SSR Mining Reports Second Quarter 2017 Results
News Release 17-22
August 9, 2017
SSR MINING REPORTS SECOND QUARTER 2017 RESULTS
VANCOUVER, B.C. - SSR Mining Inc. (NASDAQ: SSRM) (TSX: SSRM) (“SSR Mining”) reports consolidated financial results for the second quarter ended June 30, 2017.
Paul Benson, President and CEO said, “We delivered another strong quarter as production exceeded 100,000 gold equivalent ounces, which generated free cash flow to further strengthen our balance sheet to over $350 million in cash. Pleasingly, we have improved guidance at all operations after a strong first half and our confidence in the second half outlook. We continue to deliver on our goals to create value and growth for shareholders through disciplined investment, which now includes greenfields exploration and a third strong operating leg to our business, the Puna Operations joint venture, in addition to our ongoing Operational Excellence initiatives."
Second Quarter 2017 Highlights:
(All figures are in U.S. dollars unless otherwise noted)
Continued strong financial performance: Attributable net income of $37.3 million or $0.31 per share and attributable adjusted net income of $13.0 million or $0.11 per share.
Increased cash generation: Quarter-end cash increased to $353.5 million, up $13.0 million, from cash generated by operating activities of $38.6 million.
Continued strong production: Quarterly attributable production was 102,930 gold equivalent ounces at cash costs of $682 and AISC of $889 per payable gold equivalent ounce sold.
Improved annual guidance: Production guidance improved at Seabee and Puna Operations and cash costs guidance improved at Marigold and Puna Operations.
Increased tonnage at Marigold: Mined 18.0 million tonnes and stacked 6.9 million tonnes of ore, both a quarter-on-quarter increase.
Gold production at Marigold on plan: Produced 55,558 ounces of gold at cash costs of $632 and AISC of $833 per payable ounce of gold sold.
Higher mill throughput at Seabee: Record monthly ore milled at approximately 1,050 tonnes per day in June, supporting strong quarterly mill ore tonnage of 928 tonnes per day.
Robust gold production at Seabee: Produced 20,690 ounces of gold at cash costs of $592 and AISC of $831 per payable ounce of gold sold.
Exceeded planned operating performance at Pirquitas: Produced 1.9 million ounces of silver, 28% higher than in the first quarter, contributing to lower quarterly cash costs of $12.15 and AISC of $12.78 per payable ounce of silver sold.
SSR Mining Inc. PHONE +1 604.689.3846 Suite 800 - 1055 Dunsmuir Street www.ssrmining.com TOLL FREE +1 888.338.0046 PO Box 49088 Vancouver, BC, Canada V7X 1G4 Extended Pirquitas operating life: Formed Puna Operations joint venture comprised of our Pirquitas property and Golden Arrow's Chinchillas project whereby we are the operator with a 75% interest.
Marigold mine, U.S.
Three months ended
| June 30 | March 31 | December | September | June 30 | |
|---|---|---|---|---|---|
| Operating data | 2017 | 2017 | 31 2016 | 30 2016 | 2016 |
| Total material mined (kt) | 17,985 | 16,736 | 19,559 | 19,558 | 18,685 |
| Waste removed (kt) | 11,075 | 11,062 | 13,123 | 14,741 | 12,005 |
| Total ore stacked (kt) | 6,910 | 5,674 | 6,436 | 4,817 | 6,680 |
| Strip ratio | 1.6 | 1.9 | 2.0 | 3.1 | 1.8 |
| Mining costs ($/t mined) | 1.67 | 1.65 | 1.52 | 1.48 | 1.55 |
| Gold stacked grade (g/t) | 0.31 | 0.42 | 0.48 | 0.42 | 0.44 |
| Processing costs ($/t processed) | 0.82 | 0.89 | 0.80 | 0.95 | 0.70 |
| Gold recovery (%) | 73.0 | 74.0 | 75.0 | 71.0 | 70.7 |
| General and admin costs ($/t processed) | 0.42 | 0.52 | 0.46 | 0.56 | 0.38 |
| Gold produced (oz) | 55,558 | 55,215 | 59,945 | 47,456 | 47,195 |
| Gold sold (oz) | 57,426 | 52,528 | 61,308 | 47,278 | 47,124 |
| Realized gold price ($/oz)(1) | 1,265 | 1,214 | 1,247 | 1,330 | 1,259 |
| Cash costs ($/oz)(1) | 632 | 585 | 585 | 636 | 663 |
| AISC ($/oz)(1) | 833 | 799 | 835 | 1,139 | 1,067 |
Financial data ($000s)
| Revenue | 72,451 | 63,762 | 77,047 | 62,831 | 59,197 |
| Income from mine operations | 21,373 | 21,327 | 28,648 | 23,156 | 17,641 |
| Capital expenditures | 5,272 | 3,043 | 3,271 | 8,310 | 10,154 |
| Capitalized stripping | 4,350 | 6,745 | 10,171 | 13,787 | 7,231 |
| Exploration expenditures(2) | 1,538 | 1,024 | 1,276 | 1,145 | 1,597 |
(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 interim 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 six months ended June 30, 2017 ("MD&A").
(2) Includes capitalized and expensed exploration expenses.
Mine production
In the second quarter of 2017, the Marigold mine produced 55,558 ounces of gold, in line with the previous quarter production.
A total of 18.0 million tonnes were mined in the second quarter of 2017, 7% more than the first quarter of 2017, primarily due to improved weather conditions. Approximately 6.9 million tonnes of ore were delivered to the heap leach pads at an average gold grade of 0.31 g/t as we completed the current
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mining phase at the Mackay pit. This compares to 5.7 million tonnes of ore delivered to the heap leach pads at a gold grade of 0.42 g/t in the first quarter of 2017. Gold grade mined in the second quarter was 26% lower than the first quarter due to planned pit phase sequencing and mining a higher amount of lower-grade ore as we completed the deeper phase of the Mackay pit. The strip ratio declined to 1.6:1 in the quarter, an 18% reduction compared to the previous 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 $632 per payable ounce of gold sold in the second quarter of 2017 was 8% higher than the first quarter as higher tonnes stacked were at lower grade resulting in more operating costs being recognized against a similar number of ounces stacked. Total mining costs of $1.67 per tonne were similar to the first quarter primarily due to the timing of maintenance repairs on mobile equipment offset by a 7% increase in total tonnes mined. During the second half of the year, mining will benefit from a short waste haul to an exhausted pit, which we believe should increase mining efficiency and lead to a reduction in unit cost per tonne mined through the second half of 2017. Processing unit costs were 8% lower in the second quarter of 2017 than in the first quarter of 2017 due to the increase in tonnes stacked. General and administrative unit costs were also lower in the second quarter of 2017 than in the first quarter due to the increase in tonnes stacked but were comparable on an absolute basis.
AISC of $833 per payable ounce of gold sold in the second quarter of 2017 increased from $799 in the first quarter of 2017 predominantly due to higher cash costs as noted above.
Mine sales
A total of 57,426 ounces of gold were sold at an average price of $1,265 per ounce during the second quarter of 2017, compared to 52,528 ounces of gold sold at a 4% lower average price of $1,214 per ounce during the first quarter of 2017.
Exploration
Exploration activities maintained momentum on Mineral Resource to Mineral Reserve conversion with the objective of maximizing Mineral Reserve growth in proximity to existing open pit reserves. During the period we completed 15,300 meters of drilling in 55 reverse circulation holes as part of our planned $5.0 million exploration expenditure at the site for 2017. Drilling was conducted at the Mackay Pit, East Basalt, and North Red Dot targets, with the former two areas representing Mineral Reserve addition opportunities and the latter being a Mineral Resource addition opportunity.
Drilling at depth in the Mackay Pit and at East Basalt intersected gold mineralization adjacent to the existing Mineral Reserves pit outline that is expected to expand Mineral Resources.
In the second quarter of 2017, we received results from four drillholes at North Red Dot. Structural and compilation work completed early in the year was tested in the second quarter confirming continuity of mineral controlling fault systems. We plan to complete additional drilling with the objective of defining a Mineral Resource in this area in the third quarter of 2017.
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As part of our deep sulphide exploration program, we completed and received analytical results from one core hole collared in the southern part of the Marigold property during the quarter. Drillhole DDH-6421 intercepted 0.39 g/t gold over 43 meters including 0.15 meters grading 9.86 g/t gold in a sheared carbonaceous mudstone approximately 700 meters below surface. Refer to Table 1 at the end of this news release for drillhole results. This is our first encounter with mineralized mudstone lithology typically associated with high grade deposits in Carlin-type systems. We view the result as encouraging and will review all the data from the deep sulphide exploration program to determine if follow up holes will be drilled in the second half of 2017.
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Seabee Gold Operation, Canada
Three months ended
Period from
| Operating data | June 30 | March 31 | December 31 September 30 Acquisition to June | ||
|---|---|---|---|---|---|
| 2017 | 2017 | 2016 | 2016 | 30, 2016(1) | |
| Total ore milled (t) | 84,469 | 72,394 | 84,526 | 82,756 | 18,856 |
| Ore milled per day (t/day) | 928 | 804 | 919 | 900 | 629 |
| Gold mill feed grade (g/t) | 7.97 | 9.22 | 7.40 | 7.40 | 7.79 |
| Mining costs ($/t mined) | 60 | 68 | 62 | 58 | 110 |
Processing costs ($/t processed) 20 23 19 19 29 Gold recovery (%) 97.3 97.7 97.0 96.5 96.6 General and admin costs
| ($/t processed) | 50 | 59 | 44 | 37 | 61 |
| Gold produced (oz) | 20,690 | 21,023 | 19,711 | 20,142 | 6,721 |
| Gold sold (oz) | 17,909 | 22,411 | 17,229 | 21,911 | 11,306 |
| Realized gold price ($/oz)(2) | 1,257 | 1,233 | 1,230 | 1,334 | 1,278 |
| Cash costs ($/oz)(2, 4) | 592 | 574 | 595 | 661 | 663 |
| AISC ($/oz)(2, 4) | 831 | 990 | 833 | 841 | 776 |
Financial data ($000s)
Revenue 22,502 27,609 21,175 29,214 14,437 Income from mine 4,083 4,995 2,864 4,126 1,216 operations
| Capital expenditures | 711 | 4,760 | 1,010 | 579 | 337 |
| Capitalized development | 2,165 | 2,514 | 2,432 | 2,104 | 803 |
| Exploration expenditures(3) | 1,566 | 1,953 | 829 | 1,206 | 117 |
(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 SGO Mining Inc. (formerly Claude Resources Inc.) ("SGO Mining").
(2) 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 interim statements of comprehensive income (loss), please refer to “Non-GAAP and Additional GAAP Financial Measures” in section 12 of our MD&A.
(3) Includes capitalized and expensed exploration expenses.
(4) The non-GAAP financial measures of cash costs per payable ounce of gold sold and AISC per payable ounce of gold sold from the Seabee Gold Operation were adjusted to eliminate the adjustment of inventory to fair value as at the date of our acquisition of SGO Mining.
Mine production
In the second quarter of 2017, the Seabee Gold Operation produced 20,690 ounces of gold.
A near-quarterly record 84,469 tonnes of ore were milled at an average gold grade of 7.97 g/t during the second quarter of 2017. This compares to a total of 72,394 tonnes of ore at an average gold grade of 9.22 g/t in the first quarter. Ore was mined at both the Santoy and Seabee mines with lower
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grade ore at Seabee reducing the overall average mill grade during the second quarter. The Santoy mine complex supplied 76% of ore milled, predominantly from long hole stopes. Gold recovery remained relatively consistent at 97.3% in the current quarter.
Stope production at Santoy was impacted by a fall of ground early in the second quarter. While there were no injuries to people or damage to equipment, restrictions were put in place until a full review of the ground support in the area was completed. These self-imposed restrictions had the effect of reducing tonnage and grade to the plant during the quarter. Following modifications to the support design and installation, production from Santoy returned to planned levels in June.
During the second quarter, the mill achieved a record average throughput of 928 tonnes per day, 15% higher than the previous quarter, with a monthly record of 1,049 tonnes per day milled in June, as the site focused on Operational Excellence initiatives to deliver and process more ore tonnage.
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, were $592 in the second quarter of 2017, higher than the $574 in the first quarter of 2017. Costs per tonne mined were $60 in the second quarter of 2017, 12% lower than in the previous quarter due to higher tonnes mined. Processing and general and administration unit costs were lower by 13% and 15%, respectively, in the second quarter of 2017 compared to the first quarter of 2017 due to higher tonnes milled; however, the mill feed grade was 14% lower in the current quarter than in the preceding period with lower production resulting in higher cash costs in the period.
AISC per payable ounce of gold sold were $831 in the second quarter of 2017, lower than the $990 in the first quarter of 2017 when a significant portion of planned capital spending was incurred due to the delivery of capital items over the ice road. Exploration spending also decreased, but spending is consistent with our objective of adding Mineral Reserves and Mineral Resources at the mine.
Mine sales
A total of 17,909 ounces of gold were sold at an average price of $1,257 per ounce during the second quarter of 2017 due to a buildup in finished goods inventory, 20% lower than the 22,411 ounces of gold sold at a comparable price of $1,233 per ounce in the first quarter of 2017.
Exploration
Exploration drilling remained focused on Mineral Resource upgrade and conversion. In the second quarter of 2017, we completed 16,400 meters of underground and 9,700 meters of surface drilling. Underground drilling was active at both mine operations with the majority of expenditures at the Santoy mine.
Results received during the quarter have been successful at extending existing mineralization at Santoy Gap up to 200 meters down plunge and still remains open at depth and laterally. Drill results at Santoy 8A have converted a significant area of Inferred Mineral Resources to Indicated Mineral Resources, and expanded the scope of Inferred Mineral Resources at depth. As a result, we expect to increase Mineral Reserves in this area to be reported in February 2018. At the Seabee Mine we
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completed drill programs on three targets which resulted in an incremental addition to Mineral Resources.
Greenfields exploration on the Seabee property resulted in more positive results at the Carr target, which is the northern extension of the Santoy shear zone located four kilometers north from Santoy Gap. Late in the first quarter of 2017, we completed 9 drillholes as follow up to investigate a gold bearing alteration zone with characteristics similar in nature to Santoy Gap. During the second quarter of 2017 we received encouraging results with our first high grade intercept at Carr. Drilling is planned to investigate this new discovery further during the 2018 winter drilling season.
At the Fisher property, where we have an option agreement to acquire up to an 80% interest on the adjacent 34,000 hectares south of the Santoy mine, we mobilized one drill rig to conduct systematic exploration on the southern extension of the Santoy shear zone as well as other existing gold occurrences identified by previous programs. By the end of the second quarter of 2017, a camp was established and field work is underway. Drilling is expected to begin later in the third quarter of 2017.
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Puna Operations, Argentina (75% interest)
(Amounts presented on a 100% basis unless otherwise stated)
Three months ended
| June 30 | March 31 December 31 September 30 | June 30 | |||
|---|---|---|---|---|---|
| Operating data | 2017 | 2017 | 2016 | 2016 | 2016 |
| Ore milled (kt) | 446 | 449 | 476 | 455 | 425 |
| Silver mill feed grade (g/t) | 185 | 145 | 194 | 264 | 238 |
| Processing costs ($/t milled) | 12.94 | 13.66 | 14.17 | 14.78 | 15.10 |
| Silver recovery (%) | 73.5 | 72.6 | 74.5 | 79.0 | 77.6 |
| General and admin costs ($/t milled) | 5.00 | 5.22 | 6.19 | 5.84 | 6.22 |
| Silver produced ('000 oz) | 1,947 | 1,520 | 2,210 | 3,047 | 2,526 |
| Silver produced (attributable) ('000 oz)(1) | 1,777 | 1,520 | 2,210 | 3,047 | 2,526 |
| Silver sold ('000 oz) | 1,655 | 1,443 | 2,633 | 2,947 | 2,594 |
| Silver sold (attributable) ('000 oz)(1) | 1,473 | 1,443 | 2,633 | 2,947 | 2,594 |
| Realized silver price ($/oz)(2) | 17.31 | 17.35 | 17.14 | 19.64 | 16.52 |
| Cash costs ($/oz)(2) | 12.15 | 12.68 | 9.80 | 8.48 | 8.87 |
| AISC ($/oz)(2) | 12.78 | 14.82 | 11.47 | 9.87 | 10.00 |
Financial Data ($000s)
| Revenue | 22,029 | 26,534 | 29,095 | 51,336 | 45,141 |
| Income (loss) from mine operations(3) | 4,006 | 13,767 | (4,056) | 31,908 | 25,205 |
| Capital expenditures | 420 | 2,261 | 3,467 | 3,158 | 2,057 |
| Exploration expenditures(4) | — | — | 11 | 7 | 25 |
(1) Attributable production and sales figures for the second quarter of 2017 represent 100% for April and May 2017 and 75% for June 2017.
(2) We report the non-GAAP financial measures of cash costs per payable ounce of silver sold, realized silver prices and AISC to manage and evaluate operating performance at Puna Operations Inc. ("Puna Operations"). For a better understanding and a reconciliation of these measures to cost of sales, as shown in our consolidated interim statements of comprehensive income (loss), please refer to “Non-GAAP and Additional GAAP Financial Measures” in section 12 of our MD&A.
(3) The income from mine operations for the quarter ended March 31, 2017 includes a non-cash impact of $4.3 million relating to the resolution of the export duty claim in Argentina. Income (loss) from mine operations for the quarter ended December 31, 2016, includes $5.7 million of severance provision and a non-cash write-down of supplies inventory and VAT receivable of $3.7 million.
(4) Does not include exploration or development of the Chinchillas project.
Mine production
The operation produced a total of 1.9 million ounces of silver from processing of stockpiles, a 28% increase compared to the first quarter of 2017.
Ore was milled at an average rate of 4,903 tonnes per day in the second quarter, 23% above the mill’s nominal throughput of 4,000 tonnes per day. Ore milled in the second quarter of 2017 contained an average silver grade of 185 g/t, 28% higher than the 145 g/t reported in the first quarter of 2017 due to better than expected grades in the stockpiles. The average silver recovery in the second quarter was 73.5%, higher than the 72.6% recovery in the previous quarter, in line with the higher silver mill feed grade.
We finalized our joint venture, Puna Operations, to combine the Pirquitas mine with Golden Arrow Corporation's ("Golden Arrow") Chinchillas project on May 31, 2017. The joint venture is comprised of our Pirquitas property and the Chinchillas project and is owned on a 75%/25% basis by each company, respectively. We are the joint venture operator. As a result of the joint venture, our
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attributable share of production in the second quarter was 1.8 million ounces of silver and attributable sales were 1.5 million ounces.
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 $12.15 per payable ounce of silver sold in the second quarter of 2017 from $12.68 per payable ounce of silver sold in the first quarter of 2017, principally due to the higher grade of the stockpiled ore processed. In the second quarter of 2017, the stockpile inventory costs include approximately $3.30 per payable ounce of inventory costs that were previously incurred.
AISC of $12.78 per payable ounce of silver sold were 14% lower in the second quarter of 2017 than the $14.82 per payable ounce of silver sold in the first quarter of 2017 due to lower cash costs and lower sustaining capital per payable ounce of silver sold.
Mine sales
We recognized sales of 1.7 million ounces of silver in the second quarter of 2017, higher than the 1.4 million ounces in the first quarter of 2017, as a result of higher production due to processing of higher grade stockpiles. Attributable sales were 1.5 million ounces of silver in the second quarter of 2017 marginally higher than the 1.4 million ounces in the previous quarter.
Chinchillas project, Argentina
The development of the Chinchillas project was initiated on June 1, 2017 following the completion and filing of the National Instrument 43-101 - Standards of Disclosure for Mineral Projects (“NI 43-101”) technical report on May 31, 2017 and the formation of Puna Operations. The project scope consists of developing the open pit mine at Chinchillas for delivery of ore to the existing Pirquitas processing plant. Ore will be transported from the Chinchillas site via conventional 40 tonne trucks on an existing nationally operated road which will be upgraded to safely transport ore and to minimize environmental and community impacts.
Work at the Chinchillas site will include construction of related mine infrastructure consisting of administration buildings, haul truck repair shop and ancillary works. Mine design and planning commenced to refine the pre-feasibility study work and tender packages for the associated supporting infrastructure are expected to be released in the third quarter of 2017. Start of pre-stripping activities and infrastructure construction is dependent on the issuance of permits which are expected late in the third quarter of 2017. The project anticipates approximately six months of pre-stripping with associated stockpiling of mined ore.
Ongoing work at the Pirquitas property will include pumping and piping for tailings deposition in the exhausted open pit and a dome over the crushed ore stockpile. Minor process plant modifications are required to the existing flotation circuit to process the Chinchillas silver-zinc-lead ore.
Also, with the Chinchillas deposit as a base load ore source for the Pirquitas plant, we re-evaluated the potential for a small tonnage Pirquitas underground operation to provide an additional, high grade ore stream to the plant. The initial desktop study showed that this project is sufficiently attractive to
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justify more detailed studies in the second half of 2017. If these are positive, we would look to undertake a preliminary economic assessment in 2018.
Other Projects
SIB project, Canada
Late in the second quarter of 2017, we mobilized two core drills to the SIB exploration project located near the high grade, past-producing Eskay Creek mine in northwest British Columbia. At the SIB project, we hold a 3-year option to acquire a controlling interest in the project and plan to spend $3.0 million during 2017 exploring the property by drilling between 6,000 and 9,000 meters in six to ten diamond drillholes.
The exploration target is for precious metal enriched massive sulphides, and the SIB project boasts the only mineralization similar to Eskay Creek in the district. At the SIB project, previous work has defined a near surface zone of high grade gold-silver bearing massive sulphide mineralization. Our 2017 exploration program aims to identify any extensions to this precious metal enriched massive sulphide zone. To date, three holes have been completed in 2,770 meters of drilling and have successfully encountered the targeted geology over a strike length of at least 1,000 meters. Analytical results are anticipated in the third quarter of 2017.
Outlook
This section of the news release provides management's production and cost estimates. See "Cautionary Note Regarding Forward-Looking Statements."
Due to strong operating performance at all three mines through the first half of 2017 and a continued positive operating outlook for the second half of 2017, we are improving certain guidance metrics. In addition, with the combination of the Pirquitas and Chinchillas properties into Puna Operations on May 31, 2017, we have 75% ownership and attributable production from that date.
At the Marigold mine, annual cash costs midpoint guidance is being reduced by $25 to between $640 and $670 per payable ounce of gold sold from previous guidance of between $655 and $705 per payable ounce of gold sold, reflecting continued lower diesel prices. Annual production guidance is unchanged but, due to the lower grades of ore stacked in the first half of the year, third quarter gold production is expected to be approximately 40,000 to 45,000 ounces with cash costs commensurately higher before expected notable improvement in the final quarter of the year. Capital guidance at the Marigold mine remains unchanged while capitalized stripping increases marginally to $20 million reflecting the higher strip ratio in the first quarter.
The Seabee Gold Operation mill continues to operate at higher throughput levels, which combined with the completion of the Santoy ventilation upgrade project enables production guidance to be increased to between 75,000 and 85,000 ounces of gold. Cash costs and remaining guidance metrics remain unchanged.
At Puna Operations, higher than expected grades within stockpiles combined with continued high throughput rates and better than planned recoveries enable silver production guidance to be increased to between 5.0 and 6.0 million ounces. Production in the third quarter is expected to be stronger than the fourth quarter as progressively lower grade stockpiles are processed. As a result of the stronger production and ongoing positive cost performance, cash costs midpoint guidance
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is reduced by $1.50 to between $12.50 and $14.00 per payable ounce of silver sold. Cash costs include approximately $3.50 per ounce related to historical stockpile value. Capital expenditure guidance remains unchanged.
Subject to permitting, Puna Operations is expected to start the development of the Chinchillas project towards the end of the third quarter of 2017. The Chinchillas project is expected to produce on average 8.4 million ounces of annual silver equivalent production over an eight-year operating life with a modest initial capital investment of $81 million on a 100% basis. We are responsible to fund 75% of development costs and our partner is required to contribute 25% of development costs, net of any cash generated by the operation utilized to fund development. The full details of our Business Combination Agreement with Golden Arrow dated September 30, 2015, setting out the terms and conditions for the formation of the joint venture were set out in our news release dated October 1, 2015.
Puna Operations
| Revised Operating Guidance | Marigold mine Seabee Gold Operation | (75% interest)(3) | ||
|---|---|---|---|---|
| Gold Production | oz 205,000 - 215,000 | 75,000 - 85,000 | — | |
| Silver Production | Moz | — | — | 5.0 - 6.0 |
| Cash Costs per Payable Ounce Sold(1) | $/oz | 640 - 670 | 575 - 625 12.50 - 14.00 | |
| Capital Expenditures | $M | 30 | 8 | 5 |
Capitalized Stripping / Capitalized $M 20 11 — Development Exploration Expenditures (2) $M 5 5 —
Our original guidance for the full year 2017 was as follows:
Puna Operations
| Original Operating Guidance | Marigold mine Seabee Gold Operation | (75% interest)(3) | ||
|---|---|---|---|---|
| Gold Production | oz 205,000 - 215,000 | 72,000 - 82,000 | — | |
| Silver Production | Moz | — | — | 4.5 - 5.5 |
| Cash Costs per Payable Ounce Sold(1) | $/oz | 655 - 705 | 575 - 625 13.50 - 16.00 | |
| Capital Expenditures | $M | 30 | 8 | 5 |
Capitalized Stripping / Capitalized $M 17 11 — Development Exploration Expenditures (2) $M 5 5 — (1)
(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 Puna Operations. See “Cautionary Note Regarding Non-GAAP Measures".
(2) Includes capitalized and expensed exploration expenses.
(3) Shown on a 100% basis.
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Consolidated Financial Summary
Selected Financial Data (1)
Three months ended June 30 Six months ended June 30
| 2017 | 2016 | 2017 | 2016 | |
| $ | $ | $ | $ | |
| Revenue | 116,982 | 118,775 | 234,887 | 220,288 |
| Income from mine operations | 29,462 | 44,062 | 69,551 | 67,360 |
| Operating income | 46,193 | 24,237 | 71,002 | 38,851 |
| Net income | 37,747 | 12,482 | 52,795 | 14,783 |
| Basic attributable income per share | 0.31 | 0.13 | 0.44 | 0.17 |
| Adjusted attributable income before tax(2) | 15,551 | 26,661 | 38,487 | 38,261 |
| Adjusted attributable net income(2) | 13,017 | 23,622 | 32,826 | 31,664 |
Adjusted basic attributable income per 0.11 0.25 0.27 0.36 share (2)
38,614 30,162 69,258 43,487 Cash generated by operating activities Cash (used in) investing activities (26,311) (2,796) (44,431) (8,640) Cash generated by (used in) financing 550 (12,329) 885 (13,999) activities
Financial Position June 30, December 31, 2017 2016 Cash and cash equivalents 353,530 327,127 Marketable securities 174,587 148,944 Current assets (including cash and cash 755,770 704,240 equivalents)
| Current liabilities | 77,959 | 144,306 |
| Working capital(2) | 677,811 | 559,934 |
| Total assets | 1,514,567 | 1,438,688 |
(1) All values are presented in thousands of U.S. dollars, except per share amounts.
(2) We report non-GAAP measures including adjusted attributable income before- and after-tax and adjusted basic attributable income per share and working capital, to manage and evaluate our operating performance. Please see "Cautionary Note Regarding Non- GAAP Measures".
Quarterly financial summary
The 2% decrease in quarterly revenue compared to the second quarter of 2016 was mainly due lower silver sales partially offset by higher gold sales. We sold 22% more payable ounces of gold from the Marigold mine and 58% more payable ounces of gold from the Seabee Gold Operation in the second quarter of 2017 than in the second quarter of 2016, during which we acquired the Seabee Gold Operation, due to strong production at each operation. Due to the planned lower production from processing stockpiles at Puna Operations, 36% less ounces of silver were sold relative to the comparative period.
Income from mine operations in the second quarter of 2017 generated a gross margin of 25%, lower than the 37% margin in the second quarter of 2016 due to higher cost of sales at Puna Operations where we are processing stockpiles from prior periods. Net income for the second quarter of 2017 of $37.7 million was 202% higher than the comparative quarter due to continued strong performance and the positive impact of an impairment reversal of the Pirquitas plant of $24.4 million resulting from its life extension following the formation of Puna Operations.
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