Q3 2022 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' third quarter 2022 financial results Conference call.
As a reminder, all participants are in listen only mode and the conference is being recorded.
After the presentation there'll be an opportunity to ask questions to join the question queue. You May Press Star then one on your telephone keypad should you need assistance during the conference call you May signal, an operator by pressing star and zero 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 Cemetery Q3, 2022 financial results conference call and webcast to join this webcast and conference call. There is a link in our news release dated November Tonight.
Can be found on our website under news 2022.
You may find the link under the investors tab and click on events and you will see the link at the top of the page.
On the call today, we have the Companys, 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.
These statements are subject to known and unknown risks uncertainties and other factors that may cause actual results to be materially different than 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 required by applicable law for more information. We refer you to our detailed cautionary note in the Q3 presentation associated with this call or on our press release of yesterday's date.
I would like to remind everyone that this conference call is being recorded and will be available for replay later today.
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 <unk>, President and CEO , David Watson David.
Thanks, Jen good morning, everyone and welcome to <unk> Q3, 2022 financial results conference call and webcast. Thank you 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 will cover the highlights of our third quarter 2022 financial and operating performance and our plans for the fourth quarter and then we'll open it up for questions.
Please note that all figures are stated in U S dollars unless otherwise noted.
In the third quarter, we delivered our strongest quarterly production in recent history, producing 778000 ounces of silver equivalent which is an increase of 20% over Q2.
We also increased mill throughput by 37% compared to the second quarter to 160000 tons mill, which is also the highest total tonnage in recent history.
In addition, the mine optimization work continued in Q3 for the underground mining processes.
They're aimed at managing tracking and planning underground movements, which helps to increase efficiencies across communication and planning.
During the quarter. We also compiled further drill results from phase two of the 2021 2022 exploration program and at the end of Q3, a total of 11253 meters have been drilled.
Going to the end of Q3, we announced drilling from the Avino mine Atlanta to Lotze area also referred to as E. T below our deepest level 17 mining area I expand on that in a bit later in the presentation.
Installation and commissioning of the dry stack tailings project has been completed and we are currently transitioned to full time operation of the filter presses.
With site personnel fine tuning the process.
I was at the mine site in late September and I was very pleased to see that our dry stack tailing project that is using best available environmental technology is coming to fruition.
The investment that we've made in the this facility demonstrates our commitment to the safety of our people local communities and the environment.
Okay.
At <unk>, we have been focused on community engagement in the nearby towns adjacent to the property as well as studies on how to optimally integrate our mine plan to leverage the existing facilities and infrastructure.
Avino is fully committed to moving this project forward as part of the company's organic growth strategy.
Yeah. The acquisition was a major milestone for avino and factors prominently in into Avino is five year growth strategy and sets us on the path of achieving our goals of intermediate producer status.
The property, who is one of the largest undeveloped but undeveloped primary silver resources in Mexico and is located in the Joyce adjacency adjacent to our existing operations at the Avino mine.
Our financial performance in the third quarter was slightly lower than expected with marginally lower revenue compared to the second quarter.
Our strong operational achievements helped to generate revenue of $9 1 million $2 1 million in mine operating income.
Nathan Harte CFO will expand on our financial results later in the call.
The third quarter production marks the fourth full quarter. Following the restart of operations in August 2021, and as I mentioned previously record quarterly production of 778000 ounces of silver equivalent.
The production came from the Avino mine only and as compared to Q2 2022 is it is the most recent quarter of consolidated production.
The Q3 production highlights are as follows silver equivalent increased 20% to 778000 ounces silver production increased by 27% to 285.
<unk> thousand 400 ounces copper.
Copper production increased by 28% to $2 1 million pounds gold production decreased by 11% to 1200 one ounces.
Mill throughput increased by 37% to 162100 tons.
The recoveries for silver increased by 1% and copper decreased by 3% and gold recovery decreased by 5%.
On a gram per ton basis, the feed grades for silver decreased by 9% for <unk>.
For gold the decrease was 33% and for copper the feed grade decreased by five by.
By 4%.
During the third quarter 3500, 59 meters were drilled exclusively at the Avino E T area below level 17.
For 2022, the company budget at 15000 meters, which was focused on the Avino E. T area below level 17, and the oxide tailings project and let's put it xena.
And at the end of Q3 2022, a total of 11253 meters have been drilled.
Subsequent to the end of Q3.
Tober, we announced the results from phase two of the 2021 'twenty two exploration program. These results represent six holes totaling 3200 69 meters drilled below the current level 17 mining area of the tea area of the Avino mine.
Selected intercepts include whole <unk> 22 O eight.
95, silver equivalent grams per tonne over 43 eight meters.
Including 673.
Silver equivalent grants per ton over 0.66 meters.
<unk> 22 O nine 150.
Silver equivalent grams per tonne over $26 seven seven meters, including a 1037 silver equivalent grams over four six meters and 1800 silver equivalent grams per tonne over 0.28 meters.
The recent deeper drilling confirms that the mineralization persists persist down dip significantly past lowest developed mining level and may prove to add significant mineral resources subject to the completion.
Of an updated mineral resource estimate currently scheduled for Q1 2023.
During the second quarter. We also released drill results from Avino E T area that intercepted high grade silver and copper and multiple holes.
As this area of our.
Focus we encourage you to view the interactive three D model on our website, which is linked to the June press release and shows the location of the drill results and proximity to the current mining area.
Please also take a virtual tour of the mine site, which you can find on the homepage of the website for an informative and in depth look at operations.
The full drill results, including images for or the 2021 and 2022 drove programs are available on the website.
During Q3, we continued moving forward on the capital projects that we outlined for the year as previously mentioned the dry stack tailings facility installation and commissioning has been completed.
The project is expected to be fully operational by the end of the year and leads the company towards achieving the guidelines with the global industry standards on tailings management, along with community stewardship.
Our ESG initiatives continue to move forward as we incorporate principles of says that sustainability and social responsibility.
Following the restart of operations has been the company's directive to train and hire local workforce.
By providing jobs to those in the surrounding communities, we aimed to foster generations of enthusiastic and dedicated ambassadors of avino.
After receiving the ESR award in August for the first time, which is granted by the Mexican center of philanthropy and the alliance for corporate social responsibility, we continue to provide support to the local communities where it is needed.
As well some something that I believe strongly about is to provide information to the school age children teach them about the mine what we do there and how minerals are important to our daily lives and hopes to sparking they're interested in some day working at the mine.
The ESG initiatives completed during the third quarter work.
Water irrigation work at Paducah date Coronado.
Conducting mining talks in the schools and politico.
Also San Jose de Avino and grow.
Posted the first parent child visits to work event for the employees and families. During the visit the workers were able to share their knowledge with their children by showing them the areas in which they carry out their work, giving them an overview of their daily activities and participating in safety awareness talks.
Reforestation campaign of Navy native species of the region, where 10000 plants, including mesquite as ash and Magwe were planted rock removal from local roads after heavy rainfall.
Creek restoration work at Liberum Labrie, though Rivera community provided school supplies to students and the surrounding communities.
Construction rubble removal from Guillermo.
<unk> elementary school cleaning and maintaining the lown landfills at zero gosa, roadside governor maintenance and cleaning avino rescue team training.
During the quarter, we continued to see volatility in the markets with rising interest rates inflation and a strong U S dollar, which put pressure on precious metals.
Silver price.
It was in the range of $17 77, and announced near the beginning of September and a high of $2 54 announced on August 11th.
During the second quarter call I mentioned that we were living in an interesting time and this should probably brace for continued volatility and higher interest rates.
I have to repeat that now on the third quarter call interest rates have just risen again for the fourth time in a row.
Even in times of economic pressure the world still needs a steady supply of precious metals there've been a lot of focus lately on copper being one of the most important metals that the world is running low on.
And we all know that silver copper gold and a variety of other precious and base metals will be needed in the push for green energy.
So we continue to believe that the outlook for silver is positive and that the silver demand should see solid growth from 2022 onwards, and will be driven by record silver industrial fabrication.
Increased in Green technology, and investment demand for silver physical silver.
I will now ask Nathan Harte, <unk>, Chief financial Officer to present, the financial results for Q3 2022 Nathan.
David It's my pleasure to be on the call and I would like to welcome everyone, who has joined US today and is viewing our presentation.
Avino containment continued to deliver meaningful financial and operating results in the third quarter. The Avino mine produced a mine operating margin of 29% on a cash basis and the company generated $1 6 million in operating cash flows before working capital changes as well as producing positive EBITDA and adjusted earnings.
Following the acquisition cash payment of $15 3 million to core mining for <unk>. The company remains well funded with $10 9 million in cash available at the end of the third quarter, representing a net increase of $1 4 million from the end of the year. After factoring in the acquisition payment made in March.
Coming to slide 14, I'll walk you through some key financial results for the third quarter as well as some year to date figures.
During Q3, we reported net revenues of $9 1 million from 603000, silver equivalent payable ounces sold which resulted in mine operating income of $2 1 million for the quarter inclusive of noncash depreciation and depletion.
On a cash basis mine operating income came in at $2 6 million for the third quarter.
The company was impacted by provisional pricing adjustments of <unk> 3 million during Q3 with provisional net revenues coming in at $9 4 million before these adjustments.
Avino reported a net loss after taxes of $1 1 million or <unk> <unk> per share for the third quarter of 2022.
Earnings before interest taxes, depreciation and amortization or EBITDA was <unk> 2 million for the quarter and adjusted earnings were <unk> 4 million or zero cents per share.
EBITA adjusted and Unadjusted earnings were impacted negatively by a noncash loss on the company's investment in Houseware resources of $1 2 million in the third quarter, which saw the Companys investment decrease in share price.
Cash flow from operations before changes in working capital was $1 6 million or one cents per share.
Capital expenditures for this quarter totaled $2 $7 million with the year to date totaling $6 1 million both on a cash basis.
Total additions were approximately $7 million as the company continues to work with our partners to finance equipment at below or at market rates.
Okay.
Capital expenditures for this quarter related primarily to mine development and improvements to increase underground haulage rates, the dry stack tailings plant and additional surface equipment.
For the nine month period, the company generated $1 8 million and net income or <unk> <unk> per share and.
And $6 2 million or five cents per share on an adjusted earnings basis, which removes certain noncash and nonrecurring items.
Cash flow from operations was seven cents per share generated and free cash flow on the year sits at around $2 4 million today.
Here on Slide 15, you can see our cash cost per silver equivalent payable ounce in the third quarter remained close to that $10 mark coming in at $10 29.
For the nine months period costs were just under the $10 Mark at $9 71 per silver equivalent payable ounce.
All in sustaining cash cost for the third quarter were $17 32, and $17 59 on a year to date basis.
The increase in costs from Q2 represents lower ounces sold on a per ton milled basis, largely due to lower gold grades and recoveries as well as an unusually high quarter for penalties.
The increase in costs were offset by strong cost management by the operational team, which is evident in the coming slide.
Here on slide 16, we can see that costs have decreased on a per ton basis overall, when compared to both Q2 and Q1 of 2022, both on the cash costs and all in sustaining cash cost perspective, which demonstrates that we are achieving certain economies of scale, which should continue to lower costs as we continue to push forward towards.
Full capacity at the mill.
Yeah.
With Q3 rounding out the first full year of uninterrupted mining operations since 2019, I am pleased to report that the financial outlook for Avino is very positive.
With strong operating margins and cash on hand of $10 9 million following the upfront consideration payments to completed to Coeur mining our focus is solely on our Mexican assets and adding value for our shareholders and stakeholders throughout the rest of 2022 and beyond.
I will now hand, it back over to David for a discussion on what we know has planned for the rest of the year.
Thank you Nathan the third quarter was strong operationally and highlighted by record production at encouraging drill results from the Avino E T area at.
At the mine, we focused on the optimization plan for underground processes and continued with the training programs. We successfully completed the important capital projects to building the dry stack facility, the importance of which I highlighted highlighted earlier.
Now into the fourth quarter. The following operational activities are ongoing.
Production ramp up at the Avino mine with mine development work on <unk> to increase throughput.
Now the dry stack.
The facility has been completed the transitional testing will continue with the expectations that the facility will be fully operational by the end of the year.
We currently have drills, turning exclusively on avino ETE below level 17.
We are moving forward with a comprehensive metallurgical test program on the oxide tailings project to move it to the development stage.
Internal mine plans focused on the Gloria now, but down to your veins at La <unk>.
We expect to exceed the upper end of the two two to $2 4 million ounce of silver equivalent after strong production levels in Q3.
We expect to continue to generate operating cash flow in the fourth quarter.
Which we plan to reinvest into the Avino mine.
Thanks to our resilient and strong cash management, we remain well positioned to manage through any near term pressures arising from an overall economic slowdown while staying focused on a clear path to transformational growth on our way to becoming Mexico's next intermediate producer.
We're well into the fourth quarter and are excited to be on track to accomplishing our goals for the year and beyond.
We 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, you'll hear Tony geology in your request if youre using a speakerphone. Please pick up your handset before pressing any keys to withdraw your question. Please press star.
Then we.
We will pause for a moment as callers join the queue.
Our first question comes from Heiko <unk> of H C. Wainwright. Please go ahead.
Hey, guys. This is Marcus giannini, calling in for Heiko, Thanks for taking my questions.
Hey, Mark it's either.
Hey, Yeah. So just looking at your E. T results. It seems like things are trending well to depth.
So I assume this area won't see any mining activity in the near term.
Given the way things are going have you done are considered any deep holes just to sort of see what else might be found below say below the 400 meter bubble or so just might be interesting to see how extensive the system as a debt.
Yeah, I think we've got about five or six more holes planned for this year and we're just going to keep drilling until we know the extent of the ore body. So we're not stopping we're going to keep drilling.
And see how deep it goes.
Okay Fair enough and then a.
Sort of on that topic I know your budgeted for 15000 meters of drilling this year. So say another 3500 left in Q4 do you think we can trend line that figure going into 2023 and Oh.
Also on the topic of trailing what what are your current cost per meter including assets.
Good questions. So on the first one we're actually going down a site next week to do our capital budget for the next year and that will determine a bit what are how many meters, we're going to drill for exploration.
So for now it's hard to say I will give a bit more of an update probably at the beginning of the year and the second part our cost per meter is obviously very low we're spending about 300000, a month right now and producing.
Spending by 100000 a month.
About one third.
Meters or 1200 meters every month drilling so you can get them out there as we're under or just around $100 per meter drilled because we own our own drills and we have the experience in the area.
Okay excellent thanks for taking my questions guys.
Thank you. Thank you.
Our next question comes from Jake <unk>.
<unk> of Alliance Global Partners. Please go ahead.
Hey, guys. Thanks for taking my question.
Hey, Jake.
So.
The resource update David that you mentioned, that's due out in Q1 do you guys have a cut off date for that yet I'm. Just curious what that is just given the amount of drilling you have going on right now.
Yeah, It's November 15th.
We're going to keep drilling, but we're going to do all the information we have up to November 15th will go into it.
Alright perfect.
And then just on <unk>.
You're able to touch on any of the plans you guys have teed up there.
For 2023 or are those sort of still in the works as you're finalizing your own.
Ah well, we've got community engagements with the local ajito groups.
We're in the later rounds of these negotiations and we expect to have them.
Analyze hopefully by the end of the year early in Q1.
There is a large endowment broken a war on the surface a 50000 tons that are there from when Lewis men are operated the project before ortho had it and so we as soon as the agreements are in place we're planning to start tracking that to the mill.
Rehabbing circuit one in circuit to circuit, one is already operational circuit two will come online in the next four to six weeks and we'll be ready to receive that material as soon as we can start a trucking it over so we're excited about that.
Also going to apply for permits so we can put it in the portal and the decline into Gloria we've already got a mine plan attract with spiral decline that will go into Gloria.
Put in above seven levels level, one could start delivering or seven or eight months. After we break ground. So we're excited about doing all of that next year.
Got it okay, what's the grade on on that broken ore that's sitting at surface.
Okay.
So it's just under 200 grams, but we're going to have to do with an extensive sampling program again to add silver and there was a bit of golden there too, but obviously, it's an old material that could be oxidized. So I mean, you have to remember that theres no mining costs for that so it should be fairly profitable, even if the recoveries aren't as high as we see it yeah and oxidized material tends to not be.
We are not recover as well as fresh ore in the underground. So we will see what happens there but.
While we believe at this point it's profitable.
Yep.
Okay. That's all for me thanks.
Thanks Jake.
Our next question comes from Joseph Reagor of Roth Capital Partners. Please go ahead.
Hey, David and team.
Thanks for answering.
I answered the questions.
So.
A question on payable ounces versus produced ounces and how that impacts your revenue.
It looks like year to date, you guys are tracking around 90% pay ability, but for the third quarter was 77, 6%. What is the kind of puts and takes there for why that fluctuate around so much and what would be a good.
Like long term assumption for us to use for modeling purposes.
Hey, Joe Nathan here.
Between 85%, 90% is pretty safe.
Just because it's just the way it pay a royalty works on iron concentrate.
So we also did have a bit of an inventory build at the end of Q3 as well, which we sold in October just the timing of certain shipments. So there's obviously a little more of a disconnect in Q3 than you would've seen in the past.
Okay can you quantify what that looked like.
Hum.
Sorry Budd.
50000 to 100000 ounces on a silver.
Okay, so a decent decent number.
Okay and then.
You guys had a decent amount of capital this year spent.
Oh man with a dry stacks.
Have you guys started the budgeting process or can you give us any kind of like outlook as far as sustaining versus expansion Capex for next year at avino.
Yeah.
I mentioned earlier, we're going to start or we started that process, but we're really digging into it next week as we go down on a site visit for the whole week.
Spent some time with the team going over Capex, we're not expecting obviously, we don't have any significant projects that are similar to the dry stack, obviously that was a pretty monumental one for us to set us up for the future.
So there will be a little bit of sustaining capital, but obviously not that much on the expansionary capital side as well too until we get.
Get into the later stages of our five year plan.
Okay, Okay and then.
You know kind of one one final thing.
On.
You know la Presse, you're always a good.
It sounded like David was suggesting that.
It should be a quick turnaround from here to actually be getting being able to begin underground development.
Are there any potential items between here and there that you guys consider like kind of the biggest gating factors that might cause some delays in that.
Well, it's just the community engagement. So we're targeting end of the year Q1, hopefully if things go well I mean, we're in the later rounds of negotiation. So we know it's eminent.
Permitting.
We don't feel that's going to be too onerous, because it's a satellite deposit to essentially two of.
Those would be the two factors.
Hmm.
Our mine planning has already been done and we don't see any.
Issues with the hardness of the rock or anything like that based on what we know so.
We think we're going to be able to follow this plan and be able to deliver some order to the mill fresh ore to the mill before the end of next year.
Okay.
Okay great.
I'll turn it over thanks guys.
Thank you Joe.
Once again, if you have a question. Please press Star then one.
Our next question comes from Matthew O'keefe of Cantor Fitzgerald. Please go ahead.
Thanks, operator, good morning, Gents. Good morning, good good quarter. Thanks, I just had a quick most of my questions have been I've been asked and answered, but I was going to drill in a little bit on the.
The concentrate charges treatment charges and penalties.
Can you just discuss that a little bit and how that how that is going to have about how you might expect that to evolve in the following quarters.
Yes, Nathan here. So obviously it was a bit higher this quarter just be Venezuelan that had a bit more penalty elements.
And that does fluctuate from quarter to quarter, we do see that improving as we get into Q4, and especially next year, we should see some fairly significant improvement on that front.
Okay and well that.
That was really a okay. So so is it anything.
Related to the <unk>.
I mean is it is it does it go up with the copper grade or anything like that or is it completely separate just just a different.
That's right to that but also there.
There's a bit of that but there's also some changes some contract terms that will kick in next year.
Okay. Okay. That's it for me thanks.
Okay.
This concludes the question and answer session I would like to turn the conference back over to David Wilson, President and CEO for any closing remarks.
Thank you operator, and thank you to everyone for their time today.
As I said earlier, we have many positives to talk about in Q3, and we look forward to finishing off the year strong and taking that momentum into 2023.
Growth is paramount for success in the Avino has been laying the groundwork for future growth, we have given priority to the most important projects and initiatives.
On a clear path to transformational growth.
Unlocking the value of the Avino property in the region has been a priority and we are looking forward to the next steps in our growth objectives in turn maximizing value for our shareholders and stakeholders.
Have a great day.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
Yes.
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Okay.
Yeah.
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Okay.
Yeah.
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