Apex Silver Mines Limited (SIL)
Q2 2008 Earnings Call Transcript
August 12, 2008 10:00 am ET
Jerry Danni – SVP of Corporate Affairs
Jeffrey Clevenger – President and CEO
Bob Vogels – VP and Controller
Ankush Agarwal – JPMorgan
John O’Brien – Ragen MacKenzie
John Tumazos – Very Independent Research
» Apex Silver Mines: The Wall Street Analyst Forum Presentation Transcript
» Commercial Metals Company F2Q10 (Qtr End 11/30/09) Earnings Call Transcript
Thank you, operator. Good morning, ladies and gentlemen, and thank you for joining us in today’s call to discuss Apex’s 2008 second quarter results. This call is being broadcast live on the Internet and can be accessed through the company web site, www.apexsilver.com. A replay of the call will also be available for one week after on the web site. Today’s call will be led by Jeffrey Clevenger, President and CEO of Apex. Joining Jeff are other members of the Apex senior management team, including Gerald Malys, CFO, and Bob Vogels, Vice President of Finance and Controller.
Just a reminder, any forward-looking statements made today by management come under the Securities Legislation of the United States and involve a number of risks that could cause actual results to differ from our projections. Please refer to the forward-looking statements and risk factors in company’s Securities and Exchange Commission filings and to the Cautionary Statement slide in today’s earnings call presentation.
With that, I’d like to turn the call over to Jeff.
Thank you, Jerry. Good morning, everyone, and thank you for joining in today with Apex Silver Mines second quarter conference call. We welcome the opportunity to share with you this morning our progress at Minera San Cristóbal and to outline for you some opportunities and also some issues that we will be resolving going forward.
Focusing on San Cristóbal, and you can follow along the slides with us if you are queued into the web site, the ramp-up continues. All trends are in the positive direction. In the second quarter, we averaged 34,000 tons per day, which is just about 85% of the designed capacity. And our focus now is on maintaining 40,000 tons per day and improving metals recovery.
Second quarter production from San Cristóbal was 84,000 tons of zinc concentrates and 23,000 of lead concentrates, resulting in payable metal of 4.2 million ounces of silver, 42,000 tons of zinc, and 15,000 tons of lead. We’ve changed the format for our cash costs, believing that it represents the performance of the property better and something that should be easier for analysts and investors to consider when trying to measure the potential of this operation. And so we are reporting our cash costs on two bases. One, taking all credits to silver and reporting a silver cash cost, which turned out to be about $1.40 in the second quarter and then also doing the same thing for zinc using silver as a credit and lead as a credit and that results in a cash cost for the quarter of about $0.24 per pound of zinc.
We’d be remiss if we didn’t discuss with you today Apex’s liquidity. At the end of the quarter, we had cash, cash equivalents and investments totaling about $215 million, of which a little bit better than $90 million is unrestricted and readily available. This does include the $70 million of proceeds that we received from the sale of the deferred silver and zinc stream to Sumitomo.
Yesterday the Minera San Cristóbal Board approved the line of credit from Sumitomo. It’s an unsecured line. And MSC is the borrower, and the lender is a subsidiary of Sumitomo. This will provide short-term liquidity for the MSC project. And we would understate it if we did not tell you that there are significant financial obligations that we expect for the remainder of 2008 and 2009 coming directly from Minera San Cristóbal.
On an income basis, the income from operations for the second quarter was $204 million, that does include a $224 million mark-to-market gain on the metal derivative position. But it does exclude deferred revenues of $53 million, which did not go to the revenue line in the second quarter because title of risk had not passed.
Second quarter net income of $178 million does include the $63 million from the sale of the deferred payment obligation to Sumitomo resulting in net income per diluted share of $2.57. As we turn to the mine, for those that are following along, you can see the chart there. Tons mined are increasing, and the reason for that is we are trying to open up higher grade ore in the Tesorera area. And we’ve been so far successful at doing that. The mine is in pretty good shape.
In terms of the mills, tons milled increased almost 30% in the second quarter compared to the first quarter. It averaged 34,000 tons per day, again which is about 85% of designed capacity. We were successful in May at completing the 14-day throughput test that’s a requirement of our contract with Aker Kvaerner. And during that test, we averaged 43,000 tons per day for the 14-day period and saw days, several days, that exceeded 50,000 tons per day, which gives us quite a lot of comfort in the ability of this mill going forward.