Q3 2020 Avino Silver & Gold Mines Ltd Earnings Call
Thank you for standing by this is the conference operator, okay.
Welcome to the I'd be no silver and gold mines third quarter financial results Conference call.
As a reminder, all participants are in listen only mode and the conference is being recorded.
During the presentation, there will be an opportunity to ask questions.
He joined the question can you hear me Press Star then one on your telephone keypad should you need assistance. During the conference call you may signal, an upgraded by pressing star and zero I would now like to turn the conference over to Jennifer <unk> Investor Relations manager. Please go ahead.
Thank you operator, good morning, everyone and welcome to the N. Dino Silver and gold mines Limited third quarter 2020 financial results conference call and left cast on the call today, we have the company's president and CEO David Wilson.
Our Chief Financial Officer, Nathan Hart, our Chief operating Officer, Carlo Suji guess, and our VP technical services Pieter Nota.
Before we get started please note that certain statements made today on this call that the management team may include forward looking information within the meaning of applicable securities laws forward looking statements are subject to known and unknown risks uncertainties and other factors that may cause the actual results to be materially different than those expressed by on.
Side by such forward looking statements there.
The company does not intend to and does not assume any obligation to update such forward looking statements or information other than as required by applicable law for more information. We refer you to our detailed cautionary note in the presentation accompanying this call on our press release of yesterday state I would like to remind everyone that this conference call is being run.
Courted and will be available for replay later today replay.
Replay information and the presentation slides accompanying this conference call and webcast will be available on the website. Thank you I will now turn the call over to Venus, President and CEO, David Wolfin David.
Thanks, Jen good morning, everyone and welcome to Vientos Q3, 2020 financial results conference call and webcast. Thanks for joining us before we begin. Please note that the full financial statements and Mdna are now available on our website on today's call we will cover the highlights.
Of our third quarter 2020 financial and operating performance and then we will open it up for questions.
Please note that all figures are stated in us dollars unless otherwise noted firstly.
Firstly I'd like to thank our shareholders for their support and patients during the third quarter. While the if you don't mind was closed due to the strike. This was difficult for everyone and we're especially appreciative of all who stood by and understood. The process. We had to go through in addition, I would like to extend my gratitude to the managed.
Been team in Mexico, led by Carlos Rodriguez, who navigated and negotiated a successful resolution.
The strike ended in early October and due to an extended period of in activity at the mine and before the company can restarted operations.
A comprehensive evaluation of all underground milling and surface equipment is underway to ensure all are in excellent working conditions.
Our third quarter operational performance was directly impacted by the 12 week strike action at Devino mine.
Which resulted in EPS increase production profile for the quarter. During the three months ended September Thirtyth 2020, no mining activity took place.
We're setting our sights on 2021, as we look forward to commencing operations and embarking on the exploration program that was delayed during the pandemic and the strike.
We will be poised to capitalize on increased metal prices when operations returned to normal.
During the quarter of you know continue to move forward with the proposed dry stack tailings storage facility Ts F. number two we're calling it which is on privately owned vino land is permanent and is currently in the final stage prior to commencing construction. The company is looking forward to positive discussion.
Between the community of Penn Newco day, Cornetto, and the state government, which should help to provide the social approval to move forward with the construction of TSS number two.
They are combined support is important to the vitality of the community and will aid in restarting production activities there.
Restart production activities is expected to provide significant direct economic benefits and stimulus for the local communities in August vino granted gray rock.
Which has since rebranded as silver Wolf exploration the exclusive right to acquire 100% interest intravenous Anna Maria and lever until properties in Mexico.
The details of the option agreement are as follows venal to receive 300000 share purchase warrants.
Silver will add 20 cents for a period of 36 months Vino did receive 600000 Canadian in cash for common shares over four years with the first 50000 and common shares within 30 days of exchange approval silver well to incur a total of 753.
2000, and exploration expenditures on the properties over four years.
By divesting of these two assets vino limits the cost of maintaining the properties, while retaining exposure to any exploration upside through the issuance of shares.
Or warrants both properties are on paved road.
Two of Vino, which may in the future proved to be beneficial to us.
Which has the right of first refusal to purchase and process any ore concentrate extracted from the properties for processing.
During the quarter silver and gold prices were volatile, but stayed close to the highs reached in the second quarter with gold price, reaching a high of $2067 in August and silver, reaching a high of $28.85.
In September today, we have a gold price above 1900.
Which has backed off slightly and the silver prices sitting around $24.
I will now ask Nathan Heart, Venus, Chief Financial Officer to present, the financial results for Q3 2020.
Thank you David It is my pleasure to be on the call and I would like to welcome everyone, who has joined us as during our presentation today.
As you can imagine arena the operating results were impacted by the previously mentioned strike action at the moment.
Having said that the financial health of the company remains strong the vino continues with its plan to reduce the debt load during 2020, having lowered debt liabilities by further $2 million during the third quarter.
This brings total debt reduction for 2020 up to $6.1 million.
Working capital at September Thirtyth was $16.9 million compared to 13.8 million at June Thirtyth, and 13.2 million at the end of 2019.
Our cash balance at the end of the quarter was $12.5 million up from $10.4 million at June Thirtyth and $9.6 million at the end of 2019.
During Q3, we generated revenues from mining operations of $2.7 million, which was down 61% compared to Q3 2019.
They also reported mine operating losses of 200000 for the third quarter, which remains unchanged when compared to Q3 and 2019.
Losses before interest taxes, depreciation and amortization were $4.3 million compared to $1.6 million for Q3, 2019, and adjusted losses for Q3, 2000 $24.7 million compared to 100000 in Q3 of 2019.
Okay, No reported net losses after taxes from continuing operations of $4.6 million compared to $1.5 million in Q3 2019.
Translates to a loss per share of five cents from continuing operations for the third quarter of 2020 compared to three cents in Q3 2019.
It should be noted that net losses for Q3 2020 did include noncash loss of 2.7 million relating to the exercise of warrants and which will be no received proceeds of well over $3 million.
As well as unrealized losses on the company's investments in talent and resources of $1.2 million.
Our third quarter consolidated cash costs remained fairly stable at $12.56 compared to $12.74. In Q3, 2019, However, our all in sustaining cash cost per payable silver equivalent ounce did increase to $31.61 when compared to $18.62 for Q3 29.
Team.
The increase is a direct result of fewer ounces sold during Q3 2020 as well as additional standby costs of 900000 associated with maintaining operations during the strike action.
Our revenues from mining operations of $2.7 million in Q3, 2020 were derived of 31% from silver, 25% from gold and 44% from copper.
Our capital expenditures for Q3, 2020, or 400000 compared to $2.3 million in Q3 of 2019.
With the strike action the company took specific measures to eliminate any unnecessary capital expenditures during the third quarter.
All necessary upgrades and projects have continued on as planned including the new dry stack tailings storage facility equipment.
Finally, I want to reiterate that eventual remains financially strong and exited the third quarter with its strongest balance sheet in almost four years.
We have made significant strides in reducing our debt and currently maintain over $20 million and liquidity, including our investment holdings.
With current debt representing less than 50% of our cash balance I am confident that as you know is ready for any market uncertainties and to take advantage of the strong metals market moving into 2021.
I will now hand, it over to David for a discussion on our plans for the remainder of 2020.
Thank you Nathan.
Our plans for the final quarter of the year include one continuing with the comprehensive evaluation at the mine site before ramp up of operations to resume the connection between underground levels at the immuno mine three move forward with building the exploration team for.
Independent evaluation of structural controls on the property.
Five and a structural interpretation to provide better understanding and defining new targets within the dozens of veins that exist on the property.
The last two quarters have been particularly challenging, but we are rounding the corner and I want to ensure our shareholders that our focus hasn't changed and we look forward to resuming normal operations and exploration activities as soon as we can.
We thank you for your patience and understanding we're optimistic for the future.
And a return to business as usual.
Finally, I would like to say and other thank you to the teams in Canada, and Mexico for their dedication and hard work and contributions.
I would now like to move the call to question and answer portion operator.
Thank you.
We will now begin the question and answer session to join the question can you you May Press Star then one on your telephone keypad.
You will hear a tone acknowledging your request if you are using a speakerphone. Please pick up your handset or expecting any key.
Regarding your question. Please press Star then two we.
We will pause for a moment as college trying to Q.
First question comes from Jake to Kelcey Alliance Global Partners. Please go ahead.
Hey, guys. Thanks for taking my questions.
Hi, Jake.
Yes, just looking at CES two.
Able to give us any additional color on the timeline and budget. There is it something you still expect to have completed by early next year.
Pete do you want to talk about the timeline.
Sure, Yes, and then I'll pass it over to Nathan to talk about budget.
Yeah, I mean, I mean, it's going to be ongoing next year, we're going to manage to the construction of tee us up to with the amount of space that we havent CSF, one as well as the open pit.
So we know we're going to proceed along is as fast as we can construct that project.
Yeah, and Jay on a budget from a budget perspective, we're expecting total costs to come in around 4 million for just about just about everything involved all encompassing we've paid a bit already on some larger equipment and we're expecting to make another sizeable payment by the end of the year.
And then the rest of it will be labor and materials as we built the foundations as well as a lot of.
A lot of dosing workout onsite.
Yes.
Federal press, we'll be ready for pickup in December 15th So we're going to put it on.
Operator to Mexico, So we'll have it.
Possibly by year end or.
January and steel construction work has commenced in Durango.
Yes, thats the steel construction is underway.
Okay. That's that's helpful. And then just on the exploration front I mean, it seems like that's something that's going to be a top priority heading into next year. I mean, you mentioned, David you are building up the exploration team. So.
Do you have any update on when we should expect to see some details on next year's program and budget.
Yeah in December.
Mid December.
We'll disclose our budgets, we are just going over that now but.
It's going to be a minimum of what we had budgeted for this year 11500 meters, possibly more depend.
Depending on the targets.
Fair enough Thats, all from on mining and I'll hop back in the queue. Thanks. Thank you. Thank you.
The next question comes from Heiko Neely from H.C. Wainwright. Please go ahead.
Hey, guys. Thanks for taking my questions.
I want to echo.
Just just feeling a bit on what Jay kits.
Talking about your secure deposits on the long lead items for the TSS can you just sort of give a little more color on what is left bolt on which equipment and how much in dollar terms.
Pete you want to talk about the.
Sure So I mean.
Hi, stacked process. The main component is going to be the filter presses. So those are the things that we've already put a down payment on regarding.
Regarding the steel structure, that's just the the building essentially and Thats, an open air building because of that the climactic conditions in Mexico as you know.
Then there's conveyors.
And those those would be the three main components, if we just lumped those into into three thanks. So.
We've started on the steel structure as I said, it and started incurring costs on that we placed the deposit on the filter press and yet we haven't yet purchased the conveyors.
Thanks.
Does that does that answer your question or do you want more specific detail with respect to the budget.
Oh, well be if you're willing to provide more color that'd be great.
Yes, Nathan you're I can provide a bit of color so as I mentioned.
Responding to Jake spoke $4 million. All then filter press come in just over a million.
Steel construction and the labor associated with that will be somewhere in the range of one of that too and then the remaining the conveyors and other pieces Cup well rounded out to the $4 million we talked about.
Well.
The line you get your GDS Edelman.
You get your DNA don't hold less than 700 Grand I assume a good part of that is the lack of travel but are you looking into any other cost savings measures going for me I know you hinted at it in the release that you did something.
And if so what is it and how much do you think you can squeeze out.
Yeah sure I'll take I'll take that one.
We made a lot of efforts, especially after 2018, and then 29 team to reduce our DNA down from close to a million a quarter, if not higher and many quarter and so we're still looking for improvements. There. Obviously you can see we've made a few additional ones this quarter.
Yes like to travel, but we are doing some more marketing and a lot more virtual presentations and virtual conference isn't getting getting the message out there about Athena and of course, you know with with us being down for three months. We yes, we took a hard look at everything again for you know the third fourth fifth time, but.
We're going to do all we can to try and squeeze a bit more out but at the same time, we understand that there's there's marketing efforts that need to be incurred and a lot of other professional fees. That's due to still do need to be incurred on a quarterly basis.
For.
In purely out of curiosity and then this will obviously make a big difference my model, but I mean, I noticed that you still had a small loss from discontinued ops related re lorne.
And your Mdna. It says it's for settlement of working capital items should just make sure. That's still the lawsuit related to Bray Lora is there any other thing coming in the quarters to come.
No. There is nothing coming that was that just some final settlements more in Q2.
And a couple of movements like little movements in Q3, but that's it.
That's what I thought very helpful. Thank you guys guidance.
Thank you.
The next question comes from Joseph Reagor from Roth Capital Partners. Please go ahead.
Hey, guys. Thanks for taking the questions Joe.
Okay. So most of what I wanted to ask is already been touched on but I guess on the strike in the restart.
It didn't sound like you guys had a specific timeframe you were willing to give for for getting back to full operations and and there's some talking about yes looking forward to next year.
What should we be expecting as far as production rates for this quarter like do you think you're going to get one full month of production.
And a half what does that look like.
Not planning to restart so until next year, but unless the negotiations with the new cocoa.
Very quickly so.
Don't look at this year.
Stuart January.
Okay and then.
When you guys do restart.
Probably a question for Nathan what do you think they are working.
Working capital swing would be on a cash basis.
Hey, guys. Good question.
So we think there's going to be some additional startup costs of a couple million, obviously, we'll be able to start underground operating activities sooner than we will milling activities. So there will be a lag.
From getting stocked up certainly mining underground Stockhausen service through the mill and then sold off to our buyers.
So I think if I were you I would say about a month and a half flag from month to month and a half lag. So maybe we'll incur a couple million in cost that we won't get paid for Intel say 45 days down the road.
You know one of the things we do want to highlight is we have some fairly strong liquidity and a decent balance sheet.
Very loved that at this time, so were out we're feeling pretty confident that we'll be able to go through and not taking massive hit to our balance sheet.
Okay. Thanks, that's helpful.
Thanks, Joe.
The next question comes from Matthew O'keefe from Cantor Fitzgerald. Please go ahead.
Yeah. Thanks, operator, so yeah. Good morning, Yeah, just as a follow on rigorous <unk> comments, there the startup so you're not oh.
What's the sort of delay in getting restarted again, because after the the cobot shut down which I know is a lot shorter it was like two or three weeks and you're up and running and just wondering why its taking longer this time and what the.
Yeah, and when if there was anything else that you can be doing at this time, we would be a development or other things.
But don't don't require Oh and impact on tailings sure. We will we're hoping to start to get in the underground before the year is over and start the underground development work.
But during this the the pandemic and the strike and the closure we've decided that this is the best time to negotiate with the townspeople and.
The newco to Corinna auto there are a few people there that.
<unk> had opposed to traditional tailings so we've got.
The Governor's office, helping us to educate them and get their blessing to proceed with construction. So we don't we're not interrupted because we had started on that a while ago I'm probably a couple of years ago and then there were some issues. So we found other areas to put tape.
Things, but we don't want to have that problem anywhere we want we want to go to full construction on t. a tough number too. So so we're hoping to get their blessing in the next couple of weeks here.
Okay, and I I apologize if you mentioned this already but so what's the tailings capacity.
Outside of that right now I mean, it's pretty is quite limited then I'm guessing.
Yeah, there's probably about a quarter or just over a quarter and a maybe.
Maybe a three or four months capacity into September one it could be expanded but we don't really want to I mean, we could build another buttress and and and then in the open pit theres, probably three or four months of capacity. So once we nailed down the timing on a you know getting.
On the social blessing and construction then we're going to a time when we're gonna started up milling activities. So so we're hoping that this will be all done.
Very shortly.
Okay.
Great and then just switching.
Switching gears a bit on the on the development. So I know one of the things that was connecting the the a the two port a the two portals. So you'd have a you know be able to improve your throughput what's the timing on that and.
What will be what will your mining rates be sort of limited to until you get.
Until you get that development completed.
Hey, Carlos are you on the line do you want to mention when do you think we can link up and how long it will take to get a level nine to levels six.
Yeah, So David.
Thank you Mike for your question Who's here Hi, Yeah. So as we have discussed as though these are these ah connection on for the last few quarters.
But yeah. So we on allows off 100 meters I'm sorry, we have mentioned before couponing. So both are well Oh. So so you would say it was big something home high to see small to complete that you all a weekend Beck with men.
Medical Flavio spot of mining, there and they're being high degree higher jumbo operate eight orders in there and Oh, my ears, and everything so hi months I would say five months to complete that you all right when exportable, both Ah portfolio.
Okay and your throughput what was what's kind of your throughput.
I'm going to be limited to until you get that completed and then where do you expect to go after that's completed.
Yeah, Yeah. So we had these costs also in the past.
Yeah at the moment, we hear about new coffee for a boy media. It's when you file your Congress Hong Kong today, So I think you.
Easily we can reach.
So when you see having 28 times in San Jose So holidays.
Oh polished and then a yes or a booster oh I'm sorry.
So so I didn't get that we will cover Oh my God.
Okay. Okay.
Okay. No. That's that's that's fine I was just trying to look ahead here a little bit has a refined my model. Thanks very much.
Thank you.
Once again, if you have a question. Please press Star then one on your telephone keypad.
The next question comes from Bruce Shapiro, a private Investor. Please go ahead.
Good morning, Thank you for taking my call most Mike a question about the commencement of operations were answered prior.
Curious about the strike itself can you discuss what was asked or what was given a it's a simple a strike.
Well, that's not disclosed but the strikes a threat started last year when we close the San Gonzalo mine, because we're laying off 75 workers, we made some concessions and we moved half those people over to the Amina mine and then the local labor leaders.
Kept thinking more demands not financial but operational and we can live with that so they strike and then we made a settlement which is being finalized now.
Thank you it was a shrinking anyway, Nick with the but they are growing.
Growing the virus and concern about that.
No.
All right. Thank you. Thank you.
This concludes the question and answer session I would like to turn the conference back over to Mr., David Wilson for any closing remarks.
Thank you to everyone that took the time today to listen to our Q3 earnings call and webcast as I said earlier, we appreciate the patience of all our stakeholders and we look forward to resuming normal operations as soon as we can as we look towards the future. We are optimistic that metal prices will continue to rise.
And we believe that the demand for metals will continue to grow further if you know has fostered its resiliency initiative in enterprise over its 52 year history by having a large land position in a prolific area.
With a producing mine in multiple exploration targets surviving the lean times implementing cost reduction initiatives when needed and knowing the right time to.
Expand that will improve operations we.
We are committed to bringing value to our shareholders. We hope that everyone is staying healthy and and safe during Kobe and just yesterday Pfizer said that early data shows that their vaccine to be 90% effective. So we hope that this is the case more vaccines around the world will start proving the same.
Thanks, again, everyone and have a good day.
Thank you.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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