SSR Mining - Earnings Call - Q3 2020

Transcript

Speaker 0

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

Speaker 1

Thank you, operator. Good afternoon, ladies and gentlemen. Welcome to SSR Mining's third 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, EDGAR, the ASX 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 metals 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 Rod Antal, President and CEO Greg Martin, our CFO and Stuart Beckman, COO. Now,

Speaker 2

I would like

Speaker 1

to turn the call over to Rod for opening remarks.

Speaker 3

Thanks, Michael, and good afternoon all. I'm very pleased to welcome you to our first quarterly call following the completion of the merger with Alasso. Today, we'll be discussing our third quarter twenty twenty operating and financial results. It's so good to finally be talking about the new SSR and I'm privileged to be leading the company into its next chapter and having the opportunity to work with an exceptional team. Building from our larger and fundamentally strong business, we have an exciting opportunity to firmly establish SSR as the premier mid tier gold producer for the long term.

Our journey is just beginning and I fully expect that our portfolio will deliver a number of attractive growth options in the future. The third quarter was an eventful one for SSR from navigating the global impact of COVID-nineteen pandemic, closing the zero premium merger with Alacer Gold and ramping up both CB and Puna back to full capacity post the COVID shutdowns. Post merger, we have a very strong and diversified asset base across four operating jurisdictions. In 2020, we will produce between six and eighty thousand and seven hundred and sixty thousand ounces of gold equivalent. After allowing for the impacts of COVID, we have over 8,500,000 ounces of gold equivalent reserves, which puts our weighted average mine life in excess of ten years with Turkey providing longevity of around twenty years.

We are in a peer leading position due to our asset quality and low capital intensity growth going forward. We have a clear focus on free cash flow that will influence every major decision we make. Not only is free cash flow generation going to be strong, but our starting point on the balance sheet is excellent with over $770,000,000 consolidated cash. Our exploration portfolio is extensive. We have a number of organic growth options in the portfolio with over 20 near mine and standalone exploration opportunities currently active.

Over the next few months, we have a number of value enhancing catalysts planned. The first will be the upcoming Copler technical report, which will provide a refreshed view of the sulfide operations and demonstrate a longevity to our oxide gold productions at Copler. In addition, we plan on providing a number of portfolio wide exploration updates on our greenfield and brownfield initiatives before year end. The last point to make is our integration efforts are on track and largely completed. We were fortunate that there was a close cultural alignment that has helped streamline the combination.

Our team has done a tremendous job in a challenging time to bring the business together and I want to recognize them for their efforts that have gone above and beyond our normal high expectations. As 2020 draws to a close, we are firmly focused on delivering safe production and driving to a strong finish for the year. So turning to the next slide. ESG has always been ingrained in the culture of both SSR and Alacer. Going forward, we can leverage the in house strength of the combined team to continue to do the right things and be recognized as a true partner to our employees and the communities where we operate.

We have several different programs across all our operating sites. There are too many programs to call out today that I would like to highlight too. The first is the continued investing in our local communities through established social development funds where we are building capability and establishing sustainable businesses that are not dependent on the mines. And second, it's investing in schools and academic scholarships with a particular focus on encouraging local and female representation. From an environmental perspective, we hold ourselves in high regard and to a high standard.

We have many examples of best practice like being the first mine in the world to be certified under the cyanide management code at Marigold. We are proud of our achievements and will continue to be a leader in our approach to ESG. Moving on to the next slide. With respect to COVID-nineteen, we are focused on the protection of our employees and the local communities in which we operate. Both Seabee and Puna were rightly shut down for a period, while Marigold and Copler have been successful in navigating through COVID, though we had to adjust our operating plans along the way as circumstances dictated.

All our operations continue to work with national and local authorities in accordance with applicable regulations and remain vigilant with respect to on-site activities. We have implemented numerous mitigation measures such as testing, quarantining, ensuring physical distancing and providing additional protective equipment. We are operating our corporate offices at a reduced capacity with all employees working remotely. Just moving on to Slide number six. A few quarterly highlights before diving into the details.

Operationally, we had a solid third quarter and are on track to meet our updated 2020 production and all in sustaining guidance on the back of what is shaping up to be a strong fourth quarter. Gold equivalent production from all operations for the first nine months is 492,000 ounces with 164,000 ounces produced in the third quarter. Our quarter three all in sustaining cost was $10.34 dollars per ounce. Chirpala and Marigold continued to operate reliably with Puna and Seabee now back to steady state. On the growth front, we are busy on a number of fronts from continuing exploration drilling at a number of targets to finalizing the Copler District technical report.

From a financial perspective, we ended the quarter in excellent position with consolidated net cash of $315,000,000 and anticipate a strong fourth quarter with robust free cash flow to the end of the year. Moving on to Slide seven. I'm delighted to announce a corporate dividend policy beginning in quarter one twenty twenty one. We have been very thoughtful in our approach to capital allocation. Our capital allocation strategy going forward is to balance the continued investment in high growth while maintaining peer leading financial strength and providing sustainable capital returns to our shareholders.

While our recurring quarterly dividend is expected to be the primary method of capital return, we will periodically evaluate supplementing this dividend from excess trailing free cash flow. So with that, I'll turn the call over to Greg, who will discuss our financial performance in more detail.

Speaker 4

Thanks, Rod, and good afternoon to everyone. This is definitely an exciting time for SSR. I joined when we were a company with a single asset in Argentina. And to go forward positioned at the top end of the mid tiers with four strong assets and one of the best balance sheets in the business is a great opportunity. Overall, I'm quite pleased with our third quarter.

Even though Seabee and Puna operations were interrupted for part of the quarter, they contributed well, with Marigold solid and Chipler coming in strong over the quarter. As you will have noted from our statements, we only recognize the operating and financial results for Chipler within our consolidated statements for the two week period post the September 16 transaction close date. Within that context, revenues totaled $225,000,000 with income from mine operations totaling $83,000,000 Attributable net earnings totaled $27,000,000 or $0.19 per share. Each of these financial metrics were increases relative to the comparative quarter. I'll talk about a number of factors related to the transaction that impacted our quarter shortly.

But adjusted net income of $68,000,000 or $0.49 per share is an impressive start for the merged company, with all four assets contributing to that result. Cash from operating activities was $44,000,000 with notable items being catch up cash tax payments as COVID related tax deferrals expired, working capital buildup as Puna resumed concentrate sales and the settlement of payables and accruals acquired through the Alacer transaction. Like many of our peers, one of the principal impacts of COVID has been the necessity to defer capital projects to reduce risk of contractors interacting with our operating staff. While that situation has somewhat normalized, it will push some capital spend into 2021. Publishing these first quarterly statements of the new SSR really highlights one of the features of the merger: an exceptionally strong liquidity position to drive our strategy.

Consolidated cash totaled $773,000,000 with net working capital over $1,000,000,000 We have a strong net cash position and well structured low cost debt. So the balance sheet is in great shape and will get better. So let me briefly discuss the financial statement impacts of the merger. The most apparent is the transaction and integration costs we incurred in the third quarter of $15,700,000 This accounts for the majority of costs we expect to incur with the exception of certain limited integration costs that will carry forward through the next couple of quarters. The merger is accounted for as an acquisition of Alacer by SSR.

As a result, we recognize the assets and liabilities of Alacer at fair value on the date of acquisition. This has the result of increasing the book value of mineral properties and current assets to fair value as described in Note four to our financial statements. Future cash flows are not impacted by the resetting to fair value, but future earnings are. The assets impacted were inventories, finished goods, leach pad inventories and sulfide ore stockpiles. As these assets are processed, the associated production costs will increase, reflecting this recognition at fair value.

This was evident in the third quarter as we sold the gold inventory acquired and produced from the heap leach. You will note a $19,000,000 increase to production costs, principally due to these impacts. Finished goods is a onetime impact, but heap leach will carry forward for a number of future quarters. And the ore stockpiles, which equate to over two years of plant throughput, will impact certain periods over the mine life as they are processed. Finally, the mineral reserves see a significant fair value bump, in this case, just under $1,000,000 So as we mine and process these ounces, we will incur additional depletion expense of approximately $180 per ounce.

So as mentioned earlier, all noncash impacts, but important to understand in estimating future income. Next, it gives me a lot of satisfaction that we can announce the first dividend for the merged SSR commencing in the 2021. It is strong evidence of the strength and maturity of our business. The base quarterly dividend will be $05 per share, representing an annual yield of approximately 1%. While this recurring quarterly dividend is expected to be the primary method of capital return, we will periodically evaluate supplementing this dividend from twelve month trailing excess free cash flow in the form of incremental dividends and share buyback programs.

I have confidence the outlook for metal prices and our business will provide significant opportunity for capital returns as we continue to deliver shareholder value from the portfolio. Finally, I look forward to a great fourth quarter. We will have the contribution of Chuckler for the full quarter and expect all four assets to close the year strongly in an environment of robust metal prices. With those comments, I'll turn the call over to Stuart, who will discuss our operational performance and organic growth in more detail.

Speaker 5

Thanks, Greg. As always, I'll start with a comment on health, safety, environment and community relations. A considerable amount of energy has been expended through and before the integration process to ensure that we managed HSE and the risk in the business. Experience has shown us that in periods of change, we have distraction and risk. COVID has added an overlay of protocols and anguish to everything in 2020.

We have a well resourced and experienced HSE and operations teams in SSR, who have managed to achieve impressive results over the years. Our operations managers have done an impressive job of maintaining our HSE standards while managing the business and in some cases, restarting them in the COVID world. Our safety metrics were disappointingly slightly down through the middle of the year, but are now improving. Protecting and caring for our people, the environment and the communities underpins our business performance, and we will continue to be a key focus area of all of our teams. Each of the sites has a slightly different approach to dealing with COVID management tailored to the situation and the specifics of the site.

I'm confident that all of the sites have taken a very strong and proactive stance against COVID and are increasing protocols ahead of rising statistics. Now a brief comment on each of the mine sites. Please move to Slide 10. Copler has not had a direct interruption through the COVID pandemic. There have been some indirect impacts, including some impact on production and the pushing back of some work and costs into next year.

Through the first nine months of the year, both oxide and sulfide plants produced a total of 224,000 ounces of gold for approximately $214,000,000 in pretax free cash flow. There have been some reductions in workforce as As a result, there were some changes made to the mine plan to compensate. Copler remains on track to achieve full year guidance. The sulfide plant continues to operate at above design rates, compensating for slightly lower than planned grade and recovery. The change to the mine plan ensured that the manganese pit cutback was completed on time and we're now starting to mine the higher grade ore in this pit.

Autoclave one was inspected during a brief plant shutdown in July and found to be in excellent condition. The Autoclave one shutdown previously planned for the second half has now been pushed back to 2021. There are no autoclave shutdowns planned for the rest of the year. Exploration in the region and within the Copler Mine area continues with encouraging results, which we plan to share soon. Along with the other targets that we've previously discussed, our VP Exploration hypothesized the presence of a porphyry intrusion relatively close to the ultimate bottom of the Copler Main Pit.

Mid year, we started testing this target, which we've creatively named C2, and have intersected mineralization consistent with the porphyry intrusion. We will share the data when the analysis in the QAQC is complete. Engineering and early works of the supplemental flotation plant advanced during the quarter. The flotation plant will increase the sulfide plant throughput and lower unit costs. The impact of the flotation plant is being incorporated into the upcoming Copler District technical report.

The updated technical report will also contain a PEA outlining the preliminary development plan for Ardich. As a reminder, Ardich is still being explored and the resource will expand. The Ardich PEA represents only drilling from up to 2019. We restarted drilling in March, April after a bit of a COVID delay. Subsequent 2020 drilling confirms extension to the mineralization.

We will shortly provide an update of the exploration at Ardich, including both infill and step out drilling. The technical report will be released before the end of the year after finalization of engineering and business assessment and of course approvals. Please move to Slide 11 and we'll talk about Marigold. Marigold continue to operate through COVID, a great credit to the mine management. Again, there have been indirect impacts that affect both 2020 and 2021.

Total material moved was another quarter above 20,000,000 tonne despite some teething issues with our new hydraulic shovel. We believe these issues are now mostly behind us. Shorter hauls into next year will facilitate higher tonnage rates for the mine. As expected, the head grade increased in the third quarter versus previous quarters. Overall, we stacked just over 73,000 ounces recoverable in Q3 and expect to finish the year within guidance.

All in sustaining costs at $12.43 dollars took a hit from the increase in royalties as a result of the gold price as it did at all of the sites. High gold prices are a nice problem to have. Exploration drilling continued across the property with some interesting results. With the land acquisition over the last few years, we are assessing the plethora of opportunities across our very large package in the region. Very prospective areas on the edge of both mining areas and close to old tenement boundaries are some of the areas of focus.

Obviously, we avoided showing our excitement for these while we negotiated to purchase the abutting areas. We will provide some update on the Marigold tenement exploration in our group exploration updates later this year. Please move to Slide 12. Seabee is a great high grade mine with lots of potential. From a health and safety perspective, we've been doing a lot of work to comply with the new diesel particulate matter requirements stipulated by the province of Saskatchewan.

This involves a lot of improvements to existing equipment as well as we recently started commissioning of a new ventilation rise and fans, which has made a very big improvement as designed. As you know, we shut Seabee down as a precaution for COVID. This action also pushed some working capital into 2021. Seabee ramped back up in August. And in September, we had a record milling month of an average of twelve seventy one tonnes a day.

This included our best ever one day throughput of fifteen twenty two tonnes a day. Full perspective, the year that prior to SSR mining purchasing CV, the mill averaged seven sixty tonne a day throughput. In the PEA that was released subsequently 2017, mill throughput was estimated to average ten fifty for the whole life of mine. So the current throughput rates demonstrate upside to the production profile. The mine is currently bottleneck at There are also real continuous improvement opportunities in the mine at Seabee, and this will be an area of considerable ongoing focus.

We recently approved the replacement of an older jumbo along with an additional jumbo for the mining fleet. These purchases will come across the ice road in early twenty twenty one. During the shutdown for COVID, there was a lot of maintenance of both processing facility and the mobile mining equipment, which will support productivity going forward. Seabee has great exploration potential, both immediately on strike in the current mining areas and in the very large tenement package along with the contiguous Fisher tenements. You may have seen that we recently satisfied the earning requirements at Fisher and are now 60% owners with an option to increase to 80% in the future.

We are looking to increase exploration around the mine this year. When we do the corporate exploration update later this year, we will update you on some of the interesting exploration results from Seabee and Fisher and from our productive summer program at Amesk, which is about 50 kilometers to the south of Seabee. Now please move to Slide 13. Puna ramp back after our hiatus for COVID. Infection rates in Argentina, including the Puna, reached well into the twenty percent range, but we've seen generally pretty low severity and few hospitalizations.

Our team has done a fantastic job of isolating the mine. There is, of course, a cost of very tight COVID controls. The mine and the plant have ramped back up really well, and the plant is running regularly at above design throughput and recoveries. The tailing pumping system that causes some consternation last year now appears to be fully resolved and in control. On the back of higher silver prices and low costs, Puna is forecasting produce good cash flow going forward.

An all in sustaining cost of $11.26 for the quarter despite the shutdowns in COVID demonstrates the potential of Puna. I'm very excited to see what the team can deliver there. Now move to Slide 14. I've covered off most of this already. So in summary, our focus is on first, operational discipline and continuous improvement to deliver from our tremendous operating assets.

Secondary, leverage off our fertile organic growth portfolio with our immediate focus on converting some of the near mine low cost prospects into production. You will get a look at the first of these or the next of these when we reveal Ardich PEA in the Copler technical report in the next few weeks. With that, I'd like to close and hand back to Rob.

Speaker 3

Well, thanks, Stuart and Greg. So despite the challenges thrown at us by COVID, we've done an amazing job managing our operations, completing the merger and integrating both companies into the new SSR. The announcement of a dividend highlights the financial strength of the business and a responsible approach to capital allocation. And finally, we are lining up a number of catalysts that will show the value and exciting growth potential from within our portfolio. So with that, I'll pass the line to the operator and take any questions you may have.

Hello, operator?

Speaker 0

Thank you. We will now begin the question and answer session. Our first question comes from Ovais Habib of Scotiabank. Please go ahead.

Speaker 2

Hi, Gordon team and congrats on a good quarter and thanks for taking my questions. Just a couple of quick questions for me. Just starting off with Tripler. Great to hear how well the Autoclaves are performing. You mentioned the Autoclave shutdown is now or Autoclave No.

One shutdown is now expected in 2021. Is this shutdown expected in the first half or 2021?

Speaker 5

We're scheduling it in the first quarter at this point.

Speaker 2

The first quarter. I mean in terms of the shutdown that you saw in the AutoClub number two, in terms of how well the ramp up has gone, is there any kind of optimizations or anything that you guys need to do within those AutoClubs that you're seeing? Or is this just a routine shutdown that you're expecting in the first half?

Speaker 5

No, it's just a routine shutdown. The main driver for this one will be the replacement of the agitator blades, because they're a wear item and eventually they wear. They've lasted much longer than we had expected to, but we're expecting And

Speaker 0

to have to replace them late in the first

Speaker 2

just then moving on to exploration drilling at Ardich. You mentioned that recent drilling had started around the April timeframe. Has that been mostly step out in infill? And can you give us an indication as to any sort of preliminary results that have come according to expectations?

Speaker 5

Yes. So the infill drilling confirmed what we expected to see. And you'll and then we've been stepping out around the existing resource. When we issued the update in the next few weeks, we're planning on breaking it out so you can see what's infill and what step out.

Speaker 2

And just confirming, none of this will be included in the study?

Speaker 5

No, no. Well, the technical report, as you know, we have to pick a point in time. So we closed we prepared the technical report, and this is subsequent. So it's all upside to what you'll see in the technical report.

Speaker 2

Okay. And then just moving on to CB, and then I'll jump back into the queue. But in terms of CB throughput was definitely you were hitting record throughput levels. Is that expected to be sustained at current levels going into Q4 and 2021? And also, can you give us any indication of what the stockpile grade for the 17,000 tonnes is?

Speaker 5

So the challenge for Seabee in the longer term is the mine rather than the plant. So we are putting some extra equipment in there. My comment regarding the jumbos, so new jumbos. There are some requests for some other equipment, and we're working on improvement plans to get the mine rate up in order to be able to feed the plant at a higher rate. So I'm not promising anything beyond the numbers that you previously would have seen.

It will take a while for us to get some traction, but there's definitely good upside at CB.

Speaker 2

And then just any indication

Speaker 1

as

Speaker 2

to what you can give us the information on the 17,000 tonnes of stockpile grade?

Speaker 5

It's a very small stockpile. It's pretty much just a ROM. So it's around about the average grade that's sitting the plan.

Speaker 2

Got it. And I'll leave it there guys and jump back into view. Thanks.

Speaker 3

Great. Thanks, Evas.

Speaker 0

Our next question comes from Cosmos Chiu of CIBC. Please go ahead.

Speaker 6

Hi. Thanks, Rod, Stuart and Greg. And very good financials today and certainly good to see that you've put in a dividend here. I guess the market likes it as well. Maybe first off on Tripler.

As you talked about, the cutback here in Meganise Pit is still on time and looks like it's going to start contributing some higher grade material. Is it can you remind me, is it both the oxides and sulfides that will benefit from it? And what's the magnitude in terms of the grade improvement versus the main pit here?

Speaker 5

Yes. So there are there is a small contribution of oxide. The contact is sub vertical in manganese pits. So when we get to the bottom of the pit, we still do get small amounts of oxide. And with regards to the grade, I don't think we've disclosed sort of what the incremental increase will be.

But you remember that Sheffield mining rate has always been higher than the processing rate as it was in the original technical report. So we do feed the higher grade as it comes to the plant. We are, as I've discussed on previous calls, always having to juggle grade and chemistry. And it's one of the advantages that we'll have when we get the flotation plant in that we'll have a bit of a disconnect between the chemistry because we'll have a bit more control over sulfide grades and being able to manage down carbonate reporting to the autoclaves.

Speaker 6

For sure. Understood. And then again, on Turquoise Hill, as you mentioned, the MD and A, the TFS construction, you had to slow it down a little bit. However, you're still advancing ahead of operational requirements. With that said, in an ideal world, would you want to catch up on that construction later on, maybe sometime in 2021?

And is that why you've talked about some of the CapEx catch up in 2021?

Speaker 5

So with the tailings dam at Copler, another way to think of it is the waste dump for the mine. So we take the competent suitable mostly limestone material from the mine and use it for the placement with compaction into the wall. And as a result, the wall the rise at the TSF is driven mostly by the mining rate rather than the plant requirement. So we were a long way ahead of where we needed to be. And when we didn't have enough drivers, what we did was found an area to stockpile ore sorry, the tailings dam wall material partway to the Tailings Dam so that we could free the fleet back up to go into the mine and work.

Now there is a small cost associated with that because we have to pick it back up and then take it the rest of the way. So there is a cost to pick it up at some point in the future to move it out to the Tailings Dam. But we're a long way ahead of where we need to be in the Tailings Dam, and we will remain there.

Speaker 6

For sure. Again, maybe moving ahead out to Marigold here. As you talked about, you've been transitioning from the lower levels of Mackay 5 to now the upper levels of Mackay 4, and then I think Phase eight is also coming in. You talked about the grade being lower year over year due to the fact that you're transitioning into the upper levels of Mackay four. Again, I have not I haven't been to Marigold for a while now.

But can you remind me in terms of I don't remember a lot of grade variability between the different phases, but when are you getting in and out of it? Could you give us some color in terms of the grade profile, intermediate term and also potentially longer term as well?

Speaker 5

I can give you a part of that, and we'll have to take the rest on notice. Sure. You're correct. We are transitioning out of Mackay five and six and coming back up into four and eight now. And then we will be back down in Mackay five, I think about the second and third quarter.

But I'll have to confirm those numbers for you going forward.

Speaker 6

But I guess as you go deeper, as you transition deeper into the mine, you get higher grade sometimes. As you're at the upper levels, you get lower grade and then you would come to that Of

Speaker 5

We have been below the reserve grade, and we're moving back towards the reserve grade, as you would expect.

Speaker 6

Okay. And then maybe one last question here on Seabee Santoy. Stu, as you mentioned, there's the ice road that's needed every year to replenish your inventories, your supplies. Any kind of concerns in terms of with COVID-nineteen impacts and whatnot? Can you remind us, I guess, number one, what is the timing of building the Ice Road?

And number two, do you foresee any kind of impact given the current pandemic?

Speaker 5

So no, we don't expect to see any impact. We build the road ourselves with our own team, and the team is ready to go to do that work as they normally would. We start building it at the beginning of next year. We don't have to bring quite as much as we would normally bring across the Ice Road this year because we were shut down for a period. We've got those materials and inventory supplies on-site already.

So it won't be as big a year as it usually is coming across the ice road, but we don't see any impact from COVID in our ability to be able to do that.

Speaker 6

Again, when are you going to start building it? So when is it going to get cold enough?

Speaker 5

I think they start in January. Certainly, one they need to wait for it to start to freeze and then they start to then they progressively take smaller trucks across to get it to harden. So moving the equipment across it hardens it. And then usually by about February, they're getting ready to start to run it.

Speaker 6

And maybe one last question, maybe for Rod here. Again, taking a step back, looking at the big picture here, clearly, key catalyst is the Tripler technical report coming out, and it's great to see that exploration results are coming out as well. But again, when could we expect are you expecting to put out some kind of longer term sort of guidance, maybe three year guidance in terms of production and costs? And on top of that, as you talked about, Rod, you're looking at optimizing the portfolio. And when can we start expecting more details in terms of CapEx in terms of what's in the core portfolio, what might not be?

Certainly, there's Pederia that's in it. There was some chatter or some talk previously about new trucks at Marigold. Just wondering about timing and what kind of detail could we expect? Thanks, Rob.

Speaker 3

Yes, that was a long question, Cos. I appreciate it. So I think we'd sort of say as a new team that we're relieved to get the quarter three results and work behind us because it's been an important for us to sort of demonstrate the strength in the business and as we're now moving forward. I think in the meantime, we've been busily working on bringing the organizations together and also ensuring we stand things up. And as part of that, developing the catalyst rich announcements that will come out here as we close 2020 off and then moving into 2021, starting to look more about in the exploration and growth area, and particularly how it all sort of plays together.

So I think first things first, we finished the year. We've got catalysts already lined up as we've outlined in the quarterly results. And then into next year, starting to line all those up together and seeing how they play out in terms of our growth profiles and portfolio management moving into 2021. So we've got plenty on our plate. I'm pretty excited by the growth potential.

And I think it sort of plays out when you look at our capital allocation strategy. Clearly, we've got an eye into the business ensure that we're continuing to reinvest. We're continuing to ensure that we have the balance sheet to bring some of these opportunities forward and returning capital to our shareholders. So I think we've covered a lot already as a new team, but we've got a fairly aggressive plan moving into 2021 as well.

Speaker 6

Thanks a lot, Rod, and that's a great answer. And thanks again.

Speaker 0

Our next question comes from Dalton Baretto of Canaccord.

Speaker 7

Rod, I'd like to start by wishing you and your team all the very best in the new company.

Speaker 8

That

Speaker 7

said, it is a very different company than Elastir. And so I'd really like to get a sense for how you're now viewing the world through the SSR lens. In particular, I'd love to get your thoughts on how you're thinking about growth versus shareholder returns and then also rest from a jurisdictional, from a balance sheet perspective? And then just finally, thoughts on silver given SSR's legacy operations as well as some of its projects.

Speaker 3

Look, think, Dalton, when Paul and I were talking to you about the merits of the merger and bringing both companies together, what we saw was a very close cultural alignment. And the lens that we look through both businesses were eerily similar. And I think that's held true to where we are today. So from a lot of perspective, it's business as usual and getting the team to get going and starting to think about what are we doing as a business, what do we need to deliver, what's important, where do we prioritize our capital for growth. A lot of the elements and framework was already in place and thoughts were in place.

So that's why I think in a lot of regards, we've hit the ground running. And that's what you're seeing obviously play out here with the quarter three results and a number of the other catalysts coming up further in the next in this quarter and moving into next year. So we're in really good shape. And that shouldn't be a surprise to anyone because we did talk about it. In terms of prioritizing some of that growth opportunities, I've said a few times that what we see in front of us right now is low capital intensity across the portfolio because a lot of them are brownfields opportunities at a near mine.

But of course, we have a number of exciting greenfield opportunities within the portfolio, quite an extensive allotment there that we're progressing through and looking how that might play out into our capital needs moving forward as we continue to evolve the SSR story beyond this year and probably beyond next year as well. And I think that plays out in our capital allocation strategy that I just mentioned. Clearly, there's an element that we want to retain money to grow and invest because that's the best bang for the buck for our shareholders and that high yielding growth, and we'll see how that plays out. We've got it all before us. We've got a great platform to start with.

We're off to a good start and look forward to presenting more of these as we move into next year. Your last question on silver, clearly, with Puna specifically, people have asked about the future of Puna. Puna is a great contributor to the group level in its cash generation. So it shouldn't be lost on folks that for us, while it still does that and still generates on a per ounce basis, free cash flow, It's welcome within the portfolio against the other three operations. So that's our going in proposition, and that hasn't changed at all.

And we'll obviously continue to assess Puna in the longer term to see whether there are other opportunities around it as well that it may actually evolve here into something different. So that'll be part of our thought processes moving into 2021 as we continue to look at all the organic growth we have.

Speaker 0

Our next question comes from Daniel Morgan of UBS. Please go ahead.

Speaker 8

Hi, Rod and team. First question just on Copler. Are you back on reasonable manning levels? Can you just discuss the COVID impacts at Copler? And maybe just touch on the other assets, where you're at on that issue as well?

Thank you.

Speaker 5

Yes. So Chef was back up to full manning. Chef was actually got rapid testing up and running at site now. They're still isolating people for a week when they come in, but they're doing both antigen testing and testing for the virus itself, which they can turn around in about an hour. So we've got better control and things do seem to be improving.

In Puna, they had very high rates. As I said in my talk, they were up getting twenty five percent positivity rates with people. It has in just in the last week or two really markedly dropped down. I guess that means everybody's had it and they're immune. But they're so things seem to be getting a bit easier there.

At Marigold, they've got quite a lot of controls in place to control people coming to site and ensuring it. As you may know, Nevada is seeing an increase in rates, but the protocols that we've got in place are well established now and it's not impacting us from a production perspective. And then lastly, at Seabee. Seabee, we have had some issues with banning, particularly where we have quite a lot of indigenous folks coming in from sort of remote areas and where there are instances where we and from Saskatoon as well, where there are instances of family members or friends being positive, we have to delay them coming back to site. So we are seeing some impact, but it's not as much as it was previously.

Speaker 8

Okay. Thank you very much. And the grades being stacked at Marigold has seen a big uplift. Can you just talk about what you expect for the next couple of quarters? I imagine that will go up towards zero five gram or more over Q4 and into Q1.

Is that right?

Speaker 5

Mate, we start to head back up towards the reserve average. I'm not sure they're going to get to 0.5 in those periods. I think it's a little bit below that, but heading back towards the reserve numbers.

Speaker 8

Okay. And then maybe just the dividend, just keen to explore the capital return framework that you've outlined a little bit more. Great to see a dividend earlier than I had thought. The $0.05 or sorry, $0.05 per share, which is the basis, is that just every quarter you're to pay that? And then just wondering how the supplementary works.

Is that every quarter you'll look at the free cash flow for the quarter behind you and go, okay, we're looking good and pay out a supplementary? Or is it something that you might do on more a half year or annual basis, at the supplementary?

Speaker 4

Dan. It's Greg. I'll just take that question. So as you say, we're certainly pleased to have the initial dividend announced, and we'll start paying the regular quarterly dividend at $05 per share starting in 2021. And we will look at capital returns as one of the uses of our capital compared to, as Rod and Stu talked about, lots of opportunity we see in the portfolio.

So we will look at those supplemental dividends on a trailing twelve month attributable basis. So as we start to bed down the combined business and get those results put together, the Board will periodically review that. I think give us a little bit of time here to get things settled down, and then the Board will start to look at those supplemental returns, and we'll be comparing incremental dividends against share buybacks just depending on market conditions and against other needs within the portfolio.

Speaker 8

So on that and a follow-up question just on the mechanics. What do you need to do mechanically to get a buyback in place? Forgive me, I'm not as familiar with perhaps Canadian law or jurisdictions regarding this. Do you need AGM approval? Is the Board resolution?

How would you do that? And also a follow-up question on that is how do you make the assessment of a buyback versus a dividend?

Speaker 4

Yes. Thanks. So within Canada, there is a normal course issuer bid structure that allows you some buyback opportunities tied to your liquidity, so a certain amount of volume. So that is one structure. If you if we wanted to do a more significant piece, then yes, there's more regulatory and other approvals required.

And in terms of the trade offs, it's really going to be driven by really where we see market valuation conditions overall. And again, if we see an opportunity where that makes more sense for our shareholders, again, will all be focused from a shareholder lens in terms of how we make that decision. If we see that as being a preference use of capital, we'll move in that direction.

Speaker 0

Our next question comes from Mike Parkin of National Bank. Please go ahead.

Speaker 9

Thanks guys for taking my questions and congrats on the good quarter. Just a follow-up there on the NCIB, that's the vehicle you pursue like a share buyback. Would you be using like a PNAV valuation at something below spot, like something trailing twelve month average or something to kind of determine whether or not you're active within NCIB versus a cash payment?

Speaker 4

Yes. Thanks, Mike. Obviously, we'll look at a number of general market conditions in addition any specific factors that are playing out. So I don't want to get too specific on it because, obviously, we see we're in a cyclical business here, and we see we can see a lot of volatility in market conditions over time. And so again, we would be looking at it over long term valuation parts.

Certainly, it wouldn't be our intent to use that structure unless we really felt we were a strong position to do so on a valuation perspective. So I think as we said, we see the quarterly dividend as the primary recurring return of capital, and then we will look at these on a supplemental basis. I would again focus you in terms of what we've said there around the dividend being the primary capital return piece.

Speaker 9

Okay. Yes, it makes sense. Switching over to some of the stuff that's coming down the pipe in the next few weeks. With respect to Ardich, you mentioned how it will be a PEA. What are the next steps after that?

Are you going to go through like a full feasibility study? Or given track record and the experience, it's a regional kind of satellite for you. Are you more comfortable having an earlier stage economic analysis on it to move ahead with a construction decision?

Speaker 5

Yes, thanks for that. So we've determined to make it a PEA because we're still exploring it, so it's still growing. We wanted to give an indication of what our expectation was for the development and the development potential for it. It's quite separate from in that it's removed, and we'll have to spend some capital on it and then bring that across and process it at the Copler plant with an expansion of the heap leach at Copler. That's all incorporated into the PEA.

If we've gone down the pathway of doing a reserve, we could have either presented a smaller case that wasn't as indicative of what we expected to be and then had to have done a subsequent reserve. Our expectation is we'll issue this. It's as I said earlier, it's a point in time, and it represents a point in time development opportunity. But the resources is obviously already growing outside of that. And our plan will be sometime in the next year or so to issue an update.

And at that point, it will convert into a reserve, most probably a reserve in the Greater Copler, but we'll see. But it will be a reserve in the next year or so.

Speaker 9

Okay. So spending should be pretty much not much other than expiration dollars for the next twelve months?

Speaker 5

No, no. We don't have a lot to spend. So obviously, we've got the development costs of the metallurgical test work and those types. But it's of the order of $10,000,000

Speaker 9

Okay. And just with Phebe, on an exploration standpoint, you do tend to kind of do more of your expansionary step out drilling in the wintertime. What is it that you're aiming to kind of focus on? I remember a Batman zone looked pretty exciting last year with results coming out of there, plus some additional intercepts along the Santor Shear. Is it follow-up work there?

Is there additional targets that you're aiming to test?

Speaker 5

So there's quite a number of targets along that mineralized trend that goes down through Fisher and then branches up also to the I guess, to the Northwest as well. And we have a series of targets. So in the exploration, you'll see that there's some drilling as well as field exploration in those areas as well as in Amisk field exploration in Amisk a bit further away and in and around Santoy itself. And of course, we've been working on the gap hanging wall over the period as well, getting ready to convert that into a reserve. We are looking this year to maybe invest a little bit more into exploration in around Seabee to give ourselves a bit of a longer time horizon for decision making.

Speaker 9

Okay. And can you just remind us on what you need to do to take that ownership up on Fisher from 60% to, I believe you said earlier, 80%?

Speaker 4

Yes. Thanks, Mike. It's Greg here. So it's really just a onetime $3,000,000 payment that's due to our partner to do that increase from 60,000,000 to 80,000,000 And we'll look at that here as we work through the next number of months.

Speaker 9

Okay. Thanks, guys. All my other questions were answered. So thanks very much, and congrats again.

Speaker 0

Thank you. This concludes the question and answer session. I would like to turn the conference back over to Rod Intel for any closing remarks.

Speaker 3

Well, thank you and thanks operator. Want to appreciate everyone for participating today on our first call as a combined entity and wish you all a good day. Thank you very much.

Speaker 0

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