SSR Mining Inc. SSRM has plunged 39.3% year to date against the industry’s decline of 10.7%. Meanwhile, the Zacks Basic Materials sector and the S&P 500 have gained 2.2% and 22.7%, respectively.
The SSRM stock was dealt a significant blow by a major slip on the heap leach pad at the Çöpler mine on Feb. 13, 2024. Therefore, operations had to be suspended. This incident led to a 54% plunge in its share price in a day. Even though SSRM stock has picked up gradually, it has not resumed the pre-Çöpler
incident price level. The stock closed at $6.53 yesterday, which is 33% lower than the share price of $9.72 a day before the mishap.
Adding to the company’s woes, the Seabee mine had to be temporarily suspended from Aug. 21, 2024, due to wildfires. Even though it is expected to resume operations, the lost production will likely lead SSR Mining to lower its 2024 guidance.
SSRM Lags Industry, Sector & S&P 500
Image Source: Zacks Investment Research
The Çöpler Incident Remains an Overhang for SSRM Stock
On Feb. 13, 2024, approximately one-third of the material stacked on the Çöpler oxide heap leach slipped off the pad, with the bulk of the material flowing into the Sabirli Valley to the east and a smaller amount into the Manganese Pit to the west. Nine lives were lost.
All operations at Çöpler were suspended following this incident. SSR Mining also suspended its quarterly dividend payments and the automatic share purchase plan.
Prior to the incident, SSRM had provided guidance of 200,000-220,000 ounces of gold for 2024, which was subsequently withdrawn. Considering that Cöpler contributed around 31% of SSR Mining’s total production in 2023, this incident was a huge setback.
SSR Mining has taken the necessary steps to ensure the containment of the incident. More than 13 million tons of displaced heap leach material at Çöpler have been moved to temporary storage locations since the incident, including 9 million tons from the Sabirli Valley.
Estimates for site remediation costs are $250-$300 million, including legal contingencies, material movement and construction costs.
The investigations into the cause of the Çöpler incident are ongoing. SSRM has commissioned third parties to review the design, construction and operation of the heap leach pad. So far, these reviews have not identified any material non-conformance with the construction or operation of the heap leach pad, per third-party engineered design parameters.
SSR Mining is trying to secure the required permits to restart the Çöpler mine. Once all necessary regulatory approvals are reestablished, initial operations at Çöpler are anticipated to focus on processing stockpiled ore through the sulfide plant.
However, currently, there is no clear timeline for when operations may resume at Çöpler.
The Türkiye government might also rescind or revoke permits associated with the Hod Maden gold-copper development project or prevent it from completing or participating in the development of Hod Maden. SSRM has a 10% stake in the project.
Çöpler Incident Affects SSR Mining’s H1 Results
The company’s revenues declined 33% year over year to $415 million and adjusted earnings per share plunged 67% to 15 cents in the first half of 2024. While the average realized gold price rose 12% and average realized silver prices were up 13%, the declines in the top and bottom lines were attributed to lower gold equivalent ounces sold.
SSR Mining produced 177,691 gold equivalent ounces in the first half of 2024. This marked a 41% plunge from 303,518 gold equivalent ounces produced in the first half of 2023. The decline was blamed on a 79.6% year-over-year decrease at Çöpler due to the suspension.
Gold output at Marigold was down 46% year over year due to lower grade ore stacked, offset by more ore tons stacked. Gold production at Seabee, however, increased 25.7% due to higher mill feed grade. Silver production at Puna rose 8.5% due to more ore tons milled and higher mill feed grade.
Suspension at Sebee Puts SSR Mining’s 2024 Guidance at Risk
The company expects Marigold, Seabee and Puna to produce 340,000-380,000 gold equivalent ounces in 2024.
Marigold is expected to produce 155,000-175,000 ounces of gold in 2024, suggesting a decline from the record 278,488 ounces produced in 2023. Results will be impacted due to planned waste stripping at Red Dot to boost the mine’s gold production.
Puna remains on track to achieve the 2024 production guidance of 8.75-9.50 million ounces of silver. It had produced 9.69 million ounces of silver in 2023.
On Aug. 21, SSR Mining announced that operations at Seabee had been temporarily suspended due to forest fires near the mine. Per the last update provided by the company, operations are expected to resume in the second half of October.
While the process plant and the Santoy mine were not materially impacted by the fires, remote equipment, including power poles, piping and exploration equipment, were damaged. The company will likely revise Seabee’s 2024 production and cost guidance during its third-quarter 2024 financial results, slated for Nov 6. SSRM’s previous production guidance for Seabee was 75,000-85,000 ounces of gold.
Negative Analyst Sentiment for SSR Mining
The Zacks Consensus Estimate for SSR Mining’s 2024 and 2025 earnings has moved 22.41% and 58.2% south, respectively, in the past 60 days.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for 2024 earnings implies a 65% year-over-year decline and the same for 2025 suggests a 47.78% decrease. These estimates reflect the impacts of the Çöpler incident.
Image Source: Zacks Investment Research
Average Price Target for SSRM Suggests Downside
Based on short-term price targets offered by nine analysts, the average price target for SSR Mining comes to $5.80. The average price target represents a decline of 11.2% from yesterday’s closing price of $6.53.
Image Source: Zacks Investment Research
SSR Mining’s Valuation Not Cheap
SSRM is trading at a 12-month forward price-to-earnings of 24.13, much higher than the industry average of 13.14X, the broader sector’s 14.70X and the Zacks S&P 500 composite’s 22.22X.
Image Source: Zacks Investment Research
Peers Hudbay Minerals HBM and Silvercorp Metals SVM are cheaper options, trading at 12-month forward price-to-earnings of 11.28 and 15.21, respectively.
Sound Financial Position to Aid SSRM
As of June 30, 2024, SSR Mining had a cash and cash equivalent balance of $358.3 million, and a net cash position of $128.4 million. In addition, the company has an undrawn revolving credit facility, providing total liquidity of $858.4 million. SSRM has a total debt-to-total capital ratio of 0.07, much lower than the industry’s 0.26.
SSR Mining’s Roadmap for Long-term Success
SSRM has a diversified portfolio of high-quality assets. Gold prices have gained 33% year to date and are currently around $2,743 per ounce, gaining on safe-haven demand amid uncertainty surrounding the U.S. election and rising tensions in the Middle East. Interest rate cuts from major central banks have also boosted prices.
Gold's demand prospects remain robust, driven by safe-haven investment, central bank purchases, and increasing use in sectors like energy and healthcare. Gold prices will be supported by solid demand amid limited supply prospects. This bodes well for SSRM. The company will gain from its efforts to grow production capabilities. Setting the Çöpler mine aside, it has solid prospects from its other mines.
The gold production profile at Marigold is expected to increase to more than 270,000 ounces annually in 2027, seeing an 18% CAGR over 2024, and reach above 300,000 ounces by 2029. Costs are expected to improve significantly in 2026 as stacked grades increase due to increased ore contribution from Red Dot. The company is focusing on expanding Marigold’s mineral reserves and extending its mine life, including potential expansions to the Mackay, Valmy, New Millennium and Buffalo Valley deposits.
Over 2024-2028, Seabee’s production is expected to average 75,000 ounces annually. Grades are expected to trend closer to 5.0 g/t in 2025 and beyond, while throughputs are expected to increase to 1,350-1,400 tons per day. Exploration and resource development activity also continues to aggressively advance the Porky and Porky West targets as a potential underground mining front that could complement and extend the existing Seabee mine life.
At Puna, mining from the Chinchillas open pit is expected to be completed in 2026. Technical work continues to evaluate opportunities to extend the Puna mine’s life .
Our Final Take on SSRM Stock
SSR Mining’s plans to boost its production profile and rally in gold prices set the stage for long-term growth. However, considering the premium valuation, downward revisions in earnings estimates and lack of clarity on the timing of potential restart at Copler, selling this stock would be a prudent move at present. The stock currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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