Silver Standard Reports First Quarter 2017 Results
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May 3, 2017 News Release 17-16
SILVER STANDARD REPORTS FIRST QUARTER 2017 RESULTS
VANCOUVER, B.C. - Silver Standard Resources Inc. (NASDAQ: SSRI) (TSX: SSO) (“Silver
Standard”) reports consolidated financial results for the first quarter ended March 31, 2017.
Paul Benson, President and CEO said, “The first quarter of 2017 marks a strong start to the year
as we produced nearly 98,000 gold equivalent ounces at all-in sustaining costs of $977 per payable
ounce sold. Our three cash -flowing mines generated $ 31 million of operating cash flow,
supporting our continued investments in sustaining and growing our operations, while also
adding to our cash balance which now totals $341 million. This marks the sixth quarter in a row
we have added to our cash position.”
“During the quarter, we secured an exciting future for our Pirquitas operation as the resolution
of our export duty claim enabled us to exercise our option on the Chinchillas project which, once
developed, will extend the Pirquitas operating life well i nto the next decade. Additionally, as a
result of the strategic evolution of our Company, we announced a proposed name change to SSR
Mining, which will come into effect later this year, following approval by our shareholders. Our
focus remains on creating shareholder value through safe production, operational excellence and
growth opportunities.”
First Quarter 2017 Highlights:
(All figures are in U.S. dollars unless otherwise noted)
▪ Strong financial performance: Achieved quarterly revenue of $117.9 milli on, net income of
$15.0 million or $0.13 per share and adjusted net income of $19.7 million or $0.17 per share.
▪ Increased cash balance: Quarter-end cash increased by $13.5 million to $340.6 million. Cash
generated by operating activities totaled $30.6 mil lion. Marketable securities increased by
$41.7 million to $190.6 million.
▪ Consistent production: Produced 97,851 gold equivalent ounces at cash costs of $646 and
AISC of $977 per payable gold equivalent ounce.
▪ Low cost gold production at Marigold: Produced 55,215 ounces of gold at cash costs of $585
and AISC of $799 per payable ounce of gold sold.
▪ Robust gold production at Seabee: Achieved production of 21,023 ounces of gold as higher
grade ore was sourced from the Santoy mine at cash costs of $574 and A ISC of $986 per
payable ounce of gold sold.
▪ Strong operating fundamentals at Pirquitas: Concluded open pit mining in January and
commenced stockpile processing for quarterly production of 1.5 million ounces of silver at
cash costs of $12.68 and AISC of $14.82 per payable ounce of silver sold.
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▪ Exercised option on the Chinchillas project: Creates a joint venture to extend the Pirquitas
operating life with the Chinchillas silver -lead-zinc deposit. Silver Standard will be the
operator.
▪ Resolved export duty claim: We entered into the tax moratorium system in Argentina, which
resolves our export duty claim. We have agreed to pay approximately ARS 1 billion with 5%
paid upon entry and the balance in installments over 60 months.
Marigold mine, U.S.
Three months ended
Operating data
March 31
2017
December
31 2016
September
30 2016
June 30
2016
March 31
2016
Total material mined (kt) 16,736 19,559 19,558 18,685 17,291
Waste removed (kt) 11,062 13,123 14,741 12,005 11,611
Total ore stacked (kt) 5,674 6,436 4,817 6,680 5,680
Strip ratio 1.9 2.0 3.1 1.8 2.0
Mining cost ($/t mined) 1.65 1.52 1.48 1.55 1.45
Gold stacked grade (g/t) 0.42 0.48 0.42 0.44 0.47
Processing cost ($/t processed) 0.89 0.80 0.95 0.70 0.71
Gold recovery (%) 74.0 75.0 71.0 70.7 70.0
General and admin costs ($/t
processed) 0.52 0.46 0.56 0.38 0.47
Gold produced (oz) 55,215 59,945 47,456 47,195 50,520
Gold sold (oz) 52,528 61,308 47,278 47,124 48,605
Realized gold price ($/oz) (1) 1,214 1,247 1,330 1,259 1,189
Cash costs ($/oz) (1) 585 585 636 663 719
AISC ($/oz) (1) 799 835 1,139 1,067 841
Financial data ($000s)
Revenue 63,762 77,047 62,831 59,197 57,742
Income from mine operations 21,327 28,648 23,156 17,641 11,227
Capital investments 3,043 3,271 8,310 10,154 8,796
Capitalized stripping 6,745 10,171 13,787 7,231 1,435
Exploration expenditures (2) 1,024 1,276 1,145 1,597 1,102
(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 11 of our management's discussion and analysis
of the financial position and results of operation for the three months ended March 31, 2017 ("MD&A").
(2) Includes capitalized and expensed exploration expenses.
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Mine production
In the first quarter of 2017, the Marigold mine produced 55,215 ounces of gold, in line with our
plan.
A total of 16.7 million tonnes were mined in the first quarter of 2017, 14% less than the fourth
quarter of 2016, primarily due to weather-related impacts in January and February, which caused
the open pit to cease operations intermittently due to u nsafe work conditions. Additionally, the
rope shovel was down for planned maintenance for five days during the month of March. We
expect to recover the tonnage in the second half of 2017 as we will have significantly shorter hauls
available due to backfilling previously mined areas.
Approximately 5.7 million tonnes of ore were delivered to the heap leach pads at an average gold
grade of 0.42 g/t. This compares to 6.4 million tonnes of ore delivered to the heap leach pads at a
gold grade of 0.48 g /t in the fourth quarter of 2016. Gold grade mined in the first quarter was 13%
lower than the fourth quarter due to planned pit phase sequencing. The strip ratio declined to 1.9:1
in the quarter, a 5% 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 $585 per payable
ounce of gold sold in the first quarter of 2017 were equal to cash costs in the fourth quarter of 2016.
Total mining costs were lower in the first quarter of 2017 than in the fourth quarter of 2016.
However, costs per tonne mined increased by 9% to $1.65 per tonne i n the first quarter, due to a
decrease in total tonnes mined. Processing unit costs were 11% higher in the first quarter of 2017
than in the fourth quarter of 2016 due to fewer tonnes stacked. General and administrative unit
costs were also higher in the f irst quarter of 2017 than in the fourth quarter of 2016 due to fewer
tonnes stacked but were comparable on an absolute basis.
AISC of $799 per payable ounce of gold sold in the first quarter of 2017 decreased from $835 in the
fourth quarter of 2016 predominantly due to lower capitalized stripping.
Mine sales
A total of 52,528 ounces of gold were sold at an average price of $1,214 per ounce during the first
quarter of 2017, compared to 61,308 ounces of gold sold at a 3% higher average price of $1,247 per
ounce during the fourth quarter of 2016.
Exploration
Exploration activities during the first quarter of 2017 focused on the conversion of Mineral
Resources to Mineral Reserves in areas proximal to the 2016 Mineral Reserve pit. During the quarter
we completed 10,255 meters of reverse circulation drilling in 44 drillholes on four targets. Positive
drill results demonstrate the potential to increase and convert Mineral Resources and warrant
further follow up drilling, which is currently underway. The drill results from our fourth quarter
2016 and first quarter 2017 were reported in our news release dated May 1, 2017.
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Seabee Gold Operation, Canada
Operating data
March 31
2017
December 31
2016
September 30
2016
Period from
Acquisition to
June 30, 2016 (1)
Three months
ended
June 30, 2016 (2)
Total ore milled (t) 72,394 84,526 82,756 18,856 71,218
Ore milled per day (t/day) 804 919 900 629 783
Gold mill feed grade (g/t) 9.22 7.40 7.40 7.79 7.97
Mining costs ($/t mined) 68 62 58 110 N/A
Processing costs ($/t
processed) 23 19 19 29 N/A
Gold recovery (%) 97.7 97.0 96.5 96.6 96.8
General and admin costs ($/t
processed) 59 44 37 61 N/A
Gold produced (oz) 21,023 19,711 20,142 6,721 17,524
Gold sold (oz) 22,411 17,229 21,911 11,306 16,305
Realized gold price ($/oz) (3) 1,233 1,230 1,334 1,278 1,271
Cash costs ($/oz) (3,5) 574 595 661 663 N/A
AISC ($/oz) (3,5) 986 833 840 776 N/A
Financial data ($000s)
Revenue 27,609 21,175 29,214 14,437 N/A
Income from mine
operations 4,995 2,864 4,126 1,216 N/A
Capitalized development 2,514 2,432 2,104 803 N/A
Capital investments 4,760 1,010 579 337 N/A
Exploration expenditures (4) 1,953 829 1,206 117 N/A
(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 entitle d
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 th e 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 o f sales, as shown in our consolidated statements of comprehensive income (loss), please refer to “Non -
GAAP and Additional GAAP Financial Measures” in section 11 of our MD&A.
(4) Includes capitalized and expensed exploration expenses.
(5) The non-GAAP financial measures of cash costs per payable ounce of gold sold and AISC per payable ounce of gold sold fr om
the Seabee Gold Operation were 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. In the first quarter of 2017, the Seabee Gold Operation produced
21,023 ounces of gold, a 7% increase from the 19,711 ou nces of gold produced during the fourth
quarter of 2016, primarily due to higher grade ore from the Santoy mine complex.
A total of 72,394 tonnes of ore was milled at an average gold grade of 9.22 g/t and recovery of 97.7%
during the first quarter of 2017. This compares to a total of 84,526 tonnes of ore milled at an average
gold grade of 7.40 g/t and recovery of 97.0% in the fourth quarter of 2016.
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During the first quarter, the mill was maintained at a throughput of 804 tonnes per day, lower than
the previous quarter as ore delivery from the mine constrained mill throughput due to ventilation
system requirements. The need for additional ventilation was identified in the fourth quarter of
2016. A solution to deliver more fresh air, especially in deeper sec tions of the Santoy mine, was
developed with equipment delivered to site in the first quarter of 2017, with installation and
operability expected by the end of the second quarter.
The Santoy mine complex supplied 98% of ore milled in the first quarter, predominantly from long
hole stopes. We continue to develop new mine plans to achieve a higher, sustainable production
rate.
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 $574 in the first quarter of 2017, lower than the $595 in the fourth quarter of 2016.
Costs per tonne mined were $68 per tonne in the first quarter of 2017, 10% higher than in the
previous quarter due to lower tonnes mined. Processing and general and administration unit costs
were higher by 21% and 34%, respectively, in the first quarter of 2017 compared to the fourth
quarter of 2016 due to lower tonnes milled; however, the mill feed grade was 25% higher in the
current quarter than in the preceding period driving higher production which resulted in lower
cash costs in the period.
AISC per payable ounce of gold sold, were $986 in the first quarter of 2017, higher than the $833 in
the fourth quarter of 2016 as a significant portion of planned capital spending was incurred due to
the delivery of capital items over the ice road. Exploration spending also increased, consistent with
our objective of adding Mineral Reserves and Mineral Resources at the mine.
Mine sales
A total of 22,411 ounces of gold were sold at an average price of $1,233 per ounce during the first
quarter of 2017, 30% higher than the 17,229 ounces of gold sold at a comparable price of $1,230 per
ounce in the fourth quarter of 2016.
Exploration
For 2017, the Seabee Gold Operation plans to complete up to 60,000 meters of underground drilling
and 28,500 meters of surface drilling with the objective to increase and convert Mineral Resources
into Mineral Reserves. In the first quarter of 2017, we completed 16,267 meters of underground
drilling and 11,394 meters of surface drilling in 42 and 24 drillholes, respectively. Drill results
continue to be enc ouraging and additional exploration drilling has been planned for 2017 across
the Seabee Gold Operation to define, increase and convert Mineral Resources. The drill results for
fourth quarter 2016 and first quarter 2017 were reported in our news release dated May 1, 2017.
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Pirquitas mine, Argentina
Three months ended
Operating data
March 31
2017
December 31
2016
September
30 2016
June 30
2016
March 31
2016
Total material mined (kt) (1) 89 1,694 2,385 2,543 2,520
Ore mined (kt) (1) 53 501 801 729 794
Silver mined grade (g/t) (1) 205 168 190 189 181
Mining costs ($/t mined) (1) 25.80 4.84 3.80 3.54 2.97
Ore milled (kt) 449 476 455 425 418
Silver mill feed grade (g/t) 145 194 264 238 247
Processing cost ($/t milled) 13.66 14.17 14.78 15.10 13.58
Silver recovery (%) 72.6 74.5 79.0 77.6 79.7
General and admin costs ($/t milled) 5.22 6.19 5.84 6.22 5.68
Silver produced ('000 oz) 1,520 2,210 3,047 2,526 2,639
Silver sold ('000 oz) 1,443 2,633 2,947 2,594 3,223
Realized silver price ($/oz) (2) 17.35 17.14 19.64 16.52 14.94
Cash costs ($/oz) (2) 12.68 9.80 8.48 8.87 8.93
AISC ($/oz) (2) 14.82 11.47 9.87 10.00 9.67
Financial Data ($000s)
Revenue 26,534 29,095 51,336 45,141 43,771
Income (loss) from mine operations (3) 13,767 (4,056 ) 31,908 25,205 12,071
Capital investments 2,261 3,467 3,158 2,057 1,578
Exploration expenditures — 11 7 25 22
(1) Data for t he quarter ended March 31, 2017, represent mining until mid -January 2017. We will stop reporting these metrics
beginning in the second quarter of 2017.
(2) We report the non -GAAP financial measures of cash costs per payable ounce of silver sold, realized silv er prices and AISC 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, please refer to “Non -GAAP and
Additional GAAP Financial Measures” in section 11 of our MD&A.
(3) The income from mine operations in 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. Incom e (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.
Mine production
Mining from the San Miguel open pit ceased in January 2017 and medium grade stockpile material
is being processed through the plant. Lower grade stockpiles may be processed in late 2017, and
potentially in early 2018, once the medium grade stockpiles have been consumed, depending on
prevailing economic conditions. The operation produced a total of 1.5 million ounces of silver from
ore mined and stockpiles processed.
Ore was milled at an average rate of 4,994 tonnes per day in the first quarter, 25% above the mill’s
nominal throughput of 4,00 0 tonnes per day. Ore milled in the first quarter of 2017 contained an
average silver grade of 145 g/t, 25% lower than the 194 g/t reported in the fourth quarter of 2016
as the majority of mill feed was sourced from medium grade stockpiles. The jig circuit was not
utilized to treat stockpile material. The average silver recovery in the first quarter was 72.6%, lower
than the 74.5% recovery in the previous quarter, in line with reduced silver mill feed grade.
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Mine operating costs
Cash costs and AISC per pa yable 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,
increased by 29% to $12.68 per payable ounce of silver sold in the first quarter of 2017 from $9.80
per payable ounce of silver sold in the fourth quarter of 2016, principally due to the transition to
processing lower grade stockpiled ore. While unit processing costs declined as the pre -
concentration circuit was idled, the transition to processing stockpiles added re-handling costs and
stockpile inventory costs of approximately $2.00 per payable ounce that were previously incurred.
AISC of $14.82 per payable ounce of silver sold were higher in the first quarter of 2017 than the
$11.47 per payable ounce of silver sold in the fourth quarter of 2 016 due to higher cash costs per
payable ounce of silver sold and higher capital spend per ounce sold.
Mine sales
We recognized sales of 1.4 million ounc es of silver in the first quarter of 2017, lower than the 2.6
million ounces in the fourth quarter of 2016, as a result of lower production due to processing of
lower grade stockpiles.
Chinchillas project, Argentina
On March 31, 2017, we provided notice to Golden Arrow to exercise our option on the Chinchillas
project and form a joint venture comprised of our Pirquitas property and Golden Arrow's
Chinchillas property owned on a 75%/25% basis by us and Golden Arrow, respectively. The
transaction is expected to close on or before May 31, 2017 and we will be the operator.
The Chinchillas project provides operating life extension to Pirquitas with a modest capital
investment of $81 million on a 100% basis. With construction expected to begin in the third quarter
of 2017, subject to permitting, Chinchillas is expected to produce 8.4 million ounces of annual silver
equivalent production over an eight -year operating life. Chinchillas ore delivery to the Pirquitas
mill is expected in the second half of 2018.
A news release on the Chinchillas pre -feasibility study was reported by Golden Arrow on March
31, 2017. The associated National Instrument 43 -101 technical report will be filed within 45 days.
Subject to closing the transaction, we approved the development of the project and expect
construction to commence in the third quarter of 2017, following the receipt of environmental
permits.
Export duties
We entered into a fiscal stability 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 had previously challenged the legality
of the export duty applied to silver concentrate.
On March 31, 2017, we entered into the tax moratorium system in Argentina to resolve the export
duty dispute. Under the conditions of the moratorium, which converts the export duty liability to
ARS, we have agreed to pay approximately ARS 1 billion with 5% down payment initially and the
balance in installments over 60 months. Outstanding ARS amounts are subject to interest at a
minimum rate of 1.5% per month.
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With our entry into the tax moratorium for resolution of our export duty dispute, we are no longer
challenging the legality of the application of the export duty other than with respect to our right for
reimbursement of the $6.6 million of export duty that we paid. Export duties were removed
effective February 12, 2016. At December 31, 2016 we had accrued a provision for $67.1 million for
unpaid duties but had not accrued for potential interest and penalties.
Entering the tax moratorium resolves the existing liability, and we have recognized the new ARS
liability at amortized cost by discounting expected future payments using a discount rate of 20%
per annum over the 60-month period. We paid 5%, or ARS 52.9 million ($3.4 million), when entering
the moratorium on March 31, 2017 and have recognized the reduction in the liability of $4.3 million
within cost of sales.
Outlook
This section of the news release provides management's production and cos t estimates. See "Cautionary
Note Regarding Forward-Looking Statements."
Our operating guidance remains unchanged from that provided in our fourth quarter 2016
MD&A Outlook. For the full year 2017, we expect:
Operating Guidance Marigold mine
Seabee Gold
Operation Pirquitas mine
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
Development $M 17 11 —
Exploration Expenditures (2) $M 5 5 —
(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 Seab ee Gold Operation and the Pirquitas mine. See
“Cautionary Note Regarding Non-GAAP Measures".
(2) Includes capitalized and expensed exploration expenses.
In 2017, on a consolidated basis at mid -point of guidance, we expect to produce 355,000 gold
equivalent ou nces at gold equivalent cash costs of $735 per ounce. Cash costs and capital
guidance are based on $55 per barrel oil price and 1.30 Canadian to U.S. dollar exchange rate.
Gold equivalent figures are based on $1,250 per ounce gold price and $17.50 per ounce silver
price.