Q1 2021 Hycroft Mining Holding Corporation Earnings Call
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Good day and thank you for standing by welcome to the high crop first quarter 2021 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer is testing the ask a question dream defaults and he will lead the Forest Park.
One on your telephone please be advised that today's conference is being recorded if you require any further assistance. Please press star zero, although liked and had a conference over to your speaker today, Ms. Traci <unk> Vice President Investor Relations. Please go ahead.
Thank you so much good morning, thanks, everyone for joining us today.
And we will be discussing our first quarter 'twenty, one 2021 results for which we filed on form 10-Q with Securities and Exchange Commission and issued a press release this morning.
Press release can be found on our website at www Dot Hycroft mining dot com.
Please read the press release and listen to this call in conjunction with reviewing the form 10-Q, which contains additional disclosures also please note that some information provided during this call may be and May include forward looking statements that involve risks uncertainties and assumptions.
Even if the risks and uncertainties have been materialize from the assumptions prove incorrect. These results may differ materially from those expressed or implied by such forward looking statements. All statements. Other than statements of historical fact are statements that could be deemed forward looking and a discussion of some of the risks uncertainties and assumptions are set forth in more detail on our press releases and SEC filings, including the most.
Recently filed 10-Q, we assume no obligation and do not attend and intend to update any such forward looking statements I'll now turn the call over to Diane Garrett President and CEO.
Thank you Traci good morning, everyone and thank you for participating on our call today, I'm, Diane Garrett President and CEO of Hycroft mining along with Tracey others that are on the call today are Jack Henry Our executive Vice President and Chief Operating Officer, Stan ride out, our executive Vice President and Chief Financial Officer.
And my guys line, our vice President and General manager.
After my initial remarks, I'll, then outstand ride out true via the highlights of the first quarter financials, and then followed by Jack how gross who will provide a brief operational update.
After that we will open the call up for questions from our audience.
First I'd like to congratulate the entire hycroft team for their dedication to improving our health and safety culture at high crop when I joined last September our total reportable incident frequency rate otherwise not just tripper was well above the industry average we've worked diligently with a top down approach to institute and improve.
Our safety culture and additions to our corporate work culture overall.
With additions to the operating team at site and at the corporate level combined with a motivated work force. We saw the benefits of that work very quickly and by the end of 2020, we saw more than 50% reduction on that trip a rate and a significant decline and the frequency and seriousness of incidents and we all know safety performer.
And it leads to less answer them, which leads to operational efficiencies and productivity.
We've continued saying improvements and till the first quarter of this year with another decrease and our trip a rate, which now places us below the industry average of one point to two and I'm extremely pleased to report that the trend continues and as of April April our tripper rate is 0.9.
Three.
In addition, operating performances at the best level since the restart of operations and 2019.
And in addition to all of these improvements from safety to culture to operating performance, we achieved a number of goals during the first quarter and I'd like to discuss those with you now.
First of all production and sales were well above plan due to improvements made by our process group and the solution management system and increasing the brimstone Merrill Crowe throughput, which improved our recovery and metal from the from the solution.
Our drill rigs began turning and March 2021 as planned with the task of obtaining the metallurgical samples for our previously reported variability test work program as we discussed on our last call. This program is critical to completing the database of information. So that we know how each geologic domains will perform under the.
Two step novel sulfide oxidation and heap Leach process, while there was a lot of good work down and the power. There were just on gaps we identified and said we want to mitigate any potential start up route by completing that database of information.
We have significantly advanced the oxide and transitional material run of mine plan, which is what we're operating under at the current time, we have approximately 55 zero million tonne of ore of run of mine material, which represents about 450000 ounces of gold.
And 18 million ounces of silver.
That material is currently accessible.
And our existing Leach pad how's about 34 million tonnes of run of mine capacity available.
The 20 to 34 million tons of parent.
Add capacity and the 50 million tonnes of run of mine material. We can also utilize the new leach pad if necessary for this run of mine material and or the sulphide material. When we began accessing commercial scale sulfides in 2020 two.
While we did continue to experience COVID-19 related work force shortages that affected our ability to achieve our targeted mining rates during the first quarter, we're working to make up for those shortfalls and at this time, we do not expect any impacts to our full year 2021 production and guidance outlook.
Old sales.
For this quarter it is business as usual with optimizing our mine plans and performing the drilling necessary to complete the variability it worked for the sulfide oxidation process everything remains on track and on budget.
Our goals for this year are multifold first we are working our team with Forte dynamics toward a goal of being cash flow positive from our run of mine heap Leach operations. Our team is moving into the final stages of the mine plan optimization and scheduling with the current 50 million tonnes of run of mine material.
Real and more that we expect to encounter throughout our mining operations, we hope to achieve a base operation that is cash flow positive as we bring on the sulphide material to be processed under the two stage process during 2020 two.
Second we are completing the necessary design work that we previously mentioned on the two stage novel sulfide oxidation process such as.
And designing the solutions management system.
Heap stacking design and forced air injection design.
As I mentioned earlier, we're on track with the drilling for the representative samples across the entire deposit and complete the variability work and preparation and planning for this commercial scale sulfide production.
Third as we discussed on our last call with total resources of 21 million ounces of gold and over 700 million ounces of silver.
We feel it is prudent to at least look at the options for treating higher grade sulfide ores, which we have identified with and the deposit through a small mill. If we determine that additional value can be obtained by processing. Some portion of the sulfide through I know, we have the flexibility and timing of bringing a mill on line because we have the.
You already have the permits in hand, and because the mills and motors are and storage.
If a mill is determined to be a significant contributor to the overall value of the mine, we could bring it on and your three or four or five or even later in other words, we have flexibility if and why on a small mill and they make sense.
How do we have all of the equipment, we don't have the pressure of needing to spend the capital on long lead time items. So this is a very big benefit. Moreover.
And as I've mentioned earlier, we are fully permitted for the mill operations and for a tailings dam, we're doing that work right now with the Cinco engineering to see what the and taking the previously existing feasibility study on the mill and wrapping and current economics on it.
For for this year, our new team's deep dive and existing drilling information has identified several areas of high grade sulfide mineralization and we're following up on these target areas. While we have the drill rigs on site that they're going to be performing a dual purpose well this year.
Well, we have a lot of work to do during the year, we have a team that's certainly up to the task. This is what we do we take projects up the value chain for all shareholders by reducing startup risks and optimizing the approach to mine planning and processing.
And based on high Brock is having a solid base run of mine heap Leach plan, while we introduce the sulfide oxidation processing and possibly at some future point introduced a small mailing component as we've talked about before and in the past. This multi stream processing design is very common and Nevada for these types of large deposits. So.
Fairly and our area is it a one size fits all approach, but we've also talked to you before about how the ore body tells you how to process each geologic domains and said that it yields the best value for all of our shareholders.
On a final note before I turn the conversation over to stand right out we remain very disappointed and our share performance, but we also believe these were compelling buying opportunities for such a large world class mineral endowment, we have lot of seller. Following our last earnings call, who had been and the stock for a while and that continued to put pressure on our stock.
And we do see selling by other entities and I know many of you have found to be about that they have reported to me that their clothing and door realigning portfolios and while they remain shareholders of hycroft with significant positions of our stock, but you also have to liquidate some holdings and those bonds that are being closed and we anticipate and hope very.
And the selling will be nearing the end.
So we have a very busy year ahead of us and I'll provide some closing comments shortly but for now I'll turn it over to stand right, our CFO to walk us through the financial summary, Stan.
Thank you Diane and good morning during Q1, 2021 and the Hycroft mining continued to operate at a pre commercial scale with operations focused on the run of mine ore on top.
<unk> revenue was in line with our plan and we're on track to meet full your ounce sales partners sales and Q1 'twenty. One word on 90 830 ounces of gold and an average realized price of 1000 and $784 per ounce and 57236.
Ounces of silver and an average realized price of 26 12 per ounce and.
Q1, 2021 ounces sold increased from the first quarter of 2020 by 50% for gold and 16% for silver and there's more ore tonnes are out on the pads under leach compared to a year ago.
While we were making progress and achieved our Q1 2021 sales plans hycroft has not been able to generate positive net income or positive cash flows.
Due to the low gold equivalent ounce production and sales volumes and a high operating cost profile at the end of the first quarter 2020. One we had $36 5 million and cash which represents a $20 million decrease from December 31 and 2020.
On the cash balance at that time was $56 4 million cash used from operations was $15 million and cash used in investing activities accounted for another $5 million as we wrapped up and spending on the leach pad.
And while there were no financing activities. During Q1, we will begin making cash payments on the spot credit agreement and the second quarter.
Additionally, a recent development and meaningful to the operations is that we expect to start improving our cost metrics.
We experienced the arrival of the new Caterpillar and 91, four K wheel loader.
It started part started arriving in March and.
Commissioning is expected to be completed soon this unit will eliminate and expensive rental loading unit and we expect that it will improve our loading capabilities and cost structure.
And as always we continue to focus on controlling our spending and manager and our cash and with that I'll turn the conversation over to Jack.
Yeah.
Thank you Stan and good morning, everyone.
We've we've been working diligently on and mine planning and optimization work.
As Diane indicated we've identified 50 million tonnes of oxide and transitional ores. Our goal is to get the free cash flow positive as quickly as possible.
And we began this work in January and and.
And we expect to complete it and Q3.
As Stan indicated 90 94 parts began arriving in March.
On commissioning is ongoing and we expect to complete the commissioning of that new 99 for Kay in May.
It has replaced a high cost rental loading unit.
And it will help reduce our unit loading costs as we continue to focus on lowering mining costs.
Our very variability drilling program is underway.
We have a reverse or drill on site 34 pre caller holes have been completed on the planned 98 holes total.
To core rigs continue to operate on site as well and we've completed 12 core tails.
The work to date has been completed and the Campbell and quarter areas. We're currently drilling and south Brimstone and our next move will be to north brimstone.
We expect that program to continue throughout the year.
And with variability testing completed early next year.
And finally, we're on following up on high grade mineralization.
This is area, we've identified to the south and adjacent to the vortex pit.
And we'll be following up on these areas in Q3 and Q4.
In addition, we've already followed up on some and.
Third blue.
Blocks are adjacent to current and planned mining areas and the camel area. The idea is to convert them from inferred to indicated box with some additional drilling.
And our assays are pending and as some of that work has already been completed.
On that note I'll turn it back over to Dan.
Alright. Thank you Stan Thank you Jack I appreciate that very much and I, just Wanna say on behalf of the whole Hycroft team. We really appreciate the continued support of all of our shareholders as we continue to develop and unlock the value of this amazing asset.
We know we're on the right path to achieving that goal and we wouldn't be able to do that without your support and we really do appreciate it and it's it's a very busy year for us and everything is on track and we look forward to reporting back to the market once we have the.
Our final information on the <unk>.
Keep leach run of mine plan as well as our the work that comes on from our variability test work and try the two states sulfide oxidation.
And any updates we may have a on the mill and then if necessary, we'll be updating our technical report as well. So a lot on the go we're very excited about what we see with Hycroft and and where were going for our shareholders. This year, so with that I'll ask the operator to open the call for questions and again, thank you for participating and joining us.
Today.
And as a reminder, if you would like to ask a question. Please press Star then the number one on your telephone keypad and if he would like to withdraw your question press the county, when moving while we compile the Q&A roster.
Your first question comes from Vincent Anderson with Stifel. Your line is open you may ask your question.
Yeah, good morning, and sounds like the process group did a particularly nice job this quarter, so well done there.
Can you help us bridge the financial impact of the <unk> mining disruptions versus those improvements you've made to the solution management system and Merrill Crowe plant.
Just kind of thinking as it relates to the cadence of operating cash flow through the balance of the year.
So operationally and early in the year, we had issues with.
And the COVID-19 and COVID-19 management that was impacting the mine ops cruise primarily.
We also did some.
Safety and.
Stand downs to correct some issues there but.
And as those impacts were often are not felt immediately because of the way stack of pad and.
And we kind of new debt you know we wanted to.
Set ourselves up for them.
Our strong first half performance and this year.
In the latter part of 2020. So we did a lot of work on coordinating our or replacement and stacking on the pad. We also undertook a conversion of a contractor pad operations crew and and took that over internally and self performed and the result is.
I think much better coordination and operations of our solution flows and applications of pad, which improve the ounce profile, so and the heap Leach obviously solution flow is.
On a directly.
<unk> attributable to your ounce profile and you know it was and the way, we coordinated our stacking and getting more material under leach quicker and it just.
Improve the ounce profile, which translates to <unk>.
And on production and revenue are.
Relatively quickly on this pad so from an operational perspective.
And that's what we're.
Doing there.
That's all I have to and stuff.
Yeah I'll go ahead Ed.
Briefly you know the challenge was low.
Because of the COVID-19 impacts you know, we weren't able to put as Mike said as much material on the leach pads and so we're gonna have to run.
The rental fleet on the larger size rental fleet, a little longer to catch up because of the missing folks and we'll see true so that from a cost kind of came through but we'll see some of those costs flow through and the second quarter as we start stocking Oregon.
Okay Alright. Thank you that's a it's a perfect.
Good clarification there.
And.
And then I.
Just kind of balancing that those comments you know you you had gold and silver production and the quarter. It ran pretty well ahead of of ounces sold.
Not too much of an impact of working capital or unit costs and aggregate. So how should we think about that against the balance of some of those higher costs from the <unk> disruptions are just kind of flowing through the next couple of quarters.
Well you know our expectation is that we'll be able to operate more efficiently and keep our cost in line, but they will be higher.
As we stock on the pad and so those ounces will.
Come out probably more on the third quarter, then being available to us and the second quarter. So that's that's kind of day the impact on them. So.
I don't know, Mike or Jack if you want to add anything.
No that's spot on Stan and that's exactly it's kind of a delayed effect, but.
And as long as were.
One thing, we're focusing on where and we're picking up on it.
And it seem on and I should say pretty rapidly this quarter is that consistency and and getting material to the pad and and working through our mine and active mine plan and and making sure that and where we're emphasizing the ROM tonnes as they become available and and and.
Really setting up R. R.
Ore and waste runs and the and the mine to be as efficient as possible and and take advantage of it and looking at rental truck hours, you know can we optimize our own fleet and.
And reduce rental hours.
Thing that moves the needle on cost and efficiency.
Huge effort underway right now and the mind to really.
And do a deep dive in and get that extra extra margin and savings.
Okay.
And then so your and the final stages of planning out debt pre commercial kind of phase of operations as you mentioned and the report, but you know how should we think about capital expenditures this year balance between cash burn and investment and some of these more critical assets like the refining facilities that you mentioned.
So for the existing plan and.
And the guidance.
Minimal capital the <unk> nine.
994, K wheel loader, we were able to lease that so with.
And with very little money down and then spread the payment over.
48 months so it's.
Really efficient capital investment there and we're using the rental fleet. So the 10 million and investment into the variability program was the biggest item as well as you know kind of the 5 million that we've already spent and the first quarter with the predominate amount on the the new Leach pad, which we're now.
And that into the future for future capital there. So for the base plan were in good shape as we transition and work on the run of mine plan.
Really working on the capital at this point.
And we think you know will.
And we'll be able to finance a significant portion of that on our game plan is to do it through our leases capital leases with the operating equipment and then there'll be from other investments and the.
The process facilities.
It's kind of a capital plan at this point.
Okay, and do you have a preliminary budget for the for the processing facilities.
Hello.
[laughter] go ahead standard.
We're about a jump on them.
And I'm not trying to get yeah, I'm not trying to squeeze too much out of it but just low seems to be on.
Key bottleneck here.
Well no I mean, we've talked in the past I mean, the upgrades to the North Merrill Crowe plant have to happen and order for us to reach higher mining rates and higher stacking rates. So we need to be able for the plant to handle the installations and the branch down plant, while we've made a lot of upgrades and and.
You know and dress some of the issues there, it's not going to be satisfactory from a larger scale operations out for for the plant itself. The upgrades I think we've addressed in the past it's about $3 million to do that will also need we've got the refinery and the various components and all of that on site that we need to put that into place and and that's.
And and equal amount of money as well so as far as you know the larger scale operation. When we go to higher tons. You know there will be a component of additional haul trucks, which stands working with a number of equipment manufacturers right now on capital leases.
And but you know what the work that Jack and his team are doing on the mining side with Forte.
And we're finalizing the mine plans and over the next couple of weeks and then we'll be able to properly.
Is the trucks and the number of trucks that we will need for that so so does the capital items and things like that that we envision our AR.
To be delivered to the market. We're just finalizing our operational stuff right. Now so we can make sure we have the appropriate sized equipment for that but from the plant and stop it.
It's it's it's not significant dollars anything you want to and Stan or Jack or Mike to any of that.
No that was spot on.
And I don't think it's spot on.
Alright, well, thank you for that and then so just finally.
Have you been able to begin additional lab testing on the sulfide ore preoccupation and should we expect to get interim updates on those results or should we just stay tuned for the full technical report.
Yes, we're just getting rolling with the drilling and samples will start trickling in here relatively soon over the next couple of weeks, it's going to take a long time it's.
We've got a this is a very large campaign and we should start seeing some results.
And a third quarter early fourth, but it's really going to the whole suite of testing really won't be completed and until the end of Q1 next year. So we should have some indication, though as we go on but it's going to be several several months yet.
Okay. So it sounds like you kind of wanted to do and this holistic Lee there's no one specific area of the mine that you that you plan to really take take those test results through to completion and.
And kind of phases and then.
No well, we've got a we've got a pretty detailed distribution of of drill holes set up to two to well define all the geo and.
Geological domains and are and more importantly, the geo metallurgical domains.
We just don't have enough information on one way or the other.
What's more promising than the next you know so.
So it's really just going to take some time to get these core samples and and run them through some preliminary tests and then really.
It's a very true.
And I have to hand, it to the team they've done a great job and and really dive and down and putting our plan together for this meant variability testing that this should answer all the questions we need answered.
And with across this mine as we as we do this drilling.
Alright, well, thank you very much and best of luck on the rest of the year.
Great. Thank you Vincent.
Once again, if he would like to ask a question. Please press Star then the number one on your telephone keypad.
Again, if he would like to ask a question. Please press Star then the number one on your telephone keypad.
No further question at this time I'll hand, the call back to.
Dan Garrett.
Okay. Thank you operator, and we have quite a quite a few people on this call. So I guess and we've answered everybody's questions, but as always.
You have our numbers you have are emails please reach out to and he'd be happy to answer any of your questions at any time. So very excited about the progress. We've made appreciate the support from all of our shareholders and the team's just done an outstanding job and we look forward to continuing this upward momentum as we develop this amazing asked.
And so with that and everyone have a great day. Thank you again for joining us and we'll be in touch soon.
That concludes today's conference. Thank you all for joining you may now disconnect.
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And.