Digging Into Earnings: SSRI, MUX, and HL
Silver Standard Resources is shooting for Pirquitas to be profitable at $18 silver when including both operating and capital expenses. Consistent with the prior quarter, ore grades were 215 g/t Ag and 1.8% Zn. Management forecasts similar zinc grades through the second quarter of 2014. Next quarter, Silver Standard is expecting to produce 2 million ounces of silver and 8 million pounds of zinc. Expecting further details on the Mexican tax and royalty laws by late December, a construction decision at Pitarrilla is being pushed back to first-half 2014 .
The San Agustin deal with Argonaut Gold, not closed yet, values 1.6 million ounces of gold (at 0.36 g/t Au) "indicated" mineral resources at roughly $47 per M&I gold ounce. Upon closing the deal, Silver Standard strengthens its already strong balance sheet. CEO John Smith reiterated the $400 million (pre-San Agustin sale) is for funding future growth, leading me to believe an internal project like San Luis might get the nod. I can think of at least two great acquisition candidates under $75 million. Phone me up Silver Standard.
McEwen Mining is one of the few remaining miners that isn't blasting away at its exploration budget. In Nevada, sensitive water sampling techniques will be on full display come 2014. The technology and know-how isn't new; it's called groundwater geochemistry. If any more elephant-sized gold deposits are to be found in Nevada, they are not going to be up in the mountains, but in the valleys. Groundwater geochemistry can be a cost-effective way to explore vast areas quickly, grass roots stuff.
Rob McEwen, CEO of McEwen Mining and chief owner with 25% equity (no salary), is typically one of the most upbeat and confident gold guys. On the call, he described the overall industry as "ugly." McEwen sounded a bit beaten up. El Gallo 2 wants to be built, but it needs one more permit. McEwen will be happy when they get it, maybe as early as Q1 2014. With $32 million set aside, McEwen Mining should have all the capital it needs until then (Q1-Q2 2014). Though still on track for 130,000 gold equivalent ounces this year, how many will McEwen and crew be able to deliver in 2014?
Is the situation in Mexico being overblown?
Legally speaking, more details need flushing out, but McEwen thinks the Mexican tax reform will only cost them about $250,000! That number seemed surprisingly low to me (did I hear that right?). Many analysts are worried about McEwen Mining and Silver Standard getting money out of Argentina. Could that risk also be overblown? McEwen said they could take $70 million out with no restriction. He went on to say that Argentine currency depreciation is a positive for performance at San Jose (in partnership Hochschild Mining).
Hecla Mining intends to get new resource and reserve numbers published within the next six weeks. Sadly, I don't think Mr. Market is as excited to see them as Hecla is to release them. Also starving their exploration business, don't expect much from Hecla in that vein. Instead, Hecla is shining a light on its "Killer Creek" area. Less than a mile from Greens Creek infrastructure, surface drilling will follow up on some 10% copper samples. Management speculates the finding is a Greens Creek source area or a separate sulfide zone. Eureka!?
San Sebastian (Durango), Hecla's most advanced pre-development project, is on hold. New resource numbers there should be finalized in the first half of 2014. Management is debating the pluses and minuses of small-scale mining San Sebastian. During the first nine months Hecla gained $23 million on a derivatives trade. Half of Hecla's base metal revenue is hedged three years into the future, $300 million worth. So far so good in Quebec: Casa Berardi was acquired from Aurizon earlier this year. This was Hecla's first quarter under ownership. Grade fluctuation there can make or break any quarter. Lucky Friday is full steam ahead (up 121% Q-over-Q) : we'll see if they can beat Q3's production of 480,000 silver ounces in Q4? CEO Phillips Baker had one last comment to work in before Q&A: "IF" prices rise Hecla will be among the best performers on the NYSE (that's a big if).
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