Silver Standard Reports Third Quarter 2016 Results
November 8, 2016 News Release 16-30
SILVER STANDARD REPORTS THIRD QUARTER 2016 RESULTS
VANCOUVER, B.C. - Silver Standard Resources Inc. (NASDAQ: SSRI) (TSX: SSO) (“Silver Standard”) reports consolidated financial results for the third quarter ended September 30, 2016.
Paul Benson, President and CEO said, “In the third quarter of 2016 we demonstrated increased scale and healthy margin with our record quarterly production, among other operating records. We produced nearly 113,000 gold equivalent ounces at all-in sustaining costs of $940 per ounce, and have improved guidance at our Marigold and Pirquitas mines. Importantly, we continued to drive our Operational Excellence programs, which delivered tangible results at all operations, including our updated five-year outlook at Marigold, a successful plant trial at Seabee and record production and quarterly throughput at Pirquitas.”
“We further strengthened our balance sheet, which boasts $278 million of cash and cash equivalents and $178 million of marketable securities. Our three cash-flowing mines generated $53 million of operating cash flow, while we continued investing in our future. We also demonstrated once again the value held within our project portfolio with our announced project sales in the latter part of the quarter. The team delivered solid results in the third quarter and we remain focused on generating shareholder value through all parts of our business going forward.”
Third Quarter 2016 Highlights:
(All figures are in U.S. dollars unless otherwise noted)
- Strong financial performance: Achieved record quarterly revenue of $143.4 million, net income of $38.0 million or $0.32 per share and adjusted net income of $37.2 million or $0.31 per share.
- Increased cash balance: Quarter-end balance increased by $44.9 million to $277.5 million. Cash generated by operating activities totaled $53.1 million.
- Demonstrated scale and margin from three operations: Record quarterly production of 112,559 gold equivalent ounces at cash costs of $618 per equivalent gold ounce sold.
- Lowered cash costs guidance at Marigold: Reported cash costs of $636 per payable ounce of gold sold, 4% lower compared to the previous quarter, and reduced cash costs guidance to between $640 and $680 per payable ounce of gold sold. Produced 47,456 ounces of gold, on track to meet annual guidance.
- Strong production at Seabee: Produced 20,142 ounces of gold at cash costs of $661 per payable ounce of gold sold.
- Improved production and cash costs guidance at Pirquitas: Produced a record 3.0 million ounces of silver, 21% higher than the second quarter of 2016, at record low cash costs of $8.48 per payable ounce of silver sold. Increased production guidance to between 9.5 and 10.5 million ounces of silver and decreased cash costs guidance to between $9.00 and $9.50 per payable ounce of silver sold.
- Favorable resolution of tax dispute with Canada Revenue Agency: Settled in our favor the tax dispute with the CRA which resulted in the repayment of our deposit of $18.2 million plus accrued interest.
- Realized value through project portfolio: Subsequent to quarter end, completed the sale of our Parral properties in Mexico and our Diablillos and M-18 projects in Argentina, for future cash installments and shares valued at approximately $20 million.
Marigold mine, U.S.
Three months ended
| Operating data | September 30 | June 30 March 31 December 31 September 30 2016 2016 2015 2015 |
|---|---|---|
| 2016 | ||
| Total material mined (kt) Waste removed (kt) Total ore stacked (kt) Strip ratio Mining cost ($/t mined) Gold stacked grade (g/t) Processing cost ($/t processed) Gold recovery (%) General and admin costs ($/t processed) Gold produced (oz) Gold sold (oz) Realized gold price ($/oz) (1) Cash costs ($/oz) (1) AISC ($/oz) (1) Financial data ($000s) | 19,558 | 18,685 17,291 18,560 18,425 12,005 11,611 13,788 11,242 6,680 5,680 4,772 7,183 1.8 2.0 2.9 1.6 1.55 1.45 1.54 1.65 0.44 0.47 0.48 0.43 0.70 0.71 0.86 0.66 70.7 70.0 69.9 69.7 0.38 0.47 0.47 0.41 47,195 50,520 61,461 41,262 47,124 48,605 62,827 39,525 1,259 1,189 1,084 1,110 663 719 727 719 1,067 841 799 998 |
| 14,741 | ||
| 4,817 | ||
| 3.1 | ||
| 1.48 | ||
| 0.42 | ||
| 0.95 | ||
| 71.0 | ||
| 0.56 | ||
| 47,456 | ||
| 47,278 | ||
| 1,330 | ||
| 636 | ||
| 1,139 | ||
| Revenue Income from mine operations Capital investments Capitalized deferred stripping Exploration expenditures (2) | 62,831 | 59,197 57,742 67,936 43,836 17,641 11,227 7,902 7,288 10,154 8,796 3,641 8,931 7,231 1,435 — — 1,597 1,102 731 1,944 |
| 23,156 | ||
| 8,310 | ||
| 13,787 | ||
| 1,145 |
(1) We report the non-GAAP financial measures of realized gold prices, cash costs and all-in sustaining costs ("AISC") per payable ounce of gold sold to manage and evaluate operating performance at the Marigold mine. For a better understanding and a reconciliation of these measures to cost of sales, as shown in our consolidated statements of comprehensive income (loss), please refer to “Non-GAAP and Additional GAAP Financial Measures” in section 12 of our management's discussion and analysis of the financial position and results of operation for the three and nine months ended September 30, 2016 ("MD&A").
(2) Includes capitalized and expensed exploration expenses.
Mine production
We produced 47,456 ounces of gold in the third quarter of 2016, in line with our second quarter gold production and on target to meet previously increased annual guidance. The construction of a new leach pad was completed on schedule and under budget in the latter half of the third quarter. The additional leach pad capacity and higher amount of ore tonnes stacked earlier in the year are expected to result in strong fourth quarter gold production.
A total of 19.6 million tonnes of material was mined in the third quarter, 5% higher than the second quarter of 2016 and a record for the mine, due to increased hauling capacity added to the fleet earlier in the year and shorter haul distances relating to the higher strip ratio. Approximately 4.8 million tonnes of ore were delivered to the leach pads at a gold grade of 0.42 g/t, containing approximately 47,000 recoverable ounces of gold stacked during the quarter. The strip ratio increased to 3.1:1 in the third quarter as we began stripping of the next phase of the Mackay pit. Gold recovery was 71% in the third quarter.
Mine operating costs
Cash costs and AISC per payable ounce of gold sold are non-GAAP financial measures. Please see “Cautionary Note Regarding Non-GAAP Measures”.
Cash costs, which include all costs of inventory, refining costs and royalties, of $636 per payable ounce of gold sold in the third quarter of 2016 were lower than cash costs of $663 per payable ounce of gold sold in the second quarter of 2016 as costs of inventory decreased due to improved mining costs and increased capitalized stripping. Costs per tonne mined decreased to $1.48 per tonne in the third quarter of 2016, 5% lower than in the second quarter of 2016 due to maintaining expenditure levels despite the increase in total tonnes mined. Processing unit costs were 36% higher in the third quarter of 2016 than in the second quarter of 2016 due to fewer tonnes stacked resulting from the higher strip ratio. General and administrative unit costs were also higher in the third quarter of 2016 than in the second quarter of 2016 due to fewer tonnes stacked but were comparable on an absolute basis.
AISC of $1,139 per payable ounce of gold sold in the third quarter of 2016 increased from $1,067
| capitalized stripping and capital expenditures | |
|---|---|
| uring the second and third quarters of 2016 | . |
Mine sales
A total of 47,278 ounces of gold were sold at an average price of $1,330 per ounce during the third quarter of 2016, compared to 47,124 ounces of gold sold at a 6% lower average price of $1,259 per ounce during the second quarter of 2016.
Exploration
Exploration activities in the third quarter of 2016 focused on drilling at the HideOut target and the Valmy property. The objective of these drilling activities is to convert Mineral Resources to Mineral Reserves and to expand Mineral Resources, in certain instances. As reported on November 7, 2016, two track-mounted rigs completed 13,408 meters of reverse circulation drilling in 50 drillholes on targets where previous results show potential for Mineral Resource additions or Mineral Reserve conversion. The 500-meter long corridor between HideOut and the 8 South pit extension area has been a focus of drilling activity. At the Valmy property, drilling during the quarter continued to extend the zone of mineralization to the south and east of the known mineralization at the Valmy pit. Results to date are expected to expand Mineral Resources. We expect to continue drilling outside of the current pit areas, including the eastern extension of the Basalt pit mineralization.
We expanded our gravity survey coverage at Marigold to include the additional lands to the east, south and west of the original mineral claims. These data, together with our understanding of the sub-surface geology, have been used to select drill sites for the deep sulphide exploration program targeting a high grade style of mineralization similar to that found at the Turquoise Ridge mine located 56 kilometers north of the Marigold mine. We expect to complete one deep core hole by the end of the fourth quarter of 2016, representing the sixth deep core hole targeting higher-grade sulphide mineralization. We plan to complete a total of three deep core holes by the end of the first quarter of 2017.
The results from our ongoing exploration program and the completed Assay Program will be included in our annual 2016 Mineral Reserves and Mineral Resources estimate to be published in the first quarter of 2017.
Seabee Gold Operation, Canada
| Operating data | Three months ended | Period from Acquisition Three months ended to June 30, 2016 (1) June 30, 2016 (2) |
|---|---|---|
| September 30, 2016 | ||
| Total ore milled (t) Ore milled per day (t/day) Gold mill feed grade (g/t) Mining costs ($/t mined) Processing costs ($/t processed) Gold recovery (%) General and admin costs ($/t processed) Gold produced (oz) Gold sold (oz) Realized gold price ($/oz) (3) Cash costs ($/oz) (3,5) AISC ($/oz) (3,5) Financial data ($000s) | 82,756 | 18,856 71,218 629 783 7.79 7.97 110 N/A 29 N/A 96.6 96.8 61 N/A 6,721 17,524 11,306 16,305 1,278 1,271 663 N/A 776 N/A |
| 900 | ||
| 7.40 | ||
| 58 | ||
| 19 | ||
| 96.5 | ||
| 37 | ||
| 20,142 | ||
| 21,911 | ||
| 1,334 | ||
| 661 | ||
| 840 | ||
| Revenue Income from mine operations Capital development Capital investments Exploration expenditures (4) | 29,214 | 14,437 N/A 1,216 N/A 803 N/A 337 N/A 117 N/A |
| 4,126 | ||
| 2,104 | ||
| 579 | ||
| 1,206 |
(1) The data presented in this column is for the period from May 31, 2016, to June 30, 2016, the period for which we were entitled to all economic benefits of the Seabee Gold Operation following our acquisition of Claude Resources Inc. ("Claude Resources").
(2) The data presented in this column includes operating results for the Seabee Gold Operation for the entire second quarter of 2016, including the period from April 1 to May 30, 2016 prior to our acquisition of Claude Resources.
(3) We report the non-GAAP financial measures of realized gold prices, cash costs and AISC per payable ounce of gold sold to manage and evaluate operating performance at the Seabee Gold Operation. For a better understanding and a reconciliation of these measures to cost of sales, as shown in our consolidated statements of comprehensive income (loss), please refer to “Non- GAAP and Additional GAAP Financial Measures” in section 12 of our MD&A.
(4) Includes capitalized and expensed exploration expenses.
(5) The non-GAAP measure of cash costs from the Seabee Gold Operation was adjusted to eliminate the adjustment of inventory to fair value as at the date of our acquisition of Claude Resources.
Mine production
The Seabee Gold Operation consists of the Seabee and Santoy underground mines, both of which feed a single processing facility. The mine produced 20,142 ounces of gold in the third quarter of 2016 despite a three-day continuation of the ten-day unplanned power outage which commenced in June 2016.
A total of 82,756 tonnes of ore were milled at a gold grade of 7.4 g/t in the third quarter of 2016. The gold recovery was 96.5%. As part of our initial Operational Excellence plan for the Seabee Gold Operation, we successfully trialed higher mill throughput during the month of August. The mill processed ore at or above 1,000 tonnes per day, with an average of 998 tonnes per day in the month. We achieved this with minor modifications to the processing facility, while maintaining gold recovery. As a result, we were able to increase mill throughput in the third quarter by 15% to 900 tonnes per day, compared to the second quarter of 2016. We are reviewing the long-term mine plan to determine the feasibility of higher, sustainable throughput rates.
During the third quarter of 2016, the Santoy mine provided approximately 82% of total ore milled, while the Seabee mine provided 18%.
Mine operating costs
Cash costs and AISC per payable ounce of gold sold are non-GAAP financial measures. Please see “Cautionary Note Regarding Non-GAAP Measures”.
Cash costs per payable ounce of gold sold, which include all costs of inventory, refining costs and royalties and exclude the effect of the fair value adjustment at our acquisition of Claude Resources, were $661 in the third quarter of 2016. Costs per tonne mined were $58 per tonne in the third quarter, processing unit costs were $19 per tonne processed and general and administration unit costs were $37 per tonne. The decrease in the costs per tonne mined and milled in the third quarter of 2016 from June 2016 is due to higher tonnes mined and milled in total and also per day. Additionally, only a three-day unplanned power outage affected the third quarter of 2016, whereas in June 2016 the power outage lasted seven days.
AISC per payable ounce of gold sold, which also exclude the effect of the fair value adjustment at acquisition, were $840 in the third quarter of 2016, as capital spending remained modest with exploration spending increasing consistent with our objective of adding Mineral Reserves and Mineral Resources at the mine.
Mine sales
A total of 21,911 ounces of gold were sold at an average price of $1,334 per ounce during the third quarter of 2016.
Exploration
For 2016, the Seabee Gold Operation planned 65,000 meters of underground drilling and 18,000 meters of surface drilling with the objective to increase and convert Mineral Resources into Mineral Reserves. As reported on November 7, 2016, during the third quarter, we completed 13,540 meters of underground diamond drilling to upgrade Inferred Mineral Resources and explore further the extensions to the Santoy 8A and Santoy Gap deposits. From surface, we completed 6,172 meters of drilling exploring the down plunge extension of Santoy Gap 9A, 9B, and 9C deposits. Drilling intersected the projections of the mineralized structures at expected depths with anomalous results. Seven surface and underground drillholes were completed at the Santoy 8A target, of which five results were notable. Highlighted drill results from the third quarter include 5.8 meters at a grade of 27.86 g/t gold (SUG-16-920) from the 8A zone, 4.1 meters at a grade of 33.8 g/t gold (SUG-16-063) from the 9C zone and 5.0 meters at a grade of 31.94 g/t gold (SUG-16-919) from the 8A zone.
For the fourth quarter of 2016 at the Seabee Gold Operation, our focus underground and from surface will be on infill drilling at Santoy Gap with the objective to convert Inferred Mineral Resources to Measured and Indicated Mineral Resources.
On October 6, 2016, we announced an option agreement to acquire an 80% interest in the adjacent Fisher property which lies south on strike from the ore deposits at Santoy Gap and 8A. This agreement doubles our prospective land position at the Seabee Gold Operation and planning for exploration work is underway.
Pirquitas mine, Argentina
Three months ended
| Operating data | September 30 | June 30 March 31 December 31 September 30 2016 2016 2015 2015 |
|---|---|---|
| 2016 | ||
| Total material mined (kt) Waste removed (kt) Ore mined (kt) Strip ratio Silver mined grade (g/t) Mining costs ($/t mined) Ore milled (kt) Silver mill feed grade (g/t) Processing cost ($/t milled) Silver recovery (%) General and admin costs ($/t milled) Silver produced ('000 oz) Silver sold ('000 oz) Realized silver price ($/oz) (1) Cash costs ($/oz) (1) AISC ($/oz) (1) Financial Data ($000s) | 2,385 | 2,543 2,520 2,712 2,746 1,814 1,726 1,966 2,219 729 794 746 527 2.5 2.2 2.6 4.2 189 181 187 188 3.54 2.97 3.78 3.94 425 418 421 410 238 247 237 238 15.10 13.58 20.60 21.53 77.6 79.7 80.8 82.0 6.22 5.68 8.09 8.13 2,526 2,639 2,588 2,576 2,594 3,223 1,943 2,819 16.52 14.94 15.00 14.97 8.87 8.93 10.96 11.02 10.03 9.67 12.78 12.68 |
| 1,584 | ||
| 801 | ||
| 2.0 | ||
| 190 | ||
| 3.80 | ||
| 455 | ||
| 264 | ||
| 14.78 | ||
| 79.0 | ||
| 5.84 | ||
| 3,047 | ||
| 2,947 | ||
| 19.64 | ||
| 8.48 | ||
| 9.87 | ||
| Revenue Income (loss) from mine operations (2) Capital investments Capitalized stripping Exploration expenditures | 51,336 | 45,141 47,711 22,656 33,355 25,205 12,071 (28,387) (14,684) 2,057 1,578 2,305 2,500 — — — — 25 22 234 1,124 |
| 31,908 | ||
| 3,158 | ||
| — | ||
| 7 |
(1) We report the non-GAAP financial measures of realized silver prices, cash costs and AISC per payable ounce of silver sold to manage and evaluate operating performance at the Pirquitas mine. For a better understanding and a reconciliation of these measures to cost of sales, as shown in our consolidated statements of comprehensive income (loss), please refer to “Non-GAAP and Additional GAAP Financial Measures” in section 12 of our MD&A.
(2) Income (loss) from mine operations for the quarters ended December 31, 2015, and September 30, 2015, include $24.6 million and $7.7 million, respectively, of non-cash adjustments to stockpile, warehouse inventory and severance provision at the Pirquitas mine.
Mine production
The Pirquitas mine produced 3.0 million ounces of silver during the third quarter of 2016, a quarterly record for the mine, which enabled our 2016 production guidance to be increased.
Higher silver production is a result of record ore tonnes milled, higher silver mill feed grade and higher silver recovery.
Ore was milled at an average rate of 4,946 tonnes per day in the third quarter. During August 2016, the mill operated at an average rate of over 5,200 tonnes per day, a record for the mill since it began operating, a result of one of our ongoing Operational Excellence programs. Ore milled contained an average silver grade of 264 g/t, 11% higher than the 238 g/t reported in the second quarter as additional tonnes of higher grade ore, relative to the production model, encountered in the lower benches of the San Miguel open pit enabled selective milling of higher grades and stockpiling of lower grades. Detailed planning and consultation for the cessation of open pit mining in the first quarter of 2017 is well underway. Thereafter, medium and lower grade stockpile material will be processed through the plant in 2017. The average recovery rate for silver in the third quarter of 79.0% was 2% higher than the 77.6% in the previous quarter.
Mine operating costs
Cash costs and AISC per payable ounce of silver sold are non-GAAP financial measures. Please see “Cautionary Note Regarding Non-GAAP Measures”.
Cash costs, which include cost of inventory, treatment and refining costs and by-product credits, decreased by 4% to $8.48 per payable ounce of silver sold in the third quarter of 2016 from $8.87 per payable ounce of silver sold in the second quarter of 2016. Mining costs per tonne increased due primarily to longer hauls, higher diesel prices and inflation which increased at a rate greater than the Argentine peso devalued. This increase was more than offset by the lower processing costs and general and administration costs per tonne due to higher plant throughput. The second quarter of 2016 benefited marginally from residual by-product revenue from zinc of about $0.20 per payable ounce of silver sold whereas, as planned, there were no zinc sales in the current quarter.
| AISC of $9.87 | per payable ounce of silver sold were lower in the third quarter of 2016 than the | |
|---|---|---|
| $10.03 per payable ounce of silver sold in the second quarter of 2 | 016 despite higher capital spend |
as we commenced the construction on the phase 5 tailings lift required to process stockpiles to the end of 2017.
Mine sales
We recognized sales of 2.9 million ounces of silver, higher than the 2.6 million in the second quarter, as a result of higher production and timing of concentrate shipments.
Chinchillas project, Argentina
During the second quarter of 2016, Golden Arrow Resources Corporation ("Golden Arrow") released a revised Mineral Resources estimate and technical report for the Chinchillas project following an infill drilling program of 115 core drillholes comprising 15,142 meters of drilling. As part of the continuing engineering studies, a program of condemnation drilling commenced beneath areas selected for major infrastructure, such as the waste rock facility. During the third quarter, 16 core drillholes for 3,252 meters were completed to investigate the presence of near surface mineralization underlying and proximal to the proposed waste rock facility. The results of this work were reported by Golden Arrow in news releases on September 7, 2016, and October 3, 2016. In addition to this work, geotechnical, hydrological, metallurgical and environmental baseline studies, along with community engagement programs, continued. In the third quarter of 2016, we funded approximately $2.9 million for work on the Chinchillas project, bringing total expenditures to date to $10.5 million.
We are undertaking the relevant engineering studies to determine the economic viability of the Chinchillas project as a satellite mine feeding the Pirquitas plant and extending the life of the operation. Our option agreement with Golden Arrow requires the notice of exercise in regards to forming a joint venture by March 31, 2017. All technical work is scheduled for completion in advance of that date to enable a decision with regards to such notice.
Export duties
We entered into a fiscal stability agreement (the “Fiscal Agreement”) with the Federal Government of Argentina in 1998 for production from the Pirquitas mine. In December 2007, the National Customs Authority of Argentina (Dirección Nacional de Aduanas) ("Customs") levied an export duty of approximately 10% from concentrate for projects with fiscal stability agreements pre-dating 2002 and Customs has asserted that the Pirquitas mine is subject to this duty. We have challenged the legality of the export duty applied to silver concentrate and the matter is currently under review by the Federal Court (Jujuy) in Argentina.
The Federal Court (Jujuy) granted an injunction in our favor effective September 29, 2010, that prohibited the Customs from withholding the 10% export duty on silver concentrate (the “Injunction”), pending the decision of the courts with respect to our challenge of the legality of the application of the export duty. On June 21, 2016 the Federal Court (Jujuy) ruled that the Injunction would remain in place subject to certain conditions, including the provision by August 5, 2016, of a guarantee by Silver Standard against liabilities arising from export duties and applicable interest as well as security from Mina Pirquitas, LLC on certain assets at the Pirquitas mine. We have appealed the condition to provide the parent guarantee. The requirement for the guarantee and security is suspended pending the outcome of that appeal. We are also continuing discussions with the Federal Tax Authority and other government officials for potential resolution of the claim. We cannot predict the outcome of the court proceedings and those discussions. If we do not reach a successful resolution of the matter, the Federal Tax Authority may make further application to the court to have the Injunction lifted and, upon that, initiate proceedings to collect the accrued export duties and its claimed interest. The lifting of the Injunction does not impact our underlying challenge of the legality of the application of export duties or remedies available under the Fiscal Agreement. Changes in our assessment of this matter could result in material adjustments to our consolidated statements of income (loss).
Outlook
This section of the news release provides management's production and cost estimates. See "Cautionary Note Regarding Forward-Looking Statements."
We completed the acquisition of Claude Resources Inc. ("Claude Resources"), which owned the Seabee Gold Operation in northern Saskatchewan, Canada, on May 31, 2016. The operation has been in continuous production since 1991 and consists of two operating mines (the Seabee mine and Santoy mine complex), a central milling facility, camp facilities and important regional exploration targets. We also acquired the 40,400 hectare Amisk gold project in northeastern Saskatchewan.
With strong operating performance through the third quarter of 2016 combined with our outlook for the fourth quarter, we are able to improve certain guidance metrics.
At the Marigold mine, for the third time this year, annual cash costs guidance is being reduced to between $640 and $680 per payable ounce of gold sold from previous guidance of between $650 and $700 per payable ounce of gold sold reflecting continued lower diesel prices and the overcall of mined ounces from the Mackay open pit. Production, capital and capitalized stripping guidance at Marigold remain unchanged.
Annual silver production guidance for the Pirquitas mine has been revised upward for the second time this year to between 9.5 and 10.5 million ounces from previous guidance of between 9.0 and 10.0 million ounces, due to additional ore tonnes being mined from the lower benches of the San Miguel open pit. Additionally, for the third time this year, cash costs guidance is being reduced to between $9.00 and $9.50 per payable ounce of silver sold, reflecting lower diesel prices, continued stronger operating performance and effective cost control. Capital expenditure guidance at Pirquitas remains unchanged.
Seabee Gold Pirquitas Operating Guidance Marigold mine Operation(2) mine
| Gold Production | oz 200,000 - 210,000 | 32,000 - 35,000 | — | ||
| Silver Production | Moz | — | — | 9.5 - 10.5 | |
| Cash costs per payable ounce sold $/oz | 640 - 680 | 610 - 640 | 9.00 - 9.50 | ||
| Capital Expenditures | $M | 32 | 2 | 12 | |
| Capitalized Stripping Costs | $M | 30 | 6 | — |
(1) We report the non-GAAP financial measure of cash costs per payable ounce of gold and silver sold to manage and evaluate operating performance at the Marigold mine, the Seabee Gold Operation and the Pirquitas mine. See “Non-GAAP and Additional GAAP Financial Measures” in section 12 of our MD&A.
(2) Guidance for the Seabee Gold Operation is for the period from July 1, 2016 to December 31, 2016, and is estimated based on an exchange rate of 1.30 CAD/USD.
Consolidated Financial Summary
Selected Financial Data (1)
Three months ended September 30 Nine months ended September 30
| 2016 | 2015 | 2016 | 2015 | |
| $ | $ | $ | $ | |
| Revenue | 143,381 | 77,191 | 363,669 | 284,730 |
| Income (loss) from mine operations(2) | 59,190 | (7,396 ) | 126,550 | 39,325 |
| Operating income (loss)(2) | 50,248 | (50,733 ) | 89,099 | (24,244) |
| Net income (loss) for the period(2) | 38,042 | (59,416 ) | 52,825 | (57,580) |
| Basic income (loss) per share | 0.32 | (0.74 ) | 0.54 | (0.71) |
| Adjusted income (loss) before tax(3) | 45,168 | (11,844 ) | 83,996 | 7,037 |
| Adjusted net income (loss)(3) | 37,214 | (10,127 ) | 69,405 | (5,891) |
Adjusted basic income (loss) per 0.31 (0.13 ) 0.71 (0.07) share (3)
Cash generated by operating 53,066 998 96,554 53,560 activities Cash (used in) investing activities (10,581) (17,288 ) (19,222) (33,766) Cash generated by (used in) financing
2,599
- (11,400) (1,649)
activities
Financial Position September 30, December 31, 2016 2015
| Cash and cash equivalents | 277,544 | 211,862 |
| Current assets - total | 690,206 | 476,734 |
| Current liabilities - total | 133,943 | 135,851 |
| Working capital | 556,263 | 340,883 |
1,454,618
Total assets 871,677
(1) All values are presented in thousands of U.S. dollars, except per share values.
(2) Loss from mine operations for the three and nine months ended September 30, 2015 includes a $7.7 million non-cash write- down of stockpile inventory to its net realizable value at the Pirquitas mine. Operating Loss and Net Loss for the three and nine months ended September 30, 2015 include non-cash, pre-tax impairment charge and write-downs of $42.2 million related to the Pirquitas mine.
(3) We report non-GAAP measures including adjusted income before- and after-tax, to manage and evaluate our operating performance. Please see "Cautionary Note Regarding Non-GAAP Measures".
Quarterly financial summary
The 86% increase in quarterly revenue compared to the third quarter of 2015 was due to higher realized prices of gold by 20% and silver by 31%, combined with a 48% increase in gold equivalent ounces sold, largely due to sales from the newly-acquired Seabee Gold Operation and stronger sales and production from the Pirquitas mine.
Income from mine operations in the third quarter of 2016 generated a positive gross margin of 41%, significantly higher than the negative 10% margin in the third quarter of 2015 due to higher precious metals prices, lower cost of sales, particularly at the Pirquitas mine, and the addition of the Seabee Gold Operation. The loss from mining operations in the third quarter of 2015 was also negatively impacted by the write-down of low grade stockpiles at the Pirquitas mine in the amount of $7.7 million. Operating income in the third quarter of 2015 was negatively impacted by a $34.5 million impairment of the Pirquitas mine.
Cash generated by operating activities increased significantly to $53.1 million compared to $1.0 million in the third quarter of 2015. The higher prices of gold and silver and the higher volumes sold at lower unit cost generated significantly higher cash from operating activities. We used $10.6 million in investing activities in the third quarter of 2016 compared to $17.3 million in the third quarter of 2015. Investments relating to the addition of the Seabee Gold Operation, seasonally higher investments at Marigold and capitalized stripping totaling $30.8 million were partially offset by receipt of our deposit of $18.2 million plus accrued interest from the Canada Revenue Agency ("CRA"). In the comparative quarter of 2015, we invested $13.0 million in plant and equipment at the Marigold mine, and acquired the Valmy property for $11.5 million and this was offset by the release of $7.5 million of restricted cash.
Year-to-date financial summary
The increase in revenue for the nine months ended September 30, 2016, of 28%, compared to the nine months ended September 30, 2015, resulted from higher sales of gold equivalent payable ounces by 17% due to sales from the newly-acquired Seabee Gold Operation and strong performance at the Pirquitas mine and also higher prices of gold by 7.5% and silver by 6%.
Income from mine operations in the nine months ended September 30, 2016, generated a gross margin of 35%, higher than the 14% in the nine months ended September 30, 2015, mainly due to higher precious metals prices and lower cost of sales, particularly at the Pirquitas mine. The income from mine operations in the nine months ended September 30, 2015, was also negatively impacted by the write-down of low grade stockpiles at the Pirquitas mine in the amount of $7.7 million. Operating income in the nine months ended September 30, 2016, was significantly higher than in the comparative period which was also negatively impacted by a $34.5 million impairment of the Pirquitas mine.
Cash generated from operating activities was $96.6 million in the nine months ended September 30, 2016, compared to $53.6 million in the comparative period of 2015 as a result of improved margins at Marigold and Pirquitas and the addition of the strong cash producing Seabee Gold Operation in May 2016. In the nine months ended September 30, 2016, we invested $31.2 million in plant and equipment and $22.5 million in capitalized stripping primarily at the Marigold mine, higher by $3.5 million and $9.9 million, respectively, than in the comparative period. Cash used in investing activities was significantly lower in the nine months ended September 30, 2016, than in the nine months ended September 30, 2015, as we received $16.9 million of cash in the Claude Resources acquisition, collected the CRA deposit of $18.2 million plus accrued interest and received $4.4 million from the sale of marketable securities. In the comparative period, we paid the deposit to CRA but received $20.0 million as a final payment from the sale of the San Agustin project. Cash used in financing activities in the nine-month period includes repayment of Claude Resources' $13.7 million credit facility, full repayment of the short-term debt in Argentina and receipt of $6.4 million from the exercise of stock options.
Corporate Summary
The tax dispute with the CRA has now been settled in our favor. On August 24, 2016, the CRA issued a new notice of reassessment for each of the 2010 and 2011 taxation years reversing the