Q4 2020 Avino Silver & Gold Mines Ltd Earnings Call
Thank you for standing by this is the conference operator, welcome to the Avino Silver and gold mines Limited Q4, and year end 'twenty 'twenty financial results conference call and webcast.
As a reminder, all participants are in listen only mode and the conference is being recorded.
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I would now like to turn the conference over to Jennifer North manager of Investor Relations. Please go ahead.
Thank you operator, good morning, everyone and welcome to the Avino Silver and gold mines Limited Q4, and year end 'twenty 'twenty financial results conference call and webcast on the call today, we have the company's president and CEO, David Wilson, Our Chief Financial Officer, Nathan Harte, Our Chief operating Officer Carlos Rodriguez.
And our VP technical services, Peter Latta before we get started please note that certain statements made today on this call by 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 from those expressed by or implied by such forward looking statements. The company does not intend to and does not assume any obligation to update such forward looking statements or information other than as.
By applicable law for more information, we refer you to our detailed cautionary note in the presentation that accompanies this call are on our press release of yesterday's date.
Would like to remind everyone that this conference call is being recorded and will be available for replay later today replay information and the presentation slides accompanying this conference call and webcast will be available on the website. Thank you I'll now turn the call over to Avino, as President and CEO, David Wilson David.
Thanks, Jen good morning, everyone and welcome to the Avino is Q4 and year end 2020 financial results conference call and webcast. Thanks for joining us.
Before we begin please note that the full financial statements and MD&A are now available on our website.
On today's call, we will cover the highlights of our fourth quarter and year end 2020 financial and operating performance and our plans for 'twenty 'twenty, One and then we'll open it up for questions. Please note that all figures are stated in U S dollars unless otherwise noted.
2020 was a challenging year and although we are relieved to put it behind us the year can be marked as one of learning patience and a significant focus on health and safety of our entire company spanning Mexico, Canada and the U S. The pandemic presented new challenges for our.
<unk> team and I'm proud of the way, we were United by our shared culture of disciplined flexibility and teamwork that truly made us a stronger company.
I would like to extend a special thank you to the management team in.
In Mexico led by Carlos Rodriguez, who cooperated quickly and responsibly with the Mexican authorities and carried out critical task at the mine to ensure the safety of our employees and surrounding communities.
Lastly, I would like to extend my appreciation to our shareholders for their support and patience during the entire year, while we experienced a temporary shutdown due to COVID-19 and when we went through the strike at the mine.
While the strike ended in early October we have been waiting for the government offices in Mexico to reopen so the agreement with the Labor Union may be ratified.
In the meantime, we completed the comprehensive evaluation and over the last month various supplies are being ordered and delivered as we look towards startup of operations are.
Our fourth quarter operational performance was directly impacted by 12 weeks strike at the mine.
And resulted in no mining activities taking place during the three months ended December 31 2020.
Yeah.
During the quarter, we continued moving forward with the proposed dry stack tailings.
Our storage facility number two which is on privately owned avino land and is permanent and is currently in the final stage of prior to commencing construction.
We expect this project to be completed during Q3, 'twenty 'twenty, one and should add an additional eight to 10 years of tailing.
Capacity based on the current mill throughput rate.
We chose dry stacked tailings for the for its environmental and safety and economic advantages.
With its high solids content.
This significantly improves safety and stability and reduces the need to extract water from local sources by recycling the water removed from tailings. In addition, it requires less land, which is in turn results in smaller environmental footprint.
Over the years, we have been proactive in developing partnerships between the people of Durango, and Avino and we're happy to have helped in many ways, including providing maintenance of water reservoir installed new water pipes and expanded the drinking water network maintained the neighborhood streets and roads.
G catered to communities in the importance of mining delivered sports equipment and maintain sports facilities and provided medical in ambulant services, but above all we have provided steady employment to the people of the four communities that surround the mine.
Currently we are in the process of receiving in F. P. P E and rapid Covid tests. So we may ensured that the safety and good health of our work force and provide employment once again.
The restart of production activities is expected to provide significant direct economic benefits and stimulus for the local communities. So we are very much looking forward to that.
During the fourth quarter silver prices range from a low of $22 15 to a high of 26 48 and gold prices range from a low of 18 70 to a high of 1940.
The metal prices have continued to be volatile, but have stayed close to the highs reached in the third quarter with silver reaching 29 58 early in February and the gold price, reaching a high of 19 forty-three early January.
Over the last few days silver price hovered around 26, and 27 and gold has backed off from earlier highs to around $17 30.
As silver has many industrial applications, we believe it will be a great demand in as stimulus in the U S gets going.
It is also worth mentioning the price of copper.
As it makes up close two thirds of our revenue contribution went in production.
The copper price has been steadily moving upwards on a low inventories and anticipated rebound of the global economy.
Growth of industrial activities strong demands by China, Global vaccination rollout and weaker U S dollar.
We hope that our favorite metals will continue to shine.
Our sights are set on a positive and brighter 2021.
I will now ask Nathan Harte, Avino, Chief financial Officer to present, the financial results for Q4 and year end 'twenty 'twenty.
Thank you David it's my pleasure to be on the call and I would like to welcome everyone, who has joined US and is viewing our presentation today.
As you can imagine avino is operating results were impacted by the previously mentioned strike action at the Avino mine hunting.
Having said that the financial health of the company remains very strong as Avino continues with its plans to reduce net debt load into 2020, one having lowered as liabilities by a further $1 1 million during the fourth quarter.
This brings total debt reduction for the year.
<unk> to over $7 million.
Working capital at December 31, 2020 was $14 7 million compared to $16 nine at September 30th and 13 point too at the beginning of the year.
Our cash balance at the end of the year was $11 7 million compared to 12 and a half at September 30th and $9 six at the beginning of the year.
During Q4, we generated revenues from mining operations of $1 4 million from silver equivalent ounces sold a 59000.
Avino also recorded mine operating losses of $1 3 million for Q4, which includes $1 5 million in standby costs, an increase of 800000 when compared to Q4 2019.
Losses before interest taxes, depreciation and amortization were $2 3 million compared to earnings of $1 3 million in Q4 of 2019.
Adjusted losses for.
For Q4 2020 were two.
200000, compared to adjusted earnings of $1 6 million in Q4 of 2019.
Avino reported net losses after taxes from continuing operations of $1 $6 million or two cents per share for the fourth quarter of 2020, and $7 5 million or nine cents per share for full year 2020.
It should be noted that net losses for the year includes non cash losses of $2 $7 million related to the exercise of warrants and which avino received proceeds of over $3 million U S.
Our fourth quarter consolidated cash production costs net of standby costs were $14.01 per silver equivalent payable ounce sold compared to 13, 14 and Q4 of 2019.
Due to significantly lower ounces sold in Q4 of 2020, our all in sustaining cash cost per payable silver equivalent ounce number which includes standby costs of $1 5 million increased up to $73.08.
The full year consolidated cash production costs net standby costs were $10.68 for silver equivalent payable ounce sold which is a decrease compared to 2019 of 12%.
Consolidated all in sustaining cash costs, including standby costs of $2 $4 million for the year were $20 35 per payable silver equivalent ounce sold compared to $17.19 in 2020.
Again, the increase is a result of fewer ounces sold throughout the year.
The standby costs were directly associated with maintaining operations during the temporary shutdown due to the pandemic and the strike action as well as certain severance costs associated with the resolution of the strike.
Revenues for the year from mining operations were $16 million and were derived of 32% from silver, 24% from gold and 44% from copper.
Capital expenditures for the full year were $2 2 million compared to $9 million in 2019.
With the strike action the company took specific measures to limit any unnecessary capital expenditures during the third and fourth quarters.
All necessary upgrades are projects continued on as planned which includes the new dry stack tailings storage facility.
On a consolidated basis, the company reduced its general and administrative expenditures by 300000 or 9% for the full year 2020 compared to 2019.
Finally, I want to reiterate that avino remains financially strong and exited the year with a strong balance sheet. We have made siddig from significant strides in reducing our debt and at the end of the year, we maintained over $20 million in liquidity, including our investment holdings.
With current debt representing less than 50% of our cash balance at the end of the year Avino is looking forward to putting that drove it to work as we risks recently announced the kickoff of our 2021 exploration drilling campaign for our phase one initial 12000 meters.
I will now hand, it back over to David for a discussion on exploration and other exciting plans for what is shaping up to be a great 2021 for avino.
Thank you Nathan our plans for the first quarter of the year include.
The drills are turning and we are excited we have already started the 12000 meter drill program, which isn't is targeting several areas of the Vienna property, including the avino vein, the Santiago pain and the El Chapo vein future exploration targets may be limited may not be limited to these three areas enduring.
The year, our priority targets may change of geological interpretations on other areas present enhanced opportunity.
We are currently working on increasing the exploration program with details to be released once and an increase in the budget is approved continue.
Continue to ready the mine for startup of operations continue moving on the dry stack tailings project make improvements to the circuit for it that will improve gold and silver recoveries through the use of new equipment Avino has longevity demonstrates our commitment to maintaining.
Our mission vision and values as we enter our 53rd year, we remain diligent in our efforts across our operations with respect to COVID-19, and are working together to keep our employees and communities healthy.
We look forward to a positive and productive 'twenty 'twenty, one together with the potential of continued strengthening of the market and the commodity prices.
We thank you for your patience and understanding we are optimistic for the future and a return to business as usual.
We would now like to move the call to the question and answer portion operator.
Thank you.
We will now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad Youll hear a tone acknowledging your request if youre using a speakerphone. Please pick up your handset before pressing any keys to withdraw your question. Please press Star then two.
We will pause for a moment as callers join the queue.
The first question is from Jake Zukowski from Alliance Global Partners. Please go ahead.
Hi, David and team Thanks for taking my questions Hey, Jay Good morning.
Yes.
Starting with <unk>.
Two it looks like completion scheduled for Q3.
Maybe you could give us any color on how far along you are there and the total construction timeline.
And I'm also curious if youre seeing any delays on sourcing key materials or labor for that.
Due to the pandemic.
It's on schedule right now and there has been no delays whatsoever.
Filter presses have arrived in Mexico clearing customs should be.
Delivered probably within a week or two.
Steelworks is underway.
Everything is moving ahead as planned.
Okay. That's good good to hear in the switching gears to exploration.
How much of the phase one program is focused on the Santiago vein.
And when do you think we'll start seeing some results from that initial program that you guys mentioned.
I think that's what about 3500 meters on Santiago.
We are in the second or third hole.
Anywhere from 60.
Six to eight weeks to get results, depending on how or how the lab as is.
And we have also started drilling no trumbo.
Which is another.
Meters.
Got it got it and following up on that a bit I mean, you mentioned that there is potential for an increase from the program.
Is that something you think we'll see details on in Q2.
You'll see it next week.
Got it okay perfect. That's all from me and I'll hop back in the queue. Thanks again.
The next question is from Heiko.
H C. Wainwright. Please go ahead.
Hey, guys. Thanks for taking my questions.
Alright.
Hey, just a couple of things I mean, it was a good quarter during a pretty crazy year for Harbin one of the world in general.
With all the exploration that you're doing what are you seeing with cost for drilling and probably almost as importantly, the timing for assay results. Please.
Hey, Heiko Nathan here, so I'll take the cost side of things.
Don't think we're seeing any significant increases we obviously, we mentioned a few times, we have our own drills.
Very good relationships with the local trailer from Durango, So we're not seeing any significant increases even during these.
Unprecedented times.
As far as the assay results I think David mentioned.
First day weeks turnaround from when we send them off so.
Well hopefully you will get something back just over a month from now on from the initial stuff and then we will have to assess the results.
Okay.
With the lack of mining can you just sort of.
Walk us through what you've been seeing with cash burn so far in 2021 on a month by month I guess January February basis.
Mostly at the mine side, obviously I assume you can just trendline corporate expenses from Q4 right.
Yes no.
That's fair at the mine site I'd say right now.
Theres not a lot of expansion going on it's really just care and maintenance and then maintaining the water in the ground.
So it's a couple of hundred thousand dollars.
Quarter $1 million.
Mark.
Okay.
Yeah.
And then lastly startup expenses rose you call them in the press release your transitional efforts you wanted to sort of give us an idea how much money. We're looking at that youll be required to spend until this thing is fully up and running please.
Sure Yeah, I think we're looking at about an additional million $2 million.
And costs over the over the ramp up period.
We don't expect that to be Super long once we start up but.
That's kind of what you can expect.
Fair enough definitely lower than what I had in my model excellent. Thank you so much. Thanks.
Thank you.
The next question is from Joseph Reagor from Roth Capital Partners. Please go ahead.
Okay.
Good morning, guys. Thanks for taking the questions Hi, Joe Hi, Joe.
So a couple of things I guess first one on on the sales in Q4. My assumption is that was just inventory drawdown.
But is there anything we can expect.
Or we should technically ad.
Now to our Q1 number.
There were additional inventory sales so far this year.
Hey.
So Nathan here.
Some final inventory drawdown and just from a cleaning of tanks and some other areas of the mine so.
So from product too.
Two our partners at Samsung.
We do not expect anything for Q1 2021.
Yes, I would say no at this time.
Okay.
Fair enough and then.
On your ATM, what do you guys have if anything left on that and it looks like you guys pretty opportunistically use that during the quarter already.
Euro to dollar average price.
Any additional color you can give me there.
Yes, sure Joe obviously.
We wanted to use that opportunistically and so we really only used it for as you can imagine a day or two we have about.
$708 million left.
So you can do the math backwards.
On our subsequent events.
But yeah as you correctly pointed out.
<unk> raised.
Just under $2 a share U S significantly above levels that we're at now and at a fairly low cost of capital.
Okay.
Okay, that's obviously great to get the cash.
Good valuation there.
On other investments <unk> shares.
Have you guys made any additional sales there or.
What's your current share count stones, and Telus curve Hasnt changed I think it is.
About $15 million.
We have no plans to sell it.
Four drills turning in for more they're adding this spring so eight drills turning talk to Terry the CEO and they expect they're working on a resource between one five to 2 million ounces.
Okay. That's great. So last thing are you know obviously, we all realize that the Mexican government is out of your hands.
But can you give us kind of what you think is best case and worst case scenario forgetting the a new agreement with the Union ratified.
It's a tough one because of Covid is dictating when the office.
Open but.
We are bringing back people slowly and.
I'm looking at a soft start here to see what happens.
But we're hoping that that agreement gets ratified pretty soon.
Okay.
But not comfortable giving a time range on it yet.
Again as David mentioned at the top one I think best case scenario within the coming weeks and that's what we're striving for.
Our plan is to start underground mining first to get bill to stockpile.
And we can do that so that's what we're planning for right now yes.
Alright, Thanks, I'll turn it over.
Okay.
As a reminder, it is star one to ask a question.
The next question is from Matthew O'keefe from Cantor Fitzgerald. Please go ahead.
Yeah. Good morning, Thanks for taking.
Hi, Matt Good morning, Thanks for taking my call a lot of good questions already asked so I just wanted to circle back to a couple of things. One you just mentioned I think on the on the last.
From one of the last questions that youre going to do some underground development ore stockpiling now is that before you get that Uh huh, okay from the Mexican government.
That's the plan.
Slowly start and not create a lot.
Noise. There. So we feel underground work is not going to generate a lot of interest from the union. So.
Thats all I see.
So that's a different group that's like a contract group as opposed to your your operating group.
Employees that will hire from the local communities.
I see okay and then.
I guess just on the on the startup.
You mentioned that there would be some costs associated with that and it won't take is it is it a matter of week. Once you do get the okay and you're good to go is it a matter of weeks or a full quarter to get sort of up to four full throughput.
Yeah.
Nathan here.
I wouldn't think it's a matter of a full quarter for sure.
Peter here as well you can speak to from the timeline and I can speak to the cost side of things I think I mentioned earlier about a $1 1 million app over the ramp up period and additional costs.
As far as timeline, Peter maybe you want to touch on that.
I was just going to be a couple of weeks here really we think once once we get the underground going I would give us a month.
Okay.
That's great automation in the mill.
So we won't need as many people when we go to start up the mill a lot more can be automated.
Okay, and then yeah. It sounds like once things are going Youre, well positioned I mean, you've got good amount of cash you got.
Some good exploration to to look to.
What is the on the capital side, you've done a lot of that already for some of those like the tailings in the mill what is the capital expenditure budget for 2021 did you mention that.
Yes, I think we touched on it briefly previously announced cost saving in the prior news release, Matt, but obviously David mentioned in.
On the call that we're looking to increase that.
Pretty much essentially got some additional increase from crude mostly on the exploration side, but also on the automation and actually per day.
Another area of the mine that where it will be excited to talk about hopefully next week.
And so I think right now, we probably had it centers around.
$6 million to $7 million and I think we're looking at wholesale.
Okay.
Okay.
12 months.
Alright, that's it from me thanks, looking forward to a better 2021.
Thanks, Matt.
Net.
This concludes the question and answer session I would like to turn the conference back over to David Wilson for any closing remarks.
Thank you to everyone that took the time today to listen to our Q4 and year end 2020 earnings call and webcast as I said earlier, we appreciate the patience of all our stakeholders and we look forward to resuming normal operations soon as we look forward to the future. We are optimistic that our favorite metals will shine and we believe that the.
Demand for metals will continue to growth.
More vaccines are being approved by Canada and the U S.
And as the rollout of vaccine it seems to be getting better organized there is optimism that we will all be vaccinated by the fall 2021.
Once that happens we look forward to meeting with each other face to face.
Something we haven't all missed.
Stay safe everyone. Thanks, again and have a good day.
Yes.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
Okay.
Yeah.
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Yes.