IMPACT Silver Corp (OTCPK:ISVLF) Q4 2018 Earnings Conference Call March 12, 2019 8:00 AM ET
Jerry Huang – Chief Financial Officer and Investor Relations
Fred Davidson – President and Chief Executive Officer
Conference Call Participants
Good day, ladies and gentlemen. Welcome to IMPACT Silver Corp.’s Year-End 2018 period ending December 31 Financial and Production Results Conference Call. Before we begin, we would like to go over our disclosure statement followed by Mr. Fred Davidson’s comments on the quarter and year-end result and following a question-and-answer period.
Certain statements in the following conference call regarding IMPACT Silver Corp’s business operations may constitute forward-looking statements. Such statements are not historical facts but are predictions about the future, which inherently involve risks, uncertainties and may cause actual results to differ materially from those contained in the forward-looking statements.
I’d like now turn it over to President and CEO of IMPACT Silver, Mr. Fred Davidson.
Thank you, Jerry. The year-to-date and the year-end results reported revenue of $13.1 million, that’s down from $15.4 million from 2017. And I think everybody’s fully aware that the silver prices had taken a pretty heavy hit over the year. A primary reason for it, mine operating losses were $1.7 million as opposed to only $0.5 million – earnings were of $0.5 million in the prior year.
What we have done to address these issues is very significant; one, we’ve aimed – we’re now relocating our activities to higher grade areas within the mine. This unfortunately is not one of these things where you flip the switch. It takes development time and we’re progressing on that as we open up new development and shut down old development. That should result in higher grades coming through the mill. And in fact, we saw in the fourth quarter, these grades were up to 170 grams a ton over 162 grams from the equivalent period in last year.
Second thing we’re doing is cutting costs. And that takes as much time as well because although we can cut some labor, we also have to at the same time do that extra development to access the higher grade zones we’re pursuing. So the strategy going forward, then we’ll be to produce it a higher grade. The tonnage initially will be lower for the obvious reasons that we were mining lower grade material, which we’re no longer going to mine. And the costs, we’re going to work on pushing down, although we will be incurring the initial development costs as well.
The end result was the operating loss for the year as I’ve said was $3.5 million compared to $1.7 million last year. The loss before interest and EBITDA was actually $3.2 million compared to $1.9 million in the prior year.
Going forward, the cash position, as at year-end was over $1.2 million, which didn’t include the additional $700,000 that came in following the year-end. Cash-wise in, we’re at a fairly solid position and we wanted to use those funds to do two things; one, to do the development necessary to get us into the higher grade; and two, to conduct some limited expiration in certain target areas – excuse me; that would enhance the quality of the grades that we’re putting through the mill. Revenue per ton sold for the fourth quarter to $79 versus $62, 28% increase over the same period in the prior year.
So we are pushing up that grade. We will continue to align pushing up that grade. And combined with that, we’re pushing down on general administrative costs even in the inflationary area that we’re experiencing in Mexico. And costs were down approximately 10% over 2017.
Currently, we’re doing a limited exploration program in San Ramon Deeps, which is, you know, have been traditionally a producer for us now for almost 12 years. And we had underground results that included 2.4 meter – 2.04 meters of 661 grams silver and 4.97 meters of 354 grams, a fairly successful program that we advertised earlier in July, 2018. The zone remains open upward and downward and to the south.
We’re also doing some work in the Guadalupe, which is where we’re focusing. Guadalupe was one of the more traditional mines. We’ve opened it up, we’re expanding on it. We’re getting decent grades underground and combined with the lead zinc, it’s quite attractive material. And the hauling distances are very limited. Once we complete the renovation of the shaft and we expect our hauling costs to go down about $68 a ton, overall which we fairly significant in the cost of mining.
Overall then, the year is what we had to do is survive the hit that we took – everybody took on the silver price going forward into 2019, we’re looking at slowly increasing the grade is we access this new zones and pushing down on our operating cost per ton, even though we’re doing it at lower tonnage. Jerry?
A - Jerry Huang
Excellent. Thank you for the overview, Fred. That said offer on the comments from Fred on the year end for 2018, we would now go over our question-and-answer period where number of investors have contacted us and submitted questions for us during the last quarter. First of all, Fred and team congrats on a closing of financing in a relatively tough market. What’s the use of proceeds going on so far and what can investors expect news?
That’s a valid question. A part of it of course is due to the extra development, we need to get into the higher grade zone option. This can be anywhere between three months and six months worth of work to get into these zones. We are – I hesitate to use the word going to be high grading, but at the same time, we want to leave the zones were leaving in such a state that we can reenter them when the price of silver once again sort of goes up to reasonable levels.
So we’ve expended money on that development that includes the reconditioning of the shaft at the Guadalupe. We’re doing a limited drill program on a couple of targets that we hope that will produce evidence or at least the ability to determine where we can achieve higher grades in a near to the mine locations and that’s going on as we speak right now.
Okay, excellent to hear. Santa Teresa drilling is clearly exciting and they’ve got impact shares a bit higher when the drilling program was announced. What’s the plan here and if we find something material like we did back in 2008 through June 12, such as the 10, 20 grams per ton over a 3 meter. What can investor expect from this gold news on exploration?
Yes. But that the exploration program is a little more complex than one would take, when we initially say we’re going to drill on it. Structurally what’s happening at the mine overall is, we’ve always had this high grade silver at surface. And as you good at depth, the grade of the silver falls off, and then lead and the zinc becomes apparent. We identified in the Carlos Pacheco that’s the one you were talking about before that, but they’re asking about before. We identified the Carlos Pacheco that has been uplifted approximately 200 meters from the valley it’s adjacent to. So we were working then down in the bottom of that valley to define, if you will, where is the gold is vis-à-vis that one rather interesting in sample or one interesting surface work we conducted. And the program is to find the bottom to this or if there is a bottom to it.
So the technical drilling is to try and if you will determine as we go from the very top of the where the Guadalupe is at 2000 meters, all the way down to about 350 meters at the bottom of this valley. What are we seeing this in terms of our horizon and what makes it interesting is, and forgive me if I might not have the exact numbers right, but we were looking at surface sampling there that indicated about 6.5 grams gold across over almost 1.7 meters along a 50 meter strike length running north-south. And it’s about 350 meters vertically below the Carlos Pacheco. And what we’re trying to do is, we need to test the depth and be to try and test what direction that veins going and we’ll be having to release on it shortly as the results come in and can be interpreted.
But we would expect, because there’s going to be a nugget effect with this. The results with the six well program will not be definitive in itself, but should give us a good idea structurally what’s happening. And the type of gold we’re getting, whether it be an electrum, whether it be silver, whether it be gold, whether it be copper at depth. And I think that’s quite exciting because we could be looking at something vertically on the 350 meters high and that’s something that we’re going to be chasing.
Perfect. Question three, are there something impact can do with the VMS that’s currently sitting on care and maintenance at Capire, given that zinc and silver prices have been stabilizing.
Yes, that’s – actually, that’s an interesting question. Because it’s an area we haven’t gotten into a lot of detail on recently for the fact is that when we did the initial metallurgical work and test – a pilot test plant, we found that the grade from drilling wasn’t indicative enough to sort of support a mining plan at that point in time. And that is, it’s far more complex than we had anticipated. And that on test mining, we found that it required detailed mining as opposed to sort of bulk scale mining. Bulk scale mining would have required or probably a price of silver in the $20 to $23 range.
What we have done is, we’re doing some metallurgical work right now where we think we can enhance that grid, the ultimate mined grid significantly and that test work going on right now. The interesting part is, if that does work, and again this is strictly test work, so we’re not sure, what makes it interesting is the Capire that we indicated, what everybody sees is the results of the 43-101 is a very limited part of the program. There is a project north and west of it Manto Rico, which we have some testimonials in, they’d indicate sort of similar grades, but on a very, very limited scale. And then over the hill there’s a Aurora drills. Again, another, a deposit where if Capire can be mined very likely we can go after Aurora drills.
So what makes it interesting from our point of view is to break the back of the metallurgy here where we can get the cost of processing down or the ultimate grade up to the point where it’s economic at current levels. And, I think there’s probably a realistic expectation that we’re going to see some positive results out of that. The ultimate results, we’ve got a week for the testing that we’re doing right now.
Okay, excellent. Question four, operation loss seems to be melting though, but it’s going down. What can impact you in the near term to breaking even this lower silver prices?
Well, I think we discussed that a little earlier. We’re obviously trying to upgrade what we’re mining and that means, as I said before, I almost hesitate to use it because it’s a bad word in the mining business. We’re going to look at high grading, some of the deposits we have and we’re going to develop into some areas where we know there’s higher grade. So we’ll be mining higher grade, which will by definition raise the value per ton of ore mine.
At the same time, we’ve got to push the cost of mining down. And by initially, we’re actually going to incur more costs because we’ll be doing the development access the zones. But the idea is we’ll be mining from less mines and that is written any one-time we might be mining from 400 gram mines. We’re hoping to get it down to three. That means we’d have to have less infrastructure. And at the same time by accessing the Guadalupe, there is significant tonnage there that we can bring out. So we’re going to see a dip in the amount of number of tons going through.
We’re going to see the cost will be fairly resistant to falling initially. And then what were – the plans are, is that as we access those new zones, the grade and tonnage will continue to rise and the cost will actually start to fall for two reasons. One, we’ll be putting two more tons, but two that development work that was necessary to get there will be starting to sort of back off a bit. That’s the strategy going forward. These things, I said are like turning the light switch, it takes three, six months to accomplish that. But we’re well on our way right now.
Okay. Excellent. Last question, we have Fred, new swap for the year and the upcoming plans for 2018 for IMPACT, given such a large land package, are there any JV opportunities and the initiative IMPACT is working on, what can investors expect throughout the year?
Yes. Again, I think, we all recognize that the marketplace out there is a fairly insecure in terms of its ability to raise funds. And obviously, there’s some concerns about Mexico, which I think have now been relieved as they’re starting see that the new sort of administration is far more amiable than the sort of rhetoric that came about six, nine months ago. So I think there’s going to be a revamping. They’ve sort of an increase, if you will in interest in Mexico, again. We’ve got projects that are literally coming out of our ears with the – advertise well over 4,500 ore workings. We can’t explore them all, if we simply just don’t have the time or resources or money to do all of those.
And there are some that are very attractive on the standalone basis and case in point would be Pregones, which for us to even get to is almost 4 hours in driving time. Pregones is near Taxco, it’s a attract project. It’s a break beside one of the majors, big programs and we’ve already had some requestor for information about Pregones. I think there’s probably one or two others in areas that we simply haven’t been able to get to that we probably won’t be able to get to for another two or three years, where we’d really enjoy having a participant step-in and under – especially with the background of the area we have to start working on this project. So we will be pushing that and I think as the Mexican environment improves and the price of metals, it gets a little more solid and the juniors or even the intermediates can raise money. We’re going to see them more than just the one or two we’ve had very recently.
Definitely. Okay. Perfect. I think that’s all the question we have for this quarter. Thank you for everyone in joining us to review our year end 2018 financial and production results for IMPACT Silver Corp. We look forward to our next quarter’s call with everyone just around the end of May. If you have any questions, we’ll like to make questions for our upcoming quarterly conference call. Please visit our website at www.impactsilver.com or via phone at area code 604-681-0172.
Thank you for your continued support of IMPACT Silver Corp. Have a great day.