Silver Standard Resources Inc. (SSRM) Earnings & Analysis

Latest quarter

SSR Mining reported second-quarter revenue of $443.8 million, up from $405.5 million a year earlier. Adjusted earnings per share were $0.66, above the consensus estimate of $0.59. Diluted earnings per share were $0.47, compared with $0.42 a year earlier.

The company’s filing attributed the revenue increase primarily to higher realized gold and silver prices, partly offset by fewer ounces of both metals sold. It said gold sales fell at Cripple Creek & Victor and Marigold, partly offset by higher sales at Seabee. The filing also said cost of sales rose, principally because of higher costs at Seabee and Puna.

SSR Mining reported gross margin of 60.9%, compared with 59.8% a year earlier, and operating margin of 43.2%, compared with 41.5%. Free cash flow fell to $67.8 million from $126.9 million. The filing said the company received proceeds from the divestiture of its interest in Çöpler during the first half.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CFO Michael Sparks said the quarter’s production was consistent with SSR Mining’s expectations and reflected an intentional increase in sustaining capital spending. He said the company expected costs toward the upper end of its guidance range because of higher fuel prices and a decision to advance sustaining and growth investments.

Sparks said the realized gold price was below the quarterly average, primarily because a greater proportion of ounces were sold in June, when prices were lower. He said diesel hedges at Marigold and Cripple Creek & Victor had mitigated recent fuel-price increases, but the company remained exposed to market prices on unhedged purchases. He added that SSR Mining was monitoring potential effects on transport, reagents and other consumables.

On investment, Sparks said the company was accelerating capital where it saw potential to extend mine lives and improve operating resilience. Asked about sustaining spending, he pointed to fleet purchases at Marigold and other sites. He also said sustaining capital spending was expected to remain elevated in the third quarter.

Sparks said the second quarter included cash tax payments consistent with the company’s normal annual payment cycle. In response to a question about working capital, he said an inventory build had affected the quarter and was expected to work off during the year. He also said Çöpler and Hod Maden were classified as discontinued operations.

Sparks said SSR Mining returned $338.0 million through share repurchases during the quarter and announced the reinstatement of its quarterly dividend. Asked about the expanded revolving credit facility, Executive Chairman Rodney Antal said the terms were more favorable and described the change as normal course. On a separate question, Antal said the Amendment 14 permitting process was separate from the Carlton Tunnel discharge case and was moving through the regulatory process.

Guidance

William MacNevin, EVP of operations and sustainability, said SSR Mining increased its full-year Marigold growth capital guidance to $65.0 million as it accelerated spending on longer-term initiatives. He said the company also increased its Seabee growth capital forecast to $35.0 million as it advanced the Porky West project.

On the call, management attributed a reduction in its all-in sustaining cost guidance to removing Çöpler care and maintenance from the calculation.