Silver Standard Resources (SSRI)
Q1 2013 Earnings Call
May 09, 2013 11:00 am ET
John Smith - Chief Executive Officer, President and Director
Alan N. Pangbourne - Senior Vice President of Projects
Ronald Burk - Vice President of Exploration
Gregory John Martin - Chief Financial Officer and Senior Vice President
W. John DeCooman - Vice President of Business Development and Strategy
Dan Rollins - RBC Capital Markets, LLC, Research Division
Joe Reagor - Global Hunter Securities, LLC, Research Division
Chris Lichtenheldt - Dundee Capital Markets Inc., Research Division
Jorge M. Beristain - Deutsche Bank AG, Research Division
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Thank you, Kevin. Good morning, ladies and gentlemen. Welcome to Silver Standard's First Quarter 2013 Conference Call, during which, we will provide a review of our financial performance and give an update on our business.
Joining me on the call this morning are Greg Martin, our CFO; Ron Burk, Vice President, Exploration; and Alan Pangbourne, our Senior Vice President of Projects. Also present are John DeCooman, Vice President of Business Development and Strategy; and Andrew Sharp, our Vice President of Technical Services.
Our financial statements and management's discussion and analysis have been filed on SEDAR and are also available on our website. To accompany our comments today, there's also an online webcast, and you'll find the information on this in our news release relating to this call.
We will be making forward-looking statements today, and I refer you to the disclosure accompanying our slides, news release and also on SEDAR.
Now before I start to cover our business, it would be remiss of me not to comment on the market and our share price. With almost all of the major economies in the world in poor state and substantively using monetary expansion as a tool to try and generate growth, it's hard to understand a disconnect to precious metals. In my view, the reality of the situation and proper pricing of risk will see a return by investors to silver and gold.
Our share price has also been impacted by perceived Argentinian risk and the cost position of our Pirquitas Mine. Over our mining company, our same cost management is core -- same cost management is a core activity. We have a continual cost management process at our Pirquitas Mine to come to completion in Argentina. We've also commenced a formal restructuring program at Pirquitas, in depth rebasing the business and costs to a sustainable position for the future. This process addresses both optimizing production and reducing costs. And the majority of the changes will be implemented through the second and third quarters of the year.
In addition, our exploration program is being examined to reduce expense. Corporate overhead reductions are being instigated and the timing of development capital spend reassessed. Our priority is to be disciplined around the investment activities and drive the margin within the operating cash flow. Planning of activities and revised forecast, as applicable, will be reflected in the outlook guidance in our second quarter report.
Through the first quarter, we continued to progress on delivering on our commitments. Pirquitas is going through a major mining transition to widen and deepen the pit, and yet, even with the variability of ore through the transition, we still delivered 2 million ounces in the first quarter, and we also did that at a cost that keeps in line with annual guidance.
On development activity, we keep driving forward at both Pitarrilla and San Luis projects, and we'll talk more about these on the call.
In January, we issued convertible notes of $265 million in aggregate to repair existing $138 million convertible with the remaining proceeds adding to our cash position for investment in projects such as Pitarrilla construction. This was part of our strategy for funding our growth pipeline. And a cutting point that I make is that we have a team that delivers. We have proven capability and capacity across our business, and that is what, at the end of the day, delivers success.
In operations, our management at Pirquitas, again, delivered to plan this quarter, following a successful 2012. Silver production was just over 2 million ounces, cash cost for the quarter were $14.64 per ounce of silver produced, a good start to the year to achieve guidance. The mine also produced 3.3 million pounds of zinc in the first quarter, a 27.1% improvement, reflecting higher zinc grades as we mine through the zinc-rich port of sea area of the San Miguel open pit and sales match productions again as per guided.
Approximately, 396,000 tonnes of ore were milled during the quarter at an average weight of 4,402 tonnes per day, 10% above the plan's nominal design and in line with our production plan. The average recovery rate for silver decreased to 76.3% from 79.9% last quarter, mainly due to the variability of more oxidized and transitional ore in the mill feed. As Phase II of the San Miguel pit opens up, the proportion of oxide in traditional ore and the mill feed is expected to decrease, which will enable higher silver recoveries.
During the month, we had a labor action at Pirquitas Mine for approximately 36 hours, as the union sought to negotiate for the workforce a higher bonus in 2012. We have made it clear to our employees the basis on which the bonus would be paid, and this position was upheld by the Secretary of Labor in Jujuy, thus avoiding an actual strike. So at Pirquitas, we achieved our plan for the first quarter, positioning us well for the year.