SSR Mining Inc. (NEM) Earnings Call Transcript & Summary

Hello, everyone, and welcome to SSR Mining's conference call to discuss the acquisition of the Cripple Creek & Victor Gold mine. Please be advised that this call is being recorded. [Operator Instructions] At this time, for opening remarks and introductions, I'd like to turn the floor over to Alex Hunchak from SSR Mining.

Thank you, operator, and hello, everyone. Thank you for joining today's discussion on SSR Mining's acquisition of the Cripple Creek & Victor Gold Mine from Newmont. There is an online webcast accompanying this call, and you can find the information to access this webcast in today's press release and on our website. Please note that all figures discussed during the call are in U.S. dollars unless otherwise indicated. Today's discussion will include forward-looking statements. We encourage all participants to reference the accompanying slides for additional information on these forward-looking statements and on the disclosures related to the Cripple Creek & Victor Gold Mine, which we obtained from Newmont's public disclosures, as well as non-GAAP financial measures included as part of this discussion. The slides are available on our company website. Today's call will be led by Rod Antal, Executive Chairman. He will be joined by Eddie Farid, Chief Strategy Officer; Michael Sparks, Chief Financial Officer; and Bill MacNevin, Executive Vice President of Operations and Sustainability. I will now turn the line over to Rod.

Great. Thank you very much, Alex, and good morning, everyone. It's a very good day for us. Very positive news with the acquisition of Cripple Creek & Victor Gold Mine. And today, we're going to spend some time talking about the transaction. As you know, this mine is located in our home state of Colorado, and we're incredibly excited about the addition of the asset to our growing portfolio. This transaction is aligned with our long-term stated focus of free cash flow generation while continuing to diversify the portfolio by acquiring long-life, high-return assets. There are a number of strategic merits to this transaction that I want to highlight. Firstly, CC&V increases our scale, free cash flow and portfolio diversification. And when you combine this production with Marigold, our U.S.-based production becomes the third largest in the United States. Second, the transaction is expected to be accretive across all metrics, and the staged transaction consideration, including $100 million upfront and up to $175 million in the future milestone payments, helps maintain our balance sheet strength. Third, the transaction leverages our proven track record of creating value for shareholders through the acquisition and optimization of producing assets as evidenced by the value created at both Marigold and Seabee since their acquisitions. On this slide, you can see the transaction represents a rare opportunity to add a high-quality and long-lead producing asset in a Tier 1 jurisdiction at an accretive valuation. CC&V is a proven operation with a 30-year history of large tonnage open pit mining. Over the first 9 months of 2024, Newmont reported CC&V production of 101,000 ounces of gold at an all-in sustaining cost of $1,710. The addition of CC&V is expected to provide immediate production growth and additional free cash flow to our portfolio. As mentioned, we expect CC&V to expand our U.S.-based platform to an average of 300,000 to 400,000 ounces of gold production annually. We have acquired CC&V at evaluation and under attractive terms that will provide us the opportunity to create value from the operation for years, many years to come. Moving on to the next slide, and you can see here our expanded Americas platform, including Seabee in Canada and Puna in Argentina. This expanded Americas asset base, combined with Çöpler and Hod Maden in Türkiye, is anticipated to provide our shareholders with a diversified and long-lived free cash flow focused portfolio comprised of 6 key assets. Now we move on to the next slide, where I will review the transaction rationale in a little bit more detail. First, this transaction provides us with our second producing asset in the United States and the third in North America. CC&V immediately provides our portfolio diversification while its annual production profile meaningfully increases the scale of our business. Second, the mine's steady production and cost profile is expected to add free cash flow to our consolidated platform. Combined with our strong balance sheet and continued free cash flow generation across the business, we expect to be in a strong position and to continue to execute on our growth initiatives across the portfolio. As a reminder, these opportunities include the development of the Hod Maden project in Türkiye, as well as brownfield growth targets like Buffalo Valley and Marigold, Cortaderas and Puna, and the 4 key targets at Seabee. Third, the staged transaction consideration includes $100 million of upfront payments, preserving our balance sheet fee. We anticipate funding the acquisition from our current cash position and incorporating the upfront payment, which will retain our total liquidity in excess of $700 million. Additional consideration of up to $175 million is payable upon successful completion of 2-week progress milestones expected to occur between 2025 and 2030 and can potentially be funded by CC&V's stand-alone cash flow generation. Lastly, our business has a proven track record of creating value through the acquisition and optimization of producing assets, as we have demonstrated at both Marigold and Seabee. Additionally, while in different states, adding CC&V team to our already established in-house expertise of operating large tonnage open pit operations at Marigold will benefit us in terms of knowledge sharing and best practices. CC&V also features brownfield exploration opportunities that we expect to evaluate going forward. Let me just move on to Slide 6. I'm going to provide a little bit more information on CC&V Gold Mine. As mentioned, the mine is located in our home state of Colorado, approximately 100 miles from our company's headquarters here in Denver. We are committed to continuing CC&V's best practice with respect to health and safety, environmental stewardship and local community relations, and look forward to welcoming the mine's highly regarded employees into the SSR in the coming months. The large-scale open pit mining at CC&V has been active for more than 30 years, and Newmont has reported over 2.5 million ounces of gold production since it was acquired in 2015. Currently, the CC&V operations span 3 developed open pit areas: Globe Hill, Schist Island and South Cresson with a total land package of more than 5,000 hectares. In Newmont's year-end 2023 [ MMR ] statement, CC&V had gold mineral reserves of approximately 1.3 million ounces, plus an additional 1.6 million ounces of measured and indicated mineral resources and 300,000 ounces of inferred mineral resources. All of these mineral reserves and resources are oxides, which are stacked in a valley leach facility as either run-of-mine material or after a 2-stage crush. The average annual ore placement on the valley leach facility is approximately 20 million to 24 million short tonnes per annum, and current permitted and available lease capacity is more than 125 million short tonnes. There is a mill facility for sulfide and transitional ore at CC&V that the facilities on care maintenance is not factored into the current mine plan. Lastly, earlier in 2024, Newmont applied for a permit amendment referred to as Amendment 14 with the scope to extend mine leach capacity by another 189 million short tonnes in the future. As you can see, CC&V beats our strategy to focus on long lead, high returning free cash flow operations, and we look forward to incorporating the operation into our portfolio. So let me move on to the last slide and just some closing remarks. The acquisition of CC&V is right on strategy for SSR. This will become our 6th key asset of a diversified and free cash flow focused portfolio. This transaction transforms SSR Mining into the third largest gold producer in the United States from both Marigold and CC&V, and when you add Seabee and Puna, reinforces the strength of our overall platform in the Americas. When you combine this with our continued commitment to Türkiye through both Çöpler and Hod Maden, we have a clear path forward as we look to regaining the position as a leading mid-tier gold producer. The transaction is expected to close in the first quarter of 2025 upon receipt of all required regulatory approvals, and we will provide guidance for 2025 in due course. Finally, I want to thank Newmont for their stewardship of the mine over the last 9 years and professional cooperation to close this transaction. So with that, I'm going to turn the call over to the operator for questions. Thank you.

[Operator Instructions] And we do have a question. This question comes from Carey MacRury from Canaccord Genuity.

Just a question on the timing of this sort of amendment. Is there any suggested timing that you're thinking?

I'm going to pass that one to Eddie.

The Amendment 14 has been launched with the regulator. It was filed on April 25, 2024. And we'll wait the decision over the coming 12 to 24 months on the amendment.

Okay. And then maybe can you provide a bit of color on what this Carlton Tunnel water flow issue is?

Yes, sure. Look, the Carlton Tunnel is effectively a historical dewatering tunnel for the CC&V mine that was completed in 1941. And the purpose of it was to drain the Southern portion of the mine, and it's 1 amongst many dewatering tunnels for the mine. The dewatering tunnel has held discharge permits since 1983. But in January 2021, permit updates contained new water quality limits. And so a settlement agreement with Newmont involved the installation of effectively interim passive water treatment and ongoing monitoring and was subjected to a compliance schedule through November 2027. And so from there, the company is effectively evaluating different types of water treatment options along with the regulator for the long-term treatment of the Carlton Tunnel. So once those are approved by the regulator, relief will be provided.

Okay. And then maybe 1 last one. It looks like there's only 3 or 4 years of reserves, but can you talk a little bit about how you're thinking about mine life potential here?

Yes. So as you know, there's 1.6 million ounces of reserves and another 1.3 million ounces of resources. We see, obviously, through our due diligence, different opportunities throughout the mine plan. We think the reserve and resource base creates a solid foundation for the life of the asset. And over the course of the coming 12 months, we'll be updating and renewing a technical report on the asset to delineate the future and outline that to the market.

And our next question comes from Mike Parkin from National Bank.

It's an asset that Newmont hasn't really talked about much. So can you give us any kind of color in terms of like what has been if there has even been a budget for exploration on this asset for the last year or two?

Yes. As you know, CC&V was Newmont's smallest asset in the portfolio and was designated as noncore and was planned for sale for a period of time now. And as you know, when assets are traditionally in transition, exploration does take a back seat. CC&V, though, is a well-drilled property, and so we understand where the upside levers will be. And we have a plan to tackle those as we kind of incorporate the asset into the portfolio and start to provide guidance on the long-term future.

Okay. And then on the remaining reserve of open pit, can you tell us what the average strip ratio is for those tonnes?

It's about -- it ranges between 0.5 and 1.

And again, Mike, we'll update all those assumptions once the technical reports completed and then provide a lot more clarity into the asset. As Eddie mentioned, I guess the size and scale of CC&V for Newmont, the awareness of the asset is probably not as good as some of the other assets. So we'll undertake to make sure that it has a level set on what we see as the asset going forward.

Okay. This might be getting into the weeds a little too much for this call, but I'll ask it anyway just in case if you happen to know it. Do you know has the amount of cyanide applied to the pad has been pretty consistent in the last couple of years? The reason I asked, when you're sitting at $2,600, some smart news I've seen in the space done by others with heap leaches is realizing the economics allow for kind of a shocking of a pad to pull with contained ounces, which obviously, there's quite a few on this one. Is that something you guys are thinking of in terms of a near-term lever to pull?

Look, it's not a consideration for the transaction, if that's what you're asking. The option value in the asset, as we see it, as Eddie sort of outlined, not only through the asset itself and the operations, but the potential for upside with resource to reserve conversion in the future as well as exploration will all be thought through once we acquire the asset and we have our hands on it, which will happen early next year, Mike. So there will be a lot of considerations put into it, like we do with our other assets to put our plan out, do strategic reviews, do some trade-offs, look for opportunities to add value. And obviously, once we're more informed and once we have our hands on the asset itself, we'll start talking more about what we think those opportunities might be.

Okay. And then 1 final one. Given it's in a different state than Nevada, I assume it's kind of completely stand-alone. It's not reliant on any kind of supply chain infrastructure of Newmont, and so therefore, it's not requiring additions to the site to sustain a go-forward operation?

Yes. Look, it might be in a different state. But I think given it's comparisons to Marigold, including that team down there into SSR, which will start next week in our scaling down there and welcome them to our family. It's going to be a good thing, right? There's going to be a lot of good practices and best practices that we can share with each other. And ultimately, while the fleets themselves might be different, there's always opportunities for having volume-driven pricing that we will assess as time goes on. So I think we'll flip it the other way, Mike, and look at whether we can leverage some opportunities and share some best practices across each one of the groups. But in terms of your question more specifically, we're actually in pretty good shape. Most of the procurement is done at CC&V level for the asset anyway.

Then you've almost got a brand-new, shiny haul truck that's electric. What's the rest of the fleet look like? Is it fairly old or average age, new?

It's well maintained, Mike. On the diligence, we went down there and obviously, that's part of the review process. I do highlight anything that we were materially concerned about. So in what you would expect with a new run operation, things are in pretty good shape. So that's actually 1 of the benefits of picking up 1 of the assets from the majors, frankly. Usually, you're picking up well run, well orchestrated, well thought through operating strategies, and it's a real benefit for us. And we see the opportunities that live within. So we're pretty excited by it.

That was certainly the case with Marigold. You got a brand-new fleet with that one. So looking forward to the update in the New Year. Congrats, guys.

Yes. Great. Thanks, Mike. Appreciate it.

And ladies and gentlemen, with that, we'll be concluding today's question-and-answer session as well as today's conference call. We do thank you for joining. You may now disconnect your lines.