combination of the two companies tells a very compelling story that can create value and growth. In 2016, we expect to produce approximately 390,000 ounces of gold equivalent at a very competitive cash cost of $7.35 per U.S. ounce of gold sold. Also, the company will be in a strong financial position with approximately $330 million or CAD440 million to grow strategically from a diverse portfolio of assets to create long-term value for shareholders.
That concludes our presentation for today and we would be happy to entertain any questions that you may have. Thank you.
[Operator Instructions] And your first question comes from the line of Don Blyth with Paradigm Capital. Your line is open.
Thanks. Hi, Brian. Given this is probably the last quarterly conference call for Claude, I just wanted to congratulate the whole team really there for quite an amazing turnaround of the company that was certainly at risk of bankruptcy in 2013 into a company that was pretty attractive takeover candidate and a couple of questions. First, with your means with existing shareholders with respect to the Silver Standard bid, were there any shareholders that expressed any discontent after the exploration results that you put out following the bid?
No, we have had a number of shareholder meetings immediately post-transaction during the PDAC and we have subsequently marketed the transaction with Silver Standard through the western part of the U.S. and feedback has generally been very positive. I think there is a critical timeframe for both parties to get out and market the mutual benefits of the transaction. In that, many Claude shareholders will not be familiar with the details or the attractiveness of the Silver Standard assets and balance sheet and team. And the opposite also occurs in the sense that many Silver Standard shareholders will need to be – understand the Claude story and the successes and the long-term vision that we have and that the CBS has in front of it. So, feedback has been generally very positive. And there is a necessity to be out marketing the mutual benefits of the transaction and we will continue through that in the next several weeks through April in the U.S. and Europe.
Perfect. And is there likely to be any more material news flow from Claude before the shareholder bids, which I think are scheduled for mid-May, for example, obviously lots of exploration going on, anything – anymore exploration results likely to be released under the Claude name?
In terms of the news flow coming forward, there is several key events. We are just wrapping up Q1 now. So, we will publish the Q1 operational results in early April. The related financials will come on in May, later in May. Further to that, we may see some visibility on exploration results haven’t yet confirmed that.
Great. Well, congratulations again.
Thanks very much, Don.
Your next question comes from the line of Ken Arnold, a Private Investor. Your line is open.
Yes. In answer to the prior gentleman’s question, just to caveat my statements here. I am an extremely disappointed investor at this point with the proposed merger and buyout by Silver Standard. And I think that the share prices, respective share prices of both our company and Silver Standard declining since early March’s announcement says that obviously there is many people such as myself that are also concerned and disappointed. And frankly, I would strongly urge shareholders to decline that offer. And to put it in an analogy, I think looking at Silver Standard, where out of the last 5 years in aggregate they have actually lost substantial monies in their operations. Yes, they are a much larger entity, but this is like leaving the bar with the heaviest, most inefficient sort of company versus going it alone or putting ourselves on the market and shopping around publicly and over a length of time if we wish to combine with another company.
I would like to point out and I have been an investor during the bad times and the good times here that it seems to me like just now when we are a nice beauty and we can’t go it alone, albeit it maybe a little slower pace, etcetera, but if we had to, we could go it alone and be quite profitable to our fellow shareholders, but just now, we are joining with Silver Standard which I don’t consider an efficient producer at all given their financials and I have to ask why. Why not put ourselves on the market and see whether there is other more profitable, more efficient, more attractive to us acquirers that would give us an even higher longer term premium to joining them and owning their shares. I just want to express that if I may respectfully and again urge fellow shareholders to vote no on the acquisition.
Okay. So, the question was essentially why now and the rationale for Claude to pursue a transaction when we perform very well and there are other opportunities that were explored by Claude strategically. So, it’s a good question, Ken and certainly one we hear in the meetings where we are marketing. And we do hear some longer term shareholders like yourself and we need to answer that and get you comfortable with the rationale. So a bit of context on the process and how Claude ended up in this transaction. During Q3 and Q4 of last year, we had multiple parties approach Claude and the approach was strategic in intent, would Claude be interested in reviewing alternatives and those parties can be grouped into any number of mainly three scenarios. And the strategic scenarios are Claude, as you have probably pointed out, stays alone and continues producing 70,000 ounces plus or minus, has good free cash flow margins and a healthy balance sheet. That’s one scenario. The other scenario is we have a merger of equals that market transaction and we essentially marry somebody similar in Claude. And the third scenario is we have a party that can provide a premium bid like Silver Standard.
Now, we did not go well advertising ourselves for sale. We were approached strategically by a number of parties and under those approaches undertook a process to review the best path for our shareholders. You can be comfortable that we have modeled the 10-year mine plan on Claude. We have modeled exactly what our evaluation is, what the upsides are and ran sensitivities around that. And we have a very good idea of what our internal evaluation model looks like. And we modeled standalone – or sorry, merger of equal candidates and then there were some of those that approach Claude and I am not allowed to discuss the details of those under CA. And we had parties like Sliver Standard approach us which couldn’t provide a premium bid. And when we waved these three valuations and strategic paths, we found that the merger and the acquisition by Silver Standard, was in our best interest. We have done extensive due diligence on the Silver Standard assets, Marigold, Pirquitas, the balance sheet, the Praedium ownership and the other assets that exist within the portfolio that are more optioniality to Silver related. And when we reviewed those assets, we saw a very strong valuation underlying them. We visited the assets and saw a very strong operational team and a team that is delivering above expectation results. You are right that some of the financials are up and down and certainly you have got to read through them to understand what the path is going forward, but we are very comfortable with the assets or comfortable with the team and we believe that the path forward strategically with Silver Standard is in the best interest of our shareholders. Now all shareholders aren’t going to agree to that, we have had some calls that believe Claude is worth $4 a share. I personally believe that this path with Silver Standard reflects the best interest of our shareholders and myself being a significant shareholder as well as our employees. That’s how I generally feel about the transaction though Ken. Thank you very much for the question and if you would like further details, feel free to call us back.
Your next question comes from the line of Joseph Hopper, private investor. Your line is open.
Yes. I would like to know like the shares of Claude Resources have dropped down what, I think $1.35 or something like that, would you still get $1.65 for the shares?
What the transaction reflects Joe is a share exchange, so what will happen when the shares – when the transaction closes is you will get 0.185 of a Silver Standard share for every Claude share. So you may get somewhere between $1.20 and $1.80 depending on whatever Silver Standard is trading at. It’s an exchange all share transaction. So on 10,000 shares of Claude, one day you will own 1,850 shares of Silver Standard the next day and the value of those shares is whatever Silver Standard is trading at. There is no cash consideration to it. It is an all share transaction.
Okay, thanks a lot.
You are welcome.
[Operator Instructions] Your next question comes from the line of Adam Melnyk with National Bank. Your line is open.
Hi, guys. Thanks for holding the call. Just a couple of questions here, first on the reserves, in particular Santoy Gap, I think as you started to mine there, we have vectored in on a positive reconciliation at that versus previous reserves and certainly the updated reserves reflect that with the reserve grade at Santoy Gap going up and now relatively in line actually Brian with where you mined in 2015 at the reserves of Santoy Gap versus the grade in 2015, so just wondering if you think that now that you have had a chance to fine tune those reserves is a better reflection of where you expect to mine at Santoy Gap or do you think there is still some conservatism built into even the updated reserves at Santoy Gap?
Good question, Adam. It’s something we have seen over the last 2 years in mining Santoy Gap was this positive reconciliation that versus our reserves and versus our schedule and it is why we outperformed guidance in the last several years are one of the key reasons. Essentially, we are mining more ounces at a given area than we have scheduled. What we did this year is on review of the reconciliation data consisted geo-statistics of the top cuts. We increased the top cut by 60 grams to 70 grams per ton, so from 60 grams to 70 grams. We took the detailed CMS data, survey data from underground and we use that as justification to reduce our dilution assumptions as well. Those two combined parameters as well as the much increased drill spacing we do complete 65,000 meters of underground drilling and a significant portion of that is into the resource and into the reserve and that led us to believe and through the top cuts needed changing and the dilution needs changing. Ultimately, I am quite contempt with the number of 8.13, which is the grade of the Santoy Gap reserve. And it’s – as you pointed out very close to what we have mined to-date, whether there is still upside in that number or not will be determined as we develop the bigger reconciliation data sets. I m comfortable that that number right now with that in our schedule, it implies, yes we have improved an upside to our 2014 reserves which were the basis of our schedule in 2015.
Okay, that helps. And I just wanted to follow-up on some of the comments you made about Silver Standard, about the assets, having visited them, having now marketed with their team and heard their story told to investors, just get your perspective and may be a little more detail on their assets, I am thinking about Marigold obviously headline low grade, but are relatively simple low unit cost operation and maybe in reference to the facts that they do have, because of that a lot of leverage to fuel prices which have obviously come down over the past couple of years and how you see both the benefit of that, I guess as well as the risk that it echoes the other way and then at Pirquitas, I think maybe those in allusion to the fact that results have been up and down there, I mean issues with recovery with the zinc circuit and also at a headline anyway, shorter mine life at Pirquitas, so just wondering how you see that having done the detailed due diligence or/and maybe just some more specific comments on Silver Standard’s assets which Claude shareholders will have a significant stake in going forward?
Sure. First and foremost Marigold is the largest net asset value driver of Silver Standard. It’s the major component that we reviewed in a lot of detail and did visit Marigold. Marigold has been in production I think for 28 years now and it’s never produced more ounces than it did under Silver Standard management last year. That was a record year and it reflects the team that they have on-site and their focus on operational excellence. The team is very strong at assessing bottlenecks and understanding the details and finding incremental wins in the operating costs. And this has been proven at Marigold. Yes, it’s a low grade mine averaging approximately 0.45 grams a ton, but it’s a dump-leach, very simple large scale operation. And yes, you correctly pointed out that there is leverage to fuel price there. But from what I have seen the bulk of their wins are coming from other opportunities and wins within their Op cost fuel prices, yes contributing to it too. But there are other operational wins that Silver Standard is putting in place to it. It carries a 9-year reserve life. I have no question that they have extensive reserve – resource to reserve conversion post that and I have no question that that mine has 15-plus years of life left to it as well as a strong land package around to it. Very impressed with the Marigold operation and the team that runs it and the ability of Silver Standard to improve an existing asset that’s been there for 25 years and make it look better than it’s ever looked. They are very good at that. So Marigold was a big check mark for us. And we felt that it contributed the bulk of their net asset value.
And when we view it versus Pirquitas, we actually felt we got Pirquitas for free. Consensus on Pirquitas is that, yes it has a short mine life, it does it will exhaust the pit later this year and they will run stockpiles. When you look at the asset as a whole though and one thing that Silver Standard has and they are working on is the Chinchillas asset which is a satellite deposit that can be trucked to it within about 30 kilometers. That is a very attractive asset. We see significant upside at Pirquitas. We see upside in the change – regulatory changes from the government of Argentina, the export duties being removed, the import duties – the import restrictions being relaxed. And both of those combined to meet to view an asset that is worth far more than the streets giving it credit for. I quite like Pirquitas. Yes, there has been historic zinc, silver some recoveries, it’s on their kin, everything on the Chinchillas asset tells us it will be very strong metallurgically and actually milled better in the plant than the Pirquitas ore did. So, we are quite optimistic around the Argentinean assets and their longer-term contribution to the merged company. We took also a look at some of these deposits within Silver Standard largely, two of them will be – is a 600 million ounce silver deposit. It’s one of the largest undeveloped silver deposits in the world. It has a lot of optionality to it and so the attractiveness to having that. They have a number of other assets in Peru, in Chile, in Argentina, in Mexico that I am not going to go into the detail of them all. But in general, we are very happy and content with the evaluations we saw at the Marigold and Pirquitas. And when you combine that with their balance sheet and the ownership of Praedium, this company has a very strong operating team, very strong balance sheet and is a very healthy profile going forward. So, it’s what convinced our team and our Board that the strategic combination makes a lot of sense. We are exchanging margin, yes for scale and liquidity and growth, that’s essentially what this transaction reflects.
Okay, thanks. That’s some good insights and I think probably helps out with some of the questions regarding the transaction here as well. So, thanks Brian.
Thanks a lot there, Adam.
There are no further questions at this time. Mr. Skanderbeg, I will turn the call back over to you.
Again, I would like to thank everyone for taking the time to being on the call today. And I look forward to staying in touch with you all. Have a great day.
This concludes today’s conference call. You may now disconnect.
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