10-Q: SSR Mining Reports Q3 2024 Results Amidst Operational Challenges and Pler Incident Remediation

SSR Mining's Q3 2024 results reflect the impact of the Pler incident and other operational disruptions, with a focus on remediation efforts and financial adjustments.

Summary

• SSR Mining's third quarter 2024 production was 97,429 gold equivalent ounces, significantly impacted by the ongoing suspension of operations at the pler mine following a heap leach pad incident in February 2024.
• Operations at Seabee were also temporarily suspended due to forest fires, further affecting production, but have since restarted.
• The company reported a net income attributable to SSR Mining shareholders of $10.6 million, or $0.05 per diluted share, which includes significant care and maintenance costs at pler and Seabee.
• Adjusted net income was $6.4 million, or $0.03 per diluted share, after accounting for items related to the pler incident and other tax impacts.
• Operating cash flow was $(1.3) million, and free cash flow was $(34.1) million for the quarter.
• As of September 30, 2024, SSR Mining had a cash balance of $334.3 million and total liquidity of $834.0 million, including its revolving credit facility.
• Remediation efforts at pler have cost $103.3 million since April 1, 2024, with $48.3 million spent in the third quarter alone.
• The total cost for pler remediation is estimated to be between $250 and $300 million and is expected to take 24 to 36 months to complete.
• A local court decision cancelled the 2021 Environmental Impact Assessment for pler, reverting operations to the 2014 EIA guidelines, which prescribe a lower throughput rate for the sulfide plant.

Sentiment

Score: 3

Explanation: The sentiment is negative due to the significant operational disruptions, high remediation costs, and negative cash flow. While the company is taking steps to address the issues, the financial impact is substantial and the future outlook is uncertain.

Positives

• Seabee operations have successfully restarted after a temporary suspension due to forest fires.
• The company has a strong liquidity position with $334.3 million in cash and $834.0 million in total liquidity.
• Substantially all of the displaced heap leach material from the Sabrl Valley at pler has been removed.
• The company is actively working with Turkish authorities on the pler remediation plan.
• The company has successfully installed all planned containment infrastructure at pler.

Negatives

• Operations at pler remain suspended following the February 2024 incident.
• The company incurred significant care and maintenance costs at pler and Seabee.
• The company experienced a decrease in revenue due to lower gold equivalent ounces sold.
• Operating cash flow and free cash flow were negative for the quarter.
• The cancellation of the 2021 EIA for pler will result in lower throughput rates.

Risks

• The company is unable to estimate when and under what conditions operations at pler will resume.
• The company cannot assess the full impact of operating under the 2014 EIA at pler.
• The company faces potential legal costs and expenses due to the pler incident.
• The company is subject to risks and uncertainties that could cause actual results to differ materially from forward-looking statements.
• The company's business may be impacted by adverse macroeconomic and geopolitical conditions.

Future Outlook

The company is not able to estimate or predict when and under what conditions it will resume operations at pler. Additionally, SSR Mining cannot, at this time, assess the entire scope of the impact of operating under the 2014 EIA.

Management Comments

• The company focused on four key priorities following the pler incident: recovery of missing colleagues, containment and remediation, investigation into the root cause, and preparing for the restart of the pler mine.
• Public statements from Turkish government officials continue to reiterate that there has been no recordable contamination to local soil, water or air in the sampling locations.
• The initial design of the heap leach facility at pler was engineered, reviewed, and approved by independent, third-party engineering firms.
• SSR Mining continues to work closely with the relevant authorities to advance the required permits for the restart of the pler mine.

Industry Context

The report reflects the challenges faced by mining companies when dealing with operational disruptions and environmental incidents. The suspension of operations at pler and Seabee highlights the vulnerability of mining operations to unforeseen events. The legal challenge to the pler mine's environmental impact assessment also underscores the importance of regulatory compliance and community relations in the mining industry.

Comparison to Industry Standards

• The reported AISC of $2,065 per gold equivalent ounce is significantly higher than the industry average for major gold producers, which typically ranges between $1,000 and $1,400 per ounce. This is primarily due to the impact of the pler incident and the associated remediation costs.
• Companies like Newmont and Barrick Gold, which are considered industry leaders, have reported AISC in the range of $1,200 to $1,300 per ounce in recent quarters, highlighting the significant cost impact of the pler incident on SSR Mining's operations.
• The production of 97,429 gold equivalent ounces is substantially lower than the production levels of major gold producers, which often produce several hundred thousand ounces per quarter. This is due to the operational disruptions at pler and Seabee.
• The negative operating cash flow of $(1.3) million and free cash flow of $(34.1) million are also below industry standards for profitable mining companies, which typically generate positive cash flows from operations. This is a direct result of the operational challenges and remediation costs.
• The remediation costs of $103.3 million since April 1, 2024, and the estimated total cost of $250 to $300 million, are substantial and will likely impact SSR Mining's financial performance for the next several quarters. These costs are significantly higher than typical remediation costs for similar incidents in the mining industry.

Legal Proceedings

• The company is facing securities class action lawsuits in the United States and Canada related to the pler incident.

Related Party Transactions

• Artmin entered into loan agreements with Horizon to fund working capital spend of the Hod Maden project.
• Anagold Madencilik Sanayi ve Ticaret A. entered into loan agreements with Aktif Bank to fund Lidya Mines portion of reclamation and environmental obligations.

Stakeholder Impact

• Shareholders are negatively impacted by the operational disruptions, lower production, and increased costs.
• Employees at pler and Seabee have been affected by the operational suspensions.
• The local community near pler has been impacted by the incident and the ongoing remediation efforts.
• The company's suppliers and creditors may be affected by the financial challenges.

Next Steps

• Continue remediation efforts at the pler mine.
• Work with Turkish authorities to obtain necessary permits for the restart of pler operations.
• Assess the full impact of operating under the 2014 EIA at pler.
• Monitor and manage the financial impact of the pler incident.
• Continue to operate and optimize production at Marigold, Seabee and Puna.

Key Dates

Keywords

SSR Mining, pler Incident, Gold Production, Remediation, Heap Leach, Financial Results, Seabee Operations, Environmental Impact Assessment, Mining Operations, Liquidity