Q1 2020 Earnings Call
Good morning, ladies and gentlemen, thank you for standing by animal concept of fear of metals coupon Twentytwenty consolidated financial results conference call. At this time, all participants and unless an only mode. After the speakers presentation that won't be a question unanswered question to ask the question.
During the session you will need to press start one on your telephone police the advice that today's conference as being recorded if you require any further assistance. Please press start zero.
I'd like to turn the conference over to your Speaker today, Mike, Matt Mack Oh that started V.P. Investor Relations. Please go ahead.
Thank you operator, and good morning, everyone welcome to fear metals Cubans.
She went 2020 results conference call on today's called we're joined by your Gonzales, our president and C.E.O. as well as they'd get Maris R.C.F.O.s.
Today's call as mentioned by the operator will be followed by a question to answer period. The accompanying presentation for today's call is available for download both through the web cast and from the company's website.
Dot Com yesterday's press release financial statements and the management discussion and analysis document or all posted on the company's website.
Before I turn the call over to eat or I would like to indicate that this earnings call contains four is looking information that is based on the company's current expectations estimates and believe.
As far as looking information is subject to a number of rich uncertainties and other factors actual results for different materially from our conclusions forecast projections.
Sit in the forward looking information.
Additional information about the material factors that could cause actual results to defer materially from the conclusion forecast or projection and the forward looking information and the material factors or assumptions that were applied and drawing a conclusion or making a forecast or projections as reflected in the forward looking information is contained in the companies.
Annual information form, which is publicly available on C.D.R. or Edgar by a form 40, f. or on the company's website.
Please also note that all the dollar amounts mentioned on today's call our in U.S. dollars unless otherwise noted.
I would now like to turn the call over to you or Gonzales, our president and C.E.O. Please go ahead eager.
Thanks, Mike.
Neither one before I speak about about some of the first quarter 2020 production and financial highlights.
I would like to take a quick moment to update you on the most recent Kobe 19 developments in Mexico and group.
We can turn into a slide number for grew entered into a state of emergency on March 17th.
Has now been extended until May 20 poor.
During this time only essential services could be good operate and trouble is restricted.
Within the country.
However, the government has allowed some economic activities too stark and large open pit mining companies have been cleared restarted operation.
Hopeful that shortly the government will allow midsize an underground mining to command as well.
Indicates of Mexico.
I state of emergency, which also declared on March 30th.
And has been extended to may 30th.
However.
13, Mexican government declared mining as any <unk> essential.
Service.
Effective may 18.
40 normalization of mining operation.
Therefore, they're bully about my at good.
Restart normal abrasions on May 18th.
The Goosey mine remains in care and maintenance management continues to evaluate the best pet for work.
And we can not multiplied the workforce from nearby CD, yet well be held for emergencies state.
It will remain in place.
The company continues to focus on the Hill.
Safety and wellbeing of its workforce.
It's motor workforce has been <unk> to oversee the critical aspects of the operations and complete maintaining activity.
Employees due to report for work I <unk>.
Screen medical screen.
Fit.
Kobe and quarantine before being allowed to join the active workforce I've been might.
Additionally, they acted workforce continues to be monitor on a daily basis at both mine or any potential symptoms.
Through this process to potential cases.
<unk> detecting during the screen brought it at the already quit your mind.
Then what's come from positive during the quarantine period.
The other is still a page okay that according to the the quick test.
That we have on hand.
The potential case with like they do to a previous viral infection, but we are taking every precaution at both all of the cases.
And they all were returned to their home and referred before their medical between.
That's a precaution their families have also been offered to be tested.
The company is doing everything weekend to protect its employees.
And they care about their families while protecting our active workforces and to prevent late labor disruptions. We're also support the nearby communities with.
It's a blight and fumigation equipment.
Due to the contain impact of a covert on middle prices.
Sorry, due to the continued impact of so the Kobe on metal prices global economic uncertainty.
Related work stoppages at all mine.
Company has to spend it all previously you should 2020 annual annual guidance.
The overall effect.
Company's business will depend on how quickly it's site can safely returned to normal operation.
And on the duration of impact on it because customers and market for its products.
All of which are unknown at this time.
The resulting from two normal operating on T.V. is highly dependent on the progression of the pandemic success or measures taken could prevent transmission, which will influence when health and government authorities remove targeted restriction on business activities.
Moving now onto too.
Two 120 20 highlight.
Dirty into slide number bites the company has achieved strong consolidated production discord.
Consolidated Middle throughput was 740689 Dawn 830 per cent increase over Q1 2019.
Consolidated corporate quit billion pounds produce increase 43% 231.2 million pounds.
As the company a cheap.
Higher production for all metals as compared to Q1 2019, despite the impact of Kobe 19.
In the second half of March 2020.
<unk>.
Despite the lost a 15 day production boot to Kobe and dynamic.
Had 20, 22% higher throughput thing in part to running the mail at higher throughput levels.
They don't have emergency with declared in Q1.
They certainly the mind had a larger stockpiled board, which we were able to continue processing doing the work stoppage with a smaller workforce.
<unk>, we again had record quarterly throughput discord.
<unk> 4315 pounds per day average.
And processed as we continue to ramp up than mine up towards the 5000 Don per day level.
Who's he has it been delayed disquieting as we can do do <unk> difficulties catching up with developing due to preview subsided.
Which required us to leave at 60 meter pillar containing that brings or they completed development, which included some highgrade or.
Ready news from mental space in Greece, 13% to $55.6 million adjusted he'd be dot increased 24% to 16.1 million compared to Q1.
2019.
Adjusted net income game.
Came in at 1.2 million or one cent per share food Q1 2020.
We finished the corridor, where the cash balance of 37 million.
Which decrease from $43 million at the end of 2019 due to 11.2 million of capital expenditures.
1.3 million interest payments upset by 6.5 million of operating cash flow after working capital adjustment intact.
The <unk> make I said percentage of revenue for the company has <unk> the weight.
40%.
Which is expected to continue I'm, particularly in Greece border would they expansion at the ball with our mind.
Following bike think and silver each at 20% follow by lab at 10% and gold 9% Gold has also seen we've seen that increase.
Oh of a gold revenues.
The latest prices.
Q1, we continue to pay.
Lower base metal upright.
<unk>.
92% higher three men and refining charge, it as well as higher sustaining capital costs.
Despite these challenges the company generated a significant amount of operating cash flow, which has been allocated carefully imprudently, good fun capital expenditures and maintain liquidity.
Furthermore, we continued to realize substantial returns on the capital invested.
<unk>.
During into slide number six <unk> the minus 20 towards copper that's our main product as a percentage of revenue and that's a percentage of net smells the royal.
Such we're recording copper figures. In addition to think for you already coach when compared to the same period in 2019 catch costs were down to any per fan.
Yeah.
Ah 43 cents for a a dollar purchasing equivalent pay worldcom.
All in sustaining costs were down 3%, 80% <unk> thing.
<unk>.
The 46% increase in think equivalent bombs sold more than.
More than upset the impact of the increase in treatment and refining charges and hire some stuff so stink up though.
Looking at costs now for a <unk> from a copper perspective.
Compared to the same period in 2019 catch cost we're down 7%.
One point $17 for corporate equivalent payable phone and all in sustaining costs were <unk>, 15% to two point 24.
Dollar spurt copper equivalent table pound as the 24 four per cent increase incorporate quibbling pounds. So good not upset they impact.
They hired Goodman.
In charge Ya.
On higher sustaining capital costs.
I'd Boulevard.
Compared to the same period in 2090.
<unk> cost where 99% lower.
One point $15 for proper quibbling stable power.
Sustaining costs were down 48% to $1.85 cents.
They decrease in unit cost at both were driven by the 43% increase milk throughput higher great.
Resulting in higher metal production <unk>.
Oh interesting costs for proper equipment and fable pound during the first quarter grease, largely due to the combined impact of 78% higher property Copeland pound sold and 70% lower sustaining capital.
<unk> they hire operating costs due to the development costs as a consequence of this website and experience in late 2090 and due to the right off all this stuff files and concentrate inventory at Cordrey.
At such catch costs were 30% higher at 22 point $62.
And all in sustaining costs were flat coming in $30 for children equivalent payable arms when compared to Q1 2019, we believe that would increase throughput and more efficiencies weekend.
Realized lower costs going forward in this month.
Looking ahead in 2020.
Looking ahead in 2020 on this flight number seven we still see it strong growth for the company as the code pandemic effects.
Begin to eat.
And operations begin to return to normal such as in Mexico with mining being declared as essential service.
Mining operations beginning to normalize.
They're starting on May 18th.
<unk>.
We have the flexibility to run at higher level.
Who helped makeup lost aren't you.
And we're still optimistic that we will receive our permit from the government this year.
Which will allow us to increase production by 20% 3600 thumbs for date level <unk>.
Moreover, we're completing his studies to increase throughput to 5500 tons per day in the next few years.
<unk>.
We continue to ramp up production to 5000 pond.
Were they level, which is that 34, 38% increase over 2090.
Furthermore, the recent both our mineral resources update provided for a significant increasing you know resources and has demonstrated that further expansion potential exceed the beyond 5000 per day level, which will be evaluated to an updated preliminary economic system.
I could see the mind remains in here and maintenance as management continues to Valerie the best path forward for cruelty to complete the needed development and reach throughput target.
The government imposed log locked down and goosey being placed into care and maintenance anticipated in I. 43, one on one will be delayed.
Through name now to slide number eight.
<unk>.
Yeah sure everyone's that.
<unk> 19 pandemic.
We first and foremost are taking care about workforce. We continue to have a strong balance sheets balance sheet, and we have reduced deferred capital expenditures to ensure we emerged.
That's a strong company has before dependent.
One thing situation returns to a more normal one and metal prices improve we remain poised for strong future growth in cash flow, we will continue to make protein and strategic investments in the company, which will benefit.
Oh shareholders.
Yeah metals have large land packages with many high value targets that would exploration and development can provide lower cost organic growth for many years ahead.
Would that I will mouth turn to call back to Mike.
Thanks see her that into the presentation portion of this call. We would now like to open up the call to questions from our participants operator could you. Please open up the lines.
Thank you I just find me she like ask the question pastime on on your telephone keypad too much I question past dependency. Please wait while they compiled the question.
Yeah first question comes on line of checks I'm about to kept all partners piece go home.
Hey, guys thing sticking my questions.
It it looks like your taste treatment cards is increased fairly substantially during the quarter. I'm. Just wondering are these locked in over the course of 2020 or or do you expect them to come down as we've seen some global supply come off line through the call the 19.
Hi, Hi, Jake Thanks for the question.
Yeah. They the P.C.'s in our scenes are locked in for 2020, and what you are seeing in terms of the global T.C. situation. They have spots sales have come down primarily for saying.
As you know that's largely because of what's happening in in Chile and and through.
With.
Concentrate restrictions, but t. shirt normalized by by the end of the year. So the T.C.R.C.'s are expected to present anyway to creep up to around 300 times by the end of year.
And Jakes are all our contract Jake are for one year and and so it'll it'll it'll go over the way through the end of this year.
Okay. That's helpful.
Just give us a bit more color on the trend we're seeing towards copper production your coach.
Are the dominant of the copper dominant areas and stuff to the mind over the course of the year into next year or just any color surrounding that would be helpful.
Sure.
Yes, we.
<unk>.
They they already caught your mind it's.
Divided into.
Areas areas, one of the area <unk>, which is essentially a a copper mine.
Underground copper mine and and it it to extend it always scratchy got cheap.
So with with current prices with current conditions, we're trying to maximize the opportunity D.O. four or trying to.
To go to this area and mine or or given the current prices and D.C.'s R.C.'s for sync.
And we're able to do that because we have resources in in.
And also we we have I didn't <unk> or in the area between if they don't ban catchy catchy. So yet we're reviewing our mind plan and then we would like to to add more more more public funds in our in our production for this year.
Okay. It's it's good to see you guys taking advantage of that flexibility and then just lastly, Ah Ah cool to see is there a particular silver price you need to see to move forward with the development work. There you know assuming things or it will come back on line over the medium term.
Oh, Okay, Let me let me answer.
First and then that's probably compliment.
Include see well we have done is we we have a review they needed the development, we need a additional 1500 meters.
I'm in in order to be able to have enough faith. It to feed the meal at a steady state of 1200 times per day, we have tested the <unk> base already.
Many times so we know it can do it and so the only thing remaining is to have enough open or places to to feed them to have a steady feet to the meal.
Then the other activity that is required at at go see is to finalize the construction of the.
The new daily facility. So we have put both activities in front of our board both the development and detailing.
Facility and when the board approved this capital then we can move for or would that development and I I would let it talk about the price.
Thanks, Igor in terms of prices Jake there's it's really.
Based on consensus <unk>, 17, 50 and above there's no reason to see you see can't make money.
We we are in particularly downturn for silver, especially when you compare it to to gold prices.
So but in terms of consensus going forward P.C. should be making money at at those prices.
Okay. That's sir that was on my on Thanksgiving.
[noise] Yeah next question <unk> captive market. Please go ahead.
[noise] bordering a thanks for taking like question just quickly just to start off <unk>. What are your current thoughts on on capital expenditures this year.
I think you who who's who ask the question.
This is Martin Maria Martin.
Hi, Mark well given you know given that we just offended guidance until.
Until the pandemic situation returns to a somewhat normal situation or environment, it's very difficult to to really comment on on our capitols fans were.
Focus is too.
Reserve as much cash as possible, we don't know how long this pandemic will last or whether it will come in waves. So we're doing everything we can to to minimize capital spend without.
Without jeopardizing needed developments to to keep the mind producing.
But but you have yeah I I.
I I should I like to compliment that as part of our it's an area now which is during the this.
We have broken up every major capital project that is in in Sierra into.
Smaller portions that are essential for for for the operations and just to give you. An example.
One of the area so priority in a when selecting.
Capital project would be the connection between <unk> and catchy patchy, which we all have already advance hundred and 50 meters and we need to to develop that area and drill.
And another another critical.
<unk> is restarting for example, doing maintenance to the central shock.
And so forth. So we know exactly now what pieces of a of what parts all the different capital project weekend commands at each individual time and during the pandemic. We we have to stop all capital project, it's been just to to conserve Ah.
Well that's very helpful. Just a second question is just to follow up on on Q.C. I think there's kind of two elements. There. There's one that there's there's there's the.
Silver prices have been no co-operative I guess, but but also there's the issue of.
Developments needed at the mind to be able to enable it to operate that that 1200 tons per day, and so right now it's on care and maintenance and I was just kind of wondering for the balance of the year. Whether you know you would continue to keep it out of service or you know how you're thinking about that in other words.
Need to see prices go higher before you're willing to invest more in the development <unk> you know to bring the capacity up to 1200 tons per day.
Which might you know protract things, a little bit or just leave it a little clarity there.
Sure.
<unk>, what I indicated that we need 15 metres 5200 meters of development. This translate in in in terms of timing about one and a half to two months old for development.
And and.
And but at the same time, what would have to kick in with the with the painting or facility a continuation of the construction process.
So both activities are now been pretended to our board they they're fully aware of that that's needed that capital additional capital is needed to remain celebrations in in in in Goosey and and the one who we see that conditions are paper wouldn't terms so slow.
Health and also pricing <unk> weekend immediately ask for the L.T.V. station to the Board then and everything.
<unk>.
So.
Sure sure.
<unk>.
Well the last question, it's just more of those kind of an industry question that is but you know copper prices have remained you know obviously.
Reflecting the the the.
Mixture outlook, but at the same token so the prices are low like happen to catch you know the financial times had a had a a headline that says burich on the <unk>.
And.
Do you think at this point I mean, the industry participants kinda looking beyond this pandemic and you know as the industry started to kind of focus on the long term intermediate in longer term supply demand.
Factors for copper, which in my view or favorable.
So do you think we will see you know more activity.
In the space.
And <unk> my opinion is that that indeed will be the case as Cooper represents a long term investment and.
And as as we move forward.
They they industry that consumes copper will will become more prevalent like two cards solar cells et cetera, and so.
I I think we have a good future for for copper.
A on our end.
Company.
We are growing our resources.
<unk> and and also that you already quotes Ya.
And and more important perhaps in in our case is that they they operating costs are at.
At Balibar, it's it's very competitive and and that puts us in a in a very positive.
Position for for a couple of producer.
Well I agree well thank you very much.
Thank you.
Yeah. Next question comes on line is high coat with H.T. <unk>. Please go ahead.
Yeah. Thanks for taking my questions and I hope everybody is spending size.
Going a bit on one <unk> earlier with the treatment refining charges can you talk a little bit would you seen in April and more importantly, indoor and call. It the last week or two in May and other people willing willing to shop longer term or what are you seeing what's up.
Hi, <unk> go ahead there.
Yeah, I can just talk briefly on what I'm seeing with the same t. sees so.
Essentially.
Above I'd say the end of March we we saw big drop and and spotted P.C.'s are both.
But I believe those to be short lived once once.
Production normalizes out of Peru, and Chile.
You should see a return back to.
The at least a two way to 300.
She sees.
On the operating on the operating side of things cycle, all of our production in May and Naperville.
I have been has been accepted vary.
Without any any convenience the.
In the refineries and the concentrate the buyers. So oh, we haven't had any any issues with the shipping our production.
Oh, that's very helpful. Thank you.
Given that were pretty crazy I'm pretty much unprecedented times very an army of the capital markets at times, So automotive slate.
Maurcio, we're going absolutely not.
Peter is going to give your thoughts on some potential longer term hedging I know its pandora's box and a lot of investors don't like at all.
But I mean, just at what point in time does it make me I understand prices are lower it now so I'm not saying in the immediate arm, but at what point in time doesn't maybe make sense to do a little bit of thinking about.
No hennings hedging some some non core production.
I will answer apart I think with our operating cost we would like to be a position such and such a way that we can benefit from any appetite in price I think that that are.
Important now with with gold the going up or so fast.
We have seen some some companies.
Hedging on the gold the future production.
Although our production is not significant yes, the amounts for 9% of our revenue.
But I I at this point in time, I, given our especially our operating cost. So that we have been able to optimize we're well placed to benefit from any upside in pricing if you want to complement that.
Sure Igor just just to add having having had the benefit of producing five metals. We we're diversified enough and that's that's creating a natural hedge in of itself. So we can take advantages of a stronger metals for instance, a gold right now.
And ER and copper soon to follow and ER. So yeah, there's no theres no real immediate plan for hedging and we have enough margin that there's no there's no need for hedging to protect our costs.
And then lastly, just in regards to travel I mean, they offer story in two different countries, some sort of us to my understand it really isn't any travel between those who place us right now.
How much of this is actually impacting things I mean, one would think that.
You can't really give a proper property tours shoulder eurs, what we're doing on the on them I pad I mean people want to see things him in person and and it's hard it's hard to see that and also I would assume that there's something one of the operations doesn't want you to see are probably just going to forget to give it on IP network.
Is there any impact at all or is it a meaningful yet or are you people actually getting around that all.
Yeah, Hey, Heiko.
The Seeger here, Oh, yes, we have not being able to travel and through its completely closed for its the national and international flights and Mexico Likewise.
However from day, one of the Cobot, we created a crisis committee both in you already Koetje and in Bali bar and goofy.
And we we need the assume everyday and every morning.
And that every it Matt area manager.
Reports, meaning accounting logistics.
I T operations of course.
And it has actually work extremely well for us because the never before we had so much information from each area manager and we can.
Make corrections on the go very quickly and everybody can.
Can that pitch in their support for whatever is needed and so we've been following up on the operation very closely on a daily basis that include Saturday and Sunday or so I think we're we're quite a quite close to the operation as a matter of fact a asking.
We speak the basic coal going on.
Between the mine so where.
I think that has helped tremendously and but tonight, the Mexico, Theres, they're losing up which we think it's going to be the first one we're going to start to see some trouble or.
Between inside Mexico, and then later with brew now the other the other element that helped us as a company is that our workforce in Mexico.
The essentially.
It all but two of them our Mexican.
And in Peru, a workforce is so all Peruvian so.
They're all.
On site and they're the ones that do travel are at the corporate stop or from Toronto and from Lee Metro.
That's a that's an update heiko.
Appreciate it thank you guys Syn <unk>.
Thank you.
Your next question comes on like a line of somebody come from another family Office. Please go ahead. Thank you. Let me first a complement you I think you're doing a very fine job in a very difficult environment I'm curious as you take all the moving parts not looking to put you into the guidance game piece I realize you don't want to offer guidance, but would you.
We expect all things being equal that you have more cash at the end of the year than you have currently Georgia, you're expected to generate cash this year.
So highly yes, that's correct.
My question, Thank you, but you're doing fine job and stay safe and healthy.
Thank you then Julie.
Yeah again, if you like to ask the question how star one on your telephone Keypad. Your next question comes on line of Chan Young with West family investments. Please go ahead.
Yeah, Hi, a couple of questions for a number one is what seems to differentiate experimental from other mining company.
Growth opportunities you have ahead of you enter what Im curious about.
Look at the.
Production at all of our can you give us a sense as to assuming you get the and 18 take hold how long if you're going to take it to be able to ramp towards the 5000 tonnes per day.
In 2020.
Yeah, and they Jim This is the work and then the ramp up in Bali bar.
It's been on on truck until cope with of course, and it has to do a lot with development in the mine.
At the present. This is there it's already you can do 5000 with test the plan. Many many times 5000. So are the plan is not an issue I think its mine development. So as soon as we get back to normal or one of our priorities will be to.
Increase our development meters and and be able to continue there on a where we left that we left at the around 4500 tonnes per day.
It does not you know during this.
It is down period.
We have not done all the development, we need because so we were operating with a limited workforce.
Okay. So [laughter] would you still expect to be able to exceed 5000 tonnes per day level in the fourth quarter of 2020.
Yes, that's our expectation.
Okay, and then beyond the 5000 tonnes a day and 2020 in the fourth quarter is there further ability to grow the bulk of our production in 2021 and beyond.
Yeah, so how much.
Oh, we have to make a p. acreage that we which is the published our resources or new for it we want to one.
And Oh, we have a significant increase in resources.
However, I should point out that most of the increase in its in a guy you evaluate video.
Because we just didn't have enough development to do infield drilling in Balibar, west, which where we get most of our better great, but we would like to continue as a next phase of a infill drilling in Bali about with and it starts to do a P.A. study and the study will tell us what why would be a a key.
Comfortable.
The capacity increase now up to this point, we've we've done that a with a limited resources and and a further increase there has to be a study.
And we have to analyze water tailings and and and power. Both at the three elements that will have a big say on a on a larger increase.
So when when would you expect to conclude be a PK study then.
He I I don't have a date right now but.
Probably early 2021.
Okay.
And the a second question is you know I recognize that given the covered in a situation where things have been kinda shut down a little bit pickup in the in some of the a prior discussions you mentioned that are the possibility of having the porphyrias and there seems to be two porphyry that a year coach or not.
Just kind of wondering if you can discuss.
The status of those two porphyrias, where they are and and lastly regarding the porphyry discussion do you think is there a porphyria Boulevard and are you currently looking for a porphyry bar. Thank you.
Yeah, They I will answer the Balibar part first.
The answer is yes, we we have I didn't play out a porphyry environment.
Hello volleyball Wes.
[music].
Below and north of Bolivar with.
And we were in the in the process of.
Drilling when we were interrupted by cobot until we are we need to resume that if or.
When we resume operations will it probably we sometime in mid late June because weve first have to focus on the operation.
And ER and yet we will continue that that ER that work indicates a reality core chat a I think we report that we entered into a CA with a with a major for for them to evaluate what we have done to date and that has been a stopped also.
And we haven't done much work on that or this year as soon as we get back to normal in Peru will will touch base with with this major and tried to.
Accelerate this the work now in Yardi, Corcell porphyry deeper and and so it needs a lot more work to make a day for them.
But at the porphyria to your cost structure, just trying to adapt.
Prior discussions you mentioned are two possible core for it I mean, you Guy you Guy identified to one porphyry that you've entered into the see anywhere but their second porphyry any a year culture.
No there's only a large number of anomaly or nothing like what we have identified via drilling with the first porphyry.
We would like to.
Drilled first before we we confirmed that there was another porphyry.
Okay, great alright, thanks very much.
Thank you.
Hi, there no further question at this time I'll turn the call back over to their presenters for closing remarks.
Thank you operator that concludes today's call on behalf of the management team I would like to thank all participants for joining us today, a replay of the webcast and all the material can be found on our website a CRM metals dot com is there any further questions or concerns you may reach out to us anytime after today's call. Our contact information can be found in today's presentation as well as on the companies.
Lets say thank you operator, please conclude the call.
This concludes today's conference call you may now disconnect [noise].
[music].