SSR Mining Inc. (SSRM, Financial) reported disappointing results as a result of a decline in net profit and cash flow in the first quarter of the year.
Earnings were impacted by operating results at the Marigold mine in Nevada, which fell from a year ago because the mineral processed was of a low ore grade. The total gold production decreased 12.5% to 66,677 ounces of metal produced in the first quarter of 2018 from 76,200 ounces of metal produced in the first quarter of 2017.
However, efforts to enhance operations are underway. This week, the company has disclosed the results of an updated mine life plan based on an increased mining rate. Details can be retrieved from SSR Mining’s news release.
SSR Mining aims to increase the current mining rate of about 200,000 tonnes of material per day to a rate of more than 225,000 tonnes per day for the 10 years through 2028. The miner depends on a truck fleet of haul trucks it acquired over the last two years. The fleet is expected to expand to 25-300 tonne class haul trucks in the third quarter.
The raised rate is an annual average and will also be supported by year-end 2017 probable gold reserves of 3 million ounces. According to year-end 2017 estimations, the mineral reserves at Marigold had an average concentration of gold grading 0.46 grams of metal per ton of ore and included approximately 0.19 million ounces of gold inventory, which resided in the leach pad.
The updated life plan for Marigold evaluates the revised mining rate over the next 10 years of operations with an annual output averaging 236,073 ounces in the first six years and 211,394 over the entire period through 2028. The first six-years average gold output represents a nearly 17% increase from the 2017 level. The average production over 10 years represents a nearly 5% upside from Marigold’s gold output in 2017.
The yellow metal will be produced at an average cash cost of $730 per ounce and at an average all-in sustaining cost (AISC) of $966 per ounce of gold sold.
CEO Paul Benson said:
"This life of mine plan builds on our exploration success and Operational Excellence track record at Marigold. Annual gold production is forecast to exceed 265,000 ounces in 2021 and 2022, a more than 30% increase over 2017. The new reserve supports mining for over ten years and gold production for fifteen years, with significant resources and exploration potential existing beyond the currently defined reserves. Marigold opened in 1989 with an initial estimated eight-year mine life and next year celebrates its 30th year of continuous operation. We continue to invest in exploration at the site and expect to continue to increase reserves and resources."
Source: SSR mining's PR
SSR Mining also holds operations at Seabee Gold Operation in Canada and Puna Operations (75% interest) in Argentina. For the entire year of 2018, Marigold and Seabee Gold are expected to contribute to the company’s total production of gold with 190,000 to 210,000 ounces and 85,000 to 92,000 ounces at a cash cost per ounce of $725 to $775 and $560 to $610. Puna Operations is anticipated to supply 3 million to 4.4 million ounces of silver, of which 75.7% is attributable production, at a cash cost of $12.5 to $15.00 per payable ounce of the grey metal. From the Argentinian asset, SSR Mining also produces lead and zinc. The miner expects to spend $21 million for explorations, maintenance and development of existing assets.
Late Wednesday morning, the stock stood at $9.68 per share, up 0.1%.
The stock has been affected by a negative tailwind in the sector. The recent tumble is now making the stock in SSR Mining more convenient than a few days ago because its share price is under 50-SMA line levels.
During bull markets for gold, SSR Mining is a good option in the mining industry because the company has demonstrated it can outperform the industry with a trailing 12-month earnings before interest taxes depreciation and amortization (Ebitda) margin of 42%. The industry has a median of 25%. That is better than the average Ebibtda margin that is mostly embedded in a 3% stock appreciation for the 52-weeks through June 19.
But before acquiring shares of this miner I would wait for some other significant stock depreciations, which will push the market value below the midst of a 52-week range of $7.64 to $11.44 per share.
The company’s recent announcement about the updated life of Marigold mine plan will likely trigger market appreciation. However, most recent prices on the Bullion London Market do not support a rising stock. Gold is averaging $1,293.68 per troy ounce since the beginning of June, which is 0.7% down from May’s average price and about 3% lower than the early-year average for 2018.
Investors in gold futures are also not very well-off. The financial instrument is about 2% down from May to approximately $1.275 per ounce.
(Disclosure: I have no positions in any security mentioned in this article).
