10-Q: SSR Mining Reports Second Quarter 2024 Results Amidst pler Incident Aftermath

SSR Mining's second quarter 2024 results reflect the ongoing impact of the pler incident, with suspended operations and significant remediation costs.

Summary

• SSR Mining's second quarter 2024 production was 76,102 gold equivalent ounces, with cost of sales at $1,357 per payable ounce and all-in sustaining costs (AISC) at $2,116 per payable ounce.
• The company reported a net income attributable to SSR Mining shareholders of $9.7 million, or $0.05 per diluted share, which includes $30.6 million in care and maintenance costs at pler.
• Adjusted net income attributable to SSR Mining shareholders was $7.5 million, or $0.04 per diluted share, after adjustments for fair value changes in marketable securities and other tax impacts.
• Operating cash flow was $(78.1) million and free cash flow was $(116.3) million for the second quarter of 2024.
• As of June 30, 2024, SSR Mining had a cash and cash equivalent balance of $358.3 million and available borrowings of $399.6 million under its revolving credit facility.
• The company completed the sale of the non-core San Luis project for $5.0 million in cash, with potential for up to $37.5 million in contingent payments and a 4.0% net smelter return royalty.
• The pler incident on February 13, 2024, led to the suspension of all operations at the site, with remediation efforts expected to cost between $250.0 to $300.0 million over 24 to 36 months.
• SSR Mining expects to complete the removal of displaced heap leach material from the Sabrl Valley by the end of the third quarter of 2024, with over 13 million tonnes already moved.
• The heap leach pad at pler will be permanently closed, and heap leach processing will no longer take place at the site.
• The company is working to reinstate its environmental impact assessment and operating permits to restart operations at pler, initially processing stockpiled ore through the sulfide plant.

Sentiment

Score: 3

Explanation: The document reflects a negative sentiment due to the significant impact of the pler incident on the company's operations and financials. While there are some positive aspects, such as the sale of the San Luis project, the overall tone is cautious and concerned about the future.

Positives

• The company successfully sold the non-core San Luis project, generating $5.0 million in cash and potential future payments.
• SSR Mining has made significant progress in the remediation efforts at pler, moving over 13 million tonnes of displaced material.
• The company has a strong cash position of $358.3 million and access to a revolving credit facility of $399.6 million.
• The sulfide plant at pler is expected to process stockpiled ore economically while remediation work is completed.
• Public statements from the Turkish government affirm no recordable contamination to local soil, water, or air.

Negatives

• Operations at pler remain suspended following the February 13, 2024 incident, significantly impacting production.
• The company incurred $30.6 million in care and maintenance costs at pler during the second quarter of 2024.
• Operating cash flow was negative at $(78.1) million and free cash flow was negative at $(116.3) million for the quarter.
• The company recorded a net loss attributable to SSR Mining shareholders of $(277.389) million for the first six months of 2024.
• The company has incurred significant reclamation and remediation costs related to the pler incident, estimated between $250.0 to $300.0 million.
• There is ongoing uncertainty regarding the reinstatement of the environmental impact assessment and operating permits at pler.

Risks

• The pler incident has resulted in significant financial and operational disruptions, including suspended operations and substantial remediation costs.
• There is uncertainty regarding the timing and conditions for resuming operations at pler, including the reinstatement of necessary permits.
• A legal challenge against the 2021 EIA at pler could result in operating under the 2014 EIA, which prescribes a lower throughput rate for the sulfide plant.
• The company faces potential legal costs and expenses due to the pler incident.
• The company's financial performance is sensitive to fluctuations in commodity prices, particularly gold, silver, lead, and zinc.
• The company's operations are subject to macroeconomic and geopolitical risks, including inflation, interest rate and foreign currency fluctuations.
• The company's business may be impacted by physical risks, such as those experienced in connection with the pler Incident.

Future Outlook

The company anticipates initial operations at pler will consist of processing stockpiled ore through the sulfide plant while remediation work is completed, pending regulatory approvals. The company is still assessing the impact of operating under the 2014 EIA if the 2021 EIA is cancelled.

Management Comments

• Management is focused on the recovery and return of lost colleagues to their families following the pler incident.
• Management is progressing on containment and remediation efforts at pler in partnership with Turkish authorities.
• Management expects the sulfide plant could process stockpiles economically while remediation work is completed.
• Management is cooperating fully with relevant authorities in Trkiye regarding the investigation into the cause of the pler incident.

Industry Context

The suspension of operations at pler and the associated remediation costs highlight the operational risks inherent in the mining industry. The company's focus on safety and environmental responsibility is consistent with broader industry trends, but the incident underscores the potential for significant disruptions. The sale of the San Luis project reflects a trend of companies divesting non-core assets to focus on core operations and financial stability.

Comparison to Industry Standards

• SSR Mining's AISC of $2,116 per payable ounce is higher than the industry average for gold producers, which is typically between $1,000 and $1,300 per ounce, reflecting the impact of the pler incident.
• The company's negative operating and free cash flow for the quarter is significantly worse than many of its peers, who are generally reporting positive cash flows.
• The remediation costs of $250.0 to $300.0 million are substantial and will likely impact the company's financial performance for the next 24 to 36 months.
• The company's production of 76,102 gold equivalent ounces is significantly lower than its historical production and that of many of its peers, due to the pler incident.
• Companies like Newmont and Barrick Gold, which are larger gold producers, have reported lower AISC and positive cash flows in their recent quarterly reports, highlighting the impact of the pler incident on SSR Mining's performance.

Legal Proceedings

• The company is named as a defendant in six securities class actions related to the pler incident.
• The lawsuits allege that certain public statements made by the company were materially false and misleading regarding safety practices and operational integrity at pler.

Stakeholder Impact

• Shareholders are negatively impacted by the suspension of operations at pler, the significant remediation costs, and the negative financial results.
• Employees at pler are impacted by the suspension of operations and the ongoing remediation efforts.
• Customers may be impacted by the reduced production and potential delays in supply.
• Suppliers may be impacted by the reduced activity at pler.
• Creditors may be impacted by the company's negative cash flow and increased debt.

Next Steps

• The company will continue remediation efforts at pler, including the removal of displaced heap leach material.
• The company will work to reinstate its environmental impact assessment and operating permits at pler.
• The company will focus on processing stockpiled ore through the sulfide plant at pler once operations resume.
• The company will continue to cooperate with authorities in the investigation of the pler incident.

Key Dates

Keywords

SSR Mining, pler Incident, Gold Production, Heap Leach, Remediation, Mining Operations, Financial Results, Environmental Impact Assessment, Sulfide Plant, San Luis Project