Silver Standard Resources Inc. (SSRI)

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Silver Standard Resources Inc. (SSRI)

Q3 2010 Earnings Call Transcript

November 5, 2010 11:00 am ET


John Smith – President and CEO

Tom Yip – VP, Finance and CFO

George Paspalas – COO


Trevor Turnbull – Scotia Capital

Chris Lichtenheldt – UBS Securities

Haytham Hodaly – RBC Capital Markets



Good day everyone and welcome to the third quarter 2010 financial results and project update conference call. This call is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to Silver Standard's President and Chief Executive Officer, Mr. John Smith. Mr. Smith, please go ahead, sir.

John Smith

Thank you. Good morning, ladies and gentlemen. Welcome to Silver Standard's third quarter 2010 conference call reviewing our financial performance and updating our projects.

On the call this morning, we’ve got George Paspalas; George is our Chief Operating Officer; Joe Ovsenek, our Senior Vice President, Corporate Development; Tom Yip, Vice President, Finance and Chief Financial Officer; Kristin Riddell, Vice President, Corporate Secretary and General Counsel; Ken McNaughton, our Senior Vice President, Exploration; and Paul Lafontaine, Director of Investor Relations.

Our financial statements, management discussion and analysis and project updates have been filed on SEDAR and are available on our website. We have a webcast accompanying our comments today and it can be found at the web location referenced in the news release. We will be making forward-looking statements on the call today. And I advise you to refer to the disclosure accompanying our news release and also on SEDAR.

So this is my first call and marks three months for me with Silver Standard. In that time, I've gotten to know the Board, the staff at Silver Standard, visited Pirquitas, San Luis and worked on the strategy and direction for the company. At this point, let me say I'm confident that we can continue to grow Silver Standard as the assets we have and the capability of the team provide a real strong platform for action.

We will talk more on Pirquitas and the transaction with Pretium but these should be seen as enabling Silver Standard to deliver as an operator and strategically position us for future growth. You can't stand still in this business and people remain the key component to success. We will attract and retain people with the right skill sets to execute our strategy. All in all, I look forward to a strong future for Silver Standard.

It’s a knacky [ph] business. First, we will provide a review of our third quarter financial results and provide updates on the Pirquitas mine. During the third quarter, we achieved significant milestones at Pirquitas, which has resulted in improvements to both recoveries and in our production costs. And it has established us with a firm footing for the long-term success of the mine.

George Paspalas, our Chief Operating Officer, will describe mine operations in more detail and provide an update on our other key development projects. A discussion on Snowfield-Brucejack transaction will follow. And we'll take your questions at the end of the presentation.

So, returning to the primary purpose of the call, our third quarter 2010 results, I'd like to turn the over the call to Tom Yip, who will speak to our financial results. Tom?

Tom Yip

Thanks, John and good morning, everybody. As mentioned, we achieved several operating milestones at the Pirquitas mine in the third quarter. We've had better silver production quarter-over-quarter since achieving commercial production in December of last year.

So in the third quarter, the mine reached a positive operating earnings and cash flow as we sold 2.3 million ounces of silver. And for the third quarter, total company P&L reported a net loss of $7.5 million or $0.10 per share versus a loss of $95,000 or $0.00 per share in the third quarter of 2009.

The main components of these current quarter's results are shown on this slide. We saw excellent results for mine operations as we earned $10 million for Pirquitas. During the quarter, we sold 2.3 million ounces of silver at an average realized price of $19.42 per ounce and after transportation deductions and refining costs, revenues were $41.5 million, cost of sales of $24.9 million and depreciation and amortization were $6.6 million resulting in earnings of $10 million. This was a significant improvement over the second quarter, where we reported a loss from mine operations of $1.6 million and in the first quarter, reported a loss of $16.7 million.

General and administrative costs, stock-based compensation and interest expense were similar to the second quarter results. We recorded a foreign exchange loss of $3.7 million primarily related to the effects of the weakening of the peso on our net monetary assets in Argentina. And lastly, we incurred $4.1 million primarily for export taxes and future income taxes related to our Pirquitas mine.

In terms of cash flow, we began the quarter with $58 million and during the quarter, we had a net decrease of $22 million. We generated $4.9 million from operating activities, which is primarily minor operations, less G&A costs and interest costs.

Investing activities included exploration and project spending of $26.4 million under various properties including $12.1 million at the Snowfield and Brucejack projects in Northern British Columbia. At Pirquitas, we spent $5.1 million of which $2.6 million was used to pay construction liabilities recorded in 2009 and the remainder of $2.5 million was for sustaining capital. In addition, we spent $4.8 million on refundable value added taxes.

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