SSR Mining - Earnings Call - Q1 2020

Transcript

Speaker 0

Good morning, everyone, and welcome to SSR Mining's First Quarter twenty twenty Conference Call. This call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Michael McDonald, Investor Relations for SSR Mining.

Speaker 1

Thank you, operator. Good morning, ladies and gentlemen. Welcome to SSR Mining's first quarter twenty twenty conference call during which we will provide an update on our business and a review of our financial performance. Our financial statements and management's discussion and analysis have been filed on SEDAR and EDGAR and are also available on our website. To accompany our call, there is an online webcast and you will find the information to access the webcast in our news release relating to this call.

Please note that all figures discussed during the call are in U. S. Dollars unless otherwise indicated. All references to cash costs and all in sustaining costs are per payable ounce of metal sold. We will be making forward looking statements today, so please read the disclosures in the relevant documents.

Joining us on the call this morning are Paul Benson, President and CEO Greg Martin, our CFO Kevin O'Kane, COO and Carl Edmunds, Vice President, Exploration. Also present is John DeCooman, Senior Vice President, Business Development and Strategy. Now I would like to turn the call over to Paul for opening remarks.

Speaker 2

Good morning, and gentlemen. I'm very pleased to welcome you to our call to discuss our first quarter twenty twenty operating and financial results. Firstly, I hope everyone on this call is safely navigating the brave new world of COVID-nineteen. Later in the call, Kevin will explain the impacts on each of our sites and the status of our planning for restarting CB and Puna. Obviously, COVID is impacting the communities where our people work and live.

And last month we announced we're donating $350,000 to help assist the communities around our mines and projects get through this difficult period. Looking back on the first quarter, we got off to a very strong start for the year as we produced over 107,000 gold equivalent ounces and all three operations delivered solid performance. At Marigold, we produced over 58,000 ounces of gold, setting the mine up well for what will hopefully be another year of record annual gold production. At Seabee, we delivered quarterly production of over 29,000 ounces of gold. Importantly, mill throughput averaged over ten fifty tons per day in the first two months of the quarter.

At Puna, silver production was 1,800,000 ounces as we continue to achieve steady state operating metrics with Mill Srubkar will speak to shortly. We've had some exciting drill results at both Marigold and Seabee. We're also pleased with our financial performance during the quarter. In March, we repaid the remaining outstanding portion of our 2013 convertible notes and still ended the quarter with an enviable cash balance of just under $400,000,000 With that repayment, we now have no debt maturities until 2026. As we disclosed yesterday, we sold our stake in Silvercrest for gross proceeds of CAD 90,000,000 and a pretax profit of CAD 55,000,000, which will further enhance our financial flexibility moving forward.

Finally, on Monday, we announced our zero premium merger with Alacer Gold. The transaction combines our diversified portfolio with Alacer's Tier one chirpulent mine positioning SSR Mining as a leading intermediate producer. The pro form a company will have near term annual production approximately 780,000 gold equivalent ounces with highly prospective ground across the portfolio and a very strong balance sheet that will enable us to pursue internal and external value adding growth opportunities. Subject to shareholder approvals, we look forward to integrating the two companies and collaborating on value enhancing initiatives and continuing to invest heavily in exploration activities. We encourage everyone to listen to the replay of the transaction announcement call and to read the deal presentation posted on that homepage.

I briefly want to comment on that call. I made a mistake by not actually referencing what was happening to me in the transaction. I assumed it would come up as a question, but when it didn't, I didn't bother raising it. I did have a number of questions raised by shareholders thereafter. So I thought it was and I've spoken to them, but I thought it was worthwhile covering it now.

Over the last five years, we've continued to look for external opportunities at anything from MOEs down to advanced exploration projects. But with respect to MOEs, are always difficult. I think out of the 30 or so companies that technically could qualify as an MOE, we'd probably discount 20 or so just because they're not attractive from our shareholders' point of view. But with the others, say the other 10, often the conversations are quite challenging, often go along the lines of would you like to discuss a potential MOE And the response is fine, as long as I keep the top job, our board keeps their job, the name stays the same and the head office stays the same. And clearly, that's not a recipe for successful merger of equals.

Rod Antal, the CEO of Alacer, and I started talking in November. And very early on, we agreed the key terms for the deal. It was the CEO comes from one company, the chairman from the other, and the split down the middle on the board, and then best people for the job throughout the management team. Very early on in the process, I decided that Rod was the best person to lead the company going forward. To me, there are a number of clear and logical reasons.

One, he'd put together the team that built the pressure oxidation plant in Turkey and has been a very successful plant operation. I think more importantly though, about operating in Turkey, it's about relationships. And Rod has built the relationships throughout the different level of politics, communities, and also with their key joint venture partner. Once I made that decision, it was then very easy to go through the process. I need to step away from the company.

A number of shareholders asked why I didn't stay on as a non executive director. And I think the answer is very clear. I wouldn't be independent. And the last thing a CEO needs is to have a former CEO sitting behind them, whispering advice in their ear. I think finally, the other point is that all too often when deals are done, the leaving CEO takes some of the furniture with them.

There is no spin out. There is no royalty stream going anywhere else. I'll depart, albeit very happy and contented shareholder cheering from the sidelines. So that's why I just want to make that very clear. I'll now turn the call over to Kevin, who will discuss our operational performance in more detail.

Speaker 3

Thank you, Paul. Well, we certainly ended the quarter in a different context than when we started. Despite this, we had strong operating results for the 2020. Whilst we suspended operations at Puna March 20 and at Seabee during the last week of the quarter, across the three operations, we still produced a 107,000 gold equivalent ounces at a cash cost of $824 per gold equivalent ounce. We had strong mill performance at Seabee, while average throughput with average throughput during January, February over a 50 tons per day.

Material movement at Marigold was over 20,000,000 tons, and Puna operated at a steady state with mill throughput above the PFS projections. I'm proud of the teams at all our sites, projects, and offices for the way in which they manage the growing COVID nineteen crisis in a safe and responsible manner. We suspended operations at Puna March 20 in compliance with government decree and efficiently managed the movement of our people back to their homes despite complexity of cross provincial travel. We provided support and resources to the communities near the operations. At Seabee, we voluntarily suspended operations during the March and went on care and maintenance because we determined at that time this was the right thing to do for the safety and health of our employees, their families, and the communities in which they live.

As you know, Maryville does not have the complexities of the remoteness and camp environment of the other two sites, and we continued operations with strict controls for social distancing and other protocols. They have implemented robust screening and contact tracing tools for entry onto the site, and those that can are working from home. At Marigold, we produced 58,500 ounces of gold in q one consistent with q four two nineteen. Cash costs for 2020 were $824 per ounce, 6% higher than in q four two nineteen because of the lower lower recoverable ounces stacked and, therefore, higher unit inventory costs and an increase in royalty costs from the higher gold prices. Direct costs were lower than planned.

During q one, approximately 5,000,000 tonnes of ore at a gold grade of 0.3 grams per tonne were delivered to the heap leach pads, consistent with expectations compared to six point six point seven million tonnes at a gold grade of 0.36 grams per tonne in Q4 twenty nineteen. 10,000,000 tonnes of material were mined, an increase of 10% from q four two nineteen, mainly because of shorter haul distances associated with increased waste movement and some benefit from the new hydraulic shovel commissioned during the first quarter. The gold grade delivered to the leach pad was 17% lower than the prior quarter, and the strip ratio increased by 76% to three:one. The decrease in gold grade and increase in strip ratio are due to the completion of higher grade ore deliveries from Mackay Phase 5 and the transition of mining equipment to stripping of Mackay Phases 6 And 8 with ore deliveries from Mackay Phase 4 continuing. Gold grades will increase through the year, and recoverable ounces stacked in H 2 should be 50% higher than H 1.

Engineering of the new leach pad is progressing per plan, and the project is on track to be completed during the year. During the 2020, there were fewer tonnes stacked at lower grades compared to the 2019, while production levels were similar compared to the 2019 due to a drawdown in leach pad inventories and benefits of the newly commissioned leach pad. While lower than Q4 twenty nineteen, the ounces stacked in Q1 twenty twenty were in fact more than planned, which sees a higher proportion of ounces stacked during the second half of the year, as I mentioned previously. The increase in ounces stacked will positively impact costs during H2. Operating during the COVID-nineteen crisis has been challenging for the Marigold team, and I'd like to recognize the great job they're doing.

They have managed the operation with the disciplined use of social distancing and other important protocols. Moving on to Seabee. The mine produced 29,500 ounces of gold in the 2020, a 34% increase compared to the fourth quarter due mainly to higher mill feed grades. Gold sales were 27,400 ounces, a 14 in 14% increase from q four two nineteen. Cash costs were $544 per ounce compared to $5.00 $5 per ounce in Q4 twenty nineteen.

Several factors contributed to the higher costs. Ice road activities, which, of course, don't occur in Q4, higher mobile maintenance costs, mostly timing and Alamac development to access higher grade areas the upper areas of Santoy to be fed to the flat later in the year and finally, compensation payments, which are timed for Q1. During the first quarter, 89,300 tonnes of ore were milled at an average gold grade of 10.3 grams per tonne and recovery of 98.1%. This compares to 87,400 tonnes of ore milled at an average gold grade of 7.9 grams per tonne and recovery of 97.9% in the February '19. Cat throughput exceeded 1,050 tonnes per day during January and February and was impacted by the ramp down of operations in March.

Mining unit costs were $68 per ton mined in the first quarter, a 15% increase compared to the prior quarter and were impacted mainly by higher mobile equipment maintenance costs and the Alamac development work I mentioned. We completed all the planned transport across the Ice Road. As previously reported, we're expanding the capacity of our tailings storage facility to accommodate the expected increase in mine life. Activities recommenced in the quarter, but were put on hold with a suspension of operations in March. During April, we assessed options to restart operations.

We continued to manage required activities to ensure the safety of our employees and the environment and developed a staged increase in care and maintenance activities and restart schedule. At the May, we doubled the size of the care and maintenance crew on-site and should begin critical underground activities at the end of the month or the June. During depending on our ability to manage the COVID nineteen protocols and with the easing of government restrictions, we could restart mine production and processing operations before the end of the second quarter. Our operations produced 1,800,000 ounces of silver during the 2020, 17% lower than the 2019 due mainly to lower throughput as a result of the suspension of operations on March 20. The improved mill throughput and metal recoveries we saw in Q4 twenty nineteen continued in the first quarter.

Cash costs were $13.49 per ounce of silver for the quarter compared to 8.9 per ounce of silver in the fourth quarter. This difference is entirely due to a noncash write down of inventory because of the significant drop in silver and base metal prices at the end of the quarter. Time material mined during the first quarter, while planned to be lower than in Q4 twenty nineteen, was also impacted by weather events and the associated temporary suspension of operations. Existing ore stockpiles are sufficient to support milling activity for a phased restart of operations in the near term. During April, the government declared mining an essential business, and we are evaluating phased restart options that enable the safe resumption of operations and that comply with government regulations and guidelines.

We continue to manage required activities to ensure the safety of our employees and care for the environment. We expect that the earliest we would achieve steady state plant operations would be during June and July in the mine. In summary, the operations again delivered solid safety performance and production results during the quarter, especially considering the escalating COVID-nineteen crisis toward the end of the quarter. I would now like to make a few comments on the Alastair Gold merger. We conducted comprehensive due diligence over the last few months, including a visit by several members of our team to the Chippewa operation, and we look forward to combining this Tier one asset with our diversified portfolio.

We have been impressed with our safety culture, the successful delivery of the sulfide plant and the overall potential of the operation. We plan to combine the operational excellence processes that we have successfully employed at all operations with Alacer Gold's programs to further improve performance across all the operations and deliver additional value for the shareholders. I will now hand over to Carl, who will take you through our exploration activities.

Speaker 4

Thank you, Kevin. For 2020, our objectives at Marigold are to discover additional mineral resources south of the currently producing Mackay Pit at Trenton Canyon, Valmy, East Basalt and Crossfire. The goals at Seabee are to increase mineral resources and reserves at Santoy Gap Hanging Wall, Santoy 8A, and Santoy 9A through 9C zones. We also planned aggressive greenfield activity at Fisher and select areas close to existing mine infrastructure at Santoy and Seabee. Given the health and travel restrictions presently in place, it is unlikely that we will be able to complete all of our planned exploration activities in Saskatchewan.

At Marigold, 2020 work includes 64,000 meters of RC core drilling. And during the first quarter, we completed over 18,700 meters of drilling in 55 holes on Trenton Canyon, Mackay, and Valmy. Trenton Canyon received most of the drill meters where we are confirming historical results and exploring for extensions to known mineralization. We also initiated a limited core drilling program to explore for high grade sulfide ore potential at depth. Yesterday, we released exciting results from exploration drilling at Trenton Canyon with one hole demonstrating high grades, broad width sulfide mineralization in proximity to three additional mineralized holes.

In particular, MRA7178 intercepted a 94.5 meter interval of 5.2 grams per ton gold that includes 7.6 meters of 44.7 grams per ton gold. The new zone is located 300 meters north of Trenton Canyon's South Pit and has a dip length of at least 150 meters and an orthogonal thickness of 50 to 70 meters. Importantly, all four drill holes have ended in mineralization, which is open on dip and to the north and to the south. Our experience indicates that these results have grade and width characteristics consistent with underground mines successfully operating in Nevada today, and we look forward to getting the next few step out holes underway. Confirmation drilling at Trenton Canyon has progressed to plan with a notable intercept of a 108.2 meters of 3.1 grams per ton from 27 meters below surface.

This result, along with additional oxide intercepts that we reported, are expected to contribute to an inaugural SSR oxide mineral resources estimate at Trenton Canyon when we report at year end 2020. Additional positive results in the quarter's drilling came from Mackay Pit and Valmy. We also expect these will contribute to mineral resources when reported at year end 2020. The one core hole completed in the quarter near Relay Ridge provided valuable structural and lithologic information, which will be tied in with a planned seismic survey as an aid to locating further gold targets. At the Seabee Gold operation, the first quarter underground drilling totaled approximately 11,400 meters, and surface drilling totaled over 4,800 meters on near mine targets.

The majority of underground drilling was at the Gap hanging wall zone where we reported positive resource extension results of 7.6 meters of 14.8 grams per tonne gold and 2.6 meters of 28.9 grams per tonne gold. Importantly, from a growth perspective, the latter intercept is 210 meters down plunge from the gap hanging wall resource limit, implying a 20% plunge length increase if continuous. Q1 greenfield drilling activity at Seabee was conducted at Batman Lake and on several targets at Fisher. Our objective with this work is to identify areas of discovery and new resource potential. At the Joker target, located six fifty meters south of Santoy Mine workings, we completed almost 3,500 meters of drilling in 13 holes following up surface gold showings.

Here, one hole returned a resource grade intercept of 3.6 meters of 37.9 grams per ton gold at shallow depths. With two holes pending and one on plunge with anomalous results, we have follow-up drilling planned for this gold discovery area. At Fisher during the quarter, we drilled almost 9,500 meters on Mack North, Able Lake, and Aurora targets, following up on surface gold showings and twenty nineteen drilling results. Two resource grade intercepts of 1.9 meters of 9.1 grams per ton and 2.3 meters of 13.7 grams per ton gold were returned from MAC North and Yin targets, respectively. This winter season has been one of our most successful in exploration on new targets and provides support for continuing with the soil geochemistry prospecting and mapping approach.

Finally, we are keen to see the closure of the Alacer Gold merger, which brings approximately 16,600 hectares of prospective terrain near their existing operation and another 105,000 hectares across the region into the company. We consider the exploration potential to be excellent as evidenced by the widespread porphyry related intermediate sulfidation mineralization and by Alacer's success with numerous new gold discoveries in recent years. We look forward to working with the team in place at Alacer to realize the resource potential in country. Now over to Greg for a discussion of our financial results.

Speaker 5

Thanks, Carl, and good morning to everyone. I hope you're all keeping well through these interesting times. We will all remember 2020 for both personal and family reasons, but also for the extreme economic and market sell off late in the quarter. We are fortunate that while our business, like most, has been impacted by the COVID pandemic, our business model has only been strengthened and we see that through our strong first quarter results. We generated revenues of $164,500,000 from the sale of 105,000 gold equivalent ounces.

Revenues were a 30% increase from the comparative quarter. Revenue growth would have been even more significant if not due to the $8,700,000 negative mark to market impact on provisionally priced concentrate sales caused by the drop in silver and base metal prices coinciding with quarter end. With the bounce in silver prices off the quarter end lows, we have already clawed back some of that impact. Income from mine operations was CAD44.8 million, an almost 50% increase from the comparative period. Income from mine operations were impacted by both the $8,700,000 mark to market adjustment referenced and an $8,500,000 noncash fair value adjustment on Puna ore stockpiles, both due to the drop in silver and base metal prices at March 31.

Operating income was strong at CAD34.8 million aided by lower G and A due to share based compensation reversals. You will note on the income statement a $1,300,000 expense for care and maintenance activities. These costs relate to Puna operations, where operations were suspended before quarter end. We did not record any care and maintenance costs for Seabee. For the quarter, we reported net income of $24,000,000 or $0.19 per share, almost 4x the comparative quarter and 19% above the fourth quarter.

Adjusted income totaled $39,000,000 or $0.31 per share, a strong result reflecting the solid operating results and higher average metal prices. Our adjusted income considers the fair value write down on stockpiles, but we don't reverse quarterly mark to market changes. Cash generated by operating activities for the quarter totaled $58,700,000 versus zero in the comparative period and 21% above the fourth quarter, clearly showing the stronger business model. Investments in the quarter were $54,000,000 which were elevated relative to our average quarterly run rate due generally to items I raised on our Q4 call. At Marigold, with the new loader received in the fourth quarter fully commissioned, it moved from accruals into capital, and we received one of the two new haul trucks at Marigold during the quarter ahead of schedule.

Also, Marigold recorded higher deferred stripping as expected due to mine sequencing. Capital items arriving at Seabee over the Ice Road concentrate their recognition in the corridor, also as expected. Overall, capital is tracking at or below budget on each individual project. Also as announced, late in the quarter, we purchased the remaining 115,000,000 of outstanding 13 convertible notes at face value. Our debt is now solely the $230,000,000 of twenty nineteen notes with an effective term of six years requiring only interest payments at 2.5%.

We closed the quarter with $398,000,000 of cash. Based on our investment in Silvercrest, which was worth an additional $50,000,000 at that time, working capital was $646,000,000 So our balance sheet remains in fantastic shape. Our divestment of Silvercrest yesterday for gross proceeds of CAD 90,000,000 improves that position. Turning to costs in the quarter, the operating spend was consistent with budget at all operations. Reported costs show normal impacts of seasonality in each operation.

Winter conditions at Marigold, rains at Puna and ice road operations at Seabee. Combined with some business operations towards the end of the quarter as all three sites dealt with operating changes required by the COVID crisis and at Puna and Seabee phasing into care and maintenance. Higher gold prices were also evident in Marigold's reported cash costs. And while Puna's reported cash costs were high, backing out the ore stockpile adjustment puts them at $8.6 per payable silver ounce, actually below the 2019. So overall, costs were consistent to our plans and had put us on track for our targets.

Looking ahead, clearly, the second quarter is impacted by the temporary mine closures. We have provided guidance on our care and maintenance costs, and we will seek to offset a portion of these with government support where applicable, particularly the Canadian emergency wage subsidy. With Marigold operating in the mines into a phased restart, I don't anticipate much overall impact on our liquidity position. With regards to our announcement earlier this week on the merger with Alacer, the transaction provides a unique opportunity to build a strong and diversified portfolio that will generate significant free cash flows. I am confident we can build on the success of both companies to continue the track record of delivery to operational and financial objectives.

The merger makes for a strong pro form a business with exceptional liquidity to drive market recognition and superior value. It's another step that builds from strength and continues to differentiate SSR Mining. With those comments, I'll turn the call back to Paul.

Speaker 2

Thanks, Greg. In summary, this was an important quarter for SSR Mining. The zero premium merger with Alacer is an important strategic step and will position SSR Mining as a leading free cash flow focused diversified gold producer. Upon closing, SSR would have annual gold equivalent production in the order of 780,000 ounces and a market capitalization around $4,300,000,000 at today's equity prices. The company will have a peer leading balance sheet and cash generation.

The closing of the deal requires positive votes by the shareholders of SSR Mining and Alacer at meetings we expect to be held in July. Pleasingly, we've had very strong support during our marketing of the transaction this week and are encouraged by the market reaction to date. Looking forward, we have a lot of hard work ahead of us over the coming quarters with the reopening of Seabee and Puna and the integration of the two companies. The inclusion of the world class Chirpla operation into our portfolio is just the next chapter in our company's evolution. With our enviable financial position, we'll be able to continue doing what we do well, creating value for shareholders by maximizing the value of our own assets and looking externally for new opportunities.

This concludes the formal remarks of our earnings call. I'll now pass the line to the operator to take any questions you may have.

Speaker 0

Thank you, Mr. Benson. We will now begin the question and answer session. Your first question comes from Mike Parkin with National Bank. Please go ahead.

Speaker 6

Hi, guys. Thanks for taking my question. Lots of interesting stuff out this morning. I'd like to start with the the Batman zone. Looks like the, you know, the one intercept that looks really interesting is very close to surface.

You've got a couple where assays are pending. Is there any thoughts towards that being a potential open pit ore source?

Speaker 2

I'll go my general comment, most of these tend to be relatively narrow, and you end up with end up with a fairly steep or the strip ratio would increase relatively quickly. I think it's something that we've toyed about with a few different outcropping mineralization up there, but nothing's ever worked. But Carl, your view?

Speaker 4

It's narrow vein. It's unsuitable, really, for any open pit. And plus, there's surface water around there.

Speaker 2

That always is a bit of a downer up at Seabee. If you come near those lakes, it can really make the open pit difficult.

Speaker 6

Okay. And then in terms of moving down to Marigold, on the new land packages of Trenton Canyon, Buffalo Valley, are the royalty rates different there than what you're paying for at the oxide mine?

Speaker 2

Yes. They're significantly lower. I'm just going to ask Johnny DeCooman to give an update on what they are down there.

Speaker 3

Yeah. Mike, they differ anywhere from, call it, 2% to 4%. So it depends on some of the different sections that are there, but they are they're probably close to a third of what you see in general at the Marigold Mackie area.

Speaker 6

Great. So that's great news. All right. That's it for me. I'll let some others ask some questions.

Thanks very much, Kai.

Speaker 3

Thank you.

Speaker 0

Our next question comes from Chris Thompson with PI Financial. Please go ahead.

Speaker 7

Hey, good morning guys. Thanks for taking my questions. Paul, just a quick note, all the best for your future endeavors there. It's been great having you at the helm. Congratulations on the announcement obviously with Alisa earlier this week.

Just a couple of quick questions, I guess, as far as these results. You do mention obviously higher grades are going to be stacked at Marigold in the second half of this year. Can you put a number to that?

Speaker 2

No. I mean, we haven't changed guidance at Marigold, so just run off what we've got there at the moment. Obviously, the only thing that you'd probably can think about is that if gold price keeps ongoing, that impacts our forecast on cash cost because that includes the royalty. But otherwise, we're comfortable with the forecast or the guidance we've given for Marigold at the beginning of the year.

Speaker 7

All right. Thanks for that. And Karl, maybe this is a question for you. I mean, great drill results from Trenton Canyon. And you make reference, I guess, in the news release the similarities with Turquoise Ridge.

I wonder if you can just expand upon that and maybe comment on the mineralization that you see and possible sort of metallurgical similarities with turquoise.

Speaker 4

Well, what we think we know from the core drilling work that we drilled just near Relay Ridge is that approximately 300 meters down, we think we get into the Comas Formation, which is the lower plate rocks that host Turquoise Ridge. And up at this area here, albeit we only have RC information on it, we're seeing a lithological change just above where these intercepts are occurring. So we come out of more, what I understand as more, volmy looking rock types, which are the units that are above the comas, and then go into what are carbonaceous mudstones. The nature of the mineralization that we're seeing is very fine grained pyrite in variably silicified rock. And now this is all being pulled from RC chips, But that's what we're seeing.

So the similarities at present are that we've got some pretty interesting looking high grades, and it's sulfide. Some of the differences would be that we're not seeing realgar orpiment and some of the other those other, you know, exotic minerals in it. We're not seeing any of that, I would say, yet. We may see that in the future, but at least we're seeing the grade, which is the part that we're interested in. And as soon as we can follow-up with some core holes, we'll be able to provide some detail as to where we think it really fits in, in the stratigraphy.

Speaker 2

Just a couple of other points on that. When we got the package of land, we were restricted on where we could drill. So a lot of the drilling in the first half was on disturbed land. We now have the permits to go and drill where we want to. So that will be great.

The first core hole, it was a long hole, 1.5 kilometers. We haven't got all the assays back. Think of that as sort of like a Rosetta Stone to try and understand the lithology. We're to do seismic down there. And really, what then you're looking for, trying to interpret the structures and extrapolating lithology.

So this is going be a long term game. We've always said the initial budget this year is 2,000,000. We'd expect to be spending that sort of money four or five years. But with success, you can always allocate more capital to it. That's a good story down there.

Speaker 7

Good stuff, guys. Congratulations.

Speaker 2

I just wanna throw one thing in there. Obviously, if, you know, if we do come across that sort of material and it's refractory, you know, that's the technology that Alacer have just built successfully over in Turkey.

Speaker 7

Absolutely. That's exactly what I was thinking.

Speaker 2

Okay. Next question.

Speaker 0

Our next question comes from Michael Gray with AgenTus Capital. Please go ahead.

Speaker 8

Hey, thanks for taking my call. I couldn't resist calling in here on the results, and wish you well, Paul and your team, going forward. Congratulations on the deal. My question is on Trenton Canyon. And I'm sure Carl and Jim Carver really wish they had core holes right now.

But just asking, mineralization and cross section looks like it's kind of got a Lawson shape. And I'm just wondering, is it discordant or stratiform? Or can you tell right now? And and the rest of my questions have really been answered in terms of it actually being the coma. So I think this is a really great breakthrough and really excited for you guys.

Speaker 4

From we can't tell too too much from the from the chips, obviously. But in the near surface it's looking like it's following the general orientation of the rock package. The balmy rocks that are at surface, Mike, they've got there's fold packets that are in there, so it's chevron to a little tighter folded. But in general, the package is off to the east. We've either got a structure that's bounding we're thinking this is interpretive now a structure that's sitting in the hanging wall of these intercepts that's between what might be the Balmy package and the Comus lower plate package, or it's that major thrust, stratigraphic contact.

Speaker 8

Okay. And I missed whether you had actually imaged it already with geophysics

Speaker 2

to Yes.

Speaker 0

Speed up for

Speaker 4

We had that planned for the second quarter. With some of the COVID-nineteen travel restrictions for contractors out of state and so on, we've decided to delay that until we can really get a clear picture on when we can initiate it. So it's sometime in the near future, and hopefully when the area starts to get over that, those travel restrictions, we can mobilize the contractors. We have approvals to do the work. We're all set for it.

Speaker 8

Okay, fantastic. Congratulations, and congratulations again on the deal.

Speaker 2

Thanks very You'll have to start covering large cap companies so that you can keep on top of this.

Speaker 3

Next question.

Speaker 0

Our next question comes from John Tumazos with John Tumazos Very Independent Research. Please go ahead.

Speaker 9

Good morning. Congratulations on so many things.

Speaker 2

Thank you.

Speaker 9

With if I'm adding this upright, there's about $870,000,000 US of gross cash across the two companies pro form a the Silvercrest sale and the merger and the results. Should we assume that just the merger and the Silvercrest divestiture is enough corporate activity to keep you busy for a good six months and nothing more is going to happen. And should we assume that you just sit there with this nice cash position and don't retire any of the various liabilities, leases, short term, etcetera, although you do have a few liabilities you could repay?

Speaker 2

Just looking at the pro form a in the table that we put out on when we put the announcement out, Page nine, the cash and marketable securities was USD $7.00 $7,000,000 and that included the marketable securities, included the Silvercrest stake. So it's just moving it from marketable securities across the cash. In terms of debt, ours is the convertible note, the $230,000,000 that's not repayable until 2026. So we'd see no reason for doing that. And Elasa has a project loan, which they can pay back early without penalty, I understand if they want to, but that's something to be discussed later.

I still think cash is a strategic asset. It has been for us. We found that we've been we've done well by keeping a significant proportion of cash on the balance sheet. I think both companies leading into the announcement of the deal were certainly giving significant consideration to capital return. Said that down at the BMO conference at earlier this year that once we got through twenty nineteen, we were holding off because we weren't sure whether we needed extra capital at Marigold to bring in the Red Dot deposit into reserves.

Once we got through that decision and pleasingly, we didn't need the extra capital. I said midway through this year, it's obviously something that the Board would have to would pleasingly enjoy considering potential capital return. I think realistically, we put that on hold until we get out of COVID. It would be I think it would be it wouldn't be prudent to do anything in advance of understanding the full impacts of COVID. But certainly with our balance sheet and our forecast cash generation, then yes, I think that will be a key attribute of the company going forward.

Speaker 9

Do you think that four mines on three continents is an expandable platform? Some companies manage growth better than others. A few years ago, BHP divested all their smaller mines into South 32. There's different, you know, philosophies as to how many moving pieces, how far apart are manageable? Both

Speaker 2

Rod and I have come spent some time in the career in majors here at Rio, me at BHP. And I started off my career with an intermediate back in Australia, Renison Goldfields, which had about eight or nine operations. To me, the sweet spot, somewhere between five to eight minutees. So I think above that, you probably start to get diseconomies. Head office becomes too bureaucratic.

But I think you can really leverage the head office if you're in that sweet spot. So we absolutely have room to grow. And at some point, think Rio back in its heyday, if you go back in the 70s, 80s, 90s, they were brilliant at sort of winnowing out as they added a new higher quality asset, they would sell something lower down the portfolio. So I think that's a discipline that you need. To me, one of the other great benefits of building the portfolio, adding more assets is how you can help develop people in their careers.

You can move them around between mines, which is something that we haven't got to that point yet and very much looking forward to that. So absolutely, there's no way that SSR after bringing in CHERPA has reached the end of its growth potential. I see we're just on that evolution and hopefully we continue to add more.

Speaker 9

Thank you.

Speaker 3

Excellent. Okay. Understand This concludes

Speaker 0

the question and answer session. I will turn the call back to Mr. Benson.

Speaker 2

Thanks, operator. Thanks to everyone for listening today. Hope you have a good day.

Speaker 0

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.